UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~March 31,~~September 30, 2021

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

IPALCO ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Indiana

(State or other jurisdiction of incorporation)

1-8644

(Commission File Number)

35-1575582

(IRS Employer Identification No.)

One Monument Circle

Indianapolis, Indiana 46204

(Address of principal executive offices, including zip code)

317-261-8261

(Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
N/A	N/A	N/A

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

(The registrant was a voluntary filer during 2021 until its March 22, 2021 Registration Statement on Form S-4 filed with the Securities and Exchange Commission was declared effective on April 7, 2021. The registrant has filed all applicable reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.)

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

☐

☑

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

At ~~May 5,~~November 3, 2021, 108,907,318 shares of IPALCO Enterprises, Inc. common stock were outstanding, of which 89,685,177 shares were owned by AES U.S. Investments, Inc. and 19,222,141 shares were owned by CDP Infrastructures Fund G.P., a wholly-owned subsidiary of La Caisse de dépôt et placement du Québec.

IPALCO ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q

For Quarter Ended ~~March 31,~~September 30, 2021

TABLE OF CONTENTS


Item No.	Item No.		Page No.	Item No.		Page No.
		DEFINED TERMS	4		DEFINED TERMS	4

		FORWARD-LOOKING STATEMENTS	5		FORWARD-LOOKING STATEMENTS	5

		PART I - FINANCIAL INFORMATION			PART I - FINANCIAL INFORMATION
1.	1.	Financial Statements		1.	Financial Statements
		Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended			Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
		March 31, 2021 and 2020	7		September 30, 2021 and 2020	7
		Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three			Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss) for the Three and Nine
		Months Ended March 31, 2021 and 2020	8		Months Ended September 30, 2021 and 2020	8
		Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	9		Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	9
		Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended			Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
		March 31, 2021 and 2020	10		September 30, 2021 and 2020	10
		Unaudited Condensed Consolidated Statements of Common Shareholders' Equity and			Unaudited Condensed Consolidated Statements of Common Shareholders' Equity and
		Noncontrolling Interest for the Three Months Ended March 31, 2021 and 2020	11		Noncontrolling Interest for the Three and Nine Months Ended September 30, 2021 and 2020	11
		Notes to Unaudited Condensed Consolidated Financial Statements	12		Notes to Unaudited Condensed Consolidated Financial Statements	12
		Note 1 - Overview and Summary of Significant Accounting Policies	12		Note 1 - Overview and Summary of Significant Accounting Policies	12
		Note 2 - Regulatory Matters	14		Note 2 - Regulatory Matters	14
		Note 3 - Fair Value	15		Note 3 - Fair Value	15
		Note 4 - Derivative Instruments and Hedging Activities	17		Note 4 - Derivative Instruments and Hedging Activities	18
		Note 5 - Debt	18		Note 5 - Debt	20
		Note 6 - Income Taxes	20		Note 6 - Income Taxes	21
		Note 7 - Benefit Plans	20		Note 7 - Benefit Plans	21
		Note 8 - Commitments and Contingencies	20		Note 8 - Commitments and Contingencies	22
		Note 9 - Business Segment Information	21		Note 9 - Business Segment Information	23
		Note 10 - Revenue	22		Note 10 - Revenue	24
		Note 11 - Leases	23		Note 11 - Leases	26
		Note 12 - Risks and Uncertainties	23		Note 12 - Risks and Uncertainties	26
2.	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
3.	3.	Quantitative and Qualitative Disclosure About Market Risk	35	3.	Quantitative and Qualitative Disclosure About Market Risk	42
4.	4.	Controls and Procedures	35	4.	Controls and Procedures	42

		PART II - OTHER INFORMATION			PART II - OTHER INFORMATION
1.	1.	Legal Proceedings	36	1.	Legal Proceedings	42
1A.	1A.	Risk Factors	36	1A.	Risk Factors	43
2.	2.	Unregistered Sales of Equity Securities and Use of Proceeds	36	2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
3.	3.	Defaults Upon Senior Securities	36	3.	Defaults Upon Senior Securities	43
4.	4.	Mine Safety Disclosures	36	4.	Mine Safety Disclosures	43
5.	5.	Other Information	36	5.	Other Information	43
6.	6.	Exhibits	37	6.	Exhibits	43

		SIGNATURES	38		SIGNATURES	44


DEFINED TERMS
The following is a list of frequently used abbreviations or acronyms that are found in this Form 10-Q:

2020 Form 10-K			IPALCO’s Annual Report on Form 10-K for the year ended December 31, 2020, as amended
2024 IPALCO Notes			$405 million of 3.70% Senior Secured Notes due September 1, 2024
2030 IPALCO Notes			$475 million of 4.25% Senior Secured Notes due May 1, 2030
ACE			Affordable Clean Energy
AES			The AES Corporation
AES Indiana			Indianapolis Power & Light Company, which does business as AES Indiana
AES U.S. Investments			AES U.S. Investments, Inc.
~~AOCI~~			~~Accumulated Other Comprehensive Income~~
AOCL			Accumulated Other Comprehensive Loss
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
CAA			U.S. Clean Air Act
CCGT			Combined Cycle Gas Turbine
CCR			Coal Combustion Residuals
CDPQ			CDP Infrastructures Fund G.P., a wholly-owned subsidiary of La Caisse de dépôt et placement du Québec
CO2			Carbon Dioxide
COVID-19			The disease caused by the novel coronavirus that ~~caused~~resulted in a global pandemic beginning in 2020.
CPCN			Certificate of Public Convenience and Necessity
CPP			Clean Power Plan
Credit Agreement			$250 million AES Indiana Revolving Credit Facilities Amended and Restated Credit Agreement, dated as of June 19, 2019
CSAPR			Cross-State Air Pollution Rule
CWA			U.S. Clean Water Act
DOJ			U.S. Department of Justice
DSM			Demand Side Management
EGUs			Electrical Generating Units
ELG			Effluent Limitation Guidelines
EPA			U.S. Environmental Protection Agency
FAC			Fuel Adjustment Clause
FERC			Federal Energy Regulatory Commission
Financial Statements			Unaudited Condensed Consolidated Financial Statements of IPALCO in “Item 1. Financial Statements” included in Part I – Financial Information of this Form 10-Q
FTRs			Financial Transmission Rights
GAAP			Generally Accepted Accounting Principles in the United States
GHG			Greenhouse Gas
IDEM			Indiana Department of Environmental Management
IPALCO			IPALCO Enterprises, Inc.
IPL			Indianapolis Power & Light Company, which does business as AES Indiana
IRP			Integrated Resource Plan
IURC			Indiana Utility Regulatory Commission
kWh			Kilowatt hours
LIBOR			London Interbank Offered Rate
MISO			Midcontinent Independent System Operator, Inc.
MW			Megawatts
MWh			Megawatt hours
NAAQS			National Ambient Air Quality Standards
NOV			Notice of Violation
NOx			Nitrogen Oxide
NSR			New Source Review


Pension Plans			Employees’ Retirement Plan of ~~Indianapolis Power & Light Company~~AES Indiana and Supplemental Retirement Plan of ~~Indianapolis Power & Light Company~~ AES Indiana
PSD			Prevention of Significant Deterioration
SEC			United States Securities and Exchange Commission

Service Company		AES US Services, LLC
SIP	State Implementation Plan
SO2	Sulfur Dioxide
Term Loan	$65 million IPALCO Term Loan Facility Credit Agreement, dated as of October 31, 2018
TDSIC	Transmission, Distribution, and Storage System Improvement Charge
U.S.	United States of America
USD	United States Dollars
VEBA	Voluntary Employees' Beneficiary Association

Throughout this document, the terms “the Company,” “we,” “us,” and “our” refer to IPALCO and its consolidated subsidiaries.

We encourage investors, the media, our customers and others interested in the Company to review the information we post at https://www.iplpower.com. None of the information on our website is incorporated into, or deemed to be a part of, this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any reference to our website is intended to be an inactive textual reference only.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 including, in particular, the statements about our plans, strategies and prospects under the heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I – Financial Information of this Form 10-Q. Forward-looking statements express an expectation or belief and contain a projection, plan or assumption with regard to, among other things, our future revenues, income, expenses or capital structure. Such statements of future events or performance are not guarantees of future performance and involve estimates, assumptions and uncertainties. The words “could,” “may,” “predict,” “anticipate,” “would,” “believe,” “estimate,” “expect,” “forecast,” “project,” “objective,” “intend,” “continue,” “should,” “plan,” and similar expressions, or the negatives thereof, are intended to identify forward-looking statements unless the context requires otherwise.

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

•impacts of weather on retail sales;

•growth in our service territory and changes in retail demand and demographic patterns;

•weather-related damage to our electrical system;

•commodity and other input costs;

•performance of our suppliers;

•transmission, distribution and ~~distribution~~generation system reliability and capacity, including natural gas pipeline system and supply constraints;

•regulatory actions and outcomes, including, but not limited to, the review and approval of our rates and charges by the IURC;

•federal and state legislation and regulations;

•changes in our credit ratings or the credit ratings of AES;

•fluctuations in the value of pension plan assets, fluctuations in pension plan expenses and our ability to fund defined benefit pension plans;

•changes in financial or regulatory accounting policies;

•environmental and climate change matters, including costs of compliance with, and liabilities related to, current and future environmental and climate change laws and requirements;

•interest rates and the use of interest rate hedges, inflation rates and other costs of capital;

•the availability of capital;

•the ability of subsidiaries to pay dividends or distributions to IPALCO;

•level of creditworthiness of counterparties to contracts and transactions;

•labor strikes or other workforce factors, including the ability to attract and retain key personnel;

•facility or equipment maintenance, repairs and capital expenditures;

•significant delays or unanticipated cost increases associated with construction or other projects;

•the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material;

•local economic conditions;

•cyber-attacks and information security breaches;

•catastrophic events such as fires, explosions, terrorist acts, acts of war, pandemic events, including the outbreak of the novel coronavirus COVID-19, or natural disasters such as floods, earthquakes, tornadoes, severe winds, ice or snow storms, droughts, or other similar occurrences;

•costs and effects of legal and administrative proceedings, audits, settlements, investigations and claims and the ultimate disposition of litigation;

•industry restructuring, deregulation and competition;

•issues related to our participation in MISO, including the cost associated with membership, our continued ability to recover costs incurred, and the risk of default of other MISO participants;

•changes in tax laws and the effects of our tax strategies;

•the use of derivative contracts;

•product development, technology changes, and changes in prices of products and technologies; and

•the risks and other factors discussed in this report and other IPALCO filings with the SEC.

All of the above factors are difficult to predict, contain uncertainties that may materially affect actual results, and many are beyond our control. See “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in IPALCO’s 2020 Form 10-K for a more detailed discussion of the foregoing and certain other factors that could cause actual results to differ materially from those reflected in any forward-looking statements. These risks may also be specifically described in our Quarterly Reports on Form 10-Q in "Part II - Item 1A. Risk ~~Factors~~Factors"", Current Reports on Form 8-K and other documents that we may file from time to time with the SEC. Except as required by the federal securities laws, we undertake no obligation to publicly update or review any forward-looking information, whether as a result of new information, future events or otherwise. If one or more forward-looking statements are updated, no inference should be drawn that additional updates will be made with respect to those or other forward-looking statements. Our SEC filings are available to the public from the SEC’s website at www.sec.gov.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


IPALCO ENTERPRISES, INC. and SUBSIDIARIES	IPALCO ENTERPRISES, INC. and SUBSIDIARIES	IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations	Unaudited Condensed Consolidated Statements of Operations	Unaudited Condensed Consolidated Statements of Operations
(In Thousands)	(In Thousands)	(In Thousands)
		Three Months Ended					Three Months Ended						Nine Months Ended
		March 31,					September 30,						September 30,
			2021		2020				2021		2020			2021		2020

REVENUES	REVENUES		$	362,201	$	357,382		REVENUES	$	380,837	$	356,088		$	1,073,625	$	1,024,973

OPERATING COSTS AND EXPENSES:	OPERATING COSTS AND EXPENSES:							OPERATING COSTS AND EXPENSES:
Fuel	Fuel		84,731		68,788			Fuel	68,857		73,901			206,428		186,040
Power purchased	Power purchased		24,583		35,467			Power purchased	40,443		26,987			106,774		105,536
Operation and maintenance	Operation and maintenance		103,949		105,590			Operation and maintenance	117,045		100,455			337,375		300,703
Depreciation and amortization	Depreciation and amortization		63,089		60,708			Depreciation and amortization	64,797		62,359			190,880		184,166
Taxes other than income taxes	Taxes other than income taxes		12,951		12,057			Taxes other than income taxes	11,138		10,399			32,834		34,063

Total operating costs and expenses	Total operating costs and expenses		289,303		282,610			Total operating costs and expenses	302,280		274,101			874,291		810,508

OPERATING INCOME	OPERATING INCOME		72,898		74,772			OPERATING INCOME	78,557		81,987			199,334		214,465

OTHER INCOME / (EXPENSE), NET:	OTHER INCOME / (EXPENSE), NET:							OTHER INCOME / (EXPENSE), NET:
Allowance for equity funds used during construction	Allowance for equity funds used during construction		1,374		857			Allowance for equity funds used during construction	1,428		1,099			4,133		3,116
Interest expense	Interest expense		(30,067)		(30,081)			Interest expense	(31,544)		(32,741)			(93,810)		(96,757)

Other income / (expense), net			4,614		207
Total other income / (expense), net			(24,079)		(29,017)
Loss on early extinguishment of debt								Loss on early extinguishment of debt	—		—			—		(2,415)
Other income, net								Other income, net	4,572		935			13,890		2,914
Total other expense, net								Total other expense, net	(25,544)		(30,707)			(75,787)		(93,142)

EARNINGS FROM OPERATIONS BEFORE INCOME TAX	EARNINGS FROM OPERATIONS BEFORE INCOME TAX		48,819		45,755			EARNINGS FROM OPERATIONS BEFORE INCOME TAX	53,013		51,280			123,547		121,323

Less: Income tax expense	Less: Income tax expense		10,035		9,772			Less: Income tax expense	10,966		10,981			25,506		25,918
NET INCOME	NET INCOME		38,784		35,983			NET INCOME	42,047		40,299			98,041		95,405

Less: Dividends on preferred stock	Less: Dividends on preferred stock		803		803			Less: Dividends on preferred stock	803		803			2,410		2,410
NET INCOME APPLICABLE TO COMMON STOCK	NET INCOME APPLICABLE TO COMMON STOCK		$	37,981	$	35,180		NET INCOME APPLICABLE TO COMMON STOCK	$	41,244	$	39,496		$	95,631	$	92,995

See notes to unaudited condensed consolidated financial statements.	See notes to unaudited condensed consolidated financial statements.	See notes to unaudited condensed consolidated financial statements.


IPALCO ENTERPRISES, INC. and SUBSIDIARIES	IPALCO ENTERPRISES, INC. and SUBSIDIARIES	IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss)	Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss)	Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss)
(In Thousands)	(In Thousands)	(In Thousands)
		Three Months Ended					Three Months Ended						Nine Months Ended
		March 31,					September 30,						September 30,
			2021		2020				2021		2020			2021		2020

Net income applicable to common stock	Net income applicable to common stock		$	37,981	$	35,180		Net income applicable to common stock	$	41,244	$	39,496		$	95,631	$	92,995

Derivative activity:	Derivative activity:							Derivative activity:
Change in derivative fair value, net of income tax (expense)/benefit of $(9,655) and $12,522, for each respective period			30,050		(36,313)
Reclassification to earnings, net of income tax expense of $146 and $0, for each respective period			(456)		0
Change in derivative fair value, net of income tax benefit/(expense) of $(297), $(1,278), $(4,591) and $12,632, for each respective period								Change in derivative fair value, net of income tax benefit/(expense) of $(297), $(1,278), $(4,591) and $12,632, for each respective period	898		3,707			13,805		(36,632)
Reclassification to earnings, net of income tax benefit of $449, $463, $733 and $926, for each respective period								Reclassification to earnings, net of income tax benefit of $449, $463, $733 and $926, for each respective period	1,358		1,344			2,278		2,688
Net change in fair value of derivatives	Net change in fair value of derivatives		29,594		(36,313)			Net change in fair value of derivatives	2,256		5,051			16,083		(33,944)

Other comprehensive income / (loss)	Other comprehensive income / (loss)		29,594		(36,313)			Other comprehensive income / (loss)	2,256		5,051			16,083		(33,944)

Net comprehensive income / (loss)			$	67,575	$	(1,133)
Net comprehensive income								Net comprehensive income	$	43,500	$	44,547		$	111,714	$	59,051

See notes to unaudited condensed consolidated financial statements.


IPALCO ENTERPRISES, INC. and SUBSIDIARIES	IPALCO ENTERPRISES, INC. and SUBSIDIARIES					IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets	Unaudited Condensed Consolidated Balance Sheets					Unaudited Condensed Consolidated Balance Sheets
(In Thousands)	(In Thousands)					(In Thousands)
		March 31,		December 31,			September 30,		December 31,
		2021		2020			2021		2020
ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	48,592	$	20,502	Cash and cash equivalents	$	13,126	$	20,502
Restricted cash	Restricted cash	5		6,120		Restricted cash	5		6,120
Accounts receivable, net of allowance for credit losses of $1,966 and $3,155, respectively		160,735		165,193
Accounts receivable, net of allowance for credit losses of $1,100 and $3,155, respectively						Accounts receivable, net of allowance for credit losses of $1,100 and $3,155, respectively	177,636		165,193
Inventories	Inventories	80,610		95,506		Inventories	76,362		95,506
Regulatory assets, current	Regulatory assets, current	47,675		45,430		Regulatory assets, current	84,736		45,430
Taxes receivable	Taxes receivable	15,270		24,384		Taxes receivable	26,954		24,384
Prepayments and other current assets	Prepayments and other current assets	41,441		17,842		Prepayments and other current assets	48,555		17,842
Total current assets	Total current assets	394,328		374,977		Total current assets	427,374		374,977
NON-CURRENT ASSETS:	NON-CURRENT ASSETS:					NON-CURRENT ASSETS:
Property, plant and equipment	Property, plant and equipment	6,559,864		6,530,395		Property, plant and equipment	6,615,484		6,530,395
Less: Accumulated depreciation	Less: Accumulated depreciation	2,690,636		2,643,695		Less: Accumulated depreciation	2,624,804		2,643,695
		3,869,228		3,886,700			3,990,680		3,886,700
Construction work in progress	Construction work in progress	230,199		209,584		Construction work in progress	169,464		209,584
Total net property, plant and equipment	Total net property, plant and equipment	4,099,427		4,096,284		Total net property, plant and equipment	4,160,144		4,096,284
OTHER NON-CURRENT ASSETS:	OTHER NON-CURRENT ASSETS:					OTHER NON-CURRENT ASSETS:
Intangible assets - net	Intangible assets - net	56,713		59,141		Intangible assets - net	59,640		59,141
Regulatory assets, non-current	Regulatory assets, non-current	385,995		392,801		Regulatory assets, non-current	364,975		392,801
Other non-current assets	Other non-current assets	48,792		46,716		Other non-current assets	55,661		46,716
Total other non-current assets	Total other non-current assets	491,500		498,658		Total other non-current assets	480,276		498,658
TOTAL ASSETS	TOTAL ASSETS	$	4,985,255	$	4,969,919	TOTAL ASSETS	$	5,067,794	$	4,969,919
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:	CURRENT LIABILITIES:					CURRENT LIABILITIES:
Short-term debt and current portion of long-term debt (Note 5)	Short-term debt and current portion of long-term debt (Note 5)	$	184,945	$	169,907	Short-term debt and current portion of long-term debt (Note 5)	$	135,000	$	169,907
Accounts payable	Accounts payable	122,399		127,089		Accounts payable	165,871		127,089
Accrued taxes	Accrued taxes	37,831		26,620		Accrued taxes	29,652		26,620
Accrued interest	Accrued interest	42,914		31,733		Accrued interest	42,602		31,733
Customer deposits	Customer deposits	26,685		27,929		Customer deposits	28,511		27,929
Regulatory liabilities, current	Regulatory liabilities, current	10,968		30,036		Regulatory liabilities, current	7,427		30,036

Accrued and other current liabilities	Accrued and other current liabilities	14,426		19,453		Accrued and other current liabilities	35,887		19,453
Total current liabilities	Total current liabilities	440,168		432,767		Total current liabilities	444,950		432,767
NON-CURRENT LIABILITIES:	NON-CURRENT LIABILITIES:					NON-CURRENT LIABILITIES:
Long-term debt (Note 5)	Long-term debt (Note 5)	2,556,848		2,556,278		Long-term debt (Note 5)	2,651,560		2,556,278
Deferred income tax liabilities	Deferred income tax liabilities	288,825		275,714		Deferred income tax liabilities	295,942		275,714
Taxes payable	Taxes payable	7,552		7,458		Taxes payable	7,401		7,458
Regulatory liabilities, non-current	Regulatory liabilities, non-current	835,269		839,360		Regulatory liabilities, non-current	828,803		839,360
Accrued pension and other postretirement benefits	Accrued pension and other postretirement benefits	5,380		5,334		Accrued pension and other postretirement benefits	5,472		5,334
Asset retirement obligations	Asset retirement obligations	195,704		195,236		Asset retirement obligations	191,996		195,236
Derivative liabilities, non-current	Derivative liabilities, non-current	23,511		63,215		Derivative liabilities, non-current	44,816		63,215
Other non-current liabilities	Other non-current liabilities	13,683		13,785		Other non-current liabilities	389		13,785
Total non-current liabilities	Total non-current liabilities	3,926,772		3,956,380		Total non-current liabilities	4,026,379		3,956,380
Total liabilities	Total liabilities	4,366,940		4,389,147		Total liabilities	4,471,329		4,389,147
COMMITMENTS AND CONTINGENCIES (Note 8)	COMMITMENTS AND CONTINGENCIES (Note 8)					COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:	SHAREHOLDERS' EQUITY:					SHAREHOLDERS' EQUITY:
Paid in capital	Paid in capital	589,007		588,966		Paid in capital	580,855		588,966
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(13,826)		(43,420)		Accumulated other comprehensive loss	(27,337)		(43,420)
Accumulated deficit	Accumulated deficit	(16,650)		(24,558)		Accumulated deficit	(16,837)		(24,558)
Total common shareholders' equity	Total common shareholders' equity	558,531		520,988		Total common shareholders' equity	536,681		520,988
Preferred stock of subsidiary	Preferred stock of subsidiary	59,784		59,784		Preferred stock of subsidiary	59,784		59,784
Total shareholders' equity	Total shareholders' equity	618,315		580,772		Total shareholders' equity	596,465		580,772
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	4,985,255	$	4,969,919	TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	5,067,794	$	4,969,919

See notes to unaudited condensed consolidated financial statements.	See notes to unaudited condensed consolidated financial statements.					See notes to unaudited condensed consolidated financial statements.


IPALCO ENTERPRISES, INC. and SUBSIDIARIES	IPALCO ENTERPRISES, INC. and SUBSIDIARIES					IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows	Unaudited Condensed Consolidated Statements of Cash Flows					Unaudited Condensed Consolidated Statements of Cash Flows
(In Thousands)	(In Thousands)					(In Thousands)
		Three Months Ended					Nine Months Ended
		March 31,					September 30,
		2021		2020			2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	38,784	$	35,983	Net income	$	98,041	$	95,405
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	63,089		60,708		Depreciation and amortization	190,880		184,166
Amortization of deferred financing costs and debt discounts	Amortization of deferred financing costs and debt discounts	998		1,100		Amortization of deferred financing costs and debt discounts	2,950		3,006
Deferred income taxes and investment tax credit adjustments - net	Deferred income taxes and investment tax credit adjustments - net	922		2,467		Deferred income taxes and investment tax credit adjustments - net	6,677		(2,001)
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(1,374)		(857)		Allowance for equity funds used during construction	(4,133)		(3,116)

Loss on early extinguishment of debt						Loss on early extinguishment of debt	—		2,415
Change in certain assets and liabilities:	Change in certain assets and liabilities:					Change in certain assets and liabilities:
Accounts receivable	Accounts receivable	4,458		4,655		Accounts receivable	(12,443)		2,530
Inventories	Inventories	12,568		(8,265)		Inventories	15,686		(16,652)
Accounts payable	Accounts payable	3,610		(7,940)		Accounts payable	25,221		(24,228)
Accrued and other current liabilities	Accrued and other current liabilities	(6,271)		(2,514)		Accrued and other current liabilities	(4,890)		(9,041)
Accrued taxes payable/receivable	Accrued taxes payable/receivable	20,419		15,382		Accrued taxes payable/receivable	405		9,904
Accrued interest	Accrued interest	11,181		2,599		Accrued interest	10,869		8,861
Pension and other postretirement benefit expenses		46		(1,726)
Pension and other postretirement benefit assets and liabilities						Pension and other postretirement benefit assets and liabilities	(12,426)		(5,179)
Short-term and long-term regulatory assets and liabilities	Short-term and long-term regulatory assets and liabilities	(14,905)		(3,226)		Short-term and long-term regulatory assets and liabilities	(43,090)		828
Prepayments and other current assets	Prepayments and other current assets	(23,599)		(5,488)		Prepayments and other current assets	(9,519)		(6,159)
Other - net	Other - net	(2,038)		4,698		Other - net	(7,387)		421
Net cash provided by operating activities	Net cash provided by operating activities	107,888		97,576		Net cash provided by operating activities	256,841		241,160
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	Capital expenditures	(62,792)		(54,490)		Capital expenditures	(197,383)		(149,369)
Project development costs	Project development costs	(386)		(751)		Project development costs	(977)		(1,848)
Cost of removal and regulatory recoverable ARO payments	Cost of removal and regulatory recoverable ARO payments	(6,589)		(7,962)		Cost of removal and regulatory recoverable ARO payments	(31,946)		(29,483)

Other						Other	—		119
Net cash used in investing activities	Net cash used in investing activities	(69,767)		(63,203)		Net cash used in investing activities	(230,306)		(180,581)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities	Borrowings under revolving credit facilities	60,000		0		Borrowings under revolving credit facilities	145,000		80,000
Repayments under revolving credit facilities	Repayments under revolving credit facilities	(45,000)		0		Repayments under revolving credit facilities	(85,000)		(30,000)

Long-term borrowings, net of discount						Long-term borrowings, net of discount	95,000		474,568
Retirement of long-term debt, including early payment premium						Retirement of long-term debt, including early payment premium	(95,000)		(472,135)
Distributions to shareholders	Distributions to shareholders	(30,073)		(26,631)		Distributions to shareholders	(96,102)		(93,993)
Preferred dividends of subsidiary	Preferred dividends of subsidiary	(803)		(803)		Preferred dividends of subsidiary	(2,410)		(2,410)
Deferred financing costs paid	Deferred financing costs paid	(270)		0		Deferred financing costs paid	(1,384)		(5,664)

Payments for financed capital expenditures						Payments for financed capital expenditures	(36)		(51)
Other						Other	(94)		(118)
Net cash used in financing activities	Net cash used in financing activities	(16,146)		(27,434)		Net cash used in financing activities	(40,026)		(49,803)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	21,975		6,939		Net change in cash, cash equivalents and restricted cash	(13,491)		10,776
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	26,622		48,552		Cash, cash equivalents and restricted cash at beginning of period	26,622		48,552
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	48,597	$	55,491	Cash, cash equivalents and restricted cash at end of period	$	13,131	$	59,328

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest (net of amount capitalized)	Interest (net of amount capitalized)	$	18,512	$	26,438	Interest (net of amount capitalized)	$	77,084	$	81,073

Income taxes						Income taxes	21,400		27,000
Non-cash investing activities:	Non-cash investing activities:					Non-cash investing activities:
Accruals for capital expenditures	Accruals for capital expenditures	$	46,060	$	28,184	Accruals for capital expenditures	$	67,921	$	49,569

See notes to unaudited condensed consolidated financial statements.	See notes to unaudited condensed consolidated financial statements.					See notes to unaudited condensed consolidated financial statements.


IPALCO ENTERPRISES, INC. and SUBSIDIARIES	IPALCO ENTERPRISES, INC. and SUBSIDIARIES											IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Common Shareholders' Equity	Unaudited Condensed Consolidated Statements of Common Shareholders' Equity											Unaudited Condensed Consolidated Statements of Common Shareholders' Equity
and Noncontrolling Interest	and Noncontrolling Interest											and Noncontrolling Interest
For the Three Months Ended March 31, 2021 and 2020
For the Three and Nine Months Ended September 30, 2021 and 2020												For the Three and Nine Months Ended September 30, 2021 and 2020
(In Thousands)	(In Thousands)											(In Thousands)
		Paid in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Common Shareholders' Equity		Cumulative Preferred Stock of Subsidiary			Paid in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Common Shareholders' Equity		Cumulative Preferred Stock of Subsidiary
2021	2021											2021
Beginning Balance	Beginning Balance	$	588,966	$	(43,420)	$	(24,558)	$	520,988	$	59,784	Beginning Balance	$	588,966	$	(43,420)	$	(24,558)	$	520,988	$	59,784
Net comprehensive income/(loss)		—		29,594		37,981		67,575		803
Net comprehensive income												Net comprehensive income	—		29,594		37,981		67,575		803
Preferred stock dividends	Preferred stock dividends	—		—		—		—		(803)		Preferred stock dividends	—		—		—		—		(803)
Distributions to shareholders	Distributions to shareholders	—		—		(30,073)		(30,073)		—		Distributions to shareholders	—		—		(30,073)		(30,073)		—
Other	Other	41		—		—		41		—		Other	41		—		—		41		—
Balance at March 31, 2021	Balance at March 31, 2021	$	589,007	$	(13,826)	$	(16,650)	$	558,531	$	59,784	Balance at March 31, 2021	$	589,007	$	(13,826)	$	(16,650)	$	558,531	$	59,784

Net comprehensive income/(loss)												Net comprehensive income/(loss)	—		(15,767)		16,406		639		804
Preferred stock dividends												Preferred stock dividends	—		—		—		—		(804)
Distributions to shareholders(1)												Distributions to shareholders(1)	(8,192)		—		(24,314)		(32,506)		—
Other												Other	16		—		—		16		—
Balance at June 30, 2021												Balance at June 30, 2021	$	580,831	$	(29,593)	$	(24,558)	$	526,680	$	59,784
Net comprehensive income												Net comprehensive income	—		2,256		41,244		43,500		803
Preferred stock dividends												Preferred stock dividends	—		—		—		—		(803)
Distributions to shareholders(1)												Distributions to shareholders(1)	—		—		(33,523)		(33,523)		—
Other												Other	24		—		—		24		—
Balance at September 30, 2021												Balance at September 30, 2021	$	580,855	$	(27,337)	$	(16,837)	$	536,681	$	59,784

2020	2020											2020
Beginning Balance	Beginning Balance	$	590,784	$	(19,750)	$	(24,558)	$	546,476	$	59,784	Beginning Balance	$	590,784	$	(19,750)	$	(24,558)	$	546,476	$	59,784
Net comprehensive income/(loss)	Net comprehensive income/(loss)	—		(36,313)		35,180		(1,133)		803		Net comprehensive income/(loss)	—		(36,313)		35,180		(1,133)		803
Preferred stock dividends	Preferred stock dividends	—		—		—		—		(803)		Preferred stock dividends	—		—		—		—		(803)
Distributions to shareholders	Distributions to shareholders	—		—		(26,631)		(26,631)		—		Distributions to shareholders	—		—		(26,631)		(26,631)		—
Other	Other	49		—		—		49		—		Other	49		—		—		49		—
Balance at March 31, 2020	Balance at March 31, 2020	$	590,833	$	(56,063)	$	(16,009)	$	518,761	$	59,784	Balance at March 31, 2020	$	590,833	$	(56,063)	$	(16,009)	$	518,761	$	59,784
Net comprehensive income/(loss)												Net comprehensive income/(loss)	—		(2,682)		18,319		15,637		804
Preferred stock dividends												Preferred stock dividends	—		—		—		—		(804)
Distributions to shareholders												Distributions to shareholders	—		—		(26,596)		(26,596)		—
Other												Other	37		—		—		37		—
Balance at June 30, 2020												Balance at June 30, 2020	$	590,870	$	(58,745)	$	(24,286)	$	507,839	$	59,784
Net comprehensive income												Net comprehensive income	—		5,051		39,496		44,547		803
Preferred stock dividends												Preferred stock dividends	—		—		—		—		(803)
Distributions to shareholders(1)												Distributions to shareholders(1)	(998)		—		(39,768)		(40,766)		—
Other												Other	39		—		—		39		—
Balance at September 30, 2020												Balance at September 30, 2020	$	589,911	$	(53,694)	$	(24,558)	$	511,659	$	59,784

(1) IPALCO made return of capital payments of $8.2 million and $1.0 million during the nine months ended September 30, 2021 and 2020, respectively, for the portion of current year distributions to shareholders in excess of current year net income.												(1) IPALCO made return of capital payments of $8.2 million and $1.0 million during the nine months ended September 30, 2021 and 2020, respectively, for the portion of current year distributions to shareholders in excess of current year net income.

See notes to unaudited condensed consolidated financial statements.

IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

1. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

IPALCO is a holding company incorporated under the laws of the state of Indiana. IPALCO is owned by AES U.S. Investments (82.35%) and CDPQ (17.65%). AES U.S. Investments is owned by AES U.S. Holdings, LLC (85%) and CDPQ (15%). IPALCO owns all of the outstanding common stock of IPL, which does business as AES Indiana. Substantially all of IPALCO’s business consists of generating, transmitting, distributing and selling of electric energy conducted through its principal subsidiary, AES Indiana. AES Indiana was incorporated under the laws of the state of Indiana in 1926. AES Indiana has approximately ~~513,000~~515,000 retail customers in the city of Indianapolis and neighboring cities, towns and communities, and adjacent rural areas all within the state of Indiana, with the most distant point being approximately forty miles from Indianapolis. AES Indiana has an exclusive right to provide electric service to those customers. AES Indiana owns and operates 4 generating stations, all within the state of Indiana. AES Indiana’s largest generating station, Petersburg, is coal-fired, and AES Indiana retired 230 MW Petersburg Unit 1 on May 31, 2021 and has plans to retire ~~approximately~~415 MW Petersburg Unit 2 in 2023, which would result in 630 MW of ~~coal-fired generation~~total retired economic capacity at ~~Petersburg Units 1 and 2 in 2021 and 2023, respectively~~this station (for further discussion, see Note 2, "Regulatory Matters - IRP Filing and Replacement ~~Generation~~Generation""). The second largest station, Harding Street, uses natural gas and fuel oil to power combustion turbines. In addition, AES Indiana operates a 20 MW battery energy storage unit at this location, which provides frequency response. The third station, Eagle Valley, is a CCGT natural gas plant. The fourth station, Georgetown, is a small peaking station that uses natural gas to power combustion turbines. As of ~~March 31,~~September 30, 2021, AES Indiana’s net electric generation capacity for winter is ~~3,705~~3,475 MW and net summer capacity is ~~3,560~~3,330 MW.

Consolidation

The accompanying Financial Statements include the accounts of IPALCO, AES Indiana and Mid-America Capital Resources, Inc., a non-regulated wholly-owned subsidiary of IPALCO. All significant intercompany amounts have been eliminated in consolidation.

Interim Financial Presentation

The accompanying Financial Statements are unaudited; however, they have been prepared in accordance with GAAP, as contained in the FASB ASC, for interim financial information and Article 10 of Regulation S-X issued by the SEC. Accordingly, they do not include all the information and footnotes required by GAAP for annual fiscal reporting periods. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, comprehensive income, changes in equity, and cash flows. The electric utility business is affected by seasonal weather patterns throughout the year and, therefore, the operating revenues and associated operating expenses are not generated evenly by month during the year. These unaudited Financial Statements have been prepared in accordance with the accounting policies described in IPALCO’s 2020 Form 10-K and should be read in conjunction therewith.

Use of Management Estimates

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

Cash, Cash Equivalents and Restricted Cash

The following table provides a summary of cash, cash equivalents and restricted cash amounts as shown on the Unaudited Condensed Consolidated Statements of Cash Flows:


		March 31,		December 31,			September 30,		December 31,
		2021		2020			2021		2020
		(In Thousands)					(In Thousands)
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash					Cash, cash equivalents and restricted cash
Cash and cash equivalents	Cash and cash equivalents	$	48,592	$	20,502	Cash and cash equivalents	$	13,126	$	20,502
Restricted cash	Restricted cash	5		6,120		Restricted cash	5		6,120
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	48,597	$	26,622	Total cash, cash equivalents and restricted cash	$	13,131	$	26,622

Accounts Receivable

The following table summarizes our accounts receivable balances at ~~March 31,~~September 30, 2021 and December 31, 2020:


		March 31,		December 31,			September 30,		December 31,
		2021		2020			2021		2020
		(In Thousands)					(In Thousands)
Accounts receivable, net	Accounts receivable, net					Accounts receivable, net
Customer receivables	Customer receivables	$	97,231	$	91,335	Customer receivables	$	105,578	$	91,335
Unbilled revenue	Unbilled revenue	57,578		72,334		Unbilled revenue	62,665		72,334
Amounts due from related parties	Amounts due from related parties	375		490		Amounts due from related parties	118		490

Other	Other	7,517		4,189		Other	10,375		4,189
Allowance for credit losses	Allowance for credit losses	(1,966)		(3,155)		Allowance for credit losses	(1,100)		(3,155)
Total accounts receivable, net	Total accounts receivable, net	$	160,735	$	165,193	Total accounts receivable, net	$	177,636	$	165,193

The following table is a rollforward of our allowance for credit losses related to the accounts receivable balances for the periods indicated (in Thousands):


Three Months Ended March 31, 2021		Beginning Allowance Balance at January 1, 2021		Current Period Provision		Write-offs Charged Against Allowances		Recoveries Collected		Ending Allowance Balance at March 31, 2021
Nine Months Ended September 30, 2021												Nine Months Ended September 30, 2021	Beginning Allowance Balance at January 1, 2021		Current Period Provision		Write-offs Charged Against Allowances		Recoveries Collected		Ending Allowance Balance at September 30, 2021
Allowance for credit losses	Allowance for credit losses	$	3,155	$	124	$	(1,885)	$	572	$	1,966	Allowance for credit losses	$	3,155	$	1,333	$	(4,903)	$	1,515	$	1,100


Three Months Ended March 31, 2020		Beginning Allowance Balance at January 1, 2020		Current Period Provision		Write-offs Charged Against Allowances		Recoveries Collected		Ending Allowance Balance at March 31, 2020
Nine Months Ended September 30, 2020												Nine Months Ended September 30, 2020	Beginning Allowance Balance at January 1, 2020		Current Period Provision		Write-offs Charged Against Allowances		Recoveries Collected		Ending Allowance Balance at September 30, 2020
Allowance for credit losses	Allowance for credit losses	$	921	$	773	$	(1,114)	$	469	$	1,049	Allowance for credit losses	$	921	$	4,366	$	(3,127)	$	1,360	$	3,520

The allowance for credit losses primarily relates to utility customer receivables, including unbilled amounts. Expected credit loss estimates are developed by disaggregating customers into those with similar credit risk characteristics and using historical credit loss experience. In addition, we also consider how current and future economic conditions are expected to impact collectability, as applicable, including the economic impacts of the COVID-19 pandemic on our receivable balance as of ~~March 31,~~September 30, 2021. Amounts are written off when reasonable collections efforts have been exhausted. During 2021, the current period provision and allowance for credit losses have decreased due to lower past due customer receivable balances.

Inventories

The following table summarizes our inventories balances at ~~March 31,~~September 30, 2021 and December 31, 2020:


		March 31,		December 31,			September 30,		December 31,
		2021		2020			2021		2020
		(In Thousands)					(In Thousands)
Inventories	Inventories					Inventories
Fuel	Fuel	$	20,215	$	36,953	Fuel	$	17,230	$	36,953
Materials and supplies, net	Materials and supplies, net	60,395		58,553		Materials and supplies, net	59,132		58,553
Total inventories	Total inventories	$	80,610	$	95,506	Total inventories	$	76,362	$	95,506

~~Accumulated Other Comprehensive Income / (Loss)~~AOCL

The amounts reclassified out of ~~Accumulated Other Comprehensive Income/(Loss)~~AOCL by component during the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 are as follows (in thousands):

Details about Accumulated Other Comprehensive Loss components Affected line item in the Condensed Consolidated Statements of Operations Three Months Ended March 31,
2021 2020
Gains and losses on cash flow hedges (Note 4): Interest expense $ (602) $ 0
Income tax expense 146 0
Total reclassifications for the period, net of income taxes $ (456) $ 0


Details about AOCL components	Affected line item in the Condensed Consolidated Statements of Operations	Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020
Net (gains) / losses on cash flow hedges (Note 4):	Interest expense	$	1,807	$	1,807	$	3,011	$	3,614
	Income tax benefit	(449)		(463)		(733)		(926)
Total reclassifications for the period, net of income taxes		$	1,358	$	1,344	$	2,278	$	2,688

~~The~~See Note 4, "Derivative Instruments and Hedging Activities - Cash Flow Hedges" for further information on the changes in the components of ~~Accumulated Other Comprehensive Income/(Loss) during~~AOCL.

New Accounting Pronouncements Adopted in 2021

The Company assessed and determined that the ~~three months ended March 31, 2021 and 2020 are as follows (in thousands):~~

Three Months Ended March 31,
Gains and losses on cash flow hedges (Note 4): 2021 2020
Balance at January 1 $ (43,420) $ (19,750)
Other comprehensive gain (loss) before reclassifications 30,050 (36,313)
Amounts reclassified from AOCI to earnings (456) 0
Balance at March 31 $ (13,826) $ (56,063)
new accounting pronouncements adopted did not have a material impact on the Company's consolidated financial statements.

New Accounting Pronouncements Issued But Not Yet Effective

The following table provides a brief description of recent accounting pronouncements that could have a material impact on the Company’s Financial Statements once adopted. Accounting pronouncements not listed below were assessed and determined to be either not applicable or are expected to have no material impact on the Company’s Financial Statements.


New Accounting Standards Issued But Not Yet Effective
ASU Number and Name	Description	Date of Adoption	Effect on the Financial Statements upon adoption
2020-04 and 2021-01, Reference Rate Form (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The ~~standard provides~~amendments in these updates provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference to LIBOR or another reference rate expected to be discontinued by reference rate ~~reform. This standard is~~reform, and clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These amendments are effective for a limited period of time (March 12, 2020 - December 21, 2022).	March 12, 2020 - December 31, 2022	The Company is currently evaluating the impact of adopting the standard on the Financial Statements.

2. REGULATORY MATTERS

IRP Filing and Replacement Generation

~~On February 5,~~In January 2021, AES Indiana ~~announced~~executed an agreement to acquire a 195 MW solar ~~project. Expected~~project to be ~~completed in 2023, the solar project will be located~~developed in Clinton County, Indiana and ~~Invenergy will develop~~expected to be completed in 2023. On February 12, 2021, AES Indiana filed a petition and case-in-chief with the IURC seeking a CPCN for this solar project and ~~manage construction.~~on June 16, 2021, AES Indiana received an order from the IURC approving the project.

In July 2021, AES Indiana executed an agreement to acquire a 250 MW solar and 180 MWh energy storage facility to be developed in Pike County, Indiana and expected to be completed in 2024. The agreement requires approval from the IURC. On ~~February 12,~~July 30, 2021, AES Indiana filed a petition and case-in-chief with the IURC seeking a CPCN for this solar project.

On February 26, 2021, as a result of the plans to retire approximately 630 MW of coal-fired generation at Petersburg Units 1 and 2 in 2021 and 2023, respectively, AES Indiana filed a petition with the IURC for approvals and cost recovery associated with these ~~retirements, including:~~retirements. On August 6, 2021, AES Indiana filed an uncontested Stipulation and Settlement Agreement with the other parties in the case which includes: (1) ~~approval of~~ AES Indiana's creation of regulatory assets for the net book value of Petersburg units 1 and 2 upon retirement; (2) a method for amortization of the regulatory ~~assets based upon the Company’s depreciation rates;~~assets; and (3) recovery of the regulatory assets through ~~inclusion in AES Indiana’s rate base and~~ ongoing amortization in AES Indiana’s future rate cases. The Settlement Agreement also reserves all rights of all the parties with respect to the ratemaking treatment related to the regulatory assets, including the proper rate of return and mechanisms for recovery. AES Indiana retired 230 MW Petersburg Unit 1 on May 31, 2021 and has $63.1 million of Petersburg Unit 1 retirement costs, net of accumulated amortization, recorded in long-term regulatory assets as of September 30, 2021.

IURC COVID-19 Orders

As a result of the IURC's COVID-19 related orders issued in 2020, AES Indiana has recorded a regulatory asset of $5.4 million and $6.4 million as of September 30, 2021 and December 31, 2020, respectively. On August 25, 2021, the IURC closed the investigation to consider and address the impacts of the COVID-19 pandemic. For further discussion on the COVID-19 pandemic, see Note 12, "Risks and Uncertainties - COVID-19 Pandemic."

Excess Distributed Generation Rates

On March 1, 2021, AES Indiana filed a petition with the IURC for approval of its proposed rate for the procurement of excess distributed generation ("EDG") and related consumer EDG credit issues. The EDG rate will replace the current net metering program and will be offered beginning July 2022, when net metering is no longer available to new customers.

Electric Vehicle Portfolio Program

On March 2, 2021, AES Indiana filed with the IURC a request to approve its Electric Vehicle (EV) portfolio and associated accounting and ratemaking treatment. The EV portfolio aims to accelerate electric car adoption by reducing friction in the car buying process, and by providing customers incentives to optimize electric car charging during off-peak periods. The EV portfolio is designed to produce net benefits for all customers through new retail margins and grid optimization. The projected costs to successfully implement the services proposed in the EV portfolio are estimated at $5.1 million over the 3 year period. AES Indiana requested approval to defer as a regulatory asset and recover in future base rates the cost necessary to implement the EV portfolio, including carrying charges.

3. FAIR VALUE

The fair value of financial assets and liabilities approximate their reported carrying amounts. The estimated fair values of the Company’s assets and liabilities have been determined using available market information. As these amounts are estimates and based on hypothetical transactions to sell assets or transfer liabilities, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. For further information on our valuation techniques and policies, see Note 4, "Fair Value"to IPALCO’s 2020 Form 10-K.

Financial Assets

VEBA Assets

IPALCO has VEBA investments that are to be used to fund certain employee postretirement health care benefit plans. These assets are primarily comprised of open-ended mutual funds, which are valued using the net assets value per unit. These investments are recorded at fair value within "Other non-current ~~assets~~assets"" on the accompanying Unaudited Condensed Consolidated Balance Sheets and classified as equity securities. All changes to fair value on the VEBA investments are included in income in the period that the changes occur. These changes to fair value were not material for the periods covered by this report. Any unrealized gains or losses are recorded in "Other income / (expense), ~~net~~net"" on the accompanying Unaudited Condensed Consolidated Statements of Operations.

FTRs

In connection with AES Indiana’s participation in MISO, in the second quarter of each year AES Indiana is granted financial instruments that can be converted into cash or FTRs based on AES Indiana’s forecasted peak load for the period. FTRs are used in the MISO market to hedge AES Indiana’s exposure to congestion charges, which result

from constraints on the transmission system. AES Indiana’s FTRs are valued at the cleared auction prices for FTRs in MISO’s annual auction. Because of the infrequent nature of this valuation, the fair value assigned to the FTRs is considered a Level 3 input under the fair value hierarchy required by ASC 820. An offsetting regulatory liability has been recorded as these revenues or costs will be flowed through to customers through the FAC. As such, there is no impact on our Unaudited Condensed Consolidated Statements of Operations.

Forward Power Contracts

In the second and third quarters of 2021, we entered into forward purchase power contracts. The forward power contracts have a combined notional amount outstanding of 162,960 MWhs. All changes in the market value of the forward power contracts are recorded in the Consolidated Statements of Operations in the period in which the change occurred. See also Note 4, "Derivative Instruments and Hedging Activities - Derivatives Not Designated as Hedge" for further information.

Financial Liabilities

Interest Rate Hedges

In March 2019, we entered into forward interest rate hedges, which were amended in April 2020. The interest rate hedges have a combined notional amount of $400.0 million. All changes in the market value of the interest rate hedges are recorded in AOCL. See also Note 4, "Derivative Instruments and Hedging Activities - Cash Flow ~~Hedges~~Hedges"" for further information.

Recurring Fair Value Measurements

The fair value of assets and liabilities at ~~March 31,~~September 30, 2021 and December 31, 2020 measured on a recurring basis and the respective category within the fair value hierarchy for IPALCO was determined as follows:


Assets and Liabilities at Fair Value	Assets and Liabilities at Fair Value									Assets and Liabilities at Fair Value
				Level 1		Level 2		Level 3					Level 1		Level 2		Level 3
		Fair value at March 31, 2021		Based on quoted market prices in active markets		Other observable inputs		Unobservable inputs			Fair value at September 30, 2021		Based on quoted market prices in active markets		Other observable inputs		Unobservable inputs
		(In Thousands)									(In Thousands)
Financial assets:	Financial assets:									Financial assets:
VEBA investments:	VEBA investments:									VEBA investments:
Money market funds	Money market funds	$	14	$	14	$	0	$	0	Money market funds	$	14	$	14	$	—	$	—
Mutual funds	Mutual funds	3,335		0		3,335		0		Mutual funds	3,643		—		3,643		—
Total VEBA investments	Total VEBA investments	3,349		14		3,335		0		Total VEBA investments	3,657		14		3,643		—
Financial transmission rights	Financial transmission rights	139		0		0		139		Financial transmission rights	1,842		—		—		1,842
Forward power contracts										Forward power contracts	314		—		314		—
Total financial assets measured at fair value	Total financial assets measured at fair value	$	3,488	$	14	$	3,335	$	139	Total financial assets measured at fair value	$	5,813	$	14	$	3,957	$	1,842
Financial liabilities:	Financial liabilities:									Financial liabilities:
Interest rate hedges	Interest rate hedges	$	23,511	$	0	$	23,511	$	0	Interest rate hedges	$	44,816	$	—	$	44,816	$	—

Total financial liabilities measured at fair value	Total financial liabilities measured at fair value	$	23,511	$	0	$	23,511	$	0	Total financial liabilities measured at fair value	$	44,816	$	—	$	44,816	$	—


Assets and Liabilities at Fair Value	Assets and Liabilities at Fair Value									Assets and Liabilities at Fair Value
				Level 1		Level 2		Level 3					Level 1		Level 2		Level 3
		Fair value at December 31, 2020		Based on quoted market prices in active markets		Other observable inputs		Unobservable inputs			Fair value at December 31, 2020		Based on quoted market prices in active markets		Other observable inputs		Unobservable inputs
		(In Thousands)									(In Thousands)
Financial assets:	Financial assets:									Financial assets:
VEBA investments:	VEBA investments:									VEBA investments:
Money market funds	Money market funds	$	16	$	16	$	0	$	0	Money market funds	$	16	$	16	$	—	$	—
Mutual funds	Mutual funds	3,209		0		3,209		0		Mutual funds	3,209		—		3,209		—
Total VEBA investments	Total VEBA investments	3,225		16		3,209		0		Total VEBA investments	3,225		16		3,209		—
Financial transmission rights	Financial transmission rights	543		0		0		543		Financial transmission rights	543		—		—		543
Total financial assets measured at fair value	Total financial assets measured at fair value	$	3,768	$	16	$	3,209	$	543	Total financial assets measured at fair value	$	3,768	$	16	$	3,209	$	543
Financial liabilities:	Financial liabilities:									Financial liabilities:
Interest rate hedges	Interest rate hedges	$	63,215	$	0	$	63,215	$	0	Interest rate hedges	$	63,215	$	—	$	63,215	$	—
Total financial liabilities measured at fair value	Total financial liabilities measured at fair value	$	63,215	$	0	$	63,215	$	0	Total financial liabilities measured at fair value	$	63,215	$	—	$	63,215	$	—

Financial Instruments not Measured at Fair Value in the Consolidated Balance Sheets

Debt

The fair value of our outstanding fixed-rate debt has been determined on the basis of the quoted market prices of the specific securities issued and outstanding. In certain circumstances, the market for such securities was inactive and therefore the valuation was adjusted to consider changes in market spreads for similar securities. Accordingly, the purpose of this disclosure is not to approximate the value on the basis of how the debt might be refinanced.

The following table shows the face value and the fair value of fixed-rate and variable-rate indebtedness (Level 2) for the periods ending:


		March 31, 2021				December 31, 2020					September 30, 2021				December 31, 2020
		Face Value		Fair Value		Face Value		Fair Value			Face Value		Fair Value		Face Value		Fair Value
		(In Thousands)									(In Thousands)
Fixed-rate	Fixed-rate	$	2,683,800	$	3,057,958	$	2,683,800	$	3,295,588	Fixed-rate	$	2,683,800	$	3,179,439	$	2,683,800	$	3,295,588
Variable-rate	Variable-rate	90,000		90,000		75,000		75,000		Variable-rate	135,000		135,000		75,000		75,000
Total indebtedness	Total indebtedness	$	2,773,800	$	3,147,958	$	2,758,800	$	3,370,588	Total indebtedness	$	2,818,800	$	3,314,439	$	2,758,800	$	3,370,588

The difference between the face value and the carrying value of this indebtedness consists of the following:

•unamortized deferred financing costs of ~~$25.4~~$25.8 million and $26.0 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively; and

•unamortized discounts of ~~$6.6~~$6.4 million and $6.6 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We use derivatives principally to manage the interest rate risk associated with refinancing our long-term debt and the risk of price changes for purchased power. The derivatives that we use to economically hedge these risks are governed by our risk management policies for forward and futures contracts. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required. We monitor and value derivative positions monthly as part of our risk management processes. We use published sources for pricing, when possible, to mark positions to market. All of our derivative instruments are used for risk management purposes and are generally designated as cash flow hedges if they qualify under ASC 815 for accounting purposes.

For further information on the Company’s derivative and hedge accounting policies, see Note 1, "Overview and Summary of Significant Accounting Policies - Financial ~~Derivatives~~Derivatives"" and Note 5, "Derivative Instruments and Hedging ~~Activities~~Activities"" to IPALCO’s 2020 Form 10-K.

At ~~March 31,~~September 30, 2021, AES Indiana's outstanding derivative instruments were as follows:


Commodity	Commodity	Accounting Treatment (a)	Unit	Purchases (in thousands)		Sales (in thousands)		Net Purchases/(Sales) (in thousands)		Commodity	Accounting Treatment (a)	Unit	Purchases (in thousands)		Sales (in thousands)		Net Purchases/(Sales) (in thousands)
Interest rate hedges	Interest rate hedges	Designated	USD	$	400,000	$	0	$	400,000	Interest rate hedges	Designated	USD	$	400,000	$	—	$	400,000
FTRs	FTRs	Not Designated	MWh	1,046		0		1,046		FTRs	Not Designated	MWh	9,715		—		9,715
Forward power contracts										Forward power contracts	Not Designated	MWh	163		—		163

(a) Refers to whether the derivative instruments have been designated as a cash flow hedge.

Cash Flow Hedges

As part of our risk management processes, we identify the relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. The fair values of cash flow hedges determined by current public market prices will continue to fluctuate with changes in market prices up to contract expiration.

The following tables provide information on gains or losses recognized in AOCL for the cash flow hedges for the periods indicated:


		Interest Rate Hedges for the Three Months Ended March 31,					Interest Rate Hedges for the Three Months Ended September 30,
$ in thousands (net of tax)	$ in thousands (net of tax)	2021		2020		$ in thousands (net of tax)	2021		2020
Beginning accumulated derivative loss in AOCL	Beginning accumulated derivative loss in AOCL	$	(43,420)	$	(19,750)	Beginning accumulated derivative loss in AOCL	$	(29,593)	$	(58,745)

Net gains / (losses) associated with current period hedging transactions	Net gains / (losses) associated with current period hedging transactions	30,050		(36,313)		Net gains / (losses) associated with current period hedging transactions	898		3,707
Net (gains) / losses reclassified to interest expense, net of tax	Net (gains) / losses reclassified to interest expense, net of tax	(456)		0		Net (gains) / losses reclassified to interest expense, net of tax	1,358		1,344
Ending accumulated derivative loss in AOCL	Ending accumulated derivative loss in AOCL	$	(13,826)	$	(56,063)	Ending accumulated derivative loss in AOCL	$	(27,337)	$	(53,694)

Loss expected to be reclassified to earnings in the next twelve months		$	(5,375)
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months)		42


	Interest Rate Hedges for the Nine Months Ended September 30,
$ in thousands (net of tax)	2021		2020
Beginning accumulated derivative loss in AOCL	$	(43,420)	$	(19,750)

Net gains / (losses) associated with current period hedging transactions	13,805		(36,632)
Net (gains) / losses reclassified to interest expense, net of tax	2,278		2,688
Ending accumulated derivative loss in AOCL	$	(27,337)	$	(53,694)

Loss expected to be reclassified to earnings in the next twelve months	$	(5,375)
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months)	36

Derivatives Not Designated as Hedge

AES Indiana's FTRs and forward power contracts do not qualify for hedge accounting or the normal purchases and sales exceptions under ASC 815. Accordingly, ~~such contracts~~FTRs are recorded at fair value when acquired and subsequently amortized over the annual period as they are used. FTRs are initially recorded at fair value using the income approach. The forward power contracts are recorded at fair value with changes in the fair value charged or credited to the Consolidated Statements of Operations in the period in which the change occurred. Forward power contracts are fair valued using the market approach. This is commonly referred to as "MTM accounting". Realized gains and losses on the forward power contracts are included in future FAC filings, therefore any realized and unrealized gains and losses are deferred as regulatory liabilities or regulatory assets. There were unrealized gains of $0.3 million relating to open derivative positions at September 30, 2021 for the three and nine months ended September 30, 2021, and realized gains of $4.9 million and $5.6 million for the three and nine months ended September 30, 2021, respectively, related to the forward power contracts that were deferred and included with deferred fuel costs in "Regulatory assets, current" on the accompanying Unaudited Condensed Consolidated Balance Sheets.

Certain qualifying derivative instruments have been designated as normal purchases or normal sales contracts, as provided under GAAP. Derivative contracts that have been designated as normal purchases or normal sales under GAAP are not subject to hedge or mark to market accounting and are recognized in the consolidated statements of operations on an accrual basis.

When applicable, IPALCO has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements. As of ~~March 31,~~September 30, 2021, IPALCO did not have any offsetting positions.

The following table summarizes the fair value, balance sheet classification and hedging designation of IPALCO's derivative ~~instruments:~~

Commodity Hedging Designation Balance sheet classification March 31, 2021 December 31, 2020
Financial transmission rights Not a Cash Flow Hedge Prepayments and other current assets $ 139 $ 543
Interest rate hedges Cash Flow Hedge Derivative liabilities, non-current $ 23,511 $ 63,215

instruments (in thousands):


Commodity	Hedging Designation	Balance sheet classification	September 30, 2021		December 31, 2020
Financial transmission rights	Not a Cash Flow Hedge	Prepayments and other current assets	$	1,842	$	543
Forward power contracts	Not a Cash Flow Hedge	Prepayments and other current assets	$	314	$	—
Interest rate hedges	Cash Flow Hedge	Derivative liabilities, non-current	$	44,816	$	63,215

1819

5. DEBT

Long-Term Debt

The following table presents our long-term debt:


			March 31,		December 31,				September 30,		December 31,
Series	Series	Due	2021		2020		Series	Due	2021		2020
			(In Thousands)						(In Thousands)
AES Indiana first mortgage bonds:	AES Indiana first mortgage bonds:						AES Indiana first mortgage bonds:
3.875% (1)	3.875% (1)	August 2021	$	55,000	$	55,000	3.875% (1)	August 2021	$	—	$	55,000
3.875% (1)	3.875% (1)	August 2021	40,000		40,000		3.875% (1)	August 2021	—		40,000
3.125% (1)	3.125% (1)	December 2024	40,000		40,000		3.125% (1)	December 2024	40,000		40,000
0.65% (1)							0.65% (1)	August 2025	40,000		—
0.75% (2)							0.75% (2)	April 2026	30,000		30,000
0.95% (2)							0.95% (2)	April 2026	60,000		60,000
1.40% (1)							1.40% (1)	August 2029	55,000		—
6.60%	6.60%	January 2034	100,000		100,000		6.60%	January 2034	100,000		100,000
6.05%	6.05%	October 2036	158,800		158,800		6.05%	October 2036	158,800		158,800
6.60%	6.60%	June 2037	165,000		165,000		6.60%	June 2037	165,000		165,000
4.875%	4.875%	November 2041	140,000		140,000		4.875%	November 2041	140,000		140,000
4.65%	4.65%	June 2043	170,000		170,000		4.65%	June 2043	170,000		170,000
4.50%	4.50%	June 2044	130,000		130,000		4.50%	June 2044	130,000		130,000
4.70%	4.70%	September 2045	260,000		260,000		4.70%	September 2045	260,000		260,000
4.05%	4.05%	May 2046	350,000		350,000		4.05%	May 2046	350,000		350,000
4.875%	4.875%	November 2048	105,000		105,000		4.875%	November 2048	105,000		105,000
0.75% (2)		April 2026	30,000		30,000
0.95% (2)		April 2026	60,000		60,000
Unamortized discount – net	Unamortized discount – net		(5,968)		(6,006)		Unamortized discount – net		(5,893)		(6,006)
Deferred financing costs	Deferred financing costs		(17,159)		(17,384)		Deferred financing costs		(18,157)		(17,384)
Total AES Indiana first mortgage bonds	Total AES Indiana first mortgage bonds		1,780,673		1,780,410		Total AES Indiana first mortgage bonds		1,779,750		1,780,410
Total Long-term Debt – AES Indiana	Total Long-term Debt – AES Indiana		1,780,673		1,780,410		Total Long-term Debt – AES Indiana		1,779,750		1,780,410
Long-term Debt – IPALCO:	Long-term Debt – IPALCO:						Long-term Debt – IPALCO:
3.70% Senior Secured Notes	3.70% Senior Secured Notes	September 2024	405,000		405,000		3.70% Senior Secured Notes	September 2024	405,000		405,000
4.25% Senior Secured Notes	4.25% Senior Secured Notes	May 2030	475,000		475,000		4.25% Senior Secured Notes	May 2030	475,000		475,000
Unamortized discount – net	Unamortized discount – net		(600)		(625)		Unamortized discount – net		(551)		(625)
Deferred financing costs	Deferred financing costs		(8,280)		(8,600)		Deferred financing costs		(7,639)		(8,600)
Total Long-term Debt – IPALCO	Total Long-term Debt – IPALCO		871,120		870,775		Total Long-term Debt – IPALCO		871,810		870,775
Total Consolidated IPALCO Long-term Debt	Total Consolidated IPALCO Long-term Debt		2,651,793		2,651,185		Total Consolidated IPALCO Long-term Debt		2,651,560		2,651,185
Less: Current Portion of Long-term Debt	Less: Current Portion of Long-term Debt		94,945		94,907		Less: Current Portion of Long-term Debt		—		94,907
Net Consolidated IPALCO Long-term Debt	Net Consolidated IPALCO Long-term Debt		$	2,556,848	$	2,556,278	Net Consolidated IPALCO Long-term Debt		$	2,651,560	$	2,556,278

(1)First mortgage bonds issued to the Indiana Finance Authority, to secure the loan of proceeds from tax-exempt bonds issued by the Indiana Finance Authority.

(2)First mortgage bonds issued to the Indiana Finance Authority, to secure the loan of proceeds from tax-exempt bonds issued by the Indiana Finance Authority. The notes have a final maturity date of December 31, 2038, but are subject to a mandatory put in April 2026.

AES Indiana First Mortgage Bonds

In July 2021, the Indiana Finance Authority issued at the request of AES Indiana ~~has~~an aggregate principal amount of $95 million of ~~3.875%~~Environmental Facilities Refunding Revenue Bonds, Series 2021A&B. AES Indiana issued $95 million aggregate principal amount of first mortgage bonds ~~that are~~to the Indiana Finance Authority in two series: $55 million Series 2021A bonds at an interest rate of 1.40% due August 1, ~~2021. Management plans~~2029 and $40 million Series 2021B notes at an interest rate of 0.65% due August 1, 2025 to ~~refinance~~secure the loan of proceeds from these ~~first mortgage~~ bonds ~~with new debt. In~~issued by the ~~event that we are unable to refinance these first mortgage bonds on acceptable terms, AES~~ Indiana ~~has available borrowing capacity on its revolving credit facility that could be~~Finance Authority. Proceeds of the bond offering were used to ~~satisfy the obligation.~~ refund $95 million of Indiana Finance Authority Environmental Facilities Refunding Revenue Bonds Series 2011A&B due August 1, 2021 at a redemption price of 100% of par.

IPALCO’s Senior Secured Notes and Term Loan

In April 2020, IPALCO completed the sale of the $475 million aggregate principal amount of 4.25% 2030 IPALCO Notes pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. IPALCO used the net proceeds from this offering to retire the $65 million Term Loan on April 14, 2020. The remaining net proceeds, together with cash on hand, were used to redeem the 2020 IPALCO Notes on May 14, 2020, and to pay certain related fees, expenses and make-whole premiums. A loss on early extinguishment of debt of $2.4 million for the 2020 IPALCO Notes is included as a separate line item within "Other Income/(Expense), Net" in the accompanying Unaudited Condensed Consolidated Statements of Operations.

Pursuant to a registration rights agreement dated April 14, 2020, IPALCO agreed to register the 2030 IPALCO Notes under the Securities Act by filing an exchange offer registration statement or, under specified circumstances, a shelf registration statement with the ~~SEC pursuant to a Registration Rights Agreement dated April 14, 2020.~~SEC. IPALCO filed ~~its~~a registration statement on Form S-4 with respect to the 2030 IPALCO Notes with the SEC on March 22, 2021 in respect of its obligations under such registration rights agreement, and this registration statement was declared effective on April 7, 2021. The exchange offer closed on May 11, 2021.

Line of Credit

As of ~~March 31,~~September 30, 2021 and December 31, 2020, AES Indiana had ~~$90.0~~$135.0 million and $75.0 million in outstanding borrowings on the committed ~~line of credit,~~Credit Agreement, respectively.

6. INCOME TAXES

Effective Tax Rate

IPALCO’s effective combined state and federal income tax rate was 20.7% and 20.6% for the three and nine months ended ~~March 31,~~September 30, 2021, respectively, as compared to 21.4% and 21.4% for the three and nine months ended ~~March 31, 2020.~~September 30, 2020, respectively. The decrease in the effective tax rate versus the comparable ~~period~~periods was primarily due to the impact of the reversal of excess deferred income taxes as a percentage of pre-tax income. The ~~rate~~rates for the three and nine months ended ~~March 31,~~September 30, 2021 isare lower than the combined federal and state statutory rate of 25.01% primarily due to the flowthrough of the net tax benefit related to the reversal of excess deferred taxes of AES Indiana, which was partially offset by the net tax expense related to the amortization of allowance for equity funds used during construction.

Uncertain Tax Positions

IPALCO has unrecognized tax benefits of $7.4 million as of September 30, 2021 and December 31, 2020. The total amount of unrecognized tax benefits anticipated to result in a net decrease to unrecognized tax benefits within 12 months of September 30, 2021 is estimated to be $7.4 million, primarily relating to effective settlements of tax exams.

7. BENEFIT PLANS

Pension Expense

The following table presents net periodic benefit (credit) / cost information relating to the Pension Plans combined:


		For the Three Months Ended					For the Three Months Ended				For the Nine Months Ended
		March 31,					September 30,
			2021		2020				2021		2020		2021		2020
		(In Thousands)					(In Thousands)
Components of net periodic benefit (credit) / cost:	Components of net periodic benefit (credit) / cost:							Components of net periodic benefit (credit) / cost:
Service cost	Service cost		$	2,334	$	2,068		Service cost	$	2,335	$	2,068	$	7,004	$	6,204
Interest cost	Interest cost		3,915		5,538			Interest cost	3,915		5,538		11,745		16,614
Expected return on plan assets	Expected return on plan assets		(10,454)		(9,445)			Expected return on plan assets	(10,454)		(9,445)		(31,362)		(28,335)
Amortization of prior service cost	Amortization of prior service cost		736		919			Amortization of prior service cost	736		920		2,208		2,758
Amortization of actuarial loss	Amortization of actuarial loss		1,382		2,029			Amortization of actuarial loss	1,383		2,029		4,147		6,086
Net periodic benefit (credit) / cost	Net periodic benefit (credit) / cost		$	(2,087)	$	1,109		Net periodic benefit (credit) / cost	$	(2,085)	$	1,110	$	(6,258)	$	3,327

The components of net periodic benefit (credit) / cost other than service cost are included in "Other income, net" in the Unaudited Condensed Consolidated Statements of Operations.

In addition, AES Indiana provides postretirement health care benefits to certain active or retired employees and the spouses of certain active or retired employees. These postretirement health care benefits and the related unfunded obligation of $4.5 million and $4.3 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, were not material to the Financial Statements in the periods covered by this report.

8. COMMITMENTS AND CONTINGENCIES

Legal ~~Loss Contingencies~~Matters

IPALCO and AES Indiana are involved in litigation arising in the normal course of business. We accrue for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. As of ~~March 31,~~September 30, 2021 and December 31, 2020, total legal loss contingencies accrued were ~~$13.4~~$0.2 million and $13.4 million, respectively, which ~~were~~primarily related to personal injury litigation. During the quarter ended September 30, 2021, we entered into settlements resolving a significant portion of the legal loss contingencies previously accrued. The legal loss contingencies and settlement related accruals are included in"Accrued and other current liabilities" and "Other Non-Current ~~Liabilities,~~Liabilities"" on the accompanying Unaudited Condensed Consolidated Balance Sheets. ~~A significant portion of these accrued liabilities relate to a personal injury legal claim involving injuries to a contractor.~~ We maintain an amount of insurance protection for such litigation that we believe is adequate. As of September 30, 2021 and December 31, 2020, we have $21.2 million and $11.3 million, respectively, of receivables for insurance recoveries determined to be probable recorded in "Prepayments and other current assets" and "Other non-current assets" on the accompanying Unaudited Condensed Consolidated Balance Sheets. While the ultimate outcome of ~~such~~outstanding litigation cannot be predicted with certainty, management believes that final outcomes will not have a material adverse effect on IPALCO’s results of operations, financial condition and cash flows.

Environmental ~~Loss Contingencies~~Matters

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

New Source Review and Other CAA NOVs

In October 2009, AES Indiana received a NOV and Finding of Violation from the EPA pursuant to the CAA Section 113(a). The NOV alleged violations of the CAA at AES Indiana’s 3 primarily coal-fired electric generating facilities at the time, dating back to 1986. The alleged violations primarily pertain to the PSD and non-attainment New Source Review (NSR) requirements under the CAA. In addition, on October 1, 2015, AES Indiana received a NOV from the EPA pursuant to CAA Section 113(a) alleging violations of the CAA, the Indiana SIP, and the Title V operating permit related to alleged particulate matter and opacity violations at AES Indiana Petersburg Unit 3. Also, on February 5, 2016, the EPA issued a NOV pursuant to CAA Section 113(a) alleging violations of PSD, non-attainment NSR and other CAA regulations, the Indiana SIP, and the Title V operating permit at Petersburg Generating Station. On August 31, 2020, AES Indiana reached a settlement with the EPA, the DOJ and IDEM resolving the purported violations of the CAA with respect to ~~AES Indiana's four~~the coal-fired generation units ~~currently operating~~ at AES Indiana's Petersburg location. The settlement agreement, in the form of a proposed judicial consent decree, was approved and entered by the U.S. District Court for the Southern District of Indiana on March 23, 2021, and includes, among other items, the following requirements: annual caps on NOx and SO2 emissions and more stringent emissions limits than AES Indiana's current Title V air permit; payment of civil penalties totaling $1.525 million ~~(which~~(the payment of which was satisfied by AES Indiana in April 2021); a $5 million environmental mitigation project consisting of the construction and operation of a new, non-emitting source of generation at the site; expenditure of $0.325 million on a state-only environmentally beneficial project to preserve local, ecologically-significant lands; and retirement of Units 1 and 2 prior to July 1, 2023. If AES Indiana does not meet this retirement obligation, it must install a Selective Non-Catalytic Reduction System (SNCR) on Unit 4. AES Indiana had a contingent liability recorded related to these New Source Review and other CAA NOV matters.

Coal Ash Insurance Litigation

In August 2021, AES Indiana filed a civil action against various third-party insurance providers. The complaint seeks damages for breach of contract and a declaratory judgment declaring that such insurers must defend and indemnify AES Indiana under liability insurance policies issued between 1950 and the filing of the civil action against certain environmental liabilities arising from CCR at Harding Street, Petersburg and Eagle Valley. At this time, we cannot predict the outcome of this matter.

9. BUSINESS SEGMENT INFORMATION

Operating segments are components of an enterprise that engage in business activities from which it may earn revenues and incur expenses, for which separate financial information is available, and is evaluated regularly by the chief operating decision maker in assessing performance and deciding how to allocate resources. Substantially all of our business consists of the generation, transmission, distribution and sale of electric energy conducted through AES Indiana, which is a vertically integrated electric utility. IPALCO’s reportable business segment is its utility segment, with all other nonutility business activities aggregated separately. The “All Other” nonutility category primarily includes the 2024 IPALCO Notes and 2030 IPALCO Notes and related interest expense, balance associated with IPALCO's interest rate hedges, cash and other immaterial balances. The accounting policies of the identified segment are consistent with those policies and procedures described in the summary of significant accounting policies.

2123

The following table provides information about IPALCO’s business segments (in thousands):


		Three Months Ended						Three Months Ended							Three Months Ended						Three Months Ended
		March 31, 2021						March 31, 2020							September 30, 2021						September 30, 2020
		Utility		All Other		Total		Utility		All Other		Total			Utility		All Other		Total		Utility		All Other		Total
Revenues	Revenues	$	362,201	$	0	$	362,201	$	357,382	$	0	$	357,382	Revenues	$	380,837	$	—	$	380,837	$	356,088	$	—	$	356,088
Depreciation and amortization	Depreciation and amortization	$	63,089	$	0	$	63,089	$	60,708	$	0	$	60,708	Depreciation and amortization	$	64,797	$	—	$	64,797	$	62,359	$	—	$	62,359
Interest expense	Interest expense	$	21,521	$	8,546	$	30,067	$	21,920	$	8,161	$	30,081	Interest expense	$	20,609	$	10,935	$	31,544	$	21,725	$	11,016	$	32,741
Earnings/(loss) from operations before income tax	Earnings/(loss) from operations before income tax	$	57,295	$	(8,476)	$	48,819	$	54,967	$	(9,212)	$	45,755	Earnings/(loss) from operations before income tax	$	63,918	$	(10,905)	$	53,013	$	62,098	$	(10,818)	$	51,280
Capital expenditures		$	62,792	$	0	$	62,792	$	54,490	$	0	$	54,490

															Nine Months Ended						Nine Months Ended
															September 30, 2021						September 30, 2020
															Utility		All Other		Total		Utility		All Other		Total
Revenues														Revenues	$	1,073,625	$	—	$	1,073,625	$	1,024,973	$	—	$	1,024,973
Depreciation and amortization														Depreciation and amortization	$	190,880	$	—	$	190,880	$	184,166	$	—	$	184,166
Interest expense														Interest expense	$	63,385	$	30,425	$	93,810	$	65,527	$	31,230	$	96,757
Earnings/(loss) from operations before income tax														Earnings/(loss) from operations before income tax	$	153,800	$	(30,253)	$	123,547	$	155,835	$	(34,512)	$	121,323

		As of March 31, 2021						As of December 31, 2020							As of September 30, 2021						As of December 31, 2020
		Utility		All Other		Total		Utility		All Other		Total			Utility		All Other		Total		Utility		All Other		Total
Total assets	Total assets	$	4,966,065	$	19,190	$	4,985,255	$	4,952,408	$	17,511	$	4,969,919	Total assets	$	5,052,557	$	15,237	$	5,067,794	$	4,952,408	$	17,511	$	4,969,919

10. REVENUE

Revenue is primarily earned from retail and wholesale electricity sales and electricity transmission and distribution delivery services. Revenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Revenue is recorded net of any taxes assessed on and collected from customers, which are remitted to the governmental authorities. Please see Note 13, “Revenue” to IPALCO’s 2020 Form 10-K for further discussion of our retail, wholesale and miscellaneous revenues.

AES Indiana’s revenue from contracts with customers was ~~$353.6~~$371.6 million and ~~$351.9~~$350.5 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and $1,043.8 million and $1,004.8 million for the nine months ended September 30, 2021 and 2020, respectively. The following table presents our revenue from contracts with customers and other revenue (in thousands):


		For the Three Months Ended					For the Three Months Ended
		March 31, 2021		March 31, 2020			September 30, 2021		September 30, 2020
Retail Revenues	Retail Revenues					Retail Revenues
Retail revenue from contracts with customers:	Retail revenue from contracts with customers:					Retail revenue from contracts with customers:
Residential	Residential	$	160,503	$	155,408	Residential	$	158,806	$	145,407
Small commercial and industrial	Small commercial and industrial	54,517		54,253		Small commercial and industrial	56,220		50,023
Large commercial and industrial	Large commercial and industrial	113,440		122,038		Large commercial and industrial	143,871		127,884
Public lighting	Public lighting	2,186		2,305		Public lighting	2,270		2,268
Other (1)	Other (1)	4,191		3,888		Other (1)	4,206		3,875
Total retail revenue from contracts with customers	Total retail revenue from contracts with customers	334,837		337,892		Total retail revenue from contracts with customers	365,373		329,457
Alternative revenue programs	Alternative revenue programs	7,595		4,896		Alternative revenue programs	8,806		5,225
Wholesale Revenues	Wholesale Revenues					Wholesale Revenues
Wholesale revenues from contracts with customers:	Wholesale revenues from contracts with customers:	16,109		11,308		Wholesale revenues from contracts with customers:	2,733		17,667
Miscellaneous Revenues	Miscellaneous Revenues					Miscellaneous Revenues
Transmission and other revenue from contracts with customers	Transmission and other revenue from contracts with customers	2,681		2,732		Transmission and other revenue from contracts with customers	3,494		3,331
Other miscellaneous revenues (2)	Other miscellaneous revenues (2)	979		554		Other miscellaneous revenues (2)	431		408
Total Revenues	Total Revenues	$	362,201	$	357,382	Total Revenues	$	380,837	$	356,088

(1)Other retail revenue from contracts with customers includes miscellaneous charges to customers, including reconnection and late fee charges

(2)Other miscellaneous revenue includes lease and other miscellaneous revenues not accounted for under ASC 606


	For the Nine Months Ended		For the Nine Months Ended
	September 30, 2021		September 30, 2020
Retail Revenues
Retail revenue from contracts with customers:
Residential	$	448,563	$	428,568
Small commercial and industrial	158,945		147,678
Large commercial and industrial	384,320		369,224
Public lighting	6,726		6,881
Other (1)	12,572		10,568
Total retail revenue from contracts with customers	1,011,126		962,919
Alternative revenue programs	28,111		18,910
Wholesale Revenues
Wholesale revenues from contracts with customers:	23,760		33,476
Miscellaneous Revenues
Transmission and other revenue from contracts with customers	8,867		8,392
Other miscellaneous revenues (2)	1,761		1,276
Total Revenues	$	1,073,625	$	1,024,973

(1)Other retail revenue from contracts with customers includes miscellaneous charges to customers, including reconnection and late fee charges

(2)Other miscellaneous revenue includes lease and other miscellaneous revenues not accounted for under ASC 606

The balances of receivables from contracts with customers were ~~$152.8~~$166.4 million and $163.8 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Payment terms for all receivables from contracts with customers typically do not extend beyond 30 days.

Contract Balances — The timing of revenue recognition, billings, and cash collections results in accounts receivable and contract liabilities. The contract liabilities from contracts with customers were ~~$0.2~~$0.0 million and $0.5 million as of ~~March 31,~~

September 30, 2021 and December 31, 2020, respectively. During the three months ended ~~March 31,~~September 30, 2021 and 2020, we recognized revenue of ~~$0.3~~$0.0 million and ~~$0.4~~$0.3 million related to this contract liability balance, respectively. During the nine months ended September 30, 2021 and 2020, we recognized revenue of $0.5 million and $1.0 million related to this contract liability balance, respectively.

11. LEASES

LESSOR

The Company is the lessor under operating leases for land, office space and operating equipment. Minimum lease payments from such contracts are recognized as operating lease revenue on a straight-line basis over the lease term whereas contingent rentals are recognized when earned. Lease revenue included in the Unaudited Condensed Consolidated Statements of Operations was $0.3 million and $0.2 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and was $1.1 million and $0.7 million for the nine months ended September 30, 2021 and 2020, respectively. Underlying gross assets and accumulated depreciation of operating leases included in Total net property, plant and equipment on the Unaudited Condensed Consolidated Balance ~~Sheet~~Sheets were ~~$4.6~~$4.4 million and ~~$1.0~~$0.9 million, respectively, as of ~~March 31,~~September 30, 2021 and $4.3 million and $0.8 million, respectively, as of December 31, 2020.

The option to extend or terminate a lease is based on customary early termination provisions in the contract. The Company has not recognized any early terminations as of ~~March 31,~~September 30, 2021.

The following table shows the future minimum lease receipts as of ~~March 31,~~September 30, 2021 for the remainder of 2021 through 2025 and thereafter (in thousands):


		Operating Leases			Operating Leases
2021	2021	$	665	2021	$	222
2022	2022	903		2022	903
2023	2023	906		2023	906
2024	2024	786		2024	786
2025	2025	553		2025	553
Thereafter	Thereafter	2,113		Thereafter	2,113
Total	Total	$	5,926	Total	$	5,483

12. RISKS AND UNCERTAINTIES

COVID-19 Pandemic

The COVID-19 pandemic has impacted global economic activity, including electricity and energy consumption, and caused significant volatility in financial markets. ~~The global impact of the outbreak has been rapidly evolving and many~~Many countries, including the U.S., ~~have~~ reacted to the pandemic by instituting quarantines and mandating business and school closures or limitations and other social distancing ~~measures as well as restricting travel.~~measures. Responses to the COVID-19 pandemic by the State of Indiana and its residents and businesses ~~in particular,~~ continue to evolve ~~including with respect to business and school closures and limitations and other social distancing measures and the effectiveness and timing of~~as vaccine availability and ~~distribution efforts.~~usage continues and the State and businesses review and adjust the scope and requirements of social distancing measures. Social distancing measures designed to slow the spread of the virus, such as business closures and operations limitations, impact energy demand within our service territory. We ~~are taking~~continue to take a variety of measures in response to the spread of COVID-19 to ensure our ability to generate, transmit, distribute and sell electric energy, ensure the health and safety of our employees, contractors, customers and communities and provide essential services to the communities in which we operate. In addition to the impacts to demand within our service territory, we also have incurred and expect to continue to incur expenses relating to COVID-19, including those that relate to events outside of our control. The ~~ultimate~~ magnitude and duration of the COVID-19 pandemic is unknown at this time and may have material and adverse effects on our results of operations, financial condition and cash flows in future periods.

2326

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

The following discussion and analysis should be read in conjunction with the Financial Statements and the notes thereto included in “Item 1. Financial Statements” included in Part I – Financial Information of this Form 10-Q.

FORWARD-LOOKING INFORMATION

The following discussion may contain forward-looking statements regarding us, our business, prospects and our results of operations, including our expectations regarding the impact of the COVID-19 pandemic on our business, that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those described in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in IPALCO’s 2020 Form 10-K and subsequent filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that advise of the risks and uncertainties that may affect our business.

OVERVIEW OF OUR BUSINESS

IPALCO is a holding company incorporated under the laws of the state of Indiana. Our principal subsidiary is AES Indiana, a regulated electric utility operating in the state of Indiana. Substantially all of our business consists of the generation, transmission, distribution and sale of electric energy conducted through AES Indiana. Our business segments are “utility” and “all other.” For additional information regarding our business, see "Item 1. Business” of our 2020 Form 10-K.

EXECUTIVE SUMMARY

Compared with the same periods in the prior year, the results for the three and nine months ended ~~March 31,~~September 30, 2021 reflect higher earnings from operations before income tax of ~~$3.1~~$1.7 million, or ~~6.7%~~3.4% and $2.2 million, or 1.8%, respectively, primarily due to factors including, but not limited to:

•a net increase in margin due to higher volumes of retail kWh sold mostly due to favorable ~~weather;~~weather and higher weather-normalized demand resulting from unfavorable demand impacts of the COVID-19 pandemic in the prior year;

•~~a decrease in maintenance expenses;~~higher DSM shared savings and lost revenue recoveries; and

•lower pension costs.

These were partially offset by:

•~~lower demand resulting from impacts of the COVID-19 pandemic and~~

•~~a reduction~~an increase in ~~revenues in 2021 due to an accrued regulatory liability for excess earnings under the FAC provisions.~~

maintenance expenses.

2427

RESULTS OF OPERATIONS

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

Statements of Operations Highlights


		Three Months Ended										Three Months Ended									Nine Months Ended
		March 31,										September 30,									September 30,
			2021		2020		$ change		% change
$ in Thousands											$ in Thousands		2021		2020		$ change		% change			2021		2020		$ change		% change

REVENUES	REVENUES		$	362,201	$	357,382	$	4,819	1.3	%	REVENUES		$	380,837	$	356,088	$	24,749	7.0	%		$	1,073,625	$	1,024,973	$	48,652	4.7	%

OPERATING COSTS AND EXPENSES:	OPERATING COSTS AND EXPENSES:										OPERATING COSTS AND EXPENSES:
Fuel	Fuel		84,731		68,788		15,943		23.2	%	Fuel		68,857		73,901		(5,044)		(6.8)	%		206,428		186,040		20,388		11.0	%
Power purchased	Power purchased		24,583		35,467		(10,884)		(30.7)	%	Power purchased		40,443		26,987		13,456		49.9	%		106,774		105,536		1,238		1.2	%
Operation and maintenance	Operation and maintenance		103,949		105,590		(1,641)		(1.6)	%	Operation and maintenance		117,045		100,455		16,590		16.5	%		337,375		300,703		36,672		12.2	%
Depreciation and amortization	Depreciation and amortization		63,089		60,708		2,381		3.9	%	Depreciation and amortization		64,797		62,359		2,438		3.9	%		190,880		184,166		6,714		3.6	%
Taxes other than income taxes	Taxes other than income taxes		12,951		12,057		894		7.4	%	Taxes other than income taxes		11,138		10,399		739		7.1	%		32,834		34,063		(1,229)		(3.6)	%

Total operating costs and expenses	Total operating costs and expenses		289,303		282,610		6,693		2.4	%	Total operating costs and expenses		302,280		274,101		28,179		10.3	%		874,291		810,508		63,783		7.9	%

OPERATING INCOME	OPERATING INCOME		72,898		74,772		(1,874)		(2.5)	%	OPERATING INCOME		78,557		81,987		(3,430)		(4.2)	%		199,334		214,465		(15,131)		(7.1)	%

OTHER INCOME / (EXPENSE), NET:	OTHER INCOME / (EXPENSE), NET:										OTHER INCOME / (EXPENSE), NET:
Allowance for equity funds used during construction	Allowance for equity funds used during construction		1,374		857		517		60.3	%	Allowance for equity funds used during construction		1,428		1,099		329		29.9	%		4,133		3,116		1,017		32.6	%
Interest expense	Interest expense		(30,067)		(30,081)		14		—	%	Interest expense		(31,544)		(32,741)		1,197		(3.7)	%		(93,810)		(96,757)		2,947		(3.0)	%

Other income / (expense), net			4,614		207		4,407		2129.0	%
Total other income / (expense), net			(24,079)		(29,017)		4,938		(17.0)	%
Loss on early extinguishment of debt											Loss on early extinguishment of debt		—		—		—		—	%		—		(2,415)		2,415		(100.0)	%
Other income, net											Other income, net		4,572		935		3,637		389.0	%		13,890		2,914		10,976		376.7	%
Total other expense, net											Total other expense, net		(25,544)		(30,707)		5,163		(16.8)	%		(75,787)		(93,142)		17,355		(18.6)	%

EARNINGS FROM OPERATIONS BEFORE INCOME TAX	EARNINGS FROM OPERATIONS BEFORE INCOME TAX		48,819		45,755		3,064		6.7	%	EARNINGS FROM OPERATIONS BEFORE INCOME TAX		53,013		51,280		1,733		3.4	%		123,547		121,323		2,224		1.8	%

Less: Income tax expense	Less: Income tax expense		10,035		9,772		263		2.7	%	Less: Income tax expense		10,966		10,981		(15)		(0.1)	%		25,506		25,918		(412)		(1.6)	%
NET INCOME	NET INCOME		38,784		35,983		2,801		7.8	%	NET INCOME		42,047		40,299		1,748		4.3	%		98,041		95,405		2,636		2.8	%

Less: Dividends on preferred stock	Less: Dividends on preferred stock		803		803		—		—	%	Less: Dividends on preferred stock		803		803		—		—	%		2,410		2,410		—		—	%
NET INCOME APPLICABLE TO COMMON STOCK	NET INCOME APPLICABLE TO COMMON STOCK		$	37,981	$	35,180	$	2,801	8.0	%	NET INCOME APPLICABLE TO COMMON STOCK		$	41,244	$	39,496	$	1,748	4.4	%		$	95,631	$	92,995	$	2,636	2.8	%

2528

~~Comparison of three months ended March 31, 2021 and three months ended March 31, 2020~~

Revenues

Revenues during the three and nine months ended ~~March 31,~~September 30, 2021 increased ~~$4.8~~$24.7 million and $48.7 million, respectively, compared to the same ~~period~~periods in 2020, which resulted from the following changes (dollars in thousands):


		Three Months Ended								Three Months Ended							Nine Months Ended
		March 31,						Percentage		September 30,							September 30,
		2021		2020		Change				2021		2020		$ Change		% Change	2021		2020		$ Change		% Change
Revenues:	Revenues:								Revenues:
Retail revenues	Retail revenues	$	342,432	$	342,788	$	(356)	(0.1)%	Retail revenues	$	374,178	$	334,681	$	39,497	11.8%	$	1,039,237	$	981,828	$	57,409	5.8%
Wholesale revenues	Wholesale revenues	16,109		11,308		4,801		42.5%	Wholesale revenues	2,733		17,668		(14,935)		(84.5)%	23,760		33,477		(9,717)		(29.0)%
Miscellaneous revenues	Miscellaneous revenues	3,660		3,286		374		11.4%	Miscellaneous revenues	3,926		3,739		187		5.0%	10,628		9,668		960		9.9%
Total revenues	Total revenues	$	362,201	$	357,382	$	4,819	1.3%	Total revenues	$	380,837	$	356,088	$	24,749	7.0%	$	1,073,625	$	1,024,973	$	48,652	4.7%

Heating degree days:	Heating degree days:								Heating degree days:
Actual	Actual	2,704		2,434		270		11.1%	Actual	30		45		(15)		(33.3)%	3,309		3,119		190		6.1%
30-year average	30-year average	2,749		2,780					30-year average	56		59					3,309		3,304

Cooling degree days:									Cooling degree days:
Actual									Actual	882		827		55		6.7%	1,249		1,169		80		6.8%
30-year average									30-year average	788		787					1,129		1,131

The following table presents additional data on kWh sold:


								Three Months Ended					Nine Months Ended
		Three Months Ended March 31,						September 30,					September 30,
		2021	2020	kWh Change	% Change			2021	2020	kWh Change	% Change		2021	2020	kWh Change	% Change
kWh Sales (In Millions):	kWh Sales (In Millions):						kWh Sales (In Millions):
Residential	Residential	1,529	1,422	107	7.5	%	Residential	1,378	1,353	25	1.8	%	3,987	3,884	103	2.7	%
Small commercial and industrial	Small commercial and industrial	483	476	7	1.5	%	Small commercial and industrial	475	454	21	4.6	%	1,358	1,297	61	4.7	%
Large commercial and industrial	Large commercial and industrial	1,389	1,437	(48)	(3.3)	%	Large commercial and industrial	1,691	1,636	55	3.4	%	4,565	4,454	111	2.5	%
Public lighting	Public lighting	6	10	(4)	(40.0)	%	Public lighting	3	6	(3)	(50.0)	%	14	22	(8)	(36.4)	%
Sales – retail customers	Sales – retail customers	3,407	3,345	62	1.9	%	Sales – retail customers	3,547	3,449	98	2.8	%	9,924	9,657	267	2.8	%
Wholesale	Wholesale	647	485	162	33.4	%	Wholesale	63	678	(615)	(90.7)	%	882	1,352	(470)	(34.8)	%
Total kWh sold	Total kWh sold	4,054	3,830	224	5.8	%	Total kWh sold	3,610	4,127	(517)	(12.5)	%	10,806	11,009	(203)	(1.8)	%

The following graph shows the percentage changes in weather-normalized and actual retail electric sales volumes by customer class for the three months ended ~~March 31,~~September 30, 2021 as compared to the same period in the prior year:

The following graph shows the percentage changes in weather-normalized and actual retail electric sales volumes by customer class for the nine months ended September 30, 2021 as compared to the same period in the prior year:

2630

~~Retail Revenues~~During the three months ended September 30, 2021, revenue increased $24.7 million to $380.8 million compared to $356.1 million in the same period of the prior year, and, during the nine months ended September 30, 2021, revenue increased $48.7 million to $1,073.6 million compared to $1,025.0 million in the same period of the prior year. These changes were primarily the result of changes in the components of revenue shown below:

~~The decrease in retail revenues of $0.4 million was primarily due to the following (in millions):~~


~~Volume:~~
Net increase in the volume of kWh sold, primarily due to favorable weather in our service territory versus the comparable period, partially offset by lower weather normalized demand primarily due to the impacts of the COVID-19 pandemic	$	~~7.6~~
~~Price:~~
Net decrease in the weighted average price of retail kWh sold, primarily due to lower fuel revenues, including a $3.6 million reduction due to excess earnings under FAC provisions, and unfavorable block rate~~(1)~~ ~~and other retail rate variances~~	~~(11.0)~~

~~Other~~	~~3.0~~

~~Net decrease in retail revenues~~	$	~~(0.4)~~


$ in millions		Three months ended September 30, 2021 vs. 2020		Nine months ended September 30, 2021 vs. 2020
Retail revenues:

	Volume:
	Net increase in the volume of kWh sold, primarily due to favorable weather in our service territory versus the comparable period and higher weather-normalized demand attributable to the unfavorable demand impacts of the COVID-19 pandemic in the prior year	$	8.5	$	25.3
	Price:
	Net increase in the weighted average price of retail kWh sold, primarily due to higher fuel revenues, including a higher reduction due to excess earnings under FAC provision in the prior period, partially offset by unfavorable block rate(1) and other retail rate variances	27.1		20.9

	Other:
	Mostly due to increases in alternative revenue programs as a result of higher DSM shared savings and lost revenue recoveries	3.9		11.2

	Net change in retail revenues	39.5		57.4

Wholesale revenues:

	Volume:
	Net decrease in the volume of wholesale kWh sold. The amount of electricity available for wholesale sales is impacted by our retail load requirements, generation capacity and unit availability	(16.1)		(11.6)
	Price:
	Net increase in the weighted average price of wholesale kWh sold. Our ability to be dispatched in the MISO market is primarily driven by the locational marginal price of electricity and variable generation costs.	1.1		1.9

	Net change in wholesale revenues	(15.0)		(9.7)

Miscellaneous revenues		0.2		1.0

Net change in revenues		$	24.7	$	48.7

(1)Block rate variances are primarily attributable to our declining block rate structure, which generally provides for residential and commercial customers to be charged a lower per kWh rate at higher consumption levels. Therefore, as volumes increase, the weighted average price per kWh decreases and vice versa.

~~Wholesale Revenues~~

The increase in wholesale revenues of $4.8 million was primarily due to a $3.8 million volume increase and a $1.0 million increase in the weighted average price per kWh sold. We sold 646.8 million kWh in the wholesale market during the first three months of 2021 compared to 485.0 million kWh during the first three months of 2020. Our ability to be dispatched in the MISO market is primarily driven by the locational marginal price of electricity and variable generation costs. The amount of electricity available for wholesale sales is impacted by our retail load requirements, generation capacity and unit availability.

Operating Costs and Expenses

The following table illustrates our changes in Operating costs and expenses during the three and nine months ended ~~March 31,~~September 30, 2021 compared to the same ~~period~~periods in 2020 (in thousands):


		Three Months Ended									Three Months Ended								Nine Months Ended
		March 31,									September 30,								September 30,
		2021		2020		$ Change		% Change			2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Fuel	Fuel	$	84,731	$	68,788	$	15,943	23.2	%	Fuel	$	68,857	$	73,901	$	(5,044)	(6.8)	%	$	206,428	$	186,040	$	20,388	11.0	%
Power purchased	Power purchased	24,583		35,467		(10,884)		(30.7)	%	Power purchased	40,443		26,987		13,456		49.9	%	106,774		105,536		1,238		1.2	%
Operation and maintenance	Operation and maintenance	103,949		105,590		(1,641)		(1.6)	%	Operation and maintenance	117,045		100,455		16,590		16.5	%	337,375		300,703		36,672		12.2	%
Depreciation and amortization	Depreciation and amortization	63,089		60,708		2,381		3.9	%	Depreciation and amortization	64,797		62,359		2,438		3.9	%	190,880		184,166		6,714		3.6	%
Taxes other than income taxes	Taxes other than income taxes	12,951		12,057		894		7.4	%	Taxes other than income taxes	11,138		10,399		739		7.1	%	32,834		34,063		(1,229)		(3.6)	%

Total operating costs and expenses	Total operating costs and expenses	$	289,303	$	282,610	$	6,693	2.4	%	Total operating costs and expenses	$	302,280	$	274,101	$	28,179	10.3	%	$	874,291	$	810,508	$	63,783	7.9	%

Fuel

The ~~increase~~decreases/increases in fuel costs of ~~$15.9~~$5.0 million ~~was~~and $20.4 million during the three and nine months ended September 30, 2021, respectively, compared to the same periods of the prior year were primarily due to the ~~following:~~following changes:

•~~an $18.1 million increase due to the higher price of natural gas consumed versus the comparable period driven by increased market prices;~~

•~~a $14.3 million increase in the quantity of fuel consumed versus the comparable period;~~

•~~a $14.5 million decrease from deferred fuel costs; and~~

•~~a $1.7 million decrease due to the lower price of coal consumed versus the comparable period.~~


$ in millions		Three months ended September 30, 2021 vs. 2020		Nine months ended September 30, 2021 vs. 2020
Volume:
	Coal	$	5.6	$	53.7
	Natural gas	(18.2)		(42.0)
	Oil	(0.1)		0.1
	Net change in volume	(12.7)		11.8
Price:
	Coal	4.1		3.7
	Natural gas	18.4		48.2
	Oil	0.1		0.1
	Deferred fuel	(14.9)		(43.4)
	Net change in price	7.7		8.6

Net change in fuel expense		$	(5.0)	$	20.4

We are generally permitted to recover underestimated fuel and purchased power costs to serve our retail customers in future rates through quarterly FAC proceedings. These variances are deferred when incurred and amortized into expense in the same period that our rates are adjusted to reflect these variances. Additionally, fuel and purchased power costs incurred for wholesale energy sales are considered in the Off System Sales Margin rider.

Power Purchased

The ~~decrease~~increases in power purchased ~~power costs~~ of ~~$10.9~~$13.5 million ~~was~~and $1.2 million during the three and nine months ended September 30, 2021, respectively, compared to the same periods of the prior year were primarily due to the ~~following:~~following changes:

•~~a $19.2 million decrease due to a 65% decrease in the volume of power purchased during the period; partially offset by~~

•~~an $8.7 million increase in the market price of purchased power.~~


$ in millions	Three months ended September 30, 2021 vs. 2020		Nine months ended September 30, 2021 vs. 2020
Net change in the volume of power purchased primarily due to AES Indiana's generation units running less frequently during the third quarter of 2021, as well as the timing and duration of outages during these respective periods	$	30.2	$	(1.9)
Net change in the price of power purchased is primarily due to timing of FAC deferrals and amortization, variances in market prices, and changes in mix of contracted renewable and market power purchases	(15.7)		4.3
Other, net	(1.0)		(1.2)
Net change in power purchased costs	$	13.5	$	1.2

The volume of power purchased each period is primarily influenced by retail demand, generating unit capacity and outages, and the relative cost of producing power versus purchasing power in the market. The ~~primary driver for~~increase in the ~~$19.2 million~~ volume ~~decrease was~~of power purchased during the third quarter of 2021 is mostly attributed to lower unit availability due to ~~AES Indiana's generation units running more frequently during 2021, as well as~~ the timing and duration of outages, primarily an extended outage at Eagle Valley that began earlier in 2021 and currently remains in progress. Recovery of the increase volume of power purchased during ~~these respective periods.~~the third quarter of 2021 is subject to approval by the IURC through the FAC 133 application, which was filed on September 17, 2021 and remains pending. The market price of purchased power is influenced primarily by changes in the market price of delivered fuel (primarily natural gas), the supply of and demand for electricity, and the time of day during which power is purchased.

Operation and Maintenance

The ~~decrease~~increases in Operation and maintenance of ~~$1.6~~$16.6 million ~~was~~and $36.7 million during the three and nine months ended September 30, 2021, respectively, compared to the same periods of the prior year were primarily due to the ~~following:~~following changes:

•~~decreased maintenance expenses of $4.5 million primarily due to decreased outage costs, partially offset by~~

•~~higher insurance expense of $1.1 million.~~


$ in millions	Three months ended September 30, 2021 vs. 2020		Nine months ended September 30, 2021 vs. 2020
Increase in maintenance expenses primarily due to the timing of plant-related projects and increased outage costs	$	8.3	$	17.3
Increase in contracted services expense primarily due to storm costs	3.1		3.4
Increase in chemical expenses	0.5		2.5
Increase in charges from the Service Company	0.4		2.5
Increase in insurance premiums	0.4		2.1
Increase in compensation expenses, primarily pension service cost	0.1		2.1
Increase in write-offs of obsolete materials and supplies inventory	1.9		1.9
Increase in MISO non-purchased power costs (primarily transmission related expenses)	0.9		0.7
Other, net	1.0		4.2
Net change in operation and maintenance costs	$	16.6	$	36.7

Depreciation and Amortization

The ~~increase~~increases in Depreciation and amortization expense of $2.4 million ~~was~~and $6.7 million during the three and nine months ended September 30, 2021, respectively, compared to the same periods of the prior year were mostly attributed to the impact of additional assets placed in service.

~~Taxes Other Than Income Taxes~~

~~The increase in Taxes other than income taxes of $0.9 million was mostly attributed to higher property taxes of $1.0 million primarily as a result of higher assessed values.~~

Other Income / (Expense), Net

The following table illustrates our changes in Other income / (expense), net during the three and nine months ended ~~March 31,~~September 30, 2021 compared to the same period in 2020 (in thousands):


		Three Months Ended									Three Months Ended								Nine Months Ended
		March 31,									September 30,								September 30,
		2021		2020		$ Change		% Change			2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Other income/(expense), net	Other income/(expense), net									Other income/(expense), net
Allowance for equity funds used during construction	Allowance for equity funds used during construction	$	1,374	$	857	$	517	60.3	%	Allowance for equity funds used during construction	$	1,428	$	1,099	$	329	29.9	%	$	4,133	$	3,116	$	1,017	32.6	%
Interest expense	Interest expense	(30,067)		(30,081)		14		—	%	Interest expense	(31,544)		(32,741)		1,197		(3.7)	%	(93,810)		(96,757)		2,947		(3.0)	%

Other income / (expense), net		4,614		207		4,407		2,129.0	%
Loss on early extinguishment of debt										Loss on early extinguishment of debt	—		—		—		100.0	%	—		(2,415)		2,415		100.0	%
Other income, net										Other income, net	4,572		935		3,637		389.0	%	13,890		2,914		10,976		376.7	%
Total other income/(expense), net	Total other income/(expense), net	$	(24,079)	$	(29,017)	$	4,938	(17.0)	%	Total other income/(expense), net	$	(25,544)	$	(30,707)	$	5,163	(16.8)	%	$	(75,787)	$	(93,142)	$	17,355	(18.6)	%

Interest Expense

The decreases in Interest expense of $1.2 million and $2.9 million during the three and nine months ended September 30, 2021, respectively, compared to the same periods of the prior year were primarily due to increased capitalized interest.

Loss on Early Extinguishment of Debt

The decreases in Loss on early extinguishment of debt of $2.4 million during the nine months ended September 30, 2021 was primarily due to a make-whole premium and write-off of deferred financing costs due to the redemption of $405 million of 2020 IPALCO Notes and $65 million IPALCO Term Loan in the second quarter of 2020.

Other Income/(Expense), Net

The ~~increase~~increases in Other income/(expense), net of ~~$4.4~~$3.6 million ~~was~~and $11.0 million during the three and nine months ended September 30, 2021, respectively, were primarily due to ~~a decrease~~decreases in defined benefit plan costs of ~~$3.7~~$3.5 million and $10.6 million, respectively, due to lower interest cost and a higher expected return on plan assets ~~and lower interest cost~~ compared to the prior year.

KEY TRENDS AND UNCERTAINTIES

During the remainder of 2021 and beyond, we expect that our financial results will be driven primarily by retail demand, weather and maintenance costs. In addition, our financial results will likely be driven by many other factors including, but not limited to:

•regulatory outcomes and impacts;

•the passage of new legislation, implementation of regulations or other changes in regulation; and

•timely recovery of capital expenditures.

If favorable outcomes related to these factors do not occur, or if the challenges described below and elsewhere in this Quarterly Report impact us more significantly than we currently anticipate, then these factors, or other factors unknown to us, may impact our operating margin, net income and cash flows. We continue to monitor our operations and address challenges as they arise. For a discussion of the risks related to our business, see “Item 1. Business” and “Item 1A. Risk Factors” as described in IPALCO’s 2020 Form 10-K.

COVID-19 Pandemic

The COVID-19 pandemic has impacted global economic activity, including electricity and energy consumption, and caused significant volatility in financial markets. Responses to the COVID-19 pandemic by the State of Indiana and its residents and businesses ~~in particular,~~ continue to evolve ~~including with respect to business and school closures and limitations and other social distancing measures and the effectiveness and timing of~~as vaccine availability and ~~distribution efforts.~~usage continues and the State and businesses review and adjust the scope and requirements of social distancing measures.

Social distancing measures designed to slow the spread of the virus, such as business closures and operations limitations, impact energy demand within our service industry. In addition to the impacts to demand within our service territory, we also have incurred and expect to continue to incur expenses relating to COVID-19, and such expenses may include those that relate to events outside of our control. We experienced impacts from the pandemic in 2020 and into 2021 and expect to continue to experience impacts for the remainder of 2021, and any such impacts during that time or in other future periods could have material and adverse effects on our results of operations, financial condition and cash flows. The following discussion highlights our assessment of the impacts of the COVID-19 pandemic on our current financial and operating status, and our financial and operational outlook based on information known as of this filing. Also see "Item 1A. Risk Factors" to IPALCO’s 2020 Form 10-K.

Business Continuity - During the COVID-19 pandemic, we are taking a variety of measures to ensure our ability to generate, transmit, distribute and sell electric energy, to ensure the health and safety of our employees, contractors, customers and communities and to provide essential services to the communities in which we operate. We continue to respond to this global crisis through comprehensive measures to protect our employees and others while fulfilling our vital role in providing our customers with electric energy. While stay-at-home restrictions have been lifted in our service territory, most of our management and administrative personnel are able to work remotely, and we have not experienced significant issues affecting our operations or ability to maintain effective internal controls and produce reliable financial information. We prioritize the safety of our people and continue to develop targeted strategies, in line with legal and regulatory requirements, to promote vaccination in our business.

Demand - As the economic impact of the COVID-19 pandemic started to materialize in Indiana in the second half of March 2020 and continued for the duration of 2020 and into 2021, the COVID-19 pandemic primarily impacted our retail sales demand. Retail sales demand ~~including for the quarter ended March 31,~~decreased in 2020 mostly from small and large commercial and industrial customers, but has started to recover in 2021 as shown by the changes in weather-normalized volumes of kWh sold by customer class as follows:

~~Customer Class~~


	For the three				For the three				For the three				For the nine
	months ended				months ended				months ended				months ended
	March 31,				June 30,				September 30,				September 30,
Customer Class	2021 vs. 2020		2020 vs. 2019		2021 vs. 2020		2020 vs. 2019		2021 vs. 2020		2020 vs. 2019		2021 vs. 2020		2020 vs. 2019
Residential	(0.9)	%	1.6	%	(3.3)	%	6.6	%	(0.5)	%	3.9	%	(1.4)	%	3.7	%
Small commercial and industrial	(1.8)	%	(1.8)	%	8.2	%	(10.3)	%	3.4	%	(4.2)	%	2.8	%	(5.1)	%
Large commercial and industrial	(4.1)	%	(2.8)	%	7.9	%	(11.0)	%	3.0	%	(7.9)	%	2.2	%	(7.3)	%
Total	(2.4)	%	(0.8)	%	3.6	%	(4.9)	%	1.6	%	(3.1)	%	0.7	%	(2.8)	%

~~For the three months ended March 31, 2021 compared to the same period in 2020~~

~~Residential~~

~~(0.9)~~

~~Small commercial and industrial~~

~~(1.8)~~

~~Large commercial and industrial~~

~~(4.1)~~

As noted above, we also have incurred and expect to continue to incur expenses relating to COVID-19, however see Note 2, “Regulatory Matters - IURC COVID-19 Orders” to IPALCO’s 2020 Form 10-K for a discussion of regulatory measures which partially mitigate the impact of these expenses. WeWhile we have continued to experience COVID-19 impacts into ~~2021.~~2021, we continue to expect that such impacts would not be material, particularly with less expansive social distancing measures generally in place currently and improvements in energy demand. The ~~ultimate~~ magnitude and duration of the COVID-19 pandemic is unknown at this

time, however, and ~~may~~could have material and adverse effects on our results of operations, financial condition and cash flows in future periods.

Liquidity - We anticipate continuing to have sufficient liquidity to make all required payments, including payments for salaries and wages owed to our employees, during the COVID-19 pandemic. We also continue to not foresee a significant impact to our access to capital or our liquidity position as a result of the COVID-19 pandemic. For further discussion of our financial condition, liquidity, and capital requirements, see "Part I, Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity" of this Form 10-Q.

Credit Exposures - We continue to monitor and manage our credit exposures in a prudent manner. During the year ended December 31, 2020, we experienced credit-related impacts from utility customers due to the prohibition of electric utilities, including us, from discontinuing electric utility service to customers (prohibition ended August 14, 2020), and due to the economic impacts of the COVID-19 pandemic, which began to improve in 2021. See Note 1, "Overview and Summary of Significant Accounting Policies - Accounts Receivable" for further discussion of our allowance for credit losses. If these credit-related impacts from the COVID-19 pandemic continue into 2021 or beyond, further deterioration in our credit exposures and customer collections may result. See Note 2, “Regulatory

Matters - IURC COVID-19 Orders” to IPALCO’s 2020 Form 10-K for a discussion of regulatory measures which mitigate this impact.

Supply Chain - ~~Our supply chain management has remained robust during this challenging time and we~~We continue to closely manage and monitor ~~developments.~~developments in our supply chain. We are experiencing some indications of delays and price increases. The cost of fuel for example, specifically coal and natural gas, has risen and may remain at current levels or continue to rise through the winter months and into early 2022. Our exposure to fluctuations in the price of fuel is limited because of our FAC. If we are unable to timely or fully recover our fuel and purchased power costs, however, it could have a material adverse effect on our results of operations, financial condition and cash flows.

Capital Projects - During the COVID-19 pandemic, our construction projects are proceeding without material delays. For further discussion of our capital requirements, see "Part I, Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity" of this Form 10-Q.

CARES Act - The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by the U.S. Congress and signed into law on March 27, 2020. While we currently expect a limited impact from this legislation on our business, we have deferred the payment of federal payroll taxes in accordance with the provisions of this act. At ~~March 31,~~September 30, 2021, the total deferral was approximately $5.0 million.

See Note 12, "Risks and ~~Uncertainties~~Uncertainties"" to the Financial Statements of this Form 10-Q for more information.

Operational

As part of AES Indiana's December 2019 Integrated Resource Plan filing, AES Indiana retired 230 MW Petersburg Unit 1 on May 31, 2021 and has plans to retire ~~630~~415 MW ~~of coal-fired generation at~~ Petersburg ~~Units 1 and 2.~~Unit 2 in 2023. AES Indiana issued an all-source request for proposal to competitively procure replacement capacity by June 1, 2023, which is the first year AES Indiana is expected to have a capacity shortfall. Proposals were received through February 28, 2020 and are currently being evaluated. ~~On February 5,~~In January 2021, AES Indiana ~~announced~~executed an agreement to acquire a 195 MW solar project, expected to commence operations in 2023 and on June 16, 2021, AES Indiana received an order from the IURC approving the project. In July 2021, AES Indiana executed an agreement to acquire a 250 MW solar and 180 MWh energy storage facility expected to commence operations in 2024, subject to approval from the IURC. For further discussion, see Note 2, "Regulatory Matters - IRP Filing and Replacement Generation" to the Financial Statements of this Form 10-Q and Note 2, "Regulatory Matters - IRP Filing" in IPALCO’s 2020 Form 10-K.

Regulatory and Environmental

Please see Note 2, "Regulatory ~~Matters”~~Matters" to the Financial Statements of this Form 10-Q and Note 2, “Regulatory Matters” to IPALCO’s 2020 Form 10-K for a discussion of regulatory matters. We also are subject to numerous environmental and climate change laws and regulations in the jurisdictions in which we operate. We face certain risks and uncertainties related to these environmental and climate change laws and regulations, including existing and potential GHG legislation or regulations, and actual or potential laws and regulations pertaining to water discharges, waste management (including disposal or beneficial reuse of CCR) and certain air emissions, such as SO2, NOx, particulate matter and mercury. Such risks and uncertainties could result in increased capital expenditures or other compliance costs which could have a material adverse effect on our consolidated results of operations. Please see Note 8, “Commitments and Contingencies” to the Financial Statements of this Form 10-Q for a description of certain environmental matters. In addition, the following discussion of the impact of environmental laws and regulations on the Company updates the discussion provided in “Item 1. Business - Regulatory Matters” and “Item 1. Business - Environmental Matters” in IPALCO’s 2020 Form 10-K.

Climate Change Regulation

On August 31, 2018, the EPA published in the Federal Register proposed Emission Guidelines for Greenhouse Gas

Emissions from Existing Electric Utility Generating Units, known as the ACE Rule. On July 8, 2019, the EPA

published the final ACE Rule along with associated revisions to implementing regulations. The final ACE Rule

established CO2 emission rules for existing power plants under CAA Section 111(d) and replaced the EPA's 2015

CPP. In accordance with the ACE rule, the EPA determined that heat rate improvement measures are the Best

System of Emissions Reductions for existing coal-fired electric generating units. The final rule required the State of

Indiana to develop a State Plan to establish CO2 emission limits for designated facilities, including AES Indiana Petersburg's coal-fired electric generating units. States had three years to develop their plans under the rule.

However, on January 19, 2021, the D.C. Circuit vacated and remanded to EPA the ACE Rule, but withheld issuance of the mandate that would effectuate its decision. On February 22, 2021, the D.C. Circuit granted EPA’s unopposed motion for a partial stay of the issuance of the mandate on vacating the repeal of the CPP. On March 5, 2021, the D.C. Circuit issued the partial mandate effectuating the vacatur of the ACE Rule. In effect, the CPP will not take effect while EPA is addressing the remand of the ACE rule by promulgating a new Section 111(d) rule to regulate greenhouse gases from existing electric generating units. On October 29, 2021, the U.S. Supreme Court granted petitions to review the decision by the D.C. Circuit to vacate the ACE Rule. The impact of the results of such litigation and potential future greenhouse gas emissions regulations remains uncertain, but it could be material.

CSAPR

CSAPR, which became effective in January 2015, addresses the "good neighbor" provision of the CAA, which

prohibits sources within each state from emitting any air pollutant in an amount which will contribute significantly to

any other state’s nonattainment, or interference with maintenance of, any NAAQS. The CSAPR is implemented, in

part, through a market-based program under which compliance may be achievable through the acquisition and use

of emissions allowances created by the EPA. In October 2016, the EPA published a final rule to update the CSAPR

to address the 2008 ozone NAAQS (“CSAPR Update Rule”). The CSAPR Update Rule found that NOx ozone

season emissions in 22 states (including Indiana) affect the ability of downwind states to attain and maintain the

2008 ozone NAAQS, and accordingly, the EPA issued federal implementation plans that both generally provide

updated CSAPR NOx ozone season emission budgets for electric generating units within these states and that

implement these budgets through modifications to the CSAPR NOx ozone season allowance trading program.

Implementation began in the 2017 ozone season (May through September 2017). Affected facilities receive fewer

ozone season NOx allowances in 2017 and later, possibly resulting in the need to purchase additional allowances.

Additionally, on September 13, 2019, the D.C. Circuit remanded a portion of the October 2016 CSAPR Update Rule

to the EPA. In December 2018, EPA determined that the 2016 CSAPR Update Rule fully satisfied 20 states

(including Indiana) good neighbor obligations with respect to the 2008 Ozone NAAQS (“CSAPR Close-Out Rule”),

obviating the need for EPA to promulgate Federal Implementation Plans (FIPs) in these states. In October 2019, the

D.C. Circuit vacated and remanded the CSAPR Close-Out Rule. On July 28, 2020, the D.C. Circuit ordered EPA to

issue FIPs addressing seven states’ (including Indiana) outstanding 2008 NAAQS “good neighbor” obligations by

March 15, 2021. On April 30, 2021, EPA published a final rule to address the 2020 D.C. Circuit decision. EPA is issuing new or amended federal implementation plans for 12 states, including Indiana, with revised CSAPR NOx ozone season emission budgets for electric generating units within these states via a new CSAPR NOx Ozone Season Group 3 Trading Program. Implementation ~~is expected to begin~~began during the 2021 ozone season (May through September 2021) with an effective date ~~60 days following publication in the~~ ~~Federal Register~~of ~~the final rule.~~June 29, 2021. AES Indiana facilities will receive fewer ozone season NOx allowances for future NOx Ozone Seasons beginning in 2021 and later, possibly resulting in the need to purchase additional allowances.

At this time we cannot predict what the impact of these rule revisions or potential future legal outcomes, but any such impact could be material to our business, financial condition or results of operation.

Regional Haze Rule

EPA’s 1999 Regional Haze Rule established timelines for states to improve visibility in national parks and wilderness areas throughout the United States by establishing reasonable progress goals toward meeting a national goal of natural visibility conditions in Class I areas by the year 2064 through submittal of a series of state implementation plans (SIPs). Indiana’s SIP for the first planning period (through 2018) did not require any additional controls to be installed or operated on AES Indiana generating facilities. For all future SIP planning periods, states must evaluate whether additional emissions reduction measures may be needed to continue making reasonable progress toward natural visibility conditions. The deadline for submittal of the SIP covering the second planning period was extended to July 31, 2018. While Indiana did not meet this deadline, on September 28, 2021, IDEM published its Draft Indiana Regional Haze SIP for the Second Implementation Period for public comment. The draft SIP does not include additional requirements for AES Indiana EGUs or for other EGUs in Indiana. However, we cannot predict the possible outcome or potential impacts of this matter at this time. We would seek recover of capital expenditures; however, there is no guarantee we would be successful.

Environmental Wastewater Requirements

In June 2016, the EPA published the final national chronic aquatic life criterion for the pollutant, selenium, in fresh

water. On August 11, 2021, updates to IDEM’s water quality criteria for specific metals, including selenium, were adopted as final to reflect EPA’s criterion. AES Indiana facilities’ NPDES permits may be updated to include selenium water-quality based effluent limits based on a site-specific evaluation process, which includes determining if there is a reasonable potential to exceed the revised final selenium water quality standards for the specific receiving water body utilizing actual and/or projected discharge information for the AES Indiana generating facilities. As a result, it is not yet possible to predict the potential impacts of this criteria. However, if additional capital expenditures are necessary, they could be material. We would seek recovery of these capital expenditures; however, there is no guarantee we would be successful.

"Waters of the U.S." and “Navigable Waters Protection” Rules

In June 2015, the EPA and the U.S. Army Corps of Engineers ("the agencies") published a rule defining federal

jurisdiction over waters of the U.S., known as the "Waters of the U.S." (WOTUS) rule. This rule, which initially became effective in August 2015, could expand or otherwise change the number and types of waters or features subject to CWA permitting. However, after repealing the 2015 WOTUS rule on October 22, 2019, the agencies, on April 21, 2020, issued the final “Navigable Waters Protection” (NWP) rule which again revised the definition of waters of the U.S. On August 30, 2021, the U.S. District Court for the District of Arizona issued an order vacating and remanding the NWP Rule. This vacatur of the NWP Rule applies nationwide. As such, the agencies are interpreting waters of the U.S. consistent with the pre-2015 regulatory regime until further notice. It is too early to determine whether any outcome of litigation or current or future revisions to rules interpreting federal jurisdiction over waters over the U.S. might have a material impact on our business, financial condition and results of operations.

Macroeconomic and Political

Reference Rate Reform

As discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Trends and Uncertainties" of IPALCO's 2020 Form 10-K, in July 2017, the UK Financial Conduct Authority announced that it intends to phase out LIBOR by the end of 2021. In the U.S., the Alternative Reference Rate Committee at the Federal Reserve identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative rate for LIBOR; alternative reference rates in other key markets are under development. ~~On November~~

~~30, 2020, the~~The ICE Benchmark Association ("IBA") ~~announced~~has determined that it ~~had begun consultation on its intention to~~will cease publication of one week and two ~~specific~~month LIBOR rates by December 31, 2021, ~~while extending~~and will cease publication of the ~~timeline for the overnight,~~ one-month, three-month, six-month, and 12-month USD LIBOR rates ~~through~~by June 30, 2023. ~~On March 5, 2021, IBA published a feedback statement for the consultation, announcing its intention to cease the publication of these rates on the specified dates.~~ We maintain financial instruments that use LIBOR as an interest rate ~~benchmark. Although the full impact of the reform remains unknown, we have begun~~benchmark and will continue to engage with ~~our~~ counterparties to ~~discuss specific action items to be undertaken in order to prepare for amendments when they become due.~~make this transition.

CAPITAL RESOURCES AND LIQUIDITY

Overview

As of ~~March 31,~~September 30, 2021, we had unrestricted cash and cash equivalents of ~~$48.6~~$13.1 million and available borrowing capacity of ~~$160~~$115 million under our unsecured revolving Credit Agreement. All of AES Indiana’s long-term borrowings must first be approved by the IURC and the aggregate amount of AES Indiana’s short-term indebtedness must be approved by the FERC. We have approval from the FERC to borrow up to $500 million of short-term indebtedness outstanding at any time through July 26, 2022. In December 2018, we received an order from the IURC granting us authority through December 31, 2021 to, among other things, issue up to $350 million in aggregate principal amount of long-term debt, all of which authority remains available under the order as of ~~March 31,~~September 30, 2021, and refinance up to $185 million in existing indebtedness, of which ~~$95 million of~~no authority remains available under the order as of ~~March 31,~~September 30, 2021. This order also grants us authority to have up to $500 million of long-term credit agreements and liquidity facilities outstanding at any one time, of which $250 million remains available under the order as of ~~March 31,~~September 30, 2021. As an alternative to the sale of all or a portion of $65 million in principal of the long-term debt, we have the authority to issue up to $65 million of new preferred stock, all of which authority remains available under the order as of ~~March 31,~~September 30, 2021. We also have restrictions on the amount of new debt that may be issued due to contractual obligations of AES and by financial covenant restrictions under our existing debt obligations. We do not believe such restrictions will be a limiting factor in our ability to issue debt in the ordinary course of prudent business operations.

We believe that existing cash balances, cash generated from operating activities, and borrowing capacity on our committed Credit Agreement will be adequate for the foreseeable future to meet anticipated operating expenses, interest expense on outstanding indebtedness, recurring capital expenditures, and to pay dividends to AES U.S. Investments and CDPQ. Sources for principal payments on outstanding indebtedness and nonrecurring capital expenditures are expected to be obtained from: (i) existing cash balances; (ii) cash generated from operating activities; (iii) borrowing capacity on our committed Credit Agreement; (iv) additional debt financing; and (v) equity capital contributions. From time to time, we may elect to repurchase our outstanding debt through cash purchases, privately negotiated transactions or otherwise when management believes such repurchases are favorable to make. The amounts involved in any such repurchases may be material.

AES Indiana First Mortgage Bonds

In July 2021, the Indiana Finance Authority issued at the request of AES Indiana ~~has~~an aggregate principal amount of $95 million of ~~3.875% AES Indiana first mortgage bonds that are due August 1, 2021.~~Environmental Facilities Refunding Revenue Bonds, Series 2021A&B. For further discussion, please see Note 5, “Debt - AES Indiana First Mortgage Bonds.”

Cash Flows

The following table provides a summary of our cash flows (in ~~thousands~~)thousands):


		Three Months Ended March 31,							Nine Months Ended September 30,
		2021		2020		$ Change			2021		2020		$ Change
Net cash provided by operating activities	Net cash provided by operating activities	$	107,888	$	97,576	$	10,312	Net cash provided by operating activities	$	256,841	$	241,160	$	15,681
Net cash used in investing activities	Net cash used in investing activities	(69,767)		(63,203)		(6,564)		Net cash used in investing activities	(230,306)		(180,581)		(49,725)
Net cash used in financing activities	Net cash used in financing activities	(16,146)		(27,434)		11,288		Net cash used in financing activities	(40,026)		(49,803)		9,777
Net change in cash and cash equivalents	Net change in cash and cash equivalents	21,975		6,939		15,036		Net change in cash and cash equivalents	(13,491)		10,776		(24,267)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	26,622		48,552		(21,930)		Cash, cash equivalents and restricted cash at beginning of period	26,622		48,552		(21,930)
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	48,597	$	55,491	$	(6,894)	Cash, cash equivalents and restricted cash at end of period	$	13,131	$	59,328	$	(46,197)

Operating Activities

The following table summarizes the key components of our consolidated operating cash flows (in thousands):


		Three Months Ended March 31,							Nine Months Ended September 30,
		2021		2020		$ Change			2021		2020		$ Change
Net income	Net income	$	38,784	$	35,983	$	2,801	Net income	$	98,041	$	95,405	$	2,636
Depreciation and amortization	Depreciation and amortization	63,089		60,708		2,381		Depreciation and amortization	190,880		184,166		6,714
Deferred income taxes and investment tax credit adjustments - net	Deferred income taxes and investment tax credit adjustments - net	922		2,467		(1,545)		Deferred income taxes and investment tax credit adjustments - net	6,677		(2,001)		8,678
Other adjustments to net income	Other adjustments to net income	(376)		243		(619)		Other adjustments to net income	(1,183)		2,305		(3,488)
Net income, adjusted for non-cash items	Net income, adjusted for non-cash items	102,419		99,401		3,018		Net income, adjusted for non-cash items	294,415		279,875		14,540
Net change in operating assets and liabilities(1)	Net change in operating assets and liabilities(1)	5,469		(1,825)		7,294		Net change in operating assets and liabilities(1)	(37,574)		(38,715)		1,141
Net cash provided by operating activities	Net cash provided by operating activities	$	107,888	$	97,576	$	10,312	Net cash provided by operating activities	$	256,841	$	241,160	$	15,681

(1) Refer to the table below for explanations of the variance in operating assets and liabilities.	(1) Refer to the table below for explanations of the variance in operating assets and liabilities.							(1) Refer to the table below for explanations of the variance in operating assets and liabilities.

The net change in operating assets and liabilities for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020 was driven by changes in the following (in thousands):


Increase from ~~inventories is primarily due to higher consumption in 2021~~	$	~~20,833~~
~~Increase from~~ accounts payable is primarily due to timing of payments	~~11,550~~$	49,449
Increase from ~~accrued interest is due to timing of interest payments~~	~~8,582~~
~~Decrease from prepayments and other current assets~~inventories is primarily due to ~~increased funding with the Service Company in 2021~~higher current year coal consumption, partially offset by higher current year purchases	~~(18,111)~~32,338
Decrease from short-term and long-term regulatory assets and liabilities is primarily due to higher deferred fuel expense in 2021	~~(11,679)~~(43,918)
Decrease from higher accounts receivable balances due to higher current year revenue and timing of collections	(14,973)
Decrease from accrued taxes payable/receivable is primarily due to lower income tax expense in the current year	(9,499)
Decrease from pension and other postretirement benefit assets and liabilities is primarily due to overfunded pension plan assets in 2021, relating to the actuarial valuation performed at prior year end	(7,247)
Other	~~(3,881)~~(5,009)
Net change in operating assets and liabilities	$	~~7,294~~1,141

Investing Activities

Net cash used in investing activities increased ~~$6.6~~$49.7 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020, which was primarily driven by (in thousands):


Higher cash outflows for capital expenditures due to higher growth related capital expenditures primarily from TDSIC Plan investments, partially offset by lower maintenance and environmental related capital expenditures	$	~~(8,302)~~(48,014)
Higher cash outflows on cost of removal and regulatory recoverable ARO payments due to timing of such payments	(2,463)
Other	~~1,738~~752
Net change in investing activities	$	~~(6,564)~~(49,725)

Financing Activities

Net cash used in financing activities decreased ~~$11.3~~$9.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020, which was primarily driven by (in thousands):


Increase from net borrowings under revolving credit facilities due to higher net draws on AES Indiana's line of credit in 2021	$		~~15,000~~
~~Higher distributions to shareholders~~	~~(3,442)~~10,000
Other	~~(270)~~(223)
Net change in financing activities	$	~~11,288~~9,777

Capital Requirements

Capital Expenditures

Our capital expenditure program, including development and permitting costs, for the three-year period from 2021 through 2023 (including amounts already expended in the first ~~three~~nine months of 2021) is currently estimated to cost approximately $1.5 billion (excluding environmental compliance), and includes estimates as follows (amounts in millions):


								For the three-year period										For the three-year period
		2021		2022		2023		from 2021 through 2023				2021		2022		2023		from 2021 through 2023
Transmission and distribution related additions, improvements and extensions	Transmission and distribution related additions, improvements and extensions	$	287	$	268	$	287	$	842	(1)	Transmission and distribution related additions, improvements and extensions	$	110	$	78	$	74	$	262	(1)
Power plant related projects		55		266		222		543
TDSIC Plan investments											TDSIC Plan investments	177		190		213		580		(2)
Power generation related projects											Power generation related projects	55		266		222		543
Other miscellaneous equipment	Other miscellaneous equipment	63		53		35		151			Other miscellaneous equipment	63		53		35		151
Total estimated costs of capital expenditure program	Total estimated costs of capital expenditure program	$	405	$	587	$	544	$	1,536		Total estimated costs of capital expenditure program	$	405	$	587	$	544	$	1,536

(1) Additions, improvements and extensions to transmission and distribution lines, substations, power factor and voltage regulating equipment, distribution transformers and street lighting facilities	(1) Additions, improvements and extensions to transmission and distribution lines, substations, power factor and voltage regulating equipment, distribution transformers and street lighting facilities										(1) Additions, improvements and extensions to transmission and distribution lines, substations, power factor and voltage regulating equipment, distribution transformers and street lighting facilities
(2) Includes spending under AES Indiana's TDSIC plan approved by the IURC on March 4, 2020 for eligible transmission, distribution and storage system improvements totaling $1.2 billion from 2020 through 2027. Total TDSIC costs expended from project inception through September 30, 2021 were $274.8 million.											(2) Includes spending under AES Indiana's TDSIC plan approved by the IURC on March 4, 2020 for eligible transmission, distribution and storage system improvements totaling $1.2 billion from 2020 through 2027. Total TDSIC costs expended from project inception through September 30, 2021 were $274.8 million.

The amounts described in the capital expenditure program above include spending under AES Indiana's TDSIC plan approved by the IURC on March 4, 2020 for eligible transmission, distribution and storage system improvements totaling $1.2 billion from 2020 through 2027 (which includes estimated spending of $176.5 million in 2021, $190.0 million in 2022 and $212.6 million in 2023, respectively). Total TDSIC costs expended from project inception through March 31, 2021 were $176.8 million.

Additionally, estimated capital expenditure spending on environmental compliance costs for the three-year period from 2021 through 2023 includes the following (amounts in millions):


		Total Estimated Costs		Total Costs Expended		Remaining Costs			Total Estimated Costs		Total Costs Expended		Remaining Costs
		of Project		Through March 31, 2021		of Project			of Project		Through September 30, 2021		of Project
NAAQS SO2 (1)	NAAQS SO2 (1)	$	27	$	26	$	1	NAAQS SO2 (1)	$	27	$	27	$	—
Cooling water intake regulations (2)	Cooling water intake regulations (2)	$	9	$	2	$	7	Cooling water intake regulations (2)	$	9	$	2	$	7

(1) Includes spending for projects underway related to environmental compliance for NAAQS SO2.	(1) Includes spending for projects underway related to environmental compliance for NAAQS SO2.							(1) Includes spending for projects underway related to environmental compliance for NAAQS SO2.
(2) Includes spending for studies related to cooling water intake requirements in section 316(b) of the CWA.	(2) Includes spending for studies related to cooling water intake requirements in section 316(b) of the CWA.							(2) Includes spending for studies related to cooling water intake requirements in section 316(b) of the CWA.

Please see “Item 1. Business - Environmental Matters" in IPALCO’s 2020 Form 10-K for additional details on each of these projects.

Credit Ratings

Our ability to borrow money or to refinance existing indebtedness and the interest rates at which we can borrow money or refinance existing indebtedness are affected by our credit ratings. In addition, the applicable interest rates on AES Indiana’s Credit Agreement (as well as the amount of certain other fees in the Credit Agreement) are dependent upon the credit ratings of AES Indiana. Downgrades in the credit ratings of AES could result in AES Indiana’s and/or IPALCO’s credit ratings being downgraded. Any reduction in our debt or credit ratings may adversely affect the trading price of our outstanding debt securities.

The following table presents the debt ratings and credit ratings (issuer/corporate rating) and outlook for IPALCO and AES Indiana.

Debt ratings

IPALCO

AES Indiana

Outlook

Fitch Ratings

BBB (a)

A (b)

Stable

Moody’s Investors Service

Baa3 (a)

A2 (b)

Stable

S&P Global Ratings

BBB- (a)

A- (b)

~~Stable~~Positive

Credit ratings

IPALCO

AES Indiana

Outlook

Fitch Ratings

BBB-

BBB+

Stable

Moody’s Investors Service

—

Baa1

Stable

S&P Global Ratings

BBB

~~Stable~~Positive

(a)Ratings relate to IPALCO’s Senior Secured ~~Notes~~Notes.

(b)Ratings relate to AES Indiana’~~s Senior Secured Bonds.~~ first mortgage bonds.

We cannot predict whether our current debt and credit ratings or the debt and credit ratings of AES Indiana will remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn entirely by a rating agency. A security rating is not a recommendation to buy, sell or hold securities. Such ratings may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.

Dividend Distributions

All of IPALCO’s outstanding common stock is held by AES U.S. Investments and CDPQ. During the first ~~three~~nine months of 2021 and 2020, IPALCO paid ~~$30.1~~$96.1 million and ~~$26.6~~$94.0 million, respectively, in ~~dividends and returns of capital~~distributions to its shareholders. Future distributions to our shareholders will be determined at the discretion of our Board of Directors and will depend primarily on dividends received from AES Indiana. Dividends from AES Indiana are affected by AES Indiana’s actual results of operations, financial condition, cash flows, capital requirements, regulatory considerations, and such other factors as AES Indiana’s Board of Directors deems relevant.

Critical Accounting Policies and Estimates

The condensed consolidated financial statements of IPALCO are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities

at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented.

The Company’s significant accounting policies are described in Note 1, "Overview and Summary of Significant Accounting Policies" of our 2020 Form 10-K. The Company’s critical accounting estimates are described in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the 2020 Form 10-K. An accounting estimate is considered critical if the estimate requires management to make an assumption about matters that were highly uncertain at the time the estimate was made, different estimates reasonably could have been used, or if changes in the estimate that would have a material impact on the Company’s financial condition or results of operations are reasonably likely to occur from period to period. Management believes that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. The Company has reviewed and determined that these remain as critical accounting policies as of and for the nine months ended September 30, 2021.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There have been no material changes to our quantitative and qualitative disclosure about market risk as previously disclosed in the 2020 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures — The Company, under the supervision and with the participation of its management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of its “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2021, to ensure that information required to be disclosed by the Company in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Controls over Financial Reporting — There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, we are subject to various lawsuits, actions, claims, and other proceedings. We are also from time to time involved in other reviews, investigations and proceedings by governmental and regulatory agencies regarding our business, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. We have accrued in our Financial Statements for litigation and claims where it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We believe the amounts provided in our Financial Statements, as prescribed by GAAP, for these matters are adequate in light of the probable and estimable contingencies. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, claims and other matters (including those matters noted below), and to comply with applicable laws and regulations will not exceed the amounts reflected in our Financial Statements. As such, costs, if any, that may be incurred in excess of those amounts provided for in our Financial Statements cannot be reasonably determined, but could be material.

Please see Note 7, “Commitments and Contingencies” to the Financial Statements included in Part I - Financial Information of this Form 10-Q for a summary of certain legal proceedings involving us. In addition, our Form 10-K for the fiscal year ended December 31, 2020 and the Notes to IPALCO's Consolidated Financial Statements included therein contain descriptions of certain legal proceedings in which we are or were involved. The information in or incorporated by reference into this Item 1 to Part II is limited to certain recent developments concerning our

legal proceedings and new legal proceedings, since the filing of such Form 10-K, and should be read in conjunction with such Form 10-K and our Form ~~10-Q.~~10-Qs.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors as previously disclosed in the 2020 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit No.			Document

31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			XBRL Instance Document (filed herewith as provided in Rule 406T of Regulation S-T)
101.SCH			XBRL Taxonomy Extension Schema Document (filed herewith as provided in Rule 406T of Regulation S-T)
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith as provided in Rule 406T of Regulation S-T)
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document (filed herewith as provided in Rule 406T of Regulation S-T)
101.LAB			XBRL Taxonomy Extension Label Linkbase Document (filed herewith as provided in Rule 406T of Regulation S-T)
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith as provided in Rule 406T of Regulation S-T)

3743

SIGNATURES

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

IPALCO ENTERPRISES, INC.

Date:

~~May 5,~~November 3, 2021

/s/ Gustavo Garavaglia

Gustavo Garavaglia

Vice President and Chief Financial Officer

(Principal Financial Officer)

Date:

~~May 5,~~November 3, 2021

/s/ Jon S. Byers

Jon S. Byers

Controller

(Principal Accounting Officer)

3844


	Three Months Ended March 31,
Gains and losses on cash flow hedges (Note 4):	2021		2020
Balance at January 1	$	(43,420)	$	(19,750)
Other comprehensive gain (loss) before reclassifications	30,050		(36,313)
Amounts reclassified from AOCI to earnings	(456)		0
Balance at March 31	$	(13,826)	$	(56,063)