verified direct testimony of craig l. jackson on behalf of indianapolis power & light company

VERIFIED DIRECT TESTIMONY

OF

CRAIG L. JACKSON

ON BEHALF OF

INDIANAPOLIS POWER & LIGHT COMPANY

INCLUDING IPL WITNESS CLJ ATTACHMENTS 1 THROUGH 3

jxn

Typewritten text

Cause No. 45029

sthunter

New Stamp

IPL Witness Jackson 1

VERIFIED DIRECT TESTIMONY OF CRAIG L. JACKSON ON BEHALF OF


Q1. Please state your name, employer and business address. 1

A1. My name is Craig Jackson. I am employed by AES US Services, LLC, which is the 2

service company that serves Indianapolis Power and Light Company. My business 3

address is One Monument Circle, Indianapolis, IN 46204. 4

Q2. What is your position and professional relationship with Indianapolis Power & 5

Light Company (“IPL” or “Company”)? 6

A2. I am IPL’s Chief Financial Officer and Director, Vice President, and Chief Financial 7

Officer of AES US Services, LLC. 8

Q3. Please describe your duties. 9

A3. I have direct responsibility and oversight for the accounting, tax, financial planning, 10

treasury, risk management, and internal audit functions of IPL and other AES affiliates. 11

Q4. Please summarize your educational and professional qualifications. 12

A4. I received a Bachelor of Science degree in Business Administration from Bloomsburg 13

University in 1996. I also earned a Master of Business Administration degree in Finance 14

from Wright State University in 2001. 15

Q5. Please summarize your prior work experience. 16

A5. I joined The Dayton Power & Light Company (“DP&L”) in February 2000 as a Financial 17

Analyst, Corporate Modeling. In December 2002, I accepted the position of Team 18

Leader, ISO Settlements, with PPL Corporation. In June 2004, I returned to DP&L as 19


Manager, Financial Planning and Analysis, reporting to the Chief Financial Officer. 1

From June 2004 to May 2012, I was promoted through several positions of increasing 2

responsibility within the Treasury organization at DP&L, the last of which was as Vice 3

President and Treasurer. In May 2012, I was promoted to Chief Financial Officer at 4

DP&L. In May 2013, I accepted my current position. 5

Prior to joining DP&L in February of 2000, I served in the United States Air Force (“Air 6

Force”) as a Finance Technician. I began my service with the Air Force in May 1996. 7

Q6. Have you testified previously before the Indiana Utility Regulatory Commission 8

(“IURC” or “Commission”) or other regulatory agencies? 9

A6. Yes. I provided written testimony in Cause No. 44339 (Eagle Valley Combined Cycle 10

Gas Turbine and Harding Street Units 5 & 6 Refueling) and testimony in Cause No. 11

44576 (IPL 2014 Basic Rates Case). Additionally, I provided testimony in DP&L’s 12

Electric Security Plan proceedings (Case No. 12-426-EL-SSO et al and Case No. 16-13

0395-EL-SSO et al). 14

Q7. What is the purpose of your testimony in this proceeding? 15

A7. My testimony and accompanying attachments present the Company’s capital structure, 16

Weighted Average Cost of Capital (“WACC”) and credit ratings. 17

Q8. Does your testimony include any attachments? 18

A8. Yes. I have attached to my testimony the credit rating agency reports that were published 19

about IPL and IPALCO during and subsequent to the test year. These are identified as 20

IPL Witness CLJ Attachment 1.0, 1.1, 1.2 and 1.3 (Moody’s Investors Service 21


(“Moody’s”)), IPL Witness CLJ Attachment 2.0 and 2.1 (S&P Global Ratings (“S&P”)) 1

and IPL Witness CLJ Attachment 3.0 3.1, 3.2, and 3.3 (Fitch Ratings (“Fitch”)). 2

Q9. Are you sponsoring any Exhibits? 3

A9. Yes. I am sponsoring IPL Financial Exhibit IPL-CC, Schedules CC1 through CC3. 4

Q10. Were these schedules prepared by you or under your direction or supervision? 5

A10. Yes. 6

Q11. Did you submit any workpapers? 7

A11. Yes. I sponsor the workpapers supporting the schedules identified above. 8

Capital Structure 9

Q12. What is IPL’s capital structure and weighted average cost of capital as of June 30, 10

2017? 11

A12. IPL’s WACC as of June 30, 2017 is 6.77%. IPL Financial Exhibit IPL-CC, Schedule 12

CC3 depicts how this calculation is derived. This schedule computes the total cost of 13

capital for IPL, including common equity, long term debt, Accumulated Deferred Federal 14

Income Taxes (“DFIT”) and customer deposits. Line Nos. 1 - 3 identify the investor-15

supplied capital, whereas Lines Nos. 4 - 7 are added to show the regulatory capital 16

structure. As shown on IPL Financial Exhibit IPL-CC, Schedule CC3, IPL’s WACC is 17

calculated by taking the cost of each capital component multiplied by its proportional 18

weight and then summing those percentages. The cost of each line item in the capital 19

structure is determined separately as explained herein. 20


Q13. Please describe the investor-supplied capital structure components that you have 1

reflected in the calculation of IPL’s cost of capital. 2

A13. IPL seeks to maintain the financial strength of an investment grade utility so that we can 3

deliver service at a reasonable cost to our customers. Maintaining an investment grade 4

profile is important to ensure we have reliable access to the credit markets at attractive 5

interest rates during all types of economic cycles. This in turn provides the ability to 6

meet our financial obligations during periods of heavy capital expenditures which I will 7

discuss later in my testimony. IPL Financial Exhibit IPL-CC, Schedule CC3 includes 8

IPL’s investor-supplied capitalization as of June 30, 2017. This includes components of 9

long-term debt, preferred stock, and common equity. The investor-supplied capital 10

structure consists of 54.44% long-term debt, 1.92% preferred stock and 43.64% common 11

equity. 12

Q14. What is the basis for the common equity rate of 10.32% shown on IPL Financial 13

Exhibit IPL-CC, Schedule CC3? 14

A14. The common equity rate of 10.32% has been developed and recommended by IPL 15

Witness McKenzie. 16

Q15. How was the cost rate for Customer Deposits as shown on IPL Financial Exhibit 17

IPL-CC, Schedule CC3 developed? 18

A15. The cost rate for Customer Deposits is 6%, which is the interest rate on customer deposits 19

as provided for in the Commission’s rules. 20

Q16. Please discuss the long-term debt and cost included in the capital structure. 21


A16. As shown on IPL Financial Exhibit IPL-CC, Schedule CC2, the long-term debt included 1

in the capital structure is comprised of twelve (12) series of First Mortgage Bonds which 2

have been issued under a Mortgage and Deed of Trust dated May 1, 1940 as 3

supplemented and modified by various Supplemental Indentures and two (2) series of 4

unsecured debt. The twelve series of first mortgage debt mature at various dates from 5

August 2017 through May 2046; range in interest rates from 3.125% to 6.60%; and 6

represent a total principal amount outstanding before the unamortized redemption 7

premium of $1,633,450,000. Both series of unsecured debt mature in December 2038, 8

but have mandatory put dates of December 2020; carry variable interest rates that are 9

adjusted monthly based on a tax effected spread over LIBOR1; and represents a total 10

principal amount outstanding before the unamortized redemption premium of 11

$90,000,000. Therefore, the total principal amount of long-term debt outstanding before 12

the unamortized redemption premium is $1,723,450,000. Each series of debt has been 13

issued pursuant to Orders of this Commission. The calculation of the weighted average 14

effective interest rate for the long-term debt included in IPL’s capitalization is 4.97%. 15

The unamortized reacquisition premiums pertain to debt series which have been 16

previously retired from the general funds of IPL and amortized to interest expense on a 17

straight-line basis, as authorized by the Commission Orders in Cause Nos. 38603, 39076, 18

and 39511. This method is required by Accounting Standard Update (“ASU”) No. 835-19

30-35 and ASU No. 835-30-20. The long-term debt balances and associated costs are the 20

actual balances as of the end of the test year – June 30, 2017. 21

Q17. Did IPL acquire new debt during the test year? 22

1 The variable rate range from December 22, 2015 (debt issuance date) and July 1, 2017 was 1.113% to 1.548%.


A17. No, IPL did not issue new debt during the test year. However, in December 2016, IPL 1

took advantage of the par call feature available at December 1, 2016 and refinanced its 2

4.55% series due December 2024 with a 3.125% series due December 2024. 3

Q18. What is IPL’s cost of preferred stock? 4

A18. IPL has five (5) series of cumulative preferred stock outstanding at an annual cost of 5

$3,212,000 and a weighted average effective cost of 5.37% as illustrated in IPL Financial 6

Exhibit IPL-CC, Schedule CC1. The total amount of cumulative preferred stock 7

outstanding at June 30, 2017 is $59,784,000. 8

Q19. Does IPL Financial Exhibit IPL-CC, Schedule CC3 include capital structure 9

components for purposes of determining IPL’s WAAC other than the long-term 10

debt, preferred stock, common equity, and customer deposits that have previously 11

been discussed? 12

A19. Yes. The WAAC also includes components for deferred income taxes and Post-1970 13

Investment Tax Credits (“ITC”). Deferred income taxes were included at zero cost. The 14

Post-1970 ITC were included at the overall weighted required return on investor-supplied 15

capital at 7.30%. Additionally, the WACC includes the net pre-paid pension asset at zero 16

cost as discussed by IPL Witness Kunz. 17

Q20. Does the Company have an ongoing need to maintain its financial strength and to 18

attract additional capital? 19

A20. Yes. Much of the new investment reflected in rate base in this case is not yet reflected in 20

IPL rates. A timely rate order that provides a realistic opportunity for the Company to 21

actually earn a fair return on and of its significant capital investments is important to the 22


Company’s shareholders and to the credit rating agencies. It is important to maintain 1

financial strength to allow the Company to continue to provide adequate and reliable 2

service and to attract capital on reasonable terms. The Company has future capital 3

expenditures related to on-going investment to maintain IPL’s utility systems that may 4

require it to access the capital markets over the next few years, including equity 5

contributions from its parent. 6

Credit Ratings 7

Q21. What are credit ratings? 8

A21. Credit ratings reflect a credit rating agency’s independent judgment of the Company’s 9

credit worthiness and its ability to meet its debt obligations. Credit committees at each 10

agency determine the ratings of a company based on certain quantitative and qualitative 11

measures. These factors are used to assess the financial and business risks of fixed-12

income issuers. Both Fitch and S&P delineate investment grade as any rating equal to 13

“BBB-” or above. Moody’s delineates investment grade as any rating equal to “Baa3” or 14

above. Non-investment grade ratings at Fitch and S&P are “BB+” or below and “Ba1” or 15

below at Moody’s. 16

Q22. Why are credit ratings important to IPL? 17

A22. When IPL issues debt, credit rating agencies rate it as to the safety of principal and 18

interest based on the Company’s ability to pay. Credit ratings are important to investors 19

because the higher the rating, the safer the debt. But credit ratings are also important to 20

issuers of debt because they may affect the cost of doing business and access to capital. 21

The higher the credit rating, the less interest a company has to pay on its bonds because 22

investors are willing to accept slightly lower interest for more safety. Also, the higher the 23


credit rating, the more demand there is for a bond and the easier it is for a company to sell 1

it. This is especially important to IPL during our high periods of capital expenditures 2

associated with environmental compliance projects and the construction of replacement 3

generation. This capital intensive time requires IPL to be out in the debt markets more 4

frequently than normal. The ability to issue debt at the lowest coupon possible is 5

advantageous not only to IPL but to our customers. 6

Q23. Please discuss the impact to the Company and its customers if IPL’s investment 7

grade rating is not maintained. 8

A23. Financial strength and flexibility provide the framework for operational effectiveness 9

which is necessary to provide safe and reliable service to customers at a reasonable cost. 10

A non-investment grade rating would lead to an increase in overall financing costs and 11

result in a higher cost of capital. Customers would be adversely affected because higher 12

capital costs lead to higher rates for electric service and strain resources that could 13

otherwise be utilized to meet our customers’ ongoing need for reliable electric service. 14

Q24. Is cost control important to IPL and its credit rating? 15

A24. Yes. The Company strives to be efficient in the planning, selection and construction of 16

assets, the contracting for goods and services and the management of our people and 17

assets. Our approach to cost management balances acceptable levels of customer service, 18

equipment efficiency/reliability and compliance with regulatory and legal requirements, 19

while incorporating best practices for managing costs. 20


Rating agencies view the Company’s ability to efficiently manage costs, which directly 1

impact operating cash flow and credit metrics, as a key component of financial viability 2

and credit ratings. 3

Q25. Is regulatory treatment important to the rating agencies? 4

A25. Yes. Predictability, full and timely cost recovery and a regulatory environment 5

supportive of a utility’s financial strength are key credit considerations at all three credit 6

rating agencies. A utility operating in a stable, reliable, and highly predictable regulatory 7

environment will be scored higher than a utility that operates in an unstable, unreliable or 8

highly unpredictable regulatory environment. 9

Q26. What were IPL’s credit ratings as of June 30, 2017? 10

A26. As of June 30, 2017, IPL’s credit ratings assigned by the credit rating agencies were as 11

follows: 12

Moody’s Investors Service

S&P Global Ratings

Fitch Ratings

Corporate Credit Rating/Issuer Rating

Baa1 BBB- BBB-

Secured Debt* A2 BBB+ BBB+ *Ratings relate to IPL’s Senior Secured Bonds

13

All ratings have a stable outlook and are substantiated in the reports issued by Moody’s, 14

S&P and Fitch, which are included as IPL Witness CLJ Attachments 1 through 3. 15

Q27. Does that conclude your verified pre-filed direct testimony? 16

A27. Yes. 17

INFRASTRUCTURE AND PROJECT FINANCE

CREDIT OPINION13 October 2016

Update

RATINGS

IPALCO Enterprises, Inc.Domicile Indianapolis - Marion

County, Indiana, UnitedStates

Long Term Rating Baa3

Type Senior Secured - DomCurr

Outlook Stable

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Analyst Contacts

Natividad Martel,CFA

212-553-4561

VP-Senior [email protected]

Jim Hempstead 212-553-4318Associate [email protected]

IPALCO Enterprises, Inc.Holding company of wholly-owned utility subsidiaryIndianapolis Power & Light Company

Summary Rating RationaleThe Baa3 senior secured rating of IPALCO Enterprises Inc. (IPALCO) reflects structuralsubordination considerations vis-a-vis the debt outstanding at its fully regulated subsidiary,Indianapolis Power & Light Company (IPL; Issuer rating: Baa1 stable). The utility’s dividendsare the only source of cash flow to service the holding company debt that approximates$805 million and represents around 32% of the consolidated debt. This largely drivesthe two notch difference between the ratings of IPALCO and IPL. This highly leveragedconsolidated balance sheet also results in consolidated key credit metrics that are somewhatweak for the Baa-rating category. In addition, the group’s aggressive dividend policy amidIPL’s material capital expenditure (capex) program constrains the Baa3 rating. The rating alsoconsiders that speculative grade rated AES Corporation (AES; Corporate Family rating: Ba3positive) is IPALCO’s majority shareholder along with the Canadian fund Caisse de Dépôtet Placement du Québec (CDPQ, unrated), which has held an approximate 30% direct andindirect interest stake since 2014.

Exhibit 1

Historical CFO Pre-W/C, Total Debt and CFO Pre-W/C to Debt($ in millions)

Source: Moody's Investors Service

IPL Witness CLJ Attachment 1.0 IPL 2017 Basic Rates Case Page 1 of 7

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1045265

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 13 October 2016 IPALCO Enterprises, Inc.: Holding company of wholly-owned utility subsidiary Indianapolis Power & Light Company

Credit Strengths

» Parent company of IPL, whose fully regulated operations enhance its dividend visibility

» IPL operates in an overall credit supportive regulatory environment that allows for a suite of cost recovery mechanisms

Credit Challenges

» Significant financial leverage at the holding company exacerbates structural subordination considerations

» Consolidated key credit metrics are weak for the Baa-rating category amid aggressive dividends and incremental indebtedness tofund IPL’s capex

Rating OutlookThe stable outlook of IPALCO largely reflects our expectation that both consolidated and IPL key credit metrics will improve after thematerial deterioration recorded in 2015 and LTM June 2016 as the utility approaches the tail-end of its material capex program. Thestable outlook assumes that the regulatory environment in the state of Indiana will remain credit supportive and that the utility’s cashflow will benefit from a credit constructive outcome in its next rate case proceeding. The outlook assumes that consolidated key creditmetrics will become commensurate with the low range of the Baa-rating category no later than 2018. Specifically, we anticipate thatIPALCO will record a cash flow from operation pre-working capital (CFO pre-W/C) to debt ratio in excess of 13% going forward. Thestable outlook also assumes that the holding company will not incur any additional indebtedness going forward.

Factors that Could Lead to an UpgradeIPALCO's rating could experience positive momentum if IPL's ratings are upgraded, holding company debt is reduced, and if theconsolidated CFO pre-W/C to debt and retained cash flow (RCF) to debt ratios were to exceed 15% and 13%, respectively, on asustainable basis.

Factors that Could Lead to a DowngradeIPALCO's rating could face downward pressure if IPL is downgraded or if, after completion of its currently elevated capital expenditureprogram, IPALCO's consolidated CFO pre-W/C to debt and RCF to debt ratios remain below 13% and 9%, respectively, for an extendedperiod.

Key Indicators

Exhibit 2

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.Source: Moody's Investors Service




Detailed Rating ConsiderationsHIGHLY LEVERAGED OWNERSHIP STRUCTURE DRIVES STRUCTURAL SUBORDINATION CONSIDERATIONS

The material amount of IPALCO’s holding company debt that currently aggregates to $805 million (two series of Notes securedwith IPL's shares due in 2018 and 2020, respectively) represents around 32% of the consolidated IPALCO long-term indebtednessoutstanding at the end of June 2016.

The ratings anticipate a slight decline in the relative proportion of holding-company indebtedness as a percentage of total consolidateddebt as IPL incurs new debt going forward. However, holding company debt is expected to remain material at the 30% level for thenext several years. This highly leveraged ownership structure limits both entities’ financial flexibility, particularly as the utility remainsthe holding company's only source of cash to meet its debt service obligations. Moreover, we also calculate that while IPL's reporteddebt (2015: $1.37 billion) to rate base hovered in the 70-75% range last year (assuming a rate base of about $1.9 billion). This metricreaches almost 115% after considering the holding-company debt (2015: $2.18 billion), which constrains the utility's rating and drivesthe two notch difference between the senior unsecured rating of IPL and the senior secured rating of IPALCO. IPALCO’s notes are onlysecured by a pledge of all of the outstanding common stock of IPL.

IPALCO, through IPL, has been one of AES' largest and most stable sources of cash flow with annual dividend distributions that haveaveraged around $67 million between 2011 and 2015. IPL's dividend payout averaged close to 100% during the same period despite itsmaterial, multi-year capex program, considerably exceeding the industry average of approximately 70%. Both companies’ track recordof aggressive dividend policies amid IPL’s material capex program constrain their ratings.

IPALCO's Articles of Incorporation limits its ability to make dividend distributions and intercompany loans to AES. This is subject to thecompany recording debt to adjusted capitalization not greater than 67% and interest coverage below 2.5x, respectively. IPL's ability todividend cash is also limited under the amended Articles of Incorporation, the mortgage and deed of trust, as well as its credit facility(where there is a requirement to record total debt to total capitalization not greater than 65%). However, all of these restrictionsare relatively lenient. IPALCO, for example, has historically faced no challenges in complying with them despite its extremely thincapitalization that resulted from a substantial distribution and capital reduction in 2001 and its aggressive dividend payout ratio sincethen. After CDPQ became IPALCO’s minority shareholder, there were some amendments to its corporate governance with no materialcredit implications.

IPL’s DIVIDENDS UNDERPINNED BY OVERALL CREDIT SUPPORTIVE REGULATORY ENVIRONMENT AND CONSTRUCTIVERELATIONSHIP WITH IURC

IPL benefits from an overall credit supportive regulatory environment in Indiana as well as a constructive relationship with the IndianaUtility Regulatory Commission (IURC). As described in detail in IPL’s Credit Opinion available in our website, our view considers thatthe utility's cash flows benefit from a suite of mechanisms which reduce regulatory lag, a credit positive. They allow for the interimrecovery between rate cases of portions of its material investments to grow its rate base. Beginning in March 2016, IPL has also beenable to recoup net operating costs, including transmission related costs (MISO), which have historically contributed to the utility’smaterial regulatory asset balance (2015: $128.6 million; 2014: $110.5 million).

We consider the utility's rate case outcome in March 2016 to be credit neutral (rate increase: $30.8 million). It was premised on a9.85% RoE (which compares well with its utility peers), although the requested 37.33% regulatory capital structure (which equates to a45% financial capital structure) is thin compared to other regulatory jurisdictions. This was the utility's first rate case in the last twentyyears (1996). The outcome of IPL's next rate case proceeding (2017) will be key in our assessment going forward.

TAIL-END OF UTILITY’S MATERIAL CAPEX PROGRAM FOR ENVIRONMENTAL COMPLIANCE AND FUEL MIX CHANGE

IPL expects to invest around $1.2 billion during the 2016-2018 period to complete its currently elevated capex program (2013-2015:$1.7 billion). During 2016, IPL’s investments have remained high (estimated to be over $600 million in 2016) after peaking in 2015 at$673 million. After IPL commissions several of its remaining key projects during 2016 and 2017, we expect its capex to halve in 2017and 2018 and become more comparable with historical levels (2014: $382 million; 2013: $242 million).




The bulk of the remaining investments are earmarked to grow its transmission and distribution assets ($294 million), power plantrelated projects ($178 million), as well as other miscellaneous equipment ($69 million). Investments also focus on completing theinstallation of environment related equipment in order to comply with the National Pollutant Discharge Elimination System (NPDES)permit program under the US Clean Water Act (CWA) at its 1,732MW coal-fired Petersburg plant (4 units; total capex: $224 million)by 2017. In June 2016, IPL requested state regulator approval of this federally mandated initiative that would allow it to recover 80% ofthe approved costs via an automatic rate adjustment mechanism (SB251, law since May 2011), while the balance (20%) is deferred andrecovered as part of the next general rate case.

IPL’s investment program also seeks to reduce its reliance on coal and grow its natural gas-fired fleet such that in 2017, coal is expectedto represent 46% and natural gas 52% of the utility’s total installed capacity. These initiatives include re-fueling Units 5 and 6(completed last year) as well as Unit 7 (expected this year) of the coal-fired Harding Street Station (HSS) to natural gas. IPL will alsoretire its Eagle Valley plant (4 units) by year-end 2016 while it expects to commission the 685MW Eagle Valley combined cycle gasturbine (CCGT) in April 2017 (total capex: $632 million). To that end, IPL attained a Certificate of Public Convenience and Necessity(CPCN) for both the re-fueling programs and the Eagle Valley CCGT project which reduces the likelihood of cost disallowances, a creditpositive.

CONSOLIDATED KEY CREDIT METRICS ARE SOMEWHAT WEAK FOR THE Baa RATING

The table above depicts the significant deterioration in IPALCO’S consolidated key credit metrics at year-end 2015 and LTM June30, 2016. This deterioration resulted largely from IPL’s incremental indebtedness incurred to finance its material capex program(peaking in 2015 and 2016), the decision to stay out of rate cases for the last 20 years, and the increasing balance of regulatory assetsmentioned earlier. The utility has been able to partially offset these negative impacts via riders that allow for the recovery of portionsof its investments, cost savings resulting from the implementation of the AES US Services (which renders services to all AES utilitysubsidiaries in the US), and tax savings associated with bonus depreciation. There has also been a significant reduction in Moody's debtadjustment associated with unfunded defined pension obligations since 2013 (2015: $76 million; 2012: $269 million). However, thematerial amount of holding company debt results in consolidated key credit metrics that are currently weak for its Baa rating accordingto the guidelines provided under the standard grid in our Regulated Electric and Gas Utilities Rating Methodology. Specifically, the2014 through LTM June 2016 CFO pre-W/C to debt and RCF to debt averaged 12.1% and 8.7%, respectively.

That said, we anticipate an improvement in IPL’s and IPALCO’S key credit metrics due to the outcome of IPL’s recent rate case,including the allowed rate increase and the new suite of rider mechanisms that should help the utility recover certain operationalcosts on a more timely basis. These factors, along with the completion of the elevated capex program and our assumption thatthe holding company will not incur any additional indebtedness going forward, drives our expectation that IPALCO will be able toreport consolidated metrics that are in the low range of the Baa rating range no later than 2018. Specifically, we anticipate that itsconsolidated CFO pre-W/C to debt and RCF pre-W/C to debt ratios will consistently exceed 13% and 9%, respectively, on a sustainablebasis.

Liquidity AnalysisIPALCO and IPL both exhibit an adequate liquidity profile. At the end of June 2016, they reported $44 million and $29 million of cashand cash equivalents, respectively (IPALCO: year-end 2015: $22; IPL; $20 million). As of June 30, 2016, IPL had full availability under its5-year $250 million revolving credit facility maturing in October 2020. The facility also includes a $150 million accordion feature untilOctober 16, 2019 (subject to lenders’ approval).

On a reported basis, over the next two years, we expect that IPALCO and IPL will continue to fund the group's declining investments(consolidated 2015: $673 million; 2014: $382 million) and dividend distributions (consolidated 2015: $69 million; 2014: $78 million)with internally generated operating cash flow (consolidated 2015: $252 million; 2014: $254 million) and proceeds from the utility’sdebt issuances. During 2015 and 2016, IPALCO received total equity contributions of $427 million from CDPQ ($363 million) and AES(2015: $60 million; 2014 and 2013: $155.5 million) while it contributed $214.4 million last year to IPL. During 2016, IPL contributed$15.9 million to its defined pension fund (2015: $25 million).




As mentioned earlier, IPL is IPALCO's main source of cash flow used to meet its financial obligations including dividend distributionsto AES and interest payments on its holding company debt of around $34 million p.a. IPALCO’s Notes are due in May 2018 ($400million) and in July 2020 ($405 million).

Other ConsiderationsMoody's evaluates the financial performance of IPALCO and IPL relative to the standard business risk grid under the Regulated Electricand Gas Utility Methodology published in December 2013. As depicted in the grid below, IPALCO's indicated rating based on historicaland projected credit metrics is Ba1 on a historical and projected basis, one notch below its current assigned senior secured rating.

Corporate ProfileIPALCO Enterprises, Inc (IPALCO: Baa3 senior secured) is the parent holding company of its wholly-owned subsidiary IndianapolisPower & Light Company (IPL; Baa1 Issuer Rating), a regulated vertically integrated utility that provides retail electric service toapproximately 480,000 retail customers in and around the city of Indianapolis (estimated population: 934,000). IPL, a member of theMidcontinent Independent System Operator, Inc (MISO), has 3,123 MW of net summer capacity.

The utility accounts for over 99% of IPALCO’s consolidated revenues, cash flows and assets. At the end of 2014, the Canadian fundCaisse de Dépôt et Placement du Québec (CDPQ, unrated) became IPALCO’s minority shareholder. Its current ownership approximates30% (including a 17.65% direct interest stake in IPALCO)in exchange for a $349 million total equity contribution in 2015 and 2016 aswell as a 12.3% indirect ownership-stake in IPALCO via AES US Investments which owns 82.35% of IPALCO). The balance is held byAES Corporation (AES, CFR: Ba3 positive).

Since January 2014, AES US Services, LLC provides services to all of AES' US subsidiaries, including IPALCO and IPL.




Rating Methodology and Scorecard Factors

Exhibit 3

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] As of 6/30/2016(L)[3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody's Investors Service

Ratings

Exhibit 4Category Moody's RatingIPALCO ENTERPRISES, INC.

Outlook StableSenior Secured Baa3

PARENT: AES CORPORATION, (THE)

Outlook PositiveCorporate Family Rating Ba3Senior Unsecured Ba3/LGD4Speculative Grade Liquidity SGL-2


Outlook StableIssuer Rating Baa1First Mortgage Bonds A2Pref. Stock Baa3





© 2016 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES ("MIS") ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDITRISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'SPUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKESECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANYESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKETVALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICALFACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHEDBY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDITRATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDITRATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGSAND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY ANDEVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FORRETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACTYOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTEDOR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANYPERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as wellas other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information ituses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody's Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for anyindirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use anysuch information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses ordamages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of aparticular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatorylosses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for theavoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCHRATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any rating,agreed to pay to Moody's Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintainpolicies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO andrated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually atwww.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion asto the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be recklessand inappropriate for retail investors to use MOODY'S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or otherprofessional adviser.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody'sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferredstock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it feesranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

REPORT NUMBER 1045265



CREDIT OPINION1 November 2017

Update

RATINGS

IPALCO Enterprises, Inc.Domicile Indianapolis - Marion



Type Senior Secured - DomCurr

Outlook Stable


Analyst Contacts


+1.212.553.4561


Michael G. Haggarty +1.212.553.7172Associate [email protected]

Jim Hempstead [email protected]

IPALCO Enterprises, Inc.Update to credit analysis

SummaryIPALCO Enterprise Inc.’s (IPALCO) credit profile reflects structural subordinationconsiderations vis-a-vis the debt outstanding at its regulated vertically integrated subsidiary,Indianapolis Power & Light Company (IPL). The utility’s dividends are the only source ofcash flow to service the $810 million of holding company debt that approximates 31%of consolidated debt. This highly leveraged balance sheet, along with the delays in thecompletion of IPL’s Eagle Valley CCGT plant, contribute to consolidated key credit metricsthat are currently weak. However, the credit profile assumes that the plant’s completionwill occur no later than mid-2018 and that a credit supportive rate case outcome willdrive an improvement in metrics. IPALCO’s credit quality considers that the speculativegrade rated AES Corporation (AES, Ba2 stable) is IPALCO’s majority shareholder and thatthe Canadian fund Caisse de Dépôt et Placement du Québec (CDPQ, unrated) became aminority shareholder (currently with a 30.0% direct and indirect interest) in 2014.

Exhibit 1


Source: Moody's Financial Metrics

Credit Strengths

» Parent company of IPL, whose fully regulated operations enhance its dividend visibility

» IPL operates in an overall credit supportive regulatory environment that allows for a suiteof cost recovery mechanisms


https://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1096012


Credit Challenges

» Significant financial leverage at the holding company exacerbates structural subordination considerations

» Delays in the completion of IPL’s Eagle Valley CCGT plant

» Consolidated key credit metrics remain weak due to IPL's postponed general rate case

Rating OutlookThe stable outlook of IPALCO assumes the completion of IPL’s Eagle Valley CCGT by no later than mid-2018 and a credit supportiveoutcome of its next rate case. Specifically, the stable outlook assumes that IPALCO will record consolidated cash flow before changesin working capital (CFO pre-W/C) to debt in the range of 13% by no later than 2019, on a sustainable basis, and that the holdingcompany will not incur any additional indebtedness.

Factors that Could Lead to an UpgradeIPALCO's rating could experience positive momentum if IPL's ratings are upgraded, holding company debt is reduced, and if theconsolidated CFO pre-W/C to debt and retained cash flow (RCF) to debt ratios were to exceed 15% and 13%, respectively, on asustainable basis.

Factors that Could Lead to a DowngradeIPALCO's rating could face downward pressure if IPL is downgraded or if we expect IPALCO's consolidated CFO pre-W/C to debt andRCF to debt ratios remain below 13% and 9%, respectively, in 2019.

Key Indicators

Exhibit 2

KEY INDICATORS [1]

IPALCO Enterprises, Inc.

12/31/2013 12/31/2014 12/31/2015 12/31/2016 6/30/2017(L)

CFO pre-WC + Interest / Interest 3.0x 3.7x 3.2x 3.4x 3.2x

CFO pre-WC / Debt 12.5% 14.7% 10.9% 11.0% 10.1%

CFO pre-WC – Dividends / Debt 9.4% 10.9% 7.9% 6.3% 5.6%

Debt / Capitalization 82.9% 77.9% 76.0% 72.0% 73.3%

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.Source: Moody's Financial Metrics

Corporate ProfileIPALCO Enterprises, Inc. (IPALCO: Baa3 senior secured, stable) is the parent holding company of its wholly-owned subsidiaryIndianapolis Power & Light Company (IPL; Baa1 Issuer Rating, stable), a regulated vertically integrated utility that provides retail electricservice to approximately 490,000 retail customers in and around the city of Indianapolis (estimated population: 934,000). IPL, amember of the Midcontinent Independent System Operator, Inc (MISO), has nearly 3,000 MW of net winter capacity. The utilityaccounts for over 99% of IPALCO’s consolidated revenues, cash flows and assets.

The Canadian fund Caisse de Dépôt et Placement du Québec (CDPQ, unrated) became IPALCO’s minority shareholder at the end of2014. After equity contributions aggregating $372 million, its current direct and indirect ownership approximates 30%, consists of a17.65% direct interest in IPALCO and a 12.5% indirect ownership in IPALCO via AES US Investments (which owns 82.35% of IPALCO).AES Corporation (AES, CFR: Ba2 stable) is the majority shareholder, which in 2014 set up AES US Services, LLC to provide services to allof its US subsidiaries, including IPALCO and IPL.


2 1 November 2017 IPALCO Enterprises, Inc.: Update to credit analysis



Detailed Credit ConsiderationsHIGHLY LEVERAGED OWNERSHIP STRUCTURE DRIVES STRUCTURAL SUBORDINATION

In September 2017, IPALCO used the proceeds of its 7-year $405 million secured Notes issued in August for the early redemption of$400 million of Notes due in May 2018. IPALCO’s other debt consists of the $405 million secured Notes due in 2020.

The material amount of IPALCO’s $810 million of holding company debt currently represents around 31% of the consolidated debt,a credit negative. Going forward, we expect the relative proportion of holding company debt to modestly decline as a proportion ofconsolidated debt because IPL will be the only entity incurring new debt to fund the tail-end of its significant investment program.This highly leveraged capital structure limits both entities’ financial flexibility, particularly as the utility remains the holding company'sonly source of cash to meet its debt service and dividend obligations. These obligations constrain the utility's credit quality and drivesthe relatively wide differential between the credit profile of IPL and the credit profile of IPALCO. This also considers that IPALCO’soutstanding two notes issuances due in 2020 and 2024 are only secured by a pledge the outstanding common stock of IPL.

After CDPQ became IPALCO’s minority shareholder, there were some amendments to IPALCO’s corporate governance with nomaterial credit implications. Its Articles of Incorporation limit the ability to make intercompany loans and dividend distributions to AES.These are subject to the company recording debt to adjusted capitalization not greater than 67% and interest coverage below 2.5x,respectively. IPL's ability to dividend cash is also limited under the amended Articles of Incorporation, the mortgage and deed of trust,as well as its credit facility (where there is a requirement to record total debt to total capitalization not greater than 65%). However,all of these restrictions are relatively lenient. IPALCO, for example, has historically faced no challenges in complying with them despiteits extremely thin capitalization that resulted from a substantial distribution and capital reduction in 2001 and its aggressive dividendpayout ratio since then.

Both companies’ track record of maintaining aggressive dividend policies amid IPL’s material capex program also constrain their creditquality. IPALCO, through IPL, has been one of AES' largest and most stable sources of cash flow with annual dividend distributionsbased on a dividend payout ratio that has consistently exceeded 90%, considerably exceeding the industry average of approximately70%.

We acknowledge that during the 2014-2016 period, AES’ and CDPQ’s total equity contributions to IPALCO aggregated $534 million.However, the material amount of long-term debt reported by IPL (June 2017: $1.7 billion) and IPALCO (consolidated: $2.5 billion)relative to the utility’s rate base (currently around $1.9 billion) of approximately 90% (IPL) and 115% (IPALCO), respectively, is a creditnegative. We expect that, with the addition of the Eagle Valley CCGT to IPL’s rate base (depending on the next rate case outcome), thispercentage will drop to around 70% (IPL) and 100% (IPALCO), respectively. However, this will remain weak compared to IPALCO’s andIPL’s peers, another factor tempering the group’s credit quality.

HIGH CAPEX PROGRAM TO REDUCE IPL’S RELIANCE ON COAL-FIRED GENERATION; DELAYED EAGLE VALLEY CCGT ISCREDIT NEGATIVE

As explained in detail in IPL's Credit Opinion, the utility estimates its 3Q2017-2019 capital outlays (growth and maintenance capitalexpenditures) will aggregate $686 million (LTM June 2017: $285 million). This represents a significant reduction compared to theinvestments of the last three years (2014-2016: $1.7 billion; peak in 2015: $686 million). IPL’s multi-year investment program seeks togrow its natural gas-fired fleet and reduce its reliance on coal. IPL estimates that at year-end 2018, coal and natural gas will represent44% and 45%, respectively, of the utility’s total installed capacity, while renewables will account for 10%.

The Petersburg plant (1,706 MW) is IPL’s only coal-fired facility remaining following the re-fueling of the Harding Street Station tonatural gas (around 1000 MW; six units) and the retirement of the Eagle Valley coal-fired units (four; 2016). On this site, the utility isbuilding the Eagle Valley CCGT (up to 685 MW), which accounts for around 40% of the 2017-2019 planned capex. The delay in theEagle Valley plant’s completion has been caused by EPC contractor’s (CB&I) construction challenges. This is a material credit negativebecause the postponed IPL rate case is delaying the improvement in the group's credit metrics.

This considers that IPL recoups, via automatic rate adjustment mechanisms, around 80% of its investments associated withenvironmental related equipment to meet federally mandated initiatives, such as the National Pollutant Discharge Elimination System




(NPDES) permit program under the US Clean Water Act (CWA) at the Petersburg plant (total capex: $224 million). The recovery of theremaining 20% is subject to IPL's next general rate case.

IPL attained a Certificate of Public Convenience and Necessity (CPCN) for both the re-fueling programs and the Eagle Valley CCGTproject which we believe reduces the likelihood of cost disallowances, a credit positive. We also understand that the constructionchallenges at the Eagle Valley CCGT have not caused a review of the plant’s capex (total: $613 million; spent through June 2017: $559million).

WEAK CONSOLIDATED KEY CREDIT METRICS EXPECTED TO IMPROVE BY 2019

As depicted in the table above, IPALCO’s 2015-June 2017 consolidated key credit metrics are weak for its credit rating accordingto the guidelines provided under the standard grid in our Regulated Electric and Gas Utilities Rating Methodology. The significantincrease in the utility’s debt to fund its material capex has caused the deterioration. This has been only partially offset by IPL’s increasedcash flows related to the March 2017 base rate increase (+$30.8 million p.a.), the recovery of MISO deferred transmission costs, theimplementation of riders for the automatic recovery of certain investments along with cost savings resulting from the implementationof the AES US Services. On a positive note, the debt adjustment related to the group’s unfunded defined pension obligations remainmodest (year-end 2016: $50 million vs 2012: $260 million).

Hence, the completion of the Eagle Valley CCGT and a credit supportive outcome of the next rate case (with rates expected to becomeeffective no later than January 2019) are critical for IPALCO and IPL to improve their key credit metrics. Specifically, we anticipate thatIPALCO will record consolidated CFO pre-W/C to debt in the range of 13% by no later than 2019, on a sustainable basis.

OVERALL CREDIT SUPPORTIVE REGULATORY ENVIRONMENT UNDERPINS IPL’S DIVIDEND VISIBILITY

Our assessment of the regulatory environment in Indiana considers IPL’s ability to recoup certain investments between rate cases via asuite of recovery mechanisms. This includes, since March 2016, the recovery of $117.7 million in transmission related costs (MISO) over10 years, an expense that historically contributed to the utility’s significant balance of regulatory assets.

In our opinion, the utility's rate case outcome in March 2016, the first rate case in 20 years, was credit neutral. The base rate increase($30.8 million) was premised on a 9.85% RoE (which compares well with its utility peers), although the authorized and requested37.33% regulatory capital structure (which equates to a 45% financial capital structure) is thin compared to other regulatoryjurisdictions, a credit weakness.

As requested, the IURC dismissed IPL’s rate case (filed in December 2016) earlier this year due to the delay in the completion of theEagle Valley plant. The utility plans to re-file its general rate case to coincide with the CCGT completion which is currently expected byno later than mid-2018 (initially: April 2017). The outcome of IPL’s next rate case will also be key to our assessment going forward as towhether IPL’s relationship with the IURC and the regulatory framework are credit supportive.

Liquidity AnalysisIPALCO and IPL both exhibit an adequate liquidity profile. At the end of June 2017, IPL had $141.5 million available under its 5-year$250 million revolving credit facility. This facility is scheduled to mature in October 2020, and includes a $150 million accordionfeature until October 16, 2019 (subject to lenders’ approval).

For the next 18 months, we expect that IPALCO and IPL will continue to fund the group's declining investments and dividenddistributions (consolidated LTM June 2017 and 2016: $69 million; 2014: $78 million) with internally generated operating cash flow(consolidated 2015: $252 million; 2014: $254 million) and proceeds from the utility’s debt issuances.

During 2015 and 2016, IPALCO received total equity contributions of $427 million from CDPQ ($372 million) and AES (2015: $55million; 2014 and 2013: $155.5 million) while it contributed $213 million to IPL last year. During 2016, IPL contributed $15.9 million toits defined pension fund (2015: $25 million).

As mentioned earlier, IPL is IPALCO's main source of cash flow used to meet its financial obligations including dividend distributions toAES and interest payments on its holding company debt of around $29 million p.a.




Rating Methodology and Scorecard FactorsMoody's evaluates IPALCO’s financial performance relative to the Regulated Electric and Gas Utilities rating methodology publishedin June 2017. As depicted in the grid below, the company's indicated rating under this methodology based on historical and projectedaverage key credit metrics is Ba1, one notch below its assigned rating.

Exhibit 3

Rating Factors


Regulated Electric and Gas Utilities Industry Grid [1][2]

Factor 1 : Regulatory Framework (25%) Measure Score Measure Score

a) Legislative and Judicial Underpinnings of the Regulatory Framework A A A A

b) Consistency and Predictability of Regulation A A A A

Factor 2 : Ability to Recover Costs and Earn Returns (25%)

a) Timeliness of Recovery of Operating and Capital Costs A A A A

b) Sufficiency of Rates and Returns A A A A

Factor 3 : Diversification (10%)

a) Market Position Baa Baa Baa Baa

b) Generation and Fuel Diversity Ba Ba Ba Ba

Factor 4 : Financial Strength (40%)

a) CFO pre-WC + Interest / Interest (3 Year Avg) 3.4x Baa 3.3x - 3.8x Baa

b) CFO pre-WC / Debt (3 Year Avg) 11.5% Ba 10% - 15% Ba

c) CFO pre-WC – Dividends / Debt (3 Year Avg) 7.8% Ba 5% - 10% Ba

d) Debt / Capitalization (3 Year Avg) 73.1% B 72% - 77% B

Rating:

Grid-Indicated Rating Before Notching Adjustment Baa2 Baa2

HoldCo Structural Subordination Notching -2 -2 -2 -2

a) Indicated Rating from Grid Ba1 Ba1

b) Actual Rating Assigned Baa3 Baa3

Current

LTM 6/30/2017

Moody's 12-18 Month

Forward View

As of Date Published [3]

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] As of 6/30/2017(L)[3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody's Financial Metrics




Ratings

Exhibit 4Category Moody's RatingIPALCO ENTERPRISES, INC.


PARENT: AES CORPORATION, (THE)

Outlook StableCorporate Family Rating Ba2Sr Sec Bank Credit Facility Ba1/LGD2Senior Unsecured Ba2/LGD4Speculative Grade Liquidity SGL-2


Outlook StableIssuer Rating Baa1First Mortgage Bonds A2Senior Secured A2Pref. Stock Baa3





© 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDITRISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THERELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITYMAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGSDO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’SOPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVEMODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’SPUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOTPROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THESUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATIONAND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FORPURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FORRETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACTYOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTEDOR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANYPERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as wellas other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information ituses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for anyindirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use anysuch information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses ordamages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of aparticular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatorylosses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for theavoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCHRATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating,agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintainpolicies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO andrated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually atwww.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion asto the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be recklessand inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or otherprofessional adviser.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.






http://www.moodys.com


CREDIT OPINION1 November 2017

Update

RATINGS

Indianapolis Power & Light CompanyDomicile Indianapolis - Marion



Type LT Issuer Rating

Outlook Stable


Analyst Contacts


+1.212.553.4561


Michael G. Haggarty +1.212.553.7172Associate [email protected]

Jim Hempstead [email protected]

Indianapolis Power & Light CompanyUpdate to credit analysis

SummaryIndianapolis Power & Light Company’s (IPL) credit quality reflects its fully regulatedoperations, the utility’s overall constructive relationship with the Indiana Utility RegulatoryCommission (IURC), and a credit supportive environment where its cash flows benefit froma suite of rider mechanisms. IPL's financial metrics remain weak due to the delay in thecompletion of the Eagle Valley CCGT-plant. However, the current credit profile assumes thatthe plant’s commissioning will occur no later than mid-2018 and a that a credit supportiverate case outcome will drive an improvement in the metrics. IPL’s credit quality is alsoconstrained by the significant amount of holding company debt outstanding at its directparent company, IPALCO Enterprises, Inc. (IPALCO). The utility’s dividends are the onlysource of cash flow to service $810 million of holding company debt, which representsaround 31% of the consolidated debt. Our analysis also considers that the speculativegrade rated AES Corporation (AES, Ba2 stable)) is IPALCO’s majority shareholder and thatthe Canadian fund Caisse de Dépôt et Placement du Québec (CDPQ, unrated) became aminority shareholder (currently with a 30.0% direct and indirect interest) in 2014.

Exhibit 1



Credit Strengths

» Fully regulated utility that operates in an overall credit supportive regulatory environment

» Cost recovery mechanisms allow the recovery of certain cost and investments betweenrate cases


https://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBM_1096017


Credit Challenges

» Significant financial leverage of parent IPALCO constrains IPL's credit and drives relatively wide differential in credit quality

» Delay in the Eagle Valley CCGT’s completion has weakened credit metrics but they are expected to improve with rate case outcome

Rating OutlookThe stable outlook of IPL assumes the completion of Eagle Valley CCGT by not later than mid-2018 and a credit supportive outcome ofits next rate case. The stable outlook assumes that IPL will record cash flow before changes in working capital (CFO pre-W/C) to debt inthe range of 19% by no later than 2019. It also assumes that IPALCO will not incur any additional holding company debt.

Factors that Could Lead to an UpgradeIPL's rating could be upgraded if there is a significant improvement in the regulatory environment and if IPALCO and IPL’s credit metricsincrease materially. Specifically, an upgrade could occur if IPL’s CFO pre-W/C to debt ratio and retained cash flow (RCF) to debt ratioswere to exceed 23% and 17%, respectively, on a sustainable basis.

Factors that Could Lead to a DowngradeA negative outlook and/or downgrade of IPL’s rating could occur if there is a longer than anticipated delay in Eagle Valley’scommissioning and/or if the 2018 rate case outcome is less credit supportive. Downward pressure on the ratings of IPL and IPLACOis likely if the credit metrics remain weak. Specifically, if we expect IPL’s CFO pre-W/C to debt ratio to remain below 19% in 2019. Adeterioration in the consolidated metrics could also trigger a downgrade of IPL's rating.

Key Indicators

Exhibit 2

KEY INDICATORS [1]

Indianapolis Power & Light Company -Private

12/31/2013 12/31/2014 12/31/2015 12/31/2016 6/30/2017(L)

CFO pre-WC + Interest / Interest 5.1x 6.2x 4.8x 4.4x 4.3x

CFO pre-WC / Debt 23.5% 27.1% 17.2% 15.9% 15.5%

CFO pre-WC – Dividends / Debt 15.8% 17.4% 10.8% 8.4% 8.9%

Debt / Capitalization 49.9% 49.2% 51.2% 50.5% 51.8%

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.Source: Moody's Financial Metrics

Corporate ProfileIndianapolis Power & Light Company (IPL; Baa1 Issuer Rating, stable) is a regulated vertically integrated utility that provides retailelectric service to nearly 490,000 retail customers in and around the city of Indianapolis (estimated population: approximately940,000). IPL, a member of the Midcontinent Independent System Operator, Inc. (MISO), has around 3,000 MW of net wintercapacity.

IPALCO Enterprises, Inc (IPALCO: Baa3 senior secured, stable) is the parent holding company that owns 100% of the common stockof IPL. The utility accounts for over 99% of consolidated revenues, cash flows and assets. The Canadian fund Caisse de Dépôt etPlacement du Québec (CDPQ, unrated) became IPALCO’s minority shareholder at the end of 2014. Its indirect (12.5% via AES USInvestments which owns an 82.35% stake in IPALCO) and direct (17.65%) ownership-stake approximates 30%. AES Corporation (AES,


2 1 November 2017 Indianapolis Power & Light Company: Update to credit analysis



CFR: Ba2 stable), the majority shareholder set up AES US Services, LLC in 2014 to provide services to all of its US subsidiaries, includingIPALCO and IPL.

Detailed Credit ConsiderationsOVERALL CREDIT SUPPORTIVE REGULATORY ENVIRONMENT BUT NEXT RATE CASE OUTCOME KEY TO THEASSESSMENT GOING FORWARD

In our opinion, IPL’s rate case outcome in March 2016, the first rate case in 20 years, was credit neutral. The base rate increase ($30.8million; nearly +2.5%) equaled around 50% of the utility’s request. Factors contributing to the difference included an authorized RoEof 9.85% (requested: 10.93%) which compares well with IPL’s utility peers. However, the authorized and requested 37.33% regulatorycapital structure (which equates to a 45% financial capital structure) is thin compared to other regulatory jurisdictions, a creditweakness.

An investigation ordered by the IURC in connection with two underground network explosions that occurred in March 2015contributed to a lengthy rate case proceeding (initiated in December 2014). However, the findings did not result in the IURC imposingany restrictive conditions on the utility.

Earlier this year, the Courts dismissed an interveners’ appeal challenging certain rate case items. These included the increase in the fixedmonthly customer charge to $17/$11.25 (previously: $11.25/$6.70) depending on the customer class. The increased fixed charges donot fully insulate the utility’s cash flows from the negative impact of its modest growth in retail sales but it helps to better align itsrevenues to its fixed cost structure.

However, in 2016 the IURC also approved IPL’s implementation of certain rate adjustments between rate cases. They allow IPL torecover net costs associated with purchasing generation capacity and storm costs as well as allocation of off-system sales. The IURCalso authorized setting up a Major Storm Damage Restoration Reserve Account as well as the recovery of transmission related costs(MISO; $117 million). The latter had contributed to a material growth of the utility’s regulatory assets but the recovery period of 10years is long. IPL’s proposed depreciation rates were revised to reflect changes in the service lives of certain generation assets whichallow the utility to manage the impact of the rate increase on end-users’ bills.

Our analysis of IPL further acknowledges that its cash flows also benefit from riders to recover certain investments between rate cases.These automatic rate adjustment mechanisms include recovery of environmental compliance related investments such as (i) Mercuryand Air Toxics Standards via the semi-annual Environmental Compliance Cost Recovery Adjustment (ECCRA) tracker, (ii) 100% of thecosts incurred for installation, upgrade or operation of Clean Coal Technology (CCT) facilities (Senate Bill 29) as well as (iii) 80% of theinvestments associated with federally mandated programs (SB251; law since May 2011) following the IURC’s authorization in April 2017.

From a credit perspective, these costs and investment riders are important because the delay in the completion of the Eagle ValleyCCGT-plant (see next section), initially scheduled in mid-2017, has also caused a delay in the utility’s next general rate case. The IURCdismissed IPL’s rate case filed in December 2016, as requested by the utility. The delay exposes IPL’s cash flows to the regulatory lagassociated with the recovery of the CCGT-plant’s capital expenditures but also of the remaining 20% associated with the NPDESinvestments, a credit negative.

IPL anticipates refiling its general rate case as the CCGT-completion becomes certain (currently expected by not later than mid-2018).In Indiana, utilities have the option to file their rate cases based on future test year (SB560), historical test year or a hybrid mechanismwhich allows to add the investments completed between the rate case filing and the first hearing dates (four months) to rate base.IPL applied the latter mechanism in its December 2016 general rate case. SB560 (law in April 2013) allows utilities to implementtemporary rates, including 50% of the proposed increase, but only if the IURC fails to act within 360 days (including a 60-dayextension for good cause) after the filing date. The outcome of this rate case is important in our assessment of IPL’s regulatoryframework and its relationship with the IURC.




HIGH CAPEX PROGRAM TO REDUCE IPL’S RELIANCE ON COAL-FIRED GENERATION; DELAYED EAGLE VALLEY CCGT ISCREDIT NEGATIVE

During 2016, the output of IPL’s owned coal-fired capacity accounted for 65.5% of its power supply to retail customers, with naturalgas-fired units (11.7%) and purchased power under agreements and from the wholesale market (22.8%) accounting for the balance.

IPL's multi-year investment program is largely focused on environmental equipment and reducing IPL's historically material reliance oncoal. It estimates that at year-end 2018, coal and natural gas (including Eagle Valley) will represent 44% and 45%, respectively, of theutility’s total installed capacity, while renewables will account for 10%.

IPL estimates that its 3Q2017-2019 capital outlays (growth and maintenance capital expenditures) will aggregate $686 million (LTMJune 2017: $285 million). This represents a significant reduction compared to the investments of the last three years (2014-2016: $1.7billion; peak in 2015: $686 million).

Around 60% of IPL’s 2017-2019 capital outlays are earmarked to complete the installation of environment related equipment,including investments to comply with (i) coal combustion residuals (CCR) and National Ambient Air Quality Standards (NAAQS; totalcapex: $76 million; 2017: $42 million) as well as with the National Pollutant Discharge Elimination System (NPDES) permit programunder the US Clean Water Act (CWA) at the Petersburg plant (total capex: $224 million; remaining at year-end 2016: $37 million). Asexplained earlier, IPL is already recovering around 80% of these capital outlays via riders, a credit positive.

The Petersburg plant (1,706 MW) is IPL’s only coal-fired facility remaining following the re-fueling of the Harding Street Station tonatural gas (around 1000 MW; six units) and the retirement of the Eagle Valley coal-fired units (four; 2016). On this site, the utility isbuilding the Eagle Valley CCGT (up to 685 MW) which accounts for around 40% of IPL’s 2017-2019 planned capex. We understandthat the delay in the Eagle Valley plant’s commissionning has been caused by EPC-contractor’s (CB&I) construction challenges thathave not resulted in a review of the plant’s capex (total: $613 million; spent through June 2017: $559 million).

IPL attained a Certificate of Public Convenience and Necessity (CPCN) for both the re-fueling programs and the Eagle Valley CCGTproject which we believe reduces the likelihood of cost disallowances. Our analysis also considers that IPL must submit an IntegratedResource Plan (IRP) every two years that outlines how the utility will provide reliable electricity service over the following twenty years.

Different assumptions regarding demand growth, demand-side management (DSM) and demand response (DR) programs, as well asthe pace at which to incorporate renewables, energy storage and distributed generation into the grid, drive the differences betweenthe six scenarios analyzed under IPL’s 2017-2036 IRP (filed in November 2016). The IRP compares the scenarios under various metricsincluding the average impact on annual rates over the 20-year period, ranging between ¢3.53/KWh (base case) to ¢4.20/KWh (under aquick transition scenario that foresees no coal-fired units and significant amount of renewables).

IPL concluded that the most likely solution may be a blend of the variables used in order to estimate the required resources underthe base case scenario (IPL’s initial preferred option), strengthened environmental scenarios and distributed generation scenarios.Under this hybrid scenario, the utility foresees that only two units of the Petersburg coal-fired plant (around 1,100 MW) will remainoperational in 2036, likely providing capacity resources instead of base-load resources. It further estimates that its natural gas capacitycould aggregate 1,565 MW with the balance of the required resources consisting of combined heat and power generation (225MW),renewable resources (solar and wind; 1,698MW), battery storage (283MW) as well as DMR and programs (212MW).

The IRP forms the foundation for the utility’s future regulatory requests based upon its anticipated resource needs under severalportfolio options. We believe that long-term planning and preparation in a collaborative manner with key stakeholders enhances theutility’s ability to prepare for changes in the grid and its service over the long-term, while also helping to increase the utility’s ability torecover its investments, and manage affordability concerns.

HIGHLY LEVERAGED OWNERSHIP STRUCTURE DRIVES STRUCTURAL SUBORDINATION CONSIDERATIONS

We acknowledge that during the 2014-2016 period, AES’ and CDPQ’s total equity contributions to IPL, via IPALCO, aggregated asignificant $534 million; however, the aggressive dividend policies of both IPL and IPALCO amid a material capex program temper theircredit quality. Except for 2016, when it was at 85%, IPL’s dividend payout ratio has historically exceeded 90%, considerably exceedingthe industry average of approximately 70%.




We calculate that the addition of the Eagle Valley plant to IPL’s rate base (nearly $1.9 billion, according to their 2016 rate case) willreduce the utility’s ratio of debt to rate base from around 90% to around 70%; however, this compares poorly with other utilities in thesame credit range, a credit negative. Moreover, IPALCO’s material holding company debt ($810 million) represents around 31% of theconsolidated long-term debt outstanding at the end of June 2017 and we expect this metric will remain at the 30% level for the nextseveral years.

This highly leveraged ownership structure limits both entities financial flexibility and constrains the utility’s credit quality, particularlyas IPL remains the holding company's only source of cash to meet its debt service obligations. It also explains the two notch differencebetween the ratings of IPALCO and IPL.

DETERIORATING CREDIT METRICS ARE EXPECTED TO REMAIN COMMENSURATE WITH THE CREDIT PROFILE

As depicted in the table above, IPL’s 2015-June 2017 key credit metrics are weak for the credit profile according to the guidelinesprovided under the standard grid in our Regulated Electric and Gas Utilities Rating Methodology. The significant increase in theutility’s debt to fund its material capex program amid an aggressive dividend policy have contributed to the deterioration. This hasbeen only partially offset by higher IPL cash flow related to the March 2017 base rate increase (+$30.8 million p.a.), the recovery ofMISO deferred transmission costs, the implementation of riders for the automatic recovery of certain investments, along with theshareholders’ equity contributions and cost savings resulting from the implementation of the AES US Services. On a positive note, thedebt adjustment related to the group’s unfunded defined pensions obligations remain modest (year-end 2016: $50 million vs 2012:$260 million).

Hence, the completion of the Eagle Valley CCGT and a credit supportive outcome of the next rate case (with rates expected to becomeeffective no later than January 2019) are critical for IPL and IPALCO to improve their key credit metrics, and maintain their rating andstable outlook; Specifically, we expect that IPL will record CFO pre-W/C to debt in the 19% range no later than 2019, on a sustainablebasis.

Liquidity AnalysisIPL exhibits an adequate liquidity profile. At the end of June 2017, IPL had $141.5 million available under its 5-year $250 millionrevolving credit facility. This facility is scheduled to mature in October 2020, and includes a $150 million accordion feature untilOctober 16, 2019 (subject to lenders’ approval). This is subject to a single financial covenant requiring a maximum total debt to totalcapitalization of 65%. We anticipate the utility will remain in compliance with this covenant. Failure to comply could cause an event ofdefault that would also limit IPL’s ability to distribute dividends.

As mentioned above, IPL is IPALCO's main source of cash flow used to meet its financial obligations including dividend distributions toAES and interest payments on its holding company debt of around $29 million p.a. IPALCO’s Notes are due in September 2024 ($405million) and in July 2020 ($405 million). For the next 18 months, we expect that IPL will continue to fund its declining investments(LTM June 2017: $285 million; 2016: $592 million) and dividend distributions (LTM June 2017: $126 million and 2016: $136) withinternally generated operating cash flow (LTM2Q2017:$323 million), borrowings under its credit facility, and long-term debt issuances.

As of June 30, 2017, the vast majority of IPL's $1.7 billion debt was subject to fixed rates except for $90.0 million of variable ratenotes. These are due in December 2020, with IPL’s next debt maturity consisting of two first mortgage bonds due in August 2021 ($95million).

As the utility approaches the tail-end of its investment program, we anticipated modest additional capital contributions (2014-2016;$533 million). In January 2017, the utility contributed $7.1 million to its defined pension fund (2016: $15.9 million; 2015: $25 million).





Moody's evaluates the financial performance of IPALCO and IPL relative to the standard business risk grid under the Regulated Electricand Gas Utility Methodology published in June 2017. As depicted in the grid below, IPL’s indicated rating based on historical andprojected credit metrics is Baa1 on a historical and projected basis, the same as its current assigned senior unsecured rating.

Exhibit 3

Rating Factors

Indianapolis Power & Light Company -Private

Regulated Electric and Gas Utilities Industry Grid [1][2]

Factor 1 : Regulatory Framework (25%) Measure Score Measure Score

a) Legislative and Judicial Underpinnings of the Regulatory Framework A A A A

b) Consistency and Predictability of Regulation A A A A

Factor 2 : Ability to Recover Costs and Earn Returns (25%)

a) Timeliness of Recovery of Operating and Capital Costs A A A A

b) Sufficiency of Rates and Returns A A A A

Factor 3 : Diversification (10%)

a) Market Position Baa Baa Baa Baa

b) Generation and Fuel Diversity Ba Ba Ba Ba

Factor 4 : Financial Strength (40%)

a) CFO pre-WC + Interest / Interest (3 Year Avg) 5.3x A 4x - 4.5x Baa

b) CFO pre-WC / Debt (3 Year Avg) 16.2% Baa 16% - 20% Baa

c) CFO pre-WC – Dividends / Debt (3 Year Avg) 11.9% Baa 9% - 13% Baa

d) Debt / Capitalization (3 Year Avg) 50.0% Baa 48% - 52% Baa

Rating:

Grid-Indicated Rating Before Notching Adjustment Baa1 Baa1

HoldCo Structural Subordination Notching

a) Indicated Rating from Grid Baa1 Baa1

b) Actual Rating Assigned Baa1 Baa1

Current

LTM 6/30/2017

Moody's 12-18 Month

Forward View

As of Date Published [3]

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] As of 6/30/2017(L)[3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody's Financial Metrics




Ratings

Exhibit 4Category Moody's RatingINDIANAPOLIS POWER & LIGHT COMPANY

Outlook StableIssuer Rating Baa1First Mortgage Bonds A2Senior Secured A2Pref. Stock Baa3

ULT PARENT: AES CORPORATION, (THE)

Outlook StableCorporate Family Rating Ba2Sr Sec Bank Credit Facility Ba1/LGD2Senior Unsecured Ba2/LGD4Speculative Grade Liquidity SGL-2

PARENT: IPALCO ENTERPRISES, INC.






© 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDITRISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THERELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITYMAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGSDO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’SOPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVEMODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’SPUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOTPROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THESUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATIONAND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FORPURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FORRETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACTYOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTEDOR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANYPERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as wellas other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information ituses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for anyindirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use anysuch information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses ordamages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of aparticular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatorylosses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for theavoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCHRATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating,agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintainpolicies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO andrated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually atwww.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion asto the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be recklessand inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or otherprofessional adviser.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.






http://www.moodys.com


CREDIT OPINION4 October 2016

Update

RATINGS

Indianapolis Power & Light CompanyDomicile Indianapolis - Marion



Type LT Issuer Rating

Outlook Stable


Analyst Contacts


212-553-4561


Jim Hempstead 212-553-4318Associate [email protected]

Indianapolis Power & Light CompanyRegulated vertically integrated utility subsidiary of IPALCOEnterprises, Inc.

Summary Rating RationaleThe Baa1 Issuer rating of Indianapolis Power & Light Company (IPL) reflects its fully regulatedoperations, the utility’s overall constructive relationship with the Indiana Utility RegulatoryCommission (IURC), and a credit supportive environment where its cash flows benefit from asuite of rider mechanisms.

The rating is tempered by IPL's credit metrics which, despite a recent material deterioration,are expected to become well positioned within the Baa-rating category as the utility entersthe tail-end of its significant multi-year capital expenditure (capex) program, despite thegroup’s aggressive dividend policy. IPL’s rating is also constrained by the significant amountof holding-company debt outstanding at its direct parent company, IPALCO Enterprises,Inc.’s (IPALCO; Baa3 stable) which also records consolidated key credit metrics that aresomewhat weak for the Baa-rating category. The utility’s dividends are the only source ofcash flow to service holding company debt that approximates $805 million and representsaround 32% of the consolidated debt. This drives the two notch difference between theratings of IPALCO and IPL. The utility’s rating also factors in that the speculative rated AESCorporation (AES; Corporate Family rating: Ba3 positive) is IPALCO’s majority shareholderbut also that the Canadian fund Caisse de Dépôt et Placement du Québec (CDPQ, unrated)has held an approximate 30% direct and indirect interest stake since 2014.


http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1043924



2 4 October 2016 Indianapolis Power & Light Company: Regulated vertically integrated utility subsidiary of IPALCO Enterprises, Inc.

Exhibit 1



Credit Strengths

» Fully regulated utility that operates in an overall credit supportive regulatory environment that allows for a suite of cost recoverymechanisms

» Overall financial metrics expected to be commensurate with the rating category despite aggressive dividends and incrementalindebtedness to fund capex

» Changes in ownership structure are credit neutral

Credit Challenges

» Significant financial leverage of parent IPALCO constrains IPL's ratings and drives two notch differential

Rating OutlookThe stable outlook of IPL reflects our expectation that its key credit metrics will improve after the material deterioration recorded in2015 and LTM June 2016 as the utility approaches the tail-end of its material capex program. The stable outlook assumes that theregulatory environment in the state of Indiana will remain credit supportive and that the utility’s cash flows will benefit from a creditconstructive outcome in its next rate case proceeding. The outlook assumes the utility will be able to record a cash flow from operationpre-working capital (CFO pre-W/C) to debt ratio in excess of 18% going forward. The stable outlook also assumes that the holdingcompany will not incur any additional indebtedness going forward.

Factors that Could Lead to an UpgradeIPL's rating could be upgraded if Moody's perceives a significant improvement in the regulatory environment and if IPL's CFO pre-W/C to debt ratio and retained cash flow (RCF) to debt ratio were to exceed 22% and 17%, respectively, on a sustainable basis. Animprovement in the consolidated metrics could also trigger an upgrade of IPL's rating.




Factors that Could Lead to a DowngradeIPL's rating could face downward pressure if IPALCO is downgraded or if IPL's CFO pre-W/C to debt ratio and interest coverage metricsdeteriorated unexpectedly to levels below 15% and 3.5 times, respectively, for an extended period. A deterioration in the consolidatedmetrics could also trigger an upgrade of IPL's rating.

Key Indicators

Exhibit 2

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.Source: Moody's Investors Service

Detailed Rating ConsiderationsOVERALL CREDIT SUPPORTIVE REGULATORY ENVIRONMENT AND CONSTRUCTIVE RELATIONSHIP WITH IURC

IPL benefits from an overall credit supportive regulatory environment in Indiana as well as a constructive relationship with the IndianaUtility Regulatory Commission (IURC). This opinion considers that the utility's cash flows benefit from a suite of recovery mechanismsthat reduces regulatory lag. We also consider the utility's rate case outcome in March 2016 to be credit neutral, the utility's first ratecase in the last twenty years (1996). The outcome of IPL's next rate case proceeding (2017) will be also key in our assessment goingforward.

On March 30, 2016, IURC’s authorized $30.8 million increase in IPL’s base rates became effective, which equaled to only around44% of IPL’s $67.8 million request. A key driver of the significant gap was the difference between the requested (10.93%) andauthorized (9.85%) RoE, which we note compares well with other US utilities. On a negative note, the order allowed the requested37.33% regulatory capital structure (which equates to a 45% financial capital structure) which is thin compared to other regulatoryjurisdictions. The changes to the submitted rate base of around $1.9 billion (adjusted for known-and-measurable changes) was modest.The utility chose to file the rate case based on a historical test year (June 30, 2014) although Senate Bill (SB)560 allows the utilities thepossibility of using a forward test year in Indiana.

The utility initiated the regulatory proceedings in December 2014; however, the IURC’s decision in March 2015 to open an investigationin connection with two underground network explosions that occurred that month, contributed to the length of the rate caseproceeding. On a positive note, the IURC did not impose any restrictive conditions on the utility after the findings albeit the allowedRoE includes a downward adjustment to incentivize the company’s participation in a collaborative process that the regulator requestedto address operating and infrastructure management.

The IURC’s March 2016 order also authorized IPL’s requested changes in its rate structure such that the fixed charges increase to $17/$11.25 (previously: $11.25/$6.70) depending on the customer class. This helps to align the utility's revenues to its fixed cost structureand to insulate its cash flows from drops in retail sales. The IURC also authorized the implementation of rate adjustment mechanismsrequested by IP&L and implemented in the State over the last few years, another credit positive. This includes the recovery in-betweenrate cases of net costs associated with purchasing generation capacity, storm related costs, allocation of off-system sales as well astransmission related costs. The latter is particularly relevant because historical lag to recover deferred MISO related costs contributedto the utility’s material regulatory asset (2015: $128.6 million; 2014: $110.5 million). We acknowledge that the IURC allowed IPL toamortize the related balances (annual revenue requirement: $11.8 million) but over a 10-year period (requested: 6 years). The utility’srequested implementation of a Major Storm Damage Restoration Reserve Account was also approved as was IPL’s proposed reviseddepreciation rates to reflect changes in the service lives of certain generation assets.




These recovery mechanisms underpin our opinion that the regulatory environment in Indiana is credit supportive. IPL is able to recoverMATS related compliance requirements via the semi-annual Environmental Compliance Cost Recovery Adjustment (ECCRA) tracker.Under Senate Bill (SB)29, this rider allows the company to recoup 100% of the costs incurred for installation, upgrade or operation ofClean Coal Technology (CCT) facilities to comply with environmental requirements. As of year-end 2015, IPL had been authorized torecover via ECCRA-filings a total of $978 million and to include $82 million in rates for the half-year September 2015-February 2016.Following the March 2016 rate case proceeding, IPL’s base rates now include related amounts previously recouped via this tracker.

Furthermore, under SB251 (law since May 2011), 80% of the investments associated with federally mandated initiatives are alsorecoverable via an automatic rate adjustment mechanism while 20% of the approved costs are deferred and recovered as part of thenext general rate case. For example, this mechanism is applicable to IPL's investments associated with the compliance of NationalPollutant Discharge Elimination System (NPDES), cooling water intake regulation, waste management and coal ash, and wastewatereffluent. Although the recovery under SB251 is less timely than under SB29, both tracker mechanisms are a significant credit positive,and critical for IPL's rating in view of its significant capex program.

SB560 (law in April 2013) also allows utilities to implement temporary rates including 50% of the proposed increase if the IURC failsto act within 360 days (including a 60-day extension for good cause) after the filing date. The temporary increase is subject to refund/credit. SB560 also allows utilities to propose to the IURC a 7-year infrastructure plan for distribution, transmission and storage whereaspursuant to the current statutes wherein the IURC is required to review rates at least once every four years. Similar to other utilities,IPL is allowed to recover via a quarterly fuel cost adjustment surcharges (FAC) its actual fuel costs (including the energy portion ofpurchased power costs) that may be above or below the levels included in IPL's basic rates; however, these adjustments are subject tohearings.

TAIL-END OF UTILITY’S MATERIAL CAPEX PROGRAM FOR ENVIRONMENTAL COMPLIANCE AND FUEL MIX CHANGE

IPL expects to invest around $1.2 billion during the 2016-2018 period to complete its current capex program (2013-2015: $1.7 billion).During 2016, IPL’s investments have remained elevated (estimated to be over $600 million in 2016) after peaking in 2015 at $673million. After IPL commissions several of its remaining key projects during 2016 and 2017, we expect its capex to halve in 2017 and2018 and become more comparable with historical levels (2014: $382 million; 2013: $242 million).

Despite the material capex program, the utility anticipates that its rates will remain competitive compared to the other utilitiesoperating within the state. IPL believes this has helped it to maintain its constructive relationship with the IURC. Examples of the latterinclude IPL's ability to attain the Certificate of Public Convenience and Necessity (CPCN) for the re-fueling programs and the EagleValley CCGT project (see below).

The bulk of the remaining investments are earmarked to grow its transmission and distribution assets ($294 million), power plant-related projects ($178 million) as well as other miscellaneous equipment ($69 million). It will also install environment relatedequipment in order to comply with the NPDES permit program under the US Clean Water Act (CWA) at its 1,732MW coal-firedPetersburg plant (4 units; total capex: $224 million) by 2017. In June 2016, IPL requested state regulator approval of this project whichwould allow it to recover via automatic riders 80% of the approved costs (see above), a credit positive.

The investment program also seeks to reduce reliance on its coal-fired fleet. These include re-fueling to natural gas the coal-firedHarding Street Station (HSS) 410MW Unit 7 (expected before year-end; total capex: $101 million) after completing the same initiativein HSS Units 5 and 6 last year. IPL will also retire its Eagle Valley plant (4 units) by year-end 2016 while it expects to commission the685MW Eagle Valley combined cycle gas turbine (CCGT) in April 2017 (total capex: $632 million). The utility is further reviewing theassociated capital outlays required to comply with other environmental rules including the 316(b) under the Cooling Water Intake(2020; CWA), the National Ambient Air Quality Standards (NAAQS; 2018-2020) or Greenhouse Gas emission cuts as the proposedrules are defined.

Upon completion of the current capex program, IPL’s natural gas-fired fleet will total around 1,900MW and account for around 52%of total installed capacity in 2017 and its coal-fired plants will represent around 46% of its total installed capacity. This will also reducethe concentration risk in IPL's fleet associated with the 1,714MW Petersburg coal-fired Station (four units) as well as improve thecompetitive position of its fleet in the MISO. Increased penetration of renewables is negatively impacting the economic dispatch of its




coal-fired units resulting in reduced sales. Until the completion of the Eagle Valley CCGT, the utility expects to be short of power andthen become long power in 2017. To meet its obligations in the interim it will maintain its access to wholesale market purchases whilealso continuing to use load management and conservation measures, including its Demand Side Management (DSM), as well as windand solar resources.

HIGHLY LEVERAGED OWNERSHIP-STRUCTURE DRIVES STRUCTURAL SUBORDINATION CONSIDERATIONS

The material amount of IPALCO’s holding company debt that currently aggregates to $805 million (two series of Notes securedwith IPL's shares due in 2018 and 2020, respectively) represents around 32% of the consolidated IPALCO long-term indebtednessoutstanding at the end of June 2016.

The ratings anticipate a decline in the relative weight of holding-company indebtedness as a proportion of total consolidated debtas IPL incurs new indebtedness going forward. However, this is expected to remain material at the 30% level for the next severalyears. This highly leveraged ownership structure limits both entities financial flexibility, particularly as the utility remains the holdingcompany's only source of cash to meet its debt service obligations. Moreover, we also calculate that while IPL's reported debt (2015:$1.37 billion) to rate base hovered in the 70-75% range last year (assuming a rate base of about US$1.9 billion) this metric almostreaches 115% after considering the holding-company indebtedness (2015: $2.18 billion) which constrains the utility's rating, while alsodriving the two notch difference between the senior unsecured ratings of IPALCO and IPL.

IPALCO, and indirectly IPL, has been one of AES' largest and most stable sources of cash flow with annual dividend distributions thataveraged around $67 million between 2011 and 2015. IPL's dividend payout averaged close to 100% during the same period despite itsmaterial, multi-year capex program, considerably exceeding the industry average of approximately 70%. Both companies’ track recordof aggressive dividend policies amid IPL’s material capex program temper their ratings.

IPALCO's Articles of Incorporation limits its ability to make dividend distributions and intercompany loans to AES. This is subject tothe company recording debt to adjusted capitalization not greater than 67% and interest coverage below 2.5x, respectively. IPL'sability to dividend cash is also limited under the amended Articles of Incorporation, the mortgage and deed of trust as well as its creditfacility (where there is a requirement to record total debt to total capitalization not greater than 65%). However, all these restrictionsare relatively lenient. IPALCO, for example, has historically faced no challenges in complying with them despite its extremely thincapitalization that resulted from a substantial distribution and capital reduction in 2001 and its aggressive dividend payout-ratiosince then. After CDPQ became IPALCO’s minority shareholder, it resulted in some amendments to its corporate governance with nomaterial credit implications.

DETERIORATING CREDIT METRICS ARE EXPECTED TO REMAIN COMMENSURATE WITH THE RATING

The table above depicts the significant deterioration in IPL’s historically robust credit metrics at year-end 2015 and LTM June 30, 2016.This deterioration resulted largely from the incremental indebtedness incurred to finance its material capex program (peaking 2015 and2016), the decision to stay out of rate cases for the last 20 years and the increasing balance of regulatory assets mentioned earlier. Theutility has been able to partially offset these negative impacts via the riders that allow for the recovery of portions of its investments,cost savings resulting from the implementation of the AES US Services (which renders services to all AES utility subsidiaries in theUS), and tax savings associated with bonus depreciation. There has also been a significant reduction in Moody's debt adjustmentassociated with unfunded defined pension obligations since 2013 (2015: $76 million; 2012: $269 million). Nevertheless, IPL’s LTM keycredit metrics as of June 30, 2016, including CFO pre-W/C to debt and RCF to debt of 14.5% and 8.4%, respectively, were weak forthe utility’s Baa1-rating according to the guidelines provided under the standard grid in our Regulated Electric and Gas Utilities RatingMethodology.

That said, we anticipate an improvement in IPL’s key credit metrics before year-end due to a combination of the outcome of therecent rate case, including the allowed rate hike and the new suite of rider mechanisms that should help the utility recover certainoperational costs on a more timely basis. Specifically, we anticipate that IPL’s CFO pre-W/C to debt will consistently exceed 19%going forward. However, its RCF to debt will continue to score within the lower-range of the Baa-rating category due to the utility’saggressive dividend policy amid an authorized regulatory and financial capital structure that is somewhat thinner than in most otherjurisdictions, a credit negative.




Liquidity AnalysisIPL exhibits an adequate liquidity profile. At the end of June 2016, IPALCO and IPL reported $44 million and $29 million of cash andcash equivalents, respectively (IPALCO: year-end 2015: $22; IPL; $20 million). As of June 30, 2016, IPL had full availability under its 5-year $250 million revolving credit facility maturing in October 2020. The facility also includes a $150 million accordion feature untilOctober 16, 2019 (subject to lenders’ approval).

On a reported basis, over the next two years, we expect that IPALCO and IPL will continue to fund the group's declining investments(consolidated 2015: $673 million; 2014: $382 million) and dividend distributions (consolidated 2015: $69 million; 2014: $78 million)with internally generated operating cash flows (consolidated 2015: $252 million; 2014: $254 million), and proceeds from debtissuances. During 2015 and 2016 IPALCO received total equity contributions that totaled $427 million from CDPQ ($363 million) andAES (2015: $60 million; 2014 and 2013: $155.5 million). During 2016, IPL contributed $15.9 million to its defined pension fund (2015:$25 million).

IPL’s next long-term debt maturity is its $24.7 million first mortgage bond due in August 2017, with no additional maturities beforeAugust 2021 ($95 million). As of June 30, 2016, the vast majority of IPL's $1.75 billion indebtedness was subject to fixed rates exceptfor $90.0 million of variable rate notes (due December 2020). As mentioned earlier, IPL is IPALCO's main source of cash flow used tomeet its financial obligations including dividend distributions to AES and interest payments on its holding company debt of around $39million p.a. IPALCO’s Notes are due in May 2018 ($400 million) and in July 2020 ($405 million).

Other ConsiderationsMoody's evaluates the financial performance of IPL and IPALCO relative to the standard business risk grid under the Regulated Electricand Gas Utility Methodology published in December 2013. As depicted in the grid below, IPL's indicated rating based on historical andprojected credit metrics is Baa1 on a historical and projected basis, the same as the senior unsecured rating.

Corporate ProfileIndianapolis Power & Light Company (IPL; Baa1 Issuer Rating) is a regulated vertically integrated utility that provides retail electricservice to approximately 480,000 retail customers in and around the city of Indianapolis (estimated population: 934,000). IPL, amember of the Midcontinent Independent System Operator, Inc (MISO), has 3,123 MW of net summer capacity.

IPALCO Enterprises, Inc (IPALCO: Baa3 senior secured) is the parent holding company that owns 100% of the common stock of IPLthat accounts for over 99% of consolidated revenues, cash flows and assets. At the end of 2014, the Canadian fund Caisse de Dépôt etPlacement du Québec (CDPQ, unrated) became IPALCO’s minority shareholder. Its current ownership approximates 30% (includinga 17.65% direct interest stake in IPALCO in exchange for a $349 million total equity contribution in 2015 and 2016 as well as a 12.3%indirect ownership-stake in IPALCO via AES US Investments which owns 82.35% of IPALCO). The balance is held by AES Corporation(AES, CFR: Ba3 positive).

Since January 2014, AES US Services, LLC provides services to all of AES' US subsidiaries, including IPALCO and IPL. The costs areallocated based on drivers designed to avoid having regulated utilities subsidize any costs incurred for the benefit of non-regulatedbusinesses.





Exhibit 3

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] As of 6/30/2016(L)[3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody's Investors Service




Ratings

Exhibit 4Category Moody's RatingINDIANAPOLIS POWER & LIGHT COMPANY

Outlook StableIssuer Rating Baa1First Mortgage Bonds A2Pref. Stock Baa3

ULT PARENT: AES CORPORATION, (THE)

Outlook PositiveCorporate Family Rating Ba3Senior Unsecured Ba3/LGD4Speculative Grade Liquidity SGL-2

PARENT: IPALCO ENTERPRISES, INC.






© 2016 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES ("MIS") ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDITRISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'SPUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKESECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANYESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKETVALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICALFACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHEDBY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDITRATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDITRATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGSAND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY ANDEVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FORRETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACTYOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTEDOR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANYPERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as wellas other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information ituses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody's Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for anyindirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use anysuch information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses ordamages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of aparticular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatorylosses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for theavoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCHRATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any rating,agreed to pay to Moody's Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintainpolicies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO andrated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually atwww.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion asto the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be recklessand inappropriate for retail investors to use MOODY'S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or otherprofessional adviser.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody'sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.





Summary:

IPALCO Enterprises Inc.

Primary Credit Analyst:

Gabe Grosberg, New York (1) 212-438-6043; [email protected]

Secondary Contacts:

Obioma Ugboaja, New York 212-438-7406; [email protected]

Michael T O'Brien, New York 212-438-1891; [email protected]

Table Of Contents

Rationale

Outlook

Our Base-Case Scenario

Business Risk

Financial Risk

Liquidity

Group Influence

Issue Level Ratings

Ratings Score Snapshot

Related Criteria And Research

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 14, 2017 1


Summary:

IPALCO Enterprises Inc.

Business Risk: EXCELLENT

Vulnerable Excellent

Financial Risk: AGGRESSIVE

Highly leveraged Minimal

bbb bbbbbb-

Anchor Modifiers Group/Gov't

CORPORATE CREDIT RATING

BBB-/Stable/NR

Rationale

Business Risk: Excellent Financial Risk: Aggressive

• Relatively low risk, rate-regulated,

vertically-integrated electric utility

• Ongoing cost recovery through base rate increases

and rate surcharges

• Limited geographical and regulatory diversity.

• Financial ratios are measured against more

moderate benchmarks reflecting the company's

mostly rate-regulated assets and operations

• Rising capital spending reflecting environmental

compliance expenditures and a combined-cycle gas

plant currently under construction

• High debt leverage.



Outlook: Stable

S&P Global Ratings' stable outlook on IPALCO Enterprises Inc. reflects the stable outlook on parent AES Corp. and

our expectation that the company will maintain consistent financial policies. If IPALCO issues additional debt to

pay dividends to parent AES Corp. and minority owner Caisse de dépôt et placement du Québec (CDPQ), our

analysis of the company's financial policy would be significantly altered, and we would most likely lower the

ratings. Under our base-case forecast, we expect IPALCO's funds from operations (FFO) to debt to range from

9.5%-13% over the next three years. Fundamental aspects to our base case include the timing and cost of capital

spending and satisfactory outcomes on the company's future rate cases.

Downside scenario

We would lower the ratings on IPALCO if we downgraded parent AES and no additional insulation measures were

put in place. We could also downgrade IPALCO if its financial measures weakened reflecting FFO to debt below

9% on a sustained basis.

Upside scenario

Absent further enhancement to the ring-fencing provisions, higher ratings at IPALCO and IP&L (IPALCO's wholly

owned subsidiary, Indianapolis Power and Light) are unlikely at this time. We could raise the ratings if we raise the

ratings on AES.

Our Base-Case Scenario

Assumptions Key Metrics

• Continued use of existing regulatory mechanisms

that are present in the state of Indiana, including

environmental trackers and riders

• Minimal customer growth

• Heightened capital spending of approximately $325

million in 2017.

2016A 2017E 2018E

FFO/total debt (%) 12.2 10-13 10-13

Total debt/EBITDA (x) 5.6 5.6-6 5.6-6

A--Actual. E--Estimate. FFO--Funds from operations.

Business Risk: Excellent

Our assessment of IPALCO's business risk reflects its relatively low-risk, rate-regulated, vertically-integrated electric

utility operations through its wholly owned subsidiary, Indianapolis Power and Light (IP&L). IPALCO provides an

essential service to about 490,000 customers in the city of Indianapolis and surrounding areas. IPALCO also provides

wholesale electric power to customers as a member of Midcontinent Independent System Operator (MISO). IPALCO's

subsidiary IP&L is primarily regulated by the Indiana Utility Regulatory Commission (IURC) and benefits from rate

riders that allow for the timely cost recovery of its fuel expenses and the majority of its incremental environmental


Summary: IPALCO Enterprises Inc.


capital spending. In early 2016, the company implemented an approximately $30 million base rate increase, its first in

more than 20 years, and made a second rate case filing with the IURC requesting a rate increase of approximately $92

million in December 2016. The company withdrew this filing in February 2017 after it became clear that the CCGT

unit it is constructing at its Eagle Valley facility would not be online in time to be included in the rate base. Although

this will delay IPALCO's recovery of capital investments it has made recently, overall we expect the company will

continue to effectively manage regulatory risk.

Financial Risk: Aggressive

Our assessment of IPALCO's financial risk profile relies on more relaxed financial benchmark ratios reflecting the

company's low-risk, regulated, vertically integrated utility operations. We expect IPALCO's parent, AES Corp., to

maintain a prudent financial policy toward IPALCO and its subsidiary IP&L that supports their current credit quality.

Under our base-case scenario of moderately higher capital spending through early 2017 and future rate increases, we

expect FFO to debt of approximately 10%-13%, consistent with our aggressive financial risk profile category.

Liquidity: Adequate

IPALCO has adequate liquidity, in our view, and can more than cover its needs for the next 12 months, even if

EBITDA were to decline by 10%. We expect the company's liquidity sources to exceed uses by more than 1.1x over

the next 12 months. Under our stress scenario, we do not believe IPALCO would require access to the capital markets

during that period to meet its liquidity needs. The company has sound relationships with its banks, satisfactory

standing in the credit markets, and could absorb a high-impact, low-probability event with limited need for refinancing.

Principal Liquidity Sources Principal Liquidity Uses

• Assumed ongoing revolving credit availability of

about $200 million

• Expected FFO of about $300 million over the next

12 months

• Cash on hand of about $35 million.

• Capital spending of about $325 million over the next

twelve months

• Dividends of roughly $100 million annually

• Debt maturities of $25 million over the next 12

months.

Group Influence

S&P Global bases its ratings on IPALCO and IP&L on the consolidated group credit profile and application of our

group ratings methodology. We deem IPALCO to be a "moderately strategic" subsidiary of AES. IPALCO is the

intermediate holding company for regulated electric utility IP&L, which we deem to be a "core" entity that is integral to

IPALCO.

We rate IPALCO two notches higher than the 'bb' consolidated group credit profile because of the cumulative value of

structural protections in place that insulate IPALCO, and the strength of its stand-alone credit profile. We rate IP&L in




line with IPALCO, reflecting our assessment of IP&L as a core subsidiary of IPALCO.

Issue Level Ratings

We rate the senior unsecured debt at IPALCO one notch lower than the issuer credit rating because of structural

subordination. This results from priority obligations exceeding 20% of total assets.

Ratings Score Snapshot

Corporate Credit Rating

BBB-/Stable/NR

Business risk: Excellent

• Country risk: Very low

• Industry risk: Very low

• Competitive position: Strong

Financial risk: Aggressive

• Cash flow/Leverage: Aggressive

Anchor: bbb

Modifiers

• Diversification/Portfolio effect: Neutral (no impact)

• Capital structure: Neutral (no impact)

• Financial policy: Neutral (no impact)

• Liquidity: Adequate (no impact)

• Management and governance: Satisfactory (no impact)

• Comparable rating analysis: Neutral (no impact)

Stand-alone credit profile : bbb

• Group credit profile: bb

• Entity status within group: Insulated (-1 notch from SACP)

Related Criteria And Research

Related Criteria

• Criteria - Corporates - General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers

- Dec. 16, 2014

• General Criteria: Methodology For Linking Short-Term And Long-Term Ratings For Corporate, Insurance, And

Sovereign Issuers - May 7, 2013




• Criteria - Corporates - Utilities: Key Credit Factors For The Regulated Utilities Industry - Nov. 19, 2013

• Criteria - Corporates - General: Corporate Methodology: Ratios And Adjustments - Nov. 19, 2013

• General Criteria: Methodology: Industry Risk - Nov. 19, 2013

• General Criteria: Group Rating Methodology - Nov. 19, 2013

• Criteria - Corporates - General: Corporate Methodology - Nov. 19, 2013

• General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers -

Nov. 13, 2012

• General Criteria: Country Risk Assessment Methodology And Assumptions - Nov. 19, 2013

• General Criteria: Use Of CreditWatch And Outlooks - Sept. 14, 2009

• Criteria - Insurance - General: Hybrid Capital Handbook: September 2008 Edition - Sept. 15, 2008

• Criteria - Corporates - General: 2008 Corporate Criteria: Rating Each Issue - April 15, 2008

Business And Financial Risk Matrix

Business Risk Profile

Financial Risk Profile

Minimal Modest Intermediate Significant Aggressive Highly leveraged

Excellent aaa/aa+ aa a+/a a- bbb bbb-/bb+

Strong aa/aa- a+/a a-/bbb+ bbb bb+ bb

Satisfactory a/a- bbb+ bbb/bbbbbb-/bb+ bb b+

Fair bbb/bbbbbb- bb+ bb bb- b

Weak bb+ bb+ bb bb- b+ b/b-

Vulnerable bb- bb- bb-/b+ b+ b b-





STANDARD & POOR’S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor’s Financial Services LLC.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminateits opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.comand www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additionalinformation about our ratings fees is available at www.standardandpoors.com/usratingsfees.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result,certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain theconfidentiality of certain non-public information received in connection with each analytical process.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&Preserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of theassignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact.S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make anyinvestment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. TheContent should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when makinginvestment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information fromsources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may bemodified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission ofStandard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-partyproviders, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness oravailability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the useof the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESSOR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOMFROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANYSOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive,special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused bynegligence) in connection with any use of the Content even if advised of the possibility of such damages.

Copyright © 2017 by Standard & Poor’s Financial Services LLC. All rights reserved.


MY CREDITPROFILE (/mcp/c/portal/logout)English

Indianapolis Power & Light Co. IN

MY RATINGS & ARTICLES

MY ARTICLES (HTTPS://WWW.MYCREDITPROFILE.STANDARDANDPOORS.COM/MCP/MYARTICLES)

RATINGS (HTTPS://WWW.MYCREDITPROFILE.STANDARDANDPOORS.COM/MCP/RATINGS)

RATINGS HISTORY (HTTPS://WWW.MYCREDITPROFILE.STANDARDANDPOORS.COM/MCP/RATINGSHISTORY)

December 2, 2016 Analyst Info Download PDF


Financial Risk: Significant

CORPORATE CREDIT RATING

Summary: Indianapolis Power & Light Co.

Rationale

Table of Contents

Vulnerable Excellent

Highly leveraged Minimal

Anchor Modifiers Group/Gov't

BBB-/Stable/NR

a- a-

bb


https://www.mycreditprofile.standardandpoors.com/mcp/peers

https://www.mycreditprofile.standardandpoors.com/mcp/criteria

https://www.mycreditprofile.standardandpoors.com/mcp/my-ratings-articles

https://www.mycreditprofile.standardandpoors.com/mcp/my-articles

https://www.mycreditprofile.standardandpoors.com/mcp/ratings-history

https://www.mycreditprofile.standardandpoors.com/mcp/my-s-p-team

https://www.mycreditprofile.standardandpoors.com/mcp/ratings

https://www.mycreditprofile.standardandpoors.com/mcp/my-ratings-files

https://www.mycreditprofile.standardandpoors.com/mcp/ratios-medians

https://www.mycreditprofile.standardandpoors.com/mcp/home

https://www.mycreditprofile.standardandpoors.com/mcp/c/portal/logout

javascript:;

Lower-risk, rate-regulated, vertically-integrated electric utility.

Ongoing recovery through base rateincreases and rate surcharges.

Limited geographical and regulatorydiversity.

Our financial risk assessmentincorporates the use of our medialvolatility table, reflecting thecompany's lower-risk, rate-regulatedutility business and higheroperating risk of its regulatedgeneration.

Heightened capital spendingreflecting environmental complianceexpenditures and a combined-cyclegas plant expected online in early2017.

Funds from operations (FFO) to debtof approximately 20%.

Business Risk: Excellent Financial Risk: Significant

Downside scenario

Upside scenario

Outlook: Stable

Our BaseCase Scenario

The stable outlook reflects S&P Global Ratings' expectation that Indianapolis Power & Light Co.'s (IP&L) immediate

parent IPALCO Enterprises will maintain consistent financial policies and not issue additional debt to pay dividends

to owners AES Corp. and Caise de dépôt et placement du Québec (CDPQ). If IPALCO did so, our analysis of the

company's financial policy would be significantly altered, and we would most likely lower the ratings. Under our base

case forecast, we expect IPALCO's FFO to debt to range from 9.5%-11% over the next three years. Fundamental

aspects to our base case include the timing and cost of environmental capital spending and satisfactory outcomes

on the company's future rate cases.

We would lower the ratings if we downgraded ultimate parent AES. We could also downgrade IP&L if consolidated

IPALCO financial measures weaken, reflecting FFO to debt consistently below 9%.

We could raise the ratings on IP&L if we upgrade parent AES and IPALCO maintains its credit measures that support

its current stand-alone credit profile.


Approximately $1.2 billion of capitalspending through 2018, reflectingenvironmental compliance programsand replacement generation.

Dividends averaging about $100million per year.

2016 rate increase of about $30million.

Ongoing recovery through riders.

2015A 2016E 2017EFFO to debt (%) 18.2 2022 1819

Debt to EBITDA (x) 4.1 3.73.9 3.73.9

FFO to cash interest coverage(x)

5.6 6.0–6.2

5.05.2

Assumptions Key Metrics


Financial Risk: Significant

Liquidity: Adequate

A--Actual. E--Estimate. FFO--Funds from operations.

Our assessment of IP&L's business risk reflects its relatively lower-risk, rate-regulated, vertically-

integrated electric utility operations that provide an essential service to about 480,000 customers in

the city of Indianapolis and surrounding areas. IP&L also provides wholesale electric power to

customers as a member of Midcontinent Independent System Operator (MISO). IP&L is primarily

regulated by the Indiana Utility Regulatory Commission (IURC) and benefits from rate riders that allow

for the timely cost recovery of its fuel expenses and the majority of its incremental environmental

capital spending. Recently, the company implemented an approximately $30 million rate increase, its

first in more than 20 years. We expect IP&L to file rate cases more regularly, reflecting our

expectations for the timely recovery of the company's high capital spending program. Overall, we

expect that the company will continue to effectively manage regulatory risk in line with its peers.

Our assessment of IP&L's financial risk profile reflects credit measures for a utility that owns both

lower-risk regulated utility operations, and moderately higher-risk regulated generation. We expect

ultimate parent, AES to maintain a prudent financial policy toward IP&L and its immediate parent

IPALCO that is commensurate with their current credit quality. Under our base-case scenario of higher

capital spending through early 2017 and future rate increases, we expect FFO to debt of approximately

18%-22%, consistent with our significant financial risk profile category.

We assess IP&L's liquidity as adequate. We expect IP&L to cover its liquidity needs for the next 12

months even if EBITDA declines by 10%. We also expect IP&L's liquidity sources over the next 12

months will exceed uses by more than 1.1x. IP&L also benefits from sound relationships with its


Credit facility availability of about$225 million.

Cash on hand of about $50 million.

FFO of about $330 million.

Maintenance capital expenditures ofabout $400 million.

Dividends of averaging about $100million.

Debt maturities of approximately$25 million in 2017.

Principal Liquidity Sources Principal Liquidity Uses

Other Credit Considerations

Group Influence

Ratings Score SnapshotCorporate Credit Rating

Business risk: Excellent

Country risk: Very low

Industry risk: Very low

Competitive position: Strong

Financial risk: Significant

Cash flow/Leverage: Significant

banks, and has the likely ability to absorb high-impact, low-probability events, with limited need for

refinancing.

Modifiers have no impact on the rating outcome.

S&P Global Ratings bases its ratings on IP&L on the consolidated group credit profile of its parent

IPALCO and the application of our group ratings methodology. We deem IPALCO to be a moderately

strategic subsidiary of AES, and consider IP&L a core entity that is integral to IPALCO. We rate IPALCO

'BBB-', two notches higher than the 'bb' consolidated group credit profile of ultimate parent AES due to

the cumulative value of structural protections that insulate it from AES and the strength of its stand-

alone credit profile. We rate IP&L in line with IPALCO since we consider it to be an integral and fully

supported subsidiary.

BBB-/Stable/NR


Anchor: a

Modifiers

Diversification/Portfolio effect: Neutral (no impact)

Capital structure: Neutral (no impact)

Financial policy: Neutral (no impact)

Liquidity: Adequate (no impact)

Management and governance: Satisfactory (no impact)

Comparable rating analysis: Neutral (no impact)

Standalone credit profile: a

Group credit profile: bb

Entity status within group: Insulated (-3 notches from SACP)

Recovery Analysis

We assign recovery ratings to first-mortgage bonds (FMB) issued by U.S. utilities,which can result in issue ratings being notched above a utility's corporate creditrating depending on the rating category and the extent of the collateral coverage.FMBs issued by U.S. utilities are a form of secured utility bond (SUB) that qualify fora recovery rating as defined in our criteria (see "Collateral Coverage And IssueNotching Rules for ‘1+’ And ‘1’ Recovery Ratings On Senior Bonds Secured by UtilityReal Property," published Feb. 14, 2013).

The recovery methodology is supported by the ample historical record of 100%recovery for secured bondholders in U.S. utility bankruptcies and our view that thefactors that enhanced those recoveries (limited size of the creditor class and thedurable value of utility rate-based assets during and after a reorganization, giventhe essential service provided and the high replacement cost) will persist.

Under our SUB criteria, we calculate a ratio of our estimate of the value of thecollateral pledged to bondholders relative to the amount of FMBs outstanding. FMBratings can exceed a corporate credit rating on a utility by up to one notch in the 'A'category, two in the 'BBB' category, and three in speculative-grade categories,depending on the calculated ratio.

IP&L's FMBs benefit from a first-priority lien on substantially all of the utility's realproperty owned or subsequently acquired. Collateral coverage of more than 1.5xsupports a recovery rating of '1+' and an issue rating two notches above the issuercredit rating.


Related Criteria

Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014

Key Credit Factors For The Regulated Utilities Industry, Nov. 19, 2013

Ratios And Adjustments, Nov. 19, 2013

Industry Risk, Nov. 19, 2013

Group Rating Methodology, Nov. 19, 2013

Corporate Methodology, Nov. 19, 2013

Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013

Methodology For Linking Short-Term And Long-Term Ratings For Corporate,Insurance, And Sovereign Issuers, May 7, 2013

Collateral Coverage And Issue Notching Rules For ‘1+’ And ‘1’ Recovery Ratings OnSenior Bonds Secured By Utility Real Property, Feb. 14, 2013

Management And Governance Credit Factors For Corporate Entities And Insurers,Nov. 13, 2012

Use Of CreditWatch And Outlooks, Sept. 14, 2009

Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008

2008 Corporate Criteria: Rating Each Issue, April 15, 2008

Business And Financial Risk Matrix

Business Risk Profile

Financial Risk Profile

Minimal Modest Intermediate Significant Aggressive Highly leveraged

Excellent aaa/aa+ aa a+/a a bbb bbb/bb+

Strong aa/aa a+/a a/bbb+ bbb bb+ bb

Satisfactory a/a bbb+ bbb/bbb bbb/bb+ bb b+

Fair bbb/bbb bbb bb+ bb bb b

Weak bb+ bb+ bb bb b+ b/b

Vulnerable bb bb bb/b+ b+ b b

Primary Credit Analyst: Obioma Ugboaja, New York 2124387406;[email protected] (mailto:[email protected])

Secondary Contacts: Gabe Grosberg, New York (1) 2124386043;[email protected] (mailto:[email protected])Michael T O'Brien, New York;[email protected] (mailto:[email protected])


mailto:[email protected]



RECENT RESEARCH

02-Dec-2016

Summary: Indianapolis Power & Light Co. (/mcp/my-articles?p_p_id=Article_WAR_MCPportlet&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_col_count=1&&changeToRecentArticle=Y&article_id=1766895)

06-May-2014

Summary: Indianapolis Power & Light Co. (/mcp/my-articles?p_p_id=Article_WAR_MCPportlet&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-

No content (including ratings, creditrelated analyses and data, valuations, model, software or other application or outputtherefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form byany means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’sFinancial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful orunauthorized purposes. S&P and any thirdparty providers, as well as their directors, officers, shareholders, employeesor agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of theContent. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause,for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. TheContent is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIEDWARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESSFOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THATTHE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITHANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for anydirect, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legalfees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused bynegligence) in connection with any use of the Content even if advised of the possibility of such damages.

Creditrelated and other analyses, including ratings, and statements in the Content are statements of opinion as of thedate they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions(described below) are not recommendations to purchase, hold, or sell any securities or to make any investmentdecisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content followingpublication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment andexperience of the user, its management, employees, advisors and/or clients when making investment and other businessdecisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P hasobtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty ofdue diligence or independent verification of any information it receives.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued inanother jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend suchacknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of theassignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to havebeen suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence andobjectivity of their respective activities. As a result, certain business units of S&P may have information that is notavailable to other S&P business units. S&P has established policies and procedures to maintain the confidentiality ofcertain nonpublic information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securitiesor from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses aremade available on its Web sites, www.standardandpoors.com (http://www.standardandpoors.com) (free of charge),and www.ratingsdirect.com (http://www.ratingsdirect.com) and www.globalcreditportal.com(http://www.globalcreditportal.com) (subscription), and may be distributed through other means, including via S&Ppublications and thirdparty redistributors. Additional information about our ratings fees is available atwww.standardandpoors.com/usratingsfees (http://www.standardandpoors.com/usratingsfees).

Any Passwords/user IDs issued by S&P to users are single userdedicated and may ONLY be used by the individual towhom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the samepassword/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contactS&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 2124387280 or by email to:[email protected] (mailto:[email protected]).


http://www.ratingsdirect.com/

http://www.globalcreditportal.com/

http://www.standardandpoors.com/usratingsfees


http://www.standardandpoors.com/

https://www.mycreditprofile.standardandpoors.com/mcp/my-articles?p_p_id=Article_WAR_MCPportlet&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_col_count=1&&changeToRecentArticle=Y&article_id=1766895


LEGAL INFO

Terms of Use (/mcp/termsofuse)

Privacy and Cookie Notice (http://www.standardandpoors.com/privacy-notice/en/us/)

Disclaimer (/mcp/Disclaimer)

HELP CENTER

FAQ (/mcp/faq)

Feedback (/mcp/feedback)

SOCIAL NETWORKING

Twitter (http://twitter.com/standardpoors)

LinkedIn (http://www.linkedin.com/company/3062?trk=null)

YouTube (http://www.youtube.com/sptvbroadcast)

Copyright © 2017 Standard & Poor's Financial Services LLC. All rights reserved.

Reproduction and distribution of this information in any form is prohibited except with the prior written permission of Standard & Poor's FinancialServices LLC or its affiliates (collectively, S&P). S&P does not guarantee the accuracy, completeness, timeliness or availability of any information,including ratings, and is not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained fromthe use of such information. S&P GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OFMERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. S&P shall not be liable for any direct, indirect, incidental, exemplary,compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunitycosts) in connection with any use of this information, including ratings. S&P ratings are statements of opinions and are not statements of fact orrecommendations to purchase, hold or sell securities. They do not address the market value of securities or the suitability of securities for investmentpurposes, and should not be relied on as investment advice. Please read our complete disclaimer here (/mcp/disclaimer).

1&p_p_col_count=1&&changeToRecentArticle=Y&article_id=1311705)

27-Feb-2013Summary: Indianapolis Power & Light Co. (/mcp/my-articles?p_p_id=Article_WAR_MCPportlet&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_col_count=1&&changeToRecentArticle=Y&article_id=1086308)

27-Feb-2013Summary: IPALCO Enterprises Inc. (/mcp/my-articles?p_p_id=Article_WAR_MCPportlet&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_col_count=1&&changeToRecentArticle=Y&article_id=1086287)

16-Aug-2012

Summary: Indianapolis Power & Light Co. (/mcp/my-articles?p_p_id=Article_WAR_MCPportlet&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_col_count=1&&changeToRecentArticle=Y&article_id=1001901)

View All Articles (/mcp/my-articles)


http://www.linkedin.com/company/3062?trk=null

https://www.mycreditprofile.standardandpoors.com/mcp/disclaimer

https://www.mycreditprofile.standardandpoors.com/mcp/my-articles

https://www.mycreditprofile.standardandpoors.com/mcp/termsofuse

http://www.standardandpoors.com/privacy-notice/en/us/


http://www.youtube.com/sptvbroadcast

http://twitter.com/standardpoors


https://www.mycreditprofile.standardandpoors.com/mcp/feedback

https://www.mycreditprofile.standardandpoors.com/mcp/faq


https://www.mycreditprofile.standardandpoors.com/mcp/Disclaimer


Corporates Ratings NavigatorUS Utilities

Corporates Ratings Navigator

Sector Details: aaa AAA Stable

Sector: aa+ AA+ Stable

Region: aa AA Stable

Country: aa- AA- Stable

Country IDR: AAA Stable a+ A+ Stable

Country IDR Action: a A Stable

Country Action Date: a- A- Stable

Country Ceiling: AAA bbb+ BBB+ Stable

bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable

Ratings History bb BB Stable

Date bb- BB- Stable

BB+ Stable b+ B+ Stable

BB+ Stable b B Stable

BB+ Stable b- B- Stable

BB+ Stable ccc CCC Stable

BB+ Stable cc CC Stable

BB+ Stable c C Stable

BB+ Stable d or rd D or RD Stable

Bar Chart Legend: Direct Peer Group Drivers & Sensitivities

Vertical Bars = Range of Rating Factor

Bar Colors =Relative Importance

n Higher Importance

n Average Importance

n Lower Importance

Bar Arrows = Rating Factor Outlook

Positive Negative

Evolving Stable

Analysts

1st

2nd

Relevant Criteria & References

In the next five years, IPL's capex will decline substantially, as it completed retrofitting its economical coal-fired electricity generation units with new emission control equipment and completed building the Eagle Valley plant at the end of 2016.

Declining Capex

Rate Case Outcome

Constructive

In March 2016, IPL received regulatory approval for its first electric rate case since the late 1990s, allowing for an annual revenue requirement increase of $30.8 million with a return on equity of 9.85%, which Fitch views favorably.

Rating LinkageFitch Ratings views IPALCO Enterprises, Inc.’s consolidated credit metrics as a primary driver for the Issuer

Default Ratings of both IPALCO and Indianapolis Power & Light Company (IPL) as IPL is the sole source of dividend for IPALCO and there are no explicit ring-fencing measures.

Positive Rating

Sensitivities

A positive rating action is unlikely in the foreseeable future given the anticipated rate case related to the Eagle Valley plant.

IPL’s generation fuel mix has substantially improved in the last 10 years through new build and retirements.

By 2017, coal will account for 44% of IPL’s generation capacity, compared with 79% in 2007.

Cleaner Generation

Fleet

27-Sep-2016Review - No Action

22-Dec-2016AffirmedStableBBB-

Negative

Issuer Default

Rating

Factor

Levels

Sector Risk Profile

Operating Environment

US Utilities

Affirmed

16-Feb-17

12-Apr-16

B+

Financial Flexibility

Financial StructureProfitabilityCommodity

ExposureAsset Base and

OperationsMarket and FranchiseRegulation

Affirmed

Company Name Action DateActionIDR

14-Dec-2016Affirmed

Developed Markets - Americas

Publish Date:

Affirmed

15-Dec-14 Affirmed

18-Apr-12

17-Apr-13 Affirmed

Affirmed

Downgrade

Action

24-Apr-14 Affirmed

14-Dec-16

15-Dec-15

7-Apr-14

Julie Jiang

[email protected]+1 212 908 0351Shalini Mahajan

United States of America

[email protected]+1 (212) 908-0708

CMS Energy Corporation

IDR

FirstEnergy Corp.

DPL Inc.

Management and Corporate Governance

Business Profile Financial Profile

Stable

Negative Rating

Sensitivities

In the event of adverse regulatory developments, such as a negative rate case outcome reducing the likelihood of the timely recovery of fuel, purchased power or environmental costs, a negative rating action could be taken.


BBB

Introducing Ratings Navigators for Corporates Criteria for Rating Non-Financial Corporates US Utilities: Ratings Navigator Companion




https://www.fitchratings.com/site/re/769428




Operating Environment Management and Corporate Governance

aa+ aa a- bb

aa aa bbb+ bbb

bbb a

b- bbbbbb

ccc bb+

Regulation Market and Franchise

a a a bbb

a- bbb a- bbb

bbb+ bbb bbb+ a

bbb bbb bbb bbb

bbbbbb bbbbbb

Asset Base and Operations Commodity Exposure

bbb+ bb a a

bbb bbb a- bbb

bbbbbb bbb+ a

bb+ bbb bbb

bb bbb-

Profitability Financial Structure

bbb+ bb bbb bbb

bbb bbb bbb- bb

bbb- bb+

bb+ bb

bb bb-


bbb bbb

bbbbbb

bb+ bb

bb

bb- Navigator Version: RN 1.39.44.0

Free Cash Flow

Capital and Technological Intensity of Capex

Exposure to Environmental Regulations

Structurally negative FCF across the investment cycle.

Moderate reinvestments requirements in established technologies.

Financial Transparency

Group Structure

Trend in Authorized ROEs Average authorized ROE.

Degree of Transparency and Predictability

Timeliness of Cost Recovery

Diversity of Assets

Mechanisms Supportive of Creditworthiness

Mechanisms Available to Stabilize Cash Flows

Limited or manageable exposure to environmental regulations.

Operations Reliability and Cost Competitiveness

Small size and limited diversification.

Effective regulatory ring-fencing or minimum creditworthiness requirements.

Stability and predictability of profits in line with utility peers.

How to Read This Page: The left column shows the three-notch band assessment for the overall Factor, illustrated by a bar. The right column breaks down the Factor into Sub-Factors, with a description appropriate for each Sub-Factor and its corresponding category.

FFO Fixed Charge Cover

Liquidity

Financial Discipline

Volatility of Profitability

Revenues partially insulated from variability in consumption.

Hedging Strategy

Underlying Supply MixReliability and cost of operations at par with industry averages.

Market Structure

Governance Structure

Management Strategy

Financial Access

Economic Environment

Systemic Governance


Strategy generally coherent but some evidence of weak implementation.

Systemic governance (e.g. rule of law, corruption; government effectiveness) of the issuer’s country of incorporation consistent with 'aa'.

Very strong combination of issuer specific funding characteristics and of the strength of the relevant local financial market.

Very strong combination of countries where economic value is created and where assets are located.

Highly captive supply and customer base.

Low variable costs and moderate flexibility of supply.

Complete pass-through of commodity costs.

4.75x

5.0x

Total Adjusted Debt/Operating EBITDAR

Lease Adjusted FFO Gross Leverage

3.5x

One-year liquidity ratio above 1.25x. Well-spread maturity schedule of debt but funding may be less diversified.

Less conservative policy, but generally applied consistently.

Ability to Pass Through Changes in Fuel

Supply Demand Dynamics

Geographic Location

Customer Mix

Good quality reporting without significant failing. Consistent with the average of listed companies in major exchanges.

Group structure shows some complexity but mitigated by transparent reporting.

Good CG track record but effectiveness/independence of board less obvious. No evidence of abuse of power even with ownership concentration.

Moderately favorable outlook for prices/rates.

Beneficial location or reasonable locational diversity.

Favorable customer mix.

Customer and usage growth in line with industry averages.

Established market structure but some level of uncertainty in price-setting mechanisms.

Moderate lag to recover capital and operating costs.

Track record of transparent and predictable regulation.

Consumption Growth Trend



The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.



Corporates Ratings Navigator

Sector Details: aaa AAA Stable

Sector: aa+ AA+ Stable

Region: aa AA Stable

Country: aa- AA- Stable

Country IDR: AAA Stable a+ A+ Stable

Country IDR Action: a A Stable

Country Action Date: a- A- Stable

Country Ceiling: AAA bbb+ BBB+ Stable

bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable

Ratings History bb BB Stable

Date bb- BB- Stable

BBB- Stable b+ B+ Stable

BBB- Stable b B Stable

BBB- Stable b- B- Stable

BBB- Stable ccc CCC Stable

BBB- Stable cc CC Stable

BBB- Stable c C Stable

BBB- Stable d or rd D or RD Stable

Bar Chart Legend: Direct Peer Group Drivers & Sensitivities

Vertical Bars = Range of Rating Factor

Bar Colors =Relative Importance

n Higher Importance

n Average Importance

n Lower Importance

Bar Arrows = Rating Factor Outlook

Positive Negative

Evolving Stable

Analysts

1st

2nd

Relevant Criteria & References

Indianapolis Power & Light Co.

BBB

Management and Corporate Governance

Business Profile Financial Profile

Stable

Negative Rating

Sensitivities

In the event of adverse regulatory developments, such as a negative rate case outcome reducing the likelihood of timely recovery of fuel, purchased power or environmental costs could result in a negative rating action.

Julie Jiang

[email protected]+1 212 908 0351Shalini Mahajan

United States of America

[email protected]+1 (212) 908-0708

Appalachian Power Co.

IDR

Indiana Michigan Power Co.

Developed Markets - Americas

Publish Date:

Affirmed

15-Dec-14 Affirmed

18-Apr-12

17-Apr-13 Affirmed

Affirmed

Affirmed

Action

24-Apr-14 Affirmed

14-Dec-16

15-Dec-15

7-Apr-14

Issuer Default

Rating

Factor

Levels

Sector Risk Profile

Operating Environment

US Utilities

Affirmed

16-Feb-17

12-Apr-16

BBB-


Financial StructureProfitabilityCommodity

ExposureAsset Base and

OperationsMarket and FranchiseRegulation

Affirmed

Company Name Action DateActionIDR


IPL's capex will decline substantially in the next five years, as it completed retrofitting its economical coal-fired electricity generation units with new emission control equipment and building the Eagle Valley plant in 2016.

Decling Capex

Rate Case Outcome

Constructive

In March 2016 IPL received the regulatory approval for its first electric rate case since late 90s, allowing for an annual revenue requirement increase of $30.8 million with a return on equity of 9.85%, which Fitch Ratings views favorably.

Rating LinkageIndianapolis Power & Light Company's (IPL) rating is upward constrained by IPALCO. IPL is the sole source of dividend for IPALCO and there are no explicit ring-fencing measures between the two entities.

Positive Rating

Sensitivities

A positive rating action is unlikely over the foreseeable future given the anticipated rate case related to Eagle Valley plant.

IPL's generation fuel mix has substantially improved in the last 10 years through new build and retirements. IPL's generation capacity will include approximately 44% of coal in 2017, compared with 79% coal in 2007.

Cleaner Generation

Fleet


Stable

Introducing Ratings Navigators for Corporates Criteria for Rating Non-Financial Corporates US Utilities: Ratings Navigator Companion








Operating Environment Management and Corporate Governance

aa+ aa a- bbb

aa aa bbb+ bbb

bbb a

b- bbbbbb

ccc bb+

Regulation Market and Franchise

a a a bbb

a- bbb a- bbb

bbb+ bbb bbb+ a

bbb bbb bbb bbb

bbbbbb bbbbbb

Asset Base and Operations Commodity Exposure

bbb+ bb a a

bbb bbb a- bbb

bbbbbb bbb+ a

bb+ bbb bbb

bb bbb-

Profitability Financial Structure

bbb+ bb a a

bbb bbb a- bbb

bbbbbb+

bb+ bbb

bb bbb-


a bbb

a- bbb

bbb+ a

bbb

bbb- Navigator Version: RN 1.39.44.0

Ability to Pass Through Changes in Fuel

Supply Demand Dynamics

Geographic Location

Customer Mix

Good quality reporting without significant failing. Consistent with the average of listed companies in major exchanges.

Group structure shows some complexity but mitigated by transparent reporting.

Good CG track record but effectiveness/independence of board less obvious. No evidence of abuse of power even with ownership concentration.

Moderately favorable outlook for prices/rates.

Beneficial location or reasonable locational diversity.

Favorable customer mix.

Customer and usage growth in line with industry averages.

Established market structure but some level of uncertainty in price-setting mechanisms.

Moderate lag to recover capital and operating costs.

Track record of transparent and predictable regulation.

Consumption Growth Trend

Highly captive supply and customer base.

Low variable costs and moderate flexibility of supply.

Complete pass-through of commodity costs.

3.75x

3.5x

Total Adjusted Debt/Operating EBITDAR

Lease Adjusted FFO Gross Leverage

5.0x

One-year liquidity ratio above 1.25x. Well-spread maturity schedule of debt but funding may be less diversified.

Less conservative policy, but generally applied consistently.

Revenues partially insulated from variability in consumption.

Hedging Strategy

Underlying Supply MixReliability and cost of operations at par with industry averages.

Market Structure

Governance Structure

Management Strategy

Financial Access

Economic Environment

Systemic Governance

Indianapolis Power & Light Co.

Strategy may include opportunistic elements but soundly implemented.

Very strong combination of issuer specific funding characteristics and of the strength of the relevant local financial market.

Very strong combination of countries where economic value is created and where assets are located.

Stability and predictability of profits in line with utility peers.

How to Read This Page: The left column shows the three-notch band assessment for the overall Factor, illustrated by a bar. The right column breaks down the Factor into Sub-Factors, with a description appropriate for each Sub-Factor and its corresponding category.

FFO Fixed Charge Cover

Liquidity

Financial Discipline

Volatility of Profitability

Free Cash Flow

Capital and Technological Intensity of Capex

Exposure to Environmental Regulations

Structurally negative FCF across the investment cycle.

Moderate reinvestments requirements in established technologies.

Financial Transparency

Group Structure

Trend in Authorized ROEs Average authorized ROE.

Degree of Transparency and Predictability

Timeliness of Cost Recovery

Diversity of Assets

Mechanisms Supportive of Creditworthiness

Mechanisms Available to Stabilize Cash Flows

Limited or manageable exposure to environmental regulations.

Operations Reliability and Cost Competitiveness

Small size and limited diversification.

Effective regulatory ring-fencing or minimum creditworthiness requirements.



The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.


Corporates

www.fitchratings.com August 4, 2017

Utilities, Power & Gas / U.S.A.

Indianapolis Power & Light Co. Subsidiary of IPALCO Enterprises, Inc. Full Rating Report

Key Rating Drivers

Ratings Linkage: Indianapolis Power & Light Co.’s (IPL) standalone credit metrics are well

positioned for its rating given its low-risk business profile and moderate capital structure.

However, its rating is constrained by IPALCO Enterprises, Inc. and remains one notch above

IPALCO’s. IPL is the sole source of dividend for IPALCO. IPALCO’s parent-level debt

represents approximately 32% of total debt as of Dec. 31, 2016. Fitch Ratings views IPALCO’s

consolidated leverage as a primary rating driver for both companies, along with IPALCO’s

reliance on IPL to support debt service and the subordination of IPALCO’s debt to that of IPL’s.

CCGT Delay Manageable: Fitch believes the delays of the Eagle Valley combined cycle gas

turbine (CCGT) plant construction will not meaningfully affect IPL and IPALCO’s credit quality.

Due to delays of the engineering procurement and construction (EPC) contractor’s progress on

the construction, the in-service date was delayed by one year to the first half of 2018, The EPC

contractor has subcontracted some work to accelerate the construction. Fitch believes that the

delay of the plant is currently manageable as the shifting of cash flow will be approximately

$29 million on an annualized basis (or 7.6% of total cash flow).

Declining Capex: By mid-2018, IPL will complete a large capex program to retrofit most of its

economical coal-fired electricity generation units with the new emission control equipment and

to build the Eagle Valley CCGT as a replacement for its retired generating capacity. In the next

three years, capex is expected to total $685 million or $230 million per year, compared with

over $600 million annually from 2015 to 2016.

Environmental Policy Challenges: Management expects about 44% of IPL’s long-term power

generation capacity to remain coal-based. Even with the installation of new emission controls,

the long-term public policy challenges to coal-fired generation remain a threat to the long-term

viability of these assets. In assigning the Issuer Default Rating (IDR), Fitch relies on the

environmental compliance cost rider and Indiana Senate Bills 29 and 251 for timely recovery of

these investments.

Rating Sensitivities

Positive Rating Action: IPL’s rating sensitivities are driven by IPALCO’s consolidated credit

profile. A positive rating action is unlikely over the foreseeable future given the delay of the

CCGT plant and the upcoming rate case related to the plant.

Negative Rating Action: Fitch would consider a negative rating action on IPALCO in the event

of certain adverse regulatory developments, such as a materially negative rate case outcome

or lag primarily associated with the Eagle Valley CCGT, causing IPALCO’s adjusted

debt-to-operating EBITDAR to sustain above 6x with a low chance of recovery.

Ratings

Long-Term IDR BBB–

Senior Secured BBB+

Preferred Stock BB+

IDR – Issuer Default Rating.

Rating Outlook Stable

Related Research Fitch Affirms AES and U.S. Subs; Outlook for DPL and DP&L Remains Negative (December 2016)

Analysts Julie Jiang +1 212 908-0708 [email protected]

Shalini Mahajan +1 212 908-0351 [email protected]

Financial Data Indianapolis Power & Light Co.

($ Mil.) LTM 2017 2016

Adjusted Revenue 1,356 1,347 Operating EBITDAR 477 476 Cash Flow from Operations 346 328 Total Adjusted Debt 1,813 1,780 Total Capitalization 3,164 3,139 Capex/ Depreciation (%) 197.4 277.6 FFO Fixed-Charge Coverage (x) 6.8 7.0 FFO-Adjusted Leverage (x) 4.7 4.4 Total Adjusted Debt/EBITDAR (x) 3.8 3.7


https://www.fitchratings.com/site/pr/1016505



Corporates

Indianapolis Power & Light Co. 2

August 4, 2017

Financial Overview

Liquidity and Debt Structure

IPL has an unsecured revolving credit facility of $250 million due in October 2020. It includes

an uncommitted $150 million accordion feature to provide IPL with an option to request an

increase in the size of the facility at any time prior to Oct. 16, 2019, subject to approval by the

lenders. As of March 31, 2017, IPL had $60 million in borrowing under the facility, leaving

$190 million available. IPL doesn’t have any maturities until December 2020, when $90 million

of unsecured notes are due, and IPALCO has $400 million senior secured notes due in

May 2018 that will be refinanced.

IPL’s credit facility has a covenant that requires its debt to capital ratio to not exceed 65%. In

the event IPL cannot maintain this debt to capital ratio, its ability to make distributions to

IPALCO would be affected. IPALCO no longer has any debt with financial covenants that

require the maintenance of specific financial ratios, although IPALCO’s Articles of Incorporation

contain the same restrictions on dividend payments and intercompany loans to its parent, AES

Corporation, as were previously included as covenants in IPALCO’s 2011 senior notes. The

terms of IPALCO’s $805 million notes provide a modest degree of separation between IPALCO

and AES. IPALCO’s total debt is limited to $1 billion (versus $805 million currently outstanding).

IPALCO’s Articles of Incorporation restrict distribution, including inter-company loans, to AES if

the ratio of IPALCO’s EBITDA to interest is 2.5x or less and debt exceeds 67% of total

capitalization on an adjusted basis. If IPALCO is not in compliance with the foregoing ratios but

its senior long-term debt rating is at least investment grade, then no distribution restrictions

would arise.

Changing the articles of incorporation would require shareholder approval by AES, IPALCO

board approval and filing the revision with the secretary of state. As of March 31, 2017, both

entities were in compliance with the covenants.

Cash Flow Analysis

IPL’s negative FCF is expected to moderate noticeably in the next two years, as Eagle Valley is

near completion and will come online in 2018. In the next three years, capex is expected to

total $685 million or $230 million per year, compared with over $600 million annually from 2015

to 2016.

Related Criteria Non-Financial Corporates Notching and Recovery Ratings Criteria (June 2017)

Criteria for Rating Non-Financial Corporates (March 2017)

Parent and Subsidiary Rating Linkage (August 2016)

Rating U.S. Utilities, Power and Gas Companies (Sector Credit Factors) (March 2014)

Debt Maturities and Liquidity ($ Mil., As of March 31, 2017)

2017 85

2018 0

2019 0

2020 90

2021 95

Thereafter 1514

Cash and Cash Equivalents 22

Undrawn Committed Facilities 190

Source: Company data, Fitch.

0.0

1.0

2.0

3.0

4.0

5.0

0

500

1,000

1,500

2,000

2013 2014 2015 2016 LTM3/31/17

(x)($ Mil.)

Total Debt and LeverageTotal Adjusted Debt (LHS)Debt/EBITDAR (RHS)












Corporates


August 4, 2017

Upstream dividends will continue to be aggressive, with a payout ratio of over 90% on average.

In 2017, Fitch estimates that negative FCF will be approximately $150 million and then decline

to an average of negative $40 million thereafter, comparing with negative $400 million in 2016

and negative $500 million in 2017. Fitch assumes that a general rate case application for the

recovery of the CCGT plant will be filed by year-end 2017, with new rates expected to take

effect 2019.

Peer and Sector Analysis

0

100

200

300

400

500

600

700

800

2013 2014 2015 2016 LTM 3/31/17

($ Mil.)

Cash Flow from Operations and Cash Use

Cash Flow from Operations Capex Dividends


Peer Group Analysis

($ Mil.) Indianapolis Power

& Light Co. Indiana Michigan

Power Co. Appalachian Power Co.

As of 3/31/17 3/31/17 3/31/17 IDR BBB– BBB– BBB Outlook Rating Outlook Stable Rating Outlook Stable Rating Outlook Stable

Fundamental Ratios (x) Operating EBITDAR/

(Gross Interest Expense + Rents) 8.8 5.0 5.1 FFO Fixed-Charge Coverage 6.8 4.7 5.0 Total Adjusted Debt/Operating EBITDAR 3.8 5.1 3.6 FFO/Total Adjusted Debt (%) 21.5 18.5 27.1 FFO-Adjusted Leverage 4.7 5.4 3.7 Common Dividend Payout (%) 89.8 54.1 59.6 Internal Cash/Capex (%) 49.1 68.5 94.8 Capex/Depreciation (%) 197.4 318.3 188.0 Return on Equity (%) 11.3 10.8 9.8 Financial Information

Revenue 1,356 2,196 2,942 Revenue Growth (%) 8.8 3.0 3.4 EBITDA 477 589 1,080 Operating EBITDA Margin (%) 35.2 26.8 36.7 FCF (216) (196) (36) Total Adjusted Debt with Equity Credit 1,813 3,451 3,927 Readily Available Cash 22 1 3 Funds Flow from Operations 332 514 850 Capex (424) (621) (702)

IDR – Issuer Default Rating. Source: Company data, Fitch.

Peer Group Issuer Country

BBB

Appalachian Power Co. U.S. BBB– Indiana Michigan Power Co. U.S.

Issuer Rating History Date

LT IDR (FC)

Outlook/ Watch

Dec. 14, 2016 BBB– Stable Dec. 15, 2015 BBB– Stable Dec. 15, 2014 BBB– Stable April 24, 2014 BBB– Stable April 7, 2014 BBB– Stable April 17, 2013 BBB– Stable April 18, 2012 BBB– Stable April 20, 2011 BBB– Stable June 28, 2010 BBB– Stable April 3, 2009 BBB– Stable April 1, 2008 BBB– Positive Dec. 11, 2006 BBB– Stable Dec. 6, 2005 BBB– Stable Oct. 18, 2005 BBB Stable Jan. 18, 2005 BBB– RWP Jan. 7, 2004 BBB– Stable July 29, 2003 BBB– Stable July 16, 2003 BBB– Stable Jan. 28, 2003 BB+ Negative June 21, 2002 BB+ RWN Feb. 15, 2002 BBB– Stable Dec. 20, 2001 BBB RWN Oct. 3, 2001 BBB Stable March 28, 2001 BBB — July 7, 2000 AA RWN June 30, 1999 AA — April 29, 1991 AA– —

LT IDR – Long-term Issuer Default Rating. FC – Foreign currency. RWP – Rating Watch Positive. RWN – Rating Watch Negative. Source: Fitch.


Corporates


August 4, 2017

Key Rating Issues

Supportive Regulations

IPL benefits from the stable regulatory environment in Indiana. IPL has minimal commodity

price exposure due to a regulatory pass-through mechanism that allows the utility to recover

fuel and purchased power costs on a timely basis. Legislative measures exist for IPL to recover

environmental compliance related investments in a timely manner. Even with the installation of

new emission controls, the long-term policy challenges to coal-fired generation remains a

threat to the long-term viability of these assets. In assigning the IDR, Fitch relies on the

Environmental Compliance Cost Recovery Adjustment (ECCRA) and the Indiana Senate bills

29 and 251 to reduce regulatory lag partially. The Senate bills allow the recovery of federally

mandated environmental compliance costs and the installation of clean coal technologies

reducing airborne emissions associated with the use of coal. The Transmission, Distribution

and Storage System Improvement Charge (TDSIC) statute provides for cost recovery outside

of a rate case proceeding for new or replacement investments for gas or electric safety,

reliability and modernization. The statute requires a seven-year plan for eligible investments.

Once the plan is approved by the Indiana Utility Regulatory Commission (IURC), 80 percent of

eligible costs can be recovered using a periodic rate adjustment mechanism. IPL’s seven-year

program begins recovery in fourth-quarter 2018 with a total spend of $350 million.

IPL’s last electric rate case order was constructive. In March 2016, IPL received the regulatory

approval for its first electric rate case since late 1990s, which allows for an annual revenue

requirement increase of $30.8 million with an ROE of 9.85%. The order also, among other

things, authorized IPL to collect $117.7 million of previously deferred regulatory assets related

to IPL’s participation in Midcontinent Independent System Operator (MISO) over 10 years.

Rates became effective in April 2016.

CCGT Delay Pressures Credit Metrics

Fitch believes the construction delay at the Eagle Valley CCGT plant is not sufficient to affect

the Ratings and Outlook for IPL and IPALCO, although it will temporarily pressure the credit

metrics. In May 2014, IPL received an order from the Indiana Utility Regulatory Commission

(IURC) to construct a 671 MW combined cycle gas turbine plant in Martinsville, Indiana (Eagle

Valley CCGT) to replace its coal-fired generation at Eagle Valley. IPL retired four coal-fired

units at Eagle Valley. The project is estimated to cost approximately $613 million. Due to

delays of the EPC contractor’s progress on the construction, the original commercial operating

date of April 30, 2017 is now pushed to first half of 2018. The EPC contractor has

subcontracted some work to accelerate the construction. Fitch believes that the delay of the

plant is currently manageable as the shifting of cash flow generation will be approximately $29

million on a one-time annualized basis (or 7.6% of total cash flow). Additionally, IPL is eligible

for liquidated damages starting in May 2017, which Fitch estimates could total $40 million for

the remainder of the year.

Rating Linkages

IPL’s rating is constrained by IPALCO and is only one notch above IPALCO. IPL’s standalone

credit metrics are strong for its rating given its low-risk business profile and moderate capital

structure. However, IPL is the sole source of dividends for IPALCO. IPALCO’s parent-level

debt represents approximately 32% of total debt as of Dec. 31, 2016. Fitch views IPALCO’s

consolidated leverage as a primary rating driver for both companies, along with IPALCO’s


Corporates


August 4, 2017

reliance on IPL to support debt service and the subordination of IPALCO’s debt to that of IPL’s

debt.

IPALCO and IP&L’s ratings are not linked to AES. The terms of IPALCO’s notes provide a

modest degree of separation between IPALCO and its parent, AES. The ratio of IPALCO’s

EBITDA to interest must exceed 2.5x, and debt cannot exceed 67% of total capitalization on an

adjusted basis to make a distribution or intercompany loan to its parent, according to IPALCO’s

Articles of Incorporation. If IPALCO is not in compliance with the foregoing ratios but its senior

long-term debt rating is at least investment grade, then no distribution restrictions would arise.

Changing the Articles of Incorporation would require AES approval, IPALCO board approval

(Caisse de depot et placement du Quebec [CDPQ] maintains two seats on the board), and

filing the revision with the secretary of state. IPALCO and IPL maintain separate identities from

AES and do not mingle their cash with that of AES. These factors separate the ratings of

IPALCO and IPL from the IDR of AES.

Strong Equity Sponsor

Fitch positively views CDPQ’s ownership of IPALCO. CDPQ is a Canadian institutional investor

with a long-term buy-and-hold investment philosophy and a strong credit profile. The ownership

helped partially fund equity financing needs during the heavy capex cycle. In April 2015,

IPALCO received an equity capital contribution of $214.4 million from CDPQ to invest in the

capex program. CDPQ made an additional $148.2 million contribution in 2016, $134.3 million of

which increased CDPQ’s direct and indirect ownership to 30% from 15%.

Organizational and Debt Structure — Indianapolis Power & Light Co.($ Mil., As of March 31, 2017)

AES CorporationIDR: BB–/Stable

Recourse Debt 4,500Non-Recourse 14,697

IDR – Issuer Default Rating. Note: Recourse debt is direct borrowings by the parent company and is used to fund development, construction or acquisitions, including serving as funding for equity investments or loans to the affiliates. Nonrecourse debt is designed to limit cross-default risk to the parent or other subsidiaries and affiliates. Most of the debt of AES Corporation's subsidiaries is nonrecourse and is secured substantially by all of the assets of those subsidiaries. Source: Company Reports, Fitch Analysis.

Domestic and Foreign Subsidiaries(Nonrecourse)

DPL Inc.IDR: B+/Negative

Total Adjusted Debt 1,87

IPALCO Enterprises, Inc.IDR: BB+/Stable


Dayton Power & Light Co. IDR: BB+/Negative

Total Adjusted Debt 762

Indianapolis Power & Light Co.IDR: BBB–/Stable



Corporates


August 4, 2017

Key Metrics

Company Profile

IPL is an integrated utility company that provides retail electric service to more than 490,000

residential, commercial and industrial customers in Indianapolis and other central Indiana

communities. As of Dec. 31, 2016, IPL’s net electric generation capacity for winter is 2,993 MW

and net summer capacity is 2,993 MW. IPL’s generation fuel source diversity has substantially

improved in the last 10 years through new a build and retirements. In 2007, 79% of its

generation capacity was coal, 14% natural gas and 7% oil. In 2016, IPL’s generation is

composed of 57% coal, 41% gas and 2% oil. With the Eagle Valley CCGT plant coming online

in 2018, the composition will be 44% coal, 45% natural gas, 10% wind and solar and 1% oil.

IPALCO is an intermediary holding company that relies solely on upstream dividend distribution

from IPL to service its debt and pay for business related expenses and upstream dividend to its

ultimate investors AES (70%) and CDPQ (30%).

Definitions

• Total Adjusted Debt/Op. EBITDAR: Total balance sheet adjusted for equity credit and off-balance sheet debt divided by operating EBITDAR.

• FFO Fixed-Charge Coverage: FFO plus gross interest minus interest received plus preferred dividends plus rental payments divided by gross interest plus preferred dividends plus rental payments.

• FFO-Adjusted Leverage: Gross debt plus lease adjustment minus equity credit for hybrid instruments plus preferred stock divided by FFO plus gross interest paid plus preferred dividends plus rental expense.

50

100

150

200

250

300

350

2013 2014 2015 2016 LTM3/31/17

(%)

Indianapolis Power & Light Co. IUC Median

Capex/Depreciation

IUC – Integrated utility companies.Source: Company data, Fitch.

2.0

3.0

4.0

5.0

2013 2014 2015 2016 LTM3/31/17

(x)



Total Adjusted Debt/Op. EBITDAR

2.0

4.0

6.0

8.0

2013 2014 2015 2016 LTM3/31/17

(x)


FFO Fixed-Charge Coverage


1.0

2.0

3.0

4.0

5.0

2013 2014 2015 2016 LTM3/31/17

(x)Indianapolis Power & Light Co. IUC Median

FFO-Adjusted Leverage



Corporates


August 4, 2017

Business Trends

(2)0246810121416

0100200300400500600700800900

1,000

2013 2014 2015 2016 LTM3/31/17

(%)($ Mil.)

Net Revenues Net Revenue Growth


Revenue Dynamics

29

30

31

32

33

34

35

36

0

100

200

300

400

500

600

2013 2014 2015 2016 LTM3/31/17

(%)($ Mil.)

EBITDA EBITDA Margin


EBITDA Dynamics


Corporates


August 4, 2017

Financial Summary — Indianapolis Power & Light Co. ($ Mil., As of March 31, 2017, IDR — BBB–/Rating Outlook Stable) 2013 2014 2015 2016 LTM 3/31/17

Fundamental Ratios Operating EBITDAR/(Gross Interest Expense + Rents) (x) 6.6 6.6 7.0 8.8 8.8 FFO Fixed-Charge Coverage (x) 4.7 5.6 6.1 7.0 6.8 Total Adjusted Debt/Operating EBITDAR (x) 2.8 2.9 3.9 3.7 3.8 FFO/Total Adjusted Debt (%) 26.5 30.9 23.4 22.5 21.5 FFO-Adjusted Leverage (x) 3.8 3.2 4.3 4.4 4.7 Common Dividend Payout (%) 93.8 116.5 103.0 87.2 89.8 Internal Cash/Capex (%) 61.6 45.3 24.2 32.3 45.7 Capex/Depreciation (%) 133.7 204.3 336.5 277.6 197.4 Return on Equity (%) 11.0 11.6 9.3 12.0 11.3 Profitability Revenues 1,256 1,322 1,250 1,347 1,356 Revenue Growth (%) 2.1 5.3 (5.4) 7.8 8.8 Net Revenues 786 794 789 901 908 Operating and Maintenance Expense (349) (331) (356) (376) (439) Operating EBITDA 391 420 401 476 477 Operating EBITDAR 391 420 401 476 477 Depreciation and Amortization Expense (181) (187) (200) (214) (215) Operating EBIT 210 233 201 262 262 Gross Interest Expense (59) (64) (57) (54) (54) Net Income for Common 96 109 101 156 154 Operating Maintenance Expense % of Net Revenues (44.4) (41.7) (45.1) (41.7) (48.4) Operating EBIT % of Net Revenues 26.7 29.3 25.5 29.1 28.9 Cash Flow Cash Flow from Operations 239 300 267 328 346 Change in Working Capital 8 (13) (40) (16) 14 FFO 231 313 307 344 332 Dividends (90) (127) (104) (136) (139) Capex (242) (382) (673) (594) (424) FCF (93) (209) (510) (402) (216) Net Other Investment Cash Flow (15) (16) (39) (35) (35) Net Change in Debt 59 128 334 231 176 Net Equity Proceeds 49 106 214 213 79 Capital Structure Short-Term Debt 50 50 167 50 85 Total Long-Term Debt 1,024 1,152 1,369 1,700 1,675 Total Debt with Equity Credit 1,104 1,232 1,570 1,780 1,813 Total Adjusted Debt with Equity Credit 1,104 1,232 1,570 1,780 1,813 Total Common Shareholders’ Equity 899 985 1,185 1,419 1,411 Total Capital 1,943 2,157 2,695 3,139 3,164 Total Debt/Total Capital (%) 57 57 58 57 57 Common Equity/Total Capital (%) 46 46 44 45 45

IDR – Issuer Default Rating. Source: Company data, Fitch.


Corporates


August 4, 2017

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.

The ratings above were solicited and assigned or maintained at the request of the rated

entity/issuer or a related third party. Any exceptions follow below.


https://www.fitchratings.com/creditdesk/public/ratings_defintions/index.cfm?rd_file=intro%22%20\l%20%22lmt_usage

http://www.fitchratings.com/

https://www.fitchratings.com/creditdesk/public/ratings_defintions/index.cfm?rd_file=intro%22%20\l%20%22lmt_usage

http://www.fitchratings.com/

verified direct testimony of craig l. jackson on behalf of indianapolis power & light company

Documents