SEC Info - Ipalco Enterprises, Inc.

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

i 20,502

i 48,152

Restricted cash

i 6,120

i 400

Accounts receivable, net of allowance for credit losses of $ i 3,155 and $ i 921, respectively

i 165,193

i 161,090

Inventories

i 95,506

i 83,569

Regulatory assets, current

i 45,430

i 37,398

Taxes receivable

i 24,384

i 23,670

Prepayments and other current assets

i 17,842

i 17,264

Total current assets

i 374,977

i 371,543

NON-CURRENT ASSETS:

Property, plant and equipment

i 6,530,395

i 6,398,612

Less: Accumulated depreciation

i 2,643,695

i 2,414,652

i 3,886,700

i 3,983,960

Construction work in progress

i 209,584

i 130,609

Total net property, plant and equipment

i 4,096,284

i 4,114,569

OTHER NON-CURRENT ASSETS:

Intangible assets - net

i 59,141

i 64,861

Regulatory assets, non-current

i 392,801

i 355,614

Other non-current assets

i 46,716

i 22,082

Total other non-current assets

i 498,658

i 442,557

TOTAL ASSETS

i 4,969,919

i 4,928,669

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Short-term debt and current portion of long-term debt (Note 7)

i 169,907

i 559,199

Accounts payable

i 127,089

i 128,521

Accrued taxes

i 26,620

i 22,012

Accrued interest

i 31,733

i 35,334

Customer deposits

i 27,929

i 34,635

Regulatory liabilities, current

i 30,036

i 52,654

Derivative liabilities, current

i —

i 26,560

Accrued and other current liabilities

i 19,453

i 23,300

Total current liabilities

i 432,767

i 882,215

NON-CURRENT LIABILITIES:

Long-term debt (Note 7)

i 2,556,278

i 2,092,430

Deferred income tax liabilities

i 275,714

i 272,861

Taxes payable

i 7,458

i 4,658

Regulatory liabilities, non-current

i 839,360

i 846,430

Accrued pension and other postretirement benefits

i 5,334

i 19,344

Asset retirement obligations

i 195,236

i 204,219

Derivative liabilities, non-current

i 63,215

i —

Other non-current liabilities

i 13,785

i 252

Total non-current liabilities

i 3,956,380

i 3,440,194

Total liabilities

i 4,389,147

i 4,322,409

COMMITMENTS AND CONTINGENCIES (Note 10)

SHAREHOLDERS' EQUITY:

Paid in capital

i 588,966

i 590,784

Accumulated other comprehensive loss

( i 43,420)

( i 19,750)

Accumulated deficit

( i 24,558)

Total common shareholders' equity

i 520,988

i 546,476

Preferred stock of subsidiary

i 59,784

Total shareholders' equity

i 580,772

i 606,260

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

i 4,969,919

i 4,928,669

See notes to consolidated financial statements.

F-6

IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

2020

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

i 109,967

i 132,393

i 134,025

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

i 246,896

i 240,314

i 232,332

Amortization of deferred financing costs and debt discounts

i 3,942

i 4,109

i 3,975

Deferred income taxes and investment tax credit adjustments - net

i 2,854

i 15,277

( i 15,735)

Loss on early extinguishment of debt

i 2,424

i —

Allowance for equity funds used during construction

( i 4,574)

( i 3,486)

( i 8,477)

Change in certain assets and liabilities:

Accounts receivable

( i 4,103)

i 6,469

( i 9,944)

Inventories

( i 15,240)

i 13,574

( i 3,652)

Accounts payable

( i 20,322)

i 3,047

i 3,675

Accrued and other current liabilities

( i 8,214)

i 4,413

( i 10,532)

Accrued taxes payable/receivable

i 6,695

( i 15,698)

i 3,180

Accrued interest

( i 3,601)

i 544

i 458

Pension and other postretirement benefit expenses

( i 6,991)

i 5,414

( i 30,740)

Short-term and long-term regulatory assets and liabilities

( i 13,390)

i 921

i 76,647

Prepayments and other current assets

( i 578)

( i 2,119)

i 4,711

Other - net

( i 340)

( i 7,357)

i 1,089

Net cash provided by operating activities

i 295,425

i 397,815

i 381,012

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

( i 235,700)

( i 213,619)

( i 224,335)

Project development costs

( i 2,401)

( i 2,269)

( i 1,127)

Cost of removal and regulatory recoverable ARO payments

( i 37,786)

( i 21,838)

( i 29,543)

Other

i 118

i 278

i 1,053

Net cash used in investing activities

( i 275,769)

( i 237,448)

( i 253,952)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under revolving credit facilities

i 115,000

i 10,000

i 100,000

Repayments under revolving credit facilities

( i 40,000)

( i 10,000)

( i 248,000)

Long-term borrowings, net of discount

i 564,568

i —

i 169,936

Retirement of long-term debt, including early payment premium

( i 562,135)

i —

Distributions to shareholders

( i 108,739)

( i 136,426)

( i 130,179)

Preferred dividends of subsidiary

( i 3,213)

Deferred financing costs paid

( i 6,914)

i —

( i 1,067)

Payments for financed capital expenditures

( i 36)

( i 5,623)

( i 11,429)

Other

( i 117)

( i 152)

( i 190)

Net cash used in financing activities

( i 41,586)

( i 145,414)

( i 124,142)

Net change in cash, cash equivalents and restricted cash

( i 21,930)

i 14,953

i 2,918

Cash, cash equivalents and restricted cash at beginning of period

i 48,552

i 33,599

i 30,681

Cash, cash equivalents and restricted cash at end of period

i 26,622

i 48,552

i 33,599

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest (net of amount capitalized)

i 122,938

i 117,457

i 90,975

Income taxes

i 27,000

i 29,600

i 28,275

Non-cash investing activities:

Accruals for capital expenditures

i 54,360

i 35,471

i 47,553

See notes to consolidated financial statements.

F-7

IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Consolidated Statements of Common Shareholders' Equity

and Noncontrolling Interest

For the Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

Paid in
Capital

Accumulated Other Comprehensive Loss

Accumulated
Deficit

Total Common Shareholders' Equity

Cumulative Preferred Stock of Subsidiary

Balance at January 1, 2018

i 597,467

—

( i 25,191)

i 572,276

i 59,784

Net income

—

i 130,812

i 3,213

Preferred stock dividends

—

( i 3,213)

Distributions to shareholders

—

( i 130,179)

—

Other

i 357

—

i 357

—

Balance at December 31, 2018

i 597,824

—

( i 24,558)

i 573,266

i 59,784

Net comprehensive income

—

( i 19,750)

i 129,180

i 109,430

i 3,213

Preferred stock dividends

—

( i 3,213)

Distributions to shareholders(1)

( i 7,246)

—

( i 129,180)

( i 136,426)

—

Other

i 206

—

i 206

—

Balance at December 31, 2019

i 590,784

( i 19,750)

( i 24,558)

i 546,476

i 59,784

Net comprehensive income

—

( i 23,670)

i 106,754

i 83,084

i 3,213

Preferred stock dividends

—

( i 3,213)

Distributions to shareholders(1)

( i 1,985)

—

( i 106,754)

( i 108,739)

—

Other

i 167

—

i 167

—

Balance at December 31, 2020

i 588,966

( i 43,420)

( i 24,558)

i 520,988

i 59,784

1) IPALCO made return of capital payments of $ i 2.0 million, $ i 7.2 million and $ i 0.0 million in 2020, 2019 and 2018, respectively, for the portion of current year distributions to shareholders in excess of current year net income.

See notes to consolidated financial statements.

F-8

IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

1. i OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

IPALCO is a holding company incorporated under the laws of the state of Indiana. IPALCO, acquired by AES in March 2001, is owned by AES U.S. Investments ( i 82.35%) and CDPQ ( i 17.65%). AES U.S. Investments is owned by AES U.S. Holdings, LLC ( i 85%) and CDPQ ( i 15%). IPALCO owns all of the outstanding common stock of IPL. Substantially all of IPALCO’s business consists of generating, transmitting, distributing and selling of electric energy conducted through its principal subsidiary, IPL. IPL was incorporated under the laws of the state of Indiana in 1926. IPL has approximately i 512,000 retail customers in the city of Indianapolis and neighboring cities, towns and communities, and adjacent rural areas all within the state of Indiana, with the most distant point being approximately i forty miles from Indianapolis. IPL has an exclusive right to provide electric service to those customers. IPL owns and operates i four generating stations all within the state of Indiana. Our largest generating station, Petersburg, is coal-fired, and IPL has plans to retire approximately 630 MW of coal-fired generation at Petersburg Units 1 and 2 in 2021 and 2023, respectively (for further discussion, see Note 2, "Regulatory Matters - IRP Filing"). The second largest station, Harding Street, uses natural gas and fuel oil to power combustion turbines. In addition, IPL operates a i 20 MW battery energy storage unit at this location, which provides frequency response. The third station, Eagle Valley, is a CCGT natural gas plant. IPL took operational control and commenced commercial operations of this CCGT plant in April 2018. The fourth station, Georgetown, is a small peaking station that uses natural gas to power combustion turbines. As of December 31, 2020, IPL’s net electric generation capacity for winter is i 3,705 MW and net summer capacity is i 3,560 MW.

IPALCO’s other direct subsidiary is Mid-America. Mid-America is the holding company for IPALCO’s unregulated activities, which have not been material to the financial statements in the periods covered by this report. IPALCO’s regulated business is conducted through IPL. IPALCO has i two business segments: utility and nonutility. The utility segment consists of the operations of IPL and everything else is included in the nonutility segment.

Principles of Consolidation

IPALCO’s consolidated financial statements are prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The consolidated financial statements include the accounts of IPALCO, its regulated utility subsidiary, IPL, and its unregulated subsidiary, Mid-America. All intercompany items have been eliminated in consolidation. Certain costs for shared resources amongst IPL and IPALCO, such as labor and benefits, are allocated to each entity based on allocation methodologies that management believes to be reasonable. We have evaluated subsequent events through the date this report is issued.

Use of Management Estimates

The preparation of financial statements in conformity with GAAP requires that management make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The reported amounts of revenues and expenses during the reporting period may also be affected by the estimates and assumptions management is required to make. Actual results may differ from those estimates.

Regulatory Accounting

The retail utility operations of IPL are subject to the jurisdiction of the IURC. IPL’s wholesale power transactions are subject to the jurisdiction of the FERC. These agencies regulate IPL’s utility business operations, tariffs, accounting, depreciation allowances, services, issuances of securities and the sale and acquisition of utility properties. The financial statements of IPL are based on GAAP, including the provisions of FASB ASC 980 “Regulated Operations,” which gives recognition to the ratemaking and accounting practices of these agencies. See also Note 2, “Regulatory Matters - Regulatory Assets and Liabilities” for a discussion of specific regulatory assets and liabilities.

Cash, Cash Equivalents and Restricted Cash

F-9

which is restricted as to withdrawal or usage. The nature of the restrictions includes restrictions imposed by agreements related to deposits held as collateral. i The following table provides a summary of cash, cash equivalents and restricted cash amounts as shown on the Consolidated Statements of Cash Flows:

As of December 31,

2020

2019

(In Thousands)

Cash, cash equivalents and restricted cash

Cash and cash equivalents

i 20,502

i 48,152

Restricted cash

i 6,120

i 400

Total cash, cash equivalents and restricted cash

i 26,622

i 48,552

Revenues and Accounts Receivable

Revenues related to the sale of energy are generally recognized when service is rendered or energy is delivered to customers. However, the determination of the energy sales to individual customers is based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to certain customers since the date of the last meter reading are estimated and the corresponding unbilled revenue is accrued. In making its estimates of unbilled revenue, IPL uses complex models that consider various factors including daily generation volumes; known amounts of energy usage by nearly all residential, commercial and industrial customers; estimated line losses; and estimated customer rates based on prior period billings. Given the use of these models, and that customers are billed on a monthly cycle, we believe it is unlikely that materially different results will occur in future periods when revenue is billed. An allowance for potential credit losses is maintained and amounts are written off when normal collection efforts have been exhausted. Our provision for expected credit losses included in “Operating expenses - Operation and maintenance” on the accompanying Consolidated Statements of Operations was $ i 4.8 million, $ i 4.3 million and $ i 5.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

IPL’s basic rates include a provision for fuel costs as established in IPL’s most recent rate proceeding, which last adjusted IPL’s rates in December 2018. IPL is permitted to recover actual costs of purchased power and fuel consumed, subject to certain restrictions. This is accomplished through quarterly FAC proceedings, in which IPL estimates the amount of fuel and purchased power costs in future periods. Through these proceedings, IPL is also permitted to recover, in future rates, underestimated fuel and purchased power costs from prior periods, subject to certain restrictions, and therefore the over or underestimated costs are deferred or accrued and amortized into fuel expense in the same period that IPL’s rates are adjusted. See also Note 2, “Regulatory Matters” for a discussion of other costs that IPL is permitted to recover through periodic rate adjustment proceedings and the status of current rate adjustment proceedings.

In addition, we are one of many transmission system owner members of MISO, a regional transmission organization which maintains functional control over the combined transmission systems of its members and manages one of the largest energy markets in the U.S. See Note 13, "Revenue" for additional information of MISO sales and other revenue streams.

F-10

The following table summarizes our accounts receivable balances at December 31:

As of December 31,

2020

2019

(In Thousands)

Accounts receivable, net

Customer receivables

i 91,335

i 90,747

Unbilled revenue

i 72,334

i 65,822

Amounts due from related parties

i 490

i 2,717

Other

i 4,189

i 2,725

Provision for uncollectible accounts

( i 3,155)

( i 921)

Total accounts receivable, net

i 165,193

i 161,090

The following table is a rollforward of our allowance for credit losses related to the accounts receivable balances for the year ended December 31, 2020 (in Thousands):

Beginning Allowance Balance at January 1, 2020

Current Period Provision

Write-offs Charged Against Allowances

Recoveries Collected

Ending Allowance Balance at
December 31, 2020

Allowance for credit losses

i 921

i 5,861

( i 5,473)

i 1,846

i 3,155

The allowance for credit losses primarily relates to utility customer receivables, including unbilled amounts. Expected credit loss estimates are developed by disaggregating customers into those with similar credit risk characteristics and using historical credit loss experience. In addition, we also consider how current and future economic conditions are expected to impact collectability, as applicable, including the economic impacts of the COVID-19 pandemic on our receivable balance as of December 31, 2020. Amounts are written off when reasonable collections efforts have been exhausted. An Executive Order issued by the Governor of Indiana on March 19, 2020 and extended by the IURC prohibited electric utilities, including us, from discontinuing electric utility service to customers through August 14, 2020 due to the economic impacts of COVID-19. This order along with the economic impacts of COVID-19 has resulted in an increase in past due customer receivable balances, and thus the current period provision and the allowance for credit losses has increased during 2020. Please see additional discussion in Note 2, "Regulatory Matters - IURC COVID-19 Order” and Note 15, "Risks and Uncertainties - COVID-19 Pandemic."

Inventories

We maintain coal, fuel oil, materials and supplies inventories for use in the production of electricity. These inventories are accounted for at the lower of cost or net realizable value, using the average cost. i The following table summarizes our inventories balances at December 31:

As of December 31,

2020

2019

(In Thousands)

Inventories

Fuel

i 36,953

i 26,907

Materials and supplies, net

i 58,553

i 56,662

Total inventories

i 95,506

i 83,569

Property, Plant and Equipment

i Property, plant and equipment is stated at original cost as defined for regulatory purposes. The cost of additions to property, plant and equipment and replacements of retirement units of property are charged to plant accounts. Units of property replaced or abandoned in the ordinary course of business are retired from the plant accounts at cost; such amounts, less salvage, are charged to accumulated depreciation. Depreciation is computed by the straight-line method based on functional rates approved by the IURC and averaged i 3.7%, i 3.7%, and i 4.2% during 2020, 2019 /

F-11

and 2018, respectively. Depreciation expense was $ i 232.8 million, $ i 228.2 million, and $ i 235.2 million for the years ended December 31, 2020, 2019 and 2018, respectively. "Depreciation and amortization" expense on the accompanying Consolidated Statements of Operations is presented net of regulatory deferrals of depreciation expense and also includes amortization of intangible assets and amortization of previously deferred regulatory costs.

i Allowance For Funds Used During Construction

In accordance with the Uniform System of Accounts prescribed by FERC, IPL capitalizes an allowance for the net cost of funds (interest on borrowed funds and a reasonable rate of return on equity funds) used for construction purposes during the period of construction with a corresponding credit to income. IPL capitalized amounts using pretax composite rates of i 6.9%, i 6.9% and i 6.4% during 2020, 2019 and 2018, respectively.

Impairment of Long-lived Assets

GAAP requires that we test long-lived assets for impairment when indicators of impairment exist. If an asset is deemed to be impaired, we are required to write down the asset to its fair value with a charge to current earnings. The net book value of our property, plant, and equipment was $ i 4.1 billion as of December 31, 2020 and 2019. In December 2020, IPL reclassified net property, plant and equipment of $ i 74.5 million associated with the probable Petersburg Unit 1 retirement to long-term regulatory assets (for further discussion, see Note 2, “Regulatory Matters - IRP Filing” and Note 3, "Property, Plant and Equipment"). We do not believe any of these assets are currently impaired. In making this assessment, we consider such factors as: the overall condition and generating and distribution capacity of the assets; the expected ability to recover additional expenditures in the assets; the anticipated demand and relative pricing of retail electricity in our service territory and wholesale electricity in the region; and the cost of fuel.

i Intangible Assets

Intangible assets primarily include capitalized software of $ i 144.5 million and $ i 139.6 million and its corresponding accumulated amortization of $ i 85.3 million and $ i 74.7 million, as of December 31, 2020 and 2019, respectively. Amortization expense was $ i 10.6 million, $ i 7.5 million and $ i 5.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. The estimated amortization expense of this capitalized software is approximately $ i 59.0 million over the next 5 years ($ i 11.8 million in 2021, $ i 11.8 million in 2022, $ i 11.8 million in 2023, $ i 11.8 million in 2024 and $ i 11.8 million in 2025).

Implementation Costs Related to Software as a Service

IPALCO has recorded prepayments for implementation costs related to software as a service in support of utility customer services of $ i 8.8 million as of December 31, 2020, which are recorded within "Other non-current assets" on the accompanying Consolidated Balance Sheets.

i Contingencies

IPALCO accrues for loss contingencies when the amount of the loss is probable and estimable. We are subject to various environmental regulations and are involved in certain legal proceedings. If IPL’s actual environmental and/or legal obligations are different from our estimates, the recognition of the actual amounts may have a material impact on our results of operations, financial condition and cash flows; although that has not been the case during the periods covered by this report. As of December 31, 2020 and 2019, total loss contingencies accrued were $ i 15.4 million and $ i 4.5 million, respectively, which were included in “Accrued and Other Current Liabilities” and "Other Non-Current Liabilities", respectively, on the accompanying Consolidated Balance Sheets.

Concentrations of Risk

Substantially all of IPL’s customers are located within the Indianapolis area. Approximately i 69% of IPL’s employees are covered by collective bargaining agreements in two bargaining units: a physical unit and a clerical-technical unit. IPL’s contract with the physical unit expires on i December 6, 2021, and the contract with the clerical-technical unit expires i February 13, 2023. Additionally, IPL has long-term coal contracts with i two suppliers, and substantially all of the coal is currently mined in the state of Indiana.

F-12

Financial Derivatives

All derivatives are recognized as either assets or liabilities in the balance sheets and are measured at fair value. Changes in the fair value are recorded in earnings unless the derivative is designated as a cash flow hedge of a forecasted transaction or it qualifies for the normal purchases and sales exception.

IPL has contracts involving the physical delivery of energy and fuel. Because these contracts qualify for the normal purchases and normal sales scope exception in ASC 815, IPL has elected to account for them as accrual contracts, which are not adjusted for changes in fair value.

Additionally, we use interest rate hedges to manage the interest rate risk of our variable rate debt. We use cash flow hedge accounting when the hedge or a portion of the hedge is deemed to be highly effective, which results in changes in the fair value being recorded within accumulated other comprehensive income, a component of shareholders' equity. We have elected not to offset net derivative positions in the Financial Statements. Accordingly, we do not offset such derivative positions against the fair value of amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under master netting agreements. See Note 5, “Derivative Instruments and Hedging Activities” for additional information.

Accumulated Other Comprehensive Income / (Loss)

The amounts reclassified out of Accumulated Other Comprehensive Loss by component during the years ended December 31, 2020, 2019 and 2018 are as follows (in thousands):

Details about Accumulated Other Comprehensive Loss components

Affected line item in the Condensed Consolidated Statements of Operations

For the Years Ended December 31,

2020

2019

2018

Gains and losses on cash flow hedges (Note 5):

Interest expense

( i 5,422)

i —

Income tax expense

i 1,313

i —

Total reclassifications for the period, net of income taxes

( i 4,109)

i —

The changes in the components of Accumulated Other Comprehensive Income/(Loss) during the years ended December 31, 2020, 2019, and 2018 are as follows (in thousands):

For the Years Ended December 31,

2020

2019

2018

Gains and losses on cash flow hedges (Note 5):

Balance at January 1

( i 19,750)

i —

Other comprehensive loss before reclassifications

( i 27,779)

( i 19,750)

i —

Amounts reclassified from AOCI to earnings

i 4,109

i —

Balance at December 31

( i 43,420)

( i 19,750)

i —

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of the existing assets and liabilities, and their respective income tax bases. The Company establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company’s tax positions are evaluated under a more likely than not recognition threshold and measurement analysis before they are recognized for financial statement reporting.

Uncertain tax positions have been classified as noncurrent income tax liabilities unless expected to be paid within one year. The Company’s policy for interest and penalties is to recognize interest and penalties as a component of the provision for income taxes in the Consolidated Statements of Operations.

Income tax assets or liabilities, which are included in allowable costs for ratemaking purposes in future years, are recorded as regulatory assets or liabilities with a corresponding deferred tax liability or asset. Investment tax credits that reduced federal income taxes in the years they arose have been deferred and are being amortized to income

F-13

over the useful lives of the properties in accordance with regulatory treatment. See Note 2, "Regulatory Matters" for additional information.

IPALCO and its subsidiaries file U.S. federal income tax returns as part of the consolidated U.S. income tax return filed by AES. The consolidated tax liability is allocated to each subsidiary based on the separate return method which is specified in our tax allocation agreement and which provides a consistent, systematic and rational approach. See Note 8, "Income Taxes" for additional information.

Pension and Postretirement Benefits

We recognize in our Consolidated Balance Sheets an asset or liability reflecting the funded status of pension and other postretirement plans with current-year changes in the funded status, that would otherwise be recognized in AOCI, recorded as a regulatory asset as this can be recovered through future rates. All plan assets are recorded at fair value. We follow the measurement date provisions of the accounting guidance, which require a year-end measurement date of plan assets and obligations for all defined benefit plans.

We account for and disclose pension and postretirement benefits in accordance with the provisions of GAAP relating to the accounting for pension and other postretirement plans. These GAAP provisions require the use of assumptions, such as the discount rate for liabilities and long-term rate of return on assets, in determining the obligations, annual cost and funding requirements of the plans. Consistent with the requirements of ASC 715, we apply a disaggregated discount rate approach for determining service cost and interest cost for our defined benefit pension plans and postretirement plans.

See Note 9, "Benefit Plans" for more information.

Repair and Maintenance Costs

Repair and maintenance costs are expensed as incurred.

Per Share Data

IPALCO is owned by AES U.S. Investments and CDPQ. IPALCO does not report earnings on a per-share basis.

New Accounting Pronouncements Adopted in 2020

The following table provides a brief description of recent accounting pronouncements that had an impact on the Company’s Financial Statements. Accounting pronouncements not listed below were assessed and determined to be either not applicable or did not have a material impact on the Company’s Financial Statements.


New Accounting Standards Adopted
ASU Number and Name	Description	Date of Adoption	Effect on the Financial Statements upon adoption
2016-13, 2018-19, 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, 2020-03, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	See discussion of the ASU below.	January 1, 2020	See impact upon adoption of the standard below.

ASC 326 - Financial Instruments - Credit Losses

On January 1, 2020, the Company adopted ASC 326 Financial Instruments - Credit Losses and its subsequent corresponding updates ("ASC 326"). The new standard updates the impairment model for financial assets measured at amortized cost, known as the Current Expected Credit Loss ("CECL") model. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities are required to use a new forward-looking "expected loss" model that generally results in the earlier recognition of an allowance for credit losses. For available-for-sale debt securities with unrealized losses, entities measure credit losses as it was done under previous GAAP, except that unrealized losses due to credit-related factors are now recognized as an allowance on the balance sheet with a corresponding adjustment to earnings in the income statement.

F-14

The Company applied the modified retrospective method of adoption for ASC 326. Under this transition method, the Company applied the transition provisions starting at the date of adoption. The CECL model primarily impacts the calculation of the Company's expected credit losses in gross customer trade accounts receivable. The adoption of ASC 326 and the application of CECL on our trade accounts receivable did not have a material impact on our Financial Statements.

New Accounting Pronouncements Issued But Not Yet Effective

The following table provides a brief description of recent accounting pronouncements that could have a material impact on the Company’s Financial Statements once adopted. Accounting pronouncements not listed below were assessed and determined to be either not applicable or are expected to have no material impact on the Company’s Financial Statements.


New Accounting Standards Issued But Not Yet Effective
ASU Number and Name	Description	Date of Adoption	Effect on the Financial Statements upon adoption
2020-04 and 2021-01, Reference Rate Form (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The amendments in these updates provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference to LIBOR or another reference rate expected to be discontinued by reference rate reform, and clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These amendments are effective for a limited period of time (March 12, 2020 - December 21, 2022).	March 12, 2020 - December 31, 2022	The Company is currently evaluating the impact of adopting the standard on the Financial Statements.

2. REGULATORY MATTERS

General

IPL is subject to regulation by the IURC as to its services and facilities, the valuation of property, the construction, purchase, or lease of electric generating facilities, the classification of accounts, rates of depreciation, retail rates and charges, the issuance of securities (other than evidences of indebtedness payable less than twelve months after the date of issue), the acquisition and sale of some public utility properties or securities and certain other matters.

In addition, IPL is subject to the jurisdiction of the FERC with respect to, among other things, short-term borrowings not regulated by the IURC, the sale of electricity at wholesale, the transmission of electric energy in interstate commerce, the classification of accounts, reliability standards, and the acquisition and sale of utility property in certain circumstances as provided by the Federal Power Act. As a regulated entity, IPL is required to use certain accounting methods prescribed by regulatory bodies which may differ from those accounting methods required to be used by unregulated entities.

IPL is also affected by the regulatory jurisdiction of the EPA at the federal level, and the IDEM at the state level. Other significant regulatory agencies affecting IPL include, but are not limited to, the NERC, the U.S. Department of Labor and the IOSHA.

Basic Rates and Charges

Our basic rates and charges represent the largest component of our annual revenues. Our basic rates and charges are determined after giving consideration, on a pro-forma basis, to all allowable costs for ratemaking purposes including a fair return on the fair value of the utility property used and useful in providing service to customers. These basic rates and charges are set and approved by the IURC after public hearings. Such proceedings, which have occurred at irregular intervals, involve IPL, the IURC, the Indiana Office of Utility Consumer Counselor, and other interested stakeholders. Pursuant to statute, the IURC is to conduct a periodic review of the basic rates and charges of all Indiana utilities at least once every four years, but the IURC has the authority to review the rates of any Indiana utility at any time. Once set, the basic rates and charges authorized do not assure the realization of a fair return on the fair value of property.

Our declining block rate structure generally provides for residential and commercial customers to be charged a lower per kWh rate at higher consumption levels. Therefore, as volumes increase, the weighted average price per

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kWh decreases. Numerous factors including, but not limited to, weather, inflation, customer growth and usage, the level of actual operating and maintenance expenditures, fuel costs, generating unit availability, and capital expenditures including those required by environmental regulations can affect the return realized.

Base Rate Orders

On October 31, 2018, the IURC issued an order approving an uncontested settlement agreement previously filed with the IURC by IPL for a $ i 43.9 million, or i 3.2%, increase to annual revenues (the "2018 Base Rate Order"). The 2018 Base Rate Order includes recovery through rates of the CCGT at Eagle Valley completed in the first half of 2018, as well as other construction projects and changes to operating income since the 2016 Base Rate Order. New basic rates and charges became effective on December 5, 2018. The 2018 Base Rate Order also provides customers approximately $ i 50 million in benefits, which are flowing to customers over the two-year period that began March 2019, via the ECCRA rate adjustment mechanism. This liability, less amounts returned to IPL's customers during 2020 and 2019, is recorded primarily in "Regulatory liabilities, current" ($ i 4.7 million and $ i 25.1 million as of December 31, 2020 and 2019, respectively) and "Regulatory liabilities, non-current" ($ i 0.0 million and $ i 4.7 million as of December 31, 2020 and 2019, respectively) on the accompanying Consolidated Balance Sheets. In addition, the 2018 Base Rate Order provides that annual wholesale margins earned above (or below) the benchmark of $ i 16.3 million shall be passed back (or charged) to customer rates through a rate adjustment mechanism. Prior to the 2018 Base Rate Order, wholesale sales margins were shared with customers i 50% above and below an established benchmark of $ i 6.3 million. Similarly, the 2018 Base Rate Order provides that all capacity sales above (or below) a benchmark of $ i 11.3 million shall be passed back (or charged) to customer rates through a rate adjustment mechanism. The 2018 Base Rate Order also approved changes to IPL's depreciation and amortization rates (including no longer deferring depreciation on the CCGT at Eagle Valley) which altogether represent a net expense increase of approximately $ i 28.7 million annually.

Other

The DOE issued a Notice of Proposed Rule Making on September 29, 2017, which directed the FERC to exercise its authority to set just and reasonable rates that recognize the “resiliency” value provided by generation plants with certain characteristics, including having 90-days or more of on-site fuel and operating in markets where they do not receive rate base treatment through state ratemaking. Nuclear and coal-fired generation plants would have been most likely to be able to meet the requirements. As proposed, the DOE would value resiliency through rates that recover “compensable costs” that were defined to include the recovery of operating and fuel expenses, debt service and a fair return on equity. On January 8, 2018, the FERC issued an order terminating this docket stating that it failed to satisfy the legal requirements of Section 206 of the Federal Power Act of 1935. The FERC initiated a new docket to take additional steps to explore resilience issues in RTOs/ISOs. The goal of this new proceeding is to: (1) develop a common understanding among the FERC, State Commissions, RTOs/ISOs, transmission owners, and others as to what resilience of the bulk power system means and requires; (2) understand how each RTO and ISO assesses resilience in its geographic footprint; and (3) use this information to evaluate whether additional action regarding resilience is appropriate at this time. It is not possible to predict the impact of this proceeding on our business, financial condition and results of operations.

FAC and Authorized Annual Jurisdictional Net Operating Income

IPL may apply to the IURC for a change in IPL’s fuel charge every three months to recover IPL’s estimated fuel costs, including the energy portion of purchased power costs, which may be above or below the levels included in IPL’s basic rates and charges. IPL must present evidence in each FAC proceeding that it has made every reasonable effort to acquire fuel and generate or purchase power or both so as to provide electricity to its retail customers at the lowest fuel cost reasonably possible.

Independent of the IURC’s ability to review basic rates and charges, Indiana law requires electric utilities under the jurisdiction of the IURC to meet operating expense and income test requirements as a condition for approval of requested changes in the FAC. A utility may be unable to recover all of its fuel costs if its rolling twelve-month operating income, determined at quarterly measurement dates, exceeds its authorized annual jurisdictional net operating income and there are not sufficient applicable cumulative net operating income deficiencies (“Cumulative Deficiencies”) to offset it. The Cumulative Deficiencies calculation provides that only five years’ worth of historical earnings deficiencies or surpluses are included, unless it has been greater than five years since the most recent rate case.

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recorded a reduction to revenue of $ i 10.0 million in 2020. IPL's regulatory liability attributed to the Cumulative Deficiencies calculation was $ i 7.7 million as of December 31, 2020, which is recorded within "Regulatory liabilities, current" on the accompanying Consolidated Balance Sheets.

ECCRA

IPL may apply to the IURC for approval of a rate adjustment known as the ECCRA periodically to recover costs (including a return) to comply with certain environmental regulations applicable to IPL’s generating stations. The total amount of IPL’s equipment approved for ECCRA recovery as of December 31, 2020 was $ i 22.5 million. The jurisdictional revenue requirement approved by the IURC to be included in IPL’s rates for the twelve-month period ending February 2021 was a net credit to customers of $ i 31.2 million. This amount is significantly lower than ECCRA periods prior to 2019 as a result of (i) having the vast majority of the ECCRA projects rolled into IPL’s basic rates and charges effective December 5, 2018 as a result of the 2018 Base Rate Order and (ii) the approximately $50 million of customer benefits being flowed through the ECCRA as a result of the 2018 Base Rate Order, as described above. The only equipment still remaining in the ECCRA as of December 31, 2020 are certain projects associated with NAAQS compliance.

DSM

Through various rate orders from the IURC, IPL has been able to recover its costs of implementing various DSM programs throughout the periods covered by this report. In 2020, 2019 and 2018, IPL also had the ability to receive performance incentives, dependent upon the level of success of the programs. Performance incentives included in revenues for the years ended December 31, 2020, 2019 and 2018 were $ i 6.0 million, $ i 7.5 million and $ i 3.8 million, respectively.

On February 7, 2018, the IURC approved a settlement agreement approving a three year DSM plan for IPL through 2020. The approval included cost recovery of programs as well as performance incentives, depending on the level of success of the programs. The order also approved recovery of lost revenues, consistent with the provisions of the settlement agreement.

On December 29, 2020, the IURC approved a settlement agreement establishing a new three year DSM plan for IPL through 2023. The approval included cost recovery of programs as well as performance incentives, depending on the level of success of the programs. The order also approved recovery of lost revenues, consistent with the provisions of the settlement agreement.

Wind and Solar Power Purchase Agreements

We are committed under a power purchase agreement to purchase all wind-generated electricity through 2029 from a wind project in Indiana. We are also committed under another agreement to purchase all wind-generated electricity through 2031 from a project in Minnesota. The Indiana project has a maximum output capacity of approximately i 100 MW and the Minnesota project has a maximum output capacity of approximately i 200 MW. In addition, we have i 96.4 MW of solar-generated electricity in our service territory under long-term contracts (these long-term contracts have expiration dates ranging from 2021 to 2033), of which i 95.9 MW was in operation as of December 31, 2020. We have authority from the IURC to recover the costs for all of these agreements through an adjustment mechanism administered within the FAC. If and when IPL sells the renewable energy attributes (in the form of renewable energy credits) generated from these facilities, the proceeds would pass back to benefit IPL’s retail customers through the FAC.

Taxes

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income tax rate. The second phase (“Phase II”) was established to address remaining issues from the TCJA, including treatment of deferred taxes and how these benefits will be realized by customers. On August 29, 2018, the IURC approved a settlement agreement filed by IPL and various other parties to resolve the Phase I issues of the TCJA tax expense via a credit through the ECCRA rate adjustment mechanism of $ i 9.5 million. The 2018 Base Rate Order described above resolved the Phase II and all other issues regarding the TCJA impact on IPL's rates and includes an additional credit of $ i 14.3 million to be paid by IPL to its customers through the ECCRA rate adjustment mechanism over two years beginning in March 2019.

TDSIC

In 2013, Senate Enrolled Act 560, the Transmission, Distribution, and Storage System Improvement Charge ("TDSIC") statute, was signed into law. The TDSIC statute was revised in 2019. Among other provisions, this legislation provides for cost recovery outside of a base rate proceeding for new or replacement electric and gas transmission, distribution, and storage projects that a public utility undertakes for the purposes of safety, reliability, system modernization, or economic development. Provisions of the TDSIC statute require that, among other things, requests for recovery include a plan of at least five years and not more than seven for eligible investments. The first i eighty percent of eligible costs can be recovered using a periodic rate adjustment mechanism. The cost recovery mechanism is referred to as a TDSIC mechanism. Recoverable costs include a return on, and of, the investment, including AFUDC, post-in-service carrying charges, operation and maintenance expenses, depreciation and property taxes. The remaining i twenty percent of recoverable costs are to be deferred for future recovery in the public utility’s next base rate case. The periodic rate adjustment mechanism is capped at an annual increase of no more than i two percent of total retail revenues.

On March 4, 2020, the IURC issued an order approving the projects in a seven-year TDSIC Plan for eligible transmission, distribution and storage system improvements totaling $ i 1.2 billion from 2020 through 2027. On June 18, 2020, IPL filed its first annual TDSIC rate adjustment (TDSIC 1) for a return on and of investments through March 31, 2020. On October 14, 2020, the IURC issued an order approving this TDSIC rate adjustment, which was reflected in rates effective November 2020. On December 23, 2020, IPL filed its first annual TDSIC plan update filing (TDSIC 2), which was staggered by six months from TDSIC 1 as ordered by the IURC.

IRP Filing

In December 2019, IPL filed its IRP, which describes IPL's Preferred Resource Portfolio for meeting generation capacity needs for serving IPL's retail customers over the next several years. IPL's Preferred Resource Portfolio is its reasonable least cost option and provides a cleaner and more diverse generation mix for customers. IPL's Preferred Resource Portfolio includes the retirement of approximately i 630 MW of coal-fired generation at Petersburg Units 1 and 2 in 2021 and 2023, respectively. Based on extensive modeling, IPL has determined that the cost of operating Petersburg Units 1 and 2 exceeds the value customers receive compared to alternative resources. Retirement of these units allows the company to cost-effectively diversify the portfolio and transition to lower cost and cleaner resources while maintaining a reliable system.

IPL issued an all-source Request for Proposal on December 20, 2019, in order to competitively procure replacement capacity by June 1, 2023, which is the first year IPL is expected to have a capacity shortfall. Our modeling indicated that a combination of wind, solar, storage, and energy efficiency would be the lowest reasonable cost option for the replacement capacity, but IPL continues to assess the type, size, and location of resources in the bids we received. As a result of the plans to retire Petersburg Units 1 and 2, IPL recorded a $ i 6.2 million obsolescence loss in December 2019 for materials and supplies inventory IPL does not believe will be utilized by the planned retirement dates, which is recorded in "Operating expenses - Operation and maintenance" on the accompanying Consolidated Statements of Operations. In December 2020, IPL reclassified net property, plant and equipment of $ i 74.5 million, associated with the probable Petersburg Unit 1 retirement, to long-term regulatory assets. On February 5, 2021, IPL announced an agreement to acquire a 195 MW solar project. Expected to be completed in 2023, the solar project will be located in Clinton County, Indiana and Invenergy will develop the project and manage construction. The acquisition agreement is subject to approval from the IURC. On February 12, 2021, IPL filed a petition and case-in-chief with the IURC seeking a CPCN for this solar project.

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IURC COVID-19 Orders

In its June 29, 2020 order, the IURC extended the disconnection moratorium for IURC-jurisdictional utilities through August 14, 2020, which has lapsed. Additionally, the IURC authorized Indiana utilities to use regulatory accounting for any impacts associated with prohibiting utility disconnections, waiver or exclusion of certain utility fees (i.e., late fees, convenience fees, deposits, and reconnection fees), and also required utilities to use expanded payment arrangements to aid customers. The IURC also authorized regulatory accounting treatment for COVID-19 related uncollectible and incremental bad debt expense.

On August 12, 2020, the IURC required all jurisdictional utilities to continue offering extended payment arrangements for a minimum of six months to all customers for an additional 60 days, until October 12, 2020, which the IURC again extended through December 31, 2020 for residential customers on October 27, 2020. The IURC also continued to suspend the collection of certain utility fees (late fees, deposits, and disconnection/reconnection fees) from residential customers for an additional 60 days, until October 12, 2020, after which utilities were allowed to resume charging convenience fees as set forth in the rate and charges established in their Commission-approved tariffs.

As a result of these orders, IPL has recorded a $ i 6.4 million regulatory asset as of December 31, 2020. Additionally, IPL implemented and extended flexible payment assistance plans to customers during 2020.

Phase Two of the IURC investigation is expected to focus on longer-term issues related to COVID-19. Among other things, the issues may include consideration of appropriate methodology to review the reasonableness, necessity, and prudency of any COVID-19-related cost recovery requests in future rate cases. For further discussion on the COVID-19 pandemic, see Note 15, "Risks and Uncertainties - COVID-19 Pandemic".

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Regulatory Assets and Liabilities

Regulatory assets represent deferred costs or credits that have been included as allowable costs or credits for ratemaking purposes. IPL has recorded regulatory assets or liabilities relating to certain costs or credits as authorized by the IURC or established regulatory practices in accordance with ASC 980. IPL is amortizing non tax-related regulatory assets to expense over periods ranging from i 1 to i 45 years. Tax-related regulatory assets represent the net income tax costs to be considered in future regulatory proceedings generally as the tax-related amounts are paid.

The amounts of regulatory assets and regulatory liabilities at December 31 are as follows:

2020

2019

Recovery Period

(In Thousands)

Regulatory Assets

Current:

Undercollections of rate riders

i 31,569

i 22,216

Approximately 1 year(1)

Costs being recovered through basic rates and charges

i 13,861

i 15,182

Approximately 1 year(1)

Total current regulatory assets

i 45,430

i 37,398

Long-term:

Unrecognized pension and other

postretirement benefit plan costs

i 149,374

i 176,646

Various (2)

Deferred MISO costs

i 61,267

i 74,660

Through 2026(1)

Unamortized Petersburg Unit 4 carrying

charges and certain other costs

i 5,975

i 7,030

Through 2026(1)(3)

Unamortized reacquisition premium on debt

i 17,018

i 18,330

Over remaining life of debt

Environmental projects

i 74,637

i 78,021

Through 2046(1)(3)

COVID-19

i 6,391

i —

To be determined

TDSIC projects

i 2,747

i —

36.3 years(1)(3)

Petersburg Unit 1 retirement

i 74,545

i —

Through 2035(3)(5)

Other miscellaneous

i 847

i 927

Various (4)

Total long-term regulatory assets

i 392,801

i 355,614

Total regulatory assets

i 438,231

i 393,012

Regulatory Liabilities

Current:

Overcollections and other credits being passed

to customers through rate riders

i 29,493

i 51,790

Approximately 1 year(1)

FTRs

i 543

i 864

Approximately 1 year(1)

Total current regulatory liabilities

i 30,036

i 52,654

Long-term:

ARO and accrued asset removal costs

i 723,897

i 719,680

Not applicable

Deferred income taxes payable to customers through rates

i 112,957

i 122,156

Various

Long-term portion of credits being passed to customers

through rate riders

i —

i 3,337

Through 2020

Other miscellaneous

i 2,506

i 1,257

To be determined

Total long-term regulatory liabilities

i 839,360

i 846,430

Total regulatory liabilities

i 869,396

i 899,084

(1)Recovered (credited) per specific rate orders

(2)IPL receives a return on its discretionary funding

(3)Recovered with a current return

(4) The majority of these costs are being recovered in basic rates and charges through 2026. For the remainder, recovery is probable, but the

timing is not yet determined.

(5) Recovered per regulatory precedent.

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Current Regulatory Assets and Liabilities

Current regulatory assets and liabilities primarily represent costs that are being recovered per specific rate order; recovery for the remaining costs is probable, but not certain. As current assets, this includes undercollection of adjustment mechanisms for: (i) DSM, (ii) Off System Sales Margin Sharing, (iii) Capacity Cost Recovery and (iv) TDSIC. It also includes the current portion of deferred MISO costs and environmental costs which are described in greater detail below. As current liabilities, this includes overcollection of green power costs, MISO rider costs, fuel costs (including the NOI liability) and ECCRA costs.

Deferred Fuel

Deferred fuel costs are a component of current regulatory assets or liabilities (which is a result of IPL charging either more or less for fuel than our actual costs to our jurisdictional customers) and are expected to be recovered through future FAC proceedings. IPL records deferred fuel in accordance with standards prescribed by the FERC. The deferred fuel adjustment is the result of variances between estimated fuel and purchased power costs in IPL’s FAC and actual fuel and purchased power costs. IPL is generally permitted to recover underestimated fuel and purchased power costs in future rates through the FAC proceedings and therefore the costs are deferred when incurred and amortized into fuel expense in the same period that IPL’s rates are adjusted to reflect these costs.

Unrecognized Pension and Postretirement Benefit Plan Costs

In accordance with ASC 715 “Compensation – Retirement Benefits” and ASC 980, we recognize a regulatory asset equal to the unrecognized actuarial gains and losses and prior service costs. Pension expenses are recorded based on the benefit plan’s actuarially determined pension liability and associated level of annual expenses to be recognized. The other postretirement benefit plan’s deferred benefit cost is the excess of the other postretirement benefit liability over the amount previously recognized.

Deferred MISO Costs

These consist of administrative costs for transmission services, transmission expansion cost sharing, and certain other operational and administrative costs from the MISO market. These costs are being recovered per specific rate order.

Unamortized Petersburg Unit 4 Carrying Charges and Certain Other Costs

These consist of deferred debt carrying costs, depreciation, and post-in-service Allowance for Funds Used During Construction ("AFUDC") on Petersburg Unit 4. These costs are being recovered per specific rate order.

Unamortized Reacquisition Premium on Debt

This regulatory asset represents losses on long-term debt reacquired or redeemed in prior periods that have been deferred. These deferred losses are being amortized over the lives of the original issues in accordance with the rules of the FERC and the IURC.

Environmental Costs

These consist of various costs incurred to comply with environmental regulations. These costs were approved for recovery either through IPL's ECCRA proceedings or in the 2018 Base Rate Order. Amortization periods vary, ranging from i 3 to i 45 years.

COVID-19 Costs

These consist of deferred fees (foregone late fees, reconnection fees and disconnection fees), as well as deferred convenience payments and incremental bad debt expense as the result of COVID-19. See "IURC COVID-19 Orders" above for additional discussion.

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TDSIC Costs

These consist of various costs incurred for IPL's approved TDSIC Plan. These costs were approved for recovery through IPL's TDSIC proceedings and amortization periods range from i 3 to i 31 years. See "TDSIC" above for additional discussion.

Petersburg Unit 1 Retirement Costs

These consist of the estimated remaining net book value of Petersburg Unit 1 at its anticipated date of retirement. It was determined that the Petersburg Unit 1 retirement became probable, in accordance with ASC 980, in the fourth quarter of 2020. As it is expected that the entire carrying value of the asset will be recoverable through future rates, no loss on abandonment was recorded and the asset was reclassified from net property, plant and equipment to a long-term regulatory asset. See "IRP Filing" above for additional discussion.

FTRs

In connection with IPL’s participation in MISO, in the second quarter of each year IPL is granted financial instruments that can be converted into cash or FTRs based on IPL’s forecasted peak load for the period. See Note 4, "Fair Value - Fair Value Hierarchy and Valuation Techniques - Financial Assets - FTRs" for additional information.

ARO and Accrued Asset Removal Costs

In accordance with ASC 410 and ASC 980, IPL recognizes the amount collected in customer rates for costs of removal that do not have an associated legal retirement obligation as a deferred regulatory liability. This amount is net of the portion of legal ARO costs that is also currently being recovered in rates.

Deferred Income Taxes Recoverable/Payable Through Rates

A deferred income tax asset or liability is created from a difference in timing of income recognition between tax laws and accounting methods. As a regulated utility, IPL includes in ratemaking the impacts of current income taxes and changes in deferred income tax liabilities or assets.

On December 22, 2017, the U.S. federal government enacted the TCJA, which, among other things, reduced the federal corporate income tax rate from i 35% to i 21%, beginning January 1, 2018. As required by GAAP, on December 31, 2017, IPL and IPALCO remeasured their deferred income tax assets and liabilities using the new tax rate. The impact of the reduction of the income tax rate on deferred income taxes was utilized in the 2018 Base Rate Order to reduce jurisdictional retail rates. Accordingly, we have a net regulatory deferred income tax liability of $ i 113.0 million and $ i 122.2 million as of December 31, 2020 and 2019, respectively.

3. PROPERTY, PLANT AND EQUIPMENT

The original cost of property, plant and equipment segregated by functional classifications follows:

As of December 31,

2020

2019

(In Thousands)

Production

i 4,191,223

i 4,154,919

Transmission

i 408,380

i 398,903

Distribution

i 1,671,861

i 1,594,208

General plant

i 258,931

i 250,582

Total property, plant and equipment

i 6,530,395

i 6,398,612

In December 2020, IPL reclassified net property, plant and equipment of $ i 74.5 million associated with the Petersburg Unit 1 retirement to long-term regulatory assets by crediting accumulated depreciation (for further discussion, see Note 2, “Regulatory Matters - IRP Filing”).

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Substantially all of IPL’s property is subject to a $ i 1,803.8 million direct first mortgage lien, as of December 31, 2020, securing IPL’s first mortgage bonds. Total non-contractually or legally required accrued removal costs of utility plant in service at December 31, 2020 and 2019 were $ i 818.0 million and $ i 788.3 million, respectively; and total contractually or legally required removal costs of property, plant and equipment at December 31, 2020 and 2019 were $ i 195.2 million and $ i 204.2 million, respectively. Please see “ARO” below for further information.

ARO

ASC 410 “Asset Retirement and Environmental Obligations” addresses financial accounting and reporting for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal operation. A legal obligation for purposes of ASC 410 is an obligation that a party is required to settle as a result of an existing law, statute, ordinance, written or oral contract or the doctrine of promissory estoppel.

IPL’s ARO relates primarily to environmental issues involving asbestos-containing materials, ash ponds, landfills and miscellaneous contaminants associated with its generating plants, transmission system and distribution system. i The following is a roll forward of the ARO legal liability year end balances:

2020

2019

(In Thousands)

Balance as of January 1

i 204,219

i 129,451

Liabilities settled

( i 18,302)

( i 9,891)

Revisions to cash flow and timing estimates

i 1,120

i 78,153

Accretion expense

i 8,199

i 6,506

Balance as of December 31

i 195,236

i 204,219

IPL recorded adjustments to its ARO liabilities of $ i 1.1 million and $ i 78.2 million in 2020 and 2019, respectively, primarily to reflect increases to estimated ash pond closure costs, including groundwater remediation. As of December 31, 2020 and 2019, IPL did not have any assets that are legally restricted for settling its ARO liability.

4. i FAIR VALUE

The fair value of financial assets and liabilities approximate their reported carrying amounts. The estimated fair values of the Company’s assets and liabilities have been determined using available market information. As these amounts are estimates and based on hypothetical transactions to sell assets or transfer liabilities, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Fair Value Hierarchy and Valuation Techniques

ASC 820 defined and established a framework for measuring fair value and expands disclosures about fair value measurements for financial assets and liabilities that are adjusted to fair value on a recurring basis and/or financial assets and liabilities that are measured at fair value on a nonrecurring basis, which have been adjusted to fair value during the period. In accordance with ASC 820, we have categorized our financial assets and liabilities that are adjusted to fair value, based on the priority of the inputs to the valuation technique, following the three-level fair value hierarchy prescribed by ASC 820 as follows:

Level 1 - unadjusted quoted prices for identical assets or liabilities in an active market;

Level 2 - inputs from quoted prices in markets where trading occurs infrequently or quoted prices of instruments with similar attributes in active markets; and

Level 3 - unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

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value of financial instruments has been determined by using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Financial Assets

VEBA Assets

IPALCO has VEBA investments that are to be used to fund certain employee postretirement health care benefit plans. These assets are primarily comprised of open-ended mutual funds, which are valued using the net assets value per unit. These investments are recorded at fair value within "Other non-current assets" on the accompanying Consolidated Balance Sheets and classified as equity securities. All changes to fair value on the VEBA investments are included in income in the period that the changes occur. These changes to fair value were not material for the years ended December 31, 2020, 2019, or 2018. Any unrealized gains or losses are recorded in "Other income / (expense), net" on the accompanying Consolidated Statements of Operations.

FTRs

In connection with IPL’s participation in MISO, in the second quarter of each year IPL is granted financial instruments that can be converted into cash or FTRs based on IPL’s forecasted peak load for the period. FTRs are used in the MISO market to hedge IPL’s exposure to congestion charges, which result from constraints on the transmission system. IPL’s FTRs are valued at the cleared auction prices for FTRs in MISO’s annual auction. Because of the infrequent nature of this valuation, the fair value assigned to the FTRs is considered a Level 3 input under the fair value hierarchy required by ASC 820. An offsetting regulatory liability has been recorded as these revenues or costs will be flowed through to customers through the FAC. As such, there is no impact on our Consolidated Statements of Operations.

Financial Liabilities

Interest Rate Hedges

In March 2019, we entered into forward interest rate hedges, which were amended in April 2020. The interest rate hedges have a combined notional amount of $ i 400.0 million. All changes in the market value of the interest rate hedges are recorded in AOCL. See also Note 5, "Derivative Instruments and Hedging Activities - Cash Flow Hedges" for further information.

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Summary

The fair value of assets and liabilities at December 31, 2020 measured on a recurring basis and the respective category within the fair value hierarchy for IPALCO was determined as follows:

Assets and Liabilities at Fair Value

Level 1

Level 2

Level 3

Fair value at December 31, 2020

Based on quoted market prices in active markets

Other observable inputs

Unobservable inputs

(In Thousands)

Financial assets:

VEBA investments:

Money market funds

i 16

i —

Mutual funds

i 3,209

i —

i 3,209

i —

Total VEBA investments

i 3,225

i 16

i 3,209

i —

Financial transmission rights

i 543

i —

i 543

Total financial assets measured at fair value

i 3,768

i 16

i 3,209

i 543

Financial liabilities:

Interest rate hedges

i 63,215

i —

i 63,215

i —

Total financial liabilities measured at fair value

i 63,215

i —

i 63,215

i —

The fair value of assets and liabilities at December 31, 2019 measured on a recurring basis and the respective category within the fair value hierarchy for IPALCO was determined as follows:

Assets and Liabilities at Fair Value

Level 1

Level 2

Level 3

Fair value at December 31, 2019

Based on quoted market prices in active markets

Other observable inputs

Unobservable inputs

(In Thousands)

Financial assets:

VEBA investments:

Money market funds

i 25

i —

Mutual funds

i 2,854

i —

i 2,854

i —

Total VEBA investments

i 2,879

i 25

i 2,854

i —

Financial transmission rights

i 864

i —

i 864

Total financial assets measured at fair value

i 3,743

i 25

i 2,854

i 864

Financial liabilities:

Interest rate hedges

i 26,560

i —

i 26,560

i —

Total financial liabilities measured at fair value

i 26,560

i —

i 26,560

i —

F-25

The following table sets forth a roll forward of financial instruments, measured at fair value on a recurring basis, classified as Level 3 in the fair value hierarchy (note, amounts in this table indicate carrying values, which approximate fair values):


	Reconciliation of Financial Instruments Classified as Level 3
	(In Thousands)
Balance at January 1, 2019	$	i 3,046
Unrealized gain recognized in earnings	i 53
Issuances	i 2,846
Settlements	( i 5,081)
Balance at December 31, 2019	$	i 864

Issuances	i 1,889
Settlements	( i 2,210)
Balance at December 31, 2020	$	i 543

Financial Instruments not Measured at Fair Value in the Consolidated Balance Sheets

Debt

The fair value of our outstanding fixed-rate debt has been determined on the basis of the quoted market prices of the specific securities issued and outstanding. In certain circumstances, the market for such securities was inactive and therefore the valuation was adjusted to consider changes in market spreads for similar securities. Accordingly, the purpose of this disclosure is not to approximate the value on the basis of how the debt might be refinanced.

The following table shows the face value and the fair value of fixed-rate and variable-rate indebtedness (Level 2) for the periods ending:

Face Value

Fair Value

Face Value

Fair Value

(In Thousands)

Fixed-rate

i 2,683,800

i 3,295,588

i 2,523,800

i 2,876,140

Variable-rate

i 75,000

i 155,000

Total indebtedness

i 2,758,800

i 3,370,588

i 2,678,800

i 3,031,140

The difference between the face value and the carrying value of this indebtedness represents the following:

•unamortized deferred financing costs of $ i 26.0 million and $ i 20.7 million at December 31, 2020 and 2019, respectively; and

•unamortized discounts of $ i 6.6 million and $ i 6.5 million at December 31, 2020 and 2019, respectively.

5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We use derivatives principally to manage the interest rate risk associated with refinancing our long-term debt. The derivatives that we use to economically hedge these risks are governed by our risk management policies for forward and futures contracts. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required. We monitor and value derivative positions monthly as part of our risk management processes. We use published sources for pricing, when possible, to mark positions to market. All of our derivative instruments are used for risk management purposes and are designated as cash flow hedges if they qualify under ASC 815 for accounting purposes.

F-26

At December 31, 2020, IPL's outstanding derivative instruments were as follows:

Commodity

Accounting Treatment (a)

Unit

Purchases
(in thousands)

Sales
(in thousands)

Net Purchases/(Sales)
(in thousands)

Interest rate hedges

Designated

USD

i 400,000

i —

i 400,000

FTRs

Not Designated

MWh

i 3,168

i —

i 3,168

(a) Refers to whether the derivative instruments have been designated as a cash flow hedge.

Cash Flow Hedges

As part of our risk management processes, we identify the relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. The fair values of cash flow hedges determined by current public market prices will continue to fluctuate with changes in market prices up to contract expiration. With the adoption of ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted improvements to Accounting for Hedging Activities effective January 1, 2019, we are no longer required to calculate effectiveness and thus the entire change in the fair value of a hedging instrument is now recorded in other comprehensive income and amounts deferred are reclassified to earnings in the same income statement line as the hedged item in the period in which it settles.

In March 2019, we entered into i three forward interest rate swaps to hedge the interest risk associated with refinancing the IPALCO 2020 maturities. The i three interest rate swaps had a combined notional amount of $ i 400.0 million. In April 2020, we de-designated the swaps as cash flow hedges and froze the AOCL of $ i 72.3 million at the date of de-designation. The interest rate swaps were then amended and re-designated as cash flow hedges to hedge the interest rate risk associated with refinancing the 2024 IPALCO Notes. The amended interest rate swaps have a combined notional amount of $ i 400.0 million and will be settled when the 2024 IPALCO Notes are refinanced. The $ i 72.3 million of AOCL associated with the interest rate swaps through the date of the amendment will be amortized out of AOCL into interest expense over the remaining life of the 2030 IPALCO Notes, while any changes in fair value associated with the amended interest rate swaps will be recognized in AOCL going forward.

The following tables provide information on gains or losses recognized in AOCL for the cash flow hedges for the periods indicated:

Interest Rate Hedges for the Year Ended December 31,

$ in thousands (net of tax)

2020

2019

2018

Beginning accumulated derivative gain / (loss) in AOCL

( i 19,750)

i —

Net losses associated with current period hedging transactions

( i 27,779)

( i 19,750)

i —

Net losses reclassified to interest expense, net of tax

i 4,109

i —

Ending accumulated derivative loss in AOCL

( i 43,420)

( i 19,750)

i —

Loss expected to be reclassified to earnings in the next twelve months

( i 5,375)

Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months)

i 45

Derivatives Not Designated as Hedge

FTRs do not qualify for hedge accounting or the normal purchases and sales exceptions under ASC 815. Accordingly, such contracts are recorded at fair value when acquired and subsequently amortized over the annual period as they are used. FTRs are initially recorded at fair value using the income approach.

Certain qualifying derivative instruments have been designated as normal purchases or normal sales contracts, as provided under GAAP. Derivative contracts that have been designated as normal purchases or normal sales under GAAP are not subject to hedge or mark to market accounting and are recognized in the consolidated statements of operations on an accrual basis.

F-27

received (a liability) under derivative agreements. As of December 31, 2020, IPALCO had $ i 6.1 million of collateral in a broker margin account which offsets our loss positions on the interest rate hedges.

The following table summarizes the fair value, balance sheet classification and hedging designation of IPALCO's derivative instruments:

December 31,

Commodity

Hedging Designation

Balance sheet classification

2020

2019

Financial transmission rights

Not a Cash Flow Hedge

Prepayments and other current assets

i 543

i 864

Interest rate hedges

Cash Flow Hedge

Derivative liabilities, current

i —

i 26,560

Interest rate hedges

Cash Flow Hedge

Derivative liabilities, non-current

i 63,215

i —

6. i EQUITY

Dividend Restrictions

IPL’s mortgage and deed of trust and its amended articles of incorporation contain restrictions on IPL’s ability to issue certain securities or pay cash dividends. So long as any of the several series of bonds of IPL issued under its mortgage remains outstanding, and subject to certain exceptions, IPL is restricted in the declaration and payment of dividends, or other distribution on shares of its capital stock of any class, or in the purchase or redemption of such shares, to the aggregate of its net income, as defined in the mortgage, after December 31, 1939. In addition, pursuant to IPL’s articles, no dividends may be paid or accrued, and no other distribution may be made on IPL’s common stock unless dividends on all outstanding shares of IPL preferred stock have been paid or declared and set apart for payment. As of December 31, 2020, and as of the filing of this report, IPL was in compliance with these restrictions.

IPL is also restricted in its ability to pay dividends if it is in default under the terms of its Credit Agreement, which could happen if IPL fails to comply with certain covenants. These covenants, among other things, require IPL to maintain a ratio of total debt to total capitalization not in excess of i 0.67 to i 1. As of December 31, 2020. and as of the filing of this report, IPL was in compliance with all covenants and no event of default existed.

IPALCO’s Third Amended and Restated Articles of Incorporation contain provisions which state that IPALCO may not make a distribution to its shareholders or make a loan to any of its affiliates (other than its subsidiaries), unless: (a) there exists no event of default (as defined in the articles) and no such event of default would result from the making of the distribution or loan; and either (b)(i) at the time of, and/or as a result of, the distribution or loan, IPALCO’s leverage ratio does not exceed i 0.67 to i 1 and IPALCO’s interest coverage ratio is not less than i 2.50 to i 1 or, (b)(ii) if such ratios are not within the parameters, IPALCO’s senior long-term debt rating from one of the three major credit rating agencies is at least investment grade. As of December 31, 2020, and as of the filing of this report, IPALCO was in compliance with all covenants and no event of default existed.

During the years ended December 31, 2020, 2019 and 2018, IPALCO declared and paid distributions to its shareholders totaling $ i 108.7 million, $ i 136.4 million and $ i 130.2 million, respectively.

Cumulative Preferred Stock

IPL has i five separate series of cumulative preferred stock. Holders of preferred stock are entitled to receive dividends at rates per annum ranging from i 4.0% to i 5.65%. During each year ended December 31, 2020, 2019 and 2018, total preferred stock dividends declared were $ i 3.2 million. Holders of preferred stock are entitled to i two votes per share for IPL matters, and if four full quarterly dividends are in default on all shares of the preferred stock then outstanding, they are entitled to elect the smallest number of IPL directors to constitute a majority of IPL’s Board of Directors. Based on the preferred stockholders’ ability to elect a majority of IPL’s Board of Directors in this circumstance, the redemption of the preferred shares is considered to be not solely within the control of the issuer and the preferred stock was considered temporary equity and presented in the mezzanine level of the audited consolidated balance sheets in accordance with the relevant accounting guidance for non-controlling interests and redeemable securities. IPL has issued and outstanding i 500,000 shares of i 5.65% preferred stock, which are now redeemable at par value, subject to certain restrictions, in whole or in part. Additionally, IPL has i 91,353 shares of

F-28

preferred stock which are redeemable solely at the option of IPL and can be redeemed in whole or in part at any time at specific call prices.

At December 31, 2020, 2019 and 2018, preferred stock consisted of the following:

December 31,

Shares
Outstanding

Call Price

2020

2019

2018

Par Value, plus premium, if applicable

(In Thousands)

Cumulative $ i 100 par value,

authorized i 2,000,000 shares

i 4% Series

i 47,611

i 118.00

i 5,410

i 4.2% Series

i 19,331

i 103.00

i 1,933

i 4.6% Series

i 2,481

i 103.00

i 248

i 4.8% Series

i 21,930

i 101.00

i 2,193

i 5.65% Series

i 500,000

i 100.00

i 50,000

Total cumulative preferred stock

i 591,353

i 59,784

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7. i DEBT

Long-Term Debt

The following table presents our long-term debt:

December 31,

Series

Due

2020

2019

(In Thousands)

IPL first mortgage bonds:

i 3.875% (1)

August 2021

i 55,000

i 3.875% (1)

August 2021

i 40,000

i 3.125% (1)

December 2024

i 40,000

i 6.60%

January 2034

i 100,000

i 6.05%

October 2036

i 158,800

i 6.60%

June 2037

i 165,000

i 4.875%

November 2041

i 140,000

i 4.65%

June 2043

i 170,000

i 4.50%

June 2044

i 130,000

i 4.70%

September 2045

i 260,000

i 4.05%

May 2046

i 350,000

i 4.875%

November 2048

i 105,000

i 0.75% (2)

April 2026

i 30,000

i —

i 0.95% (2)

April 2026

i 60,000

i —

Unamortized discount – net

( i 6,006)

( i 6,156)

Deferred financing costs

( i 17,384)

( i 16,629)

Total IPL first mortgage bonds

i 1,780,410

i 1,691,015

IPL unsecured debt:

Variable (3)

December 2020

i —

i 30,000

Variable (3)

December 2020

i —

i 60,000

Deferred financing costs

i —

( i 114)

Total IPL unsecured debt

i —

i 89,886

Total long-term debt – IPL

i 1,780,410

i 1,780,901

Long-term debt – IPALCO:

Term Loan

July 2020

i —

i 65,000

i 3.45% Senior Secured Notes

July 2020

i —

i 405,000

i 3.70% Senior Secured Notes

September 2024

i 405,000

i 4.25% Senior Secured Notes

May 2030

i 475,000

i —

Unamortized discount – net

( i 625)

( i 313)

Deferred financing costs

( i 8,600)

( i 3,959)

Total long-term debt – IPALCO

i 870,775

i 870,728

Total consolidated IPALCO long-term debt

i 2,651,185

i 2,651,629

Less: current portion of long-term debt

i 94,907

i 559,199

Net consolidated IPALCO long-term debt

i 2,556,278

i 2,092,430

(1)First mortgage bonds issued to the Indiana Finance Authority, to secure the loan of proceeds from tax-exempt bonds issued by the Indiana Finance Authority.

(2)Unsecured notes issued to the Indiana Finance Authority by IPL to facilitate the loan of proceeds from various tax-exempt notes issued by the Indiana Finance Authority. The notes have a final maturity date of December 2038, but were subject to a mandatory put in December 2020.

(3)First mortgage bonds issued to the Indiana Finance Authority, to secure the loan of proceeds from tax-exempt bonds issued by the Indiana Finance Authority. The notes have a final maturity date of December 2038, but are subject to a mandatory put in April 2026.

F-30

Debt Maturities

Maturities on long-term indebtedness subsequent to December 31, 2020, are as follows:


Year	Amount
	(In Thousands)
2021	$	i 95,000
2022	i —
2023	i —
2024	i 445,000
2025	i —
Thereafter	i 2,143,800
Total	$	i 2,683,800

Significant Transactions

IPL First Mortgage Bonds and Recent Indiana Finance Authority Bond Issuances

The mortgage and deed of trust of IPL, together with the supplemental indentures thereto, secure the first mortgage bonds issued by IPL. Pursuant to the terms of the mortgage, substantially all property owned by IPL is subject to a first mortgage lien securing indebtedness of $ i 1,803.8 million as of December 31, 2020. The IPL first mortgage bonds require net earnings as calculated thereunder be at least two and one-half times the annual interest requirements before additional bonds can be authenticated on the basis of property additions. IPL was in compliance with such requirements as of December 31, 2020.

In December 2020, the Indiana Finance Authority issued on behalf of IPL an aggregate principal amount of $90 million of Environmental Facilities Refunding Revenue Bonds, Series 2020A&B due December 2038. IPL issued $ i 90 million aggregate principal amount of first mortgage bonds to the Indiana Finance Authority in two series: $ i 30 million Series 2020A notes at i 0.75% and $ i 60 million Series 2020B notes at i 0.95% to secure the loan of proceeds from these bonds issued by the Indiana Finance Authority. These bonds are subject to a mandatory put date of April 1, 2026. Proceeds of the bonds were used to refund $90 million of Indiana Finance Authority Environmental Facilities Refunding Revenue Bonds Series 2015A&B.

IPL has $ i 95 million of i 3.875% IPL first mortgage bonds that are due August 1, 2021. Management plans to refinance these first mortgage bonds with new debt. In the event that we are unable to refinance these first mortgage bonds on acceptable terms, IPL has available borrowing capacity on its revolving credit facility that could be used to satisfy the obligation.

IPALCO’s Senior Secured Notes and Term Loan

In April 2020, IPALCO completed the sale of the $ i 475 million aggregate principal amount of i 4.25% 2030 IPALCO Notes pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. We used the net proceeds from this offering to retire the $ i 65 million Term Loan on April 14, 2020. The remaining net proceeds, together with cash on hand, were used to redeem the 2020 IPALCO Notes on May 14, 2020, and to pay certain related fees, expenses and make-whole premiums. A loss on early extinguishment of debt of $ i 2.4 million for the 2020 IPALCO Notes is included as a separate line item within "Other Income/(Expense), Net" in the accompanying Consolidated Statements of Operations.

The 2030 IPALCO Notes are secured by IPALCO’s pledge of all of the outstanding common stock of IPL. The lien on the pledged shares is shared equally and ratably with IPALCO’s existing senior secured notes. IPALCO has also agreed to register the 2030 IPALCO Notes under the Securities Act by filing an exchange offer registration statement or, under specified circumstances, a shelf registration statement with the SEC pursuant to a Registration Rights Agreement dated April 14, 2020.

F-31

Line of Credit

IPL entered into an amendment and restatement of its i 5-year $ i 250 million revolving credit facility on June 19, 2019 with a syndication of bank lenders. This Credit Agreement is an unsecured committed line of credit to be used: (i) to finance capital expenditures; (ii) to refinance certain existing indebtedness, (iii) to support working capital; and (iv) for general corporate purposes. This agreement matures on June 19, 2024, and bears interest at variable rates as described in the Credit Agreement. It includes an uncommitted $ i 150 million accordion feature to provide IPL with an option to request an increase in the size of the facility at any time prior to June 19, 2023, subject to approval by the lenders. The Credit Agreement also includes two one-year extension options, allowing IPL to extend the maturity date subject to approval by the lenders. Prior to execution, IPL and IPALCO had existing general banking relationships with the parties to the Credit Agreement. As of December 31, 2020 and 2019, IPL had $ i 75.0 million and $ i 0.0 million in outstanding borrowings on the committed line of credit, respectively.

Restrictions on Issuance of Debt

All of IPL’s long-term borrowings must first be approved by the IURC and the aggregate amount of IPL’s short-term indebtedness must be approved by the FERC. IPL has approval from FERC to borrow up to $ i 500 million of short-term indebtedness outstanding at any time through July 26, 2022. In December 2018, IPL received an order from the IURC granting IPL authority through December 31, 2021 to, among other things, issue up to $ i 350 million in aggregate principal amount of long-term debt, all of which authority remains available as of December 31, 2020, and refinance up to $ i 185 million in existing indebtedness, of which $ i 95 million of authority remains available under the order as of December 31, 2020. This order also grants IPL authority to have up to $ i 500 million of long-term credit agreements and liquidity facilities outstanding at any one time, of which $ i 250.0 million remains available under the order as of December 31, 2020. As an alternative to the sale of all or a portion of $ i 65 million in principal of the long-term debt mentioned above, we have the authority to issue up to $ i 65 million of new preferred stock, all of which authority remains available under the order as of December 31, 2020. IPL also has restrictions on the amount of new debt that may be issued due to contractual obligations of AES and by financial covenant restrictions under our existing debt obligations. Under such restrictions, IPL is generally allowed to fully draw the amounts available on its Credit Agreement, refinance existing debt and issue new debt approved by the IURC and issue certain other indebtedness.

Credit Ratings

Our ability to borrow money or to refinance existing indebtedness and the interest rates at which we can borrow money or refinance existing indebtedness are affected by our credit ratings. In addition, the applicable interest rates on IPL’s Credit Agreement are dependent upon the credit ratings of IPL. Downgrades in the credit ratings of AES could result in IPL’s and/or IPALCO’s credit ratings being downgraded.

8. i INCOME TAXES

IPALCO follows a policy of comprehensive interperiod income tax allocation. Investment tax credits related to utility property have been deferred and are being amortized over the estimated useful lives of the related property.

AES files federal and state income tax returns which consolidate IPALCO and its subsidiaries. Under a tax sharing agreement with AES, IPALCO is responsible for the income taxes associated with its own taxable income and records the provision for income taxes as if IPALCO and its subsidiaries each filed separate income tax returns. IPALCO is no longer subject to U.S. or state income tax examinations for tax years through March 27, 2001, but is open for all subsequent periods. IPALCO made tax sharing payments to AES of $ i 27.0 million, $ i 29.6 million and $ i 28.3 million in 2020, 2019 and 2018, respectively.

On March 25, 2014, the state of Indiana amended Indiana Code 6-3-2-1 through Senate Bill 001, which phases in an additional i 1.6% reduction to the state corporate income tax rate that was initially being reduced by i 2%. While the statutory state income tax rate decreased to i 5.375% for the calendar year 2020, the deferred tax balances were adjusted according to the anticipated reversal of temporary differences. The change in required deferred taxes on plant and plant-related temporary differences resulted in a reduction to the associated regulatory asset of $ i 1.3 million. The change in required deferred taxes on non-property related temporary differences which are not probable to cause a reduction in future base customer rates resulted in a tax benefit of $ i 0.1 million. The statutory state corporate income tax rate will be i 5.075% for 2021.

F-32

Income Tax Provision

Federal and state income taxes charged to income are as follows:

2020

2019

2018

(In Thousands)

Components of income tax expense:

Current income taxes:

Federal

i 19,489

i 17,229

i 20,341

State

i 6,249

i 3,022

i 8,843

Total current income taxes

i 25,738

i 20,251

i 29,184

Deferred income taxes:

Federal

i 323

i 7,547

( i 15,150)

State

i 2,531

i 7,745

i 326

Total deferred income taxes

i 2,854

i 15,292

( i 14,824)

Net amortization of investment credit

i —

( i 15)

( i 911)

Total income tax expense

i 28,592

i 35,528

i 13,449

Effective and Statutory Rate Reconciliation

The provision for income taxes (including net investment tax credit adjustments) is different than the amount computed by applying the statutory tax rate to pretax income. i The reasons for the difference, stated as a percentage of pretax income, are as follows:


	2020		2019		2018
Federal statutory tax rate	i 21.0	%	i 21.0	%	i 21.0	%
State income tax, net of federal tax benefit	i 4.2	%	i 4.4	%	i 5.6	%

Research and development credit	i —	%	i —	%	( i 1.9)	%

Depreciation flow through and amortization	( i 6.8)	%	( i 5.7)	%	( i 15.6)	%
Additional funds used during construction - equity	i 1.0	%	i 0.2	%	i 0.3	%

Other – net	i 1.2	%	i 1.3	%	( i 0.3)	%
Effective tax rate	i 20.6	%	i 21.2	%	i 9.1	%

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Deferred Income Taxes

The significant items comprising IPALCO’s net accumulated deferred tax liability recognized on the audited Consolidated Balance Sheets as of December 31, 2020 and 2019, are as follows:

2020

2019

(In Thousands)

Deferred tax liabilities:

Relating to utility property, net

i 408,291

i 411,182

Regulatory assets recoverable through future rates

i 82,783

i 69,156

Other

i 5,485

i 6,192

Total deferred tax liabilities

i 496,559

i 486,530

Deferred tax assets:

Investment tax credit

i 6

i 7

Regulatory liabilities including ARO

i 197,657

i 191,676

Employee benefit plans

i 3,866

i 8,545

Other

i 19,316

i 13,441

Total deferred tax assets

i 220,845

i 213,669

Deferred income tax liability – net

i 275,714

i 272,861

Uncertain Tax Positions

The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018:

2020

2019

2018

(In Thousands)

Unrecognized tax benefits at January 1

i 7,056

i 7,049

Gross increases – current period tax positions

i 312

i —

Gross decreases – prior period tax positions

i —

i 7

Unrecognized tax benefits at December 31

i 7,368

i 7,056

The unrecognized tax benefits at December 31, 2020 represent tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the timing of the deductions will not affect the annual effective tax rate but would accelerate the tax payments to an earlier period.

Tax-related interest expense and income is reported as part of the provision for federal and state income taxes. Penalties, if incurred, would also be recognized as a component of tax expense. There are no interest or penalties applicable to the periods contained in this report.

9. i BENEFIT PLANS

Defined Contribution Plans

All of IPL’s employees are covered by one of two defined contribution plans, the Thrift Plan or the RSP:

The Thrift Plan

Approximately i 80% of IPL’s active employees are covered by the Thrift Plan, a qualified defined contribution plan. All union new hires are covered under the Thrift Plan. Participants elect to make contributions to the Thrift Plan based on a percentage of their base compensation. Each participant’s contribution is matched up to certain thresholds of base compensation. The IBEW clerical-technical union new hires receive an annual lump sum

F-34

company contribution into the Thrift Plan in addition to the company match. Employer contributions to the Thrift Plan were $ i 3.4 million, $ i 3.3 million and $ i 3.3 million for 2020, 2019 and 2018, respectively.

The RSP

Approximately i 20% of IPL’s active employees are covered by the RSP, a qualified defined contribution plan containing a match and nondiscretionary component. All non-union new hires are covered under the RSP. Participants elect to make contributions to the RSP based on a percentage of their eligible compensation. Each participant’s contribution is matched in amounts up to, but not exceeding, i 5% of the participant’s eligible compensation. Starting in 2018, the RSP also includes a i 4% nondiscretionary contribution based as a percentage of each participant's eligible compensation. Employer contributions (by IPL) relating to the RSP were $ i 1.8 million, $ i 1.6 million and $ i 1.7 million for 2020, 2019 and 2018, respectively.

Defined Benefit Plans

Approximately i 72% of IPL’s active employees are covered by the qualified Defined Benefit Pension Plan; while approximately i 8% of active employees are IBEW clerical-technical unit employees who are only eligible for the Thrift Plan. The remaining i 20% of active employees are covered by the RSP. All non-union new hires are covered under the RSP, while IBEW physical unit union new hires are covered under the Defined Benefit Pension Plan and Thrift Plan. The IBEW clerical-technical unit new hires are no longer covered under the Defined Benefit Pension Plan but do receive an annual lump sum company contribution into the Thrift Plan, in addition to the company match. The Defined Benefit Pension Plan is noncontributory and is funded by IPL through a trust. Benefits for non-union participants in the Defined Benefit Pension Plan are based on salary, years of service and accrued benefits at April 1, 2015. Benefits for eligible union participants are based on each individual employee's pension band and years of service as opposed to their compensation. Pension bands are based primarily on job duties and responsibilities.

Additionally, a small group of former officers and their surviving spouses are covered under a funded non-qualified Supplemental Retirement Plan. The total number of participants in the plan as of December 31, 2020 was i 22. The plan is closed to new participants.

IPL also provides postretirement health care benefits to certain active or retired employees and the spouses of certain active or retired employees. Approximately i 142 active employees and i 16 retirees (including spouses) were receiving such benefits or entitled to future benefits as of January 1, 2020. The plan is unfunded. These postretirement health care benefits and the related unfunded obligation of $ i 4.3 million and $ i 6.4 million at December 31, 2020 and 2019, respectively, were not material to the consolidated financial statements in the periods covered by this report.

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The following table presents information relating to the Pension Plans:

Pension benefits
as of December 31,

2020

2019

(In Thousands)

Change in benefit obligation:

Projected benefit obligation at January 1

i 782,795

i 697,228

Service cost

i 8,272

i 7,412

Interest cost

i 22,151

i 27,343

Actuarial loss/(gain)

i 66,827

i 88,311

Amendments (primarily increases in pension bands)

i 967

i —

Benefits paid

( i 38,487)

( i 37,499)

Projected benefit obligation at December 31

i 842,525

i 782,795

Change in plan assets:

Fair value of plan assets at January 1

i 769,704

i 684,485

Actual return on plan assets

i 118,716

i 122,690

Employer contributions

i 87

i 28

Benefits paid

( i 38,487)

( i 37,499)

Fair value of plan assets at December 31

i 850,020

i 769,704

Funded (unfunded) status

i 7,495

( i 13,091)

Amounts recognized in the statement of financial position:

Non-current assets

i 8,669

i —

Non-current liabilities

( i 1,174)

( i 13,091)

Net amount recognized at end of year

i 7,495

( i 13,091)

Sources of change in regulatory assets(1):

Prior service cost arising during period

i 967

i —

Net (gain)/loss arising during period

( i 14,110)

( i 4,472)

Amortization of prior service cost

( i 3,677)

( i 3,823)

Amortization of loss

( i 8,115)

( i 11,084)

Total recognized in regulatory assets

( i 24,935)

( i 19,379)

Amounts included in regulatory assets:

Net loss

i 145,526

i 167,750

Prior service cost

i 11,613

i 14,323

Total amounts included in regulatory assets

i 157,139

i 182,073

(1)Amounts that would otherwise be charged/credited to Accumulated Other Comprehensive Income or Loss upon application of ASC 715, “Compensation – Retirement Benefits,” are recorded as a regulatory asset or liability because IPL has historically recovered and currently recovers pension and other postretirement benefit expenses in rates. These are unrecognized amounts not yet recognized as components of net periodic benefit costs.

Information for Pension Plans with a projected benefit obligation in excess of plan assets

Pension benefits
as of December 31,

2020

2019

(In Thousands)

Benefit obligation

i 842,525

i 782,795

Plan assets

i 850,020

i 769,704

Benefit obligation in excess of plan assets

( i 7,495)

i 13,091

IPL’s total plan assets in excess of projected benefit obligation was $ i 7.5 million as of December 31, 2020 ($ i 8.7 million Defined Benefit Pension Plan plan assets in excess of projected benefit obligation, partially offset by $ i 1.2 million Supplemental Retirement Plan projected benefit obligation in excess of plan assets).

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Information for Pension Plans with an accumulated benefit obligation in excess of plan assets

Pension benefits
as of December 31,

2020

2019

(In Thousands)

Accumulated benefit obligation

i 830,458

i 771,592

Plan assets

i 850,020

i 769,704

Accumulated benefit obligation in excess of plan assets

( i 19,562)

i 1,888

IPL’s total plan assets in excess of accumulated benefit obligation was $ i 19.6 million as of December 31, 2020 ($ i 20.7 million Defined Benefit Pension Plan plan assets in excess of accumulated benefit obligation, partially offset by $ i 1.1 million Supplemental Retirement Plan accumulated benefit obligation in excess of plan assets).

Significant Gains and Losses Related to Changes in the Benefit Obligation for the Period

As shown in the table above, an actuarial loss of $ i 66.8 million increased the benefit obligation for the year ended December 31, 2020 and an actuarial loss of $ i 88.3 million increased the benefit obligation for the year ended December 31, 2019. The actuarial losses in 2020 and 2019 were primarily due to decreases in the discount rate.

Pension Benefits and Expense

Reported expenses relevant to the Defined Benefit Pension Plan are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience, including the performance of plan assets and actual benefits paid out in future years. Pension costs associated with the Defined Benefit Pension Plan are impacted by the level of contributions made to the plan, earnings on plan assets, the adoption of new mortality tables, and employee demographics, including age, job responsibilities, salary and employment periods. Changes made to the provisions of the Defined Benefit Pension Plan may impact current and future pension costs. Pension costs may also be significantly affected by changes in key actuarial assumptions, including anticipated rates of return on plan assets and the corporate bond discount rates, as well as, the adoption of a new mortality table used in determining the projected benefit obligation and pension costs.

The 2020 net actuarial gain of $ i 14.1 million recognized in regulatory assets is comprised of two parts: (1) an $ i 80.9 million pension asset actuarial gain primarily due to higher than expected return on assets; partially offset by (2) a $ i 66.8 million pension liability actuarial loss primarily due to a decrease in the discount rate used to value pension liabilities. The unrecognized net loss of $ i 145.5 million in the Pension Plans has accumulated over time primarily due to the long-term declining trend in corporate bond rates and the adoption of new mortality tables which increased the expected benefit obligation due to the longer expected lives of plan participants. During 2020, the accumulated net gain increased due to lower discount rates used to value pension liabilities, which was partially offset by a combination of higher than expected return on pension assets, as well as the year 2020 amortization of accumulated loss. The unrecognized net loss, to the extent that it exceeds i 10% of the greater of the benefit obligation or the assets, will be amortized and included as a component of net periodic benefit cost in future years. The amortization period is approximately i 10.84 years based on estimated demographic data as of December 31, 2020. The projected benefit obligation of $ i 842.5 million less the fair value of assets of $ i 850.0 million results in an overfunded status of $ i 7.5 million at December 31, 2020.

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Pension benefits for
years ended December 31,

2020

2019

2018

(In Thousands)

Components of net periodic benefit cost:

Service cost

i 8,272

i 7,412

i 8,450

Interest cost

i 22,151

i 27,343

i 25,220

Expected return on plan assets

( i 37,779)

( i 29,907)

( i 40,801)

Amortization of prior service cost

i 3,677

i 3,823

i 3,837

Recognized actuarial loss

i 8,115

i 11,084

i 11,403

Recognized settlement loss

i —

i 1,230

Total pension cost

i 4,436

i 19,755

i 9,339

Less: amounts capitalized

i 372

i 1,237

i 1,223

Amount charged to expense

i 4,064

i 18,518

i 8,116

Rates relevant to each year’s expense calculations:

Discount rate – defined benefit pension plan

i 3.33

i 4.36

i 3.67

Discount rate – supplemental retirement plan

i 3.05

i 4.24

i 3.60

Expected return on defined benefit pension plan assets

i 5.05

i 4.50

i 5.45

Expected return on supplemental retirement plan assets

i 4.45

i 4.50

i 5.45

Pension expense for the following year is determined as of the December 31 measurement date based on the fair value of the Pension Plans’ assets, the expected long-term rate of return on plan assets, a mortality table assumption that reflects the life expectancy of plan participants, and a discount rate used to determine the projected benefit obligation. For 2020, pension expense was determined using an assumed long-term rate of return on plan assets of i 5.05% for the Defined Benefit Pension Plan and i 4.45% for the Supplemental Retirement Plan. As of the December 31, 2020 measurement date, IPL decreased the discount rate from i 3.33% to i 2.46% for the Defined Benefit Pension Plan and from i 3.05% to i 2.31% for the Supplemental Retirement Plan. The discount rate assumptions affect the pension expense determined for 2021. In addition, IPL maintained the expected long-term rate of return on plan assets at i 5.05% for the Defined Benefit Pension Plan and decreased the expected long-term rate of return for the Supplemental Retirement Plan from i 4.45% to i 3.60% for 2021. The expected long-term rate of return assumption affects the pension expense determined for 2021. The effect on 2021 total pension expense of a i 25 basis point increase and decrease in the assumed discount rate is $( i 1.4) million and $ i 1.3 million, respectively.

In determining the discount rate to use for valuing liabilities we use the market yield curve on high-quality fixed income investments as of December 31, 2020. We project the expected benefit payments under the plan based on participant data and based on certain assumptions concerning mortality, retirement rates, termination rates, etc. The expected benefit payments for each year are discounted back to the measurement date using the appropriate spot rate for each half-year from the yield curve, thereby obtaining a present value of all expected future benefit payments using the yield curve. Finally, an equivalent single discount rate is determined which produces a present value equal to the present value determined using the full yield curve.

Pension Plan Assets and Fair Value Measurements

Pension plan assets consist of investments in cash and cash equivalents, government debt securities, and mutual funds (equity and debt). Differences between actual portfolio returns and expected returns may result in increased or reduced pension costs in future periods. Pension costs are determined as of the plans' measurement date of December 31, 2020. Pension costs are determined for the following year based on the market value of pension plan assets, expected employer contributions, a discount rate used to determine the projected benefit obligation and the expected long-term rate of return on plan assets.

Fair value is defined under ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest

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priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded as earned. Dividends are recorded on the ex-dividend date. Net appreciation includes the Pension Plans’ gains and losses on investments bought and sold, as well as held, during the year.

A description of the valuation methodologies used for each major class of assets and liabilities measured at fair value follows:

•The non-qualified Supplemental Retirement Plan investments have quoted market prices and are categorized as Level 1 in the fair value hierarchy.

•The qualified Defined Benefit Pension Plan investments in common collective trusts are valued based on the daily net asset value and are categorized as Level 2 in the fair value hierarchy except for cash and cash equivalents which are categorized as level 1.

The primary objective of the Pension Plans’ is to provide a source of retirement income for its participants and beneficiaries, while the primary financial objective is to improve the unfunded status of the Pension Plans. A secondary financial objective is, where possible, to minimize pension expense volatility. The objective is based on a long-term investment horizon, so that interim fluctuations should be viewed with appropriate perspective. There can be no assurance that these objectives will be met.

In establishing our expected long-term rate of return assumption, we utilize a methodology developed by the plan’s investment consultant who maintains a capital market assumption model that takes into consideration risk, return and correlation assumptions across asset classes. A combination of quantitative analysis of historical data and qualitative judgment is used to capture trends, structural changes and potential scenarios not reflected in historical data.

The result of the analyses is a series of inputs that produce a picture of how the plan consultant believes portfolios are likely to behave through time. Capital market assumptions are intended to reflect the behavior of asset classes observed over several market cycles. Stress assumptions are also examined, since the characteristics of asset classes are constantly changing. A dynamic model is employed to manage the numerous assumptions required to estimate portfolio characteristics under different base currencies, time horizons and inflation expectations.

The Pension Plans’ consultant develops forward-looking, long-term capital market assumptions for risk, return and correlations for a variety of global asset classes, interest rates and inflation. These assumptions are created using a combination of historical analysis, current market environment assessment and by applying the consultant’s own judgment. The consultant then determines an equilibrium long-term rate of return. We then take into consideration the investment manager/consultant expenses, as well as any other expenses expected to be paid out of the Pension Plans’ trust. Finally, we have the Pension Plans’ actuary perform a tolerance test of the consultant’s equilibrium expected long-term rate of return. We use an expected long-term rate of return compatible with the actuary’s tolerance level.

The following table summarizes the Company’s target pension plan allocation for 2020:


Asset Category:			Target Allocations
Equity Securities			i 36%
Debt Securities			i 64%

/ i

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Fair Value Measurements at

(in thousands)

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Asset Category

Total

(Level 1)

(Level 2)

Cash and cash equivalents

i 2,221

—

i —

Government debt securities

i 118,255

i 131

i 118,124

i 14

Mutual fund - equities

i 323,253

i 2,839

i 320,414

i 38

Mutual fund - debt

i 406,291

i 1,578

i 404,713

i 48

Total

i 850,020

i 6,769

i 843,251

i 100

Fair Value Measurements at

(in thousands)

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Asset Category

Total

(Level 1)

(Level 2)

Cash and cash equivalents

i 2,599

—

i —

Government debt securities

i 154,798

i 39

i 154,759

i 20

Mutual fund - equities

i 214,369

i 2,744

i 211,625

i 28

Mutual fund - debt

i 397,938

i 1,664

i 396,274

i 52

Total(1)

i 769,704

i 7,046

i 762,658

i 100

(1) In 2019, the qualified Defined Benefit Pension Plan moved all investments except for cash and cash equivalents into collective trusts; therefore, the 2019 balances under the Government debt securities, Mutual fund - equities, and Mutual fund - debt categories shown above as level 2 represent investments through collective trusts. The Defined Benefit Pension Plan has chosen collective trusts for which the underlying investments are mutual funds, mutual funds categories for which debt securities are the primary underlying investment, or real estate in alignment with the target asset allocation.

Pension Funding

We contributed $ i 0.1 million, $ i 0.0 million, and $ i 30.1 million to the Pension Plans in 2020, 2019 and 2018, respectively. Funding for the qualified Defined Benefit Pension Plan is based upon actuarially determined contributions that take into account the amount deductible for income tax purposes and the minimum contribution required under ERISA, as amended by the Pension Protection Act of 2006, as well as targeted funding levels necessary to meet certain thresholds.

From an ERISA funding perspective, IPL’s funded target liability percentage was estimated to be i 100%. In general, IPL must contribute the normal service cost earned by active participants during the plan year; however, this amount can be offset by any surplus or credit balance carried by the Pension Plan. The normal cost is expected to be approximately $ i 6.1 million in 2021 (including $ i 0.4 million for plan expenses), which is expected to be fully offset by the surplus amount. Each year thereafter, if the Pension Plans’ underfunding increases to more than the present value of the remaining annual installments, the excess is separately amortized over a seven-year period. IPL does not expect to make an employer contribution for the calendar year 2021. IPL’s funding policy for the Pension Plans is to contribute annually no less than the minimum required by applicable law, and no more than the maximum amount that can be deducted for federal income tax purposes.

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Benefit payments made from the Pension Plans for the years ended December 31, 2020, 2019 and 2018 were $ i 38.5 million, $ i 37.5 million and $ i 62.1 million, respectively. i Expected benefit payments are expected to be paid out of the Pension Plans as follows:


Year	Pension Benefits
	(In Thousands)
2021	$	i 41,552
2022	i 42,715
2023	i 43,371
2024	i 43,827
2025	i 44,467
2026 through 2030	i 224,933

10. i COMMITMENTS AND CONTINGENCIES

Legal Loss Contingencies

IPALCO and IPL are involved in litigation arising in the normal course of business. We accrue for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. As of December 31, 2020 and 2019, total legal loss contingencies accrued were $ i 13.4 million and $ i 2.6 million, respectively, which were included in “Accrued and Other Current Liabilities” and "Other Non-Current Liabilities," respectively, on the accompanying Consolidated Balance Sheets. A significant portion of these accrued liabilities relate to a personal injury legal claim involving injuries to a contractor. We maintain an amount of insurance protection for such litigation that we believe is adequate. While the ultimate outcome of such litigation cannot be predicted with certainty, management believes that final outcomes will not have a material adverse effect on IPALCO’s results of operations, financial condition and cash flows.

Environmental Loss Contingencies

We are subject to various federal, state, regional and local environmental protection and health and safety laws and regulations governing, among other things, the generation, storage, handling, use, disposal and transportation of regulated materials, including ash; the use and discharge of water used in generation boilers and for cooling purposes; the emission and discharge of hazardous and other materials into the environment; and the health and safety of our employees. These laws and regulations often require a lengthy and complex process of obtaining and renewing permits and other governmental authorizations from federal, state and local agencies. Violation of these laws, regulations or permits can result in substantial fines, other sanctions, permit revocation and/or facility shutdowns. We cannot assure that we have been or will be at all times in full compliance with such laws, regulations and permits.

New Source Review and other CAA NOVs

In October 2009, IPL received a NOV and Finding of Violation from the EPA pursuant to the CAA Section 113(a). The NOV alleged violations of the CAA at IPL’s i three primarily coal-fired electric generating facilities at the time, dating back to 1986. The alleged violations primarily pertain to the PSD and non-attainment New Source Review (NSR) requirements under the CAA. In addition, on October 1, 2015, IPL received a NOV from the EPA pursuant to CAA Section 113(a) alleging violations of the CAA, the Indiana SIP, and the Title V operating permit related to alleged particulate matter and opacity violations at IPL Petersburg Unit 3. Also, on February 5, 2016, the EPA issued a NOV pursuant to CAA Section 113(a) alleging violations of PSD, non-attainment NSR and other CAA regulations, the Indiana SIP, and the Title V operating permit at Petersburg Generating Station. On August 31, 2020, IPL reached a settlement with the EPA, the DOJ and IDEM resolving the purported violations of the CAA with respect to IPL's four coal-fired generation units currently operating at IPL's Petersburg location. The settlement agreement, in the form of a proposed judicial consent decree, includes, among other items, the following requirements: annual caps on NOx and SO2 emissions and more stringent emissions limits than IPL's current Title V air permit; payment of civil penalties totaling $ i 1.525 million; a $ i 5 million environmental mitigation project consisting of the construction and operation of a new, non-emitting source of generation at the site; expenditure of $ i 0.325 million on a state-only environmentally beneficial project to preserve local, ecologically-significant lands; and retirement of Units 1 and 2 prior to July 1, 2023. If IPL does not meet this retirement obligation, it must install a Selective Non-Catalytic

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Reduction System (SNCR) on Unit 4. The proposed Consent Decree is subject to final review and approval by the U.S. District Court for the Southern District of Indiana. On January 14, 2021, the U.S. and Indiana, on behalf of EPA and IDEM, respectively, filed a motion asking the court to enter the proposed Consent Decree, along with the U.S.' response to the adverse public comments on the proposed settlements. IPL has a contingent liability recorded related to these New Source Review and other CAA NOV matters.

11. i RELATED PARTY TRANSACTIONS

IPL participates in a property insurance program in which IPL buys insurance from AES Global Insurance Company, a wholly-owned subsidiary of AES. IPL is not self-insured on property insurance, but does take a $ i 5 million per occurrence deductible. Except for IPL’s large substations, IPL does not carry insurance on transmission and distribution assets, which are considered to be outside the scope of property insurance. AES and other AES subsidiaries, including IPALCO, also participate in the AES global insurance program. IPL pays premiums for a policy that is written and administered by a third-party insurance company. The premiums paid to this third-party administrator by the participants are paid to AES Global Insurance Company and all claims are paid from a trust fund funded by and owned by AES Global Insurance Company, but controlled by the third-party administrator. IPL also has third-party insurance in which the premiums are paid directly to the third-party insurers. The cost to IPL of coverage under the property insurance program with AES Global Insurance Company was approximately $ i 5.6 million, $ i 4.3 million, and $ i 3.1 million in 2020, 2019 and 2018, respectively, and is recorded in “Operating expenses - Operation and maintenance” on the accompanying Consolidated Statements of Operations. As of December 31, 2020 and 2019, we had prepaid approximately $ i 2.3 million and $ i 2.0 million, respectively, for coverage under these plans, which is recorded in "Prepayments and other current assets" on the accompanying Consolidated Balance Sheets.

IPL participates in an agreement with Health and Welfare Benefit Plans LLC, an affiliate of AES, to participate in a group benefits program, including but not limited to, health, dental, vision and life benefits. Health and Welfare Benefit Plans LLC administers the financial aspects of the group insurance program, receives all premium payments from the participating affiliates, and makes all vendor payments. The cost of coverage under this program was approximately $ i 21.0 million, $ i 20.2 million, and $ i 21.5 million in 2020, 2019 and 2018, respectively, and is recorded in “Operating expenses - Operation and maintenance” on the accompanying Consolidated Statements of Operations. We had no prepaids for coverage under this plan as of December 31, 2020 and 2019, respectively.

AES files federal and state income tax returns which consolidate IPALCO and its subsidiaries. Under a tax sharing agreement with AES, IPALCO is responsible for the income taxes associated with its own taxable income and records the provision for income taxes using a separate return method. IPALCO had a receivable balance under this agreement of $ i 24.4 million and $ i 23.7 million as of December 31, 2020 and 2019, respectively, which is recorded in “Taxes receivable” on the accompanying Consolidated Balance Sheets. See Note 8, "Income Taxes" for more information.

Long-term Compensation Plan

During 2020, 2019 and 2018, many of IPL’s non-union employees received benefits under the AES Long-term Compensation Plan, a deferred compensation program. This type of plan is a common employee retention tool used in our industry. Benefits under this plan are granted in the form of performance units payable in cash and AES restricted stock units. Restricted stock units vest ratably over a three-year period. The performance units payable in cash vest at the end of the three-year performance period and are subject to certain AES performance criteria. Total deferred compensation expense recorded during 2020, 2019 and 2018 was $ i 0.3 million, $ i 0.3 million and $ i 0.5 million, respectively, and was included in “Operating expenses - Operation and maintenance” on IPALCO’s Consolidated Statements of Operations. The value of these benefits is being recognized over the 36 month vesting period and a portion is recorded as miscellaneous deferred credits with the remainder recorded as “Paid in capital” on IPALCO’s Consolidated Balance Sheets in accordance with ASC 718 “Compensation – Stock Compensation.”

See also Note 9, “Benefit Plans” to the Financial Statements for a description of benefits awarded to IPL employees by AES under the RSP.

Service Company

Total costs incurred by the Service Company on behalf of IPALCO were $ i 55.7 million, $ i 42.0 million and $ i 44.5 million during 2020, 2019 and 2018, respectively. Total costs incurred by IPALCO on behalf of the Service Company

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during 2020, 2019 and 2018 were $ i 10.6 million, $ i 9.7 million and $ i 10.1 million, respectively, which are included as a reduction to charges from the Service Company. These costs were included in “Operating expenses - Operation and maintenance” on IPALCO’s Consolidated Statements of Operations. IPALCO had a payable balance with the Service Company of $ i 4.5 million and $ i 8.4 million as of December 31, 2020 and December 31, 2019, respectively, which is recorded in “Accounts payable” on the accompanying Consolidated Balance Sheets.

Other

A member of the AES Board of Directors is also a member of the Supervisory Board of a third party vendor that IPL engaged in 2014 for certain construction projects. As the transactions with this vendor related to capital projects, there was no direct impact on the Consolidated Statements of Operations for the periods presented. Over the life of the project, IPL had total net charges from this vendor of $ i 474.9 million. This vendor completed its service in 2018.

Additionally, transactions with various other related parties were $ i 6.5 million, $ i 3.0 million and $ i 5.7 million during 2020, 2019 and 2018, respectively. These expenses were primarily recorded in “Operating expenses - Operation and maintenance” on the accompanying Consolidated Statements of Operations.

12. i BUSINESS SEGMENT INFORMATION

Operating segments are components of an enterprise that engage in business activities from which it may earn revenues and incur expenses, for which separate financial information is available, and is evaluated regularly by the chief operating decision maker in assessing performance and deciding how to allocate resources. Substantially all of our business consists of the generation, transmission, distribution and sale of electric energy conducted through IPL which is a vertically integrated electric utility. IPALCO’s reportable business segment is its utility segment, with all other non-utility business activities aggregated separately. The "All Other" non-utility category primarily includes the 2024 IPALCO Notes and 2030 IPALCO Notes and related interest expense, balances associated with IPALCO's interest rate hedges, cash and other immaterial balances. The accounting policies of the identified segment are consistent with those policies and procedures described in the summary of significant accounting policies.

The following table provides information about IPALCO’s business segments (in thousands):


	2020						2019						2018
	Utility		All Other		Total		Utility		All Other		Total		Utility		All Other		Total
Revenues	$	i 1,352,985	$	—	$	i 1,352,985	$	i 1,481,643	$	—	$	i 1,481,643	$	i 1,450,505	$	—	$	i 1,450,505
Depreciation and amortization	$	i 246,896	$	i —	$	i 246,896	$	i 240,314	$	i —	$	i 240,314	$	i 232,332	$	i —	$	i 232,332
Interest expense	$	i 87,281	$	i 42,212	$	i 129,493	$	i 89,014	$	i 32,757	$	i 121,771	$	i 64,472	$	i 31,037	$	i 95,509
Earnings/(loss) from operations before income tax	$	i 184,174	$	( i 45,615)	$	i 138,559	$	i 200,707	$	( i 32,786)	$	i 167,921	$	i 178,953	$	( i 31,479)	$	i 147,474
Capital expenditures(1)	$	i 235,736	$	i —	$	i 235,736	$	i 219,242	$	i —	$	i 219,242	$	i 235,764	$	i —	$	i 235,764
(1) Capital expenditures includes $ i 0.0 million, $ i 5.6 million and $ i 11.4 million of payments for financed capital expenditures in 2020, 2019 and 2018, respectively.

	As of December 31, 2020						As of December 31, 2019						As of December 31, 2018
Total assets	$	i 4,952,408	$	i 17,511	$	i 4,969,919	$	i 4,918,408	$	i 10,261	$	i 4,928,669	$	i 4,851,712	$	i 10,341	$	i 4,862,053

13. i REVENUE

Revenue is primarily earned from retail and wholesale electricity sales and electricity transmission and distribution delivery services. Revenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Revenue is recorded net of any taxes assessed on and collected from customers, which are remitted to the governmental authorities.

Retail revenues - IPL energy sales to utility customers are based on the reading of meters at the customer’s location that occurs on a systematic basis throughout the month. IPL sells electricity directly to end-users, such as homes and businesses, and bills customers directly. Retail revenues have a single performance obligation, as the promise to transfer energy and other distribution and/or transmission services are not separately identifiable from other promises in the contracts and, therefore, are not distinct. Additionally, as the performance obligation is satisfied over

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time as energy is delivered, and the same method is used to measure progress, the performance obligation meets the criteria to be considered a series.

In exchange for the exclusive right to sell or distribute electricity in our service area, IPL is subject to rate regulation by federal and state regulators. This regulation sets the framework for the prices (“tariffs”) that IPL is allowed to charge customers for electric services. Since tariffs are approved by the regulator, the price that IPL has the right to bill corresponds directly with the value to the customer of IPL’s performance completed in each period. Therefore, revenue under these contracts is recognized using an output method measured by the MWhs delivered each month at the approved tariff. Customer payments are typically due on a monthly basis, though see Note 2, "Regulatory Matters - IURC COVID-19 Orders" for a discussion of the orders requiring expanded payment arrangements for customers.

Wholesale revenues - Power produced at the generation stations in excess of our retail load is sold into the MISO market. Such sales are made at either the day-ahead or real-time hourly market price, and these sales are classified as wholesale revenues. We sell to and purchase power from MISO, and such sales and purchases are settled and accounted for on a net hourly basis.

In the MISO market, wholesale revenue is recorded at the spot price based on the quantities of MWh delivered in each hour during each month. As a member of MISO, we are obligated to declare the availability of our energy production into the wholesale energy market, but we are not obligated to commit our previously declared availability. As such, contract terms end as the energy for each day is delivered to the market in the case of the day-ahead market and for each hour in the case of the real-time market.

Miscellaneous revenues - Miscellaneous revenues are mainly comprised of MISO transmission revenues. MISO transmission revenues are earned when IPL’s power lines are used in transmission of energy by power producers other than IPL. As IPL owns and operates transmission lines in central and southern Indiana, demand charges collected from network customers by MISO are allocated to the appropriate transmission owners (including IPL) and recognized as transmission revenues. Capacity revenues are also included in miscellaneous revenues, but these were not material for the period presented.

Transmission revenues have a single performance obligation, as transmission services represent a distinct service. Additionally, as the performance obligation is satisfied over time and the same method is used to measure progress, the performance obligation meets the criteria to be considered a series. The price that the transmission operator has the right to bill corresponds directly with the value to the customer of IPL’s performance completed in each period as the price paid is the transmission operator's allocation of the tariff rate (as approved by the regulator) charged to network participants.

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IPL’s revenue from contracts with customers was $ i 1,326.6 million, $ i 1,455.3 million and $ i 1,440.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. The following table presents our revenue from contracts with customers and other revenue (in thousands):


	For the Years Ended December 31,
	2020		2019		2018
Retail Revenues
Retail revenue from contracts with customers:
Residential	$	i 566,668	$	i 589,719	$	i 588,031
Small commercial and industrial	i 194,904		i 215,878		i 217,896
Large commercial and industrial	i 484,230		i 548,551		i 565,720
Public lighting	i 9,115		i 7,249		i 9,797
Other (1)	i 14,402		i 14,136		i 10,427
Total retail revenue from contracts with customers	i 1,269,319		i 1,375,533		i 1,391,871
Alternative revenue programs	i 24,781		i 23,841		i 4,594
Wholesale Revenues
Wholesale revenues from contracts with customers	i 46,482		i 68,474		i 38,789
Miscellaneous Revenues
Transmission and other revenue from contracts with customers	i 10,794		i 11,335		i 10,057
Other miscellaneous revenues (2)	i 1,609		i 2,460		i 5,194
Total Revenues	$	i 1,352,985	$	i 1,481,643	$	i 1,450,505

(1) Other retail revenue from contracts with customers includes miscellaneous charges to customers

(2) Other miscellaneous revenue includes lease and other miscellaneous revenues not accounted for under ASC 606

The balances of receivables from contracts with customers are $ i 163.8 million and $ i 155.0 million as of December 31, 2020 and December 31, 2019, respectively. Payment terms for all receivables from contracts with customers typically do not extend beyond 30 days, though see Note 2, "Regulatory Matters - IURC COVID-19 Order" for a discussion of orders requiring expanded payment arrangements for customers.

The Company has elected to apply the optional disclosure exemptions under ASC 606. Therefore, the Company has not included disclosure pertaining to revenue expected to be recognized in any future year related to remaining performance obligations, as we exclude contracts with an original length of one year or less, contracts for which we recognize revenue based on the amount we have the right to invoice for services performed, and contracts with variable consideration allocated entirely to a wholly unsatisfied performance obligation when the consideration relates specifically to our efforts to satisfy the performance obligation and depicts the amount to which we expect to be entitled.

Contract Balances — The timing of revenue recognition, billings, and cash collections results in accounts receivable and contract liabilities. The contract liabilities from contracts with customers were $ i 0.5 million as of December 31, 2020. During the year ended December 31, 2020, we recognized revenue of $ i 1.3 million related to this contract liability balance, respectively.

14. i LEASES

LESSOR

The Company is the lessor under operating leases for land, office space and operating equipment. Minimum lease payments from such contracts are recognized as operating lease revenue on a straight-line basis over the lease term whereas contingent rentals are recognized when earned. Lease revenue included in the Consolidated Statements of Operations was $ i 0.9 million and $ i 1.0 million for the years ended December 31, 2020 and 2019, respectively. Underlying gross assets and accumulated depreciation of operating leases included in Total net property, plant and equipment on the Consolidated Balance Sheet were $ i 4.3 million and $ i 0.8 million, respectively, as of December 31, 2020 and $ i 4.3 million and $ i 0.7 million, respectively, as of December 31, 2019.

F-45

The option to extend or terminate a lease is based on customary early termination provisions in the contract. The Company has not recognized any early terminations as of December 31, 2020.

The following table shows the future minimum lease receipts through 2025 and thereafter (in thousands):


	Operating Leases
2021	$	i 886
2022	i 906
2023	i 906
2024	i 786
2025	i 544
Thereafter	i 2,074
Total	$	i 6,102

15. i RISKS AND UNCERTAINTIES

COVID-19 Pandemic

The COVID-19 pandemic has severely impacted global economic activity, including electricity and energy consumption, and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the U.S., have reacted by instituting quarantines, mandating business and school closures and social distancing measures as well as restricting travel. The State of Indiana implemented, among other things, stay-at-home and other social distancing measures to slow the spread of the virus, which has impacted energy demand within our service territory, though the stay-at-home restrictions have now been lifted in our service territory. Also, the Executive Order previously issued by the Governor of Indiana prohibiting electric utilities, including us, from discontinuing electric utility service to customers through August 14, 2020 has lapsed. We are taking a variety of measures in response to the spread of COVID-19 to ensure our ability to generate, transmit, distribute and sell electric energy, ensure the health and safety of our employees, contractors, customers and communities and provide essential services to the communities in which we operate. In addition to the impacts to demand within our service territory, we also have incurred and expect to continue to incur expenses relating to COVID-19, including those that relate to events outside of our control.

As the economic impact of the COVID-19 pandemic started to materialize in Indiana in the second half of March 2020 and continued for the duration of 2020, the COVID-19 pandemic primarily impacted our retail sales demand as shown by the changes in weather-normalized volumes of kWh sold compared to the weather-normalized volumes for the same periods in 2019:

Customer class

For the three months ended

For the year ended

Residential

i 1.6

i 6.6

i 3.9

i 2.4

i 3.4

Small commercial and industrial

( i 1.8)

( i 10.3)

( i 4.2)

( i 5.3)

( i 5.2)

Large commercial and industrial

( i 2.8)

( i 11.0)

( i 7.9)

( i 5.7)

( i 6.9)

As noted above, we also have incurred and expect to continue to incur expenses relating to COVID-19, however see Note 2, "Regulatory Matters - IURC COVID-19 Orders" for a discussion of regulatory measures which partially mitigate the impact of these expenses. We continued to experience COVID-19 impacts into 2021. The magnitude and duration of the COVID-19 pandemic is unknown at this time and may have material and adverse effects on our results of operations, financial condition and cash flows in future periods.

F-46

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Indianapolis Power & Light Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Indianapolis Power & Light Company and subsidiary (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, common shareholder’s equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

Critical Audit Matter

F-47


			Regulatory Accounting
			Regulatory Accounting
Description of the Matter			As described in Note 2 to the consolidated financial statements, the Company applies the provisions of FASC 980 “Regulated Operations”, which gives recognition to the ratemaking and accounting practices of the IURC and the FERC. Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates. Regulatory assets can also represent performance incentives permitted by the regulator. Regulatory liabilities generally represent obligations to provide refunds or future rate reductions to customers for previous over collections or the deferral of revenues collected for costs that the Company expects to incur in the future. Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and related disclosures in the Company’s consolidated financial statements.
			Auditing the Company’s regulatory accounting was complex due to significant judgments made by management to support its assertions about the impact of future regulatory orders on the consolidated financial statements. In particular, there is subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of December 31, 2020, judgment required to evaluate the relevance and reliability of audit evidence to support impacted account balances and disclosures, and judgments involved in assessing the probability of recovery in future rates of incurred costs or refunds to customers. These assumptions have a significant effect on the regulatory assets and liabilities and related disclosures.
How We Addressed the Matter in Our Audit			To test the Company’s accounting for regulatory assets and liabilities, our audit procedures included, among others, reviewing relevant regulatory orders, statutes and interpretations; filings made by intervening parties; and other publicly available information, to assess the likelihood of recovery of regulatory assets in future rates or of a refund or future reduction in rates for regulatory liabilities based on precedents for the treatment of similar costs under similar circumstances. We evaluated the Company’s assertions regarding the probability of recovery of regulatory assets or refund or future reduction in rates for regulatory liabilities, to assess the Company’s assertion that amounts are probable of recovery or of a refund or future reduction in rates.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2008.

Indianapolis, Indiana

February 24, 2021

F-48

INDIANAPOLIS POWER & LIGHT COMPANY and SUBSIDIARY

Consolidated Statements of Operations

For the Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

2020

2019

2018

REVENUES

i 1,352,985

i 1,481,643

i 1,450,505

OPERATING COSTS AND EXPENSES:

Fuel

i 247,105

i 340,466

i 331,701

Power purchased

i 135,767

i 133,674

i 164,542

Operations and maintenance

i 415,824

i 427,803

i 431,125

Depreciation and amortization

i 246,896

i 240,314

i 232,332

Taxes other than income taxes

i 44,516

i 42,229

i 53,941

Total operating expenses

i 1,090,108

i 1,184,486

i 1,213,641

OPERATING INCOME

i 262,877

i 297,157

i 236,864

OTHER INCOME / (EXPENSE), NET:

Allowance for equity funds used during construction

i 4,574

i 3,486

i 8,477

Interest expense

( i 87,478)

( i 89,014)

( i 64,472)

Other income / (expense), net

i 4,201

( i 10,922)

( i 1,916)

Total other income / (expense), net

( i 78,703)

( i 96,450)

( i 57,911)

EARNINGS FROM OPERATIONS BEFORE INCOME TAX

i 184,174

i 200,707

i 178,953

Less: income tax expense

i 40,134

i 43,430

i 21,590

NET INCOME

i 144,040

i 157,277

i 157,363

Less: dividends on preferred stock

i 3,213

NET INCOME APPLICABLE TO COMMON STOCK

i 140,827

i 154,064

i 154,150

See notes to consolidated financial statements.

F-49

INDIANAPOLIS POWER & LIGHT COMPANY and SUBSIDIARY

Consolidated Balance Sheets

(In Thousands)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

i 17,946

i 42,189

Restricted cash

i 5

i 400

Accounts receivable, net of allowance for credit losses of $ i 3,155 and $ i 921, respectively

i 165,435

i 161,365

Inventories

i 95,506

i 83,569

Regulatory assets, current

i 45,430

i 37,398

Taxes receivable

i 12,531

i 23,134

Prepayments and other current assets

i 23,944

i 17,264

Total current assets

i 360,797

i 365,319

NON-CURRENT ASSETS:

Property, plant and equipment

i 6,530,395

i 6,398,612

Less: Accumulated depreciation

i 2,643,695

i 2,414,652

i 3,886,700

i 3,983,960

Construction work in progress

i 209,584

i 130,609

Total net property, plant and equipment

i 4,096,284

i 4,114,569

OTHER NON-CURRENT ASSETS:

Intangible assets - net

i 59,141

i 64,861

Regulatory assets, non-current

i 392,801

i 355,614

Other non-current assets

i 43,386

i 18,045

Total other non-current assets

i 495,328

i 438,520

TOTAL ASSETS

i 4,952,409

i 4,918,408

LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:

Short-term debt and current portion of long-term debt (Note 7)

i 169,907

i 89,886

Accounts payable

i 126,772

i 128,504

Accrued taxes

i 26,620

i 22,012

Accrued interest

i 23,340

i 23,857

Customer deposits

i 27,929

i 34,635

Regulatory liabilities, current

i 30,036

i 52,654

Accrued and other current liabilities

i 26,653

i 37,500

Total current liabilities

i 431,257

i 389,048

NON-CURRENT LIABILITIES:

Long-term debt (Note 7)

i 1,685,503

i 1,691,015

Deferred income tax liabilities

i 289,799

i 279,159

Taxes payable

i 7,458

i 4,658

Regulatory liabilities, non-current

i 839,360

i 846,430

Accrued pension and other postretirement benefits

i 5,334

i 19,344

Asset retirement obligations

i 195,236

i 204,219

Other non-current liabilities

i 13,785

i 252

Total non-current liabilities

i 3,036,475

i 3,045,077

Total liabilities

i 3,467,732

i 3,434,125

COMMITMENTS AND CONTINGENCIES (Note 10)

SHAREHOLDER'S EQUITY:

Common stock

i 324,537

Paid in capital

i 664,886

i 664,719

Retained earnings

i 435,470

i 435,243

Total shareholder's equity

i 1,424,893

i 1,424,499

Cumulative preferred stock

i 59,784

Total shareholder's equity

i 1,484,677

i 1,484,283

TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY

i 4,952,409

i 4,918,408

See notes to consolidated financial statements.

F-50

INDIANAPOLIS POWER & LIGHT COMPANY and SUBSIDIARY

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

2020

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

i 144,040

i 157,277

i 157,363

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

i 246,896

i 240,314

i 232,332

Amortization of deferred financing costs and debt discounts

i 2,335

i 2,262

i 2,011

Deferred income taxes and investment tax credit adjustments - net

i 3,078

i 15,120

( i 15,646)

Allowance for equity funds used during construction

( i 4,574)

( i 3,486)

( i 8,477)

Change in certain assets and liabilities:

Accounts receivable

( i 4,071)

i 6,504

( i 10,167)

Inventories

( i 15,240)

i 13,574

( i 3,652)

Accounts payable

( i 20,621)

i 2,816

i 4,080

Accrued and other current liabilities

( i 8,214)

i 4,416

( i 9,655)

Accrued taxes payable/receivable

i 18,012

( i 15,437)

i 3,180

Accrued interest

( i 518)

i 546

i 826

Pension and other postretirement benefit expenses

( i 6,991)

i 5,414

( i 30,740)

Short-term and long-term regulatory assets and liabilities

( i 13,390)

i 921

i 76,647

Prepayments and other current assets

( i 569)

( i 2,119)

i 7,279

Other - net

( i 6,174)

( i 7,053)

i 582

Net cash provided by operating activities

i 333,999

i 421,069

i 405,963

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

( i 235,700)

( i 213,619)

( i 224,335)

Project development costs

( i 2,401)

( i 2,269)

( i 1,127)

Cost of removal and regulatory recoverable ARO payments

( i 37,786)

( i 21,838)

( i 29,543)

Loans to parent

( i 26,110)

i —

Loan repayments from parent

i 20,000

i —

Other

i 118

i —

Net cash used in investing activities

( i 281,879)

( i 237,726)

( i 255,005)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under revolving credit facilities

i 115,000

i 10,000

i 100,000

Repayments under revolving credit facilities

( i 40,000)

( i 10,000)

( i 248,000)

Long-term borrowings, net of discount

i 90,000

i —

i 104,936

Retirement of long-term debt

( i 90,000)

i —

Dividends on common stock

( i 147,600)

( i 159,000)

( i 142,250)

Dividends on preferred stock

( i 3,213)

Deferred financing costs paid

( i 792)

i —

Equity contributions from IPALCO

i —

i 65,000

Payments for financed capital expenditures

( i 36)

( i 5,623)

( i 11,429)

Other

( i 117)

( i 152)

( i 1,110)

Net cash used in financing activities

( i 76,758)

( i 167,988)

( i 136,066)

Net change in cash, cash equivalents and restricted cash

( i 24,638)

i 15,355

i 14,892

Cash, cash equivalents and restricted cash at beginning of period

i 42,589

i 27,234

i 12,342

Cash, cash equivalents and restricted cash at end of period

i 17,951

i 42,589

i 27,234

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest (net of amount capitalized)

i 84,869

i 88,546

i 61,310

Income taxes

i 27,000

i 37,400

i 33,750

Non-cash investing activities:

Accruals for capital expenditures

i 54,360

i 35,471

i 47,553

See notes to consolidated financial statements.

F-51

INDIANAPOLIS POWER & LIGHT COMPANY and SUBSIDIARY

Consolidated Statements of Common Shareholder's Equity

For the Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

Common Stock

Paid in Capital

Retained Earnings

Total

Balance at January 1, 2018

i 324,537

i 599,157

i 442,779

i 1,366,473

Net income

—

i 157,363

Preferred stock dividends

—

( i 3,213)

Cash dividends declared on common stock

—

( i 156,750)

Contributions from IPALCO

—

i 65,000

—

i 65,000

Other

—

i 356

—

i 356

Balance at December 31, 2018

i 324,537

i 664,513

i 440,179

i 1,429,229

Net income

—

i 157,277

Preferred stock dividends

—

( i 3,213)

Cash dividends declared on common stock

—

( i 159,000)

Other

—

i 206

—

i 206

Balance at December 31, 2019

i 324,537

i 664,719

i 435,243

i 1,424,499

Net income

—

i 144,040

Preferred stock dividends

—

( i 3,213)

Cash dividends declared on common stock

—

( i 140,600)

Other

—

i 167

—

i 167

Balance at December 31, 2020

i 324,537

i 664,886

i 435,470

i 1,424,893

See notes to consolidated financial statements.

F-52

INDIANAPOLIS POWER & LIGHT COMPANY and SUBSIDIARY

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020, 2019 and 2018

1. OVERVIEW AND i SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

IPL was incorporated under the laws of the state of Indiana in 1926. All of the outstanding common stock of IPL is owned by IPALCO. IPALCO, acquired by AES in March 2001, is owned by AES U.S. Investments and CDPQ. AES U.S. Investments is owned by AES ( i 85%) and CDPQ ( i 15%). IPL is engaged primarily in generating, transmitting, distributing and selling of electric energy to approximately i 512,000 retail customers in the city of Indianapolis and neighboring cities, towns and communities, and adjacent rural areas all within the state of Indiana, with the most distant point being approximately i forty miles from Indianapolis. IPL has an exclusive right to provide electric service to those customers. IPL owns and operates i four generating stations all within the state of Indiana. Our largest generating station, Petersburg, is coal-fired, and IPL has plans to retire approximately 630 MW of coal-fired generation at Petersburg Units 1 and 2 in 2021 and 2023, respectively (for further discussion, see Note 2, "Regulatory Matters - IRP Filing"). The second largest station, Harding Street, uses natural gas and fuel oil to power combustion turbines. In addition, IPL operates a i 20 MW battery energy storage unit at this location, which provides frequency response. The third station, Eagle Valley, is a CCGT natural gas plant. IPL took operational control and commenced commercial operations of this CCGT plant in April 2018. The fourth station, Georgetown, is a small peaking station that uses natural gas to power combustion turbines. As of December 31, 2020, IPL’s net electric generation capacity for winter is i 3,705 MW and net summer capacity is i 3,560 MW.

Principles of Consolidation

IPL’s consolidated financial statements are prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The consolidated financial statements include the accounts of IPL and its unregulated subsidiary, IPL Funding Corporation, which was dissolved in 2018 and was immaterial to the consolidated financial statements in the periods covered by this report. All intercompany items have been eliminated in consolidation. Certain costs for shared resources amongst IPL and IPALCO, such as labor and benefits, are allocated to each entity based on allocation methodologies that management believes to be reasonable. We have evaluated subsequent events through the date this report is issued.

Use of Management Estimates

Regulatory Accounting

F-53

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents are stated at cost, which approximates fair value. All highly liquid short-term investments with original maturities of three months or less are considered cash equivalents. Restricted cash includes cash which is restricted as to withdrawal or usage. The nature of the restrictions includes restrictions imposed by agreements related to deposits held as collateral. T i he following table provides a summary of cash, cash equivalents and restricted cash amounts as shown on the Consolidated Statements of Cash Flows:

As of December 31,

2020

2019

(In Thousands)

Cash, cash equivalents and restricted cash

Cash and cash equivalents

i 17,946

i 42,189

Restricted cash

i 5

i 400

Total cash, cash equivalents and restricted cash

i 17,951

i 42,589

Revenues and Accounts Receivable

Revenues related to the sale of energy are generally recognized when service is rendered or energy is delivered to customers. However, the determination of the energy sales to individual customers is based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to certain customers since the date of the last meter reading are estimated and the corresponding unbilled revenue is accrued. In making its estimates of unbilled revenue, IPL uses complex models that consider various factors including daily generation volumes; known amounts of energy usage by nearly all residential, commercial and industrial customers; estimated line losses; and estimated customer rates based on prior period billings. Given the use of these models, and that customers are billed on a monthly cycle, we believe it is unlikely that materially different results will occur in future periods when revenue is billed. An allowance for potential credit losses is maintained and amounts are written off when normal collection efforts have been exhausted. IPL’s provision for expected credit losses included in “Operating expenses - Operation and maintenance” on the accompanying Consolidated Statements of Operations was $ i 4.8 million, $ i 4.3 million and $ i 5.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

In addition, IPL is one of many transmission system owner members of MISO, a regional transmission organization which maintains functional control over the combined transmission systems of its members and manages one of the largest energy markets in the U.S. See Note 13, "Revenue" for additional information of MISO sales and other revenue streams.

F-54

The following table summarizes our accounts receivable balances at December 31:

As of December 31,

2020

2019

(In Thousands)

Accounts receivable, net

Customer receivables

i 91,335

i 90,747

Unbilled revenue

i 72,334

i 65,822

Amounts due from related parties

i 734

i 2,992

Other

i 4,187

i 2,725

Provision for uncollectible accounts

( i 3,155)

( i 921)

Total accounts receivable, net

i 165,435

i 161,365

The following table is a rollforward of our allowance for credit losses related to the accounts receivable balances for the year ended December 31, 2020 (in Thousands):

Beginning Allowance Balance at January 1, 2020

Current Period Provision

Write-offs Charged Against Allowances

Recoveries Collected

Ending Allowance Balance at
December 31, 2020

Allowance for credit losses

i 921

i 5,861

( i 5,473)

i 1,846

i 3,155

Inventories

IPL maintains coal, fuel oil, materials and supplies inventories for use in the production of electricity. These inventories are accounted for at the lower of cost or net realizable value, using the average cost. i The following table summarizes our inventories balances at December 31:

As of December 31,

2020

2019

(In Thousands)

Inventories

Fuel

i 36,953

i 26,907

Materials and supplies, net

i 58,553

i 56,662

Total inventories

i 95,506

i 83,569

Property, Plant and Equipment

Property, plant and equipment is stated at original cost as defined for regulatory purposes. The cost of additions to property, plant and equipment and replacements of retirement units of property are charged to plant accounts. Units of property replaced or abandoned in the ordinary course of business are retired from the plant accounts at cost; such amounts, less salvage, are charged to accumulated depreciation. Depreciation is computed by the straight-line

F-55

method based on functional rates approved by the IURC and averaged i 3.7%, i 3.7%, and i 4.2% during 2020, 2019 and 2018, respectively. Depreciation expense was $ i 232.8 million, $ i 228.2 million, and $ i 235.2 million for the years ended December 31, 2020, 2019 and 2018, respectively. "Depreciation and amortization" expense on the accompanying Consolidated Statements of Operations is presented net of regulatory deferrals of depreciation expense and also includes amortization of intangible assets and amortization of previously deferred regulatory costs.

i Allowance For Funds Used During Construction

Impairment of Long-lived Assets

GAAP requires that IPL test long-lived assets for impairment when indicators of impairment exist. If an asset is deemed to be impaired, IPL is required to write down the asset to its fair value with a charge to current earnings. The net book value of IPL’s property, plant, and equipment was $ i 4.1 billion as of December 31, 2020 and 2019. In December 2020, IPL reclassified net property, plant and equipment of $ i 74.5 million associated with the probable Petersburg Unit 1 retirement to long-term regulatory assets (for further discussion, see Note 2, “Regulatory Matters - IRP Filing” and Note 3, "Property, Plant and Equipment"). IPL does not believe any of these assets are currently impaired. In making this assessment, IPL considers such factors as: the overall condition and generating and distribution capacity of the assets; the expected ability to recover additional expenditures in the assets; the anticipated demand and relative pricing of retail electricity in its service territory and wholesale electricity in the region; and the cost of fuel.

Intangible Assets

Implementation Costs Related to Software as a Service

IPL has recorded prepayments for implementation costs related to software as a service in support of utility customer services of $ i 8.8 million as of December 31, 2020, which are recorded within "Other non-current assets" on the accompanying Consolidated Balance Sheets.

Contingencies

IPL accrues for loss contingencies when the amount of the loss is probable and estimable. IPL is subject to various environmental regulations and is involved in certain legal proceedings. If IPL’s actual environmental and/or legal obligations are different from our estimates, the recognition of the actual amounts may have a material impact on our results of operations, financial condition and cash flows; although that has not been the case during the periods covered by this report. As of December 31, 2020 and 2019, total loss contingencies accrued were $ i 15.4 million and $ i 4.5 million, respectively, which were included in “Accrued and Other Current Liabilities” and "Other Non-Current Liabilities", respectively, on the accompanying Consolidated Balance Sheets.

Concentrations of Risk

F-56

Financial i Derivatives

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of the existing assets and liabilities, and their respective income tax bases. IPL establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized. IPL’s tax positions are evaluated under a more likely than not recognition threshold and measurement analysis before they are recognized for financial statement reporting.

Uncertain tax positions have been classified as noncurrent income tax liabilities unless expected to be paid within one year. IPL’s policy for interest and penalties is to recognize interest and penalties as a component of the provision for income taxes in the Consolidated Statements of Operations.

Income tax assets or liabilities which are included in allowable costs for ratemaking purposes in future years are recorded as regulatory assets or liabilities with a corresponding deferred tax liability or asset. Investment tax credits that reduced federal income taxes in the years they arose have been deferred and are being amortized to income over the useful lives of the properties in accordance with regulatory treatment. See Note 2, "Regulatory Matters" for additional information.

IPL and its subsidiary file U.S. federal income tax returns as part of the consolidated U.S. income tax return filed by AES. The consolidated tax liability is allocated to each subsidiary based on the separate return method which is specified in our tax allocation agreement and which provides a consistent, systematic and rational approach. See Note 8, "Income Taxes" for additional information.

Pension and Postretirement Benefits

IPL recognizes in its Consolidated Balance Sheets an asset or liability reflecting the funded status of pension and other postretirement plans with current-year changes in the funded status, that would otherwise be recognized in AOCI, recorded as a regulatory asset as this can be recovered through future rates. All plan assets are recorded at fair value. IPL follows the measurement date provisions of the accounting guidance, which require a year-end measurement date of plan assets and obligations for all defined benefit plans.

IPL accounts for and discloses pension and postretirement benefits in accordance with the provisions of GAAP relating to the accounting for pension and other postretirement plans. These GAAP provisions require the use of assumptions, such as the discount rate for liabilities and long-term rate of return on assets, in determining the obligations, annual cost and funding requirements of the plans. Consistent with the requirements of ASC 715, IPL applies a disaggregated discount rate approach for determining service cost and interest cost for its defined benefit pension plans and postretirement plans.

See Note 9, "Benefit Plans" for more information.

Repair and Maintenance Costs

Repair and maintenance costs are expensed as incurred.

Per Share Data

IPALCO owns all of the outstanding common stock of IPL. IPL does not report earnings on a per-share basis.

F-57

New Accounting Pronouncements Adopted in 2020


New Accounting Standards Adopted
ASU Number and Name	Description	Date of Adoption	Effect on the Financial Statements upon adoption
2016-13, 2018-19, 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, 2020-03, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	See discussion of the ASU below.	January 1, 2020	See impact upon adoption of the standard below.

ASC 326 - Financial Instruments - Credit Losses

New Accounting Pronouncements Issued But Not Yet Effective


New Accounting Standards Issued But Not Yet Effective
ASU Number and Name	Description	Date of Adoption	Effect on the Financial Statements upon adoption
2020-04 and 2021-01, Reference Rate Form (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The amendments in these updates provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference to LIBOR or another reference rate expected to be discontinued by reference rate reform, and clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These amendments are effective for a limited period of time (March 12, 2020 - December 21, 2022).	March 12, 2020 - December 31, 2022	The Company is currently evaluating the impact of adopting the standard on the Financial Statements.

2 i . REGULATORY MATTERS

General

F-58

after the date of issue), the acquisition and sale of some public utility properties or securities and certain other matters.

Basic Rates and Charges

IPL’s basic rates and charges represent the largest component of its annual revenues. IPL’s basic rates and charges are determined after giving consideration, on a pro-forma basis, to all allowable costs for ratemaking purposes including a fair return on the fair value of the utility property used and useful in providing service to customers. These basic rates and charges are set and approved by the IURC after public hearings. Such proceedings, which have occurred at irregular intervals, involve IPL, the IURC, the Indiana Office of Utility Consumer Counselor, and other interested stakeholders. Pursuant to statute, the IURC is to conduct a periodic review of the basic rates and charges of all Indiana utilities at least once every four years, but the IURC has the authority to review the rates of any Indiana utility at any time. Once set, the basic rates and charges authorized do not assure the realization of a fair return on the fair value of property.

IPL’s declining block rate structure generally provides for residential and commercial customers to be charged a lower per kWh rate at higher consumption levels. Therefore, as volumes increase, the weighted average price per kWh decreases. Numerous factors including, but not limited to, weather, inflation, customer growth and usage, the level of actual operating and maintenance expenditures, fuel costs, generating unit availability, and capital expenditures including those required by environmental regulations can affect the return realized.

Base Rate Orders

Other

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most likely to be able to meet the requirements. As proposed, the DOE would value resiliency through rates that recover “compensable costs” that were defined to include the recovery of operating and fuel expenses, debt service and a fair return on equity. On January 8, 2018, the FERC issued an order terminating this docket stating that it failed to satisfy the legal requirements of Section 206 of the Federal Power Act of 1935. The FERC initiated a new docket to take additional steps to explore resilience issues in RTOs/ISOs. The goal of this new proceeding is to: (1) develop a common understanding among the FERC, State Commissions, RTOs/ISOs, transmission owners, and others as to what resilience of the bulk power system means and requires; (2) understand how each RTO and ISO assesses resilience in its geographic footprint; and (3) use this information to evaluate whether additional action regarding resilience is appropriate at this time. It is not possible to predict the impact of this proceeding on our business, financial condition and results of operations.

FAC and Authorized Annual Jurisdictional Net Operating Income

In each of the last three calendar years, IPL has reported earnings in excess of the authorized level for each of the four quarterly reporting periods in those years, however IPL was not required to reduce its fuel cost recovery because of its Cumulative Deficiencies. During 2020, IPL's Cumulative Deficiencies dropped to zero and thus IPL recorded a reduction to revenue of $ i 10.0 million in 2020. IPL's regulatory liability attributed to the Cumulative Deficiencies calculation was $ i 7.7 million as of December 31, 2020, which is recorded within "Regulatory liabilities, current" on the accompanying Consolidated Balance Sheets.

ECCRA

DSM

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of success of the programs. The order also approved recovery of lost revenues, consistent with the provisions of the settlement agreement.

Wind and Solar Power Purchase Agreements

IPL is committed under a power purchase agreement to purchase all wind-generated electricity through 2029 from a wind project in Indiana. IPL is also committed under another agreement to purchase all wind-generated electricity through 2031 from a project in Minnesota. The Indiana project has a maximum output capacity of approximately i 100 MW and the Minnesota project has a maximum output capacity of approximately i 200 MW. In addition, IPL has i 96.4 MW of solar-generated electricity in its service territory under long-term contracts (these long-term contracts have expiration dates ranging from 2021 to 2033), of which i 95.9 MW was in operation as of December 31, 2020. IPL has authority from the IURC to recover the costs for all of these agreements through an adjustment mechanism administered within the FAC. If and when IPL sells the renewable energy attributes (in the form of renewable energy credits) generated from these facilities, the proceeds would pass back to benefit IPL’s retail customers through the FAC.

Taxes

On January 3, 2018, the IURC opened a generic investigation to review and consider the impacts from the TCJA and how any resulting benefits should be realized by customers. The IURC’s order opening this investigation directed Indiana utilities to apply regulatory accounting treatment, such as the use of regulatory assets and regulatory liabilities, for all estimated impacts resulting from the TCJA. On February 16, 2018, the IURC issued an order establishing two phases of the investigation. The first phase (“Phase I”) directed respondent utilities (including IPL) to make a filing to remove from respondents’ rates and charges for service, the impact of a lower federal income tax rate. The second phase (“Phase II”) was established to address remaining issues from the TCJA, including treatment of deferred taxes and how these benefits will be realized by customers. On August 29, 2018, the IURC approved a settlement agreement filed by IPL and various other parties to resolve the Phase I issues of the TCJA tax expense via a credit through the ECCRA rate adjustment mechanism of $ i 9.5 million. The 2018 Base Rate Order described above resolved the Phase II and all other issues regarding the TCJA impact on IPL's rates and includes an additional credit of $ i 14.3 million to be paid by IPL to its customers through the ECCRA rate adjustment mechanism over two years beginning in March 2019.

TDSIC

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IRP Filing

IURC COVID-19 Orders

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Regulatory Assets and Liabilities

The amounts of regulatory assets and regulatory liabilities at December 31 are as follows:

2020

2019

Recovery Period

(In Thousands)

Regulatory Assets

Current:

Undercollections of rate riders

i 31,569

i 22,216

Approximately 1 year(1)

Costs being recovered through basic rates and charges

i 13,861

i 15,182

Approximately 1 year(1)

Total current regulatory assets

i 45,430

i 37,398

Long-term:

Unrecognized pension and other

postretirement benefit plan costs

i 149,374

i 176,646

Various(2)

Deferred MISO costs

i 61,267

i 74,660

Through 2026(1)

Unamortized Petersburg Unit 4 carrying

charges and certain other costs

i 5,975

i 7,030

Through 2026(1)(3)

Unamortized reacquisition premium on debt

i 17,018

i 18,330

Over remaining life of debt

Environmental projects

i 74,637

i 78,021

Through 2046(1)(3)

COVID-19

i 6,391

i —

To be determined

TDSIC projects

i 2,747

i —

36.3 years(1)(3)

Petersburg Unit 1 retirement

i 74,545

i —

Through 2035(3)(5)

Other miscellaneous

i 847

i 927

Various(4)

Total long-term regulatory assets

i 392,801

i 355,614

Total regulatory assets

i 438,231

i 393,012

Regulatory Liabilities

Current:

Overcollections and other credits being passed

to customers through rate riders

i 29,493

i 51,790

Approximately 1 year(1)

FTRs

i 543

i 864

Approximately 1 year(1)

Total current regulatory liabilities

i 30,036

i 52,654

Long-term:

ARO and accrued asset removal costs

i 723,897

i 719,680

Not applicable

Deferred income taxes payable to customers through rates

i 112,957

i 122,156

Various

Long-term portion of credits being passed to customers

through rate riders

i —

i 3,337

Through 2020

Other miscellaneous

i 2,506

i 1,257

To be determined

Total long-term regulatory liabilities

i 839,360

i 846,430

Total regulatory liabilities

i 869,396

i 899,084

(1)Recovered (credited) per specific rate orders

(2)IPL receives a return on its discretionary funding

(3)Recovered with a current return

(4) The majority of these costs are being recovered in basic rates and charges through 2026. For the remainder, recovery is probable, but the

timing is not yet determined.

(5) Recovered per regulatory precedent.

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Current Regulatory Assets and Liabilities

Deferred Fuel

Unrecognized Pension and Postretirement Benefit Plan Costs

In accordance with ASC 715 “Compensation – Retirement Benefits” and ASC 980, IPL recognizes a regulatory asset equal to the unrecognized actuarial gains and losses and prior service costs. Pension expenses are recorded based on the benefit plan’s actuarially determined pension liability and associated level of annual expenses to be recognized. The other postretirement benefit plan’s deferred benefit cost is the excess of the other postretirement benefit liability over the amount previously recognized.

Deferred MISO Costs

Unamortized Petersburg Unit 4 Carrying Charges and Certain Other Costs

Unamortized Reacquisition Premium on Debt

Environmental Costs

COVID-19 Costs

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TDSIC Costs

Petersburg Unit 1 Retirement Costs

FTRs

In connection with IPL’s participation in MISO, in the second quarter of each year IPL is granted financial instruments that can be converted into cash or FTRs based on IPL’s forecasted peak load for the period. See Note 4, "Fair Value - Fair Value Hierarchy and Valuation Techniques - Financial Assets - FTRs" for additional information.

ARO and Accrued Asset Removal Costs

Deferred Income Taxes Recoverable/Payable Through Rates

On December 22, 2017, the U.S. federal government enacted the TCJA, which, among other things, reduced the federal corporate income tax rate from i 35% to i 21%, beginning January 1, 2018. As required by GAAP, on December 31, 2017, IPL remeasured their deferred income tax assets and liabilities using the new tax rate. The impact of the reduction of the income tax rate on deferred income taxes was utilized in the 2018 Base Rate Order to reduce jurisdictional retail rates. Accordingly, IPL has a net regulatory deferred income tax liability of $ i 113.0 million and $ i 122.2 million as of December 31, 2020 and 2019, respectively.

3 i . PROPERTY, PLANT AND EQUIPMENT

The original cost of property, plant and equipment segregated by functional classifications follows:

As of December 31,

2020

2019

(In Thousands)

Production

i 4,191,223

i 4,154,919

Transmission

i 408,380

i 398,903

Distribution

i 1,671,861

i 1,594,208

General plant

i 258,931

i 250,582

Total property, plant and equipment

i 6,530,395

i 6,398,612

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ARO

2020

2019

(In Thousands)

Balance as of January 1

i 204,219

i 129,451

Liabilities settled

( i 18,302)

( i 9,891)

Revisions to cash flow and timing estimates

i 1,120

i 78,153

Accretion expense

i 8,199

i 6,506

Balance as of December 31

i 195,236

i 204,219

4. i FAIR VALUE

The fair value of financial assets and liabilities approximate their reported carrying amounts. The estimated fair values of IPL’s assets and liabilities have been determined using available market information. As these amounts are estimates and based on hypothetical transactions to sell assets or transfer liabilities, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Fair Value Hierarchy and Valuation Techniques

ASC 820 defined and established a framework for measuring fair value and expands disclosures about fair value measurements for financial assets and liabilities that are adjusted to fair value on a recurring basis and/or financial assets and liabilities that are measured at fair value on a nonrecurring basis, which have been adjusted to fair value during the period. In accordance with ASC 820, IPL has categorized its financial assets and liabilities that are adjusted to fair value, based on the priority of the inputs to the valuation technique, following the three-level fair value hierarchy prescribed by ASC 820 as follows:

Level 1 - unadjusted quoted prices for identical assets or liabilities in an active market;

Level 2 - inputs from quoted prices in markets where trading occurs infrequently or quoted prices of instruments with similar attributes in active markets; and

Level 3 - unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

Whenever possible, quoted prices in active markets are used to determine the fair value of IPL’s financial instruments. IPL’s financial instruments are not held for trading or other speculative purposes. The estimated fair value of financial instruments has been determined by using available market information and appropriate valuation

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methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that IPL could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Financial Assets

FTRs

In connection with IPL’s participation in MISO, in the second quarter of each year IPL is granted financial instruments that can be converted into cash or FTRs based on IPL’s forecasted peak load for the period. FTRs are used in the MISO market to hedge IPL’s exposure to congestion charges, which result from constraints on the transmission system. IPL’s FTRs are valued at the cleared auction prices for FTRs in MISO’s annual auction. Because of the infrequent nature of this valuation, the fair value assigned to the FTRs is considered a Level 3 input under the fair value hierarchy required by ASC 820. An offsetting regulatory liability has been recorded as these revenues or costs will be flowed through to customers through the FAC. As such, there is no impact on IPL’s Consolidated Statements of Operations.

Summary

The fair value of assets and liabilities at December 31, 2020 measured on a recurring basis and the respective category within the fair value hierarchy for IPL was determined as follows:

Assets and Liabilities at Fair Value

Level 1

Level 2

Level 3

Fair value at December 31, 2020

Based on quoted market prices in active markets

Other observable inputs

Unobservable inputs

(In Thousands)

Financial assets:

Financial transmission rights

i 543

i —

i 543

Total financial assets measured at fair value

i 543

i —

i 543

The fair value of assets and liabilities at December 31, 2019 measured on a recurring basis and the respective category within the fair value hierarchy for IPL was determined as follows:

Assets and Liabilities at Fair Value

Level 1

Level 2

Level 3

Fair value at December 31, 2019

Based on quoted market prices in active markets

Other observable inputs

Unobservable inputs

(In Thousands)

Financial assets:

Financial transmission rights

i 864

i —

i 864

Total financial assets measured at fair value

i 864

i —

i 864

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	Reconciliation of Financial Instruments Classified as Level 3
	(In Thousands)
Balance at January 1, 2019	$	i 3,046
Unrealized gain recognized in earnings	i 53
Issuances	i 2,846
Settlements	( i 5,081)
Balance at December 31, 2019	$	i 864

Issuances	i 1,889
Settlements	( i 2,210)
Balance at December 31, 2020	$	i 543

Financial Instruments not Measured at Fair Value in the Consolidated Balance Sheets

Debt

The fair value of IPL’s outstanding fixed-rate debt has been determined on the basis of the quoted market prices of the specific securities issued and outstanding. In certain circumstances, the market for such securities was inactive and therefore the valuation was adjusted to consider changes in market spreads for similar securities. Accordingly, the purpose of this disclosure is not to approximate the value on the basis of how the debt might be refinanced.

The following table shows the face value and the fair value of fixed-rate and variable-rate indebtedness (Level 2) for the periods ending:

Face Value

Fair Value

Face Value

Fair Value

(In Thousands)

Fixed-rate

i 1,803,800

i 2,302,973

i 1,713,800

i 2,049,758

Variable-rate

i 75,000

i 90,000

Total indebtedness

i 1,878,800

i 2,377,973

i 1,803,800

i 2,139,758

The difference between the face value and the carrying value of this indebtedness represents the following:

•unamortized deferred financing costs of $ i 17.4 million and $ i 16.7 million at December 31, 2020 and 2019, respectively; and

•unamortized discounts of $ i 6.0 million and $ i 6.2 million at December 31, 2020 and 2019, respectively.

5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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At December 31, 2020, IPL's outstanding derivative instruments were as follows:

Commodity

Accounting Treatment (a)

Unit

Purchases
(in thousands)

Sales
(in thousands)

Net Purchases/(Sales)
(in thousands)

FTRs

Not Designated

MWh

i 3,168

i —

i 3,168

(a) Refers to whether the derivative instruments have been designated as a cash flow hedge.

Derivatives Not Designated as Hedge

When applicable, IPL has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements. As of December 31, 2020, IPL did not have any offsetting positions.

The following table summarizes the fair value, balance sheet classification and hedging designation of IPL's derivative instruments:

December 31,

Commodity

Hedging Designation

Balance sheet classification

2020

2019

Financial transmission rights

Not a Cash Flow Hedge

Prepayments and other current assets

i 543

i 864

6. i EQUITY

Paid In Capital and Capital Stock

IPL had capital contributions from IPALCO of $ i 0.0 million, $ i 0.0 million and $ i 65.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

All of the outstanding common stock of IPL is owned by IPALCO. IPL’s common stock is pledged under the 2024 IPALCO Notes and 2030 IPALCO Notes. There have been no changes in the capital stock of IPL during the three years ended December 31, 2020.

Dividend Restrictions

IPL is also restricted in its ability to pay dividends if it is in default under the terms of its Credit Agreement, which could happen if IPL fails to comply with certain covenants. These covenants, among other things, require IPL to maintain a ratio of total debt to total capitalization not in excess of i 0.67 to i 1. As of December 31, 2020, and as of the filing of this report, IPL was in compliance with all covenants and no event of default existed.

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During the years ended December 31, 2020, 2019 and 2018, IPL declared dividends to its shareholder totaling $ i 140.6 million, $ i 159.0 million, and $ i 156.8 million, respectively.

Cumulative Preferred Stock

At December 31, 2020, 2019 and 2018, preferred stock consisted of the following:

December 31,

Shares
Outstanding

Call Price

2020

2019

2018

Par Value, plus premium, if applicable

(In Thousands)

Cumulative $ i 100 par value,

authorized i 2,000,000 shares

i 4% Series

i 47,611

i 118.00

i 5,410

i 4.2% Series

i 19,331

i 103.00

i 1,933

i 4.6% Series

i 2,481

i 103.00

i 248

i 4.8% Series

i 21,930

i 101.00

i 2,193

i 5.65% Series

i 500,000

i 100.00

i 50,000

Total cumulative preferred stock

i 591,353

i 59,784

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7 i . DEBT

Long-Term Debt

The following table presents IPL’s long-term debt:

December 31,

Series

Due

2020

2019

(In Thousands)

IPL first mortgage bonds:

i 3.875% (1)

August 2021

i 55,000

i 3.875% (1)

August 2021

i 40,000

i 3.125% (1)

December 2024

i 40,000

i 6.60%

January 2034

i 100,000

i 6.05%

October 2036

i 158,800

i 6.60%

June 2037

i 165,000

i 4.875%

November 2041

i 140,000

i 4.65%

June 2043

i 170,000

i 4.50%

June 2044

i 130,000

i 4.70%

September 2045

i 260,000

i 4.05%

May 2046

i 350,000

i 4.875%

November 2048

i 105,000

i 0.75% (2)

April 2026

i 30,000

i —

i 0.95% (2)

April 2026

i 60,000

i —

Unamortized discount – net

( i 6,006)

( i 6,156)

Deferred financing costs

( i 17,384)

( i 16,629)

Total IPL first mortgage bonds

i 1,780,410

i 1,691,015

IPL unsecured debt:

Variable (3)

December 2020

i —

i 30,000

Variable (3)

December 2020

i —

i 60,000

Deferred financing costs

i —

( i 114)

Total IPL unsecured debt

i —

i 89,886

Total consolidated IPL long-term debt

i 1,780,410

i 1,780,901

Less: current portion of long-term debt

i 94,907

i 89,886

Net consolidated IPL long-term debt

i 1,685,503

i 1,691,015

(1)First mortgage bonds issued to the Indiana Finance Authority, to secure the loan of proceeds from tax-exempt bonds issued by the Indiana Finance Authority.

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Debt Maturities

Maturities on long-term indebtedness subsequent to December 31, 2020, are as follows:


Year	Amount
	(In Thousands)
2021	$	i 95,000
2022	i —
2023	i —
2024	i 40,000
2025	i —
Thereafter	i 1,668,800
Total	$	i 1,803,800

Significant Transactions

IPL First Mortgage Bonds and Recent Indiana Finance Authority Bond Issuances

In December 2020, the Indiana Finance Authority issued on behalf of IPL an aggregate principal amount of $90 million of Environmental Facilities Refunding Revenue Bonds, Series 2020A&B due December 2038. IPL issued $90 million aggregate principal amount of first mortgage bonds to the Indiana Finance Authority in two series: $30 million Series 2020A notes at 0.75% and $60 million Series 2020B notes at 0.95% to secure the loan of proceeds from these bonds issued by the Indiana Finance Authority. These bonds are subject to a mandatory put date of April 1, 2026. Proceeds of the bonds were used to refund $90 million of Indiana Finance Authority Environmental Facilities Refunding Revenue Bonds Series 2015A&B.

Line of Credit

IPL entered into an amendment and restatement of its i 5-year $ i 250 million revolving credit facility on June 19, 2019 with a syndication of bank lenders. This Credit Agreement is an unsecured committed line of credit to be used: (i) to finance capital expenditures; (ii) to refinance certain existing indebtedness, (iii) to support working capital; and (iv) for general corporate purposes. This agreement matures on June 19, 2024, and bears interest at variable rates as described in the Credit Agreement. It includes an uncommitted $ i 150 million accordion feature to provide IPL with an option to request an increase in the size of the facility at any time prior to June 19, 2023, subject to approval by the lenders. The Credit Agreement also includes two one-year extension options, allowing IPL to extend the maturity date subject to approval by the lenders. Prior to execution, IPL had existing general banking relationships with the parties to the Credit Agreement. As of December 31, 2020 and 2019, IPL had $ i 75.0 million and $ i 0.0 million in outstanding borrowings on the committed line of credit, respectively.

Restrictions on Issuance of Debt

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the IURC granting IPL authority through December 31, 2021 to, among other things, issue up to $ i 350 million in aggregate principal amount of long-term debt, all of which authority remains available as of December 31, 2020, and refinance up to $ i 185 million in existing indebtedness, of which $ i 95 million of authority remains available under the order as of December 31, 2020. This order also grants IPL authority to have up to $ i 500 million of long-term credit agreements and liquidity facilities outstanding at any one time, of which $ i 250.0 million remains available under the order as of December 31, 2020. As an alternative to the sale of all or a portion of $ i 65 million in principal of the long-term debt mentioned above, we have the authority to issue up to $ i 65 million of new preferred stock, all of which authority remains available under the order as of December 31, 2020. IPL also has restrictions on the amount of new debt that may be issued due to contractual obligations of AES and by financial covenant restrictions under our existing debt obligations. Under such restrictions, IPL is generally allowed to fully draw the amounts available on its Credit Agreement, refinance existing debt and issue new debt approved by the IURC and issue certain other indebtedness.

Credit Ratings

IPL’s ability to borrow money or to refinance existing indebtedness and the interest rates at which IPL can borrow money or refinance existing indebtedness are affected by IPL’s credit ratings. In addition, the applicable interest rates on IPL’s Credit Agreement are dependent upon the credit ratings of IPL. Downgrades in the credit ratings of AES and/or IPALCO could result in IPL’s credit ratings being downgraded.

8. i INCOME TAXES

IPL follows a policy of comprehensive interperiod income tax allocation. Investment tax credits related to utility property have been deferred and are being amortized over the estimated useful lives of the related property.

AES files federal and state income tax returns which consolidate IPALCO and IPL. Under a tax sharing agreement with IPALCO, IPL is responsible for the income taxes associated with its own taxable income and records the provision for income taxes as if IPL filed separate income tax returns. IPL is no longer subject to U.S. or state income tax examinations for tax years through March 27, 2001, but is open for all subsequent periods. IPL made tax sharing payments to IPALCO of $ i 27.0 million, $ i 37.4 million and $ i 33.8 million in 2020, 2019 and 2018, respectively.

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Income Tax Provision

Federal and state income taxes charged to income are as follows:

2020

2019

2018

(In Thousands)

Components of income tax expense:

Current income taxes:

Federal

i 28,395

i 23,941

i 26,021

State

i 8,661

i 4,370

i 11,215

Total current income taxes

i 37,056

i 28,311

i 37,236

Deferred income taxes:

Federal

i 503

i 7,578

( i 15,080)

State

i 2,576

i 7,556

i 345

Total deferred income taxes

i 3,079

i 15,134

( i 14,735)

Net amortization of investment credit

i —

( i 15)

( i 911)

Total income tax expense

i 40,135

i 43,430

i 21,590

Effective and Statutory Rate Reconciliation


	2020		2019		2018
Federal statutory tax rate	i 21.0	%	i 21.0	%	i 21.0	%
State income tax, net of federal tax benefit	i 4.2	%	i 4.4	%	i 5.6	%
Amortization of investment tax credits	i —	%	i —	%	( i 0.5)	%
Research and development credit	i —	%	i —	%	( i 1.6)	%
Depreciation flow through and amortization	( i 5.1)	%	( i 4.7)	%	( i 12.6)	%
Additional funds used during construction - equity	i 0.7	%	i 0.2	%	i 0.3	%

Other – net	i 1.0	%	i 0.8	%	( i 0.1)	%
Effective tax rate	i 21.8	%	i 21.7	%	i 12.1	%

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Deferred Income Taxes

The significant items comprising IPL’s net accumulated deferred tax liability recognized on the audited Consolidated Balance Sheets as of December 31, 2020 and 2019, are as follows:

2020

2019

(In Thousands)

Deferred tax liabilities:

Relating to utility property, net

i 408,291

i 411,182

Regulatory assets recoverable through future rates

i 82,783

i 69,156

Other

i 5,323

i 5,742

Total deferred tax liabilities

i 496,397

i 486,080

Deferred tax assets:

Investment tax credit

i 6

i 7

Regulatory liabilities including ARO

i 197,657

i 191,676

Employee benefit plans

i 3,866

i 8,556

Other

i 5,069

i 6,682

Total deferred tax assets

i 206,598

i 206,921

Deferred income tax liability – net

i 289,799

i 279,159

Uncertain Tax Positions

The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018:

2020

2019

2018

(In Thousands)

Unrecognized tax benefits at January 1

i 7,056

i 7,049

Gross increases – current period tax positions

i 312

i —

Gross decreases – prior period tax positions

i —

i 7

Unrecognized tax benefits at December 31

i 7,368

i 7,056

9. i BENEFIT PLANS

Defined Contribution Plans

All of IPL’s employees are covered by one of two defined contribution plans, the Thrift Plan or the RSP:

The Thrift Plan

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The RSP

Approximately i 20% of IPL’s active employees are covered by the RSP, a qualified defined contribution plan containing a match and nondiscretionary and component. All non-union new hires are covered under the RSP. Participants elect to make contributions to the RSP based on a percentage of their eligible compensation. Each participant’s contribution is matched in amounts up to, but not exceeding, i 5% of the participant’s eligible compensation. Starting in 2018, the RSP also includes a i 4% nondiscretionary contribution based as a percentage of each participant's eligible compensation. Employer contributions (by IPL) relating to the RSP were $ i 1.8 million, $ i 1.6 million and $ i 1.7 million for 2020, 2019 and 2018, respectively.

Defined Benefit Plans

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The following table presents information relating to the Pension Plans:

Pension benefits
as of December 31,

2020

2019

(In Thousands)

Change in benefit obligation:

Projected benefit obligation at January 1

i 782,795

i 697,228

Service cost

i 8,272

i 7,412

Interest cost

i 22,151

i 27,343

Actuarial loss/(gain)

i 66,827

i 88,311

Amendments (primarily increases in pension bands)

i 967

i —

Benefits paid

( i 38,487)

( i 37,499)

Projected benefit obligation at December 31

i 842,525

i 782,795

Change in plan assets:

Fair value of plan assets at January 1

i 769,704

i 684,485

Actual return on plan assets

i 118,716

i 122,690

Employer contributions

i 87

i 28

Benefits paid

( i 38,487)

( i 37,499)

Fair value of plan assets at December 31

i 850,020

i 769,704

Funded (unfunded) status

i 7,495

( i 13,091)

Amounts recognized in the statement of financial position:

Non-current assets

i 8,669

i —

Non-current liabilities

( i 1,174)

( i 13,091)

Net amount recognized at end of year

i 7,495

( i 13,091)

Sources of change in regulatory assets(1):

Prior service cost arising during period

i 967

i —

Net (gain)/loss arising during period

( i 14,110)

( i 4,472)

Amortization of prior service cost

( i 3,677)

( i 3,823)

Amortization of loss

( i 8,115)

( i 11,084)

Total recognized in regulatory assets

( i 24,935)

( i 19,379)

Amounts included in regulatory assets:

Net loss

i 145,526

i 167,750

Prior service cost

i 11,613

i 14,323

Total amounts included in regulatory assets

i 157,139

i 182,073

Information for Pension Plans with a projected benefit obligation in excess of plan assets

Pension benefits
as of December 31,

2020

2019

(In Thousands)

Benefit obligation

i 842,525

i 782,795

Plan assets

i 850,020

i 769,704

Benefit obligation in excess of plan assets

( i 7,495)

i 13,091

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Information for Pension Plans with an accumulated benefit obligation in excess of plan assets

Pension benefits
as of December 31,

2020

2019

(In Thousands)

Accumulated benefit obligation

i 830,458

i 771,592

Plan assets

i 850,020

i 769,704

Accumulated benefit obligation in excess of plan assets

( i 19,562)

i 1,888

Significant Gains and Losses Related to Changes in the Benefit Obligation for the Period

Pension Benefits and Expense

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Pension benefits for
years ended December 31,

2020

2019

2018

(In Thousands)

Components of net periodic benefit cost:

Service cost

i 8,272

i 7,412

i 8,450

Interest cost

i 22,151

i 27,343

i 25,220

Expected return on plan assets

( i 37,779)

( i 29,907)

( i 40,801)

Amortization of prior service cost

i 3,677

i 3,823

i 3,837

Recognized actuarial loss

i 8,115

i 11,084

i 11,403

Recognized settlement loss

i —

i 1,230

Total pension cost

i 4,436

i 19,755

i 9,339

Less: amounts capitalized

i 372

i 1,237

i 1,223

Amount charged to expense

i 4,064

i 18,518

i 8,116

Rates relevant to each year’s expense calculations:

Discount rate – defined benefit pension plan

i 3.33

i 4.36

i 3.67

Discount rate – supplemental retirement plan

i 3.05

i 4.24

i 3.60

Expected return on defined benefit pension plan assets

i 5.05

i 4.50

i 5.45

Expected return on supplemental retirement plan assets

i 4.45

i 4.50

i 5.45

Pension Plan Assets and Fair Value Measurements

F-79

priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

A description of the valuation methodologies used for each major class of assets and liabilities measured at fair value follows:

•The non-qualified Supplemental Retirement Plan investments have quoted market prices and are categorized as Level 1 in the fair value hierarchy.

In establishing IPL’s expected long-term rate of return assumption, we utilize a methodology developed by the plan’s investment consultant who maintains a capital market assumption model that takes into consideration risk, return and correlation assumptions across asset classes. A combination of quantitative analysis of historical data and qualitative judgment is used to capture trends, structural changes and potential scenarios not reflected in historical data.

The Pension Plans’ consultant develops forward-looking, long-term capital market assumptions for risk, return and correlations for a variety of global asset classes, interest rates and inflation. These assumptions are created using a combination of historical analysis, current market environment assessment and by applying the consultant’s own judgment. The consultant then determines an equilibrium long-term rate of return. IPL then takes into consideration the investment manager/consultant expenses, as well as any other expenses expected to be paid out of the Pension Plans’ trust. Finally, IPL has the Pension Plans’ actuary perform a tolerance test of the consultant’s equilibrium expected long-term rate of return. IPL uses an expected long-term rate of return compatible with the actuary’s tolerance level.

The following table summarizes IPL’s target pension plan allocation for 2020:


Asset Category:			Target Allocations
Equity Securities			i 36%
Debt Securities			i 64%

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Fair Value Measurements at

(in thousands)

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Asset Category

Total

(Level 1)

(Level 2)

Cash and cash equivalents

i 2,221

—

i —

Government debt securities

i 118,255

i 131

i 118,124

i 14

Mutual fund - equities

i 323,253

i 2,839

i 320,414

i 38

Mutual fund - debt

i 406,291

i 1,578

i 404,713

i 48

Total

i 850,020

i 6,769

i 843,251

i 100

Fair Value Measurements at

(in thousands)

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Asset Category

Total

(Level 1)

(Level 2)

Cash and cash equivalents

i 2,599

—

i —

Government debt securities

i 154,798

i 39

i 154,759

i 20

Mutual fund - equities

i 214,369

i 2,744

i 211,625

i 28

Mutual fund - debt

i 397,938

i 1,664

i 396,274

i 52

Total(1)

i 769,704

i 7,046

i 762,658

i 100

Pension Funding

IPL contributed $ i 0.1 million, $ i 0.0 million, and $ i 30.1 million to the Pension Plans in 2020, 2019 and 2018, respectively. Funding for the qualified Defined Benefit Pension Plan is based upon actuarially determined contributions that take into account the amount deductible for income tax purposes and the minimum contribution required under ERISA, as amended by the Pension Protection Act of 2006, as well as targeted funding levels necessary to meet certain thresholds.

From an ERISA funding perspective, IPL’s funded target liability percentage was estimated to be i 100%. In general, IPL must contribute the normal service cost earned by active participants during the plan year; however, this amount can be offset by any surplus or credit balance carried by the Pension Plan. The normal cost is expected to be approximately $ i 6.1 million in 2021 (including $ i 0.4 million for plan expenses), which is expected to be fully offset by the surplus amount. Each year thereafter, if the Pension Plans' underfunding increases to more than the present value of the remaining annual installments, the excess is separately amortized over a seven-year period. IPL does not expect to make an employer contribution for the calendar year 2021. IPL’s funding policy for the Pension Plans is to contribute annually no less than the minimum required by applicable law, and no more than the maximum amount that can be deducted for federal income tax purposes.

F-81

Benefit payments made from the Pension Plans for the years ended December 31, 2020, 2019 and 2018 were $ i 38.5 million, $ i 37.5 million and $ i 62.1 million, respectively. Expected benefit payments are expected to be paid out of the Pension Plans as follows:


Year	Pension Benefits
	(In Thousands)
2021	$	i 41,552
2022	i 42,715
2023	i 43,371
2024	i 43,827
2025	i 44,467
2026 through 2030	i 224,933

10. i COMMITMENTS AND CONTINGENCIES

Legal Loss Contingencies

IPL is involved in litigation arising in the normal course of business. We accrue for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. As of December 31, 2020 and 2019, total legal loss contingencies accrued were $ i 13.4 million and $ i 2.6 million, respectively, which were included in “Accrued and Other Current Liabilities” and "Other Non-Current Liabilities," respectively, on the accompanying Consolidated Balance Sheets. A significant portion of these accrued liabilities relate to a personal injury legal claim involving injuries to a contractor. We maintain an amount of insurance protection for such litigation that we believe is adequate. While the ultimate outcome of such litigation cannot be predicted with certainty, management believes that final outcomes will not have a material adverse effect on IPL's results of operations, financial condition and cash flows.

Environmental Loss Contingencies

IPL is subject to various federal, state, regional and local environmental protection and health and safety laws and regulations governing, among other things, the generation, storage, handling, use, disposal and transportation of regulated materials, including ash; the use and discharge of water used in generation boilers and for cooling purposes; the emission and discharge of hazardous and other materials into the environment; and the health and safety of our employees. These laws and regulations often require a lengthy and complex process of obtaining and renewing permits and other governmental authorizations from federal, state and local agencies. Violation of these laws, regulations or permits can result in substantial fines, other sanctions, permit revocation and/or facility shutdowns. IPL cannot assure that it has been or will be at all times in full compliance with such laws, regulations and permits.

New Source Review and other CAA NOVs

F-82

prior to July 1, 2023. If IPL does not meet this retirement obligation, it must install a Selective Non-Catalytic Reduction System (SNCR) on Unit 4. The proposed Consent Decree is subject to final review and approval by the U.S. District Court for the Southern District of Indiana. On January 14, 2021, the U.S. and Indiana, on behalf of EPA and IDEM, respectively, filed a motion asking the court to enter the proposed Consent Decree, along with the U.S.' response to the adverse public comments on the proposed settlements. IPL has a contingent liability recorded related to these New Source Review and other CAA NOV matters.

11. i RELATED PARTY TRANSACTIONS

IPL participates in a property insurance program in which IPL buys insurance from AES Global Insurance Company, a wholly-owned subsidiary of AES. IPL is not self-insured on property insurance, but does take a $ i 5 million per occurrence deductible. Except for IPL’s large substations, IPL does not carry insurance on transmission and distribution assets, which are considered to be outside the scope of property insurance. AES and other AES subsidiaries, including IPL, also participate in the AES global insurance program. IPL pays premiums for a policy that is written and administered by a third-party insurance company. The premiums paid to this third-party administrator by the participants are paid to AES Global Insurance Company and all claims are paid from a trust fund funded by and owned by AES Global Insurance Company, but controlled by the third-party administrator. IPL also has third-party insurance in which the premiums are paid directly to the third-party insurers. The cost to IPL of coverage under the property insurance program with AES Global Insurance Company was approximately $ i 5.6 million, $ i 4.3 million, and $ i 3.1 million in 2020, 2019 and 2018, respectively, and is recorded in “Operating expenses - Operation and maintenance” on the accompanying Consolidated Statements of Operations. As of December 31, 2020 and 2019, IPL had prepaid approximately of $ i 2.3 million and $ i 2.0 million, respectively, for coverage under these plans, which is recorded in "Prepayments and other current assets" on the accompanying Consolidated Balance Sheets.

IPL participates in an agreement with Health and Welfare Benefit Plans LLC, an affiliate of AES, to participate in a group benefits program, including but not limited to, health, dental, vision and life benefits. Health and Welfare Benefit Plans LLC administers the financial aspects of the group insurance program, receives all premium payments from the participating affiliates, and makes all vendor payments. The cost of coverage under this program was approximately $ i 21.0 million, $ i 20.2 million, and $ i 21.5 million in 2020, 2019 and 2018, respectively, and is recorded in “Operating expenses - Operation and maintenance” on the accompanying Consolidated Statements of Operations. IPL had no prepaids for coverage under this plan as of December 31, 2020 and 2019, respectively.

AES files federal and state income tax returns which consolidate IPALCO and its subsidiaries, including IPL. Under a tax sharing agreement with IPALCO, IPL is responsible for the income taxes associated with its own taxable income and records the provision for income taxes using a separate return method. IPL had a receivable balance under this agreement of $ i 12.5 million and $ i 23.1 million as of December 31, 2020 and 2019, respectively, which is recorded in “Taxes receivable” on the accompanying Consolidated Balance Sheets. See Note 8, "Income Taxes" for more information.

Long-term Compensation Plan

During 2020, 2019 and 2018, many of IPL’s non-union employees received benefits under the AES Long-term Compensation Plan, a deferred compensation program. This type of plan is a common employee retention tool used in our industry. Benefits under this plan are granted in the form of performance units payable in cash and AES restricted stock units. Restricted stock units vest ratably over a three-year period. The performance units payable in cash vest at the end of the three-year performance period and are subject to certain AES performance criteria. Total deferred compensation expense recorded during 2020, 2019 and 2018 was $ i 0.3 million, $ i 0.3 million and $ i 0.5 million, respectively, and was included in “Operating expenses - Operation and maintenance” on IPL’s Consolidated Statements of Operations. The value of these benefits is being recognized over the 36 month vesting period and a portion is recorded as miscellaneous deferred credits with the remainder recorded as “Paid in capital” on IPL’s Consolidated Balance Sheets in accordance with ASC 718 “Compensation – Stock Compensation.”

See also Note 9, “Benefit Plans” to the audited consolidated financial statements of IPL for a description of benefits awarded to IPL employees by AES under the RSP.

F-83

Service Company

Total costs incurred by the Service Company on behalf of IPL were $ i 55.5 million, $ i 41.8 million and $ i 44.1 million during 2020, 2019 and 2018, respectively. Total costs incurred by IPL on behalf of the Service Company during 2020, 2019 and 2018 were $ i 10.6 million, $ i 9.7 million and $ i 10.1 million, respectively, which are included as a reduction to charges from the Service Company. These costs were included in “Operating expenses - Operation and maintenance” on IPL’s Consolidated Statements of Operations. IPL had a payable balance with the Service Company of $ i 4.5 million and $8.4 million as of December 31, 2020 and December 31, 2019, respectively, which is recorded in “Accounts payable” on the accompanying Consolidated Balance Sheets.

Other

IPL made loans to IPALCO, net of repayments, of $ i 6.1 million during the year ended December 31, 2020. IPL has a loan receivable in the same amount recorded in “Prepayments and other current assets” on the accompanying Consolidated Balance Sheets as of December 31, 2020.

12. i BUSINESS SEGMENT INFORMATION

13. REVENUE

F-84

IPL’s revenue from contracts with customers was $ i 1,326.6 million, $ i 1,455.3 million and $ i 1,440.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. T i he following table presents IPL's revenue from contracts with customers and other revenue (in thousands):


	For the Years Ended December 31,
	2020		2019		2018
Retail Revenues
Retail revenue from contracts with customers:
Residential	$	i 566,668	$	i 589,719	$	i 588,031
Small commercial and industrial	i 194,904		i 215,878		i 217,896
Large commercial and industrial	i 484,230		i 548,551		i 565,720
Public lighting	i 9,115		i 7,249		i 9,797
Other (1)	i 14,402		i 14,136		i 10,427
Total retail revenue from contracts with customers	i 1,269,319		i 1,375,533		i 1,391,871
Alternative revenue programs	i 24,781		i 23,841		i 4,594
Wholesale Revenues
Wholesale revenues from contracts with customers	i 46,482		i 68,474		i 38,789
Miscellaneous Revenues
Transmission and other revenue from contracts with customers	i 10,794		i 11,335		i 10,057
Other miscellaneous revenues (2)	i 1,609		i 2,460		i 5,194
Total Revenues	$	i 1,352,985	$	i 1,481,643	$	i 1,450,505

(1) Other retail revenue from contracts with customers includes miscellaneous charges to customers

(2) Other miscellaneous revenue includes lease and other miscellaneous revenues not accounted for under ASC 606

F-85

IPL has elected to apply the optional disclosure exemptions under ASC 606. Therefore, IPL has not included disclosure pertaining to revenue expected to be recognized in any future year related to remaining performance obligations, as we exclude contracts with an original length of one year or less, contracts for which we recognize revenue based on the amount we have the right to invoice for services performed, and contracts with variable consideration allocated entirely to a wholly unsatisfied performance obligation when the consideration relates specifically to our efforts to satisfy the performance obligation and depicts the amount to which IPL expects to be entitled.

14. i LEASES

LESSOR

The option to extend or terminate a lease is based on customary early termination provisions in the contract. The Company has not recognized any early terminations as of December 31, 2020.

The following table shows the future minimum lease receipts through 2025 and thereafter (in thousands):


	Operating Leases
2021	$	i 886
2022	i 906
2023	i 906
2024	i 786
2025	i 544
Thereafter	i 2,074
Total	$	i 6,102

15. i RISKS AND UNCERTAINTIES

COVID-19 Pandemic

F-86

Customer class

For the three months ended

For the year ended

Residential

i 1.6

i 6.6

i 3.9

i 2.4

i 3.4

Small commercial and industrial

( i 1.8)

( i 10.3)

( i 4.2)

( i 5.3)

( i 5.2)

Large commercial and industrial

( i 2.8)

( i 11.0)

( i 7.9)

( i 5.7)

( i 6.9)

F-87

Financial Statement Schedules

SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF REGISTRANT

IPALCO ENTERPRISES, INC.

Schedule I – Condensed Financial Information of Registrant

Unconsolidated Balance Sheets

(In Thousands)

December 31,

2020

2019

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

i 302

i 3,709

Restricted cash

i 6,115

i —

Taxes receivable

i 11,862

i 541

Prepayments and other current assets

i 7,508

i 14,500

Total current assets

i 25,787

i 18,750

OTHER NON-CURRENT ASSETS:

Investment in subsidiaries

i 1,426,739

i 1,427,141

Deferred tax asset – long term

i 14,289

i 6,764

Other non-current assets

i 3,194

i 2,843

Total other non-current assets

i 1,444,222

i 1,436,748

TOTAL ASSETS

i 1,470,009

i 1,455,498

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Short-term and current portion of long-term debt

i —

i 469,313

Loans payable to subsidiary

i 6,110

i —

Accounts payable

i 365

i 292

Accrued interest

i 8,556

i 11,442

Derivative liabilities, current

i —

i 26,560

Total current liabilities

i 15,031

i 507,607

NON-CURRENT LIABILITIES:

Long-term debt

i 870,775

i 401,415

Derivative liabilities, non-current

i 63,215

i —

Total non-current liabilities

i 933,990

i 401,415

Total liabilities

i 949,021

i 909,022

SHAREHOLDERS' EQUITY

Paid in capital

i 588,966

i 590,784

Accumulated other comprehensive loss

( i 43,420)

( i 19,750)

Accumulated deficit

( i 24,558)

Total shareholders' equity

i 520,988

i 546,476

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

i 1,470,009

i 1,455,498

See notes to Schedule I.

F-88

IPALCO ENTERPRISES, INC.

Schedule I – Condensed Financial Information of Registrant

Unconsolidated Statements of Operations

(In Thousands)

2020

2019

2018

OTHER INCOME / (EXPENSE), NET:

Equity in earnings of subsidiaries

i 140,030

i 154,078

i 154,150

Interest expense

( i 42,212)

( i 32,761)

( i 31,038)

Loss on early extinguishment of debt

( i 2,415)

i —

Other income / (expense), net

i 73

( i 46)

( i 443)

Total other income / (expense), net

i 95,476

i 121,271

i 122,669

EARNINGS FROM OPERATIONS BEFORE INCOME TAX

i 95,476

i 121,271

i 122,669

Less: income tax expense / (benefit)

( i 11,278)

( i 7,909)

( i 8,143)

NET INCOME

i 106,754

i 129,180

i 130,812

See notes to Schedule I.

F-89

IPALCO ENTERPRISES, INC.

Schedule I - Condensed Financial Information of Registrant

Unconsolidated Statements of Comprehensive Income/(Loss)

(In Thousands)

2020

2019

2018

Net income

i 106,754

i 129,180

i 130,812

Derivative activity:

Change in derivative fair value, net of income tax benefit of $ i 8,876, $ i 6,810 and $ i 0, for each respective period

( i 27,779)

( i 19,750)

i —

Reclassification to earnings, net of income tax benefit of $ i 1,313, $ i 0 and $ i 0, for each respective period

i 4,109

i —

Net change in fair value of derivatives

( i 23,670)

( i 19,750)

i —

Other comprehensive loss

( i 23,670)

( i 19,750)

i —

Net comprehensive income

i 83,084

i 109,430

i 130,812

See notes to Schedule I.

F-90

IPALCO ENTERPRISES, INC.

Schedule I – Condensed Financial Information of Registrant

Unconsolidated Statements of Cash Flows

(In Thousands)

2020

2019

2018

CASH FLOWS FROM OPERATIONS:

Net income

i 106,754

i 129,180

i 130,812

Adjustments to reconcile net income to net cash

provided by operating activities:

Equity in earnings of subsidiaries

( i 140,030)

( i 154,078)

( i 154,150)

Cash dividends received from subsidiary companies

i 147,600

i 159,000

i 142,250

Amortization of deferred financing costs and debt premium

i 1,607

i 1,847

i 1,964

Deferred income taxes – net

( i 224)

i 157

( i 89)

Charges related to early extinguishment of debt

i 2,415

i —

Change in certain assets and liabilities:

Accounts payable

i 299

i 231

( i 405)

Accrued and other current liabilities

i —

( i 3)

( i 876)

Accrued taxes payable/receivable

( i 11,317)

( i 261)

i —

Accrued interest

( i 3,083)

( i 2)

( i 368)

Other – net

i 5,005

( i 623)

( i 1,838)

Net cash provided by operating activities

i 109,026

i 135,448

i 117,300

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in subsidiaries

i —

( i 65,000)

Other

i —

i 278

i 1,053

Net cash provided by (used in) investing activities

i —

i 278

( i 63,947)

CASH FLOWS FROM FINANCING ACTIVITIES:

Long-term borrowings, net of discount

i 474,568

i —

i 65,000

Retirement of long-term debt and early tender premium

( i 472,135)

i —

Loans from subsidiary

i 26,110

i —

Repayments of loans to subsidiary

( i 20,000)

i —

Distributions to shareholders

( i 108,739)

( i 136,426)

( i 130,179)

Deferred financing costs paid

( i 6,122)

i —

( i 148)

Net cash used in financing activities

( i 106,318)

( i 136,426)

( i 65,327)

Net change in cash and cash equivalents

i 2,708

( i 700)

( i 11,974)

Cash, cash equivalents and restricted cash at beginning of period

i 3,709

i 4,409

i 16,383

Cash, cash equivalents and restricted cash at end of period

i 6,417

i 3,709

i 4,409

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest (net of amount capitalized)

i 38,069

i 28,911

i 29,665

Income taxes

i 27,000

i 29,600

i 28,275

See notes to Schedule I.

F-91

IPALCO ENTERPRISES, INC.

Schedule I - Condensed Financial Information of Registrant

Unconsolidated Statements of Common Shareholders' Equity (Deficit)

(In Thousands)

Paid in Capital

Accumulated Other Comprehensive Loss

Accumulated Deficit

Total

Balance at January 1, 2018

i 597,467

—

( i 25,191)

i 572,276

Net comprehensive income

—

i 130,812

Distributions to shareholders

—

( i 130,179)

Other

i 357

—

i 357

Balance at December 31, 2018

i 597,824

—

( i 24,558)

i 573,266

Net comprehensive income

—

( i 19,750)

i 129,180

i 109,430

Distributions to shareholders(1)

( i 7,246)

—

( i 129,180)

( i 136,426)

Other

i 206

—

i 206

Balance at December 31, 2019

i 590,784

( i 19,750)

( i 24,558)

i 546,476

Net comprehensive income

—

( i 23,670)

i 106,754

i 83,084

Distributions to shareholders(1)

( i 1,985)

—

( i 106,754)

( i 108,739)

Other

i 167

—

i 167

Balance at December 31, 2020

i 588,966

( i 43,420)

( i 24,558)

i 520,988

See notes to Schedule I.

F-92

IPALCO ENTERPRISES, INC.

Schedule I – Condensed Financial Information of Registrant

Notes to Schedule I

1. i SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting for Subsidiaries and Affiliates – IPALCO has accounted for the earnings of its subsidiaries on the equity method in the unconsolidated condensed financial information.

2. FAIR VALUE

Fair Value Hierarchy and Valuation Techniques

Level 1 - unadjusted quoted prices for identical assets or liabilities in an active market;

Level 2 - inputs from quoted prices in markets where trading occurs infrequently or quoted prices of instruments with similar attributes in active markets; and

Level 3 - unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

Whenever possible, quoted prices in active markets are used to determine the fair value of our financial instruments. Our financial instruments are not held for trading or other speculative purposes. The estimated fair value of financial instruments has been determined by using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Financial Assets

VEBA Assets

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Financial Liabilities

Interest Rate Hedges

In March 2019, we entered into forward interest rate hedges, which were amended in April 2020. The interest rate hedges have a combined notional amount of $400.0 million. All changes in the market value of the interest rate hedges are recorded in AOCL. See also Note 3, "Derivative Instruments and Hedging Activities - Cash Flow Hedges" for further information.

Summary

The fair value of assets and liabilities at December 31, 2020 measured on a recurring basis and the respective category within the fair value hierarchy for IPALCO was determined as follows:

Assets and Liabilities at Fair Value

Level 1

Level 2

Level 3

Fair value at December 31, 2020

Based on quoted market prices in active markets

Other observable inputs

Unobservable inputs

(In Thousands)

Financial assets:

VEBA investments:

Money market funds

i 16

i —

Mutual funds

i 3,209

i —

i 3,209

i —

Total VEBA investments

i 3,225

i 16

i 3,209

i —

Total financial assets measured at fair value

i 3,225

i 16

i 3,209

i —

Financial liabilities:

Interest rate hedges

i 63,215

i —

i 63,215

i —

Total financial liabilities measured at fair value

i 63,215

i —

i 63,215

i —

The fair value of assets and liabilities at December 31, 2019 measured on a recurring basis and the respective category within the fair value hierarchy for IPALCO was determined as follows:

Assets and Liabilities at Fair Value

Level 1

Level 2

Level 3

Fair value at December 31, 2019

Based on quoted market prices in active markets

Other observable inputs

Unobservable inputs

(In Thousands)

Financial assets:

VEBA investments:

Money market funds

i 25

i —

Mutual funds

i 2,854

i —

i 2,854

i —

Total VEBA investments

i 2,879

i 25

i 2,854

i —

Total financial assets measured at fair value

i 2,879

i 25

i 2,854

i —

Financial liabilities:

Interest rate hedges

i 26,560

i —

i 26,560

i —

Total financial liabilities measured at fair value

i 26,560

i —

i 26,560

i —

F-94

Financial Instruments not Measured at Fair Value in the Consolidated Balance Sheets

Debt

The following table shows the face value and the fair value of fixed-rate and variable-rate indebtedness (Level 2) for the periods ending:

Face Value

Fair Value

Face Value

Fair Value

(In Thousands)

Fixed-rate

i 880,000

i 992,615

i 810,000

i 826,382

Variable-rate

i —

i 65,000

Total indebtedness

i 880,000

i 992,615

i 875,000

i 891,382

The difference between the face value and the carrying value of this indebtedness represents the following:

•unamortized deferred financing costs of $ i 8.6 million and $ i 4.0 million at December 31, 2020 and 2019, respectively; and

•unamortized discounts of $ i 0.6 million and $ i 0.3 million at December 31, 2020 and 2019, respectively.

3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

At December 31, 2020, IPALCO's outstanding derivative instruments were as follows:

Commodity

Accounting Treatment (a)

Unit

Purchases
(in thousands)

Sales
(in thousands)

Net Purchases/(Sales)
(in thousands)

Interest rate hedges

Designated

USD

i 400,000

i —

i 400,000

(a) Refers to whether the derivative instruments have been designated as a cash flow hedge.

Cash Flow Hedges

In March 2019, we entered into i three forward interest rate swaps to hedge the interest risk associated with refinancing future debt. The i three interest rate swaps have a combined notional amount of $ i 400.0 million. In April 2020, we de-designated the swaps as cash flow hedges and froze the AOCL of $ i 72.3 million at the date of de-

F-95

designation. The interest rate swaps were then amended and re-designated as cash flow hedges to hedge the interest rate risk associated with refinancing the 2024 IPALCO Notes. The amended interest rate swaps have a combined notional amount of $ i 400.0 million and will be settled when the 2024 IPALCO Notes are refinanced. The $ i 72.3 million of AOCL associated with the interest rate swaps through the date of the amendment will be amortized out of AOCL into interest expense over the remaining life of the 2030 IPALCO Notes, while any changes in fair value associated with the amended interest rate swaps will be recognized in AOCL going forward.

The following tables provide information on gains or losses recognized in AOCL for the cash flow hedges for the period indicated:

Interest Rate Hedges for the Year Ended December 31,

$ in thousands (net of tax)

2020

2019

2018

Beginning accumulated derivative gain / (loss) in AOCL

( i 19,750)

i —

Net losses associated with current period hedging transactions

( i 27,779)

( i 19,750)

i —

Net losses reclassified to interest expense, net of tax

i 4,109

i —

Ending accumulated derivative loss in AOCL

( i 43,420)

( i 19,750)

i —

Loss expected to be reclassified to earnings in the next twelve months

( i 5,375)

Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months)

i 45

When applicable, IPALCO has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements. As of December 31, 2020, IPALCO had $ i 6.1 million of collateral in a broker margin account which offsets our loss positions on the interest rate hedges.

The following table summarizes the fair value, balance sheet classification and hedging designation of IPALCO's derivative instruments:

December 31,

Commodity

Hedging Designation

Balance sheet classification

2020

2019

Interest rate hedges

Cash Flow Hedge

Accrued and other current liabilities

i —

i 26,560

Interest rate hedges

Cash Flow Hedge

Derivative liabilities, non-current

i 63,215

i —

4. DEBT

The following table presents IPALCO’s long-term indebtedness:

December 31,

Series

Due

2020

2019

(In Thousands)

Long-Term Debt

Term Loan

July 2020

i —

i 65,000

i 3.45% Senior Secured Notes

July 2020

—

i —

i 405,000

i 3.70% Senior Secured Notes

September 2024

—

i 405,000

i 4.25% Senior Secured Notes

May 2030

i 475,000

i —

Unamortized discount – net

( i 625)

( i 313)

Deferred financing costs – net

( i 8,600)

( i 3,959)

Total long-term debt

i 870,775

i 870,728

Less: current portion of long-term debt

i —

i 469,313

Net long-term debt

i 870,775

i 401,415

F-96

IPALCO’s Senior Secured Notes and Term Loan

In April 2020, IPALCO completed the sale of the $ i 475 million aggregate principal amount of i 4.25% 2030 IPALCO Notes pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. We used the net proceeds from this offering to retire the $ i 65 million Term Loan on April 14, 2020. The remaining net proceeds, together with cash on hand, were used to redeem the 2020 IPALCO Notes on May 14, 2020, and to pay certain related fees, expenses and make-whole premiums. A loss on early extinguishment of debt of $2.4 million for the 2020 IPALCO Notes is included as a separate line item within "Other Income/(Expense), Net" in the accompanying Unconsolidated Statements of Operations.

F-97

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Valuation and Qualifying Accounts and Reserves

For the Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

Column A – Description

Column B

Column C – Additions

Column D – Deductions

Column E

Balance at Beginning
of Period

Charged to
Income

Charged to Other
Accounts

Net
Write-offs

Balance at
End of Period

Year ended December 31, 2020

Accumulated Provisions Deducted from

Assets – Doubtful Accounts

i 2,053

i 5,861

( i 1,132)

i 3,627

i 3,155

Deducted from Inventories

Valuation Allowance for Materials and Supplies

i 6,204

i —

i 71

i 6,133

Year ended December 31, 2019

Accumulated Provisions Deducted from

Assets – Doubtful Accounts

i 2,821

i 4,760

i —

i 5,528

i 2,053

Deducted from Inventories

Valuation Allowance for Materials and Supplies

i —

i 6,204

i —

i 6,204

Year ended December 31, 2018

Accumulated Provisions Deducted from

Assets – Doubtful Accounts

i 2,830

i 6,008

i —

i 6,017

i 2,821

INDIANAPOLIS POWER & LIGHT COMPANY and SUBSIDIARY

Valuation and Qualifying Accounts and Reserves

For the Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

Column A – Description

Column B

Column C – Additions

Column D – Deductions

Column E

Balance at Beginning
of Period

Charged to
Income

Charged to Other
Accounts

Net
Write-offs

Balance at
End of Period

Year ended December 31, 2020

Accumulated Provisions Deducted from

Assets – Doubtful Accounts

i 2,053

i 5,861

( i 1,132)

i 3,627

i 3,155

Deducted from Inventories

Valuation Allowance for Materials and Supplies

i 6,204

i 71

i 6,133

Year ended December 31, 2019

Accumulated Provisions Deducted from

Assets – Doubtful Accounts

i 2,821

i 4,760

i —

i 5,528

i 2,053

Deducted from Inventories

Valuation Allowance for Materials and Supplies

i —

i 6,204

i —

i 6,204

Year ended December 31, 2018

Accumulated Provisions Deducted from

Assets – Doubtful Accounts

i 2,830

i 6,008

i —

i 6,017

i 2,821

F-98

IPALCO ENTERPRISES, INC.

Offer to Exchange

4.250% Senior Secured Notes due 2030 for

New 4.250% Senior Secured Notes due 2030

Until , 2021 all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters with respect to their unsold allotments or subscriptions.

PROSPECTUS

, 2021

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.

Chapter 37 of the Indiana Business Corporation Law, as amended (the “IBCL”), authorizes every Indiana corporation to indemnify its directors and officers under certain circumstances against liability and expenses. A corporation may indemnify against liability incurred in a proceeding a director or an officer who is made a party to the proceeding because of the individual’s position as a director or an officer of the corporation if the individual’s conduct was in good faith and the individual reasonably believed, if conduct was in the individual’s official capacity with the corporation, that the conduct was in the corporation’s best interests, and in all other cases, that the individual’s conduct was at least not opposed to the corporation’s best interests. In a criminal proceeding, the individual also must have had either reasonable cause to believe the individual’s conduct was lawful or no reasonable cause to believe the individual’s conduct was unlawful.

IBCL Chapter 37 also provides for a corporation’s “mandatory indemnification,” unless limited by the articles of incorporation, against reasonable expenses incurred by a director or an officer who is wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director or officer was a party by reason of the individual’s position as being or having been a director or officer of the corporation. A corporation may, in advance of the final disposition of a proceeding, reimburse reasonable expenses incurred by a director or an officer who is a party to a proceeding if the individual furnishes the corporation with a written affirmation of the individual’s good faith belief that he or she met the indemnification standard of conduct described in the preceding paragraph; the individual furnishes the corporation with a written undertaking to repay the advance if it is ultimately determined that he or she did not meet the required standard of conduct; and those making the decision to reimburse the director or officer determine that the facts then known would not preclude indemnification under IBCL Chapter 37.

IBCL Chapter 37 permits a corporation to grant indemnification rights in addition to those provided by statute, limited only by the fiduciary duties of the directors approving the indemnification and public policies of the State of Indiana.

The Third Amended and Restated Articles of Incorporation of IPALCO Enterprises, Inc. provide that, to the extent not inconsistent with applicable law, IPALCO Enterprises, Inc. shall indemnify against all liability and reasonable expense a person who is a director, officer, employee or agent of IPALCO Enterprises, Inc. or who is or was serving at the request of IPALCO Enterprises, Inc. as a director, officer, employee, agent or fiduciary of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other organization or entity (an “Eligible Person”) resulting from any pending, threatened or completed claim, action, suit or proceeding and all appeals thereof (whether brought by or in the right of IPALCO Enterprises, Inc. or any other corporation or otherwise), civil, criminal, administrative or investigative, formal or informal, in which an Eligible Person may become involved, as a party or otherwise, by reason of his or her being or having been an Eligible Person, or by reason of any action taken or not taken by him or her in his or her capacity as an Eligible Person, whether or not he or she continued in such capacity at the time such liability or expense shall have been incurred (a “Claim”), (i) if such Eligible Person is Wholly Successful with respect to the Claim, or (ii) if not Wholly Successful, then if such Eligible Person is determined to have acted in good faith in what he or she reasonably believed to be the best interests of IPALCO Enterprises, Inc. or at least not opposed to its best interests and, in addition, with respect to any criminal claim is determined to have had reasonable cause to believe that his or her conduct was lawful or had no reasonable cause to believe that his or her conduct was unlawful. For purposes of this indemnification provision, the term “Wholly Successful” means: (i) the termination of any Claim against an Eligible Person without any finding of liability or guilt against him or her; (ii) the approval by a court or agency, with knowledge of the above indemnity provisions, of a settlement of any Claim; or (iii) the expiration of a reasonable period of time after the threatened making of any Claim without commencement of an action, suit or proceeding and without any payment or promise made to induce a settlement.

The Registration Rights Agreement filed as Exhibit 4.9 to this Registration Statement provides for indemnification of directors and officers of IPALCO Enterprises, Inc. by the initial purchasers against certain liabilities.

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Item 21. Exhibits


Exhibit No.			Document
3.1			Third Amended and Restated Articles of Incorporation of IPALCO Enterprises, Inc. (Incorporated by reference to Exhibit No. 3.1 to IPALCO’s Form 8-K dated as of February 18, 2015)
3.2			Amended and Restated By-Laws of IPALCO Enterprises, Inc. (Incorporated by reference to Exhibit No. 3.2 to IPALCO’s Form 8-K dated as of February 18, 2015)
4.1			Pledge Agreement between IPALCO Enterprises, Inc. and The Bank of New York Mellon Trust Company, N.A. dated as of November 14, 2001 (Incorporated by reference to Exhibit No 4.1 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
4.2			Mortgage and Deed of Trust, dated as of May 1, 1940, between IPL and the Bank of New York Mellon Trust Company, NA, as successor in interest to American National Bank & Trust Company of Chicago, Trustee (Incorporated by reference to Exhibit No. 4.2 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
4.3			The following supplemental indentures to the Mortgage and Deed of Trust referenced in 4.2 above:
			Third Supplemental Indenture, dated as of April 1, 1949 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
			Tenth Supplemental Indenture, dated as of October 1, 1960 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
			Eighteenth Supplemental Indenture, dated as of February 15, 1974 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
			Forty-Eighth Supplemental Indenture, dated as of January 1, 2004 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
			Fifty-Third Supplemental Indenture, dated as of October 1, 2006 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
			Fifty-Fourth Supplemental Indenture, dated as of June 1, 2007 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
			Fifty-Eighth Supplemental Indenture, dated as of August 1, 2011 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
			Fifty-Ninth Supplemental Indenture, dated as of August 1, 2011 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
			Sixtieth Supplemental Indenture, dated as of November 1, 2011 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s December 31, 2011 Form 10-K)
			Sixty-First Supplemental Indenture, dated as of June 1, 2013 (Incorporated by reference to Exhibit No. 4.1 to IPALCO’s June 30, 2013 Form 10-Q)
			Sixty-Second Supplemental Indenture, dated as of June 1, 2014 (Incorporated by reference to Exhibit No. 4.1 to IPALCO’s June 30, 2014 Form 10-Q)
			Sixty-Third Supplemental Indenture, dated as of September 1, 2015 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on September 28, 2015)
			Sixty-Fourth Supplemental Indenture, dated as of May 1, 2016 (Incorporated by reference to Exhibit No. 4.1 to IPALCO’s June 30, 2016 Form 10-Q)
			Sixty-Fifth Supplemental Indenture, dated as of December 1, 2016 (Incorporated by reference to Exhibit No. 4.3 to IPALCO’s December 31, 2016 Form 10-K)
			Sixty-Sixth Supplemental Indenture, dated as of November 1, 2018 (Incorporated by reference to Exhibit No. 4.3 to IPALCO's December 31, 2018 Form 10-K)
			Sixty-Seventh Supplemental Indenture, dated as of December 1 , 20 20 (Incorporated by reference to Exhibit No. 4.3 A to IPALCO's December 31, 20 20 Form 10-K)
			Sixty-Eighth Supplemental Indenture, dated as of December 1, 2020 (Incorporated by reference to Exhibit No. 4.3 B to IPALCO's December 31, 2020 Form 10-K)
4.4			Pledge Agreement Supplement between IPALCO Enterprises, Inc. and The Bank of New York Mellon Trust Company, N.A., as Collateral Agent, dated June 25, 2015 to the Pledge Agreement between IPALCO Enterprises, Inc. and The Bank of New York Mellon Trust Company dated November 14, 2001, as amended (Incorporated by reference to Exhibit 4.2 to IPALCO’s Current Report on Form 8-K filed on June 25, 2015)
4.5			Indenture between IPALCO Enterprises, Inc. and U.S. Bank, National Association, as Trustee, dated August 22, 2017 for IPALCO’s 3.70% Senior Secured Notes due 2024 (Incorporated by reference to Exhibit No. 4.1 to IPALCO’s August 22, 2017 Form 8-K)
4.6			Pledge Agreement Supplement between IPALCO Enterprises, Inc. and The Bank of New York Mellon trust Company, N.A., as Collateral Agent, dated August 22, 2017 to the Pledge Agreement between IPALCO Enterprises, Inc. and The Bank of New York Mellon Trust Company dated November 14, 2001, as amended (Incorporated by reference to Exhibit No. 4.2 to IPALCO’s August 22, 2017 Form 8-K)
4.7			Indenture between IPALCO Enterprises, Inc. and U.S. Bank National Association, as Trustee, dated April 14, 2020 for the 4.250% Senior Secured Notes due 2030 (Incorporated by reference to Exhibit No. 4.1 to IPALCO's April 14, 2020 Form 8-K)
4.8			Pledge Agreement Supplement between IPALCO Enterprises, Inc. and The Bank of New York Mellon Trust Company, N.A., as Collateral Agent, dated April 14, 2020 to the Pledge Agreement between IPALCO Enterprises, Inc. and The Bank of New York Mellon Trust Company dated November 14, 2001, as amended and supplemented (Incorporated by reference to Exhibit No. 4.2 to IPALCO's April 14, 2020 Form 8-K)
4.9			Registration Rights Agreement, dated April 14, 2020, among IPALCO Enterprises, Inc. and J.P. Morgan Securities LLC and BofA Securities, Inc., as representatives of the initial purchasers of the Notes (Incorporated by reference to Exhibit No. 4.3 to IPALCO's April 14, 2020 Form 8-K)
5.1			Opinion of Davis Polk & Wardwell LLP with respect to the new notes
5.2			Opinion of Barnes & Thornburg LLP with respect to the new notes

II-2


10.1			Interconnection Agreement, dated April 1, 2008, between American Electric Power Service Corporation, as agent for Indiana Michigan Power Company, and IPL (Incorporated by reference to Exhibit No. 10.1 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
10.2			Interconnection Agreement, dated December 2, 1968, between IPL and Southern Indiana Gas and Electric Company as modified through Modification Number 11 (Incorporated by reference to Exhibit No. 10.2 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
10.3			Interconnection Agreement dated December 1, 1981, between IPL and Hoosier Energy Rural Electric Cooperative, Inc., as modified through Modification 6 (Incorporated by reference to Exhibit No. 10.3 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
10.4			Tenth Supplemental Agreement to the Interconnection Agreement between IPL and PSI Energy, Inc., dated as of June 26, 2002, amending and completely restating prior agreements (Incorporated by reference to Exhibit No. 10.4 to IPALCO’s Registration Statement on Form S-4 filed with the SEC on October 11, 2011)
10.5			$250,000,000 Revolving Credit Facility Amended and Restated Credit Agreement, dated June 19, 2019, among Indianapolis Power & Light Company, each lender from time to time party thereto, PNC Bank, National Association, as Administrative Agent, PNC Capital Markets LLC, as Joint Bookrunner and Joint Lead Arranger, U.S. Bank, National Association, as Syndication Agent, Joint Bookrunner and Joint Lead Arranger and BMO Harris Bank, N.A. and Fifth Third Bank, as Co-Documentation Agents (Incorporated by reference to Exhibit 10.1 to IPALCO's Current Report on Form 8-K filed on June 21, 2019)
10.6			Subscription Agreement by and between IPALCO and CDP Infrastructures Fund G.P., a wholly owned subsidiary of La Caisse de dépȏt et placement du Québec dated December 14, 2014 (Incorporated by reference to Exhibit 10.10 to IPALCO’s December 31, 2014 10-K/A)
10.7			IPALCO’s Shareholders’ Agreement by and among AES U.S. Investments, Inc., IPALCO Enterprises, Inc. and CDP Infrastructures Fund G.P. dated as of February 11, 2015 (Incorporated by reference to Exhibit No. 10.1 to IPALCO’s March 31, 2015 10-Q)
10.8			The AES Corporation 2003 Long Term Compensation Plan, as amended and restated, dated April 23, 2015 (Incorporated by reference to Exhibit 99.1 of The AES Corporation’s Form 8-K filed on April 23, 2015)
10.9			The AES Corporation Performance Incentive Plan, as amended and restated on April 23, 2015 (Incorporated by reference to Exhibit 99.2 of The AES Corporation’s Form 8-K filed on April 23, 2015)
10.10			The AES Corporation Severance Plan, as amended and restated on August 4, 2017 (Incorporated by reference to Exhibit 10.1 of The AES Corporation’s Form 10-Q for the quarter ended June 30, 2017)
10.11			The AES Corporation Restoration Supplemental Retirement Plan, as amended and restated, effective January 1, 2017 (Incorporated by reference to Exhibit 4.1 of The AES Corporation’s Form S-8 filed on August 6, 2019)
10.12			Form of AES Performance Stock Unit Award Agreement under The AES Corporation 2003 Long Term Compensation Plan (Incorporated by reference to Exhibit 10.13 of The AES Corporation’s Form 10-K for the year ended December 31, 2015)
10.13			Form of AES Restricted Stock Unit Award Agreement under The AES Corporation 2003 Long Term Compensation Plan (Incorporated by reference to Exhibit 10.14 of The AES Corporation’s Form 10-K for the year ended December 31, 2019)
10.14			Form of AES Performance Unit Award Agreement under The AES Corporation 2003 Long Term Compensation Plan (Incorporated by reference to Exhibit 10.15 of The AES Corporation’s Form 10-K for the year ended December 31, 2015)
10.15			Form of AES Nonqualified Stock Option Award Agreement under The AES Corporation 2003 Long Term Compensation Plan (Incorporated by reference to Exhibit 10.4 of The AES Corporation’s Form 10-Q for the quarter ended June 30, 2015)
10.16			Form of AES Performance Cash Unit Award Agreement under The AES Corporation 2003 Long Term Compensation Plan (Incorporated by reference to Exhibit 10.17 of The AES Corporation’s Form 10-K for the year ended December 31, 2019)
10.17			The AES Corporation Amended and Restated Executive Severance Plan dated October 5, 2018 is incorporated by reference to Exhibit 10.1 of the AES Corporation's Form 10-Q for the quarter ended September 30, 2018)
21			Subsidiaries of IPALCO Enterprises, Inc (Incorporated by reference to Exhibit 21 to IPALCO's December 31, 2018 Form 10-K)
23.1			Consent of Davis Polk & Wardwell LLP (contained in the opinion filed as Exhibit 5.1)
23.2			Consent of Barnes & Thornburg LLP (contained in the opinion filed as Exhibit 5.2)
23.3			Consent of Ernst & Young LLP
24			Power of Attorney (included on signature page)
25			Statement of Eligibility of U.S. Bank, National Association, as Trustee, on Form T-1
99.1			Form of Guaranteed Delivery
99.2			Form of Letter to Clients
99.3			Form of Letter to Brokers
99.4			Form of Instructions to Registered Holder and/or Book-Entry Transfer Participant from Owner
101.INS			XBRL Instance Document (furnished herewith as provided in Rule 406T of Regulation S-T)
101.SCH			XBRL Taxonomy Extension Schema Document (furnished herewith as provided in Rule 406T of Regulation S-T)
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith as provided in Rule 406T of Regulation S-T)
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith as provided in Rule 406T of Regulation S-T)
101.LAB			XBRL Taxonomy Extension Label Linkbase Document (furnished herewith as provided in Rule 406T of Regulation S-T)
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith as provided in Rule 406T of Regulation S-T)

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Item 22. Undertakings

(a) The undersigned hereby undertakes:

(1) To file during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, superseded or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; (iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and (iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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(c) The undersigned hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(d) The undersigned hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 as amended, IPALCO Enterprises, Inc. has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Carmel, State of Indiana, on March 22, 2021.


			IPALCO ENTERPRISES, INC.
			By:			/s/ *Kristina Lund*
						Name: Kristina Lund
						Title: President and Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Gustavo Garavaglia and Judi L. Sobecki, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power to act separately and full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and all additional registration statements pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or his or her or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature

Capacity

Date

/s/ Bernerd Da Santos

Director

Bernerd Da Santos

/s/ Paul L. Freedman

Director

Paul L. Freedman

/s/ Susan Harcourt

Director

Susan Harcourt

/s/ Lisa Krueger

Director and Executive Chairman

Lisa Krueger

/s/ Frédéric Lesage

Director

Frédéric Lesage

/s/ Kristina Lund

Director, President and Chief Executive Officer (Principal Executive Officer)

Kristina Lund

/s/ Fady Mansour

Director

Fady Mansour

/s/ Marc Michael

Director

Marc Michael

/s/ Gustavo Pimenta

Director

Gustavo Pimenta

/s/ Kenneth J. Zagzebski

Director

Kenneth J. Zagzebski

/s/ Gustavo Garavaglia

Vice President and Chief Financial Officer (Principal Financial Officer)

Gustavo Garavaglia

/s/ Karin M. Nyhuis

Controller (Principal Accounting Officer)