UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
)
The AES Corporation ) File No. 70-9779
)
Certificate Pursuant to Rule 24 and Release No. 35-27363
Under the Public Utility Holding Company Act of 1935
On March 23, 2001, the Securities and Exchange Commission ("SEC")
issued an order, Release No. 35-27363 in File No. 70-9779 ("Exemption Order"),
granting an exemption under Section 3(a) of the Public Utility Holding Company
Act of 1935, as amended, to The AES Corporation ("AES") in relation to its
proposed acquisition of IPALCO Enterprises, Inc. ("IPALCO"), which has a
public-utility subsidiary company, Indianapolis Power & Light Company ("IPL").
The Exemption Order required AES to file certain certificates (as described in
the Exemption Order) under Rule 24 within 60 days of the close of each calendar
quarter for a period of two years beginning March 31, 2001 and every six months
thereafter. A certificate complying with the Exemption Order is set forth below
(as an attachment) for the period ending September 30, 2002. AES is separately
filing a certificate in File No. 70-9465 as required by the Commission's order
in Release No. 35-27063 in connection with the AES acquisition of CILCORP Inc.
("CILCORP"), which has a public-utility subsidiary company, Central Illinois
Light Company ("CILCO").
Respectfully submitted,
/s/ EARLE H. O'DONNELL
---------------------------------
Earle H. O'Donnell
Andrew B. Young
Hugh E. Hilliard
Dewey Ballantine LLP
1775 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Dated: November 27, 2002
THE AES CORPORATION
SEC FILING PURSUANT TO SECTION 3(a)(5) EXEMPTION ORDER
QUARTER ENDED SEPTEMBER 30, 2002
ITEM (1) PER EXEMPTION ORDER (STATEMENTS ATTACHED):
1) Pro Rata Statement of Income of The AES Corporation for the 12 months ended
September 30, 2002
2) Pro Rata Balance Sheet of The AES Corporation at September 30, 2002
3) Statement of Income of IPALCO for the 12 months ended September 30, 2002
4) Statement of Income of IPL for the 12 months ended September 30, 2002
5) Consolidated Balance Sheet of IPALCO at September 30, 2002
6) Consolidated Balance Sheet of IPL at September 30, 2002
7) Statement of Income of CILCORP for the 12 months ended September 30, 2002
8) Statement of Income of CILCO for the 12 months ended September 30, 2002
9) Consolidated Balance Sheet of CILCORP at September 30, 2002
10) Consolidated Balance Sheet of CILCO at September 30, 2002
2
THE AES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(INCLUDES CILCORP AND IPALCO)
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2002
PRO RATA BASIS
(UNAUDITED)
TWELVE MONTHS
ENDED
($ in millions) 9/30/2002
-----------------------------------------------------------------------------------
REVENUES:
Sales and services $ 8,640
OPERATING COSTS AND EXPENSES:
Cost of sales and services 6,288
Selling, general and administrative expenses 115
---------------
TOTAL OPERATING COSTS AND EXPENSES 6,403
---------------
OPERATING INCOME 2,237
OTHER INCOME AND (EXPENSE):
Interest expense, net (1,678)
Other expense (175)
Loss on sale or write-down of investments (116)
---------------
INCOME BEFORE INCOME TAXES 268
Income tax provision 108
---------------
INCOME FROM CONTINUING OPERATIONS 160
Loss from operations of discontinued components
(net of income taxes) (513)
---------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (353)
Cumulative effect of accounting change
(net of income taxes) (346)
---------------
NET INCOME (LOSS) $ (699)
===============
3
THE AES CORPORATION
PRO RATA BASIS CONSOLIDATED BALANCE SHEET
(INCLUDES CILCORP AND IPALCO)
SEPTEMBER 30, 2002
($ in millions, unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 933
Restricted cash 371
Short-term investments 234
Accounts receivable, net 1,146
Inventory 484
Deferred income taxes 22
Prepaid expenses and other current assets 1,112
Current assets of discontinued operations 296
------------
TOTAL CURRENT ASSETS 4,598
PROPERTY, PLANT AND EQUIPMENT
Land 589
Electric generation and distribution assets 21,089
Accumulated depreciation and amortization (3,917)
Construction in progress 4,557
------------
PROPERTY, PLANT AND EQUIPMENT, NET 22,318
OTHER ASSETS
Deferred financing costs,net 393
Project development costs 68
Investments in and advances to affiliates 1,009
Debt service reserves and other deposits 366
Goodwill 1,806
Long-term assets of discontinued operations 2,066
Other assets 3,942
------------
TOTAL OTHER ASSETS 9,650
TOTAL $ 36,566
============
4
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 952
Accrued interest 405
Accrued and other liabilities 1,076
Current liabilities of discontinued operations 551
Recourse debt--current portion 1,544
Non-recourse debt--current portion 2,876
------------
TOTAL CURRENT LIABILITIES 7,404
LONG-TERM LIABILITIES
Non-recourse debt 11,928
Recourse debt 4,180
Deferred income taxes 1,613
Long-term liabilities of discontinued operations 1,250
Other long-term liabilities 5,760
------------
TOTAL LONG-TERM LIABILITIES 24,731
Minority interest 101
Company-obligated convertible mandatorily redeemable
preferred securities of subsidiary trusts holding solely
junior subordinated debentures of AES 978
STOCKHOLDERS' EQUITY
Common stock 5
Additional paid-in capital 5,174
Retained earnings 2,582
Accumulated other comprehensive loss (4,409)
------------
TOTAL STOCKHOLDERS' EQUITY 3,352
TOTAL $ 36,566
============
5
IPALCO
STATEMENT OF CONSOLIDATED INCOME
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2002
OPERATING REVENUES:
Electric $ 809,953,349
Steam 0
---------------
Gross Operating Revenues 809,953,349
---------------
OPERATING EXPENSES AND TAXES:
Production - Fuel 169,700,830
Production - Other 73,911,017
Power Purchased 18,173,232
Purchased Steam 0
---------------
Total 261,785,079
Transmission 6,409,151
Distribution - Electric 29,868,303
Customer and Distribution - Steam 549
Customer Accounts 15,619,220
Customer Service and Informational 3,866,911
Administrative and General 53,488,835
---------------
Total 371,038,048
Depreciation 111,041,620
Amortization of Regulatory Deferrals 1,054,475
Income Taxes - Net 101,050,408
Taxes Other than Income Taxes 32,497,349
Disposition of Allowances - Net (4,893,841)
---------------
Total Operating Expenses and Taxes 611,788,059
---------------
OPERATING INCOME 198,165,290
---------------
OTHER INCOME AND DEDUCTIONS:
Allowance for Funds During Construction 3,719,649
Carrying Charges on Regulatory Assets 3,171
IPL Miscellaneous Income & Deductions-Net 2,247,326
IPL Income Taxes - Net 1,338,226
IPALCO Enterprises, Inc. - Parent Co. (30,451,965)
Mid-America Capital Resources, Inc. 1,416,446
Mid-America Energy Resources, Inc. (105,904)
---------------
Total Other Income and Deductions (21,833,051)
---------------
TOTAL INCOME 176,332,239
INTEREST CHARGES:
Interest on Long-Term Debt 40,334,280
6
Allowance for Funds During Const-Credit (1,738,256)
Deferred Return on Regulatory Assets (7,713)
Other Interest Charges 510,058
Amortization - Debt Discount & Expense 2,199,908
---------------
Preferred Stock Transactions 3,213,312
---------------
Total Interest and Other Charges-Net 44,511,589
NET INCOME $ 131,820,650
===============
7
INDIANAPOLIS POWER & LIGHT COMPANY
STATEMENT OF INCOME
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2002
OPERATING REVENUES:
Electric $ 809,953,349
Steam 0
---------------
Gross Operating Revenues 809,953,349
OPERATING EXPENSES AND TAXES:
Production - Fuel 169,700,830
Production - Other 73,911,017
Power Purchased 18,173,232
Purchased Steam 0
---------------
Total 261,785,079
Transmission 6,409,151
Distribution - Electric 29,868,303
Customer and Distribution - Steam 549
Customer Accounts 15,619,220
Customer Service and Informational 3,866,911
Administrative and General 53,488,835
---------------
Total 371,038,048
Depreciation 111,041,620
Amortization of Regulatory Deferrals 1,054,475
Income Taxes - Net 101,050,408
Taxes Other than Income Taxes 32,497,349
Disposition of Allowances - Net (4,893,841)
---------------
Total Operating Expenses and Taxes 611,788,059
---------------
OPERATING INCOME 198,165,290
---------------
OTHER INCOME AND DEDUCTIONS:
Allowance for Other Funds During Construction 3,719,649
Carrying Charges on Regulatory Assets 3,171
Miscellaneous Income and Deductions - Net 2,247,326
Income Taxes - Net 1,338,226
---------------
Total Other Income and Deductions 7,308,372
---------------
TOTAL INCOME 205,473,662
---------------
INTEREST CHARGES:
Interest on Long-Term Debt 40,334,280
8
Allowance for Borrowed Funds Used During Const (1,738,256)
Deferred Return on Regulatory Assets-Borrowed (7,713)
Other Interest Charges 510,058
Amortization - Debt Discount & Expense 2,199,908
---------------
Total Interest and Other Charges-Net 41,298,277
---------------
INCOME BEFORE EXTRAORDINARY ITEMS
AND CUMULATIVE ACCOUNTING CHANGE 164,175,385
Less Preferred Stock Transactions 3,213,312
---------------
INCOME APPLICABLE TO COMMON STOCK $ 160,962,073
===============
9
IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30, 2002
--------------------
ASSETS
UTILITY PLANT:
Utility plant in service $ 3,095,536
Less accumulated depreciation 1,522,837
--------------------
Utility plant in service - net 1,572,699
Construction work in progress 118,708
Property held for future use 10,768
--------------------
Utility plant - net 1,702,175
--------------------
OTHER ASSETS:
Nonutility property - at cost, less accumulated depreciation 1,826
Other investments 10,608
--------------------
Other assets - net 12,434
--------------------
CURRENT ASSETS:
Cash and cash equivalents 6,768
Accounts receivable and unbilled revenue (less allowance
for doubtful accounts of $1,236) 51,888
Fuel - at average cost 29,338
Materials and supplies - at average cost 46,694
Net income tax refunds receivable 38,654
Prepayments and other current assets 1,315
--------------------
Total current assets 174,657
--------------------
DEFERRED DEBITS:
Regulatory assets 132,099
Miscellaneous 22,035
--------------------
Total deferred debits 154,134
--------------------
TOTAL $ 2,043,400
====================
10
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholder's equity:
Premium on 4% cumulative preferred stock $ 649
Retained earnings 7,032
Accumulated other comprehensive loss (14,759)
--------------------
Total common shareholder's equity (deficit) (7,078)
Cumulative preferred stock of subsidiary 59,135
Long-term debt (less current maturities and
sinking fund requirements) 1,371,981
--------------------
Total Capitalization 1,424,038
--------------------
CURRENT LIABILITIES:
Current maturities and sinking fund requirements 300
Accounts payable 32,800
Accrued expenses 14,786
Dividends payable 894
Accrued other taxes 16,891
Accrued interest 32,937
Other current liabilities 15,579
--------------------
Total current liabilities 114,187
--------------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net 338,802
Unamortized investment tax credit 31,615
Accrued postretirement benefits 8,206
Accrued pension benefits 117,461
Miscellaneous 9,091
--------------------
Total deferred credits and other long-term liabilities 505,175
--------------------
COMMITMENTS AND CONTINGENCIES
TOTAL $ 2,043,400
====================
11
INDIANAPOLIS POWER & LIGHT COMPANY
BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30, 2002
--------------------
ASSETS
UTILITY PLANT:
Utility plant in service $ 3,095,536
Less accumulated depreciation 1,522,837
--------------------
Utility plant in service - net 1,572,699
Construction work in progress 118,708
Property held for future use 10,768
--------------------
Utility plant - net 1,702,175
--------------------
OTHER PROPERTY -
At cost, less accumulated depreciation 5,305
CURRENT ASSETS:
Cash and cash equivalents 3,907
Accounts receivable and unbilled revenue (less allowances
for doubtful accounts of $1,207) 51,793
Receivable due from Parent 27
Fuel - at average cost 29,338
Materials and supplies - at average cost 46,699
Net income tax refunds receivable 31,056
Prepayments and other current assets 1,355
--------------------
Total current assets 164,175
--------------------
DEFERRED DEBITS:
Regulatory assets 132,099
Miscellaneous 13,187
--------------------
Total deferred debits 145,286
--------------------
TOTAL $ 2,016,941
====================
12
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholder's equity:
Common stock $ 324,537
Premium and net gain on preferred stock 2,642
Retained earnings 426,470
Accumulated other comprehensive loss (14,755)
--------------------
Total common shareholder's equity 738,894
Cumulative preferred stock 59,135
Long-term debt (less current maturities
and sinking fund requirements) 621,981
--------------------
Total capitalization 1,420,010
--------------------
CURRENT LIABILITIES:
Accounts payable 31,990
Accrued expenses 14,931
Dividends payable 805
Accrued other taxes 16,889
Accrued interest 11,653
Other current liabilities 15,579
--------------------
Total current liabilities 91,847
--------------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net 338,747
Unamortized investment tax credit 31,615
Accrued postretirement benefits 8,206
Accrued pension benefits 117,427
Miscellaneous 9,089
--------------------
Total deferred credits and other long-term liabilities 505,084
--------------------
COMMITMENTS AND CONTINGENCIES
TOTAL $ 2,016,941
====================
13
CILCORP CONSOLIDATED
INCOME STATEMENT
(UNAUDITED)
TWELVE MONTHS ENDED 9/30/2002
(IN THOUSANDS)
REVENUE:
CILCO ELECTRIC $ 391,668
CILCO GAS 191,899
CILCO OTHER 111,940
OTHER BUSINESSES 54,959
-------------
TOTAL 750,466
-------------
OPERATING EXPENSES:
COST OF FUEL AND PURCHASED POWER 210,580
GAS PURCHASED FOR RESALE 159,120
OTHER OPERATIONS AND MAINTENANCE 126,974
DEPRECIATION AND AMORTIZATION 75,962
TAXES, OTHER THAN INCOME TAXES 39,390
-------------
TOTAL 612,026
-------------
FIXED CHARGES AND OTHER:
INTEREST EXPENSE 66,359
PREFERRED STOCK DIVIDENDS OF SUBSIDIARY 2,159
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (991)
OTHER 1,018
-------------
TOTAL 68,545
-------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 69,895
INCOME TAXES 25,265
-------------
INCOME FROM CONTINUING OPERATIONS 44,630
LOSS FROM OPERATIONS OF DISCONTINUED
BUSINESS, NET OF TAXES (118)
-------------
NET INCOME $ 44,512
=============
14
CENTRAL ILLINOIS LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
TWELVE MONTHS ENDED SEPTEMBER 30, 2002
(In Thousands)
Operating Revenues:
Electric $ 391,668
Gas 191,899
-------------
Total Operating Revenues 583,567
-------------
Operating Expenses:
Cost of Fuel 131,233
Cost of Gas 112,071
Purchased Power 49,817
Other Operation & Maintenance Expenses 120,319
Depreciation and Amortization 70,685
Income Taxes 14,797
Other Taxes 39,124
-------------
Total Operating Expenses 538,046
-------------
Operating Income 45,521
Other Income and Deductions
Cost of Equity Funds Capitalized 14
CILCO Owned Life Insurance (1,018)
Other, Net 13,475
-------------
Total other income and (deductions) 12,471
-------------
Interest Expenses:
Interest on Long-Term Debt 18,268
Cost of Borrowed Funds Capitalized (977)
Other 3,930
-------------
Total interest expense 21,221
-------------
Net (loss) Income Before Preferred Dividends 36,771
-------------
Preferred Stock Dividends 2,159
-------------
Net Income Available for Common Stock $ 34,612
=============
15
CILCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of September 30, 2002
(In Thousands)
ASSETS
Current Assets:
Cash and Temporary Cash Investments $ 56,760
Receivables, Less Allowance for
Uncollectible Accounts of $2,067 and $1,800 58,591
Accrued Unbilled Revenue 24,587
Fuel, at Average Cost 13,896
Materials and Supplies, at Average Cost 18,130
Gas in Underground Storage, at Average Cost 27,128
FAC Underrecoveries 1,255
PGA Underrecoveries 2,379
Prepayments and Other 15,646
-------------
Total Current Assets 218,372
-------------
Investments and Other Property:
Investment in Leveraged Leases 134,257
Other Investments 17,424
-------------
Total Investments and Other Property 151,681
-------------
Property, Plant and Equipment:
Utility Plant, at Original Cost
Electric 728,738
Gas 240,250
-------------
968,988
Less-Accumulated Provision for Depreciation 170,534
-------------
798,454
Construction Work in Progress 102,288
Other, Net of Depreciation 22
-------------
Total Property, Plant and Equipment 900,764
-------------
Other Assets:
Goodwill, Net of Accumulated Amortization
of $33,753 579,211
Other 27,578
-------------
Total Other Assets 606,789
-------------
Total Assets $ 1,877,606
=============
16
CILCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of September 30, 2002
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-Term Debt $ 26,750
Notes Payable --
Accounts Payable 60,697
Accrued Taxes 23,022
Accrued Interest 25,206
Other 5,191
-------------
Total Current Liabilities 140,866
-------------
Long-Term Debt 791,016
-------------
Deferred Credits and Other Liabilities:
Deferred Income Taxes 213,660
Regulatory Liability of Regulated Subsidiary 34,418
Deferred Investment Tax Credit 13,357
Other 93,632
-------------
Total Deferred Credits and Other Liabilities 355,067
-------------
Preferred Stock of Subsidiary Without
Mandatory Redemption 19,120
Preferred Stock of Subsidiary With
Mandatory Redemption 22,000
-------------
Total Preferred Stock of Subsidiary 41,120
-------------
Stockholders' Equity:
Common Stock, No Par Value; Authorized 10,000
Outstanding 1,000 --
Additional Paid-in Capital 518,833
Retained Earnings 39,100
Accumulated Other Comprehensive Loss (8,396)
-------------
Total Stockholders' Equity 549,537
-------------
Total Liabilities and Stockholders' Equity $ 1,877,606
=============
17
CENTRAL ILLINOIS LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of September 30, 2002
(In Thousands)
ASSETS
Utility Plant, At Original Cost:
Electric $ 1,338,112
Gas 464,137
-------------
1,802,249
Less-Accumulated Provision for Depreciation 1,028,012
-------------
774,237
Construction Work in Progress 102,288
-------------
Total Utility Plant 876,525
-------------
Other Property and Investments:
Cash Surrender Value of Company-owned Life
Insurance (Net of Related Policy Loans of
$69,523 and $65,314) 3,442
Other 1,050
-------------
Total Other Property and Investments 4,492
-------------
Current Assets:
Cash and Temporary Cash Investments 40,348
Receivables, Less Allowance for
Uncollectible Accounts of $2,067 and $1,800 57,477
Accrued Unbilled Revenue 22,291
Fuel, at Average Cost 13,896
Materials and Supplies, at Average Cost 16,752
Gas in Underground Storage, at Average Cost 27,128
Prepaid Taxes 9,583
FAC Underrecoveries 1,255
PGA Underrecoveries 2,379
Other 15,605
-------------
Total Current Assets 206,714
-------------
Deferred Debits:
Unamortized Loss on Reacquired Debt 2,266
Unamortized Debt Expense 1,668
Intangible Pension Asset 168
Other 10,934
-------------
Total Deferred Debits 15,036
-------------
Total Assets $ 1,102,767
=============
18
CENTRAL ILLINOIS LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of September 30, 2002
(In Thousands)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common Stockholders' Equity:
Common Stock, No Par Value; Authorized
20,000,000 Shares; Outstanding
13,563,871 Shares $ 185,661
Additional Paid-in Capital 52,000
Retained Earnings 125,400
Accumulated Other Comprehensive Loss (175)
-------------
Total Common Stockholders' Equity 362,886
Preferred Stock Without Mandatory Redemption 19,120
Preferred Stock With Mandatory Redemption 22,000
Long-term Debt 316,017
-------------
Total Capitalization 720,023
-------------
Current Liabilities:
Current Maturities of Long-Term Debt 26,750
Notes Payable --
Accounts Payable 55,828
Accrued Taxes 42,805
Accrued Interest 5,177
Other 5,191
-------------
Total Current Liabilities 135,751
-------------
Deferred Liabilities and Credits:
Accumulated Deferred Income Taxes 103,396
Regulatory Liability 34,418
Investment Tax Credits 13,357
Other 95,822
-------------
Total Deferred Liabilities and Credits 246,993
-------------
Total Capitalization and Liabilities $ 1,102,767
=============
19
ITEM (2) PER EXEMPTION ORDER (INCOME STATEMENT AMOUNTS ARE 12 MONTHS ENDED):
CILCO AND IPL CONTRIBUTIONS TO
AES/CILCORP/IPALCO CONSOLIDATED HOLDING COMPANY
(PRO RATA CONSOLIDATION BASIS)(1)
($MM)
12 MOS. ENDED 9/30/01 12 MOS. ENDED 9/30/02(2)
------------------------------------------------------------------------------------------------
GROSS REVENUES(3) 16.24% 16.04%
CILCO 813 696
CILCORP (excluding CILCO) 59 54
IPL 853 810
IPALCO (excluding IPL) 4 0
AES (excluding CILCORP and IPALCO) 8,532 7,830
AES/CILCORP/IPALCO 10,261 9,390
OPERATING INCOME 12.84% 15.96%
CILCO 83 80
CILCORP (excluding CILCO) 24 58
IPL 229 299
IPALCO (excluding IPL) 0 -
AES (excluding CILCORP and IPALCO) 2,093 1,938
AES/CILCORP/IPALCO 2,429 2,375
NET INCOME 18.61% 36.64%
CILCO 34 35
CILCORP (excluding CILCO) (22) 10
IPL 49 161
IPALCO (excluding IPL) 4 (29)
AES (excluding CILCORP and IPALCO) 381 358
AES/CILCORP/IPALCO 446 535
NET ASSETS 7.82% 8.53%
CILCO 1,070 1,103
CILCORP (excluding CILCO) 788 775
IPL 1,911 2,017
IPALCO (excluding IPL) 57 26
AES (excluding CILCORP and IPALCO) 34,309 32,645
AES/CILCORP/IPALCO 38,135 36,566
----------
(1) This schedule presents on a proforma basis, the results of
operations of AES excluding the following items: (1) Mark to market effect of
FAS No. 133. (For the 12-month period ending September 30, 2002, the net mark to
market gain from FAS No. 133 was $83 million.); (2) Loss on sale or write-down
of investments. (In the second quarter of 2002, AES recorded an impairment
charge of $40 million on an equity method of investment in a telecommunications
company in Latin America, and a loss on the sale of an equity method investment
in a telecommunications company in Latin America of approximately $14 million.
In the first quarter of 2002, a subsidiary of AES sold an available-for-sale
security resulting in gross proceeds of $92 million. The realized loss on the
sale was $50 million. Approximately $48 million of the loss related to
recognition of previously unrealized losses which had been recorded in other
comprehensive income.); (3) Foreign currency transaction losses. (Foreign
currency transaction losses due to devaluation in Brazilian Real and devaluation
in the Argentina Peso offset by foreign transaction gains in Venezuelan Bolivar.
The net foreign currency transaction loss is approximately $284 million.); (4)
Discontinued operations. (The schedule excludes net loss of discontinued
operations of $513 million consisting mainly of Termocandelaria, IB Valley,
Power Direct, telecommunications businesses in Brazil and US, Fifoots,
Eletronet, Cilcorp, NewEnergy and Medina Valley.); (5) Accounting change. (In
April 2002, AES adopted Derivative Implementation Group (DIG) Issue C-15 which
established specific guidelines for certain contracts to be considered normal
purchases and normal sales contracts. This resulted in a cumulative effect of an
accounting change increase to $127 million, net of income tax effects. On
January 1, 2002, AES adopted SFAS No. 142, "Goodwill and Other Intangible
Assets" which establishes accounting and reporting standards for goodwill and
other intangible assets. The adoption of SFAS No. 142 resulted in a cumulative
reduction to income of $473 million, net of income tax effects.); (6) Provision
for regulatory decision in Brazil. (AES has recorded the retroactive regulatory
decision by the Brazilian regulator depriving AES Sul of amounts the company
believes it was entitled to receive as a reduction in revenue.) If the excluded
amounts are taken into account, certain CILCO and IPL contributions to
AES/CILCORP/IPALCO on a consolidated basis would be different as follows:
(28.04%) to Net Income.
(2) For purposes of comparison with the prior period, the CILCORP and
CILCO data for gross revenues and operating income were added to AES
consolidated data to arrive at AES/IPALCO amounts.
(3) Gross business revenues (utility and non-utility) of IPALCO and
CILCO combined as a percentage of total gross business revenues (including
IPALCO/IPL and CILCORP/CILCO, utility and non-utility) of AES.
20
IPL CONTRIBUTIONS TO
AES/IPALCO CONSOLIDATED HOLDING COMPANY
(PRO RATA CONSOLIDATION BASIS)(1)
($MM)
12 MOS. ENDED 9/30/01 12 MOS. ENDED 9/30/02(2)
-------------------------------------------------------------------------------------------------------
GROSS REVENUES(3) 8.80% 9.04%
IPL 853 810
IPALCO (excluding IPL) 4 -
AES (excluding CILCO jurisdictional activities) 8,836 8,153
AES/IPALCO 9,693 8,963
OPERATING INCOME 9.67% 12.82%
IPL 229 299
IPALCO (excluding IPL) 0 -
AES (excluding CILCO jurisdictional activities) 2,139 2,034
AES/IPALCO 2,368 2,333
NET INCOME 11.95% 31.51%
IPL 49 161
IPALCO (excluding IPL) 4 (29)
AES (excluding CILCO jurisdictional activities) 357 379
AES/IPALCO 410 511
NET ASSETS 5.11% 5.64%
IPL 1,911 2,017
IPALCO (excluding IPL) 57 26
AES (excluding CILCO jurisdictional activities) 35,401 33,733
AES/IPALCO 37,369 35,776
----------
(1) This schedule presents on a proforma basis, the results of
operations of AES excluding the following items: (1) Mark to market effect of
FAS No. 133. (For the 12 month period ending September 30, 2002, the net mark to
market gain from FAS No. 133 was $83 million.); (2) Loss on sale or write-down
of investments. (In the second quarter of 2002, AES recorded an impairment
charge of $40 million on an equity method of investment in a telecommunications
company in Latin America, and a loss on the sale of an equity method investment
in a telecommunications company in Latin America of approximately $14 million.
In the first quarter of 2002, a subsidiary of AES sold an available-for-sale
security resulting in gross proceeds of $92 million. The realized loss on the
sale was $50 million. Approximately $48 million of the loss related to
recognition of previously unrealized losses which had been recorded in other
comprehensive income.); (3) Foreign currency transaction losses. (Foreign
currency transaction losses due to devaluation in Brazilian Real and devaluation
in the Argentina Peso offset by foreign transaction gains in Venezuelan Bolivar.
The net foreign currency transaction loss is approximately $284 million.); (4)
Discontinued operations. (The schedule excludes net loss of discontinued
operations of $513 million consisting mainly of Termocandelaria, IB Valley,
Power Direct, telecommunications businesses in Brazil and US, Fifoots,
Eletronet, Cilcorp, NewEnergy and Medina Valley.); (5) Accounting change. (In
April 2002, AES adopted Derivative Implementation Group (DIG) Issue C-15 which
established specific guidelines for certain contracts to be considered normal
purchases and normal sales contracts. This resulted in a cumulative effect of an
accounting change increase to $127 million, net of income tax effects. On
January 1, 2002, AES adopted SFAS No. 142, "Goodwill and Other Intangible
Assets" which establishes accounting and reporting standards for goodwill and
other intangible assets. The adoption of SFAS No. 142 resulted in a cumulative
reduction to income of $473 million, net of income tax effects.); (6) Provision
for regulatory decision in Brazil. (AES has recorded the retroactive regulatory
decision by the Brazilian regulator depriving AES Sul of amounts the company
believes it was entitled to receive as a reduction in revenue.) If the excluded
amounts are taken into account, certain IPL contributions to AES/IPALCO on a
consolidated basis would be different as follows: (22.27%) to Net Income.
(2) For purposes of comparison with the prior period, the CILCO data for
gross revenues and operating income were added to AES consolidated data to
arrive at AES/IPALCO amounts.
(3) Gross business revenues (utility and non-utility) of IPL as a
percentage of total gross business revenues (including IPALCO/IPL utility and
non-utility) of AES.
21
ITEM (3) PER EXEMPTION ORDER - GENERATION INFORMATION:
AES Generating Plants in Operation at September 30, 2002 (excluding CILCORP and
IPALCO):
AES AES
CAPACITY INTEREST EQUITY REGULATORY
UNIT COUNTRY (MW) (%) (MW) STATUS
------- -------- -------- ------ ----------
AES Deepwater USA 143 100 143 QF
AES Beaver Valley USA 125 100 125 QF
AES Placerita USA 120 100 120 QF
AES Thames USA 181 100 181 QF
AES Shady Point USA 320 100 320 QF
AES Hawaii USA 180 100 180 QF
AES Warrior Run USA 180 100 180 QF
AES Somerset USA 675 100 675 EWG
AES Cayuga USA 306 100 306 EWG
AES Greenidge USA 161 100 161 EWG
AES Westover USA 126 100 126 EWG
AES Alamitos USA 2,083 100 2,083 EWG
AES Redondo Beach USA 1,310 100 1,310 EWG
AES Huntington Beach USA 563 100 563 EWG
AES Hemphill USA 14 70 10 QF
AES Mendota USA 25 100 25 QF
AES Delano USA 50 100 50 QF
AES Mountainview USA 126 100 126 EWG
AES Medina Valley (sale pending) USA 47 100 47 EWG
AES Ironwood USA 705 100 705 EWG
AES Red Oak USA 832 100 832 EWG
AES Riverside* USA 154 100 154 EWG
DOMESTIC SUBTOTAL: 8,426 8,422
* Currently in discontinued operations status.
AES AES
CAPACITY INTEREST EQUITY REGULATORY
UNIT COUNTRY (MW) (%) (MW) STATUS
----------- -------- -------- ------ ----------
AES Kingston Canada 110 50 55 EWG
AES San Nicholas Argentina 650 69 449 EWG
AES Cabra Corral Argentina 102 98 100 FUCO
AES El Tunal Argentina 10 98 10 FUCO
AES Sarmiento Argentina 33 98 32 FUCO
AES Ullum Argentina 45 98 44 FUCO
AES Quebrada Argentina 45 100 45 FUCO
22
AES Alicura Argentina 1,000 100 1,000 FUCO
CEMIG - Miranda Brazil 390 9 35 FUCO
CEMIG - Igarapava Brazil 210 1 2 FUCO
CEMIG (35 plants) Brazil 5,068 9 456 FUCO
AES Bayano Panama 236 49 116 FUCO
AES Panama Panama 42 49 21 FUCO
AES Chiriqui - La Estrella Panama 42 49 21 FUCO
AES Chiriqui - Los Valles Panama 48 49 24 FUCO
AES Los Mina Dom. Rep. 210 100 210 EWG
AES Yarra Australia 510 100 510 FUCO
AES Jeeralang Australia 449 100 449 FUCO
AES Mt. Stuart Australia 288 100 288 FUCO
AES Xiangci - Cili China 26 51 13 FUCO
Wuhu China 250 25 63 FUCO
Chengdu Lotus City China 48 35 17 FUCO
AES Jiaozuo China 250 70 175 FUCO
AES Hefei China 115 70 81 FUCO
AES Chongqing Nanchuan China 50 70 35 FUCO
Yangcheng China 2,100 25 525 FUCO
AES Ekibastuz Kazakhstan 4,000 100 4,000 FUCO
AES Ust-Kamenogorsk GES Kazakhstan 331 100 331 FUCO
AES Shulbinsk GES Kazakhstan 702 100 702 FUCO
AES Ust-Kamenogorsk TETS Kazakhstan 1,464 100 1,464 FUCO
AES Leninogorsk TETS Kazakhstan 418 100 418 FUCO
AES Sogrinsk TETS Kazakhstan 349 100 349 FUCO
AES Semipalatinsk TETS Kazakhstan 840 100 840 FUCO
AES Ust-Kamenogorsk Heat Nets Kazakhstan 310 Managt 0 FUCO
OPGC India 420 49 206 FUCO
AES Lal Pir Pakistan 351 90 316 FUCO
AES PakGen Pakistan 344 90 310 FUCO
AES Borsod Hungary 171 100 171 FUCO
AES Tisza II Hungary 860 100 860 FUCO
AES Tiszapalkonya Hungary 250 100 250 FUCO
AES Elsta Netherlands 405 50 203 FUCO
Medway U.K. 688 25 172 FUCO
AES Indian Queens U.K. 140 100 140 EWG
AES Kilroot U.K. 520 92 479 FUCO
AES Barry U.K. 230 100 230 FUCO
AES Drax U.K. 4,065 100 4,065 FUCO
AES Uruguaiana Brazil 600 100 600 FUCO
AES Tiete (10 plants) Brazil 2,650 53 1,405 FUCO
AES EDC Venezuela 2,265 87 1,971 FUCO
AES Merida III Mexico 484 55 266 FUCO
AES Mtkvari Georgia 600 100 600 FUCO
AES Khrami I Georgia 113 Managt 0 FUCO
AES Khrami II Georgia 110 Managt 0 FUCO
AES Ottana Italy 140 100 140 FUCO
AES Mammonal Columbia 90 62 56 FUCO
AES Chivor Columbia 1,000 96 960 FUCO
AES Gener-Electrica de Santiago Chile 379 89 337 FUCO
AES Gener-Energia Verde Chile 39 99 39 FUCO
AES Gener-Guacolda Chile 304 49 149 FUCO
23
AES Gener-Norgener Chile 277 99 274 FUCO
Itabo (pending sale) Dom. Rep. 587 24 141 FUCO
AES Bohemia Czech Rep. 50 83 42 FUCO
AES SONEL Cameroon 800 51 408 FUCO
Central Dique Argentina 68 51 35 FUCO
AES Termoandes Argentina 643 99 637 FUCO
AES Parana Argentina 845 67 566 FUCO
AES Kelvin Rep. South 600 95 570 FUCO
Africa
Ebute Nigeria 290 95 276 FUCO
AES Gener - Cordillera Chile 245 99 243 FUCO
AES Gener - Costa Chile 512 99 507 FUCO
AES Haripur Bangladesh 360 100 360 FUCO
FOREIGN SUBTOTAL: 43,236 30,864
TOTAL - September 30, 2002 51,662 39,286
Foreign Generation as a Percentage of Total: 84% 79%
CILCORP Generating Plants at September 30, 2002:
AES AES
CAPACITY INTEREST EQUITY REGULATORY
UNIT COUNTRY (MW) (%) (MW) STATUS
----------- -------- -------- ------ ----------
Edwards (3 units) USA 740 100 740 IL PUC
Duck Creek USA 366 100 366 IL PUC
Indian Trails USA 10 100 10 IL PUC
Sterling Avenue USA 30 100 30 IL PUC
Hallock Power Modules USA 13 100 13 IL PUC
Kickapoo Power Modules USA 13 100 13 IL PUC
TOTAL - September 30, 2002 1,172 1,172
IPALCO Generating Plants at September 30, 2002:
AES AES
CAPACITY INTEREST EQUITY REGULATORY
UNIT COUNTRY (MW) (%) (MW) STATUS
----------- -------- -------- ------ ----------
Petersburg USA 1,873 100 1,873 IN PUC
H.T. Pritchard USA 393 100 393 IN PUC
E.W. Stout USA 1,017 100 1,017 IN PUC
Georgetown USA 80 100 80 IN PUC
TOTAL - September 30, 2002 3,363 3,363
24
Revenues from electric generation capacity - 12 months ended September 30, 2002
(millions of dollars):
IPALCO 567 13%
CILCORP 157 4%
AES (excluding CILCORP and IPALCO) 3,664 83%
----- ---
Total 4,388 100%
IPALCO's electric revenues are allocated between electric generation and
electric transmission and distribution activities according to utility rate
base. CILCORP's electric revenues are allocated between electric generation and
electric transmission and distribution activities according to utility rate
base. AES generation revenues are derived from the total generation revenues
earned by AES subsidiaries times the percentage ownership interest of AES in
those subsidiaries.
There has been no change in the amount of generation capacity owned by CILCORP
or IPALCO and a 290 MW decrease in the amount of generation capacity owned by
AES (excluding CILCORP and IPALCO) from 39,576 to 39,286 MW since June 30, 2002.
There has been a less than 1% increase in the total revenues earned from the
capacity owned by AES, IPALCO and CILCORP in the 12-month period ended September
30, 2002 compared with the 12-month period ended June 30, 2002. The percentage
of the total revenues derived from the generation capacity owned by CILCORP has
remained the same at 4%. The percentage of the total revenues derived from the
generation capacity owned by IPALCO has remained the same at 13%.
The only country in which there was a net increase in AES' MW capacity since
June 30, 2002 was the United States.
ITEM (4) PER EXEMPTION ORDER - ELECTRIC TRANSMISSION AND DISTRIBUTION AND GAS
DISTRIBUTION:
Electric transmission and distribution and gas distribution assets owned as of
September 30, 2002 (millions of dollars):
IPALCO 1,038
CILCORP 790
Total AES (excluding CILCORP and IPALCO) 5,245
-----
Total 7,073
Electric transmission and distribution and gas distribution revenues for 12
months ending September 30, 2002 (millions of dollars):
IPALCO 243
CILCORP 427
Total AES (excluding CILCORP and IPALCO) 4,167
-----
Total 4,837
25
IPALCO's electric revenues are allocated between electric generation and
electric transmission and distribution activities according to utility rate
base. CILCORP's electric revenues are allocated between electric generation and
electric transmission and distribution activities according to utility rate
base. AES transmission and distribution revenues are derived from the total
revenues earned by AES transmission and distribution subsidiaries by multiplying
these revenues by the percentage ownership interest of AES in those
subsidiaries.
The total transmission and distribution assets owned by AES, CILCORP and IPALCO
have decreased since June 30, 2002. CILCORP's transmission and distribution
assets have decreased slightly while the revenues derived from such assets have
increased slightly since June 30, 2002. IPALCO's transmission and distribution
assets have increased slightly while the revenues derived from such assets have
increased slightly since June 30, 2002. AES' transmission and distribution
assets have decreased and the revenues derived from such assets have decreased
since June 30, 2002. CILCORP's percentage of the total transmission and
distribution assets has increased from 10% to 11%, and CILCORP's percentage of
the total revenues from such assets has increased from 8% to 9% for the 12-month
period ending September 30, 2002 compared to the 12-month period ending June 30,
2002. IPALCO's percentage of the total transmission and distribution assets has
increased from 13% to 15%, and IPALCO's percentage of the total revenues from
such assets has remained the same at 5% for the 12-month period ending September
30, 2002 compared to the 12-month period ending June 30, 2002.
ITEM (5) PER EXEMPTION ORDER:
Neither CILCO nor IPL has sold or transferred any electric and/or gas utility
assets to any affiliate company of the AES consolidated holding company system
during the third quarter of 2002.
ITEM (6) PER EXEMPTION ORDER:
On June 19, 2002, CILCO and Ameren Corporation filed a joint application with
the Illinois Commerce Commission for authority to engage in a reorganization,
and to enter into various agreements in connection therewith, including
agreements with affiliated interests, and for such other approvals as may be
required under the Illinois Public Utilities Act to effectuate the
reorganization. The filing was made in Docket No. 02-0428, and a copy is
attached hereto (exhibits available upon request). Evidentiary hearings were
held in this matter on October 24 and 25, 2002, in Springfield, Illinois, before
an Administrative Law Judge. The docket was marked "Heard and Taken" at the
conclusion of the hearings. The Applicants filed an "Applicant's Draft Proposed
Order" on November 13, 2002. During the third quarter of 2002, no application
has been made to nor has any order been received from the Indiana Utility
Regulatory Commission that involves AES' ownership position or AES' oversight
over the operations of IPL or IPALCO.
26
ITEM (7) PER EXEMPTION ORDER:
AES announced on April 29, 2002 an agreement with Ameren Corporation to sell
100% of AES's ownership interest in CILCORP, including the jurisdictional
business and assets of CILCO. The transaction is subject to various regulatory
approvals and is expected to close in the first quarter of 2003. In addition to
the filing with the Illinois Commerce Commission discussed in item (6) above, on
July 25, 2002, CILCO and Ameren Services Company, on behalf of the public
utility company subsidiaries of Ameren Corporation, filed an application
requesting authorization from the Federal Energy Regulatory Commission for
Ameren Corporation to acquire CILCO through the acquisition from AES of all of
the outstanding common stock of CILCORP. FERC approved the application in an
order issued on November 21, 2002 in Docket No. EC02-96-000. Also, on August 2,
2002, as amended on October 28, 2002, Ameren Corporation and CILCORP filed with
the SEC a Form U-1 application/declaration seeking certain approvals and
exemptions under the Public Utility Holding Company Act associated with the
proposed acquisition by Ameren Corporation of CILCORP. This filing was made in
File No. 70-10078. The SEC issued a notice of the filing on October 25, 2002 in
Holding Company Act Release No. 35-27586.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of 1935,
as amended, AES has duly caused this certificate to be signed on its behalf on
this 27th day of November, 2002 by the undersigned thereunto duly authorized.
The AES Corporation
/s/ ERIK LUCKAU
---------------------------
By: Erik Luckau
Associate General Counsel
27
STATE OF ILLINOIS
ILLINOIS COMMERCE COMMISSION
Central Illinois Light Company, )
Ameren Corporation )
) Docket No. 02-
Application for authority to engage in a )
reorganization, and to enter into various )
agreements in connection therewith, including )
agreements with affiliated interests, and for )
such other approvals as may be required )
under the Illinois Public Utilities Act to )
effectuate the reorganization. )
APPLICATION AND EXHIBITS
CENTRAL ILLINOIS LIGHT AMEREN CORPORATION
COMPANY
Mark J. McGuire Christopher W. Flynn
William L. Kuhn Eacata D. Gregory
McGuireWoods LLP Jones, Day, Reavis & Pogue
77 W. Wacker, Suite 4400 77 W. Wacker, Suite 3500
Chicago, Illinois 60601 Chicago, Illinois 60601
(312) 849-8100 (voice) (312) 782-3939 (voice)
(312) 849-3690 (fax) (312) 782-8585 (fax)
mmcguire@mcguirewoods.com cflynn@jonesday.com
wkuhn@mcguirewoods.com edgregory@jonesday.com
Steven R. Sullivan,
Vice President-General Counsel and Secretary
Joseph H. Raybuck
Ameren Services Company
One Ameren Plaza
1901 Chouteau Avenue
St. Louis, Missouri
(314) 554-2098 (voice)
(314) 554-2976 (voice)
(314) 554- 4014 (fax)
srsullivan@ameren.com
jraybuck@ameren.com
APPLICATION AND EXHIBITS
TABLE OF CONTENTS
TAB
Application A
Testimony of Gary L. Rainwater B
Testimony of Warner L. Baxter C
Testimony of Craig D. Nelson D
Testimony of Thomas R. Voss E
Testimony of Mark C. Birk F
Testimony of Scott Cisel G
Testimony of Brenda Freeman H
Testimony of Rodney Frame I
CILCO Corporate Affiliate Chart J
Description of Reorganization, Organizational Documents, and Other Regulatory Filings K
Statement of Costs and Fees L
Allocation Methods M
Proposed Affiliate Agreements N
1) General Services Agreement
2) Fuel Services Agreement
Identification of Transferred Assets and Information O
Forecast of CILCO's Capital Requirements (Confidential) P
1) Projected Capital Requirements
2) Sources of Capital
3) Range of Projected Capital Structure
4) Assumptions
I. INTRODUCTION
Central Illinois Light Company ("CILCO") and Ameren Corporation
("Ameren") (jointly, "Applicants") seek the Commission's approval: (i) for CILCO
to engage in a reorganization (the "Reorganization"), within the meaning of
Section 7-204 of the Illinois Public Utilities Act ("IPUA"), pursuant to which
CILCO will become a subsidiary of Ameren; (ii) for CILCO to enter into related
agreements; and (iii) to take certain other measures as explained herein in
connection with the Reorganization. Ameren is the holding company parent of two
other Illinois public utilities, Central Illinois Public Service Company
("AmerenCIPS") and Union Electric Company ("AmerenUE").(1)
Applicants seek expedited approval of this Application. This
transaction is important to CILCO, its customers and its employees, all of whom
are experiencing significant uncertainty pending closing of the transaction.
Applicants seek to minimize the period of uncertainty, and wish to close the
transaction by the end of this year. Accordingly, Applicants respectfully
request an order from this Commission by October 15, 2002. An order issued by
such a date, together with timely approval from the Federal Energy Regulatory
Commission ("FERC"), the Securities and Exchange Commission ("SEC") and the
Department of Justice/Federal Trade Commission under the Hart-Scott-Rodino Act,
will permit closing by the end of this year.
The Reorganization will bring significant benefits to CILCO and its
customers. Ameren's core business is the provision of low-cost, high quality
energy delivery services to retail customers here in Illinois, and nearby in
Missouri. Ameren is an experienced public utility holding company, with a proven
track record of integrating operations; hence, integration of CILCO into the
Ameren system can be achieved without any service disruption or diminution.
-------------------
(1) AmerenCIPS and AmerenUE are Applicants in this proceeding only to
the extent required under Section 7-102 of the IPUA, as discussed in Section
V.G. of this Application, infra.
Ameren is committed to assuring that CILCO provide high quality energy services
after the Reorganization occurs, and that CILCO continue to improve service.
Service quality enhancement is an ongoing process; it is not a one-time effort.
Ameren is committed to the principle that service providers should always strive
to improve their service, regardless of how good that service is.
Moreover, the Reorganization will provide CILCO's customers with rate
stability and protection against any risk that implementation of the
Reorganization would cause any need for increases in rates. Under legislation
recently signed into law, the Reorganization will result in a two-year extension
of the electric base rate freeze for CILCO's customers. Thus, electric rates
will be frozen through the end of 2006. Absent the Reorganization, under that
same legislation CILCO's electric rates would be frozen only through 2004.
Ameren also is committing to abstain through October 1, 2005 from any changes in
gas base rates after the final order issued in response to CILCO's presently
planned gas rate filing later this year. This will ensure that during this rate
stabilization period customers will not be asked to pay for any costs related to
the Reorganization, and that CILCO will hold the line on base rates while it
implements measures to improve service.
As will be discussed, Ameren and CILCO share a strong record of
community involvement and economic development efforts. Ameren will ensure that
CILCO's efforts in that regard continue undiminished. It is in the best
interests of both Ameren and the communities that CILCO serves that the economic
prospects of those communities be enhanced, and that the utility distribution
company continue to have a strong local presence. Applicants make specific
commitments in this Application intended to address concerns voiced by
-2-
communities within the CILCO service territory regarding the effect on those
communities of a change in control at CILCO.
To effectuate the Reorganization, the Applicants seek the Commission's
approval under Sections 7-204 and 7-204A of the IPUA, and, to the extent
required, under IPUA Section 7-102. Additionally, the Applicants seek approval
for CILCO's entry into two affiliated interest agreements under Section 7-101 of
the IPUA, and approval under Section 5-106 for CILCO to maintain certain books
and records outside of the State. Lastly, the Applicants request that the
Commission approve CILCO's capitalization under Section 6-103 of the IPUA.
The Applicants further state as follows in support of their
Application:
II. IDENTIFICATION OF COMPANIES INVOLVED AND AFFILIATES
CILCO. CILCO was incorporated under the laws of Illinois in 1913.
CILCO's principal business is the generation, transmission, distribution and
sale of electric energy in an area of approximately 3,700 square miles in
central and east-central Illinois, and the purchase, distribution,
transportation and sale of natural gas in an area of approximately 4,500 square
miles in central and east-central Illinois. CILCO furnishes electric service to
over 201,000 retail customers in 136 Illinois communities and gas service to
over 204,000 customers in 128 Illinois communities. CILCO is a public utility
within the meaning of Section 3-105 of the IPUA. In Docket Nos. 02-0140/02-0153
(consolidated), the Commission entered an order approving the transfer of
substantially all of CILCO's generation assets to a wholly-owned, but
unregulated subsidiary, Central Illinois Generation, Inc. ("CIGI"). The FERC has
approved the transfer of CILCO's generation assets to CIGI. CILCO is awaiting
FERC's approval of a power supply agreement between CIGI and CILCO, and a
technical waiver related to certain minor transmission facilities to be owned by
CIGI in order to close that transaction.
-3-
CILCO also has a retail marketing unit that negotiates special
contracts with retail load within and outside of CILCO's service territory.
Under the Commission's standards of conduct, CILCO has elected to operate as a
functionally separated utility ("FSU"). If the Reorganization is approved, and
CILCO thereby becomes a subsidiary of Ameren, CILCO intends, pursuant to
authority under legislation now awaiting the Governor's signature, to file a
revised implementation plan to operate as an Integrated Distribution Company
("IDC"). The two existing Ameren utilities, AmerenCIPS and AmerenUE (jointly,
the "Ameren Utilities"), have already elected to operate as IDCs. In the event
that the proposed legislation is not enacted, CILCO seeks from the Commission in
this docket a waiver of the Commission's standards of conduct to allow CILCO to
elect to operate as an IDC after the Reorganization takes effect.
CILCORP. CILCORP was incorporated as a holding company in the state of
Illinois in 1985. CILCORP owns 100% of the common stock of CILCO. CILCORP is a
wholly-owned subsidiary of The AES Corporation ("AES").
AES. AES is a global power company whose primary lines of business are
electricity generation and distribution. AES' electricity generation business
consists of sales to nonaffiliated wholesale customers (generally electric
utilities, regional electric companies, or wholesale commodity markets) for
further resale to end-users. AES' electricity distribution business consists of
direct sales to end-users such as commercial, industrial, governmental and
residential customers. AES' generating assets include interests in 177
facilities totaling 59 gigawatts of capacity. AES' electricity distribution
network sells over 108,000 gigawatt hours per year to over 16 million end-use
customers. AES acquired 100% ownership of the common stock of CILCORP in 1999.
-4-
Subsequent to the acquisition of CILCORP, AES acquired IPALCO
Enterprises, Inc., another utility holding company. In a decision affirming AES'
exempt status under the Public Utility Holding Company Act of 1935 ("PUHCA"),
the SEC required AES to either divest its interest in CILCO or restructure, no
later than March 27, 2003. AES elected to sell CILCORP to comply with the SEC's
decision.
AMEREN. Ameren is a Missouri corporation with its headquarters in St.
Louis, Missouri. Ameren is a registered holding company under PUHCA and is the
parent of two state-regulated utility subsidiaries, AmerenCIPS and AmerenUE,
both of which provide electric and gas service to the public and are public
utilities under Section 3-105 of the IPUA.
AMERENCIPS. AmerenCIPS is an Illinois corporation that provides
electric service to approximately 325,000 customers and gas service to about
170,000 customers, in 527 incorporated and unincorporated communities in central
and southern Illinois. AmerenCIPS owns no generation, and is served presently
under an agreement with Ameren Energy Marketing Company ("AEM"), an affiliate.
AmerenCIPS has no retail marketing function; no AmerenCIPS employees negotiate
competitive electric power supply arrangements with any retail customers, on any
system. As noted above, AmerenCIPS has elected to operate as an IDC, if approved
by the Commission.
AMERENUE. AmerenUE is a Missouri corporation that provides electric
service to approximately 62,000 customers and gas service to approximately
18,000 customers in Illinois, and electric service to nearly one million
customers and gas service to over 100,000 customers in Missouri. AmerenUE owns
8,290 MW of electric generating capacity. AmerenUE has no Illinois retail
marketing function; no AmerenUE employees negotiate competitive power supply
-5-
arrangements with retail load on any system in Illinois. As noted above,
AmerenUE also has elected to operate as an IDC if approved by the Commission.
OTHER AMEREN AFFILIATES. Ameren also has several other subsidiaries,
including: Ameren Services Company ("Ameren Services"), which provides services
to various Ameren affiliates; Ameren Energy Generating Company ("AEG"), which
owns and operates over 4330 MW of electric generating capacity, all of which is
located in Illinois and Missouri; AEM, which markets power and energy at
wholesale and at retail, and has responsibility for all Ameren retail marketing
in Illinois; Ameren Energy ("AE"), which provides short-term energy trading
services and acts as agent to AmerenUE and AEG; and Ameren Energy Fuels and
Services Company ("Ameren Fuels"), which provides generation fuels, natural gas
procurement, management and related services for Ameren affiliates and other
entities.
III. THE REORGANIZATION TRANSACTION
As indicated above, AES elected to sell its interest in CILCORP in
order to comply with the SEC's conditions relating to AES' acquisition of
IPALCO. Ameren and AES have entered into a stock purchase agreement (the
"Purchase Agreement") pursuant to which Ameren will acquire all of the
outstanding common stock of CILCORP in exchange for cash and the assumption of
debt held by CILCORP and its subsidiaries.
At the closing of the transaction, CILCORP will become a wholly-owned
subsidiary of Ameren. Thus, Ameren will become the indirect owner of CILCO, and
CILCO will do business as AmerenCILCO. Ameren does not intend to eliminate
CILCORP at the time of the Reorganization or at any time in the near future.
Subsequent to the closing, CILCO will continue to operate as a separate
company, and will not be merged into either of the two existing Ameren
utilities. Ameren does not seek approval to eliminate CILCO as a company or to
alter CILCO's rate areas or tariffs in any
-6-
respect. Accordingly, unless and until otherwise authorized by this Commission,
CILCO will maintain its own rate schedules. Applicants note, however, that while
CILCO will maintain its separate corporate existence, CILCO will be integrated
fully into the Ameren system, and will receive corporate support and other
services from Ameren affiliates.
Ameren also intends to maintain CILCO's headquarters in Peoria. Mr.
Gary Rainwater, Chief Operating Officer of Ameren, discusses Ameren's plans for
CILCO's Peoria headquarters in his testimony.
CILCO will operate as its own control area, within the Midwest
Independent System Operator ("MISO"). On May 28, 2002, AmerenCIPS and AmerenUE
informed the FERC of their intent to operate within the MISO.
IV. BENEFITS OF THE REORGANIZATION
The Reorganization will benefit CILCO's customers and the competitive
retail electric marketplace in Illinois. As noted, the Reorganization will
extend CILCO's electric rate freeze for an additional two years under recently
enacted legislation, and bring gas base rate stability. In addition, Ameren
commits to improving CILCO's level of customer service.
The integration of CILCO into the Ameren system will also allow CILCO,
and therefore its customers, to benefit from economies of scale associated with
a larger energy delivery system. Ameren expects to achieve certain synergies in
the delivery of service that will allow rate stability during a period when
Ameren intends to enhance CILCO's performance. The plan for stabilizing rates
during this period is discussed later in this Application.
Before the FERC, Ameren also intends to propose as a condition of
acquisition approval, to implement various improvements to its transmission
system that will enhance the ability of competitive providers to import electric
power and energy into Illinois markets, including Peoria.
-7-
Accordingly, the Reorganization will expand retail customers' options for real
choice among electric service providers.
The Reorganization presents a unique opportunity for CILCO, its
customers and the entire Ameren system. Both Ameren and CILCO eagerly await the
closing of the transaction so that they can begin the work to enhance CILCO's
service and achieve other opportunities for benefits that the Reorganization
offers. Above all, Ameren looks forward to serving the CILCO customers, and
enjoying the same strong and productive relationships that it enjoys with its
existing customers throughout central and southern Illinois and Missouri. In
this context, Applicants also note that Ameren strongly supports CILCO's efforts
with respect to the accelerated tree trimming program and the completion of the
reliability audit project. The Reorganization will not alter, limit or otherwise
affect any of CILCO's obligations in this regard.
V. COMPLIANCE WITH STATUTORY REQUIREMENTS
A. SECTION 7-204: REORGANIZATION APPROVAL
As indicated above, the transaction described herein is a
"reorganization" within the meaning of Section 7-204 of the IPUA. That Section
states, in part, that
For purposes of this Section, "reorganization" means any
transaction which, regardless of the means by which it is
accomplished, results in a change in the . . . ownership or
control of any entity which owns or controls the majority of
the voting capital stock of a public utility. . . ."
220 ILCS 5/7-204.
Section 7-204 requires that the Commission make a series of findings,
each of which is addressed below.
1. FINDING 1: "THE PROPOSED REORGANIZATION WILL NOT
DIMINISH THE UTILITY'S ABILITY TO PROVIDE ADEQUATE,
RELIABLE, EFFICIENT, SAFE AND LEAST-COST PUBLIC
UTILITY SERVICE."
-8-
As indicated above, Ameren brings a strong record of customer service
to this transaction. Ameren has a proven track record of high quality service
that is second to none in communities much like those that CILCO serves. In this
regard, Ameren notes that it has a full century of experience serving both
smaller communities, such as Petersburg, Illinois, and large cities, including
St. Louis. Thus, Ameren is fully qualified to oversee CILCO's provision of
service to its diverse service territory. After the Reorganization occurs,
Ameren is committed to seeing that CILCO improve its performance.
As discussed in detail in the testimony of Applicants' witness Thomas
Voss, Senior Vice President-Energy Delivery of Ameren Services, AmerenCIPS is
the top-rated Illinois electric utility in terms of reliability and customer
service, based on reports filed with the ICC. In the CILCO area, Ameren will
make and follow through on the same commitment to improve customer service that
it has made in its other service areas. In no regard will the quality of CILCO's
service diminish, and, as discussed below, Ameren is making certain commitments
to enhance service quality in the CILCO service territory.
The Reorganization will not alter the low-cost nature of CILCO's
service. To the contrary, CILCO will obtain the benefits of scale within the
larger Ameren organization, which, together with other synergies, will enable
Ameren to hold the line on CILCO's rates while taking steps to improve CILCO's
performance.
2. FINDING 2: "THE PROPOSED REORGANIZATION WILL NOT
RESULT IN THE UNJUSTIFIED SUBSIDIZATION OF
NON-UTILITY ACTIVITIES BY THE UTILITY OR ITS
CUSTOMERS."
Ameren is a registered holding company and operates under clear and
fair cost-allocation guidelines. Those guidelines are reflected in the Ameren
General Services Agreement (the "Ameren GSA"), which the Commission approved in
Docket No. 95-0551, and in the SEC's regulations. As explained in the testimony
of Mr. Warner Baxter, Ameren's Chief Financial
-9-
Officer, CILCO will be allocated and charged costs pursuant to: (i) a separate
services agreement (the "CILCO Services Agreement") that allocates and charges
costs in the same manner as the Ameren GSA; and (ii) the SEC's rules. The CILCO
Services Agreement and the SEC regulations will preclude any unjustified
subsidization of non-utility activities.
Moreover, as discussed below, CILCO will make the same commitment
regarding the preservation of the Commission's authority to determine
appropriate cost allocations that AmerenCIPS and AmerenUE made in Docket
No. 95-0551.
3. FINDING 3: "COSTS AND FACILITIES ARE FAIRLY AND
REASONABLY ALLOCATED BETWEEN UTILITY AND NON-UTILITY
ACTIVITIES IN SUCH A MANNER THAT THE COMMISSION MAY
IDENTIFY THOSE COSTS AND FACILITIES WHICH ARE
PROPERLY INCLUDED BY THE UTILITY FOR RATEMAKING
PURPOSES."
As already explained, Ameren will allocate and charge costs in
accordance with the CILCO Services Agreement, which is identical in all material
respects to the Ameren GSA, which the Commission approved in Docket No. 95-0551,
and in accordance with the SEC's regulations. Moreover, as discussed below,
CILCO will make the same commitment regarding the preservation of the
Commission's authority to determine appropriate cost allocations that AmerenCIPS
and AmerenUE made in Docket No. 95-0551.
4. FINDING 4: "THE PROPOSED REORGANIZATION WILL NOT
SIGNIFICANTLY IMPAIR THE UTILITY'S ABILITY TO RAISE
NECESSARY CAPITAL ON REASONABLE TERMS OR TO MAINTAIN
A REASONABLE CAPITAL STRUCTURE."
As Mr. Baxter discusses, the Reorganization should have a positive impact on
CILCO's ability to raise capital on reasonable terms, because CILCO will become
a subsidiary of a parent company that has a credit rating higher than that of
AES. As Mr. Baxter also discusses, the Reorganization will have no adverse
effect on CILCO's capital structure. To the extent that GAAP accounting for the
transaction requires entries that produce any changes in CILCO's capital
structure, CILCO commits that, with the Commission's authorization, it will
reverse the
-10-
effect of any such entries for regulatory reporting and ratemaking purposes. As
such, the recognition of any goodwill in connection with the Reorganization
would not have any impact on rates, or on the assessment of CILCO's rate of
return on common equity under Sections 16-111(d) and 16-111(e) of the IPUA.
5. FINDING 5: "THE UTILITY WILL REMAIN SUBJECT TO ALL
APPLICABLE LAWS, REGULATIONS, RULES, DECISIONS AND
POLICIES GOVERNING THE REGULATION OF ILLINOIS PUBLIC
UTILITIES."
CILCO will remain an Illinois public utility, subject to all applicable
laws and rules. In Docket No. 95-0551, AmerenCIPS and AmerenUE made certain
commitments intended to assure that the Commission would not be preempted from
regulating certain aspects of their businesses solely due to Ameren's status as
a registered holding company under PUHCA. CILCO will make the same commitments
here. CILCO's statement of those commitments accompanies the testimony of Mr.
Scott Cisel, Senior Vice President of CILCO, which is found at Tab G.
6. FINDING 6: "THE PROPOSED REORGANIZATION IS NOT LIKELY
TO HAVE A SIGNIFICANT ADVERSE EFFECT ON COMPETITION
IN THOSE MARKETS OVER WHICH THE COMMISSION HAS
JURISDICTION."
In connection with their request for approval of the Reorganization at
FERC, the Applicants will submit a detailed analysis of the market power
implications of Ameren's acquisition of control over CILCO. That analysis, which
is discussed in the testimony of Mr. Rodney Frame, an economist with The
Analysis Group/Economics, shows that the Reorganization will not have an adverse
effect on the competitive wholesale markets in the region.
Further, at the retail level there is no cause for concern. As of May
1, 2002, all of CILCO's electric customers have access to alternative suppliers.
Moreover, as Mr. Craig Nelson, Vice President-Corporate Planning of Ameren
Services, explains in his testimony,
-11-
Ameren's affiliate, AEM, does not have significant load in CILCO's service
territory, and CILCO's retail business does not have significant load in the
Ameren service territories. Mr. Frame discusses additional reasons why there
will be no adverse effect on retail competition.
Additionally, Ameren will make improvements to various transmission
facilities that will greatly enhance power flows in central Illinois. This will
have a positive impact on the competitive wholesale and retail markets.
As noted, Ameren seeks to operate all of its Illinois utilities as IDCs
that do not market generation services. This provides additional opportunities
to alternative suppliers to market in the Ameren territories.
Moreover, it must be noted that, irrespective of whether the
Reorganization occurs, the level of competitive retail activity in the Ameren
and CILCO territories is and will continue to be minimal, at least for the
near-term, due to the relatively low rates charged by those utilities. The
Reorganization will not change that fact in any respect.
Lastly, as Mr. Nelson also explains, there is little overlap between
the Ameren and CILCO territories, meaning that there are few areas where Ameren
provides electric service and CILCO provides gas service, or vice versa.
7. FINDING 7: "THE PROPOSED REORGANIZATION IS NOT LIKELY
TO RESULT IN ANY ADVERSE RATE IMPACTS ON RETAIL
CUSTOMERS."
As Mr. Nelson explains in detail, the change in control over CILCO and
the incorporation of CILCO in the Ameren system, with the resulting synergies,
are expected over the long-term to reduce CILCO's cost of service, not increase
it, from what it otherwise would have been. As Mr. Thomas Voss explains,
subsequent to the closing of the transaction, various steps will be taken to
improve CILCO's service. Notwithstanding these steps (which will not be caused
by the Reorganization), there will be no change in rates charged to customers
during the rate
-12-
stabilization period for electric and gas service proposed herein by Applicants.
As discussed in Section V.B., under the new legislation, if Ameren's acquisition
of CILCORP closes, CILCO's electric rates are frozen by statute through December
31, 2006; gas base rates will be based on the pre-closing cost of service for at
least the next 3 years. Accordingly, there is no significant risk of any adverse
rate impacts.
B. RATE STABILIZATION PLAN
Section 7-204 provides that the Commission may not approve a
reorganization without ruling on: (i) the allocation of any savings resulting
from the proposed reorganization; and (ii) whether the companies should be
allowed to recover any costs incurred in accomplishing the proposed
reorganization and, if so, the amount of costs eligible for recovery and how the
costs will be allocated.
CILCO and Ameren recognize that the issues surrounding the
identification and sharing of savings and the recovery of the costs to achieve
those savings are often highly contentious. Even where there is agreement that
implementation costs should be recovered and that net savings should be shared,
there remains the difficult task of identifying savings produced by a particular
reorganization or business combination. As each year passes, the task of
identifying the level of avoided costs attributable to a particular transaction
becomes increasingly complex.
The task would be even more difficult here where Ameren intends to
undertake projects and implement means to improve CILCO's services. These steps
will produce changes in the cost of service that would need to be segregated
from changes produced by synergies.
Accordingly, the Applicants propose, in lieu of any sharing
plan or cost recovery proposal, to submit a rate plan that is fair,
straightforward, simple, and avoids the need for complex and contentious
estimates of transaction savings. Applicants propose the use of a rate
stabilization period -- a period of time during which rates remain in effect
based on the pre-
-13-
closing cost of service. Electric rates are already frozen by statute; gas rates
are not. Applicants' proposal is intended to protect customers from any
unanticipated acquisition-induced changes in the level of gas base rates related
to the Reorganization and Ameren's initial efforts to improve CILCO's service.
Under the proposal, electric rates will remain frozen under the
provisions of Section 16-111 of the IPUA. The proposal also provides that CILCO
will not seek any adjustment in gas base rates that would become effective prior
to the conclusion of the rate stabilization period, October 1, 2005. CILCO
intends to file a gas base rate case prior to the closing of the transaction
that will be based on a pre-closing test year that will not reflect
Reorganization-related adjustments. CILCO commits, as a condition of
Reorganization approval, that it will not propose any additional changes in gas
base rates that will become effective prior to October 1, 2005.
Changes in rates effective after the rate stabilization period will
reflect the then-actual cost of service, including the effect of all applicable
synergies. CILCO will not seek to retain any portion of the synergies in any
future electric or gas rate filing.(2) Moreover, nothing in Applicants' rate
stabilization plan would limit the Commission's authority to investigate gas
base rates under Section 9-250 of the IPUA. (The Commission's authority to
investigate electric rates is already limited under Section 16-111 of the IPUA;
Applicants do not propose any further limitation.)
The proposal has several benefits. There is no need under this proposal
to calculate savings, and there is no risk that ratepayers would be "sharing"
savings that never materialize.
--------------------
(2) Applicants do not intend to suggest that, upon expiration of the
rate stabilization periods, AmerenCILCO will never propose an alternative
regulation plan or other general incentive ratemaking proposal.
-14-
There is no need for the Commission to track savings, or engage in a complex
review of whether and how savings were achieved.
Significantly for customers, the proposal ensures that there can be no
adverse rate impact from the Reorganization. If transition costs exceed
expectations, or if synergies fail to materialize on the schedule foreseen by
the Applicants, customers will not be harmed.
Applicants note that the rate stabilization period plan will not create
any windfall for Applicants. As Mr. Nelson explains in his testimony, the
Reorganization promises to produce for CILCO's regulated operations pre-tax net
cost reductions ranging from $0.5 to $3.2 million per year; this range reflects
neither the transaction costs nor transition expenses associated with the
Reorganization, which in the aggregate are expected to be approximately $39
million.
C. SUBMISSION OF REQUIRED DATA
Section 7-204A(a) requires the submission of certain data in connection
with any application under Section 7-204. The required data is provided herewith
at Tabs J through P, and is sponsored by Mr. Cisel and Ms. Brenda Freeman,
Investment Manager on CILCO's Finance and Administration Team.
D. APPROVAL OF AFFILIATED INTEREST AGREEMENTS
Sections 7-101 and 7-204A(b) require the approval of two affiliated
interest agreements.
1. CILCO SERVICES AGREEMENT
In Docket No. 95-0551, in connection with the formation of Ameren as
the parent to AmerenUE and AmerenCIPS, the Commission approved the entry of
those two utilities into the Ameren GSA with Ameren Services. CILCO proposes to
enter into, and become a party to the CILCO Services Agreement with Ameren
Services. (A copy of the CILCO Services Agreement is attached at Tab N.)
-15-
The use of a new service agreement is appropriate for several
reasons. First, as mentioned above, it is identical to the Ameren GSA in all
material respects. This means that all allocations within the Ameren system will
be made pursuant to the same set of methodologies. Second, the Ameren GSA
remains reasonable, and continues to govern transactions among existing Ameren
affiliates. Accordingly, the Commission should approve the CILCO Services
Agreement. Further, under Section 16-111 of the IPUA and Applicants' rate
stabilization period proposal, rates will continue at pre-closing levels for
some time after closing. Hence, there is no immediate need for the Commission to
alter allocations of costs or the basis for affiliate charges.
The Commission has approved a service agreement for CILCO and
CIGI to provide services to one another. That service agreement will remain in
effect to the extent not inconsistent with the CILCO Services Agreement.
2. FUEL SERVICES AGREEMENT
AmerenCIPS and AmerenUE are parties to a fuel services
agreement ("FSA") with Ameren Fuels. Under the FSA, Ameren Fuels provides fuel
procurement and fuel management services to AmerenCIPS and to AmerenUE.
AmerenCIPS and AmerenUE filed the FSA with the Commission for its approval in
Docket No. 00-0757. In that docket, the Ameren Utilities indicated that they
would benefit from the FSA because, among other reasons, Ameren Fuels would be
purchasing larger volumes of gas and other energy related commodities on their
behalf. This would allow Ameren Fuels to have a greater presence in applicable
fuels markets, and an enhanced negotiating position in such markets. In
response, the Commission approved the FSA as being reasonable. (Order issued
March 7, 2001)
CILCO intends to enter into a fuel services agreement with Ameren Fuels
which is identical in all material respects to the FSA. This will allow CILCO to
achieve the same kind of fuel procurement and fuel management benefits which
Ameren Fuels provides to AmerenCIPS
-16-
and AmerenUE. Accordingly, the Commission should approve the fuel services
agreement between CILCO and Ameren Fuels. (A copy of the CILCO Fuel Services
Agreement is attached at Tab N.)
E. BOOKS AND RECORDS
Ameren intends to maintain a substantial portion of CILCO's books
and records at CILCO's headquarters in Peoria. However, certain records
-- particularly those relating to services provided by an affiliated service
company, such as Ameren Services or Ameren Fuels -- may be maintained at
Ameren's headquarters in St. Louis. Accordingly, CILCO seeks approval under
Section 5-106 of the IPUA to maintain its books and records outside of this
State. CILCO acknowledges that it shall be liable for, and upon proper
invoice from the Commission shall promptly reimburse the Commission for, the
reasonable costs and expenses associated with the audit or inspection of any
books, accounts, papers, records and memoranda kept outside the State, all as
required under Section 5-106 of the IPUA. 220 ILCS 5/5-106.
F. COMMITMENTS TO SERVICE AREA COMMUNITIES
Applicants have engaged in discussions with representatives of many of
the communities served by CILCO. Through their representatives, those
communities have sought assurances that CILCO will remain steadfast in its
commitment to the communities, in terms of service quality, employment levels
and charitable and economic development efforts. To allay those concerns, and
consistent with CILCO's role as a responsible service provider, Applicants make
the following commitments.
o CILCO will maintain its headquarters at 300 Liberty Street in
Peoria for at least five years after the transaction closes.
-17-
o CILCO and its affiliates will continue to employ a minimum of
800 full-time employees within the CILCO service area at least
through 2005. CILCO will continue to honor all existing
contracts with bargaining unit employees and maintain
compensation programs and benefits at, or possibly above,
current levels. Ameren expects that existing benefit plans
will either remain in place or be integrated into Ameren's
plans at a later date.
o CILCO and affiliates will maintain a management presence in
the Peoria region by having two vice presidents (or higher
level business leaders) work out of the Peoria region. Ameren
expects that these officers will maintain their residences in
the Peoria metropolitan area.
o Ameren will increase CILCO's annual commitment to $1 million
for charitable and civic donations, economic development and
community events throughout the CILCO service territory.
o As part of the $1 million annual commitment, Ameren will
budget in excess of $100,000 annually for ongoing support to
local and regional economic development organizations,
economic development marketing and community programs.
o Ameren will dedicate one full-time person, based in Peoria, to
economic development activities.
o Ameren intends to install highly sophisticated outage analysis
tools to be used to improve CILCO's outage performance and
response times. Ameren has pledged to provide strong gas
system reliability and quality assurance by instituting its
Gas Code
-18-
Compliance System and to enhance systems intended to
streamline call handling and accelerate response to customer
calls.
o Lastly, under the rate proposal described above, which
Applicants propose be a condition of approval, electric and
gas base rates would remain at pre-Reorganization levels for
several years after closing, thereby insulating customers from
any prospect of adverse rate effects. In this regard, under
recently enacted revisions to Section 16-111 of the IPUA, if
Ameren acquires CILCORP, the electric freeze will terminate
two years later for CILCO than it otherwise would terminate.
Applicants believe that these commitments are reasonable.
G. SECTION 7-102
Section 7-102 of the IPUA requires the Commission's approval whenever a
"public utility may by any means, direct or indirect, merge or consolidate its
franchises, license, permits, plants, equipment, business or other property with
that of any other public utility." 220 ILCS 5/7-102. Applicants do not believe
the Reorganization constitutes a direct or indirect merger or consolidation of
two utilities' businesses or property. Rather, the Reorganization is a change in
control transaction over which the Commission plainly has jurisdiction under
Sections 7-204 and 7-204A.
Nevertheless, to the extent that the Commission determines that the
Reorganization is also subject to the approval requirements of Section 7-102,
Applicants seek approval pursuant that Section. In this regard, Applicants must
demonstrate that the approval should reasonably be granted and that the public
should be convenienced thereby. For all the reasons discussed above, Applicants
believe that the transaction is reasonable and in the public interest and should
be approved.
-19-
H. SECTION 6-103
Section 6-103 of the IPUA provides, in relevant part, as follows:
In any reorganization of a public utility, resulting from
forced sale, or in any other manner, the amount of
capitalization, including therein all stocks and stock
certificates and bonds, notes and other evidences of
indebtedness, shall be such as is authorized by the
Commission, which in making its determination, shall not
exceed the fair value of the property involved.
As Mr. Baxter explains, at closing, consistent with purchase
accounting, CILCO's assets will be stated at fair value. Applicants do not
believe that this action will produce any change in the level of CILCO's
capitalization. However, to the extent that it does, Applicants pledge to
reverse the effects on CILCO's capitalization of any such change for regulatory
reporting and ratemaking purposes. Accordingly, the Commission should authorize
CILCO's capitalization, which Applicants are willing to accept subject to the
condition that, in the event that GAAP requires CILCO or its affiliates to make
accounting entries that produce an effect on CILCO's capitalization, CILCO will
reverse the effect of any such entries for regulatory reporting and ratemaking
purposes.
WHEREFORE, for all the reasons discussed herein, Applicants
respectfully request the Commission to issue an order approving the
Reorganization and granting all such other relief as requested herein to
effectuate the Reorganization.
Respectfully submitted,
CENTRAL ILLINOIS LIGHT COMPANY AMEREN CORPORATION
By:___________________________ By:_____________________________
One of its attorneys One of its attorneys
Mark J. McGuire Christopher W. Flynn
William L. Kuhn Eacata D. Gregory
McGuireWoods LLP Jones, Day, Reavis & Pogue
-20-
STATE OF ILLINOIS
ILLINOIS COMMERCE COMMISSION
Central Illinois Light Company and )
Ameren Corporation )
) Docket No. 02-
Application for authority to engage in a )
reorganization, and to enter into various )
agreements in connection therewith, including )
agreements with affiliated interests, and for )
such other approvals as may be required )
under the Illinois Public Utilities Act to )
effectuate the reorganization. )
APPLICATION
CENTRAL ILLINOIS LIGHT AMEREN CORPORATION
COMPANY
Mark J. McGuire Christopher W. Flynn
William L. Kuhn Eacata D. Gregory
McGuireWoods LLP Jones, Day, Reavis & Pogue
77 W. Wacker, Suite 4400 77 W. Wacker, Suite 3500
Chicago, Illinois 60601 Chicago, Illinois 60601
(312) 849-8100 (voice) (312) 782-3939 (voice)
(312) 849-3690 (fax) (312) 782-8585 (fax)
mmcguire@mcguirewoods.com cflynn@jonesday.com
wkuhn@mcguirewoods.com edgregory@jonesday.com
Steven R. Sullivan,
Vice President-General Counsel and Secretary
Joseph H. Raybuck
Associate General Counsel
Ameren Services Company
One Ameren Plaza
1901 Chouteau Avenue
St. Louis, Missouri
(314) 554-2098 (voice)
(314) 554-2976 (voice)
June 19, 2002 (314) 554- 4014 (fax)
srsullivan@ameren.com
jraybuck@ameren.com
TABLE OF CONTENTS
I. Introduction..........................................................................................................1
II. Significant Parties to the Reorganization.............................................................................3
III. The Reorganization Transaction........................................................................................6
IV. Benefits of the Reorganization........................................................................................7
V. Compliance with Statutory Requirements...............................................................................8
A. Section 7-204: Reorganization Approval.................................................................................8
1. Finding 1: "The proposed reorganization will not diminish the utility's ability to provide adequate, reliable,
efficient, safe and least-cost public utility service."................................................................8
2. Finding 2: "The proposed reorganization will not result in the unjustified subsidization of non-utility
activities by the utility or its customers."...........................................................................9
3. Finding 3: "Costs and facilities are fairly and reasonably allocated between utility and non-utility activities
in such a manner that the Commission may identify those costs and facilities which are properly included by the
utility for ratemaking purposes.".....................................................................................10
4. Finding 4: "The proposed reorganization will not significantly impair the utility's ability to raise necessary
capital on reasonable terms or to maintain a reasonable capital structure."...........................................10
5. Finding 5: "The utility will remain subject to all applicable laws, regulations, rules, decisions and policies
governing the regulation of Illinois public utilities."...............................................................11
6. Finding 6: "The proposed reorganization is not likely to have a significant adverse effect on competition in
those markets over which the Commission has jurisdiction."............................................................11
7. Finding 7: "The proposed reorganization is not likely to result in any adverse rate impacts on retail
customers."...........................................................................................................12
B. Rate Stabilization Plan...............................................................................................13
C. Submission of Required Data...........................................................................................15
D. Approval of Affiliated Interest Agreements............................................................................15
1. General Services Agreement.........................................................................................15
-i-
2. Fuel Services Agreement............................................................................................16
E. Books and Records.....................................................................................................17
F. Commitments to Service Area Communities..............................................................................17
G. Section 7-102.........................................................................................................19
H. Section 6-103.........................................................................................................19
-ii-