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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 1999
OR

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

|Commission File Number |  | Registrant, State of Incorporation, Address, and Telephone Number                                                            |  | I.R.S. Employer Identification No.
|---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------
|1-11377                |  | CINERGY CORP.(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 287-2644                           |  | 31-1385023                        
|1-1232                 |  | THE CINCINNATI GAS & ELECTRIC COMPANY(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 287-2644      |  | 31-0240030                        
|1-3543                 |  | PSI ENERGY, INC.(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611                      |  | 35-0594457                        
|2-7793                 |  | THE UNION LIGHT, HEAT AND POWER COMPANY(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 287-2644 |  | 31-0473080                        

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Indicate
by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90
days. Yes /x/  No / /

This
combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company. Information contained herein
relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to the information relating to the other registrants.

The
Union Light, Heat and Power Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its company specific information with the
reduced disclosure format.

As
of October 31, 1999, shares of Common Stock outstanding for each registrant were as listed:

|Company                                                             |  | Shares     
|------------------------------------------------------------------- |  | -----------
|Cinergy Corp., par value $.01 per share                             |  | 158,917,227
|The Cincinnati Gas & Electric Company, par value $8.50 per share    |  | 89,663,086 
|PSI Energy, Inc., without par value, stated value $.01 per share    |  | 53,913,701 
|The Union Light, Heat and Power Company, par value $15.00 per share |  | 585,333    

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## 

TABLE OF CONTENTS

|Item
Number                   |  |                                                                                       |  | Page
Number
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | -----------
|                              |  | Glossary of Terms                                                                     |  | 3          
|PART I. FINANCIAL INFORMATION
|1                             |  | Financial Statements                                                                  |  |            
|                              |  | Cinergy Corp                                                                          |  |            
|                              |  | Consolidated Balance Sheets                                                           |  | 7          
|                              |  | Consolidated Statements of Income                                                     |  | 9          
|                              |  | Consolidated Statements of Changes in Common Stock Equity                             |  | 10         
|                              |  | Consolidated Statements of Cash Flows                                                 |  | 12         
|                              |  | The Cincinnati Gas & Electric Company                                                 |  |            
|                              |  | Consolidated Balance Sheets                                                           |  | 14         
|                              |  | Consolidated Statements of Income and Comprehensive Income                            |  | 16         
|                              |  | Consolidated Statements of Cash Flows                                                 |  | 17         
|                              |  | PSI Energy, Inc.                                                                      |  |            
|                              |  | Consolidated Balance Sheets                                                           |  | 19         
|                              |  | Consolidated Statements of Income and Comprehensive Income                            |  | 21         
|                              |  | Consolidated Statements of Cash Flows                                                 |  | 22         
|                              |  | The Union Light, Heat and Power Company                                               |  |            
|                              |  | Balance Sheets                                                                        |  | 24         
|                              |  | Statements of Income                                                                  |  | 26         
|                              |  | Statements of Cash Flows                                                              |  | 27         
|                              |  | Notes to Financial Statements                                                         |  | 28         
|2                             |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  |            
|                              |  | Financial Condition                                                                   |  | 38         
|                              |  | Capital Resources and Requirements                                                    |  | 43         
|                              |  | Results of Operations for the Quarter Ended September 30, 1999                        |  | 46         
|                              |  | Results of Operations for the Nine Months Ended September 30, 1999                    |  | 50         
|                              |  | Results of Operations for ULH&P for the Nine Months Ended
September 30, 1999          |  | 54         
|3                             |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 54         
|PART II. OTHER INFORMATION   
|1                             |  | Legal Proceedings                                                                     |  | 55         
|6                             |  | Exhibits and Reports on Form 8-K                                                      |  | 55         
|                              |  | Signatures                                                                            |  | 56         



GLOSSARY OF TERMS

The following abbreviations or acronyms used in the text of this combined Form 10-Q are defined below:

|TERM                 |  | DEFINITION                                                                                                                                                            
|-------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |  |                                                                                                                                                                       
|1998 Form 10-K       |  | Combined 1998 Annual Report on Form 10-K filed separately by Cinergy, CG&E, PSI, and ULH&P                                                                            
|Avon Energy          |  | Avon Energy Partners Holdings, an Unlimited Liability Company and its wholly-owned subsidiary Avon Energy Partners PLC, a Limited Liability Company                   
|BACT                 |  | Best Available Control Technology                                                                                                                                     
|Beckjord             |  | CG&E's W.C. Beckjord Generating Station (steam electric generating plant)                                                                                             
|CAA                  |  | Clean Air Act                                                                                                                                                         
|Cayuga               |  | PSI's Cayuga Generating Station (steam electric generating plant)                                                                                                     
|CC&T                 |  | Cinergy Capital & Trading, Inc. (a subsidiary of Investments)                                                                                                         
|CERCLA               |  | Comprehensive Environmental Response, Compensation and Liability Act                                                                                                  
|CG&E                 |  | The Cincinnati Gas & Electric Company (a subsidiary of Cinergy)                                                                                                       
|CIBU                 |  | Cinergy Investments Business Unit                                                                                                                                     
|Cinergy or Company   |  | Cinergy Corp.                                                                                                                                                         
|CM&T                 |  | Cinergy Marketing & Trading, LLC (a subsidiary of CC&T), formerly Producers Energy Marketing, LLC (ProEnergy), which is engaged in the marketing of natural gas       
|Committed Lines      |  | A line of credit providing short-term loans on a committed basis                                                                                                      
|Court of Appeals     |  | U.S. Circuit Court of Appeals for the District of Columbia                                                                                                            
|Destec               |  | Destec Energy, Inc.                                                                                                                                                   
|DOE                  |  | United States Department of Energy                                                                                                                                    
|Dynegy               |  | Dynegy Inc.                                                                                                                                                           
|ECBU                 |  | Energy Commodities Business Unit                                                                                                                                      
|EDBU                 |  | Energy Delivery Business Unit                                                                                                                                         
|EITF Issue 98-10     |  | Emerging Issues Task Force Issue No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk Management Activities                                        
|EPA                  |  | United States Environmental Protection Agency                                                                                                                         
|EPS                  |  | Earnings per share                                                                                                                                                    
|FASB                 |  | Financial Accounting Standards Board                                                                                                                                  
|Gallagher            |  | PSI's R.A. Gallagher Generating Station (steam electric generating plant)                                                                                             
|Gibson               |  | PSI's Gibson Generating Station (steam electric generating plant)                                                                                                     
|Global Resources     |  | Cinergy Global Resources, Inc. (a subsidiary of Cinergy)                                                                                                              
|GPU                  |  | GPU Inc.                                                                                                                                                              
|House                |  | U.S. House of Representatives                                                                                                                                         
|IBU                  |  | International Business Unit                                                                                                                                           
|ICR                  |  | Mercury Information Collection Request                                                                                                                                
|IDEM                 |  | Indiana Department of Environmental Management                                                                                                                        
|IGC                  |  | Indiana Gas Company, Inc., formerly Indiana Gas and Water Company, Inc.                                                                                               
|Investments          |  | Cinergy Investments, Inc. (a subsidiary of Cinergy)                                                                                                                   
|IT                   |  | Information Technology                                                                                                                                                
|IURC                 |  | Indiana Utility Regulatory Commission                                                                                                                                 
|JUMPS(sm)            |  | Junior Maturing Principal Securities                                                                                                                                  
|KWh                  |  | Kilowatt-hour                                                                                                                                                         
|mcf                  |  | Thousand cubic feet                                                                                                                                                   
|MGP                  |  | Manufactured gas plant                                                                                                                                                
|Midlands             |  | Midlands Electricity plc, a United Kingdom regional electric company (a wholly-owned subsidiary of Avon Energy)                                                       
|Midwest ISO          |  | Midwest Independent System Operator                                                                                                                                   
|N/A                  |  | Not applicable                                                                                                                                                        
|NERC                 |  | North American Electric Reliability Council                                                                                                                           
|NIPSCO               |  | Northern Indiana Public Service Company                                                                                                                               
|NOx                  |  | Nitrogen oxide                                                                                                                                                        
|NSPS                 |  | New Source Performance Standards                                                                                                                                      
|NSR                  |  | New Source Review                                                                                                                                                     
|PSD                  |  | Prevention of Significant Deterioration                                                                                                                               
|PSI                  |  | PSI Energy, Inc. (a subsidiary of Cinergy)                                                                                                                            
|PUCO                 |  | Public Utilities Commission of Ohio                                                                                                                                   
|PUHCA                |  | Public Utility Holding Company Act of 1935                                                                                                                            
|SEC                  |  | United States Securities and Exchange Commission                                                                                                                      
|Senate               |  | U.S. Senate                                                                                                                                                           
|September 1996 Order |  | An IURC order issued in September 1996 on PSI's retail rate proceeding                                                                                                
|SIP                  |  | State Implementation Plan                                                                                                                                             
|SO2                  |  | Sulfur dioxide                                                                                                                                                        
|Statement 131        |  | Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an Enterprise and Related Information                                              
|Statement 133        |  | Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities                                                     
|Statement 137        |  | Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging ActivitiesDeferral of the Effective Date of FASB Statement 133
|UCC                  |  | The Indiana Office of the Utility Consumer Counselor                                                                                                                  
|ULH&P                |  | The Union Light, Heat and Power Company (a wholly-owned subsidiary of CG&E)                                                                                           
|Uncommitted          |  | A line of credit providing short-term loans on an                                                                                                                     
|Lines                |  | uncommitted basis                                                                                                                                                     
|U.S.                 |  | United States                                                                                                                                                         
|Wabash River         |  | PSI's Wabash River Generating Station (steam electric generating plant)                                                                                               
|WVPA                 |  | Wabash Valley Power Association, Inc.                                                                                                                                 
|Zimmer               |  | CG&E's William H. Zimmer Generating Station (steam electric generating plant)                                                                                         



## 

CINERGY CORP.

AND SUBSIDIARY COMPANIES

CINERGY CORP.

CONSOLIDATED BALANCE SHEETS

ASSETS

|                                                                                                                                        |  | September 30
1999 |            | December 31
1998
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ----------------
|
|
|Current Assets                                                                                                                          |  |                   |            |                 
|Cash and temporary cash investments                                                                                                     |  | $                 | 57,486     |                 
|Restricted deposits                                                                                                                     |  |                   | 1,425      |                 
|Notes receivable                                                                                                                        |  |                   | 290        |                 
|Accounts receivable less accumulated provision for doubtful accounts of $31,057 at September 30, 1999, and $25,622 at December 31, 1998 |  |                   | 761,768    |                 
|Materials, supplies, and fuelat average cost                                                                                           |  |                   | 208,931    |                 
|Energy risk management assets                                                                                                           |  |                   | 135,817    |                 
|Prepayments and other                                                                                                                   |  |                   | 75,208     |                 
|                                                                                                                                        |  |                   |            |                 
|                                                                                                                                        |  |                   | 1,240,925  |                 
|Utility PlantOriginal Cost                                                                                                             |  |                   |            |                 
|In service                                                                                                                              |  |                   |            |                 
|Electric                                                                                                                                |  |                   | 9,330,180  |                 
|Gas                                                                                                                                     |  |                   | 811,552    |                 
|Common                                                                                                                                  |  |                   | 170,772    |                 
|                                                                                                                                        |  |                   |            |                 
|                                                                                                                                        |  |                   | 10,312,504 |                 
|Accumulated depreciation                                                                                                                |  |                   | 4,206,192  |                 
|                                                                                                                                        |  |                   |            |                 
|                                                                                                                                        |  |                   | 6,106,312  |                 
|Construction work in progress                                                                                                           |  |                   | 266,981    |                 
|                                                                                                                                        |  |                   |            |                 
|Total utility plant                                                                                                                     |  |                   | 6,373,293  |                 
|Other Assets                                                                                                                            |  |                   |            |                 
|Regulatory assets                                                                                                                       |  |                   | 1,128,957  |                 
|Investments in unconsolidated subsidiaries                                                                                              |  |                   | 309,578    |                 
|Energy risk management assets                                                                                                           |  |                   | 21,507     |                 
|Other                                                                                                                                   |  |                   | 460,227    |                 
|                                                                                                                                        |  |                   |            |                 
|                                                                                                                                        |  |                   | 1,920,269  |                 
|                                                                                                                                        |  | $                 | 9,534,487  |                 

The accompanying notes as they relate to Cinergy Corp. are an integral part of these
consolidated financial statements.

LIABILITIES AND SHAREHOLDERS' EQUITY

|                                                                                                                                                       |  | September 30
1999 |           | December 31
1998 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | --------- | ---------------- | -
|
|
|Current Liabilities                                                                                                                                    |  |                   |           |                  |  
|Accounts payable                                                                                                                                       |  | $                 | 935,430   |                  | $
|Accrued taxes                                                                                                                                          |  |                   | 248,441   |                  |  
|Accrued interest                                                                                                                                       |  |                   | 37,813    |                  |  
|Notes payable and other short-term obligations                                                                                                         |  |                   | 363,780   |                  |  
|Long-term debt due within one year                                                                                                                     |  |                   | 31,822    |                  |  
|Energy risk management liabilities                                                                                                                     |  |                   | 123,885   |                  |  
|Other                                                                                                                                                  |  |                   | 81,854    |                  |  
|                                                                                                                                                       |  |                   |           |                  |  
|                                                                                                                                                       |  |                   | 1,823,025 |                  |  
|Non-Current Liabilities                                                                                                                                |  |                   |           |                  |  
|Long-term debt                                                                                                                                         |  |                   | 2,723,483 |                  |  
|Deferred income taxes                                                                                                                                  |  |                   | 1,141,312 |                  |  
|Unamortized investment tax credits                                                                                                                     |  |                   | 149,629   |                  |  
|Accrued pension and other postretirement benefit costs                                                                                                 |  |                   | 346,994   |                  |  
|Energy risk management liabilities                                                                                                                     |  |                   | 130,188   |                  |  
|Other                                                                                                                                                  |  |                   | 488,892   |                  |  
|                                                                                                                                                       |  |                   |           |                  |  
|                                                                                                                                                       |  |                   | 4,980,498 |                  |  
|Total liabilities                                                                                                                                      |  |                   | 6,803,523 |                  |  
|Cumulative Preferred Stock of Subsidiaries                                                                                                             |  |                   |           |                  |  
|Not subject to mandatory redemption                                                                                                                    |  |                   | 92,597    |                  |  
|Common Stock Equity                                                                                                                                    |  |                   |           |                  |  
|Common stock$.01 par value; authorized shares600,000,000; outstanding shares158,917,210 at September 30, 1999, and 158,664,532 at December 31, 1998 |  |                   | 1,589     |                  |  
|Paid-in capital                                                                                                                                        |  |                   | 1,605,674 |                  |  
|Retained earnings                                                                                                                                      |  |                   | 1,038,660 |                  |  
|Accumulated other comprehensive loss                                                                                                                   |  |                   | (7,556    | )                |  
|                                                                                                                                                       |  |                   |           |                  |  
|Total common stock equity                                                                                                                              |  |                   | 2,638,367 |                  |  
|                                                                                                                                                       |  | $                 | 9,534,487 |                  | $

CINERGY CORP.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

|                                                        |  | Quarter Ended
September 30 |           | Year to Date
September 30 |  
|------------------------------------------------------- |  | -------------------------- | --------- | ------------------------- | -
|
|
|Operating Revenues                                      |  |                            |           |                           |  
|Electric                                                |  | $                          | 1,396,837 |                           | $
|Gas                                                     |  |                            | 375,837   |                           |  
|Other                                                   |  |                            | 9,524     |                           |  
|                                                        |  |                            |           |                           |  
|                                                        |  |                            | 1,782,198 |                           |  
|Operating Expenses                                      |  |                            |           |                           |  
|Fuel and purchased and exchanged power                  |  |                            | 891,351   |                           |  
|Gas purchased                                           |  |                            | 349,259   |                           |  
|Other operation and maintenance                         |  |                            | 245,330   |                           |  
|Depreciation and amortization                           |  |                            | 88,734    |                           |  
|Taxes other than income taxes                           |  |                            | 70,077    |                           |  
|                                                        |  |                            |           |                           |  
|                                                        |  |                            | 1,644,751 |                           |  
|Operating Income                                        |  |                            | 137,447   |                           |  
|Other Income and (Deductions)                           |  |                            |           |                           |  
|Equity in earnings of unconsolidated subsidiaries       |  |                            | 372       |                           |  
|Gain on sale of investment in
unconsolidated subsidiary |  |                            | 99,272    |                           |  
|Miscellaneousnet                                       |  |                            | 8,729     |                           |  
|Interest expense                                        |  |                            | (56,404   | )                         |  
|                                                        |  |                            |           |                           |  
|                                                        |  |                            | 51,969    |                           |  
|Income Before Taxes                                     |  |                            | 189,416   |                           |  
|Income Taxes                                            |  |                            | 66,489    |                           |  
|Preferred Dividend Requirements of Subsidiaries         |  |                            | 1,364     |                           |  
|                                                        |  |                            |           |                           |  
|Net Income                                              |  | $                          | 121,563   |                           | $
|Earnings Per Common Share                               |  |                            |           |                           |  
|Basic                                                   |  | $                          | 0.77      |                           | $
|Assuming dilution                                       |  | $                          | 0.76      |                           | $
|Dividends Declared Per Common Share                     |  | $                          | 0.45      |                           | $
|Average Common Shares Outstanding                       |  |                            |           |                           |  
|Basic                                                   |  |                            | 158,907   |                           |  
|Common stock options                                    |  |                            | 329       |                           |  
|Contingently issuable common stock                      |  |                            | 25        |                           |  
|                                                        |  |                            |           |                           |  
|Assuming dilution                                       |  |                            | 159,261   |                           |  

The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.



CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY(dollars in thousands)
(unaudited)

|                                                             |  | Common
Stock |       | Paid-in
Capital |   | Retained
Earnings |   | Accumulated
Other
Comprehensive
Loss |           | Total
Comprehensive
Income (Loss) |   | Total
Common Stock
Equity |  
|------------------------------------------------------------ |  | ------------ | ----- | --------------- | - | ----------------- | - | ------------------------------------ | --------- | --------------------------------- | - | ------------------------- | -
|Quarter Ended September 30, 1999                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Balance at July 1, 1999                                      |  | $            | 1,589 |                 | $ | 1,602,608         |   | $                                    | 988,598   |                                   | $ | (10,359                   | )
|Comprehensive income                                         |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Net income                                                   |  |              |       |                 |   |                   |   |                                      | 121,563   |                                   |   |                           |  
|Other comprehensive income, net of tax                       |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Foreign currency translation adjustment                      |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Minimum pension liability adjustment                         |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Unrealized loss on grantor trust                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Unrealized loss on securities available for sale             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Other comprehensive income total                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   | 2,803                     |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Comprehensive income total                                   |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Issuance of 31,043 shares of common stocknet                |  |              |       |                 |   | 2,216             |   |                                      |           |                                   |   |                           |  
|Treasury shares reissued                                     |  |              |       |                 |   | 850               |   |                                      |           |                                   |   |                           |  
|Dividends on common stock (see page 9 for per share amounts) |  |              |       |                 |   |                   |   |                                      | (71,499   | )                                 |   |                           |  
|Other                                                        |  |              |       |                 |   |                   |   |                                      | (2        | )                                 |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Balance at September 30, 1999                                |  | $            | 1,589 |                 | $ | 1,605,674         |   | $                                    | 1,038,660 |                                   | $ | (7,556                    | )
|Quarter Ended September 30, 1998                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Balance at July 1, 1998                                      |  | $            | 1,585 |                 | $ | 1,599,435         |   | $                                    | 905,556   |                                   | $ | (3,330                    | )
|Comprehensive income                                         |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Net income                                                   |  |              |       |                 |   |                   |   |                                      | 109,431   |                                   |   |                           |  
|Other comprehensive income, net of tax                       |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Foreign currency translation adjustment                      |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Other comprehensive income (loss) total                      |  |              |       |                 |   |                   |   |                                      |           |                                   |   | (329                      | )
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Comprehensive income total                                   |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Issuance of 12,423 shares of common stocknet                |  |              |       |                 |   | 225               |   |                                      |           |                                   |   |                           |  
|Treasury shares purchased                                    |  |              | (1    | )               |   | (1,536            | ) |                                      |           |                                   |   |                           |  
|Treasury shares reissued                                     |  |              | 1     |                 |   | 2,637             |   |                                      |           |                                   |   |                           |  
|Dividends on common stock (see page 9 for per share amounts) |  |              |       |                 |   |                   |   |                                      | (71,340   | )                                 |   |                           |  
|Other                                                        |  |              |       |                 |   | 15                |   |                                      |           |                                   |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                                   |   |                           |  
|Balance at September 30, 1998                                |  | $            | 1,585 |                 | $ | 1,600,776         |   | $                                    | 943,647   |                                   | $ | (3,659                    | )

The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.

CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (CONTINUED)(dollars in thousands)
(unaudited)

|                                                             |  | Common
Stock |       | Paid-in
Capital |   | Retained
Earnings |   | Accumulated
Other
Comprehensive
Loss |           | Total
Comprehensive
Income |   | Total
Common Stock
Equity |  
|------------------------------------------------------------ |  | ------------ | ----- | --------------- | - | ----------------- | - | ------------------------------------ | --------- | -------------------------- | - | ------------------------- | -
|Nine Months Ended September 30, 1999                         |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Balance at January 1, 1999                                   |  | $            | 1,587 |                 | $ | 1,595,237         |   | $                                    | 945,214   |                            | $ | (807                      | )
|Comprehensive income                                         |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Net income                                                   |  |              |       |                 |   |                   |   |                                      | 307,866   |                            |   |                           |  
|Other comprehensive income, net of tax                       |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Foreign currency translation adjustment                      |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Minimum pension liability adjustment                         |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Unrealized loss on grantor trust                             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Unrealized loss on securities available for sale             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Other comprehensive income (loss) total                      |  |              |       |                 |   |                   |   |                                      |           |                            |   | (6,749                    | )
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Comprehensive income total                                   |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Issuance of 252,678 shares of common stocknet               |  |              | 2     |                 |   | 6,493             |   |                                      |           |                            |   |                           |  
|Treasury shares purchased                                    |  |              |       |                 |   | (233              | ) |                                      |           |                            |   |                           |  
|Treasury shares reissued                                     |  |              |       |                 |   | 4,177             |   |                                      |           |                            |   |                           |  
|Dividends on common stock (see page 9 for per share amounts) |  |              |       |                 |   |                   |   |                                      | (214,413  | )                          |   |                           |  
|Other                                                        |  |              |       |                 |   |                   |   |                                      | (7        | )                          |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Balance at September 30, 1999                                |  | $            | 1,589 |                 | $ | 1,605,674         |   | $                                    | 1,038,660 |                            | $ | (7,556                    | )
|Nine Months Ended September 30, 1998                         |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Balance at January 1, 1998                                   |  | $            | 1,577 |                 | $ | 1,573,064         |   | $                                    | 967,420   |                            | $ | (2,861                    | )
|Comprehensive income                                         |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Net income                                                   |  |              |       |                 |   |                   |   |                                      | 189,569   |                            |   |                           |  
|Other comprehensive income, net of tax                       |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Foreign currency translation adjustment                      |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Minimum pension liability adjustment                         |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Other comprehensive income (loss) total                      |  |              |       |                 |   |                   |   |                                      |           |                            |   | (798                      | )
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Comprehensive income total                                   |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Issuance of 803,043 shares of common stocknet               |  |              | 8     |                 |   | 27,018            |   |                                      |           |                            |   |                           |  
|Treasury shares purchased                                    |  |              | (3    | )               |   | (6,468            | ) |                                      |           |                            |   |                           |  
|Treasury shares reissued                                     |  |              | 3     |                 |   | 7,115             |   |                                      |           |                            |   |                           |  
|Dividends on common stock (see page 9 for per share amounts) |  |              |       |                 |   |                   |   |                                      | (213,340  | )                          |   |                           |  
|Other                                                        |  |              |       |                 |   | 47                |   |                                      | (2        | )                          |   |                           |  
|                                                             |  |              |       |                 |   |                   |   |                                      |           |                            |   |                           |  
|Balance at September 30, 1998                                |  | $            | 1,585 |                 | $ | 1,600,776         |   | $                                    | 943,647   |                            | $ | (3,659                    | )

The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.



CINERGY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

|                                                                                     |  | Year to Date
September 30 |         
|------------------------------------------------------------------------------------ |  | ------------------------- | --------
|
|
|Operating Activities                                                                 |  |                           |         
|Net income                                                                           |  | $                         | 307,866 
|Items providing (using) cash currently:                                              |  |                           |         
|Depreciation and amortization                                                        |  |                           | 263,412 
|WVPA settlement                                                                      |  |                           |        
|Deferred income taxes and investment tax creditsnet                                 |  |                           | 4,283   
|Equity in earnings of unconsolidated subsidiaries                                    |  |                           | (46,059 
|Gain on sale of investment in unconsolidated subsidiary                              |  |                           | (99,272 
|Allowance for equity funds used during construction                                  |  |                           | (2,841  
|Regulatory assetsnet                                                                |  |                           | (221,470
|Changes in current assets and current liabilities                                    |  |                           |         
|Restricted deposits                                                                  |  |                           | 2,162   
|Accounts and notes receivable, net of reserves on receivables sold                   |  |                           | (187,136
|Materials, supplies, and fuel                                                        |  |                           | (6,184  
|Accounts payable                                                                     |  |                           | 266,570 
|Accrued taxes and interest                                                           |  |                           | 6,228   
|Energy risk managementnet                                                           |  |                           | (51,397 
|Other itemsnet                                                                      |  |                           | 263,840 
|                                                                                     |  |                           |         
|Net cash provided by operating activities                                            |  |                           | 500,002 
|Financing Activities                                                                 |  |                           |         
|Issuance of common stock                                                             |  |                           | 6,495   
|Issuance of long-term debt                                                           |  |                           | 541,915 
|Retirement of preferred stock of subsidiaries                                        |  |                           | (34     
|Redemption of long-term debt                                                         |  |                           | (528,900
|Change in short-term debt                                                            |  |                           | (539,920
|Dividends on common stock                                                            |  |                           | (214,413
|                                                                                     |  |                           |         
|Net cash used in financing activities                                                |  |                           | (734,857
|Investing Activities                                                                 |  |                           |         
|Construction expenditures (less allowance for equity funds used during construction) |  |                           | (262,719
|Acquisition of businesses (net of cash acquired)                                     |  |                           |        
|Investments in unconsolidated subsidiaries                                           |  |                           | (235,363
|Sale of investment in unconsolidated subsidiary                                      |  |                           | 690,269 
|                                                                                     |  |                           |         
|Net cash provided by (used in) investing activities                                  |  |                           | 192,187 
|Net increase (decrease) in cash and temporary cash investments                       |  |                           | (42,668 
|Cash and temporary cash investments at beginning of period                           |  |                           | 100,154 
|                                                                                     |  |                           |         
|Cash and temporary cash investments at end of period                                 |  | $                         | 57,486  

The accompanying notes as they relate to Cinergy Corp. are an integral part of these
consolidated financial statements.



## 

THE CINCINNATI GAS & ELECTRIC COMPANY

AND SUBSIDIARY COMPANIES

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED BALANCE SHEETS

ASSETS

|                                                                                                                                        |  | September 30 |           | December 31
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | -----------
|
|
|
|Current Assets                                                                                                                          |  |              |           |            
|Cash and temporary cash investments                                                                                                     |  | $            | 14,380    |            
|Restricted deposits                                                                                                                     |  |              | 1,172     |            
|Notes receivable from affiliated companies                                                                                              |  |              |          |            
|Accounts receivable less accumulated provision for doubtful accounts of $18,470 at September 30, 1999, and $17,607 at December 31, 1998 |  |              | 240,508   |            
|Accounts receivable from affiliated companies                                                                                           |  |              | 41,614    |            
|Materials, supplies, and fuelat average cost                                                                                           |  |              | 109,427   |            
|Energy risk management assets                                                                                                           |  |              | 67,909    |            
|Prepayments and other                                                                                                                   |  |              | 32,386    |            
|                                                                                                                                        |  |              |           |            
|                                                                                                                                        |  |              | 507,396   |            
|Utility PlantOriginal Cost                                                                                                             |  |              |           |            
|In service                                                                                                                              |  |              |           |            
|Electric                                                                                                                                |  |              | 4,855,304 |            
|Gas                                                                                                                                     |  |              | 811,552   |            
|Common                                                                                                                                  |  |              | 170,772   |            
|                                                                                                                                        |  |              |           |            
|                                                                                                                                        |  |              | 5,837,628 |            
|Accumulated depreciation                                                                                                                |  |              | 2,246,188 |            
|                                                                                                                                        |  |              |           |            
|                                                                                                                                        |  |              | 3,591,440 |            
|Construction work in progress                                                                                                           |  |              | 153,986   |            
|                                                                                                                                        |  |              |           |            
|Total utility plant                                                                                                                     |  |              | 3,745,426 |            
|Other Assets                                                                                                                            |  |              |           |            
|Regulatory assets                                                                                                                       |  |              | 594,096   |            
|Energy risk management assets                                                                                                           |  |              | 10,753    |            
|Other                                                                                                                                   |  |              | 106,790   |            
|                                                                                                                                        |  |              |           |            
|                                                                                                                                        |  |              | 711,639   |            
|                                                                                                                                        |  | $            | 4,964,461 |            

The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral
part of these consolidated financial statements.

LIABILITIES AND SHAREHOLDER'S EQUITY

|                                                                                                                                         |  | September 30 |           | December 31 |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ----------- | -
|
|
|
|Current Liabilities                                                                                                                      |  |              |           |             |  
|Accounts payable                                                                                                                         |  | $            | 302,793   |             | $
|Accounts payable to affiliated companies                                                                                                 |  |              | 64,506    |             |  
|Accrued taxes                                                                                                                            |  |              | 105,617   |             |  
|Accrued interest                                                                                                                         |  |              | 10,699    |             |  
|Long-term debt due within one year                                                                                                       |  |              |          |             |  
|Notes payable and other short-term obligations                                                                                           |  |              | 204,000   |             |  
|Notes payable to affiliated companies                                                                                                    |  |              | 110,790   |             |  
|Energy risk management liabilities                                                                                                       |  |              | 61,942    |             |  
|Other                                                                                                                                    |  |              | 23,996    |             |  
|                                                                                                                                         |  |              |           |             |  
|                                                                                                                                         |  |              | 884,343   |             |  
|Non-Current Liabilities                                                                                                                  |  |              |           |             |  
|Long-term debt                                                                                                                           |  |              | 1,205,830 |             |  
|Deferred income taxes                                                                                                                    |  |              | 778,080   |             |  
|Unamortized investment tax credits                                                                                                       |  |              | 106,177   |             |  
|Accrued pension and other postretirement benefit costs                                                                                   |  |              | 153,017   |             |  
|Energy risk management liabilities                                                                                                       |  |              | 65,094    |             |  
|Other                                                                                                                                    |  |              | 114,617   |             |  
|                                                                                                                                         |  |              |           |             |  
|                                                                                                                                         |  |              | 2,422,815 |             |  
|Total liabilities                                                                                                                        |  |              | 3,307,158 |             |  
|Cumulative Preferred Stock                                                                                                               |  |              |           |             |  
|Not subject to mandatory redemption                                                                                                      |  |              | 20,686    |             |  
|Common Stock Equity                                                                                                                      |  |              |           |             |  
|Common stock$8.50 par value; authorized shares120,000,000; outstanding shares 89,663,086 at September 30, 1999, and December 31, 1998 |  |              | 762,136   |             |  
|Paid-in capital                                                                                                                          |  |              | 553,931   |             |  
|Retained earnings                                                                                                                        |  |              | 321,674   |             |  
|Accumulated other comprehensive loss                                                                                                     |  |              | (1,124    | )           |  
|                                                                                                                                         |  |              |           |             |  
|Total common stock equity                                                                                                                |  |              | 1,636,617 |             |  
|                                                                                                                                         |  | $            | 4,964,461 |             | $

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(unaudited)

|                                              |  | Quarter Ended
September 30 |         | Year To Date
September 30 |  
|--------------------------------------------- |  | -------------------------- | ------- | ------------------------- | -
|
|
|Operating Revenues                            |  |                            |         |                           |  
|Electric                                      |  | $                          | 699,981 |                           | $
|Gas                                           |  |                            | 38,510  |                           |  
|                                              |  |                            |         |                           |  
|                                              |  |                            | 738,491 |                           |  
|Operating Expenses                            |  |                            |         |                           |  
|Fuel and purchased and exchanged power        |  |                            | 411,132 |                           |  
|Gas purchased                                 |  |                            | 14,254  |                           |  
|Other operation and maintenance               |  |                            | 103,150 |                           |  
|Depreciation and amortization                 |  |                            | 51,395  |                           |  
|Taxes other than income taxes                 |  |                            | 54,201  |                           |  
|                                              |  |                            |         |                           |  
|                                              |  |                            | 634,132 |                           |  
|Operating Income                              |  |                            | 104,359 |                           |  
|Other Income and (Deductions)                 |  |                            |         |                           |  
|Miscellaneousnet                             |  |                            | (287    | )                         |  
|Interest expense                              |  |                            | (25,090 | )                         |  
|                                              |  |                            |         |                           |  
|                                              |  |                            | (25,377 | )                         |  
|Income Before Taxes                           |  |                            | 78,982  |                           |  
|Income Taxes                                  |  |                            | 30,830  |                           |  
|                                              |  |                            |         |                           |  
|Net Income                                    |  | $                          | 48,152  |                           | $
|Preferred Dividend Requirement                |  |                            | 213     |                           |  
|                                              |  |                            |         |                           |  
|Net Income Applicable to Common Stock         |  | $                          | 47,939  |                           | $
|Other Comprehensive Income (Loss), Net Of Tax |  |                            |        |                           |  
|                                              |  |                            |         |                           |  
|Comprehensive Income                          |  | $                          | 47,939  |                           | $

The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part
of these consolidated financial statements.

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

|                                                                                     |  | Year to Date
September 30 |         
|------------------------------------------------------------------------------------ |  | ------------------------- | --------
|
|
|Operating Activities                                                                 |  |                           |         
|Net income                                                                           |  | $                         | 167,311 
|Items providing (using) cash currently:                                              |  |                           |         
|Depreciation and amortization                                                        |  |                           | 152,691 
|Deferred income taxes and investment tax creditsnet                                 |  |                           | 9,151   
|Allowance for equity funds used during construction                                  |  |                           | (2,083  
|Regulatory assetsnet                                                                |  |                           | 10,343  
|Changes in current assets and current liabilities                                    |  |                           |         
|Accounts and notes receivable, net of reserves on receivables sold                   |  |                           | 24,555  
|Materials, supplies, and fuel                                                        |  |                           | 5,867   
|Accounts payable                                                                     |  |                           | 71,390  
|Accrued taxes and interest                                                           |  |                           | (55,710 
|Energy risk managementnet                                                           |  |                           | (25,699 
|Other itemsnet                                                                      |  |                           | (7,274  
|                                                                                     |  |                           |         
|Net cash provided by operating activities                                            |  |                           | 350,542 
|Financing Activities                                                                 |  |                           |         
|Issuance of long-term debt                                                           |  |                           | 19,818  
|Retirement of preferred stock                                                        |  |                           | (26     
|Redemption of long-term debt                                                         |  |                           | (164,264
|Change in short-term debt                                                            |  |                           | 108,487 
|Dividends on preferred stock                                                         |  |                           | (642    
|Dividends on common stock                                                            |  |                           | (196,500
|                                                                                     |  |                           |         
|Net cash used in financing activities                                                |  |                           | (233,127
|Investing Activities                                                                 |  |                           |         
|Construction expenditures (less allowance for equity funds used during construction) |  |                           | (130,024
|Net cash used in investing activities                                                |  |                           | (130,024
|Net increase (decrease) in cash and temporary cash investments                       |  |                           | (12,609 
|Cash and temporary cash investments at beginning of period                           |  |                           | 26,989  
|                                                                                     |  |                           |         
|Cash and temporary cash investments at end of period                                 |  | $                         | 14,380  

The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an integral part
of these consolidated financial statements.



## 

PSI ENERGY, INC.

AND SUBSIDIARY COMPANY

PSI ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

|                                                                                                                                       |  | September 30
1999 |           | December 31
1998
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | ----------------
|
|
|Current Assets                                                                                                                         |  |                   |           |                 
|Cash and temporary cash investments                                                                                                    |  | $                 | 1,875     |                 
|Restricted deposits                                                                                                                    |  |                   | 253       |                 
|Notes receivable from affiliated companies                                                                                             |  |                   | 109,891   |                 
|Accounts receivable less accumulated provision for doubtful accounts of $12,502 at September 30, 1999, and $7,893 at December 31, 1998 |  |                   | 338,200   |                 
|Accounts receivable from affiliated companies                                                                                          |  |                   | 39,225    |                 
|Materials, supplies, and fuelat average cost                                                                                          |  |                   | 96,124    |                 
|Energy risk management assets                                                                                                          |  |                   | 67,908    |                 
|Prepayments and other                                                                                                                  |  |                   | 34,931    |                 
|                                                                                                                                       |  |                   |           |                 
|                                                                                                                                       |  |                   | 688,407   |                 
|Electric Utility PlantOriginal Cost                                                                                                   |  |                   |           |                 
|In service                                                                                                                             |  |                   | 4,474,876 |                 
|Accumulated depreciation                                                                                                               |  |                   | 1,960,004 |                 
|                                                                                                                                       |  |                   |           |                 
|                                                                                                                                       |  |                   | 2,514,872 |                 
|Construction work in progress                                                                                                          |  |                   | 112,995   |                 
|                                                                                                                                       |  |                   |           |                 
|Total electric utility plant                                                                                                           |  |                   | 2,627,867 |                 
|Other Assets                                                                                                                           |  |                   |           |                 
|Regulatory assets                                                                                                                      |  |                   | 534,861   |                 
|Energy risk management assets                                                                                                          |  |                   | 10,754    |                 
|Other                                                                                                                                  |  |                   | 90,556    |                 
|                                                                                                                                       |  |                   |           |                 
|Total other assets                                                                                                                     |  |                   | 636,171   |                 
|                                                                                                                                       |  | $                 | 3,952,445 |                 

The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.

LIABILITIES AND SHAREHOLDER'S EQUITY

|                                                                                                                                                             |  | September 30
1999 |           | December 31
1998 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | --------- | ---------------- | -
|
|
|Current Liabilities                                                                                                                                          |  |                   |           |                  |  
|Accounts payable                                                                                                                                             |  | $                 | 310,404   |                  | $
|Accounts payable to affiliated companies                                                                                                                     |  |                   | 12,845    |                  |  
|Accrued taxes                                                                                                                                                |  |                   | 116,950   |                  |  
|Accrued interest                                                                                                                                             |  |                   | 15,302    |                  |  
|Notes payable and other short-term obligations                                                                                                               |  |                   | 94,609    |                  |  
|Notes payable to affiliated companies                                                                                                                        |  |                   | 285,253   |                  |  
|Long-term debt due within one year                                                                                                                           |  |                   | 31,822    |                  |  
|Energy risk management liabilities                                                                                                                           |  |                   | 61,943    |                  |  
|Other                                                                                                                                                        |  |                   | 2,036     |                  |  
|                                                                                                                                                             |  |                   |           |                  |  
|                                                                                                                                                             |  |                   | 931,164   |                  |  
|Non-Current Liabilities                                                                                                                                      |  |                   |           |                  |  
|Long-term debt                                                                                                                                               |  |                   | 968,305   |                  |  
|Deferred income taxes                                                                                                                                        |  |                   | 373,483   |                  |  
|Unamortized investment tax credits                                                                                                                           |  |                   | 43,452    |                  |  
|Accrued pension and other postretirement benefit costs                                                                                                       |  |                   | 124,823   |                  |  
|Energy risk management liabilities                                                                                                                           |  |                   | 65,094    |                  |  
|Other                                                                                                                                                        |  |                   | 339,173   |                  |  
|                                                                                                                                                             |  |                   |           |                  |  
|                                                                                                                                                             |  |                   | 1,914,330 |                  |  
|Total liabilities                                                                                                                                            |  |                   | 2,845,494 |                  |  
|Cumulative Preferred Stock                                                                                                                                   |  |                   |           |                  |  
|Not subject to mandatory redemption                                                                                                                          |  |                   | 71,911    |                  |  
|Common Stock Equity                                                                                                                                          |  |                   |           |                  |  
|Common stockwithout par value; $0.01 stated value; authorized shares60,000,000; outstanding shares53,913,701 at September 30, 1999, and December 31, 1998 |  |                   | 539       |                  |  
|Paid-in capital                                                                                                                                              |  |                   | 410,742   |                  |  
|Retained earnings                                                                                                                                            |  |                   | 624,593   |                  |  
|Accumulated other comprehensive loss                                                                                                                         |  |                   | (834      | )                |  
|                                                                                                                                                             |  |                   |           |                  |  
|Total common stock equity                                                                                                                                    |  |                   | 1,035,040 |                  |  
|                                                                                                                                                             |  | $                 | 3,952,445 |                  | $

PSI ENERGY, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(unaudited)

|                                              |  | Quarter Ended
September 30 |         | Year To Date
September 30 |  
|--------------------------------------------- |  | -------------------------- | ------- | ------------------------- | -
|
|
|Operating Revenues                            |  |                            |         |                           |  
|Electric                                      |  | $                          | 707,193 |                           | $
|Operating Expenses                            |  |                            |         |                           |  
|Fuel and purchased and exchanged power        |  |                            | 495,015 |                           |  
|Other operation and maintenance               |  |                            | 115,254 |                           |  
|Depreciation and amortization                 |  |                            | 34,025  |                           |  
|Taxes other than income taxes                 |  |                            | 15,427  |                           |  
|                                              |  |                            |         |                           |  
|                                              |  |                            | 659,721 |                           |  
|Operating Income                              |  |                            | 47,472  |                           |  
|Other Income and (Deductions)                 |  |                            |         |                           |  
|Miscellaneousnet                             |  |                            | (1,794  | )                         |  
|Interest expense                              |  |                            | (19,620 | )                         |  
|                                              |  |                            |         |                           |  
|                                              |  |                            | (21,414 | )                         |  
|Income Before Taxes                           |  |                            | 26,058  |                           |  
|Income Taxes                                  |  |                            | 10,400  |                           |  
|                                              |  |                            |         |                           |  
|Net Income                                    |  | $                          | 15,658  |                           | $
|Preferred Dividend Requirement                |  |                            | 1,150   |                           |  
|                                              |  |                            |         |                           |  
|Net Income Applicable to Common Stock         |  | $                          | 14,508  |                           | $
|Other Comprehensive Income (Loss), Net of Tax |  |                            | (819    | )                         |  
|                                              |  |                            |         |                           |  
|Comprehensive Income                          |  | $                          | 13,689  |                           | $

The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.

PSI ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

|                                                                                     |  | Year To Date
September 30 |         
|------------------------------------------------------------------------------------ |  | ------------------------- | --------
|
|
|Operating Activities                                                                 |  |                           |         
|Net income                                                                           |  | $                         | 81,079  
|Items providing (using) cash currently:                                              |  |                           |         
|Depreciation and amortization                                                        |  |                           | 101,889 
|WVPA settlement                                                                      |  |                           |        
|Deferred income taxes and investment tax creditsnet                                 |  |                           | 10,707  
|Allowance for equity funds used during construction                                  |  |                           | (758    
|Regulatory assetsnet                                                                |  |                           | (231,813
|Changes in current assets and current liabilities                                    |  |                           |         
|Restricted deposits                                                                  |  |                           | 2,161   
|Accounts and notes receivable, net of reserves on receivables sold                   |  |                           | (244,456
|Materials, supplies, and fuel                                                        |  |                           | (15,679 
|Accounts payable                                                                     |  |                           | 75,145  
|Accrued taxes and interest                                                           |  |                           | 45,016  
|Energy risk managementnet                                                           |  |                           | (25,698 
|Other itemsnet                                                                      |  |                           | 263,850 
|                                                                                     |  |                           |         
|Net cash provided by operating activities                                            |  |                           | 61,443  
|Financing Activities                                                                 |  |                           |         
|Issuance of long-term debt                                                           |  |                           | 323,593 
|Retirement of preferred stock                                                        |  |                           | (8      
|Redemption of long-term debt                                                         |  |                           | (355,192
|Change in short-term debt                                                            |  |                           | 103,754 
|Dividends on preferred stock                                                         |  |                           | (3,451  
|Dividends on common stock                                                            |  |                           | (17,900 
|                                                                                     |  |                           |         
|Net cash provided by (used in) financing activities                                  |  |                           | 50,796  
|Investing Activities                                                                 |  |                           |         
|Construction expenditures (less allowance for equity funds used during construction) |  |                           | (129,152
|                                                                                     |  |                           |         
|Net cash used in investing activities                                                |  |                           | (129,152
|Net increase (decrease) in cash and temporary cash investments                       |  |                           | (16,913 
|Cash and temporary cash investments at beginning of period                           |  |                           | 18,788  
|                                                                                     |  |                           |         
|Cash and temporary cash investments at end of period                                 |  | $                         | 1,875   

The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.



## 

THE UNION LIGHT, HEAT AND POWER COMPANY

THE UNION LIGHT, HEAT AND POWER COMPANY

BALANCE SHEETS

ASSETS

|                                                                                                                                      |  | September 30
1999 |         | December 31
1998
|------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ----------------
|
|
|Current Assets                                                                                                                        |  |                   |         |                 
|Cash and temporary cash investments                                                                                                   |  | $                 | 5,733   |                 
|Accounts receivable less accumulated provision for doubtful accounts of $1,228 at September 30, 1999, and $1,248 at December 31, 1998 |  |                   | 4,688   |                 
|Accounts receivable from affiliated companies                                                                                         |  |                   | 1,493   |                 
|Materials, supplies, and fuelat average cost                                                                                         |  |                   | 9,230   |                 
|Prepayments and other                                                                                                                 |  |                   | 390     |                 
|                                                                                                                                      |  |                   |         |                 
|                                                                                                                                      |  |                   | 21,534  |                 
|Utility PlantOriginal Cost                                                                                                           |  |                   |         |                 
|In service                                                                                                                            |  |                   |         |                 
|Electric                                                                                                                              |  |                   | 241,005 |                 
|Gas                                                                                                                                   |  |                   | 170,482 |                 
|Common                                                                                                                                |  |                   | 20,410  |                 
|                                                                                                                                      |  |                   |         |                 
|                                                                                                                                      |  |                   | 431,897 |                 
|Accumulated depreciation                                                                                                              |  |                   | 152,061 |                 
|                                                                                                                                      |  |                   |         |                 
|                                                                                                                                      |  |                   | 279,836 |                 
|Construction work in progress                                                                                                         |  |                   | 11,545  |                 
|                                                                                                                                      |  |                   |         |                 
|Total utility plant                                                                                                                   |  |                   | 291,381 |                 
|Other Assets                                                                                                                          |  |                   |         |                 
|Regulatory assets                                                                                                                     |  |                   | 10,723  |                 
|Other                                                                                                                                 |  |                   | 5,733   |                 
|                                                                                                                                      |  |                   |         |                 
|                                                                                                                                      |  |                   | 16,456  |                 
|                                                                                                                                      |  | $                 | 329,371 |                 

The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements.

THE UNION LIGHT, HEAT AND POWER COMPANY

BALANCE SHEETS (Continued)

LIABILITIES AND SHAREHOLDER'S EQUITY

|                                                                                                                                    |  | September 30
1999 |         | December 31
1998
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ----------------
|
|
|Current Liabilities                                                                                                                 |  |                   |         |                 
|Accounts payable                                                                                                                    |  | $                 | 5,350   |                 
|Accounts payable to affiliated companies                                                                                            |  |                   | 18,075  |                 
|Accrued taxes                                                                                                                       |  |                   | 2,230   |                 
|Accrued interest                                                                                                                    |  |                   | 1,327   |                 
|Long-term debt due within one year                                                                                                  |  |                   |        |                 
|Notes payable to affiliated companies                                                                                               |  |                   | 30,167  |                 
|Other                                                                                                                               |  |                   | 3,961   |                 
|                                                                                                                                    |  |                   |         |                 
|                                                                                                                                    |  |                   | 61,110  |                 
|Non-Current Liabilities                                                                                                             |  |                   |         |                 
|Long-term debt                                                                                                                      |  |                   | 74,549  |                 
|Deferred income taxes                                                                                                               |  |                   | 24,526  |                 
|Unamortized investment tax credits                                                                                                  |  |                   | 4,029   |                 
|Accrued pension and other postretirement benefit costs                                                                              |  |                   | 12,206  |                 
|Amounts due to customersincome taxes                                                                                               |  |                   | 9,841   |                 
|Other                                                                                                                               |  |                   | 10,195  |                 
|                                                                                                                                    |  |                   |         |                 
|                                                                                                                                    |  |                   | 135,346 |                 
|Total liabilities                                                                                                                   |  |                   | 196,456 |                 
|Common Stock Equity                                                                                                                 |  |                   |         |                 
|Common stock$15.00 par value; authorized shares1,000,000; outstanding shares585,333 at September 30, 1999, and December 31, 1998 |  |                   | 8,780   |                 
|Paid-in capital                                                                                                                     |  |                   | 19,525  |                 
|Retained earnings                                                                                                                   |  |                   | 104,610 |                 
|                                                                                                                                    |  |                   |         |                 
|Total common stock equity                                                                                                           |  |                   | 132,915 |                 
|                                                                                                                                    |  | $                 | 329,371 |                 

THE UNION LIGHT, HEAT AND POWER COMPANY

STATEMENTS OF INCOME

(unaudited)

|                                                     |  | Quarter Ended
September 30 |        | Year To Date
September 30 |  
|---------------------------------------------------- |  | -------------------------- | ------ | ------------------------- | -
|
|
|Operating Revenues                                   |  |                            |        |                           |  
|Electric                                             |  | $                          | 63,041 |                           | $
|Gas                                                  |  |                            | 6,242  |                           |  
|                                                     |  |                            |        |                           |  
|                                                     |  |                            | 69,283 |                           |  
|Operating Expenses                                   |  |                            |        |                           |  
|Electricity purchased from parent company for resale |  |                            | 49,166 |                           |  
|Gas purchased                                        |  |                            | 2,229  |                           |  
|Other operation and maintenance                      |  |                            | 8,720  |                           |  
|Depreciation                                         |  |                            | 3,906  |                           |  
|Taxes other than income taxes                        |  |                            | 1,024  |                           |  
|                                                     |  |                            |        |                           |  
|                                                     |  |                            | 65,045 |                           |  
|Operating Income                                     |  |                            | 4,238  |                           |  
|Other Income and (Deductions)                        |  |                            |        |                           |  
|Miscellaneousnet                                    |  |                            | (464   | )                         |  
|Interest                                             |  |                            | (1,437 | )                         |  
|                                                     |  |                            |        |                           |  
|                                                     |  |                            | (1,901 | )                         |  
|Income Before Taxes                                  |  |                            | 2,337  |                           |  
|Income Taxes                                         |  |                            | 1,226  |                           |  
|                                                     |  |                            |        |                           |  
|Net Income                                           |  | $                          | 1,111  |                           | $

The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements.

THE UNION LIGHT, HEAT AND POWER COMPANY

STATEMENTS OF CASH FLOWS

(unaudited)

|                                                                                     |  | Year to Date
September 30 |        
|------------------------------------------------------------------------------------ |  | ------------------------- | -------
|
|
|Operating Activities                                                                 |  |                           |        
|Net income                                                                           |  | $                         | 9,073  
|Items providing (using) cash currently:                                              |  |                           |        
|Depreciation                                                                         |  |                           | 10,983 
|Deferred income taxes and investment tax creditsnet                                 |  |                           | (936   
|Allowance for equity funds used during construction                                  |  |                           | (43    
|Regulatory assets                                                                    |  |                           | 103    
|Changes in current assets and current liabilities                                    |  |                           |        
|Accounts and notes receivable, net of reserves on receivables sold                   |  |                           | 6,770  
|Materials, supplies, and fuel                                                        |  |                           | (961   
|Accounts payable                                                                     |  |                           | 2,536  
|Accrued taxes and interest                                                           |  |                           | (1,618 
|Other itemsnet                                                                      |  |                           | 2,425  
|                                                                                     |  |                           |        
|Net cash provided by operating activities                                            |  |                           | 28,332 
|Financing Activities                                                                 |  |                           |        
|Issuance of long-term debt                                                           |  |                           | 19,818 
|Redemption of long-term debt                                                         |  |                           | (20,000
|Change in short-term debt                                                            |  |                           | (1,650 
|Dividends on common stock                                                            |  |                           | (4,975 
|                                                                                     |  |                           |        
|Net cash provided by (used in) financing activities                                  |  |                           | (6,807 
|Investing Activities                                                                 |  |                           |        
|Construction expenditures (less allowance for equity funds used during construction) |  |                           | (19,036
|                                                                                     |  |                           |        
|Net cash used in investing activities                                                |  |                           | (19,036
|Net increase in cash and temporary cash investments                                  |  |                           | 2,489  
|Cash and temporary cash investments at beginning of period                           |  |                           | 3,244  
|                                                                                     |  |                           |        
|Cash and temporary cash investments at end of period                                 |  | $                         | 5,733  

The accompanying notes as they relate to The Union Light, Heat and Power Company are an integral part of these financial statements.



## 

NOTES TO FINANCIAL STATEMENTS

Cinergy, CG&E, PSI, and ULH&P



Cinergy

Cinergy and CG&E



Cinergy and PSI





CG&E and ULH&P

Cinergy, CG&E, and PSI



Cinergy, CG&E, and PSI



Cinergy, CG&E, PSI, and ULH&P

Cinergy and PSI



Cinergy, CG&E, and ULH&P



Cinergy, CG&E, PSI, and ULH&P



Cinergy

Cinergy

Pro
forma information is presented below:

|                                          |  | Quarter Ended
September 30, 1999 |     | Nine Months Ended
September 30, 1999
|----------------------------------------- |  | -------------------------------- | --- | ------------------------------------
|
|
|
|Cinergy                                   |  | $                                | 122 |                                     
|Pro forma adjustments:                    |  |                                  |     |                                     
|Equity in earnings of Avon Energy         |  |                                  |    |                                     
|Gain on sale of investment in Avon Energy |  |                                  | (99 | )                                   
|Interest expense                          |  |                                  |    |                                     
|Income taxes                              |  |                                  | 31  |                                     
|                                          |  |                                  |     |                                     
|Pro forma result                          |  | $                                | 54  |                                     

Cinergy and PSI



Cinergy, CG&E, PSI, and ULH&P



Financial
results by business unit for the quarters ended September 30, 1999, and 1998, are as follows:

|                                   |  | 1999
|---------------------------------- |  | ----
|
|
|
|(in thousands)                     |  |     
|Operating Revenues                |  |     
|External Customers                 |  | $   
|Intersegment Revenues              |  |     
|Segment Profit (Loss) Before Taxes |  |     

|                                   |  | 1998
|---------------------------------- |  | ----
|
|
|
|(in thousands)                     |  |     
|Operating Revenues                |  |     
|External Customers                 |  | $   
|Intersegment Revenues              |  |     
|Segment Profit (Loss) Before Taxes |  |     

Financial results by business unit for the nine months ended September 30, 1999, and 1998, are as follows:

|                                   |  | 1999
|---------------------------------- |  | ----
|
|
|
|(in thousands)                     |  |     
|Operating Revenues                |  |     
|External Customers                 |  | $   
|Intersegment Revenues              |  |     
|Segment Profit (Loss) Before Taxes |  |     

|                                   |  | 1998
|---------------------------------- |  | ----
|
|
|
|(in thousands)                     |  |     
|Operating Revenues                |  |     
|External Customers                 |  | $   
|Intersegment Revenues              |  |     
|Segment Profit (Loss) Before Taxes |  |     

Total segment assets at September 30, 1999, and December 31, 1998, are as follows:

|                                           |  | Cinergy Business Units |           |  |   |           |  |  
|------------------------------------------ |  | ---------------------- | --------- |  | - | --------- |  | -
|
|
|(in thousands)                             |  |                        |           |  |   |           |  |  
|Total Segment Assets at September 30, 1999 |  | $                      | 5,067,555 |  | $ | 4,053,292 |  | $
|Total Segment Assets at December 31, 1998  |  | $                      | 4,863,014 |  | $ | 3,987,055 |  | $

---



Cinergy, CG&E, and PSI



Cinergy and CG&E



## 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cinergy, CG&E, PSI, and ULH&P

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATIONMatters discussed in this section reflect and elucidate
Cinergy's corporate vision of the future and, as a part of that, outline goals and aspirations, as well as specific projections. These goals and projections are considered forward-looking statements
and are based on management's beliefs, as well as certain assumptions made by management. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially
from the forward-looking statements. In addition to any assumptions and other factors that are referred to specifically in connection with these statements, other factors that could cause actual
results to differ materially from those indicated in any forward-looking statements include, among others: factors generally affecting operations, such as unusual weather conditions, unscheduled
generation outages; unusual maintenance or repairs, unanticipated changes in fuel costs, environmental incidents, or system constraints; legislative and regulatory initiatives regarding deregulation
and restructuring of the industry; increased competition in the electric and gas utility environment; challenges related to Year 2000 readiness; regulatory factors; changes in accounting principles or
policies; adverse political, legal, or economic conditions; changing market conditions; success of efforts to invest in and develop new opportunities in non-traditional business;
availability or cost of capital; employee workforce factors; legal and regulatory delays and other obstacles associated with mergers, acquisitions, and investments in joint ventures; costs and effects
of legal and administrative proceedings; changes in legislative requirements; and other risks. The SEC's rules do not require forward-looking statements to be revised or updated, and Cinergy does not
intend to do so.

FINANCIAL CONDITION

Recent Developments

Cinergy

AcquisitionsDuring the first nine months of 1999, Cinergy invested an additional
$235 million in domestic and international unconsolidated subsidiaries.

On
September 30, 1999, Cinergy (through a CC&T subsidiary) formed a partnership with Duke Energy North America LLC. This partnership will jointly own three wholesale generating facilities with
total capacity of approximately 1,400 megawatts. These facilities will be natural gas-fired peaking stations with commercial operation anticipated for the summer of 2000.

DispositionsSee Note 14 of the "Notes to Financial Statements" in "Part I.
Financial Information."

Power Supply BusinessThe Company continues to consider a number of strategies to address the
electricity market volatility during the industry restructuring. In November 1999, the Company's board
of directors unanimously determined to remain in the supply segment of the electric industry as it moves to a competitive environment.

PSI

Securities Ratings ChangesIn October, Fitch IBCA changed their ratings for the following PSI
securities: Secured Debt to A- from A, Senior Unsecured Debt to BBB+ from A-, Junior Unsecured Debt to BBB from BBB+, and Preferred Stock to BBB from BBB+.

Competitive Pressures

Cinergy, CG&E, PSI, and ULH&P

FederalThe Clinton Administration has introduced a billthe Comprehensive
Electricity Competition Actthat would grant all retail customers of electricity the right to choose their electricity supplier beginning January 1, 2003. The legislation would
allow a state regulatory authority to opt out of the retail competition system if the authority conducted a public proceeding and determined that the electric customers of that state would be better
served by a monopoly system or an alternative retail competition plan. A "compromise bipartisan" deregulation bill introduced on May 26, 1999 by Representatives Largent (R-Ok.) and
Markey (D-Mass.) included similar mandate and opt out provisions with an effective date of January 1, 2002.

Both
the House and the Senate continue to hold hearings on electric restructuring to see if consensus legislation can be developed, but it is uncertain whether federal retail customer
choice legislation will be passed by this Congress.

OhioSee Note 19 of the "Notes to Financial Statements" in "Part I. Financial Information."

IndianaAs discussed in the 1998 Form 10-K, electric restructuring legislation supported by a group
of large industrial customers was introduced into the Indiana legislature in January 1999. This legislation did not pass in the 1999 session of the Indiana General Assembly, which ended in
April 1999. Cinergy anticipates that electric restructuring legislation will again be introduced in the "short session" in Indiana in 2000.

KentuckyThroughout 1999, a task force convened by the Kentucky legislature has been meeting to study the issue of
electric restructuring. The legislature next meets in January 2000, and it is not certain whether an electric restructuring bill will be introduced at that time.

Regulatory Matters

Cinergy and PSI

Coal Gasification Contract Buyout CostsSee Note 15 of the "Notes to Financial
Statements" in "Part I. Financial Information."

Cinergy and CG&E

PUCO OrderCG&E's Gas Rate OrderAs discussed in the 1998
Form 10-K, in April 1997, CG&E filed a notice of appeal with the Supreme Court of Ohio challenging the disallowance of information systems costs and imputation of certain
revenues by the PUCO when it approved an overall average increase in CG&E's gas revenues in December 1996. On July 7, 1999, the Supreme Court issued a ruling on the appeal supporting the
PUCO's decision to exclude a portion of the development costs of the information systems from the rate based calculation. However, the Supreme Court ruled in favor of CG&E on the imputed revenue
appeal, deciding the PUCO acted unlawfully in imputing certain revenues. The ruling resulted in a revision in rates generating a $3 million increase in annual revenues for CG&E, which
represents less than a one percentage increase in retail rates. The recovery of these costs began in the third quarter of 1999.

Other Matters

Midwest ISOIn July of 1999, the Midwest ISO named Matthew Cordaro as the first President and
Chief Executive Officer of the organization. In addition to Dr. Cordaro, the organization recently added Jim Torgeson as its Chief Financial Officer. The Midwest ISO is expected to begin
operations in June of 2001 and recently filed with the Federal Energy Regulatory Commission an appendix which once approved, would allow independent transmission companies to exist under the Midwest
ISO.

Two
additional companies have agreed to join the Midwest ISO as transmission ownersNorthern States Power and Alliant Energy. The addition of these two companies expands
the total of transmission owners participating in the Midwest ISO to fourteen. This expansion increases the coverage of the Midwest ISO to include over 69,000 miles of transmission lines extending
into portions of 16 states, and includes approximately $8.5 billion in transmission investment forming the largest ISO in the country.

Repeal of the PUHCAAs discussed in the 1998 Form 10-K, in
February 1999, S. 313, a bill to repeal significant portions of PUHCA, was introduced in the Senate. The bill is currently awaiting action by the full Senate. In June 1999, H.R. 2363, a
bill to repeal PUHCA, was introduced in the House as a companion bill to S. 313. H.R. 2363 is currently awaiting action by the House Commerce Committee.

While
it is uncertain whether these bills will be enacted into law, Cinergy continues to support the repeal of this act either as part of comprehensive reform of the electric industry
or as separate legislation.

Environmental Issues

Cinergy, CG&E, and PSI

Ozone Transport RulemakingAs discussed in the 1998 Form 10-K, in
October 1998, the EPA finalized its ozone transport rule, also known as the NOX SIP Call. It applies to 22 states in the eastern half of the U.S., including the three states in
which Cinergy's electric utilities operate, and also proposes a model nitrogen oxide (NOX) emission allowance trading program. The trading program would allow Cinergy to buy
NOX emission allowances from, or sell NOX emission allowances to, other companies as necessary. The rule recommends that states reduce NOX emissions from primarily
industrial and utility sources to a certain level by May 2003. The EPA gave the affected states until September 30, 1999, to incorporate
NOX reductions with a trading program into their SIPs (defined as a state's plan for implementing emissions reductions to address air quality concerns). If the states fail to revise their
SIPs accordingly, the EPA has proposed to implement a federal plan to accomplish NOX reductions by May 2003. The EPA must approve all SIPs.

Ohio,
Indiana, a number of other states, and various industry groups (some of which Cinergy is a member) filed legal challenges to the NOX SIP Call in late 1998. Ohio and
Indiana have also preliminarily indicated that they will seek fewer NOX reductions from the utility sector than the EPA has recommended. On May 25, 1999, the Court of Appeals
granted the petitioners' request for a deferral of the rule and indefinitely suspended the September 30 filing deadline, pending further review by the Court of Appeals. The Court of Appeals
heard arguments on the case on November 9, 1999 and is expected to make a decision in early 2000.

In
February 1998, the northeast states filed petitions seeking the EPA's assistance in reducing ozone in the eastern U.S. under Section 126 of the CAA.
Section 126 petitions allow a state to claim that another state is contributing to its air quality problem and request that the EPA require that upwind state to reduce its emissions. On
April 30, 1999, the EPA found that the Midwest stationary sources (including all of Cinergy's facilities) named in the petitions are significantly contributing to ozone problems in the
northeast for both the one- and eight-hour ozone standards (health standards for ozone levels for a one- and eight-hour time period). The EPA has stated
that the Section 126 petitions and the NOX SIP Call requirements should be coordinated. As with the NOX SIP Call, various industry groups filed legal challenges to the
Section 126 petition findings.

Based
on a court decision regarding ambient (outside) air standards (discussed below) and the May 25 court decision (previously discussed), in mid-June the EPA
(1) requested and was granted a deferral of the Section 126 rules, and (2) modified and re-proposed the Section 126 petitions

rulemaking to only address the one-hour ozone standard. The petitions are limited to 12 states instead of the original 22 states. Indiana, Kentucky, and Ohio must still meet the same
NOX emissions requirements. The EPA has scheduled a new rulemaking to be complete by November 1999.

Ambient Air Standards and Regional HazeAs discussed in the 1998 Form 10-K,
during 1997, the EPA revised the National Ambient Air Quality Standards for ozone and fine particulate matter and proposed rules for regional haze. Fine particulate matter refers to very small solid
or liquid particles in the air. Regional haze involves fine particulate matter that impairs visibility in national parks. It was anticipated that utility NOX reductions called for in the
EPA's final NOX SIP Call would (1) fully address the one-hour ozone standard and the new eight-hour ozone standard, and (2) partially address fine
particulate matter and regional haze concerns. With the recent challenges to the NOX SIP Call and the eight-hour ozone standard (discussed below), it is unclear to what extent
additional NOX reductions would be required of utilities.

On
May 14, 1999, the Court of Appeals ruled that both the new eight-hour ozone standard and the fine particulate matter standard were found questionable and were
determined to be unenforceable by the EPA. In June, the EPA appealed the decision. On October 29, 1999, the full Court of Appeals rejected the EPA's request for reconsideration. It is likely
that the EPA will appeal to the U.S. Supreme Court. Cinergy currently cannot determine the outcome of the appeals process and the effects on future emissions reduction requirements.

The
EPA published the final regional haze rule on July 1, 1999. This rule establishes planning and emission reduction timelines for states to use to improve visibility in
national parks throughout the U.S. The ultimate effect of the new regional haze rule could be requirements for (1) newer and cleaner
technologies and additional controls on conventional particulates, and (2) reductions in SO2 and NOX emissions from utility sources. If more utility emissions reductions
are required, the compliance cost could be significant. Cinergy currently cannot determine the outcome or effects of the states' determination.

Air ToxicsAs discussed in the 1998 Form 10-K, in November 1998, the
EPA finalized its ICR. The ICR requires all generating units to provide detailed information about coal use and mercury content. The EPA has selected about 100 generating units for
one-time stack sampling, including Cinergy's Gibson Unit No. 3 and the Wabash River Repowering Project. The EPA is planning to make its regulatory determination on the need for
additional regulation by the fourth quarter of 2000. If more air toxics regulations are issued, the compliance cost could be significant. Cinergy currently cannot predict the outcome or effects of the
EPA's determination.

NSRThe CAA's NSR provisions require that a company obtain a pre-construction
permit if it plans to build a new stationary source of pollution or make a major modification to an existing facility. In July 1998, the EPA requested comments on proposed revisions to the NSR
rules that would change NSR applicability by eliminating exemptions contained in the current regulation. Cinergy believes that if these changes are finalized, it will be significantly harder to
maintain its facilities without triggering the NSR permitting requirements.

See
Note 18 of the "Notes to Financial Statements" in "Part I. Financial Information" for a discussion of the lawsuit filed by the EPA as it relates to NSR issues.

On
September 15, 1999, the Attorney General of the State of New York issued a letter notifying Cinergy and CG&E of its intent to sue under the citizens suit provisions of the
CAA. On November 3, 1999, the Attorney General of the State of Connecticut issued a letter notifying Cinergy and CG&E of its intent to sue under the citizens suit provisions of the CAA. New
York and Connecticut allege that Cinergy and CG&E violated the CAA by constructing and continuing to operate a major modification of Beckjord without obtaining the required NSR
pre-construction permits. Under the CAA, New York

and Connecticut may not file a lawsuit against Cinergy or CG&E until at least sixty days after providing notice of the intent to sue.

MGP SitesSee Note 11 of the "Notes to Financial Statements" in "Part I.
Financial Information."

Accounting Issues

Cinergy, CG&E, PSI, and ULH&P

New Accounting StandardsSee Note 12 of the "Notes to Financial Statements" in
"Part I. Financial Information."

Market Risk Sensitive Instruments and Positions

Cinergy, CG&E, and PSI

Energy Commodities SensitivityThe Company markets and trades electricity, natural gas, and
other energy-related products. The Company utilizes over-the-counter forward and option contracts for the purchase and sale of electricity and also trades exchange-traded
futures contracts. See Notes 9 and 10 of the "Notes to Financial Statements" in "Part I. Financial Information" for the Company's accounting policies for certain derivative instruments. The
Company's market risks have not changed materially from the market risks reported in the 1998 Form 10-K.

Cinergy

Exchange Rate SensitivityThe Company utilizes foreign exchange forward contracts and currency
swaps to hedge certain of its net investments in foreign operations. As part of the sale of the investment in Avon Energy, Cinergy eliminated the hedges related to the Midlands investment in
July 1999. Additionally, the Company eliminated the forward exchange contracts related to its investment in the Czech Republic. See Notes 9 and 10 of the "Notes to Financial Statements" in
"Part I. Financial Information" for the Company's accounting policies for certain derivative instruments.

Cinergy, CG&E, PSI, and ULH&P

Interest Rate SensitivityThe Company's net exposure to changes in interest rates primarily
consists of debt instruments with floating interest rates that are benchmarked to various market indices. To manage the Company's exposure to fluctuations in interest rates and to lower funding costs,
the Company evaluates the use of, and has entered into, interest rate swaps. See Notes 9 and 10 of the "Notes to Financial Statements" in "Part I. Financial Information" for the Company's
accounting policies for certain derivative instruments. The Company's market risks have not changed materially from the market risks reported in the 1998 Form 10-K.

CAPITAL RESOURCES AND REQUIREMENTS

Cinergy, CG&E, PSI, and ULH&P

Long-term DebtFor information regarding recent issuances and redemptions of
long-term debt securities, see Notes 2, 3, 4, 5, 6, 7, and 8 of the "Notes to Financial Statements" in "Part I. Financial Information."

As
of September 30, 1999, CG&E, PSI, and ULH&P have remaining state regulatory authority for long-term debt issuance of $200 million, $30 million, and
$30 million, respectively.

Cinergy, CG&E, PSI, and ULH&P

Short-term DebtObligations representing notes payable and other
short-term obligations (excluding notes payable to affiliated companies) were as follows:

Cinergy

|                         |  | September 30, 1999
|------------------------ |  | ------------------
|
|
|Cinergy                  |  |                   
|Committed lines          |  |                   
|Revolving lines          |  | $                 
|Uncommitted lines        |  |                   
|Utility Subsidiaries     |  |                   
|Committed lines          |  |                   
|Uncommitted lines        |  |                   
|Pollution control notes  |  |                   
|Non-utility subsidiaries |  |                   
|Revolving lines          |  |                   
|Short-term debt          |  |                   
|                         |  |                   
|Total                    |  | $                 

CG&E

|                        |  | September 30, 1999
|----------------------- |  | ------------------
|
|
|Committed lines         |  | $                 
|Uncommitted lines       |  |                   
|Pollution control notes |  |                   
|                        |  |                   
|Total                   |  | $                 

PSI

|                        |  | September 30, 1999
|----------------------- |  | ------------------
|
|
|Committed lines         |  | $                 
|Uncommitted lines       |  |                   
|Pollution control notes |  |                   
|                        |  |                   
|Total                   |  | $                 

Cinergy, CG&E, and PSI

Cinergy's committed lines are comprised of two revolving lines. The established revolving lines also provide credit support for Cinergy's commercial paper
program, which is limited to a maximum

principal amount of $400 million. Cinergy did not issue commercial paper during the third quarter of 1999.

The
established committed lines for CG&E and PSI also provide credit support for certain uncommitted lines, which are limited to a maximum principal amount of $75 million each.
At September 30, 1999, $12 million was designated as credit support for PSI's uncommitted lines. CG&E
and PSI also have the capacity to issue commercial paper that must be supported by committed lines of the respective company. Neither CG&E nor PSI issued commercial paper during the third quarter of
1999.

Both
CG&E and PSI have issued variable rate pollution control notes. Holders of these pollution control notes have the right to put their notes to the issuing company for redemption
on any business day. Accordingly, these issuances are reflected in the Consolidated Balance Sheets as "Notes payable and other short-term obligations."

Cinergy

Global Resources established a $100 million revolving credit agreement in 1998, which expired August 29, 1999, and was not extended or replaced.

During
mid-July, Cinergy's acquisition line was paid off due to the sale of Cinergy's 50% ownership interest in Avon Energy. (See Note 14 of the "Notes to Financial
Statements" in "Part I. Financial Information.")

Cinergy, CG&E, PSI, and ULH&P

Year 2000The Year 2000 issue generally exists because many computer systems and applications,
including those embedded in equipment and facilities, use two-digit rather than four-digit date fields to designate an applicable year. As a result, the systems and
applications may not properly recognize dates including and beyond the year 2000 or accurately process data in which such dates are included, potentially causing data miscalculations and inaccuracies
or operational malfunctions and failures, which could materially affect a business's financial condition, results of operations, and cash flows.

Cinergy
has established a centrally managed, company-wide initiative, known as the Cinergy Year 2000 Readiness Program, to identify, evaluate, and address Year 2000
issues. The Cinergy Year 2000 Readiness Program, which began in the fourth quarter of 1996, is generally focused on three elements that are integral to this initiative: (1) business continuity,
(2) risk management, and (3) regulatory compliance. Business continuity includes providing reliable electric and gas supply and service in a safe and cost-effective manner.
This element encompasses mission-critical generation, transmission, and distribution systems and related infrastructure, as well as operational and financial IT systems and applications,
end-user computing resources, and building systems (such as security, elevator, and heating and cooling systems). Risk management includes a review of the Year 2000 readiness efforts of
Cinergy's critical suppliers, key customers and other principal business partners, and, as appropriate, the development of joint business support, contingency plans, and the inclusion of Year 2000
concerns as a regular part of the due diligence process in any new business venture. Regulatory compliance includes communications with regulatory agencies, other utilities, and various industry
groups. While this initiative is broad in scope, it has been structured to identify and prioritize efforts for mission-critical electric and gas systems and services and key business partners.

Under
the Cinergy Year 2000 Readiness Program, Cinergy achieved a target date of June 30, 1999, for the remediation and testing of its mission-critical generation,
transmission, and distribution systems, components, and applications (gas and electric). An innovative remediation and testing effort, which Cinergy also completed on June 30, 1999, involved
resetting the clocks on all of the generation units it operates in Ohio, Indiana, and Kentucky so that they are now operating as if it were already January 1,

2000. Cinergy's experience has been that those units have continued to operate without any material adverse result relating to a Year 2000 issue. Cinergy will continue to monitor its mission-critical
systems, components and applications for the remainder of the year to maintain their Year 2000 readiness status.

Cinergy
has also reviewed its existing contingency and business continuity plans and modified them in light of the Year 2000 issue. Contingency planning to maintain and restore
service in the event of natural and other disasters (including software- and hardware-related problems) has been part of Cinergy's standard operation for many years, and Cinergy is working to leverage
this experience in the review of existing plans to address Year 2000-related challenges. These reviews have assessed the potential for business disruption in various scenarios, including
the most reasonably likely worst-case scenario, and to provide for key operational back up, recovery, and restoration alternatives.

Cinergy
cannot guarantee that third parties on whom it depends for essential goods and services (those where the interruption of the supply of such goods and services could lead to
issues involving the safety of employees, customers, or the public; the continued reliable delivery of gas and/or electricity; and the ability to comply with applicable laws or regulations) will
convert their mission-critical systems, components, and applications in a timely manner. Failure or delay by any of these third parties could significantly disrupt business. However, to address this
issue, Cinergy has established a supplier compliance program, and is working with its critical suppliers in an effort to minimize such risks.

In
addition, Cinergy is coordinating its findings and other issues with other utilities and various industry groups via the Electric Power Research Institute Year 2000 Embedded
Systems Project and the Year 2000 Readiness Assessment Program of the NERC, acting at the request of the DOE. The DOE has asked NERC to report on the integrity of the transmission system for North
America and to coordinate and assess the preparation of the electric systems in North America for the Year 2000. NERC submitted its initial quarterly status report and coordination plan to the DOE in
September 1998, and a second quarterly status report for the fourth quarter of 1998 was submitted on January 11, 1999. A third quarterly status report for the first quarter of 1999 was
submitted on April 30, 1999. A fourth and final quarterly status report for the second quarter of 1999 was submitted to the DOE by NERC on August 3, 1999, in which Cinergy was listed as
a "Y2k Ready" organization.

Cinergy
participated in the NERC-sponsored national preparedness drill on September 8 and 9, 1999. The goal of this drill was to rehearse, under simulated
conditions, key portions of our administrative, operating, communications, and contingency plans for the transition into the Year 2000.

Three
major objectives were identified:



Cinergy
was successful in meeting these objectives.

Cinergy
currently estimates that the total cost for the inventory, assessment, remediation, testing, and upgrading of its systems as a result of the Year 2000 effort is approximately
$13 million. Approximately $12.5 million in expenses have been incurred through September 30, 1999, for such things as external
labor, for hardware and software upgrades, and for Cinergy employees who are


dedicated full-time to the Cinergy Year 2000 Readiness Program. The timing of these expenses may vary and is not necessarily indicative of readiness efforts or progress to date. Cinergy
anticipates that a portion of its Year 2000 expenses will not be incremental costs, but rather, will represent the redeployment of existing IT resources. Since its formation, Cinergy has incurred, and
will continue to incur, significant capital improvement costs related to planned system upgrades or replacements required in the normal course of business. These costs have not been accelerated as a
result of the Year 2000 issue.

The
above information is based on Cinergy's current best estimates, which were derived using numerous assumptions of future events, including the availability and future costs of
certain technological and other resources, third-party modification actions, and other factors. Given the complexity of these issues and possible unidentified risks, actual results may vary materially
from those anticipated and discussed above. Specific factors that might cause such differences include, among others; the ability to locate and correct all affected computer code, the timing and
success of remedial efforts of third-party suppliers, and similar uncertainties.

The
above information is a Year 2000 Readiness Disclosure pursuant to the Federal Year 2000 Information and Readiness Disclosure Act.

Cinergy

Other CommitmentsAt September 30, 1999, Cinergy had issued $337 million in
guarantees primarily related to the energy marketing and trading activities of its subsidiaries and affiliates. In addition, Cinergy had guaranteed $308 million of the debt securities of its
subsidiaries and affiliates.

## 

RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1999

The format of the following Results of Operations discussions has been changed from the format of prior periods. Unlike prior reports, the Results of
Operations discussions for Cinergy, CG&E, and PSI are combined within this section. The Results of Operations discussion for ULH&P is presented only for the nine months ended September 30,
1999, in accordance with General Instruction H(2)(a).

Key Results Indicators

Cinergy, CG&E, and PSI

Electric and gas margins and net income for Cinergy, CG&E, and PSI for the quarters ended September 30, 1999, and 1998 are as follows:

|                      |  | Cinergy |         | CG&E |   | PSI    
|--------------------- |  | ------- | ------- | ---- | - | -------
|
|
|Electric gross margin |  | $       | 505,486 |      | $ | 531,458
|Gas gross margin      |  |         | 26,578  |      |   | 35,685 
|Net income            |  |         | 121,563 |      |   | 109,431

Cinergy's
diluted EPS increased to $0.76 for the third quarter of 1999, up more than 10 percent over results of $0.69 per share in the third quarter of 1998. The contribution
to earnings of the Company's
international operations increased $0.36 per share in the third quarter compared with the same period a year ago, primarily the result of the sale of the Company's share of Midlands, as discussed in
Note 14.

Earnings
from regulated operations decreased $0.27 per share in the third quarter of 1999 compared with a year earlier. The decrease is primarily due to the results of the supply
business and more normal operations and maintenance expenses following significant cost reductions in 1998, offset somewhat by growth in the service territory. Third quarter results for the supply
business were down $0.36 per share from the same period in 1998. This is primarily attributable to the extreme weather conditions experienced in July 1999. Reference is made to the
Form 8-K filed August 10, 1999, which describes the earnings impact of extreme weather experienced in July 1999.

Cinergy's
electric margins were positively impacted by $12 million or $0.07 EPS (EPS is net of fuel and income taxes) during the quarter, as compared to 1998, as a result of a
change in estimate of PSI's utility services delivered but unbilled at month end.

The
explanations below follow the line items on the Statements of Income for Cinergy, CG&E, and PSI, which begin on page 9. However, only the line items that varied significantly from
prior periods are discussed in these sections.

Operating Revenues

Cinergy, CG&E and PSI

Electric Operating RevenuesThe components of electric operating revenues for Cinergy, CG&E,
and PSI for the quarters ended September 30, 1999 and 1998 were as follows:

|          |  | Cinergy(1) |       | CG&E |   | PSI   | 
|--------- |  | ---------- | ----- | ---- | - | ----- | 
|
|
|Retail    |  | $          | 799   |      | $ | 713   | 
|Wholesale |  |            | 564   |      |   | 873   | 
|Other     |  |            | 34    |      |   | 16    | 
|          |  |            |       |      |   |       | 
|Total     |  | $          | 1,397 |      | $ | 1,602 | 



The
decrease in electric operating revenues for Cinergy, CG&E and PSI for the quarter ended September 30, 1999, compared to 1998, was primarily caused by decreased volumes on
non-firm power wholesale transactions related to energy marketing and trading operations. Partially offsetting the decline was an increase in the average price per KWh for
non-firm power customers, higher firm power KWh sales, and higher retail KWh sales resulting from growth in the average number of residential and commercial customers.

Cinergy's
electric margins were positively impacted by $12 million or $0.07 EPS (EPS is net of fuel and income taxes) during the quarter, as compared to 1998, as a result of a
change in estimate of PSI's utility services delivered but unbilled at month end. Also contributing to the increase for Cinergy was increased international operations.

Cinergy and CG&E

Gas Operating RevenuesGas operating revenues for Cinergy for the quarters ended
September 30, 1999, and 1998 are as follows:

|               |  | Cinergy(1) |    
|-------------- |  | ---------- | ---
|
|
|
|Wholesale      |  | $          | 327
|Retail         |  |            | 41 
|Transportation |  |            | 8  
|Other          |  |            |   
|               |  |            |    
|Total          |  | $          | 376

---

The
increase in gas operating revenues for Cinergy for the quarter ended September 30, 1999, when compared to 1998, was primarily due to an increase in the wholesale gas
operating revenues of CM&T resulting from an increase in the average price received per mcf sold.

Partially
offsetting the increase for Cinergy was the decrease in CG&E's gas operating revenues for the quarter ended September 30, 1999, when compared to 1998. This decrease
was primarily due to an adjustment to estimated line losses used in the calculation of unbilled revenues. Also contributing to the decline in revenues for CG&E was a decrease in the number of retail
customers resulting from the November 1997 implementation of the customer choice program in Ohio. CG&E accounts for the majority of Cinergy's retail, transportation, and other gas operating
revenues.

Cinergy

Other RevenuesThe decrease in other revenues for Cinergy for the quarter ended
September 30, 1999, when compared to 1998, was primarily due to development fees associated with new initiatives by certain of Cinergy's non-regulated entities that were collected
in 1998.

Cinergy, CG&E, and PSI

Operating Expenses

Operating expenses for Cinergy, CG&E, and PSI for the quarters ended September 30, 1999 and 1998 were as follows:

|                              |  | Cinergy(1) |       | CG&E |   | PSI   | 
|----------------------------- |  | ---------- | ----- | ---- | - | ----- | 
|
|
|Fuel                          |  | $          | 200   |      | $ | 206   | 
|Purchased and exchanged power |  |            | 691   |      |   | 865   | 
|Gas purchased                 |  |            | 349   |      |   | 324   | 
|Other operation               |  |            | 207   |      |   | 176   | 
|Maintenance                   |  |            | 39    |      |   | 50    | 
|Depreciation and amortization |  |            | 89    |      |   | 82    | 
|Taxes other than income taxes |  |            | 70    |      |   | 69    | 
|                              |  |            |       |      |   |       | 
|Total                         |  | $          | 1,645 |      | $ | 1,772 | 

---

FuelThe following table details the changes in fuel expense for the quarters ended
September 30, 1999 and 1998:

|                                       |  | Cinergy(1) |     | CG&E |   | PSI |  
|-------------------------------------- |  | ---------- | --- | ---- | - | --- | -
|
|Fuel expense-September 30, 1998        |  | $          | 206 |      | $ | 93  |  
|Increase (Decrease) due to changes in: |  |            |     |      |   |     |  
|Price of fuel                          |  |            | 7   |      |   | 5   |  
|Deferred fuel cost                     |  |            | (28 | )    |   | (9  | )
|KWh generation                         |  |            | 6   |      |   | 2   |  
|Other                                  |  |            | 9   |      |   |    |  
|                                       |  |            |     |      |   |     |  
|Fuel expense September 30, 1999        |  | $          | 200 |      | $ | 91  |  

---

Purchased and Exchanged PowerThe decrease in purchased and exchanged power expense for
Cinergy, CG&E and PSI for the quarter ended September 30, 1999, compared to 1998, was primarily because of decreased purchases of non-firm power wholesale transactions as a result
of a decline in sales volume in the energy marketing and trading operations. This decrease was offset partially by the extreme weather conditions experienced in July 1999. Reference is made to
the Form 8-K filed on August 10, 1999, which describes the earnings impact of extreme weather experienced in July 1999.

Gas PurchasedThe increase in gas purchased expense for Cinergy for the quarter ended
September 30, 1999, as compared to 1998, was primarily because of an increase in the gas purchased expenses of CM&T. Partially offsetting the increase for Cinergy was a decline in purchased gas
expense for CG&E, reflecting a decrease in the volume of gas purchased due to the loss of retail customers and a lower average cost per mcf of gas purchased.

Other OperationThe increase in other operation expense for CG&E for the quarter ended
September 30, 1999, when compared to 1998, was primarily due to an increase in computer hardware leasing expense and a bad debt write-off related to the energy marketing and trading
business.

The
increase in other operation expense for PSI for the quarter ended September 30, 1999, when compared to 1998, was primarily due to an increase in the variable portion of
base monthly fees related to the coal gasification services contract with Dynegy.

The
increase in other operation expense for Cinergy for the quarter ended September 30, 1999, when compared to 1998, was primarily due to the reasons outlined in the CG&E and
PSI discussions above.

MaintenanceThe decrease in maintenance expense for Cinergy and PSI for the quarter ended
September 30, 1999, in comparison to 1998, was primarily due to a reduction in maintenance costs associated with generating station repairs.

Depreciation and AmortizationThe increase in depreciation and amortization expense for Cinergy
and CG&E for the quarter ended September 30, 1999, when compared to 1998, was primarily due to additions to depreciable plant. Also contributing to the change for Cinergy and CG&E was an
increased amortization of phase-in deferral expense, which reflects the PUCO-ordered phase-in plan for Zimmer.

Other Income and Deductions

Equity in Earnings of Unconsolidated SubsidiariesThe decrease in equity in earnings of
unconsolidated subsidiaries for Cinergy for the quarter ended September 30, 1999, was primarily driven by the July 1999 sale of Cinergy's 50% interest in Midlands. (See Note 14 of
the "Notes to Financial Statements" in "Part I. Financial Information" for a discussion of the sale of Cinergy's 50% investment in Avon Energy.)

MiscellaneousNetThe increase in miscellaneousnet for Cinergy of
$9 million for the quarter ended September 30, 1999, was primarily the result of transactions related to the sale of Midlands.

Miscellaneousnet
decreased for CG&E ($1 million) and PSI ($2 million) for the quarter ended September 30, 1999 compared to 1998. The CG&E decrease
was primarily the result of a decrease in interest income from a decrease in the balance of short-term loans to affiliated companies through Cinergy's money pool arrangement. The PSI
decrease is primarily the result of a decrease in interest income and adjustments recorded related to certain transactions.

InterestInterest expense decreased for Cinergy ($5 million) for the quarter ended
September 30, 1999. This decrease was primarily the result of a decrease in interest on short-term obligations resulting from a reduction in average short-term
borrowings and lower short-term interest rates. The decrease was partially offset by an increase in interest expense on long-term debt resulting from an increase in the amount
of long-term debt outstanding.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999

The format of the following Results of Operations discussions has been changed from the format of prior periods. Unlike prior reports, the Results of
Operations discussions for Cinergy, CG&E, and PSI are combined within this section. The Results of Operations discussion for ULH&P is presented only for the nine months ended September 30,
1999, in accordance with General Instructions H(2)(a).

Key Results Indicators

Cinergy, CG&E, and PSI

Electric and gas margins and net income for Cinergy, CG&E, and PSI for the nine months ended September 30, 1999, and 1998 were as follows:

|                      |  | Cinergy |           | CG&E |   | PSI      
|--------------------- |  | ------- | --------- | ---- | - | ---------
|
|
|Electric gross margin |  | $       | 1,531,876 |      | $ | 1,464,233
|Gas gross margin      |  |         | 148,638   |      |   | 142,435  
|Net income            |  |         | 307,866   |      |   | 189,569  

Cinergy's
diluted EPS increased to $1.93 for the nine months ended September 30, 1999, compared to $1.20 per share for the comparable period in 1998. During this same time
period, the contribution to earnings of the company's international operations was $0.43 per share. This was primarily the result of the sale of the company's share of Midlands. Earnings from
regulated operations, including the supply business, increased $0.32 per share during the nine months ended September 30, 1999. This increase includes the impact of the extreme weather
conditions experienced in July 1999. Reference is made to the Form 8-K filed on August 10, 1999, which describes the earnings impact of extreme weather experienced in
July 1999.

Cinergy's
electric margins were positively impacted by $12 million or $0.07 EPS (EPS is net of fuel and income taxes) during the quarter, as compared to 1998, as a result of a
change in estimate of PSI's utility services delivered but unbilled at month end.

The
explanations below follow the line items on the Statements of Income for Cinergy, CG&E and PSI, which begin on page 9. However, only the line items that varied significantly from
prior periods are discussed in these sections.

Operating Revenues

Cinergy, CG&E and PSI

Electric Operating RevenuesElectric operating revenues for Cinergy, CG&E, and PSI for the nine
months ended September 30, 1999 and 1998 were as follows:

|          |  | Cinergy(1) |       | CG&E |   | PSI   | 
|--------- |  | ---------- | ----- | ---- | - | ----- | 
|
|
|Retail    |  | $          | 2,098 |      | $ | 1,955 | 
|Wholesale |  |            | 1,115 |      |   | 1,790 | 
|Other     |  |            | 94    |      |   | 38    | 
|          |  |            |       |      |   |       | 
|Total     |  | $          | 3,307 |      | $ | 3,783 | 

---

The
decrease in electric operating revenues for Cinergy, CG&E, and PSI for the nine months ended September 30, 1999, compared to 1998, was primarily caused by decreased volumes
on non-firm power wholesale transactions related to energy marketing and trading operations. Partially offsetting the decline was an increase in the average price per KWh for
non-firm power customers, higher firm power KWh sales, and higher retail KWh sales resulting from growth in the average number of residential and commercial customers.

Cinergy's
electric margins were positively impacted by $12 million or $0.07 EPS (EPS is net of fuel and income taxes) for the nine months ended September 30, 1999, as
compared to 1998, as a result of a change in estimate of PSI's utility services delivered but unbilled at month end. Also contributing to the increase for Cinergy was increased international
operations.

Cinergy and CG&E

Gas Operating RevenuesGas operating revenues for Cinergy and CG&E for the nine months ended
September 30, 1999, and 1998 were as follows:

|               |  | Cinergy(1) |      
|-------------- |  | ---------- | -----
|
|
|
|Wholesale      |  | $          | 837  
|Retail         |  |            | 248  
|Transportation |  |            | 38   
|Other          |  |            | 3    
|               |  |            |      
|Total          |  | $          | 1,126

---

The
increase in gas operating revenues for Cinergy for the nine months ended September 30, 1999, when compared to 1998, was primarily due to the gas operating revenues of CM&T,
which was acquired in June 1998.

Partially
offsetting the increase for Cinergy was the decrease in CG&E's gas operating revenues for the nine months ended September 30, 1999, when compared to 1998. This
decrease was partially due to an adjustment to estimated line losses used in the calculation of unbilled revenues. Also contributing to the decrease in CG&E's gas operating revenues was a lower
average cost per mcf of gas purchased which was passed on to end users, a decrease in the number of retail customers resulting from the November 1997 implementation of the customer choice
program in Ohio, and a decrease in transportation mcf volumes resulting from the loss of a large industrial customer during late 1998. CG&E accounts for the majority of Cinergy's retail,
transportation, and other gas operating revenues.

Cinergy

Other RevenuesThe increase in other revenues for the nine months ended September 30,
1999, when compared to 1998, for Cinergy was primarily the result of increases in sales and new initiatives by certain of Cinergy's non-regulated entities.

Cinergy, CG&E, and PSI

Operating Expenses

Operating expenses for Cinergy, CG&E, and PSI for the nine months ended September 30, 1999 and 1998 were as follows:

|                              |  | Cinergy(1) |       | CG&E |   | PSI   | 
|----------------------------- |  | ---------- | ----- | ---- | - | ----- | 
|
|
|Fuel                          |  | $          | 584   |      | $ | 542   | 
|Purchased and exchanged power |  |            | 1,192 |      |   | 1,777 | 
|Gas purchased                 |  |            | 977   |      |   | 544   | 
|Other operation               |  |            | 573   |      |   | 602   | 
|Maintenance                   |  |            | 153   |      |   | 145   | 
|Depreciation and amortization |  |            | 263   |      |   | 242   | 
|Taxes other than income taxes |  |            | 209   |      |   | 208   | 
|                              |  |            |       |      |   |       | 
|Total                         |  | $          | 3,951 |      | $ | 4,060 | 

---

FuelThe following table details the changes in fuel expense for the nine months ended
September 30, 1999 and 1998:

|                                       |  | Cinergy(1) |     | CG&E |   | PSI |  
|-------------------------------------- |  | ---------- | --- | ---- | - | --- | -
|
|Fuel expenseSeptember 30, 1998        |  | $          | 542 |      | $ | 258 |  
|Increase (Decrease) due to changes in: |  |            |     |      |   |     |  
|Price of fuel                          |  |            | 6   |      |   | 7   |  
|Deferred fuel cost                     |  |            | (8  | )    |   | (21 | )
|KWh generation                         |  |            | 24  |      |   | 9   |  
|Other                                  |  |            | 20  |      |   |    |  
|                                       |  |            |     |      |   |     |  
|Fuel expense September 30, 1999        |  | $          | 584 |      | $ | 253 |  

---

Purchased and Exchanged PowerThe decrease in purchased and exchanged power expense for
Cinergy, CG&E and PSI for the nine months ended September 30, 1999, compared to 1998, was primarily because of decreased purchases of non-firm power wholesale transactions as a
result of a decline in sales volume in the energy marketing and trading operations. This decrease was offset partially by the extreme weather conditions experienced in July 1999. Reference is
made to the Form 8-K filed on August 10, 1999, which describes the earnings impact of extreme weather experienced in July 1999.

Gas PurchasedThe increase in gas purchased expense for Cinergy for the nine months ended
September 30, 1999, when compared to 1998, was primarily due to an increase in the gas purchased expense of CM&T. Partially offsetting the increase for Cinergy was a decline in purchased gas
expense for CG&E, reflecting a lower average cost per mcf of gas purchased.

Other OperationThe decrease in other operation expense for PSI for the nine months ended
September 30, 1999, when compared to 1998, was primarily due to the one-time charge of $80 million

recorded during the second quarter of 1998 reflecting the implementation of a 1989 settlement of a dispute with the WVPA. Partially offsetting the decrease was the increase in the variable portion of
the base monthly fees related to the coal gasification services contract with Dynegy.

The
decrease in other operation expense for Cinergy for the nine months ended September 30, 1999, when compared to 1998, was primarily due to the reasons outlined in the PSI
discussion above. Partially offsetting the decrease for Cinergy was an increase in expenses associated with existing and new initiatives by certain of Cinergy's consolidated non-regulated
businesses.

MaintenanceThe increase in maintenance expense for CG&E for the nine months ended
September 30, 1999, when compared to 1998, was primarily due to maintenance outages, an increase in the cost of generating station repair parts, and an overall increase in required maintenance
at all of CG&E's generating stations.

The
increase in maintenance expense for Cinergy for the nine months ended September 30, 1999, when compared to 1998, was partially due to the reasons outlined in the CG&E
discussion above. Also contributing to the change for Cinergy was an increase in PSI's maintenance expense primarily caused by generating station repair costs and planned maintenance outages.

Depreciation and AmortizationThe increase in depreciation and amortization expense for
Cinergy, CG&E, and PSI for the nine months ended September 30, 1999, when compared to 1998, was primarily due to additions to depreciable plant. Also contributing to the change for Cinergy and
CG&E was an increased amortization of phase-in deferral expense, which reflects the PUCO-ordered phase-in plan for Zimmer.

Other Income and Deductions

Equity in Earnings of Unconsolidated SubsidiariesFor the nine months ended
September 30, 1999, equity in earnings of unconsolidated subsidiaries increased $25 million for Cinergy, as compared to the same period of 1998. The increase was primarily driven by the
increase in the earnings of Avon Energy for the period prior to the sale of the investment. (See Note 14 of the "Notes to Financial Statements" in "Part I. Financial Information" for a
discussion of the sale of Cinergy's 50% interest in Avon Energy.)

MiscellaneousNetMiscellaneousnet increased $9 million for
Cinergy during the nine months ended September 30, 1999, compared to the same period of 1998. The Cinergy increase was primarily the result of transactions related to the sale of Midlands.

Miscellaneousnet
for PSI decreased $2 million for the nine months ended September 30, 1999, compared to the same period of 1998. This decrease was primarily
the result of a decrease in interest income and a decrease in the level of expenses associated with the sales of accounts receivable.

InterestInterest expense decreased $4 million for Cinergy for the nine months ended
September 30, 1999, compared to the same period of 1998. This decrease is primarily the result of a decrease in interest on short-term obligations resulting from a reduction in
average short-term borrowings and lower short-term interest rates. This decrease was partially offset by an increase in interest expense on long-term debt resulting
from an increase in the amount of long-term debt outstanding.

Preferred Dividend Requirements of Subsidiaries

Cinergy's preferred dividend requirements of subsidiaries decreased $1 million (21%) for the nine months ended September 30, 1999, as compared to
the same period of 1998. This decrease was primarily attributable to PSI's redemption of all outstanding shares of its 7.44% Series Cumulative Preferred Stock on March 1, 1998.

Preferred Dividend Requirement

PSI's preferred dividend requirement decreased $1 million (23%) for the nine months ended September 30, 1999 as compared to the same period of
1998. This decrease was primarily attributable to PSI's redemption of all outstanding shares of its 7.44% Series Cumulative Preferred Stock on March 1, 1998.

ULH&P

RESULTS OF OPERATIONS FOR ULH&P FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999

The format of the following Results of Operations discussions has been changed from the format of prior periods. Unlike prior reports, the Results of
Operations discussion for ULH&P is presented only for the nine months ended September 30, 1999, in accordance with General Instructions H(2)(a).

Electric
and gas margins and net income for ULH&P for the nine months ended September 30, 1999, and 1998 are as follows:

|                      |  | ULH&P
|--------------------- |  | -----
|
|
|Electric gross margin |  | $    
|Gas gross margin      |  |      
|Net income            |  |      

The
increase in electric operating revenues for the nine months ended September 30, 1999, compared to 1998, was primarily attributable to higher retail KWh sales resulting from
growth in the average number of residential and commercial customers. A higher volume purchased from CG&E caused the associated change in electricity purchased from parent company for resale.

The
increase in gas operating revenues for the nine months ended September 30, 1999, when compared to 1998, was primarily caused by an increase in retail mcf volumes sold and
used per customer and an increase in the average price per mcf recovered from retail customers.

The
increase in depreciation for the nine months ended September 30, 1999, as compared to 1998 was primarily due to additions to depreciable plant. The interest expense
increase for the nine months ended September 30, 1999, as compared to 1998 was primarily due to the issuance of $40 million of debt during the fourth quarter of 1998 and the third
quarter of 1999.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Cinergy, CG&E, PSI, and ULH&P

Reference is made to the "Market Risk Sensitive Instruments and Positions" section in "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations" in "Part I. Financial Information" and Notes 9 and 10 of the "Notes to Financial Statements" in "Part I. Financial Information."

## 

PART II. OTHER INFORMATION   ITEM 1. LEGAL PROCEEDINGS



See
Note 11 of the "Notes to Financial Statements" in "Part I. Financial Information."



See
Note 18 of the "Notes to Financial Statements" in "Part I. Financial Information."

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

|Exhibit
Designation           |  | Nature of Exhibit                                                                                                                                                                                                                             
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cinergy and PSI               |  |                                                                                                                                                                                                                                               
|4-A                           |  | #Seventh Supplemental Indenture dated as of October 20, 1999, between PSI and Fifth Third Bank as Trustee. (Exhibit to PSI's September 30, 1999 Form 10-Q, in File No. 1-3543.)                                                               
|Cinergy and ULH&P             |  |                                                                                                                                                                                                                                               
|4-B                           |  | #Fourth Supplemental Indenture dated as of September 17, 1999, between ULH&P and Fifth Third Bank as Trustee. (Exhibit to ULH&P's September 30, 1999 Form 10-Q, in File No. 2-7793.)                                                          
|Cinergy                       |  |                                                                                                                                                                                                                                               
|10-A                          |  | First Amendment to First Amended and Restated Employment Agreement dated September 1, 1999, between Cinergy, Cinergy Services, CG&E, and PSI and Larry E. Thomas. (Exhibit to Cinergy's September 30, 1999 Form
 10-Q, in File No. 1-11377.)  
|10-B                          |  | First Amendment to First Amended and Restated Employment Agreement dated September 1, 1999, between Cinergy, Cinergy Services, CG&E, and PSI and Charles J. Winger. (Exhibit to Cinergy's September 30, 1999 Form 10-Q, in File No.
 1-11377.)
|Cinergy, CG&E, PSI, and ULH&P
|27                            |  | Financial Data Schedules (included in electronic submission only)                                                                                                                                                                             



SIGNATURES

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although Cinergy, CG&E, PSI, and ULH&P believe that the disclosures are adequate to make the information presented not
misleading. In the opinion of Cinergy, CG&E, PSI, and ULH&P, these statements reflect all adjustments (which include normal, recurring adjustments) necessary to reflect the results of operations for
the respective periods. The unaudited statements are subject to such adjustments as the annual audit by independent public accountants may disclose to be necessary.

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed by an officer and the
chief accounting officer on their behalf by the undersigned thereunto duly authorized.

|                        |  | CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
|----------------------- |  | ------------------------------------------------------------------------------------------------------------
|                        |  | Registrants                                                                                                 
|Date: November 15, 1999 |  | /s/BERNARD F. ROBERTS                                                                                       
|                        |  | Bernard F. RobertsDuly Authorized Officer
and
Chief Accounting Officer                                      



## QuickLinks

TABLE OF CONTENTSGLOSSARY OF TERMS

CINERGY CORP.AND SUBSIDIARY COMPANIES

THE CINCINNATI GAS & ELECTRIC COMPANYAND SUBSIDIARY COMPANIES

PSI ENERGY, INC.AND SUBSIDIARY COMPANY

THE UNION LIGHT, HEAT AND POWER COMPANY

NOTES TO FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGSITEM 6. EXHIBITS AND REPORTS ON FORM 8-KSIGNATURES