-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, BqYQIHi728N95DhlbHg56cQRxVRMkH7noQHh7EUKyMHPkUTpPDHAoWUPhHM0tTzZ 9MRFRIrFoqkrRnmjKT7jfA== 0000890566-94-000122.txt : 19940404 0000890566-94-000122.hdr.sgml : 19940404 ACCESSION NUMBER: 0000890566-94-000122 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL LOUISIANA ELECTRIC CO INC CENTRAL INDEX KEY: 0000018672 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 720244480 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-05663 FILM NUMBER: 94519784 BUSINESS ADDRESS: STREET 1: 2030 DONAHUE FERRY RD CITY: PINEVILLE STATE: LA ZIP: 71360 BUSINESS PHONE: 3184847400 MAIL ADDRESS: STREET 1: P O BOX 5000 CITY: PINEVILLE STATE: LA ZIP: 71361-5000 10-K 1 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 Commission file number 1-5663 Or / / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Central Louisiana Electric Company, Inc. (Exact Name of Registrant as specified in its charter) Louisiana 72-0244480 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2030 Donahue Ferry Road, Pineville, Louisiana 71360-5226 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 318/484-7400 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, $2.00 Par Value New York Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Cumulative Preferred Stock, $100 Par Value None 4.50% 4.50%, Series of 1955 4.65%, Series of 1964 4.75%, Series of 1965 Convertible, Series of 1991 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X , No . 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. / / As of February 22, 1994, the aggregate value of the Registrant's voting stock held by non-affiliates was $494,023,447. The Registrant's Cumulative Preferred Stock is not listed on any exchange, nor are prices for the Cumulative Preferred Stock quoted on NASDAQ; therefore, its market value is not readily determinable and is not included in the foregoing amount. As of February 22, 1994, there were 22,398,341 shares outstanding of the Registrant's Common Stock, par value $2.00 per share. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Shareholders for the year ended December 31, 1993 are filed as Exhibit 13 to this report and incorporated by reference into Part II herein. Portions of the Registrant's definitive Proxy Statement dated March 9, 1994, for the Annual Meeting of Shareholders to be held on April 22, 1994, are incorporated by reference into Part III herein. TABLE OF CONTENTS PART I Page Item 1. Business General................................... 1 Electric Operations....................... 1 Regulatory and Environmental Matters...... 8 Construction and Financing................ 14 Item 2. Properties................................. 14 Item 3. Legal Proceedings.......................... 15 Item 4. Submission of Matters to a Vote of Security Holders.......................... 15 Executive Officers of the Registrant................. 16 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........... 18 Item 6. Selected Financial Data.................... 19 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 20 Item 8. Financial Statements and Supplementary Data........................ 20 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure...................... 20 PART III Item 10. Directors and Executive Officers of the Registrant......................... 20 Item 11. Executive Compensation..................... 20 Item 12. Security Ownership of Certain Beneficial Owners and Management..................... 20 Item 13. Certain Relationships and Related Transactions.............................. 21 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......... 22 PART I ITEM 1. BUSINESS GENERAL Central Louisiana Electric Company, Inc. (the Company) was incorporated in 1934 under the laws of the State of Louisiana and is engaged principally in the generation, transmission, distribution and sale of electric energy to approximately 213,000 customers in 63 communities and contiguous rural areas in a 14,000 square mile region in the State of Louisiana. At December 31, 1993 the Company employed 1,224 persons. The Company's mailing address is P. O. Box 5000, Pineville, Louisiana 71361-5000, and its telephone number is (318) 484-7400. ELECTRIC OPERATIONS POWER GENERATION The Company operates and either owns or has an ownership interest in four steam electric generating stations. The Company is the sole owner of the Coughlin Power Station, the Teche Power Station and Rodemacher Power Station Unit 1. The Company owns a 50% interest in Dolet Hills Power Station Unit 1 (Dolet Hills Unit 1), and a 30% interest in Rodemacher Power Station Unit 2 (Rodemacher Unit 2). At December 31, 1993, the Company's aggregate electric generating capacity at the four stations was 1,686,000 kilowatts. The following table sets forth certain information with respect to the Company's generating facilities.
YEAR CAPACITY TYPE OF OF AT FUEL GENERATING INITIAL 12/31/93 USED FOR Generating Station UNIT # OPERATION (KILOWATTS) GENERATION(1) Coughlin Power Station 6 1961 110,000 gas/oil(standby) 7 1966 224,000 gas/oil(standby) Teche Power Station 1 1953 23,000 gas 2 1956 48,000 gas 3 1971 359,000 gas/oil(standby) Rodemacher Power Station 1 1975 440,000 gas/oil 2 1982 157,000(2) coal/gas Dolet Hills Power Station 1 1986 325,000(3) lignite Total Generating Capability 1,686,000 (1) Where oil is used on a standby basis, capacity may be reduced. (2) Represents the Company's 30% interest in the capacity of Rodemacher Unit 2, a 523,000-kilowatt generating unit. (3) Represents the Company's 50% interest in the capacity of Dolet Hills Unit 1, a 650,000-kilowatt generating unit.
1 FUEL The following table sets forth, for the periods indicated, the percentages of power generated from various fuels at the Company's electric generating plants, the cost of fuel per kilowatt hour (KWH) attributable to each such fuel and the weighted average fuel cost per KWH.
WEIGHTED LIGNITE COAL GAS FUEL OIL AVERAGE COST COST COST COST COST PER PERCENT PER PERCENT PER PERCENT PER PERCENT PER KWH OF KWH OF KWH OF KWH OF KWH (MILLS) GENERATION (MILLS) GENERATION (MILLS) GENERATION (MILLS) GENERATION (MILLS) 1993 15.50 32.7 20.28 19.5 25.11 47.8 - - 21.02 1992 14.96 37.0 20.07 16.7 21.48 46.3 - - 18.83 1991 14.96 37.2 21.07 15.2 19.94 47.6 - - 18.26 1990 14.83 36.0 19.60 17.4 23.88 46.6 - - 19.87 1989 13.95 36.0 18.93 13.3 23.15 50.5 22.9 0.2 19.28
For information with respect to the Company's ability to pass through changes in costs of generating fuel to its customers, see "Regulatory and Environmental Matters - Rates" hereunder. Gas Supply During 1993 the Company purchased a total of 28,083 billion British thermal units (MMMBtu) of natural gas for the generation of electricity. The annual and average per-day quantities of gas purchased by the Company from each supplier is shown in the table below.
AVERAGE AMOUNT 1993 PURCHASED PERCENT PURCHASES PER DAY OF TOTAL GAS SUPPLIER (MMMBtu) (MMMBtu) GAS USED Arkansas Louisiana Gas Company 20,216 55.4 72.0 Louisiana Intrastate Gas Corporation 6,040 16.5 21.5 LL&E Gas Marketing, Inc. 1,825 5.0 6.5 Other 2 - - 28,083 76.9 100.0
Effective January 1, 1992 the Company entered into a new contract with Arkla General Supply Company (AGS), a division of Arkla Energy Marketing Company which is a subsidiary of Arkla, Inc., for the sale of natural gas to be delivered to the Company's four power stations. The contract provides for a firm gas supply through the year 2000 in quantities sufficient to meet the Company's internal system requirements and contains options designed to enable the Company to manage the natural gas component of its total fuel costs. Concurrently with the signing of the gas supply contract, AGS entered into a contract with Louisiana Intrastate Gas Corporation (LIG), which at the time was a wholly owned subsidiary 2 of Arkla, Inc., for the transportation of the gas purchased from AGS. Under the terms of the gas supply contract, AGS incurs the cost of transporting gas via LIG's pipelines to the Company's power stations. The gas supply contract with AGS allows the Company to select in advance, on an annual basis, how the Company will meet its internal system requirements for gas. One option allows the purchase of gas exclusively from AGS with transportation provided by LIG. Another option allows supply needs to be met with gas purchased from AGS and third party gas suppliers and transported by others or by LIG. The Company may continue to purchase gas under a prior contract with LL&E Gas Marketing, Inc. (described in further detail below) without such purchases being considered as purchases from a third party supplier, unless the Company has elected to purchase gas from third party suppliers. The contract with AGS contains pricing mechanisms for gas purchased thereunder which are intended to approximate current market prices at the time of purchase and are designed to be competitive with prices paid by other Louisiana utility companies. In addition to standard contractual termination provisions, the contract may be terminated by either party, subject to acceptance by the other party, if the price calculated according to the contract is determined to be unacceptable. If notice of termination is given because of pricing, the contract will remain in effect for a period of twelve months, and LIG will remain obligated to transport replacement gas for an additional eighteen months. The contract with AGS also contains minimum and maximum supply obligations which are based upon the Company's seasonal generation requirements and are dependent upon which option is selected by the Company. The supply obligations under either option may be increased if the Company's solid-fuel generating units are unavailable due to scheduled or unscheduled maintenance outages or for other reasons. The Company is obligated to purchase certain quantities of gas from AGS on an annual basis. A minimum or base quantity of 20,000 MMMBtu of gas must be purchased during a year, adjusted by plus or minus 10% at the option of the Company each year, if all gas is purchased from AGS. A minimum of 25,000 MMMBtu must be purchased during a year if any gas is purchased from third party suppliers. In 1993 the base quantity of gas to be purchased under the AGS contract was 20,000 MMMBtu. During 1993 the Company purchased a base quantity of 20,045 MMMBtu of gas, including gas purchased on behalf of Southwestern Electric Power Company (SWEPCO), joint owner of Dolet Hills Unit 1, and Louisiana Energy and Power Authority (LEPA) and Lafayette Public Power Authority (LPPA), joint owners of Rodemacher Unit 2. During 1993 the Company did not purchase any gas from third party suppliers under the terms of the contract with AGS. During 1993 the Company entered into a separate contract with LIG for the sale and transportation of natural gas to the Company's 3 power stations. A total of 6,040 MMMBtu of "spot" and surplus gas was purchased from LIG during 1993 under an interim sale and transportation agreement. Gas purchased under the LIG contract is not considered to be purchases from third parties under the gas supply contract between the Company and AGS. The contract with LIG provides for the purchase of spot gas for the Company's internal system requirements when the price of such gas is less than that of energy purchases from other utilities and provides for the purchase of surplus gas, if and when it is available, for energy sales to other utilities. The Company has a separate contract with LIG which provides for the transportation of gas purchased by the Company from third party suppliers or under circumstances where AGS fails to meet its contract obligations. The Company has contracted with LL&E Gas Marketing, Inc., an affiliate of Louisiana Land & Exploration Company, for the purchase of up to 5 MMMBtu of gas per day on a month-to-month basis, subject to termination by either party. The purchase price of the gas is based on a monthly index plus a markup and transportation fee. Purchased gas is transported via the intrastate pipeline system owned and operated by LIG. The Company has never incurred a liability for any gas not taken under the take-or-pay provisions of its gas supply agreements. Although natural gas has been relatively plentiful in recent years, supplies available to the Company and other consumers are vulnerable to disruption due to weather conditions, transportation disruption, price changes and other events. Large boiler-fuel users of natural gas, including electric utilities, generally have the lowest priority among gas users in the event pipeline suppliers are forced to curtail deliveries due to inadequate supplies. Thus, supplies of natural gas may become unavailable from time to time, or prices may increase rapidly in response to temporary supply disruptions. Such events may require the Company to shift its gas- fired generation to alternative fuel sources such as fuel oil to the extent it has the capability to burn those alternative fuels. Currently, the Company anticipates that its alternative fuel capability, combined with its solid-fuel generating resources, are adequate to meet fuel needs during any temporary interruption of gas supplies. Coal and Lignite Supply Under the terms of a contract with Kerr-McGee Coal Corporation (Kerr-McGee), the supplier of coal used in Rodemacher Unit 2, the Company has agreed to purchase approximately 12.8 million tons of low- sulfur coal over a 25 year period which began in 1982. The Company estimates that this supply of coal will be sufficient to meet its share of the fuel requirements of Rodemacher Unit 2 during the same period. The price of coal under the contract is a base price per ton plus a "total escalation charge" to reflect changes 4 in certain indices specified in the contract. The contract also provides for adjustment of the price based on the heating value of coal delivered. After purchasing a given annual quantity of base coal, the Company has the right to purchase coal from third parties in the spot market, and Kerr-McGee has the right to meet the terms of the proposed purchase if it chooses to do so. The coal supplied by Kerr- McGee is surface-mined in Wyoming and transported to the Rodemacher Unit 2 site by railroad in unit trains which are leased by the Company pursuant to various long-term leases. The Company has contracted with rail carriers for the transportation of the coal. Although it is possible that the supply of coal could be curtailed because of rail transportation interruptions, the Company has not experienced any significant interruptions in the past. During 1993 the Company purchased 670,845 tons of coal from Kerr-McGee, including 160,847 tons of spot coal. As of December 31, 1993 the cumulative total of coal purchased by the Company since the inception of this contract, which is subject to the 12.8 million ton contract amount, was approximately 6.1 million tons. At December 31, 1993 the Company's coal inventory at Rodemacher Unit 2 was approximately 75,000 tons (about a 34-day supply). Lignite is used as fuel for Dolet Hills Unit 1. The Company and SWEPCO, a co-owner of the unit, have entered into agreements pursuant to which each acquired an undivided 50% interest in the other's leased and owned lignite reserves in northwestern Louisiana. Prior to the commencement of mining operations in 1985, the estimated recoverable lignite reserves from such holdings within the lignite surface mine permit boundary totaled approximately 150 million tons. It is estimated that Dolet Hills Unit 1 will require approximately 75 million tons of lignite for 30 years of operation. The Company and SWEPCO have entered into an agreement with the Dolet Hills Mining Venture for the mining and delivery of lignite required to meet the fuel needs of the unit. No significant delivery disruptions have been experienced since mining operations began, and the Company does not expect any disruptions in the future. The price of lignite delivered pursuant to the agreement is a base price per ton, subject to escalation based on certain inflation indices, plus specified "pass-through" costs. The agreement terminates 25 years after initial operation of the unit, but may be extended up to an additional 20 years at the option of the Company and SWEPCO. During 1993 approximately 2.6 million tons of lignite were mined, bringing the cumulative total of lignite mined since mining operations began to approximately 21.8 million tons as of December 31, 1993. In order to provide an additional source of lignite for Dolet Hills Unit 1, in 1988 the Company entered into a contract with Phillips Coal Company (Phillips) for the purchase of approximately 3.5 million tons of lignite over the life of the contract. Deliveries began during 1989, and the contract will expire on January 1, 2005. The contract was amended in 1988 and assigned by 5 Phillips to Red River Mining Co., a joint venture of the North American Coal Corp. and Phillips. The contract was also amended in 1989 to increase the maximum amount to be delivered during the life of the contract to 3.7 million tons and to increase the maximum amount to be delivered during any year to 430,000 tons. Of this volume, the Company will receive 94.14%, and SWEPCO will receive 5.86%. The minimum annual purchase requirement is 200,000 tons. The price of lignite under the contract is a base price per MMMBtu, subject to escalation, plus certain pass-through costs. The contract may be terminated, subject to penalty provisions, at the option of the Company at any time after January 1, 1995, with 60 days' written advance notice to Red River Mining Co. During 1993 the Company and SWEPCO purchased a total of 460,099 tons of lignite from Red River Mining Co. Of this amount, 205,001 tons were purchased under the base contract, bringing the cumulative total of lignite purchased under this contract as of December 31, 1993 to approximately 1.3 million tons. The remaining 255,098 tons were purchased as spot lignite under two separate amendments negotiated during 1992 and 1993. The spot lignite is purchased at a base price which is escalated in proportion to the escalation in Dolet Hills Mining Ventures' price. Purchases under these amendments are not applicable to the 3.7 million ton contract obligation. The amount of lignite used by the Company during 1993 from both mining sources was approximately 1.5 million tons. The continuous supply of lignite from the mining sources may be subject to interruption due to adverse weather conditions or other factors which may disrupt mining operations. At December 31, 1993 the Company's lignite inventory was approximately 346,000 tons (about a 60-day supply). Oil Supply The Company has been able to obtain oil supplies by spot purchases as needed. Rodemacher Power Station has oil storage capacity of 762,000 barrels (approximately a 75-day supply), and the other generating stations have oil storage capacity aggregating 319,000 barrels (approximately a 20-day supply). The Company burned only 88 barrels of oil as a fuel source in 1993. POWER PURCHASES The Company purchases electric energy from neighboring utilities when the price of the energy purchased is less than the cost to the Company of generating such energy from its own facilities. Additionally, the Company has a long-term contract under which it purchases a small percentage of its total energy requirements from a hydroelectric generating plant. During 1993 the Company purchased 1,321 million KWH of electricity, or approximately 18% of its total energy requirements. 6 SALES The Company is a "public utility" engaged principally in the generation, transmission, distribution and sale of electricity solely within Louisiana. For further information regarding the Company's generating stations and its transmission and distribution facilities, see "Power Generation" above and "Properties" in Item 2. The following table sets forth information concerning sales by the Company to various classes of customers for each of the last three years. SALES (MILLION KWH) 1993 1992 1991 Residential 2,470 2,353 2,313 Commercial 1,109 1,062 1,043 Industrial 2,005 1,972 1,928 Other retail 463 477 464 Sales for resale * 175 146 141 Total sales to regular customers 6,222 6,010 5,889 Short-term sales to other utilities * 266 88 121 Total kilowatt-hour sales 6,488 6,098 6,010 * Sales to the city of Alexandria were reclassified from Short-term sales to other utilities to Sales for resale. The Company's 1993 system peak demand occurred in August and was 1,346,000 kilowatts. Sales and peak demand are affected by seasonal demand influenced by weather and are generally highest during the summer air-conditioning and winter heating seasons. The financial effects of seasonal demand on the Company's quarterly operating results are discussed in Note L to the Consolidated Financial Statements on page 32 of the 1993 Annual Report to Shareholders, which information is filed as Exhibit 13 to this report and incorporated into Part II herein by reference. The Company expects the peak demand on the system to grow at a compound annual rate of approximately 2% over the next ten years. An ongoing review of future generating requirements continues to indicate that additional generating capacity should not be needed until the year 2000. The Company expects to achieve postponement of additional new capacity by developing a demand-side management program to reduce the load on the system along with refurbishing a retired 55 MW gas unit not currently in service for use as a peaking unit. Such measures are currently under study. No customer accounted for 10% or more of the Company's revenues in 1993. Additional information regarding the Company's sales and revenues is set forth on pages 14 and 15 under the subcaption "Results of Operations" under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1993 Annual Report to Shareholders, which is filed as Exhibit 13 to this report and incorporated herein by reference. 7 REGULATORY AND ENVIRONMENTAL MATTERS RATES Retail electric operations of the Company are subject to the jurisdiction of the Louisiana Public Service Commission (LPSC) with respect to rates, standards of service, accounting and other matters. The LPSC establishes base rates based upon nonfuel costs, including the cost of capital, and sales. The Company is also subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC) with respect to certain aspects of its electric business, including rates for wholesale service and interconnections with, and the transmission of power for, other utilities. Periodically, the Company has sought and received increases in base rates from both the LPSC and the FERC to cover increases in operating costs and costs associated with additions to generating, transmission and distribution facilities. The Company's electric rates include a fuel and purchased power cost adjustment clause which enables the Company to reflect monthly fluctuations in the cost of fuel and short-term purchased power. Additionally, pretax income from certain off-system sales to other utilities is passed on to customers through the fuel cost adjustment clause. Fuel costs and fuel adjustment billing factors are approved by the LPSC and the FERC. These cost adjustments are based on costs from earlier periods which result in over or under-recovery for the period in which the adjustment is made. Any over or under-recovery is corrected by adjustment in later periods. As of December 31, 1993 the net accumulated balance of over-recovery on sales subject to the LPSC's jurisdiction was approximately $5.3 million. The Company, along with three other investor-owned electric utility companies operating within the State of Louisiana, was named by consultants in a preliminary report provided to the LPSC at its regularly scheduled meeting held on June 29, 1993, as having a current return on equity which may be higher than a return which would be awarded if rates were established currently. The LPSC offered all four utility companies the opportunity to respond to the consultants' comments within one month. The Company believes that its current return on equity is reasonable, and provided a response to the LPSC. The LPSC considered the responses of all four companies at its August meeting and elected to review the earnings of all electric, gas and telephone utilities that it regulates (approximately 35 companies), over the next two years. Currently, the Company expects to be reviewed in early 1995. 8 COMPETITION AND FRANCHISES The Company does not experience significant competition for sales of electricity to residential customers due to the existence of franchise rights granted by governmental units and enforced by state regulation. Such franchises are for fixed terms and expire from time to time. In the past, the Company has been successful in the renewal of such franchises in a timely manner. Currently, the Company is negotiating with a nonexclusive municipal franchise affecting about 6,000 customers, or about 2.8% of the Company's customers, to renew its franchise agreement which expires in July 1994. The city administration has indicated that it may seek ownership of the Company's electric system within the city limits by condemnation or otherwise. The outcome of the continuing negotiations for the franchise is uncertain, but the Company will contest any attempt to acquire its customers or local electric system. The Company does compete for residential load with natural gas companies within its service area which offer an alternative fuel for heating needs. The Company also experiences some competition for electric sales to industrial customers in the form of self-generation. In recent years, the Company has been successful in competing for wholesale sales within its service territory, including short-term sales to the city of Alexandria and a full requirements sale to the city of St. Martinville. Sales under the St. Martinville agreement, which represents an approximate 13 MW load, will begin in May 1995 and extend through December 2000. The agreement is expected to provide additional base revenues, net of facility payments, of about $4 million over the term of the agreement. The contract has been filed with the FERC for approval. The Louisiana Energy and Power Authority, the city of Lafayette and the American Public Power Association have intervened before the FERC asserting unduly preferential, discriminatory and predatory pricing. The Company is contesting these assertions. The Energy Policy Act of 1992 contains provisions which among other things are intended to broaden competition among companies that generate electricity, including nonregulated independent power producers, by promoting open access to transmission networks for wholesale transactions. At this time, the Company is unable to predict the long-range effects this legislation will have on the electric industry and the Company's financial condition or operations. RECENT DEVELOPMENTS On February 22, 1994 the Company announced its interest in purchasing Teche Electric Cooperative, Inc. (Teche). Teche serves about 8,600 customers and its service area, which is in Iberia, St. Martin and St. Mary parishes (counties), is adjacent to and similar to the Company's. Teche officials have indicated in press 9 releases that they intend to resist the acquisition. At this time, the Company is unable to predict whether it will be successful in reaching an agreement with Teche. ENVIRONMENTAL QUALITY The Company is subject to numerous laws and regulations administered by federal, state and local authorities with regard to protection of the environment. These statutory and regulatory provisions impose various substantive requirements, the violation of which may result in substantial fines and penalties. Environmental requirements continue to increase as a result of new legislation, administrative actions and judicial interpretations. Therefore, the precise future effects of existing and potential requirements are difficult to determine. During 1993 the Company's capital expenditures related to environmental compliance were approximately $2.5 million and such expenditures are estimated to total approximately $4.7 million in 1994. A large portion of this increase is attributable to the new requirement to install continuous emission monitors under the federal Clean Air Act. Air Quality The State of Louisiana regulates emissions from each of the Company's generating units through regulations issued by the Air Quality Division (AQD) of the Louisiana Department of Environmental Quality (LDEQ). In addition, the AQD implements certain programs initially established by the Environmental Protection Agency (EPA). The AQD requires permits for certain generating units including the Company's three most recently constructed generating units, Rodemacher Units 1 and 2 and Dolet Hills Unit 1. All three of these units have received AQD permits. Teche Unit 3 received a permit in 1973 when the unit was modified to burn low-sulfur fuel oil. Emissions from the Company's other units are regulated by Emission Inventory Questionnaires (EIQs), or compliance schedules, which are submitted to the AQD. Title IV of the federal Clean Air Act Amendments of 1990 (the Act) established a regulatory program to address the effects of acid rain. The Act imposes restrictions on sulfur-dioxide (SO2) emissions from certain utility units. It essentially requires that each ton of SO2 emissions must be authorized by the utility's possession of an SO2 allowance. The EPA is required to allocate a set number of allowances to each affected unit. The initial allowance allocation was published in the FEDERAL REGISTER on March 23, 1993. Because the allowances allocated to Rodemacher Unit 2 did not reflect an adjustment that had been previously requested, the Company filed a petition for judicial review of the rule on May 21, 1993 in the United States Court of Appeals for the District of Columbia Circuit. The Company's petition has been consolidated with petitions filed by other parties and the litigation is still 10 in the preliminary procedural stage. If the additional allowances requested from the EPA are not ultimately allocated to Rodemacher Unit 2, that unit may have to procure additional allowances through purchase or transfer from other Company units. At this time, the Company does not expect either of these options to involve a significant increase in the Company's five year construction plan. The allowance requirement may prove to be a critical factor in the construction of any new solid-fuel units since the EPA will not allocate allowances to new units. A utility will be required to offset all SO2 emissions from any new unit by utilizing excess allowances it may have from its other units, or by reducing SO2 emissions from those units. A utility may also purchase SO2 allowances through an allowance trading system. Compliance with this requirement of the Act will therefore make the construction of new solid-fuel units more costly. The Company's two existing solid-fuel generating units, Rodemacher Unit 2 and Dolet Hills Unit 1, either burn low-sulfur coal or utilize pollution control equipment to reduce sulfur emissions. Phase I of Title IV of the Act, which becomes effective in 1995, will not require the Company to reduce sulfur emissions at either of these two generating units. The Company also does not expect that the limits on SO2 emissions required by Phase II of the Act, effective in the year 2000, will significantly affect the way the Company's existing generating units are operated. Title V of the Act requires certain utility and industrial facilities to obtain operating permits. States are required to develop operating permit programs as part of their State Implementation Plans. In November 1993 the LDEQ promulgated new regulations to comply with the requirements of Title V that have been submitted to the EPA for review. EPA approval is expected in 1994 and permit applications must then be submitted in 1995. The operating permits will contain all acid rain permit requirements as well as requirements of existing state and federal air programs. Title V allows states to collect fees up to $25 per ton of regulated emissions to support their operating permit programs. Fee assessments on the Company's affected units have already increased because of this provision. The LDEQ currently charges $7 per ton and that amount is expected to increase. Title III of the Act addresses the effects of hazardous air pollutants. Under this provision, a three-year study of utility air emissions will be undertaken. If the results of this study indicate that it is appropriate and necessary to regulate utility emissions as hazardous emissions, the EPA will be authorized to regulate these emissions. The EPA study has not been completed. 11 Water Quality The Company has received from the EPA all National Pollutant Discharge Elimination System (NPDES) permits required under the Clean Water Act for discharges from its four generating stations. NPDES permits have fixed dates of expiration, and the Company has applied for renewal of these permits within the applicable time periods. The Water Pollution Control Division of the LDEQ requires facilities which discharge wastewater into Louisiana waters to be permitted under the Louisiana Water Discharge Permit System (LWDPS). The Company has applied for and received LWDPS permits for its four generating stations. The most recently issued NPDES permit for Dolet Hills Unit 1 contained an Administrative Order requiring biomonitoring of the discharge from the impoundment associated with the Fly Ash/Scrubber Sludge Landfill. The Order requires four biomonitoring tests to be performed on a quarterly basis. The four quarterly discharges tested to date have failed all or part of the biomonitoring test criteria which has triggered three additional tests to be performed over the next twelve months. Failure of any one of the three additional tests will require submittal to the EPA of a plan describing options for reducing certain constituents in the discharge. None of the options, if implemented, would affect the operation of the unit, or involve a significant increase in the Company's five year construction plan. Solid Waste Disposal The Solid Waste Division of the LDEQ has adopted regulations and a permitting system for the management and disposal of solid waste generated by electric utilities. The Company has received all required permits from the Solid Waste Division for the on-site disposal of solid waste generated at its generating stations. In 1993 the LDEQ promulgated extensive revisions to rules regulating the disposal of solid wastes. The revised rules required modification documents to be submitted by February 1, 1994 for all disposal facilities which have previously received permits. The Company has submitted modification documents for all of its currently permitted solid waste disposal facilities. The Company has requested an exemption from parts of the revised rules for the Dolet Hills landfill facility. The Company is gathering data to demonstrate that the landfill as it operates under its current permit provides sufficient protection of the environment. If the exemption is not granted by the LDEQ, the total cost of constructing new cells at the Dolet Hills landfill facility is expected to increase by an amount ranging from $360,000 to $900,000 per year. 12 Hazardous Waste Generation The Company produces certain wastes at its four generating stations and at other locations which are classified as hazardous. The Hazardous Waste Division of the LDEQ regulates these wastes and has issued identification numbers to the sites where such wastes are produced. The Company does not treat, store or dispose of these wastes on site; therefore, no permits are required. All hazardous wastes produced by the Company are disposed of at federally permitted hazardous waste disposal sites. PCB Disposal In 1986 the Company was named a Potentially Responsible Party (PRP) by the EPA under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) for its involvement at the Rose Chemicals (Rose) disposal site in Holden, Missouri. The Company had contracted with Rose for disposal of polychlorinated biphenyl (PCB) materials at the site from 1983 through 1986. In naming the Company a PRP, the EPA advised that Rose was no longer authorized to process PCBs for disposal and that the Company, as one of the generators of the materials previously sent to the site, was potentially responsible for the removal and disposal of PCBs remaining at the site pursuant to CERCLA. Under CERCLA, the Company could be held jointly and severally liable for the cost of cleaning up the site. In September 1992, the EPA issued a unilateral Administrative Order under Section 106 of CERCLA requiring the cleanup of contamination at the site. The Company, along with other PRPs, has entered into two Administrative Orders on Consent with Region VII of the EPA for the removal of certain PCB materials from the site. These materials have now been removed and disposed of at federally permitted PCB disposal facilities. The Company has contributed $337,000 to the cleanup of this site and does not presently anticipate any requirement to make additional contributions. The Company has complied with the statutory requirements established by the EPA for the general removal from service and disposal of certain equipment containing PCBs. The EPA has authorized the continued use of such equipment in locations where its use does not pose an exposure risk, and the Company uses such equipment only in restricted or remote areas. In 1993 the Company spent $242,000 on the disposal of PCB materials used in its system. OTHER ISSUES The electric utility industry is concerned about other environ- mental issues, such as global warming and the effects of electric and magnetic fields. The Company is participating in research of these issues through its membership in an industry association. At this time, the Company does not know what effect, if any, these other environmental concerns may have on its financial condition or operations. 13 CONSTRUCTION AND FINANCING For information on the Company's construction program and financing related matters, see "Financial Condition" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 16 and 17 of the 1993 Annual Report to Shareholders, which information is filed as Exhibit 13 to this report and incorporated into Part II herein by reference. ITEM 2. PROPERTIES All of the Company's electric generating stations and all other operating properties are located in the State of Louisiana. The Company considers all of its properties to be well maintained, in good operating condition and suitable for their intended purposes. ELECTRIC GENERATING STATIONS As of December 31, 1993, the Company either owned or had an ownership interest in four steam electric generating stations with a combined electric generating capacity of 1,686,000 kilowatts. For additional information regarding the Company's generating facilities, see "Power Generation" under the caption "Electric Operations" in Item 1. SUBSTATIONS As of December 31, 1993, the Company owned 77 transmission and 306 distribution substations. ELECTRIC LINES On December 31, 1993 the Company's transmission system consisted of approximately 67 circuit miles of 500 kilovolt (kV) lines; 450 circuit miles of 230 Kv lines; 646 circuit miles of 138 Kv lines; and 15 circuit miles of 69 Kv lines. The Company's distribution system consisted of approximately 1,950 circuit miles of 34.5 kV lines and 9,962 circuit miles of other lines. GENERAL PROPERTIES The Company owns various properties which include a seven-story headquarters office building, division offices, a central warehouse, service centers, telecommunications equipment and other facilities owned for general purposes. TITLE The Company's electric generating plants and certain other principal properties are owned in fee. Electric transmission and distribution lines are located either on private rights-of-way or along streets or highways by public consent. 14 Substantially all of the Company's property, plant and equipment is subject to liens securing obligations of the Company under an Indenture of Mortgage, none of which impairs the use of such properties in the operation of its business. ITEM 3. LEGAL PROCEEDINGS The Company is not aware of any legal proceeding to which it is a party which would have a material adverse effect on its financial condition or competitive position. For a discussion of various legal proceedings or regulatory matters involving the Company, see "Regulatory and Environmental Matters" in Item 1. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 15 EXECUTIVE OFFICERS OF THE REGISTRANT The names of the executive officers of the Company, their positions held, five-year employment history, ages and years of service as of December 31, 1993 are presented below. Executive officers are appointed annually to serve for the ensuing year or until their successors have been appointed. CURRENT POSITION AND FIVE-YEAR NAME OF EXECUTIVE OFFICER EMPLOYMENT HISTORY Gregory L. Nesbitt........ President and Chief Executive Officer since April 1993; President and Chief Operating Officer from April 1992 to April 1993; Executive Vice President and Chief Operating Officer from July 1991 to April 1992; Executive Vice President from January 1988 to July 1991. (Age 55; 13 years of service) Robert L. Duncan.......... Vice President-Customer Operations since July 1984. (Age 51; 28 years of service) David M. Eppler........... Vice President-Finance since October 1993; Vice President and Treasurer from July 1987 to October 1993. (Age 43; 12 years of service) Leonard G. Fontenot....... Vice President-Power Supply and Energy Transmission since April 1986. (Age 56; 31 years of service) Catherine C. Scheffler.... Vice President-Human Resources since October 1993; General Manager-Human Resources from August 1993 to October 1993; Administrator-Compensation from May 1991 to August 1993; Vice President at Rapides Bank and Trust Company from December 1987 to April 1991. (Age 38; 2 years of service) David K. Warner........... Vice President-Administrative Services since April 1988. (Age 43; 13 years of service) John L. Baltes, Jr........ Controller since April 1989; Manager- Accounting Services from June 1988 to April 1989. (Age 47; 12 years of service) 16 Michael P. Prudhomme...... Secretary-Treasurer since January 1994; Secretary from October 1993 to January 1994; Vice President-Customer Services from May 1985 to October 1993. (Age 50; 24 years of service) John E. Carroll........... Assistant Secretary since October 1993; Administrator-Benefits from February 1991 to October 1993; Supervisor- Compensation from October 1987 to February 1991. (Age 34; 9 years of service) 17 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is listed for trading on the New York Stock Exchange (NYSE) and the Pacific Stock Exchange. The following table sets forth high and low sales prices for the Company's common stock as reported on the NYSE Composite Transactions Tape and dividends paid per share during each calendar quarter of 1993 and 1992.
1993 1992* SALES PRICE SALES PRICE HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS First Quarter $25-3/8 $23-1/2 $.345 $24-15/16 $22-3/4 $.335 Second Quarter $26-3/4 $24-3/4 $.355 $26-1/4 $23-1/8 $.345 Third Quarter $27-1/8 $25-1/4 $.355 $25-5/8 $23-3/8 $.345 Fourth Quarter $27 $23 $.355 $24-3/4 $23 $.345 * All prior-period amounts have been adjusted to reflect a two-for-one stock split effective in May 1992.
Subject to the prior rights of the holders of the respective series of the Company's preferred stock, such dividends as determined by the Board of Directors of the Company may be declared and paid on the common stock from time to time out of funds legally available therefor. The provisions of the Company's charter applicable to preferred stock and certain provisions contained in the debt instruments of the Company under certain circumstances restrict the amount of retained earnings available for the payment of dividends by the Company. The most restrictive covenant requires that common shareholders' equity be not less than 30% of total capitalization, including short-term debt. At December 31, 1993 approximately $129,000,000 of retained earnings was not restricted. On January 21, 1994 the Board of Directors of the Company declared a quarterly dividend of $.355 per share which was paid on February 15, 1994, to common shareholders of record on January 31, 1994. The Company currently expects that dividends of a comparable amount on its common stock will continue to be paid in the future. As of February 22, 1994 there were 12,992 holders of record of the Company's common stock, and the closing price of the Company's common stock as reported on the NYSE Composite Transactions Tape was $22.25 per share. 18 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth certain selected financial data for the respective periods presented and should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto set forth on pages 20 through 33 in the 1993 Annual Report to Shareholders, which information is filed as Exhibit 13 to this report and incorporated into Item 8 herein by reference.
FOR THE YEARS ENDED DECEMBER 31, 1993 1992 1991 1990 1989 FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS) Statement of Income Data Operating revenues $382,433 $351,613 $343,350 $341,188 $324,109 Net income $41,812 $45,239 $44,929 $42,544 $41,548 Net income applicable to common stock $39,827 $43,010 $42,957 $41,663 $39,884 Net income per common share (1) $1.78 $1.93 $1.92 $1.85 $1.77 Cash dividends paid per common share (1) $1.410 $1.370 $1.325 $1.265 $1.205 Ratio of earnings to fixed charges 3.30x 3.16x 2.99x 2.84x 2.72x Ratio of earnings to combined fixed charges and preferred stock dividends 2.96x 2.83x 2.73x 2.73x 2.54x Balance Sheet Data (at end of period) Total assets $1,161,635 $978,220 $973,472 $920,999 $921,010 Long-term obligations and redeemable preferred stock $358,329 $318,214 $400,605 $328,526 $270,186 OPERATING STATISTICS Electric sales - regular system customers (million KWH) Residential 2,470 2,353 2,313 2,225 2,158 Commercial 1,109 1,062 1,043 997 968 Industrial 2,005 1,972 1,928 1,971 1,876 Other retail 463 477 464 434 412 Sales for resale (2) 175 146 141 216 260 Total sales to regular customers 6,222 6,010 5,889 5,843 5,674 Short-term energy sales to other utilities (million KWH) (2) 266 88 121 86 64 Total electric sales 6,488 6,098 6,010 5,929 5,738 System peak (thousand kilowatts) 1,346 1,308 1,233 1,218 1,148 Electric customers (3) 212,559 213,941 211,332 201,763 199,466 (1) All prior-period per share amounts have been restated to reflect a two-for-one stock split effective in May 1992. (2) Sales to the City of Alexandria have been reclassified from Short- term energy sales to other utilities to Sales for resale. (3) Beginning in 1993 the method of counting customers was revised due to the implementation of a new customer information system.
19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth on pages 14 through 18 under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report to Shareholders for the year ended December 31, 1993, furnished to the Securities and Exchange Commission pursuant to Rule 14a - 3(b) under the Securities Exchange Act of 1934 (1993 Annual Report to Shareholders), is incorporated herein by reference; such information is filed as Exhibit 13 to this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth on pages 20 through 33 in the 1993 Annual Report to Shareholders is incorporated herein by reference; such information is filed as Exhibit 13 to this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under the subcaption "Directors" under the caption "Election of Directors" in the Company's definitive Proxy Statement dated March 9, 1994, filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 (1994 Proxy Statement), is incorporated herein by reference. See also "Executive Officers of the Registrant" on pages 16 and 17 of this report. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the subcaption "Organization and Compensation of the Board of Directors" under the caption "Election of Directors" and under the caption "Executive Compensation" in the 1994 Proxy Statement (excluding the information required by paragraphs (i), (k) and (l) of Item 402 of Regulation S-K) is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the caption "Security Ownership of Directors and Management" and under the caption "Security Ownership of Certain Beneficial Owners" in the 1994 Proxy Statement is incorporated herein by reference. 20 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the subcaption "Compensation Committee Interlocks and Insider Participation" under the caption "Election of Directors" in the 1994 Proxy Statement is incorporated herein by reference. 21 Page>
PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Reference (Page) 1993 Annual Form 10-K Report to Annual Report Shareholders 14(a)(1) Financial Statements and Supplementary Data on pages 20 through 33 in the Company's 1993 Annual Report to Shareholders are filed as Exhibit 13 to this report and are incorporated herein by reference. Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991 20 Consolidated Balance Sheets at December 31, 1993 and 1992 21 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992, and 1991 22 Consolidated Statements of Changes in Common Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 23 Notes to Consolidated Financial Statements 24 Report of Independent Accountants 33 14(a)(2) Financial Statement Schedules Report of Independent Accountants 30 Schedule V - Property, Plant and Equipment 31 Schedule VI - Accumulated Depreciation of Property, Plant and Equipment 34 Schedule VIII - Valuation and Qualifying Accounts 36 Schedule IX - Short-Term Borrowings 38 Financial statement schedules other than those shown in the above index are omitted because they are either not required or are not applicable or the required information is shown in the consolidated financial statements and notes thereto.
22 14(a)(3) List of Exhibits The Exhibits designated by an asterisk are filed herewith. The Exhibits not so designated have been previously filed with the Securities and Exchange Commission, and are incorporated herein by reference. The Exhibits designated by two asterisks are management contracts and compensatory plans and arrangements required to be filed as Exhibits to this report.
SEC FILE OR REGISTRATION REGISTRATION STATEMENT EXHIBIT EXHIBITS NUMBER OR REPORT NUMBER 3(a) Restated Articles of Incorporation of the 1-5663 10-Q(3/92) 3 Company dated as of July 24, 1989, as amended through April 24, 1992 3(b) Amended and Restated Bylaws of the 1-5663 8-K(2/91) 3(a) Company, as amended to January 25, 1991 4(a)(1) Indenture of Mortgage dated as of July 1, 2-27284 S-1(10/17/67) 4(b)(1) 1950, between the Company and First National Bank of New Orleans, as Trustee 4(a)(2) First Supplemental Indenture dated as 2-27284 S-1(10/17/67) 4(b)(2) of October 1, 1951, to Exhibit 4(a)(1) 4(a)(3) Second Supplemental Indenture dated as 2-27284 S-1(10/17/67) 4(b)(3) of June 1, 1952, to Exhibit 4(a)(1) 4(a)(4) Third Supplemental Indenture dated as 2-27284 S-1(10/17/67) 4(b)(4) of January 1, 1954, to Exhibit 4(a)(1) 4(a)(5) Fourth Supplemental Indenture dated as 2-27284 S-1(10/17/67) 4(b)(5) of November 1, 1954, to Exhibit 4(a)(1) 4(a)(6) Tenth Supplemental Indenture dated as 1-5663 10-K(1986) 4(a)(11) of September 1, 1965, to Exhibit 4(a)(1) 4(a)(7) Eleventh Supplemental Indenture dated 2-32069 S-9(4/7/69) 2(m) as of April 1, 1969, to Exhibit 4(a)(1) *4(a)(8) Eighteenth Supplemental Indenture dated as of December 1, 1982, to Exhibit 4(a)(1) *4(a)(9) Nineteenth Supplemental Indenture dated as of January 1, 1983, to Exhibit 4(a)(1) 4(a)(10) Twentieth Supplemental Indenture dated as 1-5663 8-K(9/83) 4(a)(21) of September 1, 1983, to Exhibit 4(a)(1) 4(a)(11) Twenty-First Supplemental Indenture dated as 1-5663 10-Q(6/84) 4(a)(22) of July 1, 1984, to Exhibit 4(a)(1) 4(a)(12) Twenty-Third Supplemental Indenture dated as 1-5663 8-K(4/85) 4(a)(24) of April 15, 1985, to Exhibit 4(a)(1) 4(a)(13) Twenty-Fourth Supplemental Indenture dated as 1-5663 8-K(2/86) 4(a)(25) of February 15, 1986, to Exhibit 4(a)(1) 4(a)(14) Twenty-Fifth Supplemental Indenture dated as 1-5663 8-K(4/86) 4(a)(26) of April 15, 1986, to Exhibit 4(a)(1) 23 4(a)(15) Twenty-Sixth Supplemental Indenture dated as 1-5663 8-K(3/90) 4(a)(27) of March 15, 1990, to Exhibit 4(a)(1) 4(a)(16) Twenty-Seventh Supplemental Indenture dated as 1-5663 8-K(7/91) (a)(28) of July 15, 1991, to Exhibit 4(a)(1) 4(b)(1) Indenture dated December 29, 1948, between 2-27284 S-1(10/17/67) 4(f)(1) Louisiana Rural Electric Corporation (LREC) and Fidelity National Bank of Baton Rouge, as Trustee 4(b)(2) Supplemental Indenture dated August 25, 1949, 2-27284 S-1(10/17/67) 4(f)(2) to Exhibit 4(b)(1) 4(b)(3) Supplemental Indenture dated July 13, 1951, to 2-27284 S-1(10/17/67) 4(f)(3) Exhibit 4(b)(1) 4(b)(4) Supplemental Indenture dated July 11, 1958, to 1-5663 10-K(1986) 4(b)(4) Exhibit 4(b)(1) 4(b)(5) Supplemental Indenture dated September 26, 1961, 2-27284 S-1(10/17/67) 4(f)(4) to Exhibit 4(b)(1) 4(b)(6) Assumption Agreement dated July 25, 1978, 1-5663 10-K(1988) 4(b)(6) between the Company and the United States of America, relating to Exhibit 4(b)(1) 4(b)(7) Sale and Assumption of Mortgages dated August 1, 1-5663 10-K(1988) 4(b)(7) 1978, between the Company and LREC, relating to Exhibit 4(b)(1) 4(c) Agreement dated October 2, 1980, between the 1-5663 10-K(1990) 4(g) Company and the City of Franklin, Louisiana 4(d) Indenture between the Company and Bankers 33-24896 S-3(10/11/88) 4(b) Trust Company, as Trustee, dated as of October 1, 1988 4(e) Trust Indenture (The Industrial Development 1-5663 10-K(1991) 4(i) Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 1, 1991, between The Industrial Development Board of the Parish of Rapides, Inc. and First National Bank of Commerce 4(f) Refunding Agreement (The Industrial 1-5663 10-Q(6/91) 10(a) Development Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 1, 1991, between the Company and The Industrial Development Board of the Parish of Rapides, Inc. 24 4(g) Trust Indenture (Parish of DeSoto, State of 1-5663 10-K(1991) 4(k) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of May 1, 1991, between Parish of DeSoto, State of Louisiana and First National Bank of Commerce 4(h) Refunding Agreement (Parish of DeSoto, 1-5663 10-Q(6/91) 10(b) State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of May 1, 1991, between the Parish of DeSoto, State of Louisiana and the Company 4(i) Trust Indenture (Parish of DeSoto, State of 1-5663 10-K(1991) 4(m) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 1, 1991, between Parish of DeSoto, State of Louisiana and First National Bank of Commerce 4(j) Refunding Agreement (Parish of DeSoto, 1-5663 10-Q(6/91) 10(c) State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 1, 1991, between the Parish of DeSoto, State of Louisiana and the Company 4(k) $100,000,000 Credit Agreement dated as of 1-5663 10-K(1992) 4(k) April 30, 1992, among the Company, certain Banks parties thereto, and Citibank, N.A., as Agent **10(a) 1990 Long-Term Incentive Compensation Plan 1-5663 1990 Proxy A Statement (4/90) **10(b) 1981 Incentive Stock Option Plan 1-5663 10-K(1992) 10(i) **10(c) Amended Description of Incentive Compensation 1-5663 10-K(1985) 10(k) Plan **10(d) Deferred Compensation Plan for Directors 1-5663 10-K(1992) 10(n) **10(e)(1) Supplemental Executive Retirement Plan 1-5663 10-K(1992) 10(o)(1) **10(e)(2) Supplemental Executive Retirement Plan 1-5663 10-K(1992) 10(o)(2) Participation Agreement **10(f) Executive Severance Agreement between the 1-5663 10-K(1992) 10(p) Company and Gregory L. Nesbitt 25 **10(g) Executive Severance Agreement between the 1-5663 10-K(1992) 10(r) Company and Robert L. Duncan **10(h) Executive Severance Agreement between the 1-5663 10-K(1992) 10(t) Company and David M. Eppler **10(i) Executive Severance Agreement between the 1-5663 10-K(1992) 10(u) Company and Leonard G. Fontenot **10(j) Executive Severance Agreement between the 1-5663 10-K(1992) 10(w) Company and Michael P. Prudhomme **10(k) Executive Severance Agreement between the 1-5663 10-K(1992) 10(x) Company and David K. Warner **10(l) Executive Severance Agreement between the 1-5663 10-K(1992) 10(y) Company and John L. Baltes, Jr. **10(m) Agreement between the Company and 1-5663 10-K(1992) 10(z) Scott O. Brame in connection with payment of bonus for 1992 10(n)(1) Receivables Purchase Agreement, dated 1-5663 10-Q(3/90) 10(x)(1) as of April 9, 1990, among the Company, Corporate Asset Funding Company, Inc. and Citicorp North America, Inc. 10(n)(2) Receivables Purchase Agreement, dated 1-5663 10-Q(3/90) 10(x)(2) as of April 9, 1990, among the Company, Citicorp, N.A. and Citicorp North America, Inc. 10(o)(1) Term Loan Agreement dated as of April 2, 1991, 1-5663 10-Q(3/91) 4(b) among the 401(k) Savings and Investment Plan ESOP Trust, the Company, as Guarantor, the Banks listed therein and The Bank of New York, as Agent, relating to Exhibit 4(f) 10(o)(2) Assignment and Assumption Agreement, effective 1-5663 10-Q(3/91) 4(c) as of May 6, 1991, between The Bank of New York and the Canadian Imperial Bank of Commerce, relating to Exhibit 4(f) 10(o)(3) Assignment and Assumption Agreement dated as of 1-5663 10-K(1991) 10(y)(3) July 3, 1991, among The Bank of New York, Rapides Bank and Trust Company in Alexandria, relating to Exhibit 4(f) 26 10(o)(4) Assignment and Assumption Agreement dated as of 1-5663 10-K(1992) 10(bb)(4) July 6, 1992, among The Bank of New York, CIBC, Inc. and Rapides Bank and Trust Company in Alexandria, as Assignors, the 401(k) Savings and Investment Plan ESOP Trust, as Borrower, and the Company, as Guarantor 10(p) Reimbursement Agreement (The Industrial 1-5663 10-Q(6/91) 4(a) Development Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 29, 1991, among the Company, various financial institutions, Swiss Bank Corporation and The First National Bank of Chicago 10(p)(1) Remarketing Agreement (The Industrial Development 1-5663 10-K(1991) 10(z)(1) Board of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 1, 1991, between the Company and Smith Barney, Harris Upham & Co. Incorporated 10(p)(2) Tender Agreement (The Industrial Development Board 1-5663 10-K(1991) 10(z)(2) of the Parish of Rapides, Inc. (Louisiana) Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991) dated as of May 1, 1991, among First National Bank of Commerce, as Trustee, the Company, The First National Bank of Chicago, as Tender Agent and Registrar, Smith Barney, Harris Upham & Co. Incorporated, as Remarketing Agent, and Swiss Bank Corporation, as Bank 10(q) Reimbursement Agreement (Parish of DeSoto, 1-5663 10-Q(6/91) 4(b) State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of May 29, 1991, among the Company, various financial institutions, Swiss Bank Corporation and The First National Bank of Chicago 27 *10(q)(1) Remarketing Agreement (Parish of DeSoto, State of 1-5663 Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of October 12, 1993, between the Company and PaineWebber Incorporated 10(q)(2) Tender Agreement (Parish of DeSoto, State of 1-5663 10-K(1991) 10(aa)(2) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991A) dated as of May 1, 1991, among First National Bank of Commerce, as Trustee, the Company, The First National Bank of Chicago, as Tender Agent and Registrar, Smith Barney, Harris Upham & Co. Incorporated, as Remarketing Agent, and Swiss Bank Corporation, as Bank 10(r) Reimbursement Agreement (Parish of DeSoto, 1-5663 10-Q(6/91) 4(c) State of Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 29, 1991, among the Company, various financial institutions, Swiss Bank Corporation and The First National Bank of Chicago 10(r)(1) Remarketing Agreement (Parish of DeSoto, State of 1-5663 10-K(1991) 10(bb)(1) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 1, 1991, between the Company and Smith Barney, Harris Upham & Co. Incorporated 10(r)(2) Tender Agreement (Parish of DeSoto, State of 1-5663 10-K(1991) 10(bb)(2) Louisiana Adjustable Tender Pollution Control Revenue Refunding Bonds, Series 1991B) dated as of May 1, 1991, among First National Bank of Commerce, as Trustee, the Company, The First National Bank of Chicago, as Tender Agent and Registrar, Smith Barney, Harris Upham & Co. Incorporated, as Remarketing Agent, and Swiss Bank Corporation, as Bank 10(s) Selling Agency Agreement between the Company 1-5663 8-K(2/92) 1 and Salomon Brothers Inc., The First Boston Corporation and Smith Barney, Harris Upham & Co. Incorporated dated as of February 27, 1992 28 10(t) 401(k) Savings and Investment Plan ESOP 1-5663 10-Q(3/91) 4(a) Trust Agreement dated as of April 2, 1991, between State Street Bank and Trust Company and the Company *11 Computation of Net Income Per Common Share *12 Computation of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends *13 Management's Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements and Supplementary Data and Report of Independent Accountants *23 Consent of Independent Accountants *24 Power of Attorney from each Director of the Company whose signature is affixed to this Form 10-K for the year ended December 31, 1993 14(b) Reports on Form 8-K The Company filed a Report on Form 8-K dated as of February 22, 1994 to announce its interest in purchasing Teche Electric Cooperative, Inc. For more information see "Recent Developments" under "Regulatory and Environmental Matters" in Item 1. 29 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Central Louisiana Electric Company, Inc.: Our report on the consolidated financial statements of Central Louisiana Electric Company, Inc. has been incorporated by reference in this Form 10-K from page 33 of the 1993 Annual Report to Shareholders of Central Louisiana Electric Company, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in Item 14(a)(2) on page 22 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND New Orleans, Louisiana January 21, 1994 30
CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT(1) FOR THE YEAR ENDED DECEMBER 31, 1993 (In thousands) Col. A Col. B Col. C Col. D Col. E Col. F Other Balance at Changes Balance at Beginning Additions Add End Classification of Period at Cost Retirements (Deduct) of Period Property, plant and equipment, including intangibles: Electric plant in service: Organization $ 7 $ 7 Franchises and consents 2,125 2,125 Production 492,677 $ 5,044 $ 1,696 $ 137 496,162 Transmission 227,156 32,300 1,119 (174) 258,163 Distribution 392,302 26,021 8,406 (144) 409,773 General 50,087 11,842 943 9 60,995 Other (3) 13,786 13,786 Acquisition adjustment 133 3 136 Total electric plant in service 1,178,273 $75,207(4) $12,164 $ (169) 1,241,147 Construction work in progress 57,342 $53,269(2) $(76,969)(4) 33,642 Total electric plant $1,235,615 $1,274,789 (1) The provision for depreciation is computed using the straight-line method at rates approved by the LPSC which will amortize the unrecovered cost of depreciable property over its estimated useful life. The average annual composite rate for the depreciation of electric plant used by the Company in 1993 was 3.11%. (2) Additions to property, plant and equipment initially consist of construction work in progress expenditures which are reclassified to the appropriate functional categories upon completion. (3) Includes lignite related fee land, lease acquisitions and associated costs. (4) Includes the reclassification of construction work in progress expenditures to the appropriate functional categories upon completion. 31 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT(1) FOR THE YEAR ENDED DECEMBER 31, 1992 (In thousands) Col. A Col. B Col. C Col. D Col. E Col. F Other Balance at Changes Balance at Beginning Additions Add End Classification of Period at Cost Retirements (Deduct) of Period Property, plant and equipment, including intangibles: Electric plant in service: Organization $ 7 $ 7 Franchises and consents 2,125 2,125 Production 496,157 $ 1,028 $ 190 $(4,318) 492,677 Transmission 220,332 5,548 334 1,610 227,156 Distribution 371,472 24,293 2,658 (805) 392,302 General 48,157 2,298 126 (242) 50,087 Other (4) 13,736 50 13,786 Acquisition adjustment 136 (3) 133 Total electric plant in service 1,152,122 $33,217(5) $3,308 $(3,758)(3) 1,178,273 Construction work in progress 26,134 $64,425(2) $(33,217)(5) 57,342 Total electric plant $1,178,256 $1,235,615 (1) The provision for depreciation is computed using the straight-line method at rates approved by the LPSC which will amortize the unrecovered cost of depreciable property over its estimated useful life. The average annual composite rate for the depreciation of electric plant used by the Company in 1992 was 3.13%. (2) Additions to property, plant and equipment initially consist of construction work in progress expenditures which are reclassified to the appropriate functional categories upon completion. (3) Includes the following: Reclassification of power plant spare parts to inventory .................... $(4,318) Adjustment relating to City of Opelousas equipment .............................. 788 Sale of portion of old New Iberia service center property ........................ (228) $(3,758) (4) Includes lignite related fee land, lease acquisitions and associated costs. (5) Includes the reclassification of construction work in progress expenditures to the appropriate functional categories upon completion.
32 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT(1)
FOR THE YEAR ENDED DECEMBER 31, 1991 (In thousands) Col. A Col. B Col. C Col. D Col. E Col. F Other Balance at Changes Balance at Beginning Additions Add End Classification of Period at Cost Retirements (Deduct) of Period Property, plant and equipment, including intangibles: Electric plant: Organization $ 7 $ 7 Franchises and consents 25 $ 2,100 2,125 Production 494,468 $ 3,183 $1,815 321 496,157 Transmission 204,465 16,533 963 297 220,332 Distribution 346,600 25,054 4,845 4,663 371,472 General 45,821 3,546 1,176 (34) 48,157 Other (4) 13,718 18 13,736 Acquisition adjustment 136 136 Total electric plant in service 1,105,240 $48,334(5) $7,347 $ 7,347(3) 1,152,122 Construction work in progress 24,019 $50,449(2) $(48,334)(5) 26,134 Total electric plant $1,129,259 $1,178,256 (1) The provision for depreciation is computed using the straight-line method at rates approved by the LPSC which will amortize the unrecovered cost of depreciable property over its estimated useful life. The average annual composite rate for the depreciation of electric plant used by the Company in 1991 was 3.15%. (2) Additions to property, plant and equipment initially consist mainly of construction expenditures which are reclassified to the appropriate functional categories upon completion. (3) Includes the following: City of Opelousas distribution system....... $4,469 Initial franchise fee to the City of Opelousas .................................. 2,100 Purchase of distribution equipment from LP&L .................................. 77 Adjustment for Alexandria 2nd interconnection project .................... 332 Dolet Hills power station settlement........ 372 Adjustment for unrecovered Creole pipeline facilities ........................ (79) Other City of Opelousas equipment........... 79 Donation of land to the City of Pineville .................................. (12) Adjustment for reclassification of voltmeters .............................. 9 $7,347 (4) Includes lignite related fee land, lease acquisitions and associated costs. (5) Includes the reclassification of construction work in progress expenditures to the appropriate functional categories upon completion. 33 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE VI -- ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1993 (IN THOUSANDS) Col. A Col. B Col. C Col. D Col. E Col. F ADDITIONS OTHER BALANCE AT CHARGED TO CHANGES -- BALANCE AT BEGINNING COSTS AND ADD END DESCRIPTION OF PERIOD EXPENSES RETIREMENTS (DEDUCT) OF PERIOD Electric $ 355,527 $ 35,235 $ 11,779 -- $ 378,983 Transportation 1,132 22 384 -- 770 Total $ 356,659 $ 35,257 $ 12,163 -- $ 379,753 FOR THE YEAR ENDED DECEMBER 31, 1992 (IN THOUSANDS) Col. A Col. B Col. C Col. D Col. E Col. F ADDITIONS OTHER BALANCE AT CHARGED TO CHANGES -- BALANCE AT BEGINNING COSTS AND ADD END DESCRIPTION OF PERIOD EXPENSES RETIREMENTS (DEDUCT) OF PERIOD Electric $ 326,115 $ 35,003 $ 4,844 $ (747)(1) $ 355,527 Transportation 1,105 18 (9) 1,132 Total $ 327,220 $ 35,021 $ 4,835 $ (747) $ 356,659 (1) Includes the following: Reclassification of power plant spare parts to inventory------------------- $ (1,333) Sale of portion of old New Iberia service center property-------------- (128) Adjustment relating to City of Opelousas equipment------------------ 714 $ (747) 34
CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1991 (IN THOUSANDS)
Col. A Col. B Col. C Col. D Col. E Col. F ADDITIONS OTHER BALANCE AT CHARGED TO CHANGES -- BALANCE AT BEGINNING COSTS AND ADD END DESCRIPTION OF PERIOD EXPENSES RETIREMENTS (DEDUCT) OF PERIOD Electric $ 299,656 $ 34,198 $ 8,247 $ 508(1) $ 326,115 Transportation 1,391 22 308 1,105 Total $ 301,047 $ 34,220 $ 8,555 $ 508 $ 327,220 (1) Includes the following: Write-off of obsolete materials------------- $ 320 Insurance reimbursement for property damage--------------------------- 188 $ 508
35 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1993 (IN THOUSANDS) Col. A Col. B Col. C Col. D Col. E ADDITIONS BALANCE AT CHARGED TO BALANCE AT BEGINNING COST AND END DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD Allowance for uncollectible accounts $ 779 $ 92 $ 334(1) $ 537(2) (1) Uncollectible accounts written off, less recoveries. (2) Deducted in the balance sheet. FOR THE YEAR ENDED DECEMBER 31, 1992 (IN THOUSANDS) Col. A Col. B Col. C Col. D Col. E ADDITIONS BALANCE AT CHARGED TO BALANCE AT BEGINNING COST AND END DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD Allowance for uncollectible accounts $ 733 $ 240 $ 194(1) $ 779(2) (1) Uncollectible accounts written off, less recoveries. (2) Deducted in the balance sheet. 36
CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1991 (IN THOUSANDS)
Col. A Col. B Col. C Col. D Col. E ADDITIONS BALANCE AT CHARGED TO BALANCE AT BEGINNING COST AND END DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD Allowance for uncollectible accounts $ 561 $ 400 $ 228(1) $ 733(2) (1) Uncollectible accounts written off, less recoveries. (2) Deducted in the balance sheet.
37 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE IX -- SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (IN THOUSANDS, EXCEPT INTEREST RATES)
Col. A Col. B Col. C Col. D Col. E Col. F MAXIMUM AVERAGE WEIGHTED WEIGHTED AMOUNT AMOUNT AVERAGE BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE CATEGORY OF AGGREGATE BEGINNING INTEREST DURING THE DURING THE DURING THE SHORT-TERM BORROWINGS(1) OF PERIOD RATE PERIOD PERIOD(2) PERIOD(3) For the year ended December 31, 1993------------------------------- $ 28,373 $3.34% $ 91,200 $ 53,441 3.24% For the year ended December 31, 1992------------------------------- $ 63,870 $3.70% $ 87,200 $ 43,427 3.66% For the year ended December 31, 1991------------------------------- $ 25,065(4) $5.09% $ 76,500(4) $ 40,186(4) 6.44%(4) (1) Consists of indebtedness for commercial paper and borrowings from banks pursuant to revolving credit agreements and uncommitted lines of credit. (2) Computed based on the average daily principal balances. (3) Computed by dividing the actual interest paid by the average amount outstanding during the period. (4) Includes $25 million of commercial paper reclassified in the Company's balance sheet as long-term debt as of December 31, 1991.
38 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 LOUISIANA ELECTRIC COMPANY, INC. (Registrant) By /s/ GREGORY L. NESBITT (Gregory L. Nesbitt, President and Chief Executive Officer) Date: March 30, 1994 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 /s/ GREGORY L. NESBITT (Gregory L. Nesbitt) President, and Chief March 30, 1994 Executive Officer (Principal Executive Officer) /s/ DAVID M. EPPLER (David M. Eppler) Vice President March 30, 1994 (Principal Financial Officer) /s/ JOHN L. BALTES, JR. (John L. Baltes, Jr.) Controller (Principal March 30, 1994 Accounting Officer) SHERIAN G. CADORIA J. PATRICK GARRETT F. BEN JAMES, JR. HUGH J. KELLY WILLIAM A. LOCKWOOD Directors* A. DELOACH MARTIN, JR. ROBERT T. RATCLIFF EDWARD D. SIMMONS ERNEST L. WILLIAMSON *By /s/ DAVID M. EPPLER (David M. Eppler, as Attorney-in-Fact) March 30, 1994 39 EX-4.A.8 2 18TH SUPPLEMENTAL INDENTURE EXHIBIT 4(a)(8) CENTRAL LOUISIANA ELECTRIC COMPANY, INC. TO FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS, as Trustee EIGHTEENTH SUPPLEMENTAL INDENTURE DATED AS OF DECEMBER 1, 1982 Amendment to Indenture of Mortgage Dated as of July 1, 1950 1 EIGHTEENTH SUPPLEMENTAL INDENTURE, dated as of December 1, 1982, between CENTRAL LOUISIANA ELECTRIC COMPANY, INC., a corporation duly organized and existing under and by virtue of the laws of the State of Louisiana (hereinafter sometimes called the "Company"), party of the first part, and FIRST NATIONAL BANK OF COMMERCE (formerly The National Bank of Commerce in New Orleans), a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as Trustee under the Indenture of Mortgage hereinafter mentioned (hereinafter sometimes called the "Trustee"), party of the second part. WHEREAS, the Company has heretofore executed and delivered its Indenture of Mortgage (hereinafter called "Original Indenture") dated as of July 1, 1950, to the Trustee, to secure the Company's First Mortgage Bonds, from time to time, in the manner and subject to the conditions set forth in the Original Indenture, and by said Original Indenture granted and conveyed unto the Trustee, upon the trusts, uses and purposes specifically therein set forth, certain real estate, franchises and other property therein described, including property acquired after the date thereof except as therein otherwise provided; and WHEREAS, the Original Indenture provides for the issuance of bonds thereunder in one or more series, the form of each series of bonds and of the coupons to be attached to the coupon bonds to be substantially in the forms set forth therein with such omissions, variations and insertions as are authorized or permitted by the Original Indenture and determined and specified by the Board of Directors of the Company; and WHEREAS, by the Original Indenture, the Company covenanted that it would execute and deliver such further instruments and do such further acts as might be necessary or proper to carry out more effectively the purposes of the Original Indenture and to make subject to the lien thereof any property thereafter acquired and intended to be subject to the lien thereof, and the Company executed and delivered to the Trustee seventeen Supplemental Indentures (which together with the Original Indenture are herein called the "Indenture"); and WHEREAS, all terms used herein and not otherwise defined shall have the meaning set forth in the Indenture; and WHEREAS, the Company deems it desirable to amend the Indenture in certain respects; and 2 WHEREAS, the execution and delivery of the amendments effected by this Eighteenth Supplemental Indenture have been duly authorized by the Board of Directors of the Company according to law, and have been approved by the written consents of the holders of in excess of 75% of the principal amount of bonds outstanding under the Indenture at the date of execution hereof, and all conditions and requirements necessary to make this Eighteenth Supplemental Indenture a valid, binding and legal instrument in accordance with its terms, for the purposes herein expressed, and the execution and delivery hereof, in the form and terms hereof, have been in all respects duly authorized; NOW, THEREFORE, THIS EIGHTEENTH SUPPLEMENTAL INDENTURE WITNESSETH: That Central Louisiana Electric Company, Inc., by way of further assurance and in consideration of the premises and of the acceptance by the Trustee of the trusts hereby created and of one dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in order to further secure the payment of the principal of, the premium, if any, and the interest on all bonds at any time issued and outstanding under the Indenture, according to their tenor and effect, and the performance and observance by the Company of all the covenants and conditions herein and therein contained, and of said bonds, has executed and delivered this Eighteenth Supplemental Indenture, and has granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, mortgaged, hypothecated, effected, pledged, set over and confirmed, and by these presents does grant, bargain, sell, alien, remise, release, convey, assign, transfer, mortgage, hypothecate, affect, pledge, set over and confirm, unto First National Bank of Commerce, as Trustee, and to its successors in the trust, and to its and their assigns forever, all the following described properties of the Company, that is to say: All properties, real, personal and mixed, tangible and intangible, owned by the Company on the date of the execution hereof or which may be hereafter acquired by it (except such property now owned or hereafter acquired as is expressly excepted from the lien of the Indenture by the terms thereof). The property covered by the lien of the Indenture shall include particularly, among other property without prejudice to the general and particular descriptions of property contained in the Original Indenture and in each indenture supplemental thereto, including this Eighteenth Supplemental Indenture, or to the generality of the language now or hereafter contained in the Indenture, the following described property: 3 I. A. The following described real estate, together with all improvements thereon situated in the State of Louisiana: Parcel 1 An undivided one-half interest in the following described property in Rapides Parish, Louisiana, to-wit: From the North corner of Section 38, Township 5 North, Range 4 West, Rapides Parish, Louisiana, common to the former Guin, former Wettermark, and former Stewart properties, proceed South 38 degrees 18 minutes East for 4,776.86 feet, this point being more particularly described by the Rodemacher Plan construction grid system as N-264,850 and E-1,932,400; then proceed North for 300 feet to the point of beginning; Then go West for 700 feet; Then go North for 371 feet; Then go East for 510 feet; Then go South for 20 feet; Then go East for 40 feet; Then go North for 32 feet; Then go East for 290 feet; Then go South for 135 feet; Then go West for 120 feet; Then go South for 248 feet; Then go West for 20 feet, to the point of beginning, containing 6.5 acres, all lying within Section 82, Township 5 North, Range 3 West, Rapides Parish, State of Louisiana, all as shown on Pan American Engineers Drawing No. 5588R dated May 16, 1977, a copy of which is attached to 4 that certain Act of Amendment executed by Central Louisiana Electric Company, Inc. and Lafayette Public Power Authority dated June 11 and July 25, 1979, recorded in COB 982, page 407, Entry No. 713372, records of Rapides Parish, Louisiana. Being a portion of the same property acquired by Central Louisiana Electric Company, Inc., from CLECO Construction Company, Inc. by deed dated December 8, 1982, recorded in COB 1078, page 591, Entry No. 760445, records of Rapides Parish, Louisiana. There is located on Parcel 1 above described an electric generating plant. Parcel 2 (1) The following described property in Rapides Parish, Louisiana, as shown on Sargent & Lundy Engineers Drawing No. M-2-2 dated April 4, 1980 and Drawing No. S-207 dated July 13, 1979, a copy of each of which is attached to that Sale Agreement recorded in COB 1015, page 595, Entry No. 730379, records of Rapides Parish, Louisiana, to-wit: From the Southeast corner of the Unit 2 Site, said point being more particularly described by the Rodemacher Plan construction grid system as N-265,150 and E-1,320,420, proceed West along the Southern boundary of said Unit 2 Site to the point of intersection of said boundary with a field drain as shown on said Drawing No. S-207, said point of intersection being more particularly described by said grid system as N-265,150 and E-1,932,350; Then go West along the Southern boundary of said field drain to a point described by said grid system as N-265,130 and E-1,932,275; Then go South along a line described by said grid system as E-1,932,275 to the point of intersection of said line with the Northern boundary of Rodemacher Unit 1 as shown on said Drawing No. S-207, said point being more particularly described by said grid system as N-265,090 and E-1,932,275; Then go West along the line described by said grid system as N-265,090 to a point described by said grid system as N-265,090 and E-1,932,210; 5 Then go North along a line described by said grid system as E-1,932,210 to the point of intersection of said line with the Southern boundary of the field drain shown on said Drawing No. 2-207, said point being more particularly described by said grid system as N-265,110 and E-1,932,210; Then go West along said boundary of said field drain and the oil separator shown on said Drawing No. S-207 to a point described by said grid system as N-264,940 and E-1,931,700; Then go West along a line described by said grid system as N-264,940 to a point described by said grid system as N-264,940 and E-1,931,600; Then go North along a line described by said grid system as E-1,931,600 to a point described by said grid system as N-265,140 and E-1,931,600; Then go West along a line described by said grid system as N-265,140 to the point of intersection of said line and the Western boundary of the road identified as Road "B" on said Drawing No. M-2-2, said point being more particularly described by said grid system as N-265,140 and E-1,930,930; Then go South along with the Western boundary of said Road "B" to a point described by said grid system as N-264,700 and E-1,930,930; Then go West along a line described by said grid system as N-264,700 to the point of the intersection of said line with the shoreline of a portion of Lake Rodemacher, said point being more particularly described by said grid system as N-264,700 and E-1,930,170; Then go North along the Southern boundary of the road identified on said drawing No. M-2-2 as the "Entrance Road" to the point of intersection of said boundary with the road identified on said Drawing No. M-2-2 as road "F", said point being more particularly described by said grid system as N-268,800 and E-1,930,800; Then go East along a line described by said grid system as N-268,800 to the point of intersection of said line with the Northern boundary of 6 the coal railroad tracks shown on said Drawing No. M-2-2, said point being more particularly described as N-268,800 and E-1,931,600; Then go East along the Northern boundary of said coal railroad tracks to the point of intersection of said boundary with the oil storage and unloading railroad tracks shown on said Drawing No. M-2-2, said point being more particularly described by said grid system as N-268,800 and E-1,933,270; Then go East along the Northern boundary of said oil storage and unloading railroad tracks to the point of intersection of said boundary with the Southern loop of the coal railroad tracks, said point being more particularly described by said grid system as N-268,800 and E-1,933,750; Then go South along the line described by said grid system as E-1,933,750 to the Southern boundary of said coal railroad tracks; Then go West along said boundary to the point of intersection of said boundary with a line described by said grid system as N-267,000; Then go East along said line to the point of intersection of said line with the Western shoreline of a portion of Lake Rodemacher as shown on said Drawing No. M-2-2; Then go South along the said shoreline to the point of intersection of said shoreline with the Northern boundary of the bottom ash pipe bridge shown on said Drawing No. M-2-2, a point more particularly described by said grid system as N-265,770 and E-1,932,470; Then go East along the Northern boundary of said bottom ash pipe bridge to the point of intersection of said boundary with the Eastern shoreline of a portion of Lake Rodemacher as shown on said Drawing No. M-2-2, said point being more particularly described by said grid system as N-265,770 and E-1,933,230; Then go South along said shoreline to the point of intersection of said shoreline with the Southern boundary of said ash pipe bridge as shown on said Drawing No. M-2-2, said point being more particularly described by said grid system as N-265,735 and E-1,933,230; and filed 7 for record in Rapides Parish, Louisiana under Registry No. 713372, recorded in Conveyance Book 982, Page 407, records of Rapides Parish, Louisiana. Then go West along the Southern boundary of the ash pipe bridge to the point of intersection of said boundary with the Western shoreline of a portion of Lake Rodemacher as shown on said Drawing No. M-2-2, said point being more particularly described by said grid system as N-265,735 and E-1,932,470; Then go South along said shoreline to the point of intersection of said shoreline with the line described by said grid system as N-265,150; Then go West along the line described by said grid system as N-265,150 to the point of beginning; SAVE AND EXCEPT the following described property and improvements thereon and the following described improvements and the property underlying such improvements: (i) the Unit 2 Site, identified as No. 1 said Drawing No. M-2-2; (ii) the fuel gas line, fuel oil pipeline and cables identified as No. 2 on said Drawing No. S-207; (iii)the roads identified as Road "A", "B", "F" and the "Entrance Road" and the road following the construction railroad tracks shown on said Drawing No. M-2-2, all identified as No. 3 thereon; and (iv) the railroad construction track identified as No. 4 on said Drawing No. M-2-2; and (v) the following described property, identified as No. 5 on said Drawing No. M-2-2: From the point of intersection of the Northern boundary of the oil storage and unloading railroad tracks with the Southern loop of the coal railroad tracks, said point being more particularly described by said grid system as N-268,800 and E-1,933,750, proceed West along said boundary of said oil 8 storage and unloading tracks to a point described by said grid system as N-267,900 and E-1,932,250; Then go West along a line described by said grid system as N-267,900 to the point of intersection of said line with the Western boundary of the road identified as Road "F" on said Drawing No. M-2-2; Then go South along said boundary to a point described by said grid system as N-267,000 and E-1,193,050; Then go East along a line described by said grid system as N-267,000 to a point described by said grid system as N-267,000 and E-1,932,000; Then go South on a line described by said grid system as E-1,932,000 to the intersection of said line with the Western boundary of the oil storage and unloading railroad tracks shown on said drawing No. M-2-2; Then go South along said boundary of said oil storage and unloading tracks to a point described by said grid system as N-266,000 and E-1,931,440; Then go East along a line described by said grid system as N-266,000 to the point of intersection of said line with the Western boundary of the coal railroad track shown on said Drawing No. M-2-2; Then go North along said boundary of said coal railroad track to the point of intersection of said boundary with the line described by said grid system as E-1,933,750; Then go North along the line described by said grid system as E-1,933,750 to the point of beginning. (2) The following described property in Rapides Parish, Louisiana, as shown on Sargent & Lundy Engineers Drawing No. M-2-2 dated April 4, 1980 and Drawing No. M-2-1 dated April 4, 1980, each attached to that Sale Agreement recorded in COB 1015, page 595, Entry No. 730379, records of Rapides Parish, Louisiana, to-wit: From a point on the Eastern shoreline of a portion of Lake Rodemacher as shown on said Drawing No. M-2-2, said point being more particularly described by the Rodemacher Plant construction grid 9 system as N-265,650 and E-1,933,230, proceed East along the line described by said grid system as N-265,650 to the point of intersection of said line with the Eastern shoreline of another portion of Lake Rodemacher as shown on said Drawing No. M-2-2, said point being more particularly described by said grid system as N-265,650 and E-1,934,220; Then go South along said shoreline to the point of intersection of said shoreline with a line described by said grid systems as N-265,500; Then go East to a point described by said grid system as N-265,500 and E-1,934,900; Then go South along a line described by said grid system as E-1,934,900 to the point of intersection of said line with the property line shown on said Drawing No. M-2-1; Then go North along said property line as shown on said Drawing No. M-2-1 to a point described by said grid system as N-267,380 and E-1,935,400; Then go West to a point described by said grid system as N-267,650 and E-1,935,100; Then go West along a line described by said grid system as N-267,650 to the point of intersection of said line with the Eastern boundary of the road running along the construction railroad tracks, as shown on said Drawing No. M-2-2, said point being more particularly described by said grid system as N-267,650 and E-1,933,700; Then go South along the Eastern boundary of said road to the point of intersection of said boundary with the Eastern shoreline of a portion of Rodemacher Lake, all as shown on said Drawing No. M-2-2; Then go South along said shoreline to the point of beginning; SAVE AND EXCEPT the following described improvements and the property underlying such improvements: 10 (i) the road and future spur track identified as No. 6 on said Drawing No. M-2-2; and (ii) the transmission lines identified as No. 7 on said Drawing No. M-2-2 and said Drawing No. M-2-1. Being a portion of the same property acquired by Central Louisiana Electric Company, Inc. from CLECO Construction Company, Inc. by deed dated December 8, 1982, recorded in COB 1078, page 591, Entry No. 760445, records of Rapides Parish, Louisiana. There is located on Parcel 2 above described an electric generating station. Parcel 3 A certain piece, parcel or lot of ground, together with all buildings and improvements thereon, rights, ways and privileges thereto belonging or in anywise appertaining, being, lying and situated in Rapides Parish, Louisiana, and being more particularly described as follows, to-wit: Part of Lot D of the H. L. Mertens Subdivision of Lot 4 of the Sam Allen Subdivision of part of the Southwest Quarter of Section 7, Township 5 North, Range 1 East, as per plat thereof recorded in Plat Book 7, page 160, records of Rapides Parish, Louisiana, and being more particularly described as follows, to-wit: Begin at the Northeast corner of Lot D of said Lot 4 of the H. L. Mertens Subdivision, Rapides Parish, Louisiana, and from said point thence proceed South a distance of 100 feet to a point; thence run West a distance of 100 feet to a point; thence run North 100 feet to a point; thence run a distance of 100 feet East back to the Point of Beginning. Said tract containing 0.23 acres more or less and more particularly shown on a Plat of Survey by W. Pierre Lemoine and Associates, Inc. dated August 5, 1982, annexed to the deed of acquisition of Central Louisiana Electric Company, Inc., as described below. Being the same property acquired by Central Louisiana Electric Company, Inc. from Eric L. West and Mary Bailey West by deed dated September 14, 1982, recorded in COB 1071, page 647, Entry No. 757381, records of Rapides Parish, Louisiana. 11 There is located on Parcel 3 above described an electric substation. Parcel 4 An undivided one-half interest in the following described property in DeSoto Parish, Louisiana, to-wit: (1) A certain parcel of land situated in the southwest quarter, and the west half of the southeast quarter of Section 11, Township 12 North, Range 12 West, DeSoto Parish, Louisiana being more particularly described as follows; From a concrete monument at the southeast corner of Section 11, T12N-R12W run the following State (Louisiana-North Zone) Plane System course and distance to a "POINT OF BEGINNING"; N 89 degrees 28' 06" W along the south line of Section 11, 1978.33 feet to the SW corner of the E 1/2 of the SW 1/4 of the SE 1/4 and the "POINT OF BEGINNING". From said 'POINT OF BEGINNING" run along the following State (Louisiana-North Zone) Plane System courses and distances; N 89 degrees 28' 06" W along the south line of said Section 11, to the south quarter corner, a concrete monument, a distance of 659.45 feet, N 89 degrees 28' 12" W continue along the south line of Section 11, 2633.70 feet to a point on the east right-of-way line of the Make Up Road (a parish road with a right-of-way width of 50 feet, 25 feet each side of the centerline), thence continue along said east right-of-way as follows; N 01 degrees 15' 33" W - 92.56 feet N 02 degrees 57' 03" W - 20.14 feet N 00 degrees 28' 07" E - 884.14 feet N 03 degrees 47' 21" E - 228.94 feet N 02 degrees 25' 47" E - 285.18 feet N 00 degrees 41' 40" E - 494.86 feet N 03 degrees 54' 08" W - 327.63 feet to a point on the west line of Section 11. N 0 degrees 28' 07" E - 884.14 feet 12 N 0 degrees 28' 07" E along said west line 156.75 feet to the centerline of the Naborton Cut Off road (a parish road with a right-of-way width of 60 feet, 30 feet each side of the centerline), thence continue along said centerline as follows; S 89 degrees 25' 01" E - 234.39 feet S 88 degrees 26' 16" E - 27.45 feet N 88 degrees 24' 01" E - 100.03 feet N 87 degrees 37' 00" E - 99.93 feet N 88 degrees 49' 56" E - 100.10 feet N 88 degrees 00' 05" E - 99.96 feet N 86 degrees 54' 42" E - 99.69 feet N 88 degrees 12' 23" E - 100.23 feet N 86 degrees 28' 49" E - 100.29 feet N 87 degrees 39' 30" E - 99.99 feet N 86 degrees 38' 33" E - 99.90 feet N 82 degrees 29' 26" E - 299.96 feet N 84 degrees 07' 19" E - 99.86 feet N 82 degrees 18' 13" E - 100.07 feet N 83 degrees 16' 45" E - 100.03 feet N 82 degrees 34' 47" E - 77.73 feet N 84 degrees 21' 36" E - 122.30 feet N 85 degrees 43' 11" E - 99.98 feet N 86 degrees 34' 59" E - 100.05 feet N 87 degrees 51' 22" E - 100.01 feet S 89 degrees 22' 10" E - 100.11 feet S 86 degrees 19' 31" E - 99.91 feet S 84 degrees 09' 12" E - 108.96 feet S 81 degrees 48' 23" E - 81.92 feet to the west line of the SE 1/4 of Section 11, N 0 degrees 34' 53" E along said west line 9.35 feet to the NW corner of the SE 1/4 of Section 11, S 89 degrees 20' 08" E along the north line 1321.47 feet to the NE corner of the NW 1/4 of the SE 1/4, S 0 degrees 38' 15" W along the east line of the NW 1/4 of the SE 1/4, 1318.39 feet to the SE corner of said quarter-quarter section, N 89 degrees 24' 07" W along the south line of said NW 1/4 of SE 1/4 660.09 feet to the NW corner of the E 1/2 of the SW 1/4 of the SE 1/4 of Section 11, S 0 degrees 36' 34" W along the west line of the E 1/2 of the SW 1/4 of the SE 1/4, 1319.15 feet to the SW corner of the E 1/2 of SW 1/4 of SE 1/4 Section 11 and the "POINT OF BEGINNING". 13 Containing 215.025 acres more or less. (2) A certain parcel of land comprising the southwest quarter of the southwest quarter of Section 12, Township 12 North, Range 12 West, DeSoto Parish, Louisiana being more particularly described as follows; "BEGINNING" at a concrete monument at the southwest corner of Section 12, T12N-R12W, thence run along the following State (Louisiana-North Zone) Plane System courses and distances as follows; N 0 degrees 41' 37" E along the west line of Section 12 to the NW corner of the SW 1/4 of the SW 1/4 1316.86 feet, S 89 degrees 18' 23" E along the north line of the SW 1/4 of the SW 1/4 1309.84 feet, S 0 degrees 42' 39" W along the east line of the SW 1/4 of the SW 1/4 to the south line of Section 12, 1317.47 feet, N 89 degrees 16' 48" W along the south line 1309.45 feet to a concrete monument at the SW corner of Section 12 and the "POINT OF BEGINNING". Containing 39.601 acres more or less. (3) A certain parcel of land situated in the northwest quarter, west half of the northeast quarter, not half of the southwest quarter and the northwest quarter of the southeast quarter of Section 14, Township 12 North, Range 12 West, DeSoto Parish, Louisiana, being more particularly described as follows; From a concrete monument at the northeast corner of Section 14, T12N-R12W run the following State (Louisiana -North Zone) Plane System course and distance to a "POINT OF BEGINNING"; N 89 degrees 28' 06" W along the north line of Section 14, 1318.89 feet to the NE corner of the W 1/2 of the NE 1/4 and the "POINT OF BEGINNING". From said "POINT OF BEGINNING" run along the following State (Louisiana-North Zone) Plane System courses and distances; S 0 degrees 51' 01" W along the east line of the W 1/2 of the NE 1/4. 2618.64 feet, 14 S 0 degrees 53' 10" W along the east line of the NW 1/4 of the SE 1/4, 1314.29 feet to the SE corner of said quarter-quarter section, N 88 degrees 56' 23" W along south line of said quarter-quarter section 1319.31 feet to the SE corner of the N 1/2 of the SW 1/4 of Section 14, thence continue, N 88 degrees 56' 23" W along the south line of said N 1/2 of the SW 1/4, 2636.22 feet to the SW corner of said N 1/2 and a concrete monument on the west line of Section 14, N 0 degrees 56' 16" E along the west line of Section 14, 1323.13 feet to the W 1/4 corner, thence continue along west line, N 0 degrees 48' 05" E 388.66 feet to a point on the east right-of-way line of the Make Up Road (a parish road with a right-of-way width of 50 feet, 25 feet each side of the centerline), thence continue along said east right-of-way line as follows; N 23 degrees 37' 39" E - 2.96 feet N 14 degrees 31' 05" E - 42.60 feet N 09 degrees 57' 08" E - 41.21 feet N 06 degrees 27' 23" E - 41.11 feet N 03 degrees 16' 01" E - 25.86 feet N 02 degrees 17' 10" E - 90.91 feet N 01 degrees 51' 46" E - 90.33 feet N 00 degrees 47' 19" E - 93.60 feet N 00 degrees 02' 51" W - 49.95 feet N 00 degrees 33' 50" E - 49.84 feet N 00 degrees 49' 41" W - 91.94 feet N 01 degrees 45' 21" W - 100.46 feet N 02 degrees 52' 19" W - 95.97 feet N 07 degrees 23' 25" W - 50.84 feet N 06 degrees 41' 21" W - 42.48 feet to the west line of Section 14 N 00 degrees 48' 05" E - 105.93 feet along west line to east right-of-way line of the Make Up Road, thence continue along said east right-of-way line as follows; N 20 degrees 15' 34" E - 12.74 feet N 23 degrees 13' 10" E - 23.02 feet N 29 degrees 21' 19" E - 23.46 feet N 30 degrees 18' 49" E - 102.08 feet N 19 degrees 57' 46" E - 29.06 feet N 11 degrees 47' 21" E - 29.70 feet N 01 degrees 28' 42" W - 38.57 feet N 19 degrees 08' 51" W - 30.03 feet N 24 degrees 22' 32" W - 26.77 feet N 27 degrees 16' 05" W - 25.85 feet N 28 degrees 15' 35" W - 23.45 feet N 20 degrees 09' 16" W - 21.87 feet N 13 degrees 55' 57" W - 23.16 feet N 11 degrees 43' 16" W - 22.78 feet N 03 degrees 44' 22' W - 22.73 feet N 01 degrees 18' 38" W - 360.16 feet N 00 degrees 22' 21" E - 339.12 feet N 02 degrees 05' 25" W - 48.77 feet N 01 degrees 15' 33" W - 7.96 feet to the north line of Section 14, thence along the north line, S 89 degrees 28' 12" E - 2633.70 feet to the north quarter corner of Section 14, thence continue 15 along north line, S 89 degrees 28' 06" E - 1318.89 feet to the NE corner of the W 1/2 of the NE 1/4 of Section 14 and the "POINT OF BEGINNING". Containing 354.768 acres more or less. (4) An undivided 7/12ths interest only in and to a certain parcel of land comprising the east half of the southwest quarter of the southeast quarter of Section 11, Township 12 North, Range 12 West, DeSoto Parish, Louisiana being more particularly described as follows; From a concrete monument at the southeast corner of Section 11, T12N-R12W run the following State (Louisiana-North Zone) Plane System courses and distances to a "POINT OF BEGINNING"; N 89 degrees 28' 06" W along the south line of Section 11, 1318.89 feet to the SE corner of the E 1/2 of SW 1/4 of the SE 1/4 and the "POINT OF BEGINNING". From said "POINT OF BEGINNING" run along the following State (Louisiana-North Zone) Plane System courses and distances. N 89 degrees 28' 06" W along the south line of Section 11, and E 1/2 of the SW 1/4 of the SE 1/4, 659.44 feet, N 0 degrees 36' 34" E along the west line of said E 1/2 of SW 1/4, SE 1/4, 1319.15 feet, S 89 degrees 24' 07" E along north line of said E 1/2, 660.09 feet, S 0 degrees 38' 15" W along east line of said E 1/2, 1318.39 feet to the "POINT OF BEGINNING". Containing 19.974 acres more or less. (5) An undivided 7/12ths interest only in and to a certain parcel of land comprising the east half of the northeast quarter of Section 14, Township 12 North, Range 12 West, DeSoto Parish, Louisiana, being more particularly described as follows; "BEGINNING" at a concrete monument at the northeast corner of Section 14, T12N-R12W, thence run along the following State (Louisiana-North zone) Plane System courses and distances as follows; S 0 degrees 49' 55" W along the east line of Section 14 to the SE corner of the E 1/2 of the NE 1/4, 2632.10 feet, N 88 degrees 53' 01" W along the south line to 16 the SW corner of the E 1/2 of the NE 1/4, 1319.72 feet, N 0 degrees 51' 01" E along the west line to the north line of Section 14 and the NW corner of the E 1/2 of the NE 1/4, 2618.64 feet, S 89 degrees 28' 06" E along the north line of Section 14, 1318.89 feet to a concrete monument and the "POINT OF BEGINNING". Containing 79.514 acres more or less. Being a portion of the same property acquired by Central Louisiana Electric Company, Inc. from Southwestern Electric Power Company by deed dated November 13, 1981, recorded in COB 493, page 56, Entry No. 440907, records of DeSoto Parish, Louisiana. There is to be located on Parcel 4 above described an electric generating station. II. All real estate or interest therein, now owned or which may be hereafter acquired by the Company for use or which may be used by it in connection with its business as an electric and water company, together with all of the right, title and interest of the Company, now owned or hereafter acquired in and to any and all works, plants, buildings, structures, erections and constructions now or hereafter placed upon any of the real estate mentioned, described or referred to as being subject to the lien of the Indenture, with the fixtures, tenements, hereditaments and appurtenances thereunto appertaining or belonging. III. The following described property, wherever situated: First: The electric generating plants and electric transmission and/or distributions systems now or hereafter owned by the Company, and any electric generating plants and electric transmission and/or distribution systems hereafter constructed or acquired by the Company, and any additions to or extensions of any such existing or future electric generating plants and/or electric transmission and/or distribution systems, together with all engines, dynamos, motors, reactors, generators, boilers, turbines, pole lines, poles, wires, cross-arms, insulators, transformers, meters, buildings, erections, structures, stations, substations, power houses, power producing and power transmitting equipment, water, water rights, 17 water wheels, headworks, race-ways, hydraulic works, hydro-electric plants, cables, conduits, instruments, apparatus, appliances, machinery, facilities, fixtures and all other property used or provided for use in the construction, repair, maintenance and/or operation thereof, both that now owned and that which may be hereafter acquired by the Company, and together also with all the rights, privileges, franchises, easements, licenses, ordinances, rights of way, liberties, immunities and permits of the Company, howsoever conferred or acquired, and whether now owned or hereafter to be acquired, with respect to the construction, maintenance, repair and/or operation of said electric generating plants and electric transmissions and/or distribution systems, and each of them, and any additions thereto and extensions thereof. Second: The waterworks plants and waterworks distribution systems now owned by the Company, and any waterworks plants and/or waterworks distribution systems hereafter constructed or acquired by the Company together with the buildings, structures, erections, pumps, pumping machinery, reservoirs, filters, filter-galleries, chlorinating equipment, tanks, wells, water rights, water supply, water mains, hydrants, pipelines, service pipes, meters, standpipes, engines, boilers, apparatus, appliances, facilities, machinery, equipment, fixtures and all other property used or provided for use in the construction, maintenance, repair and/or operation thereof, both that are now owned and that which may be hereafter acquired by the Company, and together also with all of the rights, privileges, rights of way, franchises, licenses, easements, permits, liberties, immunities, grants and ordinances of the Company, howsoever conferred or acquired, and whether now owned or hereafter to be acquired, with respect to the construction, maintenance, repair and operation of said plants and systems, and each of them, and any additions thereto and extension thereof. TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto the Trustee and its successors in the trust hereby created and its and their assigns forever; SUBJECT, HOWEVER, to existing leases, to easements and other rights of way for pole lines and other similar encumbrances and restrictions which the Company hereby certifies, in its judgment, do not impair the use of said property by the Company in its business, to liens securing indebtedness which has neither been assumed by the Company nor upon which it customarily pays interest charges, existing solely upon real property, or rights in and relating thereto, which 18 real property or rights have been or may be acquired for right-of-way purposes, to liens of taxes and assessments for the current year and taxes and assessments not yet due, to alleys, streets and highways that may run across or encroach upon said lands, and to undetermined liens and charges, if any, incidental to construction, except such as may result from any delinquent obligation of the Company for the payment of money on account of such construction, and, with respect to any property which the Company may hereafter acquire, to all terms, conditions, agreements, covenants, exceptions, and reservations expressed or provided in such deeds and other instruments, respectively, under and by virtue of which the Company shall hereafter acquire the same and to any and all liens existing thereon at the time of such acquisition within the restrictions contained in the Indenture; and subject also to other liens and encumbrances of the character defined in the Indenture as "permitted liens" insofar as the same may attach to any of the property embraced herein; SAVING AND EXCEPTING, however, from the properties mortgaged and pledged by the Indenture (whether now owned by the Company or hereafter acquired by it) all bills, notes and accounts receivable, cash on hand and in banks, contracts, merchandise and appliances kept for purposes of sale, and all bonds, obligations, evidences of indebtedness, shares of stock and other securities, and certificates or evidences of interest therein - other than any of the foregoing which may be hereafter specifically transferred or assigned to or pledged or deposited with the Trustee under the Indenture or required by the provisions of the Indenture so to be - and all office furniture and equipment, motor vehicles, tools, testing equipment and consumable materials and supplies; provided, however, that, if upon the happening of an event of default as in the Indenture defined, the Trustee or any receiver appointed under the Indenture shall enter upon and take possession of the mortgaged property, the Trustee or such receiver may, to the extent permitted by law, at the same time likewise take possession of any and all of the property described in this paragraph then on hand and use and administer the same to the same extent as if such property were part of the mortgaged property, unless and until such event of default shall be remedied or waived and possession of the mortgaged property restored to the Company, its successors or assigns. ALSO SAVING AND EXCEPTING, however, from the property hereby mortgaged and pledged: (a) All parcels of land now owned or hereafter acquired by the Company and not used by it or useful in connection with its business as an electric or water company or as an electric or water utility. 19 (b) All machinery, equipment, fixtures, supplies and materials, now owned or hereafter acquired, not used by or useful to the Company in its business as an electric, or water company or as an electric, or water utility, not located on any parcel of real estate now owned or hereafter acquired, referred to as being subject to the lien of the Indenture. (c) All additions, improvements, betterments, extensions and replacements now or hereafter made to or acquired for or in connection with the property set forth in paragraphs (a) and (b), above. IN TRUST NEVERTHELESS, upon the terms and trusts in the Indenture set forth; PROVIDED, HOWEVER, and these presents are upon the condition that if the Company, its successors or assigns, shall pay or cause to be paid the principal of and interest on all said bonds, together with the premium, if any, payable on such of said bonds as may have been called for redemption prior to maturity, or shall provide, as permitted by the Indenture, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon for principal, interest and premium, if any, and if the Company shall also pay or cause to be paid all other sums payable under the Indenture by it, then the Indenture and the estate and rights thereby granted shall cease, determine and be void, otherwise to be and remain in full force and effect. IT IS HEREBY FURTHER COVENANTED, DECLARED AND AGREED by and between the Company and the Trustee, as follows: ARTICLE I AMENDMENTS OF INDENTURE Section 1.1 The Indenture is amended by deleting the definition of "minimum provision for property retirements or depreciation" contained in Section 1.05 of the Indenture, and inserting in lieu thereof a definition of "minimum provision for property retirements or depreciation" reading as follows: "Minimum Provision for Property Retirements or Depreciation: The term 'minimum provision for property retirements or depreciation,' when used with reference to any period of time, shall mean an amount equal to (i) fifteen per centum (15%) of the gross operating revenues of the 20 Company received from electric, gas and water operations, during such period, to the extent arising out of the operation of bondable property and leased electric, gas and water facilities, after deducting from such gross operating revenues (a) an amount equal to the aggregate cost to the Company of electric energy, gas and water purchased for resale in connection with the operation of such property or facilities and the cost to the Company of fuel used in the generation of electricity in excess of 4.377 mills ($.004377) per net kilowatt-hour, and (b) rentals paid for the lease of electric, gas and water facilities, less (ii) an amount equal to the aggregate charges by the Company to operating expenses during such period for current repairs and maintenance to bondable property and leased electric, gas and water facilities." Section 1.2 The Indenture is modified by amending subsection (A) of Section 9.06 so that following such amendment it shall read as follows: "SECTION 9.06.(A) So long as the Company is not in default in the payment of the interest on any of the bonds then outstanding hereunder and none of the completed defaults specified in Section 10.01 hereof shall have occurred and be continuing, any money received by the Trustee pursuant to the provisions of this Article IX or the provisions of Section 5.14 hereof and any money which it is specifically provided may be withdrawn, used or applied pursuant to this Section and any moneys received by the Trustee the withdrawal, use or application of which is not otherwise provided for may, at the option of the Company, evidenced by a writing signed in the name of the Company by its President or a Vice President and its Treasurer or an Assistant Treasurer, and accompanied by an officers' certificate stating that the Company is not in default in the payment of the interest on any of the bonds then outstanding hereunder and none of the completed defaults specified in Section 10.01 hereof has occurred and is continuing. (1) be withdrawn from time to time by the Company in an amount equal to (i) the amount of bondable value of property additions which the Company elects to make the basis of a withdrawal under this Section and (ii) the principal amount of bonds authenticated and delivered hereunder which might then be made the basis for the authentication and delivery of bonds under the provisions of Section 4.04 hereof and which the Company elects to make the basis of a withdrawal under this Section in lieu of the right of the Company to the 21 authentication and delivery of bonds on such basis; provided, that in case the withdrawal is applied for in whole or in part upon the basis of bonds authenticated and delivered hereunder which might then be made the basis for the authentication and delivery of bonds under the provisions of Section 4.04 hereof, the Company shall comply with the provisions of Section 4.04 hereof, except the provisions therein relating to Section 4.06 and Section 4.07 hereof; or (2) be used by the Trustee for the purchase of bonds issued hereunder in accordance with the provisions of Section 8.06 hereof; or (3) be applied by the Trustee to the payment at maturity of any bonds issued hereunder or the redemption of any bonds issued hereunder as are by their terms redeemable before maturity, of such series as may be designated by the Company or by the Trustee upon the failure of the Company to make such designation, any such redemption to be in the manner and subject to the conditions provided in the bonds to be redeemed and in Article VIII hereof; and for such purpose the Trustee may publish notice of redemption in the name of the Company or in its own name as Trustee; provided, however, that, notwithstanding the foregoing, any money received by the Trustee (in excess of 1% of the principal amount of bonds then issued hereunder) in connection with any release of property upon any acquisition thereof by any municipal corporation or other governmental subdivision or governmental body or public authority which acquisition was as a result of the exercise (or of a settlement by the Company in lieu of the exercise) of a power of eminent domain or expropriation shall be immediately used or applied by the Trustee as provided in paragraphs (2) and (3) of this subsection (A) except that if the Company shall fail to designate the series to be purchased or redeemed or shall fail to take any other action required in connection with such use or application of such money, the Trustee shall do so. If any money received by the Trustee pursuant to the provisions of this Article IX or the provisions of Section 5.14 hereof or any money which it is specifically provided may be withdrawn, used or applied pursuant to the provisions of this Section, and any moneys received by the Trustee the withdrawal, use or application of which is not otherwise provided for shall not be so withdrawn, used or applied within the next succeeding three years after the same shall have been deposited with the Trustee, it shall thereafter be used or applied by 22 the Trustee as provided in paragraphs (2) and (3) of this subsection (A) except that if the Company shall fail to designate the series to be purchased or redeemed or shall fail to take any other action required in connection with such use or application of such money, the Trustee shall do so." ARTICLE II STAMPING AND REVISION OF BONDS OF ISSUED SERIES OF BONDS SECTION 2.1. All bonds hereafter issued of Series of issued bonds shall (unless revised as hereinafter provided) be stamped or typewritten prior to their issuance with a notation as follows: "The Indenture dated as of July 1, 1950 referred to in this bond has been amended by an Eighteenth Supplemental Indenture dated as of December 1, 1982, executed and delivered with the consent of the holders of 75% of the bonds at the time outstanding under the Indenture, providing for amendment of (i) the definition of "Minimum Provision for Property Retirements or Depreciation" contained in Section 1.05 of the Indenture as amended, and (ii) subsection A of Section 9.06 of the Indenture as amended with respect to application of funds received by the Trustee upon acquisition of property by governmental entities. A copy of the Eighteenth Supplemental Indenture is on file with First National Bank of Commerce in New Orleans, Trustee under the Indenture, to which reference is hereby made. FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS, TRUSTEE" Section 2.2. Any bonds hereafter issued of Series of issued bonds at any time hereafter issued shall, if the Company so elects or if the holder of such bond so requests in writing, be in such revised form as may be approved by the Trustee so as to refer to the amendment of the Indenture hereby effected. ARTICLE III MISCELLANEOUS Section 3.1. As supplemented and amended by this Eighteenth Supplemental Indenture, the Original Indenture and the previous seventeen Supplemental Indentures thereto shall be read, taken and construed as one and the same instrument. 23 Section 3.2. The Trustee assumes no duties, responsibilities or liabilities by reason of this Eighteenth Supplemental Indenture, other than as set forth in the Indenture, as fully as if said terms and conditions were herein set forth at length. Section 3.3. This Eighteenth Supplemental Indenture shall be simultaneously executed in several counterparts and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. Section 3.4. This Eighteenth Supplemental Indenture has been dated as of December 1, 1982, solely for convenience. The date of actual execution hereof by each of the parties hereto is the date shown by the acknowledgment of execution hereof by its officers. 24 In Witness Whereof, CENTRAL LOUISIANA ELECTRIC COMPANY, INC. has caused this instrument to be signed in its corporate name by one of its Senior Vice Presidents and sealed with its corporate seal attested by one of its Assistant Secretaries, and First National Bank of Commerce to evidence its acceptance of the trust hereby created has caused this instrument to be signed in its corporate name and sealed by its corporate seal attested by one of its Corporate Trust Officers, all as of the day and year first above written. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. {Seal} By /s/ Scott o. Brame Senior Vice President Attest: /s/ Vera J. Whittington Assistant Secretary Signed, sealed, acknowledged and delivered by CENTRAL LOUISIANA ELECTRIC COMPANY, INC. in the presence of: /s/ Joyce A. Lewis /s/ Doris H. Harper FIRST NATIONAL BANK OF COMMERCE {Seal} By /s/ James P. Connor Vice President and Trust Officer Attest: /s/ Dennis L. Milliner Corporate Trust Officer Signed, sealed, acknowledged and delivered by FIRST NATIONAL BANK OF COMMERCE in the presence of: /s/ Maryem F. Hopkins /s/ Josie C. Schillage 25 STATE OF LOUISIANA PARISH OF RAPIDES BE IT KNOWN, THAT on this 17th day of December, 1982, before me the undersigned, a Notary Public in and for said Parish and State, duly qualified and commissioned as such, personally appeared S. O. Brame, Senior Vice President and Vera J. Whittington, Assistant Secretary, of Central Louisiana Electric Company, Inc., the grantor in the foregoing instrument, to me personally known and known to me to be such officers, respectively, of such Company, and personally known to me to be the identical persons whose names are subscribed and affixed to the foregoing instrument as such officers, respectively, and who subscribed the name of the Company thereto, and in my presence and in the presence of the undersigned witnesses, of lawful age and domicile, severally acknowledge that the same is their respective, free and voluntary act and deed as such officers and the free and voluntary act and deed of said Company for the uses and purposes therein expressed; and the said persons being each by me duly and severally sworn as individuals did depose and say that they are such officers, respectively, of said Company; that they know the seal of said Company; that the seal affixed to the foregoing instrument was and is such corporate seal; that said seal was so affixed and said instrument was so signed on behalf of said Company by the order and authority of the Board of Directors of said Company; and that they signed their names thereto as such officers, respectively, of said Company by like authority. IN TESTIMONY WHEREOF, the said Appearers have hereunto signed their names on the day and date first hereinabove written, in the presence of /s/ Joyce A. Lewis and /s/ Doris H. Harper, witnesses of lawful age and domicile, and of me, said Notary Public. WITNESSES: /s/ Scott O. Brame Senior Vice President /s/ Joyce A. Lewis /s/ Vera J. Whittington Assistant Secretary /s/ Doris H. Harper /s/ Sammie S. Cicardo Notary Public {Seal} 26 STATE OF LOUISIANA PARISH OF ORLEANS BE IT KNOWN, THAT on this 17th day of December, 1982, before me the undersigned, a Notary Public in and for said Parish and State, duly qualified and commissioned as such, personally appeared James P. Conner, Vice President and Trust Officer and Dennis L. Milliner, Corporate Trust Officer, of First National Bank of Commerce, a national banking association, duly organized and existing under the laws of the United States of America, Trustee under the foregoing instrument, to me personally known and known to me to be such officers, respectively, of said Bank, and personally known to me to be the identical persons whose names are subscribed and affixed to the foregoing instrument as such officers, respectively, and who subscribed the name of said Bank thereto, and in my presence and in the presence of the undersigned witnesses, of lawful age and domicile, severally acknowledge that the same is their respective, free and voluntary act and deed as such officers and the free and voluntary act and deed of said Bank for the uses and purposes therein expressed; and the said persons being each by me duly and severally sworn as individuals did depose and say that they are such officers, respectively, of said Bank; that they know the seal of said Bank; that the seal affixed to the foregoing instrument was and is such corporate seal; that said seal was so affixed and said instrument was so signed on behalf of said Bank by the order and authority of the Board of Directors of said Bank; and that they signed their names thereto as such officers, respectively, of said Bank by like authority. IN TESTIMONY WHEREOF, the said Appearers have hereunto signed their names on the day and date first hereinabove written, in the presence of /s/ Maryem F. Hopkins and /s/ Josie C. Schillage, witnesses of lawful age and domicile, and of me, said Notary Public. WITNESSES: /s/ James P. Connor Vice President and Trust Officer /s/ Maryem F. Hopkins /s/ Dennis L. Milliner Corporate Trust Officer /s/ Josie C. Schillage /s/ Patricia A. Rouen Notary Public {Seal} EX-4.A.9 3 19TH SUPPLEMENTAL INDENTURE EXHIBIT 4(a)(9) CENTRAL LOUISIANA ELECTRIC COMPANY, INC. TO FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS, as Trustee NINETEENTH SUPPLEMENTAL INDENTURE DATED AS OF JANUARY 1, 1983 Amendment to Indenture of Mortgage Dated as of July 1, 1950 NINETEENTH SUPPLEMENTAL INDENTURE, dated as of January 1, 1983, between CENTRAL LOUISIANA ELECTRIC COMPANY, INC., a corporation duly organized and existing under and by virtue of the laws of the State of Louisiana (hereinafter sometimes called the "Company"), party of the first part, and FIRST NATIONAL BANK OF COMMERCE (formerly The National Bank of Commerce in New Orleans), a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as Trustee under the Indenture of Mortgage hereinafter mentioned (hereinafter sometimes called the "Trustee"), party of the second part. WHEREAS, the Company has heretofore executed and delivered its Indenture of Mortgage (hereinafter called "Original Indenture") dated as of July 1, 1950, to the Trustee, to secure the Company's First Mortgage Bonds, from time to time, in the manner and subject to the conditions set forth in the Original Indenture, and by said Original Indenture granted and conveyed unto the Trustee, upon the trusts, uses and purposes specifically therein set forth, certain real estate, franchises and other property therein described, including property acquired after the date thereof except as therein otherwise provided; and WHEREAS, the Original Indenture provides for the issuance of bonds thereunder in one or more series, the form of each series of bonds and of the coupons to be attached to the coupon bonds to be substantially in the forms set forth therein with such omissions, variations and insertions as are authorized or permitted by the Original Indenture and determined and specified by the Board of Directors of the Company; and WHEREAS, by the Original Indenture, the Company covenanted that it would execute and deliver such further instruments and do such further acts as might be necessary or proper to carry out more effectively the purposes of the Original Indenture and to make subject to the lien thereof any property thereafter acquired and intended to be subject to the lien thereof, and the Company executed and delivered to the Trustee eighteen Supplemental Indentures (which together with the Original Indenture are herein called the "Indenture"); and 1 WHEREAS, all terms used herein and not otherwise defined shall have the meaning set forth in the Indenture; and WHEREAS, the Company deems it desirable to amend the Indenture in certain respects; and WHEREAS, the execution and delivery of the amendments effected by this Nineteenth Supplemental Indenture have been duly authorized by the Board of Directors of the Company according to law, and have been approved by the written consents of the holders of in excess of 75% of the principal amount of bonds outstanding under the Indenture at the date of execution hereof, and all conditions and requirements necessary to make this Nineteenth Supplemental Indenture a valid, binding and legal instrument in accordance with its terms, for the purposes herein expressed, and the execution and delivery hereof, in the form and terms hereof, have been in all respects duly authorized; NOW, THEREFORE, THIS NINETEENTH SUPPLEMENTAL INDENTURE WITNESSETH: That Central Louisiana Electric Company, Inc., by way of further assurance and in consideration of the premises and of the acceptance by the Trustee of the trusts hereby created and of one dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in order to further secure the payment of the principal of, the premium, if any, and the interest on all bonds at any time issued and outstanding under the Indenture, according to their tenor and effect, and the performance and observance by the Company of all covenants and conditions herein and therein contained, and of said bonds, has executed and delivered this Nineteenth Supplemental Indenture. IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the Company and the Trustee, as follows: 2 ARTICLE I SECTION 1.1 The Company covenants that in consideration of execution of this Nineteenth Supplemental Indenture it will from and after the date hereof pay on the Bonds of all Series heretofore issued under the Indenture, as heretofore supplemented and amended, other than the Bonds of Series R and the Bonds of Series S (to wit: the Bonds of Series F, G, H, I, J, K, L, M, M, N, O, P and Q) as additional interest an amount equal to .25% per annum (twenty-five hundredth of one percent) of the principal amount of such Bonds which are Outstanding. Such additional annual interest shall be payable semi-annually on each interest payment date provided for registered and coupon Bonds of such respective series and will begin to accrue from the next interest payment date of such respective series following the date of this Nineteenth Supplemental Indenture. ARTICLE II AMENDMENTS OF INDENTURE SECTION 2.1. The Indenture is modified by amending Subsection (C) of Section 1.07 of the Indenture so that following such amendment it shall read as follows: (c) the "interest earnings requirement", which shall be a figure equal to two times the aggregate annual interest charges specified in subsection (B) of this Section. ARTICLE III STAMPING AND REVISION OF BONDS OF ISSUED SERIES OF BONDS SECTION 3.1. All bonds hereafter issued of Series of issued bonds and bonds of Series of issued bonds presented for notation thereon shall (unless revised as hereinafter provided) be stamped or typewritten prior to their issuance with a notation as follows: 3 "The Indenture dated as of July 1, 1950 referred to in this bond has been amended by a Nineteenth Supplemental Indenture dated as of January 1, 1983, executed and delivered with the consent of the holders of 75% of the bonds at the time outstanding under the Indenture, providing (i) for amendment of the definition of 'interest earnings requirement' contained in Section 1.07 of the Indenture as amended and (ii) for the increase in the interest payable on this Bond by .25% per annum (twenty-five hundredth of one percent), on the principal amount hereof, accruing from the next interest payment date after January 1, 1983. A copy of the Nineteenth Supplemental Indenture is on file with First National Bank of Commerce in New Orleans, Trustee under the Indenture, to which reference is hereby made. provided, that any notation on bonds of Series R and S shall delete the language following "(ii)" in the form of notation set forth above. FIRST NATIONAL BANK OF COMMERCE IN NEW ORLEANS, "TRUSTEE" SECTION 3.2. Any bonds hereafter issued of Series of issued bonds at any time hereafter issued shall, if the Company so elects or if the holder of such bond so requests in writing, be in such revised form as may be approved by the Trustee so as to refer to the amendment of the Indenture hereby effected. 4 ARTICLE IV MISCELLANEOUS SECTION 4.1. As supplemented and amended by this Nineteenth Supplemental Indenture, the Original Indenture and the previous eighteen Supplemental Indentures thereto shall be read, taken and construed as one and the same instrument. SECTION 4.2. The Trustee assumes no duties, responsibilities or liabilities by reason of this Nineteenth Supplemental Indenture, other than as set forth in the Indenture, as fully as if said terms and conditions were herein set forth at length. SECTION 4.3. This Nineteenth Supplemental Indenture shall be simultaneously executed in several counterparts and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. SECTION 4.4. This Nineteenth Supplemental Indenture has been dated as of January 1, 1983, solely for convenience. The date of actual execution hereof by each of the parties hereto is the date shown by the acknowledgment of execution hereof by its officers. 5 IN WITNESS WHEREOF, CENTRAL LOUISIANA ELECTRIC COMPANY, INC. has caused this instrument to be signed in its corporate name by one of its Senior Vice Presidents and sealed with its corporate seal attested by one of its Assistant Secretaries, and First National Bank of Commerce to evidence its acceptance of the trust hereby created has caused this instrument to be signed in its corporate name and sealed by its corporate seal attested by one of its Assistant Vice Presidents and Trust Officers, all as of the day and year first above written. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. {SEAL} By /s/ Scott O. Brame Scott O. Brame, Senior Vice President Attest: /s/ Vera J. Whittington Assistant Secretary Signed, sealed, acknowledged and delivered by CENTRAL LOUISIANA ELECTRIC COMPANY, INC., in the presence of: /s/ David M. Eppler /s/ Joyce A. Lewis FIRST NATIONAL BANK OF COMMERCE {SEAL} By /s/ James P. Conner Vice President and Trust Officer /s/ Colin J. Hedlund Assistant Vice President and Trust Officer Signed, sealed, acknowledged and delivered by FIRST NATIONAL BANK OF COMMERCE in the presence of: /s/ Maryem F. Hopkins /s/ Josie C. Schillage 6 STATE OF LOUISIANA PARISH OF RAPIDES BE IT KNOWN, THAT on this 19th day of January, 1983, before me the undersigned, a Notary Public in and for said Parish and State, duly qualified and commissioned as such, personally appeared Scott O. Brame, Senior Vice President and Vera J. Whittington, Assistant Secretary, of Central Louisiana Electric Company, Inc., the grantor in the foregoing instrument, to me personally known and known to me to be such officers, respectively, of such Company, and personally known to me to be the identical persons whose names are subscribed and affixed to the foregoing instrument as such officers, respectively, and who subscribed the name of the Company thereto, and in my presence and in the presence of the undersigned witnesses, of lawful age and domicile, severally acknowledge that the same is their respective, free and voluntary act and deed as such officers and the free and voluntary act and deed of said Company for the uses and purposes therein expressed; and the said persons being each by me duly and severally sworn as individuals did depose and say that they are such officers, respectively, of said Company; that they know the seal of said Company; that the seal affixed to the foregoing instrument was and is such corporate seal; that said seal was so affixed and said instrument was so signed on behalf of said Company by the order and authority of the Board of Directors of said Company; and that they signed their names thereto as such officers, respectively, of said Company by like authority. IN TESTIMONY WHEREOF, the said Appearers have hereunto signed their names on the day and date first hereinabove written, in the presence of David M. Eppler and Joyce A. Lewis, witnesses of lawful age and domicile, and of me, said Notary Public. WITNESSES: /s/ Scott O. Brame Senior Vice President /s/ David M. Eppler /s/ Vera J. Whittington Assistant Secretary /s/ Joyce A. Lewis /s/ Sammie S. Cicardo Notary Public {SEAL} 7 STATE OF LOUISIANA PARISH OF ORLEANS BE IT KNOWN, THAT on this 19th day of January 1983, before me the undersigned, a Notary Public in and for said Parish and State, duly qualified and commissioned as such, personally appeared JAMES P. CONNER, Vice President and Trust Officer, and COLIN J. HEDLUND, Assistant Vice President and Trust Officer of First National Bank of Commerce, a national banking association, duly organized and existing under the laws of the United States of America, Trustee under the foregoing instrument, to me personally known and known to me to be such officers, respectively, of said Bank, and personally known to me to be the identical persons whose names are subscribed and affixed to the foregoing instrument as such officers, respectively, and who subscribed the name of said Bank thereto, and in my presence and in the presence of the undersigned witnesses, of lawful age and domicile, severally acknowledge that the same is their respective, free and voluntary act and deed as such officers and the free and voluntary act and deed of said Bank for the uses and purposes therein expressed; and the said persons being each by me duly and severally sworn as individuals did depose and say that they are such officers, respectively, of said Bank; that they know the seal of said Bank; that the seal affixed to the foregoing instrument was and is such corporate seal; that said seal was so affixed and said instrument was so signed on behalf of said Bank by the order and authority of the Board of Directors of said Bank; and that they signed their names thereto as such officers, respectively, of said Bank by like authority. IN TESTIMONY WHEREOF, the said Appearers have hereunto signed their names on the day and date first hereinabove written, in the presence of Maryem F. Hopkins and Josie C. Schillage, witnesses of lawful age and domicile, and of me, said Notary Public. WITNESSES: /s/ James P. Conner Vice President and Trust Officer /s/ Maryem F. Hopkins /s/ Collin J. Hedlund Assistant Vice President and Trust Officer /s/ Josie C. Schillage /s/ Patricia A. Rouen Notary Public {SEAL} 8 EX-10.Q.1 4 REMARKETING AGREEMENT EXHIBIT 10(q)(1) REMARKETING AGREEMENT REMARKETING AGREEMENT, dated and effective as of October 12, 1993, between CENTRAL LOUISIANA ELECTRIC COMPANY, INC. (the "Company") and PAINEWEBBER INCORPORATED ("PaineWebber"). WHEREAS, on May 29, 1991, the Parish of DeSoto, State of Louisiana (the "Issuer") issued its Adjustable Tender Pollution Control Revenue Refunding Bonds (Central Louisiana Electric Company, Inc. Project) Series 1991A in the aggregate principal amount of $25,110,000 (the "Bonds"), pursuant to that certain Trust Indenture dated as of May 1, 1991 (the "Indenture") between the Issuer and First National Bank of Commerce, as trustee (the "Trustee"); and WHEREAS, the Company and the Issuer are parties to that certain Refunding Agreement dated as of May 1, 1991 (the "Refunding Agreement") pursuant to which the Issuer agreed to make available the proceeds of the Bonds to the Company, and the Company agreed to pay amounts sufficient to pay the principal of, purchase price of, premium, if any, and interest on the Bonds; and WHEREAS, to secure the payment of the principal of, interest on and purchase price of the Bonds, Swiss Bank Corporation, New York Branch (the "Bank") issued its irrevocable direct-pay letter of credit (as amended or extended from time to time, the "Letter of Credit") to the Trustee and in connection therewith the Company entered into a Reimbursement Agreement dated as of May 1, 1991 (as amended or extended from time to time, the "Reimbursement Agreement") with the Bank; and WHEREAS, the Issuer has appointed PaineWebber (and PaineWebber has accepted the appointment) as Remarketing Agent pursuant to the Indenture; and WHEREAS, the Company and PaineWebber desire to make additional provisions regarding PaineWebber's role as Remarketing Agent for the Bonds. NOW, THEREFORE, the Company and PaineWebber hereby agree as follows: 1. DEFINITIONS. All capitalized terms used in this Agreement which are not otherwise defined herein shall have the meanings assigned to them in the Indenture. 2. CONFIRMATION OF APPOINTMENT. The Company hereby confirms the appointment of PaineWebber as Remarketing Agent pursuant to the Indenture. -2- 3. DUTIES. PaineWebber will perform the duties specified as Remarketing Agent under the Indenture subject to the terms of the Indenture and this Agreement. In acting as Remarketing Agent, PaineWebber will act as agent and not as principal except as expressly provided in this Section. PaineWebber may, if it determines to do so in its sole discretion, buy as principal any such Bonds but it will not in any event be obligated to do so, and if it buys Bonds it will have the same rights as would any other person holding the Bonds. 4. DISCLOSURE STATEMENT. (a) If PaineWebber determines that it is necessary or desirable to use a disclosure statement in connection with its offering of the Bonds, PaineWebber will notify the Company and the Company will provide PaineWebber with a disclosure statement satisfactory to PaineWebber and its counsel in respect of the Bonds. The Company will supply PaineWebber with such number of copies of the disclosure statement and documents related thereto as PaineWebber requests from time to time and will amend the disclosure statement (and/or the documents incorporated by reference in it) so that at all times the disclosure statement and any documents related thereto will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements in such documents, in the light of the circumstances under which they were made, not misleading. In addition, the Company will take all steps reasonably requested by PaineWebber which PaineWebber or its counsel may consider necessary or desirable to register the sale of the Bonds by PaineWebber under any Federal or state securities law or to qualify the Indenture under the Trust Indenture Act of 1939, as amended, and will provide PaineWebber such officers' certificates, counsel opinions, accountants' letters and other documents as may be customary in similar transactions. If the Company does not perform its obligations under this Section, PaineWebber may immediately cease remarketing efforts. (b) The Company has previously prepared and delivered to PaineWebber a copy of the Official Statement, dated May 29, 1991, including appendices consisting of financial and other information in respect of the Company and the Bank. Such Official Statement, including Appendices A, B and C thereto and the materials incorporated by reference therein, is referred to herein as the "Official Statement." The Company authorizes the use by PaineWebber of the Official Statement in connection with the remarketing of Bonds. For purposes of this Agreement, the Official Statement and any other documents provided to PaineWebber pursuant to paragraph (a) of this Section shall be considered to be the Disclosure Statement (as defined in Section 5 hereof). -3- 5. INDEMNIFICATION AND CONTRIBUTION. (a) The Company will indemnify and hold harmless PaineWebber, each of its directors, officers and employees and each person who controls PaineWebber within the meaning of Section 15 of the Securities Act of 1933, as amended (such Act being herein called the "Act" and any such person being herein sometimes called an "Indemnified Party"), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity or otherwise, and shall reimburse any such Indemnified Party for any legal or other expenses incurred by it in connection with investigating any claims against it and defending any actions, but only to the extent that such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any disclosure statement referred to in Section 4 hereof (a "Disclosure Statement") or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but the Company shall not be liable in any such case (x) to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by PaineWebber specifically for use in connection with the preparation thereof, or (y) if the person asserting any such loss, claim, damage or liability purchased Bonds from PaineWebber, if delivery to such person of the Disclosure Statement or any amendment or supplement to it would have been a valid defense to the action from which such loss, claim, damage or liability arose and if the same was not delivered to such person by or on behalf of PaineWebber; provided that the Company has delivered the Disclosure Statement as amended or supplemented to PaineWebber on a timely basis to permit such delivery or sending. This indemnity agreement shall not be construed as a limitation on any other liability which the Company may otherwise have to any Indemnified Party, but in no event shall the Company be obligated for double indemnification. (b) PaineWebber shall indemnify and hold harmless the Company and each of its directors, officers or employees and each person who controls the Company within the meaning of Section 15 of the Act (for purposes of this paragraph (b), an "Indemnified Party") against all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity or otherwise, and will reimburse any such Indemnified Party for any legal or other expenses incurred by it in connection with defending any actions, insofar as such losses, claims, damages, -4- liabilities or actions arise out of or based upon any untrue statement, or an alleged untrue statement, of a material fact contained in a Disclosure Statement or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but only with reference to written information, if any, relating to PaineWebber furnished to the Company by PaineWebber specifically for use in the preparation of a Disclosure Statement. The Company and PaineWebber agree that any statements set forth in a Disclosure Statement furnished in writing by or on behalf of PaineWebber for inclusion in such documents shall be contained in a section entitled "Remarketing" and that PaineWebber's indemnification pursuant to this paragraph (b) shall be limited to such Section. This indemnity agreement shall not be construed as a limitation on any other liability which PaineWebber may otherwise have to any Indemnified Party, but in no event shall PaineWebber be obligated for double indemnification. (c) An Indemnified Party (as defined in paragraph (a) or paragraph (b) of this Section 5) shall, promptly after the receipt of notice of the commencement of any action against such Indemnified Party in respect of which indemnification may be sought against PaineWebber or the Company, as the case may be (in either case the "Indemnifying Party"), notify the Indemnifying Party in writing of the commencement thereof. Failure of the Indemnified Party to give such notice will not relieve the Indemnifying Party from any liability which it may have to an Indemnified Party otherwise than on account of this Agreement. In case any such action shall be brought against an Indemnified Party and such Indemnified Party shall notify the Indemnifying Party of its commencement, the Indemnifying Party may, or if so requested by such Indemnified Party shall, participate therein or assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Indemnifying Party to such Indemnified Party of an election so as to assume the defense thereof, such Indemnified Party shall reasonably cooperate in the defense thereof, including, without limitation, the settlement of outstanding claims, and the Indemnifying Party will not be liable to such Indemnified Party under this Section 5 for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof other than reasonable costs of investigation incurred with the consent of the Indemnifying Party, which consent shall not be unreasonably withheld; provided, however, that unless and until the Indemnifying Party assumes the defense of any such action at the request of such Indemnified Party, the Indemnifying Party shall have the right to participate at its own expense in the defense of any such action. If the Indemnifying Party shall not -5- have employed counsel to have charge of the defense of any such action or if any Indemnified Party shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of such Indemnified Party), legal and other expenses incurred by such Indemnified Party shall be borne by the Indemnifying Party. Any obligation under this Section of an Indemnifying Party to reimburse an Indemnified Party for expenses includes the obligation to make advances to the Indemnified Party to cover such expenses in reasonable amounts as incurred. Notwithstanding the foregoing, the Indemnifying Party shall not be liable for any settlement of any action or claim effected without its consent, which consent shall not be unreasonably withheld. (d) In order to provide for just and equitable contribution in circumstances in which the indemnification amounts provided for in paragraph (a) or (b) of this Section 5 are due in accordance with its terms but are for any reason held by a court to be unavailable from the Company or PaineWebber on grounds of policy or otherwise, the Company and PaineWebber shall contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) to which the Company and PaineWebber may be subject (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and PaineWebber on the other from the remarketing of the Bonds or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and PaineWebber in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and PaineWebber on the other shall be deemed to be in the same proportion as the aggregate principal amount of the Bonds remarketed pursuant to this Agreement bear to the total remarketing fees received by PaineWebber. The relative fault of the Company on the one hand and of PaineWebber on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by PaineWebber and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above shall be deemed to include any -6- legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. (e) The Company and PaineWebber agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provision of this Section 5, PaineWebber shall not be required to contribute any amount in excess of the remarketing fee applicable to the Bonds remarketed pursuant to this Agreement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. (f) The indemnification and contribution agreements of all parties to this Agreement contained in this Section 5 shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of PaineWebber, by or on behalf of any person controlling PaineWebber, by or on behalf of the Company or by or on behalf of any person controlling the Company or (ii) any termination of this Agreement. (g) For purposes of this Section 5, each person who controls PaineWebber within the meaning of Section 15 of the Act shall have the same rights as PaineWebber and each person who controls the Company within the meaning of Section 15 of the Act shall have the same rights as the Company. Any party entitled to contribution shall, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under paragraph (d), notify such party or parties from whom contribution may be sought, but the omission so to notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have hereunder or otherwise than on account of this Agreement. 6. FEES AND EXPENSES. In consideration of PaineWebber's services under this Agreement, the Company will pay PaineWebber as Remarketing Agent, (a) "Standard Fee" of $1.00/1,000 annually, (paid quarterly in arrears), based upon the par amount of Bonds outstanding at the beginning of each quarterly period and commencing on October 1, 1993, and on each January 1, April 1, July 1 and October 1 thereafter and (b) in connection with (i) any adjustment from a Short-Term Interest Rate Period, a Daily Interest Rate Period or a Weekly Interest Rate Period to a Long-Term Interest Rate Period or (ii) any -7- mandatory tender of Bonds resulting from a substitution or termination of the Letter of Credit then in effect, a fee to be negotiated by the Company and PaineWebber. In addition, the Agent may be entitled to additional compensation, the "Performance Fee", based upon actual performance as Remarketing Agent. The amount of such Performance Fee and its method of determination shall be the subject of another agreement between the Remarketing Agent and the Company. Such Performance Fee, if any, shall be paid annually, in arrears. If no such Performance Fee agreement is entered into and in effect between the Remarketing Agent and the Company, the Remarketing Agent's compensation will be limited to the $1.00/1,000 Standard Fee described above. The Company also will pay all expenses in connection with the preparation of any Disclosure Statement and the registration of the Bonds and any other documents relating to the Bonds under any securities laws, qualifying the Indenture under the Trust Indenture Act and will reimburse PaineWebber for all of its direct out-of-pocket expenses incurred by it as Remarketing Agent under this Agreement and the Indenture, including counsel fees and disbursements. 7. FAILS. PaineWebber will not be liable to the Company on account of the failure of any person to whom PaineWebber has sold a Bond to pay for such Bond or to deliver any document in respect of the sale. 8. REMARKETING AGENT'S PERFORMANCE. The duties and obligations of PaineWebber as Remarketing Agent shall be determined solely by the express provisions of this Agreement and the Indenture, and PaineWebber shall not be responsible for the performance of any other duties and obligation than as are specifically set forth in this Agreement and the Indenture, an no implied covenants or obligations shall be read into this Agreement or the Indenture against PaineWebber. PaineWebber may conclusively rely upon any notice or document given or furnished to PaineWebber and conforming to the requirements of this Agreement or the Indenture and shall be protected in acting upon any such notice or document reasonably believed by it to be genuine and to have been given, signed or presented by the proper party or parties. 9. TERMINATION. This Agreement will terminate upon the effective resignation or removal of PaineWebber as Remarketing Agent in accordance with the Indenture. PaineWebber will resign as Remarketing Agent under this Remarketing Agreement if requested to do so by the Company in writing and may resign at any time, all in accordance with the terms of the Indenture. Following termination, the provisions of Section 5 will continue in effect, and each party will pay the other any amounts owing at the time of termination. -8- 10. MISCELLANEOUS. This agreement will be governed by the laws of the State of New York. Notices will be given to the persons addressed below until a party designates a new address in writing. 11. COUNTERPARTS. This Agreement may be signed in several counterparts. Each will be an original, but all of them together constitute the same instrument. 12. SEVERABILITY. If any provision of this Agreement shall be determined to be unenforceable, that shall not affect any other provisions of this Agreement. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. 2030 Donahue Ferry Road Pineville, Louisiana 71361 Attention: Treasurer By: /s/ David M. Eppler Title: Vice President PAINEWEBBER INCORPORATED 1285 Avenue of the Americas New York, New York 10019 Attention: Municipal Securities Group By: /s/ Randall L. Finken Title: Vice President EX-11 5 COMPUTATION OF NET INCOME PER COMMON SHARE EXHIBIT 11 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. COMPUTATION OF NET INCOME PER COMMON SHARE
FOR THE YEARS ENDED DECEMBER 31, (In thousands, except share and per share amounts) 1993 1992 1991 PRIMARY Net income applicable to common stock $39,827 $43,010 $42,957 Weighted average number of shares of common stock outstanding during the year 22,350,475 22,279,852 22,361,852 Common stock under stock option grant 38,060 63,292 81,520 Average shares 22,388,535 22,343,144 22,443,372 Net income per common share $1.78 $1.93 $1.91 FULLY DILUTED Net income applicable to common stock $39,827 $43,010 $42,957 Adjustment related to ESOP 1,325 1,973 903 Adjusted income applicable to common stock $41,152 $44,983 $43,860 Weighted average number of shares of common stock outstanding during the year 22,350,475 22,279,852 22,361,852 Number of equivalent common shares attributable to ESOP 1,437,901 1,439,752 996,924 Common stock under stock option grant 38,278 63,292 110,700 Average shares 23,826,654 23,782,896 23,469,476 Net income per common share $1.73 $1.89 $1.87
EX-12 6 COMPUTATION OF EARNINGS RATIOS EXHIBIT 12 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. COMPUTATION OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
For the years ended December 31, (In thousands, except ratios) 1993 1992 1991 1990 1989 Earnings from continuing operations $41,812 $45,239 $44,929 $42,544 $41,548 Income taxes 19,565 18,595 18,918 18,648 18,450 Earnings from continuing operations before income taxes 61,377 63,834 63,847 61,192 59,998 Fixed charges: Interest, long-term debt 22,089 26,142 28,192 26,190 27,707 Interest, other 2,750 1,604 2,233 5,515 5,769 Amortization of debt expense and premium, net 1,402 1,282 1,118 983 792 Portion of rental expense representative of interest factor 485 547 527 595 611 Total fixed charges 26,726 29,575 32,070 33,283 34,879 Earnings from continuing operations before income taxes and fixed charges $88,103 $93,409 $95,917 $94,475 $94,877 Ratio of earnings to fixed charges 3.30x 3.16x 2.99x 2.84x 2.72x Fixed charges from above $26,726 $29,575 $32,070 $33,283 $34,879 Preferred dividends 3,008 3,440 3,008 1,267 2,403 Total fixed charges and preferred stock dividends $29,734 $33,015 $35,078 $34,550 $37,282 Ratio of earnings to combined fixed charges and preferred stock dividends 2.96x 2.83x 2.73x 2.73x 2.54x
EX-13 7 PORTIONS OF ANNUAL REPORT TO STOCKHOLDERS EXHIBIT 13 CENTRAL LOUSIANA ELECTRIC COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net income applicable to common stock for 1993 totaled $39.8 million, or $1.78 per share, a decrease of $0.15 from 1992 earnings of $1.93 per share. Earnings for 1991 were $43.0 million, or $1.92 per share. The decline in net income in 1993 was the result of a $0.31 per share restructuring charge. The charge was partially offset by lower interest expense and a 3.5% increase in kilowatt-hour sales due in part to favorable weather compared with the previous year. Results for 1992 were influenced by a full year of service to the city of Opelousas, milder summer weather, lower interest expenses and higher operating expenses. REVENUES AND SALES Total revenues include fuel cost recovery and base revenues. Changes in revenues and kilowatt-hour sales were as follows: INCREASE (DECREASE) FROM PRIOR YEAR (IN MILLIONS) REVENUES 1993 1992 Change attributable to: Volume of sales to regular customers $ 7.0 $ 3.6 Recovered purchased power and fuel costs $ 23.8 $ 4.7 1993 1992 MILLION % MILLION % SALES KWH CHANGE KWH CHANGE Regular customers: Residential 2,470 5.0 2,353 1.7 Commercial 1,109 4.4 1,062 1.8 Industrial 2,005 1.7 1,972 2.3 Other 463 (2.9) 477 2.8 Sales for resale 175 19.9 146 3.5 Total sales to regular customers 6,222 3.5 6,010 2.1 Short-term sales to other utilities 266 202.3 88 (27.3) Total kilowatt-hour sales 6,488 6.4 6,098 1.5 The Company's base rates did not change in 1993 or 1992. Revenues associated with fuel costs increased in 1993 and 1992 due primarily to a rise in natural gas prices since 1991. Revenues from short-term sales to other utilities are used to reduce the cost of fuel and purchased power. Net income is not affected by changes in the cost of fuel and purchased power because these costs are recovered in revenues from customers through fuel adjustment clauses. Kilowatt-hour sales are significantly influenced by the weather. Both summer and winter temperatures were more favorable for sales during 1993 as compared to 1992. About half of the increase in sales to regular customers in 1992 was from the city of Opelousas, which was added to the system in mid-1991. During the past five years, sales growth averaged 2.9% per year. During the next five years, retail sales growth is expected to range from 2% to 2.5%. The levels of future sales will depend upon weather conditions, customer conservation efforts, the Company's retail marketing and business development programs and the overall economy of the service area. Sales to industrial customers are also affected by the national economy and worldwide demand for wood products, since the Company's two largest customers are producers of such products. In general, issues facing the electric utility industry that 14 could affect sales include deregulation, increased competition, retention of large industrial customers and municipal franchises, transmission access and demand side management programs. In 1993 the Company signed an agreement with the city of St. Martinville to provide wholesale service beginning in 1995. Sales to the city will result in 13 megawatts of additional load through the year 2000. The contract has been filed with the Federal Energy Regulatory Commission (FERC) for approval. The Louisiana Energy and Power Authority, the city of Lafayette and the American Public Power Association have intervened before the FERC asserting unduly preferential, discriminatory and predatory pricing. The Company is contesting these assertions. In July 1994 a nonexclusive municipal franchise affecting about 6,000 customers, or about 2.8% of the Company's customers, will expire. The Company has begun negotiations for a new franchise, but the city administration has indicated that it may seek ownership of the Company's electric system within the city limits by condemnation or otherwise. The outcome of the continuing negotiations for the franchise is uncertain, but the Company will contest any attempt to acquire its customers or local electric system. In December 1992 England Air Force Base (EAFB) at Alexandria was closed. In 1992 base revenues from EAFB totaled $1.2 million. The air base property is now managed by a public authority comprised of local community leaders responsible for developing and implementing a reuse plan for base facilities. A national trucking company has relocated its training facility to the site and the U.S. Army has contracted to use a portion of the property for military training exercises. In 1993 the airfield and control tower reopened for commercial use. Other companies are considering the site for possible use. FUEL AND PURCHASED POWER Changes in fuel and purchased power expenses reflect fluctuations in generation mix, fuel costs, availability of economy power and deferral of expenses for recovery from customers through fuel adjustment clauses in subsequent months. The Company obtains natural gas, coal and lignite under long-term contracts and purchases natural gas on the spot market when prices are advantageous. Power is purchased from other utilities when the purchase price is less than the Company's cost to generate or when needed to meet system requirements. RESTRUCTURING A six-month organizational effectiveness study was completed in 1993 which identified opportunities to improve Company operations and provide better service to customers. As a result of the study, the Company's organizational structure was streamlined, reflecting a reduction of up to 150 positions. So far, about 100 positions have been eliminated through enhanced early retirement and voluntary severance programs that were offered to eligible employees. The costs associated with restructuring resulted in a charge to earnings of $10.9 million, or $7.0 million on an after-tax basis, consisting mainly of long-term employee benefit obligations. Future benefit plan costs will not be affected significantly by the effects of the restructuring. The restructuring will benefit the Company in future years through reductions in operating costs and accompanying improvements in work processes. NONFUEL OPERATING EXPENSES AND INCOME TAXES The changes in nonfuel operating expenses for 1993 and 1992 were as follows: INCREASE (DECREASE) FROM PRIOR YEAR (IN THOUSANDS, EXCEPT %) 1993 1992 Other operation $ (1,232) (2.4)% $ 2,845 5.8% Maintenance $ (1,216) (4.6)% $ 438 1.7% Depreciation $ 2,474 7.1% $ 832 2.4% Other taxes $ 1,556 6.1% $ 2,501 10.9% Income taxes $ 970 5.2% $ (323) (1.7)% In 1993 other operation expenses decreased due to the recognition of pension plan income on the accrual basis and the amortization of prior regulatory liabilities of $5.4 million related to the pension plan over a five-year period. This presentation was approved by the Louisiana Public Service Commission (LPSC) staff, subject to review by the LPSC in future proceedings. Maintenance expenses declined mainly because of delays in maintenance projects attributable to the restructuring. Depreciation expenses reflect the amortization of the tax effect on prior years' AFUDC resulting from a new accounting standard implemented January 1, 1993, and the completion of a large transmission project in 1993 and other additions to utility plant balances. Other taxes increased primarily due to additional property taxes resulting from the expiration of a tax exemption on a generating unit and normal additions to utility plant. Income taxes reflect the increase in the federal tax rate in 1993. In 1992 the increase in other operation expenses reflects the early termination of an interest rate swap, the start-up of the organizational effectiveness study and increases in employee benefit costs. Maintenance expenses in total were slightly higher because 15 of Hurricane Andrew. Other taxes increased in 1992 due to higher assessed property values and millages and additional state franchise taxes. Other taxes also increased because of higher municipal franchise taxes due to higher revenues, renegotiated franchise agreements at higher rates and a full year of franchise payments to the city of Opelousas. Income tax expense, like net income, did not change significantly in 1992. A number of parishes have attempted in recent years to impose franchise fees on retail revenues earned within the unincorporated areas served by the Company. If the parishes are ultimately successful, taxes other than income taxes could increase substantially in future years. INTEREST INCOME AND EXPENSE During 1992 a note receivable and equity investments held by the Company were redeemed by the issuers. Interest income declined in 1993 and the latter part of 1992 as these funds were reinvested by the Company at lower rates. Interest expense declined in 1993 and 1992 as the Company redeemed higher cost debt. The Company refunded $34 million of high coupon debt and reduced short-term debt levels by about $35 million in 1993 by issuing long-term debt. In 1992 $96.7 million of debt was refinanced by issuing lower-cost debt and by using temporary investments. The decline in total debt in 1992, together with lower interest rates on the new debt and on variable-rate debt in 1993 and 1992, reduced interest expense in both years. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) AFUDC represents the estimated cost of financing construction work-in-progress and is not a current source of cash. A return on and recovery of AFUDC is generally permitted by regulatory bodies in setting rates charged for utility services. Prior to 1993 AFUDC was recorded on a net-of-tax basis; but beginning in 1993 AFUDC was recorded on a pre-tax basis as required by a new accounting standard. For 1993, $1 million of the increase in total AFUDC is due to the effect of the change to a pre-tax method. The increase in 1992 is primarily due to higher accruals on cumulative construction work-in-progress. AFUDC accounted for 7.6% of net income applicable to common stock in 1993, as compared to 4.5% in 1992 and 2.3% in 1991. EARNINGS PER SHARE Common stock equivalents during the three-year period ended 1993 had no material annual dilutive effect on net income per common share. The Company expects that the effects of the Incentive Stock Option Plan and the Employee Stock Ownership Plan (ESOP) will dilute earnings per share by about 3%-4% in 1994. Therefore, both primary and fully-diluted earnings per share are expected to be presented in Consolidated Statements of Income beginning in 1994. FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES Financing for construction requirements and operational needs is dependent upon the cost and availability of external funds through capital markets and from financial institutions. Access to funds is dependent upon factors such as general economic conditions, regulation and the Company's credit rating. Since 1990 the Company has participated in a program where up to $35 million of receivables can be sold on an ongoing basis. The amount of receivables that may be sold at any time depends upon seasonal fluctuations in the amount of eligible receivables. The program is presently scheduled to continue through April 1995. The Company has an effective shelf registration statement and all regulatory approvals necessary to issue up to $50 million of debt and $50 million of preferred stock. At December 31, 1993 and 1992, the Company had $28.4 million and $63.9 million of short-term debt outstanding in the form of commercial paper borrowings and bank loans. A $100 million revolving credit facility, which provides support for the issuance of commercial paper, is presently scheduled to continue through July 1996. Uncommitted lines of credit with banks totaling $23 million are available to meet short-term working capital needs. (See Note E to consolidated financial statements.) Additionally, at December 31, 1993, an unregulated subsidiary of the Company had $18 million of cash and marketable securities. In order to take advantage of the potential benefits inherent in a larger energy system, the Company may use available investments, issue additional debt or issue equity securities to finance growth opportunities. CASH GENERATION AND CASH REQUIREMENTS During 1993 the Company generated $76.2 million of cash flows from operating activities as shown in the Consolidated Statements of Cash Flows. Net cash provided by operating activities results primarily from net income adjusted for noncash charges to income and changes in certain assets and liabilities. Net cash used in investing activities is related to additions to utility plant and changes in utility and nonutility investments. Net cash used in financing activities results principally from the payment of 16 dividends to shareholders and long-term financing activities. The decrease in net cash used in financing activities in 1993 was primarily due to the Company's purchase of the ESOP note in 1992. In recent years the construction program has consisted primarily of enhancements to the transmission and distribution systems. Expenditures, excluding AFUDC, totaled $48 million in 1993 and $62 million in 1992. In 1992 Hurricane Andrew severely damaged the southwestern portion of the Company's service territory. The cost of reconstruction totaled about $17 million. Approximately $14 million of the cost was capitalized and is being depreciated at about 3% annually; about $1 million of repairs was charged to the storm damage reserve; and the balance was recognized as operation and maintenance expense. Construction expenditures for 1994 are estimated to be $52 million, excluding AFUDC, and for the five-year period ending 1998 are expected to total $278 million, excluding AFUDC. The projected expenditures for the five-year period ending 1998 include about $9 million for the refurbishment of a retired natural gas unit and demand side management program costs required to keep the Company's capacity margins at acceptable levels through the five-year construction forecast period. Also included in the projected expenditures is about $15 million of initial construction costs for generating capacity requirements after 1998. Scheduled maturities of debt and preferred stock will total about $1 million for 1994 and approximately $48 million for the five-year period ending 1998. If economical, certain issues of debt may be refinanced in 1994, and the Company may require additional funds to purchase outstanding shares of common stock on the open market as part of a $30 million buyback plan begun in 1991. No shares were purchased in 1993 or 1992, but $6.6 million was used in 1991 to reacquire common shares. In 1993 about 90% of total construction requirements was funded internally as compared to 70% in 1992 and 100% in 1991. Without the costs of restructuring in 1993 and reconstruction costs required by Hurricane Andrew in 1992, construction requirements in both years would have been substantially funded with internally generated funds. In 1994 and for the five-year period ending 1998, essentially all construction requirements are expected to be funded internally. Other capital requirements for 1993 and 1992 were funded by the issuance of debt and in 1992 by the use of temporary investments. CHANGES IN DEFERRED INCOME TAXES, PREPAYMENTS AND DEFERRED CHARGES The increases in accumulated deferred taxes and the associated increases in prepayments and deferred credits are primarily attributable to the implementation of a new method of accounting for income taxes. A new accounting standard, implemented January 1, 1993, required the recognition of deferred taxes and regulatory assets and liabilities for items which had not been previously recognized because of ratemaking treatment. These regulatory assets and liabilities will be realized over the accounting lives of the related properties to the extent past ratemaking practices are continued by regulators. RETAIL RATES Retail rates, which are regulated by the LPSC, account for 95% of total revenues. Fuel costs and monthly fuel adjustment billing factors are subject to audit by the LPSC. The LPSC establishes base rates for the Company which reflect nonfuel costs, including the cost of capital, and sales. In the past the Company has sought increases in base rates to reflect the cost of service related to plant facility additions and increases in operating costs. If the Company were to request an increase in its rates and adequate rate relief were not granted on a timely basis, the Company's ability to attract capital at reasonable costs to finance its operations and capital improvements may be impaired. The LPSC has elected to review the earnings of all electric, gas, water and telecommunication utilities regulated by it to determine if the returns on equity of these companies may be higher than returns that might be awarded in the current economic environment. The Company expects to be reviewed in early 1995 and believes its current return on equity is in line with business conditions. INFLATION The Company is a capital-intensive electric utility. As such, it is affected by inflation since depreciation, which is based on the historical cost of assets, will in all likelihood not fully reflect the cost of replacing assets. Although the cost of fuel used for electric generation is a major component of total costs, the Company is not exposed to the effects of inflation in fuel prices since fuel costs are recovered from customers through fuel adjustment clauses. NEW ACCOUNTING STANDARDS On January 1, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits, and 17 SFAS No. 115, Accounting for Certain Investments in Debt and Equity. The adoption of these standards will not have a significant effect on the Company's financial condition or the results of its operations. ENVIRONMENTAL MATTERS The Company is subject to federal, state and local laws and regulations with regard to protection of the environment. Violations may result in substantial fines and penalties. To the best of management's knowledge, the Company has obtained all environmental permits necessary for its operations and is in substantial compliance with all applicable environmental laws and regulations. In 1986 the Company was one of a number of companies named by the Environmental Protection Agency as potentially responsible parties for the cleanup of a site in Missouri previously operated by an authorized PCB (polychlorinated biphenyl) processor. The Company is participating with other parties in the cleanup of this site and all anticipated costs have been funded. In 1993 McDermott, Inc. filed a third-party complaint in federal court requesting that the Company and over 200 other entities be held jointly and severally liable for the costs of removal and disposal of chemicals at a site near Livingston, Louisiana. McDermott is also seeking indemnification for possible damages, if any, resulting from a class action suit filed against it alleging personal injuries caused by substances delivered to the site from 1962 to 1984. The Company's investigation found no evidence that it disposed of any wastes at the site during that period, and in January 1994, the Company was dismissed without prejudice from these proceedings. The 1995 implementation of phase I of the 1990 National Clean Air Act will not require the Company to reduce sulfur emissions at its solid-fuel generating units, which either burn low-sulfur coal or utilize pollution control equipment. However, the Company expects to spend about $3 million to complete the installation of continuous monitoring equipment on its generating units. Phase II of the legislation, effective in 2000, involves more stringent limits on emissions, which should not significantly affect the way the Company's generating units are operated. However, some capital investment may be necessary in order to comply with phase II requirements. 18 CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) FOR THE YEARS ENDED DECEMBER 31 1993 1992 1991 OPERATING REVENUES $382,433 $351,613 $343,350 Operating expenses Fuel used for electric generation 119,197 113,944 114,431 Power purchased 28,088 9,647 4,515 Other operation 50,693 51,925 49,080 Restructuring charge 10,851 Maintenance 24,991 26,207 25,769 Depreciation 37,292 34,818 33,986 Other taxes 27,011 25,455 22,954 Federal and state income taxes 19,565 18,595 18,918 317,688 280,591 269,653 OPERATING INCOME 64,745 71,022 73,697 Interest income 358 1,937 2,649 Allowance for other funds used during construction 2,556 1,412 642 Other income (expense), net (88) (642) (873) INCOME BEFORE INTEREST CHARGES 67,571 73,729 76,115 Interest charges Interest on debt and other 24,839 27,746 30,425 Allowance for borrowed funds used during construction (482) (538) (357) Amortization of debt discount, premium and expense, net 1,402 1,282 1,118 25,759 28,490 31,186 NET INCOME 41,812 45,239 44,929 Preferred dividend requirements, net 1,985 2,229 1,972 NET INCOME APPLICABLE TO COMMON STOCK $ 39,827 $ 43,010 $ 42,957 AVERAGE SHARES OF COMMON STOCK OUTSTANDING 22,350,475 22,279,852 22,361,852 NET INCOME PER AVERAGE COMMON SHARE $1.78 $1.93 $1.92 CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK $1.410 $1.370 $1.325 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 20 CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) AT DECEMBER 31 1993 1992 ASSETS Utility plant Property, plant and equipment $ 1,241,147 $ 1,178,273 Accumulated depreciation (379,753) (356,659) 861,394 821,614 Construction work-in-progress 33,642 57,342 Total utility plant, net 895,036 878,956 Investments and other assets 20,197 23,771 Current assets Cash and cash equivalents 5,802 1,798 Accounts receivable, net Customer 3,981 1,280 Other 6,720 6,766 Unbilled revenues 1,506 1,122 Fuel inventory, at average cost 11,898 8,215 Material and supplies inventory, at average cost 14,007 12,495 Prepayments and other 2,218 1,724 Total current assets 46,132 33,400 Prepayments and deferred charges 162,196 37,349 Accumulated deferred federal and state income taxes 38,074 4,744 $ 1,161,635 $ 978,220 CAPITALIZATION AND LIABILITIES Common shareholders' equity Common stock, $2 par value, authorized 50,000,000 shares, issued 22,708,874 and 22,634,081 shares at December 31, 1993 and 1992, respectively $ 45,418 $ 45,268 Premium on capital stock 112,829 111,811 Retained earnings 200,908 192,637 Treasury stock, at cost, 326,380 and 328,334 shares at December 31, 1993 and 1992, respectively (6,600) (6,639) 352,555 343,077 Preferred stock not subject to mandatory redemption 30,982 31,023 Preferred stock subject to mandatory redemption 7,242 7,400 Deferred compensation related to preferred stock held by ESOP (26,118) (28,306) Long-term debt 351,087 310,814 Total capitalization 715,748 664,008 Commitments and contingencies (Notes C, E, F, I and K) Current liabilities Short-term debt 28,373 63,870 Long-term debt due within one year 790 649 Accounts payable 40,653 42,216 Customer deposits 18,638 17,771 Taxes accrued 5,069 2,697 Interest accrued 8,329 7,285 Accumulated deferred fuel 5,315 3,446 Other 2,355 2,637 Total current liabilities 109,522 140,571 Deferred credits Accumulated deferred federal and state income taxes 224,151 116,690 Accumulated deferred investment tax credits 36,806 38,632 Other 75,408 18,319 Total deferred credits 336,365 173,641 $ 1,161,635 $ 978,220 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 21 CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31 1993 1992 1991 CASH FLOWS FROM OPERATING ACTIVITIES Net income $41,812 $45,239 $44,929 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 37,940 36,299 35,335 Allowance for funds used during construction (3,038) (1,950) (999) Amortization of investment tax credits (1,826) (1,830) (1,814) Deferred income taxes 1,327 10,826 6,131 Deferred fuel costs 1,869 (1,057) 748 Restructuring charge 7,135 GAIN ON DISPOSITION OF UTILITY PLANT, NET (66) Changes in assets and liabilities Accounts receivable (2,655) (6,832) 2,506 Unbilled revenues (384) (753) 1,810 Inventories (5,195) (410) 4,930 Accounts payable (2,014) 4,250 (514) Customer deposits 867 872 722 Taxes accrued 2,372 (2,456) (503) Interest accrued 1,044 (1,511) 864 Other, net (3,075) (5,010) (4,596) Net cash provided by operating activities 76,179 75,611 89,549 CASH FLOWS FROM INVESTING ACTIVITIES Additions to utility plant (51,507) (64,425) (54,918) Allowance for funds used during construction 3,038 1,950 999 Sale of utility plant 377 673 522 Proceeds from long-term note receivable 9,808 Purchase of investments (292,178) (527,754) (375,548) Sale of investments 296,658 562,933 336,919 Net cash used in investing activities (43,612) (16,815) (92,026) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock 1,160 795 864 Repurchase of common stock (6,645) Issuance of preferred stock 30,000 Redemption of preferred stock (150) (5,881) (513) Issuance of long-term debt 75,000 75,000 111,260 Retirement of long-term debt (35,583) (106,139) (61,899) Purchase of ESOP note (29,350) Increase (decrease) in short-term debt, net (35,497) 38,805 (39,272) Dividends paid on common and preferred stock, net (33,493) (32,146) (31,622) Net cash provided by (used in) financing activities (28,563) (58,916) 2,173 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,004 (120) (304) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,798 1,918 2,222 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,802 $ 1,798 $ 1,918 Supplementary cash flow information Interest paid (net of amount capitalized) $24,116 $28,748 $28,354 Income taxes paid $17,326 $11,015 $14,500 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 22 CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) PREMIUM FOR THE YEARS ENDED DECEMBER 31, COMMON STOCK ON CAPITAL RETAINED TREASURY STOCK 1991, 1992, AND 1993 SHARES AMOUNT STOCK EARNINGS SHARES COST BALANCE, JANUARY 1, 1991 22,498,502 $ 44,997 $ 110,411 $ 166,962 Redemptions of preferred stock 93 Incentive stock options exercised 71,910 144 720 Repurchases of common stock 328,600 $ 6,645 Dividend requirements, preferred stock, net (1,972) Cash dividends paid, common stock, $1.325 per share (29,650) Net income 44,929 BALANCE, DECEMBER 31, 1991 22,570,412 45,141 111,224 180,269 328,600 6,645 Redemptions of preferred stock (81) Incentive stock options exercised 63,669 127 668 Issuance of treasury stock (266) (6) Costs associated with stock split (116) Dividend requirements, preferred stock, net (2,229) Cash dividends paid, common stock, $1.370 per share (30,526) Net income 45,239 BALANCE, DECEMBER 31, 1992 22,634,081 45,268 111,811 192,637 328,334 6,639 Redemptions of preferred stock 8 Incentive stock options exercised 74,793 150 1,010 Issuance of treasury stock (1,981) (40) Incentive shares forfeited 27 1 Capital stock expense (48) Dividend requirements, preferred stock, net (1,985) Cash dividends paid, common stock, $1.410 per share (31,508) Net income 41,812 BALANCE DECEMBER 31, 1993 22,708,874 $ 45,418 $ 112,829 $ 200,908 326,380 $ 6,600
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRESENTATION AND REGULATION The consolidated financial statements include the accounts of Central Louisiana Electric Company, Inc. (the Company) and its wholly owned subsidiaries. The Company maintains its accounts in accordance with the Uniform System of Accounts prescribed for electric utilities by the Federal Energy Regulatory Commission (FERC), as adopted by the Louisiana Public Service Commission (LPSC). The Company provides electric service to a diversified base of residential, commercial and industrial customers in 23 parishes of Louisiana. The Company's retail rates for residential, commercial and industrial customers and other retail sales are regulated by the LPSC, and its rates for transmission services and wholesale power sales are regulated by the FERC. UTILITY PLANT AND DEPRECIATION Utility plant is stated at the original cost of construction, which includes certain materials, labor, payroll taxes and benefits, administrative and general costs, and the estimated cost of funds used during construction. The cost of repairs and minor replacements is charged as incurred to the appropriate operating expense and clearing accounts. The cost of improvements is capitalized. Upon retirement or disposition, the recorded cost of depreciable plant and the cost of removal, net of salvage value, are charged to accumulated depreciation. The provision for depreciation is computed using the straight-line method at rates which will amortize the unrecovered cost of depreciable property over its estimated useful life. Annual depreciation provisions expressed as a percentage of average depreciable property were 3.11% for 1993, 3.13% for 1992 and 3.15% for 1991. CASH EQUIVALENTS The Company considers highly liquid, marketable securities and other similar instruments with original maturity dates of less than three months to be cash equivalents. INCOME TAXES Deferred income taxes are provided at the current enacted income tax rate on all temporary differences between tax and book bases of assets and liabilities. The Company recognizes regulatory assets and liabilities for the tax effect of temporary differences which, to the extent past ratemaking practices are continued by regulators, will be realized over the accounting lives of the related properties. INVESTMENT TAX CREDITS Investment tax credits which were deferred for financial statement purposes are amortized to income over the estimated service lives of the properties which gave rise to the credits. DEBT EXPENSE, PREMIUM AND DISCOUNT Expense, premium and discount applicable to debt securities are being amortized to income ratably over the lives of the related issues. Expense and call premium related to refinanced debt are amortized over the remaining life of the original issue. REVENUES AND FUEL COSTS Revenues from sales of electricity are recognized based upon the amount of energy delivered. The cost of fuel is recovered from customers through fuel adjustment clauses, based upon fuel costs incurred in prior months. These adjustments are subject to audit and final determination by regulators. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC) The capitalization of AFUDC is a utility accounting practice prescribed by the FERC. AFUDC represents the estimated cost of financing construction work-in-progress. AFUDC does not represent a current source of cash, but under regulatory practices, a return on and recovery of AFUDC is permitted in setting rates charged for utility services. The composite AFUDC rate used for 1993 was 15.1% on a pre-tax basis (9.29% on a net-of-tax basis) and was 9.35% on a net-of-tax basis for 1992 and 1991. NET INCOME PER COMMON SHARE Net income per common share has been computed using the weighted average number of shares of common stock outstanding during the year. Common stock equivalents during the three-year period ended 1993 had no material annual dilutive effect on net income per common share. For 1994 the Company expects the effects of the Incentive Stock Option Plan and the Employee Stock Ownership Plan (ESOP) will dilute earnings per share by about 3%-4%. All prior-period share and per share amounts have been restated for a two-for-one stock split in May 1992. RECLASSIFICATIONS Certain prior-period amounts have been reclassified to conform with the presentation shown in the current year's consolidated financial statements. These reclassifications had no effect on net income applicable to common stock or common shareholders' equity. 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE B JOINTLY OWNED GENERATING UNITS Two electric generating units operated by the Company are jointly owned with other utilities. The Company's proportionate share of operation and maintenance expenses associated with these two units are reflected in the financial statements. Information about each of these units at December 31, 1993, was as follows: (DOLLAR AMOUNTS IN THOUSANDS) RODEMACHER DOLET HILLS UNIT #2 UNIT #1 Percentage of ownership 30% 50% Utility plant in service* $ 84,631 $ 268,846 Accumulated depreciation $ 29,028 $ 61,527 Unit capability (thousand kilowatts) 523.0 650.0 Share of capability (thousand kilowatts) 156.9 325.0 * INCLUDES GENERATING PLANT AND RELATED TRANSMISSION AND OTHER FACILITIES NOTE C RECEIVABLES The Company sells an ownership interest in certain types of accounts receivable and a portion of accrued but unbilled revenues. A maximum of $35,000,000 of receivables may be sold at any time, and new receivables are sold as previously sold receivables are collected. The Company is obligated to repurchase a limited amount of receivables if such receivables were to become uncollectible. The Company maintains an allowance for uncollectible accounts based on historical experience against which losses on all receivables are charged. Information about the sale of accounts receivable for 1993 and 1992 is as follows: (IN THOUSANDS) 1993 1992 Receivables sold but not collected* $ 35,000 $ 35,000 Average amount of receivables sold $ 34,366 $ 33,373 Costs charged to operating expense $ 1,311 $ 1,472 Receivables subject to repurchase* $ 3,374 $ 3,438 Accumulated provision for uncollectible accounts* $ 537 $ 779 * AT YEAR END NOTE D FAIR VALUE OF FINANCIAL INSTRUMENTS The amounts reflected in the financial statements at December 31, 1993 and 1992, for cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximate fair value because of their short-term nature. The fair value of investments at December 31, 1993 and 1992, is estimated based on quoted market prices for these or similar investments. The fair value of the Company's long-term debt and nonconvertible preferred stock is estimated based upon the quoted market price for the same or similar issues or by a discounted present value analysis of future cash flows using current rates obtainable by the Company for debt and preferred stock with similar maturities. The fair value of convertible preferred stock is estimated assuming its conversion into common stock at the market price per common share at December 31, 1993 and 1992, with proceeds from the sale of the common stock used to repay the principal balance of the Company's loan to the ESOP.
(IN THOUSANDS) 1993 1992 CARRYING ESTIMATED CARRYING ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE Investments $ 19,572 $ 19,657 $ 23,358 $ 23,358 Long-term debt $ 352,391 $ 379,127 $ 312,040 $ 332,727 Preferred stock not subject to Mandatory redemption $ 4,864 $ 8,165 $ 2,717 $ 5,981 Preferred stock subject to mandatory redemption $ 7,242 $ 5,978 $ 7,400 $ 5,741
25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE E DEBT The Company has a $100,000,000 revolving credit facility with a group of banks that provides for uncollateralized borrowings at prevailing market interest rates or at interest rates established by competitive bids. Each year, subject to the approval of the banks, the facility may be extended for a one-year period. In 1993 the scheduled expiration date of the facility was extended for one year to July 31, 1996. The Company pays a commitment fee (currently 0.1875%) on the full amount of the facility, based upon the Company's lowest senior secured debt or unsecured commercial paper rating. The Company is not required to maintain compensating balances in connection with the revolving credit facility. Since the revolving credit facility provides liquidity support for the issuance of commercial paper, the aggregate amount of commercial paper notes and borrowings under the revolving credit facility cannot exceed $100,000,000. In addition to its revolving credit facility, the Company also has various uncommitted borrowing arrangements with banks totaling $23,000,000. The banks are not obligated to lend under these arrangements, and any borrowings are made at negotiated interest rates and are uncollateralized. The Company pays no fees on any of these arrangements, nor are compensating balances required. Debt at December 31, 1993 and 1992, consisted of the following: (IN THOUSANDS) 1993 1992 Short-term debt Commercial paper, net $ 25,073 $ 57,870 Bank loans 3,300 6,000 Total short-term debt $ 28,373 $ 63,870 Long-term debt First mortgage bonds Series L, 5%, due 1995 $ 14,000 $ 14,000 Series M, 7 3/4%, due 1999 12,000 Series P, 7 3/4%, due 2002 12,000 Series X, 9 1/2%, due 2005 60,000 60,000 Series Y, 9 5/8%, due 2021 50,000 50,000 Pollution control revenue bonds, variable rate, due 2018 61,260 61,260 Medium-term notes 10.05%, due 2001 10,000 9.13%, due 1997 15,000 15,000 7.85%, due 2000 25,000 25,000 7.53%, due 2004 25,000 25,000 7.00%, due 2003 10,000 10,000 6.90%, due 1998 15,000 15,000 5.90%, due 1999 10,000 6.55%, DUE 2003 15,000 6.33%, DUE 2002 25,000 5.78%, DUE 2001 10,000 6.20%, DUE 2006 15,000 MORTGAGE NOTES, 2%, DUE 1994-1995 346 545 Capitalized lease obligations, 5.40% - 6.875%, due 1994-2001 1,785 2,235 352,391 312,040 Amount due within one year (790) (649) Unamortized premium and discount, net (514) (577) Total long-term debt $ 351,087 $ 310,814 In 1991 the ESOP borrowed funds needed to purchase convertible preferred stock of the Company, and the Company guaranteed the repayment of the loan. The Company subsequently purchased the balance of the loan. The purchased ESOP note offsets the Company's guarantee of the ESOP's loan. The ESOP makes debt service payments to the Company from dividends received on the Company's convertible preferred stock and, if necessary, from additional contributions by the Company in amounts sufficient to satisfy debt service requirements. Long-term debt due within one year includes $140,000 of annual sinking fund requirements associated with the Company's first mortgage bonds, which the Company may elect to satisfy by pledging property additions in accordance with the indenture under which substantially all of the Company's utility plant is pledged as collateral. The amounts payable under long-term debt agreements over the next five years and thereafter are as follows:
(IN THOUSANDS) 1994 1995 1996 1997 1998 Thereafter Total Amount payable under long-term debt agreements $ 790 $ 14,536 $ 535 $ 15,250 $ 15,005 $ 306,275 $ 352,391
26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE F COMMON STOCK In April 1992 shareholders approved a two-for-one split of the Company's common stock. The stock split reduced the par value of the common stock from $4.00 per share to $2.00 per share and increased the number of authorized shares of common stock from 25,000,000 shares to 50,000,000 shares. In association with incentive compensation plans in effect during the three-year period ended 1993, certain officers and key employees could be awarded shares of restricted or unrestricted common stock or held options to purchase shares of the Company's common stock at 100% of the fair market value of the common stock at the dates the options were granted. The cost of the restricted stock awards, as measured by the fair market value of the common stock at the time of the grant, is recorded as compensation expense during the periods in which the restrictions on the common stock lapse. The Company makes no charge to expense with respect to the options. At December 31, 1993, all options were exercisable, while the number of shares of restricted stock previously awarded for which restrictions had not lapsed totaled 20,546 shares. Changes in incentive shares for the three-year period ended 1993 were as follows:
INCENTIVE SHARES OPTION PRICE UNEXERCISED AVAILABLE FOR PER SHARE OPTION SHARES FUTURE GRANTS Balance, January 1, 1991 282,802 843,350 Options exercised $ 7.00 (11,800) $8.875 (17,990) $14.75 (42,120) Options expired and returned to plan $14.75 (2,000) 2,000 Expiration of 1981 stock option plan (45,350) Restricted stock granted (8,774) Balance, December 31, 1991 208,892 791,226 Options exercised $ 7.00 (900) $8.875 (25,668) $14.75 (30,201) $16.78 (6,900) Restricted stock granted (6,994) Balance, December 31, 1992 145,223 784,232 Options exercised $8.875 (6,118) $14.75 (35,275) $16.78 (33,400) Restricted stock granted (10,320) Restricted stock forfeited 27 Incentive stock awarded (2,624) BALANCE, DECEMBER 31, 1993 70,430 771,315
Various debt agreements of the Company contain covenants which restrict the amount of retained earnings that may be distributed as dividends to common shareholders. The most restrictive covenant requires that common shareholders' equity be not less than 30% of total capitalization, including short-term debt. At December 31, 1993, approximately $129,000,000 of retained earnings was not restricted. NOTE G SUPPLEMENTARY PROFIT AND LOSS INFORMATION (IN THOUSANDS) 1993 1992 1991 Operating revenue derived from one customer $ 29,731 $ 29,193 $ 28,969 Other taxes included in income statement $ 27,011 $ 25,455 $ 22,954 Other taxes capitalized to plant 882 775 684 Total other taxes $ 27,893 $ 26,230 $ 23,638 Other taxes consist of: State and municipal property $ 14,174 $ 13,086 $ 11,901 State and municipal franchise 9,443 9,066 7,800 Other 4,276 4,078 3,937 Total other taxes $ 27,893 $ 26,230 $ 23,638 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE H PREFERRED STOCK Information about the components of preferred stock capitalization is as follows:
(IN THOUSANDS, EXCEPT SHARE AMOUNTS) BALANCE BALANCE BALANCE JANUARY 1, DECEMBER 31, DECEMBER 31, 1991 Change 1991 Change 1992 Change CUMULATIVE PREFERRED STOCK, $100 par value NOT SUBJECT TO MANDATORY REDEMPTION 4.50% $ 1,055 $ (26) $ 1,029 $ 1,029 Convertible, series of 1991, variable rate 30,000 30,000 $ (6) 29,994 $ (41) $ 1,055 $ 29,974 $ 31,029 $ (6) $ 31,023 $ (41) SUBJECT TO MANDATORY REDEMPTION 4.50%, Series of 1955 $ 600 $ (40) $ 560 $ (40) $ 520 $ (40) 4.65%, Series of 1964 3,780 (140) 3,640 (140 3,500 4.75%, Series of 1965 3,640 (130) 3,510 (130) 3,380 (118) 7.50%, Series of 1973 5,760 (270) 5,490 (5,490) $ 13,780 $ (580) $ 13,200 $(5,800) $ 7,400 $ (158) Deferred compensation related to convertible preferred stock held by the ESOP $(29,291) $(29,291) $ 985 $(28,306) $2,188 CUMULATIVE PREFERRED STOCK, $100 par value Number of Shares Authorized 1,483,800 (5,400) 1,478,400 (57,600) 1,420,800 (1,181) Issued and Outstanding 148,345 293,943 442,288 (58,056) 384,232 (1,994) CUMULATIVE PREFERRED STOCK, $25 par value Number of Shares Authorized 3,000,000 3,000,000 3,000,000 Issued and Outstanding -- -- -- -- BALANCE DECEMBER 31, 1993 CUMULATIVE PREFERRED STOCK, $100 par value NOT SUBJECT TO MANDATORY REDEMPTION 4.50% $ 1,029 Convertible, series of 1991, variable rate 29,953 $ 30,982 SUBJECT TO MANDATORY REDEMPTION 4.50%, Series of 1955 $ 480 4.65%, Series of 1964 3,500 4.75%, Series of 1965 3,262 7.50%, Series of 1973 $ 7,242 Deferred compensation related to convertible preferred stock held by the ESOP $(26,118) CUMULATIVE PREFERRED STOCK, $100 par value Number of Shares Authorized 1,419,619 Issued and Outstanding 382,238 CUMULATIVE PREFERRED STOCK, $25 par value Number of Shares Authorized 3,000,000 Issued and Outstanding --
In 1991 the Company sold 300,000 shares of convertible preferred stock to an ESOP. The dividend rate on the preferred stock was 8.125% in 1993 and 1992. Each share of preferred stock is convertible into 4.8 shares of common stock. The amount of total capitalization reflected in the financial statements has been reduced by an amount of deferred compensation expense related to the shares of convertible preferred stock which have not yet been allocated to ESOP participants. The amount shown in the financial statements for preferred dividend requirements in 1993, 1992 and 1991 has been reduced by $840,000, $919,000 and $680,000, respectively, to reflect the benefit of the income tax deduction for dividend requirements on unallocated shares held by the ESOP. Preferred stock, other than the convertible preferred stock held by the ESOP, is redeemable at the Company's option, subject to 30 days' prior written notice to holders. Preferred stock subject to mandatory redemption is redeemable annually through sinking funds or purchase funds at prices of not more than $100 per share until all shares have been redeemed. The convertible preferred stock is redeemable at any time upon the occurrence of certain events and, after April 1, 1996, is redeemable at the Company's option. If the Company were to elect to redeem the convertible preferred shares, shareholders may elect to receive the optional redemption price or convert the preferred shares into common stock. The redemption provisions for the various series of preferred stock are shown in the following table.
OPTIONAL REDEMPTION MANDATORY REDEMPTION PRICE PER NUMBER OF PRICE PER SERIES SHARE SHARES ANNUALLY SHARE 4.50% $ 101 -- -- 4.50%, Series of 1955 $ 102 400 $ 100 4.65%, Series of 1964 $ 102 1,400 $ 100 4.75%, Series of 1965 $ 100 1,300 $ 100 Convertible, Series of 1991 -- -- Through April 1, 1996 $107.3125 to $104.875 Thereafter $ 104.0625 to $100
Upon involuntary liquidation preferred shareholders are entitled to receive par value for shares held before any distribution is made to common shareholders. Upon voluntary liquidation preferred shareholders are entitled to receive the redemption price per share applicable at the time such liquidation occurs plus any accrued dividends. In 1993 no shares of the 4.65%, Series of 1964 preferred stock were tendered by shareholders in response to the Company's offers to purchase shares in satisfaction of the annual purchase fund redemption requirement; the Company's offers to purchase shares of the 4.75%, Series of 1965 preferred stock were accepted only in part by shareholders. 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE I PENSION PLAN AND EMPLOYEE BENEFITS Substantially all employees are covered by a noncontributory, defined benefit pension plan. Benefits under the plan reflect an employee's years of service, age at retirement and highest total average compensation for any consecutive five calendar years during the last ten years of employment with the Company. The Company's policy is to fund contributions to the employee pension plan based upon actuarial computations utilizing the projected unit credit method, subject to the Internal Revenue Service full funding limitation. Consistent with regulatory accounting practices prior to 1993, the Company recognized a regulatory adjustment to accrued pension costs so that pension expense was equal to the amount funded. No contributions to the pension plan were required during the three-year period ended 1993. Effective January 1, 1993, the Company began accounting for its pension plan on an accrual basis for ratemaking purposes with the approval of the LPSC staff. Additionally, the previously recorded regulatory asset is being amortized to income over a five-year period, subject to review by the LPSC in future proceedings. The components of pension expense and the actuarial assumptions for the three-year period ended 1993 were as follows: (IN THOUSANDS) 1993 1992 1991 Service costs for benefits earned during the period $ 2,559 $ 2,422 $ 2,237 Interest costs on projected benefit obligation 5,674 5,206 4,578 Actual gain on assets (8,164) (4,175) (22,866) Special termination benefits 3,903 -- -- Net amortization and deferral (1,109) (4,490) 15,075 Net pension benefit cost 2,863 (1,037) (976) Regulatory adjustment -- (1,037) 976 Net pension cost expensed $ 2,863 $ 0 $ 0 Actuarial assumptions Weighted average discount rate 7.00% 8.50% 7.75% Rate of increase in future compensation 5.00% 6.40% 6.40% Rate of return on plan assets 9.50% 9.50% 9.50% Employee pension plan assets are invested in publicly traded domestic common stocks, U.S. government, federal agency and corporate obligations, an international equity fund, commercial real estate funds and pooled temporary investments. The employee pension plan's funded status as determined by the actuary at December 31, 1993 and 1992, is presented in the following table. (IN THOUSANDS) 1993 1992 Actuarial present value of benefit obligation Vested benefits $ (68,463) $ (49,037) Nonvested benefits (3,038) (2,562) Accumulated benefit obligation (71,501) (51,599) Effect of projected future compensation levels (14,547) (15,966) Projected benefit obligation for service rendered to date (86,048) (67,565) Plan assets at fair market value 105,105 101,540 Plan assets in excess of projected benefit obligation 19,057 33,975 Unamortized transition asset (13,214) (14,531) Unrecognized net gain (2,980) (19,444) Accrued pension asset $ 2,863 $ 0 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE I (continued) Substantially all employees are eligible to participate in a savings and investment plan (401(k) Plan). The Company makes matching contributions to 401(k) Plan participants by allocating shares of convertible preferred stock held by the ESOP. Compensation expense related to the 401(k) Plan is based upon the value of shares of preferred stock allocated to ESOP participants, and the amount of interest incurred by the ESOP, less dividends on unallocated shares held by the ESOP. Prior to the establishment of the ESOP, matching contributions to the 401(k) Plan were made by the Company in cash. The table below contains information about the 401(k) Plan and the ESOP for the three-year period ended 1993. (IN THOUSANDS) 1993 1992 1991 401(k) Plan expense $ 1,449 $ 870 $ 1,109 Dividend requirements to ESOP on convertible preferred stock $ 2,434 $ 2,436 $ 1,808 Interest incurred by ESOP on its indebtedness $ 2,079 $ 1,535 $ 1,374 Company contributions to ESOP $ 1,270 $ 325 $ 22 The Company's retirees and their dependents are eligible to receive health, dental and life insurance benefits. Prior to 1993 the Company recognized the cost of postretirement benefits as claims were paid, which was approximately $764,000 in 1992 and $552,000 in 1991. In 1993 the Company began recognizing the expected cost of these benefits during the periods in which the benefits are earned. The components of net postretirement benefit cost for 1993 were as follows: (IN THOUSANDS) Service costs for benefits earned in 1993 $ 507 INTEREST COSTS 1,010 AMORTIZATION OF TRANSITION OBLIGATION 572 PLAN CURTAILMENT COST 441 RECOGNITION OF PRIOR SERVICE COSTS 1,512 NET POSTRETIREMENT BENEFIT COST $ 4,042 The financial status of the postretirement benefit plan at December 31, 1993, as determined by the actuary is presented in the following table. (IN THOUSANDS) Accumulated benefit obligation Retirees $ 10,600 FULLY ELIGIBLE PARTICIPANTS 1,181 OTHER ACTIVE PARTICIPANTS 3,070 TOTAL ACCUMULATED BENEFIT OBLIGATION 14,851 UNAMORTIZED TRANSITION OBLIGATION (9,753) UNRECOGNIZED LOSS (1,697) ACCRUED UNFUNDED POSTRETIREMENT BENEFIT LIABILITY $ 3,401 Effective October 1, 1993, the Company revised certain actuarial assumptions used in the computation of postretirement benefit expense, which resulted in an unrecognized gain of $961,000. The unrecognized gain was subsequently eliminated against the increase in postretirement benefit costs due to the curtailment associated with the restructuring. The assumed health care cost trend rate used to measure the expected cost of benefits was 10% in 1993, declining to 5.5% by 2006 and remains at 5.5% thereafter. If the health care cost trend rate assumptions were increased by 1%, the accumulated benefit obligation would be $15,310,000 at December 31, 1993, and the aggregate of the service and interest cost components of the net periodic cost of health care benefits would be $1,552,000 annually. The weighted average assumed discount rate used to measure the accumulated benefit obligation was changed from 8.5% to 7% in 1993 and resulted in an unrecognized loss. In 1993 the Company's organizational structure was streamlined. The resulting reduction in staff was achieved through enhanced early retirement and voluntary severance programs. The restructuring charge, which totaled $10,851,000, included $3,903,000 for special pension termination benefit costs, $1,953,000 for net postretirement plan curtailment costs, and $4,995,000 for voluntary severance, relocation and other costs. Beginning in 1994, the Company will recognize the cost of providing postemployment benefits, primarily an insurance deductible associated with an employee disability plan, when incurred. The estimated liability recognized effective January 1, 1994, was approximately $109,000. 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE J INCOME TAXES Federal income tax expense for the three-year period ended 1993 is less than the amount computed by applying the statutory federal rate to book income before tax as follows:
(IN THOUSANDS, EXCEPT FOR %) 1993 1992 1991 AMOUNT % Amount % Amount % Book income before tax $ 61,377 100.0 $ 63,834 100.0 $ 63,847 100.0 Tax at statutory rate on book income before tax $ 21,482 35.0 $ 21,704 34.0 $ 21,708 34.0 Increase (decrease): Tax effect of AFUDC (1,063) (1.7) (663) (1.0) (340) (0.5) Amortizaton of investment tax credits (1,827) (2.9) (1,830) (2.9) (1,836) (2.9) Tax effect of prior-year tax benefits not deferred 444 0.7 297 0.5 383 0.6 Other, net (2,194) (3.6) (2,263) (3.6) (3,185) (5.0) Total federal income tax expense 16,842 27.5 17,245 27.0 16,730 26.2 Current state income tax expense 2,723 4.4 1,350 2.1 2,188 3.4 Total federal and state income tax expense $ 19,565 31.9 $ 18,595 29.1 $ 18,918 29.6
Information about current and deferred income tax expense is as follows: (IN THOUSANDS) 1993 1992 1991 Current federal income tax expense $ 17,342 $ 8,249 $ 12,413 Deferred federal income tax expense 1,327 10,826 6,131 Amortization of accumulated deferred investment tax credits (1,827) (1,830) (1,814) Total federal income tax expense 16,842 17,245 16,730 Current state income tax expense 2,723 1,350 2,188 Total federal and state income tax expense $ 19,565 $ 18,595 $ 18,918 Deferred federal income tax expense attributable to: Depreciation $ 5,022 $ 4,852 $ 4,815 Storm damages 414 4,801 (61) Asset basis differences (882) 380 1,243 Employee benefits (2,074) -- -- Fuel costs (620) 407 302 Other (533) 386 (168) Total deferred federal income tax expense $ 1,327 $ 10,826 $ 6,131 Cumulative net amounts of timing differences for which deferred federal income taxes have not been provided -- $ 21,480 $ 22,880 The balance of accumulated deferred federal and state income tax assets and liabilities at December 31, 1993, was comprised of the tax effect of the following: (IN THOUSANDS) Asset Liability Depreciation and property basis differences $ 4,974 $ 117,087 Allowance for funds used during construction -- 42,110 Investment tax credits 23,116 -- Other 9,984 64,954 Accumulated deferred federal and state income taxes $ 38,074 $ 224,151 In 1993 there was no material effect on the Company's results of operations from the implementation of the new accounting standard for income taxes or the increase in the federal corporate income tax rate. The implementation of the new standard increased deferred tax liabilities by $96,000,000, which was offset by an increase in AFUDC of $40,000,000 and an increase in regulatory assets of $56,000,000. Additionally, deferred tax assets of $42,000,000, and a corresponding regulatory liability, were recognized. Regulatory assets and liabilities will be realized over the accounting lives of the related properties to the extent past ratemaking practices are continued by regulators. Prior to 1993 deferred federal and state taxes were not provided for these temporary differences due to their treatment for ratemaking purposes. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE K COMMITMENTS AND CONTINGENCIES In connection with its construction program and general operations, the Company had outstanding commitments of approximately $31,000,000 at December 31, 1993. Additionally, the Company has entered into various long-term contracts for the procurement of lignite, coal and natural gas to fuel its generating stations. Most of these contracts contain provisions of price escalation, minimum purchase levels or other financial commitments. The Company's electric rates include fuel adjustment clauses to enable the Company to recover from customers the cost of generating fuel. These adjustments are subject to audit and final determination by regulatory authorities. The Company has accrued for liabilities to third parties, environmental claims, employee medical benefits, storm damages and deductibles under insurance policies which it maintains on major properties, primarily generating stations and transmission substations. Consistent with regulatory treatment, annual charges to operating expense to provide a reserve for future storm damages are based upon the average amount of noncapital, uninsured storm damages experienced by the Company during the previous five years. In the ordinary course of business, the Company becomes involved in various lawsuits, claims, environmental actions and governmental or regulatory proceedings. Management, after consultation with legal counsel, does not expect that any liability which may arise out of any asserted or unasserted claim would have a material effect on the Company's financial position or results of operations. NOTE L MISCELLANEOUS FINANCIAL INFORMATION (UNAUDITED) Quarterly information for 1993 and 1992 is shown below.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1993 1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER Operating revenues $ 75,448 $ 92,070 $ 126,110 $ 88,805 Operating income $ 12,761 $ 17,523 $ 20,252 $ 14,209 Net income applicable to common stock $ 7,024 $ 11,545 $ 13,665 $ 7,594 Net income per average common share $ .31 $ .52* $ .61* $ .34 Dividends paid per common share $ .345 $ .355 $ .355 $ .355 Market price per share High $ 25 3/8 $ 26 3/4 $ 27 1/8 $ 27 Low $ 23 1/2 $ 24 3/4 $ 25 1/4 $ 23 * FOR THE THREE MONTHS ENDED JUNE 30 AND SEPTEMBER 30, 1993, FULLY-DILUTED NET INCOME PER AVERAGE COMMON SHARE WAS $.50 AND $.59, RESPECTIVELY. THERE WAS NO MATERIAL DILUTIVE EFFECT ON AN ANNUAL BASIS. 1992 1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER Operating revenues $ 75,838 $ 85,662 $ 105,728 $ 84,385 Operating income $ 14,108 $ 19,159 $ 225,549 $ 12,206 Net income applicable to common stock $ 6,518 $ 11,764 $ 18,482 $ 6,246 Net income per average common share $ .29 $ .53 $ .83* $ .28 Dividends paid per common share $ .335 $ .345 $ .345 $ .345 Market price per share High $ 2415/16 $ 26 1/4 $ 25 5/8 $ 24 3/4 Low $ 22 3/4 $ 23 1/8 $ 23 3/8 $ 23
* FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1992, FULLY-DILUTED NET INCOME PER AVERAGE COMMON SHARE WAS $.80. THERE WAS NO MATERIAL DILUTIVE EFFECT ON AN ANNUAL BASIS. The Company's common stock is listed for trading on the New York and Pacific stock exchanges under the ticker symbol CNL. The Company's preferred stock is not listed on any stock exchange. On December 31, 1993, the Company had 12,946 common and 232 preferred shareholders, as determined from the records of the transfer agent. On January 21, 1994, the Company's Board of Directors declared a quarterly dividend of 35 1/2 cents per share payable February 15, 1994, to common shareholders of record January 31, 1994. 32 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Central Louisiana Electric Company, Inc. We have audited the accompanying consolidated balance sheets of Central Louisiana Electric Company, Inc. as of December 31, 1993 and 1992, and the related consolidated statements of income, cash flows and changes in common shareholders' equity for each of the three years in the period ended December 31, 1993. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Central Louisiana Electric Company, Inc. as of December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Notes I and J to the consolidated financial statements, in 1993 the Company changed its methods of accounting for postretirement benefits other than pensions and income taxes. COOPERS & LYBRAND New Orleans, Louisiana January 21, 1994 33 EX-23 8 CONSENT COOPERS & LYBRAND EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Central Louisiana Electric Company, Inc. on Form S-8 (Registration Nos. 2-79671, 33-10169 and 33-44663) and Form S-3 (Nos. 33-24895, 33-61068, and 33-62950) of our reports dated January 21, 1994, on our audits of the consolidated financial statements and financial statement schedules of Central Louisiana Electric Company, Inc. as of December 31, 1993 and 1992 and for each of the three years in the period ended December 31, 1993, which reports are included or incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND New Orleans, Louisiana March 30, 1994 EX-24 9 POWERS OF ATTORNEY EXHIBIT 24 CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc. a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1993, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David M. Eppler, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorney-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 21st day of January, 1994. /s/ SHERIAN G. CADORIA SHERIAN G. CADORIA CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc. a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1993, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David M. Eppler, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorney-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 21st day of January, 1994. /s/ J. PATRICK GARRETT J. PATRICK GARRETT CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc. a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1993, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David M. Eppler, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorney-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 21st day of January, 1994. /s/ F. BEN JAMES, JR. F. BEN JAMES, JR. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc. a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1993, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David M. Eppler, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorney-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 21st day of January, 1994. /s/ HUGH J. KELLY HUGH J. KELLY CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc. a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1993, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David M. Eppler, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorney-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 21st day of January, 1994. /s/ WILLIAM A. LOCKWOOD WILLIAM A. LOCKWOOD CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc. a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1993, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David M. Eppler, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorney-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 21st day of January, 1994. /s/ A. DELOACH MARTIN, JR. A. DELOACH MARTIN, JR. CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc. a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1993, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David M. Eppler, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorney-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 21st day of January, 1994. /s/ ROBERT T. RATCLIFF ROBERT T. RATCLIFF CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc. a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1993, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David M. Eppler, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorney-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 21st day of January, 1994. /s/ EDWARD D. SIMMONS EDWARD D. SIMMONS CENTRAL LOUISIANA ELECTRIC COMPANY, INC. POWER OF ATTORNEY WHEREAS, Central Louisiana Electric Company, Inc. a Louisiana corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an Annual Report on Form 10-K (the "Form 10-K") for the Company's fiscal year ended December 31, 1993, with any and all amendments thereto as may be necessary or appropriate, together with any and all exhibits and other documents having relation to the Form 10-K; NOW, THEREFORE, the undersigned, in the capacity of a director or officer or both a director and officer of the Company, as the case may be, does hereby appoint Gregory L. Nesbitt and David M. Eppler, and each of them severally, his true and lawful attorney(s)-in-fact and agent(s) with power to act without the other, with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, the Form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith, to file the same with the Commission and to appear before the Commission in connection with any matter relating thereto. Each of said attorneys-in-fact and agents shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying, approving and confirming the acts that said attorney-in-fact and agents and each of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of the 21st day of March, 1994. /s/ ERNEST L. WILLIAMSON ERNEST L. WILLIAMSON -----END PRIVACY-ENHANCED MESSAGE-----