File No. 70-9011

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

__________________________________________
AMENDMENT NO. 1 TO 
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________

Cinergy Corp.
Cinergy Investments, Inc.
139 East Fourth Street
Cincinnati, Ohio  45202

(Name of companies filing this statement
and addresses of principal executive offices)

Cinergy Corp.

(Name of top registered holding company)

William L. Sheafer
Treasurer
Cinergy Corp.
(address above)

(Name and address of agent for service)

Applicants request that the Commission send copies of all notices, orders
and communications in connection herewith to:

Cheryl M. Foley                   William T. Baker, Jr. 
Vice President, General Counsel   Reid & Priest LLP 
and Corporate Secretary           40 West 57th Street
Cinergy Corp.                     New York, New York
(address above)                   10019

Item 1 of the application-declaration as previously filed in this 
proceeding ("Application") is hereby restated in 
its entirety to read as follows:

"Item 1. Description of Proposed Transactions

    A.   Background:  Prior Orders 

         1.   September 1995 EWG/FUCO Order 

    By order dated September 21, 1995 in File No. 70-8589 (Rel. No.
35-26376) (the "September 1995 EWG/FUCO Order"), the Securities and
Exchange Commission ("Commission" or "SEC"), among other things, authorized
Cinergy Corp. ("Cinergy" or "Company"), a registered holding company under
the Public Utility Holding Company Act of 1935 (the "Act"), and Cinergy's
wholly-owned nonutility holding company subsidiary, Cinergy Investments,
Inc. ("Investments"), from time to time through May 31, 1998:

    *    to acquire the securities of one or more special-purpose entities
(each, a "Project Parent"/1/) formed to engage exclusively in the business
of acquiring and holding, directly or indirectly, the securities of, and/or
providing services to, exempt wholesale generators ("EWGs") and foreign
utility companies ("FUCOs") as defined in Sections 32 and 33 of the Act;
and

    *    to make direct and indirect investments in EWGs, FUCOs and
Project Parents (by means of equity and debt investments including
guarantees and other forms of credit support) in an aggregate amount at any
time outstanding not to exceed $115 million (the "Original EWG/FUCO
Investment Limitation"), provided that any such direct or indirect
investment by Cinergy or Investments would be made only if, on a pro forma
basis, Cinergy's "aggregate investment" would not exceed 50% of Cinergy's
"consolidated retained earnings" as determined pursuant to Rule 53(a)(1)
under the Act./2/

              2.   March 1996 EWG/FUCO Order

    By order dated March 8, 1996 in File No. 70-8589 (Rel. No. 35-26486)
(the "March 1996 EWG/FUCO Order"), the Commission modified the September
1995 EWG/FUCO Order in two respects.  Specifically, the Commission:

    *    extended the expiration date of the authorization period
established in the September 1995 EWG/FUCO Order from May 31, 1998 to
December 31, 1999; and 

    *    authorized Cinergy and Investments to increase their direct or
indirect aggregate investment in EWGs, FUCOs and Project Parents from the
$115 million limit established in the September 1995 EWG/FUCO Order to an
aggregate amount equal to 50% of Cinergy's consolidated retained earnings
(the "50% Limitation")./3/

         3.   January 1995 Cinergy Debt Financing Order

    By order dated January 11, 1995 in File No. 70-8521 (Rel. No. 35-26215) 
(the "January 1995 Cinergy Debt Financing Order"), the Commission
authorized Cinergy:

    *    to issue and sell from time to time through January 31, 1997, in
an aggregate principal amount at any one time outstanding not to exceed
$375 million (the "Aggregate Debt Limitation"), within certain parameters
set out in the Commission's order and Cinergy's Declaration as amended, (1)
unsecured short-term promissory notes to banks and other financial
institutions, (2) commercial paper to commercial paper dealers and
financial institutions, and (3) unsecured demand promissory notes to banks
evidencing Cinergy's reimbursement obligation in respect of letters of
credit issued by such banks on Cinergy's behalf (collectively, "Short-Term
Financings"); and 

    *    to use the proceeds of Short-Term Financings, inter alia, to
invest in EWGs and FUCOs, subject to the receipt of any required further
authorization from the Commission.

              4.   March 1996 Cinergy Debt Financing Order

    By order dated March 12, 1996 in File No. 70-8521 (Rel. No. 35-26488)
("March 1996 Cinergy Debt Financing Order"), the Commission modified the
January 1995 Cinergy Debt Financing Order in three respects.  Specifically,
the Commission:

    *    extended the expiration date of the authorization period
established in the January 1995 Cinergy Debt Financing Order from January
31, 1997 to December 31, 1999;

    *    increased the Aggregate Debt Limitation established in the
January 1995 Cinergy Debt Financing Order from $375 million to $1 billion;
and 

    *    authorized Cinergy to apply proceeds from Short-Term Financings,
up to the full amount of the increased Aggregate Debt Limitation, to
investments in EWGs, FUCOs and Project Parents, subject to the 50%
Limitation. 

              5.   November 1994 Common Stock Order

   By order dated November 18, 1994 in File No. 70-8477 (Release No.
35-26159)
(the "November 1994 Cinergy Common Stock Order"), the Commission
authorized Cinergy:

    *    to issue and sell up to eight million shares of common stock,
$.01 par value, from time to time through December 31, 1995; and

    *    to use the proceeds thereof to make a cash capital contribution
to Cinergy's Indiana utility subsidiary PSI Energy, Inc., with any
remaining proceeds, if any, to be applied to general corporate purposes. 
The order provided that Cinergy would not apply any such residual proceeds
to investments in EWGs and FUCOs without a separate order from the
Commission.

              6.   February 1996 Common Stock Order 

    By order dated February 23, 1996 in File No. 70-8477 (Release No.
35-26477)("February 1996 Common Stock Order"), the Commission modified the
November 1994 Common Stock Order in certain respects including:

    *    extending the expiration date of the authorization period to
December 31, 1997; and 

    *    permitting Cinergy to apply the proceeds from sales of the
remaining shares of common stock (867,385 at October 1, 1995 and at January
31, 1997) to investments in EWGs and FUCOs, subject to the September 1995
EWG /FUCO Order. 

    The September 1995 EWG/FUCO Order, the March 1996 EWG/FUCO Order, the
January 1995 Cinergy Debt Financing Order, the March 1996 Cinergy Debt
Financing Order, the November 1994 Common Stock Order and the February 1996
Common Stock Order are sometimes hereinafter collectively referred to as
the "Prior Orders." 

         B.   Proposed Modifications to Prior Orders; Applicability of
              Proposed Transactions to Certain Other Cinergy Financing
              Applications

    At December 31, 1996, Cinergy's aggregate investment and consolidated
retained earnings were approximately $487 million and approximately $990
million, respectively.  As of January 30, 1997, Cinergy increased its
aggregate investment to approximately $495 million./4/

    Accordingly, under the 50% Limitation as of January 31, 1997, Cinergy
is foreclosed from further investments in Exempt Projects and the unique
financial and strategic opportunities afforded by these investments.  By
contrast, if Cinergy were authorized to invest in Exempt Projects in an
amount equal to 100% of consolidated retained earnings, Cinergy could
presently invest an additional $495 million.  

    Cinergy considers Exempt Project investments to be a critical element
of its strategy for providing value to investors and successfully competing
in the evolving energy industry.  In view of the lack of available capacity
under the 50% Limitation, and Cinergy's satisfaction of the applicable
standards under the Act for removal of the 50% Limitation, Cinergy hereby
requests that the Commission issue an order pursuant to Rule 53(c) under
the Act appropriately modifying the Prior Orders.  Cinergy also requests
that such increased EWG/FUCO investment authority apply to certain other
pending and soon-to-be filed Cinergy financial applications.

     Specifically, Cinergy proposes: (1) to apply proceeds from the issue 
and sale of its common stock and short-term debt securities as authorized 
in the Prior Orders; and (2) to apply proceeds from the issue and sale of
debentures as proposed in Cinergy's pending application in File No. 70-8993
and additional shares of common stock and short-term debt securities
pursuant to a new applicaiton to be filed shortly by Cinergy with the
Commission and in accordance with the Commission's orders to be issued with
respect thereto; in each of the foregoing cases to direct or indirect
investments (including through Project Parents) in EWGs and FUCOs, provided
that Cinergy's aggregate investment shall not at any time exceed its
consolidated retained earnings./5/

    C.   Existing Interests in Exempt Projects 

    As of January 31, 1997, Cinergy's interests in Exempt Projects are as
follows:

         1.   EDESUR

    Cinergy indirectly owns a 1% interest in Edesur, S.A. ("EDESUR"), a
FUCO which owns an electricity distribution network serving approximately
2.1 million customers in the southern half of the city of Buenos Aires,
Argentina.  Cinergy's 1% interest in EDESUR, which is held by PSI Energy
Argentina, Inc., a wholly-owned subsidiary of PSI Energy, Inc., an Indiana
corporation and electric utility subsidiary of Cinergy ("PSI"), equated to
an aggregate investment at January 31, 1997 of approximately $11 million. 
PSI Energy Argentina also provides operating and consulting services to
EDESUR.  Cinergy's ownership interest in EDESUR was acquired in 1992 prior
to the 1994 merger creating Cinergy, by PSI Resources, Inc. ("Resources"),
the then parent holding company of PSI, in connection with the sale by the
Argentine government of a majority interest in this electric distribution
company.  See Release No. 35-25570, July 2, 1992./6/

         2.   Midlands 

    Cinergy indirectly owns 50% of Midlands, a FUCO serving approximately
2.2 million customers in mid-central England.  One of 12 regional
electricity companies created in 1990 by the British Government as a part
of the privatization of the electric utility industry in England and Wales,
Midlands is primarily a distribution company, purchasing most of its
electricity requirements from third-party generators.  At January 31, 1997,
Cinergy's aggregate investment in Midlands was approximately $484 million.  

    As previously reported,/7/ Cinergy acquired its interest in Midlands
in a 50-50 joint venture transaction with GPU, Inc. ("Joint Venture").  To
accomplish the Midlands acquisition several Project Parents were
established.  In May 1996, Investments formed Cinergy UK under Delaware law
for the purpose of indirectly acquiring and holding Cinergy's interest in
Midlands.  Pursuant to the Joint Venture agreements, Cinergy UK and a
subsidiary of GPU then formed and acquired respective 50% equity interests
in Avon Energy Partners Holdings, a U.K. unlimited liability company ("Avon
Holdings"), which in turn formed and acquired all the capital stock of Avon
Energy Partners plc, a U.K. limited liability company ("Avon Energy").  On
May 7, 1996, Avon Energy commenced its public offer to acquire Midlands. 
On June 6th, Avon Energy declared the offer unconditional.  During the
third quarter of 1996, Avon Energy completed its acquisition of all of the
outstanding common stock of Midlands.  Under GAAP, Cinergy accounts for its
interest in Midlands pursuant to the equity method of accounting.

    The total consideration paid by Avon Energy for the acquisition of
Midlands was approximately $2.6 billion.  The funds for the acquisition
were obtained from Cinergy's and GPU's equity investments in Avon Energy of
approximately $500 million each, with the remainder obtained by Avon Energy
from funds borrowed under a 1.5 billion (British Pounds) Term Loan and 
Revolving Facility Agreement, dated May 7,1996 ("Avon Credit Agreement"), 
among Avon Energy, Avon Holdings, as guarantor, certain banks named
therein, Barclays and Chase Investment Bank Limited, as arrangers, and
Barclays as agent.  Funds borrowed by Avon Energy under the Avon Energy
Credit Agreement are not recourse directly or indirectly to Cinergy or any
subsidiary thereof (other than Avon Energy and Avon Holdings and their
assets).  

    Cinergy used debt to finance its entire $503 million equity investment
in Midlands, with Cinergy borrowing $471 million under the Cinergy Corp.
Credit Agreement and Cinergy UK borrowing $32 million under the Cinergy UK
Credit Agreement./8/  The lenders under the Cinergy UK Credit Agreement
have recourse solely to Cinergy UK and its assets for repayment of
borrowings thereunder. 

    D.   Exempt Projects:  Opportunities and Risks

    Investments in Exempt Projects present an opportunity to earn a return
in excess of the risk adjusted cost of capital for such projects as well as
other valuable strategic opportunities.

    For instance, Cinergy expects that Midlands should contribute to
Cinergy's financial strength for many years to come.  Preliminary results
bolster this conviction. The Midlands acquisition added 10 cents (based on
net income of $15.4 million) to Cinergy's 1996 earnings per share of $2.12. 
On a pro forma basis, assuming Cinergy had acquired its 50% interest in
Midlands on January 1, 1996, Cinergy's earnings from its investment in
Midlands would have equated to approximately 18 cents per share for 1996. 
Earnings from Midlands also helped to make possible an increase in the
dividend payable on Cinergy common stock, from $1.72 to $1.80 annualized,
which Cinergy's board of directors approved in October 1996./9/  

    Beyond providing Cinergy with a relatively stable source of income
into the future, the Midlands acquisition is attractive to Cinergy for
other important financial and strategic reasons.  First, Cinergy believes
that it can add value to its investment in Midlands shares, primarily
through implementation of cost saving measures.  Cinergy's experience in
achieving merger-related savings and its current reengineering efforts will
provide Midlands with valuable intellectual resources./10/  Under the
British regulatory system, the benefits of these cost savings will accrue
primarily to the shareholders of Midlands.  Second, Midlands competes as a
power marketer in a market in which retail customers with a maximum annual
peak demand of 100 kW, or more, can choose their electricity supplier. 
Beginning in 1998, all customers in the U.K., regardless of load size, will
have the opportunity to choose their electricity supplier.  The experience
that Cinergy will gain in operating a utility in such a competitive
environment should be highly valuable to Cinergy in connection with its
power marketing efforts in the U.S.  Third, the electricity sector in the
U.K. may experience further consolidations, a process that in itself will
likely produce attractive returns for investors.  By its acquisition of an
ownership interest in Midlands, Cinergy has achieved early entry into that
market and therefore is positioned to earn an additional attractive return
on its investment.  Another benefit is that the Midlands acquisition
provides access to valuable managerial resources:  Midlands' management
team is generally regarded by the U.K. financial community as one of the
strongest in the U.K. utility industry.  As an affiliated team, the
combined managerial resources of Cinergy and Midlands will provide
complementary skills and experience and valuable managerial depth.  

    Together with these opportunities, investments in EWGs and FUCOs
present risks.  Cinergy scrutinizes potential Exempt Project investments to
identify and mitigate these risks.  The following discussion summarizes the
systematic review process and the risk mitigation techniques that Cinergy
currently employs./11/ 

         1.   The Project Review Process  

    Every investment opportunity pursued by Cinergy is subjected to a
series of formal reviews.  The process begins with the identification of an
investment opportunity.  If the investment opportunity is located in a
foreign country, risk analysis of that country is performed.  The analysis
focuses on the political, economic and currency stability of the particular
country, the government's commitment to energy services, the legal and
regulatory framework for private investment in energy facilities, and
whether local business practices will support long-term investment of
private capital.  The analysis frequently entails a review of independent
analyses and evaluations as well as discussions with third parties, such as
banks, equipment suppliers, governmental agencies and consulting experts. 
This extensive review process mitigates the exposure to the expenditure of
development funds without a realistic expectation of success in terms of
both making investments in projects and in obtaining appropriate levels of
non-recourse financing on commercially reasonable terms.

    Once development of a project is undertaken, the project's status and
progress are continually reviewed to ensure that development expenditures
are producing acceptable results.  In addition, the project team identifies
the major operating, commercial, financial, interest rate, foreign currency
exchange, legal and country risks associated with the particular project
and whether and how those risks have been mitigated.  The members of the
project team are responsible for the due diligence investigation of risks
that have been identified.

    Potential projects are subjected to increasing levels of management
review.  Depending on the amount of Cinergy's anticipated financial
exposure to a particular project, the proposed investment must be approved
by Investments' board of directors, by the Finance Committee of Cinergy's
board of directors (comprised entirely of outside directors), and by the
full board of directors of Cinergy.

    As a practical matter, the investment review process is to a large
extent replicated by the lenders and their consulting experts (i.e.,
engineers, legal, etc.) who provide debt financing on a non-recourse basis,
since repayment of that debt will depend solely upon the success of the
investment.  Typically, non-recourse debt documents require the
establishment of debt service and other funded reserves, and the
achievement of specific financial measurements and performance, each of
which is designed to preserve and protect the assets and the financial
performance of the investment against operational, financial and other
contingencies.  Cinergy's success in arranging appropriate levels of Exempt
Project non-recourse financing confirms the soundness of Cinergy's project
review process.

         2.   Risk Mitigation of Exempt Projects  

    Cinergy carefully evaluates the potential risks of an Exempt Project
before Cinergy's funds are committed.  Such risks may include one or more
of the following:

    *    Operating risks.  Cinergy limits project development efforts to
technologies/industries with which it has existing competencies such as
electric generation and the transmission and distribution of electricity
and gas.  Due diligence of operating assumptions is carried out by
experienced Cinergy employees and by outside consultants.  Operating risks
can be covered by equipment warranties and by casualty, business
interruption and other forms of insurance.  Further, when Cinergy or an
affiliate is actively involved in the operation or administration  of the
investment, the Company enhances its ability to identify and address
developing and existing problems.

    *    Commercial risks.  In competitive power markets electricity
prices are determined by the economic laws of supply and demand.  Cinergy
conducts extensive investigations of the electricity markets in these
environments.  Cinergy seeks to ensure that the investment will be capable
of providing electricity at or below the marginal cost in the region, thus
ensuring that the investment can be a competitive supplier in a
non-regulated 
environment.

    *    Financial risks.  Cinergy addresses the financial risks of Exempt
Projects in a variety of ways.  First and foremost, the Company seeks debt
financing which is non-recourse to Cinergy or its subsidiaries (other than
to the Exempt Project).  With non-recourse financing, the debt of each
Exempt Project is secured solely by its assets and revenues, and creditors
have no recourse to seek repayment upon default from Cinergy or its
subsidiaries (other than to the Exempt Project).  This method of financing
ensures that Cinergy's exposure to any investment is limited to the amount
of its equity commitment and that Cinergy's domestic public utility
subsidiaries (the "Operating Companies"/12/) and their customers are
properly insulated from the risk of an investment's financial distress.

    *    Interest rate risk.  Interest rate variability can be addressed,
in part, by borrowing on a fixed-rate basis or by purchasing financial
instruments that fix or cap variable interest rates.  The effects of
interest rate volatility can be mitigated principally through two
strategies:  hedging and diversifying.  Hedging techniques that Cinergy may
utilize are designed to limit the impact that rising interest rates have on
floating rate debt instruments.  Diversification implies that liabilities
will be spread among short- and long-term debt instruments, as well as
fixed and floating interest obligations.

    *    Foreign currency exchange risk.  In general, Cinergy would intend
to implement foreign currency risk minimization strategies when it enters
into projects that subject it to material foreign exchange rate risk.  For
instance, this risk can be significantly mitigated where non-recourse
project debt is borrowed in the same currency as the project revenues,
ensuring a match between debt service obligations and operating income.  In
addition, Cinergy evaluates the various approaches available to mitigate
foreign currency exchange risk based on the anticipated project return and
timing of cash flows.  Various types of both option-based (e.g., call, put
and average rate options) and fixed rate instruments (e.g., futures
contracts and currency swaps) are readily available from numerous domestic
and foreign counterparties.  

    *    Legal risks.  Legal risks are addressed by careful review of any
investment by legal counsel, including local and international counsel, if
applicable.  Such legal reviews address, among other things, regulatory and
permitting risks, environmental risks, the adequacy and enforceability of
guarantees or other contractual undertakings of third parties, the status
of title to utility property, and the obligations inherent in the financing
arrangements.

    *    Country risks.  In addition to the specific risks mentioned
above, investing outside the U.S. can entail country-specific risks related
to political or economic performance.  As indicated previously, Cinergy
evaluates country risk in the project review process and attempts to
mitigate this risk through a number of measures.  Most importantly, the
country review process ensures that the political and economic stability of
any country has been reviewed at several managerial levels, including
Cinergy's board of directors, before any investment occurs.  In addition to
a general review, the country analysis focuses specifically on the
country's energy sector and on the government's support for private
ownership in that sector.  If appropriate, introductory discussions are
arranged to facilitate dialogue between the local political community and
Cinergy management.

Also at the outset of development work in a foreign country, Cinergy will
likely seek local and international partners who are experienced in doing
business in the host country and internationally./13/  Such partners can be
a very important element in mitigating the risk of expropriation or unfair
regulatory treatment.  In addition, political risk and currency
convertibility can often be addressed through insurance underwritten by the
Overseas Private Investment Corporation ("OPIC"), a U.S. agency, or private
insurers.  In the case of Cinergy's Argentine investments (EDESUR and
Costanera), insurance was purchased from Lloyds of London and OPIC.  

    *    Liquidity risk.  Cinergy believes an exit strategy is an
important element of liquidity risk mitigation.  Investment liquidity is
analyzed during the investment review process by identifying exit options,
such as potential investors.  In addition to partners already committed to
the investment, potential investors typically include local and
international businesses which may seek vertical or horizontal integration. 
Increased investment liquidity enhances the ability to maximize economic
performance and the ability to optimize returns.  In 1995, Cinergy employed
this return-maximization strategy in liquidating its investment in
Costanera.  The divestiture of Cinergy's interest in Costanera (which had
been acquired through Cinergy's then-EWG, Costanera Power Corp.) resulted
in the realization of a $6.4 million gain, net of income taxes.  Over the 3
1/2 year period of its investment in Costanera, Cinergy realized an
after-tax average annualized return of 21%.

    *    Construction risk.  Although there may be circumstances where
Cinergy would seek to invest in "greenfield" projects, involving the
development and construction of new utility facilities, to date Cinergy has
invested only in existing utility systems and established utility
companies.  

         3.   Case Study:  Midlands 

    Cinergy's acquisition of a 50% interest in Midlands illustrates the
risk analysis outlined above.

    In assessing the commercial and operating risks of acquiring its
interest in Midlands, Cinergy was influenced by a number of factors,
including Midlands' successful operating history since privatization and
its strong competitive position.  The transaction presented no significant
construction risk since Midlands is an established company with operational
utility facilities.  Cinergy was impressed by the high quality of Midlands'
management and sought to retain the services of existing management
following the acquisition.

    Financial risks were addressed most basically through an acquisition
financing structure in which the bulk of the financing consisted of
non-recourse debt (i.e., to Cinergy or to any subsidiary thereof other than
Cinergy UK, Avon Holdings, Avon Energy and/or Midlands).  To limit interest
rate risk, Avon Energy entered into various interest rate swaps and cap
arrangements which essentially provided one-half of its debt with a fixed
rate for an average of a two-year period.  To limit the foreign currency
risk of the acquisition, Cinergy took a number of steps.  All of the
financing for the acquisition borrowed under the Avon Credit Agreement is
denominated in sterling and is expected to be repaid ultimately out of
Midlands' operating profits, which are also predominantly in sterling.  By
matching the currency of the debt and the repayment source, these
arrangements eliminate the exchange rate and currency risks of the
sterling-denominated debt.  The remainder of the acquisition financing by
Cinergy was in the form of dollar-denominated borrowings by Cinergy and
Cinergy UK under the Cinergy Corp. Credit Agreement and the Cinergy UK
Credit Agreement, respectively.  To hedge the dollar value of its
investment, Cinergy entered into a currency swap that obligates Cinergy and
a counterparty to deliver pounds sterling and dollars, respectively, at an
agreed upon exchange rate at a future date.  The currency swap also
provides a natural hedge of dividends payable by Midlands to Cinergy. 

    Given the advanced state of the British legal and political systems
and the British economy, the Midlands acquisition did not present
significant legal, political, country or economic risks.  With respect to
the potential for the imposition of a windfall profits levy on regulated
businesses (as noted earlier), Cinergy determined that such a levy was
probable; consequently Cinergy factored that assumption into its pricing
model for the acquisition and Cinergy's acquisition price was adjusted to
reflect an estimated liability.  To address any residual legal risk
associated with the acquisition, and to ensure compliance with local law,
Cinergy and GPU retained local U.K. counsel to assist in the acquisition.

              4.   Return on Exempt Projects 

    Cinergy's Exempt Project investments have historically generated
modest but important contributions to earnings.  In 1994 and 1995,
Cinergy's investments in EDESUR and Costanera contributed total net income
of $175,000 and $7,160,000 ($770,000 after elimination of the gain on the
sale of Costanera), respectively.  Since first investing in international
utility systems in 1992 through Cinergy's predecessor, Resources, Cinergy
has never reported a full-year operating loss attributable to such
projects.  The Midlands investment added 10 cents to Cinergy's 1996
earnings per share and, on a pro forma basis assuming the acquisition had
taken place on January 1, 1996, would have added 18 cents to Cinergy's 1996
earnings per share. 

    E.   Potential Investments in Additional Exempt Projects

    Potential investments in additional Exempt Projects are a critical
element of the Company's overall business strategy.  However, because
Cinergy's level of investments is at the ceiling imposed by the 50%
Limitation, this important avenue for delivering value to Cinergy's
shareholders and customers is currently closed to Cinergy.  As a result,
Cinergy is severely constrained in its ability to seriously consider
opportunities for potential investments in additional Exempt Projects.

    Several factors account for the strategic importance of Cinergy's EWG/
FUCO investment program.  First, investments in Exempt Projects present
Cinergy with the opportunity to continue to grow through reinvestment of
retained earnings in an industry sector that the Cinergy companies have
decades of experience in, while at the same time diversifying overall asset
risk.  Second, Cinergy to date has deliberately pursued utility investments
in England and Argentina, countries which have progressed much further than
the United States towards deregulation and full competition in both
wholesale and retail electricity markets.  Cinergy believes that the
creation and maintenance of value for its shareholders will hinge on its
ability to effectively operate its core business in the U.S. as that
business becomes subject to increasing competition.  Cinergy's experience
in markets that are already largely deregulated will greatly enhance its
long-term prospects for success in that endeavor.  The lessons learned from
these deregulated markets will provide Cinergy with insights about the
elements of market structures that produce efficient and equitable results
for consumers and shareholders.  These insights will assist Cinergy in
helping to shape the evolution of the electric sector in the U.S.  
Item 3 of 
the Application is hereby restated in its entirety to read as
follows:

"Item 3.      Applicable Statutory Provisions

    A.   General Provisions  

    Sections 6(a), 7, 12(b), 32 and 33 of the Act and Rules 43, 53 and 54
thereunder are or may be applicable to the proposed transactions.

    Rule 53 provides that, if each of the conditions of paragraph (a)
thereof is met, and none of the conditions of paragraph (b) thereof is
applicable, then the Commission may not make certain adverse findings under
Sections 7 and 12 of the Act in determining whether to approve a proposal
by a registered holding company to issue securities in order to finance an
investment in any EWG or to guarantee the securities of any EWG.  Giving
effect to the proposals contained herein, Cinergy will satisfy all of the
conditions of Rule 53(a) except for clause (1) thereof, since Cinergy is
proposing herein that Cinergy's aggregate investment may exceed 50% of
Cinergy's consolidated retained earnings.  None of the conditions specified
in Rule 53(b) is or will be applicable.

    B.   Compliance with Rule 53(c)  

    Rule 53(c) states that, in connection with a proposal to issue and
sell securities to finance an investment in any EWG, or to guarantee the
securities of any EWG, a registered holding company that is unable to
satisfy the requirements of paragraph (a) or (b) of Rule 53 must
affirmatively demonstrate that such proposal:

    1.   will not have a substantial adverse impact upon the financial
integrity of the registered holding company system; and 

    2.   will not have an adverse impact on any utility subsidiary of the
registered holding company, or its customers, or on the ability of State
commissions to protect such subsidiary or customers.

The proposed transactions meet each of these tests.

         1.   The proposed transactions will not have a substantial
         adverse impact upon the financial integrity of the Cinergy
         system.

    The absence of any substantial adverse impact on Cinergy's financial
integrity within the meaning of Rule 53(c)(1) as a result of the Commission
granting Cinergy's request for authorization to invest up to 100% of
consolidated retained earnings in Exempt Projects is evident from a review
of relevant factors, including (a) key financial ratios and benchmarks, (b)
the market's view of Cinergy's securities and its investments in Exempt
Projects, (c) the ratings assigned to Cinergy system securities by
nationally recognized ratings agencies, (d) Cinergy's success in obtaining
appropriate levels of Exempt Project non-recourse debt financing, and (e)
Cinergy's historical success in its investments in Exempt Projects.

         a.   Key Financial Ratios/Benchmarks

    An aggregate investment equal to 100% of Cinergy's consolidated
retained earnings would still represent a relatively small commitment of
capital based on various key financial ratios at December 31, 1996. 
Investments in this amount (assumed to be $990 million) would be equal to
only 16% of Cinergy's consolidated capitalization ($6.2 billion), 16% of
consolidated net utility plant ($6.3 billion), 11% of consolidated assets
($8.8 billion), and 19% of the market value of Cinergy's outstanding common
stock ($5.3 billion).  Cinergy's consolidated retained earnings increased
$73 million in 1995, Cinergy's first full year of operations, and an
additional $42 million in 1996.

    Cinergy's consolidated capitalization ratios at December 31, 1996, 45%
equity and 55% debt (including short-term debt), are within the guidelines
prescribed by Standard & Poor's for "A" rated utilities.

                        Capitalization Ratio
  
                      Cinergy           "A" Industry Guidelines
    Equity               45%               44-57%
    Debt                 55%               43-56%

    With respect to relevant financial benchmarks specifically
contemplated by the terms of Rule 53, none of the conditions enumerated in
paragraph (b) thereof is applicable:  (1) there has been no bankruptcy of a
Cinergy associate company (cf. Rule 53(b)(1)); (2) Cinergy's consolidated
retained earnings for the four most recent quarterly periods have not
decreased by 10% from the average for the preceding four quarterly periods
(cf. Rule 53(b)(2)); and (3) Cinergy has never reported a full-year
"operating loss" attributable to its Exempt Projects (cf. Rule 53(b)(3)).

    Cinergy undertakes to notify the Commission by filing a further post-
effective amendment in this proceeding in the event that any of the
circumstances described in Rule 53(b) arise during the authorization
period.  Cinergy also represents that it will remain in compliance with the
requirements of Rule 53(a), other than Rule 53(a)(1), at all times during
the authorization period./14/

         b.   Market Assessment

    The equity market's assessment of Cinergy's future growth and earnings
evidences exceedingly strong investor confidence in Cinergy's ability to
deliver shareholder value relative to Cinergy's competitors.  Cinergy's
market-to-book ratio of 2.04 at the end of 1996 was the highest among the
25 largest electric utilities, and Cinergy's price/earnings ratio of 15.7
at year end 1996 was among the top five.  

                        Pre-Midlands                   Post-Midlands    
                        Investment                     Investment
                        (3/96)                         (12/96)
    
Market-to-Book Ratio:/15/              
     Cinergy                 186%                          204%
     Industry                149%                          145%
     Price/Earnings Ratio:/16/
          Cinergy            13.5                          15.7
          Industry           12.5                          12.2
    
    In addition, for the year 1996, Cinergy's common stock price increased
9% compared to a decrease of 3% for the industry as a whole.

    This extremely favorable comparison of market prices and ratios bears
witness to the market's endorsement of Cinergy's management team, its track
record, and the investment strategy, techniques and evaluation skills it
employs.  

    Moreover, as indicated in the table above, the relative improvement in
market indicators following the Midlands acquisition testifies to the
market's specific endorsement of this transaction.  On the day the offer to
acquire Midlands was announced, Cinergy common stock appreciated 3% while
the industry's most generally referenced indices decreased in price.  The
market's full review of the transaction resulted in an even greater
appreciation of its value.  For the two-week period following the
announcement, the total return on Cinergy common stock was more than twice
the total return on the industry's stock indices.  To Cinergy's
shareholders, outperforming the industry's indices resulted in additional
value of approximately $168 million.   For all of 1996, Cinergy produced a
total return to shareholders of 15.42%, third among the 25 largest electric
utilities.

         c.   Ratings

    The senior securities of each of the Operating Companies are currently
rated "A-" by Standard & Poor's and have all experienced upgrades since the
Cinergy merger.  These upgrades have been received in a period when the
industry is generally being viewed as more risky by the rating agencies, as
evidenced by the number of recent downgrades experienced by utilities.

                             S&P Bond Ratings
                     1994         1995         1996
    CG&E             BBB+         A-           A-
    ULH&P            BBB+         A-           A-
    PSI              BBB+         A-           A-


                        Duff & Phelps Bond Ratings
                     1994         1995         1996
    CG&E             BBB+         A-           A-
    ULH&P            N/A          A-           A-
    PSI              BBB+         A-           A-


                        Fitch Bond Ratings
                     1994         1995         1996
    CG&E             A-           A-           A-
    ULH&P            N/A          N/A          N/A 
    PSI              A-           A-           A

                     Moody's Bond Ratings
                     1994         1995         1996
    CG&E             Baa1         A3           A3
    ULH&P            Baa1         A3           A3 
    PSI              Baa1         A3           A3

    All four rating agencies affirmed their ratings for Operating Company
debt following announcement of the Midlands acquisition.  

         d.   Non-recourse Financing

    As previously noted, approximately $1.6 billion of the $2.6 billion
purchase price of Midlands was financed through the issuance to banks and
other financing institutions of debt ultimately secured entirely by the
interests of Avon Holdings, Avon Energy and Cinergy UK in Midlands and its
earnings.  The success in placing non-recourse debt of that magnitude,
secured by the borrowers' interests in Midlands, attests to the lenders'
views of the merits of the Midlands transaction. 

         e.   Success in Exempt Project Investments 

    As discussed earlier, Cinergy's investments in Exempt Projects have
contributed to Cinergy's financial strength.  With respect to Argentina,
Cinergy's sale in late 1995 of its interest in Costanera resulted in the
realization of a gain of $6.4 million, net of taxes.  Cinergy achieved an
after-tax average annualized return of 21% from its investment in
Costanera.  The Midlands acquisition has already enhanced Cinergy's
short-term earnings growth, adding 10 cents to Cinergy's 1996 earnings per
share.

         2.   The proposed transactions will not have an adverse impact on
              any utility subsidiary of Cinergy, or its customers, or on
              the ability of Cinergy's state public utility commissions to
              protect such customers.

    The proposed transactions likewise will not have an adverse impact
within the meaning of Rule 53(c)(2) on any of the Operating Companies or
their customers, or on the ability of the applicable state public utility
commissions to protect those customers.  Among the factors that compel this
conclusion are:

    a.   the Operating Companies' financial integrity; 

    b.   the absence in the foreseeable future of any anticipated need on
the part of the Operating Companies for additional capital from Cinergy; 

    c.   Cinergy's compliance with other applicable requirements of Rule
53(a) intended to protect the interests of customers of the Operating
Companies; and 

    d.   the enhanced state commission oversight of the Operating
Companies resulting from the global settlement agreements, commitments and
conditions agreed to by Cinergy and the Operating Companies as part of the
1994 merger that created Cinergy.  
Cinergy is supplementing these safeguards with the additional commitments
set forth in subsection "d" below.

    Prior to filing this application, senior officers and other personnel
of Cinergy met with representatives of each of the state public utility
commissions that regulate the retail electric or gas rates of the Operating
Companies - the Public Utilities Commission of Ohio, the Indiana Utility
Regulatory Commission and the Kentucky Public Service Commission - to
discuss Cinergy's proposal and to address the concerns of the state
commissions.  The state commissions will be providing their written
positions to this Commission regarding Cinergy's proposal. 

         a.   Operating Company Financial Integrity

    Debt (including short-term debt) ratios of the Operating Companies are
consistent with industry averages for "A" rated electric utilities.  

                        Debt as % of Capitalization

                        1994      1995         1996
                                   
    CG&E               49%         51%          52%
    ULH&P              50%         39%          39%
    PSI                51%         47%          49%
    A-rated            49%         49%
    utilities/17/      
    
    The Operating Companies' ability to issue first mortgage bonds and
preferred stock depends upon satisfaction of certain earnings coverages in
their mortgage bond indentures and corporate charters at the time such
securities are issued.  Currently, the Operating Companies anticipate
having more than adequate earnings coverages for financing requirements in
the foreseeable future.

    The Operating Companies' coverages have generally been within the "A"
range set by the major rating agencies in recent years.  The Operating
Companies continue to show strong financial statistics as measured by the
rating agencies (pre-tax interest coverage, debt ratio, funds from
operations to debt, funds from operations interest coverage, and net cash
flow to capital expenditures). 

         b.   Lack of Foreseeable Need for Cinergy Capital 

    Additional investments in Exempt Projects will not have any negative
impact on the Operating Companies' ability to fund operations and growth
since the Operating Companies do not depend on Cinergy for capital.  Since
the merger, with the exception of a December 1994 $160 million capital
contribution from Cinergy to PSI,//18/  the Operating Companies have been
financing their capital needs entirely with their own internal funds or
with the proceeds of sales to nonassociates of their securities. Current
projections indicate that Cinergy should not have to make any equity
investments in  the Operating Companies through 2005.

         c.   Additional Protections for Operating Company Customers and
              State Commissions under Rule 53(a)

    Cinergy has complied and will continue to comply with various
conditions of Rule 53(a) providing specific protections to customers of the
Operating Companies and their state commissions - in particular, the
requirements of Rule 53(a)(2) regarding the preparation and making
available of books and records and financial reports regarding Exempt
Projects; and the requirements of Rule 53(a)(4) regaring filing copies
of applications and reports with other regulatory commissions.  

        d.  1994 Merger Settlement Agreements and Commitments; Additional
            Commitments

    The scope and magnitude of the commitments made by Cinergy to its state
regulators and other parties in connection with the settlement of merger
proceedings in 1994 provide unique assurance that the proposal will not
have an adverse impact on the ability of the state commisions to protect
Cinergy's utility subsidiaries or their customers.  Cinergy is not aware
that any other registered holding company system has entered into
comparable consensual arrangements with all of its state regulators.

     Copies of all of these settlement agreements and merger approvals were
submitted to Cinergy into the record in the Commission proceeding approving
the Cinergy merger (see amended Application-Declaration in File No.
70-8427)and were discussed by the Commission in its order granting
Cinergy's application (see Rel. No. 35-26146, October 21, 1994).

     In addition to these existing commitments, Cinergy represents that it
will not seek recovery through higher rates to the Operating Companies' 
utility customers in order to compensate Cinergy for any possible losses
that it may sustain on investments in Exempt Projects or for any inadequate
returns it may realize on such investments.  Nor will Cinergy cause or
permit the Operating Companies to mortgage, pledge or otherwise encumber or
use as collaateral any of their properties or assets in connection with any
direct or indirect acquisition by Cinergy of any interest in any EWG or
FUCO.

    The following is a detailed summary of the relevant provisions of the
1994 merger settlement agreements and commitments.

         i.   Indiana 

    On March 3, 1994, PSI, Cinergy, Resources and representatives of
various Indiana retail electric customers of PSI ("Indiana Settling
Parties") entered into a comprehensive Settlement Agreement ("Indiana
Settlement Agreement") in the context of proceedings before the Federal
Energy Regulatory Commission ("FERC") concerning the Cinergy merger.  The
Indiana Utility Regulatory Commission ("IURC") approved the Indiana
Settlement Agreement in its March 29, 1994 order in Cause No. 39897.

    The Indiana Settlement Agreement ensures the continuing effectiveness
of state regulation in a number of ways, including the following:

    *    PSI and Cinergy agreed to the continuing application of Indiana
statutory law to PSI, Cinergy and their affiliates or subsidiaries to the
extent such law overlaps with federal law (including the allowance or
denial of recovery of costs in retail rates).

    *    PSI and Cinergy agreed that (a) any proposed amendment to the
Cinergy system operating agreement filed under Section 205 of the Federal
Power Act with the FERC (the "Operating Agreement") or to the Cinergy
system utility service agreement approved by the SEC in its 1994 merger
order (the "Service Agreement") and (b) certain other proposed affiliates
contracts to which PSI would be a party that are required to be filed with
and/or approved by the FERC or the SEC would not become effective unless
and until the proposed amendment or affiliate contract had been filed with
and approved, or not finally rejected, disapproved, or found unreasonable
by the IURC.

    *    PSI and Cinergy agreed that in any pending proceeding before the
IURC, PSI and Cinergy would make available to the IURC and the Indiana
Office of Utility Consumer Counselor ("UCC") all books and records, and
employees and officers of Cinergy, PSI and any affiliate or subsidiary of
Cinergy or PSI.

    As part of the Indiana Settlement Agreement, the Indiana Settling
Parties agreed to certain "Principles of Diversification."  These
principles apply to Cinergy's or PSI's participation in non-utility
businesses or in public utility businesses outside of the United States. 
In particular, Section 11.2 of the Indiana Settlement Agreement provides
that:

    [T]he Cinergy Companies recognize and acknowledge that the IURC
    under I.C. 8-1-2 [i.e., Indiana Code 8-1-2] has continuing
    authority over [PSI's] capital structure, financings and cost of
    capital for ratemaking purposes sufficient to enable the IURC to
    protect [PSI's] retail electric customers from any material
    adverse affects that may result from [PSI's] or Cinergy's
    participation in non-utility businesses or in public utility
    businesses outside of the United States of America.  

    The foregoing statement is consistent with the following statements
contained in a July 2, 1992 letter from the then-Chairman of the IURC to
the SEC /19/ concerning a proposed investment by Resources in a public
utility business in Argentina:

         In general, the IURC's continuing authority over PSI
    Energy's capital structure, financings and cost of capital for
    ratemaking purposes will enable the IURC to protect PSI Energy's
    retail electric customers from any financial effects resulting
    from the activities in PSI Argentina.  The IURC has authority to
    investigate transactions between utilities and their
    subsidiaries, pursuant to Indiana Code ("I.C.") 8-1-1-11, to
    prescribe the form of all books, accounts, papers and records of
    utilities, I.C. 8-1-2-12 and 14, and is required to inquire into
    the management of the business of all public utilities, I.C.
8-1-2-48,and
    to keep itself informed as to the manner and method in
    which such business is conducted, I.C. 8-1-2-49.  The IURC can
    use these powers, in addition to its general ratemaking authority
    as noted above, to ensure that PSI Argentina's activities do not
    adversely affect PSI Energy's ratepayers.

         ...
         
    In sum, the IURC has both general and specific authority and will
exercise its authority, as appropriate, to protect Indiana ratepayers. 

    With respect to the furnishing of pertinent information by PSI to the
IURC concerning the diversification activities of PSI or Cinergy, Section
11.3 of the Indiana Settlement Agreement further provides:

         In addition to the annual information filings to be made by
    PSI under the Affiliate Guidelines attached hereto as Appendix
    "E", PSI agrees that it shall on an annual basis file with the
    IURC and provide to the UCC the following information for each
    applicable PSI Affiliate (as defined in the Affiliate Guidelines
    attached hereto as Appendix "E" [which definition includes, among
    others, all subsidiaries of Cinergy]):

         1. The capital structure of each Affiliate as of the end of the
applicable period;

         2. A statement of the changes in the capital structure of each
Affiliate during the applicable period; 

         3. An assessment of the effects on PSI's capital structure and
PSI's ability to attract capital of the activities of each Affiliate during
the applicable period; and

         4. If requested by the IURC or the UCC, the names and job
descriptions of any employees of PSI transferred to, or for whom 75 percent
of their time has been allotted to, an Affiliate during the applicable
period.

    In short, the Indiana Settlement Agreement confers additional
significant rights on the IURC, beyond those otherwise accruing to it under
state law, the net effect of which is to preserve unimpaired the ability of
the IURC to protect Cinergy's utility subsidiaries and their customers in
the context of the instant proposal. 

         ii.  Ohio 

    As part of a comprehensive merger settlement, Cinergy also entered
into an Ohio Joint Stipulation and Agreement ("Ohio Settlement Agreement")
that was filed with FERC on March 4, 1994.  The Ohio Settlement Agreement,
which was signed by Cinergy, CG&E, the Public Utilities Commission of Ohio
("PUCO"), and the Office of the Ohio Consumers' Counsel ("OCC"), ensures
the continuing effectiveness of state regulation in a number of ways,
including the following:

    *    CG&E and Cinergy agreed to the continuing application of Ohio
statutory law to CG&E, Cinergy, their affiliates or subsidiaries to the
extent such law overlaps with federal law (including the allowance or
denial of recovery of costs in retail rates).

    *    CG&E and Cinergy agreed that (a) any proposed amendment to the
Operating Agreement or the Service Agreement and (b) certain other proposed
affiliates contracts to which CG&E would be a party that are required to be
filed with and/or approved by the FERC or the SEC would not become
effective unless and until the proposed amendment or affiliate contract had
been filed with and approved, or not finally rejected, disapproved, or
found unreasonable by the PUCO.

    *    CG&E and Cinergy agreed that in any pending proceeding before the
PUCO, CG&E and Cinergy would make available to the PUCO and the OCC all
books and records, and employees and officers of Cinergy, CG&E and any
affiliate or subsidiary of Cinergy or CG&E.

    In addition, as part of the merger settlement process, CG&E agreed in
February 1994 to certain Principles of Diversification similar to the PSI
principles discussed above.  In these principles, CG&E and Cinergy:

    recognize and acknowledge that the [PUCO] under Title 49 of The
    Ohio Revised Code has continuing authority over CG&E's capital
    structure, financings and cost of capital for ratemaking purposes
    sufficient to enable the [PUCO] to protect CG&E's retail electric
    customers from any material adverse [e]ffects that may result
    from CG&E's or Cinergy's Participation in Diversified
    Business./20/

Principles of Diversification Section V.  

    As part of the Principles, CG&E also agreed to make certain
informational filings with the PUCO (with copies to the OCC), including:

    1.   The capital structure of each Affiliate as of the end of the
         applicable period;

    2.   A statement of the changes in the capital structure of each
         Affiliate during the applicable period;

    3.   An assessment of the effects on CG&E's capital structure and
         CG&E's ability to attract capital of the activities of each
         Affiliate during the applicable period; and 

    4.   If requested by the [PUCO] or the OCC, the names and job
         descriptions of any employees of CG&E transferred to, or for whom
         100 percent of their time has been allocated to, an Affiliate
         during the applicable period.

Principles of Diversification Section VI.

    Finally, the Principles of Diversification specify (in Exhibit B) that
the financial policies and guidelines for transactions between CG&E and its
affiliates shall reflect certain cross-subsidization principles, including:

    *    CG&E's utility customers shall not subsidize the activities of
CG&E's non-utility affiliates or CG&E's utility affiliates.

    *    Neither CG&E's non-utility affiliates nor CG&E's utility
affiliates shall subsidize the public utility activities of CG&E.

    *    CG&E's costs for jurisdictional rate purposes shall reflect only
those costs attributable to its jurisdictional customers.

    *    CG&E shall maintain and utilize accounting systems and records
which are sufficient to identify and appropriately allocate costs between
CG&E and its affiliates, consistent with these cross-subsidization
principles and such financial policies and guidelines.

    In sum, the numerous protections built into the Ohio Settlement
Agreement and ancillary agreements give substantial assurance that the
proposal before this Commission will not have an adverse impact on the
ability of the PUCO to protect Cinergy's utility subsidiaries or their
customers.  

              iii. Kentucky 

    As with Indiana and Ohio, the Kentucky Public Service Commission
("KPSC") secured various commitments through the merger settlement process
that ensure its ability to protect Cinergy utility subsidiaries and their
customers.  In its order issued May 13, 1994 in Case No. 94-104
conditionally approving the Cinergy merger, the KPSC accepted certain
commitments made by Cinergy and CG&E during the course of that proceeding
"to ensure that the creation of Cinergy does not impair the [KPSC's]
regulatory authority over ULH&P ... ."  These initial commitments included:

    *    Access to the accounts and records of Cinergy, Cinergy's service
company subsidiary, Cinergy Services, Inc., and any affiliates and
subsidiaries controlled by Cinergy to verify transactions with ULH&P. 

    *    The ability of the KPSC to review and approve or reject certain
affiliate contracts involving Cinergy system companies. 

    *    A commitment that no claim of SEC preemption would be raised
before the KPSC or in any action in any forum in the event that any
affiliated costs, other than those included in ULH&P's purchased power
costs, are excluded for rate-making purposes.

    Beyond these commitments, the KPSC in its merger order imposed certain
additional conditions, all of which were accepted in writing by Cinergy and
CG&E.  As summarized in detail below, these conditions focused on three
areas: (1) protection of utility resources; (2) the KPSC's ability to
monitor the corporate activities of ULH&P, CG&E, Cinergy and Cinergy's
other affiliates; and (3) reporting requirements.  Specifically, To
implement these protections, the KPSC imposed certain "conditions and
requirements," including but not limited to:

    1.   Protection of utility resources:  The KPSC stated that in future
proceedings it will be the responsibility of ULH&P to show that its
allocation methodologies have not resulted in any cross-subsidization.  As
part of that showing, ULH&P should be prepared to disclose fully all
allocated costs, the portion allocated to each subsidiary of Cinergy,
complete details of the methods of allocation, and the justification for
the amount and the method.  The KPSC also noted that the accounting and
other procedures and controls established by Cinergy, CG&E, and ULH&P will
be reviewed periodically, and in ULH&P proceedings as appropriate.  KPSC
Order at 13.

    In furtherance of its ability to protect the utility's resources, the
KPSC stated the following:

         For rate-making purposes, the [KPSC] has jurisdiction over
    ULH&P's capital structure, financing, and cost of capital. 
    Through this authority, the [KPSC] can protect ratepayers from
    the financial effect of non-utility activities.  No new debt,
    preferred stock, or common equity can be issued without its prior
    approval.  This prevents significant deviations from the approved
    capital structure, which is the key to ensuring that ULH&P
    maintains its financial integrity.  Supplementing this financial
    control, the [KPSC] must approve any guarantee of debt
    obligations by ULH&P for Cinergy and its affiliates.

KPSC Order at 16.  Thus, the KPSC's substantial ability to protect the
financial resources of the utility, as discussed in its order, will not be
impaired in any way by the proposal under consideration before this
Commission.

    2.   Ability to monitor corporate activities of ULH&P, CG&E, Cinergy
and Cinergy's other affiliates:  Noting that "the most indispensable
requirement is open access to all books, records, and personnel of Cinergy
and each subsidiary," the KPSC stated that it "will have access, as
necessary in the exercise of its statutory duties, to the books and records
of Cinergy and its other affiliates and subsidiaries as the books and
records may be related to transactions with ULH&P.  If the subsidiaries or
affiliates of Cinergy do not transact business with ULH&P, ULH&P will
verify, if necessary, the absence of such transactions through independent
sources."  KPSC Order at 17-18.

    3.   Reporting requirements:  The KPSC's order also imposed
substantial reporting requirements "[i]n order to monitor effectively the
activities of ULH&P, Cinergy and its related subsidiaries, and protect
ratepayers . . . ."  KPSC Order at 19.  Among the reporting required by the
KPSC, ULH&P is to "furnish financial statements of Cinergy including
consolidating adjustments of Cinergy and its subsidiaries with a brief
explanation of each adjustment and all periodic reports filed with the
SEC." KPSC Order at 19.

              iv.  Conclusion Regarding Ability of State Commissions to
              Protect Operating Companies and Their Customers   

    Clearly, the commissions in the three states in which the Cinergy
utility subsidiaries operate have substantial authority - through continued
control of each utility's operating expenses and capital structure, through
access to the books, records and employees not only of the utility but its
subsidiaries and affiliates, through prior approval rights over affiliate
contracts, through the imposition of accounting procedures and controls,
and through the various reporting requirements - to protect the utility
subsidiaries and their customers, and the proposal before the Commission in
no way impairs that authority."



                            SIGNATURE

    Pursuant to the requirements of the Act, the undersigned companies
have duly caused this statement to be signed on their behalf by the
undersigned thereunto duly authorized.

    Dated:  March 28, 1997

                                CINERGY CORP.


                                By:  William L. Sheafer
                                Treasurer

                                CINERGY INVESTMENTS, INC.


                                By:  William L. Sheafer
                                Treasurer
 

                             ENDNOTES

/1/ The September 1995 EWG/FUCO Order and the March 1996 EWG/FUCO Order
used a different defined term - a "Special Purpose Subsidiary" - to
identify any such special purpose company formed, inter alia, to acquire
and hold the securities of one or more EWGs and/or FUCOs.  There is no
substantive difference between that term and "Project Parent."  As used
herein, the term "Exempt Project" refers to any EWG, FUCO or Project Parent
in which Cinergy holds a direct or indirect ownership interest.

/2/ As used throughout this Application, the terms "aggregate
investment" and "consolidated retained earnings" have the respective
meanings assigned to such terms under Rule 53(a)(1).

/3/ The March 1996 EWG/FUCO Order also clarified that if an investment by
Cinergy or Investments in a Project Parent took the form of a guarantee of
a security of a Project Parent denominated in a currency other than U.S.
dollars, the amount of the guarantee, for purposes of determining Cinergy's
"aggregate investment," would be determined by converting the stated amount
of the underlying security into U.S. dollars at currency exchange rates in
effect at the time the guarantee was issued 

/4/ Such $8 million increase in Cinergy's "aggregate investment" resulted
from Cinergy refinancing, with the proceeds of an additional borrowing by
Cinergy under its $600 million Credit Agreement, dated May 6, 1996
("Cinergy Corp. Credit Agreement"), with certain banks named therein and
Barclays Bank plc ("Barclays") as administrative agent, $8 million of
short-term debt originally issued by Cinergy UK, Inc., a wholly-owned
subsidiary of Investments and a Project Parent ("Cinergy UK"), pursuant to
its $40 million Credit Agreement, dated May 6, 1996 ("Cinergy UK Credit
Agreement"), with certain banks named therein and Barclays as
administrative agent, to finance a portion of Cinergy's share of the
purchase price of Midlands Electricity plc ("Midlands").  For further
information with respect to the acquisition financing by Cinergy of its
investment in Midlands reference is made to the text under Item 1.C.2.

/5/ Other than to accommodate the proposed removal of the 50% Limitation
and the increased aggregate investment authority up to the full amount of
consolidated retained earnings, Cinergy does not seek herein to modify any
of the terms or conditions of the Prior Orders.

/6/ In addition, in connection with the Cinergy merger, Cinergy succeeded
to Resources' minority ownership interest in Central Costanera, S.A.
("Costanera"), an electric generation facility in Argentina, acquired by
Resources pursuant to the Commission's order in PSI Resources, Inc., et
al., Rel. No. 35-25674, November 13, 1992.  In late 1995, Cinergy sold all
of its interest in Costanera to various non-affiliated third-party buyers. 
See Rule 24 certificate in File No. 70-8589 filed on February 15, 1996.

/7/ See Notification of Foreign Utility Company Status on Form U-57 filed
by Cinergy on behalf of Midlands on July 2, 1996 and Cinergy's Quarterly
Reports on Form 10-Q for the quarterly periods ended March 31, June 30 and
September 30, 1996, respectively.

/8/ As of January 31, 1997 Cinergy UK had repaid a total of approximately
$13 million of the funds originally borrowed under the Cinergy UK Credit
Agreement and Cinergy had correspondingly increased its aggregate
investment in Midlands by $13 million.

/9/ Certain members of the opposition British Labor Party have proposed a
windfall profits levy against businesses formerly owned and operated by the
British Government which could significantly reduce the amount of income
received by Cinergy from the Midlands investment in the year in which such
a levy would be enacted.  The total amount to be raised by such a levy, the
manner in which the levy would be calculated and paid, as well as which
privatized companies would be included in the levy, remain unclear although
it is almost certain that companies such as Midlands would be included. 
The governing Conservative Party led by Prime Minister John Major is
required to hold general elections no later than May 1997, after which more
information will become available on the prospects for enactment of such a
levy.

/10/ In 1995, its first calendar year of operation following the merger,
Cinergy achieved non-fuel operation and maintenance savings of
approximately $42 million, significantly exceeding initial estimates of
first-year merger benefits.  Additionally, the merger allowed the Company
to reduce fuel costs and capital spending in 1995 by $13 million and $170
million, respectively.  Cinergy is currently undergoing a reengineering
process that it expects will result in the realization of further
significant cost savings.

/11/   This process is by its very nature evolutionary and subject to
change, and the specific risk mitigation techniques actually employed are
appropriate to the particular project.  Therefore, while the description
that follows is illustrative of those processes and techniques as employed
in the past, they are necessarily subject to change.  Similarly, the
discussion does not address any similar due diligence procedures that may
be undertaken by any Exempt Projects in which Cinergy has invested or may
invest, and which, obviously, are not parties to this application.

/12/ The "Operating Companies" consist of PSI, which among other things
provides retail electric service to customers in north central, central and
southern Indiana, and The Cincinnati Gas & Electric Company ("CG&E") and
its utility subsidiaries, The Union Light, Heat and Power Company
("ULH&P"), Lawrenceburg Gas Company, The West Harrison Gas and Electric
Company and Miami Power Corporation, which among other things provide
retail gas and electric service to customers in the southwestern portion of
Ohio and adjacent areas of Indiana and Kentucky.

/13/ For example, in the EDESUR investment, Cinergy teamed with five large
local and international services companies.  In the Midlands transaction
Cinergy is partnering with GPU.  In addition, Cinergy and GPU have an
important local partner since the acquisition left in place Midlands'
existing management team.

/14/ Cinergy appreciates that should it at any time not remain in
compliance with the requirements of Rule 53(a), other than Rule 53(a)(1),
or should any of the circumstances described in Rule 53(b) occur, the
authorization obtained in connection with this application-declaration,
insofar as it increases Cinergy's permitted aggregate investment to 100% of
consolidated retained earnings, would cease to be effective and Cinergy
would not be authorized to make any further investments in Exempt Projects
in amounts in excess of 50% of consolidated retained earnings without
obtaining a further order of the Commission.

/15/ Source:  Regulatory Research Associates, Utility Focus, April 1996 and
January 1997.

/16/ Source:  Regulatory Research Associates, Utility Focus, April 1996 and
January 1997.

/17/ Source:  Utility Focus, Regulatory Research Associates, Inc., May
1996.

/18/ In December 1994 Cinergy issued and sold over 7 million shares of its
common stock to the public and contributed $160 million of the net proceeds
thereof to the equity capital of PSI (see generally Rule 24 certificate in
File No. 70-8477).  PSI used such funds for general corporate purposes,
including repayment of short-term indebtedness incurred for construction
financing.

/19/ See PSI Resources, Inc., et al., Release No. 35-25674, November 13,
1992 (text accompanying notes 21 and 22).

/20/ "Diversified Business" was defined in the Principles to mean (i) a
non-utility business, or (ii) a public utility business outside the United
States of America.  "Participation" was defined to mean "an acquisition of
securities, or any interest in a business, which results in either CG&E
becoming a direct owner of a Diversified Business or a Diversified Business
becoming an Affiliate of CG&E."  Principles of Diversification Section II D
and G.