-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BZz4v/ku7f5ZppLSTbqUQijtmOGIwsu+1+PTDBkeNqlioiDoHtYnd5EVU632rNW0 Er+uyBBMaKITL1HlxiLktA== 0000049816-98-000018.txt : 19980514 0000049816-98-000018.hdr.sgml : 19980514 ACCESSION NUMBER: 0000049816-98-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS POWER CO CENTRAL INDEX KEY: 0000049816 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 370344645 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03004 FILM NUMBER: 98618076 BUSINESS ADDRESS: STREET 1: 500 S 27TH ST STREET 2: C/O HARRIS TRUST & SAVINGS BANK CITY: DECATUR STATE: IL ZIP: 62525-1805 BUSINESS PHONE: 2174246600 FORMER COMPANY: FORMER CONFORMED NAME: ILLINOIS IOWA POWER CO DATE OF NAME CHANGE: 19660822 10-Q 1 10-Q FOR PERIOD ENDED 03/31/98 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to __________ Commission Registrants; State of Incorporation; IRS Employer File Number Address; and Telephone Number Identification No. 1-11327 Illinova Corporation 37-1319890 (an Illinois Corporation) 500 S. 27th Street Decatur, IL 62525 (217) 424-6600 1-3004 Illinois Power Company 37-0344645 (an Illinois Corporation) 500 S. 27th Street Decatur, IL 62525 (217) 424-6600 Indicate by check mark whether the registrants (1) have 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 report), and (2) have been subject to such filing requirements for the past 90 days. Illinova Yes X No Corporation ---- ---- Illinois Power Yes X No Company ---- ---- Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date: Illinova Corporation Common stock, no par value, 71,711,837 shares outstanding at April 30, 1998 Illinois Power Company Common stock, no par value, 66,215,292 shares outstanding held by Illinova Corporation at April 30, 1998 ILLINOVA CORPORATION ILLINOIS POWER COMPANY This combined Form 10-Q is separately filed by Illinova Corporation and Illinois Power Company. Information contained herein relating to Illinois Power Company is filed by Illinova Corporation and separately by Illinois Power Company on its own behalf. Illinois Power Company makes no representation as to information relating to Illinova Corporation or its subsidiaries, except as it may relate to Illinois Power Company. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998 INDEX PAGE NO. Part I. FINANCIAL INFORMATION Item 1. Financial Statements Illinova Corporation Consolidated Balance Sheets 3 - 4 Consolidated Statements of Income 5 Consolidated Statements of Cash Flows 6 Illinois Power Company Consolidated Balance Sheets 7 - 8 Consolidated Statements of Income 9 Consolidated Statements of Cash Flows 10 Notes to Consolidated Financial Statements of Illinova Corporation and Illinois Power Company 11 - 15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for Illinova Corporation and Illinois Power Company 16 - 22 Part II. OTHER INFORMATION Item 1: Legal Proceedings 23 Item 4: Submission of Matters to a Vote of Security Holders 24 Item 6: Exhibits and Reports on Form 8-K 24 Signatures 25 - 26 Exhibit Index 27 PART I. FINANCIAL INFORMATION ILLINOVA CORPORATION CONSOLIDATED BALANCE SHEETS (See accompanying Notes to Consolidated Financial Statements)
MARCH 31, DECEMBER 31, 1998 1997 ASSETS (Unaudited) (Audited) (Millions of Dollars) Utility Plant, at original cost Electric (includes construction work in progress of $181.3 million and $214.3 million, respectively) $ 6,723.5 $ 6,690.4 Gas (includes construction work in progress of $10.9 million and $10.7 million, respectively) 667.3 663.0 ---------- ---------- 7,390.8 7,353.4 Less-Accumulated depreciation 2,843.2 2,808.1 ---------- ---------- 4,547.6 4,545.3 Nuclear fuel in process 6.2 6.3 Nuclear fuel under capital lease 128.1 126.7 ---------- ---------- Total utility plant 4,681.9 4,678.3 ---------- ---------- Investments and Other Assets 207.8 198.8 ---------- ---------- Current Assets Cash and cash equivalents 70.6 33.0 Accounts receivable (less allowance for doubtful accounts of $5.5 million Service 186.4 115.6 Other 72.3 102.3 Accrued unbilled revenue 66.6 86.3 Materials and supplies, at average cost 103.2 118.6 Prepayments and other 33.3 64.4 ---------- ---------- Total current assets 532.4 520.2 ---------- ---------- Deferred Charges 196.7 185.7 ---------- ---------- Total deferred charges 196.7 185.7 ---------- ---------- $ 5,618.8 $ 5,583.0 ========== ==========
ILLINOVA CORPORATION CONSOLIDATED BALANCE SHEETS (See accompanying Notes to Consolidated Financial Statements) MARCH 31, DECEMBER 31, 1998 1997 CAPITAL AND LIABILITIES (Unaudited) (Audited) (Millions of Dollars) Capitalization Common stock - No par value, 200,000,000 shares authorized; 71,711,837 and 71,681,937 shares outstanding, respectively, stated at $ 1,425.7 $ 1,425.7 Less - Deferred compensation - ESOP 9.1 10.2 Retained earnings 52.7 51.7 Less - Capital stock expense 7.3 7.3 Less - 3,970,100 and 4,000,000 shares of common stock in treasury, respectively, at cost 89.8 90.4 ---------- --------- Total common stock equity 1,372.2 1,369.5 Preferred stock of subsidiary 57.1 57.1 Company obligated mandatorily redeemable preferred stock of subsidiary 197.0 197.0 Long-term debt 140.0 100.0 Long-term debt of subsidiary 1,661.0 1,617.5 ---------- ---------- Total capitalization 3,427.3 3,341.1 ---------- ---------- Current Liabilities Accounts payable 158.9 177.3 Notes payable 308.6 415.3 Long-term debt and lease obligations of subsidiary maturing within one year 98.1 87.5 Other 168.9 181.6 ---------- ---------- Total current liabilities 734.5 861.7 ---------- ---------- Deferred Credits Accumulated deferred income taxes 989.9 969.0 Accumulated deferred investment tax credits 206.5 208.3 Other 260.6 202.9 ---------- ---------- Total deferred credits 1,457.0 1,380.2 ---------- ---------- $ 5,618.8 $ 5,583.0 ========== ========== ILLINOVA CORPORATION CONSOLIDATED STATEMENTS OF INCOME (See accompanying Notes to Consolidated Financial Statements) THREE MONTHS ENDED MARCH 31, 1998 1997 (Unaudited) (Millions except per share) Operating Revenues: Electric $ 276.6 $ 282.2 Electric interchange 96.3 26.6 Gas 116.6 164.0 Diversified enterprises 85.9 97.6 ------------ ------------ Total 575.4 570.4 ------------ ------------ Operating Expenses: Fuel for electric plants 55.7 45.3 Power purchased 97.1 35.8 Gas purchased for resale 66.0 99.7 Diversified enterprises 94.7 108.4 Other operating expenses 79.8 59.4 Maintenance 29.0 19.7 Depreciation & amortization 50.7 49.0 General taxes 38.7 38.7 ------------ ------------ Total 511.7 456.0 ------------ ------------ Operating Income 63.7 114.4 ------------ ------------ Other Income and Deductions: Miscellaneous-net (1.5) .8 Equity earnings in affiliates 5.5 4.0 ------------ ------------ Total 4.0 4.8 Income Before Interest Charges and Income Taxes 67.7 119.2 ------------ ------------ Interest Charges: Interest expense 36.6 38.2 Allowance for borrowed funds used during construction (1.1) (1.4) Preferred dividend requirements of subsidiary 4.9 5.5 ------------ ------------ Total 40.4 42.3 ------------ ------------ Income Before Income Taxes 27.3 76.9 ------------ ------------ Income Taxes 4.3 32.9 ------------ ------------ Net Income Applicable to Common Stock $ 23.0 $ 44.0 ============ ============ Earnings per common share (basic and diluted) $0.32 $0.58 Cash dividends declared per common share $0.31 $0.31 Cash dividends paid per common share $0.31 $0.31 Weighted average number of common shares outstanding during period 71,701,253 75,681,937 ILLINOVA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (See accompanying Notes to Consolidated Financial Statements) THREE MONTHS ENDED MARCH 31, 1998 1997 (Unaudited) (Millions of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 23.0 $ 44.0 Items not requiring cash, net 44.4 69.6 Changes in assets and liabilities 62.0 1.2 -------- -------- Net cash provided by operating activities 129.4 114.8 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures (47.8) (33.9) Other investing activities (8.5) (15.2) -------- -------- Net cash used in investing activities (56.3) (49.1) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends on common stock (22.2) (23.5) Reissuance of common stock from treasury 0.7 -- Redemptions - Short-term debt (115.6) (136.2) Issuances - Short-term debt 8.9 -- Long-term debt 92.4 100.0 Other financing activities 0.3 0.7 --------- --------- Net cash used in financing activities (35.5) (59.0) --------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS 37.6 6.7 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 33.0 24.6 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70.6 $ 31.3 ========= ========= ILLINOIS POWER COMPANY CONSOLIDATED BALANCE SHEETS (See accompanying Notes to Consolidated Financial Statements) MARCH 31, DECEMBER 31, 1998 1997 ASSETS (Unaudited) (Audited) (Millions of Dollars) Utility Plant, at original cost Electric (includes construction work in progress of $181.3 million and $214.3 million, respectively) $ 6,723.5 $ 6,690.4 Gas (includes construction work in progress of $10.9 million and $10.7 million, respectively) 667.3 663.0 ------------ ------------ 7,390.8 7,353.4 Less-Accumulated depreciation 2,843.2 2,808.1 ------------ ------------ 4,547.6 4,545.3 Nuclear fuel in process 6.2 6.3 Nuclear fuel under capital lease 128.1 126.7 ------------ ------------ Total utility plant 4,681.9 4,678.3 ------------ ------------ Investments and Other Assets 5.8 5.9 ------------ ------------ Current Assets Cash and cash equivalents 58.2 17.8 Accounts receivable (less allowance for doubtful accounts of $5.5 million) Service 186.4 115.6 Other 12.5 16.6 Accrued unbilled revenue 66.6 86.3 Materials and supplies, at average cost 102.1 117.3 Prepayments and other 24.9 61.2 ------------ ------------ Total current assets 450.7 414.8 ------------ ------------ Deferred Charges 202.3 192.5 ------------ ------------ Total deferred charges 202.3 192.5 ------------ ------------ $ 5,340.7 $ 5,291.5 ============ ============ ILLINOIS POWER COMPANY CONSOLIDATED BALANCE SHEETS (See accompanying Notes to Consolidated Financial Statements) MARCH 31, DECEMBER 31, 1998 1997 CAPITAL AND LIABILITIES (Unaudited) (Audited) (Millions of Dollars) Capitalization Common stock - No par value, 100,000,000 shares authorized; 75,643,937 shares issued, stated at $ 1,424.6 $ 1,424.6 Retained earnings 115.0 89.5 Less - Capital stock expense 7.3 7.3 Less - 9,428,645 shares of common stock in treasury at cost 207.7 207.7 ----------- ------------ Total common stock equity 1324.6 1229.1 Preferred stock 57.1 57.1 Company obligated mandatorily redeemable preferred stock 197.0 197.0 Long-term debt 1,661.0 1,617.5 ------------ ------------ Total capitalization 3,239.7 3,170.7 ------------ ------------ Current Liabilities Accounts payable 105.9 102.7 Notes payable 299.7 376.8 Long-term debt and lease obligations maturing within one year 98.1 87.5 Other 125.9 162.1 ------------ ------------ Total current liabilities 629.6 729.1 ------------ ------------ Deferred Credits Accumulated deferred income taxes 1,004.4 980.6 Accumulated deferred investment tax credits 206.5 208.3 Other 260.5 202.8 ------------ ------------ Total deferred credits 1,471.4 1,391.7 ------------ ------------ $ 5,340.7 $ 5,291.5 ============ ============ ILLINOIS POWER COMPANY CONSOLIDATED STATEMENTS OF INCOME (See accompanying Notes to Consolidated Financial Statements) THREE MONTHS ENDED MARCH 31, 1998 1997 (Unaudited) (Millions of Dollars) Operating Revenues: Electric $ 276.6 $ 282.2 Electric interchange 96.3 26.6 Gas 116.6 164.0 ------------- ------------- Total 489.5 472.8 ------------- ------------- Operating Expenses and Taxes: Fuel for electric plants 55.7 45.3 Power purchased 97.1 35.8 Gas purchased for resale 66.0 99.7 Other operating expenses 79.8 59.4 Maintenance 29.0 19.7 Depreciation & amortization 50.7 49.0 General taxes 38.7 38.7 Income taxes 10.7 36.3 ------------- ------------- Total 427.7 383.9 ------------- ------------- Operating Income 61.8 88.9 ------------- ------------- Other Income and Deductions, Net 1.6 .6 ------------- ------------- Income Before Interest Charges 63.4 89.5 ------------- ------------- Interest Charges and Other: Interest expense 34.1 35.9 Allowance for borrowed funds used during construction (1.1) (1.4) ------------- ------------- Total 33.0 34.5 ------------- ------------- Net Income 30.4 55.0 Preferred dividend requirements 4.9 5.5 ------------- ------------- Net Income Applicable to Common Stock $ 25.5 $ 49.5 ============= ============= ILLINOIS POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (See accompanying Notes to Consolidated Financial Statements) THREE MONTHS ENDED MARCH 31, 1998 1997 (Unaudited) (Millions of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 30.4 $ 55.0 Items not requiring cash, net 47.4 65.3 Changes in assets and liabilities 61.7 8.5 -------------- --------------- Net cash provided by operating 139.5 128.8 activities -------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures (47.8) (33.9) Other investing activities 0.6 0.4 -------------- --------------- Net cash used in investing (47.2) (33.5) activities -------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends on preferred and common stock (27.2) (29.0) Repurchase of common stock -- (4.3) Redemptions - Short-term debt (77.1) (59.2) Issuances Long-term debt 52.4 -- Other financing activities -- 0.6 -------------- --------------- Net cash used in financing activities (51.9) (91.9) -------------- --------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 40.4 3.4 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 17.8 12.5 -------------- --------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 58.2 $ 15.9 ============== ============== ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS GENERAL Financial statement note disclosures, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted from this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission (SEC). However, in the opinion of Illinova Corporation (Illinova) and Illinois Power Company (IP), the disclosures and information contained in this Form 10-Q are adequate and not misleading. See the consolidated financial statements and the accompanying notes in Illinova's 1997 Annual Report to Shareholders (included in the Proxy Statement), the consolidated financial statements and the accompanying notes in IP's 1997 Annual Report to Shareholders (included in the Information Statement), and Illinova's and IP's 1997 Form 10-K filings to the SEC for information relevant to the consolidated financial statements contained herein, including information as to certain regulatory and environmental matters and as to the significant accounting policies followed. In the opinion of Illinova, the accompanying unaudited March 31, 1998 and audited December 31, 1997 consolidated financial statements for Illinova reflect all adjustments necessary to present fairly the Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997, the Consolidated Statements of Income for the three months ended March 31, 1998 and 1997, and the Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997. In addition, it is Illinova's and IP's opinion that the accompanying unaudited consolidated financial statements for IP reflect all adjustments necessary to present fairly the Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997, the Consolidated Statements of Income for the three months ended March 31, 1998 and 1997, and the Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997. Due to seasonal and other factors which are characteristic of electric and gas utility operations, interim period results are not necessarily indicative of results to be expected for the year. The consolidated financial statements of Illinova include the accounts of Illinova, IP, Illinova Generating Company (IGC), Illinova Insurance Company (IIC), Illinova Energy Partners, Inc. (IEP), and Illinova Business Enterprises, Inc. (IBE). IBE was incorporated in 1998. All significant intercompany balances and transactions have been eliminated from the consolidated financial statements. All non-utility operating transactions are included in the sections titled "Diversified enterprises", "Interest expense", "Income taxes" and "Other Income and Deductions" in Illinova's Consolidated Statements of Income. This represents a format change to Illinova's Consolidated Statements of Income in 1997 during which 1997 amounts were reclassified to conform to the new 1998 presentation. The consolidated financial statements of IP include the accounts of Illinois Power Capital, L.P. and Illinois Power Financing I (IPFI). All significant intercompany balances and transactions have been eliminated from the consolidated financial statements. All non-utility operating transactions are included in the section titled "Other Income and Deductions, Net" in IP's Consolidated Statements of Income. REGULATORY AND LEGAL MATTERS OPEN ACCESS AND COMPETITION On December 16, 1997, Illinois Governor Edgar signed electric deregulation legislation, An Act in Relation to the Competitive Provision of Utility Services (P.A. 90-561). P.A. 90-561 guarantees IP's residential customers a 15 percent decrease in base electric rates beginning August 1, 1998, and an additional 5 percent decrease effective on May 1, 2002. The rate decreases are expected to result in revenue reductions of approximately $40 million in 1998, approximately $80 million in each of the years 1999 through 2001 and approximately $100 million in 2002, based on current consumption. Customers with demand greater than 4 MW at a single site will be free to choose their electric generation suppliers ("direct access") starting in October 1999. Customers with at least 10 sites which aggregate at least 9.5 MW in total demand also will have direct access starting October 1999. Direct access for the remaining non-residential customers will occur in two phases: customers representing one-third of the remaining load in the non-residential class in October 1999 and customers representing the entire remaining non-residential load on December 31, 2000. Direct access will be available to all residential customers in May 2002. IP remains obligated to serve all customers who continue to take service from IP at tariff rates, and remains obligated to provide delivery service to all at regulated rates. In 1999, rates for delivery services will be established in proceedings mandated by the legislation. Although the specified residential rate reductions and the introduction of direct access will lead to lower electric service revenues, P.A. 90-561 is designed to protect the financial integrity of electric utilities in three principal ways: 1) Departing customers are obligated to pay transition charges, based on the utility's lost revenue from that customer, adjusted to deduct: a) delivery charges the utility will continue to receive from the customer, and b) the market value of the freed-up energy net of a mitigation factor, which is a percentage reduction of the transition charge amount. The mitigation factor is designed to provide incentive for management to continue cost reduction efforts and generate new sources of revenue; 2) Utilities are provided the opportunity to lower their financing and capital costs through the issuance of "securitized" bonds, also called transitional funding instruments; and 3) Utilities are permitted to seek rate relief in the event that the change in law leads to their return on equity falling below a specified minimum based on a prescribed test. Utilities are also subject to an "over-earnings" test which requires them, in effect, to share with customers earnings in excess of specified levels. The extent to which revenues are lowered will depend on a number of factors including future market prices for wholesale and retail energy, and load growth and demand levels in the current IP service territory. The impact on net income will depend on, among other things, the amount of revenues earned and the ongoing costs of doing business. On March 18, 1998, the Company filed an application with the Illinois Commerce Commission seeking approval for securitization financings in two or more tranches up to a total of $1.728 billion. The staff of the Commission believed the Company's presentation to be lacking in adequate support regarding the impact on cost of capital. Because the securitization legislation imposes a 90 day time limit on the Commission to act, the Company elected on May 6, 1998 to withdraw its filing and work with the Commission staff to satisfy their concerns. The Company expects to re-file its application in the near future. In January 1998, IP, in conjunction with eight other transmission-owning entities, filed with the FERC for all approvals necessary to create and implement the Midwest Independent Transmission System Operator, Inc. (MISO) The goals of this joint undertaking are to: 1) put in place a tariff allowing easy and nondiscriminatory access to transmission facilities in a multi-state region, 2) enhance regional reliability and 3) establish an entity that operates independently of any transmission owner(s) or other market participants thus furthering competition in the wholesale generation market, consistent with the objectives of the FERC's Order No. 888. Since January 1998, two other transmission-owning entities joined the MISO. The parties have requested that the FERC rule on the joint filing by no later than September 1, 1998. ACCOUNTING MATTERS Prior to the passage of P.A. 90-561, IP prepared its consolidated financial statements in accordance with Statement of Financial Accounting Standards (FAS) 71, "Accounting for the Effects of Certain Types of Regulation." Reporting under FAS 71 allows companies whose service obligations and prices are regulated to maintain on their balance sheets assets representing costs they expect to recover from customers, through inclusion of such costs in their future rates. In July 1997, the EITF concluded that application of FAS 71 accounting should be discontinued at the date of enactment of deregulation legislation for business segments for which a plan of deregulation has been established. The EITF further concluded that regulatory assets and liabilities that originated in the portion of the business being deregulated should be written off unless their recovery is specifically provided for through future cash flows from the regulated portion of the business. Because P.A. 90-561 provides for future market-based pricing of electric generation services, IP discontinued application of FAS 71 for its generating segment. IP evaluated its regulatory assets and liabilities associated with its generation segment and determined that recovery of these costs was not probable through rates charged to transmission and distribution customers, the regulated portion of the business. IP wrote off generation-related regulatory assets and liabilities of approximately $195 million (net of income taxes) in December 1997. These net assets related to previously incurred costs that were expected to be collected through future revenues, including deferred costs for the Clinton Power Station (Clinton), unamortized losses on reacquired debt, recoverable income taxes and other generation-related regulatory assets. At March 31, 1998, IP's net investment in generation facilities was $3.3 billion and was reflected in "Utility Plant, at Original Cost" on IP's balance sheet. In addition, IP evaluated its generation segment plant investments to determine if they had been impaired as defined in FAS 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." This evaluation determined that future revenues were expected to be sufficient to recover the costs of generation segment plant investments and as a result, no plant write-downs were necessary. However, ultimate recovery depends on a number of factors and variables including market conditions and IP's ability to operate its generation assets efficiently. The provisions of P.A. 90-561 allow an acceleration in the rate at which any utility-owned assets are expensed without regulatory approval provided such charges are consistent with generally accepted accounting principles. Under this legislation, up to an aggregate of $1.5 billion in additional expense for the generation-related assets could be accelerated through the year 2008. The amount of expense accelerated through the year 2008 is contingent on the changes in revenue resulting from P.A. 90-561, cost mitigation efforts, fuel costs and elimination of UFAC (Uniform Fuel Adjustment Clause), and changes in the cost of capital resulting from the issuance of transitional funding instruments. Any such reduction in the net book value of IP's generation-related assets would help position IP to operate competitively and profitably in the changing business environment. This accelerated charge would have a direct impact on earnings but not on cash flows. The Financial Accounting Standards Board (FASB) issued FAS 128, "Earnings Per Share (EPS)" in February 1997, effective for financial statements issued after December 15, 1997. FAS 128 establishes standards for computing and presenting EPS and replaces the presentation of primary EPS and fully diluted EPS with a presentation of basic EPS and diluted EPS, respectively. The FASB issued FAS 130, "Reporting Comprehensive Income" in June 1997, effective for fiscal years beginning after December 15, 1997. FAS 130 establishes standards for reporting and display of comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. Illinova and Illinois Power do not currently have any components of comprehensive income in any period presented herein. Illinova and Illinois Power will continue to analyze the disclosure requirements of FAS 130. The FASB issued FAS 131, "Disclosures about Segments of an Enterprise and Related Information" in June 1997, effective for periods beginning after December 15, 1997. FAS 131 supersedes FAS 14, "Financial Reporting for Segments of a Business Enterprise." FAS 131 establishes standards for the way public business enterprises report financial and descriptive information about their reportable operating segments in their financial statements. Generally, financial information is required to be reported on the same basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments. Illinova and Illinois Power continue to evaluate the provisions of FAS 131 to determine the impact of the revised disclosure requirements on its 1998 financial statements. MANUFACTURED GAS PLANT SITES IP's estimated liability for Manufactured Gas Plant (MGP) site remediation is $63 million. This amount represents IP's current best estimate of the cost that it will incur in remediation of the 24 MGP sites for which it is responsible. Because of the unknown and unique characteristics at each site, IP cannot presently determine its ultimate liability for remediation of the sites. IP is currently recovering MGP site remediation costs through tariff riders approved by the ICC. Accordingly, IP has recorded a regulatory asset on its balance sheet totaling $63 million as of March 31, 1998. Management expects that cleanup costs will be fully recovered from IP's transmission and distribution customers. In October 1995, to offset the burden imposed on its customers, IP initiated litigation against a number of insurance carriers. As of February 1998, settlements or settlements in principle have been reached with all of the carriers. The settlement proceeds recovered from the carriers will offset a significant portion of the remediation costs and will be credited to customers through the tariff rider mechanism which the ICC previously approved. PREFERRED STOCK VOTE Illinois Power is seeking approval from preferred stockholders for an amendment of the IP Articles of Incorporation to remove a restriction limiting the amount of unsecured debt to not more than 20% of total capitalization excluding unsecured debt. Preferred shareholders of record as of April 6, 1998 are entitled and solicited to vote on this matter at a special meeting of IP common and preferred shareholders scheduled May 29, 1998. TREASURY STOCK Through March 31, 1998, IP has purchased a total of 9,428,645 shares of its common stock from Illinova, all of which are held as treasury stock and are deducted from common equity at the cost of the shares purchased. No shares of IP common stock were purchased during the first quarter. ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains estimates, projections and other forward-looking statements that involve risks and uncertainties. Actual results or outcomes could differ materially from those provided in the forward-looking statements as a result of such important factors as: the outcome of state and federal regulatory proceedings affecting the restructuring of the electric and gas utility industries; the impacts of new laws and regulations on Illinova and its subsidiaries relating to restructuring, environmental, and other matters ; the effects of increased competition on the utility businesses; risks of owning and operating a nuclear facility; changes in prices and cost of fuel; factors affecting non-utility investments, such as the risk of doing business in foreign countries; construction and operation risks; and increases in financing costs. Reference is made to the Notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations presented in Illinova's 1997 Annual Report to Shareholders (included in the Proxy Statement), the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations presented in IP's 1997 Annual Report to Shareholders (included in the Information Statement), and Illinova's and IP's Form 10-K for the year ended December 31, 1997. ILLINOVA SUBSIDIARIES IP, a subsidiary of Illinova, engages in the generation, transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the State of Illinois. IP has preferred shares outstanding but its common stock is wholly-owned by Illinova. IGC is a wholly-owned independent power subsidiary of Illinova and invests in energy supply projects throughout the world. IGC's strategy is to invest in and develop "greenfield" power plants, acquire existing generation facilities and provide power plant operations and maintenance services. IEP is a wholly-owned subsidiary of Illinova. IEP develops and markets energy-related services to the unregulated energy market throughout the United States and engages in the brokering and marketing of electric power and gas. IIC is a wholly-owned subsidiary of Illinova and was licensed by the State of Vermont as a captive insurance company. The primary business of IIC is to insure certain risks of Illinova and its subsidiaries. IBE is a wholly-owned subsidiary of Illinova and was created to account for miscellaneous business activities not regulated by the ICC or the Federal Energy Regulatory Commission (FERC) and not falling within the business scope of other Illinova subsidiaries. LIQUIDITY AND CAPITAL RESOURCES CAPITAL RESOURCES AND REQUIREMENTS Cash flows from operations during the first three months of 1998 provided sufficient working capital to meet ongoing operating requirements, to service existing common and IP preferred stock dividends and debt requirements and all of IP's construction requirements. Additionally, Illinova expects 1998 cash flows (including external financings) will enable it to meet operating requirements and continue to service IP's and Illinova's existing debt, IP's preferred and Illinova's common stock dividends, IP's sinking fund requirements and IP's and Illinova's anticipated construction requirements. IP periodically repurchases shares of its common stock from Illinova to provide Illinova cash for operations, in accordance with authority granted by the ICC. For more information, see "Treasury Stock" of the "Notes to Consolidated Financial Statements" on page 15 of this report. IP's capital requirements for construction were approximately $48 million and $34 million during the three months ended March 31, 1998 and 1997, respectively. Illinova and IP currently have total lines of credit represented by bank commitments of $150 million and $354 million, respectively. Both Illinova and IP have adequate short- and intermediate-term bank borrowing capacity. Currently, Illinova is reviewing additional financing alternatives to provide cash for operating and investment purposes. Under its $300 million shelf registration statement with the SEC, Illinova has remaining authority to issue $160 million in debt securities. On January 28, 1998, Illinova issued $40 million of 6.46% medium-term notes due October 1, 2002 under the shelf registration statement. On February 26, 1998, IP issued a redemption notice for all outstanding bonds of its 6.00% Pollution Control First Mortgage Bonds due 2007 ($18.7 million) and its 8.30% Pollution Control First Mortgage Bonds due 2017 ($33.8 million). Both series were called April 1, 1998. On March 6, 1998, IP issued $18.7 million of 5.40% Pollution Control First Mortgage Bonds due 2028 and $33.8 million of 5.40% Pollution Control First Mortgage Bonds due 2028. IP will hold a special meeting of shareholders on May 29, 1998 to vote on an amendment to its Articles to remove a restriction limiting IP's ability to issue unsecured debt. The amendment requires the separate class vote of two-thirds of outstanding shares of preferred stock. See "Preferred Stock Vote" in "Notes to Consolidated Financial Statements" page 15. Presently, IP's mortgage bonds are rated Baa1 by Moody's, BBB+ by Duff & Phelps, and BBB by Standard & Poor's. IP's preferred stock is rated Baa2 by Moody's and BBB- by both Duff & Phelps and Standard & Poor's. Illinova's senior and medium-term notes have a rating of Baa3 and BBB- from Moody's and Standard & Poor's, respectively. ACCOUNTING MATTERS For further information on accounting issues, see "Accounting Matters" under "Regulatory and Legal Matters" of the "Notes to Consolidated Financial Statements" on pages 13-14 of this report. CLINTON POWER STATION In September 1996, a leak in a recirculation pump seal caused IP operations personnel to shut down Clinton. Clinton has not resumed operation. In January 1997 and again in June 1997, the Nuclear Regulatory Commission (NRC) named Clinton among plants having a trend of declining performance. In June 1997, IP committed to conduct an Integrated Safety Assessment (ISA) to thoroughly assess Clinton's performance. The ISA was conducted by a team of 30 individuals with extensive nuclear experience and no substantial previous involvement at Clinton. Their report concluded that the underlying reasons for the performance problems at Clinton were ineffective leadership throughout the organization in providing standards of excellence, complacency throughout the organization, barrier weaknesses and weaknesses in teamwork. In late October, a team commissioned by the NRC performed an evaluation to validate the ISA results. In December, this team concluded that the findings of the ISA accurately characterized Clinton's performance deficiencies and their causes. On January 5, 1998, IP and PECO Energy Company (PECO) announced an agreement under which PECO will provide management services for Clinton. Although a PECO team will help manage the plant, IP will continue to maintain the operating license for Clinton and retain ultimate oversight of the plant. PECO employees have assumed senior positions at Clinton, but the plant will remain primarily staffed by IP employees. IP made this decision based on a belief that bringing in PECO's experienced management team would be the most efficient way to get Clinton back on line and operating at a superior level as quickly as possible. On January 21, 1998, the NRC placed Clinton on its Watch List of nuclear plants that require additional regulatory oversight because of declining performance. Twice a year the NRC evaluates the performance of nuclear power plants in the United States and identifies those which require additional regulatory oversight. Once placed on the Watch List, a plant must demonstrate consistent improved performance before it is removed from the list. The NRC will monitor Clinton more closely than plants not on the Watch List. This may include increased inspections, additional required documentation, NRC-required approval of processes and procedures, and higher-level NRC oversight. On February 19, 1998, IP filed Clinton's Summary Plan for Excellence with the NRC. This recovery/restart program to get Clinton back online is now going through a formal NRC review process. The NRC has advised IP that it must submit a written report to the NRC at least two weeks prior to restarting Clinton, giving the agency reasonable assurance that IP's actions to correct recurring weaknesses in the corrective action program have been effective. After the report is submitted, the NRC staff plans to meet with IP's management to discuss the plant's readiness for restart. Although no specific restart date has been established, Clinton is expected to return to operation by the end of 1998. IP currently expects Clinton's 1998 operating and maintenance expenses to be at least $20 million more than Clinton's 1997 expenses. The prolonged outage at Clinton is having an adverse effect on Illinova's and IP's financial condition, through higher operating and maintenance and capital costs, lost opportunities to sell energy, and replacement power costs. The magnitude of these costs and lost opportunities is unknown because of uncertainty regarding the timing of Clinton's return to service, the ultimate cost of restart and uncertain market conditions. Previously disclosed earnings expectations are subject to the effects of these uncertainties and changes. REGULATORY MATTERS SOYLAND PCA The FERC approved an amended Power Coordination Agreement (PCA) between Soyland and IP in July 1997. Under the amended PCA, Soyland is allowed to prepay an Elected Capacity Reduction Fee associated with a unilateral reduction in its base capacity charge under the PCA. In December 1997, Soyland signed a letter of intent to pay in advance the remainder of its base capacity charges in the PCA. The fee of approximately $70 million is contingent upon Soyland obtaining the necessary financing and regulatory approvals, expected during the second quarter of 1998. During the first quarter of 1998, IP received $30 million from Soyland. The prepayment has been deferred and is being recognized as interchange revenue over the initial term of the PCA which is from September 1, 1996 through August 31, 2006. UNIFORM FUEL ADJUSTMENT CLAUSE Previously, IP's rate schedules contained provisions for passing through to its electric customers increases or decreases in the cost of energy provided to its native load customers under the UFAC. Such costs included fuel and allowable fuel transportation costs, emission allowance costs, DOE spent fuel disposal fees and costs of power purchased to serve native load. However, on March 6, 1998, IP made the ICC filing required for elimination of the UFAC. This established a new base fuel cost recoverable in IP's electric tariffs effective on the date of the filing. As provided in P.A. 90-561, the new base fuel cost is 1.287 cents per kwh, which is equal to 91 percent of IP's average prudent and allowable fuel and purchased power supply costs in the two most recent years for which the ICC has approved the level of recovery. Every year UFAC cost recoveries are audited by the ICC in a reconciliation proceeding in which they may be adjusted upward for actual costs not recovered, or downward through a disallowance of costs incurred. By opting out of the UFAC, IP eliminates exposure for potential disallowed fuel and purchased power costs for periods after December 31, 1996, as those years will no longer be subject to the ICC's annual reconciliation proceeding. This change will prevent IP from automatically passing through increases in cost and will expose IP to the risks and opportunities of price volatility in the marketplace. Whether electric energy costs will continue to be recovered in revenues from customers will depend on a number of factors, including the number of customers served, demand for electric service, and changes in fuel cost components. These variables may be influenced, in turn, by market conditions, availability of generating capacity, future regulatory proceedings, and environmental protection costs, among other things. DEREGULATION RULEMAKINGS AND TARIFFS As a result of P.A. 90-561, ICC rulemakings are underway covering issues such as affiliated interests and reliability. In February 1998, these two ICC rulemaking processes began with the filing of initial written testimony by utilities and other groups. Rulemaking processes for other issues are in various stages. Affiliate Interest Rulemaking - The ICC is considering what restrictions, if any, should be placed on Illinois utilities and their affiliated companies. Testimony has been filed, cross-examination heard by the parties involved, and the record closed, with legal briefs filed in April. The hearing examiner's proposed order was issued on May 7, 1998. Emergency rules issued by the ICC are expected by June 15, 1998, and will be in effect for 150 days. The Joint Committee on Administrative Rules (a legislative committee focusing on proper format and due process) must issue final rules by December 1998. Reliability Rulemaking - Provisions of P.A. 90-561 mandate that rules be in place to address transmission and distribution reliability during the transition to a deregulated industry. The ICC is scheduled to have preliminary rules established by June 15, 1998, with final rules in place by November 15, 1998. OPEN ACCESS AND COMPETITION See "Open Access and Competition" under "Regulatory and Legal Matters" of the "Notes to Consolidated Financial Statements" on pages 12-13 of this report for additional information. YEAR 2000 DATA PROCESSING In November 1996, Illinova deployed a project team to coordinate the identification, evaluation, and implementation of changes to computer systems and applications necessary to achieve a year 2000 date conversion with no effect on customers or disruption to business operations. These actions are necessary to ensure that systems and applications will recognize and process coding for the year 2000 and beyond. Major areas of potential business impact have been identified and initial conversion efforts are underway. Illinova also is communicating with third parties with whom it does business to ensure continued business operations. The cost of achieving year 2000 compliance is estimated to be at least $18 million through 1999. Contingency plans for operating without year 2000 compliance have not been developed. Such activity will depend on assessment of progress. Project completion is planned for the fourth quarter of 1999. ENVIRONMENTAL MATTERS GAS MANUFACTURING SITES See "Manufactured Gas Plant Sites" under "Regulatory and Legal Matters" of the "Notes to Consolidated Financial Statements" on pages 14 and 15 of this report. NITROGEN OXIDE Regulators are continuing to examine potential approaches for compliance with current federal ozone air quality standards. On November 7, 1997, the U.S. EPA proposed air pollution rules which would require substantial reductions of NOx emissions in Illinois and 21 other states. The proposal would require the installation of NOx controls by September 2002. This proposal is expected to be finalized by November 1998 with Illinois utility reduction requirements specified in 1999. Preliminary cost estimates to comply with the proposed NOx limitations are $130 to $150 million beyond what is already needed to comply with the NOx requirements of Phase II of the Acid Rain Program. The legality of this proposal along with its technical feasibility is expected to be challenged by a number of utilities and utility groups, including IP. Illinois Governor Jim Edgar joined nine Midwest governors in sending a letter March 9, 1998, to President Clinton expressing concern with the EPA's proposed plan to reduce NOx emissions. A similar letter signed by the Illinois Congressional delegation also went to the President on March 9. The letter commits those states to developing an alternative reduction proposal by August 1, 1998. Instead of an overly expensive, one-size-fits-all federal approach, the states seek guidelines for efficient ozone reductions that meet individual state needs. GLOBAL WARMING On December 11, 1997, international negotiations to reduce greenhouse gas emissions concluded with the adoption of the Kyoto Protocol. This Protocol requires the United States to reduce greenhouse gas emissions to 7% below 1990 levels during the years 2008 through 2012 and to make further reductions thereafter. This Protocol must be ratified by the United States Senate. United States Senate Resolution 98 (passed 95-0) indicates the Senate would not ratify an agreement that fails to involve all countries or would damage the United States economy. Ratification will be a major political issue since the Protocol does not contain key elements that Senate Resolution 98 said would be necessary for ratification. It is anticipated that ratification will not occur in 1998. IP will face major changes in how it generates electricity if the Kyoto Protocol is ratified, or if the Protocol's reduction goals are incorporated into other environmental regulations. IP would have to repower some generating units and change from coal to natural gas in other units to reduce greenhouse gas emissions. IP estimates that compliance with these proposed regulations may require significant capital outlays and annual operating expenses which could have a material adverse impact on Illinova and IP. POWER SUPPLY AND RELIABILITY Electricity may be in short supply throughout Illinois and Wisconsin this summer because of an unusually high number of plant outages in this region. IP is attempting to secure generation and transmission capacity in order to guard against disruptions in service. If the weather is abnormally hot or if IP's major generating units were to require maintenance and/or experience delay in returning to service, IP may be unable to meet demand because of the limited availability of power in the region and limited ability to import power. IP has taken additional steps to avoid potential shortages, including inspecting and upgrading transmission lines and equipment and readying emergency procedures. Expenses will be incurred in an effort to adequately prepare for the summer situation which could have a material adverse impact on Illinova and IP. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1998 AND 1997 Electric Operations - Electric revenues for the first quarter of 1998 decreased $5.6 million compared to the first quarter of 1997 due largely to decreased sales to residential and commercial customers. Electric interchange revenues increased $69.7 million primarily due to increased activity on the interchange market. Power purchased increased $61.3 million due largely to increased interchange activity. During the quarter, Fuel for electric plants increased $10.4 million due primarily to an increase in unrecoverable fuel costs largely due to the elimination of the Uniform Fuel Adjustment Clause. For more information, see "Uniform Fuel Cost Adjustment" under "Regulatory Matters" of the "Management's Discussion and Analysis" on page 19 of this report. These factors combined to decrease electric margin $7.6 million for the quarter. Kilowatt hour (kwh) sales to ultimate consumers decreased 3.9% for the quarter due to decreases of 9.5% and 5.9% in the residential and the commercial markets, respectively. Heating degree days decreased approximately 15% from 1997 which contributed to the decrease in sales to the temperature-sensitive markets. For the first quarters of 1998 and 1997, Clinton was unavailable due to the continued outage which began September 6, 1996. The equivalent availability for IP's coal-fired plants was 79.5% and 70.9% for the three months ended March 31, 1998 and 1997, respectively. The lower equivalent availability for the fossil plants in 1997 was primarily due to the fire and subsequent shut-down of the Wood River fossil station in December 1996. Gas Operations - For the quarter, gas margin decreased $13.7 million. Gas revenues decreased $47.4 million reflecting an 18% decrease in therm sales (excluding transport) caused by the mild winter weather. Gas purchased costs decreased $33.7 million due to the lower consumption. Operation and Maintenance Expenses - The current quarter increase of $29.7 million is primarily due to higher operating and maintenance expenses associated with the Clinton outage. For more information, see "Clinton Power Station" of the "Management's Discussion and Analysis" on pages 17-18 of this report. Diversified enterprises - Due primarily to decreased sales activity at IEP, diversified enterprise revenues decreased $11.7 million for the first quarter of 1998, which was offset by a decrease in diversified enterprise expenses of $13.7 million. Earnings per Common Share - The earnings per common share for Illinova during the first quarter of 1998 and 1997 resulted from the interaction of all of the factors discussed herein as well as fewer shares of common stock outstanding. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings See "Notes to Consolidated Financial Statements" in Part I for a discussion of certain legal proceedings related to manufactured gas plant sites. Currently, commercial reprocessing of spent nuclear fuel is not allowed in the U.S. The Nuclear Waste Policy Act of 1982 (NWPA) was enacted to establish a government policy with respect to disposal of spent nuclear fuel and high-level radioactive waste. On June 20, 1994, IP, along with other utilities and state utility commissions, filed an action in the D.C. Circuit Court of Appeals asking the Court to rule that the DOE is obligated to take responsibility for spent nuclear fuel by January 31, 1998 under the NWPA. The utilities asked the Court to confirm the DOE's commitment and to order the DOE to develop a compliance program with appropriate deadlines. The utilities also asked for relief from the ongoing funding requirements or to have an escrow account established for future funds paid to DOE. Subsequently, the petition was amended to seek, in addition, relief in the form of specific performance. A three-judge panel ruled in July 1996 that the DOE's obligation to take spent fuel, by the January 1998 date specified in the NWPA, is binding and unconditional. The DOE notified utilities in December 1996 that it may not be able to meet the 1998 deadline, and solicited utility suggestions on how to accommodate the potential delay. In January 1997, petitions were filed in the D.C. Circuit Court of Appeals by IP and other utilities and state utility commissions, seeking further enforcement of DOE's obligation. In response, the Court has reaffirmed its ruling that the DOE obligation is unconditional, but has not granted injunctive relief. This means that the Court has found the DOE in breach of DOE's obligation but has not literally ordered the DOE to perform. On May 5, 1998, the court issued another order denying all motions before it on the basis that the various requests for relief were either beyond the scope of that court's jurisdiction or premature. This reaffirmed its earlier ruling that the DOE has an unconditional statutory obligation to perform, and offering relief if contract remedies imposed by a different court are inconsistent with this statutory duty. IP has on-site storage capacity that will accommodate its spent fuel storage needs until the year 2007, based on current operating levels. If by that date the DOE has not complied with its statutory obligation to dispose of spent fuel, and IP has continued to operate the plant, IP will have to use alternative means of disposal, such as dry storage in casks on site or transportation of the fuel rods to private or collectively-owned utility repositories. IP is currently an equity partner with seven other utilities in an effort to develop a private temporary repository. Attempts to reach agreement with the Mescalaro Apache Tribe of New Mexico ended in early 1996; however, the group signed a lease in December 1996 with the Goshute Tribe to use land on its Utah reservation. A spent fuel storage license was filed with the Nuclear Regulatory Commission (NRC) in 1997, initiating a process which will take the NRC up to three years to complete. Continued participation in the partnership will depend on the technological and economic viability of the project. Safe, dry, on-site storage is technologically feasible, but is subject to licensing and local permitting requirements, for which there may be effective opposition. ITEM 4. Submission of Matters to a Vote of Security Holders See "Notes to Consolidated Financial Statements" for a discussion of proxy action and vote of preferred shareholders. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits The Exhibits filed with this 10-Q are listed on the Exhibit Index. (b) Reports on Form 8-K since December 31, 1997: Report filed on Form 8-K on January 8, 1998 Other Events: IP selects PECO Nuclear to manage Clinton Power Station. Impacts of Illinois P.A. 90-561 and returning Clinton to operation will result in a fourth quarter 1997 charge of $260 million (net of income taxes). Report filed on Form 8-K on January 21, 1998 Other Events: The Nuclear Regulatory Commission places IP's Clinton Power Station on its Watch List. Report filed on Form 8-K on January 21, 1998 Other Events: Illinova offers Medium-Term Notes under its shelf Registration Statement on Form S-3. Financial Statements, Pro Forma Financial Information and Exhibits: Exhibits Report filed on Form 8-K on February 13, 1998 Other Events: Illinova releases 1997 earnings and discloses that it will not take a previously announced $40 million charge (net of income taxes) in 1997 for returning Clinton Power Station to operation. Report filed on Form 8-K on April 14, 1998 Other Events: Illinova releases 1998 first quarter earnings and provides earnings outlook for 1998. Report filed on Form 8-K on May 6, 1998 Other Events: Illinois Power withdraws its March 18, 1998 application seeking ICC authorization for securitization funding. 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. ILLINOVA CORPORATION (Registrant) By /s/ Leah Manning Stetzner ------------------------- Leah Manning Stetzner, General Counsel and Corporate Secretary on behalf of Illinova Corporation Date: May 13, 1998 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. ILLINOIS POWER COMPANY (Registrant) By /s/ Leah Manning Stetzner --------------------------- Leah Manning Stetzner, Vice President, General Counsel, and Corporate Secretary on behalf of Illinois Power Company Date: May 13, 1998 EXHIBIT INDEX PAGE NO. WITHIN SEQUENTIAL NUMBERING EXHIBIT DESCRIPTION SYSTEM 27 Financial Data Schedule UT (filed herewith) EX-27 2 FDS --
UT This schedule contains summary financial information extracted from the balance sheet, income statement, and cash flow statement of Illinois Power Company and is qualified in its entirety by reference to the balance sheet, imcome statement, and cash flow statement of Illinois Power Company. 0000049816 Illinois Power Company 0 0 1,000,000 Default 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 PER-BOOK 4682 6 451 202 0 5341 1210 0 115 1325 197 57 1562 106 0 194 69 0 99 29 1703 5341 490 11 417 428 62 1 62 32 30 5 26 22 27 140 0 0
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