-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gh8/Kk4FJ4MidlGcDWETTlOUuEdIpmv/Tutar/mKu/yeAD5n1Hq4kaidgxJ0SoAY ggrFpOF4cD/HfV8nwKGsuQ== 0000049816-94-000008.txt : 19940408 0000049816-94-000008.hdr.sgml : 19940408 ACCESSION NUMBER: 0000049816-94-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS POWER CO CENTRAL INDEX KEY: 0000049816 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 370344645 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-03004 FILM NUMBER: 94520759 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-K 1 10-K 3-31-94 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1993 Commission File Number 1-3004 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ILLINOIS POWER COMPANY (Exact name of registrant as specified in its charter) State or other jurisdiction of incorporation or organization State of Illinois I.R.S. Employer Identification No. 37-0344645 Address of principal executive offices 500 South 27th Street, Decatur, Illinois Zip Code 62525-1805 Registrant's telephone number, including area code 217-424-6600 Securities registered pursuant to Section 12(b) of the Act:
Cumulative Cumulative Preferred Preferred First Mortgage New Mortgage Stock, $50 Stock, no Bonds Bonds par value par value (Registered on the New York Stock Exchange) 4.08% Adjustable Rate Series A 6 1/2% Series due 1999 6 1/8% Series due 2000 4.26% Adjustable Rate Series B 7.95% Series due 2004 5 5/8% Series due 2000 4.70% 8.00% 8 3/4% Series due 2021 6 1.2% Series due 2003 4.42% 6 3/4% Series due 2005 4.20% 8% Series due 2023 8.24% 7 1/2% Series due 2025 7.56% 8.00%
- 1 - Common Stock, without par value (Registered on the New York and Chicago Stock Exchanges) Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of the close of business on February 28, 1994 was $1,939,133,433. The number of shares of the Registrant's Common Stock, without par value, outstanding on February 28, 1994 was 75,643,937. Documents Incorporated by Reference 1. Portions of Illinois Power Company's 1993 Annual Report. (Parts I, II and IV of Form 10-K.) Exhibit Index located on pages 54 through 62. Total number of pages sequentially numbered is 124. - 2 - ILLINOIS POWER COMPANY FORM 10-K For the Fiscal Year Ended December 31, 1993 TABLE OF CONTENTS Part I Page Item 1. Business 5 Electric Business 6 Power Coordination Agreement With Soyland 7 Fuel Supply 8 Construction Program 12 Clinton Power Station 13 General 13 Rate and Regulatory Matters 14 Accounting Matters 15 Decommissioning Costs 15 Dividends 16 Gas Business 16 Gas Supply 18 Environmental Matters 19 Air Quality 20 Clean Air Act 20 Gas Manufacturing Sites 22 Water Quality 22 Other Issues 23 Electric and Magnetic Fields 24 Environmental Expenditures 24 Research and Development 24 Regulation 24 Executive Officers of the Registrant 25 Operating Statistics 26 Item 2. Properties 26 Item 3. Legal Proceedings 27 Fuel and Purchased Gas Adjustment Clauses 27 Environmental 27 Peabody Coal Company and Arch Coal Sales Company, Inc. 27 Item 4. Submission of Matters to a Vote of Security Holders 27 - 3 - TABLE OF CONTENTS (Continued) Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 28 Item 6. Selected Financial Data 28 Item 7. Management's Discussion and Analysis Financial Condition and Results of Operations 28 Item 8. Financial Statements and Supplementary Data 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 28 Part III Item 10. Directors and Executive Officers of the Registrant 28 Item 11. Executive Compensation 29 Item 12. Security Ownership of Certain Beneficial Owners and Management 34 Item 13. Certain Relationships and Related Transactions 39 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports On Form 8-K 40 Signatures 42 Exhibit Index 54 - 4 - PART I Item 1. Business Illinois Power Company (the "Company") was incorporated under the laws of the State of Illinois on May 25, 1923. It is engaged in the generation, transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the State of Illinois. On February 9, 1994, the stockholders of the Company approved, by a favorable vote of 57,647,534 shares or 70.14% of the total shares outstanding, an agreement and plan of merger for creation of a holding company. The holding company will be named Illinova Corporation. Documents have been filed relating to the formation of a holding company with the Illinois Commerce Commission (ICC), the Federal Energy Regulatory Commission (FERC), the Securities and Exchange Commission (SEC) under the Public Utility Holding Company Act and the Nuclear Regulatory Commission (NRC). In January 1994, the NRC gave its consent to the restructuring. The applications filed with the FERC, the SEC, and the ICC are currently pending. The holding company formation is not subject to ICC approval; however, the ICC must approve the agreement under which the Company may provide services and facilities to the holding company and affiliates. The territory served by the Company comprises substantial areas in northern, central and southern Illinois, including the following larger communities (1990 Federal Census data):
Class of City Population Service Furnished Decatur................... 83,885 Electric and Gas Champaign................. 63,502 Electric and Gas Bloomington............... 51,972 Electric Belleville................ 42,785 Electric and Gas East St. Louis............ 40,944 Gas Normal.................... 40,023 Electric Urbana.................... 36,344 Electric and Gas Danville.................. 33,828 Electric and Gas Galesburg................. 33,530 Electric and Gas Granite City.............. 32,862 Electric and Gas
The Company holds franchises in all of the 310 incorporated municipalities in which it furnishes retail electric service and in all of the 257 incorporated municipalities in which it furnishes retail gas service. Total operating revenues, including interchange sales, of the Company for the past three years by classes of service were as follows:
1993 1992 1991 (Millions of dollars) Electric $1,266.4 $1,190.9 $1,186.7 Gas $ 314.8 $ 288.6 $ 288.2
- 5 - Operating income before income taxes for the past three years by classes of service were as follows:
1993 1992 1991 (Millions of dollars) Electric $ 383.2 $ 348.4 $ 337.4 Gas $ 28.6 $ 23.9 $ 29.7
Identifiable assets for the past three years by classes of service were as follows:
1993 1992 1991 (Millions of dollars) Electric $4,526.8 $4,602.9 $4,577.2 Gas $ 406.4 $ 355.4 $ 329.0
At December 31, 1993, the Company had 4,540 employees. Electric Business Overview The Company supplies electric service at retail to an estimated aggregate population of 1,265,000 in 310 incorporated municipalities, adjacent suburban and rural areas, and numerous unincorporated communities. Electric service at wholesale is supplied for resale to one electric utility and to the Illinois Municipal Electric Agency (IMEA) as agent for 11 municipalities. The Company also has a power coordination agreement with Soyland Power Cooperative, Inc. (Soyland). See the sub-caption "Power Coordination Agreement With Soyland" hereunder for additional information. In 1993, the Company provided interchange power to 13 utilities for resale. The Company's highest system peak hourly demand (native load) in 1993 was 3,415,000 kilowatts on August 26, 1993. This 1993 peak load compares with the Company's historical high of 3,508,000 kilowatts in 1988. The Company owns and operates electric generating facilities having a net summer capability of 4,416,000 kilowatts. The major electric generating stations are Clinton power station (Clinton) (933,000 kilowatts, of which 810,000 kilowatts of capability are owned by the Company and 123,000 kilowatts of capability are owned by Soyland), Baldwin (1,740,000 kilowatts), Havana (666,000 kilowatts), Wood River (603,000 kilowatts), Hennepin (286,000 kilowatts) and Vermilion (165,000 kilowatts). The other generating facilities owned by the Company consist of gas turbine units at three locations which provide peaking service and have an aggregate capability of 146,000 kilowatts. Havana Units 1-5 (238,000 killowatts) and Wood River Units 1-3 (139,000 kilowatts) are currently not staffed, but are available to meet reserve requirements with a maximum of four months' notice. The Company owns 20% of the capital stock of Electric Energy, Inc. (EEI), an Illinois corporation, which was organized to own and operate a steam electric generating station and related transmission facilities near Joppa, Illinois to supply electric energy to the Department of Energy (DOE) for its project near Paducah, Kentucky. Under a power supply agreement with EEI, the Company has the right to purchase 5.0% of the annual output of the Joppa facility. The Company has the flexibility to schedule the capacity in varying amounts ranging from a nominal 51,000 kilowatts for 52 weeks up to a maximum of 203,000 kilowatts for approximately - 6 - 13 weeks. The Company must schedule its annual capacity entitlement by August 1 of the preceding year, and availability of the scheduled capacity is subject to certain other limitations related to scheduling considerations of the other co-owners of the Joppa facility and the DOE, and unit outages (if any). The Company is a participant, together with Union Electric Company and Central Illinois Public Service Company, in the Illinois-Missouri Power Pool which was formed in 1952. The Pool operates under an Interconnection Agreement which provides for the interconnection of transmission lines and contains provisions for the coordination of generating equipment maintenance schedules, inter-company sales of firm and non-firm power, and the maintaining of minimum capacity reserves by each participant equal to the greater of 15% of its peak demand, one-half of its largest unit, or one-half of its largest non-firm purchase. The Company, Central Illinois Public Service Company and Union Electric Company have a contract with Tennessee Valley Authority (TVA) providing for the interconnection of the TVA system with those of the three companies to exchange economy and emergency power and for other working arrangements. The Company also has interconnections with Indiana-Michigan Power Company, Commonwealth Edison Company, Central Illinois Light Company, Iowa-Illinois Gas & Electric Company, Kentucky Utilities Company, Southern Illinois Power Cooperative, Soyland Power Cooperative, Inc. and the City of Springfield, Illinois for various interchanges, emergency services and other working arrangements. The Company is also a member of the Mid-America Interconnected Network, which is one of nine regional reliability councils established to coordinate plans and operations of member companies regionally and nationally. Power Coordination Agreement With Soyland Under the provisions of a Power Coordination Agreement (PCA) between Soyland and the Company dated October 5, 1984, as amended, the Company is required to provide Soyland with 8.0% (288 megawatts) of electrical capacity from its fossil-fueled generating plants through 1994. This requirement will increase to 12% in 1995 and each year thereafter until the agreement expires or is terminated. This is in addition to the capacity Soyland receives as an owner of Clinton. The Company is compensated with capacity charges and for energy costs and variable operating expenses. The Company transmits energy for Soyland through the Company's transmission and subtransmission systems. Under provisions of the PCA, Soyland has the option of participating financially in major capital expenditures at the fossil-fueled plants, such as those needed for Clean Air Act compliance, to the extent of its capacity entitlement and with each party bearing its own direct capital costs, or having the costs treated as plant additions and billed to Soyland in accordance with other billing provisions of the PCA. See the sub-caption "Clean Air Act" on page 20, under "Environmental Matters" for further discussion. At any time after December 31, 2004, either the Company or Soyland can terminate the PCA by giving not less than seven years' prior written notice to the other party. The party to whom termination notice has been given may designate an earlier effective date of termination which shall be not less than twelve months after receiving notice. The revenues received from the power supplied to Soyland under the PCA are classified as operating revenues. In 1993, Soyland supplied electricity to 21 distribution cooperative members who served approximately 150,000 rural customers in 69 Illinois counties. - 7 - Fuel Supply The Company used coal to generate 70.2% of the electricity produced during the year ended December 31, 1993, with nuclear, oil, and gas contributing 28.4%, 0.4%, and 1.0%, respectively. The respective average costs of these fuels per million Btu during 1993 were: Coal $1.50, Nuclear $.90, Oil $3.40 and Gas $2.60 for a weighted average cost of $1.34. The weighted average cost of all fuels per million Btu during the years 1992 and 1991 was $1.33 and $1.37, respectively. High-sulfur coal mined in Illinois, Indiana and Kentucky provided 44.7%, 17.2% and 4.1%, respectively, of the coal delivered to the Company's electric generating stations in 1993. In addition, the Company received low-sulfur coal from Kentucky, Colorado, West Virginia, Wyoming, Montana, Tennessee, Utah and Illinois. The average cost of primary fuel consumed at the Company's generating stations during the periods indicated was as follows:
Average Cost of Primary Fuel (per million Btu) Primary Station Fuel 1993 1992 1991 Baldwin Coal $1.41 $1.40 $1.46 Havana Coal 1.63 1.59 1.57 Hennepin Coal 1.61 1.56 1.53 Vermilion Coal 1.38 1.34 1.35 Wood River Coal 1.60 1.49 1.55 Clinton Uranium 0.91 0.99 1.04
The Company's rate schedules contain provisions for passing along to its electric customers increases or decreases in the cost of fuels used in its generating stations. See the information under the captions Revenue and Energy Cost of "Note 1 - Summary of Significant Accounting Policies" on page 33 of the Illinois Power Company 1993 Annual Report which is incorporated herein by reference and the sub-caption "1987 Uniform Fuel Adjustment Clause Reconciliation" on page 14 for additional information. Reference is made to the sub-caption "Environmental Matters" hereunder for information regarding pollution control matters relating to the Company's fuel supply. Coal - As shown below, the Company presently has contracts with expiration dates ranging from 1994 to 2004 which will provide about 41 million tons of coal. Based upon projected 1994 usage of approximately 6.6 million tons, this is equivalent to about 6.2 years of consumption. Longer-term contracts with Peabody Coal Company (Peabody) and Arch Coal Sales Company, Inc. (Arch) in effect in 1993 provide for price renegotiations related to current market prices. In 1993, as hereinafter described, the Company negotiated contract amendments with each of these suppliers lowering the cost of their coal. These amendments provide for future price adjustments based on specified benchmarks. The shorter-term contracts with Northern Coal Company, CONSOL, Inc. and Golden Oak Mining Co. contain specified annual prices for each year in the contract term. The Company will be evaluating replacement coal supply alternatives to the CONSOL, Inc. contract at Wood River and the Northern Coal Company contract at Vermilion. Final decisions on both are expected by the end of the third quarter of 1994. Total contract purchases will range between 5.4 million to 5.7 million tons of coal in 1994. - 8 - The sources and quantities of coal supplies, contract expiration dates, weighted average cost of coal purchases and anticipated sulfur contents are summarized in the following table:
Weighted Delivered Cost per Million Btu Expiration Anticipated for the Date of Sulfur Year Ended Primary Content* Supplier Station 12/31/93 Contract (Percent) Peabody Coal Co.(a) Baldwin $1.40 2004 3.0 Arch Coal Sales Co., Inc.(b) Baldwin 1.31 1999 3.0 Peabody Coal Co.(a) Hennepin 1.60 2004 3.0 CONSOL, Inc.(c) Wood River 1.62 1994 0.9 Golden Oak Mining Co.(d) Havana 1.73 1995 0.6 Northern Coal Company(e) Vermilion 1.24 1994 3.0
* High-sulfur content classified as 2.5 percent or greater. (a) The Company has a contract with Peabody to purchase, in total, 2,500,000 tons per year at Baldwin and Hennepin. The Company has also agreed to purchase and Peabody has agreed to supply through 1995 all coal needs above the Arch and Peabody contract quantities at Baldwin and Hennepin. (b) This contract will supply 2,065,500 tons per year. (c) This contract will supply 500,000 tons in 1994. (d) This contract will supply 200,000 to 250,000 tons per year. (e) This contract provides for delivery of 150,000 to 360,000 tons in 1994. See the sub-caption "Environmental Matters" hereunder for additional information regarding the supply of coal at the Baldwin power station. When the Company's needs exceed contracted quantities, coal is purchased on the spot market. Spot purchases in 1993 represented about 12% of the Company's total coal purchases. The delivered cost of coal purchased on a spot basis during the year varied between $26.47 per ton, or $1.27 per million Btu, and $50.11 per ton, or $2.01 per million Btu. The Company anticipates that the spot market will continue to be a favorable supplemental source of supply for the next few years, and the Company will have adequate supplies of coal. The coal inventory at December 31, 1993 represented a 25 day supply based on the Company's average daily burn projection for 1994. In December 1992, the Company filed a complaint in the U. S. District Court in St. Louis, Missouri, against Peabody, in which the Company sought declaratory judgment and injunctive relief with respect to its contractual rights to test burn and use coal from other suppliers in order to achieve compliance with the Clean Air Act if to do otherwise would expose the Company to higher costs. - 9 - In January 1993, the Company filed a complaint in the U. S. District Court in St. Louis, Missouri against Arch seeking a declaratory judgment to enforce provisions in the coal supply contracts with Arch which permit the Company under certain circumstances to negotiate or arbitrate lower coal prices and if coal is available from other suppliers at substantially lower cost, to terminate the contracts on one year's notice. In February 1993, Arch and two subsidiaries filed suit against the Company in Perry County, Illinois, seeking a declaratory judgment, specific performance and other relief related to the Company's rights to declare force majeure and limit its coal purchases under the existing contracts, State law, and the Clean Air Act, and its declaration of certain force majeure events in prior years. In accordance with agreements-in-principle executed by the Company with each of these suppliers, all litigation was temporarily placed on hold, and deadlines for responses extended, to allow the parties to conclude negotiation of terms under which the Company may continue to purchase coal,through amendments to the existing contracts, on a cost- competitive basis, during the Phase I compliance period of the Clean Air Act Amendments. Final agreements were executed with both Arch and Peabody in 1993. In accordance with those agreements, all of the above-described litigation will be dismissed with prejudice. Oil - The Havana power station (five units totaling 238,000 kilowatts), is the Company's only station which utilizes fuel oil for the generation of electric energy. These units are currently not staffed, but are available to meet reserve requirements with a maximum of four months' notice. Gas - Three generating units (totaling 139,000 kilowatts) at the Wood River power station and two combustion peaking plants, Stallings (75,000 kilowatts) and Oglesby (60,000 kilowatts), are fueled with natural gas. The three units at Wood River are currently not staffed, but are available to meet reserve requirements with a maximum of four months' notice. These units have the capability of burning either natural gas or distillate fuel oil. Natural gas is also used in start-up and as a secondary boiler fuel for two generating units (totaling 286,000 kilowatts) at the Hennepin power station and as a secondary boiler fuel for one generating unit (totaling 92,000 kilowatts) at the Wood River power station. Natural gas is also used as start-up fuel for one additional unit at the Wood River power station. The Company anticipates that adequate supplies of gas for these uses will be available for the foreseeable future. See the sub-caption "Gas Business" hereunder. Nuclear - The Company leases nuclear fuel from Illinois Power Fuel Company (Fuel Company). The Fuel Company, which is 50% owned by the Company, was formed in 1981, for the purpose of leasing nuclear fuel to the Company for Clinton. Lease payments are equal to the Fuel Company's cost of fuel as consumed (including related financing and administrative costs). This lease is recorded as a capitalized lease on the Company's books. As of December 31, 1993, the Fuel Company had an investment in nuclear fuel of approximately $129 million. The Company is obligated to make subordinated loans to the Fuel Company at any time the obligations of the Fuel Company which are due and payable exceed the funds available to the Fuel Company. At December 31, 1993 the Company had no outstanding loans to the Fuel Company. At December 31, 1993, the Company's net investment in nuclear fuel consisted of $22 million of Uranium 308. This inventory represents fuel to be used in connection with the fifth reload of Clinton which is scheduled to commence in March 1995. The unamortized investment of the nuclear fuel assemblies in the reactor was $106 million. The Company signed two contracts in 1988 for the supply of uranium concentrates beginning in 1991. One contract is with U. S. Energy/Crested Corporation and the other contract is with Cameco, a Canadian corpora- tion. Each of the two contracts is for 1,179,240 lbs. of uranium - 10 - concentrates, with deliveries from 1991 to 1997. The contracts contain an option for an additional 479,440 lbs. of uranium concentrates for delivery through 2000. Each of the two contracts is to provide an estimated 35% of Clinton's fuel requirements, but each contract contains provisions permitting the Company to purchase 50-60% of Clinton's fuel requirements in certain years through the spot market. The decision to utilize these provisions is made the year before each delivery and depends on the estimated price and availability from the spot market versus the estimated contract prices. During 1993, all nuclear fuel purchases were settled in United States dollars. In October 1993, the Company filed suit in U.S. District Court, Central District of Illinois, Danville, seeking a declaration that the Company's termination of one of these uranium supply contracts is permitted by the terms of the contract. Defendants in the lawsuit are U.S. Energy Corporation, Crested Corporation, U. S. Energy/Crested Corporation, Cycle Resources Investment Corporation, Sheep Mountain Partners, Nulux Nukem Luxemburg GMBH, and Dresdner Bank. The defendants are joint ventures, partnerships, and domestic and foreign corporations who are either original parties or parties by assignment to the contract. The Company purchased approximately half of its uranium concentrates supply under this contract, which the Company terminated shortly before filing this action. If the contract termination is upheld, the Company does not anticipate having difficulty in replacing the contract at significantly lower fuel prices. The defendants have filed responses including affirma- tive defenses and breach of contract claims. A motion for change of venue filed by certain of the defendants has been denied, and the case is proceeding. Conversion services for the period 1991-2001 are contracted with Sequoyah Fuels. Sequoyah Fuels closed its Oklahoma conversion plant in 1992 and has joined with Allied Chemical Company to form a new marketing company named CoverDyn. All conversion services will be performed at Allied's Metropolis, Illinois facility, but Sequoyah Fuels will retain the contract with the Company. The Company has a Utility Services contract for uranium enrichment requirements with the DOE which provides 70% of the enrichment requirements of Clinton through September 1999. The remaining 30% has been contracted with the DOE through its incentive pricing plan through September 1995, and an amendment was signed in 1993 which covers the remaining 30% through 1999. This amendment allows the Company to either purchase the enrichment services at the DOE's incentive price or provide electricity at DOE's Paducah, Kentucky enrichment plant, an agreed exchange rate. In addition, legislation was passed to create a new private government corporation, the United States Enrichment Corporation (USEC), for enrichment services. All of the DOE's assets including all contracts were transferred to the USEC as of July 1993. A contract with General Electric Company provides fuel fabrication requirements for the initial core and 2,196 fuel bundles (approximately 11 reloads through 2004). In 1993, an amendment was signed with the General Electric Company to add 1,472 fuel bundles to the contract and to change the existing price as well as some other terms and conditions. The additional 1,472 fuel bundles are expected to cover fuel fabrication requirements through 2017. Beyond the stated commitments, the Company may enter into additional contracts for uranium concentrates, conversion to uranium hexafluoride, enrichment and fabrication. Currently, no plants for commercial reprocessing of spent nuclear fuel are in operation in the U.S., and reprocessing cannot commence until appropriate licenses are issued by the NRC. Clinton has on-site high density storage capability which will provide spent nuclear fuel storage capacity to meet requirements until the year 2004. Various governmental agencies are currently reviewing the environmental impact of nuclear fuel reprocessing and waste management. The Nuclear Waste Policy Act of - 11 - 1982 was enacted to establish a government policy with respect to disposal of spent nuclear fuel and high-level radioactive waste. The Company signed a contract for disposal of spent nuclear fuel and/or high-level radioactive waste on July 6, 1984 with the DOE. Under the contract, the Company is required to pay the DOE one mill (one-tenth of a cent) per net kilowatt-hour (one dollar per MWH) of electricity generated and sold. The Company is recovering this amount through rates. The federal government is required to have a repository in place to accept spent nuclear fuel by January 31, 1998; however, current federal government schedules indicate the year 2010 for the acceptance of the first spent nuclear fuel. The Company expects that it will be able to meet interim storage requirements through 2009 on-site using existing in-core pool facilities. Under the Energy Policy Act of 1992, the Company is responsible for a portion of the cost to decontaminate and decommission the DOE's uranium enrichment facilities. Each utility will be assessed an annual fee for a period of fifteen years based on quantities purchased from the DOE facilities prior to passage of the Act. During 1992 the Company recorded an estimated liability of $10.5 million, which was revised to $7.2 million in 1993. At December 31, 1993, the Company has a remaining liability of $6.7 million representing future assessments. The Company is recovering these costs, as amortized, through its fuel adjustment clause. Construction Program The cost, including allowance for funds used during construction (AFUDC), of the Company's construction program during 1994 and during the period January 1, 1994 to December 31, 1998 is estimated as follows:
Five-Year Period 1994 1994-1998 (Millions of dollars) Electric generating facilities $ 57.4 $ 221.2 Electric generating facilities- clean air compliance 11.4 13.3 Electric transmission and distri- bution facilities 57.2 301.9 General plant 37.4 119.6 Gas facilities 24.2 119.0 Total construction 187.6 775.0 Nuclear fuel 28.4 114.8 Total $216.0 $ 889.8 The above estimates include potential costs which maybe required to comply with the Clean Air Act as discussed further in "Environmental Matters". See the sub-caption "Clean Air Act" hereunder on page 20 for additional information. The estimated construction expenditures during the period January 1, 1994 to December 31, 1998, together with the repayment at maturity of currently outstanding long-term debt (including lease payments under capital leases) and redeemable preferred stock, aggregating approximately $424 million, and sinking fund requirements of approximately $2 million are expected to require expenditures by the Company of approximately $1.315 billion. Construction and capital requirements are expected to be met through internal cash generation. In 1992, the Board authorized a new general obligation mortgage (New Mortgage), which is intended to replace the Company's 1943 Mortgage and Deed of Trust (First Mortgage). All bonds issued to date under the New - 12 - Mortgage have been secured by a corresponding issue of first mortgage bonds under the First Mortgage. As a result of the September 1993 write-off related to deferred Clinton post-construction costs, based upon the most restrictive earnings test contained in the First Mortgage, the Company anticipates that it will be prohibited from issuing additional first mortgage bonds for other than refunding purposes until mid 1994. The Company's ability to issue additional first mortgage bonds for refunding purposes is similarly limited, since the earnings test must also be met if the bonds to be refunded are not within two years of maturity. The Company does not have any first mortgage bonds maturing within two years. However, the September 1993 write-off did not impact the Company's ability to issue new mortgage bonds under the New Mortgage. The amount of available unsecured borrowing capacity totaled $105 million at December 31, 1993. Also, at December 31, 1993, the unused portion of the Company's total bank lines of credit was $200 million. The Company is required to maintain unused lines of credit with lending institutions under which the Company shall be entitled to borrow sums of money in an aggregate amount equal at any time to the total of (a) the aggregate principal amount of the commercial paper of the Fuel Company then outstanding (b) plus the aggregate principal amount of commercial paper of the Company then outstanding. At December 31, 1993, such outstanding commercial paper of the Fuel Company was $54.5 million. Clinton Power Station General The Company owns 86.8% of Clinton and Soyland owns the remaining 13.2%. The terms for sharing the construction, ownership and operation of Clinton are set forth in several related agreements between the Company and Soyland. Under these agreements, the Company has authority to act on behalf of Soyland for purposes of various matters relating to the design, construction, operation, maintenance and decommissioning of Clinton. See the sub-caption "Decommissioning Costs" hereunder on page 15 for additional information on the decommissioning of Clinton. The Clinton nuclear power station was placed in service in 1987 and represents approximately 19% of the Company's installed generation capacity. In 1993, Clinton provided 28% of the Company's total electric generation and had the lowest fuel cost per megawatt-hour generation compared to all other Company-owned power stations. The investment Clinton and its related deferred costs represented approximately 56% of the Company's total assets at December 31, 1993. Clinton related costs represented 36% of the Company's total 1993 other operating, maintenance and depreciation expenses. Clinton's equivalent availability was 73%, 62% and 76% for 1993, 1992 and 1991, respectively. Clinton's equivalent availability was lower in 1993 and 1992 due in part to the timing of refueling and maintenance outages. Ownership of an operating nuclear generating unit exposes the Company to significant risks including increased and changing regulatory, safety and environmental requirements, and increases in the future cost of closing and dismantling the unit. The Company expects to be allowed to continue to operate Clinton; however, if any unforeseen or unexpected developments would prevent the Company from doing so, the Company could be materially adversely affected. For further discussion of insurance limitations, refer to the caption Insurance of "Note 3 - Commitments and Contingencies" on page 35 of the Illinois Power Company 1993 Annual Report which is incorporated herein by reference. - 13 - Rate and Regulatory Matters 1992 Rate Order A September 1993 decision by the Illinois Appellate Court, Third District (Appellate Court Decision), upheld key components of the August 1992 Rehearing Order (Rehearing Order) issued by the ICC. The Rehearing Order denied the Company recovery of certain deferred Clinton post- construction costs consisting of all deferred depreciation and real estate taxes and 72.8% of the deferred common equity return. The Company originally recorded these deferred Clinton post-construction costs as a regulatory asset when such costs were believed probable of recovery through future rates, based on prior ICC orders. The deferred costs were recorded from the time Clinton began operations (April 1987) to the time the ICC allowed the Company to begin recovering these deferred costs in rates (March 1989), otherwise known as the regulatory lag period. Based upon the Company's assessment of the Appellate Court Decision and in accordance with Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (FAS 71) the Company recorded a loss of $271 million ($200 million or $2.65 per share, net of income taxes) in September. This write-off includes revenues and related interest to be refunded for deferred costs included in electric rates between April 1992 and August 1992 which were disallowed by the Rehearing Order. In October 1993, the Company petitioned the Appellate Court to reconsider the Appellate Court Decision. The ICC petitioned the Appellate Court to reconsider its instructions in the Appellate Court Decision regarding the application on remand of ratemaking adjustments in determining the actual financial harm incurred by the Company. In January 1994, the Appellate Court denied all petitions for rehearing. In February 1994, the parties to the appeal, including the Company and the ICC, presented a joint motion to the Appellate Court in which the parties agreed to a form of order to be entered on remand by the ICC and the Company agreed to waive its right to seek further judicial review of the Rehearing Order. The Appellate Court granted the joint motion on March 2, 1994 and remanded the matter to the ICC for further proceedings in accordance with the parties' joint motion. On March 16, 1994, the ICC issued the order on remand in the form agreed to by the parties. The order on remand entered by the ICC does not alter the ICC's determination in the Rehearing Order of the amount of post-construction costs incurred in connection with the operation of Clinton that is recoverable in rates by the Company, and does not result in any change in the Company's retail electric tariffs. The order on remand provides for refunds, calculated in accordance with the ICC's April 1992 order directing that revenues be collected subject to refund pending the rehearing proceeding, aggregating approximately $8.9 million, including interest. The refund obligation was included in the September write-off. Refunds were reflected on customer's bills beginning on March 25, 1994. 1987 Uniform Fuel Adjustment Clause Reconciliation In April, the Illinois Appellate Court, Third District, issued its decision reversing the ICC's February 1992 order pertaining to the Company's annual Uniform Fuel Adjustment Clause reconciliation. The ICC's February 1992 order had stated that carrying costs of $29.3 million incurred by the Company's nuclear fuel affiliate, Illinois Power Fuel Company, between August 1985 and April 1987, and added to the balance of nuclear fuel inventory during the same period in accordance with a previous ICC order, were imprudent and that the balance of recoverable nuclear fuel costs should be reduced by that amount. The Appellate Court held that the evidence did - 14 - not support the finding in the February 1992 order that the Company was imprudent in nuclear fuel procurement and management, reversed the disallowance and remanded for entry of an order consistent with its determination. In May, the ICC filed a petition for leave to appeal the Appellate Court decision to the Illinois Supreme Court. In October, the Illinois Supreme Court denied the ICC's petition for leave to appeal and issued its mandate to remand the case to the ICC. In January 1994 the ICC issued its order on remand consistent with the Appellate Court decision. As a result of the Appellate Court decision, the Company expects to recover approximately $14.3 million previously refunded to customers, which will not have an impact on the Company's results of operations. Accounting Matters The Company currently prepares its financial statements in accordance with FAS 71. Accordingly, the Company records various regulatory assets and liabilities, such as deferred Clinton costs. Management believes that the Company currently meets the criteria for continued application of FAS 71, but will continue to evaluate significant changes the regulatory and competitive environment to assess the Company's overall compliance with the criteria of FAS 71. Decommissioning Costs The Company is responsible for its ownership share of the costs of decommissioning Clinton. The Company is collecting future decommissioning costs through its rates based on an ICC approved formula that allows the Company to adjust rates annually for changes in decommissioning cost estimates. Based on NRC regulations that establish a minimum funding level, the Company's 86.8% share of Clinton decommissioning costs is estimated to be approximately $344 million (1993 dollars) and reflects an increase in 1993 due to changes in the calculation of the NRC minimum. The NRC minimum is based only on the cost of removing radioactive plant structures. A site-specific study to estimate the costs of dismantling, removal and disposal of Clinton has not been made; however, the Company plans to under- take this study sometime in the near future. This study may result in projected decommissioning costs higher than the NRC specified funding level. At December 31, 1993 and 1992, the Company had recorded a liability of $17.2 million and $12.3 million, respectively, for the future decommissioning of Clinton. External decommissioning trusts, as prescribed under Illinois law and authorized by the ICC, have been established to accumulate funds, based on the expected service life of the plant, for the future decommissioning of Clinton. For years 1993, 1992 and 1991, the Company has contributed $3.9 million, $3.7 million and $3.4 million, respectively, to its external nuclear decommissioning trust funds. The balances in these nuclear decommissioning funds at December 31, 1993 and 1992, were $17.2 million and $12.3 million, respectively. The Company recognizes earnings and expenses from the trust funds as changes in its assets and liabilities relating to these funds. The estimated fair value of the December 31, 1993, was $18.3 million. In 1992, the ICC entered an order in which the ICC expressed concern that the Company take all reasonable action to ensure that Soyland contributes its ownership share of the current or any revised estimate of decommissioning costs. The order also states that if the Company becomes liable for decommissioning expenses attributable to Soyland, the ICC will then decide whether that expense should be the responsibility of the Company's stockholders or its customers. - 15 - Dividends The Company's Board of Directors has declared quarterly common and preferred stock dividends payable through the second quarter of 1994. The Board of Directors acted to resolve uncertainties about the Company's ability to declare and pay common and preferred stock dividends in the event that write-offs related to the August 1992 Rehearing Order produced an accumulated deficit (negative retained earnings). Additionally, ICC authorization is required to declare and pay dividends in the event of negative retained earnings. In March 1993, the Company received such authorization to pay dividends through the second quarter of 1994, contingent on the Company meeting certain financial tests. The loss taken by the Company in September 1993 will not affect the Company's ability to meet these financial tests. On February 1, 1994, the Company paid its previously declared dividends for the first quarter of 1994. The Company expects that dividends previously declared for the second quarter of 1994 will be paid on the normal payment date in 1994. If payment is unlawful (i.e., if the Company fails to meet the financial tests in the ICC order) on normal payment date, the Company will be precluded from paying dividends. In this event, under the terms of the Board's declaration, no common stock dividend payments will be made and the payment of preferred stock dividends will be deferred until such time as payment is lawful. Payment of current and cumulative preferred stock dividends will be made to holders of preferred stock as of the record date specified for the quarter in which payment of dividends first becomes authorized and lawful. Declaration and payment of dividends on preferred and common stock for quarters subsequent to the second quarter of 1994 will require an extension of the previously granted authorization from the ICC if the Company continues to have negative retained earnings. On January 21, 1994, the Company filed a supplemental petition seeking an extension of this authorization for the third and, if necessary, fourth quarters of 1994. On March 23, 1994, the ICC granted the Company's supplemental petition but included the additional condition that the Company may not increase the current stock dividend above the current quarterly rate of $.20 per share while its retained earnings are negative. The Company will take such steps as may be required and are appropriate to sustain its normal schedule for preferred and common stock dividend payments. Consistent with its efforts to insure the continuation of preferred and common stock dividend payments during any period of negative retained earnings, the Company appropriated $100 million of year-to-date 1993 earnings for the declaration of dividends. This action was taken prior to recording the September 1993 write-off, and in a manner consistent with the FERC Uniform System of Accounts, in order to address issues raised by the Federal Power Act relating to the declaration of dividends, and to mitigate uncertainty associated with the declaration and payment of dividends subsequent to the second quarter of 1994. Gas Business The Company supplies natural gas service at retail to an estimated aggregate population of 920,000 in 257 incorporated municipalities, adjacent suburban areas and numerous unincorporated communities. It does not sell gas for resale. During the twelve months ended December 31, 1993 the Company purchased 66,608,000 MMBtu of natural gas from Panhandle Eastern Pipe Line Company (Panhandle), Natural Gas Pipeline Company of America (Natural), Mississippi River Transmission Corporation (Mississippi), Trunkline Gas Company - 16 - (Trunkline), ANR Pipeline Company (ANR), and in the spot market at a cost of approximately $188 million. The average cost of natural gas purchased by the Company from all suppliers for the years 1993, 1992 and 1991 was $2.82, $2.62 and $2.49 per MMBtu, respectively. The total cost of natural gas delivered increased 2% from 1992 due to increased sales to customers and higher prices. Approximately 30% of total gas purchased was from spot market sources. Gas therm sales, which exclude therms transported, decreased 2.6% in 1993. When transported gas for industrial and commercial customers is included, the total gas delivered (therms sold plus therms transported) to the Company's customers increased 1.1% from 1992. The Company's rate schedules contain provisions for passing through to its gas customers increases or decreases in the cost of purchased gas. See the information under the captions Revenue and Energy Cost of "Note 1 - Summary of Significant Accounting Policies" on page 33 of the Illinois Power Company 1993 Annual Report which is incorporated herein by reference. The volume of customer-owned gas transported during 1993 increased 12.3% from that of 1992 due to lower spot market prices. Approximately 150 industrial and large commercial customers purchase gas directly from gas producers. These customers are charged for the transportation of gas through the Company's system to their plant facilities. The Company has eight underground gas storage fields having a total capacity of approximately 15.2 million MMBtu and a total deliverability on a peak day of about 347,000 MMBtu. In addition to the capacity of the eight underground storage fields, the Company has contracts with Panhandle for one million MMBtu of underground storage capacity and a total deliverability on a peak day of approximately 20,000 MMBtu, with Natural for 1.2 million MMBtu of storage capacity and a total deliverability on a peak day of 37,000 MMBtu and with ANR for 173,000 MMBtu of storage capacity and a total deliverability on a peak day of 3,473 MMBtu. Operation of underground storage permits the Company to increase deliverability to its customers during peak load periods by taking gas into storage during the off-peak months. The Company owns three active liquefied petroleum gas plants having an aggregate peak-day deliverability of about 50,000 MMBtu for peak-shaving purposes. Gas properties in clude approximately 7,600 miles of mains. The Company experienced its 1993 peak-day send out of 592,197 MMBtu of natural gas on February 17, 1993. The Company's highest peak-day send out was 857,324 MMBtu of natural gas on January 10, 1982. In December 1992 the Company filed a petition with the ICC to lower the gas utility plant composite depreciation rate to 3.4%. The proposed reduction was based on new estimates of remaining plant life as developed in a gas depreciation study completed in 1992. In July 1993 the ICC issued an order approving the new rate effective on the date of the order in the Company's pending gas rate case, which is expected in April 1994. The Company filed a gas retail rate increase request with the ICC May 14, 1993, seeking to adjust its rates to reflect rising operating and maintenance expenses, the effects of lower sales to ultimate customers and capital costs associated with the Hillsboro storage field expansion and pipeline project. For a discussion of the Hillsboro storage field and expansion and pipeline project see the sub-caption "Gas Supply" hereunder. The Company originally asked for a net annual rate increase of approxi- mately $13.3 million, or slightly more than 4%. This rate increase consisted of a base rate increase of approximately $30.7 million, - 17 - partially offset by projected annual savings of $17.4 million in the cost of gas (as a result of increased storage capacity in the Hillsboro storage field) that will automatically flow to customers through the Uniform Gas Adjustment Clause. In January 1994, the Company revised its proposal to a net annual rate increase of $12.3 million consisting of a base rate increase of $27.6 million, partially offset by $15.3 million of projected gas cost savings. The requested rate increase includes an authorized rate of return of 9.84%, as compared to 11.99% which is currently authorized. The decrease in the authorized rate of return is a result of a decline in the cost of debt and preferred stock, combined with a lower rate of return on equity as compared to the Company's last gas rate case. In February 1994, the ICC issued its Hearing Examiner's Proposed Order (HEPO) recommending the Company receive a $20.3 million base rate increase which includes an authorized rate of return of 9.51%. A final order by the ICC, which may be different than the HEPO, is expected in April 1994. The Company's last gas rate increase was effective January 1983, followed by a gas rate decrease in December 1984. Gas Supply Pursuant to Orders 636 and 636-A, issued in April and August 1992, respectively, the FERC approved amendments to its rules that are intended to increase competition among natural gas suppliers by "unbundling" the interstate pipelines' merchant sales service into separate sales and transportation services and by mandating that the pipelines' firm transpor- tation service be comparable to the transportation service included in their traditional bundled sales service. Under this rule, pipelines are required to unbundle services that they provide today so that natural gas purchasers can select services as needed to meet their energy requirements. As of December 31, 1993, all of the Company's pipeline suppliers had restructured their service offerings to conform with the requirements of Orders 636 and 636-A. The Company believes these rules will increase the complexity of providing firm gas service. This additional complexity results from the greater number of options available to the Company, as well as the added responsibility to arrange for the acquisition, transportation and storage of natural gas, which was previously bundled into the pipelines' sales service. As a result of Orders 636 and 636-A, the pipelines will charge their customers "transition" costs, which arise from the unbundling of services. The Company has estimated that approximately $10.5 million in transition costs will be incurred and subsequently recovered through the Uniform Gas Adjustment Clause over the next three to four years. In 1993, the Company began to pay transition costs billed by gas pipelines and began to recover these payments through the Uniform Gas Adjustment Clause. The ICC issued its order on March 9, 1994, which permits recovery of the transition costs through the Uniform Gas Adjustment Clause. Under Order 636, the Company has entered into firm transportation agreements with the pipelines that feed its system. These contracts replace the sales contracts previously held with the respective pipelines. The amounts of firm transportation volumes under the contracts currently in effect with each pipeline are listed below. - 18 -
Order 636 Source Implementation Date Firm Transportation Volume Panhandle 5/01/93 75,900 MMBtu plus58,370 Leased Storage Natural 12/01/93 89,454 MMBtu plus 37,675 Leased Storage Mississippi 11/01/93 102,000 MMBtu including Storage Trunkline 5/01/93 10,831 MMBtu Trunkline SG-2 5/01/93 3,726 MMBtu ANR 11/01/93 5,684 MMBtu
Historic gas purchases are shown in the following table. The source labeled "Other" below represents purchases from small natural gas fields in Illinois.
Contract Purchases Expiration Years Ended December 31, Source Date 1993 1992 1991 (Millions of MMBtu) Panhandle 4/30/96 16.0 8.0 10.6 Natural 11/30/96 21.4 19.3 21.6 Mississippi 10/31/96 8.7 5.4 8.9 Trunkline 4/30/94 0.5 0.1 0.1 ANR 10/31/96 0.1 0.1 0.1 Spot Market - 19.8 37.1 24.0 Other - 0.1 0.1 0.1 Total 66.6 70.1 65.4
The Company's present estimated supplies of gas from pipelines and its own storage are sufficient to serve all of its existing firm loads, and to provide best efforts service to interruptible loads. Gas service to interruptible customers was interrupted on six occasions for a total of 622 hours during the year 1993. On these occasions, storage service was made available in lieu of curtailment. Gas service continues to be available to all applicants on a current basis. During 1993, the Company completed the Hillsboro Storage Field expansion project at a cost of approximately $56 million. The project included construction of a 62 mile pipeline from Hillsboro to the Decatur area, as well as additional facilities in the Metro-East area. The expansion increased total gas storage capacity by 42 percent and allows the Company to take maximum advantage of lower summer spot market prices, to reduce pipeline contract demand charges and to increase supplier price competition in the St. Louis Metro-East area. Nine new injection-withdrawal wells and two additional compressor units have been constructed to increase the storage capacity of the Hillsboro Field. Injection rates were tripled and delivery/withdrawal rates were increased 150 percent to better meet winter peak demand. Environmental Matters The Company is subject to regulation by certain federal and Illinois authorities with respect to environmental matters and may in the future become subject to additional regulation by such authorities or by other federal, state and local governmental bodies. Existing regulations affecting the Company are principally related to air and water quality, hazardous wastes and toxic substances. - 19 - Air Quality Pursuant to the Federal Clean Air Act (Act), the United States Environmental Protection Agency (USEPA) has established ambient air quality standards for air pollutants which in its judgment have an adverse effect on public health or welfare. The Act requires each state to adopt laws and regulations, subject to USEPA approval, designed to achieve such standards. Pursuant to the Illinois Environmental Protection Act, the Illinois Pollution Control Board (Board) adopted and, along with the Illinois Environmental Protection Agency (IEPA), is enforcing a comprehensive set of air pollution control regulations which include emission limitations and permitting, monitoring, and reporting requirements. These regulations have, with some modifications, received USEPA approval and are enforceable by both the Illinois and federal agencies. The air pollution regulations of the Board impose limitations on emissions of particulate, sulfur dioxide, nitrogen oxides, and various other pollutants. Enforcement of emission limitations is accomplished in part through the regulatory permitting process. To construct a facility which will produce regulated emissions, a construction permit must be obtained, usually on the basis of the design being sufficient to permit operation within applicable emission limitations. Upon completion of construction, an operating permit for the facility must be obtained. Operating permits are granted for various periods, usually within a range from two to five years. The initial granting or subsequent renewal of operating permits is based upon a demonstration that the facility operates within prescribed limitations on emissions. The Company's practice is to obtain an operating permit for each source of regulated emissions. Presently, it has a total of approximately 100 permits for emission sources at its power stations and other facilities, expiring at various times. In addition to having the requisite operating permits, each source of regulated emissions must be operated within the regulatory limitations on emissions. Verification of such compliance is usually accomplished by reports to regulatory authorities and inspections by such authorities. Jointly, the Company and IEPA petitioned the Board to adopt a regulatory amendment providing for a site-specific sulfur dioxide limitation applicable to the Baldwin power station. The Board granted that relief in 1979 and amended it in 1983 to satisfy certain concerns raised by USEPA. In October 1983, the amendment, with supporting information, was submitted to USEPA for approval as part of the State Implementation Plan (SIP). On March 5, 1990, USEPA approved the Baldwin SIP allowing the use of local coal up to full capacity of the Baldwin power station. In addition to the sulfur dioxide emission limitations for existing facilities, both the USEPA and the State of Illinois adopted New Source Performance Standards (NSPS) applicable to coal-fired generating units limiting emissions to 1.2 pounds of sulfur dioxide per million Btu of heat input. This standard is applicable to the Company's Unit 6 at the Havana power station. The federal NSPS also limits nitrogen oxides, opacity and particulate emissions and imposes certain monitoring requirements. In 1977 and 1990 the Act was amended and, as a result, USEPA has adopted more stringent emission standards for new sources. These standards would apply to any new plant constructed by the Company. Clean Air Act On November 15, 1990, the U. S. Congress passed the Clean Air Act Amendments (Amendments). The Amendments create new programs to control acid rain, protect stratospheric ozone and require permits for most air pollution sources. The Amendments also modify the existing hazardous air pollutant program and impose new air quality requirements on sources in areas which do not meet the ambient air quality standards. - 20 - As the regulations implementing the Amendments are developed, the Company will develop and implement plans to maintain compliance with any new air pollutant restrictions. In August 1992, the Company announced that it had suspended construction of two scrubbers at the Baldwin power station, on which the Company has expended approximately $34.6 million. After suspending scrubber construction, the Company reconsidered its alternatives for complying with Phase I of the 1990 Clean Air Act Amendments. In March, the Company announced its compliance plan for Phase I (1995-1999) of the Clean Air Act. To meet the Phase I sulfur dioxide requirements of the acid rain provisions of the Clean Air Act, the Company will purchase sulfur dioxide emission allowances while continuing the use of high-sulfur Illinois coal. An emission allowance is the authorization by the USEPA to emit one ton of sulfur dioxide. The Company has already contracted to purchase approximately 430,000 of the approximately 550,000 emission allowances it expects to need to acquire from outside sources for Phase I compliance purposes. In 1993 the Illinois General Assembly passed and the governor signed legislation authorizing the ICC to permit expenditures and revenues from emission allowance purchases and sales to be reflected in rates charged to customers through the fuel adjustment clause as a cost of fuel. On February 18, 1994, the Company filed with the ICC revised fuel adjustment clause tariffs providing for recovery of expenses and revenues from emission allowances. On March 16, 1994, the ICC suspended this filing for investigation pursuant to the provisions of the Illinois Public Utilities Act. In addition, on March 9, 1994, the ICC initiated a rule-making proceeding to consider changes to its Uniform Fuel Adjustment Clause regulation to conform to the 1993 legislation. The Company's compliance plan will defer, until at least 2000, any need for scrubbers or other capital projects associated with sulfur dioxide emission reductions. Additional actions will be required by the Company to achieve compliance with the Phase II sulfur dioxide and nitrogen-oxide emission requirements of the Clean Air Act. To achieve compliance with the Phase I nitrogen-oxide emission reduction requirements of the acid rain provision of the Clean Air Act, the Company is installing low-nitrogen-oxide burners at two generating units. The estimated capital cost for these burners is $13 million. Additional capital expenditures are anticipated prior to 2000 to comply with the Phase II nitrogen-oxide requirements, as well as potential requirements to further reduce nitrogen-oxide emissions in the St. Louis metropolitan area. The Company is also proceeding with installation of continuous emission monitoring systems at its major generating stations, as required by the acid rain provisions of the Clean Air Act. The estimated capital cost for these monitoring systems is $17 million. The Company has expended approximately $9 million through 1993 on continuous emission monitoring systems. In July 1993, the Alliance for Clean Coal (Alliance), a coalition of Western coal producers and railroads, filed suit against the ICC in the U.S. District Court in Chicago. The Alliance sought a declaration that the Illinois statute regarding the filing with and approval by the ICC of utility Clean Air Act compliance plans is unconstitutional. In September 1993, the ICC issued an order pursuant to this statute approving the Company's compliance plan for Phase I. In December 1993, the U.S. District Court issued an opinion and an order in Alliance for Clean Coal vs. Ellen Craig, et al. declaring the statute unconstitutional. The order prohibits the ICC from enforcing the statute, and declares void compliance plans prepared and approved in reliance on the statute. The Company is of the belief that no regulatory approval is now required of its Clean Air Act compliance plan, and has determined to go forward with the plan it has adopted for Phase I. The ICC has appealed the District Court decision to the U.S. Court of Appeals. - 21 - Gas Manufacturing Sites The Company, through its predecessor companies, is identified on a State of Illinois list as the responsible party for potential environmental impairment at 25 former manufactured-gas plant sites. The Company is investigating each site to determine (1) the type and amount of residues present; (2) whether the residues constitute environment or health risks and, if present, the extent of those risks; and (3) whether the Company has any responsibility for remedial action. Because of the unknown and unique characteristics of each site (such as amount and type of residues present, physical characteristics of the site and the environmental risk) and uncertain regulatory requirements, the Company is not able to determine its ultimate liability for the investigation and remediation of the 25 sites. However, at December 31, 1993, the Company has estimated and recorded a minimum liability of $35 million, which is an increase of $10 million from 1992. This adjustment to the liability was made because the Company can better define the extent of contamination due to ongoing monitoring. In 1993, the Company spent approximately $1.5 million for investi- gation and remediation activities. The Company is unable to determine at this time what portion of these costs, if any, will be eligible for recovery from insurance carriers or other potentially responsible parties. In addition, the Company is unable to determine the time frame over which these costs may be paid out. The Company has also recorded a regulatory asset in the amount of $36 million, reflecting management's expectation that investigation and remediation costs for the manufactured-gas plant sites will be recovered from customers. In September 1992, the ICC issued a generic order addressing the recoverability of costs incurred by utilities in cleaning up coal-tar deposits resulting from the operation and retirement of former manufactured-gas plant sites. The ICC order concluded that utilities will be allowed to collect from customers their prudently incurred costs paid to third parties over a five-year period with no recovery from customers of carrying costs on the unrecovered balance. Based on the ICC's ruling that carrying costs on unrecovered cleanup costs will not be allowed, the Company and other utilities appealed the ICC order to the Illinois Appellate Court, Third District. Other parties also filed appeals of the ICC order, contesting the ICC's ruling that cleanup costs may be recovered from customers and that those costs may be recovered through a tariff rider. In December 1993, the Appellate Court issued its opinion affirming the ICC's order in all respects. In February 1993, an intervenor filed a petition for leave to appeal the Appellate Court decision with the Illinois Supreme Court. In April 1993, the ICC approved tariffs filed by the Company that provide for recovery of such costs that fall within the guidelines of the ICC's September 1992 Order and were incurred by the Company subsequent to January 1, 1993. The Company is also pursuing recovery of cleanup costs from its insurance carriers. Water Quality The Federal Water Pollution Control Act Amendments of 1972 require that National Pollutant Discharge Elimination System permits be obtained from USEPA (or, when delegated, from individual state pollution control agencies) for any discharge into navigable waters. Such discharges are required to conform with the standards, including thermal, established by USEPA and also with applicable state standards. Enforcement of discharge limitations is accomplished in part through the regulatory permitting process similar to that described previously under "Air Quality". Presently, the Company has approximately two dozen permits for discharges at its power stations and other facilities, which must be periodically renewed. - 22 - In addition to obtaining such permits, each source of regulated discharges must be operated within the limitations prescribed by applicable regulations. Verification of such compliance is usually accomplished by monitoring results reported to regulatory authorities and inspections by such authorities. The Baldwin permit was reissued during the fourth quarter of 1993 and is due for renewal in the fourth quarter of 1997. The Hennepin NPDES permit was reissued in 1992 and is due for renewal in the third quarter of 1997. The Clinton permit was reissued in 1990 and is due for renewal in the second quarter of 1995. The Vermilion, Wood River and Havana permits were reissued in 1991. These permits are due for renewal in the fourth quarter of 1995. Operations at the Vermilion Plant (Plant) may be affected by allegations that continued discharge of certain levels of effluents from the ash pond at the Plant into the Middle Fork of the Vermilion River violates state water quality standards. Although both the Illinois Environmental Protection Agency and the Illinois Department of Conservation have supported the Company's position that current effluent discharge limitations, applied to the Plant since these standards first were adopted, continue to be appropriate, both the Illinois Pollution Control Board, in a 1993 decision currently under appeal by the Company, and a citizens group have challenged the Company's ability to continue to discharge these effluents at current levels, and the citizens group has notified the Company that it may bring suit against the Company and the United States and Illinois Environmental Protection Agencies to prevent such discharges. The Company is investigating compliance options to determine the least cost response should the most restrictive limitations be imposed and believes that it can avoid any material adverse impact on financial condition and operations. Other Issues Hazardous and nonhazardous wastes generated by the Company must be managed in accordance with federal regulations under the Toxic Substances Control Act, the Comprehensive Environmental Response, Compensation and Liability Act, and the Resource Conservation and Recovery Act (RCRA) and additional state regulations promulgated under both RCRA and state law. Regulations promulgated in 1988 under RCRA govern the Company's use of underground storage tanks. The use, storage, and disposal of certain toxic substances, such as polychlorinated biphenyls (PCB's) in electrical equipment, are regulated under the Toxic Substances Control Act. Hazardous substances used by the Company are subject to reporting requirements under the Community-Right-To-Know Act. The State of Illinois has been delegated authority for enforcement of these regulations under the Illinois Environ- mental Protection Act and state statutes. These requirements impose certain monitoring, recordkeeping, reporting, and operational requirements which the Company has implemented or is implementing to assure compliance. The Company does not anticipate that compliance will have a material adverse effect on its financial position or results of operations. Between June 1983 and January 1985, the Company shipped various materials containing PCB's to the Martha C. Rose Chemicals, Inc. (Rose) facility in Holden, Missouri for proper treatment and disposal. Rose, pursuant to permits issued by USEPA, had undertaken to dispose of PCB materials for the Company and others, but failed in part to do so. As a result of such failure, PCB materials were being stored at the facility. In 1986, the Company joined with a number of other generators to efficiently and economically cleanup the facility. The Steering Committee, consisting of the Company and 15 other entities has received USEPA's approval to implement the Remedial Design Work Plan (Plan). All work is scheduled for completion by December, 1994. The Steering Committee is required to monitor the site for a minimum of five years after completion of the Plan. At the present time, the Company does not believe its ratable share of potential liability related to the cost of future activities at the Rose site will have a material adverse effect on its financial condition or results of - 23 - operations. The Company, along with fourteen other steering committee members, reached a settlement with all but one of the non- participating potentially liable entities to recover their ratable share of these costs. Electric and Magnetic Fields The possibility that exposure to electric and magnetic fields emanating from power lines, household appliances and other electric sources may result in adverse health effects has been a subject of increased public, governmental and media attention. Lawsuits have been filed against several utilities seeking recovery for personal injury or loss of property values allegedly resulting from EMF emanating from power lines or substations, or to have such facilities relocated. A considerable amount of scientific research has been conducted on this topic without definitive results. Research is continuing to resolve scientific uncertainties. It is too soon to tell what, if any, impact these actions may have on the Company's financial position and results of operation. Environmental Expenditures Operating expenses for environmentally-related activities in 1993 were approximately $50 million (including the incremental costs of alternative fuels to meet environmental requirements). The Company's accumulated capital expenditures (including AFUDC) for environmental protection programs since 1969 have reached approximately $780 million. This accumulated amount of capital expenditures through 1993 has been reduced to reflect a pro rata share of the disallowance of Clinton plant costs. Research and Development The Company's research and development expenditures during 1993, 1992 and 1991 were approximately $6.4 million, $3.7 million and $7.3 million, respectively. The increased research and development costs in 1993 are primarily due to increased dues to the Electric Power Research Institute and increased alternate fuel testing at the Baldwin Power Station. The higher 1991 amount was due to incremental coal transportation costs associated with test burns of western low-sulfur coal at Baldwin, Hennepin and Havana power stations. Regulation Under the Illinois Public Utilities Act, the ICC has broad powers of supervision and regulation with respect to the rates and charges of the Company, its services and facilities, extensions or abandonment of service, classification of accounts, valuation and depreciation of property, issuance of securities, and various other matters. The Illinois Public Utilities Act was amended effective January 1, 1986 to include certain provisions specifying criteria for the inclusion of utility plant investment in rate base. These provisions state in substance that the ICC shall include in a utility's rate base only the value of its investment which is both prudently incurred and used and useful in providing service to customers; that no new electric generating plant or significant addition to existing facilities shall be included in rate base unless the ICC determines that such plant or facility is reasonable in cost, prudent and used and useful in providing utility service to customers; and that the ICC is empowered to determine whether a utility's generating capacity is in excess of that reasonably necessary to provide adequate and reliable service and to make appropriate and equitable adjustments to rates upon a finding of excess capacity, provided that any such determination and adjustment with respect to generating capacity existing or under construction prior to January 1, 1986 shall be limited to the determination and adjustment, if any, appropriate under the law then in effect. - 24 - The Company is exempt from all the provisions of the Public Utility Holding Company Act of 1935 except Section 9(a)(2) thereof. That section requires approval of the Securities and Exchange Commission prior to certain acquisitions by the Company of any securities of other public utility companies or public utility holding companies. The Company is subject to regulation under the Federal Power Act by the FERC as to rates and charges in connection with the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce, the issuance of debt securities maturing in not more than 12 months, accounting and depreciation policies, and certain other matters. The FERC has declared the Company exempt from the Natural Gas Act and the orders, rules, and regulations of the Commission thereunder. The Company is subject to the jurisdiction of the NRC with respect to Clinton. NRC regulations control the granting of permits and licenses for the construction and operation of nuclear power stations and subject such stations to continuing review and regulation. Additionally, the NRC review and regulatory process covers decommissioning, radioactive waste, environmental and radiological aspects of such stations. In general, the NRC continues to propose new and revised rules relating to the operations and maintenance aspects of nuclear facilities. It is unclear whether such proposed rules will be adopted and what effect, if any, such adoption will have on the Company. The Company is subject to the jurisdiction of the Illinois Department of Nuclear Safety (IDNS) with respect to Clinton. IDNS and the NRC entered a memorandum of understanding which allows IDNS to review and regulate nuclear safety matters at state nuclear facilities. The IDNS review and regulatory process covers radiation safety, environmental safety, emergency preparedness and emergency response. IDNS continues to propose new and revised state administrative code through legislative approval. It is unclear if such proposed rules will be adopted and what effect, if any, such adoption will have on the Company. However, the NRC has the final authority over such nuclear facilities.
Executive Officers of the Registrant Name of Officer Age Position Larry D. Haab 56 Chairman, President and Chief Executive Officer Charles W. Wells 59 Executive Vice President Larry F. Altenbaumer 46 Senior Vice President and Chief Financial Officer Paul L. Lang 53 Senior Vice President J. Stephen Perry 55 Senior Vice President Larry S. Brodsky 45 Vice President Wilfred Connell 56 Vice President John G. Cook 46 Vice President Larry L. Idleman 55 Vice President Rodney A. Smith 46 Vice President Leah Manning Stetzner 45 Vice President, General Counsel and Corporate Secretary Alec G. Dreyer 36 Controller Robert A. Schultz 53 Treasurer
- 25 - The present term of office of each of the above executive officers extends to the first meeting of the Company's Board of Directors after the Annual Election of Directors. There are no family relationships among the executive officers and directors of the Company. Each of the above executive officers, except for Ms. Stetzner, Dr. Dreyer and Mr. Schultz, has been employed by the Company for more than five years in executive or management positions. Prior to election to the positions shown above, the following executive officers held the following positions since January 1, 1989. Mr. Haab was elected Chairman in June 1991. Prior to being elected Chief Executive Office in April 1991 and President in April 1989, he was Executive Vice President and Senior Vice President. Mr. Altenbaumer was elected Senior Vice President and Chief Financial Officer in June 1992. Prior to being elected Vice President, Chief Financial Officer and Controller in June 1990, he was Controller and Treasurer. Mr. Lang was elected Senior Vice President in June 1992. He joined the Company as Vice President in July 1986. Mr. Perry was elected Senior Vice President in June 1992. Prior to being elected Vice President in December 1989, he was Assistant Vice President and Manager of Nuclear Program Coordination at Clinton. Mr. Cook was elected Vice President in June 1992. He previously held the positions of Manager of Clinton Power Station and Manager of Nuclear Planning and Support. Mr. Smith's employment with the Company ended on December 31, 1993. Ms. Stetzner was elected Vice President, General Counsel and Corporate Secretary in February 1993. Prior to joining the Company as General Counsel and Corporate Secretary in 1989, she was Associate General Counsel with Burlington Northern Railroad Company. Mr. Dreyer joined the Company as Controller in June 1992. He previously was a Senior Audit Manager with Price Waterhouse. Mr. Schultz was elected Treasurer in July 1989. He previously was Director of Planning and Programming at Clinton. Operating Statistics The information under the captions "Selected Statistics" on page 48 of the Illinois Power Company 1993 Annual Report is incorporated herein by reference. Item 2. Properties The Company owns and operates electric generating stations at Havana, Wood River, Hennepin, Baldwin, and near Danville, Illinois (designated as the Vermilion station), totaling 3,460,000 kilowatts of net summer capability. The Company has an ownership in the Clinton power station (Clinton) of 86.8% and Soyland Power Cooperative, Inc. owns the remaining 13.2%. The - 26 - Company's portion of net summer output capability of Clinton is 810,000 kilowatts. The Company also owns other gas turbine generating facilities, at three locations, with an aggregate capability of 146,000 kilowatts. The Company owns an interconnected electric transmission system of approximately 2,800 circuit miles, operating from 69,000 to 345,000 volts and a distribution system which includes about 36,900 circuit miles of overhead and underground lines. All outstanding first mortgage bonds issued under the Mortgage and Deed of Trust dated November 1, 1943 are secured by a first mortgage lien on substantially all of the fixed property, franchises and rights of the Company with certain exceptions expressly provided in the mortgage securing the bonds. All outstanding New Mortgage Bonds issued under the General Mortgage and Deed of Trust dated November 1, 1992, are secured by a lien on the Company's properties used in the generation, purchase, transmission, distribution and sale of electricity and gas, which lien is junior to the lien of the Mortgage and Deed of Trust dated November 1, 1943. Item 3. Legal Proceedings Fuel and Purchased Gas Adjustment Clauses The ICC holds annual public hearings to determine whether each utility's fuel adjustment clause and purchased gas adjustment clause reflect actual costs of fuel and gas prudently purchased and to reconcile amounts collected with actual costs, with the possibility of surcharges or refunds to reflect amounts under-collected or over-collected. See "1987 Uniform Fuel Adjustment Clause Reconciliation" reported under "Clinton Power Station" in Item 1 for information regarding a February 1992 order from the ICC. Environmental See "Environmental Matters" reported under Item 1 for information regarding legal proceedings concerning environmental matters. Peabody Coal Company and Arch Coal Sales Company, Inc. See "Coal" reported under "Fuel Supply" in Item 1 for information regarding certain legal proceedings relating to the Clean Air Act. Item 4. Submission of Matters to a Vote of Security Holders The Company did not submit any matter to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 1993. At a special meeting of shareholders held on February 9, 1994, the Company's shareholders approved an agreement and plan of merger providing for the creation of a new holding company. See "Business" under Item 1 for a description of the holding company formation. - 27 - PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The information under the caption "Quarterly Financial Information and Common Stock Data (Unaudited)" on page 46 of the Illinois Power Company 1993 Annual Report is incorporated herein by reference. Item 6. Selected Financial Data The information under the caption "Selected Financial Data" on page 47 of the Illinois Power Company 1993 Annual Report is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information under the caption "Management's Discussion and Analysis" on pages 18 through 25 of the Illinois Power Company 1993 Annual Report is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The financial statements on pages 27 through 46 and Report of Independent Accountants on page 26 of the Illinois Power Company 1993 Annual Report are incorporated herein by reference. With the exception of the aformentioned information and the information incorporated in Items 5, 6, 7, and 8, the Illinois Power Company 1993 Annual Report is not to be deemed filed as part of this Form 10-K Annual Report. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant The information relating to directors is set forth in Part III of this Annual Report on Form 10-K. The information relating to executive officers is set forth in Part I of this Annual Report on Form 10-K. - 28 - Item 11. Executive Compensation The following table sets forth a summary of the compensation of the Chief Executive Officer and the four other most highly compensated executive officers of the Company for the years indicated. Summary Compensation Table
Long Term Annual Compensation Compensation Awards Other Restricted Shares All Other Name and Bonus Annual Stock Awards Underlying Compensation Principal Position Year Salary (A) Compensation (B) Options (C) Larry D. Haab 1993 $437,500 $22,531 $13,199 $22,531 20,000 shs. $3,555 Chairman, President 1992 403,958 28,883 7,099 16,000 shs. 3,373 and Chief Executive Officer 1991 364,375 22,044 N/A Charles W. Wells 1993 $265,875 $12,629 $ 9,697 $12,629 6,500 shs. $5,341 Executive Vice 1992 252,500 16,160 7,034 6,000 shs. 5,129 President 1991 240,958 14,605 N/A Paul L. Lang 1993 $205,625 $ 9,767 $ 7,508 $ 9,767 6,000 shs. $ 527 Senior Vice President 1992 188,667 13,490 4,472 5,000 shs. 536 1991 175,417 10,638 N/A J. Stephen Perry 1993 $205,625 $10,590 $ 6,421 $10,590 6,000 shs. $ 316 Senior Vice President 1992 188,667 12,075 4,672 5,000 shs. 384 1991 175,417 10,638 N/A Larry F. Altenbaumer 1993 $187,750 $ 8,918 $ 7,093 $ 8,918 6,000 shs. $2,009 Senior Vice President 1992 166,500 10,656 3,588 5,000 shs. 1,867 and Chief Financial 1991 150,33 9,176 N/A Officer
- 29 - A)The amounts shown in this column are the cash award portion of grants made to these individuals under the Executive Incentive Compensation Plan, including amounts deferred under the Executive Deferred Compensation Plan. See Plan description in footnote (B) below. B)This table sets forth stock unit awards for 1993 under the Company's Executive Incentive Compensation Plan. One-half of each year's award under this plan is converted into stock units representing shares of the Company's Common Stock based on the closing price of the Common Stock on the last trading day of the award year. The other one-half of the award is paid to the recipient in cash in the following year and is included in the Summary Compensation Table as Bonus paid in the award year. Stock units awarded in a given year, together with cash representing the accumulated dividend equivalents on those stock units, become fully vested after a three-year holding period. Stock units are converted into cash and paid based on the closing price of the Common Stock on the first trading day of the distribution year. Participants (or beneficiaries of deceased participants) whose employment is terminated by retirement on or after age 55, disability or death receive the present value of all unpaid awards on of such termination. Participants whose employment is terminated for reasons other than retirement, disability or death forfeit all unvested awards. In the event of a termination of employment within two years after a change in control of the Company (as defined in the Employee Retention Agreement described below), without good cause or by any participant with good reason, all awards of the participant become fully vested and payable. As of December 31, 1993, named executive officers were credited with the following total aggregate number of unvested stock units under the Executive Incentive Compensation Plan since its inception, valued on the basis of the closing price of the Company's Common Stock on December 31, 1993: Mr. Haab, 3,374 units valued at $74,650; Mr. Wells, 1,992 units valued at $44,083; Mr. Lang, 1,557 units valued at $34,454. Mr. Perry, 1,528 units valued at $33,813; Mr. Altenbaumer, 1,319 units valued at $29,200. Although stock units have been rounded, valuation is based on total stock units, including partial shares. C)The amounts shown in this column are Company contributions under the Incentive Savings Plan (including the market value of shares and sale of electricity and gas, which lien is junior to the lien of the Mortgage and Deed of Trust dated November 1, 1943). - 31 - The following tables summarize grants during 1993 of stock options under the Company's 1992 Long Term Inc. Compensation Plan and awards outstanding at year end for the individuals named in the Summary Compensation Table. No options were exercisable or exercised during 1993. Option Grants in 1993 Individual Grants
% of Total Exercise Grant Options Granted or Base Date Options to Employees Price Per Expiration Present Name Granted(a) in 1993 share Date Value(b) Larry D. Haab 20,000 shs. 27 % $24.25 6/9/2003 $135,200 Charles W. Wells 6,500 shs. 9 % 24.25 6/9/2003 43,940 Paul L. Lang 6,000 shs. 8 % 24.25 6/9/2003 40,560 J. Stephen Perry 6,000 shs. 8 % 24.25 6/9/2003 40,560 Larry F. Altenbaumer 6,000 shs. 8 % 24.25 6/9/2003 40,560
a)Each option becomes exercisable on March 31, 1997. In addition to the specified expiration date, the grant expires on the first anniversary of the recipient's death and/or the 90th day following retirement, and is not exercisable in the event recipient's employment terminates. In the event of a public tender for all or a portion of the stock, or if a proposal to merge or consolidate the Company with another company is submitted to the shareholders for a vote, the Compensation and Nominating Committee may declare the option immediately exercisable. b)These options have been valued using the Black-Scholes option pricing model. Disclosure of the grant date present value, using the Black-Scholes model or potential realizable value assuming 5% and 10% annualized growth rates, is mandated; however, the Company does not necessarily view the Black-Scholes pricing methodology, or any other methodology, as a valid or accurate means of valuing stock option grants. The Company elected to use the standard Black-Scholes model, which uses the following factors: fair market value of share at grant; option exercise price; term of the option; current yield of the stock; risk-free interest rate; volatility of the stock. The fair market value of the stock on June 9, 1993 was $24.25; the exercise price of the options is $24.25; and the term option is ten years. The annual dividend rate on the Company's Common Stock on June 9, 1993 was $0.80 for a yield of 3.3 percent. The risk-free interest rate used was 5.96 percent, based on the ten-year U.S. Treasury bond yield on May 14, 1993. The volatility of the stock used was .245. This figure is based on the absolute volatility (annualized standard deviation of the logarithms of the prior stock performance) for the 36-month period ending March, 1993. This is a relatively high volatility for an electric utility due, in part, to the Company's nuclear plant construction cost recovery disallowances, related write-offs, and temporary suspension of common stock dividend payments during this period. The value thus determined, $6.76 share, was not discounted. - 31 - Aggregated Option and Fiscal Year-End Option Value Table
Value of Unexercised Number of In-the-Money Unexercised Options at Options at 1993 Year-End 1993 Year-End Exercisable/ Exercisable/ Unexercisable Name Unexercisable (None in-the-money) Larry D. Haab 0 shs./36,000 shs. 0/0 Charles W. Wells 0 shs./12,500 shs. 0/0 Paul L. Lang 0 shs./11,000 shs. 0/0 J. Stephen Perry 0 shs./11,000 shs. 0/0 Larry F. Altenbaumer 0 shs./11,000 shs. 0/0
Pension Benefits The Company maintains a Retirement Income Plan for Salaried Employees (the "Plan") providing pension for all eligible salaried employees of the Company. In addition to the Plan, the Company also maintains a nonqualified Supplemental Retirement Income Plan for Salaried Employees of Illinois Power Company (the "Supplemental Plan") that covers all elected officers eligible to participate in the Plan and provides for payments from general funds of the Company of any monthly retirement income not payable under the Plan because of benefit limits imposed by law or because of certain Plan rules limiting the amount of credited service accrued by a participant. The following table shows the estimated annual pension benefits on a straight life annuity basis payable upon retirement based on specified annual average earnings and years of credited service classifications, assuming continuation of the Plan and Supplemental Plan and employment until age 65. This table does not show, but any actual pension benefit payments would be subject to, the Social Security offset. - 32 - Estimated Annual Benefits (rounded) Annual Average 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs. Earnings Service Service Service Service Service $125,000....... $ 37,500 $ 50,000 $ 62,500 $ 75,000 $ 87,500 150,000....... 45,000 60,000 75,000 90,000 105,000 175,000....... 52,500 70,000 87,500 105,000 122,500 200,000....... 60,000 80,000 100,000 120,000 140,000 250,000....... 75,000 100,000 125,000 150,000 175,000 300,000....... 90,000 120,000 150,000 180,000 210,000 350,000....... 105,000 140,000 175,000 210,000 245,000 400,000....... 120,000 160,000 200,000 240,000 280,000 450,000....... 135,000 180,000 225,000 270,000 315,000 500,000....... 150,000 200,000 250,000 300,000 350,000 550,000....... 165,000 220,000 275,000 330,000 385,000 600,000.......... 180,000 240,000 300,000 360,000 420,000
The earnings used in determining pension benefits under the Plan are the participants' regular base compensation, as set forth under salaries in the compensation table. At December 31, 1993, for purposes of both the Plan and the Supplemental Plan, Messrs. Haab, Wells, Altenbaumer, Lang and Perry had completed 28, 30, 21, 7 and 9 years of credited service, respectively. Employee Retention Agreements The Company has entered into Employee Retention Agreements with each of its executive officers. Under each of these agreements, the officer would be entitled to receive a lump sum cash payment if his or her employment were terminated by the Company without good cause or voluntarily by the officer for good reason within two years following a change in control of the Company (as defined in the Agreement). The amount of the lump sum payment would be equal to (1) 36 months' salary at the greater of the officer's salary rate in effect on the date the change in control occurred or the salary rate in effect on the date the change in the officer's employment with the Company terminated; plus (2) three times the largest bonus earned by the officer during the three calendar years preceding termination of employment. Under the agreement, the officer would continue, after any such termination of employment, to participate in and receive benefits under other benefit plans of the Company. Such coverage would continue for 36 months following termination of employment, or, if earlier, until the officer reached age 65 or was employed by another employer; provided that, if the officer was 50 years of age or older at the time of such termination, then coverage under health, life insurance and similar welfare plans would continue until the officer became 55 years of age, at which time he or she would be eligible to receive the type of coverage extended to employees of the Company who elect early retirement. - 33 - Item 12. Security Ownership of Certain Beneficial Owners and Management The following are the only holders known by the Company to be the beneficial owners of more than five percent of any class of the Company's outstanding stock. Amount and Nature Name and Address of Beneficial Percent Title of Class of Beneficial Owner Ownership of Class Serial Preferred American Express Company 303,245 shares(1) 9.7% Stock, Without American Express Tower par value World Financial Center New York, NY 10285 Serial Preferred American General 242,000 shares(2) 7.4% Stock, $50 par Corporation and value Subsidiaries 2929 Allen Parkway Houston, TX 77019 Common Stock FMR Corp. 7,026,460 shares(3) 9.3% 82 Devonshire St. Boston, MA 02109 Common Stock Mellon Bank Corporation 5,363,000 shares(4) 7.1% One Mellon Bank Center Pittsburgh, PA 15258
1) According to its Form 4 filing, American Express Company and its Subsidiaries beneficially own 303,245 shares of Serial Preferred Stock, without par value, as of February 18, 1994, as to which beneficial ownership is disclaimed, with sole power to vote and dispose of all shares. American Express Company was late in filing a Statement of Changes in Beneficial Ownership relating to a redemption by the Company of certain shares of serial preferred stock without par value. 2) According to its Schedule 13G filing dated February 11, 1994, American General Corporation and Subsidiaries beneficially own 242,000 shares of Serial Preferred Stock, $50 par value (consisting of 211,100 shares of 8.00% Cumulative Preferred Stock, and 30,900 shares of 8.24% Cumulative Preferred Stock), and have shared power to vote or direct voting and shared power to dispose or direct disposition of all of such shares. 3) According to its Schedule 13G filing dated February 11, 1994, FMR Corp. owns 7,026,460 shares of Common Stock, with sole power to vote or direct the vote of 1,022,800 shares and sole power to dispose or direct the disposition of all shares. 4) According to its Schedule 13G filing dated February 10, 1994, Mellon Bank Corporation and Subsidiaries beneficially own 5,363,000 shares of Common Stock, with sole power to vote 3,786,000 shares, shared power to vote 202,000 shares, sole power to dispose of 4,355,000 shares and shared power to dispose of 1,008,000 shares. - 34 - The names of the Board of Directors and certain information, including their principal occupation during the last five years and ownership of securities of the Company, with respect to each are shown below:
Year in Shares of Which Common Stock Name of Director, Age, Business First of the Experience and Other Information Elected Company a Beneficially Director Owned as of January 31, 1994 RICHARD R. BERRY, 62 1988 2,108 Prior to retirement in February, 1990, Mr. Berry was Executive Vice President and Director of Olin Corporation, Stamford, Connecticut, a diversified manufacturer concentrated in chemicals, metals and aerospace/defense products, since June, 1983. (1)(2)(5) LARRY D. HAAB, 56 1986 9,264(6) Chairman, President and Chief Executive Officer of the Company since June, 1991, Mr. Haab has been an employee of the Company since 1965. He is a director of First Decatur Bancshares, Inc., The First National Bank of Decatur and Firstech, Incorporated. (1)(4)(5) GROVER J. HANSEN, 70 1981 8,063(7) Prior to retirement in January, 1984, Mr. Hansen was President and Chief Operating Officer of the First Federal Savings and Loan Association of Chicago, Chicago, Illinois, since 1971. He was a director of Peoples Energy Corporation until retirement from that position in February, 1994. (1)(2)(3) DONALD E. LASATER, 68 1981 2,713 Prior to retirement in April, 1989, Mr. Lasater was Chairman of the Board and Chief Executive Officer of Mercantile Bancorporation, Inc., St. Louis, Missouri, a bank holding company, since 1970. He is a director of Interco Incorporated, General American Life Insurance Company and A.P. Green Industries, Inc. (1)(2)(5) - 35 - DONALD S. PERKINS, 66 1988 6,676(8) Prior to retirement in June, 1983, as Chairman of the Executive Committee, Mr. Perkins was Chairman of the Board and Chief Executive Officer of Jewel Companies, Inc., Chicago, Illinois, a diversified retailer, from 1970 to 1980. He is a director of American Telephone & Telegraph Company, Aon Corporation, Cummins Engine Company, Inc., Inland Steel Industries, Inc., KMart Corporation, LaSalle Street Fund, Inc., The Putnam Funds, Springs Industries, Inc., and Time Warner, Inc. (3)(4) ROBERT M. POWERS, 62 1984 6,000(9) Prior to retirement in December, 1988, Mr. Powers was President and Chief Executive Officer of A. E. Staley Manufacturing Company, Decatur, Illinois, a processor of grain and oil seeds, since 1980. He is Chairman of the Board of A. E. Staley Manufacturing Company, and a director of Tate & Lyle, PLC. (3)(4) WALTER D. SCOTT, 62 1990 2,600 Professor of Management and Senior Austin Fellow, J.L. Kellogg Graduate School of Management, Northwestern University, Evanston, Illinois, since 1988. Mr. Scott is a director of Chicago Title and Trust Company, Chicago Title Insurance Company and Intermatic Incorporated. (1)(4) RONALD L. THOMPSON, 44 1991 1,735 Chairman and Chief Executive Officer of Midwest Stamping and Manufacturing Co., Bowling Green, Ohio, a manufacturer of automotive parts, since 1993. He was President and Chief Executive Officer and a director of The GR Group, Inc., St. Louis, Missouri (a diversified holding company with interests in manufacturing and service activities), from 1980 to 1993. (3)(4) WALTER M. VANNOY, 66 1990 2,100 Vice Chairman, Figgie International, Inc. (a diversified operating company serving consumer, industrial, technical, and service markets worldwide), since 1994, and President of Vannoy Associates, Lynchburg, Virginia, a consulting company, 1989-1994. He is a director of Figgie International, Inc., and Chempower, Inc. (2)(5) - 36 - MARILOU von FERSTEL, 56 1990 2,676 Executive Vice President and General Manager of Ogilvy Adams & Rinehart, Inc., a public relations firm in Chicago, since June, 1990. She had previously been Managing Director and Senior Vice President of Hill and Knowlton, Chicago, Illinois, a public relations consulting firm, from May, 1981 to June, 1990. Ms. von Ferstel is a director of Walgreen Company. (2)(3)(4) CHARLES W. WELLS, 59 1976 7,885(6)(10) Executive Vice President of Illinois Power Company since 1976. Mr. Wells has been an employee of the Company since 1956. He was elected a Vice President in 1972. He is a director of First of America - Decatur N.A. (1)(5) JOHN D. ZEGLIS, 46 1993 1,008 Senior Vice President-General Counsel and Government Affairs of American Telephone and Telegraph Company, Basking Ridge, New Jersey, a diversified communications company, since 1989. He had been Senior Vice President-General Counsel from 1986 to 1989. He is a director of the Helmerich & Payne Corporation in Tulsa, Oklahoma. (2)(4) VERNON K. ZIMMERMAN, 65 1973 6,564(10) Director of the Center for International Education Research and Accounting, and Distinguished Service Professor of Accountancy, University of Illinois, Urbana, Illinois, since August, 1985. He is a director of First Busey Corporation, Busey Corporation, and ICH Corporation. (1)(2)(5)
(1) Member of the Finance Committee. (2) Member of the Audit Committee. (3) Member of the Compensation and Nominating Committee. (4) Member of the Corporate Strategy Committee. (5) Member of the Nuclear Operations Committee. (6) Includes 3,929 and 6,354 shares held in the accounts of Messrs. Haab and Wells, respectively, under the Company's Incentive Savings Plan. - 37 - (7) Includes 5,540 shares to which Mr. Hansen is entitled through the Company's Deferred Compensation Plan for Certain Directors. (8) In addition to the shares shown, Mr. Perkins, as trustee of The Putnam Funds, has shared voting and investment power over 443,000 shares of Common Stock, as to which he disclaims beneficial ownership. (9) Mr. Powers'wife owns 1,200 shares of Preferred Stock, as to which he does not disclaim beneficial ownership. (10) Includes 1,000 and 1,932 shares held by wives of Messrs. Wells and Zimmerman, respectively. The Chief Executive Officer and four other most highly paid executive officers beneficially own the following shares of equity securities of the Company:
Shares of Common Stock Beneficially Owned Executive Officer as of January 31, 1994 Larry D. Haab 9,264 Charles W. Wells 7,885 Paul L. Lang, Senior Vice President 2,236 J. Stephen Perry, Senior Vice President 1,151 Larry F. Altenbaumer, Senior Vice President and Chief Financial Officer 3,241
Except as indicated above, no director or any executive officer owns any other equity securities of the Company. No director or executive officer owns as much as one percent of the Common Stock. All executive officers and directors as a group own 78,751 shares of the Common Stock (less than one percent). The nature of beneficial ownership for shares shown, unless otherwise indicated, is sole voting and investment power. Directors of the Company who are not salaried officers ("Outside Directors") receive a retainer fee of $18,000 per year. Outside Directors who also chair Board committees receive an additional $2,000 per year retainer. Outside Directors receive a grant of 600 shares of the Company's Common Stock on the date of each Annual Shareholders Meeting, representing payment in lieu of attendance-based fees for all Board and Committee meetings to be held during the subsequent one-year period. Outside Directors elected to the Board between Annual Shareholders Meetings are paid $850 for each Board and Committee meeting attended prior to the first Annual Shareholders Meeting after their election to the Board. The Company has a Retirement Plan for Outside Directors. Under this plan, each Outside Director who has attained age 65 and has served on the Board for a period of 60 or more consecutive months is eligible for annual retirement benefits at the rate of the annual retainer fee in effect when the director retires. These benefits, at the discretion of the Board, may be extended to Outside Directors who have attained the age of 65 but not served on the Board for the specified period. The benefits are payable for a number of months equal to the number of months of Board service, subject to a maximum of 120 months, and cease upon the death of the retired Outside Director. Pursuant to the Company's Deferred Compensation Plan for Certain Directors, any director who is not a salaried officer or employee of the Company may elect to defer all or any portion of his or her fees until termination of - 38 - his or her services as a director. Such deferred dollar amounts are converted into stock units representing shares of the Company's Common Stock with the value of each stock unit based upon the last reported sales price of such stock at the end of each calendar quarter. Additional credits are made to the participating director's account in dollar amounts equal to the dividends paid on the Common Stock which the director would have received if the director had been the record owner of the shares represented by stock units, and are converted into additional stock units. Upon termination of a participating director's services as a director, payment of his or her deferred fees is made in shares of Common Stock in an amount equal to the aggregate number of stock units credited to his or her account. Such payment is made in such number of annual installments as the Company may determine beginning in the year following the year of termination. Item 13. Certain Relationships and Related Transactions None. - 39 - PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Documents filed as part of this report. (1) Financial Statements: Page in Annual Report to Stockholders* Report of Independent Accountants 26 Statements of Income for the three years ended December 31, 1993 27 Balance Sheets at December 31, 1993 and 1992 28 Statements of Cash Flows for the three years ended December 31, 1993 29 Statements of Retained Earnings (Deficit) for the three years ended December 31, 1993 29 Statements of Preferred and Preference Stock at December 31, 1993 and 1992 30 Statements of Long-Term Debt at December 31, 1993 and 1992 31 Notes to Financial Statements 32 - 46 Page in Form 10-K (2) Financial Statement Schedules: Report of Independent Accountants on Financial Statement Schedules 43 V Utility 44 - 46 VI Accumulated Depreciation 47 - 49 VIII Valuation and Qualifying Accounts 50 - 52 X Supplementary Income Statement Information 53 * Incorporated by reference from the indicated pages of the 1993 Annual Report. All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. - 40 - Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued) (3) Exhibits The exhibits filed with the Form 10-K are listed in the Exhibit Index located elsewhere herein. All management contracts and compen- satory plans or arrangements set forth in such list are marked with a ~. (b) Reports on Form 8-K since September 30, 1993: A Current Report on Form 8-K, dated October 15, 1993, was filed reporting under Item 5, Other Events. A Current Report on Form 8-K, dated February 9, 1994, was filed reporting under Item 5, Other Events. - 41 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ILLINOIS POWER COMPANY (REGISTRANT) By Larry D. Haab Larry D. Haab, Chairman, President and Chief Executive Officer Date: March 30, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. Signature Title Date Larry D. Haab Chairman,President, Chief Larry D. Haab Executive Officer and Director (Principal Executive Officer) Larry F. Altenbaumer Senior Vice President Larry F. Altenbaumer and Chief Financial Officer Principal Financial Officer) Alec G. Dreyer Controller Alec G. Dreyer (Principal Accounting Officer) Richard R. Berry Richard R. Berry Grover J. Hansen Donald E. Lasater Donald E. Lasater Donald S. Perkins March 30, 1994 Donald S. Perkins Robert M. Powers Robert M. Powers Walter D. Scott Walter D. Scott Director Ronald L. Thompson Ronald L. Thompson Walter M. Vannoy Walter M. Vannoy Marilou von Ferstel Marilou von Ferstel Charles W. Wells Charles W. Wells John D. Zeglis John D. Zeglis Vernon K. Zimmerman Vernon K. Zimmerman - 42 - Report of Independent Accountants on Financial Statement Schedules To the Board of Directors of Illinois Power Company Our audits of the financial statements referred to in our report dated February 9, 1994, appearing on page 26 of the 1993 Annual Report to Stockholders of Illinois Power Company (which report and financial statements are incorporated by reference in this Annual Report on Form 10-K), also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. As discussed in Note 1 to the financial statements, the Company changed its method of accounting for income taxes. \S\ Price Waterhouse PRICE WATERHOUSE One Boatmen's Plaza St. Louis, Missouri February 9, 1994 - 43 - ILLINOIS POWER COMPANY SCHEDULE V - UTILITY PLANT
Balance at Balance at beginning of Other changes- end of period Additions add (deduct)- Period Classification January 1, 1993 at cost Retirements describe December 31, 1993 (Millions of Dollars) Electric - Intangible $ 16.1 $ 7.2 $ - $ - $ 23.3 Steam production 833.6 43.2 3.8 12.8 (1) 885.8 Nuclear 3,169.7 22.0 - 122.2 (1,4,&5) 3,313.9 Hydraulic production - - - - - Internal combustion engine 19.5 - - - 19.5 Transmission 287.5 8.1 2.9 11.5 (1 & 4) 304.2 Distribution 842.1 54.2 11.8 5.5 (1) 890.0 General 173.2 41.2 6.5 (2.6)(1,4,&6) 205.3 Plant held for future use 30.3 (1.5) 0.1 - 28.7 Construction work in progress 176.9 41.8 - - 218.7 Total electric plant 5,548.9 216.2 25.1 149.4 5,889.4 Gas - Intangible - - - - - Production 4.3 - - - 4.3 Underground storage 31.4 26.7 0.2 0.1(1) 58.0 Local storage - - - - - Transmission 54.0 22.0 0.1 0.1(1) 76.0 Distribution 380.9 17.0 3.1 0.7(1) 395.5 General 18.0 2.0 0.9 - 19.1 Plant held for future use 2.3 - 0.9 - 1.4 Construction work in progress 31.7 (12.9) - - 18.8 Gas stored underground (non- current) 15.8 - - 1.0(2 & 3) 16.8 Total gas plant 538.4 54.8 5.2 1.9 589.9 TOTAL $6,087.3 $ 271.0 $ 30.3 $ 151.3 $6,479.3
( ) Credit (1) Gross-up to Plant ($162 million - Electric and $.9 million - Gas) for Net-of-Tax AFUDC in accordance with FAS 109. (2) Transfer of ($2.7 million) from Gas Stored Underground (Noncurrent) to Underground Storage at the Hillsboro Storage Field. (3) Transfer of $3.7 million from Inventory to Gas Stored Underground (Noncurrent) at the Hillsboro Storage Field. (4) Transfer between accounts - Clinton Unitization [Nuclear - ($7.8 million), Transmission - $9.7 million, General Plant - ($1.9 million)] (5) Includes ($11.6 million) deferred Clinton costs. (6) Includes ($1 million) capital lease property. - 44 - ILLINOIS POWER COMPANY SCHEDULE V - UTILITY PLANT
Balance at Balance at beginning of Other changes - end of period Additions add (deduct) - period Classification January 1, 1992 at cost Retirements describe December 31, 1992 (Millions of Dollars) Electric - Intangible $ 15.3 $ .8 $ - $ - $ 16.1 Steam production 823.5 13.0 2.9 - 833.6 Nuclear 3,173.0 (7.3) (4.0) - 3,169.7 Hydraulic production - - - - - Internal combustion engine 19.5 - - - 19.5 Transmission 283.7 4.0 .2 - 287.5 Distribution 804.5 43.9 6.3 - 842.1 General 169.8 16.7 13.3 - 173.2 Plant held for future use 8.6 - - 21.7 (1) 30.3 Acquisition adjustment 3.9 - 3.9 - - Construction work in progress 88.2 110.4 - (21.7)(1) 176.9 Total electric plant 5,390.0 181.5 22.6 - 5,548.9 Gas - Intangible - - - - - Production 6.2 .5 - (2.4)(2) 4.3 Underground storage 28.7 .5 .1 2.3 (3) 31.4 Local storage - - - - - Transmission 53.8 .6 .1 ( .3)(2) 54.0 Distribution 370.0 13.9 3.0 - 380.9 General 17.1 3.5 2.6 - 18.0 Plant held for future use .1 - - 2.2 (2) 2.3 Construction work in progress 13.8 17.9 - - 31.7 Gas stored underground (non- current) 13.6 - - 2.2 (3&4) 15.8 Total gas plant 503.3 36.9 5.8 4.0 538.4 TOTAL $ 5,893.3 $ 218.4 $ 28.4 $ 4.0 $ 6,087.3
( ) Credit (1) Transfer of $21.7 million from CWIP to Plant held for future use due to suspended scrubber project. (2) Transfer of $2.2 million to Plant held for future use and $.5 million to Non-utility property from Production ($2.4 million) and Transmission Plan ($.3 million). (3) Transfer of $2.3 million from Gas stored underground (noncurrent) to Underground storage at the Hillsboro Storage Field. (4) Transfer of $4.5 million from Inventory to Gas stored underground (noncurrent) at the Hillsboro Storage Field. - 45 - ILLINOIS POWER COMPANY SCHEDULE V - UTILITY PLANT
Balance at Balance at beginning of Other changes - end of period Additions add (deduct)- period Classification January 1, 1991 at cost Retirements describe December 31, 1991 (Millions of Dollars) Electric - Intangible $ .6 $ 14.7 $ - $ - $ 15.3 Steam production 802.0 25.1 3.6 - 823.5 Nuclear 3,167.7 9.4 4.1 - 3,173.0 Hydraulic production - - - - - Internal combustion engine 19.4 .1 - - 19.5 Transmission 287.8 (3.7) .4 - 283.7 Distribution 771.5 40.7 7.7 - 804.5 General 153.4 18.3 3.2 - 169.8 Plant held for future use 8.6 - - 1.3 (1) 8.6 Acquisition adjustment 3.9 - - - 3.9 Construction work in progress 70.9 17.3 - - 88.2 Total electric plant 5,285.8 121.9 19.0 1.3 5,390.0 Gas - Intangible - - - - - Production 6.2 - - - 6.2 Underground storage 25.4 1.2 .1 2.2 (2) 28.7 Local storage - - - - - Transmission 52.8 1.2 .2 - 53.8 Distribution 359.1 14.4 3.5 - 370.0 General 16.2 1.1 .2 - 17.1 Plant held for future use .1 - - - .1 Construction work in progress 6.8 7.0 - - 13.8 Gas stored underground (non- current) 12.0 - - 1.6 (2&3) 13.6 Total gas plant 478.6 24.9 4.0 3.8 503.3 TOTAL $ 5,764.4 $ 146.8 $ 23.0 $ 5.1 $ 5,893.3
( ) Credit (1) Reflects acquisition of capital lease property - computers and computer equipment - and their subsequent amortization. (2) Transfer of $2.2 million from Gas stored underground (noncurrent) to Underground storage at the Hillsboro Storage Field. (3) Transfer of $3.8 million from Inventory to Gas stored underground (noncurrent) at the Hillsboro Storage Field. - 46 - ILLINOIS POWER COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION
Balance at Additions Balance at beginning of charged to Other changes - end of period cost and add (deduct) - period Classification January 1, 1993 expenses Retirements describe December 31, 1993 (Millions of Dollars) Electric - Intangible $ 5.7 $ 3.3 $ - $ - $ 9.0 Steam production 498.3 21.3 5.0 7.9 (1) 522.5 Nuclear 496.1 87.7 0.4 24.6 (1&2) 608.0 Hydraulic production - - - - - Internal combustion engine 16.9 0.5 - - 17.4 Transmission 144.7 4.8 2.6 1.0 (1) 147.9 Distribution 388.6 20.0 14.7 3.3 (1) 397.2 General 51.9 4.8 (3) 6.1 0.2 (1) 50.8 Plant held for future use - - - - - Acquisition adjustment - - - - - Construction work in progress - - - - - Total electric plant 1,602.2 142.4 28.8 37.0 1,752.8 Gas - Intangible - - - - - Production 5.2 0.2 - (2.2) (5) 3.2 Underground storage 16.1 1.0 0.2 0.1 (1) 17.0 Local storage - - - - - Transmission 27.9 1.7 - (0.2) (1&5) 29.4 Distribution 151.1 16.0 3.9 0.5 (1) 163.7 General 7.2 1.0 (4) 0.9 - 7.3 Plant held for future use - 0.1 0.8 1.9 (5) 1.2 Construction work in progress - - - - - Gas stored underground (non- current) - - - - - Total gas plant 207.5 20.0 5.8 0.1 221.8 TOTAL $ 1,809.7 $ 162.4 $ 34.6 $ 37.1 $ 1,974.6
( ) Credit (1) Includes Depreciation Reserve of $38.8 million (Electric) and $.7 million (Gas) associated with FAS 109 compliance. (2) Includes $1.8 million associated with write-off of deferred Clinton costs. (3) Includes provision of approximately $.5 million for transportation equipment harged to clearing accounts. (4) Includes provision of approximately $.9 million for transportation equipment charged to clearing accounts. (5) Transfer of $1.9 million in Accumulated Provision associated with reclassification of the Danville Propane Plant to Account 105 and $.6 million associated with Galesburg Propane Plant transfer to Account 121. - 47 - ILLINOIS POWER COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION
Balance at Addition Balance at beginning of charged to Other changes - end of period cost and add (deduct) - period Classification January 1, 1992 expenses Retirements describe December 31, 1992 (Millions of Dollars) Electric - Intangible $ 2.7 $ 3.0 $ - $ - $ 5.7 Steam production 481.7 20.4 3.8 - 498.3 Nuclear 406.5 88.0 (1.6) - 496.1 Hydraulic production - - - - - Internal combustion engine 16.5 .4 - - 16.9 Transmission 139.4 4.6 (.7) - 144.7 Distribution 378.1 19.0 8.5 - 388.6 General 60.5 4.3 12.9 - 51.9 Plant held for future use - - - - - Acquisition adjustment 3.9 - 3.9 - - Construction work in progress - - - - - Total electric plant 1,489.3 139.7 26.8 - 1,602.2 Gas - Intangible - - - - - Production 4.9 .2 (.1) - 5.2 Underground storage 15.4 .7 - - 16.1 Local storage - - - - - Transmission 26.6 1.5 .2 - 27.9 Distribution 139.7 15.7 4.3 - 151.1 General 8.5 1.0 2.3 - 7.2 Plant held for future use - - - - - Construction work in progress - - - - - Gas stored underground (noncurrent) - - - - - Total gas plant 195.1 19.1 6.7 - 207.5 TOTAL $ 1,684.4 $ 158.8 $ 33.5 $ - $ 1,809.7
( ) Credit - 48 - ILLINOIS POWER COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION
Balance at Additions Balance at beginning of charged to Other changes - end of period cost and add (deduct) - period Classification January 1, 1991 expenses Retirements describe December 31, 1991 (Millions of Dollars) Electric - Intangible $ .5 $ 2.2 $ - $ - $ 2.7 Steam production 460.6 26.7 5.6 - 481.7 Nuclear 322.8 88.0 4.3 - 406.5 Hydraulic production - - - - - Internal combustion engine 15.7 .8 - - 16.5 - Transmission 130.3 8.0 ( 1.1) - 139.4 Distribution 361.0 26.0 8.9 - 378.1 General 57.2 6.1 2.8 - 60.5 Plant held for future use - - - - - Acquisition adjustment 3.9 - - - 3.9 Construction work in progress - - - - - Total electric plant 1,352.0 157.8 20.5 - 1,489.3 Gas - Intangible - - - - - Production 4.6 .3 - - 4.9 Underground storage 15.0 .6 .2 - 15.4 Local storage - - - - - Transmission 24.6 1.5 ( .5) - 26.6 Distribution 129.3 15.2 4.8 - 139.7 General 7.8 .8 .1 - 8.5 Plant held for future use - - - - - Construction work in progress - - - - - Gas stored underground (non- current) - - - - - Total gas plant 181.3 18.4 4.6 - 195.1 TOTAL $ 1,533.3 $ 176.2 $ 25.1 $ - $ 1,684.4
( ) Credit - 49 - ILLINOIS POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS ____________________________________________________________________________________
Additions Balance at Charged to Balance at beginning of Charged to other end of period cost and accounts- Deductions- period Description January 1, 1993 expenses describe describe December 31, 1993 (Millions of Dollars) Reserve deducted in the balance sheet from the asset to which it applies - Nonutility property-Depreciation $ 1.7 $ 0.8 $ - $(0.1) $ 2.6 Uncollectible accounts $ 4.0 $ 5.9 $ - $ 5.9 $ 4.0
- 50 - ILLINOIS POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS ________________________________________________________________________________________
Additions Balance at Charged to Balance at beginning of Charged to other end of period cost and accounts- Deductions- period Description January 1, 1992 expenses describe describe December 31, 1992 (Millions of Dollars) Reserve deducted in the balance sheet from the asset to which it applies - Nonutility property-Depreciation $ 1.7 $ .1 $ - $ .1 $ 1.7 Uncollectible accounts $ 6.5 $ 3.6 $ - $ 6.1 (1) $ 4.0
(1) Includes $2.5 million reduction to the reserve for uncollectible accounts. - 51 - ILLINOIS POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS _______________________________________________________________________________________
Additions Balance at Charged to Balance at beginning of Charged to other end of period cost and accounts- Deductions- period Description January 1, 1991 expenses describe describe December 31, 1991 (Millions of Dollars) Reserve deducted in the balance sheet from the asset to which it applies - Nonutility property-Depreciation $ 1.6 $ .1 $ .1 $ .1 $ 1.7 Uncollectible accounts $ 6.5 $ 8.3 $ - $ 8.3 $ 6.5
- 52 - ILLINOIS POWER COMPANY SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION __________________________________________________________________________________ Supplementary Income Statement Information Following is a tabulation of taxes, other than income taxes charged to expense for the three year period ended 1993
December 31, 1993 1992 1991 (Millions of Dollars) Taxes, Other Than Income Taxes (General Taxes), Charged to Operating Expenses: Real Estate $ 25.8 $ 20.6 $ 23.2 Illinois Public Utility 45.6 47.5 48.3 Tax on Invested Capital 28.9 30.0 31.5 Payroll 17.5 16.3 15.0 Other 17.4 16.9 16.1 135.2 131.3 134.1 Less-charged to other income & balance sheet accounts 9.6 9.1 8.4 Total per Statement of Income $125.6 $122.2 $125.7
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Exhibit Index Exhibit Description Page Number 3(a) Restated Articles of Incorporation, as amended through April 19, 1984. Filed as Exhibit 19 to the Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934 for the quarter ended June 30, 1984. (File No. 1-3004) * 3(b) Amendment to the Restated Articles ofIncorporation of the Company, dated April 19, 1989. Filed as Exhibit 19 to the Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934 for the quarter ended March 31, 1989. (File No. 1-3004). * 3(c) Statement of Resolution Establishing Series of Cumulative Preferred Stock, Adjustable Rate Series B, dated April 29, 1985. Filed as Exhibit 4(b) to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1985. Registration No. 2-90809. * 3(d) Statement of Resolution Establishing Series of 8.52% Cumulative Preferred Stock, dated February 20, 1986. Filed as Exhibit 4(b) to the Current Report on Form 8-K dated February 18, 1986. Registration No. 33-2867. * 3(e) Statement of Resolution Establishing Series of 8.00% Cumulative Preferred Stock, dated December 18, 1986. Registration No. 33-10683. Filed as Exhibit 3(f) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1986. * 3(f) By-laws of the Company, as amended through April 14, 1993. Filed as Exhibit 3(g) to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1993. *
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Exhibit Index (Continued) Exhibit Description Page Number 3(g) Statement of Resolution Establishing Series of 7.75% Cumulative Preferred Stock, dated June 9, 1993. 63 4(a) Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 2(b) Registration No. 2-14066. * 4(b) Supplemental Indenture dated October 1, 1966. Filed as Exhibit 2(i) Registration No. 2-27783. * 4(c) Supplemental Indenture dated October 1, 1971. Filed as Exhibit 2(r) Registration No. 2-59465. * 4(d) Supplemental Indenture dated May 1, 1974. Filed as Exhibit 2(v) Registration No. 2-51674. * 4(e) Supplemental Indenture dated May 1, 1977. Filed as Exhibit 2(w) Registration No. 2-59465. * 4(f) Supplemental Indenture dated July 1, 1979. Filed as Exhibit 2 to the Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934 for the quarter ended June 30, 1979. * 4(g) Supplemental Indenture dated March 1, 1985. Filed as exhibit 4(a) to the Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934 for the quarter ended March 31, 1985 (File No. 1-3004). * 4(h) Supplemental Indenture No. 1 dated February 1, 1987, providing for $25,000,000 principal amount of 7 5/8% First Mortgage Bonds, Pollution Control Series F, due December 1, 2016. Filed as Exhibit 4(ii) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1986 (File No. 1-3004). *
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Exhibit Index (Continued) Exhibit Description Page Number 4(i) Supplemental Indenture No. 2 dated February 1, 1987, providing for $50,000,000 principal amount of 7 5/8% First Mortgage Bonds, Pollution Control Series G, due December 1, 2016. Filed as Exhibit 4(jj) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1986 (File No. 1-3004). * 4(j) Supplemental Indenture No. 3 dated February 1, 1987, providing for $75,000,000 principal amount of 7 5/8% First Mortgage Bonds, Pollution Control Series H, due December 1, 2016. Filed as Exhibit 4(kk) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, * 4(k) Supplemental Indenture dated July 1, 1987, providing for $33,755,000 principal amount of 8.30% First Mortgage Bonds, Pollution Control Series I, due April 1, 2017. Filed as Exhibit 4(ll) to the Annual Report on Form 10-K under the Securities and Exchange Act of 1934 for the year ended December 31, 1987 (File No. 1-3004). * 4(l) Supplemental Indenture dated December 13, 1989, providing for $300,000,000 principal amount of Medium-Term Notes, Series A. Filed as Exhibit 4 (nn) to the Annual Report on Form 10-K under the Securities and Exchange Act of 1934 for the year ended December 31, 1989. (File No. 1-3004). * 4(m) Supplemental Indenture dated July 1, 1991, providing for $84,710,000 principal amount of 7 3/8% First Mortgage Bonds due July 1, 2021. Filed as Exhibit 4(mm) to the Annual Report on Form 10-K under the Securities and Exchange Act of 1934 for the year ended December 31, 1991 (File No. 1-3004). * 4(n) Supplemental Indenture No. 1 dated June 1, 1992. Filed as Exhibit 4(nn) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 (File No. 1-3004). *
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Exhibit Index (Continued) Exhibit Description Page Number 4(o) Supplemental Indenture No. 2 dated June 1, 1992. Filed as Exhibit 4(oo) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 (File No. 1-3004). * 4(p) Supplemental Indenture No. 1 dated July 1, 1992. Filed as Exhibit 4(pp) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 (File No. 1-3004). * 4(q) Supplemental Indenture No. 2 dated July 1, 1992. Filed as Exhibit 4(qq) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 (File No. 1-3004). * 4(r) Supplemental Indenture dated September 1, 1992, providing for $72,000,000 principal amount of 6 1/2% First Mortgage Bonds due September 1, 1999. Filed as Exhibit 4(rr) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 (File No. 1-3004). * 4(s) General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4(cc) to the Annual Report on Form 10-K under the Securities and Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). * 4(t) Supplemental Indenture dated February 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(dd) to the Annual Report on Form 10-K under the Securities and Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). * 4(u) Supplemental Indenture dated February 15, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4(ee) to the Annual Report on Form 10-K under the Securities and Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). *
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Exhibit Index (Continued) Exhibit Description Page Number 4(v) Supplemental Indenture No. 1 dated March 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(ff) to the Annual Report on Form 10-K under the Securities and Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). * 4(w) Supplemental Indenture No. 1 dated March 15, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4(gg) to the Annual Report on Form 10-K under the Securities and Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). * 4(x) Supplemental Indenture No. 2 dated March 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(hh) to the Annual Report on Form 10-K under the Securities and Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). * 4(y) Supplemental Indenture No. 2 dated March 15, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4(ii) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). * 4(z) Supplemental Indenture dated July 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(jj) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (File No. 1-3004). * 4(aa) Supplemental Indenture dated July 15, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4(kk) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (File No. 1-3004). *
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Exhibit Index (Continued) Exhibit Description Page Number 4(bb) Supplemental Indenture dated August 1, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(ll) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (File No. 1-3004). * 4(cc) Supplemental Indenture dated August 1, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4(mm) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (File No. 1-3004). * 4(dd) Supplemental Indenture dated October 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(nn) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993. (File No. 1-3004). * 4(ee) Supplemental Indenture dated October 15, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4(oo) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993. * 4(ff) Supplemental Indenture dated November 1, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(pp) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (File No. 1-3004). * 4(gg) Supplemental Indenture dated November 1, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4(qq) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (File No. 1-3004). * 4(hh) Supplemental Indenture dated February 1, 1994, to Mortgage and Deed of Trust dated November 1, 1943. 65
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Exhibit Index (Continued) Exhibit Description Page Number 10(a) Group Insurance Benefits for Managerial Employees of Illinois Power Company as amended January 1, 1983. Supersedes the Group Insurance Benefits for Managerial Employees of Illinois Power Company as amended April 1, 1980 and filed as Exhibit 10(a) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1983 (File No. 1-3004).~ * 10(b) Illinois Power Company Deferred Compensation Plan for Certain Directors, as amended April 10, 1991. Filed as Exhibit 10(b) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1991 (File No. 1-3004).~ * 10(c) Illinois Power Company Incentive Savings Trust and Illinois Power Company Incentive Savings Plan and Amendment I thereto. Filed as Exhibit 10(d) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1984 (File No. 1-3004).~ * 10(d) Illinois Power Company Director Emeritus Plan for Outside Directors. Filed as Exhibit 10(e) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1989 (File No. 1-3004).~ * 10(e) Description of Illinois Power Company's Executive Incentive Compensation Plan. Filed as Exhibit 10(f) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1989 (File No. 1-3004).~ *
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Exhibit Index (Continued) Exhibit Description Page Number 10(f) Illinois Power Company Employee Retention Plan and Agreement. Filed as Exhibit 10(g) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1989 (File No. 1-3004).~ * 10(g) Illinois Power Company Incentive Savings Plan, as amended and restated effective January 1, 1991. Filed as Exhibit 10(h) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1990 (File No. 1-3004).~ * 10(h) Illinois Power Company Stock Plan for Outside Directors as amended and restated by the Board of Directors on April 9, 1992 and as further amended April 14, 1993. 71 10(i) Retirement and Consulting Agreement entered into as of June 1, 1991 between Illinois Power Company and Wendell J. Kelley. Filed as Exhibit 10(i) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1991 (File No. 1-3004).~ * 10(j) Illinois Power Company Retirement Plan for Outside Directors, as amended through December 11, 1991. Filed as Exhibit 10(j) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1991 (File No. 1-3004).~ * 10(k) Illinois Power Company 1992 long-term Incentive Compensation Plan. Filed as Exhibit 10(k) to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 1-3004).~ *
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Exhibit Index (Continued) Exhibit Description Page Number 10(l) Illinois Power Company Executive Deferred Compensation Plan 73 12 Computation of ratio of earnings to fixed charges. 92 13 Illinois Power Company 1993 Annual Report. 93 21 Subsidiaries of Illinois Power Company. 125 23 Consent of Independent Accountants. 126 _____________________________ * Incorporated herein by reference. ~ Management contract and compensatory plans or arrangements.
- 62 - Exhibit 3(g) Extract From Minutes of a Meeting of the Board of Directors of Illinois Power Company Held June 9, 1993 RESOLVED, that pursuant to the authority vested in the Board of Directors under the terms and provisions of Article V of the Restated Articles of Incorporation of the Company, there is hereby established, as a series of the authorized Serial Preferred Stock, $50 par value, of the Company, a series to be known and designated as 7.75% Cumulative Preferred Stock (such series being herein called the "New Preferred Stock"), the relative rights and preferences of which, in addition to those applicable to all Serial Preferred Stock as class, as stated in said Article V, are hereby fixed and determined as follows: (a) The number of shares constituting the new Preferred Stock shall be 870,000. (b) The annual dividend rate on the New Preferred Stock shall be $3.875 per share in cash, and no more, and the date from which dividends on all shares of the New Preferred Stock issued prior to the record date for the first dividend payment on the new Preferred Stock shall be cumulative shall be the date of issue thereof. (c) The New Preferred Stock is not redeemable prior to July 1, 2003. On or after July 1, 2003, the new Preferred Stock shall be redeemable, in whole or in part, at the option of the Company. The redemption price for the New Preferred Stock (exclusive of accrued and unpaid dividends), to be paid in cash, shall be $50 per share. (d) The amount payable to the holders of the New Preferred Stock upon voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company or upon any distribution of its capital shall be at the rate of $50 per share in cash (exclusive of accrued and unpaid dividends). RESOLVED, that in light of the possibility that the Company's balance of retained earnings may become negative as a result of recording additional losses due to adverse decisions with respect to the Illinois Commerce Commission's August 7, 1992 rate order on appeal, there be and hereby is declared out of retained earnings of the Company a $.4317 per share dividend on the New Preferred Stock, when and if such New Preferred Stock is issued, payable on August 1, 1993, and a $.96875 per share payable dividend on the New Preferred Stock, payable on each of November 1, 1993, February 1, 1994 and May 1, 1994, to holders of record at the close of business on the applicable record dates in proportion to their respective holdings; provided, however, that payment is contingent on satisfaction, at the - 63 - time of payment, of the financial tests set forth in the Illinois Commerce Commission Order dated March 24, 1993 in Docket 92- 0415 authorizing payment of dividends on the Company's outstanding Preferred and Common Stock in the event that the Company's retained earnings are insufficient to pay such dividends with respect to the aggregate amount of dividends on outstanding Preferred Stock and Common Stock to be paid at each payment date, including the dividends declared hereby and payment being otherwise lawful at the time made; and provided further, that if any such payment of dividends on new Preferred Stock cannot be made on each respective dividend payment date set forth above, then the payment of each such dividend shall be deferred until the earliest date on which such dividends may be paid, and in the event of such deferral, any payment in arrears shall be made to holders of record on the applicable record date which is related to the scheduled dividend payment date on which payment is made. I, LEAH MANNING STETZNER, Vice President, General Counsel and Corporate Secretary of ILLINOIS POWER COMPANY, do hereby certify that the foregoing is a true and correct copy of a certain resolution duly adopted by the Board of Directors of said Company at a meeting of said Board duly convened and held on the 9th day of June, 1993 at which meeting a quorum of said Board was present and voting throughout, and that said resolution has not been altered or amended and is in full force and effect on the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of said Illinois Power Company this 9th day of June, 1993. Secretary - 64 - Exhibit 4(hh) ILLINOIS POWER COMPANY TO HARRIS TRUST AND SAVINGS BANK, as Trustee SUPPLEMENTAL INDENTURE Dated February 1, 1994 TO Mortgage and Deed of Trust Dated November 1, 1943 - 65 - Supplemental Indenture, dated the first day of February, Nineteen hundred and ninety-four (1994) (hereinafter referred to as the "Supplemental Indenture"), made by and between ILLINOIS POWER COMPANY, a corporation organized and existing under the laws of the State of Illinois (hereinafter called the "Company"), party of the first part, and HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the laws of the State of Illinois (hereinafter called the "Trustee"), as a Trustee under the mortgage and Deed of Trust dated November 1, 1943, hereinafter mentioned, party of the second part; WHEREAS, the Company has heretofore executed and delivered its Mortgage and Deed of Trust dated November 1, 1943 (hereinafter referred to as the "Original Indenture"), to the Trustee, for the security of the First Mortgage Bonds of the Company issued and to be issued thereunder (hereinafter called the "Bonds"); and WHEREAS, pursuant to the terms and provisions of the Original Indenture there were created and authorized by various Supplemental Indentures First Mortgage Bonds of various series, including a series known as First Mortgage Bonds, Pollution Control Series K ("Pollution Control Series K Bonds") which was created and authorized by Supplemental Indenture No. 1 dated June 1, 1992 ("Supplemental Indenture No. 1 of June 1, 1992") and WHEREAS, the Pollution Control Series K Bonds were duly issued under and secured by the Indenture and Supplemental Indenture No. 1 of June 1, 1992 in the aggregate principal amount of $35,615,000, bearing interest at a rate of seven and three-tenths per cent (7.30%) per annum; and WHEREAS, the Company deems it advisable that Supplemental Indenture No. 1 of June 1, 1992 be amended as herein provided, and the holder of the outstanding Pollution Control Series K Bonds has duly consented to this amendment and the execution of this Supplemental Indenture and has delivered to the Trustee an instrument duly setting forth such consent; WHEREAS, the Company, in the exercise of the powers and authority conferred upon and reserved to it under the provisions of the Original Indenture, and pursuant to appropriate resolutions of the Board of Directors, has duly resolved and determined to make, execute and deliver to the Trustee a Supplemental Indenture in the form hereof for the purposes herein provided; and WHEREAS, all conditions and requirements necessary to make this Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled and the execution and delivery hereof have been in all respects duly authorized; - 66 - NOW, THEREFORE, THIS INDENTURE WITNESSETH: THAT Illinois Power Company, in consideration of the purchase and ownership from time to time of the Bonds and the service by the Trustee, and its successors, under the Original Indenture and of One Dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, hereby covenants and agrees to and with the Trustee and its successors in the trust under the Original Indenture, for the benefit of those who shall hold the Bonds and coupons, if any, appertaining thereto, as follows: ARTICLE I. AMENDMENT TO SUPPLEMENTAL INDENTURE NO. 1 OF JUNE 1, 1992. SECTION 1. Wherever in Supplemental Indenture No. 1 of June 1, 1992 reference is made to interest on the Pollution Control Series K Bonds at the rate of seven and tree-tenths per cent (7.30%) per annum, Supplemental Indenture No. 1 of June 1, 1992 is hereby amended to read "five and seven- tenths per cent (5.70%)" in lieu of "seven and three-tenths per cent (7.30%)" in each and every place where the term "seven and three-tenths per cent (7.30%)" shall occur. ARTICLE II. MISCELLANEOUS PROVISIONS. SECTION 1. Except as amended by this Supplemental Indenture, all of the provisions of the Indenture and Supplemental Indenture No. 1 of June 1, 1992 shall remain in full force and effect, and from and after the effective date of this Supplemental Indenture shall be deemed to have been amended as herein set forth. SECTION 2. This Supplemental Indenture may be simultaneously executed in any number of counterparts, each of which when so executed shall be deemed to be an original; but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, said Illinois Power Company has caused this Supplemental Indenture to be executed on its behalf by its Chairman and President, one of its Executive Vice Presidents, one of its Senior Vice Presidents or one of its Vice Presidents and its corporate seal to be hereto affixed and said seal and this Indenture to be attested by its Secretary or one of its Assistant Secretaries; and said Harris Trust and Savings Bank, in evidence of its - 67 - acceptance of the trust hereby created, has caused this Indenture to be executed on its behalf by its President or one of its Vice Presidents and its corporate seal to be hereto affixed and said seal and this Indenture to be attested by its secretary or one of its Assistant Secretaries; all as of the first day of February, one thousand nine hundred and ninety-four. ILLINOIS POWER COMPANY (CORPORATE SEAL) BY__\s\ LARRY F. ALTENBAUMER Senior Vice President and Chief Financial Officer ATTEST: __\s\__Gary B. Pasek _________ Assistant Secretary HARRIS TRUST AND SAVINGS BANK, Trustee (CORPORATE SEAL) BY__\s\_J. Bartoline_______________ Vice President ATTEST: __\s\_D. G. Donovan_______ - 68 - STATE OF ILLINOIS ) SS.: COUNTY OF MACON ) BE IT REMEMBERED, that on this 27th day of January, 1994, before me, the undersigned Anita F. Ricker, a Notary public within and for the County and State aforesaid, personally came L. F. Altenbaumer, Senior Vice President and Chief Financial Officer, and G. B. Pasek, Assistant Secretary, of Illinois Power Company, a corporation duly organized, incorporated and existing under the laws of the State of Illinois, who are personally known to me to be such officers, and who are personally know to me to be the same persons who executed as such officers the within instrument of writing, and such persons duly acknowledged that they signed, sealed and delivered the said instrument as their free and voluntary act as such Vice President and Assistant Secretary, respectively, and as the free and voluntary act of said Illinois Power Company for uses and purposes therein set forth. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal on the day and year last above written. __\s\ Anita S. Ricker___ Notary Public, Macon County, Illinois My Commission Expires on June 28, 1997. (NOTARIAL SEAL) STATE OF ILLINOIS ) SS.: COUNTY OF COOK ) BE IT REMEMBERED, that on this 26th day of January, 1994, before me, the undersigned Marianne Cody, a Notary Public within and for the County and State aforesaid, personally came J. Bartolini, Vice President, and D. G. Donovan, Assistant Secretary, of Harris Trust and Savings Bank, a corporation duly organized, incorporated and existing under the laws of the State of Illinois, who are personally known to me to be the same persons who executed as such officers the within instrument of writing, and such persons duly acknowledged that they signed, sealed and delivered the said instrument as their free and voluntary act as such Vice President and Assistant Secretary, respectively, and as the free and voluntary act of said Harris Trust and Savings Bank for the uses and purposes therein set forth. - 69 - IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal on the day and year last above written. _______\s\ Marianne Cody______________ Notary Public, Cook County, Illinois My Commission Expires on May 29, 1997. (NOTARIAL SEAL) Return to: This Instrument was prepared by ILLINOIS POWER COMPANY SCHIFF, HARDIN & WAITE Real Estate Dept. F-14 7200 Sears Tower 500 S. 27th Street Chicago, IL 60606 Decatur, IL 62525 - 70 - Exhibit 10(h) ILLINOIS POWER COMPANY STOCK PLAN FOR OUTSIDE DIRECTORS As Amended and Restated April 9, 1992 And As Further Amended April 14, 1993 1. HISTORY AND PURPOSE The Stock Plan for Outside Directors (the "Plan") was established by Illinois Power Company (The "Company") to increase the stock ownership interests of directors in the Company and thereby provide further incentive to directors to work toward the long-term best interests of the Company and its shareholders. The following provisions constitute an amendment, restatement and continuation of the Plan as in effect immediately prior to April 9, 1992, the "Effective Date" of the Plan as set forth herein. 2. ELIGIBILITY Only outside directors of the Company (i.e., directors who are not officers or employees of the Company or any of its subsidiaries or affiliates) are eligible to participate in the Plan. 3. GRANT OF STOCK Each outside director elected to the Board of Directors of the Company (the "Board") at each annual shareholders meeting of the Company (beginning with the 1993 annual shareholders meeting) shall receive 600 shares of common stock of the Company as soon as practicable after such meeting. Such shares shall be obtained from one or both of the following sources: (a) Shares may be purchased on the open market for the accounts of directors by a broker selected by the chief financial officer of the Company, or his delegate. If shares are obtained in accordance with this paragraph 3(a), they shall be transferred directly to the director, and shall not be transferred to or held by the Company. The cost of obtaining such shares shall be paid by the Company. - 71 - (b) Treasury shares may be used, to the extent permitted by applicable law. The shares so transferred represent payment for all Board and committee meetings to be held during the one- year period prior to the next annual shareholders meeting. Nothing in this paragraph 3 shall be construed to prevent the Board from awarding cash meeting fees to any outside director, which cash fees shall be in addition to the amounts granted to the outside directors in accordance with the other provisions of this paragraph 3. Outside directors elected to the Board between annual shareholders meetings shall be paid in cash for attendance at meetings prior to the first annual shareholders meeting after their election to the Board. 4. ADJUSTMENT TO SHARES In the event of any change in the outstanding shares of the common stock of the Company by reason of any stock dividend, split, reverse split, spin-off, recapitalization, merger, consolidation, combination, exchange of shares or other similar change, the number of shares of stock to be awarded to each director under the Plan shall be equitably adjusted by the Board. 5. AMENDMENT The Plan may be amended by the Board, except that, to the extent necessary to comply with Rule 16b- 3(c)(2)(ii), issued pursuant to the Securities Exchange Act of 1934, the provisions of the Plan may not be amended more than once in any six month period, other than to comport with changes in the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code, as amended, and applicable regulations thereunder. - 72 - Exhibt 10(1) ILLINOIS POWER COMPANY EXECUTIVE DEFERRED COMPENSATION PLAN - 73 -
TABLE OF CONTENTS SECTION 1 -1- General -1- 1.1. Purpose -1- 1.2. Effective Date -1- 1.3. Related Companies and Employers -1- 1.4. Administration -1- 1.5. Plan Year -1- 1.6. Applicable Laws -1- 1.7. Gender and Number -1- 1.8. Notices -2- 1.9. Form and Time of Elections -2- 1.10. Benefits Under Qualified Plans -2- 1.11. Evidence -2- 1.12. Action by Employers -2- 1.13. Defined Terms -2- SECTION 2 -2- Participation -2- 2.1. Participant -2- 2.2. Deferral Election -3- 2.3. Compensation -4- 2.4. Plan Not Contract of Employment -4- SECTION 3 -4- Plan Accounting -4- 3.1. Accounts -4- 3.2. Adjustment of Accounts -4- 3.3. Crediting Under Deferral Election -5- 3.4. Investment Return Rates -5- 3.5. Employee Selection of Investment Return Rate -5- 3.6. Protected Investment Return Rates -6- SECTION 4 -7- Distributions -7- 4.1. General -7- 4.2. Distribution Election -7- 4.3. Unforeseeable Emergency -7- 4.4. Sale of Business -8- 4.5. Designation of Beneficiary -8- 4.6. Distributions to Disabled Persons -8- 4.7. Benefits May Not be Assigned -9- 4.8. Offset -9-
- 74 -
SECTION 5 -9- Change in Control -9- 5.1. Distribution on Change in Control -9- 5.2. Change in Control Definition -9- SECTION 6 -10- Source of Benefit Payments -10- 6.1. Liability for Benefit Payments -10- 6.2. No Guarantee -11- 6.3. Transfer to Related Employer -11- SECTION 7 -11- Committee -11- 7.1. Powers of Committee -11- 7.2. Delegation by Committee -12- 7.3. Information to be Furnished to Committee -12- 7.4. Liability and Indemnification of Committee -12- SECTION 8 -13- Amendment and Termination -13- Appendix A
- 75 - ILLINOIS POWER COMPANY EXECUTIVE DEFERRED COMPENSATION PLAN General .1. Purpose. Illinois Power Company Executive Deferred Compensation Plan (the "Plan") has been established by Illinois Power Company (the "Company") so that it, and each of the Related Companies which, with the consent of the Company, adopts the Plan may provide its eligible key management employees with an opportunity to build additional financial security, thereby aiding such companies in attracting and retaining employees of exceptional ability. .2. Effective Date. The "Effective Date" of the Plan is December 8, 1993. No deferrals of Compensation shall be permitted under the Plan for any Plan Year with respect to Compensation otherwise payable by any Employer during that year unless the Employer has specifically adopted the Plan with respect to such year. .3. Related Companies and Employers. The term "Related Company" means any company during any period in which it owns at least fifty percent of the voting power of all classes of stock of the Company entitled to vote, and any company during any period in which at least fifty percent of the voting power of all classes entitled to vote is owned, directly or indirectly, by the Company or by any other company that is a Related Company by reason of its ownership of stock of the Company. The Company and each Related Company that adopts the Plan for the benefit of its eligible employees are referred to below collectively as the "Employers" and individually as an "Employer". .4. Administration. The authority to control and manage the operation and administration of the Plan shall be vested in the Compensation and Nominating Committee (the "Committee") of the Board of Directors of the Company. In controlling and managing the operation and administration of the Plan, the Committee shall have the rights, powers and duties set forth in Section 7. .5. Plan Year. The term "Plan Year" means the calendar year. .6. Applicable Laws. The Plan shall be construed and administered in accordance with the laws of the State of Illinois - 76 - to the extent that such laws are not preempted by the laws of the United States of America. .7. Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular. .8. Notices. Any notice or document required to be filed with the Plan Administrator or the Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Plan Administrator, in care of the Company, at its principal executive offices. The Plan Administrator may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan may be waived by the person entitled to notice. .9. Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the Plan Administrator at such times, in such form, and subject to such restrictions and limitations as the Plan Administrator shall require. .10. Benefits Under Qualified Plans. Compensation of any Participant that is deferred under the Plan, and benefits payable under the Plan, shall be disregarded for purposes of determining the benefits under the Illinois Power Company Incentive Savings Plan (the "Savings Plan"), the Illinois Power Company Retirement Income Plan for Salaried Employees, and any other plan that is intended to be qualified under section 401(a) of the Internal Revenue Code of 1986. .11. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. .12. Action by Employers. Any action required or permitted to be taken by any Employer shall be by resolution of its Board of Directors, or by a duly authorized officer of the Employer. .13. Defined Terms. Terms used frequently with the same meaning are indicated by initial capital letters, and are defined - 77 - throughout the Plan. Appendix A contains an alphabetical listing of such terms and the locations in which they are defined. 2 Participation .1. Participant. Any individual who is an Eligible Employee for any Plan Year shall be eligible to participate in the Plan for the Plan Year, subject to the terms of the Plan. For purposes of the Plan, the term "Eligible Employee" for any Plan Year shall mean any employee of the Company who is an elected officer of the Company for that Plan Year. .2. Deferral Election. An Eligible Employee shall participate in the Plan by electing to defer payment of a portion of his Compensation pursuant to the terms of a "Deferral Election". An individual's Deferral Election shall be subject to the following: (a) An individual who, prior to the beginning of any Plan Year, satisfies the requirements of an Eligible Employee for the Plan Year, shall be eligible to file a Deferral Election with respect to his Compensation for that Plan Year. Such Deferral Election shall be filed before the first day of that year (or at such earlier time as may be established by the Committee). (b) An individual who, prior to the beginning of any Plan Year, has not satisfied the requirements of an Eligible Employee for the Plan Year, but who becomes an Eligible Employee during the Plan Year, shall be eligible to file a Deferral Election with respect to his Compensation for that Plan Year, subject to the limits of paragraph 2.2(d). Such Deferral Election shall be filed within thirty days (or such shorter period as may be specified by the Committee) after he first becomes an Eligible Employee for the year. (c) If the Plan first becomes effective with respect to the employees of any Employer during any Plan Year, and an employee of that Employer becomes an Eligible Employee on the date the Plan becomes effective, such employee shall be eligible to file a Deferral Election with respect to Compensation for that Plan Year, subject to the limits of paragraph 2.2(d). Such Deferral - 78 - Election shall be filed within thirty days (or such shorter period as may be specified by the Committee) after the date the Plan becomes effective. (d) To the extent elected by a Participant, and subject to the terms of the Plan, a Participant's Deferral Election for any Plan Year shall apply to his Compensation for that Plan Year. The terms of a Deferral Election shall be subject to any conditions and limitations that may be imposed by the Committee. Except as otherwise provided in this subsection 2.2, a Deferral Election shall be irrevocable for the Plan Year to which it applies. In no event may a Deferral Election cover Compensation earned prior to the date the election is completed and filed in accordance with the Plan. (e) The Committee may revoke an individual's Deferral Election as of the date on which the individual ceases to be an Eligible Employee. (f) Each Deferral Election shall be revoked as of the date on which a Change in Control occurs, and no new Deferral Election shall be accepted for any date after the date of a Change in Control. (g) Subject to the terms of the Plan, the Participant shall specify, as part of his Deferral Election, and in accordance with subsection 4.2, the time and form of distribution of the amounts deferred pursuant to such election. .3. Compensation. For purposes of the Plan, a Participant's "Compensation" from any Employer for any Plan Year means any short-term incentive payable to him under the Illinois Power Company Executive Incentive Compensation Plan for that year (regardless of whether it is otherwise payable to him during that year or during a later year). .4. Plan Not Contract of Employment. The Plan does not constitute a contract of employment, and participation in the Plan will not give any employee the right to be retained in the employ of any Employer nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. - 79 - Plan Accounting .1. Accounts. The Plan Administrator shall establish an Account for each Plan Year for each Participant who has filed a Deferral Election. If a Participant is employed by more than one Employer in any Plan Year, and his Compensation otherwise payable from such Employers is reduced pursuant to the Plan, a separate Account shall be established for the Participant with respect to the Compensation for the Plan Year from each such Employer. .2. Adjustment of Accounts. Each Account shall be adjusted in accordance with this Section 3 in a uniform, non- discriminatory manner, as of such periodic "Accounting Dates" as may be determined by the Plan Administrator from time to time (which Accounting Dates shall be not less frequent than quarterly). As of each Accounting Date, the balance of each Account shall be adjusted as follows: (a) first, charge to the Account balance the amount of any distributions under the Plan with respect to that Account that have not previously been charged; (b) then, adjust the Account balance for the applicable Investment Return Rate(s); and (c) then, credit to the Account balance the amount to be credited to that Account in accordance with subsection 3.3 that have not previously been credited. .3. Crediting Under Deferral Election. The balance of a Participant's Account for any Plan Year shall be credited, in accordance with the provisions of paragraph 3.2(c), with the amount by which his Compensation for the year is reduced pursuant to a Deferral Election. Such crediting shall occur as of the date on which such Compensation would otherwise have been paid to the Participant by the Employer were it not for the reduction made pursuant to the Deferral Election or, if such date is not an Accounting Date, as of the first Accounting Date occurring thereafter. .4. Investment Return Rates. The "Investment Return Rate(s)" with respect to the Account(s), or portions of the Account(s), of any Participant for any period shall be the Investment Return - 80 - Rate(s) elected by the individual from among the following alternatives in accordance with subsection 3.5: (a) The Investment Return Rates described in paragraph 3.6(b), provided that no Investment Return Rate based on stock or other securities of the Company shall be offered under this paragraph 3.6(a). (b) The return from such other investment alternatives (if any) for that period which, in the discretion of the Committee, are offered from time to time under this paragraph 3.4(b). Subject to the provisions of subsection 3.6, and any other applicable provisions of the Plan, the Committee may eliminate any Investment Return Rate alternative at any time; provided, however, that the Company may not retroactively eliminate any Investment Return Rate alternative. .5. Employee Selection of Investment Return Rate. Subject to the terms of the Plan, a Participant may elect the Investment Return Rate(s) that will apply to all of his Accounts for any Plan Year, by filing an election with the Plan Administrator as to such Investment Return Rate(s), subject to the following: (a) if the Investment Return Rate(s) being selected is for the first year in which an Eligible Employee participates in the Plan, the election as to Investment Return Rate(s) must be filed by the due date for filing the Participant's Deferral Election for that year, or at such earlier time as may be established by the Plan Administrator; and (b) in all other cases, the election must be filed prior to the beginning of such Plan Year, or at such earlier time as may be established by the Plan Administrator. The same Investment Return Rate(s) shall apply to all Accounts of a Participant for any Plan Year. To the extent permitted by the Committee, the Participant may elect to have different Investment Return Rates apply to different portions of his Account balances for any Plan Year. .6. Protected Investment Return Rates. At all times the Plan is in effect, the Plan shall provide that the Investment Return - 81 - Rate(s) offered to each Participant shall include the Investment Return Rate described in paragraph 3.6(a), or each of the Investment Return Rates described in paragraph 3.6(b). (a) The Investment Return Rate described in this paragraph 3.6(a) for any period shall be the sum of: (i) the short-term borrowing rate for the Company for the period, plus (ii) 2.0 percentage points. (b) The Investment Return Rates described in this paragraph 3.6(b) for any period shall be each of the respective rates of investment return provided by each of the investment funds available under the Savings Plan for that period, subject to the following: (i) The rate of investment return with respect to the Company Stock Fund under the Savings Plan (or any investment fund based primarily on the return on stock or other securities of the Company, or any successor to the Company) need not be included as an Investment Return Rate under this Plan. (ii) The net investment return provided by an investment fund under the Savings Plan shall be the rate determined after reduction for any investment management fee or other, similar administrative fee or charge, to the extent that such fee or charge is applied under the Savings Plan in determining the net investment return of such fund. (iii) The net investment return from an investment fund under the Savings Plan shall not be reduced to reflect income taxes paid or payable with respect to such return; provided, however, that if, after the Effective Date, there is a material change in the applicable income tax laws, the rate of investment return may be adjusted by the Company to reflect income taxes to the extent that the Company reasonably determines such adjustment is necessary to preserve the benefit of the Plan, as originally established, for the Participants and the Company. (iv) The Investment Return Rates offered pursuant to this paragraph 3.6(b) shall be revised from time - 82 - to time to reflect changes in the investment funds offered under the Savings Plan; provided, however, that the recognition (with respect to this Plan) of any such changes in the investment funds offered by the Savings Plan may, in the discretion of the Company, be delayed for up to twelve months after such change is effective under the Savings Plan. Nothing in this subsection 3.6 shall be construed to require the Plan to permit a Participant to select between the Investment Return Rate described in paragraph 3.6(a), and the Investment Return Rates described in paragraph 3.6(b), with respect to the same period. 4 Distributions .1. General. Subject to this Section 4 and Section 5 (relating to change in control), the balance of a Participant's Account with respect to any year shall be distributed in accordance with the Participant's Deferral Election applicable to that Account. In no event shall the amount distributed with respect to any Participant's Account as of any date exceed the amount of the Account balance as of that date. .2. Distribution Election. A Participant's Deferral Election for any year shall specify the manner (including the time and form of distribution) in which the Account attributable to such election shall be distributed, subject to such restrictions and limitations as may be imposed by the Committee. .3. Unforeseeable Emergency. Prior to the date otherwise scheduled for distribution of his benefits under the Plan, upon a showing of an unforeseeable emergency, a Participant may elect to accelerate payment of an amount not exceeding the lesser of (a) the amount necessary to meet the emergency or (b) the sum of his Account balance(s) under the Plan. For purposes of the Plan, the term "unforeseeable emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant (or the control of the beneficiary, if the amount is payable to a beneficiary) and that would result in severe financial hardship to the individual if early withdrawal were not permitted. The determination of "unforeseeable emergency" shall - 83 - be made by the Plan Administrator, based on such information as the Plan Administrator shall deem to be necessary. .4. Sale of Business. If all or a substantial portion of the assets and business of an Employer (the "Selling Employer") is sold or otherwise transferred to a company (the "Purchaser") that is not a Related Company (a "Sale Transaction"), and in connection with the Sale Transaction, any Participant is employed by the Purchaser, then the Selling Employer may, in its sole discretion, discharge all obligation to the Participant by accelerating the date on which the Participant's Plan benefits are payable; provided, however, that any such acceleration shall be effective only if (i) the payment is made not later than 180 days following the date of the Sale Transaction, and (ii) the lump sum payable in settlement of the Employer's obligations to the Participant under the Plan is equal to 100% of the Participant's Account balances as of the date of payment. .5. Designation of Beneficiary. Each Participant from time to time, by signing a form furnished by the Plan Administrator, may designate any legal or natural person or persons (who may be designated contingently or successively) to whom his benefits under the Plan are to be paid if he dies before he receives all of his benefits. A beneficiary designation form will be effective only when the signed form is filed with the Plan Administrator while the Participant is alive and will cancel all beneficiary designation forms filed earlier. Except as otherwise specifically provided in this subsection 4.5, if a deceased Participant failed to designate a beneficiary as provided above, or if the designated beneficiary of a deceased Participant dies before him or before complete payment of the Participant's benefits, his benefits shall be paid to the legal representative or representatives of the estate of the last to die of the Participant and his designated beneficiary. .6. Distributions to Disabled Persons. Notwithstanding the provisions of this Section 4, if, in the Plan Administrator's opinion, a Participant or beneficiary is under a legal disability or is in any way incapacitated so as to be unable to manage his financial affairs, the Plan Administrator may direct that payment be made to a relative or friend of such person for his benefit until claim is made by a conservator or other person legally charged with the care of his person or his estate, and such payment shall be in lieu of any such payment to such Participant or beneficiary. Thereafter, any benefits under the Plan to which such Participant or beneficiary is entitled shall be paid to such - 84 - conservator or other person legally charged with the care of his person or his estate. .7. Benefits May Not be Assigned. Neither the Participant nor any other person shall have any voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part hereof, which are expressly declared to be unassignable and non-transferable. No part of the amounts payable shall be, prior to actual payment, subject to seizure or sequestration for payment of any debts, judgements, alimony or separate maintenance owed by the Participant or any other person, or be transferred by operation of law in the event of the Participant's or any other person's bankruptcy or insolvency. .8. Offset. Notwithstanding the provisions of subsection 4.7, if, at the time payments are to be made under the Plan, the Participant or beneficiary or both are indebted or obligated to any Employer or Related Company, then the payments remaining to be made to the Participant or the beneficiary or both may, at the discretion of the Plan Administrator, be reduced by the amount of such indebtedness, or obligation, provided, however, that an election by the Plan Administrator not to reduce any such payment shall not constitute a waiver of the claim for such indebtedness or obligation. 5 Change in Control .1. Distribution on Change in Control. Upon the occurrence of a Change in Control, each Participant shall receive a lump sum distribution equal to 100% of the Participant's Account balances determined as of the date of the Change in Control. Such distributions shall be made to Participants regardless of any elections that may otherwise be applicable to them under the Plan, and shall be made as soon as practicable after the date of such Change in Control, but in no event later than 15 days after the occurrence of such Change in Control. Payments under this subsection 5.1 shall be in lieu of any amounts that would otherwise be payable after the date as of which the Participant's Account balance is determined for purposes of payment under this subsection. - 85 - .2. Change in Control Definition. For purposes of the Plan, a "Change in Control" will be deemed to occur on the earliest of the existence of one of the following and the receipt of all necessary regulatory approvals therefor: (a) the acquisition by an entity, person or group (including all Affiliates or Associates of such entity, person or group) of beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, of capital stock of the Company entitled to exercise more than 20% of the outstanding voting power of all capital stock of the Company ("Voting Power"); (b) the effective time of (i) a merger or consolidation of the Company with one or more other corporations as a result of which the holders of the outstanding Voting Power of the Company immediately prior to such merger or consolidation (other than the surviving or resulting corporation or any Affiliate or Associate thereof) hold less than 80% of the Voting Power of the surviving or resulting corporation, (ii) a transfer of a majority of the Voting Power other than to an entity of which the Company owns at least 80% of the Voting Power, or (iii) a transfer (other than a sale/leaseback transaction) of a Substantial Portion of the Property of the Company other than to an entity of which the Company owns at least 80% of the Voting Power unless, within ten (10) days after such transfer of Property, the Board of Directors of the Company as constituted immediately before such transfer determines that such transfer shall not be a Change in Control hereunder; or (c) the election to the Board of Directors of the Company, of directors constituting a majority of the number of the directors in office unless such directors were recommended for election by the existing Board of Directors. For purposes of this subsection 5.2, (A) the term "Affiliate" or "Associate" shall have the meaning set forth in Rule 12b-2 under the Securities Exchange Act of 1934; and (B) the term "Substantial Portion of the Property of the Company" shall mean 80% of the aggregate book value of the assets of the Company and its Affiliates and Associates as set forth in the most recent balance sheet of the Company, prepared on a consolidated basis, by its regularly employed, independent public accountants. - 86 - Source of Benefit Payments .1. Liability for Benefit Payments. Subject to the provisions of this Section 6, an Employer shall be liable for payment of benefits under the Plan with respect to any Participant to the extent that such benefits are attributable to the deferral of Compensation otherwise payable by that Employer to the Participant. Any disputes relating to liability of Employers for benefit payments shall be resolved by the Committee. .2. No Guarantee. Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Employers whatsoever, including, without limitation, any specific funds, assets, or other property which the Employers, in their sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Employers. Nothing contained in the Plan shall constitute a guarantee by any of the Employers that the assets of the Employers shall be sufficient to pay any benefits to any person. .3. Transfer to Related Employer. If a Participant leaves the employ of an Employer (the "Original Employer") and becomes the employee of another Employer or a Related Company (the "New Employer") then, with the consent of the Original Employer and the New Employer, but without the consent of the Participant, the liability of the Original Employer to the Participant under the Plan may be transferred to the New Employer. In the event of such transfer: (a) The Original Employer shall thereafter have no obligation to the Participant under the Plan. (b) The New Employer's rights and obligations with respect to the Participant shall be governed by the terms of the Plan, with the New Employer substituted for the Original Employer under the Plan with respect to the obligation to pay benefits to the Participant. - 87 - The New Employer shall not be required to give effect to the Participant's Deferral Election with respect to remuneration earned at the New Employer. 7 Committee .1. Powers of Committee. Responsibility for the day-to- day administration of the Plan shall be vested in the Plan Administrator, which shall be the Committee. The authority to control and manage all other aspects of the operation and administration of the Plan shall also be vested in the Committee. The Committee is authorized to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, and to determine the terms and provisions of any agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. Except as otherwise specifically provided by the Plan, any determinations to be made by the Committee under the Plan shall be decided by the Committee in its sole discretion. Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons. .2. Delegation by Committee. The Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked at any time. Until the Committee takes action to the contrary: (a) The chief executive officer of the Company shall be delegated the power and responsibility to take all actions assigned to or permitted to be taken by the Committee under Section 2, Section 3, and Section 4 (other than the powers and responsibility of the Plan Administrator). (b) The powers and responsibilities of the Plan Administrator shall be delegated to the Employee Services Department of the Company, subject to such direction as may be provided to the Employee Services Department from - 88 - time to time by the Committee and the chief executive officer of the Company. .3. Information to be Furnished to Committee. The Employers and Related Companies shall furnish the Committee with such data and information as may be required for it to discharge its duties. The records of the Employers and Related Companies as to an employee's or Participant's employment, termination of employment, leave of absence, reemployment and Compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the Plan. .4. Liability and Indemnification of Committee. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the Employers be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Employers. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Employers against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance. 8 Amendment and Termination The Committee may, at any time, amend or terminate the Plan, subject to the following: (a) Subject to the following provisions of this Section 8, no amendment or termination may materially adversely affect the rights of any Participant or beneficiary under the Plan. - 89 - (b) The Committee may revoke the right to defer Compensation under the Plan; provided, however, that no such revocation shall apply to the Compensation of any Participant to the extent that the revocation is adopted by the Committee after the date the Compensation is otherwise required to be credited to the Participant's Account under the Plan. (c) The Committee may amend the Plan to eliminate any Investment Return alternative; provided, however, that the Plan may not be amended to retroactively eliminate any Investment Return alternative, and further provided that the provisions of subsection 3.6 (relating to Protected Investment Return Rates) may not be amended or otherwise modified to materially adversely affect any Participant's rights under that subsection without the express written consent of such Participant. (d) The Plan may not be amended to delay the date on which benefits are otherwise payable under the Plan without the consent of each affected Participant. The Committee may amend the Plan to accelerate the date on which Plan benefits are otherwise payable under the Plan; provided, however, that any such amendment (and any termination of the Plan having the effect of such acceleration) shall be effective only if the acceleration results in payment of a lump sum of all benefits for all Participants at substantially the same time; and further provided that the lump sum payable in settlement of each Employer's obligations to each Participant under the Plan shall be equal to 100% of each Participant's Account balances as of the date of payment. (e) Notwithstanding any other provision of the Plan to the contrary, the Committee may not delegate its rights and responsibilities under this Section 8; provided, however, that, the Board of Directors of the Company may, from time to time, substitute itself, or another committee of the Board of Directors of the Company, for the Compensation and Nominating Committee under this Section 8. - 90 -
APPENDIX A Accounting Dates -- 3.2 Affiliate -- 5.2 Associate -- 5.2 Change in Control -- 5.2 Company -- 1.1 Committee -- 7.0 Compensation -- 2.3 Deferral Election -- 2.2 Effective Date -- 1.2 Eligible Employee -- 2.1 Employer -- 1.3 Investment Return Rate -- 3.4 New Employer -- 6.3 Original Employer -- 6.3 Plan -- 1.1 Plan Year -- 1.5 Purchaser -- 4.4 Related Company -- 1.3 Retirement Plan -- 1.10 Sale Transaction -- 4.4 Savings Plan -- 1.10 Selling Employer -- 4.4 Substantial Portion of the Property of the Company -- 5.2 Unforeseeable Emergency -- 4.3 Voting Power -- 5.2
- 91 - ILLINOIS POWER COMPANY EXHIBIT 12 STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Thousands of Dollars)
Year Ended December 31, Supplemental** Supplement Supplemental ** 1989 1989 1990 1990 1991 1992 1993 1993 Earnings Available for Fixed Charges: Net Income (Loss) per "Statement of Income" $(288,432) $(288,432) $(78,484) $(78,484) $109,244 $122,088 $ (55,751) $ (55,751) Add: Income Taxes: Current ( 43,577) ( 43,577) 21,307 21,307 29,369 22,930 25,260 25,260 Deferred - Net 91,764 91,764 36,545 36,545 45,990 63,739 82,057 82,057 Allocated income taxes ( 9,306) ( 9,306) 2,608 2,608 ( 1,348)( 6,632) (12,599) (12,599) Investment tax credit - Deferred ( 8,787) ( 8,787) ( 14,121) ( 14,121) ( 11)( 519) (782) (782) Income tax effect of disallowed costs (105,482) (105,482) ( 24,759) ( 24,759) - - (70,638) (70,638) Interest on long-term debt 216,029 216,029 191,559 191,559 176,179 160,795 154,110 154,110 Amortization of debt expense and premium-net, and other interest charges 7,846 7,846 13,162 13,162 9,004 12,195 17,007 17,007 One-third of all rentals (Estimated to be representative of the interest component) 4,185 4,185 5,053 5,053 4,996 5,117 5,992 5,992 Interest on In-Core Fuel 8,020 8,020 6,802 6,802 8,862 8,278 6,174 6,174 Disallowed Clinton plant costs - 451,244 - 160,328 - - - 270,956 Earnings (loss) available for fixed charges $(127,740) $323,504 $159,672 $320,000 $382,285 $387,991 $150,830 $421,786 Fixed charges: Interest on long-term debt $216,029 $216,029 $191,559 $191,559 $176,179 $160,795 $154,110 $154,110 Amortization of debt expense and premium-net, and other interest charges 27,004 27,004 31,093 31,093 25,553 25,785 27,619 27,619 One-third of all rentals (Estimated to be representative of the interest component) 4,185 4,185 5,053 5,053 4,996 5,117 5,992 5,992 Total Fixed charges $247,218 $247,218 $227,705 $227,705 $206,728 $191,697 $187,721 $187,721 Ratio of earnings to fixed charges (0.52)* 1.31 0.70 * 1.41 1.85 2.02 0.80 * 2.25
* Earnings are inadequate to cover fixed charges. Additional earnings of $374,958, $68,033 and 36,891 for 1989, 1990, and 1993, respectively, are required to attain a one-to-one ratio of Earnings to Fixed Charges. ** Supplemental ratio of earnings to fixed charges presented to exclude Disallowed Clinton plant costs. - 92 - Exhibit 13 Illinois Power Company 1993 Annual Report The Illinois Power Company 1993 Annual Report was filed with the Securities and Exchange Commission. REFERENCE: IPWR10EX13 - 93-124 - EXHIBIT 21
ILLINOIS POWER COMPANY Name of State or Other Name Subsidiary Subsidiary Jurisdiction of Incorporation Doing Business Under Electric Energy, Illinois Electric Energy, Inc. Inc. IP Gas Supply Company Illinois IP Gas Supply Company Illinois Power Fuel Illinois Illinois Power Fuel Company Company IP Group, Inc. Illinois IP Group, Inc. Illinova Corporation Illinois Illinova Corporation IP Merging Corporation Illinois IP Merging Corporation IPG Dominguez, Co. Illinois Illinois Dominguez, Co. IPG Lap Cogen, Inc. Illinois IPG Lap Cogen, Inc. IPG Aztec, Co. Illinois IPG Aztec, Co. IPG Panorama, Co. Illinois IPG Panorama, Co. IPG Canfield, Co. Illinois IPG Canfield, Co. IPG Western, Inc. Illinois IPG Western, Inc. IPG Eastern, Inc. Illinois IPG Eastern, Inc. IPG Ferndale, Inc. Illinois IPG Ferndale, Inc. IPG Frederickson, Inc. Illinois IPG Frederickson, Inc. IPG Sterling, Co. Illinois IPG Sterling, Co.
- 125 - EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-22068), the Registration Statement on Form S-8 (No. 33-60278), and the Registration Statement on Form S-8 (No. 33-66124), and in the Prospectuses constituting part of the Registration Statement on Form S-3 (No. 33-50173), the Registration Statement on Form S-3 (No. 33-52048), the Registration Statement on Form S-3 (No. 33-62506), and the Registration Statement on Form S-3 (No. 33-25699) of Illinois Power Company of our report dated February 9, 1994, appearing on page 26 of the Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page 43 of this Form 10-K. \s\ Price Waterhouse PRICE WATERHOUSE March 25, 1994 - 126 - -----END PRIVACY-ENHANCED MESSAGE-----