**UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549**

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**FORM 10-Q**

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

**For the quarterly period ended June 30, 2005**

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

**Commission file number 1-8644**



|**Indiana**                                                    | **35-1575582**                         
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

**One Monument CircleIndianapolis, IN    46204**(Address of Principal Executive Offices including Zip Code)

**(317) 261-8261**(Registrant's Telephone Number, Including Area Code)

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 reports), and (2) has been subject to such filing
requirements for the past 90 days.   YES [X]    NO [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange
Act Rule 12b-2)   YES [  ]    NO [X]

At August 22, 2005, 89,685,177 shares of IPALCO Enterprises, Inc. common stock were
outstanding. All of such shares were owned by The AES Corporation.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.









**IPALCO ENTERPRISES, INC.
                                    FORM 10-Q
                                     INDEX**



|**PART I - Financial Information**                                                                                                        | **Page No.**
|----------------------------------------------------------------------------------------------------------------------------------------- | ------------
|                                                                                                                                          |             
|Item 1:   Financial Statements:                                                                                                           |             
|                                                                                                                                          |             
|Unaudited Consolidated Statements of Income for the Three-month and Six-month
        
          Periods Ended June 30, 2005 and 2004     | 3           
|                                                                                                                                          |             
|Unaudited Consolidated Balance Sheets as of June 30, 2005 
        
           and December 31, 2004                                      | 4           
|                                                                                                                                          |             
|Unaudited Consolidated Statements of Cash Flows for the
        
          Three-month and Six-month Periods Ended June 30, 2005 and 2004 | 5           
|                                                                                                                                          |             
|Notes to Unaudited Consolidated Financial Statements                                                                                      | 6           
|                                                                                                                                          |             
|Item 2:   Management's Discussion and Analysis of Financial Condition 
          
and Results of Operations                               | 10          
|                                                                                                                                          |             
|Item 3:   Quantitative and Qualitative Disclosure About Market Risk                                                                       | 14          
|                                                                                                                                          |             
|Item 4:  Controls and Procedures                                                                                                          | 14          
|                                                                                                                                          |             
|**PART II - Other Information**                                                                                                           |             
|                                                                                                                                          |             
|Item 1:  Legal Proceedings                                                                                                                | 15          
|                                                                                                                                          |             
|Item 6:  Exhibits                                                                                                                         | 15          
|                                                                                                                                          |             
|**Signature**                                                                                                                             | 16          

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**PART I -- FINANCIAL INFORMATION**

Item 1.  Financial Statements

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**IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Unaudited Consolidated Statements of Income

(In Thousands)**

`Three Months Ended     Six Months Ended
                                             June 30,                June 30,
                                       ---------------------  ---------------------
                                          2005       2004        2005       2004
                                       ---------- ----------  ---------- ----------
UTILITY OPERATING REVENUES             $ 228,799  $ 214,538   $ 455,688  $ 429,894

UTILITY OPERATING EXPENSES:
 Operation:
   Fuel                                   46,162     49,414      92,533     95,269
   Other operating expenses               35,953     30,688      69,437     58,033
 Power purchased                           6,448      3,181      10,653      5,864
 Maintenance                              21,438     20,384      39,260     40,075
 Depreciation and amortization            33,331     29,350      67,445     58,846
 Taxes other than income taxes             8,870      8,175      18,214     17,104
 Income taxes-net                         25,514     24,202      52,789     52,279
                                       ---------- ----------  ---------- ----------
  Total utility operating expenses       177,716    165,394     350,331    327,470
                                       ---------- ----------  ---------- ----------
UTILITY OPERATING INCOME                  51,083     49,144     105,357    102,424
                                       ---------- ----------  ---------- ----------
OTHER INCOME AND (DEDUCTIONS):
 Allowance for equity funds used
   during construction                       715        299       1,321      1,338
 Gains (loss) on sales of
   assets-net                                 -          (2)          0        852
 Other - net                                (254)    (1,302)        401       (290)
 Income tax benefit-net                    6,514      7,074      12,853     13,288
                                       ---------- ----------  ---------- ----------
  Total other income and
    (deductions)-net                       6,975      6,069      14,575     15,188
                                       ---------- ----------  ---------- ----------
INTEREST AND OTHER CHARGES:
 Interest on long-term debt               27,940     28,198      56,178     56,579
 Other interest                              168        144         308        269
 Allowance for borrowed funds
    used during construction                (354)      (534)       (697)    (1,254)
 Amortization of redemption premiums
    and expense on debt-net                  716        678       1,364      1,282
 Preferred dividends of subsidiary           804        804       1,607      1,607
                                       ---------- ----------  ---------- ----------
  Total interest and
    other charges-net                     29,274     29,290      58,760     58,483
                                       ---------- ----------  ---------- ----------
NET INCOME                             $  28,784  $  25,923   $  61,172  $  59,129
                                       ========== ==========  ========== ==========`

See notes to unaudited consolidated financial statements.

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**IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Unaudited Consolidated Balance Sheets

(In Thousands)**

`June 30,   December 31,
                                                        2005         2004
                                                   ------------- ------------
                      ASSETS
UTILITY PLANT:
 Utility plant in service                          $  3,491,109  $ 3,421,828
 Less accumulated depreciation                        1,403,292    1,356,364
                                                   ------------- ------------
     Utility plant in service - net                   2,087,817    2,065,464
 Construction work in progress                           65,492       76,303
 Property held for future use                             1,085        1,085
                                                   ------------- ------------
     Utility plant - net                              2,154,394    2,142,852
                                                   ------------- ------------
OTHER ASSETS:
 Nonutility property - at cost, less
  accumulated depreciation                                1,494        1,499
 Other investments                                        8,781        7,270
                                                   ------------- ------------
     Other assets - net                                  10,275        8,769
                                                   ------------- ------------
CURRENT ASSETS:
 Cash and cash equivalents                                3,316        3,779
 Short term investments                                   9,100       12,250
 Accounts receivable and unbilled revenue
   (less allowance for doubtful accounts
    of $2,230 and $2,137, respectively)                  54,743       56,125
 Fuel - at average cost                                  21,207       22,392
 Materials and supplies - at average cost                50,306       48,929
 Net income tax refunds receivable                           -         2,998
 Prepayments and other current assets                    14,702        4,543
                                                   ------------- ------------
     Total current assets                               153,374      151,016
                                                   ------------- ------------
DEFERRED DEBITS:
 Regulatory assets                                      155,793      146,678
 Miscellaneous                                           31,798       32,669
                                                   ------------- ------------
     Total deferred debits                              187,591      179,347
                                                   ------------- ------------
             TOTAL                                 $  2,505,634  $ 2,481,984
                                                   ============= ============
          CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
 Common shareholder's deficit:
   Premium on 4% cumulative preferred stock        $        649  $       649
   Paid in capital                                        1,437          791
   Accumulated deficit                                  (44,644)     (58,194)
   Accumulated other comprehensive loss                 (52,170)     (51,328)
                                                   ------------- ------------
     Total common shareholder's deficit                 (94,728)    (108,082)
 Cumulative preferred stock of subsidiary                59,135       59,135
 Long-term debt                                       1,502,080    1,502,064
                                                   ------------- ------------
     Total capitalization                             1,466,487    1,453,117
                                                   -------------  -----------
CURRENT LIABILITIES:
  Accounts payable and accrued expenses                  52,951       55,611
  Dividends payable                                         803          -
  Accrued real estate and personal property taxes        16,422       15,840
  Accrued income taxes                                    6,848        9,700
  Accrued interest                                       26,131       27,869
  Customer deposits                                      12,523       11,706
  Other current liabilities                               9,657        4,847
                                                   ------------- ------------
     Total current liabilities                          125,335      125,573
                                                   ------------- ------------
 DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
 Accumulated deferred income taxes - net                364,070      369,921
 Regulatory liabilities and other removal costs         394,647      382,559
 Unamortized investment tax credit                       24,142       25,464
 Accrued postretirement benefits                          7,574        6,799
 Accrued pension benefits                               110,908      107,080
 Miscellaneous                                           12,471       11,471
                                                   ------------- ------------
     Total deferred credits and other
          long-term liabilities                         913,812      903,294
                                                   ------------- ------------
COMMITMENTS AND CONTINGENCIES (Note 8)

             TOTAL                                 $  2,505,634  $ 2,481,984
                                                   ============= ============`

See notes to unaudited consolidated financial statements.

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**IPALCO ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)**

`Six Months Ended
                                                                       June 30,
                                                                ---------- ---------
                                                                   2005       2004
                                                                ---------  ---------
Cash Flows from Operations:
 Net income                                                    $  61,172  $  59,129
 Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                                 66,562     59,059
    Amortization of regulatory assets                              2,698      1,460
    Deferred income taxes and investment tax credit
      adjustments - net                                          (10,678)    (6,650)
    Gain on sale of land held for sale                                -      (5,922)
    Gain on sales of assets                                           -        (852)
    (Gain) loss on investments                                      (427)       154
    Allowance for funds used during construction                  (1,321)    (1,338)
  Change in certain assets and liabilities:
    Accounts receivable                                            1,382     (4,580)
    Fuel, materials and supplies                                    (192)     3,139
    Income taxes receivable or payable                               146     18,802
    Accounts payable and accrued expenses                         (7,410)     4,591
    Accrued real estate and personal property taxes                  582     (2,007)
    Pension benefits                                               3,828      4,976
    Accrued interest                                              (1,738)     1,811
    Short-term and long-term regulatory assets                   (14,668)        83
    Other - net                                                    2,691     (2,782)
                                                                ---------  ---------
Net cash provided by operating activities                        102,627    129,073
                                                                ---------  ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures - utility                                 (58,127)  (104,603)
  Proceeds from sales of assets                                       -      14,309
  Purchase of short-term investments                            (544,237)  (552,275)
  Proceeds from sales and maturities of
      short-term investments                                     547,387    556,775
  Other                                                           (1,558)    (4,352)
                                                                ---------  ---------
Net cash used in investing activities                            (56,535)   (90,146)
                                                                ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term borrowings                                            2,000       -
  Long-term borrowings                                            71,850     98,957
  Retirement of long-term debt                                   (71,850)   (80,000)
  Dividends on common stock                                      (47,622)   (58,133)
  Other                                                             (933)        -
                                                                ---------  ---------
Net cash used in financing activities                            (46,555)   (39,176)
                                                                ---------  ---------
Net change in cash and cash equivalents                             (463)      (249)
Cash and cash equivalents at beginning of period                   3,779      4,274
                                                                ---------  ---------
Cash and cash equivalents at end of period                     $   3,316  $   4,025
                                                                =========  =========
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
    Interest (net of amount capitalized)                       $  57,728  $  53,787
                                                                =========  =========
    Income taxes                                               $  49,893  $  30,667
                                                                =========  =========`

See notes to unaudited consolidated financial statements.

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IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements



1.  ORGANIZATION

IPALCO Enterprises, Inc. ("IPALCO") is a wholly-owned subsidiary of The AES
Corporation ("AES"). IPALCO owns all of the outstanding common stock of its subsidiaries.
These include its regulated electric utility subsidiary, Indianapolis Power & Light Company
("IPL"), and its unregulated subsidiary, Mid-America Capital Resources, Inc. ("Mid-
America"). Substantially all of IPALCO's business consists of the generation, transmission,
distribution and sale of electric energy conducted through IPL. IPL has more than 460,000 retail
customers in the city of Indianapolis and neighboring cities, towns and communities, and adjacent
rural areas all within the state of Indiana, the most distant point being approximately forty miles
from Indianapolis. IPL has an exclusive right to provide electric service to those customers. IPL
owns and operates two primarily coal-fired generating plants, one combination coal and gas-fired
plant and a separately-sited combustion turbine that are all used for generating electricity. IPL's
net electric generation capability for winter is 3,370 megawatts and net summer capability is 3,252
megawatts. Mid-America conducts IPALCO's unregulated activities.

2.  BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of IPALCO, IPL and
Mid-America. All significant intercompany amounts have been eliminated. The accompanying financial
statements are unaudited; however, they have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP") for interim financial
information and in conjunction with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the disclosures required by GAAP for annual
fiscal reporting periods. In the opinion of management, all adjustments of a normal recurring nature
necessary for fair presentation, have been included. The electric utility business is affected by
seasonal weather patterns throughout the year and, therefore, the operating revenues and associated
operating expenses are not generated evenly by month during the year. These unaudited financial
statements have been prepared in accordance with the accounting policies described in IPALCO's
audited financial statements for the year ended December 31, 2004, included in its annual report on
Form 10-K and should be read in conjunction therewith.

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

Certain prior period amounts have been reclassified to conform to current year presentation. The
accompanying unaudited consolidated balance sheet as of December 31, 2004 reflects a
reclassification of instruments used in IPALCO's cash management program from cash and cash
equivalents to short-term investments of $12.3 million. This reclassification is to present certain
auction rate securities and other highly-liquid instruments as short-term investments rather than as
cash equivalents. The reclassification was made based on recent accounting interpretations
considering the stated tenor of the maturities of these investments. Corresponding changes were also
made to the accompanying unaudited consolidated statements of cash flows. The change resulted in
reductions of $5.2 million and $9.7 million, in amounts presented as cash and cash equivalents June
30, 2004 and December 31, 2003, respectively.

In addition, IPALCO recently
determined that the amounts recorded for both deferred income
taxes and regulatory assets were understated as of December 31, 2004 by $14.6 million.
The December 31, 2004 balances have been adjusted in the accompanying
financial statements to reflect the correction.

Certain other prior period amounts have been reclassified to conform to current year presentation,
all of which management deems to be immaterial individually and in the aggregate with the
reclassifications describe above.

3.  NEW ACCOUNTING PRONOUNCEMENTS

In March 2005, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations, an
interpretation of FASB Statement No. 143" ("FIN 47"). FASB Statement No. 143,
"Accounting for Asset Retirement Obligations" ("SFAS 143"), addressed
financial accounting and reporting for obligations associated with retirement of tangible long-lived
assets and the associated asset retirement costs. FIN 47 clarifies that the term conditional
asset retirement obligation as used in SFAS 143 refers to a legal obligation to perform
an asset retirement activity in which the timing and (or) method of settlement are conditional on a
future event that may or may not be within the control of the entity. FIN 47 also clarifies when an
entity would have sufficient information to reasonably estimate the fair value of an asset
retirement obligation. The provisions of FIN 47 are effective for IPALCO no later than the fiscal
year ending December 31, 2005. Retrospective application for interim financial information is
permitted but is not required. Management is evaluating what impact, if any, the provisions of FIN
47 will have on our financial statements.

In May 2005, the FASB issued FASB Statement No. 154, "Accounting Changes and Error
Corrections" ("SFAS 154"). SFAS 154 replaces APB Opinion No. 20,
"Accounting Changes", and FASB Statement No. 3, "Reporting Accounting
Changes in Interim Financial Statements", and changes the requirements for the accounting
for and reporting of a change in accounting principle. SFAS 154 requires retrospective application
of changes in accounting principle, unless it is impracticable to determine either the period-
specific effects or the cumulative effect of the change. SFAS 154 defines retrospective application
as the application of a different accounting principle to prior accounting periods as if that
principle had always been used or as the adjustment of previously issued financial statements to
reflect a change in the reporting entity. SFAS 154 also redefines restatement as the revising of
previously issued financial statements to reflect the correction of an error. SFAS 154 is effective
for accounting changes and correction of errors made in fiscal years beginning after December 15,
2005.

4.  SEGMENT INFORMATION

IPALCO's operations are made up almost entirely of its ownership of IPL, its consolidated
electric utility, which is a reportable business segment. In addition, IPALCO has outstanding $750
million of Senior Secured Notes; approximately $0.5 million and $0.8 million of nonutility cash and
cash equivalents, as of June 30, 2005 and December 31, 2004, respectively; short-term and long-term
nonutility investments of $16.7 million and $8.3 million at June 30, 2005 and December 31, 2004,
respectively; and income taxes and interest related to those items. There was no utility operating
income other than the activities of IPL during the periods covered by this report. Nonutility assets
represented less than 1% of IPALCO's total assets as of June 30, 2005 and December 31, 2004 and
there were no nonutility capital expenditures during the six month periods ended June 30, 2005 and
2004.

5.  REGULATORY ASSETS

IPL is a transmission owner of the Midwest Independent Transmission System Operator, Inc.
("Midwest ISO") network and receives a portion of the transmission service revenues from
all wholesale kWh sales on the network based on its percentage of transmission system investment
within the Midwest ISO footprint. In addition, IPL pays the Midwest ISO a transmission cost adder on
its retail load and a fee for each wholesale transaction. A portion of the transmission cost adder
paid to the Midwest ISO is deferred as a regulatory asset and the remaining transmission costs,
along with all transaction fees, are expensed in other operating expenses.

Midwest Independent Transmission System Operators "Day 2" Operations.
Energy transactions under the Open Access Transmission and Energy Markets Tariff became
financially binding April 1, 2005 ("Day 2"). This initiative includes a market-based
transmission congestion management system that relies on Locational Marginal Pricing
("LMP"), i.e., pricing for energy at a given location based on a market clearing
price that takes into account physical limitations, generation and demand throughout the Midwest ISO
region. Market participants are able to hedge their exposure to congestion by acquiring certain
Financial Transmission Rights ("FTRs") which offset congestion related charges.
Participants are allocated FTRs each year and are permitted to purchase additional FTRs.
Expenses related to congestion charges and/or FTRs were not material to our
financial statements during the current period.
On July 9 2004, IPL and other Indiana utilities filed a joint petition with the Indiana Utility Regulatory
Commission (the "IURC") requesting approval of certain changes in operations and
determination of cost recovery resulting from the Midwest ISO implementation of day-ahead and real-
time energy markets. On June 1, 2005, the IURC issued an order approving the changes in operations
and allowing for recovery of the Midwest ISO components of the cost of fuel through fuel adjustment
charge proceedings as well as the deferral of certain administrative and socialized Midwest ISO
costs. The deferral treatment of Midwest ISO costs has increased our regulatory assets by $6.7
million during the six months ended June 30, 2005.

IPL's regulated operations are subject to SFAS No. 71.  Accordingly, IPL records assets and
liabilities that result from the regulated ratemaking processes that would not be recorded under
GAAP for non-regulated entities if it is probable that there will be a corresponding increase or
decrease in future rates through the rate-making process.  Accordingly, IPL has deferred certain
costs, which will be amortized over various future periods.  These costs are deferred based on rate
orders issued by the IURC or from IPL's experience with prior rate cases.  As of June 30, 2005 and
December 31, 2004, there were no regulatory liabilities on the accompanying unaudited consolidated
balance sheets.

The amounts of regulatory assets are as follows:

`June 30,  December 31,          Recovery
                                         2005       2005                Period
                                      ----------------------   -------------------------
                                          In Thousands

Related to Deferred Income Taxes        $99,644     $96,140    Various
Unamortized reacquisition premium                              Over remaining
   on debt (1)                           15,790      15,463     life of debt

Unamortized Petersburg
   unit 4 carrying charges
   and certain other costs               22,320      22,847    Through 2026 (1)(2)
Deferred Midwest ISO costs (2)           14,453       7,791    To be determined
Nox project expenses - Pete Unit 2
   Precipitator                           2,382       2,488    Through 2021 (2)
NOx project expenses                        817       1,726    Through 2026 (2)
Air Conditioning Load Management
   (Demand Management)                      178         143    Through 2006 (2)
Other Demand Side Mgmt Program Costs        209          80    Through 2006 (1)(2)
                                      ---------- -----------
   Total Regulatory Assets             $155,793    $146,678
                                      ========== ===========`

(1) Recovered with a current return 
(2) Recovered per specific rate orders

Deferred Income Taxes: This amount represents the portion of deferred income taxes that
will be recovered through future rates, based upon established regulatory practices, which permit
the recovery of current taxes.  Accordingly, this regulatory asset is offset by a deferred tax
liability and is expected to be recovered, without interest, over the period underlying book-tax
timing differences reverse and become current taxes.

Deferred Midwest ISO costs: These consist of administrative and socialized costs from IPL's participation
in the Midwest ISO market. We received an order from the IURC that granted authority for the
deferral of Midwest ISO administrative and socialized costs for recovery in a future base rate case.

6.  INDEBTEDNESS

During April 2005, IPL issued, in two separate series, $71.9 million of variable-rate first
mortgage bonds. The interest rate for each series is established through a weekly auction.
The initial interest rate on both series was 2.25%. The
2005A Series bonds in the principal amount of $41.9 million mature January 1, 2016. The 2005B Series
bonds in the principal amount of $30.0 million mature October 1, 2023. In May 2005, the net proceeds
of the new debt were used to retire two series of existing fixed-rate first mortgage bonds: (i)
$41.9 million at 6.1% maturing January 2016 and (ii) $30.0 million at 5.5% maturing October 2023.

In May 2005, IPL amended three financing arrangements to extend the maturity
dates. IPL's $45 million committed line of credit was
extended to May 18, 2006. IPL's credit agreement, which includes a $30 million committed line of
credit and a $40.6 million liquidity facility (related to $40 million of IPL variable rate bonds,
which are remarketed weekly), was extended to May 30, 2006. IPL's receivable sale agreement was
extended to May 30, 2006.

7.  PENSION BENEFITS

Employees' Retirement Plan: Most of IPL's employees are covered by the Employees'
Retirement Plan of Indianapolis Power & Light Company (the "Defined Benefit Pension
Plan"). The Defined Benefit Pension Plan is noncontributory and is funded through a trust.
Benefits are based on each individual employee's pension band and years of service as opposed to
their compensation. Pension bands are based primarily on job duties and responsibilities.

Supplemental Retirement Plan: Additionally, a select group of former management employees
of IPALCO and IPL who have terminated vested benefits are covered under a funded supplemental
retirement plan.

Pension Funding: IPL's funding policy for the Defined Benefit Pension Plan and the
supplemental retirement plan (the "Pension Plans") is to contribute annually not less than
the minimum required by applicable law, nor more than the maximum amount that can be deducted for
federal income tax purposes. IPL has not made any contributions to the Pension Plans during the
first six months of 2005. Depending on the timing of contributions, pending legislation, and other
factors related to our funding strategy, we estimate potential cash contributions to the Pension
Plans of up to $25 million in 2005, but we may elect not to make any contributions since none are
anticipated to be required to meet our minimum funding targets. We do, however, anticipate larger
pension funding commitments in 2006. This estimate is based on actuarial assumptions using a
discount rate of 6.0% and an assumed long-term rate of return on plan assets of 8.0%.

The following table presents information relating to the Defined Benefit Pension Plan and
supplemental retirement plan:

`For the Three Months    For the Six Months
                                         Ended June 30,          Ended June 30,
                                      --------------------    --------------------
                                         2005      2004          2005      2004
                                      --------------------    --------------------
Pension Benefits                            (IN THOUSANDS)

Components of net periodic
  benefit cost
Service cost                             $1,034      $913        $2,067    $1,827
Interest cost                             6,473     6,426        12,946    12,852
Expected return on plan assets           (6,489)   (6,788)      (12,978)  (13,505)
Amortization of prior service cost          116        34           233        67
Recognized actuarial gain                   780       953         1,561     1,906
                                      --------------------    --------------------
Net periodic benefit cost                $1,914    $1,538        $3,829    $3,147
                                      ====================    ====================`



8.  COMMITMENTS AND CONTINGENCIES

Legal

IPALCO and certain former officers and directors of IPALCO are named as defendants in
class action lawsuits under the Employment Retirement Income Security Act ("ERISA") and
the Federal securities laws (see below), respectively, each filed in the U.S. District Court for the
Southern District of Indiana, and each making allegations regarding matters arising from the
acquisition of IPALCO by AES. The class action ERISA lawsuit was filed in March 2002 and the class
action lawsuit under the Federal securities laws was filed in September 2002. The ERISA suit alleges
breach of fiduciary duties with respect to shares held in IPL's 401(k) thrift plan. IPALCO filed a
motion for summary judgment in the ERISA suit in October 2003, as did the plaintiffs. On August 11,
2005, an Order was entered denying both motions for summary judgment. The Order indicates that the
court will meet with counsel in the near future to schedule a bench trial addressed to the fiduciary
duty issues. While we cannot predict the outcomes, we do not believe that the suits will have a
material adverse effect on IPALCO's consolidated financial statements.

In September 2002, IPALCO and certain of its former officers and directors were sued in the U.S.
District Court for the Southern District of Indiana in connection with IPALCO's acquisition by AES.
That suit was consolidated with other actions in that court with the result that until recently, the
only remaining IPALCO defendants were three former officers who were insured under IPALCO's
liability insurance policies. The lawsuit was filed on behalf of all persons who exchanged their
shares of IPALCO common stock for shares of AES common stock. The complaint alleged violations of
Section 11 of the Securities Act; Sections 10(b), 14(a) and 20(a) of the Exchange Act and Rules 10b-
5 and 14a-9. On November 17, 2004, the court entered an order dismissing the claims against the
former IPALCO officers and, on July 7, 2005, dismissed all claims against all remaining defendants.
The plaintiffs' right to file an appeal expired on August 8, 2005.

Since May 2003, IPALCO, IPL, AES and certain former directors and officers of IPALCO and/or IPL
received subpoenas from the Securities Division of the Indiana Secretary of State seeking
information related to the acquisition of IPALCO by AES. IPALCO, IPL, AES and the individuals have
produced various materials in response to the subpoenas and otherwise cooperated with the Secretary
of State in connection with the inquiry. While we cannot predict the outcome, we do not expect this
matter to have a material adverse effect on IPALCO's consolidated financial statements.

In November 2002, IPL was sued in a Fair Labor Standards Act ("FLSA") collective action lawsuit
filed in the U.S. District Court for the Southern District of Indiana. The complaint alleges that
certain of IPL's current and former employees were not paid overtime pay at the rate required by the
FLSA. We believe that IPL did not violate the FLSA. While we cannot predict the outcome, we do not
believe the suit will have a material adverse effect on IPALCO's consolidated financial statements.

Many years ago, IPL obtained, through purchases from several owners, a substantial tract of land
as a potential site for a future power plant. IPL later determined it no longer intended to build a
power plant on that land and sold it in 2004. In September 2004, a former owner of a parcel included
within IPL's land sued IPL in Morgan County Superior Court in a purported class action to force IPL
to pay any profit on the sale to the various former owners, as well as profits received from ground
leases and timber sales. The plaintiff contended, in essence, that IPL obtained the various parcels
through eminent domain or the threat of eminent domain and alleged violations of Indiana's eminent
domain statute, conversion and unjust enrichment. IPL believes the suit is without merit. At this
time discovery has not yet begun and the court has not certified a class. While we cannot predict
the outcome, we do not expect the matter will have a material adverse effect on IPALCO's
consolidated financial statements.

As of June 30, 2005 and December 31, 2004, IPL is a defendant in approximately 112 and 113
pending lawsuits, respectively, alleging personal injury or wrongful death stemming from exposure to
asbestos and asbestos containing products formerly located in IPL power plants. IPL has been named
as a "premises defendant" in that IPL did not mine, manufacture, distribute or install
asbestos or asbestos containing products. These suits have been brought on behalf of persons who
worked for contractors or subcontractors hired by IPL. IPL has insurance which may cover some
portions of these claims; currently, these cases are being defended by counsel retained by various
insurers who wrote policies applicable to the period of time during which much of the exposure has
been alleged.

IPL has settled a number of asbestos related lawsuits for amounts which, individually and in the
aggregate, are not material to IPL or IPALCO's financial position, results of operations, or cash
flows. Historically, settlements paid on IPL's behalf have been comprised of proceeds from one or
more insurers along with comparatively smaller contributions by IPL. Although we do not believe that
any of the pending asbestos suits in which IPL is a named defendant will have a material adverse
effect on IPALCO's business or operations, we are unable to estimate the number of, the effect of,
or losses or range of loss which are reasonably possible from, these or any additional asbestos
suits. Furthermore, we are unable to estimate the portion of a settlement amount, if any, that may
be paid from any insurance coverage for any known or unknown claims. Accordingly, we cannot assure
that the pending or any additional suits will not have a material adverse effect on IPALCO's
consolidated financial statements.

In addition, IPALCO and IPL are involved in litigation arising in the normal course of business.
While the results of such litigation cannot be predicted with certainty, management, based upon
advice of counsel, believes that the final outcome will not have a material adverse effect on
IPALCO's consolidated financial statements.

Environmental

We are subject to various federal, state and local environmental protection and health
and safety laws and regulations governing, among other things, the generation, storage, handling,
use, disposal and transportation of hazardous materials; the emission and discharge of hazardous and
other materials into the environment; and the health and safety of our employees. These laws and
regulations often require a lengthy and complex process of obtaining and renewing permits and other
governmental authorizations from federal, state and local agencies. Violation of these laws,
regulations or permits can result in substantial fines, other sanctions, permit revocation and/or
facility shutdowns. We believe that we operate in material compliance with environmental laws,
regulations and permits and health and safety laws. We cannot assure, however, that we have been or
will be at all times in full compliance with such laws, regulations and permits. Please see Note 12
"Commitments and Contingencies - Environmental" of IPALCO's audited financial statements
for the year ended December 31, 2004, included in its annual report on Form 10-K, for a more
comprehensive discussion of environmental matters impacting IPALCO and IPL.

---

Item 2.	Management's Discussion And Analysis Of Financial Condition And Results Of
Operations

Cautionary Note Regarding Forward-Looking Statements

This Report on Form 10-Q includes ``forward-looking statements''
including, in particular, the statements about our plans, strategies and prospects under the heading
``Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.''
Forward-looking statements express an expectation or belief and contain a projection, plan or
assumption with regard to, among other things, our future revenues, income or capital structure.
Such statements of future events or performance are not guarantees of future performance and involve
estimates, assumptions and uncertainties. The words "could," "may," "predict," "anticipate,"
"would," "believe," "estimate," "expect," "forecast," "project," "objective," and
similar expressions are intended to identify forward-looking statements.

Some important factors that could cause our actual results or outcomes to differ materially from
those discussed in the forward-looking statements include, but are not limited to:

- changes in our credit ratings
- performance of pension plan assets
- fluctuations in customer growth and demand
- weather and weather-related damage
- fuel costs
- generating unit availability and capacity
- transmission and distribution system reliability and capacity
- purchased power costs and availability
- regulatory action
- our ownership by The AES Corporation
- federal and state legislation
- changes in financial or regulatory accounting policies
- environmental matters
- interest rates and the availability and other cost of capital
- labor strikes or other workforce factors
- unanticipated maintenance and capital expenditures
- local economic conditions
- acts of terrorism
- unanticipated generation outages, facility maintenance or repairs
- costs and effects of legal and administrative proceedings, settlements, investigations and
claims and the ultimate disposition of litigation
- industry restructuring, deregulation and competition
- issues related to our participation in the Midwest ISO, including recovery of costs
incurred
- product development and technology changes

Most of these factors affect us through our consolidated subsidiary Indianapolis Power &
Light Company. All such factors are difficult to predict, contain uncertainties that may materially
affect actual results and many are beyond our control. We undertake no obligation to publicly update
or review any forward-looking information, future events or otherwise.

Overview

IPALCO Enterprises, Inc. is a holding company incorporated under the laws
of the state of Indiana. Our principal subsidiary is Indianapolis Power & Light Company, a
regulated electric utility operating in the state of Indiana. Substantially all of our business
consists of the generation, transmission, distribution and sale of electric energy conducted through
IPL. Our other direct subsidiary, Mid-America Capital Resources, Inc., is the holding company for
our unregulated activities. Mid-America's only significant investment is a small minority ownership
interest in EnerTech Capital Partners II L.P., a venture capital fund. The investment was valued at
$4.9 million, as of June 30, 2005. Our business segments are electric and "all other."

IPL is engaged primarily in generating, transmitting, distributing and selling electric energy to
more than 460,000 retail customers in the city of Indianapolis and neighboring areas within the
state of Indiana. IPL has an exclusive right to provide electric service to those customers. IPL
owns and operates four generating stations, all within the state of Indiana. Historically,
approximately 99% of the total electricity produced by IPL was generated from coal. Natural gas and
fuel oil combined to provide the remaining kWh generation (primarily for peaking capacity). IPL's
net electric generation capability for winter and summer is 3,370 and 3,252 megawatts, respectively.
Our overall corporate mission is to serve our community's need for electric power in ways that
benefit all of our stakeholders, to build long-term value for our shareholder, and to assure
sustained excellence in performance for our owner, our people, and other individuals and
organizations which depend upon our company.

Midwest Independent Transmission System Operators "Day 2" Operations.
Energy transactions under the Open Access Transmission and Energy Markets Tariff became
financially binding April 1, 2005 ("Day 2"). This initiative includes a market-based
transmission congestion management system that relies on Locational Marginal Pricing
("LMP"), i.e., pricing for energy at a given location based on a market clearing
price that takes into account physical limitations, generation and demand throughout the Midwest ISO
region. As anticipated and in keeping with similar market start-ups around the world, LMPs are
volatile and there are process, data, and model issues requiring editing and enhancement. IPL and
other market participants have raised concerns with certain Midwest ISO transactions and the
resolution of these items could impact our results of operations. Market participants are able to
hedge their exposure to congestion with certain Financial Transmission Rights ("FTRs")
which offset congestion related charges. Participants are allocated FTRs each year and
are permitted to purchase additional FTRs. Expenses related to congestion charges and/or FTRs
were not material to our financial statements during the current period and we do not
expect them to be material in the near term. IPL was a participant in the pre market trials and
continues to be engaged in Day 2 operations as both a market participant and a participant in
helping to resolve the remaining process and data issues.

On July 9, 2004, IPL and other Indiana utilities filed a joint petition with the IURC requesting
approval of certain changes in operations and determination of cost recovery resulting from the
Midwest ISO implementation of Day 2 Operations. On June 1, 2005, the IURC issued an
order (the "Midwest ISO Order") approving the changes in operations and allowing for
recovery of the Midwest ISO components of the cost of fuel through fuel adjustment charge
proceedings as well as the deferral of certain administrative and socialized Midwest ISO costs.
Total deferred Midwest ISO costs were $7.8 million and $14.5 million as of December 31, 2004 and
June 30, 2005, respectively (See also Note 5).

Material changes in our consolidated financial condition and results of operations, except where
noted, are attributed to the operations of IPL. Consequently, the following discussion is centered
on IPL.

Results Of Operations

The electric utility business is affected by seasonal weather patterns
throughout the year and, therefore, the operating revenues and associated operating expenses are not
generated evenly by month during the year.

Comparison of Quarters Ended June 30, 2005 and June 30, 2004

Our second quarter 2005 net income of $28.8 million increased $2.9 million from net
income of $25.9 million in the second quarter of 2004. The following discussion highlights the
significant factors contributing to this change.

Utility Operating Revenues

Utility operating revenues increased by $14.3 million during the three months ended June 30,
2005 compared to the prior year as a result of the following (dollars in thousands):

`June 30,     June 30,     Increase   Percentage
                                  2005         2004      (Decrease)    Change
                              --------------------------------------------------
Retail Revenues                  $209,148      $196,063     $13,085         6.7%
Wholesale Revenues                 14,439        14,212         227         1.6%
Miscellaneous Revenues              5,212         4,263         949        22.3%
                              --------------------------------------
Total Operating Revenues         $228,799      $214,538     $14,261         6.6%
                              ======================================

Heating Degree Days                   487           401          86        21.4%
Cooling Degree Days                   353           360          (7)       (1.9%)`

The 6.7% increase in retail revenues was primarily due to a 4.6% increase in the weighted average
price of retail kWhs sold (approximately $9.1 million) and a 2.0% increase in the quantity of kWhs
sold ($4.0 million). The increase in the price of retail kWhs sold is primarily the result of costs
associated with IPL's NOx compliance construction program recovered through rates ($5.2
million), an 8.7% increase in the price of electricity sold to our non jurisdictional retail
customers ($1.3 million) which recognizes increases in our cost to produce electricity and an
increase in fuel costs charged to residential customers in 2005 (approximately $0.3 million). The
increase in the quantity of retail kWhs sold is primarily due to a 21.4% increase in heating degree
days during the quarter and because we increased our retail customer base by approximately 3,500
customers or 0.7% from June 30, 2004 to June 30, 2005. Wholesale prices in the Midwest ISO Day 2
market, which began April 1, 2005 were based upon cleared cost-based generation offers and demand
bids during the first 60 days of the market. After the first 60 days, market prices are based upon
cleared market-based generation offers and demand bids. The increase in wholesale revenues was
primarily due to a 21.8% increase in the average price of wholesale kWhs sold (approximately $3.1
million), partially offset by a 16.6% decrease in the quantity of wholesale kWhs sold (approximately
$2.9 million). The price of wholesale electricity is impacted by increases in fuel prices, coal
transportation costs and environmental emission allowance prices, as well as the supply of
electricity and demand for electricity. The quantity of wholesale kWh sales is impacted primarily by
our replacement cost of coal, the market price of electricity, our retail load requirements and our
generation capacity and unit availability.

Utility Operating Expenses

The following table illustrates the primary operating expense changes from the quarter ended
June 30, 2004 to the quarter ended June 30, 2005 for IPALCO (in millions):

`Operating Expenses for the Quarter Ended June 30, 2004          $165.4
Increase in depreciation and amortization                          4.0
Increase in cost of power purchased                                3.3
Increase in wages and benefits                                     3.0
Land sale gain in 2004                                             1.8
Decrease in fuel expenses                                         (3.3)
Other miscellaneous variances                                      3.5
                                                            -----------
Operating Expenses for the Quarter Ended June 30, 2005          $177.7
                                                            ===========`



The increase in depreciation and amortization is primarily due to a $1.6 million increase in
depreciation on $156.9 million of equipment placed in service in May of 2004 and $53.5 million
placed in service in May 2005 designed to reduce NOx emissions and a $1.8 million increase in
amortization of regulatory assets related to such equipment. Purchased power expense increased $3.3
million, primarily due to $3.1 million of Midwest ISO Day 2 purchased power expenses including costs
recoverable through the fuel adjustment clause. The increase in wages and employee benefits includes
a $1.5 million increase in payroll costs, a $0.5 million increase in employee group insurance
benefit expenses and a $0.5 million increase in pension and other postretirement benefits. The
increase in payroll costs reflects annual wage increases and additional employees. The increase in
employee group insurance benefit expenses results primarily from escalating health insurance
premiums and additional employees. The increase in pension and postretirement benefits is primarily
due to increased service costs ($0.3 million) and because we decreased the expected return rate on
the defined benefit pension plan assets from 8.5% in 2004 to 8.0% in 2005 ($0.3 million). The gain
on the sale of land held for sale, recorded as a reduction of other operating expenses, is a portion
of the total gain of $5.9 million recognized during 2004 for the sale of approximately 4,000 acres
of undeveloped property near Martinsville, Indiana. The remaining $4.1 million gain was recognized
in the first quarter of 2004.

The decrease in fuel expenses is primarily driven by a decrease in the deferred fuel adjustments
($7.5 million), partially offset by an increase in the cost of fuel ($4.9 million). The deferred
fuel adjustment is the result of variances between estimated fuel costs in IPL's fuel adjustment
charge and actual fuel costs. IPL is permitted to recover underestimated fuel costs in future rates
through the fuel adjustment charge proceeding and therefore the costs are deferred and amortized
into expense in the same period that IPL's rates are adjusted. The increase in fuel costs is driven
by an 8.6% increase in the average price of coal consumed and because we produced a greater portion
of our electricity during 2005 using peaking unit resources as a result of average temperatures in
June of 2005 being significantly higher than normal.

Additionally, we expect maintenance expenses to be higher in 2006 as more scheduled unit
overhauls are planned to coincide with our environmental compliance construction program.

Furthermore, while we continued to rely on our SO2 air emissions allowance bank to
remain in compliance with EPA SO2 regulations in the second quarter of 2005, we will be
purchasing SO2 air emissions allowances during the second half of 2005 and in 2006. In
July 2005, we purchased 3,500 SO2 air emissions allowances at the then current market
price of $840 per ton, for a total of $2.9 million. The market price for SO2 air
emissions allowances has risen significantly in recent years. The price per ton of SO2
air emissions allowances has increased from approximately $150 on January 1, 2003 to over $700 in
December 2004 to approximately $860 in August 2005. Because the price of such allowances has been
volatile, it is difficult to predict what our cost may be in the future, but we do expect our
SO2 air emissions allowance costs to increase in the second half of 2005 and in 2006
relative to prior years.

Other Income and Deductions

Other income and deductions increased from income of $6.1 million in the second quarter of
2004 to $7.0 million in the second quarter of 2005. This increase includes a $0.4 million increase
in the allowance for funds used during construction related to the NOx compliance
construction program and various smaller miscellaneous items. These increases are partially offset
by a $0.6 million decrease in the income tax benefit resulting primarily from a $1.5 million
increase in the pretax nonoperating net loss.

Interest and Other Charges

Interest and other charges was $29.3 million in each of the quarters ended June 30, 2005 and
2004.

Comparison of Six Month Periods Ended June 30, 2005 and June 30, 2004

Our net income during the six month period ended June 30, 2005 increased by $2.0
million to $61.2 million from the $59.1 million in the same period in 2004. The following discussion
highlights the significant factors contributing to this change.

Utility Operating Revenues

Utility operating revenues increased by $25.8 million during the six months ended June 30,
2005 compared to the prior year as a result of the following (dollars in thousands):

`June 30,     June 30,     Increase   Percentage
                                  2005         2004      (Decrease)    Change
                              --------------------------------------------------
Retail Revenues                  $419,760      $397,551     $22,209         5.6%
Wholesale Revenues                 27,244        24,586       2,658        10.8%
Miscellaneous Revenues              8,684         7,757         927        12.0%
                              --------------------------------------
Total Operating Revenues         $455,688      $429,894     $25,794         6.0%
                              ======================================

Heating Degree Days                 3,163         3,181         (18)       (0.6%)
Cooling Degree Days                   353           363         (10)       (2.8%)`



The 5.6% increase in retail revenues was primarily due to a 4.9% increase in the weighted
average price per kWh sold (approximately $19.6 million), which is primarily the result of costs
associated with our NOx compliance construction program ($13.2 million), an increase in
fuel costs charged to residential customers in 2005 (approximately $2.3 million) and a 7.4% increase
in the price of electricity sold to our non jurisdictional retail customers ($2.2 million) which
recognizes increases in our cost to produce electricity. In addition, we increased our retail
customer base by approximately 3,500 customers or 0.7% from June 30, 2004 to June 30, 2005. The
increase in wholesale revenues was primarily due to a 26.6% increase in the price of wholesale kWhs
sold (approximately $6.5 million), partially offset by a 12.4% decrease in the quantity of wholesale
kWhs sold (approximately $3.9 million). As described previously, the price of wholesale electricity
is impacted by increases in fuel prices, coal transportation costs and environmental emission
allowance prices, as well as the supply of electricity and demand for electricity. The quantity of
wholesale kWh sales is impacted primarily by our replacement cost of coal, the market price of
electricity, and our generation capacity and unit availability.

Utility Operating Expenses

The following table illustrates the primary operating expense changes from the six month
ended June 30, 2004 to the six months ended June 30, 2005 for IPALCO (in millions):

`Operating Expenses for the Six Months Ended June 30, 2004       $327.5
Increase in depreciation and amortization                          8.6
Land sale gain in 2004                                             5.9
Increase in wages and benefits                                     5.8
Increase in cost of power purchased                                4.8
Decrease in fuel expenses                                         (2.7)
Other miscellaneous variances                                      0.4
                                                            -----------
Operating Expenses for the Six Months Ended June 30, 2005       $350.3
                                                            ===========`



The increase in depreciation and amortization is primarily due to a $4.0 million increase in
depreciation on $156.9 million of equipment placed in service in May of 2004 and $53.5 million
placed in service in May 2005 designed to reduce NOx emissions and a $3.2 million increase in
amortization of regulatory assets related to such equipment. The gain from the sale of land held for
sale, recorded as a reduction of other operating expenses, was recognized during 2004 for the sale
of approximately 4,000 acres of undeveloped property near Martinsville, Indiana. The increase in
wages and employee benefits includes a $2.8 million increase in payroll costs, a $1.1 million
increase in employee group insurance benefit expenses and a $1.0 million increase in pension and
other postretirement benefits. The increase in payroll costs reflects annual wage increases and
additional employees. The increase in employee group insurance benefit expenses results primarily
from escalating health insurance premiums and additional employees. The increase in pension and
postretirement benefits is primarily due to increased service costs ($0.6 million) and because we
decreased the expected return rate on the defined benefit pension plan assets from 8.5% in 2004 to
8.0% in 2005 ($0.5 million). Purchased power expense increased $4.8 million, primarily due to a $3.9
million price increase including $3.1 million of Midwest ISO Day 2 purchased power expenses,
including costs recoverable through the fuel adjustment clause. In addition, we purchased 14.7% more
kWhs ($0.9 million) during the six months ended June 30, 2005, as compared to the same period in
2004.

The decrease in the fuel expenses is primarily driven by deferred fuel ($8.7 million) partially
offset by an increase in fuel costs ($7.0 million). The deferred fuel adjustment is the result of
variances between estimated fuel costs in IPL's fuel adjustment charge and actual fuel costs. Our
fuel costs have risen 7.8% in the comparative periods, primarily as a result of a 7.0% increase in
the average price of coal consumed and because we produced a greater portion of our electricity
during 2005 using peaking unit resources as a result of average temperatures in June of 2005 being
significantly higher than normal.

Other Income and Deductions

Other income and deductions decreased slightly from income of $15.2 million to $14.6 million
during the six month periods ended June 30, 2004 and 2005, respectively, primarily due to a $0.9
million gain on the sale of noncore real estate assets in 2004.

Interest and Other Charges

Interest and other charges increased less than 1% during the six month period ended June 30,
2005 as compared to the same period in 2004, but included a 44.4% decrease in the allowance for
borrowed funds used during construction. This decrease is primarily related to the NOx
compliance construction program.

Liquidity and Capital Resources

As of June 30, 2005, IPALCO had cash and cash equivalents of $3.3 million
and highly liquid short-term investments of $9.1 million. In addition, as of June 30, 2005, IPL has
available borrowing capacity of $72.3 million under its $75.0 million committed credit facilities
after outstanding borrowings of $2.0 million and existing letters of credit. All long-term
borrowings by IPL must first be approved by the IURC and the aggregate amount of IPL's short-term
borrowings must be approved by FERC. IPL has approval from FERC to borrow up to $500 million of
short-term indebtedness outstanding at any time through July 29, 2006. IPL and IPALCO also have
restrictions on the amount of new debt that may be issued due to contractual obligations of AES and
by financial covenant restrictions under their existing debt obligations. Under such restrictions,
IPL is generally allowed to fully draw the amounts available on its committed credit facilities,
refinance existing debt, issue an additional $30 million of long-term debt approved by the IURC and
incur certain other indebtedness. We believe that existing cash balances, cash generated from
operating activities and borrowing capacity on IPL's committed credit facilities will be adequate on
a short-term and long-term basis to meet anticipated operating expenses, interest expense on
outstanding indebtedness, recurring capital expenditures and pay dividends to AES. Sources for
principal payments on outstanding indebtedness and nonrecurring capital expenditures are expected to
be obtained from: (i) existing cash balances; (ii) cash generated from operating
activities; (iii) borrowing capacity on IPL's committed credit facilities and
(iv) additional debt financing.

We actively invest a portion of our available cash balances in various financial instruments,
such as tax-exempt debt securities that frequently have stated maturities of 20 years or more and
taxable and tax-exempt auction rate securities. These instruments provide for a high degree of
liquidity through features such as daily and seven day notice put options and 7, 28, and 35 day
auctions which allow for the redemption of the investments at their face amounts plus earned income.
As we intend to sell these instruments within one year or less, they are classified as current
assets.

During April 2005, IPL issued, in two separate series, $71.9 million of variable-rate first
mortgage bonds. The interest rate for each series is established through a weekly auction.
The initial interest rate on both series was 2.25%. The
2005A Series bonds in the principal amount of $41.9 million mature January 1, 2016. The 2005B Series
bonds in the principal amount of $30.0 million mature October 1, 2023. In May 2005, the net proceeds
of the new debt were used to retire two series of existing fixed-rate first mortgage bonds: (i)
$41.9 million at 6.10% maturing January 2016 and (ii) $30.0 million at 5.5% maturing October 2023.

In May 2005, IPL amended three financing arrangements to extend the maturity dates. IPL's $45
million committed line of credit was extended to May 18, 2006. IPL's credit agreement, which
includes a $30 million committed line of credit and a $40.6 million liquidity facility (related to
$40 million of IPL variable rate bonds, which are remarketed weekly), was extended to May 30, 2006.
IPL's receivable sale agreement was extended to May 30, 2006.

Capital Requirements.  Our capital requirements are primarily related to IPL's
construction expenditures needed to meet customers' needs for electricity and for environmental
compliance. IPL's capital expenditures totaled $58.1 million during the six months ended June 30,
2005. This represented a decrease of $46.5 million from the comparable period in 2004, primarily
because expenditures associated with NOx emission reductions have decreased as the NOx
compliance construction program nears completion. Construction expenditures during the first six
months of 2005 were financed with internally generated cash provided by operations. IPL's
construction program is composed of capital expenditures necessary for prudent utility operations
and compliance with environmental laws and regulations, along with discretionary investments
designed to improve overall performance. Our capital expenditure program for the three-year period
2005-2007 is currently estimated to be approximately $476 million. The estimated cost of the overall
program by year is $134 million in 2005, $215 million in 2006 and $127 million in 2007. It
includes approximately $131 million for additions, improvements and extensions to transmission and
distribution lines, substations, power factor and voltage regulating equipment, distribution
transformers and street lighting facilities. The capital expenditure program also includes
approximately $28 million for construction projects designed to reduce NOx emissions;
$204 million for construction projects designed to reduce SO2 and mercury emissions; $102
million for power plant related projects; and $11 million primarily for miscellaneous office
equipment and furniture.

Pension Funding.  IPL has not made any contributions to the Pension Plans during
2005. Depending on the timing of contributions, pending legislation, and other factors related to
our funding strategy, we estimate potential cash contributions to the Pension Plans of up to $25
million in 2005, but we may elect not to make any contributions since none are anticipated to be
required to meet our minimum funding targets. We do, however, anticipate pension funding commitments
in 2006 to be greater than $25 million. This estimate is based on actuarial assumptions using a
discount rate of 6.0% and an assumed long-term rate of return on plan assets of 8.0%.

Dividends.  All of our outstanding common stock is held by AES. During the first
six months of 2005, we paid $47.6 million in dividends to AES. Future distributions will be
determined at the discretion of our board of directors and will depend primarily on dividends
received from IPL. Dividends from IPL are affected by IPL's results of operations, cash flows, the
timing of financings, financial condition, capital requirements, regulatory considerations, and such
other factors as IPL's board of directors deems relevant.

Other Regulatory Matters

Purchased Power

Fuel Adjustment Charge Proceeding. In our most recent quarterly fuel adjustment
charge proceeding, the IURC issued an order ("the FAC Order") which stated that our
request for recovery of the Midwest ISO components of the cost of fuel was in conformance with the
Midwest ISO Order. The Office of the Utility Consumer Counselor (the "OUCC") is
responsible for reviewing the costs included in our fuel filings and they are working with each of
the Indiana utilities, including IPL, to better understand the Midwest ISO Day 2 costs. Due to the
continued discussions with the OUCC about the implementation of the Midwest ISO Order as well as
questions regarding our jurisdictional allocators, the FAC Order in the fuel adjustment charge
proceeding stated that the rates approved should be interim rates, subject to refund. The allocators
referenced in the FAC Order are used to determine our jurisdictional net operating income.

Domenici-Barton Energy Policy Act of 2005. On August 8, the Domenici-Barton Energy Policy Act of 2005 (the "Energy Bill") was signed into law.
We are in the process of reviewing the Energy Bill to determine what affect it may have on us.

---

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Not applicable pursuant to General Instruction H of the Form 10-Q.

---

Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Based upon the controls evaluation performed, the CEO and CFO have evaluated the effectiveness of
our disclosure controls and procedures in ensuring that the information required to be disclosed in
our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, including ensuring that such information is accumulated and
communicated to management as appropriate to allow timely decisions regarding required disclosure.
Based on such evaluation, our CEO and CFO have concluded that such disclosure controls and
procedures were effective, as of June 30, 2005 (the end of the period covered by this Quarterly
Report on Form 10-Q).

Changes in Internal Controls:  On April 1, 2005, the Midwest ISO Day 2 market
became effective which impacted IPL's electric generation business and purchased power processes. In
connection with the implementation of Midwest ISO Day 2, we have implemented new processes and
modified existing processes to facilitate our participation in the Midwest ISO market, including the
transaction settlement process. IPL and other market participants have raised concerns with
certain transactions and the resolution of these items could impact our results of operations. There
have not been any other changes in our internal control over financial reporting (as such term is
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter to which this
report relates that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.



Compliance with Section 404 of the Sarbanes Oxley Act of 2002.  Beginning with the year
ending December 31, 2006, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include
an internal control report of management with our annual report on Form 10-K. The internal control
report must contain (1) a statement of management's responsibility for establishing and maintaining
adequate internal controls over financial reporting for our Company, (2) a statement identifying the
framework used by management to conduct the required evaluation of the effectiveness of our internal
controls over financial reporting, (3) management's assessment of the effectiveness of our internal
controls over financial reporting as of the end of our most recent fiscal year, including a
statement as to whether or not our internal controls over financial reporting are effective, and (4)
a statement that our independent auditors have issued an attestation report on management's
assessment of our internal controls over financial reporting.

Management has developed a comprehensive plan in order to achieve compliance with Section 404
within the prescribed period and to review, evaluate and improve the design and effectiveness of our
controls and procedures on an on-going basis. The comprehensive compliance plan includes (1)
documentation and assessment of the adequacy of our internal controls over financial reporting, (2)
remediation of control weaknesses, (3) validation through testing that controls are functioning as
documented and (4) implementation of a continuous reporting and improvement process for internal
controls over financial reporting. As a result of this initiative, we have made and will continue to
make changes from time to time in our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to Note 8 of the accompanying consolidated financial
statements for a summary of significant legal proceedings involving IPALCO and/or IPL. We are also
subject to routine litigation, claims and administrative proceedings arising in the ordinary course
of business, none of which is expected to have a material adverse effect on our financial position
or results of operations.

Item 6.  Exhibits





|**Exhibit No.** | **Document**
|--------------- | ------------

`31.1  Certification by Chief Executive Officer required by Rule 13a-14(a)
       or 15d-14(a).

31.2  Certification by Chief Financial Officer required by Rule 13a-14(a)
       or 15d-14(a).

  32  Certification required by Rule 13a-14(b) or 15d-14(b).

99.1  Second Amendment, dated as of May 31, 2005, to Credit Agreement, dated as
      of June 4, 2003, Among IPL, the Institutions from time to time Parties
      Thereto, as Lenders, and Lasalle Bank National Association, as Agent.

99.2  First Modification, dated as of May 18, 2005, to Credit Agreement, Dated as
      of May 20, 2004, Among IPL, the Institutions from time to time Parties
      Thereto, as Lenders, and the Huntington National Bank, as Agent.

99.3  Second Amendment, dated as of May 31, 2005, to Amended and Restated
      Receivables Sale Agreement, Dated as of July 20, 2004, Among IPL Funding
      Corporation, ABN AMRO Bank N.V., the Liquidity Providers from time to time
      Parties Thereto and Windmill Funding Corporation.`

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**SIGNATURE**



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 22, 2005



| |     |                         
| | --- | ------------------------
| | By: | /s/ Hamsa Shadaksharappa

| |                                                                                
| | -------------------------------------------------------------------------------
| |                                                                                
| | Hamsa Shadaksharappa                                                           
| | Senior Vice President-Financial Services, Chief Financial Officer and Secretary
| | (Principal Financial Officer 
and Duly Authorized Officer)