-----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, I/VjhhNNFjlj2Vd7Q5Q6fJKqkpK/UJiPO7xoxPe4sr9TVF35UXo0avUBpSdB6gZx ks+DBcJBBNAyQAkXN6yPGg== 0000060549-96-000015.txt : 19960814 0000060549-96-000015.hdr.sgml : 19960814 ACCESSION NUMBER: 0000060549-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOUISVILLE GAS & ELECTRIC CO /KY/ CENTRAL INDEX KEY: 0000060549 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 610264150 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02893 FILM NUMBER: 96610909 BUSINESS ADDRESS: STREET 1: 220 W MAIN ST STREET 2: P O BOX 32010 CITY: LOUISVILLE STATE: KY ZIP: 40232 BUSINESS PHONE: 5026272000 MAIL ADDRESS: STREET 1: 220 WEST MAIN ST CITY: LUUISVILLE STATE: KY ZIP: 40232 10-Q 1 LG&E'S JUNE 1996 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [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 Commission file number 2 - 26720 LOUISVILLE GAS AND ELECTRIC COMPANY (Exact name of registrant as specified in its charter) Kentucky 61 - 0264150 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 220 West Main Street 40232 P.O. Box 32010 (Zip Code) Louisville, KY (Address of principal executive offices) (502) 627-2000 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 21,294,223 shares, without par value, as of July 31, 1996, all of which were held by LG&E Energy Corp. 2 Part I. Financial Information - Item 1. Financial Statements Louisville Gas and Electric Company Statements of Income (Thousands of $) The following statements of income include all normal recurring adjustments and accruals which are, in the opinion of the Company, necessary to present a fair statement of the results for the periods shown. Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 OPERATING REVENUES: Electric (Note 2). . . . . . . . . $151,745 $142,340 $287,433 $265,882 Gas. . . . . . . . . . . . . . . . 29,362 25,481 120,418 101,455 Total operating revenues. . . . . 181,107 167,821 407,851 367,337 OPERATING EXPENSES: Fuel for electric generation . . . 36,692 35,801 72,606 67,652 Power purchased. . . . . . . . . . 5,171 1,037 8,273 1,843 Gas supply expenses. . . . . . . . 18,652 13,594 76,884 61,961 Other operation expenses . . . . . 31,530 35,658 71,257 71,056 Maintenance. . . . . . . . . . . . 15,988 13,205 30,156 24,687 Depreciation and amortization. . . 22,251 21,440 44,501 42,880 Federal and state income taxes . . . . . . . . . . . . . . 13,832 13,013 28,409 26,241 Property and other taxes . . . . . 4,255 4,058 9,079 8,593 Total operating expenses. . . . . 148,371 137,806 341,165 304,913 NET OPERATING INCOME. . . . . . . . 32,736 30,015 66,686 62,424 Other income and (deductions) (Note 3). . . . . . . 590 1,809 712 2,211 Interest charges. . . . . . . . . . 10,418 10,739 20,938 21,711 NET INCOME. . . . . . . . . . . . . 22,908 21,085 46,460 42,924 Preferred Stock Dividends . . . . . 1,136 1,627 2,292 3,244 NET INCOME AVAILABLE FOR COMMON STOCK . . . . . . . . . . . $ 21,772 $ 19,458 $ 44,168 $ 39,680 3 Louisville Gas and Electric Company Balance Sheets (Thousands of $) ASSETS June 30, Dec. 31, 1996 1995 UTILITY PLANT: At original cost . . . . . . . . . . . . . . . . . .$2,637,011 $2,598,860 Less: reserve for depreciation. . . . . . . . . . . 967,982 934,942 Net utility plant . . . . . . . . . . . . . . . . . 1,669,029 1,663,918 OTHER PROPERTY AND INVESTMENTS - less reserve . . . . . . . . . . . . . . . . . . . . 765 760 CURRENT ASSETS: Cash and temporary cash investments. . . . . . . . . 62,490 58,131 Marketable securities. . . . . . . . . . . . . . . . 6,237 20,449 Accounts receivable - less reserve. . . . . . . . . 106,211 105,589 Materials and supplies - at average cost: Fuel (predominantly coal) . . . . . . . . . . . . . 6,477 14,996 Gas stored underground. . . . . . . . . . . . . . . 12,701 31,714 Other . . . . . . . . . . . . . . . . . . . . . . . 33,356 34,384 Prepayments. . . . . . . . . . . . . . . . . . . . . 1,688 2,108 Total current assets. . . . . . . . . . . . . . . . 229,160 267,371 DEFERRED DEBITS AND OTHER ASSETS: Unamortized debt expense . . . . . . . . . . . . . . 7,529 7,710 Regulatory assets. . . . . . . . . . . . . . . . . . 31,494 29,926 Other. . . . . . . . . . . . . . . . . . . . . . . . 24,315 9,805 Total deferred debits and other assets. . . . . . . 63,338 47,441 Total assets. . . . . . . . . . . . . . . . . . .$1,962,292 $1,979,490 4 Louisville Gas and Electric Company Balance Sheets (cont.) (Thousands of $) CAPITAL AND LIABILITIES June 30, Dec. 31, 1996 1995 CAPITALIZATION: Common stock, without par value - Outstanding 21,294,223 shares . . . . . . . . . . .$ 425,170 $ 425,170 Retained earnings. . . . . . . . . . . . . . . . . . 188,217 181,049 Other. . . . . . . . . . . . . . . . . . . . . . . . (895) (1,062) Total common equity . . . . . . . . . . . . . . . . 612,492 605,157 Cumulative preferred stock . . . . . . . . . . . . . 95,328 95,328 Long-term debt . . . . . . . . . . . . . . . . . . . 646,838 646,845 Total capitalization. . . . . . . . . . . . . . . . 1,354,658 1,347,330 CURRENT LIABILITIES: Long-term debt due within one year (Note 4) . . . . . . . . . . . . . . . . . - 16,000 Accounts payable . . . . . . . . . . . . . . . . . . 77,408 93,706 Trimble County Settlement . . . . . . . . . . . . . 20,078 28,300 Dividends declared . . . . . . . . . . . . . . . . . 19,636 19,672 Accrued taxes. . . . . . . . . . . . . . . . . . . . 14,263 7,814 Accrued interest . . . . . . . . . . . . . . . . . . 11,185 11,064 Other. . . . . . . . . . . . . . . . . . . . . . . . 13,651 12,071 Total current liabilities . . . . . . . . . . . . . 156,221 188,627 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 213,450 204,816 Investment tax credit, in process of amortization . . . . . . . . . . . . . . 81,834 84,037 Accumulated provision for pensions and related benefits. . . . . . . . . . . . . . . . 43,486 47,099 Regulatory liability . . . . . . . . . . . . . . . . 86,753 88,242 Other. . . . . . . . . . . . . . . . . . . . . . . . 25,890 19,339 Total deferred credits and other liabilities. . . . 451,413 443,533 Total capital and liabilities . . . . . . .. . .$1,962,292 $1,979,490 5 Louisville Gas and Electric Company Statements of Cash Flows (Thousands of $) Six Months Ended June 30, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . $ 46,460 $ 42,924 Items not requiring cash currently: Depreciation and amortization . . . . . . . . . . . 44,501 42,880 Deferred income taxes - net . . . . . . . . . . . . 7,033 5,713 Investment tax credit - net . . . . . . . . . . . . (2,203) (2,440) Other . . . . . . . . . . . . . . . . . . . . . . . 2,056 1,908 Decreases (increases) in net current assets: Accounts receivable . . . . . . . . . . . . . . . . (622) (1,069) Materials and supplies. . . . . . . . . . . . . . . 28,560 23,981 Trimble County Settlement . . . . . . . . . . . . . (8,222) - Accounts payable. . . . . . . . . . . . . . . . . . (16,298) (12,217) Accrued taxes . . . . . . . . . . . . . . . . . . . 6,449 (2,145) Accrued interest. . . . . . . . . . . . . . . . . . 121 (1,396) Prepayments and other . . . . . . . . . . . . . . . 2,000 498 Other. . . . . . . . . . . . . . . . . . . . . . . . (16,686) (9,118) Net cash provided by operating activities . . . . . 93,149 89,519 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of securities. . . . . . . . . . . . . . . (6,550) (75,468) Proceeds from sales of securities. . . . . . . . . . 21,036 91,970 Construction expenditures. . . . . . . . . . . . . . (47,949) (38,127) Net cash used for investing activities. . . . . . . . . . . . . . . (33,463) (21,625) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of pollution control bonds. . . . . . . . . - 39,959 Retirement of first mortgage bonds and pollution control bonds . . . . . . . . . . . . (16,000) (41,076) Payment of dividends . . . . . . . . . . . . . . . . (39,327) (55,184) Net cash used for financing activities. . . . . . . $(55,327) $ (56,301) 6 Louisville Gas and Electric Company Statements of Cash Flows (cont.) (Thousands of $) Six Months Ended June 30, 1996 1995 NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS . . . . . . . . . . . . . $ 4,359 $ 11,593 CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . 58,131 39,138 CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD. . . . . . . . . . . . . . . . . . . . $62,490 $ 50,731 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Income taxes. . . . . . . . . . . . . . . . . . . $21,334 $ 23,494 Interest on borrowed money. . . . . . . . . . . . 20,048 22,285 For the purposes of this statement, all temporary cash investments purchased with a maturity of three months or less are considered cash equivalents. 7 Louisville Gas and Electric Company Statements of Retained Earnings (Thousands of $) Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Balance at beginning of period. . . $184,945 $180,117 $181,049 $193,895 Net income. . . . . . . . . . . . . 22,908 21,085 46,460 42,924 Subtotal. . . . . . . . . . . . . 207,853 201,202 227,509 236,819 Cash dividends declared on stock - 5% cumulative preferred . . . . . 269 269 538 539 7.45% cumulative preferred. . . . - 400 - 799 Auction rate cumulative pref. . . 500 591 1,020 1,172 $5.875 cumulative preferred . . . 367 367 734 734 Common. . . . . . . . . . . . . . 18,500 18,000 37,000 52,000 Total dividends declared. . . . . 19,636 19,627 39,292 55,244 Balance at end of period. . . . . . $188,217 $181,575 $188,217 $181,575 8 Louisville Gas and Electric Company Notes to Financial Statements (Unaudited) 1. The financial statements included herein have been prepared by Louisville Gas and Electric Company (the "Company"), without audit, 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 believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year 1995, and the Report on Form 10-Q for the quarter ended March 31, 1996. 2. The Company filed an application with the Public Service Commission of Kentucky (Commission) on October 7, 1994, in which it requested approval of an environmental cost recovery surcharge to recover certain costs required to comply with the Federal Clean Air Act, as amended, and those federal, state, and local environmental requirements which apply to coal combustion wastes and by-products from facilities utilized for the production of energy from coal. On April 6, 1995, the Commission approved, with modifications, an environmental cost recovery surcharge that increased electric revenues by $3.2 million in 1995, and is expected to increase 1996 revenues by approximately $5.7 million. The surcharge became effective on May 1, 1995. An appeal of the Commission's April 6, 1995, order by various intervenors in the proceeding (including the Kentucky Attorney General) is currently pending in the Franklin Circuit Court of Kentucky. The intervenors are contesting the validity of the order on several grounds, including the constitutionality of the Kentucky statute that authorizes the surcharge. In an order dated April 10, 1996, associated with the first six-month review of the operation of the surcharge, the Commission stated that all environmental surcharge revenues collected from the date of the April 10 order will be subject to refund, pending the final determination of the April 6, 1995, order. The Company is vigorously contesting the legal challenges to the surcharge, but cannot predict the outcome of the appeal. The amount of refunds that may be ordered, if any, are not expected to have a material adverse effect on the Company's financial position or results of operations. 3. Other income and (deductions) consisted of the following (in thousands of $): 3 Months Ended June 30 6 Months Ended June 30 1996 1995 1996 1995 Interest and dividend income . . . . . . . $1,100 $1,403 $1,958 $2,984 Gains on fixed asset disposal . . . 54 758 56 974 Income taxes and other (564) (352) (1,302) (1,747) $ 590 $1,809 $ 712 $2,211 9 4. On June 1, 1996, the Company's First Mortgage Bonds, 5.625% Series of $16 million matured and were retired by the Company. 5. Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS No. 121). The new standard requires that long-lived assets and certain identified intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing such impairment reviews, companies are required to estimate the sum of future cash flows from an asset and compare such amount to the asset's carrying amount. Any excess of carrying amount over expected cash flows will result in a possible write-down of an asset to its fair value. Adopting SFAS No. 121 had no impact on the Company's financial position or results of operations. 6. Reference is made to Part II herein - Item 1, Legal Proceedings, and Note 13 of the Notes to Financial Statements of the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 10 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. Some of the matters discussed in Part I or Part II of this Form 10-Q may contain forward looking statements that are subject to certain risks, uncertainties and assumptions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions; business and competitive conditions in the utility industry; unusual weather; regulatory decisions; and the other factors described in the Company's Form 10-K for the year ended December 31, 1995. Results of Operations Because of seasonal fluctuations in temperature and other factors the results of one interim period are not necessarily indicative of results to be expected for the year. Quarter Ended June 30, 1996, Compared with Quarter Ended June 30, 1995 Net income increased $1.8 million (9%) for the quarter ended June 30, 1996, over the quarter ended June 30, 1995, primarily due to higher weather related electric and natural gas sales and a decrease in other operation expenses caused principally by a one-time reduction of certain employee fringe benefits. This improvement in net income was achieved despite the costs associated with numerous severe storms that occurred this quarter. A comparison of operating revenues for the quarter ended June 30, 1996, with the quarter ended June 30, 1995, reflects increases and decreases which have been segregated by the following principal causes: Increase or (Decrease) (Thousands of $) Electric Gas Cause Revenues Revenues Sales to ultimate consumers: Fuel and gas supply adjustments. . . . . . . $(1,054) $ 3,374 Demand side management/revenue decoupling. . . . . . . . . . . . . . . . (1,607) (1,907) Environmental cost recovery surcharge. . . . 793 - Variation in sales volume, etc.. . . . . . . 6,343 1,911 Total . . . . . . . . . . . . . . . . . . 4,475 3,378 Sales for resale. . . . . . . . . . . . . . . 4,789 - Gas transportation - net. . . . . . . . . . . - 326 Other . . . . . . . . . . . . . . . . . . . . 141 177 Total . . . . . . . . . . . . . . . . . . $ 9,405 $ 3,881 11 As shown above, electric and gas revenues increased in the second quarter primarily because of weather conditions. Electric sales for resale increased over the second quarter of 1995 due to aggressive efforts in marketing off-system sales. Fuel for electric generation and gas supply expenses comprise a large segment of the Company's total operating expenses. The Company's electric and gas rates contain a fuel adjustment clause and a gas supply clause, respectively, whereby increases or decreases in the cost of fuel and gas supply may be reflected in the Company's rates, subject to the approval of the Public Service Commission of Kentucky. Fuel for electric generation increased $.9 million (2%) for the quarter because of an increase in generation ($2.3 million), partially offset by a decrease in the cost of coal burned ($1.4 million). Gas supply expenses increased $5.1 million (37%) due to an increase in net gas supply cost ($2.7 million) and a higher volume of gas delivered to the distribution system ($2.4 million). The Company's rates also include an environmental cost recovery surcharge that recovers certain costs required to comply with the Federal Clean Air Act and other governmental pollution control requirements. See Note 2 of Notes to Financial Statements. Power purchased increased $4.1 million due to increased purchases required to meet native load and other power commitments. Other operation expenses decreased $4.1 million (12%) primarily due to a one-time reduction of certain employee fringe benefits in connection with a change in the collective bargaining agreement ($3.6 million). Maintenance expenses increased $2.8 million (21%) primarily related to an increase in scheduled turbine overhauls ($2 million) and expenses related to storm damage ($1.5 million). Depreciation and amortization increased because of additional depreciable plant in service. Variations in income tax expense are largely attributable to changes in pre-tax income. Other income and deductions decreased $1.2 million primarily because of lower gains related to the sale of property ($.7 million) as compared to the same period in 1995 and a decrease in dividend and interest income from investments ($.3 million). See Note 3 of Notes to Financial Statements. Interest charges decreased because of a lower composite interest rate on outstanding debt. The Company's First Mortgage Bonds, 5.625% Series of $16 million were retired at maturity on June 1, 1996. See Note 4 of Notes to Financial Statements. The decrease in preferred stock dividends is primarily related to redemption of the 7.45% Series Cumulative Preferred Stock in December 1995. 12 Six Months Ended June 30, 1996, Compared with Six Months Ended June 30, 1995 Net income for the six months ended June 30, 1996 increased $3.5 million (8%) over the same period of 1995. This increase is due primarily to an increase in sales of natural gas and electricity, partially offset by increased maintenance expenses at the power plants and increased storm-related expenses. A comparison of operating revenues for the six months ended June 30, 1996, with the six months ended June 30, 1995 reflects increases and decreases which have been segregated by the following principal causes: Increase or (Decrease) (Thousands of $) Electric Gas Cause Revenues Revenues Sales to ultimate consumers: Fuel and gas supply adjustments. . . . . . . $ (593) $ 3,418 Demand side management/revenue decoupling. . . . . . . . . . . . . . . . (2,358) (1,708) Environmental cost recovery. . . . . . . . . 2,105 - Variation in sales volume, etc.. . . . . . . 10,754 18,446 Total . . . . . . . . . . . . . . . . . . 9,908 20,156 Sales for resale. . . . . . . . . . . . . . . 11,121 - Gas transportation - net. . . . . . . . . . . - (1,539) Other . . . . . . . . . . . . . . . . . . . . 522 346 Total . . . . . . . . . . . . . . . . . . $21,551 $18,963 Fuel for electric generation increased $5 million (7%) for the six months ended June 30, 1996, primarily because of increased generation ($7.4 million), partially offset by a lower cost of coal burned ($2.4 million). Gas supply expenses increased $14.9 million (24%) primarily because of an increase in gas delivered to the distribution system ($13.1 million) and the higher cost of net gas supply ($1.8 million). See Note 2 of Notes to Financial Statements concerning the environmental cost recovery surcharge. Power purchased increased $6.4 million due to increased purchases to meet native load and other power commitments. Other operation expenses increased only slightly overall, but the increase was primarily offset by a one-time reduction of certain employee fringe benefits in connection with a change in the collective bargaining agreement ($3.6 million). Maintenance expenses increased $5.5 million (22%), primarily due to an increase in scheduled turbine overhauls ($4.1 million) and expenses related to storm damage ($1.7 million). Other income and deductions decreased $1.5 million primarily because of lower gains related to the sale of property as compared to the same period in 1995 ($.9 million) and lower dividend and interest income from investments ($1 million). See Note 3 of Notes to Financial Statements. 13 Liquidity and Capital Resources The Company's capital structure and cash flow remained strong throughout the reported periods. This is evidenced primarily by the Company's ability to meet its capital needs through internal generation. The Company's need for capital funds is primarily related to the construction of plant and equipment necessary to meet electric and gas customers' needs and the protection of the environment. Construction expenditures for the six months ended June 30, 1996, of $48 million were financed with internally generated funds. The Company's cash and temporary cash investments balance increased $4 million during the six months ended June 30, 1996. The increase reflects the Company's cash flow from operations plus proceeds from the sale of marketable securities less construction expenditures, dividends paid, and the retirement of bonds. Other cash flows from operating activities for the first six months of 1996 included $20 million in increased gas supply costs. The Company will recover these costs through its gas supply clause mechanism subject to the approval of the Public Service Commission of Kentucky. The higher gas prices were due to unusually cold weather that resulted in increased demand. Variations in accounts receivable, accounts payable and materials and supplies are not generally significant indicators of the Company's liquidity, as such variations are primarily attributable to seasonal fluctuations in weather, which has a direct effect on sales of electricity and natural gas. The Company's First Mortgage Bonds, 5.625% Series of $16 million matured on June 1, 1996. The Company used internally generated cash to retire the bonds. At June 30, 1996, the Company had unused lines of credit of $160 million with banks for which it pays commitment fees. The lines are scheduled to expire in the year 2000. The Company expects to renegotiate such lines when they expire. The Company's capitalization ratios at June 30, 1996, and December 31, 1995 were: June 30, Dec. 31, 1996 1995 Long-term debt (including current portion) . . . . . . . . 47.8% 48.6% Preferred stock . . . . . . . . . . . . . . . 7.0 7.0 Common equity . . . . . . . . . . . . . . . . 45.2 44.4 Total. . . . . . . . . . . . . . . . . . . . 100.0% 100.0% For a description of significant contingencies that may affect the Company, reference is made to Part II herein - Item 1, Legal Proceedings. 14 Part II. Other Information Item 1. Legal Proceedings. For a description of the significant legal proceedings involving the Company, reference is made to: (i) the information under the following items and captions of the Company's Annual Report on Form 10-K for the year ended December 31, 1995: Item 1, Business; Item 3, Legal Proceedings; Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition; and Notes 2 and 13 of the Notes to Financial Statements under Item 8. Except as noted below, there have been no material changes in these proceedings as reported in the Company's 1995 Form 10-K and Form 10-Q for the quarter ended March 31, 1996. Environmental. The Clean Air Act Amendments of 1990 (the Act) impose stringent limits on emissions of sulfur dioxide and nitrogen oxides by electric utility generating plants. The Company is well-positioned in the market to be a "clean" power provider without the large capital expenditures that are expected to be incurred by many other utilities. All of the Company's coal-fired boilers are equipped with sulfur dioxide "scrubbers" and already achieve the final sulfur dioxide emission rates required by the year 2000 under the legislation. However, as part of its ongoing capital construction program, the Company has spent $27 million to date and, based on engineering estimates from contractors, anticipates incurring additional capital expenditures of approximately $3 million for remedial measures necessary to meet the Act's requirements for nitrogen oxides. The overall financial impact of the legislation on the Company is expected to be minimal. The Company, along with a number of other companies, has been identified as a potentially responsible party (PRP) allegedly liable for cleanup under the Comprehensive Environmental Response Compensation and Liability Act as amended at four off-site waste treatment or disposal sites. Under the law, each PRP potentially could be held jointly and severally liable for the cost of cleanup, but would have the right to seek contribution from other PRPs. The sites targeted for cleanup in which the Company has been identified as a PRP include: the Smith's Farm site located in Bullitt County, Kentucky, the Sonora and Carlie Middleton Burn sites located in Hardin County, Kentucky, and the M.T. Richards site located in Crossville, Illinois. With respect to the Smith's Farm site, the United States Environmental Protection Agency (USEPA) has identified the Company as a de minimis PRP and is currently pursuing other parties for the vast majority of the $42 million in cleanup costs as estimated by USEPA. USEPA recently revised its estimate for cleanup costs downward from $60 million to $42 million. The Company is participating in settlement discussions in an effort to resolve any alleged liability which it may have. With respect to the Sonora Site and Carlie Middleton Burn Site, the Company is now involved in litigation with USEPA and approximately 50 companies in an effort to resolve liability for approximately $1.8 million in cleanup costs incurred by USEPA. With respect to the M.T. Richards site, the Company has been identified as a de minimis party and has reached a tentative settlement for $7,500, subject to approval by the government and entry by the court. While it is not possible at this time to predict the exact outcome or precise impact of these matters, management believes that these matters should not have a material adverse impact on the financial position or results of operations of the Company. 15 Open Access. As reported in Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition, of the Company's 1995 Form 10-K, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking on Open Access Nondiscriminatory Transmission Services and a Supplemental Notice of Proposed Rulemaking on Stranded Investment (collectively, the Mega-NOPR). On April 24, 1996, the FERC adopted final rules, which are similar in many respects to the Mega-NOPR (Orders 888 and 889). The final rules are intended, among other things, to create a vigorous wholesale electric market by requiring transmission providers to functionally unbundle transmission from generation and distribution businesses, and to offer open access to their transmission systems. While the Company is still reviewing the provisions of the final rules and is unable at this time to determine its precise effect on operations, the Company generally is supportive of proposals to increase competition at all levels of the electric power market and intends to pursue opportunities created by a more competitive market. Item 4. Submission of Matters to a Vote of Security Holders a) The Company's Annual Meeting of Shareholders was held on April 23, 1996. b) Not applicable. c) The matters voted upon and the results of the voting at the Annual Meeting follow: 1. The shareholders voted to elect the Company's nominees for election to the Board of Directors as follows: Roger W. Hale - 21,929,986 shares cast in favor of election and 2,461 shares withheld; David B. Lewis - 21,925,731 shares cast in favor of election and 6,716 shares withheld; Anne H. McNamara - 21,928,622 shares cast in favor of election and 3,825 shares withheld; Donald C. Swain - 21,923,947 shares cast in favor of election and 8,500 shares withheld. 2. The shareholders voted 21,917,648 shares in favor of and 2,197 shares against the approval of Arthur Andersen LLP as independent auditors for 1996. Holders of 12,602 shares abstained from voting on this matter. d) Not applicable. Item 6(a). Exhibits. Exhibit No. 27. Financial Data Schedule Item 6(b). Reports on Form 8-K. None. 16 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LOUISVILLE GAS AND ELECTRIC COMPANY Registrant Date: August 13, 1996 Walter Z. Berger --------------------------------------- Walter Z. Berger Executive Vice President and Chief Financial Officer (On behalf of the registrant in his capacity as Principal Accounting Officer) EX-27 2
UT 1,000 6-MOS DEC-31-1996 JUN-30-1996 PER-BOOK 1,669,029 765 229,160 63,338 0 1,962,292 424,275 0 188,217 612,492 0 95,328 646,838 0 0 0 0 0 0 0 607,634 1,962,292 407,851 28,409 312,756 341,165 66,686 712 67,398 20,938 46,460 2,292 44,168 37,000 20,168 93,149 0 0
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