FORM 10-K

                       SECURlTlES AND EXCHANGE COMMlSSlON
                             WASHINGTON, D. C. 20549

       [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

  For the fiscal year ended
       December 31, 1998                  Commission File Number  1-3132-2


                       INDIANAPOLIS POWER & LIGHT COMPANY
             (Exact name of Registrant as specified in its charter)

          Indiana                                              35-0413620
 (State or other jurisdiction                             (I.R.S. Employer
   of incorporation or organization)                        Identification No.)

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

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

 Securities Registered Pursuant to Section 12(b) of the Act:  None

 Securities Registered Pursuant to Section 12(g) of the Act:

 518,985 Shares of Cumulative Preferred Stock

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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )

     As of January 31, 1999,  there were 17,206,630  shares of the  registrant's
common stock (without par value) issued and outstanding.
                     -------------------------------------

 DOCUMENTS INCORPORATED BY REFERENCE

 Portions  of  the  Indianapolis   Power  &  Light  Company   definitive
 Information Statement for the Annual Meeting of Shareholders to be held
 on April 21, 1999 are  incorporated  by reference into Part III of this
 Report.

                                     PART I
                                     ------

Item 1. BUSINESS
        --------

ORGANIZATION

       Indianapolis  Power & Light Company (IPL) is an operating  public utility
incorporated  under the laws of the state of Indiana on October 27, 1926. IPL is
a wholly-owned  subsidiary of IPALCO  Enterprises,  Inc.  (IPALCO).  IPALCO is a
holding company incorporated under the laws of the state of Indiana on September
14, 1983. All common stock of IPL is owned by IPALCO.

       IPL has two business segments, electric and "all other." Steam operations
of IPL are in the "all other" segment.  Information  regarding revenues,  pretax
operating income and total assets of both segments can be found in the Financial
Statements and Notes thereto.

GENERAL

       IPL is engaged  primarily in generating,  transmitting,  distributing and
selling  electric  energy in the city of Indianapolis  and  neighboring  cities,
towns,  communities,  and adjacent rural areas, all within the state of Indiana,
the most distant point being about 40 miles from Indianapolis. It also produces,
distributes and sells steam within a limited area in such city.  There have been
no significant changes in the services rendered, or in the markets or methods of
distribution, since the beginning of the fiscal year. IPL intends to do business
of the same general  character  as that in which it is now engaged.  Indiana law
authorizes electricity suppliers to have exclusive retail service areas.

       IPL's business is not dependent on any single  customer or group of a few
customers. IPL's sales for 1994-1998 are depicted on page I-4.

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

       IPL's  generation,  transmission  and distribution  facilities  (electric
system) are described in Item 2, "PROPERTIES." IPL's electric system is directly
interconnected with the electric systems of Indiana Michigan Power Company,  PSI
Energy,  Inc.,  Southern Indiana Gas and Electric  Company,  Wabash Valley Power
Association,  Hoosier  Energy Rural Electric  Cooperative,  Inc. and the Indiana
Municipal Power Agency.

       Also, IPL is a member of the East Central Area Reliability  Group (ECAR),
and is cooperating under an agreement that provides for coordinated  planning of
generation and  transmission  facilities and the operation of such facilities to
promote  reliability  of bulk power supply in the  nine-state  region  served by
ECAR.  Smaller electric utility systems,  independent  power producers and power
marketers participate as associate members.

REGULATION

       IPL is subject to regulation by the Indiana Utility Regulatory Commission
(IURC)  as  to  its  services  and  facilities,   valuation  of  property,   the
construction,   purchase   or   lease   of   electric   generating   facilities,
classification of accounts, rates of depreciation,  rates and charges,  issuance
of securities  (other than  evidences of  indebtedness  payable less than twelve
months  after the date of issue),  the  acquisition  and sale of public  utility
properties or securities  and certain other matters (see Note 10 in the Notes to
Financial Statements).

       In addition,  IPL is subject to the  jurisdiction  of the Federal  Energy
Regulatory   Commission  (FERC),  with  respect  to  short-term  borrowings  not
regulated  by the  IURC,  the  sale  and  transmission  of  electric  energy  in
interstate commerce,  the classification of its accounts and the acquisition and
sale of utility  property  in certain  circumstances  as provided by the Federal
Power Act.

       IPL is also subject to federal,  state and local  environmental  laws and
regulations,  particularly as to generating station discharges affecting air and
water quality. The impact of compliance with such regulations on the capital and
operating costs of IPL has been and will continue to be  substantial.  Estimated
new annual capital  expenditures  for air,  solid waste and water  environmental
compliance measures are $2.4 million, $1.2 million and $.4 million in 1999, 2000
and 2001, respectively.

RETAIL RATEMAKING

       IPL's tariffs for electric and steam service to retail  customers  (basic
rates and charges) are set and approved by the IURC after public hearings.  Such
proceedings,  which have occurred at irregular intervals, involve IPL, the staff
of the IURC, the Office of the Indiana Utility  Consumer  Counselor,  as well as
other  interested  consumer  groups and customers.  In Indiana,  basic rates and
charges are determined after giving consideration,  on a pro-forma basis, to all
allowable  costs for  ratemaking  purposes  including  a fair return on the fair
value of the utility property used and useful in providing service to customers.
Once set, the basic rates and charges  authorized do not assure the  realization
of a fair  return  on  the  fair  value  of  property.  Other  numerous  factors
including,  but not limited to, weather,  inflation,  customer growth and usage,
the level of actual  maintenance and capital  expenditures and IURC restrictions
on the level of operating income can affect the return realized. During 1998, in
an order  resulting  from an IPL  initiated  proceeding,  the IURC  declined  to
exercise its  jurisdiction  in part over IPL  customers who  voluntarily  select
service  under  IPL's  Elect  Plan  option.  Under  two of  these  options,  the
customer's  prices are not adjusted for changes in fuel costs or other  factors.
Substantially all other IPL customers are served pursuant to retail tariffs that
provide for the monthly  billing or  crediting  to  customers  of  increases  or
decreases,  respectively,  in the actual costs of fuel consumed  from  estimated
fuel costs  embedded in base  tariffs.  Additionally,  most such retail  tariffs
provide for billing of "lost revenue margins" on estimated  kilowatt-hour  (KWH)
sales  reductions  along with current and deferred  costs  resulting  from IPL's
IURC-approved demand side management programs (DSM). IPL maintains its books and
records consistent with generally accepted accounting  principles reflecting the
impact of regulation  (see Note 1 in the Notes to Financial  Statements and Item
7, "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF
OPERATIONS" under "Nature of Operations and Regulatory Matters").

       Future events,  including the advent of retail  competition  within IPL's
service  territory,  could  result in the  deregulation  of all or part of IPL's
existing regulated businesses (see "Competition and Industry Changes" in Item 7,
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS"). Upon deregulation,  adjustments to IPL's accounting records may be
required to eliminate  the  historical  impact of  regulatory  accounting.  Such
adjustments,  as required by Statement of Financial Accounting Standards No. 101
(SFAS 101),  "Regulated  Enterprises  - Accounting  for the  Discontinuation  of
Application  of FASB  Statement  No. 71," would  eliminate  the  "effects of any
actions of regulators that have been  recognized as assets and  liabilities...."
Required  adjustments  could include expensing of any unamortized net regulatory
assets,  elimination of certain tax liabilities and a write down of any impaired
utility plant balances.  IPL does not expect to be required to adopt SFAS 101 in
the near term.

FUEL

       In 1998,  approximately  99% of the total KWH sold by IPL were  generated
from coal and 1% from  middle  distillate  fuel oil.  Gas and  purchased  steam,
combined,  provided  less  than 1% of the  generation  of KWH  sold  by IPL.  In
addition to use in oil-fired generating units, fuel oil is used for start up and
flame  stabilization in coal-fired  generating units as well as for coal thawing
and coal handling. Gas is used in IPL's newer combustion turbines.  During 1998,
IPL converted part of its C.C.  Perry Section K plant to gas fired  boilers.  In
the future, approximately 50% of the fuel used by this plant will be gas and 50%
will be coal.

       IPL's long-term coal contracts  provide for the major portion of its burn
requirements  through the year 1999. The long-term coal agreements are with four
suppliers and the coal is mined  entirely in the state of Indiana.  See Exhibits
listed under Part IV Item 14(a)2(10.1 to 10.3) for a list of coal contracts.  It
is  presently  believed  that all coal used by IPL will be mined by others.  IPL
normally  carries  fuel oil and a 60-day  supply  of coal to  offset  unforeseen
occurrences  such as labor  disputes,  equipment  breakdowns  and power sales to
other  utilities.  IPL increases its stockpile to an  approximate  80-day supply
when  strikes  are  anticipated  in the coal  industry.  In order to prepare for
possible supply problems associated with Year 2000 issues, IPL will increase its
stockpile to an approximate 85 to 90 day supply before the end of 1999.

EMPLOYEE RELATIONS

       As of  December  31,  1998,  IPL had 2,020  employees  of whom 1,015 were
represented  by the  International  Brotherhood of Electrical  Workers,  AFL-CIO
(IBEW) and 337 were represented by the Electric Utility Workers Union (EUWU), an
independent  labor  organization.  In December  1996, the membership of the IBEW
ratified a new labor  agreement  that remains in effect until December 13, 1999.
The agreement  provided for general pay  adjustments of 3.5% in 1996 and 3.0% in
both 1997 and 1998, and changes in pension and health care coverage. In February
of 1998, the membership of the EUWU ratified a new labor  agreement that remains
in effect  until  February  of 2001.  The  agreement  provides  for  general pay
adjustments of 3% in both 1998 and 1999, as well as an adjustment of 2% in 2000.
The agreement also provides for increases in pension amounts.

DISPOSITION OF ASSETS

       In 1997,  IPL  retired  and sold its C.C.  Perry  Section  W plant  site,
including land and improvements,  to the State of Indiana White River State Park
Commission.

<PAGE>
<TABLE>

                                           INDIANAPOLIS POWER & LIGHT COMPANY
                                           STATISTICAL INFORMATION - ELECTRIC

The following table of statistical information presents additional data on IPL's
operation.
<CAPTION>

                                                                    Year Ended December 31,
                                      ------------------------------------------------------------------------------------
Operating Revenues (In Thousands):       1998 (1)        1997 (1)            1996              1995              1994
                                      -------------    ------------     --------------    --------------    --------------
<S>                                   <C>              <C>              <C>               <C>               <C>          
  Residential                         $    269,351     $   261,832      $     261,819     $     243,055     $     230,805
  Small industrial and commercial          122,082         125,131            131,465           130,009           128,597
  Large industrial and commercial          321,103         306,761            298,720           275,803           266,703
  Public lighting                            9,754           9,324              9,043             8,369             7,698
  Miscellaneous                             12,469          12,050              9,264             8,289             7,186
                                      -------------    ------------     --------------    --------------    --------------
    Revenues - ultimate consumers          734,759         715,098            710,311           665,525           640,989
  Sales for resale - REMC                      936           1,082              1,141             1,105             1,098
  Sales for resale - other                  50,140          21,954             13,312             6,758             7,680
                                      -------------    ------------     --------------    --------------    --------------
      Total electric revenues         $    785,835     $   738,134      $     724,764     $     673,388     $     649,767
                                      =============    ============     ==============    ==============    ==============

Kilowatt-hour Sales (In Millions):
  Residential                                4,320           4,255              4,367             4,277             4,077
  Small industrial and commercial            1,873           1,960              2,117             2,197             2,195
  Large industrial and commercial            7,095           6,834              6,772             6,509             6,306
  Public lighting                               70              69                 71                73                76
                                      -------------    ------------     --------------    --------------    --------------
    Sales - ultimate consumers              13,358          13,118             13,327            13,056            12,654
  Sales for resale - REMC                       31              29                 29                28                26
  Sales for resale - other                   2,252           1,111                725               394               456
                                      -------------    ------------     --------------    --------------    --------------
      Total kilowatt-hours sold             15,641          14,258             14,081            13,478            13,136
                                      =============    ============     ==============    ==============    ==============

Customers at End of Year:
  Residential                              379,943         374,686            370,029           365,163           360,347
  Small industrial and commercial           42,230          41,137             40,393            39,772            38,840
  Large industrial and commercial            4,036           3,960              3,657             3,557             3,525
  Public lighting                              445             357                313               290               275
                                      -------------    ------------     --------------    --------------    --------------
    Total ultimate consumers               426,654         420,140            414,392           408,782           402,987
  Sales for resale - REMC                        1               1                  1                 1                 1
                                      -------------    ------------     --------------    --------------    --------------
      Total electric customers             426,655         420,141            414,393           408,783           402,988
                                      =============    ============     ==============    ==============    ==============

(1) Includes estimated electric operating revenue and kilowatt-hour sales for
 services delivered but not billed during the period (see Note 3 in the Notes
 to Financial Statements).
</TABLE>

Item 2.       PROPERTIES
              ----------

       IPL's executive offices are in the IPALCO Corporate Center located at One
Monument   Circle,   Indianapolis,   Indiana.   This  facility   houses  certain
administrative operations of IPALCO's subsidiaries.

       IPL also owns two  distribution  service  centers in Indianapolis at 1230
West Morris  Street and 3600 North  Arlington  Avenue.  IPL's  customer  service
center is located at 2102 North Illinois Street in Indianapolis.

       IPL owns and operates three primarily  coal-fired  generating plants that
are used for  electric  generation.  IPL also  operates  one coal and  gas-fired
plant.  During  1998,  part of the  C.C.  Perry  Section  K  plant,  used  for a
combination  of  electric  and steam  generation,  was  converted  to  gas-fired
boilers. In the future, approximately 50% of the fuel used by this plant will be
gas and 50% will be coal.  For electric  generation,  the total gross  nameplate
rating is 3,024 MW, winter capability is 3,036 MW and summer capability is 2,956
MW. For steam  generation,  gross capacity is 1,990 Mlbs.  (thousands of pounds)
per hour.

       Total Electric Stations:

     H.  T.  Pritchard  plant   (Pritchard),   located  25  miles  southwest  of
Indianapolis  (seven units in service - one each in 1949,  1950,  1951, 1956 and
1967 and two in 1953)  with 367 MW  nameplate  rating  and net winter and summer
capabilities of 344 MW and 341 MW, respectively.

     E. W. Stout plant (Stout)  located in the  southwest  part of Marion County
(eleven units in service - one each in 1941,  1947,  1958,  1961, 1967, 1994 and
1995 and four in 1973)  with 921 MW  nameplate  rating and net winter and summer
capabilities of 1,000 MW and 924 MW, respectively.

     Petersburg plant (Petersburg), located in Pike County, Indiana (seven units
in  service - four in 1967 and one each in 1969,  1977 and 1986)  with  1,716 MW
nameplate rating and net winter and summer capabilities of 1,672 MW.

       Combination Electric and Steam Station:

     C.C.Perry  Section K plant (Perry K),  located in  Indianapolis  with 20 MW
nameplate rating (net winter  capability 20 MW, summer 19 MW) for electric and a
gross capacity of 1,990 Mlbs. per hour for steam.



       Net  electrical  generation  during 1998,  at the  Petersburg,  Stout and
Pritchard stations accounted for about 72.0%, 21.2% and 6.7%,  respectively,  of
IPL's total net generation.  Perry K produced 0.1% net electrical generation and
all of the  steam  generated  by IPL for the  steam  system.  In  addition,  IPL
purchases steam from an independent resource recovery system in Indianapolis.

        Included in the above  totals are three gas  turbine  units at the Stout
station  added in 1973,  one gas turbine added in 1994 and one gas turbine added
in 1995 with a combined  nameplate rating of 214 MW. Also included is one diesel
unit each at Pritchard  and Stout  stations and three diesel units at Petersburg
station, all added in 1967. Each diesel unit has a nameplate rating of 3 MW.

       During 1998, IPL announced  plans to construct up to 200 megawatts of new
combustion  turbines  (CTs).  The new  turbines  would be used  during  times of
highest or "peak"  electric  demand.  One  turbine is  expected  to be placed in
service by 2001,  and is  included  in the  construction  forecast.  IPL filed a
petition with the IURC  recommending that the IURC decline its jurisdiction over
IPL's planned construction and operation of the new CTs and adopt an alternative
procedure for dealing with the sale of power produced by the CTs to IPL's retail
customers.

       IPL's  transmission  system  includes  457 circuit  miles of 345,000 volt
lines,  359  circuit  miles of 138,000  volt lines and 268 miles of 34,500  volt
lines. Distribution facilities include 4,717 pole miles and 19,892 wire miles of
overhead lines.  Underground  distribution  and service  facilities  include 596
miles of conduit and 5,990 wire miles of conductor.  Underground street lighting
facilities  include 108 miles of conduit and 726 wire miles of  conductor.  Also
included  in the  system  are 73  bulk  power  substations  and 68  distribution
substations.

       Steam  distribution  properties  include  22  miles  of  mains  with  260
services. Other properties include coal and other minerals, underlying 798 acres
in Sullivan County,  Indiana,  and coal underlying about 6,215 acres in Pike and
Gibson Counties,  Indiana.  Additional land, approximately 4,067 acres in Morgan
County,  Indiana and approximately 884 acres in Switzerland County,  Indiana has
been purchased for future plant sites.

       All of the facilities owned by IPL are well-maintained, in good condition
and meet the present needs of IPL.

       The Mortgage  and Deed of Trust of IPL,  together  with the  Supplemental
Indentures thereto (the "Mortgage"),  secure first mortgage bonds issued by IPL.
Pursuant to the terms of the Mortgage,  substantially  all property owned by IPL
is subject to a direct first mortgage lien.

Item 3.       LEGAL PROCEEDINGS
              -----------------

         None

Item 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              ---------------------------------------------------

         None

EXECUTIVE OFFICERS OF THE REGISTRANT AT FEBRUARY 23, 1999

       Name, age (at December 31, 1998),  and positions and offices held for the
past five years:

                                                 From                 To
                                                 ----                 --
 John R. Hodowal (53)
   Chairman of the Board                      February, 1990    
   Chief Executive Officer                    May, 1989

 Ramon L. Humke (66)
   President and Chief Operating
     Officer                                  February, 1990

 John R. Brehm (45)
   Senior Vice President - Finance            May, 1998
   Senior Vice President - Finance
     and Information Services                 May, 1991           May, 1998

 Ralph E. Canter (42)
   Senior Vice President -
     Customer Services                        May, 1998
   Vice President-
     Steam Operations                         May, 1995           May, 1998
   Manager of Steam Operations                October, 1990       May, 1995

 Bryan G. Tabler (55)
   Senior Vice President -
     Secretary and General Counsel            January, 1995
   Partner, Barnes & Thornburg                January, 1979       October, 1994

 Stephen M. Powell (48)
   Senior Vice President -
     Energy Supply                            May, 1998
   Manager of Engineering and
     Production Services                      June, 1994          May, 1998

 Paul S. Mannweiler (49)
   Senior Vice President -
     External Affairs                         January, 1997
   Partner, Locke Reynolds Boyd and Weisell   July, 1980         December, 1996

 Max Califar (45)
   Vice President - Human
     Resources                                December, 1992

 Steven L. Meyer (40)
   Treasurer                                  December, 1992

 Stephen J. Plunkett (50)
   Controller                                 May, 1991

                                     PART II
                                     -------

Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
        ------------------------------------------------------------------------

       All common stock of IPL is owned by IPALCO and is not publicly  traded on
any stock exchange.

     Aggregate dividends paid on the common stock were $214.2 million and $104.6
million  during 1998 and 1997,  respectively.  Dividends  were paid on a monthly
basis.

        IPL's Board of  Directors  declared  dividends  on common stock of $12.5
million on November  24, 1998, and $13.0 million on February 23, 1999,  payable
January 15, 1999 and April 15, 1999, respectively.

Dividend Restrictions
---------------------

       So long as any of the  several  series of bonds of IPL  issued  under the
Mortgage  and  Deed of  Trust,  dated as of May 1,  1940,  as  supplemented  and
modified,  executed  by IPL to  American  National  Bank and  Trust  Company  of
Chicago, as Trustee,  remain  outstanding,  IPL is restricted in the declaration
and payment of dividends,  or other  distribution on shares of its capital stock
of any class, or in the purchase or redemption of such shares,  to the aggregate
of its net income, as defined in Section 47 of such Mortgage, after December 31,
1939.  The amount which these  Mortgage  provisions  would have permitted IPL to
declare and pay as dividends at December 31, 1998, exceeded retained earnings at
that  date.  Such  restrictions  do not apply to the  declaration  or payment of
dividends  upon any  shares  of  capital  stock of any class to an amount in the
aggregate not in excess of $1,107,155,  or to the application to the purchase or
redemption  of any shares of capital stock of any class of amounts not to exceed
in the aggregate the net proceeds received by IPL from the sale of any shares of
its capital  stock of any class  subsequent  to December 31, 1939.  In addition,
pursuant to IPL's Articles of Incorporation, no dividends may be paid or accrued
and no other  distribution may be made on IPL's common stock unless dividends on
all outstanding shares of IPL preferred stock have been paid or declared and set
apart for payment.  The management of IPL believes these  restrictions  will not
materially restrict anticipated dividends.
<PAGE>
<TABLE>

Item 6.  SELECTED FINANCIAL DATA
         -----------------------
<CAPTION>

(In Thousands)                                  1998             1997             1996             1995              1994
---------------------------------------    --------------   -------------    -------------    -------------    --------------

<S>                                        <C>              <C>              <C>              <C>              <C>             
Total operating revenues (1)               $     821,256    $     776,427    $     762,503    $     709,206    $      686,076
Operating income                                 179,511          167,315          163,219          147,588           143,310
Allowance for funds used
  during construction                              2,300            4,407            9,321           11,370             9,381
Income before cumulative effect
  of accounting change (1)                       149,147          133,402          122,588          106,273           103,823
Cumulative effect of accounting change (1)             -           18,347                -                -                 -
Net income                                       149,147          151,749          122,588          106,273           103,823
Preferred dividend requirements                    3,119            2,760            3,182            3,182             3,182
Income applicable to
  common stock                                   146,028          148,989          119,406          103,091           100,641
Utility plant - net                            1,748,460        1,766,383        1,787,969        1,792,007         1,711,772
Total assets                                   2,023,066        2,049,772        2,052,400        2,108,816         2,000,380
Construction expenditures                         79,458           73,130           78,543          166,874           178,295
Common shareholder's equity                      767,926          835,492          782,249          747,129           725,762
Nonredeemable cumulative
  preferred stock                                 59,135            9,135           51,898           51,898            51,898
Long-term debt (less current
  maturities and sinking
  fund requirements)                             627,893          627,840          627,791          669,000           654,121


    See financial statements.

(1) In 1997,  IPL  adopted  the  unbilled  revenues  method  of  accounting  for
    electricity and steam delivered during the period.  Revenues are accrued for
    services  provided  but unbilled at the end of each month (see Note 3 in the
    Notes to Financial Statements).
</TABLE>



Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         -----------------------------------------------------------------------
           OF OPERATIONS (INCLUDING ITEM 7A)
           ---------------------------------
   
       IPL  has  two  business  segments  (electric  and  "all  other").   Steam
operations  are  in the  "all  other"  category  (See  the  Notes  to  Financial
Statements).

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

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

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

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

       IPL's ability to predict results or effects of issues related to the Year
2000 is  inherently  uncertain,  and is subject to factors that may cause actual
results to differ materially from those projected. Factors that could affect the
actual results include the  possibility  that  contingency  plans or remediation
efforts  will not operate as  intended;  IPL's  failure to timely or  completely
identify all software,  hardware or embedded chip devices requiring remediation;
unexpected  costs;  and the uncertainty  associated with the impact of Year 2000
issues on the utility industry and on IPL's  customers,  vendors and others with
whom it does  business.  See "Year 2000" under the section  titled  "Other," for
information about IPL's efforts.

LIQUIDITY AND CAPITAL RESOURCES

                   Nature of Operations and Regulatory Matters
                   -------------------------------------------
Regulation
----------

       IPL is a regulated public utility and is principally engaged in providing
electric and steam service to the Indianapolis metropolitan area. As a regulated
entity,  IPL is  required  to  use  certain  accounting  methods  prescribed  by
regulatory bodies which may differ from those accounting  methods required to be
used by nonregulated entities (see Note 1 in the Notes to Financial Statements).

Voluntary Early Retirement and Separation Program
-------------------------------------------------

        During 1998,  IPL offered a voluntary  early  retirement  and separation
program for certain  individuals.  Those  eligible to participate in the program
were selected by virtue of their positions or job classifications and because of
the impact of efficiency  improvements  from new  technologies.  IPL provided 42
employees, who accepted the offer, a lump sum payment in the aggregate amount of
$2.2 million.

Demand Side Management (DSM) Agreement
--------------------------------------

       On July 30, 1997, the IURC issued an order approving,  without amendment,
a new settlement  agreement for IPL's DSM program. The new agreement resulted in
a reduction  in required DSM  expenditures,  authorization  to amortize  certain
deferred DSM regulatory assets and the recovery of certain  additional DSM costs
through a tracker (see Note 10 in the Notes to Financial Statements).

Authorized Annual Operating Income
----------------------------------

       During  quarterly  fuel  adjustment   clause   proceedings,   the  annual
jurisdictional operating income of IPL's electric business is subject to review.
IPL's steam business is subject to annual fuel  adjustment  clause  proceedings.
Customer refunds could result if actual annual  jurisdictional  operating income
exceeds  levels  authorized  by the IURC (see  Note 1 in the Notes to  Financial
Statements).  IPL does not anticipate  any customer  refunds to result from such
reviews during 1999.

Elect Plan
----------

       During 1998, the IURC approved a plan that allows IPL to offer  customers
with less than 2,000  kilowatts of demand an opportunity to choose from optional
payment or service plans. Under the plan,  eligible IPL customers may enter into
written contracts for:

      Fixed Rate - Pay a guaranteed fixed rate per unit of consumption for up to
        three years.
      
      Green Power - Purchase  environmentally  friendly or "green"
        power.

       Additionally,  residential  customers  may choose a "Sure  Bill"  option,
paying  the  same  bill  each  month  for 12  months,  regardless  of  how  much
electricity  is used.  Customers not choosing one of these  options  continue to
receive electric service under existing  tariffs.  (See Item 1, BUSINESS,  under
the subheading "Retail Ratemaking.")


                        Competition and Industry Changes
                        --------------------------------

       In  recent  years,  various  forms  of  proposed   industry-restructuring
legislation  and/or rulemakings have been introduced at the federal level and by
some  states.  Generally,  the intent of these  initiatives  is to  encourage an
increase in competition  within the regulated  electric utility industry.  While
federal  rulemaking to date has addressed  only the electric  wholesale  market,
various state  legislatures  are  considering or have enacted new laws impacting
the retail energy markets within their  respective  states.  A discussion of the
legislative and regulatory initiatives most likely to affect IPL follows:

Wholesale Energy Market
-----------------------

       In April 1996, the Federal  Energy  Regulatory  Commission  (FERC) issued
Orders 888 and 889  concerning  open access  transmission  service for wholesale
sales.  These Orders require all utilities under FERC  jurisdiction  to: 1. file
open,  nondiscriminatory   transmission  access  tariffs  with  FERC;  2.  offer
transmission   to  eligible   customers   comparable  to  service  they  provide
themselves;  3. take service under the tariffs for their own wholesale sales and
purchases  of  electricity.  FERC Order 888 also  provides  for the  recovery of
utility  stranded  costs.  Stranded  cost is defined  by FERC as the  difference
between  revenues  received  by  utilities  under  traditional   ratemaking  and
market-based prices.

       IPL  requested  and was initially  denied a waiver from  compliance  with
orders 888 and 889. On October 11, 1996, IPL was granted a stay by FERC, pending
disposition of its request for rehearing.  IPL requested a waiver because, among
other reasons,  the estimated costs of compliance are expected to exceed revenue
derived from its transmission service for others. To date, FERC has not acted on
IPL's request for rehearing.

Retail Energy Market
--------------------

       The legislatures of a few states have enacted,  and many other states are
considering,  new laws that would allow various forms of competition  for retail
sales of electric energy.  While each state proposal is different,  most provide
for some  recovery  of a  utility's  stranded  costs  and  require  an  extended
transition  period before full competition is fully effective.  Additionally,  a
few states have  implemented  pilot programs that  experiment with allowing some
form of customer choice of electricity suppliers.

       In Indiana,  competition  among electric  energy  providers for sales has
focused  primarily  on the  sale of bulk  power to other  public  and  municipal
utilities.  Indiana law provides  for  electricity  suppliers to have  exclusive
retail service areas.

       In  1995,  the  Indiana   General   Assembly,   anticipating   increasing
competitive  forces in the  regulated  public  utility  industry,  enacted  I.C.
8-1-2.5,  which  enables  the IURC to consider  and  approve,  on an  individual
utility basis,  utility  -initiated  proposals that the IURC decline to exercise
jurisdiction  over the whole or any part of the  utility,  or its retail  energy
service or both. The IPL Elect Plan was approved by the IURC under this law.

       During 1997, the Indiana General Assembly  authorized a legislative study
committee to assess the issue of electric utility competition and restructuring.
A comprehensive restructuring bill was introduced in the Indiana Senate in 1998,
but failed to pass. Another  comprehensive  restructuring bill, Senate Bill 648,
has been submitted in 1999.

IPL's Position on Industry Deregulation
---------------------------------------

       In general,  the  foregoing  FERC  wholesale  and  state-by-state  retail
initiatives are inconsistent with IPL beliefs. IPL favors federal legislation to
deregulate  the industry for all companies and all customers  across the country
at the same time.  IPL believes that  customers,  particularly  residential  and
small  businesses,  are best served by the creation of large,  diverse  markets.
Such markets enable the  development of residential  aggregators who can deliver
the same benefits of volume  purchasing to residential  customers as are enjoyed
by  large  industrial  customers.  IPL  advocates  a  single,  nondistance-based
transmission  access price over wide geographic  areas to maximize  competition;
turning over transmission  system operation to an independent system operator to
avoid  gamesmanship  by  incumbents  who own both  transmission  and  generation
assets;  rejecting the piecemeal  opening of markets in favor of national access
to all markets and  rejecting  recovery of "stranded  costs" due to  competition
because such  recovery  would  subsidize  certain  high-cost  generators  to the
detriment of competition. Absent a comprehensive national approach, IPL believes
state policy makers must recognize and make allowances for the distorted markets
that will  inevitably  be created  by  state-by-state  approaches.  IPL does not
support Senate Bill 648.

       There can be no  assurance  as to the  outcome of the debate on  electric
utility industry restructuring. IPL intends to remain competitive in the face of
increasing competition through maintaining its low cost structure and continuing
to serve existing  customers well,  while  accessing the wholesale  market as it
continues to open.

New Environmental Standards
---------------------------

       On July 16, 1997, the United States Environmental Protection Agency (EPA)
promulgated  final  regulations  which amended the National  Ambient Air Quality
Standards by introducing  standards for fine particulate matter and creating new
ozone  standards.  On October 27, 1998,  the EPA issued a final rule calling for
Indiana,  along with 22 other  jurisdictions  in the eastern third of the United
States,  to impose more  stringent  limits on  emission of nitrogen  oxides from
fossil-fuel  fired steam  electric  generators,  such as those  operated by IPL.
Because power plants emit  nitrogen  oxides,  as well as certain air  pollutants
that could  contribute to the formation of fine particulate  matter,  there is a
possibility  that existing IPL sources will be required to be  retrofitted  with
additional air pollution controls in the future.  Numerous  entities,  including
eight states, IPL and scores of other electric utilities,  have challenged EPA's
1998 rule on nitrogen oxides in the United States Court of Appeals. Due to these
uncertainties,  it is not  presently  possible  to predict  the effects of these
standards on IPL.

           Liquidity, Financing Requirements and Capital Market Access
           -----------------------------------------------------------

       Liquidity  is the  ability  of an  entity  to  meet  its  short-term  and
long-term cash needs.  IPL's  liquidity is a function of its ability to generate
internal  funds,  its  construction  program,  its mortgage  covenants  and loan
agreements and its access to external capital markets.

       Sustaining investment grade debt ratings is also a key element for having
adequate  liquidity and financial  flexibility.  As of December 31, 1998,  IPL's
senior secured debt was rated AA- by Standard & Poor's,  Aa2 by Moody's Investor
Services and AA by Duff & Phelps,  and IPL's  commercial paper was rated A-1+ by
Standard & Poor's and P-1 by Moody's Investor  Services.  IPL expects to be able
to maintain investment grade debt ratings into the foreseeable future.

       IPL has no  long-term  debt that  matures  during  1999.  However,  other
existing higher-rate debt may be refinanced depending upon market conditions.

       On January 13, 1998, IPL issued $50 million of Cumulative Preferred Stock
with a rate of 5.65%.  The stock will be  redeemable  at par  value,  subject to
certain  restrictions,  in whole or in part,  at any time on or after January 1,
2008, at the option of IPL.

       During  the  next  five  years,  IPL  is  forecasted  to  meet  its  cash
requirements  without  any  additional  permanent  financing.  Cash  flows  from
operations  and temporary  short-term  borrowings  are forecasted to provide the
funds required for IPL's  construction  program.  See the following  section for
discussion of the construction program.

                               Future Performance
                               ------------------

       Traditionally,   retail  KWH  sales,   after   adjustments   for  weather
variations,  have grown in close  correlation  with growth in service  territory
economic  activity.  During the past 10 years, IPL's retail KWH sales have grown
at a compound  annual rate of 2.1%,  while the  Indianapolis  economy grew at an
annual rate of 2.3%. The  Indianapolis  economy is expected to grow at an annual
rate of 2.4% for 1999 through 2003.

       IPL's  wholesale  KWH sales  doubled in 1998 over the level  achieved  in
1997. As IPL's retail sales grow the amount of generating capacity available for
wholesale  sales  is more  limited.  Moreover,  IPL  plans to  perform  overhaul
maintenance on more megawatts of generating  capacity in 1999 than in 1998 which
further reduces the amount of generating capacity available for wholesale sales.
The  ability to sell power in the highly  competitive  wholesale  market is also
highly dependent on market conditions.  IPL is unable to predict with any degree
of certainty the level of wholesale sales that may be achieved in 1999.

       Operating and  maintenance  expenses were $423.3  million in 1998.  These
expenses in 1999 will be influenced by the level of KWH  generation,  generating
unit availability and overhaul costs,  expected increased  purchased power costs
(see Note 13 in the Notes to Financial  Statements),  cost control  programs and
inflation.

       IPL's  construction  program  for  the  three-year  period  1999-2001  is
estimated to cost $259.5  million  including  AFUDC.  The estimated  cost of the
program by year (in millions) is $96.2 in 1999, $95.6 in 2000 and $67.7 in 2001.
It includes  $147.8  million  for  additions,  improvements  and  extensions  to
transmission  and  distribution  lines,  substations,  power  factor and voltage
regulating   equipment,    distribution   transformers   and   street   lighting
distribution.  The construction  program includes $26.5 million for construction
of a 100-megawatt combustion turbine expected to be in service by 2001.

                                      Other
                                      -----

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

       On December 31, 1997, effective January 1, 1997, IPL adopted the unbilled
revenues  method of accounting  for all electric and steam sales to more closely
match revenues with expenses.  Under this method,  IPL accrues  revenues for all
electric and steam  energy  delivered  to  customers  during the period  whether
billed or not. Previously,  IPL recognized these revenues only as customers were
billed,  with the service rendered after monthly meter reading dates through the
end of a calendar month recognized as operating revenues in the following month.
The cumulative effect of this change in accounting method as of January 1, 1997,
net of income  taxes,  was a one-time  income  increase of $18.3 million and was
reported as a separate  component of net income for 1997. This accounting change
does not  impact  IPL's  cash  flow or  liquidity  (see  Note 3 of the  Notes to
Financial  Statements  for additional  information  concerning  this  accounting
change).

Preferred Stock, Debt Issuance and Dividend Restrictions
--------------------------------------------------------

       Restrictions  on IPL's  ability to issue  certain  securities or pay cash
dividends  are  contained in its Mortgage and Deed of Trust  (Mortgage)  and its
Amended Articles of Incorporation (Articles).  The Articles require that the net
income of IPL, as  specified  therein,  be at least one and  one-half  times the
total interest on the funded debt and the pro forma dividend requirements on the
outstanding,  and any proposed,  preferred stock before any additional preferred
stock  is  issued.  The  Mortgage  requires  that  net  earnings  as  calculated
thereunder be two and one-half  times the annual  interest  requirements  before
additional bonds can be authenticated on the basis of property additions.  Based
on IPL's net  earnings for the 12 months  ended  December  31, 1998,  the ratios
under the Articles and the Mortgage are 5.09 and 11.62, respectively (see Note 6
in  the  Notes  to  Consolidated  Financial  Statements).   IPL  believes  these
requirements  will  not  restrict  any  anticipated  future  financings  or cash
dividend   payments.   At  December  31,  1998,  and  considering  all  existing
restrictions,  IPL had the  capacity  to issue  approximately  $1.1  billion  of
additional long-term debt.


Market Risk Sensitive Instruments and Positions
-----------------------------------------------

       The  primary  market  risk to which IPL is exposed is related to interest
rate  risk.  IPL uses  long-term  debt as a  primary  source of  capital  in its
business.  A portion of this debt has an  interest  component  that  resets on a
periodic basis to reflect current market  conditions.  IPL had $478.8 million of
fixed rate and $150  million of variable  rate  long-term  debt  outstanding  at
December 31, 1998. The weighted  average  interest rates of IPL's fixed rate and
variable rate long-term debt were 6.7% and 4.0%,  respectively,  at December 31,
1998. There are no maturities or sinking fund requirements on long-term debt for
the five years  subsequent  to December 31,  1998.  The fair values of the fixed
rate and variable rate  long-term debt were $517.0 million and $150.0 million at
December 31, 1998.

       To manage IPL's exposure to  fluctuations  in interest rates and to lower
funding costs,  IPL has entered into an interest rate swap. Under this swap, IPL
agrees with counterparties to exchange,  at specified intervals,  the difference
between  fixed-rate and floating-rate  interest amounts  calculated on an agreed
notional amount.  This interest  differential  paid or received is recognized in
the  statements  of income as a component of interest  expense.  At December 31,
1998,  IPL's interest rate swap agreement had a notional  amount of $40 million,
and it expires in January  2023.  IPL agrees to pay  interest at a fixed rate of
5.21%  to a swap  counter  party  and  receive  a  variable  rate  based  on the
tax-exempt weekly rate.

Year 2000
---------

       IPL is potentially  subject to operational  problems  associated with the
inability of various computer hardware, software and devices containing embedded
chips to properly process the year change from 1999 to 2000. Such problems could
conceivably  affect  IPL's  ability  to  deliver  electricity  or  steam  to its
customers,  as well as IPL's  internal  operations  such as  billing  or payroll
functions. Further, Year 2000 problems experienced by other entities, over which
IPL has no control,  such as certain suppliers or other electric  utilities with
which IPL is interconnected, could adversely affect IPL's operations.

       In 1997, IPL established a Year 2000 Committee. IPL currently manages the
Year 2000  project  through two  employee  committees,  the  Compliance  Testing
Committee  and the  Contingency  Planning  Committee,  each headed by  corporate
officers.  Each of those  committees  reports to a Year 2000 Steering  Committee
composed of officers.  The Year 2000 Steering Committee reports to the Office of
the Chairman.

       The IURC has ordered all Indiana public utilities, including IPL, to "use
their best efforts to identify their mission critical  operations and conduct an
inventory  of all  electronic  devices  that may be affected by date  processing
logic, assess the status of these devices, take steps to correct problems in the
devices and test the devices to determine  compliance" in order to be "Year 2000
ready."

       The Compliance  Testing Committee is engaged in inventorying,  reviewing,
analyzing,  correcting  and testing  computer-related  systems and embedded chip
devices.  The  Contingency  Planning  Committee  is in the process of  assessing
various  operating  scenarios  associated  with potential Year 2000 problems and
formulating  plans by which to operate IPL in the event of such  problems.  Both
the Compliance  Testing  Committee and the  Contingency  Planning  Committee are
concentrating  first on systems  critical to the  continuity of IPL's  business.
Non-critical systems have lower priorities.

       IPL is participating in an Electric Power Research  Institute  program on
the Year 2000 issue, as well as the North American Electric  Reliability Council
system readiness assessments.

       IPL's Year 2000 Plan  includes  attention to its  generating  facilities,
energy management systems,  telecommunications  systems,  substation control and
protection systems,  transmission and distribution systems, business information
systems,  financial systems and business partners.  It includes efforts, such as
assessing Year 2000 risks to computer  hardware,  software and embedded systems;
identifying options and solutions;  evaluating solutions;  repairing,  upgrading
and replacing systems; testing systems; and contingency planning.

State of Readiness

A. Identification and Assessment

       The  Compliance  Testing  Committee is  coordinating  and  reviewing  the
enterprise-wide use of information  technology and assessing potential Year 2000
problems.  That effort involves making an inventory of applications  and systems
and evaluating exposures associated with, for example,  vendor-provided software
and hardware,  IPL-developed  software,  and various devices containing embedded
chips.  The  Committee  is also in contact  with  vendors to  determine  product
compliance  and vendors'  timeframes  for  compliance.  Computer  systems  being
reviewed include hardware,  machine microcode and firmware,  operating  systems,
generic applications  software,  billing software,  communications  software and
financial software.

       The Compliance Testing Committee continues to assess computer systems and
embedded chip devices related to IPL's:

      Electricity generating stations and plants producing steam;
      Energy management systems;
      Substation controls, system protection, and transmission and
         distribution systems;
      Telecommunications systems; and
      Business information systems.

       IPL  has  essentially   completed  the   identification,   inventory  and
assessment phases for critical systems.

B. Remediation and Testing

       The Compliance Testing Committee is coordinating,  modifying or replacing
legacy  systems which may not be Year 2000  compliant.  IPL is in the process of
replacing most of its key financial software applications. Although that project
was not  specifically  initiated as a Year 2000 effort,  it will  coincidentally
result in replacement of non-compliant software.

       The  Compliance  Testing  Committee is also engaged in  establishing  and
operating appropriate testing environments to determine, to the extent possible,
the Year 2000  compliance of existing  systems and/or devices and the compliance
of  replacement or upgraded  systems and devices.  IPL may employ one or more of
the following techniques:  component tests, simulations, outside testing, vendor
verifications  or  upgrades or  change-outs.  Some  devices or systems,  such as
satellite communication links, may not be susceptible to testing, in which cases
IPL must rely on the service providers' verifications.

       IPL  has   inquired   of  its   suppliers   and   vendors  of   software,
computer-related  equipment,  devices and services  about Year 2000  compliance.
Some provided the required information and/or assurances and some did not.

       IPL's  operations  could  be  adversely  affected  by  Year  2000-related
failures of other companies,  such as telecommunication  providers,  that supply
IPL with  mission-critical  services.  Similarly,  Year 2000  failures  of other
utilities with which IPL is interconnected  could adversely affect IPL's ability
to deliver services to its customers.

       IPL currently  expects to complete the remediation and testing phases for
critical  systems by the end of the second quarter 1999 and estimates that it is
now approximately 65% complete.

Costs to Address IPL's Year 2000 Issues

       Not including the cost of replacing  IPL's business  software,  a project
not  initiated  specifically  for Year 2000  reasons but which will provide Year
2000 benefits through replacing  non-compliant software, IPL currently estimates
that its costs of the  phases of  identification,  assessment,  remediation  and
testing may be approximately  $4 million,  which IPL believes is not material to
its results of operations,  liquidity and financial  condition.  Of that figure,
IPL has currently expended  approximately $1.2 million. A substantial proportion
of the costs of remediation are associated  with  functional  areas of IPL other
than Information Services. IPL currently estimates that its costs of contingency
planning efforts may be approximately $1.5 million.

Risks of IPL's Year 2000 Issues

       In light of the  numerous  computer-related  systems  and  embedded  chip
devices present in business and production  equipment used by a utility, and the
interdependent  nature of control systems, a large number of potential Year 2000
failure scenarios exist, potentially involving IPL's internal functions (such as
billing),  as well as its  steam and  electricity  generation  and  distribution
functions.  Consequences could conceivably range from essentially no operational
problems to a massive  disruption  of steam and electric  service  lasting for a
significant  period of time.  Further,  since  IPL does not  stand  alone but is
electrically interconnected with other utilities across a substantial portion of
the nation, even if IPL experiences no significant Year 2000 problems associated
with its own equipment,  its ability to deliver  electricity  could be adversely
affected by Year 2000 failures  experienced by other  interconnected  utilities.
IPL currently  expects to experience at least some,  hopefully  minor,  problems
associated with Year 2000. Some particularly  bleak, yet conceivable,  Year 2000
failure scenarios could be material to IPL's results of operations.

       There are both external and internal risks associated with Year 2000 that
could  affect  IPL's  steam  and  electricity   generation,   transmission   and
distribution  operations.  Potential internal risk factors include,  but are not
limited to,  increased  risk of generator  trips,  inability to start or restart
generators,  increased  risk of  transmission  facility  trips,  loss of  energy
management  systems,  loss of Company-owned  voice/data  communications,  system
protection  (relay) failures  resulting in cascading outages or facility damage,
failure  of  load-shedding  controls  to  operate  properly,   failure  of  load
management systems to operate properly,  loss of or incorrect critical operating
data, failure of environmental  control systems, loss of distribution systems or
failure of voltage  control  devices to operate  properly.  Occurrences of those
internal problems,  alone or in combination,  could result in varying effects on
IPL's operations.

       External risk factors  include,  but are not limited to, loss of customer
load,  uncharacteristic load patterns, loss of leased communication  facilities,
failure of  delivery  systems to  maintain  supplies  of fuel and severe or cold
weather. Occurrences of various of those events, alone or in combination,  could
result in varying effects on IPL.

       Particularly  with  respect to  responding  to  contingencies  that might
occur,  unavailability of skilled labor could exacerbate Year 2000 problems. The
current  collective  bargaining  agreement  between  IPL and  the  International
Brotherhood of Electrical  Workers,  the union  representing  IPL's  production,
distribution,  construction and maintenance  employees,  expires on December 13,
1999.  That union  rejected  a proposed  one-year  extension  of the  collective
bargaining  agreement that was proposed by management so that negotiations would
not occur near the end of calendar year 1999.

       IPL's insurance  policies,  including policies for liability and property
damage,  currently  expire,  are up for renewal or have anniversary dates during
1999. IPL currently  expects that, in line with a general trend in the insurance
industry,  insurance  policies  purchased  or renewed  during  1999 may  exclude
coverage of Year 2000 events or certain elements of damage  potentially  flowing
therefrom.

       In light of the many  adverse  circumstances  that  could  happen  to IPL
associated with Year 2000,  along with the speculation that some or many of them
may not happen,  it is extremely  difficult  to  hypothesize  a most  reasonably
likely worst case Year 2000 scenario with any degree of certainty.  With that in
mind,  IPL  currently  believes the most  reasonably  likely worst case scenario
would  be the  temporary  loss  of one or more  generation  units  resulting  in
interruptions  of power to IPL  customers.  IPL does not believe  that the worst
case  scenario  will  occur  and,  should  it  occur,   IPL  believes  that  the
consequences  of that  scenario,  with regard to either  costs of repair or lost
revenues,  are  not  likely  to have a  material  effect  on  IPL's  results  of
operations, liquidity and financial condition.

IPL's Contingency Plans

       The Contingency  Planning Committee is engaged in reviewing  hypothetical
scenarios  involving  various system or device  failures and preparing  plans by
which to  operate  IPL in the event  those  failures  occur.  IPL's  contingency
planning  efforts are not yet complete,  but are underway within the scope of an
overall  outline.  IPL's  contingency  planning  involves  the  phases  of  plan
development,  testing,  execution and recovery  after Year 2000 events.  As with
compliance testing, contingency planning touches essentially every area of IPL's
operations,  as well as interactions with interconnected  utilities,  customers,
critical vendors and emergency and other governmental authorities.

       The planning phase attempts to identify and evaluate potential impacts on
business  operations,  life,  property,  and the environment;  develop emergency
plans including establishing  procedures for mitigation of failures and evaluate
contingency  planning  being done on systems that  interface with IPL's systems;
identify dates of action for various contingencies; establish responsibility and
authority  for various  response  efforts;  and establish and perform a training
program with respect to responding to  contingencies,  including  practicing and
testing the contingency  plans and  coordinating  the efforts with  governmental
functions.

       Contingency planning may include consideration of potential interruptions
in the supply  chain or  transportation  of  critical  fuel,  water,  chemicals,
material supplies etc., and acquisition of appropriate  extra supplies,  as well
as potential  failures of or other problems  associated with the  interconnected
electricity  grid.   Similarly,   consideration  may  be  given  to  cooperative
arrangements  with other  utilities in the event that Year 2000 problems  impact
the  supply of  skilled  labor to effect  remediation  actions.  IPL's  existing
disaster recovery plans may form bases for some Year 2000 contingency plans.

       In the testing phase,  various drills may be conducted to test the plan's
effectiveness.  Modifications may be made where testing indicates a need. In the
execution  phase,  IPL will operate its contingency  plans in response to events
actually occurring.

       After  Year  2000  events,  if  any,  IPL  will  execute  its  post-event
contingency  plans as required.  It will test its system  functions,  review the
results,  restore and restart systems, and notify appropriate authorities of the
resolution of problems.

Cash Flows
----------

       Additional   information  regarding  IPL's  historical  cash  flows  from
operations,  investing  and  financing  for the past three years,  including the
capital expenditures of IPL, is disclosed in the Statements of Cash Flows and in
the Notes to Financial Statements.

RESULTS OF OPERATIONS

       Income  applicable  to common  stock  decreased  by $3.0  million in 1998
compared to 1997.  Income  applicable to common stock increased by $29.6 million
in 1997  compared  to 1996.  The  following  discussion  highlights  the factors
contributing to these increases.

       The 1998 income  applicable to common stock was affected by a pretax gain
of $12.5 million ($7.8 million,  net of tax) resulting from the  liquidation and
termination of an agreement to purchase power (see Note 13 in Notes to Financial
Statements).

       The 1997 income applicable to common stock included a one-time cumulative
effect adjustment of $18.3 million, net of taxes, resulting from IPL's change to
the unbilled revenue method of accounting.  The 1997 income applicable to common
stock also included a $5.7 million gain ($3.5 million, net of tax) from the sale
of a  retired  plant  site  (see  Notes  2  and  3 in  the  Notes  to  Financial
Statements).

Utility Operating Revenues
--------------------------

     Operating  revenues in 1998 and 1997 increased from the prior year by $44.8
million and $13.9 million, respectively. The increases in revenues resulted from
the following:

                                                       Increase (Decrease)
                                                       -------------------
                                                1998 over 1997    1997 over 1996
                                                --------------    --------------
                                                     (Millions of Dollars)
Electric:
     Increase in retail basic rates                  $   -           $  12.7
     Change in retail KWH sales - net of fuel           14.5            (7.4)
     Fuel revenue                                        3.5            (4.7)
     Wholesale revenue                                  28.0             8.6
     DSM tracker revenue                                 1.3             1.3
Steam revenue                                           (2.9)             .6
Other revenue                                             .4             2.8
                                                     -------         -------
     Total change in operating revenues              $  44.8         $  13.9
                                                     =======         =======

       The  increase  in retail KWH sales in 1998  reflects  economic  growth in
Indianapolis  and an increase in cooling degree days during the summer partially
offset by a decrease in heating  degree days during the mild winter of 1998. The
increase in retail basic rates in 1997 is the result of new  tariffs,  effective
July 1, 1996,  designed  to  produce  additional  annual  base  revenues  of $25
million. The decrease in retail KWH sales in 1997 reflects a decrease in cooling
and heating  degree days in 1997,  compared to 1996, due to milder  weather.  In
both years, total KWH sales,  including wholesale KWH sales,  increased.  Actual
and percentage  changes in electric  customers and in heating and cooling degree
days for these periods are as follows:

                                                Increase (Decrease)
                                                -------------------
                                       1998 over 1997          1997 over 1996
                                       --------------          --------------

 Electric Residential Customers        5,257      1.4%        4,657      1.3%
 Commercial & Industrial Customers     1,169      2.6%        1,048      2.4%

 Heating Degree Days                  (1,261)   (22.2)%       (203)     (3.4)%
 Cooling Degree Days                     381     43.8%        (121)    (12.2)%

   
       The changes in fuel revenues in 1998 and 1997 from the prior year reflect
differences  in fuel  costs  billed to  customers.  Wholesale  sales  were $51.1
million, $23.1 million and $14.5 million for 1998, 1997 and 1996,  respectively.
The increases in wholesale revenues in 1998 and 1997 reflect increased wholesale
marketing efforts and energy requirements of other utilities in those years. The
increases in other revenues represent increased service revenues.

Utility Operating Expenses
--------------------------

       Fuel expense increased in 1998 by $16.5 million and only slightly in 1997
from the prior years.  The increases were  primarily due to increased  total KWH
sales.

       Other  operating  expenses in 1998 and 1997 increased from the prior year
by $12.3  million and by $6.1  million,  respectively.  The increase in 1998 was
partially due to increased  administrative and general expenses of $7.7 million.
This  increase  was due to  payments  for the  voluntary  early  retirement  and
separation  program as well as increased  outside  services and increased  labor
costs. Electric distribution expenses also increased $1.7 million and production
expenses  increased $1.5 million during 1998. The increase in 1997 was primarily
due to increased  administrative  and general expense of $6.0 million  resulting
from increased  outside services and labor costs.  Also contributing to the 1997
increase  was  increased  amortization  of DSM program  expenses of $2.3 million
partially offset by decreased expense at the production plants.

       Power  purchased  decreased by $.7 million and $10.5 million  during 1998
and 1997, respectively,  compared to the prior periods. The decrease in 1998 was
due to decreased demand charges partially offset by increased  purchases of KWH.
The 1997 decrease was primarily due to reduced  demand  charges as a result of a
new power purchase contract.

       Purchased steam decreased during 1998 and 1997 primarily due to decreased
therms purchased from an independent resource recovery system located within the
city of Indianapolis.

       Maintenance  expenses decreased by $3.2 million during 1998 and increased
by $8.9 million during 1997. The decrease in 1998 was primarily due to decreased
overhaul expenses. The increase in 1997 was primarily due to an overhaul of Unit
3 at Petersburg, as well as repairs to Unit 7 at the Stout plant.

       Taxes other than income taxes  increased  $2.0 million  during 1998 while
decreasing  $.3  million  in 1997.  The  increase  in 1998 was due to  increased
property taxes,  gross income taxes and employment  taxes.  The decrease in 1997
was due to decreased property and gross income taxes.

     Income taxes - net  increased in both 1998 and 1997 from the prior years by
$6.9 million and $5.1 million, respectively.  These changes reflect increases in
pretax operating income.

Other Income And Deductions
---------------------------

       Allowance  for  equity  funds used  during  construction  decreased  $2.1
million and $2.5 million  during 1998 and 1997,  respectively.  In mid 1997, the
amortization of deferred carrying charges on a plant asset ended contributing to
the decreases in both 1998 and 1997. Also contributing to the 1997 variance were
decreased carrying charges on other regulatory assets of $1.2 million.

       Other-net,  which  includes  the pretax  non-operating  income  from IPL,
decreased by $4.7  million  during 1998,  and  increased by $7.0 million  during
1997, as compared to the prior years. The decrease in 1998 was primarily related
to the  non-recurring  gain from the sale of a retired  plant site in 1997.  The
increase  during 1997 was due to a $5.7 million pretax gain from the sale of the
retired plant site. Also  contributing to the increase in other-net  during 1997
was an increase in net revenues for contract work by IPL.

        During 1998, a gain from the liquidation and termination of an agreement
to purchase  power was  recognized by IPL in the amount of $12.5 million  before
taxes.

Interest Charges
----------------

       Interest on long-term  debt  decreased by $.4 million in 1998 and by $4.6
million  in 1997  from the  prior  years.  The  decrease  in 1998 was due to the
redemption of $11.3 million 5 5/8% Series in May 1997.  The decrease in interest
expense for 1997 was due to the redemption of $15 million 5 1/8% Series in April
1996, $50 million 9 5/8% Series in December 1996 and $11.3 million 5 5/8% Series
in May 1997,  partially  offset by the issuance of a $20  variable  rate note in
November 1996.

       Other  interest  charges  decreased  by $.6 million  during 1998 and $2.4
million  during  1997,  from the prior  years.  The  decrease in 1998 was due to
decreased  interest on tax assessments and decreased interest on short-term debt
borrowings.  The decrease during 1997 was primarily due to decreased  short-term
debt borrowings.

     As compared to the prior year, the allowance for borrowed funds used during
construction  decreased in 1997 by $2.4 million due to a decreased  construction
base for that period.

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

       A cumulative  effect of accounting change in the amount of $18.3 million,
net of taxes, was recorded during 1997.  Effective  January 1, 1997, IPL adopted
the unbilled  revenues  method of accounting for electricity and steam delivered
during the period.  Revenues are accrued for  services  provided but unbilled at
the end of each month (see Note 3 in the Notes to Financial Statements).

New Accounting Pronouncement
----------------------------

       The  Financial   Accounting  Standards  Board  has  issued  Statement  of
Financial Standards No. 133, "Accounting for Derivative  Instruments and Hedging
Activities," that IPL will be required to adopt in 2000 (see Note 1 in the Notes
to Financial Statements for further discussion).

<PAGE>

Item 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
              -------------------------------------------


                          INDEPENDENT AUDITORS' REPORT
                          ============================


To the Board of Directors of Indianapolis Power & Light Company:

We have audited the  accompanying  balance sheets of Indianapolis  Power & Light
Company as of December 31, 1998 and 1997, and the related  statements of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1998. These financial  statements are the  responsibility  of IPL's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit 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,  such  financial  statements  present  fairly,  in all material
respects,  the financial  position of  Indianapolis  Power & Light Company as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended  December 31, 1998 in conformity
with generally accepted accounting principles.

     As discussed  in Note 3 to the  Financial  Statements,  in 1997 the Company
changed its method of accounting for unbilled revenue.


DELOITTE & TOUCHE LLP

Indianapolis, Indiana
January 22, 1999
<PAGE>
<TABLE>

                                          INDIANAPOLIS POWER & LIGHT COMPANY

                                                 Statements of Income
                                 For the Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
------------------------------------------------------------------------------------------------------------------------

                                                                             1998             1997              1996
------------------------------------------------------------------------------------------------------------------------
                                                                                         (In Thousands)
OPERATING REVENUES (Notes 3 and 10):
<S>                                                                     <C>              <C>              <C>          
  Electric                                                              $    785,835     $     738,134    $     724,764
  Steam                                                                       35,421            38,293           37,739
                                                                        -------------    --------------   --------------
    Total operating revenues                                                 821,256           776,427          762,503
                                                                        -------------    --------------   --------------

OPERATING EXPENSES:
  Operation:
    Fuel                                                                     181,036           164,578          164,339
    Other                                                                    155,610           143,311          137,192
  Power purchased                                                              7,170             7,833           18,365
  Purchased steam                                                              5,968             7,075            7,240
  Maintenance                                                                 73,501            76,679           67,768
  Depreciation and amortization                                              103,223           103,230          102,769
  Taxes other than income taxes                                               35,047            33,071           33,363
  Income taxes - net (Note 9)                                                 80,190            73,335           68,248
                                                                        -------------    --------------   --------------
    Total operating expenses                                                 641,745           609,112          599,284
                                                                        -------------    --------------   --------------
OPERATING INCOME                                                             179,511           167,315          163,219
                                                                        -------------    --------------   --------------

OTHER INCOME AND (DEDUCTIONS):
  Allowance for equity funds used during construction                          1,389             3,462            5,967
  Other - net                                                                   (158)            4,507           (2,527)
  Gain on termination of agreement (Note 13)                                  12,500                -                -
  Income taxes - net (Note 9)                                                 (4,196)           (1,105)             982
                                                                        -------------    --------------   --------------
    Total other income - net                                                   9,535             6,864            4,422
                                                                        -------------    --------------   --------------
INCOME BEFORE INTEREST CHARGES                                               189,046           174,179          167,641
                                                                        -------------    --------------   --------------

INTEREST CHARGES:
  Interest on long-term debt                                                  38,395            38,809           43,425
  Other interest                                                                 675             1,243            3,638
  Allowance for borrowed funds used during construction                         (911)             (945)          (3,354)
  Amortization of redemption premiums and expenses on
    debt - net                                                                 1,740             1,670            1,344
                                                                        -------------    --------------   --------------
    Total interest charges                                                    39,899            40,777           45,053
                                                                        -------------    --------------   --------------

INCOME BEFORE CUMULATIVE EFFECT
   OF ACCOUNTING CHANGE                                                      149,147           133,402          122,588
                                                                        -------------    --------------   --------------

CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 3)                                    -            18,347                -
                                                                        -------------    --------------   --------------

NET INCOME                                                                   149,147           151,749          122,588
                                                                        -------------    --------------   --------------

PREFERRED DIVIDEND REQUIREMENTS                                                3,119             2,760            3,182
                                                                        -------------    --------------   --------------

INCOME APPLICABLE TO COMMON STOCK                                       $    146,028     $     148,989    $     119,406
                                                                        =============    ==============   ==============


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

                                         INDIANAPOLIS POWER & LIGHT COMPANY

                                                   Balance Sheets
                                             December 31, 1998 and 1997
<CAPTION>
---------------------------------------------------------------------------------------------------------------------

ASSETS                                                                            1998                     1997
---------------------------------------------------------------------------------------------------------------------

                                                                                        (In Thousands)

UTILITY PLANT:
<S>                                                                         <C>                      <C>            
  Utility plant in service (Note 2)                                         $     2,859,899          $     2,800,446
  Less accumulated depreciation                                                   1,202,356                1,121,317
                                                                            ----------------         ----------------
      Utility plant in service - net                                              1,657,543                1,679,129
  Construction work in progress                                                      80,198                   77,030
  Property held for future use                                                       10,719                   10,224
                                                                            ----------------         ----------------
      Utility plant - net                                                         1,748,460                1,766,383
                                                                            ----------------         ----------------




OTHER PROPERTY -
  At cost, less accumulated depreciation                                              5,790                    5,171
                                                                            ----------------         ----------------




CURRENT ASSETS:
  Cash and cash equivalents                                                           4,250                    4,950
  Accounts receivable and unbilled revenue (less allowance for doubtful
    accounts - 1998, $996,000 and 1997, $1,005,000) (Note 3)                         36,692                   43,053
  Fuel - at average cost                                                             38,968                   35,000
  Materials and supplies - at average cost                                           48,163                   47,648
  Tax refund receivable                                                               7,643                    4,393
  Prepayments and other current assets                                                3,634                    4,093
                                                                            ----------------         ----------------
      Total current assets                                                          139,350                  139,137
                                                                            ----------------         ----------------




DEFERRED DEBITS:
  Regulatory assets (Note 5)                                                        116,801                  126,784
  Miscellaneous                                                                      12,665                   12,297
                                                                            ----------------         ----------------
      Total deferred debits                                                         129,466                  139,081
                                                                            ----------------         ----------------


      TOTAL                                                                 $     2,023,066          $     2,049,772
                                                                            ================         ================


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

<CAPTION>
--------------------------------------------------------------------------------------------------------------

CAPITALIZATION AND LIABILITIES                                              1998                     1997
--------------------------------------------------------------------------------------------------------------
                                                                                   (In Thousands)

<S>                                                                   <C>                      <C>
CAPITALIZATION (See Notes 6 and 7):
  Common shareholder's equity
    Common stock, no par, authorized - 20,000,000 shares,
     issued and outstanding - 17,206,630 shares in 1998,
      17,206,630 shares in 1997                                       $       324,537          $      324,537
    Premium and net gain on preferred stock                                     2,642                   2,329
    Retained earnings                                                         440,747                 508,626
                                                                      ----------------         ---------------
      Total common shareholder's equity                                       767,926                 835,492
  Cumulative preferred stock                                                   59,135                   9,135
  Long-term debt (Note 2)                                                     627,893                 627,840
                                                                      ----------------         ---------------
        Total capitalization                                                1,454,954               1,472,467
                                                                      ----------------         ---------------


CURRENT LIABILITIES:
  Notes payable - banks and commercial paper (Note 8)                          19,200                  23,700
  Accounts payable and accrued expenses                                        64,461                  63,970
  Dividends payable                                                            13,158                  13,290
  Taxes accrued                                                                18,283                  18,674
  Interest accrued                                                             13,326                  13,258
  Other current liabilities                                                    13,731                  12,556
                                                                      ----------------         ---------------
      Total current liabilities                                               142,159                 145,448
                                                                      ----------------         ---------------


DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
  Deferred income taxes - net (Note 9)                                        328,417                 325,386
  Unamortized investment tax credit                                            41,993                  44,783
  Accrued postretirement benefits (Note 11)                                    10,768                  17,144
  Accrued pension benefits (Note 11)                                           39,953                  39,821
  Miscellaneous                                                                 4,822                   4,723
                                                                      ----------------         ---------------
      Total deferred credits and other long-term liabilities                  425,953                 431,857
                                                                      ----------------         ---------------

COMMITMENTS AND CONTINGENCIES (Note 12)

      TOTAL                                                           $     2,023,066          $    2,049,772
                                                                      ================         ===============

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

                                          INDIANAPOLIS POWER & LIGHT COMPANY

                                               Statements of Cash Flows
                                 For the Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
------------------------------------------------------------------------------------------------------------------------

                                                                               1998             1997            1996
------------------------------------------------------------------------------------------------------------------------
                                                                                          (In Thousands)
CASH FLOWS FROM OPERATIONS:
<S>                                                                       <C>             <C>              <C>         
  Net income                                                              $    149,147    $     151,749    $    122,588
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                                              100,829           98,908          97,313
    Amortization of regulatory assets                                           11,507           15,405          17,680
    Deferred income taxes and investment tax credit adjustments - net           (2,483)          12,669           3,195
    Allowance for funds used during construction                                (2,300)          (4,407)         (9,321)
    Cumulative effect of accounting change - before taxes (Note 3)                   -          (29,915)              -
    Premiums on redemptions of debt                                                  -                -          (3,128)
    Change in certain assets and liabilities:
     Accounts receivable - excluding cumulative effect
         of accounting change                                                    6,361           (5,246)         49,260
      Fuel, materials and supplies                                              (4,483)            (500)          4,293
      Accounts payable                                                             491            7,433         (16,516)
      Taxes accrued                                                               (391)            (947)            598
      Accrued pension benefits                                                     132            2,538           5,449
      Other - net                                                               (9,338)          (6,200)        (17,177)
                                                                          -------------   --------------   -------------
Net cash provided by operating activities                                      249,472          241,487         254,234
                                                                          -------------   --------------   -------------

CASH FLOWS FROM INVESTING:
  Construction expenditures                                                    (79,458)         (73,130)        (78,543)
  Other                                                                          1,637           (1,528)        (13,488)
                                                                          -------------   --------------   -------------
Net cash used in investing activities                                          (77,821)         (74,658)        (92,031)
                                                                          -------------   --------------   -------------

CASH FLOWS FROM FINANCING:
  Issuance of long-term debt                                                         -                -          20,000
  Issuance of preferred stock (Note 6)                                          50,000                -               -
  Retirement of long-term debt                                                       -          (11,250)        (65,150)
  Preferred stock redemptions (Note 6)                                               -          (41,814)              -
  Short-term debt - net                                                         (4,500)         (10,300)        (31,022)
  Dividends paid                                                              (217,362)        (107,384)        (86,811)
  Other                                                                           (489)              29            (365)
                                                                          -------------   --------------   -------------
Net cash used in financing activities                                         (172,351)        (170,719)       (163,348)
                                                                          -------------   --------------   -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                         (700)          (3,890)         (1,145)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                   4,950            8,840           9,985
                                                                          -------------   --------------   -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                  $      4,250    $       4,950    $      8,840
                                                                          =============   ==============   =============


------------------------------------------------------------------------------------------------------------------------
Supplemental  disclosures  of cash flow  information:  Cash paid during the year
  for:
    Interest (net of amount capitalized)                                  $     38,644    $      39,837    $     45,339
                                                                          =============   ==============   =============
    Income taxes                                                          $     90,467    $      75,621    $     67,979
                                                                          =============   ==============   =============

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


                                              INDIANAPOLIS POWER & LIGHT COMPANY

                                               Statements of Retained Earnings
                                     For the Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------

                                                                                 1998               1997               1996
-------------------------------------------------------------------------------------------------------------------------------
                                                                                               (In Thousands)


<S>                                                                        <C>                 <C>                <C>         
RETAINED EARNINGS AT BEGINNING OF YEAR                                     $     508,626       $    456,349       $    421,229
NET INCOME                                                                       149,147            151,749            122,588
                                                                              -----------        -----------        -----------
    Total                                                                        657,773            608,098            543,817

DEDUCT:
  Cash dividends declared:
    Cumulative preferred stock - at prescribed
      rate of each series (See Note 6)                                             3,119              2,760              3,182
    Common stock                                                                 213,417             96,712             84,286
    Capital stock expense                                                            490                -                  -
                                                                           --------------      -------------      -------------
    Total                                                                        217,026             99,472             87,468
                                                                           --------------      -------------      -------------

RETAINED EARNINGS AT END OF YEAR                                           $     440,747       $    508,626       $    456,349
                                                                           ==============      =============      =============

See notes to financial statements.
</TABLE>

                       INDIANAPOLIS POWER & LIGHT COMPANY
                       ==================================

                          Notes to Financial Statements
              For the Years Ended December 31, 1998, 1997 and 1996
--------------------------------------------------------------------------------

 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

       All the outstanding  common stock of  Indianapolis  Power & Light Company
(IPL) is owned by IPALCO  Enterprises,  Inc. At December 31, 1998 and 1997,  IPL
had a receivable, which is due on demand, for advances made to IPALCO.

     Nature of Operations:  IPL is engaged principally in providing electric and
steam service to the Indianapolis metropolitan area.

       Concentrations  of Risk:  Substantially all of IPL's business activity is
with customers located within the Indianapolis area. In addition,  approximately
67% of IPL's  employees  are covered by  collective  bargaining  agreements.  In
December 1999, the contract of approximately  75% of those employees  covered by
collective bargaining agreements will expire.

       Regulation:  The  retail  utility  operations  of IPL are  subject to the
jurisdiction  of  the  Indiana  Utility  Regulatory   Commission  (IURC).  IPL's
wholesale  power  transactions  are subject to the  jurisdiction  of the Federal
Energy  Regulatory  Commission.  These agencies  regulate IPL's utility business
operations,  tariffs,  accounting,  depreciation allowances,  services, security
issues  and the  sale and  acquisition  of  utility  properties.  The  financial
statements  of IPL  are  based  on  generally  accepted  accounting  principles,
including the provisions of Statement of Financial  Accounting Standards No. 71,
"Accounting  for the  Effects  of  Certain  Types of  Regulation,"  which  gives
recognition to the ratemaking and accounting practices of these agencies.

       Revenues:  Effective  January 1, 1997, IPL adopted the unbilled  revenues
method of  accounting  for electric and steam  delivered  during the period (see
Note 3).  Revenues are accrued for services  provided but unbilled at the end of
each month.

       A fuel adjustment  charge  provision,  which is established  after public
hearing,  is  applicable  to most of the rate  schedules  of IPL and permits the
billing or crediting of estimated fuel costs above or below the levels  included
in such rate  schedules.  Actual fuel costs in excess of or under estimated fuel
costs billed are deferred or accrued, respectively.

       Authorized  Annual  Operating  Income:   Indiana  law  requires  electric
utilities  under the  jurisdiction  of the IURC to meet  operating  expense  and
income  requirements  as a condition  for approval of requested  changes in fuel
adjustment charges.  Additionally,  customer refunds may result if the utilities
rolling 12-month  operating income,  determined at quarterly  measurement dates,
exceeds the utilities'  authorized  annual operating income and cannot be offset
by  applicable   cumulative  net  operating  income  deficiencies.   In  such  a
circumstance,  the required customer refund for the quarterly measurement period
is calculated to be one-fourth of the excess annual  operating income grossed up
for federal and state taxes.

       Effective July 1, 1996, IPL's authorized annual  jurisdictional  electric
net operating income, for purposes of quarterly  operating income tests, is $163
million,  as established in an IURC order dated August 24, 1995. This level will
be maintained until changed by an IURC order.  During 1998, IPL's rolling annual
jurisdictional  electric  operating  income was less than the authorized  annual
operating  income at each of the quarterly  measurement  dates (January,  April,
July and October).  At October 31, 1998, IPL's most recent quarterly measurement
date, IPL had a cumulative net operating deficiency of $65.4 million, of which $
14.7 million  expires at varying  amounts during the period ending  September 1,
2000.  The  operating  deficiency  is  calculated  by summing the 20 most recent
quarterly measurement period annual results. As a consequence,  IPL could, for a
period of time, earn above $163 million of electric net operating income without
being required to make a customer refund.

       Through  the date of IPL's  next  general  electric  rate  order,  IPL is
required  to file  upward and  downward  adjustments  in fuel cost  credits  and
charges on a quarterly basis, based on changes in the cost of fuel, irrespective
of its level of earnings.

       Pursuant  to an order of the  IURC,  IPL's  authorized  annual  steam net
operating  income is $6.2  million,  plus any  cumulative  annual  underearnings
occurring during the five-year period  subsequent to the  implementation  of the
new rate  tariffs.  During 1998,  IPL's annual  jurisdictional  steam  operating
income was less than the authorized  annual  operating income at the January 31,
1998, measurement date.

       Allowance  For Funds Used During  Construction:  In  accordance  with the
prescribed uniform system of accounts,  IPL capitalizes an allowance for the net
cost of funds (interest on borrowed funds and a reasonable rate on equity funds)
used  for  construction  purposes  during  the  period  of  construction  with a
corresponding  credit to income. IPL capitalized  amounts using pretax composite
rates of 9.7%, 9.1% and 7.3% during 1998, 1997 and 1996, respectively.

       Utility Plant and Depreciation:  Utility plant is stated at original cost
as defined for regulatory  purposes.  The cost of additions to utility plant and
replacements of retirement units of property, as distinct from renewals of minor
items that are charged to maintenance,  are charged to plant accounts.  Units of
property  replaced or abandoned  in the ordinary  course of business are retired
from the plant accounts at cost; such amounts plus removal costs,  less salvage,
are  charged  to  accumulated  depreciation.  Depreciation  is  computed  by the
straight-line method based on functional rates approved by the IURC and averaged
3.5% during 1998 and 1997 and 3.4% during  1996.  Depreciation  expense for 1997
and 1996 include  adjustments to spare parts  inventory of $0.6 million and $4.5
million, respectively,  resulting from recognition of the impairment in value of
excess spare parts.

     Sale of  Accounts  Receivable:  IPL has  sold,  on a  revolving  basis,  an
undivided percentage interest in $50 million of its accounts receivable.

       Regulatory  Assets:  Regulatory assets represent deferred costs that have
been,  or that are expected to be,  included as allowable  costs for  ratemaking
purposes.  IPL has  recorded  regulatory  assets  relating  to certain  costs as
authorized by the IURC.  Specific  regulatory assets are disclosed in Note 5. As
of December 31, 1998, all nontax-related regulatory assets have been included as
allowable  costs in orders of the IURC (see  Note 10).  IPL is  amortizing  such
regulatory   assets  to  expense  over  periods   authorized  by  these  orders.
Tax-related  regulatory  assets  represent  the  net  income  tax  costs  to  be
considered in future regulatory proceedings generally as the tax related amounts
are paid .

       In accordance  with  regulatory  treatment,  IPL deferred as a regulatory
asset  certain post  in-service  date  carrying  charges and certain other costs
related  to its  investment  in  Petersburg  Unit 4. As  authorized  in the 1995
Electric Rate  Settlement  (see Note 10), IPL,  effective  September 1, 1995, is
amortizing this deferral to expense over a life that generally  approximates the
useful  life  of the  related  facility.  Also  in  accordance  with  regulatory
treatment,  IPL defers as regulatory assets  non-sinking fund debt and preferred
stock redemption  premiums and expenses,  and amortizes such costs over the life
of the original debt, or, in the case of preferred  stock  redemption  premiums,
over 20 years.

       Derivatives:  IPL has only limited involvement with derivative  financial
instruments  and does not use them for trading  purposes.  IPL  entered  into an
interest  rate swap  agreement as a means of managing the interest rate exposure
on one of its debt  facilities.  This  interest rate swap is accounted for under
the accrual method.  Under this method,  the differential to be paid or received
on the interest rate swap agreement is recognized over the life of the agreement
in interest expense.  Changes in market value of the interest swap accounted for
under  the  accrual  method  are not  reflected  in the  accompanying  financial
statements.

       Income Taxes:  Deferred taxes are provided for all significant  temporary
differences  between  book and taxable  income.  The effects of income taxes are
measured based on enacted laws and rates.  Such  differences  include the use of
accelerated depreciation methods for tax purposes, the use of different book and
tax  depreciable  lives,  rates and  in-service  dates and the  accelerated  tax
amortization  of  pollution   control   facilities.   Deferred  tax  assets  and
liabilities are recognized for the expected future tax  consequences of existing
differences  between the financial  reporting and tax reporting  basis of assets
and liabilities.

       IPL has recorded as regulatory  assets and net deferred tax  liabilities,
income taxes payable and includable in allowable  costs for ratemaking  purposes
in future years.

       Investment  tax credits  that reduced  federal  income taxes in the years
they arose have been deferred and are being  amortized to income over the useful
lives of the properties in accordance with regulatory treatment.

       IPL participates in a tax sharing agreement with the consolidated  IPALCO
group  which  allocates  taxes  as if  each  company  had  filed a  return  on a
stand-alone basis.

       Cash and Cash  Equivalents:  IPL considers all highly liquid  investments
purchased with original maturities of 90 days or less to be cash equivalents.

     Employee Benefit Plans: Substantially all employees of IPL are covered by a
defined benefit pension plan, a defined  contribution  plan and a group benefits
plan.

       The defined benefit pension plan is noncontributory and is funded through
two trusts.  Additionally,  a select  group of  management  employees of IPL are
covered under a funded  supplemental  retirement plan.  Collectively,  these two
plans are  referred  to as the  Plans.  Benefits  are  based on each  individual
employee's  years of  service  and  compensation.  IPL's  funding  policy  is to
contribute  annually not less than the minimum  required by applicable  law, nor
more than the  maximum  amount  that can be  deducted  for  federal  income  tax
purposes.

       The  defined  contribution  plan is  sponsored  by IPL as the  Employees'
Thrift Plan of Indianapolis Power & Light Company (Thrift Plan). Employees elect
to make  contributions  to the Thrift Plan based on a percentage of their annual
base compensation. Each employee's contribution is matched in amounts up to, but
not  exceeding,   4%  of  the  employee's   annual  base   compensation.   IPL's
contributions  to the Thrift Plan, net of amounts  allocated to related  parties
were  $3.4  million,  $3.3  million  and $3.4  million  in 1998,  1997 and 1996,
respectively.

       The  group  benefits  plan  is  sponsored  by IPL  and  provides  certain
health-care  and life insurance  benefits to active  employees and employees who
retire from active  service on or after  attaining  age 55 and have  rendered at
least 10 years of service.  The postretirement  benefit obligations of this plan
are funded through a Voluntary  Employee  Beneficiary  Association (VEBA) Trust.
IPL's policy is to fund the annual actuarially determined postretirement benefit
cost.

       New  Accounting  Pronouncements:   In  1998,  IPL  adopted  Statement  of
Financial Accounting Standards No. 130 (SFAS 130), "Comprehensive Income," which
requires  that  changes  in the  amounts  of certain  items,  including  foreign
currency  translation  adjustments and gains and losses on certain securities be
shown in the  financial  statements.  The  adoption of SFAS 130 had no impact on
IPL's financial position or results of operations.

       In  1998,  IPL  adopted  SFAS  131,  "Disclosures  about  Segments  of an
Enterprise and Related  Information."  In accordance with the terms of SFAS 131,
IPL has two  business  segments  (electric  and "all  other").  Adoption of this
standard had no impact on IPL's  financial  position,  results of  operations or
cash  flows.  Steam  operations  of IPL are in the "all other"  segment.  Pretax
operating income for the electric segment was $255.4 million, $233.0 million and
$224.8  million and for the "all other"  segment was $4.3 million,  $7.7 million
and $6.7 million in 1998, 1997 and 1996,  respectively.  Steam operations of IPL
are included in the caption UTILITY OPERATING INCOME.

       SFAS 133, "Accounting for Derivative Instruments and Hedging Activities,"
was issued in June 1998 and is effective  for all fiscal  quarters of all fiscal
years beginning after June 15, 1999. This statement  establishes  accounting and
reporting standards for derivative  instruments and for hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities   in  the  statement  of  financial   condition  and  measure  those
instruments  at fair value.  If certain  conditions are met, a derivative may be
specifically  designated as a fair value hedge, a cash flow hedge, or a hedge of
a foreign currency  exposure.  The accounting for changes in the fair value of a
derivative  (that is,  gains and  losses)  depends  of the  intended  use of the
derivative and the resulting designation.  Management has not yet quantified the
effect of the new standard on the financial statements.

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

     Reclassifications:  Certain amounts from prior years' financial  statements
have been reclassified to conform to the current year presentation.

2.  UTILITY PLANT IN SERVICE

       The original cost of utility plant in service at December 31, segregated
by functional classifications, follows:
                                                   1998               1997
-----------------------------------------------------------------------------
                                                       (In Thousands)

Production.................................     $1,716,786         $1,687,190
Transmission...............................        238,453            237,547
Distribution...............................        761,296            743,251
General  ..................................        143,364            132,458
                                               -----------       ------------
         Total utility plant in service....     $2,859,899         $2,800,446
                                                ==========         ==========

       Included  above is steam  plant in service of $107.4  million  and $103.2
million for 1998 and 1997, respectively.  Substantially all of IPL's property is
subject to the lien of the indentures securing IPL's First Mortgage Bonds.

       In 1997, IPL retired and sold its C.C. Perry W plant site, including land
and  improvements,  to the state of Indiana White River State Park Commission at
an approximate  pretax net gain of $5.7 million included under the caption OTHER
INCOME AND (DEDUCTIONS), "Other - net".

3. CUMULATIVE EFFECT OF ACCOUNTING CHANGE

       In December  1997, IPL changed its method of accounting  (retroactive  to
January 1,  1997) to record  revenues  of all  electricity  and steam  delivered
during the period.  Prior to 1997, IPL  recognized  revenues on a cycle basis as
meters were read. The new accounting method more accurately  reports revenues in
the period in which  electricity and steam is used by customers.  The cumulative
effect of the change in  accounting at January 1, 1997 was $18.3 million (net of
income taxes of $11.2  million and other taxes of $.4  million).  The change had
the effect of decreasing 1997 income before  cumulative effect of the accounting
change by $1.9 million (net of taxes).

     If this method had been applied  retroactively,  net income would have been
$120.4 million for the year ended December 31, 1996.

4.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

       The estimated fair value of financial  instruments has been determined by
IPL using available market information and appropriate valuation  methodologies.
However,  considerable  judgment  is  required  in  interpreting  market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not  necessarily  indicative  of the  amounts  that IPL could  realize  in a
current  market  exchange.  The  use  of  different  market  assumptions  and/or
estimation methodologies may have an effect on the estimated fair value amounts.

       Cash  and  Cash  Equivalents  and  Notes  Payable:  The  carrying  amount
approximates fair value due to the short maturity of these instruments.

       Long-Term   Debt,   Including   Current   Maturities   and  Sinking  Fund
Requirements: Interest rates that are currently available to IPL for issuance of
debt with  similar  terms and  remaining  maturities  are used to estimate  fair
value.  The  variable  rate debt has been  included  at the face amount for both
carrying  amount  and fair  value.  The fair  value of the  interest  rate  swap
agreement  has been  estimated  at $(5.7)  million  and  $(3.3)  million,  which
represents  the amount  that IPL would  have to pay to enter into an  equivalent
agreement  at December  31, 1998,  and 1997,  respectively,  with a swap counter
party.  The fair value of the debt  outstanding has been determined on the basis
of the specific securities issued and outstanding.  Accordingly,  the purpose of
this  disclosure  is not to  approximate  the value on the basis of how the debt
might be  refinanced.  At December 31, 1998,  and 1997,  the carrying  amount of
IPL's   long-term   debt,   including   current   maturities  and  sinking  fund
requirements, and the approximate fair value are as follows:

                                                      1998              1997
      ------------------------------------------------------------------------
                                                          (In Thousands)

        Carrying amount                             $627,893          $627,840
        Approximate fair value                       667,035           651,620


5.  REGULATORY ASSETS

       The amounts of regulatory assets at December 31 are as follows:
<TABLE>
<CAPTION>
                                                                     1998               1997
----------------------------------------------------------------------------------------------
                                                                        (In Thousands)

<S>                                                               <C>                 <C>        
Related to deferred taxes (Note 1)                                $  46,823           $  44,099
Postretirement benefit costs in excess of cash payments
   and amounts capitalized (Note 11)                                 10,720              17,152
Unamortized reacquisition premium on debt (Note 1)                   22,301              23,751
Unamortized Petersburg Unit 4 carrying charges
     and certain other costs (Note 1)                                29,174              30,228
Demand side management costs (Note 10)                                7,783              10,308
Other                                                                     -               1,246
                                                                  ---------           ---------
      Total regulatory assets                                     $ 116,801           $ 126,784
                                                                  =========           =========
</TABLE>

6.  CAPITAL STOCK

       Common Stock:  There were no changes in IPL common stock during 1998,
1997 and 1996.

       Restrictions on the payment of cash dividends or other  distributions  on
common stock and on the purchase or  redemption  of such shares are contained in
the indentures  securing IPL's First Mortgage  Bonds.  In addition,  pursuant to
IPL's  Articles of  Incorporation,  no  dividends  may be paid or accrued and no
other  distribution  may be made on the Common  Stock  unless  dividends  on all
outstanding  shares of its  preferred  stock have been paid or declared  and set
apart for payment.  All of the retained earnings at December 31, 1998, were free
of such restrictions.

       Cumulative  Preferred Stock of Subsidiary:  Preferred stock  shareholders
are entitled to two votes per share for IPL matters,  and if four full quarterly
dividends are in default on all shares of the preferred stock then  outstanding,
they are entitled to elect the smallest  number of IPL Directors to constitute a
majority.  Preferred stock is redeemable  solely at the option of IPL and can be
redeemed in whole or in part at any time at specific call prices.

       During  1997,  IPALCO  purchased  252,675  shares of IPL's $100 par value
Cumulative Preferred Stock pursuant to the terms of a tender offer. All tendered
shares subsequently were purchased from IPALCO by IPL at cost and canceled. Also
during 1997, IPL  authorized  the redemption of an additional  174,957 shares of
its $100 par value Cumulative Preferred Stock.

       On January  13,  1998,  IPL issued the 5.65%  Preferred  Series  which is
redeemable at par value, subject to certain  restrictions,  in whole or in part,
at any time on or after January 1, 2008, at the option of IPL.

At December 31, preferred stock consisted of the following:


                                       December 31, 1998
                                       -----------------         December 31
                                       Shares      Call          -----------
                                     Outstanding   Price        1998      1997
                                     -----------  -------      ------    ------
                                                                (In Thousands)
Cumulative $100 Par Value,
     authorized 2,000,000 shares


4% Series.............................  47,611   $118.00       $4,761     $4,761
4.2% Series...........................  19,331    103.00        1,933      1,933
4.6% Series...........................   2,481    103.00          248        248
4.8% Series...........................  21,930    101.00        2,193      2,193
5.65% Series.......................... 500,000         -       50,000         -
                                       -------                -------     ------

Total cumulative preferred stock       591,353                $59,135     $9,135
                                       =======                =======     ======


       During 1998, 1997 and 1996,  preferred stock dividends were $3.1 million,
$2.8 million and $3.2 million, respectively.

7.  LONG-TERM DEBT

       Long-term debt consists of the following:    
                                                           December 31,
                                                          ------------
                                                        1998           1997
                                                        ----           ----
           Series                  Due                     (In Thousands)
           ------                  ---                     
     First Mortgage Bonds:
         6.05%             February 2004..........   $ 80,000        $ 80,000
         8%                October 2006...........     58,800          58,800
         7 3/8%            August 2007............     80,000          80,000
         6.10% *           January 2016...........     41,850          41,850
         5.40% *           August 2017............     24,650          24,650
         7.45%             August 2019............     23,500          23,500
         5.50% *           October 2023...........     30,000          30,000
         7.05%             February 2024..........    100,000         100,000
         6 5/8% *          December 2024..........     40,000          40,000
     Unamortized discount - net...................       (907)           (960)
                                                     --------        --------
         Total first mortgage bonds...............    477,893         477,840

     IPL Variable Series Notes *
         1991              August 2021............     40,000          40,000
         1994A             December 2024..........     20,000          20,000
         1995B             January 2023...........     40,000          40,000
         1995C             December 2029..........     30,000          30,000
         1996              November 2029..........     20,000          20,000
                                                     --------        --------
         Total long-term debt ....................   $627,893        $627,840
                                                     ========        ========

* Notes are issued to the city of Petersburg, Indiana, by IPL to secure the loan
of proceeds from various tax-exempt instruments issued by the city.



       The Series 1991 note  provides for an interest  rate that varies with the
tax-exempt commercial paper rate. The 1994A, 1995B, 1995C and 1996 notes provide
for an interest rate which varies with the tax-exempt  weekly rate.  IPL, at its
option,  can change the interest  rate mode for these notes to be based on other
short-term  rates.  Additionally,  the variable rate notes can be converted into
long-term  fixed  interest  rate  instruments  by the  issuance  of an IPL First
Mortgage  Bond. The notes are  classified as long-term  liabilities  because IPL
maintains  long-term credit facilities  supporting these agreements,  which were
unused at December 31, 1998.

       The year-end interest rates for the variable rate notes are as follows:

                                      Interest Rate at
                                         December 31
                                    1998              1997
 ----------------------------------------------------------

 Series 1991                        3.48%             3.78%
 Series 1994A                       3.56%             3.75%
 Series 1995B                       5.21%             5.21%
 Series 1995C                       3.54%             3.75%
 Series 1996                        3.54%             3.75%

       In  conjunction  with the issuance of the 1995B note, IPL entered into an
interest  rate swap  agreement.  Pursuant  to the swap  agreement,  IPL will pay
interest  at a fixed rate of 5.21% to a swap  counter  party and will  receive a
variable  rate of interest in return,  which is identical  to the variable  rate
payment made on the 1995B note. The result is to  effectively  establish a fixed
rate of interest on the 1995B note of 5.21%. The interest rate swap agreement is
accounted for on a settlement  basis. IPL is exposed to credit loss in the event
of  nonperformance  by the counterparty for the net interest  differential  when
floating rates exceed the fixed maximum rate.  However,  IPL does not anticipate
nonperformance by the counterparty.

       There are no maturities or sinking fund  requirements  on long-term  debt
for the five years subsequent to December 31, 1998.

8.  LINES OF CREDIT

       IPL has  committed  lines of credit with banks of $75 million at December
31, 1998,  to provide  loans for interim  financing  that require the payment of
commitment  fees.  These lines of credit,  based on separate formal and informal
agreements, have expiration dates ranging from February 1, 1999, to December 31,
1999. No lines of credit were required to support  commercial  paper at December
31, 1998. IPL has a Liquidity  facility in the amount of $150 million to support
certain floating-rate tax-exempt facilities (see Note 7).

     The weighted  average  interest rate on notes payable and commercial  paper
outstanding was 6.13% and 6.69% at December 31, 1998, and 1997, respectively.
<PAGE>
9.  INCOME TAXES

       Federal and state income taxes charged to income are as follows:
<TABLE>
<CAPTION>

                                                                         1998           1997           1996
-----------------------------------------------------------------------------------------------------------
Operating Expenses:                                                                (In Thousands)
  Current income taxes:
<S>                                                                      <C>            <C>            <C>    
    Federal.....................................................         $72,094        $64,553        $56,676
    State.......................................................          10,585          9,474          8,378
                                                                        --------       --------       --------
      Total current taxes.......................................          82,679         74,027         65,054
                                                                        --------       --------       --------

    Deferred federal income taxes...............................            (414)         1,444          6,507
    Deferred state income taxes.................................             715            803           (398)
                                                                        --------       --------       --------
      Total deferred  income taxes..............................             301          2,247          6,109
                                                                        --------       --------       --------

  Net amortization of investment credit.........................          (2,790)        (2,939)        (2,915)
                                                                        --------       --------       --------
      Total charge to operating expenses........................          80,190         73,335         68,248
  Net debit/ (credit) to other income and deductions............           4,196          1,105           (982)
                                                                        --------       --------       --------
                                                                          84,386         74,440         67,266
  Cumulative effect of change in accounting principle...........               -         11,209              -
                                                                        --------       --------       --------
      Total federal and state income tax provisions.............         $84,386        $85,649        $67,266
                                                                        ========       ========       ========
</TABLE>

       The provision for federal  income taxes  (including  net  investment  tax
credit  adjustments)  is less than the amount computed by applying the statutory
tax  rate to  pretax  income.  The  reasons  for  the  difference,  stated  as a
percentage of pretax income, are as follows:

                                                 1998         1997       1996
-------------------------------------------------------------------------------
Federal statutory tax rate....................   35.0%        35.0%        35.0%
Effect of state income taxes..................   (1.8)        (1.7)        (1.5)
Amortization of investment tax credits........   (1.2)        (1.2)        (1.5)
Other - net...................................   (1.0)        (0.9)        (0.7)
                                                -----        -----        -----
  Effective tax rate..........................   31.0%        31.2%        31.3%
                                                 ====         ====         ====

       The  significant  items  comprising  IPL's  net  deferred  tax  liability
recognized  in the balance  sheets as of December  31,  1998,  and 1997,  are as
follows:

                                                      1998                1997
------------------------------------------------------------------------------
                                                            (In Thousands)
Deferred tax liabilities:
     Relating to utility property.................    $412,922         $405,164
     Other........................................      15,113           15,546
                                                      --------         --------
         Total deferred tax liabilities...........     428,035          420,710
                                                      --------         --------
Deferred tax assets:
     Relating to utility property.................      44,444           40,731
     Investment tax credit........................      25,547           27,251
     Employee Benefit Plans.......................      24,259           22,019
     Other........................................       5,260            5,143
                                                      --------         --------
         Total deferred tax assets................      99,510           95,144
                                                      --------         --------
Net deferred tax liability........................     328,525          325,566
     Current deferred tax liability...............         108              180
                                                      --------         --------
Deferred income taxes - net.......................    $328,417         $325,386
                                                      ========         ========

10.  RATE MATTERS

       Electric Rate Settlement  Agreement:  On August 24, 1995, the IURC issued
an order  approving  without  amendment a Stipulation  and Settlement  Agreement
(Settlement  Agreement)  resolving  all  issues in IPL's then  pending  electric
general  rate  proceeding.  As provided  for by the  Settlement  Agreement,  IPL
increased its basic rates and charges for retail  electric  service in two steps
designed  to provide  increased  annual  revenues of $35 million and $25 million
during 1995 and 1996,  respectively.  Effective with the  implementation  of new
tariffs  in  Step  1,  IPL was  authorized  to  begin  amortization  of  certain
regulatory  assets.   Additionally,   IPL's  existing  depreciation  rates  were
reapproved.

       Under terms of the Settlement Agreement, IPL agreed not to file a request
to build any large,  base-load  generating capacity before January 1, 2000. This
provision  can be waived in extreme  circumstances.  In  addition,  the  parties
agreed to, and subsequently  resolved,  pending litigation involving IPL's Clean
Air Act compliance plan.

       Steam Rate Order: By an order dated January 13, 1993, the IURC authorized
IPL to increase its steam system rates and charges over a six-year  period.  The
final increase  associated  with this order took effect on January 13, 1998, and
authorized  IPL to  increase  rates by an  estimated  cumulative  amount of $9.9
million in additional annual operating revenues.

       Demand Side Management Program: In compliance with certain orders, IPL is
deferring  certain  approved DSM costs and carrying  charges.  In the Settlement
Agreement  approved  by the IURC on  August  24,  1995,  IPL was  authorized  to
amortize  $5.3 million of such costs  deferred  prior to February  1995,  over a
four-year period beginning  September 1, 1995. On December 19, 1996, IPL filed a
petition with the IURC requesting  review,  modification  and/or termination of,
and related  regulatory  treatment for, DSM programs approved in the order dated
September  8, 1993.  On July 30, 1997,  IPL  received an IURC order  approving a
settlement  agreement  authorizing  IPL  to  recognize  in  rates  the  existing
regulatory  asset  (consisting  of DSM costs  deferred  after January 31, 1995),
along with carrying charges, and also to approve changes to IPL's DSM programs.

       Elect  Plan:  During  1998,  the IURC  approved  a plan that  allows  IPL
customers  with less than 2,000  kilowatts of demand,  an  opportunity to choose
optional  service or payment plans.  This includes a green power option, a fixed
rate per unit of  consumption  option and a fixed  bill  option.  Customers  not
choosing  one of these  options  continue  to  receive  electric  service  under
existing tariffs.
<PAGE>
11.  PENSIONS AND OTHER POSTRETIREMENT BENEFITS
<TABLE>
<CAPTION>

                                                             Pension Benefits                     Other Benefits
                                                         ------------------------            -----------------------
(In Thousands)                                             1998           1997                 1998           1997
                                                           ----           ----                 ----           ----
<S>                                                      <C>             <C>                 <C>            <C>    
Change in Benefit Obligation
Benefit obligation at beginning year                     $254,540        $229,936            $135,982       $146,049
Service cost                                                5,535           5,708               3,503          3,942
Interest cost                                              18,021          16,873               9,932         11,088
Actuarial (gain) loss                                      12,740           7,436               5,155        (20,811)
Amendments                                                 (1,408)          6,083                   -              -
Benefits paid                                             (12,790)        (11,496)             (5,677)        (4,286)
                                                         --------        ---------           --------       --------
Benefit obligation at end of year                         276,638         254,540             148,895        135,982
                                                         --------        ---------           --------       --------

Change in plan assets
Fair value of plan assets
   at beginning of year                                   262,126         235,250              68,006         49,274
Actual return on plan assets                               37,179          37,813              11,232           (314)
Employer contribution                                       4,254             559              19,036         23,332
Benefits paid                                             (12,789)        (11,496)             (5,677)        (4,286)
                                                         ---------       ---------           ---------      --------
Fair value of plan assets at end of year                  290,770         262,126              92,597         68,006
                                                         ---------       ---------           ---------      --------

Funded status                                              14,132           7,586             (56,298)       (67,976)

Unrecognized net gain                                     (55,065)        (47,250)            (39,776)       (40,568)
Unrecognized prior service cost                            15,871          13,056                   -              -
Unrecognized net transition (asset) obligation             (9,755)        (11,169)             85,306         91,400
Adjustment to recognize minimum liability                  (5,136)         (2,044)                  -              -
                                                         ---------       ---------           ---------      ---------
Accrued benefit cost                                     $(39,953)       $(39,821)           $(10,768)      $(17,144)
                                                         =========       =========           =========      =========

Weighted-average assumptions as of
   December 31
Discount rate                                               7.00%           7.25%               7.00%          7.25%
Expected return on plan assets                              9.00%           8.00%               8.00%          8.00%
Rate of compensation increase                               5.10%           5.10%               5.10%          5.10%

</TABLE>

        For  measurement  purposes,  a 7.4%  annual  rate of increase in the per
capita cost of covered  health care  benefits was assumed for 1999.  The year in
which the  ultimate  health  care cost  trend rate of 4.5% will be  achieved  is
assumed to be 2003.

<TABLE>
<CAPTION>

                                                          Pension Benefits                        Other Benefits
                                                  ---------------------------------      ---------------------------------
(In Thousands)                                      1998         1997         1996          1998        1997        1996
                                                    ----         ----         ----          ----        ----        ----
<S>                                               <C>          <C>         <C>           <C>         <C>          <C>
Components of net periodic benefit cost
Service cost                                      $ 10,617     $  6,584    $  6,482      $  3,503    $  3,942     $  3,891
Interest cost                                       18,021       16,873      16,335         9,932      11,088       10,450
Expected return on plan assets                     (20,426)     (18,344)    (17,206)       (5,223)     (3,734)      (2,177)
Amortization of transition (asset) obligation       (1,414)      (1,414)     (1,414)        6,093       6,093        6,093
Amortization of prior service cost                   1,124        1,159       1,641             -           -            -
Recognized actuarial gain                           (1,545)        (910)       (570)       (1,646)       (548)        (403)
                                                  --------     --------    --------      --------    --------     --------
Periodic benefit cost                                6,377        3,948       5,268        12,659      16,841       17,854
  Less: amounts to other parties                        65           60         121             -           -            -
                                                  --------     --------    --------      --------    --------     -------- 
Net periodic benefit cost                            6,312        3,888       5,147        12,659      16,841       17,854
  Less: amounts capitalized                            339          621       1,061         1,924       2,930        3,511
                                                  --------     --------    --------      --------    --------     -------- 
Amount charged to expense                         $  5,973     $  3,267    $  4,086      $ 10,735    $ 13,911     $ 14,343
                                                  ========     ========    ========      ========    ========     ========
</TABLE>

       Assumed  health  care cost trend rates have a  significant  effect on the
amounts  reported for the health care plans.  A one  percentage-point  change in
assumed health care cost trend rates would have the following effects:

                                               One-Percentage-  One Percentage-
(In Thousands)                                  Point Increase   Point Decrease
                                                --------------   --------------
Effect on total of service and interest cost
   components                                       $  1,762       $  (1,762)
Effect on postretirement benefit obligation           16,435         (16,435)

12.  COMMITMENTS AND CONTINGENCIES

       In 1999,  IPL  anticipates  the cost of its  construction  program  to be
approximately $96.2 million.

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

       With respect to environmental  issues,  IPL has ongoing  discussions with
various  regulatory  authorities  and  continues  to  believe  that  IPL  is  in
compliance with its various permits.

13.  GAIN ON TERMINATION OF AGREEMENT

       During  September  1998,  a pretax gain of $12.5  million  ($7.8  million
after-tax)  resulted from the  liquidation  and  termination  of an agreement to
purchase up to 150 megawatts of power during the summer months  through the year
2000.  IPL plans to replace  this supply  resource  and is  considering  several
alternatives.
<PAGE>
14.  QUARTERLY RESULTS (UNAUDITED)

       Operating  results for the years ended  December 31, 1998,  and 1997,  by
quarter, are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                             1998
                                                ----------------------------------------------------------------
                                                March 31            June 30      September 30        December 31
                                                --------            -------      ------------        -----------

<S>                                              <C>              <C>               <C>              <C>     
Operating revenues.........................      $ 190,321        $ 206,706         $ 222,028        $ 202,201
Operating income...........................      $  40,142        $  49,198         $  51,665        $  38,506
Net income.................................      $  30,205        $  39,815         $  50,147        $  28,980

                                                                             1997
                                                ----------------------------------------------------------------
                                                March 31            June 30      September 30        December 31
                                                --------            -------      ------------        -----------

Operating revenues.........................      $ 195,299        $ 183,777         $ 203,872        $ 193,479
Operating income...........................      $  44,534        $  39,092         $  48,820        $  34,869
Income   before cumulative effect
   of accounting change....................      $  34,766        $  30,130         $  39,507        $  28,999
Cumulative effect of
   accounting change.......................      $  18,347                -                 -                -
Net income.................................      $  53,113        $  30,130         $  39,507        $  28,999
</TABLE>


       The 1997 results have been restated for the change in  accounting  method
to the unbilled  revenues method.  The change in method was made on December 31,
1997, but each quarter's results have been restated to reflect the results as if
the  change had  occurred  on January 1,  1997,  in  accordance  with  generally
accepted  accounting  principles  (see Note 3 regarding the change in accounting
method).

       The quarterly figures reflect seasonal and  weather-related  fluctuations
which are normal to IPL's operations (see Note 10 regarding rate increases).


Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        ---------------------------------------------------------------
            FINANCIAL DISCLOSURE
            --------------------

              None.


                                    PART III
                                    --------

Item 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
              --------------------------------------------------

                  Information  relating to the directors of the registrant,  set
                  forth in the  Information  Statement of  Indianapolis  Power &
                  Light   Company   dated  March  15,  1999  (the   registrant's
                  Information  Statement),  under  "Proposal  1-Election  of  15
                  Directors" at pages 3-5 is incorporated herein  by  reference.
                  Information relating to the registrant's executive officers is
                  set  forth  at page I-7 of this  Form  10-K  under  "Executive
                  Officers of the Registrant at February 23, 1999."

Item 11.      EXECUTIVE COMPENSATION
              ----------------------

                  Information relating to executive  compensation,  set forth in
                  the registrant's  Information Statement under "Compensation of
                  Executive  Officers" at page 13,"Compensation of Directors" at
                  pages 7-8,"Compensation  Committee   Interlocks  and  Insider
                  Participation" at page 7, "Pensions Plans" at pages 18-19, and
                  "Employment Contracts and Termination of Employment and Change
                  in Control  Arrangements" at pages 19-20,is incorporated
                  herein by reference.

Item 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
              --------------------------------------------------------------

                  Information  relating to ownership of the registrant's  common
                  stock by persons known by the  registrant to be the beneficial
                  owners  of more  than 5% of the  outstanding  shares of common
                  stock  and  by  management,  set  forth  in  the  registrant's
                  Information  Statement under "Voting Securities and Beneficial
                  Owners" at page 2 is incorporated herein by reference.

Item 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
              ----------------------------------------------

                  Information  relating  to certain  relationships  and  related
                  transactions,   set  forth  in  the  registrant's  Information
                  Statement under "Certain Business  Relationships" at page 8,
                  is incorporated herein by reference.


                                     PART IV
                                     -------

Item 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
              ---------------------------------------------------------------

                   (a)   The  Financial  Statements  under  this  Item 14 (a) 1
                      filed in this  Form  10-K are  those of Indianapolis
                      Power & Light Company.

                         1.  Financial Statements
                             --------------------

                                Included in Part II of this report:

                                   Independent Auditors' Report

                                   Statements of Income for the Years Ended
                                     December 31, 1998, 1997 and 1996

                                   Balance Sheets, December 31, 1998 and 1997

                                   Statements of Cash Flows for the Years
                                     Ended December 31, 1998, 1997 and 1996

                                   Statements of Retained Earnings for the Years
                                     Ended December 31, 1998, 1997 and 1996

                                   Notes to Financial Statements

                         2.  Exhibits
                             --------

                                   The Exhibit  Index  beginning on page IV-5 of
                            this Annual  Report on Form 10-K lists the  exhibits
                            that are filed as part of this report.

                         3.  Financial Statement Schedules
                             -----------------------------

                                    None

                   (b)   Reports on Form 8-K
                         -------------------

                            None
<PAGE>
<TABLE>
                      

                       INDIANAPOLIS POWER & LIGHT COMPANY          EXHIBIT 12.1

                       Ratio of Earnings to Fixed Charges

<CAPTION>

                                                                 YEARS ENDED DECEMBER 31,
                                                 ------------------------------------------------------
                                                     1998                1997                 1996
                                                 --------------      --------------       -------------
                                                                 (Thousands of Dollars)
Earnings, as defined:
<S>                                              <C>                 <C>                 <C>     
     Net income (1)                                   $149,147            $133,402            $122,588
     Income taxes                                       84,386              74,440              67,266
     Fixed charges, as below                            40,991              41,893              48,570
                                                 --------------      --------------       -------------

         Total earnings, as defined                   $274,524            $249,735            $238,424
                                                 ==============      ==============       =============

Fixed charges, as defined:
     Interest charges                                  $40,810             $41,721             $48,406
     Rental interest factor                                181                 172                 164
                                                 --------------      --------------       -------------

         Total fixed charges, as defined               $40,991             $41,893             $48,570
                                                 ==============      ==============       =============

Ratio of earnings to fixed charges                        6.70                5.96                4.91
                                                 ==============      ==============       =============

(1) 1997 Net income excludes after-tax effect of cumulative effect
of accounting change
</TABLE>



                                   SIGNATURES

       Pursuant  to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       INDIANAPOLIS POWER & LIGHT COMPANY



                                    By  /s/ John R. Hodowal
                                        ---------------------
                                        (John R. Hodowal, Chairman of the Board
                                         and Chief Executive Officer)

Date:  February 23, 1999
       -----------------

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.

           Signature                    Title                        Date
           ---------                    -----                        ----

  (i) Principal Executive Officer:


 /s/ John R. Hodowal           Chairman of the Board and      February 23, 1999
    -------------------------   Chief Executive Officer
   (John R. Hodowal)                           


 (ii) Principal Financial Officer:


 /s/ John R. Brehm                Senior Vice President -     February 23, 1999
    --------------------------             Finance
     (John R. Brehm)                              



(iii) Principal Accounting Officer:


/s/ Stephen J. Plunkett           Controller                  February 23, 1999
    ---------------------------
   (Stephen J. Plunkett)


 (iv) A  majority  of the  Board  of  Directors  of  Indianapolis  Power & Light
Company:


 /s/ Joseph D. Barnette, Jr.       Director             February 23, 1999
------------------------------
 (Joseph D. Barnette, Jr.)


 /s/ Robert A. Borns                 Director             February 23, 1999
------------------------------
 (Robert A. Borns)


 /s/ Mitchell E. Daniels, Jr.        Director             February 23, 1999
------------------------------
 (Mitchell E. Daniels, Jr.)


 /s/ Rexford C. Early                Director             February 23, 1999
------------------------------
 (Rexford C. Early)


 /s/ Otto N. Frenzel III             Director             February 23, 1999
------------------------------
 (Otto N. Frenzel III)


 /s/ Max L. Gibson                   Director             February 23, 1999
------------------------------
 (Max L. Gibson)


 /s/ John R. Hodowal                 Director             February 23, 1999
------------------------------
 (John R. Hodowal)


 /s/ Andre B. Lacy                   Director             February 23, 1999
-------------------------------
 (Andre B. Lacy)


 /s/ Michael S. Maurer               Director             February 23, 1999
-------------------------------
 (Michael S. Maurer)


 /s/ Andrew J. Paine, Jr.            Director             February 23, 1999
--------------------------------
 (Andrew J. Paine, Jr.)


 /s/ Sallie W. Rowland               Director             February 23, 1999
--------------------------------
 (Sallie W. Rowland)


 /s/ Thomas H. Sams                  Director             February 23, 1999
--------------------------------
 (Thomas H. Sams)

                                  EXHIBIT INDEX
                                  -------------

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

  Exhibit
    No.                    Description
    ---                    -----------

3.1*       Articles of  Incorporation  of Indianapolis  Power & Light Company,
           as amended.  (Exhibit 3.1 to the Form 10-K dated 12-31-97.)

3.2*       Bylaws of  Indianapolis  Power & Light  Company,  as  amended.
           (Exhibit  3.2 to the Form 10-Q  dated 3-31-98.)

4.1*       Mortgage and Deed of Trust, dated as of May 1, 1940,  between
           Indianapolis Power & Light Company and American  National Bank and
           Trust Company of Chicago,  Trustee,  as  supplemented  and modified
           by 30 Supplemental Indentures.

                  Exhibits D in File No. 2-4396;  B-1 in File No. 2-6210;  7-C
           File No. 2-7944;  7-D in File No.2-72944;  7-E in File No.  2-8106;
           7-F in File No. 2-8749;  7-G in File No. 2-8749;  4-Q in File No.
           2-10052;  2-I in File No. 2-12488;  2-J in File No. 2-13903; 2-K in 
           File No. 2-22553; 2-L in File No.2-24581;  2-M in File No.  2-26156;
           4-D in File No. 2-26884;  2-D in File No. 2-38332;  Exhibit A to
           Form 8-K for October 1970;  Exhibit 2-F in File No.  2-47162;  2-F
           in File No.  2-50260;  2-G in File No. 2-50260;  2-F in File 
           No. 2-53541;  2E in File No.  2-55154;  2E in File no. 2-60819;
           2F in File No.  2-60819;  2-G in File No.  2-60819;  Exhibit A to 
           Form 10-Q for the quarter  ended  9-30-78 File No. 1-3132;  13-4 in 
           File No.  2-73213;  Exhibit 4 in File No. 2-93092.  Twenty-eighth, 
           Twenty-ninth and Thirtieth Supplemental Indentures.  (Form 10-K dated
           for year ended 12-31-85.)

4.2*       Thirty-Second  Supplemental  Indenture  dated  as  of  June  1, 1989.
           (Form  10-K  for  year  ended 12-31-89.)
           

4.3*       Thirty-Third  Supplemental  Indenture  dated  as of  August 1,  1989.
           (Form  10-K  for  year  ended 12-31-89.)

4.4*       Thirty-Fourth  Supplemental  Indenture  dated as of October 15, 1991.
           (Form  10-K for year  ended 12-31-91.)

4.5*       Thirty-Fifth  Supplemental Indenture  dated  as of  August  1,  1992.
           (Form  10-K  for  year  ended 12-31-92.)

4.6*       Thirty-Sixth  Supplemental  Indenture  dated as of April  1,  1993.
           (Form  10-Q  for  quarter  ended 9-30-93.)

4.7*       Thirty-Seventh  Supplemental  Indenture  dated as of October 1, 1993.
           (Form 10-Q for  quarter  ended 9-30-93.)

4.8*       Thirty-Eighth  Supplemental  Indenture  dated as of  October 1, 1993.
           (Form 10-Q for  quarter  ended 9-30-93.)

4.9*       Thirty-Ninth Supplemental Indenture dated as of February 1, 1994.
           (Form 8-K, dated  1-25-94.)

4.10*      Fortieth Supplemental Indenture dated as of February 1, 1994. (Form
           8-K, dated 1-25-94.)

4.11*      Forty-First  Supplemental  Indenture  dated as of January 15,  1995.
           (Exhibit  4.12 to the Form 10-K dated 12-31-94.)

4.12*      Forty-Second  Supplemental  Indenture  dated as of October 1,  1995.
          (Exhibit  4.12 to the Form 10-K dated 12-31-95.)

10.1*      Coal  Supply  Agreement  between  Indianapolis  Power  & Light
           Company and  Peabody  Coal  Company as  amended.  Confidential
           portions  of  this   Contract  have  been  omitted  and  filed
           separately  with the SEC pursuant to 17 CFR  240.24b-2.  (Form
           10-Q for the quarter ended 3-31-93.)

10.2*      Coal Supply  Agreement,  between  Indianapolis  Power & Light Company
           and Black Beauty Coal Company,Inc. as  amended. Confidential portions
           of this  Contract  have been  omitted and filed  separately with the
           SEC pursuant to 17 CFR 240.24b-2.  (Form 10-K dated 12-31-87.)

10.3*      Coal Supply Agreement between  Indianapolis  Power & Light Company
           and Triad Mining of Indiana,  Inc. and Marine Coal Sales Company
           dated  December 7, 1994.  Confidential  portions of this Contract
           have been omitted and filed  separately  with the SEC pursuant to
           17 CFR  240.24b-2.  (Exhibit 10.2 to the Form 10-Q dated 3-31-95.)

10.4*      Interconnection  Agreement,  dated December 30, 1960,  between
           IPL and  Indiana &  Michigan  Electric  Company  (nka  Indiana
           Michigan Power Company) as modified  through  Modification  17
           and Addendum IV.(Exhibit 10.6 to the Form 10-K dated 12-31-95.)

10.5*      Interconnection  Agreement dated May 1, 1992, among Indianapolis
           Power & Light Company,  PSI Energy, Inc. and CINERGY  Services, 
           Inc. as modified  through  Amendment Number 6. (Exhibit 10.7 to the
           Form 10-K dated 12-31-97.)

10.6*      Facilities  Agreement  effective in 1968 among  Indianapolis  Power
           & Light  Company,  Public Service Company  of  Indiana,  Inc.  and
           Indiana  &  Michigan  Electric  Company.  (Exhibit  5-G in File No.
           2-28756.)

10.7*      Facilities  Agreement dated August 16, 1977,  between  Indianapolis
           Power & Light Company and Public Service  Company of Indiana,  Inc.,
           together  with  Amendment  Number 1 and 2.  (Exhibit 10.9 to the
           Form 10-K dated 12-31-95.)

10.8*      East Central Area  Reliability  Agreement dated August 1, 1967,
           between  Indianapolis  Power & Light Company and 23 other  electric
           utility  companies as  supplemented. (Exhibit 10.10 to the Form 10-K
           dated 12-31-96.)

10.9*      Interconnection  Agreement  dated December 2, 1969,  between 
           Indianapolis  Power & Light Company and Southern Indiana Gas and
           Electric Company as modified through  Modification  Number 9.
           (Exhibit 10.11 to the Form 10-K dated 12-31-95).

10.10*     Interconnection  Agreement  dated December 1, 1981,  between
           Indianapolis  Power & Light Company and Hoosier  Energy Rural
           Electric  Cooperative,  Inc.,  as modified  through  Modification 
           4. (Exhibit 10.12 to the Form 10-K dated 12-31-95).

10.11*     Interconnection  Agreement,  dated October 7, 1987,  between
           Indianapolis  Power & Light Company and Wabash Valley Power
           Association,  as modified  through  Modification  1. (Exhibit  10.13
           to the Form 10-K dated 12-31-95).

10.12*     Interchange  Agreement  between  Indianapolis  Power & Light Company
           and ENRON Power Marketing,  Inc. dated August 1, 1995. 
           (Exhibit 10.14 to the Form 10-K dated   12-31-95).

10.13*     Interconnection  Agreement between  Indianapolis Power & Light
           Company and Indiana Municipal Power Agency as modified through
           Modification   1.  (Exhibit  10.15  to  the  Form  10-K  dated
           12-31-95).

10.14*     Employment  Agreement between  Indianapolis Power & Light Company
           and Ramon L. Humke dated January 1,1997.  (Exhibit 10.1 to the Form
           10-Q dated 3-31-97.)  **

10.15*     Employment  Agreement by and among IPALCO Enterprises,  Inc., 
           Indianapolis Power & Light Company and John R. Hodowal dated
           July 29, 1986.  (Exhibit 10.32 to the Form 10-K dated 12-31-94.)  **

10.16      Directors' and Officers'  Liability  Insurance Policy No.  DO392B1A97
           effective June 1, 1998 to June 1, 1999.  **

10.17      Unfunded  Deferred  Compensation  Plan for IPALCO  Enterprises,  Inc.
           and Indianapolis  Power & Light Company Officers and Directors as
           amended and restated effective January 1, 1999.  **

10.18      Indianapolis  Power & Light Company  Supplemental  Retirement  Plan
           and Trust  Agreement For a Select Group of Management Employees (As
           Amended and Restated Effective January 1, 1999.)  **

10.19      1998 Management Incentive Program.  **

10.20*     Form of  Termination  Benefits  Agreement  together  with  schedule
           of parties to, and dates of, the Termination Benefits Agreements.
          (Exhibit 10.23 to the Form 10-K dated 12-31-97.)**

12.1       Ratio of Earnings to Fixed Charges.

21.1*      Subsidiaries of the Registrant. (Exhibit 21.1 to the Form 10-K dated
           12-31-96.)

27.1       Financial Data Schedule.