-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TzfX3grnW18y4+GkrotZJ00Mmndcj5uW8y3OMG0jVpWyEZF9H3kP7sZ+8jw33uSH +37+a8U1iWV0NAfOa5GycQ== 0000055387-96-000014.txt : 19960918 0000055387-96-000014.hdr.sgml : 19960918 ACCESSION NUMBER: 0000055387-96-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960805 SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENTUCKY UTILITIES CO CENTRAL INDEX KEY: 0000055387 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 610247570 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03464 FILM NUMBER: 96603484 BUSINESS ADDRESS: STREET 1: ONE QUALITY ST CITY: LEXINGTON STATE: KY ZIP: 40507 BUSINESS PHONE: 6062552100 10-Q 1 2ND QTR 1996 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission Registrant; State of Incorporation; IRS Employer File Number Address; and Telephone Number Identification No. 1-10944 KU Energy Corporation 61-1141273 (A Kentucky Corporation) One Quality Street Lexington, Kentucky 40507-1428 (606) 255-2100 1-3464 Kentucky Utilities Company 61-0247570 (A Kentucky and Virginia Corporation) One Quality Street Lexington, Kentucky 40507-1428 (606) 255-2100 Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that such Registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days. Yes X No . Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date: KU Energy Corporation: Common stock, no par value, 37,817,878 shares outstanding at August 2, 1996 Kentucky Utilities Company: Common stock, no par value, 37,817,878 shares outstanding and held by KU Energy Corporation at August 2, 1996 -1- KU ENERGY CORPORATION AND KENTUCKY UTILITIES COMPANY FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 CONTENTS PART I. FINANCIAL INFORMATION Page No. Item 1: Financial Statements KU ENERGY CORPORATION Consolidated Statements of Income 3-4 Consolidated Statements of Cash Flows 5 Consolidated Balance Sheets 6 KENTUCKY UTILITIES COMPANY Statements of Income 7-8 Statements of Cash Flows 9 Balance Sheets 10 CONDENSED NOTES TO FINANCIAL STATEMENTS OF KU ENERGY CORPORATION AND KENTUCKY UTILITIES COMPANY 11-15 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations KU ENERGY CORPORATION AND KENTUCKY UTILITIES COMPANY 16-21 PART II. OTHER INFORMATION Item 1: Legal Proceedings 22 Item 4: Submission of Matters to a Vote of Security Holders 22 Item 6: Exhibits and Reports on Form 8-K 22 Signatures 23 -2- PART I. FINANCIAL INFORMATION KU ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands except for per share amounts) For the Three Months Ended June 30, 1996 1995 Operating Revenues $167,510 $154,749 Operating Expenses: Fuel, principally coal, used in generation 45,079 40,679 Electric power purchased 17,589 17,631 Other operating expenses 30,727 30,661 Maintenance 17,606 19,495 Depreciation 20,154 18,832 Federal and state income taxes 9,636 5,378 Other taxes 3,894 4,180 Total Operating Expenses 144,685 136,856 Net Operating Income 22,825 17,893 Other Income and Deductions: Interest and dividend income 666 1,127 Other income and deductions - net 2,927 1,868 Total Other Income and Deductions 3,593 2,995 Income Before Interest and Other Charges 26,418 20,888 Interest and Other Charges 10,345 10,466 Net Income $ 16,073 $ 10,422 Average Common Shares Outstanding 37,818 37,818 Earnings Per Common Share $ .42 $ .27 The accompanying Condensed Notes to Financial Statements are an integral part of these statements. -3- KU ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands except for per share amounts) For the Six Months Ended June 30, 1996 1995 Operating Revenues $358,500 $321,889 Operating Expenses: Fuel, principally coal, used in generation 99,104 86,385 Electric power purchased 35,093 33,408 Other operating expenses 60,724 61,867 Maintenance 31,810 34,353 Depreciation 40,219 37,580 Federal and state income taxes 25,336 15,869 Other taxes 8,261 8,523 Total Operating Expenses 300,547 277,985 Net Operating Income 57,953 43,904 Other Income and Deductions: Interest and dividend income 1,551 2,104 Other income and deductions - net 3,995 3,999 Total Other Income and Deductions 5,546 6,103 Income Before Interest and Other Charges 63,499 50,007 Interest and Other Charges 21,107 20,778 Net Income $ 42,392 $ 29,229 Average Common Shares Outstanding 37,818 37,818 Earnings Per Common Share $ 1.12 $ .77 The accompanying Condensed Notes to Financial Statements are an integral part of these statements. -4- KU ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of dollars) For the Six Months Ended June 30, 1996 1995 Cash Flows from Operating Activities: Net Income $ 42,392 $ 29,229 Items not requiring (providing) cash currently: Depreciation 40,219 37,580 Deferred income taxes and investment tax credit 701 (392) Changes in current assets and liabilities: Change in fuel inventory (8,089) (2,199) Change in accounts receivable 1,505 3,253 Change in accounts payable 3,050 (10,411) Change in accrued taxes 42 4,575 Change in accrued utility revenues 2,345 (628) Change in liability to ratepayers (6,599) (314) Change in escrow funds 6,599 317 Other--net 6,886 (52) Net Cash Provided by Operating Activities 89,051 60,958 Cash Flows from Investing Activities: Construction expenditures - utility (47,431) (54,480) Proceeds from leveraged lease investments 236 236 Investment in independent power projects (666) (2,595) Proceeds from independent power projects 638 188 Other 201 13 Net Cash Used by Investing Activities (47,022) (56,638) Cash Flows from Financing Activities: Short-term borrowings - net (14,900) (31,300) Issuance of long-term debt 35,682 49,401 Funds deposited with trustee - net 3,779 8,600 Retirement of long-term debt, incl. premiums (36,192) (21) Payment of common stock dividends (32,523) (31,767) Net Cash Used by Financing Activities (44,154) (5,087) Net Decrease in Cash and Cash Equivalents (2,125) (767) Cash and Cash Equivalents Beginning of Period 29,492 28,927 Cash and Cash Equivalents End of Period $ 27,367 $ 28,160 Supplemental Disclosures Cash paid for: Interest on short- and long-term debt $ 17,896 $ 18,622 Federal and state income taxes $ 26,975 $ 12,554 The accompanying Condensed Notes to Financial Statements are an integral part of these statements. -5- KU ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of dollars) As of As of June 30, Dec. 31, ASSETS 1996 1995 Utility Plant: Plant in service, at cost $ 2,434,567 $2,394,018 Less: Accumulated depreciation 1,034,025 997,366 1,400,542 1,396,652 Construction work in progress 64,247 61,410 1,464,789 1,458,062 Current Assets: Cash and cash equivalents 27,367 29,492 Escrow funds - coal contract litigation - 6,599 Construction funds held by trustee - 3,743 Accounts receivable 48,024 49,529 Accrued utility revenues 25,555 27,900 Fuel, principally coal, at average cost 37,527 29,438 Materials and supplies, at average cost 22,970 23,064 Other 8,447 8,121 169,890 177,886 Investments, Deferred Charges and Other Assets: Investment in leveraged leases 23,038 21,509 Unamortized loss on reacquired debt 11,370 11,304 Other 45,726 46,213 80,134 79,026 Total Assets $ 1,714,813 $1,714,974 CAPITALIZATION AND LIABILITIES Capitalization: Common stock equity $ 638,480 $ 628,611 Preferred stock of Subsidiary 40,000 40,000 Long-term debt of Subsidiary 546,373 545,980 1,224,853 1,214,591 Current Liabilities: Long-term debt due within one year 21 21 Short-term borrowings 40,700 55,600 Accounts payable 40,985 37,935 Accrued interest 8,304 7,556 Accrued taxes 5,002 4,960 Customers' deposits 7,729 6,876 Accrued payroll and vacations 9,609 8,759 Liab. to ratepayers - coal contract litigation - 6,599 Other 9,112 6,992 121,462 135,298 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 237,953 233,707 Accumulated deferred investment tax credits 32,174 34,180 Regulatory tax liability 55,929 57,726 Other 42,442 39,472 368,498 365,085 Total Capitalization and Liabilities $ 1,714,813 $1,714,974 The accompanying Condensed Notes to Financial Statements are an integral part of these statements. -6- KENTUCKY UTILITIES COMPANY STATEMENTS OF INCOME (Unaudited) (in thousands of dollars) For the Three Months Ended June 30, 1996 1995 Operating Revenues $167,516 $154,757 Operating Expenses: Fuel, principally coal, used in generation 45,079 40,679 Electric power purchased 17,589 17,631 Other operating expenses 30,214 30,127 Maintenance 17,604 19,493 Depreciation 20,107 18,785 Federal and state income taxes 9,215 5,634 Other taxes 3,845 4,125 Total Operating Expenses 143,653 136,474 Net Operating Income 23,863 18,283 Other Income and Deductions: Interest and dividend income 401 803 Other income and deductions - net 1,706 1,376 Total Other Income and Deductions 2,107 2,179 Income Before Interest Charges 25,970 20,462 Interest Charges 9,780 9,901 Net Income 16,190 10,561 Preferred Stock Dividend Requirements 564 564 Net Income Applicable to Common Stock $ 15,626 $ 9,997 The accompanying Condensed Notes to Financial Statements are an integral part of these statements. -7- KENTUCKY UTILITIES COMPANY STATEMENTS OF INCOME (Unaudited) (in thousands of dollars) For the Six Months Ended June 30, 1996 1995 Operating Revenues $358,512 $321,905 Operating Expenses: Fuel, principally coal, used in generation 99,104 86,385 Electric power purchased 35,093 33,408 Other operating expenses 59,902 60,725 Maintenance 31,806 34,349 Depreciation 40,125 37,486 Federal and state income taxes 25,551 16,268 Other taxes 8,080 8,439 Total Operating Expenses 299,661 277,060 Net Operating Income 58,851 44,845 Other Income and Deductions: Interest and dividend income 1,014 1,436 Other income and deductions - net 3,806 2,856 Total Other Income and Deductions 4,820 4,292 Income Before Interest Charges 63,671 49,137 Interest Charges 19,978 19,648 Net Income 43,693 29,489 Preferred Stock Dividend Requirements 1,128 1,128 Net Income Applicable to Common Stock $ 42,565 $ 28,361 The accompanying Condensed Notes to Financial Statements are an integral part of these statements. -8- KENTUCKY UTILITIES COMPANY STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of dollars) For the Six Months Ended June 30, 1996 1995 Cash Flows from Operating Activities: Net Income $ 43,693 $ 29,489 Items not requiring (providing) cash currently: Depreciation 40,125 37,486 Deferred income taxes and investment tax credit (497) (1,097) Changes in current assets and liabilities: Change in fuel inventory (8,089) (2,199) Change in accounts receivable 1,447 2,957 Change in accounts payable 3,650 (11,075) Change in accrued taxes (118) 4,737 Change in accrued utility revenues 2,345 (628) Change in liability to ratepayers (6,599) (314) Change in escrow funds 6,599 317 Other--net 7,515 1,797 Net Cash Provided by Operating Activities 90,071 61,470 Cash Flows from Investing Activities: Construction expenditures - utility (47,431) (54,480) Other 201 17 Cash Used by Investing Activities (47,230) (54,463) Cash Flows from Financing Activities: Short-term borrowings - net (14,900) (31,300) Issuance of long-term debt 35,682 49,401 Funds deposited with trustee - net 3,779 8,600 Retirement of long-term debt, incl. premiums (36,192) (21) Payment of dividends (33,651) (32,706) Net Cash Used by Financing Activities (45,282) (6,026) Net Increase (Decrease) in Cash and Cash Equivalents (2,441) 981 Cash and Cash Equivalents Beginning of Period 5,697 3,111 Cash and Cash Equivalents End of Period $ 3,256 $ 4,092 Supplemental Disclosures Cash paid for: Interest on short- and long-term debt $ 17,896 $ 18,622 Federal and state income taxes $ 27,918 $ 12,826 The accompanying Condensed Notes to Financial Statements are an integral part of these statements. -9- KENTUCKY UTILITIES COMPANY BALANCE SHEETS (Unaudited) (in thousands of dollars) As of As of June 30, Dec. 31, 1996 1995 ASSETS Utility Plant: Plant in service, at cost $2,434,567 $2,394,018 Less: Accumulated depreciation 1,034,025 997,366 1,400,542 1,396,652 Construction work in progress 64,247 61,410 1,464,789 1,458,062 Current Assets: Cash and cash equivalents 3,256 5,697 Escrow funds - coal contract litigation - 6,599 Construction funds held by trustee - 3,743 Accounts receivable 48,024 49,471 Accrued utility revenues 25,555 27,900 Fuel, principally coal, at average cost 37,527 29,438 Materials and supplies, at average cost 22,970 23,064 Other 8,447 8,121 145,779 154,033 Investments, Deferred Charges and Other Assets: Unamortized loss on reacquired debt 11,370 11,304 Other 37,202 36,589 48,572 47,893 Total Assets $1,659,140 $1,659,988 CAPITALIZATION AND LIABILITIES Capitalization: Common stock equity $ 586,578 $ 576,537 Preferred stock 40,000 40,000 Long-term debt 546,373 545,980 1,172,951 1,162,517 Current Liabilities: Long-term debt due within one year 21 21 Short-term borrowings 40,700 55,600 Accounts payable 41,650 38,000 Accrued interest 8,304 7,556 Accrued taxes 5,083 5,201 Customers' deposits 7,729 6,876 Accrued payroll and vacations 9,560 8,706 Liab. to ratepayers - coal contract litigation - 6,599 Other 8,997 6,752 122,044 135,311 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 234,765 231,717 Accumulated deferred investment tax credits 32,174 34,180 Regulatory tax liability 55,929 57,726 Other 41,277 38,537 364,145 362,160 Total Capitalization and Liabilities $1,659,140 $1,659,988 The accompanying Condensed Notes to Financial Statements are an integral part of these statements. -10- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY CONDENSED NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. PRESENTATION OF CONDENSED INFORMATION The unaudited interim financial statements presented herein include the consolidated statements of KU Energy Corporation and Subsidiaries (KU Energy or the Company) as well as separate financial statements for Kentucky Utilities Company (KU). KU Energy Corporation is a holding company organized under the laws of Kentucky with two first-tier subsidiaries: KU Capital Corporation (KU Capital), a non- utility subsidiary, and KU, an electric utility. KU Energy Corporation owns 100% of the common equity of KU Capital and KU. KU is KU Energy Corporation's principal subsidiary. The unaudited statements have been prepared by the Company and KU, respectively, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company and KU believe the disclosures are adequate to make the information presented not misleading. The Company's consolidated financial statements should be read in conjunction with the financial statements and notes thereto incorporated by reference in the Annual Report on Form 10-K of KU Energy for the year ended December 31, 1995; and the KU financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K of KU for the year ended December 31, 1995. In the opinion of the Company and KU, the respective information furnished herein reflects all adjustments, all of which are normal and -11- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY CONDENSED NOTES TO FINANCIAL STATEMENTS (Unaudited) recurring, which are necessary to present fairly the results of the periods shown and the disclosures which have been made are adequate to make the information not misleading. Results of interim periods are not necessarily indicative of results for any twelve-month period due to the seasonal nature of KU's business. Prior year amounts have been reclassified on a basis consistent with the June 30, 1996 presentation. 2. ENVIRONMENTAL COST RECOVERY Since August 1994, KU has been collecting an environmental surcharge from its Kentucky retail customers under a Kentucky statute which authorizes electric utilities (including KU) to implement, beginning January 1, 1993, an environmental surcharge. The surcharge is designed to recover certain operating and capital costs of compliance with federal, state or local environmental requirements associated with the production of energy from coal, including the Federal Clean Air Act as amended. KU's environmental surcharge was approved by the Kentucky Public Service Commission (PSC) in July 1994 and was implemented in August 1994. The total surcharge collections from August 1, 1994 through June 30, 1996 were approximately $31 million. The constitutionality of the surcharge statute was challenged in the Franklin County (Kentucky) Circuit Court in an action brought against KU and the PSC by the Attorney General of Kentucky and joined by representatives of consumer groups. In July 1995, the Circuit Court entered a judgment upholding the constitutionality of the -12- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY CONDENSED NOTES TO FINANCIAL STATEMENTS (Unaudited) statute, but vacating that part of the PSC's July 1994 order which the judgment describes as allowing KU to recover, under the surcharge, environmental expenditures incurred before January 1, 1993, and ordering the case remanded to the PSC for a determination in accordance with the Circuit Court judgment. The Attorney General and other consumer representatives appealed to the Kentucky Court of Appeals that part of the Circuit Court judgment upholding the constitutionality of the surcharge statute. The PSC and KU appealed that part of the judgment denying recovery of environmental expenditures incurred before January 1, 1993. On August 22, 1995, in the first semi-annual reconciliation review, the PSC ordered all surcharge revenues collected by KU from that date subject to refund pending final determination of all appeals. In March 1996 in the second semi-annual reconciliation review, the PSC ordered all surcharge revenues collected during the six-month period then under review (February 1, 1995 through July 31, 1995) subject to refund pending final determination of all appeals. The total surcharge collections from February 1, 1995 through June 30, 1996 were approximately $27 million. KU believes the constitutionality of the surcharge statute will be upheld, but it cannot predict the outcome of that part of the Circuit Court judgment disallowing recovery of environmental expenditures incurred before January 1, 1993. If the Circuit Court judgment is ultimately upheld as entered, KU estimates that the amount it would be required to refund (which is based solely on costs associated with environmental expenditures incurred before January 1, -13- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY CONDENSED NOTES TO FINANCIAL STATEMENTS (Unaudited) 1993) for surcharge collections through June 30, 1996, from the implementation of the surcharge would be approximately $9 million, and from February 1, 1995 would be approximately $7 million. At this time, KU has not recorded any reserve for refund. 3. FINANCING In January 1996, KU issued $36 million of Series S First Mortgage Bonds which bear interest at 5.99% and will mature January 15, 2006. The proceeds were used to redeem $35.5 million of Series K First Mortgage Bonds. A redemption premium of approximately $.7 million was recorded on the balance sheet and will be amortized over the period to the scheduled maturity of the new bonds. 4. OPERATING REVENUES AND FUEL COSTS Pursuant to regulatory orders, KU had been refunding fuel cost savings related to the resolution of a coal contract dispute. Refunds were made to Virginia retail customers during the period August 1993 through June 1994. Refunds were made to wholesale customers under the jurisdiction of the FERC in lump sum payments in September 1993. Refunds to Kentucky retail customers commenced in July 1994. A portion remained to be refunded to Kentucky customers who had not filed required claims for refunds. Kentucky passed legislation in March 1996 which provides for the distribution by the State of certain unclaimed utility refunds to pay qualifying workers' compensation claims through the Kentucky Workers' Compensation Funding Commission (Funding Commission). KU requested permission from the PSC to -14- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY CONDENSED NOTES TO FINANCIAL STATEMENTS (Unaudited) transfer the remaining unclaimed refunds to the state for this purpose. The PSC issued an order in June 1996 approving this request and releasing KU from any obligation imposed by the PSC to hold, maintain and distribute the funds. KU transferred the funds (approximately $6.8 million) to the Funding Commission in June 1996. The legislation releases KU upon payment to the Kentucky State Treasurer from any future liability relating to unclaimed refunds, preserves the rights of ratepayers entitled to claim a refund who have not yet done so, and authorizes the Funding Commission to make any such refunds using any funds available. -15- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations is for the Company unless otherwise stated. Material changes in the consolidated financial condition and operating results of KU Energy are based primarily upon the operations of KU. LIQUIDITY & RESOURCES At June 30, 1996, KU's short-term borrowings were $40.7 million compared to $55.6 million at December 31, 1995. The short-term borrowings have been used primarily to finance ongoing construction expenditures and general corporate requirements. The decrease is due primarily to planned reductions in construction expenditures and additional cash provided by operations during the first half of 1996. Refer to Note 3 of the Condensed Notes to Financial Statements for a discussion of KU's recent financing activities. RESULTS OF OPERATIONS Quarter ended June 30, 1996, compared to the Quarter ended June 30, 1995 The Company's earnings per common share for the three-month period ended June 30, 1996 were $.42 compared to $.27 for the corresponding period of 1995. The increase reflects the success of KU's aggressive marketing efforts in the residential sector and the positive effects of colder weather in April 1996 as well as increased sales to industrial customers and increased opportunity sales during the second quarter of 1996 compared to 1995. The positive effects of these factors were somewhat offset by increased fuel and depreciation. -16- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS expenses. The changes in operating revenues and kilowatt-hour sales described below are for the Company. The only difference between changes in operating revenues for the Company and operating revenues for KU are intercompany revenues that are eliminated in the consolidated financial statements. These intercompany amounts are immaterial. Increase (Decrease) From Prior Year Three Months Ended June 30, 1996 kWh Revenues (%) (000's) Residential 13 $4,663 Commercial 3 968 Industrial 7 2,272 Mine Power (7) (677) Public Authorities 10 1,236 Total Retail Sales 7 8,462 Wholesale 6 908 Opportunity 45 2,167 Total Other Electric Utilities 22 3,075 Miscellaneous Revenues & Other - 1,224 Total 9 $12,761 Operating revenues increased $12.8 million (8%). The increase reflects a 9% increase in kilowatt-hour sales. The increase in kilowatt-hour sales is primarily attributable to increases in residential, industrial and opportunity sales. The increase in residential sales was due to the positive impacts of aggressive marketing efforts and to colder weather during April 1996. The increase in industrial sales reflects continued economic growth in the manufacturing sector of KU's service area evidenced primarily by a 10% increase in the number of industrial customers over 1995. The -17- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS increase in opportunity sales (374,794 megawatt-hours versus 257,961 megawatt-hours) is primarily due to agreements with two neighboring utilities for non-firm energy sales during 1996. Fuel expense increased $4.4 million (11%). The increase was primarily due to a 14% increase in the tons of coal consumed partially offset by a 4% reduction in the average price per ton of coal consumed. The increased consumption was primarily caused by a 13% increase in generation due to the previously mentioned increase in kilowatt-hour sales. Maintenance expense decreased $1.9 million (10%). The decrease was primarily due to the timing of expenditures for transmission and distribution maintenance. Federal and state income taxes increased $4.3 million (79%). The increase was primarily attributable to higher pretax net income. Six Months ended June 30, 1996, compared to the Six Months ended June 30, 1995 The Company's earnings per common share for the six-month period ended June 30, 1996 were $1.12 compared to $.77 for the corresponding period of 1995. The increase reflects the success of KU's aggressive marketing efforts in the residential sector, the positive effects of colder weather in the first four months of 1996 and increases in industrial and opportunity sales during the first half of 1996 compared to 1995. The positive effects of these factors were somewhat offset by increased fuel and depreciation expenses. -18- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Increase (Decrease) From Prior Year Six Months Ended June 30, 1996 kWh Revenues (%) (000's) Residential 13 $12,849 Commercial 4 2,986 Industrial 9 5,406 Mine Power (5) (912) Public Authorities 9 2,378 Total Retail Sales 8 22,707 Wholesale 6 1,681 Opportunity 149 10,087 Total Other Electric Utilities 51 11,768 Miscellaneous Revenues & Other - 2,136 Total 14 $36,611 Operating revenues increased $36.6 million (11%). The increase reflects a 14% increase in kilowatt-hour sales. The increase in kilowatt-hour sales is primarily due to increases in residential, industrial and opportunity sales. The increase in residential sales was due to the positive impacts of aggressive marketing efforts and to colder weather during the first four months of 1996 compared to the same period of 1995. KU set an all-time record peak demand for electricity on February 5, 1996 of 3,391 megawatts. The increase in opportunity sales was primarily attributable to agreements with neighboring utilities for non-firm energy sales during 1996. The increase in industrial sales was primarily due to an 8% increase in the number of industrial customers over 1995. Fuel expense increased $12.7 million (15%). The increase was primarily due to a 17% increase in the tons of coal consumed slightly offset by a 3% decrease in the average price per ton of coal consumed. The increase in consumption was primarily due to a 16% increase in -19- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS generation due to the previously mentioned increase in kilowatt-hour sales. Maintenance expense decreased by $2.5 million (7%) due primarily to the timing of expenditures for transmission and distribution maintenance. Federal and state income taxes increased by $9.5 million (60%). The increase was primarily attributable to higher pretax net income. UTILITY ISSUES - COMPETITION Refer to Management's Discussion and Analysis in the 1995 KU Energy Annual Report on Form 10-K under the heading "Utility Issues -Competition" for a discussion of the Federal Energy Regulatory Commission's (FERC) proposed rules addressing open access transmission service and the collection of charges for the recovery of stranded costs. In late April 1996, the FERC issued two final rules and a Notice of Proposed Rulemaking (NOPR). FERC Order No. 888 (Order 888) addressed both open access and stranded cost issues. FERC Order No. 889 (Order 889) requires utilities to establish an electronic Open Access Same-Time Information System (OASIS) to share information about available transmission capacity, and also requires the establishment by each utility of standards of conduct for its transmission system operation. The NOPR proposes to establish a new system for utilities to use in reserving capacity on their own and other's transmission lines. On July 9, 1996, KU filed a new open access transmission tariff with the FERC designed to comply with provisions of Order 888. Upon acceptance by the FERC, the new tariff will supersede KU's existing -20- KU ENERGY CORPORATION AND SUBSIDIARIES KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Transmission Services Tariff, which had been in effect since December 1994. The provisions of the tariff filed July 9, 1996, are similar to the terms and conditions of service contained in KU's existing tariff. KU is in the process of developing an OASIS and finalizing its standards of conduct pursuant to Order 889. KU expects to meet the FERC's November 1, 1996, deadline for implementation of these requirements. KU is also in the process of evaluating the FERC's NOPR which rules, if adopted as proposed, would supersede KU's transmission tariff filed July 9, 1996. The Company believes that competition and change will continue to impact the industry going forward. With utility rates that are among the lowest in the Nation, KU believes it is well-positioned for an increasingly competitive environment. -21- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note 2 of the Condensed Notes to Financial Statements, Environmental Cost Recovery, for a discussion of KU's environmental surcharge. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS KU Energy Corporation At the April 23, 1996, Annual Meeting of Shareholders, the following proposal was acted upon and approved. To elect five Directors to the Board of Directors of the Company. Votes for Votes Withheld Mira S. Ball 31,443,277 371,571 Carol M. Gatton 31,402,099 371,571 Frank V. Ramsey, Jr. 31,432,761 371,571 Charles L. Shearer 31,397,729 371,571 Lee T. Todd, Jr. 31,454,407 371,571 Kentucky Utilities Company At the April 23, 1996, Annual Meeting of Shareholders, the following proposal was acted upon and approved. To elect five Directors to the Board of Directors of KU. Votes for Votes Withheld Mira S. Ball 37,817,878 0 Carol M. Gatton 37,817,878 0 Frank V. Ramsey, Jr. 37,817,878 0 Charles L. Shearer 37,817,878 0 Lee T. Todd, Jr. 37,817,878 0 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following exhibits are filed as part of this report: Exhibit Number Description 4.01 By-laws of KU Energy Corporation dated July 29, 1996 4.02 By-laws of Kentucky Utilities Company dated July 29, 1996 27.01 Financial Data Schedule for KU Energy 27.02 Financial Data Schedule for KU (Both required for electronic filing only in accordance with Item 601(c)(1) of Regulation S-K.) (b) Reports on Form 8-K. None. -22- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, KU Energy Corporation and Kentucky Utilities Company have each duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KU ENERGY CORPORATION and KENTUCKY UTILITIES COMPANY (Registrants) Date August 2, 1996 /s/ Michael R. Whitley Michael R. Whitley Chairman and President Date August 2, 1996 /s/ Michael D. Robinson Michael D. Robinson Controller -23- EX-4.01 2 EXHIBIT 4.01 - KU ENERGY CORPORATION BY-LAWS EXHIBIT 4.01 BY-LAWS OF KU ENERGY CORPORATION Dated July 29, 1996 -24- BY-LAWS OF KU ENERGY CORPORATION ARTICLE I STOCK TRANSFERS Section 1. Each holder of fully paid stock shall be entitled to a certificate or certificates of stock stating the number and the class of shares owned by such holder, provided that, the Board of Directors may, by resolution, authorize the issue of some or all of the shares of any or all classes or series of stock without certificates. All certificates of stock shall, at the time of their issuance, be signed by the Chairman of the Board, the President or a Vice-President and by the Secretary or Assistant Secretary, and may be authenticated and registered by a duly appointed registrar. If the stock certificate is authenticated by a registrar, the signatures of the corporate officers may be facsimiles. In case any officer designated for the purpose who has signed or whose facsimile signature has been used on any stock certificate shall, from any cause, cease to be such officer before the certificate has been delivered by the Company, the certificate may nevertheless be adopted by the Company and be issued and delivered as though the person had not ceased to be such officer. Section 2. Shares of stock shall be transferable only on the books of the Company and upon proper endorsement and surrender of the outstanding certificates representing the same. If any outstanding certificate of stock shall be lost, destroyed or stolen, the officers of the Company shall have authority to cause a new certificate to be issued to replace such certificate upon the receipt by the Company of satisfactory evidence that such certificate has been lost, destroyed or stolen and of a bond of indemnity deemed sufficient by the officers to protect the Company and any registrar and any transfer agent of the Company against loss which may be sustained by reason of issuing such new certificate to replace the certificate reported lost, destroyed or stolen; and any transfer agent of the Company shall be authorized to issue and deliver such new certificate and any registrar of the Company is authorized to register such new certificate, upon written directions signed by the Chairman of the Board, the President or a Vice-President and by the Treasurer or the Secretary of the Company. Section 3. All certificates representing each class of stock shall be numbered and a record of each certificate shall be kept showing the name of the person to whom the certificate was issued with the number and the class of shares and the date thereof. All certificates exchanged or returned to the Company shall be cancelled and an appropriate record made. Section 4. The Board of Directors may fix a date not exceeding seventy days preceding the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date of allotment of rights, or, subject to contract rights with respect thereto, the date when any change or conversion or exchange of shares shall be made or go into effect, as a record date for the determination of the shareholders -25- entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividend, or allotment of rights, or to exercise the rights with respect to any such change, conversion or exchange of shares, and in such case only shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting, or to receive payment of such dividend or allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of shares on the books of the Company after the record date fixed as aforesaid. The Board of Directors may close the books of the Company against transfer of shares during the whole or any part of such period. When a determination of shareholders entitled to notice of and to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof except as otherwise provided by statute. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. An Annual Meeting of Stockholders of the Company shall be held at such date and time as shall be designated from time to time by the Board of Directors. Each such Annual Meeting shall be held at the principal office of the Company in Kentucky or at such other place as the Board of Directors may designate from time to time. Section 2. Special meetings of the stockholders may be called by the Board of Directors or by the holders of not less than 51% of all the votes entitled to be cast on each issue proposed to be considered at the special meeting, or in such other manner as may be provided by statute. Business transacted at special meetings shall be confined to the purposes stated in the notice of meeting. Section 3. Notice of the time and place of each annual or special meeting of stockholders shall be sent by mail to the recorded address of each stockholder entitled to vote not less than ten or more than sixty days before the date of the meeting, except in cases where other special method of notice may be required by statute, in which case the statutory method shall be followed. The notice of special meeting shall state the object of the meeting. Notice of any meeting of the stockholders may be waived by any stockholder. Section 4. At an Annual Meeting of the Stockholders, only such business shall be conducted as shall have been properly brought before the meeting in accordance with the procedures set forth in these By-laws. To be properly brought before the Annual Meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise be a proper matter for consideration and otherwise be properly requested to be brought before the meeting by a stockholder as hereinafter provided. For business to be properly requested to be brought before an Annual Meeting by a stockholder, a stockholder of a class of shares of the Company entitled to vote upon the matter requested to be brought before the meeting (or his designated proxy as provided below) must have given timely and proper notice thereof to the Secretary. To be timely, a stockholder's notice must be given by personal -26- delivery or mailed by United States mail, postage prepaid, and received by the Secretary not fewer than sixty calendar days prior to the meeting; provided, however, that in the event that the date of the meeting is not publicly announced by mail, press release or otherwise or disclosed in a public report, information statement, or other filing made with the Securities and Exchange Commission, in either case, at least seventy calendar days prior to the meeting, notice by the stockholder to be timely must be received by the Secretary, as provided above, not later than the close of business on the tenth day following the day on which such notice of the date of the meeting or such public disclosure or filing was made. To be proper, a stockholder s notice to the Secretary must be in writing and must set forth as to each matter the stockholder proposes to bring before the Annual Meeting (a) a description in reasonable detail of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting, (b) the name and address, as they appear on the Company books, of the stockholder proposing such business or granting a proxy to the proponent or an intermediary, (c) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (d) the name and address of the proponent, if the holder of a proxy from a qualified stockholder of record, and the names and addresses of any intermediate proxies, (e) the class and number of shares of the Company which are beneficially owned by the stockholder, and (f) any material interest of the stockholder or the proponent in such business. The chairman of an Annual Meeting shall determine whether business was properly brought before the meeting, which determination absent manifest error will be conclusive for all purposes. Section 5. The Chairman of the Board, if present, and in his absence the President, and the Secretary of the Company, shall act as Chairman and Secretary, respectively, at each stockholders meeting, unless otherwise provided by the Board of Directors prior to the meeting. Unless otherwise determined by the Board of Directors prior to the meeting, the Chairman of the stockholders meeting shall determine the order of business and shall have the authority in his discretion to regulate the conduct of any such meeting, including, without limitation, by imposing restrictions on the persons (other than stockholders of the Company or their duly appointed proxies) who may attend any such stockholders meeting, by determining whether any stockholder or his proxy may be excluded from any stockholders meeting based upon any determination by the Chairman, in his sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and by regulating the circumstances in which any person may make a statement or ask questions at any stockholders meeting. Section 6. The Company shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by law. Section 7. The Board of Directors may postpone and reschedule any previously scheduled annual or special meeting of stockholders and may adjourn any convened meeting of stockholders to another date and time as specified by the chairman of the meeting. -27- ARTICLE III BOARD OF DIRECTORS Section 1. The Board of Directors shall consist of no more than eleven and no less than nine members as determined from time to time by resolution of the Board of Directors. The Directors shall be divided into three groups, with each group containing one-third of the total, as near as may be, to be elected and to serve staggered terms as provided in the Articles of Incorporation of the Company. Except as otherwise expressly provided by the Articles of Incorporation, the Board of Directors may accept resignations of individual Directors and may fill, until the first annual election thereafter and until the necessary election shall have taken place, vacancies occurring at any time in the membership of the Board by death, resignation or otherwise. Written notice of such resignation shall be made as provided by law. Section 2. Nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if the stockholder has given timely and proper notice thereof to the Secretary. To be timely, a stockholder s notice must be given by personal delivery or mailed by United States mail, postage prepaid, and received by the Secretary not fewer than sixty calendar days or more than ninety calendar days prior to the meeting; provided, however, that in the event that the date of the meeting is not publicly announced by mail, press release or otherwise or disclosed in a public report, information statement or other filing made with the Securities and Exchange Commission, in either case, at least seventy calendar days prior to the meeting, notice by the stockholder to be timely must be so received by the Secretary, as provided above, not later than the close of business on the tenth day following the day on which such notice of the date of the meeting or such public disclosure or filing was made. To be proper, a stockholder s notice of nomination to the Secretary must be in writing and must set forth as to each nominee: (a) the name and address, as they appear on the Company books, of the stockholder who intends to make the nomination or granting a proxy to the proponent or an intermediary; (b) the name and address of the person or persons to be nominated; (c) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (d) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (e) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors, provided that (i) such information does not in any way violate any applicable Securities and Exchange Commission regulation, including regulations concerning public availability of information, and (ii) any information withheld on such basis shall be provided by separate notice at such time as would not be in violation of any applicable Securities and Exchange Commission regulation, such notice to be a supplement to the -28- notice otherwise required herein; (f) the class and number of shares of the Company which are beneficially owned by the stockholder; and (g) the signed consent of each nominee to serve as a director of the Company if so elected. Section 3. If the Chairman of the meeting for the election of Directors determines that a nomination of any candidate for election as a director at such meeting was not made in accordance with the applicable provisions of these By-laws, such nomination shall be void. Section 4. The Board of Directors may adopt such special rules and regulations for the conduct of their meetings and the management of the affairs of the Company as they may determine to be appropriate, not inconsistent with law or these By-laws. Section 5. A regular meeting of the Board of Directors shall be held as soon as practicable after the annual meeting of stockholders in each year. In addition, regular quarterly meetings of the Board may be held at the general offices of the Company in Kentucky, or at such other place as shall be specified in the notice of such meeting on the last Monday of January, July and October in each year. Written notice of every regular meeting of the Board, stating the time of day at which such meeting will be held, shall be given to each Director not less than two days prior to the date of the meeting. Such notice may be given personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same, properly addressed, in the mail. Section 6. Special meetings of the Board may be called at any time by the Chairman of the Board, or the President, or by a Vice-President when acting as President, or by any two Directors. Notice of such meeting, stating the place, day and hour of the meeting shall be given to each Director not less than one day prior to the date of the meeting. Such notice may be given personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same, properly addressed, in the mail. Section 7. Notice of any meeting of the Board may be waived by any Director. Section 8. A majority of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the board, but a less number may adjourn the meeting to some other day or sine die. The Board of Directors shall keep minutes of their proceedings at their meetings. The members of the Board may be paid such fees or compensations for their services as Directors as the Board, from time to time, by resolution, may determine. ARTICLE IV COMMITTEES Section 1. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of not less than three members of the Board, including the Chairman of the Board, if there be one, and the President of the Company. The Executive Committee may make its own rules of procedure and elect its Chairman, and shall meet where and as provided by such rules, or by resolution of the Board of Directors. A -29- majority of the members of the Committee shall constitute a quorum for the transaction of business. During the intervals between the meetings of the Board of Directors, the Executive Committee shall have all the powers of the Board in the management of the business and affairs of the Company except as limited by statute, including power to authorize the seal of the Company to be affixed to all papers which require it, and, by majority vote of all its members, may exercise any and all such powers in such manner as such Committee shall deem best for the interests of the Company, in all cases in which specific directions shall not have been given by the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board at meetings thereof. Section 2. The Board of Directors may appoint other committees, standing or special, from time to time from among their own number, or otherwise, and confer powers on such committees, and revoke such powers and terminate the existence of such committees at its pleasure. Section 3. Meetings of any committee may be called in such manner and may be held at such times and places as such committee may by resolution determine, provided that a meeting of any committee may be called at any time by the Chairman of the Board or by the President. Notice of such meeting, stating the place, day and hour of the meeting shall be given to each Director not less than one day prior to the meeting. Such notice may be given personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same, properly addressed, in the mail. Members of all committees may be paid such fees for attendance at meetings as the Board of Directors may determine. ARTICLE V OFFICERS Section 1. There shall be elected by the Board of Directors in each year, and if practicable at its first meeting after the annual election of Directors, the following principal officers, namely: a President, one or more Vice-Presidents (any one or more of whom may be designated Executive Vice-President or Senior Vice-President), a Secretary, a Treasurer, and a Controller; and the Board may provide for and elect a Chairman of the Board and such other officers and prescribe such duties for them as in its judgment may, from time to time, be required to conduct the business of the Company. If the Board shall elect a Chairman of the Board, the Board may, but need not, designate the Chairman of the Board as the chief executive officer of the Company. In absence of the election of a Chairman of the Board or any such designation, the President shall be the chief executive officer of the Company. All references in the By-laws of the Company to a Vice-President or Vice-Presidents shall include any Executive Vice-President and any Senior Vice-President. All officers, unless sooner removed, shall hold their respective offices until the first meeting of the Board of Directors after the next succeeding annual election of Directors, and until their successors, willing to serve, shall have been elected, but any officer may be removed from office at the pleasure of the Board. Section 2. The chief executive officer of the Company (whether the Chairman of the Board or the President) shall have responsibility for the general management and direction, subject to the approval of the Board of -30- Directors and of the Executive Committee, of the business of the Company, including the power to appoint and to remove and discharge any and all agents and employees of the Company not elected or appointed directly by the Board of Directors. He shall have such other power and duties as usually devolve upon the chief executive officer of the corporation and such further powers and duties as may from time to time be prescribed by the Board of Directors. Section 3. The Chairman of the Board, if there be one elected and when present, shall preside at all meetings of the Board of Directors, and at all meetings of the stockholders of the Company at which the stockholders shall not choose some other person to preside. He shall be a member of the Executive Committee, if there be one, and may attend any meeting of any committee of the Board whether or not he is a member of such committee. The Chairman of the Board, when requested so to do, shall give the President and the Board of Directors of the Company the benefit of his advice and experience with respect to the Company s affairs and, when not designated as the chief executive officer, shall perform such other duties as may be delegated to him by the Board of Directors. Section 4. The President, when not designated as the chief executive officer or when not acting as the chief executive officer, shall have such other powers and duties as usually devolve upon the President of a corporation and such further powers and duties as may from time to time be prescribed by the Board of Directors or as may be delegated to him by the Chairman of the Board. The President shall be a member of the Executive Committee, if there be one, and may attend any meeting of any committee of the Board whether or not he is a member of such committee. In the absence or inability of the Chairman of the Board to act, if there be one elected, the powers and duties of the Chairman of the Board (including those as chief executive officer if he shall have been designated as such) shall temporarily devolve upon the President. The President shall, unless a Chairman of the Board shall have been elected and present, preside at all meetings of the Board of Directors and at all meetings of the stockholders at which the stockholders shall not choose some other person to preside. He may, with the approval of the Board of Directors, appoint, to aid him in his duties, an assistant to be known as Assistant to the President, and may assign to said Assistant such duties as he shall think advisable and as shall not be inconsistent with the By-laws of the Company. Section 5. Each of the Vice-Presidents shall have such powers and duties as may be prescribed for him by the Board of Directors, or be delegated to him by the Chairman of the Board or the President. In the absence or inability of the President, or in case of his death, resignation or removal from office, the powers and duties of the President shall temporarily devolve upon such of the Vice-Presidents as the Board shall have designated or shall designate for the purpose, and the officer so designated shall have and exercise all powers and duties of the President during such absence or disability, or until the vacancy in the office of President shall be filled. Section 6. The Secretary shall attend all meetings of the Board of Directors and of the Executive Committee, shall keep a true and faithful record thereof in proper books to be provided for that purpose, and shall have the custody and care of the corporate seal, records, minutes and stock books of the Company. He shall also act as Secretary of all stockholders meetings, and keep a record thereof, except as some other person may be selected as -31- Secretary or as may be prescribed for him by the Board or the Executive Committee. Section 7. The Treasurer shall have charge of, and be responsible for, the collection, receipt, custody and disbursement of the funds of the Company, and shall deposit its funds in the name of the Company in such banks, trust companies, or safety vaults as he shall select, subject to the approval of the chief executive officer. He shall have the custody of such books, receipted vouchers and other books and papers as in the practical business operations of the Company shall naturally belong in the office or custody of the Treasurer, or shall be placed in his custody by the Board of Directors, by the Executive Committee, by the Chairman of the Board, by the President, or by any one of the Vice-Presidents when acting as or on behalf of the President. He shall sign checks, drafts and other papers providing for the payment of money by the Company for approved purposes in the usual course of business, and shall have such other powers and duties as are commonly incidental to the office of Treasurer, or as may be prescribed for him by the Board or the Executive Committee. He may be required to give bond to the Company for the faithful discharge of his duties in such form and to such amount and with such sureties as shall be determined by the Board of Directors. Section 8. The Controller shall have general supervision over all books and accounts of the Company relating to receipts and disbursements, and shall arrange the form of all vouchers, accounts, reports and returns required by the various departments. He shall examine the accounts of all officers and employees from time to time, and as often as practicable, and shall see that proper returns are made of all receipts from all sources, and that correct vouchers are turned over to him for all disbursements for any purpose. All bills for the previous month, properly made in detail and certified, shall be submitted to him, and he shall audit and approve the same if found satisfactory and correct, but he shall not approve or audit any voucher unless the charges covered by the voucher have been previously approved through working order, requisition or otherwise by the head of the department in which it originated or unless he shall be otherwise satisfied of its propriety and correctness. He shall have full access to all contracts, correspondence and other papers and records of the Company relating to its business matters, and shall have the custody of its account books, original contracts, and other papers relating to the accounts of the Company, except such as in the practical business operations of the Company shall naturally belong in the custody of the Treasurer, or shall be placed in his custody by the Board of Directors, by the Executive Committee, by the Chairman of the Board, by the President, or by one of the Vice-Presidents when acting as or on behalf of the President. The Controller shall have such other powers and duties as are commonly incidental to the office of Controller or as may be prescribed for him. He may be required to give bond to the Company for the faithful discharge of his duties in such form and to such amount and with such sureties as shall be determined by the Board of Directors. Section 9. Assistant Secretaries, Assistant Treasurers and Assistant Controllers, when elected, shall, respectively, assist the Secretary, Treasurer and Controller of the Company in the performance of their respective duties assigned to such principal officers, and in assisting his principal officer, each assistant officer shall, for such purpose, have the same powers as his principal officer. The powers and duties of any such principal officer, shall, except as otherwise ordered by the Board of -32- Directors, temporarily devolve upon his assistant in case of the absence, disability, death, resignation or removal from office of such principal officer. ARTICLE VI MISCELLANEOUS Section 1. The funds of the Company shall be deposited to its credit in such banks or trust companies as are selected by the Treasurer, subject to the approval of the chief executive officer. Such funds shall be withdrawn only on checks or drafts of the Company for the purpose of the Company, except that such funds may be withdrawn without the issuance of a check or draft (a) to effect a transfer of funds between accounts maintained by the Company at one or more depositaries; (b) to effect the withdrawal of funds, pursuant to resolution of the Board of Directors, for the payment of either commercial paper promissory notes of other entities or government securities purchased by the Company; (c) to effect a withdrawal of funds by the Company pursuant to the terms of any agreement or other document, approved by the Board of Directors, which requires or contemplates payment or payments by the Company by means other than a check or draft; or (d) to effect a withdrawal of funds for such other purpose as the Board of Directors by resolution shall provide. All checks and drafts of the Company shall be signed in such manner and by such officer or officers or such individuals as the Board of Directors, from time to time by resolution, shall determine. Only checks and drafts so signed shall be valid checks or drafts of the Company. Section 2. No debt shall be contracted except for current expenses unless authorized by the Board of Directors or the Executive Committee, and no bills shall be paid by the Treasurer unless audited and approved by the Controller or some other person or committee expressly authorized by the Board of Directors or the Executive Committee, to audit and approve bills for payment. All notes of the Company shall be executed by two different officers of the Company. Either or both of such executions may be by facsimile. Section 3. The fiscal year of the Company shall close at the end of December annually. ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS Section 1. Unless prohibited by law, the Company shall indemnify each of its Directors, officers, employees and agents against expenses (including attorneys fees), judgments, taxes, fines and amounts paid in settlement, incurred by such person in connection with, and shall advance expenses (including attorneys fees) incurred by such person in defending any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) to which such person was, is, or is threatened to be made a party by reason of the fact that such person is or was a Director, officer, employee or agent of another domestic or foreign corporation, partnership, joint venture, trust, other enterprise, or employee -33- benefit plan. Advancement of expenses shall be made upon receipt of a written statement of his good faith belief that he has met the standard of conduct as required by statute and a written undertaking, with such security, if any, as the Board may reasonably require, by or on behalf of the person seeking indemnification, to repay amounts advanced if it shall ultimately be determined that such person is not entitled to be indemnified by the Company. Section 2. In addition (and not by way of limitation of) the foregoing provisions of Section 1 of this Article VII and the provisions of the Kentucky Business Corporation Act, each person (including the heirs, executors, administrators and estate of such person) who is or was or had agreed to become a Director, officer, employee or agent of the Company and each person (including the heirs, executors, administrators and estate of such person) who is or was serving or who had agreed to serve at the request of the Directors or any officer of the Company as a Director, officer, employee, trustee, partner or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be indemnified by the Company to the fullest extent permitted by the Kentucky Business Corporation Act or any other applicable laws as presently or hereafter in effect. Without limiting the generality or the effect of the foregoing, the Company is authorized to enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article VII. Any repeal or modification of this Article by the stockholders of the Company shall not adversely affect any indemnification of any person hereunder in respect of any act or omission occurring prior to the time of such repeal or modification. Section 3. The Company may purchase and maintain insurance on behalf of any person who is or was entitled to indemnification as described above, whether or not the Company would have the power or duty to indemnify such person against such liability under this Article VII or applicable law. Section 4. To the extent required by applicable law, any indemnification of, or advance of expenses to, any person who is or was entitled to indemnification as described above, if arising out of a proceeding by or in the right of the Company, shall be reported in writing to the stockholders with or before the notice of the next stockholders meeting. Section 5. The indemnification provided by this Article VII: (a) shall not be deemed exclusive of any other rights to which the Company s Directors, officers, employees or agents may be entitled pursuant to the Articles of Incorporation, any agreement of indemnity, as a matter of law or otherwise; and (b) shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of such person s heirs, executors and administrators. ARTICLE VIII AMENDMENT OR REPEAL OF BY-LAWS These By-laws may be added to, amended or repealed at any meeting of the Board of Directors, and may also be added to, amended or repealed by the stockholders. -34- EX-4.02 3 EXHIBIT 4.02 - KENTUCKY UTILITIES COMPANY BY-LAWS EXHIBIT 4.02 BY-LAWS OF KENTUCKY UTILITIES COMPANY Dated July 29, 1996 -35- BY-LAWS OF KENTUCKY UTILITIES COMPANY ARTICLE I STOCK TRANSFERS Section 1. Each holder of fully paid stock shall be entitled to a certificate or certificates of stock stating the number and the class of shares owned by such holder, provided that, the Board of Directors may, by resolution, authorize the issue of some or all of the shares of any or all classes or series of stock without certificates. All certificates of stock shall, at the time of their issuance, be signed by the Chairman of the Board, the President or a Vice-President and by the Secretary or Assistant Secretary, and may be authenticated and registered by a duly appointed registrar. If the stock certificate is authenticated by a registrar, the signatures of the corporate officers may be facsimiles. In case any officer designated for the purpose who has signed or whose facsimile signature has been used on any stock certificate shall, from any cause, cease to be such officer before the certificate has been delivered by the Company, the certificate may nevertheless be adopted by the Company and be issued and delivered as though the person had not ceased to be such officer. Section 2. Shares of stock shall be transferable only on the books of the Company and upon proper endorsement and surrender of the outstanding certificates representing the same. If any outstanding certificate of stock shall be lost, destroyed or stolen, the officers of the Company shall have authority to cause a new certificate to be issued to replace such certificate upon the receipt by the Company of satisfactory evidence that such certificate has been lost, destroyed or stolen and of a bond of indemnity deemed sufficient by the officers to protect the Company and any registrar and any transfer agent of the Company against loss which may be sustained by reason of issuing such new certificate to replace the certificate reported lost, destroyed or stolen; and any transfer agent of the Company shall be authorized to issue and deliver such new certificate and any registrar of the Company is authorized to register such new certificate, upon written directions signed by the Chairman of the Board, the President or a Vice-President and by the Treasurer or the Secretary of the Company. Section 3. All certificates representing each class of stock shall be numbered and a record of each certificate shall be kept showing the name of the person to whom the certificate was issued with the number and the class of shares and the date thereof. All certificates exchanged or returned to the Company shall be cancelled and an appropriate record made. Section 4. The Board of Directors may fix a date not exceeding seventy days preceding the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date of allotment of rights, or, subject to contract rights with respect thereto, the -36- date when any change or conversion or exchange of shares shall be made or go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividend, or allotment of rights, or to exercise the rights with respect to any such change, conversion or exchange of shares, and in such case only shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting, or to receive payment of such dividend or allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of shares on the books of the Company after the record date fixed as aforesaid. The Board of Directors may close the books of the Company against transfer of shares during the whole or any part of such period. When a determination of shareholders entitled to notice of and to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof except as otherwise provided by statute. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. An Annual Meeting of Stockholders of the Company shall be held at such date and time as shall be designated from time to time by the Board of Directors. Each such Annual Meeting shall be held at the principal office of the Company in Kentucky or at such other place as the Board of Directors may designate from time to time. Section 2. Special meetings of the stockholders may be called by the Board of Directors or by the holders of not less than 51% of all the votes entitled to be cast on each issue proposed to be considered at the special meeting, or in such other manner as may be provided by statute. Business transacted at special meetings shall be confined to the purposes stated in the notice of meeting. Section 3. Notice of the time and place of each annual or special meeting of stockholders shall be sent by mail to the recorded address of each stockholder entitled to vote not less than ten or more than sixty days before the date of the meeting, except in cases where other special method of notice may be required by statute, in which case the statutory method shall be followed. The notice of special meeting shall state the object of the meeting. Notice of any meeting of the stockholders may be waived by any stockholder. Section 4. At an Annual Meeting of the Stockholders, only such business shall be conducted as shall have been properly brought before the meeting in accordance with the procedures set forth in these By-laws. To be properly brought before the Annual Meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise be a proper matter for consideration and otherwise be properly requested to be brought before the meeting by a stockholder as hereinafter provided. For business to be properly requested to be brought before an Annual Meeting by a stockholder, a stockholder of a class of shares of the Company entitled to vote upon the -37- matter requested to be brought before the meeting (or his designated proxy as provided below) must have given timely and proper notice thereof to the Secretary. To be timely, a stockholder s notice must be given by personal delivery or mailed by United States mail, postage prepaid, and received by the Secretary not fewer than sixty calendar days prior to the meeting; provided, however, that in the event that the date of the meeting is not publicly announced by mail, press release or otherwise or disclosed in a public report, information statement, or other filing made with the Securities and Exchange Commission, in either case, at least seventy calendar days prior to the meeting, notice by the stockholder to be timely must be received by the Secretary, as provided above, not later than the close of business on the tenth day following the day on which such notice of the date of the meeting or such public disclosure or filing was made. To be proper, a stockholder s notice to the Secretary must be in writing and must set forth as to each matter the stockholder proposes to bring before the Annual Meeting (a) a description in reasonable detail of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting, (b) the name and address, as they appear on the Company books, of the stockholder proposing such business or granting a proxy to the proponent or an intermediary, (c) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (d) the name and address of the proponent, if the holder of a proxy from a qualified stockholder of record, and the names and addresses of any intermediate proxies, (e) the class and number of shares of the Company which are beneficially owned by the stockholder, and (f) any material interest of the stockholder or the proponent in such business. The chairman of an Annual Meeting shall determine whether business was properly brought before the meeting, which determination absent manifest error will be conclusive for all purposes. Section 5. The Chairman of the Board, if present, and in his absence the President, and the Secretary of the Company, shall act as Chairman and Secretary, respectively, at each stockholders meeting, unless otherwise provided by the Board of Directors prior to the meeting. Unless otherwise determined by the Board of Directors prior to the meeting, the Chairman of the stockholders meeting shall determine the order of business and shall have the authority in his discretion to regulate the conduct of any such meeting, including, without limitation, by imposing restrictions on the persons (other than stockholders of the Company or their duly appointed proxies) who may attend any such stockholders meeting, by determining whether any stockholder or his proxy may be excluded from any stockholders meeting based upon any determination by the Chairman, in his sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and by regulating the circumstances in which any person may make a statement or ask questions at any stockholders meeting. Section 6. The Company shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by law. Section 7. The Board of Directors may postpone and reschedule any previously scheduled annual or special meeting of stockholders and may adjourn -38- any convened meeting of stockholders to another date and time as specified by the chairman of the meeting. ARTICLE III BOARD OF DIRECTORS Section 1. The Board of Directors shall consist of no more than eleven and no less than nine members as determined from time to time by resolution of the Board of Directors. Subject to the special rights of the holders of shares of the Preferred Stock and the holders of shares of the Preference Stock to elect Directors as specified in the Articles of Incorporation, the Directors shall be divided into three groups, with each group containing one-third of the total, as near as may be, to be elected and to serve staggered terms as provided in the Articles of Incorporation of the Company. Except as otherwise expressly provided by the Articles of Incorporation, the Board of Directors may accept resignations of individual Directors and may fill, until the first annual election thereafter and until the necessary election shall have taken place, vacancies occurring at any time in the membership of the Board by death, resignation or otherwise. Written notice of such resignation shall be made as provided by law. Section 2. Nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if the stockholder has given timely and proper notice thereof to the Secretary. To be timely, a stockholder s notice must be given by personal delivery or mailed by United States mail, postage prepaid, and received by the Secretary not fewer than sixty calendar days or more than ninety calendar days prior to the meeting; provided, however, that in the event that the date of the meeting is not publicly announced by mail, press release or otherwise or disclosed in a public report, information statement or other filing made with the Securities and Exchange Commission, in either case, at least seventy calendar days prior to the meeting, notice by the stockholder to be timely must be so received by the Secretary, as provided above, not later than the close of business on the tenth day following the day on which such notice of the date of the meeting or such public disclosure or filing was made. To be proper, a stockholder s notice of nomination to the Secretary must be in writing and must set forth as to each nominee: (a) the name and address, as they appear on the Company books, of the stockholder who intends to make the nomination or granting a proxy to the proponent or an intermediary; (b) the name and address of the person or persons to be nominated; (c) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (d) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (e) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by -39- the Board of Directors, provided that (i) such information does not in any way violate any applicable Securities and Exchange Commission regulation, including regulations concerning public availability of information, and (ii) any information withheld on such basis shall be provided by separate notice at such time as would not be in violation of any applicable Securities and Exchange Commission regulation, such notice to be a supplement to the notice otherwise required herein; (f) the class and number of shares of the Company which are beneficially owned by the stockholder; and (g) the signed consent of each nominee to serve as a director of the Company if so elected. Section 3. If the Chairman of the meeting for the election of Directors determines that a nomination of any candidate for election as a director at such meeting was not made in accordance with the applicable provisions of these By-laws, such nomination shall be void. Section 4. The Board of Directors may adopt such special rules and regulations for the conduct of their meetings and the management of the affairs of the Company as they may determine to be appropriate, not inconsistent with law or these By-laws. Section 5. A regular meeting of the Board of Directors shall be held as soon as practicable after the annual meeting of stockholders in each year. In addition, regular quarterly meetings of the Board may be held at the general offices of the Company in Kentucky, or at such other place as shall be specified in the notice of such meeting on the last Monday of January, July and October in each year. Written notice of every regular meeting of the Board, stating the time of day at which such meeting will be held, shall be given to each Director not less than two days prior to the date of the meeting. Such notice may be given personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same, properly addressed, in the mail. Section 6. Special meetings of the Board may be called at any time by the Chairman of the Board, or the President, or by a Vice-President when acting as President, or by any two Directors. Notice of such meeting, stating the place, day and hour of the meeting shall be given to each Director not less than one day prior to the date of the meeting. Such notice may be given personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same, properly addressed, in the mail. Section 7. Notice of any meeting of the Board may be waived by any Director. Section 8. A majority of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the board, but a less number may adjourn the meeting to some other day or sine die. The Board of Directors shall keep minutes of their proceedings at their meetings. The members of the Board may be paid such fees or compensations for their services as Directors as the Board, from time to time, by resolution, may determine. -40- ARTICLE IV COMMITTEES Section 1. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of not less than three members of the Board, including the Chairman of the Board, if there be one, and the President of the Company. The Executive Committee may make its own rules of procedure and elect its Chairman, and shall meet where and as provided by such rules, or by resolution of the Board of Directors. A majority of the members of the Committee shall constitute a quorum for the transaction of business. During the intervals between the meetings of the Board of Directors, the Executive Committee shall have all the powers of the Board in the management of the business and affairs of the Company except as limited by statute, including power to authorize the seal of the Company to be affixed to all papers which require it, and, by majority vote of all its members, may exercise any and all such powers in such manner as such Committee shall deem best for the interests of the Company, in all cases in which specific directions shall not have been given by the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board at meetings thereof. Section 2. The Board of Directors may appoint other committees, standing or special, from time to time from among their own number, or otherwise, and confer powers on such committees, and revoke such powers and terminate the existence of such committees at its pleasure. Section 3. Meetings of any committee may be called in such manner and may be held at such times and places as such committee may by resolution determine, provided that a meeting of any committee may be called at any time by the Chairman of the Board or by the President. Notice of such meeting, stating the place, day and hour of the meeting shall be given to each Director not less than one day prior to the meeting. Such notice may be given personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same, properly addressed, in the mail. Members of all committees may be paid such fees for attendance at meetings as the Board of Directors may determine. ARTICLE V OFFICERS Section 1. There shall be elected by the Board of Directors in each year, and if practicable at its first meeting after the annual election of Directors, the following principal officers, namely: a President, one or more Vice-Presidents (any one or more of whom may be designated Executive Vice-President or Senior Vice-President), a Secretary, a Treasurer, and a Controller; and the Board may provide for and elect a Chairman of the Board and such other officers and prescribe such duties for them as in its judgment may, from time to time, be required to conduct the business of the Company. If the Board shall elect a Chairman of the Board, the Board may, but need not, designate the Chairman of the Board as the chief executive officer of the Company. In absence of the election of a Chairman of the Board or any such designation, the President shall be the chief executive officer of the Company. All references in the By-laws of the Company to a Vice-President or Vice-Presidents shall include any Executive Vice-President and any Senior Vice-President. All officers, unless sooner removed, shall hold their respective offices until the first meeting of the Board of Directors after the next succeeding annual election of Directors, and until their successors, -41- willing to serve, shall have been elected, but any officer may be removed from office at the pleasure of the Board. Section 2. The chief executive officer of the Company (whether the Chairman of the Board or the President) shall have responsibility for the general management and direction, subject to the approval of the Board of Directors and of the Executive Committee, of the business of the Company, including the power to appoint and to remove and discharge any and all agents and employees of the Company not elected or appointed directly by the Board of Directors. He shall have such other power and duties as usually devolve upon the chief executive officer of the corporation and such further powers and duties as may from time to time be prescribed by the Board of Directors. Section 3. The Chairman of the Board, if there be one elected and when present, shall preside at all meetings of the Board of Directors, and at all meetings of the stockholders of the Company at which the stockholders shall not choose some other person to preside. He shall be a member of the Executive Committee, if there be one, and may attend any meeting of any committee of the Board whether or not he is a member of such committee. The Chairman of the Board, when requested so to do, shall give the President and the Board of Directors of the Company the benefit of his advice and experience with respect to the Company s affairs and, when not designated as the chief executive officer, shall perform such other duties as may be delegated to him by the Board of Directors. Section 4. The President, when not designated as the chief executive officer or when not acting as the chief executive officer, shall have such other powers and duties as usually devolve upon the President of a corporation and such further powers and duties as may from time to time be prescribed by the Board of Directors or as may be delegated to him by the Chairman of the Board. The President shall be a member of the Executive Committee, if there be one, and may attend any meeting of any committee of the Board whether or not he is a member of such committee. In the absence or inability of the Chairman of the Board to act, if there be one elected, the powers and duties of the Chairman of the Board (including those as chief executive officer if he shall have been designated as such) shall temporarily devolve upon the President. The President shall, unless a Chairman of the Board shall have been elected and present, preside at all meetings of the Board of Directors and at all meetings of the stockholders at which the stockholders shall not choose some other person to preside. He may, with the approval of the Board of Directors, appoint, to aid him in his duties, an assistant to be known as Assistant to the President, and may assign to said Assistant such duties as he shall think advisable and as shall not be inconsistent with the By-laws of the Company. Section 5. Each of the Vice-Presidents shall have such powers and duties as may be prescribed for him by the Board of Directors, or be delegated to him by the Chairman of the Board or the President. In the absence or inability of the President, or in case of his death, resignation or removal from office, the powers and duties of the President shall temporarily devolve upon such of the Vice-Presidents as the Board shall have designated or shall designate for the purpose, and the officer so designated shall have and exercise all powers and duties of the President during such absence or disability, or until the vacancy in the office of President shall be filled. -42- Section 6. The Secretary shall attend all meetings of the Board of Directors and of the Executive Committee, shall keep a true and faithful record thereof in proper books to be provided for that purpose, and shall have the custody and care of the corporate seal, records, minutes and stock books of the Company. He shall also act as Secretary of all stockholders meetings, and keep a record thereof, except as some other person may be selected as Secretary or as may be prescribed for him by the Board or the Executive Committee. Section 7. The Treasurer shall have charge of, and be responsible for, the collection, receipt, custody and disbursement of the funds of the Company, and shall deposit its funds in the name of the Company in such banks, trust companies, or safety vaults as he shall select, subject to the approval of the chief executive officer. He shall have the custody of such books, receipted vouchers and other books and papers as in the practical business operations of the Company shall naturally belong in the office or custody of the Treasurer, or shall be placed in his custody by the Board of Directors, by the Executive Committee, by the Chairman of the Board, by the President, or by any one of the Vice-Presidents when acting as or on behalf of the President. He shall sign checks, drafts and other papers providing for the payment of money by the Company for approved purposes in the usual course of business, and shall have such other powers and duties as are commonly incidental to the office of Treasurer, or as may be prescribed for him by the Board or the Executive Committee. He may be required to give bond to the Company for the faithful discharge of his duties in such form and to such amount and with such sureties as shall be determined by the Board of Directors. Section 8. The Controller shall have general supervision over all books and accounts of the Company relating to receipts and disbursements, and shall arrange the form of all vouchers, accounts, reports and returns required by the various departments. He shall examine the accounts of all officers and employees from time to time, and as often as practicable, and shall see that proper returns are made of all receipts from all sources, and that correct vouchers are turned over to him for all disbursements for any purpose. All bills for the previous month, properly made in detail and certified, shall be submitted to him, and he shall audit and approve the same if found satisfactory and correct, but he shall not approve or audit any voucher unless the charges covered by the voucher have been previously approved through working order, requisition or otherwise by the head of the department in which it originated or unless he shall be otherwise satisfied of its propriety and correctness. He shall have full access to all contracts, correspondence and other papers and records of the Company relating to its business matters, and shall have the custody of its account books, original contracts, and other papers relating to the accounts of the Company, except such as in the practical business operations of the Company shall naturally belong in the custody of the Treasurer, or shall be placed in his custody by the Board of Directors, by the Executive Committee, by the Chairman of the Board, by the President, or by one of the Vice-Presidents when acting as or on behalf of the President. The Controller shall have such other powers and duties as are commonly incidental to the office of Controller or as may be prescribed for him. He may be required to give bond to the Company for the faithful discharge of his duties in such form and to such amount and with such sureties as shall be determined by the Board of Directors. -43- Section 9. Assistant Secretaries, Assistant Treasurers and Assistant Controllers, when elected, shall, respectively, assist the Secretary, Treasurer and Controller of the Company in the performance of their respective duties assigned to such principal officers, and in assisting his principal officer, each assistant officer shall, for such purpose, have the same powers as his principal officer. The powers and duties of any such principal officer, shall, except as otherwise ordered by the Board of Directors, temporarily devolve upon his assistant in case of the absence, disability, death, resignation or removal from office of such principal officer. ARTICLE VI MISCELLANEOUS Section 1. The funds of the Company shall be deposited to its credit in such banks or trust companies as are selected by the Treasurer, subject to the approval of the chief executive officer. Such funds shall be withdrawn only on checks or drafts of the Company for the purpose of the Company, except that such funds may be withdrawn without the issuance of a check or draft (a) to effect a transfer of funds between accounts maintained by the Company at one or more depositaries; (b) to effect the withdrawal of funds, pursuant to resolution of the Board of Directors, for the payment of either commercial paper promissory notes of other entities or government securities purchased by the Company; (c) to effect a withdrawal of funds by the Company pursuant to the terms of any agreement or other document, approved by the Board of Directors, which requires or contemplates payment or payments by the Company by means other than a check or draft; or (d) to effect a withdrawal of funds for such other purpose as the Board of Directors by resolution shall provide. All checks and drafts of the Company shall be signed in such manner and by such officer or officers or such individuals as the Board of Directors, from time to time by resolution, shall determine. Only checks and drafts so signed shall be valid checks or drafts of the Company. Section 2. No debt shall be contracted except for current expenses unless authorized by the Board of Directors or the Executive Committee, and no bills shall be paid by the Treasurer unless audited and approved by the Controller or some other person or committee expressly authorized by the Board of Directors or the Executive Committee, to audit and approve bills for payment. All notes of the Company shall be executed by two different officers of the Company. Either or both of such executions may be by facsimile. Section 3. The fiscal year of the Company shall close at the end of December annually. ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS Section 1. Unless prohibited by law, the Company shall indemnify each of its Directors, officers, employees and agents against expenses (including attorneys fees), judgments, taxes, fines and amounts paid in -44- settlement, incurred by such person in connection with, and shall advance expenses (including attorneys fees) incurred by such person in defending any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) to which such person was, is, or is threatened to be made a party by reason of the fact that such person is or was a Director, officer, employee or agent of another domestic or foreign corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan. Advancement of expenses shall be made upon receipt of a written statement of his good faith belief that he has met the standard of conduct as required by statute and a written undertaking, with such security, if any, as the Board may reasonably require, by or on behalf of the person seeking indemnification, to repay amounts advanced if it shall ultimately be determined that such person is not entitled to be indemnified by the Company. Section 2. In addition (and not by way of limitation of) the foregoing provisions of Section 1 of this Article VII and the provisions of the Kentucky Business Corporation Act, each person (including the heirs, executors, administrators and estate of such person) who is or was or had agreed to become a Director, officer, employee or agent of the Company and each person (including the heirs, executors, administrators and estate of such person) who is or was serving or who had agreed to serve at the request of the Directors or any officer of the Company as a Director, officer, employee, trustee, partner or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be indemnified by the Company to the fullest extent permitted by the Kentucky Business Corporation Act or any other applicable laws as presently or hereafter in effect. Without limiting the generality or the effect of the foregoing, the Company is authorized to enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article VII. Any repeal or modification of this Article by the stockholders of the Company shall not adversely affect any indemnification of any person hereunder in respect of any act or omission occurring prior to the time of such repeal or modification. Section 3. The Company may purchase and maintain insurance on behalf of any person who is or was entitled to indemnification as described above, whether or not the Company would have the power or duty to indemnify such person against such liability under this Article VII or applicable law. Section 4. To the extent required by applicable law, any indemnification of, or advance of expenses to, any person who is or was entitled to indemnification as described above, if arising out of a proceeding by or in the right of the Company, shall be reported in writing to the stockholders with or before the notice of the next stockholders meeting. Section 5. The indemnification provided by this Article VII: (a) shall not be deemed exclusive of any other rights to which the Company s Directors, officers, employees or agents may be entitled pursuant to the Articles of Incorporation, any agreement of indemnity, as a matter of law or otherwise; and (b) shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of such person s heirs, executors and administrators. -45- ARTICLE VIII AMENDMENT OR REPEAL OF BY-LAWS These By-laws may be added to, amended or repealed at any meeting of the Board of Directors, and may also be added to, amended or repealed by the stockholders. -46- EX-27.02 4 ARTICLE UT FDS FOR KENTUCKY UTILITIES CO. - 2ND QTR 1996
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF JUNE 30, 1996 AND THE STATEMENTS OF INCOME AND CASH FLOWS FOR THE PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q QUARTERLY REPORT. 1,000 6-MOS DEC-31-1996 JUN-30-1996 PER-BOOK 1,464,789 11,935 145,779 36,637 0 1,659,140 308,140 (594) 279,032 586,578 0 40,000 546,373 40,700 0 0 21 0 0 0 445,468 1,659,140 358,512 25,551 274,110 299,661 58,851 4,820 63,671 19,978 43,693 1,128 42,565 32,523 18,937 90,071 0 0 ALL OUTSTANDING COMMON STOCK OF KENTUCKY UTILITIES COMPANY IS HELD BY ITS PARENT COMPANY, KU ENERGY CORPORATION. THEREFORE, EARNINGS PER SHARE IS NOT APPLICABLE.
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