-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OTOOOJXk3VK3os4eci9I71JsudetkvGgkSqoMDQu/ZJgsm2IwwdgUC10A8050U9U eUkjuF09TvFry1X6vPKH4Q== 0000762129-96-000010.txt : 19970930 0000762129-96-000010.hdr.sgml : 19970930 ACCESSION NUMBER: 0000762129-96-000010 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 SROS: CSX SROS: NYSE 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-K405 SEC ACT: SEC FILE NUMBER: 001-08946 FILM NUMBER: 96538352 BUSINESS ADDRESS: STREET 1: 300 HAMILTON BLVD STE 300 CITY: PEORIA STATE: IL ZIP: 61602 BUSINESS PHONE: 3096758810 MAIL ADDRESS: STREET 1: 300 HAMILTON BLVD STREET 2: STE 300 CITY: PEORIA STATE: IL ZIP: 61602 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-K405 SEC ACT: SEC FILE NUMBER: 001-02732 FILM NUMBER: 96538353 BUSINESS ADDRESS: STREET 1: 300 LIBERTY ST CITY: PEORIA STATE: IL ZIP: 61602 BUSINESS PHONE: 3096725271 MAIL ADDRESS: STREET 1: 300 LIBERTY STREET CITY: PEORIA STATE: IL ZIP: 61602 10-K405 1 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, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from ........ to ........ Commission 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 12, 1996, the aggregate market value of the voting stock of CILCORP Inc. (CILCORP) held by nonaffiliates was approximately $556 million. On that date, 13,366,069 common shares (no par value) were outstanding. At March 12, 1996, the aggregate market value of the voting stock of Central Illinois Light Company (CILCO) held by nonaffiliates was approximately $61 million. The voting stock of CILCO consists of its common and 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 11, 1996, in connection with its Annual Meeting to be held on April 23, 1996, is incorporated into Part I and Part III hereof. Central Illinois Light Company's Proxy Statement dated March 26, 1996, in connection with its Annual Meeting to be held on April 23, 1996, is incorporated into Part I and Part III hereof. CILCORP Inc.'s Annual Report to Shareholders for the year ended December 31, 1995 -- Management@s Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference into Part II Item 7. CILCORP Inc.'s Annual Report to Shareholders for the year ended December 31, 1995 -- Financial Statements, Notes to the Financial Statements and Supplementary Data is incorporated herein by reference into Part II Item 8. CILCORP INC. and Central Illinois Light Company 1995 Form 10-K Annual Report This combined Form 10-K is separately filed by CILCORP Inc. and Central Illinois Light Company (CILCO). Information herein relating to each individual registrant is filed by such registrant on its own behalf. Accordingly, except for its subsidiaries, CILCO makes no representation as to information relating to any other subsidiary of CILCORP Inc. Table of Contents Page Glossary 5-6 Part I Item 1. Business The Company and its Subsidiaries 7-9 Business of CILCO 9 Electric Service 9-11 Gas Service 11 Regulation 11-12 Electric Fuel and Purchased Gas Adjustment Clauses 12 Fuel Supply - Coal 13 Natural Gas Supply 13-14 Financing and Capital Expenditures Programs 14 Environmental Matters 14-15 Significant Customer 15 Franchises 16 Competition 16 Employees 17 Union Contracts 17 Early Retirement Programs 17 Business of ESE 17-20 Customers 20 Regulation of ESE's Clients 20-22 Regulation of ESE 22 Competition 22-23 Subcontractors 23 Government Contracts 23 Patents and Trademark Protection 23 Potential Liabilities and Insurance 23-24 Employees 25 Business of QST 25 Other Businesses 25 CIM/CLM 25-26 Holding Company 26 CVI 26 Employees 26 Item 2. Properties 27-28 Item 3. Legal Proceedings 28 Item 4. Submission of Matters to a Vote of Security Holders 29 Executive Officers of the Registrant 29-31 Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 32 Item 6. Selected Financial Data 33 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 33 Item 8. Index - Financial Statements, Supplementary Data and Exhibits 34 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 59 Part III Item 10. Directors and Executive Officers of the Registrants 59 Item 11. Executive Compensation 60 Item 12. Security Ownership of Certain Beneficial Owners and Management 60 Item 13. Certain Relationships and Related Transactions 60-61 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 62-66 GLOSSARY OF TERMS When used herein, the following terms will have the meanings indicated. AFUDC -- Allowance for Funds Used During Construction 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 CESI -- CILCORP Energy Services Inc. 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 warmer than normal weather experienced, based on the extent to which the average of high and low temperatures for a day falls above 65 degrees Fahrenheit (the 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) ESE -- Environmental Science & Engineering, Inc. FAC -- Fuel Adjustment Clause FASB -- Financial Accounting Standards Board FERC -- Federal Energy Regulatory Commission Heating Degree Days -- The measure of the degree of colder than normal weather experienced, based on the extent to which the average of high and low temperatures for a day falls below 65 degrees Fahrenheit (the historic average provided by U.S. Weather Bureau for 30-year period). ICC -- Illinois Commerce Commission 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. 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. MCF -- One thousand cubic feet MW -- Megawatt, a million watts MWG -- Midwest Grain Products, Inc. NEPA -- National Energy Policy Act. PGA -- Purchased Gas Adjustment QST -- QST Enterprises Inc. RCRA -- Resource Conservation and Recovery Act. 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). 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 subsidiaries are Environmental Science & Engineering, Inc. (ESE) and QST Enterprises Inc. (QST). The Company also has two other first-tier subsidiaries, CILCORP Investment Management Inc. (CIM) and CILCORP Ventures Inc. (CVI), whose operations, combined with those of the holding company itself (Holding Company), are collectively referred to herein as Other Businesses. CILCORP owns 100% of the common stock of CILCO. All of the other subsidiaries are wholly-owned by CILCORP. 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. 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 currently significant. ESE 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, through certain subsidiaries, also acquires or invests in environmentally impaired property for remediation and resale. ESE has 12 wholly-owned subsidiaries: Keck Instruments, which manufactures geophysical instruments used in environmental applications; Chemrox, Inc., which formerly manufactured products and provided engineering services for the safe use and control of ethylene oxide and chlorofluorocarbons, and is now maintained to preserve the name; ESE Biosciences, Inc., whose on- site biological treatment of contaminated soil and groundwater is now performed by ESE, and is now maintained to preserve the name; ESE Architectural Services, Inc., which provides architectural services; National Professional Casualty Co., which provides professional and pollution liability insurance to ESE; ESE International Ltd., which provides engineering and consulting services in foreign countries; ESE Michigan, Inc., which formerly conducted business as ESE Environmental Science & Engineering, Inc., and is now maintained to preserve the name; Keck Consulting Services, Inc., which is maintained to preserve the name; Ordnance/Explosives Environmental Services, Inc. (OES), which is engaged in the removal of unexploded ordnance and related waste from contaminated sites; and ESE Land Corporation, Savannah Resources Corp. and ESE Placentia Development Corporation, organized to purchase or invest in environmentally impaired parcels of real estate for remediation and resale. ESE Land Corporation is a member of North Shore at Mandalay Bay L.L.C., organized to purchase an environmentally impaired parcel of real estate for resale. In addition, ESE owns a minority interest in ESE Ohio, Inc., which provides professional engineering services in the State of Ohio. QST was formed in December 1995 to facilitate CILCORP's expansion into non-regulated energy and related services businesses and has not yet generated revenues. QST has two wholly-owned subsidiaries - QST Energy Inc. and QST Communications Inc. (formerly CILCORP FiberCom Inc., a subsidiary of CVI). QST Energy Inc. has one wholly-owned subsidiary - QST Energy Trading Inc. CIM 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 both formed in 1993. CIM's other wholly-owned subsidiary is CIM Energy Investments Inc., which was formed in 1989 to invest in non-regulated, independent power production facilities (see Other Businesses). CIM also directly owns limited partnership interests in affordable housing portfolios. CVI 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. CVI has an 80% interest in Agricultural Research and Development Corporation and one wholly-owned subsidiary, CILCORP Energy Services, Inc. (CESI). CESI's primary business is the sale of carbon monoxide detectors to utilities for resale to their customers. The following table summarizes the relative contribution of each business group to consolidated assets, revenue and net income for the year ended December 31, 1995.
Assets Revenue Net Income (Loss) (In thousands) CILCO $1,059,991 $477,744 $39,099 ESE 87,952 127,530 113 Other Businesses 128,128 9,466 (630) ---------- -------- ------- $1,276,071 $614,740 $38,582 ========== ======== =======
CILCORP is an intrastate exempt holding company under the Public Utility Holding Company Act of 1935 (Act). In June 1995 the SEC issued a report recommending to Congress that the Act be repealed with certain conditions or, if Congress so chooses, unconditionally. The Company has endorsed the unconditional repeal of the Act and will continue to monitor alternative proposals including those seeking conditional repeal or amendment of the Act. On October 12, 1995, a bill, entitled the "Public Utility Holding Company Act of 1995," was introduced in the U.S. Senate. This bill provides for conditional repeal of the current Act and for the assumption of certain responsibilities under the new Act by the FERC. The Company cannot predict whether or when this bill or any other proposals related to the Act may be enacted. 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. CILCO is continuing to experience, in varying degrees, the impact of developments common to the electric and gas utility industries. These include increased competition in wholesale markets and the prospect of competition in retail markets, changes in regulation, 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 for its investors. Refer to the caption "Electric Competition" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 18 of CILCORP's 1995 Annual Report to Shareholders which is incorporated herein by reference. ELECTRIC SERVICE CILCO furnishes electric service to retail customers in 138 Illinois communities (including Peoria, East Peoria, Pekin, Lincoln and Morton). At December 31, 1995, CILCO had approximately 192,000 retail electric customers. In 1995, 68% of CILCO's total operating revenue was derived from the sale of electricity. Approximately 40% of electric revenue resulted from residential sales, 31% from commercial sales, 27% from industrial sales, 1% 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:
1995 1994 1993 (In thousands) Residential $129,722 $120,314 $119,709 Commercial 99,992 95,932 91,629 Industrial 87,491 86,804 85,384 Sales for resale 5,132 8,182 4,522 Street lighting 1,132 1,058 1,027 Other revenue 2,729 795 853 -------- -------- -------- Total electric revenue $326,198 $313,085 $303,124 ======== ======== ========
CILCO owns and operates two coal-fired base load generating plants and two natural gas combustion turbine-generators which are used for peaking service. A 21 megawatt (MW) cogeneration plant at Midwest Grain Products, Inc. (MWG) began generating electricity for distribution to CILCO's customers in June 1995 (see Item 2. Properties-CILCO). The plant, which is owned by CILCO, also provides steam heat to MWG's Pekin, Illinois, facility. CILCO set a new all-time system peak demand of 1,188 MW on August 17, 1995, surpassing the previous all-time system peak demand of 1,137 MW set on July 5, 1994. The system peak demand for 1996 is estimated to be 1,172 MW with a reserve margin of approximately 10.9%. The system peak demand estimate does not account for any load loss due to CILCO's proposed retail competition pilot programs (see Competition). The reserve margin takes into account 130 MW of firm purchased power and 81 MW of interruptible industrial load and other related Demand Side Management (DSM) programs. The system peak demand includes 25 MW of firm power to be provided to the City of Springfield (City Water, Light and Power Department) and an option for Commonwealth Edison to purchase 50 MW from CILCO. CILCO's planned 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 first electric least cost energy plan. In 1992, CILCO filed its second 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 8, Item 8. Financial Statements and Supplementary Data for further discussion of the purchase agreement with CIPS). CILCO is interconnected with CIPS, Commonwealth Edison Company, Illinois Power Company 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, East Peoria, Pekin, Lincoln and Springfield). At December 31, 1995, CILCO had approximately 199,000 gas customers, including 391 industrial and commercial gas transportation customers that purchase gas directly from suppliers for transportation through CILCO's system. In 1995, 32% 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, 22% from commercial sales, 2% from industrial sales, 6% 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:
1995 1994 1993 (In thousands) Residential $103,992 $ 99,567 $104,348 Commercial 32,792 32,563 32,406 Industrial 3,165 4,219 3,013 Transportation of gas 8,927 10,124 10,134 Other revenue 2,670 1,812 853 -------- -------- -------- Total gas revenue $151,546 $148,285 $150,754 ======== ======== ========
CILCO's all-time maximum daily send-out of 443,167 MCF occurred on January 15, 1972. The 1995 peak day send-out of 357,655 MCF occurred on December 9, 1995. CILCO has been able to meet all of its existing customer requirements during the 1995-1996 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 1996-1997 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 Federal Energy Regulatory Commission (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. Refer to the caption "Electric Competition" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 18 of CILCORP's 1995 Annual Report to Shareholders which is incorporated herein by reference. The Illinois statute governing public utilities requires the ICC to review and adopt electric least-cost energy plans (LCP) for public utilities. In general, CILCO's LCP 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 LCP is reviewed by the ICC every three years. CILCO filed its most recent electric LCP on June 30, 1995. ICC approval of the plan is expected during the first quarter of 1996. 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 LCP, as updated. The law requires that the LCP incorporate economical cogeneration, renewable resources and Demand Side Management (DSM) programs, to the fullest extent possible, as resources for meeting the future energy service needs of CILCO's customers. This recently filed LCP contains several existing DSM programs including interruptible and standby generation rates, residential heat pumps, commercial audits and the "In Concert With The Environment" program. The new plan also proposes to add four new DSM programs to help meet system load growth anticipated over the planning period. These include new interruptible contracts, new standby generation contracts, air conditioning cycling and targeted thermal storage cooling programs. Three new informational programs are also proposed, including new construction efficiency, motor efficiency and commercial lighting efficiency programs. Based on a preliminary assessment, electric DSM programs are projected to reduce CILCO's peak demand by 137 MW over the twenty-year planning horizon. In 1995, the total cost of the programs, excluding interruptible rates, was approximately $380,000. 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 currently included in the FAC, and are normally addressed in general ratemaking proceedings. However, by statute effective as of August 27, 1991, any Illinois utility purchasing coal under any contract that was in effect on August 27, 1991, shall, whenever the utility requests, but not later than the conclusion of the utility@s next general electric rate proceeding, begin recovering the transportation costs of that coal through the utility's FAC. CILCO's tariffs also provide for adjustments to its gas rates through the purchased gas adjustment clause (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 current base load capacity. Approximately 2.4 million tons of coal were burned during 1995. Existing coal contracts with suppliers in central Illinois and eastern Kentucky are expected to supply about 70% of the 1996 requirements. Coal will be purchased on the spot market during the year to meet remaining annual fuel requirements. During the years 1995, 1994 and 1993, the average cost per ton of coal burned, including transportation, was $37.21, $39.22 and $40.30, respectively. The cost of coal burned per million BTU's was $1.66, $1.71 and $1.75, respectively (see Electric Fuel and Purchased Gas Adjustment Clauses). During 1995, Illinois mid-sulfur coal was successfully test burned at E. D. Edwards Station. A two-year contract signed with the supplier at the end of 1995 will reduce Edwards Station's dependency on east Kentucky low-sulfur coal and contribute to lower station fuel cost. CILCO has a long-term contract with Freeman United Coal Mining Company (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. CILCO and Freeman conducted discussions in 1995 concerning coal cost reduction strategies in 1996. Freeman will pursue several initiatives identified in those discussions. NATURAL GAS SUPPLY During 1995, CILCO continued to maintain a widely diversified and flexible natural gas supply portfolio. This portfolio is structured around firm and interruptible gas transportation service provided by five interconnecting interstate pipeline suppliers and firm and interruptible gas purchase arrangements of varying terms made directly with approximately 35 gas suppliers. Reliability was enhanced through natural gas injections and withdrawals at CILCO's two natural gas storage fields and contracted storage facilities. The supply and pipeline capacity 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 present and projected firm customer requirements at prevailing market prices. During 1995, CILCO purchased approximately 32,000,000 MCF of natural gas at a cost of approximately $68.4 million, or an average cost of $2.14 per MCF. The average cost per MCF of natural gas purchased was $2.71 in 1994 and $2.66 in 1993 (see Electric Fuel and Purchased Gas Adjustment Clauses). On August 23, 1995 the ICC entered an order authorizing the submission to the Joint Committee on Administrative Rules (Committee) of the second notice of the proposed repealer of 83 Ill. Adm. Code 525, "Uniform Purchased Gas Adjustment Clause" and the second notice of proposed rules for 83 Ill. Adm. Code 525, "Purchased Gas Adjustment Clause." The purpose of this proceeding was to reflect the changes that have taken place in the gas utility industry since the adoption of the previous rules. The Committee issued its certifications of no objection on September 12, 1995. As a result of current rulings, monthly utility charges for gas will be more reflective of the market. For a discussion of other gas issues, refer to the caption "Gas Pipeline Supplier Transition Costs" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 21 of CILCORP's 1995 Annual Report to Shareholders which is incorporated herein by reference. 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 1996 are estimated to be $49.3 million, including pollution control expenditures of $3.2 million. Expenditures include $31.3 million for the electric business, $15.9 million for the gas business and $2.1 million for general and miscellaneous purposes. Electric expenditures include $7.7 million for additions and modifications to generating facilities and $23.6 million for transmission and 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 1997-2000 are $198.6 million. CILCO expects to finance its 1996 capital expenditures with funds provided by operating activities. CILCO issued $20 million of secured medium-term notes in May 1995. CILCO also issued $16 million of secured medium-term notes in December 1995 which were used to retire $16 million of first mortgage bonds due in February 1996. CILCO had $24.6 million of short-term commercial paper outstanding at December 31, 1995, and expects to issue short-term commercial paper throughout 1996. At December 31, 1995, CILCO had bank lines of credit aggregating $30 million, all of which were unused. CILCO expects these bank lines will remain unused through 1996. ENVIRONMENTAL MATTERS Refer to the caption "Environmental Matters" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 20 of CILCORP's 1995 Annual Report to Shareholders which is incorporated herein by reference. 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 produced no conclusive evidence that EMF has an adverse impact on health. CILCO is participating in utility industry-funded studies on this subject. There are also claims that EMF may contribute to losses in the market value of property near certain electric transmission lines. CILCO will continue to monitor these issues, but their ultimate impact cannot be predicted at this time. CILCO, through agreements with the U. S. Department of Energy, has developed and implemented voluntary programs pursuant to the Climate Change Action Plan goal of limiting greenhouse gas emissions to 1990 levels by year 2000. Commitments made by CILCO will build upon current and planned energy and environmental initiatives contained within its Business Plan and will not materially impact CILCO's financial results. Failure of voluntary programs undertaken by the utility industry could result in the imposition of mandatory greenhouse gas reduction programs which could have material impacts on the Company. Past legislative proposals have called for as much as a $30 per ton tax on carbon dioxide which could cost CILCO approximately $166 million per year. Many urban areas around the country face the major challenge of achieving compliance with ozone air quality standards. Ozone is formed when Volatile Organic Compound (VOC) emissions and/or Nitrogen Oxide (NOx) emissions photochemically react in the atmosphere. Strategies for reduction of ozone levels have targeted mobile, area and stationary sources (including power plants) of VOCs and NOx. Under Title I of the Clean Air Act, states are required to develop and implement State Implementation Plans (SIP) for ozone compliance by 2007. Where boundary area emissions are contributing to the non- attainment areas, additional VOC/NOx controls in attainment areas are being considered. This matter is further complicated by the transport of emissions across state boundaries and regionally. CILCO may be targeted for additional NOx emission reductions at its power plants pursuant to regional ozone compliance programs, despite the fact that CILCO's plants are in attainment areas. CILCO is participating in ozone compliance strategy activities at the national, regional, and state levels. CILCO's position calls for (1) equitable consideration among all VOC/NOx sources, (2) credit for past and planned emission reductions and (3) cost-benefit/risk-benefit support for control regulation. Should additional NOx emission controls be mandated for CILCO's power plants, new and costly control technology retrofits would be required. The exact costs for such compliance cannot be determined at this time, and multiple technologies might be necessary to meet extremely stringent NOx levels. SIGNIFICANT CUSTOMER Caterpillar Inc. is CILCO's largest industrial customer. Aggregate gas and electric revenues from sales to Caterpillar were 8.6%, 9.4%, and 9.1% of CILCO's total operating revenue for 1995, 1994 and 1993, respectively. See CILCO's Consolidated Statements of Segments of Business under Item 8. Financial Statements and Supplementary Data. 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 1995, CILCO continued to transport gas purchased by commercial and industrial customers directly from producers and marketers. In 1995, approximately $8.9 million of revenue was generated from transportation services provided to 391 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. Recent legislation passed in Illinois will exempt qualifying gas transportation customers, beginning January 1, 1996, from paying gross receipts taxes on their purchases of natural gas supply and interstate transportation from the local gas distribution company. This legislation will allow CILCO to more effectively compete with out-of-state gas marketing companies. To lead the movement toward increased customer choice, CILCO requested regulatory approval from the ICC in August 1995 to establish two electric pilot retail competition programs known as Power Quest. The proposed programs would offer greater choice to a limited number of customers and provide the opportunity for CILCO and its customers to participate in a competitive business environment. These programs were approved by the ICC on March 13, 1996. Approval will also be required from the FERC. Refer to the captions "Electric Competition" and "CILCO Electric Operations" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 18 and 21 of CILCORP's 1995 Annual Report to Shareholders, incorporated herein by reference, for additional discussion of Power Quest and a discussion of other competitive trends which may affect CILCO's electric operations. EMPLOYEES The number of full-time and part-time employees at December 31, 1995, was 1,540, excluding employees assigned to the Holding Company, QST and Other Businesses. Of these, 228 power plant employees were represented by Local 8 of the International Brotherhood of Firemen and Oilers (IBF&O), and 511 gas and electric department employees were represented by Local 51 of the International Brotherhood of Electrical Workers (IBEW). CILCO'S UNION CONTRACTS A two-year IBEW contract and a three-year IBF&O contract were both ratified effective July 1, 1995. Both the IBEW and the IBF&O contracts provide for annual 3% salary increases during the contracts. As part of the IBF&O contract, medical benefits may be renegotiated in January 1997. CILCO'S EARLY RETIREMENT PROGRAMS As part of a continuing effort to better position itself for competition in the energy services industry, CILCO offered Voluntary Early Retirement Programs (programs) to eligible employees in July 1995. The programs offered to the members of the IBEW and the IBF&O are based upon agreements made between CILCO and its unions. Another program was offered to all management and office and technical workers. CILCO had 257 full-time employees who were eligible for these programs. One hundred and sixty-six accepted the offer, with retirements effective January 1, 1996. The programs resulted in an after-tax charge of approximately $7.8 million against fourth quarter 1995 earnings. Management expects the programs to generate an annual after-tax cost reduction of approximately $3.4 million beginning in 1996. BUSINESS OF ESE ESE is an environmental consulting and engineering firm with additional capabilities in laboratory analysis and equipment manufacturing. ESE, through its subsidiaries, also acquires or invests in environmentally impaired property for remediation and resale. 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, structural and transportation 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. Through its wholly-owned subsidiary, ESE Land Corporation, ESE acquires or invests in land that is environmentally impaired, and remediates and then sells this property. OES, a wholly-owned subsidiary, identifies and remediates unexploded ordnance and related waste from contaminated sites. Employees of this subsidiary are primarily former military personnel who have been trained in unexploded ordnance procedures. 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. These services include 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. Asbestos Management/Industrial Hygiene/Lead-Based Paint Services: ESE provides on-site consultation and facility surveys to identify potential asbestos, industrial hygiene, 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. Engineering Design: 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 services and subdivision design and surveying. ESE provides services for new building projects, remodeling or additions, and investigations and evaluations of building deficiencies. ESE also has experience designing large industrial parks, major highways, waste water treatment plants and certain types of military installations. Construction Management: ESE provides turnkey design and construction services and construction observation services on transportation and site development projects and infrastructure projects. Using a Design- Build approach, ESE has implemented major facility improvements for both industrial and governmental facilities. Services provided by ESE on these projects included detailed design, selection and purchases of equipment, selection and hiring of subcontractors to perform the installation, project scheduling and budgeting, construction supervision, site safety, start-up and operational assistance. 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. 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. 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. Remediation: ESE develops, designs and implements remediation plans at contaminated sites. ESE has developed and patented an above-ground fixed- film bioreactor, under the registered trademark PetroClean, 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. ESE's subsidiary, OES, was formed to provide a single source service for investigating and remediating former U. S. military bases containing unexploded artillery, ammunition, explosive waste and debris so the site may ultimately be converted to alternate uses. Storage Tank Management Service: ESE provides services for managing environmental issues related to underground and above-ground 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 above-ground 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. Transportation Engineering: ESE has sited, designed and provided construction oversight for numerous transportation systems, including highways and bridges, for state transportation agencies and local governments. ESE's engineers, planners and scientists work together to develop alternatives that minimize environmental impacts while maintaining transportation objectives. CUSTOMERS ESE sells its products and services to governmental agencies and public and private companies. Approximately 46% of ESE's revenue for 1995 was generated by services performed for federal, state and local governmental agencies compared to 42% for 1994. No single customer accounted for more than 5% of ESE's gross revenues for the years ended December 31, 1995 and 1994. In 1995, approximately 79% of ESE's revenue was generated from environmental consulting and engineering services, 16% from laboratory services, 4% from land remediation and resale 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. Significant legislation includes the following: 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. 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). CWA@s reauthorization by Congress is anticipated in 1996 or 1997. 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's reauthorization is anticipated in 1996 or 1997. Federal Insecticide, Fungicide and Rodenticide Act (FIFRA): FIFRA regulates the use and manufacture of pesticides and related chemicals. 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. National Pollutant Discharge Elimination System (NPDES) Stormwater Permitting Regulations of 1990: The intent of these regulations, 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. 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 has been postponed through 1996. Legislative actions continue to evolve through regulatory changes such as risk-based corrective actions. 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. 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. 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. 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 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. This non- compete agreement expired in February 1995. 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 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 Many of ESE's contracts with governmental agencies 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 April 1, 1995, 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) and the next $5 million of coverage provided by a non-affiliated company. Captive is capitalized by the combination of an ESE letter of credit and cash. Captive does not transfer risk and is not reinsured; CILCORP does not provide credit support to 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. ESE expects to renew these policies annually in the normal course of business. The professional and pollution 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 with its clients 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, 1995, ESE employed 1,099 full-time, part-time and on- call employees, many of whom have advanced degrees in a variety of technical disciplines. ESE believes its relations with its employees are good. No ESE employees are represented by a labor union. BUSINESS OF QST QST Enterprises Inc. was formed in December 1995 to facilitate CILCORP's expansion into non-regulated energy and related services businesses. QST will provide total energy services -- buying, managing, and controlling energy -- for customers who are able to choose their energy supplier. The initial focus of QST will be to compete against other suppliers when a portion of CILCO's service territory is opened to competition through CILCO's Power Quest pilot programs (refer to the caption "Electric Competition" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 18 of CILCORP's 1995 Annual Report to Shareholders which is incorporated herein by reference). Power Quest will provide a means for certain customers to begin buying electricity from suppliers other than CILCO in 1996. QST also plans to compete against other energy suppliers to provide energy to customers of other utilities that will offer similar retail competition pilot programs in their service territories. QST will also provide a portfolio of non-regulated energy-related products and services to customers, and will supplement its competencies through selected acquisitions aimed at broadening its customer base. At December 31, 1995, there were 14 full-time employees assigned to QST. OTHER BUSINESSES CIM The investment portfolio of CIM at December 31, 1995, and December 31, 1994, is shown in the following table:
Type of Investment At December 31 1995 1994 (In thousands) Equity in leveraged leases $127,140 $120,961 Cash and temporary cash investments 124 76 Investment in Energy Investors Fund 1,591 1,691 Investment in affordable housing funds 1,500 10 Other 67 91 -------- -------- Total $130,422 $122,829 ======== ========
At December 31, 1995, CIM held equity investments in seven leveraged leases through its wholly-owned subsidiaries, CILCORP Lease Management Inc. (CLM), CIM Air Leasing Inc. and CIM Leasing Inc. According to the terms of some of the lease agreements, under certain circumstances, subsidiaries of 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 a net investment of $1.6 million in the Energy Investors Fund, L.P.(Fund), representing a 3.1% interest in the Fund at December 31, 1995. 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. CIM is a limited partner in three affordable housing portfolios. The ownership interests in these partnerships range from 3.4% to 6.4% at December 31, 1995. The cost method of accounting is used for these investments. HOLDING COMPANY The Company issued 299,850 shares of common stock in 1995 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 $37.83 per share for total proceeds of $11.3 million (refer to the caption "Capital Resources and Liquidity" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 17 of CILCORP's 1995 Annual Report to Shareholders which is incorporated herein by reference.) Depending on market conditions, the Company may issue additional shares of common stock through these plans or through a conventional stock offering. CVI In 1995, CVI invested an additional $138,000 in Peoria Medical Research Corporation doing business as Health Advance Institute - Medical Research Centers (Health Advance Institute). Health Advance Institute's objective is to create a clinical research organization which will be paid by pharmaceutical firms to administer clinical trials for new products. In March of 1995, CVI sold its $500,000 investment in preferred stock of Multilink, Inc. for approximately $872,000, which included dividends received by CVI of approximately $372,000. CVI's investment in CESI, its wholly-owned subsidiary, is approximately $500,000. CESI's primary business is the sale of carbon monoxide detectors to utilities for resale to their customers. EMPLOYEES At December 31, 1995, there were 32 full-time 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 1,152 MW in 1995. One of the two combustion turbine-generators is a cogeneration plant at a MWG facility in Pekin, Illinois. The plant, which became operational during 1995, produces steam for MWG and also generates electricity for distribution to CILCO's customers. This turbine-generator has an available summer capability of 16 MW. (See Electric Service under Item 1. Business.) The major generating facilities of CILCO (representing 96.0% of CILCO's available summer generating capability projected for 1995), all of which are fueled with coal, are as follows:
Available Summer Capability (MW) Station & Unit Installed Actual 1995 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 3,364,200 kilovolt-amperes. The electric distribution system includes approximately 6,212 miles of overhead pole and tower lines and 1,976 miles of underground distribution cables. The distribution system also includes 105 substations with an installed capacity of 2,007,860 kilovolt-amperes. The gas system includes approximately 3,490 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 BCF. An additional storage facility near Lincoln, Illinois, has a present recoverable capacity of approximately 5.2 BCF. ESE ESE owns approximately 53 acres of land in Gainesville, Florida, containing 118,000 square feet of offices, laboratory and other space. In 1995 ESE expanded its Gainesville, Florida, laboratory by approximately 8,000 square feet. In Peoria, Illinois, ESE owns approximately 27,000 square feet of offices, laboratory and other space 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, other than the purchases of land for remediation and resale through its subsidiaries. Refer to the caption "Capital Resources and Liquidity - ESE" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation on page 18 of CILCORP's 1995 Annual Report to shareholders which is incorporated herein by reference. Item 3. Legal Proceedings Reference is made to the captions "Environmental Matters" and "Gas Pipeline Supplier Transition Costs" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of CILCORP's 1995 Annual Report to Shareholders incorporated herein by reference, for certain pending legal proceedings and/or proceedings known to be contemplated by governmental authorities. Reference is also made to Note 9 - Rate Matters, 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 Note 9 - Rate Matters. On July 6, 1994, a lawsuit was filed against CILCO in a United States District Court by the current property owner, Vector-Springfield Properties, Ltd., seeking damages related to alleged coal tar contamination from a gas manufacturing plant formerly located at the site which was owned but never operated by CILCO. The lawsuit seeks cost recovery of more than $3 million related to coal tar investigation expenses, operating losses and diminution of market value. CILCO intends to vigorously defend these claims. For a further discussion of gas manufacturing plant sites refer to the caption "Environmental Matters" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 20 of CILCORP's 1995 Annual Report to Shareholders which is incorporated herein by reference. Management cannot currently determine the outcome of this litigation, but does not believe it will have a material adverse impact on CILCO's financial position or results of operations. The Company and its subsidiaries are subject to certain claims and lawsuits in connection with work performed in the ordinary course of their businesses. Except as otherwise disclosed or referred to in this section, in the opinion of management, all such claims currently pending either will not result in a material adverse effect on the financial position and results of operations of the Company or are adequately covered by: (i) insurance; (ii) contractual or statutory indemnification, or (iii) reserves for potential losses. 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 1995. CILCO There were no matters submitted to a vote of security holders during the fourth quarter of 1995.
Executive Officers of CILCORP Age at Positions Held During Initial Name 3/31/96 Past Five Years Effective Date(1) R. O. Viets 52 President and Chief Executive Officer February 1, 1988 J. G. Sahn 49 Vice President, General March 1, 1994 Counsel and Secretary Vice President and General Counsel February 1, 1989 M. D. Austin(2) 37 Treasurer and Assistant Secretary April 25, 1995 Director - Corporate Investments April 1, 1990 J. L. Barnett(3) 37 Controller April 1, 1995 Tax Manager April 1, 1992 Director - Financial Analysis February 1, 1989 Notes: (1) The term of each executive officer extends to the organization meeting of CILCORP's Board of Directors following the next annual election of Directors. (2) R. J. Sprowls served as Treasurer and Assistant Secretary from October 1, 1990, until April 1, 1995 when he became CILCO Vice President - Strategic Services Division. Effective January 29, 1996, Mr. Sprowls became Assistant to the President and Chief Executive Officer of CILCORP. (3) T. D. Hutchinson served as Controller from February 1, 1988, until April 1, 1995, when he became CILCO Director - Competitive Strategy. Mr. Hutchinson is currently Director of Planning and Administration for QST Enterprises Inc., a subsidiary of CILCORP.
Executive Officers of CILCO Age as of Positions Held During Initial Name 3/31/96 Past Five Years(1) Effective Date(2) R. O. Viets 52 Chairman of the Board and Chief Executive Officer April 1, 1995(3) J. F. Vergon 48 President and Chief Operating Officer January 29, 1996(4) Group President, Gas Operations April 1, 1995 Vice President October 1, 1986 M. J. Bowling 49 Vice President April 1, 1995(5) S. A. Cisel 42 Vice President April 1, 1995(5) S. R. Corwell 40 Vice President April 1, 1995(5) T. S. Romanowski 46 Vice President October 1, 1986(5) W. R. Dodds 41 Treasurer and Manager of Treasury Department October 1, 1990 Controller and Manager of Accounting February 1, 1988 R. L. Beetschen 50 Controller and Manager of Accounting October 1, 1990 Supervisor - General Accounting May 1, 1988 J. G. Sahn 49 Secretary March 1, 1993 Notes: (1) The officers listed have been employed by CILCO in executive or management positions for the past five years except for Mr. Viets, Mr. Shay, Mr. Sprowls and Mr. Sahn. Mr. Viets previously served as Chairman of the Board from February 1, 1988 to April 23, 1991. He also serves as President and Chief Executive Officer of CILCO's parent, CILCORP Inc., a position he has held since February 1, 1988. Mr. Shay was Vice President and Chief Financial Officer of CILCORP Inc., from August 15, 1988, through December 31, 1992. Mr. Sprowls was Treasurer and Assistant Secretary of CILCORP Inc. from October 1, 1990 to March 31, 1995. Mr. Sahn also serves as Vice President and General Counsel of CILCORP Inc., a position he has held since February 1, 1989. He was elected Secretary and Assistant Treasurer of CILCORP effective March 1, 1994. (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) R. W. Slone retired from CILCO April 1, 1995. He was replaced by R. O. Viets as Chairman and Chief Executive Officer. (4) W. M. Shay and J. F. Vergon became Group Presidents of Electric Operations and Gas Operations, respectively, on April 1, 1995. Effective January 29, 1996, W. M. Shay resigned as Group President to become President and Chief Operating Officer of QST Enterprises Inc., also a subsidiary of CILCORP. J. F. Vergon was elected President and Chief Operating Officer of CILCO on January 29, 1996. He also serves as Chairman of the Board of CILCORP Investment Management Inc. (5) M. J. Bowling, S. A. Cisel, S. R. Corwell and T. S. Romanowski head Distribution; Rates, Regulation and Legislation; Sales and Customer Service; and Finance, respectively. T. S. Romanowski also serves as CILCO's Principal Financial Officer. T. S. Kurtz, a former Vice President of the Company resigned effective November 8, 1995. R. J. Sprowls, also a former Vice President, resigned January 29, 1996 to become Assistant to the President and Chief Executive Officer of CILCORP.
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, 1995, there were 13,976 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 1994 First Second Third Fourth Price Range High $37 1/2 $34 7/8 $31 $32 1/2 Low $33 $28 7/8 $28 3/4 $29 1/4 Dividends Paid $ .615 $ .615 $ .615 $ .615 1995 Price Range High $37 $37 7/8 $38 $44 3/4 Low $31 7/8 $35 3/8 $34 $37 1/2 Dividends Paid $ .615 $ .615 $ .615 $ .615 The number of common shareholders of record as of March 12, 1996, was 13,697.
CILCO CILCO's common stock is not traded on any market. As of March 12, 1996, 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 is described in Note 5 of CILCO's Notes to the Consolidated 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 1995 1994 1993 1992 1991 (In thousands except per share amounts) Revenue $ 614,740 $ 605,139 $ 584,511 $ 581,225 $ 590,165 Net income available for common stockholders 38,582 32,586 33,583 32,097 39,656 Earnings per share 2.93 2.50 2.60 2.48 3.14 Total assets 1,276,071 1,238,384 1,198,440 1,184,916 1,147,978 Long-term debt 344,113 326,695 325,711 307,628 324,998 Dividends declared per common share 2.46 2.46 2.46 2.46 2.46
Central Illinois Light Company Selected Financial Data
For the Years Ended December 31 1995 1994 1993 1992 1991 (In thousands) Revenue $ 477,744 $ 461,370 $453,878 $433,739 $454,602 Net income available for common stockholders 39,099 29,507 33,635 31,195 39,790 Total assets 1,059,991 1,019,109 988,325 965,691 942,634 Long-term debt 298,397 278,359 278,321 257,361 268,006 Ratio of earnings to fixed charges 3.3 3.0 3.2 3.1 3.7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 16 through 25 of CILCORP's 1995 Annual Report to Shareholders is incorporated herein by reference. Item 8.: Financial Statements and Supplementary Data The financial statements on pages 27 through 42 and Management's Report to the Stockholders of CILCORP Inc. on page 26 of CILCORP's 1995 Annual Report to Shareholders are incorporated herein by reference. Index to Financial Statements: CILCORP Page Report of Independent Public Accountants on Schedules 35 CILCO Management's Report 36 Report of Independent Public Accountants 37 Consolidated Statements of Income 38 Consolidated Balance Sheets 39-40 Consolidated Statements of Cash Flows 41-42 Statements of Segments of Business 43-44 Consolidated Statements of Retained Earnings 45 Notes to Consolidated Financial Statements 46-59 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To CILCORP Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in CILCORP Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 2, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The financial statement schedules listed in Item 14(a)2 are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the 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 LLP Chicago, Illinois February 2, 1996 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 public accountants, Arthur Andersen LLP. 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 independent public accountants 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 independent public accountants have direct access to the Audit Committee. The Audit Committee meets separately with the independent public accountants. J. F. Vergon President and Chief Operating Officer T. S. Romanowski Vice President and Chief Financial Officer R. L. Beetschen Controller and Manager of Accounting 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, 1995 and 1994, 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, 1995. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Central Illinois Light Company and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedule listed in Item 14(a)2 is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This financial statement schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Chicago, Illinois February 2, 1996 Central Illinois Light Company Consolidated Statements of Income
For the Years Ended December 31 1995 1994 1993 (In thousands) Operating Revenues: Electric $326,198 $313,085 $303,124 Gas 151,546 148,285 150,754 ------- -------- -------- Total Operating Revenues 477,744 461,370 453,878 ------- -------- -------- Operating Expenses: Cost of Fuel 94,235 97,184 92,112 Cost of Gas 68,948 78,696 79,022 Purchased Power 12,353 9,433 8,754 Other Operation Expenses 94,519 81,143 77,125 Maintenance 31,037 28,174 30,648 Depreciation and Amortization 56,765 54,349 53,023 Income Taxes 23,267 21,489 22,226 State and Local Taxes on Revenue 20,867 20,450 19,417 Other Taxes 12,205 11,945 11,364 ------- -------- -------- Total Operating Expenses 414,196 402,863 393,691 ------- -------- -------- Operating Income 63,548 58,507 60,187 ------- -------- -------- Other Income and Deductions: Cost of Equity Funds Capitalized 97 530 (23) CILCO-owned Life Insurance, Net (623) (667) (516) Disallowed Plant Cost -- (7,523) -- Income Tax Reduction for Disallowed Plant Cost -- 2,982 -- Other, Net 2,581 (1,051) 262 ------- -------- -------- Total Other Income and (Deductions) 2,055 (5,729) (277) ------- -------- -------- Income Before Interest Expenses 65,603 52,778 59,910 ------- -------- -------- Interest Expenses: Interest on Long-term Debt 20,242 19,221 19,753 Cost of Borrowed Funds Capitalized (417) (510) (222) Other 3,380 1,580 2,701 ------- -------- -------- Total Interest Expenses 23,205 20,291 22,232 ------- -------- -------- Net Income 42,398 32,487 37,678 ------- -------- -------- Dividends on Preferred Stock 3,299 2,980 4,043 ------- -------- -------- Net Income Available for Common Stock $ 39,099 $ 29,507 $ 33,635 ======= ======== ======== The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
Central Illinois Light Company Consolidated Balance Sheets Assets
As of December 31 1995 1994 (In thousands) Utility Plant, At Original Cost: Electric $1,142,945 $1,092,382 Gas 379,985 355,270 ---------- ---------- 1,522,930 1,447,652 Less - Accumulated Provision for Depreciation 682,574 653,571 ---------- ---------- 840,356 794,081 Construction Work in Progress 44,749 71,105 Plant Acquisition Adjustments, Net of Amortization 2,642 3,355 ---------- ---------- Total Utility Plant 887,747 868,541 ---------- ---------- Other Property and Investments: Cash Surrender Value of Company-owned Life Insurance (Net of Related Policy Loans of $33,211 in 1995 and $28,831 in 1994) 1,924 1,637 Other 1,623 1,041 ---------- ---------- Total Other Property and Investments 3,547 2,678 ---------- ---------- Current Assets: Cash and Temporary Cash Investments 16,556 629 Receivables, Less Reserves of $650 and $600 42,312 30,543 Accrued Unbilled Revenue 28,891 22,340 Fuel, at Average Cost 11,596 14,765 Materials and Supplies, at Average Cost 16,541 16,731 Gas in Underground Storage, at Average Cost 13,592 17,484 Prepaid Taxes 7,978 2,103 Other 10,300 7,217 ---------- ---------- Total Current Assets 147,766 111,812 ---------- ---------- Deferred Debits: Unamortized Loss on Reacquired Debt 6,029 6,486 Unamortized Debt Expense 2,374 2,212 Prepaid Pension Cost 536 13,312 Other 11,992 14,068 ---------- ---------- Total Deferred Debits 20,931 36,078 ---------- ---------- Total Assets $1,059,991 $1,019,109 ========== ========== 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
As of December 31 1995 1994 (In thousands) Capitalization: Common Shareholder's Equity: Common Stock, No Par Value; Authorized 20,000,000 Shares; Outstanding 13,563,871 Shares $ 185,661 $ 185,661 Retained Earnings 140,814 122,125 ---------- ---------- Total Common Shareholder's Equity 326,475 307,786 Preferred Stock Without Mandatory Redemption 44,120 44,120 Preferred Stock With Mandatory Redemption 22,000 22,000 Long-term Debt 298,397 278,359 ---------- ---------- Total Capitalization 690,992 652,265 ---------- ---------- Current Liabilities: Current Maturities of Long-Term Debt 16,000 -- Notes Payable 24,600 23,400 Accounts Payable 40,483 47,536 Accrued Taxes 5,917 6,387 Accrued Interest 8,508 8,477 PGA Over-Recoveries 1,987 2,142 Level Payment Plan 1,870 4,155 Other 6,418 6,809 ---------- ---------- Total Current Liabilities 105,783 98,906 ---------- ---------- Deferred Liabilities and Credits: Accumulated Deferred Income Taxes 144,378 151,856 Regulatory Liability, Net 59,482 59,997 Investment Tax Credits 24,485 26,178 Capital Lease Obligation 3,025 2,665 Other 31,846 27,242 ---------- ---------- Total Deferred Liabilities and Credits 263,216 267,938 ---------- ---------- Total Capitalization and Liabilities $1,059,991 $1,019,109 ========== ========== 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 1995 1994 1993 (In thousands) Cash Flows from Operating Activities: Net Income Before Preferred Dividends $ 42,398 $ 32,487 $ 37,678 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Disallowed Plant Costs -- 7,522 -- Income Tax Reduction for Disallowed Plant Costs -- (2,982) -- Depreciation and Amortization 57,478 55,062 53,734 Deferred Taxes, Investment Tax Credits and Regulatory Liability, Net (9,687) (2,006) (1,512) Decrease (Increase) in Accounts Receivable (11,769) 3,654 1,513 Decrease (Increase) in Fuel, Materials and Supplies, and Gas in Underground Storage 7,251 565 (5,609) Decrease (Increase) in Unbilled Revenue (6,551) 2,771 (320) Increase in Accounts Payable (7,053) 6,565 6,098 Increase in Accrued Taxes and Interest (439) 867 3,304 Capital Lease Payments 590 478 478 Decrease (Increase) in Other Current Assets (8,958) 193 (272) Increase (Decrease) in Other Current Liabilities (2,831) 1,192 (6,398) (Increase) Decrease in Other Non-Current Assets 17,025 (1,631) 3,050 Increase in Other Non-Current Liabilities 3,424 2,319 81 -------- -------- -------- Net Cash Provided by Operating Activities 80,878 107,056 91,825 -------- -------- -------- Cash Flows from Investing Activities: Capital Expenditures (69,412) (90,873) (72,580) Cost of Equity Funds Capitalized (97) (530) 23 Other (8,462) (7,308) 2,581 -------- -------- -------- Net Cash Used in Investing Activities (77,971) (98,711) (69,976) -------- -------- -------- Cash Flows from Financing Activities: Common Dividends Paid (20,056) (16,027) (15,878) Preferred Dividends Paid (3,299) (2,980) (4,043) Long-Term Debt Issued 35,765 175 107,269 Preferred Stock Issued -- -- 46,006 Long-Term Debt Retired -- -- (97,756) Preferred Stock Retired -- -- (46,051) Payments on Capital Lease Obligation (590) (478) (478) (Decrease) Increase in Short-Term Borrowing 1,200 11,000 (12,100) -------- -------- -------- Net Cash Provided to (Used in) Financing Activities 13,020 (8,310) (23,031) -------- -------- -------- Net Increase (Decrease) in Cash and Temporary Cash Investments 15,927 35 (1,182) Cash and Temporary Cash Investments at Beginning of Year 629 594 1,776 -------- -------- -------- Cash and Temporary Cash Investments at December 31 $ 16,556 $ 629 $ 594 ======== ======= ======= Supplemental Disclosures of Cash Flow Information: Cash Paid During the Period for: Interest (Net of Cost of Borrowed Funds Capitalized) $ 22,145 $ 20,809 $20,271 Income Taxes 35,954 24,155 13,198 The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
Central Illinois Light Company Statements of Segments of Business
Operating Information For the Years Ended December 31 1995 1994 1993 (In thousands) Utility Segment: Electric Operations Revenue $326,198 $313,085 $303,124 Expenses 277,429 263,462 253,995 -------- -------- -------- Operating Income 48,769 49,623 49,129 Income Taxes 17,975 19,925 17,542 -------- -------- -------- Operating Income Before Income Taxes $ 66,744 $ 69,548 $ 66,671 ======== ======== ======== Depreciation and Amortization $ 40,665 $ 39,130 $ 38,337 Capital Expenditures $ 45,466 $ 66,537 $ 41,880 Gas Operations Revenue $151,546 $148,285 $150,754 Expenses 136,767 139,401 139,696 -------- -------- -------- Operating Income 14,779 8,884 11,058 Income Taxes 5,292 1,564 4,684 -------- -------- -------- Operating Income Before Income Taxes $ 20,071 $ 10,448 $ 15,742 ======== ======== ======== Depreciation and Amortization $ 16,100 $ 15,219 $ 14,686 Capital Expenditures $ 24,043 $ 24,867 $ 30,677
Major Customer for the Years Ended December 31 1995 1994 1993 Caterpillar Inc. Electric Revenue $40,109 12.3% $41,422 13.2% $39,831 13.1% Gas Revenue 1,022 .7% 1,719 1.2% 1,581 1.0% ------- ----- ------- ---- ------- ---- Total $41,131 8.6% $43,141 9.4% $41,412 9.1% ======= ===== ======= ==== ======= ====
Utility Identifiable Assets as of December 31 1995 1994 1993 Electric $ 735,463 $ 718,431 $684,618 Gas 273,428 260,070 259,462 Other Utility Assets* 51,100 40,608 44,245 ---------- ---------- -------- Total Utility Assets $1,059,991 $1,019,109 $988,325 ========== ========== ======== *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.
Central Illinois Light Company Consolidated Statements of Retained Earnings
For the Years Ended December 31 1995 1994 1993 (In thousands) Balance Beginning of Year $122,125 $108,645 $ 92,433 Add Net Income 42,398 32,487 37,678 -------- -------- -------- Total $164,523 $141,132 $130,111 -------- -------- -------- Deduct Cash Dividends Declared Preferred Stock $100 Par Value 4 1/2% Series 501 501 501 4.64% Series 371 371 371 5.85% Series 1,287 1,287 725 7.56% Series -- -- 668 7.72% Series -- -- 686 8.28% Series -- -- 817 Auction Rate Series (rate at December 31, 1995 was 4.40%) 1,140 821 275 Common Stock, No Par Value 20,056 16,027 15,878 -------- -------- -------- Total Dividends Declared 23,355 19,007 19,921 -------- -------- -------- 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 Additional Minimum Liability for Non- Qualified Pension Plan at December 31, 1995, net of $233 taxes 354 -- -- -------- ------- -------- 23,709 19,007 21,466 -------- -------- --------- Balance End of Year $140,814 $122,125 $108,645 ======== ======== ======== 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 Company and CILCO Energy Corporation. CILCO is a subsidiary of CILCORP Inc. Prior year amounts have been reclassified on a basis consistent with the 1995 presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REGULATION CILCO is a public utility subject to regulation by the Illinois Commerce Commission and the Federal Energy Regulatory Commission with respect to accounting matters, and maintains its accounts in accordance with the Uniform System of Accounts prescribed by these agencies. As a regulated public utility, CILCO is subject to the provisions of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation." Regulatory assets represent the probable future revenues to CILCO resulting from the ratemaking action of regulatory agencies. Net regulatory liabilities are approximately $59.5 million and $60 million at December 31, 1995 and 1994, respectively (see Note 2). At December 31, 1995, and 1994, the regulatory assets included on the Consolidated Balance Sheets were as follows:
1995 1994 (In thousands) Included in prepayments and other: Fuel and gas cost adjustments $ 1,516 $ 3,682 Coal tar remediation cost - estimated current 1,500 300 Gas transition costs 2,268 1,171 ------- ------- Current costs included in prepayments and other 5,284 5,153 ------- ------- Included in other assets: Coal tar remediation cost, net of recoveries 4,222 4,993 Gas transition costs 1,656 2,781 Deferred gas costs 3,207 3,895 Unamortized loss on reacquired debt 6,029 6,486 ------- ------- Future costs included in other assets 15,114 18,155 ------- ------- Total regulatory assets $20,398 $23,308 ======= =======
If a portion of CILCO's operations becomes no longer subject to the provisions of SFAS 71, a write-off of related regulatory assets and liabilities would be required, unless some form of transition cost recovery (refund) continues through rates established and collected for CILCO's remaining regulated operations. In addition, CILCO would be required to determine any impairment to the costs recorded for deregulated plant and inventory assets. 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 on the Balance Sheets as a current asset or current liability (see Regulation, above) 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, 1995, CILCO had net receivables of $42.3 million, of which approximately $5.5 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 $1.7 million, $2.4 million and $2.3 million in 1995, 1994 and 1993, 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 1995, 1994 and 1993 were 6.7%, 8.0% and 3.5%, respectively. DEPRECIATION AND MAINTENANCE Provisions for depreciation of utility 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 utility property, were 3.8% and 4.6% for electric and gas, respectively, for each of the last three years. Utility 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 related to utility property have been deferred and are being 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 CILCO considers all highly liquid debt instruments purchased with a remaining maturity of three months or less to be cash equivalents for purposes of the Consolidated Statements of Cash Flows. CILCO-OWNED LIFE INSURANCE POLICIES The following amounts related to CILCO-owned life insurance contracts, issued by one major insurance company, are recorded on the Consolidated Balance Sheets:
1995 1994 (In thousands) Cash surrender value of contracts $35,135 $30,468 Borrowings against contracts (33,211) (28,831) ------- ------- Net investment $ 1,924 $ 1,637 ======= =======
Interest expense related to borrowings against CILCO-owned life insurance, included in CILCO-owned Life Insurance, Net on the Consolidated Statements of Income, was $2.3 million, $2 million and $1.4 million for 1995, 1994 and 1993, respectively. NOTE 2 - INCOME TAXES CILCO follows 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. CILCO established a regulatory liability to account for the net effect of expected future regulatory actions related to unamortized investment tax credits, income tax liabilities 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, 1995, December 31, 1994 and December 31, 1993, were as follows:
December 31 1995 1994 1993 (In thousands) Deferred tax liabilities: Property, including allowance for funds used during construction $213,187 $212,308 $213,056 Other 3,759 11,105 11,835 Deferred tax assets: Other (13,086) (11,560) (10,446) Net regulatory liability (59,482) (59,997) (69,477) -------- -------- -------- Deferred income taxes $144,378 $151,856 $144,968 ======== ======== ======== Of the $7,478,000 decrease in the net deferred income tax liability at December 31, 1995, from December 31, 1994, $5,351,000 is attributable to the implementation of CILCO's early retirement programs.
Income tax expenses were as follows:
Years Ended December 31 1995 1994 1993 (In thousands) Current income taxes Federal $26,712 $18,912 $18,510 State 5,780 4,165 4,860 ------- ------- ------- Total operating current taxes 32,492 23,077 23,370 ------- ------- ------- Deferred operating income taxes, net Depreciation and amortization (3,642) (1,905) (1,786) Repair allowance 1,917 648 168 Borrowed component of AFUDC 396 (249) 76 Capitalized overhead costs (893) (794) (888) Removal costs 2,130 2,176 2,471 Call premiums (236) 401 2,623 Gas take-or-pay settlements (751) (1,244) 1,413 Gas storage field 861 408 (2,856) Taxable salvage 654 1,229 573 Coal tar remediation costs 642 253 120 Pension expense (6,673) (145) (646) Other (1,937) (674) (718) ------- ------- ------- Total operating deferred income taxes (7,532) 104 550 ------- ------- ------- Investment tax credit amortization (1,693) (1,693) (1,694) ------- ------- ------- Total operating income taxes 23,267 21,488 22,226 ------- ------- ------- Income tax reduction for disallowed plant costs 168 (2,982) -- Other net (902) (1,339) (1,859) ------- ------- ------- Total income taxes $22,533 $17,167 $20,367 ======= ======= ======= Total deferred income taxes, net, includes deferred state income taxes of $533,000, $752,000 and $332,000 for 1995, 1994 and 1993, respectively.
1995 1994 1993 Statutory federal income tax rate 35.0 35.0% 35.0% ===== ==== ==== Equity component of AFUDC not subject to taxation (.1) (.4) -- Depreciation differences for which deferred taxes have not been provided 1.0 1.4 1.0 Amortization of investment tax credit (2.7) 3.6 (3.1) CILCO-owned life insurance (1.0) (1.0) (.6) State income taxes 5.8 6.0 6.2 Civil fine -- .7 -- Other differences (1.4) (1.3) (.8) ----- ---- ----- Total 1.6 1.8 2.7 ----- ---- ----- Effective income tax rate 36.6% 36.8% 37.7% ----- ---- -----
NOTE 3 - POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE CILCO has recorded a liability of approximately $.9 million and $1.5 million at December 31, 1995 and 1994, respectively, for benefits other than pensions or health care provided to former or inactive employees. PENSION BENEFITS Substantially all of CILCO's full-time employees, including those assigned to the Holding Company and QST, are covered by trusteed, non-contributory defined benefit pension plans. Benefits under these qualified plans reflect the employee's years of service, age at retirement and maximum total compensation for any consecutive sixty-month period prior to retirement. CILCO also has an unfunded nonqualified plan for certain employees. Pension costs for the past three years were charged as follows:
1995 1994 1993 (In thousands) Operating expenses $15,383 $2,465 $1,841 Utility plant and other 1,139 1,189 925 ------- ------ ------ Net pension costs $16,522 $3,654 $2,766 ======= ====== ======
Provisions for pension expense reflect the use of the projected unit credit actuarial cost method. At December 31, 1995, CILCO recognized an additional minimum liability on the Balance Sheets for the plan in which the accumulated benefit obligation exceeds the fair value of plan assets. The components of net periodic pension costs follow:
1995 1994 (In thousands) Cost of pension benefits earned by employees $ 4,654 $ 5,589 Interest cost on projected benefit obligation 15,188 14,422 Actual return on plan assets (50,816) 1,237 Net amortization and deferral 34,437 (17,594) Special termination benefits 13,059 -- -------- -------- Net pension costs $ 16,522 $ 3,654 ======== ========
During 1995, CILCO recognized $13.1 million of net pension costs in accordance with Statement of Financial Accounting Standards No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. These amounts represented the costs associated with additional benefits extended in connection with voluntary early retirement programs. Information on the funded status of plans in which assets exceed accumulated benefits follows:
Actuarial present value of accumulated benefit 1995 1994 obligation: (In thousands) Vested benefits - employees' rights to receive benefits no longer contingent upon continued employment $171,422 $145,975 Non-vested benefits - employees' rights to receive benefits contingent upon continued employment 15,266 11,258 -------- -------- Net benefit obligation $186,688 $157,233 ======== ======== Funded status: pension assets and obligations Pension assets at fair market value $232,560 $192,427 Projected benefit obligation at present value (233,746) (189,438) Unrecognized transition asset (6,675) (7,842) Unrecognized prior service cost 9,034 10,603 Unrecognized net (gain) loss (3,338) 7,562 ------- -------- Pension asset (liability) recorded on Balance Sheets $ (2,165) $ 13,312 ======= ========
Information on the funded status of the plan in which accumulated benefits exceed assets follows:
Actuarial present value of accumulated benefit 1995 1994 obligation: (In thousands) Vested benefits - employees' rights to receive benefits no longer contingent upon continued employment $ 1,792 $900 Non-vested benefits - employees' rights to receive benefits contingent upon continued employment 132 -- ------ ---- Net benefit obligation $ 1,924 $900 ====== ==== Funded status: pension assets and obligations Pension assets at fair market value $ -- $ -- Projected benefit obligation at present value (2,689) (1,002) Unrecognized prior service cost 536 576 Unrecognized net (gain) loss 1,352 (363) Adjustment to recognize minimum liability (1,123) (111) ------- ------ Pension liability recorded on Balance Sheets $(1,924) $ (900) ======= ======
Significant assumptions used for calculations: 1995 1994 Discount rate 7.25% 8.00% Expected rate of salary increase 4.50% 4.50% Expected long-term rate of return 8.50% 8.50%
POSTRETIREMENT HEALTH CARE BENEFITS Provisions for postretirement benefits expenses are determined under the accrual method of accounting. Substantially all of CILCO's full-time employees, including those assigned to the Holding Company and QST, are currently covered by a trusteed, non-contributory defined benefit postretirement 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. Postretirement health care benefit costs were charged as follows:
1995 1994 1993 (In thousands) Operating expenses $5,108 $5,253 $5,767 Utility plant and other 1,882 1,913 2,060 ------ ------ ------ Net postretirement health care benefit costs $6,990 $7,166 $7,827 ====== ====== ======
Information on the plan's funded status follows:
1995 1994 (In thousands) Components of net postretirement health care benefit costs: Service cost - benefits attributed to service during the period $ 1,302 $ 1,496 Actual return on plan assets (5,936) 133 Interest cost on accumulated postretirement health care benefit obligation 4,795 4,469 Amortization of transition obligation over 18.6 years 2,858 2,858 Other net amortization and deferral 3,971 (1,790) ------- ------- Net postretirement health care benefit costs $ 6,990 $ 7,166 ======= ======= Accumulated postretirement health care benefit obligation: Retirees $36,646 $30,849 Other fully eligible participants 12,668 10,859 Other active participants 22,003 20,046 ------- ------- Total accumulated postretirement health care benefit obligation 71,317 61,754 Less: Unrecognized actuarial gain (814) (3,046) Unrecognized transition obligation 38,871 41,730 Plan assets at fair value 33,157 22,929 ------- ------- Accrued postretirement health care benefit cost liability $ 103 $ 141 ======= =======
For measurement purposes, the annual health care cost trend rate averaged 8.5% for 1995; the rate was assumed to decrease gradually to 6% by 2049 and remain at that level thereafter. Increasing the assumed health care cost trend rate by 1% in each year would increase the accumulated postretirement benefit obligation at December 31, 1995, by $3.2 million and the aggregate of the service and interest cost components of net postretirement health care cost for 1995 by $268,000. The discount rate used in determining the accumulated postretirement benefit obligation at December 31, 1995, was 7.25% and at December 31, 1994, 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%. NOTE 4 - SHORT-TERM DEBT CILCO had arrangements for bank lines of credit totaling $30.0 million at December 31, 1995, all of which were unused. These lines of credit were maintained by commitment fees of 1/20 of 1% per annum in lieu of balances. These bank lines of credit support CILCO's issuance of commercial paper. Short-term borrowings consisted of commercial paper totaling $24.6 million and $23.4 million at December 31, 1995 and 1994, respectively. NOTE 5 - 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, 1995, was $6.5 million. NOTE 6 - PREFERRED STOCK
At December 31 1995 1994 (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 Class A, no par value, authorized 3,500,000 shares Flexible auction rate - 250,000 shares (a) 25,000 25,000 With mandatory redemption 5.85% series - 220,000 shares 22,000 22,000 ------- ------- Total preferred stock $66,120 $66,120 ======= ======= (a) Dividend rates at December 31, 1995 and 1994, were 4.40% and 4.72%, respectively.
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, 1995, is $3.3 million, assuming a continuation of the auction dividend rate at December 31, 1995, 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, 1995, 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, CUMULATIVE No Par Value, Authorized 2,000,000 shares, of which none have been issued. NOTE 7 - LONG-TERM DEBT
At December 31 1995 1994 (In thousands) First Mortgage Bonds 5 1/8% series due 1996 $ 16,000 $ 16,000 5 1/2% series due 1997 20,000 20,000 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 10,650 6.4% series due 2000 30,000 30,000 6.82% series due 2003 25,350 25,350 6.13% series due 2005 16,000 -- 7.8% series due 2023 10,000 10,000 7.73% series due 2025 20,000 -- Pollution Control Refunding Bonds 6.5% series F due 2010 5,000 5,000 6.2% series G due 2012 1,000 1,000 6.5% series E due 2018 14,200 14,200 5.9% series H due 2023 32,000 32,000 -------- -------- 315,200 279,200 Unamortized premium and discount on long-term debt, net (803) (841) -------- -------- Total CILCO long-term debt $314,397 $278,359 ======== ========
CILCO's first mortgage bonds 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. Scheduled maturities of long-term debt for 1997, 1998 and 2000 are $20 million, $10.6 million and $30 million, respectively. There are no scheduled maturities of long-term debt for 1999. The 1996 maturities of long-term borrowings have been classified as current liabilities. NOTE 8 - COMMITMENTS & CONTINGENCIES CILCO's 1996 capital expenditures for utility plant are estimated to be $49.3 million, in connection with which CILCO has normal and customary purchase commitments at December 31, 1995. CILCO's policy is 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 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's capacity during the time period June 1998 through May 2002. In March 1995, CILCO and CIPS renegotiated the November 1992 limited- term power agreement. This agreement, which now expires in May 2009, provides for CILCO to purchase 150 MW of CIPS@ capacity from June 1998 through May 2002, and 50 MW from June 2002 through May 2009. This renegotiated agreement is subject to the ICC@s final approval of CILCO@s 1995 electric least cost energy plan, which has been revised to include the terms of this bulk power purchase agreement. ICC approval is expected in June 1996. For a discussion of former gas manufacturing sites, refer to the caption"'Environmental Matters" of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 20 of CILCORP's 1995 Annual Report which is incorporated herein by reference. NOTE 9 - RATE MATTERS In December 1994, the Illinois Commerce Commission (ICC) issued a rate order designed to grant CILCO a $10.6 million, or 6.7% annual increase in gas base rate revenues. The new rates, designed to yield an 11.82% return on common equity and a 9.24% return on rate base, were effective in December 1994. In mid-1992, after a significant number of leaks were detected in CILCO's Springfield cast iron gas distribution system, CILCO began a detailed examination of its Springfield gas distribution system and related operating practices and procedures. CILCO thereafter began an aggressive program to renew its Springfield gas cast iron main system. This project was completed in November 1995. As a part of its rate order, the ICC disallowed approximately $7.5 million of CILCO's $24 million investment in the Springfield cast iron main renewal project. To reflect the disallowance, CILCO recorded a pre-tax charge of approximately $7.5 million ($4.5 million after-tax) against 1994 earnings. The ICC staff began an informal review of CILCO@s Springfield gas operations and record-keeping practices in September 1992. Subsequently, the U.S. Department of Transportation (DOT) and the U.S. Department of Justice (DOJ) began conducting investigations of CILCO which were also focused principally on CILCO@s Springfield gas operations and its record-keeping practices. In September 1994, CILCO entered into a federal court civil consent decree with the DOJ which concluded the DOT and DOJ investigations. As a part of the settlement with the DOJ, CILCO accepted adjustments recommended by the ICC staff which resulted in a net disallowance from CILCO's gas rate base of approximately $4.5 million of the cost of the Springfield cast iron main renewal project. This charge is part of the $7.5 million disallowance included in the December 1994 rate order. In addition to the rate base disallowance, CILCO agreed to pay an $844,000 civil fine to the United States and agreed to reimburse the ICC, the DOT and the DOJ $156,000 for the costs of their investigations. CILCO also agreed to underwrite the reasonable expense of an outside expert, selected by the ICC, to examine CILCO's gas operations manuals and systems to ensure they are in compliance with all applicable statutes and regulations. The audit was completed in October 1995 at a total cost of $356,000. The DOJ agreed not to seek any additional civil or criminal penalties from CILCO or the Company. The ICC staff also agreed not to seek any additional enforcement penalties from CILCO or the Company. CILCO agreed to continue to cooperate with the DOJ in its investigation and prosecution of any individuals who may be responsible for willful violations of any applicable statute or regulation. For a discussion of other gas and electric rate matters refer to information under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations of CILCORP's 1995 Annual Report to Shareholders, which is incorporated herein by reference. NOTE 10 - 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, 1995, are $19.4 million in total. Payments due during the years ending December 31, 1996, through December 31, 2000, are $4.9 million, $4.4 million, $3.2 million, $2.7 million and $1.7 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 CILCO'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 CILCO's business.
For the Three Months Ended March 31 June 30 September 30 December 31 (In thousands) 1995 Operating revenue $133,227 $100,512 $122,035 $121,970 Operating income 17,883 13,019 26,127 6,519 Net income 12,082 7,074 20,106 3,136 1994 Operating revenue $145,386 $101,505 $108,142 $106,337 Operating income 16,007 12,204 18,227 12,069 Net income 10,615 7,057 8,986 5,829
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 1996 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" 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 1996 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" 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" 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" 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" 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" 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 direct subsidiaries Central Illinois Light Company (CILCO), CILCORP Investment Management Inc. (CIM), CILCORP Ventures Inc. (CVI), QST Enterprises Inc. (QST) 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. At December 31, 1995, ESE had $2.6 million borrowed from CILCORP under this agreement. ESE also borrowed $20 million from the Holding Company on a term credit basis with the principal due May 2, 1998. At December 31, 1995, CILCORP guaranteed $3 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. The Chairman and Chief Executive Officer of CILCO is also the President and Chief Executive Officer of CILCORP and the secretary of CILCO is also Vice President, General Counsel and Secretary of CILCORP Inc. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K CILCORP Page in Annual Report to Stockholders (a) 1. Financial Statements The following statements are included in Exhibit 13 of this filing and are incorporated herein by reference from CILCORP Inc.@s 1995 Annual Report: Management's Report 26 Report of Independent Public Accountants 26 Consolidated Statements of Income for the three years ended December 31, 1995 27 Consolidated Balance Sheets as of December 31, 1995, and December 31, 1994 28-29 Consolidated Statements of Segments of Business for the three years ended December 31, 1995 30-31 Consolidated Statements of Cash Flows for the three years ended December 31, 1995 32 Consolidated Statements of Common Stockholders' Equity for the three years ended December 31, 1995 33 Notes to the Consolidated Financial Statements 34-42 (a) 2. Financial Statement Schedules The following schedules are included herein: Page No. Form 10-K --------- Schedule II - Valuation and Qualifying Accounts and Reserves 67 Schedule XIII -Investment in Leveraged Leases at December 31, 1995 69 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 effective April 25, 1995. ***(4) Instruments defining the rights of security holders, including indentures (10) CILCO Executive Deferral Plan as amended through January 29, 1996. (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 as amended January 29, 1996 (Designated in Form 10-K for the year ended December 31, 1989, File No. 1-8946, as Exhibit (10)b). *(10)b CILCORP Economic Value Added Incentive Compensation Plan (Adopted February 29, 1989 & Revised January 29, 1991 and January 30, 1996.) *(10)c CILCORP Compensation Protection Plan. (Adopted June 28, 1994.) *(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 Annual Meeting of Stockholders, filed with the Commission on March 26, 1993.) (12) Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends Page No. Form 10-K ---------- (13) Annual Report to Security Holders 74 (24) Consent of Arthur Andersen LLP 75 (25) Power of Attorney (27) CILCORP Inc. Consolidated Financial Data Schedule (b) 3. Reports on Form 8-K No reports on Form 8-K were filed during the fourth quarter of 1995. * These exhibits have been previously filed with the Securities and Exchange Commission (SEC) as exhibits to registration statements or to other filings of CILCORP or 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 36 Report of Independent Public Accountants 37 Consolidated Statements of Income for the three years ended December 31, 1995 38 Consolidated Balance Sheets as of December 31, 1995 and December 31, 1994 39-40 Consolidated Statements of Cash Flows for the three years ended December 31, 1995 41-42 Consolidated Statements of Segments of Business for the three years ended December 31, 1995 43-44 Consolidated Statements of Retained Earnings for the three years ended December 31, 1995 45 Notes to the Consolidated Financial Statements 46-59 (a) 2. Financial Statement Schedules The following schedule is included herein: Schedule II - Valuation and Qualifying Accounts and Reserves for the three years ended December 31, 1995 68 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. As amended July 26, 1993. (3)a Bylaws. As amended effective April 1, 1995. *(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 November 1, 1994. (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) in Form 8-K dated January 29, 1993, File No. 1-2732, as Exhibit (4) and in Form 8-K dated December 2, 1994, File No. 1-273, as Exhibit (4).) *(4)a Supplemental Indenture dated November 1, 1994. (Designated in Form 8-K dated November 1, 1994, File No. 1-2732, as Exhibit (4).) (10) Executive Deferral Plan as amended January 29, 1996. (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 as amended January 29, 1996. (Designated in Form 10-K for the year ended December 31, 1989, File No. 1-2732, as Exhibit (10)b.) *(10)b CILCO 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 CILCO Economic Value Added Incentive Compensation Plan (adopted January 29, 1991 and revised January 29, 1996). (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 (included as part of CILCORP Inc.'s definitive proxy in 1993 Annual Meeting of Stockholders, filed with the Commission on March 26, 1993.) (12) Computation of Ratio of Earnings to Fixed Charges (25) Power of Attorney (27) Central Illinois Light Company Financial Data Schedule (b) 3. Reports on Form 8-K No reports on Form 8-K were filed during the fourth quarter of 1995. *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 II CILCORP INC. AND SUBSIDIARY COMPANIES Valuation and Qualifying Accounts and Reserves Years Ended December 31, 1995, 1994 and 1993 (Thousands of dollars)
Column A Column B Column C Column D Column E Additions Balance at Charged Charged Balance at Beginning to to Other End of Description of Period Income Accounts Deductions Period Year ended December 31, 1995 Accumulated Provisions Deducted from Assets - Doubtful Accounts $2,291 $2,216 -- $2,284 $2,223 Accumulated Provisions Not Deducted from Assets - Injuries and Damages 2,600 1,279 -- 1,329 2,550 Year ended December 31, 1994 Accumulated Provisions Deducted from Assets - Doubtful Accounts $2,255 $2,617 -- $2,581 $2,291 Accumulated Provisions Not Deducted from Assets - Injuries and Damages 2,321 1,027 -- 748 2,600 Year ended December 31, 1993 Deducted from Assets - Doubtful Accounts $1,943 $2,760 -- $2,448 $2,255 Accumulated Provisions Not Deducted from Assets - Injuries and Damages 1,869 1,209 -- 757 2,321
SCHEDULE II CENTRAL ILLINOIS LIGHT COMPANY Valuation of Qualifying Accounts and Reserves Years Ended December 31, 1995, 1994 and 1993 (Thousands of dollars)
Column A Column B Column C Column D Column E Additions Balance at Charged Charged Balance at Beginning to to other End of Description of Period Income Accounts Deductions Period Year ended December 31, 1995 Accumulated Provisions Deducted from Assets - Doubtful Accounts $ 600 $1,299 -- $1,249 $ 650 Accumulated Provisions Not Deducted from Assets - Injuries and Damages 2,600 1,279 -- 1,329 2,550 Year ended December 31, 1994 Accumulated Provisions Deducted from Assets - Doubtful Accounts $ 585 $1,494 -- $1,479 $ 600 Accumulated Provisions Not Deducted from Assets - Injuries and Damages 2,321 1,027 -- 748 2,600 Year ended December 31, 1993 Accumulated Provisions Deducted from Assets - Doubtful Accounts $ 799 $1,079 -- $1,293 $ 585 Accumulated Provisions Not Deducted from Assets - Injuries and Damages 1,869 1,209 -- 757 2,321
SCHEDULE XIII CILCORP INC. AND SUBSIDIARY COMPANIES Investment in Leveraged Leases Year Ended December 31, 1995 (Thousands of dollars)
Cost Amount Leveraged Leases of each carried on lease (A) Balance Sheet (B) Office buildings $23,130 $ 49,944 Warehouses 11,746 19,852 Mining equipment 10,244 16,895 Generating station 14,957 22,312 Passenger railway equipment 3,805 4,907 Cargo aircraft 9,583 13,230 ------ ------- Totals $73,465 $127,140 ====== ======= (A) This value is the original cost of the leveraged lease net of original 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.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly cuased this report to be signed on its behalf by the undersigned, therunto duly authorized. CILCORP INC. March 14, 1996 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 14, 1996 Executive Officer And Director (iii) Controller J. L. Barnett J. L. Barnett Controller March 14, 1996 (iv) A majority of the Directors (including the director named above): M. Alexis* Director March 14, 1996 J. R. Brazil* Director March 14, 1996 W. Bunn III* Director March 14, 1996 D. E. Connor* Director March 14, 1996 H. J. Holland* Director March 14, 1996 H. S. Peacock* Director March 14, 1996 K. E. Smith* Director March 14, 1996 R. M. Ullman* Director March 14, 1996 M. M. Yeomans* Director March 14, 1996 R. O. Viets R. O. Viets Director March 14, 1996 *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 14, 1996 By J. F. Vergon J. F. Vergon President and Chief Operating 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: J. F. Vergon J. F. Vergon President and Chief March 14, 1996 Operating Officer and Director (ii( Principal financial officer: T. S. Romanowski T. S. Romanowski Vice President March 14, 1996 (iii) controller R. L. Beetschen R. L. Beetschen Controller March 14, 1996 (iv) A majority of the Directors (including the director named above): M. Alexis* Director March 14, 1996 D. E. Connor* Director March 14, 1996 R. W. Slone* Director March 14, 1996 K. E. Smith* Director March 14, 1996 J. F. Vergon* Director March 14, 1996 R. O. Viets* Director March 14, 1996 M. M. Yeomans* Director March 14, 1996 J. F. Vergon J. F. Vergon Director March 14, 1996 *By J. F. Vergon J. F. Vergon Attorney-in-fact EXHIBIT (12) CILCORP INC. AND SUBSIDIARIES Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Twelve Months Ended 1995 1994 1993 1992 1991 (Thousands of Dollars) Earnings, as Defined: Net Income $38,582 $32,586 $33,583 $32,097 $ 39,656 Income Taxes 23,274 18,180 18,069 20,810 29,676 Interest 29,861 26,341 27,363 29,205 28,661 Interest Portion of Rentals 1,905 1,864 2,447 415 453 Preferred Dividends 3,299 2,980 4,043 4,441 4,441 Convertible Preferred dividends -- -- -- -- 828 ------- ------ ------ ------ ------- Total Earnings, as Defined $96,921 $81,951 $85,505 $86,968 $103,715 Fixed Charges, as Defined: Interest Expense $27,512 $24,313 $25,929 $28,275 $ 27,791 Interest Expense on COLI 2,349 2,028 1,434 930 870 Interest Portion of Rentals 1,905 1,864 2,447 415 453 Tax Effected Preferred Dividends 5,468 4,939 6,701 7,249 8,601 ------- ------- ------- ------- -------- Total Fixed Charges, as Defined $37,234 $33,144 $36,511 $36,869 $37,715 ======= ======= ======= ======= ======= Ratio of Earnings to Fixed Charges 2.6 2.5 2.3 2.4 2.8 === === === === ===
EXHIBIT (12) CENTRAL ILLINOIS LIGHT COMPANY Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended 1995 1994 1993 1992 1991 (Thousands of Dollars) Earnings, as Defined: Net Income $42,398 $32,487 $37,678 $35,636 $44,231 Income Taxes 22,534 17,168 20,368 17,723 22,329 Fixed Charges, as Below 27,876 24,693 26,335 25,130 24,295 ------- ------- ------- ------- ------- Total Earnings, as Defined $92,808 $74,348 $84,381 $78,489 $90,855 ======= ======= ======= ======= ======= Fixed Charges, as Defined: Interest on COLI $ 2,349 $ 2,028 $ 1,434 $ 930 $ 870 Interest on Short-term Debt 744 292 592 180 -- Interest on Long-term Debt 20,242 19,221 19,753 20,747 21,285 Amortization of Debt Discount & Expense, Premium and Reacquired Loss 669 665 624 410 96 Miscellaneous Interest Expense 1,967 623 1,485 2,448 1,591 Interest Portion of Rentals 1,905 1,864 2,447 415 453 ------- ------- ------- ------- ------- Total Fixed Charges, as Defined $27,876 $24,693 $26,335 $25,130 $24,295 ======= ======= ======= ======= ======= Ratio of Earnings to Fixed Charges 3.3 3.0 3.2 3.1 3.7 === === === === ===
NOTICE This copy of CILCORP Inc.'s and central Illinois Light Company's Form 10-K does not include our 1995 Consolidated Annual Report. If you have not received our 1995 Consolidated Annual Report and would like one, please let us know. Telephone: In Peoria 675-8808 Elsewhere in Illinois 1-800-322-3569 Outside Illinois 1-800-322-3569 TDD 1-309-675-8892 Or you can write to us at: Investor Relations Department CILCORP Inc. 300 Hamilton Blvd. Suite 300 Peoria, IL 61602-1238 EXHIBIT 24 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports, dated February 2, 1996, included herein or incorporated by reference in this Form 10-K, into CILCORP Inc.'s previously filed Registration Statements File No. 33-45318, 33-51315 and 33-51241. ARTHUR ANDERSEN LLP Chicago, Illinois March 8, 1996 EX-13 2 Management's Discussion and Analysis of Financial Condition and Results of Operations The financial condition and operating results of CILCORP Inc. (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, through its subsidiaries, also acquires environmentally impaired property for remediation and resale. OVERVIEW Contributions to the Company's earnings per share for the last three calendar years are shown below:
1995 1994 1993 CILCO $2.97 $2.26 $2.60 ESE .01 .14 (.17) Other Businesses (.05) .10 .17 ----- ----- ----- Earnings per share $2.93 $2.50 $2.60 ===== ===== =====
CILCO's earnings increased by 31% in 1995. Electric gross margin increased by 6% due primarily to warmer summer weather. Gas gross margin increased by 22% in 1995 due to a 6.7% gas base rate increase effective in December 1994 (see Note 9) and increased sales due to colder weather during the heating season. In addition, CILCO sold two parcels of land in 1995 at the former R. S. Wallace electric generating plant site (see CILCO Other Income and Deductions) which generated an after-tax gain of $2.1 million, or $.16 per share. Offsetting these increases was a one-time $7.8 million after-tax charge related to CILCO's early retirement programs (see CILCO Early Retirement Programs). This item reduced 1995 earnings by $.59 per share. Earnings for 1994 include a $4.5 million after-tax charge against income to reflect the Illinois Commerce Commission's (ICC) disallowance of a portion of CILCO's investment in renewing its gas system in Springfield, Illinois. In 1994 CILCO also paid $1 million, consisting of a fine and expenses, related to a U. S. Department of Justice and U. S. Department of Transportation review of CILCO's gas operations (see Note 9). These one-time charges reduced 1994 earnings by $.42 per share. ESE's earnings declined in 1995 due primarily to delays in government spending and changes in the regulatory climate at both the federal and state levels. Other Businesses' results declined in 1995 because the prior year's results included a one-time $1.8 million gain on the sale of stock and warrants held by a CILCORP subsidiary as a result of a leveraged lease restructuring. Also, revenue from CIM's lease portfolio was lower in 1995 compared to 1994 due to the normal aging of the leases. Results for 1993 reflect the favorable settlement of a federal tax dispute related to CIM's lease portfolio. The following table summarizes each business segment's contribution to net income (see Results of Operations for further discussion).
1995 1994 1993 (in thousands) Electric operating income $48,769 $49,623 $49,129 Gas operating income 14,779 8,884 11,058 ------- ------- ------- Total utility operating income 63,548 58,507 60,187 Utility interest expense and other (24,743) (24,686) (26,828) Disallowed plant cost of regulated subsidiary, net of tax -- (4,541) -- Environmental and engineering services net income (loss) 113 1,824 (2,266) Other businesses net income (loss) (336) 1,482 2,490 ------- ------- ------- Net income $38,582 $32,586 $33,583 ======= ======= =======
Return on average common equity was 11% in 1995 compared to 9.5% in 1994 and 10% in 1993. The ratio of common equity to total capitalization, including short-term debt, was 43% in 1995 and 44% in 1994 and 1993. The fixed charge coverage ratio increased to 2.7 in 1995 compared to 2.6 in 1994 and 2.4 in 1993. Inflation may have a significant impact on the Company's future operations and its ability to contain costs. To help protect CILCO from the effects of inflation, substantially all electric and gas sales rates include a fuel adjustment clause or a purchased gas adjustment clause to provide for changes in electric fuel costs, excluding coal transportation, and changes in the cost of natural gas. Over the past five years, the annual rate of inflation, as measured by the Consumer Price Index, has ranged from 2.6% to 4.3%. 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@s long-term ability to declare and pay dividends depends upon the ability of its subsidiaries to generate cash from their operations, future business conditions, earnings, and the financial condition of the Company. THE COMPANY The Company issued 299,850 and 64,255 shares of common stock during 1995 and 1994, respectively, through the CILCO Employees@ Savings Plan (ESP) and the CILCORP Inc. Automatic Reinvestment and Stock Purchase Plan (DRIP). These shares were issued at average prices of $37.83 and $36.18 for 1995 and 1994, respectively. Depending on market conditions, the Company may issue additional shares of common stock through the ESP, the DRIP or through a conventional stock offering. The proceeds from newly-issued stock have been, and will continue to be, used to retire CILCORP short-term debt, to meet working capital and capital expenditure requirements at CILCO and for other corporate purposes. Future proceeds may also fund the operations and investments of QST Enterprises Inc. and its affiliated subsidiaries (see Electric Competition). CILCORP is currently authorized by its Board of Directors to borrow up to $50 million on a short-term basis. The Company had $50 million and $40 million of committed bank lines at the end of 1995 and 1994, respectively. The Company also had $5 million of discretionary bank lines at the end of 1995 and 1994. At December 31, 1995, $22.5 million of the lines were used, compared to $6 million at December 31, 1994. At the end of 1995, the Company had $45 million of medium-term notes outstanding, compared to $48 million outstanding at the end of 1994. The Company may issue up to $75 million under its medium-term note program. The Company may issue additional notes in the future under this program to retire maturing debt and to provide funds for other corporate purposes. CILCO In 1995, CILCO spent $69.5 million for capital additions and improvements. These expenditures consisted primarily of replacements and improvements to the existing electric and gas systems, including $3.3 million for the steam boilers and related auxiliary equipment of a cogeneration plant at Midwest Grain Products, Inc. (MWG), one of CILCO's major gas, electric and steam customers. The total expenditures for the MWG project were $19.1 million incurred in 1994 and 1995. The plant, which is owned by CILCO, began providing steam to MWG's Pekin, Illinois, facility in December 1994, and began generating electricity for distribution to CILCO's customers in June 1995. CILCO recognizes that increased competition in the utility industry requires different systems and processes for providing quality customer service. To address this need, CILCO replaced its Customer Information System (CIS) in September 1995, at a cost of approximately $12.7 million, of which $4.6 million was spent in 1995. Utility capital projects were financed during 1995 with funds from operating activities, $20 million of medium-term notes, and issuance of short-term debt. CILCO's net cash flow from operations in 1995 was $80.9 million. CILCO paid $20.1 million in cash dividends to CILCORP during 1995. CILCO's estimated capital expenditures for 1996 and 1997 are $49.3 million and $49.7 million, respectively. The 1996 estimate includes $8.4 million for electric energy supply and transmission projects, $1.8 million for gas supply and transmission projects, and $37 million for electric and gas distribution system improvements. Capital expenditures for 1998-2000 are currently estimated to be $148.9 million. Actual capital expenditures may vary from these estimates because of a number of factors, including changes in costs of labor, equipment, capital, environmental regulations, and load growth estimates. CILCO's short-term debt increased to $24.6 million at December 31, 1995, from $23.4 million at December 31, 1994. CILCO expects to issue commercial paper periodically during 1996, and is currently authorized by its Board of Directors to issue up to $66 million of short-term debt. At December 31, 1995, committed bank lines of credit totaled $30 million, all of which were unused. CILCO expects these bank lines will remain unused through 1996. In May 1995, CILCO issued $20 million of secured medium-term notes to finance capital expenditures and to retire a portion of CILCO's short-term debt. In December 1995, CILCO issued $16 million of secured medium-term notes which were used to retire $16 million of first mortgage bonds due in February 1996 (see Note 7). CILCO plans to finance its 1996 and 1997 capital expenditures with funds provided by operations. ESE ESE spent $4.5 million for capital additions and improvements in 1995. In addition, through its wholly-owned subsidiary, Savannah Resources, Inc. (Savannah), ESE spent $2.4 million in 1995 to acquire land that will be remediated and sold in 1996. In September 1995, ESE sold property which was acquired in 1994 for remediation, realizing a pre-tax gain of $1.2 million. ESE expects to spend $8 million in 1996 to acquire land for remediation and resale, and $1 million for other purposes. ESE's cash flow from operations totaled $7.8 million in 1995. Cash flow is supplemented by a $15 million revolving line of credit with the Holding Company. The revolving line of credit expires on May 2, 1996, at which time it may be renewed or replaced with a line of credit from a non-affiliated lender. ESE has also issued a $20 million term note to the Holding Company which is due on May 2, 1998. At December 31, 1995, ESE had $2.6 million outstanding on the revolving line of credit, compared to $5.6 million outstanding at December 31, 1994. ESE also has a $10 million bank line of credit to collateralize performance bonds issued in connection with ESE projects, of which $4.4 million was committed as of December 31, 1995. ESE anticipates that the funds generated by operations and the amounts available under the revolving credit facility will be sufficient to meet its anticipated working capital requirements. CIM CIM had outstanding debt of $26 million and $27 million at the end of 1995 and 1994, respectively. The debt at the end of 1995 consisted of $23 million borrowed from the Holding Company and $3 million borrowed from external sources. The debt at the end of 1994 consisted of $6 million borrowed from the Holding Company and $21 million borrowed from external sources. In December 1995, CIM purchased a $1 million limited partnership interest in an affordable housing portfolio. CIM expects to finance new investments and working capital needs during 1996 with a combination of funds generated internally and periodic short-term borrowings from the Holding Company. ELECTRIC COMPETITION The National Energy Policy Act of 1992 (NEPA) encourages competition but specifically bans federally-mandated transmission of power to retail customers. However, several state legislatures and public utility regulatory commissions are investigating or adopting pilot programs to initiate competition at the retail level. In addition, incentive regulation is being implemented or considered by legislatures and public utility commissions in over twenty states. Utilities may benefit or lose depending upon their ability to reduce costs and improve efficiency. In July 1995, Illinois enacted a law which offers gas and electric public utilities an opportunity to develop alternative regulation and performance-based ratemaking programs. These programs will be subject to standards established by the ICC and restricted to the utility's service territory. They may begin in 1996 and must end by June 30, 2000. A report on the results of the programs will be delivered to the Illinois legislature by December 31, 2000. Programs developed under the law may become effective January 1, 1996, with the ICC's approval. In 1995, legislation was introduced in Illinois to provide, among other things, an option for electric utilities to lease their generating plants to a subsidiary or other affiliated company, to provide for full competition for power requirements of larger electric customers within five years, to provide experimental retail competition for smaller electric customers, to create a new class or status of "competitive" customers that are permitted to negotiate service contracts with their electric utility suppliers without regulatory oversight, and to provide for alternative regulation. This proposal allows recovery of costs incurred by utilities, but @stranded@ as a result of retail competition. The legislation was not adopted by the 1995 session of the legislature, which instead created a Joint Committee on Electric Utility Regulatory Reform (Committee) to study deregulation and increased competition in the electric industry. The Committee will review reports and studies from a diverse group of organizations. A technical advisory group comprised of representatives from the ICC and various companies, including CILCO, will conduct research and offer testimony. The Committee will include the previously described legislative proposal in its deliberations and is expected to recommend legislation to the Illinois legislature in late 1996. During 1996, CILCO plans to develop and offer its own proposal. With the proposed changes in the regulatory environment and the potential for increased competition in the electric utility industry at both the wholesale and retail levels, CILCO anticipates significant changes in the industry in the years to come. Management cannot predict the ultimate effect of these changes, but believes that they will result in customers having the opportunity to select the electric supplier of their choice and that low operating costs and improved efficiency will be key competitive factors for electric utilities. In August 1995, CILCORP took steps to position itself and its subsidiaries to deal more effectively with industry change. The Company developed a point of view about the future utility and energy services industry which has led it to champion customer choice and to develop a growth strategy. In addition, CILCORP identified the need to gain additional customer insight through market research and other means, to obtain new core competencies, to develop new product and service offerings, to make operational changes to become more competitive, to pursue legislative and regulatory strategies to further competition, and to identify and strategically allocate Company resources. To lead the movement toward increased customer choice, in August 1995 CILCO requested regulatory approval from the ICC to establish two electric pilot retail competition programs known as Power Quest. The programs, as proposed, would offer greater choice to customers and provide the opportunity for CILCO and its customers to participate in a competitive business environment. CILCO expects these programs to be approved by the ICC during the first quarter of 1996. One program will permit eight of CILCO's industrial customers that had peak loads of 10 megawatts or more during the twelve months ended July 31, 1995, to secure part or all of their electric power requirements from suppliers other than CILCO, subject to the limitation that at no time shall total purchases by participants in the program exceed 50 megawatts (approximately 10% of CILCO's industrial load). The program@s two-year term may be extended with the approval of the ICC. In the other program, the first of its kind proposed in the nation, CILCO will designate one or more areas within its service territory as "Open Access Sites" for up to five years. During that period, customers located within an Open Access Site-whether residential, commercial or industrial-will be eligible to purchase some or all of their electric power requirements from suppliers other than CILCO. The five-year program period may be extended with ICC approval. Under Power Quest, CILCO will deliver, for an approved fee, other suppliers' power from a designated receipt point on CILCO's system to the customer's location, as well as provide other associated services. CILCO will not impose any exit fees, entrance fees, or stranded cost recovery upon any customers in connection with Power Quest. CILCO anticipates that, during Power Quest, it is likely that there will be some reduction in electric profit margin because some eligible customers may purchase some or all of their power requirements from other suppliers. The amount of any such reduction depends largely upon the extent of customer participation in Power Quest. CILCO expects, but cannot assure, that some of the reduced profit margin will be offset by increased sales to customers and utilities outside its service territory. The estimated annual net income reduction associated with the pilot program for industrial customers is not likely to exceed $2.5 million. The amount of any such loss associated with the other pilot program cannot be estimated at this time, but it is not expected to be material. Management cannot currently predict the impact on its financial condition which may result from proposed changes in the regulatory environment or from increased competition in the electric utility industry. In December 1995, CILCORP formed a new wholly-owned subsidiary - QST Enterprises Inc. (QST) - to facilitate CILCORP's expansion into non-regulated energy and related services businesses. QST will initially have two subsidiaries: QST Energy Inc. and QST Energy Trading Inc. The staff of QST will initially consist of 14 employees transferred from CILCO and CILCORP. Also in December 1995, QST Energy Trading Inc. filed a proposal with the Federal Energy Regulatory Commission (FERC) to operate as a wholesale marketer and broker of electric power, transmission services, and fuel supplies. QST Energy Inc. will sell power and provide related metering and billing services to retail customers. These activities will take place through unregulated service opportunities as they become available, including CILCO's Power Quest retail competition program. In an effort to obtain a competitive advantage, various mergers and business combinations are occurring in the utility industry. There have been several announced utility industry mergers or business combinations which will have an impact on the region in which CILCO currently operates. Mergers and combinations have also been announced in other areas of the country. CILCO management will monitor this activity and continue to position itself for competition by keeping its costs and prices low, maintaining good customer relations and developing the flexibility to respond directly to individual customer requirements. CILCO'S EARLY RETIREMENT PROGRAMS As part of a continuing effort to better position itself for competition in the energy services industry (see Electric Competition), CILCO offered Voluntary Early Retirement Programs (programs) to eligible employees in July 1995. The programs offered to the International Brotherhood of Electrical Workers (IBEW) and the International Brotherhood of Firemen and Oilers (IBF&O) are based upon agreements made between CILCO and its unions. Another program was offered to all management and office and technical workers. CILCO had 257 full-time employees who were eligible for these programs. One hundred and sixty-six accepted the offer, with retirements effective January 1, 1996. The programs resulted in an after-tax charge of approximately $7.8 million against fourth quarter 1995 earnings. Management expects the programs to generate an annual after-tax cost reduction of approximately $3.4 million beginning in 1996. ENVIRONMENTAL MATTERS CILCO's capital expenditures related to pollution control facilities are estimated to be $3.2 million and $5 million for 1996 and 1997, respectively. The acid rain provisions of the Clean Air Act Amendments of 1990 (Amendments) require additional sulfur dioxide (SO2) and nitrogen oxide (NOx) emission reductions at CILCO's generating facilities. CILCO's facilities are exempt from 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 will continue to monitor regulatory actions and develop compliance strategies to minimize any financial impact. Under current regulatory policies, CILCO can recover compliance costs associated with the Amendments and other environmental regulations through rates charged to customers. CILCO's present strategy includes use of an existing SO2 scrubber and limited fuel switching to control SO2 emissions, and combustion control modifications to reduce NOx emissions. CILCO's generating units will not require additional SO2 scrubbers. In 1996 and 1997, CILCO expects to spend $4.8 million for boiler retrofits and emissions monitoring equipment related to the Amendments. CILCO spent $12.1 million through 1995. In 1993, the U. S. Environmental Protection Agency established SO2 emission allowance reserves for power plants in Phase II. Allowances are transferable to third parties at market prices. CILCO continues to weigh the costs of allowances against alternative operating scenarios and may use the allowance market if allowances are the least cost option to meet future compliance goals. Neither CILCORP, CILCO, nor any of their affiliates has been identified as a potentially responsible party under federal or state environmental laws governing waste storage or disposal. CILCO continues to investigate and/or monitor four former gas manufacturing plant sites (Sites A, B, C, and D) located within CILCO's present gas service territory. The purpose of these studies is to determine if waste materials, principally coal tar, are present, whether such waste materials constitute an environmental or health risk and if CILCO is responsible for the remediation of any remaining waste materials at those sites. CILCO previously operated plants at three of the four sites (Sites A, B, and C) and currently owns two (Sites A and B). CILCO has remediated Site A, at a cost of $3.3 million. In 1994, CILCO investigated Site B to define the extent of waste materials at the site. A risk assessment remedial alternatives study at Site B is underway, taking into consideration new clean-up options available under current Illinois law. CILCO has paid approximately $397,000 to date to outside parties for investigating, testing and clean-up of Site B. CILCO has not yet formulated a remediation plan for Site C. Until more detailed site specific testing has been completed, CILCO cannot determine the ultimate extent or cost of any remediation of Site C. CILCO has not yet determined the extent, if any, of its remediation responsibility for Site D. CILCO spent approximately $251,000 for former gas manufacturing plant site monitoring, legal fees and feasibility studies in 1995. A $4.2 million regulatory asset and a corresponding liability are recorded on the Balance Sheets (see Note 1) representing the minimum amount of future coal tar investigation and remediation costs CILCO expects to incur. Coal tar remediation costs incurred through December 1995 have been deferred on the Balance Sheets, net of amounts recovered from customers. Through December 31, 1995, CILCO has recovered approximately $4.2 million in coal tar remediation costs from its customers through a gas rate rider approved by the ICC. Since the spring of 1994, this gas rate rider has allowed recovery of these costs over five years without carrying charges. In April 1995, the Illinois Supreme Court held that Illinois utilities are entitled to recover 100% of their prudently incurred coal tar remediation costs. Based upon the Supreme Court's decision, the ICC granted CILCO's request to implement revised gas rate riders in November 1995 which will allow recovery of coal tar remediation costs in the year they are incurred. Under these circumstances, management continues to believe that the cost of coal tar remediation will not have a material adverse effect on CILCO's financial position or results of operations. GAS PIPELINE SUPPLIER TRANSITION COSTS In 1992, the FERC issued Orders 636, 636A, and 636B (collectively Order 636). Order 636 substantially restructured the relationship between gas pipelines and distribution companies, such as CILCO, for the sale, transportation and storage of natural gas. These services, which traditionally had been @bundled@ by interstate pipeline companies, are now individually arranged by CILCO. CILCO believes it is well-positioned to ensure the continued acquisition of adequate and reliable gas supplies. Order 636 also permitted pipeline suppliers to recover from gas distribution companies prudently incurred transition costs attributed to compliance with Order 636. As of December 31, 1995, pipeline suppliers have billed CILCO, subject to refund, for approximately $2.2 million of transition costs, including interest. These charges have been, or will be, recovered from CILCO@s customers through its purchased gas adjustment clause (PGA). The PGA requires CILCO to adjust customer billings to reflect changes in the cost of natural gas. Presently, CILCO cannot determine its actual allocation of suppliers' transition costs but believes that it could ultimately be billed an additional $1.6 million, excluding interest. During 1994, the ICC affirmed the right of Illinois gas distribution companies to recover pipeline transition costs from their customers; therefore, management does not expect that Order 636 will materially impact CILCO's financial position or results of operations. Under FERC Order 500, and subsequent Orders 528 and 528A, interstate gas pipelines may bill gas distribution utilities for take-or-pay and other charges related to the transition to a more competitive gas industry. Through December 1995, gas pipelines have billed CILCO $23.1 million, including interest, for take-or-pay charges and certain costs related to one supplier@s liquefied natural gas project. CILCO estimates that it could ultimately be directly billed a total of approximately $24.4 million, excluding interest, for these costs. CILCO is allowed by the ICC to recover these charges via a factor incorporated into the PGA, and through December 31, 1995, has recovered $23 million, including interest, from its customers. CILCO has recorded a regulatory asset and corresponding liability of $3.9 million on its Balance Sheets as of December 31, 1995, of which $2.3 million will be due in one year (see Note 1). The remaining $1.6 million represents the minimum amount of the estimated range of such future pipeline direct billings which CILCO expects to receive related to take-or-pay and transition costs. ACCOUNTING PRONOUNCEMENTS No accounting pronouncements issued by the Financial Accounting Standards Board (FASB) in 1995 will have a material effect on the Company's financial position, results of operations or cash flows. RESULTS OF OPERATIONS CILCO ELECTRIC OPERATIONS The following table summarizes electric operating revenue and expenses by component.
Components of Electric Operating Income 1995 1994 1993 (In thousands) Revenue: Electric retail $321,066 $304,903 $298,602 Sales for resale 5,132 8,182 4,522 -------- -------- -------- Total revenue 326,198 313,085 303,124 -------- -------- -------- Cost of sales: Cost of fuel 94,235 97,184 92,112 Purchased power expense 12,353 9,433 8,754 Revenue taxes 14,244 13,260 12,378 -------- -------- -------- Total cost of sales 120,832 119,877 113,244 -------- -------- -------- Gross margin 205,366 193,208 189,880 -------- -------- -------- Operating expenses: Operation and maintenance expenses 89,113 75,806 76,287 Depreciation and amortization 40,665 39,130 38,337 Income taxes 17,975 19,925 17,542 Other taxes 8,844 8,724 8,585 -------- -------- -------- Total operating expenses 156,597 143,585 140,751 -------- -------- -------- Electric operating incoe $ 48,769 $ 49,623 $ 49,129 ======== ======== ========
Electric gross margin increased 6% in 1995, primarily due to a 4% increase in retail kilowatt hour (kwh) sales. The increase in retail sales was partially offset by a decrease in sales for resale revenue. Residential sales volumes increased 7% while commercial sales volumes increased 5%. These increases were primarily due to warmer summer weather. Cooling degree days were 11% higher in 1995 than in 1994. Industrial sales volumes increased 1% compared to 1994. CILCO set a new all-time system peak demand of 1,188 megawatts (MW) on August 17, 1995. Electric gross margin increased 2% in 1994, primarily due to a 3% increase in retail kilowatt hour sales. The ratio of 1994 gross margin to revenue remained relatively constant compared to prior years. Increases in the number of residential and commercial customers, higher demand by commercial customers and warmer summer weather contributed to the increased sales volumes. Cooling degree days were 5% higher in 1994 than in 1993. Industrial sales volumes increased 3% compared to 1993, due to greater demand by several of CILCO's large industrial customers. Sales for resale decreased 37% in 1995 compared to 1994 due to lower available capacity. Sales for resale vary based on CILCO@s available capacity for bulk power sales, energy requirements of neighboring utilities and the price of power available for sale. In the future, CILCO expects increased competition and reduced margins in the sales for resale and purchased power markets (see Electric Competition). 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 and gross margin may also be affected in the long-term by increased competition in the electric utility industry (see Electric Competition). The cost of fuel for generation decreased 3% in 1995 primarily due to lower coal costs and electric generation. Substantially all of CILCO's electric generation capacity is coal-fired. The cost per ton of coal burned, including transportation cost, decreased 5% in 1995 compared to 1994. The decrease was partially offset by an increase in purchased power for the same period. Purchased power expense varies based on CILCO's need for energy and the price of power available for purchase. CILCO makes use of purchased power when it is economical to do so, or when required to meet its power requirements, such as during maintenance outages at CILCO plants. Costs and savings realized from the purchase of power are passed on to CILCO's customers via the fuel adjustment clause (FAC), which requires CILCO to pass increases and decreases in the cost of fuel through to customers. CILCO expects the wholesale power market to become increasingly competitive due to certain provisions of NEPA (see Electric Competition). Freeman United Coal Mining Company (Freeman), a coal supplier with whom CILCO has a long-term contract, notified CILCO of its intent to change from the cash method of billing for postretirement benefits/costs other than pensions to the accrual basis pursuant to SFAS 106 (see Note 3). Freeman has billed CILCO an additional $5.8 million for postretirement benefit costs for the period from January 1, 1993, through December 31, 1995. CILCO anticipates that Freeman will continue to bill CILCO on the accrual basis for such costs. Based upon the language of a 1992 settlement agreement between CILCO and Freeman, CILCO believes it is responsible for paying these postretirement benefit costs on a cash basis rather than on an accrual basis. To date, no liability for these charges has been recorded and no payments have been remitted to Freeman. This issue has been submitted to arbitration. CILCO believes that any additional charges which may be paid to Freeman are properly recoverable through the FAC. Management cannot currently determine the outcome of this arbitration, but does not believe it will have a material adverse impact on CILCO's financial position or results of operations. Electric operation and maintenance expenses increased 18% in 1995 compared to 1994. The 1995 increases were primarily due to the early retirement programs (see CILCO's Early Retirement Programs), power plant operating and maintenance expenses, and outside services . The 1995 increases were partially offset by decreased costs accrued for certain benefits provided to former or inactive employees (see Note 3). The decrease in 1994 from 1993 was primarily due to lower power plant and overhead line maintenance expenses, injury and damage claims and other postretirement benefit costs. The increases in depreciation and amortization expense in 1995 and 1994 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 1995 and 1994 were primarily the result of changes in pre-tax income. CILCO GAS OPERATIONS The following table summarizes gas operating revenue and expenses by component.
Components of Gas Operating Income 1995 1994 1993 (In thousands) Revenue: Sale of gas $142,619 $138,161 $140,620 Transportation services 8,927 10,124 10,134 ------- -------- -------- Total revenue 151,546 148,285 150,754 ------- -------- -------- Cost of sales: Cost of gas 68,948 78,696 79,022 Revenue taxes 6,623 7,190 7,039 -------- -------- -------- Total cost of sales 75,571 85,886 86,061 -------- -------- -------- Gross margin 75,975 62,399 64,693 -------- --------- -------- Operating expenses: Operation and maintenance expenses 36,443 33,511 31,486 Depreciation and amortization 16,100 15,219 14,686 Income taxes 5,292 1,564 4,684 Other taxes 3,361 3,221 2,779 -------- -------- -------- Total operating expenses 61,196 53,515 53,635 -------- -------- -------- Gas operating income $ 14,779 $ 8,884 $ 11,058 ======== ======== ========
Gas gross margin increased 22% in 1995 compared to 1994. Gross margin was positively affected by a December 1994 6.7% increase in overall gas base rates (see Note 9). Residential and commercial sales volumes increased 6% and 10%, respectively, primarily due to colder weather during the heating season. Heating degree days were 9% higher in 1995 than in 1994. The cost of gas decreased 12% in 1995, primarily due to lower natural gas prices. The lower natural gas prices were passed through to customers via the PGA. Gas operation and maintenance expenses increased 9% in 1995 and 6% in 1994. The increase for 1995 was principally due to increased pension expenses resulting from the early retirement programs (see CILCO's Early Retirement Programs), increased outside services expenses, and increased injury and damage claims. Decreased gas regulatory commission expenses partially offset the increases. The 1994 increases were primarily due to increased regulatory costs associated with CILCO's gas rate case and higher employee benefit costs related to the implementation of SFAS 112 (see Note 3). Decreased other postretirement benefit costs and gas maintenance expenses partially offset the increases. Maintenance expenses decreased as a result of the completion of repairs to the Springfield gas distribution system in 1993 (see Note 9). Gas gross margin decreased 4% in 1994, primarily due to a 4% decrease in retail sales volumes. Residential and commercial sales volumes decreased 7% and 1%, respectively, primarily due to milder weather during the heating season. Increases in sales volumes by certain classes of industrial customers partially offset the decreases in retail sales. Heating degree days were 8% lower in 1994 than in 1993. The cost of gas decreased in 1994 primarily due to decreased retail sales volumes and lower natural gas prices. Revenue from gas transportation services decreased 12% in 1995 and decreased slightly in 1994, while the volume of gas transported decreased 10% in 1995 and increased 8% in 1994. Transportation revenues for 1995 declined primarily due to increased customer purchases of gas from CILCO. The revenue change in 1994 was not proportional to the changes in volume because certain large volume transportation customers negotiated lower unit charges for service. Transportation arrangements have made it practical for certain industrial customers to continue to use gas instead of switching to alternate fuels, allowing CILCO to provide transportation services. There were 391 transportation customers in 1995 compared to 567 customers in 1994 and 668 in 1993. As a result of CILCO's new gas rates (see Note 9), CILCO's system rates are more competitive with transportation rates. Some transportation customers switched back to CILCO's system in December 1994 and during 1995. During 1994 and 1995, CILCO utilized NYMEX (New York Mercantile Exchange) futures contracts on a pilot basis to hedge approximately 3% of CILCO-owned natural gas storage. The program, which includes investments in derivatives as defined by FASB Statement No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments" (SFAS 119), will be expanded in 1996 to hedge a greater portion of CILCO's gas costs. Costs incurred and benefits realized from this program will be passed along to customers. Weather conditions, the ability of 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. The increases in depreciation and amortization expenses in 1995 and 1994 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 1995 and 1994 were primarily the result of changes in taxable income. CILCO OTHER INCOME AND DEDUCTIONS Utility other income increased in 1995 from 1994 primarily due to the sale in December 1995 of two parcels of land at the former R. S. Wallace electric generating plant site. The after-tax gain from the sale totalled $2.1 million. In 1994, CILCO entered into an agreement to sell the 95-acre site for $7 million. The remaining three parcels at the site will be sold in 1996 and 1997. Interest expense increased primarily due to the issuance of $36 million of secured medium-term notes (see Note 7) and an increase in short- term debt during 1995. In 1994, disallowed gas plant costs, net of related income taxes, resulting from an ICC gas rate order, significantly increased CILCO's other deductions (see Note 9). The civil fine and other costs CILCO agreed to pay as a result of the U. S. Department of Justice and the U. S. Department of Transportation investigations also contributed to the increase in other deductions. ESE The following table summarizes environmental and engineering services revenue and expenses.
Components of ESE Net Income (Loss) 1995 1994 1993 (In thousands) Environmental and engineering services revenue $127,530 $132,799 $123,162 Direct non-labor project costs 50,245 52,896 43,627 -------- -------- -------- Net revenue 77,285 79,903 79,535 -------- -------- -------- Expenses: Direct salaries and other costs 38,624 39,720 40,180 General & administrative 30,153 29,319 34,418 Depreciation and amortization 5,646 5,867 6,064 -------- -------- -------- Operating expenses 74,423 74,906 80,662 -------- -------- -------- Interest 1,902 1,915 1,719 -------- -------- -------- Income before income taxes 960 3,082 (2,846) Income taxes 847 1,258 (580) -------- -------- -------- ESE net income (loss) $ 113 $ 1,824 $(2,266) ======== ======== ========
ESE incurs substantial direct non-labor project costs from the use of subcontractors on projects. These costs are passed directly through to ESE's clients. As a result, a better measure of operating performance is net revenue, which is determined by deducting such direct non-labor project costs from gross revenues. Net revenue decreased by 3% in 1995 compared to 1994, after remaining relatively unchanged in 1994 compared to 1993. The 1995 decrease was due primarily to delays in government spending, changes in the regulatory climate at both the federal and state levels, and increased competition for laboratory services. The overall decrease in consulting and laboratory net revenues was partially offset by the sale of property owned by Savannah (see Capital Resources and Liquidity--ESE). The pre-tax gain on this sale was $1.2 million. This property was acquired in 1994 and was remediated by Savannah and its subcontractors. Direct salaries and other costs reflect the cost of professional and technical staff and other costs billable to customers. Such costs consist of salaries and related fringe benefits, including employer-paid insurance, payroll taxes, vacations, sick leave, and retirement plan contributions. General and administrative expenses include non-billable employee time devoted to marketing, proposals, supervision, and professional development; supplies expenses; and corporate administrative expenses. Direct salaries and other costs decreased by 3% in 1995, after decreasing by 1% in 1994. The decreases reflect ESE's adjustment of its staffing levels to respond to changing business conditions. General and administrative expenses increased by 3% in 1995, following a 15% decrease in 1994, due to ESE's additional marketing efforts. Depreciation and amortization expense declined by 4% in 1995 primarily due to the full amortization in early 1995 of a non-compete agreement associated with the acquisition of ESE and an increase in fully depreciated assets. Amortization expense continues for the Cost in Excess of Net Assets of Acquired Businesses, which is being amortized over 40 years. Interest expense remained the same in 1995 after increasing in 1994. ESE formed a wholly-owned subsidiary, Ordnance/Explosives Environmental Services, Inc. (OES), on May 4, 1995, to engage in removing unexploded ordnance and related waste from contaminated sites. Employees of this subsidiary are primarily former military personnel who have been trained in unexploded ordnance procedures. ESE's initial equity investment in the subsidiary is $100,000. On October 24, 1995, ESE formed a wholly-owned subsidiary, ESE Land Corporation, to coordinate both organizationally and financially the acquisition, remediation and resale of environmentally impaired properties. ESE's future business activity will continue to be impacted by the level of demand for its services, which is affected by governmental funding levels, 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 (Loss) 1995 1994 1993 (In thousands) Revenue: Leveraged lease revenue $6,224 $ 6,907 $ 4,280 Other revenue 3,242 4,063 3,191 ------ ------ ------- Total revenue 9,466 10,970 7,471 ------ ------- ------- Expenses: Operating expenses 5,064 5,527 2,637 Depreciation and amortization 203 214 177 Interest expense 4,227 3,624 3,190 Income and other taxes 308 123 (1,283) Minority interest -- -- 260 ------ ------- ------- Total expenses 9,802 9,488 4,981 ------ ------- ------- Other businesses net income (loss) $ (336) $ 1,482 $ 2,490 ====== ======= =======
Leveraged lease revenues declined by 10% in 1995. Under generally accepted accounting principles pertaining to leveraged leases, revenues decline as the lease portfolio matures. During 1996 and future years, CIM expects leveraged lease revenues to decrease, absent any investment in new leases. Leveraged lease revenues in 1994 reflected a full year's revenues from two leveraged lease investments made in late 1993. This increase was partially offset by a decline in 1994 revenues from CIM's other leveraged leases. Other revenues decreased in 1995 primarily because 1994 results included a $1.8 million gain from the sale of Tucson Electric Power (TEP) common stock and warrants. In 1993, CIM sold one million shares of TEP stock for a $2 million gain. The effect of the gain in 1994 was partially offset by the inclusion of a full year's revenues from CILCORP Energy Services Inc. (CESI) in 1995. This subsidiary of CVI was formed in 1994 to market energy related services and consumer products. Operating expenses declined in 1995 primarily because 1994 expenses include several one-time charges, including termination of a lease at an ESE facility which it no longer uses. The lease was entered into during negotiations which led to CILCORP's 1990 acquisition of ESE. The effect of the one-time charges in 1994 was partially offset by the inclusion of a full year's costs from CESI in 1995. Interest expense increased in 1995 and 1994 due to higher average debt balances used to finance working capital and CILCO capital expenditures. Income and other taxes increased in 1995 primarily because the expense in 1994 includes a reduction in taxes to reflect the settlement of several issues with the Internal Revenue Service (IRS) which were unrelated to CIM's lease portfolio. Income and other taxes in 1993 include a $3.1 million reversal of tax expense which had been recorded in prior years to reflect the potential unfavorable outcome of a tax dispute between the Company and the IRS regarding the depreciable life of the Springerville Unit No. 1 lease. Offsetting this reduction in 1993 was an additional $1.1 million of income tax expense to record the effect of an increase in the federal income tax rate on the Company's lease portfolio. In December 1993, CIM purchased the remaining 19% minority interest in a subsidiary, CILCORP Lease Management Inc., for $1.4 million. 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 LLP, 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 independent public accountants 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 independent public accountants have direct access to the Audit Committee. The Audit Committee meets separately with the independent public accountants. R. O. Viets President and Chief Executive Officer J. L. Barnett 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, 1995 and 1994, 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, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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 subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Arthur Andersen LLP Chicago, Illinois February 2, 1996 Consolidated Statements of Income CILCORP Inc. and Subsidiaries
For the Years Ended December 31 1995 1994 1993 (In thousands except per share amounts) Revenue: Electric $326,198 $313,085 $303,124 Gas 151,546 148,285 150,754 Environmental and Engineering Services 127,530 132,799 123,162 Other Businesses 9,466 10,970 7,471 -------- -------- -------- Total 614,740 605,139 584,511 -------- -------- -------- Operating Expenses: Fuel for Generation and Purchased Power 106,588 106,617 100,866 Gas Purchased for Resale 68,948 78,696 79,022 Other Operations and Maintenance 243,043 234,323 225,135 Disallowed Plant Cost of Regulated Subsidiary -- 7,522 -- Depreciation and Amortization 63,326 61,143 59,975 State and Local Revenue Taxes 20,866 20,485 19,466 Other Taxes 16,844 16,640 16,412 -------- -------- -------- Total 519,615 525,426 500,876 -------- -------- -------- Fixed Charges and Other: Interest Expense 29,861 26,341 27,363 Preferred Stock Dividends of Subsidiary 3,299 2,980 4,043 Allowance for Funds Used During Construction (514) (1,040) (199) Other 623 666 516 -------- -------- -------- Total 33,269 28,947 31,723 -------- -------- -------- Income Before Income Taxes 61,856 50,766 51,912 Income Taxes 23,274 18,180 18,069 -------- -------- -------- Net Income Including Minority Interest 38,582 32,586 33,843 Minority Interest -- -- 260 -------- -------- -------- Net Income Available for Common Stockholders $ 38,582 $ 32,586 $ 33,583 ======== ======== ======== Average Common Shares Outstanding 13,147 13,026 12,914 ======== ======== ======== Net Income Per Common Share $2.93 $2.50 $2.60 ======== ======== ======== 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
Current Assets: Cash and Temporary Cash Investments $ 17,100 $ 1,604 Receivables, Less Reserves of $2,223 and $2,291 68,479 55,779 Accrued Unbilled Revenue 42,842 40,474 Fuel, at Average Cost 11,596 14,765 Materials and Supplies, at Average Cost 16,963 16,731 Gas in Underground Storage, At Average Cost 13,592 17,484 Prepayments and Other 14,921 12,402 ---------- ---------- Total Current Assets 185,493 159,239 ---------- ---------- Investments and Other Property: Investment in Leveraged Leases 127,141 120,961 Other Investments 7,316 5,427 ---------- ---------- Total Investments and Other Property 134,457 126,388 ---------- ---------- Property, Plant and Equipment: Utility Plant, at Original Cost Electric 1,142,945 1,092,382 Gas 379,985 355,270 ---------- ---------- 1,522,930 1,447,652 Less - Accumulated Provision for Depreciation 682,574 653,571 ---------- ---------- 840,356 794,081 Construction Work in Progress 44,749 71,105 Plant Acquisition Adjustments, being Amortized to 1999 2,642 3,355 Other, Net of Depreciation 22,774 23,152 ---------- ---------- Total Property, Plant and Equipment 910,521 891,693 ---------- ---------- Other Assets: Prepaid Pension Expense 536 13,312 Cost in Excess of Net Assets of Acquired Businesses, Net of Accumulated Amortization of $4,293 and $3,589 23,845 24,548 Other 21,219 23,204 ---------- ---------- Total Other Assets 45,600 61,064 ---------- ---------- Total Assets $1,276,071 $1,238,384 ========== ========== 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) 1995 1994 (In thousands) Current Liabilities: Current Portion of Long-Term Debt $ 19,052 $ 21,200 Notes Payable 47,100 29,400 Accounts Payable 44,550 51,952 Accrued Taxes 5,035 7,729 Accrued Interest 10,059 9,024 Purchased Gas Adjustment Over-Recoveries 1,987 2,142 Other 15,259 16,557 ---------- ---------- Total Current Liabilities 143,042 138,004 ---------- ---------- Long-Term Debt 344,113 326,695 ---------- ---------- Deferred Credits and Other Liabilities: Deferred Income Taxes 241,603 246,815 Net Regulatory Liability of Regulated Subsidiary 59,482 59,997 Deferred Investment Tax Credit 24,485 26,178 Other 35,248 29,860 ---------- ---------- Total Deferred Credits 360,818 362,850 ---------- ---------- Preferred Stock of Subsidiary 66,120 66,120 ---------- ---------- Stockholders' Equity: (See Statements on page 33) Common Stock, no par value; Authorized 50,000,000 shares - Outstanding 13,335,606 and 13,035,756 shares 179,330 167,987 Retained Earnings 182,648 176,728 ---------- ---------- Total Stockholders' Equity 361,978 344,715 ---------- ---------- Total Liabilities and Stockholders@ Equity $1,276,071 $1,238,384 ========== ========== 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 1995 1994 1993 (In thousands) Cash Flows from Operating Activities: Net Income Before Preferred Dividends $ 41,881 $ 35,566 $ 37,626 -------- -------- -------- Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Non-Cash Lease & Investment Income (6,224) (7,121) (4,280) Depreciation and Amortization 63,326 61,143 59,975 Disallowed Plant Cost of Regulated Subsidiary -- 7,522 -- Deferred Income Taxes, Investment Tax Credit and Regulatory Liability of Subsidiary, Net (7,420) 5,745 6,354 Changes in Operating Assets and Liabilities: (Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenue (15,068) 276 9,476 (Increase) Decrease in Inventories 6,829 565 (5,609) Increase (Decrease) in Accounts Payable (7,402) 4,284 8,067 (Increase) Decrease in Other Assets 12,591 (4,509) (7,831) Increase (Decrease) in Other Liabilities 2,276 6,885 (6,565) -------- -------- -------- Total Adjustments 48,908 74,790 59,587 -------- -------- -------- Net Cash Provided by Operating Activities 90,789 110,356 97,213 -------- -------- -------- Cash Flows from Investing Activities: Additions to Plant (74,046) (95,762) (76,933) Purchase of Long-Term Investments and Leveraged Lease Property (1,617) (11) (13,595) Proceeds from Sale of Long-Term Investments and Leveraged Lease Property 500 4,667 3,787 Purchase of Minority Interest in Consolidated Subsidiary -- -- (1,425) Other (8,836) (6,559) 2,625 -------- -------- -------- Net Cash Provided by (Used) in Investing Activities (83,999) (97,665) (85,541) -------- -------- -------- Cash Flows from Financing Activities: Net Increase (Decrease) in Short-Term Debt 17,700 (1,800) 1,949 Proceeds from Issuance of Long-Term Debt 36,473 22,000 107,269 Repayment of Long-Term Debt (21,203) -- (108,781) Proceeds from Issuance of Preferred Stock by Subsidiary -- -- 46,006 Retirement of Preferred Stock by Subsidiary -- -- (46,051) Common Dividends Paid (32,308) (32,063) (31,757) Preferred Dividends Paid (3,299) (2,980) (4,043) Common Stock Issued 11,343 2,325 2,365 Preferred and Common Stock Issuance Costs -- (9) (1,590) -------- -------- -------- Net Cash Used in Financing Activities 8,706 (12,527) (34,633) -------- -------- -------- Net Increase (Decrease) in Cash and Temporary Cash Investments 15,496 164 (22,961) Cash and Temporary Cash Investments at Beginning of Year 1,604 1,440 24,401 -------- -------- -------- Cash and Temporary Cash Investments at End of Year $ 17,100 $ 1,604 $ 1,440 ======== ======== ======== 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, 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 (31,757) (31,757) share) 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 Common Stock Issued 64,255 2,325 2,325 Cash Dividend Declared on Common Stock ($2.46 per (32,063) (32,063) share) Preferred and Common Stock Issuance Costs (9) (9) Net Income 32,586 32,586 ---------- -------- -------- -------- Balance at December 31, 1994 13,035,756 $167,987 $176,728 $344,715 Common Stock Issued 299,850 11,343 11,343 Cash Dividend Declared on Common Stock ($2.46 per share) (32,308) (32,308) Additional Minimum Liability of Non-Qualified Pension Plan at December 31, 1995, net of $233 taxes (354) (354) Net Income 38,582 38,582 ---------- -------- -------- -------- Balance at December 31, 1995 13,335,606 $179,330 $182,648 $361,978 ========== ======== ======== ======== 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 1995 1994 1993 (In thousands) Utility Segment: Electric Operations Revenue $326,198 $313,085 $303,124 Expenses 277,429 263,462 253,995 -------- -------- -------- Operating Income 48,769 49,623 49,129 Income Taxes 17,975 19,925 17,542 -------- -------- -------- Operating Income Before Income Taxes $ 66,744 $ 69,548 $ 66,671 ======== ======== ======== Depreciation and Amortization $ 40,665 $ 39,130 $ 38,337 ======== ======== ======== Capital Expenditures $ 45,466 $ 66,537 $ 41,880 ======== ======== ======== Gas Operations Revenue $151,546 $148,285 $150,754 Expenses 136,767 139,401 139,696 -------- -------- -------- Operating Income 14,779 8,884 11,058 Income Taxes 5,292 1,564 4,684 -------- -------- -------- Operating Income Before Income Taxes $ 20,071 $ 10,448 $ 15,742 ======== ======== ======== Depreciation and Amortization $ 16,100 $ 15,219 $ 14,686 ======== ======== ======== Capital Expenditures $ 24,043 $ 24,867 $ 30,677 ======== ======== ========
Major Customer For the Years Ended December 31 1995 1994 1993 Caterpillar Inc. Electric Revenue $40,109 12.3% $41,422 13.2% $39,831 13.1% Gas Revenue 1,022 .7% 1,719 1.2% 1,581 1.0% ------- ----- ------- ---- ------- ---- Total $41,131 8.6% $43,141 9.4% $41,412 9.1% ======= ===== ======= ==== ======= ====
Utility Identifiable Assets as of December 31 1995 1994 1993 Electric $ 735,463 $ 718,431 $ 684,618 Gas 273,428 260,070 259,462 Other Utility Assets* 43,122 38,505 44,245 ---------- ---------- -------- Total Utility Assets $1,052,013 $1,017,006 $ 988,325 ========== ========== ======== *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 1995 1994 1993 (In thousands) Revenue $127,530 $132,799 $123,162 Operating Expenses 124,668 127,802 124,289 -------- -------- -------- Operating Income (Loss) Before Income Taxes $ 2,862 $ 4,997 $ (1,127) ======== ======== ======== Depreciation and Amortization $ 5,646 $ 5,867 $ 6,064 ======== ======== ======== Capital Expenditures $ 4,537 $ 4,358 $ 4,300 ======== ======== ========
Environmental and Engineering Services
Identifiable Assets as of December 31 1995 1994 1993 Property, Plant and Equipment $21,961 $22,254 $23,116 Cost in Excess of Net Assets of Acquired Businesses, Net of Amortization 23,845 24,548 25,251 Accounts Receivable and Unbilled Revenue 37,238 42,199 36,637 Other Assets* 4,908 4,463 2,433 ------- ------- ------- Total Environmental and Engineering Services Assets $87,952 $93,464 $87,437 ======= ======= ======= *Real estate held for resale and other current assets
Other Businesses Segment
For the Years Ended December 31 1995 1994 1993 Revenue $9,466 $10,970 $ 7,471 Expenses 9,494 9,365 6,264 ------ ------- ------- Income (Loss) Before Income Taxes $ (28) $ 1,605 $ 1,207 ====== ======= =======
Other Businesses Identifiable Assets as of December 31 1995 1994 1993 Leveraged Leases $127,140 $120,961 $114,803 Cash and Temporary Cash Investments 544 1,179 1,564 Other Assets 8,422 5,774 6,311 -------- -------- -------- Total Other Businesses Assets $136,106 $127,914 $122,678 ======== ======== ======== The accompanying Notes to Financial Statements are an integral part of these statements.
NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of CILCORP Inc. (CILCORP or the 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 1995 presentation. CILCORP is an investor-owned public utility holding company. The Company's principal business subsidiary 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. The Company also has four other first-tier subsidiaries which are nonutility businesses. These subsidiaries provide: engineering and environmental consulting, analysis and laboratory services; acquire and remediate environmentally impaired property for resale; manage the Company's investment portfolio; pursue investment opportunities in new ventures and the expansion of existing ventures in environmental services, energy, biotechnology, health care and telecommunications; and provide wholesale marketing and brokering services for electric power, transmission services, and fuel supplies. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REGULATION CILCO is a public utility subject to regulation by the Illinois Commerce Commission and the Federal Energy Regulatory Commission with respect to accounting matters, and maintains its accounts in accordance with the Uniform System of Accounts prescribed by these agencies. As a regulated public utility, CILCO is subject to the provisions of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). Regulatory increases and decreases, respectively, of assets and liabilities represent probable future increases and decreases, respectively, of revenues to CILCO resulting from the ratemaking action of regulatory agencies. Net regulatory liabilities are approximately $59.5 million and $60 million at December 31, 1995 and 1994, respectively (see Note 2). At December 31, 1995 and 1994, the regulatory assets included on the Consolidated Balance Sheets were as follows:
1995 1994 (In thousands) Included in prepayments and other: Fuel and gas cost adjustments $ 1,516 $ 3,682 Coal tar remediation cost - estimated current 1,500 300 Gas transition costs 2,268 1,171 ------- ------- Current costs included in prepayments and other 5,284 5,153 ------- ------- Included in other assets: Coal tar remediation cost, net of recoveries 4,222 4,993 Gas transition costs 1,656 2,781 Deferred gas costs 3,207 3,895 Unamortized loss on reacquired debt 6,029 6,486 ------- ------- Future costs included in other assets 15,114 18,155 ------- ------- Total regulatory assets $20,398 $23,308 ======= =======
If a portion of CILCO's operations becomes no longer subject to the provisions of SFAS 71, a write-off of related regulatory assets and liabilities would be required, unless some form of transition cost recovery (refund) continues through rates established and collected for CILCO's remaining regulated operations. In addition, CILCO would be required to determine any impairment to the costs recorded for deregulated plant and inventory assets. 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 on the Balance Sheets as a current asset or current liability (see Regulation, above) 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, 1995, CILCO had net receivables of $42.3 million, of which approximately $5.5 million was due from its major industrial customers. See Note 5 for a discussion of receivables related to CILCORP Investment Management Inc.'s leveraged lease portfolio. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of Cash and Temporary Cash Investments, Other Investments, Preferred Stock with Mandatory Redemption and Notes Payable approximates fair value. The estimated fair value of the Company's Long-Term Debt, including current maturities, was $399 million at December 31, 1995, and $340 million at December 31, 1994, 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 and analytical laboratory services under time and material, cost-plus and fixed- price contracts. These service 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 utility 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 utility property, were 3.8% and 4.6% for electric and gas, respectively, for each of the last three years. Utility 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 40 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 40 years. The amortization is related to ESE and is a component of depreciation and amortization expense on the Consolidated Statements of Income. INCOME TAXES The Company follows a policy of comprehensive interperiod income tax allocation. Investment tax credits related to utility property have been deferred and are being 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 remaining 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:
1995 1994 1993 (In thousands) Interest $27,615 $27,663 $24,514 Income taxes 32,673 13,103 14,760 ------- ------- -------
COMPANY-OWNED LIFE INSURANCE POLICIES The following amounts related to Company-owned life insurance contracts, issued by one major insurance company, are included in Other Investments:
1995 1994 (In thousands) Cash surrender value of contracts $35,135 $30,468 Borrowings against contracts (33,211) (28,831) ------- ------- Net investment $ 1,924 $ 1,637 ======= =======
Interest expense related to borrowings against Company-owned life insurance, included in "Other" on the Consolidated Statements of Income, was $2.3 million, $2 million and $1.4 million for 1995, 1994 and 1993, respectively. NOTE 2 - INCOME TAXES The Company follows 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. CILCO has recorded a regulatory liability to account for the net effect of expected future regulatory actions related to unamortized investment tax credits, income tax liabilities 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, 1995, December 31, 1994 and December 31, 1993, were as follows:
December 31 1995 1994 1993 (In thousands) Deferred tax liabilities: Property, including allowance for funds used during construction $217,049 $216,304 $216,897 Leveraged leases 93,566 88,308 80,129 Other 5,641 13,760 14,427 Deferred tax assets: Other (15,171) (11,560) (12,079) Net regulatory liability of regulated subsidiary (59,482) (59,997) (69,477) -------- -------- -------- Deferred income taxes $241,603 $246,815 $229,897 ======== ======== ======== Of the $5,212,000 decrease in the consolidated net deferred income tax liability at December 31, 1995, from December 31, 1994, $5,377,000 is due to current year deferred federal and state income tax. An additional reduction to deferred tax liability of approximately $233,000 was recorded due to an equity adjustment related to the CILCO early retirement programs.
Income tax expenses were as follows:
Years Ended December 31 1995 1994 1993 (In thousands) Current income taxes Federal $25,024 $11,825 $10,102 State 5,320 2,238 3,352 ------- ------- ------- Total current taxes 30,344 14,063 13,454 ------- ------- ------- Deferred income taxes, net Property-related deferred income taxes 516 (1,094) (2,316) Leveraged leases 6,341 8,179 5,257 Unbilled revenue (2,982) 222 758 Gas take-or-pay settlements (751) (1,244) 1,413 Coal tar remediation costs 642 253 120 Pension expenses (6,673) (145) (646) Customer advances (1,467) (143) (24) Other (1,003) (218) 1,747 -------- ------- ------- Total deferred income taxes, net (5,377) 5,810 6,309 -------- ------- ------- Investment tax credit amortization (1,693) (1,693) (1,694) -------- ------- ------- Total income tax provisions $23,274 $18,180 $18,069 ======== ======= ======= Total deferred income taxes, net, includes deferred state income taxes of $(67,000), $1,801,000 and $1,827,000 for 1995, 1994 and 1993, respectively.
The following table represents a reconciliation of the effective tax rate with the statutory federal income tax rate.
1995 1994 1993 Statutory federal income tax 35.0% 35.0% 35.0% ----- ----- ----- Equity component of AFUDC not subject to taxation (.1) (.4) -- Depreciation differences for which deferred taxes have not been provided 1.0 1.2 1.0 Amortization of investment tax credit (2.7) (3.3) (3.3) State income taxes 5.9 5.3 7.1 Excess of book over tax basis of assets .4 .5 .5 Preferred dividends of subsidiary and other permanent differences 1.1 2.3 2.4 Tax provision adjustment .5 (1.3) (5.3) Civil fine -- .7 -- Other differences (3.5) (4.2) (2.6) ----- ----- ---- Total 2.6 .8 (.2) ----- ----- ---- Effective income tax rate 37.6% 35.8 34.8 ===== ==== ====
NOTE 3 - POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE CILCO has recorded a liability of approximately $0.9 million and $1.5 million at December 31, 1995 and 1994, respectively, for benefits other than pensions or health care provided to former or inactive employees. PENSION BENEFITS Substantially all of CILCO's full-time employees, including those assigned to the Holding Company and QST, are covered by trusteed, non-contributory defined benefit pension plans. Benefits under these qualified plans reflect the employee's years of service, age at retirement and maximum total compensation for any consecutive sixty-month period prior to retirement. CILCO also has an unfunded nonqualified plan for certain employees. Pension costs for the past three years were charged as follows:
1995 1994 1993 (In thousands) Operating expenses $15,383 $2,465 $1,841 Utility plant and other 1,139 1,189 925 ------- ------ ------ Net pension costs $16,522 $3,654 $2,766 ======= ====== ======
Provisions for pension expense reflect the use of the projected unit credit actuarial cost method. At December 31, 1995, CILCO recognized an additional minimum liability on the Balance Sheets for the plan in which the accumulated benefit obligation exceeds the fair value of plan assets. The components of net periodic pension costs follows:
1995 1994 (In thousands) Cost of pension benefits earned by employees $ 4,654 $ 5,589 Interest cost on projected benefit obligation 15,188 14,422 Actual return on plan assets (50,816) 1,237 Net amortization and deferral 34,437 (17,594) Special termination benefits 13,059 -- -------- -------- Net pension costs $ 16,522 $ 3,654 ======== ========
During 1995, CILCO recognized $13.1 million of net pension costs in accordance with Statement of Financial Accounting Standards No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. These amounts represented the costs associated with additional benefits extended in connection with voluntary early retirement programs. Information on the funded status of plans in which assets exceed accumulated benefits follows:
Actuarial present value of accumulated benefit 1995 1994 obligation: (In thousands) Vested benefits - employees' rights to receive benefits no longer contingent upon continued employment $171,422 $145,975 Non-vested benefits - employees' rights to receive benefits contingent upon continued employment 15,266 11,258 -------- -------- Net benefit obligation $186,688 $157,233 ======== ======== Funded status: pension assets and obligations Pension assets at fair market value $232,560 $192,427 Projected benefit obligation at present value (233,746) (189,438) Unrecognized transition asset (6,675) (7,842) Unrecognized prior service cost 9,034 10,603 Unrecognized net (gain) loss (3,338) 7,562 ------- -------- Pension asset (liability) recorded on Balance Sheets $ (2,165) $ 13,312 ======= ========
Information on the funded status of the plan in which accumulated benefits exceed assets follows:
Actuarial present value of accumulated benefit 1995 1994 obligation: (In thousands) Vested benefits - employees' rights to receive benefits no longer contingent upon continued employment $1,792 $900 Non-vested benefits - employees' rights to receive benefits contingent upon continued employment 132 -- ------ ---- Net benefit obligation $1,924 $900 ====== ==== Funded status: pension assets and obligations Pension assets at fair market value $ -- $ -- Projected benefit obligation at present value (2,689) (1,002) Unrecognized prior service cost 536 576 Unrecognized net (gain) loss 1,352 (363) Adjustment to recognize minimum liability (1,123) (111) ------- ----- Pension liability recorded on Balance Sheets $(1,924) $ (900) ======= =====
Significant assumptions used for calculations: 1995 1994 Discount rate 7.25% 8.00% Expected rate of salary increase 4.50% 4.50% Expected long-term rate of return 8.50% 8.50%
POSTRETIREMENT HEALTH CARE BENEFITS Provisions for postretirement benefits expenses are determined under the accrual method of accounting. Substantially all of CILCO's full-time employees, including those assigned to the Holding Company and QST, are currently covered by a trusteed, non- contributory defined benefit postretirement 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. Postretirement health care benefit costs were charged as follows:
1995 1994 1993 (In thousands) Operating expenses $5,108 $5,253 $5,767 Utility plant and other 1,882 1,913 2,060 ------ ------ ------ Net postretirement health care benefit costs $6,990 $7,166 $7,827 ====== ====== ======
Information on the plans' funded status, on an aggregate basis, follows:
1995 1994 (In thousands) Components of net postretirement health care benefit costs: Service cost - benefits attributed to service during the period $ 1,302 $ 1,496 Actual return on plan assets (5,936) 133 Interest cost on accumulated postretirement health care benefit obligation 4,795 4,469 Amortization of transition obligation over 18.6 years 2,858 2,858 Other net amortization and 3,971 (1,790) deferral ------- ------- Net postretirement health care benefit costs $ 6,990 $ 7,166 ======= ======= Accumulated postretirement health care benefit obligation: Retirees $36,646 $30,849 Other fully eligible participants 12,668 10,859 Other active participants 22,003 20,046 ------- ------- Total accumulated postretirement health care benefit obligation 71,317 61,754 Less: Unrecognized actuarial gain (814) (3,046) Unrecognized transition obligation 38,871 41,730 Plan assets at fair value 33,157 22,929 ------- ------- Accrued postretirement health care benefit cost liability $ 103 $ 141 ======= =======
For measurement purposes, the health care cost trend rate averaged 8.5% annually for 1995; the rate was assumed to decrease gradually to 6% by 2049 and remain at that level thereafter. Increasing the assumed health care cost trend rate by 1% in each year would increase the accumulated postretirement benefit obligation at December 31, 1995, by $3.2 million and the aggregate of the service and interest cost components of net postretirement health care cost for 1995 by $268,000. The discount rate used in determining the accumulated postretirement benefit obligation at December 31, 1995, was 7.25% and at December 31, 1994, 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%. NOTE 4 - SHORT-TERM DEBT Short-term debt at December 31, 1995, consisted of $22.5 million of Holding Company bank borrowings and $24.6 million of CILCO commercial paper. Short- term debt at December 31, 1994, included $6 million of Holding Company bank borrowings and $23.4 million of CILCO commercial paper. The Holding Company had arrangements for bank lines of credit totaling $50 million at December 31, 1995, of which $22.5 million was used. These lines were maintained by commitment fees of 1/8 of 1% per annum in lieu of balances. The Company also had a $5 million discretionary bank line at the end of 1995, which was unused. CILCO had arrangements for bank lines of credit totaling $30 million at December 31, 1995, all of which were unused. These lines of credit were maintained by commitment fees of 1/20 of 1% per annum in lieu of balances. These bank lines of credit support CILCO's issuance of commercial paper. At December 31, 1995, ESE had a $10 million bank line of credit, of which $4.4 million was committed at year end to collateralize performance bonds issued in connection with ESE projects. NOTE 5 - LEVERAGED LEASE INVESTMENTS The Company, through subsidiaries of CILCORP Investment Management Inc. (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 at December 31, 1995 and 1994. 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 $216 million at December 31, 1995, and $223 million at December 31, 1994. Leveraged lease residual value assumptions, which are conservative in relation to independently appraised residual values, are tested on a periodic basis. CIM's net investment in leveraged leases at December 31, 1995 and 1994 is shown below:
1995 1994 (In thousands) Minimum lease payments receivable $122,713 $122,757 Estimated residual value 94,368 94,368 Less: Unearned income 89,940 96,164 -------- -------- Investment in lease financing receivables 127,141 120,961 Less: Deferred taxes arising from leveraged leases 93,566 88,308 -------- -------- Net investment in leveraged leases $ 33,575 $ 32,653 ======== ========
NOTE 6 - PREFERRED STOCK PREFERRED STOCK OF SUBSIDIARY
At December 31 1995 1994 (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 Class A, no par value, authorized 3,500,000 shares Flexible auction rate - 250,000 shares (a) 25,000 25,000 With mandatory redemption 5.85% series - 220,000 shares 22,000 22,000 ------- ------- Total preferred stock $66,120 $66,120 ======= ======= (a) Dividend rates at December 31, 1995 and 1994, were 4.40% and 4.72%, respectively.
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, 1995, is $3.3 million, assuming a continuation of the auction dividend rate at December 31, 1995, 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, 1995, 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, 1995 and 1994. NOTE 7 - LONG-TERM DEBT
At December 31 1995 1994 (In thousands) CILCO first mortgage bonds 5 1/8% series due 1996 $ -- $ 16,000 5 1/2% series due 1997 20,000 20,000 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 10,650 6.4% series due 2000 30,000 30,000 6.82% series due 2003 25,350 25,350 6.13% series due 2005 16,000 -- 7.8% series due 2023 10,000 10,000 7.73% series due 2025 20,000 -- Pollution control refunding bonds 6.5% series F due 2010 5,000 5,000 6.2% series G due 2012 1,000 1,000 6.5% series E due 2018 14,200 14,200 5.9% series H due 2023 32,000 32,000 -------- -------- 299,200 279,200 Unamortized premium and discount on long-term debt, net (803) (841) -------- -------- Total CILCO $298,397 $278,359 -------- -------- CILCORP Lease Management Inc. Unsecured financial institution borrowings; interest rate of 9.55%; matures in 1997 $3,000 $3,000 CILCORP Inc. Unsecured medium-term notes; varying in term from 2 years to 6 years; interest rates ranging from 8.33% to 9.10% 42,000 45,000 Other 716 336 -------- -------- Total long-term debt $344,113 $326,695 ======== ========
CILCO's first mortgage bonds 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 1997-2000 are $23 million, $22 million, $13 million and $30 million, respectively. The 1996 maturities of long-term borrowings have been classified as current liabilities. NOTE 8 - COMMITMENTS & CONTINGENCIES CILCO's 1996 capital expenditures are estimated to be $49.3 million, in connection with which CILCO has normal and customary purchase commitments at December 31, 1995. CILCO's policy is to act as a self-insurer for certain insurable risks resulting from employee health and life insurance programs. ESE expects to spend $8 million in 1996 to acquire land for remediation and resale. Additional capital expenditures for 1996 are estimated to be $1 million, in connection with which ESE has normal and customary purchase commitments at December 31, 1995. 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 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. In March 1995, CILCO and CIPS renegotiated the November 1992 limited-term power agreement. This agreement, which now expires in May 2009, provides for CILCO to purchase 150 MW of CIPS@ capacity from June 1998 through May 2002, and 50 MW from June 2002 through May 2009. This renegotiated agreement is subject to the ICC's final approval of CILCO's 1995 electric least cost energy plan, which has been revised to include the terms of this bulk power purchase agreement. ICC approval is expected in June 1996. 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. NOTE 9 - RATE MATTERS In December 1994, the ICC issued a rate order designed to grant CILCO a $10.6 million, or 6.7% annual increase in gas base rate revenues. The new rates, designed to yield an 11.82% return on common equity and a 9.24% return on rate base, were effective in December 1994. In mid-1992, after a significant number of leaks were detected in CILCO@s Springfield cast iron gas distribution system, CILCO began a detailed examination of its Springfield gas distribution system and related operating practices and procedures. CILCO thereafter began an aggressive program to renew its Springfield gas cast iron main system. This project was completed in November 1995. As a part of the rate order, the ICC disallowed approximately $7.5 million of CILCO@s $24 million investment in the Springfield cast iron main renewal project. To reflect the disallowance, CILCO recorded a pre-tax charge of approximately $7.5 million ($4.5 million after tax) against 1994 earnings. The ICC staff began an informal review of CILCO@s Springfield gas operations and record-keeping practices in September 1992. Subsequently, the U.S. Department of Transportation (DOT) and the U.S. Department of Justice (DOJ) began conducting investigations of CILCO which were also focused principally on CILCO@s Springfield gas operations and its record-keeping practices. In September 1994, CILCO entered into a federal court civil consent decree with the DOJ which concluded the DOT and DOJ investigations of CILCO. As a part of the settlement with the DOJ, CILCO accepted adjustments recommended by the ICC staff which resulted in a net disallowance from CILCO@s gas rate base of approximately $4.5 million of the cost of the Springfield cast iron main renewal project. This charge is part of the $7.5 million disallowance included in the December 1994 rate order. In addition to the rate base disallowance, CILCO agreed to pay an $844,000 civil fine to the United States and agreed to reimburse the ICC, the DOT and the DOJ $156,000 for the costs of their investigations. CILCO also agreed to underwrite the reasonable expense of an outside expert, selected by the ICC, to examine CILCO's gas operations manuals and systems to ensure they are in compliance with all applicable statutes and regulations. The audit was completed in October 1995 at a total cost of $356,000. The DOJ agreed not to seek any additional civil or criminal penalties from CILCO or the Company. The ICC staff also agreed not to seek any additional enforcement penalties from CILCO or the Company. CILCO agreed to continue to cooperate with the DOJ in its investigation and prosecution of any individuals who may be responsible for willful violations of any applicable statute or regulation. Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations, Electric Competition and Environmental Matters for a discussion of other 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-cancellable capital and operating leases having remaining terms in excess of one year as of December 31, 1995, are $27.2 million in total. Payments due during the years ending December 31, 1996 through December 31, 2000, are $8.1 million, $6.4 million, $4.4 million, $3.5 million and $2.2 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.
For the Three Months Ended March 31 June 30 September 30 December 31 (In thousands except per share amounts) 1995 Revenue $170,587 $132,490 $157,574 $154,089 Income before income taxes 18,833 8,890 32,031 2,102 Net income 11,473 5,677 19,435 1,997 Earnings per average common share $.88 $.43 $1.47 $.15 1994 Revenue $177,436 $137,146 $145,854 $144,703 Income before income taxes 15,577 11,469 15,158 8,562 Net income 9,701 6,940 9,570 6,375 Earnings per average common share $.75 $.53 $.73 $.49
EX-3 3 BY-LAWS of CILCORP Inc. (As Amended Effective April 25, 1995) ARTICLE I OFFICES The corporation shall continuously maintain in the State of Illinois a registered office and a registered agent whose business office is identical with such registered office, and may have other offices within or without the State. ARTICLE II SHAREHOLDERS SECTION l. ANNUAL MEETING. An annual meeting of the shareholders shall be held on the fourth Tuesday of April in each year commencing in 1986, such meeting to be held at such time as determined by the Board of Directors and specified in the notice of such annual meeting for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holi day, such meeting shall be held on the next succeeding business day. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the Chief Executive Officer, by the Board of Directors, or by the holders of not less than one-fifth of all the outstanding shares entitled to vote on the matter for which the meeting is called, for the purpose or purposes stated in the call of the meeting. SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be at the principal office of the corporation in the City of Peoria, Illinois. SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than twenty nor more than sixty days before the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meet ing, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his or her address as it appears on the records of the corporation, with postage thereon prepaid. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 5. FIXING OF RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of sharehold ers, or to receive payment of any dividend, or for the purpose of determining shareholders for any other proper purpose, the Board of Directors may fix in advance a record date which shall not be more than sixty days and, for a meeting of shareholders, not less than ten days, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than twenty days, before the date of such meeting. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be the date on which notice of the meeting is mailed, and the record date for the determination of shareholders for any other purpose shall be the date on which the Board of Directors adopts the resolution relating thereto. A determina tion of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting. SECTION 6. VOTING LISTS. The officer or agent having charge of the transfer books for shares of the corporation shall make, within twenty days after the record date for a meeting of shareholders or ten days before such meeting, whichever is earlier, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the corpo ration and shall be subject to inspection by any shareholder, and to copying at the shareholder's expense, for any purpose germane to the meeting, at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and may be inspected by any share holder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this State, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders. SECTION 7. QUORUM. A majority of the outstanding shares of the corporation entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum for consideration of such matter at a meeting of shareholders; provided, that if less than a majority of the outstanding shares entitled to vote on a matter are represented at said meeting, a majority of the shares so represented may adjourn the meeting as to that matter at any time without further notice. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on a matter shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Business Corporation Act of 1983, or the Articles of Incorporation. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting. Withdrawal of shareholders from any meeting shall not cause failure of a duly constituted quorum at that meeting. SECTION 8. PROXIES. Each shareholder entitled to vote at a meeting of shareholders or to express consent or assent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be valid after eleven months from the date thereof, unless otherwise provided in the proxy. SECTION 9. VOTING OF SHARES. Each outstanding share shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares registered in the name of another corporation, domestic or foreign, may be voted by any officer, agent, proxy or other legal representative authorized to vote such shares under the law of incorporation of such corporation. Shares registered in the name of a deceased person, a minor ward or person under legal disability, may be voted by his or her administrator, executor or court appointed guardian, either in person or by proxy, without a transfer of such shares into the name of such administrator, executor or court appointed guardian. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy. Shares registered in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authori ty so to do is contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of the corporation held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares entitled to vote at any given time. SECTION 11. INSPECTORS. At any meeting of shareholders, the chairman of the meeting may, or upon the request of any shareholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. Each report of an inspector shall be in writing and signed by him or her or by a majority of them if there be more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspec tors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. SECTION 12. VOTING BY BALLOT. Voting on any question or in any election may be by voice unless the chairman of the meeting shall order or any shareholder entitled to vote shall demand that voting be by ballot. ARTICLE III DIRECTORS SECTION l. GENERAL POWERS. The business and affairs of the corpo ration shall be managed by or under the direction of its Board of Directors. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of direc tors of the corporation shall be ten. Directors need not be residents of Illinois or shareholders of the corporation. Unless sooner terminated by any other provision hereof, the term of any director shall automatically expire at the first annual meeting of the shareholders following his or her attainment of the age of 67. Provided, however, that the term of any director serving in such capacity and over the age of 60 on August 20, 1993 shall automatically expire at the first annual meeting of the shareholders following his or her attainment of the age of 70. Notwithstanding any other provision hereof, the term of any director who is an officer or other full time employee of the corporation shall automatically expire at the first annual meeting of the shareholders following his or her retirement from employment by the corporation unless such retiree was the Chief Executive Officer of the corporation at the time of retirement, in which case his or her term as a director (unless such term otherwise sooner termi nates) shall automatically terminate at the second annual meeting of share holders following his or her retirement. Any such retiree shall not thereafter be eligible to stand for election to the Board of Directors, except that any such retiree who was the Chief Executive of the corporation at the time of retirement and whose term expires at the annual meeting of shareholders next following his or her retirement shall be eligible to stand for election to a single, additional term of one year, which one-year term shall commence at the annual meeting of shareholders next following the retirement of such Chief Executive Officer. If a vacancy occurs in the Board of Directors prior to the end of what would have been a three-year term but for the provisions of this paragraph, the vacancy shall be filled for the balance of said three-year term in accordance with the provisions of Section 9 of this Article. SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without other notice than this By-law, immediately after the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the Chief Executive Officer or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors called by them. SECTION 5. NOTICE. Notice of any special meeting shall be given by written notice to each director at his business address. If mailed, such notice shall be given at least seven days prior to the meeting, and shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, or overnight delivery service, such notice shall be given at least three days prior to the meeting and shall be deemed to be delivered when, in the case of a telegram, it is delivered to the telegraph company, or in the case of overnight delivery service, it is delivered to the carrier. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the trans action of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. SECTION 6. QUORUM. A majority of the number of directors fixed by these By-laws shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, provided that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting at any time without further notice. The presence of a director who is directly or indirectly a party to a transac tion to be acted upon by the Board of Directors, or who is otherwise not disinterested, may be counted in determining whether a quorum is present, but the vote of such director may not be counted when the Board of Directors or a committee of the Board takes action on the transaction. SECTION 7. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by these By-laws or the Articles of Incorporation. Members of the Board of Directors or of any committee of the Board may participate in and act at a meeting through the use of a conference telephone or other communication equipment by means of which all persons participating in the meeting can hear each other. Participation in such meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating. SECTION 8. RESIGNATIONS. A director may resign at any time by giving written notice to the Board of Directors, its chairman, or to the President or Secretary of the corporation. A resignation is effective when the notice is given unless the notice specifies a future date. SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors, including any vacancy occurring by reason of an increase in the number of directors, shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose, provided that the Board of Directors may fill by appointment any such vacancy occurring between meetings of the shareholders. A director appointed by the Board of Directors pursuant to this Section to fill a vacancy shall serve until the next meeting of shareholders at which directors are to be elected. A director elected by the shareholders to fill a vacancy shall hold office for the balance of the term for which he or she was elected. SECTION 10. ACTION WITHOUT A MEETING. Any action required to be taken at a meeting of the Board of Directors, or any other action which may be taken at a meeting of the Board of Directors or a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be. The consent shall be evidenced by one or more written approvals, each of which sets forth the action taken and bears the signature of one or more directors. All such approvals shall be delivered to the Secretary to be filed in the corporate records. The action taken shall be effective when all the directors have approved the consent unless the consent specifies a different effective date. Any such consent signed by all the directors or all the members of a committee shall have the same effect as a unanimous vote, and may be stated as such in any document filed with the Secretary of State of Illinois or with anyone else. SECTION 11. COMPENSATION. The Board of Directors, by the affirmative vote of a majority of directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise. The directors shall be paid their expenses, if any, of attendance at each meeting of the Board. No such payment previously mentioned in this Section shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 12. REMOVAL OF DIRECTORS. If the notice of a meeting of shareholders shall state that a purpose of the meeting is to vote upon the removal of one or more directors named in the notice, then one or more of such directors may be removed at such meeting by the affirmative vote of the holders of a majority of the outstanding shares then entitled to vote at an election of directors. Only the named director or directors may be removed at such meeting and directors may only be removed for cause. SECTION 13. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless he or she (a) files his or her written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof, or (b) forwards such dissent by registered or certified mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent does not apply to a director who voted in favor of such action. SECTION 14. COMMITTEES. A majority of the directors may create one or more committees and appoint members of the Board to serve on the committee or committees. Each committee shall have two or more members, who serve at the pleasure of the Board. Each committee, to the extent specified by the Board of Directors, may exercise the authority of the Board of Directors in the management of the corporation, except as otherwise provided by law. Vacancies in the membership of the committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. Each committee shall render a report of its proceedings to the Board when required. Unless the resolution of appointment by the Board of Directors requires a greater number, a majority of any committee shall constitute a quorum, and a majority of a quorum shall be necessary for committee action. A committee may act by unanimous consent in writing without a meeting and, subject to the provisions of these By-laws or action of the Board of Directors, the committee by majority vote of its members shall determine the time and place of meetings and the notice required therefor. SECTION 15. NOMINATIONS OF DIRECTORS. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of shareholders (a) by or at the direction of the Board of Directors by any nominating committee or person appointed by the Board or, (b) by any shareholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 15. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary. To be timely, a shareholder's notice shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than sixty (60) days prior to the first anniversary of the date of the last annual meeting of shareholders. Such shareholder's notice to the Secretary shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the corporation which are beneficially owned by the person, and (iv) such other information relating to the person that would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission as then in effect; and (b) as to the shareholder giving the notice (i) the name and record address of the shareholder, and (ii) the class and number of shares of the corporation which are beneficially owned by the shareholder. If the Chairman of the meeting of shareholders shall determine that a nomination was not made in accordance with the foregoing procedure, he or she shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE IV OFFICERS SECTION l. NUMBER. The officers of the corporation shall be a Chairman of the Board (if one is elected by the Board of Directors), a Presi dent, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer, and a Secretary to be elected by the Board of Directors, and such Assistant Treasurers, Assistant Secretaries, Controller or other officers as may be elected by the Board of Directors or appointed by the Board of Directors or the Chief Executive Officer of the corporation. The Chief Executive Officer of the corporation shall be the Chairman of the Board or the President as designated by the Board of Directors. In the event that a Chairman of the Board is not elected, the President shall be the Chief Executive Officer. Any two or more offices may be held by the same person. SECTION 2. ELECTION AND TERM OF OFFICE. The elected officers of the corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as shall be convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided. Election or appointment of an officer shall not of itself create contract rights. SECTION 3. REMOVAL. Any elected officer may be removed by the Board of Directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any appointed officer may be similarly removed by either the Board of Directors or the Chief Executive Officer of the corporation. SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall have such duties and functions as shall be assigned or delegated to him or her from time to time by the Board of Directors. The chairman shall report to the Board of Directors, and shall preside at the meetings of the shareholders and of the Board of Directors. SECTION 5. PRESIDENT. Subject to the direction and control of the Board of Directors, the President shall be in charge of the business of the corporation; he or she shall see that the resolutions and directions of the Board of Directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the Board of Directors; and, in general, he or she shall discharge all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time. In the absence of the Chairman of the Board, the President shall preside at all meetings of the shareholders and of the Board of Directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws, the President may execute for the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, and may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument. The President may vote all securities which the corporation is entitled to vote except to the extent such authority shall be vested in a different officer or agent of the corporation by the Board of Directors. SECTION 6. THE VICE PRESIDENTS. Each Vice President shall assist the President in the discharge of his or her duties, as the President may direct, and shall perform such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors. In the absence of the President or in the event of his or her inability or refusal to act, the Vice President (or in the event there be more than one Vice Presi dent, the Vice Presidents in the order designated by the Board of Directors, or by the President if the Board of Directors has not made such a designation, or in the absence of any designation, then in the order of seniority of tenure as Vice President) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws, the Vice President (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, and he or she may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument. SECTION 7. THE TREASURER. Subject to the supervision of the Board of Directors and Chief Executive Officer, the Treasurer shall have the custody of all funds and securities of the corporation and charge of the collection of amounts due the corporation. He or she shall disburse the funds of the corporation only upon receipt of properly authorized vouchers and shall keep a record of all receipts and disbursements of funds by him or her. He or she shall have authority to give receipts for moneys paid to the corporation and to endorse checks, drafts and warrants in the name of the corporation. SECTION 8. THE SECRETARY. The Secretary shall: (a) record the minutes of the shareholders' and the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the President or a Vice President, or any other officer thereunto authorized by the Board of Directors, certificates for shares of the corporation, the issue of which shall have been authorized by the Board of Directors, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the Board of Directors or these By-laws; (f) have general charge of the stock transfer books of the corporation; and (g) perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors. The Secretary shall have the authority to certify the By-laws, resolutions of the shareholders and Board of Directors and committees thereof, and other docu ments of the corporation as true and correct copies thereof. SECTION 9. ASSISTANT TREASURERS, ASSISTANT SECRETARIES, CONTROLLER, AND OTHER OFFICERS. The Assistant Treasurers and Assistant Secretaries shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the President or the Board of Directors. The Assistant Secretaries may sign with the President, or a Vice President, or any other officer thereunto authorized by the Board of Directors, certificates for shares of the corporation, the issue of which shall have been authorized by the Board of Directors, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the Board of Directors or these By-laws. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Controller, if one be elected or appointed, shall be the principal accounting officer of the corporation and as such shall have and perform all duties normally incident to the office of principal accounting officer. The Assistant Treasurers, the Assistant Secretaries, the Controller and any other officers shall have and perform such other duties as may be assigned from time to time by the Board of Directors or the Chief Executive Officer of the corporation. SECTION 10. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors or, if authorized by the Board, by the Chief Executive Officer of the corporation. No officer shall be prevented from receiving any salary by reason of the fact that he or she is also a director of the corporation. ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION l. CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the Board of Directors may select. ARTICLE VI CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION l. CERTIFICATES FOR SHARES. Certificates representing shares of the corporation shall be signed by the President or a Vice President or by such officer as shall be designated by resolution of the Board of Directors and by the Secretary or an Assistant Secretary, and shall be sealed with the seal or a facsimile of the seal of the corporation. If both of the signatures of the officers be by facsimile, the certificate shall be manually signed by or on behalf of a duly authorized transfer agent or clerk. Each certificate representing shares shall be consecutively numbered or otherwise identified, and shall also state the name of the person to whom issued, the number and class of shares (with designation of series, if any), the date of issue, and that the corporation is organized under Illinois law. If the corporation is authorized and does issue shares of more than one class or of a series within a class, the certificate shall also contain such information or statement with respect thereto as may be required by law. The name and address of each shareholder, the number and class of shares held and the date on which the certificates for the shares were issued shall be entered on the books of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation. SECTION 2. LOST CERTIFICATES. If a certificate representing shares allegedly has been lost or destroyed, the Board of Directors may in its discretion, except as may be required by law, direct that a new certificate be issued upon such indemnification and other reasonable requirements as it may impose. SECTION 3. TRANSFERS OF SHARES. Transfers of shares of the corporation shall be recorded on the books of the corporation and, except in the case of a lost or destroyed certificate, shall be made only upon surrender for cancellation of the certificate for such shares. A certificate presented for transfer must be duly endorsed and accompanied by proper guaranty of signature and other appropriate assurances that the endorsement is effective. ARTICLE VII INDEMNIFICATION SECTION l. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. SECTION 2. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, provided that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation, unless, and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. SECTION 3. To the extent that a director, officer, employee or agent of the corporation has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Sections l and 2 of this Article, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. SECTION 4. Any indemnification under Sections l and 2 of this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case, upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section l or 2 of this Article. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or even if obtainable, if a quorum of disinterested direc tors so directs, by independent legal counsel in a written opinion, or (c) by the shareholders. SECTION 5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he or she is entitled to be indemnified by the corporation as authorized in this Article. SECTION 6. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article. SECTION 8. If the corporation has paid indemnity or has advanced expenses to a director, officer, employee or agent, the corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting. SECTION 9. For purposes of this Article, references to "the corporation" shall include, in addition to the surviving corporation, any merging corporation (including any corporation having merged with a merging corporation) absorbed in a merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers and employees or agents, so that any person who was a director, officer, employee or agent of such merging corporation, or was serving at the request of such merging corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the surviving corporation as such person would have with respect to such merging corporation if its separate existence had continued. SECTION 10. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner he or she reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article. ARTICLE VIII FISCAL YEAR The fiscal year of the corporation shall begin on the first day of January in each year and end on the last day of December in each year. ARTICLE IX DISTRIBUTIONS The Board of Directors from time to time may authorize, and the corporation may make, distributions to its shareholders in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. ARTICLE X SEAL The corporation shall have a corporate seal with the name of the corporation and the word "Illinois" inscribed about a circle and the phrase "Incorporated 1985" within such circle. Such seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE XI WAIVER OF NOTICE Whenever any notice is required to be given under the provisions of these By-laws, the Articles of Incorporation or the Business Corporation Act of 1983, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance at any meeting shall constitute waiver of notice thereof unless the person at the meeting objects to the holding of the meeting because proper notice was not given. ARTICLE XII AMENDMENTS In furtherance of, and not in limitation of, the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized and empowered to adopt, amend or repeal the By-laws (or any portion thereof) of the Corporation. The shareholders of the Corporation are authorized and empowered to adopt, amend or repeal the By-laws only by an affirmative vote of 75% of the shares outstanding and entitled to vote thereon. The By-laws may contain any provisions for the regulation and management of the affairs of the Corporation not inconsistent with law or the Articles of Incorporation. EX-13 4 [DESCRIPTION] Graph Data attached to EXHIBIT 13 Information related to the nine graphs included in the CILCORP Inc. Annual Report in Management@s Discussion and Analysis and Financial Statements follows. A bar graph titled "Fixed Charge Coverage (Scale: # of Times)" depicting the following information appears in the left hand column on Page 16 of Management's Discussion and Analysis. 1991 2.8 1992 2.4 1993 2.4 1994 2.6 1995 2.7 A bar graph titled "Utility Plant Expenditures (Scale: $ Millions)" depicting the following information appears in the right hand column on page 17 of Management's Discussion and Analysis. 1991 56 1992 62 1993 73 1994 91 1995 70 A bar graph titled "Electric Sales (Scale: Millions of kilowatt-hours)" depicting the following information appears in the right hand column on page 21 of Management's Discussion and Analysis. Each bar consists of four sections which build on one another. 1995 1994 1993 1992 1991 BAR 1 RESIDENTIAL 1,783 1,672 1,664 1,508 1,680 BAR 2 COMMERCIAL 1,537 1,470 1,396 1,327 1,318 CUMULATIVE 3,320 3,142 3,060 2,835 2,998 BAR 3 INDUSTRIAL 2,325 2,303 2,238 2,120 2,202 CUMULATIVE 5,645 5,445 5,298 4,955 5,200 BAR 4 OTHER 270 390 234 457 428 CUMULATIVE 5,915 5,835 5,532 5,412 5,628 A bar graph titled "Cooling Degree Days Per Year Compared to Normal" depicting the following information appears in the left hand column on page 22 of Management's Discussion and Analysis. A horizontal bar depicting normal cooling days is shown at approximately 1,059 days. 1991 1,344.0 1992 811.5 1993 1,056.0 1994 1,104.0 1995 1,222.0 A bar graph titled "Gas Sales (Scale: Millions of mcf)" depicting the following information appears in the right hand column on page 23 of Management's Discussion and Analysis. Each bar consists of three sections which build on one another. 1995 1994 1993 1992 1991 BAR 1 RESIDENTIAL 20,080 18,929 20,263 18,427 18,993 BAR 2 COMMERCIAL 7,374 6,686 6,748 6,205 6,371 CUMULATIVE 27,454 25,615 27,011 24,632 25,364 BAR 3 INDUSTRIAL 1,242 1,186 756 960 736 CUMULATIVE 28,696 26,801 27,767 25,592 26,100 A bar graph titled "Heating Degree Days Per Year Compared to Normal" depicting the following information appears in the right hand column on page 23 of Management's Discussion and Analysis. A horizontal bar depicting normal heating degree days is shown at approximately 5,930 days. 1991 5,410.5 1992 5,320.0 1993 5,882.0 1994 5,443.5 1995 5,920.5 Two pie charts titled "Consolidated Assets by Segment" as percentage of the whole by year are printed on page 28 below the Asset portion of the Balance Sheets. 1995 1995 1994 1994 Electric 761,336 59.9% 741,578 59.9% Gas 290,677 22.6% 275,428 22.3% Environmental and Engineering Services 87,952 6.9% 93,464 7.5% Other 136,106 10.6% 127,914 10.3% Total 1,276,071 100.0% 1,238,384 100.0% Two pie charts titled "Consolidated Capitalization Including Short-Term Debt" as percentages of the whole by year are printed on page 29 below the Liability portion of the Balance Sheets. 1995 1995 1994 1994 S-T Debt 66,152 8% 50,600 6% L-T Debt 344,113 41% 326,695 42% Preferred Stock 66,120 8% 66,120 8% Common Stock 361,978 43% 344,715 44% Total 838,363 100% 788,130 100% Three pie charts titled "Consolidated Revenue by Component" as percentages of the whole by year is printed on page 31 below the Statements of Segments of Business. 1995 1995 1994 1994 1993 1993 Electric 326,198 53% 313,085 52% 326,198 52% Gas 151,546 24% 148,285 24% 150,754 26% Environmental and Engineering Services 127,530 21% 132,799 22% 123,162 21% Other 9,466 2% 10,970 2% 7,471 1% Total 614,740 100% 605,139 100% 584,511 100% EX-3 5 CENTRAL ILLINOIS LIGHT COMPANY As Amended Effective April 1, 1995 ARTICLE I: LOCATION OF OFFICES Section 1 - Principal Office: The principal office of the Company shall be in the City of Peoria, Illinois, at such place as the Board of Directors may designate. Section 2 - Other Offices: The Company may have and maintain such other offices as the Board of Directors may deem expedient. ARTICLE II: CORPORATE SEAL Section 1 - The Company shall have a corporate seal with the name of the Company described about a circle and the words "Incorporated 1913 Illinois" within such circle. ARTICLE III: FISCAL YEAR Section 1 - The fiscal year of the Company shall begin with the first day of January and end with the thirty-first day of December of each year. ARTICLE IV: SHAREHOLDERS' MEETINGS Section 1 - Annual Meeting: The annual meeting of the shareholders shall be held at the principal office of the Company on the fourth Tuesday of April in each year if not a legal holiday, and if a legal holiday, then on the next day following which is not a legal holiday nor a Saturday or a Sunday. Such annual meeting shall commence at a time determined by the Board of Directors specified in a notice of such annual meeting sent to shareholders, which shall not be earlier than 9:00 AM, nor later than 3:00 PM, local time at the place of the meeting. Section 2 - Special Meetings: Unless otherwise provided by law, special meetings of the shareholders may be called by the Board of Directors, by the Chairman of the Board, by the President, by the Secretary under the written direction of a majority of the Directors, or by shareholders holding not less than one-fifth of the total capital stock. Such meetings shall be held at the principal office of the Company, or if the Board of Directors or the Chairman of the Board or the President shall designate another place, then at such other place as may be so designated. Section 3 - Notices: Written notice of either annual or special meetings shall be mailed at least ten days prior to the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets at least twenty days prior to the meeting, to each shareholder at his last known address as the same appears on the stock books of the Company. Such notice shall specify the time and place of holding the meeting and shall further specify the dates for closing and opening the stock transfer books of the Company, provided the Board of Directors shall have ordered them closed. Notices of special meetings shall further specify the purpose for which the meeting is called and no other business shall be transacted at such special meeting. No notice of a special meeting shall be necessary provided every shareholder shall have signed a written waiver of such notice or shall be present or represented by proxy at the meeting. No notice of the holding of an adjourned meeting shall be necessary. Section 4 - Quorum: The holders of a majority of the stock of the Company issued and outstanding shall constitute a quorum for the transaction of business at any meeting but a less number may convene and adjourn. Section 5 - Voting: Shareholders may vote at all meetings in person or by proxy. At all meetings, each share of stock shall be entitled to one vote on all questions and a majority of the votes cast at any such meeting shall be sufficient for the adoption or rejection of any question presented, unless otherwise provided by law. In the election of Directors, each shareholder shall have the right to cast as many votes in the aggregate as shall equal the number of shares of stock held by such shareholder, multiplied by the number of Directors to be then elected, and each shareholder may cast the whole number of votes for one candidate or distribute them among two or more candidates. ARTICLE V: DIRECTORS Section 1 - Number: The Board of Directors of this Company shall consist of eleven members. Section 2 - Election: The Directors shall be elected annually at the annual meeting of the shareholders, provided that in the event of failure to hold such meeting or to hold said election thereat, it may be held at any special meeting of shareholders called for that purpose. Unless sooner terminated by any other provision hereof, the term of any director shall automatically expire at the first annual meeting of the shareholders following his or her attainment of the age of 67. Provided, however, that the term of any director serving in such capacity and over the age of 60 on August 20, 1993 shall automatically expire at the first annual meeting of the shareholders following his or her attainment of the age of 70. No Director who is an officer or full-time employee of the Company, except the Chief Executive Officer, shall be re-elected to the Board after retirement. The Chief Executive Officer may be re-elected as a Director for one full term after retirement. The Chief Executive Officer may appoint inspectors or judges for such election who shall pass upon the validity of all proxies, receive and count the votes cast, and make a report thereof to the shareholders' meeting. Section 3 - Term of Office: The Directors shall hold office from the date of their election until the next succeeding annual meeting or until their successors are elected and shall qualify. Section 4 - Vacancies: Any vacancy occurring in the Board of Directors and any directorship to be filled by reason of an increase in the number of Directors shall be filled in the manner provided by the laws of Illinois then in effect. Section 5 - Fees: Directors shall be reimbursed for expenses, if any, incurred in attending meetings of the Board of Directors and in otherwise performing duties of such Directors. Directors' fees shall be fixed by the Board of Directors, provided that any Director who receives compensation from the Company as an officer or full-time employee shall not receive Director's fees. Section 6 - Executive or Other Committees: The Board of Directors may authorize appointment of an Executive Committee or other committees of the Board as the Board of Directors determines to be desirable, and may fix the number of members and designate the chairman of each such committee. The powers, terms of office, and method of filing vacancies shall be as defined in the resolution or resolutions of the Board of Directors relating to the authorization of such committees. Each such committee shall make a written report or recommendation following its meetings or keep minutes of all of its meetings. ARTICLE VI: DIRECTORS' MEETINGS Section 1 - Regular Meetings: Regular meetings of the Board of Directors shall be held at the principal office of the Company or at such other place or places, within or without the State of Illinois, at such time and day as the Board of Directors may designate. Section 2 - Special Meetings: Unless otherwise provided by law, special meetings of the Board of Directors may be held at any time, at the principal office of the Company or elsewhere, within or without the state. The Secretary or Assistant Secretary shall call a special meeting whenever so requested by the Chairman of the Board, the President, a Vice President, or by three Directors. Section 3 - Organization Meeting: As soon as possible after their election, the Board of Directors shall meet and organize and they may also transact such other business as may be presented, provided the same shall receive the affirmative votes of a majority of the constituent membership of the Board. Section 4 - Notice: No notice shall be required for a regular meeting. No notice shall be required for an "Organization Meeting," if held on the same day as the shareholders' meeting at which the Directors were elected. No notice of the holding of an adjourned meeting shall be necessary. A reasonable notice of special meetings, in writing or otherwise, shall be given to each Director or sent to his residence or place of business. Notice of special meeting shall specify the time and place of holding the meeting and, unless otherwise stated, any and all business may be transacted at such special meeting. Notice of any meeting may be waived in writing. Section 5 - Quorum: At all meetings of the Board of Directors, a majority shall constitute a quorum, but a less number may convene and adjourn. Section 6 - Voting: All questions coming before any meeting of the Board of Directors for action shall be decided by a majority vote of the Directors present at said meeting, unless otherwise provided by law or by these Bylaws. ARTICLE VII: OFFICERS Section 1 - General: The principal officers of the Company shall be elected by the Board of Directors. They shall include a President, one or more Vice Presidents, one or more of whom may be designated as Executive or Senior Vice President, one or more Assistant Vice Presidents, a Secretary and a Treasurer, and may include a Chairman of the Board. The Board of Directors may appoint or remove such other officers and agents of the Company as it may deem proper or may delegate such authority to the Chief Executive Officer. The Chief Executive Officer of the Company shall be the President or Chairman of the Board, as designated by the Board of Directors. In the event that a Chairman of the Board has not been elected, the President shall be the Chief Executive Officer. Section 2 - Qualifications: The Chairman of the Board, if one is elected, and the President shall be chosen from among the Board of Directors. Section 3 - Election: The principal officers shall be elected annually at the organization meeting of the Directors, provided that any such officers not elected at such meeting may be elected at any succeeding meeting of the Directors. Section 4 - Term of Office: The principal officers shall hold office from the date of their election until the next succeeding organization meeting of Directors or until their successors are elected and shall qualify, provided that the Directors shall at all times have the power to remove any officer, when in their judgment such removal may be to the best interests of the Company. Section 5 - Vacancies: Any vacancy or vacancies among the officers, arising from any cause, shall be filled by the Directors as provided above. Section 6 - Compensation: The compensation of the principal officers shall be fixed by the Board of Directors. The compensation of other officers shall, in the absence of any action by the Board of Directors, be fixed by the Chief Executive Officer. Section 7 - Combining Offices: Except to the extent otherwise provided by law, any two or more of such offices may be held by the same person but no officer shall execute, acknowledge, or verify any instrument in more than one capacity if such instrument is required by law or by the Bylaws to be executed, acknowledged, or verified by any two or more officers. ARTICLE VIII: AGENTS Section 1 - Depositories: The funds of the Company, from any source, shall be deposited in the name of the Company with such depositories as may be designated by the Board of Directors. ARTICLE IX: POWERS AND DUTIES Section 1 - Directors: The Board of Directors shall have and exercise all power and authority in the government of the affairs of the Company except where specifically excepted by law or by these Bylaws. Section 2 - Chairman of the Board: The Chairman of the Board, if one is elected, shall preside at all meetings of the shareholders and the Board of Directors. He shall do and perform all acts and things incident to the position of Chairman of the Board and such other duties as may be assigned to him by the Board of Directors. Section 3 - President: The President shall have the general control and management of the business and affairs of the Company, subject, however, to the supervision of the Board of Directors. He shall perform and do all acts and things incident to the position of President and such other duties as may be assigned to him by the Board of Directors. In the absence or disability of the Chairman of the Board, or if a Chairman of the Board has not been elected, he shall have and exercise all of the powers and duties of that office. He shall appoint such agents and employees as he may deem necessary for the proper conduct of the business of the Company and shall prescribe their duties and fix their compensation, provided that the Board of Directors shall at all times have the power to remove any agent or employee, when, in their judgment, such removal may be to the best interest of the Company. Section 4 - Vice Presidents: The Vice Presidents shall perform such of the duties of the President and such other duties on behalf of the Company as may be respectively assigned to them by the Board of Directors, or the Chief Executive Officer. In the absence or disability of the President or in the case of his death, resignation, or removal from office, the powers and duties of the President shall temporarily pass to such one of the Vice Presidents as the Board of Directors shall have designated or shall designate, and the Vice President so designated shall have and exercise all the powers and duties of the President during such absence or disability or until the vacancy in the office of President shall be filled. Section 5 - Assistant Vice Presidents: The Assistant Vice Presidents shall perform such of the duties of the Vice Presidents and such other duties on behalf of the Company as may be respectively assigned to them by the Board of Directors, the Chief Executive Officer or a Vice President who would otherwise perform such duties. Section 6 - Secretary: Subject to the supervision of the Board of Directors and the Chief Executive Officer, the Secretary shall have the custody of the corporate seal and records of the Company and shall prepare and file all reports required by law to be made to any and all public authorities and officials. He shall act as Secretary at meetings of the shareholders and Directors and shall be responsible for keeping and recording the minutes of all meetings in a suitable minute book and shall attend to publishing, giving, and serving all official notices of the Company. He shall be responsible for keeping the capital stock records. He shall perform such other duties as may be assigned to him by the Board of Directors and the Chief Executive Officer. Section 7 - Treasurer: Subject to the supervision of the Board of Directors and Chief Executive Officer, the Treasurer shall have the custody of all funds and securities of the Company and charge of the collection of amounts due the Company. He shall disburse the funds of the Company only upon receipt of properly authorized vouchers and shall keep a record of all receipts and disbursements of funds by him. He shall have authority to give receipts for moneys paid to the Company and to endorse checks, drafts, and warrants in the name of the Company. He shall perform such other duties as may be assigned to him by the Board of Directors and Chief Executive Officer. Section 8 - Other Officers and Agents: The powers and duties of such other officers and agents shall be prescribed by the Board of Directors or the Chief Executive Officer. ARTICLE X: STOCK Section 1 - Stock Certificates: The shares of stock of the Company shall be represented by certificates signed by the President or a Vice President and the Secretary or an Assistant Secretary and sealed with the seal of the Company. Such seal may be a facsimile. Where such certificate is countersigned by a Transfer Agent other than the Company itself or an employee of the Company, or by a Transfer Clerk and registered by a Registrar, the signatures of the President or Vice President and the Secretary or Assistant Secretary upon such certificate may be facsimiles engraved or printed. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Company with the same effect as if such officer had not ceased to be such at the date of its issue. Section 2 - Stock Transfer Books: The stock shall be transferable on the stock transfer books of the Company in person or by proxy duly authorized, and upon surrender and cancellation of the old certificates therefor. Section 3 - Replacing Certificates: In case of the loss or destruction of any certificate of stock and the submission of proper proof thereof by the owner, a new certificate may be issued in lieu thereof under such regulations and restrictions as the Board of Directors may prescribe. ARTICLE XI: DIVIDENDS Section 1 - The Directors may declare, from the net profits or surplus of the Company, dividends upon its capital stock, payable at such times and for such amounts as they may determine in conformity with the Articles of Incorporation of the Company, as amended, and the laws of the State of Illinois. ARTICLE XII: AUTHORIZED SIGNATURES Section 1 - All checks, drafts, and other negotiable instruments issued by the Company shall be made in the name of the Company and shall be signed by such officer or officers of the Company, or by such other person or persons as the Board of Directors may designate. To the extent authorized by the Board of Directors, facsimile signatures may be used. ARTICLE XIII: FIDELITY BONDS Section 1 - The officers and employees of the Company shall, in the discretion of the President, give bonds for the faithful discharge of their respective duties, in such form and for such amounts as may be directed by the President. ARTICLE XIV: AMENDMENTS Section 1 - The Bylaws of the Company may be altered, amended, or repealed by either the shareholders or the Board of Directors. ARTICLE XV: INDEMNIFICATION Section 1 - The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he or she is or was a director, officer, employee or agent of the Company, or who is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. Section 2 - The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company, provided that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Company, unless, and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. Section 3 - To the extent that a director, officer, employee or agent of the Company has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Sections l and 2 of this Article, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. Section 4 - Any indemnification under Sections l and 2 of this Article (unless ordered by a court) shall be made by the Company only as authorized in the specific case, upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section l or 2 of this Article. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the shareholders. Section 5 - Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he or she is entitled to be indemnified by the Company as authorized in this Article. Section 6 - The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 7 - The Company shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of this Article. Section 8 - If the Company has paid indemnity or has advanced expenses to a director, officer, employee or agent, the Company shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting. Section 9 - For purposes of this Article, references to "the Company" shall include, in addition to the surviving Company, any merging Company (including any Company having merged with a merging Company) absorbed in a merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers and employees or agents, so that any person who was a director, officer, employee or agent of such merging Company, or was serving at the request of such merging Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the surviving Company as such person would have with respect to such merging Company if its separate existence had continued. Section 10 - For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner he or she reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Article. EX-25 6 January 31, 1996 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, 1995 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______________________ R. O. Viets, President Power of attorney related to execution and filing of CILCORP Inc. 1995 annual report on Form 10-K. ____________________________________ __________________________________ M. Alexis K. E. Smith ____________________________________ __________________________________ J. R. Brazil R. N. Ullman ____________________________________ _________________________________ W. Bunn III R. O. Viets ____________________________________ __________________________________ D. E. Connor M. M. Yeomans ____________________________________ __________________________________ H. J. Holland J. L. Barnett ____________________________________ H. S. Peacock Extract from Minutes of the Board of Directors of CILCORP Inc. held January 30, 1996 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, 1995 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 may 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 January 29, 1996, 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 8th day of March, 1996. ____________________________________ John G. Sahn (S E A L) EX-25 7 January 29, 1996 Mr. R. O. Viets Mr. T. S. Romanowski 300 Hamilton Blvd. 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, 1995 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_________________________ R. O. Viets, Chairman and Chief Executive Officer January 29, 1996 Power of attorney related to execution and filing of Central Illinois Light Company 1995 annual report on Form 10-K. ________________________________ ______________________________ M. Alexis R. W. Slone ________________________________ ______________________________ J. R. Brazil K. E. Smith ________________________________ _______________________________ W. Bunn III R. N. Ullman ________________________________ _______________________________ D. E. Connor J. F. Vergon ________________________________ _______________________________ W. M. Shay R. O. Viets ________________________________ _______________________________ T. S. Romanowski M. M. Yeomans ________________________________ R. L. Beetschen Extract from Minutes of Meeting of the Board of Directors of Central Illinois Light Company held January 29, 1996 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, 1995 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. F. Vergon, 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 January 29, 1996, 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 8th day of March, 1996. ____________________________________ John G. Sahn (S E A L) EX-27 8
OPUR1 0000762129 CILCORP INC. 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 PER-BOOK 887,747 157,231 185,493 45,600 0 1,276,071 179,330 0 182,648 361,978 22,000 44,120 344,113 22,500 0 24,600 19,052 0 3,025 371 434,312 1,276,071 614,740 23,274 519,615 542,889 71,851 0 71,742 29,861 41,881 3,299 38,582 32,308 20,242 90,789 2.93 2.93
EX-27 9
OPUR1 0000018651 CENTRAL ILLINOIS LIGHT COMPANY 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 PER-BOOK 887,747 3,547 147,766 20,931 0 1,059,991 185,661 0 140,814 326,475 22,000 44,120 298,397 0 0 24,600 16,000 0 3,025 371 325,003 1,059,991 477,744 23,267 390,929 414,196 63,548 2,055 65,506 23,108 42,398 3,299 39,099 20,056 20,242 80,878 0 0
EX-10 10 [DESCRIPTION] This document is Exhibit (10) for both CILCORP Inc. and CILCO CENTRAL ILLINOIS LIGHT COMPANY EXECUTIVE DEFERRAL PLAN (EDP) December 1, 1985 as amended February 22, 1994 and January 29, 1996 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. 1.5(a) "Continuing Director" means any member of the Board of the Company or of its majority shareholder (hereinafter the "Board"), while such person is a member of the Board, who was a member of the Board prior to January 29, 1996. A "Continuing Director" also means any person who subsequently becomes a member of the Board, while such person is a member of the Board, if such person's nomination for election or election to the Board is recommended or approved by resolution of a majority of the Continuing Directors. 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. 1.12(a) "Hostile Takeover" shall mean the acquisition of beneficial ownership (determined in accordance with Rule 13(d)-3 of the Exchange Act) directly or indirectly, of more than 30% of the voting power of the outstanding stock of the Company or its majority shareholder by any person coupled with or followed by the failure of Continuing Directors to constitute a majority of the Board." 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 Participant'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 Participant'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 participation 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. EX-10 11 [DESCRIPTION] This document in Exhibit (10)a for both CILCORP Inc. and CILCO. EXECUTIVE DEFERRAL PLAN II OF CENTRAL ILLINOIS LIGHT COMPANY (EDP II) December 1, 1989 AMENDED January 29, 1996 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. . . . . . . . . . . . . . . . . 3 3.1 Minimum Deferral. . . . . . . . . . . . . . . . . . . . . . 3 3.2 Maximum Deferral. . . . . . . . . . . . . . . . . . . . . . 3 3.3 Deferral Election. . . . . . . . . . . . . . . . . . . . . 3 3.4 Changing Deferral Election . . . . . . . . . . . . . . . . 3 3.5 Withholding of Deferral Amounts. . . . . . . . . . . . . . 3 3.6 Annual Rate. . . . . . . . . . . . . . . . . . . . . . . . 4 3.7 Deferral Period. . . . . . . . . . . . . . . . . . . . . . 4 3.8 Default. . . . . . . . . . . . . . . . . . . . . . . . . . 4 3.9 Deferral Penalty In the Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 4 3.10 No Waiver of Default . . . . . . . . . . . . . . . . . . . 4 3.11 Crediting of Deferral Amounts. . . . . . . . . . . . . . . 4 Article IV - 5th-Year Distribution . . . . . . . . . . . . . . . . . 4 4.1 5th-Year Distribution. . . . . . . . . . . . . . . . . . . 4 Article V - Retirement Benefit. . . . . . . . . . . . . . . . . . . 4 5.1 Retirement Benefit . . . . . . . . . . . . . . . . . . . . 4 5.2 Rate of Interest for Retirement Benefits. . . . . . . . . . 5 5.3 Commencement of Retirement Benefits. . . . . . . . . . . . 5 5.4 Pre-Retirement Plan Agreements. . . . . . . . . . . . . . . 5 5.5 Amount of Retirement Benefit. . . . . . . . . . . . . . . . 5 5.6 Death Prior to Completion of Retirement Benefits . . . . . . . . . . . . . . . . . . . 5 Article VI - Survivor Benefits. . . . . . . . . . . . . . . . . . . 6 6.1 Survivor Benefit. . . . . . . . . . . . . . . . . . . . . . 6 6.2 Amount of Survivor Benefits. . . . . . . . . . . . . . . . 6 Article VII - Termination Benefit. . . . . . . . . . . . . . . . . . 6 7.1 Termination Benefits . . . . . . . . . . . . . . . . . . . 6 Article VIII - Disability Benefit. . . . . . . . . . . . . . . . . . 6 8.1 Amount of Disability Benefit. . . . . . . . . . . . . . . . 6 Article IX - Beneficiary Designation. . . . . . . . . . . . . . . . 6 9.1 Beneficiary Designation. . . . . . . . . . . . . . . . . . 6 9.2 Change of Beneficiary Designation. . . . . . . . . . . . . 6 9.3 No Participant Designation. . . . . . . . . . . . . . . . . 6 9.4 Effect of Payment. . . . . . . . . . . . . . . . . . . . . 7 Article X - Leave of Absence. . . . . . . . . . . . . . . . . . . . 7 10.1 Paid Leave of Absence. . . . . . . . . . . . . . . . . . . 7 10.2 Unpaid Leave of Absence . . . . . . . . . . . . . . . . . 7 Article XI - Other Benefits and Agreements. . . . . . . . . . . . . 7 11.1 Coordination With Other Benefits. . . . . . . . . . . . . 7 11.2 Restoration of Pension Benefits . . . . . . . . . . . . . 7 Article XII - Discontinuance, Amendment or Termination. . . . . . . 8 12.1 Discontinuance . . . . . . . . . . . . . . . . . . . . . . 8 12.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 8 12.3 Termination. . . . . . . . . . . . . . . . . . . . . . . . 8 Article XIII - Miscellaneous. . . . . . . . . . . . . . . . . . . . 8 13.1 Unsecured General Creditor. . . . . . . . . . . . . . . . 8 13.2 Nonassignability. . . . . . . . . . . . . . . . . . . . . 8 13.3 Not a Contract of Employment. . . . . . . . . . . . . . . 9 13.4 Protective Provisions. . . . . . . . . . . . . . . . . . . 9 13.5 Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 13.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . 9 13.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 9 13.8 Validity . . . . . . . . . . . . . . . . . . . . . . . . . 9 13.9 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 9 13.10 Successors. . . . . . . . . . . . . . . . . . . . . . . 10 13.11 Attorney Fees. . . . . . . . . . . . . . . . . . . . . . 10 13.12 Late Payment Penalty. . . . . . . . . . . . . . . . . . 10 13.13 Incompetent . . . . . . . . . . . . . . . . . . . . . . 10 Article XIV - Administration. . . . . . . . . . . . . . . . . . . . 10 14.1 Committee Duties. . . . . . . . . . . . . . . . . . . . . 10 14.2 Agents. . . . . . . . . . . . . . . . . . . . . . . . . . 11 14.3 Binding Effect of Decisions. . . . . . . . . . . . . . . 11 14.4 Indemnity of Committee. . . . . . . . . . . . . . . . . . 11 14.5 Employer Information. . . . . . . . . . . . . . . . . . . 11 14.6 Change in Payments. . . . . . . . . . . . . . . . . . . . 11 EXECUTIVE DEFERRAL PLAN II OF CENTRAL ILLINOIS LIGHT COMPANY Purpose The primary purpose of the Executive Deferral Plan II 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., selected officers, department heads, and other key employees reporting to executive officers) will be allowed to participate in the Executive Defer- ral Plan II. 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 II, contribute significantly to the health and wellbeing 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, persons, or the entity designated 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 14. 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 1986, as amended, and all successor companies thereto. 1.4(a) "Continuing Director" means any member of the Board of the Company or of its majority shareholder (hereinafter the "Board"), while such person is a member of the Board, who was a member of the Board prior to January 29, 1996. A "Continuing Director" also means any person who subsequently becomes a member of the Board, while such person is a member of the Board, if such person's nomination for election or election to the Board is recommended or approved by resolution of a majority of the Continuing Directors. 1.5 "Covered Salary" shall mean a Participant's Base Annual Salary and bonuses. 1.6 "Deferral Amount" shall mean the amount of Covered Salary deferred by a Participant pursuant to his election in the form of a Plan Agreement, or as changed pursuant to Article 3.4 hereof. 1.7 "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. 1.8 "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 the Participant is unable to perform the duties of his occupation. 1.9 "EDP II Account" shall mean an individual account comprised of a Participant's Deferral Amounts and interest credited thereon. An EDP II Account shall be maintained for each Participant. A Participant's EDP II Account shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan. A Participant's EDP II Account shall not constitute or be treated as a trust fund. 1.10 "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. 1.11 "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. 1.11(a) "Hostile Takeover" shall mean the acquisition of beneficial ownership (determined in accordance with Rule 13(d)-3 of the Exchange Act) directly or indirectly, of more than 30% of the voting power of the outstanding stock of the Company or its majority shareholder by any person coupled with or followed by the failure of Continuing Directors to constitute a majority of the Board." 1.12 "Moody's Seasoned Corporate Bond Rate" (Moody's) shall mean an economic indicator which is an arithmetic average of yields of representative Aaa, Aa, and Baa bonds for industrials and public utilities. 1.13 "Participant" shall mean any Executive who elects to participate in the Plan by executing a Plan Agreement. 1.14 "Plan" shall mean the Executive Deferral Plan II of the Employer which shall be evidenced by this instrument and by each Plan Agreement, as amended from time to time. 1.15 "Plan Agreement" shall mean the form of written agreement, as amended from time to time, which is entered into by and between and Employer and a Participant. 1.16 "Plan Anniversary Date" shall be the last day of the Plan Year. 1.17 "Plan Year" shall mean the 12 consecutive month period commencing on January I and ending on the next following December 31. 1.18 "Retirement" and 'Retire' shall mean severance from employment with the Employer at or after the attainment of age fifty-five (55). 1.19 "Retirement Benefit Date" shall mean the date that the Retired Participant first receives Retirement benefits under the Plan. 1.20 "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 discretion 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. 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 $1.00 per Plan Year. 3.2 Maximum Deferral. The Participant may defer no more than 100% of Covered Salary or board fees, as applicable. 3.3 Deferral Election. The Participant may elect to participate in the Plan by executing a Plan Agreement. If the Participant executes a Plan Agreement on or before December 15, the Participant's Deferral Period shall begin on January 1 of the following Plan Year. However, if a Participant was participating in the Company's Executive Deferral Plan dated December 1, 1985, the Participant may begin his initial Deferral Period for this Plan on the December 1 immediately following the completion of his Deferral Period in that Plan by executing a Plan Agreement hereunder by December 1 of that year. 3.4 Changing Deferral Election. A Participant may change his Deferral Amount for any following Plan Year by providing the Employer with written notice of such change by December 15. 3.5 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. 3.6 Annual Rate. The Moody's rate for any Plan Year shall be fixed 90 days prior to the beginning of the Plan Year. Subject to the provisions and limitations of the Plan, the EDP II Account will accrue annual interest at a crediting rate of Moody's. Interest shall accrue monthly on a Participant's EDP II Account balance. 3.7 Deferral Period. The Deferral Period for each Participant shall be that individual's full time employment term, or directorship, with the Company. 3.8 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. 3.9 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. 3.10 No Waiver of Default. The Committee may not waive any default penalty set forth in Section 3.9. 3.11 Crediting of Deferral 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 II Account throughout each Plan Year as the Participant is paid the nondeferred portion of Covered Salary for such Plan Year. The amount or perc- entage of Covered Salary so credited to a Participant's EDP II Account shall equal the amount deferred. The Participant shall designate in the Plan Agreement the percentage of Covered Salary to be deferred. Article 4 5th Year Distributions 4.1 5th-Year Distribution. A Participant may elect in writing, at the time of the execution of his Plan Agreement, to receive a distribution of all, or any percentage, of his EDP II Account, as it exists as of the distribution date, on January 15, 1995, January 15, 2000, January 15, 2005 and January 15, 2010. All other funds in the EDP II Account will remain in the Plan until the Participant dies, incurs a Disability, Retires or incurs a Termination of Employment. Article 5 Retirement Benefit 5.1 Retirement Benefit. A Participant who Retires shall become eligible to receive, in accordance with this Article 5, an amount per month based on his EDP II Account as of the Participant's Retirement Benefit Date. The Retirement Benefit Date of a Participant who Retires shall be the first day of the month following his Retirement. 5.2 Rate of Interest for Retirement Benefits. The interest on the EDP II Account, for purposes of calculating the retirement benefit, 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 preceding Plan Years. 5.3 Commencement of Retirement Benefits. Unless otherwise provided pursuant to a Pre-Retirement Plan Agreement as provided in Section 5.4, Retirement benefit payments of a Participant shall commence on the first day of the month following the Retirement of the Participant and shall be paid at the Participant's election in a lump sum or in equal monthly payments, not to exceed 240 months, pursuant to the election made by the Participant at the time of the execution of his Plan Agreement. Not less than thirty (30) days before his Retirement, the Participant must inform the Committee in writing of any desired change in the benefit payment period over which his benefits are to be paid. If no change in the election is timely made, the Plan will pay benefits pursuant to the Participant's Plan Agreement election. 5.4 Pre-Retirement Plan Agreements. A Participant may enter into a Pre-Retirement Plan Agreement whereby the Participant and the Employer agree to a change of the time period over which such benefits are to be paid. The Pre-Retirement Plan Agreement must be executed by the Participant in writing in a form acceptable to the Company not less than 30 days prior to the Participant's Retirement. Retirement benefit payments which are changed by reason of a Pre-Retirement Agreement shall be paid to the Participant commencing on the first day of the month following the Retirement of the Participant pursuant to the terms of the Pre-Retirement Plan Agreement (the Retirement Benefit Date) in a lump sum or in equal monthly payments, not to exceed 240 months, as selected by the Participant. 5.5 Amount of Retirement Benefit. A Participant's Retirement benefits shall be equal to the balance of his EDP II Account as of his Retirement Benefit Date plus interest thereon at the rate set forth in Article 5.2 hereof on any undistributed balance. 5.6 Death Prior to Completion of Retirement Benefits. If a Retired Participant 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 shall be paid to the Participant's Beneficiary in the same manner as selected by the Participant. Article 6 Survivor Benefits 6.1 Survivor Benefit. If a Participant dies before the commencement of Retirement benefit payments, the Employer will pay a Survivor's Benefit to the designated Beneficiary of the Participant. 6.2 Amount of Survivor Benefits. The Beneficiary eligible for a Survivor Benefit will receive in a lump sum as soon as practicable the existing EDP II Account balance. Article 7 Termination Benefit 7.1 Termination Benefits. If the Participant incurs a Termination of Employment, by means other than Retirement, Disability or death, such Participant shall receive in a lump sum his EDP II Account. Such amount shall be paid to the Participant within 90 days of the date of his Termination of Employment. Article 8 Disability Benefit 8.1 Amount of Disability Benefit. If the Committee determines that a Participant has a Disability, the Participant shall receive in a lump sum his EDP II Account. Such amount shall be paid to the participant within 90 days of the date that the Committee determines that the Participant is disabled. Article 9 Beneficiary Designation 9.1 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). 9.2 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 designations previously filed. The Committee shall be entitled to rely on the last designation filed by the Participant prior to his death. 9.3 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 representative (executor or administrator of the Participant's estate). 9.4 Effect of Payment. The payment of benefits under the Plan to the deemed Beneficiary shall completely discharge the Employer's obligations under this Plan. Article 10 Leave of Absence 10.1 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 Amount for the Deferral Period shall remain in full force and effect during such leave of absence. 10.2 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 Amount shall be suspended and shall be considered a Default pursuant to Section 3.8. Article 11 Other Benefits and Agreements 11.1 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 otherwise be expressly provided. 11.2 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 1986, as amended. Therefore, 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 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 payments which would otherwise have been made under the Pension Plan. Article 12 Discontinuance, Amendment or Termination 12.1 Discontinuance. The Company reserves the right to discontinue the Plan at any time. Upon discontinuance of the Plan, the Participants' EDP II Accounts shall be paid out according to the Plan. 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. 12.2 Amendment. The Company may, at any time, amend or modify the Plan in whole or in part, provided, however, that no amendment or modification shall adversely affect any EDP II 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 Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification. 12.3 Termination. The Company reserves the right, in the event of a hostile or nonnegotiated takeover or acquisition of the Company, or upon a final decision of any court or administrative agency pertaining 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 Participants' EDP II Accounts to them as soon as practicable thereafter. Article 13 Miscellaneous 13.1 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. 13.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, 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 insolvency. 13.3 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. 13.4 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. 13.5 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. 13.6 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. 13.7 Governing Law. The provisions of this Plan shall be construed and interpreted according to the laws of the State of Illinois. 13.8 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. 13.9 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 II 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. 13.10 Successors. The provisions of this Plan shall bind and inure to the benefit and detriment 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. 13.11 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. 13.12 Late Payment Penalty. In the event that the Company fails or refuses to make any of the payments to a Participant or a Beneficiary 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 from the date such payment was due until the date such payment is made by the Company. 13.13 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 appropriate 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 14 Administration 14.1 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 and discretion 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 and the calculation of benefits, as may arise in connection with the Plan. 14.2 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. 14.3 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. 14.4 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. 14.5 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, Disability, death or Termination of Employment of all Participants, and such other pertinent information as the Committee may reasonable require. 14.6 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. EX-10 12 [DESCRIPTION] This is exhibit (10)d to CILCO's Exhibits CENTRAL ILLINOIS LIGHT COMPANY EVA-BASED INCENTIVE COMPENSATION PLAN Central Illinois Light Company (hereinafter "CILCO") EVA-BASED INCENTIVE COMPENSATION PLAN adopted by the Board of Directors of CILCO this 29th day of January 1991. ARTICLE I Statement of Purpose 1.1 The purpose of the PLAN is to provide an incentive to officers and employees of CILCO to increase and maintain shareholder value by rewarding the achievement of this objective. ARTICLE II Definitions Unless the context provides a different meaning, whenever used in this PLAN, the following terms shall have the following meanings: 2.1 "Award" means the amount of money credited annually to the award bank of each Participant in accordance with the terms and conditions of the PLAN. 2.2 "Bank" means the account maintained for each PLAN Participant which includes the award(s) credited annually to the participant plus interest earned thereon. 2.3 "Board" means the Board of Directors of the Company. 2.4 "Capital" means, except where specifically noted on a Schedule attached hereto pertaining to each Participating Unit, the following components of Capital for each participating Unit of the Company: Current Assets Less: Non-interest bearing current liabilities Plus: Long Term Assets Less: Construction in Progress (CWIP) Accumulated Depreciation Accumulated Deferred Taxes Plus: Adjustments (if they exist) LIFO Reserve Present Value of Noncapitalized Leasesa Cumulative Amortization of Goodwill Cumulative FAS-90 Writedown Less: Deferred Expenses & Payments Notes: a. Minimum lease commitments discounted at long-term borrowing rate 2.5 "Capital Asset pricing Model" or "CAPM" is a method for calculation of the cost of capital 2.6 "Committee" means the Compensation Committee of the Board of Directors of the Company or such other committee to which the Board has delegated the responsibility for administering the PLAN. 2.7 "Company" means Central Illinois Light Company ("CILCO"). 2.8 "Cost of Capital" or "C*" means the weighted average of the (after tax) cost of debt, common equity and preferred equity for the year in question. The Capital Asset pricing Model (CAPM) is used to estimate equity costs. Cost of Capital is calculated on a quarterly basis. A Schedule attached hereto sets forth the methodology for calculation of the Cost of capital. Cost of Capital is the same as "required return. 2.9 "Discretionary Award" has the meaning given at Paragraph 5.3 hereof. 2.10 "Economic value added" or "EVA" is an amount equal to the difference between the return management actually earns on capital and Cost of Capital. It is calculated as follows: EVA - (return earned - Cost of capital) x capital 2.11 "Employee" means a person who is employed by the Company. 2.12 "Established Award" has the meaning given at Paragraph 5.2 hereof. 2.13 "Improvement Award" means a percent of each year's increase in EVA. 2.14 "Maintenance Award" means a percent of a moving three-year average of the level of EVA. 2.15 "Net operating profit after tax" or "NOPAT" means the adjusted cash earnings attributable to the capital employed in the participating Unit for the Plan year to date. The components of NOPAT are as follows: operating Revenuesa Less: Operating Expenses Depreciation Expenses Sales, General and Administrative Expenses Non-Operating Incomea Cash Taxes on Operating Profitsb Plus: Goodwill Amortization Expense Plus: Increases in: LIFO Reserve Deferred Sales & Credits Less: Increases in: Deferred Expenses & Debits Notes: a. Non-0perating revenues, expenses. and income will not ordinarily exist. Only extremely unusual items should be classed as Non-operating. b. "Cash Taxes on Operating Profits" is calculated as follows: Book Tax provision Less: Increase in deferred ITC's Tax at appropriate rate on any non-operating incomec Plus: Tax saved on interest expensed Sub-Notes: c. See footnote above d. Calculate as: (Interest Expensee) x (Marginal Tax Rate) Sub-Sub-Note: e. Include implicit interest expense on non-capitalized leases: (PV of Non-capitalized leases) x (capitalization rate) 2.16 "Participant" means an employee who is participating in the PLAN. 2.17 "PLAN" means the CILCO EVA-BASED INCENTIVE COMPENSATION PLAN, as set forth herein. 2.18 "Plan Year" shall be the period from 1 October through 30 September. 2.19 "Prime interest rate" means the month-end prime rate charged by the First National Bank of Chicago in Chicago, Illinois. 2.20 "Required return" means Cost of Capital or C*. 2.21 "Return on capital" or "R" or "Return" means NOPAT divided by beginning Capital balances for each of the four quarters contained within the Plan Year. 2.22 "Total performance Award" means the aggregate of the Award in any PLAN year for EVA Improvement and EVA Maintenance. ARTICLE III Participation 3.1 Participants. The Participants will include those officers and employees who most directly affect value creation. A list of Participants shall be established as soon as possible after commencement of each PLAN year. 3.2 Change in Participants. The addition or deletion of Participants shall be made upon the request of the Chief Executive Officer (CEO) of the Company subject to approval by the Committee. The Award Bank of each additional Participant shall be primed in the manner set forth at paragraph 4.4 hereof. The addition or deletion of a participant during any PLAN year may require an amendment to the Established Award allocation as described hare in at Article V. Notice of any such amendment shall be given to each Participant whose allocable share of the Established Award is thereby changed. 3.3 Partial Participation. In any PLAN year the CEO may include Partial Participant(s) who share only in the Discretionary Award. Partial Partici- pants may be added or deleted at the discretion of the CEO of the Company without notice to other PLAN participants. No Award Bank shall be established for partial participants. Awards to partial participants shall be paid in cash. ARTICLE IV Awards 4.1 Use of EVA. The Total Performance Award shall be based upon the calcula- tion of EVA. It is not reduced by award payments to PLAN participants or partial Participants. 4.2 Calculation of EVA. Two performance results are calculated for the Company. These include the following: a. Improvement in EVA b. Three-year average of EVA. A percentage of each is added to the incentive award pool. The percentages are referenced at paragraphs 4.3.1 and 4.3.2 hereof. 4.3 Total Performance Award Components. The total performance award in any plan year is determined based upon the sum of EVA measurements for improving performance and for maintaining value. 4.3.1 EVA Improvement. The percent, specified on Schedule A attached hereto, of each year's change in EVA is credited to the Total performance Award. In the event of a decrease in EVA, a negative percent is calculated and the Total Performance Award is decreased accordingly. 4.3.2 EVA Maintenance. The moving three-year average of the level of EVA is calculated and the percent, specified on the schedule A attached hereto, of the three-year average EVA is added to or subtracted from the Total Performance Award. 4.4 PLAN Start UP. In the initial year of operation, several adjustments are needed to make the PLAN workable. Calculation of an award for EVA improvement requires establishment of an EVA from the previous year. Calculation of beginning balances in the Award Banks requires having an ending balance from the previous year. 4.4.1 First Year EVA Target. First year EVA targets will be the average of EVA for the Company for the five (5) years preceding the Plan year. 4.4.2. Priming the Award Bank. To allow full incentives to be paid in the first year an employee is a full participant in the PLAN, each Award Bank shall be primed with an amount sufficiently large that, if an average award is earned, an average payment can be made. This amount shall be equal to twice the targeted bonus percentage of base salary. In that the amounts used to prime the Award Banks have not been earned by the Participants, no interest is earned on said amounts. The loan is amortized evenly over a five year period commencing in the third year of the PLAN. The loan shall be repaid without interest. 4.5 Adjustments to EVA. In order that the calculation of EVA will be fair during each separate year of the PLAN, adjustments will be made in the calculation of EVA where certain one-time events,acquisitions or dives- titures would otherwise significantly distort the award calculations. 4.5.1 One Time Events. In the event assets are sold, it is possi- ble for EVA to increase or decrease sharply when gains or losses are realized. Although EVA in the year of such event is calculated to include the event, the target for the following years' EVA Improve- ment Award will exclude the event. The Maintenance Award in all years will include the event. Determination of what constitutes a one-time event will be made by the Committee. 4.5.2 Acquisitions and Divestitures. In the event of acquisitions or divestitures, the EVA calculated for the operating results of an acquired or divested entity is added to or subtracted from, as the case may be, the ongoing calculations. The full price paid for the acquisition (including good will) is the capital base for the acquired company. A partial adjustment is made for transactions which occur during the year. One time gains from divestitures are treated as discussed at Paragraph 4.5.1 above. In the event of an acquisition of a company whose earnings are expected to increase substantially (eg., a company with a high P/E ratio), EVA may be negative at first and thereby discourage other- wise prudent acquisitions. In such cases, the Capital of the acquisition may be divided in two parts. The first, which will be used for the award calculation is an amount equal to an amount sufficient to allow the acquisition to exactly earn its Cost of Capital in the first year. The remainder of the purchase price is placed in a reserve account which is increased each year at an interest rate equal to the Acquisition's Cost of Capital. The reserve is amortized into the Capital base of the acquisition over a period of time equal to the earnings growth period. If the reserve amount is negative, no adjustment is made. 4.5.3. Award Allocation Cap. Unless the Committee approves an allocation of awards in any PLAN year in which the Total Performance Award equals more than 200% of the aggregate base salaries, no allocation of awards in excess of 200% of aggregate base salaries shall be paid to participants during the PLAN year. Failure of the Committee to approve a Total Performance Award in excess of 200% of salaries may, at the Committee's discretion, result in allocation of a portion of such excess, deferral of all or a portion of the allocation of any such excess until the next PLAN year or forfeiture of said excess amount. ARTICLE V Allocation of Award 5.1 Annual Allocation. The Total Performance Award is allocated annually among participants. Except as provided at paragraph 3.3 regarding partial Participants, each Participant's award is credited to the Award Bank main- tained for each Participant. Such crediting will occur as soon as possible after conclusion of each PLAN year. Although an Award Bank may, as a result of negative EVA, have a deficit, no PLAN Participant shall be required, at any time, to reimburse his/her Award Bank. 5.2 Established Award. Except in the event of an amendment as provided at paragraph 3.2 herein and further as provided at paragraph 5.4 hereof, in each PLAN year, the Committee, upon recommendation by the CEO, shall pre-determine an allocation to PLAN Participants such that 80% of the Total Performance Award will be allocated. This is the Established Award. Each participant will be notified of his/her allocable share of the Established Award as soon as possible after commencement of the PLAN year. 5.3 Discretionary Award. The discretionary Award is the remaining 20% of the Total Performance Award. It will be utilized to reward outstanding perfor- mance for one or more Participants or partial Participants. The Discretionary Award shall be allocated by the CEO of the Company, with the approval of the Committee at the conclusion of each PLAN year, provided that the allocation to the CEO of the Company of a Discretionary Award shall be at the same percentage as his/her allocable share of the Established Award for the PLAN year. The Committee may, in their discretion, increase or decrease the Discretionary Award to the CEO which increase or decrease shall not alter the Discretionary Awards determined by the CEO for other Participants and partial Participants. 5.4 Committee Adjustment or Suspension of Plan. In any PLAN year in which the CEO fails to recommend the allocation of the Established Award Paragraph 5.2 hereof, the Plan shall be suspended, except that the Plan shall not be suspended in the event the Committee in their discretion, either apply the allocation percentages from the previous PLAN year or establish new allocation percentages for the PLAN year. 5.5 Annual Review. Prior to the payment of the Awards in any PLAN year, the calculation of such Awards shall be reviewed by an independent party selected by the Audit Committee of the Board. The report of the independent party shall be delivered to the Committee as soon as possible after allocation of the Total Performance Award has been calculated. ARTICLE VI Payment of Awards 6.1 Reporting Status of the Plan. A report of the current status of the plan shall be provided to Participants within 45 days after the close of each calendar quarter. 6.2 Award Banks. All allocations from the PLAN shall be credited to an individual Award Bank for each PLAN Participant. The Award Bank shall include the Award plus interest earned thereon less any payments therefrom. Award Banks are not secured by the Company and are 100 percent at risk. The Award Bank balance increases in the event of an Award and decreases if the Award is negative. Following the crediting of the Award for the prior year, one-third of the Award Bank balance of each Participant who has a positive Bank balance shall be distributed in cash to the Participant. No distribution shall be made in the event of a negative Bank balance. Although an Award Bank may, as a result of negative EVA or otherwise, have a deficit, no Plan Participant shall be required, except in the event of an overpayment, to reimburse his/her Award Bank. 6.3 Interest. Except as provided at paragraph 4.4.2 regarding loans to prime Award Banks, the amounts in the Award tanks will be credited monthly with interest at the prime interest rate. Negative bank balances will not earn or accrue interest. 6.4 Deferral of Payment. Amounts not paid from the Award Bank as specified hereinabove will be deferred and maintained in individual Award Banks for each Participant. 6.5 Accelerated Payment. Notwithstanding any other provisions of the PLAN to the contrary, upon the occurrence of a successful tender offer, where the purchase is by a person, or by a group as defined in section 14 (d)(2) of the securities Exchange Act of 1934, of 30% or more of the voting stock of the Company and subject to approval by the Committee, all Participants may receive immediate distribution of the entire amount in their Award Banks less any amounts used to prime an Award Bank as provided herein at Article IV, Section D. 2 (paragraph 4.8). Each bank balance shall be payable upon demand from the Participant, with interest to the date of distribution. ARTICLE VII Termination 7.1 Termination by the Company. 7.1.1. Termination of Plan. The PLAN may be terminated by the Board at any time and for any reason or no reason. Payment of Award Banks shall proceed as specified hereinabove at Paragraph 6.5 for accelerated payment. 7.1.2. Committee Action. Upon recommendation by the CEO and with or without cause, any Participant may be terminated by the Committee from participation in the PLAN whether or not the Participant continues to be an employee. In such event, the Participant shall have no further right to any distribution from his/her Award Bank except that, at the discretion of the Committee, he/she way be granted a pro-rata allocation for the PLAN year in which he/she ceases to be a Participant and may be granted a full or partial distribution of his/her Bank balance. 7.1.3. Sale of the Company. In the event a Participant ceases to be an employee because of a sale or transfer of the business of the Company to a person or entity not controlled, directly or indirectly, by the Company or a sale, lease, exchange or transfer of all or substantially all the assets of the Company, the Participant shall receive a distribution of the entire balance of his/her Bank at the time when distributions are :made in the year following the year that he/she ceases to be an employee less any amounts used to prime the Award Bank (paragraph 4.4). 7.2 Termination by the Participant. 7.2.1. Death or Disability. Termination of participation in the PLAN results from death or disability of the Participant. Disabil- ity will be determined in accordance with other benefit provisions of the Company which define "disability." The entire Award Bank, less any amounts used to prime the Award Bank Paragraph 4.4.2. shall be distributed to the Participant or his/her legal representative when distributions are made in the year following the PLAN year in which the Participant died or became disabled. 7.2.2. Retirement. A Participant who retires from the employment of the Company, as retirement shall, from time to time, be defined by the Company for purposes of awarding pension and other similar benefits, shall continue to receive distribution from his/her Award Bank as though he/she had continued to be an employee for a period of two (2) Plan years following the Plan year in which he/she retires. The distributions to such a retired Participant shall be the entire balance of his/her Award Bank less an amount used to prime the Award Bank Paragraph 4.4.2. The amount used to prime the Award Bank shall be deducted from the Participant's Award Bank on the first day of the first Plan Year following the date of retire- ment. 7.2.3. Voluntary Quit. A Participant who voluntarily terminates employment with the Company other than to retire shall be deemed to have forfeited the balance in his/her Award Bank. However, at the recommendation of the CEO and upon approval by the Committee, the Participant may be granted a pro-rata allocation for the PLAN year in which his/her employment terminates and may be granted full or partial distribution of his/her Award Bank. ARTICLE VIII Forfeiture 8.1 Voluntary Quit. In the event a Participant voluntarily terminates employment with the Company and thereby forfeits all or a portion of his/her Award Bank, the balance remaining in the Award Bank shall be distributed or deleted and the Award Bank terminated. 8.2 Non-Allocation of Award. In the event of a suspension of the PLAN in any PLAN year, as provided herein at paragraph 5.4, the Total Performance Award for the subject PLAN year shall be deemed forfeited and no portion thereof shall be allocated to Participants. Any such forfeiture shall not affect the calculation of EVA in any subsequent year. ARTICLE IX Limitations 9.1 No Continued Employment. Nothing contained herein shall provide any employee with any right to continued employment or in any way abridge the rights of the Company and its Participating Units to determine the terms and conditions of employment and whether to terminate employment of any employee. 9.2 No Vested Rights. Except as otherwise provided herein, no employee or other person shall have any claim of right (legal, equitable. or otherwise) to any award, allocation, or distribution or any right, title, or vested interest in any amounts in his/her Award Bank and no officer or employee of the Company or any Participating Unit or any other person shall have any authority to make representations or agreements to the contrary. No interest conferred herein to a Participant shall be assignable or subject to claim by a Participant's creditors. 9.3 Not a Part of Other Benefits. The benefits provided in this PLAN shall not be deemed a part of any other benefit provided by the Company to its employees. The Company assumes no obligation to PLAN Participants except as specified herein. This is a complete statement, along with the Schedules and Appendices attached hereto, of the terms and conditions of the PLAN. ARTICLE X Authority 10.1 Committee Authority. Except as otherwise expressly provided herein, full power and authority to interpret and administer this PLAN shall be vested in the Committee. 10.2 Board of Directors Authority. The Board shall be ultimately responsible for administration of the PLAN. References made herein to the "Committee" assume that the Board of Directors has created a committee of its membership to administer the PLAN. In the event a Committee is not so designated, the Board shall administer the PLAN. The Board or its Committee, as appropriate, shall work with the CEO of the Company in all aspects of the administration of the PLAN. 10.3 Annual Review. The PLAN shall be reviewed at least annually by the Audit Committee of the Board. It shall report its findings to the Board. The report prepared annually in accordance with the provisions of Paragraph 5.5 shall be provided to the Audit Committee. ARTICLE XI Notice 11.1 Any notice to be given pursuant to the provisions of the PLAN shall be in writing and directed to the appropriate recipient thereof at his/her business address or office location. ARTICLE XII Effective Date 12.1 This PLAN shall be effective as of 1 October 1990. ARTICLE XIII Amendments 13.1 This PLAN may be amended, suspended or terminated at any time at the sole discretion of the Board upon the recommendation of the Committee. Provided, however, that no such change in the PLAN shall be effective to eliminate or diminish the distribution of any Award that has been allocated to the Bank of a Participant prior to the date of such amendment, suspension or termination. Notice of any such amendment, suspension or termination shall be given promptly to each Participant. ARTICLE XIV Applicable Law 14.1 This PLAN shall be construed in accordance with the provisions of the laws of the State of Illinois. CENTRAL ILLINOIS LIGHT COMPANY EVA-BASED INCENTIVE COMPENSATION PLAN Schedule A: Central Illinois Light Company I. Components of Capital (As defined in PLAN) II. Cost of Capital (C*): C* - weighted average of the following components; Cost of debt - (current borrowing rate) (l-t) Cost of equity - [Quarterly avg. B) x 4.5%] + Quarterly avg. LTCB Cost of preferred - Quarterly avg. yield on preferred Note: The D/C ratio is adjusted to reflect an estimate which neither improves nor detracts from the Company's overall credit. i.e. D/C should be the Participating Units targeted capital structure. Glossary: Avg - Average Beta - Beta Coefficient D/C - Debt/Capital LTGB - Long term government bond rate (30 years) t - Marginal tax rate YTD - Plan year-to-date Sources: The following sources are recommended for Cost of Capital calculations: 1. LTGB rate available from Federal Reserve Bulletin. Salomon Bros., Moody' s Bond Record etc. 2. Beta calculated by the Company using methodology provided by ALCAR for an appropriate peer group of companies. 3. Current borrowing rate and YTD yield available from current rating. 4. Debt, equity and preferred percents taken against capital, as defined. III. Components of NOPAT: (As defined in PLAN) IV. First-year EVA Target for Improvement Award: 1] V. Award Payment Percentages: EVA Improvement 2.5% of EVA allocated to Total Performance Award EVA Maintenance 7.5% of EVA allocated to Total Performance Award 1] To be calculated using five-year average of EVA JGS:2022 -----END PRIVACY-ENHANCED MESSAGE-----