-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, YznMlqYPIu1dDO34Ofj90rXQk7MZ1CJX18PMI54P4VX7OFpHwf16oGSbBye++nUT uP1nUcMBapwJ2p4WO8mybw== 0000860520-94-000003.txt : 19940321 0000860520-94-000003.hdr.sgml : 19940321 ACCESSION NUMBER: 0000860520-94-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIPSCO INC CENTRAL INDEX KEY: 0000860520 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 371260920 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-10628 FILM NUMBER: 94516616 BUSINESS ADDRESS: STREET 1: 607 E ADAMS ST CITY: SPRINGFIELD STATE: IL ZIP: 62739 BUSINESS PHONE: 2175233600 MAIL ADDRESS: STREET 1: 607 E ADAMS STREET CITY: SPRINGFIELD STATE: IL ZIP: 62739 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to_________ Commission file number 1-10628 CIPSCO Incorporated ______________________________________________________ (Exact Name of Registrant as Specified in its Charter) Illinois 37-1260920 -------------- ------------------- (State of (I.R.S. Employer Incorporation) Identification No.) 607 EAST ADAMS STREET SPRINGFIELD, ILLINOIS 62739 --------------------------------------- ------------ (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (217) 523-3600 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Class on Which Registered -------------- ----------------------- Common Stock, without par value New York Stock Exchange Chicago Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value at February 1, 1994 of the voting stock held by non-affiliates of the Registrant - $1,030,164,200 - Common Stock, without par value. Number of shares outstanding of each of the Registrant's classes of common stock at February 1, 1994: 34,107,706 shares of Common Stock, without par value. Documents Incorporated By Reference: A portion of the Company's 1993 Annual Report to Shareholders is incorporated by reference in Part II hereof. A portion of the Company's Proxy Statement relating to its 1994 Annual Meeting of Shareholders is incorporated by reference in Part III hereof. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = CIPSCO Incorporated 1993 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I PAGE Item 1. Business CIPSCO Incorporated. . . . . . . . . . . . . . . . . . . 3 Non-Utility Subsidiary - CIPSCO Investment Company . . . 3 Utility Subsidiary - Central Illinois Public Service Company. . . . . . . . . . . . . . . . . . . . . . . . 4 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . 5 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 5 Item 4. Submission of Matters to a Vote of Security Holders. . . 5 Executive Officers of the Registrant . . . . . . . . . . 5 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . . . . 6 Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . 6 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . 6 Item 8. Consolidated Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . 6 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . 6 PART III Item 10. Directors and Executive Officers of the Registrant . . . 7 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . 7 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . 7 Item 13. Certain Relationships and Related Transactions . . . . . 7 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 8 Report of Independent Public Accountants . . . . . . . . 13 Schedules. . . . . . . . . . . . . . . . . . . . . . . . 14 Signature. . . . . . . . . . . . . . . . . . . . . . . . 22 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . 23 PART I Item 1. Business CIPSCO INCORPORATED ___________________ CIPSCO Incorporated (CIPSCO or the Company) was incorporated in the State of Illinois on July 11, 1986. CIPSCO has two first-tier subsidiaries: CIPSCO Investment Company (CIC), an investment subsidiary, and Central Illinois Public Service Company (CIPS), an electric and gas public utility. Except where the context otherwise indicates, the term "Company" refers to CIPSCO and its consolidated subsidiaries. Effective October 1, 1990, CIPSCO became the parent holding company of CIPS. CIPSCO owns 100% of the outstanding common stock of CIPS. CIPSCO was created as a holding company to provide the flexibility and capability to respond to increasing competition and risks in the utility business thereby enhancing the long-term earnings potential of the organization while maintaining the strength of the utility business of CIPS as the predominant part of the holding company. CIPSCO's business is conducted through properties and employees of CIPS and CIPSCO reimburses CIPS for their use. Each of CIPSCO's officers is also an officer of CIPS. CIPSCO's principal executive office is the same as that of CIPS. CIPSCO is a public-utility holding company as defined in the Public Utility Holding Company Act of 1935, but is exempt, by virtue of an order issued September 18, 1990, from all the provisions thereof except provisions relating to the acquisition of securities of public utility companies. CIPSCO is not subject to regulation as a utility under the Illinois Public Utilities Act or the Federal Power Act. The ability of CIPSCO to pay dividends on its common stock is dependent upon distributions made to it by CIPS and on amounts earned by CIPSCO on its other investments. NON-UTILITY SUBSIDIARY - CIPSCO INVESTMENT COMPANY __________________________________________________ CIPSCO Investment Company (CIC), the non-utility subsidiary of CIPSCO, was established on October 2, 1990. CIC was formed for the purpose of managing non-utility investments and providing investment management services to CIPSCO and its affiliates. CIC's investment portfolio includes money- market investments, hedged preferred stocks, hedged common stocks, and equity interests in lease transactions and energy related projects. Investments are held in the three subsidiaries of CIC: CIPSCO Securities Company, CIPSCO Leasing Company and CIPSCO Energy Company. CIPSCO Securities Company manages marketable securities, CIPSCO Leasing Company makes long-term investments in leveraged lease transactions and CIPSCO Energy Company makes investments in energy-related projects. UTILITY SUBSIDIARY - CENTRAL ILLINOIS PUBLIC SERVICE COMPANY ____________________________________________________________ GENERAL. Central Illinois Public Service Company (CIPS) is a public utility operating company engaged in the sale of electricity and natural gas in portions of central and southern Illinois. CIPS generates, transmits and distributes electricity and, through interchange agreements with other utility systems, purchases and sells power on a firm basis, in emergency situations or when economical to do so. CIPS sells and distributes natural gas which it purchases from natural gas producers and other suppliers and transports natural gas purchased by end-users directly from suppliers. The principal executive offices of CIPS are located in Springfield, Illinois. CIPS furnishes electric service to about 316,000 retail customers in 557 incorporated and unincorporated communities and adjacent suburban and rural areas. CIPS also furnishes natural gas service to about 164,000 retail customers in 267 incorporated and unincorporated communities and adjacent suburban and rural areas and provides gas transportation service to about 340 end-users. CIPS furnishes both electric and natural gas service in 236 of the communities served by it. The territory served by CIPS, located in 66 counties in Illinois, has an estimated population of 820,000 and is devoted principally to agriculture and diversified industrial operations. Key industries include petroleum and petrochemical industries, food processing, metal fabrication and coal mining. The electric and gas utility business of CIPS is expected to provide the major portion of the Company's consolidated assets and earnings for the foreseeable future. For further information regarding the business of CIPS, reference is made to the CIPS Annual Report on Form 10-K for the year ended December 31, 1993 ("CIPS 1993 10-K"), filed as Exhibit 99.02 hereto and incorporated herein by reference. Item 2. Properties. For a description of properties, refer to the CIPS 1993 10-K. Currently, CIPSCO principally conducts its business through the use of the properties of its utility subsidiary, Central Illinois Public Service Company. CIC leases office space pursuant to a lease expiring in 1994. CIPSCO has no other material properties. Item 3. Legal Proceedings. For a description of pending legal proceedings, refer to the CIPS 1993 10-K. The Company is not involved in any other material legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to a vote of security holders during the three months ended December 31, 1993. Executive Officers of the Registrant (ages at December 31, 1993). Name Age Positions Held _____ ___ ______________ C. L. Greenwalt 60 President and Chief Executive Officer of CIPSCO* President and Chief Executive Officer of CIPS and Chairman of the Board of CIC R. W. Jackson 63 Senior Vice President, Secretary, and Chief Financial Officer of CIPSCO* Senior Vice President -- Finance and Secretary of CIPS President and Chief Executive Officer of CIC J. C. Fiaush 63 Controller, Chief Accounting Officer and Assistant Treasurer of CIPSCO and Controller of CIPS C. D. Nelson 40 Treasurer, Assistant Secretary and Assistant Controller of CIPSCO and Treasurer and Assistant Secretary of CIPS ______________________ * Messrs. Greenwalt and Jackson are directors of CIPSCO. The present term of office of the above executive officers extends to the first meeting of CIPSCO's Board of Directors after the next annual election of Directors, scheduled to be held on April 27, 1994. There is no family relationship between any executive officer and any other executive officer or any director. Each of the officers named above has been employed by CIPSCO and/or CIPS for more than the past five years in various executive capacities. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The information required by Item 5 is set forth in CIPSCO's 1993 Annual Report to Shareholders (the "Annual Report"). Such information is incorporated herein by reference to the material appearing in Note 6 of the Notes to Consolidated Financial Statements on Page 31 and to the material appearing under the caption "Market and Dividend Information -- Quarterly Consolidated Financial Information and -- Common Stock" on page 38 of the Annual Report. Item 6. Selected Financial Data. The information required by Item 6 is set forth in the Annual Report. Such information is incorporated herein by reference to the material appearing under the caption "Selected Consolidated Financial Data" on page 37 of the Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The information required by Item 7 is set forth in the Annual Report. Such information is incorporated herein by reference to the material appearing under the caption "Management's Discussion and Analysis" on pages 18 through 21 of the Annual Report. Item 8. Consolidated Financial Statements and Supplementary Data. The information required by Item 8 is set forth in the Annual Report. Such information is incorporated herein by reference to the material appearing under the captions "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Cash Flows," "Consolidated Statements of Retained Earnings," "Report of Independent Public Accountants," " Notes to Consolidated Financial Statements" and "Market and Dividend Information -- Quarterly Consolidated Financial Information" on pages 22 through 33 and page 38 of the Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The information required by Item 10 relating to each director who is a nominee for election as director at CIPSCO's 1994 Annual Meeting of Shareholders is to be set forth in its definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the "proxy statement") in connection with its Annual Meeting of Shareholders. Such information is incorporated herein by reference to the material appearing under the caption "Election of Directors -- Director Information" in the proxy statement. Information required by Item 10 relating to executive officers of the Company is set forth under a separate caption in Part I hereof. Item 11. Executive Compensation. The information required by Item 11 is to be set forth in the proxy statement. Such information is incorporated herein by reference to the material appearing under the caption "Election of Directors - Executive Compensation" and -- "Directors' Compensation" appearing in the proxy statement;provided, however, that no part of the information appearing under the portion of the proxy statement entitled "Election of Directors -- Compensation Committee Report on Executive Compensation" or -- "Performance Graph" is deemed to be filed as part of this Form 10-K Annual Report. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information required by Item 12 is to be set forth in the proxy statement. Such information is incorporated herein by reference to the material appearing under the captions "Voting Securities Beneficially Owned by Directors, Nominees and Executive Officers" and "Election of Directors -- Director Information" appearing in the proxy statement. Item 13. Certain Relationships and Related Transactions. CIPSCO is the parent company of CIPS. At December 31, 1993, CIPSCO owned 100% of the common stock of CIPS (representing in excess of 97% of the voting shares of CIPS). There are situations where CIPS interacts with its affiliated companies through the use of shared facilities, common employees and other business relationships. In these situations, CIPS receives payment in accordance with regulatory requirements for the services provided to affiliated companies. Each individual who is a member of the Board of Directors of CIPSCO is also a member of the Board of Directors of CIPS. Each of the officers of CIPSCO is also an officer of CIPS. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Page of 1993 Annual Report to Shareholders ________________ (a) 1. Financial statements (incorporated by reference under Item 8, Consolidated Financial Statements and Supplementary Data): Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991. . . . . . . . 22 Consolidated Balance Sheets - December 31, 1993 and 1992. . . . . . . . . . . . . . . . . . . . . . . 23 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991. . . . . 24 Consolidated Statements of Retained Earnings for the years ended December 31, 1993, 1992 and 1991. . . 25 Report of Independent Public Accountants. . . . . . . 25 Notes to Consolidated Financial Statements. . . . . . 26-33 Page of this Report on Form 10-K ----------- (a) 2. Schedules supporting financial statements (included herein): Schedule V - Property, Plant and Equipment at Original Cost for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . 14-16 Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equip- ment for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . 17-19 Schedule IX - Short-Term Borrowings for the years ended December 31, 1993, 1992 and 1991. . . . . . 20 Schedule X - Supplementary Income Statement Information for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . 21 All other schedules have been omitted as not applicable or not required or because the information required to be shown therein is included in the consolidated financial statements or notes thereto. Page of this Report on Form 10-K ____________ (a) 3. Exhibits 3.01 Amended and Restated Articles of Incorporation of CIPSCO. Exhibit 3.01 filed with 1990 Annual Report on Form 10-K). Incorporated by Reference. - 3.02 Bylaws of CIPSCO. 23-32 4 Indenture of Mortgage or Deed of Trust dated October 1, 1941, from CIPS to Continental Illinois National Bank and Trust Company of Chicago and Edmond B. Stofft, as Trustees. (Exhibit 2.01 in File No. 2-60232.) Supplemental Indentures dated, respectively September 1, 1947, January 1, 1949, February 1, 1952, September 1, 1952, June 1, 1954, February 1, 1958, January 1, 1959, May 1, 1963, May 1, 1964, June 1, 1965, May 1, 1967, April 1, 1970, April 1, 1971, September 1, 1971, May 1, 1972, December 1, 1973, March 1, 1974, April 1, 1975, October 1, 1976, November 1, 1976, October 1, 1978, August 1, 1979, February 1, 1980, February 1, 1986, May 15, 1992, July 1, 1992, September 15, 1992 and April 1, 1993, between CIPS and the Trustees under the Indenture of Mortgage or Deed of Trust referred to above (Amended Exhibit 7(b) in File No. 2-7341; Second Amended Exhibit 7.03 in File No. 2-7795; Second Amended Exhibit 4.07 in File No. 2-9353; Amended Exhibit 4.05 in file No. 2-9802; Amended Exhibit 4.02 in File No. 2-10944; Amended Exhibit 2.02 in File No. 2-13866; Amended Exhibit 2.02 in File No. 2-14656; Amended Exhibit 2.02 in File No. 2-21345; Amended Exhibit 2.02 in file No. 2-22326; Amended Exhibit 2.02 in File No. 2-23569; Amended Exhibit 2.02 in File No. 2-26284; Amended Exhibit 2.02 in File No. 2-36388; Amended Exhibit 2.02 in File No. 2-39587; Amended Exhibit 2.02 in File No. 2-41468; Amended Exhibit 2.02 in File No. 2-43912; Exhibit 2.03 in File No. 2-60232; Amended Exhibit 2.02 in File No. 2-50146; Amended Exhibit 2.02 in File No. 2-52886; Second Amended Exhibit 2.04 in File No. 2-57141; Amended Exhibit 2.04 in File No. 2-57557; Amended Exhibit 2.06 in File No. 2-62564; Exhibit 2.02(a) in File No. 2-65914; Amended Exhibit 2.02(a) in File No. 2-66380; and Amended Exhibit 4.02 in File No. 33-3188; Exhibit 4.02 to Form 8-K dated May 15, 1992; Exhibit 4.02 to Form 8-K dated July 1, 1992; Exhibit 4.02 to Form 8-K dated September 15, 1992; Exhibit 4.02 to Form 8-K dated March 30, 1993.) Incorporated by reference. - 10.01 Form of Deferred Compensation Agreement for Directors (Exhibit 10.01 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference. . . . . . . . . . . . . . - 10.02 Amended Form of Deferred Compensation Agreement for Directors . . . . . . . . . . . . . . . . . . . . . . 33-40 10.03 Form of Special Executive Retirement Plan (Exhibit 10.03 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference. . . . . . . . . . . . . . - 10.04 Amendment to Form of Special Executive Retirement Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Page of this Report on Form 10-K ____________ Exhibits (Continued) 10.05 Form of Employment Agreement (change in control severance agreement) (Exhibit 10.05 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference . . . . . . . . . . . . . . . - 10.06 Form of Director's Retirement Income Plan (Exhibit 10.06 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference . . . . . . . . . . . . . . . - 10.07 Form of Excess Benefit Retirement Plan (Exhibit 10.07 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference . . . . . . . . . . . . . . . - 10.08 Amendment to Form of Excess Benefit Retirement Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 10.09 Form of Management Incentive Plan (Exhibit 10.09 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference . . . . . . . . . . . . . . . - 12 Computation of Ratio of Earnings to Fixed Charges . . . . . 43 13 1993 Annual Report to Shareholders. (With the exception of the data incorporated by reference in Part II, Items 5, 6, 7 and 8, no other data appearing in the 1993 Annual Report to Shareholders is to be deemed filed as part of this Form 10-K Annual Report.). . . . . . . . . . . . . . . 44-80 21 Subsidiaries of Registrant. . . . . . . . . . . . . . . . . 81 23 Consent of Independent Public Accountants . . . . . . . . . 82 24 Powers of Attorney. . . . . . . . . . . . . . . . . . . . . 83-90 99.01 Description of Capital Stock. . . . . . . . . . . . . . . . 91-93 99.02 Annual Report on Form 10-K of CIPS for the year ended December 31, 1993. . . . . . . . . . . . . . . . 94-195 Exhibits 10.01 through 10.09 are management contracts or compensatory plans or arrangements required to be filed as exhibits pursuant to Item 14(c) hereof. The following instruments defining the rights of holders of certain unregistered long-term debt of CIPS have not been filed with the Securities and Exchange Commission but will be furnished upon request. 1. Loan Agreement dated as of March 1, 1990, between CIPS and the Illinois Development Finance Authority (IDFA) in connection with the IDFA's $20,000,000 Pollution Control Revenue Refunding Bonds, 1990 Series A due March 1, 2014 and $32,000,000 Pollution Control Revenue Refunding Bonds, 1990 Series B due September 1, 2013. 2. Loan Agreement dated January 1, 1993, between CIPS and IDFA in connection with IDFA's $35,000,000, 6-3/8% Pollution Control Revenue Refunding Bonds (Central Illinois Public Service Company Project) 1993 Series A, due January 1, 2028. 3. Loan Agreement dated June 1, 1993, between CIPS and IDFA in connection with IDFA's $17,500,000 Pollution Control Revenue Refunding Bonds, 1993 Series B-1 due June 1, 2028 and $17,500,000 Pollution Control Revenue Refunding Bonds, 1993 Series B-2 due June 1, 2028. 4. Loan Agreement dated August 15, 1993, between CIPS and IDFA in connection with IDFA's $35,000,000 Pollution Control Revenue Refunding Bonds, 1993 Series C-1 due August 15, 2026 and $25,000,000 Pollution Control Revenue Refunding Bonds, 1993 Series C-2 due August 15, 2026. 5. CIPS Credit Agreement dated October 1, 1992 with various banks providing unsecured lines of credit in an aggregate amount of $60,000,000. (b) Reports on Form 8-K (filed during the reporting period): No reports on Form 8-K were filed for the three months ended December 31, 1993. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To CIPSCO Incorporated and Subsidiaries: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in CIPSCO Incorporated's Annual Report to Shareholders incorporated by reference in this Form 10-K and have issued our report thereon dated January 28, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14(a)2 are the responsibility of CIPSCO Incorporated's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly state in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Chicago, Illinois, January 28, 1994 SCHEDULE V (1 of 3) CIPSCO INCORPORATED AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT AT ORIGINAL COST (a) YEAR ENDED DECEMBER 31, 1993 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = === = = = = = = = = = Column A Column B Column C Column D Column E Column F Transfers and Retirements Amortization Balance Additions or Sales at of Balance Classification of Property Dec. 31, 1992 at Cost Cost(b) Franchises(c) Dec. 31, 1993 __________________________ _____________ ___________ ___________ _____________ _____________ ELECTRIC UTILITY PLANT: Electric utility plant in service-- Intangible. . . . . . . . . . . . . . . . $ 51 $ - $ - $ - $ 51 Production. . . . . . . . . . . . . . . . 1,146,088 27,619 9,771 8,400 1,172,336 Transmission. . . . . . . . . . . . . . . 291,519 26,147 962 2,790 319,494 Distribution. . . . . . . . . . . . . . . 423,998 36,813 3,698 1,800 458,913 General . . . . . . . . . . . . . . . . . 87,450 9,825 2,139 (289) 94,847 Electric plant held for future use. . . . . 1,217 - - - 1,217 Construction work in progress . . . . . . . 41,638 17,150 - - 58,788 Completed construction not classified . . . 165,999 (40,598) - - 125,401 _________ _________ __________ ________ _________ Total electric utility plant . . . . . . 2,157,960 76,956 16,570 12,701 2,231,047 _________ _________ __________ ________ _________ GAS UTILITY PLANT: Gas utility plant in service-- Intangible. . . . . . . . . . . . . . . . 40 - - - 40 Production. . . . . . . . . . . . . . . . 1,153 20 3 - 1,170 Storage . . . . . . . . . . . . . . . . . 19,338 12 1 - 19,349 Transmission. . . . . . . . . . . . . . . 33,685 3,099 4 105 36,885 Distribution. . . . . . . . . . . . . . . 113,273 15,074 454 1,180 129,073 General . . . . . . . . . . . . . . . . . 8,765 991 384 39 9,411 Gas plant held for future use . . . . . . . 37 - - - 37 Construction work in progress . . . . . . . 3,581 (1,265) - - 2,316 Completed construction not classified . . . 19,418 (7,175) - - 12,243 _________ _________ __________ ________ _________ Total gas utility plant. . . . . . . . . 199,290 10,756 846 1,324 210,524 _________ _________ __________ ________ _________ Total utility plant. . . . . . . . . . . $2,357,250 $ 87,712 $ 17,416 $ 14,025 $2,441,571 ========= ========= ========== ======== ========= _________________________ (a) Reference is made to Note 1 to Consolidated Financial Statements. (b) Represents retirements charged to accumulated depreciation (Schedule VI). (c) Represents land and buildings transferred to other physical property, amortization of franchises, plant acquisition adjustments and the effect of adjustment as a result of adopting SFAS No. 109, "Accounting for Income Taxes". (See Notes 1 and 10 to Consolidated Financial Statements.) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE V (2 of 3) CIPSCO INCORPORATED AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT AT ORIGINAL COST (a) YEAR ENDED DECEMBER 31, 1992 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Column F Transfers and Retirements Amortization Balance Additions or Sales at of Balance Classification of Property Dec. 31, 1991 at Cost Cost(b) Franchises(c) Dec. 31, 1992 __________________________ _____________ ___________ ___________ _____________ _____________ ELECTRIC UTILITY PLANT: Electric utility plant in service-- Intangible. . . . . . . . . . . . . . . . $ 52 $ - $ - $ (1) $ 51 Production. . . . . . . . . . . . . . . . 1,141,535 7,275 2,722 - 1,146,088 Transmission. . . . . . . . . . . . . . . 288,202 4,782 1,556 91 291,519 Distribution. . . . . . . . . . . . . . . 395,394 33,849 5,110 (135) 423,998 General . . . . . . . . . . . . . . . . . 83,833 7,699 4,071 (11) 87,450 Electric plant held for future use. . . . . 1,217 - - - 1,217 Construction work in progress . . . . . . . 56,708 (15,070) - - 41,638 Completed construction not classified . . . 87,928 78,071 - - 165,999 _________ _________ __________ ________ _________ Total electric utility plant . . . . . . 2,054,869 116,606 13,459 (56) 2,157,960 _________ _________ __________ ________ _________ GAS UTILITY PLANT: Gas utility plant in service-- Intangible. . . . . . . . . . . . . . . . 40 - - - 40 Production. . . . . . . . . . . . . . . . 1,216 - 63 - 1,153 Storage . . . . . . . . . . . . . . . . . 15,163 4,177 2 - 19,338 Transmission. . . . . . . . . . . . . . . 33,001 711 26 (1) 33,685 Distribution. . . . . . . . . . . . . . . 106,664 7,280 671 - 113,273 General . . . . . . . . . . . . . . . . . 7,880 1,561 686 10 8,765 Gas plant held for future use . . . . . . . 37 - - - 37 Construction work in progress . . . . . . . 1,774 1,807 - - 3,581 Completed construction not classified . . . 13,390 6,028 - - 19,418 _________ _________ __________ ________ _________ Total gas utility plant. . . . . . . . . 179,165 21,564 1,448 9 199,290 _________ _________ __________ ________ _________ Total utility plant. . . . . . . . . . . $2,234,034 $ 138,170 $ 14,907 $ (47) $2,357,250 ========= ========= ========== ======== ========= _________________________ (a) Reference is made to Note 1 to Consolidated Financial Statements. (b) Represents retirements charged to accumulated depreciation (Schedule VI). (c) Represents land and buildings transferred to other physical property, amortization of franchises and plant acquisition adjustments. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE V (3 of 3) CIPSCO INCORPORATED AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT AT ORIGINAL COST (a) YEAR ENDED DECEMBER 31, 1991 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Column F Transfers and Retirements Amortization Balance Additions or Sales at of Balance Classification of Property Dec. 31, 1990 at Cost Cost(b) Franchises(c) Dec. 31, 1991 __________________________ _____________ ___________ ___________ _____________ _____________ ELECTRIC UTILITY PLANT: Electric utility plant in service-- Intangible. . . . . . . . . . . . . . . . $ 52 $ - $ - $ - $ 52 Production. . . . . . . . . . . . . . . . 1,138,222 6,794 3,483 2 1,141,535 Transmission. . . . . . . . . . . . . . . 258,482 3,437 766 49 288,202 Distribution. . . . . . . . . . . . . . . 380,381 18,449 3,430 (6) 395,394 General . . . . . . . . . . . . . . . . . 77,718 8,474 2,313 (46) 83,833 Electric plant held for future use. . . . . 1,294 231 - (308) 1,217 Construction work in progress . . . . . . . 34,752 21,956 - - 56,708 Completed construction not classified . . . 48,266 39,662 - - 87,928 _________ _________ __________ ________ _________ Total electric utility plant . . . . . . 1,966,167 99,003 9,992 (309) 2,054,869 _________ _________ __________ ________ _________ GAS UTILITY PLANT: Gas utility plant in service-- Intangible. . . . . . . . . . . . . . . . 40 - - - 40 Production. . . . . . . . . . . . . . . . 1,217 - - (1) 1,216 Storage . . . . . . . . . . . . . . . . . 15,126 40 3 - 15,163 Transmission. . . . . . . . . . . . . . . 32,929 134 62 - 33,001 Distribution. . . . . . . . . . . . . . . 102,236 5,253 830 - 106,664 General . . . . . . . . . . . . . . . . . 7,468 1,167 731 5 7,880 Gas plant held for future use . . . . . . . 41 - - (24) 37 Construction work in progress . . . . . . . 2,439 (665) - (4) 1,774 Completed construction not classified . . . 4,440 8,950 - - 13,390 _________ _________ __________ ________ _________ Total gas utility plant. . . . . . . . . 165,936 14,879 1,626 (24) 179,165 _________ _________ __________ ________ _________ Total utility plant. . . . . . . . . . . $2,132,103 $ 113,882 $ 11,618 $ (333) $2,234,034 ========= ========= ========== ======== ========= _________________________ (a) Reference is made to Note 1 to Consolidated Financial Statements. (b) Represents retirements charged to accumulated depreciation (Schedule VI). (c) Represents land and buildings transferred to other physical property, amortization of franchises and plant acquisition adjustments. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE VI (1 of 3) CIPSCO INCORPORATED AND SUBSIDIARIES ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1993 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Additions(a) Deduction(a) _____________________________ ______________________ Balance Charged Charged Retirements Cost of Balance Description Dec. 31, 1992 to Income(b) Other Accounts at Cost Removal Dec. 31, 1993 ___________ _____________ ____________ ______________ ___________ ________ _____________ Electric . . . . . . . . . . $882,353 $ 69,229 $ 7,328 $ 16,570 $ 5,998 $ 936,342 Gas. . . . . . . . . . . . . 79,066 5,273 783 846 521 83,755 _______ _______ _______ _______ _______ _________ Total . . . . . . . . . $961,419 $ 74,502 $ 8,111(c) $ 17,416 $ 6,519 $1,020,097 ======= ======= ======= ======= ======= ========= _________________________ (a) Reference is made to Note 1 to Consolidated Financial Statements. Electric Gas Corporate Total ________ ________ _________ _______ (b) Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,876 $ 5,771 $415 $ 78,062 Amortization of major systems development, roads and rights-of-way . . (2,647) (498) - (3,145) _______ _______ ___ _______ $ 69,229 $ 5,273 $415 $ 74,917 ======= ======= === ======= (c) Depreciation charged to clearing and other accounts. . . . . . . . . . . . $ 3,672 Salvage and miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 4,439 _______ $ 8,111 ======= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE VI (2 of 3) CIPSCO INCORPORATED AND SUBSIDIARIES ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1992 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Additions(a) Deduction(a) _____________________________ ______________________ Balance Charged Charged Retirements Cost of Balance Description Dec. 31, 1991 to Income(b) Other Accounts at Cost Removal Dec. 31, 1992 ___________ _____________ ____________ ______________ ___________ ________ _____________ Electric . . . . . . . . . . $825,452 $ 66,345 $ 9,713 $ 13,459 $ 5,698 $882,353 Gas. . . . . . . . . . . . . 75,175 4,791 580 1,448 32 79,066 _______ _______ _______ _______ _______ _______ Total . . . . . . . . . $900,627 $ 71,136 $ 10,293(c) $ 14,907 $ 5,730 $961,419 ======= ======= ======= ======= ======= ======= _________________________ (a) Reference is made to Note 1 to Consolidated Financial Statements. Electric Gas Corporate Total ________ _______ _________ _______ (b) Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,902 $ 5,252 $ 16 $ 74,170 Amortizatin of major systems development, roads and rights-of-way. . . . . (2,557) (461) - (3,018) _______ _______ ___ _______ $ 66,345 $ 4,791 $ 16 $ 71,152 ======= ======= === ======= (c) Depreciation charged to clearing and other accounts. . . . . . . . . . . . $ 3,198 Salvage and miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 7,095 _______ $ 10,293 ======= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE VI (3 of 3) CIPSCO INCORPORATED AND SUBSIDIARIES ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1991 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Additions(a) Deduction(a) _____________________________ ______________________ Balance Charged Charged Retirements Cost of Balance Description Dec. 31, 1990 to Income(b) Other Accounts at Cost Removal Dec. 31, 1991 ___________ _____________ ____________ ______________ ___________ ________ _____________ Electric . . . . . . . . . . $774,242 $ 63,310 $ 4,912 $ 9,992 $ 7,020 $825,452 Gas. . . . . . . . . . . . . 71,948 4,475 680 1,626 302 75,175 _______ _______ _______ _______ _______ _______ Total . . . . . . . . . $846,190 $ 67,785 $ 5,592(c) $ 11,618 $ 7,322 $900,627 ======= ======= ======= ======= ======= ======= _________________________ (a) Reference is made to Note 1 to Consolidated Financial Statements. Electric Gas Total ________ _______ _______ (b) Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,880 $ 4,603 $ 69,483 Amortizatin of major systems development, roads and rights-of-way. . . . . (1,570) (128) (1,698) _______ _______ _______ $ 63,310 $ 4,475 $ 67,785 ======= ======= ======= (c) Depreciation charged to clearing and other accounts. . . . . . . . . . . . $ 2,872 Salvage and miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 2,720 _______ $ 5,592 ======= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE IX CIPSCO INCORPORATED AND SUBSIDIARIES SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Column F Weighted Average Amount Weighted Average Interest Maximum Amount Outstanding Average Interest Balance at Rate at Outstanding at During the Rate During Catetory End of Year End of Year Any Month-End Year(a) the Year(a) ________ ___________ _________________ ______________ ______________ ________________ 1993: _____ CIPS - Commercial Paper . . . - - $10,397 $ 1,992 3.38% CIC - Bank Line of Credit. . - - 6,800 3,509 3.62 ______ ______ Total $17,197 $ 5,501 ====== ====== 1992: _____ CIPS - Commercial Paper . . . $17,393 3.45% $17,393 $ 59 3.46% CIC - Bank Line of Credit. . 4,000 3.85 4,000 122 3.85 ______ ______ ______ Total $21,393 $21,393 $ 181 ====== ====== ====== 1991: _____ None __________________________ (a) Computed on a daily weighted average basis. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
SCHEDULE X CIPSCO INCORPORATED AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE THREE YEARS ENDED DECEMBER 31, 1993 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Charged to Costs and Expenses _____________________________ 1993 1992 1991 ____ ____ ____ Taxes other than income taxes: Real estate . . . . . . . . . . . . . . $ 7,517 $ 7,055 $ 7,301 Invested capital. . . . . . . . . . . . 8,876 8,888 8,989 Gross receipts and public utility . . . 30,961 27,207 30,150 Payroll . . . . . . . . . . . . . . . . 6,986 7,620 6,960 Other . . . . . . . . . . . . . . . . . 473 363 714 _______ _______ _______ $ 54,813 $ 51,133 $ 54,114 ======= ======= ======= The amounts charged to the respective accounts for royalties, advertising, and depreciation and amortization of intangible assets, preoperating costs and similar deferrals each aggregated less than one percent of total revenues. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CIPSCO Incorporated (Registrant) By C. L. GREENWALT _____________________________________ C. L. Greenwalt President and Chief Executive Officer Date: March 10, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated. Signature Title Principal Executive Officer: C. L. GREENWALT President and Chief Executive Officer and Director Principal Financial Officer: R. W. JACKSON Senior Vice President, Chief Financial Officer, Secretary, Director and as Attorney-in-Fact* Principal Accounting Officer: J. C. FIAUSH Controller, Chief Accounting Officer and Assistant Treasurer WILLIAM J. ALLEY* Director ROBERT S. ECKLEY* Director JOHN L. HEATH* Director GORDON R. LOHMAN* Director HANNE M. MERRIMAN* Director DONALD G. RAYMER* Director THOMAS L. SHADE* Director JAMES W. WOGSLAND* Director Date: March 10, 1994 EXHIBIT 3.02 BYLAWS OF CIPSCO INCORPORATED ARTICLE I SHARES AND TRANSFERS Section 1. Each holder of duly paid shares of the Company shall be entitled to a certificate or certificates stating the number and class of shares owned by such holder. Such certificates shall be signed by the appropriate officers of the Company (which, in the absence of contrary action by the Board, shall be the President or any Vice President and the Secretary or any Assistant Secretary of the Company); shall be sealed with the corporate seal of the Company, which seal may be facsimile; and shall be countersigned by a Transfer Agent, and countersigned and registered by a Registrar, appointed by the Board. If a certificate is countersigned by a Transfer Agent and countersigned and registered by a Registrar, other (in each case) than the Company itself or its employee, the signature of either or both of such officers of the Company, and the countersignature of any such Transfer Agent or its officer or employee, may be facsimiles. In case any officer of the Company, or any officer or employee of a Transfer Agent, who has signed or whose facsimile signature has been placed upon any such certificate shall cease to be an officer of the Company or an officer or an employee of the Transfer Agent, as the case may be, before such certificate is issued, the certificate may be issued by the Company with the same effect as if such officer of the Company or such officer or employee of the Transfer Agent had not ceased to be such at the date of issue of such certificate. Section 2. Shares shall be transferable only on the books of the Company and upon proper endorsement and surrender of the outstanding certificate or certificates representing such shares. If an outstanding certificate shall be lost, destroyed or stolen, the holder thereof may have a new certificate upon producing evidence satisfactory to the Company of such loss, destruction or theft and upon furnishing to the Company, the Transfer Agent and the Registrar indemnity deemed sufficient by the Company. Section 3. Notwithstanding the foregoing provisions of this Article I, the Board of Directors may also provide by resolution that some or all of any or all classes and series of its shares shall be uncertificated shares, provided that such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Company. Except as otherwise provided by statute, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. The annual meeting of the shareholders shall be held on the fourth Wednesday in April of each year (or if such day shall be a legal holiday in Illinois then upon the following day) or upon such other day determined by resolution of the Board of Directors. Each such regular annual meeting shall be held at such time and at such location, within or without the State of Illinois, as the Board of Directors shall order. At such annual meeting, a board of directors shall be elected and such other business shall be transacted as may properly come before such meeting. Section 2. Special meetings of the shareholders may be called by the President, by the Board of Directors, by the holders of not less than one-fifth of all the outstanding shares entitled to vote on the matter for which the meeting is called, or in such other manner as may be provided by statute. Each such special meeting shall be held at such location, within or without the State of Illinois, as the Board of Directors shall order. Section 3. Written notice of the place, day and hour of each meeting of shareholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each shareholder of record entitled to vote at such meeting. Such notice shall be sent by mail to each such shareholder, at the address of such shareholder as it appears on the records of the Company, not less than ten days or more than sixty days before the date of the meeting, except in cases where some other special method of notice may be required by statute, in which case the statutory method shall be followed. Notice of any meeting of the shareholders may be waived by any shareholder. Attendance of a shareholder (either in person or by proxy) at any meeting shall constitute waiver of notice thereof unless the shareholder (in person or by proxy, as the case may be) at the meeting objects to the holding of the meeting because proper notice was not given. Section 4. At any shareholders' meeting a majority of the shares outstanding and entitled to vote on the matter (excluding such shares as may be owned by the Company) must be represented (either in person or by proxy) in order to constitute a quorum for consideration of such matter, but the shareholders represented at any meeting, though less than a quorum, may adjourn the meeting to some other day or sine die. If a quorum is present (either in person or by proxy) at a shareholders' meeting, the affirmative vote of the holders of the majority of shares represented at the meeting and entitled to vote on a matter shall be the act of the shareholders, unless the vote of a greater number or voting by classes shall be required by law or the Articles of Incorporation. Section 5. The President and Secretary of the Company shall act as Chairman and Secretary, respectively, of each shareholders' meeting, unless the shareholders represented at the meeting shall otherwise decide. ARTICLE III BOARD OF DIRECTORS Section 1. The business and affairs of the Company shall be managed by or under the direction of the Board of Directors consisting of not less than seven or more than twelve members. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. Any vacancy occurring in the Board of Directors arising between meetings of shareholders by reason of an increase in the number of directors or otherwise may be filled by a majority of the members of the Board. Section 2. A meeting of the Board of Directors shall be held on the same date as the annual meeting of shareholders in each year, at the same place where such annual meeting shall have been held or at such other place as shall be determined by the Board. A regular meeting of the Board shall be held at the general offices of the Company in Springfield, Illinois, or at such other place as shall be specified in the notice of such meeting, on the first Tuesday of the months of June, August, October, December, and February of each year. Notice of every such regular meeting of the Board, stating the place, day and hour of the meeting, shall be given to each director personally, or by telegraph or other written means of electronic communication, or by depositing the same in the mails properly addressed, at least two days before the date of such meeting. Except where required by statute, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice or waiver of notice of such meeting. Section 3. Special meetings of the Board of Directors may be called at any time by the President, or by a Vice President, when acting as President, or by any two directors. Notice of such meeting, stating the place, day and hour of the meeting shall be given to each director personally in writing, or by telegraph or other written means of electronic communication, or by depositing the same in the mails properly addressed, or orally promptly confirmed by written notice in any one of the aforesaid forms, not less than the day prior to the date of such meeting. Section 4. Notice of any meeting of the Board may be waived by any director. Attendance of a director at any meeting shall constitute waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting to the transaction of any business at the meeting because the meeting is not lawfully called or convened. Section 5. A majority of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board, but less than a majority of the Board may adjourn the meeting to some other day or sine die. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the vote of a greater number or the vote of any class of directors shall be required by the Articles of Incorporation. The President of the Company shall act as Chairman at each meeting of the Board but, in the President's absence, one of the directors present at the meeting who shall have been elected for the purpose by majority vote of those directors in attendance shall act as Chairman; and the Secretary of the Company, or in the Secretary's stead, an Assistant Secretary shall act as Secretary at each such meeting. The members of the Board shall receive such compensation as the Board may from time to time by resolution determine. ARTICLE IV COMMITTEES OF THE BOARD OF DIRECTORS Section 1. A majority of directors may appoint committees, standing or special, from time to time from among members of the Board, and confer powers on such committees and revoke such powers and terminate the existence of such committees at its pleasure. Section 2. Meetings of any committee may be called in such manner and may be held at such times and places as such committee may by resolution determine, provided that a meeting of any committee may be called at any time by the President of the Company. Members of all committees shall receive such compensation as the Board of Directors may from time to time by resolution determine. Section 3. Each committee shall have such authority of the Board of Directors as shall be granted to it by the Board; provided, however, a committee may not take any action not permitted to be taken by a committee pursuant to the Business Corporation Act of 1983, as amended from time to time. ARTICLE V OFFICERS Section 1. There shall be elected by the Board of Directors (if practicable at its first meeting after the annual election of directors in each year) the following principal officers, namely: A President, such number of Vice Presidents as the Board may from time to time decide upon (any one or more of whom may be designated as Executive Vice President, Senior Vice President or otherwise), a Secretary and a Treasurer. The Board of Directors may, in its discretion, determine that the principal officers of the Company shall include a Controller in which case the Controller shall be elected in the same manner as other principal officers. References in these Bylaws to Vice Presidents shall include any such Executive Vice President, Senior Vice President or other Vice President, however denominated. The Board may in its discretion also elect such other officers as may from time to time be provided for by the Board. Any two or more offices may be held by the same person. All officers, unless sooner removed, shall hold their respective offices until the first meeting of the Board of Directors after the next succeeding annual election of directors and until their successors, willing to serve, shall have been elected, but any officer, including any officer appointed by the President as provided in Section 2 of this Article V, may be removed from office at the pleasure of the Board. Election or appointment of an officer shall not of itself create contract rights. Section 2. The President shall be the chief executive officer of the Company and shall have the general management and direction, subject to the control of the Board of Directors, of the business of the Company, including the power to appoint and to remove and discharge any and all assistant officers, agents and employees of the Company not elected or appointed directly by the Board of Directors. The President may execute for and on behalf of the Company any contracts, deeds, mortgages, leases, bonds, or other instruments and may accomplish such execution either under or without the seal of the Company and either individually or with the Secretary, any Assistant Secretary, or any other officer or person thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument. The President shall have such other powers and duties as usually devolve upon the president of a corporation, and such further powers and duties as may from time to time be prescribed by the Board of Directors. The President may delegate any part of the duties of that office to one or more of the Vice Presidents of the Company. Section 3. Each of the Vice Presidents shall have such powers and duties as may be prescribed for such office by the Board of Directors or as may be prescribed for or delegated to such officer by the President. Each Vice President may execute for and on behalf of the Company any contracts, deeds, mortgages, leases, bonds, or other instruments in each case in accordance with the authority therefor granted by the President or the Board of Directors, which authority may be general or confined to specific instances. Such execution may be accomplished either individually or with any other officer or person thereunto authorized by the President or the Board of Directors, according to the requirements of the form of the instrument. In the absence or inability of the President or in case of the President's death, resignation or removal from office, the powers and duties of the President shall temporarily devolve upon such one of the Vice Presidents as the Board shall have designated or shall designate for the purpose and the Vice President so designated shall have and exercise all the powers and duties of the President during such absence or disability or until the vacancy in the office of President shall be filled. Each Vice President may delegate any part of the duties of that office to employees of the Company under the respective Vice President's supervision. Section 4. The Secretary shall attend all meetings of the Board of Directors, shall keep a true and faithful record thereof in proper books to be provided for that purpose, and shall have the custody and care of the corporate seal, records, minutes and stock books of the Company. The Secretary shall also act as Secretary of all shareholders' meetings, and keep a record thereof, except to the extent some other person may have been selected to act as Secretary by such meeting. The Secretary shall keep a suitable record of the addresses of shareholders, shall have general charge of the stock transfer books of the Company, and shall, except as may be otherwise required by statute or by the Bylaws, sign , issue and publish all notices required for meetings of shareholders and for meetings of the Board of Directors. The Secretary shall sign all share certificates, bonds and mortgages, and all other documents and papers to which the Secretary's signature may be necessary or appropriate, shall affix the seal of the Company to all instruments requiring the seal, and shall have such other powers and duties as are commonly incidental to the office of Secretary or as may be prescribed for or delegated to that office by the Board of Directors, by the President, or, if authorized by the Board or the President to prescribe such powers and duties, by a Vice President. The Secretary may delegate any part of the duties of that office to employees of the Company under the Secretary's supervision. Section 5. The Treasurer shall have charge of, and be responsible for, the collection, receipt, custody and disbursement of the funds of the Company, and the deposit of funds in the name of the Company in such banks, trust companies or safety vaults as the Board of Directors may direct which direction may be general or confined to specific depositories. The Treasurer shall have custody of such books, receipted vouchers and other papers and records as in the practical business operations of the Company shall naturally belong in the office or custody of the Treasurer or as shall be placed in the custody of the Treasurer by the Board of Directors, by the President, or, if authorized by the Board or the President, by a Vice President. The Treasurer shall have such other powers and duties as are commonly incidental to the office of Treasurer or as may be prescribed for or delegated to that office by the Board of Directors, by the President, or, if authorized by the Board or the President to prescribe such powers and duties, by a Vice President. The Treasurer may be required to give a bond to the Company for the faithful discharge of the Treasurer's duties, in such form and in such amount and with such sureties as shall be determined by the Board of Directors. The Treasurer may delegate any part of the Treasurer's duties to employees of the Company under the Treasurer's supervision. Section 6. Except as otherwise provided in these Bylaws and except as otherwise provided by the Board of Directors, the Controller, if designated as a principal officer of the Company, will be responsible for the establishment and maintenance of accounting procedures, the interpretation of all financial statements and accounting reports of the Company and functional supervision over the records of all other departments of the Company pertaining to revenues, expenses, moneys, securities, properties, materials and supplies. The Controller shall have such other powers and duties as are commonly incidental to the office of Controller or as may be prescribed for or delegated to the Controller by the Board of Directors, by the President, or, if authorized by the Board or the President to prescribe such powers and duties, by a Vice President. The Controller may be required to give a bond to the Company for the faithful discharge of the Controller's duties, in such form and in such amount and with such sureties as shall be determined by the Board of Directors. The Controller may delegate any part of the Controller's duties to employees of the Company under the Controller's supervision. Section 7. The Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers shall, respectively, assist the Vice Presidents, the Secretary, the Treasurer and the Controller of the Company in the performance of the respective duties assigned to such principal officers and, in assisting the respective principal officer, each assistant officer shall, for such purposes, have the same powers as the respective principal officer. The powers and duties of any principal officer shall, except as otherwise ordered by the Board of Directors, temporarily devolve upon the respective assistant in case of the absence, disability, death, resignation or removal from office of such principal officer. ARTICLE VI MISCELLANEOUS Section 1. The funds of the Company shall be deposited to its credit in such banks or trust companies as the Board of Directors from time to time shall approve, which approval may be general or confined to specific instances. Such funds shall be withdrawn only on checks or drafts of the Company or by direct, wire or other electronic transfer of funds for the purposes of the Company in accordance with procedures relating to signatures and authorizations by officers of the Company which are approved by the Board of Directors from time to time, which approval may be general or confined to specific instances. Section 2. No debts shall be contracted except for current expenses unless authorized by the Board of Directors, and no bills shall be paid by the Treasurer unless audited and approved by the Controller or by some other person or committee authorized by the Board of Directors to audit and approve bills for payment. Section 3. All distributions to shareholders and all acquisitions by the Company of its own shares shall be authorized by the Board of Directors. Section 4. The fiscal year of the Company shall close at the end of December annually. Section 5. All or any shares of stock of any corporation owned by the Company may be voted at any meeting of the shareholders of such corporation by the President, any Vice President or the Secretary of the Company upon any question that may be presented at such meeting, and any such officer may, on behalf of the Company, waive any notice of the calling of such meeting required by any statute or bylaw and consent to the holding of any such meeting without notice. The President, any Vice President or the Secretary of the Company shall have authority to give to any person a written proxy in the name of the Company and under its corporate seal to vote at any meeting of the shareholders of any corporation all or any shares of stock of such corporation owned by the Company upon any question that may be presented at such meeting, with full power to waive any notice of the calling of such meeting required by any statute or bylaw and to consent to the holding of any such meeting without notice. Section 6. (a) The Company shall indemnify any person who was or is a party, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or who is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, if such person had no reasonable cause to believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, that the person had reasonable cause to believe that such person's conduct was unlawful. (b) The Company shall indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, if the person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Company, provided that no indemnification shall be made with respect to any claim, issue, or matter as to which such person has been adjudged to have been liable to the Company, unless, and only to the extent that, the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. (c) To the extent that a director, officer, employee or agent has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in paragraph (a) or (b), or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. (d) Any indemnification under paragraph (a) or (b) (unless ordered by a court) shall be made by the Company only as authorized in the specific case, upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in paragraph (a) or (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the shareholders of the Company. (e) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Company as authorized in this Section 6. (f) The indemnification and advancement of expenses provided by or granted under the other subsections of this Section 6 shall be effective with respect to acts, errors or omissions occurring prior to, on or subsequent to the date of adoption hereof and such indemnification shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action by a director, officer, employee or agent in such person's official capacity and as to action in another capacity while holding such office. (g) The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or who is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of this Section 6. (h) If the Company has paid indemnity or has advanced expenses to a director, officer, employee or agent, the Company shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting. (i) For purposes of this Section 6 references to "the Company" shall include, in addition to the surviving corporation, any merging corporation (including any corporation having merged with a merging corporation) absorbed in a merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers, and employees or agents, so that any person who was a director, officer, employee or agent of such merging corporation, or was serving at the request of such merging corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section 6 with respect to the surviving corporation as such person would have with respect to such merging corporation if its separate existence had continued. (j) For purposes of this Section 6, references to "other enterprise" shall include employee benefit plans, and references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner such person reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Section 6. (k) The indemnification and advancement of expenses provided by or granted under this Section 6 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of that person. ARTICLE VII AMENDMENT OR REPEAL OF BYLAWS These Bylaws may be added to, amended or repealed by the Board of Directors at any regular or special meeting of the Board. STATE OF ILLINOIS ) )SS. COUNTY OF SANGAMON ) I, the undersigned, hereby certify that I am Assistant Secretary of CIPSCO Incorporated and the Custodian of the books and records of said Company. I further certify that the above and foregoing is a true copy of the Bylaws of said Company in effect on February 1, 1994. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of said Company this 10th day of March, A.D. 1994. ___/s/Craig D. Nelson____________ (CORPORATE SEAL) EXHIBIT 10.02 A G R E E M E N T This AGREEMENT made this _______ day of _________,19__, by and between CIPSCO Incorporated, an Illinois corporation (hereinafter called the "Company"), and ___________________________ (hereinafter called the "Director"). WITNESSETH: WHEREAS, the Director is a member of the Board of Directors of the Company; and WHEREAS, the Company and the Director desire to enter into this Agreement with respect to compensation to accrue to the Director as a member of the Board of Directors commencing _________, 19__ * (the "Effective Date"); NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth it is agreed: 1. The Director shall serve diligently and honestly in the administration of the affairs of the Company during his or her service as a director. 2. As compensation for the services to be rendered by the Director to the Company, the Company shall set up on its books an account in the name of the Director to which shall be accrued, commencing with the Effective Date and continuing for the period that compensation is to be accrued hereunder, the amounts provided in subparagraphs (a) and (b) hereof. (a) There shall be accrued to the account amounts equivalent to such amounts as the Director would have received as a director of the Company as compensation for the services rendered by the Director but for this Agreement, such accruals to commence as of the respective dates payment of such amounts would have been made by the Company. * January 1 of the year following the date of the Agreement. (b) There shall be accrued an additional amount equivalent to such amounts as would have been available if the amount accrued to the account were invested in the Company's Common Stock at the closing price as reported in the listing of the New York Stock Exchange - Composite Transactions for the trading day coincident with or next following the date payment would have been made to the Director but for this Agreement, including subsequent cash dividends on the shares of Common Stock treated as credited to the Director's account. Such cash dividends shall be treated as automatically reinvested in the Company's Common Stock at the closing price as reported in the listing of the New York Stock Exchange - Composite Transactions for the trading day coincident with or next following the applicable dividend payment date. Adjustments of the value of the account for appreciation or depreciation in the market value of shares of Common Stock deemed to be so held will be made on any applicable valuation date using the closing price as reported in the listing of the New York Stock Exchange - Composite Transactions. 3. The amount accrued to the Director's account shall be paid over in accordance with the provisions of this paragraph 3. (a) Commencing with the last day of the calendar quarter in which the Director shall have retired as a director of the Company and its affiliates, the Company shall pay, or commence to pay, to the Director in cash the amount accrued to his or her account as of such date. The manner of payment shall be in accordance with Payment Method 1 below or Payment Method 2 below, whichever the Director designates at the end of this Agreement as the method of payment; provided, however, that the Director may elect from time to time to change as of any January 1 his or her payment designation by filing an appropriate written direction with the Company prior to the January 1st as which the change is to be effective. A change in payment designation, however, shall only be effective with respect to amounts to be accrued to the Director's account attributable to years of service commencing on or after the effective date of such change for which compensation is accrued under Paragraph 2(a) of this Agreement. A payment designation shall be irrevocable with respect to amounts accrued to the Director's account that are attributable to years of service commencing prior to such January 1st during which the payment designation was in effect. PAYMENT METHOD 1 -- The portion of the Director's account covered by this Payment Method 1 shall be paid over in equal quarterly installments, the number of which shall be the lesser of (i) 20 or (ii) the number of calendar quarters during which compensation was accrued under this Agreement and under any similar agreement with the Company or an affiliate of the Company (but not counting any such calendar quarter more than once). In addition, the Company shall pay to the Director quarterly an amount equivalent to interest on the balance of such portion of his or her account from time to time unpaid, at a rate, in respect of each quarterly payment, equal to the rate of interest obtained at the auction of six month United States Treasury Bills taking place nearest to the first day of the calendar quarter for which the payment is made. PAYMENT METHOD 2 -- The portion of the Director's account covered by this Payment Method 2 shall be paid over in one of the following methods as the Company,in its sole discretion, shall determine prior to the Director's retirement after consultation with the Director: (i) By payment in a lump sum, or (ii) By payment in equal quarterly installments, the number of which shall be the lesser of (i) 20 or (ii) the number of calendar quarters during which compensation was accrued under this Agreement and under any similar agreement with the Company or an affiliate of the Company (but not counting any such calendar quarter more than once). In addition, the Company shall pay to the Director quarterly an amount equivalent to interest on the balance of such portion of his or her account from time to time unpaid at a rate, in respect of each quarterly payment, equal to the rate of interest obtained at the auction of six month United States Treasury Bills taking place nearest to the first day of the calendar quarter for which the payment is made. (b) Upon the death of the Director prior to complete distribution of the amount accrued to his or her account, any undistributed amount shall be paid in cash in a lump sum to such beneficiaries and in such proportions among them as the Director shall have designated in the latest instrument in writing filed by the Director with the Company. If there shall be no beneficiary designated or in existence at the Director's death, any undistributed amount shall be paid to the executor or administrator of the Director's estate. If the death of the Director occurs prior to retirement, the amount to be distributed shall be based on the value of his or her account as of the last day of the calendar quarter in which death occurs. 4. The Director, by filing an appropriate written direction with the Company prior to January 1 of any calendar year, may have the amounts payable for service referred to in paragraph 2 subsequent to such January 1 paid in cash. Any such direction shall be effective with respect to all future calendar years until revoked by the Director filing an appropriate written direction with the Company prior to January 1 of any calendar year to the have the amounts payable for such services subsequent to January 1 accrued hereunder. 5. The Director shall have no power to commute, encumber, sell or otherwise dispose of the rights provided herein and such rights shall be non-assignable and non-transferable. 6. This Agreement shall be binding upon and inure to the benefit of the Director, his heirs, executors and administrators, and the Company, its successors and assigns. 7. All amounts payable under this Agreement shall be paid by the Company from its general assets. No trust fund or other fund shall be created or held for the financing of such amounts. 8. Attached hereto and incorporated herein are the Elections of Director, dated the date hereof, made under this Agreement. Such elections are hereby acknowledged by the Company. IN WITNESS WHEREOF, the parties have signed this Agreement on the day and year first above written. CIPSCO INCORPORATED By_____________________________ ATTEST: _______________________ Secretary ____________________________________ Director ELECTIONS INSTRUCTION: CHECK APPROPRIATE BOXES AND FILL IN BLANKS. 1. Payment Method Under Paragraph 3: Subject to my right to change my payment designation to the extent provided in Paragraph 3 of the Agreement, I designate the following method for payment of amounts accrued to my account under the Agreement: / / Payment Method 1 / / Payment Method 2 2. Beneficiary: My beneficiary(ies) are as indicated on the attached "Designation of Beneficiary." Name of Director ________________________ Date ____________________ * * Date as of date Agreement is signed, same date as in caption on page 1. _____________________________________________________________ Name of Director Account No. CIPSCO INCORPORATED DEFERRED COMPENSATION AGREEMENT ___________________ DESIGNATION OF BENEFICIARY 1. Pursuant to the provisions of the Deferred Compensation Agreement ("Agreement") between CIPSCO Incorporated and me, dated ____________________, 19______, I hereby designate the followingas the beneficiary(ies) to whom the entire undistributed amount accrued to my account under the Agreement shall be paid in the event of my death: Address (Street, City, Birth % of Full Name State & Zip Code) Relationship Date Dist. __________ __________________ ____________ _____ ________ __________ __________________ ____________ _____ ________ __________ __________________ ____________ _____ ________ __________ __________________ ____________ _____ ________ If I have designated above more than one beneficiary, payment of such undistributed amount shall be made to the beneficiary(ies) surviving me in the percentage indicated; provided,however, if any beneficiary shall not survive me, such beneficiary's share shall be paid to the beneficiaries(ies) who do survive me pro-rata based on the percentages indicated. 2. If no beneficiary designated above survives me, I hereby designate the following contingent beneficiary(ies) to whom the entire undistributed amount accrued to my account under the Agreement shall bepaid in the event of my death: Address (Street, City, Birth Perct of Full Name State & Zip Code) Relationship Date Distrib. ___________ _________________ ____________ ______ ___________ ___________ _________________ ____________ ______ ___________ ___________ _________________ ____________ ______ ___________ ___________ _________________ ____________ ______ ___________ If I have designated above more than one contingent beneficiary, payment of such undistributed amount shall be made to the contingent beneficiary(ies) surviving me in the percentage indicated; provided, however,if any beneficiary shall not survive me, such beneficiary's share shall bepaid to the beneficiary(ies) who do survive me pro-rata based on the percentages indicated. 3. I hereby revoke any previous beneficiary designations made by me with respect to the Agreement. IN WITNESS WHEREOF, I have signed this designation in duplicate this _______________ day of __________,19____. _____________________________________ Signature of Director The foregoing is in accordance with our records. CIPSCO INCORPORATED By __________________________ EXHIBIT 10.04 Form of Special Executive Retirement Plan Amendment No. 3 Qualifying executives of CIPSCO Incorporated may also participate in the Special Executive Retirement Plan as shown under Exhibit 10.03 of the Central Illinois Public Service Company Annual Report Form 10-K. Amendment No. 3, shown as Exhibit 10.04 to the Central Illinois Public Service Company Annual Report Form 10-K, also applies to the CIPSCO Incorporated Special Executive Retirement Plan. EXHIBIT 10.08 Form of Excess Benefit Retirement Plan Amendment No. 1 Qualifying employees of CIPSCO Incorporated may also participate in the Excess Benefit Retirement Plan as shown under Exhibit 10.07 of the Central Illinois Public Service Company Annual Report Form 10-K. Amendment No. 1, shown as Exhibit 10.08 of the Central Illinois Public Service Company Annual Report Form 10-K, also applies to the CIPSCO Incorporated Excess Benefit Retirement Plan. Exhibit 12 CIPSCO INCORPORATED AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES FOR THE FIVE YEARS ENDED DECEMBER 31, 1993 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = 1993 1992 1991 1990 1989 ___________ ___________ ___________ ___________ ___________ Net income. . . . . . . . . . . . . . . . . . . $ 85,498 $ 72,499(c) $ 72,065(c) $ 65,756(c) $ 65,366(c) Add--Federal and state income taxes: Current (a) . . . . . . . . . . . . . . . . . 41,320 5,380 34,717 43,107 48,653 Deferred (net). . . . . . . . . . . . . . . . 13,907 38,707 12,078 (3,911) (2,718) Deferred investment tax credits, net. . . . . (3,366) (3,336) (3,464) (3,306) (3,288) Income tax applicable to provision for prior period revenue refunds. . . . . . - - - - (7,465) _______ _______ _______ _______ _______ 51,861 40,751 43,331 35,890 35,182 _______ _______ _______ _______ _______ Net income before income taxes. . . . . . . . . 137,359 113,250 115,396 101,646 100,548 _______ _______ _______ _______ _______ Add--Fixed charges Interest on long-term debt (b). . . . . . . . 32,823 35,534 36,652 36,589 36,604 Interest on provision for revenue refunds . . - (803) 4,261 3,396 3,432 Other interest. . . . . . . . . . . . . . . . 603 398 1,231 1,070 1,052 Amortization of net debt premium and discount (b). . . . . . . . . . . . . . . . 1,598 863 338 326 290 Preferred stock dividend of subsidiary. . . . 3,718 4,549 5,396 5,617 5,856 _______ _______ _______ _______ _______ 38,742 40,541 47,878 46,998 47,234 _______ _______ _______ _______ _______ Earnings as defined . . . . . . . . . . . . . $176,101 $153,791 $163,274 $148,644 $147,782 ======= ======= ======= ======= ======= Fixed charges . . . . . . . . . . . . . . . . . 38,742 40,541 47,878 46,998 47,234 Adjustment to pre-tax basis . . . . . . . . . . 2,255 2,557 3,244 3,065 3,152 _______ _______ _______ _______ _______ 40,997 43,098 51,122 50,063 50,386 Ratio of earnings to fixed charges adjusted to pre-tax basis . . . . . . . . . . 4.30 3.57 3.19 2.97 2.93 ======= ======= ======= ======= ======= _________________________ (a) Federal portion and state portion are shown separately in Consolidated Notes to Financial Statements. (b) Combined as interest charges on long-term debt on Statements of Income. (c) Includes revenues collected subject to refund as discussed in Note 11 to Financial Statements. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
Exhibit 13 CIPSCO Incorporated Management's Discussion and Analysis CIPSCO Incorporated is a holding company incorporated under the laws of Illinois. Its principal subsidiary is Central Illinois Public Service Company (CIPS), an electric and natural gas utility. Another subsidiary, CIPSCO Investment Company (CIC), has subsidiaries engaged in non-utility investing activities. Material changes in the consolidated financial condition and results of operations are primarily attributable to CIPS operations, except where noted. CIPSCO INCORPORATED Fundamental strengths of the financial position of CIPSCO and its subsidiaries remained intact during 1993. CIPSCO's business activities are conducted by CIPS and CIC. A discussion of the financial condition of CIPS and CIC follows in the sections below. CIPSCO may become involved in additional businesses or investments directly, through a subsidiary or through the formation of one or more additional subsidiaries. The sources of capital to finance these activities will depend on the nature of the investment and market conditions. The total number of shares of common stock authorized under CIPSCO's articles of incorporation is 100 million. At year-end 1993, a total of 34,107,706 shares of common stock was outstanding, unchanged from a year earlier. No underwritten offerings of common stock are planned through 1998. CIPSCO is authorized to issue 4.6 million shares of preferred stock, none of which has been issued. There are no constraints in the CIPSCO articles of incorporation as to the amount of debt which may be issued. At year-end 1993, CIPSCO had no temporary investments or short-term borrowings. CIPSCO INVESTMENT COMPANY At year-end 1993, there were $85 million of non-utility investments managed by subsidiaries of CIC. One of those subsidiaries, CIPSCO Securities Company, manages marketable securities. At year end it had invested approximately $43 million in hedged portfolios of preferred and common stocks. Another subsidiary, CIPSCO Leasing Company, invests in long-term leveraged lease transactions. At year end, $33 million was invested in leased assets consisting of a commercial jet aircraft, an interest in a natural gas liquids plant, natural gas processing equipment and retail department store properties. A third subsidiary, CIPSCO Energy Company, was formed in 1993 to seek energy-related investment opportunities. Its first investment was the purchase of leases for six combustion gas turbine generating units. At year end, CIPSCO Energy had invested a total $9 million in leased energy assets. In the near term, CIC will seek additional investments which yield higher returns than the types of temporary investments available to CIPS. The long-term goal of CIC's investment policy is to earn returns that exceed the allowed return in the regulated utility business. CIC may become involved in additional non-utility activities directly, through a subsidiary or through the formation of one or more additional subsidiaries. The sources of capital to finance these activities will depend on the nature of the investment and market conditions. At year-end 1993, CIC had $2.8 million of temporary investments and no short-term borrowings. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY FINANCIAL CONDITION. The utility's financial position remained fundamentally strong during 1993. A strong capital structure and strong cash flows have minimized the need to access capital markets, other than for refinancings, in recent years. Neither CIPSCO nor CIPS has raised additional capital through the sale of common stock to the general public since 1980. Common stock was issued and sold to existing shareholders by CIPS through a dividend reinvestment plan until 1984. The long-range financial objectives for the capital structure of the utility subsidiary are: a debt ratio of no more than 45 percent, a common equity ratio of no less than 45 percent, and a preferred equity ratio of no more than 10 percent. At December 31, 1993, capitalization consisted of 43 percent long-term debt, 50 percent common equity and 7 percent preferred stock. At year end, 25,452,373 shares of CIPS common stock were outstanding, all of which were held by CIPSCO Incorporated. During 1993, 884,345 shares of common stock were repurchased by CIPS from CIPSCO as a means of conveying funds to the parent company for dividend payments and other corporate purposes. CAPITAL REQUIREMENTS. Construction expenditures were $88 million in 1993. Of that amount, $77 million and $11 million related to improvements and replacements to the electric and natural gas systems, respectively. In 1994 construction expenditures are expected to be about $87 million. Of that amount, $77 million is scheduled for electric facilities, while gas system expenditures are estimated at $10 million. Construction expenditures are estimated at $431 million for the five-year period 1994-1998. This is $31 million, or seven percent, less than was spent in the preceding five years. In addition to construction funds, projected capital requirements for the 1994-1998 period include $93 million for scheduled debt retirements. FINANCING REQUIREMENTS. Capital requirements for the 1994-1998 period are expected to be met primarily through internally generated funds. External financing to fund scheduled debt retirements will be required. If external financing were needed to fund the construction program, such financing could consist of funds from the parent, the issuance of short-term debt, long-term debt or preferred stock, or any combination of the four. Refinancings to lower the costs of capital may also occur, depending on market conditions. On April 6, 1993, CIPS issued $65 million of first mortgage bonds to refinance higher-cost debt issues. On May 4, 1993, and October 13, 1993, CIPS issued $30 million and $12.5 million of preferred stock, respectively. The new issues were used to redeem the utility's outstanding 7.48% Series and 8.08% Series of preferred stock, and to raise $15 million of additional capital. During the year, CIPS refinanced $130 million of pollution control loan obligations to achieve lower rates of interest. Financing requirements may be affected by such factors as availability and cost of capital, load growth, changes in construction expenditures, regulatory developments, changes in environmental regulations and other governmental activities. FINANCING FLEXIBILITY AND LIQUIDITY. The utility's ability to finance the construction program at reasonable cost and to provide for other capital needs is dependent upon its ability to earn a fair return on capital. Financing flexibility is enhanced by providing a high percentage of total capital requirements from internal sources and having the ability, if necessary, to issue long-term securities and to obtain short-term credit. Flexibility also is provided by the parent corporation which is capable of providing additional capital if circumstances warrant. The utility's mortgage indenture limits the amount of first mortgage bonds which may be issued. At December 31, 1993, CIPS could have issued about $532 million of additional first mortgage bonds under the indenture, assuming an annual interest rate of 7.25 percent. CIPS' articles of incorporation limit amounts of preferred stock which may be issued. Assuming a preferred dividend rate of 6.75 percent, the utility could have issued all $185 million of authorized, but unissued preferred stock remaining as of year end. At year-end 1993, CIPS had $2.7 million of temporary investments. There were no short-term borrowings. CONSOLIDATED RESULTS OF OPERATIONS (1991-1993) EARNINGS. Net income and earnings per share increased 18 percent in 1993 to $85.5 million and $2.51, respectively. Net income and earnings per share increased one percent in 1992 to $72.5 million and $2.13, respectively. These increases were primarily attributable to improved results of operations at CIPS as described below. INVESTMENT REVENUES. Investment revenues are comprised of income from temporary investments, long-term marketable securities and leveraged leases. Investment revenues decreased three percent, or $.3 million, in 1993 due to a decline in average temporary investment balances during the year. The decrease was partially offset by higher returns on long-term investments held by CIC. In 1992, investment revenues decreased 12 percent, or $1.4 million, due to lower interest rates and a decline in temporary investment balances. Temporary investment balances of CIPS decreased in the last half of 1992 principally due to revenue refunds to customers resulting from the settlement of the revenue subject to refund proceedings in March 1992. (See Note 11 to Consolidated Financial Statements.) CIPS RESULTS OF OPERATIONS (1991-1993) ELECTRIC OPERATIONS. Electric revenues increased $93.2 million in 1993. Cooling degree days for 1993 were 37 percent higher than in 1992. Electric kilowatthour sales, including interchange sales, were 39 percent higher than a year ago. Revenues from electric interchange sales to other utility systems for economy and emergency purposes were $76.3 million, or $48.3 million higher than a year ago, reflecting much greater sales opportunities. The greater opportunities for sales resulted from hot weather, flooding conditions which limited availability of generating capacity at some neighboring utilities, and coal miners' strikes which hampered deliveries of coal at other utilities. These factors contributed to a significantly increased level of interchange economy and emergency sales which is unlikely to be matched in 1994. Electric revenues increased $3 million in 1992 as compared to 1991. The effects of a favorable settlement in the revenues subject to refund proceeding, and a rate increase of approximately one percent in March 1992, were offset by a one percent decrease in kilowatthour sales. The sales decrease was primarily caused by cooler summer weather in 1992. Cooling degree days for 1992 were 33 percent lower than in 1991. Fuel for electric generation increased eight percent, or $14.4 million, in 1993 primarily due to higher electric generation caused by increased kilowatthour sales. Kilowatthours generated increased 16 percent in 1993. Average fuel cost remained the same at $1.67 per million Btu in 1993, 1992 and 1991. Purchased power expense increased 185 percent, or $39.1 million in 1993 reflecting additional purchases principally used for economy and emergency interchange sales. Purchased power and fuel cost for electric generation increased three percent, or $5.7 million, in 1992 as compared to 1991. Kilowatthours generated decreased two percent in 1992. GAS OPERATIONS. Gas revenues increased nine percent to $145.7 million in 1993 as compared to 1992 due to increases in therm sales and a full heating season of the increased rates effective March 1992. Therm sales increased 21 percent primarily due to more industrial customers purchasing gas from the utility's system rather than from other gas suppliers. Residential therm sales increased 14 percent reflecting colder temperatures in 1993. Heating degree days were 13 percent higher in 1993 as compared to 1992. Gas revenues increased 14 percent to $133.8 million in 1992 due to increased rates effective in March 1992, and adjustments for higher purchased gas costs. Therm sales increased five percent in 1992 compared to 1991 primarily due to industrial customers purchasing gas from the utility's system rather than from other gas suppliers. The utility transported approximately 108 million therms of customer owned gas in 1993 compared with 118 million and 120 million therms in 1992 and 1991, respectively. Purchased gas costs increased $7.5 million, or nine percent, in 1993 due to higher therm sales, while the average price paid for purchased gas from suppliers remained unchanged. In 1992, purchased gas costs increased $9.4 million, or 13 percent, due to an average three-cent-per-therm price increase charged by gas suppliers. OPERATING EXPENSES. Other operation expense increased $11.4 million, or nine percent in 1993, and $15.5 million, or 13 percent in 1992 due principally, in each case, to postretirement medical expense which CIPS began accruing in April 1992 consistent with the related treatment afforded such costs for ratemaking. (See Note 5 to Consolidated Financial Statements.) Depreciation expense increased $3.9 million and $4.7 million in 1993 and 1992, respectively, due to property additions. Taxes other than income taxes increased in 1993 because utility taxes, which are based upon receipts from sales, increased as sales increased. Other taxes decreased in 1992 because the rate refund reduced amounts collected from customers which in turn reduced utility taxes. Interest on long-term debt and preferred dividend requirements decreased $2.8 million, or seven percent, in 1993, due to refinancing of long-term debt and preferred stock at lower interest and dividend rates. Interest on provision for revenue refunds was not applicable in 1993 and decreased in 1992 due to settlement of the revenue subject to refund proceeding in 1992. (See Note 11 to Consolidated Financial Statements.) Miscellaneous, net, for 1993 decreased $4.5 million, or 59 percent because Miscellaneous, net, for 1992 includes $3 million resulting from a Federal Energy Regulatory Commission (FERC) order issued February 12, 1992. That order reversed a 1989 order which required CIPS to refund to cooperative customers a portion of amounts paid to CIPS in a litigation settlement with a former coal supplier. Miscellaneous, net, increased in 1992 due to inclusion of the $3 million resulting from the FERC order. Income tax expense reflects the changes in pre-tax income in both 1993 and 1992. In addition, the federal tax rate changed from 34 percent to 35 percent effective January 1, 1993. OTHER MATTERS. Customer usage of electricity and natural gas varies with weather conditions, general business conditions, the state of the economy and the cost of energy services. The level of sales also is impacted by conditions in the interchange market. Further, certain large gas customers can purchase gas from alternative suppliers or bypass the utility's system by switching to other fuels or by connecting directly to pipelines. Forecasts indicate that retail sales growth will remain at the historical levels of the past decade. Rates for retail electric and gas service are regulated by the Illinois Commerce Commission. Non-retail electric rates are regulated by FERC. The utility's rates are designed to recover operating costs including depreciation on utility plant investment. Inflation continues to be a factor affecting its operations, earnings, shareholders' equity and financial performance. Changes in the cost of fuel for electric generation and purchased gas generally are reflected in billings to customers on a timely basis through fuel and purchased gas adjustment clauses. The Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" was adopted as of January 1, 1993. SFAS No. 106 requires that the expected cost of postretirement benefits be accrued during the employees' years of service. (See Note 5 to Consolidated Financial Statements.) On January 1, 1993 the Company adopted SFAS No. 109, "Accounting for Income Taxes" which requires the use of the liability method for recording deferred income taxes on temporary differences using the rate at which the differences are expected to reverse. (See Notes 1 and 10 to Consolidated Financial Statements.) In 1993, the Company adopted, SFAS No. 112 "Employers' Accounting for Postemployment Benefits". The new statement requires the accrual of certain postemployment benefits to former and inactive employees. (See Note 5 to Consolidated Financial Statements.) ENVIRONMENTAL REMEDIATION COSTS. The utility has identified 13 former manufactured gas plant sites (environmental remediation sites) which contain potentially harmful materials. In 1990, one site was added to the United States Environmental Protection Agency (USEPA) Superfund list. The utility has a long-term remedial plan for the site. Costs and associated legal expenses related to investigation have been incurred at other sites. Commencing in 1987, the estimated incurred costs related to studies and remediation at these 13 sites and associated legal expenses and certain carrying charges are being accrued and deferred rather than expensed currently, pending recovery either from rates, from insurance carriers or from other parties. Management believes that costs incurred in connection with the sites that are not recovered from insurance carriers or other parties will be recovered through utility rates. Accordingly, management believes that costs incurred in connection with these sites will not have a material adverse effect on financial position or results of operations. (See Note 2 to Consolidated Financial Statements.) CLEAN AIR ACT. CIPS' compliance strategy for Phases I and II of the Clean Air Act Amendments of 1990 is to switch to lower sulfur coal at some generating units along with increased scrubbing at Newton Unit 1. The utility estimates capital costs, including costs incurred to date, for various equipment modifications at its generating stations related to compliance will aggregate less than $50 million. These costs may result in electric base rate increases totaling about one to two percent by the year 2000. The utility does not anticipate that operating costs will change materially as a result of compliance with these amendments. (See Note 2 to Consolidated Financial Statements.) FERC ORDER 636. During 1992, the FERC issued Order No. 636. This and successor orders have resulted in substantial restructuring of the service obligations of interstate pipeline suppliers. (See Note 2 to Consolidated Financial Statements.) ENERGY POLICY ACT. The National Energy Policy Act of 1992 (NEPA) contains, among other provisions, legislation designed to promote competition in the development of wholesale power generation in the electric utility industry. NEPA exempts a new class of independent power producers from traditional utility regulation. This new class of producers can build generating plants and sell electricity in wholesale markets without the same constraints of regulated utilities. NEPA also allows FERC to order wholesale "wheeling" by public utilities to provide utility and non-utility generators access to public utility transmission facilities. Public utilities, not voluntarily providing access to their transportation system at agreed upon rates, may be ordered to deliver power at rates to be established by FERC. Although the final impact of the provisions of NEPA cannot be predicted, management believes that the increased competition in the area of generation and transmission may affect the traditional marketing and pricing strategies of the utility business. LABOR DISPUTES. Labor agreements ending June 1995 have been reached with the two unions representing 1,400 hourly employees of CIPS. The contracts with one union have been signed and contracts with the other union are expected to be formally signed in the near future. Before the agreements were reached, the memberships of both unions authorized a strike and instituted an overtime boycott and work slowdown beginning in April 1993. CIPS initiated a lockout of union employees over a period of approximately 14 weeks beginning in May 1993. Subsequent to this date, both unions filed unfair labor practice charges with the National Labor Relations Board (NLRB) claiming back pay and other benefits during the lockout period. The Peoria Regional Office of NLRB has issued a complaint against CIPS concerning the lockout of employees represented by one union. However, the Peoria Regional Office did not find merit to a similar charge filed by the other union and it will be dismissed. CIPS estimates the amount of back pay and other benefits for both unions to be less than $12 million. The NLRB decisions on the complaint and the charges will be subject to various appeals by the parties. Management believes that the lockout was both lawful and reasonable and that these matters will be ultimately resolved in favor of CIPS. (See Note 2 to Consolidated Financial Statements.) GRAPHIC MATERIAL APPENDIX [Graph] This bar graph displays the five-year (1988-1993) comparison of the rate of return on average common equity and would relate to the Financial Condition portion of the preceeding Management's Discussion and Analysis. Rate of Return on Average Common Equity (in percent) 13.7% 11.0% 11.0% 11.9% 11.8% 13.7% Year '88 '89 '90 '91 '92 '93 [Graph] This bar graph displays the five-year (1988-1993) comparison of CIPSCO capitalization (total dollar amount for each year is either slightly above or slightly below $1.2 billion (rounded)) and would relate to the Financial Condition portion of the preceeding Management's Discussion and Analysis. CIPSCO CAPITALIZATION (in billions of dollars and percent) Long-term debt 43% 42% 42% 42% 42% 41% Preferred stock 7 7 7 7 6 7 Common equity 50 51 51 51 52 52 Year '88 '89 '90 '91 '92 '93 [Graph] This bar graph displays the five-year (1988-1993) comparison of market value to book value and would relate to the Financing Requirements portion of the preceeding Management's Discussion and Analysis. (in dollars per common share at year end) Market Value 22.25 22.88 21.75 27.88 30.25 30.75 Book Value 17.38 17.52 17.63 17.86 18.08 18.60 Year '88 '89 '90 '91 '92 '93 [Graph] This bar graph displays the five-year (1988-1993) comparison of system generating capability at the time of peak to gross system peak and would relate to the Capital Requirements portion of the preceeding Management's Discussion and Analysis. (in megawatts) System Generating Capability at Time of Peak 2,680 2,637 2,647 2,679 2,707 2,727 Gross System Peak 2,108 1,954 2,027 2,093 1,930 2,157 Year '88 '89 '90 '91 '92 '93 [Graph] This bar graph displays the five-year (1988-1993) comparison of heating and cooling degree days matched against normal temperatures and would relate to the Electric Operations portion of the preceeding Management's Discussion and Analysis. (Degree days based on average daily temperature of 65 degrees) Heating Degree Days 5,452 5,632 4,681 5,013 5,030 5,702 Compared to Normal 5,441 5,441 5,441 5,441 5,441 5,441 Cooling Degree Days 1,487 1,171 1,178 1,543 884 1,213 Compared to Normal 1,182 1,182 1,182 1,182 1,182 1,182 Year '88 '89 '90 '91 '92 '93 CIPSCO Incorporated Consolidated Statements of Income (in thousands, except per share data) Years Ended December 31, _________________________________________ 1993 1992 1991 ___________ ___________ ___________ Operating Revenues: Electric $ 688,820 $ 593,973 $ 604,542 Provision for revenue refunds - 1,646 (11,896) __________ __________ __________ 688,820 595,619 592,646 Gas 145,702 133,756 117,533 Investment 10,238 10,502 11,902 __________ __________ __________ Total operating revenues 844,760 739,877 722,081 __________ __________ __________ Operating Expenses: Fuel for electric generation 186,938 172,544 165,806 Purchased power 60,181 21,094 22,109 Gas purchased 90,097 82,553 73,189 Other operation 142,716 131,305 115,776 Maintenance 61,218 64,092 66,784 Depreciation and amortization 78,062 74,170 69,483 Taxes other than income taxes 54,813 51,133 54,114 __________ __________ __________ Total operating expenses 674,025 596,891 567,261 __________ __________ __________ Operating Income 170,735 142,986 154,820 __________ __________ __________ Interest and Other Charges: Interest on long-term debt of subsidiary 34,421 36,397 36,990 Interest on provision for revenue refunds - (803) 4,261 Other interest charges 603 398 1,231 Allowance for funds used during construction (2,259) (3,226) (3,067) Preferred stock dividends of subsidiary 3,718 4,549 5,396 Miscellaneous, net (3,107) (7,579) (5,387) __________ __________ __________ Total interest and other charges 33,376 29,736 39,424 __________ __________ __________ Income Before Income Taxes 137,359 113,250 115,396 __________ __________ __________ Income taxes 51,861 40,751 43,331 __________ __________ __________ Net Income $ 85,498 $ 72,499 $ 72,065 ========== ========== ========== Average Shares of Common Stock Outstanding 34,108 34,108 34,169 Earnings Per Average Share of Common Stock $ 2.51 $ 2.13 $ 2.11 The accompanying notes to consolidated financial statements are an integral part of these statements. CIPSCO Incorporated Consolidated Balance Sheets (in thousands) December 31, ___________________________ 1993 1992 ____________ ____________ ASSETS Utility Plant, at original cost: Electric $ 2,172,259 $ 2,116,322 Gas 208,208 195,709 ___________ ___________ 2,380,467 2,312,031 Less - Accumulated depreciation 1,020,097 961,419 ___________ ___________ 1,360,370 1,350,612 Construction work in progress 61,104 45,219 ___________ ___________ 1,421,474 1,395,831 ___________ ___________ Current Assets: Cash 4,630 1,534 Temporary investments, at cost which approximates market 5,527 2,578 Accounts receivable, net 61,445 47,936 Accrued unbilled revenues 38,774 36,680 Materials and supplies, at average cost 40,824 38,529 Fuel for electric generation, at average cost 26,046 34,382 Gas stored underground, at average cost 14,335 12,180 Prepayments 10,142 15,644 ___________ ___________ 201,723 189,463 ___________ ___________ Investments and Other Assets: Investment in marketable securities 42,703 39,913 Investment in leveraged leases 42,216 31,384 Other 49,634 68,865 ___________ ___________ 134,553 140,162 ___________ ___________ $ 1,757,750 $ 1,725,456 =========== =========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholders' equity: Common stock, no par value, authorized shares, 100,000,000; outstanding 34,107,706 shares $ 357,212 $ 357,212 Retained earnings 277,040 259,338 ___________ ___________ 634,252 616,550 Preferred stock of subsidiary 80,000 65,000 Long-term debt of subsidiary 474,323 493,700 ___________ ___________ 1,188,575 1,175,250 ___________ ___________ Current Liabilities: Long-term debt of subsidiary due within one year 20,000 10,000 Commercial paper and short-term borrowings - 21,393 Accounts payable 56,039 56,992 Accrued wages 12,775 11,417 Accrued taxes 12,973 11,104 Accrued interest 9,204 6,564 Other 34,902 27,940 ___________ ___________ 145,893 145,410 ___________ ___________ Deferred Credits: Accumulated deferred income taxes 294,732 342,468 Investment tax credits 58,962 62,328 Regulatory liabilities, net 69,588 - ___________ ___________ 423,282 404,796 ___________ ___________ $ 1,757,750 $ 1,725,456 =========== =========== The accompanying notes to consolidated financial statements are an integral part of these statements. CIPSCO Incorporated Consolidated Statements of Cash Flows (in thousands) Years Ended December 31, _________________________________________ 1993 1992 1991 ___________ ___________ ___________ OPERATING ACTIVITIES: Net income $ 85,498 $ 72,499 $ 72,065 Adjustments to reconcile net income to net cash provided: Depreciation and amortization 78,062 74,170 69,483 Allowance for equity funds used during construction (AFUDC) (1,459) (2,162) (2,054) Deferred income taxes, net 7,900 20,149 14,135 Investment tax credit amortization (3,366) (3,336) (3,464) Cash flows impacted by changes in assets and liabilities: Accounts receivable, net and accrued unbilled revenues (15,603) 4,900 (1,886) Fuel for electric generation 8,336 2,872 664 Other inventories (4,450) (667) (893) Prepayments 5,502 21,159 (3,937) Other assets 19,231 (19,761) (12,233) Accounts payable and other 6,009 19,225 1,218 Accrued wages, taxes and interest 5,867 (4,580) (457) Accumulated provision for revenue refunds - (75,449) 16,157 Other 4,400 (5,580) (2,615) ___________ __________ __________ Net cash provided by operating activities 195,927 103,439 146,183 ___________ __________ __________ INVESTING ACTIVITIES: Utility construction expenditures, excluding AFUDC (85,453) (117,198) (110,815) Allowance for borrowed funds used during construction (800) (1,064) (1,013) Change in temporary investments (2,949) 95,575 87,725 Long-term investment in marketable securities (2,790) (3,510) (36,403) Long-term investment in leveraged leases (10,832) (13,388) (17,996) ___________ __________ __________ Net cash used in investing activities (102,824) (39,585) (78,502) ___________ __________ __________ FINANCING ACTIVITIES: Common stock dividends paid (66,510) (65,146) (63,901) Proceeds from issuance of long-term debt of subsidiary 195,000 199,000 - Repayment of long-term debt of subsidiary (205,000) (190,500) - Retirement of common stock - - (1,718) Redemption of preferred stock of subsidiary (27,500) (18,245) (3,000) Proceeds from issuance of preferred stock of subsidiary 42,500 - - Proceeds from (repayment of) commercial paper and short-term borrowings (21,393) 21,393 - Issuance expense, discount and premium (7,104) (11,718) - ___________ __________ __________ Net cash used in financing activities (90,007) (65,216) (68,619) ___________ __________ __________ Net increase (decrease) in cash 3,096 (1,362) (938) Cash at beginning of year 1,534 2,896 3,834 ___________ __________ __________ Cash at end of year $ 4,630 $ 1,534 $ 2,896 =========== ========== ========== Supplemental disclosures of cash flow information: Cash payments during the year: Interest, net of amounts capitalized $ 31,058 $ 38,382 $ 36,867 Income taxes $ 36,718 $ 10,326 $ 39,426 The accompanying notes to consolidated financial statements are an integral part of these statements. CIPSCO Incorporated Consolidated Statements of Retained Earnings (in thousands) Years Ended December 31, __________________________________________ 1993 1992 1991 ____________ ____________ ____________ Balance, beginning of year $ 259,338 $ 251,893 $ 244,422 Add (deduct): Net income 85,498 72,499 72,065 Common stock dividends ($1.95, $1.91 and $1.87 per share, respectively) (66,510) (65,146) (63,901) Other (1,286) 92 (693) ___________ ___________ ___________ Balance, end of year $ 277,040 $ 259,338 $ 251,893 =========== =========== =========== The accompanying notes to consolidated financial statements are an integral part of these statements. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ARTHUR ANDERSEN & CO. To the Board of Directors and Shareholders of CIPSCO Incorporated: We have audited the accompanying consolidated balance sheets of CIPSCO Incorporated (an Illinois corporation) and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CIPSCO Incorporated and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN & CO. Chicago, Illinois January 28, 1994 CIPSCO Incorporated Notes to Consolidated Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of CIPSCO Incorporated, a holding company, Central Illinois Public Service Company (CIPS), a combination electric and gas utility, and CIPSCO Investment Company (CIC). The three subsidiaries of CIC are CIPSCO Securities Company, which invests in marketable securities, CIPSCO Leasing Company, which invests in leveraged leases directly or through subsidiaries, and CIPSCO Energy Company, which invests in energy projects or leases through subsidiary companies. All significant intercompany balances and transactions have been eliminated from the consolidated financial statements. Certain items previously reported for years prior to 1993 have been reclassified to conform with the current-year presentation. The operating revenues of all investment activities are included under the caption Operating Revenues, "Investment." Operating expenses are included under the appropriate captions as shown on the Consolidated Statements of Income. CONCENTRATION OF CREDIT RISK. CIPS provides electric service to about 316,000 customers in 557 communities and natural gas service to approximately 164,000 customers in 267 communities throughout a 20,000-square-mile area in central and southern Illinois. Credit risk is spread over a diversified base of residential, commercial and industrial customers. See Note 4 to Consolidated Financial Statements for a discussion of receivables related to the leveraged lease investments. REGULATION. CIPS is a public utility subject to regulation by the Illinois Commerce Commission (Illinois commission) and the Federal Energy Regulatory Commission (FERC). With respect to accounting matters, the utility maintains its accounts in accordance with the Uniform System of Accounts as defined by these agencies. Its accounting policies conform to generally accepted accounting principles applicable to rate regulated enterprises and reflect the effects of the ratemaking process. OPERATING REVENUES. CIPS accrues an estimate of electric and gas revenues for service rendered but unbilled at the end of each accounting period. Investment revenues are comprised of interest on temporary investments and income from marketable securities and leveraged leases. UTILITY PLANT. Utility plant in service is stated at original cost. Substantially all of the utility plant of CIPS is subject to the lien of its first mortgage bond indenture. Additions to utility plant include the cost of contracted services, material, labor, overheads and an allowance for funds used during construction. Maintenance and repair of property and replacement of minor items of property are charged to operating expenses. Property retired is removed from utility plant accounts and charged to accumulated depreciation. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC). AFUDC is included in Construction Work in Progress (CWIP) and represents the cost of financing that construction. AFUDC does not represent a current source of cash funds. The inclusion of AFUDC in CWIP affords the opportunity to earn a return on the cost of construction capital after the related asset is placed in service and included in the rate base. The AFUDC rate, based on a formula prescribed by the FERC, on a before-tax basis, was 9% in 1993 and 10% in 1992 and 1991. DEPRECIATION. Depreciation expense is based on remaining life straight-line rates (composite, approximately 3.4% in 1993, and 3.3% in 1992 and 1991) applied to the various classes of depreciable property. FUEL AND PURCHASED GAS COSTS. CIPS adjusts fuel expense to recognize over- or under-recoveries from customers of allowable fuel costs through the uniform fuel adjustment clause (FAC). The FAC provides for the current recovery of changes in the cost of fuel for electric generation in billings to customers. Monthly, the difference between revenues recorded through application of the FAC and recoverable fuel costs is recorded as a current asset or liability, pending reflection in future billings to customers, with a corresponding decrease or increase in cost of fuel for electric generation. The uniform purchased gas adjustment clause (PGA) provides a matching of gas costs with revenues. Monthly, the difference between revenues recorded through application of the PGA and recoverable gas costs is recorded as a current asset or liability with a corresponding decrease or increase in the cost of gas purchased. The cumulative difference for the calendar year is collected from, or refunded to, customers over a one-year period beginning in the following April. The Illinois commission conducts annual reconciliation proceedings with respect to each year's FAC and PGA revenues and has completed its review for all years prior to 1992. Reconciliation proceedings for 1992 commenced in October 1993. No reconciliation proceeding has yet commenced for the year 1993. INCOME TAXES AND INVESTMENT TAX CREDITS. Deferred income taxes are recorded which result from the use of accelerated depreciation methods, rapid amortization, repair allowance and certain other timing differences in recognition of income and expense for tax and financial statement purposes. CIPSCO and its subsidiaries file a consolidated federal income tax return. Income taxes are allocated to the individual companies, based on their respective taxable income or loss. Investment tax credits are being amortized over the estimated average useful lives of the related properties. The Company adopted, effective January 1, 1993, the liability method of accounting for deferred income taxes required by Statement of Financial Accounting Standards (SFAS) No. 109. This statement requires the establishment of deferred tax liabilities and assets for all temporary differences between the tax basis of assets and liabilities and the amounts reported in the financial statements. (See Note 10 to Consolidated Financial Statements). CASH AND TEMPORARY INVESTMENTS. Temporary investments consist of deposits and U.S. Treasury obligations. For purposes of Consolidated Statements of Cash Flows, temporary investments are not considered cash equivalents. MARKETABLE SECURITIES. The investment in marketable securities is stated at the lower of aggregate cost or market. The portfolios consist of common and preferred stocks which are hedged with futures and options. Gains and losses on purchased hedges of the equity securities are deferred as an adjustment to the carrying amount of the hedged equity securities. The amount of deferred hedge loss at December 31, 1993 and 1992 was $2.3 million and $1.7 million, respectively. Other options are recorded at market value. For hedged investments, the investment and related hedging instrument have been combined on the Consolidated Balance Sheets. The Company plans to adopt SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" effective January 1, 1994. Under the statement, the Company's investments in debt and marketable equity securities are reported at fair value with unrealized gains and losses reported as a net amount in a separate component of shareholders' equity until realized. The adoption of SFAS No. 115 will not have a material effect on financial position or results of operation. 2. COMMITMENTS AND CONTINGENCIES ENVIRONMENTAL REMEDIATION COSTS. The utility and certain of its predecessors and other affiliates operated facilities in the past for manufacturing gas from coal. In connection with manufacturing gas, various by-products were produced, some of which remain on sites where the facilities were located. The utility has identified 13 of these former manufactured gas plant sites (environmental remediation sites) which contain potentially harmful materials. Under directives from the Illinois Environmental Protection Agency (IEPA), CIPS has incurred costs and associated legal expenses related to the investigation and remediation of the sites. One site was added to the United States Environmental Protection Agency (USEPA) Superfund list on August 30, 1990. On September 30, 1992 the IEPA, in consultation with the USEPA, decided that the long-term remedial plan for this site should consist of a ground- water pump-and-treat program. The IEPA and CIPS entered into an agreement, subject to court approval, for CIPS to carry out the remedial action with the IEPA providing oversight. It is not known at this time what specific remedial action will be required at the other 12 sites. In 1987, CIPS filed a lawsuit against a number of insurance carriers seeking full indemnification for all costs in connection with certain environmental sites. As of December 31, 1993 all but five insurance carriers have settled. The estimated incurred costs relating to studies and remediation at these 13 sites and associated legal expenses are being accrued and deferred rather than expensed currently, pending recovery through rates, from insurance carriers or from other parties. The total amount deferred represents costs incurred and estimates for costs of completing studies at various sites and an estimate of remediation costs at the Superfund site. At December 31, 1993, the amounts recovered have exceeded the aggregate amount deferred. In 1992, the Illinois commission issued an Order (the Generic Order) in its consolidated generic proceeding regarding appropriate ratemaking treatment of cleanup costs incurred by Illinois utilities with respect to environmental remediation sites. The Generic Order indicates that allowed cleanup costs may include prudently incurred cost of investigation, assessment and cleanup of environmental remediation sites, as well as litigation costs, including those involved in insurance recovery claims. The Generic Order authorizes utilities, including CIPS, to propose a mechanism to recover cleanup costs which is consistent with the provisions of the order. Such a mechanism must, among other things, provide for (1) recovery of cleanup costs over a five-year period, excluding carrying costs associated with the unrecovered balance of cleanup costs from the time that the recovery mechanism becomes effective; (2) a return to ratepayers over a five-year amortization period of any reimbursement of cleanup costs received from insurance carriers or other parties; and (3) a prudence review of each utility's expenditures. The Generic Order was upheld on appeal by the Third District Illinois Appellate Court. That decision held that a rate rider mechanism is an appropriate means for utilities to recover cleanup costs. An intervenor has filed a petition for leave to appeal the decision to the Illinois Supreme Court. The intervenor has maintained that no recovery of cleanup costs should be allowed. The Illinois Supreme Court has discretion to accept or deny the appeal. On March 26, 1993, the Illinois commission approved CIPS' proposed environmental cost-recovery rate riders, effective with April 1993 billings to customers. Known as the electric environmental adjustment clause and the gas environmental adjustment clause, the riders are designed to enable CIPS to recover from its customers costs associated with cleanup of the environmental remediation sites, along with associated legal expenses, over a five-year period on terms consistent with the Generic Order. The environmental adjustment clause riders provide for an annual review of amounts recovered through the riders. Amounts found to have been incorrectly included would be subject to refund. Through December 31, 1993, CIPS has collected $2.6 million from its customers pursuant to the riders. The total costs to be incurred for the cleanup of these sites or the possible recovery from insurance carriers and other parties cannot be estimated. Management believes that costs incurred in connection with the sites that are not recovered from insurance carriers or other parties will be recovered through utility rates. Accordingly, management believes that costs incurred in connection with these sites will not have a material adverse effect on financial position or results of operations. FERC ORDER 636. During 1992, FERC issued a series of orders that require substantial restructuring of the service obligations of interstate pipeline suppliers. These Orders (together called Order 636) required mandatory unbundling of existing pipeline gas sales services. Mandatory unbundling requires pipelines to sell separately the various components previously included with gas sales services. Order 636 provides a mechanism for pipelines to recover four categories of transition costs associated with restructuring their gas sales services. Based on currently available information contained in the various interstate pipeline Order 636 compliance filings, CIPS estimates that the total amount of transition costs to be incurred by CIPS is approximately $10 million. At December 31, 1993 CIPS had recorded a liability and a related deferred gas cost for that portion of the transition costs that will be billed to CIPS regardless of future pipeline services. On September 15, 1993, the Illinois commission initiated an investigation into the appropriate ratemaking treatment of Order 636 transition costs. In January 1994, the hearing examiner released a draft order which would allow full recovery through rates by CIPS of transition costs. A final order from the Illinois commission is expected by mid-February 1994. Management believes that all transition costs will be recoverable from customers. CLEAN AIR ACT. CIPS' compliance strategy to meet the sulfur dioxide emission reduction requirements of the Clean Air Act Amendments of 1990 (Amendments) includes complying with Phase I of the Amendments by switching to a lower sulfur coal at some of its units. Phase II compliance will be accomplished by additional fuel switching at various units and by increased scrubbing with its existing scrubber at Newton Unit 1. Phase I and Phase II emission provisions of the Amendments become effective in 1995 and 2000, respectively. The utility estimates that total capital costs, primarily for modifications to boilers, precipitators, coal handling facilities, and continuous monitoring equipment for implementation of this compliance strategy will be less than $50 million in total including amounts spent to date. Operating costs are not expected to change materially. Compliance costs could result in electric base rate increases of approximately one to two percent by the year 2000. In 1991, in accordance with the plan to switch some units to lower sulfur coal, the utility signed a long-term coal contract with an existing supplier for lower sulfur Illinois coal. Due to the magnitude of the supplier's capital investment, the contract includes a graduated termination charge. In 1994 CIPS can terminate the contract under certain conditions, and CIPS would be required to pay up to $41 million (plus an inflation adjustment) in termination charges. Each year subsequent to 1994 the termination charge is reduced according to a formula using tons of coal purchased. The termination charge would not be effective if CIPS terminated the contract due to failure of the coal to meet quality specifications provided for in the contract. LABOR DISPUTES. The International Union of Operating Engineers Local 148 and the International Brotherhood of Electrical Workers Local 702 have both filed unfair labor practice charges with the National Labor Relations Board (NLRB) relating to the legality of the lockout by CIPS of both unions during 1993. The Peoria Regional Office of the NLRB has issued a complaint against CIPS concerning its lockout of IBEW-702 represented employees. However, the Peoria Regional Office did not find merit to a similar charge filed by IUOE 148 and it will be dismissed, subject to an appeal. Both unions seek, among other things, back pay and other benefits for the period of the lockout. CIPS estimates the amount of back pay and other benefits for both unions to be less than $12 million. Management believes the lockout was both lawful and reasonable and that the final resolution of the disputes will not have a material adverse effect on financial position or results of operations. OTHER ISSUES. CIPSCO's utility subsidiary is involved in other legal and administrative proceedings before various courts and agencies with respect to rates, taxes, gas and electric fuel cost reconciliations, service area disputes, environmental and other matters. Although unable to predict the outcome of these matters, management believes that appropriate liabilities have been established and that final disposition of these actions will have no material adverse effect on the results of operations or the financial position of CIPSCO. 3. Preferred Stock of Subsidiary The preferred stock is generally redeemable at the option of CIPS on 30 days notice at the redemption prices shown below. At December 31, 1993, 1992 and 1991 the preferred stock outstanding was: Current Shares Redemption Shares 1993 1992 1991 Authorized Par Value Series Price(a) Issued Amount Amount Amount (in thousands) (in thousands) (in thousands) _____________ _________ ______ _______ ___________ ______________ ______________ ______________ CIPSCO 4,600,000(b) - - - - - - - CIPS Cumulative 2,000,000(b) $100 4.00% $101.00 150,000 $15,000 $15,000 $15,000 100 4.25% 102.00 50,000 5,000 5,000 5,000 100 4.90% 102.00 75,000 7,500 7,500 7,500 100 4.92% 103.50 50,000 5,000 5,000 5,000 100 5.16% 102.00 50,000 5,000 5,000 5,000 100 7.48% 101.08 - - 15,000 15,000 100 8.08% 101.00 - - 12,500 12,500 100 1993 Auction(c) 100.00 300,000 30,000 - - 100 6.625% 100.00(d) 125,000 12,500 - - _______ ______ ______ ______ 800,000 80,000 65,000 65,000 CIPS No par(e) 2,600,000(b) - - - - - - - _______ ______ ______ ______ 800,000 $80,000 $65,000 $65,000 ======= ====== ====== ====== (a) Accrued dividends, if any, would be added to the current redemption price. (b) The Board of Directors has the authority to fix and determine the relative rights and preferences of the authorized and unissued shares. (c) Dividend rate for each dividend period (currently quarterly) is set at a then current market rate according to an auction procedure. The rate at December 31, 1993 was 2.67%. (d) Not redeemable prior to October 1, 1998. (e) Aggregate stated value cannot exceed $65,000,000.
4. LEVERAGED LEASES CIC and its subsidiaries are the lessors in several leveraged lease arrangements involving a commercial jet aircraft, an interest in a natural gas liquids plant, natural gas processing equipment, retail department store properties, and gas turbine generating units. These leases expire in various years beginning in 1999 through 2013. The aggregate residual values are estimated to be 36 percent of the aggregate cost. CIC's aggregate equity investment represents 20 percent of the aggregate purchase price of the properties. The remaining 80 percent was financed by nonrecourse debt provided by lenders who have been granted, as their sole remedy in the event of default by the lessees, an assignment of rentals due under the leases and a security interest in the leased properties. The following is a summary of the components of CIC's net investment in leveraged leases at December 31: (in thousands) 1993 1992 1991 _______ _______ _______ Rentals receivable (net of nonrecourse debt) $25,776 $25,196 $17,395 Estimated residual value of leased property 53,671 33,094 16,645 Less - Unearned and deferred income (37,231) (26,906) (16,044) ______ ______ ______ Investment in leveraged leases 42,216 31,384 17,996 Less - Deferred taxes, net of AMT (19,777) (7,942) (3,777) ______ ______ ______ Net investment $22,439 $23,442 $14,219 ====== ====== ====== The following is a summary of the components of income from leveraged leases for the years ended December 31: (in thousands) 1993 1992 1991 _______ _______ _______ Income before income taxes $ 4,702 $ 3,071 $ 667 Income tax expense (2,037) (1,165) (253) ______ ______ ______ Income from leveraged leases $ 2,665 $ 1,906 $ 414 ====== ====== ====== 5. PENSIONS AND OTHER POSTRETIREMENT BENEFITS CIPS sponsors a defined benefit pension plan covering substantially all of its employees. The benefits are based on years of service and employees' final average pay. Pension costs are accrued and funded on a current basis based upon actuarial determinations and in compliance with income tax regulations and federal funding requirements. CIPS uses a September 30 measurement date for its valuation of pension plan assets and liabilities. The utility also provides certain employees with pension benefits which exceed the qualified plan limits imposed by federal tax law. FUNDED STATUS OF PENSION PLAN (in thousands) 1993 1992 1991 ________ ________ ________ Fair value of plan assets* $177,824 $150,729 $127,075 _______ _______ _______ Accumulated benefit obligations:** Vested benefits 125,641 98,770 78,515 Nonvested benefits 559 284 212 Effect of projected future compensation levels (based on 4.3% annual increases in 1993, 4.5% in 1992 and 5% in 1991) 41,214 37,025 36,791 _______ _______ _______ Total projected benefit obligation 167,414 136,079 115,518 _______ _______ _______ Plan assets in excess of projected benefit obligation $ 10,410 $ 14,650 $ 11,557 ======= ======= ======= * Plan assets are invested in common and preferred stocks, bonds, money market instruments, guaranteed income contracts and real estate. **The assumed weighted average discount rate was 6.50% for 1993, 7.25% for 1992 and 7.75% for 1991. PENSION PLAN ASSETS IN EXCESS OF PROJECTED BENEFIT OBLIGATION (in thousands) 1993 1992 1991 ________ ________ ________ Plan assets in excess of projected benefit obligation $ 10,410 $ 14,650 $ 11,557 Unrecognized transition asset (being amortized over 18.2 years) (4,862) (5,325) (5,772) Unrecognized net (gain) loss (5,188) (13,617) (14,756) Unrecognized prior service cost 760 1,590 1,703 _______ _______ _______ Prepaid (Accrued) pension costs at September 30 1,120 (2,702) (7,268) Expense, net of funding October to December 1,944 91 (1,347) _______ _______ _______ Prepaid (Accrued) pension costs at December 31 $ 3,064 $ (2,611) $ (8,615) ======= ======= ======= COMPONENTS OF NET PENSION EXPENSE (in thousands) 1993 1992 1991 ________ ________ ________ Service cost (present value of benefits earned during the year) $ 6,398 $ 5,721 $ 6,467 Interest cost on projected benefit obligation 10,193 9,302 8,583 Actual return on plan assets (expected long-term rate of return was 8%) (21,101) (13,755) (19,490) Deferred investment gains 10,071 4,834 11,167 Amortization of the unrecognized prior service cost 118 118 118 Amortization of the transition amount (463) (463) (463) _______ _______ _______ Net pension expense $ 5,216 $ 5,757 $ 6,382 ======= ======= ======= Effective January 1, 1993, CIPS adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". The standard requires companies to recognize the cost of providing postretirement medical and life insurance benefits over the employees' service period. CIPS is funding the medical benefits under two Voluntary Employee Beneficiary Association trusts (VEBA), and a 401(h) account established within the Company's retirement income trust. The Company sponsors postretirement plans providing medical and life benefits for certain of its retirees and their eligible dependents. The medical plan pays percentages of eligible medical expenses incurred by covered retirees after a deductible has been met, and after taking into account payment by Medicare or other providers. Currently, participants become eligible for coverage if they retire from CIPS after meeting age and years of service eligibility requirements. The life insurance plan continues for all retirees who have been in the plan as employees for ten years or more. CIPS uses a September 30 measurement date for its valuation of postretirement assets and liabilities. FUNDED STATUS OF POSTRETIREMENT BENEFIT PLANS (in thousands) 1993 ________ Fair value of plan assets* $ 13,302 _______ Accumulated benefit obligations: Retirees 39,599 Fully eligible active employees 17,026 Other active employees 80,532 _______ Total accumulated benefit obligations 137,157 _______ Accumulated benefit obligations in excess of plan assets (123,855) Unrecognized transition obligation (being amortized over 20 years) 110,511 Unrecognized net loss (including changes in assumptions) 1,959 _______ Accrued postretirement benefit cost at September 30 (11,385) Expense, net of funding, October to December 9,643 _______ Accrued postretirement benefit cost at December 31 $ (1,742) ======= *Plan assets are invested in common and preferred stocks, bonds, money market instruments, guaranteed income contracts and real estate. COMPONENTS OF POSTRETIREMENT BENEFIT COST (in thousands) 1993 ________ Service costs on benefits earned $ 4,215 Interest costs on accumulated benefit obligations 9,948 Actual return on plan assets (1,038) Deferred investment gains 397 Amortization of transition amount 5,816 _______ Postretirement benefit cost $ 19,338 ======= For purposes of calculating the postretirement benefit obligation it is assumed that health-care costs will increase by 12.75% in 1994, and that the rate of increase thereafter (the health-care cost trend rate) will decline to 4.25% in 2007 and subsequent years. The health-care cost trend rate has a significant effect on the amounts reported for costs each year as well as on the accumulated postretirement benefit obligation. To illustrate, increasing the assumed health-care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation as of September 30, 1993 by $20.2 million and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost $2.7 million annually. The weighted-average discount rate used to determine the accumulated postretirement benefit obligation was 7 percent. The expected long-term rate of return on plan assets is 8 percent. In March 1992, CIPS was granted rates by the Illinois commission which included its estimated postretirement costs determined on an accrual basis of accounting. CIPS' financial reporting for postretirement costs is consistent with the rate treatment. Therefore, adoption of SFAS No. 106 did not have a material effect on financial position or results of operations. The Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," in 1993. The new statement required the accrual of certain postemployment benefits to former or inactive employees. The adoption of SFAS No. 112 did not have a material effect on financial position or results of operations. 6. COMMON SHAREHOLDERS' EQUITY RETAINED EARNINGS. CIPSCO is subject to restrictions on the use of retained earnings for cash dividends on common stock applicable to all corporations under the Illinois Business Corporation Act. CIPS is subject to the same restrictions, as well as those contained in its mortgage indenture and articles of incorporation. At December 31, 1993, 1992 and 1991, no amount of retained earnings was restricted. 7. LINES OF CREDIT AND SHORT-TERM BORROWINGS External financing needs may be met from the sale of commercial paper or short-term borrowings from banks. CIPSCO and CIC have joint bank lines of credit totaling $30 million. The banks are compensated for these lines of credit. CIPS has arrangements for bank lines of credit which totaled $77.9 million. CIPS compensates banks for lines of credit totaling $60 million. The bank lines of credit are for corporate purposes including the support of any commercial paper borrowings. At December 31, 1993 there were no short-term borrowings at CIPSCO, CIC or CIPS. 8. LONG-TERM DEBT OF SUBSIDIARY Maturities and sinking fund requirements of CIPS' long-term debt through 1998 are as follows: Sinking Fund (in thousands) Maturities Requirements Total __________ ____________ _______ 1994 $20,000 $300 $20,300 1995 15,000 150 15,150 1996 - 150 150 1997 58,000 - 58,000 1998 - - - In 1993 and 1992 the sinking fund requirements were satisfied by the application of net expenditures for bondable property in an amount equal to 166 2/3 percent of the annual requirement. The utility expects to meet the 1994 requirement in the same manner. Long-term debt outstanding at December 31, excluding maturities due within one year, was: (in thousands) 1993 1992 Amount Amount ________ ________ First mortgage bonds (principal amount): Series J, 4 1/2% due 5/1/1994 $ - $ 20,000 Series K, 4 5/8% due 6/1/1995 15,000 15,000 Series L, 5 7/8% due 5/1/1997 15,000 15,000 Series N, 7 1/2% due 4/1/2001 - 35,000 Series P, 7 1/2% due 5/1/2002 - 30,000 Series 6 5/8% due 8/1/2009 (for Newton pollution control) 1,000 1,000 Series W, 7 1/8% due 5/15/1999 50,000 50,000 Series W, 8 1/2% due 5/15/2022 33,000 33,000 Series X, 6 1/8% due 7/1/1997 43,000 43,000 Series X, 7 1/2% due 7/1/2007 50,000 50,000 Series Y, 6 3/4% due 9/15/2002 23,000 23,000 Series Z, 6% due 4/1/2000 25,000 - Series Z, 6 3/8% due 4/1/2003 40,000 - _______ _______ 295,000 315,000 _______ _______ Pollution control loan obligations: Series A, 5.85% due 10/1/2007 - 60,000 Series B, 6.80% due 4/1/2005 - 17,500 Series B, 6 7/8% due 4/1/2009 - 17,500 Series C, 6 5/8% due 8/1/2004 - 20,000 Series C, 6 3/4% due 8/1/2009 - 15,000 1990 Series A, 7.60% due 3/1/2014 20,000 20,000 1990 Series B, 7.60% due 9/1/2013 32,000 32,000 1993 Series A, 6 3/8% due 1/1/2028 35,000 - 1993 Series B-1, 4 3/8% due 6/1/2028 17,500 - 1993 Series B-2, 5.90% due 6/1/2028 17,500 - 1993 Series C-1, 4.20% due 8/15/2026 35,000 - 1993 Series C-2, 5.70% due 8/15/2026 25,000 - _______ _______ 182,000 182,000 _______ _______ Unamortized net debt premium and discount (2,677) (3,300) _______ _______ $474,323 $493,700 ======= ======= Interest rates on the 1993 Series B-1 and 1993 Series C-1 bonds will be adjusted to a then current market rate on June 1, 1998 and August 15, 1998, respectively. Interest rates on the 1993 Series B-2 and 1993 Series C-2 bonds are subject to redetermination at the option of the utility commencing June 1, 2003 and August 15, 2003, respectively. 9. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value at December 31, 1993 and 1992 of each class of financial instruments for which it is practicable to make such estimates. CASH AND TEMPORARY INVESTMENTS - The carrying amounts approximate fair value because of the short-term maturity of these instruments. MARKETABLE SECURITIES - The fair value is based on quoted market prices obtained from dealers or investment managers. SHORT-TERM BORROWINGS - The carrying amounts approximate fair value due to their short-term maturities. PREFERRED STOCK OF SUBSIDIARY - The fair value was estimated using market values provided by independent pricing services. LONG-TERM DEBT OF SUBSIDIARY - The fair value was estimated using market values provided by independent pricing services. The estimated fair value of the Company's financial instruments as of December 31, are shown below: 1993 1992 __________________ __________________ Carrying Fair Carrying Fair (in thousands) Value Value Value Value ________ ________ ________ ________ Marketable Securities $ 42,703 $ 43,713 $ 39,913 $ 40,741 Preferred Stock 80,000 68,403 65,000 50,519 Long-Term Debt 474,323 504,478 493,700 514,912 10. INCOME TAXES The Company adopted the liability method of accounting for deferred income taxes in compliance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" effective January 1, 1993. Due to rate regulation, adoption of this statement had an immaterial effect on net income. However, the adoption resulted in a balance sheet reduction of $81.3 million of deferred income taxes along with corresponding balance sheet increases of $95.3 million of regulatory liabilities, net, and $14 million of plant assets. Income tax expense continues to include provisions for deferred taxes to reflect the effect of temporary differences between the time certain costs are recorded for financial reporting and when they are deducted for income tax return purposes. As temporary differences reverse, the related accumulated deferred income taxes and a portion of the regulatory assets and liabilities are also reversed. Investment tax credits have been deferred and will continue to be credited to income over the lives of the related property. The components of federal and state income tax provisions and investment tax credits at December 31 were: (in thousands) 1993 1992 1991 ________ ________ ________ Current - Federal $ 34,340 $ 7,070 $ 28,587 - State 6,980 (1,690) 6,130 _______ _______ _______ 41,320 5,380 34,717 _______ _______ _______ Deferred - Federal 12,315 29,679 9,507 - State 1,592 9,028 2,571 _______ _______ _______ 13,907* 38,707* 12,078* Amortization of investment tax credits (3,366) (3,336) (3,464) _______ _______ _______ Total income taxes $ 51,861 $ 40,751 $ 43,331 ======= ======= ======= *Detail of Deferred Taxes: Excess of tax depreciation and amortization over book $ 5,825 $ 5,588 $ 7,465 Revenue refunds - 29,526 (6,259) Leveraged leases 7,511 8,489 3,777 Deferred fuel cost 2,782 (2,921) 2,030 Deferred environmental site cleanup costs (11,811) 62 2,243 Net operating loss carryback 1,526 (1,526) - Alternative minimum tax credit carryforward 7,236 (6,927) - Cost of removal 1,863 3,108 731 Unamortized loss on reacquired debt 1,082 3,561 (72) Miscellaneous (2,107) (253) 2,163 _______ _______ _______ Total $ 13,907 $ 38,707 $ 12,078 ======= ======= ======= Reconciliations with statutory federal income tax rates at December 31 were: (in thousands) 1993 1992 1991 ____ ____ ____ Effective income tax rate 36.8% 34.6% 35.9% Amortization of investment tax credits 2.4 2.8 2.9 Tax exempt interest and dividends 1.5 1.8 2.4 Out-of-period items (0.1) (0.5) (1.8) State income tax rate, net of federal income tax benefit (3.9) (4.1) (4.8) Other, net (1.7) (0.6) (0.6) ____ ____ ____ Statutory federal income tax rate 35.0% 34.0% 34.0% ==== ==== ==== The components of deferred income taxes at December 31, and January 1, 1993 are: (in thousands) December 31, 1993 January 1, 1993 _________________ _______________ Accumulated deferred income tax liabilities related to: Depreciable property $316,327 $298,089 Investment tax credits (23,500) (24,145) Regulatory liabilities, net (27,423) (37,148) Leveraged leases 19,777 12,266 Other 9,551 11,971 _______ _______ Accumulated deferred income taxes per balance sheet $294,732 $261,033 ======= ======= Deferred tax assets (included in prepayments) $ 5,999 $ 12,006 ======= ======= 11. REVENUES COLLECTED SUBJECT TO REFUND REVENUES COLLECTED SUBJECT TO REFUND. In May 1992, the Illinois commission approved a March 18, 1992 settlement agreement that resolved a proceeding regarding the impact on the utility of the reduced federal corporate income tax rates established by the Tax Reform Act of 1986. Under terms of the agreement, $73 million, including accrued interest, was refunded to customers from July through December 1992 in complete settlement of all issues related to the proceeding. For the 61-month period, March 1987 through March 1992, a total of $78.4 million had been accrued for refunds. The total liability recorded by the utility exceeded the settlement agreement amount by $5.4 million resulting in a $3.3 million (net of taxes) or $.10 per share favorable impact on consolidated earnings during 1992. 12. SEGMENTS OF BUSINESS CIPSCO's primary subsidiary, CIPS, is a public utility engaged in the sale of electricity which it generates, transmits and distributes. CIPS also sells natural gas, which it purchases from producers and suppliers and distributes through its system, and transports customer-owned natural gas. The investments of CIPSCO and subsidiaries include temporary investments and long-term investments including marketable securities and leveraged leases. The following is a summary of operations: Years Ended December 31, ________________________________________ (in thousands) 1993 1992 1991 __________ __________ __________ OPERATING INFORMATION Electric operations: Operating revenues $ 688,820 $ 595,619 $ 592,646 Operating expenses, excluding provision for income taxes 534,071 472,414 455,365 _________ _________ _________ Pretax operating income 154,749 123,205 137,281 _________ _________ _________ Gas operations: Operating revenues 145,702 133,756 117,533 Operating expenses, excluding provision for income taxes 138,086 122,844 110,374 _________ _________ _________ Pretax operating income 7,616 10,912 7,159 _________ _________ _________ Investments: Operating revenues 10,238 10,502 11,902 Operating expenses, excluding provision for income taxes 1,868 1,633 1,522 _________ _________ _________ Pretax investment income 8,370 8,869 10,380 _________ _________ _________ Total 170,735 142,986 154,820 _________ _________ _________ Less interest expense and other charges 33,376 29,736 39,424 Less income taxes 51,861 40,751 43,331 _________ _________ _________ Net income per Consolidated Statements of Income $ 85,498 $ 72,499 $ 72,065 ========= ========= ========= Depreciation and amortization expense: Electric $ 71,876 $ 68,902 $ 64,880 Gas 5,771 5,252 4,603 Corporate 415 16 - _________ _________ _________ Total $ 78,062 $ 74,170 $ 69,483 ========= ========= ========= INVESTMENT INFORMATION Identifiable assets: Electric $1,459,073 $1,435,755 $1,416,883 Gas 177,857 188,019 157,206 Temporary investments 5,527 2,578 98,153 Marketable securities 42,703 39,913 36,403 Leveraged leases 42,216 31,384 17,996 Corporate 30,374 27,807 24,933 _________ _________ _________ Total $1,757,750 $1,725,456 $1,751,574 ========= ========= ========= Construction expenditures: Electric $ 76,956 $ 103,023 $ 99,004 Gas 10,756 17,401 14,878 _________ _________ _________ Total $ 87,712 $ 120,424 $ 113,882 ========= ========= ========= CIPSCO Incorporated SELECTED CONSOLIDATED FINANCIAL DATA 1993 1992 1991 1990 1989 1988 __________ __________ __________ __________ __________ __________ EARNINGS AND DIVIDENDS (in thousands, except per share data) Net income $ 85,498 $ 72,499 $ 72,065 $ 65,756 $ 65,366 $ 80,148 Earnings per common share $ 2.51 $ 2.13 $ 2.11 $ 1.92 $ 1.91 $ 2.35 Dividends per common share $ 1.95 $ 1.91 $ 1.87 $ 1.83 $ 1.79 $ 1.75 Average shares of common stock outstanding 34,108 34,108 34,169 34,172 34,172 34,172 Dividend payout ratio 77.7% 89.7% 88.6% 95.3% 93.7% 74.5% OPERATING REVENUES (in thousands) Electric $ 688,820 $ 595,619 $ 592,646 $ 581,669 $ 572,160 $ 563,010 Gas 145,702 133,756 117,533 103,552 111,699 116,702 Investment 10,238 10,502 11,902 14,500 14,495 10,941 _________ _________ _________ _________ _________ _________ Total operating revenues $ 844,760 $ 739,877 $ 722,081 $ 699,721 $ 698,354 $ 690,653 ========= ========= ========= ========= ========= ========= BALANCE SHEET DATA (in thousands) Construction expenditures (excluding AFUDC) $ 85,453 $ 117,198 $ 110,815 $ 76,193 $ 61,276 $ 55,302 Allowance for equity funds used during construction 1,459 2,162 2,054 1,008 472 560 Allowance for borrowed funds used during construction 800 1,064 1,013 389 182 225 _________ _________ _________ _________ _________ _________ Construction expenditures $ 87,712 $ 120,424 $ 113,882 $ 77,590 $ 61,930 $ 56,087 ========= ========= ========= ========= ========= ========= Total assets $1,757,750 $1,725,456 $1,751,574 $1,720,059 $1,714,518 $1,656,203 Long-term obligations and preferred stock-Redemption required $ 474,323 $ 493,700 $ 513,165 $ 516,064 $ 518,801 $ 521,697 COVERAGE RATIOS Ratio of earnings to fixed charges: Pre-income tax method 5.03x 4.27x 3.84x 3.59x 3.57x 4.27x Mortgage indenture method (CIPS) 5.70 4.86 4.65 4.32 4.51 4.95 Preferred stock coverage - CIPS charter 3.24 2.78 2.80 2.66 2.64 2.95 Preferred stock coverage - SEC method 4.59 3.80 3.81 3.50 3.63 4.02 CASH FLOW RATIOS Funds from operations interest coverage 6.22x 5.99x 5.14x 4.71x 4.61x 4.99x Funds from operations to total debt 33% 33% 30% 27% 25% 28% Net cash flow to capital expenditures 117 86 78 96 108 150 MISCELLANEOUS Average interest rate on long-term debt 6.43% 6.82% 7.38% 7.37% 7.38% 7.24% Average dividend rate on preferred stock 4.95 6.14 6.37 6.42 6.47 6.52 AFUDC as a percent of net income 3% 4% 4% 2% 1% 1% Return on average common equity 13.7 11.8 11.9 11.0 11.0 13.7 Return on average invested capital (including current portion and unamortized net debt premium and discount) 10.4 9.5 10.1 9.5 9.5 10.6 QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (in thousands except for Cash per share data) Total Total Earnings Dividends Operating Operating Net Per Common Per Common Book Value Quarters Revenues Income Income Share* Share (end of period) ________ _________ _________ ______ __________ ___________ _______________ 1993 First $211,304 $35,619 $16,661 $ .49 $ .48 $18.09 Second 189,291 28,364 12,670 .37 .49 17.95 Third 235,677 74,446 40,122 1.18 .49 18.63 Fourth 208,488 32,306 16,045 .47 .49 18.60 1992 First $185,531 $24,696 $12,079 $ .35 $ .47 $17.75 Second 168,251 33,218 16,450** .48** .48 17.72 Third 189,198 54,833 30,404 .89 .48 18.15 Fourth 196,897 30,239 13,566 .40 .48 18.08 *The quarterly earnings per share may not add to the total earnings per share for the year due to rounding. **Quarterly earnings reflect adjustment for settling Revenues Subject to Refund proceeding. See Note 11 to Notes to Consolidated Financial Statements. COMMON STOCK CIPSCO common stock is listed for trading on both the New York Stock Exchange and the Chicago Stock Exchange under the ticker symbol "CIP." Quotes may be obtained from The Wall Street Journal and other newspapers as "CIPSCO" near the top of the "C" section of the New York Stock Exchange Composite listings. As of December 31, 1993, the number of holders of record of CIPSCO's outstanding common stock was 42,790. Common stock prices listed as "CIPSCO" were reported as follows: 1993 Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31 _______ _______ ________ _______ High 32 3/4 33 5/8 33 3/4 33 3/8 Low 29 1/4 31 1/4 32 29 1/4 Close 32 3/4 32 33 5/8 30 3/4 1992 Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31 _______ _______ ________ _______ High 28 28 7/8 30 7/8 30 7/8 Low 26 26 1/8 28 1/4 29 1/8 Close 27 1/8 28 3/8 30 3/4 30 1/4
Exhibit 21 SUBSIDIARIES OF REGISTRANT State or Jurisdiction Subsidiary of Incorporation __________ _____________________ Central Illinois Public Service Company Illinois Illinois Steam Inc. Illinois CIPS Energy Inc. Illinois Electric Energy, Inc.* Illinois CIPSCO Investment Company Illinois CIPSCO Securities Company Illinois CIPSCO Leasing Company Illinois CLC Aircraft Leasing Company Illinois CLC Leasing Company A Illinois CLC Leasing Company B Illinois CLC Leasing Company C Illinois CIPSCO Energy Company Illinois CEC-PGE-G Co. Illinois CEC-PGE-L Co. Illinois CEC-APL-G Co. Illinois CEC-APL-L Co. Illinois CEC-PSPL-G Co. Illinois CEC-PSPL-L Co. Illinois CEC-MPS-G Co. Illinois CEC-MPS-L Co. Illinois * Central Illinois Public Service Company owns 20% of the common stock of EEI. Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS _________________________________________ As independent public accountants, we hereby consent to the incorporation of our reports included in and incorporated by reference in this Form 10-K, into Central Illinois Public Service Company's previously filed Registration Statements File Nos. 33-29384 and 33-31475 and CIPSCO Incorporated's previously filed Registration Statement File No. 33-32936. ARTHUR ANDERSEN & CO. Chicago, Illinois, March 10, 1994 Exhibit 24 POWER OF ATTORNEY _________________ The undersigned, as a director of CIPSCO Incorporated, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the CIPSCO Incorporated Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/ William J. Alley _______________________________ (SEAL) William J. Alley Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of CIPSCO Incorporated, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the CIPSCO Incorporated Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Robert S. Eckley _______________________________ (SEAL) Robert S. Eckley Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of CIPSCO Incorporated, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the CIPSCO Incorporated Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/John L. Heath _______________________________ (SEAL) John L. Heath Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of CIPSCO Incorporated, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the CIPSCO Incorporated Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Gordon R. Lohman _______________________________ (SEAL) Gordon R. Lohman Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of CIPSCO Incorporated, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the CIPSCO Incorporated Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Hanne M. Merriman _______________________________ (SEAL) Hanne M. Merriman Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of CIPSCO Incorporated, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the CIPSCO Incorporated Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Donald G. Raymer _______________________________ (SEAL) Donald G. Raymer Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of CIPSCO Incorporated, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the CIPSCO Incorporated Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Thomas L. Shade _______________________________ (SEAL) Thomas L. Shade Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of CIPSCO Incorporated, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the CIPSCO Incorporated Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/James W. Wogsland _______________________________ (SEAL) James W. Wogsland Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 Exhibit 99.01 DESCRIPTION OF CAPITAL STOCK General. The authorized capital stock of CIPSCO consists of 4,600,000 shares of Preferred Stock, without par value, issuable in series, of which none are outstanding and 100,000,000 shares of Common Stock without par value of which 34,107,706 shares were outstanding at December 31, 1993. The following statements, unless the context otherwise indicates, are brief summaries of the substance or general effect of certain provisions of CIPSCO's Amended and Restated Articles of Incorporation ("CIPSCO Articles") and the CIPS Restated and Amended Articles of incorporation, as amended, and the resolutions establishing series of Preferred Stock (collectively, the "CIPS Articles"), and of the CIPS Mortgage Indenture securing outstanding First Mortgage Bonds of CIPS. Such statements make use of defined terms and are not complete; they are subject to all the provisions of the CIPSCO Articles, the CIPS Articles or the CIPS Mortgage Indenture, as the case may be. Preferred Stock. The CIPSCO Articles grant the Board of Directors of the Company the Authority to determine how shares of Preferred Stock may be divided into and issued in series, and on what terms and for what consideration such shares shall be issued. In addition, the CIPSCO Articles grant the Board the authority to fix and determine the following relative rights and preferences of shares of each such series of Preferred Stock: (1) the distinctive designation of, and the number of shares that constitute, such series and the "stated value" or "nominal value," if any, thereof; (2) the rate or rates of dividend (or method of determining the rate or rates) applicable to shares of such series; (3) the price at which, and the terms and conditions on which, shares of such series may be redeemed by CIPSCO; (4) the amount payable upon shares of such series in the event of the involuntary liquidation of CIPSCO; (5) the amount payable upon shares of such series in the event of the involuntary liquidation of CIPSCO; (6) sinking fund provisions for the redemption or purchase of shares of such series; (7) the terms and conditions on which shares of such series may be converted, if such shares are issued with the privilege of conversion; (8) the voting rights (including, but not limited to, any special voting rights), if any, of the holders of shares of such series, provided that in no event shall any share of Preferred Stock be entitled to more than a number of votes equal to the amount determined by dividing the amount payable on such share (exclusive of accrued dividends) in the event of the involuntary liquidation of CIPSCO by $100. Dividend Rights. Dividends are payable on CIPSCO's Common Stock if and when declared by the Board of Directors of CIPSCO and no restrictions are placed on the declaration of dividends by the CIPSCO Articles. The ability of CIPSCO to pay dividends is dependent upon distributions made to it by CIPS and amounts earned by CIPSCO on its other investments. Whenever dividends on all outstanding shares of the CIPS Preferred Stock of all series for all previous quarter-yearly dividend periods and the current quarter-yearly dividend period shall have been paid or declared and set apart for payment, and whenever all amounts required to be set aside for any sinking fund for the redemption or purchase of shares of the CIPS Preferred Stock for all previous periods or dates shall have been paid or set aside, and subject to the limitations summarized below, the Board of Directors of CIPS may declare dividends on the CIPS Common Stock out of any surplus or net profits of the Company legally available for the purpose. The CIPS Mortgage Indenture provides, in effect, that CIPS will not declare or pay any dividends (other than in stock) on its Common Stock, or make any other distribution on or purchase any Common Stock, unless the total amount charged or provided for maintenance, repairs and depreciation of the mortgaged properties subsequent to December 31, 1940, plus the surplus earned during the period and remaining after any such dividend, distribution or purchase, shall equal at least 15% of the total utility operating revenues of CIPS for the period, after deducting from such revenues the cost of electricity and gas purchased for resale. The CIPS Articles provide in effect that, so long as any Preferred Stock is outstanding, the total amount of all dividends or other distributions on CIPS Common Stock (other than in stock) that may be paid, and purchases of Common Stock that may be made, during any 12-month period shall not exceed (a) 75% of the net income of CIPS (as defined) for the 12-month period next preceding each such dividend, distribution or purchase, if the ratio of "common stock equity" to "total capital" (as defined) is 20% to 25%, or (b) 50% of such net income if such ratio is less than 20%. If such ratio is in excess of 25%, no such dividends may be paid or distributions or purchases made that would reduce such ratio to less than 25% except to the extent permitted by clauses (a) and (b). At December 31, 1993, no amount of retained earnings was restricted as to the payment of dividends on CIPS Common Stock under the foregoing provisions of the CIPS Mortgage Indenture or the CIPS Articles. Voting Rights. Under Illinois law and the CIPSCO Articles, each share of Common Stock of CIPSCO is entitled to one vote on each matter voted on at all meetings of shareholders, with the right of cumulative voting in the election of directors and, in accordance with Illinois law, the right to vote as a class on certain questions. Preferred Stock may have such voting rights as are established by the Board of Directors subject to the provisions of the CIPSCO Articles described under "Preferred Stock" above. Preemptive Rights. Holders of CIPSCO's capital stock have no preemptive subscription rights. Liquidation Rights. In the event of any liquidation or dissolution of CIPSCO, holders of Common Stock are entitled to share ratably in the net assets and profits of CIPSCO remaining after the payment in full to the holders of the Preferred Stock of the aggregate preferential amount payable in respect of the Preferred Stock in any such event. Miscellaneous. The Transfer Agents for the Common Stock are Illinois Stock Transfer Company, Chicago, Illinois, and Harris Trust and Savings Bank, Chicago, Illinois; and the Registrar is Harris Trust and Savings Bank, Chicago, Illinois. CIPSCO reserves the right to increase, decrease or reclassify its authorized capital stock or any class or series thereof, and to amend or repeal any provisions in the CIPSCO Articles, in the manner prescribed by law; and all rights conferred on shareholders in the CIPSCO Articles are subject to this reservation. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to_________ Commission file number 1-3672 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY ________________________________________________ (Exact Name of Registrant as Specified in its Charter) Illinois 37-0211380 -------------- ------------------- (State of (I.R.S. Employer Incorporation) Identification No.) 607 EAST ADAMS STREET SPRINGFIELD, ILLINOIS 62739 --------------------------------------- ------------ (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (217) 523-3600 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Cumulative Preferred Stock (par value $100 per share) _________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value at February 1, 1994 of the voting stock held by non-affiliates of the Registrant - $22,396,800 - Cumulative Preferred Stock (par value $100 per share) [Note: Excludes value of 400,000 shares of Cumulative Preferred Stock for which the Registrant has been unable to determine market value.] Number of shares outstanding of each of the Registrant's classes of common stock at February 1, 1994: 25,452,373 shares of Common Stock, without par value (owned by the parent - CIPSCO Incorporated). Documents Incorporated By Reference: A portion of the Company's Proxy Statement relating to its 1994 Annual Meeting of Shareholders is incorporated by reference in Part III hereof. ============================================================================= CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 1993 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I PAGE Item 1. Business General . . . . . . . . . . . . . . . . . . . . . . . 97 Holding Company Structure . . . . . . . . . . . . . . 97 Revenues. . . . . . . . . . . . . . . . . . . . . . . 97 Competition -- Electric Business . . . . . . . . . . 99 Competition -- Gas Business . . . . . . . . . . . . . 100 Utility Industry. . . . . . . . . . . . . . . . . . . 100 Construction Program and Financing. . . . . . . . . . 100 Rate Matters. . . . . . . . . . . . . . . . . . . . . 102 Electric Operations . . . . . . . . . . . . . . . . . 103 Electric Power Sales/Participation Agreements . . . . 105 Gas Operations. . . . . . . . . . . . . . . . . . . . 106 Fuel. . . . . . . . . . . . . . . . . . . . . . . . . 108 Regulation. . . . . . . . . . . . . . . . . . . . . . 109 Environmental Matters . . . . . . . . . . . . . . . . 110 Employees . . . . . . . . . . . . . . . . . . . . . . 111 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . 112 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 113 Item 4. Submission of Matters to a Vote of Security Holders. . . 114 Executive Officers of the Registrant . . . . . . . . . . 114 Directors of Registrant . . . . . . . . . . . . . . . . 115 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . . . . 118 Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . 119 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . 120 Item 8. Financial Statements and Supplementary Data. . . . . . . 126 Report of Independent Public Accountants . . . . . . . . 152 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . 153 PART III Item 10. Directors and Executive Officers of the Registrant . . . 153 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . 153 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . 153 Item 13. Certain Relationships and Related Transactions . . . . . 153 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 154 Schedules. . . . . . . . . . . . . . . . . . . . . . . . 159 Signature. . . . . . . . . . . . . . . . . . . . . . . . 167 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . 168 PART I Item 1. Business GENERAL. Central Illinois Public Service Company (CIPS or the Company), an Illinois corporation, was organized in 1902. CIPS is a public utility operating company engaged in the sale of electricity and natural gas in portions of central and southern Illinois. CIPS generates, transmits and distributes electricity and, through interchange agreements with other utility systems, purchases and sells power on a firm basis, in emergency situations or when economical to do so. CIPS sells and distributes natural gas which it purchases from natural gas producers and other suppliers and transports natural gas purchased by end-users directly from suppliers. The principal executive offices of CIPS are located in Springfield, Illinois. CIPS furnishes electric service to about 316,000 retail customers in 557 incorporated and unincorporated communities and adjacent suburban and rural areas. See Business - Electric Operations and - Electric Power Sales/Participation Agreements regarding certain electric power arrangements with other utility systems. CIPS also furnishes natural gas service to about 164,000 retail customers in 267 incorporated and unincorporated communities and adjacent suburban and rural areas and provides gas transportation service to about 340 end-users. CIPS furnishes both electric and natural gas service in 236 of the communities served by it. The territory served by CIPS, located in 66 counties in Illinois, has an estimated population of 820,000 and is devoted principally to agriculture and diversified industrial operations. Key industries include petroleum and petrochemical industries, food processing, metal fabrication and coal mining. HOLDING COMPANY STRUCTURE. Effective October 1, 1990, CIPSCO Incorporated (CIPSCO) became the parent holding company of CIPS. CIPSCO owns 100% of the outstanding common stock of CIPS, representing in excess of 97% of the voting securities of CIPS. The electric and gas utility business of CIPS is expected to provide the major portion of CIPSCO's assets and earnings for the foreseeable future. REVENUES. The total operating revenues of CIPS for the year 1993 were $834,556,000 of which about 83% was derived from the sale of electricity and about 17% from the sale of natural gas. The retail electric revenues were derived approximately as follows (percentage of total electric operating revenue): 32% from residential customers, 26% from commercial customers, 16% from industrial customers and 2% from public authorities and other. The wholesale electric revenues were derived approximately as follows (percentage of total electric operating revenue): 10% from interchange sales (firm), 11% from interchange sales (economy/emergency) and 3% from cooperatives and municipal customers. Sales of power to the petroleum and related petrochemical industries and to the coal mining industry contributed about 6% of total electric revenues. Sales to these three industries accounted for approximately 37% of the 1993 electric revenue derived from the industrial customer group. Revenues from the coal mining industry may decline in the future as a result of declining consumption of Illinois coal, as many industrial coal customers shift to lower sulfur coal or other fuels as a means of complying with the Clean Air Act Amendments of 1990. The natural gas revenues for the year 1993 were derived approximately as follows: 63% from residential customers, 22% from commercial customers, 8% from industrial customers and 7% from transportation service customers and miscellaneous. The sources of the operating revenues of CIPS for the years indicated were as follows: Electric 1993 1992 1991 -------- ________ ________ ________ (in thousands) Residential . . . . . . . . . . . . . . . . $219,510 $197,120 $205,734 Commercial. . . . . . . . . . . . . . . . . 176,154 169,460 159,110 Industrial. . . . . . . . . . . . . . . . . 112,382 109,648 113,414 Public authorities and other. . . . . . . . 15,144 12,970 13,332 ________ ________ ________ Total retail revenues . . . . . . . . . 523,190 489,198 491,590 ________ ________ ________ Interchange sales (firm). . . . . . . . . . 68,040 58,913 56,235 Interchange sales (economy/emergency) . . . 76,272 27,949 26,624 Cooperatives and municipals . . . . . . . . 21,347 19,582 18,220 ________ ________ ________ Total wholesale revenues . . . . . . . . 165,659 106,444 101,079 ________ ________ ________ Total electric revenues. . . . . . . . . $688,849 $595,642 $592,669 ======== ======== ======== Natural Gas 1993 1992 1991 ----------- ________ ________ ________ (in thousands) Residential . . . . . . . . . . . . . . . . $ 92,213 $ 86,968 $ 78,070 Commercial. . . . . . . . . . . . . . . . . 32,023 31,036 26,751 Industrial. . . . . . . . . . . . . . . . . 12,139 6,445 3,200 Transportation service. . . . . . . . . . . 8,915 9,269 9,203 Miscellaneous . . . . . . . . . . . . . . . 417 42 312 -------- -------- -------- Total gas revenues. . . . . . . . . . . . $145,707 $133,760 $117,536 ======== ======== ======== The portions of operating income of CIPS, before income taxes, attributable to electric operations were approximately $154,779,000 (95%) in 1993, $123,228,000 (92%) in 1992 and $137,303,000 (95%) in 1991. The portions of operating income, before income taxes, attributable to gas operations were approximately $7,621,000 (5%) in 1993, $10,916,000 (8%) in 1992 and $7,161,000 (5%) in 1991. Identifiable assets relating to electric and gas operations were as follows: 1993 1992 1991 __________ __________ __________ (in thousands) Electric operations . . . . . . . . . . $1,459,073 $1,443,578 $1,419,036 Gas operations. . . . . . . . . . . . . 177,857 188,321 157,757 Other . . . . . . . . . . . . . . . . . 31,532 13,160 115,050 ---------- ---------- ---------- Total assets. . . . . . . . . . . . . $1,668,462 $1,645,059 $1,691,843 ========== ========== ========== COMPETITION -- ELECTRIC BUSINESS. Competition among suppliers of electric energy is increasing. In particular, competition for interchange sales, which is based primarily on price and availability of energy, has become much more intense in recent years with the addition of electric generating capacity by other utilities in the Midwest. However, such additional capacity has made lower cost power available for purchase by CIPS which, in certain instances, is at a cost lower than the variable cost of generating power from the generating stations owned by CIPS. CIPS is responding to overall increased competition in a number of ways designed to lower its costs and increase sales. Since instituting an economic development incentive rate in 1985, the CIPS economic development program has been expanded to include new customer and community development initiatives. An ongoing program in which senior management plays a critical role in communicating CIPS' competitive advantages to our largest industrial customers is continuing. Additional services to our customers have included energy technology assistance and market development programs. CIPS works in partnership with communities throughout the service area to implement projects to respond to growth opportunities. This, in combination with the ongoing business development initiatives including industrial site location assistance, community profiles and technical development services, is designed to maximize economic development throughout the CIPS territory. In addition to a general program of controlling costs, in 1987 CIPS initiated a major program of renegotiating long-term coal supply contracts. Savings from these renegotiation efforts continued during 1993. Further renegotiation is expected in 1994. The effect of this program has been and will be to help CIPS control its fuel costs. Passage of the National Energy Policy Act of 1992 ("NEPA") will require electric utilities, such as CIPS, to compete with nonutility power producers who can generate power. Under NEPA these producers may gain access to utility transmission lines. (See Management's Discussion and Analysis of Financial Condition and Results of Operations.) This enhances competition over time and will give customers and CIPS opportunities to take advantage of competitive markets. Furthermore, large retail customers may decide to install cogeneration or other facilities and supply their own electricity. Over the next several years, excluding the 1994 summer season, CIPS expects to have uncommitted generating capacity available to market principally because certain existing capacity sales agreements with other utility systems are scheduled to expire on various dates during that period. Such capacity sales during 1993 represented 532 megawatts, or 20% of CIPS' capacity. To compete successfully in the capacity sales market, as well as the interchange sales market, it will be important for CIPS to be a low-cost supplier. (See Business - Electric Power Sales/Participation Agreements.) COMPETITION -- GAS BUSINESS. Competition in the natural gas industry is increasing. For a number of years, CIPS customers have had the ability to purchase natural gas from producers or other suppliers and transport that gas through the interstate pipelines and the CIPS system. CIPS collects a rate for such transportation. New policies of the Federal Energy Regulatory Commission ("FERC") such as Order 636 (see "Gas Operations" below) have increased the competitive nature of the gas business. Customers have the ability to receive supply from pipelines that do not serve the CIPS system. In this case, CIPS would no longer necessarily serve the customer with either gas supply or transportation service. CIPS has negotiated or is currently negotiating with a number of its larger industrial gas customers regarding flexible rates to address the more competitive environment in which CIPS is operating. UTILITY INDUSTRY. CIPS is experiencing some of the problems common to electric and gas utility companies, namely, increased competition for customers, increased construction costs, delays and uncertainties in the regulatory process and costs of compliance with environmental and other laws and regulations. CONSTRUCTION PROGRAM AND FINANCING. Total construction expenditures for CIPS for 1994 through 1998 are estimated at $431 million. For 1994, anticipated construction expenditures are $87 million for replacements and improvements and consist of about $28 million for electric production facilities, $14 million for electric transmission facilities, $35 million for electric distribution and general facilities, and $10 million for gas utility facilities. Total capital costs through the year 2000 (including costs incurred through 1993) related to compliance with the Clean Air Act Amendments of 1990 including Phase I (effective in 1995) and Phase II (effective in 2000) are estimated to be less than $50 million. (See Business - Fuel.) CIPS continuously reviews its construction program, which may be affected by numerous factors, including the rate of load growth, escalation of construction costs, fuel shortages, changes in governmental and environmental regulations, customers' patterns of consumption and conservation of energy, the adequacy of rate relief and the ability of CIPS to raise necessary capital. Load growth projections are subject to a number of uncertainties due to influences on customer consumption, economic conditions and the effect of rates on consumption and peak load demand. CIPS has no electric generating units under construction. On May 11, 1993, the Illinois Commerce Commission (the "Illinois commission") approved CIPS' "least cost" plan which includes the 20-year generating plan of the utility. As demonstrated by the Plan, CIPS will not require additional generating capacity or demand-side resources during the 1993-2013 planning period. Pursuant to the Plan, CIPS will engage in several demand-side management activities intended to enhance its capability to deliver demand- side management resources in the future. For a discussion of the funds requirements for the period 1994-1998 and the assumptions as to the sources of funds to meet those requirements, see Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Requirements and - Financing Requirements. See Management's Discussion and Analysis of Financial Condition and Results of Operations - Financing Requirements for information regarding securities issuances and redemptions during 1993. The issuance by CIPS of first mortgage bonds, common stock, preferred stock and certain unsecured debt securities is subject to the receipt of necessary regulatory approvals. (See Business - Regulation.) The Mortgage Indenture of CIPS, as presently operative, permits the issuance of additional first mortgage bonds up to 60% of available net expenditures for bondable property, provided the "net earnings" of CIPS (determined after deducting income taxes and otherwise as provided in the Mortgage Indenture) for a recent 12-month period equal at least twice the annual interest requirements on all first mortgage bonds outstanding (and on all equally secured and prior lien indebtedness) and on the bonds then to be issued. At December 31, 1993, the more restrictive of these requirements was the "net earnings" test. The "net earnings" of CIPS for the year ended December 31, 1993, so computed, were equal to 5.70 times the interest for one year on the aggregate amount of bonds outstanding under the Mortgage Indenture at December 31, 1993. Based on the "net earnings" of CIPS (so computed) for the year ended December 31, 1993, and the bonds outstanding under the Mortgage Indenture at December 31, 1993, CIPS could have issued about $532 million of additional first mortgage bonds under the foregoing interest coverage provision (assuming an annual interest rate of 7.25% on such bonds). The Articles of Incorporation of CIPS provide, in effect, that so long as any CIPS preferred stock is outstanding, CIPS shall not, without the requisite vote of the holders of preferred stock, unless the retirement of such stock is provided for, (a) issue any preferred or equal ranking stock (except to retire or in exchange for an equal amount thereof) unless the "gross income available for interest" of CIPS for a recent 12-month period is at least one and one- half (1-1/2) times the sum of (i) one year's interest on all funded debt and notes maturing more than 12 months after the date of issuance of such shares and (ii) one year's dividend requirement on all preferred stock to be outstanding after such issue, or (b) issue or assume any unsecured debt securities maturing less than two years from the date of issuance or assumption (except for certain refunding or retirement purposes) if immediately after such issuance or assumption the total amount of all such unsecured debt securities would exceed 20% of the sum of all secured debt securities and the capital and surplus of CIPS. For the year ended December 31, 1993, the "gross income available for interest" of CIPS equalled 3.24 times the sum of the annual interest charges and dividend requirements on all such funded debt, notes and preferred stock outstanding at December 31, 1993. Such "gross income available for interest" was sufficient under the test to support the issuance of additional preferred stock (assuming an annual dividend rate on such preferred stock of 6.75%) in an amount in excess of the maximum amount ($185 million) of authorized and unissued preferred stock under the Articles. RATE MATTERS. The most recent CIPS retail rate case before the Illinois commission resulted in electric and natural gas rate increases which became effective March 20, 1992. In its decision, the Illinois commission allowed a return on net original cost rate base of 9.77% (electric) and 9.88% (natural gas) and a return on common equity of 12.28% (electric) and 12.50% (natural gas). The Illinois commission order was designed to increase annual electric and natural gas revenues of CIPS by $11.6 million. On March 6, 1991, the Illinois commission commenced a generic proceeding (Docket No. 91-0081 for CIPS) to consider whether costs related to the cleanup and restoration of former manufactured gas plant sites (environmental remediation sites) should be recoverable from ratepayers by Illinois utilities (including CIPS) and, if recoverable, what recovery mechanism should be utilized. See Note 2 of Notes to Financial Statements included under Item 8 of this report for a discussion of the regulatory and legal proceedings related to the recovery of remediation and related costs. On March 26, 1993, the Illinois commission entered an order accepting the proposed riders filed by CIPS designed to recover environmental cleanup costs and associated legal expenses relating to its environmental remediation sites (including costs previously incurred and deferred). The riders were filed in response to the Illinois commission's generic order described in Note 2 to the Financial Statements. CIPS began recovering amounts under the riders in April, 1993. On May 13, 1992, the Illinois commission entered an Order which approved a settlement agreement resolving all issues in the "show cause" proceeding which had been initiated by the Illinois commission in December 1986 for purposes of determining the effects on CIPS of the passage of the Tax Reform Act of 1986. See Note 11 of Notes to Financial Statements included under Item 8 of this report for a discussion of the impact of the settlement. The Illinois commission conducts annual proceedings to determine whether the electric fuel and purchased gas charges collected by CIPS in each year pursuant to the applicable fuel adjustment and purchased gas adjustment clauses reflect the actual costs of electric fuel and natural gas prudently purchased in that year and to reconcile revenues collected under the clauses during the year with actual costs incurred. The Illinois commission can order refunds to customers if it determines that actual costs of fuel or purchased gas were less than the amounts charged to customers pursuant to the clauses or if it finds that CIPS was imprudent in its purchases of fuel or gas. The Illinois commission has completed its review of fuel adjustment and purchased gas adjustment charges for all years prior to 1992. No significant refunds or adjustments were required for those years. Fuel reconciliation proceedings for the year 1992 commenced in October 1993. (See Business - Fuel.) The most recent general rate increase of CIPS approved by the FERC became effective in 1984. There are currently no rate proceedings pending at the FERC, and CIPS has no plans for any such rate increase filings. All of CIPS' requirements sales to cooperatives and municipals for resale are through negotiated service agreements. As a result of the retail rate increase granted to CIPS in 1992 referred to above, a corresponding rate adjustment was granted by the FERC for certain customers who purchase power from CIPS for resale. This rate adjustment was provided for in the service agreements between CIPS and these customers. In January 1985, CIPS received approval from the Illinois commission for an economic development rate which is designed to encourage industrial expansion and stimulate job creation in the service territory of CIPS. Under the economic development rate, each qualifying electric customer receives discounted rates for a maximum period of five years. In June 1986, CIPS received further approval which grants flexibility to negotiate agreements to fit the specific needs of certain industrial prospects. In August 1989, the Illinois commission granted CIPS further approval to offer customers the economic development rate through December 31, 1994. Since the rate was instituted, 117 new or existing business expansions have led to the creation of over 8,000 new jobs in the CIPS service territory. ELECTRIC OPERATIONS. Since late 1977 CIPS has been a net off-system seller of electricity and during 1993 it generated 120% of its system requirements. The maximum gross system load to date on the CIPS electrical system, on a one-hour integrated basis, occurred on August 27, 1993, and was 2,157,000 kilowatts. Gross system load includes sales to electric cooperative and municipal customers (but excludes emergency and interchange sales). The 1993 maximum gross system load of 2,157,000 kilowatts was 2.3% greater than the historical maximum gross system load of 2,108,000 which occurred in 1988. CIPS, Illinois Power Company and Union Electric Company are parties to an Interconnection Agreement providing for the coordination and interconnected operation of their respective electric systems and the interchange of power and energy at rates and under conditions set forth therein, including the maintenance by the parties of minimum reserve capacity positions. The Agreement provides that CIPS will maintain a minimum 15% system reserve capacity. CIPS, Illinois Power and Union Electric are parties to an Interconnection Agreement with Tennessee Valley Authority (TVA) providing for the interconnection of the TVA system with the systems of the three companies to exchange economy and emergency power and for other working arrangements. In addition, CIPS has interconnection agreements with various other neighboring utilities, including Central Illinois Light Company, Commonwealth Edison Company, Indiana Michigan Power Company, Public Service Company of Indiana, Inc., Iowa Electric Light and Power Company and Northern Indiana Public Service Company. These agreements provide for various interchanges, emergency services and other working arrangements. CIPS owns 20% (and three other utilities own the remaining 80%) of the common stock of Electric Energy, Inc., and is entitled to receive from it varying amounts of power. Electric Energy, Inc. owns and operates a 1,015,000 kilowatt coal-fired power station located in Joppa, Illinois. CIPS is one of 15 members of the Mid-America Interconnected Network reliability council, which has as its purpose the promotion of maximum coordination of planning, construction and utilization of generation and transmission facilities on a regional basis in order to assure the reliability of electric bulk power supply in the area served. One municipal agency, two municipal electric systems, one cooperative agency and one cooperative are engaged in the generation of electricity within, or in close proximity to, portions of the territory served by CIPS. In 1993 CIPS began the process of analyzing the economic value of each of its generating units, which will consider the cost effectiveness of continued operation, retirement or repowering of each unit and other options as well. The Electric Power Research Institute ("EPRI") is participating in this analysis with CIPS. The study is expected to be completed in mid-1994. Electric and magnetic fields (sometimes referred to as EMF) surround electric wires or conductors of electricity such as electrical tools, household wiring and appliances and electric transmission and distribution lines such as those owned by CIPS. A number of statistical and laboratory studies have investigated whether EMF pose human health risks. The United States Environmental Protection Agency (USEPA) stated in its December 1992 brochure "Questions and Answers about Electric and Magnetic Fields" that "Some epidemiological evidence is suggestive of an association between surrogate measurements of magnetic field exposure and certain cancer outcomes. Though the body of evidence cannot be dismissed, it is not complete enough at this time to draw meaningful conclusions." The nation's electric utilities, including CIPS, have participated in the sponsorship of millions of dollars of EMF research. CIPS has also agreed to participate in the National EMF Research and Public Information Dissemination Program, a 5-year $65 million effort headed by the United States Department of Energy aimed at furthering EMF research. Through its participation with EPRI, CIPS will continue its investigation and research with regard to the possible health effects posed by exposure to EMF. ELECTRIC POWER SALES/PARTICIPATION AGREEMENTS. As shown in the table below, CIPS currently has contracts with Norris Electric Cooperative, City of Newton, Village of Greenup and Mt. Carmel Public Utility Company for the sale of electric power. These contracts provide for firm full requirements service which obligates CIPS to maintain adequate system reserves to support the contracts, or to supply the requirements with off-system purchases. Peak Contract Demand Expiration Contract (Megawatts) Date - -------- ___________ __________ Norris Electric Cooperative. . . . . . . . . 49 MW 2007 City of Newton . . . . . . . . . . . . . . . 5 MW 1999 Village of Greenup . . . . . . . . . . . . . 2 MW 1999 Mt. Carmel Public Utility Co. . . . . . . . 40 MW 2001 CIPS has entered into an agreement with Central Illinois Light Company ("CILCO") to sell CILCO limited term power through May, 1998. The agreement calls for a minimum contract delivery rate of 50 megawatts in 1993 rising to 90 megawatts by the end of the contract period. At CILCO's request, and provided the capacity is available, purchases can be increased to 100 megawatts at any time during the contract period with prior written notice. In November 1992, CIPS entered into an agreement with CILCO to sell CILCO limited term power for the period of June, 1998 through May, 2002. The agreement calls for a minimum contract delivery rate of 100 megawatts for the entire period. At CILCO`s request, and provided the capacity is available, purchases can be increased to 150 megawatts with prior written notice. In addition, CIPS sells electric power to three power pooling agencies through negotiated capacity participation agreements identified in the following table. These agencies include Soyland Power Cooperative (Soyland), Illinois Municipal Electric Agency (IMEA) and Wabash Valley Power Association (WVPA). Maximum Capability Entitlement Contract (Megawatts) Expiration Contract (for years indicated) Date - -------- _____________________ __________ Soyland . . . . . . . . . 217MW 1993-1994 1999 103MW 1995-1999 IMEA. . . . . . . . . . . 116MW 1994-2014 2014 WVPA. . . . . . . . . . . 60 MW 1994 2011 65 MW 1995-2011 GAS OPERATIONS. CIPS distributes and sells natural gas to 267 incorporated and unincorporated communities located in 41 counties of Central and Southern Illinois. The CIPS service territory is predominantly made up of small towns and rural areas. Of the communities served, only 5 have populations greater than 15,000. CIPS operates 4,520 miles of transmission and distribution mains, and its customer density is approximately 36 customers per mile of main. Six interstate pipelines pass through various portions of the CIPS service area: Panhandle Eastern Pipe Line Company, Texas Eastern Transmission Corporation, Natural Gas Pipeline Company, Texas Gas Transmission Company, Midwestern Gas Transmission Company and Trunkline Gas Company. CIPS has multiple interconnections with each of these pipelines, with the total of all such interconnections being 45. Most of the CIPS system is integrated by virtue of Company-owned pipelines, or by transportation agreements with interstate pipelines. CIPS owns and operates four underground storage fields which provide a total peak day capacity of 36,500 mcf/day (thousand cubic feet per day). CIPS also operates one propane-air peak shaving facility which has a peak day capacity rating of 10,000 mcf/day. The peak day firm demand recorded by CIPS in 1993 was 254,870 mcf which was reached on February 17, 1993. This demand level is 20% less than the all- time peak demand of 319,033 mcf which occurred on December 24, 1983. During calendar year 1993, the CIPS throughput (total of sales and transportation) was 36 billion cubic feet (bcf) compared to 36.5 bcf experienced in 1972, the year of highest historical throughput. In 1993, CIPS transported 10.8 bcf of customer-owned gas which represented 30% of the total system throughput. Volumes of customer-owned gas transported in 1992 and 1991 were 11.8 bcf and 12.0 bcf, respectively. The average cost per mcf of natural gas purchased from all suppliers was about $3.66 in 1993, $3.66 in 1992 and $3.39 in 1991. The rate schedules of CIPS applicable to all of its gas sales include a uniform purchased gas adjustment clause, which permits CIPS to adjust its rates to its customers to reflect substantially all changes in the cost of purchased gas. (See Note 1 of Notes to Financial Statements included under Item 8 of this report. See Business - Rate Matters.) In 1992, the FERC issued orders (together called Order 636) which address pipeline service restructuring. Order 636 required interstate pipelines to "unbundle" their sales service, and offer separately the components of that service (i.e., gas supply, transportation and storage). Order 636 essentially precludes interstate pipelines from selling natural gas. However, many pipelines have established separate unregulated marketing affiliates which function as gas merchants in competition with producers and other sellers of gas. Each of the six pipelines providing service to CIPS have made restructured services filings at FERC to comply with Order 636. The last such filing was effective December 1, 1993. See Note 2 of Notes to Financial Statements included under Item 8 of this report for a discussion of the transition costs to be paid by CIPS and the Illinois commission order initiated to investigate the appropriate ratemaking treatment of Order 636 transition costs. Full implementation of Order 636 has resulted in several changes in CIPS' gas supply portfolio. Pipeline sales service contracts have been replaced by additional direct purchase gas supply contracts coupled with gas transportation contracts with various pipelines and storage contracts with pipelines or other independent storage service providers. In some cases CIPS has also contracted for so-called "no-notice" services with interstate pipelines. Under such contracts, the pipeline essentially combines and manages a number of independent supply, transportation and storage contracts in order to provide flexibility in the amount of gas actually delivered to CIPS on any day. Such flexibility, which was formerly provided by the pipeline sales service, is needed for CIPS to economically meet the highly weather sensitive needs of its firm service customers. In addition to its diversified portfolio of gas supply, transportation, leased storage and no-notice service contracts, CIPS' company-owned storage and propane-air facilities provide additional reliability and flexibility to meet peak day and peak season requirements. In recent years CIPS has made investments to construct additional pipeline interconnections, increase company owned storage capacity, improve reliability of existing storage facilities, modernize propane-air facilities and improve data acquisition capabilities. At the same time CIPS has reorganized and enhanced its gas supply planning and procurement functions. FUEL. Over 99% of the net kilowatthour generation of CIPS in 1993 was provided by coal-fired generating units and the remainder by an oil-fired unit. The average costs of fuel consumed by CIPS, per ton and per million Btu, for the periods shown were as follows: 1993 1992 1991 ----- ----- ----- Per ton ($) . . . . . . . . . . . . 36.62 36.46 36.68 Per million Btu ($) . . . . . . . . 1.67 1.67 1.67 In 1993, approximately 21.9% of the coal purchased for electric generation was purchased on a spot basis at average delivered costs of $31.35 per ton and $1.37 per million Btu. The retail fuel adjustment clause (FAC) of CIPS is consistent with the uniform FAC mandated by the Illinois commission for all electric utilities as applicable to retail electric sales in Illinois. The FAC provides for the recovery of changes in electric fuel costs, including certain transportation costs of coal, in billings to retail customers. CIPS adjusts fuel expense to recognize over- or under-recoveries of allowable fuel costs. The cumulative effect is deferred on the Balance Sheet as a Current Asset or Current Liability, pending automatic reflection in future billings to customers. In 1992, CIPS received Illinois commission approval to include certain coal transportation costs in the FAC in accordance with the August 1991 modifications to the Illinois Public Utilities Act. CIPS also has contractual arrangements with certain other utility system customers which contain a fuel adjustment clause which permits CIPS to adjust its rates to such customers to reflect substantially all changes in the cost of fuel (including all transportation costs) used to supply those customers. The amount of coal supplies on hand at the generating stations of CIPS varies from time to time. CIPS generally attempts to maintain a 65-day supply. High usage resulting from increased generation to meet interchange sales opportunities and increased native load requirements in 1993 led to somewhat lower than normal coal supplies in early 1994. More than 85% of the annual coal requirements of the generating facilities of CIPS are being met by long-term coal contracts expiring at various dates from 1995 to 2010. As contracts approach their expiration, or when appropriate, CIPS evaluates alternative supply arrangements based on then current and expected market conditions for coal. CIPS believes there are adequate reserves reasonably available to supply its existing generating units with the quantity and quality of coal required for the foreseeable future. Compliance with the sulfur dioxide emission requirements of Phase I (effective in 1995) and Phase II (effective in 2000) of the Clean Air Act Amendments of 1990 is expected to be accomplished through switching to lower sulfur coal for several generating units in combination with increased scrubbing with the existing scrubber at Newton Unit 1. In January 1991, CIPS entered into a long-term contract for the purchase of lower sulfur Illinois coal at its Coffeen Power Station to meet the requirements under the Clean Air Act Amendments. This new contract replaced an existing contract and, in addition to providing the source of coal for clean air compliance, resulted in lower fuel costs. The new contract provides for certain termination charges as described in Note 2 of Notes to Financial Statements included under item 8 of this report. CIPS estimates that capital costs to be incurred through the year 2000 for various equipment and coal handling facility modifications at all five of its generating stations in order to comply with the Clean Air Act Amendments will be less than $50 million. Such costs could result in electric base rate increases of approximately one to two percent by the year 2000. CIPS does not anticipate that operating costs will change materially as a result of compliance with the Clean Air Act Amendments. Under the Clean Air Act Amendments each utility must have, beginning in 1995, sufficient emission allowances, which are granted by the USEPA, to cover the amount of sulfur dioxide to be emitted each year from its generating stations. Any emission allowances in excess of a utility's needs for a year can be retained by it for future use or sold. Based upon CIPS' current compliance program, CIPS expects to have available allowances (after consideration of allowances sold) in excess of its requirements. REGULATION. CIPS is subject to regulation by the Illinois commission as to rates, accounting practices, issuance of certain securities and in other respects as provided by Illinois law. The Electric Supplier Act of Illinois permits utilities and electric cooperatives to delineate their respective service areas, subject to the approval of the Illinois commission, and gives the Illinois commission power to determine, pursuant to guidelines provided in the Act, whether a prospective electric customer will be furnished service by a public utility or by a cooperative. (See Item 3. Legal Proceedings.) The FERC has jurisdiction under the Federal Power Act over certain of the electric utility facilities and operations, accounting practices, issuance or acquisition of certain securities and electric rates of CIPS for resale and interchange customers. CIPS has been classified as a "public utility" within the meaning of that Act. CIPS has been declared exempt from the federal Natural Gas Act. CIPS is presently exempt from all the provisions of the Public Utility Holding Company Act of 1935, except provisions thereof relating to the acquisition of securities of other public utility companies, until further action by the Securities and Exchange Commission, by virtue of an annual exemption statement filed by CIPS with the Commission pursuant to Rule 2 under the Act. ENVIRONMENTAL MATTERS. CIPS is subject to regulation with respect to air and water quality standards, standards relating to the discharge and disposal of solid and hazardous wastes and other environmental matters by various federal, state and local authorities. The Illinois Pollution Control Board (the "Board") has jurisdiction over all phases of environmental control by the State of Illinois and has authority to grant variances from environmental requirements. The Illinois Environmental Protection Agency (the "Agency") has authority to issue permits, investigate violations and recommend enforcement cases. The Illinois Attorney General has the authority to prosecute enforcement cases. The USEPA has jurisdiction to promulgate and enforce air and water quality standards in addition to those standards which relate to the discharge and disposal of solid and hazardous wastes. Air pollution control regulations promulgated by the Board impose restrictions on emissions of particulate, sulfur dioxide, nitrogen oxides and other air pollutants and require that CIPS obtain permits from the Agency for the construction and operation of its generating facilities in compliance with these regulations. CIPS has secured all necessary operating permits for all of its existing generating facilities and is in substantial compliance with the provisions contained therein. Future construction projects may require additional construction permits. Water pollution control regulations promulgated by the Board impose restrictions on effluent discharges, set water quality standards and require CIPS to obtain construction permits for certain facilities and National Pollutant Discharge Elimination system ("NPDES") permits for discharges into public waters. CIPS has secured all necessary NPDES permits for all of its generating units and is in substantial compliance with the currently effective provisions contained therein. However, it would be difficult to comply with certain conditions in the recently renewed permits for the Coffeen and Newton Power Stations, scheduled to take effect in 1997. CIPS has appealed these permit conditions to the Illinois Pollution Control Board. If these appeals are unsuccessful, CIPS will seek regulatory relief under applicable rules to alter the requirements for these two stations. Pollution control regulations promulgated by the Board impose restrictions on the discharge and disposal of solid and hazardous waste, and determine design standards to prevent contamination of groundwater. CIPS has secured all necessary permits and authorizations for disposal and is in substantial compliance with the provisions contained therein. Future construction projects may require additional authorizations or permits. Beginning in 1986 and ending in October 1993, CIPS operated Units 1 and 2 at the Coffeen Power Station at a reduced load to meet applicable emission limitations. A new coal supply has allowed the operation of Coffeen Units 1 and 2 at their maximum capability of 325,000 KW and 550,000 KW, respectively, since October 1993. Total capability of the generating units was previously restricted to 750,000 KW when both units were in full operation. Removal of the operating restrictions increased total electric system capability to 2,852,000 KW. On May 21, 1993, the USEPA issued a Finding of Violation (FOV) to CIPS regarding Units 1 and 2 at the Newton Power Station. The FOV alleges that both generating units at the Newton Power Station were operated at various times from January 1991 through August 1992 in violation of applicable emission regulations, including opacity and sulfur dioxide limitations, regarding New Source Performance Standards established under the Clean Air Act for fossil fuel fired steam generating units. On January 3, 1994, CIPS entered into a consent agreement with the Illinois Environmental Protection Agency and the Illinois Attorney General resolving the issues presented in the FOV. Under terms of the consent agreement, CIPS will pay a fine of $40,000. CIPS also agreed to install a continuous emissions stack monitor on Newton Unit 2. This monitor has already been installed as part of the Company's Clean Air Act Compliance Plan. CIPS also entered into a consent agreement with the USEPA concerning these same issues. This latter agreement did not require any further action on the part of CIPS. See the subcaption "Environmental Remediation Costs" under Note 2 of the Notes to Financial Statements, included under Item 8 of this report, for information relating to costs incurred and to be incurred in connection with the remediation of certain sites where gas had been manufactured from coal and which contain potentially harmful materials. EMPLOYEES. Composition of the work force of CIPS at the payroll period nearest year-end 1993 and 1992 was as follows: Number of Employees ------------------- Employee Group 1993 1992 - -------------- ----- ----- Salaried. . . . . . . . . . . . . . . . . 1,218 1,182 IBEW - 702. . . . . . . . . . . . . . . . 922 965 IUOE - 148. . . . . . . . . . . . . . . . 479 489 ----- ----- Total . . . . . . . . . . . . . . . . . . 2,619 2,636 ===== ===== See Management's Discussion and Analysis of Financial Condition and Results of Operations--Labor Disputes for a discussion of the status of labor contracts, unfair labor practice charges and related matters involving those employees represented by labor unions. As part of the agreement leading to new labor contracts, International Brotherhood of Electrical Workers Local 702 ("IBEW 702") has dropped the class action suit filed by it against CIPS and others seeking treble damages for lost wages and benefits and other damages. The settlement is subject to court approval. Item 2. Properties. The electric generating facilities of CIPS consist of the following: Estimated 1994 Summer Year Capability Station and Unit Fuel Installed (KW) - ---------------- ---- --------- ----------- Newton Unit 1 . . . . . . . . . . . . . . Coal 1977 555,000 Unit 2 . . . . . . . . . . . . . . Coal 1982 560,000 Coffeen Unit 1 . . . . . . . . . . . . . . Coal 1965 325,000 Unit 2 . . . . . . . . . . . . . . Coal 1972 550,000 Grand Tower Unit 3 . . . . . . . . . . . . . . Coal 1951 82,000 Unit 4 . . . . . . . . . . . . . . Coal 1958 104,000 Hutsonville Unit 3 . . . . . . . . . . . . . . Coal 1953 76,000 Unit 4 . . . . . . . . . . . . . . Coal 1954 77,000 Diesel Unit. . . . . . . . . . . . Oil 1968 3,000 Meredosia Unit 1 . . . . . . . . . . . . . . Coal 1948 62,000 Unit 2 . . . . . . . . . . . . . . Coal 1949 62,000 Unit 3 . . . . . . . . . . . . . . Coal 1960 220,000 Unit 4 . . . . . . . . . . . . . . Oil 1975 176,000 _________ Total . . . . . . . . . . . . . 2,852,000 ========== All of the generating stations are located in Illinois on land owned in fee by CIPS. At December 31, 1993, CIPS owned 12,922 pole miles of overhead electric lines and 843 miles of underground electric lines. At that date, CIPS also owned 4,520 miles of natural gas transmission and distribution mains, four underground gas storage fields and one propane-air gas plant used to supplement the available pipeline supply of natural gas during periods of abnormally high demands. Substantially all of the permanent fixed utility property of CIPS is subject to the lien of the Mortgage Indenture securing the first mortgage bonds. Item 3. Legal Proceedings. Actions have been brought against CIPS by Southwestern Electric Cooperative, Inc. ("Southwestern") on October 30, 1991 in the Macon County, Illinois Circuit Court and by Wayne-White Counties Electric Cooperative ("Wayne-White" and together with Southwestern, the "Distribution Cooperatives") on August 15, 1991 in the White County, Illinois Circuit Court. Soyland Power Cooperative ("Soyland"), a generating and transmission cooperative that supplies power to the Distribution Cooperatives, is also a plaintiff in the actions. In various prior cases brought before the Illinois commission and finally determined on appeal, the Distribution Cooperatives prevailed in disputes between each of them and the Company as to which of them was entitled to serve certain electric customers under the Illinois Electric Supplier Act ("ESA") and certain service area agreements entered into pursuant to the ESA. Based on the results of the prior proceedings, the pending suits, in general, seek actual damages for breach of the service area agreements and punitive damages based on various grounds, such as tortious interference with contractual relationships and business expectancies and violation of the Illinois Public Utilities Act. A CIPS motion to dismiss the Southwestern/Soyland case was successful only as to certain counts. In the remaining counts, Southwestern seeks $182,000 in alleged actual damages for breach of the service area agreement and an additional $5 million in punitive damages for both interference with a contractual relationship and a business expectancy (it is not clear whether these claims are intended as separate bases for the recovery of $5 million in punitive damages or are cumulative). In addition, Soyland seeks $323,000 in alleged actual damages and $5 million in punitive damages for interference with a business expectancy. In the Wayne-White/Soyland action, Wayne-White seeks unspecified alleged actual damages for breach of the service area agreement and additional unspecified punitive damages for violation of the Public Utilities Act and interference with a business expectancy. In addition, Soyland claims $819,000 in alleged actual damages based on breach of the service area agreement and an additional $5 million in punitive damages based on interference with both a contractual relationship and a business expectancy and based on violation of the Public Utilities Act (again, it is not clear whether these claims are intended as separate bases for the recovery of $5 million in punitive damages or are cumulative). On March 11, 1993, Soyland was dismissed from the Wayne-White action on statue of limitations grounds and the claims by Wayne-White under the Illinois Public Utilities Act were dismissed. Soyland has filed an appeal of its dismissal. This action is continuing with regard to Wayne-White's other claims. While CIPS cannot predict the outcome of any of these matters, it intends to vigorously defend against all such claims. See Item 1. Business - Rate Matters, Business - Gas Operations and Business - Environmental Matters with respect to certain matters involving CIPS. See also Note 2 of Notes to Financial Statements included under Item 8 of this report. Item 4. Submission of matters to a Vote of Security Holders. There were no matters submitted to a vote of security holders during the three months ended December 31, 1993. Executive Officers of the Registrant (ages at December 31, 1993). Name Age Positions Held _____ ___ ______________ C. L. Greenwalt 60 President* R. W. Jackson 63 Senior Vice President Finance and Secretary* L. A. Dodd 55 Senior Vice President Operations J. G. Bachman 45 Vice President Corporate Planning W. A. Koertner 44 Vice President Corporate Services G. W. Moorman 50 Vice President Power Supply W. R. Morgan 57 Vice President Division Operations W. R. Voisin 58 Vice President Public Relations J. C. Fiaush 63 Controller (Principal Accounting Officer)* C. D. Nelson 40 Treasurer and Assistant Secretary* ______________________ * Messrs. Greenwalt and Jackson are directors of CIPS and are also officers of CIPSCO. Mr. Fiaush and Mr. Nelson are also officers of CIPSCO. The present term of office of the above executive officers extends to the first meeting of the Board of Directors of CIPS after the next annual election of Directors, scheduled to be held on April 27, 1994. There is no family relationship between any executive officer and any other executive officer or any director. All of the officers named above have been employed by CIPS in their present positions for more than the past five years except as indicated below: Mr. Greenwalt served as Senior Vice President Operations from August 4, 1980 to August 1, 1989, when he was named President. Mr. Dodd served as Vice President Corporate Planning from July 1, 1985 to August 1, 1989 and as Vice President Division Operations from August 1, 1989 to July 1, 1990 when he was named Senior Vice President Operations. Mr. Bachman served as Manager of Rates and Research from February 1, 1980 to August 1, 1989, when he was named Vice President Corporate Planning. Mr. Koertner served as Treasurer and Assistant Secretary from February 1, 1982 to August 1, 1989 and as Vice President Financial Services from August 1, 1989 to April 1, 1993, when he was named Vice President Corporate Services. Mr. Moorman served as Manager of System Operation from April 1, 1976 to June 1, 1988, when he was named Vice President Power Supply. Mr. Morgan served as Vice President Corporate Services from August 5, 1980 to July 1, 1990, when he became Vice President Division Operations. Mr. Voisin served as Superintendent of the Quincy Area from January 1, 1985 to July 1, 1989, when he was named Vice President Public Relations. Mr. Nelson served as Assistant Treasurer from January 1, 1985 to August 1, 1989 when he was named Treasurer and Assistant Secretary. Directors of the Registrant. Name, Age, Principal Occupation, and other Directorships Director Since ________________________________________________________ ______________ WILLIAM J. ALLEY, age 64. Chairman of the Board and Chief 1974 Executive Officer of American Brands, Inc. (diversified manufacturing and other businesses), Old Greenwich, Connecticut; director of American Brands, Inc., Moorman Manufacturing Company and Rayonier, Inc. ROBERT S. ECKLEY, age 72. President Emeritus of Illinois 1973 Wesleyan University, Bloomington, Illinois; director of State Farm Mutual Automobile Insurance Co. CLIFFORD L. GREENWALT, age 60. President and Chief 1986 Executive Officer of CIPS, CIPSCO and Chairman of the Board of CIPSCO Investment Company, and served as Senior Vice President - Operations of CIPS from 1980 to August 1989 when he became President; director of First of America Bank Corporation, Kalamazoo, Michigan and a director of its wholly owned subsidiary, First of America Bank - Springfield, N.A. Name, Age, Principal Occupation, and other Directorships Director Since ________________________________________________________ ______________ JOHN L. HEATH, age 58. Retired Chairman and President 1977 of the Heath Candy Company, Robinson, Illinois; served as Chairman of L.S. Heath & Sons, Inc. from 1971 until 1988 and also as President and Chief Executive Officer from 1971 until 1982 and is a director of the Biltmore Bank Corp. and of its wholly owned subsidiary, The Biltmore investors Bank of Phoenix, Arizona; and is a director of Sun Street Food Corporation of Phoenix, Arizona. ROBERT W. JACKSON, age 63. Senior Vice President - 1986 Finance and Secretary of CIPS, Senior Vice President and Chief Financial Officer and Secretary of CISPCO and President and Chief Executive Officer of CIPSCO Investment Company, and served as Senior Vice President - - Finance and Secretary of CIPS since 1980; director of Firstbank of Illinois Co. and each of its wholly owned subsidiary banks, including the First National Bank of Springfield. GORDON R. LOHMAN, age 59. President and Chief Executive 1989 Officer of AMSTED Industries Incorporated (diversified manufacturer of industrial products), Chicago, Illinois in 1988 and 1990, respectively; Executive Vice President of that firm in 1988 and Vice President from 1978 through 1987; and is a director of American Brands, Inc. HANNE M. MERRIMAN, age 52. Principal in Hanne Merriman 1990 Associates (retail business consultants), Washington, D.C.; President of Nan Duskin, Inc., from 1991 to 1992; retail business consultant since January 1990; President and Chief Executive Officer of Honeybee, Inc. a division of Spiegel, Inc. from January 1988 through December 1989; President of Garfinckels, a division of Allied Stores Corporation, from 1981 through 1987 and is a director of USAir Group, Inc., State Farm Mutual Automobile Insurance Co., The Rouse Company and AnnTaylor Stores Corporation. DONALD G. RAYMER, age 69. Retired President and Chief 1972 Executive Officer of CIPS; director of Bank One Springfield and served as President and Chief Executive Officer of CIPS from 1980 to August 1989. Name, Age, Principal Occupation, and other Directorships Director Since ________________________________________________________ ______________ THOMAS L. SHADE, age 63. Retired Chairman of the Board and 1991 Chief Executive Officer of Moorman Manufacturing Company (livestock feed products), Quincy, Illinois, having served in those capacities during 1992 and 1993 and was President and Chief Executive Officer of that firm from 1984 to 1992 and is a director of that firm and Quincy Soybean Company of Quincy, Illinois. JAMES W. WOGSLAND, age 62. Vice Chairman of Caterpillar 1992 Inc. (heavy equipment and engine manufacturer), Peoria, Illinois, since 1990 and was Executive Vice President of that firm from 1987 until 1990 and is a director of that firm and First of America Bank Corporation, Kalamazoo, Michigan and its wholly owned subsidiary First of America Bank-Illinois, N.A., Peoria, Illinois and is also a director of Protection Mutual Insurance Company. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder matters. All the common stock of CIPS is owned by CIPSCO, its corporate parent, and is not publicly traded. The following table sets forth the cash distributions on common stock paid to CIPSCO by CIPS, which, in some cases, were used to repurchase common shares of CIPS for the periods indicated: 1993 1992 ____ ____ First Quarter . . . . . . . . . . $16,500,000* $16,400,000* Second Quarter . . . . . . . . . . $16,750,000* $16,700,000* Third Quarter . . . . . . . . . . $16,750,000 $16,500,000* Fourth Quarter . . . . . . . . . . $16,750,000 $16,500,000* * Reflects the repurchase of common shares of CIPS. CIPS is subject to restrictions on the use of retained earnings for cash dividends on common stock as described in Note 6 of Notes to Financial Statements included under Item 8 of this report. Item 6. Selected Financial Data. For the Years Ended December 31, 1993 1992 1991 1990 1989 __________ __________ __________ __________ __________ (in thousands) Operating Revenues $ 834,556 $ 729,402 $ 710,205 $ 685,226 $ 683,859 Operating Income 113,651 97,372 104,039 97,135 109,433 Net Income 84,011 72,601 75,683 71,562 71,222 Preferred Dividends 3,718 4,549 5,396 5,617 5,856 Earnings for Common Stock 80,293 68,052 70,287 65,945 65,366 As of December 31, Total Assets $1,668,462 $1,645,059 $1,691,843 $1,665,614 $1,714,544 Long-Term Debt 494,323 503,700 496,420 496,319 496,301 Preferred Stock subject to mandatory redemption - - 18,245 21,245 24,000 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. MANAGEMENT'S DISCUSSION AND ANALYSIS ____________________________________ Central Illinois Public Service Company (CIPS or the Utility) is a subsidiary of CIPSCO Incorporated (the Parent company), a holding company incorporated under the laws of the State of Illinois. FINANCIAL CONDITION. Central Illinois Public Service Company's financial position remained fundamentally strong during 1993. A strong capital structure and strong cash flows have minimized the need to access capital markets, other than for refinancings, in recent years. Neither CIPSCO nor CIPS has raised additional capital through the sale of common stock to the general public since 1980. Common stock was issued and sold to existing shareholders by CIPS through a dividend reinvestment plan until 1984. The long-range financial objectives for the capital structure of CIPS are: a debt ratio of no more than 45 percent, a common equity ratio of no less than 45 percent, and a preferred equity ratio of no more than 10 percent. At December 31, 1993, capitalization consisted of 43 percent long-term debt, 50 percent common equity and 7 percent preferred stock. At year end, 25,452,373 shares of CIPS common stock were outstanding, all of which were held by CIPSCO Incorporated. During 1993, 884,345 shares of common stock were repurchased by CIPS from CIPSCO as a means of conveying funds to the parent company for dividend payments and other corporate purposes. CAPITAL REQUIREMENTS. Construction expenditures were $88 million in 1993. Of that amount, $77 million and $11 million related to improvements and replacements to the electric and natural gas systems, respectively. In 1994 construction expenditures are expected to be about $87 million. Of that amount, $77 million is scheduled for electric facilities while gas system expenditures are estimated at $10 million. Construction expenditures are estimated at $431 million for the five-year period 1994-1998. This is $31 million, or seven percent, less than was spent in the preceding five years. In addition to construction funds, projected capital requirements for the 1994-1998 period include $93 million for scheduled debt retirements. FINANCING REQUIREMENTS. Capital requirements for the 1994-1998 period are expected to be met primarily through internally generated funds. External financing to fund scheduled debt retirements will be required. If external financing were needed to fund the construction program such financing could consist of funds from the parent, the issuance of short-term debt, long-term debt or preferred stock, or any combination of the four. Refinancings to lower the costs of capital may also occur, depending on market conditions. On April 6, 1993, CIPS issued $65 million of first mortgage bonds to refinance higher-cost debt issues. On May 4, 1993, and October 13, 1993, CIPS issued $30 million and $12.5 million of preferred stock, respectively. The new issues were used to redeem the utility's outstanding 7.48% Series and 8.08% Series of preferred stock, and to raise $15 million of additional capital. During the year, CIPS refinanced $130 million of pollution control loan obligations to achieve lower rates of interest. Financing requirements may be affected by such factors as availability and cost of capital, load growth, changes in construction expenditures, regulatory developments, changes in environmental regulations and other governmental activities. FINANCING FLEXIBILITY AND LIQUIDITY. The utility's ability to finance the construction program at reasonable cost and to provide for other capital needs is dependent upon its ability to earn a fair return on capital. Financing flexibility is enhanced by providing a high percentage of total capital requirements from internal sources and having the ability, if necessary, to issue long-term securities and to obtain short-term credit. Flexibility also is provided by the parent corporation which is capable of providing additional capital if circumstances warrant. The CIPS mortgage indenture limits the amount of first mortgage bonds which may be issued. At December 31, 1993, CIPS could have issued about $532 million of additional first mortgage bonds under the indenture, assuming an annual interest rate of 7.25 percent. CIPS' articles of incorporation limit amounts of preferred stock which may be issued. Assuming a preferred dividend rate of 6.75 percent, CIPS could have issued all $185 million of authorized, but unissued preferred stock remaining as of year end. At year-end 1993, CIPS had $2.7 million of temporary investments. There were no short-term borrowings. RESULTS OF OPERATIONS --------------------- (1991-1993) EARNINGS. Earnings for common stock increased 18 percent in 1993 to $80.3 million. The increases in electric and gas revenues were the result of increased sales due to the occurrence of more-normal weather conditions. Weather-related factors and a coal miners' strike which hampered coal deliveries to some utilities, resulted in increased sales of power by CIPS to other utility systems. The interchange sales in 1993 resulted from exceptional opportunities which are unlikely to be matched in future years. Earnings for common stock decreased three percent in 1992 to $68.1 million. Increases in gas and electric revenues resulting from the retail rate increase effective in March, and a favorable earnings adjustment of $3.3 million due to settlement of the revenues subject to refund proceeding, were offset by weather-related decreases in electric revenues. ELECTRIC OPERATIONS. Electric revenues increased $93.2 million in 1993. Cooling degree days for 1993 were 37 percent higher than in 1992. Electric kilowatthour sales, including interchange sales, were 39 percent higher than a year ago. Revenues from electric interchange sales to other utility systems for economy and emergency purposes were $76.3 million, or $48.3 million higher than a year ago, reflecting much greater sales opportunities. The greater opportunities for sales resulted from hot weather, flooding conditions which limited availablity of generating capacity at some neighboring utilities, and coal miners' strikes which hampered deliveries of coal at other utilities. These factors contributed to a significantly increased level of interchange economy and emergency sales which is unlikely to be matched in 1994. Electric revenues increased $3 million in 1992 as compared to 1991. The effects of a favorable settlement in the revenues subject to refund proceeding, and a rate increase of approximately one percent in March 1992, were offset by a one percent decrease in kilowatthour sales. The sales decrease was primarily caused by cooler summer weather in 1992. Cooling degree days for 1992 were 33 percent lower than in 1991. Fuel for electric generation increased eight percent, or $14.4 million, in 1993 primarily due to higher electric generation caused by increased kilowatthour sales. Kilowatthours generated increased 16 percent in 1993. Average fuel cost remained the same at $1.67 per million Btu in 1993, 1992 and 1991. Purchased power expense increased 185 percent, or $39.1 million in 1993 reflecting additional purchases principally used for economy and emergency interchange sales. Purchased power and fuel cost for electric generatin increased three percent, or $5.7 million, in 1992 as compared to 1991. Kilowatthours generated decreased two percent in 1992. GAS OPERATIONS. Gas revenues increased nine percent to $145.7 million in 1993 as compared to 1992 due to increases in therm sales and a full heating season of the increased rates effective March 1992. Therm sales increased 21 percent primarily due to more industrial customers purchasing gas from the utility's system rather than from other gas suppliers. Residential therm sales inreased 14 percent reflecting colder temperatures in 1993. Heating degree days were 13 percent higher in 1993 as compared to 1992. Gas revenues increased 14 percent to $133.8 million in 1992 due to increased rates effective in March 1992, and adjustments for higher purchased gas costs. Therm sales increased five percent in 1992 compared to 1991 primarily due to industrial customers purchasing gas from the utility's system rather than from other gas suppliers. The utility transported approximately 108 million therms of customer owned gas in 1993 compared with 118 million and 120 million therms in 1992 and 1991, respectively. Purchased gas costs increased $7.5 million, or nine percent, in 1993 due to higher therm sales, while the average price paid for purchased gas from suppliers remained unchanged. In 1992, purchased gas costs increased $9.4 million, or 13 percent, due to an average three-cent-per-therm price increase charged by gas suppliers. OPERATING EXPENSES. Other operation expense increased $11.4 million, or nine percent in 1993, and $15.5 million, or 13 percent in 1992 due principally, in each case, to postretirement medical expense which CIPS began accruing in April 1992 consistent with the related treatment afforded such costs for ratemaking. (See Note 4 to Financial Statements.) Depreciation expense increased $3.9 million and $4.7 million in 1993 and 1992, respectively, due to property additions. Taxes other than income taxes increased in 1993 because utility taxes, which are based upon receipts from sales, increased as sales increased. Other taxes decreased in 1992 because the rate refund reduced amounts collected from customers which in turn reduced utility taxes. Interest on long-term debt and preferred dividend requirements decreased $2.8 million, or seven percent, in 1993, due to refinancing of long-term debt and preferred stock at lower interest and dividend rates. Interest on provision for revenue refunds was not applicable in 1993 and decreased in 1992 due to settlement of the revenue subject to refund proceeding in 1992. (See Note 11 to Financial Statements.) Miscellaneous, net, for 1993 decreased $4.5 million, or 59 percent because Miscellaneous, net, for 1992 includes $3 million resulting from a Federal Energy Regulatory Commission (FERC) order issued February 12, 1992. That order reversed a 1989 order which required CIPS to refund to cooperative customers a portion of amounts paid to CIPS in a litigation settlement with a former coal supplier. Miscellaneous, net, increased in 1992 due to inclusion of the $3 million resulting from the FERC order. Income tax expense reflects the changes in pre-tax income in both 1993 and 1992. In addition, the federal tax rate changed from 34 percent to 35 percent effective January 1, 1993. OTHER MATTERS. Customer usage of electricity and natural gas varies with weather conditions, general business conditions, the state of the economy and the cost of energy services. The level of sales also is impacted by conditions in the interchange market. Further, certain large gas customers can purchase gas from alternative suppliers or bypass the utility's system by switching to other fuels or by connecting directly to pipelines. Forecasts indicate that retail sales growth will remain at the historical levels of the past decade. Rates for retail electric and gas service are regulated by the Illinois Commerce Commission. Non-retail electric rates are regulated by FERC. The utility's rates are designed to recover operating costs including depreciation on utility plant investment. Inflation continues to be a factor affecting its operations, earnings, shareholders' equity and financial performance. Changes in the cost of fuel for electric generation and purchased gas generally are reflected in billings to customers on a timely basis through fuel and purchased gas adjustment clauses. The Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" was adopted as of January 1, 1993. SFAS No. 106 requires that the expected cost of posretirement benefits be accrued during the employees' years of service. (See Note 4 to Financial Statements.) On January 1, 1993 the Company adopted SFAS No. 109, "Accounting for Income Taxes" which requires the use of the liability method for recording deferred income taxes on temporary differences using the rate at which the differences are expected to reverse. (See Notes 1 and 9 to Financial Statements.) In 1993, The Company adopted, SFAS No. 112 "Employers' Accounting for Postemployment Benefits". The new statement requires the accrual of certain postemployment benefits to former and inactive employees. (See Note 4 to Financial Statements.) ENVIRONMENTAL REMEDIATION COSTS. The utility has identified 13 former manufactured gas plant sites (environmental remediation sites) which contain potentially harmful materials. In 1990, one site was added to the United States Environmental Protection Agency (USEPA) Superfund list. The utility has a long-term remedial plan for the site. Costs and associated legal expenses related to investigation have been incurred at other sites. Commencing in 1987, the estimated incurred costs related to studies and remediation at these 13 sites and associated legal expenses and certain carrying charges are being accrued and deferred rather than expensed currently, pending recovery either from rates, from insurance carriers or from other parties. Management believes that costs incurred in connection with the sites that are not recovered from insurance carriers or other parties will be recovered through utility rates. Accordingly, management believes that costs incurred in connection with these sites will not have a material adverse effect on financial position or results of operations. (See Note 2 to Financial Statements.) CLEAN AIR ACT. CIPS' compliance strategy for Phases I and II of the Clean Air Act Amendments of 1990 is to switch to lower sulfur coal at some generating units along with increased scrubbing at Newton Unit 1. The utility estimates capital costs, including costs incurred to date, for various equipment modifications at its generating stations related to compliance will aggregate less than $50 million. These costs may result in electric base rate increases totaling about one to two percent by the year 2000. The utility does not anticipate that operating costs will change materially as a result of compliance with these amendments. (See Note 2 to Financial Statements.) FERC ORDER 636. During 1992, the FERC issued Order No. 636. This and successor orders have resulted in substantial restructuring of the service obligations of interstate pipeline suppliers. (See Note 2 to Financial Statements.) ENERGY POLICY ACT. The National Energy Policy Act of 1992 (NEPA) contains, among other provisions, legislation designed to promote competition in the development of wholesale power generation in the electric utility industry. NEPA exempts a new class of independent power producers from traditional utility regulation. This new class of producers can build generating plants and sell electricity in wholesale markets without the same constraints of regulated utilities. NEPA also allows FERC to order wholesale "wheeling" by public utilities to provide utility and non-utility generators access to public utility transmission facilities. Public utilities, not voluntarily providing access to their transportation system at agreed upon rates, may be ordered to deliver power at rates to be established by FERC. Although the final impact of the provisions of NEPA cannot be predicted, management believes that the increased competition in the area of generation and transmission may affect the traditional marketing and pricing strategies of the utility business. LABOR DISPUTES. Labor agreements ending June 1995 have been reached with the two unions representing 1,400 hourly employees of CIPS. The contracts with both unions have been signed. Before the agreements were reached, the memberships of both unions authorized a strike and institued an overtime boycott and work slowdown beginning in April 1993. CIPS initiated a lockout of union employees over a period of approximately 14 weeks beginning in May 1993. Subsequent to this date, both unions filed unfair labor practice charges with the National Labor Relations Board (NLRB) claiming back pay and other benefits during the lockout period. The Peoria Regional Office of the NLRB has issued a complaint against CIPS concerning the lockout of employees represented by one union. However, the Peoria Regional Office did not find merit to a similar charge filed by the other union and it has been dismissed. CIPS estimates the amount of back pay and other benefits for both unions to be less than $12 million. The NLRB decisions on the complaint and the charges will be subject to various appeals by the parties. Management believes that the lockout was both lawful and reasonable and that these matters will be ultimately resolved in favor of CIPS. (See Note 2 to Financial Statements.) Item 8. Financial Statements and Supplementary Data. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY STATEMENTS OF INCOME Years Ended December 31, __________________________________ 1993 1992 1991 __________ __________ __________ (in thousands) Operating Revenues: Electric $ 688,849 $ 593,996 $ 604,565 Provision for revenue refunds - 1,646 (11,896) _________ _________ _________ 688,849 595,642 592,669 Gas 145,707 133,760 117,536 _________ _________ _________ Total operating revenues 834,556 729,402 710,205 _________ _________ _________ Operating Expenses: Fuel for electric generation 186,938 172,544 165,806 Purchased power 60,181 21,094 22,109 Gas purchased 90,097 82,553 73,189 Other operation 141,310 129,715 114,434 Maintenance 61,216 64,092 66,784 Depreciation and amortization 77,647 74,154 69,483 Taxes other than income taxes 54,767 51,106 53,936 Income taxes 48,749 36,772 40,425 _________ _________ _________ Total operating expenses 720,905 632,030 606,166 _________ _________ _________ Operating Income 113,651 97,372 104,039 _________ _________ _________ Other Income and Deductions: Allowance for equity funds used during construction 1,459 2,162 2,054 Nonoperating income taxes (631) (2,989) (2,413) Miscellaneous, net 3,632 10,978 13,472 _________ _________ _________ Total other income and deductions 4,460 10,151 13,113 _________ _________ _________ Income Before Interest Charges 118,111 107,523 117,152 _________ _________ _________ Interest Charges: Interest on long-term debt 34,421 36,397 36,990 Interest on provision for revenue refunds - (803) 4,261 Other interest charges 479 392 1,231 Allowance for borrowed funds used during construction (800) (1,064) (1,013) _________ _________ _________ Total interest charges 34,100 34,922 41,469 _________ _________ _________ Net Income 84,011 72,601 75,683 Preferred stock dividends 3,718 4,549 5,396 _________ _________ _________ Earnings for Common Stock $ 80,293 $ 68,052 $ 70,287 ========== ========== ========== The accompanying notes to financial statements are an integral part of these statements. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY BALANCE SHEETS December 31, ___________________________ 1993 1992 _____________ ____________ (in thousands) ASSETS Utility Plant, at original cost: Electric $2,172,259 $2,116,322 Gas 208,208 195,709 __________ __________ 2,380,467 2,312,031 Less--Accumulated depreciation 1,020,097 961,419 __________ __________ 1,360,370 1,350,612 Construction work in progress 61,104 45,219 __________ __________ 1,421,474 1,395,831 __________ __________ Current Assets: Cash 4,038 480 Temporary investments, at cost which approximates market 2,734 2,578 Accounts receivable, net 61,591 48,415 Accrued unbilled revenues 38,774 36,680 Materials and supplies, at average cost 40,824 38,529 Fuel for electric generation, at average cost 26,046 34,382 Gas stored underground, at average cost 14,335 12,180 Prepayments 9,847 13,152 __________ __________ 198,189 186,396 __________ __________ Other Assets 48,799 62,832 __________ __________ $1,668,462 $1,645,059 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholder's equity: Common stock, no par value, authorized 45,000,000 shares; outstanding 25,452,373 and 26,336,718 shares respectively $ 121,282 $ 154,532 Retained earnings 443,741 398,235 __________ __________ 565,023 552,767 Preferred stock 80,000 65,000 Long-term debt 474,323 493,700 __________ __________ 1,119,346 1,111,467 __________ __________ Current Liabilities: Long-term debt due within one year 20,000 10,000 Commercial paper - 17,393 Accounts payable 55,931 56,786 Accrued wages 12,720 11,417 Accrued taxes 13,391 11,117 Accrued interest 9,204 6,564 Other 34,895 27,934 __________ __________ 146,141 141,211 __________ __________ Deferred Credits: Accumulated deferred income taxes 274,425 330,053 Investment tax credits 58,962 62,328 Regulatory liabilities, net 69,588 - __________ __________ 402,975 392,381 __________ __________ $1,668,462 $1,645,059 ========== ========== The accompanying notes to financial statements are an integral part of these statements. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY STATEMENTS OF CASH FLOW Years Ended December 31, __________________________________ 1993 1992 1991 __________ __________ __________ (in thousands) OPERATING ACTIVITIES: Net income $ 84,011 $ 72,601 $ 75,683 Adjustments to reconcile net income to net cash provided: Depreciation and amortization 77,647 74,154 69,483 Allowance for equity funds used during construction (AFUDC) (1,459) (2,162) (2,054) Deferred income taxes, net 7 16,407 10,822 Investment tax credit amortization (3,366) (3,336) (3,464) Cash flows impacted by changes in assets and liabilities: Accounts receivable, net and accrued unbilled revenues (15,270) 4,542 (9) Fuel for electric generation 8,336 2,872 664 Other inventories (4,450) (667) (893) Prepayments 3,305 23,585 (4,050) Other assets 14,033 (20,210) (12,958) Accounts payable and other 6,106 17,641 2,871 Accrued wages, taxes and interest 6,217 (5,197) (152) Accumulated provision for revenue refunds - (75,449) 16,157 Other 4,815 (5,991) (2,992) __________ __________ _________ Net cash provided by operating activities 179,932 98,790 149,108 __________ __________ _________ INVESTING ACTIVITIES: Construction expenditures, excluding AFUDC (85,453) (117,198) (110,815) Allowance for borrowed funds used during construction (800) (1,064) (1,013) Changes in temporary investments (156) 92,175 36,728 __________ __________ _________ Net cash used in investing activities. (86,409) (26,087) (75,100) __________ __________ _________ FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 195,000 199,000 - Repayment of long-term debt (205,000) (190,500) - Proceeds from issuance of preferred stock 42,500 - - Redemption of preferred stock (27,500) (18,245) (3,000) Retirement of common stock (33,250) (66,100) (66,950) Proceeds from (repayment of) commercial paper (17,393) 17,393 - Dividends paid: Preferred stock (3,718) (4,549) (5,396) Common stock (33,500) - - Issuance expense, discount and premium (7,104) (11,718) - _________ _________ _________ Net cash used in financing activities. (89,965) (74,719) (75,346) _________ _________ _________ Net increase (decrease) in cash 3,558 (2,016) (1,338) Cash at beginning of period 480 2,496 3,834 _________ _________ _________ Cash at end of period $ 4,038 $ 480 $ 2,496 ========= ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest, net of amount capitalized $ 30,909 $ 38,382 $ 36,867 Income taxes 48,367 12,150 $ 42,731 The accompanying notes to financial statements are an integral part of these statements. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY STATEMENTS OF RETAINED EARNINGS Years Ended December 31, __________________________________ 1993 1992 1991 __________ __________ __________ (in thousands) Balance, beginning of year $ 398,235 $ 330,518 $ 260,304 Add (deduct); Net income 84,011 72,601 75,683 Dividends: Preferred stock (3,718) (4,549) (5,396) Common stock (33,500) - - Other (1,287) (335) (73) _________ _________ _________ Balance, end of year $ 443,741 $ 398,235 $ 330,518 ========= ========= ========= The accompanying notes to financial statements are an integral part of these statements. NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General. Central Illinois Public Service Company (CIPS or the Utility), a subsidiary of CIPSCO Incorporated (CIPSCO), provides certain services to CIPSCO and other affiliates for which all costs incurred are reimbursed to CIPS. In 1993, 1992 and 1991 these amounts were immaterial. Certain items previously reported for years prior to 1993 have been reclassified to conform with the current-year presentation. Regulation. CIPS is a public utility subject to regulation by the Illinois Commerce Commission (Illinois commission) and the Federal Energy Regulatory Commission (FERC). With respect to accounting matters, the utility maintains its accounts in accordance with the Uniform System of Accounts as defined by these agencies. Its accounting policies conform to generally accepted accounting principles applicable to rate regulated enterprises and reflect the effects of the ratemaking process. Operating Revenues. CIPS accrues an estimate of electric and gas revenues for service rendered but unbilled at the end of each accounting period. Utility Plant. Utility plant in service is stated at original cost. Substantially all of the utility plant of CIPS is subject to the lien of its first mortgage bond indenture. Additions to utility plant include the cost of contracted services, material, labor, overheads and an allowance for funds used during construction. Maintenance and repair of property and replacement of minor items of property are charged to operating expenses. Property retired is removed from utility plant accounts and charged to accumulated depreciation. Allowance for Funds Used During Construction (AFUDC). AFUDC is included in Construction Work in Progress (CWIP) and represents the cost of financing that construction. AFUDC does not represent a current source of cash funds. The inclusion of AFUDC in CWIP affords the opportunity to earn a return on the cost of construction capital after the related asset is placed in service and included in the rate base. The AFUDC rate, based on a formula prescribed by the FERC, on a before- tax basis, was 9% in 1993 and 10% in 1992 and 1991. Depreciation. Depreciation expense is based on remaining life straight-line rates (composite, approximately 3.4% in 1993 and 3.3% in 1992 and 1991) applied to the various classes of depreciable property. Concentration of Credit Risk. CIPS provides electric service to about 316,000 customers in 557 communities and natural gas service to approximately 164,000 customers in 267 communities throughout a 20,000-square-mile area in central and southern Illinois. Credit risk is spread over a diversified base of residential, commercial and industrial customers. Fuel and Purchased Gas Costs. CIPS adjusts fuel expense to recognize over- or under-recoveries from customers of allowable fuel costs through the uniform fuel adjustment clause (FAC). The FAC provides for the current recovery of changes in the cost of fuel for electric generation in billings to customers. Monthly, the difference between revenues recorded through application of the FAC and recoverable fuel costs is recorded as a current asset or liability, pending reflection in future billings to customers, with a corresponding decrease or increase in cost of fuel for electric generation. The uniform purchased gas adjustment clause (PGA) provides a matching of gas costs with revenues. Monthly, the difference between revenues recorded through application of the PGA and recoverable gas costs is recorded as a current asset or liability with a corresponding decrease or increase in the cost of gas purchased. The cumulative difference for the calendar year is collected from, or refunded to, customers over a one-year period beginning in the following April. The Illinois commission conducts annual reconciliation proceedings with respect to each year's FAC and PGA revenues and has completed its review for all years prior to 1992. Reconciliation proceedings for 1992 commenced in October 1993. No reconciliation proceeding has yet commenced for the year 1993. Income Taxes and Investment Tax Credits. Deferred income taxes are recorded which result from the use of accelerated depreciation methods, rapid amortization, repair allowance and certain other timing differences in recognition of income and expense for tax and financial statement purposes. CIPS is included as part of CIPSCO's consolidated federal income tax return. Income taxes are allocated to the individual companies, based on their respective taxable income or loss. Investment tax credits are being amortized over the estimated average useful lives of the related properties. The Company adopted, effective January 1, 1993, the liability method of accounting for deferred income taxes required by Statement of Financial Accounting Standards (SFAS) No. 109. This statement requires the establishment of deferred tax liabilities and assets for all temporary differences between the tax basis of assets and liabilities and the amounts reported in the financial statements. (See Note 9 to Financial Statements.) Cash and Temporary Investments. Temporary investments consist of deposits and U.S. Treasury obligations. For purposes of Statements of Cash Flows, temporary investments are not considered cash equivalents. 2. COMMITMENTS AND CONTINGENCIES Environmental Remediation Costs. The utility and certain of its predecessors and other affiliates operated facilities in the past for manufacturing gas from coal. In connection with manufacturing gas, various by-products were produced, some of which remain on sites where the facilities were located. The utility has identified 13 of these former manufactured gas plant sites (environmental remediation sites) which contain potentially harmful materials. Under directives from the Illinois Environmental Protection Agency (IEPA), CIPS has incurred costs and associated legal expenses related to the investigation and remediation of the sites. One site was added to the United States Environmental Protection Agency (USEPA) Superfund list on August 30, 1990. On September 30, 1992 the IEPA, in consultation with the USEPA, decided that the long-term remedial plan for this site should consist of a ground water pump-and-treat program. The IEPA and CIPS entered into an agreement, subject to court approval, for CIPS to carry out the remedial action with the IEPA providing oversight. It is not known at this time what specific remedial action will be required at the other 12 sites. In 1987, CIPS filed a lawsuit against a number of insurance carriers seeking full indemnification for all costs in connection with certain environmental sites. As of December 31, 1993 all but five insurance carriers have settled. The estimated incurred costs relating to studies and remediation at these 13 sites and associated legal expenses are being accrued and deferred rather than expensed currently, pending recovery through rates, from insurance carriers or from other parties. The total amount deferred represents costs incurred and estimates for costs of completing studies at various sites and an estimate of remediation costs at the Superfund site. At December 31, 1993, the amounts recovered have exceeded the aggregate amount deferred. In 1992, the Illinois commission issued an Order (the Generic Order) in its consolidated generic proceeding regarding appropriate ratemaking treatment of cleanup costs incurred by Illinois utilities with respect to environmental remediation sites. The Generic Order indicates that allowed cleanup costs may include prudently incurred cost of investigation, assessment and cleanup of environmental remediation sites, as well as litigation costs, including those involved in insurance recovery claims. The Generic Order authorizes utilities, including CIPS, to propose a mechanism to recover cleanup costs which is consistent with the provisions of the order. Such a mechanism must, among other things, provide for (1) recovery of cleanup costs over a five-year period, excluding carrying costs associated with the unrecovered balance of cleanup costs from the time that the recovery mechanism becomes effective; (2) a return to ratepayers over a five-year amortization period of any reimbursement of cleanup costs received from insurance carriers or other parties; and (3) a prudence review of each utility's expenditures. The Generic Order was upheld on appeal by the Third District Illinois Appellate Court. That decision held that a rate rider mechanism is an appropriate means for utilities to recover cleanup costs. An intervenor has filed a petition for leave to appeal the decision to the Illinois Supreme Court. The intervenor has maintained that no recovery of cleanup costs should be allowed. The Illinois Supreme Court has discretion to accept or deny the appeal. On March 26, 1993, the Illinois commission approved CIPS' proposed environmental cost-recovery rate riders, effective with April 1993 billings to customers. Known as the electric environmental adjustment clause and the gas environmental adjustment clause, the riders are designed to enable CIPS to recover from its customers costs associated with cleanup of the environmental remediation sites, along with associated legal expenses, over a five-year period on terms consistent with the Generic Order. The environmental adjustment clause riders provide for an annual review of amounts recovered through the riders. Amounts found to have been incorrectly included would be subject to refund. Through December 31, 1993, CIPS has collected $2.6 million from its customers pursuant to the riders. The total costs to be incurred for the cleanup of these sites or the possible recovery from insurance carriers and other parties cannot be estimated. Management believes that costs incurred in connection with the sites that are not recovered from insurance carriers or other parties will be recovered through utility rates. Accordingly, management believes that costs incurred in connection with these sites will not have a material adverse effect on financial position or results of operations. FERC Order 636. During 1992, FERC issued a series of orders that require substantial restructuring of the service obligations of interstate pipeline suppliers. These orders (together called Order 636) required mandatory unbundling of existing pipeline gas sales services. Mandatory unbundling requires pipelines to sell separately the various components previously included with gas sales services. Order 636 provides a mechanism for pipelines to recover four categories of transition costs associated with restructuring their gas sales services. Based on currently available information contained in the various interstate pipeline Order 636 compliance filings, CIPS estimates that the total amount of transition costs to be incurred by CIPS is approximately $10 million. At December 31, 1993 CIPS had recorded a liability and a related deferred gas cost for that portion of the transition costs that will be billed to CIPS regardless of future pipeline services. On September 15, 1993, the Illinois commission initiated an investigation into the appropriate ratemaking treatment of Order 636 transition costs. In January 1994, the hearing examiner released a draft order which would allow full recovery through rates by CIPS of transition costs. A final order from the Illinois commission is expected in the first quarter 1994. Management believes that all transition costs will be recoverable from customers. Clean Air Act. CIPS' compliance strategy to meet the sulfur dioxide emission reduction requirements of the Clean Air Act Amendments of 1990 (Amendments) includes complying with Phase I of the Amendments by switching to a lower sulfur coal at some of its units. Phase II compliance will be accomplished by additional fuel switching at various units and by increased scrubbing with its existing scrubber at Newton Unit 1. Phase I and Phase II emission provisions of the Amendments become effective in 1995 and 2000, respectively. The utility estimates that total capital costs, primarily for modifications to boilers, precipitators, coal handling facilities, and continuous monitoring equipment for implementation of this compliance strategy, will be less than $50 million in total including amounts spent to date. Operating costs are not expected to change materially. Compliance costs could result in electric base rate increases of approximately one to two percent by the year 2000. In 1991, in accordance with the plan to switch some units to lower sulfur coal, the utility signed a long-term coal contract with a current supplier for lower sulfur Illinois coal. Due to the magnitude of the supplier's capital investment, the contract includes a graduated termination charge. In 1994 CIPS can terminate the contract under certain conditions, and CIPS would be required to pay up to $41 million (plus an inflation adjustment) in termination charges. Each year subsequent to 1994 the termination charge is reduced according to a formula using tons of coal purchased. The termination charge would not be effective if CIPS terminated the contract due to the failure of the coal to meet quality specifications provided for in the contract. Labor Disputes. The International Union of Operating Engineers Local 148 and the International Brotherhood of Electric Workers Local 702 have both filed unfair labor practice charges with the National Labor Relations Board (NLRB) relating to the legality of the lockout by CIPS of both unions during 1993. The Peoria Regional Office of the NLRB has issued a complaint against CIPS concerning its lockout of IBEW-702 represented employees. However, the Peoria Regional Office did not find merit to a similar charge filed by IUOE 148 and it has been dismissed, subject to appeal rights. Both unions seek, among other things, back pay and other benefits for the period of the lockout. CIPS estimates the amount of back pay and other benefits for both unions to be less than $12 million. Management believes the lockout was both lawful and reasonable and that the final resolution of the disputes will not have a material adverse effect on financial position or results of operations. Other Issues. The utility is involved in other legal and administrative proceedings before various courts and agencies with respect to rates, taxes, gas and electric fuel cost reconciliations, service area disputes, environmental and other matters. Although unable to predict the outcome of these matters, management believes that appropriate liabilities have been established and that final disposition of these actions will have no material adverse effect on the results of operations or the financial position of CIPS. 3. PREFERRED STOCK The preferred stock is generally redeemable at the option of CIPS on 30 days notice at the redemption prices shown below. At December 31, 1993, 1992 and 1991 the preferred stock outstanding was: Preferred Stock Outstanding
1993 1992 1991 Current Amount Amount Amount Shares Par Redemption Shares (in (in (in Authorized Value Series Price(a) Issued thousands) thousands) thousands) __________ _____ ______ __________ _______ __________ __________ __________ Cumulative 2,000,000(b) $100 4.00% $101.00 150,000 $ 15,000 $ 15,000 $ 15,000 100 4.25% 102.00 50,000 5,000 5,000 5,000 100 4.90% 102.00 75,000 7,500 7,500 7,500 100 4.92% 103.50 50,000 5,000 5,000 5,000 100 5.16% 102.00 50,000 5,000 5,000 5,000 100 7.48% 101.08 - - 15,000 15,000 100 8.08% 101.00 - - 12,500 12,500 100 1993 Auction(c) 100.00 300,000 30,000 - - 100 6.625% 100.00(d) 125,000 12,500 - - _______ _______ _______ _______ 800,000 80,000 65,000 65,000 No par(e) 2,600,000(b) - - - - - - - _______ _______ _______ _______ 800,000 $ 80,000 $ 65,000$ 65,000 ======= ======= ======= ======= _________________________ (a) Accrued dividends, if any, would be added to the current redemption price. (b) The Board of Directors has the authority to fix and determine the relative rights and preferences of the authorized and unissued shares. (c) Dividend rate for each dividend period (currently quarterly) is set at a then current market rate according to an auction procedure. The rate at December 31, 1993 was 2.67% (d) Not redeemable prior to October 1, 1998. (e) Aggregate stated value cannot exceed $65,000,000.
4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS CIPS sponsors a defined benefit pension plan covering substantially all of its employees. The benefits are based on years of service and employees' final average pay. Pension costs are accrued and funded on a current basis based upon actuarial determinations and in compliance with income tax regulations and federal funding requirements. CIPS uses a September 30 measurement date for its valuation of pension plan assets and liabilities. The utility also provides certain employees with pension benefits which exceed the qualified plan limits imposed by federal tax law. Funded Status of Pension Plan (in thousands) 1993 1992 1991 _________ _________ ____________ Fair value of plan assets* $177,824 $150,729 $127,075 _______ _______ _______ Accumulated benefit obligations:** Vested benefits 125,641 98,770 78,515 Nonvested benefits 559 284 212 Effect of projected future compensation levels (based on 4.3% annual increases in 1993, 4.5% in 1992 and 5% in 1991) 41,214 37,025 36,791 _______ _______ _______ Total projected benefit obligation 167,414 136,079 115,518 _______ _______ _______ Plan assets in excess of projected benefit obligation $ 10,410 $ 14,650 $ 11,557 ======= ======= ======= ________________________ * Plan assets are invested in common and preferred stocks, bonds, money market instruments, guaranteed income contracts and real estate. ** The assumed weighted average discount rate was 6.50% for 1993, 7.25% for 1992 and 7.75% for 1991. Pension Plan Assets in Excess of Projected Benefit Obligation (in thousands) 1993 1992 1991 _________ _________ ____________ Plan assets in excess of projected benefit obligation $ 10,410 $ 14,650 $ 11,557 Unrecognized transition asset (being amortized over 18.2 years) (4,862) (5,325) (5,772) Unrecognized net (gain) loss (5,188) (13,617) (14,756) Unrecognized prior service cost 760 1,590 1,703 _______ _______ _______ Prepaid (Accrued) pension costs at September 30 1,120 (2,702) (7,268) Expense, net of funding October to December 1,944 91 (1,347) _______ _______ _______ Prepaid (Accrued) pension costs at December 31 $ 3,064 $ (2,611) $ (8,615) ======= ======= ======= Components of Net Pension Expense (in thousands) 1993 1992 1991 _________ _________ ____________ Service cost (present value of benefits earned during the year) $ 6,398 $ 5,721 $ 6,467 Interest cost on projected benefit obligation 10,193 9,302 8,583 Actual return on plan assets (expected long-term rate of return was 8%) (21,101) (13,755) (19,490) Deferred investment gains 10,071 4,834 11,167 Amortization of the unrecognized prior service cost 118 118 118 Amortization of the transition amount (463) (463) (463) _______ _______ _______ Net pension expense $ 5,216 $ 5,757 $ 6,382 ======= ======= ======= Effective January 1, 1993, CIPS adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". The standard requires companies to recognize the cost of providing postretirement medical and life insurance benefits over the employees' service period. CIPS is funding the medical benefits under two Voluntary Employee Beneficiary Association trusts (VEBA), and a 401(h) account established within the Company's retirement income trust. The Company sponsors postretirement plans providing medical and life benefits for certain of its retirees and their eligible dependents. The medical plan pays percentages of eligible medical expenses incurred by covered retirees after a deductible has been met, and after taking into account payment by Medicare or other providers. Currently, participants become eligible for coverage if they retire from CIPS after meeting age and years of service eligiblity requirements. The life insurance plan continues for all retirees who have been in the plan as employees for ten years or more. CIPS uses a September 30 measurement date for its valuation of postretirement assets and liabilities. Funded Status of Postretirement Benefit Plans (in thousands) 1993 _________ Fair value of plan assets* $ 13,302 ________ Accumulated benefit obligations: Retirees 39,599 Fully eligible active employees 17,026 Other active employees 80,532 ________ Total accumulated benefit obligation 137,157 ________ Accumulated benefit obligations in excess of plan assets (123,855) Unrecognized transition obligation (being amortized over 20 years) 110,511 Unrecognized net loss (including changes in assumptions) 1,959 ________ Accrued postretirement benefit cost at September 30 (11,385) Expense, net of funding, October to December 9,643 ________ Accrued postretirement benefit cost at December 31 $ (1,742) ======== * Plan assets are invested in common and preferred stocks, bonds, money market instruments, guaranteed income contracts and real estate. Components of Postretirement Benefit Cost (in thousands) 1993 _________ Service costs on benefits earned $ 4,215 Interest costs on accumulated benefit obligations 9,948 Actual return on plan assets (1,038) Deferred investment gains 397 Amortization of the transition amount 5,816 _______ Postretirement benefit cost $ 19,338 ======= For purposes of calculating the postretirement benefit obligation it is assumed that health-care costs will increase by 12.75% in 1994, and that the rate of increase thereafter (the health-care cost trend rate) will decline to 4.25% in 2007 and subsequent years. The health-care cost trend rate has a significant effect on the amounts reported for costs each year as well as on the accumulated postretirement benefit obligation. To illustrate, increasing the assumed health-care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation as of September 30, 1993 by $20.2 million and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost $2.7 million annually. The weighted-average discount rate used to determine the accumulated postretirement benefit obligation was 7 percent. The expected long-term rate of return on plan assets is 8 percent. In March 1992, CIPS was granted rates by the Illinois commission which included its estimated postretirement costs determined on an accrual basis of accounting. CIPS' financial reporting for postretirement costs is consistent with the related rate treatment. Therefore, adoption of SFAS No. 106 did not have a material effect on financial position or results of operations. The Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," in 1993. The new statement required the accrual of certain postemployment benefits to former or inactive employees. The adoption of SFAS No. 112 did not have a material effect on financial position or results of operations. 5. LONG-TERM DEBT Maturities and sinking fund requirements of CIPS' long-term debt through 1998 are as follows: Sinking Fund Maturities Requirements Total __________ ____________ _______ (in thousands) 1994 $20,000 $300 $20,300 1995 15,000 150 15,150 1996 - 150 150 1997 58,000 - 58,000 1998 - - - In 1993 and 1992 the sinking fund requirements were satisfied by the application of net expenditures for bondable property in an amount equal to 166-2/3 percent of the annual requirement. The utility expects to meet the 1994 requirement in the same manner. Long-term debt outstanding at December 31, excluding maturities due within one year, was: 1993 1992 Amount Amount ______ ______ (in thousands) First mortgage bonds (principal amount): Series J, 4 1/2% due 5/1/1994 $ - $20,000 Series K, 4 5/8% due 6/1/1995 15,000 15,000 Series L, 5 7/8% due 5/1/1997 15,000 15,000 Series N, 7 1/2% due 4/1/2001 - 35,000 Series P, 7 1/2% due 5/1/2002 - 30,000 Series 6 5/8% due 8/1/2009 (for Newton pollution control) 1,000 1,000 Series W, 7 1/8% due 5/15/1999 50,000 50,000 Series W, 8 1/2% due 5/15/2022 33,000 33,000 Series X, 6 1/8% due 7/1/1997 43,000 43,000 Series X, 7 1/2% due 7/1/2007 50,000 50,000 Series Y, 6 3/4% due 9/15/2002 23,000 23,000 Series Z, 6% due 4/1/2000 25,000 - Series Z, 6 3/8% due 4/1/2003 40,000 - _______ _______ 295,000 315,000 _______ _______ 1993 1992 Amount Amount ______ ______ (in thousands) Pollution control loan obligations: Series A, 5.85% due 10/1/2007 - 60,000 Series B, 6.80% due 4/1/2005 - 17,500 Series B, 6 7/8% due 4/1/2009 - 17,500 Series C, 6 5/8% due 8/1/2004 - 20,000 Series C, 6 3/4% due 8/1/2009 - 15,000 1990 Series A, 7.60% due 3/1/2014 20,000 20,000 1990 Series B, 7.60% due 9/1/2013 32,000 32,000 1993 Series A, 6 3/8% due 1/1/2028 35,000 - 1993 Series B-1, 4 3/8% due 6/1/2028 17,500 - 1993 Series B-2, 5.90% due 6/1/2028 17,500 - 1993 Series C-1, 4.20% due 8/15/2026 35,000 - 1993 Series C-2, 5.70% due 8/15/2026 25,000 - _______ _______ 182,000 182,000 _______ _______ Unamortized net debt premium and discount (2,677) (3,300) _______ _______ $474,323 $493,700 ======= ======= Interest rates on the 1993 Series B-1 and 1993 Series C-1 bonds will be adjusted to a then current market rate on June 1, 1998 and August 15, 1998, respectively. Interest rates on the 1993 Series B-2 and 1993 Series C-2 bonds are subject to redetermination at the option of the utility commencing June 1, 2003 and August 15, 2003, respectively. 6. COMMON SHAREHOLDER'S EQUITY Common Stock. The authorized common stock, no par value, for CIPS was 45,000,000 shares as of December 31, 1993, 1992 and 1991. All outstanding shares were exchanged with CIPS shareholders for CIPSCO Incorporated stock on October 1, 1990. Since then, CIPSCO Incorporated which holds all CIPS common shares, has been retiring CIPS shares as detailed in the table below: Common Shares Outstanding
Number of Shares Outstanding Amounts ______________________________________ ____________________________ 1993 1992 1991 1993 1992 1991 __________ __________ __________ ________ ________ ________ Balance, beginning of year 26,336,718 28,410,703 31,031,024 $154,532 $220,632 $287,607 Common stock retired (884,345) (2,073,985) (2,620,321) (33,250) (66,100) (66,950) Other - - - - - (25) __________ __________ __________ ________ ________ ________ Balance, end of year 25,452,373 26,336,718 28,410,703 $121,282 $154,532 $220,632 ========== ========== ========== ======== ======== ========
Retained Earnings. CIPS is subject to restrictions on the use of retained earnings for cash dividends on common stock applicable to all corporations under the Illinois Business Corporation Act, as well as those contained in its mortgage indenture and articles of incorporation. At December 31, 1993, 1992 and 1991, no amount of retained earnings was restricted. 7. LINES OF CREDIT AND SHORT-TERM BORROWINGS CIPS has arrangements for bank lines of credit which totaled $77.9 million. CIPS compensates banks for lines of credit totaling $60 million. The bank lines of credit are for corporate purposes including the support of any commercial paper borrowings. At December 31, 1993 there were no short- term borrowings at CIPS. 8. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value at December 31, 1993 and 1992 of each class of financial instruments for which it is practicable to make such estimates. Cash and Temporary Investments - The carrying amounts approximate fair value because of the short-term maturity of these instruments. Short-Term Borrowings - The carrying amounts approximate fair value due to their short-term maturities. Preferred Stock - The fair value was estimated using market values provided by independent pricing services. Long-Term Debt - The fair value was estimated using market values provided by independent pricing services. The estimated fair value of the Company's financial instruments as of December 31, are shown below: 1993 1992 _________________ _________________ Carrying Fair Carrying Fair Value Value Value Value ________ _____ ________ _____ (in thousands) Preferred Stock $ 80,000 $ 68,403 $ 65,000 $ 50,519 Long-Term Debt 474,323 504,478 493,700 514,912 9. INCOME TAXES The Company adopted the liability method of accounting for deferred income taxes in compliance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" effective January 1, 1993. Due to rate regulation, adoption of this statement had an immaterial effect on net income. However, the adoption resulted in a balance sheet reduction of $81.3 million of deferred income taxes along with corresponding balance sheet increases of $95.3 million of regulatory liabilities, net, and $14 million of plant assets. Income tax expense continues to include provisions for deferred taxes to reflect the effect of temporary differences between the time certain costs are recorded for financial reporting and when they are deducted for income tax return purposes. As temporary differences reverse, the related accumulated deferred income taxes and a portion of the regulatory assets and liabilities are also reversed. Investment tax credits have been deferred and will continue to be credited to income over the lives of the related property. The components of federal and state income tax provisions and investment tax credits at December 31, were: 1993 1992 1991 ________ ________ ________ (in thousands) Current - - Federal $ 42,422 $ 6,859 $ 29,950 - - State 8,019 (749) 6,366 _______ _______ _______ 50,441 6,110 36,316 _______ _______ _______ Deferred - - Federal 1,483 26,551 5,800 - - State 191 7,447 1,773 _______ _______ _______ 1,674 33,998* 7,573* _______ _______ _______ Amortization of deferred investment tax credits (3,366) (3,336) (3,464) _______ _______ _______ Total 48,749 36,772 40,425 _______ _______ _______ Nonoperating income taxes: Current 1,119 2,411 1,629 Deferred (488) 578 784 _______ _______ _______ 631 2,989 2,413 _______ _______ _______ Total income taxes $ 49,380 $ 39,761 $ 42,838 ======= ======= ======= 1992 1991 ______ ______ (in thousands) *Detail of Deferred Taxes: Excess of tax depreciation and amortization over book $ 5,566 $ 7,465 Unbilled revenues - - Revenue refunds 29,526 (6,259) Deferred fuel cost (2,921) 2,030 Deferred environmental site cleanup costs 62 2,243 Alternative minimum tax credit carryforward (4,449) - Cost of removal 3,108 731 Unamortized loss on reacquired debt 3,561 (72) Miscellaneous (455) 1,435 _______ _______ Total $ 33,998 $ 7,573 ======= ======= Reconciliations with statutory federal income tax rates at December 31 were: 1993 1992 1991 ---- ---- ---- Effective income tax rate 37.0% 35.4% 36.1% Amortization of investment tax credits 2.5 3.0 2.9 Tax exempt interest and dividends .7 1.3 1.9 Out-of-period items (0.1) (0.6) (1.8) State income tax rate, net of federal income tax benefit (4.0) (4.2) (4.8) Other, net (1.1) (0.9) (0.3) ____ ____ ____ Statutory federal income tax rate 35.0% 34.0% 34.0% ==== ==== ==== The components of deferred income taxes at December 31 and January 1, 1993 are: December 31, 1993 January 1, 1993 _________________ _______________ (in thousands) Accumulated deferred income tax liabilities related to: Depreciable propeprty $316,327 $298,089 Investment tax credits (23,500) (24,145) Regulatory liabilities, net (27,423) (37,148) Other 9,021 11,773 _______ _______ Accumulated deferred income taxes per balance sheet $274,425 $248,569 ======= ======= Deferred tax assets (included in prepayments $ 5,977 $ 7,155 ======= ======= 10. SEGMENTS OF BUSINESS CIPS is a public utility engaged in the sale of electricity which it generates, transmits and distributes. CIPS also sells natural gas, which it purchases from producers and suppliers and distributes through its system, and transports customer-owned natural gas. The following is a summary of operations: Years Ended December 31, _________________________________ 1993 1992 1991 ______ ______ ______ (in thousands) OPERATING INFORMATION Electric operations: Operating revenues $ 688,849 $ 595,642 $ 592,669 Operating expenses, excluding provision for income taxes 534,070 472,414 455,366 _________ _________ _________ Pretax operating income 154,779 123,228 137,303 _________ _________ _________ Gas operations: Operating revenues 145,707 133,760 117,536 Operating expenses, excluding provision for income taxes 138,086 122,844 110,375 _________ _________ _________ Pretax operating income 7,621 10,916 7,161 _________ _________ _________ Total 162,400 134,144 144,464 _________ _________ _________ Plus other income and deductions 4,460 10,151 13,113 Less interest charges 34,100 34,922 41,469 Less income taxes 48,749 36,772 40,425 Less preferred dividends 3,718 4,549 5,396 _________ ________ _________ Earnings for common stock $ 80,293 $ 68,052 $ 70,287 ========= ========= ========= Depreciation expense: Electric $ 71,876 $ 68,902 $ 64,880 Gas 5,771 5,252 4,603 _________ ________ _________ Total $ 77,647 $ 74,154 $ 69,483 ========= ========= ========= INVESTMENT INFORMATION Identifiable assets: Electric $1,459,073 $1,443,578 $1,419,036 Gas 177,857 188,321 157,757 Temporary investments 2,734 2,578 94,753 Corporate 28,798 10,582 20,297 _________ ________ _________ Total $1,668,462 $1,645,059 $1,691,843 ========= ========= ========= Construction expenditues: Electric $ 76,956 $ 103,023 $ 99,004 Gas 10,756 17,401 14,878 _________ ________ _________ Total $ 87,712 $ 120,424 $ 113,882 ========= ========= ========= 11. REVENUES COLLECTED SUBJECT TO REFUND In May 1992, the Illinois commission approved a March 18, 1992 settlement agreement that resolved a proceeding regarding the impact on the utility of the reduced federal corporate income tax rates established by the Tax Reform Act of 1986. Under terms of the agreement, $73 million, including accrued interest, was refunded to customers from July through December 1992 in complete settlement of all issues related to the proceeding. For the 61-month period, March 1987 through March 1992, a total of $78.4 million had been accrued for refunds. The total liability recorded by the utility exceeded the settlement agreement amount by $5.4 million resulting in a $3.3 million (net of taxes) favorable impact on earnings during 1992. 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The fluctuations in the quarterly results are due to the seasonal nature of the electric and gas utility business. Total Total Earnings Operating Operating for Common Revenues Income Stock _________ _________ __________ (in thousands) Quarters 1993 First $209,548 $ 24,726 $ 15,774 Second 187,385 20,093 11,610 Third 232,104 46,204 38,172 Fourth 205,519 22,628 14,737 1992 First 182,208 17,055 10,884 Second 165,104 21,859 15,634* Third 187,154 38,129 29,441 Fourth 194,936 20,329 12,093 * Quarterly earnings reflect adjustment for settling Revenues Subject to Refund proceeding. See Note 11 to Notes to Financial Statements. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Central Illinois Public Service Company: We have audited the accompanying balance sheets of CENTRAL ILLINOIS PUBLIC SERVICE COMPANY (an Illinois corporation and a wholly owned subsidiary of CIPSCO Incorporated) as of December 31, 1993 and 1992, and the related statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1993. These financial statements and schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Central Illinois Public Service Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in Item 14(a)2 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly state, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Chicago, Illinois, January 28, 1994 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The information required by Item 10 relating to each director who is a nominee for election as director at the Company's 1994 Annual Meeting of Shareholders is to be set forth in the Company's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the "proxy statement") in connection with the Company's Annual Meeting of Shareholders. Such information is incorporated herein by reference to the material appearing under the caption "Election of Directors -- Director Information" in the proxy statement. Information required by Item 10 relating to directors and executive officers of the Company is set forth under a separate caption in Part I hereof. Item 11. Executive Compensation. The information required by Item 11 is to be set forth in the proxy statement. Such information is incorporated herein by reference to the material appearing under the caption "Election of Directors -- Executive Compensation" and -- "Directors' Compensation" appearing in the proxy statement; provided, however, that no part of the information appearing under the portion of the proxy statement entitled "Election of Directors -- Compensation Committee Report on Executive Compensation" or -- "Performance Graph" is deemed to be filed as part of this Form 10-K Annual Report. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information required by Item 12 is to be set forth in the proxy statement. Such information is incorporated herein by reference to the material appearing under the captions "Voting Securities Beneficially Owned by Principal Holders, Directors, Nominees and Executive Officers" and "Election of Directors -- Director Information" appearing in the proxy statement. Item 13. Certain Relationships and Related Transactions. CIPS is a subsidiary of CIPSCO. At December 31, 1993, CIPSCO owned 100% of the common stock of CIPS (representing 97% of the voting shares of CIPS). There are situations where CIPS interacts with its affiliated companies through the use of shared facilities, common employees and other business relationships. In these situations, CIPS receives payment in accordance with regulatory requirements for the services provided to affiliated companies. Each individual who is a member of the Board of Directors of CIPSCO is also a member of the Board of Directors of CIPS. Each of the officers of CIPSCO is also an officer of CIPS. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Page of this Report on Form 10-K ____________ (a) 1. Financial statements (included in Item 8, Financial Statements and Supplementary Data): Statements of Income for the years ended December 31, 1993, 1992 and 1991. . . . . . . . . . . 126-127 Balance Sheets - December 31, 1993 and 1992 . . . . . 128-129 Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991. . . . . . . . . . . 130-131 Statements of Retained Earnings for the years ended December 31, 1993, 1992 and 1991. . . . . . . . 132 Notes to Financial Statements . . . . . . . . . . . . 133-152 Report of Independent Public Accountants. . . . . . . 153 (a) 2. Schedules supporting financial statements (included herein): Schedule V - Property, Plant and Equipment at Original Cost for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . 159-161 Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equip- ment for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . 162-164 Schedule IX - Short-Term Borrowings for the years ended December 31, 1993, 1992 and 1991. . . . . . 165 Schedule X - Supplementary Income Statement Information for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . 166 All other schedules have been omitted as not applicable or not required or because the information required to be shown therein is included in the financial statements or notes thereto. Page of this Report on Form 10-K ____________ (a) 3. Exhibits 3.01 Amended and Restated Articles of Incorporation, as amended, of CIPS. (Exhibit 3.02 to Form 8-K, dated October 8, 1993). Incorporated by Reference. - 3.02 Bylaws of CIPS (Form 10-Q of the Company (1-3672), June 1990, Exhibit 19) Incorporated by Reference. - 4 Indenture of Mortgage or Deed of Trust dated October 1, 1941, from CIPS to Continental Illinois National Bank and Trust Company of Chicago and Edmond B. Stofft, as Trustees. (Exhibit 2.01 in File No. 2-60232.) Supplemental Indentures dated, respectively September 1, 1947, January 1, 1949, February 1, 1952, September 1, 1952, June 1, 1954, February 1, 1958, January 1, 1959, May 1, 1963, May 1, 1964, June 1, 1965, May 1, 1967, April 1, 1970, April 1, 1971, September 1, 1971, May 1, 1972, December 1, 1973, March 1, 1974, April 1, 1975, October 1, 1976, November 1, 1976, October 1, 1978, August 1, 1979, February 1, 1980, February 1, 1986, May 15, 1992, July 1, 1992, September 15, 1992 and April 1, 1993, between CIPS and the Trustees under the Indenture of Mortgage or Deed of Trust referred to above (Amended Exhibit 7(b) in File No. 2-7341; Second Amended Exhibit 7.03 in File No. 2-7795; Second Amended Exhibit 4.07 in File No. 2-9353; Amended Exhibit 4.05 in file No. 2-9802; Amended Exhibit 4.02 in File No. 2-10944; Amended Exhibit 2.02 in File No. 2-13866; Amended Exhibit 2.02 in File No. 2-14656; Amended Exhibit 2.02 in File No. 2-21345; Amended Exhibit 2.002 in File No. 2-22326; Amended Exhibit 2.02 in File No. 2-23569; Amended Exhibit 2.02 File No. 2-26284; Amended Exhibit 2.02 in File No. 2-36388; Amened Exhibit 2.02 in File No. 2-39587; Amended Exhibit 2.02 in File No. 2-41468; Amended Exhibit 2.02 in File No. 2-43912; Exhibit 2.03 in File No. 2-60232; Amended Exhibit 2.02 in File No. 2-50146; Amended Exhibit 2.02 in File No. 2-52886; Second Amended Exhibit 2.04 in File No. 2-57141; Amended Exhibit 2.04 in File No. 2-57557; Amended Exhibit 2.06 in File No. 2-62564; Exhibit 2.02(a) in File No. 2-65914; Amended Exhibit 2.02(a) in File No. 2-66380; and Amended Exhibit 4.02 in File No. 33-3188; Exhibit 4.02 to Form 8-K dated May 15, 1992; Exhibit 4.02 to Form 8-K dated July 1, 1992; Exhibit 4.02 to Form 8-K dated September 15, 1992; Exhibit 4.02 to Form 8-K dated March 30, 1993.) Incorporated by reference. - Page of this Report on Form 10-K ____________ Exhibits (Continued) 10.01 Form of Deferred Compensation Agreement for Directors . . . - (Exhibit 10.01 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference. 10.02 Amended Form of Deferred Compensation Agreement for . . . . 168-174 Directors 10.03 Form of Special Executive Retirement Plan . . . . . . . . . - (Exhibit 10.03 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference. 10.04 Amendment to Form of Special Executive Retirement . . . . . 175 Plan 10.05 Form of Employment Agreement (change in control . . . . . . - severance agreement) (Exhibit 10.05 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference. 10.06 Form of Director's Retirement Income Plan . . . . . . . . . - (Exhibit 10.06 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference. 10.07 Form of Excess Benefit Retirement Plan. . . . . . . . . . . - (Exhibit 10.07 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference. 10.08 Amendment to Form of Excess Benefit Retirement. . . . . . . 176 Plan 10.09 Form of Management Incentive Plan . . . . . . . . . . . . . - (Exhibit 10.09 filed with 1990 Annual Report on Form 10-K) Incorporated by Reference. 12 Computation of Ratio of Earnings to Fixed Charges . . . . . 177 21 Subsidiaries of Registrant. . . . . . . . . . . . . . . . . 178 Page of this Report on Form 10-K ____________ Exhibits (Continued) 23 Consent of Independent Public Accountants . . . . . . . . . 179 24 Powers of Attorney. . . . . . . . . . . . . . . . . . . . . 180-187 99 Description of Capital Stock. . . . . . . . . . . . . . . . 188-189 Exhibits 10.01 through 10.09 are management contracts or compensatory plans or arrangements required to be filed as exhibits pursuant to Item 14(c) hereof. The following instruments defining the rights of holders of certain unregistered long-term debt of CIPS have not been filed with the Securities and Exchange Commission but will be furnished upon request. 1. Loan Agreement dated as of March 1, 1990, between CIPS and the Illinois Development Finance Authority (IDFA) in connection with the IDFA's $20,000,000 Pollution Control Revenue Refunding Bonds, 1990 Series A due March 1, 2014 and $32,000,000 Pollution Control Revenue Refunding Bonds, 1990 Series B due September 1, 2013. 2. Loan Agreement dated January 1, 1993, between CIPS and IDFA in connection with IDFA's $35,000,000, 6-3/8% Pollution Control Revenue Refunding Bonds (Central Illinois Public Service Company Project) 1993 Series A, due January 1, 2028. 3. Loan Agreement dated June 1, 1993, between CIPS and IDFA in connection with IDFA's $17,500,000 Pollution Control Revenue Refunding Bonds, 1993 Series B-1 due June 1, 2028 and $17,500,000 Pollution Control Revenue Refunding Bonds, 1993 Series B-2 due June 1, 2028. 4. Loan Agreement dated August 15, 1993, between CIPS and IDFA in connection with IDFA's $35,000,000 Pollution Control Revenue Refunding Bonds, 1993 Series C-1 due August 15, 2026 and $25,000,000 Pollution Control Revenue Refunding Bonds, 1993 Series C-2 due August 15, 2026. 5. CIPS Credit Agreement dated October 1, 1992 with various banks providing unsecured lines of credit in an aggregate amount of $60,000,000. (b) Reports on Form 8-K (filed during the reporting period): Date of Report Item Reported ______________ _____________ October 8, 1993 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. Contains certain exhibits filed in connection with the Registration Statements of CIPS (Registration Nos. 33-59674 and 33-50349) which became effective March 29, 1993 and September 30, 1993, respectively. (c) Reports on Form 8-K (filed subsequent to the reporting period): None. Schedule V
SCHEDULE V (1 of 3) CENTRAL ILLINOIS PUBLIC COMPANY PROPERTY, PLANT AND EQUIPMENT AT ORIGINAL COST (a) YEAR ENDED DECEMBER 31, 1993 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Collumn D Column E Column F Transfers and Retirements Amortization Balance Additions or Sales at of Balance Classification of Property Dec. 31, 1992 at Cost Cost(b) Franchises(c) Dec. 31, 1993 __________________________ _____________ ___________ ___________ _____________ _____________ ELECTRIC UTILITY PLANT: Electric utility plant in service-- Intangible. . . . . . . . . . . . . . . . $ 51 $ - $ - $ - $ 51 Production. . . . . . . . . . . . . . . . 1,146,088 27,619 9,771 8,400 1,172,336 Transmission. . . . . . . . . . . . . . . 291,519 26,147 962 2,790 319,494 Distribution. . . . . . . . . . . . . . . 423,998 36,813 3,698 1,800 458,913 General . . . . . . . . . . . . . . . . . 87,450 9,825 2,139 (289) 94,847 Electric plant held for future use. . . . . 1,217 - - - 1,217 Construction work in progress . . . . . . . 41,638 17,150 - - 58,788 Completed construction not classified . . . 165,999 (40,598) - - 125,401 _________ _________ __________ ________ _________ Total electric utility plant . . . . . . 2,157,960 76,956 16,570 12,701 2,231,047 _________ _________ __________ ________ _________ GAS UTILITY PLANT: Gas utility plant in service-- Intangible. . . . . . . . . . . . . . . . 40 - - - 40 Production. . . . . . . . . . . . . . . . 1,153 20 3 - 1,170 Storage . . . . . . . . . . . . . . . . . 19,338 12 1 - 19,349 Transmission. . . . . . . . . . . . . . . 33,685 3,099 4 105 36,885 Distribution. . . . . . . . . . . . . . . 113,273 15,074 454 1,180 129,073 General . . . . . . . . . . . . . . . . . 8,765 991 384 39 9,411 Gas plant held for future use . . . . . . . 37 - - - 37 Construction work in progress . . . . . . . 3,581 (1,265) - - 2,316 Completed construction not classified . . . 19,418 (7,175) - - 12,243 _________ _________ __________ ________ _________ Total gas utility plant. . . . . . . . . 199,290 10,756 846 1,324 210,524 _________ _________ __________ ________ _________ Total utility plant. . . . . . . . . . . $2,357,250 $ 87,712 $ 17,416 $ 14,025 $2,441,571 ========= ========= ========== ======== ========= _________________________ (a) Reference is made to Note 1 to Financial Statements. (b) Represents retirements charged to accumulated depreciation (Schedule VI). (c) Represents land and buildings transferred to other physical property, amortization of franchises, plant acquisition adjustments and the effect of adjustment as a result of adopting SFAS No. 109, "Accounting for Income Taxes". (See Notes 1 and 9 to Financial Statements.) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE V (2 of 3) CENTRAL ILLINOIS PUBLIC SERVICE COMPANY PROPERTY, PLANT AND EQUIPMENT AT ORIGINAL COST (a) YEAR ENDED DECEMBER 31, 1992 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Collumn D Column E Column F Transfers and Retirements Amortization Balance Additions or Sales at of Balance Classification of Property Dec. 31, 1991 at Cost Cost(b) Franchises(c) Dec. 31, 1992 __________________________ _____________ ___________ ___________ _____________ _____________ ELECTRIC UTILITY PLANT: Electric utility plant in service-- Intangible. . . . . . . . . . . . . . . . $ 52 $ - $ - $ (1) $ 51 Production. . . . . . . . . . . . . . . . 1,141,535 7,275 2,722 - 1,146,088 Transmission. . . . . . . . . . . . . . . 288,202 4,782 1,556 91 291,519 Distribution. . . . . . . . . . . . . . . 395,394 33,849 5,110 (135) 423,998 General . . . . . . . . . . . . . . . . . 83,833 7,699 4,071 (11) 87,450 Electric plant held for future use. . . . . 1,217 - - - 1,217 Construction work in progress . . . . . . . 56,708 (15,070) - - 41,638 Completed construction not classified . . . 87,928 78,071 - - 165,999 _________ _________ __________ ________ _________ Total electric utility plant . . . . . . 2,054,869 116,606 13,459 (56) 2,157,960 _________ _________ __________ ________ _________ GAS UTILITY PLANT: Gas utility plant in service-- Intangible. . . . . . . . . . . . . . . . 40 - - - 40 Production. . . . . . . . . . . . . . . . 1,216 - 63 - 1,153 Storage . . . . . . . . . . . . . . . . . 15,163 4,177 2 - 19,338 Transmission. . . . . . . . . . . . . . . 33,001 711 26 (1) 33,685 Distribution. . . . . . . . . . . . . . . 106,664 7,280 671 - 113,273 General . . . . . . . . . . . . . . . . . 7,880 1,561 686 10 8,765 Gas plant held for future use . . . . . . . 37 - - - 37 Construction work in progress . . . . . . . 1,774 1,807 - - 3,581 Completed construction not classified . . . 13,390 6,028 - - 19,418 _________ _________ __________ ________ _________ Total gas utility plant. . . . . . . . . 179,165 21,564 1,448 9 199,290 _________ _________ __________ ________ _________ Total utility plant. . . . . . . . . . . $2,234,034 $ 138,170 $ 14,907 $ (47) $2,357,250 ========= ========= ========== ======== ========= _________________________ (a) Reference is made to Note 1 to Financial Statements. (b) Represents retirements charged to accumulated depreciation (Schedule VI). (c) Represents land and buildings transferred to other physical property, amortization of franchises and plant acquisition adjustments. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE V (3 of 3) CENTRAL ILLINOIS PUBLIC SERVICE COMPANY PROPERTY, PLANT AND EQUIPMENT AT ORIGINAL COST (a) YEAR ENDED DECEMBER 31, 1991 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Collumn D Column E Column F Transfers and Retirements Amortization Balance Additions or Sales at of Balance Classification of Property Dec. 31, 1990 at Cost Cost(b) Franchises(c) Dec. 31, 1991 __________________________ _____________ ___________ ___________ _____________ _____________ ELECTRIC UTILITY PLANT: Electric utility plant in service-- Intangible. . . . . . . . . . . . . . . . $ 52 $ - $ - $ - $ 52 Production. . . . . . . . . . . . . . . . 1,138,222 6,794 3,483 2 1,141,535 Transmission. . . . . . . . . . . . . . . 258,482 3,437 766 49 288,202 Distribution. . . . . . . . . . . . . . . 380,381 18,449 3,430 (6) 395,394 General . . . . . . . . . . . . . . . . . 77,718 8,474 2,313 (46) 83,833 Electric plant held for future use. . . . . 1,294 231 - (308) 1,217 Construction work in progress . . . . . . . 34,752 21,956 - - 56,708 Completed construction not classified . . . 48,266 39,662 - - 87,928 _________ _________ __________ ________ _________ Total electric utility plant . . . . . . 1,966,167 99,003 9,992 (309) 2,054,869 _________ _________ __________ ________ _________ GAS UTILITY PLANT: Gas utility plant in service-- Intangible. . . . . . . . . . . . . . . . 40 - - - 40 Production. . . . . . . . . . . . . . . . 1,217 - - (1) 1,216 Storage . . . . . . . . . . . . . . . . . 15,126 40 3 - 15,163 Transmission. . . . . . . . . . . . . . . 32,929 134 62 - 33,001 Distribution. . . . . . . . . . . . . . . 102,236 5,253 830 - 106,664 General . . . . . . . . . . . . . . . . . 7,468 1,167 731 5 7,880 Gas plant held for future use . . . . . . . 41 - - (24) 37 Construction work in progress . . . . . . . 2,439 (665) - (4) 1,774 Completed construction not classified . . . 4,440 8,950 - - 13,390 _________ _________ __________ ________ _________ Total gas utility plant. . . . . . . . . 165,936 14,879 1,626 (24) 179,165 _________ _________ __________ ________ _________ Total utility plant. . . . . . . . . . . $2,132,103 $ 113,882 $ 11,618 $ (333) $2,234,034 ========= ========= ========== ======== ========= _________________________ (a) Reference is made to Note 1 to Financial Statements. (b) Represents retirements charged to accumulated depreciation (Schedule VI). (c) Represents land and buildings transferred to other physical property, amortization of franchises and plant acquisition adjustments. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE VI (1 of 3) CENTRAL ILLINOIS PUBLIC SERVICE COMPANY ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1993 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Additions(a) Deduction(a) _____________________________ ______________________ Balance Charged Charged Retirements Cost of Balance Description Dec. 31, 1992 to Income(b) Other Accounts at Cost Removal Dec. 31, 1993 ___________ _____________ ____________ ______________ ___________ ________ _____________ Electric . . . . . . . . . . $882,353 $ 69,229 $ 7,328 $ 16,570 $ 5,998 $ 936,342 Gas. . . . . . . . . . . . . 79,066 5,273 783 846 521 83,755 _______ _______ _______ _______ _______ _________ Total . . . . . . . . . $961,419 $ 74,502 $ 8,111(c) $ 17,416 $ 6,519 $1,020,097 ======= ======= ======= ======= ======= ========= _________________________ (a) Reference is made to Note 1 to Financial Statements. Electric Gas Total _________ ________ _______ (b) Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,876 $ 5,771 $ 77,647 Amortization of major systems development, roads and rights-of-way . . (2,647) (498) (3,145) _______ _______ _______ $ 69,229 $ 5,273 $ 74,502 ======= ======= ======= (c) Depreciation charged to clearing and other accounts. . . . . . . . . . . . $ 3,672 Salvage and miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 4,439 _______ $ 8,111 ======= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE VI (2 of 3) CENTRAL ILLINOIS PUBLIC SERVICE COMPANY ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1992 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Additions(a) Deduction(a) _____________________________ ______________________ Balance Charged Charged Retirements Cost of Balance Description Dec. 31, 1991 to Income(b) Other Accounts at Cost Removal Dec. 31, 1992 ___________ _____________ ____________ ______________ ___________ ________ _____________ Electric . . . . . . . . . . $825,452 $ 66,345 $ 9,713 $ 13,459 $ 5,698 $882,353 Gas. . . . . . . . . . . . . 75,175 4,791 580 1,448 32 79,066 _______ _______ _______ _______ _______ _______ Total . . . . . . . . . $900,627 $ 71,136 $ 10,293(c) $ 14,907 $ 5,730 $961,419 ======= ======= ======= ======= ======= ======= _________________________ (a) Reference is made to Note 1 to Financial Statements. Electric Gas Total ________ _______ _______ (b) Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,902 $ 5,252 $ 74,154 Amortizatin of major systems development, roads and rights-of-way. . . . . (2,557) (461) (3,018) _______ _______ _______ $ 66,345 $ 4,791 $ 71,136 ======= ======= ======= (c) Depreciation charged to clearing and other accounts. . . . . . . . . . . . $ 3,198 Salvage and miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 7,095 _______ $ 10,293 ======= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE VI (3 of 3) CENTRAL ILLINOIS PUBLIC SERVICE COMPANY ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1991 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Additions(a) Deduction(a) _____________________________ ______________________ Balance Charged Charged Retirements Cost of Balance Description Dec. 31, 1990 to Income(b) Other Accounts at Cost Removal Dec. 31, 1991 ___________ _____________ ____________ ______________ ___________ ________ _____________ Electric . . . . . . . . . . $774,242 $ 63,310 $ 4,912 $ 9,992 $ 7,020 $825,452 Gas. . . . . . . . . . . . . 71,948 4,475 680 1,626 302 75,175 _______ _______ _______ _______ _______ _______ Total . . . . . . . . . $846,190 $ 67,785 $ 5,592(c) $ 11,618 $ 7,322 $900,627 ======= ======= ======= ======= ======= ======= _________________________ (a) Reference is made to Note 1 to Financial Statements. Electric Gas Total ________ _______ _______ (b) Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,880 $ 4,603 $ 69,483 Amortizatin of major systems development, roads and rights-of-way. . . . . (1,570) (128) (1,698) _______ _______ _______ $ 63,310 $ 4,475 $ 67,785 ======= ======= ======= (c) Depreciation charged to clearing and other accounts. . . . . . . . . . . . $ 2,872 Salvage and miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 2,720 _______ $ 5,592 ======= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SCHEDULE IX CENTRAL ILLINOIS PUBLIC SERVICE COMPANY SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Column C Column D Column E Column F Weighted Average Amount Weighted Average Interest Maximum Amount Outstanding Average Interest Balance at Rate at Outstanding at During the Rate During Catetory End of Year End of Year Any Month-End Year(a) the Year(a) ________ ___________ _________________ ______________ ______________ ________________ 1993: _____ Commercial Paper . . . - - $10,397 $1,992 3.38% 1992: _____ Commercial Paper . . . $17,393 3.45% $17,393 $ 59 3.46% 1991: _____ None __________________________ (a) Computed on a daily weighted average basis. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
SCHEDULE X CENTRAL ILLINOIS PUBLIC SERVICE COMPANY SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE THREE YEARS ENDED DECEMBER 31, 1993 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Column A Column B Charged to Costs and Expenses _____________________________ 1993 1992 1991 ____ ____ ____ Taxes other than income taxes: Real estate . . . . . . . . . . . . . . $ 7,517 $ 7,055 $ 7,301 Invested capital. . . . . . . . . . . . 8,876 8,888 8,989 Gross receipts and public utility . . . 30,961 27,207 30,150 Payroll . . . . . . . . . . . . . . . . 6,980 7,617 6,960 Other . . . . . . . . . . . . . . . . . 433 339 536 _______ _______ _______ $ 54,767 $ 51,106 $ 53,936 ======= ======= ======= The amounts charged to the respective accounts for royalties, advertising, and depreciation and amortization of intangible assets, preoperating costs and similar deferrals each aggregated less than one percent of total revenues. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY (Registrant) By C. L. GREENWALT _____________________________________ C. L. Greenwalt President and Chief Executive Officer Date: March 10, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated. Signature Title Principal Executive Officer: C. L. GREENWALT President and Chief Executive Officer and Director Principal Financial Officer: R. W. JACKSON Senior Vice President and Secretary, Director and as Attorney-in-Fact* Principal Accounting Officer: J. C. FIAUSH Controller WILLIAM J. ALLEY* Director ROBERT S. ECKLEY* Director JOHN L. HEATH* Director GORDON R. LOHMAN* Director HANNE M. MERRIMAN* Director DONALD G. RAYMER* Director THOMAS L. SHADE* Director JAMES W. WOGSLAND* Director Date: March 10, 1994 EXHIBIT 10.02 A G R E E M E N T This AGREEMENT made this_______ day of _____________, 19__, by and between CENTRAL ILLINOIS PUBLIC SERVICE COMPANY, an Illinois corporation (hereinafter called the "Company"), and ____________________________ (hereinafter called the "Director"). WITNESSETH: WHEREAS, the Director is a member of the Board of Directors of the Company; and WHEREAS, the Company and the Director desire to enter into this Agreement with respect to compensation to accrue to the Director as a member of the Board of Directors commencing __________, 19__ (the "Effective Date"); NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth it is agreed: 1. The Director shall serve diligently and honestly in the administration of the affairs of the Company during his or her service as a director. 2. As compensation for the services to be rendered by the Director to the Company, the Company shall set up on its books an account in the name of the Director to which shall be accrued, commencing with the Effective Date and continuing for the period that compensation is to be accrued hereunder, the amounts provided in subparagraphs (a) and (b) hereof. (a) There shall be accrued to the account amounts equivalent to such amounts as the Director would have received as a director of the Company as compensation for the services rendered by the Director but for this Agreement, such accruals to commence as of the respective dates payment of such amounts would have been made by the Company. (b) There shall be accrued an additional amount equivalent to such amounts as would have been available if the amount accrued to the account were invested in CIPSCO Incorporated Common Stock at the closing price as reported in the listing of the New York Stock Exchange - Composite Transactions for the trading day coincident with or next following the date payment would have been made to the Director but for this Agreement, including subsequent cash dividends on the shares of Common Stock treated as credited to the Director's account. Such cash dividends shall be treated as automatically reinvested in CIPSCO Incorporated Common Stock at the closing price as reported in the listing of the New York Stock Exchange - Composite Transactions for the trading day concident with or next following the applicable dividend payment date. Adjustments of the value of the account for appreciation or depreciation in the market value of shares of Common Stock deemed to be so held will be made on any applicable valuation date using the closing price as reported in the listing of the New York Stock Exchange - Composite Transactions. 3. The amount accrued to the Director's account shall be paid over in accordance with the provisions of this paragraph 3. (a) Commencing with the last day of the calendar quarter in which the Director shall have retired as a director of the Company and its affiliates, the Company shall pay, or commence to pay, to the Director in cash the amount accrued to his or her account as of such date. The manner of payment shall be in accordance with Payment Method 1 below or Payment Method 2 below, whichever the Director designates at the end of this Agreement as the method of payment; provided, however, that the Director may elect from time to time to change as of any January 1 his or her payment designation by filing an appropriate written direction with the Company prior to the January 1st as which the change is to be effective. A change in payment designation, however, shall only be effective with respect to amounts to be accrued to the Director's account attributable to years of service commencing on or after the effective date of such change for which compensation is accrued under Paragraph 2(a) of this Agreement. A payment designation shall be irrevocable with respect to amounts accrued to the Director's account that are attributable to years of service commencing prior to such January 1st during which the payment designation was in effect. Payment Method 1 -- The portion of the Director's account covered by this Payment Method 1 shall be paid over in equal quarterly installments, the number of which shall be the lesser of (i) 20 or (ii) the number of calendar quarters during which compensation was accrued under this Agreement and under any similar agreement with the Company or an affiliate of the Company (but not counting any such calendar quarter more than once). In addition, the Company shall pay to the Director quarterly an amount equivalent to interest on the balance of such portion of his or her account from time to time unpaid, at a rate, in respect of each quarterly payment, equal to the rate of interest obtained at the auction of six month United States Treasury Bills taking place nearest to the first day of the calendar quarter for which the payment is made. Payment Method 2 -- The portion of the Director's account covered by this Payment Method 2 shall be paid over in one of the following methods as the Company, in its sole discretion, shall determine prior to the Director's retirement after consultation with the Director: (i) By payment in a lump sum, or (ii) By payment in equal quarterly installments, the number of which shall be the lesser of (i) 20 or (ii) the number of calendar quarters during which compensation was accrued under this Agreement and under any similar agreement with the Company or an affiliate of the Company (but not counting any such calendar quarter more than once). In addition, the Company shall pay to the Director quarterly an amount equivalent to interest on the balance of such portion of his or her account from time to time unpaid at a rate, in respect of each quarterly payment, equal to the rate of interest obtained at the auction of six month United States Treasury Bills taking place nearest to the first day of the calendar quarter for which the payment is made. (b) Upon the death of the Director prior to complete distribution of the amount accrued to his or her account, any undistributed amount shall be paid in cash in a lump sum to such beneficiaries and in such proportions among them as the Director shall have designated in the latest instrument in writing filed by the Director with the Company. If there shall be no beneficiary designated or in existence at the Director's death, any undistributed amount shall be paid to the executor or administrator of the Director's estate. If the death of the Director occurs prior to retirement, the amount to be distributed shall be based on the value of his or her account as of the last day of the calendar quarter in which death occurs. 4. The Director, by filing an appropriate written direction with the Company prior to January 1 of any calendar year, may have the amounts payable for service referred to in paragraph 2 subsequent to such January 1 paid in cash. Any such direction shall be effective with respect to all future calendar years until revoked by the Director filing an appropriate written direction with the Company prior to January 1 of any calendar year to the have the amounts payable for such services subsequent to January 1 accrued hereunder. 5. The Director shall have no power to commute, encumber, sell or otherwise dispose of the rights provided herein and such rights shall be non-assignable and non-transferable. 6. This Agreement shall be binding upon and inure to the benefit of the Director, his heirs, executors and administrators, and the Company, its successors and assigns. 7. All amounts payable under this Agreement shall be paid by the Company from its general assets. No trust fund or other fund shall be created or held for the financing of such amounts. 8. Attached hereto and incorporated herein are the Elections of Director, dated the date hereof, made under this Agreement. Such elections are hereby acknowledged by the Company. IN WITNESS WHEREOF, the parties have signed this Agreement on the day and year first above written. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY By______________________________ ATTEST: ________________________ Secretary _____________________________________ Director ELECTIONS INSTRUCTION: CHECK APPROPRIATE BOXES AND FILL IN BLANKS. 1. Payment Method Under Paragraph 3: Subject to my right to change my payment designation to the extent provided in Paragraph 3 of the Agreement, I designate the following method for payment of amounts accrued to my account under the Agreement: / / Payment Method 1 / / Payment Method 2 2. Beneficiary: My beneficiary(ies) are as indicated on the attached "Designation of Beneficiary." Name of Director ________________________ Date _________________________* * Date as of date Agreement is signed, same date as in caption on page 1. _______________________________ _____________________________ Name of Director Account No. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY DEFERRED COMPENSATION AGREEMENT _______________________ DESIGNATION OF BENEFICIARY 1. Pursuant to the provisions of the Deferred Compensation Agreement ("Agreement") between Central Illinois Public Service Company and me, dated _______________, 19___, I hereby designate the following as the beneficiary(ies) to whom the entire undistributed amount accrued to my account under the Agreement shall be paid in the event of my death: Address (Street, City, Birth Perct. of Full Name State & Zip Code) Relationship Date Distribution ______________ _________________ ____________ ____ ____________ ______________ _________________ ____________ ____ ____________ ______________ _________________ ____________ ____ ____________ ______________ _________________ ____________ ____ ____________ I have designated above more than one beneficiary, payment of such undistributed amount shall be made to the beneficiary(ies) surviving me in the percentage indicated; provided, however, if any beneficiary shall not survive me, such beneficiary's share shall be paid to the beneficiaries(ies) who do survive me pro-rata based on the percentages indicated. 2.If no beneficiary designated above survives me, I hereby designate the following contingent beneficiary(ies) to whom the entire undistributed amount accrued to my account under the Agreement shall be paid in the event of my death: Address (Street, City, Birth Perct. of Full Name State & Zip Code) Relationship Date Distribution ____________ _________________ _____________ ______ ____________ ____________ _________________ _____________ ______ ____________ ____________ _________________ _____________ ______ ____________ ____________ _________________ _____________ ______ ____________ If I have designated above more than one contingent beneficiary, payment of such undistributed amount shall be made to the contingent beneficiary(ies) surviving me in the percentage indicated; provided, however, if any beneficiary shall not survive me, such beneficiary's share shall be paid to the beneficiary(ies) who do survive me pro-rata based on the percentages indicated. 3. I hereby revoke any previous beneficiary designations made by me with respect to the Agreement. IN WITNESS WHEREOF, I have signed this designation in duplicate this ______________ day of ____________, 19____. ____________________________________ Signature of Director The foregoing is in accordance with our records. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY By _______________________________ EXHIBIT 10.04 AMENDMENT NO. 3 TO CENTRAL ILLINOIS PUBLIC SERVICE COMPANY SPECIAL EXECUTIVE RETIREMENT PLAN The Central Illinois Public Service Company Special Executive Retirement Plan, as heretofore amended (the "Plan"), is hereby further amended, effective as of December 1, 1993, in the following respect: 1. By adding to Article III of the Plan a new paragraph L. after paragraph K. as follows: "L. VESTED BENEFIT - Each employee of an Employer on December 31, 1993 who is eligible to take normal or early retirement under the Retirement Income Plan and who on such retirement would be an eligible participant as defined in Article I shall be fully vested in his Accrued Benefit under the Plan as of December 31, 1993 subject to the terms and conditions of the Plan. For this purpose, "Accrued Benefit" means the amount of monthly benefit to which such employee would be entitled under Article II of the Plan if he terminated his employment with the Company and its affiliates as of December 31, 1993. Such employee's Accrued Benefit shall also include the amount of monthly benefit to which the employee's Eligible Spouse would be entitled following his death." IN WITNESS WHEREOF, Central Illinois Public Service Company has executed this instrument this _7th_ day of December, 1993. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY By: _______/s/Clifford L. Greenwalt_____ President [CORPORATE SEAL] ATTEST: _/s/Craig D. Nelson___ Assistant Secretary EXHIBIT 10.08 AMENDMENT NO. 1 TO CENTRAL ILLINOIS PUBLIC SERVICE COMPANY EXCESS BENEFIT PLAN (As Amended And Restated Effective As Of October 1, 1990) The Central Illinois Public Service Company Excess Benefit Plan (As Amended And Restated Effective As Of October 1, 1993), (the "Plan"), is hereby further amended, effective as of December 1, 1993, in the following respect: 1. By adding to Article II of the Plan a new paragraph L. after paragraph K. as follows: "L. VESTED BENEFIT - Each participant in the Basic Plan who is an employee of the Company on December 31, 1993 shall be fully vested in his Accrued Benefit under the Excess Benefit Plan as of December 31, 1993 subject to the terms and conditions of the Excess Benefit Plan. For this purpose, "Accrued Benefit" means the amount of monthly benefit to which a participant in the Basic Plan would be entitled under Article I of the Excess Benefit Plan if he terminated his employment with the Company and its affiliates as of December 31, 1993. A participant's Accrued Benefit shall also include the amount of monthly benefit to which the participant's Eligible Spouse would be entitled following his death." IN WITNESS WHEREOF, Central Illinois Public Service Company has executed this instrument this _7TH_ day of December, 1993. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY By: _____/s/Clifford L. Greenwalt______ President [CORPORATE SEAL] ATTEST: ___/s/Craig D. Nelson____ Assistant Secretary Exhibit 12
Exhibit 12 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES FOR THE FIVE YEARS ENDED DECEMBER 31, 1993 (in thousands) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = 1993 1992 1191 1990 1989 ___________ ___________ ___________ ___________ ___________ Net income. . . . . . . . . . . . . . . . . . . $ 84,011 $ 72,601(c) $ 75,683(c) $ 71,562(c) $ 71,222(c) Add--Federal and state income taxes: Current (a) . . . . . . . . . . . . . . . . . 50,441 6,110 36,316 39,380 45,464 Deferred (net). . . . . . . . . . . . . . . . 1,674 33,998 7,573 (2,964) (2,774) Investment tax credit amortization. . . . . . (3,366) (3,336) (3,464) (3,306) (3,288) Income tax applicable to nonoperating activities. . . . . . . . . . . . . . . . . 631 2,989 2,413 2,986 3,246 Income tax applicable to provision for prior period revenue refunds. . . . . . - - - - (7,465) _______ _______ _______ _______ _______ 49,380 39,761 42,838 36,096 35,183 _______ _______ _______ _______ _______ Net income before income taxes. . . . . . . . . 133,391 112,362 118,521 107,658 106,405 _______ _______ _______ _______ _______ Add--Fixed charges Interest on long-term debt (b). . . . . . . . 32,823 35,534 36,652 36,589 36,604 Interest on provision for revenue refunds . . - (803) 4,261 3,396 3,432 Other interest. . . . . . . . . . . . . . . . 479 392 1,231 1,070 1,052 Amortization of net debt premium and discount (b). . . . . . . . . . . . . . 1,598 863 338 326 290 _______ _______ _______ _______ _______ 34,900 35,986 42,482 41,381 41,378 _______ _______ _______ _______ _______ Earnings as defined . . . . . . . . . . . . . $168,291 $148,348 $161,003 $149,039 $147,783 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges. . . . . . 4.82 4.12 3.79 3.60 3.57 Earnings required for preferred dividends: Preferred stock dividends . . . . . . . . . . $ 3,718 4,549 5,396 5,617 5,856 Adjustment to pre-tax basis . . . . . . . . . 2,185 2,491 3,054 2,833 2,893 _______ _______ _______ _______ _______ $ 5,903 7,040 8,450 8,450 8,749 _______ _______ _______ _______ _______ Fixed charges plus preferred stock dividend requirements . . . . . . . . . . . $ 40,803 43,026 50,932 49,831 50,127 ======= ======= ======= ======= ======= Ratio of Earnings to fixed charges plus preferred stock dividend requirements . . . 4.12 3.45 3.16 2.99 2.95 _________________________ (a) Federal portion and state portion are shown separately in Notes to Financial Statements. (b) Combined as interest charges on long-term debt on Statements of Income. (c) Includes revenues collected subject to refund as discussed in Note 11 to Financial Statements. = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
Exhibit 21 Central Illinois Public Service Company Subsidiaries of Registrant State or Jurisdiction Subsidiary of Incorporation __________ _____________________ Illinois Steam Inc. Illinois CIPS Energy Inc. Illinois Electric Energy, Inc.* Illinois *Central Illinois Public Service Company owns 20% of the common stock of EEI. Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS _________________________________________ As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into Central Illinois Public Service Company's previously filed Registration Statements File Nos. 33-29384, 33- 31475, 33-59674, and 33-50349 and CIPSCO Incorporated's previously filed Registration Statement File No. 33-32936. ARTHUR ANDERSEN & CO. Chicago, Illinois, March 10, 1994 Exhibit 24 POWER OF ATTORNEY _________________ The undersigned, as a director of Central Illinois Public Service Company, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the Central Illinois Public Service Company Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/William J. Alley _______________________________ (SEAL) William J. Alley Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of Central Illinois Public Service Company, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the Central Illinois Public Service Company Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Robert S. Eckley _______________________________ (SEAL) Robert S. Eckley Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of Central Illinois Public Service Company, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the Central Illinois Public Service Company Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/John L. Heath _______________________________ (SEAL) John L. Heath Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of Central Illinois Public Service Company, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the Central Illinois Public Service Company Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Gordon R. Lohman _______________________________ (SEAL) Gordon R. Lohman Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of Central Illinois Public Service Company, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the Central Illinois Public Service Company Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Hanne M. Merriman _______________________________ (SEAL) Hanne M. Merriman Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of Central Illinois Public Service Company, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the Central Illinois Public Service Company Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Donald G. Raymer _______________________________ (SEAL) Donald G. Raymer Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of Central Illinois Public Service Company, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the Central Illinois Public Service Company Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/Thomas L. Shade _______________________________ (SEAL) Thomas L. Shade Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 POWER OF ATTORNEY _________________ The undersigned, as a director of Central Illinois Public Service Company, does hereby constitute and appoint C. L. Greenwalt and R. W. Jackson, and each of them, his or her true and lawful attorneys and agents, each with full power and authority (acting alone and without the other) to execute in the name and on behalf of the undersigned, in his or her capacity, the Central Illinois Public Service Company Annual Report on Form 10-K for 1993, and any amendments thereto, to be filed under the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or either of them, may do or cause to be done by virtue of this Power of Attorney. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 7th day of December, 1993. /s/James W. Wogsland _______________________________ (SEAL) James W. Wogsland Subscribed and sworn to before me this 7th day of December, 1993. /s/Janet K. Cooper _________________________ Notary Public My commission expires: March 27, 1995 Exhibit 99 DESCRIPTION OF CAPITAL STOCK General. The authorized capital stock of Central Illinois Public Service Company (the "Company") consists of 2,000,000 shares of Cumulative Preferred Stock, par value $100 per share, issuable in series, of which 800,000 shares are outstanding; 2,600,000 shares of Cumulative Preferred Stock without par value, issuable in series, of which no shares are outstanding (both such classes of preferred stock being hereinafter collectively referred to as the "Preferred Stock"); and 45,000,000 shares of Common Stock without par value of which 25,452,373 shares were outstanding (all of which were held by CIPSCO) at December 31, 1993. The following statements, unless the context otherwise indicates, are brief summaries of the substance or general effect of certain provisions of the Company's Restated and Amended Articles of Incorporation, as amended, and the reslutions establishing series of Preferred Stock (collectively, the "Articles"), and of its Mortgage Indenture securing its outstanding First Mortgage bonds. Such statements make use of defined terms and are not complete; they are subject to all the provisions of the Articles or the Mortgage Indenture, as the case may be. Dividend Rights. Whenever dividends on all outstanding shares of the Preferred Stock of all series for all previous quarter-yearly dividend periods and the current quarter-yearly dividend period shall have been paid or declared and set apart for payment, and whenever all amounts required to be set aside for any sinking fund for the redemption or purchase of shares of the Preferred Stock for all previous periods or dates shall have been paid or set aside, and subject to the limitations summarized below, the Board of Directors may declare dividends on the Common Stock out of any surplus or net profits of the Company legally available for the purpose. Currently, none of the series of the Preferred Stock have a sinking fund for the redemption or purchase of shares of such series. The Mortgage Indenture provides, in effect, that the Company will not declare or pay any dividends (other than in stock) on Common Stock, or make any other distribution on or purchase any Common Stock, unless the total amount charged or provided for maintenance, repairs and depreciation of the mortgaged properties subsequent to December 31, 1940, plus the surplus earned during the period and remaining after any such dividend, distribution or purchase, shall equal at least 15% of the Company's total utility operating revenues for the period, after deducting from such revenues the cost of electricity and gas purchased for resale. The Articles provide in effect that, so long as any Preferred Stock is outstanding, the total amount of all dividends or other distributions on Common Stock (other than in stock) that may be paid, and purchases of Common Stock that may be made, during any 12- month period shall not exceed (a) 75% of the Company's net income (as defined) for the 12-month period next preceding each such dividend, distribution or purchase, if the ratio of "common stock equity" to "total capital" (as defined) is 20% to 25%, or (b) 50% of such net income if such ratio is less than 20%. If such ratio is in excess of 25%, no such dividends may be paid or distributions or purchases made that would reduce such ratio to less than 25% except to the extent permitted by clauses (a) and (b). At December 31, 1993, no amount of retained earnings was restricted as to the payment of dividends on Common Stock under the foregoing provisions of the Mortgage Indenture or the Articles. Voting Rights. Under Illinois law, each share of common stock of the Company, common and preferred, is entitled to one vote on each matter voted on at all meetings of shareholders, with the right of cumulative voting in the election of directors and the right to vote as a class on certain questions. The Articles give to holders of Preferred Stock certain special voting rights designed to protect their interests with respect to specified corporate action, including certain amendments to the Articles, the issuance of Preferred Stock or parity stock, the issuance or assumption of certain unsecured indebtedness, and mergers, consolidations or sales or leases of substantially all of the Company's assets. Preemptive Rights. Holders of Common Stock have no preemptive subscription rights. Liquidation Rights. In the event of any liquidation or dissolution of the Company, holders of Common Stock are entitled to share ratably in the net assets and profits of the Company remaining after the payment in full to the holders of the Preferred Stock of the aggregate preferential amount payable in respect of the Preferred Stock in any such event. Miscellaneous. The Transfer Agents for the Common Stock are Illinois Stock Transfer Company, Chicago, Illinois, and Harris Trust and Savings Bank, Chicago, Illinois; and the Registrar is Harris Trust and Savings Bank, Chicago, Illinois. The Company reserves the right to increase, decrease or reclassify its authorized capitial stock or any class or series thereof, and to amend or repeal any provisions in the Articles; and all rights conferred on shareholders in the Articles are subject to this reservation. -----END PRIVACY-ENHANCED MESSAGE-----