-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Udsb3NZVtmOUp/3GqO8W5ISd5e3wUD3Xa17ADWOlvEXRzvyY3R7KnaCKxXALRq3Y dcRBB2hSBb8nh4aaaieMHA== 0000092195-99-000016.txt : 19990817 0000092195-99-000016.hdr.sgml : 19990817 ACCESSION NUMBER: 0000092195-99-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN INDIANA GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000092195 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 350672570 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03553 FILM NUMBER: 99693819 BUSINESS ADDRESS: STREET 1: 20 NW FOURTH ST CITY: EVANSVILLE STATE: IN ZIP: 47741-0001 BUSINESS PHONE: 8124655300 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the quarterly period ended June 30, 1999 OR TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________
Commission Registrant; State of Incorporation; IRS Employer File Number Address; and Telephone Number Identification No. 1-11603 SIGCORP, Inc. 35-1940620 (An Indiana Corporation) 20 N. W. Fourth Street Evansville, Indiana 47741-0001 (812) 465-5300 1-3553 Southern Indiana Gas and Electric Company 35-0672570 (An Indiana Corporation) 20 N. W. Fourth Street Evansville, Indiana 47741-0001 (812) 465-5300
Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X . No . Indicate the number of shares outstanding of each of the Registrants' classes of common stock, as of the latest practicable date: SIGCORP, Inc.: Common stock, no par value, 23,630,568 shares outstanding at June 30, 1999 Southern Indiana Gas and Electric Company: Common stock, no par value, 15,754,826 shares outstanding and held by SIGCORP, Inc. at June 30, 1999
SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 TABLE OF CONTENTS Page No. PART I. FINANCIAL INFORMATION: Item 1: Financial Statements SIGCORP, Inc. Consolidated Statements of Income 2 Consolidated Statements of Cash Flows 3 Consolidated Balance Sheets 4-5 Consolidated Statements of Capitalization 6 Consolidated Statements of Retained Earnings 7 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY Statements of Income 8 Statements of Cash Flows 9 Balance Sheets 10-11 Statements of Capitalization 12 Statements of Retained Earnings 13 NOTES TO FINANCIAL STATEMENTS OF SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY 14-17 Item 2: Management's Discussion and Analysis of Results of Operations and Financial Condition 18-23 SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY Part II. OTHER INFORMATION Item 4: Submission of Matters to a Vote of Security Holders 24 Item 5: Other information 24 Item 6: Exhibits and Reports on Form 8-K 23 Signatures 25
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SIGCORP, Inc. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 (in thousands except for per share amounts) OPERATING REVENUES: Electric utility $ 73,802 $ 77,526 $144,789 $142,753 Gas utility 10,517 10,295 40,214 40,213 Energy services and other 47,601 45,484 97,078 91,410 Total operating revenues 131,920 133,305 282,081 274,376 OPERATING EXPENSES: Fuel for electric generation 15,730 17,563 31,358 32,470 Purchased electric energy 7,064 5,720 10,325 7,406 Cost of gas sold 4,867 5,384 24,372 25,642 Cost of energy services and other 46,564 43,809 95,646 89,028 Other operation expenses 17,211 18,765 34,232 34,128 Maintenance 9,857 11,401 17,173 16,866 Depreciation and amortization 11,327 10,673 22,636 21,374 Property and other taxes 3,143 3,367 6,389 6,959 Total operating expenses 115,763 116,682 242,131 233,873 OPERATING INCOME 16,157 16,623 39,950 40,503 INTEREST AND OTHER CHARGES: Interest expense on long-term debt 3,317 4,958 7,602 10,418 Interest expense on short-term debt 2,441 951 3,848 1,254 Amortization of premium, discount and expense on debt 97 169 274 337 Allowance for funds used during construction (297) (379) (605) (717) Preferred dividend requirements of subsidiary 269 274 539 548 Interest income (1,206) (2,016) (2,194) (2,952) Other, net (422) (496) (599) (5,163) Total interest and other charges 4,199 3,461 8,865 3,725 INCOME BEFORE INCOME TAXES 11,958 13,162 31,085 36,778 Federal and state income taxes 3,788 4,155 10,294 11,345 NET INCOME $ 8,170 $ 9,007 $ 20,791 $ 25,433 AVERAGE COMMON SHARES OUTSTANDING 23,631 23,631 23,631 23,631 BASIC EARNINGS PER SHARE OF COMMON STOCK $ 0.35 $ 0.38 $ 0.88 $ 1.08 DILUTED EARNINGS PER SHARE OF COMMON STOCK $ 0.34 $ 0.38 $ 0.88 $ 1.07 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SIGCORP, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 1999 1998 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 20,791 $ 25,433 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 22,636 21,374 Preferred dividend requirements of subsidiary 539 548 Deferred income taxes and investment tax credits, net (188) (7,487) Allowance for other funds used during construction 51 8 Change in assets and liabilities: Receivables, net (including accrued unbilled revenues) 14,633 5,850 Inventories 4,857 (4,702) Accounts payable (16,365) (8,582) Accrued taxes (1,476) 2,414 Refunds from gas suppliers (1,107) (364) Refunds to customers 1,868 (95) Other assets and liabilities 9,003 13,584 Net cash provided by operating activities 55,242 47,981 CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (net of allowance for other funds used during construction) (31,422) (24,170) Demand side management program expenditures (58) (484) Investments in leveraged leases 13 7,249 Purchases of investments - (1,860) Sale of Investments 96 80 Investments in partnerships and other corporations (1,556) 148 Change in nonutility property (801) 1,487 Other (278) 2,011 Net cash used in investing activities (34,006) (15,539) CASH FLOWS FROM FINANCING ACTIVITIES First mortgage bonds (45,000) - Dividends paid (16,190) (14,845) Reduction in preferred stock (116) - Change in environmental improvement funds held by trustee (84) (95) Payments on partnership obligations (1,513) (2,139) Change in notes payable 44,997 (6,863) Other 1,165 268 Net cash used in financing activities (16,741) (23,674) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,495 8,768 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,049 5,827 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,544 $ 14,595 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SIGCORP, Inc. CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 1999 1998 (in thousands) ASSETS UTILITY PLANT, at original cost: Electric $1,149,334 $1,141,870 Gas 150,551 150,136 1,299,885 1,292,006 Less accumulated provision for depreciation 614,404 593,901 685,481 698,105 Construction work in progress 46,130 24,306 Net utility plant 731,611 722,411 OTHER INVESTMENTS AND PROPERTY: Investments in leveraged leases 35,990 36,003 Investments in partnerships and other corporations 33,757 32,389 Environmental improvement funds held by trustee 4,384 4,300 Notes receivable 20,955 20,372 Nonutility property and other, net 15,119 14,901 Total other investments and property 110,205 107,965 CURRENT ASSETS: Cash and cash equivalents 9,544 5,049 Temporary investments, at market 600 793 Receivables, less allowance of $2,520 and $2,204, respectively 58,204 65,829 Accrued unbilled revenues 13,587 20,595 Inventories 40,318 45,351 Current regulatory assets 7,555 9,527 Other current assets 4,432 3,777 Total current assets 134,240 150,921 OTHER ASSETS: Unamortized premium on reacquired debt 4,050 4,226 Postretirement benefits other than pensions - 985 Demand side management programs 24,995 25,046 Allowance inventory 2,269 2,093 Deferred charges 15,787 15,871 Total other assets 47,101 48,221 TOTAL $1,023,157 $1,029,518 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SIGCORP, Inc. CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 1999 1998 (in thousands) SHAREHOLDERS' EQUITY AND LIABILITIES CAPITALIZATION: Common Stock $ 78,258 $ 78,258 Retained Earnings 298,361 292,288 Accumulated Other Comprehensive Income (72) (12) Total common shareholders' equity 376,547 370,534 Cumulative Nonredeemable Preferred Stock of Subsidiary 11,090 11,090 Cumulative Redeemable Preferred Stock of Subsidiary 7,500 7,500 Cumulative Special Preferred Stock of Subsidiary 692 808 Long-Term Debt, net of current maturities 204,883 204,771 Long-Term Partnership Obligations, net of current maturities 224 781 Total capitalization, excluding bonds subject to tender (see Consolidated Statements of Capitalization) 600,936 595,484 CURRENT LIABILITIES: Current Portion of Adjustable Rate Bonds Subject to Tender 53,700 53,700 Current Maturities of Long-Term Debt, Interim Financing and Long-Term Partnership Obligations: Maturing long-term debt 19 45,000 Notes payable 114,430 69,508 Partnership obligations 621 1,577 Total current maturities of long-term debt, interim financing and long-term partnership obligations 115,070 116,085 Other Current Liabilities: Accounts payable 37,026 53,391 Dividends payable 117 120 Accrued taxes 3,348 4,863 Accrued interest 4,741 5,140 Refunds to customers 2,917 2,156 Other accrued liabilities 28,053 21,749 Total other current liabilities 76,202 87,419 Total current liabilities 244,972 257,204 OTHER LIABILITIES: Accumulated deferred income taxes 144,558 144,032 Accumulated deferred investment tax credits, being amortized over lives of property 18,087 18,802 Postretirement benefits other than pensions 13,006 11,337 Other 1,598 2,659 Total other liabilities 177,249 176,830 TOTAL $1,023,157 $1,029,518 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SIGCORP, Inc. CONSOLIDATED STATEMENTS OF CAPITALIZATION (Unaudited) June 30, December 31, 1999 1998 (in thousands) COMMON SHAREHOLDERS' EQUITY Common Stock, without par value, authorized 50,000,000 shares, issued 23,630,568 $ 78,258 $ 78,258 Retained Earnings, $2,174 restricted as to payment of cash dividends on common stock 298,361 292,288 Accumulated Other Comprehensive Income (72) (12) Total common shareholders' equity 376,547 370,534 PREFERRED STOCK OF SUBSIDIARY Cumulative, $100 par value, authorized 800,000 shares, issuable in series: Nonredeemable 4.8% Series, outstanding 85,895 shares, callable at $110 per share 8,590 8,590 4.75% Series, outstanding 25,000 shares, callable at $101 per share 2,500 2,500 Total nonredeemable preferred stock of subsidiary 11,090 11,090 Redeemable 6.50% Series, outstanding 75,000 shares, redeemable at $100 per share December 1, 2002 7,500 7,500 SPECIAL PREFERRED STOCK OF SUBSIDIARY Cumulative, no par value, authorized 5,000,000 shares, issuable in series: 8-1/2% series, outstanding 6,917 and 8,077 shares, respectively, redeemable at $100 per share 692 808 LONG-TERM DEBT, NET OF CURRENT MATURITIES First mortgage bonds 169,915 169,915 Notes payable 36,084 36,009 Unamortized debt premium and discount, net (1,116) (1,153) Total long-term debt 204,883 204,771 LONG-TERM PARTNERSHIP OBLIGATIONS, NET OF CURRENT MATURITIES 224 781 CURRENT PORTION OF ADJUSTABLE RATE POLLUTION CONTROL BONDS SUBJECT TO TENDER, DUE 2025, Series A, presently 3.00% 31,500 31,500 2030, Series C, presently 3.05% 22,200 22,200 53,700 53,700 TOTAL CAPITALIZATION, including bonds subject to tender $654,636 $649,184 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY Accumulated Other Common Retained Comprehensive (in thousands) Total Stock Earnings Income Balances, December 31, 1997 $349,163 $78,258 $270,828 $ 77 Net Income 50,476 - 50,476 - Unrealized Gain on Securities (net of tax) (89) - - (89) Comprehensive Income 50,387 - - - Common Stock Dividends ($1.21 per share) (28,587) - (28,587) - Stock Expense (429) - (429) - Balances, December 31, 1998 370,534 78,258 292,288 (12) Net Income 20,791 - 20,791 - Unrealized (Loss) on Securities (net of tax) (60) - - (60) Comprehensive Income 20,731 - - - Common Stock Dividends ($0.62 per share) (14,640) - (14,640) - Stock Expense (78) - (78) - Balances, June 30,1999 $376,547 $78,258 $298,361 $ (72) The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 (in thousands except for per share amounts) OPERATING REVENUES: Electric $ 73,802 $ 77,526 $144,789 $142,753 Gas 10,516 10,295 40,214 40,213 Total operating revenues 84,318 87,821 185,003 182,966 OPERATING EXPENSES: Fuel for electric generation 16,880 18,103 33,748 33,897 Purchased electric energy 7,063 5,720 10,325 7,406 Cost of gas sold 4,867 5,384 24,372 25,642 Other operation expenses 14,519 16,287 29,460 30,097 Maintenance 9,838 11,371 17,126 16,780 Depreciation and amortization 11,216 10,632 22,433 21,264 Federal and state income taxes 4,535 4,528 11,865 12,168 Property and other taxes 3,062 3,278 6,189 6,775 Total operating expenses 71,980 75,303 155,518 154,029 OPERATING INCOME 12,338 12,518 29,485 28,937 OTHER INCOME: Allowance for other funds used during construction 51 (3) 51 (8) Interest 69 94 127 161 Other, net 83 (106) 108 1,493 Total interest and other charges 203 (15) 286 1,646 INCOME BEFORE INTEREST AND OTHER CHARGES 12,541 12,503 29,771 30,583 INTEREST AND OTHER CHARGES: Interest on long-term debt 3,324 4,320 7,381 9,126 Amortization of premium, discount, and expense on debt 97 169 274 337 Other interest 1,480 537 2,277 949 Allowance for borrowed funds used during construction (246) (382) (554) (725) Total interest and other charges 4,655 4,644 9,378 9,687 NET INCOME 7,886 7,859 20,393 20,896 Preferred stock dividend 269 274 539 548 NET INCOME APPLICABLE TO COMMON STOCK $ 7,617 $ 7,585 $ 19,854 $ 20,348 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 1999 1998 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 20,393 $ 20,896 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 22,433 21,264 Deferred income taxes and investment tax credits, net (307) (981) Allowance for other funds used during construction 51 8 Change in assets and liabilities: Receivables, net (including accrued unbilled revenues) 8,274 7,037 Inventories 5,654 (3,832) Accounts payable (10,348) (7,087) Accrued taxes (2,647) (2,035) Refunds from gas suppliers (1,107) (297) Refunds to customers 1,868 (163) Other assets and liabilities 10,092 12,038 Net cash provided by operating activities 54,356 46,848 CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (net of allowance for other funds used during construction) (31,422) (24,170) Demand side management program expenditures (58) (152) Change in nonutility property - (10) Other (262) (131) Net cash used in investing activities (31,742) (24,463) CASH FLOWS FROM FINANCING ACTIVITIES First mortgage bonds (45,000) - Dividends paid (16,191) (14,845) Reduction in preferred stock (116) - Change in environmental improvement funds held by trustee (84) (95) Change in notes payable 38,395 (8,715) Other 213 262 Net cash used in financing activities (22,783) (23,393) NET DECREASE IN CASH AND CASH EQUIVALENTS (169) (1,008) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 512 1,114 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 343 $ 106 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY BALANCE SHEETS (Unaudited) June 30, December 31, 1999 1998 (in thousands) ASSETS UTILITY PLANT, at original cost: Electric $1,149,334 $1,141,870 Gas 150,551 150,136 1,299,885 1,292,006 Less accumulated provision for depreciation 614,404 593,901 685,481 698,105 Construction work in progress 46,130 24,306 Net utility plant 731,611 722,411 OTHER INVESTMENTS AND PROPERTY: Environmental improvement funds held by trustee 4,384 4,300 Nonutility property and other, net 1,577 1,577 Total other investments and property 5,961 5,877 CURRENT ASSETS: Cash and cash equivalents 343 512 Receivables, less allowance of $2,460 and $2,156, respectively 27,587 28,854 Accrued unbilled revenues 13,587 20,595 Inventories 38,736 44,566 Current regulatory assets 7,555 9,527 Other current assets 3,056 2,776 Total current assets 90,864 106,830 OTHER ASSETS: Unamortized premium on reacquired debt 4,050 4,226 Postretirement benefits other than pensions - 985 Demand side management programs 24,995 25,046 Allowance inventory 2,269 2,093 Deferred charges 14,466 14,444 Total other assets 45,780 46,794 TOTAL $ 874,216 $ 881,912 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY BALANCE SHEETS (Unaudited) June 30, December 31, 1999 1998 (in thousands) SHAREHOLDERS' EQUITY AND LIABILITIES CAPITALIZATION: Common Stock $ 78,258 $ 78,258 Retained Earnings 246,127 241,924 Total common shareholders' equity 324,385 320,182 Cumulative Nonredeemable Preferred Stock of Subsidiary 11,090 11,090 Cumulative Redeemable Preferred Stock of Subsidiary 7,500 7,500 Cumulative Special Preferred Stock of Subsidiary 692 808 Long-Term Debt, net of current maturities 169,799 169,762 Total capitalization, excluding bonds subject to tender (see Consolidated Statements of Capitalization) 513,466 509,342 CURRENT LIABILITIES: Current Portion of Adjustable Rate Bonds Subject to Tender 53,700 53,700 Current Maturities of Long-Term Debt, Interim Financing and Long-Term Partnership Obligations: Maturing long-term debt - 45,000 Notes payable 83,584 50,759 Notes payable to Associated Company 20,500 14,930 Total current maturities of long-term debt and interim financing 104,084 110,689 Other Current Liabilities: Accounts payable 17,779 28,127 Dividends payable 117 120 Accrued taxes 2,124 4,772 Accrued interest 4,082 4,676 Refunds to customers 2,916 2,156 Other accrued liabilities 24,688 18,544 Total other current liabilities 51,706 58,395 Total current liabilities 209,490 222,784 OTHER LIABILITIES: Accumulated deferred income taxes 118,555 118,147 Accumulated deferred investment tax credits, being amortized over lives of property 18,087 18,801 Postretirement benefits other than pensions 13,006 11,337 Other 1,612 1,501 Other liabilities 151,260 149,786 TOTAL $874,216 $881,912 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY STATEMENTS OF CAPITALIZATION (Unaudited) June 30, December 31, 1999 1998 (in thousands) COMMON SHAREHOLDERS' EQUITY Common Stock, without par value, authorized 50,000,000 shares, issued 15,754,826 $ 78,258 $ 78,258 Retained Earnings, $2,174 restricted as to payment of cash dividends on common stock 246,127 241,924 Total common shareholders' equity 324,385 320,182 PREFERRED STOCK OF SUBSIDIARY Cumulative, $100 par value, authorized 800,000 shares, issuable in series: Nonredeemable 4.8% Series, outstanding 85,895 shares, callable at $110 per share 8,590 8,590 4.75% Series, outstanding 25,000 shares, callable at $101 per share 2,500 2,500 Total nonredeemable preferred stock of subsidiary 11,090 11,090 Redeemable 6.50% Series, outstanding 75,000 shares, redeemable at $100 per share December 1, 2002 7,500 7,500 SPECIAL PREFERRED STOCK OF SUBSIDIARY Cumulative, no par value, authorized 5,000,000 shares, issuable in series: 8-1/2% series, outstanding 6,917 and 8,077 shares, respectively, redeemable at $100 per share 692 808 LONG-TERM DEBT, NET OF CURRENT MATURITIES First mortgage bonds 169,915 169,915 Notes payable 1,000 1,000 Unamortized debt premium and discount, net (1,116) (1,153) Total long-term debt 169,799 169,762 CURRENT PORTION OF ADJUSTABLE RATE POLLUTION CONTROL BONDS SUBJECT TO TENDER, DUE 2025, Series A, presently 3.00% 31,500 31,500 2030, Series C, presently 3.05% 22,200 22,200 53,700 53,700 TOTAL CAPITALIZATION, including bonds subject to tender $567,166 $563,042 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY STATEMENTS OF RETAINED EARNINGS (Unaudited) Six Months Ended June 30, 1999 1998 (in thousands) Balance Beginning of Period $241,924 $228,570 Net Income 20,394 20,896 262,318 249,466 Preferred Stock Dividends 539 548 Common Stock Dividends 15,652 14,297 16,191 14,845 Balance End of Period (See Consolidated Statements of Capitalization for restriction) $246,127 $234,621 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
14 SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization SIGCORP, Inc. (SIGCORP) is a holding company incorporated October 19, 1994 under the laws of the state of Indiana. SIGCORP has 11 wholly-owned subsidiaries: Southern Indiana Gas and Electric Company (SIGECO), a gas and electric utility which accounts for over 90% of SIGCORP's net income for the six months ended June 30, 1999, and ten nonregulated subsidiaries. On June 14, 1999, the announcement was made that Indiana Energy, Inc. (IEI) and SIGCORP have agreed to be merged into a new holding company to be named Vectren Corporation (Vectren). The merger requires shareholder and regulatory approvals which are expected to be completed in six to nine months. 2. General It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in SIGCORP's and SIGECO's 1998 Annual Report or Form 10-K. The consolidated statements include the accounts of SIGCORP, Inc. and eleven of its wholly-owned subsidiaries: Southern Indiana Gas and Electric Company (SIGECO), Southern Indiana Properties, Inc. (SIPI), Energy Systems Group, Inc. (ESGI), Southern Indiana Minerals, Inc. (SIMI), SIGCORP Energy Services, Inc. (Energy), SIGCORP Capital, Inc. (Capital), SIGCORP Communications, Inc. (Communications), SIGCORP Fuels, Inc. (Fuels), SIGECO Advanced Communications, Inc. (Advanced Communications), SIGCORP Environmental Services, Inc. (Environmental Services) and SIGCORP Power Marketing, Inc. (Power), not yet active, and include all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position and results of operations. Because of seasonal and other factors, the earnings for the six months ending June 30, 1999 should not be taken as an indication for all or any part of the balance of 1999. 3. Cash Flow Information For the purposes of the Consolidated Balance Sheets and Consolidated Statements of Cash Flows, SIGCORP and SIGECO consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. SIGCORP, for the six months ended June 30, 1999 and 1998, paid interest (net of amounts capitalized) of $11,295,000 and $10,803,000, respectively, and income taxes of $13,624,000 and $16,462,000, respectively. Additionally, SIGCORP is involved in several partnerships which are partially financed by partnership obligations amounting to $845,000 and $2,358,000 at June 30, 1999 and December 31, 1998, respectively. SIGECO, for the six months ended June 30, 1999 and 1998, paid interest (net of amounts capitalized) of $9,698,000 and $9,054,000, respectively, and $14,766,000 and $14,795,000, respectively. 4.Long-Term Debt On March 1, 1999, the interest rate on $31,500,000 of Adjustable Rate Pollution Control bonds was changed from 3.65% to 3.00% due March 1, 2025. The new interest rate will be fixed through February 29, 2000. Also on March 1, 1999, the interest rate on $22,200,000 of Adjustable Rate Pollution Control bonds was changed from 3.70% to 3.05% due March 1, 2020. The new interest rate will also be fixed through February 29, 2000. For financial statement presentation the $53,700,000 of Adjustable Rate Pollution Control bonds are shown as a current liability. 15 On April 1, SIGECO repaid the $45,000,000 6% Series of 1993 First Mortgage Bonds and a $20,000,000 commercial loan with short-term borrowings. On July 26,1999, $80,000,000 of 6.72% Senior Notes due August 1, 2029 were issued to retire $80 million of short-term debt, including the above amounts. 5.Earnings Per Share The following table illustrates the basic and diluted earnings per share calculations:
Six Months Ended Six Months Ended June 30, 1999 June 30, 1998 Net Per Share Net Per Share Income Shares Amount Income Shares Amount (in thousands except for per share amounts) Basic EPS $20,791 23,631 $0.88 $25,433 23,631 $1.08 Effect of dilutive securities 114 103 Diluted EPS $20,791 23,745 $0.88 $25,433 23,734 $1.07
Basic earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share were determined using the treasury stock method for dilutive stock options. 6. Segments of Business SIGCORP and SIGECO adopted SFAS No. 131 ''Disclosures about Segments of an Enterprise and Related Information'' in 1998. SFAS No. 131 establishes standards for reporting information about operating segments in financial statements and disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. SIGCORP has four reportable segments. They are SIGECO's electric and gas utility operations, Energy Services gas marketing services and SIPI's investment operations. All other subsidiary operations and corporate activities are included in other. SIGCORP's reportable segments are operations that are managed separately and meet the quantitative thresholds required by SFAS No. 131. Revenues for each of SIGCORP's segments are attributable principally to customers in the United States. 16 Certain financial information relating to significant segments of business is presented below:
Six Months Ended June 30 (in thousands) 1999 1998 Operating revenues: Electric $ 144,789 $ 142,753 Gas 40,214 40,213 Gas marketing 93,599 86,165 Investment operations 514 474 All other 12,902 11,958 Total 292,018 281,563 Interest income: Electric 116 147 Gas 11 14 Gas marketing 34 44 Investment operations 1,229 2,067 All other 2,817 2,455 Total 4,207 4,727 Interest expense: Electric 8,788 9,167 Gas 869 907 Gas marketing 66 84 Investment operations 1,386 1,383 All other 2,353 1,906 Total 13,462 13,447 Income taxes: Electric 10,258 10,908 Gas 1,607 1,260 Gas marketing 37 101 Investment operations (1,348) (881) All other (260) (43) Total 10,294 11,345 Net income: Electric 16,840 17,836 Gas 3,014 2,512 Gas marketing 62 177 Investment operations 1,317 4,787 All other (442) 121 Total 20,791 25,433 Depreciation and amortization expense: Electric 20,119 19,103 Gas 2,315 2,162 Gas marketing 32 12 Investment operations 69 50 All other 101 47 Total 22,636 21,374 Capital expenditures: Electric 26,152 20,759 Gas 5,217 3,404 Gas marketing 12 31 Investment operations - - All other 358 1,953 Total 31,739 26,147 Identifiable assets: Electric 734,341 721,852 Gas 139,875 137,496 Gas marketing 23,356 19,443 Investment operations 89,314 90,508 All other 479,548 426,564 Total assets $1,466,434 $1,395,863 SIGECO allocates interest revenue and expense based on the net plant ratio which is 91% electric and 9% gas. Utility plant less accumulated provision for depreciation, inventories, receivables (less allowance), regulatory assets and other identifiable assets.
17 The following is a reconciliation to the consolidated financial statements of SIGCORP:
Six Months Ended June 30 (in thousands) 1999 1998 Operating revenues: Total revenues for segments $ 292,018 $ 281,563 Elimination of intersegment revenues (9,937) (7,187) Total consolidated revenues 282,081 274,376 Interest income: Total interest income for segments 4,207 4,727 Elimination of intersegment interest (2,013) (1,775) Total consolidated interest income 2,194 2,952 Interest expense: Total interest expense for segments 13,462 13,447 Elimination of intersegment interest (2,013) (1,775) Total consolidated interest expense 11,449 11,672 Identifiable assets: Total assets for segments 1,466,434 1,395,863 Elimination of intersegment assets (443,277) (366,345) Total consolidated assets $1,023,157 $1,029,518
Southern Indiana Gas and Electric Company Six Months Ended June 30 (in thousands) 1999 1998 Operating revenues: Electric $144,789 $142,753 Gas 40,214 40,213 Total 185,003 182,966 Interest income: Electric 116 147 Gas 11 14 Total 127 161 Interest expense: Electric 8,788 9,168 Gas 869 907 Total 9,657 10,075 Identifiable assets: Electric Gas 139,875 137,576 Total assets $874,216 $859,848 SIGECO allocates interest revenue and expense based on the net plant ratio which is 91% electric and 9% gas. Utility plant less accumulated provision for depreciation, inventories, receivables (less allowance), regulatory assets and other identifiable assets.
18 SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The consolidated financial statements of SIGCORP, Inc. (SIGCORP), an investor-owned holding company, include SIGCORP's principal subsidiary, Southern Indiana Gas and Electric Company (SIGECO), a regulated gas and electric utility, and ten nonregulated subsidiaries. The following discussion and analysis includes those factors which have, or may, materially affect the results of operations and financial condition of SIGCORP and its subsidiaries. This discussion includes forward looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to the terms ''anticipate'', ''expect'', ''potential'', ''estimate'' and similar words, and actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric and gas utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy market prices, legislative and regulatory changes including revised environmental requirements, impacts of Year 2000 issues, industry restructuring, availability and cost of capital, and other similar factors. RESULTS OF OPERATIONS Basic earnings were $.35 and $.88 per share for the three- month and six-month periods ending June 30, 1999 compared to basic earnings of $.38 and $1.08 per share, respectively, for the second quarter and first six months of 1998. The factors affecting earnings follow:
Qtr 6 Mos Period ended June 30, 1998 $.38 $1.08 Weather (.04) - Electric sales to other utilities and power marketers (.08) (.06) Utility O&M expense .09 .01 Utility depreciation expense (.01) (.03) Nonregulated gas energy services and nonutility operations (.03) (.18) Other .04 .06 Period ended June 30, 1999 $.35 $.88 Reflects $.05 per share provision for uncollectible Federal Energy revenues in June 1998
REVENUES Second quarter electric utility revenue declined $3.7 million, or 5%, due to 43% fewer power sales to other utilities and power marketers and lower unit prices for those sales, reflecting milder weather than a year ago when temperatures, 23 percent warmer than normal, and a June heat wave greatly increased demand for energy and substantially widened wholesale unit margins in a tight supply market. Despite a 5% decline in weather-sensitive residential sales, total retail and firm wholesale electric sales increased 2% during the second quarter of 1999 compared to the same period a year ago, reflecting the continued strength of the local economy. Commercial and industrial electric sales rose 2% and 5%, respectively, while 29% warmer temperatures in April (in terms of heating degree days) and 31% cooler temperatures (in terms of cooling degree days) during the remainder of the quarter caused the decrease in residential sales. Excluding one- time charges to other operation expenses in June 1998 for anticipated 19 uncollectible revenues from a defaulting power marketer, second quarter earnings from sales to other utilities and power marketers decreased $0.08 per share compared to the same period a year ago. Despite the warmer April weather, gas sales were relatively unchanged during the period, but total sales and transported volumes increased 13% during the current quarter reflecting the area's growth in commercial and industrial activity. The greater activity of SIGCORP's natural gas marketing subsidiary, SIGCORP Energy Services (Energy), whose revenues were up $3.3 million, was the primary reason for a $2.1 million increase in energy services and other nonregulated revenues during the quarter ending June 30, 1999. For the six-month period ending June 30, 1999, electric revenues were $2.0 million (1.4%) greater than the same period a year ago due primarily to stronger system sales and a more favorable sales mix during the first quarter. Total electric sales were up 3% for the six-month period, reflecting a 4% increase in system sales; sales to other utilities and power marketers were comparable to the same period in 1998. Gas revenues for the current six-month period equaled gas revenues from a year ago; although gas sales were up 11% during the recent six-month period, chiefly due to colder temperatures during the first quarter of 1999, lower unit costs of purchased natural gas recovered through revenues decreased related gas revenues. Revenues from SIGCORP's natural gas marketing subsidiary, SIGCORP Energy Services (Energy), rose $7.4 million during the six months ending June 30, 1999 from continued growth in sales and services throughout the period and accounted for the $5.7 million increase in energy services and other nonregulated revenues during the current period. Fewer coal sales by SIGCORP's Fuels subsidiary during the six- month period ending June 30, 1999 to customers other than SIGECO was the primary reason for a $1.7 million reduction in revenues from nonregulated operations other than Energy. OPERATING EXPENSES In total, costs for fuel for electric generation and purchased electric energy during the second quarter of 1999 declined slightly ($.5 million) on sales volumes comparable to the same period in 1998, and increased $1.8 million (5%) during the recent six-month period due to a 3% increase in total electric sales and higher prices for wholesale market power purchased for resale during the first three months of 1999. Despite increased gas sales, cost of gas sold decreased 10% and 5%, respectively, during the current three- and six-month periods due to a 17% and a 14% decline, respectively, in the average per unit costs of gas sold during those periods. The cost of energy services and other revenues, which was chiefly the cost of natural gas purchased for resale by Energy, increased $2.7 million and $6.6 million, respectively, during the second quarter and first six months of 1999 compared to the same periods in 1998 due primarily to Energy's increased sales. Other operation expenses were down $1.6 million (8%) in the second quarter reflecting a $1.8 million decrease in utility operation expenses and a $.2 million increase in operation expenses at SIGCORP's newer nonregulated subsidiaries. The decrease in other operation expenses at SIGECO reflects the $2.0 million provision in June 1998 for uncollectible revenues from a wholesale power marketer. SIGCORP's maintenance expense decreased $1.5 million during the current three- month period compared to the second quarter in 1998 when maintenance expenditures at SIGECO's generating plants and other facilities were greater than anticipated. Maintenance expense for the first six months of 1999 was up 2% over the same period in 1998 due to greater scheduled maintenance expenditures by SIGECO during the first quarter of 1999. INTEREST AND OTHER CHARGES Total interest and other charges increased $.8 million in the second quarter of 1999 due to an equal decline in interest income on investments by SIGCORP's Southern Indiana Properties, Inc. (SIPI) subsidiary. During the six months ending June 30, 1999, total interest and other charges rose $5.1 million due to a substantial decrease in other nonutility income during the first quarter of 1999 compared to the same period in 1998, which included a $2.9 million after-tax gain on the liquidation of SIPI's equity position in a 20 leveraged lease and a $1.4 million decrease in sales to another utility of a portion of SIGECO's emission allowances under a five year agreement beginning in 1995. Total interest expense was comparable to the same period a year ago. A $1.6 million decrease in interest on long-term debt during the current quarter and a $2.8 million decline in this expense for the first six months of 1999 reflected lower average interest rates resulting from SIGECO's 1998 refunding of $80.3 million of tax-exempt bond issues with an equal amount of tax-exempt bonds, and a reduction of long-term debt due to the 1998 refunding of $14 million of first mortgage bonds and the April 1999 refunding of $45 million of first mortgage bonds, with short-term debt (see ''Financing Activities''). The resultant increase in SIGECO's short-term debt is reflected in increases in short-term interest expense during the reporting periods. EARNINGS For the second quarter of 1999, nonutility earnings declined $.03 per share, primarily due to lower earnings at SIPI; utility earnings were unchanged. During the second quarter of 1999, utility earnings were favorably impacted by SIGECO's substantially lower non-fuel operation and maintenance expenses and the growth-related increases in electric sales, all of which were fully offset by fewer sales to other utilities and power marketers and related lower unit prices, fewer sales to residential electric customers and higher depreciation expense. Absent the $2.9 million ($.12 per share) after-tax gain realized at SIPI during the first quarter of 1998, basic earnings for the six-month period would have been $.08 per share below the same period 1998 earnings. PENDING MERGER On June 14, 1999, SIGCORP announced an agreement to merge with Indiana Energy, Inc. (IEI) in an all-stock pooling transaction through which a new holding company, Vectren Corporation, would be formed. In a tax- free exchange, SIGCORP shareholders would receive one and one-third shares of Vectren stock for each share of SIGCORP stock, while IEI shares would be exchanged on a one-for-one basis. The merger would create a company with more than 650,000 customers providing gas and/or electric service in adjoining service areas covering nearly two-thirds of Indiana and assets of approximately $1.8 billion. Completion of the merger is expected in six to nine months. Management expects to generate $200 million in cost savings/avoidance over a ten-year period, net of the one- time merger transaction costs estimated to total $40 million. ENVIRONMENTAL MATTERS (Refer to ''Environmental Matters'' in Management's Discussion and Analysis of Results of Operations and Financial Condition in SIGCORP's 1998 Form 10-K for further discussion of environmental matters.) In July 1997, the United States Environmental Protection Agency (USEPA) issued its final rule which revised the national ambient air quality standard for ozone by setting a lower concentration limit and changing measurement methods. It is anticipated that the number of ozone nonattainment counties in the United States will increase significantly. The USEPA has encouraged states to target utility coal-fired boilers for the majority of the reductions required, especially NOx emissions. Northeastern states have claimed that ozone transport from midwestern states (including Indiana) is the primary reason for their ozone concentration problems. Although this premise is challenged by others based on various air quality modeling studies, including studies commissioned by the USEPA, the USEPA intends to incorporate a regional control strategy to reduce ozone transport. In October 1997, the USEPA provided each state a proposed budget of allowed NOx emissions, a key ingredient of ozone, which requires a significant reduction of such emissions. Under that budget, utilities may be required to reduce NOx emissions to a rate of 0.15 lb/mmBtu from levels already imposed by Phase I and Phase II of the Clean Air Act Amendments of 1990. Midwestern states (the alliance) have been working together to determine the most appropriate compliance strategy as an alternative to the USEPA proposal. The alliance submitted its proposal, which calls for a smaller, phased in reduction of NOx levels, to the USEPA and the Indiana Department of Environmental Management in June 1998. 21 In July 1998, Indiana submitted its proposed plan to the USEPA in response to the USEPA's proposed new NOx rule and the emissions budget proposed for Indiana. The Indiana plan, which calls for a reduction of NOx emissions to a rate of 0.25 lb/mmBtu by 2003, is less stringent than the USEPA proposal but more stringent than the alliance proposal. The USEPA issued its final ruling on September 24, 1998, which was essentially unchanged from its July 1997 proposed rule, after considering all filed comments. The USEPA's final ruling is being litigated in the federal courts by approximately ten midwestern states, including Indiana. The proposed NOx emissions budget for Indiana stipulated in the USEPA's final ruling requires a 36% reduction in total NOx emissions from Indiana. The ruling could require SIGECO to lower its system-wide emissions by approximately 70%. Depending on the level of system-wide emissions reductions ultimately required, and the control technology utilized to achieve the reductions, the estimated construction costs of the control equipment could reach $90 million, and related additional operation and maintenance expenses could be an estimated $10 million to $15 million, annually. Under the USEPA implementation schedule, the emissions reductions and required control equipment must be implemented and in place by May 15, 2003. During the second quarter of 1999, the USEPA lost two federal court challenges to key air-pollution control requirements. In the first ruling by the U.S. Circuit Court of Appeals for the District of Columbia on May 14, 1999, the Court struck down the USEPA's attempt to tighten the one-hour ozone standard to an eight-hour standard and the attempt to tighten the standard for particulate emissions, finding the actions unconstitutional. In the second ruling by the same Court on May 25, 1999, the Court placed an indefinite stay on the USEPA's attempts to reduce the allowed NOx emissions rate from levels required by the Clean Air Act Amendments of 1990. The USEPA has filed appeals on both court rulings. YEAR 2000 READINESS SIGCORP, primarily SIGECO, uses various software, systems and technology that may be affected by the date change in the Year 2000. A Year 2000 team was established in early 1997 to identify and address Year 2000-readiness issues. A high-level assessment of the mission-critical systems and items of all SIGCORP subsidiaries was completed in early 1997. In 1998, this process became more formalized with the establishment of SIGCORP's Year 2000 Task Force. SIGECO has completed a detailed inventory of all systems and devices, including imbedded technology in the operational areas, determined to be date-sensitive. All systems and devices in the inventory have been rated on criticality and likelihood of failure and prioritized for testing. Due to functional obsolescence, under its general business plan SIGECO has recently replaced, or is currently replacing, all of its known major noncompliant mission-critical information and control systems with systems incorporating Year 2000-ready technology. As of June 30, 1999, SIGECO has tested all of its mission-critical systems and devices and remediated those systems and devices found not ready for 2000, thus meeting the North American Electric Reliability Council (NERC)-imposed deadline to ensure Y2K readiness of SIGECO's operations. SIGECO's noncompliant critical information systems, the customer billing and financials/supply chain systems, developed in the late 1960's, are being replaced to address functional obsolescence. The two projects, initiated in 1996 and 1997, respectively, are expected to be completed by 2000. Of the two noncompliant critical information systems being replaced, the customer billing system carries the most risk since it has experienced project delays. Due to the risk of not completing this project by 2000, SIGECO modified its existing customer billing system to be Year 2000-ready, testing of which is substantially completed. The first and largest phase of the financials/supply chain systems project was successfully implemented September 1, 1998 and the smaller, final phase of the financials/supply chain systems project, the payroll/HR information system was successfully implemented in July 1999. 22 At SIGECO's base-load generating stations, all noncompliant critical control and data systems have been replaced or were scheduled to be replaced in 1999 due to functional obsolescence. The 1999 projects were completed by June 30, 1999. Based on the findings of SIGECO's detailed inventory and related testing completed to date, it is anticipated that there will be a low number of smaller noncritical systems and items requiring Year 2000-readiness upgrades or replacement, most of which have been completed. SIGCORP's contingency planning has been completed, and SIGECO's detailed contingency plan was filed with the Indiana Utility Regulatory Commission on June 30, 1999. The planning encompasses external dependencies such as critical suppliers, interconnected electricity and natural gas transmission systems and major customers, as well as SIGECO's electric generation facilities and other gas and electric operations areas. SIGCORP does not yet know whether the critical systems of its suppliers and major customers will be Year 2000-ready, however it believes that noncompliance of such systems would not have a material adverse effect on its financial position or results of operations. SIGCORP estimates the remaining amounts required to be expensed for Year 2000-readiness modifications and replacements to total less than $250,000. SIGECO expects to complete the replacement of all noncompliant mission- critical information and control systems before 2000, except its existing billing system which will have been remediated and will be used until the new system is completed.
Estimated Incurred throughRemaining 1999 June 1999 Expenditures Capital expenditure requirement for replacement of critical: information and generating station control systems not in compliance but replaced due to functional obsolescence $24,700,000 $2,500,000 Expense of Year 2000-readiness modifications to existing critical systems or replacements treated as expense $ 1,500,000 $ 250,000
MARKET RISK SIGCORP is exposed to market risk due to changes in interest rates and changes in the market price for electricity and natural gas resulting from changes in supply and demand. Exposure for interest rate changes relates to its long-term debt and preferred equity and partnership obligations. Exposure to electricity market price risk relates to forward contracts to effectively manage the supply of, and demand for, the electric generation capability of SIGECO's generating plants related to its wholesale power marketing activities. Exposure to natural gas price risk relates to forward contracts taken by Energy to manage its exposure to commodity price risks in providing natural gas supplies to its customers. SIGECO is not currently exposed to market risk for purchases of electric power and natural gas for its retail customers due to current Indiana regulations which allow for full cost recovery of such purchases through SIGECO's fuel and natural gas cost adjustment mechanisms. SIGECO and Energy do not utilize financial instruments for trading or speculative purposes. As of June 30, 1999, management believes exposure from these positions did not change materially from December 31, 1998, and was not material. (Refer to ''Market Risk'' in Management's Discussion and Analysis of Results of Operations and Financial Condition in SIGCORP's 1998 Form 10-K for further discussion of market risk.) SIGECO and Energy are also exposed to counterparty credit risk when a customer or supplier defaults upon a contract to pay or deliver product. To mitigate this risk, they have established procedures to determine and monitor the creditworthiness of counterparties. 23 LIQUIDITY AND CAPITAL RESOURCES CAPITAL REQUIREMENTS SIGCORP's demand for capital is primarily related to SIGECO's construction of utility plant and equipment necessary to meet customers' electric and gas energy needs and environmental compliance requirements. Additionally, SIGCORP may periodically make capital investments in nonregulated operations. Construction expenditures (excluding allowance for other funds used during construction) incurred during the six months ending June 30, 1999 totaled $31.4 million and were 88% funded with internally generated cash. Cash provided from operations increased $7.3 million during the current six- month period compared to the same period in 1998. Cash required for investing and financing activities increased $11.5 million for the six months ended June 30, 1999 compared to the same period a year ago. SIGCORP estimates that SIGECO's construction expenditures for the five-year period 1999-2003 will total approximately $280 million, including approximately $10 million to complete several comprehensive information systems which are necessary to fulfill expanding customer service needs and to better manage SIGECO's resources, but exclude construction expenditures that may be required to comply with new USEPA air quality standards discussed in AEnvironmental Matters@ which could range from estimates of $10 million to $90 million. Additionally, SIGCORP expects to invest approximately $75 million during the five-year period to implement its recently announced Income / Growth strategy which, among other initiatives, incorporates the expansion of SIGCORP's energy services businesses through the acquisition of electrical contracting and HVAC companies in an eight-state region to provide industrial, commercial and institutional customers total energy solutions. FINANCING ACTIVITIES The only financing activity during the second quarter of 1999 was a $44.9 million increase in short-term notes payable representing the April 1, 1999 refunding of $45 million of SIGECO's first mortgage bonds with short-term debt. On July 26, 1999, $80 million in short-term borrowings, including the above amount, were refunded with the issue of $80 million of 6.72% Senior Notes due August 1, 2029. Over the five-year period, SIGCORP expects the majority of the construction requirements, the capital contributions to its nonregulated subsidiaries and an estimated $47 million in debt security redemptions to be provided by internally generated funds. External financing requirements of $95- 110 million are anticipated of which $60-70 million will be used primarily to redeem long-term debt and $35-40 million will be required for acquisitions of nonregulated businesses. These estimates do not reflect construction expenditures that may be required to comply with new USEPA air quality standards. 24 PART TWO - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders NONE Item 5. Other Information NONE Item 6. Exhibits and Reports on Form 8-K (a) 3) Exhibits: SIGCORP and SIGECO EX-4(a) Supplemental Indenture dated July 1, 1999 to the Mortgage and Deed of Trust between Southern Indiana Gas and Electric Company and Bankers Trust Company, as Trustee, for the First Mortgage Bonds, 6.72% Senior Note Series of 1999 due August 1, 2029. EX-4(b) First Supplemental Indenture dated July 1, 1999 between Southern Indiana Gas and Electric Company and Bankers Trust Company, as Trustee, for the 6.72% Senior Notes due August 1, 2029. (b) Reports on Form 8-K The Agreement and Plan of Merger between Indiana Energy, Inc., SIGCORP, Inc. and Vectren Corporation dated June 11, 1999 was filed with the SEC on June 15, 1999. 25 SIGNATURES Pursuant to the requirements 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. SIGCORP, Inc (Registrant) /s/ T. L. Burke T. L. Burke Secretary and Treasurer Date August 16, 199 9 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY s/ S. M. Kerney S. M. Kerney Controller Date August 16, 1999 EX-27 2
UT 0000092195 SOUTHERN INDIANA GAS AND ELECTRIC CO 6-MOS DEC-31-1999 JUN-30-1999 PER-BOOK 731,611 5,961 90,864 45,780 0 874,216 78,258 0 246,127 324,385 0 19,282 169,799 104,084 0 0 53,700 0 0 0 202,966 874,216 185,003 11,865 143,653 155,518 29,485 286 29,771 9,378 20,393 539 19,854 16,191 7,381 54,356 0 0
EX-4.1 3 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY WITH BANKERS TRUST COMPANY, as Trustee SUPPLEMENTAL INDENTURE Providing among other things for FIRST MORTGAGE BONDS 6.72% Senior Note Series of 1999 due 2029 Dated as of July 1, 1999 SUPPLEMENTAL INDENTURE, dated as of July 1, 1999, between SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Indiana (hereinafter called the "Company"), party of the first part, and BANKERS TRUST COMPANY, a corporation organized and existing under the laws of the State of New York, as Trustee under the Mortgage hereinafter referred to, party of the second part. WHEREAS, the Company heretofore executed and delivered to Bankers Trust Company, as Trustee (hereinafter called the "Trustee"), a certain Indenture of Mortgage and Deed of Trust dated as of April 1, 1932, to secure an issue of bonds of the Company, issued and to be issued in series, from time to time, in the manner and subject to the conditions set forth in the said Indenture, and the said Indenture has been amended and supplemented by Supplemental Indentures dated as of August 31, 1936, October 1, 1937, March 22, 1939, July 1, 1948, June 1, 1949, October 1, 1949, January 1, 1951, April 1, 1954, March 1, 1957, October 1, 1965, September 1, 1966, August 1, 1968, May 1, 1970, August 1, 1971, April 1, 1972, October 1, 1973, April 1, 1975, January 15, 1977, April 1, 1978, June 4, 1981, January 20, 1983, November 1, 1983, March 1, 1984, June 1, 1984, November 1, 1984, July 1, 1985, November 1, 1985, June 1, 1986, November 15, 1986, January 15, 1987, December 15, 1987, December 13, 1990, April 1, 1993, May 1, 1993 and June 1, 1993, which Indenture as so amended and supplemented is hereinafter referred to as the "Mortgage" and as further supplemented by this Supplemental Indenture is hereinafter referred to as the "Indenture"; and WHEREAS, the Mortgage provides that the Company and the Trustee may, from time to time, enter into such indentures supplemental to the Mortgage as shall be deemed by them necessary or desirable, to establish the terms and provisions of any series of bonds to be issued under said Mortgage and to add to the covenants and agreements of the Company for the protection of the holders of bonds and of the mortgaged and pledged property; and WHEREAS, the Company and the Trustee deem it necessary or desirable to enter into this Supplemental Indenture for such purposes; and WHEREAS, the Company by appropriate corporate action in conformity with the terms of the Indenture has duly determined to create a series of bonds to be issued under the Indenture to be designated as "First Mortgage Bonds, 6.72% Senior Note Series of 1999 due 2029" (hereinafter sometimes referred to as "bonds of the Thirty- Eighth Series"), the bonds of which series are to bear interest at the rate per annum set forth in the title thereof; and WHEREAS, the definitive registered (without coupons) bonds of the Thirty-Eighth Series and the Trustee's certificate of authentication to be borne by such bonds are to be substantially in the following forms, respectively: [FORM OF FULLY REGISTERED BOND OF THE THIRTY-EIGHTH SERIES] [FORM OF FACE OF BOND] TRANSFER RESTRICTED. EXCEPT AS PROVIDED BELOW, THIS BOND IS NOT TRANSFERABLE. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY FIRST MORTGAGE BOND, 6.72% SENIOR NOTE SERIES OF 1999 DUE 2029 No. _______ $ 80,000,000 Southern Indiana Gas and Electric Company, a corporation of the State of Indiana (hereinafter called the "Company"), for value received, hereby promises to pay to BANKERS TRUST COMPANY, as Trustee (hereinafter called the "Senior Note Trustee") under and Indenture (For Senior Notes) dated as of July 1, 1999, between the Company and the Senior Note Trustee, as supplemented by the First Supplemental Indenture dates as of July 1, 1999 (hereinafter called, together with such First Supplemental Indenture, the "Senior Note Indenture"), or registered assigns Eighty Million Dollars, on August 1, 2029 at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, and to pay to the registered owner hereof interest thereon from the interest payment date (February 1 or August 1) next preceding the date of this bond unless the date hereof is prior to February 1, 2000, in which case from July 26, 1999 (or, if this bond is dated between the record date for any interest payment date and such interest payment date, then from such interest payment date), at the rate of six and seventy-two one-hundredths per cent (6.72%) per annum in like coin or currency, payable at said office or agency on February 1 and August 1 in each year, commencing February 1, 2000, until the Company's obligation with respect to the payment of such principal shall have been discharged. The interest so payable on any February 1 or August 1 will, subject to certain exceptions provided in the Mortgage hereinafter mentioned, be paid to the person in whose name this bond is registered at the close of business on the record date, which shall be the January 15 or July 15, as the case may be, next preceding such interest payment date, or, if such January 15 or July 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, The City of New York, New York, are authorized or obligated by law to close, the next preceding day which shall not be a legal holiday or a day on which such institutions are so authorized or obligated to close. The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. This bond shall not become obligatory until Bankers Trust Company, the Trustee under the Mortgage, or its successor thereunder, shall have signed the form of certificate endorsed hereon. IN WITNESS WHEREOF, Southern Indiana Gas and Electric Company has caused this bond to be signed in its name by its President or a Vice President, by his signature or a facsimile thereof, and a facsimile of its corporate seal to be imprinted hereon, attested by its Secretary or an Assistant Secretary, by his signature or a facsimile thereof. Dated: SOUTHERN INDIANA GAS AND ELECTRIC COMPANY By:__________________________ Name: Title: President and Chief Executive Officer Attest: _______________________________ Secretary [FORM OF TRUSTEE'S CERTIFICATE] This bond is one of the bonds of the series designated therein, described in the within-mentioned Mortgage. BANKERS TRUST COMPANY, as Trustee, By:____________________ Name: Title: [FORM OF REVERSE OF BOND] SOUTHERN INDIANA GAS AND ELECTRIC COMPANY FIRST MORTGAGE BOND, 6.72% SENIOR NOTE SERIES OF 1999 DUE 2029 This bond is one of an issue of First Mortgage Bonds of the Company, issuable in series, and is one of the series designated in the title hereof, all issued and to be issued under and equally secured (except as to any sinking fund established in accordance with the provisions of the Mortgage hereinafter mentioned for the bonds of any particular series) by an Indenture of Mortgage and Deed of Trust, dated as of April 1, 1932, executed by the Company to Bankers Trust Company, as Trustee, as amended and supplemented by indentures supplemental thereto, to which Indenture as so amended and supplemented (herein referred to as the Mortgage) reference is made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof and the terms and conditions upon which the bonds are secured. The principal hereof may be declared or may become due on the conditions, with the effect, in the manner and at the time set forth in the Mortgage, upon the occurrence of a completed default as provided in the Mortgage. The bonds of the Thirty-Eighth Series are not transferable except (i) as required to effect an assignment to a successor trustee under the Senior Note Indenture, or as otherwise provided in Sections 407 and 409 of the Senior Note Indenture, or (ii) in compliance with a final order of a court of competent jurisdiction in connection with any bankruptcy or reorganization proceeding of the Company. The Company's obligation to make payments with respect to the principal of, and/or premium, if any, and/or interest on, the bonds of the Thirty-Eighth Series shall be fully or partially satisfied and discharged to the extent that, at the time any such payment shall be due, the corresponding amount then due of principal of, and/or premium, if any, and/or interest on, the senior notes (the "Senior Notes") issued pursuant to the Senior Note Indenture (the "Senior Notes") shall have been fully or partially paid (other than by the application of the proceeds of a payment in respect of the bonds of the Thirty-Eighth Series), as the case may be, or there shall have been deposited with the Senior Note Trustee pursuant to the Senior Note Indenture trust funds sufficient under such indenture to fully or partially pay, as the case may be, the corresponding amount then due of principal of, and/or or premium, if any, and/or interest on, the Senior Notes (other than by the application of the proceeds of a payment in respect of the bonds of the Thirty-Eighth Series). Upon payment of the principal of, and premium if any, and interest due on the Senior Notes, whether at maturity or prior to maturity by acceleration, redemption, repayment at the option of a registered holder of Senior Notes or otherwise, or upon provision for the payment thereof having been made in accordance with the Senior Note Indenture (other than by the application of the proceeds of a payment in respect of the bonds of the Thirty-Eighth Series), the bonds of the Thirty-Eighth Series in a principal amount equal to the principal amount of Senior Notes so paid or for which such provision for payment has been made shall be deemed fully paid, satisfied and discharged and the obligations of the Company thereunder shall be terminated and such bonds of the Thirty-Eighth Series shall be surrendered to and canceled by the Trustees. From and after the Release Date (as defined in the Senior Note Indenture), the bonds of the Thirty-Eighth Series shall be deemed fully paid, satisfied and discharged and the obligation of the Company thereunder shall be terminated. On the Release Date, the bonds of the Thirty- Eighth Series shall be surrendered to and canceled by the Trustees. The Company may redeem the bonds of the Thirty- Eighth Series, in whole or in part, at any time, upon notice as provided in the Mortgage (not less than 30 nor more than 60 days prior to a date fixed for redemption (the "Redemption Date")) at a redemption price equal to the greater of (1) 100% of principal or (2) the sum of the remaining scheduled payments of principal and interest on the bonds of the Thirty-Eighth Series, discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield plus ten basis points (.10%), plus in each case accrued interest to the Redemption Date (the "Redemption Price"), such Redemption Price to be set forth in an Officer's Certificate delivered to the Trustee on or before the Redemption Date and upon which the Trustee may conclusively rely. The following terms shall have the following meanings: "Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the bonds of the Thirty-Eighth Series that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the bonds of the Thirty- Eighth Series. "Independent Investment Banker" means Goldman, Sachs & Co. or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing selected by the Company and appointed by the Trustee. "Comparable Treasury Price" means, with respect to any Redemption Date, the Reference Treasury Dealer Quotation for such Redemption Date. "Reference Treasury Dealer Quotation" means, with respect to the Reference Treasury Dealer and any Redemption Date, the average of the bid and asked prices for the Comparable Treasury Issue (expressed as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption Date. The Company shall furnish the Trustee a notice in writing at least five business days and not more than ten business days prior to such Redemption Date of (a) the name of the Reference Treasury Dealer, (b) the Redemption Date, and (c) the third business day preceding the Redemption Date. "Reference Treasury Dealer" means Goldman, Sachs & Co. and its successors; provided, however, that if Goldman, Sachs & Co. shall cease to be a primary U.S. Government Securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. The Company shall deliver to the Trustee the Officer's Certificate referred to above setting forth the Company's calculation of the Redemption Price applicable to any such redemption promptly after the calculation thereof but, in any event, prior to the Redemption Date of any such bonds of the Thirty-Eighth Series. Except with respect to the obligations of the Trustee expressly set forth in the foregoing definition of "Reference Treasury Dealer Quotation," the Trustee shall be under no duty to inquire into, may presume the correctness of, and shall be fully protected in acting upon the Company's calculation of any Redemption Price of the bonds of the Thirty-Eighth Series. If the registered holder of Senior Notes elects to have any portion of such Senior Notes repaid on August 3, 2009 pursuant to the terms of such Senior Notes, an equal principal amount of the bonds of the Thirty-Eighth Series shall be repaid by the Company to the holder thereof on such date at 95.5% of such principal amount, together with accrued interest to August 3, 2009. Failure by the Company to repay the bonds of the Thirty-Eighth Series when required as described in the preceding paragraph will result in an Event of Default under the Mortgage. The bonds of this series are issuable as registered bonds without coupons in denominations of $1,000 and authorized multiples thereof. In the manner and upon payment of the charges prescribed in the Mortgage, registered bonds without coupons of this series may be exchanged for a like aggregate principal amount of registered bonds without coupons of other authorized denominations of the same series, upon presentation and surrender thereof, for cancellation, to the Trustee at its principal corporate trust office in the Borough of Manhattan, The City of New York, New York. No recourse shall be had for the payment of the principal of, premium, if any, or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, office or director of the Company or of any predecessor or successor corporation, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage. Pursuant to the Mortgage, the holder or owner of this bond by his acceptance hereof is deemed to have agreed to amendments to the Mortgage which will eventually permit certain amendments to the Mortgage with the consent of the holders of 66% of the principal amount of the outstanding bonds of all series issued under the Mortgage, which redefine, effective at such time as all bonds of each series of bonds issued under the Mortgage prior to January 1, 1977 are no longer outstanding, the amounts required to be spent by the Company under the Mortgage for the repair, maintenance, renewal and replacement of its property and which authorize the Company, effective at such time as all bonds of each series issued under the Mortgage on or prior to May 31, 1986 are no longer outstanding, to designate bonds of any series as the bonds to be redeemed pursuant to Section 36B of the Mortgage and to do so at any time that cash for such purpose is on deposit with Trustee pursuant to the provisions of that Section. [END OF FORM OF BOND] and WHEREAS, all things necessary to make the bonds of the Thirty-Eighth Series, when authenticated by the Trustee and issued as in the Indenture provided, the valid, binding and legal obligations of the Company, entitled in all respects to the security of the Indenture, have been done and performed, and the creation, execution and delivery of this Supplemental Indenture has in all respects been duly authorized; and WHEREAS, the Company and the Trustee deem it advisable to enter into this Supplemental Indenture for the purposes above stated and for the purpose of describing the bonds of the Thirty-Eighth Series, and of providing the terms and conditions of redemption thereof; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: That Southern Indiana Gas and Electric Company, in consideration of the premises and of one dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and of the purchase and acceptance of the bonds issued or to be issued hereunder by the holders or registered owners thereof, and in order to secure the payment of the principal, premium, if any, and interest of all bonds at any time issued and outstanding under the Indenture, according to their tenor and effect, and the performance of all of the provisions hereof and of said bonds, hath granted, bargained, sold, released, conveyed, assigned, transferred, pledged, set over and confirmed and by these presents doth grant, bargain, sell, release, convey, assign, transfer, pledge, set over and confirm unto Bankers Trust Company, as Trustee, and to its successor or successors in said trust, and to its and their assigns forever, all the properties of the Company located in the State of Indiana described in Schedule A (which is identified by the signature of an officer of each party hereto at the end thereof) hereto annexed and hereby made a part hereof and does hereby confirm that the Company will not cause or consent to a partition, either voluntary or through legal proceedings, of property, whether herein described or heretofore or hereafter acquired, in which its ownership shall be as a tenant in common, except as permitted by and in conformity with the provisions of the Indenture and particularly of Article X thereof. TOGETHER WITH all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid property or any party thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Article X of the Indenture), the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right title interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof. TO HAVE AND TO HOLD all such properties, real, personal and mixed, mortgaged, pledged or conveyed by the Company as aforesaid, or intended so to be, unto the Trustee and its successors and assigns forever. IN TRUST, NEVERTHELESS, upon the terms and trusts of the Indenture, for those who shall hold the bonds and coupons issued and to be issued thereunder, or any of them, without preference, priority or distinction as to lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiation thereof, or otherwise howsoever, subject, however, to the provisions in reference to extended, transferred or pledged coupons and claims for interest set forth in the Indenture (and subject to any sinking funds that may be created for the benefit of any particular series). PROVIDED, HOWEVER, and these presents are upon the condition that, if the Company, its successors or assigns, shall pay or cause to be paid, the principal of, premium, if any, and interest on said bonds, at the times and in the manner stipulated therein and herein, and shall keep, perform and observe all and singular the covenants and promises in said bonds and in the Indenture expressed to be kept, performed and observed by or on the part of the Company, then this Supplemental Indenture and the estate and rights hereby granted shall cease, determine and be void, otherwise to be and remain in full force and effect. IT IS HEREBY COVENANTED, DECLARED AND AGREED, by the Company, that all such bonds and coupons are to be issued, authenticated and delivered, and that all property subject or to become subject hereto is to be held, subject to the further covenants, conditions, uses and trusts in the Indenture set forth, and the Company, for itself and its successors and assigns, does hereby covenant and agree to and with the Trustee and its successor or successors in such trust, for the benefit of those who shall hold said bonds and interest coupons, or any of them, as follows: SECTION 1. Bonds of the Thirty-Eighth Series shall mature on the date set forth in the form of bond relating thereto hereinbefore set forth, shall bear interest at the rate per annum set forth in the title thereof, payable semi-annually, on February 1 and August 1 in each year, and all bonds of said series shall be designated as hereinbefore in the fourth Whereas clause set forth. Principal of, premium, if any, and interest on said bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York. Definitive bonds of said series may be issued, originally or otherwise, only as registered bonds without coupons; and they and the Trustee's certificate of authentication shall be substantially in the forms hereinbefore recited, respectively. Definitive registered bonds of the Thirty- Eighth Series may be issued in the denomination of $1,000 and in such other denominations (in multiples of $1,000) as the Board of Directors of the Company shall approve, and execution and delivery to the Trustee for authentication shall be conclusive evidence of such approval. In the manner and upon payment of the charges prescribed in the Indenture, registered bonds without coupons of said series may be exchanged for a like aggregate principal amount of registered bonds without coupons of other authorized denominations of the same series, upon presentation and surrender thereof for cancellation to the Trustee at its principal corporate trust office in the Borough of Manhattan, The City of New York, New York. However, notwithstanding the provisions of Section 12 of the Indenture, no charge shall be made upon any transfer or exchange of bonds of said series other than for any tax or taxes or other governmental charge required to be paid by the Company. The form of the temporary bonds of said series shall be in substantially the form of the form of registered bond hereinbefore recited with such appropriate changes therein as are required on account of the temporary nature thereof. Said temporary bonds of said series shall be in registered form without coupons and shall be exchangeable for definitive bonds of said series when prepared. The person in whose name any registered (without coupons) bond of the Thirty-Eighth Series is registered at the close of business on any record date (as hereinbelow defined) with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such registered bond upon any transfer or exchange thereof subsequent to the record date and prior to such interest payment date, except if and to the extent the Company shall default in the payment of the interest due on such interest payment date, in which case such defaulted interest shall be paid to the person in whose name such bond is registered either at the close of business on the day preceding the date of payment of such defaulted interest or on a subsequent record date for such payment if one shall have been established as hereinafter provided. A subsequent record date may be established by or on behalf of the Company by notice mailed to the holders of bonds not less than ten days preceding such record date, which record date shall be not more than thirty days prior to the subsequent interest payment date. The term "record date" as used in this Section with respect to any regular interest payment date shall mean the January 15 or July 15, as the case may be, next preceding such interest payment date, or, if such January 15 or July 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, The City of New York, New York, are authorized or obligated by law to close, the next preceding day which shall not be a legal holiday or day on which such institutions are so authorized or obligated to close. Except as provided in this Section, every registered bond without coupons of the Thirty-Eighth Series shall be dated and shall bear interest as provided in Section 10 of the Indenture; provided, however, that so long as there is no existing default in the payment of interest on the bonds, the holder of any bond authenticated by the Trustee between the record date for any interest payment date and such interest payment date shall not be entitled to the payment of the interest due on such interest payment date and shall have no claim against the Company with respect thereto; and provided, further, that, if and to the extent the Company shall default in the payment of the interest due on such interest payment date, then any such bond shall bear interest from the February 1 or August 1, as the case may be, next preceding the date of such bond, to which interest has been paid or, if the Company shall be in default with respect to the interest due on February 1, 2000, then from July 26, 1999. The Company may redeem the bonds of the Thirty- Eighth Series, in whole or in part, at any time, upon notice as provided in the Indenture (not less than 30 nor more than 60 days prior to a date fixed for redemption (the "Redemption Date")) at a redemption price equal to the greater of (1) 100% of principal or (2) the sum of the remaining scheduled payments of principal and interest on the bonds of the Thirty-Eighth Series, discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield plus ten basis points (.10%), plus in each case accrued interest to the Redemption Date (the "Redemption Price"), such Redemption Price to be set forth in an Officer's Certificate delivered to the Trustee on or before the Redemption Date and upon which the Trustee may conclusively rely. The following terms shall have the following meanings: "Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the bonds of the Thirty-Eighth Series that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the bonds of the Thirty- Eighth Series. "Independent Investment Banker" means Goldman, Sachs & Co. or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing selected by the Company and appointed by the Trustee. "Comparable Treasury Price" means, with respect to any Redemption Date, the Reference Treasury Dealer Quotation for such Redemption Date. "Reference Treasury Dealer Quotation" means, with respect to the Reference Treasury Dealer and any Redemption Date, the average of the bid and asked prices for the Comparable Treasury Issue (expressed as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption Date. The Company shall furnish the Trustee a notice in writing at least five business days and not more than ten business days prior to such Redemption Date of (a) the name of the Reference Treasury Dealer, (b) the Redemption Date, and (c) the third business day preceding the Redemption Date. "Reference Treasury Dealer" means Goldman, Sachs & Co. and its successors; provided, however, that if Goldman, Sachs & Co. shall cease to be a primary U.S. Government Securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. The Company shall deliver to the Trustee the Officer's Certificate referred to above setting forth the Company's calculation of the Redemption Price applicable to any such redemption promptly after the calculation thereof but, in any event, prior to the Redemption Date of any such bonds of the Thirty-Eighth Series. Except with respect to the obligations of the Trustee expressly set forth in the foregoing definition of "Reference Treasury Dealer Quotation," the Trustee shall be under no duty to inquire into, may presume the correctness of, and shall be fully protected in acting upon the Company's calculation of any Redemption Price of the bonds of the Thirty-Eighth Series. The bonds of the Thirty-Eighth Series may be repaid on August 3, 2009, at the option of the registered holders of the bonds of the Thirty-Eighth Series, at 95.5% of their principal amount, together with accrued interest to August 3, 2009. In order for a holder to exercise this option, the Company must receive at its office or agency in New York, New York, during the period beginning on June 3, 2009 and ending at 5:00 p.m. (New York City time) on July 3, 2009 (or, if July 3, 2009 is not a Business Day, the next succeeding Business Day), the bonds of the Thirty-Eighth Series with the form titled "Option to Elect Repayment on August 3, 2009" on the reverse of the bonds of the Thirty-Eighth Series duly completed. Any such notice received by the Company during the period beginning on June 3, 2009 and ending at 5:00 p.m. (New York City time) on July 3, 2009 shall be irrevocable. The repayment option may be exercised by the holder of a bonds of the Thirty-Eighth Series for less than the entire principal amount of the bonds of the Thirty-Eighth Series held by such holder, so long as the principal amount that is to be repaid is equal to $1,000 or an integral multiple of $1,000. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any bonds of the Thirty-Eighth Series for repayment will be determined by the Company, whose determination will be final and binding. Failure by the Company to repay the bonds of the Thirty-Eighth Series when required as described in the preceding paragraph will result in an Event of Default under the Indenture. As long as the bonds of the Thirty-Eighth Series are represented by a Global Security, the Depositary's nominee will be the registered holder of the bonds of the Thirty- Eighth Series and therefore it will be the only entity that can exercise the right to repayment. SECTION 2. The Company's obligation to make payments with respect to the principal of, and/or premium, if any, and/or interest on, the bonds of the Thirty-Eighth Series shall be fully or partially satisfied and discharged to the extent that, at the time any such payment shall be due, the corresponding amount then due of principal of, and/or premium, if any, and/or interest then due on, the senior notes (the "Senior Notes") issued pursuant to the Indenture (For Senior Notes) dated as of July 1, 1999, between the Company and Bankers Trust Company, the Senior Note Trustee (the "Senior Note Indenture") shall have been fully or partially paid (other than by the application of the proceeds of a payment in respect of such bonds of the Thirty-Eighth Series), as the case may be, or there shall have been deposited with the Senior Note Trustee pursuant to the Senior Note Indenture trust funds sufficient under such indenture to fully or partially pay, as the case may be, the corresponding amount then due of principal of, and/or premium, if any, and/or interest on, the Senior Notes (other than by the application of the proceeds of a payment in respect of such bonds of the Thirty-Eighth Series). Upon payment of the principal of, and premium if any, and interest due on the Senior Notes, whether at maturity or prior to maturity by acceleration, redemption, repayment at the option of a registered holder of Senior Notes or otherwise, or upon provision for the payment thereof having been made in accordance with the Senior Note Indenture (other than by the application of the proceeds of a payment in respect of such bonds of the Thirty-Eighth Series), bonds of the Thirty-Eighth Series in a principal amount equal to the principal amount of Senior Notes so paid or for which such provision for payment has been made shall be deemed fully paid, satisfied and discharged and the obligations of the Company thereunder shall be terminated and such bonds of the Thirty-Eighth Series shall be surrendered to and cancelled by the Trustee. From and after the Release Date (as defined in the Senior Note Indenture), the bonds of the Thirty-Eighth Series shall be deemed fully paid, satisfied and discharged and the obligation of the Company thereunder shall be terminated. On the Release Date, the bonds of the Thirty-Eighth Series shall be surrendered to and cancelled by the Trustee. If the registered holder of Senior Notes elects to have any portion of such Senior Notes repaid on August 3, 2009 pursuant to the terms of such Senior Notes, an equal principal amount of the bonds of the Thirty-Eighth Series shall be repaid by the Company to the holder thereof on such date at 95.5% of such principal amount, together with accrued interest to August 3, 2009. SECTION 3. The Company covenants that the provisions of Section 36A of the Indenture and of Section 1.02 of the Supplemental Indenture dated as of July 1, 1948, which are to remain in effect so long as any bonds of the series referred to in said Section shall be outstanding under the Indenture, shall remain in full force and effect so long as any bonds of the Thirty-Eighth Series shall be outstanding under the Indenture. SECTION 4. Except as herein otherwise expressly provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture, other than as set forth in the Mortgage. The Trustee shall not be responsible for the recitals herein or in the bonds (except the Trustee's certificate of authentication), all of which are made by the Company solely. Without limiting the generality of the foregoing, the Trustee shall have no responsibility for, and shall incur no liability with respect to, the form or substance of the Certificates or the form or substance of any agreement under which any banking or other financial institution receives the Deposit or makes the Payments nor shall the Trustee have any responsibility, or incur any liability, with respect to the performance of such banking or other financial institution under any such agreement. SECTION 5. As supplemented and amended by this Supplemental Indenture, the Mortgage is in all respects ratified and confirmed, and the Mortgage and this Supplemental Indenture shall be read, taken and construed as one and the same instrument. SECTION 6. This Supplemental Indenture may be executed in several counterparts and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. IN WITNESS WHEREOF, SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, party of the first part hereto, and BANKERS TRUST COMPANY, party of the second part hereto, have caused these presents to be executed in their respective names by their respective Chairmen of the Board or Presidents or one of their Vice Presidents or Assistant Vice Presidents and their respective seals to be hereunto affixed and attested by their respective Secretaries or one of their Assistant Secretaries, all as of the day and year first above written. (SEAL) SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, By:/s/ Timothy L. Burke Name: Timothy L. Burke Title: Secretary/Treasurer Attest: /s/ Linda K. Tiemann_________ Name: Linda K. Tiemann Title: Assistant Secretary (SEAL) BANKERS TRUST COMPANY, By:/s/ Vincent Chorney Name: Vincent Chorney Title: Assistant Vice President Attest: /s/ Marc Parilla__________ Name: Marc Parilla Title: Assistant Vice President STATE OF INDIANA ) ) ss.: COUNTY OF VANDERBURGH ) On this 26 day of July, 1999, before me, the undersigned, a notary public in and for the county and state aforesaid, personally came Timothy L. Burke, to me known, who being by me duly sworn, did depose and say that he resides at 3277 Brookfield Drive, Newburgh, Indiana; that he is Secretary/Treasurer of SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of the said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order; and the said Linda K. Tiemann, Assistant Secretary acknowledged the execution of the foregoing instrument on behalf of the said corporation as the voluntary act and deed of the said corporation for the uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year first above written. (SEAL) /s/ Donna S. Welden__________ Notary Public My Commission Expires November 29, 2000 My County of Residence is Vanderburgh STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this 26 day of July, 1999, before me, the undersigned, a notary public in and for the county and state aforesaid, personally came Vincent Chorney, to me known, who being by me duly sworn, did depose and say that he resides at 215 W. 75 Street, New York, NY; that he is an Assistant Vice President of BANKERS TRUST COMPANY, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of the said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order; and the said Assistant Vice President acknowledged the execution of the foregoing instrument on behalf of the said corporation as the voluntary act and deed of the said corporation for the uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year first above written. (SEAL) /s/ Boris Treyger Notary Public My Commission Expires November 9, 2000 My County of Residence is Kings County A-1 SCHEDULE A Detailed Description of Additional Properties The following list outlines equipment and properties pledged as collateral and placed in service between 1993 and 1996: * Culley Generating Station Units 2 & 3 Scrubber Project; * Brown Unit 1 Turbine Blades * Broadway Gas Turbine Overhaul * Z-98 Transmission Line Phase 3 Construction * GE Plastics Substation Purchase (Transmission) * Point Substation Addition (Transmission) * System Power Control Center Upgrades * Deaconess Hospital Substation Upgrades (Distribution) * Toyota Substation (Distribution) * Kasson - Copperline Gas Main Installations * CNG Fueling Station * Wagner Operation Center Phase 5 Construction and Improvements Signed for identification /s/ Timothy L. Burke Name: Timothy L. Burke Title: Secretary/Treasurer SOUTHERN INDIANA GAS AND ELECTRIC COMPANY /s/ Marc J. Parilla Name: Marc J. Parilla Title: Assistant Vice President BANKERS TRUST COMPANY EX-4.2 4 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY TO BANKERS TRUST COMPANY, Trustee ------ First Supplemental Indenture Dated as of July 1, 1999 to Indenture (For Senior Notes) Dated as of July 1, 1999 ____________________________ 6.72% Senior Notes due August 1, 2029 THIS FIRST SUPPLEMENTAL INDENTURE, dated as of July 1, 1999, between SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, a corporation duly organized and existing under the laws of the State of Indiana (herein called the "Company"), having its principal office at 20 N.W. Fourth Street, Evansville, Indiana 47741-0001, and BANKERS TRUST COMPANY, a banking corporation of the State of New York, having its principal office at 4 Albany Street, 4th Floor, New York, New York 10006, as Trustee (herein called the "Trustee") under the Indenture (For Senior Notes) dated as of July 1, 1999 between the Company and the Trustee (the "Indenture"). Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. RECITALS OF THE COMPANY A. The Company has executed and delivered the Indenture to the Trustee to provide for the issuance from time to time of its Senior Notes (the "Notes"), said Notes to be issued in one or more series as in the Indenture provided. B. Pursuant to the terms of the Indenture, the Company desires to establish a new series of its Notes to be known as its 6.72% Senior Notes due 2029 (herein called the "Senior Notes Due 2029"), the form and substance of such Senior Notes Due 2029 and the terms, provisions, and conditions thereof to be set forth as provided in the Indenture and this First Supplemental Indenture. C. All things necessary to make this First Supplemental Indenture a valid agreement of the Company, and to make the Senior Notes Due 2029, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been done. NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Senior Notes Due 2029 by the Holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Senior Notes Due 2029 and the terms, provisions, and conditions thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Senior Notes Due 2029, as follows: ARTICLE I GENERAL TERMS AND CONDITIONS OF THE SENIOR NOTES DUE 2029 Section 101 There is hereby established a series of Notes designated the "6.72% Senior Notes due 2029," limited in the aggregate principal amount of EIGHTY MILLION AND NO/100 DOLLARS ($80,000,000). Such series of Notes shall be initially authenticated and delivered from time to time upon delivery to the Trustee of the documents required by Section 303 of the Indenture including, among other things, a Company Order for the authentication and delivery of the Senior Notes Due 2029. Section 102 The Senior Notes Due 2029 shall be issued in certificated form, except that the Senior Notes Due 2029 shall be issued initially as a Global Note to and registered in the name of a nominee of The Depository Trust Company, as Depositary therefor. Any Senior Notes Due 2029 to be issued or transferred to, or to be held by such nominee (or any successor thereof) for such purpose shall bear the depositary legend in substantially the form set forth at the top of the form of Senior Notes Due 2029 in Article II hereof, unless otherwise agreed by the Company, such agreement to be confirmed in writing to the Trustee. Such Global Note may be exchanged in whole or in part for Senior Notes Due 2029 registered, and any transfer of such Global Note in whole or in part may be registered, in the name or names of Persons other than such Depositary or a nominee thereof as to which the Company shall agree, such agreement to be confirmed in writing to the Trustee. Principal of, and premium, if any, and interest on the Senior Notes Due 2029 will be payable, the transfer of Senior Notes Due 2029 will be registrable and Senior Notes Due 2029 will be exchangeable for Senior Notes Due 2029 bearing identical terms and provisions, at the office or agency of the Company in the Borough of Manhattan, The City and State of New York; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holders thereof at such address as shall appear in the Note Register. The Senior Notes Due 2029 shall have the terms set forth in the form of the Senior Notes Due 2029 set forth in Article II hereof. Section 103 The Company may redeem the Senior Notes Due 2029, in whole or in part, at any time, upon notice as provided in the Indenture (not less than 30 nor more than 60 days prior to a date fixed for redemption (the "Redemption Date")) at a redemption price equal to the greater of (1) 100% of principal or (2) the sum of the remaining scheduled payments of principal and interest on the Senior Notes Due 2029, discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield plus ten basis points (.10%), plus in each case accrued interest to the Redemption Date (the "Redemption Price"), such Redemption Price to be set forth in an Officer's Certificate delivered to the Trustee on or before the Redemption Date and upon which the Trustee may conclusively rely. For purposes of this Section 103, the following terms shall have the following meanings: "Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Senior Notes Due 2029 that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Senior Notes Due 2029. "Independent Investment Banker" means Goldman, Sachs & Co. or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing selected by the Company and appointed by the Trustee. "Comparable Treasury Price" means, with respect to any Redemption Date, the Reference Treasury Dealer Quotation for such Redemption Date. "Reference Treasury Dealer Quotation" means, with respect to the Reference Treasury Dealer and any Redemption Date, the average of the bid and asked prices for the Comparable Treasury Issue (expressed as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption Date. The Company shall furnish the Trustee a notice in writing at least five business days and not more than ten business days prior to such Redemption Date of (a) the name of the Reference Treasury Dealer, (b) the Redemption Date, and (c) the third business day preceding the Redemption Date. "Reference Treasury Dealer" means Goldman, Sachs & Co. and its successors; provided, however, that if Goldman, Sachs & Co. shall cease to be a primary U.S. Government Securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. The Company shall deliver to the Trustee the Officer's Certificate referred to above in this Section 103 setting forth the Company's calculation of the Redemption Price applicable to any such redemption promptly after the calculation thereof but, in any event, prior to the Redemption Date of any such Senior Notes Due 2029. Except with respect to the obligations of the Trustee expressly set forth in the foregoing definition of "Reference Treasury Dealer Quotation," the Trustee shall be under no duty to inquire into, may presume the correctness of, and shall be fully protected in acting upon the Company's calculation of any Redemption Price of the Senior Notes Due 2029. Section 104 The Senior Notes Due 2029 may be repaid on August 3, 2009, at the option of the registered holders of the Senior Notes Due 2029, at 95.5% of their principal amount, together with accrued interest to August 3, 2009. In order for a holder to exercise this option, the Company must receive at its office or agency in New York, New York, during the period beginning on June 3, 2009 and ending at 5:00 p.m. (New York City time) on July 3, 2009 (or, if July 3, 2009 is not a Business Day, the next succeeding Business Day), the Senior Note Due 2029 with the form titled "Option to Elect Repayment on August 3, 2009" on the reverse of the Senior Note Due 2029 duly completed. Any such notice received by the Company during the period beginning on June 3, 2009 and ending at 5:00 p.m. (New York City time) on July 3, 2009 shall be irrevocable. The repayment option may be exercised by the holder of a Senior Note Due 2029 for less than the entire principal amount of the Senior Notes Due 2029 held by such holder, so long as the principal amount that is to be repaid is equal to $1,000 or an integral multiple of $1,000. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any Senior Note Due 2029 for repayment will be determined by the Company, whose determination will be final and binding. Failure by the Company to repay the Senior Notes Due 2029 when required as described in the preceding paragraph will result in an Event of Default under the Indenture. As long as the Senior Notes Due 2029 are represented by a Global Security, the Depositary's nominee will be the registered holder of the Senior Notes Due 2029 and therefore it will be the only entity that can exercise the right to repayment. Section 105 The Company has issued pursuant to a Supplemental Indenture dated as of July 1, 1999 to the First Mortgage, and hereby delivers to the Trustee for the benefit of the Holders of all Notes from time to time Outstanding under the Indenture, a series of Senior Note First Mortgage Bonds designated the "First Mortgage Bonds, 6.72% Senior Note Series Due 2029." The Senior Note First Mortgage Bonds have the same rate or rates of interest (or interest calculated in the same manner) (including interest payable following a default on the Senior Notes Due 2029), interest payment dates, maturity and redemption provisions, and have been issued in the same aggregate principal amount, as the Senior Notes Due 2029. Section 106 When the obligation of the Company to make payments with respect to the principal of, and premium, if any, and interest on all or any part of the Senior Note First Mortgage Bonds shall be satisfied or deemed satisfied pursuant to Section 403, Section 801 or Section 802 of the Indenture or pursuant to Section 103 of this First Supplemental Indenture, the Trustee shall, upon written request of the Company and the receipt of the certificate of the Expert described in Section 404(b) of the Indenture (if such certificate is then required by Section 404(b) of the Indenture), deliver to the Company without charge therefor all of the Senior Note First Mortgage Bonds so satisfied or deemed satisfied, together with such appropriate instruments of transfer or release as may be reasonably requested by the Company. All Senior Note First Mortgage Bonds delivered to the Company in accordance with this Section 106 shall be delivered by the Company to the Mortgage Trustee for cancellation. Section 107 The Senior Notes Due 2029 shall be defeasible pursuant to Section 801 of the Indenture. ARTICLE II FORM OF 6.72% SENIOR NOTES DUE 2029 Section 201 The Senior Notes Due 2029 and the Trustee's certificate of authentication to be endorsed are to be substantially in the following forms: [Form of Face of Note] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO SOUTHERN INDIANA GAS AND ELECTRIC COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY 6.72% Senior Notes due 2029 No. ____ $__________ CUSIP No. 843163AX4 Southern Indiana Gas and Electric, a corporation duly organized and existing under the laws of the State of Indiana (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to ___________, or registered assigns, the principal sum of __________ Dollars ($_________) on August 1, 2029, and to pay interest thereon from July 26, 1999 or from the most recent Interest Payment Date with respect to which interest has been paid or duly provided for, semi-annually on February 1 and August 1 in each year (each an "Interest Payment Date"), commencing February 1, 2000, at the rate of 6.72% per annum, until the principal hereof is paid or made available for payment, provided that any principal and premium, and any such installment of interest, which is overdue shall bear interest at the rate of 6.72% per annum (to the extent that the payment of such interest shall be legally enforceable); from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be the January 15 or July 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Notes of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium if any) and such interest on this Note will be made at the office or agency of the Company maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of such interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Note Register. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Interest will accrue from each prior Interest Payment Date to, but not including, the relevant payment date. In the event that any date on which interest is payable on the Notes of this series is not a Business Day at any Place of Payment, then payment of interest or principal and premium, if any, need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, and, if such payment is made or duly provided for on such Business Day, no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to such Business Day. A "Business Day" means when used with respect to a Place of Payment or any other particular location specified in the Indenture, means any day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in such Place of Payment or other location are generally authorized or required by law, regulation or executive order to remain closed. Reference is hereby made to the further provisions of this Note set forth below, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to below by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY By:________________________ Attest: ________________________ [Form of Reverse of Note] This Note is one of a duly authorized issue of securities of the Company (herein called the "Notes"), issued and to be issued in one or more series under an Indenture (For Senior Notes), dated as of July 1, 1999 (herein called the "Indenture", which term shall have the meaning assigned to it in such instrument), between the Company and Bankers Trust Company, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one of the series designated on the face hereof, limited in aggregate principal amount to $80,000,000. Prior to the Release Date (as hereinafter defined), this Note will be secured by first mortgage bonds (the "Senior Note First Mortgage Bonds") delivered by the Company to the Trustee for the benefit of all Holders of Notes from time to time Outstanding, issued under the Indenture, dated as of April 1, 1932, between the Company and Bankers Trust Company, as trustee, as supplemented and amended from time to time (the "First Mortgage"). Reference is made to the First Mortgage for a description of property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the first mortgage bonds under the First Mortgage and of the Mortgage Trustee in respect thereof, the duties and immunities of the Mortgage Trustee and the terms and conditions upon which the Senior Note First Mortgage Bonds are secured and the circumstances under which additional first mortgage bonds may be issued. FROM AND AFTER SUCH TIME AS ALL FIRST MORTGAGE BONDS, OTHER THAN FIRST MORTGAGE BONDS WHICH DO NOT IN AGGREGATE PRINCIPAL AMOUNT EXCEED THE GREATER OF FIVE PERCENT (5%) OF THE COMPANY'S NET TANGIBLE ASSETS OR FIVE PERCENT (5%) OF THE COMPANY'S CAPITALIZATION, HAVE BEEN RETIRED THROUGH REPAYMENT, REDEMPTION OR OTHERWISE (INCLUDING THOSE FIRST MORTGAGE BONDS THE PAYMENT FOR WHICH HAS BEEN PROVIDED FOR IN ACCORDANCE WITH THE FIRST MORTGAGE) AT, BEFORE OR AFTER THE MATURITY THEREOF, PROVIDED THAT NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING (THE "RELEASE DATE"), THE SENIOR NOTE FIRST MORTGAGE BONDS SHALL CEASE TO SECURE THE NOTES IN ANY MANNER. The Company may redeem the Senior Notes Due 2029, in whole or in part, at any time, upon notice as provided in the Indenture (not less than 30 nor more than 60 days prior to a date fixed for redemption (the "Redemption Date")) at a redemption price equal to the greater of (1) 100% of principal or (2) the sum of the remaining scheduled payments of principal and interest on the Senior Notes Due 2029, discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield plus ten basis points (.10%), plus in each case accrued interest to the Redemption Date (the "Redemption Price"), such Redemption Price to be set forth in an Officer's Certificate delivered to the Trustee on or before the Redemption Date and upon which the Trustee may conclusively rely. The following terms shall have the following meanings: "Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Senior Notes Due 2029 that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Senior Notes Due 2029. "Independent Investment Banker" means Goldman, Sachs & Co. or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing selected by the Company and appointed by the Trustee. "Comparable Treasury Price" means, with respect to any Redemption Date, the Reference Treasury Dealer Quotation for such Redemption Date. "Reference Treasury Dealer Quotation" means, with respect to the Reference Treasury Dealer and any Redemption Date, the average of the bid and asked prices for the Comparable Treasury Issue (expressed as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption Date. The Company shall furnish the Trustee a notice in writing at least five business days and not more than ten business days prior to such Redemption Date of (a) the name of the Reference Treasury Dealer, (b) the Redemption Date, and (c) the third business day preceding the Redemption Date. "Reference Treasury Dealer" means Goldman, Sachs & Co. and its successors; provided, however, that if Goldman, Sachs & Co. shall cease to be a primary U.S. Government Securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. The Company shall deliver to the Trustee the Officer's Certificate referred to above setting forth the Company's calculation of the Redemption Price applicable to any such redemption promptly after the calculation thereof but, in any event, prior to the Redemption Date of any such Senior Notes Due 2029. Except with respect to the obligations of the Trustee expressly set forth in the foregoing definition of "Reference Treasury Dealer Quotation," the Trustee shall be under no duty to inquire into, may presume the correctness of, and shall be fully protected in acting upon the Company's calculation of any Redemption Price of the Senior Notes Due 2029. This Senior Note Due 2029 may be repaid on August 3, 2009, at the option of the registered holder hereof, at 95.5% of its principal amount, together with accrued interest to August 3, 2009. In order for the holder to exercise this option, the Company must receive at its office or agency in New York, New York, during the period beginning on June 3, 2009 and ending at 5:00 p.m. (New York City time) on July 3, 2009 (or, if July 3, 2009 is not a Business Day, the next succeeding Business Day), this Senior Note Due 2029 with the form titled "Option to Elect Repayment on August 3, 2009" on the reverse hereof duly completed. Any such notice received by the Company during the period beginning on June 3, 2009 and ending at 5:00 p.m. (New York City time) on July 3, 2009 (or, if July 3, 2009 is not a Business Day, the next succeeding Business Day) shall be irrevocable. No transfer or exchange of this Senior Note Due 2029 (or, in the event that this Senior Note Due 2029 is to be repaid in part, such portion of this Senior Note Due 2029 to be repaid) will be permitted after such notice is received by the Company. The repayment option may be exercised by the holder hereof for less than the entire principal amount of the Senior Notes Due 2029 held by such holder, so long as the principal amount that is to be repaid is equal to $1,000 or an integral multiple of $1,000. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any Senior Note Due 2029 for repayment will be determined by the Company, whose determination will be final and binding. Failure by the Company to repay the Senior Notes Due 2029 when required as described in the preceding paragraph will result in an Event of Default under the Indenture. As long as the Senior Notes Due 2029 are represented by a Global Security, the Depositary's nominee will be the registered holder of the Senior Notes Due 2029 and therefore it will be the only entity that can exercise the right to repayment. If notice has been given as provided in the Indenture and funds for the redemption of any Notes (or any portion thereof) called for redemption shall have been made available on the redemption date referred to in such notice, such Notes (or any portion thereof) will cease to bear interest on the date fixed for such redemption specified in such notice and the only right of the Holders of such Notes will be to receive payment of the Redemption Price. Notice of any optional redemption of Notes of this series (or any portion thereof) will be given to Holders at their addresses, as shown in the Note Register for such Notes, not more than 60 nor less than 30 days prior to the date fixed for redemption. The notice of redemption will specify, among other items, the method of calculation of the Redemption Price and the principal amount of the Notes held by such Holder to be redeemed. If less than all of the Notes are to be redeemed at the option of the Company, the Trustee shall select, in such manner as it shall deem fair and appropriate, the portion of such Note to be redeemed in whole or in part. The Notes of this series will not be subject to any sinking fund. In the event of redemption of this Note in part only, a new Note or Notes of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Note upon compliance with certain conditions set forth in the Indenture. If an Event of Default with respect to Notes of this series shall occur and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture and, upon such declaration, the Trustee shall demand the acceleration of the payment of principal of the Senior Note First Mortgage Bonds as provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of specified percentages of the Notes Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Notes at the time Outstanding, on behalf of the Holders of all Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. As provided in and subject to the provisions of the Indenture, the Holder of this Note shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Notes of this series, the Holders of not less than a majority in aggregate principal amount of the Notes of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be continuing shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Notes of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be continuing a direction inconsistent with such request, and shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Note for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Note Register, upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Notes of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Note that are defined in the Indenture shall have the meanings assigned to them in the Indenture. [Form of Option to Elect Repayment] OPTION TO ELECT REPAYMENT ON AUGUST 3, 2009 The undersigned hereby irrevocably request(s) and instruct(s) the Corporation to repay this Note (or portion hereof specified below) pursuant to its terms at a price equal to 95.5% of the principal amount to be repaid, together with unpaid interest accrued hereon to August 3, 2009, to the undersigned, at: ___________________________________________________________ __________________________________________________________ __________________________________________________________ (Please print or typewrite name and address of the undersigned) For this Note to be repaid, the Trustee must receive at its Corporate Trust Office in The City of New York, State of New York, currently located at 4 Albany Street, 4th Floor, New York, New York 10006, during the period beginning on June 3, 2009 and ending at 5:00 p.m. (New York City time) on July 3, 2009 (or if July 3, 2009 is not a Business Day, the next succeeding Business Day), this Note with this "Option to Elect Repayment on August 3, 2009" form duly completed. If less than the entire principal amount of this Note is to be repaid, specify the portion thereof (which shall be in increments of $1,000) which the holder elects to have repaid and specify the denomination or denominations of the Notes to be issued to the holder for the portion of this Note not being repaid (in the absence of any such specification, one such Note will be issued for the portion not being repaid). Principal Amount to be Repaid: $_______________ Date:__________ ______________________________________ Notice: The signature(s) on this Option to Elect Repayment on August 3, 2009 must correspond with the name(s) as written upon the face of this Note in every particular, without alteration or enlargement or any change whatsoever. [Form of Trustee's Certificate of Authentication] CERTIFICATE OF AUTHENTICATION This is one of the Notes of the series designated therein referred to in the within-mentioned Indenture. Dated: ___________________ BANKERS TRUST COMPANY, as Trustee By:___________________ Authorized Signatory ARTICLE III ORIGINAL ISSUE OF SENIOR NOTES DUE 2029 Section 301 Senior Notes Due 2029 in the aggregate principal amount of $80,000,000, may, upon execution of this First Supplemental Indenture, be executed by the Company by an Authorized Officer and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Notes upon receipt of and in accordance with a Company Order therefor without any further action by the Company. ARTICLE IV PAYING AGENT AND REGISTRAR Section 401 Bankers Trust Company will be the Paying Agent and Note Registrar for the Senior Notes Due 2029. ARTICLE V MISCELLANEOUS PROVISIONS Section 501 Except as otherwise expressly provided in this First Supplemental Indenture or in the form of Senior Notes Due 2029 or otherwise clearly required by the context hereof or thereof, all terms used herein or in said form of Senior Notes Due 2029 that are defined in the Indenture shall have the several meanings respectively assigned to them thereby. Section 502 The Indenture, as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. Section 503 The Trustee hereby accepts the trusts herein declared, provided, created, supplemented, or amended and agrees to perform the same upon the terms and conditions herein and in the Indenture set forth and upon the following terms and conditions: The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general, each and every term and condition contained in Article Seven of the Indenture shall apply to and form part of this First Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations, and insertions, if any, as may be appropriate to make the same conform to the provisions of this First Supplemental Indenture. __________________________________ This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY By:/s/ Timothy L. Burke [SEAL] Name: Timothy L. Burke Title: Secretary / Treasurer ATTEST: /s/ Linda K. Tiemann Name: Linda K. Tiemann Title: Assistant Secretary (Trustee's Signature Page Follows) Trustee's Signature Page First Supplemental Indenture, dated as of July 1, 1999, to Indenture (For Senior Notes), dated as of July 1, 1999 BANKERS TRUST COMPANY, as Trustee By: /s/ Vincent Chorney [SEAL] Name: Vincent Chorney Title: Assistant Vice President ATTEST: /s/ Marc Parilla Name: Marc Parilla Title: Assistant Vice President -----END PRIVACY-ENHANCED MESSAGE-----