-----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, o1VIuWUEOjgOUOO/vmB/04bb+T83u5JAUiI7BBHYsRQHhH3ys4TPJjOYa/604yVZ uZDGKGFcHAj+FWJlj6kFgw== 0000049816-94-000029.txt : 19940822 0000049816-94-000029.hdr.sgml : 19940822 ACCESSION NUMBER: 0000049816-94-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 DATE AS OF CHANGE: 19940819 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03004 FILM NUMBER: 94544522 BUSINESS ADDRESS: STREET 1: 500 S 27TH ST STREET 2: C/O HARRIS TRUST & SAVINGS BANK CITY: DECATUR STATE: IL ZIP: 62525-1805 BUSINESS PHONE: 2174246600 FORMER COMPANY: FORMER CONFORMED NAME: ILLINOIS IOWA POWER CO DATE OF NAME CHANGE: 19660822 10-Q 1 - - - 3 - SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to______________ Commission Registrants; State of Incorporation; IRS Employer File Number Address; and Telephone Number Identification No. 1-11327 Illinova Corporation 37-1319890 (an Illinois Corporation) 500 S. 27th Street Decatur, IL 62526-1805 (217) 424-6600 1-3004 Illinois Power Company 37-0344645 (an Illinois Corporation) 500 S. 27th Street Decatur, IL 62526-1805 (217) 424-6600 Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) have been subject to such filing requirements for the past 90 days. Illinova Corporation Yes No X (subject to filing requirements of the Securities Exchange Act of 1934 as of May 27, 1994) Illinois Power Company Yes X No Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date: Illinova Corporation Common stock, no par value,75,643,937 shares outstanding at July 31, 1994 Illinois Power Company Common stock, no par value,75,643,937 shares outstanding held by Illinova Corporation at July 31,1994 Total number of sequentially numbered pages is 18 ILLINOVA CORPORATION ILLINOIS POWER COMPANY This combined Form 10-Q is separately filed by Illinova Corporation and Illinois Power Company. Prior to this filing, Illinova was not a reporting company for purposes of the Securities Exchange Act of 1934, and Illinois Power Company filed its own separate reports on Form 10-Q. Information contained herein relating to Illinois Power Company is filed by Illinova Corporation and separately by Illinois Power Company on its own behalf. Illinois Power Company makes no representation as to information relating to Illinova Corporation or its subsidiaries, except as it may relate to Illinois Power Company. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1994 INDEX Page No. Part 1. FINANCIAL INFORMATION Item 1. Financial Statements Illinova Corporation Consolidated Balance Sheets 3 - 4 Consolidated Statements of Income 5 Consolidated Statements of Cash Flows 6 Illinois Power Company Balance Sheets 7 - 8 Statements of Income 9 Statements of Cash Flows 10 Notes to Consolidated Financial Statements Illinova Corporation and Illinois Power Company 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Illinova Corporation and Illinois Power Company 12 - 15 Part II. OTHER INFORMATION Item 1: Legal Proceedings 16 Item 6: Exhibits and Reports on Form 8-K 16 Signatures 17 - 18 PART I. FINANCIAL INFORMATION ILLINOVA CORPORATION CONSOLIDATED BALANCE SHEETS (See accompanying Notes to Financial Statements) June 30, December 31, 1994 1993 ASSETS (Unaudited) (Millions of Dollars) Utility Plant, at original cost Electric (includes construction work in progress of $234.6 million and $218.7 million, respectively) $ 5,950.1 $ 5,889.4 Gas (includes construction work in progress of $14.5 million and $18.8 million, respectively) 596.9 589.9 6,547.0 6,479.3 Less-Accumulated depreciation 2,039.0 1,974.6 4,508.0 4,504.7 Nuclear fuel in process 6.9 6.6 Nuclear fuel under capital lease 110.3 128.5 Total utility plant 4,625.2 4,639.8 Investments and Other Assets 20.6 20.1 Current Assets Cash and cash equivalents 33.3 9.9 Accounts receivable (less allowance for doubtful accounts of $4.0 million) Service 89.3 85.2 Other 36.5 37.5 Accrued unbilled revenue 41.4 49.0 Material and supplies, at average cost 131.1 131.6 Prepayments and other 41.5 31.8 Total current assets 373.1 345.0 Deferred Charges Deferred Clinton costs 112.6 114.3 Recoverable income taxes 119.8 108.0 Other 196.4 196.3 Total deferred charges 428.8 418.6 $ 5,447.7 $ 5,423.5 ILLINOVA CORPORATION CONSOLIDATED BALANCE SHEETS (See accompanying Notes to Financial Statements) June 30, December 31, 1994 1993 CAPITAL AND LIABILITIES (Unaudited) (Millions of Dollars) Capitalization Common stock - No par value, 100,000,000 shares authorized; 75,643,937 shares outstanding, stated at $ 1,424.6 $ 1,424.6 Less - Deferred compensation - ESOP 26.7 28.2 Retained earnings (deficit) (9.2) (64.6) Less - Capital stock expense 10.6 10.8 Preferred and preference stock of subsidiary 303.7 303.7 Mandatorily redeemable preferred stock of subsidiary 36.0 48.0 Long-term debt 1,943.6 1,926.3 Total capitalization 3,661.4 3,599.0 Current Liabilities Accounts payable 100.1 128.8 Notes payable 116.4 92.3 Long-term debt and lease obligations maturing within one year 145.1 187.7 Other 155.9 197.9 Total current liabilities 517.5 606.7 Deferred Credits Accumulated deferred income taxes 954.2 906.4 Accumulated deferred investment tax credits 226.4 230.5 Other 88.2 80.9 Total deferred credits 1,268.8 1,217.8 $ 5,447.7 $ 5,423.5 ILLINOVA CORPORATION CONSOLIDATED STATEMENTS OF INCOME (See accompanying Notes to Financial Statements) Three Months EndedSix Months E nded June 30, June 30, 1994 1993 1994 1993 (Unaudited) (Millions except per share) Operating Revenues: Electric $ 270.2$ 265.1$ 549.7$ 514.5 Electric interchange 28.5 25.3 53.1 45.4 Gas 50.9 60.1 189.7 185.7 Total 349.6 350.5 792.5 745.6 Operating Expenses and Taxes: Fuel for electric plants 57.7 54.8 128.7 111.4 Power purchased 16.7 13.1 26.7 17.1 Gas purchased for resale 18.8 28.6 116.4 111.8 Other operating expenses 63.2 65.0 129.3 128.0 Maintenance 23.6 25.0 43.7 47.2 Depreciation 43.8 42.2 87.7 83.6 Amortization of excess unprotected deferred taxes - (1.4) (1.4) (2.8) General taxes 28.6 31.6 67.2 66.4 Deferred Clinton costs 0.9 2.8 1.8 5.6 Income Taxes 24.1 20.9 48.9 41.0 Total 277.4 282.6 649.0 609.3 Operating Income 72.2 67.9 143.5 136.3 Other Income and Deductions: Allowance for equity funds used during construction 1.1 0.5 2.0 1.0 Miscellaneous - net (1.5) (0.2) (5.7) (0.3) Total (0.4) 0.3 (3.7) 0.7 Income Before Interest Charges & Other 71.8 68.2 139.8 137.0 Interest Charges & Other: Interest on long-term debt 35.5 37.9 70.2 78.1 Other interest charges 2.3 1.8 4.0 3.6 Allowance for borrowed funds used during construction (1.5) (0.8) (3.1) (2.0) Preferred dividend requirements of subsidiary 6.0 6.8 11.9 13.8 Total 42.3 45.7 83.0 93.5 Net Income $ 29.5$ 22.5 $ 56.8 $ 43.5 Net Earnings per common share $ 0.39 $ 0.30 $ 0.75 $ 0.57 Cash dividends declared per common share $ 0.20 $0.20 $ 0.20 $ 0.40 Cash dividends paid per common share $ 0.20 $ 0.20 $ 0.40 $ 0.40 Weighted average number of common shares outstanding during period 75,643,937 75,643,937 75,643,937 75,643,937 ILLINOVA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (See accompanying Notes to Financial Statements) Six Months Ended June 30, 1994 1993 (Unaudited) (Millions of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 56.8 $ 43.5 Items not requiring cash, net 108.2 110.1 Changes in assets and liabilities (29.5) 13.5 Net cash provided by operating activities 135.5 167.1 CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures (83.6) (91.9) Other investing activities (3.0) (6.0) Net cash used in investing activities (86.6) (97.9) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends on common stock (30.3) (30.3) Redemptions - Short-term debt (99.5) (102.1) Long-term debt (35.8) (360.2) Preferred stock of subsidiary (12.0) (22.0) Issuances - Short-term debt 123.6 134.5 Long-term debt 35.6 345.0 Preferred stock of subsidiary -- 43.5 Other financing activities (7.1) (20.5) Net cash used in financing activities (25.5) (12.1) NET CHANGE IN CASH AND CASH EQUIVALENTS 23.4 57.1 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9.9 8.7 CASH AND CASH EQUIVALENTS AT END OF PERIOD$ 33.3 $ 65.8 ILLINOIS POWER COMPANY BALANCE SHEETS (See accompanying Notes to Financial Statements) June 30, December 31, 1994 1993 ASSETS (Unaudited) (Millions of Dollars) Utility Plant, at original cost Electric (includes construction work in progress of $234.6 million and $218.7 million, respectively) $ 5,950.1 $ 5,889.4 Gas (includes construction work in progress of $14.5 million and $18.8 million, respectively) 596.9 589.9 6,547.0 6,479.3 Less-Accumulated depreciation 2,039.0 1,974.6 4,508.0 4,504.7 Nuclear fuel in process 6.9 6.6 Nuclear fuel under capital lease 110.3 128.5 Total utility plant 4,625.2 4,639.8 Investments and Other Assets 16.1 15.4 Current Assets Cash and cash equivalents 16.1 9.3 Accounts receivable (less allowance for doubtful accounts of $4.0 million) Service 89.3 85.2 Other 37.9 37.5 Accrued unbilled revenue 41.4 49.0 Material and supplies, at average cost 131.1 131.6 Prepayments and other 41.3 31.7 Total current assets 357.1 344.3 Deferred Charges Deferred Clinton costs 112.6 114.3 Recoverable income taxes 119.8 108.0 Other 193.4 195.1 Total deferred charges 425.8 417.4 $ 5,424.2 $ 5,416.9 ILLINOIS POWER COMPANY BALANCE SHEETS (See accompanying Notes to Financial Statements) June 30, December 31, 1994 1993 CAPITAL AND LIABILITIES (Unaudited) (Millions of Dollars) Capitalization Common stock - No par value, 100,000,000 shares authorized; 75,643,937 shares outstanding, stated at$ 1,424.6$ 1,424.6 Less - Deferred compensation - ESOP 26.7 28.2 Retained earnings (deficit) (18.4) (71.0) Less - Capital stock expense 10.6 10.8 Preferred and preference stock 303.7 303.7 Mandatorily redeemable preferred stock 36.0 48.0 Long-term debt 1,943.6 1,926.3 Total capitalization 3,652.2 3,592.6 Current Liabilities Accounts payable 100.2 128.4 Notes payable 115.3 92.3 Long-term debt and lease obligations maturing within one year 145.1 187.7 Other 140.7 197.9 Total current liabilities 501.3 606.3 Deferred Credits Accumulated deferred income taxes 956.1 906.6 Accumulated deferred investment tax credits226.4 230.5 Other 88.2 80.9 Total deferred credits 1,270.7 1,218.0 $ 5,424.2 $ 5,416.9 ILLINOIS POWER COMPANY STATEMENTS OF INCOME (See accompanying Notes to Financial Statements) Three Months EndedSix Months E nded June 30, June 30, 1994 1993 1994 1993 (Unaudited) (Millions except per share) Operating Revenues: Electric $ 270.2$ 265.1 $ 549.7$ 514.5 Electric interchange 28.5 25.3 53.1 45.4 Gas 50.9 60.1 189.7 185.7 Total 349.6 350.5 792.5 745.6 Operating Expenses and Taxes: Fuel for electric plants 57.7 54.8 128.7 111.4 Power purchased 16.7 13.1 26.7 17.1 Gas purchased for resale 18.8 28.6 116.4 111.8 Other operating expenses 63.2 65.0 129.3 128.0 Maintenance 23.6 25.0 43.7 47.2 Depreciation 43.8 42.2 87.7 83.6 Amortization of excess unprotected deferred taxes - (1.4) (1.4) (2.8) General taxes 28.6 31.6 67.2 66.4 Deferred Clinton costs 0.9 2.8 1.8 5.6 Income Taxes 24.1 20.9 48.9 41.0 Total 277.4 282.6 649.0 609.3 Operating Income 72.2 67.9 143.5 136.3 Other Income and Deductions: Allowance for equity funds used during construction 1.1 0.5 2.0 1.0 Miscellaneous - net 0.7 (0.2) (3.5) (0.3) Total 1.8 0.3 (1.5) 0.7 Income Before Interest Charges74.0 68.2 142.0 137.0 Interest Charges: Interest on long-term debt 35.5 37.9 70.2 78.1 Other interest charges 2.3 1.8 4.0 3.6 Allowance for borrowed funds used during construction (1.5) (0.8) (3.1) (2.0) Total 36.3 38.9 71.1 79.7 Net Income 37.7 29.3 70.9 57.3 Preferred dividend requirements 6.0 6.8 11.9 13.8 Net Income applicable to common stock $ 31.7$ 22.5 $ 59.0$ 43.5 Net Earnings per common share $ 0.42 $ 0.30$ 0.78 $ 0.57 Cash dividends declared per common share $ 0.20 $ 0.20$ 0.20 $ 0.40 Cash dividends paid per common share $ 0.40 $ 0.20$ 0.60 $ 0.40 Weighted average number of common shares outstanding during period75,643,937 75,643,937 75,643,937 75,643,937 ILLINOIS POWER COMPANY STATEMENTS OF CASH FLOWS (See accompanying Notes to Financial Statements) Six Months Ended June 30, 1994 1993 (Unaudited) (Millions of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 70.9 $ 57.3 Items not requiring cash, net 109.7 110.1 Changes in assets and liabilities (28.6) 13.5 Net cash provided by operating activities 152.0 180.9 CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures (83.6) (91.9) Other investing activities (8.0) (6.0) Net cash used in investing activities (91.6) (97.9) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends on preferred and common stock(57.5) (44.5) Redemptions - Short-term debt (99.5) (102.1) Long-term debt (35.8) (360.2) Preferred Stock (12.0) (22.0) Issuances - Short-term debt 122.5 134.5 Long-term debt 35.6 345.0 Preferred stock -- 43.5 Other financing activities (6.9) (20.1) Net cash used in financing activities (53.6) (25.9) NET CHANGE IN CASH AND CASH EQUIVALENTS 6.8 57.1 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9.3 8.7 CASH AND CASH EQUIVALENTS AT END OF PERIOD$ 16.1 $ 65.8 ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY NOTES TO FINANCIAL STATEMENTS General On May 27, 1994, Illinova Corporation (Illinova), a holding company, became the parent of Illinois Power Company (IP) pursuant to a share-for-share conversion of Illinois Power Company common stock into Illinova common stock. On June 8, 1994, Illinova Generating Company (formerly IP Group, Inc.), a subsidiary of Illinois Power Company, was transferred as a dividend in the amount of $9.2 million from Illinois Power Company to Illinova, effectively establishing Illinova Generating Company as a subsidiary of Illinova. Financial Statement note disclosures, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. However, in the opinion of Illinova Corporation, the disclosures and information contained in this Form 10-Q are adequate and not misleading. See IP's Form 10-K for the year ended December 31, 1993 and the "Notes to Financial Statements" in IP's 1993 Annual Report incorporated by reference in IP's Form 10- K for the year ended December 31, 1993, and IP's report on Form 10-Q for the quarter ended March 31, 1994, for information relevant to the financial statements contained herein, including information as to certain regulatory and environmental matters involving IP and as to the significant accounting policies followed by IP. In the opinion of Illinova, the accompanying unaudited financial statements reflect all adjustments necessary to present fairly the Consolidated Balance Sheets as of June 30, 1994 and December 31, 1993, the Consolidated Statements of Income for the three months and six months ended June 30, 1994 and 1993, and the Consolidated Statements of Cash Flows for the six months ended June 30, 1994 and 1993. In addition, it is Illinova's opinion that the accompanying unaudited financial statements for IP reflect all adjustments necessary to present fairly the Balance Sheets as of June 30, 1994 and December 31, 1993, the Statements of Income for the three months and six months ended June 30, 1994 and 1993, and the Statements of Cash Flows for the six months ended June 30, 1994 and 1993. Due to seasonal and other factors which are characteristic of electric and gas utility operations, interim period results are not necessarily indicative of results to be expected for the year. Accounting Matters Consolidation The consolidated financial statements include the accounts of Illinova, IP and Illinova Generating. Intercompany balances and transactions have been eliminated from the consolidated financial statements. All non-utility operating transactions are included in the section titled Other Income and Deductions, "Miscellaneous-net" in the Consolidated Statements of Income. Prior year amounts have been reclassified on a basis consistent with the June 30, 1994, presentation. IP's financial condition and results of operation are currently the principal factors affecting Illinova's financial condition and results of operations. Regulatory Matters Decommissioning See "Decommissioning" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Page 13 and in IP's Report on Form 10-Q for the quarter ended March 31, 1994, for further discussion. ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reference is made to Notes to Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations presented in IP's 1993 Annual Report incorporated by reference in IP's Form 10-K for the year ended December 31, 1993, and IP's Report on Form 10-Q for the quarter ended March 31, 1994. Important factors affecting financial condition and results of operations between the periods indicated are as follows: Formation of Holding Company The Federal Energy Regulatory Commission (FERC) issued an order approving the Company's proposed formation of a holding company structure. IP received approval from the Securities and Exchange Commission (SEC) to allow the proposed holding company to operate exempt from SEC regulation under the Public Utility Holding Company Act of 1935. On May 27, the holding company (Illinova Corporation) was officially formed with the filing of documents with the Illinois Secretary of State, establishing IP as a subsidiary thereof. On June 8, Illinova Generating Company (formerly IP Group Inc.) was transferred from IP to Illinova and became Illinova's second subsidiary. On that same day, the Board of Directors of Illinova formally approved the corporation's third subsidiary, Illinova Power Marketing, Inc. IP, the primary business subsidiary, 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. Illinova Generating Company invests in energy supply projects throughout the world. Illinova Power Marketing plans to become active in the business of brokering electric power to various customers. On July 20, Illinova Power Marketing filed a request for FERC approval to buy electricity from producers and sell at market rates to wholesale customers (i.e., utilities, electric cooperatives, municipalities) which are at least two systems away from IP. Eventually, the subsidiary intends to sell electricity directly to industrial and commercial customers. Illinova Power Marketing is one of many companies seeking authorization from FERC to sell power at market-based prices. Liquidity and Capital Resources Dividends On March 23, 1994, the Illinois Commerce Commission (ICC) granted IP permission to declare and pay common and preferred dividends for the third and fourth quarters of 1994, with dividends on common stock not to exceed 20 cents per share per quarter, in the event of a negative retained earnings balance, contingent on satisfaction of certain net income, cash flow and capitalization requirements as set forth in the ICC order. On June 8, 1994, the Board of Directors of Illinova and IP declared common stock dividends for the third quarter of 1994. IP declared and paid its common dividend to Illinova in order to fund the eventual dividend payment by Illinova to its common shareholders. In addition, IP declared preferred stock dividends for the third quarter of 1994. Decommissioning The SEC staff has questioned certain current accounting practices of the electric utility industry regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in financial statements. In response to these questions, the Edison Electric Institute, on behalf of the electric utility industry, requested the Financial Accounting Standards Board (FASB) to review the accounting for removal costs of nuclear generating stations, including decommissioning. In June 1994, the FASB added a project to its agenda that would address the accounting for decommissioning for nuclear power plants. The objective of the project is to determine if and when a liability for nuclear decommissioning should be recognized, and if so, how the liability should be measured and whether a corresponding asset should be created. Although it is too early to determine whether any changes to current electric utility industry accounting practices for decommissioning will be adopted, IP believes, based on current information, that any changes, if required, would not have an adverse effect on results of operations due to its current and anticipated future ability to recover decommissioning costs through rates. The FASB's decommissioning project is expected to begin in the third quarter of 1994. Capital Resources and Requirements Cash flow from operations during the first six months of 1994 provided sufficient working capital to meet ongoing operating and construction requirements and to service existing preferred and common stock dividends and debt requirements for Illinova and its subsidiaries. Additionally, Illinova and its subsidiaries believe internal and external sources of capital will be available to meet future operating requirements and continue to service existing debt, preferred stock and common stock dividends, sinking fund requirements and all or nearly all anticipated construction requirements. IP's capital requirements for construction were approximately $84 million and $92 million during the six months ended June 30, 1994 and 1993, respectively. Illinois Power Company mortgage bonds are currently rated BBB by Duff & Phelps, Baa2 by Moody's and BBB by Standard & Poor's. IP's preferred stock is currently rated BBB by Duff & Phelps, baa3 by Moody's and BBB- by Standard & Poor's. As a result of the September 1993 write-off relating to deferred Clinton post-construction costs, based upon the most restrictive earnings test contained in IP's First Mortgage and Deed of Trust, IP anticipates that it will be prohibited from issuing additional first mortgage bonds for other than refunding purposes until September, 1994. IP's ability to issue additional first mortgage bonds for refunding purposes is similarly limited by this earnings test in cases where the bonds to be redeemed are not within two years of maturity. Both Illinova and IP have adequate short- and intermediate-term bank borrowing capacity. IP has current Board of Directors authorization to issue up to $255 million of debt securities and $156 million of preferred stock. Currently, IP has received ICC authorization to issue $117 million of debt securities and $56 million of preferred stock. However, ICC authorization to issue $5 million of debt securities and $56 million of preferred stock will expire in October of this year. Regulatory Matters See "1993 Gas Rate Case" under "Regulatory Matters" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in IP's Report on Form 10-Q for the quarter ended March 31, 1994, for a discussion of the financial impacts of the ICC rate order issued on April 6, 1994. Results of Operations Three Months Ended June 30, 1994 and 1993 Electric Operations - The current quarter increase of $5.1 million in electric revenues is primarily due to increased sales to the industrial sector. Total kilowatt- hour sales (excluding interchange and sales to municipalities) increased 5.5% or 212 million kwh from the second quarter 1993. The primary reason for this result was an increase in industrial sales of 10.7% (218 million kwh) due to the improving economic conditions throughout IP's territory. Interchange revenues increased $3.2 million due to increased sales opportunities. The current quarter cost of fuel for electric plants increased $2.9 million and electric generation increased 6.4%. The increase in fuel cost was attributable to increased generation and the impact of the Uniform Fuel Adjustment Clause. The equivalent availability of Clinton was 86% and 99% for the three months ended June 30, 1994 and 1993, respectively. Clinton's decrease in equivalent availability stems from a scheduled outage in April 1994. The equivalent availability for IP's coal-fired plants was 71% and 76% for the three months ended June 30, 1994 and 1993, respectively. Power purchased and interchanged for the current quarter increased $3.6 million due to increased sales opportunities. Gas Operations - Gas revenues decreased $9.2 million in the second quarter of 1994 due to milder temperatures in the latter part of the heating season and the effects of the Uniform Gas Adjustment Clause. Therm sales decreased 20.0% (18 million therms) but was partially offset by an increase in therms transported which resulted in only a 0.8% decrease in gas consumption. Residential sales decreased 14.3% (7 million therms), commercial sales and transport decreased 27.3% (5 million therms) and industrial sales and transport increased 19.7% (12 million therms). The cost of gas purchased for resale decreased $9.8 million in the second quarter as a result of the effects of the Uniform Gas Adjustment Clause, lower costs of gas and decreased sales. Gas bypass (i.e., connection by the natural gas customer directly to a pipeline, "bypassing" IP's transportation service) continues to be actively considered and utilized by several of IP's large customers. IP is aggressively competing with the bypass options available to these customers in an attempt to minimize the potential loss in earnings. Interest on Long-Term Debt - The current quarter decrease of $2.4 million (6.3%) in interest on long-term debt is due to IP's 1993 refinancing of higher-cost debt with lower-cost debt. Earnings per Common Share - The earnings per common share during the second quarter of 1994 and 1993 resulted from the interaction of all other factors discussed herein and lower dividend requirements due to the redemption of preferred stock in 1994 and 1993. Six Months Ended June 30, 1994 and 1993 Electric Operations - The current period increase of $35.2 million in electric revenues is primarily due to increased sales across all classes of customers. Total kilowatt-hour sales (excluding interchange and sales to municipalities) increased 8.3% or 640 million kwh. With heating degree days being 3 percent less than last year and 6 percent less than normal, weather had little impact on the increases in both residential sales of 5.0% (104 million kwh) and commercial sales of 3.6% (57 million kwh) and can largely be attributed to the reviving economy in IP's territory. The improving economy also contributed to an increase in sales for the industrial sector of 11.6% (454 million kwh). Interchange revenues increased $7.7 million mainly due to increased sales opportunities. The current period cost of fuel for electric plants increased $17.3 million with electric generation increasing 4.8%. The increase in fuel cost is a result of an increase in higher-cost fossil generation and a decrease in lower- cost nuclear generation coupled with the effects of the Uniform Fuel Adjustment Clause. The equivalent availability of Clinton was 93% and 99% for the six months ended June 30, 1994 and 1993, respectively. The equivalent availability of IP's coal-fired plants was 71% and 78% for the six months ended June 30, 1994 and 1993, respectively. Power purchased and interchanged for the period increased $9.6 million due to increased purchases and increased sales opportunities. Gas Operations - Gas revenues increased $4.0 million in the current period due mainly to the effects of the Uniform Gas Adjustment Clause. Therm sales increased 0.8% (3 million therms) and therms transported increased 20.3% (21 million therms) for a combined increase in gas consumption of 5.2% (24 million therms). Therm sales to residential customers increased 3.5% (8 million therms), commercial sales and transport increased 3.2% (2 million therms) and industrial therm sales and transport increased 9.4% (14 million therms). Cost of gas purchased for resale increased $4.6 million for the period. Increased gas storage service costs due to increased gas injections and the effects of the Uniform Gas Adjustment Clause account for the increased costs. Miscellaneous - net - The year-to-date increase of $5.4 million is primarily a result of increased coal transportation costs related to the 1993 United Mine Workers' strike and the flooding in the Midwest. Earnings per Common Share - The earnings per common share during the six months ended June 30, 1994 and 1993 resulted from the interaction of all other factors discussed and lower dividend requirements due to the redemptions of preferred stock in 1994 and 1993. Item 1. Legal Proceedings On June 20, 1994, Illinois Power Company and 13 other utilities filed an action in the U.S. Court of Appeals for the District of Columbia circuit asking the court to rule that the U.S. Department of Energy (DOE) is obligated to take responsibility for spent nuclear fuel by January 31, 1998. The Nuclear Waste Policy Act of 1982 obligated the DOE to accept spent nuclear fuel by 1998. Illinois Power Company and the other utilities believe the DOE is reneged on that commitment, and the utilities are asking the court to confirm the DOE's commitment and to order the DOE to develop and monitor a program with appropriate deadlines. Illinois Power based its decision to build Clinton, in part, on the assurance that a federal repository would be built and operated by the DOE. Under the same Act, the DOE has been collecting money from Illinois Power to pay for such a repository. The utilities have asked for relief from the ongoing funding requirements or to have an escrow account established for future funds paid to DOE. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K since March 31, 1994: An IP Current Report on Form 8-K, dated May 27, 1994, was filed reporting under Item 5, Other Events. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ILLINOIS POWER COMPANY (Registrant) By /s/ Larry F. Altenbaumer Larry F. Altenbaumer, Senior Vice President and Chief Financial Officer on behalf of Illinois Power Company Date: August 10, 1994 -----END PRIVACY-ENHANCED MESSAGE-----