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

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                    For quarterly period ended June 30, 2001

                                       OR

[    ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                       to
                                    -----------------  -----------------

                          Commission file number 1-3553


                    SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
                   ------------------------------------------
             (Exact name of registrant as specified in its charter)

         INDIANA                                       35-0672570
(State or other jurisdiction of                        (I.R.S Employer
incorporation or organization)                         Identification No.)


                20 N.W. Fourth Street, Evansville, Indiana 47741
              (Address of principal executive offices and Zip Code)

                                 (812) 491-4000
                               ------------------
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]  No [ ]

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

      Common Stock -Without par value     15,754,826         August 10, 2001
-------------------------------------     ----------         ---------------
                   Class                  Number of shares   Date


<PAGE> 2



                                TABLE OF CONTENTS


Item                                                                   Page
Number                                                                 Number
                          PART I. FINANCIAL INFORMATION
      1        Financial Statements (Unaudited)
               Southern Indiana Gas and Electric Company
                  Condensed Balance Sheets                              3-4
                  Condensed Statements of Operations                     5
                  Condensed Statements of Cash Flows                     6
               Notes to Condensed Unaudited Financial Statements        7-14
      2        Management's Discussion and Analysis of Results
               of Operations and Financial Condition                   15-20
      3        Quantitative and Qualitative Disclosure About
               Market Risk                                             20-21

                           PART II. OTHER INFORMATION
      1        Legal Proceedings                                        22
      6        Exhibits and Reports on Form 8-K                         22
               Signatures                                               23


<PAGE> 3


                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)


                    SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
                             CONDENSED BALANCE SHEETS
                             (Unaudited - Thousands)

                                                         June 30,   December 31,
          ASSETS                                           2001          2000
          ------                                       -----------   ----------
Utility Plant at original cost:
     Electric                                           $1,171,249   $1,175,552
     Gas                                                   160,000      160,872
                                                        ----------   ----------
                                                         1,331,249    1,336,424
     Less: accumulated depreciation and amortization       669,382      650,499
                                                        ----------   ----------
                                                           661,867      685,925
     Construction work in progress                          65,772       52,582
                                                        ----------   ----------
        Net utility plant                                  727,639      738,507
                                                        ----------   ----------

Current Assets:
     Cash and cash equivalents                                 748        1,613
     Accounts receivable, less reserves of $2,598 and
        $2,639, respectively                                43,620       49,554
     Accounts receivable from affiliated company                 -       27,829
     Accrued unbilled revenues                              13,365       24,414
     Inventories                                            29,659       31,055
     Recoverable fuel and natural gas costs                 19,947       28,703
     Other current assets                                    2,601          312
                                                        ----------   ----------
        Total current assets                               109,940      163,480
                                                        ----------   ----------

Other Investments and Property:
     Environmental improvement funds held by trustee         1,071        1,056
     Nonutility property and other, net                      2,924        1,960
                                                        ----------   ----------
        Total other investments and property                 3,995        3,016
                                                        ----------   ----------
Other Assets:
     Regulatory assets                                      33,368       33,443
     Deferred charges, net                                  22,645       12,868
                                                        ----------   ----------
        Total other assets                                  56,013       46,311
                                                        ----------   ----------
TOTAL ASSETS                                            $  897,587   $  951,314
                                                        ==========   ==========


   The accompanying notes are an integral part of
     these condensed financial statements.



<PAGE> 4




                    SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
                            CONDENSED BALANCE SHEETS
                             (Unaudited - Thousands)

                                                           June 30, December 31,
       SHAREHOLDER'S EQUITY AND LIABILITIES                  2001        2000
       ------------------------------------               --------- -----------

Capitalization:
     Common stock                                          $ 78,258   $ 78,258
     Retained earnings                                      256,921    258,877
                                                           --------   --------
        Total common shareholder's equity                   335,179    337,135
     Cumulative nonredeemable preferred stock                 8,852      8,890
     Cumulative redeemable preferred stock                    7,500      7,500
     Cumulative special preferred stock                         460        576
     Long-term debt, net of current maturities              291,601    237,799
                                                           --------   --------

         Total capitalization, net of current maturities    643,592    591,900
                                                           --------   --------
Commitments and Contingencies (Notes 6 through 8)

Current Liabilities:
     Current maturities of adjustable rate bonds
       subject to tender                                          -     53,700
     Short-term borrowings                                    8,888     40,154
     Notes payable to affiliated company                     32,300          -
     Accounts payable to affiliated company                  16,519     11,486
     Accounts payable                                        23,548     60,085
     Dividends payable                                          142        144
     Accrued taxes                                            3,428      9,956
     Accrued interest                                         5,980      6,047
     Refunds to customers                                     2,765      3,543
     Deferred income taxes                                    9,246     11,295
     Other accrued liabilities                                4,652     14,278
                                                           --------   --------
        Total current liabilities                           107,468    210,688
                                                           --------   --------
Deferred Credits and Other Liabilities:
     Deferred income taxes                                  107,822    112,122
     Unamortized investment tax credits                      15,267     15,944
     Accrued postretirement benefits other
       than pensions                                         14,991     14,054
     Accrued pensions                                         4,818      6,310
     Other                                                    3,629        296
                                                           --------   --------
        Total deferred credits and other liabilities        146,527    148,726
                                                           --------   --------
TOTAL SHAREHOLDER'S EQUITY AND LIABILITIES                 $897,587   $951,314
                                                           ========   ========


    The accompanying notes are an integral part of
       these condensed financial statements.




<PAGE> 5


<TABLE>
<CAPTION>
                    SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
                        CONDENSED STATEMENTS OF OPERATIONS
                             (Unaudited - Thousands)

                                            Three Months           Six Months
                                            Ended June 30,        Ended June 30,
                                         -------------------   -------------------
                                           2001       2000       2001       2000
                                         --------   --------   --------   --------
OPERATING REVENUES:
<S>                                      <C>        <C>        <C>        <C>
    Electric revenues                    $ 95,020   $ 78,289   $183,229   $151,279
    Gas revenues                           11,351     14,182     63,301     43,409
                                         --------   --------   --------   --------
      Total operating revenues            106,371     92,471    246,530    194,688
                                         --------   --------   --------   --------

COST OF OPERATING REVENUES:
    Cost of fuel and purchased power       51,519     26,423     82,656     48,101
    Cost of gas                             4,529      7,012     45,987     26,646
                                         --------   --------   --------   --------
      Total cost of operating revenues     56,048     33,435    128,643     74,747
                                         --------   --------   --------   --------
         Total margin                      50,323     59,036    117,887    119,941


OPERATING EXPENSES:
    Operations and maintenance             25,364     28,505     48,891     49,743
    Merger and integration costs                -      1,402        302     13,759
    Restructuring costs                     4,344          -      4,344          -
    Depreciation and amortization          11,053     10,712     22,137     22,202
    Income taxes                              666      4,610      9,707      8,847
    Taxes other than income taxes           3,227      3,107      6,853      6,340
                                         --------   --------   --------   --------
      Total operating expenses             44,654     48,336     92,234    100,891
                                         --------   --------   --------   --------
OPERATING INCOME                            5,669     10,700     25,653     19,050

OTHER INCOME-NET                              928        892      1,787      1,591

INTEREST EXPENSE                            5,117      4,866     10,373      9,649
                                         --------   --------   --------   --------

INCOME BEFORE CUMULATIVE EFFECT OF
    CHANGE IN ACCOUNTING PRINCIPLE          1,480      6,726     17,067     10,992

CUMULATIVE EFFECT OF CHANGE IN
     ACCOUNTING PRINCIPLE-NET OF TAX            -          -      3,938          -
                                         --------   --------   --------   --------
NET INCOME                                  1,480      6,726     21,005     10,992

PREFERRED STOCK DIVIDEND                      242        267        480        535
                                         --------   --------   --------   --------

NET INCOME APPLICABLE TO
    COMMON SHAREHOLDER                   $  1,238   $  6,459   $ 20,525   $ 10,457
                                         ========   ========   ========   ========
</TABLE>

     The accompanying notes are an integral part of
        these condensed financial statements.


<PAGE>  6



                    SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
                       CONDENSED STATEMENTS OF CASH FLOWS
                             (Unaudited - Thousands)

                                                         Six Months
                                                        Ended June 30,
                                                    --------------------
                                                      2001        2000
                                                    --------    --------

NET CASH FLOWS FROM OPERATING ACTIVITIES            $ 35,620    $ 34,095
                                                    --------    --------
CASH FLOWS (REQUIRED FOR) FINANCING ACTIVITIES
    Retirement of preferred stock                       (153)       (117)
    Net change in short-term borrowings and notes
    payable to affiliated company                      1,136       6,898
    Dividends on common and preferred stock          (16,808)    (14,647)
    Other                                                (15)      2,253
                                                    --------    --------
        Net cash flows (required for) financing
          activities                                 (15,840)     (5,613)
                                                    --------    --------
CASH FLOWS (REQUIRED FOR) INVESTING ACTIVITIES
    Capital expenditures                             (18,511)    (25,243)
    Change in nonutility property                       (964)     (1,298)
    Other                                             (1,170)     (1,550)
                                                    --------    --------
        Net cash flows (required for) investing
          activities                                 (20,645)    (28,091)
                                                    --------    --------
Net increase (decrease) in cash                         (865)        391

Cash and cash equivalents at beginning of period       1,613         449
                                                    --------    --------

Cash and cash equivalents at end of period          $    748    $    840
                                                    ========    ========


    The accompanying notes are an integral part of
         these condensed financial statements.

<PAGE> 7


                    SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.       Organization and Nature of Operations

Southern Indiana Gas and Electric Company (SIGECO) operates as a separate wholly
owned subsidiary of Vectren Corporation (Vectren) and provides generation,
transmission, distribution and the sale of electric power to Evansville,
Indiana, and 74 other communities, and the distribution and sale of natural gas
to Evansville, Indiana, and 64 communities in ten counties in southwestern
Indiana.

Vectren was organized on June 10, 1999 solely for the purpose of effecting the
merger of Indiana Energy, Inc. (Indiana Energy) and SIGCORP, Inc. (SIGCORP),
SIGECO's former parent company. On March 31, 2000, the merger of Indiana Energy
with SIGCORP and into Vectren was consummated with a tax- free exchange of
shares that has been accounted for as a pooling-of-interests. The merger did not
affect SIGECO's preferred stock or debt securities.

2.       Basis of Presentation

The interim condensed financial statements included in this report have been
prepared by SIGECO, without audit, as provided in the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
omitted as provided in such rules and regulations. SIGECO believes that the
information in this report reflects all adjustments necessary to fairly state
the results of the interim periods reported. These condensed financial
statements and related notes should be read in conjunction with SIGECO's audited
annual financial statements for the year ended December 31, 2000 filed on Form
10-K. Because of the seasonal nature of SIGECO's operations, the results shown
on a quarterly basis are not necessarily indicative of annual results.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Certain reclassifications have been made to prior period financial statements to
conform with the current year classification. These reclassifications have no
impact on previously reported net income.

3.       Merger and Integration Costs

Merger and integration costs incurred for the three and six months ended June
30, 2001 were zero and $0.3 million, respectively, and for the three and six
months ended June 30, 2000 totaled $1.4 million and $13.8 million, respectively.
The continued merger integration activities will be completed in 2001. Merger
costs are reflected in the financial statements of the operating subsidiaries in
which merger savings are expected to be realized.

Since March 31, 2000, $14.4 million has been expensed associated with merger and
integration activities. Accruals were established at March 31, 2000 totaling
$7.4 million. Of this amount, $0.7 million related to employee and executive
severance costs and $6.7 million related to transaction costs and regulatory
filing fees incurred prior to the closing of the merger. At June 30, 2001, the
accrual remaining for such costs totaled $0.3 million, all related to severance
costs. Of the $14.4 million expensed, the remaining $7.0 million was expensed
through June 30, 2001 ($6.7 million in 2000 and $0.3 million in 2001) for
accounting fees resulting from merger related filing requirements, consulting
fees related to integration activities such as organization structure, employee
travel between company locations as part of integration activities, internal
labor of employees assigned to integration teams, investor relations
communications activities, and certain benefit costs.


<PAGE> 8

The integration activities experienced by the company included such things as
information system consolidation, process review and definition, organization
design and consolidation, and knowledge sharing.

4.       Restructuring Costs

In June 2001, the management and board of directors of SIGECO's parent company,
Vectren, approved a plan to restructure primarily, its regulated operations. The
restructuring plan will involve the elimination of administrative and
supervisory positions in its utility operations and corporate office.
Restructuring and related charges of $4.3 million were expensed during the
second quarter for severance, related benefits and other employee related costs.

These charges include expected cash payments of $3.5 million for employee
separation benefits including severance, healthcare and outplacement services.
Expected cash payments are associated with the separation of approximately 35
employees. Employees are expected to begin exiting the business beginning August
2001. These charges also include a non-cash charge of $0.8 million related to
the curtailment of a post retirement medical plan which included the impacted
employees.

As of June 30, 2001, there have been no charges against the accrual for employee
separation benefits, which is included in other current liabilities. The
restructuring program will be substantially completed by December 31, 2001.

5.       Long - Term Debt

SIGECO has $53.7 million of adjustable rate pollution control series first
mortgage bonds which could, at the election of the bondholder, be tendered to
SIGECO when the interest rates are reset. Prior to the latest reset on March 1,
2001, the interest rates were reset annually, and the bonds subject to tender
were presented in the Balance Sheets as current liabilities. Effective March 1,
2001, the bonds were reset for a five-year period and have been classified as
long-term debt. Resulting from the reset, the interest rate on the $31.5 million
Series A bonds increased from 4.30% to 4.75%, and the interest rate on the $22.2
million Series C bonds increased from 4.45% to 5.00%.

6.       Contingencies

SIGECO is party to various legal proceedings arising in the normal course of
business. In the opinion of management, with the exception of the litigation
matter related to the Culley Generating Station Investigation Matter (See Note
7), there are no legal proceedings pending against SIGECO that are likely to
have a material adverse effect on its financial position or results of
operations.

7.       Environmental Matters

NOx SIP Call Matter
On October 27, 1998, the United States Environmental Protection Agency (USEPA)
issued a final rule "Finding of Significant Contribution and Rulemaking for
Certain States in the Ozone Transport Assessment Group Region for Purposes of
Reducing Regional Transport of Ozone," (63 Fed. Reg. 57355) that required
uniform nitrogen oxide (NOx) emissions reductions of 85% by utilities and other
large sources in certain Midwestern states and the District of Columbia. These
emission levels are below those already imposed by Phase I and Phase II of the
Clean Air Act Amendments of 1990 (the Act).

In their state implementation plans (SIPs), the USEPA encouraged states to
target utility coal-fired boilers for the majority of the reductions required,
especially NOx emissions. Northeastern states have claimed that ozone transport
from Midwestern states (including Indiana) is the primary reason for their ozone


<PAGE> 9

concentration problems. Although this premise is challenged by others based on
various air quality modeling studies, including studies commissioned by the
USEPA, the USEPA intends to incorporate a regional control strategy to reduce
ozone transport.

The NOx emissions budget for Indiana stipulated in the USEPA's final ruling
requires a 31% reduction in total NOx emissions from Indiana. Indiana's
implementation plan requires SIGECO to lower its system-wide NOx emissions to
 .14/mmbtu. Based on the level of system-wide emissions reductions required and
the control technology utilized to achieve the reductions, the estimated
construction cost of the control equipment could reach $160 million and is
expected to be expended during the 2001-2004 period. Related additional annual
operation and maintenance expenses could be an estimated $8 million to $10
million. The deadline for the company's compliance is May 31, 2004 (the
compliance date).

In April 2001, Vectren initiated steps toward compliance with the revised
regulations. These steps include upgrading Culley Generating Station Unit 3,
Warrick Generating Station Unit 4, and A.B. Brown Generating Station Unit 2 with
a selective catalytic reduction (SCR) systems. SCR systems reduce flue gas NOx
emissions to atmospheric nitrogen and water using ammonia in chemical reaction.
This technology is known to be the most effective method of reducing NOx
emissions where high removal efficiencies are required. The company expects the
Culley, Warrick and A.B. Brown SCR systems to be operational by the compliance
date. Modifications to these stations are expected to reduce the company's
overall NOx emissions to levels compliant with Indiana's NOx emissions budget
allotted by the USEPA. No accrual has been recorded by the company related to
the NOx SIP Call matter. The rules governing NOx emissions are to be applied
prospectively.

Culley Generating Station Investigation Matter
The USEPA initiated an investigation under Section 114 of the Act of SIGECO's
coal-fired electric generating units in commercial operation by 1977 to
determine compliance with environmental permitting requirements related to
repairs, maintenance, modifications and operations changes. The focus of the
investigation was to determine whether new source performance standards should
be applied to the modifications and whether the best available control
technology was, or should have been, used. Numerous other electric utilities
were, and are currently, being investigated by the USEPA under an industry-wide
review for similar compliance. SIGECO responded to all of the USEPA's data
requests during the investigation. In July 1999, SIGECO received a letter from
the Office of Enforcement and Compliance Assurance of the USEPA discussing the
industry-wide investigation, vaguely referring to the investigation of SIGECO
and inviting SIGECO to participate in a discussion of the issues. No specifics
were noted; furthermore, the letter stated that the communication was not
intended to serve as a notice of violation. Subsequent meetings were conducted
in September and October with the USEPA and targeted utilities, including
SIGECO, regarding potential remedies to the USEPA's general allegations.

On November 3, 1999, the USEPA filed a lawsuit against seven utilities,
including SIGECO. The USEPA alleges that, beginning in 1992, SIGECO violated the
Act by: (i) making modifications to its Culley Generating Station in Yankeetown,
Indiana without obtaining required permits; (ii) making major modifications to
the Culley Generating Station without installing the best available emission
control technology; and (iii) failing to notify the USEPA of the modifications.
In addition, the lawsuit alleges that the modifications to the Culley Generating
Station required SIGECO to begin complying with federal new source performance
standards.

SIGECO believes it performed only maintenance, repair and replacement activities
at the Culley Generating Station, as allowed under the Act. Because proper
maintenance does not require permits, application of the best available emission
control technology, notice to the USEPA, or compliance with new source
performance standards, SIGECO believes that the lawsuit is without merit, and
intends to vigorously defend the lawsuit.

The lawsuit seeks fines against SIGECO in the amount of $27,500 per day per
violation. The lawsuit does not specify the number of days or violations the
USEPA believes occurred. The lawsuit also seeks a court order requiring SIGECO
to install the best available emissions technology at the Culley Generating


<PAGE> 10

Station. If the USEPA is successful in obtaining an order, SIGECO estimates that
it would incur capital costs of approximately $40 million to $50 million to
comply with the order. As a result of the NOx SIP call issue, the majority of
the $40 million to $50 million for best available emissions technology at Culley
Generating Station is included in the $160 million expenditure previously
discussed.

The USEPA has also issued an administrative notice of violation to SIGECO making
the same allegations, but alleging that violations began in 1977.

While it is possible that SIGECO could be subjected to criminal penalties if the
Culley Generating Station continues to operate without complying with the new
source performance standards and the allegations are determined by a court to be
valid, SIGECO believes such penalties are unlikely as the USEPA and the electric
utility industry have a bonafide dispute over the proper interpretation of the
Act. Accordingly, no accrual has been recorded by the company, and SIGECO
anticipates at this time that the plant will continue to operate while the
matter is being decided.

Information Request
On January 23, 2001, SIGECO received an information request from the USEPA under
Section 114(a) of the Act for historical operational information on the Warrick
and A.B. Brown generating stations. SIGECO has provided all information
requested, and management believes that no significant issues will arise from
this request.

8.       Rate and Regulatory Matters

Commodity prices for natural gas purchases have increased significantly,
primarily due to a colder winter, increased demand and tighter supplies. Subject
to compliance with applicable state laws, SIGECO is allowed full recovery of
such changes in purchased gas and fuel costs for its retail customers through
commission-approved gas and fuel cost adjustment mechanisms.

As a result of the ongoing appeal of a generic order issued by the IURC in
August 1999 regarding guidelines for the recovery of purchased power costs,
SIGECO entered into a settlement agreement with the Indiana Office of Utility
Consumer Counselor (OUCC) that provides certain terms with respect to the
recoverability of such costs. The settlement, originally approved by the IURC on
August 9, 2000, has been extended by agreement through March 2002. Under the
settlement, SIGECO can recover the entire cost of purchased power up to an
established benchmark, and during forced outages, SIGECO will bear a limited
share of its purchased power costs regardless of the market costs at that time.
Based on this agreement, SIGECO believes it has limited its exposure to
unrecoverable purchased power costs.

9.       Affiliate Transactions

Certain wholly owned subsidiaries of Vectren began providing support services to
SIGECO beginning April 1, 2000. Approximately $6.2 million of certain assets
owned by SIGECO were contributed to a wholly owned subsidiary of Vectren
(Vectren Resources, LLC). The contribution of assets was reflected as a
reduction of common shareholder's equity and is omitted from the Condensed
Statements of Cash Flows.

Vectren and certain subsidiaries of Vectren have provided certain corporate
general and administrative services to the company including legal, finance,
tax, risk management and human resources. The costs have been allocated to
SIGECO using various allocators, primarily number of employees, number of
customers and/or revenues. Allocations are based on cost. Management believes
that the allocation methodology is reasonable and approximates the costs that
would have been incurred had SIGECO secured those services on a stand alone
basis. For the three months ended June 30, 2001 and 2000, amounts billed by
other wholly owned subsidiaries of Vectren to SIGECO were $10.4 million and
$10.3 million, respectively. For the six months ended June 30, 2001 and 2000,
amounts billed by other wholly owned subsidiaries of Vectren to SIGECO were
approximately $21.5 million and $10.3 million, respectively. Prior to April 1,
2000, these costs were incurred by SIGECO directly.


<PAGE> 11

Vectren Fuels, Inc., a wholly owned subsidiary of Vectren, owns and operates
coal mines from which SIGECO purchases fuel used for electric generation.
Amounts paid for such purchases for the three months ended June 30, 2001 and
2000 were $9.7 million and $6.0 million respectively. Amounts paid for such
purchases for the six months ended June 30, 2001 and 2000 were $20.9 million and
$9.3 million, respectively. Amounts charged by Vectren Fuels, Inc. are market
based.

SIGECO also participates in a centralized cash management program with its
parent, affiliated companies and banks which permits funding of checks as they
are presented.

Amounts owed to wholly owned subsidiaries of Vectren including notes payable to
an affiliated company, as of June 30, 2001 and December 31, 2000 totaled $48.8
million and $11.5 million, respectively. Amounts due from wholly owned
subsidiaries of Vectren as December 31, 2000 totaled $27.8 million.

10.      Risk Management and New Accounting Principle

Risk Management
SIGECO is exposed to market risks associated with commodity prices, interest
rates, and counterparty credit. These financial exposures are monitored and
managed by the company as an integral part of its overall risk management
program.

Commodity Price Risk. SIGECO's regulated operations have limited exposure to
commodity price risk for purchases and sales of natural gas and electric energy
for its retail customers due to current Indiana regulations, which subject to
compliance with applicable state regulations, allow for recovery of such
purchases through natural gas and fuel cost adjustment mechanisms. (See Note 8
Rate and Regulatory Matters.)

SIGECO does engage in limited, wholesale power marketing that may expose the
company to commodity price risk associated with fluctuating electric power
prices. These wholesale power marketing activities manage the utilization of
SIGECO's available electric generating capacity. Power marketing operations
enter into forward contracts that commit the company to purchase and sell
electric power in the future.

Commodity price risk results from forward sales contracts that commit SIGECO to
deliver electric power on specified future dates. Power marketing uses planned
unutilized generation capability and forward purchase contracts to protect
certain sales transactions from unanticipated fluctuations in the price of
electric power, and periodically, will use derivative financial instruments to
protect its interests from unplanned outages and shifts in demand.

Open positions in terms of price, volume and specified delivery points may occur
to a limited extent and are managed using methods described above and frequent
management reporting.

Interest Rate Risk. The company is exposed to interest rate risk associated with
its short-term borrowings and adjustable rate long term debt. Its risk
management program seeks to reduce the potentially adverse effects that market
volatility may have on operations.

Under normal circumstances, the company tries to limit the amount of short-term
debt and adjustable rate long-term debt outstanding to a maximum of 25% of total
debt. However, there are times when this targeted level of interest rate
exposure may be exceeded.

Other Risks. By using forward purchase contracts and derivative financial
instruments to manage risk, the company exposes itself to counterparty credit
risk and market risk. The company manages this exposure to counterparty credit
risk by entering into contracts with financially sound companies that can be
expected to fully perform under the terms of the contract. The company attempts
to manage exposure to market risk associated with commodity contracts by
establishing and monitoring parameters that limit the types and degree of market
risk that may be undertaken.



<PAGE> 12


Accounting for Forward Contracts and Other Financial Instruments
Commodity Contracts. At origination all contracts to buy and sell electric power
are designated as "physical", "other-than-trading" or "trading."

Power marketing contracts are designated as "physical" when there is intent and
ability to physically deliver power from SIGECO's unutilized generating
capacity. Power marketing contracts are designated as "other-than-trading" when
there is intent to receive power to manage base and peak load capacity. Both
contract designations generally require settlement by physical delivery of
electricity. However, certain of these contracts may be net settled in
accordance with industry standards when unplanned outages, favorable pricing
movements, and shifts in demand occur.

Prior to the adoption of Statement of Financial Accounting Standard No. 133
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133),
contracts in the "physical" and "other-than-trading" portfolios receive
accounting recognition on settlement with revenues recorded in electric utility
revenues and costs recorded in fuel for electric generation for those contracts
fulfilled through generation and in purchased electric energy for contracts
purchased in the wholesale energy market. Subsequent to the adoption of SFAS
133, certain contracts that are periodically settled net are recorded at market
value.

SIGECO may occasionally enter into forward purchase and sale contracts
designated as "trading" that attempt to take advantage of short-term movement in
commodity prices. Commodity contracts designated as "trading" are generally
settled net in accordance with industry trading standards. These contracts are
accounted for at market value. As of June 30, 2001, the company has no contracts
designated as "trading."

Contracts recorded at market value are recorded as assets or liabilities in the
Consolidated Balance Sheet as deferred charges, net, other current assets, other
current liabilities and other liabilities, as appropriate, and changes in market
value are recorded in the Condensed Statements of Operations as purchased
electric energy or cost of energy services and other, as appropriate. Market
value is determined using quoted market prices from independent sources.

Impact of New Accounting Principle
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS 133,
which requires that every derivative instrument be recorded on the balance sheet
as an asset or liability measured at its market value and that changes in the
derivative's market value be recognized currently in earnings unless specific
hedge accounting criteria are met.

SFAS 133, as amended, requires that as of the date of initial adoption, the
difference between the market value of derivative instruments recorded on the
balance sheet and the previous carrying amount of those derivatives be reported
in net income or other comprehensive income, as appropriate, as the cumulative
effect of a change in accounting principle in accordance with APB Opinion No.
20, "Accounting Changes."

Resulting from the adoption of SFAS 133, certain contracts in the power
marketing operations that are periodically settled net were required to be
recorded at market value. Previously, the company accounted for these contracts
on settlement. The cumulative impact of the adoption of SFAS 133 resulting from
marking these contracts to market on January 1, 2001 was an earnings gain of
approximately $6.3 million ($3.9 million net of tax) recorded as a cumulative
effect of accounting change in the Condensed Statements of Operations. SFAS 133
did not impact other commodity contracts because they were normal purchases and
sales that are specifically excluded.

As of June 30, 2001, the company has derivative assets resulting from its power
marketing operations of $6.0 million classified in deferred charges, net as well
as derivative liabilities of $2.0 million classified in other current
liabilities. Unrealized losses totaling $2.4 million arising from the difference
between the current market value and the market value on the date of adoption is
included in purchased electric energy in the Condensed Statements of Operations
for the six months ended June 30, 2001. Unrealized losses for the three months
ended June 30, 2001 were $7.9 million.


<PAGE> 13

11.      Segment Reporting

Operating segments are defined as components of an enterprise for which separate
financial information is available and evaluated regularly by the chief
operating decision makers in deciding how to allocate resources and in the
assessment of performance.

There were two operating segments of SIGECO during the reported periods: (1)
Electric Utility Services and (2) Gas Utility Services. The Electric Utility
Services segment generates, transmits, distributes and sells electricity
primarily within southwestern Indiana and in periods of under utilized capacity,
sells unutilized electricity to other wholesale customers. The Gas Utility
Services segment distributes, transports and sells natural gas to Evansville,
Indiana and 64 communities in ten counties in southwestern Indiana. Revenues for
each segment are attributable to customers in the United States. Effective
January 1, 2001, SIGECO announced the realignment of its utility operations into
two primary business units: Energy Delivery and Power Supply. During 2001,
organizational alignment will occur along with the development of management
reporting processes. As a result, SIGECO will report segment information as Gas
Utility Services and Electric Utility Services.

Certain information relating to SIGECO's business segments is presented below.

<TABLE>
<CAPTION>
                                        Three Months               Six Months
                                        Ended June 30,           Ended June 30,
                                    ----------------------   ---------------------
In thousands                             2001         2000        2001        2000
                                    ---------    ---------   ---------   ---------
<S>                                 <C>          <C>         <C>         <C>
Operating Revenues:
     Electric Utility Services      $  95,020    $  78,289   $ 183,229   $ 151,279
     Gas Utility Services              11,351       14,182      63,301      43,409
                                    ---------    ---------   ---------   ---------
         Total operating revenues   $ 106,371    $  92,471   $ 246,530   $ 194,688
                                    =========    =========   =========   =========

Net Income (Loss) Applicable to
  Common Shareholder:
     Electric Utility Services      $   3,272    $   5,876   $  20,141   $   8,483
     Gas Utility Services              (2,034)         583         384       1,974
                                    ---------    ---------   ---------   ---------
         Net income applicable to
          common shareholder        $   1,238    $   6,459   $  20,525   $  10,457
                                    =========    =========   =========   =========
</TABLE>


                                                        June 30,  December 31,
                                                            2001       2000
                                                        --------   --------
Identifiable Assets:
     Electric Utility Services                          $761,935   $799,104
     Gas Utility Services                                135,652    152,210
                                                        --------   --------
         Total identifiable assets                      $897,587   $951,314
                                                        ========   ========




12.      Impact of Recently Issued Accounting Guidance

The FASB issued two new statements of financial accounting standards in July
2001: SFAS No. 141, "Business Combinations" (SFAS 141), and SFAS No. 142,
"Goodwill and Other Intangible Assets" (SFAS 142). These interrelated standards
change the accounting for business combinations and goodwill in two significant
ways:

         SFAS 141 requires that the purchase method of accounting be used for
         all business combinations initiated after June 30, 2001. Use of the
         pooling-of-interests method is prohibited. This change does not affect
         the pooling-of-interest transaction forming Vectren, SIGECO's parent.


<PAGE> 14

         SFAS 142 changes the accounting for goodwill from an amortization
         approach to an impairment-only approach. Thus, amortization of
         goodwill, including goodwill recorded in past business combinations
         will cease upon adoption of the statement. Goodwill is to be tested for
         impairment at a reporting unit level at least annually.

SFAS 142 also requires the initial impairment review of all goodwill and other
intangible assets within six months of the adoption date, which is January 1,
2002 for SIGECO. The impairment review consists of a comparison of the fair
value of a reporting unit to its carrying amount. If the fair value of a
reporting unit is less than its carrying amount, an impairment loss would be
recognized. Results of the initial impairment review are to be treated as a
change in accounting principle in accordance with APB Opinion No. 20 "Accounting
Changes." An impairment loss recognized as a result of an impairment test
occurring after the initial impairment review is to be reported as a part of
operations. SIGECO has no significant components of goodwill.

SFAS 142 also changes certain aspects of accounting for intangible assets;
however, SIGECO does not have any significant intangible assets.

The adoption of SFAS 141 and SFAS 142 are not expected to materially impact
operations.

Also in July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" (SFAS 143). SFAS 143 requires entities to record the
fair value of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the entity
capitalizes a cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. SFAS 143 is effective
for fiscal years beginning after June 15, 2002, with earlier application
encouraged. SIGECO is currently evaluating the impact that SFAS 143 will have on
its operations.



<PAGE> 15


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

                    SOUTHERN INDIANA GAS AND ELECTRIC COMPANY

                           Description of the Business

Southern Indiana Gas and Electric Company (SIGECO) operates as a separate wholly
owned subsidiary of Vectren Corporation (Vectren) and provides generation,
transmission, distribution and the sale of electric power to Evansville,
Indiana, and 74 other communities, and the distribution and sale of natural gas
to Evansville, Indiana, and 64 communities in ten counties in southwestern
Indiana.

Vectren was organized on June 10, 1999 solely for the purpose of effecting the
merger of Indiana Energy, Inc. (Indiana Energy) and SIGCORP, Inc. (SIGCORP),
SIGECO's former parent company. On March 31, 2000, the merger of Indiana Energy
with SIGCORP and into Vectren was consummated with a tax- free exchange of
shares that has been accounted for as a pooling-of-interests. The merger did not
affect SIGECO's preferred stock or debt securities.

                              Results of Operations

Net Income Applicable to Common Shareholder

For the three months ended June 30, 2001, net income applicable to common
shareholder was $1.2 million. Net income applicable to common shareholder before
merger and integration costs and restructuring costs was $3.9 million, compared
to net income applicable to common shareholder before merger and integration
costs for the second quarter of 2000 of $7.3 million.

For the six months ended June 30, 2001, net income applicable to common
shareholder was $20.5 million. Net income applicable to common shareholder
before merger and integration costs and restructuring costs was $23.4 million,
compared to net income applicable to common shareholder before merger and
integration costs for the six months ended June 30, 2000 of $21.3 million.

See discussion of merger and integration costs and restructuring costs that
follow.

Merger and Integration Costs

Merger and integration costs incurred for the three and six months ended June
30, 2001 were zero and $0.3 million ($0.2 million after tax), respectively, and
for the three and six months ended June 30, 2000 totaled $1.4 million ($0.8
million after tax) and $13.8 million ($10.8 million after tax), respectively.
Vectren expects to realize net merger savings of nearly $200 million over the
next ten years from the elimination of duplicate corporate and administrative
programs and greater efficiencies in operations, business processes and
purchasing encompassed in operations. The continued merger integration
activities, which will contribute to the merger savings, will be completed in
2001. Merger costs are reflected in the financial statements of the operating
subsidiaries in which merger savings are expected to be realized.

Since March 31, 2000, $14.4 million has been expensed associated with merger and
integration activities. Accruals were established at March 31, 2000 totaling
$7.4 million. Of this amount, $0.7 million related to employee and executive
severance costs and $6.7 million related to transaction costs and regulatory
filing fees incurred prior to the closing of the merger. At June 30, 2001, the
accrual remaining for such costs totaled $0.3 million, all related to severance
costs. Of the $14.4 million expensed, the remaining $7.0 million was expensed
through June 30, 2001 ($6.7 million in 2000 and $0.3 million in 2001) for
accounting fees resulting from merger related filing requirements, consulting
fees related to integration activities such as organization structure, employee
travel between company locations as part of integration activities, internal



<PAGE> 16

labor of employees assigned to integration teams, investor relations
communications activities, and certain benefit costs.

The integration activities experienced by the company included such things as
information system consolidation, process review and definition, organization
design and consolidation, and knowledge sharing.

Restructuring Costs

In June 2001, the management and board of directors of SIGECO's parent company,
Vectren, approved a plan to restructure primarily, its regulated operations. The
restructuring plan will involve the elimination of administrative and
supervisory positions in its utility operations and corporate office.
Restructuring and related charges of $4.3 million ($2.7 million after tax) were
expensed during the second quarter for severance, related benefits and other
employee related costs.

These charges include expected cash payments of $3.5 million for employee
separation benefits including severance, healthcare and outplacement services.
Expected cash payments are associated with the separation of approximately 35
employees. Employees are expected to begin exiting the business beginning August
2001. These charges also include a non-cash charge of $0.8 million for a pension
curtailment.

As of June 30, 2001, there have been no charges against the accrual for employee
separation benefits, which is included in other current liabilities. The
restructuring program will be substantially completed by December 31, 2001.

Utility Margin (Operating Revenues Less Cost of Fuel, Purchased Power and Cost
of Gas)

Electric Utility Margin
Electric Utility margin for the three months ended June 30, 2001 of $43.5
million, decreased $8.4 million, or 16%, compared to 2000 due to a $7.9 million
reduction in margin recorded to reflect certain wholesale power marketing
purchase and sale contracts at current market values as required by Statement of
Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133). This overall decrease was partially offset by 5%
and 3% increases in volumes sold to residential and commercial customers,
respectively, for the quarter. Increases in retail sales result from weather 22%
warmer than the previous year and combined residential and commercial customer
growth of 4%.

Electric Utility margin for the six months ended June 30, 2001 of $100.6
million, decreased $2.6 million, or 3% over 2000 primarily due to a $2.4 million
reduction in margin recorded to reflect certain wholesale power marketing
purchase and sale contracts at current market values as required by SFAS 133.
The remaining decrease results from decreased margins from sales to wholesale
energy markets despite volumes increasing 86% over 2000, offset by an increase
in sales to retail customers for the period due to the impact of warmer weather
and increasing residential and commercial customer bases.

Total cost of fuel for electric generation and purchased power increased $25.1
million, or 95%, and $34.6 million, or 72%, for the three and six month periods
ended June 30, 2001, compared to the same periods in the prior year due
primarily to increased purchased power related to the greater sales to other
utilities and power marketers as well as the impacts of SFAS 133 noted above.

Gas Utility Margin
Gas Utility margin for the three months ended June 30, 2000 of $6.8 million
decreased $0.3 million, or 5%, compared to 2000. The decrease is due to a 5%
decrease in throughput resulting from a 1% decrease in the customer base and
reduced consumption caused by increased gas prices (see below).

Total cost of gas sold was $4.5 million for the three months ended June 30, 2001
compared to $7.0 million in 2000. This decrease of $2.5 million, or 35% is
primarily due to a decrease in volumes sold and lower average per unit purchased


<PAGE> 17

gas costs. The total average cost per dekatherm of gas purchased by SIGECO for
the three months ended June 30, 2001 was $5.24 compared to $5.81 for the same
period in 2000.

Gas Utility margin for the six months ended June 30, 2001 of $17.3 million
increased $0.5 million, or 3%, compared to 2000. The increase is due to a 3%
increase in throughput resulting primarily from temperatures being 16% colder
than the previous year. Favorable impacts on gas margin were partially offset by
the cost of unaccounted for gas due to higher gas costs.

Total cost of gas sold was $46.0 million for the six months ended June 30, 2001
and $26.6 million in 2000. This increase of $19.4 million, or 73%, compared to
2000 is primarily due to significantly higher per unit purchased gas costs. The
total average cost per dekatherm of gas purchased by SIGECO for the six months
ended June 30, 2001 was $6.49 compared to $4.35 for the same period in 2000.

Commodity prices for natural gas purchases have been volatile, primarily due to
a colder winter, increased demand and tighter supplies. Subject to compliance
with applicable state laws, SIGECO is allowed full recovery of such charges in
purchased gas costs from its retail customers through commission-approved gas
cost adjustment mechanisms, and margin on gas sales should not be impacted.
However, in 2001, SIGECO has experienced and may continue to experience higher
working capital requirements, increased expenses including unrecoverable
interest costs, uncollectibles and unaccounted for gas, and some level of price
sensitive reduction in volumes sold.

Operating Expenses

Operations and Maintenance
Operations and maintenance expenses decreased $3.1 million, or 11%, for the
three months ended June 30, 2001 compared to the prior year, and operations and
maintenance expenses decreased $0.8 million, or 2% for the six months ended June
30, 2001. The decreases are primarily the result of reduced maintenance costs in
the current year.

Income Taxes
Federal and state income taxes decreased $3.9 million for the three month period
and increased $0.9 million for the six month period due primarily due to
fluctuations in pre-tax earnings. The effective tax rate for the six month
period in 2000 was higher as a result of the non-deductibility of certain merger
and integration costs.

Other Operating Expenses
Both depreciation and amortization and taxes other than income taxes for the
three and six months ended June 30, 2001 are comparable to the prior year.

Other Income, Net

Other income, net increased slightly for the three and six months ended June 30,
2001 compared to the prior year due to increased allowance for funds used during
construction (AFUDC) resulting from increased utility plant construction in
progress.

Interest Expense

Interest expense increased by $0.3 million and $0.7 million for the three and
six months ended June 30, 2001, respectively, when compared to the prior year.
The increases were due primarily to increased working capital requirements
resulting from higher natural gas prices.

<PAGE> 18

                             Other Operating Matters

New Accounting Principle and Cumulative Effect of Change in Accounting Principle

See Note 10 in the condensed financial statements regarding the adoption of SFAS
133, as amended.

Organizational Realignment

Effective January 1, 2001, SIGECO announced the realignment of its utility
operations into two primary business units: Energy Delivery and Power Supply.
During 2001, organizational alignment will occur along with the development of
management reporting processes. As a result, SIGECO will report segment
information as Gas Utility Services and Electric Utility Services.

                               Financial Condition

Liquidity and Capital Resources

SIGECO's equity capitalization objective is 40-55% of total capitalization. This
objective may have varied, and will vary, from time to time, depending on
particular business opportunities and seasonal factors that affect the company's
operation. SIGECO's common equity component was 52% and 57% of total
capitalization, including current maturities of long-term debt, at June 30, 2001
and December 31, 2000, respectively.

Short-term cash working capital is required primarily to finance customer
accounts receivable, unbilled utility revenues resulting from cycle billing, gas
in underground storage, prepaid gas delivery services, capital expenditures and
investments until permanently financed. Short-term borrowings tend to be
greatest during the summer when accounts receivable and unbilled utility
revenues related to electricity are highest and gas storage facilities are being
refilled. However, working capital requirements have been significantly higher
throughout 2001 due to the higher natural gas costs.

Cash Flow from Operations
SIGECO's primary source of liquidity to fund working capital requirements has
been cash generated from operations, which totaled approximately $35.6 million
and $34.1 million for the six months ended June 30, 2001 and 2000, respectively.

Cash flow from operations increased during the six months ended June 30, 2001
compared to 2000 by $1.5 million due to increased income, offset by increased
working capital requirements.

SIGECO expects the majority of its capital expenditures and debt security
redemptions to be provided by internally generated funds.

Financing Activities
Cash flow required for financing activities of $15.8 million for the six months
ended June 30, 2001 includes $1.1 million of additional net borrowings and $16.8
million common and preferred stock dividends. This is an increase in cash
required for financing activities when compared to the six months ended June 30,
2000 of $10.2 million. The increase is primarily due to decreased reliance on
short-term borrowings and increased dividend payments.

SIGECO has $53.7 million of adjustable rate pollution control series first
mortgage bonds which could, at the election of the bondholder, be tendered to
SIGECO when the interest rates are reset. Prior to the latest reset on March 1,
2001, the interest rates were reset annually, and the bonds subject to tender
were presented in the Balance Sheets as current liabilities. Effective March 1,
2001, the bonds were reset for a five-year period and have been classified as
long-term debt. Resulting from the reset, the interest rate on the $31.5 million
Series A bonds increased from 4.30% to 4.75%, and the interest rate on the $22.2
million Series C bonds increased from 4.45% to 5.00%.


<PAGE> 19

At June 30, 2001, SIGECO has approximately $24 million of short-term borrowing
capacity with third parties for use in its operations, of which approximately
$15.1 million is available.

SIGECO's credit rating on outstanding debt at June 30, 2001 was A/A1.

Capital Expenditures and Other Investment Activities
Cash required for investing activities of $20.6 million for the six months ended
June 30, 2001 is comprised mainly of capital expenditures. Cash requirements for
investing activities have decreased $7.4 million from prior year requirements
primarily due to a decrease in capital expenditures for utility plant.

New construction, normal system maintenance and improvements, and technology
investments needed to provide service to a growing customer base will continue
to require substantial expenditures. Capital expenditures for the remainder of
2001 are estimated at $67.2 million.

Environmental and Regulatory Matters

See Notes 7 and 8 in SIGECO's condensed financial statements included in Part I,
Item 1  regarding  matters  affecting  operations  including  Culley  Generating
Station  Investigation  Matter  compliance  (Note 7) and  purchased  power costs
recovery (Note 8).

Impact of Recently Issued Accounting Guidance

See Note 12 in SIGECO's condensed financial  statements included in Part I, Item
1 regarding recently issued accounting standards.

                           Forward-Looking Information

A "safe harbor" for forwarding-looking statements is provided by the Private
Securities Litigation Reform Act of 1995 (Reform Act of 1995). The Reform Act of
1995 was adopted to encourage such forward-looking statements without the threat
of litigation, provided those statements are identified as forward-looking and
are accompanied by meaningful cautionary statements identifying important
factors that could cause the actual results to differ materially from those
projected in the statement. Certain matters described in Management's Discussion
and Analysis of Results of Operations and Financial Condition, including, but
not limited to Vectren's realization of net merger savings, are forward-looking
statements. Such statements are based on management's beliefs, as well as
assumptions made by and information currently available to management. When used
in this filing, the words "believe," "anticipate," "endeavor," "estimate,"
"expect," "objective," "projection," "forecast," "goal," and similar expressions
are intended to identify forward-looking statements. In addition to any
assumptions and other factors referred to specifically in connection with such
forward-looking statements, factors that could cause Vectren and its
subsidiaries' actual results to differ materially from those contemplated in any
forward-looking statements included, among others, the following:

     |X|  Factors affecting utility operations such as unusual weather
          conditions; catastrophic weather-related damage; unusual maintenance
          or repairs; unanticipated changes to fossil fuel costs; unanticipated
          changes to gas supply costs, or availability due to higher demand,
          shortages, transportation problems or other developments;
          environmental or pipeline incidents; transmission or distribution
          incidents; unanticipated changes to electric energy supply costs, or
          availability due to demand, shortages, transmission problems or other
          developments; or electric transmission or gas pipeline system
          constraints.

     |X|  Increased competition in the energy environment including effects of
          industry restructuring and unbundling.


<PAGE> 20

     |X|  Regulatory factors such as unanticipated changes in rate-setting
          policies or procedures, recovery of investments and costs made under
          traditional regulation, and the frequency and timing of rate
          increases.

     |X|  Financial or regulatory accounting principles or policies imposed by
          the Financial Accounting Standards Board, the Securities and Exchange
          Commission, the Federal Energy Regulatory Commission, state public
          utility commissions, state entities which regulate natural gas
          transmission, gathering and processing, and similar entities with
          regulatory oversight.

     |X|  Economic conditions including inflation rates and monetary
          fluctuations.

     |X|  Changing market conditions and a variety of other factors associated
          with physical energy and financial trading activities including, but
          not limited to, price, basis, credit, liquidity, volatility, capacity,
          interest rate, and warranty risks.

     |X|  Availability or cost of capital, resulting from changes in SIGECO,
          interest rates, and securities ratings or market perceptions of the
          utility industry and energy-related industries.

     |X|  Employee workforce factors including changes in key executives,
          collective bargaining agreements with union employees, or work
          stoppages.

     |X|  Legal and regulatory delays and other obstacles associated with
          mergers, acquisitions, and investments in joint ventures.

     |X|  Costs and other effects of legal and administrative proceedings,
          settlements, investigations, claims, and other matters, including, but
          not limited to, those described in Management's Discussion and
          Analysis of Results of Operations and Financial Condition.

     |X|  Changes in federal, state or local legislature requirements, such as
          changes in tax laws or rates, environmental laws and regulations.

SIGECO undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of changes in actual results, changes in
assumptions, or other factors affecting such statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management
SIGECO is exposed to market risks associated with commodity prices, interest
rates, and counterparty credit. These financial exposures are monitored and
managed by the company as an integral part of its overall risk management
program.

Commodity Price Risk. SIGECO's operations have limited exposure to commodity
price risk for purchases and sales of natural gas and electric energy for its
retail customers due to current Indiana regulations which, subject to compliance
with applicable state regulations, allow for recovery of such purchases through
natural gas and fuel cost adjustment mechanisms. (See Note 8 Rate and Regulatory
Matters)

The company does engage in limited, wholesale power marketing activities that
may expose the company to commodity price risk associated with fluctuating
electric power prices. These wholesale power marketing activities manage the
utilization of its available electric generating capacity. Power marketing
operations enter into forward contracts that commit the company to purchase and
sell electric power in the future.


<PAGE> 21

Commodity price risk results from forward sales contracts that commit SIGECO to
deliver electric power on specified future dates. Power marketing uses planned
unutilized generation capability and forward purchase contracts to protect
certain sales transactions from unanticipated fluctuations in the price of
electric power, and periodically, will use derivative financial instruments to
protect its interests from unplanned outages and shifts in demand.

Open positions in terms of price, volume and specified delivery points may occur
to a limited extent and are managed using methods described above and frequent
management reporting.

Market risk is measured by management as the potential impact of pre tax
earnings resulting from a 10% adverse change in the forward price of electricity
on market sensitive financial instruments (all contracts not expected to be
settled by physical receipt or delivery). For the three and six months ended
June 30, 2001, a 10% adverse change in the forward prices of electricity on
market sensitive financial instruments would have decreased pre tax earnings by
approximately $0.6 million and $1.4 million, respectively.

Interest Rate Risk. The company is exposed to interest rate risk associated with
its short-term borrowings. The company's risk management program seeks to reduce
the potentially adverse effects that market volatility may have on operations.

Under normal circumstances, the company tries to limit the amount of short-term
debt and adjustable rate long-term debt outstanding to a maximum of 25% of total
debt. However, there are times when this targeted level of interest rate
exposure may be exceeded.

At June 30, 2001, SIGECO's short-term debt, represented 12% of the company's
total debt portfolio due primarily to resetting of adjustable rate bonds for a
five year period, offset by increased working capital requirements resulting
from higher purchased gas costs.

Market risk is estimated as the potential impact resulting from fluctuations in
interest rates on short-term borrowings, including bank notes, lines of credit
and borrowings from affiliated companies. At June 30, 2001 and December 31,
2000, the combined borrowings under these facilities totaled $41.2 million and
$40.2 million, respectively. Based upon average borrowing rates under these
facilities during the three months ended June 30, 2001 and 2000, an increase of
100 basis points (1%) in the rates would have increased interest expense by $0.1
million for both periods. For the six months ended June 30, 2001 and 2000, an
increase of 100 basis points in the rates would have increased interest expense
by $0.2 million for both periods.

Other Risks. By using forward purchase contracts and derivative financial
instruments to manage risk, the company exposes itself to credit risk and market
risk. The company manages this exposure to counterparty credit risk by entering
into contracts with financially sound companies that can be expected to fully
perform under the terms of the contract. The company manages exposure to market
risk associated with commodity contracts by establishing and monitoring
parameters that limit the types and degree of market risk that may be
undertaken.


<PAGE> 22

                    SOUTHERN INDIANA GAS AND ELECTRIC COMPANY

                              PART II - OTHER ITEMS


ITEM 1.  LEGAL PROCEEDINGS

SIGECO is party to various legal proceedings arising in the normal course of
business. In the opinion of management, with the exception litigation matter
related to the Culley Generating Station Investigation Matter (See Note 7),
there are no legal proceedings pending against SIGECO that are likely to have a
material adverse effect on the financial position or results of operations.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

Reports on Form 8-K

On April 2, 2001 SIGECO filed a Current Report on Form 8-K with respect to the
creation of a common name for Vectren Corporation's (Vectren) regulated
distribution businesses in the State of Indiana. Indiana Gas Company, Inc.
(Indiana Gas) and Southern Indiana Gas and Electric Company (SIGECO) will begin
doing business as Vectren Energy Delivery of Indiana effective April 1, 2001.
Vectren's power generation and wholesale power marketing functions will transact
business under the name Vectren Power Supply.

         Item 5. Other Matters
         Item 7. Exhibits
                   99.1 - Press release, dated March 30, 2001
                   99.2 - Forward Looking Statements

On April 26, 2001, SIGECO filed a Current Report on Form 8-K with respect to the
release of financial information to the investment community regarding the
company's results of operations, financial position and cash flows for the three
and twelve month periods ended March 31, 2001. The financial information was
released to the public through this filing.
         Item 5.  Other Events
         Item 7.  Exhibits
                   99.1 - Press Release - First Quarter 2001 Vectren Earnings
                   99.2 - Cautionary Statement for Purposes of the "Safe
                         Harbor" Provisions of the Private Securities Litigation
                         Reform Act of 1995




<PAGE> 23



                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.


                                   SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
                                              Registrant




        August 14, 2001                  /s/Jerome A. Benkert, Jr.
                                         -------------------------
                                         Jerome A. Benkert, Jr.
                                         Executive Vice President and
                                         Chief Financial Officer


                                         /s/M. Susan Hardwick
                                         -------------------------
                                         M. Susan Hardwick
                                         Vice President and Controller