**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, 2004**

**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]

On August 9, 2004, 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, 2004 and 2003 | 3           
|                                                                                                                                      |             
|Unaudited Consolidated Balance Sheets as of June 30, 2004 
        
           and December 31, 2003                                  | 4           
|                                                                                                                                      |             
|Unaudited Consolidated Statements of Cash Flows for the
        
          Six-month Periods Ended June 30, 2004 and 2003             | 5           
|                                                                                                                                      |             
|Notes to Unaudited Consolidated Financial Statements                                                                                  | 6           
|                                                                                                                                      |             
|Item 2:   Management's Discussion and Analysis of Financial Condition 
          
and Results of Operations                           | 12          
|                                                                                                                                      |             
|Item 3:   Quantitative and Qualitative Disclosure About Market Risk                                                                   | 18          
|                                                                                                                                      |             
|Item 4:  Controls and Procedures                                                                                                      | 18          
|                                                                                                                                      |             
|**PART II - Other Information**                                                                                                       |             
|                                                                                                                                      |             
|Item 1:  Legal Proceedings                                                                                                            | 19          
|                                                                                                                                      |             
|Item 6:  Exhibits and Reports on Form 8-K                                                                                             | 19          
|                                                                                                                                      |             
|Signature                                                                                                                             | 20          

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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
                                                               March 31,              June 30,
                                                        ---------------------  ---------------------
                                                           2004       2003        2004       2003
                                                        ---------- ----------  ---------- ----------
ELECTRIC UTILITY OPERATING REVENUES                     $ 212,740  $ 187,694   $ 427,368  $ 407,737

UTILITY OPERATING EXPENSES:
 Operation:
   Fuel                                                    49,414     40,020      95,269     85,062
   Other operating expenses                                28,890     29,990      55,507     56,662
 Power purchased                                            3,181      4,390       5,864      9,533
 Maintenance                                               20,384     24,616      40,075     43,911
 Depreciation and amortization                             29,350     29,978      58,846     59,596
 Taxes other than income taxes                              8,175      7,175      17,104     16,084
 Income taxes-net                                          24,202     16,877      52,279     48,769
                                                        ---------- ----------  ---------- ----------
  Total utility operating expenses                        163,596    153,046     324,944    319,617
                                                        ---------- ----------  ---------- ----------
UTILITY OPERATING INCOME                                   49,144     34,648     102,424     88,120
                                                        ---------- ----------  ---------- ----------
OTHER INCOME AND (DEDUCTIONS):
 Allowance for equity funds used during construction          299      1,000       1,338      1,930
 Gain (loss) on sales of assets, net                           (2)         0         852       (842)
 Other-net                                                 (1,302)      (243)       (290)      (509)
 Income tax benefit-net                                     7,074      6,551      13,288     13,072
                                                        ---------- ----------  ---------- ----------
  Total other income and (deductions)-net                   6,069      7,308      15,188     13,651
                                                        ---------- ----------  ---------- ----------
INTEREST AND OTHER CHARGES:
 Interest on long-term debt                                28,198     25,563      56,579     50,188
 Other interest                                               144         97         269        220
 Allowance for borrowed funds used during construction       (534)      (483)     (1,254)      (928)
 Amortization of redemption premiums and expense on
  debt-net                                                    678        738       1,282      1,476
 Preferred dividends of subsidiary                            804        804       1,607      1,607
                                                        ---------- ----------  ---------- ----------
  Total interest and other charges-net                     29,290     26,719      58,483     52,563
                                                        ---------- ----------  ---------- ----------
NET INCOME                                              $  25,923  $  15,237   $  59,129  $  49,208
                                                        ========== ==========  ========== ==========`

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,
                                                                2004         2003
                                                            ------------ ------------
                           ASSETS
UTILITY PLANT:
 Utility plant in service                                   $ 3,366,966  $ 3,205,454
 Less accumulated depreciation                                1,313,546    1,277,373
                                                            ------------ ------------
     Utility plant in service - net                           2,053,420    1,928,081
 Construction work in progress                                   82,378      160,774
 Land held for sale                                                   -        6,623
 Property held for future use                                     1,085        1,085
                                                            ------------ ------------
     Utility plant - net                                      2,136,883    2,096,563
                                                            ------------ ------------
OTHER ASSETS:
 Nonutility property - at cost, less
  accumulated depreciation                                        1,505        1,511
 Other investments                                                6,465        7,762
                                                            ------------ ------------
     Other assets - net                                           7,970        9,273
                                                            ------------ ------------
CURRENT ASSETS:
 Cash and cash equivalents                                        9,225       13,974
 Accounts receivable and unbilled revenue (less allowance
  for doubtful accounts of $1,458 and $1,653, respectively)      48,735       44,155
 Fuel - at average cost                                          26,734       29,803
 Materials and supplies - at average cost                        46,986       47,056
 Net income tax refunds receivable                                  222       11,397
 Prepayments and other current assets                             5,782        4,574
                                                            ------------ ------------
     Total current assets                                       137,684      150,959
                                                            ------------ ------------
DEFERRED DEBITS:
 Regulatory assets                                              100,521      110,061
 Miscellaneous                                                   34,855       30,954
                                                            ------------ ------------
     Total deferred debits                                      135,376      141,015
                                                            ------------ ------------
             TOTAL                                          $ 2,417,913  $ 2,397,810
                                                            ============ ============
               CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
 Common shareholder's deficit:
   Premium on 4% cumulative preferred stock                 $       649  $       649
   Paid in capital                                                  422          104
   Accumulated deficit                                          (63,115)     (64,111)
   Accumulated other comprehensive loss                         (54,240)     (58,420)
                                                            ------------ ------------
     Total common shareholder's deficit                        (116,284)    (121,778)
 Cumulative preferred stock of subsidiary                        59,135       59,135
 Long-term debt (less current maturities and sinking
  fund requirements)                                          1,502,027    1,482,011
                                                            ------------ ------------
     Total capitalization                                     1,444,878    1,419,368
                                                            ------------  -----------
CURRENT LIABILITIES:
  Notes payable                                                     300          300
  Accounts payable                                               42,284       49,074
  Accrued expenses                                               18,688       20,221
  Dividends payable                                                 803          868
  Accrued real estate and personal property taxes                16,938       14,662
  Accrued income taxes and other taxes                            7,218        3,873
  Accrued interest                                               27,570       25,759
  Customer deposits                                              10,926       10,428
  Other current liabilities                                         649        1,746
                                                            ------------ ------------
     Total current liabilities                                  125,376      126,931
                                                            ------------ ------------
 DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
 Accumulated deferred income taxes - net                        318,224      335,008
 Regulatory liabilities and other removal costs                 371,207      361,221
 Unamortized investment tax credit                               26,819       28,173
 Accrued postretirement benefits                                  6,499        6,059
 Accrued pension benefits                                       115,573      112,574
 Miscellaneous                                                    9,337        8,476
                                                            ------------ ------------
     Total deferred credits and other long-term liabilities     847,659      851,511
                                                            ------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 10)

             TOTAL                                          $ 2,417,913  $ 2,397,810
                                                            ============ ============`

See notes to unaudited consolidated financial statements.

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**IPALCO ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)**

`Three Months Ended
                                                                 June 30,
                                                          ---------- ---------
                                                             2004       2003
                                                          ---------  ---------
Cash Flows from Operations:
 Net income                                              $  59,129  $  49,208
 Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                           59,059     59,558
    Amortization of regulatory assets                        1,460      1,438
    Deferred income taxes and investment tax credit
      adjustments - net                                     (6,650)    (4,131)
    Gain on sale of land held for sale                      (5,922)        --
    (Gain) loss on sales of assets, net                       (852)       842
    Loss on investments                                        154        165
    Allowance for funds used during construction            (2,592)    (2,858)
  Change in certain assets and liabilities:
    Accounts receivable                                     (4,580)     5,152
    Fuel, materials and supplies                             3,139     (7,699)
    Net income taxes receivable or payable                  18,802      6,044
    Accounts payable and accrued expenses                   (8,323)    (4,058)
    Accrued real estate and other taxes                     (2,007)     3,954
    Accrued pension benefits                                 4,976    (13,547)
    Accrued interest                                         1,811         90
    Other - net                                              1,950     (1,299)
                                                          ---------  ---------
Net cash provided by operating activities                  119,554     92,859
                                                          ---------  ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Construction expenditures - utility                      (93,261)   (62,314)
  Proceeds from sales of assets                             14,309         --
  Other                                                     (6,175)    (2,549)
                                                          ---------  ---------
Net cash used in investing activities                      (85,127)   (64,863)
                                                          ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term borrowings                                         --     13,600
  Long-term borrowings                                      98,957         --
  Retirement of long-term debt                             (80,000)        --
  Common dividends paid                                    (58,133)   (63,262)
                                                          ---------  ---------
Net cash used in financing activities                      (39,176)   (49,662)
                                                          ---------  ---------
Net change in cash and cash equivalents                     (4,749)   (21,666)
Cash and cash equivalents at beginning of period            13,974     31,429
                                                          ---------  ---------
Cash and cash equivalents at end of period               $   9,225  $   9,763
                                                          =========  =========
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
    Interest (net of amount capitalized)                 $  53,787  $  49,396
                                                          =========  =========
    Income taxes                                         $  30,667  $  40,202
                                                          =========  =========`

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 utility subsidiary, Indianapolis Power & Light Company
("IPL") and its unregulated subsidiary, Mid-America Capital Resources, Inc. ("Mid-
America"). IPL is an electric utility with its customer base concentrated in Indianapolis,
Indiana and is the primary subsidiary of IPALCO. 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 complete
financial statements. In the opinion of management, all adjustments necessary for fair
presentation, consisting of only normal recurring adjustments, 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. Certain amounts from prior year financial statements have been reclassified to conform to the
current year presentation. 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, 2003, 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.

3.  NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46
addresses consolidation by business enterprises of variable interest entities ("VIE") and
significantly changes the consolidation requirements for those entities. FIN 46 is intended to
achieve more consistent application of consolidation policies related to VIE's and thus improve
comparability between enterprises engaged in similar activities when those activities are conducted
through VIE's. In December 2003, the FASB issued a revision to the original Interpretation
("FIN 46-R") to codify both the proposed modifications and other decisions previously
issued through certain FASB Staff Positions into one document. FIN 46-R currently applies to VIE's
created after January 31, 2003, and to VIE's in which an enterprise obtains an interest after that
date. For entities created prior to January 31, 2003, FIN 46 is to be adopted no later than the end
of the first interim or annual reporting period ending after March 15, 2004. The application of FIN
46 and FIN 46-R did not have any impact on IPALCO's consolidated financial statements as neither
IPALCO nor any of its consolidated subsidiaries obtained any interest in a VIE since January 31,
2003 or is the primary beneficiary in any VIE.

In May 2004, the FASB issued FASB Staff Position ("FSP") 106-2, which provides
guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the "Act") for employers that sponsor postretirement health
care plans that provide prescription drug benefits. The enactment of the Act does not have a
significant effect on IPL's retirement plans. IPL's accumulated pension benefit obligation and net
periodic postretirement benefit costs currently do not reflect any effect of the Act. The effects
of the Act, which are not material, will be incorporated into the next measurement of plan
obligations (November 30, 2004) as required by FSP 106-2.

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 (the "IPALCO Notes"); approximately $3.9 million and $2.5
million of nonutility cash and cash equivalents, as of June 30, 2004 and December 31, 2003,
respectively; nonutility investments of $5.7 million and $6.1 million at June 30, 2004 and December
31, 2003, respectively; and income taxes related to those items. There was no operating income for
any nonutility activities during the periods covered by this report. Nonutility assets represented
less than 1% of IPALCO's total assets as of June 30, 2004 and December 31, 2003 and there were no
nonutility capital expenditures during the six month periods ended June 30, 2004 and 2003.

5.  INDEBTEDNESS

On January 13, 2004, IPL issued $100 million of 6.60% first mortgage bonds due
January 1, 2034. The net proceeds of approximately $99 million were used to retire $80 million
of 6.05% first mortgage bonds due February 1, 2004 and to reimburse IPL's treasury for expenditures
previously incurred in connection with its capital expenditure program.

In May 2004, IPL renewed its $45 million committed
line of credit. The new agreement has substantially the same terms as the
previous agreement and matures May 19, 2005.In June 2004, IPL amended another 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) to extend the maturity to May
31, 2005.

On July 22, 2004, Standard & Poor's raised its ratings on the utility first mortgage bonds
of 20 utility companies, based on an updated analysis of ultimate recovery prospects. As a result,
all of IPL's first mortgage bonds were upgraded from BB+ to BBB-. The upgrade did not affect the
interest rates on any of IPL's existing debt.

On July 23, 2004, the Federal Energy Regulatory Commission ("FERC") issued an order
renewing IPL's authority to issue up to $500 million of short-term indebtedness outstanding at any
time through July 2006.

6.  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.

IPL's funding policy for the Defined Benefit Pension Plan 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.

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.

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,
                                               -------------------- --------------------
                                                  2004      2003       2004      2003
                                               -------------------- --------------------
Pension Benefits                                             (IN THOUSANDS)

Components of net periodic benefit cost
Service cost                                        $913      $925     $1,827    $1,851
Interest cost                                      6,426     6,744     12,852    13,487
Expected return on plan assets                    (6,788)   (5,674)   (13,505)  (11,348)
Amortization of prior service cost                    34        34         67        67
Recognized actuarial gain                            953       669      1,906     1,339
                                               -------------------- --------------------
Net periodic benefit cost                         $1,538    $2,698     $3,147    $5,396
                                               ==================== ====================`

In April 2004, pension legislation was passed which decreased the present value of IPALCO's
current pension fund liabilities and lowered IPALCO's pension funding requirements in the short-
term. As a result, IPALCO can achieve the desired level of funding in 2004 (90%) with approximately
$5.7 million of contributions. Management is evaluating whether it is economically attractive to
discretionally fund in excess of this amount. IPALCO did not make any pension funding contributions
during the six months ended June 30, 2004.



7.  OTHER POSTRETIREMENT BENEFITS

The Group Benefits Plan: IPL sponsors a group benefits plan which provides certain health
care and life insurance benefits to active employees. Prior to October 20, 2000, the plan also
provided certain health care and life insurance benefits to employees who retired from active
service on or after attaining age 55 and had rendered at least 10 years of service. The
postretirement benefit costs of this plan were funded through an independent voluntary employee
beneficiary association ("VEBA") trust (the "VEBA Trust"). On April 30, 2001,
all assets of the VEBA Trust and its obligations were formally spun-off to an independent trustee
into a newly formed plan, the VEBA Plan (the "VEBA Plan") that provides postretirement
medical and life benefits to retirees who retired from IPL or IPALCO before October 20, 2000. In
addition, people who were employed by IPL or IPALCO on October 20, 2000, who subsequently retire
from IPL or IPALCO and who meet the retirement requirements of age 55 or older and 10 or more years
service are eligible for postretirement health care benefits under the VEBA Trust. The VEBA Plan is
sponsored and administered by an independent VEBA committee.

In November 2002, IPL and one bargaining unit of the International Brotherhood of Electrical
Workers union reached an agreement whereby IPL will provide postretirement health care benefits
through the end of their current contract to unit members who were hired by IPL after October 20,
2000. The plan was amended accordingly.

The following table presents the components of period benefit costs for other postretirement
benefits:

`For the Three Months For the Six Months
                                                   Ended June 30,       Ended June 30,
                                               -------------------- --------------------
                                                  2004      2003       2004      2003
                                               -------------------- --------------------
Other Postretirement Benefits                                (IN THOUSANDS)

Components of net periodic benefit cost
Service cost                                        $198       $47       $395       $94
Interest cost                                        206       196        413       392
Amortization of prior service cost                   236       213        471       427
                                               -------------------- --------------------
Total periodic benefit cost                         $640      $456     $1,279      $913
                                               ==================== ====================`

8.  LAND SALES

In December 2003, IPL reached agreements to sell approximately 4,000 acres of undeveloped
property near Martinsville, Indiana divided between two purchasers for an aggregate price of $13.2
million. This land is presented on IPALCO's consolidated balance sheet as land held for sale at
$6.6 million as of December 31, 2003. The sale to one of the purchasers was completed in February
2004 for $7.4 million net proceeds with a gain of $4.1 million and the other sale was completed in
April 2004 with net proceeds of $4.3 million and a gain of $1.8 million. In accordance with
regulatory accounting, these gains are included as a reduction of other operating expenses on
IPALCO's consolidated statements of income.

9.  LONG TERM COMPENSATION PLAN

During 2004, all non-union employees of IPL became eligible to participate in the AES Long
Term Compensation Plan, a deferred compensation program. Participants receive deferred compensation
in the form of cash, restricted shares of AES common stock and options to purchase shares of AES
common stock. All three of such components vest in thirds over a three-year period. Total deferred
compensation expense recorded during the three-month and six-month periods ended June 30, 2004 was
$0.3 million and $0.6 million, respectively, and was included in Other Operating Expenses on
IPALCO's consolidated statement of income.

10.  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 ERISA suit alleges breach of fiduciary duties with respect to
shares held in IPL's 401(k) thrift plan. 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.

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 focused largely on circumstances surrounding the acquisition of IPALCO by AES. The
Secretary of State's inquiry is ongoing, as indicated in the Secretary of State's January 27, 2004
press release. IPALCO, IPL, AES and the individuals have produced various materials in response to
the subpoenas. While we can not predict the outcome, we do not expect these matters will 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.

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 has now been consolidated with other actions in that court with the result that the only
remaining IPALCO defendants are three former officers who are insured under IPALCO's liability
insurance policies. The lawsuit purports to be filed on behalf of all persons who exchanged their
shares of IPALCO common stock for shares of AES common stock. The complaint alleges 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. We believe that the IPALCO defendants have meritorious defenses to the suit. While
we cannot predict the outcome, we do not believe that the suit will have a material adverse effect
on IPALCO's consolidated financial statements.

As of June 30, 2004, IPL is a defendant in approximately 88 pending lawsuits 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 coverage for many 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. 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 predict the number or effect any additional suits
may have. Accordingly, we cannot assure that the pending or any additional suits will not have a
material 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.

National Ambient Air Quality Standards.  On July 16, 1997, the U.S. Environmental
Protection Agency ("EPA") promulgated final rules tightening the National Ambient Air
Quality Standards for ozone and creating a new fine particulate matter standard. On April 30, 2004,
the EPA designated Marion and Morgan counties as parts of the Greater Indianapolis nonattainment
area for ozone, effective June 15, 2004. Indiana is now required to devise implementation plan
revisions to attain and maintain the new ozone standards. Such revisions may require IPL to reduce
emissions of ozone precursors, chiefly oxides of nitrogen, from its Harding Street and Eagle Valley
generating stations.

On June 29, 2004, the EPA wrote to the Governor of Indiana stating its intention to designate
Marion, Morgan, and Pike Counties nonattainment for the fine particulate matter ambient air quality
standard. The EPA stated that it intends to promulgate these designations in November 2004. The non
attainment designation for both ozone and particulate matter will legally require the State of
Indiana to modify its State Implementation Plan ("SIP") by 2008. The SIP will detail how
the state will regain its compliance status. It is unclear at this time the potential impact of
these new EPA designations on our generating stations.

NOx SIP Call. On October 27, 1998, the EPA issued a final rule, referred to as the
NOx SIP call, which imposes more stringent limits on NOx emissions from
fossil fuel-fired steam electric generators. IPL's current estimates are the NOx SIP
call will necessitate capital expenditures of approximately $109 million during 2004 and 2005 to
achieve substantially all of the required NOx emission reductions.

On November 14, 2002, the IURC issued a Certificate of Public Convenience and Necessity for the
construction and use of clean coal technology ("CCT") to allow IPL to meet the
NOx emission limits imposed pursuant to the EPA's NOx SIP call. The CCT
constitutes qualified pollution control property as defined in Ind. Code section 8-1-2-6.6 and the
IURC has approved ratemaking treatment applicable to such property through an Environmental
Compliance Cost Recovery Adjustment ("ECCRA"). The ratemaking treatment provided for in
the IURC order includes a return on the investment in IPL's planned CCT projects under
construction. After the projects have been placed in service, the approved ratemaking treatment
provides for a return on the investment and recovery of the depreciation expenses and operation and
maintenance expenses associated with these projects. Such costs are deferred as regulatory assets
on IPALCO's balance sheets. The ratemaking treatment also provides for recovery of expenditures
related to the purchase of NOx emission allowances, should such expenditures be made to
supplement IPL's CCT construction projects. IPL may add the approved return on its CCT projects to
its authorized annual net operating income in subsequent fuel adjustment charge proceedings. The
increase in the amount of rate revenues and authorized net operating income resulting from IPL's
CCT plan will be determined in periodic filings to the IURC to be made at intervals of no more
often than every 6 months and will depend on the amount of cumulative investment, depreciation
expenses, operation and maintenance expenses and actual NOx emission allowance purchases
at the time of each of the filings. Our first ECCRAs were approved on August 20, 2003 and February
18, 2004.

Guarantees

As of June 30, 2004 and December 31, 2003, Mid-America had a commitment to invest
additional capital of $3.8 million in EnerTech Capital Partners II L.P. ("EnerTech"), a
venture capital fund. IPALCO has guaranteed the prompt payment of this commitment when it may
become due pursuant to the terms of the partnership agreement between Mid-America and EnerTech. As
required by GAAP, there is no liability on the accompanying balance sheets for this guarantee.

In connection with the sale of the Cleveland Energy Resources assets, Cleveland Thermal
Energy Corporation and Cleveland District Cooling Corporation, both of which are subsidiaries of
Mid-America, have agreed to indemnify the buyer on an after-tax basis from and against all losses
arising out of: any liabilities excluded from the sale; and certain litigation and environmental
matters existing at the closing date, November 2, 2000. IPALCO has guaranteed this indemnification
up to $14.6 million. Claims regarding a breach of an environmental representation or regarding an
excluded liability must be brought on or before November 2, 2004. The indemnification provided for
under this agreement will in no event exceed the total aggregate purchase price, or $14.6 million.

Lease Commitments

IPL has capital leases expiring at various dates through 2010. Plant-in-service includes
fixed assets under capital lease, net of accumulated depreciation, totaling $3.9 million at June
30, 2004. The interest component of capital leases as of June 30, 2004 is $0.1 million and the net
present value of future minimum lease payments is $3.5 million. The current portion of this
liability is recorded in other current liabilities and the noncurrent portion is recorded in
miscellaneous on IPL's balance sheets. IPL also has operating leases expiring at various
dates through 2009. Rental expense for the six-month periods ended June 30, 2004 and 2003 was $0.5
million and $0.2 million, respectively. The following table shows fixed future minimum lease
payments as of June 30, 2004 for all capital leases and for operating leases with remaining
noncancelable lease terms in excess of one year (in thousands):

|                 | 2004 | 2005 | 2006 | 2007 | 2008 | Thereafter | Total 
|---------------- | ---- | ---- | ---- | ---- | ---- | ---------- | ------
|Operating Leases | $501 | $921 | $786 | $658 | $646 | $128       | $3,640
|Capital Leases   | $439 | $906 | $657 | $651 | $581 | $673       | $3,907





11.  RELATED PARTY TRANSACTION

On June 11, 2004, IPL entered into an agreement with Health and Welfare Benefit Plans LLC
("HWBP"), an affiliate of AES, to participate in a group benefits program, including but not
limited to, health, dental, vision and life benefits, in which AES and other AES subsidiaries also
participate. HWBP will administer the financial aspects of the group insurance program, receive all
premium payments from the participating affiliates, and make all vendor payments. We believe that
cost savings can be realized through participation in this group benefits program. Coverage for IPL
employees through the group benefits program began on August 1, 2004.

---

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q includes "forward-looking statements" including, in particular, the
statements about our plans, strategies and prospects under the heading "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," "should," "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: our ownership by
AES, 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, purchased power costs and availability, regulatory action, environmental matters, federal
and state legislation, interest rates, availability and cost of capital, labor strikes, maintenance
and capital expenditures, local economic conditions, the ultimate disposition of litigation, the
specific needs of plants to perform unanticipated facility maintenance or repairs or outages, the
timing of deregulation and competition, product development and technology changes. Most of these
factors affect us through our consolidated subsidiary, IPL. These factors are difficult to predict,
contain uncertainties that may materially affect actual results and 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 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, valued at $3.3 million, as
of June 30, 2004. Our business segments are electric and "all other."

IPL is engaged primarily in generating, transmitting, distributing and selling electric energy
to more than 455,000 customers in the city of Indianapolis and neighboring areas within the state
of Indiana. IPL has an exclusive right to provide retail electric service to those customers. IPL
owns and operates four generating stations, all within the state of Indiana. Approximately 99% of
the total electricity produced by IPL is 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 3,356 and 3,238 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.

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, 2004 and June 30, 2003

Our second quarter 2004 net income of $25.9 million increased $10.7 million from net
income of $15.2 million in the second quarter of 2003. The following discussion highlights the
significant factors contributing to this change.

Operating Revenues

Operating revenues increased by $25.0 million during the three-month period ended June 30,
2004 compared to the prior year as a result of the following (dollars in thousands):

`June 30,   June 30,   Increase  Percentage
                              2004       2003    (Decrease)   Change
                           --------------------------------------------
Retail Revenues              $196,063   $177,440    $18,623       10.5%
Wholesale Revenues             12,826      7,497      5,329       71.1%
Miscellaneous Revenues          3,851      2,757      1,094       39.7%
                           ---------------------------------
Total Operating Revenues     $212,740   $187,694    $25,046       13.3%
                           =================================

Heating Degree Days               401        509       (108)     -21.2%
Cooling Degree Days               360        193        167       86.5%`

The $18.6 million increase in retail revenues was primarily due to a 6.4% increase in the
quantity of kWh's sold (approximately $11.7 million) and an increase of 3.8% in the weighted
average price per kWh sold (approximately $6.9 million). The quantity variance is primarily the
result of the significant increase in cooling degree days during the comparative periods, partially
offset by a decrease in heating degree days.The price variance is primarily due to
increases in fuel costs charged to residential customers in 2004 (approximately $4.8 million) and
$2.3 million in increased rate revenues from costs IPL was permitted to recover from its customers
associated with its NOx compliance construction program, partially offset by increased
volume discounts on kWh usage. Most of IPL's retail customers are charged lower rates per kWh used
after reaching certain benchmarks. In addition, IPL increased its retail customer base by 6,920
customers or 1.5% from June 30, 2003 to June 30, 2004. The increase in wholesale revenues was
primarily due to a 43.9% increase in the quantity of wholesale kWh's sold and an 18.9% increase in
the weighted average price per kWh sold. The average market price per kWh increased approximately
55.4% during the comparative periods.

The $1.1 million increase in miscellaneous revenues is primarily the result of $1.0 million of
revenues from the Midwest Independent Transmission System Operator, Inc. ("Midwest ISO").
The Midwest ISO was established as a non-profit organization to maintain functional control over
the combined transmission systems of its members. As a transmission owner, IPL receives a portion
of the transmission service revenues from all wholesale kWh sales on the Midwest ISO network based
on its percentage of transmission system investment within the Midwest ISO footprint. In addition,
IPL pays the Midwest ISO an added transmission cost on its retail load and a fee for each wholesale
transaction. A portion of the additional transmission cost 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. Our total revenues from the Midwest ISO for 2004 are expected
to be approximately $3 million to $4 million and the portion of Midwest ISO costs that are expensed
are expected to be approximately $2 million to $2.5 million in 2004.

Operating Expenses

Operating expenses increased $10.6 million, or 6.9% during the three months ended June 30,
2004, as compared to the same period in 2003. This increase is primarily the result of a $9.4
million increase in fuel costs, and a $7.3 million increase in income taxes, partially offset by a
$4.2 million decrease in maintenance costs and a $1.8 million gain in 2004 on the sale of land held
for sale. The increase in fuel costs is primarily due to a $4.6 million increase in the cost of
coal and a $3.9 million increase in deferred fuel adjustments in the second quarter of 2004
compared to the same period in 2003. The cost of coal used in the second quarter of 2004 was higher
primarily because of an 11.0% increase in the number of kWh's generated by IPL during the
comparative periods resulting primarily from the milder temperatures in the second quarter of 2003.
The $3.9 million increase in the deferred fuel adjustments resulted primarily from IPL
underestimating the cost of fuel in 2003 in its fuel adjustment clause. IPL is permitted to recover
this underestimate in future rates through the fuel cost adjustment proceeding and therefore the
costs are deferred and amortized into expense in the same period that IPL's rates are adjusted. The
increase in income taxes is primarily the result of the increase in pre-tax income, partially
offset by a decrease in the flow-through tax expense from depreciation of $0.8 million. The
maintenance expense decrease resulted primarily from increased plant maintenance activity in 2003
scheduled to coincide with our NOx compliance construction program. In accordance with regulatory
accounting, the gain on the sale of land held for sale is included as a reduction of other
operating expenses on IPALCO's consolidated statements of income.

Primarily as a result of the foregoing, utility operating income increased $14.5 million or
41.8% during the second quarter of 2004 from the same period in 2003.

Other Income and Deductions

Other income and deductions decreased from income of $7.3 million in 2003 to $6.1 million in
2004, primarily due to a $0.7 million decrease in the allowance for equity funds used during
construction, a $0.5 million increase in contracted services, which relates primarily to nonutility
legal services, and a $0.2 million writedown of our investment in Enertech, partially offset by a
$0.5 million increase in our income tax benefit. The decrease in the allowance for equity funds
used during construction resulted primarily from approximately $138 million of equipment being
placed in service in 2004 related to the NOx compliance construction program. The increase in the
income tax benefit was primarily due to additional interest expense in 2004 of $2.6 million, as
described below, partially offset by the $1.1 million increase in Other - net miscellaneous
expenses.

Interest and Other Charges

Interest and other charges increased $2.6 million to $29.3 million in the second quarter of
2004 as compared to the same period in 2003. This increase is primarily the result of additional
interest expense of $1.7 million on each of the issuances of $110 million and $100 million of first
mortgage bonds by IPL on August 6, 2003 and January 13, 2004, respectively, and a $0.5 million
increase in interest expense on the IPALCO Notes due to a 50 basis point increase, beginning May
15, 2003, in the interest charged as a result of ratings downgrades. These increases are partially
offset by a $1.2 million decrease from the retirement of $80 million of first mortgage bonds at IPL
on February 1, 2004.

Comparison of Six Month Periods Ended June 30, 2004 and June 30, 2003

Our net income during the six month period ended June 30, 2004 increased $9.9
million to $59.1 million from net income of $49.2 million in the same period in 2003. The following
discussion highlights the significant factors contributing to this change.

Operating Revenues

Operating revenues increased by $19.6 million during the six-month period ended June 30,
2004 as compared to the prior year as a result of the following (dollars in thousands):

`June 30,   June 30,   Increase  Percentage
                              2004       2003    (Decrease)   Change
                           --------------------------------------------
Retail Revenues              $397,550   $380,161    $17,389        4.6%
Wholesale Revenues             22,471     22,512        (41)      -0.2%
Miscellaneous Revenues          7,347      5,064      2,283       45.1%
                           ---------------------------------
Total Operating Revenues     $427,368   $407,737    $19,631        4.8%
                           =================================

Heating Degree Days             3,181      3,615       (434)     -12.0%
Cooling Degree Days               363        193        170       88.1%`

The $17.4 million increase in retail revenues was primarily due to a 2.4% increase in the
quantity of kWh's sold (approximately $9.4 million) and a 2.1% increase in the weighted average
price per kWh sold (approximately $8.0 million). The quantity variance is primarily the result of
the significant increase in cooling degree days during the comparative periods, partially offset by
the decrease in heating degree days. The price variance is primarily due to increases in fuel costs
charged to residential customers in 2004 (approximately $5.3 million) and $3.8 million in increased
rate revenues from costs IPL was permitted to recover from its customers associated with its
NOx compliance construction program, partially offset by increased volume discounts on
kWh usage. Most of IPL's retail customers are charged lower rates per kWh used after reaching
certain benchmarks. In addition, IPL increased its retail customer base by 6,920 customers or 1.5%
from June 30, 2003 to June 30, 2004. The $2.3 million increase in miscellaneous revenues is
primarily the result of $2.0 million of revenues from the Midwest ISO in 2004.

Operating Expenses

Operating expenses increased $5.3 million, or 1.7% during the six months ended June 30,
2004, as compared to the same period in 2003. This increase is primarily the result of a $10.2
million increase in fuel costs; a $3.5 million increase in income taxes; and a $2.9 million
decrease in gains on sales of sulfur dioxide ("SO2") allowances; partially
offset by a $5.9 million gain in 2004 on the sale of land held for sale; a $3.8 million decrease in
maintenance expenses; and a $3.7 million decrease in power purchased. The increase in fuel costs is
primarily due to a $4.3 million increase in the cost of coal and a $5.2 million increase in
deferred fuel adjustments in the six months ended June 30, 2004, as compared to the same period in
2003. The cost of coal used in 2004 was higher due to an 11.0% increase in the number of kWh's
generated by IPL during the comparative periods resulting primarily from the milder temperatures in
2003. The $3.9 million increase in the deferred fuel adjustments resulted primarily from IPL
underestimating the cost of fuel in 2003 in its fuel adjustment clause. The increase in income
taxes is primarily the result of the increase in pre-tax income, partially offset by a decrease in
the flow-through tax expense from depreciation of $2.4 million. In accordance with regulatory
accounting, both the gain on the sale of land held for sale and the gain on sales of SO2
allowances are included as reductions of other operating expenses on IPALCO's consolidated
statements of income. The $3.7 million decrease in purchased power during the first six months of
2004, as compared to the same period in 2003, was primarily due to higher than normal power
purchases in March of 2003 totaling $4.5 million, which was $3.4 million higher than in March 2004.
The high cost of power purchases in March of 2003 was the result of a combination of (i) a
scheduled maintenance outage during March of 2003 on our largest base load coal fired unit (ii)
colder than normal temperatures (iii) higher than normal wholesale energy prices and (iv) an
unscheduled maintenance outage on another of our large coal fired units. The combination of these
factors resulted in us purchasing more energy and at higher than normal prices.

We do not expect to sell SO2 allowances in the foreseeable future and therefore we do
not expect to have gains as we did in 2003. IPL projects to exceed the SO2 EPA emissions
allowance cap in 2004 and will rely on its allowance bank to meet  SO2 allowances
as necessary to remain in compliance with EPA SO2 regulations in 2004. For 2005 and
2006, IPL is currently projecting to meet its supplemental SO2 allowance requirements
via allowance purchases. Historically, the price of such allowances has been volatile and
therefore it is difficult to predict what our cost may be in the future. However, based on current
prices, we project to spend approximately $5 million in 2005 and approximately $8 million in 2006
for SO2 allowances.

Primarily as a result of the foregoing, utility operating income increased $14.3 million or
16.2% during the six months ended June 30, 2004 as compared to the same period in 2003.

Other Income and Deductions

Other income and deductions increased from income of $13.7 million in 2003 to $15.2 million
in 2004, primarily due to dividend income received in 2004 of $1.4 million, a $0.9 million gain on
the sale of noncore real estate assets in 2004 and a $0.8 million loss in 2003 on the sale of one-
third of our ownership interest in EnerTech, partially offset by a $0.6 million decrease in the
allowance for equity funds used during construction and a $0.5 million increase in contracted
services, which relates primarily to nonutility legal services.

Interest and Other Charges

Interest and other charges increased $5.9 million to $58.5 million in the six months ended
June 30, 2004 as compared to the same period in 2003. This increase is primarily the result of
additional interest expense of $3.5 million, and $3.2 million on the issuances of $110 million and
$100 million of first mortgage bonds by IPL on August 6, 2003 and January 13, 2004, respectively,
and a $1.9 million increase in interest expense on the IPALCO Notes due to a 50 basis point
increase, beginning May 15, 2003, in the interest charged as a result of ratings downgrades. These
increases are partially offset by a $2.0 million decrease from the retirement of $80 million of
first mortgage bonds at IPL on February 1, 2004.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2004, IPALCO had cash and cash equivalents of $9.2 million. In addition, IPL
has available borrowing capacity of $74.3 million, after existing letters of credit, under its
$75.0 million committed credit facilities. 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 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.

On January 13, 2004, IPL issued $100 million of 6.60% first mortgage bonds due
January 1, 2034. The net proceeds of approximately $99 million were used to retire $80 million
of 6.05% first mortgage bonds due February 2004 and to reimburse IPL's treasury for expenditures
previously incurred in connection with its capital expenditure program.

In May 2004, IPL renewed its $45 million committed line of credit. The new agreement has
substantially the same terms as the previous agreement and matures May 19, 2005. In June 2004, IPL
amended another 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)
to extend the maturity to May 31, 2005.

On July 22, 2004, Standard & Poor's raised its ratings on the utility first mortgage bonds
of 20 utility companies, based on an updated analysis of ultimate recovery prospects. As a result,
all of IPL's first mortgage bonds were upgraded from BB+ to BBB-.  The upgrade did
not affect the interest rates on any of IPL's existing debt.

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 construction expenditures totaled $93.3 million during the six months ended June
30, 2004. This represented an increase of $30.9 million from the comparable period in 2003,
primarily due to expenditures associated with new environmental standards imposed by the EPA
relating to NOx emission reductions. Construction expenditures during the first six months of 2004
were financed with internally generated cash provided by operations, borrowings on IPL's committed
credit facilities and a portion of the proceeds from the January 2004 issuance of $100 million of
first mortgage bonds by IPL. We estimate total capital expenditures of approximately $152 million
in 2004, $132 million in 2005 and $172 million in 2006. These estimates include approximately $123
million for additions, improvements and extensions to transmission and distribution lines,
substations, power factor and voltage regulating equipment, distribution transformers and street
lighting facilities; $98 million for power plant related projects; $12 million primarily for
miscellaneous office equipment, furniture and leasehold improvements; and $223 million for
construction projects designed to reduce NOx and SO2 emissions.

Pension Funding.  In April 2004, pension legislation was passed which decreased
the present value of our current pension fund liabilities and lowered our pension funding
requirements in the short-term. As a result, IPL can achieve the desired level of funding in 2004
(90%) with approximately $5.7 million of contributions. Management is still evaluating whether it
is economically attractive to discretionally fund in excess of this amount. We did not make any
pension funding contributions during the six months ended June 30, 2004.

Dividends.  All of our outstanding common stock is held by AES. During the first
six months of 2004, we paid $58.1 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,
financial condition, capital requirements, regulatory considerations, and such other factors as
IPL's board of directors deems relevant.

Environmental Matters

National Ambient Air Quality Standards.  On July 16, 1997, the EPA promulgated final
rules tightening the National Ambient Air Quality Standards for ozone and creating a new fine
particulate matter standard. On April 30, 2004, the EPA designated Marion and Morgan counties as
parts of the Greater Indianapolis nonattainment area for ozone, effective June 15, 2004. Indiana is
now required to devise implementation plan revisions to attain and maintain the new ozone
standards. Such revisions may require IPL to reduce emissions of ozone precursors, chiefly oxides
of nitrogen, from its Harding Street and Eagle Valley generating stations.

On June 29, 2004, the EPA wrote to the Governor of Indiana stating its intention to designate
Marion, Morgan, and Pike Counties nonattainment for the fine particulate matter ambient air quality
standard. The EPA stated that it intends to promulgate these designations in November 2004. The non
attainment designation for both ozone and particulate matter will legally require the State of
Indiana to modify its State Implementation Plan by 2008. The SIP will detail how the state will
regain its compliance status. It is unclear at this time the potential impact of these new EPA
designations on our generating stations.

Regulatory Matters

Midwest ISO Energy Markets Tariff Filing.  The Midwest ISO filed its revised Energy
Markets Tariff with the FERC on March 31, 2004, as part of the Midwest Market Initiative to
standardize the structure and operation of competitive wholesale power markets, including plans to
implement the market restructuring, including day-ahead and real-time energy markets. This
restructuring could have an impact on the costs associated with IPL's energy service to its utility
customers. FERC has not yet approved the Midwest ISO's Energy Markets Tariff, but on May 26, 2004,
FERC directed the Midwest ISO to implement the Energy Markets Tariff in the Midwest ISO region on
March 1, 2005. Pursuant to an order from the IURC, certain Midwest ISO administrative costs are
deferred for future recovery. At this time, we cannot predict the effect the Midwest ISO filing
will have on our results of operations.

Final Report of the Joint U.S.-Canadian Blackout Task Force.

Related Party Transaction

On June 11, 2004, IPL entered into an agreement with HWBP, an affiliate of AES, to
participate in a group benefits program, including but not limited to, health, dental, vision and
life benefits, in which AES and other AES subsidiaries also participate. HWBP will administer the
financial aspects of the group insurance program, receive all premium payments from the
participating affiliates, and make all vendor payments. We believe that cost savings can be
realized through participation in this group benefits program. Coverage for IPL employees through
the group benefits program began on August 1, 2004.

---



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.  We carried out an evaluation,
under the supervision and with the participation of our management, including the chief executive
officer ("CEO") and chief financial officer ("CFO"), of the effectiveness of
our "disclosure controls and procedures" (as defined in the Securities Exchange Act of
1934 Rules 13a-15(e) and 15-d-15 (e) as required by paragraph (b) of the Exchange Act Rules 13a-15
or 15d-15) as of June 30, 2004. The Company's management, including the CEO and CFO, is engaged in
a comprehensive effort to review, evaluate and improve our controls; however, management does not
expect that our disclosure controls or our internal controls over financial reporting will prevent
all errors and all fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system's objectives will be met. In
addition, we have interests in certain unconsolidated entities. As we do not control or manage
these entities, our disclosure controls and procedures with respect to such entities is generally
more limited than those we maintain with respect to our consolidated subsidiaries.

Based upon the controls evaluation performed, the CEO and CFO have concluded that as of June 30,
2004, our disclosure controls and procedures were effective to provide reasonable assurance that
material information relating to us and our consolidated subsidiaries is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.



Changes in Internal Controls.  In the course of our evaluation of disclosure controls and
procedures, management considered certain internal control areas in which we have made and are
continuing to make changes to improve and enhance controls. Based upon that evaluation, the CEO and
CFO concluded that there were no changes in our internal controls over financial reporting
identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15
or 15d-15 that occurred during the second quarter ended June 30, 2004 that have materially
affected, or are reasonably likely to materially affect, our internal controls over financial
reporting.



Compliance with Section 404 of the Sarbanes Oxley Act of 2002.  Beginning with the year
ending December 31, 2005, 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 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 10 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 and Reports on Form 8-K

(a) Exhibits



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

`10.1   First Amendment, dated as of June 2, 2004, 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

 10.2   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

 10.3   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 IPL Funding Corporation, ABN AMRO Bank N.V., the
        Liquidity Providers from time to time Parties Thereto and Windmill
        Funding Corporation

 31.1   Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-1

 31.2   Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-1

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

(b) Reports on Form 8-K -No reports on Form 8-K were filed during the period covered by this
report.

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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 9, 2004



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

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