EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

Net income applicable to common stock for 1995 totaled $46.7 million, or $2.08
per share, an increase of $0.16 per share from 1994 earnings of $1.92 per share.
Earnings for 1993 were $1.78 per share on net income applicable to common stock.
Results for 1995 were affected by increased kilowatt-hour sales resulting from
the warmer-than-normal weather, partially offset by higher operating expenses
compared to the previous year. Net income for 1994 included a $0.03 per share
after-tax restructuring charge for a customer service office consolidation plan.
Earnings for 1994 were also affected by an increase in sales, which were more
than offset by higher operating expenses compared to 1993. Earnings for 1993
included a $0.31 per share after-tax restructuring charge arising out of an
organizational effectiveness study.

REVENUES AND SALES

Revenues and kilowatt-hour (kwh) sales were as follows:

Revenues                                 1995                     1994
--------                          -------------------      -------------------
                                    In         Percent       In         Percent
                                 Thousands      Change    Thousands      Change
                                  --------       ----      --------       ----
Base (nonfuel) ...............    $261,143        7.0%     $244,047        2.7%

Fuel cost recovery ...........     133,283       (1.7)%     135,556       (6.5)%
                                  --------       ----      --------       ----
   Total revenues ............    $394,426        3.9%     $379,603       (0.7)%
                                  ========       ====      ========       ====

Sales                                            1995               1994
-----                                      -----------------  -----------------
                                           Million   Percent  Million   Percent
                                             kwh      Change    kwh      Change
                                            -----      ----    -----     -----
Regular customers
   Residential .........................    2,763       9.1%   2,532       2.5%
   Commercial ..........................    1,265       7.2%   1,180       6.4%
   Industrial ..........................    2,227       9.7%   2,030       1.2%
   Other ...............................      502       3.1%     487       5.2%
   Sales for resale ....................      360      71.4%     210      20.0%
                                            -----      ----    -----     -----
Total sales to regular customers .......    7,117      10.5%   6,439       3.5%
Short-term sales to other utilities ....       68     (60.9)%    174     (34.6)%
                                            -----      ----    -----     -----
   Total electric sales ................    7,185       8.6%   6,613       1.9%
                                            =====      ====    =====     =====

     The Company's base rates did not change in 1995, 1994 or 1993. Total
operating revenues were higher in 1995 compared to 1994 largely resulting from
the effect on base revenues of weather-related increases in kilowatt-hour sales.
The increase in revenues resulted from an increase in base revenues reduced
slightly by a decrease in fuel cost recovery revenues resulting from lower
natural gas prices. Net income is not affected by changes in the cost of fuel
and purchased power because these cost fluctuations are passed on to customers
through fuel adjustment clauses.

     Total operating revenues were lower in 1994 compared to 1993 due primarily
to a decrease in fuel cost recovery revenues resulting from lower natural gas
prices and lower sales to other utilities.

     Kilowatt-hour sales are influenced significantly by weather. During 1995
the unusually hot weather together with industrial growth produced more
favorable sales compared to 1994. Winter temperatures in 1994 were more
favorable for sales compared to 1993, but the summer weather in 1994 was less
favorable than 1993.

     During the past five years, sales growth averaged 4.0% per year, and is
expected to range from 2% to 2.5% per year during the next five years. The level
of future sales will depend upon weather conditions, customer conservation
efforts, the Company's retail marketing and business development programs,
acquisitions of other electric utility properties and the overall economy of the
service area. Sales to industrial customers are also affected by the national
economy and worldwide demand for wood products, since the Company's two largest
customers are producers of such products. Issues facing the electric utility
industry that could affect sales include deregulation, retail wheeling,
retention of large industrial customers, municipal franchises and transmission
access.

     The citizens of Leesville voted to approve a 20-year franchise with the
Company in April 1995. The Company continued to serve the city after the
previous franchise expired on December 31, 1994. The nonexclusive municipal
franchise commenced on June 1 and affects approximately 5,000 customers.

     Two existing industrial customers are building new plants. Boise Cascade
Corporation is building a $50 million engineered wood products plant near the
Company's Rodemacher Power Station, and Martco Partnership is building a $50
million plywood plant a little farther north. The two plants, both scheduled for
completion in 1996, will add a combined load of about 12 megawatts.

     On May 1, 1995, the Company began providing approximately 13 megawatts of
wholesale power service to the city of St. Martinville under a five-year
contract
                                      -15-

subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC).
This contract was challenged in 1993 by the previous supplier, Louisiana Energy
and Power Authority (LEPA), as well as the city of Lafayette and the American
Public Power Association, with assertions of preferential, discriminatory and
predatory pricing. An initial decision of the FERC's presiding administrative
law judge (ALJ) in February 1995 rejected LEPA's arguments. Under FERC
procedures, LEPA has filed a brief requesting the FERC to revise the initial
decision. The Company has opposed LEPA's brief. Management believes that the
ALJ's initial decision will be upheld.

FUEL AND PURCHASED POWER

Changes in fuel and purchased power expenses reflect fluctuations in generation
mix, fuel costs, availability of economy power and deferral of expenses for
recovery from customers through fuel adjustment clauses in subsequent months.

     The Company obtains natural gas, coal and lignite under long-term contracts
and purchases natural gas on the spot market when prices are advantageous. Power
is purchased from other utilities when the purchase price is less than the
Company's cost to generate or when needed to meet system requirements.

     Last year the Company negotiated modifications to certain contracts which
provide us with lignite from a Louisiana mine and provide for rail
transportation of coal from Wyoming. Both of these newly modified contracts will
help lower the prices and increase the reliability of these important supplies
of power plant fuel.

CO-OP DEVELOPMENTS

In February 1994 the Company approached the management of Teche Electric
Cooperative, Inc. (Teche) about the possibility of purchasing Teche. Teche
serves about 8,600 customers, and its service area, which comprises parts of
Iberia, St. Martin and St. Mary parishes, is adjacent to the Company's service
area. Based on available data, the acquisition of Teche would result in an
increase in the Company's kilowatt-hour sales to regular customers of about
2.4%.

     In February 1995 Teche and the Company executed a purchase and sale
agreement for a purchase price, including the Company's assumption or other
discharge of Teche's liabilities, of approximately $22.4 million. The members of
Teche overwhelmingly approved the sale at their annual meeting in March 1995.
Closing of the transaction is subject to a number of conditions, including the
approval by the Louisiana Public Service Commission (LPSC) and the Rural
Utilities Service, successful resolution of Teche's power supply contract with
Cajun Electric Power Cooperative, Inc. (Cajun) and certain other conditions. All
costs incurred as of December 31, 1995, in association with the acquisition of
Teche have been expensed.

     In December 1994 the Company announced its interest in purchasing
Washington-St. Tammany Electric Cooperative, Inc. (WST). WST serves
approximately 30,600 customers in an area adjacent to the Company's service
territory. The Company's proposal to acquire WST, submitted to WST's board on
February 14, 1995, has expired without action from the WST board. The Company
has not renewed its proposal to acquire WST. The potential purchase of WST would
be subject to similar conditions to which the Teche acquisition is subject and
to approval by WST members.

NONFUEL OPERATING EXPENSES AND
INCOME TAXES

The changes in nonfuel operating expenses for 1995 and 1994 were as follows:

                                    Increase (Decrease) from Prior Year
                                           (In thousands except %)
                                      1995                         1994
                             -----------------------     -----------------------
Other operation .......      $ 9,402          16.6%      $ 5,868          11.6%
Maintenance ...........      $(2,064)         (8.4)%     $  (311)         (1.2)%
Depreciation ..........      $ 1,157           2.9%      $ 2,715           7.3%
Other taxes ...........      $   164           0.6%      $ 1,888           7.0%
Income taxes ..........      $ 5,328          26.8%      $   336           1.7%

     Excluding the effects of restructuring charges, 1995 nonfuel operating
expenses increased 8.2% over 1994. This increase was primarily due to costs
associated with the Company's co-op acquisition efforts, an employee incentive
plan, prior year criteria pollutant fees assessed by the Louisiana Department of
Environmental Quality in 1995, costs associated with the start-up of the
Company's 24-hour call center (while customer service offices remained open
until full implementation of the call center) and uncollectible accounts expense
resulting from higher sales and a pre-bankruptcy receivable from Cajun.
Maintenance expenses in 1995 decreased relative to 1994 as a result of a major
inspection at Teche power plant performed in 1994 and a reduction in the portion
of employees' time associated with maintenance activities. Income taxes
increased primarily due to higher taxable income in 1995.

     In 1994 nonfuel operating expenses, excluding restructuring charges,
increased 6.6% over 1993. Other operation expenses increased due to increases in
retirement plan costs, computer software expenses, uncollectible accounts
expense, expenses associated with the FERC proceeding in connection with service
to St. Martinville and Company efforts related to the acquisition of Teche.
Depreciation expenses increased in 1994 due to the installation of a customer
information system and the completion of a large transmission line in 1993,
along with
                                      -16-

the Company's continuing construction program. Property taxes increased because
of routine additions to utility plant in service and higher millages. Higher
city franchise taxes resulted from increased sales and the renegotiation of
several small municipal franchise agreements.

     An audit of the Company's 1991 and 1992 tax returns was completed by agents
of the Internal Revenue Service (IRS) in January 1995. A number of assessments
were proposed that would substantially increase federal and Louisiana taxable
income for those years. The Company has contested most of these assessments.
Deferred federal taxes have been provided for all temporary differences, and
reserves have been provided for other issues. If the IRS is completely
successful on all of the contested issues, an additional liability in excess of
current reserves would arise for interest and, if assessed, penalties. In
October 1995 agents of the IRS began an audit of the Company's 1993 and 1994 tax
returns.

     A number of parishes have attempted in recent years to impose franchise
fees on retail revenues earned within the unincorporated areas served by the
Company. If the parishes are ultimately successful, taxes other than income
taxes could increase substantially in future years.

INTEREST AND OTHER INCOME AND
INTEREST EXPENSE

Other income increased in 1995 as a result of earnings from short-term
instruments held by an unregulated subsidiary. Earnings from investments held by
this subsidiary declined in 1994 due to unfavorable market conditions.

     Interest expense increased in 1995 due to higher interest rates on
short-term debt and variable rate pollution control bonds. Also during 1995 $25
million of medium-term notes were issued at a weighted average interest rate of
6.63% to refinance $14 million of maturing 5.0% first mortgage bonds and to
reduce short-term debt levels. In 1994 the increase in interest expense
attributable to higher interest rates on short-term and variable rate pollution
control bond debt was partially offset by lower average short-term debt balances
and a full year's effect of lower long-term debt costs due to refinancings in
1993.

ALLOWANCE FOR FUNDS USED
DURING CONSTRUCTION (AFUDC)

AFUDC represents the estimated cost of financing construction work-in-progress
and is not a current source of cash. A return on and recovery of AFUDC is
generally permitted by regulatory bodies in setting rates charged for utility
services. AFUDC increased in 1995 from the prior year as a result of higher
average construction balances. AFUDC for 1994 declined from 1993 primarily due
to declining levels of construction work-in-progress, whereas average
construction balances resulted in higher AFUDC in 1993. AFUDC accounted for 4.5%
of net income applicable to common stock in 1995, compared to 3.3% in 1994 and
4.6% in 1993.

EARNINGS PER SHARE

In 1994 potentially dilutive securities had more than a 3% dilutive effect on
net income per common share due to the assumed conversion of the Incentive Stock
Option Plan and the convertible preferred stock held by the Employee Stock
Ownership Plan (ESOP). As a result, both primary and fully diluted average
shares of common stock outstanding and earnings per share are presented in the
Consolidated Statements of Income.

FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES

Financing for construction requirements and operational needs is dependent upon
the cost and availability of external funds through capital markets and from
financial institutions. Access to funds is dependent upon factors such as
general economic conditions, regulation and the Company's credit rating.

     Since 1990 the Company has participated in a program where up to $35
million of receivables are sold on an ongoing basis. The amount of receivables
that may be sold at any time depends upon seasonal fluctuations in the amount of
eligible receivables. The program was amended in March 1995 to allow for its
continuation until the year 2000.

     The Company has an effective shelf registration statement and all
regulatory approvals necessary to issue up to $50 million of preferred stock.

     At December 31, 1995 and 1994, the Company had $23.1 million and $29.0
million, respectively, of short-term debt outstanding in the form of commercial
paper borrowings and bank loans. In June 1995 the Company replaced its $100
million revolving credit agreement. The new $100 million agreement provides
support for the issuance of commercial paper and is scheduled to continue
through June 15, 2000. Uncommitted lines of credit with banks totaling $20
million are available to meet short-term working capital needs. Additionally, at
December 31, 1995, an unregulated consolidated subsidiary of the Company had
$18.6 million of cash and marketable securities.

CASH GENERATION AND CASH REQUIREMENTS

During 1995 the Company generated $87.7 million of cash flows from operating
activities as shown in the Consolidated Statements of Cash Flows. Net cash
provided by operating activities results from net income, adjusted for noncash
charges to income and changes in working capital. Net cash used in investing
activities is related to additions to utility plant and changes in utility and
nonutility investments. Net cash used in financing activities results
principally from the payment of dividends to shareholders and long-term
financing
                                      -17-

activities.

     In recent years the construction program has consisted primarily of
enhancements to the transmission and distribution systems. Expenditures,
excluding AFUDC, totaled $55 million in 1995 and $53 million in 1994.

     Construction expenditures, excluding AFUDC, for 1996 are estimated to be
$57 million and for the five-year period ending 2000 are expected to total $302
million. Projected expenditures for the five-year period ending 2000 include a
distribution resource management system, enhancements to the information
technology infrastructure, a new employee information and payroll system and the
addition of a new 230 kv substation. Also included in the five-year period are
the refurbishment of two retired natural gas units and the conversion of one
natural gas unit to combined cycle.

     In mid-1995 the Company issued $25 million of medium-term notes at an
average interest rate of 6.63%. Proceeds were used to retire a $14 million issue
of 5.0% first mortgage bonds which matured in September 1995 and to reduce
short-term debt. In early January 1996, the Company issued $25 million of
medium-term notes at an average interest rate of 6.40%. Proceeds from the
issuances were used to reduce short-term debt and for other general corporate
purposes. All debt securities registered under the Company's shelf registration
statement have now been issued.

     Scheduled maturities of debt and preferred stock will total about $0.3
million for 1996 and approximately $66.6 million for the five-year period ending
2000. In 1991 the Company began a common stock repurchase program, and as part
of that program, up to $23.5 million of common stock may be repurchased in the
future. The Company may require additional funds to purchase outstanding shares
of the Company's common stock.

     Approximately 93% of total construction requirements were funded internally
in 1995 as compared to 100% in 1994 and 90% in 1993. Without the costs of
restructuring in 1993, construction requirements in 1993 would have been
entirely funded with internally generated funds. In 1996 all construction
requirements are expected to be funded internally. For the five-year period
ending 2000, approximately 89% of construction requirements are expected to be
funded internally.

     Other capital requirements in 1995 and 1993 were funded by the issuance of
debt, while in 1994, other capital requirements were funded internally.

RETAIL RATES

Retail rates, which are regulated by the LPSC, account for 95% of total
revenues. Fuel costs and monthly fuel adjustment billing factors are subject to
audit by the LPSC. The LPSC establishes base rates for the Company which reflect
nonfuel costs, including the cost of capital, and sales. In the past the Company
has sought increases in base rates to reflect the cost of service related to
plant facility additions and increases in operating costs. If the Company were
to request an increase in its rates and adequate rate relief was not granted on
a timely basis, the Company's ability to attract capital at reasonable costs to
finance its operations and capital improvements might be impaired.

     The LPSC has elected to review the earnings of all electric, gas, water and
telecommunication utilities regulated by it to determine if the returns on
equity of these companies may be higher than returns that might be awarded in
the current economic environment. The LPSC project team began its review of the
Company in August 1995. Resolution of the earnings review, which is not subject
to any statutory or procedural deadlines, is expected in early 1996. Although
the Company's rates are among the lowest in the state, we cannot predict the
outcome of the review or the effect on the Company's financial position, results
of its operations or its cash flows.

INFLATION

The Company is a capital-intensive electric utility. As such, it is affected by
inflation since depreciation, which is based on the historical cost of assets,
will in all likelihood not fully reflect the cost of replacing assets. Although
the cost of fuel used for electric generation is a major component of total
costs, the Company is not exposed to the effects of inflation in fuel prices
since fuel costs are recovered from customers through fuel adjustment clauses.

ENVIRONMENTAL MATTERS

The Company is subject to federal, state and local laws and regulations
governing the protection of the environment. Violations may result in
substantial fines and penalties. The Company has obtained all material
environmental permits necessary for its operations and believes it is in
substantial compliance with all applicable environmental laws and regulations.
The Company is preparing operating permit applications under the Clean Air Act
Amendments of 1990 (Clean Air Act).

     Implementation of Phase I of the Clean Air Act will not require the Company
to reduce sulfur emissions at its solid-fuel generating units, which either burn
low-sulfur coal or utilize pollution control equipment. Installation of
continuous emission monitoring equipment on its generating units has been
completed at a cost of approximately $2.9 million. Although Phase II of the
legislation, effective in 2000, involves more stringent limits on emissions, it
should not significantly affect the way the Company's generating units are
operated. However, some capital investment may be necessary in order to comply
with Phase II requirements. Capital expenditures for environmental matters in
1996 are estimated to be $1.4 million.

     In 1986 the Company was one of a number of

                                      -18-

companies named by the Environmental Protection Agency as potentially
responsible parties for the cleanup of a site in Missouri previously operated by
an authorized PCB (polychlorinated biphenyl) processor. The Company participated
with other parties in the cleanup of this site, which was completed in 1995. The
site is required to be monitored over the next eight to ten years. All
anticipated costs have been funded.

REGULATORY MATTERS

On March 29, 1995, the FERC issued a Notice of Proposed Rulemaking (NOPR)
addressing two key issues: open transmission access and recovery of stranded
cost. The open access provisions of the NOPR propose to require FERC-regulated
electric utilities to offer third parties open access to transmission under the
same or comparable terms and conditions as the utilities' use of their own
systems. Providing unbundled transmission services to firm-requirements
customers may have significant financial consequences to the utility industry.
Providing open access for nonfirm sales may have a significant effect on utility
operations.

     The stranded-cost proposal would allow utilities to recover investments in
assets stranded by customers departing as a result of opening the transmission
systems. This proposal could mitigate the financial consequences of unbundling
transmission services to wholesale customers. Currently, the Company has three
wholesale full-requirements customers representing about 1.2% of the Company's
total kilowatt-hour sales.

     At this time, it is not possible to predict whether the NOPR will become a
final rule, and if it does become a final rule, the form of such final rule and
its effect on the Company.

     Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS 121) was issued in March 1995, and effective for fiscal years beginning
after December 15, 1995. SFAS 121 establishes accounting standards for
determining if long-lived assets are impaired, and when losses, if any, should
be recognized and how any such losses should be recognized. In addition, the
Company has recorded regulatory assets and liabilities, primarily for the
effects of income taxes, as a result of past rate actions of the Company's
regulators, pursuant to Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" (SFAS 71). The
effects of potential deregulation of the industry or possible future changes in
the method of rate regulation of the Company could require that the Company
discontinue the application of SFAS 71, pursuant to Statement of Financial
Accounting Standards No. 101, "Regulated Enterprises - Accounting for the
Discontinuation of Application of FASB Statement No. 71". Management believes
that for the foreseeable future, the Company's rates will remain based on its
costs of providing service. The effects of these standards on the Company's
financial position, results of its operations and its cash flows will be
determined by the facts and circumstances at that time.

NEW ACCOUNTING STANDARD

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", requires beginning in 1996, a fair value based method of
accounting for stock-based compensation plans or, in lieu of a change in
accounting, the disclosure of pro forma differences in net income and earnings
per share. Because of the limited number of shares of common stock currently
being granted pursuant to compensation plans in effect, management estimates
that there would be no significant difference in net income or earnings per
share between the fair value method and the intrinsic value method currently
being used.

                                      -19-

                       CONSOLIDATED STATEMENTS OF INCOME

                                                   (In thousands,
                                          except share and per share amounts)

For the Years Ended December 31            1995         1994         1993
                                        ----------   ----------   ----------
OPERATING REVENUES ...................    $394,426     $379,603     $382,433
                                        ----------   ----------   ----------
Operating expenses
     Fuel used for electric generation     108,322      120,546      119,197
     Power purchased .................      27,367       17,376       28,088
     Other operation .................      65,963       56,561       50,693
     Restructuring charges ...........                    1,203       10,851
     Maintenance .....................      22,616       24,680       24,991
     Depreciation ....................      41,164       40,007       37,292
     Taxes other than income taxes ...      29,063       28,899       27,011
     Federal and state income taxes ..      25,229       19,901       19,565
                                        ----------   ----------   ----------
          Total operating expenses ...     319,724      309,173      317,688
                                        ----------   ----------   ----------
OPERATING INCOME .....................      74,702       70,430       64,745
Interest income ......................         219          238          358
Allowance for other funds used
 during construction .................       1,912        1,716        2,556
Other income (expenses), net .........          74         (967)         (88)
                                        ----------   ----------   ----------
INCOME BEFORE INTEREST CHARGES .......      76,907       71,417       67,571
                                        ----------   ----------   ----------
Interest charges
     Interest on debt and other ......      27,998       25,736       24,839
     Allowance for borrowed funds used
      during construction ............      (1,028)        (585)        (482)
     Amortization of debt discount,
      premium and expense, net .......       1,234        1,223        1,402
                                        ----------   ----------   ----------
          Total interest charges .....      28,204       26,374       25,759
                                        ----------   ----------   ----------
NET INCOME ...........................      48,703       45,043       41,812
Preferred dividend requirements, net .       2,052        2,026        1,985
                                        ----------   ----------   ----------
NET INCOME APPLICABLE TO
 COMMON STOCK ........................     $46,651      $43,017      $39,827
                                        ==========   ==========   ==========
AVERAGE SHARES OF COMMON
 STOCK OUTSTANDING
     Primary .........................  22,430,759   22,414,831   22,388,535
     Fully diluted ...................  23,849,854   23,842,199   23,826,654
                                        ==========   ==========   ==========
EARNINGS PER SHARE
     Primary .........................       $2.08        $1.92        $1.78
     Fully diluted ...................       $2.01        $1.86        $1.73
                                        ==========   ==========   ==========
CASH DIVIDENDS PAID PER SHARE
 OF COMMON STOCK .....................       $1.49        $1.45        $1.41
                                        ==========   ==========   ==========

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      -20-

                          CONSOLIDATED BALANCE SHEETS
                                                          (In thousands)
At December 31                                         1995           1994
                                                   -----------    -----------
ASSETS
Utility plant (Notes A and B)
     Property, plant and equipment ..............  $ 1,319,815    $ 1,276,266
     Accumulated depreciation ...................     (441,686)      (410,513)
                                                   -----------    -----------
     Net property, plant and equipment ..........      878,129        865,753
     Construction work-in-progress ..............       51,390         46,379
                                                   -----------    -----------
          Total utility plant, net ..............      929,519        912,132
                                                   -----------    -----------
Investments and other assets (Note D) ...........        8,097         20,327
                                                   -----------    -----------
Current assets
     Cash and cash equivalents (Note A) .........       20,621          7,440
     Accounts receivable, net (Note C)
          Customer accounts receivable ..........        6,081          2,165
          Other accounts receivable .............       10,994          8,982
     Unbilled revenues ..........................        3,098            573
     Fuel inventory, at average cost ............        8,699         10,184
     Material and supplies inventory,
      at average cost ...........................       15,819         14,945
     Prepayments and other current assets .......        2,501          2,374
                                                   -----------    -----------
          Total current assets ..................       67,813         46,663
                                                   -----------    -----------
Prepayments .....................................        8,213          7,861
                                                   -----------    -----------
Regulatory assets and other deferred charges ....      185,934        151,831
                                                   -----------    -----------
Accumulated deferred federal and state
 income taxes (Note J) ..........................       66,458         39,377
                                                   -----------    -----------
          TOTAL ASSETS ..........................  $ 1,266,034    $ 1,178,191
                                                   ===========    ===========
CAPITALIZATION AND LIABILITIES
Common shareholders' equity
     Common stock, $2 par value, authorized
      50,000,000 shares, issued 22,745,104
      and 22,720,074 shares at December 31,
      1995 and 1994, respectively (Note F) ......  $    45,490    $    45,440
     Premium on capital stock ...................      113,444        113,070
     Retained earnings ..........................      224,688        211,198
     Treasury stock, at cost, 318,446 and
      329,433 shares at December 31, 1995
      and 1994, respectively ....................       (6,459)        (6,681)
                                                   -----------    -----------
          Total common shareholders' equity .....      377,163        363,027
Preferred stock (Note H)
     Not subject to mandatory redemption ........       30,519         30,748
     Subject to mandatory redemption ............        6,610          6,920
Deferred compensation related to preferred
 stock held by ESOP .............................      (22,595)       (24,404)
Long-term debt, net (Note E) ....................      360,822        336,589
                                                   -----------    -----------
          Total capitalization ..................      752,519        712,880
                                                   -----------    -----------
Current liabilities
     Short-term debt (Note E) ...................       23,062         28,977
     Long-term debt due within one
      year (Note E) .............................                      14,676
     Accounts payable ...........................       51,087         43,466
     Customer deposits ..........................       19,725         19,513
     Taxes accrued (Note J) .....................        2,503          3,262
     Interest accrued ...........................        8,909          8,298
     Accumulated deferred fuel ..................        3,651          6,114
     Other current liabilities ..................        2,343          2,618
                                                   -----------    -----------
          Total current liabilities .............      111,280        126,924
                                                   -----------    -----------
Deferred credits
     Accumulated deferred federal and state
      income taxes (Note J) .....................      266,873        228,803
     Accumulated deferred investment tax
      credits (Note J) ..........................       33,173         34,987
     Regulatory liabilities and other
      deferred credits ..........................      102,189         74,597
                                                   -----------    -----------
          Total deferred credits ................      402,235        338,387
                                                   -----------    -----------
Commitments and contingencies
 (Notes C, E, F, H, I, J and K)
                                                   -----------    -----------
          TOTAL CAPITALIZATION AND LIABILITIES ..  $ 1,266,034    $ 1,178,191
                                                   ===========    ===========

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      -21-

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the Years Ended December 31                                          (In thousands)
                                                                   1995        1994        1993
                                                                 --------   ---------   ---------
<S>                                                              <C>        <C>         <C>
OPERATING ACTIVITIES
     Net income ...............................................  $ 48,703   $  45,043   $  41,812
     Adjustments to reconcile net income
       to net cash provided by operating activities
          Depreciation and amortization .......................    42,398      40,095      37,940
          Allowance for funds used during construction ........    (2,940)     (2,301)     (3,038)
          Amortization of investment tax credits ..............    (1,814)     (1,819)     (1,826)
          Deferred income taxes ...............................     2,854       2,445       1,327
          Deferred fuel costs .................................    (2,463)        799       1,869
          Restructuring charge ................................                 1,152       7,135
          Gain (loss) on disposition of utility plant, net ....      (270)         25
          Changes in assets and liabilities
               Accounts receivable, net .......................    (5,928)       (446)     (2,655)
               Unbilled revenues ..............................    (2,525)        933        (384)
               Fuel, material and supplies inventories ........       611         776      (5,195)
               Accounts payable ...............................     7,621       2,076      (2,014)
               Customer deposits ..............................       212         875         867
               Taxes accrued ..................................      (759)     (1,807)      2,372
               Interest accrued ...............................       611         (31)      1,044
          Other, net ..........................................     1,343         981      (3,075)
                                                                 --------   ---------   ---------
               Net cash provided by operating activities ......    87,654      88,796      76,179
                                                                 --------   ---------   ---------
INVESTING ACTIVITIES
     Additions to utility plant ...............................   (57,839)    (55,445)    (51,507)
     Allowance for funds used during construction .............     2,940       2,301       3,038
     Sale of utility plant ....................................       546         373         377
     Purchase of investments ..................................    (2,618)   (203,165)   (292,178)
     Sale of investments ......................................    14,278     203,749     296,658
                                                                 --------   ---------   ---------
               Net cash used in investing activities ..........   (42,693)    (52,187)    (43,612)
                                                                 --------   ---------   ---------
FINANCING ACTIVITIES
     Issuance of common stock .................................       379         208       1,160
     Repurchase of common stock ...............................                  (309)
     Redemption of preferred stock                                   (310)       (322)       (150)
     Issuance of long-term debt ...............................    25,000                  75,000
     Retirement of long-term debt .............................   (15,481)       (650)    (35,583)
     Increase (decrease) in short-term debt, net ..............    (5,915)        603     (35,497)
     Dividends paid on common and preferred stock, net ........   (35,453)    (34,501)    (33,493)
                                                                 --------   ---------   ---------
               Net cash used in financing activities ..........   (31,780)    (34,971)    (28,563)
                                                                 --------   ---------   ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS .....................    13,181       1,638       4,004
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................     7,440       5,802       1,798
                                                                 --------   ---------   ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR ......................  $ 20,621   $   7,440   $   5,802
                                                                 ========   =========   =========
Supplementary cash flow information
     Interest paid (net of amount capitalized) ................  $ 27,744   $  27,457   $  24,116
     Income taxes paid ........................................  $ 24,357   $  25,762   $  17,326
                                                                 ========   =========   =========
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      -22-

       CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS' EQUITY

               (In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Years Ended                                   Common Stock            Premium              Treasury Stock
                                                    ----------------------   on Capital  Retained  ---------------
December 31, 1993, 1994 and 1995                      Shares       Amount      Stock     Earnings  Shares    Cost
                                                    -----------   --------   ---------   --------  -------  ------
<S>              <C>                                 <C>          <C>        <C>         <C>       <C>      <C>
BALANCE, JANUARY 1, 1993 .........................   22,634,081   $ 45,268   $ 111,811   $192,637  328,334  $6,639
                                                    -----------   --------   ---------   --------  -------  ------
Redemptions of preferred stock ...................                                   8
Incentive stock options exercised ................       74,793        150       1,010
Issuance of treasury stock .......................                                                  (1,981)    (40)
Incentive shares forfeited .......................                                                      27       1
Capital stock expense ............................                                            (48)
Dividend requirements, preferred stock, net ......                                         (1,985)
Cash dividends paid, common stock, $1.41 per share                                        (31,508)
Net income .......................................                                         41,812
                                                    -----------   --------   ---------   --------  -------  ------
BALANCE, DECEMBER 31, 1993 .......................   22,708,874     45,418     112,829    200,908  326,380   6,600
                                                    -----------   --------   ---------   --------  -------  ------
Redemptions of preferred stock ...................                                  48
Incentive stock options exercised ................       11,200         22         186
Repurchase of common stock .......................                                                  14,300     309
Issuance of treasury stock .......................                                   7             (11,247)   (228)
Capital stock expense ............................                                            (12)
Dividend requirements, preferred stock, net ......                                         (2,026)
Cash dividends paid, common stock, $1.45 per share                                        (32,475)
Unrealized holding loss on available-for-sale
 securities, net .................................                                           (240)
Net income .......................................                                         45,043
                                                    -----------   --------   ---------   --------  -------  ------
BALANCE, DECEMBER 31, 1994 .......................   22,720,074     45,440     113,070    211,198  329,433   6,681
                                                    -----------   --------   ---------   --------  -------  ------
Redemptions of preferred stock ...................                                  39
Incentive stock options exercised ................       25,030         50         329
Issuance of treasury stock .......................                                   6             (10,987)   (222)
Dividend requirements, preferred stock, net ......                                         (2,052)
Cash dividends paid, common stock, $1.49 per share                                        (33,401)
Change in unrealized holding loss on
     available-for-sale securities, net ..........                                            240
Net income .......................................                                         48,703
                                                    -----------   --------   ---------   --------  -------  ------
BALANCE, DECEMBER 31, 1995 .......................   22,745,104   $ 45,490   $ 113,444   $224,688  318,446  $6,459
                                                    ===========   ========   =========   ========  =======  ======
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      -23-

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRESENTATION AND REGULATION

The consolidated financial statements include the accounts of Central Louisiana
Electric Company, Inc. (the Company) and its wholly owned subsidiaries.

     The Company maintains its accounts in accordance with the Uniform System of
Accounts prescribed for electric utilities by the Federal Energy Regulatory
Commission (FERC), as adopted by the Louisiana Public Service Commission (LPSC).
The Company provides electric service to a diversified base of residential,
commercial and industrial customers in 23 parishes of Louisiana. The Company's
retail rates for residential, commercial and industrial customers and other
retail sales are regulated by the LPSC, and its rates for transmission services
and wholesale power sales are regulated by the FERC.

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make 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 and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

UTILITY PLANT AND DEPRECIATION

Utility plant is stated at the original cost of construction, which includes
certain materials, labor, payroll taxes and benefits, administrative and general
costs, and the estimated cost of funds used during construction. The cost of
repairs and minor replacements is charged as incurred to the appropriate
operating expense and clearing accounts. The cost of improvements is
capitalized. Upon retirement or disposition, the recorded cost of depreciable
plant and the cost of removal, net of salvage value, are charged to accumulated
depreciation.

     The provision for depreciation is computed using the straight-line method
at rates which will amortize the unrecovered cost of depreciable property over
its estimated useful life. Annual depreciation provisions expressed as a
percentage of average depreciable property were 3.19% for 1995, 3.17% for 1994
and 3.11% for 1993.

CASH EQUIVALENTS

The Company considers highly liquid, marketable securities and other similar
instruments with original maturity dates of three months or less at the time of
purchase to be cash equivalents.

INCOME TAXES

Deferred income taxes are provided at the current enacted income tax rate on all
temporary differences between tax and book bases of assets and liabilities. The
Company recognizes regulatory assets and liabilities for the tax effect of
temporary differences which, to the extent past ratemaking practices are
continued by regulators, will be realized over the accounting lives of the
related properties.

INVESTMENT TAX CREDITS

Investment tax credits which were deferred for financial statement purposes are
amortized to income over the estimated service lives of the properties which
gave rise to the credits.

DEBT EXPENSE, PREMIUM AND DISCOUNT

Expense, premium and discount applicable to debt securities are amortized to
income ratably over the lives of the related issues. Expense and call premium
related to refinanced debt are amortized over the remaining life of the original
issue.

REVENUES AND FUEL COSTS

Revenues from sales of electricity are recognized based upon the amount of
energy delivered. The cost of fuel is recovered from customers through fuel
adjustment clauses, based upon fuel costs incurred in prior months. These
adjustments are subject to audit and final determination by regulators.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)

The capitalization of AFUDC is a utility accounting practice prescribed by the
FERC. AFUDC represents the estimated cost of financing construction
work-in-progress. AFUDC does not represent a current source of cash, but under
regulatory practices, a return on and recovery of AFUDC is permitted in setting
rates charged for utility services. The composite AFUDC rate, including borrowed
and other funds on a combined basis, for 1995, 1994 and 1993 was 15.10% on a
pre-tax basis (9.29% net of tax).

NET INCOME PER COMMON SHARE

Net income per common share has been computed using the weighted average number
of shares of common stock outstanding during the year. In 1994 potentially
dilutive securities had more than a 3% dilutive effect on net income per common
share due to the assumed conversion of the Incentive Stock Option Plan and the
convertible preferred stock held by the Employee Stock Ownership Plan (ESOP). As
a result, both primary and fully diluted average shares of common stock
outstanding and earnings per share are presented.

                                      -24-

NOTE B -- JOINTLY OWNED GENERATING UNITS

     Two electric generating units operated by the Company are jointly owned
with other utilities. The Company's proportionate share of operation and
maintenance expenses associated with these two units is reflected in the
financial statements.

                                                   (Dollar amounts in thousands)
                                                     Rodemacher      Dolet Hills
At December 31, 1995                                  Unit #2           Unit #1
                                                      -------          --------
Percentage of ownership .....................              30%               50%
Utility plant in service ....................         $84,765          $270,789
Accumulated depreciation ....................         $34,238          $ 78,415
Unit capability (thousand kilowatts) ........           523.0             650.0
Share of capability (thousand kilowatts) ....           156.9             325.0

NOTE C -- RECEIVABLES

The Company sells an ownership interest in certain types of accounts receivable
and accrued unbilled revenues. A maximum of $35,000,000 of receivables may be
sold at any time, and new receivables are sold as previously sold receivables
are collected. Sales of the Company's receivables are scheduled to continue
through February 2000. The Company is obligated to repurchase a limited amount
of receivables if such receivables were to become uncollectible. The Company
maintains an allowance for uncollectible accounts, based on historical
experience, against which losses on all receivables are charged.

                                                              (In thousands)
For the year ended December 31                              1995          1994
                                                           -------       -------
Receivables sold but not collected (at year end) ...       $35,000       $34,000
Average amount of receivables sold .................       $34,058       $34,557
Costs charged to operating expense .................       $ 2,251       $ 1,751
Receivables subject to repurchase (at year end) ....       $ 4,137       $ 3,510
Accumulated provision for uncollectible
 accounts (at year end) ............................       $   538       $   444

NOTE D -- INVESTMENTS AND OTHER FINANCIAL INSTRUMENTS

In 1994 the Company classified various debt and equity securities it owned which
were invested through an outside investment manager as "available-for-sale"
securities and carried these securities at fair value. In 1995 this portfolio
was liquidated and the proceeds were invested in government/agency securities
and other securities classified as cash equivalents through a different outside
investment manager pending final determination by the Company as to their
ultimate utilization.

                                                (In thousands)
                                         1995                    1994
                                  Original  Fair Market   Original  Fair Market
At December 31                      Cost       Value        Cost        Value
                                   ------      ------      -------     -------
Equity securities ...............                           $6,750      $6,466
U.S. Treasury/Government Agency .  $  594      $  594        4,371       4,317
Corporate obligations ...........                            1,333       1,303
                                   ------      ------      -------     -------
  Total marketable securities ...  $  594      $  594      $12,454     $12,086
                                   ======      ======      =======     =======

     Proceeds from the sales of available-for-sale securities in 1995 were
$15,092,000 and in 1994 were $14,448,000. The gross realized gains from these
sales were approximately $78,000 in 1995 and $1,295,000 in 1994 and the gross
realized losses were approximately $76,000 in 1995 and $2,170,000 in 1994. The
contractual maturities of debt securities classified as available-for-sale at
December 31, 1995, were within one year.

     The amounts reflected in the financial statements at December 31, 1995 and
1994 for cash and cash equivalents, accounts receivable, accounts payable and
short-term debt approximate fair value because of their short-term nature. The
fair value of investments at December 31, 1995 and 1994 is estimated based on
quoted market prices for these or similar investments. The fair value of the
Company's long-term debt and nonconvertible preferred stock is estimated based
upon the quoted market price for the same or similar issues or by a discounted
present value analysis of future cash flows using current rates obtainable by
the Company for debt and preferred stock with similar maturities. The fair value
of convertible preferred stock is estimated assuming its conversion into common
stock at the market price per common share at December 31, 1995 and 1994, with
proceeds from the sale of the common stock used to repay the principal balance
of the Company's loan to the ESOP.

                                                (In thousands)
At December 31                         1995                       1994
                               Carrying    Estimated      Carrying    Estimated
                                Value      Fair Value      Value      Fair Value
                               --------     --------      --------     --------
Investments ..............     $  7,786     $  7,786      $ 19,558     $ 19,558
Long-term debt ...........     $361,260     $384,427      $351,741     $345,810
Preferred stock not
 subject to mandatory
 redemption ..............     $  7,924     $ 13,359      $  6,344     $  6,722
Preferred stock
 subject to mandatory
 redemption ..............     $  6,610     $  4,597      $  6,920     $  5,927

                                      -25-

NOTE E -- DEBT

The Company has a $100,000,000 revolving credit facility with a group of banks
that provides for uncollateralized borrowings at prevailing market interest
rates or at interest rates established by competitive bids. The facility has a
scheduled termination date of June 15, 2000. The Company pays a commitment fee
(currently 0.10%) on the full amount of the facility, based upon the Company's
lowest senior secured debt rating. The Company is not required to maintain
compensating balances in connection with the revolving credit facility. Since
the revolving credit facility provides liquidity support for the issuance of
commercial paper, the aggregate amount of commercial paper notes and borrowings
under the revolving credit facility cannot exceed $100,000,000. In addition to
its revolving credit facility, the Company also has various uncommitted
borrowing arrangements with banks totaling $20,000,000. The banks are not
obligated to lend under these arrangements, and any borrowings are made at
negotiated interest rates and are uncollateralized. The Company pays no fees on
any of these arrangements, nor are compensating balances required. The weighted
average interest rate on short-term debt was 5.90% at December 31, 1995 and
5.87% at December 31, 1994. In January 1996 the Company issued $25 million of
medium-term notes at an average interest rate of 6.40%.

                                                          (In thousands)
At December 31                                        1995               1994
                                                   ---------          ---------
Commercial paper, net ....................         $  22,922          $  28,977
Bank loans ...............................               140
                                                   ---------          ---------
     Total short-term debt ...............         $  23,062          $  28,977
                                                   =========          =========
First mortgage bonds
     Series L, 5%, retired 1995 ..........                            $  14,000
     Series X, 9 1/2%, due 2005 ..........         $  60,000             60,000
     Series Y, 9 5/8%, due 2021 ..........            50,000             50,000
Pollution control revenue bonds,
 variable rate, due 2018 .................            61,260             61,260
Medium-term notes
     9.13%, due 1997 .....................            15,000             15,000
     7.85%, due 2000 .....................            25,000             25,000
     7.53%, due 2004 .....................            25,000             25,000
     7.00%, due 2003 .....................            10,000             10,000
     6.90%, due 1998 .....................            15,000             15,000
     5.90%, due 1999 .....................            10,000             10,000
     6.55%, due 2003 .....................            15,000             15,000
     6.33%, due 2002 .....................            25,000             25,000
     5.78%, due 2001 .....................            10,000             10,000
     6.20%, due 2006 .....................            15,000             15,000
     6.42%, due 2001 .....................            15,000
     6.95%, due 2006 .....................            10,000
Mortgage notes, 2%, retired 1995 .........                                  171
Capitalized lease obligations,
 5.0% - 6.875%, retired 1995 .............                                1,310
                                                   ---------          ---------
     Total long-term debt ................           361,260            351,741
Amount due within one year ...............                              (14,676)
Unamortized premium
 and discount, net .......................              (438)              (476)
                                                   ---------          ---------
     Total long-term debt, net ...........         $ 360,822          $ 336,589
                                                   =========          =========

                                        (In thousands)
                            1997    1998     1999     2000   Thereafter  Total
                          -------  -------  -------  -------  --------  --------
Amounts payable under
 long-term debt
 agreements ............  $15,000  $15,000  $10,000  $25,000  $296,260  $361,260

NOTE F -- COMMON STOCK

In association with incentive compensation plans in effect during the three-year
period ended December 31, 1995, certain officers and key employees could be
awarded shares of restricted or unrestricted common stock or granted options to
purchase shares of the Company's common stock at 100% of the fair market value
of the common stock at the dates the options were granted. The cost of the
restricted stock awards, as measured by the fair market value of the common
stock at the time of the grant, is recorded as compensation expense during the
periods in which the restrictions on the common stock lapse. The Company makes
no charge to expense with respect to the granting of options. At December 31,
1995, all options were exercisable, while the number of shares of restricted
stock previously awarded for which restrictions had not lapsed totaled 29,037
shares.
                                      -26-

     Changes in incentive shares for the three-year period ended December 31,
1995 were as follows:

                                               Incentive Shares
                                ----------------------------------------------
                                 Option Price    Unexercised     Available for
                                  per Share     Option Shares    Future Grants
                                   --------        --------        --------
Balance, January 1, 1993 ......                     145,223         784,232
                                   --------        --------        --------
Options exercised .............    $   8.875         (6,118)
                                   $  14.75         (35,275)
                                   $  16.78         (33,400)
Restricted stock granted ......                                     (10,320)
Restricted stock forfeited ....                                          27
Incentive stock awarded .......                                      (2,624)
                                   --------        --------        --------
Balance, December 31, 1993 ....                      70,430         771,315
                                   --------        --------        --------
Options exercised .............    $  14.75          (6,500)
                                   $  16.78          (4,700)
Restricted stock granted ......                                      (9,263)
Incentive stock awarded .......                                      (2,274)
                                   --------        --------        --------
Balance, December 31, 1994 ....                      59,230         759,778
                                   --------        --------        --------
Options exercised .............    $  14.75         (18,230)
                                   $  16.78          (6,800)
Restricted stock granted ......                                     (11,186)
                                   --------        --------        --------
Balance, December 31, 1995 ....                      34,200         748,592
                                   ========        ========        ========

     Various debt agreements of the Company contain covenants which restrict the
amount of retained earnings that may be distributed as dividends to common
shareholders. The most restrictive covenant requires that common shareholders'
equity be not less than 30% of total capitalization, including short-term debt.
At December 31, 1995, approximately $144 million of retained earnings was not
restricted.

NOTE G -- SUPPLEMENTARY PROFIT AND LOSS INFORMATION

                                                         (In thousands)
For the years ended December 31                   1995        1994        1993
                                                 -------     -------     -------
Operating revenue derived from
 one customer ..............................     $28,695     $28,259     $29,731
                                                 =======     =======     =======
Other taxes included in the
 consolidated income statements ............     $29,063     $28,899     $27,011
Other taxes capitalized to plant ...........       1,010         742         882
                                                 -------     -------     -------
Total other taxes ..........................     $30,073     $29,641     $27,893
                                                 =======     =======     =======
Other taxes consist of:
     State and municipal property ..........     $15,868     $15,406     $14,174
     State and municipal franchise .........      10,072      10,424       9,443
     Other .................................       4,133       3,811       4,276
                                                 -------     -------     -------
Total other taxes ..........................     $30,073     $29,641     $27,893
                                                 =======     =======     =======
NOTE H -- PREFERRED STOCK

In 1991 the Company sold 300,000 shares of 8.125% convertible preferred stock to
the ESOP. Each share of preferred stock is convertible into 4.8 shares of common
stock. The amount of total capitalization reflected in the consolidated
financial statements has been reduced by an amount of deferred compensation
expense related to the shares of convertible preferred stock which have not yet
been allocated to ESOP participants. The amount shown in the consolidated
financial statements for preferred dividend requirements in 1995, 1994 and 1993
has been reduced by $716,000, $771,000 and $840,000, respectively, to reflect
the benefit of the income tax deduction for dividend requirements on unallocated
shares held by the ESOP.

     Upon involuntary liquidation, preferred shareholders are entitled to
receive par value for shares held before any distribution is made to common
shareholders. Upon voluntary liquidation, preferred shareholders are entitled to
receive the redemption price per share applicable at the time such liquidation
occurs plus any accrued dividends.

                                      -27-

     Information about the components of preferred stock capitalization is as
follows:
<TABLE>
<CAPTION>
                                                            (In thousands, except share amounts)

                                 Balance                     Balance                     Balance                  Balance
                                January 1,                 December 31,                December 31,             December 31,
                                   1993         Change        1993         Change         1994        Change       1995
                               -----------   -----------   -----------   -----------   -----------   --------   -----------
<S>                            <C>           <C>           <C>           <C>           <C>           <C>        <C>
CUMULATIVE PREFERRED
STOCK, $100 par value

NOT SUBJECT TO MANDATORY
 REDEMPTION
     4.50%                     $     1,029                 $     1,029                  $    1,029                 $  1,029
     Convertible, Series
      of 1991, variable
      rate ..................       29,994   $       (41)       29,953   $      (234)       29,719   $   (229)       29,490
                               -----------   -----------   -----------   -----------   -----------   --------   -----------
                               $    31,023   $       (41)  $    30,982   $      (234)  $    30,748   $   (229)  $    30,519
                               ===========   ===========   ===========   ===========   ===========   ========   ===========
SUBJECT TO MANDATORY
 REDEMPTION
     4.50%, Series of 1955 ..  $       520   $       (40)  $       480   $       (40)  $       440   $    (40)  $       400
     4.65%, Series of 1964 ..        3,500                       3,500          (140)        3,360       (140)        3,220
     4.75%, Series of 1965 ..        3,380          (118)        3,262          (142)        3,120       (130)        2,990
                               -----------   -----------   -----------   -----------   -----------   --------   -----------
                               $     7,400   $      (158)  $     7,242   $      (322)  $     6,920   $   (310)  $     6,610
                               ===========   ===========   ===========   ===========   ===========   ========   ===========
Deferred compensation related
 to convertible preferred
 stock held by the ESOP .....  $   (28,306)  $     2,188   $   (26,118)  $     1,714   $   (24,404)  $  1,809   $   (22,595)
                               ===========   ===========   ===========   ===========   ===========   ========   ===========
CUMULATIVE PREFERRED
 STOCK, $100 par value
Number of Shares
 Authorized .................    1,420,800        (1,181)    1,419,619        (2,819)    1,416,800     (2,700)    1,414,100
 Issued and Outstanding .....      384,232        (1,994)      382,238        (5,562)      376,676     (5,389)      371,287
                               ===========   ===========   ===========   ===========   ===========   ========   ===========
CUMULATIVE PREFERRED
 STOCK, $25 par value
Number of Shares
 Authorized .................    3,000,000                   3,000,000                   3,000,000                3,000,000
 Issued and Outstanding
</TABLE>
     Preferred stock, other than the convertible preferred stock held by the
ESOP, is redeemable at the Company's option, subject to 30 days' prior written
notice to holders. Preferred stock subject to mandatory redemption is redeemable
annually through sinking funds or purchase funds at prices of not more than $100
per share until all shares have been redeemed. The convertible preferred stock
is redeemable at any time upon the occurrence of certain events and, after April
1, 1996, is redeemable at the Company's option. If the Company were to elect to
redeem the convertible preferred shares, shareholders may elect to receive the
optional redemption price or convert the preferred shares into common stock. The
redemption provisions for the various series of preferred stock are shown in the
following table.
                                        Optional
                                       Redemption     Mandatory Redemption
                                       ----------  ---------------------------
                                        Price per     Number of      Price per
Series                                   Share     Shares Annually     Share
------                                   ----      ---------------     -----
4.50% ..................................  $101
4.50%, Series of 1955 ..................  $102            400           $100
4.65%, Series of 1964 ..................  $102          1,400           $100
4.75%, Series of 1965 ..................  $100          1,300           $100
Convertible, Series of 1991
     Through April 1, 1996 .............  $104.875
     Thereafter ........................  $104.0625 to $100

                                      -28-

NOTE I -- PENSION PLAN AND EMPLOYEE BENEFITS

Substantially all employees are covered by a noncontributory, defined benefit
pension plan. Benefits under the plan reflect an employee's years of service,
age at retirement and highest total average compensation for any consecutive
five calendar years during the last ten years of employment with the Company.
The Company's policy is to fund contributions to the employee pension plan based
upon actuarial computations utilizing the projected unit credit method, subject
to the Internal Revenue Service full funding limitation. No contributions to the
pension plan were required during the three-year period ended December 31, 1995.
Effective January 1, 1993, the Company began accounting for its pension plan on
an accrual basis for ratemaking purposes with the approval of the LPSC staff. A
previously recorded regulatory credit with regard to the pension plan is being
amortized to income over a five-year period, subject to review by the LPSC in
future proceedings.

                                                      (In thousands)
For the years ended December 31               1995         1994         1993
                                             -------      -------      -------
Service costs for benefits
 earned during the period ...............    $ 2,498      $ 2,648      $ 2,559
Interest costs on projected
 benefit obligation .....................      6,542        6,269        5,674
Actual gain on assets ...................     (8,920)      (8,730)      (8,164)
Special termination benefits ............                                3,903
Net amortization and deferral ...........     (1,037)      (1,037)      (1,109)
                                             -------      -------      -------
Net pension benefit cost ................    $  (917)     $  (850)     $ 2,863
                                             =======      =======      =======
Actuarial assumptions
     Weighted average discount rate .....       7.00%        7.50%        7.00%
     Rate of increase in
      future compensation ...............       5.00%        5.00%        5.00%
     Rate of return on plan assets ......       9.50%        9.50%        9.50%
                                             =======      =======      =======

     Employee pension plan assets are invested in the Company's common stock,
other publicly traded domestic common stocks, U.S. government, federal agency
and corporate obligations, an international equity fund, commercial real estate
funds and pooled temporary investments.

     The employee pension plan's funded status as determined by the actuary at
December 31, 1995 and 1994 is presented in the following table.

                                                            (In thousands)
                                                          1995           1994
                                                        ---------     ---------
Actuarial present value of benefit obligation
     Vested benefits ...............................    $ (77,427)    $ (71,740)
     Nonvested benefits ............................       (3,479)       (3,149)
                                                        ---------     ---------
     Accumulated benefit obligation ................      (80,906)      (74,889)
     Effect of projected future
      compensation levels ..........................      (19,352)      (14,438)
                                                        ---------     ---------
Projected benefit obligation for service
 rendered to date ..................................     (100,258)      (89,327)
Plan assets at fair market value ...................      121,801       101,432
                                                        ---------     ---------
Plan assets in excess of projected
 benefit obligation ................................       21,543        12,105
Unamortized transition asset .......................      (10,578)      (11,896)
Unrecognized net loss (gain) .......................       (6,336)        3,504
                                                        ---------     ---------
Prepaid pension asset ..............................    $   4,629     $   3,713
                                                        =========     =========

     Substantially all employees are eligible to participate in a savings and
investment plan (401(k) Plan). The Company makes matching contributions to
401(k) Plan participants by allocating shares of convertible preferred stock
held by the ESOP. Compensation expense related to the 401(k) Plan is based upon
the value of shares of preferred stock allocated to ESOP participants, and the
amount of interest incurred by the ESOP, less dividends on unallocated shares
held by the ESOP. At December 31, 1995 and 1994, the ESOP had allocated to
employees 71,761 and 55,086 shares, respectively.

     The table below contains information about the 401(k) Plan and the ESOP:

                                                          (In thousands)
For the years ended December 31 ............        1995        1994        1993
                                                  ------      ------      ------
401(k) Plan expense ........................      $1,542      $1,537      $1,449
                                                  ------      ------      ------
Dividend requirements to ESOP on
 convertible preferred stock ...............      $2,396      $2,415      $2,434
                                                  ------      ------      ------
Interest incurred by ESOP on
 its indebtedness ..........................      $1,905      $2,008      $2,079
                                                  ------      ------      ------
Company contributions to ESOP ..............      $1,071      $1,205      $1,270
                                                  ======      ======      ======

                                      -29-

     The Company's retirees and their dependents are eligible to receive health,
dental and life insurance benefits. The Company recognizes the expected cost of
these benefits during the periods in which the benefits are earned.

     The components of net postretirement benefit cost for 1995 and 1994 were as
follows:
                                                              (In thousands)
                                                            1995          1994
                                                           ------        ------
Service costs for benefits earned ..................       $  639        $  640
Interest costs .....................................        1,066         1,025
Amortization of transition obligation ..............          513           567
                                                           ------        ------
Net postretirement benefit cost ....................       $2,218        $2,232
                                                           ======        ======

     The financial status of the postretirement benefit plan at December 31,
1995 and 1994, as determined by the actuary, is presented in the following
table.
                                                             (In thousands)
                                                            1995         1994
                                                          --------     --------
Accumulated benefit obligation
     Retirees ........................................    $ 10,255     $ 10,042
     Fully eligible participants .....................       1,958        2,412
     Other active participants .......................       3,954        2,758
                                                          --------     --------
Total accumulated benefit obligation .................      16,167       15,212
Unamortized transition obligation ....................      (8,726)      (9,240)
Unrecognized loss ....................................        (630)        (949)
                                                          --------     --------
Accrued unfunded postretirement benefit liability ....    $  6,811     $  5,023
                                                          ========     ========

     The assumed health care cost trend rate used to measure the expected cost
of benefits was 10% in 1995, declining to 5.5% by 2008 and remaining at 5.5%
thereafter. If the health care cost trend rate assumptions were increased by 1%,
the accumulated benefit obligation would be $16,844,000 at December 31, 1995,
and the aggregate of the service and interest cost components of the net
periodic cost of health care benefits would be $1,801,000 annually. The weighted
average assumed discount rate used to measure the accumulated benefit obligation
in 1995 was changed from 7.5% to 7% and resulted in an unrecognized loss. The
weighted average assumed discount rate used to measure the accumulated benefit
obligation in 1994 was changed from 7% to 7.5% and resulted in an unrecognized
gain.

     In 1994 the Company announced a plan to consolidate 25 customer service
offices into ten regional offices by June 1995. This plan resulted in a
restructuring charge to 1994 earnings of $1,203,000. This charge consisted
mainly of voluntary severance benefits and customer service office lease
commitment costs. In 1993 the Company's organizational structure was
streamlined. The resulting reduction in staff was achieved through enhanced
early retirement and voluntary severance programs. The restructuring charge,
which totaled $10,851,000, included $3,903,000 for special pension termination
benefit costs, $1,953,000 for net postretirement plan curtailment costs, and
$4,995,000 for voluntary severance, relocation and other costs.

NOTE J -- INCOME TAXES

Federal income tax expense is less than the amount computed by applying the
statutory federal rate to book income before tax as follows:
<TABLE>
<CAPTION>
                                                           (In thousands, except for %)
For the years ended December 31              1995                      1994                       1993
                                     ------------------     -------------------------     ------------------
                                      Amount        %        Amount              %         Amount        %
                                     --------     -----     --------          -------     --------     -----
<S>                                   <C>         <C>        <C>                <C>        <C>         <C>
Book income before tax ..........     $73,932     100.0      $64,944            100.0      $61,377     100.0
                                     --------     -----     --------          -------     --------     -----
Tax at statutory rate on
 book income before tax .........     $25,876      35.0      $22,730             35.0      $21,482      35.0
Increase (decrease):
     Tax effect of AFUDC ........      (1,029)     (1.4)        (805)            (1.2)      (1,063)     (1.7)
     Amortization of investment
      tax credits ...............      (1,814)     (2.5)      (1,819)            (2.8)      (1,827)     (2.9)
     Tax effect of prior-year tax
      benefits not deferred .....         900       1.2          537              0.8          444       0.7
     Other, net .................      (1,435)     (1.9)      (3,219)            (5.0)      (2,194)     (3.6)
                                     --------     -----     --------          -------     --------     -----
Total federal income tax expense       22,498      30.4       17,424             26.8       16,842      27.5
                                     --------     -----     --------          -------     --------     -----
Current state income tax expense        2,731       3.7        2,477              3.8        2,723       4.4
                                     --------     -----     --------          -------     --------     -----
Total federal and state income
 tax expense ....................     $25,229      34.1      $19,901             30.6      $19,565      31.9
                                     ========     =====     ========          =======     ========     =====
</TABLE>

                                      -30-

     Information about current and deferred income tax expense is as follows:

                                                        (In thousands)
                                                 1995        1994        1993
                                               --------    --------    --------
Current federal income tax expense .........   $ 21,458    $ 16,798    $ 17,342
Deferred federal income tax expense ........      2,854       2,445       1,327
Amortization of accumulated
 deferred investment tax credits ...........     (1,814)     (1,819)     (1,827)
                                               --------    --------    --------
Total federal income tax expense ...........     22,498      17,424      16,842
Current state income tax expense ...........      2,731       2,477       2,723
                                               --------    --------    --------
Total federal and state income
 tax expense ...............................   $ 25,229    $ 19,901    $ 19,565
                                               ========    ========    ========
Deferred federal income tax
 expense attributable to:
     Depreciation ..........................   $  3,746    $  4,466    $  5,022
     Storm damages .........................        (15)       (340)        414
     Asset basis differences ...............     (1,213)       (352)       (882)
     Employee benefits .....................       (558)       (455)     (2,074)
     Fuel costs ............................        890        (244)       (620)
     Other .................................          4        (630)       (533)
                                               --------    --------    --------
Total deferred federal income tax expense ..   $  2,854    $  2,445    $  1,327
                                               ========    ========    ========

     The balance of accumulated deferred federal and state income tax assets and
liabilities at December 31, 1995 and 1994 was comprised of the tax effect of the
following:

                                                   (In thousands)
                                            1995                   1994
                                      -------------------    -------------------
                                       Asset    Liability     Asset    Liability
                                      -------    --------    -------    --------
Depreciation and property
 basis differences ...............    $ 6,311    $125,494    $ 5,717    $122,210
Allowance for funds used
 during construction .............                 42,038                 41,933
Investment tax credits ...........     20,844                 21,979
FASB 109 adjustments .............     34,126      93,383      7,427      59,720
Other ............................      5,177       5,958      4,254       4,940
                                      -------    --------    -------    --------
Accumulated deferred federal
 and state income taxes ..........    $66,458    $266,873    $39,377    $228,803
                                      =======    ========    =======    ========

     In 1993 there was no material effect on the Company's results of operations
from the implementation of the new accounting standard for income taxes or the
increase in the federal corporate income tax rate. Regulatory assets recorded
for deferred taxes at December 31, 1995 and 1994 were $160,987,000 and
$125,356,000, respectively. Regulatory liabilities recorded for deferred taxes
at December 31, 1995 and 1994 were $79,332,000 and $51,712,000, respectively.
Regulatory assets and liabilities will be realized over the accounting lives of
the related properties to the extent past ratemaking practices are continued by
regulators.

NOTE K -- COMMITMENTS AND CONTENGENCIES

Construction expenditures for 1996 are estimated to be $57,000,000, excluding
AFUDC, and for the five-year period ending 2000 are expected to total
$302,000,000, excluding AFUDC. Scheduled maturities of debt and preferred stock
will total about $310,000 for 1996 and approximately $66,550,000 for the
five-year period ending 2000.

     The Company has entered into various long-term contracts for the
procurement of lignite, coal and natural gas to fuel its generating stations.
Most of these contracts contain provisions for price changes, minimum purchase
levels and other financial commitments.

     The Company has accrued for liabilities to third parties, environmental
claims, employee medical benefits, storm damages and deductibles under insurance
policies which it maintains on major properties, primarily generating stations
and transmission substations. Consistent with regulatory treatment, annual
charges to operating expense to provide a reserve for future storm damages are
based upon the average amount of noncapital, uninsured storm damages experienced
by the Company during the previous five years.

     An audit of the Company's 1991 and 1992 tax returns was completed by agents
of the Internal Revenue Service (IRS) in January 1995. A number of assessments
were proposed that would substantially increase the Company's federal and
Louisiana taxable income for those years. The Company has contested most of
these assessments. Deferred taxes have been provided for all temporary
differences and reserves have been provided for other issues. If the IRS is
completely successful on all of the contested issues, an additional liability in
excess of current reserves would exist for interest and, if assessed, penalties.
In October 1995 agents of the IRS began an audit of the Company's 1993 and 1994
tax returns.

                                      -31-

     In early 1995 the Company and Teche Electric Cooperative, Inc. (Teche)
executed a purchase and sale agreement regarding a purchase of all of the assets
of Teche by the Company for a purchase price, including the Company's assumption
or other discharge of Teche's liabilities, of approximately $22.4 million.
Closing of the transaction is subject to a number of conditions, including
approval by the LPSC and the Rural Utilities Service, successful resolution of
Teche's power supply contract with Cajun Electric Cooperative and certain other
conditions. The Teche members approved the sale at their annual meeting in March
1995.

     The LPSC is currently reviewing the Company's earnings. Although the
Company's rates are among the lowest in the state, at this time management
cannot predict the outcome of the review or the effect on the Company's
financial position, results of its operations or its cash flows.

     Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS 121) was issued in March 1995 and establishes accounting standards for
determining if long-lived assets are impaired, and when and how losses, if any,
should be recognized. In addition, the Company has recorded regulatory assets
and liabilities, primarily for the effects of income taxes, as a result of past
rate actions of the Company's regulators, pursuant to Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS 71). The effects of potential deregulation of the industry or
possible future changes in the method of rate regulation of the Company could
require that the Company discontinue the application of SFAS 71, pursuant to
Statement of Financial Accounting Standards No. 101, "Regulated Enterprises --
Accounting for the Discontinuation of Application of FASB Statement No. 71".
Management believes that for the foreseeable future, the Company's rates will
remain based on its costs of providing service. The future effects of these
standards on the Company's financial position, results of its operations and its
cash flows will be determined by the facts and circumstances at that time.

     Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", requires beginning in 1996, a fair value based method
of accounting for stock-based compensation plans or, in lieu of a change in
accounting, the disclosure of pro forma differences in net income and earnings
per share. Because of the limited number of shares of common stock currently
being granted pursuant to compensation plans in effect, management estimates
that there would be no significant difference in net income or earnings per
share between the fair value method and the intrinsic value method currently
being used.

NOTE L -- MISCELLANEOUS FINANCIAL INFORMATION (UNAUDITED)

Quarterly information for 1995 and 1994 is shown below.

                             (In thousands, except per share amounts)

                                               1995
                           ----------------------------------------------
                             1st          2nd          3rd          4th
                           Quarter      Quarter      Quarter      Quarter
                           -------     --------     --------     --------
Operating revenues ...     $79,872     $100,599     $123,383     $ 90,572
Operating income .....     $14,589     $ 20,295     $ 27,444     $ 12,374
Net income applicable
 to common stock .....     $ 7,582     $ 13,490     $ 20,556     $  5,023
Primary net income per
 average common share      $ 0.34      $  0.60      $  0.92      $  0.22
Fully diluted net
 income per average
 common share ........     $ 0.33      $  0.58      $  0.88      $  0.22
Dividends paid per
 common share ........     $ 0.365     $  0.375     $  0.375     $  0.375
Market price per share
     High ............     $24 1/2     $ 24 1/2     $ 25 5/8     $ 28 1/8
     Low .............     $22         $ 22 1/8     $ 22 1/4     $ 25 1/4
                           =======     ========     ========     ========

                                               1994
                           ----------------------------------------------
                             1st          2nd          3rd          4th
                           Quarter      Quarter      Quarter      Quarter
                           -------     --------     --------     --------
Operating revenues ...     $84,147     $100,940     $112,633     $ 81,883
Operating income .....     $14,779     $ 19,276     $ 24,093     $ 12,282
Net income applicable
 to common stock .....     $ 8,081     $ 12,268     $ 17,100     $  5,568
Primary net income per
 average common share      $ 0.36      $  0.55      $  0.76      $  0.25
Fully diluted net
 income per average
 common share ........     $ 0.35      $  0.53      $  0.73      $  0.25
Dividends paid per
 common share ........     $ 0.355     $  0.365     $  0.365     $  0.365
Market price per share
     High ............     $24 7/8     $ 25 5/8     $ 24 3/8     $ 23 5/8
     Low .............     $21 1/4     $ 22 1/4     $ 21 1/4     $ 20 7/8
                           =======     ========     ========     ========

     The Company's common stock is listed for trading on the New York and
Pacific stock exchanges under the ticker symbol "CNL". The Company's preferred
stock is not listed on any stock exchange. On December 31, 1995, the Company had
12,148 common and 195 preferred shareholders, as determined from the records of
the transfer agent.

     On January 26, 1996, the Company's Board of Directors declared a quarterly
dividend of 37 1/2 cents per share payable February 15, 1996, to common
shareholders of record on February 5, 1996.

                                      -32-

                              REPORT OF MANAGEMENT

To the Shareholders of
Central Louisiana Electric Company, Inc.

The management of Central Louisiana Electric Company, Inc. is responsible for
the preparation of the financial statements and accompanying disclosures.
Financial information throughout this annual report is consistent with the
financial statements. The financial statements have been prepared in conformity
with generally accepted accounting principles and include amounts based upon
currently available facts and the informed estimates and judgments of
management.

     Management maintains a system of internal accounting controls which it
believes is adequate to provide reasonable assurance as to the integrity of the
accounting records and the protection of assets. The system of internal
accounting controls is supported by written policies and procedures, by a staff
of internal auditors who conduct comprehensive internal audits, by the selection
and training of qualified personnel and by an organizational structure that
provides for appropriate delegation of authority and segregation of
responsibilities.

     The Audit Committee of the Board of Directors, comprised entirely of
outside directors, meets periodically with management, internal auditors and the
Company's independent accountants to discuss accounting, auditing and financial
reporting matters. To ensure their independence, both the internal auditors and
the independent accountants have unrestricted access to the Audit Committee.

DAVID K. WARNER
Vice President - Finance and
Chief Financial Officer


JOHN L. BALTES, JR.
Controller

January 26, 1996


REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Central Louisiana Electric Company, Inc.

We have audited the accompanying consolidated balance sheets of Central
Louisiana Electric Company, Inc. as of December 31, 1995 and 1994, and the
related consolidated statements of income, cash flows and changes in common
shareholders' equity for each of the three years in the period ended December
31, 1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based upon our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Central Louisiana Electric Company, Inc. as of December 31, 1995 and 1994, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana

January 26, 1996
                                      -33-