ILLINOIS POWER COMPANY

Dear Preferred Shareholder:

    Enclosed is important information relating to the following two matters:

        (1) an offer by Illinova Corporation to purchase any and all of the
    outstanding shares of all series of preferred stock of Illinois Power
    Company, or IPC; and

        (2) a companion proposal to amend IPC's articles of incorporation to
    eliminate a provision that restricts IPC's ability to issue or assume
    unsecured debt.

    Please give your prompt attention to the enclosed materials. These materials
contain important information. You are urged to read the materials in their
entirety.

    Illinova is offering to purchase all of the outstanding shares of the series
of IPC's preferred stock listed on the front cover page of the enclosed Offer to
Purchase and Consent Statement. Although Illinova has determined that the offer
is fair to holders of each series of preferred stock, neither Illinova, IPC,
their respective boards of directors, nor any of their respective officers makes
any recommendation to you as to whether to tender your shares. You must make
your own decision as to whether to tender shares and, if so, how many shares to
tender.

    IPC believes that adoption of the proposed amendment is important to its
financial flexibility and will enable it to obtain financing on more
advantageous terms than would otherwise be the case. As competition intensifies
in the utility industry, financial flexibility and financial cost structure are
increasingly important to IPC's success. IPC's board of directors believes the
proposed amendment is in IPC's best interests but has not made any separate
determination that the proposed amendment is in your best interest.

    The record date for determining preferred shareholders entitled to grant a
consent with respect to the consent solicitation is February 20, 2002.

    If you are a holder of record of shares as of the record date, you may grant
your consent to the proposed amendment. Illinova's offer to purchase the
preferred shares and IPC's obligation to make the special cash payments are
conditioned upon, among other things, the approval of the proposed amendment by
the holders of record as of the record date of at least two-thirds of the shares
of the preferred stock.

    If you are a holder of record of shares as of the record date and you
validly consent to the proposed amendment and tender your shares, you will
receive the total consideration, which is the applicable purchase price per
share and the special cash payment. If you are a holder of record of shares as
of the record date and you validly consent to the proposed amendment with
respect to shares which are not tendered in the tender offer, IPC will make the
special cash payment to you for each such share, provided that the proposed
amendment is approved by the preferred shareholders. If you tender your shares
and Illinova accepts your shares for payment and you do not grant a consent with
respect to such shares, you will receive the applicable purchase price per share
but will not be entitled to the special cash payment. Instructions for tendering
your shares and information pertaining to the special cash payment are included
in the enclosed material.

    Your consent to the proposed amendment is important, regardless of the
number of shares you own. To receive the special cash payment and/or the
applicable purchase price, you must return your consent, which is included in
the accompanying letter of transmittal and consent, and/or the certificates for
any shares being tendered, by the expiration date of the tender offer, unless
extended.

    IPC's board of directors requests that you grant your consent to the
proposed amendment if you are a holder of record of shares as of the record
date.

    If you have any questions regarding the consent solicitation or Illinova's
offer to purchase shares, please call Merrill Lynch & Co., the dealer
manager/solicitation agent, at (888) ML4-TNDR (654-8637), Mellon Investor
Services LLC, the depositary/information agent, at (800) 982-7650, or your
broker, dealer, commercial bank or trust company.

    Thank you for your continued interest in IPC.

                                          Sincerely,

                                          [LOGO]
                                          Stephen W. Bergstrom
                                          Chief Executive Officer