-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DSjcihkF2e9TSFLHT1Q2IhKlQKMheAx1MK0NUGJUmW08juTuv5ufe0m+YTxT4IyC 8Ua4c9dTKOL1cXYMExMy2A== /in/edgar/work/20000814/0000912057-00-037469/0000912057-00-037469.txt : 20000921 0000912057-00-037469.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-037469 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 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: SEC FILE NUMBER: 001-03004 FILM NUMBER: 700475 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 a10-q.txt 10-Q UNITED STATES 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, 2000 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ________________ Commission file number: 1-3004 ILLINOIS POWER COMPANY (Exact name of registrant as specified in its charter) ILLINOIS 37-0344645 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 500 S. 27TH STREET DECATUR, ILLINOIS 62521-2200 (Address of principal executive offices) (Zip Code) (217) 424-6600 (Registrant's telephone number, including area code) www.illinoispower.com (Registrant's home page) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- All outstanding common equity of Illinois Power Company is held by its parent Illinova Corporation. Illinois Power is an indirect wholly owned subsidiary of Dynegy Inc. 1 ILLINOIS POWER COMPANY TABLE OF CONTENTS - --------------------------------------------------------------------------------
PAGE PART I. FINANCIAL INFORMATION Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheets: June 30, 2000 and December 31, 1999...................................3 Condensed Consolidated Statements of Operations: For the three and six months ended June 30, 2000 and 1999.............4 Condensed Consolidated Statements of Cash Flows: For the six months ended June 30, 2000 and 1999.......................5 Notes to Condensed Consolidated Financial Statements......................6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................12 PART II. OTHER INFORMATION Item 1. Legal Proceedings.............................................20 Item 2. Not Applicable................................................-- Item 3. Not Applicable................................................-- Item 4. Not Applicable................................................-- Item 5. Not Applicable................................................-- Item 6. Exhibits and Reports on Form 8-K..............................20
2 ILLINOIS POWER COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE DATA) - --------------------------------------------------------------------------------
JUNE 30, DECEMBER 31, 2000 1999 ---------------- ---------------- (unaudited) ASSETS UTILITY PLANT: Electric (includes construction work in progress of $90 million and $84 million, respectively) $ 2,237 $ 2,189 Gas (includes construction work in progress of $14 million and $17 million, respectively) 728 714 ----------- ------------ 2,965 2,903 Less: accumulated depreciation 1,170 1,139 ----------- ------------ 1,795 1,764 ----------- ------------ INVESTMENTS AND OTHER ASSETS 20 13 ----------- ------------ CURRENT ASSETS: Cash and cash equivalents 23 24 Accounts receivable, net 106 108 Accounts receivable, affiliates 54 84 Accrued unbilled revenue 67 83 Inventory 31 41 Prepayments and other 14 102 ----------- ------------ 295 442 ----------- ------------ DEFERRED CHARGES AND OTHER: Transition period cost recovery 297 320 Note receivable, affiliate 2,262 2,598 Other 137 161 ----------- ------------ 2,696 3,079 ----------- ------------ $ 4,806 $ 5,298 =========== ============ CAPITAL AND LIABILITIES CAPITALIZATION: Common stock -- no par value, 100,000,000 shares authorized: 75,643,937 shares issued $ 1,274 $ 1,274 Retained earnings - accumulated since January 1, 1999 101 55 Less: 12,751,724 shares of common stock in treasury, at cost 287 287 Less: capital stock expense 7 7 ----------- ------------ 1,081 1,035 Preferred stock 46 46 Mandatorily redeemable preferred stock 100 193 Long-term debt 1,831 1,907 ----------- ------------ 3,058 3,181 ----------- ------------ CURRENT LIABILITIES: Accounts payable 62 79 Accounts payable, affiliates 16 13 Accrued liabilities 103 110 Notes payable and current portion of long-term debt 212 564 ----------- ------------ 393 766 ----------- ------------ DEFERRED CREDITS: Deferred income taxes 1,092 1,100 Other 263 251 ----------- ------------ 1,355 1,351 ----------- ------------ $ 4,806 $ 5,298 =========== ============
See notes to condensed consolidated financial statements. 3 ILLINOIS POWER COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN MILLIONS) - --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------------------------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ OPERATING REVENUES: Electric $ 281 $ 277 $ 549 $ 532 Electric interchange 3 56 4 150 Gas 55 45 171 168 ------------ ------------ ------------ ------------ 339 378 724 850 ------------ ------------ ------------ ------------ OPERATING EXPENSES AND TAXES: Fuel for electric plants -- 60 -- 111 Power purchased 178 46 338 98 Gas purchased for resale 28 17 96 90 Other operating expenses 35 81 62 191 Retirement and severance expense -- -- 38 -- Maintenance 14 26 26 67 Depreciation and amortization 19 45 38 89 Amortization of regulatory asset 13 6 26 8 General taxes 16 23 38 53 Income taxes (4) 23 (9) 37 ------------ ------------ ------------ ------------ 299 327 653 744 ------------ ------------ ------------ ------------ OPERATING INCOME 40 51 71 106 Other income (expenses), net (20) 10 (36) 17 Interest income from affiliates 43 1 91 1 ------------ ------------ ------------ ------------ INCOME BEFORE INTEREST CHARGES 63 62 126 124 Interest expense (34) (44) (72) (84) Allowance for borrowed funds used during construction 1 2 1 3 ------------ ------------ ------------ ------------ NET INCOME 30 20 55 43 Preferred dividend requirement and other (4) (5) (9) (9) ------------ ------------ ------------ ------------ NET INCOME APPLICABLE TO COMMON SHAREHOLDER $ 26 $ 15 $ 46 $ 34 ============ ============ ============ ============ Net income applicable to common shareholder $ 26 $ 15 $ 46 $ 34 Unrealized gains on securities, net of taxes -- 2 -- 2 ------------ ------------ ------------ ------------ COMPREHENSIVE INCOME $ 26 $ 17 $ 46 $ 36 ============ ============ ============ ============
See notes to condensed consolidated financial statements. 4 ILLINOIS POWER COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN MILLIONS) - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, ---------------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 55 $ 43 Items not affecting cash flows from operating activities: Depreciation and amortization 68 96 Deferred income taxes 18 40 Changes in assets and liabilities resulting from operating activities: Accounts receivable 48 (16) Inventories 10 10 Prepayments and other assets 80 3 Accounts payable (14) (15) Accrued liabilities (33) (112) Other, net 28 (11) ------------ ------------ Net cash provided by operating activities 260 38 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (66) (154) Other, net (2) (2) ------------ ------------ Net cash used in investing activities (68) (156) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from affiliate note receivable 336 --- Repayments of long-term borrowings (225) (490) Issuances of long-term borrowings --- 250 Net change in commercial paper and money market lines of credit (202) (68) Redemption of mandatorily redeemable preferred stock (93) (11) Other, net (9) (50) ------------ ------------ Net cash used in financing activities (193) (369) ------------ ------------ Net change in cash and cash equivalents (1) (487) Cash and cash equivalents, beginning of period 24 504 ------------ ------------ Cash and cash equivalents, end of period $ 23 $ 17 ============ ============
See notes to condensed consolidated financial statements. 5 ILLINOIS POWER COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 NOTE 1 -- ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to interim financial reporting as prescribed by the Securities and Exchange Commission ("SEC"). These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Illinois Power's ("IP" or the "Company") Annual Report on Form 10-K for the year ended December 31, 1999, filed with the SEC. The financial statements include all material adjustments consisting of normal recurring adjustments, which, in the opinion of management, were necessary for a fair presentation of the results for the interim period. Interim period results are not necessarily indicative of the results for the full year. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to develop estimates and make assumptions that affect reported financial position and results of operations and that impact the nature and extent of disclosure, if any, of contingent assets and liabilities. Actual results could differ from those estimates. The condensed consolidated financial statements include the accounts of IP; Illinois Power Capital, L. P.; Illinois Power Financing I ("IPFI"); Illinois Power Securitization Limited Liability Company ("LLC"); and Illinois Power Special Purpose Trust ("IPSPT"). As of May 31, 2000, the Monthly Income Preferred Securites held by IPFI were redeemed and no other debts exist within the IPFI trust. All significant intercompany balances and transactions have been eliminated from the consolidated financial statements. All nonutility operating transactions are included in the line titled "Other income and expenses, net" in IP's Condensed Consolidated Statements of Operations. Cash and cash equivalents include cash on hand and temporary investments purchased with an initial maturity of three months or less. At June 30, 2000, $12 million of such cash and cash equivalents was restricted while at December 31, 1999, $13 million was restricted. This cash is reserved for use in retiring the Transitional Funding Trust Notes issued under the provisions of P.A. 90-561 (Illinois electric utility restructuring legislation enacted in December 1997). NOTE 2 -- BUSINESS COMBINATION On February 1, 2000, Dynegy, a Delaware corporation since renamed Dynegy Holdings Inc. ("Former Dynegy"), and Illinova Corporation ("Illinova") merged in a transaction (the "Merger") in which Former Dynegy and Illinova became wholly owned subsidiaries of Dynegy Inc., a newly formed Illinois corporation ("Dynegy"). This Merger, which was approved by shareholders of both Former Dynegy and Illinova on October 11, 1999, resulted in each share of Illinova common stock, no par value per share, being converted into one share of New Dynegy Class A common stock, no par value per share. This Merger was accounted for under the purchase method of accounting and Former Dynegy was the acquirer for accounting purposes. IP continues to be a wholly owned subsidiary of Illinova, but is ultimately subject to control by the Dynegy Board of Directors. IP's condensed consolidated financial statements were prepared on the historical cost basis and do not reflect an allocation of the purchase price to IP that was recorded by Dynegy as a result of the Merger. As part of the Merger, severance and retirement costs of $38 million ($23 million after-tax) were recorded in the first quarter 2000. Severance charges represented approximately $20 million ($12 million after tax) of the total costs incurred, of which $15 million had been paid by the end of the second quarter. As of June 30, 2000, approximately 249 employees were either severed or have retired as a result of the Merger. It is expected that an additional 25 will be severed or retire by the end of the year. The severance/retirement plan is being executed pursuant to IP's plan and related actions are expected to be substantially complete by the end of 2000. 6 ILLINOIS POWER COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 NOTE 3 -- AFFILIATED COMPANIES Effective October 1, 1999, IP transferred its wholly owned fossil generating assets and other generation-related assets and liabilities at net book value, to Illinova, in exchange for an unsecured note receivable of $2.8 billion. Such assets were subsequently transferred by Illinova to a separate subsidiary, which was later renamed Dynegy Midwest Generation, Inc. ("DMG"). The note matures on September 30, 2009 and bears interest at an annual rate of 7.5%, due semiannually in April and October. At June 30, 2000, principal and accrued interest outstanding under the note receivable approximated $2.3 billion and $42 million, respectively. IP has recognized $90 million interest income from Illinova on the note in 2000 and $42 million for the three months ended June 30, 2000. IP routinely conducts business with subsidiaries of Dynegy. These transactions include the purchase or sale of electricity, natural gas and transmission services as well as certain other services. Operating revenue derived from transactions with affiliates approximated $11 million and $17 million for the three and six months ended June 30, 2000, respectively. Aggregate operating expenses charged by affiliates approximated $155 million and $293 million for the three and six months ended June 30, 2000, respectively. Related party transactions have been conducted at prices and terms similar to those available to and transacted with unrelated parties. IP has a power purchase agreement ("PPA") with DMG, providing IP the right to purchase power from DMG for a primary term extending through December 31, 2004, with provisions to extend the PPA thereafter on an annual basis, subject to concurrence by both parties. The PPA defines the terms and conditions under which DMG provides capacity and energy to IP, using a tiered pricing structure. Effective January 1, 2000, the Dynegy consolidated group, which includes IP, began operating under a Services and Facilities Agreement, whereby the affiliates exchange services with IP such as financial, legal, information technology and human resources as well as shared facility space. IP services are exchanged at fully distributed costs and revenue is not recorded under this agreement. NOTE 4 -- COMMITMENTS AND CONTINGENCIES LEGAL AND ENVIRONMENTAL ISSUES. ENVIRONMENTAL PROTECTION AGENCY COMPLAINT. On November 3, 1999, the United States Environmental Protection Agency ("EPA") issued a Notice of Violation ("NOV") against IP and, with the Department of Justice ("DOJ"), filed a Complaint against IP in the U.S. District Court for the Southern District of Illinois, No. 99C833. Subsequently, the DOJ and EPA amended the NOV and Complaint to include DMG (IP and DMG collectively the "Defendants"). Similar notices and lawsuits have been filed against a number of other utilities. Both the NOV and Complaint allege violations of the Clean Air Act and regulations thereunder. More specifically, both allege, based on the same events, that certain equipment repairs, replacements and maintenance activities at the Defendants' three Baldwin Station generating units constituted "major modifications" under either or both the Prevention of Significant Deterioration and the New Source Performance Standards regulations. When non-exempt "major modifications" occur, the Clean Air Act and related regulations generally require that generating facilities meet more stringent emissions standards. The DOJ amended its complaint to assert the claims found in the NOV. The Defendants filed an answer denying all claims and asserting various specific defenses. By order dated April 19, 2000, a trial date of November, 2001 was set. The initial trial is limited to liability. The regulations under the Clean Air Act provide certain exemptions to the definition of "major modifications," particularly an exemption for routine repair, replacement or maintenance. Management has analyzed each of the activities covered by the EPA's allegations and believes each activity represents prudent practice regularly performed throughout the utility industry as necessary to maintain the operational efficiency and safety of equipment. As such, Management believes that each of these activities is covered by the exemption for routine repair, replacement and maintenance and that the EPA is changing, or attempting to change through enforcement actions, the intent and meaning of its regulations. 7 ILLINOIS POWER COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 Management also believes that, even if some of the activities in question were found not to qualify for the routine exemption, there were no increases either in annual emissions or in the maximum hourly emissions achievable at any of the units caused by any of the activities. The regulations provide an exemption for increased hours of operation or production rate and for increases in emissions resulting from demand growth. Although none of the Defendants' other facilities are covered in the Complaint and NOV, the EPA has officially requested information concerning activities at the Defendants' Vermilion, Wood River and Hennepin Plants. It is possible that the EPA will eventually commence enforcement actions against those plants as well. The EPA has the authority to seek penalties for the alleged violations in question at the rate of up to $27,500 per day for each violation. The EPA also will be seeking installation of "best available control technology" ("BACT") (or equivalent) at the Baldwin Station and possibly at the other three plants as well. Management believes that the EPA's and DOJ's claims are without merit, and that the ultimate resolution of this lawsuit will not have a material adverse effect on IP's financial position or results of operations. MANUFACTURED GAS PLANTS ("MGP"). IP's estimated liability for MGP site remediation is $56 million. This amount represents IP's current estimate of the costs it will incur to remediate the 24 MGP sites for which it is responsible. Because of the unknown and unique characteristics at each site, IP cannot currently determine its ultimate liability for remediation of the sites. In October 1995, IP initiated litigation against a number of its insurance carriers. Settlement proceeds recovered from these carriers offset a significant portion of the MGP remediation costs and are credited to customers through the tariff rider mechanism that the Illinois Commerce Commission ("ICC") previously approved. Cleanup costs in excess of insurance proceeds are considered probable of recovery from IP's transmission and distribution customers. OTHER LEGAL PROCEEDINGS. IP is involved in legal or administrative proceedings before various courts and agencies with respect to matters occurring in the ordinary course of business. Management believes that the final disposition of these proceedings will not have a material adverse effect on IP's consolidated financial position or results of operations. REGULATORY MATTERS. P.A. 90-561 - UTILITY EARNINGS CAP. P.A. 90-561 contains floor and ceiling provisions applicable to IP's Return on Equity ("ROE") during the transition period ending in 2006 (or 2008 at the option of the utility and with approval by the ICC). Pursuant to these provisions, IP may request an increase in its base rates if the two-year average of its earned ROE is below the two-year average of the monthly average yields of 30-year U.S. Treasury bonds for the concurrent period ("Treasury Yield"). Conversely, IP is required to refund amounts to its customers equal to 50 percent of the value earned above a defined "ceiling limit." The ceiling limit is exceeded if IP's ROE exceeds the Treasury Yield, plus 6.5 percent in 2000 through 2004 (which increases to 8.5% in 2000 through 2004 if a utility chooses not to implement transition charges after 2006). Regulatory asset amortization is included in the calculation of ROE for the ceiling test, but is not included in the floor test calculation. P.A. 90-561 - RATE ADJUSTMENT PROVISIONS. P.A. 90-561 gave IP's residential customers a 15 percent decrease in base electric rates beginning August 1, 1998, and an additional 5 percent decrease effective on May 1, 2002. The rate decreases result in expected revenue reductions of approximately $75 million in each of the years 2000 and 2001, approximately $92 million in 2002, and approximately $101 million in 2003 and 2004, based on projected consumption. P.A. 90-561 - DIRECT ACCESS PROVISIONS. Beginning in October 1999, customers with demand greater than 4 MW at a single site, customers with at least 10 sites having aggregate total demand of at least 9.5 MW, and customers representing one-third of the remaining load in the non-residential class were free to choose their electric generation suppliers ("direct access"). Direct access for remaining non-residential customers occurs December 31, 2000. Direct access will be available to all residential customers in May 2002. IP remains obligated to serve all customers who continue to take service from IP at tariff rates and remains obligated to provide delivery service to all customers at regulated rates. The 8 ILLINOIS POWER COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 transition charges departing customers must pay to IP are not designed to hold IP completely harmless from resulting revenue loss because of the mitigation factor. Although the specified residential rate reductions and the introduction of direct access will lead to lower electric service revenues, P.A. 90-561 is designed to protect the financial integrity of electric utilities in three principal ways: 1) Departing customers are obligated to pay transition charges, based on the utility's lost revenue from that customer. The transition charges are applicable through 2006 and can be extended two additional years by the ICC. 2) Utilities are provided the opportunity to lower their financing and capital costs through the issuance of "securitized" bonds, also called transitional funding instruments; and 3) The ROE of utilities is managed through application of floor and ceiling test rules contained in P.A. 90-561 described elsewhere herein. The extent to which revenues are affected by P.A. 90-561 will depend on a number of factors including future market prices for wholesale and retail energy, and load growth and demand levels in the current IP service territory. The impact on net income will depend on, among other things, the amount of revenues earned and the cost of doing business. P.A. 90-561 - INDEPENDENT SYSTEM OPERATOR ("ISO") PARTICIPATION. Participation in an ISO by utilities serving retail customers in Illinois was one of the requirements included in P.A. 90-561. In January 1998, IP, in conjunction with eight other transmission-owning entities, filed with the FERC for all approvals necessary to create and to implement the Midwest Independent Transmission System Operator, Inc. ("MISO"). On September 16, 1998, the FERC issued an order authorizing the creation of a MISO. The goals of this joint undertaking are: 1) to put in place a tariff allowing easy and nondiscriminatory access to transmission facilities in a multi-state region, 2) to enhance regional reliability, and 3) to establish an entity that operates independently of any transmission owner(s) or other market participants, thus furthering competition in the wholesale generation market consistent with the objectives of the FERC's Order No. 888. Since January 1998, eight other transmission-owning entities have joined the MISO. The MISO has a stated goal to be fully operational by November 1, 2001. OTHER COMMITMENTS AND CONTINGENCIES. INTERNAL REVENUE SERVICE AUDIT. The Internal Revenue Service is currently auditing Illinova's federal income tax returns for the years 1994 through 1997. IP's operations were included in the consolidated federal income tax returns filed by Illinova during those periods. Management believes that the ultimate resolution of these proceedings will not have a material adverse effect on IP's financial position or results of operations. NOTE 5 -- SEGMENT INFORMATION IP is engaged in the transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the state of Illinois. In previous periods, IP was also engaged in the generation of electric energy. As previously discussed, effective October 1, 1999, IP transferred its fossil-fueled generating assets to Illinova. Additionally, as a condition precedent to the Merger, IP sold its interest in the Clinton Nuclear Power Station to AmerGen. As a result of these enterprise changes, the structure of IP's internal organization has constricted into a single prospective reportable segment. For 2000, this segment includes the transmission, distribution, and sale of electric energy in Illinois; and the transportation, distribution, and sale of natural gas in Illinois. Also included in this segment are specialized support functions, including accounting, legal, performance management, information technology, human resources, environmental resources, purchasing and materials management, and public affairs. For comparability purposes, results for 2000 should be compared with the Customer Service segment in previous periods. During the 1999 period, IP's operations were divided into four reportable segments: Customer Service, Wholesale Energy, Nuclear and Other. 9 ILLINOIS POWER COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 The business groups and their principal services were as follows: - - Customer Service Business Group - transmission, distribution, and sale of electric energy; distribution, transportation, and sale of natural gas in Illinois. - - Wholesale Energy Business Group - fossil-fueled electric generation in Illinois, wholesale electricity transactions throughout the United States, and dispatching activities. - - Nuclear Generation Business Group - nuclear-fueled electric generation in Illinois. - - Other - This category included the financial support functions such as accounting, finance, corporate performance, audit and compliance, investor relations, legal, corporate development, regulatory, risk management, and tax services. Also included in this group were specialized support functions, including information technology, human resources, environmental resources, purchasing and materials management, and public affairs. Generally, Illinois Power accounts for intercompany transactions at prevailing rates or fully distributed costs. Operating segment information for the three-month period ended June 30, 1999 is presented below.
==================================================================================================================== ILLINOIS POWER'S SEGMENT DATA FOR THE QUARTER ENDED JUNE 30, 1999 ==================================================================================================================== CUSTOMER WHOLESALE SERVICE ENERGY NUCLEAR OTHER TOTAL ------------------------------------------------------------------------ (IN MILLIONS) Unaffiliated domestic revenues $ 321 $ 52 $ 5 $ --- $ 378 Intersegment domestic revenues (a) --- 119 37 (156) --- ------------------------------------------------------------------------ Total revenues 321 171 42 (156) 378 ------------------------------------------------------------------------ Depreciation and amortization 24 26 1 --- 51 Other operating expenses (a) 210 135 59 (151) 253 Interest expense 20 21 3 --- 44 AFUDC --- (2) --- --- (2) Interest and other income --- (2) (2) (1) (5) Income tax expense (benefit) 26 (4) (7) 2 17 Net income (loss) after taxes $ 41 $ (3) $ (12) $ (6) $ 20 Identifiable assets: Domestic (b) $ 2,315 $ 3,162 $ 199 $ 36 $ 5,712 Capital expenditures 28 86 --- 2 116 ====================================================================================================================
(a) Intersegment revenue priced at 2.9 cents per kwh delivered for 1999. Intersegment expense is reflected in other operating expenses for Customer Service. Intersegment revenues and expenses are eliminated in the Other column. (b) Primary assets for Nuclear include decommissioning assets, shared general and intangible plant and nuclear fuel. 10 ILLINOIS POWER COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 Operating segment information for the six months ended June 30, 1999 is presented below.
==================================================================================================================== ILLINOIS POWER'S SEGMENT DATA FOR THE SIX MONTHS ENDED JUNE 30, 1999 ==================================================================================================================== CUSTOMER WHOLESALE SERVICE ENERGY NUCLEAR OTHER TOTAL ------------------------------------------------------------------------ (IN MILLIONS) Unaffiliated domestic revenues $ 697 $ 146 $ 7 $ --- $ 850 Intersegment domestic revenues (a) --- 255 37 (292) --- ------------------------------------------------------------------------ Total revenues 697 401 44 (292) 850 ------------------------------------------------------------------------ Depreciation and amortization 42 51 4 --- 97 Other operating expenses (a) 485 262 149 (286) 610 Interest expense 39 41 4 --- 84 AFUDC (1) (2) --- --- (3) Interest and other income --- (2) (4) (3) (9) Income tax expense (benefit) 51 18 (43) 2 28 Net income (loss) after taxes $ 81 $ 33 $ (66) $ (5) $ 43 Identifiable assets: Domestic (b) $ 2,315 $ 3,162 $ 199 $ 36 $ 5,712 Capital expenditures 50 101 --- 3 154 ====================================================================================================================
(a) Intersegment revenue priced at 2.9 cents per kwh delivered for 1999. Intersegment expense is reflected in other operating expenses for Customer Service. Intersegment revenues and expenses are eliminated in the Other column. (b) Primary assets for Nuclear include decommissioning assets, shared general and intangible plant and nuclear fuel. 11 ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of IP included elsewhere herein and with the Company's Annual Report on Form 10-K for the year ended December 31, 1999. GENERAL COMPANY PROFILE. IP is engaged in the transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the state of Illinois. IP's condensed consolidated financial statements include the accounts of IP; Illinois Power Capital, L.P., a limited partnership in which IP serves as the general partner; Illinois Power Financing I, a statutory business trust in which IP serves as sponsor; Illinois Power Securitization Limited Liability Company, a special purpose Delaware LLC whose sole member is IP; and Illinois Power Special Purpose Trust, a special purpose Delaware business trust whose sole owner is Illinois Power Securitization LLC. Effective October 1, 1999, IP's wholly owned fossil generating assets were transferred to Illinova and Illinova contributed these assets to Illinois Power Marketing, Inc. ("IPMI"), a wholly owned subsidiary of Illinova, which was later renamed Dynegy Midwest Generation, Inc. following the Merger. As a condition precedent to the Merger, IP sold its interest in the Clinton Power Station to AmerGen in December 1999. As of May 31, 2000, the Monthly Income Preferred Securites held by IPFI were redeemed and no other debts exist within the IPFI trust. On February 1, 2000, Dynegy, a Delaware corporation since renamed Dynegy Holdings Inc. ("Former Dynegy"), and Illinova merged in a transaction in which Former Dynegy and Illinova became wholly owned subsidiaries of Dynegy Inc., a newly formed Illinois corporation ("Dynegy"). This Merger, which was approved by shareholders of both Former Dynegy and Illinova on October 11, 1999, resulted in each share of Illinova common stock, no par value per share, being converted into one share of Dynegy Class A common stock, no par value per share. This Merger was accounted for under the purchase method of accounting and Former Dynegy was the acquirer for accounting purposes. IP continues to be a wholly owned subsidiary of Illinova, but is ultimately subject to control by the Dynegy Board of Directors. IP's condensed consolidated financial statements have been prepared on the historical cost basis and do not reflect an allocation of the purchase price to IP that was recorded by Dynegy as a result of the Merger. BUSINESS SEGMENTS. As a result of the enterprise changes impacting IP during the fourth quarter of 1999, IP's operations now consist of a single prospective reportable segment. For 2000, this segment includes the transmission, distribution, and sale of electric energy in Illinois; and the transportation, distribution, and sale of natural gas in Illinois. Also included in this segment are specialized support functions, including accounting, legal, performance management, information technology, human resources, environmental resources, purchasing and materials management, and public affairs. For comparability purposes, results for 2000 should be compared with the Customer Service segment from the previous period. IP's operations were divided into four reportable segments in 1999: Customer Service, Wholesale Energy, Nuclear and Other. The business groups and their principal services in 1999 were as follows: - - Customer Service Business Group - transmission, distribution, and sale of electric energy; distribution, transportation, and sale of natural gas in Illinois. - - Wholesale Energy Business Group - fossil-fueled electric generation in Illinois, wholesale electricity transactions throughout the United States, and dispatching activities. - - Nuclear Generation Business Group - nuclear-fueled electric generation in Illinois. - - Other - This category included the financial support functions such as accounting, finance, corporate performance, audit and compliance, investor relations, legal, corporate development, regulatory, risk management, and tax services. Also included in this group were specialized support functions, including information technology, human resources, environmental resources, purchasing and materials management, and public affairs. 12 ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION. This Form 10-Q contains various forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and information that are based on management's beliefs as well as assumptions made by and information currently available to management. When used in this document, words such as "anticipate", "estimate", "project", "forecast" and "expect" reflect forward-looking statements. Although IP believes that the expectations reflected in such forward-looking statements are reasonable; it can give no assurance that such expectations will prove to have been correct. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected, forecasted or expected. Among the key risk factors that may have a direct bearing on IP's results of operations and financial condition are: - - Competitive practices in the industries in which IP competes; - - Fluctuations in commodity prices for electricity and/or natural gas; - - Operational and systems risks; - - Environmental liabilities that are not covered by indemnity or insurance; - - General economic and capital market conditions, including fluctuations in interest rates; and - - The impact of current and future laws and governmental regulations, whether federally or state imposed (particularly environmental regulations and further changes to energy deregulation), affecting the energy industry in general, and IP's operations in particular. COMPETITION. Competition has become a dominant issue for the electric utility industry. It is a significant departure from traditional regulation in which public utilities have a universal obligation to serve the public in return for protected service territories and regulated pricing designed to allow a reasonable return on prudent investment and recovery of operating costs. Competition arises not only from co-generation or independent power production, but also from municipalities seeking to extend their service boundaries to include customers being served by utilities. The right of municipalities to have power wheeled to them by utilities was established in 1973. IP has been obligated to wheel power for municipalities and cooperatives in its territory since 1976. Further competition may be introduced by state action, as has occurred in Illinois, or by federal regulatory action. However, the Energy Policy Act currently precludes the FERC from mandating retail wheeling. Retail wheeling involves the transport of electricity to end-use customers. IMPACT OF PRICE FLUCTUATIONS. IP's operating results may be impacted by commodity price fluctuations for electricity used in supplying service to its customers. IP has contracted with AmerGen and DMG to supply power via Power Purchase Agreements. With these arrangements, IP has provided adequate power supply for expected IP load plus a reserve supply above that expected level. Should power acquired under these agreements be insufficient to meet IP load requirements, IP will have to buy power at current market prices. The power purchase agreement with DMG obligates DMG to provide power up to the reservation amount even if DMG has individual units unavailable at various times. The power purchase agreement with AmerGen does not provide for an obligation by AmerGen to acquire replacement power for IP in the event of a curtailment or shutdown at the Clinton Power Station. Under a Clinton shutdown scenario, to the extent IP exceeds its capacity reservation with DMG, IP will have to buy power at current market prices. The ICC determines IP's rates for gas service. These rates have been designed to recover the cost of service and allow shareholders the opportunity to earn a reasonable rate of return. Future natural gas sales will continue to be affected by an increasingly competitive marketplace, changes in the regulatory environment, transmission access, weather conditions, gas cost recoveries, customer conservation efforts, and the overall economy. 13 ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 SEASONALITY. IP's revenue and operating margin are impacted by seasonal factors that affect sales volumes of electricity and gas. Typically, revenues from sales of electricity are higher in the summer months resulting from the summer cooling season; whereas, gas revenues are higher in the winter heating season. EFFECT OF INFLATION. Although IP's operations are affected by general economic trends, management does not believe inflation has had a material effect on IP's results of operations. LIQUIDITY AND CAPITAL RESOURCES IP has historically emphasized intellectual solutions to solving business issues. IP was a leader in the development of the comprehensive electric utility regulatory reform legislation for the state of Illinois, which provided the foundation for the Company's subsequent strategic actions and transformation. Following the successful execution of its strategy to transfer its fossil-fueled generation to an unregulated status and to exit its nuclear operation, IP is now focused on delivering reliable transmission and distribution services in a cost-effective manner. IP will also continue its efforts to capitalize on strategic and operational synergies made possible by the Merger. IP has historically relied upon operating cash flow and borrowings from a combination of commercial paper issuances, bank lines of credit, corporate credit agreements and various public debt issuances for its liquidity and capital resource requirements. The following briefly describes the terms of these arrangements. AFFILIATE TRANSACTION. IP maintains an unsecured note receivable due from its parent relating to the October 1999 transfer of the fossil-fueled generating assets. The note matures on September 30, 2009, and bears interest at an annual rate of 7.5 percent, due semiannually in April and October. Principal outstanding under this note totaled $2.3 billion at June 30, 2000. Principal repayments and interest payments accruing under this arrangement provide IP with a significant source of liquidity to meet its prospective operating and capital expenditure requirements. COMMERCIAL PAPER AND LINES OF CREDITS. At June 30, 2000, IP had commercial paper outstanding in the amount of $125 million. Remaining availability under a credit agreement totaled $175 million. IP believes additional financing arrangements can be obtained at reasonable terms, if required. MORTGAGE. Aggregate principal outstanding under IP's New Mortgage Bonds approximated $1.1 billion at June 30, 2000, bearing interest ranging from 5.4 percent to 7.5 percent per annum. At June 30, 2000, IP had unsecured non-mortgage-borrowing capacity totaling approximately $354 million. SECURITIZATION. In December 1998, IPSPT issued $864 million of Transitional Funding Trust Notes as allowed under the Illinois Electric Utility Transition Funding Law in P.A. 90-651. Per annum interest on these notes averages approximately 5.4 percent. IP is retiring the principal outstanding under these notes through quarterly payments of $21.6 million. DIVIDENDS. Under the Restated Articles of Incorporation, common stock dividends are subject to the preferential rights of the holders of preferred and preference stock. IP's retained earnings balance is expected to be sufficient during 2000 to support payment of all scheduled preferred dividends. PREFERRED SECURITIES OF SUBSIDIARY TRUST. A wholly owned subsidiary of IP has $100 million aggregate liquidation amount of Subordinated Capital Income Securities outstanding at June 30, 2000, which were issued in a private transaction. These Trust Originated Preferred Securities ("TOPrS") were issued at 8 percent with a $25 per share liquidation preference. The TOPrS mature on January 31, 2045 and may be redeemed at IP's option, in whole or in part, from time to time on or after January 31, 2001. IP redeemed all $93 million of the tax advantaged Monthly Income Preferred Securities on May 31, 2000. CAPITAL ASSET PROGRAM. Construction expenditures for the six months ended June 2000 were approximately $66 million. IP estimates that it will spend approximately $98 million on construction for the remainder of 2000. IP construction 14 ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 expenditures for 2001 through 2004 are expected to total approximately $760 million. Additional expenditures may be required during this period to accommodate the transition to a competitive environment, environmental compliance, system upgrades, and other costs that cannot be determined at this time. YEAR 2000 ISSUES. IP completed all phases of the Year 2000 Program relative to computer systems and technology infrastructure considered essential to IP's business prior to the event. The year 2000 event passed without significant incident. IP's contingency plans are designed to minimize any disruptions or other adverse effects resulting from unexpected incompatibilities regarding core systems and business applications and to facilitate the early identification and remediation of system problems that manifest themselves after December 31, 1999. To date, no significant items have been identified. IP continues to assess, test and remediate business applications and technology infrastructure that were previously determined to be other than essential to core business operations. The extent of these activities is very insignificant to IP's overall business. CONCLUSION. The Company continues to believe that it will be able to meet all foreseeable cash requirements, including working capital, capital expenditures and debt service, from operating cash flow, supplemented by borrowings under its various credit facilities and other sources of liquidity. 15 ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 RESULTS OF OPERATIONS Provided below is an unaudited tabular presentation of certain IP operating and financial statistics for the three month periods ended June 30, 2000 and 1999, respectively.
======================================================================================================= THREE MONTHS ENDED JUNE 30, ----------------------------------- 2000 1999 ----------------- ---------------- (IN MILLIONS) ELECTRIC SALES REVENUES - Residential $ 90 $ 90 Commercial 79 80 Industrial 93 95 Other 9 9 --------------- --------------- Revenues from ultimate consumers 271 274 Interchange 3 56 Transmission/Wheeling 10 3 --------------- --------------- Total Electric Revenues $ 284 $ 333 ============== ============== ELECTRIC SALES IN KWH (MILLIONS) - Residential 1,041 1,018 Commercial 1,012 999 Industrial 2,314 2,321 Other 88 90 --------------- --------------- Sales to ultimate consumers 4,455 4,428 Interchange 3 1,349 --------------- --------------- Total Electric Sales 4,458 5,777 =============== =============== GAS SALES REVENUES - Residential $ 32 $ 26 Commercial 10 9 Industrial 7 7 Other 1 - --------------- --------------- Revenues from ultimate consumers 50 42 Transportation of customer-owned gas 2 2 Interdepartmental sales 3 1 --------------- --------------- Total Gas Revenues $ 55 $ 45 ============== ============== GAS SALES IN THERMS (MILLIONS) - Residential 38 34 Commercial 15 15 Industrial 17 23 --------------- --------------- Sales to ultimate consumers 70 72 Transportation of customer-owned gas 64 67 --------------- --------------- Total gas sold and transported 134 139 Interdepartmental sales 7 4 --------------- --------------- Total Gas Delivered 141 143 =============== =============== =======================================================================================================
16 ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 Provided below is an unaudited tabular presentation of certain IP operating and financial statistics for the six month periods ended June 30, 2000 and 1999, respectively.
======================================================================================================= SIX MONTHS ENDED JUNE 30, ----------------------------------- 2000 1999 ----------------- ---------------- (IN MILLIONS) ELECTRIC SALES REVENUES - Residential $ 183 $ 185 Commercial 154 152 Industrial 177 172 Other 17 17 --------------- --------------- Revenues from ultimate consumers 531 526 Interchange 4 150 Transmission/Wheeling 18 6 --------------- --------------- Total Electric Revenues $ 553 $ 682 ============== ============== ELECTRIC SALES IN KWH (MILLIONS) - Residential 2,277 2,306 Commercial 2,053 2,016 Industrial 4,412 4,290 Other 180 188 --------------- --------------- Sales to ultimate consumers 8,922 8,800 Interchange 50 2,653 --------------- --------------- Total Electric Sales 8,972 11,453 =============== =============== GAS SALES REVENUES - Residential $ 108 $ 111 Commercial 38 39 Industrial 15 12 Other 2 1 --------------- --------------- Revenues from ultimate consumers 163 163 Transportation of customer-owned gas 3 3 Miscellaneous 5 2 --------------- --------------- Total Gas Revenues $ 171 $ 168 ============== ============== GAS SALES IN THERMS (MILLIONS) - Residential 183 203 Commercial 76 83 Industrial 41 37 --------------- --------------- Sales to ultimate consumers 300 323 Transportation of customer-owned gas 139 145 --------------- --------------- Total gas sold and transported 439 468 Interdepartmental sales 13 8 --------------- --------------- Total Gas Delivered 452 476 =============== =============== =======================================================================================================
17 ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 THREE MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 For the second quarter ended June 30, 2000, IP reported net income of $30 million, compared with second quarter 1999 net income of $20 million. Operational factors impacting comparability of results period-to-period include: - - market purchases of power during the 1999 period as a result of the extended Clinton outage during that period, - - recognition of operational expenses in the 1999 period associated with the fossil generation assets, and - - contractual terms associated with the purchased power from AmerGen and DMG in the 2000 period. Operating revenues in 2000 decreased $39 million primarily due to decreased electric interchange sales. Operating expenses and taxes decreased $28 million in 2000 compared to 1999. The increase in power purchased was offset by reductions in production, operating, maintenance, depreciation and amortization, and general taxes due to the transfer of fossil assets in late 1999. Other income includes interest income associated with the affiliate note receivable of $42 million in 2000 arising from the October 1999 asset transfer. Interest expense period-to-period decreased $10 million reflecting lower average principal balances, partially offset by higher average rates. IP reported an income tax provision of $21 million for the three-month period ended June 30, 2000, compared to an income tax provision of $16 million for the 1999 period. The effective tax rates approximated 41 and 45 percent in 2000 and 1999, respectively. DIVIDEND REQUIREMENTS The holders of the IP Serial Preferred Stock are entitled to receive dividends if and when, as declared by the Board of Directors of the Company out of funds legally available therefore. The Company paid approximately $4 million in cash dividends and distributions during the three-months ended June 30, 2000, of which approximately $1 million was on its Preferred Stock. In addition, IP paid dividends on its Monthly Income Preferred Securities (MIPS) and Trust Originated Preferred Securities (TOPrS) of approximately $4 million. During the same quarter of 1999, dividends paid on MIPS and TOPrS approximated $4 million. SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 For the six months ended June 30, 2000, IP reported net income of $55 million, compared with net income of $43 million during the first six months of 1999. Non-recurring charges totaling $38 million ($23 million after-tax) relating to retirement and severance costs associated with the Merger impacted the 2000 results. The 1999 results include Clinton operations and maintenance expenses of $64 million ($38 million after-tax) and a non-recurring contract pre-settlement gain of $61 million ($37 million after-tax). After adjusting for these non-recurring charges and gains, and deleting the effect of 1999 Clinton operation and maintenance expenses, recurring net income for the first six months of 2000 totaled approximately $78 million, compared to approximately $44 million in the same prior year period. Other operational factors impacting comparability of results period-to-period include: - - market purchases of power during the 1999 period as a result of the extended Clinton outage during that period, - - recognition of operational expenses in the 1999 period associated with the fossil generation assets, and - - contractual terms associated with the purchased power from AmerGen and DMG in the 2000 period. Operating revenues in 2000 excluding the contract settlement adjustment identified above, decreased $65 million primarily due to decreased electric interchange sales. Operating expenses in 2000 excluding income taxes and the expense adjustments identified above, decreased $19 million. The increase in power purchased was offset by reductions in production, operating, maintenance, depreciation and amortization, and general taxes due to the transfer of fossil assets in late 1999. Other income includes interest income associated with the affiliate note receivable of $90 million in 2000 arising from the October 1999 asset transfer. Interest expense period-to-period decreased $12 million reflecting lower average principal balances, partially offset by higher average rates. 18 ILLINOIS POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999 IP reported an income tax provision of $34 million for the six-month period ended June 30, 2000, compared to an income tax provision of $28 million for the 1999 period. The effective tax rates approximated 38 and 39 percent in 2000 and 1999, respectively. The differences between the aforementioned effective tax rates and the statutory tax rate of 40 percent for both periods result principally from the tax deductibility of the dividends on company obligated mandatorily redeemable preferred securities and depreciation not normalized. OPERATING CASH FLOW Cash flow from operating activities totaled $260 million for the six-month period ended June 30, 2000, compared to $38 million reported in the 1999 period. Changes in operating cash flow reflect the operating results previously discussed herein. Also affecting cash flow for 2000 was a decrease in receivables from associated companies, an income tax refund, fewer purchases of gas stored underground, and decreases in accrued liabilities attributable to interest accrued for federal and state taxes and to reductions in deferred revenue. CAPITAL EXPENDITURES AND INVESTING ACTIVITIES During the six-months ended June 30, 2000, IP spent approximately $66 million on electric and gas construction compared to $154 million in the same period of 1999. IP expects expenditures for the remainder of the current year to approximate $98 million. DIVIDEND REQUIREMENTS The holders of the IP Serial Preferred Stock are entitled to receive dividends if and when, as declared by the Board of Directors of the Company out of funds legally available therefore. The Company paid approximately $9 million in cash dividends and distributions during the six-months ended June 30, 2000, of which approximately $1 million was on its Preferred Stock. In addition, IP paid dividends on its Monthly Income Preferred Securities (MIPS) and Trust Originated Preferred Securities (TOPrS) of approximately $8 million. During the same period of 1999, dividends paid on MIPS and TOPrS approximated $8 million. 19 ILLINOIS POWER COMPANY PART II. OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS See "Note 4 - Commitments and Contingencies" in the Notes to Condensed Consolidated Financial Statements for an update on legal proceedings. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) The following instruments and documents are included as exhibits to this Form 10-Q.
EXHIBIT NUMBER DESCRIPTION -------------- ----------- 27 Financial Data Schedule-Schedule UT (filed only electronically with the SEC)
(b) There have been no Form 8-Ks, Commission File No. 1-3004, filed since the first quarter Form 10-Q. 20 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 and thereunto duly authorized. Illinois Power Company Date: August 14, 2000 By: /s/ Peggy E. Carter ---------------- ------------------------------- Peggy E. Carter, Controller (Principal Accounting Officer) 21 EX-27 2 ex-27.txt EXHIBIT 27
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET, INCOME STATEMENT, AND CASH FLOW STATEMENT OF ILLINOIS POWER COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE BALANCE SHEET, OPERATIONS STATEMENT, AND CASH FLOW STATEMENT OF ILLINOIS POWER COMPANY. 1,000,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 PER-BOOK 1,795 20 295 2,559 137 4,806 980 0 101 1,081 100 46 1,831 0 0 125 87 0 0 0 1,536 4,806 724 (9) 662 653 71 55 126 71 55 9 46 0 59 260 0 0
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