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

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**FORM 10-K**

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**ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the fiscal year ended December 31, 2004**

**Commission file number 1-8644**

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



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

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

**(317) 261-8261**(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: **None**
                                Securities registered pursuant to Section 12(g) of the Act: **None**

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for 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]

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

At March 21, 2005, 89,685,177 shares of IPALCO Enterprises, Inc. common stock
were outstanding. All of such shares were owned by The AES Corporation.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTIONS I(1)(a) AND (b) FOR FORM 10-K AND IS THEREFORE FILING THIS FORM
WITH A REDUCED DISCLOSURE FORMAT.







IPALCO ENTERPRISES, INC

Annual Report on Form 10-K

December 31, 2004



Table of Contents





|Item No. |                                                                                                | Page No.
|-------- | ---------------------------------------------------------------------------------------------- | --------
|Part I   |                                                                                               
|1.       | Business                                                                                       | 4       
|2.       | Properties                                                                                     | 9       
|3.       | Legal Proceedings                                                                              | 10      
|4.       | Submission of Matters to a Vote of Security Holders                                            | 10      
|         |                                                                                                |         
|Part II  |                                                                                               
|         |                                                                                                |         
|5.       | Market for Registrant's Common Equity and Related Stockholder Matters                          | 10      
|6.       | Selected Financial Data                                                                        | 11      
|7.       | Management's Discussion and Analysis of Financial Condition and Results of
Operations          | 12      
|7A.      | Quantitative and Qualitative Disclosure About Market Risk                                      | 33      
|8.       | Financial Statements and Supplementary Data                                                    | 36      
|9.       | Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure           | 86      
|9A.      | Controls and Procedures                                                                        | 86      
|9B.      | Other Information                                                                              | 86      
|         |                                                                                                |         
|Part III |                                                                                               
|         |                                                                                                |         
|10.      | Directors and Executive Officers of the Registrant                                             | 87      
|11.      | Executive Compensation                                                                         | 87      
|12.      | Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters | 87      
|13.      | Certain Relationships and Related Transactions                                                 | 87      
|14.      | Principal Accounting Fees and Services                                                         | 87      
|         |                                                                                                |         
|Part IV  |                                                                                               
|         |                                                                                                |         
|15.      | Exhibits, Financial Statements and Financial Statement Schedules                               | 88      
|         |                                                                                                |         
|         | Signatures                                                                                     | 92      

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report on Form 10-K includes ''forward-looking statements'' including, in particular,
the statements about our plans, strategies and prospects under the headings ''Item 1, Business'' and
''Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.''
Forward-looking statements express an expectation or belief and contain a projection, plan or
assumption with regard to, among other things, our future revenues, income or capital structure.
Such statements of future events or performance are not guarantees of future performance and involve
estimates, assumptions and uncertainties. The words ''could,'' ''may,'' ''predict,'' ''anticipate,''
''would,'' ''believe,'' ''estimate,'' ''expect,'' ''forecast,'' ''project,'' ''objective,'' and
similar expressions are intended to identify forward-looking statements.

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

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

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



PART I

Item 1. Business

Overview

IPALCO Enterprises, Inc. ("IPALCO") is a holding company incorporated under the
laws of the state of Indiana on September 14, 1983. Our principal subsidiary is Indianapolis Power
& Light Company ("IPL"), a regulated electric utility with its customer base
concentrated in Indianapolis, Indiana. Substantially all of our business consists of the generation,
transmission, distribution and sale of electric energy conducted through IPL. Our other direct
subsidiary, Mid-America Capital Resources, Inc. ("Mid-America") is the holding company for
our unregulated activities. Mid-America's only significant investment is a small minority ownership
interest in EnerTech Capital Partners II L.P., a venture capital fund, valued at $4.1 million, as of
December 31, 2004. Throughout this document, the terms "we", "us" and
"our" refer to IPALCO and its consolidated subsidiaries. IPALCO is wholly-owned by The AES
Corporation ("AES"). Our total electric revenues and net income for the fiscal year ended
December 31, 2004 were $885 million and $125 million, respectively. The book value of our total
assets as of December 31, 2004 is $2.5 billion. All of our operations are conducted within the
United States of America and primarily within the state of Indiana. Please refer to Note 14 in the
audited consolidated financial statements of IPALCO included in this report for segment
reporting.

Our principal executive offices are located at One Monument Circle, Indianapolis, Indiana 46204,
and our telephone number is (317) 261-8261. Our internet website address is www.IPALCO.com.

Indianapolis Power & Light Company

General

We own all of the outstanding common stock of IPL. IPL was incorporated under the laws of the
state of Indiana in 1926. IPL is engaged primarily in generating, transmitting, distributing and
selling electric energy to more than 460,000 retail customers in the city of Indianapolis and
neighboring areas within the state of Indiana; the most distant point being about 40 miles from
Indianapolis. IPL has an exclusive right to provide electric service to those customers. IPL owns
and operates four generating stations. Two of the generating stations are primarily coal-fired
stations. The third station has a combination of units that use coal (base load capacity) and
natural gas and/or oil (peaking capacity) for fuel to produce electricity. The fourth station is a
small peaking station that uses gas-fired combustion turbine technology for the production of
electricity. IPL's net electric generation capability for winter is 3,370 megawatts and net summer
capability is 3,252 megawatts. IPL's generation, transmission and distribution facilities are
further described under "Item 2. Properties." There have been no significant changes in
the services rendered by IPL, or in IPL's markets, during 2004.

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 business is not dependent on any single customer or group of customers.
IPL's electricity sales for 2000 through 2004 are set forth in the table of statistical information
included at the end of this section.

IPL is also a member of the East Central Area Reliability Council ("ECAR"). ECAR members
cooperate under the East Central Area Reliability Coordination Agreement to augment the reliability
of its members' electricity supply systems in the nine-state ECAR region through coordination of the
planning and operation of the members' generation and transmission facilities. Smaller electric
utility systems, independent power producers and power marketers participate as associate members.
In addition, IPL's transmission operations are integrated with those of the Midwest Independent
Transmission System Operator, Inc. ("Midwest ISO") and IPL is a transmission owner of the
Midwest ISO. See also "Management's Discussion and Analysis of Financial Condition and Results of
Operations- Industry Changes - FERC-Midwest ISO".

Regulation

IPL is subject to regulation by the Indiana Utility Regulatory Commission (the
"IURC") as to its services and facilities, the valuation of property, the construction,
purchase, or lease of electric generating facilities, the classification of accounts, rates of
depreciation, retail rates and charges, the 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.

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

IPL is also affected by the regulatory jurisdiction of the U.S. Environmental Protection Agency
("EPA"), at the federal level, and the Indiana Department of Environmental Management, at
the state level. Other significant regulatory agencies affecting IPL include, but are not limited
to, the U.S. Department of Labor and the Indiana Occupational Safety and Health Administration.

Please see "Management's Discussion and Analysis of Financial Condition and Results of
Operations-Regulatory Matters and - Industry Changes" for a more comprehensive discussion
of regulatory matters impacting IPL and IPALCO.

Retail Ratemaking

IPL's tariff rates for electric 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 Indiana Office of Utility Consumer Counselor, and
other interested consumer groups and customers. Pursuant to statute, the IURC is to conduct a
periodic review of the basic rates and charges of all utilities at least once every four years. 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. Numerous
factors including, but not limited to, weather, inflation, customer growth and usage, the level of
actual operating and maintenance expenditures, capital expenditures, fuel costs, generating unit
availability and purchased power costs and availability 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 (see "Management's Discussion and Analysis of Financial Condition and Results of
Operations-Regulatory Matters") options. Under two of these options, the customers' prices
are not adjusted for changes in fuel costs or other factors. The Elect Plan was extended by an IURC
Order through December 31, 2006. 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 basic
rates, subject to certain restrictions on the level of operating income. In addition, IPL's rate
authority provides for a return on IPL's investment and recovery of the depreciation and operation
and maintenance expenses associated with the nitrogen oxide ("NOx") compliance
construction program and the Multipollutant Plan (See Environmental Matters). IPL maintains
its books and records consistent with accounting principles generally accepted in the United States
of America reflecting the impact of regulation. See Note 2 to the Consolidated Financial Statements
of IPALCO included in this Form 10-K.

Future events, including the advent of retail competition within IPL's service territory, could
result in the deregulation of part of IPL's existing regulated business. 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
("SFAS") No. 101, "Regulated Enterprises-Accounting for the Discontinuation of
Application of SFAS No. 71," could eliminate the effects of any actions of regulators that
have been recognized as assets and liabilities. Required adjustments could include the expensing of
any unamortized net regulatory assets, the elimination of certain tax liabilities, and a write down
of any impaired utility plant balances. We expect IPL to meet the criteria for the application of
SFAS No. 71 for the foreseeable future.

Fuel

In 2004, approximately 99.9% of the total kWhs produced by IPL was generated from coal.
Natural gas and fuel oil combined to provide the remaining kWh generation. Natural gas is used in
IPL's newer combustion turbines. Fuel oil is used for start up and flame stabilization in coal-fired
generating units, as primary fuel in oil-fired steam turbine generating units and three older
combustion turbines, and as an alternate fuel in two newer combustion turbines.

IPL's existing long-term coal contracts provide for approximately 84% of its current projected
requirements through the year 2006 and approximately 68% through 2009. The long-term coal agreements
are with two suppliers. Substantially all of the coal is currently mined in the state of Indiana.
Approximately 64% of IPL's coal is from one supplier. IPL has entered into three contracts with this
supplier for the provision of coal from three separate mines. It is presently believed that all coal
used by IPL will be mined by others. IPL normally carries fuel oil and a 30-60 day system supply of
coal to offset unforeseen occurrences such as equipment breakdowns and transportation or mine
delays.

Statistical Information on Electric Operations

The following table of statistical information presents additional data on IPL's electric
operations:

`Year Ended December 31,
                                   -------------------------------------------------
                                     2004      2003      2002      2001      2000
                                   --------- --------- --------- --------- ---------
Operating Revenues (In Thousands):
Residential                        $314,018  $300,735  $292,855  $289,779  $285,000
Small commercial and industrial     137,820   129,790   130,642   127,863   130,482
Large commercial and industrial     354,325   336,136   335,436   334,387   337,725
Public lighting                      11,118    11,022    10,926    10,415    10,249
Miscellaneous                        15,092    21,921    13,657    10,385    12,425
                                   --------- --------- --------- --------- ---------
   Revenues - retail customers      832,373   799,604   783,516   772,829   775,881
Wholesale - REMC                      1,433     1,330     1,402     1,367     1,222
Wholesale - other                    51,667    37,231    38,160    56,951    57,112
                                   --------- --------- --------- --------- ---------
   Total electric revenues         $885,473  $838,165  $823,078  $831,147  $834,215
                                   ========= ========= ========= ========= =========
Kilowatt-hour Sales (In Millions):
Residential                           4,984     4,917     4,939     4,717     4,614
Small commercial and industrial       2,028     1,986     2,018     1,955     1,990
Large commercial and industrial       7,489     7,370     7,417     7,337     7,432
Public lighting                          89        83        72        72        71
                                   --------- --------- --------- --------- ---------
   Sales - retail customers          14,590    14,356    14,446    14,081    14,107
Wholesale - REMC                         47        44        47        46        42
Wholesale - other                     1,568     1,307     1,691     2,129     2,272
                                   --------- --------- --------- --------- ---------
   Total kilowatt-hours sold         16,205    15,707    16,184    16,256    16,421
                                   ========= ========= ========= ========= =========
Retail Customers at End of Year:
Residential                         410,998   405,549   400,130   394,793   391,086
Small commercial and industrial      45,208    44,833    44,428    43,767    43,078
Large commercial and industrial       4,389     4,327     4,337     4,283     4,195
Public lighting                         676       666       655       622       574
                                   --------- --------- --------- --------- ---------
   Total retail customers           461,271   455,375   449,550   443,465   438,933
                                   ========= ========= ========= ========= =========`



Environmental Matters

We are subject to various federal, state and local environmental protection and health and
safety laws and regulations governing, among other things, the generation, storage, handling, use,
disposal and transportation of hazardous materials; the emission and discharge of hazardous and
other materials into the environment; and the health and safety of our employees. These laws and
regulations often require a lengthy and complex process of obtaining and renewing permits and other
governmental authorizations from federal, state and local agencies. Violation of these laws,
regulations or permits can result in substantial fines, other sanctions, suspension or revocation of
permits and/or facility shutdowns. We believe that we operate in material compliance with
environmental laws, regulations and permits and health and safety laws. We cannot assure, however,
that we have been or will be at all times in full compliance with such laws, regulations and
permits. Please see "Management's Discussion and Analysis of Financial Condition and Results
of Operations-Environmental Matters" for a more comprehensive discussion of environmental
matters impacting IPL and IPALCO.

Regulatory Matters - Rate Developments

Multipollutant Plan filing

On November 30, 2004, in response to a petition we filed, the IURC issued an Order approving
up to $182 million of capital expenditures to install pollution control technology at two of our
power plants. These capital expenditures are projected to address required sulfur dioxide
("SO2") and mercury emissions reductions from our power plants and to reduce
fine particulate pollution in the atmosphere. The Order also approves ratemaking treatment for such
expenditures, including a return on the investment and recovery of depreciation expenses and
operation and maintenance expenses associated with these projects. The Order also granted IPL the
authority to add the approved return on its environmental projects to IPL's authorized annual
jurisdictional net operating income in subsequent fuel adjustment charge proceedings (See
"Management's Discussion and Analysis of Financial Condition and Results of Operations-
Environmental Matters"). We believe these expenditures are necessary to reliably and
economically achieve a level of emission reductions that complies with the Clean Air Interstate Rule
and the Clean Air Mercury Rule (the "Clean Air Rules of 2005") (See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Environmental
Matters"). We cannot assure that all costs to comply with the Clean Air Rules of 2005 will
be covered by the IURC Order.

NOx SIP Call

In November 2002, the IURC issued a Certificate of Public Convenience and Necessity for the
construction and use of clean coal technology ("CCT") to allow us to meet the
NOx emission limits imposed pursuant to the EPA's NOx State Implementation
Plan ("SIP") call. The CCT constitutes qualified pollution control property as defined in
Ind. Code section 8-1-2-6.6 and the IURC has approved ratemaking treatment applicable to such
property through an Environmental Compliance Cost Recovery Adjustment ("ECCRA"). The
ratemaking treatment provided for in the IURC Order includes a return on the investment in IPL's
planned CCT projects under construction. After the projects have been placed in service, the
approved ratemaking treatment provides for a return on the investment and recovery of the
depreciation expenses and operation and maintenance expenses associated with these projects. Such
costs are deferred as regulatory assets on IPALCO's balance sheets until recovered through periodic
rate adjustments. The ratemaking treatment also provides for recovery of expenditures related to the
purchase of NOx emission allowances, should such expenditures be made to supplement our
CCT construction projects. IPL may add the approved return on its CCT projects to its authorized
annual jurisdictional net operating income in subsequent fuel adjustment charge proceedings. The
increase in the amount of rate revenues and authorized net operating income resulting from IPL's CCT
plan will be determined in periodic filings to the IURC to be made at intervals of no more often
than every 6 months and will depend on the amount of cumulative investment, depreciation expenses,
operation and maintenance expenses and actual NOx emission allowance purchases at the
time of each of the filings. These ECCRA filings have collectively added $6.7 million to IPL's
authorized annual jurisdictional net operating income through December 31, 2004.

Through December 31, 2004, IPL spent approximately $185 million on NOx emissions
reduction projects. Further expenditures are estimated to be approximately $27 million in 2005 to
substantially meet the required NOx SIP Call reductions.

Midwest ISO

IPL has received IURC approval for the recovery of certain MISO costs and is currently
seeking IURC approval for certain changes in operations and for determination of the manner and
timing of recovery of other costs. See "Management's Discussion and Analysis of Financial
condition and Results of Operations - Industry Changes" for a discussion of the Midwest
ISO.

Competition and Industry Changes

IPL has an exclusive right to provide electric service to its retail customers. In recent
years, various forms of proposed industry-restructuring legislation and/or rulemakings have been
introduced at the federal level. 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 have enacted laws
to allow more competition and customer choice in the retail energy markets within their respective
states. Indiana has not done so.

At times, we will purchase power on the wholesale markets, and at other times we will have
electric generation capacity available for sale on the wholesale market in competition with other
utilities and power generators. Our ability to compete in the wholesale market for the sale of
excess generation is dependent on the price, terms and conditions of the sale.

The Midwest ISO is completing market trials and testing for the Midwest Market Initiative
scheduled to begin April 1, 2005. This will change our interface with the wholesale energy markets,
particularly with respect to day-ahead and real-time transactions. See also, "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Industry
Changes" for information about our participation in the Midwest ISO that will impact both
revenues and costs associated with our energy service to utility customers beginning in 2005. This
section also discusses our filing with the IURC related to the Midwest ISO referenced above.

Employees

As of December 31, 2004, IPL had 1,414 employees of whom 1,384 were full time. Of these
employees, 957 were represented by the International Brotherhood of Electrical Workers
("IBEW") in two bargaining units: a physical unit and a clerical-technical unit. In
November 2002, the membership of the IBEW physical unit ratified a labor agreement that remains in
effect until December 19, 2005. In February 2004, the membership of the IBEW clerical-technical unit
ratified a labor agreement that remains in effect until February 19, 2007. As of December 31, 2004,
neither IPALCO nor any of its subsidiaries other than IPL had any employees.

Item 2. Properties

Our executive offices are located at One Monument Circle, Indianapolis, Indiana. This facility
and the remainder of our material properties in our business and operations are owned directly by
IPL. The following is a description of these material properties.

IPL owns two distribution service centers in Indianapolis at 1230 West Morris Street and 3600
North Arlington Avenue. IPL also owns the building in Indianapolis which houses its customer service
center located at 2102 North Illinois Street.

IPL owns and operates four generating stations. Two of the generating stations are primarily
coal-fired stations. The third station has a combination of units that use coal (base load capacity)
and natural gas and/or oil (peaking capacity) for fuel to produce electricity. The fourth station is
a small peaking station that uses gas-fired combustion turbine technology for the production of
electricity. For electric generation, the net winter capability is 3,370 MW and net summer
capability is 3,252 MW. IPL's highest recorded winter and summer peak loads are 2,671 MW and 3,003
MW, respectively.

IPL's sources of electric generation are as follows:

Petersburg Plant, located in Pike County, Indiana (seven units in service3⁄4
four in 1967 and one each in 1969, 1977 and 1986) with net winter and summer capabilities of 1,730
MW;

Harding Street Station, located in the southwest part of Marion County (twelve units in
service3⁄4
one each in 1941, 1947, 1958, 1961, 1967, 1994, 1995 and 2002 and four in 1973) with net winter and
summer capabilities of 1,196 MW and 1,102 MW, respectively;

Eagle Valley Plant, located 25 miles southwest of Indianapolis (seven units in
service3⁄4
one each in 1949, 1950, 1951, 1956 and 1967 and two in 1953) with net winter and summer capabilities
of 344 MW and 341 MW, respectively; and

Georgetown Combustion Turbine, located in Pike Township on the northwest side of
Indianapolis, Indiana (one unit in service3⁄4
May 2000) with net winter and summer capabilities of 100 MW and 79 MW, respectively.

Net electrical generation during 2004, at the Petersburg, Harding Street and Eagle Valley plants
accounted for approximately 67.7%, 24.0% and 8.3%, respectively, of IPL's total net generation.

Included in the above totals are three gas turbine units at the Harding Street plant added in
1973, one gas turbine added in each of 1994, 1995 and 2002 with a combined nameplate rating of 374
MW. Also included is one diesel unit each at Eagle Valley and Harding Street plants and three diesel
units at Petersburg station, all added in 1967. Each diesel unit has a nameplate rating of 3 MW.

IPL's electric system is directly interconnected with the electric systems of Indiana Michigan
Power Company, Southern Indiana Gas and Electric Company, Hoosier Energy Rural Electric Cooperative,
Inc., and the electric system jointly owned by PSI Energy, Inc., Indiana Municipal Power Agency and
Wabash Valley Power Association, Inc. IPL's transmission system includes 457 circuit miles of
345,000 volt lines, 363 circuit miles of 138,000 volt lines and 269 circuit miles of 34,500 volt
lines. The distribution system consists of 4,259 circuit miles underground primary and secondary
cables and 5,914 circuit miles of overhead primary and secondary wire. Underground street lighting
facilities include 671 circuit miles of underground cable. Also included in the system are 75 bulk
power substations and 88 distribution substations.

IPL holds an option to purchase suitable acreage of land in Switzerland County, Indiana to use as
a potential power plant site. In addition, IPL owns the rights to coal and other minerals underlying
798 acres of land in Sullivan County, Indiana, and coal underlying approximately 6,215 acres in Pike
and Gibson Counties, Indiana.

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

Mortgage Financing on Properties

The mortgage and deed of trust of IPL, together with the supplemental indentures to 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 in the amount of
$692.7 million at March 21, 2005. In addition, IPALCO has $750 million principal amount of
indebtedness outstanding, which is secured by its pledge of all of the outstanding common stock of
IPL.

Item 3. Legal Proceedings

Please refer to Note 12 of the attached audited consolidated financial statements of IPALCO
for a summary of significant legal proceedings involving IPALCO and/or IPL. We are also subject to
routine litigation, claims and administrative proceedings arising in the ordinary course of
business, none of which is expected to have a material adverse effect on our financial position or
results of operations.

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

Not applicable pursuant to General Instruction I of the Form 10-K.

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

All of the outstanding common stock of IPALCO is owned by AES, and as a result is not listed for
trading on any stock exchange.

Dividends. During 2004 and 2003, we paid dividends to AES totaling $119.1 million and
$126.9 million, respectively. Future distributions will be determined in the discretion of the Board
of Directors of IPALCO and will depend primarily on dividends received from IPL and such other
factors as the Board of Directors of IPALCO deems relevant. Please refer to the Liquidity and
Capital Resources section of Item 7 of this report for a discussion of limitations on dividends
from IPL. In order for us to make any dividend payments to AES, we must, at the time and as a result
of such dividends, either maintain certain credit ratings on our $750 million of Senior Secured
Notes or be in compliance with leverage and interest coverage ratios contained in the Indenture for
our $750 million of Senior Secured Notes. We do not believe this requirement will be a limiting
factor in paying dividends in the ordinary course of prudent business operations.



---

Item 6. Selected Financial Data



The following table presents our selected consolidated financial data, which should be read in
conjunction with our audited consolidated financial statements and the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of Operations."
IPALCO is a wholly-owned subsidiary of AES and therefore does not report earnings or dividends on a
per-share basis. Other data management believes is important in understanding trends in IPALCO's
business is also included in this table.

`Year Ended December 31,
                                         -------------------------------------------------------
                                            2004       2003       2002       2001     2000 (1)
                                         -------------------------------------------------------
                                                              (IN THOUSANDS)
Operating Data:
Total utility operating revenues           $885,473   $838,165   $823,078   $831,147   $861,795
Termination benefit agreement costs (2)          --         --         --    (74,765)        --
Voluntary early retirement program
  benefits costs (3)                             --         --         --    (23,751)   (62,007)
Utility operating income                    214,334    186,583    200,586    130,641    136,223
Allowance for funds used during
  construction                                3,769      6,539      5,738      1,974      3,034
Income before extraordinary loss            124,994    103,265    124,946     77,947    158,842
Extraordinary loss on early
  retirement of debt                              --        --         --         --     (4,259)
Net income                                  124,994    103,265    124,946     77,947    154,583

Balance Sheet Data (end of period):
Utility plant - net                       2,142,852  2,096,563  2,028,144  1,984,313  1,947,708
Total assets                              2,467,348  2,397,810  2,360,169  2,331,312  2,283,150
Common shareholder's equity (deficit)      (108,082)  (121,778)   (92,449)     4,229    730,148
Cumulative preferred stock of subsidiary     59,135     59,135     59,135     59,135     59,135
Long-term debt (less current maturities)  1,502,064  1,482,011  1,372,006  1,371,930    621,863
Long-term capital lease obligations           4,148        747         --         --         --

Other Data:
Utility capital expenditures                146,785    156,855     94,709    126,517     75,712`

1. In November 2000, IPL sold its steam operations and used a portion of the net proceeds to retire
debt specifically assignable to the assets sold. In connection with the retirement, IPL incurred
make-whole payments and wrote off debt issuance costs of $4.3 million, which was recorded as an
extraordinary loss on early retirement of debt.
2. Termination benefits represents costs related to the termination of certain employees as a
result of our acquisition by AES. The pretax expenses included $59.4 million related to termination
benefit agreements and severance, $9.2 million in supplemental retirement costs and $6.2 million in
restricted stock expense.
3. Voluntary Early Retirement Program benefit costs for 2000 represented $56.8 million pre-tax non-
cash pension and $5.2 million other postretirement benefit costs. In 2001 we recognized $19.2
million in pre-tax non-cash pension and $4.6 million other postretirement benefit costs associated
with the VERP plans implemented in 2001.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

The following discussion and analysis should be read in conjunction with our audited financial
statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K. The
following discussion contains forward-looking statements. Our actual results may differ materially
from the results suggested by these forward-looking statements. Please see "Cautionary Note
Regarding Forward - Looking Statements" at the beginning of this Form 10-K.

Introduction

IPALCO Enterprises, Inc. ("IPALCO") is a holding company incorporated under the
laws of the state of Indiana. Our principal subsidiary is Indianapolis Power & Light Company
("IPL"), a regulated utility operating in the state of Indiana. Substantially all of our
business consists of the generation, transmission, distribution and sale of electric energy
conducted through IPL. Our other direct subsidiary, Mid-America Capital Resources, Inc. ("Mid-
America"), is the holding company for our unregulated activities. Mid-America's only
significant investment is a small minority ownership interest in EnerTech Capital Partners II L.P.
("EnerTech"), a venture capital fund, valued at $4.1 million, as of December 31, 2004. Our
business segments are electric and "all other."

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

The most important matters on which we focus in evaluating IPALCO's financial condition and
operating performance and allocating our resources include: (i) recurring factors which have
significant impacts on operating performance such as; regulatory action, environmental matters,
weather and weather-related damage in IPL's service area, the wholesale price of electricity,
generating unit availability and capacity, and the local economy; (ii) our progress on performance
improvement strategies designed to maintain high standards in several operating areas (including
safety, environmental, reliability, and customer service) simultaneously, (iii) our short-term and
long-term financial and operating strategies. For a discussion of how we are impacted by regulation
and environmental matters, please see Regulatory Matters and Environmental Matters
later in this section.

Weather and weather-related damage in IPL's service area. Extreme high and low
temperatures in our service area have a significant impact on revenues as many of our retail
customers use electricity to power air conditioners, electric furnaces and heat pumps. To
illustrate, during the first fiscal quarter of 2003, when IPL's service territory experienced a 24%
increase in heating degree days as compared to the same period in 2002, IPL realized an $18.1
million, or 10% increase in retail revenues, primarily due to the colder winter temperatures.
Conversely, during the third fiscal quarter of 2003, when IPL's service territory experienced a 33%
decrease in cooling degree days as compared to the same period in 2002, IPL realized a $6.4 million,
or 3% decrease in retail revenues, primarily due to the milder summer temperatures, and partially
offset by an increase in heating degree days during the comparative periods. In addition, because
extreme temperatures have the effect of increasing demand for electricity, the wholesale price for
electricity generally increases during periods of extreme hot or cold weather and, therefore, if IPL
has excess capacity, it can generate additional income by selling power on the wholesale market (see
below).

Storm activity can also have an adverse effect on our operating performance. Severe storms often
damage transmission and distribution equipment, which can cause power outages, which reduces
revenues and increases repair costs.

Wholesale price of electricity. At times, IPL will purchase power on the wholesale
markets, and at other times IPL will have electric generation capacity available for sale on the
wholesale market in competition with other utilities and power generators. During the past five
years, wholesale revenues represented an average of approximately 5.9% of IPL's total electric
revenues. IPL's ability to compete in the wholesale market for the sale of its excess generation is
dependent on the price, terms and conditions of the sale. The price of wholesale power can be
volatile and therefore IPL's revenues from wholesale sales can fluctuate significantly from year to
year. During 2004, the estimated average hourly market price at which we could buy or sell wholesale
power increased 22% from 2003. The weighted average price of wholesale kWhs IPL sold increased
approximately 15% in 2004 as compared to 2003.

In 2005, the Midwest ISO's Midwest Market Initiative will change IPL's interface with the
wholesale energy markets, particularly with respect to day-ahead and real-time transactions. See
also, "Industry Changes" for information about our participation in the Midwest ISO
that will impact both revenues and costs associated with IPL's energy service to its utility
customers beginning in 2005.

Generating unit availability and capacity. Currently, IPL's plants generally have enough
capacity to meet the needs of IPL's retail customers when all of its coal-fired units are available.
As described above, IPL can, at times, generate additional revenues by selling excess energy on the
wholesale market when prices are favorable to do so. From time to time, IPL must shut generating
units down to perform maintenance or repairs. Generally, maintenance is scheduled during the spring
and fall months when demand for power is lowest. Occasionally, it is necessary to shut units down
for maintenance or repair during periods of high power demand. In addition, occasionally during
periods of peak demand IPL's coal-fired generating capacity is not available or sufficient to meet
its retail load. On these occasions, IPL may generate power using more costly gas or oil fired
generating units or purchase power on the wholesale market to meet its retail demand. This can cause
a loss of wholesale revenues and increased operating costs.

Local economy. Increases in commercial and industrial productivity in IPL's service area
generally lead to increased use of electricity. During 2004, 40% of our revenues came from large
commercial and industrial customers. During the past 10 years, IPL's retail kWh sales have grown at
a compound annual rate of 1.4%.

Performance improvement program. Our objective is to achieve top industry performance in
the United States by focusing on performance in seven key areas: safety, environmental performance,
customer service, reliability (production and delivery), financial performance (retail rates and
shareholder value), employee commitment and corporate philanthropy and by balancing them in a way
and to a degree necessary to ensure a sustainable level of excellence in all these areas
simultaneously as compared to our peers. We monitor our performance in these areas and where
practical and meaningful compare performance in some areas to peer utilities. We have implemented
numerous initiatives in order to meet our performance goals. The result was improved overall
operational performance during 2004, including a significant improvement in both safety and power
delivery reliability.

Short-term and long-term financial and operating strategies. Our financial management plan
is closely integrated with our operating strategies. Our objective is to maintain stand-alone credit
statistics at IPL that are comparable to investment grade credit ratings. Key aspects of our
financial planning include rigorous budgeting and analysis, maintaining sufficient levels of
liquidity and a prudent dividend policy at both our subsidiary and holding company levels. This
strategy allows us to remain flexible in the face of evolving environmental legislation and
regulatory initiatives in our industry.

Critical Accounting Estimates

General. We prepare our consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America. As such, we are required
to make certain estimates, judgments and assumptions that we believe are reasonable based upon the
information available. These estimates and assumptions affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the period presented. Therefore, the possibility exists for materially different
reported amounts under different conditions or assumptions. Significant accounting policies used in
the preparation of the consolidated financial statements in Item 8 of this Form 10-K are described
in Note 2 Significant Accounting Policies thereto. This section addresses only those accounting
policies involving amounts material to our financial statements that require the most estimation,
judgment or assumptions and should be read in conjunction with Note 2 of IPALCO's audited
consolidated financial statements.

Regulation. As a regulated utility, IPL applies the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 71, "Accounting for the Effects of Certain Types of
Regulation," which gives recognition to the ratemaking and accounting practices of the Indiana
Utility Regulatory Commission (the "IURC") and the Federal Energy Regulatory Commission
("FERC"). In accordance with SFAS 71, IPL has recognized as regulatory assets, deferred
costs totaling $132.0 million that have been included as allowable costs for ratemaking purposes, as
authorized by the IURC. Specific regulatory assets are disclosed in Note 5 to IPALCO's audited
consolidated financial statements. The deferral of costs (as regulatory assets) is appropriate only
when the future recovery of such costs is probable. In assessing probability, we consider such
factors as specific Orders from the IURC, regulatory precedent and the current regulatory
environment. To the extent recovery of costs is no longer deemed probable, related regulatory assets
would be required to be expensed in current period earnings. Substantially all of IPL's regulatory
assets have been approved by specific Order of the IURC.

Revenue Recognition. Revenues related to the sale of energy are generally recognized when
service is rendered or energy is delivered to customers. However, the determination of the energy
sales to individual customers is based on the reading of their meters, which occurs on a systematic
basis throughout the month. At the end of each month, amounts of energy delivered to customers since
the date of the last meter reading are estimated and the corresponding unbilled revenue is accrued.
In making our estimates of unbilled revenue, we use complex models that consider various factors
including daily generation volumes, estimated customer usage by class, weather factors, line losses
and applicable customer rates based on regression analyses reflecting significant historical trends
and experience. Given the use of these models, and that customers are billed on a monthly cycle, we
believe it is unlikely that materially different results will occur in future periods when revenue
is billed. As part of the estimation of unbilled revenues, we estimate line losses on a monthly
basis. The effect on 2004 revenues and ending unbilled revenues of a one percentage point increase
and decrease in the estimated line losses for the month of December 2004 is ($0.4 million) and $0.4
million, respectively. At December 31, 2004, customer accounts receivable include unbilled
energy revenues of $36.2 million on a base of annual revenue of $885.5 million.

A fuel adjustment charge provision, which is established after public hearing, applies to most of
IPL's rate schedules and permits the billing or crediting of estimated fuel costs above or below the
estimated levels included in IPL's basic rates. Actual fuel costs in excess of or under estimated
fuel costs billed are deferred or accrued, respectively. IPL files quarterly with the IURC for fuel
cost adjustments.

Pension Costs. Most of IPL's employees participate in the Employees' Retirement Plan of
Indianapolis Power & Light (the "Defined Benefit Pension Plan"). Reported expenses
relevant to Defined Benefit Pension Plan are dependant upon numerous factors resulting from actual
plan experience and assumptions of future experience, including the performance of plan assets and
actual benefits paid out in future years. Pension costs associated with the Defined Benefit Pension
Plan are impacted by the level of contributions made to the plan, earnings on plan assets and
employee demographics, including age, job responsibilities and employment periods. Changes made to
the provisions of the Defined Benefit Pension Plan may impact current and future pension costs.
Pension costs may also be significantly affected by changes in key actuarial assumptions, including
anticipated rates of return on plan assets and the corporate bond discount rates used in determining
the projected benefit obligation and pension costs. Pension expense, net of amounts capitalized, for
the years ended December 31, 2004, 2003 and 2002 were $5.6 million, $9.7 million and $5.9 million,
respectively.

Previously, federal law required employers to use the 30-year Treasury bond rate for a variety of
pension calculations, including plan liability determinations, funding requirements and premiums
plan sponsors pay to the Pension Benefit Guarantee Corporation ("PBGC") for insurance. In
2001, the Treasury Department discontinued the 30-year bond, and yields began to drop. This inflated
pension liabilities, which in turn forced employers to increase contributions and insurance premium
payments. Congress passed temporary relief for the years 2002 and 2003 which allowed companies to
use a higher maximum fluctuation above the weighted average 30-year Treasury bond rate. In April
2004, Congress passed additional temporary relief replacing the 30-year bond with a temporary
corporate long-term bond rate replacement. That relief expires December 31, 2005 and Congress is
working to find a replacement. In the event the temporary relief is not continued, it could
materially increase our pension liabilities and funding requirements. It is possible that Congress
may try to enact broad pension funding reforms fueled by the need to permanently replace the 30-year
Treasury rate. Broad pension reform may address, among other things, funding rules, plan designs,
disclosures and premium payments to the PBGC. We are not able to predict the effect any such pension
legislation will have on our business or results of operations.

Pension plan assets consist of investments in equity, real estate, fixed income securities and
cash. Differences between actual portfolio returns and expected returns may result in increased or
decreased pension costs in future periods. Pension costs are determined on November 30 for the
following year based on the market value of pension plan assets, a discount rate used to determine
the projected benefit obligation and the expected long-term rate of return on plan assets. For 2004,
we determined expense using a discount rate of 6.0% and an assumed long-term rate of return on plan
assets of 8.5%.

In determining the discount rate to use for valuing liabilities we use a rate of return on high
quality fixed income investments, adjusting for liability duration differences. In establishing our
expected long-term rate of return assumption, we consider historical returns, as well as, the
expected future weighted-average returns for each asset class based on the target asset allocation.
Our expected long-term rate of return on pension plan assets is based on our targeted asset
allocation assumption of approximately 55% equity investments, 40% fixed income investments and 5%
real estate investments. As of November 30, 2004, the discount rate remained constant at 6.00% and
we reduced the expected long-term rate of return on assets from 8.50% to 8.00%. These assumptions
affected the pension expense determined for 2005. The effect on 2005 total pension expense of a one
percentage point increase and decrease in the assumed discount rate of the projected benefit
obligation is ($3.3 million) and $3.9 million, respectively. The effect on 2005 total pension
expense of a one percentage point increase and decrease in the expected long-term rate of return on
plan assets is ($3.2 million) and $3.2 million, respectively.

Impairment of Long-lived Assets. Accounting principles generally accepted in the United
States of America require that we measure long-lived assets for impairment when indicators of
impairment exist. If an asset is deemed to be impaired, we are required to write down the asset to
its fair value with a charge to current earnings. The book value of IPL's utility plant assets was
$2.1 billion at December 31, 2004. We do not believe any of these assets are currently impaired. In
making this assessment, we consider such factors as: the overall condition and generating and
distribution capacity of the assets; the expected ability to recover additional investment in the
assets, such as nitrogen oxide ("NOx") expenditures; the anticipated demand and
relative pricing of retail electricity in our service territory and wholesale electricity in the
region; and the cost of fuel.

Income Taxes.We are subject to federal and state
of Indiana income taxes. Our income tax provision requires significant judgment
and is based on calculations and assumptions that are subject to examination by
the Internal Revenue Service and other tax authorities. We are currently under
examination by the Internal Revenue Service for the period 1996 through 2001. We
regularly assess the potential outcome of these examinations when determining
the adequacy of our income tax provisions. Tax reserves have been established,
which we believe to be adequate in relation to the potential for additional
assessments. Once established, reserves are adjusted only when there is more
information available or when an event occurs necessitating a change to the
reserves. While we believe that the amount of the tax estimates are reasonable,
it is possible that the ultimate outcome of current or future examinations may
exceed current reserves in amounts that could be material. A range of these
amounts cannot be reasonably estimated as of December 31, 2004, as they are
primarily unasserted claims.

Contingencies.We accrue for loss contingencies when the amount of the loss is
probable and estimable. We are subject to various environmental regulations, and are involved in
certain legal proceedings. If our actual environmental and/or legal obligations are different from
our estimates, the recognition of the actual amounts may have a material impact on our operating
results and financial condition.

Results of Operations

See also, the statistical information table on page 6 for additional revenue data such as kWh
sales and number of customers by customer class.

Land Sale

In 2004, IPL sold approximately 4,000 acres of undeveloped property near Martinsville,
Indiana divided between two purchasers for an aggregate price of $13.2 million. The net sale
proceeds were $11.7 million and the net gain was $5.9 million. This land is presented on IPALCO's
consolidated balance sheet as land held for sale at $6.6 million as of December 31, 2003. In
accordance with regulatory accounting, these gains are included as a reduction of other operating
expenses on IPALCO's consolidated statements of income.

The year ended December 31, 2004 as compared to the year ended December 31, 2003

Utility Operating Revenues

Utility operating revenues increased in 2004 from the prior year by $47.3 million, which
resulted from the following (dollars in thousands):

`2004       2003               Percentage
Utility Operating Revenues    Revenues   Revenues    Change     Change
                             ---------- ---------- ---------- ----------
Retail Revenues               $817,281   $777,683    $39,598        5.1%
Wholesale Revenues              53,100     38,561     14,539       37.7%
Miscellaneous Revenues          15,092     21,921     (6,829)     (31.2%)
                             ---------- ---------- ----------
Total Utility
 Operating Revenues           $885,473   $838,165    $47,308        5.6%
                             ========== ========== ==========
Heating Degree Days              5,065      5,502       (437)      (7.9%)
Cooling Degree Days                952        890         62        7.0%`

The 5.1% increase in retail revenues was primarily due to a 3.4% increase in the weighted average
price per kWh sold (approximately $26.5 million) and a 1.6% increase in the quantity of kWhs sold at
retail (approximately $13.1 million). The price variance is primarily due to increased rate revenues
($15.7 million) from costs IPL recovered from its retail customers associated with its
NOx compliance construction program and increases in fuel costs charged to retail
customers in 2004 (approximately $8.8 million). The quantity of retail kWhs sold increased
moderately for residential, commercial and industrial customers. We believe the residential increase
is primarily the result of a 1.3% increase in the number of residential customers from December 31,
2003 to December 31, 2004 and the 7.0% increase in cooling degree days, partially offset by the 7.9%
decrease in heating degree days during the comparative periods. We believe the increase in
commercial and industrial kWh sales is primarily due to economic growth in our service territory
during 2004.

The 37.7% increase in wholesale revenues was primarily due to a 19.5% increase in the quantity of
wholesale kWhs sold (approximately $8.7 million) and a 15.2% increase (approximately $5.9 million)
in the weighted average price per wholesale kWh sold. The estimated average hourly market price at
which we could buy or sell wholesale power increased approximately 22% in 2004 as compared to
2003.

The $6.8 million decrease in miscellaneous revenues is primarily the result of a $3.8 million
decrease in gains on sales of environmental air emissions allowances and a $3.0 million decrease in
revenues from the Midwest Independent Transmission System Operator, Inc. ("Midwest ISO").
We do not expect to sell our environmental air emissions allowances in the foreseeable future as we
will rely, in part, on our bank of allowances to remain in compliance with the U.S. Environmental
Protection Agency's ("EPA") sulfur dioxide ("SO2") regulations. The
Midwest ISO was established as a non-profit organization to maintain functional control over the
combined transmission systems of its members. As a transmission owner, IPL receives a portion of the
transmission service revenues from all wholesale kWh sales on the Midwest ISO network based on its
percentage of transmission system investment within the Midwest ISO footprint. In addition, IPL pays
the Midwest ISO an added transmission cost on its retail load and a fee for each wholesale
transaction. A portion of the additional transmission cost paid to the Midwest ISO is deferred as a
regulatory asset and the remaining transmission costs, along with all transaction fees, are expensed
in other operating expenses. Our historical Midwest ISO revenues and expenses are not necessarily
indicative of future revenues and expenses from the Midwest ISO which will be impacted by the
implementation of the Midwest Market Initiative, which is scheduled to be in place on April 1, 2005.
(See also, "Industry Changes - FERC - Midwest ISO".)



Utility Operating Expenses

The following table illustrates the primary operating expense changes from 2003 to 2004 for
IPALCO (in millions):

`2003 Operating Expenses                                                      $651.6
 Increase in cost of coal                                                       9.9
 Increase in salaries and wages included in other operating expenses            6.0
 Increase in depreciation and amortization                                      5.4
 Increase in real estate and property taxes                                     5.2
 Increase in deferred fuel expensed                                             3.6
 Increase in employee benefits-excluding pension costs                          3.1
 Decrease in maintenance expenses                                              (6.1)
 Land sale gain in 2004                                                        (5.9)
 Decrease in pension costs                                                     (4.6)
 Other miscellaneous variances                                                  2.9
                                                                      --------------
2004 Operating Expenses                                                      $671.1
                                                                      ==============`

Our coal costs have risen as a result of a 3.9% increase in the quantity of coal burned during
the comparative periods and a 1.8% increase in the average price of such coal. The increase in
salaries and wages included in other operating expenses is primarily the result of an 8.9% increase
in full-time employees from January 1, 2003 to December 31, 2004 and from annual wage increases. The
increase in depreciation and amortization is primarily due to $4.6 million of depreciation on $156.9
million of equipment placed in service in 2004 designed to reduce NOx

In addition to these variances, the net income tax provision on utility operating income
decreased only slightly from $96.8 million to $96.0 million, but was primarily the net result of an
$8.5 million increase in the tax provision resulting from a $21.0 million increase in pretax
operating income, offset by a decrease in the flow-through tax expense from depreciation ($5.2
million) and a reversal of previously expensed tax amounts ($5.7 million).

Also, in 2004, we relied on our allowance bank and the purchase of $0.3 million of SO2
air emissions allowances to remain in compliance with EPA SO2 regulations. For 2005
and 2006, we are again projecting to meet our supplemental SO2 air emissions allowance
requirements by relying on our allowance bank and the purchase of allowances. Recently, the price of
such allowances has been volatile and therefore it is difficult to predict what our cost may be in
the future, but we do expect our costs to escalate in 2005 and 2006. The price per ton of
SO2 air emissions allowances has increased from approximately $150 on January 1, 2003 to
over $700 in December 2004.

Other Income and Deductions

Other income and deductions increased from income of $26.4 million in 2003 to $28.2 million
in 2004. This increase is primarily due to a $2.2 million increase in nonoperating income tax
benefits, dividend income received in 2004 of $1.4 million, a $0.9 million gain on the sale of
noncore real estate assets in 2004, losses of $1.6 million in 2003 related to our investment in
EnerTech and losses on the sales of other nonutility investments in 2003 totaling $0.8 million,
partially offset by a $2.5 million decrease in the allowance for equity funds used during
construction and a $1.4 million increase in nonutility legal services. The $2.2 million increase in
nonoperating income tax benefits is primarily the result of adjustments made during 2004 ($1.8
million) to adjust the estimated tax provision for 2003 and from a $2.2 million decrease in pretax
nonoperating income ($0.9 million). The decrease in the allowance for equity funds used during
construction resulted primarily from approximately $156.9 million of equipment being placed in
service in 2004 related to the NOx compliance construction program.

Interest and Other Charges

Interest and other charges increased $7.9 million to $117.6 million in 2004 as compared to
2003. This increase is primarily the result of additional interest on long-term debt of $6.4 million
and $4.2 million on the issuances of $100 million and $110 million of first mortgage bonds by IPL on
January 13, 2004 and August 6, 2003, respectively, and a $1.9 million increase in interest expense
on $750 million of Senior Secured Notes issued by IPALCO in November 2001 (the "IPALCO
Notes") due to a 50 basis point increase, beginning May 15, 2003, in the interest rate charged
on the notes as a result of ratings downgrades in 2003. These increases are partially offset by a
$4.4 million decrease from the retirement of $80 million of first mortgage bonds at IPL on February
1, 2004.

The year ended December 31, 2003 as compared to the year ended December 31, 2002

Utility Operating Revenues

Utility operating revenues increased in 2003 from the prior year by $15.1 million, which
resulted from the following changes (dollars in thousands):

`2003       2002               Percentage
Utility Operating Revenues    Revenues   Revenues    Change     Change
                             ---------- ---------- ---------- ----------
Retail Revenues               $777,683   $769,859     $7,824        1.0%
Wholesale Revenues              38,561     39,562     (1,001)      (2.5%)
Miscellaneous Revenues          21,921     13,657      8,264       60.5%
                             ---------- ---------- ----------
Total Utility
 Operating Revenues           $838,165   $823,078    $15,087        1.8%
                             ========== ========== ==========
Heating Degree Days              5,502      5,191        311        6.0%
Cooling Degree Days                890      1,437       (547)     (38.1%)`



The $15.1 million increase in revenues in 2003 was primarily due to a $7.8 million increase in
revenues charged to residential customers and $7.1 million of Midwest ISO revenues recognized in
2003. While kWhs used by IPL's residential customers remained substantially constant, the overall
rate charged to those customers increased 1.7%. This increase resulted primarily from increases in
fuel costs charged to residential customers in 2003 (approximately $4.2 million) and because the
unusually hot summer temperatures in 2002 resulted in a lower per kWh rate for customers as they
experienced volume discounts on kWh usage. All of IPL's residential customers receive a 34.9%
decrease in the price per kWh used after a usage of 500 kWhs per month and over a third receive an
additional 27.0% decrease after 1,000 kWhs of usage per month. In addition, 2003 included a $0.8
million decrease in service quality credits that IPL was required to refund to its customers (see
"-Regulatory Matters-Stipulation and Settlement Agreement") and $0.5 million in
increased rate revenues IPL was permitted to charge its customers to recover costs associated with
its NOx compliance construction program. In addition, IPL increased its retail customer
base by 5,825 customers or 1.3%.

While wholesale revenues decreased only 2.5%, it is the result of a 22.2% decrease in wholesale
kWh sales and a 25.4% increase in the average price per wholesale kWh sold during the periods. The
decrease in kWh sales was due to a combination of plant outages during 2003 for construction that
limited our ability to sell kWhs in the wholesale market. The estimated average hourly market price
at which we could buy or sell wholesale power increased more than 27% in 2003 as compared to 2002.
This increase can be attributed to improvements in the economy, unusually cold temperatures in the
first few months of 2003, which increased the demand for wholesale kWhs and a decrease in supply as
many utilities had generating units offline while they made capital improvements to reduce
NOx emissions.

The $8.3 million increase in miscellaneous revenues is primarily the result of $7.1 million of
revenues from the Midwest ISO (see "- Industry Changes - FERC - Midwest ISO").

Utility Operating Expenses

The following table illustrates the primary operating expense changes from 2002 to 2003 for
IPALCO (in millions):

`2002 Operating Expenses                                                      $622.5
 Increase in maintenance expenses                                              22.1
 Increase in salaries and wages included in other operating expenses            6.5
 Increase in fuel costs                                                         5.4
 Increase in pension costs                                                      4.1
 Increase in Midwest ISO expenses                                               3.8
 Increase in state utility receipts taxes in 2003
  over gross receipts taxes in 2002                                             2.0
 Decrease in operating income taxes - net                                      (9.6)
 Decrease in real estate and property taxes                                    (5.2)
 Other miscellaneous variances                                                  0.0
                                                                      --------------
2003 Operating Expenses                                                      $651.6
                                                                      ==============`

The maintenance expense increase is primarily the result of increased outages in 2003, which were
planned to coincide with our NOx compliance construction program, $1.9 million spent in
the third quarter of 2003 to repair damage caused by severe storms, and an insurance settlement,
which reduced maintenance expenses in 2002 by $1.1 million. The increase in salaries and wages
included in other operating expenses is primarily due to a net additional 73 employees hired by IPL
during 2003 and base wage increases during 2003. The increase in fuel cost is primarily due to a
steadier demand for electricity in 2002, which allowed IPL to produce a greater proportion of
electricity from its low-cost, base-load, coal-fired units than from less efficient peaking unit
resources, and increased scheduled outages in 2003, which made some of our low-cost, base-load,
coal-fired units unavailable for periods of time. The increase in pension costs is primarily the
result of actuarial losses ($2.6 million) and increased service costs and service cost amortization
($1.7 million). Effective January 1, 2003, the state of Indiana no longer imposes a 1.2% gross
receipts tax, but does require utilities to pay a utility receipts tax based primarily on 1.4% of
retail energy sales. The decrease in operating income taxes-net is primarily the result of an $11.6
million decrease in deferred federal income tax expense and a $7.7 million decrease in current
federal income tax expense, partially offset by an $11.3 million increase in current state income
tax expense, which is primarily due to the increase in the Indiana corporate income tax rate from
4.5% to 8.5%. The decrease in current federal income tax expense is due to a decrease in federal
taxable income, including the deduction for state income taxes. The decrease in deferred federal
income taxes is primarily due to a $38.3 million decrease in property related deferred taxes,
primarily from depreciation, partially offset by a $27.3 million increase in deferred taxes related
to pensions and other employee benefits. The decrease in real estate and property taxes results
primarily from decreases in IPL's assessed values.

In addition, while power purchased expenses decreased only $1.1 million, it was the net result of
a 21.2% decrease in the number of kWhs purchased and a 17.7% increase in the weighted average price
paid per kWh during the comparative periods.

Other Income and Deductions

Other income and deductions decreased slightly from income of $26.5 million in 2002 to income
of $26.4 million in 2003. Included in this decrease are net gains of $4.4 million recognized in 2002
related to the sales of noncore real estate assets and a $2.7 million increase in the income tax
benefit in 2003, which resulted primarily from the increase in the state income tax rate ($2.6
million). In addition, in 2003 and 2002 we recorded losses of $1.6 million and $2.2 million related
to our investment in EnerTech, respectively, and additional losses in 2003 of $0.8 million on other
nonutility investments. The allowance for equity funds used during construction includes $2.2
million related to NOx expenditures in 2003 and $2.2 million in 2002 related to a gas
combustion turbine placed in service during 2002.

Interest and Other Charges

Interest and other charges increased $7.6 million, or 7.4% for the year ended December 31,
2003 from the same period in 2002. This increase includes $2.8 million in interest on the $110
million 6.30% first mortgage bonds issued by IPL on August 6, 2003 and a $4.7 million increase in
interest expense on the IPALCO Notes due to a 50 basis point increase, beginning November 15, 2002,
and another 50 basis points increase beginning May 15, 2003 in the interest rate as a result of
ratings downgrades. The allowance for borrowed funds used during construction includes $1.1 million
in 2003 related to NOx expenditures and $1.0 million in 2002 related to a gas combustion
turbine placed in service during 2002.

Liquidity and Capital Resources

Overview

As of December 31, 2004, we had cash and cash equivalents of $16.0 million. In addition, IPL
has available borrowing capacity of $74.3 million, after existing letters of credit, under its $75.0
million committed credit facilities. All long-term borrowings by IPL must first be approved by the
IURC and the aggregate amount of IPL's short-term borrowings must be approved by FERC. IPL has
approval from FERC to borrow up to $500 million of short-term indebtedness outstanding at any time
through July 29, 2006. IPL and IPALCO also have restrictions on the amount of new debt that may be
issued due to financial covenant restrictions under their existing debt obligations and by
contractual obligations of AES. Under such restrictions, IPL is generally allowed to fully draw the
amounts available on its committed credit facilities, refinance existing debt, issue an additional
$30 million of long-term debt approved by the IURC (see below) and incur certain other indebtedness.
We believe that existing cash balances, cash generated from operating activities and borrowing
capacity on IPL's committed credit facilities will be adequate on a short-term and long-term basis
to meet anticipated operating expenses, interest expense on outstanding indebtedness, recurring
capital expenditures and to pay dividends to AES. We believe those sources, along with additional
debt financing, will be adequate to fund principal payments on outstanding indebtedness and
nonrecurring capital expenditures.

We are a holding company, and accordingly substantially all of our cash is generated by the
operating activities of our subsidiaries, principally IPL. None of our subsidiaries, including IPL,
is obligated under or has guaranteed the IPALCO Notes, however, all of IPL's common stock is pledged
under the IPALCO Notes. Accordingly, our ability to make payments on the IPALCO Notes depends on the
ability of our subsidiaries to generate cash and distribute it to us.

IPL's mortgage and deed of trust and its amended articles of incorporation contain restrictions
on IPL's ability to issue certain securities or pay cash dividends. So long as any of the several
series of bonds of IPL issued under its mortgage remains outstanding, and subject to certain
exceptions, 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 the mortgage, after December 31, 1939. The amount which
these mortgage provisions would have permitted IPL to declare and pay as dividends at December 31,
2004, exceeded IPL's retained earnings at that date. In addition, pursuant to IPL's articles, 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.

IPL is also restricted in its ability to pay dividends under the terms of its credit facilities
if it is not in compliance with certain financial covenants. These covenants require IPL to maintain
a ratio of earnings before interest and taxes to interest expense not less than of 2.5 to 1, and a
ratio of total debt to total capitalization not in excess of .60 to 1, in order to pay dividends. As
of December 31, 2004 and as of the filing of this report, IPL and IPALCO were in compliance with all
financial covenants and no event of default existed.

IPL's amended articles of incorporation also require that, so long as any shares of preferred
stock are outstanding, the net income of IPL, as specified in the articles, 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 at least two and one-half times the
annual interest requirements before additional bonds can be authenticated on the basis of property
additions. As of December 31, 2004, the requirements would not materially restrict IPL's ability to
issue additional preferred stock or first mortgage bonds in the ordinary course of prudent business
operations.

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

In May 2004, IPL renewed its $45 million committed line of credit. The new agreement has
substantially the same terms as the previous agreement and matures May 19, 2005. In June 2004, IPL
amended another credit agreement which includes a $30 million committed line of credit and a $40.6
million liquidity facility (related to $40.0 million of IPL variable rate bonds, which are
remarketed weekly) to extend the maturity to May 31, 2005.

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

On February 12, 2003 and April 16, 2003, the IURC issued Orders (collectively the "IURC 2003
Financing Order"), approving IPL's 2003-2006 financing program, including, among other things, the
issuance of up to $160 million of additional long-term debt to pay, in part, for its capital
expenditure program during 2003-2005, and the refinancing of up to approximately $211 million
of long-term debt. To date, $130 million of additional long-term debt has since been issued and the
$80 million of long-term debt due in February 2004 has been refinanced (see above). The IURC 2003
Financing Order also set forth a process whereby, prior to declaring or paying common stock
dividends, IPL must file a report with the IURC which includes certain specific historical and
pro forma financial information including, among other things, information relating to dividends
proposed, dividends paid in the prior twelve months, capitalization and retained earnings. The IURC
2003 Financing Order states that IPL is not to pay any common stock dividends until after twenty
calendar days have passed after IPL has filed its report, or after the IURC approves the common
stock dividend after initiating a proceeding to explore the implications of a proposed dividend. If
within twenty calendar days the IURC does not initiate a proceeding to further explore the
implications of the proposed dividend, the proposed dividend will be deemed approved. The IURC 2003
Financing Order stated that such process should continue in effect during the term of the financing
authority, which expires December 31, 2006.

The reports filed to date with the IURC under the dividend reporting process were all deemed
approved after twenty calendar days had elapsed and the IURC did not initiate any proceedings to
explore the implications of the proposed dividends. Management continues to believe that IPL will
not be prevented from paying future dividends in the ordinary course of prudent business operations.

Our principal sources of funds in 2004 were net cash provided by operating activities of $237.6
million and net proceeds of approximately $98.9 million from the sale of IPL first mortgage bonds.
Net cash provided by operating activities is net of cash paid for interest of $109.6 million and
pension funding of $6.1 million. The principal uses of funds in 2004 included capital expenditures
of $146.8 million, dividends to AES of $119.1 million, and the retirement of $80.0 million of first
mortgage bonds that matured February 1, 2004. We believe our future principal uses of net cash
provided by operating activities, net of required pension contributions, will be capital
expenditures and distributions to our parent, AES.

While we believe that our sources of liquidity will be adequate to meet our needs, this belief is
based on a number of material assumptions, including, without limitation, assumptions about weather,
economic conditions, our credit ratings and those of AES and IPL, regulatory constraints,
environmental pronouncements and pension obligations. If and to the extent these assumptions prove
to be inaccurate, our sources of liquidity may be affected. Moreover, changes in these factors or in
the bank or other credit markets could reduce available credit or our ability to renew existing
liquidity facilities on acceptable terms. The absence of adequate liquidity could adversely affect
our ability to operate our business, and our results of operations and financial condition.

Our non-contingent contractual obligations as of December 31, 2004 are set forth
below:

`Payment due by period
                                                     (in millions)
                                    Less than    1 to 3     4 to 5     Over 5
                                      1 year     years      years      years      Total
                                    ---------- ---------- ---------- ---------- ----------
Long-term debt, including current        $0.0     $138.8     $375.0     $988.9   $1,502.7
  maturities (1)
Capital lease obligations                 1.2        2.0        1.3        0.2        4.7
Operating lease obligations               0.9        1.5        0.8        0.0        3.2
Purchase obligations (2):
  Coal, gas and related
    transportation (3)                  105.3      176.5      118.2        1.4      401.4
  Other (4)                              43.1       26.8       13.1       51.3      134.3
Qualified Pension Plans (5)              12.5        N/A        N/A        N/A       12.5
                                    ---------- ---------- ---------- ---------- ----------
Total                                  $163.0     $345.6     $508.4   $1,041.8   $2,058.8
                                    ========== ========== ========== ========== ==========`

1. Excludes payments for interest or other fees.
2. We have not included purchase orders or normal purchases for goods or services: (1) for which
there is not also an enforceable contract; or (2) which does not specify all significant terms,
including fixed or minimum quantities. We have not included contractual commitments that can be
terminated by us without penalty on notice of 90 days or less.
3. Some fuel purchase contracts contain price re-opener provisions that may be exercised upon
mutual agreement of the parties or upon unilateral action by a party. Obligations reflected above do
not include obligations past the date of a re-opener provision. Not all transportation costs are
currently under contract and this table includes only those that are under contract. Subsequent to
December 31, 2004, we executed an agreement to purchase a minimum of $2.5 million of coal in 2005.
One of our coal agreements may be terminated by us on 10 days notice and is not included in these
totals.
4. Mid-America received a capital call from Enertech of $800,000 in February 2005, which has been
paid and is included in the Less than 1 Year column. The remaining obligation of $2.2 million is
included in years 1 to 3 as our best estimate of the timing of this obligation.
5. Represents the midpoint of estimated potential pension funding of zero and $25 million. We have
not included an estimate of pension funding past 2005.

Capital Expenditures

We spent approximately $146.8 million and $156.9 million on capital expenditures in 2004 and
2003, respectively. Capital expenditures during these periods were financed using internally
generated cash provided by operations, IPL's credit facilities and the net proceeds from the sales
of first mortgage bonds. IPL's construction program is composed of capital expenditures necessary
for prudent utility operations and compliance with environmental laws and regulations, along with
discretionary investments designed to improve overall performance. Our capital expenditure program
for the three-year period 2005-2007 is currently estimated to cost approximately $473 million. The
estimated cost of the overall program by year is $129 million in 2005, $183 million in 2006 and
$161 million in 2007. It includes approximately $132 million for additions, improvements and
extensions to transmission and distribution lines, substations, power factor and voltage regulating
equipment, distribution transformers and street lighting facilities. The capital expenditure program
also includes approximately $27 million for construction projects designed to reduce NOx
emissions; $206 million for construction projects designed to reduce SO2 and mercury
emissions; $96 million for power plant related projects; and $12 million primarily for miscellaneous
office equipment, furniture and leasehold improvements. See "-Environmental Matters-
NOx SIP Call" and "-Environmental Matters - Multipollutant Plan Filing" below,
regarding the IURC ratemaking treatment providing for recovery of our NOx, SO2
and mercury emissions compliance costs.

Distributions

All of our outstanding common stock is held by AES. During 2004 and 2003, we paid $119.1
million and $126.9 million, respectively, in dividends to AES. Future distributions will be
determined in the discretion of our board of directors and will depend primarily on dividends
received from IPL. Dividends from IPL are affected by IPL's actual results of operations, cash
flows, financial condition, capital requirements, regulatory considerations (including compliance
with the IURC 2003 Financing Order described above), and such other factors as IPL's board of
directors deems relevant.

Pension Plans

Total cash contributed to the Defined Benefit Pension Plan and supplemental retirement plan
(the "Pension Plans") was $6.1 million in 2004 and $96.1 million in 2003. Depending on the
timing of contributions, pending legislation, and other factors related to our funding strategy, we
estimate potential cash contributions to the Pension Plans up to $25 million in 2005, but we may
elect not to make any contributions since none are anticipated to be required to meet our minimum
funding targets. This estimate is based on actuarial assumptions using a discount rate of 6.0% and
an assumed long-term rate of return on plan assets of 8.0%.

Pension plan assets consist of investments in equity, real estate, fixed income securities and
cash. Funding for the qualified Defined Benefit Pension Plan is based upon actuarially determined
contributions that take into account the amount deductible for income tax purposes and the minimum
contribution required under the Employee Retirement Income Security Act of 1974, as amended, as well
as targeted funding levels necessary to qualify under standards of the PBGC for exemption from
certain administrative requirements. See "

Related Party Transactions

In June 2004, IPL entered into an agreement with Health and Welfare Benefit Plans LLC, an
affiliate of AES, to participate in a group benefits program, including but not limited to, health,
dental, vision and life benefits, in which AES and other AES subsidiaries also participate. Health
and Welfare Benefit Plans LLC will administer the financial aspects of the group insurance program,
receive all premium payments from the participating affiliates, and make all vendor payments. Health
insurance costs have risen significantly during the last few years. We believe that, though our
insurance costs will likely continue to rise, cost savings can be realized through participation in
this group benefits program with AES. During 2004, IPL paid $7.3 million for six months coverage
under this program beginning August 1, 2004.

Effective September 1, 2003, IPALCO and IPL entered into a property insurance program in which
AES and other AES subsidiaries also participate. The program includes a policy issued by a third
party insurance company for funding losses of the participants up to a total aggregate amount of $20
million. Funds to pay claims within this limit will be derived from premiums paid to this third
party carrier by the participants and will be deposited into a trust fund owned by AES Global
Insurance Company, a wholly-owned subsidiary of AES, but controlled by the third party carrier.
Claims above the $20 million aggregate will be covered by separate insurance policies issued by a
syndicate of third party carriers. These policies will provide coverage of $600 million per
occurrence. We believe that the combined cost of these policies is less than comparable insurance in
the marketplace. The cost of coverage under this program, which began September 1, 2003, was
approximately $3.0 million and $1.0 million in 2004 and 2003, respectively.

AES files federal and state income tax returns which consolidate IPALCO and its subsidiaries.
Under a tax sharing agreement with AES, IPALCO is responsible for the income taxes associated with
its own taxable income.

We also participate with AES and other AES affiliates in global sourcing initiatives intended to
provide cost savings to us. Any agreements we enter into as a result of the global sourcing
initiatives comply with the terms of the Stipulation and Settlement Agreement discussed under
Regulatory Matters in this section.

Inflation

Recent inflation rates have not materially impacted our liquidity or financial condition. Our
exposure to fluctuations in the price of coal is limited because IURC regulations generally provide
for the recovery of fuel costs in the ordinary course of prudent business operations related to
serving IPL's jurisdictional customers above or below the levels included in its rate schedules.
This recovery is accomplished through a fuel cost adjustment filing with the IURC. In addition,
under Indiana law the IURC is required to set jurisdictional retail rates that allow IPL the
opportunity to earn a reasonable rate of return on the fair value of its property. IPL is also
allowed to recover purchased power costs up to a benchmark for most retail service (See -
Regulatory Matters-Retail Ratemaking for details).

Credit Ratings

Our ability to borrow money and the interest rates at which we can borrow money are both
affected by our credit ratings. During 2002 and 2003, certain of IPALCO and IPL's credit ratings
were downgraded. On each of November 15, 2002 and May 15, 2003, the interest rates on the IPALCO
Notes were increased by 50 basis points, as a result of the downgrades. In addition, certain other
fees related to IPL's credit lines have increased due to such downgrades. These downgrades did not
impact the interest rates on IPL's existing long-term debt. Any further reductions in the credit
ratings of AES, IPALCO or IPL would not impact the interest rates on IPALCO or IPL's outstanding
debt, but improvements in IPALCO's credit ratings could reduce the interest rates on the IPALCO
Notes.

The credit ratings of IPALCO and IPL as of March 21, 2005 are as follows:

`Standard & Poors
                                     Moody's        (S&P)            Fitch
                                    --------- ----------------- ---------------
IPALCO Senior Secured Notes            Ba1           BB-              BB
IPL Issuer Rating/Corporate
  Credit Rating/Long Term Rating      Baa3           BB+              BBB-
IPL Senior Secured                    Baa2          BBB-              BBB
IPL Senior Unsecured                    -            BB-              BBB-`

We cannot assure you that our current credit ratings or the credit ratings of IPL
will remain in effect for any given period of time or that one or more of these ratings will not be
lowered or withdrawn entirely by a rating agency. Any downgrade or withdrawal of these credit
ratings may affect our and IPL's ability to borrow and may increase financing costs, which may
decrease earnings.

Off-Balance Sheet Arrangements

IPL formed IPL Funding Corporation ("IPL Funding") in 1996 to purchase, on a
revolving basis, up to $50 million of the retail accounts receivable and related collections of IPL
in exchange for a note payable. IPL Funding is not consolidated by IPL or IPALCO since it meets
requirements set forth in SFAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" to be considered a qualified special-purpose entity.
IPL Funding has entered into a purchase facility with unrelated parties (the "Purchasers")
pursuant to which the Purchasers agree to purchase from IPL Funding, on a revolving basis, up to
$50.0 million of the receivables purchased from IPL. During 2004, this agreement was extended
through October 26, 2005. As of December 31, 2004, the aggregate amount of receivables IPL has sold
to IPL Funding and IPL Funding has sold to the Purchasers was $50.0 million. Accounts receivable on
IPALCO's balance sheets are stated net of the $50 million sold.

The net cash flows between IPL and IPL Funding are limited to cash payments made by IPL to IPL
Funding for interest charges and processing fees. These payments totaled approximately $1.1 million,
$1.0 million and $1.1 million for the years ended December 31, 2004, 2003 and 2002, respectively.
IPL retains servicing responsibilities through its role as a collection agent for the amounts due on
the purchased receivables. IPL and IPL Funding provide certain indemnities to the Purchasers,
including indemnification in the event that there is a breach of representations and warranties made
with respect to the purchased receivables. IPL Funding and IPL each have agreed to indemnify the
Purchasers on an after-tax basis for any and all damages, losses, claims, liabilities, penalties,
taxes, costs and expenses at any time imposed on or incurred by the indemnified parties arising out
of or otherwise relating to the purchase facility, subject to certain limitations as defined in the
purchase facility. The transfers of receivables to IPL Funding are recorded as sales however no gain
or loss is recorded on the sale.

Under the receivables purchase facility, if IPL fails to maintain certain financial covenants
regarding interest coverage and debt-to-capital ratios, it would constitute a "termination
event." IPL is in compliance with such covenants.

As a result of IPL's current credit rating, the facility agent has the ability to (i) replace IPL
as the collection agent; and (ii) declare a "lock-box" event. Under a lock-box event or a
termination event, the facility agent has the ability to require all proceeds of purchased
receivables of IPL to be directed to lock-box accounts within 45 days of notifying IPL. A
termination event would also (i) give the facility agent the option to take control of the lock-box
account, and (ii) give the Purchasers the option to discontinue the purchase of new receivables and
cause all proceeds of the purchased receivables to be used to reduce the Purchaser's investment and
to pay other amounts owed to the Purchasers and the facility agent. This would have the effect of
reducing the operating capital available to IPL by the aggregate amount of such purchased
receivables (currently $50 million).

Regulatory Matters

General

IPL is a regulated public utility and is principally engaged in providing electric 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 accounting methods required to be used
by nonregulated entities.

IPL is subject to extensive regulation at both the federal and state level. IPL is substantially
affected by the regulatory jurisdiction of the EPA and the FERC at the federal level; and the
Indiana Department of Environmental Management and the IURC at the state level. Other significant
regulatory agencies affecting IPL include, but are not limited to, the U.S. Department of Labor and
the Indiana Occupational Safety and Health Administration. The regulatory power of the IURC over IPL
is both comprehensive and typical of the economic regulation generally imposed by state public
utility commissions.

An inherent business risk facing any regulated public utility is that of unexpected or adverse
regulatory action. Regulatory discretion is reasonably broad in Indiana, as elsewhere. Therefore,
IPL attempts to work cooperatively with regulators and those who participate in the regulatory
process, while remaining vigilant in protecting or asserting IPL's legal rights in the regulatory
process. IPL takes an active role in addressing regulatory policy issues in the current regulatory
environment. Current federal initiatives include FERC's efforts to deregulate the wholesale energy
markets (discussed below under "-Industry Changes-FERC-Midwest ISO").
Additionally, there is increased activity by environmental regulators. (See Environmental
Matters.)

Retail Ratemaking

IPL's tariffed rates for electric 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 Indiana Office of Utility Consumer
Counselor, as well as other interested consumer groups and customers. Pursuant to statute, the IURC
is to conduct a periodic review of the basic rates and charges of all utilities at least once every
four years. 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. Numerous factors including, but not limited to, weather, inflation, customer growth and
usage, the level of actual operating and maintenance expenditures, capital expenditures, fuel costs,
generating unit availability and purchased power costs and availability 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 (see below). We assume fuel and purchase power cost risk for Elect Plan customers.
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 basic rates, subject to certain
restrictions on the level of operating income. In addition, IPL's rate authority provides for a
return on IPL's investment and recovery of the depreciation and operation and maintenance expenses
associated with the NOx compliance construction program and the Multipollutant Plan (See
Environmental Matters).

IPL is generally allowed to recover, through its fuel adjustment charge, the fuel portion of
purchased power costs incurred to meet jurisdictional retail load. Purchased power costs below an
established benchmark are presumed to be fuel costs. Under a settlement agreement approved by the
IURC, which expires March 31, 2005, the benchmark for IPL is established at $77.50 per MWh. The
settlement also generally provides for recovery of 85% of power purchased up to $700/MWh to replace
capacity losses for certain full forced outages and environmental derates for power purchases up to
the first 11% of IPL's total rated summer capacity in any hour and full recovery for power purchases
exceeding 11% of IPL's total rated summer capacity in any hour. IPL has a new settlement agreement
pending at the IURC which would continue the recovery mechanism and establish a prospective
benchmark each month related to the forward price for oil or natural gas.

Elect Plan

In 1998, the IURC approved a plan (the "Elect 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. As of December 31, 2004, approximately 1% of IPL's retail customers were included in
the Elect Plan. Customers who do not choose one of the Elect Plan options receive electric service
under existing tariffs. IPL's authority to offer these options will expire on December 31, 2006,
unless a subsequent plan is approved by the IURC. Under the Elect Plan, eligible IPL customers may
enter into written contracts for:

Fixed Rate3⁄4
Pay a guaranteed fixed rate per unit of consumption for one or more years.

Green Power3⁄4
Purchase environmentally friendly or "green" power.

Sure Bill3⁄4
Pay the same bill each month for 12 months, regardless of how much electricity is used.

Authorized Annual Jurisdictional Net Operating Income

Indiana law requires electric utilities under the jurisdiction of the IURC to meet operating
expense and income test 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 jurisdictional net 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 jurisdictional net
operating income grossed up for federal and state taxes.

IPL's authorized annual jurisdictional net operating income, for purposes of quarterly operating
income tests, is $163 million, as established in IPL's last base rate case, plus additional returns
authorized in the ECCRA filings (see below) of $6.7 million as of December 31, 2004. During the four
quarterly measurement dates in 2004, the IURC found that IPL's rolling annual jurisdictional retail
electric operating income was less than the authorized annual jurisdictional net operating income.
During the four quarterly measurement dates in 2003, the IURC found that IPL's rolling annual
jurisdictional retail electric operating income was greater than the authorized annual
jurisdictional net operating income by $13.5 million and $1.8 million at January and April,
respectively, and was less than the authorized annual jurisdictional net operating income at July
and October of 2003. Because IPL has a cumulative net operating income deficiency, we were not
required to make customer refunds for any of these periods. As of IPL's quarterly measurement date
on October 31, 2004, IPL had a cumulative net operating income deficiency of $748.7 million. The
deficiency is calculated by summing the quarterly measurement period annual results from the date of
the last rate Order. Because of the deficiency, IPL can, for a period of time, earn above the
authorized annual electric jurisdictional retail net operating income without being required to make
customer refunds. Based on our current assumptions, we do not anticipate our rolling annual
jurisdictional retail electric operating income to be greater than the authorized annual
jurisdictional net operating income for the measurement periods in 2005.

The IURC approved an Environmental Compliance Cost Recovery Adjustment ("ECCRA")
pertaining to equipment being installed to allow IPL to meet the NOx emission limits
imposed pursuant to the EPA's NOx SIP call. A return on IPL's clean coal technology
("CCT") investments is included in this ratemaking treatment. IPL may add the approved
return on its CCT projects to its authorized annual jurisdictional net operating income in
subsequent fuel adjustment charge proceedings. The additional amount of return will be dependent on
the cumulative amount of CCT investment that has been made at the time IPL files a request for
approval of an increase in the ECCRA. Such requests can be made no more often than every 6
months.

Stipulation and Settlement Agreement

During 2002, the IURC issued an Order approving a Stipulation and Settlement Agreement
entered into by IPL, the Indiana Office of Utility Consumer Counselor, and two intervening parties.
The Stipulation and Settlement Agreement requires IPL to: meet certain ongoing performance measures
for system reliability and customer call center performance or pay penalties of up to $1.75 million
per quarter; file quarterly reports regarding service reliability and call center performance; file
reports following major storm events; upgrade or replace its Outage Management System and Energy
Management System at a cost of approximately $6 million; and issue credits totaling $1.16 million to
certain residential customers whose service was interrupted in July 2001 following severe storms in
our service area. The system reliability performance measures are assessed quarterly based on a
twelve-month rolling average. IPL has been subject to the quarterly measures for system reliability
and customer call center performance since the second fiscal quarter of 2002. To date, IPL has paid
penalties totaling $1.8 million for failing to meet certain of the performance measures. The
Stipulation and Settlement Agreement expires March 31, 2005.

IURC 2003 Financing Order

On February 12, 2003, the IURC issued an Order which approved IPL's 2003-2006 financing
program and set forth a process whereby IPL must file a report with the IURC, prior to declaring or
paying common stock dividends. Please see "Liquidity and Capital Resources" for
more information relating to that Order.

Environmental Compliance

Please see "Environmental Matters" for a discussion of our IURC filings
related to our proposed capital expenditures for environmental compliance.

Industry Changes

In recent years, various forms of proposed industry-restructuring legislation and/or
rulemakings have been introduced at the federal level. 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 have enacted laws to allow more competition and customer choice in the retail energy
markets within their respective states. Indiana has not done so. A discussion of the legislative and
regulatory initiatives most likely to affect IPL follows:

FERC - Midwest ISO

Background. IPL's participation in the wholesale power and transmission markets is subject to
FERC requirements. IPL filed its open access transmission service tariff and request for the
authority to sell wholesale power at market-based rates on January 6, 2000. FERC accepted IPL's
tariff and made effective its market-based rate authority on April 29, 2000. Subsequently, IPL
joined the Midwest ISO and sought FERC and IURC approval of the transfer of functional control of
its transmission facilities to the Midwest ISO. Upon agency approval, IPL's transmission operations
were integrated with those of the Midwest ISO on February 1, 2002.

FERC Notice of Proposed Rulemaking - Standard Market Design. On July 31, 2002, FERC issued
a Notice of Proposed Rulemaking regarding Standard Market Design ("SMD"), which proposed
to standardize the structure and operation of competitive wholesale power markets nationally. With
respect to IPL, the SMD proposal would modify the terms and conditions under which the Midwest ISO
would provide transmission service over IPL's transmission facilities. The SMD proposal would also
be incorporated as part of the Midwest ISO's Midwest Market Initiative ("MMI"), which is
scheduled to be in place on April 1, 2005. FERC subsequently issued on April 28, 2003, its White
Paper entitled "Wholesale Power Market Platform." It has also indicated it will continue
to consider comments, maintain outreach to states and stakeholders, and monitor pending legislation
in Congress as it prepares the final rule, the timing of which is uncertain. FERC has not taken
action on this NOPR, and at this time we cannot determine what, if any, impact the final SMD rule
will have on IPL.

Midwest ISO's Open Access Transmission and Energy Markets Tariff. The Midwest ISO filed
its revised Open Access Transmission and Energy Markets Tariff with the FERC in March 2004, as part
of the MMI to standardize the structure and operation of competitive wholesale power markets. The
MMI proposes non-discriminatory transmission services, reliable grid operation, and the purchase and
sale of electric energy in a competitive, efficient and non-discriminatory manner. This initiative
includes a market-based transmission congestion management system that relies on locational marginal
pricing, i.e., pricing for energy at a given location based on a market clearing price that
takes into account physical limitations, generation and demand throughout the Midwest ISO region.
Market participants will be able to hedge their exposure to these congestion costs by acquiring
certain financial transmission rights with which they may receive compensation for, or be required
to pay, congestion related charges.

Subsequent Orders issued by FERC accepted and suspended the proposed Open Access Transmission and
Energy Markets Tariff and permitted it to become effective March 1, 2005, subject to conditions and
further Orders on specific issues. Subsequent Orders addressed the treatment of certain
grandfathered agreements, which does not have a material affect on IPL or its agreements, and
directed the Midwest ISO to implement additional safeguards during the startup and transition to
fully-functioning energy markets. On January 27, 2005, the Midwest ISO announced it will proceed to
implement its energy market but settlements under the Open Access Transmission and Energy Markets
Tariff would not be financially binding during March for parties participating in the energy market
until April 1, 2005.

Market Based Rates and Market Power. In April 2004, the FERC issued two Orders concerning
the ability of a utility to sell wholesale electricity at market-based rates, including the adoption
of new interim screens for assessing potential generation market power of applicants for wholesale
market based rates. We have submitted our Market Power Analysis pursuant to the FERC's Orders and
IPL is awaiting an Order from FERC on this matter. We do not believe this issue will have a material
impact on the company.

Operational Changes and Cost Recovery. The restructuring of the energy markets will also
have an impact on the costs associated with IPL's energy service to its utility customers. In July
2004, IPL, PSI Energy, Inc, Northern Indiana Public Service Company, Inc., and Vectren Energy
Delivery of Indiana, Inc., filed a Joint Petition with the IURC for approval of certain changes in
operations that are likely to result from the Midwest ISO's implementation of energy markets, and
for determination of the manner and timing of recovery of costs resulting from the energy markets.
IPL has requested recovery of costs resulting from operational changes, such as charges and credits
settled in the day-ahead and real-time energy markets, through the fuel cost adjustment. Costs
associated with Midwest ISO MMI, such as Midwest ISO administrative adders and other charges and
credits, are generally proposed to be recovered pursuant to a proposed standard contract rider. A
hearing was heard on this matter on February 10 and 11, 2005. At this time, we cannot predict the
effect these filings, or the implementation of the MMI, will have on our business or results of
operations.

Wholesale Energy Markets

The MMI will change IPL's interface with wholesale energy markets, particularly with respect
to day-ahead and real-time transactions. On occasion, IPL depends on purchased power to meet its
retail load obligations. We currently purchase power from specific counter-parties with which we
have executed interchange agreements in place. Subsequent to the start up of the MMI, it is
anticipated that most of these purchases will be made using the Midwest ISO energy market. IPL also
engages in limited wholesale power marketing after first providing for its projected utility retail
load. Power marketing enables us to use excess power generating capacity, when available, to
generate wholesale revenues. Our ability to compete effectively in the wholesale market is dependent
on a variety of factors, including our available excess generation, the supply of wholesale power,
and the price, terms and conditions of sale we proposed. Subsequent to the start of the Midwest ISO
Energy Market, we anticipate our wholesale revenues will be generated primarily from sales directly
to the Midwest ISO Energy Market, replacing the current practice of direct wholesale sales to
individual wholesale counter-parties using existing interchange agreements. We are unable to predict
the effect this may have on wholesale sales in 2005 and beyond. During the past five years,
wholesale revenues represented an average of approximately 5.9% of our total electric revenues.

Blackout Report - Reliability Standards

In April 2004, the U.S.- Canadian Power System Outage Task Force filed its Final Report on
the August 14, 2003 electric power blackout that occurred in large portions of the Midwest and
Northeast United States and Ontario, Canada. The blackout did not include IPL's service territory.
The Final Report contains findings and recommendations related to the blackout. The adoption of
federal legislation regarding mandatory and enforceable reliability provisions is central to the
recommendations of the task force.

Pending federal reliability legislation would provide the FERC with authority to certify an
Electric Reliability Organization that will set mandatory standards. The North American Electric
Reliability Council ("NERC") will most likely fill this role and will have enforcement
authority. The 108th Congress adjourned without passing mandatory and enforceable reliability
standards and similar legislation has yet to be enacted by the 109th Congress.

NERC recently adopted a set of formalized reliability standards (Version 0 Reliability Standards)
that consist of existing operating and planning standards. On February 9, 2005, FERC supplemented
its reliability policy to include compliance with NERC's Version 0 Reliability Standards as part of
its definition of Good Utility Practice in its pro forma open access transmission tariff. Although
NERC does not currently have authority to mandate compliance with these standards, utilities
generally choose to voluntarily comply with the standards. At this time we cannot fully predict the
effect any legislation or other implementation of the recommendations of the Task Force will have on
IPL. However, we currently estimate spending approximately $3.3 million for transmission system
monitoring and control equipment by the end of 2006 in anticipation of requirements that we believe
are likely to be imposed on all transmission control areas.

Energy and Reliability Bill

Congress has considered, but failed to pass, a comprehensive energy plan in 2003. During
2004, a reliability bill was considered but also failed to pass. It is anticipated that energy
legislation will again be introduced during this session of Congress. Many issues remain to be
resolved and we are not able to predict whether or not legislation will pass this year, and if
passed, the scope and content of such legislation.

Retail Energy Market

The legislatures of several states have enacted 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 competition is fully effective. Additionally, a few states have implemented programs that
experiment with allowing some form of customer choice of electricity suppliers. Indiana has not done
so.

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 Ind. Code chapter 8-1-2.5. This law enables the IURC to
consider and approve, on an individual utility basis, utility-initiated proposals wherein the IURC
declines to exercise jurisdiction over the whole or any part of the utility, or its retail energy
service or both. The 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. Comprehensive restructuring bills were
introduced in the Indiana Senate in 1998, 1999 and 2000, but failed to pass. There has been no
restructuring legislation submitted in Indiana since 2000.

Indiana Legislative Matters

In January 2005, a Republican Governor took office in Indiana for the first time in 16 years,
and Republicans took control of both the House of Representatives and Senate for the first time
since 1996. This is expected to result in many changes throughout state government. Although we are
unable to predict the legislative agenda of the current administration, we do not anticipate any
restructuring legislation by the state of Indiana in 2005.

Environmental Matters

We are subject to various federal, state and local environmental protection and health and
safety laws and regulations governing, among other things, the generation, storage, handling, use,
disposal and transportation of hazardous materials; the emission and discharge of hazardous and
other materials into the environment; and the health and safety of our employees. These laws and
regulations often require a lengthy and complex process of obtaining and renewing permits and other
governmental authorizations from federal, state and local agencies. Violation of these laws,
regulations or permits can result in substantial fines, other sanctions, permit revocation and/or
facility shutdowns. We believe that we operate in material compliance with environmental laws,
regulations and permits and health and safety laws. We cannot assure, however, that we have been or
will be at all times in full compliance with such laws, regulations and permits.

Under certain environmental laws, we could be held responsible for costs relating to
contamination at our past or present facilities and at third party waste disposal sites. We could
also be held liable for human exposure to such hazardous substances or for other environmental
damage. We cannot assure that our costs of complying with current and future environmental and
health and safety laws, and our liabilities arising from past or future releases of, or exposure to,
hazardous substances will not adversely affect our business, results of operations or financial
condition.

Multipollutant Plan Filing

On November 30, 2004, in response to a petition we filed, the IURC issued an Order approving
up to $182 million of capital expenditures to install pollution control technology at two of our
power plants. These capital expenditures are projected to address required SO2 and
mercury emissions reductions from our power plants and to reduce fine particulate pollution in the
atmosphere. The Order also approves ratemaking treatment for such expenditures, including a return
on the investment and recovery of depreciation expenses and operation and maintenance expenses
associated with these projects. The Order also granted IPL the authority to add the approved return
on its environmental projects to IPL's authorized annual jurisdictional net operating income in
subsequent fuel adjustment charge proceedings. We believe these expenditures are necessary to
reliably and economically achieve a level of emission reductions that complies with the Clean Air
Interstate Rule and the Clean Air Mercury Rule (the "Clean Air Rules of 2005") that are
discussed in more detail below. We cannot assure that all costs to comply with the Clean Air Rules
of 2005 will be covered by the IURC Order.

The Clean Air Act

The Clean Air Act Amendments of 1990 (the "Clean Air Act") affect both new and
existing facilities. The Clean Air Act and many state laws require significant reductions in
SO2, particulate matter, and NOx emissions that result from burning fossil
fuels. The following is a discussion of specific areas that affect our business, primarily under or
related to the Clean Air Act and the rules thereunder, including the Clean Air Rules of 2005.

NOxSIP Call. On October 27, 1998, the EPA issued a final rule, referred
to as the NOx SIP call, requiring Indiana, along with 21 other states in the eastern
third of the United States and the District of Columbia, to impose more stringent limits on
NOx emissions from fossil fuel-fired steam electric generators, including those operated
by IPL. The EPA's NOx SIP call requires operators of coal-fired electric utility boilers
in designated areas to limit NOx emissions during the annual ozone season. In 2001, the
Indiana Air Pollution Control Board adopted rules requiring fossil fuel-fired electric generating
units, including IPL's, to adhere to the requirements of the EPA's NOx SIP call which
became effective on May 31, 2004. IPL is in compliance with those requirements.

In November 2002, the IURC issued a Certificate of Public Convenience and Necessity for the
construction and use of CCT to allow IPL to meet the NOx emission limits imposed pursuant
to the EPA's NOx SIP call. The CCT constitutes qualified pollution control property as
defined in Ind. Code section 8-1-2-6.6 and the IURC has approved ratemaking treatment applicable to
such property through the ECCRA. The ratemaking treatment provided for in the IURC Order includes a
return on the investment in IPL's planned CCT projects under construction. After the projects have
been placed in service, the approved ratemaking treatment provides for a return on the investment
and recovery of the depreciation expenses and operation and maintenance expenses associated with
these projects. Such costs are deferred as regulatory assets on IPALCO's balance sheets. The
ratemaking treatment also provides for recovery of expenditures related to the purchase of
NOx emission allowances, should such expenditures be made to supplement IPL's CCT
construction projects. IPL may add the approved return on its CCT projects to its authorized annual
jurisdictional net operating income in subsequent fuel adjustment charge proceedings. The increase
in the amount of rate revenues and authorized net operating income resulting from IPL's CCT plan
will be determined in periodic filings to the IURC to be made at intervals of no more often than
every 6 months and will depend on the amount of cumulative investment, depreciation expenses,
operation and maintenance expenses and actual NOx emission allowance purchases at the
time of each of the filings. These ECCRA filings have collectively added $6.7 million to IPL's
authorized annual jurisdictional net operating income through December 31, 2004.

Through December 31, 2004, IPL spent approximately $185 million on NOx emissions
reduction projects. Further expenditures are estimated to be approximately $27 million in 2005 to
substantially meet the required NOx SIP Call reductions.

Clean Air Interstate Rule. On March 10, 2005 the EPA signed the Clean Air Interstate Rule,
("CAIR") which will reduce interstate migration of air pollutants on downwind states. The
CAIR will establish a two-phase regional cap and trade program for SO2 and NOx
emissions that will result in emissions reductions of approximately 70% and 65%, respectively, by
2015. Required SO2 and NOx reductions may require IPL to install additional
control technologies prior to 2010.

Mercury. On March 15, 2005 the EPA signed the Clean Air Mercury Rule that will require
utilities to reduce mercury emissions from new and existing coal fired power plants. The rule
creates `standards of performance' limiting mercury emissions from utilities and establishes a
staged approach for reductions via a "cap-and-trade" program. The first phase cap, to be
achieved by 2010, is 38 tons. In the second phase, due in 2018, coal-fired power plants will be
subject to a second cap, which will reduce nationwide emissions to 15 tons upon full implementation.

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

On December 17, 2004, EPA signed a final rule designating Marion and Morgan Counties, and a
portion of Pike County, as nonattainment for the fine particulate matter ambient air quality
standard, effective April 5, 2005. Our Petersburg Plant, Harding Street Station and Eagle Valley
Plant are located in Pike, Marion and Morgan Counties, respectively. On March 7, 2005, the state of
Indiana filed a petition in the D.C. Circuit Court of Appeals challenging EPA's nonattainment
designations for Morgan County and the portion of Pike County. At this time, it is not possible to
predict the outcome of this litigation.

The non attainment designation for both ozone and particulate matter will legally require the
state of Indiana to modify its SIP by 2008. The SIP will detail how the state will regain its
compliance status. The potential impact these new EPA designations may have on our generating
stations is unclear at this time.

Section 126 Petitions. In February 1998, eight northeastern states filed petitions seeking
the EPA's assistance in reducing ozone in the eastern United States under Section 126 of the Clean
Air Act. On May 15, 2001, the U.S. Appeals Court for the District of Columbia Circuit upheld the EPA
rule requiring some power plants in the Midwest to reduce NOx emissions. This ruling does
not currently affect IPL's Indiana fossil fuel-fired plants, as long as IPL complies with
NOx SIP Call requirements. At this time, it is impossible to determine what impact, if
any, the EPA's February 17, 2005 agreement with the state of North Carolina to minimize migratory
pollutants from upwind states will have on our operations. However, we cannot guarantee that IPL's
plants will not be affected by these or other Section 126 petitions at some point in the future.

New Source Review. The EPA has commenced an investigation of the fossil fuel-fired
electric power generation industry to determine compliance with environmental requirements under the
Clean Air Act associated with repairs, maintenance, modifications and operational changes made to
facilities over the years. The EPA's focus is on whether such changes were subject to New Source
Review ("NSR") or new source performance standards, and whether best available control
technology was or should have been installed. In the summer of 2000, IPL received two Clean Air Act
Section 114 requests from the EPA regarding its maintenance modifications and operational activities
over the last twenty-five years. IPL responded to this information request in December 2000, January
2001 and January 2005. To date, the EPA has yet to act directly on this request.

The EPA promulgated two new rules on December 31, 2002, and October 27, 2003 that clarified some
of the issues as to when an NSR permit is required. The substantive changes made in the December 31,
2002 rule were adopted by the Indiana Air Pollution Control Board and became effective in Indiana on
September 9, 2004, but have yet to be incorporated into the state's implementation plan. The October
27, 2003 rule, however, which establishes criteria for when the replacement of facility components
requires an NSR permit, has been stayed in court pending review by the US Court of Appeals for the
DC Circuit. We believe it is unlikely that Indiana will proceed with state regulations to
incorporate the October 27, 2003 rule until these legal issues are resolved. Moreover, the EPA has
recently given conflicting signals as to the future course on the NSR enforcement initiative. On
November 5, 2003, the EPA's top enforcement official revealed plans to close pending investigations.
However, in an abrupt change, on January 9, 2004, the agency announced its intent to bring new court
actions. In addition, the New York Attorney General has requested from the EPA copies of the
documents that several utilities, including IPL, produced in response to the EPA's request. There is
the potential that New York or another state could file an NSR enforcement case based on the citizen
suit provisions of the Clean Air Act. With the liability issues currently being decided in courts
and the potential for the EPA or New York filing new lawsuits in this area, IPL cannot assure how or
when this issue will be resolved.

Regional Haze. The EPA published the final regional haze rule on July 1, 1999. This rule
established planning and emission reduction timelines for states to use to improve visibility in
national parks throughout the United States. On June 22, 2001, the EPA signed a proposed rule to
guide states in implementing the 1999 rule and in controlling power plant emissions that cause
regional haze problems. The proposed rule set guidelines for states in setting best available
retrofit technology, or BART, at older power plants. On May 5, 2004, EPA published a proposed rule
with new BART provisions and reproposed the BART guidelines. The new regional haze rule could (1)
require newer and cleaner technologies and additional controls on conventional particulates, and (2)
result in reductions in SO2, NOx and particulate matter emissions from utility
sources. If the proposed rules are finalized and utility air emissions reductions are required,
compliance costs could be significant. At this time, we cannot, however, estimate the costs to
comply with the final regional haze rule.

Global Warming. The Kyoto Protocol to the United Nations Framework Convention on Climate
Change went into force on February 16, 2005, and requires countries that have ratified it to make
substantial reductions in "greenhouse gas" emissions. While it seems unlikely the Kyoto
Protocol will be ratified by the United States under the Bush Administration, global warming remains
a policy issue that is regularly considered for possible government regulation, and if legislation
requiring reductions in greenhouse gases is adopted, such regulation could substantially affect both
the costs and the operating characteristics of IPL's fossil fuel-fired plants.

Cooling Water Intake. On February 16, 2004, the EPA issued final rules governing existing
facilities that have cooling water intake structures. The regulation, which is designed to protect
aquatic life, requires that the location, design, and construction of cooling water intake
structures reflect the best technology available to prevent impingement or entrainment of aquatic
life. IPL will be required to conduct aquatic studies to determine if its intake structures minimize
adverse environmental impact. Once the studies are completed, IPL may be required to take measures
to reduce harm to the aquatic environment. At this time, it is not possible to determine the results
of the aquatic studies or what, if any, corrective actions IPL may be required to take.

Mercury. In December 2000, the EPA announced it would adopt rules to regulate mercury
emissions from coal-fired power plants pursuant to the Clean Air Act hazardous air pollutant rules.
In December 2003, the EPA proposed alternative approaches to achieving reductions in mercury
emissions from coal-fired utilities. One of these approaches is to regulate mercury and nickel as
hazardous air pollutants and establish nationally uniform emission limits developed by applying the
Maximum Achievable Control Technology criteria. These requirements would be applicable to existing
facilities three years after the final rule is promulgated, but with the potential for a one year
extension. If this alternative were selected and finalized in 2005, compliance would be required by
2008. In the alternative, the EPA proposed to rescind its prior finding that it is necessary and
appropriate to regulate mercury as a hazardous pollutant from coal plants and instead proposed to
issue guidelines that would be minimum standards for state regulation of mercury from coal plants.
Under this approach, the targeted compliance date for first phase mercury reductions would be 2010
and the second phase in 2018. In the proposed rulemaking, the EPA also indicated that it would be
issuing a supplemental proposed "cap and trade" rule that would allow companies to comply
by reducing emissions or purchasing emission allowances from other companies. The supplemental
proposed "cap and trade" rule was issued on February 24, 2004. Such a rule, if adopted,
would provide IPL with increased flexibility in compliance.

Cooling Water Intake. On February 16, 2004, the EPA issued final rules governing existing
facilities that have cooling water intake structures. The regulation, which is designed to protect
aquatic life, requires that the location, design, and construction of cooling water intake
structures reflect the best technology available to prevent impingement or entrainment of aquatic
life. IPL will be required to conduct aquatic studies to determine if its intake structures minimize
adverse environmental impact. Once the studies are completed, IPL may be required to take measures
to reduce harm to the aquatic environment. At this time, it is not possible to determine the results
of the aquatic studies or what, if any, corrective actions IPL may be required to take.

Clear Skies Legislation

President Bush proposed environmental legislation that would create a mandatory program that
would reduce power plant emissions of SO2, NOx and mercury by setting a
national cap on each pollutant. Clear Skies legislation was first introduced in both Houses of
Congress in July 2002, and reintroduced in 2003, 2004 and 2005. On March 9, 2005, the Senate
Environmental Committee failed to pass Clear Skies. Several committee members have requested further
analysis and information, which is likely to significantly delay any reconsideration of the bill in
the Senate. It is unclear as to whether or if federal Clear Skies legislation will pass
Congress.We are unable to predict the scope and content of
any final legislation or whether any environmental emission legislation will be approved.

Summary

In summary, environmental laws and regulations presently require substantial capital
expenditures and operating costs. Our capital expenditures relating to environmental matters were
approximately $81 million in 2004, substantially all of which related to the NOx SIP
call. We currently estimate total additional capital expenditures related to environmental matters
of approximately $55 million, $86 million and $92 million during 2005, 2006 and 2007, respectively.
In addition, environmental laws are complex, change frequently and have tended to become more
stringent over time. As a result, our operating expenses and continuing capital expenditures
associated with environmental matters may increase. More stringent standards may also limit our
operating flexibility. Because other electric power plants will have similar restrictions, we
believe that compliance with more stringent environmental laws and regulations is not likely to
affect our competitive position. However, depending upon the level and timing of recovery allowed by
the IURC, these costs could adversely affect our financial condition, liquidity and results of
operations.

Current Business Outlook

The electric utility business is affected by seasonal weather patterns throughout the year
and, therefore, our operating revenues and associated operating expenses are not generated evenly by
month during the year. Traditionally, retail kWh sales, after adjustments for weather variations,
have grown in reasonable 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 1.4%. Our number of
retail customers also grew at a compound annual rate of 1.4% during the past 10 years.

New Accounting Standards

Please refer to Note 2 of the Notes to the Consolidated Financial Statements of IPALCO
included in Item 8 of this Form 10-K for a discussion of new accounting pronouncements and the
potential impact to our results of operations and financial position.

Item 7A. Quantitative and Qualitative Disclosure about Market Risk

Interest Rate Risk

We use long-term debt as a significant source of capital in our business, which exposes us to
interest rate risk. We do not enter into market risk sensitive instruments for trading purposes. We
manage our exposure to interest rate risk through the use of fixed-rate debt, interest rate hedging
instruments and by refinancing existing long-term debt at times when it is deemed economic and
prudent. In addition, IPL has two credit facilities that bear interest at variable rates based
primarily on the London InterBank Offered Rate, or LIBOR. As of December 31, 2004, IPL was not drawn
on these credit facilities, but did have a $0.8 million letter of credit against one of the
facilities. Our fair values relating to financial instruments are dependent upon prevalent market
rates of interest, primarily LIBOR. At December 31, 2004, we had $1,462.7 million principal amount
fixed rate debt and a $40 million principal amount variable rate debt issue. The interest rate in
effect on the $40 million variable rate debt issue was 2.0% as of December 31, 2004, which was
effectively fixed at 5.21% through a floating-to-fixed rate swap, which expires concurrent with the
debt issue in January 2023. The fair value of IPL's swap agreement was $(7.1) million at December
31, 2004. The following table shows our consolidated indebtedness (in millions) by maturity as of
December 31, 2004:

`2005     2006     2007     2008     2009   Thereafter   Total   Fair Value
                         -------- -------- -------- -------- -------- ---------- --------- ----------

Fixed-rate debt             $0.0    $58.8    $80.0   $375.0     $0.0     $948.9  $1,462.7   $1,601.8
Variable-rate debt
  swapped to fixed           0.0      0.0      0.0      0.0      0.0       40.0      40.0       40.0
                         -------- -------- -------- -------- -------- ---------- --------- ----------
Total Indebtedness          $0.0    $58.8    $80.0   $375.0     $0.0     $988.9  $1,502.7   $1,641.8
                         ======== ======== ======== ======== ======== ========== ========= ==========
Weighted Average Interest
  Rates by Maturity           N/A    8.00%   7.375%   8.375%      N/A     7.156%    7.505%`

Fuel

IPL has limited exposure to commodity price risk for the purchase of coal, the primary fuel
used by IPL for the production of electricity. IPL manages this risk by providing for approximately
84% of its current projected burn through 2006, and 68% of its current projected burn through 2009,
under long-term contracts. The balance of IPL's projected burn is purchased under short-term
contracts and on the spot market. We anticipate coal purchases made in 2005 outside of existing
contractual commitments will be made at prices that are higher than those experienced in 2004. 
Our exposure to fluctuations in the price of coal is limited because IURC regulations provide for
the recovery of estimated fuel costs above or below the levels included in IPL's rate schedules.
This recovery is accomplished through a fuel cost adjustment filing with the IURC.

Power Purchases

IPL depends on purchased power, in part, to meet its retail load obligations. As a result, we
also have limited exposure to commodity price risk for the purchase of electric energy for our
retail customers. Purchased power costs can be highly volatile. IPL is generally allowed to recover,
through its fuel adjustment charge, the fuel portion of purchased power costs incurred to meet
jurisdictional retail load. In certain circumstances, IPL may not be allowed to recover a portion of
purchased power costs incurred to meet its jurisdictional retail load. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Regulatory Matters-Retail
Ratemaking".

Wholesale Sales

IPL engages in limited wholesale power marketing to earn wholesale revenues after first
providing for its projected utility retail load. Power marketing enables us to use excess power
generating capacity, when available, to generate wholesale revenues. Our ability to compete
effectively in the wholesale market is dependent on a variety of factors, including our available
excess generation, the supply of wholesale power, and the price, terms and conditions of sale we
proposed. Subsequent to the start of the Midwest ISO Energy Market, we anticipate our wholesale
revenues will be generated primarily from sales directly to the Midwest ISO Energy Market, replacing
the current practice of direct wholesale sales to individual wholesale counter-parties using
existing interchange agreements. During 2004, the average market price per kWh we sold wholesale
increased by 15.2% to $32.9, as compared to 2003. During the past five years, wholesale revenues
represented an average of approximately 5.9% of our total electric revenues.

Elect Plan

The Elect Plan offered by IPL, as discussed under "Regulatory Matters - Elect Plan," allows
IPL to offer certain customers the opportunity to select optional payment or service plans. IPL's
authority to offer these options will expire on December 31, 2006 unless a subsequent plan is
approved by the IURC. IPL is subject to the market risk of both purchased power costs and fuel costs
for those customers who have chosen to receive power under one of the Elect Plan options. These
costs associated with Elect Plan customers are not recovered under the fuel cost adjustment
proceedings as set forth in "Fuel" and "Power Purchases" discussed above.

Counter-Party Credit Risk

IPL utilizes forward purchase contracts to manage the risk associated with power purchases,
and is exposed to counter-party credit risk in these contracts. IPL manages this exposure to
counter-party credit risk by entering into contracts with companies that are expected to fully
perform under the terms of the contract. Individual credit limits are implemented for each counter-
party to further mitigate credit risk. IPL may also ask a counter-party to provide collateral in the
event certain credit ratings are not maintained, or certain financial benchmarks are not
maintained.

Remarketing Agreement and Liquidity Facility

IPL has entered into a Remarketing Agreement with J.P. Morgan Securities, Inc. ("J.P.
Morgan") for the weekly remarketing of IPL's $40 million City of Petersburg, Indiana, Pollution
Control Refunding Revenue Bonds Adjustable Rate Tender Securities Series 1995B, Indianapolis Power
& Light Company Project (the "Pollution Control Bonds"). J.P. Morgan is obligated to
use its best efforts to remarket the Pollution Control Bonds, but is not obligated to buy or take
any position in the Pollution Control Bonds. In addition, one of the conditions precedent to J.P.
Morgan's obligations is that there shall have been no adverse change in the properties, business,
condition (financial or otherwise) or results of operations of IPL. In the event J.P. Morgan is
unable to remarket the Pollution Control Bonds, a $40.6 million liquidity facility is in place in
the form of a Credit Agreement to purchase the Pollution Control Bonds. The Trustee for the
Pollution Control Bonds has sole authority to request an advance under this facility, and this is
only contemplated in the event of a failed remarketing of the Pollution Control Bonds by J.P.
Morgan. The Credit Agreement contains financial covenants regarding IPL's debt to total
capitalization and interest coverage, with which IPL is in compliance.

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

|IPALCO Enterprises, Inc. and Subsidiaries - Consolidated Financial Statements                                         | Page
|--------------------------------------------------------------------------------------------------------------------- | ----
|Independent Auditors' Report                                                                                          | 37  
|Consolidated Statements of Income for the years ended December 31, 2004, 2003 and
2002                                | 38  
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                                          | 39  
|Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003
and 2002                            | 40  
|Consolidated Statements of Common Shareholder's Equity (Deficit) for the years ended
December 31, 2004, 2003 and 2002 | 41  
|Notes to Consolidated Financial Statements                                                                            | 42  
|Indianapolis Power & Light Company - Financial Statements                                                             |     
|Independent Auditors' Report                                                                                          | 63  
|Statements of Income for the years ended December 31, 2004, 2003 and 2002                                             | 64  
|Balance Sheets as of December 31, 2004 and 2003                                                                       | 65  
|Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002                                         | 66  
|Statements of Common Shareholder's Equity for the years ended December 31, 2004,
2003 and 2002                        | 67  
|Notes to Financial Statements                                                                                         | 68  





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholder and Board of Directors of IPALCO Enterprises, Inc.:
Indianapolis, Indiana

We have audited the accompanying consolidated balance sheets of IPALCO
Enterprises, Inc. and subsidiaries (the "Company") as of December 31, 2004 and 2003, and
the related consolidated statements of income, common shareholder's equity (deficit), and cash flows
for each of the three years in the period ended December 31, 2004.  Our audits also included
the financial statement schedules listed in the Index at Item 15.  These financial statements
and financial statement schedules are the responsibility of the Company's management.  Our
responsibility is to express an opinion on the financial statements and financial statement
schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements present fairly, in all
material respects, the financial position of IPALCO Enterprises, Inc. and subsidiaries as of
December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.  Also, in our opinion, such financial
statement schedules, when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly in all material respects the information set forth therein.





Indianapolis, Indiana
March 23, 2005

---

`IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Statements of Income
For the Years Ended December 31, 2004, 2003 and 2002

(In Thousands)

                                                     2004        2003        2002
                                                  ----------- ----------- -----------
ELECTRIC UTILITY OPERATING REVENUES                 $885,473    $838,165    $823,078

UTILITY OPERATING EXPENSES:
  Operation:
    Fuel                                             191,786     178,402     173,028
    Other operating expenses                         130,458     127,839     114,424
  Power purchased                                     15,172      16,942      18,002
  Maintenance                                         78,105      84,153      62,065
  Depreciation and amortization                      125,011     119,595     117,985
  Taxes other than income taxes                       34,563      27,857      30,596
  Income taxes - net                                  96,044      96,794     106,392
                                                  ----------- ----------- -----------
    Total utility operating expenses                 671,139     651,582     622,492
                                                  ----------- ----------- -----------
UTILITY OPERATING INCOME                             214,334     186,583     200,586
                                                  ----------- ----------- -----------
OTHER INCOME AND (DEDUCTIONS):
  Allowance for equity funds used during
    construction                                       1,829       4,351       3,927
  Gain (loss) on sales of assets - net                   852        (830)      4,378
  Other - net                                         (2,521)     (3,047)     (5,006)
  Income tax benefit - net                            28,066      25,906      23,184
                                                  ----------- ----------- -----------
    Total other income and (deductions) - net         28,226      26,380      26,483
                                                  ----------- ----------- -----------
INTEREST AND OTHER CHARGES:
  Interest on long-term debt                         113,065     105,021      97,522
  Other interest                                         589         654         493
  Allowance for borrowed funds used during
    construction                                      (1,940)     (2,188)     (1,811)
  Amortization of redemption premiums and
    expense on debt-net                                2,639       2,998       2,706
  Preferred dividends of subsidiary                    3,213       3,213       3,213
                                                  ----------- ----------- -----------
    Total interest and other charges - net           117,566     109,698     102,123
                                                  ----------- ----------- -----------
NET INCOME                                          $124,994    $103,265    $124,946
                                                  =========== =========== ===========
  See notes to consolidated financial statements`

---

`IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Balance Sheets
As of December 31, 2004 and 2003

(In Thousands)


                                                               December 31,  December 31,
                            ASSETS                                 2004          2003
UTILITY PLANT:                                                 ------------  ------------
  Utility plant in service                                      $3,421,828    $3,205,454
  Less accumulated depreciation                                  1,356,364     1,277,373
                                                               ------------  ------------
      Utility plant in service - net                             2,065,464     1,928,081
  Construction work in progress                                     76,303       160,774
  Land held for sale                                                     -         6,623
  Property held for future use                                       1,085         1,085
                                                               ------------  ------------
      Utility plant - net                                        2,142,852     2,096,563
OTHER ASSETS:                                                  ------------  ------------
  Nonutility property - at cost, less accumulated depreciation       1,499         1,511
  Other investments                                                  7,270         7,762
                                                               ------------  ------------
      Other assets - net                                             8,769         9,273
                                                               ------------  ------------
CURRENT ASSETS:
  Cash and cash equivalents                                         16,029        13,974
  Accounts receivable and unbilled revenue (less allowance
    for doubtful accounts of $2,137 and $1,653 respectively)        56,125        44,155
  Fuel - at average cost                                            22,392        29,803
  Materials and supplies - at average cost                          48,929        47,056
  Net income tax refunds receivable                                  3,164        11,397
  Prepayments and other current assets                               4,377         4,574
                                                               ------------  ------------
      Total current assets                                         151,016       150,959
                                                               ------------  ------------
DEFERRED DEBITS:
  Regulatory assets                                                132,042       110,061
  Miscellaneous                                                     32,669        30,954
                                                               ------------  ------------
      Total deferred debits                                        164,711       141,015
                                                               ------------  ------------
              TOTAL                                             $2,467,348    $2,397,810
                                                               ============  ============
                CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
  Common shareholder's deficit:
    Premium on 4% cumulative preferred stock                          $649          $649
    Paid in capital                                                    791           104
    Accumulated deficit                                            (58,194)      (64,111)
    Accumulated other comprehensive loss                           (51,328)      (58,420)
                                                               ------------  ------------
      Total common shareholder's deficit                          (108,082)     (121,778)
  Cumulative preferred stock of subsidiary                          59,135        59,135
  Long-term debt                                                 1,502,064     1,482,011
                                                               ------------  ------------
      Total capitalization                                       1,453,117     1,419,368
                                                               ------------  ------------
CURRENT LIABILITIES:
  Accounts payable                                                  39,310        49,074
  Accrued expenses                                                  19,806        20,221
  Dividends payable                                                      -           868
  Accrued real estate and personal property taxes                   15,840        14,662
  Accrued income taxes and other taxes                               9,700         3,873
  Accrued interest                                                  27,869        25,759
  Customer deposits                                                 11,706        10,428
  Other current liabilities                                          1,342         2,046
                                                               ------------  ------------
      Total current liabilities                                    125,573       126,931
                                                               ------------  ------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
  Accumulated deferred income taxes - net                          355,285       335,008
  Regulatory liabilities and other removal costs                   382,559       361,221
  Unamortized investment tax credit                                 25,464        28,173
  Accrued postretirement benefits                                    6,799         6,059
  Accrued pension benefits                                         107,080       112,574
  Miscellaneous                                                     11,471         8,476
                                                               ------------  ------------
      Total deferred credits and other long-term liabilities       888,658       851,511
                                                               ------------  ------------
COMMITMENTS AND CONTINGENCIES (Note 12)
              TOTAL                                             $2,467,348    $2,397,810
                                                               ============  ============`

See notes to consolidated financial statements

---

`IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2004, 2003 and 2002`

---

See notes to consolidated financial statements

---

`IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Statements of Common Shareholder's Equity (Deficit)
For the Years Ended December 31, 2004, 2003 and 2002

(In Thousands)

                                                     Premium on 4%             Retained   Accumulated
                                                       Cumulative              Earnings      Other
                                                       Preferred    Paid in  (Accumulated Comprehensive
                                                         Stock      Capital    Deficit)       Loss         Total
                                                     -------------- -------- ------------ ------------- -----------
Balance at January 1, 2002                                    $649       $0      $15,049      ($11,469)     $4,229
                                                     -------------- -------- ------------ ------------- -----------
  Distributions to AES                                                          (180,472)                 (180,472)
  Comprehensive Income (Loss):
   Net income                                                                    124,946                   124,946
   Minimum pension liability adjustment, net                                                   (38,050)    (38,050)
     of income taxes of $23,247
   Adjust financial instruments to fair market                                                  (3,102)     (3,102)
     value, net of income taxes of $1,895
                                                     -------------- -------- ------------ ------------- -----------
 Total Comprehensive Income (Loss)                               0        0      124,946       (41,152)     83,794
                                                     -------------- -------- ------------ ------------- -----------
Balance at December 31, 2002                                  $649       $0     ($40,477)     ($52,621)   ($92,449)
                                                     -------------- -------- ------------ ------------- -----------
   Distributions to AES                                                         (126,899)                 (126,899)
   Contributions from AES                                               104                                    104
  Comprehensive Income (Loss):
   Net income                                                                    103,265                   103,265
   Minimum pension liability adjustment, net                                                    (5,536)     (5,536)
     of income taxes of $3,772
   Adjust financial instruments to fair market                                                    (263)       (263)
     value, net of income taxes of $179
                                                     -------------- -------- ------------ ------------- -----------
 Total Comprehensive Income (Loss)                               0        0      103,265        (5,799)     97,466
                                                     -------------- -------- ------------ ------------- -----------
Balance at December 31, 2003                                  $649     $104     ($64,111)     ($58,420)  ($121,778)
                                                     -------------- -------- ------------ ------------- -----------
   Distributions to AES                                                         (119,077)                 (119,077)
   Contributions from AES                                               687                                    687
  Comprehensive Income:
   Net income                                                                    124,994                   124,994
   Minimum pension liability adjustment, net
     of income taxes of $(512)                                                                   5,630       5,630
   Adjust financial instruments to fair market
     value, net of income taxes of $(615)                                                        1,462       1,462
                                                     -------------- -------- ------------ ------------- -----------
 Total Comprehensive Income                                      0        0      124,994         7,092     132,086
                                                     -------------- -------- ------------ ------------- -----------
Balance at December 31, 2004                                  $649     $791     ($58,194)     ($51,328)  ($108,082)
                                                     ============== ======== ============ ============= ===========
See notes to consolidated financial statements.`

IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2004, 2003 and 2002

1.	ORGANIZATION

IPALCO Enterprises, Inc. ("IPALCO") is a holding company incorporated under the
laws of the state of Indiana. IPALCO is a wholly-owned subsidiary of The AES Corporation
("AES"). IPALCO was acquired by AES in March 2001 (the "AES Acquisition").
IPALCO owns all of the outstanding common stock of its subsidiaries (collectively referred to as
"Enterprises"). Substantially all of Enterprises business consists of the generation,
transmission, distribution and sale of electric energy conducted through its principal subsidiary,
Indianapolis Power & Light Company ("IPL"). IPL has more than 460,000 retail customers
in the city of Indianapolis and neighboring cities, towns and communities, and adjacent rural areas
all within the state of Indiana, the most distant point being approximately forty miles from
Indianapolis. IPL has an exclusive right to provide electric service to those customers. IPL owns
and operates two primarily coal-fired generating plants, one combination coal and gas-fired plant
and a separately-sited combustion turbine that are all used for generating electricity. IPL's net
electric generation capability for winter is 3,370 megawatts and net summer capability is 3,252
megawatts.

IPALCO's other direct subsidiary is Mid-America Capital Resources, Inc., ("Mid-
America"). Mid-America is the holding company for IPALCO's unregulated activities. Mid-America
owns a 4.4% interest in EnerTech Capital Partners II L.P. ("Enertech"), a venture capital
fund that invests in early stage and emerging growth companies in the energy technology, clean
technology and related markets. IPALCO's regulated business is conducted through IPL. Enterprises
has two business segments: electric and all other. The electric segment consists of the operations
of IPL and everything else is included in the all other segment.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:  IPALCO's consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of America
("GAAP"). The consolidated financial statements include the accounts of IPALCO, its
regulated utility subsidiary, IPL, and its unregulated subsidiary, Mid-America. All significant
intercompany items have been eliminated in consolidation.

The operating components of all subsidiaries other than IPL, as well as nonoperating income of
IPL, are included below UTILITY OPERATING INCOME in the accompanying consolidated statements of
income.

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 ("FERC"). 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 GAAP, including the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 71, "Accounting for the Effects of Certain Types of
Regulation," which gives recognition to the ratemaking and accounting practices of these
agencies.

Revenues:  Revenues related to the sale of energy are generally recognized when service is
rendered or energy is delivered to customers. However, the determination of the energy sales to
individual customers is based on the reading of their meters, which occurs on a systematic basis
throughout the month. At the end of each month, amounts of energy delivered to customers since the
date of the last meter reading are estimated and the corresponding unbilled revenue is estimated.
This unbilled revenue is estimated each month based on daily generation volumes, estimated customer
usage by class, weather factors, line losses and applicable customer rates based on regression
analyses reflecting significant historical trends and experience. Customer accounts receivable at
December 31, 2004 include unbilled energy revenues of $36.2 million on a base of annual revenue of
$885.5 million.

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 IPL's basic rates. Actual fuel costs in excess of or under estimated
fuel costs billed are deferred or accrued, respectively. IPL files 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.

IPL is generally allowed to recover, through its fuel adjustment charge, the fuel portion of
purchased power costs incurred to meet jurisdictional retail load. Purchased power costs below an
established benchmark are presumed to be fuel costs. Under a settlement agreement approved by the
IURC, which expires March 31, 2005, the benchmark for IPL is established at $77.50 per MWh. The
settlement also generally provides for recovery of 85% of power purchased up to $700/MWh to replace
capacity losses for certain full forced outages and environmental derates for power purchases up to
the first 11% of IPL's total rated summer capacity in any hour and full recovery for power purchases
exceeding 11% of IPL's total rated summer capacity in any hour. IPL has a new settlement agreement
pending at the IURC which would continue the recovery mechanism and establish a prospective
benchmark each month related to the forward price for oil or natural gas.

In 1998, the IURC approved a plan (the "Elect 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. As of December 31, 2004, approximately 1% of IPL's retail customers were included in the
Elect Plan. Customers who do not choose one of the Elect Plan options receive electric service under
existing tariffs. IPL's authority to offer these options will expire on December 31, 2006, unless a
subsequent plan is approved by the IURC. Under the Elect Plan, eligible IPL customers may enter into
written contracts for (i) Fixed Rate3⁄4
Pay a guaranteed fixed rate per unit of consumption for one or more years (ii) Green Power3⁄4
Purchase environmentally friendly or "green" power or (iii) Sure Bill3⁄4
Pay the same bill each month for 12 months, regardless of how much electricity is used.

Regulatory Assets and Liabilities:  Regulatory assets represent deferred costs that have
been 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. IPL is amortizing such nontax-related regulatory assets to expense over periods ranging from
1 to 30 years. 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. Regulatory liabilities
represent obligations associated with retirement of tangible long-lived assets and the associated
non-legal asset retirement costs.

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 Unit 4 at the
Petersburg Plant. As authorized in the 1995 Electric Rate Settlement, 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.

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

On November 14, 2002, the IURC issued a Certificate of Public Convenience and Necessity for the
construction and use of clean coal technology ("CCT") to allow IPL to meet the nitrogen
oxide ("NOx") emission limits imposed pursuant to the U.S. Environmental
Protection Agency's ("EPA") NOx State Implementation Plan ("SIP")
call. The CCT constitutes qualified pollution control property as defined in Ind. Code section 8-1-
2-6.6 and the IURC has approved ratemaking treatment applicable to such property through an
Environmental Compliance Cost Recovery Adjustment ("ECCRA"). The ratemaking treatment
provided for in the IURC Order includes a return on the investment in IPL's planned CCT projects
under construction. After the projects have been placed in service, the approved ratemaking
treatment provides for a return on the investment and recovery of the depreciation expenses and
operation and maintenance expenses associated with these projects. Such costs are deferred as
regulatory assets on IPALCO's balance sheets (see Note 5).

Authorized Annual Jurisdictional Net Operating Income:  Indiana law requires
electric utilities under the jurisdiction of the IURC to meet operating expense and income test
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 jurisdictional
net 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 jurisdictional net operating income
grossed up for federal and state taxes.

IPL's authorized annual jurisdictional net operating income, for purposes of quarterly operating
income tests, is $163 million, as established in IPL's last base rate case, plus additional returns
authorized in the ECCRA filings of $6.7 million as of December 31, 2004. During the four quarterly
measurement dates in 2004, the IURC found that IPL's rolling annual jurisdictional retail electric
operating income was less than the authorized annual jurisdictional net operating income. During the
four quarterly measurement dates in 2003, the IURC found that IPL's rolling annual jurisdictional
retail electric operating income was greater than the authorized annual jurisdictional net operating
income by $13.5 million and $1.8 million at January and April, respectively, and was less than the
authorized annual jurisdictional net operating income at July and October of 2003. Because IPL has a
cumulative net operating income deficiency, it was not required to make customer refunds for any of
these periods. As of IPL's quarterly measurement date on October 31, 2004, IPL had a cumulative net
operating income deficiency of $748.7 million. The deficiency is calculated by summing the quarterly
measurement period annual results from the date of the last rate Order. Because of the deficiency,
IPL can, for a period of time, earn above the authorized annual electric jurisdictional retail net
operating income without being required to make customer refunds.

The IURC approved the use of CCT, which constitutes qualified pollution control property as
defined in Ind. Code section 8-1-2-6.6 and ratemaking treatment through the ECCRA that allows IPL to
meet the NOx emission limits imposed pursuant to the EPA'sNOx SIP
Call. A return on the investment in IPL's CCT investments is included in the ratemaking treatment.
IPL may add the approved return on its CCT projects to its net operating income authorized by the
IURC for purposes of annual operating income test requirements in subsequent fuel adjustment charge
proceedings. The additional amount of return will be dependent on the cumulative amount of CCT
investment that has been made at the time IPL files with the IURC for ratemaking treatment on such
CCT investment. Such filings are made at intervals of no more often than every 6 months.

Contingencies:  Enterprises accrues for loss contingencies when the amount of the loss is
probable and estimable. Enterprises is subject to various environmental regulations, and is involved
in certain legal proceedings. If Enterprises' actual environmental and/or legal obligations are
different from our estimates, the recognition of the actual amounts may have a material impact on
Enterprises' operating results and financial condition.

Concentrations of Risk:  Substantially all of IPL's customers are located within the
Indianapolis area. In addition, approximately 68% of IPL's employees are covered by collective
bargaining agreements in two bargaining units: a physical unit and a clerical-technical unit. IPL's
current contracts with the physical unit and the clerical-technical units expire on December 19,
2005 and February 19, 2007, respectively.

Allowance For Funds Used During Construction:  In accordance with the Uniform System of
Accounts prescribed by FERC, 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 8.8%, 9.5% and 9.4% during 2004, 2003 and 2002, 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, 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 3.7% during 2004, 3.6% during 2003 and 3.7% during 2002.

Off-Balance Sheet Arrangements:  IPL formed IPL Funding Corporation
("IPL Funding") in 1996 to purchase, on a revolving basis, up to $50 million of the retail
accounts receivable and related collections of IPL in exchange for a note payable. IPL Funding is
not consolidated by IPL or IPALCO since it meets requirements set forth in SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" to be considered a qualified special-purpose entity. IPL Funding has entered into a
purchase facility with unrelated parties (the "Purchasers") pursuant to which the
Purchasers agree to purchase from IPL Funding, on a revolving basis, up to $50.0 million of the
receivables purchased from IPL. During 2004, this agreement was extended through October 26, 2005.
As of December 31, 2004 and 2003, the aggregate amount of receivables IPL has sold to IPL Funding
and IPL Funding has sold to the Purchasers pursuant to this purchase facility was $50.0 million.
Accounts receivable on the accompanying consolidated balance sheets of IPALCO are stated net of the
$50 million sold.

The net cash flows between IPL and IPL Funding are limited to cash payments made by IPL to IPL
Funding for interest charges and processing fees. These payments totaled approximately $1.1 million,
$1.0 million and $1.1 million for the years ended December 31, 2004, 2003 and 2002, respectively.
IPL retains servicing responsibilities through its role as a collection agent for the amounts due on
the purchased receivables. IPL and IPL Funding provide certain indemnities to the Purchasers,
including indemnification in the event that there is a breach of representations and warranties made
with respect to the purchased receivables. IPL Funding and IPL each have agreed to indemnify the
Purchasers on an after-tax basis for any and all damages, losses, claims, liabilities, penalties,
taxes, costs and expenses at any time imposed on or incurred by the indemnified parties arising out
of or otherwise relating to the purchase facility, subject to certain limitations as defined in the
purchase facility. The transfers of receivables to IPL Funding are recorded as sales however no gain
or loss is recorded on the sale.

Under the receivables purchase facility, if IPL fails to maintain certain financial covenants
regarding interest coverage and debt-to-capital ratios, it would constitute a "termination
event." IPL is in compliance with such covenants.

As a result of IPL's current credit rating, the facility agent has the ability to (i) replace IPL
as the collection agent; and (ii) declare a "lock-box" event. Under a lock-box event or a
termination event, the facility agent has the ability to require all proceeds of purchased
receivables of IPL to be directed to lock-box accounts within 45 days of notifying IPL. A
termination event would also (i) give the facility agent the option to take control of the lock-box
account, and (ii) give the Purchasers the option to discontinue the purchase of new receivables and
cause all proceeds of the purchased receivables to be used to reduce the Purchaser's investment and
to pay other amounts owed to the Purchasers and the facility agent. This would have the effect of
reducing the operating capital available to IPL by the aggregate amount of such purchased
receivables (currently $50 million).

Derivatives:  Enterprises has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Enterprises accounts for its derivatives in
accordance with SFAS No. 133 "Accounting for Derivatives", as amended. Enterprises
has one interest rate swap agreement, which it entered into as a means of managing the interest rate
exposure on its variable-rate debt. Management has formally designated the swap as a hedge. IPALCO's
balance sheets reflect the current fair market value of this hedge and IPALCO records the change in
its fair value in accumulated other comprehensive loss. Management relies on financial institutions,
which use standard market conventions to determine the fair value of Enterprises' hedges. All
methods of assessing fair value result in a general approximation of value and such value may never
be realized.

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. Those income taxes payable which are includable in
allowable costs for ratemaking purposes in future years are recorded as regulatory assets with a
corresponding deferred tax liability. 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. Contingent liabilities related to income
taxes are recorded when the criteria for loss recognition under SFAS No. 5, "Accounting for
Contingencies," as amended, have been met.

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

Investments:  As of December 31, 2004, Mid-America owned a 4.4% investment in EnerTech
Capital Partners II L.P., a venture capital fund, recorded at approximately $4.1 million. Enteprises
evaluates the recoverability of investments in unconsolidated subsidiaries when events or changes in
circumstances indicate the carrying amount of the asset is other than temporarily impaired. An
investment is considered impaired if the fair value of the investment is less than its carrying
value. Impairment losses are recognized when an impairment is considered to be other than temporary.
Impairments are considered to be other than temporary when we do not expect to recover the
investment's carrying value for a reasonable period of time. In making this determination,
Enterprises considers several factors, including, but not limited to, the intent and ability to hold
the investment, the severity of the impairment, the duration of the impairment and the entity's
historical and projected financial performance. Once an investment is considered other than
temporarily impaired and an impairment loss is recognized, the carrying value of the investment is
not adjusted for any subsequent recoveries in fair value. As of December 31, 2004, we do not have
any material unrealized losses that are deemed to be temporary in nature.

Long Term Compensation Plan:  During 2004, most of IPL's non-union employees received
benefits under the AES Long Term Compensation Plan, a deferred compensation program. Benefits under
this plan are granted in the form of performance units payable in cash, AES restricted stock units
and options to purchase shares of AES common stock. All three of such components granted to non-
union employees of IPL vest in thirds over a three-year period and the terms of the AES restricted
stock units also include a five-year minimum holding period. In addition, the performance units
payable in cash are subject to certain AES performance criteria. Total deferred compensation expense
recorded during 2004 was $1.5 million and was included in Other Operating Expenses on IPALCO's
consolidated statements of income. The value of these benefits is being amortized over the 36 month
vesting period and a portion is recorded as miscellaneous deferred credits with the remainder
recorded as paid in capital on IPALCO's balance sheets in accordance with SFAS No. 148
"Accounting for Stock-Based Compensation- Transition and Disclosure - An Amendment of FASB
Statement No. 123."

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

In May 2004, the FASB issued FASB Staff Position ("FSP") 106-2, which provides guidance
on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization
Act of 2003 for employers that sponsor postretirement health care plans that provide prescription
drug benefits. The effects of FSP 106-2, which were not material, were incorporated into the
November 30, 2004 measurement of plan obligations, as required.

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

Per Share Data: IPALCO is a wholly-owned subsidiary of AES and does not report earnings on
a per-share basis.

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

3.	UTILITY PLANT IN SERVICE

The original cost of utility plant in service at December 31, segregated by functional
classifications, follows:

`2004        2003
                                                     ----------- -----------
                                                          (IN THOUSANDS)
Production                                           $2,059,490  $1,881,449
Transmission                                            257,118     256,046
Distribution                                            939,178     904,607
General                                                 166,042     163,352
                                                     ----------- -----------
Total Utility Plant in Service                       $3,421,828  $3,205,454
                                                     =========== ===========`

Substantially all of IPL's property is subject to a $692.7 million direct first mortgage lien, as
of December 31, 2004, securing IPL's first mortgage bonds. Total utility plant in service includes
$4.0 and $1.2 million of property under capital leases as of December 31, 2004 and 2003,
respectively. Total non-legal removal costs at December 31, 2004 and 2003 were $382.6 million and
$361.2 million, respectively.

4.	DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of financial instruments has been determined by Enterprises 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 Enterprises could
realize in a current market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

Cash and Cash Equivalents:  The book value approximates fair value due to the short
maturity of these instruments.

Long-Term Debt and Cumulative Preferred Stock of Subsidiary:  The fair value of
Enterprises' outstanding fixed rate debt and cumulative preferred stock have been determined on the
basis of the quoted market prices 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, 2004, and 2003, the approximate fair value of Enterprises' long-term
debt was $1,642 million and $1,595 million, respectively. The fair value of the variable-rate debt
outstanding at December 31, 2004 and 2003 approximates its face amount, which is $40 million. The
fair value of IPL's interest rate swap agreement at December 31, 2004 and 2003 is approximately
$(7.1) million and $(7.3) million, respectively. These amounts estimate what IPL would have to pay
to sell its position in the swap. In addition, on December 31, 2003, IPL was party to an interest
rate lock agreement to hedge the interest rate risk on $100 million of first mortgage bonds IPL
issued in January 2004. The agreement had a fair value of approximately $(1.9) million at December
31, 2003 and IPL settled it in January of 2004 for $(1.7) million. The fair value of IPL's
cumulative preferred stock approximates its book value as IPL is subject to regulation and gains and
losses may be included in rates.

5.	REGULATORY ASSETS

The amounts of regulatory assets (see also Note 2) at December 31 are as follows:

`2004        2003
                                                     ----------- -----------
                                                         (IN THOUSANDS)
Related to deferred taxes                               $81,505     $61,804
Unamortized reacquisition premium on debt                15,463      16,640
Unamortized Petersburg unit 4 carrying charges and
  certain other costs                                    22,847      23,901
Deferred Midwest ISO costs                                7,791       4,825
NOx Project Expenses                                      4,214       2,458
Other                                                       222         433
                                                     ----------- -----------
Total regulatory assets                                $132,042    $110,061
                                                     =========== ===========`

Included in prepayments and other current assets at December 31, 2004 and 2003 are deferred fuel
costs of $8.4 thousand and $2.5 million, respectively.

6.	CAPITAL STOCK

IPALCO's common stock is pledged under AES' Amended and Restated Credit and Reimbursement
Agreement as well as AES' Collateral Trust Agreement. There have been no changes to IPALCO's capital
stock balances during the three years ended December 31, 2004.

Dividend Restrictions:  Restrictions on the payment of cash dividends or other
distributions of IPL common stock held by IPALCO and on the purchase or redemption of such shares by
IPL are contained in the indenture 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 IPL's common stock unless dividends on all outstanding shares of IPL's preferred stock
have been paid or declared and set apart for payment. All of IPL's retained earnings at December 31,
2004 were free of such restrictions. IPL is also restricted in its ability to pay dividends under
the terms of its credit facilities if it is not in compliance with certain financial covenants.
These covenants require IPL to maintain a ratio of earnings before income taxes to interest expense
not in excess of 2.5 to 1, and a ratio of total debt to total capitalization not in excess of .60 to
1, in order to pay dividends. IPL was in compliance with such covenants as of December 31, 2004.

In addition, on February 12, 2003 and April 16, 2003, the IURC issued Orders (collectively, the
"IURC 2003 Financing Order"), approving IPL's 2003-2006 financing program, including, among other
things, the issuance of up to $160 million of additional long-term debt to pay, in part, for IPL's
capital expenditure program during 2003-2005, and the refinancing of up to approximately $211
million of long-term debt. To date, $130 million of additional long-term debt has since been issued
and the $80 million of long-term debt due in February 2004 has been refinanced. In addition, the
IURC 2003 Financing Order set forth a process whereby, prior to declaring or paying common stock
dividends, IPL must file a report with the IURC which includes certain specific historical and pro
forma financial information including, among other things, information relating to dividends
proposed, dividends paid in the prior twelve months, capitalization and retained earnings. The IURC
2003 Financing Order states that IPL is not to pay any common stock dividends until after twenty
calendar days have passed after IPL has filed its report, or after the IURC approves the common
stock dividend after initiating a proceeding to explore the implications of a proposed dividend. If
within twenty calendar days the IURC does not initiate a proceeding to further explore the
implications of the proposed dividend, the proposed dividend will be deemed approved. The IURC 2003
Financing Order stated that such process should continue in effect during the term of the financing
authority, which expires December 31, 2006.

The reports IPL has filed to date with the IURC under the dividend reporting process were all
deemed approved after twenty calendar days had elapsed and the IURC did not initiate any proceedings
to explore the implications of the proposed dividends. Management continues to believe that IPL will
not be prevented from paying future dividends in the ordinary course of prudent business
operations.

Cumulative Preferred Stock of Subsidiary:  IPL has five separate series of cumulative
preferred stock. Holders of preferred stock are entitled to receive dividends at rates per annum
ranging from 4.0% to 5.65%. During each year ended December 31, 2004, 2003 and 2002, total preferred
stock dividends were $3.2 million. Holders of preferred stock 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 of IPL's board of directors. IPL has issued and outstanding 500,000 shares of
5.65% Preferred Stock, which are 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. Additionally, IPL has
91,353 shares of preferred stock which are redeemable solely at the option of IPL and can be
redeemed in whole or in part at any time at specific call prices.

At December 31, 2004 and 2003, preferred stock consisted of the following:

`December 31, 2004      December 31,
                                    ---------------------- ------------------
                                        Shares      Call
                                     Outstanding   Price     2004     2003
                                    ---------------------- ------------------
                                                           (PAR VALUE IN
Cumulative $100 Par Value,                                 THOUSANDS)
   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   50,000
                                    --------------         ------------------
Total cumulative preferred stock          591,353           $59,135  $59,135
                                    ==============         ==================`

7.	INDEBTEDNESS

Long-term Debt

Before IPL can incur additional long-term debt, it must first obtain approval from the
IURC. As of December 31, 2004, IPL had approval from the IURC to issue up to $30 million of
additional long-term debt, primarily for the purpose of funding a portion of its planned capital
expenditures. Also, IPL and IPALCO have restrictions on the amount of new debt they may issue by
contractual obligations of AES and financial covenant restrictions under existing debt obligations
at IPL and IPALCO. Under such restrictions, IPL is generally allowed to fully draw the amounts
available on its credit facilities, refinance existing debt, issue the remaining debt approved by
the IURC and issue certain other indebtedness.

The following table presents Enterprises' long-term indebtedness as of December 31, 2004 and
2003:

`December 31,
                                                            ----------------------
Series                        Due                               2004        2003
------------------------------------------------------------------------------------
                                                            (IN THOUSANDS)
IPL First Mortgage Bonds:
6.05%                         February 2004                          $-     $80,000
8%                            October 2006                       58,800      58,800
7.375%                        August 2007                        80,000      80,000
6.30%                         July 2013                         110,000     110,000
6.10%*                        January 2016                       41,850      41,850
5.40%*                        August 2017                        24,650      24,650
5.75%*                        August 2021                        40,000      40,000
5.50%*                        October 2023                       30,000      30,000
7.05%                         February 2024                     100,000     100,000
6.625%*                       December 2024                      40,000      40,000
5.90%*                        December 2024                      20,000      20,000
5.95%*                        December 2029                      30,000      30,000
5.95%**                       August 2030                        17,350      17,350
6.60%                         January 2034                      100,000           -
Unamortized discount - net                                         (586)       (639)
                                                            ------------------------
Total first mortgage bonds                                      692,064     672,011
                                                            ------------------------
IPL Unsecured Notes:
1995B*                        January 2023                       40,000      40,000
6.375%*                       November 2029                      20,000      20,000
                                                            ------------------------
Total IPL Unsecured Notes                                        60,000      60,000
                                                            ------------------------
Total long-term debt - IPL                                      752,064     732,011
Long-Term Debt - IPALCO:                                    ------------------------
8.375% Senior Secured Notes, due November 2008                  375,000     375,000
8.625% Senior Secured Notes, due November 2011                  375,000     375,000
                                                            ------------------------
Total long-term debt - IPALCO                                   750,000     750,000
                                                            ------------------------
Total consolidated IPALCO long-term debt                     $1,502,064  $1,482,011
                                                            ========================

*  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.
** Notes are issued to the Indiana Develpment Finance Authority, to secure the loan of
    proceeds from various tax-exempt instruments issued by the Indiana Develpment Finance
    Authority.`

___________________

*	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.

**	Notes are issued to the Indiana Development Finance Authority, to secure the loan of
proceeds from various tax-exempt instruments issued by the Indiana Development Finance
Authority.

IPL First Mortgage Bonds. The mortgage and deed of trust of IPL, together with the
supplemental indentures thereto, secure the first mortgage bonds issued by IPL. Pursuant to the
terms of the mortgage, substantially all property owned by IPL is subject to a $692.7 million direct
first mortgage lien, as of December 31, 2004. The IPL first mortgage bonds require net earnings as
calculated thereunder be at least two and one-half times the annual interest requirements before
additional bonds can be authenticated on the basis of property additions. IPL was in compliance with
such requirements as of December 31, 2004.

On August 6, 2003, IPL issued $110 million of 6.30% first mortgage bonds due July 1, 2013. The
net proceeds of approximately $109 million were used primarily to finance a portion of IPL's capital
expenditure program, to reimburse its treasury for expenditures previously incurred in connection
with the capital expenditure program and to repay amounts outstanding on its credit lines. In
January 2004, IPL issued $100 million of 6.60% first mortgage bonds due January 1, 2034.
The net proceeds of approximately $99 million were used to retire $80 million of 6.05% first
mortgage bonds due February 1, 2004 and to reimburse IPL's treasury and pay down IPL's committed
credit facilities for expenditures previously incurred in connection with its capital expenditure
program.

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

The IPALCO Notes. IPALCO has outstanding $375 million of 7.375% and $375 million of 7.625%
Senior Secured Notes due November 14, 2008 and November 14, 2011, respectively (the "IPALCO
Notes"), which are secured by IPALCO's pledge of all of the outstanding common stock of IPL.
Interest on the IPALCO Notes is paid semi-annually on May 15 and November 15. On each of November
15, 2002 and May 15, 2003, the interest rates on these notes were increased by 50 basis points, as a
result of downgrades of IPALCO's credit ratings during 2002 and 2003. Any further reductions in the
credit ratings of AES, IPALCO or IPL would not impact the interest rates on IPALCO or IPL's
outstanding debt, but improvements in IPALCO's credit ratings could reduce the interest rates on the
IPALCO Notes. The IPALCO Notes contain certain financial covenants based on earnings to interest
expense and debt to capital, with which IPALCO is in compliance.

Variable-Rate Debt. The IPL 1995B notes provide for an interest rate that varies with the
tax-exempt weekly rate. These notes are classified as long-term liabilities because IPL maintains a
$40.6 million long-term liquidity facility supporting these agreements, which was unused at December
31, 2004. In June 2003, IPL executed an agreement which combined the $40.6 million liquidity
facility and its $30 million committed line of credit into one two-tranche agreement, which, as
amended, matures on May 31, 2005. IPL, at its option, can change the interest rate mode for the
1995B notes to other permitted

Debt Maturities. Maturities on indebtedness subsequent to December 31, 2004, are as
follows:

`Year             Amount
                      (IN THOUSANDS)
2005                      $        -
2006                          58,800
2007                          80,000
2008                         375,000
2009                               -
Thereafter                   988,850
                      ---------------
Total                     $1,502,650
                      ===============`

Lines Of Credit

IPL did not have any outstanding borrowings on its lines of credits as of December 31,
2004. In May 2004, IPL renewed its $45 million committed line of credit. The new agreement has
substantially the same terms as the previous agreement and matures May 19, 2005. In June 2004, IPL
amended another agreement which includes a $30 million committed line of credit and a $40.6 million
liquidity facility (related to $40 million of IPL variable rate bonds, which are remarketed weekly)
to extend the maturity to May 31, 2005.

On July 23, 2004, FERC issued an Order renewing IPL's authority to issue up to $500 million of
short-term indebtedness outstanding at any time through July 2006.

8.	INCOME TAXES

IPALCO follows a policy of comprehensive interperiod income tax allocation. Investment tax
credits related to utility property have been deferred and are being amortized over the estimated
useful lives of the related property. AES files federal and state income tax returns which
consolidate IPALCO and its subsidiaries. Under a tax sharing agreement with AES, IPALCO is
responsible for the income taxes associated with its own taxable income.

Enterprises is currently under examination by the Internal Revenue Service for the period 1996
through 2001. Management regularly assesses the potential outcome of these examinations when
determining the adequacy of the provision for income taxes. Tax reserves have been established,
which management believes to be adequate, but not excessive, in relation to the potential for
additional assessments. Once established, reserves are adjusted only when there is more information
available or when an event occurs necessitating a change to the reserves. While management believes
that the amount of the tax estimates are reasonable, it is possible that the ultimate outcome of
current or future examinations may exceed current reserves in amounts or a range of amounts that
could be material but cannot be estimated as of December 31, 2004.

Federal and state income taxes charged to income are as follows:

`2004     2003     2002
                                                  ---------------------------
                                                           (IN THOUSANDS)
Current income taxes:
Federal                                            $75,234  $45,922  $53,585
State                                               25,243   18,519    7,201
                                                  ---------------------------
  Total current taxes                              100,477   64,441   60,786
                                                  ---------------------------
Deferred federal income taxes                         (944)  30,433   42,061
Deferred state income taxes                           (780)   4,673    6,308
                                                  ---------------------------
  Total deferred income taxes                       (1,724)  35,106   48,369
                                                  ---------------------------
Net amortization of investment credit               (2,709)  (2,753)  (2,763)
                                                  ---------------------------
  Total charge to utility operating expenses        96,044   96,794  106,392
Net debit (credit) to other income and deductions  (28,066) (25,906) (23,184)
                                                  ---------------------------
Total federal and state income tax provisions      $67,978  $70,888  $83,208
                                                  ===========================



The provision for federal income taxes (including net investment tax credit adjustments) is
different 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:

                                                    2004     2003     2002
                                                  ---------------------------
Federal statutory tax rate                            35.0%    35.0%    35.0%
Effect of state income taxes                          (3.4)    (3.6)    (1.8)
Amortization of investment tax credits                (1.4)    (1.6)    (1.3)
Preferred dividends of subsidiary                      0.6      0.6      0.5
Depreciation flow through and amortization            (1.7)     1.3      2.5
Change in tax reserves                                (2.2)     0.1      0.0
Other - net                                           (1.5)    (1.3)    (0.2)
                                                  ---------------------------
Effective federal tax rate                            25.4%    30.5%    34.7%
                                                  ===========================

The significant items comprising IPALCO's net accumulated deferred tax liability
 recognized in the consolidated balance sheets as of December 31, 2004 and 2003
 are as follows:

                                                             2004     2003
                                                           ------------------
Deferred tax liabilities:                                    (IN THOUSANDS)
Relating to utility property                               $488,489 $468,445
Other                                                        10,833   11,115
                                                           ------------------
Total deferred tax liabilities                              499,322  479,560
Deferred tax assets:                                       ------------------
Relating to utility property                                 69,536   67,621
Investment tax credit                                        18,838   20,902
Employee benefit plans                                       20,348   18,471
Accumulated other comprehensive loss                         34,972   36,099
Other                                                           479    1,159
                                                           ------------------
Total deferred tax assets                                   144,173  144,252
                                                           ------------------
Accumulated net deferred tax liability                      355,149  335,308
  Less: Current portion of deferred tax liability              (136)     300
                                                           ------------------
Accumulated deferred income taxes - net                    $355,285 $335,008
                                                           ==================`

9.	PENSION BENEFITS

Employees' Retirement Plan: Most of IPL's employees are covered by the Employees' Retirement
Plan of Indianapolis Power & Light Company (the "Defined Benefit Pension Plan.") The
Defined Benefit Pension Plan is noncontributory and is funded through a trust. Benefits are based on
each individual employee's pension band and years of service as opposed to their compensation.
Pension bands are based primarily on job duties and responsibilities. Benefit accrual was frozen for
all non-union participants effective July 8, 2001. The non-union participants who had their benefit
accrual frozen also were prohibited from making additional contributions to the IPL defined
contribution plan (the "Thrift Plan.") These non-union people became eligible to
participate in the AES defined contribution plan.

In the 4th quarter of 2002, the non-union people who had their defined benefit pension frozen on
July 8, 2001 were given a one-time, irrevocable choice to either (1) continue as an active
participant in the AES defined contribution plan; or (2) return to the Defined Benefit Pension Plan
as an active participant, and return to the Thrift Plan as an active participant. Most of them chose
to return as active participants to the Defined Benefit Pension Plan and the Thrift Plan.

IPL's funding policy for the Defined Benefit Pension Plan is to contribute annually not less than
the minimum required by applicable law, nor more than the maximum amount that can be deducted for
federal income tax purposes.

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

The following tables present information relating to the Defined Benefit Pension Plan and
supplemental retirement plan (the "Pension Plans"):

`Pension Benefits
                                                           2004         2003
                                                        -----------  ----------
Change in benefit obligation:                                (In Thousands)
Benefit obligation at beginning Measurement Date (see     $442,947    $410,630
  below)
Service cost                                                 3,654       3,702
Interest cost                                               25,703      26,973
Actuarial loss                                                 394      27,331
Amendments (Primarily increases in pension bands)            2,089       3,334
Benefits paid                                              (29,079)    (29,023)
                                                        -----------  ----------
  Benefit obligation at ending Measurement Date            445,708     442,947
                                                        -----------  ----------
Change in plan assets:
Fair value of plan assets at beginning Measurement Date    330,373     223,869
Actual return on plan assets                                31,186      39,453
Employer contribution                                        6,148      96,074
Benefits paid                                              (29,079)    (29,023)
                                                        -----------  ----------
  Fair value of plan assets at ending Measurement Date     338,628     330,373
                                                        -----------  ----------
  Funded status                                           (107,080)   (112,574)
  Unrecognized net gain                                     80,479      88,034
  Unrecognized prior service cost                           16,823      16,282
  Unrecognized net transition asset                         (1,272)     (2,686)
                                                        -----------  ----------
  Net amount recognized                                   ($11,050)   ($10,944)
                                                        ===========  ==========`

`Pension Benefits
                                                     ------------------------------
                                                        2004      2003      2002
                                                     ------------------------------
                                                              (IN THOUSANDS)

Components of net periodic benefit cost
Service cost                                            $3,654    $3,702    $2,844
Interest cost                                           25,703    26,973    26,722
Expected return on plan assets                         (27,049)  (22,696)  (22,203)
Amortization of transition asset                        (1,414)   (1,414)   (1,414)
Amortization of prior service cost                       1,547     1,547       712
Recognized actuarial loss                                3,812     2,680       105
                                                     ------------------------------
Total pension cost                                       6,253    10,792     6,766
Less: amounts capitalized                                  605     1,116       830
                                                     ------------------------------
Amount charged to expense                               $5,648    $9,676    $5,936
                                                     ==============================
Weighted average assumptions as of November 30
Discount rate                                              6.0%      6.0%     6.75%
Expected return on Defined Benefit Pension Plan asset      8.0%      8.5%      8.9%
Expected return on supplemental retirement plan asset      8.0%      8.9%      8.9%`



The accumulated pension benefit obligation was $445.7 million and $442.9 million at December 31,
2004 and 2003, respectively. Pension expense for the following year is determined on November 30
(the "Measurement Date") based on the market value of the Pension Plans' assets, a
discount rate used to determine the projected benefit obligation and the expected long-term rate of
return on plan assets. To develop the assumption for expected long-term rate of return on assets, we
considered the historical returns, as well as, the future expectations of the weighted-average
expected returns for each asset class based on the target asset allocation. For 2004, pension
expense was determined using a discount rate of 6.00% and an assumed long-term rate of return on
plan assets of 8.5%. The effect on total pension cost of a one percentage point increase and
decrease in the assumed discount rate of the projected benefit obligation is ($3.3 million) and $3.9
million, respectively. The effect on total pension cost of a one percentage point increase and
decrease in the expected long-term rate of return on plan assets is ($3.2 million) and $3.2 million,
respectively.

Total cash contributions to the Pension Plans were $6.1 million, $96.1 million and $15.2 million
for 2004, 2003 and 2002, respectively. Depending on the timing of contributions, pending
legislation, and other factors related to the funding strategy, management estimates potential cash
contributions to the Pension Plans up to $25 million in 2005, but may elect not to make any
contributions since none are anticipated to be required to meet IPL's minimum funding targets. This
estimate is based on actuarial assumptions using a discount rate of 6.0% and an assumed long-term
rate of return on plan assets of 8.0%.

The targeted investment allocations of the Pension Plans as of December 31, 2004 and 2003 were
approximately 55%, 40% and 5% in equity securities, debt securities and real estate securities,
respectively. The actual assets as of December 31, 2004 and 2003 were as follows (in
thousands):

`2004       2003
                                ---------------------
Equity securities                 $215,281  $189,471
Debt securities                    104,073   116,447
Real estate securities              13,147    17,395
Cash                                12,224    14,150
                                ---------------------
Total assets                      $344,725  $337,463
                                =====================

      Benefit payments made from the Defined Benefit Pension Plan for the years
ended December 31, 2004 and 2003 were $29.1 million and $29.0 million, respectively.
Projected benefit payments are as follows:

             Year                   Amount
                                (IN THOUSANDS)
2005                                29,027
2006                                28,826
2007                                28,695
2008                                28,576
2009                                28,640
2010 through 2014 (in total)       148,785`

Voluntary Early Retirement Programs (the "VERPS"): In conjunction with the AES
Acquisition, IPL implemented three VERPS which offered eligible employees enhanced retirement
benefits upon early retirement. Participation in the VERPS was accepted by 551 qualified employees,
who elected actual retirement dates between March 1, 2001, and August 1, 2004. Additionally, we
currently intend to provide postretirement medical and life insurance benefits to the retirees in
the first VERP (400 participants) until age 55; at which time they will be eligible to receive
similar benefits from the independent Voluntary Employees Beneficiary Association Trust (the
"VEBA Trust"). IPL reserves the right to modify or terminate any of the postretirement
health care and life insurance benefits provided by IPL.

On December 23, 2002, IPL executed an agreement with the administrator of the VEBA Trust to
provide postretirement medical and life insurance benefits to the retirees in the second and third
VERPS (151 participants) from their retirement until age 62, subject to IPL's right to modify or
terminate such benefits in the future. The additional cost is estimated to be $7.5 million to be
amortized over 8 years. When those retirees reach age 62, they will be eligible for benefits from
the VEBA Trust.

Defined Contribution Plans: All of IPL's employees are covered by one of two defined
contribution plans, The Thrift Plan or The Wealth Accumulation Plan:

The Thrift Plan. Most employees of IPL are covered by the Thrift Plan, which is a defined
contribution plan sponsored by IPL. Participants elect to make contributions to the Thrift Plan
based on a percentage of their base compensation. Each participant's contribution is matched in
amounts up to, but not exceeding, 4% of the participant's base compensation, except for employees
hired after October 20, 2000 who are members of the clerical-technical unit of the International
Brotherhood of Electrical Workers union, who are not eligible for postretirement health care
benefits, whose contributions are matched up to 5% of their base compensation. Employer
contributions to the Thrift Plan were $2.4 million, $2.1 million and $1.2 million for 2004, 2003 and
2002, respectively.

The Wealth Accumulation Plan. IPL's employees not covered by the Thrift Plan are covered
by The AES Corporation Profit Sharing and Stock Ownership Plan, which is a defined contribution plan
sponsored by AES. Participants elect to make contributions to the AES defined contribution plan
based on a percentage of their taxable compensation. Each participant's contribution is matched in
amounts up to, but not exceeding, 5% of the participant's taxable compensation. In addition, the AES
defined contribution plan has a profit sharing component whereby AES contributes a percentage of
each employee's annual salary in the form of shares of AES common stock into the plan on a pre-tax
basis. The profit sharing percentage is determined by the AES Board on an annual basis. Employer
payroll-matching and profit sharing contributions (by IPL) relating to the AES defined contribution
plan were $1.0 million, $23 thousand and $3.4 million for 2004, 2003 and 2002, respectively.

10.	OTHER POSTRETIREMENT BENEFITS

IPL sponsors a group benefits plan which provides certain health care and life insurance
benefits to active employees. IPL also provides postretirement health care benefits, through the end
of its current contract, to employees in the physical unit of the International Brotherhood of
Electrical Workers

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

Other postretirement benefit costs for the years ended December 31, 2004, 2003 and 2002, net of
amounts capitalized, were $2.3 million, $1.6 million and $0.7 million, respectively. As of December
31, 2004 and 2003 IPL had benefit obligations of $13.8 and $14.9 million, respectively.

The following tables present information relating to other postretirement benefits:

`2004       2003
Other Postretirement Benefits                           ---------- ----------
                                                             (In Thousands)
Change in benefit obligation:
Benefit obligation at beginning of year                   $14,901    $12,658
Service cost                                                  790        188
Interest cost                                                 826        785
Actuarial (gain) loss                                        (862)     1,317
Plan amendments                                                 -      1,685
Benefits paid                                              (1,818)    (1,732)
                                                        ---------- ----------
Benefit obligation at end of year                          13,837     14,901
                                                        ---------- ----------
Change in plan assets:
Employer contribution                                       1,818      1,732
Benefits paid                                              (1,818)    (1,732)
                                                        ---------- ----------
Fair value of plan assets at end of year                        -          -
                                                        ---------- ----------
Funded status                                             (13,837)   (14,901)
Unrecognized net gain                                          78        939
Unrecognized prior service cost                             6,960      7,903
                                                        ---------- ----------
Net amount recognized                                     ($6,799)   ($6,059)
                                                        ========== ==========`

`Other Postretirement Benefits                     2004    2003    2002
                                               ------------------------
Components of net periodic benefit cost:            (IN THOUSANDS)
Service cost                                      $790    $188      $-
Interest cost                                      826     785     438
Amortization of prior service cost                 942     853       -
Recognized actuarial loss                            -       -     399
                                               ------------------------
Net periodic postretirement benefit cost         2,558   1,826     837
Less: amounts capitalized                          247     189     103
                                               ------------------------
Amount charged to expense                       $2,311  $1,637    $734
                                               ========================
Discount rate as of November 30                   6.00%   6.00%   6.75%`

Other postretirement benefit costs are determined using a discount rate, which is determined on
November 30th of the preceding year. For measurement purposes, we assumed an annual rate
of increase in the per capita cost of covered medical care benefits of 9.0% for 2005, gradually
declining to 5.0% in 2009 and remaining level thereafter. In addition, we assumed an annual rate of
increase in the per capita cost of covered prescription drugs of 14.0% for 2005, gradually declining
to 5.0% in 2014 and remaining level thereafter. The effect of a one percentage point increase and
decrease in the assumed health care cost trend rates on the aggregate of the service and interest
cost components of net periodic postretirement health care benefit costs is $0.3 million and $(0.3)
million, respectively. The effect of a one percentage point increase and decrease in the assumed
health care cost trend rates on the accumulated postretirement benefit obligation for health care
benefit costs is $1.8 million and $(1.4) million, respectively. See also, Note 2 for disclosure
regarding FSP106-2, which provides guidance on the accounting for the effects of the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 for employers that sponsor
postretirement health care plans that provide prescription drug benefits.

Benefit payments made from the Group Benefit Plan for postretirement benefit costs the years
ended December 31, 2004 and 2003 were $1.8 million and $1.7 million, respectively. Projected benefit
payments are as follows:

`Year                      Amount
                              (IN THOUSANDS)
2005                                   1,826
2006                                   1,655
2007                                   1,524
2008                                   1,379
2009                                   1,121
2010 through 2014 (in total)           4,004`

11.	LAND SALES

In 2004, IPL sold approximately 4,000 acres of undeveloped property near Martinsville,
Indiana divided between two purchasers for an aggregate price of $13.2 million. The net sale
proceeds were $11.7 million and the net gain was $5.9 million. This land is presented on IPALCO's
consolidated balance sheet as land held for sale at $6.6 million as of December 31, 2003. In
accordance with regulatory accounting, these gains are included as a reduction of other operating
expenses on IPALCO's consolidated statements of income.

12.	COMMITMENTS AND CONTINGENCIES

Legal

IPALCO and certain former officers and directors of IPALCO are named as defendants in
class action lawsuits under the Employment Retirement Income Security Act ("ERISA") and
the Federal securities laws (see below), respectively, each filed in the U.S. District Court for the
Southern District of Indiana, and each making allegations regarding matters arising from the
acquisition of IPALCO by AES. The ERISA suit alleges breach of fiduciary duties with respect to
shares held in IPL's 401(k) thrift plan. IPALCO filed a motion for summary judgment in the ERISA
suit. While we cannot predict the outcomes, we do not believe that the suits will have a material
adverse effect on IPALCO's consolidated financial statements.

In September 2002, IPALCO and certain of its former officers and directors were sued in the U.S.
District Court for the Southern District of Indiana in connection with IPALCO's acquisition by AES.
That suit was consolidated with other actions in that court with the result that the only remaining
IPALCO defendants are three former officers who were insured under IPALCO's liability insurance
policies. The lawsuit was filed on behalf of all persons who exchanged their shares of IPALCO common
stock for shares of AES common stock. The complaint alleged violations of Section 11 of the
Securities Act; Sections 10(b), 14(a) and 20(a) of the Exchange Act and Rules 10b-5 and 14a-9. On
November 17, 2004, the court entered an order dismissing the claims against the former IPALCO
officers but that order will not be final until the balance of the case is resolved.

Since May 2003, IPALCO, IPL, AES and certain former directors and officers of IPALCO and/or IPL
received subpoenas from the Securities Division of the Indiana Secretary of State seeking
information related to the acquisition of IPALCO by AES. IPALCO, IPL, AES and the individuals have
produced various materials in response to the subpoenas and otherwise cooperated fully with the
Secretary of State in connection with the inquiry. Since August 11, 2004, they have received no
further inquiries or other communications from the Secretary of State concerning the matter. While
we can not predict the outcome, we do not expect this matter to have a material adverse effect on
IPALCO's consolidated financial statements.

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

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

As of December 31, 2004, IPL is a defendant in approximately 113 pending lawsuits alleging
personal injury or wrongful death stemming from exposure to asbestos and asbestos containing
products formerly located in IPL power plants. IPL has been named as a "premises
defendant" in that IPL did not mine, manufacture, distribute or install asbestos or asbestos
containing products. These suits have been brought on behalf of persons who worked for contractors
or subcontractors hired by IPL. IPL has insurance coverage for many of these claims; currently,
these cases are being defended by counsel retained by various insurers who wrote policies applicable
to the period of time during which much of the exposure has been alleged. Although we do not believe
that any of the pending asbestos suits in which IPL is a named defendant will have a material
adverse effect on IPALCO's business or operations, we are unable to predict the number or effect any
additional suits may have. Accordingly, we cannot assure that the pending or any additional suits
will not have a material adverse effect on IPALCO's consolidated financial statements.

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

Environmental

We are subject to various federal, state and local environmental protection and health
and safety laws and regulations governing, among other things, the generation, storage, handling,
use, disposal and transportation of hazardous materials; the emission and discharge of hazardous and
other materials into the environment; and the health and safety of our employees. These laws and
regulations often require a lengthy and complex process of obtaining and renewing permits and other
governmental authorizations from federal, state and local agencies. Violation of these laws,
regulations or permits can result in substantial fines, other sanctions, permit revocation and/or
facility shutdowns. We believe that we operate in material compliance with environmental laws,
regulations and permits and health and safety laws. We cannot assure, however, that we have been or
will be at all times in full compliance with such laws, regulations and permits.

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

On December 17, 2004, EPA signed a final rule designating Marion and Morgan Counties, and a
portion of Pike County, as nonattainment for the fine particulate matter ambient air quality
standard, effective April 5, 2005. The non attainment designation for both ozone and particulate
matter will legally require the state of Indiana to modify its SIP by 2008. The SIP will detail how
the state will regain its compliance status. The potential impact these new EPA designations may
have on our generating stations is unclear at this time.

Multipollutant Plan filing. On November 30, 2004, in response to a petition filed by IPL,
the IURC issued an Order approving up to $182 million of capital expenditures to install pollution
control technology at two of IPL's power plants. These capital expenditures are projected to address
required sulfur dioxide and mercury emissions reductions from our power plants and to reduce fine
particulate pollution in the atmosphere. The Order also approves ratemaking treatment for such
expenditures, including a return on the investment and recovery of depreciation expenses and
operation and maintenance expenses associated with these projects. The Order also granted IPL the
authority to add the approved return on its environmental projects to IPL's authorized annual
jurisdictional net operating income in subsequent fuel adjustment charge proceedings.

NOx SIP Call. In October 1998, the EPA issued a final rule, referred to as the
NOx SIP call, which imposes more stringent limits on NOx emissions from fossil
fuel-fired steam electric generators. Through December 31, 2004, IPL spent
approximately $185 million on NOx emissions reduction projects. Further expenditures are
estimated to be approximately $27 million in 2005 to substantially meet the required NOx
SIP Call reductions.

In November 2002, the IURC issued a Certificate of Public Convenience and Necessity for the
construction and use of CCT to allow IPL to meet the NOx emission limits imposed pursuant
to the EPA's NOx SIP call. The CCT constitutes qualified pollution control property as
defined in Ind. Code section 8-1-2-6.6 and the IURC has approved ratemaking treatment applicable to
such property through the ECCRA. The ratemaking treatment provided for in the IURC Order includes a
return on the investment in IPL's planned CCT projects under construction. After the projects have
been placed in service, the approved ratemaking treatment provides for a return on the investment
and recovery of the depreciation expenses and operation and maintenance expenses associated with
these projects. Such costs are deferred as regulatory assets on IPALCO's balance sheets. The
ratemaking treatment also provides for recovery of expenditures related to the purchase of
NOx emission allowances, should such expenditures be made to supplement IPL's CCT
construction projects. IPL may add the approved return on its CCT projects to its authorized annual
jurisdictional net operating income in subsequent fuel adjustment charge proceedings. The increase
in the amount of rate revenues and authorized net operating income resulting from IPL's CCT plan
will be determined in periodic filings to the IURC to be made at intervals of no more often than
every 6 months and will depend on the amount of cumulative investment, depreciation expenses,
operation and maintenance expenses and actual NOx emission allowance purchases at the
time of each of the filings. IPL's ECCRA filings have collectively added $6.7 million to IPL's
authorized annual jurisdictional net operating income through December 31, 2004.

Guarantees

As of December 31, 2004, Mid-America had a commitment to invest additional capital of up
to $3.0 million in EnerTech. IPALCO has guaranteed the prompt payment of this commitment when it may
become due pursuant to the terms of the partnership agreement between Mid-America and EnerTech. As
required by GAAP, there is no liability on the accompanying balance sheets for the commitment or the
guarantee.

In connection with the sale of the Cleveland Energy Resources assets, Cleveland Thermal
Energy Corporation and Cleveland District Cooling Corporation, both of which are subsidiaries of
Mid-America, agreed to indemnify the buyer on an after-tax basis from and against all losses arising
out of: any liabilities excluded from the sale; and certain litigation and environmental matters
existing at the closing date, November 2, 2000. IPALCO guaranteed this indemnification up to $14.6
million. The indemnification and IPALCO's guarantee only apply to claims brought on or before
November 2, 2004. Claims against this indemnification are not expected to be material to IPALCO.

Lease Commitments

IPL has capital leases expiring at various dates through 2010. Total Utility Plant
includes fixed assets under capital lease, net of accumulated depreciation, totaling $4.0 million at
December 31, 2004. The interest component of capital leases as of December 31, 2004 is $0.2 million
and the net present value of future minimum lease payments is $4.2 million. The current portion of
this liability is recorded in other current liabilities and the noncurrent portion is recorded in
miscellaneous on IPALCO's consolidated balance sheets. IPL also has operating leases expiring at
various dates through 2009. Rental expense for 2004 and 2003 was

$1.0 million and $0.6 million, respectively. The following table shows fixed future minimum lease
payments as of December 31, 2004 for all capital leases and for operating leases with remaining
noncancelable lease terms in excess of one year (in thousands):

`2005   2006   2007   2008   2009  Thereafter  Total
Operating Leases    $866   $800   $662   $649   $129          -  $3,106
Capital Leases      $997   $983   $978   $795   $515       $247  $4,515`

13.	RELATED PARTY TRANSACTIONS

Effective September 1, 2003, IPALCO and IPL entered into a property insurance program in
which AES and other AES subsidiaries also participate. The program includes a policy issued by a
third party insurance company for funding losses of the participants up to a total aggregate amount
of $20 million. Funds to pay claims within this limit will be derived from premiums paid to this
third party carrier by the participants and will be deposited into a trust fund owned by AES Global
Insurance Company, a wholly-owned subsidiary of AES, but controlled by the third party carrier.
Claims above the $20 million aggregate will be covered by separate insurance policies issued by a
syndicate of third party carriers. These policies will provide coverage of $600 million per
occurrence. We believe that the combined cost of these policies is less than comparable insurance in
the marketplace. The cost of coverage under this program, which began September 1, 2003, was
approximately $3.0 million and $1.0 million in 2004 and 2003, respectively.

In June 2004, IPL entered into an agreement with Health and Welfare Benefit Plans LLC, an
affiliate of AES, to participate in a group benefits program, including but not limited to, health,
dental, vision and life benefits, in which AES and other AES subsidiaries also participate. Health
and Welfare Benefit Plans LLC will administer the financial aspects of the group insurance program,
receive all premium payments from the participating affiliates, and make all vendor payments. Health
insurance costs have risen significantly during the last few years. We believe that, though our
insurance costs will likely continue to rise, cost savings can be realized through participation in
this group benefits program with AES. During 2004, IPL paid $7.3 million for six months coverage
under this program beginning August 1, 2004.

AES files federal and state income tax returns which consolidate IPALCO and its subsidiaries.
Under a tax sharing agreement with AES, IPALCO is responsible for the income taxes associated with
its own taxable income.

14.	SEGMENT INFORMATION

Operating segments are components of an enterprise for which separate financial information
is available and is evaluated regularly by the chief operating decision maker in assessing
performance and deciding how to allocate resources. Substantially all of our business consists of
the generation, transmission, distribution and sale of electric energy conducted through IPL.
Enterprises' reportable business segments are electric and "all other." The "all
other" category includes the IPALCO Notes, costs associated with the AES Acquisition, and all
of IPALCO's subsidiaries other than IPL. The accounting policies of the identified segments are
consistent with those policies and procedures described in the summary of significant accounting
policies. Intersegment sales are generally based on prices that reflect the current market
conditions.

The following tables provide information about Enterprises' business segments (in
millions):

`2004                        2003                        2002
                               --------------------------- --------------------------- ---------------------------
                                         All (1)                     All (1)                     All (1)
                               Electric   Other    Total   Electric   Other    Total   Electric   Other    Total
                               --------------------------- --------------------------- ---------------------------
Operating revenues                 $885        0     $885      $838        0     $838      $823        0     $823
Depreciation and amortization       125        0      125       120        0      120       118        0      118
Income taxes                         95      (27)      68        96      (25)      71       108      (25)      83
Net income                          168      (43)     125       146      (43)     103       166      (41)     125
Property - net of depreciation    2,143        1    2,144     2,096        2    2,098     2,028        1    2,029
Capital expenditures                147        0      147       157        0      157        95        0       95`

(1) The All Other segment includes $0.2 million, $0.7 million and $2.2 million of writedowns in
Mid-America's investment in EnerTech in 2004, 2003 and 2002, respectively and a $0.8 million loss
realized in 2003 on the sale of 1/3 of Enterprises' ownership interests in EnerTech.

15.	QUARTERLY RESULTS (UNAUDITED)

Operating results for the years ended December 31, 2004, and 2003, by quarter, are as follows
(in thousands):

`2004 (1)
                           ------------------------------------------------------------
                              March 31        June 30     September 30    December 31
                           ------------------------------------------------------------
Utility operating revenue        $215,356       $214,538       $230,229       $225,350
Utility operating income           53,280         49,144         53,957         57,953
Net income                         33,206         25,923         30,995         34,870

                                                       2003
                           ------------------------------------------------------------
                              March 31        June 30     September 30    December 31
                           ------------------------------------------------------------
Utility operating revenue        $224,544       $188,317       $221,393       $203,911
Utility operating income           53,472         34,648         51,315         47,148
Net income                         33,971         15,237         30,813         23,244`

The quarterly figures reflect seasonal and weather-related fluctuations that are normal to IPL's
operations.

************

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholder and Board of Directors of Indianapolis Power & Light Company:
Indianapolis, Indiana

We have audited the accompanying balance sheets of Indianapolis Power & Light Company (the
"Company") as of December 31, 2004 and 2003, and the related statements of income, common
shareholder's equity, and cash flows for each of the three years in the period ended December 31,
2004. Our audits also included the financial statement schedules listed in the Index at Item 15.
These financial statements and financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial statements and financial
statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, 2004 and 2003, and
the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2004, in conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such financial statement schedules, when considered in relation to
the basic financial statements taken as a whole, present fairly in all material respects the
information set forth therein.





Indianapolis, Indiana
March 23, 2005

---

`INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Income
For the Years Ended December 31, 2004, 2003 and 2002`

See notes to financial statements

---

`INDIANAPOLIS POWER & LIGHT COMPANY
Balance Sheets
As of December 31, 2004 and 2003

(In Thousands)

                             ASSETS                                  2004         2003
UTILITY PLANT:                                                    -----------  -----------
  Utility plant in service                                        $3,421,828   $3,205,454
  Less accumulated depreciation                                    1,356,364    1,277,373
                                                                  -----------  -----------
      Utility plant in service - net                               2,065,464    1,928,081
                                                                  -----------  -----------
  Construction work in progress                                       76,303      160,774
  Land held for sale                                                       -        6,623
  Property held for future use                                         1,085        1,085
                                                                  -----------  -----------
      Utility plant - net                                          2,142,852    2,096,563
                                                                  -----------  -----------
OTHER ASSETS:
  At cost, less accumulated depreciation                               2,172        3,125
                                                                  -----------  -----------
CURRENT ASSETS:
  Cash and cash equivalents                                           13,388       11,505
  Accounts receivable and unbilled revenue (less allowance
    for doubtful accounts of $2,123 and $1,639 respectively)          55,922       44,074
  Receivable due from Parent                                             247          819
  Fuel - at average cost                                              22,392       29,803
  Materials and supplies - at average cost                            48,929       47,062
  Net income tax refunds receivable                                    2,537        9,356
  Prepayments and other current assets                                 4,377        4,574
                                                                  -----------  -----------
      Total current assets                                           147,792      147,193
                                                                  -----------  -----------
DEFERRED DEBITS:
  Regulatory assets                                                  132,042      110,061
  Miscellaneous                                                       25,841       22,465
                                                                  -----------  -----------
      Total deferred debits                                          157,883      132,526
                                                                  -----------  -----------
              TOTAL                                               $2,450,699   $2,379,407
                                                                  ===========  ===========
                 CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
  Common shareholder's equity:
    Common stock                                                    $324,537     $324,537
    Premium on 4% cumulative preferred stock                           2,642        2,642
    Paid in capital                                                      791          104
    Retained earnings                                                357,366      349,915
    Accumulated other comprehensive loss                             (51,326)     (58,418)
                                                                  -----------  -----------
      Total common shareholder's equity                              634,010      618,780
                                                                  -----------  -----------
  Cumulative preferred stock                                          59,135       59,135
  Long-term debt                                                     752,064      732,011
                                                                  -----------  -----------
      Total capitalization                                         1,445,209    1,409,926
                                                                  -----------  -----------
CURRENT LIABILITIES:
  Accounts payable                                                    39,310       49,074
  Accrued expenses                                                    19,115       19,651
  Dividends payable                                                        -          805
  Accrued real estate and personal property taxes                     15,837       14,659
  Accrued income and other taxes                                      11,018        3,873
  Accrued interest                                                    19,689       17,580
  Customer deposits                                                   11,706       10,428
  Other current liabilities                                            1,042        1,746
                                                                  -----------  -----------
      Total current liabilities                                      117,717      117,816
                                                                  -----------  -----------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
  Accumulated deferred income taxes - net                            354,400      335,162
  Regulatory liabilities and other removal costs                     382,559      361,221
  Unamortized investment tax credit                                   25,464       28,173
  Accrued postretirement benefits                                      6,799        6,059
  Accrued pension benefits                                           107,080      112,574
  Miscellaneous                                                       11,471        8,476
                                                                  -----------  -----------
      Total deferred credits and other long-term liabilities         887,773      851,665
                                                                  -----------  -----------
COMMITMENTS AND CONTINGENCIES (Note 12)

              TOTAL                                               $2,450,699   $2,379,407
                                                                  ===========  ===========`

See notes to financial statements

---

`INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Cash Flows
For the Years Ended December 31, 2004, 2003 and  2002`

---

See notes to financial statements

---

`INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Common Shareholder's Equity
For the Years Ended December 31, 2004, 2003 and 2002

(In Thousands)
                                                        Premium
                                                        and Net                          Accumulated
                                                        Gain on                             Other
                                              Common   Preferred   Paid in    Retained   Comprehensive
                                               Stock     Stock     Capital    Earnings       Loss         Total
                                             --------- ---------- ---------- ----------- -------------  ----------
Balance at Janaury 1, 2002                   $324,537     $2,642        $--    $363,083       (11,469)   $678,793
                                             --------- ---------- ---------- ----------- -------------  ----------
 Cash dividends declared:
  Common stock                                                                 (157,407)                 (157,407)
  Cumulative preferred stock                                                     (3,213)                   (3,213)
 Comprehensive Income (Loss):
  Net income                                                                    166,487                   166,487
  Minimum pension liability adjustment, net
   of income taxes of $23,247                                                                 (38,050)    (38,050)
  Adjust financial instruments to fair market
   value, net of income taxes of $1,895                                                        (3,100)     (3,100)
                                             --------- ---------- ---------- ----------- -------------  ----------
 Total Comprehensive Income (Loss)                  -          -          -     166,487       (41,150)    125,337
                                             --------- ---------- ---------- ----------- -------------  ----------
Balance at December 31, 2002                 $324,537     $2,642        $--    $368,950      ($52,619)   $643,510
                                             --------- ---------- ---------- ----------- -------------  ----------
 Cash dividends declared:
  Common stock                                                                 (161,706)                 (161,706)
  Cumulative preferred stock                                                     (3,213)                   (3,213)
 Contributions from AES                                                 104                                   104
 Comprehensive Income (Loss):
  Net income                                                                    145,884                   145,884
  Minimum pension liability adjustment, net
   of income taxes of $3,772                                                                   (5,536)     (5,536)
  Adjust financial instruments to fair market
   value, net of income taxes of $179                                                            (263)       (263)
                                             --------- ---------- ---------- ----------- -------------  ----------
 Total Comprehensive Income (Loss)                  -          -          -     145,884        (5,799)    140,085
                                             --------- ---------- ---------- ----------- -------------  ----------
Balance at December 31, 2003                 $324,537     $2,642       $104    $349,915      ($58,418)   $618,780
                                             --------- ---------- ---------- ----------- -------------  ----------
 Cash dividends declared:
  Common stock                                                                 (157,650)                 (157,650)
  Cumulative preferred stock                                                     (3,213)                   (3,213)
 Contributions from AES                                                 687                                   687
 Comprehensive Income:
  Net income                                                                    168,314                   168,314
  Minimum pension liability adjustment, net
   of income taxes of $(512)                                                                    5,630       5,630
  Adjust financial instruments to fair market
   value, net of income taxes of $(615)                                                         1,462       1,462
                                             --------- ---------- ---------- ----------- -------------  ----------
 Total Comprehensive Income                         -          -          -     168,314         7,092     175,406
                                             --------- ---------- ---------- ----------- -------------  ----------
Balance at December 31, 2004                 $324,537     $2,642       $791    $357,366      ($51,326)   $634,010
                                             ========= ========== ========== =========== =============  ==========
See notes to financial statements.`

INDIANAPOLIS POWER & LIGHT COMPANY

Notes to Financial Statements

For the Years Ended December 31, 2004, 2003 and 2002

1.	ORGANIZATION

Indianapolis Power & Light Company ("IPL") was incorporated under the laws of
the state of Indiana. All of the outstanding common stock of IPL is owned by IPALCO Enterprises,
Inc. ("IPALCO"). IPALCO is a wholly-owned subsidiary of The AES Corporation
("AES"). IPALCO was acquired by AES in March 2001 (the "AES Acquisition"). IPL
is engaged primarily in generating, transmitting, distributing and selling electric energy to more
than 460,000 retail customers in the city of Indianapolis and neighboring cities, towns and
communities, and adjacent rural areas all within the state of Indiana, the most distant point being
approximately forty miles from Indianapolis. IPL has an exclusive right to provide electric service
to those customers. IPL owns and operates two primarily coal-fired generating plants, one
combination coal and gas-fired plant and a separately-sited combustion turbine that are all used for
generating electricity. IPL's net electric generation capability for winter is 3,370 megawatts and
net summer capability is 3,252 megawatts.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Regulation:  The retail utility operations of IPL are subject to the jurisdiction of the
Indiana Utility Regulatory Commission (the "IURC"). IPL's wholesale power transactions are
subject to the jurisdiction of the Federal Energy Regulatory Commission ("FERC"). 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 prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"), including the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 71, "Accounting for the Effects of Certain Types of
Regulation," which gives recognition to the ratemaking and accounting practices of these
agencies.

Revenues:  Revenues related to the sale of energy are generally recognized when service is
rendered or energy is delivered to customers. However, the determination of the energy sales to
individual customers is based on the reading of their meters, which occurs on a systematic basis
throughout the month. At the end of each month, amounts of energy delivered to customers since the
date of the last meter reading are estimated and the corresponding unbilled revenue is estimated.
This unbilled revenue is estimated each month based on daily generation volumes, estimated customer
usage by class, weather factors, line losses and applicable customer rates based on regression
analyses reflecting significant historical trends and experience. Customer accounts receivable at
December 31, 2004 include unbilled energy revenues of $36.2 million on a base of annual revenue of
$885.5 million.

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 IPL's basic rates. Actual fuel costs in excess of or under estimated
fuel costs billed are deferred or accrued, respectively. IPL files 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.

IPL is generally allowed to recover, through its fuel adjustment charge, the fuel portion of
purchased power costs incurred to meet jurisdictional retail load. Purchased power costs below an
established benchmark are presumed to be fuel costs. Under a settlement agreement approved by the
IURC, which expires March 31, 2005, the benchmark for IPL is established at $77.50 per MWh. The
settlement also generally provides for recovery of 85% of power purchased up to $700/MWh to replace
capacity losses for certain full forced outages and environmental derates for power purchases up to
the first 11% of IPL's total rated summer capacity in any hour and full recovery for power purchases
exceeding 11% of IPL's total rated summer capacity in any hour. IPL has a new settlement agreement
pending at the IURC which would continue the recovery mechanism and establish a prospective
benchmark each month related to the forward price for oil or natural gas.

In 1998, the IURC approved a plan (the "Elect 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. As of December 31, 2004, approximately 1% of IPL's retail customers were included in the
Elect Plan. Customers who do not choose one of the Elect Plan options receive electric service under
existing tariffs. IPL's authority to offer these options will expire on December 31, 2006, unless a
subsequent plan is approved by the IURC. Under the Elect Plan, eligible IPL customers may enter into
written contracts for (i) Fixed Rate3⁄4
Pay a guaranteed fixed rate per unit of consumption for one or more years (ii) Green Power3⁄4
Purchase environmentally friendly or "green" power or (iii) Sure Bill3⁄4
Pay the same bill each month for 12 months, regardless of how much electricity is used.

Regulatory Assets and Liabilities:  Regulatory assets represent deferred costs that have
been 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. IPL is amortizing such nontax-related regulatory assets to expense over periods ranging from
1 to 30 years. 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. Regulatory liabilities
represent obligations associated with retirement of tangible long-lived assets and the associated
non-legal asset retirement costs.

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 Unit 4 at the
Petersburg Plant. As authorized in the 1995 Electric Rate Settlement, 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.

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

On November 14, 2002, the IURC issued a Certificate of Public Convenience and Necessity for the
construction and use of clean coal technology ("CCT") to allow IPL to meet the nitrogen
oxide ("NOx") emission limits imposed pursuant to the U.S. Environmental
Protection Agency's ("EPA") NOx State Implementation Plan ("SIP")
call. The CCT constitutes qualified pollution control property as defined in Ind. Code section 8-1-
2-6.6 and the IURC has approved ratemaking treatment applicable to such property through an
Environmental Compliance Cost Recovery Adjustment ("ECCRA"). The ratemaking treatment
provided for in the IURC Order includes a return on the investment in IPL's planned CCT projects
under construction. After the projects have been placed in service, the approved ratemaking
treatment provides for a return on the investment and recovery of the depreciation expenses and
operation and maintenance expenses associated with these projects. Such costs are deferred as
regulatory assets on IPL's balance sheets (see Note 5).

Authorized Annual Jurisdictional Net Operating Income:  Indiana law requires
electric utilities under the jurisdiction of the IURC to meet operating expense and income test
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 jurisdictional
net 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 jurisdictional net operating income
grossed up for federal and state taxes.

IPL's authorized annual jurisdictional net operating income, for purposes of quarterly operating
income tests, is $163 million, as established in IPL's last base rate case, plus additional returns
authorized in the ECCRA filings of $6.7 million as of December 31, 2004. During the four quarterly
measurement dates in 2004, the IURC found that IPL's rolling annual jurisdictional retail electric
operating income was less than the authorized annual jurisdictional net operating income. During the
four quarterly measurement dates in 2003, the IURC found that IPL's rolling annual jurisdictional
retail electric operating income was greater than the authorized annual jurisdictional net operating
income by $13.5 million and $1.8 million at January and April, respectively, and was less than the
authorized annual jurisdictional net operating income at July and October of 2003. Because IPL has a
cumulative net operating income deficiency, we were not required to make customer refunds for any of
these periods. As of IPL's quarterly measurement date on October 31, 2004, IPL had a cumulative net
operating income deficiency of $748.7 million. The deficiency is calculated by summing the quarterly
measurement period annual results from the date of the last rate Order. Because of the deficiency,
IPL can, for a period of time, earn above the authorized annual electric jurisdictional retail net
operating income without being required to make customer refunds.

The IURC approved the use of CCT which constitutes qualified pollution control property as
defined in Ind. Code section 8-1-2-6.6 and ratemaking treatment through the ECCRA that allows IPL to
meet the NOx emission limits imposed pursuant to the EPA's NOx SIP Call. A
return on the investment in IPL's CCT investments is included in the ratemaking treatment. IPL may
add the approved return on its CCT projects to its net operating income authorized by the IURC for
purposes of annual operating income test requirements in subsequent fuel adjustment charge
proceedings. The additional amount of return will be dependent on the cumulative amount of CCT
investment that has been made at the time IPL files with the IURC for ratemaking treatment on such
CCT investment. Such filings are made at intervals of no more often than every 6 months.

Contingencies:  IPL accrues for loss contingencies when the amount of the loss is probable
and estimable. IPL is subject to various environmental regulations, and is involved in certain legal
proceedings. If actual environmental and/or legal obligations are different from our estimates, the
recognition of the actual amounts may have a material impact on IPL's operating results and
financial condition.

Concentrations of Risk:  Substantially all of IPL's customers are located within the
Indianapolis area. In addition, approximately 68% of IPL's employees are covered by collective
bargaining agreements in two bargaining units: a physical unit and a clerical-technical unit. IPL's
current contracts with the physical unit and the clerical-technical units expire on December 19,
2005 and February 19, 2007, respectively.

Allowance For Funds Used During Construction:  In accordance with the Uniform System of
Accounts prescribed by FERC, 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 8.8%, 9.5% and 9.4% during 2004, 2003 and 2002, 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, 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 3.7% during 2004, 3.6% during 2003 and 3.7% during 2002.

Off-Balance Sheet Arrangements:  IPL formed IPL Funding Corporation ("IPL
Funding") in 1996 to purchase, on a revolving basis, up to $50 million of the retail accounts
receivable and related collections of IPL in exchange for a note payable. IPL Funding is not
consolidated by IPL or IPALCO since it meets requirements set forth in SFAS No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" to be
considered a qualified special-purpose entity. IPL Funding has entered into a purchase facility with
unrelated parties (the "Purchasers") pursuant to which the Purchasers agree to purchase
from IPL Funding, on a revolving basis, up to $50.0 million of the receivables purchased from IPL.
During 2004, this agreement was extended through October 26, 2005. As of December 31, 2004 and 2003,
the aggregate amount of receivables IPL has sold to IPL Funding and IPL Funding has sold to the
Purchasers pursuant to this purchase facility was $50.0 million. Accounts receivable on the
accompanying balance sheets of IPL are stated net of the $50 million sold.

The net cash flows between IPL and IPL Funding are limited to cash payments made by IPL to IPL
Funding for interest charges and processing fees. These payments totaled approximately $1.1 million,
$1.0 million and $1.1 million for the years ended December 31, 2004, 2003 and 2002, respectively.
IPL retains servicing responsibilities through its role as a collection agent for the amounts due on
the purchased receivables. IPL and IPL Funding provide certain indemnities to the Purchasers,
including indemnification in the event that there is a breach of representations and warranties made
with respect to the purchased receivables. IPL Funding and IPL each have agreed to indemnify the
Purchasers on an after-tax basis for any and all damages, losses, claims, liabilities, penalties,
taxes, costs and expenses at any time imposed on or incurred by the indemnified parties arising out
of or otherwise relating to the purchase facility, subject to certain limitations as defined in the
purchase facility. The transfers of receivables to IPL Funding are recorded as sales however no gain
or loss is recorded on the sale.

Under the receivables purchase facility, if IPL fails to maintain certain financial covenants
regarding interest coverage and debt-to-capital ratios, it would constitute a "termination
event." IPL is in compliance with such covenants.

As a result of IPL's current credit rating, the facility agent has the ability to (i) replace IPL
as the collection agent; and (ii) declare a "lock-box" event. Under a lock-box event or a
termination event, the facility agent has the ability to require all proceeds of purchased
receivables of IPL to be directed to lock-box accounts within 45 days of notifying IPL. A
termination event would also (i) give the facility agent the option to take control of the lock-box
account, and (ii) give the Purchasers the option to discontinue the purchase of new receivables and
cause all proceeds of the purchased receivables to be used to reduce the Purchaser's investment and
to pay other amounts owed to the Purchasers and the facility agent. This would have the effect of
reducing the operating capital available to IPL by the aggregate amount of such purchased
receivables (currently $50 million).

Derivatives:  IPL has only limited involvement with derivative financial instruments and
does not use them for trading purposes. IPL accounts for its derivatives in accordance with SFAS No.
133 "Accounting for Derivatives", as amended. IPL has one interest rate swap
agreement, which it entered into as a means of managing the interest rate exposure on its variable-
rate debt. Management has formally designated the swap as a hedge. IPL's balance sheets reflect the
current fair market value of this hedge and IPL records the change in its fair value in accumulated
other comprehensive loss. Management relies on financial institutions, which use standard market
conventions to determine the fair value of its hedges. All methods of assessing fair value result in
a general approximation of value and such value may never be realized.

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. Those income taxes payable which are includable in
allowable costs for ratemaking purposes in future years are recorded as regulatory assets with a
corresponding deferred tax liability. 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. Contingent liabilities related to income
taxes are recorded when the criteria for loss recognition under SFAS No. 5, "Accounting for
Contingencies," as amended, have been met.

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

Long Term Compensation Plan:  During 2004, most of IPL's non-union employees received
benefits under the AES Long Term Compensation Plan, a deferred compensation program. Benefits under
this plan are granted in the form of performance units payable in cash, AES restricted stock units
and options to purchase shares of AES common stock. All three of such components granted to non-
union employees of IPL vest in thirds over a three-year period and the terms of the AES restricted
stock units also include a five-year minimum holding period. In addition, the performance units
payable in cash are subject to certain AES performance criteria. Total deferred compensation expense
recorded during 2004 was $1.5 million and was included in Other Operating Expenses on IPL's
statements of income. The value of these benefits is being amortized over the 36 month vesting
period and a portion is recorded as miscellaneous deferred credits with the remainder recorded as
paid in capital on IPL's balance sheets in accordance with SFAS No. 148 "Accounting for
Stock-Based Compensation- Transition and Disclosure - An Amendment of FASB Statement No.
123."

New Accounting Pronouncements:  In January 2003, the Financial Accounting Standards Board
("FASB") issued Interpretation 46, "Consolidation of Variable Interest Entities"
("FIN 46"). FIN 46 addresses consolidation by business enterprises of variable interest
entities ("VIE") and significantly changes the consolidation requirements for those
entities. FIN 46 is intended to achieve more consistent application of consolidation policies
related to VIE's and thus improve comparability between enterprises engaged in similar activities
when those activities are conducted through VIE's. In December 2003, the FASB issued a revision to
the original Interpretation ("FIN 46-R") to codify both the proposed modifications and
other decisions previously issued through certain FASB Staff Positions into one document. FIN 46-R
currently applies to VIE's created after January 31, 2003, and to VIE's in which an enterprise
obtains an interest after that date. For entities created prior to January 31, 2003, FIN 46 had to
be adopted no later than the end of the first interim or annual reporting period ending after March
15, 2004. The application of FIN 46 and FIN 46-R did not have any impact on IPL's financial
statements as IPL has not obtained any interest in a VIE since January 31, 2003 nor is it the
primary beneficiary in any VIE.

In May 2004, the FASB issued FASB Staff Position ("FSP") 106-2, which provides guidance
on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization
Act of 2003 for employers that sponsor postretirement health care plans that provide prescription
drug benefits. The effects of the FSP 106-2, which were not material, were incorporated into the
November 30, 2004 measurement of plan obligations, as required.

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

Per Share Data: IPL is a wholly-owned subsidiary of IPALCO and does not report earnings on
a per-share basis.

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

3.	UTILITY PLANT IN SERVICE

The original cost of utility plant in service at December 31, segregated by functional
classifications, follows:

`2004        2003
                                                     ----------- -----------
                                                          (IN THOUSANDS)
Production                                           $2,059,490  $1,881,449
Transmission                                            257,118     256,046
Distribution                                            939,178     904,607
General                                                 166,042     163,352
                                                     ----------- -----------
Total Utility Plant in Service                       $3,421,828  $3,205,454
                                                     =========== ===========`

Substantially all of IPL's property is subject to a $692.7 million direct first mortgage lien, as
of December 31, 2004, securing IPL's first mortgage bonds. Total utility plant in service includes
$4.0 and $1.2 million of property under capital leases as of December 31, 2004 and 2003,
respectively. Total non-legal removal costs at December 31, 2004 and 2003 were $382.6 million and
$361.2 million, respectively.

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 a material effect on the estimated fair value amounts.

Cash and Cash Equivalents:  The book value approximates fair value due to the short
maturity of these instruments.

Long-Term Debt and Cumulative Preferred Stock:  The fair value of IPL's outstanding fixed
rate debt and cumulative preferred stock have been determined on the basis of the quoted market
prices 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, 2004 and 2003, the approximate fair value of IPL's long-term debt was $788  million and
$763 million, respectively. The fair value of IPL's variable-rate debt outstanding at December 31,
2004 and 2003 approximates its face amount, which is $40 million. The fair value of IPL's interest
rate swap agreement at December 31, 2004 and 2003 is approximately $(7.1) million and $(7.3)
million, respectively. These amounts estimate what IPL would have to pay to sell its position in the
swap. In addition, on December 31, 2003, IPL was party to an interest rate lock agreement to hedge
the interest rate risk on $100 million of first mortgage bonds IPL issued in January 2004. The
agreement had a fair value of approximately $(1.9) million at December 31, 2003 and IPL settled it
in January of 2004 for $(1.7) million. The fair value of IPL's cumulative preferred stock
approximates its book value as IPL is subject to regulation and gains and losses may be included in
rates.

5.	REGULATORY ASSETS

The amounts of regulatory assets (see also Note 2) at December 31 are as follows:

`2004        2003
                                                     ----------- -----------
                                                         (IN THOUSANDS)
Related to deferred taxes                               $81,505     $61,804
Unamortized reacquisition premium on debt                15,463      16,640
Unamortized Petersburg unit 4 carrying charges and
  certain other costs                                    22,847      23,901
Deferred Midwest ISO costs                                7,791       4,825
NOx Project Expenses                                      4,214       2,458
Other                                                       222         433
                                                     ----------- -----------
Total regulatory assets                                $132,042    $110,061
                                                     =========== ===========`

Included in prepayments and other current assets at December 31, 2004 and 2003 are deferred fuel
costs of $8.4 thousand and $2.5 million, respectively.

6.	CAPITAL STOCK

All of the outstanding common stock of IPL is owned by IPALCO. IPL's common stock is pledged
under IPALCO's $750 million senior secured notes. There have been no changes in the capital stock of
IPL during the periods covered by this report.

Dividend Restrictions:  Restrictions on the payment of cash dividends or other
distributions of IPL common stock and on the purchase or redemption of such shares by IPL are
contained in the indenture 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 IPL's common stock unless dividends on all outstanding shares of IPL's preferred stock have been
paid or declared and set apart for payment. All of IPL's retained earnings at December 31, 2004 were
free of such restrictions. IPL is also restricted in its ability to pay dividends under the terms of
its credit facilities if it is not in compliance with certain financial covenants. These covenants
require IPL to maintain a ratio of earnings before income taxes to interest expense not in excess of
2.5 to 1, and a ratio of total debt to total capitalization not in excess of .60 to 1, in order to
pay dividends. IPL was in compliance with such covenants as of December 31, 2004.

In addition, on February 12, 2003 and April 16, 2003, the IURC issued Orders (collectively, the
"IURC 2003 Financing Order"), approving IPL's 2003-2006 financing program, including, among other
things, the issuance of up to $160 million of additional long-term debt to pay, in part, for IPL's
capital expenditure program during 2003-2005, and the refinancing of up to approximately $211
million of long-term debt. To date, $130 million of additional long-term debt has since been issued
and the $80 million of long-term debt due in February 2004 has been refinanced. In addition,
the IURC 2003 Financing Order set forth a process whereby, prior to declaring or paying
common stock dividends, IPL must file a report with the IURC which includes certain specific
historical and pro forma financial information including, among other things, information relating
to dividends proposed, dividends paid in the prior twelve months, capitalization and retained
earnings. The IURC 2003 Financing Order states that IPL is not to pay any common stock dividends
until after twenty calendar days have passed after IPL has filed its report, or after the IURC
approves the common stock dividend after initiating a proceeding to explore the implications of a
proposed dividend. If within twenty calendar days the IURC does not initiate a proceeding to further
explore the implications of the proposed dividend, the proposed dividend will be deemed approved.
The IURC 2003 Financing Order stated that such process should continue in effect during the term of
the financing authority, which expires December 31, 2006.

The reports IPL has filed to date with the IURC under the dividend reporting process were all
deemed approved after twenty calendar days had elapsed and the IURC did not initiate any proceedings
to explore the implications of the proposed dividends. Management continues to believe that IPL will not
be prevented from paying future dividends in the ordinary course of prudent business operations.

Cumulative Preferred Stock:  IPL has five separate series of cumulative preferred stock.
Holders of preferred stock are entitled to receive dividends at rates per annum ranging from 4.0% to
5.65%. During each year ended December 31, 2004, 2003 and 2002, total preferred stock dividends were
$3.2 million. Holders of preferred stock 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 of IPL's
board of directors. IPL has issued and outstanding 500,000 shares of 5.65% Preferred Stock, which
are 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. Additionally, IPL has 91,353 shares of preferred stock
which are redeemable solely at the option of IPL and can be redeemed in whole or in part at any time
at specific call prices.

At December 31, 2004 and 2003, preferred stock consisted of the following:

`December 31, 2004      December 31,
                                    ---------------------- ------------------
                                        Shares      Call
                                     Outstanding   Price     2004     2003
                                    ---------------------- ------------------
                                                           (PAR VALUE IN
Cumulative $100 Par Value,                                 THOUSANDS)
   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   50,000
                                    --------------         ------------------
Total cumulative preferred stock          591,353           $59,135  $59,135
                                    ==============         ==================`

7.	INDEBTEDNESS

Long-term Debt

Before IPL can incur additional long-term debt, it must first have the approval of the
IURC. As of December 31, 2004, IPL had approval from the IURC to issue up to $30 million of
additional long-term debt, primarily for the purpose of funding a portion of its planned capital
expenditures. Also, IPL has restrictions on the amount of new debt it may issue due to contractual
obligations of AES and financial covenant restrictions under existing debt obligations at IPL and
IPALCO. Under such restrictions, IPL is generally allowed to fully draw the amounts available on its
credit facilities, refinance existing debt, issue the remaining debt approved by the IURC and issue
certain other indebtedness.

The following table presents IPL's long-term indebtedness as of December 31, 2004 and
2003:

`December 31,
                                                           ---------------------
Series                         Due                           2004       2003
--------------------------------------------------------------------------------
                                                          (IN THOUSANDS)
First Mortgage Bonds:
6.05%                          February 2004                      $0    $80,000
8%                             October 2006                   58,800     58,800
7.375%                         August 2007                    80,000     80,000
6.30%                          July 2013                     110,000    110,000
6.10%*                         January 2016                   41,850     41,850
5.40%*                         August 2017                    24,650     24,650
5.75%*                         August 2021                    40,000     40,000
5.50%*                         October 2023                   30,000     30,000
7.05%                          February 2024                 100,000    100,000
6.625%*                        December 2024                  40,000     40,000
5.90%*                         December 2024                  20,000     20,000
5.95%*                         December 2029                  30,000     30,000
5.95%**                        August 2030                    17,350     17,350
6.60%                          January 2034                  100,000          -
Unamortized discount - net                                      (586)      (639)
                                                          ----------------------
Total first mortgage bonds                                   692,064    672,011
                                                          ----------------------
Unsecured Notes:
1995B*                         January 2023                   40,000     40,000
6.375%*                        November 2029                  20,000     20,000
                                                          ----------------------
Total unsecured notes                                         60,000     60,000
                                                          ----------------------
Total long-term debt                                        $752,064   $732,011
                                                          ======================

*  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.
** Notes are issued to the Indiana Develpment Finance Authority, to secure the loan of
    proceeds from various tax-exempt instruments issued by the Indiana Develpment Finance
    Authority.`

___________________

*	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.

**	Notes are issued to the Indiana Development Finance Authority, to secure the loan of
proceeds from various tax-exempt instruments issued by the Indiana Development Finance
Authority.

IPL First Mortgage Bonds. The mortgage and deed of trust of IPL, together with the
supplemental indentures thereto, secure the first mortgage bonds issued by IPL. Pursuant to the
terms of the mortgage, substantially all property owned by IPL is subject to a $692.7 million direct
first mortgage lien, as of December 31, 2004. The IPL first mortgage bonds require net earnings as
calculated thereunder be at least two and one-half times the annual interest requirements before
additional bonds can be authenticated on the basis of property additions. IPL was in compliance with
such requirements as of December 31, 2004.

On August 6, 2003, IPL issued $110 million of 6.30% first mortgage bonds due
July 1, 2013. The net proceeds of approximately $109 million were used primarily to
finance a portion of IPL's capital expenditure program, to reimburse its treasury for expenditures
previously incurred in connection with the capital expenditure program and to repay amounts
outstanding on its credit lines. In January 2004, IPL issued $100 million of 6.60% first
mortgage bonds due January 1, 2034. The net proceeds of approximately $99 million were used to
retire $80 million of 6.05% first mortgage bonds due February 1, 2004 and to reimburse IPL's
treasury and pay down IPL's committed credit facilities for expenditures previously incurred in
connection with its capital expenditure program.

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

Variable-Rate Debt. The IPL 1995B notes provide for an interest rate that varies with the
tax-exempt weekly rate. These notes are classified as long-term liabilities because IPL maintains a
$40.6 million long-term liquidity facility supporting these agreements, which was unused at December
31, 2004. In June 2003, IPL executed an agreement which combined the $40.6 million liquidity
facility and its $30 million committed line of credit into one two-tranche agreement, which, as
amended, matures on May 31, 2005. IPL, at its option, can change the interest rate mode for the
1995B notes to other permitted

Debt Maturities. Maturities on indebtedness subsequent to December 31, 2004, are as
follows:

`Year             Amount
                      (IN THOUSANDS)
2005                      $        -
2006                          58,800
2007                          80,000
2008                               -
2009                               -
Thereafter                   613,850
                      ---------------
Total                       $752,650
                      ===============`

Lines Of Credit

IPL did not have any outstanding borrowings on its lines of credits as of December 31,
2004. In May 2004, IPL renewed its $45 million committed line of credit. The new agreement has
substantially the same terms as the previous agreement and matures May 19, 2005. In June 2004, IPL
amended another agreement which includes a $30 million committed line of credit and a $40.6 million
liquidity facility (related to $40 million of IPL variable rate bonds, which are remarketed weekly)
to extend the maturity to May 31, 2005.

On July 23, 2004, FERC issued an Order renewing IPL's authority to issue up to $500 million of
short-term indebtedness outstanding at any time through July 2006.

8.	INCOME TAXES

IPL follows a policy of comprehensive interperiod income tax allocation. Investment tax
credits related to utility property have been deferred and are being amortized over the estimated
useful lives of the related property. AES files federal and state income tax returns which
consolidate IPALCO and IPL. IPL is responsible for the income taxes associated with its own taxable
income.

IPL is currently under examination by the Internal Revenue Service for the period 1996 through
2001. Management regularly assesses the potential outcome of these examinations when determining the
adequacy of the provision for income taxes. Tax reserves have been established, which management
believes to be adequate, but not excessive, in relation to the potential for additional assessments.
Once established, reserves are adjusted only when there is more information available or when an
event occurs necessitating a change to the reserves. While the management believes that the amount
of the tax estimates are reasonable, it is possible that the ultimate outcome of current or future
examinations may exceed current reserves in amounts or a range of amounts that could be material but
cannot be estimated as of December 31, 2004.

Federal and state income taxes charged to income are as follows:

`2004      2003      2002
                                                    ------------------------------
                                                             (IN THOUSANDS)
Current income taxes:
Federal                                               $75,234   $45,922   $53,585
State                                                  25,243    18,519     7,201
                                                    ------------------------------
  Total current taxes                                 100,477    64,441    60,786
                                                    ------------------------------
Deferred federal income taxes                            (944)   30,433    42,061
Deferred state income taxes                              (780)    4,673     6,308
                                                    ------------------------------
  Total deferred income taxes                          (1,724)   35,106    48,369
                                                    ------------------------------
Net amortization of investment credit                  (2,709)   (2,753)   (2,763)
                                                    ------------------------------
  Total charge to utility operating expenses           96,044    96,794   106,392
Net debit (credit) to other income and deductions        (905)     (345)    1,323
                                                    ------------------------------
Total federal and state income tax provisions         $95,139   $96,449  $107,715
                                                    ==============================


The provision for federal income taxes (including net investment tax credit
adjustments) is different 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:

                                                       2004      2003      2002
                                                    ------------------------------
Federal statutory tax rate                               35.0%     35.0%     35.0%
Effect of state income taxes                             (3.3)     (3.3)     (1.8)
Amortization of investment tax credits                   (1.0)     (1.1)     (1.0)
Depreciation flow through and amortization               (1.3)      0.9       1.9
Change in tax reserves                                   (1.6)      0.0       0.0
Other - net                                              (1.0)     (1.2)      0.1
                                                    ------------------------------
Effective federal tax rate                               26.8%     30.3%     34.2%
                                                    ==============================

The significant items comprising IPL's net accumulated deferred tax liability
recognized in the balance sheets as of December 31, 2004 and 2003 are as follows:

                                                       2004      2003
                                                    --------------------
Deferred tax liabilities:                              (IN THOUSANDS)
Relating to utility property                         $488,489  $468,445
Other                                                  10,138    10,651
                                                    --------------------
Total deferred tax liabilities                        498,627   479,096
Deferred tax assets:                                --------------------
Relating to utility property                           69,536    67,621
Investment tax credit                                  18,838    20,902
Employee benefit plans                                 20,348    18,261
Accumulated other comprehensive loss                   34,972    36,099
Other                                                     669       751
                                                    --------------------
Total deferred tax assets                             144,363   143,634
                                                    --------------------
Accumulated net deferred tax liability                354,264   335,462
  Less: Current portion of deferred tax liability        (136)      300
                                                    --------------------
Accumulated deferred income taxes - net              $354,400  $335,162
                                                    ====================`

9.	PENSION BENEFITS

Employees' Retirement Plan: Most of IPL's employees are covered by the Employees' Retirement
Plan of Indianapolis Power & Light Company (the "Defined Benefit Pension Plan.") The
Defined Benefit Pension Plan is noncontributory and is funded through a trust. Benefits are based on
each individual employee's pension band and years of service as opposed to their compensation.
Pension bands are based primarily on job duties and responsibilities. Benefit accrual was frozen for
all non-union participants effective July 8, 2001. The non-union participants who had their benefit
accrual frozen also were prohibited from making additional contributions to the IPL defined
contribution plan (the "Thrift Plan.") These non-union people became eligible to
participate in the AES defined contribution plan.

In the 4th quarter of 2002, the non-union people who had their defined benefit pension frozen on
July 8, 2001 were given a one-time, irrevocable choice to either (1) continue as an active
participant in the AES defined contribution plan; or (2) return to the Defined Benefit Pension Plan
as an active participant, and return to the Thrift Plan as an active participant. Most of them chose
to return as active participants to the Defined Benefit Pension Plan and the Thrift Plan.

IPL's funding policy for the Defined Benefit Pension Plan is to contribute annually not less than
the minimum required by applicable law, nor more than the maximum amount that can be deducted for
federal income tax purposes.

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

The following tables present information relating to the Defined Benefit Pension Plan and
supplemental retirement plan (the "Pension Plans"):

`Pension Benefits
                                                           2004         2003
                                                        -----------  ----------
Change in benefit obligation:                                (In Thousands)
Benefit obligation at beginning Measurement Date (see     $442,947    $410,630
  below)
Service cost                                                 3,654       3,702
Interest cost                                               25,703      26,973
Actuarial loss                                                 394      27,331
Amendments (Primarily increases in pension bands)            2,089       3,334
Benefits paid                                              (29,079)    (29,023)
                                                        -----------  ----------
  Benefit obligation at ending Measurement Date            445,708     442,947
                                                        -----------  ----------
Change in plan assets:
Fair value of plan assets at beginning Measurement Date    330,373     223,869
Actual return on plan assets                                31,186      39,453
Employer contribution                                        6,148      96,074
Benefits paid                                              (29,079)    (29,023)
                                                        -----------  ----------
  Fair value of plan assets at ending Measurement Date     338,628     330,373
                                                        -----------  ----------
  Funded status                                           (107,080)   (112,574)
  Unrecognized net gain                                     80,479      88,034
  Unrecognized prior service cost                           16,823      16,282
  Unrecognized net transition asset                         (1,272)     (2,686)
                                                        -----------  ----------
  Net amount recognized                                   ($11,050)   ($10,944)
                                                        ===========  ==========`

`Pension Benefits
                                                     ------------------------------
                                                        2004      2003      2002
                                                     ------------------------------
                                                              (IN THOUSANDS)

Components of net periodic benefit cost
Service cost                                            $3,654    $3,702    $2,844
Interest cost                                           25,703    26,973    26,722
Expected return on plan assets                         (27,049)  (22,696)  (22,203)
Amortization of transition asset                        (1,414)   (1,414)   (1,414)
Amortization of prior service cost                       1,547     1,547       712
Recognized actuarial loss                                3,812     2,680       105
                                                     ------------------------------
Total pension cost                                       6,253    10,792     6,766
Less: amounts capitalized                                  605     1,116       830
                                                     ------------------------------
Amount charged to expense                               $5,648    $9,676    $5,936
                                                     ==============================
Weighted average assumptions as of November 30
Discount rate                                              6.0%      6.0%     6.75%
Expected return on Defined Benefit Pension Plan asset      8.0%      8.5%      8.9%
Expected return on supplemental retirement plan asset      8.0%      8.9%      8.9%`



The accumulated pension benefit obligation was $445.7 million and $442.9 million at December 31,
2004 and 2003, respectively. Pension expense for the following year is determined on November 30
(the "Measurement Date") based on the market value of the Pension Plans' assets, a
discount rate used to determine the projected benefit obligation and the expected long-term rate of
return on plan assets. To develop the assumption for expected long-term rate of return on assets, we
considered the historical returns, as well as, the future expectations of the weighted-average
expected returns for each asset class based on the target asset allocation. For 2004, pension
expense was determined using a discount rate of 6.00% and an assumed long-term rate of return on
plan assets of 8.5%. The effect on total pension cost of a one percentage point increase and
decrease in the assumed discount rate of the projected benefit obligation is ($3.3 million) and $3.9
million, respectively. The effect on total pension cost of a one percentage point increase and
decrease in the expected long-term rate of return on plan assets is ($3.2 million) and $3.2 million,
respectively.

Total cash contributions to the Pension Plans were $6.1 million, $96.1 million and $15.2 million
for 2004, 2003 and 2002, respectively. Depending on the timing of contributions, pending
legislation, and other factors related to the funding strategy, management estimates potential cash
contributions to the Pension Plans up to $25 million in 2005, but may elect not to make any
contributions since none are anticipated to be required to meet IPL's minimum funding targets. This
estimate is based on actuarial assumptions using a discount rate of 6.0% and an assumed long-term
rate of return on plan assets of 8.0%.

The targeted investment allocations of the Pension Plans as of December 31, 2004 and 2003 were
approximately 55%, 40% and 5% in equity securities, debt securities and real estate securities,
respectively. The actual assets as of December 31, 2004 and 2003 were as follows (in
thousands):

`2004       2003
                                ---------------------
Equity securities                 $215,281  $189,471
Debt securities                    104,073   116,447
Real estate securities              13,147    17,395
Cash                                12,224    14,150
                                ---------------------
Total assets                      $344,725  $337,463
                                =====================

      Benefit payments made from the Defined Benefit Pension Plan for the years
ended December 31, 2004 and 2003 were $29.1 million and $29.0 million, respectively.
Projected benefit payments are as follows:

             Year                   Amount
                                (IN THOUSANDS)
2005                                29,027
2006                                28,826
2007                                28,695
2008                                28,576
2009                                28,640
2010 through 2014 (in total)       148,785`

Voluntary Early Retirement Programs (the "VERPS"): In conjunction with the AES
Acquisition, IPL implemented three VERPS which offered eligible employees enhanced retirement
benefits upon early retirement. Participation in the VERPS was accepted by 551 qualified employees,
who elected actual retirement dates between March 1, 2001, and August 1, 2004. Additionally, we
currently intend to provide postretirement medical and life insurance benefits to the retirees in
the first VERP (400 participants) until age 55; at which time they will be eligible to receive
similar benefits from the independent Voluntary Employees Beneficiary Association Trust (the
"VEBA Trust"). IPL reserves the right to modify or terminate any of the postretirement
health care and life insurance benefits provided by IPL.

On December 23, 2002, IPL executed an agreement with the administrator of the VEBA Trust to
provide postretirement medical and life insurance benefits to the retirees in the second and third
VERPS (151 participants) from their retirement until age 62, subject to IPL's right to modify or
terminate such benefits in the future. The additional cost is estimated to be $7.5 million to be
amortized over 8 years. When those retirees reach age 62, they will be eligible for benefits from
the VEBA Trust.

Defined Contribution Plans: All of IPL's employees are covered by one of two defined
contribution plans, The Thrift Plan or The Wealth Accumulation Plan:

The Thrift Plan. Most employees of IPL are covered by the Thrift Plan, which is a defined
contribution plan sponsored by IPL. Participants elect to make contributions to the Thrift Plan
based on a percentage of their base compensation. Each participant's contribution is matched in
amounts up to, but not exceeding, 4% of the participant's base compensation, except for employees
hired after October 20, 2000 who are members of the clerical-technical unit of the International
Brotherhood of Electrical Workers union, who are not eligible for postretirement health care
benefits, whose contributions are matched up to 5% of their base compensation. Employer
contributions to the Thrift Plan were $2.4 million, $2.1 million and $1.2 million for 2004, 2003 and
2002, respectively.

The Wealth Accumulation Plan. IPL's employees not covered by the Thrift Plan are covered
by The AES Corporation Profit Sharing and Stock Ownership Plan, which is a defined contribution plan
sponsored by AES. Participants elect to make contributions to the AES defined contribution plan
based on a percentage of their taxable compensation. Each participant's contribution is matched in
amounts up to, but not exceeding, 5% of the participant's taxable compensation. In addition, the AES
defined contribution plan has a profit sharing component whereby AES contributes a percentage of
each employee's annual salary in the form of shares of AES common stock into the plan on a pre-tax
basis. The profit sharing percentage is determined by the AES Board on an annual basis. Employer
payroll-matching and profit sharing contributions (by IPL) relating to the AES defined contribution
plan were $1.0 million, $23 thousand and $3.4 million for 2004, 2003 and 2002, respectively.

10.	OTHER POSTRETIREMENT BENEFITS

IPL sponsors a group benefits plan which provides certain health care and life insurance
benefits to active employees. IPL also provides postretirement health care benefits, through the end
of its current contract, to employees in the physical unit of the International Brotherhood of
Electrical Workers union who meet existing minimum retirement requirements and were hired after
October 20, 2000. In addition, non-union employees of IPL who meet existing minimum retirement
requirements and were hired from October 21, 2000 through September 1, 2003, are eligible to receive
postretirement health care benefits.

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

Other postretirement benefit costs for the years ended December 31, 2004, 2003 and 2002, net of
amounts capitalized, were $2.3 million, $1.6 million and $0.7 million, respectively. As of December
31, 2004 and 2003 IPL had benefit obligations of $13.8 and $14.9 million, respectively.

The following tables present information relating to other postretirement benefits:

`2004       2003
Other Postretirement Benefits                           ---------- ----------
                                                             (In Thousands)
Change in benefit obligation:
Benefit obligation at beginning of year                   $14,901    $12,658
Service cost                                                  790        188
Interest cost                                                 826        785
Actuarial (gain) loss                                        (862)     1,317
Plan amendments                                                 -      1,685
Benefits paid                                              (1,818)    (1,732)
                                                        ---------- ----------
Benefit obligation at end of year                          13,837     14,901
                                                        ---------- ----------
Change in plan assets:
Employer contribution                                       1,818      1,732
Benefits paid                                              (1,818)    (1,732)
                                                        ---------- ----------
Fair value of plan assets at end of year                        -          -
                                                        ---------- ----------
Funded status                                             (13,837)   (14,901)
Unrecognized net gain                                          78        939
Unrecognized prior service cost                             6,960      7,903
                                                        ---------- ----------
Net amount recognized                                     ($6,799)   ($6,059)
                                                        ========== ==========`

`Other Postretirement Benefits                    2004    2003    2002
                                               ------------------------
Components of net periodic benefit cost:            (IN THOUSANDS)
Service cost                                      $790    $188      $-
Interest cost                                      826     785     438
Amortization of prior service cost                 942     853       -
Recognized actuarial loss                            -       -     399
                                               ------------------------
Net periodic postretirement benefit cost         2,558   1,826     837
Less: amounts capitalized                          247     189     103
                                               ------------------------
Amount charged to expense                       $2,311  $1,637    $734
                                               ========================
Discount rate as of November 30                   6.00%   6.00%   6.75%`

Other postretirement benefit costs are determined using a discount rate, which is determined on
November 30th of the preceding year. For measurement purposes, we assumed an annual rate
of increase in the per capita cost of covered medical care benefits of 9.0% for 2005, gradually
declining to 5.0% in 2009 and remaining level thereafter. In addition, we assumed an annual rate of
increase in the per capita cost of covered prescription drugs of 14.0% for 2005, gradually declining
to 5.0% in 2014 and remaining level thereafter. The effect of a one percentage point increase and
decrease in the assumed health care cost trend rates on the aggregate of the service and interest
cost components of net periodic postretirement health care benefit costs is $0.3 million and $(0.3)
million, respectively. The effect of a one percentage point increase and decrease in the assumed
health care cost trend rates on the accumulated postretirement benefit obligation for health care
benefit costs is $1.8 million and $(1.4) million, respectively. See also, Note 2 for disclosure
regarding FSP106-2, which provides guidance on the accounting for the effects of the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 for employers that sponsor
postretirement health care plans that provide prescription drug benefits.

Benefit payments made from the Group Benefit Plan for postretirement benefit costs the years
ended December 31, 2004 and 2003 were $1.8 million and $1.7 million, respectively. Projected benefit
payments are as follows:

`Year                      Amount
                              (IN THOUSANDS)
2005                                   1,826
2006                                   1,655
2007                                   1,524
2008                                   1,379
2009                                   1,121
2010 through 2014 (in total)           4,004`

11.	LAND SALES

In 2004, IPL sold approximately 4,000 acres of undeveloped property near Martinsville,
Indiana divided between two purchasers for an aggregate price of $13.2 million. The net sale
proceeds were $11.7 million and the net gain was $5.9 million. This land is presented on IPL's
balance sheet as land held for sale at $6.6 million as of December 31, 2003. In accordance with
regulatory accounting, these gains are included as a reduction of other operating expenses on IPL's
statements of income.

12.	COMMITMENTS AND CONTINGENCIES

Legal

IPALCO and certain former officers and directors of IPALCO are named as defendants in
separate class action lawsuits under the Employment Retirement Income Security Act and the Federal
securities laws, respectively, each filed in the U.S. District Court for the Southern District of
Indiana, and each making allegations regarding matters arising from the acquisition of IPALCO by
AES. IPL is not a party to these suits. Since May 2003, IPALCO, IPL, AES and certain former
directors and officers of IPALCO and/or IPL received subpoenas from the Securities Division of the
Indiana Secretary of State seeking information related to the acquisition of IPALCO by AES. IPALCO,
IPL, AES and the individuals have produced various materials in response to the subpoenas and
otherwise cooperated fully with the Secretary of State in connection with the inquiry. Since August
11, 2004, they have received no further inquiries or other communications from the Secretary of
State concerning the matter. While we can not predict the outcome, we do not expect this matter to
have a material adverse effect on IPL's financial statements.

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

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

As of December 31, 2004, IPL is a defendant in approximately 113 pending lawsuits alleging
personal injury or wrongful death stemming from exposure to asbestos and asbestos containing
products formerly located in IPL power plants. IPL has been named as a "premises
defendant" in that IPL did not mine, manufacture, distribute or install asbestos or asbestos
containing products. These suits have been brought on behalf of persons who worked for contractors
or subcontractors hired by IPL. IPL has insurance coverage for many of these claims; currently,
these cases are being defended by counsel retained by various insurers who wrote policies applicable
to the period of time during which much of the exposure has been alleged. Although we do not believe
that any of the pending asbestos suits in which IPL is a named defendant will have a material
adverse effect on IPALCO's business or operations, we are unable to predict the number or effect any
additional suits may have. Accordingly, we cannot assure that the pending or any additional suits
will not have a material adverse effect on IPL's financial statements.

In addition, 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 IPL's financial
statements.

Environmental

We are subject to various federal, state and local environmental protection and health
and safety laws and regulations governing, among other things, the generation, storage, handling,
use, disposal and transportation of hazardous materials; the emission and discharge of hazardous and
other materials into the environment; and the health and safety of our employees. These laws and
regulations often require a lengthy and complex process of obtaining and renewing permits and other
governmental authorizations from federal, state and local agencies. Violation of these laws,
regulations or permits can result in substantial fines, other sanctions, permit revocation and/or
facility shutdowns. We believe that we operate in material compliance with environmental laws,
regulations and permits and health and safety laws. We cannot assure, however, that we have been or
will be at all times in full compliance with such laws, regulations and permits.

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

On December 17, 2004, EPA signed a final rule designating Marion and Morgan Counties, and a
portion of Pike County, as nonattainment for the fine particulate matter ambient air quality
standard, effective April 5, 2005. The non attainment designation for both ozone and particulate
matter will legally require the state of Indiana to modify its SIP by 2008. The SIP will detail how
the state will regain its compliance status. The potential impact these new EPA designations may
have on our generating stations is unclear at this time.

Multipollutant Plan filing.  On November 30, 2004, in response to a petition filed by IPL,
the IURC issued an Order approving up to $182 million of capital expenditures to install pollution
control technology at two of IPL's power plants. These capital expenditures are projected to address
required sulfur dioxide, and mercury emissions reductions from our power plants and to reduce fine
particulate pollution in the atmosphere. The Order also approves ratemaking treatment for such
expenditures, including a return on the investment and recovery of depreciation expenses and
operation and maintenance expenses associated with these projects. The Order also granted IPL the
authority to add the approved return on its environmental projects to IPL's authorized annual
jurisdictional net operating income in subsequent fuel adjustment charge proceedings.

NOx SIP Call. In October 1998, the EPA issued a final rule, referred to as the
NOx SIP call, which imposes more stringent limits on NOx emissions from fossil
fuel-fired steam electric generators. Through December 31, 2004, IPL spent approximately $185
million on NOx emissions reduction projects. Further expenditures are estimated to be
approximately $27 million in 2005 to substantially meet the required NOx SIP Call
reductions.

In November 2002, the IURC issued a Certificate of Public Convenience and Necessity for the
construction and use of CCT to allow IPL to meet the NOx emission limits imposed pursuant
to the EPA's NOx SIP call. The CCT constitutes qualified pollution control property as
defined in Ind. Code section 8-1-2-6.6 and the IURC has approved ratemaking treatment applicable to
such property through the ECCRA. The ratemaking treatment provided for in the IURC Order includes a
return on the investment in IPL's planned CCT projects under construction. After the projects have
been placed in service, the approved ratemaking treatment provides for a return on the investment
and recovery of the depreciation expenses and operation and maintenance expenses associated with
these projects. Such costs are deferred as regulatory assets on IPALCO's balance sheets. The
ratemaking treatment also provides for recovery of expenditures related to the purchase of
NOx emission allowances, should such expenditures be made to supplement IPL's CCT
construction projects. IPL may add the approved return on its CCT projects to its authorized annual
jurisdictional net operating income in subsequent fuel adjustment charge proceedings. The increase
in the amount of rate revenues and authorized net operating income resulting from IPL's CCT plan
will be determined in periodic filings to the IURC to be made at intervals of no more often than
every 6 months and will depend on the amount of cumulative investment, depreciation expenses,
operation and maintenance expenses and actual NOx emission allowance purchases at the
time of each of the filings. IPL's ECCRA filings have collectively added $6.7 million to IPL's
authorized annual jurisdictional net operating income through December 31, 2004.

Lease Commitments

IPL has capital leases expiring at various dates through 2010. Total Utility Plant includes
fixed assets under capital lease, net of accumulated depreciation, totaling $4.0 million at December
31, 2004. The interest component of capital leases as of December 31, 2004 is $0.2 million and the
net present value of future minimum lease payments is $4.2 million. The current portion of this
liability is recorded in other current liabilities and the noncurrent portion is recorded in
miscellaneous on IPL's balance sheets. IPL also has operating leases expiring at various dates
through 2009. Rental expense for 2004 and 2003 was $1.0 million and $0.6 million, respectively. The
following table shows fixed future minimum lease payments as of December 31, 2004 for all capital
leases and for operating leases with remaining noncancelable lease terms in excess of one year (in
thousands):

`2005   2006   2007   2008   2009  Thereafter  Total
Operating Leases    $866   $800   $662   $649   $129          -  $3,106
Capital Leases      $997   $983   $978   $795   $515       $247  $4,515`

13.	RELATED PARTY TRANSACTIONS

Effective September 1, 2003, IPALCO and IPL entered into a property insurance program in
which AES and other AES subsidiaries also participate. The program includes a policy issued by a
third party insurance company for funding losses of the participants up to a total aggregate amount
of $20 million. Funds to pay claims within this limit will be derived from premiums paid to this
third party carrier by the participants and will be deposited into a trust fund owned by AES Global
Insurance Company, a wholly-owned subsidiary of AES, but controlled by the third party carrier.
Claims above the $20 million aggregate will be covered by separate insurance policies issued by a
syndicate of third party carriers. These policies will provide coverage of $600 million per
occurrence. We believe that the combined cost of these policies is less than comparable insurance in
the marketplace. The cost of coverage under this program, which began September 1, 2003, was
approximately $3.0 million and $1.0 million in 2004 and 2003, respectively.

In June 2004, IPL entered into an agreement with Health and Welfare Benefit Plans LLC, an
affiliate of AES, to participate in a group benefits program, including but not limited to, health,
dental, vision and life benefits, in which AES and other AES subsidiaries also participate. Health
and Welfare Benefit Plans LLC will administer the financial aspects of the group insurance program,
receive all premium payments from the participating affiliates, and make all vendor payments. Health
insurance costs have risen significantly during the last few years. We believe that, though our
insurance costs will likely continue to rise, cost savings can be realized through participation in
this group benefits program with AES. During 2004, IPL paid $7.3 million for six months coverage
under this program beginning August 1, 2004.

AES files federal and state income tax returns which consolidate IPALCO and its subsidiaries,
including IPL. Under a tax sharing agreement with AES, IPL is responsible for the income taxes
associated with its own taxable income.

14.	SEGMENT INFORMATION

Operating segments are components of an enterprise for which separate financial information
is available and is evaluated regularly by the chief operating decision maker in assessing
performance and deciding how to allocate resources. All of IPL's current business operations consist
of the generation, transmission, distribution and sale of electric energy, and therefore IPL has
only one reportable segment.

15.	QUARTERLY RESULTS (UNAUDITED)

Operating results for the years ended December 31, 2004, and 2003, by quarter, are as follows
(in thousands):

`2004 (1)
                           --------------------------------------------------------
                              March 31      June 30     September 30  December 31
                           --------------------------------------------------------
Utility operating revenue       $215,356      $214,538      $230,229      $225,350
Utility operating income          53,280        49,144        53,957        57,953
Net income                        43,847        36,831        41,668        45,968

                                                     2003
                           --------------------------------------------------------
                              March 31      June 30     September 30  December 31
                           --------------------------------------------------------
Utility operating revenue       $224,544      $188,317      $221,393      $203,911
Utility operating income          53,472        34,648        51,315        47,148
Net income                        44,137        25,378        41,318        35,051`

The quarterly figures reflect seasonal and weather-related fluctuations that are normal to IPL's
operations.

************

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.  We carried out an evaluation, under
the supervision and with the participation of our management, including the chief executive officer
("CEO") and chief financial officer ("CFO"), of the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934
Rules 13a-15(e) and 15-d-15 (e) as required by paragraph (b) of the Exchange Act Rules 13a-15 or
15d-15) as of December 31, 2004. The Company's management, including the CEO and CFO, is engaged in
a comprehensive effort to review, evaluate and improve our controls; however, management does not
expect that our disclosure controls or our internal controls over financial reporting will prevent
all errors and all fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system's objectives will be met. In
addition, we have interests in certain unconsolidated entities. As we do not control or manage these
entities, our disclosure controls and procedures with respect to such entities is generally more
limited than those we maintain with respect to our consolidated subsidiaries.

Based upon the controls evaluation performed, the CEO and CFO have concluded that as of December
31, 2004, our disclosure controls and procedures were effective to provide reasonable assurance that
material information relating to us and our consolidated subsidiaries is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.

Changes in Internal Controls.  In the course of our evaluation of disclosure controls and
procedures, management considered certain internal control areas in which we have made and are
continuing to make changes to improve and enhance controls. Based upon that evaluation, the CEO and
CFO concluded that there were no changes in our internal controls over financial reporting
identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15
or 15d-15 that occurred during the quarter ended December 31, 2004 that have materially affected, or
are reasonably likely to materially affect, our internal controls over financial reporting.



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

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

Item 9B. Other Information

Not applicable.





Part III



Item 10. Directors and Executive Officers of the Registrant

Not applicable pursuant to General Instruction I of the Form 10-K.

Item 11. Executive Compensation

Not applicable pursuant to General Instruction I of the Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Not applicable pursuant to General Instruction I of the Form 10-K.

Item 13. Certain Relationships and Related Transactions

Not applicable pursuant to General Instruction I of the Form 10-K.

Item 14. Principal Accounting Fees and Services.

The Financial Audit Committee of AES pre-approved the audit and non-audit services provided
by the independent auditor for 2004 and 2003 for itself and its subsidiaries, including IPALCO and
its subsidiaries. The AES Financial Audit Committee maintained its policy established in 2002 within
which to judge if the independent auditor may be eligible to provide certain services outside of its
main role as outside auditor. Services within the established framework include audit and related
services and certain tax services. Services outside of the framework require AES Financial Audit
Committee approval prior to the performance of the service. The Sarbanes-Oxley Act of 2002 addresses
auditor independence and this framework is consistent with the provisions of the Act. No services
performed by the independent auditor with respect to IPALCO and its subsidiaries were approved after
the fact by the AES Financial Audit Committee other than those that were considered to be de minimis
and approved in accordance with Regulation 2-01 (c)(7)(i)(c) to Regulation S-X of the Securities
Exchange Act of 1934, as amended.

In addition to the pre-approval policies of the AES Financial Audit Committee, the IPALCO Board
of Directors has established a pre-approval policy for audit, audit related, and certain tax and
other non-audit services for 2004. The Board of Directors will specifically approve the annual audit
services engagement letter, including terms and fees, with the independent auditor. Other audit,
audit related and tax consultation services specifically identified in the pre-approval policy are
pre-approved by the Board of Directors on an annual basis, subject to review of the policy at least
annually. This pre-approval allows management to request the specified services on an as-needed
basis during the year. Any such services are reviewed with the Board of Directors on a timely basis.
Any audit or non-audit services that involve a service not listed on the pre-approval list must be
specifically approved by the Board of Directors prior to commencement of such work. No services were
approved after the fact by the IPALCO Board of Directors other than those that were considered to be
de minimis and approved in accordance with Regulation 2-01 (c)(7)(i)(c) to Regulation S-X of the
Securities Exchange Act of 1934, as amended.

> The following table lists fees billed to IPALCO for products and
> services provided by our principal accountants:

`2004       2003
                                                               ----------------------
Audit Fees                                                       $477,870   $525,275
Audit Related Fees:
  Fees for the audit of IPL's employee benefit plans               43,000     40,000
  Fees for testing internal controls over financial reporting     208,320          -
Tax Fees:
  Review of federal and state income tax returns                   17,955     17,350
  Consulting fees                                                 426,640          -
Other - software licensing fees                                     3,275          -
                                                               ----------------------
Total Principal Accounting Fees and Services                   $1,177,060   $582,625
                                                               ======================`



Part IV

Item 15. Exhibits, Financial Statements and Schedules

1. Exhibits

`Exhibit
Number  Document
------- -------------------------------------------------------------------------------------
3.1*    Articles of Incorporation
3.2*    By-Laws
4.1*    Indenture, dated as of November 14, 2001 between IPALCO and the Trustee
4.2*    Pledge Agreement dated as of November 14, 2001 between IPALCO and the
         Collateral Agent for the benefit of the Secured Parties
4.3*    Mortgage and Deed of Trust, dated as of May 1, 1940, between IPL and
         American National Bank & Trust Company of Chicago, Trustee
4.4*    The following supplemental indentures to the Mortgage and Deed of Trust
        referenced in 4.3 above:
        Third Supplemental Indenture dated as of April 1, 1949
        Tenth Supplemental Indenture dated as of October 1, 1960
        Eighteenth Supplemental Indenture dated as of February 15, 1974
        Thirty-Fourth Supplemental Indenture dated as of October 15, 1991
        Thirty-Fifth Supplemental Indenture dated as of August 1, 1992
        Thirty-Sixth Supplemental Indenture dated as of April 1, 1993
        Thirty-Seventh Supplemental Indenture dated as of October 1, 1993
        Thirty-Ninth Supplemental Indenture dated as of February 1, 1994
        Fortieth Supplemental Indenture dated as of February 1, 1994
        Forty-First Supplemental Indenture dated as of January 15, 1995
        Forty-Second Supplemental Indenture dated as of January 15, 1995
        Forty-Second Supplemental Indenture dated as of October 1, 1995
        Forty-Third Supplemental Indenture dated as of August 1, 2001
        Forty-Fourth Supplemental Indenture dated as of August 1, 2001
        Forty-Fifth Supplemental Indenture dated as of August 1, 2001
        Forty-Sixth Supplemental Indenture dated as of August 1, 2001
        Forty-Seventh Supplemental Indenture dated as of August 1, 2003 (Incorporated
         by reference to Exhibit No. 10.1 to IPALCO's June 30, 2003 Form 10-Q)
        Forty-Eighth Supplemental Indenture dated as of January 1, 2004

4.5     Rights Agreement dated as of June 28, 1990, as amended and restated as of
         April 28, 1998, Between IPALCO and First Chicago Trust Company of New York
         (Rights Agent) (Incorporated by reference to IPALCO's Registration
         Statement of Form 8-A/A filed April 29, 1998)
4.6*    Amendment No. 1 dated as of July 15, 2000, to the Rights Agreement between
         IPALCO and First Chicago Trust Company of New York (Rights Agent)
10.1*   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 V
10.2*   Interconnection Agreement dated May 1, 1992, among IPL, PSI Energy, Inc. and
         CINERGY Services, Inc. as modified through Amendment Number 9 (The Third
         Amendment amends and restates the complete agreement between the parties)
10.3*   Interconnection Agreement dated December 2, 1969, between IPL and Southern
         Indiana Gas and Electric Company as modified through Modification Number 11
10.4*   Interconnection Agreement dated December 1, 1981, between IPL and Hoosier
         Energy Rural Electric Cooperative, Inc., as modified through Modification 6
10.5    Tenth supplemental agreement to interconnection agreement between IPL and
         PSI Energy, Inc., dated as of June 26, 2002 (Incorporated by reference to
         Exhibit No. 10.2 to IPALCO's September 30, 2002 Form 10-Q.)
10.6*   Receivables Purchase Agreement between IPL and IPL Funding Corporation
         dated December 20, 1996
10.7**  Amended and Restated Receivables Sale Agreement, Dated as of July 20, 2004,
         Among IPL Funding Corporation, ABN AMRO Bank N.V., the Liquidity Providers from
         time to time Parties Thereto and Windmill Funding Corporation
10.8    First Amendment, Dated as of October 27, 2004 to Amended and Restated Receivables
         Sale Agreement Dated as of July 20, 2004 (Incorporated by reference to Exhibit
         No. 10.1 to IPALCO's September 30, 2004 Form 10-Q)
10.9*   Indemnity Agreement dated as of December 20, 1996, between IPL and ABN AMRO
         Bank N.V., as the agent
10.10*  Subordination Agreement dated as of December 20, 1996, between IPL, IPL
         Funding Corporation and ABN AMRO Bank N.V., as the agent
10.11*  Revolving Subordinated Promissory Note between IPL Funding Corporation and
         IPL dated December 20, 1996
10.12   Remarketing Agreement between IPL and J.P. Morgan Securities, Inc. dated June 15,
         2001 for the remarketing of the $40,000,000 City of Petersburg, Indiana, Pollution
         Control Refunding Revenue Bonds, Adjustable Rate Tender Securities, Series 1995B
10.13** Credit Agreement, Dated as of May 20, 2004, Among IPL, the Institutions from time
         to time Parties Thereto, as Lenders, and The Hungtington National Bank, as agent
10.14   Credit Agreement Among IPL, the Institutions from time to time Parties Thereto, as
         Lenders, and Lasalle Bank National Association, as Agent, Dated as of June 4, 2003
         (Incorporated by reference to Exhibit No. 10.2 to IPALCO's June 30, 2003 Form 10-Q)
10.15** First Amendment, dated as of June 2, 2004, to Credit Agreement, dated as of June 4, 2
         2003, Among IPL, the Institutions from time to time Parties Thereto, as Lenders, and
         Lasalle Bank National Association, as Agent
10.16*  IPALCO 1991 Directors Stock Option Plan
10.17*  IPALCO 1997 Stock Option Plan
10.18*  IPALCO 1999 Stock Incentive Plan
31.1    Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a).
31.2    Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a).
32      Certification required by Rule 13a-14(b) or 15d-14(b).


*	Incorporated by reference to IPALCO's Registration Statement of Form S-4 filed with the
Securities and Exchange Commission on April 3, 2002.
**	Incorporated by reference to IPALCO's June 30, 2004 Form 10-Q.

 b. Financial Statement Schedules



IPALCO ENTERPRISES, INC.
Valuation and Qualifying Accounts and Reserves
Years ended December 31, 2004, 2003 and 2002
(in thousands)

                                               Column C--Additions
                                         --------------------------
                              Column B--      (1)--        (2)--                   Column E--
                              Balance at     Charged      Charged    Column D--    Balance at
Column A--Description          Beginning        to        to Other  Deductions--     End of
                               of Period      Income      Accounts Net Write-offs    Period
----------------------------------------------------------------------------------------------

Year ended December 31, 2004
  Accumulated Provisions
     Deducted from Assets-
     Doubtful Accounts            $1,653          $4,087        $0         $3,603      $2,137

Year ended December 31, 2003
  Accumulated Provisions
     Deducted from Assets-
     Doubtful Accounts            $1,556          $3,411        $0         $3,314      $1,653

Year ended December 31, 2002
  Accumulated Provisions
     Deducted from Assets-
     Doubtful Accounts            $1,095          $3,773        $0         $3,312      $1,556





INDIANAPOLIS POWER & LIGHT COMPANY
Valuation and Qualifying Accounts and Reserves
Years ended December 31, 2004, 2003 and 2002
(in thousands)

                                                Column C--Additions
                                          ------------------------
                               Column B--    (1)--       (2)--                 Column E--
                               Balance at   Charged     Charged    Column D--  Balance at
Column A--Description          Beginning       to       to Other  Deductions--   End of
                               of Period     Income     Accounts  Net Write-of   Period
------------------------------------------------------------------------------------------
Year ended December 31, 2004
  Accumulated Provisions
     Deducted from Assets-
     Doubtful Accounts             $1,639      $4,087          $0      $3,603      $2,123

Year ended December 31, 2003
  Accumulated Provisions
     Deducted from Assets-
     Doubtful Accounts             $1,526      $3,411          $0      $3,298      $1,639

Year ended December 31, 2002
  Accumulated Provisions
     Deducted from Assets-
     Doubtful Accounts             $1,065      $3,768          $0      $3,307      $1,526






                                   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 b
by the undersigned, thereunto duly authorized.`

| |                         
| | ------------------------
| | IPALCO ENTERPRISES, INC.



| |     |                   
| | --- | ------------------
| | By: | /s/ Ann D. Murtlow

| |                                                             
| | ------------------------------------------------------------
| |                                                             
| | Ann D. Murtlow                                              
| | Chairman of the Board, President and Chief Executive Officer
| | March 23, 2005                                              

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                                Capacity                             Date
--------------------------  --------------------------------------------------  -----------------
                            Chairman of the Board, President, Chief Executive
/s/ Ann D. Murtlow           Officer and Director                               March 23, 2005
--------------------------  (Principal Executive Officer)
Ann D. Murtlow

                            Senior Vice President - Financial Services, Chief
/s/ Hamsa Shadaksharappa     Financial Officer, Secretary and Director          March 23, 2005
--------------------------   (Principal Financial and Accounting Officer)
Hamsa Shadaksharappa

/s/ Stephen Corwell         Senior Vice President - Corporate Affairs and       March 23, 2005
--------------------------   Director
Stephen Corwell

/s/ Ronald E. Talbot        Senior Vice President - Customer Operations and     March 23, 2005
--------------------------   Director
Ronald E. Talbot

                            Director and Senior Vice President of AES           March 23, 2005
--------------------------
Andres Gluski

                            Director                                            March 23, 2005
--------------------------
Kenneth Uva`