-----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, QwwFCE196ZJwCElqTqoz+wtKFpiiHlcWfumq99qpBpPuoUGlIr+7AJtF8EipCGbq hh9HX2ONQmmJD+e8V1POWA== /in/edgar/work/20000814/0000861388-00-000005/0000861388-00-000005.txt : 20000921 0000861388-00-000005.hdr.sgml : 20000921 ACCESSION NUMBER: 0000861388-00-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LG&E ENERGY CORP CENTRAL INDEX KEY: 0000861388 STANDARD INDUSTRIAL CLASSIFICATION: [4931 ] IRS NUMBER: 611174555 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10568 FILM NUMBER: 699160 BUSINESS ADDRESS: STREET 1: 220 W MAIN ST STREET 2: P O BOX 32030 CITY: LOUISVILLE STATE: KY ZIP: 40232 BUSINESS PHONE: 5026272000 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: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03464 FILM NUMBER: 699161 BUSINESS ADDRESS: STREET 1: ONE QUALITY ST CITY: LEXINGTON STATE: KY ZIP: 40507 BUSINESS PHONE: 6062552100 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOUISVILLE GAS & ELECTRIC CO /KY/ CENTRAL INDEX KEY: 0000060549 STANDARD INDUSTRIAL CLASSIFICATION: [4931 ] IRS NUMBER: 610264150 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02893 FILM NUMBER: 699162 BUSINESS ADDRESS: STREET 1: 220 W MAIN ST STREET 2: P O BOX 32030 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 0001.txt 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, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission Registrant, State of Incorporation, IRS Employer File Number Address, and Telephone Number Identification No. 1-10568 LG&E Energy Corp. 61-1174555 (A Kentucky Corporation) 220 West Main Street P.O. Box 32030 Louisville, Ky. 40232 (502) 627-2000 2-26720 Louisville Gas and Electric Company 61-0264150 (A Kentucky Corporation) 220 West Main Street P.O. Box 32010 Louisville, Ky. 40232 (502) 627-2000 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 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: LG&E Energy Corp. 129,677,030 shares, without par value, as of July 31, 2000. Louisville Gas and Electric Company 21,294,223 shares, without par value, as of July 31, 2000, all held by LG&E Energy Corp. Kentucky Utilities Company 37,817,878 shares, without par value, as of July 31, 2000, all held by LG&E Energy Corp. This combined Form 10-Q is separately filed by LG&E Energy Corp., Louisville Gas and Electric Company and Kentucky Utilities Company. Information contained herein related to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants. In particular, information contained herein related to LG&E Energy Corp. or any of its direct or indirect subsidiaries other than Louisville Gas and Electric Company or Kentucky Utilities Company is provided solely by LG&E Energy Corp., not Louisville Gas and Electric Company or Kentucky Utilities Company, and shall be deemed not included in the Form 10-Q of Louisville Gas and Electric Company or the Form 10-Q of Kentucky Utilities Company. TABLE OF CONTENTS PART I Item 1 Financial Statements LG&E Energy Corp. and Subsidiaries Consolidated Statements of Income 1 Consolidated Balance Sheets 3 Consolidated Statements of Cash Flows 5 Consolidated Statements of Retained Earnings 7 Consolidated Statements of Comprehensive Income 8 Louisville Gas and Electric Company Statements of Income 9 Balance Sheets 10 Statements of Cash Flows 12 Statements of Retained Earnings 13 Statements of Comprehensive Income 14 Kentucky Utilities Company Statements of Income 15 Balance Sheets 16 Statements of Cash Flows 18 Statements of Retained Earnings 19 Notes to Financial Statements 20 Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition 27 Item 3 Quantitative and Qualitative Disclosures About Market Risk 37 PART II Item 1 Legal Proceedings 38 Item 4 Submission of Matters to a Vote of Security Holders 39 Item 6 Exhibits and Reports on Form 8-K 40 Signatures 41 Part I. Financial Information - Item 1. Financial Statements LG&E Energy Corp. and Subsidiaries Consolidated Statements of Income (Unaudited - Thousands of $ Except Per Share Data) Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 REVENUES: Electric utility $ 376,606 $ 406,258 $ 742,496 $ 767,931 Gas utility 29,979 23,652 118,295 99,431 International and non-utility 199,706 193,747 370,890 355,560 Net revenues 606,291 623,657 1,231,681 1,222,922 OPERATING EXPENSES: Fuel and power purchased 206,509 250,994 409,705 456,082 Gas supply expenses 88,675 56,920 207,903 151,984 Utility operation and maintenance 98,257 115,192 202,115 218,897 International and non- utility operation and maintenance 56,210 47,434 104,748 92,398 Depreciation and amortization 56,802 53,479 115,175 108,215 Asset impairment charge (Note 4) 45,000 - 45,000 - Non-recurring charges (Notes 2 and 3) 14,676 - 35,389 - Total operating expenses 566,129 524,019 1,120,035 1,027,576 Equity in earnings of unconsolidated ventures (Note 6) 10,760 12,051 16,690 33,707 OPERATING INCOME 50,922 111,689 128,336 229,053 Other income 5,707 2,611 10,716 8,999 Interest charges and preferred dividends 36,919 32,243 71,884 62,763 Minority interest 4,520 3,842 6,014 5,413 Income before income taxes 15,190 78,215 61,154 169,876 Income taxes 3,841 28,250 19,923 63,132 Income from continuing operations $ 11,349 $ 49,965 $ 41,231 $ 106,744 - 1 - LG&E Energy Corp. and Subsidiaries Consolidated Statements of Income (cont.) (Unaudited - Thousands of $ Except Per Share Data) Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 Income from continuing operations $ 11,349 $ 49,965 $ 41,231 $ 106,744 (Loss) income from disposal of discontinued operations, net of income tax benefit (expense) of $94,476 and ($328) (Note 5) (155,000) - (155,000) 788 NET INCOME (LOSS) $(143,651) $ 49,965 $ (113,769)$ 107,532 Average common shares outstanding 129,677 129,677 129,677 129,677 Earnings (loss) per share - basic and diluted: Continuing operations $ .09 $ .39 $ .32 $ .82 (Loss) income from dis- posal of discontinued operations (1.20) .00 (1.20) .01 Total $ (1.11) $ .39 $ (.88) $ .83 The accompanying notes are an integral part of these financial statements. - 2 - LG&E Energy Corp. and Subsidiaries Consolidated Balance Sheets (Thousands of $) ASSETS (Unaudited) June 30, Dec. 31, 2000 1999 CURRENT ASSETS: Cash and temporary cash investments $ 57,291 $ 91,413 Marketable securities 8,558 10,126 Accounts receivable - less reserve 313,139 318,914 Materials and supplies - primarily at average cost: Fuel (predominantly coal) 82,669 91,931 Gas stored underground 25,340 49,038 Other 96,186 90,259 Prepayments and other 46,955 54,038 Total current assets 630,138 705,719 UTILITY PLANT: At original cost 6,021,543 5,916,905 Less: reserve for depreciation 2,603,334 2,503,851 Net utility plant 3,418,209 3,413,054 OTHER PROPERTY AND INVESTMENTS - LESS RESERVES: Investment in unconsolidated ventures (Note 6) 243,948 249,455 Non-utility property and plant, net 430,336 477,442 Other 50,926 25,596 Total other property and investments 725,210 752,493 DEFERRED DEBITS AND OTHER ASSETS 263,805 262,491 Total assets $5,037,362 $5,133,757 The accompanying notes are an integral part of these financial statements. - 3 - LG&E Energy Corp. and Subsidiaries Consolidated Balance Sheets (cont.) (Thousands of $) CAPITAL AND LIABILITIES (Unaudited) June 30, Dec. 31, 2000 1999 CURRENT LIABILITIES: Current portion of long-term debt $ 375,506 $ 411,810 Notes payable 413,660 449,578 Accounts payable 192,382 220,460 Net liabilities of discontinued opera- tions (Note 5) 291,905 158,222 Other 226,031 248,841 Total current liabilities 1,499,484 1,488,911 Long-term debt 1,404,441 1,299,415 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 587,722 585,880 Investment tax credit, in process of amortization 81,849 85,828 Regulatory liability 96,799 104,795 Other 172,840 182,357 Total deferred credits and other liabilities 939,210 958,860 Minority interests 106,379 109,952 Cumulative preferred stock 142,640 135,328 COMMON EQUITY: Common stock, without par value - 129,677,030 shares outstanding 777,013 777,013 Other (1,926) (1,956) Retained earnings 170,121 366,234 Total common equity 945,208 1,141,291 Total liabilities and capital $5,037,362 $5,133,757 The accompanying notes are an integral part of these financial statements. - 4 - LG&E Energy Corp. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited - Thousands of $) Six Months Ended June 30, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (113,769)$ 107,532 Items not requiring cash currently: Depreciation and amortization 115,175 108,215 Deferred income taxes - net (7,288) (2,157) Asset impairment charge (Note 4) 45,000 - Non-recurring charges (Notes 2 and 3) 35,389 - Loss (income) from disposal of dis- continued operations (Note 5) 155,000 (788) Other (5,530) (24,170) Change in net current assets (35,224) 40,018 Other (40,973) 26,223 Net cash flows from operating activities 147,780 254,873 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of securities (339) (652) Proceeds from sales of securities 1,635 7,871 Construction expenditures (157,273) (199,770) Investments in unconsolidated ventures (Note 6) (2,125) (74,498) Proceeds from sales of investments in affiliates (Note 6) 22,507 33,821 Net cash flows from investing activities (135,595) (233,228) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of debt 187,900 150,000 Retirement of debt (120,913) - Short-term borrowings 5,031,905 756,132 Repayment of short-term borrowings (5,070,355) (813,132) Issuance of preferred stock 7,500 - Redemption of preferred stock - (1,202) Payment of common dividends (82,344) (79,752) Net cash flows from financing activities (46,307) 12,046 CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (34,122) 33,691 BEGINNING CASH AND TEMPORARY CASH INVESTMENTS 91,413 105,604 ENDING CASH AND TEMPORARY CASH INVESTMENTS $ 57,291 $ 139,295 - 5 - LG&E Energy Corp. and Subsidiaries Consolidated Statements of Cash Flows (cont.) (Unaudited - Thousands of $) Six Months Ended June 30, 2000 1999 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Income taxes $ 31,985 $ 9,375 Interest on borrowed money 52,650 53,857 For the purposes of these statements, all temporary cash investments purchased with a maturity of three months or less are considered cash equivalents. The accompanying notes are an integral part of these financial statements. - 6 - LG&E Energy Corp. and Subsidiaries Consolidated Statements of Retained Earnings (Unaudited - Thousands of $) Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 Balance at beginning of period $ 354,944 $ 483,970 $ 366,234 $ 466,279 Net income (loss) (143,651) 49,965 (113,769) 107,532 Cash dividends declared on common stock ($.3175, $.3075, $.6350 and $.6150 per share) 41,172 39,876 82,344 79,752 Balance at end of period $ 170,121 $ 494,059 $ 170,121 $ 494,059 The accompanying notes are an integral part of these financial statements. - 7 - LG&E Energy Corp. and Subsidiaries Consolidated Statements of Comprehensive Income (Unaudited - Thousands of $) Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 Net income (loss) $(143,651) $ 49,965 $(113,769) $107,532 Unrealized holding gains (losses) on available-for-sale securities arising during the period (205) (155) (517) 37 Reclassification adjustment for realized gains and (losses) on available-for-sale securities included in net income 26 (163) 40 (158) Other comprehensive loss, before tax (179) (318) (477) (121) Income tax benefit related to items of other comprehensive income 38 110 151 46 Comprehensive income (loss) $(143,792) $ 49,757 $(114,095) $107,457 The accompanying notes are an integral part of these financial statements. - 8 - Louisville Gas and Electric Company Statements of Income (Unaudited) (Thousands of $) Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 OPERATING REVENUES: Electric $179,752 $190,445 $341,079 $341,286 Gas 29,979 23,652 118,295 99,431 Total operating revenues 209,731 214,097 459,374 440,717 OPERATING EXPENSES: Fuel for electric generation 38,650 39,380 78,576 71,838 Power purchased 24,346 30,858 46,100 53,884 Gas supply expenses 18,688 13,395 82,082 63,887 Non-recurring charges (Note 3) - - 8,141 - Other operation expenses 30,547 39,457 67,522 79,649 Maintenance 17,442 20,227 31,323 34,930 Depreciation and amortization 23,901 24,143 48,050 48,285 Federal and state income taxes 14,397 12,079 24,066 21,634 Property and other taxes 4,475 3,962 9,637 8,998 Total operating expenses 172,446 183,501 395,497 383,105 NET OPERATING INCOME 37,285 30,596 63,877 57,612 Other income 1,850 234 3,369 1,312 Interest charges 11,126 8,790 21,816 17,968 NET INCOME 28,009 22,040 45,430 40,956 Preferred stock dividends 1,317 1,086 2,482 2,176 NET INCOME AVAILABLE FOR COMMON STOCK $ 26,692 $ 20,954 $ 42,948 $ 38,780 The accompanying notes are an integral part of these financial statements. - 9 - Louisville Gas and Electric Company Balance Sheets (Thousands of $) ASSETS (Unaudited) June 30, Dec. 31, 2000 1999 UTILITY PLANT: At original cost $3,125,138 $3,065,839 Less: reserve for depreciation 1,267,106 1,215,032 Net utility plant 1,858,032 1,850,807 OTHER PROPERTY AND INVESTMENTS - less reserve 1,161 1,224 CURRENT ASSETS: Cash and temporary cash investments 39,579 54,761 Marketable securities 5,527 6,936 Accounts receivable - less reserve 107,534 113,859 Materials and supplies - at average cost: Fuel (predominantly coal) 15,964 17,350 Gas stored underground 14,648 38,780 Other 34,919 35,010 Prepayments and other 2,996 2,775 Total current assets 221,167 269,471 DEFERRED DEBITS AND OTHER ASSETS: Unamortized debt expense 5,607 5,607 Regulatory assets 29,999 31,443 Other 18,682 12,900 Total deferred debits and other assets 54,288 49,950 Total assets $2,134,648 $2,171,452 The accompanying notes are an integral part of these financial statements. - 10 - Louisville Gas and Electric Company Balance Sheets (cont.) (Thousands of $) CAPITALIZATION AND LIABILITIES (Unaudited) June 30, Dec. 31, 2000 1999 CAPITALIZATION: Common stock, without par value - Outstanding 21,294,223 shares $ 425,170 $ 425,170 Retained earnings 269,179 259,231 Other (1,184) (1,025) Total common equity 693,165 683,376 Cumulative preferred stock 95,140 95,328 Long-term debt 335,600 380,600 Total capitalization 1,123,905 1,159,304 CURRENT LIABILITIES: Current portion of long-term debt 271,200 246,200 Notes payable 131,757 120,097 Accounts payable 83,784 113,008 Provision for rate refunds - 8,962 Dividends declared 17,817 24,236 Accrued taxes 39,632 23,759 Accrued interest 6,798 9,265 Other 16,830 15,725 Total current liabilities 567,818 561,252 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 261,967 255,910 Investment tax credit, in process of amortization 65,111 67,253 Accumulated provision for pensions and related benefits 39,454 38,431 Customer advances for construction 9,965 11,104 Regulatory liability 55,080 58,726 Other 11,348 19,472 Total deferred credits and other liabilities 442,925 450,896 Total capital and liabilities $2,134,648 $2,171,452 The accompanying notes are an integral part of these financial statements. - 11 - Louisville Gas and Electric Company Statements of Cash Flows (Unaudited - Thousands of $) Six Months Ended June 30, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 45,430 $ 40,956 Items not requiring cash currently: Depreciation and amortization 48,050 48,285 Deferred income taxes - net 246 (3,982) Investment tax credit - net (2,142) (2,145) Other 4,264 3,585 Changes in current assets and liabilities 8,036 10,050 Other (4,508) 6,319 Net cash flows from operating activities 99,376 103,068 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of securities (194) (495) Proceeds from sales of securities 1,520 7,861 Construction expenditures (64,560) (59,757) Net cash flows from investing activities (63,234) (52,391) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of pollution control bonds 25,000 - Retirement of first mortgage and pollution control bonds (46,083) - Short-term borrowings 1,432,256 - Repayment of short-term borrowings (1,420,596) - Payment of dividends (41,901) (46,257) Net cash flows from financing activities (51,324) (46,257) CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (15,182) 4,420 CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 54,761 31,730 CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $ 39,579 $ 36,150 SUPPLEMENTAL DISCLOSURES: Cash paid during the period for: Income taxes $ 4,396 $ 16,065 Interest on borrowed money 17,876 16,657 For the purposes of these statements, all temporary cash investments purchased with a maturity of three months or less are considered cash equivalents. The accompanying notes are an integral part of these financial statements. - 12 - Louisville Gas and Electric Company Statements of Retained Earnings (Unaudited) (Thousands of $) Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 Balance at beginning of period $258,987 $243,288 $259,231 $247,462 Net income 28,009 22,040 45,430 40,956 Subtotal 286,996 265,328 304,661 288,418 Cash dividends declared on stock: 5% cumulative preferred 269 269 538 538 Auction rate cumulative preferred 681 450 1,210 904 $5.875 cumulative preferred 367 367 734 734 Common 16,500 22,000 33,000 44,000 Subtotal 17,817 23,086 35,482 46,176 Balance at end of period $269,179 $242,242 $269,179 $242,242 The accompanying notes are an integral part of these financial statements. - 13 - Louisville Gas and Electric Company Statements of Comprehensive Income (Unaudited - Thousands of $) Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 Net income available for common stock $26,692 $20,954 $42,948 $38,780 Unrealized holding losses on available-for-sale securities arising during the period (107) (178) (266) (94) Income tax benefit related to unrealized holding gains and losses 43 72 107 38 Comprehensive income $26,628 $20,848 $42,789 $38,724 The accompanying notes are an integral part of these financial statements. - 14 - Kentucky Utilities Company Statements of Income (Unaudited) (Thousands of $) Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 OPERATING REVENUES $205,324 $225,794 $423,102 $443,143 OPERATING EXPENSES: Fuel for electric generation 51,466 49,412 107,081 107,567 Power purchased 43,464 51,606 82,308 90,923 Non-recurring charges (Note 3) - - 11,030 - Other operation expenses 24,167 31,812 53,015 58,955 Maintenance 17,078 15,944 31,228 28,464 Depreciation and amortization 24,493 22,158 48,825 44,149 Federal and state income taxes 11,368 16,077 22,734 33,221 Property and other taxes 4,376 3,788 9,216 7,901 Total operating expenses 176,412 190,797 365,437 371,180 NET OPERATING INCOME 28,912 34,997 57,665 71,963 Other income 2,654 1,993 3,979 4,162 Interest charges 10,034 9,233 19,938 18,740 NET INCOME 21,532 27,757 41,706 57,385 Preferred stock dividends 564 564 1,128 1,128 NET INCOME AVAILABLE FOR COMMON STOCK $ 20,968 $ 27,193 $ 40,578 $ 56,257 The accompanying notes are an integral part of these financial statements. - 15 - Kentucky Utilities Company Balance Sheets (Thousands of $) ASSETS (Unaudited) June 30, Dec. 31, 2000 1999 UTILITY PLANT: At original cost $2,896,405 $2,851,066 Less: reserve for depreciation 1,336,228 1,288,819 Net utility plant 1,560,177 1,562,247 OTHER PROPERTY AND INVESTMENTS - less reserve 14,688 14,349 CURRENT ASSETS: Cash and temporary cash investments 484 6,793 Accounts receivable - less reserve 96,165 88,549 Materials and supplies - at average cost: Fuel (predominantly coal) 27,980 30,225 Other 28,015 26,213 Prepayments and other 3,106 3,743 Total current assets 155,750 155,523 DEFERRED DEBITS AND OTHER ASSETS: Unamortized debt expense 4,665 4,827 Regulatory assets 20,787 23,033 Other 26,118 25,111 Total deferred debits and other assets 51,570 52,971 Total assets $1,782,185 $1,785,090 The accompanying notes are an integral part of these financial statements. - 16 - Kentucky Utilities Company Balance Sheets (cont.) (Thousands of $) CAPITALIZATION AND LIABILITIES (Unaudited) June 30, Dec. 31, 2000 1999 CAPITALIZATION: Common stock, without par value - Outstanding 37,817,878 shares $ 308,140 $ 308,140 Retained earnings 320,048 329,470 Other (595) (595) Total common equity 627,593 637,015 Cumulative preferred stock 40,000 40,000 Long-term debt 430,830 430,830 Total capitalization 1,098,423 1,107,845 CURRENT LIABILITIES: Current portion of long-term debt 54,000 115,500 Notes payable 29,931 - Accounts payable 144,792 116,546 Provision for rate refunds 7,981 20,567 Dividends declared 25,188 19,150 Accrued taxes 34,319 10,502 Accrued interest 7,127 7,329 Other 18,285 18,617 Total current liabilities 321,623 308,211 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 239,461 243,620 Investment tax credit, in process of amortization 16,738 18,575 Accumulated provision for pensions and related benefits 48,369 48,285 Regulatory liability 41,161 46,069 Other 16,410 12,485 Total deferred credits and other liabilities 362,139 369,034 Total capital and liabilities $1,782,185 $1,785,090 The accompanying notes are an integral part of these financial statements. - 17 - Kentucky Utilities Company Statements of Cash Flows (Unaudited - Thousands of $) Six Months Ended June 30, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 41,706 $ 57,385 Items not requiring cash currently: Depreciation and amortization 48,825 44,149 Deferred income taxes - net (7,478) (2,214) Investment tax credit - net (1,837) (1,839) Changes in current assets and liabilities 38,445 (23,820) Other (1,049) 7,658 Net cash flows from operating activities 118,612 81,319 CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures (48,403) (44,282) Net cash flows from investing activities (48,403) (44,282) CASH FLOWS FROM FINANCING ACTIVITIES: Short-term borrowings 69,773 - Repayment of short-term borrowings (39,842) - Issuance of pollution control bonds 12,900 - Retirement of pollution control bonds (74,785) - Payment of dividends (44,564) (37,128) Net cash flows from financing activities (76,518) (37,128) CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (6,309) (91) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 6,793 59,071 CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $ 484 $ 58,980 SUPPLEMENTAL DISCLOSURES: Cash paid during the period for: Income taxes $ 19,949 $ 30,273 Interest on borrowed money 18,654 17,632 For the purposes of these statements, all temporary cash investments purchased with a maturity of three months or less are considered cash equivalents. The accompanying notes are an integral part of these financial statements. - 18 - Kentucky Utilities Company Statements of Retained Earnings (Unaudited) (Thousands of $) Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 Balance at beginning of period $324,080 $310,231 $329,470 $299,167 Net income 21,532 27,757 41,706 57,385 Subtotal 345,612 337,988 371,176 356,552 Cash dividends declared on stock: 4 75% preferred 237 237 475 475 6.53% preferred 327 327 653 653 Common 25,000 18,000 50,000 36,000 Subtotal 25,564 18,564 51,128 37,128 Balance at end of period $320,048 $319,424 $320,048 $319,424 The accompanying notes are an integral part of these financial statements. - 19 - LG&E Energy Corp. and Subsidiaries Louisville Gas and Electric Company Kentucky Utilities Company Notes to Financial Statements (Unaudited) 1. The unaudited consolidated financial statements include the accounts of LG&E Energy Corp. and its wholly-owned subsidiaries. In the opinion of management, all adjustments, including those of a normal recurring nature, have been made to present fairly the consolidated financial position, results of operations and cash flows for the periods indicated. 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 SEC rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. See the Company's, LG&E's and KU's Reports on Form 10-K for 1999 for information relevant to the accompanying financial statements, including information as to the significant accounting policies of the Company. 2. On February 28, 2000, the Company announced that its Board of Directors accepted an offer to be acquired by Powergen for cash of approximately $3.2 billion or $24.85 per share and the assumption of $2.2 billion of the Company's debt. Pursuant to the acquisition agreement, among other things, LG&E Energy will become a wholly owned subsidiary of Powergen and its U.S. headquarters. The Utility Operations of the Company will continue their separate identities and serve customers in Kentucky and Virginia under their present names. The preferred stock and debt securities of the Utility Operations will not be affected by this transaction. The acquisition is expected to close 9 to 12 months from the announcement, shortly after all of the conditions to consummation of the acquisition are met. It is possible that the remaining regulatory approvals may be received in time to permit a closing during the fourth quarter of 2000. Those conditions include, without limitation, the approval of the holders of a majority of the outstanding shares of common stock of each of LG&E Energy and Powergen, the receipt of all necessary governmental approvals and the making of all necessary governmental filings, including approvals of various regulators in Kentucky and Virginia under state utility laws, the approval of the FERC under the FPA, the approval of the SEC under the PUHCA of 1935, and the filing of requisite notifications with the Federal Trade Commission and the Department of Justice under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), and with the Committee on Foreign Investment in the United States under the Exon-Florio Provisions of the Omnibus Trade and Competitiveness Act of 1988 (E-F Act) and the expiration of all applicable waiting periods thereunder. The Company expensed approximately $14.7 million and $15.4 million related to the Powergen transaction during the three- and six- month periods ended June 30, 2000, respectively. The foregoing description of the acquisition does not purport to be complete and is qualified in its entirety by reference to LG&E Energy's current reports on Form 8-K, filed February 29, 2000, with the SEC. Through mid-August 2000, a number of approval steps have been completed by the Company and Powergen. Shareholders of the Company and of Powergen approved the merger transaction in separate meetings held in June 2000. Further, approvals were received from the Kentucky Commission in May 2000, the FERC in June 2000 and the Virginia Commission in July 2000. The parties submitted the requisite filings under the HSR Act and the E-F Act in late July and early August 2000, respectively, which trigger 30 day waiting periods due to expire in late August and early September, respectively, absent any further inquiry or investigation by the applicable regulatory authority. - 20 - The parties' joint application for approval to the SEC under PUHCA was submitted in April 2000. While the Company and Powergen believe that they will receive the requisite regulatory approvals for the merger in sufficient time to complete the transaction on the schedule mentioned above, there can be no assurance as to the timing of such approvals or the ability to obtain such approvals on satisfactory terms or otherwise. 3. During the first quarter 2000, the Company took a $12.1 million ($.09) after-tax charge for the continued "One Utility" integration of the operations of LG&E and KU including their customer service centers and certain administrative elements of their retail electric and gas distribution operations. The result of this consolidation was the elimination of approximately 400 positions most of which were taken by employees through the Company's voluntary enhanced severance program. 4. The Company previously announced its intention to sell its natural gas gathering and processing business in the near term. Information gathered to date indicates that the Company will realize proceeds from the sale of this business below carrying value. As a result, the Company recorded a pretax impairment charge of $45 million in the second quarter of 2000 to reduce the carrying value of this business to more appropriately reflect net realizable value. 5. Effective June 30, 1998, the Company discontinued its merchant energy trading and sales business. This business consisted primarily of a portfolio of energy marketing contracts entered into in 1996 and early 1997, nationwide deal origination and some level of speculative trading activities, which were not directly supported by the Company's physical assets. The Company's decision to discontinue these operations was primarily based on the impact that volatility and rising prices in the power market had on its portfolio of energy marketing contracts. Exiting the merchant energy trading and sales business enabled the Company to focus on optimizing the value of physical assets it owns or controls, and reduced the earnings impact on continuing operations of extreme market volatility in its portfolio of energy marketing contracts. The Company continues to settle commitments that obligate it to buy and sell natural gas and electric power. If the Company is unable to dispose of these commitments or assets it will continue to meet its obligations to buy and sell natural gas and electric power under the terms of the contracts until disposition or expiration. The Company, however, has maintained sufficient market knowledge, risk management skills, technical systems and experienced personnel to maximize the value of power sales from physical assets it owns or controls, including LG&E, KU and WKE. As a result of the Company's decision to discontinue its merchant energy trading and sales activity, and the initial decision to sell the associated gas gathering and processing business, the Company recorded an after-tax loss on disposal of discontinued operations of $225 million in the second quarter of 1998. The loss on disposal of discontinued operations resulted primarily from several fixed-price energy marketing contracts entered into in 1996 and early 1997, including the Company's long-term contract with OPC. Other components of the write-off included costs relating to certain peaking options, goodwill associated with the Company's 1995 purchase of merchant energy trading and sales operations and exit costs. In the fourth quarter of 1999, the Company received an adverse decision from the arbitration panel considering its contract dispute with OPC, which was commenced by the Company in April 1998. As a result of this adverse decision, higher than anticipated commodity prices, increased load demands, and other factors, the Company increased its after-tax accrued loss on disposal of discontinued operations by $175 million. The additional write-off included costs related to the remaining commitments in its portfolio and exit costs expected to be incurred to serve those commitments. - 21 - In the second quarter of 2000, the Company increased its after-tax accrued loss on disposal of discontinued operations by an additional $155 million primarily to reflect the most recent OPC load forecast, coupled with the increased demand experienced this summer, and new price forecasts for the OPC and other long-term contracts. Although the Company used what it believes to be appropriate estimates for future energy prices, among other factors, to calculate the net realizable value of discontinued operations, there are inherent limitations in models to accurately predict future commodity prices, load demands and other events that could impact the amounts recorded by the Company. Operating results for the discontinued merchant energy trading and sales business follow. Three Months Six Months Ended Ended June 30, June 30, 2000 1999 2000 1999 Revenues $106,878 $156,345 $181,576 $289,782 Loss before taxes (32,944) (25,468) (43,559) (37,544) Income (loss) from discontinued oper- ations, net of in- come taxes (20,469) (16,692) (27,063) (20,480) Net assets of discontinued operations at June 30, 2000, follow. Accounts receivable $ 44,249 Price risk management assets 28,346 Accounts payable (77,633) Other assets and liab- ilities, net 16,070 Net assets before balance of reserve for discontinued operations 11,032 Accrued loss on disposal of discontinued operations, net of income tax benefit of $184,647 (302,937) Net liabilities of discon- tinued operations $(291,905) Total pretax charges against the accrued loss on disposal of discontinued operations through June 30, 2000, include $288.6 million for commitments prior to disposal, $69.6 million for transaction settlements, $11.1 million for goodwill, and $36.5 million for other exit costs. While the Company has been successful in settling portions of its discontinued operations, significant assets, operations and obligations remain. The Company continues to manage the remaining portfolio and believes it has hedged certain of its future obligations through various power purchase commitments and planned construction of physical assets. Management cannot predict the ultimate effectiveness of these hedges. The pretax net fair value of the remaining commitments as of June 30, 2000, are currently estimated to be approximately $112 million in 2000, $61 million to $98 million each year in 2001 through 2004 and $17 million in the aggregate thereafter. - 22 - As of June 30, 2000, the Company's discontinued operations were under various contracts to buy and sell power and gas with net notional amounts of 24.4 million Mwh's of power and 24.9 million Mmbtu's of natural gas with a volumetric weighted-average period of approximately 34 and 38 months, respectively. These notional amounts are based on estimated loads since various commitments do not include specified firm volumes. The Company is also under contract to buy or sell coal and SO2 allowances in support of its power contracts. Notional amounts reflect the nominal volume of transactions included in the Company's price risk management commitments, but do not reflect actual amounts of cash, financial instruments, or quantities of the underlying commodity which may ultimately be exchanged between the parties. As of July 27, 2000, the Company estimates that a $1 change in electricity prices and a 10-cent change in natural gas prices across all geographic areas and time periods could change the value of the Company's remaining energy portfolio by approximately $10.8 million. In addition to price risk, the value of the Company's remaining energy portfolio is subject to operational and event risks including, among others, increases in load demand, regulatory changes, and forced outages at units providing supply for the Company. As of July 27, 2000, the Company estimates that a 1% change in the forecasted load demand could change the value of the Company's remaining energy portfolio by $11.7 million. The Company's discontinued operations maintain policies intended to minimize credit risk and revalue credit exposures daily to monitor compliance with those policies. As of June 30, 2000, over 94% of the Company's price risk management commitments were with counterparties rated BBB equivalent or better. As of June 30, 2000, six counterparties represented 76% of the Company's price risk management commitments. 6. In March 2000, the Company sold its interest in CEC-APL L.P., a partnership in which the Company owned a 49% interest, for approximately $18 million. This sale resulted in a pretax gain of approximately $2 million. In June 2000, the Company sold its interest in KUCC Cleburne Corporation, through which the Company owned a minority interest in one of the Tenaska limited partnerships, for $4.6 million. This sale resulted in a pretax gain of approximately $1.3 million. 7. In March 2000, the 2000 Kentucky General Assembly passed House Bill 897 that established requirements for cost allocations, affiliate transactions and a code of conduct governing the relationship between utilities and their non-utility operations and affiliates. Management does not expect this matter to have a material adverse effect on the Company's financial position or results of operations. In March 2000, LG&E filed a Notice and Statement with the Kentucky Commission requesting an adjustment in LG&E's gas rates. LG&E asked for a general adjustment in gas rates for a test year for the twelve months ended December 31, 1999. The revenue increase applied for was $26.4 million. The Commission subsequently suspended the effective date of the proposed new tariffs, and held hearings August 2, 2000, through August 4, 2000. Under Kentucky law the Commission must issue a decision on LG&E's application no later than September 28, 2000. In May 2000, the Court upheld the Commission's February 1999 order that LG&E make FAC refunds, but reversed the Commission's determination that it was not appropriate to require LG&E to pay interest on the amounts to be refunded. The Court remanded the case to the Commission for a determination of whether interest should be awarded to compensate ratepayers for LG&E's use of the money to be refunded. On June 2, 2000, LG&E filed a Notice of Appeal to the Kentucky Court of Appeals from the Franklin Circuit Court decision. - 23 - In June 2000, the Commission acknowledged that the PBR Order issued in January 2000 contained errors and issued its Orders on rehearing which revised the rate reductions it had previously ordered. LG&E's rate reduction was lowered to $26.3 million, and KU's reduction was lowered to $30.4 million. No parties filed appeals from the Commission's orders within the time allowed by statute. 8. In May 2000, LG&E and KU issued new variable-rate pollution-control bonds for $25 million and $12.9 million, respectively. At June 30, 2000, the interest rates paid on the bonds equaled 4.40% for LG&E and 4.45% for KU. The new bonds replaced LG&E's 7.45% Series P bonds and KU's 7.375% Series 7 and 7.60% Series 7 bonds. LG&E and KU called the old bonds in June 2000. In June 2000, Capital Corp. issued $150 million of floating-rate medium- term notes due June 2001. The notes bear an interest rate of 7.4925% through September 18, 2000, and a rate equal to the three-month LIBOR plus 70 basis points thereafter. In August 2000, LG&E issued $83.3 million of variable-rate pollution- control bonds. At August 9, 2000, the interest rates paid on the bonds equaled 4.40%. The new bonds replaced LG&E's 7.625% Series Q bonds. LG&E fully defeased the Series Q bonds on August 9, 2000. 9. External and intersegment revenues and income from continuing operations by business segment for the three months ended June 30, 2000, follow: Income (Loss) Inter- from External segment Cont. Revenues Revenues Oper. LG&E electric $175,420 $ 4,333 $ 26,773 LG&E gas 29,979 - (80) KU electric 201,186 4,139 20,968 Independent Power Operations 5,938 - 8,037 Western Kentucky Energy 66,975 - 3,002 Argentine Gas Distribution 49,017 - 6,723 Other Capital Corp. 77,776 - (37,073) All Other - (8,472) (17,001) Consolidated $606,291 $ - $ 11,349 - 24 - External and intersegment revenues and income from continuing operations by business segment for the six months ended June 30, 2000, follow: Income (Loss) Inter- from External segment Cont. Revenues Revenues Oper. LG&E electric $ 330,539 $ 10,540 $ 43,078 LG&E gas 118,295 - (129) KU electric 411,957 11,146 40,578 Independent Power Operations 10,614 - 14,864 Western Kentucky Energy 127,729 - 2,501 Argentine Gas Distribution 79,759 - 5,992 Other Capital Corp. 152,788 - (47,063) All Other - (21,686) (18,590) Consolidated $1,231,681 $ - $ 41,231 External and intersegment revenues and income from continuing operations by business segment for the three months ended June 30, 1999, follow: Income (Loss) Inter- from External segment Cont. Revenues Revenues Oper. LG&E electric $185,519 $ 4,927 $ 20,740 LG&E gas 23,652 - 213 KU electric 220,739 5,055 27,193 Independent Power Operations 6,197 - 7,097 Western Kentucky Energy 69,050 - (464) Argentine Gas Distribution 45,146 - 4,796 Other Capital Corp. 73,354 - (6,484) All Other - (9,982) (3,126) Consolidated $623,657 $ - $ 49,965 - 25 - External and intersegment revenues and income from continuing operations by business segment for the six months ended June 30, 1999, follow: Income (Loss) Inter- from External segment Cont. Revenues Revenues Oper. LG&E electric $ 333,845 $ 7,441 $ 38,353 LG&E gas 99,431 - 427 KU electric 434,086 9,057 56,257 Independent Power Operations 13,101 - 21,277 Western Kentucky Energy 129,028 - (1,488) Argentine Gas Distribution 74,943 - 5,153 Other Capital Corp. 138,488 - (5,596) All Other - (16,498) (7,639) Consolidated $1,222,922 $ - $106,744 10.Reference is made to Part II, Legal Proceedings, below and Part I, Item 3, Legal Proceedings, of the Company's, LG&E's and KU's (and Notes 18 and 22 of the Company's Notes to Financial Statements) Annual Reports on Form 10-K for the year ended December 31, 1999, and Part II, Item 1, Legal Proceedings, of the Form 10-Q for the quarter ended March 31, 2000. - 26 - Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. General The Company's principal subsidiaries are LG&E, an electric and gas utility, KU, an electric utility, LEM and Capital Corp., the holding company for all non-utility investments other than trading operations. LG&E's and KU's results of operations and liquidity and capital resources are important factors affecting the Company's consolidated results of operations and capital resources and liquidity. On February 28, 2000, the Company announced that its Board of Directors accepted an offer to be acquired by Powergen for cash of approximately $3.2 billion or $24.85 per share and the assumption of $2.2 billion of the Company's debt. For more information, see Note 2 of Notes to Financial Statements under Item 1. Some of the matters discussed in the Notes to Consolidated Financial Statements and Management's Discussion and Analysis 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 energy industry; future prices of power and natural gas; unusual weather; regulatory decisions; and other factors described from time to time in the Company's reports to the Securities and Exchange Commission, including Exhibit 99.01 to the Form 10-K for the year ended December 31, 1999. Results of Operations The results of operations for LG&E, KU and Capital Corp.'s Argentine gas distribution and WKE operations are affected by seasonal fluctuations in temperature and other weather-related factors. Because of these and other factors, the results of one interim period are not necessarily indicative of results or trends to be expected for the full year. Three Months Ended June 30, 2000, Compared to Three Months Ended June 30, 1999 The Company's primary and diluted earnings per share from continuing operations decreased to $.09 in 2000 from $.39 in 1999. The decrease resulted from an asset impairment charge taken on the Company's natural gas gathering and processing business ($.21) and from recording expenses related to the Powergen acquisition ($.09). Excluding these nonrecurring items, earnings per share from continuing operations remained unchanged at $.39 as higher earnings at LG&E and WKE offset lower earnings at KU, an increase in corporate expenses, and higher interest expense at Capital Corp. Including discontinued operations, the Company incurred a loss of $1.11 per share in the second quarter of 2000. These results include a $155 million (after tax) charge related to an adjustment of the Company's reserve for discontinued operations, primarily reflecting the most recent OPC load forecast, coupled with the increased demand experienced this summer, and new price forecasts for the OPC and other long-term contracts. LG&E Results: LG&E's net income increased $6.0 million (27%) for the quarter ended June 30, 2000, as compared to the quarter ended June 30, 1999, primarily because of lower operations and maintenance expenses. These expense savings were partially offset by a decrease in electric retail rates ordered by the Kentucky Commission. - 27 - A comparison of LG&E's revenues for the quarter ended June 30, 2000, with the quarter ended June 30, 1999, reflects increases and decreases which have been segregated by the following principal causes (in thousands of $): Electric Gas Cause Revenues Revenues Retail sales: Fuel and gas supply adjustments $ 664 $4,022 Environmental cost recovery surcharge (310) - Performance based rate reduction (1,096) - Electric rate reduction (5,398) - Merger surcredit (481) - Variation in sales volume, etc. 3,186 806 Total retail sales (3,435) 4,828 Sales for resale (7,958) 1,733 Gas transportation - net - (26) Other 700 (208) Total $(10,693) $6,327 In January 2000, the Kentucky Commission ordered the termination of LG&E's proposed PBR mechanism. As a result, LG&E refunded certain amounts collected from its customers during the nine months ended March 31, 2000. The electric rate reduction resulted from the Kentucky Commission's January 2000 PBR order reducing LG&E's base electric rates. Electric sales for resale decreased $8 million due to decreases in brokered sales activities. Fuel for electric generation and gas supply expenses comprise a large segment of LG&E's total operating expenses. LG&E'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 retail rates, subject to the approval of the Kentucky Commission. Fuel for electric generation decreased $.7 million (2%) for the quarter because of a lower cost of coal burned ($.9 million) partially offset by an increase in volume of generation ($.2 million). Gas supply expenses increased $5.3 million (40%) due to an increase in the volume of gas delivered to the distribution system ($2.6 million) and an increase in net gas supply cost ($2.7 million). Power purchased decreased $6.5 million primarily because of a decrease in brokered sales activities ($10.1 million), partially offset by increased purchases to support sales to other utilities ($3.6 million). Other operations expenses decreased $8.9 million (22.5%) in 2000, as compared to 1999, primarily as a result of lower administrative expenses ($6.8 million) and steam production costs ($2 million). Maintenance expenses decreased $2.8 million (13.8%) in 2000 mainly due to decreases in scheduled outages at the Mill Creek and Cane Run generating stations ($2.8 million). Other income and deductions increased $1.6 million (690%) due to gains on the sale of non-utility property. - 28 - Variations in income tax expense are largely attributable to changes in pre- tax income. Interest charges increased $2.3 million (27%) due to increased borrowings through the issuance of commercial paper. KU Results: KU's net income decreased $6.2 million (23%) for the quarter ended June 30, 2000, as compared to the quarter ended June 30, 1999. The decrease was mainly due to retail rate reductions ordered by the Kentucky Commission early this year and lower wholesale sales. A comparison of KU's revenues for the quarter ended June 30, 2000, with the quarter ended June 30, 1999, reflects increases and (decreases) which have been segregated by the following principal causes (in thousands of $): Sales to ultimate consumers: Fuel supply adjustments $ (1,707) Environmental cost recovery surcharge (1,342) Performance based rate reduction (839) Merger surcredit (299) Electric rate reduction (8,061) Variation in sales volume, etc. 6,846 Total retail sales (5,402) Wholesale sales (18,060) Other 2,992 Total $(20,470) The environmental cost recovery surcharges are costs recovered from retail customers for investments KU made in facilities for compliance with clean air regulations. As shown above, KU recovered $1.3 million less as compared with the same quarter 1999. In January 2000, the Kentucky Commission ordered the termination of KU's proposed PBR mechanism. As a result, KU refunded certain amounts collected from its customers during the nine months ended March 31, 2000. The electric rate reduction resulted from the Kentucky Commission's January 2000 PBR order reducing KU's base electric rates. On May 4, 1998, LG&E Energy and KU Energy merged. As a result of merger, the Kentucky Commission approved a surcredit for savings achieved from the merger to be passed to the ultimate consumer over a five-year period. The reduction to retail sales for the merger surcredit is a reflection of that rate reduction. The variation in sales volumes for the quarter ended June 30, 2000, compared with the quarter ended June 30, 1999, is attributable to higher volumes resulting from cooler weather early in the quarter and warmer weather at the end of the quarter. The decrease in wholesale sales is due to fewer brokered sales marketing opportunities and the reduced availability of power because of planned outages at the electric generating plants. Fuel for electric generation comprises a large segment of KU's total operating expenses. KU's electric rates contain an FAC, whereby increases or decreases in the cost of fuel are reflected in retail rates, subject to the approval of the Kentucky Commission, the Virginia Commission, and the FERC. - 29 - Fuel for electric generation increased $2.1 million (4%) for the quarter because of an increase in generation ($.5 million) and the cost of coal burned ($1.5 million). Power purchased decreased $8.1 million (16%) because there were fewer opportunities in the brokered sales market as mentioned above. Other operating expenses decreased by $7.6 million (24%). The decrease was mainly attributable to lower administrative and general expenses ($4.8 million) as well as decreased customer service and information expenses ($1.3 million), which were the result of further integration of customer functions. Maintenance expenses increased by $1.1 million (7%) due to increased maintenance at the generating plants ($2.5 million) offset by decreases in transmission maintenance ($1.0 million) and distribution maintenance ($.3 million). Depreciation and amortization increased due to additional utility plant in service. Variations in income tax expense are largely attributable to changes in pretax income. LG&E Capital Corp. and Other Results: Power Operations Power Operations' equity in earnings of unconsolidated ventures decreased from $8.6 million in 1999 to $6.5 million in 2000. The decrease reflects proceeds received from bankruptcy settlements related to the Company's windpower partnerships in the second quarter of 1999. Power Operations' other income increased from $.1 million expense in 1999 to $1.4 million income in 2000. The increase resulted from recognizing a gain on the sale of KUCC Cleburne in the second quarter of 2000. Interest income increased from $2.4 million in 1999 to $3.7 million in 2000 due to an increase in cash resulting from asset sales. Western Kentucky Energy WKE's revenues decreased from $69.1 million in 1999 to $67.0 million in 2000 due mainly to lower off-system sales. WKE's cost of revenues decreased from $41.3 million in 1999 to $35.8 million in 2000 due to a decrease in purchased power. WKE's operation and maintenance expenses decreased from $26.6 million in 1999 to $24.3 million in 2000 due mainly to a decrease in payroll-related benefits expenses. Argentine Gas Distribution The Argentine Gas Distribution companies' net income increased from $4.8 million in 1999 to $6.7 million in 2000 due mainly to an increase in net revenues and higher equity in the earnings of Gas BAN. Other Other revenues increased from $73.4 million in 1999 to $77.8 million in 2000. The increase resulted from acquiring CRC-Evans in July 1999 and from increased sales in the Company's natural gas gathering and processing business, partially offset by a decrease in Retail Access Services' revenues and lower energy marketing revenues. Other cost of revenues decreased from $64.8 million in 1999 to $62.3 million in 2000. The decrease resulted from a decrease at Retail Access Services and lower energy marketing - 30 - cost of revenues, partially offset by an increase resulting from acquiring CRC-Evans in July 1999 and increased sales in the Company's natural gas gathering and processing business. The Company recorded asset-impairment and other non-recurring charges totaling $59.7 million during the second quarter of 2000. See Notes 2 and 4 of Notes to Financial Statements under Item 1 for more information. Other income for Capital Corp. and Other increased from $1.3 million in 1999 to $2.7 million in 2000. The increase resulted from recognizing the gain on the sale of the Company's interest in KUCC Cleburne in the second quarter of 2000. Capital Corp. and Other interest expense increased from $13.0 million in 1999 to $14.6 million in 2000. The increase resulted from funding discontinued operations, corporate operating expenses, and the Gas BAN and CRC acquisitions. The Company's consolidated effective income tax rate decreased from 36.1% in 1999 to 25.3% in 2000 due to an increase in investment and wind tax credits as a percent of pretax income. Six Months Ended June 30, 2000, Compared to Six Months Ended June 30, 1999 The Company's primary and diluted earnings per share from continuing operations decreased to $.32 in 2000 from $.82 in 1999. The decrease resulted from an asset impairment charge taken on the Company's natural gas gathering and processing business ($.21), recognizing expenses associated with the integration of the Company's two utilities ($.09), and from recording expenses related to the Powergen acquisition ($.09). Excluding these nonrecurring items, earnings per share from continuing operations decreased from $.82 in 1999 to $.71 in 2000. This decrease resulted from lower earnings at KU, decreases resulting from recognizing one-time items in 1999, a decrease resulting from acquiring CRC-Evans in July 1999, and higher interest expense at Capital Corp. Higher earnings at LG&E and WKE partially offset these decreases. The one-time items recognized in 1999 consisted of a gain on the sale of the Company's interest in the Rensselaer project, proceeds from bankruptcy settlements related to the Company's windpower partnerships, and fees related to the development of an independent power project in Gregory, Texas. LG&E Results: LG&E's net income increased $4.5 million (11%) for the first six months of 2000, as compared to the first six months of 1999, primarily because of lower operations and maintenance expenses, a decrease in power purchased and an increase in electric sales to other utilities. These expenses are partially offset by a decrease in electric rates, a decline in brokered sales transactions, a nonrecurring net of tax charge of $4.9 million for costs associated with further integration of KU and LG&E, and the reversal of various rate refunds of $1.4 million net of tax. Excluding the one-time charges for the One-Utility Program and the reversal of provisions for certain rate refunds, LG&E's net income would have increased $8.0 million. - 31 - A comparison of LG&E's revenues for the six months ended June 30, 2000, with the six months ended June 30, 1999, excluding the reversal of provisions for certain rate refunds of $2.3 million, reflects increases and decreases which have been segregated by the following principal causes (in thousands of $): Electric Gas Cause Revenues Revenues Retail sales: Fuel and gas supply adjustments $ (1,820) $14,029 Environmental cost recovery surcharge (724) - Performance based rate reduction (2,275) - Electric rate reduction (7,005) - Merger surcredit (931) - Variation in sales volume, etc. 1,687 (1,638) Total retail sales (11,068) 12,391 Sales for resale 7,828 6,453 Gas transportation - net - 163 Other 689 (143) Total $ (2,551) $18,864 In January 2000, the Kentucky Commission ordered the termination of LG&E's proposed PBR mechanism. As a result, LG&E refunded certain amounts collected from its customers during the nine months ended March 31, 2000. The electric rate reduction resulted from the Kentucky Commission's January 2000 PBR order reducing LG&E's base electric rates. Sales for resale increased due to increased sales to other utilities. Fuel for electric generation increased $6.7 million (9%) for the six months because of an increase in generation ($11 million) partially offset by lower cost of coal burned ($4.3 million). Gas supply expenses increased $18.2 million (28%) due to an increase in gas prices ($19.2 million) partially offset by a decrease in the volume of gas delivered to the distribution system ($1 million). Power purchased decreased $7.8 million primarily because of a decrease in brokered sales activities ($13.1 million), partially offset by increased sales to other utilities ($5.3 million). Other operation expenses decreased $4 million (5%) primarily as a result of lower administrative expenses ($10.3 million) and steam production costs ($1.3 million) partially offset by a one-time expense of $8.1 million for the Company's One-Utility Program. Maintenance expenses for the first six months of 2000 decreased $3.6 million (10%) primarily due to decreases in scheduled outages at the Mill Creek and the Cane Run generating stations ($4.3 million), and electric distribution maintenance ($1.1 million), partially offset by increased software maintenance costs ($1.9 million). Other income and deductions increased $2.1 million (157%) due to gains on the sale of non-utility property. - 32 - Variations in income tax expense are largely attributable to changes in pre- tax income. Interest charges increased $3.8 million (21%) due to the issuance of commercial paper. KU Results: KU's net income decreased $15.7 million (28%) for the six months ended June 30, 2000 as compared to the six months ended June 30, 1999. The decrease was partially due to a non-recurring charge of $6.6 million, after tax, made in the first quarter of 2000 for costs associated with further integration of KU and LG&E. Excluding this non-recurring charge, net income decreased $9.2 million, mainly due to rate reductions ordered by the Kentucky Commission early in 2000 and lower wholesale sales. A comparison of KU's revenues for the six months ended June 30, 2000, with the six months ended June 30, 1999, and reflects increases and (decreases) which have been segregated by the following principal causes (in thousands of $): Sales to ultimate consumers: Fuel supply adjustments $ (840) Environmental cost recovery surcharge (2,614) Performance based rate reduction (1,732) Merger surcredit (733) Electric rate reduction (12,140) Variation in sales volume, etc. 12,119 Total retail sales (5,940) Wholesale sales (16,751) Other 2,651 Total $(20,040) The environmental cost recovery surcharges are costs recovered from retail customers for investments KU made in facilities for compliance with clean air regulations. As shown above, KU recovered $2.6 million less for the six months ended June 30, 2000 as compared with the six months ended June 30, 1999. In January 2000, the Kentucky Commission ordered the termination of KU's proposed PBR mechanism. As a result, KU refunded certain amounts collected from its customers during the nine months ended March 31, 2000. The electric rate reduction resulted from the Kentucky Commission's January 2000 PBR order reducing KU's base electric rates. On May 4, 1998, LG&E Energy and KU Energy merged. As a result of merger, the Kentucky Commission approved a surcredit for savings achieved from the merger to be passed to the ultimate consumer over a five-year period. The reduction to retail sales for the merger surcredit is a reflection of that rate reduction. Variation in sales volumes is mainly due to higher volumes this year as compared to the same period last year. The higher volumes (288,137 Mwh) are attributable to an increase in the number of customers served as well as warmer weather this period as compared to the same period last year. The decrease in wholesale sales is due to fewer brokered sales marketing opportunities and the reduced availability of power because of planned outages at the electric generating plants. - 33 - Fuel for electric generation decreased $0.5 million (.5%) because of a decrease in generation ($1.0 million) which was partially offset by the increased cost of coal burned ($.5 million). Power purchased decreased $8.6 million (9.5%) because there were fewer opportunities in the brokered sales market as mentioned above. Non-recurring charges of $6.6 million, after tax, include the costs associated with the Company's One-Utility Program. Other operating expenses decreased by $5.9 million (10%). The decrease was mainly attributable to a decrease in administration and general expenses ($4.2 million) and customer service and information expenses ($1.1 million). Maintenance expenses increased by $2.7 million (10%) due to increased maintenance at the steam generating plants ($3.4 million) which was offset by decreases in transmission ($1.1 million) and distribution ($.5 million) maintenance. Depreciation and amortization increased due to additional utility plant in service. Variations in income tax expense are largely attributable to changes in pretax income. LG&E Capital Corp. and Other Results: Power Operations Power Operations' revenues decreased from $13.1 million in 1999 to $10.6 million in 2000. The decrease resulted mainly from recognizing revenues in 1999 related to the Rensselaer project, which the Company sold in March 1999. Power Operations' operation and maintenance expense decreased from $5.5 million in 1999 to $3.4 million in 2000. The decrease resulted primarily from writing off assets related to the Rensselaer project in 1999. Power Operations' equity in earnings of unconsolidated ventures decreased from $30.0 million in 1999 to $12.2 million in 2000, due to recognizing a pretax gain of $15.4 million on the sale of the Rensselaer project in 1999 and to receiving proceeds from bankruptcy settlements related to the Company's windpower partnerships in the second quarter of 1999. Western Kentucky Energy WKE's revenues decreased from $129.0 million in 1999 to $127.7 million in 2000 due mainly to lower off-system sales, partially offset by higher sales to industrial customers. WKE's cost of revenues decreased from $77.0 million in 1999 to $71.0 million in 2000 due to a decrease in purchased power. WKE's operation and maintenance expenses decreased from $50.6 million in 1999 to $48.8 million in 2000 due mainly to a decrease in payroll-related benefits expenses. WKE's depreciation and amortization expense increased from $1.5 million in 1999 to $2.9 million in 2000 due to increased expenditures for information systems conversions. WKE's interest income increased from $.4 million in 1999 to $1.4 million in 2000 due to an increase in the note receivable from Big Rivers. - 34 - Argentine Gas Distribution The Argentine Gas Distribution companies' net income increased from $5.2 million in 1999 to $6.0 million in 2000 due mainly to an increase in net revenues and higher equity in the earnings of Gas BAN. Other Other revenues increased from $138.5 million in 1999 to $152.8 million in 2000. The increase resulted from acquiring CRC-Evans in July 1999 and from increased sales in the Company's natural gas gathering and processing business, partially offset by a decrease in Retail Access Services' revenues and lower energy marketing revenues. Fees received in 1999 related to the development of an independent power project in Gregory, Texas, partially offset the increases also. Other cost of revenues increased from $112.7 million in 1999 to $123.0 million in 2000. The increase resulted from acquiring CRC-Evans in July 1999 and from increased sales in the Company's natural gas gathering and processing business, partially offset by a decrease at Retail Access Services and lower energy marketing cost of revenues. The Company recorded asset-impairment and other non-recurring charges totaling $80.4 million during the six months ended June 30, 2000. See Notes 2, 3 and 4 of Notes to Financial Statements under Item 1 for more information. Other income for Capital Corp. and Other increased from $4.6 million in 1999 to $6.9 million in 2000. The increase resulted from recognizing the gain on the sale of the Company's interest in KUCC Cleburne in the second quarter of 2000 and the gain on the sale of the Company's interest in CEC- APL L.P. in the first quarter of 2000. Higher interest income also contributed to the increase. Decreases resulting from payments received in 1999 related to the Rensselaer sale and the initial settlement of a claim on an undeveloped independent power project in California partially offset the increases. Capital Corp. and Other interest expense increased from $23.2 million in 1999 to $27.8 million in 2000. The increase resulted from funding discontinued operations, corporate operating expenses, and the Gas BAN and CRC acquisitions. The Company's consolidated effective income tax rate decreased from 37.2% in 1999 to 32.6% in 2000 due to an increase in investment and wind tax credits as a percent of pretax income. Liquidity and Capital Resources The Company's need for capital funds is largely related to the construction of plant and equipment necessary to meet the needs of electric and gas utility customers and equity investments in connection with independent power production projects and other energy-related growth or acquisition opportunities among the non-utility businesses. Capital funds are also needed for the Company's capital obligations under the Big Rivers lease arrangements, losses incurred in connection with the discontinuance of the merchant energy trading and sales business, information system enhancements, and other business development opportunities. Fluctuations in the Company's discontinued energy marketing and trading activities also affected liquidity throughout the quarter. Lines of credit and commercial paper programs are maintained to fund these temporary capital requirements. Construction expenditures for the six months ended June 30, 2000, of $157.3 million were financed with internally generated funds and commercial paper. The Company's combined cash and marketable securities balance decreased $35.7 million during the six months ended June 30, 2000. The decrease reflects construction expenditures - 35 - and dividends paid, partially offset by cash flows from operations, proceeds received from sales of investments in affiliates, and a net increase in debt. Variations in accounts receivable, accounts payable and materials and supplies are generally not significant indicators of the Company's liquidity. Such variations are primarily attributable to fluctuations in weather, which have a direct effect on sales of electricity and natural gas. The decrease in accounts receivable during the six months ended June 30, 2000, resulted mainly from seasonal fluctuations at LG&E and WKE, and a decrease in the balance at Retail Access Services, partially offset by seasonal fluctuations at the Company's natural gas gathering and processing business and an increase in Centro's balance. The decrease in accounts payable resulted mainly from seasonal fluctuations at LG&E, KU and WKE, and a decrease in the balance at Retail Access Services, partially offset by seasonal fluctuations at the Company's natural gas gathering and processing business and an increase in Centro's balance. The decrease in gas stored underground resulted from seasonal fluctuations at LG&E. The decrease in non-utility property and plant resulted from recording an impairment charge in the second quarter of 2000. See Note 4 of Notes to Financial Statements under Item 1 for more information. The increase in other property and investments resulted from expenditures related to the purchase of combustion turbines by Capital Corp. The increase in net liabilities of discontinued operations resulted from an increase in the Company's accrued loss on disposal of discontinued operations. Long-term debt (including current portion) increased by $68.7 million due to Capital Corp.'s issuing $150 million of medium-term notes in June 2000, partially offset by LG&E's redeeming its first mortgage bonds 7.5% series due July 1, 2002, in January 2000, and by KU's redeeming its Series Q 5.95% bonds due June 15, 2000, in June 2000. At June 30, 2000, unused capacity under the Company's lines of credit totaled $469.3 million after considering commercial paper support and approximately $47.0 million in letters of credit securing on- and off- balance sheet commitments. KU maintains an uncommitted borrowing facility of $100 million. Standard and Poor's downgraded LG&E's, KU's and Capital Corp.'s debt ratings on February 28, 2000. The downgrades reflect S&P's opinion of the credit quality of the Companies following the impact of the Kentucky Commission rate reduction and the OPC decision. S&P, Moody's and Fitch continue to have the debt of the Companies on credit watch pending review of the financial condition following consummation of the merger of the Company with Powergen. In July 2000, Fitch (formerly Duff and Phelps) downgraded the long-term debt of Capital Corp. to BBB+ following the announcement of the increase in the discontinued operations reserve. Also during the second quarter of 2000, Capital Corp.'s commercial paper rating changed from D-1- to F-2 as a result of the merger of Fitch and Duff and Phelps. Also in July 2000, the Company announced plans to build up to ten natural gas fired combustion turbines. The Company will build the turbines in Kentucky and Georgia to meet the native load commitments of its two utilities and to mitigate its exposure related to the OPC contract. The Company has not arranged, but has under consideration, several possible methods of financing the construction of the turbines, including the use of new short- or long-term credit facilities or the use of project or lease financing. Certain of Capital Corp.'s long-term debt agreements require the Company to maintain a debt-to-capitalization ratio not greater than 65%. The Company's debt-to-capitalization ratio at June 30, 2000, as defined in those agreements, equaled an amount just under 65%. Capital Corp. is pursuing a variety of actions to avoid any event of default under the - 36 - agreements, including selling the gas facilities business and certain asset securitization programs to reduce working capital requirements and debt, and is working with the financial institutions to obtain standstill agreements or waivers of the 65% debt-to-capitalization limit. The Company's capitalization ratios follow: June 30, Dec. 31, 2000 1999 Long-term debt (including current portion) 54.3% 49.8% Notes payable 12.6 13.1 Preferred stock 4.3 3.9 Common equity 28.8 33.2 Total 100.0% 100.0% LG&E's capitalization ratios follow: June 30, Dec. 31, 2000 1999 Long-term debt (including current portion) 39.7% 41.1% Notes payable 8.6 7.9 Preferred stock 6.2 6.2 Common equity 45.5 44.8 Total 100.0% 100.0% KU's capitalization ratios follow: June 30, Dec. 31, 2000 1999 Long-term debt (including current portion) 41.0% 44.7% Notes payable 2.5 0.0 Preferred stock 3.4 3.3 Common equity 53.1 52.0 Total 100.0% 100.0% For a description of certain contingencies that may affect the Company, LG&E and KU, reference is made to Part II herein - Item 1, Legal Proceedings. Item 3. Quantitative and Qualitative Disclosures About Market Risk. LG&E Energy is exposed to market risks in both its regulated and non- utility operations. Both operations are exposed to market risks from changes in interest rates and commodity prices, while the non-utility operations are also exposed to changes in foreign exchange rates. To mitigate changes in cash flows attributable to these exposures, the Company has entered into various derivative instruments. Derivative positions are monitored using techniques that include market value and sensitivity analysis. The potential change in interest expense resulting from changes in base interest rates of the Company's unswapped debt did not change materially during the three- and six-month periods ended June 30, 2000. The potential changes in the fair values of the Company's interest-rate swaps resulting from changes in interest rates and the yield curve also did not change materially three- and six-month periods ended June 30, 2000. The Company's exposure to market risks from changes in commodity prices and foreign exchange rates remained immaterial three- and six-month periods ended June 30, 2000. - 37 - Part II. Other Information Item 1. Legal Proceedings. For a description of the significant legal proceedings involving the Company, LG&E and KU, reference is made to the information under the following items and captions of (a) the Company's, LG&E's and KU's respective combined Annual Report on Form 10-K for the year ended December 31, 1999: Item 1, Business; Item 3, Legal Proceedings; Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition; Notes 2, 6, 18 and 22 of the Company's Notes to Financial Statements under Item 8; Notes 3, 12 and 16 of LG&E's Notes to Financial Statements under Item 8 and Notes 3, 11 and 14 of KU's Notes to Financial Statements under Item 8 and (b) the Company's, LG&E's and KU's respective combined Quarterly Report on Form 10-Q for the quarter ended March 31, 2000: Part III, Item 1, Legal Proceedings. Except as described herein, to date, the proceedings reported in the Company's, LG&E's and KU's respective combined Annual Report on Form 10-K have not changed materially. Powergen Merger Regulatory Filings On February 28, 2000, the Company announced the signing of a definitive merger agreement with Powergen plc of the United Kingdom, wherein, upon closing, the Company will become a wholly-owned subsidiary of Powergen and shareholders of the Company will receive $24.85 per share of Company common stock. The transaction is expected to be completed 9 to 12 months from announcement, subject to receipt of required regulatory approvals and other conditions to consummation. It is possible that the remaining regulatory approvals may be received in time to permit a closing during the fourth quarter of 2000 Applications for approval were filed with the Kentucky Commission, the Virginia Commission and the FERC (under the Federal Power Act) in March 2000, and with the SEC (under the Public Utility Holding Company Act of 1935) in April 2000. Notice filings were made to the Tennessee Regulatory Authority in the second quarter of 2000, to the Department of Justice and the Federal Trade Commission (under the Hart- Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act)) in July 2000 and as required under the "Exon-Florio" US Omnibus Trade and Competitiveness Act of 1988 (the E-F Act) in August 2000. Powergen has made standard filings with the United Kingdom Office of Fair Trading under the Fair Trading Act of 1973, which implements a voluntary regulatory regime. Through mid-August 2000, a number of approval steps have been completed by the Company and Powergen. Shareholders of the Company and of Powergen approved the merger transaction in separate meetings held in June 2000. Further, approvals were received from the Kentucky Commission in May 2000, the FERC in June 2000 and the Virginia Commission in July 2000. The parties submitted the requisite filings under the HSR Act and the E-F Act in late July and early August 2000, respectively, which trigger 30 day waiting periods due to expire in late August and early September, respectively, absent any further inquiry or investigation by the applicable regulatory authority. The parties joint application for approval to the SEC under PUHCA was submitted in April 2000. While the Company and Powergen believe that they will receive the requisite regulatory approvals for the merger in sufficient time to complete the transaction on the schedule mentioned above, there can be no assurance as to the timing of such approvals or the ability to obtain such approvals on satisfactory terms or otherwise. See Item 1, Powergen Merger and Note 22 to the Company's Notes to Financial Statements under Item 8 of its Annual Report on Form 10-K for the year ended December 31, 1999 for further discussion of this matter. Gas Rate Increase Proceeding In August 2000, hearings were held before the Kentucky Commission regarding LG&E's March 2000 application for an general adjustment in gas rates. The requested increase of approximately $26.4 million, the first major non-fuel- related adjustment requested by LG&E - 38 - to gas rates in 10 years, is designed to reflect higher service and distribution costs to natural gas customers. A final decision in the matter is expected in late September 2000 from the Kentucky Commission, whose decision may include possible changes to the amount of any approved increases. An October 2000 effective date for the new rates has been suspended. Item 4. Submission of Matters to a Vote of Security Holders. a) LG&E Energy's, LG&E's and KU's Annual Meetings of Shareholders were held on June 7, 2000. b) Not applicable. c) The matters voted upon and the results of the voting at the Annual Meetings are set forth below: 1. LG&E Energy: i) The shareholders voted 85,066,839 common shares in favor of and 8,118,348 shares against the Merger Agreement and related transactions with Powergen. Holders of 2,154,339 common shares abstained from voting on this matter. ii) The shareholders voted to elect LG&E Energy's nominees for election to the Board of Directors as follows: William C. Ballard, Jr. - 106,760,854 common shares cast in favor of election and 4,442,532 shares withheld. T. Ballard Morton, Jr. - 106,719,738 common shares cast in favor of election and 4,483,648 shares withheld. William L. Rouse, Jr. - 106,617,016 common shares cast in favor of election and 4,586,370 shares withheld. Charles L. Shearer - 106,735,367 common shares cast in favor of election and 4,468,019 shares withheld. Holders of 3,725,775 common shares abstained from voting on this matter. iii) The shareholders voted 108,358,737 common shares in favor of and 1,440,846 shares against the approval of Arthur Andersen LLP as independent auditors for 2000. Holders of 1,403,803 common shares abstained from voting on this matter. 2. LG&E: i) The shareholders voted to elect LG&E's nominees for election to the Board of Directors as follows: William C. Ballard, Jr. - 21,294,223 common shares and 582,318 preferred shares cast in favor of election and 17,408 preferred shares withheld. T. Ballard Morton, Jr. - 21,294,223 common shares and 586,296 preferred shares cast in favor of election and 13,430 preferred shares withheld. William L. Rouse, Jr. - 21,294,223 common shares and 586,105 preferred shares cast in favor of election and 13,621 preferred shares withheld. - 39 - Charles L. Shearer - 21,294,223 common shares and 586,832 preferred shares cast in favor of election and 12,894 preferred shares withheld. Holders of no common or preferred shares abstained from voting on this matter. ii) The shareholders voted 21,294,223 common shares and 587,072 preferred shares in favor of and 2,373 preferred shares against the approval of Arthur Andersen LLP as independent auditors for 2000. Holders of 10,281 preferred shares abstained from voting on this matter. 3. KU: i) The sole shareholder voted to elect KU's nominees for election to the Board of Directors as follows: 37,817,878 common shares cast in favor of election and no shares withheld for each of William C. Ballard, Jr., T. Ballard Morton, Jr., William L. Rouse, Jr., and Charles L. Shearer, respectively. ii) The sole shareholder voted 37,817,878 common shares in favor of and no shares against the approval of Arthur Andersen LLP as independent auditors for 2000. Holders of no common shares abstained from voting on these matters. d) Not applicable. Item 6(a). Exhibits. Exhibit Number Description 27 Financial Data Schedules for LG&E Energy Corp., Louisville Gas and Electric Company, and Kentucky Utilities Company. Item 6(b). Reports on Form 8-K. On August 14, 2000, the Company filed a report on Form 8-K stating that on July 28, 2000, it announced that it had increased its after-tax loss on disposal of discontinued operations by an additional $155 million. - 40 - 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. LG&E Energy Corp. Registrant Date: August 14, 2000 /s/ Michael D. Robinson Michael D. Robinson Vice President and Controller (On behalf of the registrant in his capacity as Principal Accounting Officer) 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 14, 2000 /s/ Michael D. Robinson Michael D. Robinson Vice President and Controller (On behalf of the registrant in his capacity as Principal Accounting Officer) 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. Kentucky Utilities Company Registrant Date: August 14, 2000 /s/ Michael D. Robinson Michael D. Robinson Vice President and Controller (On behalf of the registrant in his capacity as Principal Accounting Officer) - 41 - EX-27 2 0002.txt
UT 0000055387 KENTUCKY UTILITIES COMPANY 1,000 6-MOS DEC-31-2000 JUN-30-2000 PER-BOOK 1,560,177 14,688 155,750 51,570 0 1,782,185 307,545 0 320,048 627,593 0 40,000 430,830 29,931 0 0 54,000 0 0 0 599,831 1,782,185 423,102 22,734 342,703 365,437 57,665 3,979 61,644 19,938 41,706 1,128 40,578 50,000 17,380 118,612 0 0 Includes common stock expense of $595.
EX-27 3 0003.txt
UT 0000861388 LG&E ENERGY CORP. 1,000 6-MOS DEC-31-2000 JUN-30-2000 PER-BOOK 3,418,209 725,210 630,138 263,805 0 5,037,362 775,679 (592) 170,121 945,208 0 142,640 1,404,441 413,660 0 0 375,506 0 0 0 1,755,907 5,037,362 1,231,681 19,923 1,109,359 1,129,282 102,399 (144,284) (41,885) 68,275 (110,160) 3,609 (113,769) 82,344 33,906 146,697 (0.88) (0.88) Includes common stock expense of $1,334. Represents unrealized loss on marketable securities, net of taxes. Includes equity in earnings of affiliates of $16,690.
EX-27 4 0004.txt
UT 0000060549 LOUISVILLE GAS AND ELECTRIC COMPANY 1,000 6-MOS DEC-31-2000 JUN-30-2000 PER-BOOK 1,858,032 1,161 221,167 54,288 0 2,134,648 425,170 (1,184) 269,179 693,165 0 95,140 335,600 0 0 131,757 271,200 0 0 0 607,786 2,134,648 459,374 24,066 371,431 395,497 63,877 3,369 67,246 21,816 45,430 2,482 42,948 33,000 16,526 98,293 0 0 Includes common stock expense of $836. Represents unrealized gain/loss on marketable securities, net of taxes.
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