-----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, JvctyTfizBM/Qzl5IBBaruxrm9nBgMIVSYgOafK8Gd9smg1Q/CAQmvIxg4FeziYO /WxM15UCZ2U6hKDHIY0aVA== 0000081020-99-000009.txt : 19990514 0000081020-99-000009.hdr.sgml : 19990514 ACCESSION NUMBER: 0000081020-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSI ENERGY INC CENTRAL INDEX KEY: 0000081020 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 350594457 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03543 FILM NUMBER: 99620579 BUSINESS ADDRESS: STREET 1: 1000 E MAIN ST CITY: PLAINFIELD STATE: IN ZIP: 46168 BUSINESS PHONE: 3178399611 FORMER COMPANY: FORMER CONFORMED NAME: PUBLIC SERVICE CO OF INDIANA INC DATE OF NAME CHANGE: 19900509 10-Q 1 PSI FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MarkOne) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address, and Telephone Number Identification No. 1-11377 CINERGY CORP. 31-1385023 (A Delaware Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 421-9500 1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030 (An Ohio Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 421-9500 1-3543 PSI ENERGY, INC. 35-0594457 (An Indiana Corporation) 1000 East Main Street Plainfield, Indiana 46168 (317) 839-9611 2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080 (A Kentucky Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 421-9500 Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company. Information contained herein relating 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. The Union Light, Heat and Power Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its company specific information with the reduced disclosure format. As of April 30, 1999, shares of Common Stock outstanding for each registrant were as listed: Company Shares - ---------------------------------------------------------------- ------------ Cinergy Corp., par value $.01 per share 158,870,194 The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086 PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701 The Union Light, Heat and Power Company, par value $15.00 per share 585,333 TABLE OF CONTENTS Item Page Number Number Glossary of Terms . . . . . . . . . . . . . . . . . . . 3 PART I. FINANCIAL INFORMATION 1 Financial Statements Cinergy Corp. Consolidated Balance Sheets . . . . . . . . . . . . . 6 Consolidated Statements of Income . . . . . . . . . . 8 Consolidated Statements of Changes in Common Stock Equity. . . . . . . . . . . . . . . . . . . . 9 Consolidated Statements of Cash Flows . . . . . . . . 10 Results of Operations . . . . . . . . . . . . . . . . 11 The Cincinnati Gas & Electric Company Consolidated Balance Sheets . . . . . . . . . . . . . 15 Consolidated Statements of Income and Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . 17 Consolidated Statements of Cash Flows . . . . . . . . 18 Results of Operations . . . . . . . . . . . . . . . . 19 PSI Energy, Inc. Consolidated Balance Sheets. . . . . . . . . . . . 23 Consolidated Statements of Income and Comprehensive Income . . . . . . . . . . . . . . . 25 Consolidated Statements of Cash Flows. . . . . . . . 26 Results of Operations . . . . . . . . . . . . . . . . 27 The Union Light, Heat and Power Company Balance Sheets. . . . . . . . . . . . . . . . . . . . 31 Statements of Income. . . . . . . . . . . . . . . . . 33 Statements of Cash Flows. . . . . . . . . . . . . . . 34 Results of Operations . . . . . . . . . . . . . . . . 35 Notes to Financial Statements . . . . . . . . . . . . . 37 2 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 45 3 Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . 51 PART II. OTHER INFORMATION 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 52 4 Submission of Matters to a Vote of Security Holders . . 52 5 Other Information . . . . . . . . . . . . . . . . . . . 53 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 53 Signatures. . . . . . . . . . . . . . . . . . . . . . . 56 GLOSSARY OF TERMS The following abbreviations or acronyms used in the text of this combined Form 10-Q are defined below: TERM DEFINITION 1998 Form Combined 1998 Annual Report on Form 10-K filed separately by 10-K Cinergy, CG&E, PSI, and ULH&P Avon Energy Avon Energy Partners Holdings, an Unlimited Liability Company and its wholly-owned subsidiary Avon Energy Partners PLC, a Limited Liability Company CAAA Clean Air Act Amendments of 1990 CC&T Cinergy Capital and Trading, Inc. (a subsidiary of Investments) CERCLA Comprehensive Environmental Response, Compensation and Liability Act CG&E The Cincinnati Gas & Electric Company (a subsidiary of Cinergy) CIBU Cinergy Investments Business Unit Cinergy or Cinergy Corp. Company Committed Lines A line of credit providing short-term loans on a committed basis Destec Destec Energy, Inc. DOE United States Department of Energy Dynegy Dynegy Inc. ECBU Energy Commodities Business Unit EDBU Energy Delivery Business Unit EPA United States Environmental Protection Agency EPS Earnings per share FASB Financial Accounting Standards Board Gibson PSI's Gibson Generating Station (steam electric generating plant) IBU International Business Unit ICR Information Collection Request IDEM Indiana Department of Environmental Management IGC Indiana Gas Company, Inc., formerly Indiana Gas and Water Company, Inc. Investments Cinergy Investments, Inc. (a subsidiary of Cinergy) IT Information Technology GLOSSARY OF TERMS (Continued) TERM DEFINITION IURC Indiana Utility Regulatory Commission kwh Kilowatt-hour mcf Thousand cubic feet MGP Manufactured gas plant Midlands Midlands Electricity plc, a United Kingdom regional electric company (a wholly-owned subsidiary of Avon Energy) MW Megawatts N/A Not applicable NERC North American Electric Reliability Council NIPSCO Northern Indiana Public Service Company NOx Nitrogen oxide ProEnergy Producers Energy Marketing, LLC (a subsidiary of CC&T), which is engaged in the marketing of natural gas PSI PSI Energy, Inc. (a subsidiary of Cinergy) RUS Rural Utilities Service SEC United States Securities and Exchange Commission September 1996 An IURC order issued in September 1996 on PSI's retail Order rate proceeding SIP State Implementation Plan SO2 Sulfur dioxide Statement 131 Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an Enterprise and Related Information Statement 133 Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ULH&P The Union Light, Heat and Power Company (a wholly-owned subsidiary of CG&E) Uncommitted A line of credit providing short-term loans on an Lines uncommitted basis US United States WVPA Wabash Valley Power Association, Inc. CINERGY CORP. AND SUBSIDIARY COMPANIES
CINERGY CORP. CONSOLIDATED BALANCE SHEETS ASSETS March 31 December 31 1999 1998 (unaudited) (dollars in thousands) Current Assets Cash and temporary cash investments $ 92,652 $ 100,154 Restricted deposits 3,641 3,587 Notes receivable 59 64 Accounts receivable less accumulated provision for doubtful accounts of $31,355 at March 31, 1999, and $25,622 at December 31, 1998 397,686 580,305 Materials, supplies, and fuel - at average cost 180,969 202,747 Prepayments and other 73,692 74,849 Energy risk management assets 703,278 969,000 ----------- ------------ 1,451,977 1,930,706 Utility Plant - Original Cost In service Electric 9,248,374 9,222,261 Gas 794,785 786,188 Common 197,299 186,364 ----------- ----------- 10,240,458 10,194,813 Accumulated depreciation 4,100,406 4,040,247 ----------- ----------- 6,140,052 6,154,566 Construction work in progress 209,461 189,883 ----------- ----------- Total utility plant 6,349,513 6,344,449 Other Assets Regulatory assets 940,386 970,767 Investments in unconsolidated subsidiaries 645,250 574,401 Other 459,022 478,472 ----------- ----------- 2,044,658 2,023,640 $ 9,846,148 $10,298,795 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
CINERGY CORP. LIABILITIES AND SHAREHOLDERS' EQUITY March 31 December 31 1999 1998 (unaudited) (dollars in thousands) Current Liabilities Accounts payable $ 433,732 $ 668,860 Accrued taxes 240,179 228,347 Accrued interest 40,878 51,679 Notes payable and other short-term obligations 1,052,811 903,700 Long-term debt due within one year 25,959 136,000 Energy risk management liabilities 828,424 1,117,146 Other 86,814 93,376 ---------- ----------- 2,708,797 3,199,108 Non-Current Liabilities Long-term debt 2,605,657 2,604,467 Deferred income taxes 1,100,473 1,091,075 Unamortized investment tax credits 154,381 156,757 Accrued pension and other postretirement benefit costs 323,949 315,147 Other 268,042 298,370 ---------- ----------- 4,452,502 4,465,816 Total liabilities 7,161,299 7,664,924 Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 92,616 92,640 Common Stock Equity Common stock - $.01 par value; authorized shares - 600,000,000; outstanding shares - 158,779,900 at March 31, 1999, and 158,664,532 at December 31, 1998 1,588 1,587 Paid-in capital 1,598,884 1,595,237 Retained earnings 1,001,034 945,214 Accumulated other comprehensive loss (9,273) (807) ---------- ----------- Total common stock equity 2,592,233 2,541,231 $9,846,148 $10,298,795
CINERGY CORP. CONSOLIDATED STATEMENTS OF INCOME (unaudited) Quarter Ended March 31 1999 1998 (in thousands, except per share amounts) Operating Revenues Electric $ 968,532 $1,158,724 Gas 421,308 184,846 Other 12,439 4,891 ---------- ---------- 1,402,279 1,348,461 Operating Expenses Fuel and purchased and exchanged power 433,169 652,404 Gas purchased 334,402 107,586 Other operation and maintenance 244,548 212,693 Depreciation and amortization 86,477 79,935 Taxes other than income taxes 69,534 70,135 ---------- ---------- 1,168,130 1,122,753 Operating Income 234,149 225,708 Equity in Earnings of Unconsolidated Subsidiaries 44,682 11,854 Other Income and (Expenses) - Net (11,886) (11,815) Interest 60,772 59,805 ---------- ---------- Income Before Taxes 206,173 165,942 Income Taxes 77,564 57,449 Preferred Dividend Requirements of Subsidiaries 1,364 2,422 ---------- ---------- Net Income $ 127,245 $ 106,071 Average Common Shares Outstanding 158,746 157,764 Earnings Per Common Share Net income $0.80 $0.67 Earnings Per Common Share - Assuming Dilution Net income $0.80 $0.67 Dividends Declared Per Common Share $0.45 $ 0.45 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
CINERGY CORP. CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (dollars in thousands) (unaudited) Accumulated Other Total Total Common Paid-in Retained Comprehensive Comprehensive Common Stock Stock Capital Earnings Loss Income (Loss) Equity Quarter Ended March 31, 1999 Balance at January 1, 1999 $1,587 $1,595,237 $ 945,214 $ (807) $2,541,231 Comprehensive income Net income 127,245 $127,245 127,245 Other comprehensive income, net of tax Foreign currency translation adjustment (8,451) (8,451) Unrealized gains/losses - grantor trusts (15) (15) -------- Other comprehensive loss total (8,466) (8,466) -------- Comprehensive income total $118,779 Issuance of 115,368 shares of common stock - net 1 1,978 1,979 Treasury shares purchased (233) (233) Treasury shares reissued 1,902 1,902 Dividends on common stock (see page 8 for per share amounts) (71,422) (71,422) Other (3) (3) ------ ---------- ---------- ------- ---------- Balance at March 31, 1999 $1,588 $1,598,884 $1,001,034 $(9,273) $2,592,233 Quarter Ended March 31, 1998 Balance at January 1, 1998 $1,577 $1,573,064 $ 967,420 $(2,861) $2,539,200 Comprehensive income Net income 106,071 $106,071 106,071 Other comprehensive income, net of tax Foreign currency translation adjustment (367) (367) Minimum pension liability adjustment (51) (51) -------- Other comprehensive loss total (418) (418) -------- Comprehensive income total $105,653 ======== Issuance of 19,362 shares of common stock - net 1 289 290 Treasury shares purchased (1) (1,430) (1,431) Treasury shares reissued 1 2,149 2,150 Dividends on common stock (see page 8 for per share amounts) (70,994) (70,994) Other 8 (2) 6 ------ ---------- ---------- ------- ---------- Balance at March 31, 1998 $1,578 $1,574,080 $1,002,495 $(3,279) $2,574,874 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
CINERGY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1999 1998 (in thousands) Operating Activities Net income $ 127,245 $ 106,071 Items providing (using) cash currently: Depreciation and amortization 86,477 79,935 Deferred income taxes and investment tax credits - net 12,877 (12,955) Equity in earnings of unconsolidated subsidiaries (44,682) (11,854) Allowance for equity funds used during construction (775) (21) Regulatory assets - net 5,140 10,670 Changes in current assets and current liabilities Restricted deposits (54) (29) Accounts and notes receivable, net of reserves on receivables sold 182,265 (106,525) Materials, supplies, and fuel 21,778 4,660 Accounts payable (235,128) 69,305 Accrued taxes and interest 1,031 24,938 Energy risk management - net (23,000) - Other items - net 9,478 25,788 --------- --------- Net cash provided by operating activities 142,652 189,983 Financing Activities Issuance of common stock 1,979 290 Issuance of long-term debt 6,623 98,901 Retirement of preferred stock of subsidiaries (20) (85,229) Redemption of long-term debt (116,000) (160,291) Change in short-term debt 149,111 108,767 Dividends on common stock (71,422) (70,994) --------- --------- Net cash used in financing activities (29,729) (108,556) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (79,143) (66,348) Investments in unconsolidated subsidiaries (41,282) (9,658) --------- --------- Net cash used in investing activities (120,425) (76,006) Net increase (decrease) in cash and temporary cash investments (7,502) 5,421 Cash and temporary cash investments at beginning of period 100,154 53,310 --------- --------- Cash and temporary cash investments at end of period $ 92,652 $ 58,731 The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
CINERGY CORP. Below is information concerning the consolidated results of operations for Cinergy for the quarter ended March 31, 1999. For information concerning the results of operations for each of the other registrants for the quarter ended March 31, 1999, see the discussion under the heading "Results of Operations" following the financial statements of each registrant. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999 Operating Revenues Electric Operating Revenues The components of electric operating revenues and the related kwh sales are shown below: Quarter Ended March 31 Revenue Kwh Sales 1999 1998 1999 1998 ($ and kwh in millions) Retail $676 $ 633 12,276 11,678 Sales for resale 266 515 10,694 21,733 Other 27 11 172 - ---- ------ ------ ------- Total $969 $1,159 23,142 33,411 Electric operating revenues decreased $190 million (16%) for the quarter ended March 31, 1999, when compared to the same period for 1998. This decrease was primarily due to decreased volumes on non-firm power sales for resale transactions related to energy marketing and trading operations. Partially offsetting the decline was an increase in the average price per kwh for retail customers, higher retail and firm power kwh sales resulting from growth in the average number of residential and commercial customers and a return to more normal weather in the first quarter of 1999, as compared to 1998, and increased international operations. Gas Operating Revenues The components of gas operating revenues and the related mcf sales are shown below: Quarter Ended March 31 Revenue Mcf Sales ------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ----- ($ and mcf in millions) Sales for resale $243 $ - 143 N/A Retail 158 174 26 26 Transportation 20 11 13 16 ---- ---- --- --- Total $421 $185 182 42 Gas operating revenues increased $236 million in the first quarter of 1999, when compared to the same period last year, primarily due to the gas operating revenues of ProEnergy, which was acquired in June 1998. A lower average cost per mcf of gas purchased, which was passed on to end users, contributed to the decrease in retail sales. Transportation revenues increased as more residential and commercial customers began to purchase gas directly from suppliers, using transportation services provided by CG&E. This increase in transportation revenues was partially offset by a decrease in mcf transportation volumes resulting from the loss of a large industrial transportation customer during late 1998. Other Revenues Other revenues increased $8 million for the quarter ended March 31, 1999, over the same period of 1998. This increase was primarily the result of increased revenues of new non-regulated initiatives operated by the various business units. Operating Expenses Fuel and Purchased and Exchanged Power The components of fuel and purchased and exchanged power are shown below: Quarter Ended March 31 1999 1998 (in millions) Fuel $198 $181 Purchased and exchanged power 235 471 ---- ---- Total $433 $652 Electric fuel costs increased $17 million (9%) for the quarter ended March 31, 1999, as compared to the same period last year. An analysis of these fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1998 $181 Increase (Decrease) due to change in: Price of fuel (2) Deferred fuel cost 5 Kwh generation 9 Other 5 ---- Fuel expense - March 31, 1999 $198 Purchased and exchanged power expense decreased $236 million (50%) for the quarter ended March 31, 1999, as compared to the same period last year, primarily reflecting decreased purchases of non-firm power for resale to others as a result of a decline in sales for resale volumes in the energy marketing and trading operations. Gas Purchased Gas purchased for the quarter ended March 31, 1999, increased $227 million, when compared to the same period last year, primarily due to the gas purchased expenses of ProEnergy, which was acquired in June 1998. Partially offsetting this increase was a lower average cost per mcf of gas purchased. Other Operation and Maintenance The components of other operation and maintenance expenses are shown below: Quarter Ended March 31 1999 1998 (in millions) Other operation $195 $174 Maintenance 50 39 ---- ---- Total $245 $213 Other operation expenses increased $21 million (12%) for the quarter ended March 31, 1999, as compared to the same period last year, primarily due to an increase in operating expenses related to various non-regulated subsidiaries and the estimated loss on a specific customer account. Maintenance expenses increased $11 million (28%) for the quarter ended March 31, 1999, as compared to the same period of 1998, primarily due to an increase in maintenance activities associated with planned outages at certain production facilities. Depreciation and Amortization The components of depreciation and amortization expenses are shown below: Quarter Ended March 31 1999 1998 (in millions) Depreciation $79 $73 Amortization of phase-in deferrals 6 6 Amortization of post-in-service deferred operating expenses 1 1 --- --- Total $86 $80 Depreciation expense increased $6 million (8%) for the quarter ended March 31, 1999, as compared to the same period last year, primarily due to additions to depreciable plant. Equity in Earnings of Unconsolidated Subsidiaries The $33 million increase in equity in earnings of unconsolidated subsidiaries for the quarter ended March 31, 1999, as compared to the same period of 1998, is primarily attributable to an increase in the earnings of Avon Energy resulting from increased profits related to Midlands' supply business and lower costs of purchased electricity. Preferred Dividend Requirements of Subsidiaries The decrease in preferred dividend requirements of subsidiaries of $1 million (44%) for the quarter ended March 31, 1999, as compared to the same period of 1998, is primarily attributable to PSI's redemption of all outstanding shares of its 7.44% Series Cumulative Preferred Stock on March 1, 1998. THE CINCINNATI GAS & ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS ASSETS March 31 December 31 1999 1998 (unaudited) (dollars in thousands) Current Assets Cash and temporary cash investments $ 17,856 $ 26,989 Restricted deposits 1,173 1,173 Notes receivable from affiliated companies 109,725 84,358 Accounts receivable less accumulated provision for doubtful accounts of $19,295 at March 31, 1999, and $17,607 at December 31, 1998 119,288 205,060 Accounts receivable from affiliated companies 431 22,635 Materials, supplies, and fuel - at average cost 94,163 115,294 Prepayments and other 41,369 40,158 Energy risk management assets 351,639 484,500 ---------- --------- 735,644 980,167 Utility Plant - Original Cost In service Electric 4,817,108 4,806,958 Gas 794,786 786,188 Common 197,299 186,364 ---------- ---------- 5,809,193 5,779,510 Accumulated depreciation 2,184,770 2,147,298 ---------- ---------- 3,624,423 3,632,212 Construction work in progress 121,476 119,993 ---------- ---------- Total utility plant 3,745,899 3,752,205 Other Assets Regulatory assets 616,784 627,035 Other 101,817 100,061 ---------- ---------- 718,601 727,096 $5,200,144 $5,459,468 The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated financial statements.
THE CINCINNATI GAS & ELECTRIC COMPANY LIABILITIES AND SHAREHOLDER'S EQUITY March 31 December 31 1999 1998 (unaudited) (dollars in thousands) Current Liabilities Accounts payable $ 171,792 $ 282,743 Accounts payable to affiliated companies 34,376 13,166 Accrued taxes 138,096 151,455 Accrued interest 13,920 20,571 Long-term debt due within one year 20,000 130,000 Notes payable and other short-term obligations 288,991 189,283 Notes payable to affiliated companies 4,289 17,020 Energy risk management liabilities 414,212 558,573 Other 25,961 26,422 ---------- ---------- 1,111,637 1,389,233 Non-Current Liabilities Long-term debt 1,219,901 1,219,778 Deferred income taxes 779,201 771,145 Unamortized investment tax credits 109,260 110,801 Accrued pension and other postretirement benefit costs 149,830 146,361 Other 134,550 134,990 ---------- ---------- 2,392,742 2,383,075 Total liabilities 3,504,379 3,772,308 Cumulative Preferred Stock Not subject to mandatory redemption 20,697 20,717 Common Stock Equity Common stock - $8.50 par value; authorized shares - 120,000,000; outstanding shares - 89,663,086 at March 31, 1999, and December 31, 1998 762,136 762,136 Paid-in capital 553,929 553,926 Retained earnings 360,127 351,505 Accumulated other comprehensive loss (1,124) (1,124) ---------- ---------- Total common stock equity 1,675,068 1,666,443 $5,200,144 $5,459,468
THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited) Quarter Ended March 31 1999 1998 (in thousands) Operating Revenues Electric $481,586 $593,305 Gas 163,797 173,462 -------- -------- 645,383 766,767 Operating Expenses Fuel and purchased and exchanged power 198,871 325,171 Gas purchased 78,878 96,588 Other operation and maintenance 108,156 101,405 Depreciation and amortization 50,570 47,660 Taxes other than income taxes 54,114 54,683 -------- -------- 490,589 625,507 Operating Income 154,794 141,260 Other Income and (Expenses) - Net (1,261) (2,494) Interest 24,407 26,789 -------- -------- Income Before Taxes 129,126 111,977 Income Taxes 48,889 40,785 -------- -------- Net Income $ 80,237 $ 71,192 Preferred Dividend Requirement 214 215 -------- -------- Net Income Applicable to Common Stock $ 80,023 $ 70,977 Other Comprehensive Income (Loss), Net of Tax - (155) -------- -------- Comprehensive Income $ 80,023 $ 70,822 The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated financial statements.
THE CINCINNATI GAS & ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1999 1998 (in thousands) Operating Activities Net income $ 80,237 $ 71,192 Items providing (using) cash currently: Depreciation and amortization 50,570 47,660 Deferred income taxes and investment tax credits - net 8,795 (27) Allowance for equity funds used during construction (775) (10) Regulatory assets - net 4,496 2,912 Changes in current assets and current liabilities Accounts and notes receivable, net of reserves on receivables sold 80,619 391 Materials, supplies, and fuel 21,131 14,073 Accounts payable (89,741) 51,971 Accrued taxes and interest (20,010) (4,439) Energy risk management - net (11,500) - Other items - net (1,938) 9,753 --------- -------- Net cash provided by operating activities 121,884 193,476 Financing Activities Retirement of preferred stock (17) (9) Redemption of long-term debt (110,000) (160,291) Change in short-term debt 86,977 49,157 Dividends on preferred stock (214) (215) Dividends on common stock (71,400) (42,600) --------- --------- Net cash used in financing activities (94,654) (153,958) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (36,363) (36,483) Net cash used in investing activities (36,363) (36,483) Net increase (decrease) in cash and temporary cash investments (9,133) 3,035 Cash and temporary cash investments at beginning of period 26,989 2,349 --------- --------- Cash and temporary cash investments at end of period $ 17,856 $ 5,384 The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part of these consolidated financial statements.
THE CINCINNATI GAS & ELECTRIC COMPANY RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999 Operating Revenues Electric Operating Revenues The components of electric operating revenues and the related kwh sales are shown below: Quarter Ended March 31 Revenue Kwh Sales 1999 1998 1999 1998 ($ and kwh in millions) Retail $358 $336 5,882 5,438 Sales for resale 121 254 4,918 10,793 Other 3 3 N/A N/A ---- ---- ------ ------ Total $482 $593 10,800 16,231 Electric operating revenues decreased $111 million (19%) for the quarter ended March 31, 1999, when compared to the same period for 1998. This decrease was primarily due to decreased volumes on non-firm power sales for resale transactions related to Cinergy's energy marketing and trading operations. Partially offsetting the decline was higher retail kwh sales resulting from growth in the average number of residential and commercial customers and a return to more normal weather in the first quarter of 1999, as compared to 1998. Gas Operating Revenues The components of gas operating revenues and the related mcf sales are shown below: Quarter Ended March 31 Revenue Mcf Sales 1999 1998 1999 1998 ($ and mcf in millions) Retail $144 $162 26 26 Transportation 20 11 13 16 ---- ---- -- -- Total $164 $173 39 42 Gas operating revenues decreased $9 million (5%) in the first quarter of 1999, when compared to the same period last year. A lower average cost per mcf of gas purchased, which was passed on to end users, contributed to the decrease in retail sales. Transportation revenues increased as more residential and commercial customers began to purchase gas directly from suppliers, using transportation services provided by CG&E. This increase in transportation revenues was partially offset by a decrease in mcf transportation volumes resulting from the loss of a large industrial transportation customer during late 1998. Operating Expenses Fuel and Purchased and Exchanged Power The components of fuel and purchased and exchanged power are shown below: Quarter Ended March 31 1999 1998 (in millions) Fuel $ 86 $ 88 Purchased and exchanged power 113 237 ---- ---- Total $199 $325 Electric fuel costs decreased $2 million (2%) for the quarter ended March 31, 1999, as compared to the same period last year. An analysis of these fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1998 $88 Increase (Decrease) due to change in: Price of fuel 1 Deferred fuel cost (7) Kwh generation 4 --- Fuel expense - March 31, 1999 $86 Purchased and exchanged power expense decreased $124 million (52%) for the quarter ended March 31, 1999, as compared to the same period last year. This decline primarily reflects decreased purchases of non-firm power for resale to others as a result of a decline in sales for resale volumes in Cinergy's energy marketing and trading operations. Gas Purchased Gas purchased for the quarter ended March 31, 1999, decreased $18 million (18%), when compared to the same period last year, primarily due to an decrease in the average cost per mcf of gas purchased. Other Operation and Maintenance The components of other operation and maintenance expenses are shown below: Quarter Ended March 31 1999 1998 (in millions) Other operation $ 84 $ 82 Maintenance 24 19 --- --- Total $108 $101 Maintenance expenses increased $5 million (26%) for the quarter ended March 31, 1999, as compared to the same period of 1998, primarily due to an increase in maintenance activities associated with planned outages at certain production facilities. Depreciation and Amortization The components of depreciation and amortization expenses are shown below: Quarter Ended March 31 1999 1998 (in millions) Depreciation $43 $41 Amortization of phase-in deferrals 7 6 Amortization of post-in-service deferred operating expenses 1 1 --- --- Total $51 $48 Depreciation expense increased $2 million (5%) for the quarter ended March 31, 1999, as compared to the same period of 1998, primarily due to additions to depreciable plant. Other Income and (Expenses) - Net The change in other income and (expenses) - net of $1 million for the quarter ended March 31, 1999, as compared to the same period of 1998, is primarily due to an increase in interest income and an increase in allowance for equity funds used during construction resulting from an increase in the equity rate applied and an increase in construction expenditures subject to allowance. Interest The decrease in interest expense of $2 million (9%) for the quarter ended March 31, 1999, as compared to the same period last year, was due to decreases in both interest on long-term debt and other interest expense. The decrease in interest expense on long-term debt is primarily due to a net redemption of approximately $90 million of long-term debt during the period of March 1998 through February 1999. The decrease in other interest expense was due to a reduction in average short-term borrowings and lower short-term interest rates. PSI ENERGY, INC. AND SUBSIDIARY COMPANY
PSI ENERGY, INC. CONSOLIDATED BALANCE SHEETS ASSETS March 31 December 31 1999 1998 (unaudited) (dollars in thousands) Current Assets Cash and temporary cash investments $ 31,187 $ 18,788 Restricted deposits 2,468 2,414 Notes receivable 8,298 17,024 Notes receivable from affiliated companies 70 73 Accounts receivable less accumulated provision for doubtful accounts of $11,968 at March 31, 1999, and $7,893 at December 31, 1998 139,685 225,449 Accounts receivable from affiliated companies 10,674 384 Materials, supplies, and fuel - at average cost 83,789 80,445 Prepayments and other 27,485 31,461 Energy risk management assets 351,639 484,500 ---------- ---------- Total current assets 655,295 860,538 Electric Utility Plant - Original Cost In service 4,431,266 4,415,303 Accumulated depreciation 1,915,636 1,892,949 ---------- ---------- 2,515,630 2,522,354 Construction work in progress 87,984 69,891 ---------- ---------- Total electric utility plant 2,603,614 2,592,245 Other Assets Regulatory assets 323,603 343,731 Other 92,496 93,012 ---------- ---------- Total other assets 416,099 436,743 $3,675,008 $3,889,526 The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
PSI ENERGY, INC. LIABILITIES AND SHAREHOLDER'S EQUITY March 31 December 31 1999 1998 (unaudited) (dollars in thousands) Current Liabilities Accounts payable $ 141,076 $ 217,959 Accounts payable to affiliated companies 12,954 30,145 Accrued taxes 90,558 58,901 Accrued interest 17,628 28,335 Notes payable and other short-term obligations 157,597 173,162 Notes payable to affiliated companies 103,092 102,946 Long-term debt due within one year 5,959 6,000 Energy risk management liabilities 414,212 558,573 Other 2,161 2,227 ---------- ---------- 945,237 1,178,248 Non-Current Liabilities Long-term debt 1,020,093 1,025,659 Deferred income taxes 360,007 364,049 Unamortized investment tax credits 45,121 45,956 Accrued pension and other postretirement benefit costs 116,664 112,387 Other 101,641 115,656 ---------- ---------- 1,643,526 1,663,707 Total liabilities 2,588,763 2,841,955 Cumulative Preferred Stock Not subject to mandatory redemption 71,919 71,923 Common Stock Equity Common stock - without par value; $0.01 stated value; authorized shares - 60,000,000; outstanding shares - 53,913,701 at March 31, 1999, and December 31, 1998 539 539 Paid-in capital 410,740 410,739 Retained earnings 603,557 564,865 Accumulated other comprehensive loss (510) (495) ---------- ---------- Total common stock equity 1,014,326 975,648 $3,675,008 $3,889,526
PSI ENERGY, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited) Quarter Ended March 31 1999 1998 (in thousands) Operating Revenues Electric $482,465 $592,125 Operating Expenses Fuel and purchased and exchanged power 234,927 352,746 Other operation and maintenance 113,240 101,685 Depreciation and amortization 33,743 32,275 Taxes other than income taxes 14,488 14,967 -------- -------- 396,398 501,673 Operating Income 86,067 90,452 Other Income and (Expenses) - Net 323 1,718 Interest 21,364 22,898 -------- -------- Income Before Taxes 65,026 69,272 Income Taxes 25,185 25,944 -------- -------- Net Income $ 39,841 $ 43,328 Preferred Dividend Requirement 1,150 2,208 -------- -------- Net Income Applicable to Common Stock $ 38,691 $ 41,120 Other Comprehensive Income (Loss), Net of Tax (15) 944 -------- --------- Comprehensive Income $ 38,676 $ 42,064 The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
PSI ENERGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1999 1998 (in thousands) Operating Activities Net income $ 39,841 $ 43,328 Items providing (using) cash currently: Depreciation and amortization 33,743 32,275 Deferred income taxes and investment tax credits - net (3,476) (473) Allowance for equity funds used during construction - (11) Regulatory assets - net 644 7,758 Changes in current assets and current liabilities Restricted deposits (54) (29) Accounts and notes receivable, net of reserves on receivables sold 85,834 (75,348) Materials, supplies, and fuel (3,344) (9,413) Accounts payable (94,074) 33,541 Accrued taxes and interest 20,950 26,088 Energy risk management - net (11,500) - Other items - net 7,593 (14,292) --------- --------- Net cash provided by operating activities 76,157 43,424 Financing Activities Issuance of long-term debt - 98,901 Retirement of preferred stock (3) (85,220) Redemption of long-term debt (6,000) - Change in short-term debt (15,419) 8,481 Dividends on preferred stock (1,150) (2,736) Dividends on common stock - (28,400) --------- --------- Net cash used in financing activities (22,572) (8,974) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (41,186) (26,803) Net cash used in investing activities (41,186) (26,803) Net increase in cash and temporary cash investments 12,399 7,647 Cash and temporary cash investments at beginning of period 18,788 18,169 --------- --------- Cash and temporary cash investments at end of period $ 31,187 $ 25,816 The accompanying notes as they relate to PSI Energy, Inc. are an integral part of these consolidated financial statements.
PSI ENERGY, INC. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999 Operating Revenues The components of operating revenues and the related kwh sales are shown below: Quarter Ended March 31 Revenue Kwh Sales 1999 1998 1999 1998 ($ and kwh in millions) Retail $318 $297 6,393 6,239 Sales for resale 157 287 6,282 12,185 Other 7 8 N/A N/A ---- ---- ------ ------ Total $482 $592 12,675 18,424 Operating revenues decreased $110 million (19%) for the quarter ended March 31, 1999, when compared to the same period for 1998. This decrease was primarily due to decreased volumes on non-firm power sales for resale transactions related to Cinergy's energy marketing and trading operations. Partially offsetting the decline was an increase in the average price per kwh for retail customers and higher retail and firm power kwh sales resulting from growth in the average number of residential and commercial customers and a return to more normal weather in the first quarter of 1999, as compared to 1998. Operating Expenses Fuel and Purchased and Exchanged Power The components of fuel and purchased and exchanged power are shown below: Quarter Ended March 31 1999 1998 (in millions) Fuel $107 $ 92 Purchased and exchanged power 128 261 ---- ---- Total $235 $353 Fuel costs increased $15 million (16%) for the first quarter of 1999, as compared to the same period last year. An analysis of fuel costs is shown below: Quarter Ended March 31 (in millions) Fuel expense - March 31, 1998 $ 92 Increase (Decrease) due to change in: Price of fuel (3) Deferred fuel cost 12 Kwh generation 6 ---- Fuel expense - March 31, 1999 $107 Purchased and exchanged power expense decreased $133 million (51%) for the quarter ended March 31, 1999, as compared to the same period last year. This decline primarily reflects decreased purchases of non-firm power for resale to others as a result of a decline in sales for resale volumes in Cinergy's energy marketing and trading operations. Other Operation and Maintenance The components of other operation and maintenance expenses are shown below: Quarter Ended March 31 1999 1998 (in millions) Other operation $ 88 $ 82 Maintenance 25 20 ---- ---- Total $113 $102 Other operation expense increased $6 million (7%) for the quarter ended March 31, 1999, as compared to the same period of 1998, primarily due to the estimated loss on a specific customer account. Maintenance expense increased $5 million (25%) for the quarter ended March 31, 1999, as compared to the same period of 1998, primarily due to an increase in maintenance activities associated with planned outages at certain production facilities. Other Income and (Expenses) - Net The change in other income and (expenses) - net of $1 million for the quarter ended March 31, 1999, as compared to the same period of 1998, is primarily attributable to a decrease in interest income. Interest The $2 million (7%) decrease in interest expense for the quarter ended March 31, 1999, as compared to the same period of 1998, is primarily due to a decrease in other interest expense resulting from a reduction in average short-term borrowings and lower short-term interest rates. Partially offsetting the decrease was an increase in interest expense on long-term debt resulting from the net issuance of approximately $144 million of long-term debt during the period from March 1998 through December 1998. Preferred Dividend Requirement The decrease in preferred dividend requirement of $1 million (48%) for the quarter ended March 31, 1999, as compared to the same period of 1998, is primarily attributable to PSI's redemption of all outstanding shares of its 7.44% Series Cumulative Preferred Stock on March 1, 1998. THE UNION LIGHT, HEAT AND POWER COMPANY
THE UNION LIGHT, HEAT AND POWER COMPANY BALANCE SHEETS ASSETS March 31 December 31 1999 1998 (unaudited) (dollars in thousands) Current Assets Cash and temporary cash investments $ 4,993 $ 3,244 Accounts receivable less accumulated provision for doubtful accounts of $1,826 at March 31, 1999, and $1,248 at December 31, 1998 9,076 14,125 Accounts receivable from affiliated companies - 666 Materials, supplies, and fuel - at average cost 3,668 8,269 Prepayments and other 154 308 -------- -------- Total current assets 17,891 26,612 Utility Plant - Original Cost In service Electric 234,791 232,222 Gas 165,629 164,040 Common 20,358 18,908 -------- -------- 420,778 415,170 Accumulated depreciation 146,128 143,386 -------- -------- 274,650 271,784 Construction work in progress 9,971 11,444 -------- -------- Total utility plant 284,621 283,228 Other Assets Regulatory assets 10,893 10,978 Other 5,470 3,767 -------- -------- 16,363 14,745 $318,875 $324,585 The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements.
THE UNION LIGHT, HEAT AND POWER COMPANY LIABILITIES AND SHAREHOLDER'S EQUITY March 31 December 31 1999 1998 (unaudited) (dollars in thousands) Current Liabilities Accounts payable $ 6,729 $ 5,903 Accounts payable to affiliated companies 15,582 14,986 Accrued taxes 6,616 3,216 Accrued interest 1,432 1,959 Long-term debt due within one year 20,000 20,000 Notes payable to affiliated companies 11,386 31,817 Other 4,179 4,247 -------- -------- 65,924 82,128 Non-Current Liabilities Long-term debt 54,571 54,553 Deferred income taxes 25,711 26,134 Unamortized investment tax credits 4,168 4,238 Accrued pension and other postretirement benefit costs 11,920 11,678 Amounts due to customers - income taxes 9,253 8,959 Other 11,968 8,077 -------- -------- 117,591 113,639 Total liabilities 183,515 195,767 Common Stock Equity Common stock - $15.00 par value; authorize shares - 1,000,000; outstanding shares - 585,333 at March 31, 1999, and December 31, 1998 8,780 8,780 Paid-in capital 19,525 19,525 Retained earnings 107,055 100,513 -------- -------- Total common stock equity 135,360 128,818 $318,875 $324,585
THE UNION LIGHT, HEAT AND POWER COMPANY STATEMENTS OF INCOME (unaudited) Quarter Ended March 31 1999 1998 (in thousands) Operating Revenues Electric $49,159 $46,999 Gas 33,000 28,480 ------- ------- 82,159 75,479 Operating Expenses Electricity purchased from parent company for resale 36,748 34,090 Gas purchased 17,322 16,353 Operation and maintenance 10,190 9,430 Depreciation 3,571 3,232 Taxes other than income taxes 1,083 1,005 ------- ------- 68,914 64,110 Operating Income 13,245 11,369 Other Income and (Expenses) - Net (390) (496) Interest 1,563 1,115 ------- ------- Income Before Taxes 11,292 9,758 Income Taxes 4,749 3,989 ------- ------- Net Income $ 6,543 $ 5,769 The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements.
THE UNION LIGHT, HEAT AND POWER COMPANY STATEMENTS OF CASH FLOWS (unaudited) Year to Date March 31 1999 1998 (in thousands) Operating Activities Net income $ 6,543 $ 5,769 Items providing (using) cash currently: Depreciation 3,571 3,232 Deferred income taxes and investment tax credits - net (200) 462 Allowance for equity funds used during construction 16 14 Regulatory assets 35 (41) Changes in current assets and current liabilities Accounts and notes receivable, net of reserves on receivables sold 4,006 240 Materials, supplies, and fuel 4,601 3,111 Accounts payable 1,422 (5,751) Accrued taxes and interest 2,873 (1,000) Other current assets and liabilities 86 - Other items - net 4,200 1,627 -------- -------- Net cash provided by operating activities 27,153 7,663 Financing Activities Change in short-term debt (20,431) (2,030) -------- -------- Net cash used in financing activities (20,431) (2,030) Investing Activities Construction expenditures (less allowance for equity funds used during construction) (4,973) (6,175) Net cash used in investing activities (4,973) (6,175) Net increase (decrease) in cash and temporary cash investments 1,749 (542) Cash and temporary cash investments at beginning of period 3,244 546 -------- -------- Cash and temporary cash investments at end of period $ 4,993 $ 4 The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements.
THE UNION LIGHT, HEAT AND POWER COMPANY RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999 Operating Revenues Electric Operating Revenues Electric operating revenues increased $2 million (5%) for the quarter ended March 31, 1999, as compared to the same period last year. This increase primarily reflects a return to more normal weather conditions, as compared to the same period in 1998, and higher retail kwh sales resulting from growth in the average number of residential and commercial customers. Gas Operating Revenues The components of gas operating revenues and the related mcf sales are shown below: Quarter Ended March 31 Revenue Mcf Sales 1999 1998 1999 1998 ($ and mcf in thousands) Retail $31,555 $27,266 5,219 4,491 Transportation 1,445 1,214 1,078 1,106 ------- ------- ----- ----- Total $33,000 $28,480 6,297 5,597 Gas operating revenues increased $5 million (16%) in the first quarter of 1999, when compared to the same period last year, primarily due to a increase in mcf volumes sold, a return to more normal weather conditions, and an increase in the number of customers. Operating Expenses Electricity Purchased from Parent Company for Resale Electricity purchased increased $3 million (8%) for the quarter ended March 31, 1999, as compared to the same period last year. This increase reflects higher volumes purchased from CG&E. Gas Purchased Gas purchased for the quarter ended March 31, 1999, increased $1 million (6%), when compared to the same period last year, primarily due to an increase in the volumes of gas purchased, due to higher demand and an increase in the number of customers. Other Operation and Maintenance The components of other operation and maintenance expenses are shown below: Quarter Ended March 31 1999 1998 (in thousands) Other operation $ 8,948 $8,135 Maintenance 1,242 1,295 ------- ------- Total $10,190 $9,430 Other operation expenses increased $.8 million (10%) for the quarter ended March 31, 1999, as compared to the same period last year, primarily due to an increase in administrative and general activities. Depreciation Depreciation increased $.3 million (10%) for the quarter ended March 31, 1999, as compared to the same period last year, due to additions to depreciable plant. Other Income and (Expenses) - Net The change in other income and (expenses) - net of $.1 million for the quarter ended March 31, 1999, as compared to the same period of 1998, is primarily attributable to an increase in miscellaneous non-utility revenues. Interest The increase in interest expense of $.4 million (40%) for the quarter ended March 31, 1999, as compared to the same period last year, was primarily due to the net issuance of approximately $30 million of long-term debt during the period of April 1998 through December 1998. NOTES TO FINANCIAL STATEMENTS Cinergy, CG&E, PSI, and ULH&P 1. These Financial Statements reflect all adjustments (which include normal, recurring adjustments) necessary in the opinion of the registrants for a fair presentation of the interim results. These statements should be read in conjunction with the Financial Statements and the notes thereto included in the combined 1998 Form 10-K of the registrants. Certain amounts in the 1998 Financial Statements have been reclassified to conform to the 1999 presentation. Cinergy 2. On April 16, 1999, Cinergy issued and sold $200 million principal amount of its 6.125% Debentures due 2004. Proceeds from the sale were used to repay a portion of short-term indebtedness and for general corporate purposes. Cinergy and PSI 3. On April 30, 1999, PSI issued: $124.7 million principal amount of its First Mortgage Bonds, Series BBB, 8%, due July 15, 2009, in exchange for $125.7 million principal amount of certain outstanding Secured Medium-term Notes, Series A; $60.1 million principal amount of its First Mortgage Bonds, Series CCC, 8.85%, due January 15, 2022, in exchange for $60.5 million principal amount of certain outstanding Secured Medium-term Notes, Series A; and $38 million principal amount of its First Mortgage Bonds, Series DDD, 8.31%, due September 1, 2032, in exchange for $38 million principal amount of certain outstanding Secured Medium-term Notes, Series B. Also on April 30, 1999, PSI issued $97 million principal amount of its 6.52% Senior Notes due 2009 in exchange for a like principal amount of outstanding 7.25% Junior Maturing Principal Securities due 2028 ("JUMPS(sm)"). The Secured Medium-term Notes and JUMPS(sm) received by PSI in the exchange transactions described above have been cancelled. Cinergy, CG&E, and PSI 4. Cinergy'senergy marketing and trading operations, conducted primarily through its ECBU, markets and trades electricity, natural gas, and other energy-related products. The power marketing and trading operation has both physical and trading activities. Generation not required to meet native load requirements is available to be sold to third parties, either under long-term contracts, such as full requirements transactions or firm forward sales contracts, or in short-term and spot market transactions. When transactions are entered into, each transaction is designated as either a physical or trading transaction. In order for a transaction to be designated as physical, there must be intent and ability to physically deliver the power from company-owned generation. Physical transactions are accounted for on a settlement basis. All other transactions are considered trading transactions and are accounted for using the mark-to-market method of accounting. Under the mark-to-market method of accounting, these trading transactions are reflected at fair value as "Energy risk management assets" and "Energy risk management liabilities." Changes in fair value, resulting in unrealized gains and losses, are reflected in "Fuel and purchased and exchanged power." Revenues and costs for all transactions are recorded gross in the Consolidated Statements of Income as contracts are settled. Revenues are recognized in "Operating Revenues - Electric" and costs are recorded in "Fuel and purchased and exchanged power." Although physical transactions are entered with the intent and ability to settle the contract with company-owned generation, it is likely, that from time to time, due to numerous factors such as generating station outages, native load requirements, and weather, power used to settle the physical transactions will be required to be purchased on the open market. Depending on the factors giving rise to these open market purchases, the cost of such purchases could be in excess of the associated revenues. Losses such as this will be recognized as the power is delivered. In addition, physical contracts are subject to permanent impairment tests. At March 31, 1999, management has concluded that no physical contracts are impaired. Prior to December 31, 1998, the transactions now included in the trading portfolio were accounted for and valued at the aggregate lower of cost or market. Under this method, only the net value of the entire portfolio was recorded as a liability in the Consolidated Balance Sheets. Contracts in the trading portfolio are valued at end-of-period market prices, utilizing factors such as closing exchange prices, broker and over-the-counter quotations, and model pricing. Model pricing considers time value and volatility factors underlying any options and contractual commitments. Management expects that some of these obligations, even though considered as trading contracts, will ultimately be settled from time to time by using company-owned generation. The cost of this generation is typically below the market prices at which the trading portfolio has been valued. Because of the volatility currently experienced in the power markets, and the factors discussed above pertaining to both the physical and trading activities, volatility in future earnings (losses) from period to period in the ECBU is likely. Cinergy's ECBU also physically markets natural gas and trades natural gas and other energy-related products. All of these operations are accounted for on the mark-to-market method of accounting. Revenues and costs from physical marketing are recorded gross in the Consolidated Statements of Income as contracts are settled due to the exchanging of title to the natural gas throughout the earnings process. All non-physical transactions are recorded net in the Consolidated Statements of Income. Energy risk management assets and liabilities and gross margins from these trading activities currently are not significant. Cinergy, CG&E, and PSI 5. Cinergy and its subsidiaries use derivative financial instruments to hedge exposures to foreign currency exchange rates, lower funding costs, and manage exposures to fluctuations in interest rates. Instruments used as hedges must be designated as a hedge at the inception of the contract and must be effective at reducing the risk associated with the exposure being hedged. Accordingly, changes in market values of designated hedge instruments must be highly correlated with changes in market values of the underlying hedged items at inception of the hedge and over the life of the hedge contract. Cinergy and its subsidiaries utilize foreign exchange forward contracts and currency swaps to hedge certain of its net investments in foreign operations. Accordingly, any translation gains or losses related to the foreign exchange forward contracts or the principal exchange on the currency swap are recorded in "Accumulated other comprehensive loss," which is a separate component of common stock equity. Aggregate translation losses related to these instruments are reflected in "Current Liabilities" in the Consolidated Balance Sheets. Interest rate swaps are accounted for under the accrual method. Accordingly, gains and losses based on any interest differential between fixed-rate and floating-rate interest amounts, calculated on agreed upon notional principal amounts, are recognized in the Consolidated Statements of Income as a component of interest expense as realized over the life of the agreement. Cinergy, CG&E, PSI, and ULH&P 6. As discussed in the 1998 Form 10-K, prior to the 1950s, gas was produced at MGP sites through a process that involved the heating of coal and/or oil. The gas produced from this process was sold for residential, commercial, and industrial uses. Cinergy and PSI Coal tar residues, related hydrocarbons, and various metals associated with MGP sites have been found at former MGP sites in Indiana, including at least 21 MGP sites which PSI or its predecessors previously owned. PSI acquired four of the sites from NIPSCO in 1931 and at the same time it sold NIPSCO the sites located in Goshen and Warsaw, Indiana. In 1945, PSI sold 19 of these sites (including the four it acquired from NIPSCO) to Indiana Gas and Water Company, Inc. (now IGC). One of the 19 sites, located in Rochester, Indiana, was later sold by IGC to NIPSCO. IGC and NIPSCO both made claims against PSI, contending that PSI is a Potentially Responsible Party under the CERCLA with respect to the 21 MGP sites, and therefore legally responsible for the costs of investigating and remediating these sites. Moreover, in August 1997, NIPSCO filed suit against PSI in federal court, claiming, pursuant to CERCLA, recovery from PSI of NIPSCO's past and future costs of investigating and remediating MGP related contamination at the Goshen MGP site. In November 1998, NIPSCO, IGC, and PSI entered into a Site Participation and Cost Sharing Agreement by which they settled allocation of CERCLA liability for past and future costs, among the three companies, at seven MGP sites in Indiana. Pursuant to this agreement, NIPSCO's lawsuit against PSI was dismissed. The parties have assigned one of the parties lead responsibility for managing further investigation and remediation activities at each of the sites. Similar agreements were reached between IGC and PSI which allocate CERCLA liability at 14 MGP sites with which NIPSCO had no involvement. These agreements conclude all CERCLA and similar claims between the three companies relative to MGP sites. Pursuant to the agreements and applicable laws, the parties are continuing to investigate and remediate the sites as appropriate. Investigation and cleanup of some of the sites is subject to oversight by the IDEM. PSI has placed its insurance carriers on notice of IGC's, NIPSCO's, and the IDEM's claims related to MGP sites. In April 1998, PSI filed suit in Hendricks County Circuit Court against its general liability insurance carriers seeking, among other matters, a declaratory judgment that its insurance carriers are obligated to defend MGP claims against PSI or pay PSI's costs of defense and to indemnify PSI for its costs of investigating, preventing, mitigating, and remediating damage to property and paying claims associated with MGP sites. PSI cannot predict the outcome of this litigation. Based upon the work performed to date, PSI has accrued costs for the sites related to investigation, remediation, and groundwater monitoring. Estimated costs of certain remedial activities are accrued when such costs are reasonably estimable. PSI does not believe it can provide an estimate of the reasonably possible total remediation costs for any site prior to completion of a remedial investigation/feasibility study and the development of some sense of the timing for the implementation of the potential remedial alternatives, to the extent such remediation may be required. Accordingly, the total costs that may be incurred in connection with the remediation of all sites, to the extent remediation is necessary, cannot be determined at this time. These future costs at the 21 Indiana MGP sites, based on information currently available, are not material to Cinergy's financial condition or results of operations. However, as further investigation and remediation activities are undertaken at these sites, the potential liability for the 21 MGP sites could be material to Cinergy's and PSI's financial condition or results of operations. Cinergy, CG&E, and ULH&P CG&E and its utility subsidiaries are aware of potential sites where MGP activities have occurred at some time in the past. None of these sites is known to present a risk to the environment. CG&E and its utility subsidiaries have undertaken preliminary site assessments to obtain more information about some of these MGP sites. Cinergy, CG&E, PSI, and ULH&P 7. During the second quarter of 1998, the FASB issued Statement 133. The new standard requires companies to record derivative instruments, as defined in Statement 133, as assets or liabilities, measured at fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting treatment. The standard is effective for fiscal years beginning after June 15, 1999, and Cinergy expects to adopt the provisions of Statement 133 in the first quarter of 2000. The Company has not yet quantified the impacts of adopting Statement 133 on its consolidated financial statements. However, Statement 133 could increase volatility in earnings and other comprehensive income.
Cinergy Presented below is a reconciliation of earnings per common share (basic EPS) and earnings per common share assuming dilution (diluted EPS). Income Shares Earnings (Numerator) (Denominator) Per Share (In thousands, except per share amounts) Quarter ended March 31, 1999 Earnings per common share: Net income $127,245 158,746 $ .80 Effect of dilutive securities: Common stock options 412 Contingently issuable common stock 13 EPS--assuming dilution: Net income plus assumed conversions $127,245 159,171 $ .80 Quarter ended March 31, 1998 Earnings per common share: Net income $106,071 157,764 $ .67 Effect of dilutive securities: Common stock options 787 Contingently issuable common stock 123 EPS--assuming dilution: Net income plus assumed conversions $106,071 158,674 $ .67
Options to purchase shares of common stock that were excluded from the calculation of EPS--assuming dilution because the exercise prices of these options were greater than the average market price of the common shares during the period are summarized below: Quarter Average Ended Exercise March 31 Shares Price 1999 1,744,800 $35.70 1998 914,800 37.61 Cinergy 9. Midlands (of which the Company owns 50%) has a 40% ownership interest in a 586 MW power project in Pakistan ("Uch project" or "Uch") which as originally scheduled to begin commercial operation in late 1998. In July 1998, the Pakistani government-owned utility issued a notice of intent to terminate certain key project agreements relative to the Uch project. The notice asserted that various forms of corruption were involved in the original granting of the agreements to the Uch investors by a predecessor government. The Company believes that this notice is similar to notices received by a number of other independent power projects in Pakistan. The Uch investors, including a subsidiary of Midlands, strongly deny the allegations and have pursued all available legal options to enforce their contractual rights under the project agreements. Physical construction of the project is complete; however, commercial operations have been delayed pending resolution of the dispute. In December 1998, the Pakistani government offered to withdraw its notice. Through its 50% ownership of Midlands, the Company's current investment in the Uch project is approximately $36 million. In addition, project lenders could require investors to make additional capital contributions to the project under certain conditions. The Company's share of these additional contributions is approximately $8 million. At the present time, the Company cannot predict the ultimate outcome of this matter. Cinergy and PSI 10. As discussed in the 1998 Form 10-K, PSI and Dynegy (formerly Destec) entered into a 25-year contractual agreement for the provision of coal gasification services in November 1995. The agreement requires PSI to pay Dynegy a base monthly fee including certain monthly operating expenses. PSI received authorization in the September 1996 Order for the inclusion of these costs in retail rates. In addition, PSI received authorization to defer, for subsequent recovery in retail rates, the base monthly fees and expenses incurred prior to the effective date of the September 1996 Order. Over the next five years, the base monthly fees and expenses for the coal gasification service agreement are expected to total $201 million. During the third quarter of 1998, PSI reached an agreement with Dynegy to purchase the remainder of its 25-year contract for coal gasification services for $265.7 million. The proposed purchase, which is contingent upon regulatory approval satisfactory to PSI, could be completed in 1999. PSI is investigating financing alternatives. The transaction, if approved as proposed, is not expected to have a material impact on PSI's earnings. Currently, natural gas prices have fallen to a level which causes the synthetic gas supply taken under the current gasification services agreement to be substantially above market. If the buyout of the gasification services agreement is approved, the combustion turbine will be fired with natural gas, or with synthetic gas if it can be produced at a cost competitive with natural gas. 11. As discussed in the 1998 Form 10-K, the collective-bargaining agreement with the International Brotherhood of Electrical Workers Local No. 1393, covering approximately 1,470 employees, expired on May 1, 1999. A new labor agreement was ratified April 22, 1999, and is effective from May 1, 1999, through April 30, 2002. Cinergy, CG&E, PSI, and ULH&P 12. As discussed in the 1998 Form 10-K, during 1998, Cinergy and its subsidiaries adopted the provisions of Statement 131. During the first quarter of 1999, Cinergy reorganized its reportable segments. The business unit structure effective with that reorganization is described below. The ECBU operates and maintains, exclusive of certain jointly-owned plant, all of the Company's domestic electric generation facilities. In addition to the production of electric power, all energy risk management, marketing, and proprietary arbitrage trading, with the exception of electric and gas retail sales, is conducted through the ECBU. Revenues from external customers are derived from the ECBU's marketing, trading, and risk management activities. Intersegment revenues are derived from the sale of electric power to the EDBU. The EDBU plans, constructs, operates, and maintains the Company's transmission and distribution systems and provides gas and electric energy to end users. Revenues from customers other than end users are primarily derived from the transmission of electric power through the Company's transmission system. The CIBU manages the development, sales, and marketing of domestic, non-regulated wholesale energy and energy-related products and services. Most of the CIBU's revenues are derived from the sales of such products and services to external, end-use customers. In addition, some of the CIBU's activities are conducted through joint-venture affiliates, including the construction and sale or lease of cogeneration and trigeneration facilities to large commercial/industrial customers and energy management services to third parties. The IBU directs and manages all of the Company's international business holdings, which include wholly-owned subsidiaries and equity investments. Revenues and equity earnings from unconsolidated companies are primarily derived from energy-related businesses. Transfer pricing for sales of electric energy and sales of electric and gas transmission and distribution services between the ECBU and EDBU are derived from the operating utilities' retail and wholesale rate structures.
Financial results by business unit for the quarters ended March 31, 1999, and 1998, and Total Segments Assets at March 31, 1999, and December 31, 1998, are as follows: 1999 All Reconciling Cinergy Business Units Other Eliminations ECBU EDBU CIBU IBU Total (1) (2) Consolidated ------------------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues - External Customers $ 503,638 $ 868,367 $17,400 $ 12,874 $1,402,279 $ - $ - $1,402,279 Intersegment Revenues 456,536 - - - 456,536 - (456,536) - Segment Profit (Loss) Before Taxes 83,317 102,754 (2,729) 24,136 207,478 (1,305) - 206,173 Total Segment Assets at March 31, 1999 $5,081,083 $3,897,368 $46,876 $789,840 $9,815,167 $30,981 $ - $9,846,148 1998 All Reconciling Cinergy Business Units Other Eliminations ECBU EDBU CIBU IBU Total (1) (2) Consolidated ------------------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues - External Customers $ 502,098 $ 832,452 $13,765 $ 146 $ 1,348,461 $ - $ - $ 1,348,461 Intersegment Revenues 434,931 - - - 434,931 - (434,931) - Segment Profit (Loss) Before Taxes 91,153 90,572 (3,268) (961) 177,496 (11,554) - 165,942 Total Segment Assets at December 31, 1998 $5,474,428 $3,987,055 $42,107 $751,861 $10,255,451 $ 43,344 $ - $10,298,795 1. The all other category represents miscellaneous corporate items, which are not allocated to business units for the purposes of segment profit measurement. 2. The reconciling eliminations category eliminates the intersegment revenues of the ECBU and the EDBU.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cinergy, CG&E, PSI, and ULH&P CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION Matters discussed in this "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" in "Part I. Financial Information" reflect and elucidate Cinergy's corporate vision of the future and, as a part of that, outline goals and aspirations, as well as specific projections. These goals and projections are considered forward-looking statements and are based on management's beliefs, as well as certain assumptions made by management. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. In addition to any assumptions and other factors that are referred to specifically in connection with these statements, other factors that could cause actual results to differ materially from those indicated in any forward-looking statements include, among others: factors generally affecting operations, such as unusual weather conditions, unscheduled generation outages; unusual maintenance or repairs, unanticipated changes in fuel costs, environmental incidents, or system constraints; legislative and regulatory initiatives regarding deregulation and restructuring of the industry; increased competition in the electric and gas utility environment; challenges related to Year 2000 readiness; regulatory factors; changes in accounting principles or policies; adverse political, legal, or economic conditions; changing market conditions; success of efforts to invest in and develop new opportunities in non-traditional business; availability or cost of capital; employee workforce factors; legal and regulatory delays and other obstacles associated with mergers, acquisitions, and investments in joint ventures; costs and effects of legal and administrative proceedings; changes in legislative requirements; and other risks. The SEC's rules do not require forward-looking statements to be revised or updated, and Cinergy does not intend to do so. FINANCIAL CONDITION Recent Developments Cinergy Acquisitions During the first quarter of 1999, Cinergy, through its international subsidiaries, invested an additional $41 million in international unconsolidated subsidiaries. Competitive Pressures Cinergy, CG&E, PSI, and ULH&P Ohio As discussed in the 1998 Form 10-K, electric restructuring legislation was reintroduced in 1999 in both houses of the Ohio General Assembly. These companion bills propose to give choice to all retail electric customers by January 1, 2001. As written, the legislation has not gained consensus among the stakeholders. The Ohio Senate Ways and Means Committee has scheduled a vote on a deregulation bill during the second quarter of 1999 with a full senate vote scheduled if a bill is reported from committee. It is uncertain whether these efforts will produce legislation in Ohio in 1999. Indiana As discussed in the 1998 Form 10-K, legislation by a large group of industrial customers was introduced into the Indiana legislature in January 1999. This legislation did not pass in the 1999 session of the Indiana General Assembly, which came to a close on April 29, 1999. Regulatory Matters Cinergy and PSI Coal Contract Buyout Costs See Note 10 of the "Notes to Financial Statements" in "Part I. Financial Information." Environmental Issues Cinergy, CG&E, and PSI Ozone Transport Rulemaking As discussed in the 1998 Form 10-K, in October 1998, the EPA finalized its Ozone Transport Rule (or NOx SIP Call). It applies to 22 states in the eastern half of the US, including the three states in which the Cinergy electric utilities operate, and also proposes a model NOx trading program. This rule recommends that states reduce NOx emissions from primarily industrial and utility sources to a certain limit by May 2003. The EPA gave the affected states until September 30, 1999, to incorporate utility NOx reductions with a trading program into their SIPs. Ohio, Indiana, a number of other states, and various industry groups, including some of which Cinergy is a member, filed legal challenges to the NOx SIP Call in late 1998. Ohio and Indiana have also provided preliminary indications that they will seek fewer NOx reductions from the utility sector in their implementing regulations than the EPA has budgeted in its rulemaking. On April 30, 1999, the EPA made an affirmative technical determination on the February 1998 northeast state CAAA Section 126 petitions seeking to reduce ozone in the eastern US. By affirming these Section 126 petitions the EPA makes a finding that the named Midwest stationary sources (including all of Cinergy's facilities) are significantly contributing to ozone problems in the northeast for both the one- and eight-hour ozone standard. The EPA has stated that the Section 126 petitions and the NOx SIP call requirements should be coordinated. Therefore, the EPA will defer fully granting the relief sought by petitioners until the affected states file their proposed SIPs in September 1999. Ambient Air Standards and Regional Haze As discussed in the 1998 Form 10-K, in 1997, the EPA revised the National Ambient Air Quality Standards for ozone and fine particulate matter and was scheduled to finalize new regional haze rules by the summer of 1999. It is currently anticipated that the new ozone standard will not require additional utility NOx reductions beyond those resulting from the NOx SIP Call discussed above. The EPA finalized the new regional haze rules on April 22, 1999. These rules established planning and emission reduction timelines for states to use to improve visibility in national parks throughout the US. The ultimate effect of the new regional haze rules could be requirements for newer and cleaner technologies and additional controls on conventional particulates and/or reductions in SO2 and NOx emissions from utility sources. If more utility emissions reductions are required, the compliance cost could be significant. The outcome or effects of the states' determination cannot currently be predicted. Air Toxics As discussed in the 1998 Form 10-K, in November 1998, the EPA finalized its Mercury ICR. Pursuant to the ICR, all generating units must provide detailed information about coal use and mercury content. The EPA has since selected about 100 generating units for one-time stack sampling, including Cinergy's Gibson Unit No. 3 and the Wabash River Repowering Project. The EPA is planning to make its regulatory determination on the need for additional regulation by the fourth quarter of 2000. If more air toxics regulations are issued, the compliance cost could be significant. The outcome or effects of the EPA's determination cannot currently be predicted. MGP Sites See Note 6 of the "Notes to Financial Statements" in "Part I. Financial Information." Accounting Issues Cinergy, CG&E, PSI, and ULH&P New Accounting Standards See Note 7 of the "Notes to Financial Statements" in "Part I. Financial Information." Market Risk Sensitive Instruments and Positions Cinergy, CG&E, and PSI Energy Commodities Sensitivity The Company markets and trades electricity, natural gas, and other energy-related products. The Company utilizes over-the-counter forward and option contracts for the purchase and sale of electricity and also trades exchange-traded futures contracts. See Notes 4 and 5 of the "Notes to Financial Statements" in "Part I. Financial Information" for the Company's accounting policies for certain derivative instruments. The Company's market risks have not changed materially from the market risks reported in the 1998 Form 10-K. Cinergy Exchange Rate Sensitivity The Company utilizes foreign exchange forward contracts and currency swaps to hedge certain of its net investments in foreign operations. See Notes 4 and 5 of the "Notes to Financial Statements" in "Part I. Financial Information" for the Company's accounting policies for certain derivative instruments. The Company's market risks have not changed materially from the market risks reported in the 1998 Form 10-K. Cinergy, CG&E, PSI, and ULH&P Interest Rate Sensitivity The Company's net exposure to changes in interest rates primarily consists of debt instruments with floating interest rates that are benchmarked to various market indices. To manage the Company's exposure to fluctuations in interest rates and to lower funding costs, the Company constantly evaluates the use of, and has entered into, interest rate swaps. See Notes 4 and 5 of the "Notes to Financial Statements" in "Part I. Financial Information" for the Company's accounting policies for certain derivative instruments. The Company's market risks have not changed materially from the market risks reported in the 1998 Form 10-K. CAPITAL RESOURCES AND REQUIREMENTS Cinergy, CG&E, PSI, and ULH&P Long-term Debt For information regarding recent issuances and redemptions of long-term debt securities, see Notes 2 and 3 of the "Notes to Financial Statements" in "Part I. Financial Information." As of April 30, 1999, CG&E and PSI have remaining state regulatory authority for long-term debt issuance of $200 million and $30 million, respectively. Cinergy, CG&E, PSI, and ULH&P Short-term Debt Obligations representing notes payable and other short-term obligations (excluding notes payable to affiliated companies) at March 31, 1999, were as follows: Cinergy Established Lines Outstanding (in millions) Cinergy Committed lines Acquisition line $ 160 $ 160 Revolving line 600 - Commercial paper - 336 Uncommitted line 45 83* Utility subsidiaries Committed lines 215 - Uncommitted lines 410 180 Pollution control notes 267 267 Non-utility subsidiary 130 27 ------ ------ Total $1,827 $1,053 * Excess over Established Line represents amount sold by dealers to other investors. CG&E Established Lines Outstanding (in millions) Committed lines $ 85 $ - Uncommitted lines 215 105 Pollution control notes 184 184 ---- ---- Total $484 $289 PSI Established Lines Outstanding (in millions) Committed lines $130 $ - Uncommitted lines 195 75 Pollution control notes 83 83 ---- ---- Total $408 $158 Cinergy, CG&E, and PSI Cinergy's committed lines are comprised of an acquisition line and a revolving line. The established revolving line also provides credit support for Cinergy's commercial paper program, which is limited to a maximum principal amount of $400 million. The proceeds from the commercial paper sales were used for general corporate purposes. The established committed lines for CG&E and PSI each include $75 million designated as backup for certain of the uncommitted lines at March 31, 1999. CG&E and PSI also have the capacity to issue commercial paper that must be supported by committed lines of the respective company. Neither CG&E nor PSI issued commercial paper during the first quarter of 1999. Both CG&E and PSI have issued variable rate pollution control notes. Holders of these pollution control notes have the right to put their notes on any business day. Accordingly, these issuances are reflected in the Consolidated Balance Sheets as "Notes payable and other short-term obligations." Cinergy Global Resources established a $100 million revolving credit agreement in 1998, which was due to expire in March 1999 and has been extended to June 29, 1999. Cinergy, CG&E, PSI, and ULH&P Year 2000 The Year 2000 issue generally exists because many computer systems and applications, including those embedded in equipment and facilities, use two-digit rather than four-digit date fields to designate an applicable year. As a result, the systems and applications may not properly recognize dates including and beyond the year 2000 or accurately process data in which such dates are included, potentially causing data miscalculations and inaccuracies or operational malfunctions and failures, which could materially affect a business's financial condition, results of operations, and cash flows. Cinergy has established a centrally-managed, company-wide initiative, known as the Cinergy Year 2000 Readiness Program, to identify, evaluate, and address Year 2000 issues. The Cinergy Year 2000 Readiness Program, which began in the fourth quarter of 1996, is generally focused on three elements that are integral to this initiative: (1) business continuity, (2) risk management, and (3) regulatory compliance. Business continuity includes providing reliable electric and gas supply and service in a safe and cost-effective manner. This element encompasses mission-critical generation, transmission, and distribution systems and related infrastructure, as well as operational and financial IT systems and applications, end-user computing resources, and building systems (such as security, elevator, and heating and cooling systems). Risk management includes a review of the Year 2000 readiness efforts of Cinergy's critical suppliers, key customers and other principal business partners, and, as appropriate, the development of joint business support, contingency plans, and the inclusion of Year 2000 concerns as a regular part of the due diligence process in any new business venture. Regulatory compliance includes communications with regulatory agencies, other utilities, and various industry groups. While this initiative is broad in scope, it has been structured to identify and prioritize efforts for mission-critical electric and gas systems and services and key business partners. Under the Cinergy Year 2000 Readiness Program, Cinergy has established a target date of June 30, 1999, for the remediation and testing of its mission-critical generation, transmission, and distribution systems (gas and electric). An innovative remediation and testing effort which Cinergy has initiated involves operating several electric-generating units with post Year 2000 dates. Cinergy's experience has been that those units have continued to operate without any material adverse result relating to a Year 2000 issue. Cinergy's progress to date ranges from approximately 95% regarding IT systems to approximately 87% regarding assessment of critical suppliers. Cinergy has also reviewed its existing contingency and business continuity plans and modified them in light of the Year 2000 issue. Contingency planning to maintain and restore service in the event of natural and other disasters (including software- and hardware-related problems) has been part of Cinergy's standard operation for many years, and Cinergy is working to leverage this experience in the review of existing plans to address Year 2000-related challenges. These reviews have assessed the potential for business disruption in various scenarios, including the most reasonably likely worst-case scenario, and to provide for key operational back up, recovery, and restoration alternatives. Cinergy cannot guarantee that third parties on whom it depends for essential goods and services (those where the interruption of the supply of such goods and services could lead to issues involving the safety of employees, customers, or the public; the continued reliable delivery of gas and/or electricity; and the ability to comply with applicable laws or regulations) will convert their mission-critical systems and processes in a timely manner. Failure or delay by any of these third parties could significantly disrupt business. However, to address this issue, Cinergy has established a supplier compliance program, and is working with its critical suppliers in an effort to minimize such risks. In addition, Cinergy is coordinating its findings and other issues with other utilities and various industry groups via the Electric Power Research Institute Year 2000 Embedded Systems Project and the Year 2000 Readiness Assessment Program of the NERC, acting at the request of the DOE. The DOE has asked NERC to report on the integrity of the transmission system for North America and to coordinate and assess the preparation of the electric systems in North America for the Year 2000. NERC submitted its initial quarterly status report and coordination plan to the DOE in September 1998, and a second quarterly status report for the fourth quarter of 1998 was submitted on January 11, 1999. A third quarterly status report for the first quarter of 1999 was submitted on April 30, 1999. Cinergy currently estimates that the total cost for the inventory, assessment, remediation, testing, and upgrading of its systems as a result of the Year 2000 effort is approximately $13 million. Approximately $12 million in expenses have been incurred through March 31, 1999, for such things as external labor, for hardware and software upgrades, and for Cinergy employees who are dedicated full-time to the Cinergy Year 2000 Readiness Program. The timing of these expenses may vary and is not necessarily indicative of readiness efforts or progress to date. Cinergy anticipates that a portion of its Year 2000 expenses will not be incremental costs, but rather, will represent the redeployment of existing IT resources. Since its formation, Cinergy has incurred, and will continue to incur, significant capital improvement costs related to planned system upgrades or replacements required in the normal course of business. These costs have not been accelerated as a result of the Year 2000 issue. The above information is based on Cinergy's current best estimates, which were derived using numerous assumptions of future events, including the availability and future costs of certain technological and other resources, third-party modification actions, and other factors. Given the complexity of these issues and possible unidentified risks, actual results may vary materially from those anticipated and discussed above. Specific factors that might cause such differences include, among others, the ability to locate and correct all affected computer code, the timing and success of remedial efforts of third-party suppliers, and similar uncertainties. The above information is a Year 2000 Readiness Disclosure pursuant to the Federal Year 2000 Information and Readiness Disclosure Act. Cinergy Other Commitments At March 31, 1999, Cinergy had issued $297 million in guarantees primarily related to the energy marketing and trading activities of its subsidiaries and affiliates. In addition, Cinergy had guaranteed $258 million of the debt securities of its subsidiaries and affiliates. RESULTS OF OPERATIONS Cinergy, CG&E, PSI, and ULH&P Reference is made to "Item 1. Financial Statements" in "Part I. Financial Information." ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Cinergy, CG&E, PSI, and ULH&P Reference is made to the "Market Risk Sensitive Instruments and Positions" section in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" in "Part I. Financial Information" and Notes 4 and 5 of the "Notes to Financial Statements" in "Part I. Financial Information." PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Cinergy, CG&E, and PSI Manufactured Gas Plant Sites See Note 6 of the "Notes to Financial Statements" in Part I. Financial Information. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Cinergy The annual meeting of shareholders of Cinergy was held April 21, 1999, in Cincinnati, Ohio. At the meeting, six Class II directors were elected to the board of Cinergy to serve three-year terms, expiring in 2002, as set forth below: Votes Votes Class II For Withheld Melvin Perelman, Ph.D. 128,436,454 2,555,756 Thomas E. Petry 128,566,730 2,425,480 Jackson H. Randolph 128,212,529 2,779,681 Mary L. Schapiro 128,329,336 2,662,874 Philip R. Sharp, Ph.D. 128,557,852 2,434,358 Dudley S. Taft 128,586,398 2,405,812 Also at the meeting, the following matters were submitted to a vote of security holders: Votes Votes Votes Item For Against Abstain Approval of Amended and Restated Cinergy Corp. Retirement Plan for Directors 107,613,574 21,666,413 1,712,217 Approval of Cinergy Corp. Directors' Equity Compensation Plan 112,705,936 16,438,145 1,848,122 Adoption of Amendment to Article III, Section 3.1, of the Company's By-laws 127,811,378 4,740,599 1,979,187 CG&E (a) In lieu of the annual meeting of shareholders of CG&E, a resolution was duly adopted via unanimous written consent of CG&E's sole shareholder, effective April 20, 1999. (b) The following members of the Board of Directors were elected via unanimous written consent of the sole shareholder of CG&E, in lieu of its annual meeting, for one-year terms expiring in 2000: Jackson H. Randolph James E. Rogers James L. Turner PSI (a) The annual meeting of shareholders of PSI was held April 21, 1999, in Cincinnati, Ohio. (b) Proxies were not solicited for the annual meeting, at which the Board of Directors was re-elected in its entirety (see (c) below). (c) The following members of the Board of Directors were unanimously re-elected at the annual meeting for one-year terms expiring in 2000: James K. Baker Michael G. Browning John A. Hillenbrand II John M. Mutz Jackson H. Randolph James E. Rogers ULH&P Omitted pursuant to Instruction H(2)(b). ITEM 5. OTHER INFORMATION Cinergy and PSI On April 20, 1999, the Company announced that John M. Mutz will retire May 31, 1999, as president of PSI. Mr. Mutz has served as president of PSI since October 1993. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits identified with a pound sign (#) are being filed herewith by the registrant identified in the exhibit discussion below and are incorporated herein by reference with respect to any other designated registrant. Exhibits not so identified are filed herewith: Exhibit Designation Nature of Exhibit Cinergy 3-a By-laws of Cinergy, as amended on April 21, 1999. 4-a Indenture between Cinergy and Fifth Third Bank, as Trustee, dated as of April 15, 1999. Cinergy and PSI 4-b #Fifty-second Supplemental Indenture between PSI and LaSalle National Bank, as Trustee, dated as of April 30, 1999. (Exhibit to PSI's March 31, 1999, Form 10-Q in File No. 1-3543.) 4-c #Sixth Supplemental Indenture between PSI and Fifth Third Bank, as Trustee, dated as of April 30, 1999. (Exhibit to PSI's March 31, 1999, Form 10-Q in File No. 1-3543.) Cinergy, CG&E, and PSI 10-a #First Amended and Restated Employment Agreement dated March 1, 1999, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Cheryl M. Foley. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) Exhibit Designation Nature of Exhibit 10-b #First Amended and Restated Employment Agreement dated March 1, 1999, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and William J. Grealis. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) 10-c #Employment Agreement dated July 1, 1998, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and M. Stephen Harkness. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) 10-d #First Amended and Restated Employment Agreement dated March 1, 1999, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Donald B. Ingle, Jr. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) 10-e #First Amended and Restated Employment Agreement dated March 1, 1999, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Madeleine W. Ludlow. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) 10-f #Employment Agreement dated July 1, 1998, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and William L. Sheafer. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) 10-g #Employment Agreement dated July 1, 1998, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and John P. Steffen. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) 10-h #Employment Agreement dated February 16, 1999, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and James L. Turner. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) 10-i #First Amended and Restated Employment Agreement dated March 1, 1999, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Charles J. Winger. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) 10-j #First Amended and Restated Employment Agreement dated March 1, 1999, between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Larry E. Thomas. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.) Cinergy, CG&E, PSI, and ULH&P 27 Financial Data Schedules (included in electronic submission only) The following reports on Form 8-K were filed during the quarter ended March 31, 1999. Date of Report Item Filed Cinergy December 31, 1998 Item 5. Other Events Item 7. Financial Statements and Exhibits SIGNATURES 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 Cinergy, CG&E, PSI, and ULH&P believe that the disclosures are adequate to make the information presented not misleading. In the opinion of Cinergy, CG&E, PSI, and ULH&P, these statements reflect all adjustments (which include normal, recurring adjustments) necessary to reflect the results of operations for the respective periods. The unaudited statements are subject to such adjustments as the annual audit by independent public accountants may disclose to be necessary. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed by an officer and the chief accounting officer on their behalf by the undersigned thereunto duly authorized. CINERGY CORP. THE CINCINNATI GAS & ELECTRIC COMPANY PSI ENERGY, INC. THE UNION LIGHT, HEAT AND POWER COMPANY Registrants Date: May 13, 1999 /s/Bernard F. Roberts --------------------------------------- Bernard F. Roberts Duly Authorized Officer and Chief Accounting Officer EX-4 2 PSI 52ND SUPPLEMENTAL INDENTURE FIFTY-SECOND SUPPLEMENTAL INDENTURE TO INDENTURE DATED SEPTEMBER 1, 1939 --------------- PSI ENERGY, INC. (FORMERLY NAMED "PUBLIC SERVICE COMPANY OF INDIANA, INC." AND SUCCESSOR BY CONSOLIDATION TO PUBLIC SERVICE COMPANY OF INDIANA) TO LASALLE NATIONAL BANK AS TRUSTEE (SUCCESSOR TO THE FIRST NATIONAL BANK OF CHICAGO) ---------------- DATED AS OF APRIL 30, 1999 ---------------- CREATING FIRST MORTGAGE BONDS, SERIES BBB, 8%, DUE JULY 15, 2009, FIRST MORTGAGE BONDS, SERIES CCC, 8.85%, DUE JANUARY 15, 2022, AND FIRST MORTGAGE BONDS, SERIES DDD, 8.31%, DUE SEPTEMBER 1, 2032 AND OTHERWISE SUPPLEMENTING AND AMENDING THE INDENTURE TABLE OF CONTENTS ---------------- Page PARTIES: Company (PSI Energy, Inc. formerly named Public Service Company of Indiana, Inc., successor by consolidation to Initial Mortgagor (Public Service Company of Indiana)), and Trustee 1 RECITALS: Indenture of the Initial Mortgagor, dated September 1, 1939, and First Supplemental Indenture thereto of the Initial Mortgagor, dated as of March 1, 1941 1 Consolidation of Initial Mortgagor (and four other companies) into the Company 1 Execution by Company of Second Supplemental Indenture to the original Indenture 1 Company substituted for Initial Mortgagor under Indenture 1 Execution by Company of Third through the Fifty-First Supplemental Indentures to the original Indenture 2 LaSalle National Bank, successor to original Trustee 2 Change of name of Company from Public Service Company of Indiana, Inc. to PSI Energy, Inc. 3 Amount of bonds presently outstanding under the Indenture 3 Fifty-Second Supplemental Indenture and Bonds of Series BBB, CCC, and DDD authorized 3 Conditions precedent performed 3 EXECUTING CLAUSE 4 - i - Page ARTICLE I. FIRST MORTGAGE BONDS, SERIES BBB, 8%, DUE JULY 15, 2009, FIRST MORTGAGE BONDS, SERIES CCC, 8.85%, DUE JANUARY 15, 2022, AND FIRST MORTGAGE BONDS, SERIES DDD, 8.31%, DUE SEPTEMBER 1, 2032. Section 1..Creation and designation of Bonds of Series BBB, CCC and DDD 4 Section 2..Bonds of Series BBB, CCC, and DDD to be in registered form only 4 Form of face of Bonds of Series BBB 9 Form of reverse of Bonds of Series BBB and Trustee's certificate 11 Form of face of Bonds of Series CCC 15 Form of reverse of Bonds of Series CCC and Trustee's certificate 17 Form of face of Bonds of Series DDD 21 Form of reverse of Bonds of Series DDD and Trustee's certificate 23 Section 3..Date of Bonds of Series BBB, CCC, and DDD 27 Section 4..Maturity dates and interest rates of Bonds of Series BBB, CCC, and DDD 27 Section 5..Place and manner of payment of Bonds of Series BBB, CCC, and DDD 27 Section 6..Denominations and numbering of definitive Bonds of Series BBB, CCC and DDD 27 Temporary Bonds of Series BBB, CCC, and DDD and exchange thereof for definitive bonds 27 ARTICLE II. ISSUANCE OF BONDS OF SERIES BBB, CCC, AND DDD. Section 1..Aggregate principal amount of Bonds of Series BBB, Bonds of Series CCC, and Bonds of Series DDD issuable at once 28 Section 2..Issuance of additional Bonds of Series BBB, CCC, and DDD 28 ARTICLE III. INDENTURE AMENDMENTS. Section 1..Amendments to Article I of the original Indenture 28 Section 2..Amendments to Article VII of the original Indenture 29 Section 3..Amendments to Article IX of the original Indenture 31 Section 4..Amendments to Section 22 of Article V of the original Indenture 31 Section 5..Company's right to further amend the original Indenture 31 - ii - Page ARTICLE IV. CONCERNING THE TRUSTEE. Acceptance of trust by Trustee 32 Trustee not responsible for validity or sufficiency of Fifty-Second Supplemental Indenture, etc. 32 Terms and conditions of Article XVII of the original Indenture to be applied to the Fifty-Second Supplemental Indenture 32 ARTICLE V. MISCELLANEOUS PROVISIONS. Section 1..References in any article or section of the original Indenture refer to such article or section as amended by all Fifty-Two Supplemental Indentures thereto 33 Section 2..Operation and construction of amendments to the original Indenture 33 Section 3..All covenants, etc., for sole benefit of parties to the Fifty-Second Supplemental Indenture and holders of bonds 33 Section 4..Table of contents and headings of articles not part of Fifty-Second Supplemental Indenture 33 Section 5..Execution of Fifty-Second Supplemental Indenture in counterparts 33 Section 6..Payments Due on Legal Holidays 33 ATTESTATION CLAUSE 34 SIGNATURES 34 ACKNOWLEDGMENT BY COMPANY 35 ACKNOWLEDGMENT BY TRUSTEE 36 - iii - FIFTY-SECOND SUPPLEMENTAL INDENTURE dated as of the thirtieth day of April, 1999, made and entered into by and between PSI ENERGY, INC. (hereinafter commonly referred to as the "Company"), a corporation organized and existing under the laws of the State of Indiana, formerly named Public Service Company of Indiana, Inc., and the successor by consolidation to Public Service Company of Indiana, an Indiana corporation, party of the first part, and LASALLE NATIONAL BANK, a national banking association organized and existing under the laws of the United States and having its office or place of business in the City of Chicago, State of Illinois and the successor trustee to The First National Bank of Chicago (hereinafter commonly referred to as the "Trustee"), party of the second part, WITNESSETH: WHEREAS, Public Service Company of Indiana (hereinafter commonly referred to as the "Initial Mortgagor"), prior to its consolidation with certain other corporations to form the Company, executed and delivered to the Trustee a certain indenture of mortgage or deed of trust (hereinafter called the "original Indenture" when referred to as existing prior to any amendment thereto, and the "Indenture" when referred to as heretofore, now or hereafter amended), dated September 1, 1939, and a First Supplemental Indenture thereto, dated as of March 1, 1941, to secure the bonds of the Initial Mortgagor, its successors and assigns, issued from time to time under the Indenture in series for the purposes of and subject to the limitations specified in the Indenture; and WHEREAS, the Company on September 6, 1941, became, through a consolidation, the successor of the Initial Mortgagor (and four other companies) and succeeded to all the rights and became liable for all the obligations of the Initial Mortgagor (and such other companies); and WHEREAS, after said consolidation, the Company executed and delivered a Second Supplemental Indenture, dated as of November 1, 1941, to the original Indenture for the purposes, among others, of (i) the making by the Company of an agreement of assumption and adoption by it of the Indenture, (ii) the assumption by the Company of the bonds (and interest and premium, if any, thereon) issued or to be issued under the Indenture, and of all terms, covenants and conditions binding upon it under the Indenture, and the agreeing by the Company to pay, perform and fulfill the same, and (iii) the conveying to the Trustee upon the trusts declared in the Indenture, but subject to any outstanding liens and encumbrances, all the property which the Company then owned or which it might thereafter acquire, except property of a character similar to the property of the Initial Mortgagor which is excluded from the lien of the Indenture; and WHEREAS, all conditions have been met and all acts and things necessary have been done and performed to make the Indenture the valid and binding agreement of the Company and to substitute the Company for the Initial Mortgagor under the Indenture, and to vest the Company with each and every right and power of the Initial Mortgagor, including the right and power to issue bonds thereunder; and WHEREAS, the Company has subsequently executed and delivered, for purposes authorized under the Indenture, a Third Supplemental Indenture dated as of March 1, 1942, a Fourth Supplemental Indenture dated as of May 1, 1943, a Fifth Supplemental Indenture dated as of August 1, 1944, a Sixth Supplemental Indenture dated as of September 1, 1945, a Seventh Supplemental Indenture dated as of November 1, 1947, an Eighth Supplemental Indenture dated as of January 1, 1949, a Ninth Supplemental Indenture dated as of May 1, 1950, a Tenth Supplemental Indenture dated as of July 1, 1952, an Eleventh Supplemental Indenture dated as of January 1, 1954, a Twelfth Supplemental Indenture dated as of October 1, 1957, a Thirteenth Supplemental Indenture dated as of February 1, 1959, a Fourteenth Supplemental Indenture dated as of July 15, 1960, a Fifteenth Supplemental Indenture dated as of June 15, 1964, a Sixteenth Supplemental Indenture dated as of January 1, 1969, a Seventeenth Supplemental Indenture dated as of March 1, 1970, an Eighteenth Supplemental Indenture dated as of January 1, 1971, a Nineteenth Supplemental Indenture dated as of January 1, 1972, a Twentieth Supplemental Indenture dated as of February 1, 1974, a Twenty-First Supplemental Indenture dated as of August 1, 1974, a Twenty-Second Supplemental Indenture dated as of August 1, 1975, a Twenty-Third Supplemental Indenture dated as of January 1, 1977, a Twenty-Fourth Supplemental Indenture dated as of October 1, 1977, a Twenty-Fifth Supplemental Indenture dated as of September 1, 1978, a Twenty-Sixth Supplemental Indenture dated as of September 1, 1978, a Twenty-Seventh Supplemental Indenture dated as of March 1, 1979, a Twenty-Eighth Supplemental Indenture dated as of May 1, 1979, a Twenty-Ninth Supplemental Indenture dated as of March 1, 1980, a Thirtieth Supplemental Indenture dated as of August 1, 1980, a Thirty-First Supplemental Indenture dated as of February 1, 1981, a Thirty-Second Supplemental Indenture dated as of August 1, 1981, a Thirty-Third Supplemental Indenture dated as of December 1, 1981, a Thirty-Fourth Supplemental Indenture dated as of December 1, 1982, a Thirty-Fifth Supplemental Indenture dated as of March 30, 1984, a Thirty-Sixth Supplemental Indenture dated as of November 15, 1984, a Thirty-Seventh Supplemental Indenture dated as of August 15, 1985, a Thirty-Eighth Supplemental Indenture dated as of October 1, 1986, a Thirty-Ninth Supplemental Indenture dated as of March 15, 1987, a Fortieth Supplemental Indenture dated as of June 1, 1987, a Forty-First Supplemental Indenture dated as of June 15, 1988, a Forty-Second Supplemental Indenture dated as of August 1, 1988, a Forty-Third Supplemental Indenture dated as of September 15, 1989, a Forty-Fourth Supplemental Indenture dated as of March 15, 1990, a Forty-Fifth Supplemental Indenture dated as of March 15, 1990, a Forty-Sixth Supplemental Indenture dated as of June 1, 1990, a Forty-Seventh Supplemental Indenture dated as of July 15, 1991, a Forty-Eighth Supplemental Indenture dated as of July 15, 1992, a Forty-Ninth Supplemental Indenture dated as of February 15, 1993, a Fiftieth Supplemental Indenture dated as of February 15, 1993, and a Fifty-First Supplemental Indenture dated as of February 1, 1994, each supplementing and amending the Indenture; and WHEREAS, the Thirty-Fifth Supplemental Indenture authorized and appointed LaSalle National Bank, a national banking association duly organized and existing under the law of the United States of America with its principal office in Chicago, Illinois, as Successor Trustee to The First National Bank of Chicago, which appointment was accepted, and all trust powers under the Indenture were thereby transferred from The First National Bank of Chicago to LaSalle National Bank; and WHEREAS, the Forty-Sixth Supplemental Indenture amended the Indenture to reflect a change in the name of the Company from Public Service Company of Indiana, Inc. to PSI Energy, Inc. effective as of April 20, 1990; and WHEREAS, as of April 30, 1999, the only bonds that have been heretofore issued under the Indenture which are now outstanding are $10,000,000 aggregate principal amount of "Public Service Company of Indiana, Inc. First Mortgage Bonds, Series TT, 7 3/8%, Due March 15, 2012" and $14,250,000 aggregate principal amount of "Public Service Company of Indiana, Inc. First Mortgage Bonds, Series UU, 7 1/2%, Due March 15, 2015" and $300,000,000 aggregate principal amount of "PSI Energy, Inc. First Mortgage Bonds, Series VV, Due July 15, 2026" and $545,000,000 aggregate principal amount of "PSI Energy, Inc. First Mortgage Bonds, Series WW, Due August 15, 2027" and $29,945,000 aggregate principal amount of "PSI Energy, Inc. First Mortgage Bonds, Series YY, 5.60%, Due February 15, 2023" and $50,000,000 aggregate principal amount of "PSI Energy, Inc. First Mortgage Bonds, Series ZZ, 5 3/4%, Due February 15, 2028" and $50,000,000 aggregate principal amount of "PSI Energy, Inc. First Mortgage Bonds, Series AAA, 7 1/8%, Due February 1, 2024"; and WHEREAS, in accordance with the provisions of Section 1 of Article XVIII of the Indenture, the Board of Directors has authorized the execution and delivery by the Company of a Fifty-Second Supplemental Indenture, substantially in the form of this Fifty-Second Supplemental Indenture, for the purpose of creating a forty-seventh, a forty-eighth and a forty-ninth series of bonds to be issued under the Indenture, to be known as, respectively, "PSI Energy, Inc. First Mortgage Bonds, Series BBB, 8%, Due July 15, 2009" (such bonds being hereinafter referred to as "Bonds of Series BBB"), "PSI Energy, Inc. First Mortgage Bonds, Series CCC, 8.85%, Due January 15, 2022" (such bonds being hereinafter referred to as "Bonds of Series CCC") and "PSI Energy, Inc. First Mortgage Bonds, Series DDD, 8.31%, Due September 1, 2032" (such bonds being hereinafter referred to as "Bonds of Series DDD") (the Bonds of Series BBB, the Bonds of Series CCC, and the Bonds of Series DDD, when referred to collectively in this Fift Second Supplemental Indenture, shall be hereinafter referred to as "Bonds of Series BBB, CCC, and DDD"), and prescribing the form and substance of the Bonds of Series BBB, CCC, and DDD and the terms, provisions and characteristics thereof, and for the purpose of adding to the covenants and agreements of the Company for the protection of the bondholders and of the trust estate and of making such changes in the Indenture as are deemed necessary or desirable and as are permitted by the Indenture; and WHEREAS, all conditions and requirements necessary to make this Fifty-Second Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled and the execution and delivery hereof have been in all respects duly authorized: NOW, THEREFORE, in consideration of the premises, and of the acceptance and purchase of the Bonds of Series BBB, CCC, and DDD by the holders and registered owners thereof, and of the sum of One Dollar ($1.00) duly paid by the Trustee to the Company, the receipt whereof is hereby acknowledged, and in accordance with and subject to the terms and provisions of the Indenture, the Company and the Trustee, respectively, have entered into, executed and delivered this Fifty-Second Supplemental Indenture for the uses and purposes hereinafter expressed, that is to say: ARTICLE I. FIRST MORTGAGE BONDS, SERIES BBB, 8%, DUE JULY 15, 2009, FIRST MORTGAGE BONDS, SERIES CCC, 8.85%, DUE JANUARY 1, 2022, AND FIRST MORTGAGE BONDS, SERIES DDD, 8.31%, DUE SEPTEMBER 1, 2032 Section 1. There are hereby created a forty-seventh, a forty-eighth and a forty-ninth series of bonds to be issued under and secured by the Indenture, to be designated as "PSI Energy, Inc. First Mortgage Bonds, Series BBB, 8%, Due July 15, 2009", "PSI Energy, Inc. First Mortgage Bonds, Series CCC, 8.85%, Due January 15, 2022" and "PSI Energy, Inc. First Mortgage Bonds, Series DDD, 8.31%, Due September 1, 2032", respectively, being the Bonds of Series BBB, the Bonds of Series CCC, and the Bonds of Series DDD, or collectively, the Bonds of Series BBB, CCC, and DDD, hereinbefore referred to. Section 2. The following provisions shall apply to the Bonds of Series BBB, CCC, and DDD. (a) The Bonds of Series BBB, CCC, and DDD shall be issued in fully registered form only. However, except as provided elsewhere in this Section, the registered owner of all of the Bonds of Series BBB, CCC, and DDD initially shall be The Depository Trust Company ("DTC") or its nominee, and such Bonds of Series BBB, CCC, and DDD initially shall be registered in the name of DTC or its nominee. Payment of the principal of or interest on Bonds of Series BBB, CCC, and DDD registered in the name of DTC or its nominee shall be made in the manner and at the address(es) specified in the Letter of Representations, dated April 30, 1999, from the Company and the Trustee to DTC. DTC (and any successor securities depository) and its (or their) participating institutions (collectively "Participants") shall maintain a book-entry registration and transfer system with respect to ownership of beneficial interests in the Bonds of Series BBB, CCC, and DDD (the "Book-Entry System"). (b) The Bonds of Series BBB, CCC, and DDD, initially shall be issued in the form of a separate, single, authenticated, fully registered bond for each such series (each a "Global Debt Security") which (i) need not be in the form of a lithographed or engraved certificate, but may be typewritten or printed on ordinary paper or such paper as the Trustee may reasonably request, (ii) shall represent and be denominated in an amount equal to 100% of the aggregate principal amount of the Bonds of Series BBB, CCC, or DDD (as applicable) issued under this Supplemental Indenture, (iii) shall be executed by the Company and authenticated by the Trustee in accordance with the provisions of the Indenture, (iv) shall be registered in the name of DTC or its nominee, and delivered to DTC or its nominee or a custodian therefor, and (v) shall contain the following legend on the face thereof: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an interest herein. Unless and until it is exchanged in whole or in part for Bonds of Series BBB, CCC, or DDD (as applicable) in definitive certificated form, a Global Debt Security representing the Bonds of a particular Series may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor securities depository or a nominee of any such successor securities depository. (c) The Trustee and the Company may treat Cede & Co. or its nominee, or any successor securities depository or nominee thereof (collectively, the "Depository") as the sole and exclusive owner of the Bonds of Series BBB, CCC, and DDD, registered in its name for the purposes of payment of the principal or redemption price of or interest on the Bonds of Series BBB, CCC, or DDD (as applicable), giving any notice permitted or required to be given to holders of the Bonds of Series BBB, CCC, or DDD (as applicable), under the Indenture or this Supplemental Indenture, registering the transfer of the Bonds of Series BBB, CCC, and DDD, obtaining any consent or other action to be taken by holders of the Bonds of Series BBB, CCC, or DDD (as applicable), and for all other purposes whatsoever and neither the Trustee nor the Company shall be affected by any notice to the contrary. Neither the Company nor the Trustee nor any registrar nor any paying agent shall have any responsibility or obligation to any Participant, any person claiming a beneficial ownership interest in the Bonds of Series BBB, CCC, or DDD (as applicable) under or through the Depository or any Participant, or any other person which is not shown on the registration books as being a holder of the Bonds of Series BBB, CCC, or DDD (as applicable) with respect to (i) the accuracy of any records maintained by the Depository or any Participant; (ii) the payment by the Depository to any Participant of any amount in respect of the principal or redemption price of or interest on the Bonds of Series BBB, CCC, or DDD (as applicable); (iii) the payment by any Participant to any owner of a beneficial ownership interest in the Bonds of Series BBB, CCC, or DDD (as applicable), in respect of the principal of or interest on the Bonds of Series BBB, CCC, or DDD (as applicable) or (iv) any consent or other action taken by the Depository as owner of the Bonds of Series BBB, CCC, or DDD (as applicable). The Trustee shall pay all principal of and interest on the Bonds of Series BBB, CCC, or DDD (as applicable), only to or upon the order of the registered holder or holders of the Bonds of Series BBB, CCC, or DDD (as applicable), as shown on the registration books, and all such payments shall be valid and effective to fully satisfy and discharge the Company's obligations with respect to the principal or redemption price of and interest on the Bonds of Series BBB, CCC, or DDD (as applicable), to the extent of the sum or sums so paid. No person other than a holder of the Bonds of Series BBB, CCC, or DDD (as applicable), as shown on the registration books of DTC, shall receive an authenticated Bond evidencing the obligation of the Company to make payment of the principal of and interest on the Bonds of Series BBB, CCC, and DDD, pursuant to the Indenture and this Supplemental Indenture. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee for Cede & Co, and subject to the provisions of the Indenture and this Supplemental Indenture, the word "Cede & Co.", as used in this Supplemental Indenture, shall refer to each new nominee of DTC. (d) In the event that after the occurrence of an event of default that has not been cured or waived, holders of a majority in aggregate principal amount of the beneficial interests in the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD (as applicable), as reflected in the books and records of the Depository, notify the Trustee, through the Depository or any Participant, that the continuation of the Book-Entry System is no longer in the best interests of such holders of beneficial interests in the Bonds of such Series, then the Trustee shall notify the Depository and the Company, and the Depository will notify the Participants of the availability through the Depository of definitive certificated Bonds of such Series. In such event, the Company shall execute, and the Trustee, upon receipt of a written order of the Company, signed by its President or a Vice President and by its Treasurer, Assistant Treasurer, Secretary or Assistant Secretary (an "Issue Order"), for the authentication and delivery of definitive certificated Bonds of Series BBB, Bonds of Series CCC, and Bonds Series DDD (as applicable), will authenticate and deliver Bonds of such Series in definitive certificated form, in any authorized denominations, all pursuant to the provisions of the Indenture, to the person or persons specified to the Trustee in writing by the Depository in the aggregate principal amount of the applicable Global Debt Security or Securities and in exchange for such Global Debt Security or Securities. (e) If at any time the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD, or if at any time the Depository shall no longer be registered as a clearing agency in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, the Company may appoint a successor Depository with respect to the Bonds of such Series. If a successor Depository for the Bonds of such Series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, the Company will execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of definitive certificated Bonds of Series BBB, Bonds of Series CCC, and Bonds of Series DDD (as applicable), will authenticate and deliver Bonds of such Series in definitive certificated form, in any authorized denominations, all pursuant to the provisions of the Indenture, to the person or persons specified to the Trustee in writing by the Depository in the aggregate principal amount of the applicable Global Debt Security or Securities and in exchange for such Global Debt Security or Securities. (f) The Company may at any time and in its sole discretion determine that the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD shall no longer be represented by a Global Debt Security. In such event the Company will execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of definitive certificated Bonds of such Series, will authenticate and deliver Bonds of Series BBB, Bonds of Series CCC, and Bonds of Series DDD (as applicable) in definitive certificated form, in any authorized denominations, all pursuant to the provisions of the Indenture, to the person or persons specified to the Trustee in writing by the Depository in the aggregate principal amount of the applicable Global Debt Security and in exchange for such Global Debt Security or Securities. (g) Upon the exchange of a Global Debt Security for the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD in definitive certificated form, in authorized denominations, the applicable Global Debt Security or Securities shall be cancelled by the Trustee. (h) Whenever the Depository requests the Company and the Trustee to do so, the Trustee and the Company will cooperate with the Depository in taking appropriate action after reasonable notice to (i) make available one or more separate Global Debt Securities evidencing the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD to any Participant having Bonds of such Series credited to its account at the Depository, or (ii) arrange for another Depository to maintain custody of the Global Debt Security or Securities evidencing the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD. (i) In connection with any notice or other communication to be provided to holders of the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD pursuant to the Indenture and this Supplemental Indenture by the Company or the Trustee with respect to any consent or other action to be taken by holders of the Bonds of such Series, the Company or the Trustee, as the case may be, shall establish a record date for such consent or other action and give the Depository notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. Such notice to the Depository shall be given only so long as a Depository or its nominee is the sole holder of the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD (as applicable). The Bonds of Series BBB, CCC, and DDD and the Trustee's certificate of each such series to be endorsed thereon shall be substantially in the following forms, respectively: - 1 - (FORM OF FACE OF SERIES BBB BOND) No. BBB- $............ PSI ENERGY, INC. FIRST MORTGAGE BOND, SERIES BBB, 8%, DUE JULY 15, 2009 [Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an interest herein.]1 PSI Energy, Inc., an Indiana corporation (hereinafter called the "Company"), for value received, hereby promises to pay to ______________, or registered assigns, the principal sum of _____________________________ Dollars ($ ) on the fifteenth day of July, 2009 and to pay interest on said sum from the date hereof, until said principal sum is paid, at the rate of 8% per annum, payable semi-annually on the fifteenth day of January and July in each year. Both the principal of and the interest on this bond shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts at the office or agency of the Company in Plainfield, Indiana, or, at the option of the registered owner hereof, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York, except that interest on this bond may be paid, at the option of the Company, by check or draft mailed to the address of the person entitled thereto as it appears on the books of the Company maintained for that purpose. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. This bond shall not be valid or become obligatory for any purpose unless and until it shall have been authenticated by the execution by the Trustee, or its successor in trust under the Indenture, of the certificate endorsed hereon. - -------- 1 This should be included only if the Series BBB Bonds are being issued in global form. - 2 - IN WITNESS WHEREOF, PSI Energy, Inc. has caused this bond to be executed in its name by the manual or facsimile signature of its President or an Executive Vice President or one of its Vice Presidents, and its corporate seal or a facsimile thereof to be hereto affixed and attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. Dated as of: PSI ENERGY, INC. By............................................. ......................................President ATTEST: ............................................. ..............................Secretary - 3 - (FORM OF REVERSE OF SERIES BBB BOND) This bond is one of the bonds of the Company issued and to be issued from time to time under and in accordance with and all secured by an indenture of mortgage or deed of trust, dated September 1, 1939, from Public Service Company of Indiana (predecessor of the Company) to The First National Bank of Chicago, as Trustee, to which LaSalle National Bank is successor trustee, (which indenture as amended by all supplemental indentures is hereinafter referred to as the "Indenture"). Said Trustee or its successor in trust under the Indenture is hereinafter sometimes referred to as the "Trustee." Reference is hereby made to the Indenture for a description of the property mortgaged and pledged and the nature and extent of the security for said bonds. By the terms of the Indenture, the bonds secured thereby are issuable in series which may vary as to date, amount, date of maturity, rate of interest and in other respects as in the Indenture provided. This bond is one of a series designated as "PSI Energy, Inc. First Mortgage Bonds, Series BBB, 8%, Due July 15, 2009" (hereinafter referred to as "Bonds of Series BBB") of the Company issued under and secured by the Indenture and created by a Fifty-Second Supplemental Indenture, dated as of April 30, 1999, which also amends the Indenture. The rights and obligations of the Company and of the bearers and registered owners of bonds may be modified or amended with the consent of the Company by an affirmative vote of the bearers or registered owners entitled to vote of at least seventy-five per centum (75%) in principal amount of the bonds then outstanding at a meeting of bondholders called for the purpose (and by an affirmative vote of the bearers or registered owners entitled to vote of at least seventy-five per centum (75%) in principal amount of bonds of any series affected by such modification or amendment in case one or more, but less than all, series of bonds are so affected), all in the manner and subject to the limitations set forth in the Indenture, any consent by the bearer or registered owner of any bond being conclusive and binding upon such bearer or registered owner and upon all future bearers or registered owners of such bond, irrespective of whether or not any notation of such consent is made on such bond; provided that no such modification or amendment shall, among other things, extend the maturity or reduce the amount of, or reduce the rate of interest on, or otherwise modify the terms of the payment of the principal of, or interest or premium (if any) on this bond, which obligations are absolute and unconditional, or permit the creation of any lien ranking prior to or equal with the lien of the Indenture on any of the mortgaged property. The Bonds of Series BBB will be subject to redemption (the "Make-Whole Redemption") at the option of the Company at any time in whole, or from time to time in part, until maturity, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to the sum of (i) the principal amount of the Bonds of Series BBB being redeemed plus accrued and unpaid interest thereon to the redemption date, and (ii) the Make-Whole Amount (as defined below), if any, with respect to such Bonds of Series BBB. "Make-Whole Amount" means, in connection with any Make-Whole Redemption of any Bonds of Series BBB, the excess, if any, of (i) the sum, as determined by a Quotation Agent (as defined herein), of the present values of the principal amount of such Bonds of Series BBB, together with scheduled payments of interest from the redemption date to the stated maturity of the Bonds of Series BBB, in each case discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) over (ii) 100% of the principal amount of the Bonds of Series BBB to be redeemed. "Adjusted Treasury Rate" means, with respect to any redemption date for a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (as defined herein), calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price (as defined herein) for such redemption date, calculated on the third business day preceding the redemption date, plus 0.15% (15 basis points). "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term from the redemption date to the stated maturity of the Bonds of Series BBB that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Bonds of Series BBB. "Quotation Agent" means the Reference Treasury Dealer selected by the Trustee after consultation with the Company. "Reference Treasury Dealer" means a primary U.S. Government securities dealer. "Comparable Treasury Price" means, with respect to any redemption date for a Make-Whole Redemption, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, as set forth in the daily statistical release designated "H.15" (or any successor release) published by the Board of Governors of the Federal Reserve System or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date for a Make-Whole Redemption, the average, as determined by the Trustee (after consultation with the Company), of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. Notice of any redemption by the Company will be mailed at least 30 days but not more than 60 days before any redemption date to each holder of Bonds of Series BBB to be redeemed. If less than all the Bonds of Series BBB are to be redeemed at the option of the Company, the Trustee shall select, in such manner as it shall deem fair and appropriate, the Bonds of Series BBB of such series to be redeemed in whole or in part. Unless the Company defaults in payment of the redemption price, on and after any redemption date, interest will cease to accrue on the Bonds of Series BBB or portions thereof called for redemption. In the case of any of certain events of default specified in the Indenture, the principal of this bond may be declared or may become due and payable prior to the stated date of maturity hereof in the manner and with the effect provided in the Indenture. No recourse shall be had for the payment of the principal of or interest on this bond, or for any claim based hereon, or otherwise in respect hereof or of the Indenture, to or against any incorporator, shareholder, officer or director, past, present or future, of the Company or of any predecessor or successor company, either directly or through the Company or such predecessor or successor company, under any constitution or statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability of incorporators, shareholders, directors and officers being waived and released by the registered owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Indenture. The Bonds of Series BBB are issuable only in registered form without coupons. This bond is transferable by the registered owner hereof, in person or by attorney duly authorized, at the principal office or place of business of LaSalle National Bank, the Trustee, or its successor in trust under the Indenture, or, at the option of the registered owner, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York, upon the surrender and cancellation of this bond, and upon any such transfer a new registered bond or bonds of the same series and maturity date and for the same aggregate principal amount will be issued to the transferee in exchange herefor. The Bonds of Series BBB are issuable in the denomination of $1,000 and in such multiples thereof as shall from time to time be determined and authorized by the Board of Directors of the Company. In the manner and subject to the limitations provided in the Indenture, Bonds of Series BBB are exchangeable as between authorized denominations, upon presentation thereof for such purpose by the registered owner, at the principal office or place of business of LaSalle National Bank, the Trustee, or its successor in trust under the Indenture, or, at the option of the registered owner, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York. - 4 - No service charge will be made for any transfer or exchange of this bond, but the Company may require a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (FORM OF TRUSTEE'S CERTIFICATE) TRUSTEE'S CERTIFICATE This bond is one of the Bonds of the Series BBB designated therein referred to and described in the within mentioned Indenture and Fifty-Second Supplemental Indenture. LASALLE NATIONAL BANK, AS TRUSTEE, By............................................. Authorized Officer - 5 - (FORM OF FACE OF SERIES CCC BOND) No. CCC- $............ PSI ENERGY, INC. FIRST MORTGAGE BOND, SERIES CCC, 8.85%, DUE JANUARY 15, 2022 [Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an interest herein.]1 PSI Energy, Inc., an Indiana corporation (hereinafter called the "Company"), for value received, hereby promises to pay to ______________, or registered assigns, the principal sum of _____________________________ Dollars ($ ) on the fifteenth day of January, 2022 and to pay interest on said sum from the date hereof, until said principal sum is paid, at the rate of 8.85% per annum, payable semi-annually on the fifteenth day of January and July in each year. Both the principal of and the interest on this bond shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts at the office or agency of the Company in Plainfield, Indiana, or, at the option of the registered owner hereof, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York, except that interest on this bond may be paid, at the option of the Company, by check or draft mailed to the address of the person entitled thereto as it appears on the books of the Company maintained for that purpose. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. This bond shall not be valid or become obligatory for any purpose unless and until it shall have been authenticated by the execution by the Trustee, or its successor in trust under the Indenture, of the certificate endorsed hereon. - -------- 1 This should be included only if the Series CCC Bonds are being issued in global form. - 6 - IN WITNESS WHEREOF, PSI Energy, Inc. has caused this bond to be executed in its name by the manual or facsimile signature of its President or an Executive Vice President or one of its Vice Presidents, and its corporate seal or a facsimile thereof to be hereto affixed and attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. Dated as of: PSI ENERGY, INC. By............................................. ......................................President ATTEST: ............................................. ..............................Secretary - 7 - (FORM OF REVERSE OF SERIES CCC BOND) This bond is one of the bonds of the Company issued and to be issued from time to time under and in accordance with and all secured by an indenture of mortgage or deed of trust, dated September 1, 1939, from Public Service Company of Indiana (predecessor of the Company) to The First National Bank of Chicago, as Trustee, to which LaSalle National Bank is successor trustee, (which indenture as amended by all supplemental indentures is hereinafter referred to as the "Indenture"). Said Trustee or its successor in trust under the Indenture is hereinafter sometimes referred to as the "Trustee." Reference is hereby made to the Indenture for a description of the property mortgaged and pledged and the nature and extent of the security for said bonds. By the terms of the Indenture, the bonds secured thereby are issuable in series which may vary as to date, amount, date of maturity, rate of interest and in other respects as in the Indenture provided. This bond is one of a series designated as "PSI Energy, Inc. First Mortgage Bonds, Series CCC, 8.85%, Due January 15, 2022" (hereinafter referred to as "Bonds of Series CCC") of the Company issued under and secured by the Indenture and created by a Fifty-Second Supplemental Indenture, dated as of April 30, 1999, which also amends the Indenture. The rights and obligations of the Company and of the bearers and registered owners of bonds may be modified or amended with the consent of the Company by an affirmative vote of the bearers or registered owners entitled to vote of at least seventy-five per centum (75%) in principal amount of the bonds then outstanding at a meeting of bondholders called for the purpose (and by an affirmative vote of the bearers or registered owners entitled to vote of at least seventy-five per centum (75%) in principal amount of bonds of any series affected by such modification or amendment in case one or more, but less than all, series of bonds are so affected), all in the manner and subject to the limitations set forth in the Indenture, any consent by the bearer or registered owner of any bond being conclusive and binding upon such bearer or registered owner and upon all future bearers or registered owners of such bond, irrespective of whether or not any notation of such consent is made on such bond; provided that no such modification or amendment shall, among other things, extend the maturity or reduce the amount of, or reduce the rate of interest on, or otherwise modify the terms of the payment of the principal of, or interest or premium (if any) on this bond, which obligations are absolute and unconditional, or permit the creation of any lien ranking prior to or equal with the lien of the Indenture on any of the mortgaged property. The Bonds of Series CCC will be subject to redemption (the "Make-Whole Redemption") at the option of the Company at any time in whole, or from time to time in part, until maturity, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to the sum of (i) the principal amount of the Bonds of Series CCC being redeemed plus accrued and unpaid interest thereon to the redemption date, and (ii) the Make-Whole Amount (as defined below), if any, with respect to such Bonds of Series CCC. "Make-Whole Amount" means, in connection with any Make-Whole Redemption of any Bonds of Series CCC, the excess, if any, of (i) the sum, as determined by a Quotation Agent (as defined herein), of the present values of the principal amount of such Bonds of Series CCC, together with scheduled payments of interest from the redemption date to the stated maturity of the Bonds of Series CCC, in each case discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) over (ii) 100% of the principal amount of the Bonds of Series CCC to be redeemed. "Adjusted Treasury Rate" means, with respect to any redemption date for a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (as defined herein), calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price (as defined herein) for such redemption date, calculated on the third business day preceding the redemption date, plus 0.25% (25 basis points). "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term from the redemption date to the stated maturity of the Bonds of Series CCC that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Bonds of Series CCC. "Quotation Agent" means the Reference Treasury Dealer selected by the Trustee after consultation with the Company. "Reference Treasury Dealer" means a primary U.S. Government securities dealer. "Comparable Treasury Price" means, with respect to any redemption date for a Make-Whole Redemption, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, as set forth in the daily statistical release designated "H.15" (or any successor release) published by the Board of Governors of the Federal Reserve System or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date for a Make-Whole Redemption, the average, as determined by the Trustee (after consultation with the Company), of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. Notice of any redemption by the Company will be mailed at least 30 days but not more than 60 days before any redemption date to each holder of Bonds of Series CCC to be redeemed. If less than all the Bonds of Series CCC are to be redeemed at the option of the Company, the Trustee shall select, in such manner as it shall deem fair and appropriate, the Bonds of Series CCC of such series to be redeemed in whole or in part. Unless the Company defaults in payment of the redemption price, on and after any redemption date, interest will cease to accrue on the Bonds of Series CCC or portions thereof called for redemption. In the case of any of certain events of default specified in the Indenture, the principal of this bond may be declared or may become due and payable prior to the stated date of maturity hereof in the manner and with the effect provided in the Indenture. No recourse shall be had for the payment of the principal of or interest on this bond, or for any claim based hereon, or otherwise in respect hereof or of the Indenture, to or against any incorporator, shareholder, officer or director, past, present or future, of the Company or of any predecessor or successor company, either directly or through the Company or such predecessor or successor company, under any constitution or statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability of incorporators, shareholders, directors and officers being waived and released by the registered owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Indenture. The Bonds of Series CCC are issuable only in registered form without coupons. This bond is transferable by the registered owner hereof, in person or by attorney duly authorized, at the principal office or place of business of LaSalle National Bank, the Trustee, or its successor in trust under the Indenture, or, at the option of the registered owner, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York, upon the surrender and cancellation of this bond, and upon any such transfer a new registered bond or bonds of the same series and maturity date and for the same aggregate principal amount will be issued to the transferee in exchange herefor. The Bonds of Series CCC are issuable in the denomination of $1,000 and in such multiples thereof as shall from time to time be determined and authorized by the Board of Directors of the Company. In the manner and subject to the limitations provided in the Indenture, Bonds of Series CCC are exchangeable as between authorized denominations, upon presentation thereof for such purpose by the registered owner, at the principal office or place of business of LaSalle National Bank, the Trustee, or its successor in trust under the Indenture, or, at the option of the registered owner, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York. - 8 - No service charge will be made for any transfer or exchange of this bond, but the Company may require a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (FORM OF TRUSTEE'S CERTIFICATE) TRUSTEE'S CERTIFICATE This bond is one of the Bonds of the Series CCC designated therein referred to and described in the within mentioned Indenture and Fifty-Second Supplemental Indenture. LASALLE NATIONAL BANK, AS TRUSTEE, By............................................. Authorized Officer - 9 - (FORM OF FACE OF SERIES DDD BOND) No. DDD- $............ PSI ENERGY, INC. FIRST MORTGAGE BOND, SERIES DDD, 8.31%, DUE SEPTEMBER 1, 2032 [Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an interest herein.]1 PSI Energy, Inc., an Indiana corporation (hereinafter called the "Company"), for value received, hereby promises to pay to ______________, or registered assigns, the principal sum of _____________________________ Dollars ($ ) on the first day of September, 2032 and to pay interest on said sum from the date hereof, until said principal sum is paid, at the rate of 8.31% per annum, payable semi-annually on the first day of March and September in each year. Both the principal of and the interest on this bond shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts at the office or agency of the Company in Plainfield, Indiana, or, at the option of the registered owner hereof, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York, except that interest on this bond may be paid, at the option of the Company, by check or draft mailed to the address of the person entitled thereto as it appears on the books of the Company maintained for that purpose. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. This bond shall not be valid or become obligatory for any purpose unless and until it shall have been authenticated by the execution by the Trustee, or its successor in trust under the Indenture, of the certificate endorsed hereon. - -------- 1 This should be included only if the Series DDD Bonds are being issued in global form. - 10 - IN WITNESS WHEREOF, PSI Energy, Inc. has caused this bond to be executed in its name by the manual or facsimile signature of its President or an Executive Vice President or one of its Vice Presidents, and its corporate seal or a facsimile thereof to be hereto affixed and attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. Dated as of: PSI ENERGY, INC. By............................................. ......................................President ATTEST: ............................................. ..............................Secretary - 11 - (FORM OF REVERSE OF SERIES DDD BOND) This bond is one of the bonds of the Company issued and to be issued from time to time under and in accordance with and all secured by an indenture of mortgage or deed of trust, dated September 1, 1939, from Public Service Company of Indiana (predecessor of the Company) to The First National Bank of Chicago, as Trustee, to which LaSalle National Bank is successor trustee, (which indenture as amended by all supplemental indentures is hereinafter referred to as the "Indenture"). Said Trustee or its successor in trust under the Indenture is hereinafter sometimes referred to as the "Trustee." Reference is hereby made to the Indenture for a description of the property mortgaged and pledged and the nature and extent of the security for said bonds. By the terms of the Indenture, the bonds secured thereby are issuable in series which may vary as to date, amount, date of maturity, rate of interest and in other respects as in the Indenture provided. This bond is one of a series designated as "PSI Energy, Inc. First Mortgage Bonds, Series DDD, 8.31%, Due September 1, 2032" (hereinafter referred to as "Bonds of Series DDD") of the Company issued under and secured by the Indenture and created by a Fifty-Second Supplemental Indenture, dated as of April 30, 1999, which also amends the Indenture. The rights and obligations of the Company and of the bearers and registered owners of bonds may be modified or amended with the consent of the Company by an affirmative vote of the bearers or registered owners entitled to vote of at least seventy-five per centum (75%) in principal amount of the bonds then outstanding at a meeting of bondholders called for the purpose (and by an affirmative vote of the bearers or registered owners entitled to vote of at least seventy-five per centum (75%) in principal amount of bonds of any series affected by such modification or amendment in case one or more, but less than all, series of bonds are so affected), all in the manner and subject to the limitations set forth in the Indenture, any consent by the bearer or registered owner of any bond being conclusive and binding upon such bearer or registered owner and upon all future bearers or registered owners of such bond, irrespective of whether or not any notation of such consent is made on such bond; provided that no such modification or amendment shall, among other things, extend the maturity or reduce the amount of, or reduce the rate of interest on, or otherwise modify the terms of the payment of the principal of, or interest or premium (if any) on this bond, which obligations are absolute and unconditional, or permit the creation of any lien ranking prior to or equal with the lien of the Indenture on any of the mortgaged property. The Bonds of Series DDD will be subject to redemption (the "Make-Whole Redemption") at the option of the Company at any time in whole, or from time to time in part, until maturity, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to the sum of (i) the principal amount of the Bonds of Series DDD being redeemed plus accrued and unpaid interest thereon to the redemption date, and (ii) the Make-Whole Amount (as defined below), if any, with respect to such Bonds of Series DDD. "Make-Whole Amount" means, in connection with any Make-Whole Redemption of any Bonds of Series DDD, the excess, if any, of (i) the sum, as determined by a Quotation Agent (as defined herein), of the present values of the principal amount of such Bonds of Series DDD, together with scheduled payments of interest from the redemption date to the stated maturity of the Bonds of Series DDD, in each case discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) over (ii) 100% of the principal amount of the Bonds of Series DDD to be redeemed. "Adjusted Treasury Rate" means, with respect to any redemption date for a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (as defined herein), calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price (as defined herein) for such redemption date, calculated on the third business day preceding the redemption date, plus 0.25% (25 basis points). "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term from the redemption date to the stated maturity of the Bonds of Series DDD that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Bonds of Series DDD. "Quotation Agent" means the Reference Treasury Dealer selected by the Trustee after consultation with the Company. "Reference Treasury Dealer" means a primary U.S. Government securities dealer. "Comparable Treasury Price" means, with respect to any redemption date for a Make-Whole Redemption, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, as set forth in the daily statistical release designated "H.15" (or any successor release) published by the Board of Governors of the Federal Reserve System or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date for a Make-Whole Redemption, the average, as determined by the Trustee (after consultation with the Company), of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. Notice of any redemption by the Company will be mailed at least 30 days but not more than 60 days before any redemption date to each holder of Bonds of Series DDD to be redeemed. If less than all the Bonds of Series DDD are to be redeemed at the option of the Company, the Trustee shall select, in such manner as it shall deem fair and appropriate, the Bonds of Series DDD of such series to be redeemed in whole or in part. Unless the Company defaults in payment of the redemption price, on and after any redemption date, interest will cease to accrue on the Bonds of Series DDD or portions thereof called for redemption. In the case of any of certain events of default specified in the Indenture, the principal of this bond may be declared or may become due and payable prior to the stated date of maturity hereof in the manner and with the effect provided in the Indenture. No recourse shall be had for the payment of the principal of or interest on this bond, or for any claim based hereon, or otherwise in respect hereof or of the Indenture, to or against any incorporator, shareholder, officer or director, past, present or future, of the Company or of any predecessor or successor company, either directly or through the Company or such predecessor or successor company, under any constitution or statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability of incorporators, shareholders, directors and officers being waived and released by the registered owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Indenture. The Bonds of Series DDD are issuable only in registered form without coupons. This bond is transferable by the registered owner hereof, in person or by attorney duly authorized, at the principal office or place of business of LaSalle National Bank, the Trustee, or its successor in trust under the Indenture, or, at the option of the registered owner, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York, upon the surrender and cancellation of this bond, and upon any such transfer a new registered bond or bonds of the same series and maturity date and for the same aggregate principal amount will be issued to the transferee in exchange herefor. The Bonds of Series DDD are issuable in the denomination of $1,000 and in such multiples thereof as shall from time to time be determined and authorized by the Board of Directors of the Company. In the manner and subject to the limitations provided in the Indenture, Bonds of Series DDD are exchangeable as between authorized denominations, upon presentation thereof for such purpose by the registered owner, at the principal office or place of business of LaSalle National Bank, the Trustee, or its successor in trust under the Indenture, or, at the option of the registered owner, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York. - 12 - No service charge will be made for any transfer or exchange of this bond, but the Company may require a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (FORM OF TRUSTEE'S CERTIFICATE) TRUSTEE'S CERTIFICATE This bond is one of the Bonds of the Series DDD designated therein referred to and described in the within mentioned Indenture and Fifty-Second Supplemental Indenture. LASALLE NATIONAL BANK, AS TRUSTEE, By............................................. Authorized Officer - 13 - Section 3. Each Bond of Series BBB, CCC, and DDD issued prior to the first interest payment date shall be dated as of April 30, 1999, and otherwise shall be dated as provided in Section 1 of Article II of the Indenture. Section 4. All Bonds of Series BBB shall be due and payable on July 15, 2009, and shall bear interest from the date thereof at the rate of 8% per annum, payable semi-annually on the fifteenth day of January and July in each year, commencing July 15, 1999. All Bonds of Series CCC shall be due and payable on January 15, 2022, and shall bear interest from the date thereof at the rate of 8.85% per annum, payable semi-annually on the fifteenth day of January and July in each year, commencing July 15, 1999. All Bonds of Series DDD shall be due and payable on September 1, 2032, and shall bear interest from the date thereof at the rate of 8.31% per annum, payable semi-annually on the first day of March and September in each year, commencing September 1, 1999. Section 5. Subject to agreements with or the rules of the Depository or any successor book-entry security system or similar system with respect to Global Securities, both the principal of and the interest on the Bonds of Series BBB, CCC, and DDD shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, at the office or agency of the Company in Plainfield, Indiana, or, at the option of the holder thereof, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York, except that interest on the Bonds of Series BBB, CCC, and DDD may be paid, at the option of the Company, by check or draft mailed to the address of the person entitled thereto as it appears on the books of the Company maintained for that purpose. Section 6. Definitive Bonds of Series BBB, CCC, and DDD shall be issuable in any denomination which is a multiple of $1,000 numbered consecutively from "BBB-1", "CCC-1", and "DDD-1", respectively, upward. All Bonds of Series BBB, CCC, and DDD shall be executed on behalf of the Company by the manual or facsimile signature of its President or an Executive Vice President or one of its Vice Presidents and shall have affixed thereto the seal of the Company or a facsimile thereof attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries and shall be authenticated by the execution by the Trustee of the certificate endorsed on said bonds. No service charge will be made by the Company for the transfer or for the exchange of Bonds of Series BBB, CCC, and DDD except, in the case of transfer, a charge sufficient to reimburse the Company for any tax or other governmental charge payable in connection therewith. Pursuant to the provisions of Section 11 of Article II of the Indenture, Bonds of Series BBB, CCC, and DDD may be issued in temporary form, and if temporary bonds be issued, the Company shall, with all reasonable dispatch, at its own expense and without charge to the holders of the temporary bonds, prepare and execute definitive Bonds of Series BBB, CCC, and DDD and exchange the temporary bonds for such definitive bonds in the manner provided for in said section, provided, however, no presentation or surrender of temporary Bonds of Series BBB, CCC, and DDD shall be necessary in order for the holders entitled to interest thereon to receive such interest. ARTICLE II. ISSUANCE OF BONDS OF SERIES BBB, CCC, AND DDD. Section 1. An initial issue of Bonds of Series BBB in the aggregate principal amount not exceeding one hundred twenty-four million six hundred sixty-five thousand dollars ($124,665,000), an initial issue of Bonds of Series CCC in the aggregate principal amount not exceeding sixty million fifty-five thousand dollars ($60,055,000), and an initial issue of Bonds of Series DDD in the aggregate principal amount not exceeding thirty-eight million dollars ($38,000,000), may be executed by the Company and delivered to the Trustee for authentication, and shall be authenticated and delivered by the Trustee to or upon the order of the Company (which authentication and delivery may be made without awaiting the filing or recording of this Fifty-Second Supplemental Indenture), upon receipt by the Trustee of the resolutions, certificates, orders, opinions and other instruments required by the provisions of Section 2 of Article IV of the Indenture to be received by the Trustee as a condition to the authentication and delivery by the Trustee of bonds pursuant to said Section 2. Section 2. Subject to the limitations provided in Section 24 of Article V of the Indenture, additional Bonds of Series BBB, CCC, and DDD may be issued by the Company under the provisions of Sections 2, 3 or 4 of Article IV of the Indenture. ARTICLE III. INDENTURE AMENDMENTS. Section 1. Article I of the Indenture, as heretofore amended, is hereby further amended (i) by adding immediately after subdivision "(91)" thereof an additional subdivision numbered "(92)" and reading as follows: "(92) The term 'Fifty-Second Supplemental Indenture' shall mean the Fifty-Second Supplemental Indenture executed by the Company and the Trustee, dated as of April 30, 1999, supplementing and amending the Indenture, and the terms 'Bonds of Series BBB' shall mean the 'PSI Energy, Inc. First Mortgage Bonds, Series BBB, 8%, Due July 15, 2009,', 'Bonds of Series CCC' shall mean the 'PSI Energy, Inc. First Mortgage Bonds, Series CCC, 8.85%, Due January 15, 2022,', and 'Bonds of Series BBB' shall mean the 'PSI Energy, Inc. First Mortgage Bonds, Series DDD, 8.31%, Due September 1, 2032,', created by the Fifty-Second Supplemental Indenture." and (ii) by changing the numbering of the present subdivision "(92)" thereof to "(93)". Section 2. Article VII of the Indenture, as heretofore amended, is hereby further amended by inserting therein immediately after Section 36 thereof, a new section designated "Section 37" and reading as follows: "Section 37. Each of the Bonds of Series BBB, the Bonds of Series CCC, and the Bonds of Series DDD will be subject to redemption (the 'Make-Whole Redemption') at the option of the Company at any time in whole, or from time to time in part, until maturity, upon not less than 30 nor more than 60 days' notice to the holders of such Series, at a redemption price equal to the sum of (i) the principal amount of the Bonds of such Series being redeemed, plus accrued and unpaid interest thereon to the redemption date, and (ii) the Make-Whole Amount (as defined below), if any, with respect to such Bonds. 'Make-Whole Amount' means, in connection with any Make-Whole Redemption of any Bonds of Series BBB, Bonds of Series CCC, or Bonds of Series DDD, the excess, if any, of (i) the sum, as determined by a Quotation Agent (as defined herein), of the present values of the principal amount of such Bonds being redeemed, together with scheduled payments of interest from the redemption date to the stated maturity of such Bonds, in each case discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) over (ii) 100% of the principal amount of the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD (as applicable) to be redeemed. 'Adjusted Treasury Rate' means, with respect to any redemption date for a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (as defined herein), calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price (as defined herein) for such redemption date, calculated on the third business day preceding the redemption date, plus 0.15% (15 basis points) for the Bonds of Series BBB and plus 0.25% (25 basis points) for the Bonds of Series CCC and Bonds of Series DDD. 'Comparable Treasury Issue' means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term from the redemption date to the stated maturity of the Bonds of Series BBB, CCC, and DDD that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Bonds of Series BBB, CCC, and DDD. 'Quotation Agent' means the Reference Treasury Dealer selected by the Trustee after consultation with the Company. 'Reference Treasury Dealer' means a primary U.S. Government securities dealer. 'Comparable Treasury Price' means, with respect to any redemption date for a Make-Whole Redemption, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, as set forth in the daily statistical release designated 'H.15' (or any successor release) published by the Board of Governors of the Federal Reserve System or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of such Quotations. 'Reference Treasury Dealer Quotations' means, with respect to each Reference Treasury Dealer and any redemption date for a Make-Whole Redemption, the average, as determined by the Trustee (after consultation with the Company), of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date. Notice of any redemption by the Company will be mailed at least 30 days but not more than 60 days before any redemption date to each holder of Bonds of Series BBB, CCC, and DDD to be redeemed. If less than all the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD (as applicable) are to be redeemed at the option of the Company, the Trustee shall select, in such manner as it shall deem fair and appropriate, the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD (as applicable) to be redeemed in whole or in part. Unless the Company defaults in payment of the redemption price, on and after any redemption date, interest will cease to accrue on the Bonds of Series BBB, CCC, and DDD or portions thereof called for redemption. The Company shall indemnify and hold harmless the Trustee from any and all losses, costs, damages, expenses, fees (including attorneys' fees), court costs, judgments, penalties, obligations, suits, disbursements and liabilities of any kind or character whatsoever which may at any time be imposed upon, incurred by or asserted against the Trustee by reason of or arising out of or caused, directly or indirectly by any act or omission of the Trustee with respect to the foregoing Section 37, including without limitation selection of any Reference Treasury Dealer or determination of any Reference Treasury Dealer Quotations, except for such that would arise out of the willful misconduct or gross negligence of the Trustee and except for costs and expenses arising in the ordinary course of the Trustee's business.." Section 3. Article IX of the Indenture, "Maintenance and Renewal Fund and Sinking Fund Provisions" as heretofore and hereby amended or supplemented shall not apply to the Bonds of Series BBB, CCC, and DDD or to any subsequently created series of bonds from and after the date on which no series of bonds created under the Indenture prior to the Bonds of Series BBB, CCC, and DDD are outstanding. Section 4. Section 22 of Article V of the Indenture as heretofore and hereby amended or supplemented which, among other things, requires an inspection of the mortgaged property every two years by an independent engineer, shall not apply to the Bonds of Series BBB, CCC, and DDD or to any subsequently created series of bonds, from and after the date in which no series of bonds created under the Indenture prior to the Bonds of Series BBB, CCC, and DDD are outstanding. Section 5. The Company reserves the right, without consent or other action by the holders of the Bonds of Series BBB, CCC, and DDD or of any subsequently created series of bonds, to amend the Indenture, as heretofore and hereby amended or supplemented, at any time after all bonds of any series created prior to the Bonds of Series BBB, CCC, and DDD are no longer outstanding under the Indenture, as follows: (a) by substituting for the words "in principal amount not greater than sixty per centum (60%) of " in Section 3 of Article IV thereof the following: "in principal amount not greater than sixty-six and two-thirds per centum (66-2/3%) of ". (b) by substituting for the words "shall exceed sixty per centum (60%) of the value of bondable property so acquired" in Section 9 of Article V thereof the following: "shall exceed sixty-six and two-thirds per centum (66-2/3%) of the value of bondable property so acquired". (c) by substituting for the words "shall be deemed to be paid within the meaning of this article; provided, that the date for the payment or redemption of such bonds shall be not more than one (1) year after such moneys shall have been so set apart or paid." in the first paragraph of Article XIV thereof the following: "shall be deemed to be paid within the meaning of this article.". (d) by substituting for the words "with the consent of holders of at least seventy-five per centum (75%) in aggregate principal amount of the bonds at the time outstanding;" in sub-section (a) of Section 3 of Article XVIII thereof the following: "with the consent of holders of at least sixty-six and two-thirds per centum (66-2/3%) in aggregate principal amount of the bonds at the time outstanding;". (e) by substituting for the words "holders (or persons entitled to vote the bonds) of not less than seventy-five per centum (75%) in aggregate principal amount of the bonds entitled to be voted" in sub-section (l) of Section 3 of Article XVIII thereof the following: "holders (or persons entitled to vote the bonds) of not less than sixty-six and two-thirds per centum (66-2/3%) in aggregate principal amount of the bonds entitled to be voted". (f) by substituting for the words "holders (or persons entitled to vote the bonds) of at least seventy-five per centum (75%) in principal amount of the bonds outstanding" in sub-section (m) of Section 3 of Article XVIII thereof the following: "holders (or persons entitled to vote the bonds) of at least sixty-six and two-thirds per centum (66-2/3%) in principal amount of the bonds outstanding". ARTICLE IV. CONCERNING THE TRUSTEE. The Trustee hereby accepts the trusts hereby declared and agrees to perform the same upon the terms and conditions in the Indenture and in this Fifty-Second Supplemental Indenture set forth. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Fifty-Second Supplemental Indenture or the due execution hereof by the Company or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general, each and every term and condition contained in Article XVII of the Indenture shall apply to this Fifty-Second Supplemental Indenture. - 14 - ARTICLE V. MISCELLANEOUS PROVISIONS. Section 1. Wherever in the original Indenture or in any of the fifty-two supplemental indentures thereto reference is made to any article or section of the original Indenture, such reference shall be deemed to refer to such article or section as amended by such supplemental indentures. Section 2. Upon the execution and delivery hereof, the Indenture shall thereupon be deemed to be amended as hereinabove set forth as fully and with the same effect as if the amendments made hereby were set forth in the original Indenture and each of the fifty-two supplemental indentures to the Indenture shall henceforth be read, taken and construed as one and the same instrument; but such amendments shall not operate so as to render invalid or improper any action heretofore taken under the original Indenture or said supplemental indentures. Section 3. All the covenants, stipulations and agreements in this Fifty-Second Supplemental Indenture contained are and shall be for the sole and exclusive benefit of the parties hereto, their successors and assigns, and of the holders from time to time of the bonds. Section 4. The table of contents to, and the headings of the different articles of, this Fifty-Second Supplemental Indenture are inserted for convenience of reference, and are not to be taken to be any part of the provisions hereof, nor to control or affect the meaning, construction or effect of the same. Section 5. This Fifty-Second Supplemental Indenture may be simultaneously executed in any number of counterparts, and all such counterparts shall constitute but one and the same instrument. Section 6. Whenever a payment of principal or interest in respect of the Bonds of Series BBB, CCC, and DDD are due on any day other than a business day (as hereinafter defined), such payment shall be payable on the first business day next following such date, and, in the case of a principal payment, interest on such principal payment shall accrue to the date of such principal payment. For the purposes of this Section 6 the term business day shall mean any day other than a day on which the Trustee is authorized by law to close. - 15 - IN WITNESS WHEREOF, said PSI Energy, Inc. has caused this instrument to be executed in its corporate name by its President or one of its Vice Presidents and to be attested by its Secretary or one of its Assistant Secretaries and said LaSalle National Bank has caused this instrument to be executed in its corporate name by one of its First Vice Presidents and to be attested by one of its Assistant Secretaries, in several counterparts, all as of the day and year first above written. PSI ENERGY, INC. (CORPORATE SEAL) By ________________________ William L. Sheafer Vice President and Treasurer ATTEST: - ---------------------- John E. Polley, Assistant Secretary Signed and delivered by PSI Energy, Inc. in the presence of: - --------------------------- Witness --------------------------- Witness LASALLE NATIONAL BANK (CORPORATE SEAL) By ________________________ Sarah H. Webb First Vice President ATTEST: - ---------------------- Russell C. Bergman, Assistant Secretary Signed and delivered by LaSalle National Bank in the presence of: - --------------------------- Witness - --------------------------- Witness - 16 - STATE OF OHIO ) ) ss: COUNTY OF HAMILTON ) BE IT REMEMBERED, that on this ___ day of April, 1999, before me, the undersigned, a notary public in and for the County and State aforesaid, duly commissioned and qualified, personally appeared William L. Sheafer and John E. Polley, personally known to me to be the same persons whose names are subscribed to the foregoing instrument, and personally known to me to be the Vice President and Treasurer, and an Assistant Secretary, respectively, of PSI Energy, Inc., an Indiana corporation, and acknowledged that they signed and delivered said instrument as their free and voluntary act as such Vice President and Treasurer, and Assistant Secretary, respectively, and as the free and voluntary act of said PSI Energy Inc., for the uses and purposes therein set forth; in pursuance of the power and authority granted to them by resolution of the Board of Directors of said Company. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day and year aforesaid. (NOTARIAL SEAL) ------------------------- Notary Public My commission expires _________________. County of residence: Hamilton - 17 - STATE OF ILLINOIS ) ) ss: COUNTY OF COOK ) BE IT REMEMBERED, that on this ____ day of April, 1999, before me, the undersigned, a notary public in and for the County and State aforesaid, duly commissioned and qualified, personally appeared Sarah H. Webb and Russell C. Bergman, personally known to me to be the same persons whose names are subscribed to the foregoing instrument, and personally known to me to be a First Vice President and an Assistant Secretary, respectively, of LaSalle National Bank, a national banking association, and acknowledged that they signed and delivered said instrument as their free and voluntary act as such First Vice President and Assistant Secretary, respectively, and as the free and voluntary act of said LaSalle National Bank, for the uses and purposes therein set forth; in pursuance of the power and authority granted to them by the bylaws of said association. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day and year aforesaid. (NOTARIAL SEAL) ------------------------- Notary Public My commission expires _________________. County of residence: Cook - 18 - EX-4 3 PSI SIXTH SUPPLEMENTAL INDENTURE PSI ENERGY, INC. AND FIFTH THIRD BANK, Trustee ---------------- Sixth Supplemental Indenture Dated as of April 30, 1999 To Indenture Dated as of November 15, 1996 ---------------- 6.52% Senior Notes Due 2009 SIXTH SUPPLEMENTAL INDENTURE, dated as of April 30, 1999, between PSI Energy, Inc., a corporation duly organized and existing under the laws of the State of Indiana (herein called the "Company"), having its principal office at 1000 East Main Street, Plainfield, Indiana 46168, and Fifth Third Bank, an Ohio banking corporation, as Trustee (herein called the "Trustee") under the Indenture dated as of November 15, 1996 between the Company and the Trustee, as supplemented (the "Indenture"). Recitals of the Company The Company has executed and delivered the Indenture to the Trustee to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (the "Securities"), to be issued in one or more series as provided in the Indenture. Pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of its Securities to be known as its 6.52% Senior Notes Due 2009 (herein called the "Debentures"), in this Sixth Supplemental Indenture. All things necessary to make this Sixth Supplemental Indenture a valid agreement of the Company have been done. Now, Therefore, This Sixth Supplemental Indenture Witnesseth: For and in consideration of the premises and the purchase of the Debentures by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Debentures, as follows: ARTICLE ONE Terms of the Debentures Section 101. There is hereby authorized a series of Securities designated the "6.52% Senior Notes Due 2009", limited in aggregate principal amount to $97,342,000 (except as provided in Section 301(2) of the Indenture). The Debentures shall mature and the principal shall be due and payable together with all accrued and unpaid interest thereon on March 15, 2009 and shall be issued in the form of a registered Global Security without coupons, registered in the name of Cede & Co., as nominee of the Depository Trust Company (the "Depositary"). Section 102. The provisions of Section 305 of the Indenture applicable to Global Securities shall apply to the Debentures. Section 103. Interest on each of the Debentures shall be payable semiannually on March 15 and September 15 in each year (each an "Interest Payment Date"), commencing on September 15, 1999, at the rate per annum specified in the form of Debentures, from and including, April 30, 1999, or from the most recent Interest Payment Date to which interest has been paid or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the Person in whose name such Debenture (or one or more Predecessor Securities) is registered at the close of business on March 1 or September 1 next preceding the Interest Payment Date. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Section 104. Subject to agreements with or the rules of the Depositary or any successor book-entry security system or similar system with respect to Global Securities, payments of interest will be made by check mailed to the Holder of each Debenture at the address shown in the Security Register, and payments of the principal amount of each Debenture will be made at maturity by check against presentation of the Debenture at the office or agency of the Trustee. Section 105. The Debentures shall be issued in denominations of $1,000 or any integral multiple of $1,000. Section 106. Principal and interest on the Debentures shall be payable in the coin or currency of the United States of America, which, at the time of payment, is legal tender for public and private debts. Section 107. The Debentures shall be subject to defeasance and covenant defeasance, at the Company's option, as provided for in Sections 1302 and 1303 of the Indenture. Section 108. Subject to the terms of Article Eleven of the Indenture, the Company shall have the right to redeem the Debentures, at any time in whole or from time to time in part, until maturity, (such redemption, a "Make-Whole Redemption", and the date thereof, the "Redemption Date"), upon not less than 30 nor more than 60 days' notice to the holders, at a redemption price equal to the sum of the principal amount of the Debentures being redeemed plus accrued and unpaid interest thereon to the Redemption Date, and (ii) the Make-Whole Amount (as defined below), if any, with respect to the Debentures being redeemed. "Make-Whole Amount" means, in connection with any Make-Whole Redemption of any Debentures, the excess, if any, of (i) the sum, as determined by a Quotation Agent (as defined herein) of the present value of the principal amount of such Debentures, together with scheduled payments of interest from the Redemption Date to the Stated Maturity of the Debentures, in each case discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) over (ii) 100% of the principal amount of the Debentures to be redeemed. "Adjusted Treasury Rate" means, with respect to any Redemption Date for a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date, calculated on the third business day preceding the Redemption Date, plus in each case 0.20% (20 basis points). "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term from the Redemption Date to the Stated Maturity of the Debentures that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Debentures. "Quotation Agent" means the Reference Treasury Dealer selected by the Trustee after consultation with the Company. "Reference Treasury Dealer" means a primary U.S. Government securities dealer. "Comparable Treasury Price" means, with respect to the any Redemption Date for a Make-Whole Redemption, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such Redemption Date, as set forth in the daily statistical release designated "H.15" (or any successor release) published by the Board of Governors of the Federal Reserve System or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date for a Make-Whole Redemption, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such Redemption Date. ARTICLE TWO Form of the Debentures Section 201. The Debentures are to be substantially in the following form and shall include substantially the legend shown so long as the Debentures are Global Securities: (FORM OF FACE OF DEBENTURE) No. R-1 $97,342,000 CUSIP No. 693627AL 5 PSI ENERGY, INC. 6.52% SENIOR NOTES DUE 2009 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. PSI ENERGY, INC., a corporation duly organized and existing under the laws of the State of Indiana (herein called the "Company", which term includes any successor Person under the Indenture hereafter referred to), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of Ninety Seven Million Three Hundred Forty Two Thousand and No/100 Dollars ($97,342,000.00) on March 15, 2009, and to pay interest thereon from, and including, April 30, 1999 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually, on March 15 and September 15, in each year, commencing September 15, 1999, at the rate of 6.52% per annum, until the principal hereof is paid or made available for payment. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the March 1 or September 1 next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the corporate trust office of the Trustee maintained for that purpose in the City of Cincinnati, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Any payment on this Security due on any day which is not a Business Day in the City of New York need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on the due date and no interest shall accrue for the period from and after such date, unless such payment is a payment at maturity or upon redemption, in which case interest shall accrue thereon at the stated rate for such additional days. As used herein, "Business Day" means any day, other than a Saturday or Sunday, or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to be closed. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. In Witness Whereof, the Company has caused this instrument to be duly executed. PSI ENERGY, INC. By............. CERTIFICATE OF AUTHENTICATION Dated: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. FIFTH THIRD BANK, as Trustee By............... Authorized Signatory (FORM OF REVERSE OF DEBENTURE) This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of November 15, 1996 (herein called the "Indenture", which term shall have the meaning assigned to it in such instrument), between the Company and Fifth Third Bank, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $97,342,000. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security or certain restrictive covenants and Events of Default with respect to this Security upon compliance with certain conditions set forth in the Indenture. The Securities of this series are subject to optional redemption at any time in whole or from time to time in part, until maturity, (such redemption, a "Make-Whole Redemption", and the date thereof, the "Redemption Date"), upon not less than 30 nor more than 60 days' notice to the holders, at a redemption price equal to the sum of the principal amount of the Debentures being redeemed plus accrued and unpaid interest thereon to the Redemption Date, and (ii) the Make-Whole Amount (as defined below), if any, with respect to the Debentures being redeemed. "Make-Whole Amount" means, in connection with any Make-Whole Redemption of any Debentures, the excess, if any, of (i) the sum, as determined by a Quotation Agent (as defined herein) of the present value of the principal amount of such Debentures, together with scheduled payments of interest from the Redemption Date to the Stated Maturity of the Debentures, in each case discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) over (ii) 100% of the principal amount of the Debentures to be redeemed. "Adjusted Treasury Rate" means, with respect to any Redemption Date for a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date, calculated on the third business day preceding the Redemption Date, plus in each case 0.20% (20 basis points). "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term from the Redemption Date to the Stated Maturity of the Debentures that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Debentures. "Quotation Agent" means the Reference Treasury Dealer selected by the Trustee after consultation with the Company. "Reference Treasury Dealer" means a primary U.S. Government securities dealer. "Comparable Treasury Price" means, with respect to the any Redemption Date for a Make-Whole Redemption, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such Redemption Date, as set forth in the daily statistical release designated "H.15" (or any successor release) published by the Board of Governors of the Federal Reserve System or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date for a Make-Whole Redemption, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such Redemption Date. If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities of each series at the time outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 35% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonably satisfactory indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. ARTICLE THREE Original Issue of Debentures Section 301. Debentures in the aggregate principal amount of $97,342,000, may, upon execution of this Sixth Supplemental Indenture, or from time to time thereafter, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Debentures upon a Company Order without any further action by the Company. ARTICLE FOUR Paying Agent and Security Registrar Section 401. Fifth Third Bank will be the Paying Agent and Security Registrar for the Debentures. ARTICLE FIVE Sundry Provisions Section 501. Except as otherwise expressly provided in this Sixth Supplemental Indenture or in the form of Debenture or otherwise clearly required by the context hereof or thereof, all terms used herein or in said form of Debenture that are defined in the Indenture shall have the several meanings respectively assigned to them thereby. Section 502. The Indenture, as supplemented by this Sixth Supplemental Indenture, is in all respects ratified and confirmed, and this Sixth Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. ------------------ This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. In Witness Whereof, the parties hereto have caused this Sixth Supplemental Indenture to be duly executed as of the day and year first above written. PSI ENERGY, INC. By William L. Sheafer Vice President and Treasurer FIFTH THIRD BANK, as Trustee By Kerry Byrne Vice President EX-27 4 PSI FDS FOR FORM 10-Q
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 PER-BOOK 2,603,614 0 655,295 323,603 92,496 3,675,008 539 410,740 603,047 1,014,326 0 71,919 1,020,093 260,689 0 0 5,959 0 0 0 1,302,022 3,675,008 482,465 25,185 396,398 421,583 60,882 308 61,190 21,364 39,826 1,150 38,676 0 19,577 76,157 0.00 0.00
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