-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, A9Wr3JBX1K6a3J/K3SHeCrjSmkrEcF/l0aUh3DfTKhdDXXWGrUynEHqcsizyR8By i3bXM4M7j6F1DtSP+WfiPg== 0000762129-94-000018.txt : 19940323 0000762129-94-000018.hdr.sgml : 19940323 ACCESSION NUMBER: 0000762129-94-000018 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940322 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CILCORP INC CENTRAL INDEX KEY: 0000762129 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 371169387 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-08946 FILM NUMBER: 94517169 BUSINESS ADDRESS: STREET 1: 300 HAMILTON BLVD STE 300 CITY: PEORIA STATE: IL ZIP: 61602 BUSINESS PHONE: 3096758850 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL ILLINOIS LIGHT CO CENTRAL INDEX KEY: 0000018651 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 370211050 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-02732 FILM NUMBER: 94517170 BUSINESS ADDRESS: STREET 1: 300 LIBERTY ST CITY: PEORIA STATE: IL ZIP: 61602 BUSINESS PHONE: 3096725271 10-K 1 12/31/93 CILCORP/CILCO 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 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, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from ........ to ........ Commission Registrant; State of Incorporation; IRS Employer File Number Address; and Telephone Number Identification No. 1-8946 CILCORP Inc. 37-1169387 (An Illinois Corporation) 300 Hamilton Blvd, Suite 300 Peoria, Illinois 61602 (309) 675-8810 1-2732 CENTRAL ILLINOIS LIGHT COMPANY 37-0211050 (An Illinois Corporation) 300 Liberty Street Peoria, Illinois 61602 (309) 675-8810 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class so registered on which registered CILCORP Inc. Common stock, no par value New York and Chicago CILCO Preferred Stock, Cumulative $100 par, 4 1/2% series New York Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) At March 15, 1994, the aggregate market value of the voting stock of CILCORP Inc. (CILCORP) held by nonaffiliates was approximately $435 million. On that date, 13,035,756 common shares (no par value) were outstanding. At March 15, 1994, the aggregate market value of the voting stock of Central Illinois Light Company (CILCO) held by nonaffiliates was approximately $60 million. The voting stock of CILCO consists of its preferred stock. On that date, 13,563,871 shares of CILCO's common stock, no par value, were issued and outstanding and privately held, beneficially and of record, by CILCORP Inc. DOCUMENTS INCORPORATED BY REFERENCE CILCORP Inc.'s Proxy Statement dated March 21, 1994, in connection with its Annual Meeting to be held on April 26, 1994, is incorporated into Part I and Part III hereof. Central Illinois Light Company's Proxy Statement dated March 28, 1994, in connection with its Annual Meeting to be held on April 26, 1994, is incorporated into Part I and Part III hereof. CILCORP INC. and Central Illinois Light Company 1993 Form 10-K Annual Report Table of Contents Page Glossary 5-7 Part I Item 1. Business The Company and its Subsidiaries 8-9 Business of CILCO 9-10 Electric Service 10-11 Gas Service 11-12 Regulation 12-13 Electric Fuel and Purchased Gas Adjustment Clauses 13 Fuel Supply - Coal 13-14 Natural Gas Supply 14 Financing and Capital Expenditures Programs 14-15 Environmental Matters 15 Industry Segments 15 Franchises 15 Competition 16 Employees 16 Business of ESE 16-18 Customer/Industry Segments 19 Regulation of ESE's Clients 19-21 Regulation of ESE 21 Competition 21 Subcontractors 21-22 Government Contracts 22 Patents and Trademark Protection 22 Potential Liabilities and Insurance 22-23 Employees 23 Other Businesses CIM/CLM 24 Holding Company 24 CVI 24 Employees 25 Item 2. Properties 25-26 Item 3. Legal Proceedings 26 Item 4. Submission of Matters to a Vote of Security Holders 27 Executive Officers of the Registrant 28-29 Part II Item 5. Market for the Registrant's Common Equity 30 and Related Stockholder Matters Item 6. Selected Financial Data 31 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 32-48 Item 8. Index - Financial Statements and Supplementary Data 49 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 101 Part III Page Item 10. Directors and Executive Officers of the Registrants 101 Item 11. Executive Compensation 101 Item 12. Security Ownership of Certain Beneficial Owners and Management 102 Item 13. Certain Relationships and Related Transactions 102 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 103 GLOSSARY OF TERMS When used herein, the following terms will have the meanings indicated. AFUDC -- Allowance for Funds Used During Construction ANR -- ANR Pipeline Company BTU -- British Thermal Unit. The quantity of heat required to raise temperature of one pound of water one degree Fahrenheit. BCF -- Billion cubic feet Caterpillar -- Caterpillar Inc., CILCO's largest industrial customer CECO -- CILCO Energy Corporation; a wholly-owned subsidiary of CILCO. CEDCO -- CILCO Exploration and Development Company; a wholly-owned subsidiary of CILCO. CERCLA -- Comprehensive Environmental Response Compensation and Liability Act CILCO -- Central Illinois Light Company CIM -- CILCORP Investment Management Inc. CIPS -- Central Illinois Public Service Company CLM -- CILCORP Lease Management Inc. Company -- CILCORP Inc. Cooling Degree Days -- The measure of the degree of warm weather experienced, based on the extent to which average of high and low temperatures for a day falls above 65 degrees Fahrenheit (annual degree days above historic average indicate warmer than average temperatures); historic average provided by U.S. Weather Bureau for 30-year period. CVI -- CILCORP Ventures Inc. DSM -- Demand Side Management. The process of helping customers control how they use energy resources. EMF -- Electric and magnetic fields EPA -- Environmental Protection Agency (Federal) FAC -- Fuel Adjustment Clause FASB -- Financial Accounting Standards Board FERC -- Federal Energy Regulatory Commission Freeman -- Freeman United Coal Mining Company Heating Degree Days -- The measure of the degree of cold weather experienced, based on the extent to which average of high and low temperatures for a day falls below 65 degrees Fahrenheit (annual degree days above historic average indicate cooler than average temperatures); historic average provided by U.S. Weather Bureau for 30-year period. ICC -- Illinois Commerce Commission IEPA -- Illinois Environmental Protection Agency IP -- Illinois Power Company IPCB -- Illinois Pollution Control Board KW -- Kilowatt, a thousand watts KWH -- Kilowatt-hour, one thousand watts used for one hour (unit of work) LCP -- Least Cost Energy Plan, a long-term resource acquisition strategy that balances both supply and demand-side resource options to provide the best value at the least cost to customers. LDCs -- Local Distribution Companies MAIN -- Mid-America Interconnected Network. One of nine regions that make up the National Electric Reliability Council. Its purpose is to ensure the Midwest region will meet its load responsibility. MMCF -- One million cubic feet MCF -- One thousand cubic feet MW -- Megawatt, a million watts NGPL -- Natural Gas Pipeline Company of America NOPR -- Notice of proposed rulemaking issued by the FERC NPDES -- National Pollutant Discharge Elimination System PCBs -- Polychlorinated biphenyls PGA -- Purchased Gas Adjustment Pan-Alberta -- Pan-Alberta Gas Company RCRA -- Resource Conservation and Recovery Act. This act deals with solid waste pollution control. SFAS -- Statement of Financial Accounting Standards Therm -- Unit of measurement for natural gas; a therm is equal to one hundred cubic feet (volume) or 100,000 BTUs (energy). TSCA -- Toxic Substances Control Act PART I Item 1. Business THE COMPANY AND ITS SUBSIDIARIES CILCORP Inc. (CILCORP or the Company) was incorporated as a holding company in the state of Illinois in 1985. The financial condition and operating results of CILCORP primarily reflect the operations of Central Illinois Light Company (CILCO), the Company's principal business subsidiary. The Company's other core business subsidiary is Environmental Science & Engineering, Inc. (ESE). The Company also has three other first-tier subsidiaries, CILCORP Development Services Inc., CILCORP Investment Management Inc. (CIM) and CILCORP Ventures Inc. (CVI), whose operations, combined with those of the holding company itself, are collectively referred to herein as Other Businesses. The Company owns 100% of the common stock of CILCO. CILCO is engaged in the generation, transmission, distribution and sale of electric energy in an area of approximately 3,700 square miles in central and east-central Illinois, and the purchase, distribution, transportation and sale of natural gas in an area of approximately 4,500 square miles in central and east-central Illinois. ESE, a wholly-owned subsidiary, was formed in February 1990 to conduct the environmental consulting and analytical services businesses acquired from Hunter Environmental Services, Inc. (Hunter) during that year. ESE provides engineering and environmental consulting, analysis, and laboratory services to a variety of governmental and private customers. ESE has seven wholly-owned subsidiaries: Keck Instruments, Inc., which manufactures geophysical instruments used in environmental applications; Chemrox, Inc., which has reduced its presence in the ethylene oxide and chloroflurocarbon control-equipment market by maintaining only a minimal staff, primarily to concentrate on warranty work; ESE Biosciences, Inc. whose on-site biological treatment of contaminated soil and groundwater is now performed primarily by ESE; ESE Architectural Services, Inc. which provides architecture and design services; National Professional Casualty Co., which provides professional liability insurance to ESE; ESE International Ltd., which provides engineering and consulting services in foreign countries; and ESE Michigan, Inc. which formerly conducted business as ESE Environmental Science and Engineering, Inc., provided the same services as its parent, ESE. CIM, a wholly-owned subsidiary, manages the Company's investment portfolio. CIM manages seven leveraged lease investments through three wholly-owned subsidiaries: CILCORP Lease Management Inc. which was formed in 1985, and CIM Leasing Inc. and CIM Air Leasing Inc., which were formed in 1993. CIM's other subsidiary is CIM Energy Investments Inc. which was formed in 1989 to invest in non-regulated, independent power production facilities (see Other Businesses). CVI, a wholly-owned subsidiary, is a venture capital company which pursues investment opportunities in new ventures and the expansion of existing ventures in environmental services, biotechnology and health care. The following table summarizes the relative contribution of each business group to consolidated assets, revenue and net income for the year ended December 31, 1993.
(In thousands) Assets Revenue Net Income (Loss) CILCO $ 988,325 $453,877 $33,635 ESE 87,437 123,162 (2,266) Other Businesses 122,678 7,471 2,214 ---------- -------- ------- $1,198,440 $584,510 $33,583 ========== ======== =======
CILCORP is an intrastate exempt holding company under the Public Utility Holding Company Act of 1935 (PUHCA). In 1989, the Securities and Exchange Commission (SEC) issued proposed rules regarding diversification by exempt intrastate utility holding companies. The proposed rules, which are intended to take effect three years after adoption in final form, would establish two safe harbors which specify those circumstances in which the SEC would not find diversification detrimental to interests protected under the PUHCA. If the rules are adopted, CILCORP will be required to apply for a formal exemptive order from the SEC or come within one of the safe harbors by either seeking passage of Illinois legislation permitting diversification or reducing its interest in non-utility businesses to less than 10% of consolidated assets. Although certain members of the U.S. Congress continue to explore this issue, the SEC has not taken any public action towards adopting final diversification rules since the proposed rules were issued. BUSINESS OF CILCO CILCO was incorporated under the laws of Illinois in 1913. CILCO's principal business is the generation, transmission, distribution and sale of electric energy in an area of approximately 3,700 square miles in central and east-central Illinois, and the purchase, distribution, transportation and sale of natural gas in an area of approximately 4,500 square miles in central and east-central Illinois. In addition to its principal business, CILCO has two wholly-owned subsidiaries, CILCO Exploration and Development Company (CEDCO) and CILCO Energy Corporation (CECO). CEDCO was formed to engage in the exploration and development of gas, oil, coal and other mineral resources. CECO was formed to research and develop new sources of energy, including the conversion of coal and other minerals into gas. The operations of these subsidiaries are not significant. CILCO is continuing to experience, in varying degrees, the issues common to the electric and gas utility industries. These include uncertainties as to the future demand for electricity and natural gas, structural and competitive changes in the markets for these commodities, the high cost of compliance with environmental and safety laws and regulations, and uncertainties in regulatory and political processes. At the same time, CILCO has sought to provide reliable service at reasonable rates for its customers and a fair return on its common equity. ELECTRIC SERVICE CILCO furnishes electric service to retail customers in 136 Illinois communities (including Peoria, Pekin, Lincoln and Morton). At December 31, 1993, CILCO had approximately 190,000 retail electric customers. In 1993, 67% of CILCO's total operating revenue was derived from the sale of electricity. Approximately 39% of electric revenue resulted from residential sales, 30% from commercial sales, 28% from industrial sales, 2% from sales for resale and 1% from other sales. Electric sales, particularly residential and commercial sales during the summer months, fluctuate based on weather conditions. The electric operating revenues of CILCO were derived from the following sources:
Electric 1993 1992 1991 (In thousands) Residential $119,709 $108,562 $121,863 Commercial 90,594 86,747 86,205 Industrial 85,384 82,122 86,409 Sales for resale 4,522 8,433 8,446 Street lighting and public authorities 2,062 2,034 2,120 Other revenue 853 915 1,146 -------- -------- -------- Total electric revenue $303,124 $288,813 $306,189 ======== ======== ========
CILCO owns and operates two coal-fired base load generating plants and two natural gas combustion turbine-generators which are used for peaking service (see Item 2. Properties-CILCO). CILCO's all-time system peak demand was 1,120 megawatts (MW) on August 16, 1988. The 1993 system peak demand was 1,106 MW on August 26, 1993. The system peak demand for 1994 is estimated to be 1,110 MW with a reserve margin of approximately 14.5%. The reserve margin takes into account 70 MW of firm purchased power from Central Illinois Public Service Company (CIPS) and 70 MW of interruptible industrial load and other related Demand Side Management (DSM) programs. The system peak demand includes 20 MW of firm power to be provided to the City of Springfield (City Water, Light and Power Department). CILCO's reserve margin complies with planning reserve margin requirements established by the Mid-America Interconnected Network (MAIN), of which CILCO is a member. Studies conducted by CILCO indicate that it has sufficient base load generating capacity and purchased capacity to provide an adequate and reliable supply of electricity to satisfy base load demand through the end of the century. To help meet anticipated increases in peak demand and maintain adequate reserve margins, CILCO entered into a firm, wholesale bulk power agreement to purchase capacity from CIPS. The agreement, which expires in 1998, was approved by the Illinois Commerce Commission (ICC) in 1990 as part of CILCO's electric least cost energy plan. In 1992, CILCO filed an updated electric least cost energy plan with the ICC which anticipates CILCO will experience shortages of peak generating capacity ranging from 100 MW in 1998 up to 130 MW by 2001. In 1993, the ICC approved another firm, wholesale power purchase agreement between CIPS and CILCO to meet this shortfall (see CILCO's Note 7, Item 8. Financial Statements and Supplementary Data). On December 17, 1993, CILCO filed a petition for the issuance of a certificate of convenience and necessity to construct a 20 megawatt (MW) cogeneration plant at the site of Midwest Grain Products Inc. (See Electric Competition under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.) As part of that filing, CILCO requested that the ICC approve an update to its most recently approved least cost energy plan. CILCO is interconnected with CIPS, Commonwealth Edison Company, Illinois Power (IP) and the City Water, Light and Power Department to provide for the interchange of electric energy on an emergency and mutual help basis. GAS SERVICE CILCO provides gas service to customers in 128 Illinois communities (including Peoria, Pekin, Lincoln and Springfield). At December 31, 1993, CILCO had approximately 196,000 gas customers, including 668 industrial and commercial gas transportation customers that purchase gas directly from suppliers for transportation through CILCO's system. In 1993, 33% of CILCO's total operating revenue was derived from the sale or transportation of natural gas. Approximately 69% of gas revenue resulted from residential sales, 21% from commercial sales, 2% from industrial sales, 7% from transportation and 1% from other sales. Gas sales, particularly residential and commercial sales during the winter months, fluctuate based on weather conditions. The gas operating revenues of CILCO were derived from the following sources:
Gas 1993 1992 1991 (In thousands) Residential $104,348 $ 99,096 $101,589 Commercial 32,396 30,767 32,056 Industrial 3,013 3,793 2,927 Transportation of Gas 10,134 10,541 11,049 Other revenue 863 729 792 -------- -------- -------- Total gas revenue $150,754 $144,926 $148,413 ======== ======== ========
CILCO's all-time maximum daily send-out of 443,167 thousand cubic feet (mcf) occurred on January 15, 1972. The 1993 peak day send-out of 322,006 mcf occurred on February 23, 1993. CILCO has been able to meet all of its existing customer requirements during the 1993-1994 heating season. CILCO believes that its present and planned supplies of gas will continue to be sufficient to serve all of its existing customer requirements during the 1994-1995 heating season. REGULATION CILCO is a public utility under the laws of the State of Illinois and is subject to the jurisdiction of the ICC. The ICC has general power of supervision and regulation with respect to services and facilities, rates and charges, classification of accounts, valuations of property, determination of depreciation rates, construction, contracts with any affiliated interest, the issuance of stock and evidences of indebtedness, and various other matters. With respect to certain electric matters, CILCO is subject to regulation by the FERC. CILCO is exempt from the provisions of the Natural Gas Act, but is affected by orders, rules and regulations issued by the FERC with respect to certain gas matters. The Illinois statute governing public utilities requires the ICC to review and adopt electric least cost energy plans for public utilities. Legislation was passed in 1993 which eliminated the requirement for least cost plans from gas utilities. In general, CILCO's plan consists of customer demand forecasts and the projected resources that CILCO will rely upon to meet that demand. The planning horizon is 20 years, and the plan is reviewed by the ICC every three years. CILCO filed its most recent least cost energy plan on July 1, 1992; the plan was approved by the ICC on June 23, 1993. (CILCO is proposing to amend this plan as discussed above under "Electric Service"). The ICC may not issue a certificate of convenience and necessity for any new construction project unless the ICC has determined that the proposed construction is consistent with CILCO's most recently approved least cost energy plan, as updated. The law requires that the plan incorporate economical cogeneration, renewable resources, and demand-side management (DSM) programs, to the fullest extent practicable, as resources for meeting the future energy service needs of CILCO's customers. CILCO's most recent electric least cost energy plan contains several DSM programs, including existing residential and commercial heat pump programs and commercial audit programs. It also includes pilot programs whose objective is to verify the cost effectiveness of electric DSM in CILCO's service territory and to develop capability to deliver DSM effectively. Based upon a preliminary assessment, electric DSM programs are projected to reduce CILCO's peak demand by 146 MW over the 20 year planning horizon. These projections may change depending on the results of pilot programs currently in progress or scheduled to begin in the next few years. Current pilot programs for electric service include: new interruptible rates, residential air conditioner cycling, natural gas air conditioning, energy audits, high efficiency air conditioning, motor efficiency and new construction energy efficiency incentives. Three additional pilot programs are currently under development: high efficiency interior lighting, high efficiency refrigeration equipment, and thermal storage incentives. In 1993, the total cost of the pilot and full-scale programs mentioned above, excluding interruptible rates, was approximately $405,000. The ICC has authorized riders which are specifically designed to recover DSM program costs. The Illinois Appellate Court for the First District ruled that the ICC had improperly authorized the recovery of DSM-related costs through a rider. The Appellate Court decision currently has no direct impact on CILCO because CILCO has not filed a tariff for recovery of DSM-related costs. ELECTRIC FUEL AND PURCHASED GAS ADJUSTMENT CLAUSES CILCO's tariffs provide for adjustments to its electric rates through the fuel adjustment clause (FAC) to reflect increases or decreases in the cost of fuel used in its generating stations. The transportation costs of coal are not included in the FAC. Changes in transportation costs are addressed in general rate-making proceedings. CILCO's tariffs also provide for adjustments to its gas rates through the purchased gas adjustment (PGA) to reflect increases or decreases in the cost of natural gas purchased for sale to customers. FUEL SUPPLY - COAL Substantially all of CILCO's electric generation capacity is coal-fired, including 100% of its base load capacity. Approximately 2.2 million tons of coal were burned during 1993. Existing coal contracts with suppliers in central Illinois, eastern Kentucky and West Virginia are expected to supply about 73% of the 1994 requirements. Coal will be purchased on the spot market during the year to meet remaining annual fuel requirements. During the years 1993, 1992 and 1991, the average cost per ton of coal burned, including transportation, was $40.30, $40.13 and $42.26, respectively. The cost of coal burned per million BTU's was $1.75, $1.73 and $1.80, respectively (see Electric Fuel and Purchased Gas Adjustment Clauses). CILCO has several contracts for the purchase of low-sulfur coal burned at E. D. Edwards Station. The contracts are normally 36 months in length. CILCO negotiated a three-year agreement with a new coal supplier to replace a contract which expired in 1993. All low-sulfur coal contracts contain provisions which allow CILCO to terminate the contracts with no monetary penalties if any new governmental or environmental regulations are enacted which restrict the burning of these coals. Furthermore, these contracts contain provisions that permit adjustment of the annual contract quantity in the event of an economic downturn. CILCO has a long-term contract with Freeman for the purchase of high-sulfur, Illinois coal used predominantly at the Duck Creek Station. The contract gives CILCO the flexibility to purchase between 500,000 and 1,000,000 tons annually. Under the terms of the contract, CILCO's obligation to purchase coal could be extended through 2010; however, Freeman has the option of terminating the contract after 1997. The contract requires CILCO to pay all variable coal production costs on tons purchased and certain fixed costs not affected by the volume purchased. NATURAL GAS SUPPLY During 1993 CILCO continued to maintain a widely diversified and flexible natural gas supply portfolio. This portfolio is structured around new firm and interruptible services provided by five interconnecting interstate pipeline suppliers in response to FERC Order 636 (see Federal Energy Regulatory Commission Order 636 under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations) and direct firm and interruptible purchases of varying terms from approximately 35 non-interstate pipeline suppliers. Gas purchased was also injected into and withdrawn from CILCO's two natural gas storage fields and the storage fields of various interstate pipeline suppliers via contracted storage services. The supply portfolio continues to provide reliable supplies at prevailing market prices. CILCO believes that its present and planned supply of gas will continue to be sufficient to serve all of its existing firm customer requirements during the 1994-1995 heating season at prevailing market prices. During 1993, CILCO purchased approximately 32,300,000 mcf of natural gas at a cost of approximately $85.7 million, or an average cost of $2.66 per mcf. The average cost per mcf of natural gas purchased was $2.86 in 1992 and $2.50 in 1991. On March 9, 1994 the ICC issued an order allowing Illinois gas utilities to recover 100% of pipeline transition costs. CILCO estimates that it could ultimately be billed up to $3 million, excluding interest, for pipeline transition costs. While CILCO cannot at this time determine the outcome of an expected appeal of the March 9, 1994 ICC order regarding transition costs, management believes that based on existing law and the ICC order, any transition charges or other billings by the pipelines to CILCO as a result of Order 636 will be recoverable from customers through CILCO's gas rates. For a discussion of other gas issues, including pending reviews by state and federal regulatory authorities of CILCO's gas operations and recordkeeping practices in the City of Springfield, see the Gas Operations, Gas Rate Increase Request, Federal Energy Regulatory Commission Order 636, Gas Take-or-Pay Charges, and Liquefied Natural Gas Settlement sections under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. FINANCING AND CAPITAL EXPENDITURES PROGRAMS CILCO's ongoing capital expenditures program is designed to maintain reliable electric and gas service and to meet the anticipated demands of its customers. Capital expenditures for 1994 are estimated to be $90 million, including Allowance for Funds Used During Construction of approximately $288,000 and pollution control expenditures of $9 million. Expenditures include $62 million for the electric business, $20 million for the gas business, and $8 million for general and miscellaneous purposes. Electric expenditures include $32 million for additions and modifications to generating facilities, $2 million for transmission projects, and $28 million for distribution system additions and improvements. Gas expenditures are primarily for necessary additions, replacements and improvements to existing facilities. Anticipated gas and electric capital expenditures for 1995-1998 are $286 million. CILCO expects to finance its 1994 capital expenditures with funds provided by operating activities and the issuance of approximately $30 million of additional long-term debt. CILCO had $12.4 million of short-term commercial paper outstanding at December 31, 1993 and expects to issue short-term commercial paper throughout 1994. At December 31, 1993, CILCO had bank lines of credit aggregating $30 million, all of which were unused. CILCO expects these bank lines will remain unused through 1994 (see Capital Resources and Liquidity - CILCO under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations). ENVIRONMENTAL MATTERS See Environmental Matters under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. INDUSTRY SEGMENTS/CUSTOMERS See Consolidated Statements of Segments of Business are under Item 8. Financial Statements and Supplementary Data. Caterpillar Inc. (Caterpillar) is CILCO's largest industrial customer. Aggregate gas and electric revenues from sales to Caterpillar were 9.1%, 9.3% and 9.8% of CILCO's total operating revenue for 1993, 1992 and 1991, respectively. On November 3, 1991, Caterpillar employees began a selective labor strike at one of Caterpillar's facilities in CILCO's service territory and at additional facilities outside its service territory. Caterpillar responded to the selective strike by locking out workers at several of its facilities. In February 1992, Caterpillar ended the selective lockout, but the employees responded by initiating strikes against these and several other facilities. In April 1992, the employees agreed to return to work. A new contract has not yet been negotiated. CILCO's future electric operating results could be adversely affected if the strike is resumed and lasts for a prolonged period. FRANCHISES CILCO negotiates franchise agreements which authorize it to provide utility services to the communities in its service area. The franchises are for various terms, usually 25 to 50 years. Based on past experience, CILCO anticipates that as franchises expire new franchises will be granted in the normal course of business. COMPETITION CILCO, as a regulated public utility, has an obligation to provide service to retail customers within its defined service territory; thus, CILCO is not currently in competition with other public utilities for retail electric or gas customers in these areas. However, electricity and natural gas compete with other forms of energy available to customers. For example, within the City of Springfield, CILCO's natural gas business competes with the City's municipal electric system to provide customer energy needs. During 1993, CILCO continued to transport gas purchased by commercial and industrial customers directly from producers and marketers. In 1993, approximately $10.1 million of revenue was generated from transportation services provided to 668 customers. Transportation arrangements have made it practical for certain industrial customers to continue to use gas instead of switching to alternate fuels. The amount of gas transported in the future will depend on a number of factors including regulatory and legislative action, the relative cost of gas purchased on the spot market compared to the cost of gas provided by CILCO and the cost of alternate fuels, and the feasibility of customers bypassing the CILCO system. See Electric Competition under Item 7. Management's Discussion and Analysis of Financial Condition for a discussion of competitive trends which may affect CILCO's electric operations. EMPLOYEES The number of full-time and part-time employees at December 31, 1993 was 1,533, excluding CILCO employees assigned to the Other Businesses. Of these, 225 power plant employees were represented by Local 8 of the International Brotherhood of Firemen and Oilers, and 497 gas and electric department employees were represented by Local 51 of the International Brotherhood of Electrical Workers. BUSINESS OF ESE ESE is an environmental consulting and engineering firm with additional capabilities in laboratory analysis and equipment manufacturing. ESE's services are intended to address the growing concern over the quality of the environment, the promulgation of numerous complex federal, state, and local environmental regulations, and enforcement efforts in support of environmental laws. As such, ESE's business is affected by the existence and enforcement of various federal and state statutes and regulations dealing with the environment and the use, control, disposal and clean-up of hazardous wastes (see Regulation of ESE's Clients herein). ESE provides a full-service approach to business, industrial and governmental clients, commencing with problem identification and analysis, continuing through regulatory negotiation and engineering, and concluding with the preparation and implementation of a remediation plan or final design and construction. ESE has a wide range of clients in business, industry and government, including federal agencies, local and state governments, institutional, commercial and industrial firms, and professional service firms. ESE employs environmental, chemical, geotechnical, civil, mechanical, electrical, structural, transportation and process engineers; geologists; hydrogeologists; chemists; biologists; toxicologists; meteorologists; industrial hygienists; architects; and surveyors. ESE has a nationwide network of offices with its corporate office in Peoria, Illinois. Presently, ESE has three major laboratories located in Englewood, Colorado; Gainesville, Florida; and Peoria, Illinois. ESE provides services in the following areas: Air Quality Services: ESE provides ambient air monitoring, source testing, permitting and licensing emissions inventories; planning and compliance strategies; dispersion modeling; data management; indoor air quality; and engineering design/installation. Analytical Services: ESE provides comprehensive chemical analysis, field sampling services, and interpretation for environmental, wastewater and air pollution chemistry, industrial hygiene and treatability studies. Included is hazardous waste analysis/characterization for inorganics/organics; trace environmental analysis for toxics in water, sediments, and tissue; acid rain analysis; analytical methods research and development; priority pollutant analysis; radiochemical analysis (including radon testing); asbestos identification and quantification; drinking water characterization; industrial hygiene analysis; and chemical data information management. Services are provided to industry, agriculture, commercial firms, consulting engineers and federal, state and local governmental agencies. Facilities Engineering and Planning Services: ESE provides services for new building projects, remodeling or additions, and investigations and evaluations of building deficiencies. ESE designs heating, ventilating, air conditioning, plumbing and fire prevention systems for new or existing structures, and designs electrical systems for industrial operations, municipal facilities, health care institutions, and commercial buildings. ESE also has experience designing large industrial parks, major highways, wastewater treatment plants and certain types of military installations. Asbestos Management/Industrial Hygiene/Lead-Based Paint Services: ESE provides on-site consultation and facility surveys to identify potential asbestos, industrial hygiene, radon and lead-based paint problems. ESE's industrial hygiene staff collects bulk samples of suspect materials, monitors buildings for contamination, and also provides construction management/contract administration services, renovation and restoration services (post-abatement) and health and safety training courses. Construction Management: ESE provides turnkey design and construction services and construction observation services on transportation and site development projects and infrastructure projects. Actual construction services are subcontracted. Environmental Assessment and Toxicology Services: ESE conducts field and laboratory studies involving chemical migration and transport, aquatic toxicology and bioassay, ecological and human health risk assessments, site selection and certification, development of regional impact studies, and environmental impact statements. Civil Engineering: ESE performs a variety of civil engineering services including highway, street and bridge planning and design, hydrological hydraulic studies and drainage design, structural analysis and design foundation engineering, computer-aided drafting and design (CADD) services, and subdivision design and surveying. Environmental Audit Service: ESE performs operational audits for clients in industry to verify an operating facility's compliance status with regulatory requirements, identifies potential liabilities associated with past waste management practices, and identifies methods for minimizing future waste generation. ESE also performs transactional audits which focus on the transfer of potential liabilities in real estate or business transactions. Environmental Engineering Services: ESE provides environmental engineering services which include applied research and development, water and waste characterization, treatability and disposal studies, process and concept design of treatment and disposal facilities, design of drinking water treatment and distribution facilities, design of wastewater/industrial waste treatment and collection facilities, technical and economic feasibility evaluations, contract operation and maintenance of water and wastewater treatment facilities, pursuit of permit approval for water and solid waste-oriented activities and design of solid waste landfills and recycling facilities. Hydrogeology: ESE performs subsurface investigations and evaluations for both geological and engineering studies. Service areas include hydrogeologic investigations, geophysical studies, soils and materials testing, aquifer evaluation, well inventories and consumptive use analysis, saltwater intrusion investigations, leakage-recharge investigations, well field studies, groundwater pollution investigations, groundwater supply permitting, and groundwater modeling. Remediation: ESE develops, designs and implements remediation plans at contaminated sites. ESE has developed and patented the above-ground fixed-film bioreactor under the registered trademark PetroClean biomediation system, which treats contaminated soil and groundwater in place without excavating and removing affected soil. ESE also provides remediation services for contaminated soil and groundwater using a variety of other technologies. Storage Tank Management Service: ESE provides services for managing environmental issues related to underground and aboveground storage tanks. Key service areas range from pre-planning to assessment and closure of problem sites including site assessments, analytical services, remediation and risk assessment. ESE's tank management programs include tank removal, retrofitting, replacement, and conversion of underground systems to aboveground storage. Surface Water Resources Service: ESE offers characterizations of the freshwater, estuarine, and oceanic environments; environmental impact assessments; site selection studies; licensing and permitting studies; field surveys and monitoring; numerical/physical modeling; technical analyses; and hydrologic and hydraulic engineering services including stormwater drainage analysis, floodplain management, and receiving water quality evaluations. Manufacture of Equipment: Through its wholly-owned subsidiary, Keck Instruments,Inc., ESE designs, assembles, and markets instrumentation for measuring, monitoring, detecting, and sampling groundwater as well as instruments for mineral exploration and detection, analysis, and subsurface mapping. CUSTOMERS/INDUSTRY SEGMENTS ESE sells its products and services to both governmental agencies and public and private companies. Approximately 29% of ESE's revenue for 1993 was generated by services performed for federal, state and local governmental agencies. No single customer accounted for more than 10% of ESE's gross revenues for the year ended December 31, 1993. In 1993, approximately 81% of ESE's revenue was generated from environmental consulting and engineering services, 18% from laboratory services and 1% from manufactured equipment sales. REGULATION OF ESE'S CLIENTS The level and nature of ESE's business activity is largely dependent upon government statutes and regulations relating to the environment. Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund or CERCLA): CERCLA is the most significant federal statute addressing practices involving hazardous substances and imposing liability for cleaning up contamination in soil and groundwater. This legislation has four basic provisions: (i) creation of an information gathering and analysis program which enables federal and state governments to identify abandoned waste sites and to set priorities for investigation and response; (ii) granting of federal authority to respond to hazardous waste emergencies and to clean up hazardous waste sites; (iii) imposition of liability on persons responsible for disposal of hazardous substances that may be released into the environment; and (iv) creation of a federally managed trust fund to pay for the cleanup of waste sites where a "potentially responsible party" cannot be identified or where a threat to the environment requires immediate response. In October 1986, the Superfund Amendments and Reauthorization Act (SARA) was passed as a five-year extension of the Superfund program. Title III of SARA, also known as the Emergency Planning and Community Right-to-Know Act of 1986, established a reporting and notification system for companies dealing with hazardous chemicals. The Superfund program was reauthorized in 1990 and was extended without change until September 30, 1994. CERCLA is scheduled for reauthorization in 1994. Resource Conservation and Recovery Act of 1976 (RCRA): While Superfund seeks to remedy the damage caused by inactive or abandoned waste sites, RCRA imposes comprehensive regulation of the management of hazardous waste at active facilities. RCRA and the regulations thereunder establish a comprehensive "cradle to grave" regulatory program applicable to hazardous waste and impose requirements for performance testing and recordkeeping for any person generating, transporting, treating, storing, or disposing of more than the specified minimum levels of hazardous waste. In November 1984, RCRA was amended by the Hazardous and Solid Waste Amendments, which extend RCRA to most industrial and commercial activities in the nation. In addition, RCRA requires that underground storage tanks be identified and inspected, and those found to be leaking must be cleaned up. RCRA's reauthorization by Congress is anticipated in 1994 or 1995. National Environmental Policy Act of 1970 (NEPA): NEPA requires an analysis of the environmental impact of any major federal action, including the issuance of federal environmental permits for industrial facilities which may significantly affect the quality of the environment. Toxic Substances Control Act of 1976 (TSCA): TSCA authorizes the EPA to gather information relating to the risks posed by chemicals and to regulate the use and disposal of asbestos and polychlorinated biphenyls. Federal Insecticide, Fungicide and Rodenticide Act (FIFRA): FIFRA regulates the use and manufacture of pesticides and related chemicals. Clean Air Act of 1970 (CAA): Provisions of the CAA, as amended in 1977 and 1990, authorize the EPA to set maximum acceptable contaminant levels in the ambient air, to control emissions of certain toxic materials, and to ensure compliance with air quality standards. The Clean Air Act Amendments of 1990 discussed in Environmental Matters under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, included herein, will create additional regulation for air toxic emissions, acid rain and attainment of air quality standards. Clean Water Act of 1972, as amended in 1987 (CWA): CWA requires every state to set water quality standards for each significant body of water within its boundaries, and to ensure attainment and/or maintenance of those standards. These standards and limitations are enforced in large part under a nationwide permit program known as the National Pollutant Discharge Elimination System (NPDES). Reauthorization of CWA is pending and is likely to be accomplished in 1994. Safe Drinking Water Act, as amended in 1986 (SDWA): The SDWA affects numerous public water supplies. Under this Act, the EPA must establish primary drinking water standards. National Pollutant Discharge Elimination System (NPDES) Stormwater Permitting Regulations of 1990: The intent of this regulation, passed in November 1990, is to control pollution from stormwater discharges associated with industrial activity and municipal storm sewer systems. Occupational Safety and Health Act of 1970 (OSHA): Health and safety at the workplace are regulated under OSHA. OSHA provides for permissible exposure levels for certain hazardous substances, including asbestos, and also establishes an enforcement mechanism for these and other health and safety standards. State and Local Regulations: In addition to federal statutes and regulations, numerous state and local statutes and regulations relating to environmental risks impose additional environmental standards on ESE's customers. Some of the activities and risks covered by these statutes and regulations, and which ESE assists its customers in addressing, include: - - clean-up and remediation of contaminated soil and groundwater; - - identification, inspection and clean-up of leaking underground storage tanks; - - the use and disposal of asbestos, polychlorinated biphenyls and other toxic substances; - - ambient air quality and the control of emissions into the atmosphere; - - compliance with water quality standards, including those related to drinking water; and - - occupational safety and health in the workplace. REGULATION OF ESE The environmental statutes and regulations described above primarily affect ESE's clients, and thus have a significant impact on the volume of ESE's business activity and specific types of services that ESE provides to its clients. These environmental statutes and regulations also govern the manner in which ESE performs services for its clients. ESE must comply with specific worker protection requirements and other health and safety standards. These standards include taking steps to limit exposure to asbestos and chemical substances in the workplace. ESE also must comply with regulations pertaining to the disposal of certain hazardous chemicals and substances pursuant to guidelines established under federal and state law. Among those substances are chemicals used in ESE's laboratory processes as well as materials removed from the properties and facilities of its clients. Disposal costs for these materials, and legal compliance costs generally for ESE, have risen steadily in recent years and are expected to continue to increase. Management believes that the degree of enforcement of environmental regulations at the federal, state and local level will continue to affect the levels of business of ESE and its clients. COMPETITION The market for ESE's consulting services is highly competitive, and ESE is subject to competition with respect to all of the services it provides. ESE competes primarily on the basis of quality of service, expertise and, to a lesser extent, price. ESE's competitors range from small local firms to major national companies. No single entity currently dominates the environmental consulting and engineering services marketplace. In February 1990, the Company paid Hunter $2 million for a five-year non-compete agreement. Under the terms of this agreement, Hunter has agreed not to compete in the environmental consulting businesses conducted by the companies acquired by CILCORP. Hunter also agreed not to solicit employees or customers of the acquired businesses or represent itself as being engaged in the businesses conducted by these companies. SUBCONTRACTORS Because of the nature of the projects in which ESE is involved, ESE often subcontracts a portion of its projects to other contractors in order to utilize their expertise, equipment and experience in areas where ESE may lack the ability to complete the entire project. For example, because ESE does not perform underground storage tank removal or have the necessary equipment to perform drilling services in all parts of the country, such work may be subcontracted to local contractors. In addition, contracts which ESE has with federal, state and local governmental agencies may require, as a matter of law, that on a particular job ESE hire a certain percentage of minority-owned subcontractors. GOVERNMENT CONTRACTS Approximately 29% of ESE's revenue for 1993 was generated by services performed for federal, state and local governmental agencies. Many of ESE's contracts are cost-plus, based on a combination of labor cost, overhead cost, and allowable fee. Overhead rates are estimated at the time of contract negotiations. Following the completion of a contract, actual overhead is determined and the difference is reimbursed to the government or paid to ESE within the limits of the contract. Although ESE enjoys a good working relationship with the governmental agencies for which it performs these services, these contracts may be subject to renegotiation of profits or termination at the election of the government agency. PATENTS AND TRADEMARK PROTECTION ESE has applied for or been assigned certain patents or patent rights. ESE believes that its technical expertise, field experience, understanding of regulatory requirements and implementation of technological advances will continue to provide opportunities for ideas to develop which may lead to patents; however, research and development is not currently significant to ESE's operations. POTENTIAL LIABILITIES AND INSURANCE ESE is exposed to risk of financial loss during its normal course of business in a variety of ways typically associated with an environmental and engineering consulting business, including: work-related injury or illness of employees or third parties; damage to property in ESE's control during the course of a project; damage to ESE's property; repair or rectification costs resulting from failure to detect, analyze, or measure pollutants, asbestos or other toxic substances; repair or rectification costs due to faulty design, workmanship, or liability resulting from ESE's construction or design activities; failure to perform or delay in project completion; and claims by third parties for alleged pollution or contamination damage. Also, ESE assumes contingent liabilities arising out of its need to exercise care in the selection and supervision of subcontractors on various projects. Since ESE derives revenues from work involving hazardous materials, toxic wastes and pollutants, potential losses may surface many years after a project is completed. These risks, along with enforcement of environmental regulations and increasing public awareness regarding environmental issues and responsibilities, make it mandatory that ESE maintain a sound risk management and insurance program. ESE carries professional liability insurance which covers design errors and omissions resulting from its typical operations. This policy is extended to include pollution liability losses. Clients may also be named as additional insured parties for specific projects. The current policy, effective February 23, 1994, has a limit of $8 million, with the first $3 million of coverage provided by ESE's wholly-owned captive insurance subsidiary, National Professional Casualty Co. (Captive) with the next $5 million of coverage provided by a non-affiliated company. The Captive is capitalized by a combination of an ESE letter of credit and cash. The Captive does not transfer risk and is not reinsured; CILCORP does not provide credit support to the Captive. The policies cover activities in which ESE is typically involved. Accordingly, in the event of a serious spill or loss resulting from a design error or omission, ESE faces potential liability for the self-insured retention portion of a claim, as well as any amounts in excess of $8 million. ESE's professional and pollution liability insurance coverage has a standard term of one year. The professional liability insurance policies include standard industry exclusions for: dishonesty, discrimination, warranties and guarantees, punitive damages, intentional non-compliance with government regulations or statutes, nuclear energy, war, and bodily injury from the specification, installation, transportation, storage or disposal of asbestos. ESE also carries insurance policies covering worker's compensation, general liability and auto and property damage claims. The worker's compensation policy provides statutory average limits. It is a loss sensitive program under which insurance premiums vary according to actual claims paid. General Liability and auto policies provide full insurance coverage with minor deductible amounts. Also, performance and payment bonds may be provided for specific projects if required by clients. To supplement its insurance policies, ESE attempts to limit and/or transfer its risk contractually. ESE believes it operates in a safe manner and purchases insurance to protect against loss and maintain competitiveness in the marketplace; however, its entire potential liability may not be covered by insurance. Also, the total cost of a potential claim could exceed ESE's policy limits. EMPLOYEES At December 31, 1993, ESE employed 1,273 full-time and part-time employees, many of whom have advanced degrees in a variety of technical disciplines. ESE believes its relations with its employees are good. None of its employees is represented by a labor union. OTHER BUSINESSES CIM/CLM The investment portfolio of CIM at December 31, 1993 and December 31, 1992 is shown in the following table:
Type of Investment At December 31, 1993 At December 31, 1992 (In thousands) Equity in leveraged leases $114,803 $ 97,133 Cash and temporary cash investments 291 20,612 Investment in Energy Investors Fund 4,116 3,649 Other 48,204 1,761 -------- -------- Total $167,414 $123,155 ======== ========
At December 31, 1993, CIM had equity investments in seven leveraged leases through its wholly-owned subsidiaries, CILCORP Lease Management Inc. (CLM), CIM Air Leasing Inc. and CIM Leasing Inc. CIM made two new leveraged lease investments in 1993. The increase during 1993 in equity in leveraged leases reflects those investments. According to the terms of some of the lease agreements, under certain circumstances CIM may be obligated to incur additional non-recourse debt to finance the cost of certain alterations, additions, or improvements required by the lessee. CIM, through its wholly-owned subsidiary CIM Energy Investments Inc., has invested $5 million in the Energy Investors Fund, L.P.(Fund), representing a 3.13% interest in the Fund at December 31, 1993. The Fund invests in non-regulated, non-utility facilities for the production of electricity or thermal energy. The equity method of accounting is used for the investment. HOLDING COMPANY From December 1993 through March 1994, the Company issued a total of 126,475 shares of common stock through the CILCO Employees' Savings Plan (ESP) and the CILCORP Automatic Reinvestment and Stock Purchase Plan (DRIP). These shares were issued at an average price of $37.08 per share for total proceeds of $4.7 million (see Management's Discussion and Analysis of Financial Condition and Operations - Capital Resources and Liquidity.) In March 1994, the Company suspended issuing stock through the ESP and DRIP. The Company may resume issuing new shares to these plans as early as June 1994, depending on market conditions. CVI CVI invested an additional $48,000 in Peoria Medical Research Corporation doing business as Peoria Medical Research Institute, in 1993. PMRC's objective is to create a clinical research organization which will be paid by pharmaceutical firms to administer clinical trials for new products. EMPLOYEES At December 31, 1993, there were 38 full-time CILCO employees assigned to CILCORP, CVI and CIM. Item 2. Properties CILCO CILCO owns and operates two steam-electric generating plants and two combustion turbine-generators. These facilities had an available summer capability of 1,136 MW in 1993. In December 1993, CILCO announced it will acquire a cogeneration plant to be financed and built by CILCORP at the site of a Midwest Grain Inc. facility (see Capital Resources & Liquidity - CILCO under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations). The major generating facilities of CILCO (representing 97.4% of CILCO's available summer generating capability projected for 1994), all of which are fueled with coal, are as follows:
Available Summer Capability (MW) Station & Unit Installed Actual 1993 Duck Creek Unit 1 1976 366 E. D. Edwards Unit 1 1960 117 Unit 2 1968 262 Unit 3 1972 361
CILCO's transmission system includes approximately 285 circuit miles operating at 138,000 volts, 48 circuit miles operating at 345,000 volts and 14 principal substations with an installed capacity of 3,343,200 kilovolt-amperes. The electric distribution system includes approximately 6,210 miles of overhead pole and tower lines and 1,912 miles of underground distribution cables. The distribution system also includes 106 substations with an installed capacity of 1,996,995 kilovolt-amperes. The gas system includes approximately 3,406 miles of transmission and distribution mains. CILCO has an underground gas storage facility located about ten miles southwest of Peoria near Glasford, Illinois. The facility has a present recoverable capacity of approximately 4.5 billion cubic feet (bcf). An additional storage facility near Lincoln, Illinois, has a present recoverable capacity of approximately 5.2 bcf. ESE ESE owns approximately 55 acres of land in Gainesville, Florida, containing 110,000 square feet of offices, laboratory and other space. In Peoria, Illinois, ESE owns approximately 27,000 square feet of offices, laboratory and other space, secured by mortgages of $315,000 and leases approximately 21,000 square feet of additional space for offices. ESE and its subsidiaries lease additional facilities for offices, laboratories and warehouse space in 32 cities throughout the United States. ESE believes its facilities are suitable and adequate for its current businesses and does not expect to make any material acquisitions of real property in the near future. However, in 1994 ESE plans to spend $1.2 million to expand its Gainesville, Florida, laboratory by approximately 8,000 square feet. Item 3. Legal Proceedings Reference is made to Environmental Matters under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for certain pending legal proceedings and/or proceedings known to be contemplated by governmental authorities. Reference is also made to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Gas Take-or-Pay Charges and CILCO Gas Operations and CILCORP Note 3 - Federal Income Tax Audit Settlement included herein. Pursuant to CILCO's By Laws, CILCO has advanced legal and other expenses actually and reasonably incurred by employees, and former employees, in connection with the investigation of CILCO's Springfield gas operations described in Item 7. Management's Discussion and Anaylsis of Financial Condition and Results of Operations - CILCO Gas Operations. CILCO and ESE are subject to certain claims and lawsuits in connection with work performed in the ordinary course of their businesses. In the opinion of management, all claims unless otherwise currently pending will not result in a material adverse effect on the financial position and results of operations of the Company as a result of one or more of the following reasons: (i) insurance coverage; (ii) contractual or statutory indemnification, or (iii) reserves for potential losses. ESE ESE leases a building in Shelton, Connecticut, under a lease agreement which expires February 15, 2000. In January 1991, ESE gave notice of its intent to exercise an option to purchase the building at fair market value pursuant to a provision of the lease. Due to a dispute with the lessor regarding the definition of fair market value, exercise of the option was delayed pending a declaratory judgment by a federal district court in Connecticut. On February 25, 1994, the court issued its final order which declared the purchase option void. ESE filed its notice of appeal on March 2, 1994. Management cannot predict whether its appeal will be successful. Future minimum rental payments are reflected in Note 10 to the financial statements. The building is not currently occupied by ESE or a sublessor, as ESE's Shelton operations ceased in 1991. If the purchase option is ultimately voided, ESE will record an after-tax loss of approximately $500,000, which is equal to the present value of the future rental payments, net of income taxes and estimated sublease revenues. Item 4. Submission of Matters to a Vote of Security Holders CILCORP There were no matters submitted to a vote of security holders during the fourth quarter of 1993. CILCO There were no matters submitted to a vote of security holders during the fourth quarter of 1993. Executive Officers of CILCORP Age at Positions Held During Initial Name 3/31/94 Past Five Years Effective Date(2) R. O. Viets 50 President and Chief Executive Officer February 1, 1988 J. G. Sahn(1) 47 Vice President, General March 1, 1994 Counsel and Secretary Vice President and General Counsel February 1, 1989 R. J. Sprowls 36 Treasurer and Assistant Secretary October 1, 1990 Treasurer - CILCO February 1, 1988 T. D. Hutchinson 39 Controller February 1, 1988 Notes: (1) M. J. Murray served as Secretary and Assistant Treasurer from January 22, 1985, until February 28, 1994, when he retired and was replaced as Secretary by J. G. Sahn. (2) The term of each executive officer extends to the organization meeting of CILCORP's Board of Directors following the next annual election of Directors. Executive Officers of CILCO Age as of Positions Held During Initial Name 3/31/94 Past Five Years(1) Effective Date(2) R. W. Slone 58 Chairman of the Board, President and Chief Executive Officer April 23, 1991 President and Chief Executive Officer February 1, 1988 T. S. Kurtz 46 Vice President November 1, 1988(3) T. S. Romanowski 44 Vice President October 1, 1986(3) W. M. Shay 41 Vice President January 1, 1993(3) J. F. Vergon 46 Vice President October 1, 1986(3)(4) W. R. Dodds 39 Treasurer and Manager of Treasury Department October 1, 1990 Controller and Manager of Accounting February 1, 1988 R. L. Beetschen 48 Controller and Manager of Accounting October 1, 1990 Supervisor - General Accounting May 1, 1988 J. G. Sahn 47 Secretary March 1, 1993 Notes: (1) The officers listed have been employed by CILCO in executive or management positions for more than five years except Mr. Shay and Mr. Sahn. Mr. Shay was Vice President and Chief Financial Officer of CILCO's parent, CILCORP Inc., from August 15, 1988 through December 31, 1992. Mr. Sahn also serves as Vice President and General Counsel of CILCORP Inc., a position he has held since February 1, 1989. (2) The term of each executive officer extends to the organization meeting of CILCO's Board of Directors following the next annual election of Directors. (3) T. S. Kurtz, T. S. Romanowski, W. M. Shay and J. F. Vergon head the Electric Production Group, the Finance and Administrative Services Group, the Electric Operations Group, and the Gas Operations Group, respectively. T. S. Romanowski also serves as CILCO's Principal Financial Officer. J. F. Vergon also serves as Chairman of the Board, President and Chief Executive Officer of CILCORP Investment Management Inc. (4) J. F. Vergon was Vice President of CILCO from October 1, 1986 through December 31, 1992. From January 1, 1993 through February 28, 1993, Mr. Vergon was Vice President and Chief Financial Officer of CILCO's parent, CILCORP Inc. Effective March 1, 1993, Mr. Vergon became a Vice President of CILCO. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters CILCORP The Company's common stock is listed on the New York and Chicago Stock Exchanges (ticker symbol CER). At December 31, 1993, there were 15,830 holders of record of the Company's common stock. The following table sets forth, for the periods indicated, the dividends per share of common stock and the high and low prices of the common stock as reported in New York Stock Exchange Composite Transactions.
Quarter 1992 First Second Third Fourth Price Range High $37 7/8 $38 $40 1/4 $40 5/8 Low $33 5/8 $35 1/4 $37 $38 1/4 ------- ------- ------- ------- Dividends Paid $ .615 $ .615 $ .615 $ .615 ======= ======= ======= ======= 1993 Price Range High $43 3/8 $43 3/8 $43 3/4 $43 Low $39 $40 3/8 $41 5/8 $35 3/4 ------- ------- ------- ------- Dividends Paid $ .615 $ .615 $ .615 $ .615 ======= ======= ======= ======= The number of common shareholders of record as of March 15, 1994, was 15,726.
CILCO CILCO's common stock is not traded on any market. As of March 15, 1994, 13,563,871 shares of CILCO's Common Stock, no par value, were issued, and outstanding and privately held, beneficially and of record, by CILCORP Inc. CILCO's requirement for retained earnings before common stock dividends may be paid as described in Note 4 of CILCO's Notes to Financial Statements contained in Item 8. Financial Statements and Supplementary Data. Item 6. Selected Financial Data CILCORP INC. Selected Financial Data
For the Years Ended December 31 1993 1992 1991 1990 1989 (In thousands except per share amounts) Revenue $ 584,511 $ 581,225 $ 590,165 $ 542,847 $ 463,062 Net income available for common stockholders 33,583 32,097 39,656 34,504 48,399 Earnings per share 2.60 2.48 3.14 2.69 3.58 Total assets 1,198,440 1,184,916 1,147,978 1,155,254 1,136,140 Long-term debt 325,711 307,628 324,998 298,217 301,114 Dividends declared per common share 2.46 2.46 2.46 2.46 2.46
CILCO
For the Years Ended December 31 1993 1992 1991 1990 1989 (In thousands) Operating revenues $453,878 $433,739 $454,602 $432,961 $426,302 Net income available for common stockholders 33,635 31,195 39,790 36,525 39,989 Total assets 988,325 965,691 942,634 928,304 947,465 Long-term debt 278,321 257,361 268,006 268,051 268,095 Ratio of Earnings to Fixed Charges 3.20 3.12 3.74 3.55 3.71
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations CILCORP AND SUBSIDIARIES The financial condition and operating results of CILCORP (the Company) primarily reflect the operations of Central Illinois Light Company (CILCO), the Company's principal business subsidiary. The Company's other core business subsidiary is Environmental Science & Engineering, Inc. (ESE). The Other Businesses segment includes the operations of the holding company itself (Holding Company), its investment subsidiary, CILCORP Investment Management Inc. (CIM), and its venture capital subsidiary, CILCORP Ventures Inc. (CVI). CILCO is a regulated public utility engaged in the generation, transmission and distribution of electric energy and the purchase, transportation and distribution of natural gas in Central Illinois. ESE is an environmental consulting and engineering firm with additional capabilities in laboratory analysis and equipment manufacturing. ESE provides a full-service approach to private, industrial and government clients, commencing with problem identification and analysis, continuing through regulatory negotiation and engineering, and concluding with preparation and implementation of remediation plans. OVERVIEW Contributions to the Company's earnings per share for the last three calendar years are shown below:
1993 1992 1991 CILCO $2.60 $2.41 $3.15 ESE (.17) .15 (.11) Other Businesses .17 (.08) .10 ----- ----- ----- Earnings per share $2.60 $2.48 $3.14 ===== ===== =====
CILCO's earnings increased approximately 8% in 1993 due to higher electric retail sales. Cooling degree days were near normal in 1993 but were 23% below normal in 1992. The effect of higher gas sales resulting from increased heating degree days was more than offset by higher operations, maintenance, and depreciation expense resulting from increased repairs and replacements to the gas distribution system. As a result, gas operating income again declined. In January 1994, CILCO filed a request with the Illinois Commerce Commission (ICC) for an 8.9% increase in gas base rates (see Gas Rate Increase Request). ESE's results decreased the Company's earnings by $2.3 million in 1993 compared to a positive earnings contribution of $1.9 million in 1992. ESE's revenues declined due to continued economic uncertainty, delays in government enforcement actions, and a more cautious approach by ESE's customers toward environmental compliance. During 1993, ESE continued to close and consolidate offices with low personnel utilization and took steps to control administrative costs. Other Businesses' results improved by $2.6 million from 1992. In late 1993, the Company and the Internal Revenue Service (IRS) settled certain tax issues related to the Company's leveraged lease portfolio. The settlement resulted in a $.24 per share increase in the Company's 1993 earnings. The following table summarizes each business segment's contribution to net income (see Results of Operations for further discussion).
1993 1992 1991 Electric operating income $49,129 $45,079 $52,647 Gas operating income 11,058 12,521 13,376 ------- ------- ------- Total utility operating income 60,187 57,600 66,023 Utility interest expense and other (26,828) (27,014) (27,079) Environmental and engineering services net income (loss) (2,266) 1,938 (1,424) Other Businesses net income (loss) 2,490 (427) 2,964 ------- ------- ------- Net Income $33,583 $32,097 $40,484 ======= ======= =======
Return on average common equity was 10% in 1993 compared to 9.5% in 1992 and 12.3% in 1991. The ratio of common equity to total capitalization, including minority interest and short-term debt, remained stable in 1993 at approximately 45%. The fixed charge coverage ratio also remained stable at 2.4. Inflation may have a significant impact on the Company's future operations, its ability to contain costs, and the need to seek timely and adequate utility rate increases. Over the past five years, the rate of inflation as measured by the Consumer Price Index has ranged from 2.6% to 5.4% annually. To help protect CILCO from the effects of inflation, substantially all electric and gas sales rates include a fuel adjustment clause (FAC) or a purchased gas adjustment clause (PGA) to provide for the recovery of changes in electric fuel costs, excluding coal transportation, and changes in the cost of gas. CAPITAL RESOURCES AND LIQUIDITY The Company believes that internal and external sources of capital which are, or are expected to be, available to the Holding Company and its subsidiaries will be adequate during the coming year to fund the Company's capital expenditures program, pay interest and dividends, meet working capital needs and retire (or refinance) debt as it matures. THE COMPANY In December 1993, the Company issued 62,220 shares of common stock through the CILCO Employees' Savings Plan (ESP) and the CILCORP Automatic Reinvestment and Stock Purchase Plan (DRIP). These shares were issued at an average price of $38 per share for total proceeds of $2.4 million. Previously, the ESP and DRIP plans purchased shares of CILCORP common stock on the open market. Depending on market conditions, the Company may choose to issue new shares of common stock through the ESP and DRIP or have the plans resume purchasing CILCORP stock on the open market. However, the Company may not change its strategy more frequently than every 90 days. The Company plans to issue up to $30 million of common stock through these plans by 1996, depending on market conditions and corporate needs, but is under no commitment to do so. The proceeds from newly issued stock will be used to retire CILCORP short-term debt, to meet working capital and capital expenditure requirements at CILCO, and for other corporate purposes. During 1993, CILCORP's Board of Directors authorized an increase in the Holding Company's short-term borrowing limit from $35 million to $40 million. At December 31, 1993, the Holding Company had $35 million of committed bank lines and $5 million of discretionary bank lines, of which $18.8 million was used, compared to $20 million committed and $2 million outstanding at December 31, 1992. The Company established a $75 million private medium-term note program in 1991. To date, $26 million has been issued. The Company may issue additional notes during 1994-1997 to retire short-term debt incurred to partially fund new investments by CIM, to retire maturing debt of CILCORP Lease Management Inc. (CLM), a wholly-owned subsidiary of CIM, and to provide funds for other corporate purposes. In December 1993, the Holding Company announced that it will initially finance the $11 million construction cost of a cogeneration facility to be located at the site of one of CILCO's current industrial customers (see Electric Competition). Upon receiving ICC approval for the project, CILCO will acquire the steam boilers and other equipment from the Holding Company and invest an additional $5.8 million to install a 20 megawatt turbine generator and related equipment. In December 1993, the IRS and the Company reached agreement on certain disputed issues relating to the IRS audit of the Company's 1985 and 1986 income tax returns (see Note 3). OTHER BUSINESSES At December 31, 1992, CIM and CLM had cash and temporary cash investments of $20.6 million. During 1993, CIM invested $13 million in leveraged leases of passenger railway equipment and an aircraft. The two assets had a total cost of $67 million. The balance of CIM's investment was financed with non-recourse debt. During 1993, CLM retired $6 million of debt and paid the tax liability relating to the gain on the 1992 sale of an office building. At year-end, CIM and CLM had $300,000 of cash and temporary cash investments. As part of the 1992 restructuring of the Springerville Unit No. 1 lease, CLM received approximately 1.2 million shares of Tucson Electric Power Company (TEP) common stock, and warrants to purchase approximately 895,000 additional shares. During 1993, CLM sold one million shares at an average price per share of $3.57, realizing a pre-tax gain of $2 million. CLM plans to sell the remaining TEP stock during 1994, depending upon market conditions. In December 1993, CIM acquired the 19% minority interest in CLM. CILCO In 1993, CILCO spent $73 million for capital additions and improvements. These expenditures consisted primarily of replacements and improvements to the existing electric and gas systems, including $17.5 million to replace certain portions of the Springfield gas distribution system (see Results of Operations, CILCO Gas Operations). This project was substantially completed in September 1993, at an ultimate cost of approximately $24 million. Utility capital projects were financed during 1993 with funds from operating activities. CILCO's cash flow from operations in 1993 was $92 million. During 1993, CILCO issued $108 million of first mortgage pollution control bonds and medium term notes (see Note 7), $22 million of perpetual preferred stock and $25 million of flexible auction rate preferred stock (see Note 6). CILCO retired $96.4 million of first mortgage bonds and $45.5 million of perpetual preferred stock during 1993. The balance of the financing proceeds was used to retire short-term debt. Annual interest expense will decrease $730,000 as a result of the bond refinancings. Also, annual preferred dividend requirements are expected to decrease by $1.3 million as a result of refinancing fixed-rate preferred stock with lower fixed-rate preferred stock and with flexible auction rate preferred stock. CILCO's short-term debt decreased to $12.4 million at December 31, 1993, from $24.5 million at December 31, 1992. CILCO expects to issue short-term commercial paper periodically during 1994, and is currently authorized by its Board of Directors to issue up to $66 million of short-term debt. At December 31, 1993, committed bank lines of credit totalled $30 million, all of which were unused. CILCO expects these bank lines will remain unused through 1994. Estimated capital expenditures for 1994 and 1995 are $90 million and $73 million, respectively. The 1994 estimate includes $34 million for electric energy supply and transmission projects, $5 million for gas supply and transmission projects, and $43 million for electric and gas distribution system improvements. CILCO's expected purchase of the cogeneration plant being initially financed by the Holding Company is included in 1994 capital expenditures. CILCO plans to finance its 1994 and 1995 capital requirements with funds provided by operating activities and the issuance of approximately $30 million of additional long-term debt during 1994. Anticipated total capital expenditures for 1996-1998 are $213 million. These expenditures are expected to be financed primarily with internally-generated funds. In October 1993, Standard & Poor's (S&P) released revised financial ratio benchmarks for rating electric utilities' debt which reflect increased business risk in the industry. As a result, S&P revised CILCO's rating outlook from "stable" to "negative." A "negative" outlook means a long-term debt rating may be lowered, but it is not necessarily a precursor of a rating change. CILCO's current S&P long-term debt rating is AA. ESE ESE spent $4.3 million for capital additions and improvements in 1993, and expects to spend $5.0 million in 1994. ESE's 1993 cash flow from operations was $11.5 million, which was used to fund capital expenditures and to reduce debt. A decrease in accounts receivable contributed $4.8 million to 1993 cash flow. ESE had borrowed $23 million from the Holding Company and $8.1 million from third parties at December 31, 1992. In May 1993, ESE and the Holding Company entered into a credit agreement to consolidate ESE's outstanding debt at that time. The proceeds from this borrowing were used, in part, to retire loans from the Holding Company under the prior agreement. Under this new agreement, ESE can draw on a $15 million revolving line of credit which expires May 2, 1996. At December 31, 1993, ESE had $.9 million outstanding on this line. ESE also borrowed $20 million from the Holding Company on a term credit basis with the principal due on May 2, 1998. ESE reduced borrowings from the Holding Company by $2.1 million during 1993 and retired $7.6 million of its debt to third parties. ESE had an unused $1 million bank line of credit at December 31, 1993, to provide for working capital needs and had a separate $5 million bank line of credit, of which $2.6 million was used, to collateralize performance bonds issued to companies in connection with ESE projects. ESE expects to finance its capital expenditures and working capital needs for 1994 with a combination of funds generated internally and periodic short-term borrowing from the Holding Company. GAS RATE INCREASE REQUEST On January 14, 1994, CILCO filed a request with the ICC to increase gas base rates to reflect both the current costs of providing gas service and its additional investment in the gas system, including the replacement of certain portions of the Springfield gas distribution system (see Capital Resources and Liquidity-CILCO). The revised rates are designed to increase annual gas revenues approximately $15 million, or 8.9% based upon an adjusted test year ended December 31, 1995. The filing requests a 9.4% return on original cost rate base and a 12% return on common equity. Management cannot predict the outcome of the filing. A decision from the ICC is not expected until late 1994. ENVIRONMENTAL MATTERS CILCO's capital expenditures relating to pollution control facilities are estimated to be $9 million and $5 million for 1994 and 1995, respectively. The acid rain provisions of the Clean Air Act Amendments of 1990 (Amendments) will require additional sulfur dioxide (SO2) and nitrogen oxide (NOx) emission reductions at CILCO's generating facilities. CILCO's facilities are exempt in Phase I of the Amendments due to previous emission reductions, but are subject to Phase II of the Amendments, which require additional emission reductions by the year 2000. CILCO's final compliance strategy will depend upon regulations issued under the Amendments; therefore, CILCO cannot currently determine definitive compliance costs and schedules. CILCO's present strategy includes use of an existing SO2 scrubber and limited fuel switching to reduce SO2 emissions, and combustion control modifications to reduce NOx emissions. CILCO's generating units will not require additional SO2 scrubbers. CILCO cannot determine the extent to which greater market demand for low-sulfur compliance coal in Phase II may increase fuel costs. CILCO spent $3.5 million through 1993 to install replacement burners on one of its generating units to reduce NOx emissions. Total costs for boiler retrofits and emissions monitoring equipment are expected to be $15.8 million through 1995. CILCO will install additional NOx controls at its generating units as needed to meet the compliance provisions under Title IV of the Clean Air Act. Other provisions of the Amendments call for new permitting programs, new monitoring and enforcement programs, and several power plant emissions studies which could eventually result in further emission regulation and additional emission controls for hazardous air pollutants. Also, the Clean Water Act and the Resource Conservation and Recovery Act, which deal with water and solid waste pollution control, may be reauthorized during 1994. CILCO will continue to monitor regulatory actions and develop compliance strategies to minimize any financial impact. Under current regulatory policies, CILCO expects to recover compliance costs associated with the Amendments and other environmental regulations through rates charged to customers. In March 1993, the U.S. Environmental Protection Agency (EPA) issued a final rule which specified the number of acid rain emission allowances allocated to power plants in Phase II of the Amendments and established various allowance reserves. Allowances are transferable from one utility to another at market prices. The number of allowances allocated to CILCO approximates its future needs, so CILCO expects it will buy or sell minimal amounts of allowances. Some studies suggest that magnetic fields produced by electric current, known as "electric and magnetic fields" or EMF, may be associated with illness or disease. However, research conducted to date has found no conclusive evidence that EMF has an adverse impact on health. CILCO is participating in utility industry funded studies on this subject. There also are claims that EMF may contribute to losses in the market value of property near electric power lines. CILCO will continue to monitor these issues; their ultimate impact cannot be predicted at this time. CILCO continues to investigate former gas manufacturing plant sites to determine if it is responsible for the remediation of any remaining waste materials (coal tar) at those sites. The sites of five former gas manufacturing plants are located within CILCO's present gas service territory. CILCO previously operated three of the five plants, and of the three sites, it currently owns two. In cooperation with the Illinois Environmental Protection Agency (IEPA), CILCO has completed remedial action, at a cost of $3.3 million, at one of the two owned sites at which it operated a plant. CILCO developed an investigation plan in 1992 to define the extent of remediation for the other owned site at which it formerly operated a plant. That investigation plan has been reviewed and approved by the IEPA, and CILCO implemented the investigation plan in 1993. A remediation plan for this site is currently being developed. CILCO has not yet formulated a remediation plan for the previously owned site where it formerly operated a gas manufacturing plant. CILCO does not currently own the two sites at which it did not operate a plant. Through 1993, CILCO paid approximately $500,000 to outside parties to investigate and/or test former gas manufacturing plant sites. CILCO expects to spend approximately $200,000 for site monitoring and feasibility studies in 1994. Until more detailed site specific testing has been completed, CILCO cannot determine the ultimate extent or cost of any remediation of the two remaining sites where it operated plants. CILCO has recorded a $4.4 million liability and a corresponding regulatory asset on its balance sheet for coal tar investigation and remediation costs. The $4.4 million represents the minimum amount of the estimated range of such future costs which CILCO expects to incur. CILCO has not yet determined the extent, if any, of its remediation responsibility for the non-owned sites at which it never operated a gas manufacturing plant. In August 1991, the ICC approved a rate rider which authorized CILCO to recover prudently incurred coal tar investigation and remediation costs from gas customers during the respective years the costs were incurred. The rider provided that the incurred costs would be subject to a yearly prudence review and a reconciliation of actual costs with amounts recovered through the rider. Future recoveries were to be adjusted to reflect prior under-recoveries or over-recoveries of costs. In 1992, the ICC issued a generic order which authorized Illinois utilities to recover prudently incurred expenditures paid to outside parties to investigate and remediate coal tar sites. Under the generic order, expenses would be recovered over a five-year period, with no carrying costs allowed on the unrecovered balance. CILCO was directed by the ICC to make its rider consistent with the generic order. The 1991 decision relating to CILCO and the 1992 generic order were appealed to the Illinois Appellate Court by various parties, including CILCO. In December 1993, the Illinois Appellate Court affirmed the ICC's generic order and directed the ICC to make the 1991 CILCO order consistent with the generic order. Based upon CILCO's interpretation of existing law, it believes that coal tar expenses prudently incurred and collected prior to the Appellate Court's decision are not subject to refund. However, if no appeal is granted from the Appellate Court's decision or if that decision is affirmed by the Illinois Supreme Court, expenses incurred after the Appellate Court's decision will be subject to the generic order. CILCO has been advised that at least one party plans to appeal the generic order to the Illinois Supreme Court. Coal tar remediation costs incurred through 1993 have been deferred on the Balance Sheets, net of amounts recovered from customers. CILCO began recovering remediation costs under its coal tar rider on October 1, 1991, and through 1993 has recovered approximately $4 million. CILCO cannot predict the outcome of any appeal to the Illinois Supreme Court, or whether amounts previously recovered will be subject to refund, but believes most or all of its future coal tar remediation costs will continue to be recoverable from customers. Although the total cost to CILCO of any action with respect to the unremediated sites and the possibility of recovering that cost from insurance carriers or any potentially responsible parties cannot now be determined, management believes that such cost will not have a material adverse effect on CILCO's financial position or results of operations. ELECTRIC COMPETITION The electric utility industry is expected to become more competitive as a result of the passage in 1992 of the National Energy Policy Act. This Act encourages competition by allowing both utilities and non-utilities to form non-regulated generation subsidiaries to supply additional electric demand without being restricted by the Public Utility Holding Company Act of 1935. Also, the Federal Energy Regulatory Commission (FERC) may order access to utility transmission systems by third-party energy producers on a case-by-case basis and may order electric utilities to enlarge their transmission systems to transport (wheel) power, subject to certain conditions. The Act specifically bans federally-mandated wheeling of power for retail customers, but several state public utility regulatory commissions, including Illinois, are currently studying retail wheeling. To prepare for an increasingly competitive environment, CILCO implemented a new electric tariff in 1993 which permits it to negotiate contractual rates with individual customers who find it economically feasible and practical to use cogeneration, independent power production, or other power arrangements in place of CILCO-supplied energy. CILCO currently has one customer on this contractual rate. In December 1993, CILCO and one of its current large industrial customers, Midwest Grain Products, Inc. (Midwest Grain), announced an agreement to build a cogeneration plant. The plant, which will be located at a Midwest Grain facility in CILCO's service territory, will utilize natural gas to provide steam heat to the facility and electricity for sale to Midwest Grain and other CILCO customers (see Capital Resources and Liquidity-The Company). With growing competition in the electric utility industry, CILCO's largest customers may have increased opportunities to select their electric supplier. CILCO formed a Corporate Sales Department in 1993 to work with its larger customers to address their unique electric power requirements and business needs so that CILCO may remain their supplier of choice. To date, CILCO has entered into long-term contracts with four of its industrial customers to provide them with their electric power requirements. FEDERAL ENERGY REGULATORY COMMISSION ORDER 636 In 1992, the FERC issued Orders 636, 636A, and 636B (collectively Order 636). The orders have been appealed to the United States Court of Appeals by various parties. As a result of Order 636 and subsequent regulatory filings by interstate pipelines, the pipelines will continue to transport gas to local gas distribution companies such as CILCO, but this service will be administered independently of the pipelines' sales of gas. Interstate pipelines serving CILCO have generally ceased sales of gas and have become transporters only. CILCO currently arranges for the purchase of gas from a variety of suppliers and has contracted for additional gas storage capacity to meet customer demands for gas. CILCO believes it is well-positioned to ensure the continued acquisition of adequate and reliable gas supplies despite the regulatory changes. Order 636 also permits pipelines to file new tariffs to provide for the recovery from their customers, including CILCO, of prudently incurred costs resulting from the transition to services under Order 636 ("transition costs"). Thus far, CILCO's pipeline suppliers have filed with the FERC to directly bill CILCO, subject to refund, for approximately $1.4 million of transition costs, including interest, as of December 31, 1993. CILCO has been billed approximately $394,000 through December 31, 1993. These charges are being recovered from CILCO's customers through its PGA. The PGA allows CILCO to immediately reflect increases or decreases in the cost of natural gas in its charges to customers. Approximately $332,000 has been recovered from customers through December 31, 1993. CILCO has recorded a liability of approximately $1 million and a corresponding regulatory asset on its balance sheet, representing the minimum amount of the estimated range of such future transition costs which CILCO expects to incur. On September 15, 1993, the ICC ordered an investigation into the appropriate recovery of transition costs by Illinois gas utilities. CILCO estimates that it could ultimately be billed up to $3 million, excluding interest, for pipeline transition costs. While CILCO cannot at this time determine its actual allocation of suppliers' transition costs or the outcome of the ICC proceeding, management believes that based on existing law and regulatory practice, any transition charges or other billings by the pipelines to CILCO as a result of Order 636 should be recoverable from customers through CILCO's gas rates. Therefore, management does not expect the orders will materially impact CILCO's financial position or results of operations. GAS TAKE-OR-PAY CHARGES Under FERC Order 500, and subsequent Orders 528 and 528A, interstate gas pipelines may bill gas distribution utilities for take-or-pay charges, including interest. In response to the latter two orders, pipelines serving CILCO filed new tariff allocations, entered into system-wide negotiations and reached settlements with their customers. Based on these and subsequent FERC-approved settlements, CILCO estimates it will ultimately be directly billed a total of approximately $19.6 million of take-or-pay costs, excluding interest. This number includes $3.2 million of take-or-pay charges for the Liquefied Natural Gas Settlement (discussed below). Through December 1993, pipelines have billed CILCO $19.4 million for take-or-pay charges, including $3.6 million of interest. In 1988, the ICC issued an order allowing Illinois gas utilities to recover from customers take-or-pay charges, including interest, billed to utilities by interstate pipelines. Upon appeal, the Illinois Supreme Court affirmed that ruling, and a subsequent petition for issuance of a writ of certiorari to the U.S. Supreme Court was denied. CILCO is currently recovering take-or-pay charges via a factor incorporated into the PGA, and has thus far recovered $18.6 million from its customers. LIQUEFIED NATURAL GAS SETTLEMENT A joint settlement proposal before the FERC among Trunkline LNG Company (Trunkline), Panhandle Eastern Pipeline Company (Panhandle), and others, including CILCO, became effective in September 1992. The settlement allows Panhandle to recover certain costs related to Trunkline's liquefied natural gas project and various other matters. As a result of this settlement, disputed issues were resolved, and CILCO was billed approximately $4.4 million. CILCO began recovering the cost through the PGA beginning in 1993. Approximately $3.2 million of this billing relates to gas take-or-pay, and is included in the discussion of gas take-or-pay charges above. Of the remaining $1.2 million, approximately $330,000 has been billed as of December 31, 1993. Through 1993, CILCO has recovered approximately $270,000 from its customers. CILCO has recorded a regulatory asset and corresponding liability of $1 million on the Balance Sheets. This $1 million represents the minimum amount of the estimated range of such future costs which CILCO expects to incur. ACCOUNTING PRONOUNCEMENTS In 1992, the Financial Accounting Standards Board (FASB) issued Statement No. 109, "Accounting for Income Taxes" (SFAS 109), and Statement No. 112, "Employer's Accounting for Postemployment Benefits" (SFAS 112). CILCO adopted SFAS 109 effective January 1, 1993 (see Note 2). CILCO will adopt SFAS 112 on January 1, 1994 (see Note 1). RESULTS OF OPERATIONS ELECTRIC OPERATIONS The following table summarizes electric operating revenue and expenses by component.
Components of Electric Operating Income 1993 1992 1991 (In thousands) Revenue: Electric retail $298,602 $280,380 $297,743 Sales for resale 4,522 8,433 8,446 -------- -------- -------- Total revenue 303,124 288,813 306,189 -------- -------- -------- Cost of Sales: Cost of fuel 92,112 94,133 100,775 Purchased power expense 8,754 4,295 6,368 Revenue taxes 12,378 11,276 10,725 -------- -------- -------- Total cost of sales 113,244 109,704 117,868 -------- -------- -------- Gross margin 189,880 179,109 188,321 -------- -------- -------- Operating Expenses: Operation expenses 50,689 47,889 46,574 Maintenance expenses 25,598 24,323 25,278 Depreciation and amortization 38,337 37,465 36,266 Income taxes 17,542 15,747 19,175 Other taxes 8,585 8,606 8,381 -------- -------- -------- Total operating expenses 140,751 134,030 135,674 -------- -------- -------- Electric operating income $ 49,129 $ 45,079 $ 52,647 ======== ======== ========
Electric gross margin increased 6% in 1993, primarily due to a 7% increase in retail kilowatt hour sales. The increase in retail sales was partially offset by a decrease in sales for resale revenue. The ratio of gross margin to revenue has remained constant at 62%. Residential sales volumes increased 10%, while commercial sales volumes increased 5%. These increases were primarily due to warmer summer weather. Cooling degree days were 30% higher in 1993 than in 1992. Industrial sales volumes increased 6% compared to 1992 due to greater demand by several of CILCO's large industrial customers. The overall level of business activity in CILCO's service territory and weather conditions are expected to continue to be the primary factors affecting electric sales in the near term. CILCO's electric sales may also be affected in the long-term by increased competition in the electric utility industry (see Electric Competition). The 1993 increase in purchased power expense was partially offset by a decrease in cost of fuel. Sales for resale and purchased power vary based on the energy requirements of neighboring utilities, CILCO's available capacity for bulk power sales, its need for energy, and the price of power available for sale or purchase. CILCO expects increased competition to continue in the bulk power market due to certain provisions of the Energy Policy Act of 1992 (see Electric Competition). Electric gross margin in 1992 decreased 5% from 1991, primarily due to decreased sales. Residential sales volumes decreased 10% while commercial sales volumes remained relatively constant. Industrial sales volumes decreased 4% in 1992 compared to 1991, primarily due to reduced demand at several of CILCO's large industrial customers during 1992. Cooling degree days for 1992 were 40% lower than in 1991, which contributed to the revenue decreases. Electric operation and maintenance expenses increased 6% in 1993 and increased slightly in 1992. The 1993 increase was primarily due to greater power plant maintenance costs and the cancellation of a combustion turbine which CILCO had planned to construct to meet electric peak demand in the late 1990's. Instead, CILCO's increased energy needs will be met through firm power purchases and by the Midwest Grain cogeneration facility (see Electric Competition). Operation and maintenance expenses were also affected by general inflationary trends. A decrease in medical expenses partially offset this trend. On December 31, 1993, CILCO changed the discount rate assumption used to calculate pension and postretirement medical benefit obligations from 8% to 7% (see Note 1). This change will increase benefit costs for electric operations employees by approximately $640,000 in 1994 and $550,000 in 1995. The increases in depreciation and amortization expense in 1993 and 1992 reflect additions and replacements of utility plant at costs in excess of the original cost of the property retired. The changes in income taxes in 1993 and 1992 were primarily the result of changes in pre-tax income. Higher federal corporate income tax rates also contributed to the 1993 increase (see Note 2). GAS OPERATIONS The following table summarizes gas operating revenue and expenses by component.
Components of Gas Operating Income 1993 1992 1991 (In thousands) Revenue: Sale of gas $140,620 $134,385 $137,364 Transportation services 10,134 10,541 11,049 -------- -------- -------- Total revenue 150,754 144,926 148,413 -------- -------- -------- Cost of Sales: Cost of gas 79,022 77,123 81,138 Revenue taxes 7,039 6,547 6,902 -------- -------- -------- Total cost of sales 86,061 83,670 88,040 -------- -------- -------- Gross margin 64,693 61,256 60,373 -------- -------- -------- Operating Expenses: Operation expenses 26,436 23,803 23,858 Maintenance expenses 5,050 4,238 2,931 Depreciation and amortization 14,686 13,930 13,279 Income taxes 4,684 4,082 4,468 Other taxes 2,779 2,682 2,461 -------- -------- -------- Total operating expenses 53,635 48,735 46,997 -------- -------- -------- Gas operating income $ 11,058 $ 12,521 $ 13,376 ======== ======== ========
Gas gross margin increased 6% in 1993, primarily due to an 8% increase in retail sales volumes. Residential and commercial sales volumes increased 10% and 9%, respectively, primarily due to colder weather during the heating season. Heating degree days were 11% higher in 1993 than in 1992. Gas gross margin for 1992 increased 1% from 1991 while total retail sales volumes decreased 2%. Residential and commercial sales volumes each decreased 3% primarily due to a milder heating season. Heating degree days in 1992 were 2% lower than the previous year. While total gas revenues decreased 2% in 1992 from 1991 levels, cost of sales decreased 5%, primarily due to a 5% decrease in the cost of gas. This decrease was a result of lower sales and lower take-or-pay charges, partially offset by higher natural gas prices. Revenue from gas transportation services decreased 4% in 1993 and 5% in 1992, while the volume of gas transported decreased 11% in 1993 and increased 12% in 1992. Revenues declined primarily due to decreased purchases of gas by industrial transportation customers from suppliers other than CILCO. The changes in 1993 and 1992 revenue were not proportional to the changes in volume because certain large volume transportation customers can negotiate lower unit charges for service. There were 668 transportation customers in 1993 compared to 635 customers in 1992 and 617 in 1991. Transportation arrangements have made it practical for certain industrial customers to continue to use gas instead of switching to alternate fuels. Weather conditions, the ability of large customers to purchase gas on the open market at competitive rates, the continuing trend toward more efficient gas appliances, and overall economic conditions in CILCO's service area will affect future gas sales. On January 14, 1994, CILCO filed a request with the ICC to increase its gas base rates (see Gas Rate Increase Request). After a significant number of leaks were detected in the Springfield gas distribution system in mid-1992, CILCO began a detailed examination of its Springfield gas distribution system and related operating practices and procedures. The objective of this examination was to detect and repair gas main leaks and to identify and correct any operating deficiencies. This project was substantially completed on September 30, 1993 (see Capital Resources and Liquidity-CILCO). In September 1992, the ICC staff began an informal review of CILCO's Springfield gas operations and recordkeeping practices. Subsequently, at the request of the ICC, the U.S. Department of Transportation and the U.S. Department of Justice began conducting investigations, which management believes to be focused principally on CILCO's Springfield gas operations. These reviews could potentially lead to criminal charges, regulatory actions (see Gas Rate Increase Request), as well as certain sanctions and civil penalties. Management cannot currently determine the outcome of these reviews or their regulatory effect, but does not believe they will have a material adverse impact on CILCO's financial position or results of operations. Gas operation and maintenance expenses increased 12% in 1993 and 5% in 1992. These increases were primarily due to increased repairs to the Springfield gas distribution system, partially offset by lower injury and damage claims expenses. Operation and maintenance expenses are also affected by general inflationary trends. The December 31, 1993, change in the discount rate assumption used to calculate pension and postretirement medical benefit obligations (see Note 1) will increase benefit costs for gas operations employees by approximately $330,000 in 1994 and $280,000 in 1995. The increases in depreciation and amortization expenses in 1993 and 1992 reflect additions and replacements of utility plant at costs in excess of the original cost of the property retired. The changes in income taxes in 1993 and 1992 were primarily the result of changes in taxable income. Higher federal corporate income tax rates (see Note 2) also contributed to the 1993 increase. OTHER INCOME AND DEDUCTIONS Utility other income and deductions changed slightly from 1992 to 1993. Interest expense decreased due to lower interest rates on bonds refinanced in 1993 (see Capital Resources and Liquidity-CILCO). Interest expense increased during 1992 due to interest on overcollection of take-or-pay charges and settlement of utility-related tax issues arising from an IRS audit, partially offset by lower interest expense on bonds refinanced during 1992. ESE The following table summarizes environmental and engineering services revenue and expenses.
Components of ESE Net Income 1993 1992 1991 (In thousands) Environmental and engineering services revenue $123,162 $137,858 $127,627 Direct non-labor costs 43,627 52,531 46,330 -------- -------- -------- Net revenue 79,535 85,327 81,297 -------- -------- -------- Expenses: Direct salaries and other costs 40,180 41,667 40,246 General & administrative 34,418 32,737 34,930 Depreciation and amortization 6,064 5,472 5,031 -------- -------- -------- Operating expenses 80,662 79,876 80,207 -------- -------- -------- Interest 1,719 2,167 2,955 -------- -------- -------- Income before income taxes (2,846) 3,284 (1,865) Income taxes (580) 1,346 (441) -------- -------- -------- ESE net income (loss) $ (2,266) $ 1,938 $ (1,424) ======== ======== ========
Revenues decreased by 11% in 1993 following revenue increases of 8% in 1992 and 35% in 1991. ESE experienced difficulty in obtaining new contracts to replace completed projects due to continued economic uncertainty, delays in government enforcement actions, and a more cautious approach by ESE's customers toward environmental compliance. In late 1992, ESE was awarded a contract by the U.S. Environmental Protection Agency (USEPA) to determine the effectiveness of new air quality regulations. This five-year contract has a total value of $81 million, assuming annual contract renewals and authorization of task by the USEPA. ESE currently estimates total revenues for this project to be $50 million. Due to delays in task approvals, this project provided only $5 million of revenue in 1993. ESE closed two offices and one laboratory during 1993 in response to market factors. The closed facilities contributed $11 million in revenue in 1992 and less than $.5 million in 1993. Direct non-labor costs as a percentage of gross revenue fluctuate primarily due to subcontractor usage. Direct non-labor costs decreased by 17% due to decreased business activity and the completion of a large turnkey project in 1992. This turnkey project constituted 24% of the direct non-labor costs for 1992 and less than 1% of the direct non-labor costs for 1993. Direct and indirect salary expense decreased by 4% in 1993 primarily as a result of a reduction in work force associated with the overall decline in business volume. Because the consulting business is labor intensive, ESE can adjust staffing levels to appropriately recognize changing business conditions. The increase of 4% in 1992 resulted from wage increases. General and administrative expenses increased by 5% in 1993 due to general inflation and higher employee medical benefit costs. Additionally, a more competitive marketplace has led to increased overhead costs as utilization of staff on projects declined, and bid and proposal costs increased. The 6% decrease in general and administrative costs in 1992 resulted from the closing of certain offices and reduced insurance costs resulting from the establishment of a wholly-owned subsidiary to provide professional liability insurance. Depreciation expense increased each year as a result of additions to fixed assets. Amortization expense relates to a non-compete agreement, which is being amortized over its five-year duration, and to the Cost in Excess of Net Assets of the Acquired Company, which is being amortized over forty years. Interest expense decreased because of lower interest rates and lower average debt balances during 1993 and 1992. The reduction in income taxes results primarily from the decrease in ESE's pre-tax income. ESE's future business activity will continue to be affected by the level of demand for consulting services and by the enforcement of various federal and state statutes and regulations dealing with the environment and the use, control, disposal and clean-up of hazardous wastes. The market for ESE's services is competitive; however, no single entity currently dominates the environmental and engineering consulting services marketplace. OTHER BUSINESSES The following table summarizes Other Businesses' revenue and expenses. Other Businesses' results include income earned and expenses incurred at the Holding Company, CIM, CVI, and non-operating interest income of CILCO.
Components of Other Businesses Net Income 1993 1992 1991 (In thousands) Revenue: Leveraged lease revenue $ 4,280 $ 5,903 $ 5,713 Other revenue 3,191 3,725 2,223 ------- ------- ------- Total revenue 7,471 9,628 7,936 ------- ------- ------- Pre-tax gain on sale of subsidiary - - 11,575 ------- ------- ------- Expenses: Operating expenses 2,637 3,814 4,702 Depreciation and amortization 177 148 86 Interest expense 3,190 3,253 2,734 Income and other taxes (1,283) 2,392 8,417 Minority interest 260 448 608 ------- ------- ------- Total expenses 4,981 10,055 16,547 ------- ------- ------- Other Businesses net income (loss) $ 2,490 $ (427) $ 2,964 ======= ======= =======
The increase in Other Businesses' net income resulted primarily from the December 1993 settlement of the Company's dispute with the IRS concerning certain leveraged lease tax issues, including the proper depreciable life of the Springerville Unit No. 1 generating station (see Note 3). As a result of the settlement, income tax expense was reduced by $3.1 million in 1993 to reverse tax expense which had been recorded in prior years to reflect the potential unfavorable outcome of the dispute. During 1993, the Company adjusted leveraged lease revenues and related income taxes to reflect higher corporate income tax rates enacted during the year. Statement of Financial Accounting Standards No. 13, "Accounting for Leases," requires that the amount and timing of leveraged lease income be adjusted when tax rates change. The Company will recognize less income over the life of its existing lease portfolio due to the tax rate change; therefore, the Company recorded a one-time charge of $1.1 million against 1993 lease portfolio net income. Leveraged lease revenue in 1992 included a $1.5 million one-time adjustment related to the December 1992 restructuring of the Springerville Unit No. 1 lease. This adjustment offset revenue declines from other leases during 1992. Generally accepted accounting principles pertaining to leveraged leases cause revenues to decline as the lease portfolio matures. A slight decline in 1993 revenues from the Company's maturing leveraged leases was partially offset by revenues from two new leveraged lease investments made in late 1993 (see Capital Resources and Liquidity-Other Businesses). During 1994, the Company expects leveraged lease revenues to increase by $2.6 million as a result of the two new leases. Other revenues in 1993 reflect a $2 million gain from the sale of one million shares of TEP stock. Other revenues in 1992 included the fair market value of approximately 1.2 million shares of TEP stock the Company received in December 1992 as part of the Springerville Unit No. 1 lease restructuring. Other revenues also included a 1992 gain from the sale of an office building from the Company's lease portfolio. Interest income on temporary cash investments, which is included in other revenues, declined due to lower interest rates and investment balances. Operating expenses declined due to fewer employees assigned to the Holding Company, greater utilization of Holding Company staff by operating subsidiaries, and lower legal and professional services expenses. In late 1993, CIM purchased the 19% minority interest in CLM (see Capital Resources and Liquidity-Other Businesses). Since the purchase occurred prior to the Company's settlement of the leveraged lease tax issues with the IRS, there was no minority interest in the resulting reduction in income tax expense. In 1991, CIM sold CLM Inc.-IX, a subsidiary which owned three leveraged lease investments. Income and other taxes for 1991 included income taxes from the sale of this subsidiary, which were partially offset by a capital loss carryforward from 1987. Income tax expense in 1991 and 1992 also included a reserve for potential income taxes and interest in the event the Company's position regarding the depreciable life of Springerville Unit No. 1 was not upheld. ITEM 8.: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements: Page CILCORP Inc. Management's Report to the Stockholders of CILCORP Inc. 50 Report of Independent Public Accountants 51 Consolidated Statements of Income 52-53 Consolidated Balance Sheets 54-55 Consolidated Statements of Cash Flows 56-57 Consolidated Statements of Common Stockholders' Equity 58 Statements of Segments of Business 59-61 Notes to Consolidated Financial Statements 62-77 CILCO Management's Report 78 Report of Independent Public Accountants 79 Consolidated Statements of Income 80 Consolidated Balance Sheets 81-82 Consolidated Statements of Cash Flows 83-84 Consolidated Statements of Retained Earnings 85 Statements of Segments of Business 86-87 Notes to Consolidated Financial Statements 88-100 Management's Report To the Stockholders of CILCORP Inc.: Management has prepared the accompanying financial statements and notes for CILCORP Inc. and its consolidated subsidiaries in accordance with generally accepted accounting principles. Estimates and judgments used in developing these statements are the responsibility of management. Financial data presented throughout this report is consistent with these statements. CILCORP Inc. maintains a system of internal accounting controls which management believes is adequate to provide reasonable assurance as to the integrity of accounting records and the protection of assets. Such controls include established policies and procedures, a program of internal audit, and the careful selection and training of qualified personnel. The financial statements have been audited by CILCORP's independent public accountants, Arthur Andersen & Co., whose appointment was ratified by stockholders. Their audit was conducted in accordance with generally accepted auditing standards and included an assessment of selected internal accounting controls only to determine the scope of their audit procedures. The report of the auditors is contained in this annual report. The Audit Committee of the Board of Directors, consisting solely of outside directors, meets periodically with the independent public accountants, internal auditors and management to review accounting, auditing, internal accounting control, and financial reporting matters. The auditors have direct access to the Audit Committee. R. O. Viets R. O. Viets President and Chief Executive Officer T. D. Hutchinson T. D. Hutchinson Controller Report of Independent Public Accountants To the Stockholders of CILCORP Inc.: We have audited the accompanying consolidated balance sheets of CILCORP Inc. (an Illinois corporation) and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, cash flows, stockholders' equity and segments of business for each of the three years in the period ended December 31, 1993. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules 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 CILCORP Inc. and its subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As explained in Note 2, effective January 1, 1993, the Company changed its method of accounting for income taxes. As explained in Note 1, effective January 1, 1991, the Company changed its method of accounting for postemployment health care benefits. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedules listed in Item 14(a)2 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not a required part of the basic financial statements. These financial statement schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly state 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 & Co. Chicago, Illinois February 4, 1994 Consolidated Statements of Income CILCORP Inc. and Subsidiaries
For the Years Ended December 31 1993 1992 1991 (In thousands except per share amounts) Revenue: Electric $303,124 $288,813 $306,189 Gas 150,754 144,926 148,413 Environmental and Engineering Services 123,162 137,858 127,627 Other Businesses 7,471 9,628 7,936 -------- -------- -------- Total 584,511 581,225 590,165 -------- -------- -------- Operating Expenses: Fuel for Generation and Purchased Power 100,866 98,428 107,143 Gas Purchased for Resale 79,022 77,123 81,138 Other Operations and Maintenance 225,135 227,111 221,381 Depreciation and Amortization 59,975 57,727 55,374 State and Local Revenue Taxes 19,466 17,874 17,664 Other Taxes 16,412 16,156 15,453 -------- -------- -------- Total 500,876 494,419 498,153 -------- -------- -------- Fixed Charges and Other: Interest Expense 27,363 29,205 28,661 Preferred Stock Dividends of Subsidiary 4,043 4,441 4,441 Allowance for Funds Used During Construction (199) (337) (450) Gain on Sale of Subsidiary - - (11,575) Other 516 142 167 -------- -------- -------- Total 31,723 33,451 21,244 -------- -------- -------- Income Before Income Taxes 51,912 53,355 70,768 Income Taxes 18,069 20,810 29,676 -------- -------- -------- Net Income Including Minority Interest 33,843 32,545 41,092 Minority Interest 260 448 608 -------- -------- -------- Net Income 33,583 32,097 40,484 Convertible Preferred Stock Dividends - - 828 -------- -------- -------- Net Income Available for Common Stockholders $ 33,583 $ 32,097 $ 39,656 ======== ======== ======== Average Common Shares Outstanding 12,914 12,924 12,640 Net Income Per Common Share $ 2.60 $ 2.48 $ 3.14 ======== ======== ======== Dividends Per Common Share $ 2.46 $ 2.46 $ 2.46 ======== ======== ======== The accompanying Notes to Financial Statements are an integral part of these statements.
Consolidated Balance Sheets CILCORP Inc. and Subsidiaries
Assets (As of December 31) 1993 1992 (In thousands) Current Assets: Cash and Temporary Cash Investments $ 1,440 $ 24,401 Receivables, Less Reserves of $2,255 and $1,943 58,350 66,937 Accrued Unbilled Revenue 38,179 39,068 Fuel, at Average Cost 8,323 9,158 Materials and Supplies, at Average Cost 16,674 17,957 Gas in Underground Storage, at Average Cost 24,548 16,821 Prepayments and Other 9,441 5,431 ---------- ---------- Total Current Assets 156,955 179,773 ---------- ---------- Investments and Other Property: Investment in Leveraged Leases 114,803 97,133 Investment in Marketable Securities and Other 7,453 16,266 ---------- ---------- Total Investments and Other Property 122,256 113,399 ---------- ---------- Property, Plant and Equipment: Utility Plant, at Original Cost Electric 1,068,818 1,042,844 Gas 348,541 327,642 ---------- ---------- 1,417,359 1,370,486 Less - Accumulated Provision for Depreciation 618,912 592,603 ---------- ---------- 798,447 777,883 Construction Work in Progress 31,896 25,477 Plant Acquisition Adjustments, being Amortized to 1999 4,068 4,780 Other, Net of Depreciation 24,173 23,556 ---------- ---------- Total Property, Plant and Equipment 858,584 831,696 ---------- ---------- Other Assets: Prepaid Pension Expense 13,953 13,720 Cost in Excess of Net Assets of Acquired Businesses, Net of Accumulated Amortization of $3,479 and $2,179 25,251 26,551 Other 21,441 19,777 ---------- ---------- Total Other Assets 60,645 60,048 ---------- ---------- Total Assets $1,198,440 $1,184,916 ========== ========== The accompanying Notes to Financial Statements are an integral part of these balance sheets.
Consolidated Balance Sheets CILCORP Inc. and Subsidiaries
Liabilities and Stockholders' Equity (As of December 31) 1993 1992 Current Liabilities: Current Portion of Long-Term Debt $ 193 $ 17,502 Notes Payable 31,200 29,251 Accounts Payable 47,668 39,601 Accrued Taxes 5,666 7,834 Accrued Interest 9,632 8,710 Purchased Gas Adjustment Over-Recoveries 3,268 10,600 Other 12,080 14,438 ---------- ---------- Total Current Liabilities 109,707 127,936 ---------- ---------- Long-Term Debt 325,711 307,628 ---------- ---------- Deferred Credits and Other Liabilities: Deferred Income Taxes 229,897 291,326 Net Regulatory Liability of Regulated Subsidiary 69,477 - Deferred Investment Tax Credit 27,871 29,565 Customers' Advances for Construction and Other 27,781 23,410 ---------- ---------- Total Deferred Credits 355,026 344,301 ---------- ---------- Minority Interest in Consolidated Subsidiaries - 1,156 ---------- ---------- Preferred Stock of Subsidiary 66,120 64,620 ---------- ---------- Stockholders' Equity: (See Statements on page 58) Common Stock, no par value; Authorized 50,000,000 shares - Outstanding 12,971,501 and 12,909,281 shares 165,662 163,297 Retained Earnings 176,214 175,978 ----------- ---------- Total Stockholders' Equity 341,876 339,275 ---------- ---------- Total Liabilities and Stockholders' Equity $1,198,440 $1,184,916 ========== ========== The accompanying Notes to Financial Statements are an integral part of these balance sheets.
Consolidated Statements of Cash Flows CILCORP Inc. and Subsidiaries
For the Years Ended December 31 1993 1992 1991 (In thousands) Cash Flows from Operating Activities: Net Income Before Preferred Dividends $37,626 $ 36,538 $44,925 ------- -------- ------- Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Non-Cash Lease & Investment Income (4,280) (7,616) (5,757) Depreciation and Amortization 59,975 57,727 55,374 Deferred Income Taxes, Investment Tax Credit, and Regulatory Liability of Subsidiary, Net 6,354 (1,464) 4,388 Gain on Sale of Subsidiary - - (11,575) Changes in Operating Assets and Liabilities: (Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenue 9,476 (5,005) (781) (Increase) Decrease in Inventories (5,609) (2,591) 3,765 Increase (Decrease) in Accounts Payable 8,067 5,394 (412) Changes in Other Assets and Liabilities, Net (19,209) 15,466 10,933 ------- -------- -------- Total Adjustments 54,774 61,911 55,935 ------- -------- -------- Net Cash Provided by Operating Activities 92,400 98,449 100,860 ------- -------- -------- Cash Flows from Investing Activities: Additions to Plant (76,933) (69,111) (63,746) Purchase of Long-Term Investments and Leveraged Lease Property (13,595) (803) (1,750) Proceeds from Sale of Subsidiary, Net of Transaction Costs - - 22,383 Proceeds from Sale of Long-Term Investments and Leveraged Lease Property 3,787 11,378 5,336 Purchase of Minority Interest in Consolidated Subsidiary (1,425) - - Other 7,438 (5,673) (10,385) ------- ------- -------- Net Cash Used in Investing Activities (80,728) (64,209) (48,162) ------- -------- -------- Cash Flows from Financing Activities: Net Increase (Decrease) in Short-Term Debt 1,949 17,721 (27,212) Proceeds from Issuance of Long-Term Debt 107,269 133,334 27,017 Repayment of Long-Term Debt (108,781) (140,318) (4,514) Proceeds from Issuance of Preferred Stock by Wholly-owned Subsidiary 46,006 - - Retirement of Preferred Stock by Wholly-owned Subsidiary (46,051) - - Common Dividends Paid (31,757) (31,788) (31,056) Preferred and Convertible Preferred Dividends Paid (4,043) (4,441) (5,429) Common Stock Issued 2,365 - - Preferred and Common Stock Issuance Costs (1,590) - - Common Stock Repurchased - (1,732) (7,236) Convertible Preferred Stock Repurchased - - (1,700) ------- ------- -------- Net Cash Used in Financing Activities (34,633) (27,224) (50,130) ------- -------- -------- Net Increase (Decrease) in Cash and Temporary Cash Investments (22,961) 7,016 2,568 Cash and Temporary Cash Investments at Beginning of Year $24,401 $ 17,385 $ 14,817 ------- -------- -------- Cash and Temporary Cash Investments at End of Year $ 1,440 $ 24,401 $ 17,385 ======= ======== ======== The accompanying Notes to Financial Statements are an integral part of these statements.
Consolidated Statements of Stockholders' Equity CILCORP Inc. and Subsidiaries
Common Stock Retained Shares Amount Earnings Total (In thousands except share amounts) Balance at December 31, 1990 12,630,768 $153,286 $167,142 $320,428 Repurchase of Common Stock (223,300) (7,236) (7,236) Common Stock Issued 551,656 18,979 18,979 Cash Dividend Declared on Common Stock ($2.46 per share) (31,056) (31,056) Cash Dividend Declared on Convertible Preferred Stock ($2.46 per equivalent common share) (828) (828) Stock Issuance Costs (73) (73) Net Income 40,484 40,484 ---------- -------- -------- -------- Balance at December 31, 1991 12,959,124 $165,029 $175,669 $340,698 Repurchase of Common Stock (49,843) (1,732) (1,732) Cash Dividend Declared on Common Stock ($2.46 per share) (31,788) (31,788) Net Income 32,097 32,097 ---------- -------- -------- -------- Balance at December 31, 1992 12,909,281 $163,297 $175,978 $339,275 Common Stock Issued 62,220 2,365 2,365 Cash Dividend Declared on Common Stock ($2.46 per share) (31,757) (31,757) Preferred and Common Stock Issuance Costs (1,590) (1,590) Net Income 33,583 33,583 ---------- -------- -------- -------- Balance at December 31, 1993 12,971,501 $165,662 $176,214 $341,876 ========== ======== ======== ======== The accompanying Notes to Financial Statements are an integral part of these statements.
Statements of Segments of Business CILCORP Inc. and Subsidiaries
Operating Information For the Years Ended December 31 1993 1992 1991 (In thousands) Utility Segment: Electric Operations Revenue $303,124 $288,813 $306,189 Expenses 253,995 243,734 253,542 -------- -------- -------- Operating Income 49,129 45,079 52,647 Income Taxes 17,542 15,747 19,175 -------- -------- -------- Operating Income Before Income Taxes $ 66,671 $ 60,826 $ 71,822 ======== ======== ======== Depreciation and Amortization $ 38,337 $ 37,465 $ 36,266 Capital Expenditures $ 41,880 $ 41,821 $ 42,246 Gas Operations Revenue $150,754 $144,926 $148,413 Expenses 139,696 132,405 135,037 -------- -------- -------- Operating Income 11,058 12,521 13,376 Income Taxes 4,684 4,082 4,468 -------- -------- -------- Operating Income Before Income Taxes $ 15,742 $ 16,603 $ 17,844 ======== ======== ======== Depreciation and Amortization $ 14,686 $ 13,930 $ 13,279 Capital Expenditures $ 30,677 $ 20,001 $ 14,545
Major Customer For the Years Ended December 31
1993 1992 1991 Caterpillar Inc. Electric Revenue $39,831 13.1% $38,428 13.3% $42,474 13.9% Gas Revenue 1,581 1.0 1,847 1.3 2,181 1.5 ------- ----- ------- ----- ------- ----- Total $41,412 9.1% $40,275 9.3% $44,655 9.8% ======= ===== ======= ===== ======= =====
Utility Identifiable Assets As of December 31 1993 1992 1991 Electric $684,618 $684,968 $671,643 Gas 259,462 226,579 220,242 Other Utility Assets* 44,245 47,578 41,722 -------- -------- -------- Total Utility Assets $988,325 $959,125 $933,607 ======== ======== ======== *Other investments, miscellaneous accounts receivable, prepaid assets, deferred pension costs, and unamortized debt, discount, and expense The accompanying Notes to Financial Statements are an integral part of these statements.
Environmental and Engineering Services Segment For the Years Ended December 31 1993 1992 1991 (In thousands) Revenue $123,162 $137,858 $127,627 Operating Expenses 124,289 132,407 126,537 -------- -------- -------- Operating Income (Loss) Before Income Taxes $ (1,127) $ 5,451 $ 1,090 ======== ======== ======== Depreciation and Amortization $ 6,064 $ 5,472 $ 5,031 Capital Expenditures $ 4,300 $ 6,804 $ 5,973 Environmental and Engineering Services Identifiable Assets As of December 31 1993 1992 1991 Property, Plant and Equipment $23,116 $22,347 $19,475 Cost in Excess of Net Assets of Acquired Businesses, net of amortization 25,251 26,551 27,270 Other Assets* 39,070 47,380 46,705 ------- ------- ------- Total Environmental and Engineering Services Assets $87,437 $96,278 $93,450 ======= ======= ======= *Accounts receivable, unbilled revenues, non-compete agreement, and other current assets Other Businesses Segment For the Years Ended December 31 1993 1992 1991 Revenue $ 7,471 $ 9,628 $ 7,936 Gain on Sale of Subsidiary - - 11,575 Expenses 6,264 7,663 8,130 -------- ------- ------- Income Before Income Taxes $ 1,207 $ 1,965 $11,381 ======== ======= ======= Other Businesses Identifiable Assets As of December 31 1993 1992 1991 Leveraged Leases $114,803 $ 97,133 $101,586 Cash and Temporary Cash Investments 1,564 21,879 12,828 Other Assets 6,311 10,501 6,507 -------- -------- -------- Total Other Businesses Assets $122,678 $129,513 $120,921 ======== ======== ======== The accompanying Notes to Financial Statements are an integral part of these statements.
CILCORP INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of CILCORP Inc. (CILCORP or Company), Central Illinois Light Company (CILCO), Environmental Science & Engineering, Inc. (ESE) and CILCORP's other subsidiaries after elimination of significant intercompany transactions. Prior year amounts have been reclassified on a basis consistent with the 1993 presentation. REGULATION CILCO is a public utility subject to regulation by the Illinois Commerce Commission (ICC) and the Federal Energy Regulatory Commission (FERC) with respect to accounting matters, and maintains its accounts in accordance with the Uniform System of Accounts prescribed by these agencies. UTILITY OPERATING REVENUES, FUEL COSTS, AND COST OF GAS Electric and gas revenues include service provided but unbilled at year end. Substantially all electric rates and gas system sales rates of CILCO include a fuel adjustment clause and a purchased gas adjustment clause, respectively. These clauses provide for the recovery of changes in electric fuel costs, excluding coal transportation, and changes in the cost of gas on a current basis in billings to customers. CILCO adjusts the cost of fuel and cost of gas to recognize over or under recoveries of allowable costs. The cumulative effects are deferred in the Balance Sheet as a current asset or current liability and adjusted by refunds or collections through future billings to customers. CONCENTRATION OF CREDIT RISK CILCO, as a public utility, must provide service to customers within its defined service territory and may not discontinue service to residential customers when certain weather conditions exist. CILCO continually reviews customers' creditworthiness and requests deposits or refunds deposits based on that review. At December 31, 1993, CILCO had net receivables of $34.2 million, of which approximately $4.9 million was due from its major industrial customers. See Note 5 for a discussion of receivables related to CILCORP's leveraged lease portfolio. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of Cash and Temporary Cash Investments, Investment in Marketable Securities and Other, Preferred Stock with Mandatory Redemption, and Notes Payable approximates fair value, with the exception of the Company's investment in Tucson Electric Power Company (TEP) stock and warrants, which had a value at December 31, 1993 approximately $1.6 million greater than its $266,000 carrying amount. At December 31, 1992, the carrying amount of this investment was $1.6 million and its fair market value was $2.9 million. The estimated fair value of the Company's Long-Term Borrowings was $358 million at December 31, 1993, and $343 million at December 31, 1992, based on current market interest rates for other companies with comparable credit ratings, capital structures, and size. ENVIRONMENTAL AND ENGINEERING SERVICES REVENUES ESE performs professional environmental and engineering consulting services under time and material, cost-plus, and fixed-price contracts. Consulting services revenues include amounts for services provided but unbilled at year end. Revenues from time and material and cost-plus contracts are recognized as costs are incurred. Revenues from fixed-price contracts are recognized under the percentage-of-completion method. DEPRECIATION AND MAINTENANCE Provisions for depreciation of property for financial reporting purposes are based on straight-line composite rates. The annual provisions for utility plant depreciation, expressed as a percentage of average depreciable property, were as follows:
1993 1992 1991 Electric 3.8% 3.8% 3.8% Gas 4.6% 4.6% 4.6%
Maintenance and repair costs are charged directly to expense. Renewals of units of property are charged to the utility plant account, and the original cost of depreciable property replaced or retired, together with the removal cost less salvage, is charged to the accumulated provision for depreciation. Non-utility property is depreciated over estimated lives ranging from 5 to 30 years. COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES Cost in excess of net assets of acquired businesses is being amortized using the straight-line method over forty years. INCOME TAXES The Company follows a policy of comprehensive interperiod income tax allocation. Investment tax credits have been deferred and are amortized over the estimated useful lives of the related property. CILCORP and its subsidiaries file a consolidated federal income tax return. Income taxes are allocated to the individual companies based on their respective taxable income or loss. CONSOLIDATED STATEMENTS OF CASH FLOWS The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents for purposes of the Consolidated Statements of Cash Flows. Cash paid for interest and income taxes was as follows:
1993 1992 1991 (In thousands) Interest $24,514 $27,425 $27,276 Income Taxes 14,760 16,207 23,822
During 1991, $18,979,000 of CILCORP convertible preferred stock was converted to CILCORP common stock. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE In November 1992, the Financial Accounting Standards Board (FASB) issued Statement No. 112, "Employer's Accounting for Postemployment Benefits" (SFAS 112). The Company will adopt SFAS 112 on January 1, 1994. This accounting standard requires the accrual of a liability for certain benefits other than pensions or health care provided to former or inactive employees. The Company will record a pre-tax expense of approximately $1.1 million upon adoption of SFAS 112 to establish the liability for these benefits. PENSION BENEFITS Substantially all of CILCO's full-time employees, including those assigned to the Holding Company, are covered by trusteed, non-contributory defined benefit pension plans. Benefits under these plans reflect the employee's years of service, age at retirement, and maximum total compensation for any consecutive sixty-month period prior to retirement. Pension costs for the past three years were charged as follows:
1993 1992 1991 (In thousands) Operating expenses $1,841 $1,995 $2,249 Utility plant and other 925 721 1,308 ------ ------ ------ Total pension costs $2,766 $2,716 $3,557 ====== ====== ======
Provisions for pension expense are determined under the rules prescribed by Statement of Financial Accounting Standards No. 87, including the use of the projected unit credit actuarial cost method. Information on the plans' funded status, on an aggregate basis follows:
1993 1992 (In thousands) Components of Net Periodic Pension Cost Cost of pension benefits earned by employees $ 4,401 $ 4,405 Interest cost on projected benefit obligation 13,611 13,035 Actual return on plan assets (22,053) (12,216) Net amortization and deferral 6,807 (2,508) -------- --------- Net pension costs $ 2,766 $ 2,716 ======== ========= Actuarial present value of accumulated benefit obligation Vested benefits - employees' rights to receive benefits no longer contingent upon continued employment $157,570 $132,927 Non-vested benefits - employees' rights to receive benefits contingent upon continued employment 7,793 6,628 -------- -------- Total benefit obligation $165,363 $139,555 ======== ======== Funded Status of Plans: Pension Assets and Obligations Pension assets at fair market value $200,337 $183,838 Projected benefit obligation at present value (209,416) (174,332) Unrecognized transition asset (8,765) (9,688) Unrecognized prior service cost 11,687 12,772 Unrecognized net loss 20,110 1,130 -------- -------- Prepaid pension costs recorded on Balance Sheet $ 13,953 $ 13,720 ======== ======== Rates used for calculations: Discount rate 7.00% 8.00% Expected rate of salary increase 5.00% 5.00% Expected long-term rate of return 8.50% 8.50%
POSTEMPLOYMENT HEALTH CARE BENEFITS Substantially all of CILCO's full-time employees, including those assigned to the Holding Company, are currently covered by a trusteed, non-contributory defined benefit postemployment health care plan. The plan pays stated percentages of most necessary medical expenses incurred by retirees, after subtracting payments by Medicare or other providers and after a stated deductible has been met. Participants become eligible for the benefits if they retire from CILCO after reaching age 55 with 10 or more years of service. ESE does not provide health care benefits to retired employees. On January 1, 1991, CILCO adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106), which requires that the expected cost of postemployment health care benefits be charged to expense during the years in which employees render service. CILCO has elected to amortize the unfunded obligation at January 1, 1991, over a period of 18.6 years, which represents the average remaining service period. Postemployment health care benefit costs were charged as follows:
1993 1992 1991 (In thousands) Operating expenses $5,767 $6,127 $5,770 Utility plant and other 2,060 2,098 2,374 ------ ------ ------ Total postemployment health care benefit costs $7,827 $8,225 $8,144 ====== ====== ======
Information on the plans' funded status, on an aggregate basis follows: 1993 1992 (In thousands) Accumulated postemployment health care benefit obligation: Retirees $44,340 $36,240 Other fully eligible participants 12,409 10,135 Other active participants 19,823 16,208 ------- ------- Total accumulated postemployment health care benefit obligation $76,572 $62,583 Less: Unrecognized actuarial loss 13,093 3,137 Unrecognized transition obligation 44,588 47,447 Plan assets at fair value 18,748 11,855 ------- ------ Accrued postemployment health care benefit cost liability $ 143 $ 144 ======= =======
The components of net postemployment health care benefit costs are: Service cost - benefits attributed to service during the period $ 1,194 $ 1,096 Actual return on plan assets (1,732) (1,120) Interest cost on accumulated postemployment health care benefit obligation 4,873 4,639 Amortization of transition obligation over 18.6 years 2,858 2,858 Other net amortization and deferral 634 752 ------- ------- Net postemployment health care benefit costs $ 7,827 $ 8,225 ======= =======
For measurement purposes, a health care cost trend rate of 9% annually was assumed for 1994; the rate was assumed to decrease to 8% for 1995, then decrease gradually to 6% by 2020 and remain at that level thereafter. Increasing the assumed health care cost trend rate by 1% in each year would increase the accumulated postemployment benefit obligation at December 31, 1993, by $5.2 million and the aggregate of the service and interest cost components of net postemployment health care cost for 1993 by $376,000. The discount rate used in determining the accumulated postemployment benefit obligation at December 31, 1993, was 7% and at December 31, 1992, was 8%. The weighted average expected return on assets net of taxes was 8.1%, where taxes are assumed to decrease return by 0.4%. COMPANY-OWNED LIFE INSURANCE POLICIES The following amounts related to company-owned life insurance contracts, issued by one major insurance company, are included in Investments and Other Property.
1993 1992 (In thousands) Cash surrender value of contracts $26,186 $22,423 Borrowings against contracts 24,923 13,361 ------- ------- Net investment $ 1,263 $ 9,062 ======= =======
Interest expense related to borrowings against company-owned life insurance, included in "Other" on the Consolidated Statements of Income, was $1.4 million, $930,000 and $870,000 for 1993, 1992 and 1991. NOTE 2: INCOME TAXES The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), on January 1, 1993, and accounted for its initial application as a cumulative change in accounting principle. SFAS 109 requires the use of the liability method to account for income taxes. Under the liability method, deferred income taxes are recognized at currently enacted income tax rates to reflect the tax effect of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. Temporary differences occur because the income tax law either requires or permits certain items to be reported on the Company's income tax return in a different year than they are reported in the financial statements. Adoption of SFAS 109 did not have a material impact on the Company's financial position, results of operations or cash flows; however, the adoption of SFAS 109 required reclassification of accumulated deferred income taxes on the balance sheet. CILCO established a regulatory liability to account for the net effect of expected future regulatory actions related to unamortized investment tax credits, income tax liability initially recorded at tax rates in excess of current rates, the equity component of Allowance for Funds Used During Construction, and other items for which deferred taxes had not previously been provided. The temporary differences related to the consolidated net deferred income tax liability at December 31, 1993, and January 1, 1993, were as follows:
December 31, 1993 January 1, 1993 Deferred Tax Liabilities: (In thousands) Property, including allowance for funds used during construction $216,897 $216,190 Leveraged leases 80,129 74,850 Other 14,427 10,586 Deferred Tax Assets: Other (12,079) (8,585) Net Regulatory Liabilities of Regulated Subsidiary (69,477) (74,321) -------- -------- Net deferred income tax liability $229,897 $218,720 ======== ======== Of the $11,177,000 increase in the consolidated net deferred income tax liability from January 1, 1993 to December 31, 1993, $6,309,000 is due to current year deferred federal and state income tax expense. The remaining increase is primarily the result of a decrease in the net regulatory liability.
Income Tax expenses were as follows: Years Ended December 31, 1993 1992 1991 (In thousands) Current income taxes Federal $10,102 $22,153 $20,917 State 3,352 4,077 4,399 ------- ------- ------- Total current 13,454 26,230 25,316 ------- ------- ------- Deferred income taxes, net Property-related deferred income taxes (2,316) 249 1,289 Leveraged leases 5,257 (1,742) 7,359 Unbilled revenue 758 - (2,464) Gas take-or-pay settlements 1,413 (1,679) (1,318) Coal tar remediation costs 120 (952) 894 Other 1,077 398 294 ------- ------- ------- Total deferred income taxes, net 6,309 (3,726) 6,054 ------- ------- ------- Investment tax credit amortization (1,694) (1,694) (1,694) ------- ------- ------- Total income tax provisions $18,069 $20,810 $29,676 ======= ======= ======= Total deferred income taxes, net, include deferred state income taxes of $1,827,000, $236,000 and $2,148,000, for 1993, 1992 and 1991.
The following table represents a reconciliation of the effective tax rate with the statutory federal income tax rate.
1993 1992 1991 Statutory federal income tax rate 35.0% 34.0% 34.0% ---- ---- ---- Equity component of AFUDC not subject to taxation - (.1) (.2) Depreciation differences for which deferred taxes have not been provided 1.0 .8 .8 Amortization of investment tax credit (3.3) (3.2) (2.4) State income taxes 7.1 5.4 6.3 Excess of book over tax basis of assets, net of capital loss carryforward .5 .5 2.5 Preferred dividends of subsidiary and other permanent differences 2.5 2.8 2.2 Dividends received deduction (.1) - (.1) Leveraged lease adjustment (5.3) 3.2 - Other differences (2.6) (4.4) (1.2) ---- ---- ---- Total (0.2) 5.0 7.9 ---- ---- ---- Effective income tax rate 34.8% 39.0% 41.9% ==== ==== ====
NOTE 3: FEDERAL INCOME TAX AUDIT SETTLEMENT In December 1990, the Internal Revenue Service (IRS) completed a review of the Company's 1985 and 1986 consolidated federal income tax returns. The IRS proposed to disallow depreciation deductions claimed in 1985 and 1986 for assets purchased and leased to four lessees during those years by CLM or CLM's wholly-owned subsidiaries (collectively CLM). The IRS asserted that these transactions were financing arrangements and that CLM did not own the properties for federal income tax purposes. Alternatively, the IRS contended that one of the properties, the Springerville Unit No. 1 generating station, should be depreciated over 15 years rather than 5 years. The potential tax deficiency from the depreciable life issue was $9.4 million, plus interest, for 1985-1993. In January 1991, the Company protested the proposed adjustments to the Appeals Division of the IRS, and in December 1993, the Company and the IRS entered into a closing agreement settling the disputed issues. The IRS recognized the Company as owner of the properties and allowed it to depreciate a significant portion of the Springerville Unit No. 1 generating station over five years. To reflect the settlement, the Company reduced its 1993 income tax expense by $3.1 million to reverse income tax expense which it had recorded in prior years to reflect the potential unfavorable resolution of this dispute. NOTE 4: SHORT-TERM DEBT Short-term debt at December 31, 1993, consisted of $18.8 million of Holding Company bank borrowings and $12.4 million of CILCO commercial paper. Short-term debt at December 31, 1992, included $24.5 million of commercial paper and $4.8 million of other notes payable. CILCO had arrangements for bank lines of credit totalling $30 million at December 31, 1993, all of which were unused. These lines of credit consisted of $6.65 million maintained by compensating balances and $23.35 million maintained by commitment fees ranging from 1/16 to 3/16 of 1% per annum in lieu of balances. The compensating bank balance arrangements provide that CILCO maintain bank deposits to average annually 3% to 5% of the line, such balances being available to CILCO for operating purposes and as compensation to the bank for other bank services. These bank lines of credit also support CILCO's issuance of commercial paper. At December 31, 1993, ESE had a $1 million bank line of credit to provide for working capital needs. In addition, ESE had a $5 million bank line of credit, of which $2.6 million was used at year-end, to collateralize performance bonds issued by insurance companies. NOTE 5: LEVERAGED LEASE INVESTMENTS The Company, through subsidiaries of CIM is a lessor in seven leveraged lease arrangements under which mining equipment, electric production facilities, warehouses, office buildings, passenger railway equipment and an aircraft are leased to third parties. The economic lives and lease terms vary with the leases. CIM's share of total equipment and facilities cost was approximately $305 million and $239 million at December 31, 1993 and 1992. During 1993, CIM invested $13 million, net of non-recourse debt, in leveraged leases of passenger railway equipment and an aircraft (see Capital Resources and Liquidity-Other Businesses). The cost of the equipment and facilities owned by CIM is partially financed by non-recourse debt provided by lenders, who have been granted as their sole remedy in the event of a lessee default an assignment of rents due under the leases and a security interest in the leased property. Such debt amounted to $229 million at December 31, 1993, and $180 million at December 31, 1992. Leveraged lease residual value assumptions, which are conservative in relation to independently appraised residual values, are tested on a periodic basis. The Company's net investment in leveraged leases at December 31, 1993 and 1992 is shown below:
1993 1992 (In thousands) Minimum lease payments receivable $122,869 $107,379 Estimated residual value 94,368 84,369 Less: Unearned income 102,434 94,615 -------- -------- Investment in lease financing receivables 114,803 97,133 Less: Deferred taxes arising from leveraged leases 80,129 74,850 -------- -------- Net investment in leveraged leases $ 34,674 $ 22,283 ======== ========
The table above includes CLM's approximately 7% investment in the Springerville Unit No. 1 electric generating station, which is leased pursuant to TEP's comprehensive financial restructuring plan that was consummated in December 1992. NOTE 6: PREFERRED STOCK PREFERRED STOCK OF SUBSIDIARY
At December 31 1993 1992 (In thousands) Preferred stock, cumulative $100 par value, authorized 1,500,000 shares Without Mandatory Redemption 4.50% series - 111,264 shares $11,126 $11,126 4.64% series - 79,940 shares 7,994 7,994 7.56% series - 170,000 shares - 17,000 7.72% series - 135,000 shares - 13,500 8.28% series - 150,000 shares - 15,000 Class A, no par value, authorized 3,500,000 shares Flexible Auction Rate - 250,000 shares (a) 25,000 - With Mandatory Redemption 5.85% series - 220,000 shares 22,000 - ------- ------- Total preferred stock $66,120 $64,620 ======= ======= (a) Dividend rate at December 31, 1993 was 2.62%.
All classes of preferred stock are entitled to receive cumulative dividends and rank equally as to dividends and assets, according to their respective terms. The total annual dividend requirement for preferred stock outstanding at December 31, 1993, is $2.8 million, assuming a continuation of the auction dividend rate at December 31, 1993, for the flexible auction rate series. PREFERRED STOCK WITHOUT MANDATORY REDEMPTION The call provisions of preferred stock redeemable at CILCO's option outstanding at December 31, 1993, are as follows:
Series Callable Price Per Share (plus accrued dividends) 4.50% $110 4.64% $102 Flexible auction rate $100
PREFERRED STOCK WITH MANDATORY REDEMPTION CILCO's 5.85% Class A preferred stock may be redeemed in 2003 at $100 per share. A mandatory redemption fund must be established on July 1, 2003. The fund will provide for the redemption of 11,000 shares for $1.1 million on July 1 of each year through July 1, 2007. On July 1, 2008, the remaining 165,000 shares will be retired for $16.5 million. PREFERENCE STOCK OF SUBSIDIARY, CUMULATIVE No Par Value, Authorized 2,000,000 shares, of which none have been issued. PREFERRED STOCK OF HOLDING COMPANY No Par Value, Authorized 4,000,000 shares, of which none were outstanding at December 31, 1993 and 1992. NOTE 7: LONG-TERM DEBT
AT DECEMBER 31 1993 1992 (In thousands) CILCO First Mortgage Bonds 5 1/8% series due 1996 $ 16,000 $ 16,000 5 1/2% series due 1997 20,000 20,000 7 7/8% series due 2001 - 30,000 7 5/8% series due 2002 - 25,000 7 1/2% series due 2007 50,000 50,000 8 1/5% series due 2022 65,000 65,000 Medium-Term Notes 5.7% series due 1998 10,650 - 6.4% series due 2000 30,000 - 6.82% series due 2003 25,350 - 7.8% series due 2023 10,000 - Pollution Control Series A, $20,000,000 6.2% due 2004, with a sinking fund commencing in 1995 - 20,000 Pollution Control Series B, 6 1/8% due 2008, with a sinking fund commencing in 2000 - 12,000 Pollution Control Refunding Series F, 6.5% due 2010 5,000 5,000 Pollution Control Refunding Series G, 6.2% due 2012 1,000 1,000 Pollution Control Refunding Series E, 6.5% due 2018 14,200 14,200 Pollution Control Refunding Series H, 5.9% due 2023 32,000 - -------- -------- 279,200 258,200 Unamortized premium and discount on long-term debt, net (879) (839) -------- -------- Total CILCO $278,321 $257,361 ======== ======== CILCORP LEASE MANAGEMENT INC. Unsecured financial institution borrowings; interest rates of 8.30% to 9.55%; maturities by year are as follows: 1995 18,000 18,000 1997 3,000 3,000 ------ ------ Total CLM 21,000 21,000 ====== ====== CILCORP Inc. Unsecured medium-term notes; varying in term from 2 years to 8 years; interest rates ranging from 8.25% to 9.10%. 26,000 26,000 Other 390 3,267 -------- -------- Total long-term debt $325,711 $307,628 ======== ========
The first mortgage bonds of CILCO are secured by a lien on substantially all of its property and franchises. Unamortized borrowing expense, premium and discount on outstanding long-term debt are being amortized over the lives of the respective issues. Total consolidated maturities of long-term debt for 1995-1998 are $21 million, $19 million, $23 million, and $22 million, respectively. The 1994 maturities of long-term borrowings have been classified as current liabilities. NOTE 8: COMMITMENTS & CONTINGENCIES CILCO's capital expenditures for 1994 are estimated to be $90 million, in connection with which CILCO has normal and customary purchase commitments at December 31, 1993. CILCO's policy is to act as a self-insurer for certain insurable risks resulting from employee health and life insurance programs. ESE's capital expenditures for 1994 are estimated to be $5 million, in connection with which ESE has normal and customary purchase commitments at December 31, 1993. ESE's policy is to act as a self-insurer for certain insurable risks resulting from employee health programs and professional liability claims. In August 1990, CILCO entered into a firm, wholesale bulk power purchase agreement with CIPS. This agreement, which expires in 1998, provides for an initial purchase of 30 MW of capacity, increasing to 90 MW in 1997. CILCO can increase purchases to a maximum of 100 MW during the contract period, provided CIPS then has the additional capacity available. In November 1992, CILCO entered into a limited-term power agreement to purchase 100 MW of CIPS' capacity from June 1998 through May 2002. At CILCO's request, purchases may be increased to a maximum of 150 MW during the contract period, provided CIPS has the additional capacity available. Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations, Environmental Matters (regarding former gas manufacturing sites) for a discussion of that item and Gas Operations, for a discussion of contingencies related to CILCO's Springfield gas system. NOTE 9: RATE MATTERS Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations, Gas Rate Increase Request, Environmental Matters, Electric Competition, Gas Take-or-Pay, and Liquefied Natural Gas Settlement for a discussion of gas and electric rate matters. NOTE 10: LEASES The Company and its subsidiaries lease certain equipment, buildings, and other facilities under capital and operating leases. Several of the operating leases provide that the Company pay taxes, maintenance and other occupancy costs applicable to these premises. Minimum future rental payments under non-cancelable capital and operating leases having remaining terms in excess of one year as of December 31, 1993, are $35.3 million in total. Payments due during the years ending December 31, 1994, through December 31, 1998, are $8.5 million; $5.7 million; $5.0 million; $4.3 million; and $3.5 million, respectively. NOTE 11: SELECTED QUARTERLY FINANCIAL DATA (Unaudited) The following quarterly operating results are unaudited, but, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of CILCORP Inc.'s operating results for the periods indicated. The results of operations for each of the fiscal quarters are not necessarily comparable to, or indicative of, the results of an entire year due to the seasonal nature of the Company's business and other factors. The sums of earnings per average common share for the four quarters of 1992 do not equal the totals for the year because the average number of shares outstanding changed.
For the Three Months Ended March 31 June 30 September 30 December 31 (In thousands except per share amounts) 1993 Revenue $164,923 $125,695 $141,740 $152,153 Income before income taxes 15,401 6,965 21,270 8,276 Net income 9,334 4,008 12,645 7,596 Earnings per average common share $.72 $.31 $.98 $.59 1992 Revenue $159,741 $126,657 $137,004 $157,823 Income before income taxes 12,043 10,335 19,433 11,544 Net income 7,617 6,569 12,587 5,324 Earnings per average common share $.59 $.51 $.98 $.41
MANAGEMENT'S REPORT The accompanying financial statements and notes for CILCO and its consolidated subsidiaries have been prepared by management in accordance with generally accepted accounting principles. Estimates and judgments used in developing these statements are the responsibility of management. Financial data presented throughout this report is consistent with these statements. CILCO maintains a system of internal accounting controls which management believes is adequate to provide reasonable assurance as to the integrity of accounting records and the protection of assets. Such controls include established policies and procedures, a program of internal audit, and the careful selection and training of qualified personnel. The financial statements have been audited by CILCO's independent accountants, Arthur Andersen & Co. Their audit was conducted in accordance with generally accepted auditing standards and included an assessment of selected internal accounting controls only to determine the scope of their audit procedures. The report of the auditors is contained in this Form 10-K annual report. The Audit Committee of the CILCORP Inc. Board of Directors, consisting solely of outside directors, meets periodically with the independent public accountants, internal auditors and management to review accounting, auditing, internal accounting control, and financial reporting matters. The auditors have direct access to the Audit Committee. R. W. Slone R. W. Slone Chairman of the Board, President and Chief Executive Officer T. S. Romanowski T. S. Romanowski Vice President and Chief Financial Officer R. L. Beetschen R. L. Beetschen Controller and Manager of Accounting February 4, 1994 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Central Illinois Light Company: We have audited the accompanying consolidated balance sheets of Central Illinois Light Company (an Illinois corporation) and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, cash flows, segments of business, and retained earnings for each of the three years in the period ended December 31, 1993. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules 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 Central Illinois Light Company and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As explained in Note 2 effective January 1, 1993, the Company changed its method of accounting for income taxes. As explained in Note 1, effective January 1, 1991, the Company changed its method of accounting for postemployment health care benefits. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedules listed in Item 14(a)2 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not a required part of the basic financial statements. These financial statement schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly state 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 & CO. Chicago, Illinois February 4, 1994 CENTRAL ILLINOIS LIGHT COMPANY CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31 1993 1992 1991 (In thousands) OPERATING REVENUES Electric $303,124 $288,813 $306,189 Gas 150,754 144,926 148,413 -------- -------- -------- TOTAL OPERATING REVENUES 453,878 433,739 454,602 -------- -------- -------- OPERATING EXPENSES Cost of Fuel 92,112 94,133 100,775 Cost of Gas 79,022 77,123 81,138 Purchased Power 8,754 4,295 6,368 Other Operation Expenses 77,125 71,692 70,432 Maintenance 30,648 28,561 28,209 Depreciation and Amortization 53,023 51,395 49,545 Income Taxes 22,226 19,829 23,643 State and Local Taxes on Revenue 19,417 17,823 17,628 Other Taxes 11,364 11,288 10,841 -------- -------- -------- TOTAL OPERATING EXPENSES 393,691 376,139 388,579 -------- -------- -------- OPERATING INCOME 60,187 57,600 66,023 -------- -------- -------- OTHER INCOME AND DEDUCTIONS Cost of Equity Funds Capitalized (23) 122 303 CILCO-owned Life Insurance, Net (516) (142) (167) Other, Net 262 1,626 897 -------- -------- -------- TOTAL OTHER INCOME AND DEDUCTIONS (277) 1,606 1,033 -------- -------- -------- INCOME BEFORE INTEREST EXPENSE 59,910 59,206 67,056 -------- -------- -------- INTEREST EXPENSE Interest on Long-term Debt 19,753 20,747 21,285 Cost of Borrowed Funds Capitalized (222) (215) (147) Other 2,701 3,038 1,687 -------- -------- -------- TOTAL INTEREST EXPENSE 22,232 23,570 22,825 -------- -------- -------- NET INCOME 37,678 35,636 44,231 -------- -------- -------- DIVIDENDS ON PREFERRED STOCK 4,043 4,441 4,441 -------- -------- -------- NET INCOME AVAILABLE FOR COMMON STOCK $ 33,635 $ 31,195 $ 39,790 ======== ======== ======== The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
CENTRAL ILLINOIS LIGHT COMPANY CONSOLIDATED BALANCE SHEETS ASSETS
December 31 1993 1992 (In thousands) UTILITY PLANT At Original Cost Electric $1,068,818 $1,042,844 Gas 348,541 327,642 ---------- ---------- 1,417,359 1,370,486 Less - Accumulated Provision for Depreciation 618,912 592,603 ---------- ---------- 798,447 777,883 Construction Work in Progress 31,896 25,477 Plant Acquisition Adjustments, Net of Amortization 4,068 4,780 ---------- ---------- TOTAL UTILITY PLANT 834,411 808,140 OTHER PROPERTY AND INVESTMENTS Cash surrender value of CILCO-owned life insurance (net of related policy loans of $24,923 in 1993 and $13,361 in 1992) 1,263 9,062 Other 1,056 1,165 ---------- ---------- TOTAL OTHER PROPERTY AND INVESTMENTS 2,319 10,227 ---------- ---------- CURRENT ASSETS Cash and Temporary Cash Investments 594 1,776 Receivables, Less Reserves of $585 and $799 34,197 35,710 Accrued Unbilled Revenue 25,111 24,791 Fuel, at Average Cost 8,323 9,158 Materials and Supplies, at Average Cost 16,674 17,957 Gas in Underground Storage, at Average Cost 24,548 16,821 Prepaid Taxes 856 6,566 Other 6,945 2,675 ---------- ---------- TOTAL CURRENT ASSETS 117,248 115,454 ---------- ---------- DEFERRED DEBITS Unamortized Loss on Reacquired Debt 6,950 5,606 Unamortized Debt Expense 2,185 1,769 Prepaid Pension Cost 13,953 13,720 Other 11,259 10,775 ---------- ---------- TOTAL DEFERRED DEBITS 34,347 31,870 ---------- ---------- TOTAL ASSETS $ 988,325 $ 965,691 ========== ========== The accompanying Notes to the Consolidated Financial Statements are an integral part of these balance sheets.
CENTRAL ILLINOIS LIGHT COMPANY CONSOLIDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES
December 31 1993 1992 (In thousands) CAPITALIZATION Common Shareholder's Equity Common Stock, no par value; Authorized 20,000,000 shares; Outstanding 13,563,871 $185,661 $185,661 Retained Earnings 108,645 92,433 -------- -------- Total Common Shareholder's Equity 294,306 278,094 Preferred Stock Without Mandatory Redemption 44,120 64,620 Preferred Stock With Mandatory Redemption 22,000 - Long-term Debt 278,321 257,361 -------- -------- TOTAL CAPITALIZATION 638,747 600,075 -------- -------- CURRENT LIABILITIES Current Maturities of Long-term Debt - 9,375 Notes Payable 12,400 24,500 Accounts Payable 40,971 34,873 Accrued Taxes 6,083 3,454 Accrued Interest 8,616 7,941 PGA Over-Recoveries 3,268 10,600 Level Payment Plan 2,944 2,615 Other 5,106 5,097 -------- -------- TOTAL CURRENT LIABILITIES 79,388 98,455 -------- -------- DEFERRED LIABILITIES AND CREDITS Accumulated Deferred Income Taxes 144,969 214,264 Net Regulatory Liability 69,477 - Investment Tax Credits 27,871 29,565 Capital Lease Obligation 2,954 - Other 24,919 23,332 -------- -------- TOTAL DEFERRED LIABILITIES AND CREDITS 270,190 267,161 -------- -------- TOTAL CAPITALIZATION AND LIABILITIES $988,325 $965,691 ======== ======== The accompanying Notes to the Consolidated Financial Statements are an integral part of these balance sheets.
CENTRAL ILLINOIS LIGHT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31 1993 1992 1991 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income including preferred dividends $ 37,678 $ 35,636 $ 44,231 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 53,734 52,108 50,257 Deferred taxes, investment tax credits and regulatory tax liability, net (1,512) (4,157) (1,364) Decrease (increase) in accounts receivable 1,513 (232) (3,860) (Increase) decrease in fuel, materials and supplies, and gas in underground storage (5,609) (2,591) 3,765 (Increase) decrease in unbilled revenue (320) (2,336) 4,069 Decrease (increase) in prepaid taxes 5,710 2,461 (7,311) Increase in accounts payable 6,098 5,716 873 Increase (decrease) in accrued taxes and interest 3,304 476 (90) Decrease in other assets and liabilities, net (8,771) 7,599 6,595 -------- --------- -------- Net cash provided by operating activities 91,825 94,680 97,165 -------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (72,580) (61,701) (56,488) Cost of equity funds capitalized 23 (122) (303) Other 2,581 (5,113) (9,053) -------- --------- -------- Net cash used in investing activities (69,976) (66,936) (65,844) -------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Common dividends paid (15,878) (31,787) (45,969) Preferred dividends paid (4,043) (4,441) (4,441) Long-term debt issued 107,269 133,001 - Preferred stock issued 46,006 - - Long-term debt retired (97,756) (140,318) - Preferred stock retired (46,051) - - Payments on capital lease obligation (478) - (64) (Decrease) increase in short-term borrowing (12,100) 13,000 11,500 -------- --------- -------- Net cash used in financing activities (23,031) (30,545) (38,974) -------- --------- -------- Net (decrease) in cash and temporary cash investments (1,182) (2,801) (7,653) Cash and temporary cash investments at beginning of year 1,776 4,577 12,230 -------- --------- -------- CASH AND TEMPORARY CASH INVESTMENTS AT DECEMBER 31 $ 594 $ 1,776 $ 4,577 ======== ========= ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (net of cost of borrowed funds capitalized) $ 20,271 $ 20,690 $ 22,541 Income taxes 13,198 23,838 31,471 The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
CENTRAL ILLINOIS LIGHT COMPANY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31 1993 1992 1991 (In thousands) BALANCE BEGINNING OF YEAR $ 92,433 $ 93,025 $ 99,204 ADD Net Income 37,678 35,636 44,231 -------- -------- -------- Total 130,111 128,661 143,435 ======== ======== ======== DEDUCT Cash Dividends Declared Preferred Stock $100 Par Value 4 1/2% Series (annual rate $4.50 per share) 501 501 501 4.64% Series (annual rate $4.64 per share) 371 371 371 5.85% Series (annual rate $5.85 per share) 725 - - 7.56% Series (annual rate $7.56 per share) 668 1,285 1,285 7.72% Series (annual rate $7.72 per share) 686 1,042 1,042 8.28% Series (annual rate $8.28 per share) 817 1,242 1,242 Flexible Auction Rate Series (rate at December 31, 1993 was 2.62%) 275 - - Common Stock, No Par Value 15,878 31,787 45,969 -------- -------- -------- Total Dividends Declared 19,921 36,228 50,410 Capital Stock Expense 720 - - Excess of stated value over purchase price of 135,000 shares 7.72% Series preferred stock and 150,000 shares 8.28% Series preferred stock retired in 1993 825 - - -------- -------- -------- 21,466 36,228 50,410 -------- -------- -------- BALANCE END OF YEAR $108,645 $ 92,433 $ 93,025 ======== ======== ======== The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
CENTRAL ILLINOIS LIGHT COMPANY CONSOLIDATED STATEMENTS OF SEGMENTS OF BUSINESS
OPERATING INFORMATION For the Years Ended December 31 1993 1992 1991 (In thousands) ELECTRIC OPERATIONS: Revenue $303,124 $288,813 $306,189 Expenses 253,995 243,734 253,542 -------- -------- -------- Operating Income 49,129 45,079 52,647 Income Taxes 17,542 15,747 19,175 -------- -------- -------- Operating Income Before Income Taxes $ 66,671 $ 60,826 $ 71,822 ======== ======== ======== Depreciation and Amortization $ 38,337 $ 37,465 $ 36,266 Capital Expenditures $ 41,880 $ 41,821 $ 42,246 GAS OPERATIONS: Revenue $150,754 $144,926 $148,413 Expenses 139,696 132,405 135,037 -------- -------- -------- Operating Income 11,058 12,521 13,376 Income Taxes 4,684 4,082 4,468 -------- -------- -------- Operating Income Before Income Taxes $ 15,742 $ 16,603 $ 17,844 ======== ======== ======== Depreciation and Amortization $ 14,686 $ 13,930 $ 13,279 Capital Expenditures $ 30,677 $ 20,001 $ 14,545
MAJOR CUSTOMER For the Years Ended December 31 1993 1992 1991 (In thousands) Caterpillar Inc. Electric Revenue $39,831 13.1% $38,428 13.3% $42,474 13.9% Gas Revenue 1,581 1.0 1,847 1.3 2,181 1.5 ------- ---- ------- ---- ------- ---- Total $41,412 9.1% $40,275 9.3% $44,655 9.8% ======= ==== ======= ==== ======= ====
IDENTIFIABLE ASSETS As of December 31 1993 1992 1991 (In thousands) Electric $684,618 $684,968 $671,643 Gas 259,462 226,579 220,242 Other Utility Assets (1) 44,245 54,144 50,749 -------- -------- -------- Total Utility Assets $988,325 $965,691 $942,634 ======== ======== ======== (1) Other investments, miscellaneous accounts receivable, prepaid assets, deferred pension costs, and unamortized debt, discount and expenses. The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
CENTRAL ILLINOIS LIGHT COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements of CILCO include the accounts of CILCO and its subsidiaries, CILCO Exploration and Development Corporation and CILCO Energy Corporation. CILCO is a subsidiary of CILCORP Inc. In accordance with FERC Order 529, sales of electricity for resale, which had been previously recorded as an offset to purchased power expense, have been reclassified to electric revenues. Prior year amounts have been reclassified on a basis consistent with the 1993 presentation. REGULATION CILCO is subject to regulation by the ICC and the FERC with respect to accounting matters and maintains its accounts in accordance with the Uniform System of Accounts prescribed by these agencies. OPERATING REVENUES, FUEL COSTS, AND COST OF GAS Electric and gas revenues include service provided but unbilled at year end. Substantially all electric rates and gas system sales rates include a fuel adjustment clause and a purchased gas adjustment clause, respectively. These clauses provide for the recovery of changes in electric fuel costs, excluding coal transportation, and in the cost of gas on a current basis in billings to customers. CILCO adjusts the cost of fuel and cost of gas to recognize over or under recoveries of allowable costs. The cumulative effects are deferred in the Balance Sheet as a current asset or current liability and adjusted by refunds or collections through future billings to customers. CONCENTRATIONS OF CREDIT RISK CILCO, as a public utility, is required to provide service to customers within its defined service territory and is precluded from discontinuing service to residential customers when certain weather conditions exist. CILCO continually reviews customers' credit worthiness and requests deposits or refunds deposits based on that review. At December 31, 1993 CILCO had net receivables of $34.2 million, of which approximately $4.9 million was due from its major industrial customers. TRANSACTIONS WITH AFFILIATES CILCO, which is a subsidiary of CILCORP, incurs certain corporate expenses such as legal, shareholder and accounting fees on behalf of CILCORP and its other subsidiaries. These expenses are billed monthly to CILCORP and its other subsidiaries based on specific identification of costs except for shareholder-related costs which are based on the relative equity percentages of CILCORP and its subsidiary corporations. A return on CILCO assets used by CILCORP and its other subsidiaries is also calculated and billed monthly. Total billings to CILCORP and its other subsidiaries amounted to $2.3 million, $3.3 million and $4 million, in 1993, 1992 and 1991, respectively. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) The allowance, representing the cost of equity and borrowed funds used to finance construction, is capitalized as a component of the cost of utility plant. The amount of the allowance varies depending on the rate used and the size and length of the construction program. The Uniform System of Accounts defines AFUDC, a non-cash item, as the net cost for the period of construction of borrowed funds used for construction purposes and a reasonable rate upon other funds when so used. On the income statement, the cost of borrowed funds capitalized is reported as a reduction of total interest expense and the cost of equity funds capitalized is reported as other income. In accordance with the FERC formula, the composite AFUDC rates used in 1993, 1992 and 1991 were 3.5%, 5.7% and 10.6%, respectively. DEPRECIATION AND MAINTENANCE Provisions for depreciation for financial reporting purposes are based on straight-line composite rates. The annual provisions expressed as a percentage of average depreciable property were as follows:
1993 1992 1991 Electric 3.8% 3.8% 3.8% Gas 4.6% 4.6% 4.6%
Maintenance and repair costs are charged directly to expense. Renewals of units of property are charged to the utility plant account, and the original cost of depreciable property replaced or retired, together with the removal cost less salvage, is charged to the accumulated provision for depreciation. INCOME TAXES CILCO follows a policy of comprehensive interperiod income tax allocation. Investment tax credits (except for amounts applicable to the Employee Stock Ownership Plan) have been deferred and are amortized over the estimated useful lives of the related property. CILCORP and its subsidiaries file a consolidated federal income tax return. Income taxes are allocated to the individual companies, including CILCO, based on their respective taxable income or loss. CONSOLIDATED STATEMENTS OF CASH FLOWS CILCO considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents for purposes of the Consolidated Statements of Cash Flows. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE In November 1992, the Financial Accounting Standards Board (FASB) issued Statement No. 112, "Employer's Accounting for Postemployment Benefits" (SFAS 112). CILCO will adopt SFAS 112 on January 1, 1994. This standard requires accrual of benefits other than pensions or health care provided to former or inactive employees. The cumulative effect to CILCO of initially applying SFAS 112 will be a pre-tax charge of approximately $1 million in January 1994, a portion of which will be capitalized. PENSION BENEFITS Substantially all of CILCO's full-time employees, including those assigned to the Holding Company, are covered by trusteed, non-contributory defined benefit pension plans. Benefits under these plans reflect the employee's years of service, age at retirement and maximum total compensation for any consecutive sixty-month period prior to retirement. Pension costs for the past three years were charged as follows:
1993 1992 1991 (In thousands) Operating expenses $1,841 $1,995 $2,249 Utility plant and other 925 721 1,308 ------ ------ ------ Net pension costs $2,766 $2,716 $3,557 ====== ====== ======
Provisions for pension costs were determined under the rules prescribed by Statement of Financial Accounting Standards No. 87, including the use of the projected unit credit actuarial cost method. Information on the plans' funded status, on an aggregate basis, at December 31, 1993 and 1992 follows:
1993 1992 (In thousands) Components of Net Periodic Pension Cost: Cost of pension benefits earned by employees $ 4,401 $ 4,405 Interest cost on projected benefit obligation 13,611 13,035 Actual return on plan assets (22,053) (12,216) Net amortization and deferral 6,807 (2,508) --------- --------- Net pension costs $ 2,766 $ 2,716 ========= ========= Actuarial present value of accumulated benefit obligation: Vested benefits - employees' rights to receive benefits no longer contingent upon continued employment $ 157,570 $ 132,927 Non-vested benefits - employees' rights to receive benefits contingent upon continued employment 7,793 6,628 --------- --------- Total benefit obligation $ 165,363 $ 139,555 ========= ========= Funded Status of Plans: Pension Assets and Obligations Pension assets at fair market value $ 200,337 $ 183,838 Projected benefit obligation at present value (209,416) (174,332) Unrecognized transition asset (8,765) (9,688) Unrecognized prior service cost 11,687 12,772 Unrecognized net loss 20,110 1,130 --------- --------- Prepaid pension costs recorded on Balance Sheet $ 13,953 $ 13,720 ========= ========= Rates used for calculations: Discount rate 7.00% 8.00% Expected rate of salary increase 5.00% 5.00% Expected long-term rate of return 8.50% 8.50%
POSTEMPLOYMENT HEALTH CARE BENEFITS Substantially all of CILCO's full-time employees, including those assigned to the Holding Company, are currently covered by a trusteed, non-contributory defined benefit postemployment health care plan. The plan pays stated percentages of most necessary medical expenses incurred by retirees, after subtracting payments by Medicare or other providers and after a stated deductible has been met. Participants become eligible for the benefits if they retire from CILCO after reaching age 55 with 10 or more years of service. On January 1, 1991, CILCO adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106). This standard requires that the expected cost of postemployment health care benefits be charged to expense during the years in which employees render service. CILCO has elected to amortize the unfunded obligation at January 1, 1991, over a period of 18.6 years, which represents the average remaining service period. Postemployment health care benefit costs were charged as follows:
1993 1992 1991 (In thousands) Operating expenses $5,767 $6,127 $5,770 Utility plant and other 2,060 2,098 2,374 ------ ------ ------ Net postemployment health care benefit costs $7,827 $8,225 $8,144 ====== ====== ======
Information on the plans' funded status, on an aggregate basis at December 31, 1993 and 1992, follows:
1993 1992 (In thousands) Accumulated postemployment health care benefit obligation: Retirees $44,340 $36,240 Other fully eligible participants 12,409 10,135 Other active participants 19,823 16,208 ------- ------- Total accumulated postemployment health care benefit obligation $76,572 $62,583 Less: Unrecognized actuarial loss 13,093 3,137 Unrecognized transition obligation 44,588 47,447 Plan assets at fair value 18,748 11,855 ------- ------- Accrued postemployment health care benefit cost liability $ 143 $ 144 ======= ======= The components of net postemployment health care benefit costs are: Service cost - benefits attributed to service during the period $ 1,194 $ 1,096 Actual return on plan assets (1,732) (1,120) Interest cost on accumulated postemployment health care benefit obligation 4,873 4,639 Amortization of transition obligation over 18.6 years 2,858 2,858 Other net amortization and deferral 634 752 ------- ------- Net postemployment health care benefit costs $ 7,827 $ 8,225 ======= =======
For measurement purposes, a health care cost trend rate of 9% annually was assumed for 1994; the rate was assumed to decrease to 8% for 1995, then decrease gradually to 6% by 2020 and remain at that level thereafter. Increasing the assumed health care cost trend rate by 1% in each year would increase the accumulated postemployment benefit obligation at December 31, 1993, by $5.2 million and the aggregate of the service and interest cost components of net postemployment health care cost for 1993 by $376,000. The discount rate used in determining the accumulated postemployment benefit obligation at December 31, 1993 was 7% and at December 31, 1992 was 8%. The weighted average expected return on assets net of taxes was 8.1% where taxes are assumed to decrease return by 0.4%. CILCO-OWNED LIFE INSURANCE POLICIES The following amounts related to CILCO-owned life insurance contracts, with one major insurance company, are recorded on the consolidated balance sheets:
1993 1992 (In thousands) Cash surrender value of contracts $26,186 $22,423 Borrowings against contracts 24,923 13,361 ------- ------- Net $ 1,263 $ 9,062 ======= =======
Interest expense for CILCO-owned life insurance borrowings included in CILCO-owned Life Insurance, Net in the Consolidated Statements of Income was $1.4 million, $930,000 and $870,000 for 1993, 1992 and 1991, respectively. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of Cash and Temporary Cash Investments, Other Investments, and Notes Payable approximates fair value. At December 31, 1993 and 1992, CILCO had $278.3 million and $266.7 million, respectively, in long-term debt, including current maturities, consisting of first mortgage bonds, pollution control bonds, and medium-term notes, recorded on the Balance Sheet. The estimated fair value of these financial instruments at December 31, 1993 and 1992 is $305.2 million and $267.3 million, respectively, based on current market interest rates for other companies with comparable credit ratings, capital structures, and size. NOTE 2: INCOME TAX EXPENSE CILCO adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), on January 1, 1993, and accounted for its initial application as a cumulative change in accounting principle. SFAS 109 requires the use of the liability method to account for income taxes. Under the liability method, deferred income taxes are recognized at currently enacted income tax rates to reflect the tax effect of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. Temporary differences occur because the income tax law either requires or permits certain items to be reported on CILCO's income tax return in a different year than they are reported in the financial statements. Adoption of SFAS 109 did not have a material impact on CILCO's financial position, results of operations or cash flows; however, the adoption of SFAS 109 required reclassification of accumulated deferred income taxes on the balance sheet. CILCO established a regulatory liability to account for the net effect of expected future regulatory actions related to unamortized investment tax credits, income tax liability initially recorded at tax rates in excess of current rates, the equity component of Allowance for Funds Used During Construction, and other items for which deferred taxes had not previously been provided. The temporary differences related to CILCO's net deferred income tax liability at December 31, 1993, and January 1, 1993, were as follows:
December 31, 1993 January 1, 1993 (In thousands) Deferred Tax Liabilities: Property, including allowance for funds used during construction $213,056 $212,891 Other 11,835 8,302 Deferred Tax Assets: Other (10,446) (6,931) Net Regulatory Liabilities (69,477) (74,321) -------- -------- Net deferred income tax liability $144,968 $139,941 ======== ========
Of the $5,027,000 increase in the net deferred income tax liability from January 1, 1993 to December 31, 1993, $182,000 is due to current year deferred federal and state income tax expense. The remaining increase is primarily the result of a decrease in the net regulatory liability. Income taxes were as follows:
For the Years Ended December 31 1993 1992 1991 (In thousands) Current operating income taxes Federal $18,510 $19,254 $20,008 State 4,860 4,363 4,679 ------- ------- ------- Total operating current taxes 23,370 23,617 24,687 ------- ------- ------- Deferred operating income taxes, net Depreciation and amortization (1,786) (1,243) (962) Repair allowance 168 (431) (46) Borrowed component of AFUDC 76 (70) (70) Capitalized overhead costs (888) (867) (732) Removal costs 2,471 2,238 1,366 Call premiums 2,623 - - Gas take-or-pay settlements 1,413 (1,679) (1,318) Gas Storage Field (2,856) 12 378 Postemployment health care costs - - 593 Coal tar remediation costs 120 (952) 894 Other (791) 898 547 ------- ------- ------- Total operating deferred taxes 550 (2,094) 650 ------- ------- ------- Investment tax credits utilized, net of amortization (1,694) (1,694) (1,694) ------- ------- ------- Total operating income taxes 22,226 19,829 23,643 ------- ------- ------- Income taxes included in other income and expense, net (1,859) (2,106) (1,314) ------- ------- ------- Total income taxes $20,367 $17,723 $22,329 ======= ======= =======
Total deferred income taxes, net, include deferred state income taxes of $332,000, $435,000 and $775,000 for 1993, 1992 and 1991, respectively.
1993 1992 1991 Effective income tax rate 37.7% 36.2% 35.9% ---- ---- ---- Equity component of AFUDC not subject to taxation - .1 .2 Depreciation differences for which deferred taxes have not been provided (1.0) (.9) (.9) Amortization of investment tax credit 3.1 3.5 2.7 CILCO-owned life insurance .6 .5 .4 State income taxes (6.2) (6.3) (5.7) Other differences .8 .9 1.4 ---- ---- ---- Total (2.7) (2.2) (1.9) ---- ---- ---- Statutory federal income tax rate 35.0% 34.0% 34.0% ==== ==== ====
NOTE 3: SHORT-TERM FINANCING ARRANGEMENTS CILCO had arrangements for bank lines of credit totaling $30 million at December 31, 1993, all of which were unused. These lines of credit consisted of $6.65 million maintained by compensating balances and $23.35 million maintained by commitment fees ranging from 1/16 to 3/16 of 1% per annum in lieu of balances. The compensating bank balance arrangements provide that CILCO maintain bank deposits to average annually from 3% to 5% of the line, such balances being available to CILCO for operating purposes and as compensation to the bank for other bank services. These bank lines of credit are also used to support CILCO's issuance of commercial paper. Short-term borrowings consisted of commercial paper totaling $12.4 million at December 31, 1993. NOTE 4: RETAINED EARNINGS CILCO's Articles of Incorporation provide that no dividends shall be paid on the common stock if, at the time of declaration, the balance of retained earnings does not equal at least two times the annual dividend requirement on all outstanding shares of preferred stock. The amount of retained earnings so required at December 31, 1993 was $5.6 million. NOTE 5: PREFERRED STOCK
December 31 1993 1992 (In thousands) PREFERRED STOCK, CUMULATIVE $100 Par Value, Authorized 1,500,000 Shares Without Mandatory Redemption 4.50% Series - 111,264 Shares $11,126 $11,126 4.64% Series - 79,940 Shares 7,994 7,994 7.56% Series - 170,000 Shares - 17,000 7.72% Series - 135,000 Shares - 13,500 8.28% Series - 150,000 Shares - 15,000 Class A, No Par Value, Authorized 3,500,000 Shares Flexible Auction Rate - 250,000 Shares(a) 25,000 - With Mandatory Redemption 5.85% Series - 220,000 Shares 22,000 - ------- ------- Total Preferred Stock $66,120 $64,620 ======= ======= (a) Dividend rate at December 31, 1993 was 2.62%.
All classes of preferred stock are entitled to receive cumulative dividends and rank equally as to dividends and assets, according to their respective terms. The total annual dividend requirement for preferred stock outstanding at December 31, 1993 is $2.8 million, assuming the auction dividend rate at December 31, 1993 for the flexible auction rate series. Preferred Stock Without Mandatory Redemption The call provisions of preferred stock redeemable at CILCO's option outstanding at December 31, 1993 are as follows:
Series Callable Price Per Share (plus accrued dividends) 4.50% $110 4.64% $102 Flexible Auction Rate $100 Preferred Stock With Mandatory Redemption CILCO's 5.85% Class A preferred stock may be redeemed in 2003 at $100 per share. A mandatory redemption fund must be established on July 1, 2003. The fund will provide for the redemption of 11,000 shares for $1.1 million on July 1 of each year through July 1, 2007. On July 1, 2008, the remaining 165,000 shares will be retired for $16.5 million. NOTE 6: LONG-TERM DEBT
December 31 1993 1992 (In thousands) LONG-TERM DEBT (excluding current maturities) First Mortgage Bonds 5 1/8% Series Due 1996 $ 16,000 $ 16,000 5 1/2% Series Due 1997 20,000 20,000 7 7/8% Series Due 2001 - 30,000 7 5/8% Series Due 2002 - 25,000 7 1/2% Series Due 2007 50,000 50,000 8 1/5% Series Due 2022 65,000 65,000 Medium-Term Notes 5.7% Series Due 1998 10,650 - 6.4% Series Due 2000 30,000 - 6.82% Series Due 2003 25,350 - 7.8% Series Due 2023 10,000 - Pollution Control Series A, $20,000,000 6.2% Due 2004, with a sinking fund commencing in 1995 - 20,000 Pollution Control Series B, 6 1/8% Due 2008, with a sinking fund commencing in 2000 - 12,000 Pollution Control Refunding Series F, 6 1/2% Due 2010 5,000 5,000 Pollution Control Refunding Series G, 6.2% Due 2012 1,000 1,000 Pollution Control Refunding Series E, 6 1/2% Due 2018 14,200 14,200 Pollution Control Refunding Series H, 5.9% Due 2023 32,000 - -------- -------- Total First Mortgage Bonds 279,200 258,200 Unamortized Premium and Discount on Long- Term Debt, Net (879) (839) -------- -------- TOTAL LONG-TERM DEBT $278,321 $257,361 ======== ========
CILCO's first mortgage bonds are secured by a lien on substantially all property and franchises. Unamortized borrowing expense, call premiums, premium and discount on outstanding long-term debt are being amortized over the lives of the respective issues. Scheduled maturities of long-term debt for the five-year period ending December 31, 1998 are $16 million due in 1996, $20 million due in 1997 and $10.65 million due in 1998. NOTE 7: COMMITMENTS & CONTINGENCIES CILCO's capital expenditures for utility plant for 1994 are estimated to be $90 million, in connection with which CILCO has normal and customary purchase commitments at December 31, 1993. It is the policy of CILCO to act as a self-insurer for certain insurable risks resulting from employee health and life insurance programs. In August 1990, CILCO entered into a firm, wholesale bulk power purchase agreement with Central Illinois Public Service Company (CIPS). This agreement, which expires in 1998, provides for an initial purchase of 30 megawatts (MW) of capacity, increasing to 90 MW in 1997. CILCO can increase purchases to a maximum of 100 MW during the contract period, provided CIPS then has the additional capacity available. In November 1992, CILCO entered into a limited-term power agreement to purchase 100 MW of CIPS' capacity from June 1998 through May 2002. At CILCO's request, purchases may be increased to a maximum of 150 MW during the contract period, provided CIPS has the additional capacity available. Reference is made to the following sections in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation for a discussion of additional commitments and contingencies: Environmental Matters (regarding former gas manufacturing sites) and Gas Operations for a discussion regarding contingencies related to CILCO's Springfield gas system. NOTE 8: RATE MATTERS Reference is made to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Gas Rate Increase Request, Environmental Matters, Electric Competition, and Gas Take-or-Pay Charges for a discussion of gas and electric rate matters. NOTE 9: LEASES CILCO leases certain equipment, buildings, and other facilities under capital and operating leases. Minimum future rental payments under non-cancelable capital and operating leases having remaining terms in excess of one year as of December 31, 1993, are $24 million in total. Payments due during the years ending December 31, 1994 through December 31, 1998, are $5.2 million; $3.1 million; $2.9 million; $2.9 million; and $2.9 million, respectively. NOTE 10: SELECTED QUARTERLY FINANCIAL DATA (Unaudited) The following quarterly consolidated operating results are unaudited, but, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of CILCO's operating results for the periods indicated (see Note 1). The results of operations for each of the fiscal quarters are not necessarily comparable or necessarily indicative of the results of an entire year due to, among other factors, the seasonal nature of CILCO's business.
For the Three Months Ended March 31 June 30 September 30 December 31 (In thousands) 1993 Operating revenue $133,234 $94,184 $109,800 $116,660 Operating income 16,978 11,358 19,855 11,996 Net income 11,303 5,862 14,052 6,461 1992 Operating revenue $122,523 $91,578 $100,212 $119,426 Operating income 16,332 11,701 18,012 11,555 Net income 9,922 7,053 12,512 6,149
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure CILCORP Not applicable. CILCO Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant CILCORP The information required by Item 10 relating to directors is set forth in the Company's definitive proxy statement for its 1994 Annual Meeting of Stockholders filed with the Commission pursuant to Regulation 14A. Such information is incorporated herein by reference to the material appearing under the caption "Election of Directors" on pages 3 through 11 of such proxy statement. Information required by Item 10 relating to executive officers of the Company is set forth under a separate caption in Part I hereof. CILCO The information required by Item 10 relating to directors is set forth in CILCO's definitive proxy statement for its 1994 Annual Meeting of Stockholders filed with the Commission pursuant to Regulation 14A. Such information is incorporated herein by reference to the material appearing under the caption "Election of Directors" on pages 2 through 7 of such proxy statement. Information required by Item 10 relating to executive officers of CILCO is set forth under a separate caption in Part I hereof. Item 11. Executive Compensation CILCORP The Company has filed with the Commission a definitive proxy statement pursuant to Regulation 14A. The information required by Item 11 is incorporated herein by reference to the material appearing under the caption "Executive Compensation" on pages 13 through 19 of such proxy statement. CILCO CILCO has filed with the Commission a definitive proxy statement pursuant to Regulation 14A. The information required by Item 11 is incorporated herein by reference to the material appearing under the caption "Executive Compensation" on pages 8 through 13 of such proxy statement. Item 12. Security Ownership of Certain Beneficial Owners and Management CILCORP The Company has filed with the Commission a definitive proxy statement pursuant to Regulation 14A. The information required by Item 12 is incorporated herein by reference to the material appearing under the caption "Voting Securities and Principal Holders" on pages 2 through 4 of such proxy statement. CILCO CILCO has filed with the Commission a definitive proxy statement pursuant to Regulation 14A. The information required by Item 12 is incorporated herein by reference to the material appearing under the caption "Voting Securities and Principal Holders" on pages 1 and 2 of such proxy statement. Item 13. Certain Relationships and Related Transactions CILCORP CILCORP Inc. (CILCORP or Company), a holding company, is the parent of its subsidiaries Central Illinois Light Company (CILCO), CILCORP Development Services Inc., CILCORP Investment Management Inc., CILCORP Ventures Inc., and Environmental Science & Engineering, Inc. (ESE). In the course of business, the Company carries on certain relations with affiliated companies such as shared facilities, utilization of employees and other business transactions. Central Illinois Light Company is reimbursed at cost by the Company and the other subsidiaries for any services it provides. ESE and the Holding Company entered into an agreement to consolidate ESE's outstanding debt. Under this agreement, ESE can draw on a $15 million revolving line of credit which expires May 2, 1996. ESE also borrowed $20 million from the Holding Company on a term credit basis with the principal due May 2, 1998. Additionally, at December 31, 1993, ESE had borrowed $20.9 million from CILCORP. At December 31, 1993, CILCORP guaranteed $21 million of outstanding debt of CILCORP Lease Management Inc. CILCORP receives a fee for the guarantee. CIM has guaranteed the performance of CIM Leasing Inc. and CIM Air Leasing Inc. with respect to certain obligations arising from the leveraged lease investments held by these subsidiaries. CILCO Certain members of the Board of Directors of CILCORP Inc. are also members of the Board of Directors of CILCO and the secretary of CILCO is also a Vice President of CILCORP Inc. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K CILCORP Page No. Form 10-K (a) 1. Financial Statements The following are included herein: Management's Report 50 Report of Independent Public Accountants 51 Consolidated Statements of Income for the three years ended December 31, 1993 52-53 Consolidated Balance Sheets as of December 31, 1993 and December 31, 1992 54-55 Consolidated Statements of Cash Flows for the three years ended December 31, 1993 56-57 Consolidated Statements of Common Stockholders' Equity for the three years ended December 31, 1993 58 Consolidated Statements of Segments of Business for the three years ended December 31, 1993 59-61 Notes to the Consolidated Financial Statements 62-77 (a) 2. Financial Statement Schedules The following schedules are included herein. Schedule V - Property, Plant and Equipment for the three years ended December 31, 1993 109-114 Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment for the three years ended December 31, 1993 115-120 Schedule VIII - Valuation and Qualifying Accounts and Reserves 121 Schedule IX - Short-term Borrowings for the three years ended December 31, 1993 122 Schedule XIII -Investment in Leveraged Leases at December 31, 1993 123 Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. (a) 3. Exhibits *(3) Articles of Incorporation (Designated in Form 10-K for the year ended December 31, 1991, File No. 1-8946, as Exhibit (3)). *(3)a By-laws as amended December 4, 1990 (Designated in Form 10-K for the year ended December 31, 1990, File No. 1-8946, as Exhibit (3)a). *(4) Indenture of Mortgage and Deed of Trust between Illinois Power *** Company and Bankers Trust Company, as Trustee, dated as of April 1, 1933, Supplemental Indenture between the same parties dated as of June 30, 1933, Supplemental Indenture between the Company and Bankers Trust Company, as Trustee, dated as of July 1, 1933 and Supplemental Indenture between the same parties dated as of January 1, 1935, securing First Mortgage Bonds, and indentures supplemental to the foregoing through January 1, 1993. (Designated in Registration No. 2-1937 as Exhibit B-1, in Registration No. 2-2093 as Exhibit B-1(a), in Form 8-K for April 1940, File No. 1-2732-2, as Exhibit A, in Form 8-K for December 1949, File No. 1-2732-2, as Exhibit A, in Form 8-K for December 1951, File No. 1-2732, as Exhibit A, in Form 8-K for July 1957, File No. 1-2732, as Exhibit A, in Form 8-K for July 1958, File No. 1-2732, as Exhibit A, in Form 8-K for March 1960, File No. 1-2732, as Exhibit A, in Form 8-K for September 1961, File No. 1-2732, as Exhibit B, in Form 8-K for March 1963, File No. 1-2732, as Exhibit A, in Form 8-K for February 1966, File No. 1-2732, as Exhibit A, in Form 8-K for March 1967, File No. 1-2732, as Exhibit A, in Form 8-K for August 1970, File No. 1-2732, as Exhibit A, in Form 8-K for September 1971, File No. 1-2732, as Exhibit A, in Form 8-K for September 1972, File No. 1-2732, as Exhibit A, in Form 8-K for April 1974, File No. 1-2732, as Exhibit 2(b), in Form 8-K for June 1974, File No. 1-2732, as Exhibit A, in Form 8-K for March 1975, File No. 1-2732, as Exhibit A, in Form 8-K for May 1976, File No. 1-2732, as Exhibit A, in Form 10-Q for the quarter ended June 30, 1978, File No. 1-2732, as Exhibit 2, in Form 10-K for the year ended December 31, 1982, File No. 1-2732, as Exhibit (4)(b), in Form 8-K dated January 30, 1992, File No. 1-2732, as Exhibit (4) and in Form 8-K dated January 29, 1993, File No. 1-2732, as Exhibit (4).) *(4)a Supplemental Indenture dated August 1, 1993. (10) CILCO Executive Deferral Plan as amended through February 22, 1994. *(10)a Executive Deferral Plan II (Designated in Form 10-K for the year ended December 31, 1989, File No. 1-8946, as Exhibit (10)b). *(10)b Economic Value Added Incentive Compensation Plan (Designated in Form 10-K for the year ended December 31, 1989, File No. 1-8946, as Exhibit (10)c). *(10)c CILCO Compensation Protection Plan (Designated in Form 10-K for the year ended December 31, 1990, File No. 1-8946, as Exhibit (10)d). *(10)d CILCO Benefit Replacement Plan (Designated in Form 10-K for the year ended December 31, 1991, File No. 1-8946, as Exhibit (10)e). *(10)e Deferred Compensation Stock Plan (Designated in Form 10-K for the year ended December 31, 1991, File No. 1-8946, as Exhibit (10)f). *(10)f Shareholder Return Incentive Compensation Plan (included as part of Company's definitive proxy in 1993 Anuual Meeting of Stockholders, filed with the Commission on March 26,1993.) (12) Computation of Ratio of Earnings to Fixed Charges *(13) Annual Report to Security Holders (24) Consent of Arthur Andersen & Co. (25) Power of Attorney **(b) Reports on Form 8-K A Form 8-K was filed on December 17, 1993, to disclose an agreement between CILCO and one of its largest customers to develop a cogeneration plant. A Form 8-K was filed on December 31, 1993, to disclose CILCORP Inc., through its wholly-owned subsidiary, CILCORP Investment Management Inc., (CIM), acquired a 40% partnership interest in a McDonnell Douglas MD-11F cargo plane through a leveraged lease transaction. The plane will be leased to a U. S. corporation which will use it in its fleet operations. A Form 8-K was filed on January 14, 1994, to disclose CILCO's filing with the Illinois Commerce Commission (ICC) to increase gas base rates. *These exhibits have been previously filed with the Securities and Exchange Commission (SEC) as exhibits to registration statements or to other filings of CILCO with the SEC and are incorporated herein as exhibits by reference. The file number and exhibit number of each such exhibit (where applicable) are stated in the description of such exhibit. ***Pursuant to Paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, the Company has not filed as an exhibit to this Form 10-K any instrument with respect to long-term debt as the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis, but hereby agrees to furnish to the SEC on request any such instruments. CILCO Page No. Form 10-K (a) 1. Financial Statements The following are included herein: Management's Report 78 Report of Independent Public Accountants 79 Consolidated Statements of Income for the three years ended December 31, 1993 80 Consolidated Balance Sheets as of December 31, 1993 and December 31, 1992 81-82 Consolidated Statements of Cash Flows for the three years ended December 31, 1993 83-84 Consolidated Statements of Retained Earnings for the three years ended December 31, 1993 85 Consolidated Statements of Segments of Business for the three years ended December 31, 1993 86-87 Notes to the Consolidated Financial Statements 88-100 (a) 2. Financial Statement Schedules The following schedules are included herein: Schedule II - Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other Than Related Parties 124 Schedule V - Property, Plant and Equipment for the three years ended December 31, 1993 125-130 Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment for the three years ended December 31, 1993 131-136 Schedule VIII - Valuation and Qualifying Accounts and Reserves for the three years ended December 31, 1993 137 Schedule IX - Short-Term Borrowings for the three years ended December 31, 1993 138 Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. (a) 3. Exhibits *(3) Articles of Incorporation. (Designated in Form 10-K for the fiscal year ended December 31, 1980, File No. 1-2732, as Exhibit 3). *(3)a Bylaws. (Designated in Form 10-K for the year ended December 31, 1990, File No. 1-2732, as Exhibit (3) a). *(4) Indenture of Mortgage and Deed of Trust between Illinois Power Company and Bankers Trust Company, as Trustee, dated as of April 1, 1933, Supplemental Indenture between the same parties dated as of June 30, 1933, Supplemental Indenture between the Company and Bankers Trust Company, as Trustee, dated as of July 1, 1933 and Supplemental Indenture between the same parties dated as of January 1, 1935, securing First Mortgage Bonds, and indentures supplemental to the foregoing through January 1, 1993. (Designated in Registration No. 2-1937 as Exhibit B-1, in Registration No. 2-2093 as Exhibit B-1(a), in Form 8-K for April 1940, File No. 1-2732-2, as Exhibit A, in Form 8-K for December 1949, File No. 1-2732-2, as Exhibit A, in Form 8-K for December 1951, File No. 1-2732, as Exhibit A, in Form 8-K for July 1957, File No. 1-2732, as Exhibit A, in Form 8-K for July 1958, File No. 1-2732, as Exhibit A, in Form 8-K for March 1960, File No. 1-2732, as Exhibit A, in Form 8-K for September 1961, File No. 1-2732, as Exhibit B, in Form 8-K for March 1963, File No. 1-2732, as Exhibit A, in Form 8-K for February 1966, File No. 1-2732, as Exhibit A, in Form 8-K for March 1967, File No. 1-2732, as Exhibit A, in Form 8-K for August 1970, File No. 1-2732, as Exhibit A, in Form 8-K for September 1971, File No. 1-2732, as Exhibit A, in Form 8-K for September 1972, File No. 1-2732, as Exhibit A, in Form 8-K for April 1974, File No. 1-2732, as Exhibit 2(b), in Form 8-K for June 1974, File No. 1-2732, as Exhibit A, in Form 8-K for March 1975, File No. 1-2732, as Exhibit A, in Form 8-K for May 1976, File No. 1-2732, as Exhibit A, in Form 10-Q for the quarter ended June 30, 1978, File No. 1-2732, as Exhibit 2, in Form 10-K for the year ended December 31, 1982, File No. 1-2732, as Exhibit (4)(b), in Form 8-K dated January 30, 1992, File No. 1-2732, as Exhibit (4) and in Form 8-K dated January 29, 1993, File No. 1-2732, as Exhibit (4).) *(4)a Supplemental Indenture dated August 1, 1993. (10) Executive Deferral Plan as amended February 2, 1994. (Designated in Form 10-K for the year ended December 31, 1993, File No. 1-8946, as Exhibit (10).) *(10)a Executive Deferral Plan II. (Designated in Form 10-K for the year ended December 31, 1989, File No. 1-2732, as Exhibit (10)b.) *(10)b Compensation Protection Plan. (Designated in Form 10-K for the year ended December 31, 1990, File No. 1-2732, as Exhibit (10)c.) *(10)c Deferred Compensation Stock Plan. (Designated in Form 10-K for the year ended December 31, 1990, File No. 1-2732, as Exhibit (10)d.) *(10)d Economic Value Added Incentive Compensation Plan. (Designated in Form 10-K for the year ended December 31, 1990, File No. 1-2732, as Exhibit (10)e.) *(10)e Benefit Replacement Plan. (Designated in Form 10-K for the year ended December 31, 1991, File No. 1-2732, as Exhibit (10)f.) *(10)f Shareholder Return Incentive Compensation Plan (12) Computation of Ratio of Earnings to Fixed Charges (25) Power of Attorney (b) Reports on Form 8-K A Form 8-K was filed on December 17, 1993 to disclose an agreement between CILCO and one of its largest customers to develop a cogeneration plant. A Form 8-K was filed on January 14, 1994 to disclose CILCO's filing with the Illinois Commerce Commission (ICC) to increase gas base rates. *These exhibits have been previously filed with the Securities and Exchange Commission (SEC) as exhibits to registration statements or to other filings of CILCO with the SEC and are incorporated herein as exhibits by reference. The file number and exhibit number of each such exhibit (where applicable) are stated in the description of such exhibit. Schedule V Page 1 of 6 CILCORP INC. AND SUBSIDIARY COMPANIES Property, Plant and Equipment at Original Cost Year Ended December 31, 1993
Column A Column B Column C Column D Column E Column F Balance at Balance at Beginning of Additions Other End of Period at Changes Period Classification January 1, 1993 Cost Retirements Add (Deduct) December 31, 1993 (Thousands of dollars) Electric Utility Plant: In Service - Intangible $ 633 $ - $ - $ - $ 633 Steam production 459,695 4,338 4,084 - 459,949 Other production 5,995 53 - - 6,048 Transmission 86,475 545 366 - 86,654 Distribution 446,660 27,834 4,564 12 469,942 General 23,888 1,795 1,755 (14) 23,914 Held for future use 443 - - - 443 Construction work in progress 19,046 6,572 - - 25,618 Plant acquisition adjustment 12,462 - - - 12,462 ---------- ------- ------- ------ ---------- 1,055,297 41,137 10,769 (2) 1,085,663 ---------- ------- ------- ------ ---------- Gas Utility Plant: In Service - Intangible 30 - - - 30 Storage 37,913 571 134 - 38,350 Transmission 48,798 1,207 194 (38) 49,773 Distribution 216,917 27,440 9,810 38 234,585 General 11,280 1,089 723 - 11,646 Construction work in progress 4,165 (126) - - 4,039 Plant acquisition adjustment 6,206 - - - 6,206 ---------- ------- ------- ------ ---------- 325,309 30,181 10,861 - 344,629 ---------- ------- ------- ------ ---------- Schedule V Page 2 of 6 Common Utility Plant: In Service 31,759 1,265 869 3,237 35,392 Construction work in progress 2,266 (27) - - 2,239 ---------- ------- ------- ------- ---------- 34,025 1,238 869 3,237 37,631 ---------- ------- ------- ------- ---------- Other: 27,573 5,704 636 - 32,641 ---------- ------- ------- ------- ---------- Total: $1,442,204 $78,260 $23,135 $ 3,235 $1,500,564 ========== ======= ======= ======= ==========
Schedule V Page 3 of 6 CILCORP INC. AND SUBSIDIARY COMPANIES Property, Plant and Equipment at Original Cost Year Ended December 31, 1992
Column A Column B Column C Column D Column E Column F Balance at Balance at Beginning of Additions Other End of Period at Changes Period Classification January 1, 1992 Cost Retirements Add (Deduct) December 31, 1992 (Thousands of dollars) Electric Utility Plant: In Service - Intangible $ 633 $ - $ - $ - $ 633 Steam production 456,138 7,781 4,391 167 459,695 Other production 6,332 - 331 (6) 5,995 Transmission 87,322 73 73 (847) 86,475 Distribution 422,054 27,796 4,076 886 446,660 General 23,232 2,497 1,847 6 23,888 Held for future use 443 - - - 443 Construction work in progress 16,523 2,523 - - 19,046 Plant acquisition adjustment 12,462 - - - 12,462 ---------- ------- ------- ----- ---------- 1,025,139 40,670 10,718 206 1,055,297 ---------- ------- ------- ----- ---------- Gas Utility Plant: In Service - Intangible 30 - - - 30 Storage 37,929 304 319 (1) 37,913 Transmission 48,453 363 16 (2) 48,798 Distribution 203,900 15,265 2,250 2 216,917 General 11,197 798 716 1 11,280 Construction work in progress 1,662 2,503 - - 4,165 Plant acquisition adjustment 6,206 - - - 6,206 ---------- ------- ------- ----- ---------- 309,377 19,233 3,301 - 325,309 ---------- ------- ------- ----- ---------- Schedule V Page 4 of 6 Common Utility Plant: In Service 31,303 868 412 - 31,759 Construction work in progress 1,214 1,052 - - 2,266 ---------- ------- ------- ----- ---------- 32,517 1,920 412 - 34,025 ---------- ------- ------- ----- ---------- Other 32,885 7,260 447 (12,125) 27,573 ---------- ------- ------- ------- ---------- Total $1,399,918 $69,083 $14,878 $(11,919) $1,442,204 ========== ======= ======= ======= ==========
Schedule V Page 5 of 6 CILCORP INC. AND SUBSIDIARY COMPANIES Property, Plant and Equipment at Original Cost Year Ended December 31, 1991
Column A Column B Column C Column D Column E Column F Balance at Balance at Beginning of Additions Other End of Period at Changes Period Classification January 1, 1991 Cost Retirements Add (Deduct) December 31, 1991 (Thousands of dollars) Electric Utility Plant: In Service - Intangible $ 633 $ - $ - $ - $ 633 Steam production 450,177 8,065 1,907 (197) 456,138 Other production 6,299 33 - - 6,332 Transmission 84,759 2,750 120 (67) 87,322 Distribution 401,069 24,152 3,371 204 422,054 General 22,551 1,985 1,311 7 23,232 Held for future use 424 - 47 66 443 Construction work in progress 12,746 3,777 - - 16,523 Plant acquisition adjustment 12,462 - - - 12,462 ---------- ------- ------- ----- ---------- 991,120 40,762 6,756 13 1,025,139 ---------- ------- ------- ----- ---------- Gas Utility Plant: In Service - Intangible 30 - - - 30 Storage 37,505 845 419 (2) 37,929 Transmission 47,666 847 68 8 48,453 Distribution 192,762 12,622 1,466 (18) 203,900 General 10,942 938 698 15 11,197 Construction work in progress 3,358 (1,696) - - 1,662 Plant acquisition adjustment 6,206 - - - 6,206 ---------- ------- ------- ----- ---------- 298,469 13,556 2,651 3 309,377 ---------- ------- ------- ----- ---------- Schedule V Page 6 of 6 Common Utility Plant: In Service 32,660 1,307 2,583 (81) 31,303 Construction work in progress 48 1,166 - - 1,214 ---------- ------- ------- ----- ---------- 32,708 2,473 2,583 (81) 32,517 ---------- ------- ------- ------- ---------- Other: 26,347 6,538 - - 32,885 ---------- ------- ------- ----- ---------- Total $1,348,644 $63,329 $11,990 $ (65) $1,399,918 ========== ======= ======= ===== ==========
Schedule VI Page 1 of 6 CILCORP INC. AND SUBSIDIARY COMPANIES Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment Year Ended December 31, 1993
Column A Column B Column C Column D Column E Column F Balance at Additions Other Balance at Beginning Charged Charged Deductions Changes End of of Period to to Other Retirements Cost of Add Period Description January 1, 1993 Income Accounts(1) at Cost Removal (Deduct) December 31, 1993 (Thousands of dollars) Accumulated provision for depreciation and amortization of plant and equipment: Electric Production $203,569 $15,896 $ 17 $ 4,084 $2,649 $ - $212,749 Transmission 43,054 2,350 - 366 (25) - 45,063 Distribution 182,890 18,590 504 4,564 1,282 - 196,138 General 10,751 507 1,397 1,755 558 - 10,342 -------- ------- ------ ------- ------- --- -------- 440,264 37,343 1,918 10,769 4,464 - 464,292 -------- ------- ------ ------- ------- --- -------- Gas Intangible 17 - - - - - 17 Storage 16,940 1,400 - 135 13 - 18,192 Transmission 24,180 1,213 34 194 20 - 25,213 Distribution 98,026 11,236 10 9,810 2,389 - 97,073 General 4,833 173 719 723 - - 5,002 -------- ------- ------ ------- ------ --- -------- 143,996 14,022 763 10,862 2,422 - 145,497 -------- ------- ------ ------- ------ --- -------- Common 8,343 1,657 - 869 8 - 9,123 -------- ------- ------ ------- ------ --- -------- Other 4,017 5,057 - 606 - - 8,468 -------- ------- ------ ------- ------ --- -------- Total $596,620 $58,079 $2,681 $23,106 $6,894 - $627,380 ======== ======= ====== ======= ====== === ======== Schedule VI Page 2 of 6 Accumulated provision for amortization of acquisition adjustments: Electric $ 9,180 $ 498 $ - $ - $ - $ - $ 9,678 Gas 4,708 214 - - - - 4,922 -------- ------- ------ ------- ------ --- -------- Total $ 13,888 $ 712 $ - $ - $ - $ - $ 14,600 ======== ======= ====== ======= ====== === ======== (1) Includes charges to clearing accounts of $1.8 million, charges to administrative and general expense of $9,000, charges to affiliates of $16,000, salvage on retirements of $1 million, and a plant adjustment of $(13,000).
Schedule VI Page 3 of 6 CILCORP INC. AND SUBSIDIARY COMPANIES Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment Year Ended December 31, 1992
Column A Column B Column C Column D Column E Column F Balance at Additions Other Balance at Beginning Charged Charged Deductions Changes End of of Period to to Other Retirements Cost of Add Period Description January 1, 1992 Income Accounts(1) at Cost Removal (Deduct) December 31, 1992 (Thousands of dollars) Accumulated provision for depreciation and amortization of plant and equipment: Electric Production $195,935 $15,852 $ 14 $ 4,723 $3,509 $ - $203,569 Transmission 40,627 2,374 159 74 32 - 43,054 Distribution 170,222 17,632 457 4,076 1,345 - 182,890 General 10,637 577 1,469 1,846 86 - 10,751 -------- ------- ------ ------- ------- -------- -------- 417,421 36,435 2,099 10,719 4,972 - 440,264 -------- ------- ------ ------- ------- -------- -------- Gas Intangible 17 - - - - - 17 Storage 15,883 1,394 - 318 19 - 16,940 Transmission 23,018 1,196 4 16 22 - 24,180 Distribution 91,183 10,475 5 2,251 1,386 - 98,026 General 4,622 178 752 716 3 - 4,833 -------- ------- ------ ------- ------ -------- -------- 134,723 13,243 761 3,301 1,430 - 143,996 -------- ------- ------ ------- ------ -------- -------- Common Utility 7,075 1,717 31 380 100 - 8,343 -------- ------- ------ ------- ------ -------- -------- Other 12,316 4,423 - 597 - (12,125) 4,017 -------- ------- ------ ------- ------ -------- -------- Total $571,535 $55,818 $2,891 $14,997 $6,502 $(12,125) $596,620 ======== ======= ====== ======= ====== ======== ======== Schedule VI Page 4 of 6 Accumulated provision for amortization of acquisition adjustments: Electric $ 8,682 $ 498 $ - $ - $ - $- $ 9,180 Gas 4,494 214 - - - - 4,708 -------- ------- ------ ------- ------ --- -------- Total $ 13,176 $ 712 $ - $ - $ - $- $ 13,888 ======== ======= ====== ======= ====== === ======== (1) Includes charges to clearing accounts of $1.8 million, charges to administrative and general expense of $8,000, charges to affiliates of $11,000, salvage on retirements of $1 million, and a plant adjustment of $42,000.
Schedule VI Page 5 of 6 CILCORP INC. AND SUBSIDIARY COMPANIES Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment Year Ended December 31, 1991
Column A Column B Column C Column D Column E Column F Balance at Additions Other Balance at Beginning Charged Charged Deductions Changes End of of Period to to Other Retirements Cost of Add Period Description January 1, 1991 Income Accounts(1) at Cost Removal (Deduct) December 31, 1991 (Thousands of dollars) Accumulated provision for depreciation and amortization of plant and equipment: Electric Production $184,379 $15,684 $ 51 $ 1,907 $2,272 $ - $195,935 Transmission 38,478 2,332 - 119 64 - 40,627 Distribution 157,485 16,687 576 3,330 1,196 - 170,222 General 9,959 634 1,356 1,309 - (3) 10,637 -------- ------- ------ ------- ------ --- -------- 390,301 35,337 1,983 6,665 3,532 (3) 417,421 -------- ------- ------ ------- ------ --- -------- Gas Intangible 16 1 - - - - 17 Storage 14,945 1,382 - 419 25 - 15,883 Transmission 21,939 1,182 - 68 35 - 23,018 Distribution 84,025 9,918 6 1,466 1,300 - 91,183 General 4,443 205 672 698 - - 4,622 -------- ------- ------ ------- ------ --- -------- 125,368 12,688 678 2,651 1,360 - 134,723 -------- ------- ------ ------- ------ --- -------- Common 8,060 1,592 7 2,585 2 3 7,075 -------- ------- ------ ------- ------ --- -------- Other 8,802 3,514 - - - - 12,316 -------- ------- ------ ------- ------ --- -------- Total $532,531 $53,131 $2,668 $11,901 $4,894 $ - $571,535 ======== ======= ====== ======= ====== === ======== Schedule VI Page 6 of 6 Accumulated provision for amortization of acquisition adjustments: Electric $ 8,183 $ 499 $ - $ - $ - $ - $ 8,682 Gas 4,280 214 - - - - 4,494 -------- ------- ------ ------- ------ --- -------- Total $ 12,463 $ 713 $ - $ - $ - $ - $ 13,176 ======== ======= ====== ======= ====== === ======== (1) Includes charges to clearing accounts of $1.8 million, charges to administrative and general expense of $8,000, charges to affiliates of $9,000 and salvage on retirements of $833,000.
Schedule VIII CILCORP INC. AND SUBSIDIARY COMPANIES Valuation and Qualifying Accounts and Reserves for the Three Years Ended December 31, 1993 (Thousands of dollars)
Column A Column B Column C Balance at Balance at Beginning of End of Description Period Period Allowance deducted from asset to which it applies: Allowance for uncollectible accounts receivable: Year ended December 31, 1993 - $1,943 $2,255 Year ended December 31, 1992 - $1,934 $1,943 Year ended December 31, 1991 - $2,090 $1,934 Other reserves: Reserve for injuries and damages: Year ended December 31, 1993 - $1,869 $2,321 Year ended December 31, 1992 - $1,284 $1,869 Year ended December 31, 1991 - 1,036 1,284
Schedule IX CILCORP INC. AND SUBSIDIARY COMPANIES Short-Term Borrowings for the Three Years Ended December 31, 1993 (Thousands of dollars)
Column A Column B Column C Column D Column E Column F Weighted Weighted average Maximum Average average Category of interest amount amount interest aggregate Balance rate at outstanding outstanding rate short-term at end end of during the during the during the borrowings of period period period period period 1993 Commercial Paper $12,400 3.4% $28,000 $18,785 3.2% Notes payable to banks $18,800 3.6% $18,800 $ 6,484 4.1% 1992 Commercial paper $24,500 3.6% $24,500 $ 5,933(c) 3.0%(b) Notes payable other $ 0 N/A $ 30 $ 7(a) 11.8%(b) Notes payable to banks $ 4,751 5.1% $ 5,800 $ 3,713(a) 5.0%(b) 1991 Commercial paper $11,500 4.7% $11,500 $ 415(c) 4.7%(b) Notes payable other $ 30 11.8% $ 396 $ 322(a) 11.9%(b) Notes payable to banks $ 0 N/A $38,450 $16,288(a) 7.6%(b) (a) The average borrowings were determined based on the amounts outstanding at each month-end. (b) The weighted average interest rate during the year was computed by dividing actual interest expense by average short-term borrowings. (c) The average borrowings were based on the outstanding daily balance.
Schedule XIII CILCORP INC. AND SUBSIDIARY COMPANIES Investment in Leveraged Leases Year Ended December 31, 1993 (Thousands of dollars)
Cost Amount Leveraged leases of each carried on lease(A) Balance Sheet(B) Office buildings $ 8,004 $ 43,794 Warehouses 26,872 19,244 Mining equipment 10,244 15,737 Generating station 14,957 22,313 Passenger railway equipment 3,805 4,003 Cargo aircraft 9,583 9,712 -------- -------- Totals $73,465 $114,803 ======== ======== (A) This value is the original cost of the leveraged lease net of nonrecourse debt. (B) The amount carried on the balance sheet includes current rents receivable and estimated residual value, net of unearned and deferred income and nonrecourse debt.
Schedule II CENTRAL ILLINOIS LIGHT COMPANY Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other Than Related Parties
Column A Column B Column C Column D Column E Balance at Balance at Year Ended Beginning of End of December 31 Name of Debtor Period Additions Deductions Period (In thousands) 1993 CILCORP Inc. $338 $1,612 $1,602 $348 1992 CILCORP Inc. 734 2,724 3,120 338 1991 CILCORP Inc. 629 3,793 3,688 734
Schedule V Page 1 of 6 CENTRAL ILLINOIS LIGHT COMPANY AND SUBSIDIARY COMPANIES Property, Plant and Equipment at Original Cost Year Ended December 31, 1993
Column A Column B Column C Column D Column E Column F Balance at Balance at Beginning of Additions Other End of Period at Changes Period Classification January 1, 1993 Cost Retirements Add (Deduct) December 31, 1993 (Thousands of dollars) Electric Utility Plant: In Service - Intangible $ 633 $ - $ - $ - $ 633 Steam production 459,695 4,338 4,084 - 459,949 Other production 5,995 53 - - 6,048 Transmission 86,475 545 366 - 86,654 Distribution 446,660 27,834 4,564 12 469,942 General 23,888 1,795 1,755 (14) 23,914 Held for future use 443 - - - 443 Construction work in progress 19,046 6,572 - - 25,618 Plant acquisition adjustment 12,462 - - - 12,462 ---------- ------- ------- ------ ---------- 1,055,297 41,137 10,769 (2) 1,085,663 ---------- ------- ------- ------ ---------- Gas Utility Plant: In Service - Intangible 30 - - - 30 Storage 37,913 571 134 - 38,350 Transmission 48,798 1,207 194 (38) 49,773 Distribution 216,917 27,440 9,810 38 234,585 General 11,280 1,089 723 - 11,646 Construction work in progress 4,165 (126) - - 4,039 Plant acquisition adjustment 6,206 - - - 6,206 ---------- ------- ------- ------ ---------- 325,309 30,181 10,861 - 344,629 ---------- ------- ------- ------ ---------- Schedule V Page 2 of 6 Common Utility Plant: In Service 31,759 1,265 869 3,237 35,392 Construction work in progress 2,266 (27) - - 2,239 ---------- ------- ------- ------ ---------- 34,025 1,238 869 3,237 37,631 ---------- ------- ------- ------ ---------- Total $1,414,631 $72,556 $22,499 $3,235 $1,467,923 ========== ======= ======= ====== ==========
Schedule V Page 3 of 6 CENTRAL ILLINOIS LIGHT COMPANY AND SUBSIDIARY COMPANIES Property, Plant and Equipment at Original Cost Year Ended December 31, 1992
Column A Column B Column C Column D Column E Column F Balance at Balance at Beginning of Additions Other End of Period at Changes Period Classification January 1, 1992 Cost Retirements Add (Deduct) December 31, 1992 (Thousands of dollars) Electric Utility Plant: In Service - Intangible $ 633 $ - $ - $ - $ 633 Steam production 456,138 7,781 4,391 167 459,695 Other production 6,332 - 331 (6) 5,995 Transmission 87,322 73 73 (847) 86,475 Distribution 422,054 27,796 4,076 886 446,660 General 23,232 2,497 1,847 6 23,888 Held for future use 443 - - - 443 Construction work in progress 16,523 2,523 - - 19,046 Plant acquisition adjustment 12,462 - - - 12,462 ---------- ------- ------- ----- ---------- 1,025,139 40,670 10,718 206 1,055,297 ---------- ------- ------- ----- ---------- Gas Utility Plant: In Service - Intangible 30 - - - 30 Storage 37,929 304 319 (1) 37,913 Transmission 48,453 363 16 (2) 48,798 Distribution 203,900 15,265 2,250 2 216,917 General 11,197 798 716 1 11,280 Construction work in progress 1,662 2,503 - - 4,165 Plant acquisition adjustment 6,206 - - - 6,206 ---------- ------- ------- ----- ---------- 309,377 19,233 3,301 - 325,309 ---------- ------- ------- ----- ---------- Schedule V Page 4 of 6 Common Utility Plant: In Service 31,303 868 412 - 31,759 Construction work in progress 1,214 1,052 - - 2,266 ---------- ------- ------- ----- ---------- 32,517 1,920 412 - 34,025 ---------- ------- ------- ----- ---------- Total $1,367,033 $61,823 $14,431 $ 206 $1,414,631 ========== ======= ======= ===== ==========
Schedule V Page 5 of 6 CENTRAL ILLINOIS LIGHT COMPANY AND SUBSIDIARY COMPANIES Property, Plant and Equipment at Original Cost Year Ended December 31, 1991
Column A Column B Column C Column D Column E Column F Balance at Balance at Beginning of Additions Other End of Period at Changes Period Classification January 1, 1991 Cost Retirements Add (Deduct) December 31, 1991 (Thousands of dollars) Electric Utility Plant: In Service - Intangible $ 633 $ - $ - $ - $ 633 Steam production 450,177 8,065 1,907 (197) 456,138 Other production 6,299 33 - - 6,332 Transmission 84,759 2,750 120 (67) 87,322 Distribution 401,069 24,152 3,371 204 422,054 General 22,551 1,985 1,311 7 23,232 Held for future use 424 - 47 66 443 Construction work in progress 12,746 3,777 - - 16,523 Plant acquisition adjustment 12,462 - - - 12,462 ---------- ------- ------- ----- ---------- 991,120 40,762 6,756 13 1,025,139 ---------- ------- ------- ----- ---------- Gas Utility Plant: In Service - Intangible 30 - - - 30 Storage 37,505 845 419 (2) 37,929 Transmission 47,666 847 68 8 48,453 Distribution 192,762 12,622 1,466 (18) 203,900 General 10,942 938 698 15 11,197 Construction work in progress 3,358 (1,696) - - 1,662 Plant acquisition adjustment 6,206 - - - 6,206 ---------- ------- ------- ----- ---------- 298,469 13,556 2,651 3 309,377 ---------- ------- ------- ----- ---------- Schedule V Page 6 of 6 Common Utility Plant: In Service 32,660 1,307 2,583 (81) 31,303 Construction work in progress 48 1,166 - - 1,214 ---------- ------- ------- ----- ---------- 32,708 2,473 2,583 (81) 32,517 ---------- ------- ------- ----- ---------- Total $1,322,297 $56,791 $11,990 $ (65) $1,367,033 ========== ======= ======= ===== ==========
Schedule VI Page 1 of 6 CENTRAL ILLINOIS LIGHT COMPANY AND SUBSIDIARY COMPANIES Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment Year Ended December 31, 1993
Column A Column B Column C Column D Column E Column F Balance at Additions Other Balance at Beginning Charged Charged Deductions Changes End of of Period to to Other Retirements Cost of Add Period Description January 1, 1993 Income Accounts(1) at Cost Removal (Deduct) December 31, 1993 (Thousands of dollars) Accumulated provision for depreciation and amortization of plant and equipment: Electric Production $203,569 $15,896 $ 17 $ 4,084 $2,649 $ - $212,749 Transmission 43,054 2,350 - 366 (25) - 45,063 Distribution 182,890 18,590 504 4,564 1,282 - 196,138 General 10,751 507 1,397 1,755 558 - 10,342 -------- ------- ------ ------- ------- --- -------- 440,264 37,343 1,918 10,769 4,464 - 464,292 -------- ------- ------ ------- ------- --- -------- Gas Intangible 17 - - - - - 17 Storage 16,940 1,400 - 135 13 - 18,192 Transmission 24,180 1,213 34 194 20 - 25,213 Distribution 98,026 11,236 10 9,810 2,389 - 97,073 General 4,833 173 719 723 - - 5,002 -------- ------- ------ ------- ------ --- -------- 143,996 14,022 763 10,862 2,422 - 145,497 -------- ------- ------ ------- ------ --- -------- Common 8,343 1,657 - 869 8 - 9,123 -------- ------- ------ ------- ------ --- -------- Total $592,603 $53,022 $2,681 $22,500 $6,894 $ - $618,912 ======== ======= ====== ======= ====== === ======== Schedule VI Page 2 of 6 Accumulated provision for amortization of acquisition adjustments: Electric $ 9,180 $ 498 $ - $ - $ - $ - $ 9,678 Gas 4,708 214 - - - - 4,922 -------- ------- ------ ------- ------ --- -------- Total $ 13,888 $ 712 $ - $ - $ - $ - $ 14,600 ======== ======= ====== ======= ====== === ======== (1) Includes charges to clearing accounts of $1.8 million, charges to administrative and general expense of $9,000, charges to affiliates of $16,000, salvage on retirements of $1 million, and a plant adjustment of $(13,000).
Schedule VI Page 3 of 6 CENTRAL ILLINOIS LIGHT COMPANY AND SUBSIDIARY COMPANIES Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment Year Ended December 31, 1992
Column A Column B Column C Column D Column E Column F Balance at Additions Other Balance at Beginning Charged Charged Deductions Changes End of of Period to to Other Retirements Cost of Add Period Description January 1, 1992 Income Accounts(1) at Cost Removal (Deduct) December 31, 1992 (Thousands of dollars) Accumulated provision for depreciation and amortization of plant and equipment: Electric Production $195,935 $15,852 $ 14 $ 4,723 $3,509 $- $203,569 Transmission 40,627 2,374 159 74 32 - 43,054 Distribution 170,222 17,632 457 4,076 1,345 - 182,890 General 10,637 577 1,469 1,846 86 - 10,751 -------- ------- ------ ------- ------- --- -------- 417,421 36,435 2,099 10,719 4,972 - 440,264 -------- ------- ------ ------- ------- --- -------- Gas Intangible 17 - - - - - 17 Storage 15,883 1,394 - 318 19 - 16,940 Transmission 23,018 1,196 4 16 22 - 24,180 Distribution 91,183 10,475 5 2,251 1,386 - 98,026 General 4,622 178 752 716 3 - 4,833 -------- ------- ------ ------- ------ --- -------- 134,723 13,243 761 3,301 1,430 - 143,996 -------- ------- ------ ------- ------ --- -------- Common 7,075 1,717 31 380 100 - 8,343 -------- ------- ------ ------- ------ --- -------- Total $559,219 $51,395 $2,891 $14,400 $6,502 $- $592,603 ======== ======= ====== ======= ====== === ======== Schedule VI Page 4 of 6 Accumulated provision for amortization of acquisition adjustments: Electric $ 8,682 $ 498 $ - $ - $ - $- $ 9,180 Gas 4,494 214 - - - - 4,708 -------- ------- ------ ------- ------ --- -------- Total $ 13,176 $ 712 $ - $ - $ - $- $ 13,888 ======== ======= ====== ======= ====== === ======== (1) Includes charges to clearing accounts of $1.8 million, charges to administrative and general expense of $8,000, charges to affiliates of $11,000, salvage on retirements of $1 million, and a plant adjustment of $42,000.
Schedule VI Page 5 of 6 CENTRAL ILLINOIS LIGHT COMPANY AND SUBSIDIARY COMPANIES Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment Year Ended December 31, 1991
Column A Column B Column C Column D Column E Column F Balance at Additions Other Balance at Beginning Charged Charged Deductions Changes End of of Period to to Other Retirements Cost of Add Period Description January 1, 1991 Income Accounts(1) at Cost Removal (Deduct) December 31, 1991 (Thousands of dollars) Accumulated provision for depreciation and amortization of plant and equipment: Electric Production $184,379 $15,684 $ 51 $ 1,907 $2,272 $ - $195,935 Transmission 38,478 2,332 - 119 64 - 40,627 Distribution 157,485 16,687 576 3,330 1,196 - 170,222 General 9,959 634 1,356 1,309 - (3) 10,637 -------- ------- ------ ------- ------ --- -------- 390,301 35,337 1,983 6,665 3,532 (3) 417,421 -------- ------- ------ ------- ------ --- -------- Gas Intangible 16 1 - - - - 17 Storage 14,945 1,382 - 419 25 - 15,883 Transmission 21,939 1,182 - 68 35 - 23,018 Distribution 84,025 9,918 6 1,466 1,300 - 91,183 General 4,443 205 672 698 - - 4,622 -------- ------- ------ ------- ------ --- -------- 125,368 12,688 678 2,651 1,360 - 134,723 -------- ------- ------ ------- ------ --- -------- Common 8,060 1,592 7 2,585 2 3 7,075 -------- ------- ------ ------- ------ --- -------- Total $523,729 $49,617 $2,668 $11,901 $4,894 $ - $559,219 ======== ======= ====== ======= ====== === ======== Schedule VI Page 6 of 6 Accumulated provision for amortization of acquisition adjustments: Electric $ 8,183 $ 499 $ - $ - $ - $ - $ 8,682 Gas 4,280 214 - - - - 4,494 -------- ------- ------ ------- ------ --- -------- Total $ 12,463 $ 713 $ - $ - $ - $ - $ 13,176 ======== ======= ====== ======= ====== === ======== (1) Includes charges to clearing accounts of $1.8 million, charges to administrative and general expense of $8,000, charges to affiliates of $9,000 and salvage on retirements of $833,000.
Schedule VIII CENTRAL ILLINOIS LIGHT COMPANY AND SUBSIDIARY COMPANIES Valuation and Qualifying Accounts and Reserves for the Three Years Ended December 31, 1993
Column A Column B Column C Balance at Balance at Beginning of End of Description Period Period (Thousands of dollars) Reserves deducted from asset to which it applies: Reserve for doubtful accounts - Year ended December 31, 1993 $ 799 $ 585 Year ended December 31, 1992 928 799 Year ended December 31, 1991 809 928 Other reserves: Reserve for injuries and damages - Year ended December 31, 1993 $1,869 $2,321 Year ended December 31, 1992 1,284 1,869 Year ended December 31, 1991 1,036 1,284
Schedule IX CENTRAL ILLINOIS LIGHT COMPANY AND SUBSIDIARY COMPANIES Short-Term Borrowings for the Three Years Ended December 31, 1993
Column A Column B Column C Column D Column E Column F Weighted average Maximum Average Weighted Category of interest amount amount average aggregate Balance rate at outstanding outstanding interest rate short-term at end end of during the during the during the borrowings of period period period period (1) period (Thousands of Dollars) 1993 Commercial Paper $12,400 3.4% $28,000 $18,758 3.2% 1992 Commercial Paper $24,500 3.6% $24,500 $ 5,933 3.0% 1991 Commercial Paper $11,500 4.7% $11,500 $ 415 4.7% (1) Based on the outstanding daily balance.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CILCORP INC. March 15, 1994 By R. O. Viets R. O. Viets President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date (i) and (ii) Principal executive officer, director and principal financial officer: R. O. Viets R. O. Viets President, Chief March 15, 1994 Executive Officer and Director (iii) Controller T. D. Hutchinson T. D. Hutchinson Controller March 15, 1994 (iv) A majority of the Directors (including the director named above): M. Alexis* Director March 15, 1994 J. R. Brazil* Director March 15, 1994 D. E. Connor* Director March 15, 1994 R. V. O'Keefe* Director March 15, 1994 H. S. Peacock* Director March 15, 1994 R. W. Slone* Director March 15, 1994 K. E. Smith* Director March 15, 1994 R. N. Ullman* Director March 15, 1994 J. M. Unland* Director March 15, 1994 M. M. Yeomans* Director March 15, 1994 R. O. Viets R. O. Viets Director March 15, 1994 *By R. O. Viets R. O. Viets Attorney-in-fact SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENTRAL ILLINOIS LIGHT COMPANY March 15, 1994 By R. W. Slone R. W. Slone Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date (i) Principal executive officer and director: R. W. Slone R. W. Slone Chairman of the Board, March 15, 1994 President, Chief Executive Officer and Director (ii) Principal financial officer: T. S. Romanowski T. S. Romanowski Vice President March 15, 1994 (iii) Controller R. L. Beetschen R. L. Beetschen Controller and March 15, 1994 Manager of Accounting (iv) A majority of the Directors (including the director named above): M. Alexis* Director March 15, 1994 J. R. Brazil* Director March 15, 1994 W. Bunn III* Director March 15, 1994 D. E. Connor* Director March 15, 1994 H. S. Peacock* Director March 15, 1994 W. M. Shay* Director March 15, 1994 K. E. Smith* Director March 15, 1994 R. N. Ullman* Director March 15, 1994 J. M. Unland* Director March 15, 1994 J. F. Vergon* Director March 15, 1994 M. M. Yeomans* Director March 15, 1994 R. W. Slone R. W. Slone Director March 15, 1994 *By R. W. Slone R. W. Slone Attorney-in-fact EXHIBIT (12) CILCORP INC. AND SUBSIDIARIES Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended 1993 1992 1991 1990 1989 (Thousands of Dollars) Earnings, as defined: Net Income $33,583 $32,097 $ 39,656 $34,504 $ 48,399 Income Taxes 18,069 20,810 29,676 24,344 27,824 Interest 27,363 29,205 28,661 27,934 28,007 Preferred Dividends 4,043 4,441 4,441 4,441 4,441 Convertible Preferred Dividends - - 828 1,839 - ------- ------- -------- ------- -------- Total earnings, as defined $83,058 $86,553 $103,262 $93,062 $108,671 ======= ======= ======== ======= ======== Fixed charges, as defined: Interest Expense 25,929 28,275 27,791 27,066 27,209 Interest Expense on COLI 1,434 930 870 868 798 Tax Effected Preferred Dividends 6,701 7,249 8,601 10,251 7,219 ------- ------- ------- ------- ------- Total Fixed Charges, as defined $34,064 $36,454 $37,262 $38,185 $35,226 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 2.4 2.4 2.8 2.4 3.1 ==== ==== ==== ==== ====
EXHIBIT (12) CENTRAL ILLINOIS LIGHT COMPANY Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended 1993 1992 1991 1990 1989 (Thousands of Dollars) Earnings, as defined: Net Income $37,678 $35,636 $44,231 $40,966 $44,430 Income Taxes 20,368 17,723 22,329 20,500 22,179 Fixed Charges, as below 26,335 25,130 24,295 24,095 24,540 ------- ------- ------- ------- ------- Total earnings, as defined $84,381 $78,489 $90,855 $85,561 $91,149 ======= ======= ======= ======= ======= Fixed charges, as defined: Interest on COLI 1,434 930 870 868 798 Interest on Short-Term Debt 592 180 0 0 0 Interest on Long-Term Debt 19,753 20,747 21,285 21,399 21,968 Amortization of Debt Discount & Expense, Premium and Reacquired Loss 624 410 96 97 107 Miscellaneous Interest Expense 1,485 2,448 1,591 1,320 1,205 Interest Portion of Rentals 2,447 415 453 411 462 ------- ------- ------- ------- ------- Total Fixed Charges, as defined $26,335 $25,130 $24,295 $24,095 $24,540 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 3.20 3.12 3.74 3.55 3.71 ==== ==== ==== ==== ====
Exhibit 24 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports, dated February 4, 1994, included herein in this Form 10-K, into CILCORP Inc.'s previously filed Registration Statements File No. 33-45318, 33-51315 and 33-51241. ARTHUR ANDERSEN & CO. Chicago, Illinois March 11, 1994 EX-25 2 POWER OF ATTORNEY FOR CILCORP & CILCO '93 10-K'S February 22, 1994 Mr. R. O. Viets Mr. J. G. Sahn 300 Hamilton Boulevard, Suite 300 Peoria, Illinois 61602 Mr. J. H. Byington, Jr. Mr. D. P. Falck One Battery Park Plaza New York, New York 10004-1490 Gentlemen: We hereby make, constitute and appoint each of you and any one of you our true and lawful attorney for each of us and in each of our names, places or steads, both in our individual capacities as directors and/or that of officers of CILCORP Inc., to sign and cause to be filed with the Securities and Exchange Commission CILCORP Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 1993 and any appropriate amendment or amendments to said report and any necessary exhibits. The undersigned, CILCORP Inc., also authorizes you and any one of you to sign said annual report 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 any exhibits. Very truly yours, CILCORP Inc. By /s/ R. O. Viets R. O. Viets, President Power of attorney related to execution and filing of CILCORP Inc. 1993 annual report on Form 10-K. /s/ M. Alexis /s/ K. E. Smith M. Alexis K. E. Smith /s/ J. R. Brazil /s/ R. N. Ullman J. R. Brazil R. N. Ullman /s/ D. E. Connor /s/ J. M. Unland D. E. Connor J. M. Unland /s/ R. V. O'Keefe /s/ R. O. Viets R. V. O'Keefe R. O. Viets /s/ H. S. Peacock /s/ M. M. Yeomans H. S. Peacock M. M. Yeomans /s/ R. W. Slone R. W. Slone /s/ T. D. Hutchinson T. D. Hutchinson EXHIBIT (25) Extract from Minutes of Meeting of the Board of Directors of CILCORP Inc. held February 22, 1994 Upon motion duly made and seconded, the following resolution was unanimously adopted: RESOLVED: That for the purpose of executing and completing CILCORP Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 1993 to be filed with the Securities and Exchange Commission, and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, this Company, its officers and members of its Board of Directors are authorized to give their several powers of attorney to R. O. Viets, J. G. Sahn, J. H. Byington, Jr. and D. P. Falck, or any one of them, in such form as the officers of the Company determine and as counsel may advise. * * * * * * * * * * * I, John G. Sahn, Secretary of CILCORP Inc., do hereby certify that the foregoing is a true and correct copy of a resolution duly and regularly adopted at meeting of the Board of Directors of CILCORP Inc., duly held February 22, 1994, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded, but is still in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Company this 22 day of March, 1994. /s/ John G. Sahn John G. Sahn Secretary (S E A L) February 22, 1994 Mr. R. W. Slone Mr. T. S. Romanowski 300 Liberty Street Peoria, Illinois 61602 Mr. J. H. Byington, Jr. Mr. D. P. Falck One Battery Park Plaza New York, New York 10004-1490 Gentlemen: We hereby make, constitute and appoint each of you and any one of you our true and lawful attorney for each of us and in each of our names, places or steads, both in our individual capacities as directors and/or that of officers of Central Illinois Light Company to sign and cause to be filed with the Securities and Exchange Commission Central Illinois Light Company's annual report on Form 10-K for the fiscal year ended December 31, 1993 and any appropriate amendment or amendments to said report and any necessary exhibits. The undersigned, Central Illinois Light Company, also authorizes you and any one of you to sign said annual report 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 any exhibits. Very truly yours, CENTRAL ILLINOIS LIGHT COMPANY By /s/ R. W. Slone R. W. Slone, Chairman, President and Chief Executive Officer Power of attorney related to execution and filing of Central Illinois Light Company 1993 annual report on Form 10-K. /s/ M. Alexis /s/ R. W. Slone M. Alexis R. W. Slone /s/ J. R. Brazil /s/ K. E. Smith J. R. Brazil K. E. Smith /s/ W. Bunn III /s/ R. N. Ullman W. Bunn III R. N. Ullman /s/ D. E. Connor /s/ J. M. Unland D. E. Connor J. M. Unland /s/ H. S. Peacock /s/ J. F. Vergon H. S. Peacock J. F. Vergon /s/ W. M. Shay /s/ M. M. Yeomans W. M. Shay M. M. Yeomans /s/ R. L. Beetschen /s/ T. S. Romanowski R. L. Beetschen T. S. Romanowski EXHIBIT (25) Extract from Minutes of Meeting of the Board of Directors of Central Illinois Light Company held February 22, 1994 Upon motion duly made and seconded, the following resolution was unanimously adopted: RESOLVED: That for the purpose of executing and completing Central Illinois Light Company's annual report on Form 10-K for the fiscal year ended December 31, 1993 to be filed with the Securities and Exchange Commission, and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, this Company, its officers and members of its Board of Directors are authorized to give their several powers of attorney to R. W. Slone, T. S. Romanowski, J. H. Byington, Jr. and D. P. Falck, or any one of them, in such form as the officers of the Company may determine and as counsel may advise. * * * * * * * * * * * I, John G. Sahn, Secretary of Central Illinois Light Company, do hereby certify that the foregoing is a true and correct copy of a resolution duly and regularly adopted at meeting of the Board of Directors of Central Illinois Light Company, duly held February 22, 1994, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded, but is still in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Company this 22 day of March, 1994. /s/ John G. Sahn John G. Sahn Secretary (S E A L) EX-10 3 EXHIBIT 10 TO 1993 CILCORP/CILCO 10K CENTRAL ILLINOIS LIGHT COMPANY EXECUTIVE DEFERRAL PLAN (EDP) December 1, 1985 as amended February 22, 1994 TABLE OF CONTENTS Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Article I - Definitions . . . . . . . . . . . . . . . . . . . . . . . 1 Article II - Eligibility . . . . . . . . . . . . . . . . . . . . . . . 3 2.1 Selection By Committee . . . . . . . . . . . . . . . . . . . 3 2.2 Plan Agreement of Executive . . . . . . . . . . . . . . . . 3 Article III - Deferral Commitments . . . . . . . . . . . . . . . . . . 4 3.1 Minimum Deferral . . . . . . . . . . . . . . . . . . . . . . 4 3.2 Maximum Deferral . . . . . . . . . . . . . . . . . . . . . . 4 3.3 Special Deferral . . . . . . . . . . . . . . . . . . . . . 4 3.4 Withholding of Deferral Amounts . . . . . . . . . . . . . . 4 3.5 Annual Rate . . . . . . . . . . . . . . . . . . . . . . . . 4 3.6 Deferral Period . . . . . . . . . . . . . . . . . . . . . . 4 3.7 Default . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3.8 Deferral Penalty In the Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . 4 3.9 No Waiver of Default . . . . . . . . . . . . . . . . . . . . 5 3.10 Crediting of Deferral Amounts, Company Contributions and Rollover ESPP Amounts . . . . . . . . . . . . . . . . . . . . . . . . 5 3.11 Termination of Participation . . . . . . . . . . . . . . . . 5 Article IV - 7th-Year Distribution . . . . . . . . . . . . . . . . . . 5 4.1 7th-Year Distribution . . . . . . . . . . . . . . . . . . . 5 4.2 Supplemental Plan Agreements . . . . . . . . . . . . . . . . 5 4.3 Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . 6 Article V - Retirement Benefit . . . . . . . . . . . . . . . . . . . . 6 5.1 Retirement Benefit . . . . . . . . . . . . . . . . . . . . . 6 5.2 Rate of Interest for Retirement Benefits . . . . . . . . . . 7 5.3 Commencement of Retirement Benefits . . . . . . . . . . . . 7 5.4 Post-Retirement Plan Agreements . . . . . . . . . . . . . . 7 5.5 Amount of Retirement Benefit . . . . . . . . . . . . . . . . 8 5.6 Death Prior to Completion of Retirement Benefits . . . . . . . . . . . . . . . . . . . . 8 Article VI - Rollover ESPP . . . . . . . . . . . . . . . . . . . . . . 8 6.1 Participants Eligible for ESPP Rollover . . . . . . . . . . 8 6.2 ESPP Vesting Credit . . . . . . . . . . . . . . . . . . . . 8 Article VII - Survivor Benefit . . . . . . . . . . . . . . . . . . . . 9 7.1 Pre-Retirement Survivor Benefit . . . . . . . . . . . . . . 9 7.2 Amount of Survivor Benefit . . . . . . . . . . . . . . . . . 9 7.3 Eligibility Requirements for Survivor Benefits . . . . . . . . . . . . . . . . . . . . . 9 7.4 Restriction in the Event of Suicide . . . . . . . . . . . . 9 Article VIII - Termination Benefit . . . . . . . . . . . . . . . . . 10 8.1 Termination Benefits . . . . . . . . . . . . . . . . . . . 10 8.2 Termination Prior to 7 Years of Plan Participation and Prior to Age 55 . . . . . . . . . . . . . 10 8.3 Termination after 7 Years of Plan Participation and Prior to Age 55 . . . . . . . . . . . . . 10 Article IX - Disability Benefit . . . . . . . . . . . . . . . . . . . 11 9.1 Amount of Disability Benefit . . . . . . . . . . . . . . . 11 9.2 Commencement and Termination of Disability Benefits . . . . . . . . . . . . . . . . . . . . 11 9.3 Maximum Age for Disability Benefits . . . . . . . . . . . . 11 Article X - Beneficiary Designation . . . . . . . . . . . . . . . . . 11 10.1 Beneficiary Designation . . . . . . . . . . . . . . . . . . 11 10.2 Change of Beneficiary Designation . . . . . . . . . . . . . 11 10.3 No Participant Designation . . . . . . . . . . . . . . . . 11 10.4 Effect of Payment . . . . . . . . . . . . . . . . . . . . . 12 Article XI - Leave of Absence . . . . . . . . . . . . . . . . . . . . 12 11.1 Paid Leave of Absence . . . . . . . . . . . . . . . . . . . 12 11.2 Unpaid Leave of Absence . . . . . . . . . . . . . . . . . . 12 Article XII - Other Benefits and Agreements . . . . . . . . . . . . . 12 12.1 Coordination With Other Benefits . . . . . . . . . . . . . 12 12.2 Restoration of Pension Benefits . . . . . . . . . . . . . . 12 Article XIII - Termination, Amendment or Modification . . . . . . . . 13 13.1 Discontinuance . . . . . . . . . . . . . . . . . . . . . . 13 13.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 13 13.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . 13 Article XIV - Miscellaneous . . . . . . . . . . . . . . . . . . . . . 13 14.1 Unsecured General Creditor . . . . . . . . . . . . . . . . 13 14.2 Nonassignability . . . . . . . . . . . . . . . . . . . . . 14 14.3 Not a Contract of Employment . . . . . . . . . . . . . . . 14 14.4 Protective Provisions . . . . . . . . . . . . . . . . . . . 14 14.5 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 14 14.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . 14 14.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 14 14.8 Validity . . . . . . . . . . . . . . . . . . . . . . . . . 14 14.9 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 15 14.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . 15 14.11 Hostile Takeover . . . . . . . . . . . . . . . . . . . . . 15 14.12 Attorneys Fees . . . . . . . . . . . . . . . . . . . . . . 15 14.13 Late Payment Penalty . . . . . . . . . . . . . . . . . . . 15 14.14 Incompetent . . . . . . . . . . . . . . . . . . . . . . . . 15 Article XV - Administration . . . . . . . . . . . . . . . . . . . . . 16 15.1 Committee Duties . . . . . . . . . . . . . . . . . . . . . 16 15.2 Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 16 15.3 Binding Effect of Decisions . . . . . . . . . . . . . . . . 16 15.4 Indemnity of Committee . . . . . . . . . . . . . . . . . . 16 15.5 Employer Information . . . . . . . . . . . . . . . . . . . 16 15.6 Change in Payments . . . . . . . . . . . . . . . . . . . . 16 EXECUTIVE DEFERRAL PLAN OF CENTRAL ILLINOIS LIGHT COMPANY Purpose The primary purpose of the Executive Deferral Plan of Central Illinois Light Company is to help attract and maintain high caliber employees in high-level management positions. Directors, executive officers of the Company and certain other key employees on the Company's management staff (i.e., elected officers, department heads, and other key employees reporting to executive officers) will be allowed to participate in the Executive Defer ral Plan. Members of the management staff allowed to participate will be those key employees who, in the opinion of the administrative committee of the Executive Deferral Plan, contribute significantly to the health and well-being of the Company through their leadership and managerial talents and who occupy management positions of importance in the Company. Article 1 Definitions For purposes hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Base Annual Salary" shall mean the yearly compensation excluding bonuses or other fees paid to a Participant for employment services rendered to the Employer, before reduction for compensation deferred pursuant to this plan. 1.2 "Beneficiary" shall mean the person or persons, or the entity desig nated by the Participant to receive any benefits payable under this Plan upon the death of a Participant. Any Participant's Beneficiary designation shall be made by written instrument filed with the Committee and shall become effective only when received, accepted and acknowledged in writing by the Committee. 1.3 "Committee" shall mean the administrative committee appointed to manage and administer the Plan in accordance with its provisions pursuant to Article 15. 1.4 "Company" shall mean CENTRAL ILLINOIS LIGHT COMPANY, any corporation which is, along with the Company, a member of a controlled group of corporations as described in Section 414(b) of the Internal Revenue Code of 1954, as amended, and all successor companies thereto. 1.5 "Company Contributions" shall mean such amounts, if any, that an Employer, in its sole discretion, contributed to the Plan in any year for the benefit of all or some Participants. 1.6 "Covered Salary" shall mean a Participant's Base Annual Salary and bonuses which serves as a basis for computation of the Retirement, Survivor or Termination benefits pursuant to the terms and condi tions of this Plan. 1.7 "Deferral Amount" shall mean the amount of Covered Salary deferred by a Participant each year pursuant to his election in the form of a Plan Agreement. 1.8 "Deferral Period" shall mean the period during which amounts of Covered Salary are being deferred pursuant to the deferral election of the Participant as set forth in the Participant's Plan Agreement. 1.9 "Disability". A Participant shall be considered totally disabled by bodily injuries, sickness or disease for purposes of the Plan for the period, excluding any period for which he receives benefits under the Company's Sick Pay Plan, if: a. During the first two years of any period of total disability, the Participant is unable to perform the duties of his occupa tion; and b. During continuation of the period of total disability beyond two years, the Participant is unable to engage in any business or occupation or to perform any work for compensation, gain or profit for which he is reasonably fitted by education, training or experience. 1.10 "EDP Account" shall mean an individual account comprised of a Participant's Deferral Amounts, Rollover ESPP amounts, Company Contributions and interest credited thereon. An EDP Account shall be maintained for each Participant. A Participant's EDP Account shall be utilized solely as a device for the measurement and deter mination of the amounts to be paid to the Participant pursuant to this Plan. A Participant's EDP Account shall not constitute or be treated as a trust fund. 1.11 "Employer" shall mean the Company having one or more eligible Employees who have been selected by the Committee to participate. Where the context dictates, the term "Employer" as used herein refers to the particular Employer which has entered into a Plan Agreement with a specific Participant. 1.12 "Executive" shall mean directors and those persons in the regular full-time employment of the Company who are key employees and members of the management staff who are selected for participation in the Plan by the Committee. 1.13 "Moody's Seasoned Corporate Bond Rate" (Moody's) shall mean an economic indicator which is an arithmetic average of yields of representative bonds: industrials, public utilities, Aaa, Aa, A, and Baa. 1.14 "Participant" shall mean any Executive who elects to participate in the Plan by executing a Plan Agreement. 1.15 "Plan" shall mean the Executive Deferral Plan of the Employer which shall be evidenced by this instrument and by each Plan Agreement, as amended from time to time. 1.16 "Plan Agreement" shall mean the form of written agreement, as amended from time to time, which is entered into by and between an Employer and a Participant. 1.17 "Plan Anniversary Date" shall be the last day of the Plan Year. 1.18 "Plan Year" shall mean the 12 consecutive month period commencing on December 1 and ending on the next following November 30. 1.19 "Retirement" and "Retire" shall mean severance from employment with the Employer at or after the attainment of age fifty-five (55). 1.20 "Retirement Benefit Date" shall mean the date that the Retired Participant first receives Retirement benefits under the Plan. 1.21 "Rollover ESPP" shall mean the amount credited to a Participant under the Executive Salary Protection Plan which is to be credited to the Participant's EDP Account (one-time credit equal to the present value of the ESPP benefit). 1.22 "Secondary Account Balance" shall mean the portion of the EDP Account attributable to the 5% interest credited thereon which is above Moody's and any accumulation thereon at a crediting rate of Moody's plus five percent (5%). 1.23 "Termination of Employment" shall mean the ceasing of employment with the Company, voluntarily or involuntarily, for any reason other than Retirement, Disability or death. Article 2 Eligibility 2.1 Selection By Committee. The Committee shall have the sole discre tion to determine the employees of the Company who are key employees and members of the management staff who are eligible to become Participants in accordance with the purpose of the Plan. The Committee shall also have the sole discretion to determine the directors of the Company who are eligible to become Participants. The foregoing notwithstanding, participation shall be limited to those individuals who are Participants as of June 15, 1994. 2.2 Plan Agreement of Executive. As a condition of participation, each Executive shall complete, execute and return to the Committee prior to the beginning of the applicable Deferral Period a Plan Agreement. Article 3 Deferral Commitments 3.1 Minimum Deferral. The Participant may defer no less than $2,000 per Plan Year. 3.2 Maximum Deferral. A Participant who became eligible to participate in the Plan on or before November 30, 1989, and all directors of the Company, may defer no more than 100% of Covered Salary or board fees, as applicable. A Participant who became eligible to partici pate in the Plan on or after December 1, 1989 may defer no more than 15% of Covered Salary. 3.3 Special Deferral. The Committee may specify the Plan Years, if any, in which each Participant may elect to defer an amount ("Special Deferral Amount") in addition to the amount or percentage of Covered Salary otherwise specified for deferral under the Plan Agreement. The Special Deferral Amount, if any, shall be set forth in the Plan Agreement of the Participant and shall be treated as a Deferral Amount under the provisions of the Plan except as otherwise provided in Sections 7.2 and 9.1. 3.4 Withholding of Deferral Amounts. The amount or percentage of Covered Salary elected to be deferred pursuant to the Plan Agreement of a Participant shall be withheld over the Deferral Period in the manner set forth in the Plan Agreement of the Participant. 3.5 Annual Rate. The Moody's rate for any Plan Year shall be fixed 60 days prior to the beginning of the Plan Year. Subject to the provisions and limitations of the Plan, the EDP Account will accrue annual interest at a crediting rate of Moody's plus five percent (5%) from the date of Plan inception. 3.6 Deferral Period. The Deferral Period for each Participant shall be a fixed 4 year period commencing on the December 1 coincident with or next preceding the date on which the Participant's initial Deferral Amount is made to the Plan following the Participant's filing of a Plan Agreement with the Committee. 3.7 Default. Default occurs when the Participant does not defer the amount of Covered Salary previously committed to the Plan under that Participant's Plan Agreement. Termination of Employment is not considered a default. A Participant who has a Termination of Employment will receive Termination Benefits, as set forth in Article 8. 3.8 Deferral Penalty In the Event of Default. In the event of default by a Participant on a deferral commitment during the Deferral Period, the Participant may not defer any portion of his Covered Salary for the balance of the Plan Year in which the default occurs or for the next following Plan Year. 3.9 No Waiver of Default. The Committee may not waive any default penalty set forth in Section 3.8. 3.10 Crediting of Deferral Amounts, Company Contributions and Rollover ESPP Amounts. The amount or percentage of Covered Salary that a Participant elects to defer in the Plan Agreement executed by the Participant with respect to each Plan Year shall be credited by the Employer to the Participant's EDP Account throughout each Plan Year as the Participant is paid the nondeferred portion of Covered Salary for such Plan Year or on the date any lump sum Deferral Amount is contributed to the Plan. The amount or percentage of Covered Salary so credited to a Participant's EDP Account shall equal the amount deferred. The Participant shall designate in the Plan Agreement the amount or percentage of Covered Salary to be deferred. Company Contributions, if any, and Rollover ESPP amounts, if any, shall be credited to a Participant's EDP Account at the time made by the Employer. 3.11 Termination of Participation. A Participant may terminate partici pation in the Plan at any time by giving the Employer written notice of such termination not less than 30 days prior to the anniversary date of the execution of the most recent Plan Agreement of the Participant. Benefits to a Participant who elects to terminate Plan participation shall be payable in accordance with the terms of the Plan. Article 4 7th Year Distribution 4.1 7th-Year Distribution. Except as otherwise provided in Section 4.2, a Participant shall be paid his EDP Account, excluding that portion attributable to interest credited in excess of Moody's and any accumulation thereon, 45 days after the commencement of his seventh Plan Year of participation in the Plan. All other funds in the EDP Account will remain in the Plan until the Participant dies, incurs a Disability, Retires or incurs a Termination of Employment. 4.2 Supplemental Plan Agreements Prior to the Plan Anniversary Date preceding the Plan Year in which the 7th-Year Distribution is payable to a Participant, the Partici pant may enter into a Supplemental Plan Agreement ("Supplemental Plan Agreement") whereby the Participant and the Employer agree to a further deferral until retirement of all or a portion of the amount that would otherwise be payable as a 7th-Year Distribution. The Supplemental Plan Agreement must be entered into a minimum of one (1) year prior to the Plan Anniversary Date preceding the Plan Year in which the 7th-Year Distribution is payable to a Participant, must be executed by the Participant in writing in a form acceptable to the Committee, and must be returned to the Committee one (1) year prior to the beginning of the Plan Year in which the 7th-Year Distribution would otherwise be payable. If a Supplemental Plan Agreement is timely executed all funds remaining in the EDP Account will remain in the Plan until the Participant's death, disability, retirement or termination of employment. No Retired Participant shall be eligible to enter into a Supplemental Plan Agreement under this provision. 4.3 Hardship Withdrawals A Participant may make a "Hardship" withdrawal of his EDP Account balance only if: (1) the withdrawal is on account of an immediate and heavy financial need of the Participant; and (2) the withdrawal does not exceed the amount necessary to satisfy the immediate and heavy financial need. Any request for a withdrawal in accordance with this subsection 4.3 shall be in writing filed with the Commit tee in such form and at such time as the Committee may require. A Participant will be deemed to have a Hardship if he has an immediate and heavy financial need and if such withdrawal is for the purpose of: (1) medical expenses of the Participant, his spouse or a depen dent, (2) the purchase of a Participant's principal residence; (3) the post-secondary tuition (for a period following the date of the hardship request) of the Participant, his spouse or a dependent; or (4) the prevention of the eviction from or the foreclosure on a Participant's principal residence. A distribution will be deemed not to exceed the amount necessary to meet the Participant's immedi ate and heavy financial need if: (a) the amount of withdrawal under this paragraph 4.3 does not exceed the amount necessary to satisfy his immediate and heavy financial need; (b) he has received all distributions and taken all loans under any tax-qualified plan of the Company; (c) his ability to make contributions to any salary deferral plan, qualified or nonqualified, is suspended for a period of 12 months following a withdrawal under this paragraph 4.3; and (d) the maximum amount of contributions the Participant may make to any salary deferral plan, qualified or nonqualified, for the Plan Year next following the Plan Year in which a Hardship withdrawal, pursuant to this paragraph 4.3 is made, is reduced by the amount of contributions, if any, the Participant made during the Plan Year in which such a withdrawal was made. Article 5 Retirement Benefit 5.1 Retirement Benefit A Participant who Retires shall become eligible to receive, in accordance with this Article 5, Retirement benefits on the Partici pant's Retirement Benefit Date. Unless a Post-Retirement Plan Agreement provides otherwise, the Retirement Benefit Date of a Participant who Retires shall be the first day of the month follow ing his Retirement. Retirement benefits may be in the form of a lump sum or an amount per month based on his EDP Account as of the Participant's Retirement Benefit Date. 5.2 Rate of Interest for Retirement Benefits. The interest on the EDP Account will be based on a fixed rate which is an average of the annual Moody's Seasoned Corporate Bond Rate for a five (5) year period consisting of the Plan Year in which the Participant's Retirement Benefit Date occurs and the four (4) immediately preced ing Plan Years with an additional 5% interest credited to the fixed rate. 5.3 Form and Commencement of Retirement Benefits Thirty (30) days before his Retirement the Participant must inform the Committee in writing of the form in which his Retirement bene fits are to be paid, either in a lump sum or in equal monthly payments. If no election is timely made, the Plan will pay benefits in equal monthly installments. Unless otherwise provided pursuant to a Post-Retirement Plan Agreement, Retirement benefits, if a lump sum form of payment is selected, shall be paid on the first day of the month following the Participant's Retirement. If the Partici pant elects the monthly installment form of payment, his Retirement benefits shall commence on the first day of the month following the Retirement of the Participant and shall be paid over a period up to 120 months or a 180 or 240 month period, in equal monthly installments. Thirty (30) days before his Retirement, the Participant must inform the Committee in writing of the benefit payment period over which his monthly benefits are to be paid. If no election is timely made, the Plan will pay benefits over 240 months. 5.4 Post-Retirement Plan Agreements A Participant may enter into a Post-Retirement Plan Agreement whereby the Participant and the Employer agree to a deferral to a date certain of the payment of the Retirement benefits that would otherwise be paid under Section 5.3, the form in which the benefits are to be paid and/or, if a monthly installment form has been selected, the time period over which such benefits are to be paid. The Post-Retirement Plan Agreement must be executed by the Partici pant in writing in a form acceptable to the Committee and delivered to the Committee at least thirty (30) days prior to the Partici pant's Retirement. Retirement benefits which are deferred by reason of a Post-Retirement Plan Agreement shall be paid to the Participant in the form and on the date certain as selected by the Participant. No Participant may defer the payment of his Retirement benefits to a date beyond the later of (1) ten (10) years following the Partici pant's commencement of Plan participation, (2) Retirement, or (3) age 65 (age 72 in the case of a Participant who was a Director on August 20, 1993). 5.5 Amount of Retirement Benefit A Participant's Retirement benefits shall be equal to the balance of his EDP Account as of his Retirement Benefit Date, except that the amount payable from the Participant's Secondary Account Balance shall be reduced, as appropriate, in accordance with the vesting schedule set forth in Section 8.3 and fixed as of the date that a lump sum payment is made or that monthly payments commence (the Retirement Benefit Date). 5.6 Death Prior to Completion of Retirement Benefits If a Retired Participant who has elected the monthly installment form of payment dies after the commencement of Retirement benefit payments but before the applicable Retirement benefit is paid in full, the Participant's unpaid Retirement benefit payments shall continue and be paid to that Participant's Beneficiary in the same manner as selected by the Participant. If a Retired Participant dies prior to the payment of Retirement benefits, his Beneficiary shall be paid benefits in a lump sum on the first day of the month following the death of the Participant, unless the Participant had retired on or before January 1, 1995, in which case the benefit will be paid over a 240 month period. The aggregate benefits to be paid to the Participant's Beneficiary will be in an amount equal to the balance of the Participant's EDP Account as of the date of the Participant's death. Notwithstanding the foregoing, the Committee may, in its sole and absolute discretion, select a later commence ment date or an alternate payment period not to exceed 120 months for the payment of benefits under this Section to any Beneficiary. Article 6 Rollover ESPP 6.1 Participants Eligible for ESPP Rollover. A Participant who had participated in the Executive Salary Protection Plan ("ESPP") shall be entitled to a Rollover ESPP only if such Participant is age 55 or older as of December 1, 1985. Each Participant who is eligible for a Rollover ESPP will be credited with such amount in his EDP Ac count. Individual Rollover ESPP amounts, if any, will be reported on the Participant's Plan Agreement. 6.2 ESPP Vesting Credit. All Participants who had participated in the ESPP shall be credited with three additional years of Plan partici pation for purposes of the vesting schedule set forth in Section 8.3 but for no other purpose under the Plan. The vesting years so credited shall be in addition to actual years (and fractional years) of actual participation in the ESPP. A Participant's Rollover ESPP will at all times remain fully vested. For example, a Participant with four and one-half years in the ESPP will initially be 70% vested in his Secondary Account Balance (4 1/2 years + 3 years = 7 1/2 years = 70% vested). Article 7 Survivor Benefits 7.1 Pre-Retirement Survivor Benefit. If a Participant dies before Retirement, the Employer will pay a Survivor's Benefit to the designated Beneficiary of the Participant. 7.2 Amount of Survivor Benefits. The Beneficiary eligible for a Survi vor Benefit will receive in a lump sum as soon as practicable the greater of: a. The existing EDP Account balance, or b. Ten (10) times the sum of: i. the greatest Deferral Amount committed in one Plan Year by the Participant, except that only one-quarter (1/4) of any Special Deferral Amount shall be considered for this purpose, and ii. the Company Contributions made for that Plan Year, provided, however, that if a Participant failed to meet the eligi bility requirement set forth in Section 7.3(b), the Beneficiary of that Participant shall be limited to the Survivor Benefit set forth in paragraph (a) of this Section 7.2. 7.3 Eligibility Requirements For Survivor Benefit. The obligation of the Employer to pay the Survivor Benefit to any Beneficiary shall exist only if: a. at the time of death, the Participant was employed by the Employer, on an authorized leave of absence, or absent from employment due to Disability; b. all amounts committed for deferral under the Plan were actually deferred; c. the Participant's death was determined not to be from a bodily or mental cause or causes, the information about which was withheld, or knowingly concealed, or falsely provided by the Participant, when requested by the Employer to furnish evidence of good health; d. proof of death in such form as determined acceptable by the Committee is furnished. 7.4 Restriction in the Event of Suicide. In the event of a Partici pant's suicide, the amount of the Survivor Benefit which the Employ er shall be obligated to pay shall be limited to benefits granted more than two years prior to the date of such suicide. Article 8 Termination Benefit 8.1 Termination Benefits. If the Participant incurs a Termination of Employment prior to age 55 by means other than death or Disability, such Participant will be eligible to receive a Termination Benefit as set forth in this Article 8. 8.2 Termination Prior to 7 Years of Plan Participation and Prior to Age 55. A participant who incurs a Termination of Employment before completing 7 years of Plan participation, and prior to attaining age 55, shall be entitled to receive in a lump sum that portion of his EDP Account attributable to his Deferral Amount, his Rollover ESPP Benefit, if any, his Company Contributions, if any, and interest credited at Moody's. Such amount shall be paid to the Participant within 90 days of the date of his Termination of Employment. 8.3 Termination after 7 Years of Plan Participation and Prior to Age 55. A participant who incurs a Termination of Employment after complet ing 7 years of Plan participation, and prior to attaining age 55, shall receive, to the extent not otherwise distributed pursuant to Article 4, a distribution of his EDP Account, including that vested portion attributable to interest credited in excess of Moody's and any accumulation thereon, in a lump sum within 90 days of the date of his Termination of Employment. The vested portion of such Participant's Secondary Account Balance shall be determined upon his Termination of Employment in accordance with the following schedule: Percentage of Years of Plan Secondary Participation Account Balance Less than 7 years 0% 7 but less than 8 years 70% 8 but less than 9 years 80% 9 but less than 10 years 90% 10 or more years 100% Article 9 Disability Benefit 9.1 Amount of Disability Benefit. If the Committee determines that a Participant has a Disability, the Participant shall be eligible to receive an annual Disability Benefit in an amount equal to one and one-half (1.5) times the greatest Deferral Amount committed under the Plan in any Plan Year prior to or coincident with the date in which benefits commence under the Sick Pay Plan of the Company, except that only one quarter (1/4) of any Special Deferral Amount shall be considered for this purpose. 9.2 Commencement and Termination of Disability Benefits. Disability Benefits will be paid to a Participant who has a Disability commenc ing on the date immediately following the expiration of benefits to that Participant under the Sick Pay Plan of the Company. The Disability Benefits of a Participant shall continue until the earliest of: (a) the date of the death of the Participant; (b) the date as of which the Participant ceases to be classified as having a Disability; or (c) the date the Participant attains age 65. 9.3 Maximum Age for Disability Benefits. In order to be eligible to receive a Disability Benefit upon Disability as set forth in this Article 9, a Participant must first enter into a Plan Agreement prior to attaining age 60. Article 10 Beneficiary Designation 10.1 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both principal as well as contingent). 10.2 Change of Beneficiary Designation. Any Beneficiary designation may be changed by a Participant at any time by the filing in writing of such change on a form prescribed by the Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary desig nations previously filed. The Committee shall be entitled to rely on the last designation filed by the Participant prior to his death. 10.3 No Participant Designation. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be the surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan shall be payable to the Participant's personal representa tive (executor or administrator of the Participant's estate). 10.4 Effect of Payment. The payment of benefits under the Plan to the deemed Beneficiary shall completely discharge the Employer's obliga tions under this Plan. Article 11 Leave of Absence 11.1 Paid Leave of Absence. If a Participant is authorized by the Company for any reason to take a paid leave of absence from the employment of the Company, the deferral commitments for the Deferral Period shall remain in full force and effect during such leave of absence. 11.2 Unpaid Leave of Absence. If a Participant is authorized by the Company for any reason to take an unpaid leave of absence from the employment of the Company, the deferral commitments shall be sus pended and shall be considered a default pursuant to Section 3.7. Article 12 Other Benefits and Agreements 12.1 Coordination With Other Benefits. The benefits provided for a Participant or for the Beneficiary of a Participant under the Plan are in addition to any other benefits to which the Participant or Beneficiary may be entitled under any other plan or program of the Employer. This Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may other wise be expressly provided. 12.2 Restoration of Pension Benefits. The Company recognizes that amounts deferred under the Plan may not be considered as earnings for purposes of the computation of benefits under qualified plans under the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1954, as amended. There fore, any loss of retirement benefits incurred by a Participant under the Pension Plan for Management, Office & Technical Employees of Central Illinois Light Company, as may be amended and restated from time to time (the "Pension Plan"), which result from the deferrals made under the Plan by the Participant, shall be restored by the Company upon the Retirement of a Participant or upon the Termination of Employment of a Participant prior to Retirement. Such pension restoration benefit payments may be paid from this Plan or, in the sole discretion of the Committee, may be paid through an alternate vehicle. Such pension restoration benefits shall be in an amount designed to restore the benefits, if any, that were lost under the Pension Plan due to the deferral under this Plan, and the timing and other characteristics of the pension restoration benefit payments shall coincide as closely as practicable to benefit pay ments which would otherwise have been made under the Pension Plan. Article 13 Discontinuance, Amendment or Termination 13.1 Discontinuance. The Company reserves the right to discontinue the Plan at any time. Upon discontinuance of the Plan, the Partici pants' EDP Accounts shall be paid out according to the schedules set forth in Articles 5 and 8, as applicable. The discontinuance of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan. 13.2 Amendment. The Company may, at any time, amend or modify the Plan in whole or in part, provided, however, that no amendment or modifi cation shall adversely affect any EDP Account in existence at the time the amendment or modification is made. The amendment or modification of the Plan shall not affect any Participant or Benefi ciary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification. 13.3 Termination. The Company reserves the right, in the event of a hostile or non-negotiated takeover or acquisition of the Company, or upon a final decision of any court or administrative agency pertain ing to the income tax treatment of Plan benefits or deductions to the Company or a Participant which is deemed adverse by the Company, to terminate the Plan and to distribute the present value of the Participants' estimated future EDP Accounts, as determined by the Company, to them as soon as practicable thereafter. Article 14 Miscellaneous 14.1 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of Employer, nor shall they be Beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by the Employer ("Policies"). Such Policies or other assets of the Employer shall not be held under any trust for the benefit of Participants, their Beneficiaries, heirs, successors or assigns, or held in any way as collateral security for the fulfilling of the obligations of the Employer under this Plan. Any and all of the Employer's assets and Policies shall be, and remain, the general assets of the Employer. The Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Employer to pay money in the future. 14.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, antici pate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insol vency. 14.3 Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Employer and the Participant, and the Participant (or his Beneficiary) shall have no rights against the Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge him at any time. 14.4 Protective Provisions. A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer in order to facilitate the payment of benefits hereunder and by taking such physical examinations as the Employer may deem necessary and taking such other action as may be requested by the Employer. 14.5 Terms. Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 14.6 Captions. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 14.7 Governing Law. The provisions of this Plan shall be construed and interpreted according to the laws of the State of Illinois. 14.8 Validity. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. 14.9 Notice. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to Central Illinois Light Company Executive Deferral Plan Administrative Committee 300 Liberty Street Peoria, Illinois 61602 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. 14.10 Successors. The provisions of this Plan shall bind and inure to the benefit of the Employer and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Employer, and successors of any such corporation or other business entity. 14.11 Hostile Takeover. In the event of a hostile or non-negotiated takeover or acquisition of an Employer by another corporation or entity, the benefits to all persons under the Plan may become fully vested at the option of the Employer prior to such takeover or acquisition. 14.12 Attorney Fees. In the event that the Company breaches any of the terms of the Plan and it is necessary for a Participant to institute court proceedings to enforce the Plan provisions, the Participant, upon prevailing, shall also recover reasonable attorney's fees and costs as damages from the Company. 14.13 Late Payment Penalty. In the event that the Company fails or refuses to make any of the payments to a Participant or a Beneficia ry required by the Plan, after the Participant or Beneficiary has advised the Company in writing of such failure or refusal and has given the Company thirty (30) days to make such payment, the Company shall pay interest to the Participant or Beneficiary on the amount of the late payment at the rate of two times Moody's, plus 10%, from the date such payment was due until the date such payment is made by the Company. 14.14 Incompetent. In the event that it shall be found upon evidence satisfactory to the Committee that any Participant or Beneficiary to whom a benefit is payable under this Plan is unable to care for his affairs because of illness or accident, any payment due (unless prior claim therefor shall have been made by a duly authorized guardian or other legal representative) may be paid, upon appropri ate indemnification of the Committee, to the spouse of such person or other person deemed by the Committee to have incurred expense for such Participant. Any such payment shall be a payment for the account of the Participant and shall be a complete discharge of any liability of the Plan for such payment amount. Article 15 Administration 15.1 Committee Duties. This Plan shall be administered by a Committee which shall consist of persons appointed by the Board of Directors of the Company. Members of the Committee may be Participants under this Plan. The Committee shall also have the authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. 15.2 Agents. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit and may from time to time consult with counsel who may be counsel to the Employer. 15.3 Binding Effect of Decision. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 15.4 Indemnity of Committee. The Employer shall indemnify and hold harmless the members of the Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee or any of its members. 15.5 Employer Information. To enable the Committee to perform its functions, the Employer shall supply full and timely information to the Committee on all matters relating to the Covered Salary of all Participants, the date and circumstances of the Retirement, Disabil ity, death or Termination of Employment of all Participants, and such other pertinent information as the Committee may reasonably require. 15.6 Change in Payments. The Committee shall have the power, in its sole discretion, to change the manner and time of payments to be made to a Participant or Beneficiary from that which would be otherwise payable to such person. -----END PRIVACY-ENHANCED MESSAGE-----