FORM 10-Q


                       SECURlTlES AND EXCHANGE COMMlSSlON
                             WASHINGTON, D. C. 20549


             Quarterly Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


     For the quarterly period ended
              June 30, 1998                  Commission File Number  1-8644



                            IPALCO ENTERPRISES, INC.
             (Exact name of Registrant as specified in its charter)

                  Indiana                                    35-1575582
         (State or other jurisdiction                    (I.R.S. Employer
           of incorporation or organization)              Identification No.)

                  One Monument Circle               
                  Indianapolis, Indiana                       46204
         (Address of principal executive offices)           (Zip Code)


         Registrant's telephone number, including area code:  317-261-8261



     Indicate  by check mark  whether the  registrant  (1) has 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
Registrant was required to file such  reports),  and (2) has been subject to the
filing requirements for at least the past 90 days.    Yes  X     No
                                                          ----      ----

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

                   Class                       Outstanding At June 30, 1998
                   -----                       ---------------------------- 
      Common (Without Par Value)                     44,921,232 shares

<PAGE>


                    IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
                    -----------------------------------------

                                      INDEX
                                      -----



                                                                       Page No.
                                                                       --------

PART I.   FINANCIAL INFORMATION
-------   ---------------------

         Statements of Consolidated Income - Three Months Ended and
            Six Months Ended June 30, 1998 and 1997                          2

         Consolidated Balance Sheets - June 30, 1998 and
            December 31, 1997                                                3

         Statements of Consolidated Cash Flows -
            Six Months Ended June 30, 1998 and 1997                          4

         Notes to Consolidated Financial Statements                        5-7

         Management's Discussion and Analysis of
            Financial Condition and Results of Operations                 8-12

PART II.  OTHER INFORMATION                                              13-15
--------  -----------------                                              
<PAGE>


                     PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
<TABLE>

                                   IPALCO ENTERPRISES, INC. and SUBSIDIARIES
                                       Statements of Consolidated Income
                                    (In Thousands Except Per Share Amounts)
                                                 (Unaudited)
<CAPTION>
                                                              
                                                                       Three Months Ended                 Six Months Ended
                                                                             June 30                           June 30
                                                                      1998            1997              1998            1997
                                                                  -------------   --------------    --------------  --------------
<S>                                                               <C>             <C>               <C>             <C>   
UTILITY OPERATING REVENUES:
  Electric                                                        $    198,539    $     175,388     $     377,448   $     359,054
  Steam                                                                  8,167            8,389            19,579          20,022
                                                                  -------------   --------------    --------------  --------------
    Total operating revenues                                           206,706          183,777           397,027         379,076
                                                                  -------------   --------------    --------------  --------------
    
UTILITY OPERATING EXPENSES:
  Operation:
    Fuel                                                                43,209           37,506            84,249          79,122
    Other                                                               38,425           35,622            73,346          68,255
  Power purchased                                                        2,842            1,131             3,849           5,290
  Purchased steam                                                        1,226            1,684             3,116           3,903
  Maintenance                                                           15,295           17,613            35,035          33,311
  Depreciation and amortization                                         25,378           26,504            50,663          52,244
  Taxes other than income taxes                                          8,636            8,127            17,458          17,000
  Income taxes - net                                                    22,497           16,498            39,971          36,325
                                                                  -------------   --------------    --------------  --------------
    Total operating expenses                                           157,508          144,685           307,687         295,450
                                                                  -------------   --------------    --------------  --------------
UTILITY OPERATING INCOME                                                49,198           39,092            89,340          83,626
                                                                  -------------   --------------    --------------  --------------

OTHER INCOME AND (DEDUCTIONS):
  Allowance for equity funds used during construction                      260            1,124               525           2,281
  Other - net                                                            1,148           (1,577)              722          (2,774)
  Income taxes - net                                                     1,818            3,184             4,670           3,919
                                                                  -------------   --------------    --------------  --------------
    Total other income - net                                             3,226            2,731             5,917           3,426
                                                                  -------------   --------------    --------------  --------------
    ME BEFORE INTEREST AND OTHER CHARGES                                52,424           41,823            95,257          87,052
                                                                  -------------   --------------    --------------  --------------
    
INTEREST AND OTHER CHARGES:
  Interest                                                              16,316           17,064            33,307          28,696
  Allowance for borrowed funds used during construction                   (192)            (226)             (396)           (472)
  Preferred stock transactions                                             491              796             1,200           1,591
                                                                  -------------   --------------    --------------  --------------
    Total interest and other charges - net                              16,615           17,634            34,111          29,815
                                                                  -------------   --------------    --------------  --------------
    ME BEFORE CUMULATIVE EFFECT
   OF ACCOUNTING CHANGE                                                 35,809           24,189            61,146          57,237

CUMULATIVE EFFECT OF ACCOUNTING CHANGE -
   NET OF TAXES (Note 4)                                                     -                -                 -          18,347
                                                                  -------------   --------------    --------------  --------------
    
NET INCOME                                                        $     35,809    $      24,189     $      61,146   $      75,584
                                                                  =============   ==============    ==============  ==============
    
BASIC EARNINGS PER SHARE (Note 2)

INCOME BEFORE CUMULATIVE EFFECT
   OF ACCOUNTING CHANGE                                           $       0.80    $        0.53     $        1.36   $        1.11
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 4)                              -                -                 -            0.36
                                                                  -------------   --------------    --------------  --------------
    
NET INCOME                                                        $       0.80    $        0.53     $        1.36   $        1.47
                                                                  =============   ==============    ==============  ==============
    
DILUTED EARNINGS PER SHARE (Note 2)

INCOME BEFORE CUMULATIVE EFFECT
   OF ACCOUNTING CHANGE                                           $       0.79    $        0.53     $        1.34   $        1.11
CUMULATVE EFFECT OF ACCOUNTING CHANGE (Note 4)                               -                -                 -            0.36
                                                                  -------------   --------------    --------------  --------------

NET INCOME                                                        $       0.79    $        0.53     $        1.34   $        1.47
                                                                  =============   ==============    ==============  ==============
    
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>

                            IPALCO ENTERPRISES, INC. and SUBSIDIARIES
                                   Consolidated Balance Sheets
                                         (In Thousands)
                                           (Unaudited)
<CAPTION>

                                                                    June 30          December 31
                          ASSETS                                     1998                1997
                          ------                                                                 
                                                                 --------------      -------------
<S>                                                              <C>                 <C>    
UTILITY PLANT:
  Utility plant in service                                       $   2,823,722       $  2,800,446
  Less accumulated depreciation                                      1,161,523          1,121,317
                                                                 --------------      -------------
      Utility plant in service - net                                 1,662,199          1,679,129
  Construction work in progress                                         77,987             77,030
  Property held for future use                                          10,224             10,224
                                                                 --------------      -------------
      Utility plant - net                                            1,750,410          1,766,383
                                                                 --------------      -------------
OTHER ASSETS:
  Nonutility property - at cost, less accumulated                       73,592             72,865
depreciation
  Other investments                                                     11,355             13,023
                                                                 --------------      -------------
      Other assets - net                                                84,947             85,888
                                                                 --------------      -------------
CURRENT ASSETS:
  Cash and cash equivalents                                             30,780             17,293
  Accounts receivable and unbilled revenue
   (less allowance for doubtful accounts
   1998, $1,105 and 1997, $1,202)                                       38,739             47,033
  Fuel - at average cost                                                29,543             35,257
  Materials and supplies - at average cost                              49,905             48,416
  Prepayments and other current assets                                   4,404              9,100
                                                                 --------------      -------------
      Total current assets                                             153,371            157,099
                                                                 --------------      -------------
DEFERRED DEBITS:
  Regulatory assets                                                    122,402            126,784
  Miscellaneous                                                         18,048             19,404
                                                                 --------------      -------------
      Total deferred debits                                            140,450            146,188
                                                                 --------------      -------------
              TOTAL                                              $   2,129,178       $  2,155,558
                                                                 ==============      =============

              CAPITALIZATION AND LIABILITIES
              ------------------------------
CAPITALIZATION:
  Common shareholders' equity:
    Common stock                                                 $     406,951       $    395,851
    Unearned compensation - restricted stock awards                     (6,165)             1,209
    Premium on 4% cumulative preferred stock                               649                649
    Retained earnings                                                  568,679            532,730
    Treasury stock, at cost                                           (403,629)          (403,101)
                                                                 --------------      -------------
      Total common shareholders' equity                                566,485            527,338
  Cumulative preferred stock of subsidiary (Note 2)                     59,135              9,135
  Long-term debt (less current maturities and
   sinking fund requirements)                                          946,073          1,032,846
                                                                 --------------      -------------
      Total capitalization                                           1,571,693          1,569,319
                                                                 --------------      -------------
CURRENT LIABILITIES:
  Notes payable - banks and commercial paper                             8,000             33,700
  Current maturities and sinking fund requirements                         894              3,094
  Accounts payable and accrued expenses                                 53,234             66,105
  Dividends payable                                                     13,435             11,523
  Taxes accrued                                                         36,720             22,126
  Interest accrued                                                      14,932             15,493
  Other current liabilities                                             11,020             12,555
                                                                 --------------      -------------
      Total current liabilities                                        138,235            164,596
                                                                 --------------      -------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
  Accumulated deferred income taxes - net                              316,512            314,869
  Unamortized investment tax credit                                     43,388             44,783
  Accrued postretirement benefits                                       13,936             17,144
  Accrued pension benefits                                              40,814             39,821
  Miscellaneous                                                          4,600              5,026
                                                                 --------------      -------------
      Total deferred credits and other long-term liabilities           419,250            421,643
                                                                 --------------      -------------

COMMITMENTS AND CONTINGENCIES
              TOTAL                                              $   2,129,178       $  2,155,558
                                                                 ==============      =============

See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>


                                IPALCO ENTERPRISES, INC. and SUBSIDIARIES
                                  Statements of Consolidated Cash Flows
                                             (In Thousands)
                                               (Unaudited)
<CAPTION>

                                                                                 Six Months Ended
                                                                                     June 30
                                                                              1998               1997
                                                                         --------------     --------------
<S>                                                                      <C>                <C>   
CASH FLOWS FROM OPERATIONS:
  Net income                                                             $      61,146      $      75,584
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                                               51,666             52,146
    Amortization of regulatory assets                                            5,184              7,825
    Deferred income taxes and investment tax credit adjustments - net           (1,395)            11,360
    Allowance for funds used during construction                                  (921)            (2,753)
    Cumulative effect of accounting change - before taxes                            -            (29,915)
  Change in certain assets and liabilities:
    Accounts receivable - excluding cumulative effect of accounting              8,294              6,741
change
    Fuel, materials and supplies                                                 4,225              4,651
    Accounts payable and accrued expenses                                      (12,871)            (5,139)
    Taxes accrued                                                               14,594               (138)
    Accrued pension benefits                                                       993              2,165
    Other - net                                                                    (18)               213
                                                                         --------------     --------------
Net cash provided by operating activities                                      130,897            122,740
                                                                         --------------     --------------

CASH FLOWS FROM INVESTING:
  Construction expenditures - utility                                          (32,525)           (30,569)
  Construction expenditures - nonutility                                        (1,882)            (1,187)
  Other                                                                          2,505             (9,637)
                                                                         --------------     --------------
Net cash used in investing activities                                          (31,902)           (41,393)
                                                                         --------------     --------------

CASH FLOWS FROM FINANCING:
  Issuance of long-term debt                                                         -            451,000
  Retirement of long-term debt                                                 (89,000)           (61,250)
  Short-term debt - net                                                        (25,700)           (40,000)
  Common dividends paid                                                        (23,516)           (35,363)
  Issuance of preferred stock (Note 2)                                          50,000                  -
  Issuance of common stock related to incentive compensation plans               3,852              1,794
  Reacquired common stock                                                         (528)          (401,262)
  Other                                                                           (616)              (531)
                                                                         --------------     --------------
Net cash used in financing activities                                          (85,508)           (85,612)
                                                                         --------------     --------------
Net increase in cash and cash equivalents                                       13,487             (4,265)
Cash and cash equivalents at beginning of period                                17,293             19,317
                                                                         --------------     --------------
Cash and cash equivalents at end of period                               $      30,780      $      15,052
                                                                         ==============     ==============

----------------------------------------------------------------------------------------------------------
Supplemental  disclosures of cash flow information:  Cash paid during the period
  for:
    Interest (net of amount capitalized)                                 $      32,769      $      25,622
                                                                         ==============     ==============
    Income taxes                                                         $      17,085      $      29,089
                                                                         ==============     ==============


See notes to consolidated financial statements.
</TABLE>
<PAGE>


                    IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
                    -----------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------


1.      GENERAL

        IPALCO  Enterprises,  Inc.  (IPALCO) owns all of the outstanding  common
        stock of its subsidiaries (collectively referred to as Enterprises). The
        consolidated  financial  statements  include the accounts of IPALCO, its
        utility  subsidiary,  Indianapolis  Power & Light  Company (IPL) and its
        unregulated    subsidiary,    Mid-America   Capital   Resources,    Inc.
        (Mid-America).   Mid-America   is  the  parent   company  of  nonutility
        energy-related businesses.

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

        In the opinion of management these  statements  reflect all adjustments,
        consisting of only normal recurring accruals,  including  elimination of
        all  significant  intercompany  balances  and  transactions,  which  are
        necessary  to a fair  statement  of the results for the interim  periods
        covered by such  statements.  Due to the seasonal nature of the electric
        utility business, the annual results are not generated evenly by quarter
        during the year.  Certain  amounts from prior year financial  statements
        have been  reclassified  to conform to the  current  year  presentation.
        Certain  amounts  have been  restated  due to the change to the unbilled
        revenue method of accounting  (see note 4). These  financial  statements
        and notes should be read in  conjunction  with the audited  consolidated
        financial statements included in Enterprises' 1997 Annual Report on Form
        10-K.

2.      CAPITAL STOCK

       Common Stock
                                              Shares                  Amount

       Balance at December 31, 1997         44,649,844             $395,851,016
            Compensation plans                 174,992                7,437,935
            Exercise of stock options          113,223                3,852,313
           Restricted stock canceled            (4,543)                (190,397)
                                            ----------             ------------ 
       Balance at June 30, 1998                                    $406,950,867
                                                                   ============
         Less shares reacquired by Treasury    (12,284)
                                            ----------
       Shares issued and outstanding
           at June 30, 1998                 44,921,232
                                            ==========

       The following is a  reconciliation  of the weighted average common shares
        for the basic and diluted earnings per share  computations in accordance
        with Statement of Financial Accounting Standard (SFAS) No. 128:
<PAGE>
<TABLE>
<CAPTION>


                                                          For the Period Ended June 30,
                                                          -----------------------------
                                                  Three Months Ended            Six Months Ended
                                                   1998        1997              1998       1997
                                                 --------------------          -------------------
                                                                     (In thousands)

       <S>                                      <C>           <C>              <C>        <C>   
       Weighted average common shares             44,924        45,507           44,881     51,272
       Dilutive effect of stock options              675           216              674        191
                                                --------      --------         --------   --------
       Weighted average common
          and incremental shares                  45,599        45,723           45,555     51,463
                                                ========      ========         ========   ========
</TABLE>

        Preferred Stock

        On January  13,  1998,  Indianapolis  Power & Light  Company  issued $50
        million of  cumulative  preferred  stock  with a rate of 5.65%.  500,000
        shares were issued at $100 par value each.  The stock will be redeemable
        at par value, subject to certain  restrictions,  in whole or in part, at
        any time on or after January 1, 2008, at the option of IPL.


3.      LONG-TERM DEBT

        IPALCO's  Revolving  Credit  Facility  was  issued in April  1997 in the
        amount of $401 million.  The proceeds  were used to purchase,  through a
        self-tender offer, shares of IPALCO's  outstanding common capital stock.
        During the first six months of 1998, IPALCO reduced the debt amount by a
        net of $89  million  resulting  in a debt  balance  under the  Revolving
        Credit  Facility of $234 million as of June 30, 1998.  On July 15, 1998,
        IPALCO  repaid the  remaining  $234  million due through the issuance of
        $230 million in commercial paper and a cash payment of $4 million.  This
        transaction is not reflected in the  Consolidated  Financial  Statements
        for the period ending June 30, 1998.


4.      CUMULATIVE EFFECT OF ACCOUNTING CHANGE

        Effective  January 1, 1997,  IPL adopted the unbilled  revenue method of
        accounting  for all  electric  and  steam  sales to more  closely  match
        revenues with expenses.  Under this method, IPL accrues revenues for all
        electric  and steam energy  delivered  to  customers  during the period,
        whether billed or not.  Previously IPL recognized these revenues only as
        customers  were billed,  with the service  rendered  after monthly meter
        reading dates through the end of a calendar month recognized as revenues
        in the following month. The cumulative effect of accounting  change, net
        of taxes,  was a one-time  increase of $18.3 million  ($0.32 per share),
        reported as a separate  component  of net income in the  restated  first
        quarter earnings of 1997. The change had the effect of increasing income
        before cumulative effect of accounting change in the first six months of
        1997 by less than $0.1  million.  The results of 1997 were  restated for
        the accounting change.


5.      COMPREHENSIVE INCOME

        On January 1, 1998, IPALCO adopted SFAS No. 130, "Comprehensive Income,"
        which requires that changes in the amounts of certain  items,  including
        foreign currency translation adjustments and gains and losses on certain
        securities be shown in the financial statements.  It has been determined
        that  IPALCO  has  no  amounts   that   require   classification   under
        comprehensive income.
<PAGE>
6.      STOCK-BASED COMPENSATION

       A summary of options  issued  under  IPALCO's  stock  option  plans is as
follows:
<TABLE>
<CAPTION>

                                              Weighted Average             Range of Option            Number of
                                               Price per Share             Price per Share             Shares
                                              ----------------             ---------------            ---------  
<S>                                                  <C>                 <C>                         <C>           
Outstanding, December 31, 1997................       28.27               16.8317 -   31.375          2,045,338
   Issued.....................................       42.26               40.69   -   43.34             126,000
   Exercised..................................       29.08               16.8317 -   31.375           (113,223)
                                                                                                     --------- 
Outstanding, June 30, 1998....................       29.08               16.8317 -   43.34           2,058,115
                                                                                                     =========
</TABLE>

        Accounting  Principles Board (APB) Opinion No. 25, "Accounting for Stock
        Issued to Employees," and related  interpretations in accounting for the
        stock based plan have been applied by IPALCO.  No compensation  cost has
        been  recognized  for the plans because the stock options price is equal
        to fair value at the grant  date.  Had  compensation  cost for the plans
        been  determined  based on the fair value at the grant  dates for awards
        under the plans consistent with the method of SFAS No. 123,  "Accounting
        for  Stock-Based  Compensation,"  IPALCO's net income for the six months
        ended June 30, 1998,  would have decreased from $61.1 million ($1.34 per
        share)  to the pro forma  amount of $60.8  million  ($1.33  per  share).
        IPALCO's  net income and  earnings  per share for the similar  period in
        1997 would have  decreased  from $75.6 million  ($1.47 per share) to the
        pro forma amount of $72.1 million  ($1.40 per share).  IPALCO  estimated
        the SFAS No. 123 fair value by utilizing  the binomial  options  pricing
        model with the following assumptions: dividend yields of 2.54% to 6.88%,
        risk-free rates of 6.38% to 6.88%, volatility of 12% to 13% and expected
        lives of 5 years. Earnings per share amounts presented in this paragraph
        are diluted.

        On January  27,  1998,  the Board of  Directors  amended  the  Long-Term
        Performance  and  Restricted  Stock  Incentive  Plan  as the  Long  Term
        Performance and Restricted Stock Incentive Plan (As Amended and Restated
        effective  January 1, 1998) also referred to as the 1998 Plan.  Pursuant
        to the 1998 Plan, an additional 900,000 shares of common stock of IPALCO
        have been  authorized  and  reserved  for  issuance,  for a total of 1.5
        million  shares.  Initial awards of 112,691 shares of restricted  common
        stock were made to  participating  employees on January 27, 1998.  These
        initial  grants were made  subject to  shareholder  approval of the 1998
        Plan, which approval was received on April 15, 1998.  Awards are made on
        established  targets for the  participants to reflect the  participant's
        actual base salary.  The shares remain  restricted and  non-transferable
        throughout  each  three-year  performance  period,  vesting in one-third
        increments  in  each  of  the  three  years  following  the  end  of the
        performance  period.  At the end of a  performance  period,  awards  are
        subject to adjustment to reflect  Enterprises'  performance  compared to
        companies in the S&P 500 Index with regard to cumulative total return to
        shareholders  during the  three-year  performance  period.  Depending on
        Enterprises'  performance,  final  awards  may  range  from  400% of the
        initial awards to zero.

7.      NEW ACCOUNTING STANDARD

        Statement of Financial  Standards No. 133,  "Accounting  for  Derivative
        Instruments  and  Hedging  Activities",  was  issued in June 1998 and is
        effective for all fiscal  quarters of all fiscal years  beginning  after
        June 15, 1999.  This  statement  establishes  accounting  and  reporting
        standards for  derivative  instruments  and for hedging  activities.  It
        requires that an entity  recognizes all  derivatives as either assets or
        liabilities  in the statement of financial  condition and measures those
        instruments at fair value.  If certain  conditions are met, a derivative
        may be specifically designated as a fair value hedge, a cash flow hedge,
        or a hedge of a foreign currency exposure. The accounting for changes in
        the fair value of a derivative  (that is,  gains and losses)  depends of
        the  intended  use of the  derivative  and  the  resulting  designation.
        Management  has not yet quantified the effect of the new standard on the
        consolidated financial statements.


<PAGE>

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

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         In connection with the safe harbor provisions of the Private Securities
Litigation  Reform Act of 1995 (the Reform Act),  IPALCO  Enterprises,  Inc. and
subsidiaries (collectively,  Enterprises) is hereby filing cautionary statements
identifying  important factors that could cause  Enterprises'  actual results to
differ  materially  from  those  projected  in  forward-looking   statements  of
Enterprises.  This Form  10-Q,  and  particularly  Management's  Discussion  and
Analysis,   contains   forward-looking   statements.   The  Reform  Act  defines
forward-looking  statements as statements  that express an expectation or belief
and contain a projection, plan or assumption with regard to, among other things,
future  revenues,   income,  earnings  per  share  or  capital  structure.  Such
statements  of  future  events  or  performance  are not  guarantees  of  future
performance  and  involve  estimates,  assumptions,  and  uncertainties  and are
qualified  in their  entirety  by  reference  to,  and are  accompanied  by, the
following  important  factors that could cause  Enterprises'  actual  results to
differ materially from those contained in forward-looking  statements made by or
on  behalf  of  Enterprises.  The  words  "anticipate,"  "believe,"  "estimate,"
"expect,"  "forecast,"   "project,"  "objective"  and  similar  expressions  are
intended to identify forward-looking statements.

         Some important factors that could cause Enterprises'  actual results or
outcomes  to differ  materially  from  those  discussed  in the  forward-looking
statements include,  but are not limited to, fluctuations in customer growth and
demand,  weather,  fuel and purchased power costs and  availability,  regulatory
action,   Federal  and  State   legislation,   interest  rates,  labor  strikes,
maintenance and capital expenditures and local economic conditions. In addition,
IPL's ability to have  available an appropriate  amount of electric  supply in a
timely manner can significantly impact IPL's financial  performance.  The timing
of  deregulation  and  competition,  product  development and  introductions  of
technology changes are also important  potential factors.  Most of these factors
impact Enterprises through its wholly-owned subsidiary, IPL.

         All such factors are difficult to predict,  contain uncertainties which
may materially affect actual results and are beyond the control of Enterprises.


LIQUIDITY AND CAPITAL RESOURCES

         Material changes in the consolidated financial condition and results of
operations of IPALCO Enterprises,  Inc.  (Enterprises),  except where noted, are
attributed  to the  operations  of  Indianapolis  Power & Light  Company  (IPL).
Consequently, the following discussion is centered on IPL.

Overview
--------

         The Board of  Directors  of  Enterprises  on May 25,  1998,  declared a
quarterly  dividend on common stock of 27.5 cents per share compared to 25 cents
per share declared in the second quarter of 1997. The dividend was paid July 15,
1998, to shareholders of record June 19, 1998.

         IPL's  capital  requirements  are  primarily  related  to  construction
expenditures  needed to meet customers'  needs for  electricity  and steam,  for
environmental compliance and for the implementation of an integrated information
system.  Enterprises'  construction  expenditures (excluding allowance for funds
used during  construction)  totaled $20.9 million  during the second  quarter of
1998,  representing a $2.7 million increase from the comparable  period in 1997.
Internally  generated  cash  provided by  operations  was used for  construction
expenditures  during  the  second  quarter  of 1998.  Enterprises'  construction
expenditures  (excluding allowance for funds used during  construction)  totaled
$34.4 million  during the first six months ended June 30, 1998,  representing  a
$2.7 million increase from the comparable period in 1997.  Internally  generated
cash provided by operations was used for  construction  expenditures  during the
first six months of 1998.

         The  three-year   construction   program  has  not  changed  from  that
previously reported in IPALCO's 1997 Form 10-K report. (See "Future Performance"
in Item 7 of  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations in IPALCO's 1997 Form 10-K report for further discussion).

         IPALCO's  Revolving  Credit  Facility  was  issued in April 1997 in the
amount  of  $401  million.  The  proceeds  were  used  to  purchase,  through  a
self-tender offer,  shares of IPALCO's  outstanding common capital stock. During
the first six months of 1998,  IPALCO  reduced  the debt  amount by a net of $89
million  resulting in a debt balance under the Revolving Credit Facility of $234
million as of June 30, 1998. On July 15, 1998,  IPALCO repaid the remaining $234
million due through the issuance of $230 million in commercial  paper and a cash
payment of $4 million.  This  transaction  is not reflected in the  Consolidated
Financial Statements for the period ending June 30, 1998.

         IPALCO is continuing to perform analyses of its systems and is working
with suppliers and service organizations in order to determine the impact of
year 2000 issues and make appropriate preparations.  Management is unable to
predict at this time the full impact year 2000 issues will have on IPALCO's
operations or future financial condition.   Management presently estimates that
the total cost of testing and required changes to systems owned or controlled
by IPALCO to allow for year 2000 issues will be approximately $4 million.


<PAGE>


RESULTS OF OPERATIONS

         Comparison of Second Quarter and Six Months Ended June 30, 1998
         ---------------------------------------------------------------
             with Second Quarter and Six Months Ended June 30, 1997
             ------------------------------------------------------

         Diluted  earnings  per share  during  the  second  quarter of 1998 were
$0.79, or $0.26 above the $0.53 attained in the comparable 1997 period.  Diluted
earnings per share during the six months  ended June 30,  1998,  were $1.34,  or
$0.13 below the $1.47 attained in the comparable 1997 period. Net income for the
first six months of 1997  included a one-time  positive  after-tax  increase  of
$18.3 million  ($0.36 per share) See  "Cumulative  Effect of Accounting  Change"
below. Also, weighted average,  diluted shares for the six months ended June 30,
1998, were 45.6 million  compared to 51.5 million for the similar period in 1997
due to IPALCO's  repurchase  of 12.5 million  common  shares in April 1997.  The
following  discussion  highlights the factors contributing to the second quarter
and six months ended results.

Operating Revenues
------------------

         Operating  revenues  during the second  quarter and six months ended of
1998  increased  from the  comparable  1997  periods by $22.9  million and $18.0
million, respectively. The increases in revenues resulted from the following:
<TABLE>
<CAPTION>

                                                              Increase (Decrease) from Comparable Period
                                                              ------------------------------------------
                                                                            June 30, 1998
                                                                            -------------
                                                              Three Months Ended         Six Months Ended
                                                              ------------------         ----------------
                                                                          (Millions of Dollars)

         Electric:
              <S>                                                <C>                       <C>
              Change in retail KWH sales - net of fuel               10.8                       4.6
              Fuel revenue                                           (0.4)                      0.2
              Wholesale revenue                                      11.0                      11.7
              DSM Tracker revenue                                     0.4                       0.8
         Steam revenue                                               (0.2)                     (0.4)
         Other revenue                                                1.3                       1.1
                                                                 --------                  --------
              Total change in operating revenues                 $   22.9                  $   18.0
                                                                 ========                  ========
</TABLE>


         The second  quarter  increase in retail KWH sales  compared to the same
period in 1997 was due in part to warmer weather.  Cooling degree days increased
91% during the  second  quarter  compared  to the same  period in 1997.  The six
months ended  increase was due in part to a 99% increase in cooling  degree days
partially  offset by a decrease of 23% in heating  degree  days  compared to the
same  period  last  year.  Economic  growth  in  IPL's  service  territory  also
contributed  to the increase in sales for both the second quarter and six months
ended.  The changes in fuel revenues in 1998 from the prior year reflect changes
in total fuel costs billed to customers.  The increased  wholesale  sales during
the second quarter and six months ended of 1998, as compared to the same periods
in 1997, reflect increased  wholesale  marketing efforts and energy requirements
of other utilities.

Operating Expenses
------------------

         Fuel  expenses  in the  second  quarter  and six  months  ended of 1998
increased by $5.7 million and $5.1  million,  respectively  compared to the same
periods  during  1997.  The  primary  reason for both  variances  from the prior
periods was a result of increased total KWH sales.

         Other  expenses  in the second  quarter  and six  months  ended of 1998
increased by $2.8 million and $5.1 million, respectively. The second quarter and
six month ended increases primarily resulted from expenses related to a hospital
chilled water project of $2.0 million. Also contributing to the six months ended
increase  was  increased  electric  distribution  expense  as well as  increased
administrative and general expense.

         Power purchased  expenses in the second quarter and six months ended of
1998 increased by $1.7 million and decreased by $1.4 million,  respectively. The
increase  during the second quarter  resulted from increased KWH purchases while
being  partially  offset by  decreased  demand  charges.  The six  months  ended
decrease resulted primarily from decreased demand charges.

         Maintenance expenses decreased $2.3 million in the second quarter while
increasing $1.7 million for the six months ended of 1998 compared to the similar
periods in 1997. The decrease in the second quarter reflects the timing of costs
for  plant  maintenance.  Due to the  mild  weather,  overhaul  maintenance  was
advanced to the first quarter in 1998,  compared to the more conventional timing
of performing overhaul  maintenance in the second quarter.  The increase for the
six months ended period  resulted  primarily  from the overhaul of unit 6 at the
Pritchard  plant as well as increased  boiler and electric plant  maintenance at
the Petersburg plant.

         Income  taxes - net,  increased  $6.0  million and $3.6  million in the
second quarter and six months ended periods,  respectively due to an increase in
pretax operating income.

         As a result of the foregoing,  utility operating income increased 25.9%
during the second  quarter of 1998 from the  comparable  1997  period,  to $49.2
million.  Utility operating income during the six months ended of 1998 increased
6.8% from the comparable 1997 period, to $89.3 million.

Other Income and Deductions
---------------------------

         Allowance  for equity  funds used  during  construction  decreased  $.9
million and $1.8  million in the second  quarter and six months  ended  periods,
respectively  compared  to the same  periods  last  year.  In August  1997,  the
amortization  of deferred  carrying  charges on a plant asset ended resulting in
this decrease.

         Other - net, which includes the pretax operating and investment  income
from  operations  other  than IPL,  as well as  non-operating  income  from IPL,
increased  $2.7  million and $3.5  million in the second  quarter and six months
ended,  respectively.  The second  quarter and six months  increases were due in
part to decreased  non-operating  expenses at IPL and decreased  pretax  losses,
excluding interest, at Mid-America of $1.0 million.

Interest and Other Charges
--------------------------

         Interest  expense  decreased $.7 million  during the second  quarter of
1998 while  increasing $4.6 million for the six months ended of 1998 compared to
the same periods in 1997.  The decrease in the second quarter is a result of the
decreased  debt  balance  in the  second  quarter  of 1998  compared  to 1997 on
IPALCO's  recapitalization debt facility.  This decrease was partially offset by
increased  interest  expense at  Mid-America  for a $50 million  long-term  note
issued in June 1997.  The six months ended  variance  was  primarily a result of
interest  on the  recapitalization  debt  facility  of IPALCO that was issued in
April  1997.  There was no interest  associated  with this debt during the first
quarter  of  1997.  Also  contributing  to the six  months  ended  variance  was
increased  long-term  interest  expense  at  Mid-America,  partially  offset  by
decreased interest expense at IPL.


Cumulative Effect of Accounting Change
--------------------------------------

         A  cumulative  effect  of  accounting  change  in the  amount  of $18.3
million,  net of taxes,  was  effectively  recorded  during the first quarter of
1997.  Effective  January 1, 1997, IPL adopted the unbilled  revenues  method of
accounting for electricity and steam delivered  during the period.  Revenues are
accrued for services provided but unbilled at the end of each month.


<PAGE>


PART II - OTHER INFORMATION
---------------------------

Item 1.  Legal Proceedings
-------  -----------------

         In February 1998, Region V of the U.S. Environmental  Protection Agency
issued to Cleveland Energy Resources a Notice of Violation (NOV) under the Clean
Air Act. (Cleveland Thermal Energy Corporation  conducts business under the name
Cleveland Energy  Resources.) The NOV alleged that particulate  matter emissions
from four of Cleveland's five boilers exceeded  applicable  limits on five dates
during the period 1993 through 1996,  and that the opacity limit was exceeded on
one date in 1997 based on a visible  emission  reading.  The alleged  violations
during the period 1993 through 1996 were .01-.02  lb/MMBtu  above the applicable
limit,  and the visible  emission  rating was not  statistically  significant at
1.7-2.7% opacity above the applicable  limit.  Representatives  of Cleveland met
with the Agency on March 16, 1998,  and July 22, 1998,  in an attempt to resolve
the matter.  Additional  stack  testing is  scheduled  for the fall of 1998.  If
Cleveland were adjudged to have violated applicable emission limits, it could be
subject to maximum penalties of $27,500 per day of violation.  While the results
of this  proceeding  cannot be predicted with  certainty,  management,  based on
advice of  counsel,  believes  that the final  outcome  will not have a material
adverse effect on the consolidated financial statements.

         On August  18,  1997,  Region V of the U. S.  Environmental  Protection
Agency  issued to IPL a Notice of  Violation  (NOV) under the Clean Air Act. The
NOV alleged that particulate matter emissions from IPL's Perry K Units 11 and 12
exceeded  applicable  limits on three  dates in 1995,  that  particulate  matter
emissions  from Perry K Units 15 and 16 exceeded  applicable  limits on a single
date in each of 1994 and 1995,  and that sulfur dioxide  emissions  exceeded the
applicable  limit on four days in the first quarter of 1997.  IPL disagrees with
the Agency's interpretations of the applicable rules and believes that the Perry
K Plant has been in compliance with applicable  limits.  Representatives  of IPL
met with the  Agency on  several  occasions  in 1997 and 1998,  in an attempt to
resolve the matter and have  subsequently  provided  the Agency with  additional
information  on the  operation of the Plant.  IPL  believes  that it has reached
agreement  with the  Agency on the terms of an  Administrative  Order  that will
resolve the matter without  penalty.  The Agency has not yet formally issued the
order,  however.  If IPL were  adjudged  to have  violated  applicable  emission
limits,  it  could  be  subject  to  maximum  penalties  of  $27,500  per day of
violation.  While  the  results  of this  proceeding  cannot be  predicted  with
certainty, management, based upon the advice of counsel, believes that the final
outcome will not have a material  adverse effect on the  consolidated  financial
statements.


Item 4.  Submission of Matters to a Vote of Security Holders
-------  ---------------------------------------------------

         The Annual Meeting of shareholders of IPALCO Enterprises, Inc. was held
on April 15, 1998. At the Annual  Meeting,  approval of the IPALCO  Enterprises,
Inc.  Long-Term  Performance and Restricted Stock Incentive Plan (as amended and
restated  effective January 1, 1998) occurred.  The vote was 36,047,997 in favor
and 2,069,935 against, with 961,051 abstaining.

         At the same  meeting,  the following  four  directors in Class III were
elected  to terms of three  years  which  expire in April  2001.  Each  director
received the following number of votes as shown opposite his name:

         Director                           Votes for      Votes Withheld
         --------                           ---------      --------------

         Robert A. Borns                    37,793,021         1,285,962
         Otto N. Frenzel III                38,378,042           700,941
         Andre B. Lacy                      38,419,267           659,716
         L. Ben Lytle                       37,592,482         1,486,501


<PAGE>

Item 6.  Exhibits and Reports on Form 8-K
-------  --------------------------------

         (a)      Exhibits.   Copies  of   documents   listed  below  which  are
                  identified  with an asterisk  (*) are  incorporated  herein by
                  reference and made a part hereof. The management  contracts or
                  compensatory  plans are  marked  with a double  asterisk  (**)
                  after the description of the contract or plan.

3.1*     Articles of Incorporation of IPALCO Enterprises, Inc., as amended.
          (Exhibit 3.1 to the Form 10-Q dated 6-30-97.)

3.2*     Bylaws of IPALCO Enterprises, Inc. (Exhibit 3.2 to the Form 10-Q
          dated 3-31-98).

4.1*     IPALCO Enterprises, Inc. IPALCO PowerInvest Dividend Reinvestment
          and Direct Stock Purchase Plan. (Exhibit 4.1 to the Form 10-Q
          dated 9-30-96.)

4.2*     IPALCO Enterprises, Inc. and First Chicago Trust Company of New York
          (Rights Agreement as amended and restated).  (Exhibit B to the Form
           8-K dated 4-29-98.)

10.1     Form of Termination Benefits Agreement together with schedule of
          parties to, and dates of, the Termination Benefits Agreements.  **

11.1     Computation of Per Share Earnings.


27.1     Financial Data Schedule.

         (b)      Reports on Form 8-K.

                           IPALCO  filed a Form 8-K on April 28,  1998,  to file
                           the amended and  restated  Rights  Agreement  between
                           IPALCO  Enterprises,  Inc.  and First  Chicago  Trust
                           Company of New York.


<PAGE>


                                   Signatures
                                   ----------

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                                    IPALCO ENTERPRISES, INC.
                                                    ------------------------
                                                          (Registrant)



Date:       August 7, 1998                  /s/ John R. Brehm
            --------------                  ---------------------------
                                                John R. Brehm
                                                Vice President and Treasurer



Date:       August 7, 1998                  /s/ Stephen J. Plunkett
            --------------                  ----------------------------
                                                Stephen J. Plunkett
                                                Controller