-----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, T2AjlD1l3SF5SHKh2su8B9UKp//zwX8ESn4ub8kpNIPtwamRq9Z0qEHHO1tZzAZY +t1iW/okldi2ddNDfgPlEQ== 0000950172-99-000225.txt : 19990402 0000950172-99-000225.hdr.sgml : 19990402 ACCESSION NUMBER: 0000950172-99-000225 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 22 FILED AS OF DATE: 19990305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AES CORPORATION CENTRAL INDEX KEY: 0000874761 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 541163725 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: SEC FILE NUMBER: 070-09465 FILM NUMBER: 99558500 BUSINESS ADDRESS: STREET 1: 1001 N 19TH ST STREET 2: STE 2000 CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7035221315 U-1 1 FORM U-1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM U-1 ----------------------------------------- APPLICATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ---------------------------------------------------- The AES Corporation 1001 North 19th Street Arlington, VA 22209 (Name of company filing this statement and address of principal executive offices) ------------------------------------------------------------------ None (Name of top registered holding company parent of each applicant or declarant) --------------------------------- William R. Luraschi General Counsel and Secretary The AES Corporation 1001 North 19th Street Arlington, VA 22209 (Name and address of agent for service) ---------------------------------- The Commission is also requested to send copies of any communications in connection with this matter to: Clifford M. Naeve, Esq. Judith A. Center, Esq. Kathleen A. Foudy, Esq. Skadden, Arps, Slate, Meagher & Flom L.L.P. 1440 New York Avenue, N.W. Washington, D.C. 20005 APPLICATION FOR EXEMPTION FROM THE PROVISIONS OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 PURSUANT TO SECTION 3(a)(5) INTRODUCTION AND REQUEST FOR COMMISSION ACTION The AES Corporation ("AES") hereby applies for an order from the United States Securities and Exchange Commission (the "Commission") to the effect that upon consummation of the merger transaction described in Item 1 below, the resulting public utility holding company, and every subsidiary company thereof as such, will be exempt from the provisions of the Public Utility Holding Company Act of 1935, as amended ("PUHCA" or "the Act"), other than Section 9(a)(2), pursuant to Section 3(a)(5) of the Act.1 ITEM 1. DESCRIPTION OF THE TRANSACTION A. SUMMARY OF THE TRANSACTION Pursuant to a Merger Agreement dated November 22, 1998 between AES and CILCORP Inc. ("CILCORP"), Midwest Energy, Inc., an Illinois corporation and wholly-owned subsidiary of AES, will be merged with and into CILCORP, with CILCORP as the surviving corporation (the "Transaction"). As a result of the Transaction, each outstanding share of common stock of CILCORP ("CILCORP Shares") and each associated purchase right under the Rights Agreement, dated as of October 29, 1996, between Continental Stock Transfer and Trust Company and CILCORP will be converted into the right to receive $65.00 (subject to adjustment as described in the Merger Agreement) in cash, without interest. The Merger Agreement is attached to this Application as Exhibit B-1. Following the Transaction, CILCORP will be a first-tier, direct subsidiary of AES, and CILCORP's subsidiaries will maintain their current structure as direct or indirect subsidiaries, as the case may be, of CILCORP. In addition, CILCORP will continue to be an Illinois corporation with its principal executive offices in Peoria, Illinois and AES will continue to be a Delaware corporation with its principal executive offices in Arlington, Virginia. - --------------- 1 Some AES subsidiaries also will continue to be exempt from the Act as exempt wholesale generators ("EWGs"), pursuant to Section 32 of the Act, as foreign utility companies ("FUCOs"), pursuant to Section 33 of the Act, or as qualifying facilities ("QFs"), pursuant to Section 210(e) of the Public Utility Regulatory Policies Act of 1978, and the implementing rules of the Federal Energy Regulatory Commission. The merger will provide important benefits to CILCORP's utility customers and shareholders. AES's international and diversified experience in competitive power markets will provide CILCORP's public utility subsidiary, Central Illinois Light Company ("CILCO"), the resources necessary to provide quality customer services in a deregulated environment. Pursuant to the Electric Service Customer Choice and Rate Relief Law of 1997, which was enacted in Illinois in December 1997 and becomes effective in October 1999, industrial and commercial customers will be able to choose their own retail electric power providers. Residential customers will have the same choice sometime thereafter, ultimately leading to open choice for all Illinois electricity customers by mid-year 2002. This deregulation will result in direct competition for customers and will create demand for a broader range of services at competitive prices. AES's worldwide experience and management resources, coupled with CILCORP's utility expertise in Illinois, will facilitate enhanced customer services at competitive prices. The Merger Agreement is subject to the approval of CILCORP's shareholders at a special meeting called for that purpose to be held in May. The Merger also is subject to approval by the Federal Energy Regulatory Commission ("FERC"). An application for such approval was filed with the FERC on February 19, 1999. See Exhibit D-2. The Merger also is subject to the notification and reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). On February 22, 1999, the Federal Trade Commission granted early termination of the HSR Act waiting period. In addition, CILCO has provided notice to the Illinois Commerce Commission ("ICC") pursuant to Section 16-111(g) of the Illinois Public Utilities Act regarding the Transaction, and has filed a petition with the ICC for an order finding that the ICC has no pre-approval jurisdiction over the Transaction, or, in the alternative, for an order approving the Transaction with respect to CILCO's gas operations. See Exhibit D-1. Since the filing of its petition, CILCO has withdrawn its request that the ICC make a ruling on the jurisdictional issue. The ICC held an evidentiary hearing on February 5, 1999; its order is pending. CILCO also is requesting that the ICC issue a state commission certification in accordance with the requirements of Section 33(a)(2) of the Act. 2 Upon consummation of the Transaction, AES will own CILCORP, an intrastate exempt holding company under Section 3(a)(1) of the Act, and its direct and indirect subsidiaries, including CILCO, a utility subsidiary principally engaged in the generation, transmission, distribution and sale of electric energy, and the purchase, distribution, transportation and sale of natural gas in central and east-central Illinois. After giving effect to the Transaction, CILCORP will remain predominantly an intrastate holding company - --------------- 2 The Transaction is not subject to pre-approval by this Commission under Section 9(a)(2) of the Act, since AES will acquire and own only one PUHCA-jurisdictional public utility company upon consummation of the Transaction. See Coral Petroleum, Inc., Rel. No. 35-21, 632 (1980). that will not derive any material part of its income from an out-of-state utility subsidiary. Accordingly, CILCORP will continue to claim an exemption from registration under PUHCA pursuant to Section 3(a)(1) and Rule 2. For the reasons set forth herein, AES will qualify for an exemption from registration under Section 3(a)(5) of the Act. B. DESCRIPTION OF PARTIES TO THE TRANSACTION 1. AES CORPORATION AES, incorporated in Delaware, is a United States-based multinational electric power generation and energy distribution company, with operations in 17 countries worldwide. AES is engaged principally in the development, ownership, and operation of electric generating plants and electric and gas distribution companies, all of which either are (or are owned by) EWGs, FUCOs or QFs. Revenues from electric generation and distribution activities accounted for over 95 percent of revenues in 1997 and again in 1998. Other activities include the sale of steam and other commodities related to AES's cogeneration operations, as well as operational, construction and project development services, and gas and power marketing.3 AES currently is not a holding company subject to the provisions of the Act because none of its subsidiaries is a public utility company as defined by the Act. Exhibit K-2 lists all AES subsidiaries and their respective jurisdictions of organization. AES has grown since its founding in 1981 to become one of the largest, if not the largest, global electricity suppliers. AES currently owns and/or operates (entirely or in part) a diverse international portfolio of electric power plants with a total capacity of 24,076 megawatts ("MW"), including plants that are part of distribution companies in which AES has an interest. Of that total, 5,025 MW (nine plants) are located in the United States; 1,818 MW (five plants) are in the United Kingdom; 885 MW (six plants) are in Argentina; 817 MW (eight plants) are in China; 1,281 MW (three plants) are in Hungary; 6,456 MW (41 plants) are in Brazil; 5,384 MW (seven plants) are in Kazakhstan; 210 MW (one plant) are in the Dominican Republic; 110 MW (one plant) are in Canada; 695 MW (two plants) are in Pakistan; 288 MW (one plant) are in Australia; 405 MW (one plant) are in the Netherlands; 420 MW (one plant) are in India and 282 MW (two plants) are in Panama. Over 19,000 MW of this generating capacity is located outside the United States. As noted above, AES also owns partial interests (both majority and minority) in companies that distribute and sell electricity directly to commercial, industrial, governmental, and residential customers. AES has majority ownership in three distribution companies in Argentina, one in Brazil, - --------------- 3 AES Power, a wholly owned subsidiary of AES active in power marketing, generated less than 1 percent of AES's1998 net income. In addition, CEMIG, in which AES has a minority investment, has operated a small gas distribution company, Gasmig, since 1995. one in the country of Georgia, and one in El Salvador, and less than majority ownership in three additional distribution companies in Brazil. These nine companies served a total of approximately 13.2 million foreign customers with sales exceeding 100,000 gigawatt hours in 1997. On a net equity basis, AES's ownership represents approximately three million foreign customers and sales exceeding 20,000 gigawatt hours in 1997. Exhibit K-3 lists the AES subsidiary companies which own generation facilities currently in operation, and also includes company operating locations, power generation capacities, AES net equity interests, and the regulatory status of the companies and/or generating facilities (i.e., whether QF, EWG, or FUCO). Exhibit K-3 also lists the distribution companies in which AES owns an interest, including location, regulatory status and the nature of AES's interest. Exhibit K-4 depicts the locations of AES's current and prospective generation and distribution businesses worldwide. In addition to power generation and distribution, AES owns and operates the Lyukobanya Coal Mine in Hungary. The mine has an output of approximately one million tons per year of brown coal and is the sole supplier of AES Borsod. AES has grown rapidly throughout this decade. In 1990, the year before it went public, AES's total assets were $1.1 billion, and the company earned annual revenues of less than $200 million and had net income of less than $16 million. Between 1990 and 1997, total assets grew 700 percent, revenues rose 600 percent and net income increased over 1,000 percent. At year-end 1997, AES's total assets, gross revenues and net income, determined in accordance with Generally Accepted Accounting Principles ("GAAP"), were $8.9 billion, $1.4 billion and $185 million, respectively.4 AES continued its fast-paced growth in 1998. Total assets (reported on a GAAP basis) rose nearly 20 percent from year-end 1997 to $10.7 billion at the end of 1998. Revenues and net income increased approximately 70 percent and 66 percent, respectively, as compared to 1997. By the end of 1998, gross revenues and net income (reported on a GAAP basis) had grown to $2.4 billion and $307 million, respectively. In 1999, AES is adding 3,458 MW to its operating portfolio by acquiring existing and constructing new electric generating plants.5 Thus far in 1999, AES has achieved financial closing on its acquisitions of the electric - --------------- 4 As explained in greater detail herein, AES's consolidated financial statements prepared in accordance with GAAP do not include revenues from minority-owned subsidiaries as AES gross revenues, but rather report such as Other Income, as equity in earnings of affiliates. 5 The projections assume AES growth only from AES projects under develop ment which are expected to be operational in this period and from existing projects which AES already has committed to acquire during this period. The projections conservatively do not include all projects or companies which AES is likely to acquire or develop during this period. generating plants of OPGC (420 MW), EGE Bayano (192 MW) and EGE Chiriqui (90 MW). In 1999, AES also expects to achieve financial closing on its acquisitions of the electric generating plants of CILCO (1,152 MW) and New York State Electric and Gas Corporation (1,424 MW).6 Also in 1999, AES is expected to complete construction of and begin operating a 180 MW coal-fired plant in the United States.7 Combining the 97 power plants currently in operation, to-be-acquired or under construction, AES is expected to have a minimum of 26,832 MW of generating capacity by the end of 1999. 2. CILCORP CILCORP was incorporated as a utility holding company in the State of Illinois in 1985. CILCORP is the parent of four first-tier subsidiaries: CILCO, QST Enterprises Inc. ("QST"), CILCORP Investment Management Inc. ("CIM"), and CILCORP Ventures Inc. ("CVI"). The consolidated assets, revenues and net income of CILCORP for the year ending December 31, 1997 were $1.335 billion, $976.5 million and $16.4 million, respectively. For 1998, CILCORP's consolidated assets, revenues and net income were $1.313 billion, $559 million and $38 million, respectively. CILCORP is exempt from the provisions of PUHCA (except for Section 9(a)(2)) under Section 3(a)(1) pursuant to Rule 2. CILCO, the primary business subsidiary of CILCORP, is an electric and gas utility engaged in the generation, transmission, distribution, and sale of electric energy in an area of approximately 3,700 square miles in central and east-central Illinois, and the purchase, distribution, transportation and retail sale of natural gas in an area of approximately 4,500 square miles in central and east-central Illinois. As of December 31, 1997, CILCO served approximately 250,000 customers: 193,000 retail electric customers and 202,000 gas customers, including 1,892 industrial, commercial and residential gas transportation customers. At the end of 1997, the electric utility assets of CILCO were $711 million and the gas utility assets were $287 million. In 1997, CILCO earned $338.1 million in electric utility revenues (62 percent of total revenue) and $208.8 million in gas utility revenues (38 percent of total revenues). CILCO owns and operates two steam-electric generating plants, one cogeneration plant and two combustion turbine-generators. These facilities had an available summer capability of 1,152 megawatts in 1997. At the end of 1997, CILCO's transmission system included approximately 285 circuit miles operating at 138,000 volts, 47 circuit miles operating at 345,000 volts and 13 principal substations with an installed capacity of 3,032,700 kilovolt-amperes. In 1997, the system peak demand was 1,135 megawatts for electric activities and the peak day natural gas send-out was 381,384 million cubic feet. CILCO had total assets, revenues and - --------------- 6 The generating assets of New York State Electric and Gas Corporation will be owned by a wholly-owned subsidiary of AES that has EWG status. 7 The plant will be owned by AES Warrior Run, a wholly-owned subsidiary of AES, and will be a QF. net income of $1.022 billion, $546.9 million and $53 million, respectively, for the year ending December 31, 1997. At the end of 1998, CILCO had total assets, revenues and net income of $1.024 billion, $532 million and $41 million, respectively. QST was formed in December 1995 to facilitate CILCORP's expansion into non-regulated energy and related services businesses. QST has three wholly-owned first-tier subsidiaries: QST Energy, Inc. ("QST Energy"), QST Infraservices, Inc. and QST Environmental, Inc. ("QST Environmental"). QST Energy has one wholly-owned subsidiary: QST Energy Trading Inc. ("QST Trading"). QST Environmental has nine wholly-owned subsidiaries, including: Keck Instruments, Inc., QST Architectural Services, Inc., National Professional Casualty Co., Chemrox, Inc., Environmental Staffing Solutions, Inc., and ESE Land Corporation. QST Environmental also holds interests in ESE, Inc. and ESE New York, P.C. QST provides non-regulated energy and energy-related services to retail and wholesale customers through QST Energy, which began operations in 1996. QST Energy competes against marketers, brokers and utility affiliates to market and provide energy and related services to customers of utilities and other energy providers who have the ability to choose a supplier. QST Trading is a wholesale natural gas and electric power marketer which purchases, sells, and brokers energy and capacity at market-based rates to other marketers, including QST Energy, utilities and other customers. In June of 1998, CILCORP announced that it was reevaluating its strategy for QST Energy, and indicated that the company would focus on opportunities for profitable growth in Illinois, de-emphasizing energy trading activities at QST. After further consideration, CILCORP decided to wind down the operations of QST Energy and QST Trading, except to the extent required to fulfill commitments to existing customers and counterparties. QST Environmental is an environmental consulting and engineering firm serving governmental, industrial and commercial customers. CILCORP has decided to sell QST Environmental and expects that the sale will be completed before the end of 1999. In August of 1998, QST completed the sale of QST Communications Inc., formerly a wholly-owned QST subsidiary which provides telecommunications services. For the year ending December 31, 1997, QST had total assets, revenues and net income of $144 million, $419 million and minus $31 million, respectively. CILCORP Infraservices, Inc. ("CII") provides utility operation and maintenance services. CII currently serves one customer in central Illinois. CIM invests in a diversified portfolio of long-term financial investments which currently include leveraged leases, energy-related projects and affordable residential housing. CIM has four wholly-owned subsidiaries: CILCORP Lease Management, Inc., CIM Leasing, Inc., CIM Air Leasing, Inc., and CIM Energy Investments, Inc. For the year ending December 31, 1997, CIM had total assets, revenues and net income of $163 million, $6.817 million and $2.246 million, respectively. CVI primarily invests in ventures in energy-related products and services. CVI has an 80 percent interest in the Agricultural Research and Development Corporation and has one wholly-owned subsidiary, CILCORP Energy Services Inc., ("CESI"). CESI's primary business is the sale of non-regulated energy services, including non-regulated sales of natural gas. For the year ending December 31, 1997, CVI had total assets, revenues and net income of $4.9 million, $4.01 million and minus $1.9 million, respectively. ITEM 2. FEES, COMMISSIONS AND EXPENSES The fees, commissions and expenses to be paid or incurred, directly or indirectly, by all parties in connection with the Transaction are estimated to total approximately $28 million. ITEM 3. APPLICABLE STATUTORY PROVISION SECTION 3(a)(5) Under Section 3(a)(5), a holding company and its subsidiaries will be exempt from the provisions of the Act (except for Section 9(a)(2)) if the holding company is not and does not derive any material part of its income from a subsidiary whose principal business within the U.S. is that of a public utility company. As the Commission has noted, the Section 3(a)(5) exemption is meant to be available to a holding company system with foreign operations whose U.S. utility operations "account for no material part of the holding company's income" and are "small in size". Gaz Metropolitain, Inc., Rel. No. 26170 (1994) (quoting and citing Electric Bond and Share Company, Rel. No. 11004, 1952 WL 1058 (1952) ("Electric Bond and Share"). For the reasons set forth below, it is clear that AES will qualify for a Section 3(a)(5) exemption upon completion of the Transaction. A. MATERIALITY OF CILCO INCOME In the relatively few cases decided under Section 3(a)(5) where the Commission has addressed the materiality of the U.S. utility subsidiary, the Commission has considered the relative size of the U.S. utility subsidiary's operations, expressed as a percentage of the applicant holding company's total operations, based upon a variety of financial yardsticks. See, e.g., Gaz Metropolitain (citing to U.S. utility contributions to holding company total consolidated revenues, net income, and net utility plant); TransCanada Pipelines Limited, Rel. No. 35-25647 (1992)(citing to percentages of holding company total revenues and net assets); Consumers' Gas Company, Rel. No. 35- 14956 (1963)(comparing U.S. utility and holding company revenues, net income, and net assets). In considering these various financial measurements, the Commission has not indicated that any given one is entitled to particular deference. The Commission similarly has not applied a strict percentage test of materiality under Section 3(a)(5). It has granted Section 3(a)(5) exemptions where the U.S. utility subsidiary represented less than approximately 5 percent of total holding company operations (see, e.g., Gaz Metropolitain; TransCanada Pipelines). The Commission also has indicated that a holding company that derived approximately 46 percent of its total business revenues from a utility subsidiary (in the form of fees for underwriting services) received a material amount of income from such subsidiary. H.M. Byllesby & Company, Rel. No. 1882 (1940). See also Cities Service Company, 8 SEC 318 (1940)(noting in dicta that U.S. utility subsidiary contributions to holding company of approximately 30 percent of gross revenues and 45 percent of net fixed assets would be considered material). See also NIPSCO Industries, Inc., Rel. No. 35-26975 (Feb. 10, 1999) ("NIPSCO") (emphasizing that there is no strict percentage test for assessing materiality under Section 3(a)(1)). It should be noted that the Commission Staff has recommended that the Commission adopt a more flexible standard for exemptions under Section 3(a), urging the agency to take into account the ability of affected state commissions to "adequately protect utility consumers against any detriment that might be associated with certain activities of exempt holding companies." The Regulation of Public-Utility Holding Companies (June 1995), pp. 119-120. A review of CILCO's contributions to AES's total operations (including CILCORP), from the perspective of a variety of financial indicators, reveals that CILCO's utility activities and assets constitute only a very minor percentage of AES's overall business, a percentage that will become increasingly minor over time, as the size of AES's business continues to grow. Set forth below in Table 1 are the percentages, on a pro forma basis for 1996-1998, of gross operating revenues, net operating revenues8, operating income, net income, and net assets of CILCO, to the total combined gross operating revenues, net operating revenues, operating income, net income, and net assets of AES as a whole. - --------------- 8 Net operating revenues are gross operating revenues less cost of purchased gas for retail gas distribution and the cost of fuel for electric generation, for both AES and CILCO.
TABLE 1 CILCO CONTRIBUTIONS TO AES/CILCORP CONSOLIDATED HOLDING COMPANY (PROPORTIONAL CONSOLIDATION BASIS) 1996 1997 1998 GROSS REVENUES 28.38% 18.55% 14.03% AES ($MM) 1,199 1,973 3,235 CILCO ($MM) 519 547 532 AES/ CILCORP ($MM) 1,827 2,949 3,794 NET OPERATING REVENUES 23.24% 14.77% 11.54% AES ($MM) 946 1,482 2,613 CILCO ($MM) 320 331 344 AES/ CILCORP ($MM) 1,375 2,242 2,984 OPERATING INCOME 13.88% 11.52% 8.34% AES ($MM) 427 585 1,021 CILCO ($MM) 70 74 93 AES/ CILCORP ($MM) 502 641 1,112 NET INCOME 29.51% 26.32% 11.89% AES ($MM) 125 185 307 CILCO ($MM) 45 53 41 AES/ CILCORP ($MM) 153 201 345 NET ASSETS 17.87% 9.11% 8.01% AES ($MM) 4,512 9,889 11,469 CILCO ($MM) 1,036 1,022 1,024 AES/ CILCORP ($MM) 5,798 11,224 12,783
The AES data contained in Table 1 is compiled on a proportional consolidation basis rather than in accordance with Generally Accepted Accounting Principles ("GAAP"). On a proportional consolidation basis, revenues, income and assets are allocated to AES on a pro rata basis in proportion to the ownership percentages held by AES in each of the projects/companies in which it has an equity interest. AES holds a less-than-50 percent equity interest in a number of projects that generate substantial revenues.9 On a proportional consolidation basis, revenues from sales made by these minority-interest investments are included as revenues in statements of operations. On financial statements prepared in accordance with GAAP, on the other hand, returns from minority-interest projects are not reported as revenues, but instead are reported as equity in earnings of affiliates (net of income taxes). Thus, using GAAP-based data here would understate the revenues AES earns from its electric business. The proportional consolidation data provides a more accurate representation of the size of AES's generation and distribution business relative to that of CILCO's business. - --------------- 9 AES holds majority equity interests in a number of projects/companies. Under GAAP, revenues and income from such projects are included in AES's consolidated financial statements in the same manner as wholly-owned projects. However, the revenue impact of these holdings is far outweighed by the exclusion of minority-owned projects from the calculation of AES's GAAP-based gross revenues. It generally is recognized that proportional accounting is an acceptable approach for accounting for joint ventures in the utility industry. See CCH Accountants SEC Practice Manual P. 4330, "[w]here pro-rata consolidation is a widespread industry practice, as in the case of utilities, it will continue to be permitted." Proportional consolidation also has been used historically by the oil and gas industry, where multinational oil companies commonly own fractional interests in oil field production rights and facilities. Proportional consolidation also has been adopted recently by other industries, including some joint ventures in the telecommunication and satellite industries. The AES businesses which, for financial reporting purposes, are accounted for using the equity method, are similar to joint venture utility projects that use the proportional consolidation method. Each project is governed by a joint venture agreement, and these joint venture agreements provide for the management of the company, setting of budgets, appointment of directors and transfer of shares. Moreover, each participating AES subsidiary always is an active partner with significant management responsibility and representation on the board, and usually is responsible for directly staffing specific needs of the company. The pro-rata approach used with proportional consolidation paints a more accurate picture of the size and configuration of AES and the relative contributions from each of its businesses. For this reason, in non-SEC matters, including presentations to investors and analysts, AES has used proportional consolidation to describe the minority businesses which are accounted for under the equity method in its GAAP financials. In addition, proportional consolidation is consistent with the status of the minority-interest companies as subsidiary companies of AES. AES owns at least 10 percent of the voting securities of such companies, and as noted above, participates in their management and operation. Therefore, it is appropriate to allocate the revenues and assets of these companies to AES on a pro-rata basis. To do otherwise significantly would underestimate the extent of AES's foreign operations.10 Although Table 1 includes data for 1996, 1997 and 1998, given AES's phenomenal growth, the 1998 data is by far the most relevant for purposes of comparing the relative size of CILCO and AES. As the description in Item 1, Section B above notes, AES's revenues increased 600 percent between 1990 and 1997, and increased by nearly 70 percent from 1997 to 1998. Unlike a traditional utility company, whose financial results are relatively static over time or who have year-to-year variations (perhaps attributable to weather conditions, or - --------------- 10 AES also has calculated the percentages set forth in Table 1 in accordance with GAAP. Such calculations are set forth in Exhibit K-5. As explained above, however, use of this GAAP-based data understates the size of AES's worldwide business relative to CILCO, whereas data compiled on a proportional consolidation basis provides a more accurate comparison of the size of CILCO to the size of the AES/CILCORP merged company. one-time extraordinary changes) that can best be viewed over a several-year period, AES has experienced and will continue to experience rapid growth through project development and acquisitions. In fact, in light of its rapid growth, AES was quite a different company at the end of 1998 than it was in 1996 or 1997. Between the end of 1996 and 1998, AES gross revenues grew 170 percent, from $1.2 billion to $3.24 billion; net operating revenues grew 176 percent, from $946 million to $2.61 billion; operating income grew 139 percent, from $427 million to $1.02 billion; net income grew 146%, from $125 million to $307 million; and net assets grew 154 percent, from $4.51 billion to $11.47 billion.11 Therefore, in light of AES's significant growth from the years 1996 through 1998, the financial data for 1996 and 1997 do not provide an accurate picture of the relative size of AES and its current foreign operations. Thus, to avoid a misleading comparison, greatest weight should be given to AES's most recent financial results (1998) in evaluating the relative contribution of CILCO to the holding company. Table 1 demonstrates the relative size of AES and the merged AES/CILCORP holding company based on five financial yardsticks. In this instance, because of the differing nature of AES's and CILCO's operations, certain of the financial yardsticks, particularly gross revenues and, to a lesser extent, net income, tend to overstate CILCO's contributions to the merged AES/CILCORP holding company. Thus, as explained below, the Table 1 data comparing net operating revenues, operating income and net assets present the most accurate representation of the relative size of CILCO to the merged AES/CILCORP holding company. There are several reasons why a comparison of gross revenues presents a misleading picture of the relative size of AES and CILCO. First, approximately 40 percent of CILCO's gross revenues are earned from its natural gas business, whereas virtually all of AES's current revenues are derived from electric generation and distribution. The Commission has recognized the difficulty of making size comparisons between an electric company and a natural gas distribution company based upon gross revenues. Houston Industries, Inc., Rel. No. 35-26744 (1997); NIPSCO, supra. In NIPSCO, the Commission observed that the "[c]omponents of gross revenues are different for electric and gas utilities" and that "pass-through costs" (e.g., purchased gas and fuel for electric generation) constitute a larger part of gross revenues for a gas utility than for an electric utility. The Commission thus concluded that where a predominantly electric system (NIPSCO) acquired an exclusively gas system (Bay - --------------- 11 Similarly, use of an average of financial information for the years 1996 through 1998 also significantly understates the extent of AES's operations and therefore also proves inadequate. AES's 1998 gross revenues are 46 percent greater than the average of AES's gross revenues for the years 1996 through 1998. AES's 1998 net operating revenues are 47 percent greater than the average of AES's net operating revenues for the years 1996 through 1998; 1998 operating income is 41 percent greater than the three-year average; 1998 net income is 42 percent greater than the three-year average; and 1998 net assets are 44 percent greater than the three-year average. State), a reliance on gross revenues comparisons would distort the relative sizes of the merging companies. The same considerations apply in this instance. Here AES, almost exclusively an electric company, is acquiring CILCO, a company earning a substantial portion of its gross revenues from gas distribution. Although AES does not, for the most part, have automatic "pass-throughs" of its electric fuel costs in the manner of a domestic regulated electric utility, subtracting AES's electric fuel and purchased gas costs (as well as CILCO's electric fuel and purchased gas costs) from gross revenues reveals the impact of different operating margins of the two companies. In 1998 CILCO had revenues of $532 million and net income of $41 million -- a margin of 7.7 percent. AES reported revenues of $2.4 billion and net income of $307 million -- a margin of 12.8 percent. Part of this differential also can be explained by the fact that CILCO provides service which is subject to rate regulation (including, inter alia, tariff provisions for electric fuel cost recovery and pass-through of purchased gas costs which provide automatic recoupment from ratepayers), while AES conducts the vast bulk of its business in unregulated, competitive markets. A comparison of AES and CILCO net income also may obscure the true scope of CILCO's business vis-a-vis that of AES. Net income is sensitive to differences in capital structure, and AES and CILCO have disparate capital structures driven by differences in their respective business operations. AES uses project financing for much of its investment, and thus has proportionally larger interest expenses than does CILCO.12 Since interest is deducted before calculating net income, comparisons based on net income may result merely from differences in capital structure rather than differences in size or scope of business operations. Such is the case with AES and CILCO, because AES maintains a more highly leveraged capital structure than does CILCO. A more accurate comparison of the scope of CILCO's business vis-a-vis the merged AES holding company is achieved by comparing net operating revenues, operating income and net assets. Table 1 shows that in 1998, CILCO's contributions to AES's total net operating revenues, operating income, and net assets were 11.54, 8.34 and 8.01 percent, respectively. The results of the analysis demonstrate that CILCO will not make a contribution to AES's total operations that is sufficiently appreciable so as to be deemed "material" within the Commission's understanding - --------------- 12 For example, comparing the unleveraged net income of CILCO to the unleveraged net income of the AES holding company provides a better understanding of the relative size of the CILCO and AES holding company business operations. (Unleveraged net income is calculated by determining net income on a before-interest expense, after-tax basis.) For example, CILCO would represent 8.38 percent of 1998 total holding company unleveraged net income, compared to 11.89 percent of total holding company net income. of materiality under Section 3(a). In NIPSCO, for example, the Commission recently determined that a utility's contributions to gross revenues of 15 percent to 16.2 percent; to net operating revenues of 10.8 percent to 11.2 percent; to operating income of 7.1 percent to 8.7 percent; and to net utility income of 3.5 percent to 6.3 percent would not be considered material in the context of Section 3(a)(1). In making such determination, the Commission noted that Section 3(a)(1) "has no specific numerical tests to guide a finding that a public-utility subsidiary is material" and that the Commission has not "embraced any numerical bright-line test of materiality under section 3(a)(1)." See NIPSCO, slip op. at 34-35. Instead, the Commission noted that "factors other than mere percentages must be taken into consideration in determining the application of the materiality standard of section 3(a)(1)" and noted the Division of Investment Management's recommendation (set forth in its 1995 study, supra) that the Commission "adopt a more flexible standard for exemptions under section 3(a) that would consider the facts and circumstances of each situation and take into account the ability of the affected state regulators to adequately protect the interests of utility consumers." Id. See also Atlanta Gas Light Company, Rel. No. 35-26482 (1996)(granting Section 3(a)(1) exemption to holding company with an out-of-state subsidiary representing over 6 percent of the holding company's consolidated operating revenues and total net assets).13 B. SIZE OF CILCO OPERATIONS In Gaz Metropolitain, the Commission stated that the standard under which a foreign holding company system could be exempted under Section 3(a)(5) included, in addition to an inquiry into materiality, an assessment of whether U.S. utility operations were "small in size."14 This concern about size under Section 3(a)(5) was articulated in Cities Service Company, where the Commission stated, based on the legislative history of the Act, that the size standard was established in order to prevent abuse of the Section 3(a)(5) exemption by holding companies that had a great bulk of their utility subsidiaries within the United States and had no (or at most minimal) foreign utility operations. The Commission emphasized that the fact that a holding company's domestic utility income is not material to its total income is irrelevant if the holding company is so large that domestic utility activity is still large in an absolute sense. 8 SEC 318, 334-335 (1940). The merged AES/CILCORP holding company will satisfy both the "small in size" standard and the policy concern underlying the - --------------- 13 Although Section 3(a)(1) sets forth a different standard for exemption than Section 3(a)(5), both Section 3(a)(5) and Section 3(a)(1) incorporate the concept of "materiality." The Act does not suggest that the term would have different meanings in the two sections. Thus, the Commission's analysis of materiality in the Section 3(a)(1) context does provide insight into the concept of materiality in the Section 3(a)(5) context. 14 58 SEC Docket 189 at 193 (1994) (quoting Electric Bond and Share). standard. First, AES has significant foreign operations. Second, CILCO's U.S. utility operations clearly are "small in size," both in terms of prior Commission precedent and as compared to other regional and U.S. utilities today. The context of this transaction is sharply different from that which confronted the Commission in Electric Bond and Share and Cities Service. In those cases, the applicants seeking exemption under Section 3(a)(5) were companies with little or no foreign business of any sort, but with very large domestic non-utility businesses. As the Commission pointed out, granting a Section 3(a)(5) exemption under such circumstances would necessarily mean that the exemption "[w]ould not be contingent on the existence in the system of foreign operations and an exemption would be afforded even where the holding company system has no foreign interest, a result obviously not intended by Congress." Electric Bond and Share, 1952 WL 1058 at 19. In denying exemptions to Electric Bond and Share and Cities Service, the Commission expressed its concern that Section 3(a)(5) not be used as an exemption for large U.S. non-utility enterprises that could not qualify for exemption under Section 3(a)(3). Unlike either Electric Bond and Share or Cities Service, AES has very significant foreign electric generation and distribution operations and is without question a global provider of electric services. AES has electric generation and/or distribution operations in 17 countries. AES owns and/or operates (entirely or in part) over 19,000 MW of generating capacity located outside of the United States. In addition, AES owns partial interests (both majority and minority) in nine companies located outside of the United States that sell electricity directly to commercial, industrial, governmental, and residential customers. These nine companies served a total of approximately 13.2 million foreign customers with sales exceeding 100,000 gigawatt hours in 1997. On a net equity basis, AES's ownership represented approximately three million foreign customers and sales exceeding 20,000 gigawatt hours in 1997. Companies in which AES has an ownership interest supply approximately half of the electricity in Northern Ireland, 40 percent of the electricity in Panama, 30 percent of the electricity in the Dominican Republic, 19 percent of the electricity in Hungary, 18 percent of the electricity in Kazakhstan, and 10 percent of the electricity in Pakistan. Moreover, as illustrated on Exhibit K-1, 96 percent of AES employees are located outside of the United States, and only 6 percent of AES employees speak English as a first language. While AES does have operations within the United States, its domestic businesses are all either QFs or EWGs, which are deemed not to be public utility companies under the Act and which the Commission does not need to regulate to protect the interests of U.S. ratepayers and investors. The Commission Staff has recognized that ownership of QF and EWG interests by foreign utility companies ("FUCOs") should not defeat FUCO status. The Southern Company, 1996 SEC No-Act. LEXIS 496 (No-Action Letter Issued May 10, 1996). Just as QF and EWG investments do not transform a FUCO into a holding company subject to the potential full brunt of jurisdiction under the Act, AES's domestic QF and EWG investments should not prevent AES from qualifying for a Section 3(a)(5) exemption, where its only other current investments are FUCOs and foreign EWGs and its proposed single U.S. regulated utility investment is small in size from any relevant perspective. Not only are AES's foreign operations significant, but CILCO's U.S. utility operations are small in size, both in terms of prior Commission precedent and when compared to other regional and U.S. utilities. In denying the Cities Service exemption application, the Commission held that Cities Service and its utility subsidiaries: (i) comprised "one of the most important public utility holding company systems in the United States," (ii) "controlled a far-flung utility empire with assets valued at more than $400,000,000," and (iii) had operations that extended to "20 states and Canada with an estimated population in the areas served of approximately 4,500,000." Id. at 336. In Electric Bond and Share, Electric Bond and Share Company ("Electric Bond") sought to be relieved of its commitment to dispose of the common stock it held in United Gas Corporation ("United"), its gas utility subsidiary, through exemptions under, inter alia, Section 3(a)(5) of PUHCA. 33 SEC 21 (1952). Applying the "small in size" standard developed in Cities Service, the Commission held that the gas utility operations of United, a recently acquired subsidiary of Electric Bond, were "very substantial" in magnitude and, therefore, rejected the application. Id. at 43. The Commission focused on the fact that United operated the second largest gas distribution operations in its region, and accounted "for a large and significant part of the natural gas distribution business in the United States." Id. at 43-44. The Commission cited to the following facts in its analysis of the magnitude of United's gas utility operations: o United's non-industrial gas distribution operations were "approximately twice as large as those carried on in the entire State of Mississippi, slightly greater than those in the State of Louisiana, and about 25 percent of those in the State of Texas. With one exception, there [was] no company whose residential and commercial gas distribution operations in the three (3) state area [were] as large as those of United." o Within the three-state region in which it operated, United served "approximately 21.1 percent of all residential and commercial customers, with approximately 18.2 percent of all the residential and commercial gas consumed and accounted for approximately 19.2 percent of the total gross residential and commercial gas revenues." o United's gas distribution operations were large in relation to other gas distributors in the United States. The absolute size of CILCO's utility business clearly is smaller than the utility business of Electric Bond or that of Cities Service. In its day, Electric Bond's gas operations were in three states - Texas, Louisiana and Mississippi - in which Electric Bond served 21.2 percent of all customers, provided 18.2 percent of all gas consumed and accounted for 19.2 percent of total gas reserves. CILCO, on the other hand, operates only in one state, in which it only serves 5.6 percent of all customers, provides only 6 percent of all gas consumed and accounts for only 5.9 percent of total gas revenues. There are three gas companies larger than CILCO in the state of Illinois, while only one gas company was larger than Electric Bond in its three-state service area. Cities Service, in sharp contrast to CILCO, had operations in 19 states, compared to CILCO's single-state operations. It also should be noted that an analysis of the size of CILCO's utility activities should reflect the realities of today's public utility markets. Since the time of Cities Service and Electric Bond, utility operations have become larger enterprises commensurate with growth in population and number of utility customers, as well as increased electricity and gas consumption per utility customer. Recently, the size of public utility companies has grown and will continue to grow in the wake of consolidations undertaken in response to increased competition and restructuring initiatives. Moreover, it is clear from the case law, in particular Electric Bond and Share, that the Commission is concerned with the size of the holding company's U.S. utility operations as compared to regional and national competitors. CILCO's utility operations are small in size relative to other utilities on both a regional15 and national basis. The data establishes that the activities of CILCO, in terms of electric and gas utility activities considered separately and in terms of combined utility activity, are small in scale. Exhibit K-6 compares CILCO's electric utility activities to other regional electric utilities in terms of assets, revenues and customers. According to all three measures, CILCO's electric utility business accounts for: o 0.9 percent of the Region's electric utility revenues, o 1.0 percent of the Region's electric utility assets, and o 1.1 percent of the Regions's electric utility customers. Only 3 percent of the Region's electric utility revenues are earned by electric utility companies with fewer revenues than CILCO. Only 3.5 percent of the Region's electric utility assets are owned by electric utility companies with fewer assets than CILCO. Only 3.5 percent of the Region's electric utility customers are served by electric utilities with fewer customers than CILCO. Exhibit K-7 compares CILCO's gas utility activities to other regional gas utilities, also in terms of assets, revenues and customers. According to all three measures, CILCO's gas utility business accounts for: - --------------- 15 The Region is defined as the State of Illinois and the five states bordering Illinois - Indiana, Kentucky, Missouri, Iowa, and Wisconsin. o 1.7 percent of the Region's gas utility revenue, o 1.9 percent of the Region's gas utility assets, and o 1.5 percent of the Region's gas utility customers. Only 4.4 percent of the Region's gas utility revenues are earned by gas utility companies with fewer revenues than CILCO. Only 5.7 percent of the Region's gas utility assets are owned by gas utility companies with fewer assets than CILCO. Only 2.9 percent of the Region's gas utility customers are served by gas utilities with fewer customers than CILCO. Exhibit K-8 compares CILCO's combined electric and gas utility activities to other regional combination electric and gas utilities, again in terms of revenues, assets and customers. According to all three measures, CILCO's combined electric and gas utility business accounts for: o 2.5 percent of the Region's combination electric and gas utility revenue, o 2.5 percent of the Region's combination electric and gas utility assets, and o 2.9 percent of the Region's combination electric and gas utility customers. Only 5.6 percent of the Region's combination electric and gas utility revenues are earned by combination electric and gas utility companies with fewer revenues than CILCO. Only 5.5 percent of the Region's combination electric and gas utility assets are owned by combination electric and gas utility companies with fewer assets than CILCO. Only 5 percent of the Region's combination electric and gas utility customers are served by combination electric and gas utilities with fewer customers than CILCO. Exhibit K-9 compares CILCO's total utility activities to all other regional utilities (electric, gas and combination electric and gas), again in terms of revenues, assets and customers. According to all three measures, CILCO's combined electric and gas utility business accounts for: o 1.1 percent of the Region's utility revenues, o 1.2 percent of the Region's utility assets, and o 1.3 percent of the Region's utility customers. Only 8.8 percent of the Region's total utility revenues are earned by utility companies with fewer revenues than CILCO. Only 8.4 percent of the Region's utility assets are owned by utility companies with fewer assets than CILCO. Only 3.9 percent of the Region's utility customers are served by utilities with fewer customers than CILCO. The Exhibits described above clearly indicate that CILCO's utility operations are small in size, particularly when compared to other utilities in the Region. Comparing the size of CILCO's utility operations to all United States utilities, again in terms of revenues, assets and customers, makes it even clearer that CILCO's utility operations are small in size. Exhibit K-10 compares CILCO's electric utility activities to all other United States electric utilities in terms of assets, revenues and customers. According to all three measures, CILCO's electric utility business accounts for: o 0.2 percent of U.S. electric utility revenues, o 0.2 percent of U.S. electric utility assets, and o 0.2 percent of U.S. electric utility customers. Only 1.6 percent of U.S. electric utility revenues are earned by electric utility companies with fewer revenues than CILCO. Only 2.2 percent of United States electric utility assets are owned by electric utility companies with fewer assets than CILCO. Only 1.9 percent of United States electric utility customers are served by electric utilities with fewer customers than CILCO. Exhibit K-11 compares CILCO's gas utility activities to all United States gas utilities, also in terms of assets, revenues and customers. According to all three measures, CILCO's gas utility business accounts for: o 0.5 percent of U.S. gas utility revenue, o 0.5 percent of U.S. gas utility assets, and o 0.4 percent of U.S. gas utility customers. Only 7.3 percent of U.S. gas utility revenues are earned by gas utility companies with fewer revenues than CILCO. Only 8.5 percent of U.S. gas utility assets are owned by gas utility companies with fewer assets than CILCO. Only 6 percent of U.S. gas utility customers are served by gas utilities with fewer customers than CILCO. Exhibit K-12 compares CILCO's combined electric and gas utility activities to all U.S. combination electric and gas utilities, again in terms of revenues, assets and customers. According to all three measures, CILCO's combined electric and gas utility business accounts for: o 0.7 percent of U.S. combination electric and gas utility revenue, o 0.7 percent of U.S. combination electric and gas utility assets, and o 0.7 percent of U.S. combination electric and gas utility customers. Only 2.8 percent of U.S. combination electric and gas utility revenues are earned by combination electric and gas utility companies with fewer revenues than CILCO. Only 3.2 percent of U.S. combination electric and gas utility assets are owned by combination electric and gas utility companies with fewer assets than CILCO. Only 3.9 percent of U.S. combination electric and gas utility customers are served by combination electric and gas utilities with fewer customers than CILCO. Exhibit K-13 compares CILCO's total utility activities to all other U.S. utilities (electric, gas and combination electric and gas), again in terms of revenues, assets and customers. According to all three measures, CILCO's combined electric and gas utility business accounts for: o 0.2 percent of U.S. utility revenues, o 0.2 percent of U.S. utility assets, and o 0.3 percent of U.S. utility customers. Only 6.1 percent of U.S. utility revenues are earned by utility companies with fewer revenues than CILCO. Only 6.3 percent of U.S. utility assets are owned by utility companies with fewer assets than CILCO. Only 7.6 percent of U.S. utility customers are served by utilities with fewer customers than CILCO. It is clear from the data described above that the utility activities of CILCO, in terms of combined utility activity and in terms of electric and gas utility activities considered separately, whether on a regional or national basis, are small in scale. C. PUBLIC INTEREST Under the "unless and except" clause of Section 3(a), the Commission has the authority to deny a request for exemption if it were to determine that granting the exemption would be "detrimental to the public interest or the interest of investors or consumers." No such concerns, however, are presented with respect to this Transaction and request for exemption. The Transaction will result in a holding company which will be well-equipped to respond effectively to the changing nature of the electric and gas industries, thus promoting the interests of both investors and ratepayers. The Transaction is subject to approval by the FERC and the ICC. CILCO's operations will continue to be subject to regulation by the ICC and FERC. ITEM 4. REGULATORY APPROVAL The Merger Agreement is subject to the approval of CILCORP's shareholders at a special meeting called for that purpose to be held in May. The Merger also is subject to approval by the FERC. An application for such approval was filed with the FERC on February 19, 1999. See Exhibit D-2. The Merger also is subject to the notification and reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). On February 22, 1999, the Federal Trade Commission granted early termination of the HSR Act waiting period. CILCO has provided notice to the ICC pursuant to Section 16-111(g) of the Illinois Public Utilities Act regarding the Transaction, and has filed a petition with the ICC for an order finding that the ICC has no pre-approval jurisdiction over the Transaction, or, in the alternative, for an order approving the Transaction with respect to CILCO's gas operations. See Exhibit D-1. Since the filing of its petition, CILCO has withdrawn its request that the ICC make a ruling on the jurisdictional issue. The ICC held an evidentiary hearing on February 5, 1999; its order is pending. CILCO also is requesting that the ICC issue a state commission certification in accordance with the requirements of Section 33(a)(2) of the Act. ITEM 5. PROCEDURE AES respectfully requests that the Commission issue its order granting and permitting the requested exemption as soon as practicable, but in any event not later than May 3, 1999. It is submitted that a recommended decision by a hearing or other responsible officer of the Commission is not needed for approval of the proposed Transaction. The Division of Investment Management may assist in the preparation of the Commission's decision. There should be no waiting period between issuance of the Commission's order and the date on which it is to become effective. ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS A. EXHIBITS A-1 Articles of Incorporation of AES A-2 By-Laws of AES A-3 Articles of Incorporation of CILCORP A-4 By-Laws of CILCORP A-5 Articles of Incorporation of Midwest Energy, Inc. A-6 By-Laws of Midwest Energy, Inc. B-1 Agreement and Plan of Merger (Exhibit A to Exhibit D-2 hereto) C-1 CILCORP, Inc. Proxy Statement (to be filed by amendment) D-1 Petition to the Illinois Commerce Commission, filed on December 11, 1998, together with testimony and exhibits (Exhibit F to Exhibit D-2 hereto) D-2 Application to FERC, filed on February 19, 1999, together with testimony and exhibits E-1 AES organization chart (to be filed by amendment) E-2 CILCORP organization chart (to be filed by amendment) E-3 Combined company organization chart after the Transaction (to be filed by amendment) F-1 Opinion of Counsel (to be filed by amendment) F-2 Past Tense Opinion of Counsel (to be filed by amendment with Rule 24 certificate) G-1 AES's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-12291, filed March 30, 1998, and incorporated herein by reference) G-2 AES' Quarterly Report on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 (File No. 1-12291 and incorporated herein by reference) G-3 CILCORP's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-2732, filed March 18, 1998, and incorporated herein by reference) G-4 CILCORP's Quarterly Report on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 (File No. 1-2732 and incorporated herein by reference) H-1 Proposed Form of Notice K-1 AES Employees K-2 AES Subsidiaries K-3 Generating Plants in Operation K-4 Global Map of Generating Plants and Distribution Companies K-5 CILCO Contributions To AES Consolidated Holding Company (GAAP Basis) K-6 Market Shares for Electric Companies in Illinois and Bordering States K-7 Market Shares for Gas Companies in Illinois and Bordering States K-8 Market Shares for Combined Gas and Electric Companies in Illinois and Bordering States K-9 Market Shares for Utilities in Illinois and Bordering States K-10 Market Shares for Electric Companies in the U.S. K-11 Market Shares for Gas Companies in the U.S. K-12 Market Shares for Combined Gas and Electric Companies in the U.S. K-13 Market Shares for Utility Companies in the U.S. B. FINANCIAL STATEMENTS FS-1 AES Consolidated Balance Sheet as of December 31, 1997 (previously filed with the Commission in AES' Annual Report on Form 10K for the year ended December 31, 1997 (Exhibit G-1 hereto), filed March 30, 1998, File No. 1-12291, and incorporated herein by reference) FS-2 AES Consolidated Balance Sheet as of September 30, 1998 (previously filed with the Commission in AES' Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (Exhibit G-2 hereto), filed November 16, 1998, File No. 1-12291, and incorporated herein by reference) FS-3 AES Consolidated Statement of Income for the 12 months ended December 31, 1997 (previously filed with the Commission in AES' Annual Report on Form 10K for the year ended December 31, 1997 (Exhibit G-1 hereto), filed March 30, 1998, File No. 1-12291, and incorporated herein by reference) FS-4 AES Consolidated Statement of Income for the 9 months ended September 30, 1998 (previously filed with the Commission in AES' Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (Exhibit G-2 hereto), filed November 16, 1998, File No. 1-12291, and incorporated herein by reference) FS-5 CILCORP Consolidated Balance Sheet as of December 31, 1997 (previously filed with the Commission in CILCORP's Annual Report on Form 10K for the year ended December 31, 1997 (Exhibit G-3 hereto), filed March 18, 1998, File No. 1-2732, and incorporated herein by reference) FS-6 CILCORP Consolidated Balance Sheet as of September 30, 1998 (previously filed with the Commission in CILCORP's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (Exhibit G-4 hereto), filed November 10, 1998, File No. 1-2732, and incorporated herein by reference) FS-7 CILCORP Consolidated Statement of Income for the 12 months ended December 31, 1997 (previously filed with the Commission in CILCORP's Annual Report on Form 10K for the year ended December 31, 1997 (Exhibit G- 3 hereto), filed March 18, 1998, File No. 1-2732, and incorporated herein by reference) FS-8 CILCORP Consolidated Statement of Income for the 9 months ended September 30, 1998 (previously filed with the Commission in CILCORP's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (Exhibit G-4 hereto), filed November 10, 1998, File No. 1-2732, and incorporated herein by reference) SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned company has duly caused this Application to be signed on its behalf by the undersigned thereunto duly authorized. The AES Corporation By: /s/ William R. Luraschi ------------------------------- Name: William R. Luraschi Title: General Counsel and Secretary Date: March 5, 1999 ------------- EX-99.1 2 EXHIBIT A-1 ARTICLES OF INCORP. OF AES EXHIBIT 3.1 FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE AES CORPORATION The AES Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The present name of the corporation is The AES Corporation. 2. The name under which the corporation was originally incorporated is Applied Energy Services, Inc.; and the date of filing the original Certificate of Incorporation of the Corporation with the Secretary of the State of Delaware is January 28, 1981. 3. The Certification of Incorporation of the Corporation, as heretofore amended or supplemented, is hereby restated and further amended and attached hereto as Exhibit A. 4. The Fifth Amended and Restated Certificate of Incorporation, which further amends the Certificate of Incorporation of the Corporation, was proposed by the Board of Directors of the Corporation and was duly adopted by its stockholders in the manner and by the vote prescribed by Sections 228 and 242 of the General Corporation Law of the State of Delaware. 5. The Fifth Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the undersigned has executed this certificate this 27th day of May 1998. /s/ William R. Luraschi ---------------------------- William R. Luraschi Vice President and Secretary The AES Corporation EXHIBIT A FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE AES CORPORATION PURSUANT TO SECTION 245 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE Article I. The name of the corporation is The AES Corporation (the "Corporation"). Article II. The address of the Corporation's registered office in the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is Corporation Service Company. Article III. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as amended from time to time. Article IV. 1. The total number of shares of all classes of capital stock that the Corporation is authorized to issue is five hundred fifty million (550,000,000), of which five hundred million (500,000,000) shall be Common Stock, par value one cent ($0.01) per share, and fifty million (50,000,000) shall be Preferred Stock, without par value. The designations and the powers, preferences and rights of the Common Stock and the Preferred Stock, and the qualifications, limitation or restrictions thereof, are as provided in or pursuant to this Article IV. 2. (a) The rights of holders of Common Stock to receive dividends or to share in the distribution of assets in the event of liquidation, dissolution or winding up of the affairs of the Corporation shall be subject to the preferences and other rights of the Preferred Stock as may be fixed in this Certificate of Incorporation or in the resolution or resolutions of the Board of Directors providing for the issuance of such Preferred Stock. (b) The holders of Common Stock shall be entitled to one vote for each share of Common Stock held by them of record at the time for determining the holders thereof entitled to vote. 3. Authority is hereby vested in the Board of Directors to issue from time to time the Preferred Stock in one or more classes or series and to fix by the resolution or resolutions providing for the issuance of shares of any such class or series the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of such class or series to the full extent permitted by this Certificate of Incorporation and the General Corporation Law of the State of Delaware. The authority of the Board of Directors with respect to each such series shall include, but not be limited to, determination of the following: (i) The number of shares to constitute such class or series, and the distinctive designation thereof; (ii) The voting powers, full or limited, if any, of such class or series; (iii) The rate of dividends payable on shares of such class or series, the conditions on which and the times when such dividends are payable, the preference to, or the relations to, the payment of the dividends payable on any other class or series of stock, whether cumulative or noncumulative, and, if cumulative, the date from which dividends on shares of such class or series shall be cumulative; (iv) The right, if any, of the Corporation to redeem shares of such class or series and the terms and conditions of such redemption (v) The requirement of any sinking fund or funds to be applied to the purchase or redemption of shares of such class or series and, if so, the amount of such fund or funds and the manner of application; (vi) The rights of shares of such class or series upon the liquidation, dissolution or winding up of, or upon any distribution of the assets of, the Corporation; (vii) The rights, if any, of the holders of shares of such class or series to convert such shares into, or to exchange such shares for, shares of any other class or series of stock and the price or prices or rate or rates of exchange at which such shares shall be convertible or exchangeable and any adjustments thereto, and any other terms and conditions of such conversion or exchange; and (viii) Any other preferences and relative, participating, optional or other special rights of shares of such class or series, and qualifications, limitations or restrictions including, without limitation, any restriction on an increase in the number of shares of any class or series theretofore authorized and any qualifications, limitations or restrictions of rights or powers to which shares of any future class or series shall be subject. 4. The number of authorized shares of any class or classes of stock of the Corporation may be increased or decreased by the affirmative vote of the holders of a majority of the stock of the Corporation that is entitled to vote, without a separate class vote of any class or classes of stock of the Corporation, except as may be otherwise provided in this Certificate of Incorporation or in the resolution or resolutions fixing the voting rights of any class or series of the Preferred Stock. 5. No holder of Common Stock or Preferred Stock, as such, shall have or be entitled to any preemptive right whatsoever. Article V. The Corporation is to have perpetual existence. Article VI. The Board of Directors is expressly authorized to adopt, alter or repeal the By-Laws of the Corporation, except for any By-Law that by its terms states that it may be amended or repealed only by action of the stockholders. Article VII. Meetings of stockholders may be held at such place, either within or without the state of Delaware, as the By-Laws may provide. Elections of directors need not be by written ballot unless the By-Laws of the Corporation shall so provide. Article VIII. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by General Corporation Law of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation. Article IX. The number of directors of the Corporation shall be fixed from time to time pursuant to the By-Laws of the Corporation. Article X. No director of this Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. Neither the amendment nor repeal of this Article X, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article X, shall be effective with respect to any cause of action, suit, claim or other matter that, but for this Article X, would accrue or arise prior to such amendment, repeal or adoption of an inconsistent provision. EX-99.2 3 EXHIBIT A-2 BY-LAWS OF AES EXHIBIT 3.2 Date of last amendment: April 21, 1998 BY-LAWS OF THE AES CORPORATION ARTICLE I OFFICES Section 1.01. Registered Office. The registered office shall be at 1013 Centre Road in the City of Wilmington in the State of Delaware. Section 1.02. Additional Offices. The Corporation may also have offices and places of business at such other places, within or without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 2.01. Time and Place. All meetings of stockholders shall be held at such time and place within or without the State of Delaware as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof. Section 2.02. Annual meetings of stockholders shall be held on the first Friday of June of each year, if not a legal holiday, and if a legal holiday, then on the next succeeding business day not a legal holiday, or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At the annual meeting, the stockholders shall elect a Board of Directors, and transact any other business as may properly come before the meeting, notice of which was given in the notice of the meeting. At each election of directors, every holder of stock entitled to vote shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote. Directors shall be elected by a plurality of votes cast at an election. Section 2.03. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 2.04. Special meetings of the stockholders, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be held at such place as may from time to time be designated by the directors and may be called only by the Chairman of the Board, the President or by resolution adopted by a majority of the entire Board of Directors, for such purposes as shall be specified in the call. Section 2.05. Written notice of the annual meeting or any special meeting of stockholders stating the place, date and hour of the meeting shall be given in accordance with Section 4.01 to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 2.06. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 2.07. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, or the officer presiding over the meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjournment at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with Section 2.01 or 2.05 as the case may be, to each stockholder of record entitled to vote at the meeting. Section 2.08. At any meeting at which a quorum is present, the vote of the holders of a majority of the stock entitled to vote on the subject matter, present in person or represented by proxy, shall be the act of the stockholders, unless the subject matter is such that, by express provision of the statutes, the Certificate of Incorporation or these By-Laws, a different vote is required, in which case such express provision shall govern and control the decision of such subject matter. The stockholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Section 2.09. If a vote is to be taken by ballot, each ballot shall state the number of shares voted and the name of the stockholder or proxy voting. Section 2.10. Each meeting of the stockholders, whether annual or special, shall be presided over by the Chairman of the Board if present, and if he or she is not present or declines to preside by the President if present. If neither officer specified in the preceding sentence is present, the meeting shall be presided over by the person designated in writing by the Chairman of the Board, or if the Chairman of the Board has made no designation, by the person designated by the President, or if the President has made no designation, by the person designated by the Board of Directors. If neither officer specified in the first sentence of this Section 2.10 is present, and no one designated by the Chairman of the Board or the President or the Board of Directors is present, the meeting may elect any stockholder of record who is entitled to vote for directors, or any person present holding a proxy for such a stockholder, to preside. The Secretary of the Company (or in his or her absence any Assistant Secretary) shall be the Secretary of any such meeting; in the absence of the Secretary and Assistant Secretaries, any person may be elected by the meeting to act as Secretary of the meeting. Section 2.11. Any voting proxy given by a stockholder must be: in writing, executed by the stockholder, or, in lieu thereof, to the extent permitted by law, may be transmitted in a telegram, cablegram or other means of electronic transmission setting forth or submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. A copy, facsimile transmission or other reliable reproduction of a written or electronically-transmitted proxy authorized by this Section 2.11 may be substituted for or used in lieu of the original writing or electronic transmission to the extent permitted by law. Section 2.12. The directors shall appoint one or more inspectors of election and of the vote at any time prior to the date of any meeting of stockholders at which an election is to be held or a vote is to be taken. In the event any inspector so appointed is absent from such meeting or for any other reason fails to act as such at the meeting, the person presiding at such meeting pursuant to these By-Laws may appoint a substitute who shall have all the powers and duties of such inspector. The inspector or inspectors so appointed shall act at such meeting, make such reports thereof and take such other action as shall be provided by law and as may be directed by the person presiding over the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. Section 2.13. The directors may, at any time prior to any annual or special meeting of the stockholders, adopt an order of business for such meeting which shall be the order of business to be followed at such meeting. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at such meeting shall be announced at such meeting by the person presiding over such meeting. Section 2.14. At any meeting of stockholders a stock vote shall be taken on any resolution or other matter presented to the meeting for action if so ordered by the person presiding over the meeting or on the demand of any stockholder of record entitled to vote at the meeting or any person present holding a proxy for such a stockholder. Such order or demand for a stock vote may be made either before or after a vote has been taken on such resolution or other matter in a manner other than by stock vote and before or after the result of the vote taken otherwise than by stock vote has been announced. The result of a stock vote taken in accordance with this By-Law shall supersede the result of any vote previously taken in any manner other than by stock vote. Section 2.15. (A) The proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders (1) pursuant to the Corporation's notice of meeting, (2) by or at the direction of the Board of Directors or (3) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 2.15, who is entitled to vote thereon at the meeting and who complies with the notice procedures set forth in this Section 2.15. (B) For business (other than the nominations of persons for election to the Board of Directors) to be properly brought before an annual meeting by a stockholder pursuant to clause (3) of paragraph (A) of this Section 2.15, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered, either by personal delivery or by United States mail, postage pre-paid, to the Secretary not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth (1) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and (2) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (a) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (b) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (C) Only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this by-law. Except as otherwise provided by law, the Certificate of Incorporation or these by-laws, the person presiding over an annual meeting of stockholders shall have the power and duty to determine whether any business proposed by any stockholder to be brought before the meeting was made in accordance with the procedures set forth in this Section 2.15 and, if any proposed business is not in compliance with this Section 2.15, to declare that such defective proposal shall be disregarded. (D) For purposes of this by-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (E) In addition to the foregoing provisions of this Section 2.15, a stockholder shall comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.15. Nothing in this Section 2.15 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under such Act. ARTICLE III MATTERS RELATING TO THE BOARD OF DIRECTORS Directors Section 3.01. The business of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute, the Certificate of Incorporation or these By-Laws directed or required to be exercised or done by the stockholders. Section 3.02. The number of directors of the Corporation which shall constitute the whole Board shall be nine, or such other numbers as may be determined by written resolution of the Board of Directors. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3.04, and each director elected shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Directors need not be stockholders of the Corporation. Section 3.03. Any director of the Corporation may resign at any time either by oral tender of resignation at any meeting of the Board of Directors or by delivering written notice thereof to the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified with respect thereto the acceptance of such resignation shall not be necessary to make it effective. Section 3.04. Any director may be removed for cause, at any time, by the affirmative vote of the holders of record of a majority of all the shares of capital stock entitled to vote at a special meeting of the stockholders called for such purpose. Vacancies in the Board of Directors created by the death, resignation or removal of directors and newly created directorships resulting from any increase in the authorized number of directors may be filled only by the affirmative vote of a majority of the remaining directors. If the directors remaining in office shall be unable, by majority vote, to fill such vacancy within 60 days of the occurrence thereof, the Chairman of the Board or the President may call a special meeting of the stockholders at which such vacancy shall be filled. Any director so chosen shall hold office until the next annual election and until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. If there are no directors in office, then an election of directors may be held in the manner provided by statute. Meetings of the Board of Directors Section 3.05. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 3.06. The Board of Directors shall meet as soon as practicable after the annual election of directors, for the purpose of organization and the transaction of other business including the election of officers. No notice of such meeting shall be required. Such organization meeting may, however, be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board, or in a consent and waiver of notice thereof signed by all the directors. Section 3.07. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board. Any business of the Corporation may be transacted at any such regular meeting. Section 3.08. Special meetings of the Board of Directors shall be called by the Secretary, on three days; notice to each director as provided in Article IV, either on the request of the Chairman of the Board, the President or on the written request of two directors. Section 3.09. At all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business, and the act of a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these By-Laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 3.10. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or such committee. Section 3.11. Members of the Board of Directors or any committee designated by the Board pursuant to Section 3.12 may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. Committees of Directors Section 3.12. The Board of Directors may, by resolution passed by the affirmative vote of a majority of the directors, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The Board may by like vote designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the adopting resolution, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation except as limited by the General Corporation Law of the State of Delaware, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 3.13. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Compensation Section 3.14. Directors, and members of any committee of the Board of Directors, shall be entitled to such reasonable compensation for their services as directors and members of each such committee as shall be fixed from time to time by resolution of the Board of Directors, and shall also be entitled to reimbursement for any reasonable expenses incurred in attending such meetings. Any directors receiving compensation under these provisions shall not be barred from serving the Corporation in any other capacity and receiving reasonable compensation for such other services. ARTICLE IV NOTICES Section 4.01. Whenever, under the provisions of the statutes, the Certificate of Incorporation or these By-Laws, notice e is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director, or stockholder, at his or her address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram, cable or facsimile transmission. Section 4.02. Whenever any notice is required to be given under the provisions of the statutes, the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to such notice. Attendance in person or by proxy of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting and does so object at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any director attending a meeting of the Board of Directors without protesting, prior to the meeting or at its commencement, any lack of notice shall be conclusively deemed to have waived notice if such meeting. ARTICLE V OFFICERS Section 5.01. The Board of Directors at its first meeting after each meeting of stockholders at which directors are elected, shall elect a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer, each of whom shall hold office until the first meeting of the Board after the next annual meeting of the stockholders and until his or her successor is elected and qualified. At any time, the Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers and such other officers and agents as in its judgment the business of the Corporation may require and who shall perform such duties as the Board shall from time to time determine. Except for the Chairman of the Board, no officer of the Corporation need be a member of the Board of Directors. Two or more offices, except President and Secretary, may be held by the same person. Section 5.02. The compensation of all officers and agents of the Corporation shall be fixed by the Board of Directors except to the extent such power shall be delegated, by resolution of the Board, to a committee of directors, to the Chairman of the Board or to the President. Section 5.03. Any officer or agent of the Corporation may be removed at any time, either with or without cause, by the Board of Directors in its sole discretion. Any vacancy occurring in any office of the Corporation may be filled at any time by the Board of Directors. The Chairman of the Board Section 5.04. The Chairman of the Board shall be the Chief Executive Officer of the Company and shall preside at all meetings of the Board of Directors, and shall have such other powers and duties as may from time to time be assigned by the Board of Directors. The President Section 5.05. The President shall be the Chief Operating Officer of the Corporation. Subject to the authority of the Board of Directors, the President shall have general and active charge, control and supervision of all the business and affairs of the Corporation. The President shall perform such other duties as the Board may from time to time prescribe. The Vice Presidents Section 5.06. The several Vice Presidents may be designated by such title or titles and in such order of seniority as the Board of Directors may determine. They shall perform such duties and exercise such powers as the Board of Directors or the President may from time to time prescribe. The Secretary and Assistant Secretaries Section 5.7. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors; attend all meetings of the Board of Directors and all meetings of the stockholders and record the proceedings of all such meetings in a book kept for that purpose; perform like duties for the standing committees when required; keep and account for all books, documents, papers and records of the Corporation, except those for which some other officer or agent is properly accountable; and perform such other duties as may be prescribed from time to time by the Board of Directors or the President. The Secretary shall have custody of the corporate seal of the Corporation and shall, and any Assistant Secretary shall, have authority to affix the same to any instrument requiring it and, when so affixed, it may be attested by the signature of the Secretary or such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. Section 5.08. The Assistant Secretary, or if there be more than one, the Assistant Secretaries, shall perform such duties and exercise such powers as the Board of Directors, the President or the Secretary may from time to time prescribe. The Treasurer and Assistant Treasurers Section 5.09. The Treasurer shall have the custody of the corporate funds and securities and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the President, shall render to the President and to the Board, whenever the President or the Board shall require, an account of all his or her transactions as Treasurer. Section 5.10. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers, shall perform such duties and exercise such powers as the Board of Directors, the President or the Treasurer may from time to time prescribe. ARTICLE VI MATTERS RELATING TO THE STOCK OF THE CORPORATION Section 6.01. The certificates for shares of the Corporation shall be in such form as shall be determined by the Board of Directors and shall be numbered consecutively and entered in the books of the Corporation as they are issued. Every holder of shares of capital stock of the Corporation shall be entitled to have a certificate in the form approved by the Board of Directors, signed by the Chairman of the Board or the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number of such shares owned by him or her. Section 6.02. Where any such certificate is signed either by a transfer agent or an assistant transfer agent, or by a transfer clerk acting on behalf of the Corporation and by a registrar, the signature of any such Chairman of the Board, President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimile. In case any such officer who has signed, or whose facsimile signature has been affixed on, any such certificate shall cease to be such officer, whether because of resignation, removal or otherwise, before such certificate has been issued or delivered by the Corporation, such certificate may nevertheless be issued and delivered by the Corporation with the same effect as if such officer had not ceased to be such at the date of such delivery. Section 6.03. In case any certificate of stock shall be lost, stolen or destroyed, the Board of Directors, in its discretion, or any officer or officers thereunto duly authorized by the Board, may authorize the issuance of a substitute certificate in place of the certificate so lost, stolen or destroyed; provided, however, that in each such case the applicant for a substitute certificate shall furnish evidence to the Corporation which the Board of Directors, or any office or officers authorized as aforesaid, determines is satisfactory, of the loss, theft or destruction of such certificate and of the ownership thereof, and also such security or indemnity as may be required by the Board. Section 6.04. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the proper officers of the Corporation or of the transfer agent to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6.05. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 6.06. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the General Corporation Law of the State of Delaware. ARTICLE VII GENERAL PROVISIONS Dividends Section 7.01. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of capital stock, subject to the applicable provisions, if any, of the Certificate of Incorporation. Section 7.02. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Fiscal Year Section 7.03. The fiscal year of the Corporation shall be the calendar year unless otherwise fixed by resolution of the Board of Directors. Deposits Section 7.04. The Board of Directors shall select banks, trust companies, or other depositories in which all funds of the Corporation not otherwise employed shall, from time to time, be deposited to the credit of the Corporation. All checks and drafts on the Corporation's bank accounts and all other instruments for the payment of money shall be signed by such officer or officers or other person or persons as shall be thereunto authorized from time to time by the Board of Directors. Voting Securities Held by the Corporation Section 7.05. Unless otherwise ordered by the Board of Directors, the President shall have full power and authority on behalf of the Corporation to attend and to act and to vote at any meeting of security holders of other corporations in which the Corporation may hold securities. At such meeting the President shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the Corporation might have possessed and exercised if it had been present. The Board of Directors may, from time to time, confer like powers upon any other person or persons. Section 7.06. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII INDEMNIFICATION Section 8.01. (A) Any person who was or is a party or is threatened to be made a party to or was or is involved (as a witness or otherwise) in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than any action or suit by or in the right of the Corporation to procure a judgment in its favor (a "derivative action")) by reason of the fact that he or she is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified by the Corporation, to the extent authorized by the laws of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such laws permitted prior to such amendment), against all expenses (including, but not limited to, attorneys' fees, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by him or her in connection with the defense or settlement of such action, suit or proceeding. In the event of any derivative action, such persons shall be indemnified by the Corporation under the same conditions and to the same extent as specified above, except that no indemnification is permitted in respect of any claim, issue or matter as to which such persons shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. The indemnification expressly provided by statute in a specific case shall not be deemed exclusive of any other rights to which any person indemnified may be entitled under any lawful agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (B) The right to indemnification conferred in this Article VIII is and shall be a contract right. The right to indemnification conferred in this Article VIII shall include the right to be paid by the Corporation the expenses (including attorneys' fees and retainers therefor) reasonably incurred in connection with any such proceeding in advance of its final disposition, such advances to be paid by the Corporation within 20 days after the receipt by the Corporation of a statement or statements from a director, officer or employee of the Corporation requesting such advance or advances from time to time; provided, however, the payment of such expenses incurred by a director, officer or employee in his or her capacity as a director, officer or employee in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director, officer or employee to repay all amounts so advanced if it shall ultimately be determined that such director, officer or employee is not entitled to be indemnified under this Article VIII or otherwise. (C) To obtain indemnification under this Article VIII, an indemnitee shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to such person and is reasonably necessary to determine whether and to what extent the indemnitee is entitled to indemnification. (D) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture; trust or other enterprise including service with respect to employee benefit plans, against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. To the extent that the Corporation maintains any policy or policies providing such insurance, each such director, officer or employee, and each such agent to which rights to indemnification have been granted as provided in paragraph (E) of this Article VIII, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such director, officer, employee or agent. (E) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in connection with any proceeding in advance of its final disposition, to any agent of the Corporation to the fullest extent of the provisions of this Article VIII with respect to the indemnification and advancement of expenses of directors, officers and employees of the Corporation. ARTICLE IX NOMINATION OF DIRECTORS Section 9.01. Any stockholder of record may nominate one or more persons for election as director at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (a) with respect to an election to be held at an annual meeting of stockholders, ninety (90) days in advance of such meeting; and (b) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the seventh day following the earlier of (i) the date on which notice of such meeting is first given to stockholders and (ii) the date on which a public announcement of such meeting is first made. Each such notice shall include: (1) the name and address of each stockholder of record who intends to appear in person or by proxy to make the nomination and of the person or persons to be nominated; (2) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (3) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement .filed pursuant to the proxy rules of the Securities and Exchange Commission; and (4) the consent of each nominee to serve as a director of the Corporation if so elected. The person presiding at the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. ARTICLE X AMENDMENTS Section 10.01. These By-Laws may be amended or repealed by the affirmative vote of a majority of the stockholders entitled to vote thereon or a majority of the directors then in office at any regular meeting of the stockholders or of the Board of Directors, respectively, or at any special meeting of the stockholders or of the Board of Directors, respectively, if notice of such proposed alteration or repeal be contained in the notice of such meeting. The stockholders may determine by majority vote that any action taken by them with respect to adoption, amendment or repeal of any part of these By-Laws shall not be subject to subsequent amendment or repeal by the Board of Directors, provided that any such determination shall be set forth in the appropriate place in the text of these By-Laws. EX-99.3 4 EXHIBIT A-3 ARTICLES OF INCORP OF CILCORP CILCORP INC. (ORGANIZED JANUARY 10, 1985) ARTICLES OF INCORPORATION COMPOSITE AS AMENDED BY THE AMENDMENT FILED IN THE OFFICE OF THE SECRETARY OF STATE OF ILLINOIS ON MAY 9, 1991 ARTICLE ONE The name of the corporation is CILCORP Inc. ARTICLE TWO The name and address of the initial registered agent and its registered office are: Registered Agent: M.J. Murray Registered Office: 300 Liberty Street Peoria, Illinois 61602 (Peoria County) ARTICLE THREE The purpose or purposes for which the corporation is organized are any lawful purpose or purposes under The Business Corporation Act of 1983. ARTICLE FOUR PARAGRAPH 1: The authorized shares shall be: Class Par Value Per Share Number of Shares Authorized ----- ------------------- --------------------------- Common Without par value 50,000,000 Preferred Without par value 4,000,000 PARAGRAPH 2: The designations, preferences, qualifications, limitations, restrictions and the special or relative rights in respect of the shares of each class are: COMMON STOCK. Holders of the common stock shall be entitled to one vote per share on all matters submitted to a vote of the shareholders of the Company, except matters required to be voted on exclusively by holders of preferred stock or of any series of preferred stock. Subject only to the prior rights and preferences of the preferred stock, the holders of the common stock shall be entitled to dividends thereon, when, as and if declared by the Board of Directors out of funds of the Company legally available therefor. In the event of any dissolution or liquidation of the Company, the holders of the common stock shall be entitled to receive, pro rata, after the prior rights of the holders of the preferred stock have been satisfied, all of the assets of the Company remaining available for distribution, if any. PREFERRED STOCK. The preferred stock may be issued from time to time in one or more series and shall have preference over the common stock as to the payment of dividends and to the assets of the Company upon the voluntary or involuntary liquidation of the Company. Dividends on the preferred stock shall be cumulative and shares of preferred stock shall have such rights of conversion into shares of any other class, or into shares of any series of the same or any other class, as shall be provided with respect to such shares. The Board of Directors by resolution shall establish each series of preferred stock and fix and determine the number of shares and the relative rights and preferences of each such series, provided that all shares of the preferred stock shall be identical except as to the following relative rights and preferences, as to which there may be variations fixed and determined by the Board of Directors between different series: (1) The rate of dividend. (2) The price at and the terms and conditions on which shares may be redeemed. (3) The amount payable upon shares in event of involuntary liquidation. (4) The amount payable upon shares in event of voluntary liquidation. (5) Sinking fund provisions for the redemption or purchase of shares. (6) The terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion. (7) The limitation or denial of voting rights, or the grant of special voting rights. 2 (8) Any other rights or preferences now or hereafter permitted by the laws of the State of Illinois as variations between different series of preferred stock. ARTICLE FIVE Deleted. ARTICLE SIX The number of directors of the corporation shall be such number as may from time to time be fixed by or pursuant to the By-laws. The directors shall be elected and divided into three classes, Class I, Class II and Class III, each class to be as nearly equal in number as possible. The directors shall initially be allocated to the same classes as those to which they were designated under the By-laws in effect immediately prior to the annual meeting in 1991. At each annual meeting, the number of directors of the class whose terms expire at the time of such meeting (unless the number of directors in such class is increased or decreased as a result of a change in the total number of directors, in which case the number of directors in such class as so increased or decreased) shall be elected to hold office until the third succeeding annual meeting. Directors may be removed only for cause. ARTICLE SEVEN In furtherance of, and not in limitation of, the powers conferred by statute, the Board of Directors of the corporation is expressly authorized and empowered to adopt, amend or repeal the By-laws (or any portion thereof) of the corporation. The shareholders of the corporation are authorized and empowered to adopt, amend or repeal the By-laws only by an affirmative vote of 75% of the voting power of the shares outstanding and entitled to vote thereon. ARTICLE EIGHT PARAGRAPH 1. The holders of capital stock of the corporation now or hereafter outstanding shall not have the right to cumulate their respective votes in any election for directors of the corporation. PARAGRAPH 2. Any action required or permitted to be taken by the shareholders of the corporation shall be taken only at a duly called annual or special meeting. Such action may not be taken by written consent of the shareholders. 3 ARTICLE NINE PARAGRAPH 1: A Business Combination (as hereinafter defined) shall require the affirmative vote of the holders of that percentage of the Voting Shares (as hereinafter defined) which is the greater of: A. 75%, or B. The percentage calculated by dividing (x) the sum of (i) the aggregate number of Voting Shares which are beneficially owned by each and every Related Person (as hereinafter defined) and (ii) one-half of all Voting Shares which are not beneficially owned by any such Related Person by (y) the total number of Voting Shares (the "Required Percentage"): provided, however, that for the purpose of determining the Required Percentage of affirmative votes required for any Business Combination between the corporation or any Subsidiary (as hereinafter defined) and any Related Person, only the Related Person which is a party to such transaction shall be deemed a "Related Person" under this Paragraph 1. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or otherwise. PARAGRAPH 2: The provisions of Paragraph 1 shall not apply to a Business Combination, and such business Combination shall require the affirmative vote of the holders of a majority of the Voting Shares, if all of the following conditions shall have been satisfied: A. If, with respect to such Business Combination (i) at least two-thirds of the Continuing Directors (as hereinafter defined) shall have approved expressly a memorandum of understanding with the Related Person which is a party to such transaction, consistent in material terms with the Business Combination for which a shareholder vote is sought, before such Related Person became a Related Person; or (ii) at least two-thirds of the Continuing Directors shall have approved expressly in advance the acquisition of the Voting Shares that caused such Related Person to become a Related Person; or (iii) such Business Combination is approved expressly by the affirmative vote of at least two-thirds of the Continuing Directors before the consummation of such transaction. 4 B. The aggregate amount of cash or fair market value of Other Consideration (as hereinafter defined) to be received per share by holders of Voting Shares in such Business Combination is not less than the Highest Per Share Price (as hereinafter defined) paid by the Related Person in acquiring within the two-year period immediately preceding the Business Combination any shares of capital stock of the corporation which if continued to be held at the Record Date (as hereinafter defined) would be (or are) Voting Shares. C. The consideration to be received by Public Holders (as hereinafter defined) in such Business Combination shall be in the same form and of the same kind as the consideration paid by the Related Person in acquiring, within the two-year period immediately preceding the Business Combination any shares of capital stock of the corporation which if continued to be held at the Record Date would be (or are) Voting Shares. D. After such Related Person became a Related Person and before the Business Combination the Related Person shall have taken steps to ensure that the corporation's Board of Directors included at all times representation by Continuing Directors proportionate to the ratio that the Voting Shares which from time to time are owned by Public Holders bear to all Voting Shares outstanding at such respective times (with a Continuing Director to occupy any resulting fractional Board position). E. Before the Business Combination, such Related Person shall not have (i) received the benefit, directly or indirectly, (except proportionately a shareholder) of any loans, advances, guarantees, pledges, financial assistance or tax credits provided by the corporation, or (ii) made any major change in the corporation's business or equity capital structure without the approval of at least two-thirds of the Continuing Directors. F. A proxy statement responsive to the requirements of the Securities Act of 1933, as amended, shall have been mailed to all holders of Voting Shares for the purpose of soliciting shareholder approval of such Business Combination. The proxy statement shall contain on the front page thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may have furnished in writing and, if deemed advisable by a majority of the Continuing Directors, an 5 opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such Business Combination from the point of view of the Public Holders (such investment banking firm to be selected by a majority of the Continuing Directors, to be furnished with all information it reasonably requests and to be paid a reasonable fee for its services upon receipt by the corporation of such opinion). PARAGRAPH 3. The following definitions shall apply to the provisions of Article Nine and Paragraph 1 of Article Ten of these Articles of Incorporation. A. "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (any such Rule hereinafter shall be referred to as "Rule"). B. A Person shall be the "Beneficial Owner" of Voting Shares: (i) which are beneficially owned, directly or indirectly, by it or any of its Affiliates and Associates; (ii) which such Person or any of its Affiliates or Associates has (a) the right to acquire at any time (notwithstanding that Rule 13d-3 deems shares to be beneficially owned only if such right may be exercised within 60 days) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants, options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such first mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Voting Shares. C. "Business Combination" shall mean: (i) any merger or consolidation of the corporation or any Subsidiary with or into (a) any Related Person or (b) any other Person (whether or not itself a Related Person) which, after such 6 merger or consolidation, would be an Affiliate of a Related Person: (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition, either in a single transaction or a series of related transactions, to or with any Related Person of (x) a Substantial Part of the assets of the corporation (including without limitation any voting securities of a Subsidiary) or (y) any Subsidiary having total assets with an aggregate fair market value of $5,000,000 or more; (iii) the issuance or transfer by the corporation or any Subsidiary, either in a single transaction or a series of related transactions, of any securities of the corporation or of any Subsidiary to any Related Person in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $5,000,000 or more; (iv) the adoption of any plan or proposal for the liquidation or dissolution of the corporation; (v) any reclassification of securities, including without limitation, any reverse stock split, recapitalization, reorganization, merger or consolidation, of the corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving a Related Person) which has the effect, directly or indirectly, of increasing, the proportionate share of the outstanding shares of any class of capital stock of the corporation or any Subsidiary which is directly or indirectly owned by any Related Person; or (vi) any agreement, contract or other arrangement providing for any of the transactions described in (i) through (v) of this subparagraph C. D. "Continuing Director" shall mean a person who was a member of the Board of Directors of the corporation elected by the Public Holders immediately before the date as of which any Related Person became a Related Person, or a person designated (before his initial election as 7 a director) as a Continuing Director by a majority of the then Continuing Directors. E. "Highest Per Share Price" shall mean the highest price that can be determined to have been paid at any time within the two-year period immediately preceding the Business Combination by the Related Person for any share or shares of capital stock of the corporation which if continued to be held at the Record Date would be (or are) Voting Shares. In determining the Highest Per Share Price, all purchases, by the Related Person shall be taken into account regardless of whether the shares were purchased before or after the Related Person became a Related Person. Also, the Highest Per Share Price shall include any brokerage commissions, transfer taxes and soliciting dealers' fees paid by the Related Person with respect to the shares acquired by that Related Person. Determination of the Highest Per Share Price as required from time to time by this Article Nine shall be made by at least two-thirds of the Continuing Directors then in office. F. "Other Consideration" shall include, without limitation, property, the capital stock of the corporation retained by its Public Holders in the event of a Business Combination in which the corporation is the surviving corporation, or other securities. G. "Person" shall mean any individual, firm, corporation, partnership or other entity. H. A "Public Holder" shall mean a Beneficial Owner of Voting Shares who is not a Related Person. I. "Record Date" shall mean the date set by the corporation for the determination of shareholders entitled to notice of and to vote on the proposed Business Combination. J. "Related Person" shall mean, with respect to any Business Combination, any Person (other than the corporation, any Subsidiary or any Person who owns all of the Voting Shares) who, together with its Affiliates and Associates, as of the Record Date or immediately prior to the consummation of any such transaction, is the Beneficial Owner of not less than 10% of the Voting Shares. 8 K. "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1) is owned, directly or indirectly, by the corporation; provided, however, that for the purposes of the definition of Related Person set forth in subparagraph J of this Paragraph 3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of capital stock is owned, directly or indirectly, by the corporation. L. "Substantial Part" shall mean more than 20% of the fair market value as determined by at least two-thirds of the Continuing Directors of the total consolidated assets of the corporation and its Subsidiaries taken as a whole as of the end of its most recent fiscal year ended prior to the time the determination is being made. M. "Voting Shares" shall mean all of the shares of capital stock of the corporation which are issued and outstanding as of the Record Date. The Voting Shares shall include shares deemed owned through application of subparagraph B of this Paragraph 3 but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants, options or otherwise. PARAGRAPH 4: For the purposes of this Article Nine, at least two-thirds of the Continuing Directors shall determine (A) the number of Voting Shares beneficially owned by any Person, (B) whether a Person is an Affiliate or Associate of another, (C) whether a Person is the Beneficial Owner of any Voting Shares, and (D) whether the assets subject to any Business Combination have an aggregate fair market value of $5,000,000 or more. PARAGRAPH 5: Nothing contained in this Article Nine shall be construed to relieve any Related Person from any fiduciary obligation imposed by law. ARTICLE TEN PARAGRAPH 1: Any amendment, alteration, change or repeal of Article Nine or this Paragraph 1 of Article Ten of these Articles of Incorporation shall require the affirmative vote of the holders of at least 75% of the Voting Shares and if there is a Related Person, such action must also be approved by the affirmative vote of a majority in interest of the Public Holders; provided that this Paragraph 1 of Article Ten shall not apply to, and the majority vote prescribed by Paragraph 2 of this Article Ten shall be required for, any amendment, 9 alteration, change or repeal recommended to the shareholders by two-thirds or more of the Continuing Directors. PARAGRAPH 2: Any provision of these Articles of Incorporation other than Article Nine and Paragraph 1 of Article Ten may be amended, altered, changed or repealed by the affirmative vote of the holders of a majority of the outstanding capital stock of the corporation having the right to vote on the issue and, if a class vote thereon is required pursuant to applicable law, by the affirmative vote of the holders of a majority of the outstanding shares of each such class. 10 EX-99.4 5 EXHIBIT A-4 BY-LAWS OF CILCORP BY-LAWS of CILCORP Inc. (As Amended Effective April 25, 1995) ARTICLE I OFFICES The corporation shall continuously maintain in the State of Illinois a registered office and a registered agent whose business office is identical with such registered office, and may have other offices within or without the State. ARTICLE II SHAREHOLDERS SECTION l. ANNUAL MEETING. An annual meeting of the shareholders shall be held on the fourth Tuesday of April in each year commencing in 1986, such meeting to be held at such time as determined by the Board of Directors and specified in the notice of such annual meeting for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the Chief Executive Officer, by the Board of Directors, or by the holders of not less than one-fifth of all the outstanding shares entitled to vote on the matter for which the meeting is called, for the purpose or purposes stated in the call of the meeting. SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be at the principal office of the corporation in the City of Peoria, Illinois. SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than twenty nor more than sixty days before the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his or her address as it appears on the records of the corporation, with postage thereon prepaid. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 5. FIXING OF RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders, or to receive payment of any dividend, or for the purpose of determining shareholders for any other proper purpose, the Board of Directors may fix in advance a record date which shall not be more than sixty days and, for a meeting of shareholders, not less than ten days, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than twenty days, before the date of such meeting. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be the date on which notice of the meeting is mailed, and the record date for the determination of shareholders for any other purpose shall be the date on which the Board of Directors adopts the resolution relating thereto. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting. SECTION 6. VOTING LISTS. The officer or agent having charge of the transfer books for shares of the corporation shall make, within twenty days after the record date for a meeting of shareholders or ten days before such meeting, whichever is earlier, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder, and to copying at the shareholder's expense, for any purpose germane to the meeting, at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and may be inspected by any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this State, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders. SECTION 7. QUORUM. A majority of the outstanding shares of the corporation entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum for consideration of such matter at a meeting of shareholders; provided, that if less than a majority of the outstanding shares entitled to vote on a matter are represented at said meeting, a majority of the shares so represented may adjourn the meeting as to that matter at any time without further notice. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on a matter shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Business Corporation Act of 1983, or the Articles of Incorporation. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting. Withdrawal of shareholders from any meeting shall not cause failure of a duly constituted quorum at that meeting. SECTION 8. PROXIES. Each shareholder entitled to vote at a meeting of shareholders or to express consent or assent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be valid after eleven months from the date thereof, unless otherwise provided in the proxy. SECTION 9. VOTING OF SHARES. Each outstanding share shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares registered in the name of another corporation, domestic or foreign, may be voted by any officer, agent, proxy or other legal representative authorized to vote such shares under the law of incorporation of such corporation. Shares registered in the name of a deceased person, a minor ward or person under legal disability, may be voted by his or her administrator, executor or court appointed guardian, either in person or by proxy, without a transfer of such shares into the name of such administrator, executor or court appointed guardian. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy. Shares registered in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority so to do is contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of the corporation held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares entitled to vote at any given time. SECTION 11. INSPECTORS. At any meeting of shareholders, the chairman of the meeting may, or upon the request of any shareholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. Each report of an inspector shall be in writing and signed by him or her or by a majority of them if there be more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. SECTION 12. VOTING BY BALLOT. Voting on any question or in any election may be by voice unless the chairman of the meeting shall order or any shareholder entitled to vote shall demand that voting be by ballot. ARTICLE III DIRECTORS SECTION l. GENERAL POWERS. The business and affairs of the corpo ration shall be managed by or under the direction of its Board of Directors. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the corporation shall be ten. Directors need not be residents of Illinois or shareholders of the corporation. Unless sooner terminated by any other provision hereof, the term of any director shall automatically expire at the first annual meeting of the shareholders following his or her attainment of the age of 67. Provided, however, that the term of any director serving in such capacity and over the age of 60 on August 20, 1993 shall automatically expire at the first annual meeting of the shareholders following his or her attainment of the age of 70. Notwithstanding any other provision hereof, the term of any director who is an officer or other full time employee of the corporation shall automatically expire at the first annual meeting of the shareholders following his or her retirement from employment by the corporation unless such retiree was the Chief Executive Officer of the corporation at the time of retirement, in which case his or her term as a director (unless such term otherwise sooner terminates) shall automatically terminate at the second annual meeting of shareholders following his or her retirement. Any such retiree shall not thereafter be eligible to stand for election to the Board of Directors, except that any such retiree who was the Chief Executive of the corporation at the time of retirement and whose term expires at the annual meeting of shareholders next following his or her retirement shall be eligible to stand for election to a single, additional term of one year, which one-year term shall commence at the annual meeting of shareholders next following the retirement of such Chief Executive Officer. If a vacancy occurs in the Board of Directors prior to the end of what would have been a three-year term but for the provisions of this paragraph, the vacancy shall be filled for the balance of said three-year term in accordance with the provisions of Section 9 of this Article. SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without other notice than this By-law, immediately after the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the Chief Executive Officer or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors called by them. SECTION 5. NOTICE. Notice of any special meeting shall be given by written notice to each director at his business address. If mailed, such notice shall be given at least seven days prior to the meeting, and shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, or overnight delivery service, such notice shall be given at least three days prior to the meeting and shall be deemed to be delivered when, in the case of a telegram, it is delivered to the telegraph company, or in the case of overnight delivery service, it is delivered to the carrier. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. SECTION 6. QUORUM. A majority of the number of directors fixed by these By-laws shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, provided that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting at any time without further notice. The presence of a director who is directly or indirectly a party to a transaction to be acted upon by the Board of Directors, or who is otherwise not disinterested, may be counted in determining whether a quorum is present, but the vote of such director may not be counted when the Board of Directors or a committee of the Board takes action on the transaction. SECTION 7. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by these By-laws or the Articles of Incorporation. Members of the Board of Directors or of any committee of the Board may participate in and act at a meeting through the use of a conference telephone or other communication equipment by means of which all persons participating in the meeting can hear each other. Participation in such meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating. SECTION 8. RESIGNATIONS. A director may resign at any time by giving written notice to the Board of Directors, its chairman, or to the President or Secretary of the corporation. A resignation is effective when the notice is given unless the notice specifies a future date. SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors, including any vacancy occurring by reason of an increase in the number of directors, shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose, provided that the Board of Directors may fill by appointment any such vacancy occurring between meetings of the shareholders. A director appointed by the Board of Directors pursuant to this Section to fill a vacancy shall serve until the next meeting of shareholders at which directors are to be elected. A director elected by the shareholders to fill a vacancy shall hold office for the balance of the term for which he or she was elected. SECTION 10. ACTION WITHOUT A MEETING. Any action required to be taken at a meeting of the Board of Directors, or any other action which may be taken at a meeting of the Board of Directors or a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be. The consent shall be evidenced by one or more written approvals, each of which sets forth the action taken and bears the signature of one or more directors. All such approvals shall be delivered to the Secretary to be filed in the corporate records. The action taken shall be effective when all the directors have approved the consent unless the consent specifies a different effective date. Any such consent signed by all the directors or all the members of a committee shall have the same effect as a unanimous vote, and may be stated as such in any document filed with the Secretary of State of Illinois or with anyone else. SECTION 11. COMPENSATION. The Board of Directors, by the affirmative vote of a majority of directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise. The directors shall be paid their expenses, if any, of attendance at each meeting of the Board. No such payment previously mentioned in this Section shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 12. REMOVAL OF DIRECTORS. If the notice of a meeting of shareholders shall state that a purpose of the meeting is to vote upon the removal of one or more directors named in the notice, then one or more of such directors may be removed at such meeting by the affirmative vote of the holders of a majority of the outstanding shares then entitled to vote at an election of directors. Only the named director or directors may be removed at such meeting and directors may only be removed for cause. SECTION 13. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless he or she (a) files his or her written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof, or (b) forwards such dissent by registered or certified mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent does not apply to a director who voted in favor of such action. SECTION 14. COMMITTEES. A majority of the directors may create one or more committees and appoint members of the Board to serve on the committee or committees. Each committee shall have two or more members, who serve at the pleasure of the Board. Each committee, to the extent specified by the Board of Directors, may exercise the authority of the Board of Directors in the management of the corporation, except as otherwise provided by law. Vacancies in the membership of the committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. Each committee shall render a report of its proceedings to the Board when required. Unless the resolution of appointment by the Board of Directors requires a greater number, a majority of any committee shall constitute a quorum, and a majority of a quorum shall be necessary for committee action. A committee may act by unanimous consent in writing without a meeting and, subject to the provisions of these By-laws or action of the Board of Directors, the committee by majority vote of its members shall determine the time and place of meetings and the notice required therefor. SECTION 15. NOMINATIONS OF DIRECTORS. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of shareholders (a) by or at the direction of the Board of Directors by any nominating committee or person appointed by the Board or, (b) by any shareholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 15. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary. To be timely, a shareholder's notice shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than sixty (60) days prior to the first anniversary of the date of the last annual meeting of shareholders. Such shareholder's notice to the Secretary shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the corporation which are beneficially owned by the person, and (iv) such other information relating to the person that would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission as then in effect; and (b) as to the shareholder giving the notice (i) the name and record address of the shareholder, and (ii) the class and number of shares of the corporation which are beneficially owned by the shareholder. If the Chairman of the meeting of shareholders shall determine that a nomination was not made in accordance with the foregoing procedure, he or she shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE IV OFFICERS SECTION l. NUMBER. The officers of the corporation shall be a Chairman of the Board (if one is elected by the Board of Directors), a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer, and a Secretary to be elected by the Board of Directors, and such Assistant Treasurers, Assistant Secretaries, Controller or other officers as may be elected by the Board of Directors or appointed by the Board of Directors or the Chief Executive Officer of the corporation. The Chief Executive Officer of the corporation shall be the Chairman of the Board or the President as designated by the Board of Directors. In the event that a Chairman of the Board is not elected, the President shall be the Chief Executive Officer. Any two or more offices may be held by the same person. SECTION 2. ELECTION AND TERM OF OFFICE. The elected officers of the corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as shall be convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided. Election or appointment of an officer shall not of itself create contract rights. SECTION 3. REMOVAL. Any elected officer may be removed by the Board of Directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any appointed officer may be similarly removed by either the Board of Directors or the Chief Executive Officer of the corporation. SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall have such duties and functions as shall be assigned or delegated to him or her from time to time by the Board of Directors. The chairman shall report to the Board of Directors, and shall preside at the meetings of the shareholders and of the Board of Directors. SECTION 5. PRESIDENT. Subject to the direction and control of the Board of Directors, the President shall be in charge of the business of the corporation; he or she shall see that the resolutions and directions of the Board of Directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the Board of Directors; and, in general, he or she shall discharge all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time. In the absence of the Chairman of the Board, the President shall preside at all meetings of the shareholders and of the Board of Directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws, the President may execute for the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, and may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument. The President may vote all securities which the corporation is entitled to vote except to the extent such authority shall be vested in a different officer or agent of the corporation by the Board of Directors. SECTION 6. THE VICE PRESIDENTS. Each Vice President shall assist the President in the discharge of his or her duties, as the President may direct, and shall perform such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors. In the absence of the President or in the event of his or her inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or by the President if the Board of Directors has not made such a designation, or in the absence of any designation, then in the order of seniority of tenure as Vice President) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws, the Vice President (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, and he or she may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors, according to the requirements of the form of the instrument. SECTION 7. THE TREASURER. Subject to the supervision of the Board of Directors and Chief Executive Officer, the Treasurer shall have the custody of all funds and securities of the corporation and charge of the collection of amounts due the corporation. He or she shall disburse the funds of the corporation only upon receipt of properly authorized vouchers and shall keep a record of all receipts and disbursements of funds by him or her. He or she shall have authority to give receipts for moneys paid to the corporation and to endorse checks, drafts and warrants in the name of the corporation. SECTION 8. THE SECRETARY. The Secretary shall: (a) record the minutes of the shareholders' and the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the President or a Vice President, or any other officer thereunto authorized by the Board of Directors, certificates for shares of the corporation, the issue of which shall have been authorized by the Board of Directors, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the Board of Directors or these By-laws; (f) have general charge of the stock transfer books of the corporation; and (g) perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors. The Secretary shall have the authority to certify the By-laws, resolutions of the shareholders and Board of Directors and committees thereof, and other documents of the corporation as true and correct copies thereof. SECTION 9. ASSISTANT TREASURERS, ASSISTANT SECRETARIES, CONTROLLER, AND OTHER OFFICERS. The Assistant Treasurers and Assistant Secretaries shall perform such duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the President or the Board of Directors. The Assistant Secretaries may sign with the President, or a Vice President, or any other officer thereunto authorized by the Board of Directors, certificates for shares of the corporation, the issue of which shall have been authorized by the Board of Directors, and any contracts, deeds, mortgages, bonds, or other instruments which the Board of Directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the Board of Directors or these By-laws. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Controller, if one be elected or appointed, shall be the principal accounting officer of the corporation and as such shall have and perform all duties normally incident to the office of principal accounting officer. The Assistant Treasurers, the Assistant Secretaries, the Controller and any other officers shall have and perform such other duties as may be assigned from time to time by the Board of Directors or the Chief Executive Officer of the corporation. SECTION 10. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors or, if authorized by the Board, by the Chief Executive Officer of the corporation. No officer shall be prevented from receiving any salary by reason of the fact that he or she is also a director of the corporation. ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION l. CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the Board of Directors may select. ARTICLE VI CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION l. CERTIFICATES FOR SHARES. Certificates representing shares of the corporation shall be signed by the President or a Vice President or by such officer as shall be designated by resolution of the Board of Directors and by the Secretary or an Assistant Secretary, and shall be sealed with the seal or a facsimile of the seal of the corporation. If both of the signatures of the officers be by facsimile, the certificate shall be manually signed by or on behalf of a duly authorized transfer agent or clerk. Each certificate representing shares shall be consecutively numbered or otherwise identified, and shall also state the name of the person to whom issued, the number and class of shares (with designation of series, if any), the date of issue, and that the corporation is organized under Illinois law. If the corporation is authorized and does issue shares of more than one class or of a series within a class, the certificate shall also contain such information or statement with respect thereto as may be required by law. The name and address of each shareholder, the number and class of shares held and the date on which the certificates for the shares were issued shall be entered on the books of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation. SECTION 2. LOST CERTIFICATES. If a certificate representing shares allegedly has been lost or destroyed, the Board of Directors may in its discretion, except as may be required by law, direct that a new certificate be issued upon such indemnification and other reasonable requirements as it may impose. SECTION 3. TRANSFERS OF SHARES. Transfers of shares of the corporation shall be recorded on the books of the corporation and, except in the case of a lost or destroyed certificate, shall be made only upon surrender for cancellation of the certificate for such shares. A certificate presented for transfer must be duly endorsed and accompanied by proper guaranty of signature and other appropriate assurances that the endorsement is effective. ARTICLE VII INDEMNIFICATION SECTION l. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. SECTION 2. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, provided that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation, unless, and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. SECTION 3. To the extent that a director, officer, employee or agent of the corporation has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Sections l and 2 of this Article, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. SECTION 4. Any indemnification under Sections l and 2 of this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case, upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section l or 2 of this Article. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the shareholders. SECTION 5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he or she is entitled to be indemnified by the corporation as authorized in this Article. SECTION 6. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article. SECTION 8. If the corporation has paid indemnity or has advanced expenses to a director, officer, employee or agent, the corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting. SECTION 9. For purposes of this Article, references to "the corporation" shall include, in addition to the surviving corporation, any merging corporation (including any corporation having merged with a merging corporation) absorbed in a merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers and employees or agents, so that any person who was a director, officer, employee or agent of such merging corporation, or was serving at the request of such merging corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the surviving corporation as such person would have with respect to such merging corporation if its separate existence had continued. SECTION 10. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner he or she reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article. ARTICLE VIII FISCAL YEAR The fiscal year of the corporation shall begin on the first day of January in each year and end on the last day of December in each year. ARTICLE IX DISTRIBUTIONS The Board of Directors from time to time may authorize, and the corporation may make, distributions to its shareholders in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. ARTICLE X SEAL The corporation shall have a corporate seal with the name of the corporation and the word "Illinois" inscribed about a circle and the phrase "Incorporated 1985" within such circle. Such seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE XI WAIVER OF NOTICE Whenever any notice is required to be given under the provisions of these By-laws, the Articles of Incorporation or the Business Corporation Act of 1983, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance at any meeting shall constitute waiver of notice thereof unless the person at the meeting objects to the holding of the meeting because proper notice was not given. ARTICLE XII AMENDMENTS In furtherance of, and not in limitation of, the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized and empowered to adopt, amend or repeal the By-laws (or any portion thereof) of the Corporation. The shareholders of the Corporation are authorized and empowered to adopt, amend or repeal the By-laws only by an affirmative vote of 75% of the shares outstanding and entitled to vote thereon. The By-laws may contain any provisions for the regulation and management of the affairs of the Corporation not inconsistent with law or the Articles of Incorporation. EX-99.5 6 EXHIBIT A-5 ART. OF INCORP. OF MIDWEST ENERGY File Number 6022-340-8 1998R63660 12-04-1998 9:30 AM SANGAMON COUNTY ILLINOIS 15.00 4 MARY ANN LAMM SANGAMON COUNTY RECORDER State of Illinois Office of The Secretary of State Whereas, ARTICLES OF INCORPORATION OF MIDWEST ENERGY, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984. Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. In Testimony Whereof, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, at the City of Springfield, this 20TH day of NOVEMBER A.D. 1998 and of the Independence of the United States the two hundred and 23RD. [SEAL] SEAL OF THE STATE OF ILLINOIS /s/ GEORGE H. RYAN AUG. 26TH 1818 Secretary of State C-212.2
Form BCA-2.10 ARTICLES OF INCORPORATION - ----------------------------------------------------------------------------------------------------------------------------------- (Rev. Jan. 1995) This space for use by Secretary State George H. Ryan FILED Secretary of State NOV 20 1998 -------------------------------------- Department of Business Services This space for use by Springfield, IL 62756 GEORGE H. RYAN Secretary of State - --------------------------------- SECRETARY OF STATE Payment must be made by certi- Date 11-20-98 fied check, cashier's check, Ill- Franchise Tax $ 25 inois attorney's check, Illinois Filing Fee $ 75 C.P.A.'s check or money order, ------ payable to "Secretary of State". Approved 100 -- /s/JM =================================================================================================================================== 1. CORPORATE NAME: Midwest Energy, Inc. -------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------ (The corporate name must contain the word "corporation", "company," "incorporated," "limited" or an abbreviation thereof.) =================================================================================================================================== 2. Initial Registered Agent: Corporation Service Company ---------------------------------------------------------------------------------------------------- First Name Middle Initial Last Name Initial Registered Office: 700 South Second Street --------------------------------------------------------------------------------------------------- Number Street Suite # Springfield IL 62704 Sangamon --------------------------------------------------------------------------------------------------- City Zip Code County =================================================================================================================================== 3. Purpose or purposes for which the corporation is organized: (If not sufficient space to cover this point, add one or more sheets of this size.) To engage in any lawful act or activity for which a corporation may be organied under the Illinois Business corporation Act of 1983, as amended. =================================================================================================================================== 4. Paragraph 1: Authorized Shares, Issued Shares and Consideration Received: Par Value Number of Shares Number of Shares Consideration to be Class per Share Authorized Proposed to be Issued Received Therefor ------------------------------------------------------------------------------------------------------------------------------ Common $ no par value 10,000 1000 $ 1000 ------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------ TOTAL = $ 1000 Paragraph 2: The preferences, qualifications, limitations, restrictions and special or relative rights in respect of the shares of each class are: See attached (If not sufficient space to cover this point, add one or more sheets of this size.)
EXPEDITED NOV 20 1998 SECRETARY OF STATE (over) 5. OPTIONAL: (a) Number of directors constituting the initial board of directors of the corporation: (b) Names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and qualify: Name Residential Address City, State, Zip --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- ================================================================================ 6. OPTIONAL: (a) It is estimated that the value of all property to be owned by the corporation for the following year wherever located will be: $ -------------- (b) It is estimated that the value of the property to be located within the State of Illinois during the following year will be: $ -------------- (c) It is estimated that the gross amount of business that will be transacted by the corporation during the following year will be: $ -------------- (d) It is estimated that the gross amount of business that will be transacted from places of business in the State of Illinois during the following year will be: $ -------------- ================================================================================ 7. OPTIONAL: OTHER PROVISIONS Attach a separate sheet of this size for any other provision to be included in the Articles of Incorporation, e.g., authorizing preemptive rights, denying cumulative voting, regulating internal affairs, voting majority requirements, fixing a duration other than perpetual, etc. See Rider. ================================================================================ 8. NAME(S) & ADDRESS(ES) OF INCORPORATOR(S) The undersigned incorporator(s) hereby declare(s), under penalties of perjury, that the statements made in the foregoing Articles of Incorporation are true. Dated November 19, 1998 Signature and Name Address 1. /s/ M.M. Sherry 1. 333 W. Walker Dr. Suite 2100 ------------------------------------ --------------------------------- Signature Street M.M. Sherry Chicago IL 60606 ------------------------------------ --------------------------------- (Type or Print Name) City/Town State Zip Code 2. 2. ------------------------------------ --------------------------------- Signature Street ------------------------------------ --------------------------------- (Type or Print Name) City/Town State Zip Code 3. ------------------------------------ --------------------------------- Signature Street ------------------------------------ --------------------------------- (Type or Print Name) City/Town State Zip Code (Signatures must be in BLACK INK on original document. Carbon copy, photocopy or rubber stamp signatures may only be used on conformed copies.) NOTE: If a corporation acts as incorporator, the name of the corporation and the state of incorporation shall be shown and the execution shall be by its president or vice president and verified by him, and attested by its secretary or assistant secretary. ================================================================================ FEE SCHEDULE o The initial franchise tax is assessed at the rate of 15/100 of 1 percent ($1.50 per $1,000) on the paid-in capital represented in this state, with a minimum of $25. o The filing fee is $75. o The minimum total due (franchise tax + filing fee) is $100. (Applies when the Consideration to be Received as set forth in Item 4 does not exceed $16,667) o The Department of Business Services in Springfield will provide assistance in calculating the total fees if necessary. Illinois Secretary of State Springfield, IL 62756 Department of Business Services Telephone (217) 782-9522 or 782-9523 C-162.18 EX-99.6 7 EXHIBIT A-6 BY-LAWS OF MIDWEST ENERGY BY-LAWS OF MIDWEST ENERGY, INC. ARTICLE I. OFFICES Section 1. The registered office of the Corporation required by the Illinois Business Corporation Act of 1983, as amended (the "Act"), to be maintained in the State of Illinois shall be in the City of Chicago, County of Cook, State of Illinois. The Corporation may also have offices at such other places both within and without the State of Illinois as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II. SHAREHOLDERS Section 1. Time and Place of Meetings. All meetings of the shareholders for the election of directors or for any other purpose shall be held at such time and place, within or without the State of Illinois, as shall be designated by the Board of Directors. In the absence of a designation of a place for any such meeting by the Board of Directors, each such meeting shall be held at the principal office of the Corporation. Section 2. Annual Meetings. An annual meeting of shareholders shall be held for the purpose of electing directors and transacting such other business as may properly be brought before the meeting. The date of the annual meeting shall be determined by the Board of Directors. Section 3. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by law, may be called by the Chief Executive Officer, by the President, by the Chairman of the Board, by a majority of the Board of Directors, or by the holders of not less than twenty percent of the outstanding shares entitled to vote on the matter for which the meeting is called by written request executed by such holders and delivered to the President or the Secretary of the Corporation. Section 4. Notice of Meetings. Written notice of each meeting of the shareholders stating the place, date and time of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than twenty nor more than sixty days before the date of the meeting, either personally or by mail, by the President, or by the Secretary at the direction of the President or the person or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the records of the Corporation, with postage thereon prepaid. Any shareholder entitled to receive notice may waive notice of any meeting by a writing executed and delivered to the Corporation either before or after the meeting. Attendance of a shareholder at any meeting shall constitute a waiver of notice of such meeting, unless the shareholder attends such meeting for the express purpose of objecting to the holding of such meeting because proper notice was not given and at the beginning of such meeting records such objection with the person acting as secretary of the meeting and does not thereafter vote on any action taken at the meeting. Section 5. Quorum. The holders of record of a majority of the shares issued and outstanding and entitled to vote thereat, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by the Act or by the Articles of Incorporation. If a quorum is not represented, the holders of record of the shares represented in person or by proxy at the meeting and entitled to vote thereat shall have power, by the affirmative vote of the holders of a majority of such shares, to adjourn the meeting to another time and/or place, without notice other than announcement at the meeting, except as hereinafter provided, until a quorum shall be present or represented. At such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. Withdrawal of shareholders from any meeting shall not cause the failure of a duly constituted quorum at such meeting. -2- Section 6. Voting. At all meetings of the shareholders, each shareholder shall be entitled to vote, in person or by proxy, each share owned by such shareholder of record on the record date for the meeting. Each outstanding share shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, unless otherwise provided in the Act or in the Articles of Incorporation. When a quorum is present at any meeting, the affirmative vote of the holders of record of a majority of the shares having voting power represented in person or by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the Act or of the Articles of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. A shareholder who is in attendance at a meeting of shareholders in person or by proxy, but who abstains from the vote on any matter, shall not be deemed to be represented at such meeting for purposes of the preceding sentence with respect to such vote, but shall be deemed to be represented at such meeting for all other purposes. Section 7. Informal Action by Shareholders. Unless otherwise provided by the Act or by the Articles of Incorporation, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by (a) the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voting, provided, that (i) at least five days prior to the execution of the consent a notice in writing is delivered to all of the shareholders entitled to vote with respect to the subject matter thereof, and (ii) those shareholders who have not consented in writing are notified in writing of the taking of the corporate action promptly after the effective date of such action; or (b) all of the shareholders entitled to vote with respect to the subject matter thereof. Section 8. Proxies. At all meetings of shareholders, a shareholder may vote in person or vote by proxy which is executed by the shareholder or his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary or other person authorized to tabulate votes at any time prior to the commencement of the meeting. No proxy shall be valid after eleven months from the date of its execution unless otherwise provided in the proxy. -3- ARTICLE III. DIRECTORS Section 1. General Powers. The business and affairs of the Corporation shall be managed and controlled by or under the direction of its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Articles of Incorporation or by these By-laws directed or required to be exercised or done by the shareholders. Section 2. Number, Qualification and Tenure. The Board of Directors of the Corporation shall consist of not less than one (1) member and not more than twelve (12) members. Within the limits above specified, the number of directors shall be determined from time to time by resolution of the Board of Directors. The directors shall be elected at the annual meeting of the shareholders, except as provided in the Articles of Incorporation or Section 3 of this Article, and each director elected shall hold office until his successor is elected and qualified or until his earlier death, termination, resignation or removal from office. Any decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. Section 3. Vacancies and Newly Created Directorships. Vacancies and newly created directorships resulting from any increase in the number of directors may be filled by the appointment of a majority of the directors then in office though less than a quorum, and each director so appointed shall hold office until the next annual meeting of shareholders and until his successor is elected and qualified or until the earlier death, termination, resignation or removal from office of such director. Section 4. Place of Meetings. The Board of Directors may hold meetings, both regular and special, either within or without the State of Illinois. Section 5. Meetings. The Board of Directors shall hold a regular meeting, to be known as the annual meeting, immediately following each annual meeting of the shareholders without any notice being given. Other regular meetings of the Board of Directors shall be held at such time and place as the Board of -4- Directors may designate from time to time. No notice of regular meetings need be given, other than by announcement at the immediately preceding regular meeting. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board or a majority of the Board of Directors. Notice of any special meeting of the Board shall be given at least two days prior thereto, either in writing, or telephonically if confirmed promptly in writing, to each director at the address shown for such director on the records of the Corporation. Section 6. Waiver of Notice; Business and Purpose. Notice of any meeting of the Board of Directors may be waived in writing signed by the person or persons entitled to such notice either before or after the time of the meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened and at the beginning of such meeting records such objection with the person acting as secretary of the meeting and does not thereafter vote on any action taken at the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice or waiver of notice of such meeting, unless specifically required by the Act. Section 7. Quorum and Voting. At all meetings of the Board of Directors a majority of the total number of directors then in office shall constitute a quorum for the transaction of business. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting without notice other than announcement at the meeting, to any other date, time and place until a quorum shall be present. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, unless the act of a greater number is required by the Act or by the Articles of Incorporation. Withdrawal of directors from any meeting shall not cause the failure of a duly constituted quorum at such meeting. A director who is in attendance at a meeting of the Board of Directors but who abstains from the vote on any matter by announcing his abstention to the person acting as secretary of the meeting and not voting on such matter shall not be deemed to be present at such meeting for purposes of the preceding sentence or Section 13 of this Article with respect to such vote, but shall be deemed to be present at such meeting for all other purposes. -5- Section 8. Organization. The Chairman of the Board, if elected, shall act as chairman at all meetings of the Board of Directors. If the Chairman of the Board is not elected or if elected, is not present, the Vice Chairman, if any, or, if no such Vice Chairman is present, a director chosen by a majority of the directors present, shall act as chairman at such meeting of the Board of Directors. Section 9. Committees. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate two or more directors to constitute an Executive Committee. The Board of Directors, by resolution adopted by a majority of the whole Board, may create one or more other committees and appoint two or more directors to serve on such committee or committees. Each director appointed to serve on any such committee shall serve, unless the resolution designating the respective committee is sooner amended or rescinded by the Board of Directors, until the next annual meeting of the Board or until his respective successor is designated. The Board of Directors, by resolution adopted by a majority of the whole Board, may also designate additional directors as alternate members of any committee to serve as members of such committee in the place and stead of any regular member or members thereof who may be unable to attend a meeting or otherwise unavailable to act as a member of such committee. In the absence or disqualification of a member and all alternate members designated to serve in the place and stead of such member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another director to act at the meeting in the place and stead of such absent or disqualified member. The Executive Committee may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation between the meetings of the Board of Directors, and any other committee may exercise the power and authority of the Board of Directors to the extent specified by the resolution designating such committee, or the Articles of Incorporation or these By-laws; provided, however, that no committee may take any action that is expressly required by the Act or the Articles of Incorporation or these By-laws to be taken by the Board of Directors and not by a committee thereof. Each committee shall keep a record of its acts and proceedings, which shall form a part of the records of the Corporation in the custody of the Secretary, and all actions of each committee shall be reported to the Board of Directors at the next meeting of the Board. -6- Meetings of committees may be called at any time by the Chairman of the Board, if any, or the chairman of the respective committee. A majority of the members of the committee shall constitute a quorum for the transaction of business and, except as expressly limited by this section, the act of a majority of the members present at any meeting at which there is a quorum shall be the act of such committee. Except as expressly provided in this section or in the resolution designating the committee, a majority of the members of any such committee may select its chairman, fix its rules of procedure, fix the time and place of its meetings and specify what notice of meetings, if any, shall be given. Section 10. Action without Meeting. Unless otherwise specifically prohibited by the Articles of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if all members of the Board of Directors or such committee, as the case may be, execute a consent thereto in writing setting forth the action so taken, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee. Section 11. Attendance by Telephone. Members of the Board of Directors or any committee thereof may participate in and act at any meeting of the Board of Directors or such committee, as the case may be, through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating. Section 12. Compensation. By resolution of the Board of Directors, irrespective of any personal interest of any of the members thereof, the directors may be paid their reasonable expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at meetings or a stated salary as directors, payable in cash or securities. These payments shall not preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. -7- Section 13. Presumption of Assent. A director who is present at a meeting of the Board of Directors or any committee thereof when corporate action is taken shall be deemed to have assented to the action taken unless: (1) he objects at the beginning of the meeting to holding such meeting or transacting business at such meeting; (2) his dissent from the action taken is entered in the minutes of such meeting; or (3) he delivers written notice of his dissent to the person acting as the secretary of the meeting before the adjournment thereof or forwards such dissent by registered or certified mail to the Secretary immediately after the adjournment of such meeting. The right of dissent is not available to a director who votes in favor of the action taken. ARTICLE IV. OFFICERS Section 1. Enumeration. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President and a Secretary. The Board of Directors may also elect a Chairman of the Board, a Vice Chairman, one or more Vice Presidents, a Treasurer, one or more Assistant Secretaries and Assistant Treasurers and such other officers and agents as it may deem appropriate. Any number of offices may be held by the same person. Section 2. Term of Office. The officers of the Corporation shall be elected at the annual meeting of the Board of Directors and shall hold office until their successors are elected and qualified or until their earlier death, termination, resignation or removal from office. Any officer or agent of the Corporation may be removed, with or without cause, by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Any vacancy in any office because of death, resignation, termination, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. Section 3. Chief Executive Officer. The Chief Executive Officer of the Corporation, if elected, shall have general supervision, direction and control of the business and affairs of the Corporation, subject to the control of the Board of Directors, and shall have such other functions, authority and duties as customarily appertain to the office of the chief executive officer of a business corporation or as may be prescribed by the Board of Directors. -8- Section 4. President. During any period when there shall be an office of Chief Executive Officer, the President shall be the chief operating officer of the Corporation and shall have such functions, authority and duties as may be prescribed by the Board of Directors or the Chief Executive Officer. During any period when there shall not be an office of Chief Executive Officer, the President shall be the chief executive officer of the Corporation, and, as such, shall have the functions, authority and duties provided for the Chief Executive Officer. Section 5. Vice President. The Vice President or, if there shall be more than one, each Vice President, in the absence of the President or in the event of the President's inability or refusal to act (and if there be no Chief Executive Officer), shall have the authority to perform the duties of the President, subject to such limitations thereon as may be imposed by the Board of Directors, and such other duties as may from time to time be prescribed by the Board of Directors, the Chief Executive Officer or the President. Section 6. Secretary. The Secretary shall: (a) keep a record of all proceedings of the shareholders, the Board of Directors and any committees thereof in one of more books provided for that purpose; (b) give, or cause to be given, all notices that are required by law or these Bylaws to be given by the Secretary; (c) be custodian of the corporate records and, if the Corporation has a corporate seal, of the seal of the Corporation; (d) have authority to affix the seal of the Corporation to all instruments the execution of which requires such seal and to attest such affixing of the seal; (e) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (f) sign, with the Chief Executive Officer, if any, or President or any Vice President, or any other officer thereunto authorized by the Board of Directors, any certificates for shares of the Corporation, or any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed by the signature of more than one officer; (g) have general charge of the share transfer books of the Corporation; (h) have authority to certify as true and correct copies of the By-laws, or resolutions of the shareholders, the Board of Directors and committees thereof, and of other documents of the Corporation; and (i) in general, perform the duties incident to the office of secretary and such other duties as from time to time may be prescribed by the Board of Directors, the Chief Executive Officer or the President. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest such affixing of the seal. -9- Section 7. Assistant Secretary. The Assistant Secretary, or if there shall be more than one, each Assistant Secretary in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, shall have the authority to perform the duties of the Secretary, subject to such limitations thereon as may be imposed by the Board of Directors, and such other duties as may from time to time be prescribed by the Board of Directors, the Chief Executive Officer, the President or the Secretary. Section 8. Treasurer. The Treasurer shall be the principal accounting and financial officer of the Corporation. The Treasurer shall: (a) have charge of and be responsible for the maintenance of adequate books of account for the Corporation; (b) have charge and custody of all funds and securities of the Corporation, and be responsible therefor and for the receipt and disbursement thereof; and (c) perform the duties incident to the office of treasurer and such other duties as may from time to time be prescribed by the Board of Directors, the Chief Executive Officer or the President. The Treasurer may sign with the Chief Executive Officer, if any, or the President, or any Vice President, or any other officer thereunto authorized by the Board of Directors, certificates for shares of the Corporation. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may determine. Section 9. Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, each Assistant Treasurer, in the absence of the Treasurer or in the event of the Treasurer's inability or refusal to act, shall have the authority to perform the duties of the Treasurer, subject to such limitations thereon as may be imposed by the Board of Directors, and such other duties as may from time to time be prescribed by the Board of Directors, the Chief Executive Officer, the President or the Treasurer. Section 10. Other Officers and Agents. Any officer or agent who is elected or appointed from time to time by the Board of Directors and whose duties are not specified in these By-laws shall perform such duties and have such powers as may from time to time be prescribed by the Board of Directors, the Chief Executive Officer or the President. -10- ARTICLE V. CERTIFICATES FOR SHARES Section 1. Form. The shares of the Corporation shall be represented by certificates; provided, however, the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation's shares shall be uncertificated shares. Each certificate for shares shall be consecutively numbered or otherwise identified. Certificates representing shares in the Corporation shall be signed by or in the name of the Corporation by the Chief Executive Officer or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation. Where a certificate is countersigned by a transfer agent, other than the Corporation or an employee of the Corporation, or by a registrar, the signatures of one or more officers of the Corporation may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, the certificate may be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were such officer, transfer agent or registrar at the date of its issue. Section 2. Transfer. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate or uncertificated shares in place of any certificate therefor issued by the Corporation to the person entitled thereto, cancel the old certificate and record the transaction in its share book. Section 3. Replacement. In case of the loss, destruction, mutilation or theft of a certificate representing shares of the Corporation, a new certificate may be issued upon the surrender of the mutilated certificate or, in the case of loss, destruction or theft of a certificate, upon satisfactory proof of such loss, destruction or theft and upon such terms as the Board of Directors may prescribe. The Board of Directors may in its discretion require the owner of the lost, destroyed or stolen certificate, or his legal representative, to give the Corporation a bond, in such sum and in such form and with such surety or sureties as it may direct, to indemnify the Corporation against any claim that may be made against it with respect to the certificate alleged to have been lost, destroyed or stolen. -11- ARTICLE VI. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS Section 1. Third Party Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including all appeals (other than an action, suit or proceeding by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation (and the Corporation, in the discretion of the Board of Directors, may so indemnify a person by reason of the fact that he is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation, another corporation, partnership, joint venture, trust or other enterprise in any capacity), against expenses (including attorneys' fees), judgments, decrees, fines, penalties and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith or in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe his conduct was unlawful. Section 2. Actions By or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit, including all appeals, by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation (and the Corporation, in the discretion of the Board of Directors, may so indemnify a person by reason of the fact that he is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation in any other capacity for or on behalf of the Corporation), against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the -12- best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been finally adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court in which such action or suit was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper. Notwithstanding the foregoing, the Corporation shall be required to indemnify an officer or director in connection with an action, suit or proceeding initiated by such person only if such action, suit or proceeding was authorized by the Board of Directors. Section 3. Indemnity if Successful. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 or 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 4. Standard of Conduct. Except in a situation governed by Section 3 of this Article, any indemnification under Section 1 or 2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or 2, as applicable, of this Article. Such determination shall be made (i) by a majority vote of directors acting at a meeting at which a quorum consisting of directors who were not parties to such action, suit or proceeding is present, or (ii) if such a quorum is not obtainable, or even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the shareholders. Section 5. Expenses. Expenses of each officer and director hereunder indemnified actually and reasonably incurred in defending a civil or criminal action, suit or proceeding or threat thereof shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of any undertaking by or on behalf of such person to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article. Such expenses incurred by employees and agents may be so paid upon receipt of the aforesaid undertaking and such other terms and conditions, if any, as the Board of Directors deems appropriate. -13- Section 6. Nonexclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to other Sections of this Article, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may now or hereafter be entitled under any law, by-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 7. Insurance. The Corporation may purchase and maintain insurance, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of the Act. Section 8. Definitions. For purposes of this Article, references to "the Corporation" shall include, in addition to the surviving corporation, any merging corporation (including any corporation having merged with a merging corporation) absorbed in a merger which, if its separate existence had continued, would have had the power and authority to indemnify any or all of its directors, officers, employees and agents, so that any person who was a director, officer, employee or agent of such merging corporation, or was serving at the request of such merging corporation in any other capacity, shall stand in the same position under the provisions of this Article with respect to the surviving corporation as such person would have had with respect to such merging corporation if its separate existence had continued as such corporation was constituted immediately prior to such merger. For purposes of this Article, references to "other capacities" shall include serving as a trustee or agent for any employee benefit plan; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. -14- Section 9. Reports to Shareholders. If required by the Act, the Corporation shall report any indemnity payment or advancement of expenses by the Corporation to any director, officer, employee or agent provided for in this Article to the shareholders in writing either with or before the distribution of the notice of the next shareholders' meeting. Section 10. Severability. If any provision hereof is invalid or unenforceable in any jurisdiction, the other provisions hereof shall remain in full force and effect in such jurisdiction, and the remaining provisions hereof shall be liberally construed to effectuate the provisions hereof, and the invalidity of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. Section 11. Amendment. The right to indemnification conferred by this Article shall be deemed to be a contract between the Corporation and each person referred to herein until amended or repealed, but no amendment to or repeal of these provisions shall apply to or have any effect on the right to indemnification of any person with respect to any liability or alleged liability of such person for or with respect to any act or omission of such person occurring prior to such amendment or repeal. ARTICLE VII. GENERAL PROVISIONS Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed from time to time by resolution of the Board of Directors. Section 2. Corporation Seal. The corporate seal, if any, of the Corporation shall be in such form as may be approved from time to time by the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 3. Notices and Mailing. Except as otherwise provided in the Act, the Articles of Incorporation or these By-laws, all notices required to be given by any provision of these Bylaws shall be deemed to have been given (i) when received, if given in person, (ii) on the date of acknowledgment of receipt, if sent by telex, facsimile or other wire transmission, (iii) one day after delivery, properly addressed, to a reputable courier for same day or overnight delivery, or (iv) three days after being deposited, properly addressed, in the U.S. mail, certified or registered mail, postage prepaid. -15- Section 4. Waiver of Notice. Whenever any notice is required to be given under the Act or the provisions of the Articles of Incorporation or these By-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Section 5. Interpretation. In these By-laws, unless a clear contrary intention appears, the singular number includes the plural number and vice versa, and reference to either gender includes the other gender. ARTICLE VIII. AMENDMENTS Unless the power to make, alter, amend or repeal these By-laws is reserved to the shareholders by the Articles of Incorporation, these By-laws, including any By-law adopted by the shareholders, may be made, altered, amended or repealed by the shareholders or the Board of Directors, but the fact that the power to make, alter, amend or repeal these By-laws has been conferred upon the Board of Directors shall not divest the shareholders of the same powers. (147802) -16- EX-99.7 8 EXHIBIT D-2 APPLICATION TO FERC [Letterhead of Winthrop, Stimson, Putnam & Roberts] February 19, 1999 Hon. David P. Boergers Acting Secretary, Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C. 20426 Re: Central Illinois Light Company and The AES Corporation, Docket No. EC99- ---------------------------------- Dear Mr. Boergers: On behalf of Central Illinois Light Company (CILCO) and the AES Corporation (AES), we are herewith submitting for filing the original and six copies of an Application for Authorization of the Disposition of Jurisdictional Facilities under Section 203 of the Federal Power Act. A form of Notice, suitable for publication in the Federal Register, is also included in the materials filed herewith, together with a diskette containing the text of the Notice in WordPerfect format. This Application seeks Commission authorization for the merger of a subsidiary of AES with CILCO's parent, CILCORP Inc., and the possible merger of CILCORP Inc. into AES. The attention of the Commission and the Staff are respectfully called to the applicants request for expeditious consideration and approval of this application so that the merger can take place by the end of April 1999. We are also attaching two additional copies of this letter and the Application and ask that a member of your Staff stamp them to indicate their receipt and return them to us in the envelope provided for that purpose. February 19, 1999 If there are any questions about this filing, please do not hesitate to contact me. Sincerely, Isaac D. Benkin Counsel for Central Illinois Light Company Atch. UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Central Illinois Light Company, ) on its own behalf ) Docket No. EC99-_______ and on behalf of ) The AES Corporation ) APPLICATION FOR APPROVAL OF MERGER UNDER SECTION 203 OF THE FEDERAL POWER ACT February 19, 1999 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Central Illinois Light Company, ) on its own behalf ) Docket No. EC99-_______ and on behalf of ) The AES Corporation ) APPLICATION FOR AUTHORIZATION OF THE DISPOSITION OF JURISDICTIONAL FACILITIES UNDER SECTION 203 OF THE FEDERAL POWER ACT AND REQUEST FOR EXPEDITED TREATMENT Pursuant to section 203 of the Federal Power Act, 16 U.S.C. section 824b, and Part 33 of the Commission's Regulations, 18 C.F.R. sections 33.1 - 33.10 (1998), Central Illinois Light Company ("CILCO"), a public utility, hereby applies for an order authorizing and approving the merger of its parent, CILCORP Inc. ("CILCORP") into and with Midwest Energy, Inc. ("Midwest Energy"), a wholly-owned subsidiary of The AES Corporation ("AES"), with CILCORP being the surviving corporation and, thereafter, at the discretion of AES, the merger of CILCORP into AES, to the extent that such merger or mergers result in a transfer of control over jurisdictional facilities. (CILCO and AES are hereinafter referred to collectively as the "Applicants.") The Applicants request expeditious consideration and approval of this application to avoid delaying the proposed merger. Specifically, the Applicants request that the Commission set a 30-day period for public comment so that it may issue an order authorizing the merger no later than the end of April 1999. As the Applicants demonstrate below, this merger application does not require an Appendix A analysis and, therefore, interested persons do not need a 60-day comments period to review the application. A 30-day comment period is appropriate in cases, such as this one, where no Appendix A analysis is required. See, e.g., Phibro, Inc., Docket No. EC98-41-000, Notice issued May 13, 1998 (setting 30-day comment period); Nova Corp. and TransCanada Pipelines Ltd., Docket No. EC98-29-000, Notice issued February 13, 1998 (same). I. INTRODUCTION The proposed merger does not raise any of the public policy concerns that frequently are present in utility merger proceedings and therefore should be approved promptly. CILCO is a FERC-jurisdictional public utility that provides retail electric and natural gas service in central and east-central Illinois, provides open access transmission service and makes wholesale power sales. Recently, CILCO requested the Commission's approval to transfer control of its jurisdictional transmission facilities to the Midwest Independent System Operator ("ISO"). AES primarily is an independent power developer and also is involved in electric power marketing. AES does not own any electric transmission facilities in the United States and does not control any inputs necessary for electric generation in the United States. AES does not own any generation facilities in the market in which CILCO sells wholesale power, and the generating facilities owned by AES in the surrounding region are fully committed under long-term contracts. - 2 - As the affidavit of Cliff W. Hamal, annexed hereto as Exhibit B, demonstrates, the merger transaction will have no adverse effect on competition in any relevant market. AES is not now a competitor or potential competitor for wholesale power sales or transmission service in the relevant geographic or product markets served by CILCO. With the exception of facilities in Texas and Florida, the capacity of each of AES's generation facilities is fully committed under long-term contracts. No AES facility is closer than three transmission wheels away from CILCO. Hence, this transaction does not raise any of the competitive concerns frequently associated with the utility sector. Instead, the merger will invest an existing competitor in the marketplace with enhanced experience, financial resources and management expertise. The merger also will have no adverse effect on rates. AES has no captive customers. CILCO serves at wholesale two transmission-dependent utilities. One, CILCO's only wholesale requirements customer, is protected until March 2001 by a fixed-rate contract. The other has a five-year transmission contract with CILCO that precludes CILCO from increasing its transmission rates. Once these agreements expire, the customers will be free to obtain sales service in the competitive market, and transmission service will be available at regulated rates under CILCO's open-access tariff. CILCO and AES are hereby committing themselves not to file for an increase in CILCO's current transmission rates for a period of four years after the merger takes place. The merger will not alter in any way the effectiveness of regulation over the Applicants; CILCO will be, - 3 - as it now is, subject to regulation by this Commission and the Illinois Commerce Commission ("ICC"). Consequently, the merger will be consistent with the public interest. Although CILCO and AES are submitting this application pursuant to Part 33 of the Commission's regulations, the Applicants have conformed to the revised procedural requirements for section 203 applications which the Commission announced in its April 16, 1998 Notice of Proposed Rulemaking in Docket No. RM98-4, Revised Filing Requirements Under Part 33 of the Commission's Regulations, FERC Stats. & Regs. P. 32,528 (1998) ("Filing Requirements NOPR"). In this regard, the Applicants have included in this application new material called for under the Filing Requirements NOPR. II. DESCRIPTION OF THE APPLICANTS A. CILCO and CILCORP CILCO, an Illinois corporation and a combination gas and electric company, is a regulated "public utility" within the meaning of section 201(e) of the Federal Power Act, 16 U.S.C. section 824(e). CILCO provides retail electric service to approximately 193,000 customers in central and east central Illinois and provides retail gas service to approximately 202,000 customers in central and east central Illinois. CILCO distributes electricity in Peoria, Pekin and Lincoln, Illinois and numerous other communities in central and east central Illinois and provides natural gas distribution service in Peoria, Pekin and Springfield, Illinois and numerous other communities in central and east central Illinois. CILCO's natural gas service is exempt from the Commission's - 4- jurisdiction under the Hinshaw Amendment to the Natural Gas Act. The ICC has jurisdiction over the rates, terms and conditions of the retail service provided by CILCO. CILCO also provides wholesale electric sales service pursuant to cost-based 1/ and market-based 2/ tariffs on file with the Commission. CILCO provides full requirements sales service to one customer, the Village of Riverton, Illinois pursuant to a contract approved in Docket No. ER96-1365-000. CILCO provides open access transmission service under a tariff which was approved by the Commission in Docket Nos. OA96-36-000 and OA97-612-000. The Commission's jurisdiction under the Federal Power Act extends to certain of CILCO's electric transmission facilities and services, its wholesale sales of power and energy and related transactions. The 1998 net generating capability owned by CILCO is approximately 1152 MW. CILCO owns two coal-fired generating stations in central Illinois. Those facilities have a combined capability of 1106 MW. In addition, CILCO owns a gas-fired peaking station having a 30-MW capability. CILCO also owns the Midwest Grain Cogeneration plant, with a capacity of 16 MW. The plant is located in Pekin, Illinois. It is not a Qualifying Facility, and its power output is used as CILCO system power. CILCO has two contracts with Central Illinois Public - --------------- 1/ CILCO's cost-based tariff was approved by the Commission's unpublished letter order issued April 25, 1995, in Docket No. ER95-602-000. 2/ CILCO's market-based tariff was approved by the Commission's order in Docket No. ER98-2440-000 issued on June 2, 1998. Central Illinois Light Co., 83 FERC P. 61,252 (1998). - 5 - Service Company, under which CILCO currently makes bundled wholesale purchases of 150 MW of capacity and energy, plus reserves. The amount purchased declines to 50 MW after May 31, 2002. The last of these two contracts expires in 2009. The 345-kV, 138-kV and 34.5-kV transmission facilities of CILCO are shown on a map included in Exhibit I to this application. CILCO owns approximately 350 miles of 345-kV, 138-kV and 34.5-kV lines which are functionalized as transmission facilities. The map identifies the facilities owned by CILCO. CILCO is part of the Mid-American Interconnected Network ("MAIN"). Within MAIN, CILCO is interconnected directly with three other investor-owned utilities and the City of Springfield, Illinois, a municipal system. CILCO is a member of the Midwest ISO. CILCO's principal place of business is 300 Liberty Street, Peoria, Illinois 61602. 3/ - --------------- 3/ In addition to its ownership interest in CILCO, CILCORP, through subsidiaries, holds two non-operating investments in electric generating facilities: (1) Springerville Unit 1. CILCORP Lease Management Inc. ("CLM") owns a 7.4257% undivided interest in Springerville Unit 1, a 360-MW coal-fired power plant located in Springerville, Arizona. The plant is operated by Tucson Electric Power ("TEP") and is leased to TEP under a long-term leveraged lease. The lease expires in 2015. CLM acquired its $52.5 million interest in the $707 million facility in 1986. CLM is a wholly-owned subsidiary of CILCORP Investment Management Inc. ("CIM"), which, in turn, is a wholly-owned subsidiary of CILCORP Inc. CLM has no involvement in the operation of Springerville Unit 1. (2) Energy Investors Fund, L.P. CIM Energy Investments Inc., a wholly-owned subsidiary of CIM, owns a 3.13% limited partnership interest in Energy Investors Fund, L.P. ("the Fund"). The Fund holds interests in 18 independent power projects. CIM Energy, as a limited partner, has no operating control of the Fund or of the Fund's investments. CIM Energy acquired its $5 million interest in the $159.5 million Fund in 1989. All of these interests are passive investments. - 6 - All of CILCO's common stock is owned by CILCORP. CILCORP, an Illinois corporation, was incorporated in 1985. CILCORP is a "public-utility holding company" (as defined in PUHCA), exempt from all provisions (other than section 9(a)(2)) of PUHCA) pursuant to section 3(a)(1) of PUHCA and in accordance with Rule 2 of PUHCA. 4/ Its principal business subsidiaries are CILCO and QST Enterprises Inc. ("QST"). With the exception of CILCO, no CILCORP subsidiary or CILCORP affiliate is a "holding company" or a "public-utility company" within the meaning of PUHCA. CILCORP also has two other first-tier subsidiaries, CILCORP Investment Management Inc. and CILCORP Ventures Inc., neither of which is subject to the Commission's jurisdiction. CILCORP owns 100 percent of the common stock of all of its first tier subsidiaries. QST is a CILCORP subsidiary that, through its subsidiary, QST Environmental Inc., provides environmental services to governmental and industrial clients across the United States. QST also provides energy and energy-related services to a broad spectrum of retail and wholesale customers through another subsidiary, QST Energy Inc. QST Energy Inc. has one wholly-owned subsidiary, QST Energy Trading Inc., which purchases and sells energy in the wholesale market. - --------------- 4/ This is the so-called intrastate exemption for holding companies and their utility subsidiaries that are "predominantly intrastate in character and carry on their business substantially in a single state in which such holding company and every such subsidiary company thereof are organized." - 7 - CILCO and QST Energy Trading Inc. have each received approval from the Commission to charge market- based rates. 5/ B. AES AES, incorporated in Delaware, is a United States-based multinational electric power generation and distribution company with operations in 16 countries worldwide. It is engaged principally in the development, ownership and operation of electric generating plants and electric distribution companies. Revenues from electric generation and distribution activities accounted for over 95 percent of revenues in 1997. Other activities include the sale of steam and other commodities related to the company's cogeneration operations as well as operational, construction and project development services and gas and power marketing. AES is not currently a holding company subject to the provisions of PUHCA because none of its subsidiaries is a public utility company as defined by PUHCA. The Commission has authorized the following AES subsidiaries to make wholesale sales of power at market-based rates: (i) AES Power, Inc. ("AES Power"), a wholly owned subsidiary of AES (see Docket No. ER94-890); (ii) Northern/AES Energy L.L.C., which is a joint venture of AES Power North, Inc. (a wholly owned AES Power subsidiary), United Power Association and J Power, Inc. (see Docket No. ER98-445; (iii) Commonwealth Chesapeake Company, L.L.C., fifty percent of which is owned by AES Chesapeake, Inc. (a wholly owned subsidiary of - --------------- 5/ See Central Illinois Light Co., 83 FERC P. 61,252 (1998); QST Energy Trading, Inc., 74 FERC P. 61,282 (1996). - 8 - AES Enterprises, Inc., which in turn is a wholly owned AES subsidiary) (see Docket No. ER99-415); and (iv) AES NY, L.L.C. (an AES subsidiary created to acquire and own certain generating facilities in New York) (see Docket No. ER99-564). In addition, the Commission has granted three AES subsidiaries (AES Huntington Beach, L.L.C., AES Alamitos, L.L.C. and AES Redondo Beach, L.L.C.) authorization to sell wholesale power and certain ancillary services at market-based rates (see Docket Nos. ER98- 2184, -2185, -2186, -2843, -2844 and - -2883). AES has grown since its founding in 1981 to become one of the largest, if not the largest, global electricity suppliers. AES currently owns and/or operates (entirely or in part) a diverse international portfolio of electric power plants with a total capacity of 23,656 MW, including plants that are part of distribution companies in which AES has an interest. Of that total, 5,025 MW (nine plants) are either Qualifying Facilities ("QFs") or Exempt Wholesale Generators ("EWGs") that are located in the United States; 1,818 MW (five plants) are in the United Kingdom; 885 MW (six plants) are in Argentina; 817 MW (eight plants) are in China; 1,291 MW (three plants) are in Hungary; 6,456 MW (41 plants) are in Brazil; 5,384 MW (seven plants) are in Kazakhstan; 210 MW (one plant) are in the Dominican Republic; 110 MW (one plant) are in Canada; 695 MW (two plants) are in Pakistan; 288 MW (one plant) are in Australia; 405 MW (one plant) are in the Netherlands; and 282 MW (two plants) are in Panama. - 9 - Nearly 80 percent of this generating capacity (on an MW basis) is located outside the United States. AES owns and operates the Lyukobanya Coal Mine in Hungary. The mine has an output of approximately one million tons per year of brown coal and is the sole supplier of AES Borsod. Also, CEMIG, in which AES has a minority investment, has operated a small gas distribution company, GASMIG, since 1995. In addition to the above, AES owns Midwest, an Illinois corporation that was incorporated for the sole purpose of this merger transaction. AES's and Midwest's principal places of business are co-located at 1001 North 19th Street, 20th Floor, Arlington, Virginia 22209. AES is not currently a "public utility holding company" within the meaning of PUHCA. Each of the generating facilities in which AES has an interest is or has been (1) owned and operated by a "foreign utility company" within the meaning of section 33 of PUHCA; (b) certified as a QF under section 210 of the Public Utility Regulatory Policies Act of 1978, 16 U.S.C. section 824a-3 ("PURPA"), and the Commission's regulations in Part 292 of title 18, C.F.R. implementing PURPA; (c) been determined to be owned and operated by an Exempt Wholesale Generator ("EWG") under section 32 of PUHCA; or (d) some combination of the foregoing statuses exempting the holder from regulation under PUHCA. - 10 - III. DESCRIPTION OF THE TRANSACTION The merger will be implemented in accordance with an Agreement and Plan of Merger ("Merger Agreement") dated November 22, 1998, by and among CILCORP, AES and Midwest. A copy of the Merger Agreement is attached as Exhibit A to this application. The Merger Agreement provides for a two-step merger, the second being within AES's discretion. First, Midwest will be merged into CILCORP, with CILCORP as the surviving corporation (the "first merger"). As part of the first merger, the common stock of CILCORP will be canceled in exchange for the right to receive $65.00 per share in cash, and the common stock of Midwest will be the common stock of the surviving corporation, CILCORP. AES will own all of CILCORP's common stock and, thus, AES indirectly will own and control all of the common stock of CILCORP's subsidiaries, including CILCO. Thereafter, at the discretion of AES, CILCORP may be merged into AES, with AES as the surviving corporation (the "second merger"). (The first merger and the second merger are herein individually and collectively referred to as the "merger".) Following the merger, AES will own and control (directly, if the second merger takes place, or indirectly, if it does not) CILCO and its jurisdictional assets. Thus, either or both merger transactions will result in a transfer of control over CILCO and its jurisdictional assets. The Merger Agreement provides that following the merger, each CILCORP subsidiary, including CILCO, will continue to provide the same products and services it provided beforehand. Under - 11 - the Merger Agreement, the merger transaction cannot be consummated until all required regulatory approvals have been obtained. Under an Illinois statute which became effective in December 1997, Illinois electric utilities are required only to provide notice and certain information to the ICC prior to implementing a merger, provided that the merger is not a merger of two or more Illinois public utilities or their holding companies. The new statute specifies that ICC approval of the merger transaction described in this application is not required for public utilities. However, the ICC Staff has taken the position that because CILCO is a combination electric and gas utility, ICC approval of the merger transaction is required with respect to CILCO's gas operations. CILCO has filed with the ICC the required notice for an electric utility under the new statute and has also filed a separate petition with the ICC requesting a determination that ICC approval of the merger transaction is not required or, in the alternative, requesting approval of the merger transaction with respect to CILCO's gas operations. Because AES currently is not a public utility holding company, the merger transaction does not require Securities and Exchange Commission ("SEC") approval. However, AES has filed an application with the SEC requesting an exemption from registration under section 3(a)(5) of PUHCA. In addition, a notification of the merger to the Federal Trade Commission and the Department of Justice has been filed pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. - 12 - IV. EFFECT ON COMPETITION On behalf of the Applicants, Cliff W. Hamal, an economist and a Director of an economic consulting firm, LECG, Inc. evaluated the competitive implications of the proposed merger. Mr. Hamal has a great deal of experience in the analysis of market power issues in the utility industry. His conclusions are set forth in detail in his affidavit attached to this application as Exhibit B. Mr Hamal did not find it necessary to prepare an Appendix A analysis of the proposed transaction because he concluded that the Applicants "do not sell the same products in the same geographic markets." Para. 5. See Inquiry Concerning the Commission's Merger Policy Under the Federal Power Act: Policy Statement (hereinafter cited as "Merger Policy Statement"), FERC Stats & Regs paragraph 31,044 at 30,113. See also the Filing Requirements NOPR at 33,375; MidAmerican Energy Co. and MidAmerican Energy Holdings Co., 85 FERC paragraph 61,354 at 62,367-68 (1998); Boston Edison Co., 82 FERC paragraph 61,311 at 62,236 (1998); San Diego Gas & Elec. Co., 81 FERC paragraph 61,410 at 62,860 (1997); Duke Power Co. and PanEnergy Corp., 79 FERC paragraph 61,236 at 62,037-038 (1997). Mr. Hamal defines relevant geographic markets by identifying entities directly connected with the Applicants and customers that historically have purchased power from the Applicants. Para. 18. 6/ - --------------- 6/ Because the power marketers affiliated with the Applicants do not control generation, Mr. Hamal has not included power marketers in his study. Para. 19. This is consistent with FERC precedent. See Enron Corp., 78 FERC paragraph 61,179 at 61,735 (1997). - 13 - Several facts support the conclusion that AES and CILCO do not sell the same products in the same markets. First, CILCO's installed capacity of 1152 MW and firm purchases of 185 MW are needed to meet its native load obligations (and its obligations under its wholesale power sales contracts), leaving CILCO with no excess capacity to sell at wholesale. In particular, CILCO has only 32 MW of uncommitted capacity in 1999, and this amount will be reduced to zero in 2000 and 2001. Second, even AES's closest generation facilities (located in Pennsylvania and Oklahoma) are geographically remote from CILCO, and no AES generation facility is closer than three transmission wheels away from CILCO. Third, all of the capacity associated with AES's facilities in the United States and Canada is committed fully to customers under long-term contracts, with the exception of two facilities -- one in Texas and the other in Florida. Table CWH-3, attached to Mr. Hamal's affidavit, sets forth three years of data regarding CILCORP's sales to utilities; these sales include six interconnected utilities, including two transmission-dependent utilities -- the Village of Riverton, Illinois ("Riverton") and Corn Belt Electric Cooperative ("Corn Belt") -- and four utilities one transmission wheel away from CILCO. As Mr. Hamal explains, AES has not sold power from any generation facility under its control to any of the ten entities listed in Table CWH-3, or to CILCO itself. The absence of AES sales in CILCO's region is to be expected, because almost all of the power generated by AES's facilities is committed under long-term contracts and, as discussed above, AES's facilities are located far from the CILCO territory in central Illinois. - 14 - The only uncommitted capacity currently owned by AES is associated with the Deepwater facility in Texas, which has 8 MW of uncommitted capacity through 1999 and 3 MW thereafter, and the 610- MW Indian River facility in Florida, which AES is in the process of acquiring. Mr. Hamal explains that the small amount (3-8 MW) of uncommitted capacity from the Deepwater facility is four transmission wheels away from CILCO and, thus, raises no competitive concerns. Para. 20. Regarding the Indian River facility in Florida, AES is pursuing a long-term contract for its output, and it may be fully committed before the merger transaction is consummated. In addition, the Indian River facility "is even farther from the relevant markets, and not from a state that is a historical supplier of power to the destination markets near CILCO." Para. 20. The geographic distance between AES's facilities and CILCO's service territory is demonstrated in Table CWH-4, which identifies the number of wheels associated with the most direct contract path between each AES generator and CILCO. Para. 21. That table shows that AES's facilities are between 3 and 4 wheels away from CILCO. 7/ - --------------- 7/ Mr. Hamal has not included in his analysis an AES project that is in an early stage of development in Indiana. In particular, AES has applied to the Indiana Regulatory Commission for a certificate of convenience and necessity to build a unit of up to 400 MW capacity that will benefit Hoosier Rural Electric Cooperative, Inc. and an unnamed power marketer. However, "the project has no site, permits, equipment or other contracts." Para. 22, Mr. Hamal explains that "[a]ctive power project developers are always considering potential new projects, and clearly this one has not reached the level of maturity where there can be any assurance it will be constructed." Para. 22. The earliest date the Indiana station could come on line is the Spring of 2000. Para. 15. - 15 - Mr. Hamal notes that CILCO has 32 MW of uncommitted capacity in 1999, and this amount will be reduced to zero in 2000 and 2001. Para. 29. Retail competition in Illinois will cause the uncommitted capacity of utilities such as CILCO to increase. Mr. Hamal has not included the effects of retail competition in his analysis because "it is reasonable to presume that the loss of requirements customers by Illinois utilities will proceed at roughly similar rates." Id. Moreover, "[s]ince CILCORP is only a small portion of the total Illinois system, which includes Com. Ed., Illinois Power, portions of Ameren and others, its share of the uncommitted generation in Illinois will remain modest." Id. Mr. Hamal notes that retail competition will not affect AES's uncommitted capacity levels because its generation is not tied to retail load obligations. Next, Mr. Hamal examines the nine entities, discussed above, that are connected directly to CILCO or have purchased power from CILCO. Aside from the purchases by two direct interconnects -- Riverton and Springfield -- purchases from CILCO by the seven other entities amounts to less than four percent of those entities' historic purchases. Para. 24. Moveover, Mr. Hamal continues, "the other destination markets all have access to large supply markets through multiple utility interconnections listed in Table CWH-1." Id. In contrast, CILCO is Riverton's only source of power, and Riverton's access to other power markets is through CILCO. Mr. Hamal explains, however, that CILCO's current contract - 16 - with Riverton runs through March 2001, and, thus, there are no competitive implications for Riverton during the period prior to that date. Para. 25. Furthermore, CILCO's open access transmission tariff provides Riverton access to a large wholesale market, including, among others, Com Ed, Ameren and Illinois Power. Id. CILCO's sales to Springfield are modest -- less than 60,000 MWH in 1997 -- and amount to less than 3 percent of Springfield's own generation. Mr. Hamal explains that "Springfield has access to other suppliers, including direct interconnections with Ameren and Illinois Power, as well as through CILCO to Com Ed via CILCO's open access tariff." Para. 26. Finally, as stated above, Corn Belt is dependent on CILCO for transmission service, but Corn Belt has a five-year contract with CILCO for such service. Para. 27. This transmission contract, Mr. Hamal continues, "assures Corn Belt that it will not be affected by the merger through 2003." Id. CILCO's open access tariff and the increasing competitive electric power market ensure that, as is the case for Riverton, Corn Belt will have access to competitive supplies after 2003. As Mr. Hamal shows in his Table CWH-5, Corn Belt has not purchased any energy from CILCO in recent years. Id. Mr. Hamal looked at total capacity, producing Table CWH-6, which analyses that subject. "If one looks at a market that includes CILCO and its interconnects on a total capacity basis," says Mr. Hamal, "CILCORP is only 3 percent of the market for 1999- 2000. Again, AES does not have any capacity in - 17 - this market." Para. 28. As we have noted, AES's generation facilities are located far from the CILCO service territory and are committed to a large extent under long-term contracts. Turning to the issue of vertical market power, Mr. Hamal's affidavit concludes that "[t]here are . . . no vertical market power issues of moment in this matter." Para. 6. He notes that neither company owns or controls fuel or fuel transportation that could be withheld from potential competitors, and that although CILCO is in the retail gas business, the few large generators interconnected with its gas system arrange for their own gas suppliers and use CILCO only as an open access transporter. Para. 28. Moreover, CILCO is prohibited by a condition included in the Commission's June 2, 1998 order approving its application for market-based rate authority from providing favored treatment for its own electric generating plants or from discriminating against owners of competing generating facilities located in CILCO's gas service territory. AES does not own or control any inputs into electric generation except for normal fuel inventories at its power plants. The combined company could not conceivably use gas distribution facilities in Illinois to affect the cost of generating electricity in the localities where AES's U.S. plants are located. CILCO owns two potential sites for generating stations in Illinois, and AES does not own any sites within two wheels of CILCO's service territory. There is, however, no scarcity of such sites. Mr. Hamal concludes that ownership of such potential generation sites does not raise vertical market power concerns; "there - 18 - are many sites across the Midwest," he reports, "that could be used by other project developers." Para. 34. "Neither company," Mr. Hamal adds, "has any emission permits or related rights beyond those needed for its own, ongoing operations which it can withhold from potential competitors." Para. 31. This application does not raise any questions about transmission market power. CILCO has on file an open-access transmission tariff that conforms to the Commission's pro forma tariff and otherwise complies with Order No. 888. In addition, CILCO is a participant in the Midwest ISO. Consequently, the Midwest ISO will control CILCO's transmission facilities and provide access to such facilities. The proposed merger transaction will not change these facts. AES's only electric transmission facility consists of a 3-kilometer line connecting the Kingston generating facility to the transmission grid located in Ontario, Canada. It is too geographically remote to be relevant to the market power issue. Hence, this application does not present the Commission with vertical market power issues. V. EFFECT ON RATES a. EFFECT ON WHOLESALE SALES RATES The proposed merger will have no adverse effect on CILCORP's wholesale rates. As mentioned above, under "Description of Applicants," CILCORP has two subsidiaries, CILCO and QST Energy Inc., with business activities in wholesale generation. CILCO has only one firm long-term wholesale requirements customer, - 19 - the Village of Riverton, Illinois ("Riverton"). The existing contract between CILCO and Riverton (which was filed with, and accepted by, the Commission in Docket No. ER96-1365-000) 8/ obligates CILCO not to increase its existing base rates to Riverton until the contract terminates on February 28, 2001. It is a five-year fixed-price contract containing a fuel adjustment clause. Under the contract, CILCO may not increase its sales rate to recover any merger-related costs. Once its contract with CILCO expires, Riverton will be free to obtain its supplies from the competitive market, if it chooses to do so. Hence, the Commission's approval of this merger transaction will have no adverse effect on the wholesale rates that Riverton pays for its electric power requirements. QST Energy Inc.'s marketing activities are winding down, and a request to terminate its FERC sales tariff, which was approved in Docket No. ER96-553-000, will soon be filed with the Commission. Hence, the merger transaction will have no effect on QST's wholesale rates. The Applicants also make power sales pursuant to FERC market- based rate tariffs. The rates specified in contracts entered into pursuant to these tariffs are not based on the Applicants' costs and, therefore, cannot be affected by the merger. The Commission has held that such market-based sales fail to raise any concerns about a merger's possible adverse effect on rates. See, e.g., Destec - --------------- 8/ See unpublished letter order dated May 15, 1996. - 20 - Energy, Inc. and NGC Corporation, 79 FERC paragraph 61,373 at 62,574-75 (1997); Enron Corp., 78 FERC paragraph 61,179 at 61,737 (1997). The proposed merger also will have no effect on the rates charged for sales by AES affiliates that own generating plants certified as QFs or EWGs. AES has no power unilaterally to change the rates or any of the other provisions contained in the contracts for sale of the output of such facilities. Thus, the merger cannot have an adverse effect on such rates or the terms and conditions of the sales. b. EFFECT ON WHOLESALE TRANSMISSION RATES The proposed merger transaction will have no adverse effect on CILCO's transmission rates. CILCO had an open access transmission tariff in place prior to the issuance of Order 888. After Order 888 was issued, CILCO filed open access compliance tariffs which were approved in Docket Nos. OA96-36-000 and OA97-612-000. CILCO is a Participant in the Midwest ISO. The Midwest ISO Participants filed an application on January 15, 1998 in Docket No. ER98-1438- 000, asking the Commission for authority to transfer operational control over their jurisdictional transmission facilities to an Independent System Operator. Concurrently, the Participants asked the Commission to approve a single tariff for transmission throughout the system. On September 16, 1998, the Commission issued an order in Docket Nos. ER98-1438-000 and EC98-24-000, approving the - 21 - transfer of operational control, accepting the tariff for filing, suspending it for a nominal period and setting certain features of it for hearing. Midwest Independent System Operator, 84 FERC paragraph 61,231 (1998). CILCO's jurisdictional transmission rates will, therefore, be subject to review by the Commission in the proceedings now ongoing in the above cited dockets or in future proceedings involving transmission rate filings by CILCO. To ensure that CILCO's (and the Midwest ISO's) transmission rates do not recover merger-related costs, the Applicants hereby commit that, for a period of four years after the merger takes place, CILCO will not seek an increase in its jurisdictional transmission rates. This is a commitment that amply fulfills the ratepayer protection goals the Commission established in its Merger Policy Statement, FERC Stats & Regs. paragraph 31,044 at 30,123-24. See Duke Power Co. and PanEnergy Corp., 79 FERC paragraph 61,236 at 62,039-40 (1997). Under the Illinois Electric Service Customer Choice and Rate Relief Law of 1997 (220 Ill. Comp. Stat. 5/16-101-130 (West 1998), CILCO is required to be a member of a regional ISO or to participate in an Illinois ISO. Hence, it is clear that approval of this merger transaction will not affect CILCO's membership in the Midwest ISO or any regional transmission organization that succeeds it. VI. EFFECT ON REGULATION Approval of this application will have no effect on the regulated status of CILCO. As provided by Illinois law, it will continue to be regulated by the ICC - 22 - with respect to its retail activities and by the Commission under the Federal Power Act with respect to its wholesale sale and transmission service. CILCORP, the holding company which owns all of the common equity in CILCO, enjoys the status of an exempt holding company under PUHCA. The Applicants expect that AES will have the same status, albeit under a different provision of PUHCA. Their Agreement provides, as a condition to closing, that the Securities and Exchange Commission must issue to AES, in a form and substance reasonably satisfactory to AES, an exemption from registration as a holding company under PUHCA section 3(a)(5). Because the merger will not result in the formation of a registered public utility holding company and the Commission's jurisdiction over CILCO will not be affected, no Ohio Power concerns are raised. 9/ Consequently, there is no reason to conduct any further inquiry with respect to this issue. See, e.g., PG&E Corp., 80 FERC paragraph 61,041 at 61,138 (1997); Enova Corp., 79 FERC paragraph 61,107 at 62,567 (1997). Various AES facilities have been determined to be QFs pursuant to the Public Utility Regulatory Policies Act of 1978. The proposed transaction will have no adverse effect on the QF status of these facilities. Under section 292.206(c)(1) of the Commission's regulations, 18 C.F.R. section 292.206(c)(1) (1998), a company exempt under PUHCA section 3(A)(5) is not considered to be an "electric utility holding company" for purposes of satisfying QF ownership criteria. - --------------- 9/ See Ohio Power Co. v. FERC, 954 F.2d 779 (D.C. Cir.), cert. denied, 498 U.S. 73 (1992). - 23 - The proposed transaction will not affect the ICC's exercise of its jurisdiction over the retail rates of CILCO as an electricity provider or as a provider of natural gas distribution service. CILCO will continue to function as it does today. Moreover, as discussed above, a filing has been made with the ICC requesting that it disclaim jurisdiction over the merger transaction or, in the alternative, approve it. Thus, there is no need for the Commission to investigate the merger's effect on state regulation. See, e.g., Long Island Lighting Co., 80 FERC paragraph 61,035 at 61,080 (1997). VII. COMPLIANCE WITH APPLICABLE REQUIREMENTS OF 18 C.F.R. SECTION 33.2 The Applicants submit the following information pursuant to 18 C.F.R. Part 33, as the same has been proposed to be modified under the Commission's Filing Requirements NOPR: A. Name and Address of Persons Authorized to Receive Notices and Communications Regarding the Application (section 33.2(b)): FOR CILCO John G. Sahn Central Illinois Light Company 300 Liberty Street Peoria, Illinois 61602 (309) 675-8822 (telephone) (309) 675-8888 (facsimile) and - 24 - Isaac D. Benkin Kelly D. Hewitt Winthrop, Stimson, Putnam & Roberts 1133 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 775-9800 (telephone) (202) 833-8491 (facsimile) FOR THE AES CORPORATION Jonathan S. Moore The AES Corporation 1001 North 19th Street, 20th Floor Arlington, Virginia 22209 (703) 522-1315 (telephone) (703) 528-4510 (facsimile) and C.M. Naeve Mary Margaret Farren Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue, N.W. Washington, D.C. 20005 (202) 371-7000 (telephone) (202) 393-5760 (facsimile) B. Description of the Applicants (section 33.2(c)): (1) all business activities of the applicant[s] including authorization by charter or regulatory approval, even if not currently engaged in such activity; The business activities of CILCO and AES are set forth above in this application. (2) organizational charts depicting the applicant[s'] current and proposed post-transaction corporate structures (including any pending authorized but not implemented changes) indicating all parent companies, subsidiaries, affiliates and associate companies, unless the applicant[s] demonstrate that the proposed transaction does not affect the corporate structure of any party to the transaction; Organizational charts of CILCO and AES are set forth at Exhibit E. (3) a description of all joint ventures, strategic alliances, or other business arrangements to which the Applicant or its parent companies, subsidiaries, affiliates and associate companies is a party, unless the Applicant demonstrates that the proposed transaction does not affect any of its business interests; - 25 - Neither CILCO nor any of its affiliates is a party to any joint venture, strategic alliance or other business arrangement relevant to this application other than those set forth in this application. Similarly, neither AES nor any of its affiliates is a party to any joint venture, strategic alliance or other business arrangement relevant to this application other than those set forth in this application. (4) the identity of common officers or directors of parties to the proposed transaction; CILCO and AES do not have any common officers or directors. (5) a description of any authorizations, licenses, or other approvals received from the Commission; Any relevant Commission approvals or authorizations are described above in this application, and consist of the Commission's approval of market-based rates for CILCO and QST Energy Inc., the Commission's approval of market-based rates for AES and its subsidiaries, Commission authorization for QF status and EWG status for various projects in which AES has an interest, Commission approval (subject to a hearing) of the Midwest ISO filing and the pending application of CILCO for authorization to transfer operational control of its jurisdictional transmission facilities to the Midwest ISO. (6) a description and location of wholesale power sales customers and unbundled transmission services customers served by the applicant[s] or [their] parent companies, subsidiaries, affiliates and associate companies. A full and complete description and location of the single wholesale power sales customer served by CILCO is set forth in this application. CILCO also provides unbundled transmission service under an open-access tariff conforming - 26 - to the pro forma tariff promulgated in Order No. 888. As noted above, operational control over CILCO's unbundled transmission service will be in the hands of the Midwest ISO. CILCO has entered into transmission service agreements with more than 20 customers who obtain service under CILCO's open access transmission tariff. C. A description of jurisdictional facilities owned, operated, or controlled by the applicant[s] or [their] parent companies, subsidiaries, affiliates, and associate companies (section 33.2(d)): The nature of the jurisdictional facilities owned by CILCORP and AES is described fully in this application. D. A narrative description of the proposed transaction for which Commission authorization is requested, including: (1) the identity of all parties involved in the transaction; (2) all jurisdictional facilities and securities associated with or affected by the transaction; (3) the consideration for the transaction; and (4) the effect of the transaction on such jurisdictional facilities and securities (section 33.2(e)): A complete narrative description of the proposed transaction is set forth in this application. E. All contracts related to the proposed transaction together with copies of all other written instruments entered into or proposed to be entered into by the parties to the transaction (section 33.2(f)): Copies of all of the contracts related to the proposed transaction are contained in Exhibit A. F. If the proposed transaction involves physical property of any party, the applicant[s] must provide a general or key map showing in different colors the properties of each party to the transaction (section 33.2(h)): - 27 - A map showing CILCO properties is attached as Exhibit I. G. If the applicant[s are] required to obtain licenses, orders, or other approvals from other regulatory bodies in connection with the proposed transaction, the applicant[s] must identify the regulatory bodies and indicate the status of other regulatory actions, and provide a copy of each order of those regulatory bodies that relates to the proposed transaction (section 33.2(i)): As noted in the application, the Illinois Commerce Commission claims jurisdiction over the merger transaction only as it relates to the natural gas properties of CILCO. CILCO has filed with the ICC an application for a declaratory order, finding that the ICC lacks pre-approval jurisdiction over AES' acquisition of CILCORP, or, in the alternative, for approval of the acquisition. That filing has been assigned Docket No. 98-0882. A copy of the application (including the exhibits thereto but excluding the prepared testimony filed therewith) is attached as Exhibit F. The Illinois Commission has not yet acted upon the application. As stated above, SEC approval is not required to consummate the merger transaction. However, AES will file an application at the SEC requesting a PUHCA registration exemption. The Applicants will file with the Commission a copy of the SEC order once it is available. In addition, on February 5, 1999, the Federal Trade Commission and the Department of Justice were notified of the proposed merger pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Applicants requested early termination of the waiting period, which will expire on March 7, 1999. - 28 - Accounting Treatment The Filing Requirements NOPR requires applicants to specify the proposed accounting entries they propose to make, showing the effect of the transaction on all account balances, income statements and other relevant financial statements. See FERC Stats. and Regs. paragraph 32,528 at 33,393. Because this merger transaction will take place at the holding company level only, it will have no effect on CILCO's account balances and financial statements, which will continue to be maintained, as they are today, in accordance with the Commission's Uniform System of Accounts for Public Utilities. Hence, the Applicants respectfully request a waiver of the requirement to file the accounting entries. The following additional exhibits are attached in support of this application: Exhibit G -- Verifications. Exhibit H -- Form of Notice Suitable for Publication in the Federal Register. In addition, the Applicants are submitting a 3.5" diskette containing a copy of the form of the Notice in WordPerfect format. - 29 - Exhibit J -- List of all persons upon whom copies of this filing have been served. Respectfully submitted, /S/ Isaac D. Benkin --------------------------- Isaac D. Benkin Kelly D. Hewitt Winthrop, Stimson, Putnam & Roberts 1133 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 775-9800 Counsel for Central Illinois Light Company Dated: February 19, 1999 - 30 - LIST OF EXHIBITS EXHIBIT A AGREEMENT AND PLAN OF MERGER among THE AES CORPORATION, CILCORP INC., and MIDWEST ENERGY, INC. ----------------------------- Dated as of November 22, 1998 ----------------------------- TABLE OF CONTENTS Page ARTICLE I. THE MERGER............................................2 Section 1.1 The Merger............................................2 Section 1.2 Effective Time........................................3 Section 1.3 Effect of the Merger..................................3 Section 1.4 Subsequent Actions....................................3 Section 1.5 Articles of Incorporation; By-Laws; Directors; Officers..............................................3 ARTICLE II. TREATMENT OF SHARES...................................4 Section 2.1 Conversion of Securities..............................4 Section 2.2 Per Share Amount Adjustments..........................5 Section 2.3 Dissenting Shares.....................................5 Section 2.4 Surrender of Shares; Stock Transfer Books.............6 Section 2.5 CILCORP Options.......................................8 ARTICLE III. THE CLOSING...........................................8 Section 3.1 Closing...............................................8 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF CILCORP.............9 Section 4.1 Organization and Qualification........................9 Section 4.2 Subsidiaries..........................................9 Section 4.3 Capitalization.......................................10 Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance...........................................12 Section 4.5 Reports and Financial Statements.....................14 Section 4.6 Absence of Certain Changes or Events; Absence of Undisclosed Liabilities..............................15 Section 4.7 Litigation...........................................16 Section 4.8 Proxy Statement......................................17 Section 4.9 Tax Matters..........................................17 Section 4.10 Employee Matters; ERISA..............................21 Section 4.11 Environmental Protection.............................25 Section 4.12 Regulation as a Utility..............................30 i Section 4.13 Vote Required........................................30 Section 4.14 Insurance............................................30 Section 4.15 Opinion of Financial Advisor.........................30 Section 4.16 Brokers..............................................30 Section 4.17 Non-Applicability of Certain Provisions of Illinois Act.........................................31 Section 4.18 CILCORP Rights Agreement.............................31 Section 4.19 Year 2000 Compliance.................................31 Section 4.20 Title to Real Property...............................32 Section 4.21 Assets Other than Real Property Interests............32 Section 4.22 Intellectual Property................................33 Section 4.23 Transactions with Affiliates.........................33 Section 4.24 Discontinued Business................................34 Section 4.25 Captive Insurance Business...........................34 Section 4.26 Contractual Obligations..............................34 Section 4.27 Disclosure...........................................35 ARTICLE V. REPRESENTATIONS AND WARRANTIES OF AES AND MERGER SUB...........................................35 Section 5.1 Organization and Qualification.......................35 Section 5.2 Authority; Non-Contravention; Statutory Approvals....35 Section 5.3 Compliance...........................................37 Section 5.4 Reports and Financial Statements.....................37 Section 5.5 Proxy Statement Information..........................38 Section 5.6 Financing............................................38 Section 5.7 Regulatory Status....................................38 Section 5.8 Regulatory Approval..................................38 ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER; COVENANTS OF THE PARTIES.............................39 Section 6.1 Conduct of Business by CILCORP Pending the Merger....39 Section 6.2 Covenants of AES ....................................47 ARTICLE VII. ADDITIONAL AGREEMENTS................................49 Section 7.1 Access to Information................................49 Section 7.2 Proxy Statement......................................50 Section 7.3 Regulatory Approvals and Other Matters...............51 Section 7.4 Approval of CILCORP Stockholders.....................52 ii Section 7.5 Directors' and Officers' Indemnification.............53 Section 7.6 Disclosure Schedules.................................54 Section 7.7 Public Announcements.................................55 Section 7.8 No Solicitations.....................................55 Section 7.9 Expenses.............................................57 Section 7.10 Board of Directors...................................58 Section 7.11 Illinois Responsible Property Transfer Act...........58 Section 7.12 Signature Authority..................................58 Section 7.13 Termination of Existing Tax Sharing Agreements.......58 Section 7.14 Deferred Compensation Plans..........................58 ARTICLE VIII. CONDITIONS...........................................59 Section 8.1 Conditions to Each Party's Obligation to Effect the Merger...........................................59 Section 8.2 Conditions to Obligation of CILCORP to Effect the Merger...........................................60 Section 8.3 Conditions to Obligation of AES and Merger Sub to Effect the Merger....................................60 ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER....................62 Section 9.1 Termination..........................................62 Section 9.2 Effect of Termination................................66 Section 9.3 Termination Fees; Expenses...........................66 Section 9.4 Amendment............................................67 Section 9.5 Waiver...............................................67 ARTICLE X. GENERAL PROVISIONS...................................67 Section 10.1 Non-Survival; Effect of Representations and Warranties...........................................67 Section 10.2 Notices..............................................67 Section 10.3 Miscellaneous........................................69 Section 10.4 Interpretation.......................................69 Section 10.5 Counterparts; Effect.................................69 Section 10.6 Enforcement..........................................69 Section 10.7 Parties in Interest..................................70 Section 10.8 Further Assurances...................................70 Section 10.9 Waiver Of Jury Trial.................................70 Section 10.10 Certain Definitions..................................70 iii AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of November 22, 1998 (this "Agreement"), among The AES Corporation, a Delaware corporation ("AES"), CILCORP Inc., an Illinois corporation ("CILCORP"), and Midwest Energy, Inc., an Illinois corporation and wholly-owned subsidiary of AES ("Merger Sub"). W I T N E S S E T H : WHEREAS, the respective Boards of Directors of AES and CILCORP each have determined that the acquisition of CILCORP by AES is in the best interests of their respective stockholders; and WHEREAS, in furtherance thereof, the respective Boards of Directors of AES, CILCORP and Merger Sub have approved the merger of Merger Sub with and into CILCORP, pursuant to the terms and subject to the conditions set forth in this Agreement (the "Merger"); and WHEREAS, the Board of Directors of AES has determined that it may be desirable for AES to merge CILCORP with and into AES following but substantially contemporaneously with the Merger (the "Second Merger" which, for purposes of this Agreement, if it occurs, shall be deemed to occur immediately after the Merger). NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I THE MERGER Section 1.1 The Merger. At the Effective Time (as defined in Section 1.2 hereof) and upon the terms and subject to the conditions of this Agreement and the Illinois Business Corporation Act (the "Illinois Act"), Merger Sub shall be merged with and into CILCORP, the separate corporate existence of Merger Sub shall cease, and CILCORP shall 2 continue as the surviving corporation (sometimes hereinafter referred to as the "Surviving Corporation"). Section 1.2 Effective Time. On the Closing Date (as defined in Section 3.1 hereof), Articles of Merger complying with the requirements of the Illinois Act shall be executed and filed by CILCORP and Merger Sub with the Secretary of State of the State of Illinois. The Merger shall become effective on the date on which the Certificate of Merger is issued by the Secretary of State of the State of Illinois (the "Effective Time"). Section 1.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the Illinois Act. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of CILCORP and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of CILCORP and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation. Section 1.4 Subsequent Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of CILCORP or Merger Sub acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either CILCORP or Merger Sub, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. Section 1.5 Articles of Incorporation; By-Laws; Directors; Officers. Unless otherwise determined by AES prior to the Effective Time, at the Effective Time: (a) The Articles of Merger shall provide that the Articles of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Articles of Incorporation. 3 (b) The By-Laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the By-Laws of the Surviving Corporation until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such By-Laws. (c) The members of the Board of Directors of Merger Sub immediately prior to the Effective Time shall be the members of the Board of Directors of the Surviving Corporation, to hold office from the Effective Time until their respective successors are duly elected or appointed and shall have qualified in the manner provided in the Articles of Incorporation and By-Laws of the Surviving Corporation or as otherwise provided by law. (d) The officers of CILCORP in office immediately prior to the Effective Time shall be the officers of the Surviving Corporation, to hold office from the Effective Time until their respective successors are duly elected or appointed and shall be qualified in the manner provided in the Articles of Incorporation and By-Laws of the Surviving Corporation or as otherwise provided by law. ARTICLE II TREATMENT OF SHARES Section 2.1 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, CILCORP or the holder of any of the following securities: (a) Each share of common stock, no par value, of CILCORP (a "Share"), together with the associated purchase rights ("CILCORP Rights") under the CILCORP Rights Agreement (as defined in Section 4.18 hereof), issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to Section 2.1(b) hereof and any Dissenting Shares (as defined in Section 2.3(a) hereof) shall be canceled and extinguished and be converted into the right to receive $65.00, subject to adjustment in accordance with Section 2.2 hereof (the "Per Share Amount"), in cash payable to the holder thereof, without interest, upon surrender of the certificate representing such Share in accordance with Section 2.4 hereof. Throughout this Agreement, the term "Shares" refers to the Shares together with the associated CILCORP Rights and the term "Aggregate 4 Consideration Amount" shall mean an amount equal to the product of (x) the Per Share Amount as adjusted in accordance with Section 2.2 hereof and (y) the number of Shares outstanding on the Closing Date. (b) Each Share held in the treasury of CILCORP and each Share owned by AES or any direct or indirect Subsidiary (as defined in Section 4.1 hereof) of AES or of CILCORP immediately prior to the Effective Time shall be canceled and extinguished, and no consideration shall be paid with respect thereto. (c) Each share of common stock, no par value, of Merger Sub issued and outstanding immediately prior to the Effective Time shall thereafter be converted into and become one validly issued, fully paid and nonassessable share of common stock, no par value, of the Surviving Corporation. Section 2.2 Per Share Amount Adjustments. Subject to AES' right of termination set forth in Section 9.1(c)(ii) hereof, in the event the SEC Exemption Order (as defined in Section 8.3(e) hereof) is issued by the Securities and Exchange Commission (the "SEC") after the date which is the nine-month anniversary of the date hereof, and provided that CILCORP shall have delivered to AES the CILCORP Certificate pursuant to Section 6.2(d) hereof, then the Per Share Amount shall be increased to $66.00 on the later to occur of (i) the day following the nine-month anniversary of the date hereof and (ii) the day after the date on which CILCORP delivers to AES the CILCORP Certificate. Throughout this Agreement, the date on which the Per Share Amount is increased to $66.00 pursuant to this Section 2.2 is referred to as the "First Adjustment Period." If the CILCORP Certificate is delivered after the nine-month anniversary but prior to the SEC Exemption Order being issued, then, following the First Adjustment Period, the Per Share Amount shall be increased from $66.00 by $0.00546448 per day for each day until the SEC Exemption Order is issued up to a maximum Per Share Amount of $68.00. Notwithstanding the above, in no event shall the Per Share Amount be increased for any period after which AES has irrevocably waived the condition set forth in Section 9.1(c)(ii) hereof. Section 2.3 Dissenting Shares. (a) Notwithstanding anything to the contrary contained in this Agreement, to the extent appraisal rights are available to CILCORP stockholders pursuant to the Illinois Act, any Shares held by a person who objects to the Merger, whose Shares either were not entitled to vote or were not voted in favor of the Merger and who complies with all of 5 the provisions of the Illinois Act concerning the rights of such person to dissent from the Merger and to require appraisal of such person's Shares and who has not withdrawn such objection or waived such rights prior to the Closing Date (as defined in Section 3.1 hereof) ("Dissenting Shares") shall not be converted into or represent a right to receive cash pursuant to Section 2.1 hereof, but shall become the right to receive such consideration as may be determined to be due to the holder of such Dissenting Shares pursuant to the Illinois Act. (b) Notwithstanding the provisions of subsection (a) of this Section, each Dissenting Share held by a person at the Effective Time who shall, after the Effective Time, withdraw the demand for appraisal or lose the right of appraisal, in either case pursuant to the Illinois Act, shall be deemed to be converted, as of the Effective Time, into the right to receive cash as provided in Section 2.1(a) hereof, without interest thereon, upon surrender of the certificate or certificates representing such Shares in accordance with Section 2.4 hereof. (c) CILCORP shall give AES (i) prompt notice of any written demands for appraisal or payment of the fair value of any Shares, withdrawals of such demands, and any other instruments served pursuant to the Illinois Act received by CILCORP in respect of demands for appraisal or payment of the fair value of any Shares and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the Illinois Act. CILCORP shall not voluntarily make any payment with respect to any demands for appraisal and shall not, except with the prior written consent of AES, settle or offer to settle any such demands. Section 2.4 Surrender of Shares; Stock Transfer Books. (a) Prior to the Effective Time, CILCORP shall designate a bank or trust company to act as paying agent (the "Paying Agent") for purposes of paying the amounts contemplated by Section 2.1 hereof. At the Effective Time, AES shall deposit, or cause to be deposited, with the Paying Agent for the benefit of holders of Shares, the aggregate consideration to which such holders shall be entitled when and as required pursuant to Section 2.1 hereof. (b) As soon as practicable after the Effective Time, AES shall cause the Paying Agent to mail to each holder of record as of the Effective Time of a certificate or certificates that have been converted pursuant to Section 2.1 hereof: (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates shall pass, only upon actual delivery of the certificates to the Paying Agent) and (ii) instructions 6 for effecting the surrender of the certificates and receiving the aggregate consideration to which such holder shall be entitled therefor pursuant to Section 2.1 hereof. Upon surrender of a certificate to the Paying Agent for cancellation, together with a duly executed letter of transmittal and such other documents as the Paying Agent may reasonably require, the holder of such certificate shall be entitled to receive in exchange therefor cash in an amount equal to the Per Share Amount multiplied by the number of Shares represented by such certificate. Until so surrendered, each such certificate (other than certificates representing Dissenting Shares and certificates representing Shares canceled pursuant to Section 2.1(b) hereof) shall be deemed at any time after the Effective Time to represent solely the right to receive upon such surrender the aggregate Per Share Amount relating thereto. No interest shall accrue or be paid on any cash payable upon the surrender of a certificate or certificates which immediately prior to the Effective Time represented outstanding Shares. (c) If payment of cash in respect of canceled Shares is to be made to a person other than the person in whose name a surrendered certificate or instrument is registered in the transfer records of CILCORP, it shall be a condition to such payment that the certificate or instrument so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and shall be accompanied by evidence satisfactory to the Paying Agent that any transfer or other Taxes (as defined in Section 4.9 hereof) required by reason of such payment in a name other than that of the registered holder of the certificate or instrument either has been paid or is not payable. (d) At the Effective Time, the stock transfer books of CILCORP shall be closed and there shall not be any further registration of transfer of any shares of capital stock thereafter on the records of CILCORP. If, after the Effective Time, certificates for Shares are presented to the Surviving Corporation or AES, they shall be canceled and exchanged for cash as provided in Section 2.1(a) hereof and in this Section 2.4. (e) Promptly following the date which is six months after the Effective Time, the Paying Agent shall deliver to AES all cash (including any interest received with respect thereto), certificates and other documents in its possession relating to the transactions contemplated hereby, and the Paying Agent's duties shall terminate. Thereafter, each holder of a certificate representing Shares (other than certificates representing Dissenting Shares and certificates representing Shares canceled pursuant to Section 2.1(b) hereof) shall be entitled to look to the Surviving Corporation (subject to applicable abandoned property, escheat and similar laws) only as general creditors thereof with respect to the aggregate Per Share Amount payable upon due surrender of their certificates, without any interest or dividends thereon. 7 Notwithstanding the foregoing, neither AES, the Surviving Corporation nor the Paying Agent shall be liable to any holder of a certificate representing Shares for the Per Share Amount delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (f) The Per Share Amount paid in the Merger shall be net to the holder of Shares in cash, subject to reduction only for (i) such amounts as AES or the Paying Agent are required to withhold or deduct under the Code (as defined in Section 4.9(e) of this Agreement) or any provision of state, local or foreign Tax law with respect to the making of such payment, and (ii) as set forth in Section 2.4(c) hereof, any stock transfer or other Taxes payable by reason of such payment being made in a name other than that of the registered holder of the certificate or instrument. Section 2.5 CILCORP Options. Two business days prior to the Closing Date, the CILCORP Shareholder Return Incentive Compensation Plan (the "CILCORP Option Plan") shall be amended (which such amendment shall be conditioned on the Closing occurring) to provide (i) as to all performance shares that have been granted under the CILCORP Option Plan and that have not been exercised prior to the date of such amendment (the "Performance Shares"), that such Performance Shares shall be cancelled as of the Closing Date and (ii) at the Closing CILCORP shall pay to each holder of Performance Shares a cash payment equal to the number of Performance Shares held immediately prior to such amendment multiplied by the excess of the Per Share Amount over $36.00 less the amount of all applicable federal, state and local withholding Taxes in connection with such payment. CILCORP shall take all actions necessary to ensure that such payment extinguishes all rights of such participants under the CILCORP Option Plan to receive either Shares or shares of common stock of AES at or after the Effective Time. ARTICLE III THE CLOSING Section 3.1 Closing. The closing of the Merger (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022-3897 at 10:00 A.M., New York time, on the second business day immediately following the date on which the last of the conditions set forth in Article VIII hereof 8 is fulfilled or waived, or at such other time, date and place as AES and CILCORP shall mutually agree (the "Closing Date"). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CILCORP CILCORP hereby represents and warrants to AES and Merger Sub as follows: Section 4.1 Organization and Qualification. CILCORP and each of the CILCORP Subsidiaries (as defined below) and, to the knowledge of CILCORP, each of the CILCORP Joint Ventures (as defined below) is a corporation or other entity duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority and has been duly authorized by all necessary approvals and orders to own, lease and operate its assets and properties and to carry on its business as it is now being conducted and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its assets and properties makes such qualification necessary, other than in such jurisdictions where the failure to so qualify and be in good standing, when taken together with all other such failures, would not have a material adverse effect on the business, operations, properties, assets, condition (financial or other), prospects or the results of operations of CILCORP and the CILCORP Subsidiaries taken as a whole or on the consummation of the transactions contemplated by this Agreement and the Second Merger (any such material adverse effect, a "CILCORP Material Adverse Effect"). The term "Subsidiary" of a person shall mean any corporation or other entity (including partnerships and other business associations and joint ventures) in which such person directly or indirectly owns at least a majority of the voting power represented by the outstanding capital stock or other voting securities or interests having voting power under ordinary circumstances to elect a majority of the directors or similar members of the governing body, or otherwise to direct the management and policies, of such corporation or entity and the term "CILCORP Subsidiary" shall mean a Subsidiary of CILCORP. The term "Joint Venture" of a person shall mean any corporation or other entity (including partnerships and other business associations and joint ventures) in which such person directly or indirectly owns an equity interest that is less than a majority of any class of the outstanding voting securities or equity of any such entity, other than equity interests held for passive investment purposes which are less than 5% of any class of the outstanding voting 9 securities or equity of any such entity, and the term "CILCORP Joint Venture" shall mean a Joint Venture of CILCORP. Section 4.2 Subsidiaries. Section 4.2 of the disclosure schedule delivered by CILCORP to AES concurrent with the execution of this Agreement (the "CILCORP Disclosure Schedule") sets forth a list of all the CILCORP Subsidiaries and the CILCORP Joint Ventures, including the name of each such entity, a brief description of the principal line or lines of business conducted by each such entity and the interest of CILCORP and the CILCORP Subsidiaries therein. CILCORP is a "public-utility holding company" (as defined in the Public Utility Holding Company Act of 1935, as amended ("PUHCA")) exempt from all provisions (other than Section 9(a)(2)) of PUHCA, pursuant to Section 3(a)(1) in accordance with Rule 2 of PUHCA, and Central Illinois Light Company ("CILCO") is a "public-utility company" within the meaning of Section 2(a)(5) of PUHCA. With the exception of CILCO, no CILCORP Subsidiary or CILCORP Joint Venture is a "holding company" or a "public-utility company" within the meaning of Sections 2(a)(7) and 2(a)(5) of PUHCA, respectively, nor, except with respect to their relationship with CILCORP, are any of such entities an "affiliate" or a "subsidiary company" of a holding company within the meaning of Sections 2(a)(11) and 2(a)(8) of PUHCA, respectively. Except as set forth in Section 4.2 of the CILCORP Disclosure Schedule, (i) all of the issued and outstanding shares of capital stock of each CILCORP Subsidiary are validly issued, fully paid, nonassessable and free of preemptive rights and to the extent owned, directly or indirectly, by CILCORP, are owned free and clear of any liens, claims, encumbrances, security interests, charges and options of any nature whatsoever ("Liens"), and (ii) there are no outstanding subscriptions, options, calls, contracts, voting trusts, proxies or other pledges, security interests, claims, equities, charges, encumbrances, commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement, obligating CILCORP or any CILCORP Subsidiary to issue, deliver or sell, pledge, grant a security interest or encumber, or cause to be issued, delivered or sold, pledged or encumbered or a security interest to be granted on, shares of capital stock of any CILCORP Subsidiary or obligating CILCORP or any CILCORP Subsidiary to grant, extend or enter into any such agreement or commitment. Section 4.3 Capitalization. (a) CILCORP. The authorized capital stock of CILCORP consists of 50,000,000 shares of common stock, no par value ( the "CILCORP Common Stock"), and 4,000,000 shares of preferred stock, no par value, none of which preferred stock is 10 outstanding. As of the close of business on November 20, 1998, (i) 13,610,680 shares of CILCORP Common Stock were issued and outstanding (such number of shares is hereinafter referred to as the "Outstanding Shares"), (ii) 125,000 shares of CILCORP Common Stock were reserved for issuance pursuant to the CILCORP Option Plan, and (iii) no shares of CILCORP Common Stock were held by CILCORP in its treasury or by its wholly owned Subsidiaries. No bonds, debentures, notes or other indebtedness having the right to vote (or convertible into securities having the right to vote) on any matters on which stockholders may vote ("Voting Debt") are issued or outstanding. All of the issued and outstanding shares of CILCORP Common Stock are validly issued, fully paid, nonassessable and free of preemptive rights. Since December 17, 1996, CILCORP has not issued any shares of capital stock of any class of CILCORP other than issuances of shares of CILCORP Common Stock pursuant to awards under the CILCORP Option Plan. As of the date of this Agreement, except as set forth in Section 4.3(a) of the CILCORP Disclosure Schedule, there are no outstanding subscriptions, options, calls, contracts, voting trusts, proxies or other pledges, security interests, encumbrances, commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement, obligating CILCORP or any CILCORP Subsidiary to issue, deliver or sell, pledge, grant a security interest or encumber, or cause to be issued, delivered or sold, pledged or encumbered or a security interest to be granted on, shares of capital stock or any Voting Debt of CILCORP or obligating CILCORP or any CILCORP Subsidiary to grant, extend or enter into any such agreement or commitment. Except as set forth in Section 4.3(a) of the CILCORP Disclosure Schedule, there is no outstanding contractual commitment or obligation of CILCORP or any CILCORP Subsidiary to make any investment (in the form of a loan, capital contribution or otherwise) in any CILCORP Subsidiary or in any other person. (b) CILCO. The authorized capital stock of CILCO consists of 20,000,000 shares of common stock, no par value; 1,500,000 shares of preferred stock, par value $100 per share ("CILCO Preferred Stock"), consisting of 111,264 shares of 4.50 percent Series CILCO Preferred Stock ("4.50% Series Preferred"), 79,940 shares of 4.64 percent Series CILCO Preferred Stock ("4.64% Series Preferred"), and 1,308,796 shares of Undesignated Series CILCO Preferred Stock ("Undesignated Series Preferred"); 3,500,000 shares of Class A preferred stock, no par value ("CILCO Class A Preferred Stock"), consisting of 220,000 shares of 5.85 percent Series CILCO Class A Preferred Stock ("5.85% Series Class A Preferred"), 250,000 shares of Flexible Auction Rate Series CILCO Class A Preferred Stock ("Flexible Auction Rate Series Class A Preferred"); and 3,030,000 shares of Undesignated Series CILCO Class A Preferred Stock ("Undesignated Series Class A Preferred"); and 2,000,000 shares of Undesignated Series CILCO Preference Stock, no par 11 value ("CILCO Preference Stock"). With respect to the capital stock of CILCO, (i) 13,563,871 shares of CILCO Common Stock are issued and outstanding, all of which are owned by CILCORP free and clear of any Liens and (ii) 111,264 shares of 4.50% Series Preferred, 79,940 shares of 4.64% Series Preferred, no shares of Undesignated Series Preferred, 220,000 shares of 5.85% Class A Series Preferred, 250,000 shares of Flexible Auction Rate Series Class A Preferred, 250,000 shares of Undesignated Series Class A Preferred and no shares of CILCO Preference Stock are issued and outstanding. No Voting Debt is issued or outstanding. All of the issued and outstanding shares of CILCO capital stock are validly issued, fully paid, nonassessable and free of preemptive rights. Since the date hereof, CILCO has not issued any shares of capital stock of any class of CILCO. As of the date of this Agreement, except as set forth in Section 4.3(b) of the CILCORP Disclosure Schedule, there are no outstanding subscriptions, options, calls, contracts, voting trusts, proxies or other pledges, security interests, encumbrances, commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement, obligating CILCORP or any CILCORP Subsidiary to issue, deliver or sell, pledge, grant a security interest or encumber, or cause to be issued, delivered or sold, pledged or encumbered or a security interest to be granted on, shares of capital stock or any Voting Debt of CILCO or obligating CILCORP or any CILCORP Subsidiary to grant, extend or enter into any such agreement or commitment. (c) Indebtedness. Section 4.3(c)(i) of the CILCORP Disclosure Schedule sets forth a true and complete statement of the borrowing limit under all loan agreements (including indentures) of CILCORP and its Subsidiaries existing on the date hereof and Section 4.3(c)(ii) of the CILCORP Disclosure Schedule sets forth a true and complete statement of the total indebtedness of CILCORP and its Subsidiaries outstanding on the date hereof under such agreements. Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance. (a) Authority. CILCORP has all requisite power and authority to enter into this Agreement and, subject to the receipt of the CILCORP Stockholders' Approval (as defined in Section 4.13 hereof) and the CILCORP Required Statutory Approvals (as defined in Section 4.4(c) hereof), to consummate the transactions contemplated hereby and, subject to receipt of the Second Merger Statutory Approvals (as defined in Section 4.4(c) hereof), to consummate the Second Merger if such were to be consummated. The execution and delivery of this Agreement and the consummation by CILCORP of the transactions contemplated 12 hereby have been duly authorized by all necessary corporate action on the part of CILCORP, subject to obtaining the CILCORP Stockholders' Approval. This Agreement has been duly and validly executed and delivered by CILCORP, and, assuming the due authorization, execution and delivery hereof by the other signatories hereto, this Agreement constitutes the valid and binding obligation of CILCORP enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). (b) Non-Contravention. The execution and delivery of this Agreement by CILCORP do not, and the consummation of the Merger and the other transactions contemplated hereby and if such were consummated, the Second Merger, will not, in any respect, violate, conflict with or result in a breach of any provision of, or constitute a default (with or without notice or lapse of time or both) under, or result in the termination or modification of, or accelerate the performance required by, or result in a right of termination, cancellation or acceleration of any obligation or the loss of a benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of CILCORP or any of the CILCORP Subsidiaries or the imposition or administration of any other penalty or fee (any such violation, conflict, breach, default, right of termination, modification, cancellation or acceleration, loss, creation or imposition, is referred to herein as a "Violation" with respect to CILCORP, the CILCORP Subsidiaries and the CILCORP Joint Ventures, and such term when used in Article V shall have a correlative meaning with respect to AES) pursuant to any provisions of (i) the Articles of Incorporation, By-Laws or similar governing documents of CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint Ventures, (ii) subject to obtaining the CILCORP Required Statutory Approvals (as defined in Section 4.4(c) hereof), the Second Merger Statutory Approvals (as defined in Section 4.4(c) hereof) and the receipt of the CILCORP Stockholders' Approval, any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court, federal, state, local or foreign governmental or regulatory body (including a stock exchange or other self-regulatory body) or authority (each, a "Governmental Authority") applicable to CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint Ventures or any of their respective properties or assets or (iii) subject to obtaining the third-party consents set forth in Section 4.4(b)(i) of the CILCORP Disclosure Schedule for the Second Merger (the "CILCORP Second Merger Required Consents"), and set forth in Section 4.4(b)(ii) of the CILCORP Disclosure Schedule for the Merger and the other transactions contemplated hereby (the "CILCORP Required Consents"), any note, bond, mortgage, 13 indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind to which CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint Ventures is a party or by which it or any of its properties or assets may be bound or affected, excluding from the foregoing clauses (ii) and (iii) such Violations which would not, in the aggregate, have a CILCORP Material Adverse Effect. (c) Statutory Approvals. No declaration, filing or registration with, or notice to or authorization, consent or approval of, any Governmental Authority is necessary for the execution and delivery of this Agreement by CILCORP or the consummation by CILCORP of the Merger and the other transactions contemplated hereby, except as described in Section 4.4(c)(i) of the CILCORP Disclosure Schedule, (the "CILCORP Required Statutory Approvals") and except as described in Section 4.4(c)(ii) of the CILCORP Disclosure Schedule with respect to the Second Merger (the "Second Merger Statutory Approvals"), it being understood that references in this Agreement to "obtaining" such CILCORP Required Statutory Approvals and Second Merger Statutory Approvals shall mean making such declarations, filings or registrations; giving such notices; obtaining such authorizations, consents or approvals; and having such waiting periods expire as are necessary to avoid a violation of law. (d) Compliance. Except as set forth in Section 4.4(d) of the CILCORP Disclosure Schedule or in Section 4.11 hereof, or as disclosed in the CILCORP SEC Reports (as defined in Section 4.5 hereof) filed on or prior to the date of this Agreement, neither CILCORP nor any of the CILCORP Subsidiaries nor, to the knowledge of CILCORP, any CILCORP Joint Venture is in violation of, is, to the knowledge of CILCORP, under investigation with respect to any violation of, or has been given notice of or been charged with any violation of, any law, statute, order, rule, regulation, ordinance or judgment, permit, license, concession or franchise (including, without limitation, any applicable environmental law, ordinance or regulation) of any Governmental Authority, except for violations or failures to comply with Environmental Laws (which are the subject of Section 4.11 hereof) and except for violations which individually or in the aggregate do not, and insofar as reasonably can be foreseen will not, have a CILCORP Material Adverse Effect. Except as set forth in Section 4.4(d) or 4.11 of the CILCORP Disclosure Schedule, CILCORP and the CILCORP Subsidiaries and, to the knowledge of CILCORP, the CILCORP Joint Ventures have all permits, licenses, franchises and other governmental authorizations, consents, approvals and exemptions necessary to conduct their businesses as presently conducted which are material to the operation of the businesses of CILCORP and the CILCORP Subsidiaries. Except as set forth in Section 4.4(d) of the CILCORP Disclosure Schedule and Section 4.11 hereof, 14 CILCORP and each of the CILCORP Subsidiaries and, to the knowledge of CILCORP, each of the CILCORP Joint Ventures is not in breach or violation of or in default in the performance or observance of any term or provision of, and no event has occurred which, with lapse of time or action by a third party, could result in a default by CILCORP or any CILCORP Subsidiary or, to the knowledge of CILCORP, any CILCORP Joint Venture under (i) its Articles of Incorporation, By-Laws or other organizational documents or (ii) any contract, commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond, license, approval or other instrument to which it is a party or by which CILCORP or any CILCORP Subsidiary or any CILCORP Joint Venture is bound or to which any of its property is subject, except in the case of clause (ii) above, for violations, breaches or defaults which individually or in the aggregate do not, and insofar as reasonably can be foreseen will not, have a CILCORP Material Adverse Effect. Section 4.5 Reports and Financial Statements. The filings required to be made by CILCORP and the CILCORP Subsidiaries under the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), PUHCA, the Federal Power Act (the "Power Act") and applicable state, municipal, local and other laws, including franchise and public utility laws and regulations, including all forms, statements, reports, agreements (oral or written) and all documents, exhibits, amendments and supplements appertaining thereto, have been filed with the SEC, the Federal Energy Regulatory Commission (the "FERC") and the appropriate Illinois or other appropriate Governmental Authorities, as the case may be, and complied, as of their respective dates, in all material respects with all applicable requirements of the appropriate statutes and the rules and regulations thereunder. CILCORP has made available to AES a true and complete copy of each report, schedule, registration statement and definitive proxy statement and all amendments thereto filed with the SEC by CILCORP or any CILCORP Subsidiary (or their predecessors) pursuant to the requirements of the Securities Act or Exchange Act since January 1, 1996 (as such documents have since the time of their filing been amended, the "CILCORP SEC Reports"). As of their respective dates, the CILCORP SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited interim financial statements of CILCORP and CILCO included in the CILCORP SEC Reports (collectively, the "CILCORP Financial Statements") have been prepared in accordance with generally accepted accounting principles applied on a consistent basis ("GAAP") (except as may be indicated therein or in the notes thereto) and fairly present the financial position of CILCORP and CILCO, as the case may be, as of the dates thereof and the results of their 15 operations and cash flows for the periods then ended, subject, in the case of the unaudited interim financial statements, to normal, recurring audit adjustments. True, accurate and complete copies of the Articles of Incorporation and By-Laws of CILCORP and CILCO, as in effect on the date of this Agreement, are included (or incorporated by reference) in the CILCORP SEC Reports. Section 4.6 Absence of Certain Changes or Events; Absence of Undisclosed Liabilities. (a) Absence of Certain Changes or Events. Except as set forth in Section 4.6(a) of the CILCORP Disclosure Schedule or as disclosed in the CILCORP SEC Reports filed prior to the date of this Agreement, since December 31, 1997, CILCORP and each of the CILCORP Subsidiaries and, to the knowledge of CILCORP, each of the CILCORP Joint Ventures, have conducted their business only in the ordinary course of business consistent with past practice and there has not been, and no fact or condition exists which would have or, insofar as reasonably can be foreseen, could have, a CILCORP Material Adverse Effect. (b) Absence of Undisclosed Liabilities. Except as set forth in Section 4.6(b) of the CILCORP Disclosure Schedule or as disclosed in the CILCORP SEC Reports filed prior to the date of this Agreement, and except for liabilities, obligations or contingencies which are accrued or reserved against in the consolidated financial statements of CILCORP and CILCO or reflected in the notes thereto for the year ended December 31, 1997, or which were incurred after December 31, 1997 in the ordinary course of business and would not, in the aggregate, have a CILCORP Material Adverse Effect, neither CILCORP nor any CILCORP Subsidiary, nor, to the knowledge of CILCORP, any CILCORP Joint Venture, has any liabilities or obligations (whether absolute, accrued, contingent or otherwise and including, without limitation, margin loans) which are material to CILCORP and the CILCORP Subsidiaries taken as a whole. Section 4.7 Litigation. Except as set forth in Section 4.7 of the CILCORP Disclosure Schedule or as disclosed in the CILCORP SEC Reports filed prior to the date of this Agreement, (a) there are no claims, suits, actions or proceedings pending before any court, Governmental Authority or any arbitrator or, to the knowledge of CILCORP, threatened, nor are there, to the knowledge of CILCORP, any investigations or reviews by any court, Governmental Authority or any arbitrator pending or threatened against, relating to or affecting CILCORP or any of the CILCORP Subsidiaries or, to the knowledge of CILCORP, the 16 CILCORP Joint Ventures, (b) there have not been any significant developments since December 31, 1997 with respect to such disclosed claims, suits, actions, proceedings, investigations or reviews and (c) there are no judgments, decrees, injunctions, rules or orders of any Governmental Authority or any arbitrator applicable to CILCORP or any of the CILCORP Subsidiaries or, to the knowledge of CILCORP, applicable to any of the CILCORP Joint Ventures, which, when taken together with any other nondisclosures described in clauses (a), (b) or (c), could, if determined adversely to CILCORP, any CILCORP Subsidiary or any CILCORP Joint Venture, have a CILCORP Material Adverse Effect. Section 4.8 Proxy Statement. At the dates mailed to stockholders of CILCORP and at the time of the meeting of such stockholders to be held in connection with the Merger and the other transactions contemplated hereby, the Proxy Statement (as defined in Section 7.2(a) hereof), (i) will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading and (ii) will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder, provided, however, CILCORP makes no representation or warranty as to any information provided by AES pursuant to Section 5.5 hereof. Section 4.9 Tax Matters. For purposes of this Agreement: (i) "Taxes" (including, with correlative meaning, the word "Tax") shall include any and all federal, state, county, local, foreign or other taxes, charges, imposts, rates, fees, levies or other assessments, including, without limitation, all net income, gross income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, capital stock, production, business and occupation, disability, employment, payroll, license, estimated, stamp, custom duties, severance, withholding or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and penalties (civil or criminal) on or additions to any such taxes and any expenses incurred in connection with the determination, settlement or litigation of any tax liability, (ii) "Taxing Authority" means any Governmental Authority or any subdivision, agency, court, commission, instrumentality or official thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection, imposition or administration of any Tax (including the Internal Revenue Service (the "IRS")) and (iii) "Tax Return" means any return, report, information return, schedule, certificate, statement or other document (including any related or supporting information) required to be filed with or supplied to, or, where none is required to be filed with or supplied to a Taxing Authority, the statement or other document issued by, a Taxing Authority in connection with any Tax 17 (including, without limitation, any combined, consolidated or unitary returns for any group of entities that includes CILCORP or any CILCORP Subsidiary). Except as specifically identified in the relevant section of the CILCORP Disclosure Schedule: (a) Filing of Timely Tax Returns. CILCORP and each of the CILCORP Subsidiaries have timely filed (or there has been timely filed on their behalf) all Tax Returns required to be filed by or on behalf of each of them under applicable law. All such Tax Returns were and are in all material respects true, complete and correct. (b) Payment of Taxes. CILCORP and each of the CILCORP Subsidiaries have, within the time and in the manner prescribed by law, paid all Taxes that are due and payable from them. (c) Tax Reserves. The accrual for Taxes on the most recent CILCORP Financial Statements is in an amount at least equal to the sum of CILCORP' and the CILCORP Subsidiaries' liability for Taxes (other than Taxes previously paid over to the appropriate Taxing Authority) for all Tax periods (and portions thereof) ending on or before the date of such financial statements plus their deferred Tax liability. (d) Tax Liens. There are no Tax liens upon the assets, properties or business of CILCORP or any of the CILCORP Subsidiaries except liens for Taxes not yet due or being contested in good faith through appropriate proceedings and for which adequate reserves have been established in the CILCORP Financial Statements. (e) Withholding Taxes. CILCORP and each of the CILCORP Subsidiaries have complied in all material respects with the provisions of the Internal Revenue Code of 1986, as amended (the "Code") and all other applicable laws relating to the payment and withholding of Taxes, including, without limitation, the withholding and reporting requirements under Code Sections 1441 through 1464, 3401 through 3406 and 6041 through 6049, as well as similar provisions under any other laws, and have, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper Taxing Authorities all amounts required. (f) Extensions of Time for Filing Tax Returns. Neither CILCORP nor any of the CILCORP Subsidiaries has requested any extension of time within which to file any Tax Return, which Tax Return has not since been timely filed. 18 (g) Waivers of Statute of Limitations. Neither CILCORP nor any of the CILCORP Subsidiaries has executed any outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns. (h) Expiration of Statute of Limitations. The statutes of limitations for the assessment of all Taxes with respect to all Tax Returns of CILCORP and the CILCORP Subsidiaries for all Tax periods have expired. Prior to the date of this Agreement, CILCORP has provided AES with written schedules of (i) the Tax years of CILCORP and each CILCORP Subsidiary for which any statute of limitation with respect to any Tax has not expired and (ii) with respect to any franchise Tax and any Tax based on net income, gross receipts or gross income, for all Tax years of CILCORP and each CILCORP Subsidiary for which the statutes of limitations have not yet expired, those years for which examinations have been completed, those years for which examinations are presently being conducted, and those years for which examinations have not yet been initiated. No deficiency for any Taxes has been proposed, asserted or assessed against CILCORP or any of the CILCORP Subsidiaries that has not been resolved and paid in full. (i) Audit, Administrative and Court Proceedings. No audits or other proceedings by any Taxing Authority are presently pending, or, to the knowledge of CILCORP or any of the CILCORP Subsidiaries, threatened, with regard to any Taxes or Tax Returns of CILCORP or any of the CILCORP Subsidiaries. (j) Powers of Attorney. No power of attorney currently in force has been granted by CILCORP or any of the CILCORP Subsidiaries concerning any Tax matter. (k) Tax Rulings. Neither CILCORP nor any of the CILCORP Subsidiaries has received or requested a Tax Ruling or entered into a Closing Agreement with any taxing authority that would have a continuing adverse effect after the Closing Date. "Tax Ruling," as used in this Agreement, shall mean any written ruling of (or other written guidance from) a Taxing Authority relating to Taxes. "Closing Agreement," as used in this Agreement, shall mean a written and legally binding agreement with a Taxing Authority relating to Taxes. (l) Availability of Tax Returns. CILCORP has made available to AES complete and accurate copies of (i) all Tax Returns for open years, and any amendments thereto, filed by or on behalf of CILCORP or any of the CILCORP Subsidiaries, (ii) all audit reports or written proposed adjustments (whether formal or informal) received from any Taxing Authority relating to any Tax Return filed by or on behalf of CILCORP or any of the 19 CILCORP Subsidiaries and (iii) any Tax Ruling or request for a Tax Ruling applicable to CILCORP or any of the CILCORP Subsidiaries and Closing Agreements entered into by CILCORP or any of the CILCORP Subsidiaries. (m) Tax Sharing Agreements. Neither CILCORP nor any CILCORP Subsidiary is a party to, is bound by, or has any obligation under, any agreement relating to the allocation or sharing of Taxes or has any liability for the Taxes of any person other than CILCORP or the CILCORP Subsidiaries, as a transferee, or successor or otherwise (including, without limitation, any liability under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law). (n) Code Section 341(f). Neither CILCORP nor any of the CILCORP Subsidiaries has filed (or will file prior to the Closing) a consent pursuant to Code Section 341(f) or has agreed to have Code Section 341(f)(2) apply to any disposition of a subsection (f) asset (as that term is defined in Code Section 341(f)(4)) owned by CILCORP or any of the CILCORP Subsidiaries. (o) Code Section 168. No property of CILCORP or any of the CILCORP Subsidiaries is property that CILCORP or any CILCORP Subsidiary or any party to this transaction is or will be required to treat as being owned by another person pursuant to the provisions of Code Section 168(f)(8) (as in effect prior to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property" within the meaning of Code Section 168(h). (p) Code Section 481 Adjustments. Neither CILCORP nor any of the CILCORP Subsidiaries is required to include in income for any Tax period ending after the date hereof any adjustment pursuant to Code Section 481(a) by reason of a voluntary change in accounting method of CILCORP or any of the CILCORP Subsidiaries, nor has the IRS proposed any such adjustment or change in accounting method. (q) Acquisition Indebtedness. No indebtedness of CILCORP or any of the CILCORP Subsidiaries is "corporate acquisition indebtedness" within the meaning of Code Section 279(b) or an "applicable high yield discount obligation" within the meaning of Code Section 163(i). (r) Consolidated Tax Returns. Neither CILCORP nor any of the CILCORP Subsidiaries has ever been a member of an affiliated group of corporations (within 20 the meaning of Code Section 1504(a)) filing consolidated Tax Returns, other than the affiliated group of which CILCORP is the common parent. (s) 5% Foreign Stockholders. Based on any Schedule 13D and 13G filings with the SEC with respect to CILCORP and any other relevant information within CILCORP's knowledge, no foreign person has owned 5% or more of the outstanding shares of CILCORP Common Stock at any time during the five year period ending on the Closing Date. Section 4.10 Employee Matters; ERISA. (a) Benefit Plans. Section 4.10(a) of the CILCORP Disclosure Schedule contains a true and complete list of each employee benefit plan, practice, program or arrangement currently sponsored, maintained or contributed to by CILCORP or any of the CILCORP Subsidiaries for the benefit of employees, former employees or directors and their beneficiaries in respect of services provided to any such entity, including, but not limited to, any employee benefit plans within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any employee pension benefit plan, program, arrangement or agreement, any health, medical, welfare, disability, life insurance, bonus, option, stock appreciation plan, performance stock plan, restricted stock plan, deferred compensation plan, retiree benefits plan, severance pay and other employee benefit or fringe benefit plan and any employment, consulting, non-compete, severance or change in control agreement (collectively, the "CILCORP Benefit Plans"), together with, for any option, stock appreciation plan, performance stock plan, restricted stock plan, deferred compensation plan and supplemental retirement plan, the current amounts or benefits granted or payable under each and reasonable details (including exercise prices) regarding the outstanding options to purchase shares of CILCORP Common Stock (the "CILCORP Options") or other securities which represent the right (contingent or other) to purchase or receive shares of CILCORP Common Stock or, following the Merger, of the common stock, no par value, of the Surviving Corporation or of the common stock, par value $.01 per share, of AES ("AES Common Stock"). For the purposes of this Section 4.10, the term "CILCORP" shall be deemed to include predecessors thereof. (b) Contributions. Except as set forth in Section 4.10(a) of the CILCORP Disclosure Schedule, all material contributions and other payments required to be made by CILCORP or any of the CILCORP Subsidiaries to any CILCORP Benefit Plan (or to any person pursuant to the terms thereof) have been timely made or the amount of such payment or contribution obligation has been reflected in the CILCORP Financial Statements. 21 Except as set forth in Section 4.10(a) of the CILCORP Disclosure Schedule, (i) the current value of all accrued benefits under any CILCORP Benefit Plan does not exceed the current value of the assets of such plan and (ii) neither CILCORP nor any entity which is or ever has been considered as a single employer together with CILCORP or CILCO pursuant to Section 414 of the Code contributes or has contributed, during the eight-year period immediately prior to the date of this Agreement, to a multiemployer plan (as defined in Section 3(37) of ERISA), or has any liability under ERISA Section 4203 or Section 4205 in respect of any such plan. (c) Qualification; Compliance. Except as set forth in Section 4.10(c) of the CILCORP Disclosure Schedule, each of the CILCORP Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of the Code has been determined by the IRS to be so qualified, and no circumstances exist that are reasonably expected by CILCORP to result in the revocation of any such determination. CILCORP and each of the CILCORP Subsidiaries are in compliance in all material respects with, and each CILCORP Benefit Plan is and has been operated in all material respects in compliance with the terms thereof and all applicable laws, rules and regulations governing such plan, including, without limitation, ERISA and the Code. Each CILCORP Benefit Plan intended to provide for the deferral of income, the reduction of salary or other compensation or to afford other income Tax benefits complies in all material respects with the requirements of the applicable provisions of the Code or other laws, rules and regulations required to provide such income Tax benefits. (d) Liabilities. With respect to the CILCORP Benefit Plans individually and in the aggregate, there are no actions, suits, claims (other than claims for benefits in the ordinary course) pending or, to the knowledge of CILCORP, threatened and no event has occurred, and, there exists no condition or set of circumstances that could subject CILCORP or any of the CILCORP Subsidiaries to any liability arising under the Code, ERISA or any other applicable law including, without limitation, any liability of any kind whatsoever, whether direct or indirect, contingent, inchoate or otherwise, to any such plan or the Pension Benefit Guaranty Corporation (the "PBGC"), or under any indemnity agreement to which CILCORP or any of the CILCORP Subsidiaries is a party, in each such case, which liability, individually or in the aggregate, could reasonably be expected to have a CILCORP Material Adverse Effect. (e) Welfare Plans. Except as set forth in Section 4.10(e) of the CILCORP Disclosure Schedule, none of the CILCORP Benefit Plans that are "welfare plans", within the meaning of Section 3(1) of ERISA, provides for any benefits payable to or on behalf of any employee or director after termination of employment or service, or after retirement, as 22 the case may be, other than elective continuation required pursuant to Code Section 4980B or coverage which expires at the end of the calendar month following such event. Each such plan that is a "group health plan" (as defined in Code Section 4980B(g)) has been operated in compliance with Code Section 4980B in all material respects at all times. (f) Documents Made Available. CILCORP has made available to AES a true and correct copy of each collective bargaining agreement to which CILCORP or any of the CILCORP Subsidiaries is a party or under which CILCORP or any of the CILCORP Subsidiaries has obligations, and with respect to each CILCORP Benefit Plan, to the extent applicable, (i) such plan and summary plan description (including all amendments to each such document), (ii) the most recent annual report filed with the IRS, (iii) each related trust agreement, insurance contract, service provider or investment management agreement (including all amendments to each such document), (iv) the most recent determination of the IRS with respect to the qualified status of such plan, (v) the most recent actuarial report or valuation and (vi) all material employee communications. (g) Payments Resulting from Merger and Other Severance Payments. Except as set forth in Section 4.10(g) of the CILCORP Disclosure Schedule or as specifically provided for in this Agreement, (i) the announcement or consummation of the Merger or any other transaction contemplated by this Agreement or the Second Merger will not (either alone or upon the occurrence of any additional or further acts or events, including, without limitation, termination of employment) result in any (A) payment (whether of severance pay or otherwise) becoming due from CILCORP or any of the CILCORP Subsidiaries to any officer, employee, former employee or director thereof or to the trustee under any "rabbi trust" or similar arrangement or (B) benefit being established or becoming accelerated, vested or payable under any CILCORP Benefit Plan and (ii) neither CILCORP nor any of the CILCORP Subsidiaries is a party to (A) any management, employment, deferred compensation, severance (including any payment, right or benefit resulting from a change in control), bonus or other contract for personal services with any officer, director or employee, (B) any consulting contract with any person who prior to entering into such contract was a director or officer of CILCORP or any of the CILCORP Subsidiaries or (C) any material plan, agreement, arrangement or understanding similar to the foregoing. (h) Labor Agreements. As of the date hereof, except as set forth in Section 4.10(h) of the CILCORP Disclosure Schedule, neither CILCORP nor any of the CILCORP Subsidiaries is a party to or bound by any collective bargaining agreement or other labor agreement with any union or labor organization, or work rules or practices agreed to with 23 any labor organization or employee association applicable to employees of CILCORP or any of the CILCORP Subsidiaries. To the knowledge of CILCORP, as of the date hereof, there is no current union representation question involving employees of CILCORP or any of the CILCORP Subsidiaries, nor does CILCORP know of any activity or proceeding of any labor organization (or representative thereof) or employee group to organize any such employees. There are no written personnel policies, rules or procedures applicable to employees of CILCORP or any of the CILCORP Subsidiaries, other than those set forth in Section 4.10(h) of the CILCORP Disclosure Schedule, true and correct copies of which have heretofore been delivered to AES. Except as set forth in Section 4.10(h) of the CILCORP Disclosure Schedule, (i) there is no grievance arising out of any collective bargaining agreement or other grievance procedure, unfair labor practice, employment discrimination or other investigation, charge or complaint against CILCORP or any of the CILCORP Subsidiaries pending or, to the knowledge of CILCORP, threatened, which has or could reasonably be expected to have a CILCORP Material Adverse Effect, (ii) there is no strike, dispute, slowdown, work stoppage or lockout pending, or, to the knowledge of CILCORP, threatened, against or involving CILCORP or any of the CILCORP Subsidiaries which has or could reasonably be expected to have, a CILCORP Material Adverse Effect and during the past five years there has not been any such action, (iii) there is no proceeding, claim, suit, action or governmental investigation pending or, to the knowledge of CILCORP, threatened, in respect of which any director, officer, employee or agent of CILCORP or any of the CILCORP Subsidiaries is or may be entitled to claim indemnification from CILCORP pursuant to their respective Articles of Incorporation or By-Laws or as provided in the Indemnification Agreements listed in Section 4.10(h) of the CILCORP Disclosure Schedule. Except as set forth in Section 4.10(h) of the CILCORP Disclosure Schedule, CILCORP and the CILCORP Subsidiaries have complied in all material respects with all laws relating to the employment of labor, including without limitation any provisions thereof relating to wages, hours, collective bargaining and the payment of social security and similar Taxes, and no person has, to the knowledge of CILCORP, asserted that CILCORP or any of the CILCORP Subsidiaries is liable in any material amount for any arrears of wages or any Taxes or penalties for failure to comply with any of the foregoing. Since the enactment of the Worker Adjustment and Retraining Notification Act (the "WARN Act"), neither CILCORP nor any of the CILCORP Subsidiaries has effectuated, without complying with the applicable requirements of the WARN Act, (a) a "plant closing" (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of CILCORP or any of the CILCORP Subsidiaries; or (b) a "mass layoff" (as defined in the WARN Act) affecting any site of employment or facility of CILCORP or any of the CILCORP Subsidiaries; nor has CILCORP or any of the CILCORP Subsidiaries been affected by any transaction or engaged in layoffs or employment terminations 24 sufficient in number to trigger application of any similar state, local or foreign law or regulation without complying with the applicable requirements of such law or regulation. (i) Parachute Payments. Section 4.10(i)(a) of the CILCORP Disclosure Schedule sets forth (i) the name of each employee, former employee or other person who is or was providing services to CILCORP or any of the CILCORP Subsidiaries and who, in connection with the Merger, the other transactions contemplated by this Agreement or the Second Merger, will receive, or will or may become entitled to receive in the future or upon termination of such person's employment, any payments (including, without limitation, accelerated vesting of CILCORP Options or other equity-based awards) which could reasonably be expected to constitute "excess parachute payments" with respect to such person within the meaning of Section 280G of the Code ("Excess Parachute Payments") and (ii) a description of the arrangements that could give rise to such Excess Parachute Payments. Section 4.10(i)(b) of the CILCORP Disclosure Schedule sets forth the maximum sum of the aggregate change in control payments and entitlements (including, without limitation, accelerated vesting of CILCORP Options or other equity-based awards) which any employee, former employee, or other person who is or was providing services to CILCORP or any of the CILCORP Subsidiaries may be entitled to receive now or in the future (including upon termination of such person's employment) in connection with the Merger, the other transactions contemplated by this Agreement and the Second Merger. Section 4.10(i)(c) of the CILCORP Disclosure Schedule sets forth the maximum sum of (i) the Tax cost associated with the loss of deductions under Section 280G with respect to such Excess Parachute Payments and (ii) the amount of any excise taxes that may be imposed with respect to such Excess Parachute Payments and any gross-ups on such amounts. (j) Section 162(m). Except as set forth in Section 4.10(j) of the CILCORP Disclosure Schedule, no payments to any executive officer of CILCORP or any of the CILCORP Subsidiaries will fail to be deductible for federal income Tax purposes by reason of the deduction limit imposed under Section 162(m) of the Code. Section 4.10(j) of the CILCORP Disclosure Schedule sets forth the name of each executive officer who will receive compensation which may not be fully deductible by reason of the application of Section 162(m), and a reasonable estimate of the amount of such potentially nondeductible compensation. 25 Section 4.11 Environmental Protection. (a) Definitions. As used in this Agreement: (i) "Environmental Claim" means any and all written administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any person or entity (including any Governmental Authority) alleging potential liability (including, without limitation, potential responsibility for or liability for enforcement, investigatory costs, cleanup costs, spent fuel or waste disposal costs, decommissioning costs, governmental response costs, removal costs, remediation costs, natural resources damages, property damages, personal injuries or civil or criminal penalties) arising out of, based on or resulting from (A) the presence, Release or threatened Release into the environment of any Hazardous Materials at any location or (B) circumstances forming the basis of any violation or alleged violation of any Environmental Law or (C) any and all claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence or Release of any Hazardous Materials. (ii) "Environmental Laws" means all applicable federal, state and local laws, rules, regulations, ordinances, orders, directives and any binding judicial or administrative interpretation thereof, and common law and equitable doctrines relating to pollution, the environment (including, without limitation, indoor or ambient air, surface water, groundwater, land surface or subsurface strata) or protection of human health or safety as it relates to the environment including, without limitation, those relating to Releases or threatened Releases of Hazardous Materials, or otherwise relating to the manufacture, generation, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. (iii) "Hazardous Materials" means (A) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls; (B) any chemicals, materials or substances which are now defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants" or words of similar import under any Environmental Law; and (C) any other chemical, material, substance or waste, exposure to which is now prohibited or regulated under any Environmental Law. 26 (iv) "Release" means any release, spill, emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching or migration into the atmosphere, soil, sediments, surface water, groundwater or property. (b) Compliance. Except as set forth in Section 4.11(b)(i) of the CILCORP Disclosure Schedule, CILCORP and each of the CILCORP Subsidiaries and, to the knowledge of CILCORP, the CILCORP Joint Ventures, are in compliance with all applicable Environmental Laws except where the failure to so comply would not have a CILCORP Material Adverse Effect, and neither CILCORP nor any of the CILCORP Subsidiaries has received any written communication from any person or Governmental Authority that alleges that CILCORP or any of the CILCORP Subsidiaries or, to the knowledge of CILCORP, the CILCORP Joint Ventures is not in such compliance with applicable Environmental Laws. Except as set forth in Section 4.11(b)(ii) of the CILCORP Disclosure Schedule, to the knowledge of CILCORP, compliance with all applicable Environmental Laws will not require CILCORP or any CILCORP Subsidiary or, to the knowledge of CILCORP, any CILCORP Joint Venture to incur material expenditures beyond that currently budgeted in the five CILCORP fiscal years beginning with January 1, 1998 (as disclosed to AES prior to the date of this Agreement), including but not limited to the costs of CILCORP and CILCORP Subsidiary and CILCORP Joint Venture pollution control equipment required or reasonably contemplated to be required in the future. (c) Environmental Permits. Except as set forth in Section 4.11(c) of the CILCORP Disclosure Schedule, CILCORP and each of the CILCORP Subsidiaries and, to the knowledge of CILCORP, the CILCORP Joint Ventures, have obtained or have applied for all permits, licenses, registrations, consents, and other governmental authorizations required under any Environmental Law ("Environmental Permits") necessary for the construction of its facilities or the conduct of its operations except where the failure to so obtain would not have a CILCORP Material Adverse Effect, and all such Environmental Permits are in good standing or, where applicable, a renewal application has been timely filed and is pending agency approval, and CILCORP and the CILCORP Subsidiaries and, to the knowledge of CILCORP, the CILCORP Joint Ventures are in compliance with all terms and conditions of all Environmental Permits necessary for the construction of its facilities or the conduct of its operations, except where the failure to so comply, in the aggregate, would not have a CILCORP Material Adverse Effect. 27 [Page intentionally left blank] 28 (d) Environmental Claims. Except as set forth in Section 4.11(d) of the CILCORP Disclosure Schedule, there is no Environmental Claim pending (or, to the knowledge of CILCORP, threatened) (A) against CILCORP or any of the CILCORP Subsidiaries or, to the knowledge of CILCORP, any of the CILCORP Joint Ventures, (B) to the knowledge of CILCORP, against any person or entity whose liability for any Environmental Claim CILCORP, any of the CILCORP Subsidiaries or CILCORP Joint Ventures has or may have retained or assumed either contractually or by operation of law, or (C) against any real or personal property or operations which CILCORP or any of the CILCORP Subsidiaries or, to the knowledge of CILCORP, any of the CILCORP Joint Ventures owns, leases or manages, in whole or in part, which, if adversely determined, would have, individually or in the aggregate, a CILCORP Material Adverse Effect. (e) Releases. Except as set forth in Section 4.11(e) of the CILCORP Disclosure Schedule, CILCORP has no knowledge of any Releases of any Hazardous Material that would be reasonably likely to form the basis of any Environmental Claim against CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint Ventures, or against any person or entity whose liability for any Environmental Claim CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint Ventures has or may have retained or assumed either contractually or by operation of law except for any Environmental Claim which would not have, individually or in the aggregate, a CILCORP Material Adverse Effect. (f) Predecessors. Except as set forth in Section 4.11(f) of the CILCORP Disclosure Schedule, CILCORP has no knowledge, with respect to any predecessor of CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint Ventures, of any Environmental Claim pending or threatened, or of any Release of Hazardous Materials that would be reasonably likely to form the basis of any Environmental Claim, which, if determined adversely, could reasonably be expected to require payments of $500,000 or more or which could reasonably be expected to have a CILCORP Material Adverse Effect. (g) Disclosure. CILCORP has disclosed in writing to AES all material facts which CILCORP reasonably believes could have a CILCORP Material Adverse Effect arising from (i) the cost of CILCORP pollution control equipment (including, without limitation, upgrades and other modifications to existing equipment) currently required or reasonably contemplated to be required in the future, (ii) current remediation costs or costs to CILCORP or any of the CILCORP Subsidiaries for remediation reasonably contemplated to be required in the future or (iii) any other environmental matter affecting CILCORP or any of the CILCORP Subsidiaries. 29 (h) Cost Estimates. To CILCORP's knowledge, no environmental matter set forth in the CILCORP SEC Reports or the CILCORP Disclosure Schedule could reasonably be expected to exceed the cost estimates provided in the CILCORP SEC Reports by an amount that individually or in the aggregate could reasonably be expected to have a CILCORP Material Adverse Effect. (i) Orders; Environmental Indemnification. Except as set forth in Section 4.11(i) of the CILCORP Disclosure Schedule, neither CILCORP nor any of the CILCORP Subsidiaries nor, to the knowledge of CILCORP, any CILCORP Joint Ventures, are or have been subject to any administrative or judicial orders relating to Environmental Laws or Hazardous Materials, including, but not limited to, Hazardous Materials that have been Released at locations that are not currently owned or operated by CILCORP, the CILCORP Subsidiaries or any CILCORP Joint Ventures, except for such orders where CILCORP or any CILCORP Subsidiary or any CILCORP Joint Ventures completed all obligations under said orders (and where there are no outstanding potential obligations or penalties that could arise from said orders) more than five years prior to the date of this Agreement. Except as set forth in Section 4.11(i) of the CILCORP Disclosure Schedule, neither CILCORP nor any of the CILCORP Subsidiaries nor, to the knowledge of CILCORP, any CILCORP Joint Ventures, have entered into any agreements with any non-governmental persons requiring CILCORP, any CILCORP Subsidiary or, to the knowledge of CILCORP, any CILCORP Joint Venture to indemnify, reimburse or provide contribution to such other person for any matter related to Environmental Laws, Hazardous Materials, or the environment, except for such matters that have been fully resolved and where CILCORP, any CILCORP Subsidiary or any CILCORP Joint Venture has no further monetary or non-monetary obligation. (j) NOx Emissions. Section 4.11(j) of the CILCORP Disclosure Schedule is a true and correct description of (i) CILCORP current plan to comply with current or reasonably anticipated requirements relating to the control of atmospheric emissions of oxides of nitrogen (NOx), including, but not limited to, costs and expenses related to compliance with a rule issued by the EPA, published in the Federal Register on October 27, 1998, that requires 22 States and the District of Columbia to submit State implementation plan revisions to prohibit specified amounts of NOx ("NOx SIP Call"), and compliance with state statutes, regulations and policies promulgated or issued to implement the NOx SIP Call, and (ii) CILCORP best judgment as to the estimated capital costs and operating costs associated with such plan. 30 Section 4.12 Regulation as a Utility. CILCO is regulated as a public utility by the FERC and in the State of Illinois and in no other state. Except as set forth in the preceding sentence or Section 4.12 of the CILCORP Disclosure Schedule, neither CILCORP nor any "subsidiary company" or "affiliate" (as each such term is defined in PUHCA) of CILCORP (other than CILCO) is subject to regulation as a public utility or public service company (or similar designation) by the FERC or any municipality, locality, state in the United States or any foreign country. Section 4.13 Vote Required. The approval of the Merger by the affirmative vote of two-thirds of the votes entitled to be cast by holders of CILCORP Common Stock (the "CILCORP Stockholders' Approval") is the only vote of the holders of any class or series of the capital stock of CILCORP or any of the CILCORP Subsidiaries required to approve this Agreement, the Merger, the other transactions contemplated hereby and the Second Merger. Section 4.14 Insurance. Except as set forth in Section 4.14 of the CILCORP Disclosure Schedule, CILCORP and each of the CILCORP Subsidiaries is, and has been continuously since January 1, 1996, insured with financially responsible insurers in such amounts and against such risks and losses as are customary for companies conducting the business as conducted by CILCORP and the CILCORP Subsidiaries during such time period. Neither CILCORP nor any of the CILCORP Subsidiaries is in default under or has received any notice of cancellation or termination with respect to any material insurance policy of CILCORP or any of the CILCORP Subsidiaries. The insurance policies of CILCORP and each of the CILCORP Subsidiaries are valid and enforceable policies and will remain in effect following the Merger and the Second Merger. Section 4.15 Opinion of Financial Advisor. The Board of Directors of CILCORP has received the opinion of Salomon Smith Barney ("Salomon"), dated the date of this Agreement, to the effect that, as of the date thereof, the Per Share Amount to be received by the holders of CILCORP Common Stock in the Merger is fair from a financial point of view to the holders of CILCORP Common Stock. Section 4.16 Brokers. No broker, finder or investment banker (other than Salomon) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of CILCORP or any CILCORP Subsidiary. CILCORP has heretofore furnished to AES a complete and correct copy of all agreements between CILCORP and Salomon, pursuant to which such firm would be entitled to any payment relating to the Merger. 31 Section 4.17 Non-Applicability of Certain Provisions of Illinois Act. None of the business combination provisions of Section 5/7.85 and Section 5/11.75 of the Illinois Act or any similar provisions of the Illinois Act, the Articles of Incorporation or By-Laws of CILCORP are applicable to the transactions contemplated by this Agreement because such provisions do not apply by their terms or because any required approvals of the Board of Directors of CILCORP have been obtained. Section 4.18 CILCORP Rights Agreement. Prior to the date of this Agreement, CILCORP has delivered to AES and its counsel a true and complete copy of the Rights Agreement, dated as of October 29, 1996, between Continental Stock Transfer and Trust Company and CILCORP (the "CILCORP Rights Agreement"), in effect as of the date hereof. As promptly as practicable on or after the date hereof, but in no event later than the date of delivery of the CILCORP Certificate, CILCORP will amend the CILCORP Rights Agreement, as necessary (the "Rights Amendment"), (i) to prevent the Merger, the other transactions contemplated hereby and the Second Merger from resulting in the distribution of separate rights certificates or the occurrence of a Distribution Date (as defined in the CILCORP Rights Agreement) or being deemed a Triggering Event (as defined in the CILCORP Rights Agreement) and (ii) to provide that neither AES nor any AES Subsidiary shall be deemed to be an Acquiring Person (as defined in the CILCORP Rights Agreement) by reason of the Merger, the other transactions contemplated by this Agreement and the Second Merger. CILCORP represents that the Rights Amendment will be sufficient to render the Preferred Stock Purchase Rights (the "Rights") inoperative with respect to any acquisition of Shares by AES, any AES Subsidiary or any of their affiliates pursuant to this Agreement. CILCORP represents that as a result of the Rights Amendment, the Rights will not be exercisable upon or at any time after the Merger or the Second Merger by reason of the transactions contemplated hereby. Section 4.19 Year 2000 Compliance. The computer software operated by CILCORP and its Subsidiaries which is used in the conduct of their business is capable of providing or being adapted to provide uninterrupted millennium functionality to record, store, process and present calendar dates falling on or after January 1, 2000 in substantially the same manner and with the same functionality as such software records, stores, processes and presents such calendar dates falling on or before December 31, 1999. CILCORP reasonably believes as of the date hereof that the remaining cost of adaptions referred to in the foregoing sentence will not exceed $22.0 million, and all such costs have been included in CILCORP's 32 budget for capital expenditures set forth in Section 6.1(k) of the CILCORP Disclosure Schedule. Section 4.20 Title to Real Property. Except as set forth in Section 4.20 of the CILCORP Disclosure Schedule or except as is not reasonably likely to result in a CILCORP Material Adverse Effect, CILCORP and each CILCORP Subsidiary: (i) owns and has good, valid and marketable title in fee simple to the real property owned by such party, free and clear of Liens, except for (A) minor imperfections of title, easements and rights of way, none of which, individually or in the aggregate, materially detracts from the value of or impairs the use of the affected property or impairs the operations of CILCORP or any CILCORP Subsidiary and (B) Liens for current Taxes not yet due and payable ((A) and (B) are collectively referred to as "Permitted CILCORP Liens"); (ii) is in peaceful and undisturbed possession of the space and/or estate under each lease under which it is a tenant, and there are no material defaults by it as tenant thereunder; and (iii) has good and valid rights of ingress and egress to and from all the real property owned or leased by such party from and to the public street systems for all usual street, road and utility purposes. The failure to hold any easements or rights of way will not have a CILCORP Material Adverse Effect. Section 4.21 Assets Other than Real Property Interests. CILCORP or a CILCORP Subsidiary has good and valid title to all material assets reflected on the most recent balance sheet included in the CILCORP SEC Reports (the "Balance Sheet") or thereafter acquired, except those sold or otherwise disposed of for fair value since the date of the Balance Sheet in the ordinary course of business consistent with past practice and not in violation of this Agreement, in each case free and clear of all mortgages, liens, security interests or encumbrances of any kind except (i) mechanics', carriers', workmen's, repairmen's or other like liens arising or incurred in the ordinary course of business, liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business and that may thereafter be paid without penalty, (ii) mortgages, liens, security interests and encumbrances which secure debt that is reflected as a liability on the Balance Sheet and the existence of which is indicated in the notes thereto and (iii) other imperfections of title or encumbrances, if any, which do not, individually or in the aggregate, materially impair the continued use and operation of the assets to which they relate in the business of CILCORP and each of the CILCORP Subsidiaries as presently conducted. All the material tangible personal property of CILCORP and the CILCORP Subsidiaries has been maintained in all material respects in accordance with the past practice of CILCORP and the CILCORP Subsidiaries and generally accepted industry practice. Each item of material tangible personal property of CILCORP and the CILCORP Subsidiaries is in all material 33 respects in good working order and is adequate and sufficient for CILCORP' intended purposes, ordinary wear and tear excepted. All leased personal property of CILCORP and its subsidiaries is in all material respects in the condition required of such property by the terms of the lease applicable thereto during the term of the lease and upon the expiration thereof. Section 4.22 Intellectual Property. CILCORP and each of the CILCORP Subsidiaries own, or possess licenses or other valid rights to use, all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, copyrights, service marks, service mark rights, trade secrets, applications to register, and registrations for, the foregoing trademarks, service marks, know-how and other proprietary rights and information (collectively, "Intellectual Property") necessary in connection with the business of CILCORP and the CILCORP Subsidiaries as currently conducted, except where the failure to possess such rights or licenses or valid rights to use would not have a CILCORP Material Adverse Effect, and (i) the conduct of the business of CILCORP and each of the CILCORP Subsidiaries as currently conducted does not infringe upon any Intellectual Property of any third party except where such infringement would not result in a CILCORP Material Adverse Effect and (ii) no person is infringing upon any Intellectual Property of CILCORP or any CILCORP Subsidiary except where such infringement would not result in a CILCORP Material Adverse Effect. The execution and delivery of this Agreement and the consummation of the Merger, the other transactions contemplated hereby and the Second Merger will not result in the loss of, or any encumbrance on, the rights of CILCORP or any CILCORP Subsidiary with respect to the Intellectual Property owned or used by them, except where such loss or encumbrance would not have a CILCORP Material Adverse Effect. Section 4.23 Transactions with Affiliates. Except as set forth in Section 4.23 of the CILCORP Disclosure Schedule or in the CILCORP SEC Reports, there is no agreement, contract or other arrangement between CILCORP and any CILCORP Subsidiary, on the one hand, and any affiliate (other than CILCORP or a CILCORP Subsidiary), on the other hand, that will continue in effect subsequent to the Closing Date. After the Closing Date no affiliate of CILCORP or any CILCORP Subsidiary (other than CILCORP or any CILCORP Subsidiary) will have any material interest in any property (real or personal, tangible or intangible) or contract used in or pertaining to the business of CILCORP or any CILCORP Subsidiary. No affiliate of CILCORP or any CILCORP Subsidiary (other than CILCORP or any CILCORP Subsidiary) has any direct or indirect ownership interest in any person (other than the ownership of 5% or less of the stock of any person held as a passive investment) in which CILCORP or any CILCORP Subsidiary has any direct or indirect ownership interest or with which CILCORP or any CILCORP Subsidiary competes or has a business relationship. 34 Section 4.24 Discontinued Business. Section 4.24(i) of the CILCORP Disclosure Schedule contains a true and complete list of each CILCORP Subsidiary which has ceased operations or discontinued any business (the "Discontinued Business") since January 1, 1997. Except for liabilities, contingent or otherwise, disclosed in Section 4.24(ii) of the CILCORP Disclosure Schedule, neither CILCORP nor any CILCORP Subsidiary has any liabilities or obligations, contingent or otherwise, with respect to a Discontinued Business and no creditor of any Discontinued Business has any recourse against CILCORP or any CILCORP Subsidiary. Section 4.25 Captive Insurance Business. National Professional Casualty Company is licensed as a pure captive insurance company within the meaning of Section 6001 of the Vermont Insurance Laws, and has all insurance licenses, permits and authorizations required to operate its business as currently conducted. At no time has National Professional Casualty Company insured any risks other than those of QST Environmental Inc. and its Subsidiaries. The loss and loss adjustment expense reserves reflected on National Professional Casualty Company's most recently filed statutory statement were established in accordance with generally accepted actuarial standards consistently applied and are adequate to meet all liabilities on insurance policies issued by National Professional Casualty Company. CILCORP has previously delivered to AES the most recent market conduct and financial examinations report of National Professional Casualty Company issued by any insurance regulatory authority, and all material deficiencies or violations in such reports have been resolved to the satisfaction of the insurance regulatory authorities. Except as set forth in Section 4.25 of the CILCORP Disclosure Schedule, there are no pending market conduct examinations or inquiries by any insurance regulatory authority with respect to National Professional Casualty Company. Section 4.26 Contractual Obligations. Section 4.26 of the CILCORP Disclosure Schedule sets forth a true and complete list of all contractual commitments or other contractual obligations of CILCORP and the CILCORP Subsidiaries to make investments or purchase an equity interest in, make contributions to, or otherwise fund the operations, expenses or capital of, any person. The execution and delivery of this Agreement by CILCORP do not, and the consummation of the Merger and the other transactions contemplated hereby and if such were consummated, the Second Merger, will not result in any obligation on the part of CILCORP or any CILCORP Subsidiaries to pay money to, guarantee the performance or obligations of, or cause AES to guarantee the performance or obligations of, any person, including in connection with obtaining the CILCORP Required Consents and the CILCORP Second Merger Required Consents, under any note, bond, mortgage, indenture 35 or deed of trust or any material contract, lease or other agreement of any kind to which CILCORP or any of the CILCORP Subsidiaries or the CILCORP Joint Ventures is a party or by which any of them or any of their respective properties or assets may be bound. Section 4.27 Disclosure. CILCORP has not failed to disclose to AES any facts known to CILCORP or which CILCORP could reasonably be expected to know pertaining to CILCORP, any CILCORP Subsidiary, any CILCORP Joint Venture, or its or their business or operations that may materially and adversely affect the business, assets, operations, or prospects of CILCORP, any CILCORP Subsidiary or any CILCORP Joint Venture taken as a whole. ARTICLE V REPRESENTATIONS AND WARRANTIES OF AES AND MERGER SUB AES and Merger Sub hereby represent and warrant to CILCORP as follows: Section 5.1 Organization and Qualification. Each of AES and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority and has been duly authorized by all necessary approvals and orders to own, lease and operate its assets and properties and to carry on its business as it is now being conducted and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its assets and properties makes such qualification necessary, other than in such jurisdictions where the failure to so qualify and be in good standing, when taken together with all other such failures, would not have a material adverse effect on the business, operations, properties, assets, condition (financial or other), prospects or the results of operations of AES and its subsidiaries taken as a whole or on the consummation of the transactions contemplated by this Agreement (any such material adverse effect, an "AES Material Adverse Effect"). Section 5.2 Authority; Non-Contravention; Statutory Approvals. (a) Authority. AES and Merger Sub have all requisite power and authority to enter into this Agreement and, subject to the receipt of the AES Required Statutory Approvals (as defined in Section 5.2(c) hereof), to consummate the transactions contemplated 36 hereby. The execution and delivery of this Agreement and the consummation by AES and Merger Sub of the Merger and theother transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of AES and Merger Sub. This Agreement has been duly and validly executed and delivered by AES and Merger Sub, and, assuming the due authorization, execution and delivery hereof by CILCORP, this Agreement constitutes the valid and binding obligation of each of AES and Merger Sub, enforceable against each of them in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). (b) Non-Contravention. The execution and delivery of this Agreement by AES and Merger Sub do not, and the consummation of the Merger and the other transactions contemplated hereby will not, result in a Violation pursuant to any provisions of (i) the Certificate or Articles of Incorporation, By-Laws or similar governing documents of AES or Merger Sub, (ii) subject to obtaining the AES Required Statutory Approvals (as defined below), any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any Governmental Authority (as defined in Section 4.4(b) hereof) applicable to AES or Merger Sub or any of their respective properties or assets or (iii) subject to obtaining the third-party consents (the "AES Required Consents") set forth in Section 5.2(b) of the disclosure schedule delivered by AES to CILCORP concurrent with the execution of this Agreement (the "AES Disclosure Schedule"), any material note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind to which AES or Merger Sub is a party or by which it or any of its properties or assets may be bound or affected, excluding from the foregoing clauses (ii) and (iii) such Violations which would not, in the aggregate, have an AES Material Adverse Effect. (c) Statutory Approvals. Except as described in Section 5.2(c) of the AES Disclosure Schedule, no declaration, filing or registration with, or notice to or authorization, consent or approval of, any Governmental Authority is necessary for the execution and delivery of this Agreement by AES and Merger Sub or the consummation by AES and Merger Sub of the Merger and the other transactions contemplated hereby (the "AES Required Statutory Approvals"), other than such AES Required Statutory Approvals the failure of which to be obtained or made would not prevent the consummation by AES of the Merger and the other transactions contemplated hereby, it being understood that references in this Agreement to "obtaining" such AES Required Statutory Approvals shall mean making such 37 declarations, filings or registrations; giving such notices; obtaining such authorizations, consents or approvals; and having such waiting periods expire as are necessary to avoid a violation of law. Section 5.3 Compliance. Except as set forth in Section 5.3 of the AES Disclosure Schedule or as disclosed in any report, schedule, registration statement and definitive proxy statement and all amendments thereto filed with the SEC by AES or Merger Sub (or their predecessors) pursuant to the requirements of the Securities Act or Exchange Act since January 1, 1996 and prior to the date hereof (as such documents have since the time of their filing been amended, the "AES SEC Reports"), true and complete copies of which have been provided to CILCORP concurrent with the execution of this Agreement, neither AES nor Merger Sub is in violation of, is, to the knowledge of AES, under investigation with respect to any violation of, or has been given notice or been charged with any violation of, any law, statute, order, rule, regulation, ordinance or judgment (including, without limitation, any applicable environmental law, ordinance or regulation) of any Governmental Authority, except for violations which individually or in the aggregate do not, and insofar as reasonably can be foreseen will not, have an AES Material Adverse Effect. Except as set forth in Section 5.3 of the AES Disclosure Schedule, AES and Merger Sub have all permits, licenses, franchises and other governmental authorizations, consents, approvals and exemptions necessary to conduct their businesses as presently conducted which are material to the operation of the businesses of AES and Merger Sub, except for such permits, licenses, franchises and other governmental authorizations, consents, approvals and exemptions the failure of which to have would not result in an AES Material Adverse Effect. Except as set forth in Section 5.3 of the AES Disclosure Schedule, each of AES and Merger Sub is not in breach or violation of or in default in the performance or observance of any term or provision of, and no event has occurred which, with lapse of time or action by a third party, could result in a default by AES or Merger Sub under (i) its Articles of Incorporation, By-Laws or other organizational document or (ii) any material contract, commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond, license, approval or other instrument to which it is a party or by which AES or Merger Sub is bound or to which any of its property is subject, except in the case of clause (ii) above, for violations, breaches or defaults which individually or in the aggregate do not, and insofar as reasonably can be foreseen will not, have an AES Material Adverse Effect. Section 5.4 Reports and Financial Statements. The filings required to be made by AES and Merger Sub under the Securities Act, the Exchange Act, the Public Utility Regulatory Policies Act of 1978 ("PURPA"), PUHCA and applicable state, municipal, local and other laws, including all forms, statements, reports, agreements (oral or written) and all 38 documents, exhibits, amendments and supplements appertaining thereto, have been filed with the SEC or the FERC, or other appropriate Governmental Authorities, as the case may be, and complied, as of their respective dates, in all material respects with all applicable requirements of the appropriate statutes and the rules and regulations thereunder. As of their respective dates, the AES SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited interim financial statements of AES included in the AES SEC Reports (collectively, the "AES Financial Statements") have been prepared in accordance with GAAP (except as may be indicated therein or in the notes thereto) and fairly present the financial position of AES, as of the dates thereof and the results of their operations and cash flows for the periods then ended, subject, in the case of the unaudited interim financial statements, to normal, recurring audit adjustments. True, accurate and complete copies of the Articles of Incorporation and By-Laws of AES, as in effect on the date of this Agreement, are included (or incorporated by reference) in the AES SEC Reports. Section 5.5 Proxy Statement Information. None of the information supplied in writing by AES, Merger Sub or any AES Subsidiary for inclusion in the Proxy Statement (as defined in Section 7.2(a) hereof), at the dates mailed to stockholders of CILCORP and at the time of the meeting of such stockholders to be held in connection with the Merger and the other transactions contemplated hereby, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Section 5.6 Financing. As of the date of this Agreement and assuming that CILCORP delivers the CILCORP Certificate, AES believes in its reasonable good faith judgment that it will be able to obtain the funds, through financing or otherwise, in an amount sufficient to pay the Aggregate Consideration Amount upon consummation of the Merger. Section 5.7 Regulatory Status. (a) Except as set forth in Section 5.7 of the AES Disclosure Schedule, as of the date of this Agreement, neither AES nor any "subsidiary company" or "affiliate" (as such terms are defined in PUHCA) of AES is subject to regulation as a public utility or public service company (or similar designation) by the FERC or any municipality, locality or state in the United States. 39 (b) As soon as reasonably practicable after the date hereof, AES will not be a "holding company" (as such term is defined in PUHCA) nor will it be a "subsidiary company" of a "holding company" or an "affiliate" of any "public utility company" (as such terms are defined in PUHCA), and therefore, prior approval of the SEC pursuant to Section 9(a)(2) of PUHCA will not be required for consummation of the Merger and the other transactions consummated hereby. Section 5.8 Regulatory Approval. As of the date of this Agreement, AES believes in its reasonable good faith judgment that it will be able to obtain the SEC Exemption Order. ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER; COVENANTS OF THE PARTIES Section 6.1 Conduct of Business by CILCORP Pending the Merger. CILCORP covenants and agrees, as to itself and each of the CILCORP Subsidiaries, that after the date of this Agreement and prior to the Effective Time or earlier termination of this Agreement, except as expressly contemplated or permitted in this Agreement, or to the extent AES shall have otherwise consented in writing, which decision regarding consent shall be made as soon as reasonably practicable and which consent shall not be unreasonably withheld: (a) Ordinary Course of Business. CILCORP shall, and shall cause the CILCORP Subsidiaries to, carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and use all commercially reasonable efforts to preserve intact their present business organizations and goodwill, preserve the goodwill and relationships with customers, suppliers and others having business dealings with them, including regulators, and, subject to prudent management of workforce needs and ongoing or planned programs relating to downsizing, re-engineering and similar matters, keep available the services of their present officers and employees to the end that their goodwill and ongoing businesses shall not be impaired in any material respect at the Effective Time. (b) Dividends. CILCORP shall not, nor shall CILCORP permit any of the CILCORP Subsidiaries to, (i) declare or pay any dividends on or make other distributions 40 in respect of any of their capital stock other than (A) to CILCORP or its wholly-owned Subsidiaries, (B) dividends required to be paid on any CILCO Preferred Stock, CILCO Class A Preferred Stock or CILCO Preference Stock in accordance with the terms thereof, (C) regular quarterly dividends of $.615 on CILCORP Common Stock with respect to the fiscal quarters ending prior to the Effective Date, with usual record and payment dates not in excess of the average quarterly dividend for the four quarterly dividend payments immediately preceding the date hereof with respect thereto, and (D) a special dividend on CILCORP Common Stock with respect to the quarter in which the Effective Time occurs with a record date on or prior to the Effective Time, which does not exceed an amount equal to $.615 multiplied by a fraction, the numerator of which is the number of days in such quarter prior to the Effective Time, and the denominator of which is the total number of days in such fiscal quarter; (ii) split, combine or reclassify any of their capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of their capital stock; or (iii) redeem, repurchase or otherwise acquire any shares of their capital stock, other than redemptions, purchases or acquisitions required by the respective terms of any series of CILCO Preferred Stock, CILCO Class A Preferred Stock or CILCO Preference Stock. (c) Issuance of Securities. Except as described in Section 6.1(c) of the CILCORP Disclosure Schedule, CILCORP shall not, nor shall CILCORP permit any of the CILCORP Subsidiaries to, issue, agree to issue, deliver, sell, award, pledge, dispose of or otherwise encumber or authorize or propose the issuance, delivery, sale, award, pledge, grant of a security interest, disposal or other encumbrance of, any shares of their capital stock of any class or any securities convertible into or exchangeable for, or any rights, warrants or options to acquire, any such shares or convertible or exchangeable securities, other than (i) issuances by a wholly owned Subsidiary of its capital stock to its direct or indirect parent and (ii) issuances of shares of CILCORP Common Stock after the date of this Agreement pursuant to CILCORP Options existing as of the date hereof, as identified in Section 4.10(a) of the CILCORP Disclosure Schedule. (d) Charter Documents. CILCORP shall not, nor shall CILCORP permit any CILCORP Subsidiary to, amend or propose to amend the Articles of Incorporation or By-Laws of CILCORP or such comparable organizational documents of any CILCORP Subsidiary. (e) No Acquisitions. Except as provided in Section 6.1(aa) hereof, CILCORP shall not, nor shall CILCORP permit any CILCORP Subsidiary to: (i) acquire, or 41 publicly propose to acquire, or agree to acquire, by merger or consolidation with, or by purchase or otherwise, an equity interest in or a substantial portion of the assets of, any business or corporation, partnership, association or other business organization or division thereof, (ii) otherwise acquire or agree to acquire a material amount of assets, other than fuel used for the production of electricity and limestone used for its SO2 scrubber, or natural gas for send-out or storage or (iii) alter (through merger, liquidation, reorganization, restructuring or in any other fashion) the corporate structures or ownership of CILCORP or any of the CILCORP Subsidiaries, other than the transfer of ownership of QST Environmental Inc. from an indirect CILCORP Subsidiary to CILCORP. (f) No Dispositions. Except as disclosed in Section 6.1(f)(i) of the CILCORP Disclosure Schedule or with respect to CILCORP or the CILCORP Subsidiaries making dispositions in the ordinary course of business consistent with past practice at fair market value of less than $2 million per transaction (not to exceed $10 million in the aggregate) in sales price and indebtedness assumed by the acquiring party and its affiliates, or making dispositions not in the ordinary course of business at fair market value of less than $50,000 per transaction (not to exceed $1 million in the aggregate) in sales price, CILCORP shall not, nor shall CILCORP permit any of the CILCORP Subsidiaries to, sell or dispose of any of their respective assets, provided, however, that no consent shall be required of AES for CILCORP or any Pacer Subsidiary to sell or dispose of (i) the stock or assets of QST Environmental Inc. and/or its Subsidiaries (or enter into any agreement for the sale or disposition of QST Environmental Inc. and/or its Subsidiaries) for a cash purchase price of at least $25 million, net of fees and expenses, if such sale or agreement includes as a term thereof, the release of CILCORP and the CILCORP Subsidiaries of all liabilities and obligations, contingent or otherwise, arising out of the operations of QST Environmental Inc. and its Subsidiaries prior to the date the sale is to be consummated, and whether or not known prior to the date of sale, and does not impose any liability on AES or any of the AES Subsidiaries with respect to such operations, or (ii) the assets listed in Section 6.1(f)(ii) of the CILCORP Disclosure Schedule if the purchase price for any such asset is less than $2,000,000 individually (not to exceed $5,000,000 in the aggregate) and if the price to be received for such asset after taking into account fees and expenses and on-going indemnification obligations and other post-closing liabilities is more than book value of such asset. (g) Cooperation, Notification. CILCORP shall (i) confer on a regular and frequent basis with one or more representatives of AES to discuss, subject to applicable law, material operational matters and the general status of CILCORP's ongoing operations, (ii) promptly notify AES of any significant changes in its business, properties, assets, condition 42 (financial or other), results of operations or prospects, (iii) promptly notify AES of any sales of assets by CILCORP or any CILCORP Subsidiary in excess of $1 million and shall discuss with AES use of proceeds from such sales to the extent that such proceeds exceed $1 million, (iv) promptly advise AES of (A) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate as so qualified in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect, (B) the failure by it to comply in any material respect with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement and (C) any change or event which, individually or in the aggregate, has had or would have a CILCORP Material Adverse Effect (provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement) and (v) promptly provide AES with copies of all filings made by CILCORP or any CILCORP Subsidiary with any state or federal court, administrative agency, commission or other Governmental Authority in connection with this Agreement and the transactions contemplated hereby. AES shall designate one or more of its Representatives (as defined in Section 7.1 hereof), by name, for purposes of this subsection (g), who will make themselves reasonably available by telephone, electronic mail and in person. (h) Third-Party Consents. CILCORP shall, and shall cause the CILCORP Subsidiaries to, use all reasonable best efforts to obtain all CILCORP Required Consents. CILCORP shall promptly notify AES of any failure or prospective failure to obtain any such consents and shall provide copies of all CILCORP Required Consents obtained by CILCORP to AES. (i) No Breach, Etc. CILCORP shall not, and CILCORP shall not permit any CILCORP Subsidiary to, take any action that would or is reasonably likely to result in a material breach of any provision of this Agreement or in any of its representations and warranties set forth in this Agreement being untrue on and as of the Closing Date. (j) Tax Matters. CILCORP shall not, nor shall it permit any CILCORP Subsidiary to, (i) make or rescind any material express or deemed election relating to Taxes, (ii) except as set forth in Section 6.1(j)(ii) of the CILCORP Disclosure Schedule, settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, (iii) except as set forth in Section 6.1(j)(iii) of the CILCORP Disclosure Schedule or as required by applicable law, change in any material respect any of its methods of reporting income or deductions for federal income Tax purposes 43 from those employed in the preparation of its federal income Tax return for the taxable year ending December 31, 1997 or (iv) except as set forth in Section 6.1(j)(iv) of the CILCORP Disclosure Schedule, make any change in its method of accounting for Taxes as reflected on or used in preparing its Form 10-Q, dated as of November 10, 1998 (including any change in the amount of its reserve for contingent Tax liabilities). (k) Capital Expenditures. CILCORP shall, and CILCORP shall permit the CILCORP Subsidiaries to, make capital expenditures during any six-month fiscal period only up to and not in excess of 110% of the amount budgeted for such six-month fiscal period by CILCORP for capital expenditures and then only as set forth in Section 6.1(k) of the CILCORP Disclosure Schedule, except for unplanned capital expenditures due to emergency conditions, unanticipated catastrophic events, extreme weather, and unscheduled unit outages. (l) Indebtedness. CILCORP shall not, and CILCORP shall not permit any CILCORP Subsidiary to, incur or guarantee any indebtedness (including any debt borrowed or guaranteed or otherwise assumed including, without limitation, the issuance of debt securities or warrants or rights to acquire debt) or enter into any "keep well" or other agreement to maintain any financial statement condition of another person or entity or enter into any arrangement having the economic effect of any of the foregoing other than short-term indebtedness in the ordinary course of business consistent with past practice (such as the issuance of commercial paper, the use of credit facilities existing as of the date hereof or hedging activities undertaken in order to hedge a balance sheet asset or liability and not for speculative purposes); provided however in no event shall CILCORP and the CILCORP Subsidiaries, taken together, have outstanding at any time, $428 million in the aggregate of indebtedness, guarantees and keep-well obligations. (m) Compensation, Benefits. Except as set forth in Section 6.1(m) of the CILCORP Disclosure Schedule, as may be required by applicable law or as contemplated by this Agreement, CILCORP shall not, nor shall CILCORP permit any of the CILCORP Subsidiaries to, (i) enter into, adopt or amend or increase the amount or accelerate the payment or vesting of any benefit or amount payable under, any employee benefit plan or other contract, agreement, commitment, arrangement, plan, trust, fund or policy maintained by, contributed to or entered into by CILCORP or any of the CILCORP Subsidiaries (including, without limitation, the CILCORP Benefit Plans set forth in Section 4.10(a) of the CILCORP Disclosure Schedule) or increase, or enter into any contract, agreement, commitment or arrangement to increase in any manner, the compensation or fringe benefits, or otherwise to extend, expand or enhance the engagement, employment, compensation or any related rights, of any director, 44 officer or other employee of CILCORP or any of the CILCORP Subsidiaries, except pursuant to binding legal commitments existing on the date of this Agreement and specifically identified in Section 4.10(a) of the CILCORP Disclosure Schedule. (n) PUHCA. CILCORP shall not, nor shall CILCORP permit any of the CILCORP Subsidiaries to, except as required or contemplated by this Agreement, engage in any activities which would cause a change in its status, or that of the CILCORP Subsidiaries, under PUHCA, or that would impair the ability of CILCORP or AES or any AES Subsidiary to claim any exemption under PUHCA or that would subject AES or any AES Subsidiary to regulation under PUHCA (other than under Section 9(a)(2) or as an exempt holding company under PUHCA) following the Merger. (o) Accounting. CILCORP shall not, and CILCORP shall not permit any CILCORP Subsidiary to, make any changes in their accounting methods, except as required by law, rule, regulation or GAAP. (p) Affiliate Transactions. Subject to the other restrictions set forth in this Section 6.1, CILCORP shall not, and CILCORP shall not permit any CILCORP Subsidiary to, enter into any agreement or arrangement with any of their respective affiliates other than such agreements and arrangements as are entered into in the usual, ordinary and regular course of business and which have been negotiated on an arms-length basis and are no less favorable to CILCORP or a CILCORP Subsidiary than CILCORP or such CILCORP Subsidiary would have obtained from an unaffiliated third party, and provided that CILCORP shall have notified AES in writing prior to entering into any such affiliate transaction. (q) Rate Matters. CILCORP shall, and shall cause the CILCORP Subsidiaries to, discuss with AES any changes and proposed changes in its or the CILCORP Subsidiaries' rates or charges (including those with respect to fuel adjustment charges and purchased gas adjustments), standards of service or accounting from those in effect on the date hereof and consult with AES prior to making any filing (or any amendment thereto), or effecting any agreement, commitment, arrangement or consent, whether written or oral, formal or informal, with respect thereto, and except as provided in Section 6.1(q) of the CILCORP Disclosure Schedule, CILCORP shall not, and shall cause the CILCORP Subsidiaries not to, make any filing to change its rates on file with the FERC or any applicable state utility commission, except as may be required by applicable law, that would have a CILCORP Material Adverse Effect. 45 (r) Contracts. CILCORP shall not, and CILCORP shall not permit any CILCORP Subsidiary to, (i) except in the ordinary course of business consistent with past practice, enter into new contracts, modify, amend, terminate, renew or fail to use reasonable business efforts to renew any contract or agreement to which CILCORP or any CILCORP Subsidiary is a party, which is material to CILCORP and the CILCORP Subsidiaries taken as a whole and provided that the term of any new contract or any contract modification, amendment or renewal does not exceed twelve months, or waive, release or assign any material rights or claims therein, or (ii) enter into, modify, amend, or renew any contract or agreement outside the ordinary course of business or on a basis not consistent with past practice if the dollar value of such new contract or agreement, or existing contract or agreement as so amended, modified, or renewed, is or would be in excess of $2,000,000 (not to exceed $20,000,000 in the aggregate) or have an initial term (or a renewal or extension term) greater than twelve months. (s) Insurance. Section 6.1(s) of the CILCORP Disclosure Schedule is a true and correct list of the specific types of losses as to which CILCORP and the CILCORP Subsidiaries self-insure and the dollar amounts of each such type of coverage. CILCORP shall, and shall cause each CILCORP Subsidiary to, maintain with financially responsible insurance companies insurance in such amounts and against such risks and losses as are customary for companies engaged in the electric and gas utility industry and employing such methods of generating electric power and fuel sources similar to the methods employed and fuels used by CILCORP or the CILCORP Subsidiaries, except that CILCORP may continue to self-insure for the type of losses and in the dollar amounts as provided in Section 6.1(s) of the CILCORP Disclosure Schedule. (t) Permits. CILCORP shall, and shall cause each CILCORP Subsidiary to, use reasonable best efforts to maintain in effect all existing governmental permits which are material to the operations of CILCORP or any of the CILCORP Subsidiaries. (u) Discharge of Liabilities. CILCORP shall not, and CILCORP shall not permit any CILCORP Subsidiary to, pay, discharge, settle, compromise or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) material to CILCORP and the CILCORP Subsidiaries, taken as a whole, other than the payment, discharge, settlement, compromise or satisfaction, in the ordinary course of business consistent with past practice (which includes the payment of final and unappealable judgments) or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto of the 46 CILCORP SEC Reports filed prior to the date hereof), or incurred in the ordinary course of business consistent with past practice. (v) Staffing. Except as set forth in Sections 6.1(v) and 6.1(aa) of the CILCORP Disclosure Schedule, CILCORP shall not, and shall not permit any CILCORP Subsidiary to, make any increase in staffing levels over those in effect on the date hereof. (w) Tax-Exempt Status. CILCORP shall not, nor shall CILCORP permit any CILCORP Subsidiary to, take any action that would likely jeopardize the qualification of CILCORP's outstanding revenue bonds which qualify as of the date hereof under Section 142(a) of the Code as "exempt facility bonds" or as tax-exempt industrial development bonds under Section 103(b)(4) of the Internal Revenue Code of 1954, as amended, prior to the Tax Reform Act of 1986. (x) CILCORP Certificate. As promptly as practicable after all conditions to Closing set forth in Section 8.1 hereof have been satisfied and the conditions set forth in Section 8.3(a), (b), (c) and (d) have been satisfied or waived, CILCORP shall deliver to AES the CILCORP Certificate (as defined in Section 6.2(d) hereof). (y) QST Environmental Inc.. CILCORP shall, and shall cause the CILCORP Subsidiaries to, use commercially reasonable efforts to pursue the sale of QST Environmental Inc. prior to the Closing on the most favorable commercial terms available. (z) WARN Act. CILCORP shall (i) notify AES of all employees of CILCORP and the CILCORP Subsidiaries who suffer an "employment loss" (as defined in the WARN Act) during the 90 day period prior to the Closing Date and (ii) provide, or cause the CILCORP Subsidiaries to provide, all written notices required by the WARN Act to all employees which AES designates. (aa) New Lines of Business. CILCORP shall not, nor shall CILCORP permit any CILCORP Subsidiary to, enter into a new line of business or make any change in the line of business in which it engages as of the date of this Agreement, except that CILCORP may establish a new wholly-owned subsidiary to take over the operation and maintenance of a steam plant, as disclosed on Section 6.1(aa) of the CILCORP Disclosure Schedule, but shall not in connection therewith hire any personnel, except as disclosed in Section 6.1(aa) of the CILCORP Disclosure Schedule. 47 (bb) Rights Agreement. Except for the amendments contemplated by Section 4.18 hereof or amendments approved in writing by AES or any AES Subsidiary, CILCORP will not, following the date hereof, amend the CILCORP Rights Agreement in any manner. In addition, CILCORP covenants and agrees that it will not redeem the Rights unless such redemption is consented to in writing by AES prior to such redemption. (cc) Illinois Commerce Commission Certification. CILCORP shall use its commercially reasonable efforts to obtain from the Illinois Commerce Commission the certification addressed to the SEC pursuant to Section 33(a)(2) of PUHCA in the form of Exhibit A hereto or in a form otherwise reasonably satisfactory to AES (the "Illinois Certification"). (dd) Hedging. CILCORP shall not, and shall not permit any CILCORP Subsidiary to, buy or sell any energy futures or forward contracts or energy transportation futures or forward contracts, or options on any of the foregoing, other than for purposes of hedging contracts to buy or sell physical energy or energy transportation. In addition, in transacting business outside of the native load service territory of CILCO, CILCORP shall not, and shall not permit any CILCORP Subsidiary to, enter into any energy-related sales or purchase contracts that would create an unhedged position of more than $100,000 for any single contract, or $1,000,000 on a cumulative basis. Section 6.2 Covenants of AES . AES covenants and agrees, as to itself and each of the AES Subsidiaries, that after the date of this Agreement and prior to the Effective Time or earlier termination of this Agreement, except as expressly contemplated or permitted in this Agreement, or to the extent CILCORP shall have otherwise consented in writing, which decision regarding consent shall be made as soon as reasonably practicable and which consent shall not be unreasonably withheld: (a) Cooperation, Notification. AES shall (i) promptly advise CILCORP of (A) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect and (B) the failure by it to comply in any material respect with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement (provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement) and (ii) promptly provide 48 CILCORP with copies of all filings made by AES or any AES Subsidiary with any state or federal court, administrative agency, commission or other Governmental Authority in connection with this Agreement and the transactions contemplated hereby. (b) No Breach, Etc. AES shall not, and AES shall not permit any AES Subsidiary to, take any action that would or is reasonably likely to result in a material breach of any provision of this Agreement or in any of its representations and warranties set forth in this Agreement being untrue on and as of the Closing Date. (c) PUHCA Application. Subject to AES' determination not to seek an exemption under PUHCA Section 3(a)(5), as promptly as practicable following the date hereof, AES shall file with the SEC an application (the "PUHCA Application") pursuant to PUHCA for an exemption from the requirement that it register as a holding company under PUHCA Section 3(a)(5). AES shall promptly notify CILCORP upon issuance of the SEC Exemption Order (as defined in Section 8.3(e) hereof). (d) Financing. AES shall diligently pursue and use commercially reasonable efforts to arrange financing or obtain funds sufficient to pay the Aggregate Consideration Amount in the Merger (the "Financing"). The Financing may consist of (i) non-recourse borrowings and (ii) general corporate funding from the capital reserves, working capital and other sources of AES, in each case, in such proportions to the Aggregate Consideration Amount as AES shall determine in its sole discretion. AES covenants and agrees that if the proceeds from the sources specified in clauses (i) and (ii) of this Section 6.2(d) are less than the Aggregate Consideration Amount, AES shall use commercially reasonable efforts to sell a number of shares of AES Common Stock (the "AES Common Stock Sale") so that the aggregate proceeds from clauses (i) and (ii) of this Section 6.2(d) and the AES Common Stock Sale shall be an amount equal to the Aggregate Consideration Amount. Notwithstanding the foregoing, AES shall have no obligation to undertake any action to arrange financing, obtain funds or sell AES Common Stock in the AES Common Stock Sale until CILCORP shall have delivered to AES a certificate signed by an executive officer of CILCORP to the effect that, to the best of such officer's knowledge as of the date of the delivery of such certificate, the conditions set forth in Section 8.1 hereof have been satisfied by CILCORP and the conditions set forth in Sections 8.3(a) (as of the date of such certificate), 8.3(b) (as of the date hereof and as of the date of such certificate), 8.3(c), 8.3(d) and 8.3(k) hereof have been satisfied by CILCORP or waived by AES, which certificate must be delivered by CILCORP within five business days of all such conditions being satisfied or waived, as the case may be (the "CILCORP Certificate") and AES shall have satisfied or 49 waived the condition set forth in Section 8.3(e) hereof, and provided further, that in no event shall AES be required to arrange financing, obtain funds or sell AES Common Stock in the AES Common Stock Sale if there shall have occurred (or, in the case of clauses (i) through (iv) below, been threatened) (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) any limitation (whether or not mandatory) by any government, domestic, foreign or supranational, or governmental entity on the extension of credit by banks or other lending institutions in the United States, (iv) a commencement of a war or armed hostilities or other national or international calamity involving the United States, (v) any significant disruption or material adverse change in the market for new issues of senior debt securities, credit facilities or common or preferred equity securities (or equity-linked securities) by a company having financial characteristics similar to those of AES, (vi) any significant disruption or material adverse change in the financial or capital markets in general which make it impracticable for a company having financial characteristics similar to those of AES to finance a transaction of the size and nature as that contemplated hereunder on commercially reasonable financing terms or (vii) in the case of any of the foregoing existing at the time of the proposed AES Common Stock Sale, a material acceleration or worsening thereof; and provided, further, that in no event shall AES be required to sell AES Common Stock in the AES Common Stock Sale if during any five trading days following the date of delivery of the CILCORP Certificate, there shall have occurred a decline of twenty percent or more in the average closing price of AES Common Stock from the average closing price over the five trading days preceding the date hereof. The sole remedy for failure to obtain the Financing shall be as provided in Section 9.1(b)(iv) hereof, except in the case of intentional and willful breach by AES of its obligations (as qualified herein) under this Section 6.2(d). ARTICLE VII ADDITIONAL AGREEMENTS Section 7.1 Access to Information. Upon reasonable notice, CILCORP shall, and shall cause the CILCORP Subsidiaries to, afford to the officers, directors, employees, accountants, counsel, investment bankers, financial advisors and other representatives (collectively, "Representatives") of AES reasonable access, during normal business hours throughout the period prior to the Effective Time, to all of their respective properties, books, contracts, commitments, records, budgets, forecasts and other information 50 (including, but not limited to, Tax Returns) and, during such period, CILCORP shall, and shall cause the CILCORP Subsidiaries to, furnish promptly to AES (i) access to each report, schedule and other document filed or received by it or any of the CILCORP Subsidiaries pursuant to the requirements of federal or state securities laws or filed with or sent to the SEC, the FERC, the public utility commission of any state, the Department of Labor, the Immigration and Naturalization Service, the Environmental Protection Agency (state, local and federal), the IRS, the Department of Justice, the Federal Trade Commission, or any other federal or state regulatory agency or commission or other Governmental Authority, (ii) access to all information concerning CILCORP, the CILCORP Subsidiaries, directors, officers and stockholders, properties, facilities or operations owned, operated or otherwise controlled by CILCORP, or if not so owned, operated or controlled, which properties, facilities or operations that CILCORP may nonetheless obtain access to through the exercise of reasonable diligence, and such other matters as may be reasonably requested by AES in connection with any filings, applications or approvals required or contemplated by this Agreement or for any other reason related to the transactions contemplated by this Agreement; (iii) such additional information relating to Taxes as AES shall from time to time reasonably request (or, where applicable, to cooperate with AES in collecting such information), including information relating to (a) Tax basis of the stock of the CILCORP Subsidiaries, (b) earnings and profits, (c) material Tax elections, (d) net operating loss carryovers and Tax credit carryovers, (e) intercompany transactions, (f) reconciliation of book and Tax items, (g) the rollout of any deferred Tax items and (h) ongoing audits (including copies of any Internal Revenue Service Forms 4564 or other similar information document requests) and (iv) office space and equipment at CILCORP's headquarters for the purposes of designing a transition plan in conjunction with CILCORP's Representatives. Subject to the following sentence, such information provided to AES may be shown to AES' investment bankers and financial advisors. Each party shall, and shall cause its Subsidiaries and Representatives to, hold in strict confidence all documents and information concerning the other furnished to it in connection with the transactions contemplated by this Agreement in accordance with the Confidentiality Agreement, dated as of July 8, 1998, between AES and CILCORP (the "Confidentiality Agreement"). Notwithstanding the foregoing, nothing herein shall require CILCORP to disclose system information that it is precluded from sharing with others pursuant to FERC Orders 888 and 889 (as amended) without simultaneous disclosure to all parties on its electronic bulletin board. Section 7.2 Proxy Statement. (a) As soon as reasonably practicable after the date of this Agreement, CILCORP shall prepare and file with the SEC, and AES shall cooperate with CILCORP in 51 such preparation and filing, a preliminary proxy statement or information statement relating to this Agreement and the transactions contemplated hereby and use its commercially reasonable efforts to furnish the information required to be included by the SEC in the Proxy Statement (as hereinafter defined) and, after consultation with and approval of AES, to respond promptly to any comments made by the SEC with respect to the preliminary proxy statement and, promptly after the completion of any SEC review or notification from the SEC that the preliminary proxy materials will not be subject to comment, cause a definitive proxy statement or information statement (the "Proxy Statement") to be mailed to its stockholders. Subject to the fiduciary obligations of the Board of Directors under applicable law, CILCORP shall include in the Proxy Statement the recommendation of the Board of Directors of CILCORP that the stockholders of CILCORP approve and adopt this Agreement and the transactions contemplated hereby. (b) AES agrees that (i) it will provide CILCORP with all information concerning AES necessary or appropriate to be included in the Proxy Statement and (ii) at the meeting of CILCORP stockholders to be held in connection with the Merger and the other transactions contemplated hereby, it will vote, or cause to be voted, all of the Shares then owned by, or with respect to which proxies are held by it or any of the AES Subsidiaries, if any, in favor of the approval and adoption of this Agreement. (c) CILCORP and AES shall cooperate with one another in the preparation and filing of the Proxy Statement and shall use their reasonable best efforts to promptly obtain and furnish the information required to be included in the Proxy Statement and to respond promptly to any comments or requests made by the SEC with respect to the Proxy Statement. Each party hereto shall promptly notify the other parties of the receipt of comments of, or any requests by, the SEC with respect to the Proxy Statement, and shall promptly supply the other parties with copies of all correspondence between such party (or its Representatives) and the SEC (or its staff) relating thereto. CILCORP and AES each agree to correct any information provided by it for use in the Proxy Statement which shall have become, or is, false or misleading. Section 7.3 Regulatory Approvals and Other Matters. (a) HSR Filings. Each party hereto shall file or cause to be filed with the Federal Trade Commission and the Department of Justice any notifications required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the rules and regulations promulgated thereunder with respect to the transactions 52 contemplated hereby. Such parties will use all commercially reasonable efforts to coordinate such filings and any responses thereto, to make such filings promptly and to respond promptly to any requests for additional information made by either of such agencies. (b) Other Approvals. Each party hereto shall cooperate with the others and use its commercially reasonable efforts to promptly prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to use reasonable best efforts to obtain all necessary permits, consents, approvals and authorizations of all Governmental Authorities and all other persons necessary or advisable to consummate (i) the transactions contemplated hereby, including, without limitation, the SEC Exemption Order (as defined in Section 8.3(e) hereof), the AES Required Statutory Approvals, the CILCORP Required Statutory Approvals, the AES Required Consents and the CILCORP Required Consents (and any concurrent or related rate filings, if any), and (ii) if AES determines to proceed with the Second Merger and so notifies CILCORP, the Second Merger Statutory Approvals and the CILCORP Second Merger Required Consents. AES and CILCORP agree that they will consult with each other with respect to the obtaining of all such necessary or advisable permits, consents, approvals and authorizations of Governmental Authorities; provided, however, that it is agreed that CILCORP shall have primary responsibility for the preparation and filing of any applications with or notifications to applicable state regulatory authorities for approval of the Merger. Each of AES and CILCORP shall have the right to review and approve in advance drafts of all such necessary applications, notices, petitions, filings and other documents made or prepared in connection with the transactions contemplated by this Agreement, which approval shall not be unreasonably withheld or delayed. Section 7.4 Approval of CILCORP Stockholders. CILCORP shall, as soon as reasonably practicable after the date of this Agreement, (i) take all steps necessary to duly call, give notice of, convene and hold a meeting of its stockholders (the "CILCORP Meeting") for the purpose of securing the CILCORP Stockholders' Approval, (ii) distribute to its stockholders the Proxy Statement in accordance with applicable federal and state law and with its Articles of Incorporation and By-Laws, (iii) subject to the fiduciary duties of its Board of Directors, recommend to its stockholders the approval of the Merger, this Agreement and the transactions contemplated hereby and (iv) cooperate and consult with AES with respect to each of the foregoing matters. Without limiting the generality of the foregoing, CILCORP agrees that its obligations pursuant to the first sentence of this Section 7.4 shall not be affected by the commencement, public proposal, public disclosure or communication to CILCORP of any Acquisition Proposal (as defined in Section 7.8(b) hereof). 53 Section 7.5 Directors' and Officers' Indemnification. (a) Indemnification. From and after the Effective Time, the Surviving Corporation shall, to the fullest extent permitted by applicable law, indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof, an officer or director of CILCORP or any of the CILCORP Subsidiaries (each an "Indemnified Party" and collectively, the "Indemnified Parties") against all losses, expenses (including reasonable attorney's fees and expenses), claims, damages or liabilities or, subject to the proviso of the next succeeding sentence, amounts paid in settlement, arising out of actions or omissions occurring at or prior to the Effective Time that are, in whole or in part, (x) based on or arising out of the fact that such person is or was a director or officer of CILCORP or any CILCORP Subsidiary or (y) arising out of or pertaining to the transactions contemplated by this Agreement (the "Indemnified Liabilities"). In the event of any such loss, expense, claim, damage or liability (whether or not arising prior to the Effective Time), (i) the Surviving Corporation shall pay the reasonable fees and expenses of counsel for the Indemnified Parties selected by the Surviving Corporation, which counsel may also serve as counsel to the Surviving Corporation and which counsel shall be reasonably satisfactory to the Indemnified Parties (whose consent shall not be unreasonably withheld), promptly after statements therefor are received and otherwise advance to such Indemnified Party upon request reimbursement of documented expenses reasonably incurred, in either case to the extent not prohibited by the Illinois Act subject to the provision by such Indemnified Party of an undertaking to reimburse the amounts so advanced in the event of a final determination by a court of competent jurisdiction that such Indemnified Party is not entitled thereto, (ii) the Surviving Corporation will cooperate in the defense of any such matter and (iii) any determination required to be made with respect to whether an Indemnified Party's conduct complies with the standards set forth under the Illinois Act and the Articles of Incorporation or By-Laws of CILCORP shall be made by independent counsel mutually acceptable to the Surviving Corporation and the Indemnified Party (the "Independent Counsel"); provided, however, that the Surviving Corporation shall not be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld). The Indemnified Parties as a group may retain only one law firm with respect to each related matter except to the extent there is, in the written opinion of the Independent Counsel, under applicable standards of professional conduct, a conflict on any significant issue between positions of such Indemnified Party and any other Indemnified Party or Indemnified Parties. 54 (b) Insurance. For a period of six years after the Effective Time, the Surviving Corporation shall cause to be maintained in effect existing policies of directors' and officers' liability insurance maintained by CILCORP; provided, that the Surviving Corporation may substitute therefor policies of substantially similar coverage and amounts containing terms that are no less advantageous with respect to matters occurring prior to the Effective Time to the extent such liability insurance can be maintained annually at a commercially reasonable cost to the Surviving Corporation for annual premiums for such directors' and officers' liability insurance, which existing premium costs are disclosed on Section 7.5(b) of the CILCORP Disclosure Schedule; provided, further, that if such insurance cannot be so maintained or obtained at such cost, the Surviving Corporation shall maintain or obtain as much of such insurance for CILCORP as can be so maintained or obtained at a commercially reasonable cost for annual premiums for directors' and officers' liability insurance. (c) Successors. In the event the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person or entity, then and in either such case, proper provisions shall be made so that the successors and assigns of the Surviving Corporation shall assume the obligations set forth in this Section 7.5. (d) Survival of Indemnification. To the fullest extent permitted by applicable law, from and after the Effective Time, all rights to indemnification existing as of the date hereof in favor of any Indemnified Party, as provided in their respective Articles of Incorporation and By-Laws in effect on the date thereof, shall survive the Merger and shall continue in full force and effect for a period of six years from the Effective Time. Section 7.6 Disclosure Schedules. On or before the date hereof, (i) AES has delivered to CILCORP the AES Disclosure Schedule, accompanied by a certificate signed by an executive officer of AES stating the AES Disclosure Schedule has been delivered pursuant to this Section 7.6 and (ii) CILCORP has delivered to AES the CILCORP Disclosure Schedule, accompanied by a certificate signed by an executive officer of CILCORP stating the CILCORP Disclosure Schedule has been delivered pursuant to this Section 7.6. The AES Disclosure Schedule and the CILCORP Disclosure Schedule are collectively referred to herein as the "Disclosure Schedules." The Disclosure Schedules shall be deemed to constitute an integral part of this Agreement and to modify the respective representations, warranties, covenants or agreements of the parties hereto contained herein to the extent that such representations, warranties, covenants or agreements expressly refer to the Disclosure 55 Schedules. Anything to the contrary contained herein or in the Disclosure Schedules notwithstanding, any and all statements, representations, warranties or disclosures set forth in the Disclosure Schedules delivered on or before the date hereof shall be deemed to have been made on and as of the date hereof. From time to time prior to the Closing, the parties shall promptly supplement or amend the Disclosure Schedules with respect to any matter, condition or occurrence hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in the Disclosure Schedules. No supplement or amendment shall be deemed to cure any breach of any representation or warranty made in this Agreement or have any effect for the purpose of determining satisfaction of the conditions set forth in Section 8.2(b) hereof or Section 8.3(b) hereof. Section 7.7 Public Announcements. Subject to each party's disclosure obligations imposed by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange, AES and CILCORP will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement or any of the transactions contemplated hereby and shall not issue any public announcement or statement with respect hereto or thereto without the consent of the other party (which consent shall not be unreasonably withheld and which decision regarding consent shall be made as soon as reasonably practicable). Section 7.8 No Solicitations. (a) From and after the date hereof, (i) CILCORP will not, and will not authorize or permit any of its Representatives to, directly or indirectly, solicit, initiate or encourage (including by way of furnishing information) or take any other action to facilitate knowingly any inquiries or the making of any proposal which constitutes or may reasonably be expected to lead to an Acquisition Proposal (as defined in Section 7.8(b) hereof) from any person, or engage in any discussion or negotiations relating thereto and (ii) neither the Board of Directors of CILCORP nor any committee thereof shall (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to AES, the approval or recommendation by such Board of Directors or such committee of the Merger or this Agreement, (B) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal, or (C) cause CILCORP or any CILCORP Subsidiary to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an "Acquisition Agreement") related to any Acquisition Proposal; provided, however, that CILCORP may, at any time prior to receipt of CILCORP Stockholders' Approval (the "CILCORP Applicable Period"), (i) in response to an Acquisition Proposal which was not solicited by it or its 56 Representatives and which did not otherwise result from a breach of this Section 7.8, if the Board of Directors of CILCORP (x) reasonably believes in good faith, after consultation with its financial advisors, that an Acquisition Proposal may be a Superior Proposal (as defined in Section 7.8(b) hereof) and (y) determines in good faith, after consultation with its financial advisors and outside counsel, that failing to take such action could reasonably be expected to be a breach of its fiduciary duties to CILCORP's stockholders under applicable law, and subject to providing AES with prior written notice of its decision to take such action (the "CILCORP Notice") and compliance with Section 7.8(c) hereof, (1) furnish information with respect to CILCORP and the CILCORP Subsidiaries to any person making a Superior Proposal pursuant to a customary confidentiality agreement and (2) participate in discussions or negotiations regarding such Superior Proposal, (ii) comply with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or exchange offer (provided that, except in connection with a termination of this Agreement pursuant to clause (iii) of this proviso, neither CILCORP nor its Board of Directors nor any committee thereof shall withdraw or modify, or propose publicly to withdraw or modify, its position with respect to this Agreement or the Merger or approve or recommend, or propose publicly to approve or recommend, an Acquisition Proposal), and/or (iii) in the event that during the CILCORP Applicable Period the Board of Directors of CILCORP reasonably believes in good faith, after consultation with its financial advisors and outside counsel, (x) that it has received an Acquisition Proposal that constitutes a Superior Proposal and (y) that failure to terminate this Agreement and accept such Superior Proposal could reasonably be expected to be a breach of its fiduciary duties to CILCORP's stockholders under applicable law, by action of the Board of Directors of CILCORP (subject to this sentence and Section 9.1(d)(ii) hereof), terminate this Agreement (and, following the exercise of such termination right, withdraw or modify in any adverse manner its approval or recommendation of this Agreement or the Merger, and approve or recommend any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving CILCORP or any such CILCORP Subsidiary, other than the transactions contemplated by this Agreement), but only at a time that is during the CILCORP Applicable Period and is after the third business day following AES' receipt of written notice advising AES that the Board of Directors of CILCORP is prepared to accept a Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the person making such Superior Proposal. CILCORP shall immediately cease and terminate any existing solicitation, initiation, encouragement, activity, discussion or negotiation with any persons conducted heretofore by CILCORP or its Representatives with respect to any of the foregoing. 57 (b) As used herein, (i) "Acquisition Proposal" shall mean any inquiry, proposal or offer from any person relating to any direct or indirect acquisition or purchase of a business (a "Material Business") that constitutes 15% or more of the net revenues, net income or the assets (including equity securities) of CILCORP and the CILCORP Subsidiaries, taken as a whole, or 15% or more of any class of voting securities of CILCORP or any CILCORP Subsidiary owning, operating or controlling a Material Business, any tender offer or exchange offer that it consummated would result in any person beneficially owing 15% or more of any class of voting securities of CILCORP or any such CILCORP Subsidiary, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving CILCORP or any such CILCORP Subsidiary, other than the transactions contemplated by this Agreement; provided, however, that no transaction permitted pursuant to Section 6.1(f) hereof shall be deemed an Acquisition Proposal for any purpose and (ii) a "Superior Proposal" shall mean any proposal made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of the shares of CILCORP Common Stock then outstanding or all or substantially all the assets of CILCORP which the Board of Directors of CILCORP determines in its good faith judgment, after consultation with its financial advisors and outside counsel, to be more favorable to CILCORP's Stockholders (taking into account any changes to the financial terms of this Agreement proposed by AES in response to such proposal and all financial and strategic considerations, including relevant legal, financial, regulatory and other aspects of the proposal and the third party making such proposal and the conditions and the prospects for completion of such proposal, the strategic direction and benefits sought by CILCORP and any changes to this Agreement proposed by AES in response to such proposal) than the Merger and the other transactions contemplated by this Agreement. (c) CILCORP shall promptly advise AES orally and in writing of the receipt of any Acquisition Proposal or Superior Proposal and of the receipt of any inquiry with respect to or which CILCORP reasonably believes could lead to any Acquisition Proposal or Superior Proposal. CILCORP shall promptly advise AES orally and in writing of the identity of the person making any such Acquisition Proposal or Superior Proposal or inquiry and of the material terms of any such Acquisition Proposal or Superior Proposal and of any material changes thereto. 58 Section 7.9 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses. Section 7.10 Board of Directors. At or prior to the Effective Time, CILCORP shall obtain the resignation as of the Effective Time of each director of CILCORP and, if so requested by AES, of any director or officer of any CILCORP Subsidiary or officer of CILCORP. Section 7.11 Illinois Responsible Property Transfer Act. If, as a result of the transactions contemplated by this Agreement or as a result of any debt financing undertaken by AES or an affiliate of AES or a AES Subsidiary in order to complete the transactions contemplated by this Agreement, the requirements of the Illinois Responsible Property Transfer Act (the "Property Transfer Act") are triggered with respect to any of the real property owned or operated by CILCORP, any CILCORP Subsidiary or any CILCORP Joint Venture, CILCORP shall be responsible, at its own cost and expense, for compliance with all of the obligations of the Property Transfer Act, including, without limitation, the preparation of any disclosure document required to be provided to AES or any lender. Section 7.12 Signature Authority. Effective as of the Closing, at the request of AES, CILCORP shall prepare and deliver to AES a list of all persons with signature authority on the bank accounts of CILCORP and the CILCORP Subsidiaries and all persons with authority to bind CILCORP and any CILCORP Subsidiary to an agreement with an amount in excess of $100,000 or a term longer than one year. CILCORP shall revoke such authority of any person designated by AES, effective as of the morning of the Closing Date. Section 7.13 Termination of Existing Tax Sharing Agreements. CILCORP shall take or cause to be taken all actions necessary such that after the Closing Date, neither CILCORP nor any CILCORP Subsidiary shall have any further rights or liabilities under any agreement existing on or before the Closing Date which relates to the allocation or sharing of Taxes. Section 7.14 Deferred Compensation Plans. Prior to the Effective Time, CILCORP will take all actions necessary or appropriate to establish a so-called "rabbi trust" (in form and substance reasonably satisfactory to AES) which shall be used to fund the CILCO Executive Deferral Plan (the "EDP I Plan"). Upon the establishment of the rabbi trust for the EDP I Plan, CILCORP shall transfer ownership of the CILCORP life insurance policies that 59 currently are intended to fund the EDP I Plan to such trust. After the Effective Time, AES shall cause CILCO to remain the primary obligor of and to honor, in accordance with its terms, the EDP I Plan and the related rabbi trust. Nothing in this Section 7.14 shall require AES or CILCO to allow participants in such plan to defer compensation income that will be earned by the participants on or after the Effective Time. ARTICLE VIII CONDITIONS Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions: (a) Stockholder Approvals. The CILCORP Stockholders' Approval shall have been obtained. (b) No Injunctions or Restraints. No judgment, decree, statute, law, ordinance, rule, regulation, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any court of competent jurisdiction or other Governmental Authority or other legal restraint or prohibition (collectively, "Restraints") preventing the consummation of the Merger shall be in effect; provided, however, that each of the parties shall have used all reasonable efforts to prevent the entry of any such Restraints and to appeal as promptly as possible any such Restraints that may be entered. (c) Statutory Approvals. The AES Required Statutory Approvals and the CILCORP Required Statutory Approvals shall have been obtained, such approvals shall have become Final Orders (as defined below) and such Final Orders shall not impose terms or conditions which, in the aggregate, would have, or insofar as reasonably can be foreseen, could have, a AES Material Adverse Effect or a CILCORP Material Adverse Effect, or which would be inconsistent with the agreements of the parties contained herein. The term "Final Order" shall mean action by the relevant regulatory authority which has not been reversed, stayed, enjoined, set aside, annulled or suspended, with respect to which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired, and as to which all conditions to the consummation of such transactions prescribed by law, regulation or order have been satisfied. 60 (d) HSR Act. All applicable waiting periods under the HSR Act shall have expired or been terminated. Section 8.2 Conditions to Obligation of CILCORP to Effect the Merger. The obligation of CILCORP to effect the Merger shall be further subject to the satisfaction or waiver, on or prior to the Closing Date, of the following conditions: (a) Performance of Obligations of AES. AES and Merger Sub each shall have performed in all material respects their respective agreements and covenants contained in or contemplated by this Agreement, which are required to be performed by it at or prior to the Closing Date. (b) Representations and Warranties. The representations and warranties of AES set forth in this Agreement shall be true and correct in all material respects (or where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects as so qualified) as of the date hereof (except to the extent such representations and warranties speak as of an earlier or later date) and as of the Closing Date as if made on and as of the Closing Date, except as otherwise contemplated by this Agreement. (c) Closing Certificates. CILCORP shall have received a certificate signed by an executive officer of AES, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Section 8.2(a) hereof and Section 8.2(b) hereof have been satisfied. Section 8.3 Conditions to Obligation of AES and Merger Sub to Effect the Merger. The obligation of AES and Merger Sub to effect the Merger shall be further subject to the satisfaction or waiver, on or prior to the Closing Date, of the following conditions: (a) Performance of Obligations of CILCORP. CILCORP (and/or appropriate CILCORP Subsidiaries) shall have performed in all material respects its agreements and covenants contained in or contemplated by this Agreement which are required to be performed by it at or prior to the Closing Date. (b) Representations and Warranties. The representations and warranties of CILCORP set forth in this Agreement shall be true and correct in all material 61 respects (or where any statement in a representation or warranty expressly includes a standard of materiality, such statement shall be true and correct in all respects as so qualified) as of the date hereof (except to the extent such representations and warranties speak as of an earlier or later date) and as of the Closing Date as if made on and as of the Closing Date, except as otherwise contemplated by this Agreement. (c) CILCORP Material Adverse Effect. Subject to Section 8.3(c) of the CILCORP Disclosure Schedule, no CILCORP Material Adverse Effect shall have occurred and there shall exist no fact or circumstance that would or, insofar as reasonably can be foreseen, could have a CILCORP Material Adverse Effect. (d) CILCORP Required Consents. The CILCORP Required Consents shall have been obtained. (e) PUHCA Exemption. The SEC shall have issued an order in form and substance reasonably satisfactory to AES (the "SEC Exemption Order") granting AES an exemption from registration as a holding company under PUHCA pursuant to PUHCA Section 3(a)(5), and the SEC Exemption Order shall be in full force and effect on the Closing Date. (f) Financing. AES shall have the proceeds available pursuant to the Financing sufficient to pay the Aggregate Consideration Amount. (g) Closing Certificates. AES shall have received a certificate signed by an executive officer of CILCORP, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Sections 8.3(a), (b), (c), (d) and (k) hereof have been satisfied. (h) AES Required Consents. The AES Required Consents shall have been obtained. (i) No Injunctions or Restraints as to Second Merger. No Restraints preventing the consummation of the Second Merger shall be in effect; provided, however, that each of the parties shall have used all reasonable efforts to prevent the entry of any such Restraints and to appeal as promptly as possible any such Restraints that may be entered. (j) Trigger of CILCORP Rights. No event has occurred or could occur pursuant to this Agreement or otherwise that would result in the triggering of any right or 62 entitlement of CILCORP stockholders under the CILCORP Rights Agreement, including a "flip-in" or "flip-over" or similar event commonly described in such rights plans which, in the reasonable judgment of AES, would have or be reasonably likely to result in a CILCORP Material Adverse Effect or materially change the number of outstanding equity securities of CILCORP, and the CILCORP Rights shall not have become nonredeemable by the CILCORP Board of Directors. (k) Illinois Commerce Commission. (i) The Illinois Commerce Commission shall have issued the Illinois Certification and (ii) AES shall reasonably believe that any order of, approval by or result of any filing, proceeding or notice with the Illinois Commerce Commission required under the Illinois Public Utilities Act in connection with the Merger could not be expected to have an adverse effect on AES' ability to obtain the Financing or on AES, CILCORP or any of the CILCORP Subsidiaries after the Effective Time (the "AES Reasonable Belief Standard"). ARTICLE IX TERMINATION, AMENDMENT AND WAIVER Section 9.1 Termination. This Agreement may be terminated at any time prior to the Closing Date: (a) without payment of a termination fee by mutual written consent of CILCORP and AES. (b) by AES or CILCORP under any of the following circumstances: (i) without payment of a termination fee, if any state or federal law, order, rule or regulation is adopted or issued, which has the effect, as supported by the written opinion of outside counsel for such party, of prohibiting the Merger, or by any party hereto if any court of competent jurisdiction in the United States or any state shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the Merger, and such order, judgment or decree shall have become final and nonappealable. (ii) after the eighteen-month anniversary of the date of this Agreement without payment of a termination fee, by written notice to the other party, if the 63 Merger shall not have been consummated on or before the eighteen-month anniversary of the date of this Agreement; provided, however, that the right to terminate the Agreement under this Section 9.1(b)(ii) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Merger to have been consummated, and provided further, that if after the fifteen-month anniversary of the date hereof and prior to the eighteen-month anniversary, CILCORP shall have delivered to AES the CILCORP Certificate as provided in Section 6.2(d), then neither AES nor CILCORP shall be entitled to terminate under this Section 9.1(b)(ii) until a period of 90 days shall have elapsed from the receipt of the CILCORP Certificate. (iii) by written notice to the other party, if the CILCORP Shareholders' Approval shall not have been obtained at the CILCORP Meeting, including any adjournments thereof. In the event this Agreement is terminated pursuant to this Section 9.1(b)(iii) and at or within twelve months of the date of the CILCORP Meeting, CILCORP enters into any agreement with respect to an Alternative Transaction (as defined below), then within ten business days after the execution of such agreement, CILCORP shall immediately pay in cash to AES by wire transfer of same day funds a termination fee in an amount equal to 3.0% of the Aggregate Consideration Amount (the "Acquisition Termination Fee"). As used herein, "Alternative Transaction" means any of (i) a transaction or series of transactions pursuant to which any person (or group of persons) other than AES or the AES Subsidiaries and other than CILCORP and the CILCORP Subsidiaries (a "Third Party") acquires or would acquire, directly or indirectly, beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the outstanding Shares of CILCORP or CILCO, as the case may be, whether from CILCORP or CILCO or pursuant to a tender offer or exchange offer or otherwise, (ii) any acquisition or proposed acquisition of CILCORP or CILCO by a merger or other business combination (including any so-called "merger of equals" and whether or not CILCORP or CILCO is the entity surviving any such merger or business combination) or (iii) any other transaction pursuant to which any Third Party acquires or would acquire, directly or indirectly, all or substantially all of the assets (including for this purpose the outstanding equity securities of CILCORP or CILCO, and any entity surviving any merger or combination including any of them) of CILCORP or CILCO. (iv) by written notice to the other party after the Financing Due Date (as defined below), if the financing condition set forth in Section 8.3(f) has not been satisfied but all conditions to Closing have been satisfied on or prior to such date. The "Financing Due Date" shall mean that date which is the 90th day after all conditions to Closing set forth in Article VIII have been satisfied other than Section 8.3(f), it being agreed that the 90 64 days shall not begin to run until all such conditions have been satisfied and AES has received a certificate signed by an executive officer of CILCORP attesting to the satisfaction by CILCORP of the conditions in Sections 8.1 and 8.3(a), (b), (c), (d) and (k), which certificate shall be dated no earlier than the date on which the last of the conditions set forth in Article VIII has been satisfied. In the event that this Agreement is terminated pursuant to this Section 9.1(b)(iv), AES shall pay CILCORP in cash by wire transfer of same day funds within ten business days of such termination notice a termination fee in an amount equal to the product of (x) the Outstanding Shares and (y) $5.00 (the "Financing Termination Fee"). (c) by AES under any of the following circumstances: (i) by written notice to CILCORP, if (x) there shall have been any material breach of any representation or warranty, or any material breach of any covenant or agreement, of CILCORP hereunder, and such breach shall not have been remedied within thirty days after receipt by CILCORP of notice in writing from AES, specifying the nature of such breach and requesting that it be remedied; provided, however that CILCORP shall not be entitled to expend more than $10 million to cure any and all such breaches without the prior written approval of AES; or (y) the Board of Directors of CILCORP (A) shall withdraw or modify in any manner adverse to AES its approval of this Agreement and the transactions contemplated hereby or its recommendation to its stockholders regarding the approval of this Agreement, (B) shall fail to reaffirm such approval or recommendation upon the request of AES, (C) shall approve or recommend any Acquisition Proposal or (D) shall resolve to take any of the actions specified in clause (A), (B) or (C); provided, however, that AES and CILCORP acknowledge and affirm that notwithstanding anything in this Section 9.1(c)(i) to the contrary, the parties hereto intend this Agreement to be an exclusive agreement and, accordingly, nothing in this Agreement is intended to constitute a solicitation of an Acquisition Proposal, it being acknowledged and agreed that any such offer or proposal would interfere with the strategic advantages and benefits which the parties expect to derive from the Merger. In the event this Agreement is terminated pursuant to this Section 9.1(c)(i), CILCORP shall pay AES in cash by wire transfer of same day funds within ten business days of such termination notice a termination fee in an amount equal to 3.0% of the Aggregate Consideration Amount (the "CILCORP Breach Termination Fee"). (ii) by written notice to CILCORP after the nine-month anniversary of the date hereof if the SEC Exemption Order shall not have been issued or irrevocably waived by AES prior to the time such notice is given. In the event this Agreement is terminated pursuant to this Section 9.1(c)(ii), then AES shall pay CILCORP in cash by wire 65 transfer of same day funds within ten business days of such termination notice a termination fee in an amount equal to the product of (x) the Outstanding Shares and (y) $1.00, together with an additional $0.00546448 per day for each day beginning on the later of (A) the day after the nine-month anniversary of the date hereof or (B) five days after the date of any order, approval or result, as the case may be, contemplated by clause (ii) of Section 8.3(k) hereof, unless AES shall have notified CILCORP within such five-day period that the condition in clause (ii) of Section 8.3(k) hereof has not been satisfied, until the date of termination (up to a maximum of $3.00 under this clause (y)) (the "Regulatory Termination Fee"); provided, however, that the Regulatory Termination Fee shall not be payable to CILCORP if the failure to obtain the SEC Exemption Order by the nine-month anniversary of the date hereof has been caused by breach of this Agreement by CILCORP or by any action or omission by CILCORP after the date hereof unless taken at the direction of AES. (iii) without payment of a termination fee by AES or CILCORP by written notice to CILCORP after the one-year anniversary of the date hereof if any approvals or other actions of the Illinois Commerce Commission required under the Illinois Public Utilities Act have either not been issued, or if issued or taken, such order, approval or other actions shall not meet the AES Reasonable Belief Standard set forth in clause (ii) of Section 8.3(k) hereof, provided however that AES may terminate this Agreement (without payment of a termination fee by AES or CILCORP) by written notice to CILCORP after the eighth-month anniversary of the date hereof if AES does not reasonably believe that within the above-referenced one-year period the AES Reasonable Belief Standard set forth in the clause (ii) of Section 8.3 (k) hereof will be satisfied with respect to such approvals or other actions. (d) by CILCORP under any of the following circumstances: (i) by written notice to AES, if there shall have been any material breach of any representation or warranty contained in Sections 5.1, 5.2 and 5.5 hereof, or any material breach of any covenant or agreement of AES hereunder, and such breach shall not have been remedied within thirty days after receipt by AES of notice in writing from CILCORP, specifying the nature of such breach and requesting that it be remedied. In the event this Agreement is terminated pursuant to this Section 9.1(d)(i), AES shall pay CILCORP in cash by wire transfer of same day funds within ten business days of such termination notice a termination fee in an amount equal to 3.0% of the Aggregate Consideration Amount (the "AES Breach Termination Fee"). 66 (ii) in accordance with clause (iii) of the proviso to the first sentence of Section 7.8(a) hereof, by written notice to AES; provided that, in order for the termination of this Agreement pursuant to this subparagraph (ii) to be deemed effective, CILCORP shall have complied with all provisions of Section 7.8 hereof. In the event this Agreement is terminated pursuant to this Section 9.1(d)(ii), CILCORP shall pay AES within ten days in cash by wire transfer of same day funds a termination fee in an amount equal to the Acquisition Termination Fee. (iii) by written notice to AES after the 18-month anniversary of the date hereof, if all conditions to Closing have been satisfied, other than the issuance of the SEC Exemption Order and CILCORP delivers to AES a certificate signed by an executive officer of CILCORP attesting to the satisfaction by CILCORP of the conditions in Sections 8.1 and 8.3(a), (b), (c), (d) and (k) (the "Section 9.1(d) Certificate") then within 10 business days of the receipt of the Section 9.1(d) Certificate, AES shall pay to CILCORP in cash by wire transfer of same day funds within ten business days of such termination notice a termination fee in an amount equal to the Regulatory Termination Fee. (iv) without payment of a termination fee by AES or CILCORP, upon two business days' written notice to AES after the six-month anniversary of the date hereof if the Illinois Certification shall not have been issued or waived by AES prior to or within two business days after the time such notice is given. Section 9.2 Effect of Termination. In the event of termination of this Agreement by either CILCORP or AES pursuant to Section 9.1, there shall be no liability on the part of either CILCORP or AES or their respective officers or directors hereunder, except that Section 7.8, Section 9.1, Section 9.2 and Section 9.3, the agreement contained in the last sentence of Section 7.1 and in Section 10.6 shall survive the termination. Section 9.3 Termination Fees; Expenses. (a) Expenses. The parties agree that the termination fees contained in Article IX are an integral part of the transactions contemplated by this Agreement and constitute liquidated damages and not a penalty. Notwithstanding anything to the contrary contained in this Agreement, if one party fails to promptly pay to the other any fee or expense due under Article IX, in addition to any amounts paid or payable pursuant to such Section, the party shall pay the costs and expenses (including legal fees and expenses) in connection with any action, including the filing of any lawsuit or other legal action, taken to collect payment, 67 together with interest on the amount of any unpaid fee at the publicly announced prime rate of Citibank, N.A. from the date such fee was required to be paid. (b) Limitation Of Fees. Notwithstanding anything herein to the contrary, AES shall in no event be liable or required to pay to CILCORP more than one of (A) the Regulatory Termination Fee, (B) the Financing Termination Fee or (C) the AES Breach Termination Fee. Section 9.4 Amendment. This Agreement may be amended by the Boards of Directors of the parties hereto, at any time before or after approval hereof by the stockholders of CILCORP and prior to the Effective Time, but after such approval, no such amendment shall (a) alter or change the Per Share Amount under Article II or (b) alter or change any of the terms and conditions of this Agreement if any of the alterations or changes, alone or in the aggregate, would materially adversely affect the rights of holders of CILCORP Common Stock, except for alterations or changes that could otherwise be adopted by the Board of Directors of CILCORP or AES, without the further approval of CILCORP stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 9.5 Waiver. At any time prior to the Effective Time, the parties hereto may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein, to the extent permitted by applicable law. Any agreement on the part of a party hereto to any such extension or waiver shall be valid if set forth in an instrument in writing signed on behalf of such party. ARTICLE X GENERAL PROVISIONS Section 10.1 Non-Survival; Effect of Representations and Warranties. No representations or warranties in this Agreement shall survive the Effective Time, except as otherwise provided in this Agreement. 68 Section 10.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given (a) when delivered personally, (b) when sent by reputable overnight courier service or (c) when telecopied (which is confirmed by copy sent within one business day by a reputable overnight courier service) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) If to AES or Merger Sub, to: The AES Corporation 1001 North 19th Street, 20th Floor Arlington, Virginia 22209 Attention: General Counsel Telephone: 703-522-1315 Facsimile: 703-528-4510 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue, N.W. Washington, DC 20005 Attention: Michael P. Rogan, Esq. Marcia R. Nirenstein, Esq. Telephone: 202-371-7000 Facsimile: 202-393-5760 and (ii) if to CILCORP, to: CILCORP Inc. 300 Hamilton Boulevard, Suite 300 Peoria, Illinois 61602 Attention: John G. Sahn, Esq. Telephone: 309-675-8822 Facsimile: 309-675-8888 with a copy to: 69 Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004 Attention: Stephen R. Rusmisel, Esq. Telephone: 212-858-1000 Facsimile: 212-858-1500 Section 10.3 Miscellaneous. This Agreement (a) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof (other than the Confidentiality Agreement), (b) shall not be assigned by operation of law or otherwise and (c) shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed in and to be fully performed in such State, without giving effect to its conflicts of law rules or principles and except to the extent the provisions of this Agreement (including the documents or instruments referred to herein) are expressly governed by or derive their authority from the Illinois Act. Section 10.4 Interpretation. When a reference is made in this Agreement to Sections or Exhibits, such reference shall be to a Section or Exhibit of this Agreement, respectively, unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." Section 10.5 Counterparts; Effect. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. Section 10.6 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of New York or any New York state court in the County 70 of New York, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any federal court located in the State of New York or any New York state court in the County of New York in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a federal court sitting in the State of New York or a New York state court sitting in the County of New York. Section 10.7 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and, except for rights of Indemnified Parties as set forth in Section 7.5, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 10.8 Further Assurances. Each party will execute such further documents and instruments and take such further actions as may reasonably be requested by any other party in order to consummate the Merger in accordance with the terms hereof. Section 10.9 Waiver Of Jury Trial. Each party to this Agreement waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any action, suit or proceeding arising out of or relating to this Agreement. Section 10.10 Certain Definitions. The term "affiliate," except where otherwise defined herein, shall mean, as to any person, any other person which directly or indirectly controls, or is under common control with, or is controlled by, such person. The term "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise). 71 IN WITNESS WHEREOF, AES, CILCORP and Merger Sub have caused this Agreement as of the date first written above to be signed by their respective officers thereunto duly authorized. THE AES CORPORATION By: ----------------------------------- Name: Title: CILCORP INC. By: ----------------------------------- Name: Title: MIDWEST ENERGY, INC. By: ----------------------------------- Name: Title: 72 EXHIBIT B UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION - -----------------------------------) Central Illinois Light Company, ) on its own behalf ) Docket No. EC99-___ and on behalf of ) The AES Corporation ) - ----------------------------------- AFFIDAVIT OF CLIFF W. HAMAL I, Cliff W. Hamal, being duly sworn, depose and state as follows: I. INTRODUCTION l. I am an economist and Director at LECG, Inc. My business address is 1600 M Street, N.W., Suite 700, Washington, D.C. 20036. LECG provides expert analysis, litigation support, and management consulting in economics, business strategy, and finance. I received my bachelor of science degree, majoring in Marine Engineering and Marine Transportation, from the U.S. Merchant Marine Academy in 1980, and my masters of science degree in Industrial Administration from Carnegie Mellon University in 1989. I specialize in providing economic and strategic consulting, principally in electric utility and related industries. 2. Prior to receiving my masters degree, I held several positions involving the operation, maintenance and management of power generation 2 facilities. This included working for Westinghouse with responsibilities in the project management of nuclear power maintenance services and for training personnel in commercial nuclear power plant operations. I also worked for General Electric as a nuclear plant engineer responsible for the operations of a Department of Energy nuclear facility, and sailed on two merchant vessels as an engineer responsible for engine room operations. 3. Since receiving my masters degree in 1989, I have been engaged in management and strategic consulting, principally in the electric utility industry. I was an Associate with Putnam, Hayes and Bartlett, Inc. until 1993, a Vice President of JFG Associates through 1994, President of The Tesla Group, Inc. until mid-1996, and a Director at LECG since that time. Among the many engagements in which I have participated, I have had substantial experience in antitrust matters before the Federal Energy Regulatory Commission ("Commission"), state public utility commissions, Federal District Court in civil proceedings, the Department of Justice and the Federal Trade Commission. I have evaluated transactions and suggested testimony regarding market power issues in the Central Maine Power-FPL Energy transaction, the New England Power-US Generating transaction, the US Generating-TransCanada Pipeline sale of 3 Ocean State Power facilities, the PG&E Corporation-Valero Energy Corporation merger, and the Houston Industries-NorAm Energy Services acquisition. I have also participated in antitrust reviews in defense, consumer products and industrial commodity industries. In addition to antitrust analyses, I have testified on damages issues associated with replacement power, evaluated damages and regulatory issues in the electric industry, provided strategic counsel on market design and market power issues associated with electric industry restructuring outside of the U.S., participated in independent power project acquisition evaluations, provided analysis of environmental compliance strategies, and have been involved in a variety of other economic issues in the electric industry. My professional experience is described more fully in Attachment l. II. PURPOSE, CONCLUSION, AND ORGANIZATION OF AFFIDAVIT 4. I have been asked by The AES Corporation ("AES") and Central Illinois Light Company ("CILCO") to evaluate the competitive implications of the proposed acquisition of CILCO's parent, CILCORP, Inc. ("CILCORP"), by AES. AES is a global power company that owns or has interests in power generation and distribution facilities around the world. Its interests in power facilities in 4 the United States have been generally limited to independent power production facilities that typically are fully committed under long-term contracts. CILCORP is an energy services company whose largest subsidiary, CILCO, is a regulated electric and gas utility serving Central Illinois. Under the proposed transaction, an AES subsidiary, Midwest Energy, Inc., will purchase all of the outstanding stock of CILCORP, and CILCORP will become a wholly-owned subsidiary of AES. 5. In evaluating the competitive effects of the acquisition, I have addressed potential horizontal and vertical market power issues in accordance with the requirements set forth in the Commission's Merger Policy Statement, Order No. 592, and also have given consideration to the Notice of Proposed Rulemaking ("NOPR"), Docket No. RM98-4, issued on April 16, 1998. Under these guidelines, a detailed screen analysis ("Appendix A" analysis) is required unless it can be demonstrated that the merging parties do not sell the same products in the same geographic markets. This clearly is the case in this instance. CILCORP's operations are in central Illinois where it is a modest-sized utility with l, 152 MW of installed capacity, and firm purchases of another l 85 MW. This essentially matches its native load obligation and leaves 5 the utility with no excess capacity to sell into the wholesale market. AES's nearest operations are in Pennsylvania and Oklahoma, and are fully committed to customers under long-term contracts. Throughout the United States and Canada, AES has only 8 MW of capacity that is not committed to others under long-term projects. While projects under development and other acquisitions are expected to increase the generating capacity under AES control, these activities are all far from markets in which CILCORP operates and the output of the projects generally is sold under long-term contracts. 6. This evaluation concludes that this transaction does not raise horizontal market power concerns because the parties do not control generation facilities that sell into the same geographic markets. Throughout 1996 and 1997, no wholesale customers purchased power from facilities controlled by both entities. All of the AES facilities are at least three transmission wheels away from CILCO, and the closest facility with more than 10 MW of uncommitted capacity is five wheels away. Also, there are no vertical market power issues of moment in this matter. Neither party has more than de minimis control over generation inputs and in no case are these in locations that could rise to vertical market power issues. Clearly, there are no competitive issues that raise material antitrust concerns with respect to this transaction. 6 7. This affidavit reviews the operations of CILCORP and AES in section III, provides a horizontal market power evaluation in section IV, and then presents a vertical market power evaluation in section V. Tables CWH-l through CWH-6 provide the results of the analyses that have been performed to support the evaluation and Attachment 2 provides supporting work papers. III. DESCRIPTION OF THE PARTIES A. CILCORP 8. CILCORP is an exempt public utility holding company whose largest subsidiary, CILCO, is a regulated utility that serves approximately a quarter of a million gas and electric customers in Central Illinois. CILCO owns 1,152 MW of almost entirely coal-fired generation capacity (all ratings are summer ratings unless otherwise stated), has 35 MW of non-utility generation under contract and has 150 MW of purchase power through two separate contracts with Ameren Corporation ("Ameren"), consisting of a 100 MW contract that expires in 2003 and a 50 MW contract that expires in 2009. Currently, there is a dispute regarding the Ameren contracts. CILCO has suspended payments under the contract and is not taking the associated energy. Instead, CILCO is making other short-term arrangements for energy to meet its obligations for the summer of 1999. While resolution of the dispute could lead to cancellation of the contracts, this 7 analysis assumes CILCO continues to control this capacity. CILCO traditionally plans to a reserve margin of 15 percent in the first year of a forecast and 18 percent in later years when there are more uncertainties. Based on projected load and these reserve margin assumptions, CILCO will have 32 MW of excess capacity in 1999, with shortfalls of 15 MW and 31 MW in 2000 and 2001, respectively. This information is summarized in Table CWH-l. CILCO's load forecast does not assume any loss of customers from retail open access, even though Illinois' Electric Service Customer Choice and Rate Relief Law of 1997 calls for a phased transition to retail competition. Under the legislation, certain large customers and a portion of other non-residential customers may shop for power as of October l, 1999, the remaining non-residential customers may begin shopping later in the year 2000, and all customers will have open access by May 1, 2002. 9. Through its unregulated subsidiaries, CILCORP also has two passive investments in fully committed generation facilities. It has a 7.4257 percent undivided interest in Springerville Unit l ("Springerville"), a 380 MW generation station that is located in Arizona and leased to Tucson Electric Power until 2015. CILCORP also has a 2.476 percent limited partnership interest in the Energy Investors Fund, L.P. ("EIF"), which in turn has passive 8 investments in eleven power projects, all of which are fully committed until at least 2011. 10. CILCO is an open access system with applicable tariffs on file at the Commission. CILCO is interconnected with six utilities: Commonwealth Edison ("Com Ed"); Ameren; Illinois Power; City Water, Light & Power for the City of Springfield, Illinois ("Springfield"); the Village of Riverton ("Riverton"); and Corn Belt Electric Cooperative ("Corn Belt"). As shown in Table CWH-l, Riverton and Corn Belt are the only transmission dependent utilities in CILCO's service territory. Riverton is a full requirements customer of CILCO with a peak load of 6 MW that is currently under contract until March of 2001. Corn Belt recently signed a five-year wheeling tariff with CILCO under which CILCO will provide 5 MW of transmission services across its system. This agreement gives Corn Belt access to competitive supplies sufficient to meet its full requirements through 2003. 11. Through other subsidiaries, CILCORP has been involved in competitive electricity sales at both the retail and wholesale levels. QST Energy Inc. ("QST Energy"), a wholly-owned subsidiary of CILCORP, has been involved in competitive retail sales of energy (both electricity and gas) in Illinois, Pennsylvania and California. For strategic reasons, QST Energy is de-emphasizing its activities outside of Illinois. It has sold its electric and 9 gas accounts in Pennsylvania and, with the exception of a few contracts that could not be transferred, has exited this market. It is evaluating similar options regarding its California activities. QST Energy Trading Inc. ("QST Trading") is a subsidiary of QST Energy and is a Commission-authorized wholesale power marketer of electricity that also markets natural gas. As a result of recent strategy changes, QST Trading no longer focuses on new trading activities and its only trading activities are those necessary to balance its physical and financial portfolio in order to fulfill prior commitments. 12. CILCO is a regulated gas utility with retail sales in central Illinois. It provided 53 Bcf of gas and generated $209 million in revenue in 1997. Among CILCO's gas customers are five power generators. All of CILCO's large volume gas customers have the option of buying unbundled gas transportation services and arranging for the gas commodity and interstate transportation services on their own. CILCO's customers with the two largest electric generators (64 MW and 7 MW of capacity) take advantage of this option and do not buy any gas from CILCO. The three smaller electric generation facilities total less than a de minimis 0.25 MW of capacity. CILCO controls two sites that could be used for new power generation facilities, the Hallock site near Chillicothe, Illinois, and additional space at the Duck Creek station near Dunfermline, Illinois. 10 B. AES 13. AES has interests in approximately ninety power generation facilities around the world that total over 23,000 MW of capacity, and has interests in many more projects in various states of development. AES has interests in companies that distribute power to approximately 13 million customers outside of North America. AES's interests are held in various subsidiary corporate structures, and are referred to collectively as AES in this discussion. Table CWH-2 presents information on AES's generation facilities within the U.S. and Canada. In North America, AES has interests in ten operating projects, one under construction, and one in an advanced stage of development. AES is in the process of acquiring six generating stations from New York State Electric & Gas Corporation ("NYSEG") in a transaction that is-expected to close at the end of March 1999. AES also is in the process of acquiring the 610 MW Indian River project located in Titusville, Florida. Most of the existing stations are fully committed under long-term contracts, including those in Pennsylvania, Maryland, Connecticut, Oklahoma, and Ontario. Some stations, however, are not fully committed. The 143 MW Deepwater project in Texas (located in the Electric Reliability Council of Texas, Inc., "ERCOT") has contracts with Dynegy and The Williams Company, Inc. ("Williams") covering all but 8 MW of its output through 1999, at which time a new two-year contract with Texas Utilities 11 Electric Co. will cover all but 3 MW of the unit's output. Regarding the six NYSEG stations it is acquiring, AES will have a three-year contract with NYSEG for all of the capacity, but none of the energy from these units. The energy, as well as the post-April 2001 capacity, will be sold into the competitive marketplace. The 610 MW Indian River project currently is not committed under long-term contract, but AES is pursuing a long-term contract for its output and it may be fully committed before the transaction is consummated. 14. AES's subsidiary, AES Power, Inc., is a Commission-authorized wholesale power marketer that sells power throughout the United States, including the Mid-America Interconnected Network ("MAIN") region. AES Power has a 45 percent ownership interest in Northern/AES Energy, LLC ("Northern AES"), another Commission-authorized, wholesale power marketer with operations generally in the Northern plains states. Neither AES Power nor Northern AES owns or controls power supplies under long-term contract that are not committed to other purchasers. Long-term contracts are those of one or more year's duration. Together, the sales of these two entities do not place them among the top twenty largest power marketers in the U.S. 15. AES has an interest in one electric transmission facility, a 3 kilometer line in Ontario, Canada that connects the Kingston unit to the transmission grid. AES does not own or control any fuel supplies or 12 transportation facilities other than those that are necessary for the operation of its own electric generation facilities. AES either controls or otherwise has an interest in power generation sites in the U.S., located in Texas, California, Arkansas, Connecticut, New Hampshire, and New Jersey. AES has one project in the early stage of development in Indiana. It has applied to the Indiana Utility Regulatory Commission for a certificate of convenience and necessity to build a unit of up to 400 MW capacity, although the project's capacity in its initial phase is expected to be less than 200 MW. The facility will benefit Hoosier Rural Electric Cooperative, Inc. ("Hoosier"), and an unnamed power marketer. While an application has been made, the rights to a station site have not been obtained, no equipment or construction contracts have been obtained, no financing is in place, and no applications for other permits including environmental permits, have been made. AES' objective is to develop the project with a long-term power sale contract for the full output of the station. The soonest the station is expected to come on line is June of 2000. IV. HORIZONTAL MARKET POWER ANALYSIS l6. This section begins with a description of the relevant product markets and then a discussion of the process by which a geographic market can be defined. Analyses are then presented that demonstrate that the applicants do not 13 control supplies of the relevant products in the same geographic markets. A. Relevant Product Market 17. The Merger Policy Statement identifies three product markets: non-firm energy, short-term capacity (firm energy) and long-term capacity. The long-term capacity market presumably is competitive as long as entry is not limited, and detailed analyses typically have focused on the short-term markets. The Commission identified four potential measures of these products: economic capacity, available economic capacity, uncommitted capacity, and total capacity. Economic capacity and available economic capacity measures require a delivered price analysis as outlined in Appendix A of the Merger Policy Statement. Because it is the conclusion of this evaluation that such an analysis is not required, only summary statistics on total capacity and uncommitted capacity are provided. B. Relevant Geographic Markets 18. The process of defining relevant geographic markets starts by identifying those parties directly connected with the merging parties or who historically have been served by the parties. These become "destination" markets in an Appendix A analysis, and the geographic market associated with each destination market includes all those suppliers that economically could reach these markets. 14 19. Table CWH-3 provides three years of data on CILCORP's sales to utilities. This table includes the two transmission dependent utilities, Riverton and Corn Belt, four other interconnected neighbors, and four utilities one transmission wheel away. Transactions with power marketers are not included in this and other tables because it is not possible to determine the ultimate destination where the power was delivered. Also, power sales by AES Power, Northern/AES and QST Trading have not been included throughout this evaluation because these entities do not control generation. These entities only trade power among wholesale market participants and have no ability to withhold generation from the marketplace or exercise market power. Not including power marketers is consistent with an Appendix A delivered price analysis, which addresses only generation controlled by the participants. Also, concerns regarding power marketing trading activities have not been raised in recent Commission decisions where such entities do not control generation. 20. AES has not sold a single megawatt from any generation station which it controls to any of the entities listed in Table CWH-3 or to CILCORP itself. This is not surprising when one considers that AES's projects are nearly fully committed to buyers and are located far from markets in which CILCORP participates. This is supported by a quick review of Table CWH-2. Most of AES's projects have long-term contracts to utilities in markets where the units are 15 located, which are far from central Illinois. When one looks at AES' uncommitted capacity, there is no reason to presume that the 8 MW in Texas or the potential 610 MW in Florida would compete in the Illinois market. The Deepwater facility continues to sell its output in Texas after the expiration of its original contract, far from the market in Illinois. The new facility in Florida, Indian River, is even further from the relevant markets, and not from a state that is a historical supplier of power to the destination markets near CILCO. Further, energy sales from the New York facilities are extremely unlikely to be competitive in the Illinois area. 21. As another way of demonstrating the relative distance between AES stations and CILCO's service territory, Table CWH-4 is presented. For the six AES stations closest to CILCO, this table identifies the most direct contract path for wheeling power to CILCO. There are at least three utility service territories between the stations and CILCO. Also, because AES does not control energy in the markets in which CILCORP participates, logic dictates that CILCORP does not sell energy into AES's market. 22. AES' early-stage development project in Indiana is too speculative to include in this analysis. Active power project developers are always considering potential new projects, and clearly this one has not reached the level of maturity where there can be any assurance it will be constructed. The 16 project has no site, permits, equipment, or other contracts. Without a specific location, it is not even possible to evaluate its effect on competition. In any event, AES anticipates developing the project with a long-term power sale agreement for the full output of the station which is consistent with their approach on other such projects. If the project proceeds in this fashion, AES will not control the output of the facility in any event. 23. CILCORP's passive investments in Springerville and EIF also do not raise competitive issues. All of the projects are fully committed under long-term contracts, CILCORP's modest ownership share translates to less than 27 MW in Springerville and less than 7 MW for EIF. Even if these projects were not fully committed, as a passive investor, CILCORP would not have any control over the output of these facilities. 24. In order to further evaluate the implications of the merger, Table CWH-5 looks at the total purchases of the nine entities which purchased power produced by CILCORP assets. As mentioned above, AES has not sold a single megawatt from any generation station which it controls to any of these entities or to CILCORP itself. With the exception of Riverton and Springfield, purchases from CILCORP amount to less than 4 percent of these utilities' historical purchases. Also, the other destination markets all have access to large supply markets through multiple utility interconnections as listed in Table CWH- l. 17 25. Riverton's situation is unique, both because its only access to the market is through CILCO and because CILCORP has been its only source of power during this period. Riverton remains covered under its current contract until March of 2001, so there clearly are no competitive implications of the transaction during this period. Also, CILCO has an open access tariff that assures Riverton access to a large wholesale market. This market includes Corn Ed, Ameren, Illinois Power, and other wholesale market participants. Ongoing developments toward more competitive markets in general, and likely developments for a Midwest ISO in particular, will only increase competitive options over the next two years for Riverton and similar entities. 26. CILCORP's sales to Springfield are modest, totaling under 60,000 MWH in 1997, which was less than 3 percent of Springfield's own generation even though a high percentage of Springfield's purchases come from CILCORP. Springfield has access to other suppliers, including direct interconnections with Ameren and Illinois Power, as well as through CILCO to CoM Ed via CILCO's open access tariff. This transaction will not change Springfield's options, as AES's resources are located far from this market, they are committed largely to purchasers, and there are a growing number of other supply options. 27. Corn Belt is dependent on CILCO for transmission access, but the existing five-year contract for transmission services assures Corn Belt that it 18 will not be affected by the merger through 2003. In recent years, Corn Belt has not purchased any energy from CILCO. As was discussed regarding Riverton, CILCO's open access tariff and developments in the market in general will assure Corn Belt access to competitive energy supplies after 2003, and in any event its options will not be reduced as a result of this transaction. 28. Lastly, because in the past the Commission has looked at total capacity analyses, Table CWH-6 was prepared. If one looks at a market that includes CILCO and its interconnects on a total capacity basis, CILCORP is only 3 percent of the market for 1999-2000. Again, AES does not have any capacity in this market. 29. A separate table has not been prepared for uncommitted capacity. Data is not readily available on the uncommitted capacity of these utilities and it is obvious that there are no competitive concerns regarding this measure. CILCORP has only 32 MW of uncommitted capacity in 1999, and this amount reduces to zero in 2000 and 2001. AES has 8 MW of uncommitted capacity in Texas and may acquire 610 MW in Florida later in 1999 if the anticipated long-term contract is not signed. These resources are far from CILCORP's markets. The advent of retail competition will change the levels of uncommitted capacity for utilities, but there is no reasonable scenario which would result in a substantial concern in this case. CILCORP's uncommitted capacity will increase with retail competition 19 in Illinois, but this same legislation also applies to the other utilities in the state and it is reasonable to presume that the loss of requirements customers by Illinois utilities will proceed at roughly similar rates. Since CILCORP is only a small portion of the total Illinois system, which includes Com Ed, Illinois Power, portions of Ameren and others, its share of the uncommitted generation in Illinois will remain modest. AES's generation is not tied to retail load obligations so the implementation of retail competition will not increase its uncommitted capacity. Retail competition in other states will create more uncommitted capacity in the market place in general, further reducing AES's market shares. V. VERTICAL MARKET POWER ANALYSIS 30. The creation of vertical market power can be an issue in a merger context when the combined company has the ability to withhold supplies of critical inputs necessary for the generation of electricity and profitably can withhold them from the market in order to obtain higher profits than it would otherwise earn on its sales of electricity. The focus is on the effect of the merger, and does not require a full review of all potential issues if it is clear that these are not changed by the transaction. Here the question is whether AES controls resources that would allow the combined company to earn 20 more profits on its CILCORP generation assets, or whether CILCORP's resources, when combined with AES's, would allow greater earnings on the AES generation assets. An evaluation of vertical market power generally Involves a description of relevant product markets, both downstream and upstream, and relevant geographic markets. The Commission's review of these markets can be abbreviated where the facts clearly demonstrate de minimis involvement and the lack of any market power, as is the case for this transaction. 31. The downstream product markets include the various electricity products described in the horizontal market power section. The upstream products considered in this evaluation include fuel, fuel transportation services, electric transmission Services, generation sites, and environmental emission permits. The relevant geographic markets for downstream products should be limited to those where CILCORP and AES have generation that has not been committed under long-term contracts. The upstream markets could have a geographic market that is different than those of the downstream products. Rather than attempt to define precisely these geographic markets, inputs across the United States and Canada have been included in this review. 32. The companies do not own or control fuel or fuel transportation Services that could be withheld from potential competitors. While CILCO does have a retail gas franchise territory in Illinois, it has open access policies 21 and the few generators of any size on its system arrange for their own gas supplies. Also, these gas facilities are far removed from any market in which AES has generation assets and the combined company will not be able to use gas distribution facilities in Illinois to manipulate electricity prices in Texas or PJM. Neither CILCORP nor AES controls fuel supplies or transportation rights that are in excess of its ongoing needs. 33. The companies cannot withhold electric transmission service from potential competitors. CILCO provides transmission on an open access basis. AES's only transmission facility is a three kilometer transmission line in Ontario that is too small and too far away to be an issue. 34. CILCORP has several sites that may be developed for new generation facilities, but these are in Illinois, far from AES's operations, and there are many sites across the Midwest that could be used by other project developers. AES does consider developing new projects, and occasionally obtains the rights to develop project sites, but currently does not have any such rights within three wheels of CILCO's service territory, and as stated earlier, AES does not control any sites associated with its development project in Indiana. For competitive reasons, AES prefers to keep confidential the details of such activity that is far removed from Illinois. 22 35. Neither company has any emission permits or related rights beyond those needed for its own, ongoing operations which it can withhold from potential competitors. AES is expected to obtain slightly over 130,000 tons of SO2 emission allowances through its NYSEG transaction, but allowances are traded actively and this is a modest quantity relative to the size of the nationwide market. 36. In short, this transaction does not raise vertical market power concerns because it does not create the potential for the combined firm to withhold any relevant product from the market in order to profitably raise electricity prices in the markets it serves. /s/ Cliff W. Hamal ---------------------------------------- Cliff W. Hamal Subscribed and sworn to before me this 18th day of February, 1999. /s/ Charlotte S. Brown - ---------------------------- Notary Public Commission expires: 4/30/03
Table CWH-1 Central Illinois Light Co's (CILCO's) Resources CILCO's Generating Plants - -------------------------------------------------------------------------------- Plant County State NERC Fuel Capacity Region - -------------------------------------------------------------------------------- (MW) E.D. Edwards 1-3 Peoria IL MAIN Coal 740 Sterling Avenue 1-2 Peoria IL MAIN Gas 30 Duck Creek Fulton IL MAIN Coal 366 Cogen 1 Tazewell IL MAIN Gas 16 ----- Total 1,152
CILCO's Projected Load and Resources Capacity ----------------------------------------- Resource 1999 2000 2001 - -------- ----------------------------------------- (MW) (MW) (MW) Owned Capacity 1,152 1,152 1,152 Non-Utility & Standby Generation 35 35 35 - -------------------------------- -- -- -- Total Resources 1,187 1,187 1,187 1,154 1,169 1,182 Peak Demand (Net of DSM) 150 150 150 ----- ----- ----- Purchases(1) 1,004 1,019 1,032 - --------- Net Internal Demand Required Capacity(2) 1,155 1,202 1,218 Excess Capacity 32 (15) (31)
Notes (1) Two separate contracts with Ameren Corporation ("Ameren") consisting of a 100 MW contract that expires in May 2002 and a 50 MW contract that expires in 2009. (2) Based on 15 percent Reserve Margin Requirement for 1999 and 18 percent for 2000 and 2001.
Table CWH - 1 (Con't) CILCO's Interconnected Utilities - -------------------------------------------------------------------------------- CILCO Number of Utility Name Tieline Inter- List of all Interconnected Utilities Capacity connected Utilities - -------------------------------------------------------------------------------- (MW) Commonwealth Edison 2,464 9 CILCO, Ameren, Illinois Power, Northern Indiana Public Service, AEP, Wisconsin P&L, Wisconsin Electric L&P, Mid-American Energy, and Interstate Power. Ameren 448 21 CILCO, TVA, Kentucky Utilities, C&SW, Entergy, Western Resources, SPA, AECI, Kansas City P&L, Missouri Public Service, IES Utilities, Columbia W&L, Springfield City W, L&P, St. Joseph L&P, Mid-American Energy, ComEd, N. Indiana Public Service, S. Illinois Power Coop, Illinois Power, AEP, and Cinergy Corp. Illinois Power 572 9 CILCO, Southern Illinois Power Coop, ComEd, Kentucky Utilities, AEP, TVA, Ameren, Springfield City W, L.&P. and Mid-American Energy. Springfield City 287 3 CILCO, Ameren, and Illinois Power. Water Light & Power Riverton 13 1 CILCO Corn Belt 12 1 CILCO
Source Affidavit of William Shav and The 1998 NERC Operating Manual, Electrical world McGraw Hill Co.
Table CWH - 2 AES Resources AES Generation Stations in U.S. and Canada - ------------------------------------------------------------------------------------------------------------------------------------ Non- Generating Contracted Start AES Contract Plant Location Interconnected Utility Fuel Capacity Capacity Date Ownership Purchaser Expiration (MW) (MW) - ------------------------------------------------------------------------------------------------------------------------------------ Shady Point OK Oklahoma G&E Coal 320 0 Operating 100% Oklahoma G&E 2008 Beaver Valley PA West Penn Power Coal 125 0 Operating 80% West Penn Power 2017 Ironwood PA General Public Utilities Coal 700 0 42001 est 100% The Williams Co. 2021 Warrior Run MD Potomac Edison Coal 180 0 10/99 est 100% Potomac Edison 2/29 est Deepwater TX Houston Lighting & Pet 143 3-8 Operating 100% Dynegy, The Williams 1231 Power Coke Energy Co. and Texas Utilities Thames CT Connecticut Light & Coal 181 0 Operating 100% Connecticut Light 2015 Power & Power Alamitos CA Southern California Gas 2,083 0 Operating 100% The Williams Co. Beyond 2003 Edison Co. Huntington CA Southern California Gas 563 0 Operating 100% The Williams Co. Beyond 2003 Beach Edison Co. Redondo Beach CA Southern California Gas 1,310 0 Operating 100% The Williams Co. Beyond 2003 Edison Co. Placenta CA Southern California Gas 120 0 Operating 100% Southern California 2014 Edison Co. Edison Co. Hawaii HI Hawaiian Electric Co. Coal 180 0 Operating 100% Hawaiian Electric Co. 2023 Kingston Ontario Ontario Hydro Gas 110 0 Operating 50% Ontario Hydro 2017 --- - Subtotal Varies by Year 5,135-6,015 3-8 Additional Generating Units that AES is in the Process of Acquiring - ------------------------------------------------------------------- Kinogh NY New York State E&G Coal 675 0 Operating 100% New York State E&G Apr-01 Milliken NY New York State E&G Coal 306 0 Operating 100% New York State E&G Apr-01 Goudey NY New York State E&G Coal 126 0 Operating 100% New York State E&G Apr-01 Greenidge NY New York State E&G Coal 161 0 Operating 100% New York State E&G Apr-01 Hickling NY New York State E&G Coal 85 0 Operating 100% New York State E&G Apr-01 Jennison NY New York State E&G Coal 1 0 Operating 100% New York State E&G Apr-01 Indian River FL Orlando Utilities Oil, 610 610 Operating 100% None Commission Gas Subtotal 2,034 610 Total Varies by Year 7,169-8,049 613-618 Notes 1. Deepwater has contracts to sell 112 MW to Williams through 1999. It also has a contract to sell 140 MW to Texas Utilities for 2000 and 2001 2. The exact duration of contract is confidential. AES is a processing facility in which Williams delivers the gas and takes control of the entire energy output from the plant 3. The NYSEG sale covers of the capacity but none of the energy from their six facilities
Table CWH - 3 CILCO's 1996 - 1998 Wholesale Sales to Utilities MWh Delivered - -------------------------------------------------------------------------------- NERC Company Region 1996 1997 1998 - -------------------------------------------------------------------------------- AEP ECAR - 3,200 16,000 Ameren MAIN 22,814 75 2,320 Cinergy ECAR - 21 - Commonwealth Edison Co. MAIN 250,474 143,818 155,301 Corn Belt Electric Coop. MAIN - - - Illinois Power Co. MAIN 81,325 112,164 27,315 Riverton MAIN 16,738 17,150 18,312 Springfield, City Water, Light & Power MAIN 22,888 56,918 16,446 Wisconsin Electric Power Co. MAIN 690 18,659 694 Wisconsin Power & Light Co. MAIN 11,489 2,333 1,600 - -------------------------------------------------------------------------------- Total 406,418 354,338 237,988 - --------------------------------------------------------------------------------
Note: Sales to power marketers are not included Source: 1996-97 FERC Form 1 data compiled by OPRI. 1998 data provided by CILCO
Table CWH - 4 Proximity of Selected AES Units to CILCO's Service Territory - -------------------------------------------------------------------------------- AES AES Unit Controlled Number of Interconnection Path Capacity (MW) Wheels - -------------------------------------------------------------------------------- Beaver Valley 0 3 APS - AEP - Ameren - CILCO Shady Point 0 3 Oklahoma G&E - SWAPA - Ameren - CILCO Warrior Run 0 3 APS - AEP - Ameren - CILCO Deepwater 3-8 4 HL&P - C&SW - SWAPA - Ameren - CILCO Ironwood 0 4 PJM - APS - AEP - Ameren - CILCO Kingston 0 4 Ontario Hydro - Michigan Electric Coordinated System - AEP - Ameren - CILCO
Sources: Affidavit of Thomas Tribone and Directory of Power Producers 1998. Electrical World McGraw Hill
Table CWH - 5 Wholesale Purchase by Selected Utilities1 (1996-7) TOTAL MWHS PURCHASED 1996 ------------------------------------------------------------- AES CILCO AES & CILCO Total Purchases Sale Sales Combined Share Company ------------------------------------------------------------- AEP 33,655,122 - - 0.00% Ameren 11,565,366 - 22,814 0.20% Cinergy 3,507,907 - - 0.00% Commonwealth Edison2 7,922,357 - 250,474 3.16% Corn Belt Electric Coop. 255,036 - - 0.00% Illinois Power Co. 3,354,342 - 81,325 2.42% Riverton 16,738 - 16,738 100.00% Springfield, City Water, Light & Power(2) 35,210 - 22,888 65.00% Wisconsin Power & Light 1,749,723 - 690 0.04% Wisconsin Power & Light 4,460,488 - 11,489 0.26% TOTAL MWHS PURCHASED 1996 ------------------------------------------------------------- AES CILCO AES & CILCO Total Purchases Sale Sales Combined Share Company ------------------------------------------------------------- AEP 42,881,624 - 3,200 0.01% Ameren 6,764,510 - 75 0.00% Cinergy 24,560,850 - 21 0.00% Commonwealth Edison2 19,090,843 - 143,818 0.75% Corn Belt Electric Coop. 264,674 - - 0.00% Illinois Power Co. 10,158,754 - 112,164 1.10% Riverton 17,150 - 17,150 100.00% Springfield, City Water, Light & Power2 72,509 - 56,918 78.50% Wisconsin Power & Light 5,274,300 - 18,659 0.35% Wisconsin Power & Light 5,313,127 - 2,333 0.04%
- --------------- 1 AES and CILCO's sales only include energy from resources they control through ownership of long-term contracts. 2 In 199__ net generation for Com Ed and Springfield City W.P. & L was 91.196 and 2.040 GWhs, respectively (1998 Directory of Electric Power Producers) Source: 199___ FERC Form __ data compiled by OPRI.
Table CWH - 6 Total Capacity for Market Centered on CILCO 1999 2000 2001 Utility Name Capacity Percent Capacity Percent Capacity Percent (MW) (%) (MW) (%) (MW) (%) CILCO 1,337 3% 1,337 3% 1,337 3% AES 0 0% 0 0% 0 0% Direct Interconnects - -------------------- ComEd 22,597 56% 22,853 56% 22,133 55% Ameren 11,373 28% 11,548 28% 11,694 29% Illinois Power Co. 4,683 12% 4,592 11% 4,589 11% Springfield, City Water Light & Power 507 1% 507 1% 507 1% Corn Belt Electric Coop1 64 0% 64 0% 64 0% Riverton1 5 0% 5 0% 5 0% - ------------------------------------------------------------------------------------------------------------------------------------ Total 40,566 100% 40,906 100% 40,329 100% - ------------------------------------------------------------------------------------------------------------------------------------
Note (1) Projected capacity was unavailable. Therefore 1993 summer peaking capacity is assumed for the future total capacity. Sources 1. FERC Docket EC98-63. Prepared Direct Testimony and Exhibits of William Hieronymus. 2. Affidavit of William Shay. 3. The Directory of Electric Power Producers 1998. Electric World McGraw Hill Co. Attachment 1 LECG CLIFF W. HAMAL Law & Economics Consulting Group, Inc. Home Address: 1600 M Street., NW 2142 Silentree Drive Suite 700 Vienna, VA 22182 Washington, D.C. 20036 Tel. (703) 847-6538 Tel. (202) 466-4422 Fax (703) 847-9433 Fax (202) 4664-487 EDUCATION B.S. (with Honors), Marine Engineering and Marine Transportation, U.S. Merchant Marine Academy. M.S. (with Distinction), Industrial Administration, Carnegie Mellon University. PROFESSIONAL EXPERIENCE LAW AND ECONOMICS CONSULTING GROUP, INC., Director, 1996 - present. THE TESLA GROUP, NC., President and Founder, 1995-1996. JFG ASSOCIATES, INC., Vice President, 1993-1994. PUTNAM, HAYES AND BARTLETT, INC., Associate, 1989-1993. WESTINGHOUSE ELECTRIC CORPORATION, Senior Engineer, 1986-1989 and Lead Engineer for Training , 1983-1986. GENERAL ELECTRIC CORPORATION, KNOLLS ATOMIC POWER LABORATORY, Nuclear Plant Engineer, 1981-1983 TRINIDAD LINES and MARINE TRANSPORT LINE, Third Assistant Engineer, 1980-1981. REPRESENTATIVE PRIOR ENGAGEMENTS STRATEGIC CONSULTING o Implemented a power project acquisition strategy on behalf of a consortium of companies. This included identification of acquisition candidates, structuring the acquisition, negotiating with principals, evaluating the economics of the transaction, coordinating technical due diligence reviews, and arranging for project financing. o Conducted numerous electricity price evaluations, with particular emphasis on the dynamics of increasing competition, the need for new Attachment 1 Cliff W. Hamal Page 2 power projects and the future marginal cost of electric power generation. Market reviews have been conducted for New England, the mid-Atlantic states (PJM Interconnection), Florida, south-western United States, United Kingdom, Peru, Portugal, and other areas. o Evaluated power purchase arrangements with non-utility generators on behalf of utilities seeking to restructure the agreements to lower the cost of power. Alternatives have included buy-outs, restructuring operating requirements, plant modifications, and ownership changes. o Conducted due diligence review, economic evaluation, and partnership agreement negotiations on behalf of an investor in a merchant power plant in the late stages of development. o On behalf of an independent power producer, conducted a search for, evaluation of, and initial negotiations regarding existing power generating facilities for acquisition. o Evaluated electric price projections, and resulting utility asset valuations, on behalf of a utility involved with stranded cost proceedings. o Wrote the proposal and participated in the development of bidding strategy for the repowering of a major oil-fired generating unit in the United States on behalf of a project developer and equipment supplier. o Supported the development of a bidding strategy and proposal for acquiring state-owned electric generating assets in Eastern Europe. o Developed a strategy for the construction of transmission and distribution facilities in order for a firm to enter the competitive retail electric market by constructing new distribution facilities to existing consumers. o On behalf of electric utilities, fuel supply companies, and equipment suppliers on over fifteen occasions, evaluated strategies to respond to the sulfur dioxide emission requirements of the Clean Air Act Amendments of 1990. This has included the review of potential equipment modifications, fuel switching strategies, and plant retirement in an environment of uncertain markets for emission allowances and electricity prices in general. o Conducted an evaluation of the cost and impact of proposed climate change legislation designed to reduce the emission of carbon dioxide and other gases. o Evaluated the economic impact of CFC and HCFC reduction policies. o Evaluated strategic alternatives for the use of waste wood for a manufacturer that considered power generation, resale markets, and innovative product development. Attachment 1 Cliff W. Hamal Page 3 ECONOMIC COUNSEL IN CONTESTED PROCEEDINGS o Evaluated the claim of damages associated with a multi-year outage of a major nuclear generating facility. o Evaluated the anti-trust implications of a merger among electric and gas companies in support of an application before the FERC. o Supported a utility in an arbitration regarding the interpretation of a power purchase agreement with a non-utility generator. o Conducted analyses and supported rebuttal testimony on behalf of a utility in regulatory proceedings concerning stranded costs and the market price for electricity. o Supported a utility's prudence hearing regarding the repowering of a generation unit in a contested proceeding that focused on the market prices for power and availability of non-utility generation for meeting power needs. o Supported rebuttal damage testimony in a civil proceeding regarding allegations of defective power plant equipment and claims of direct and consequential damages. o Evaluated the claim of damages associated with alleged failings in the testing of a new power generation technology. The evaluation considered the potential for project finding, market penetration projections, and overall profitability. o Reviewed a utility's Integrated Resource Plan and the decision to shut down a major power generating facility for possible intervention by an industrial concern. o Evaluated the economic effects of tortious interference in a proposed utility merger on the economics of future operations of the combined utility system. o Supported testimony on self-dealing issues associated with a utility's investment in an independent power facility in a proceeding before the FERC. o Evaluated wholesale electricity prices in an anti-trust case where the parties contested the value of output from a qualifying facility. TESTIMONY "Expert Report of Cliff W. Hamal Regarding Replacement Power Costs For Salem," submitted on behalf of Public Service Electric & Gas Co., before the United States District Court for the Eastern District of Pennsylvania. Docket No. 96-CV1705, in the Matter of Delmarva Power & Light Company and PECO Energy Company v. Public Service Enterprise Group, Inc. and Public Service Electric and Gas Co., March 28, 1997. Attachment 1 Cliff W. Hamal Page 4 OTHER AFFILIATIONS Member of the Board of Directors, Ridge Utilities Inc., 1996-1997. Mentor, The Dingman Center for Entrepreneurship, University of Maryland College of Business. Program Planning Committee Member for PennWell's EnergyMart '96 and EnergyMart '97 conferences on electric power marketing. SPEECHES "Perspectives of Investors and Developers." Presented at the American Education Institute Conference on Power Contracts in affiliation with the United States Energy Association to the Romanian Electric Authority, Washington, D.C., March 19, 1997. "Risk and Risk Management In Electricity Markets." Presented at the Electric Load Aggregation Conference, Washington, D.C., November 18, 1996. "Developing Firm Plans During Uncertain Times: Anticipating Change." Presented during a session titled "Integrated Resource Planning and Demand Side Management After Federal Endorsement," to the Institute of Public Utilities, Williamsburg, Virginia, December 15, 1992. Presented numerous speeches and training programs regarding nuclear power plant operations, accident analysis, nuclear engineering and related subjects to operators and technical engineering personnel from power plants around the world, 1984-1986. July 1997 ATTACHMENT 2 SUPPORTING WORK PAPERS OPERATING MANUAL - TABLE OF CONTENTS - -------------------------------------------------------------------------------- SECTION - -------------------------------------------------------------------------------- GENERAL INFORMATION NERC History Map of the Regional Councils Operating Committee Organization and Procedures Procedures for Developing and Approving NERC Standards Waivers to Operating Policies NERC System Operator Certification Dispute Resolution Process - -------------------------------------------------------------------------------- OPERATING POLICIES Preamble Introduction Policy 1 - Generation Control and Performance Policy 2 - Transmission Policy 3 - Interchange Policy 4 - System Coordination Policy 5 - Emergency Operations Policy 6 - Operations Planning Policy 7 - Telecommunications Policy 8 - Operator Personnel and Training - -------------------------------------------------------------------------------- TRAINING DOCUMENTS Area Interchange Error Survey Training Document Performance Standard Training Document Frequency Response Characteristic Training Document Inadvertent Interchange Accounting Training Document - -------------------------------------------------------------------------------- DATA Control Areas Control Area Names and Abbreviations Control Area Diagrams Ld Values Bias Settings - -------------------------------------------------------------------------------- REFERENCES Available Transfer Capability Definitions and Determination (not available electronically) System Restoration Monitoring Review Questionnaire Backup Control Centers Demand-Side Management - -------------------------------------------------------------------------------- [MAP OF NERC REGIONS AND CONTROL AREAS Dynamically Controlled Generation As of Jan. 15, 1998] [MAP OF MAIN CONTROL AREA Dynamically Controlled Generation As of Jan. 15, 1998] [MAP OF ECAR CONTROL AREA Dynamically Controlled Generation As of Jan. 15, 1998] [MAP OF MAPP CONTROL AREA Dynamically Controlled Generation As of Jan. 15, 1998] [MAP OF SPP CONTROL AREA Dynamically Controlled Generation As of Jan. 15, 1998] ELECTRICAL WORLD DIRECTORY OF ELECTRIC POWER PRODUCERS 1998 106th Edition Robert G. Schwieger, VP/Editorial Director Ann T. Hayes, Editor Ellen Flynn Giles, Associate Editor PUBLISHED ANNUALLY $395 ILLINOIS 4 Holding Companies HOLD 6 Investor-Owned Utilities IOU 1 Wholesale Generating Utility WGEN 42 Municipal Utility Systems MUNI 29 Rural Electric Cooperative Utilities COOP 1 State System STATE - -------------------------------------------------------------------------------- INVESTOR OWNED SYSTEMS - -------------------------------------------------------------------------------- CENTRAL ILLINOIS LIGHT CO IOU Parent/Owner: Cilcorp Inc. IL 300 Liberty St. Peoria, IL 61602 Phone: 309-672-5271 Fax: 309-677-5590 Service: Electric (Gen/T&D) & Gas (LDC) KEY PERSONNEL Chmn & CEO..................................................Robert O. Viets Contr..................................................Thomas D. Hutchinson Pres & COO..................................................James F. Vergon Sec...............................................................J.G. Sahn Treas......................................................William R. Dodds VP, Distr...................................................Mike J. Bowling VP, Fin & Admin........................................Thomas S. Romanowski VP, HR.....................................................Todd K. Severson VP, Rates, Reg & Leg...........................................Scott Cissel Dir, Corp Commun.................................................G.L. Worth Mgr, Elec Oper..................................................Bill Prebil Mgr, Energy Ctrl & Plan.....................................Larry J. Kazele Sr Proj Eng.................................................Stella Thompson Supv. Distr Proj................................................Ed Schanzle Supv, Elec Meter Shop........................................Tom E. Johnson Supv, Envir Svcs............................................Robert M. Bisha Supv, Gen UG Oper.........................................Jerry M. Moreland Supv, Indust Sales............................................Stan E. Ogden Supv, Methods & Results....................................Don L. Sylvester Supv, Substa Proj..................................................Joe Glad CORPORATE FINANCIAL DATA ($) FY'96 Assets & Debits 1,065,904,110 Elec Plant in Service Generation 511,603,632 Transmission 91,404,763 Distribution 530,940,123 Other 633,525 TOTAL 1,159,303,660 Elec Plant Construction Budget ('97) Generation 6,945,922 Transmission 591,488 Distribution 18,084,275 Other 764,661 TOTAL 26,386,346 Electric Revenue 322,967,541 Electric Operating Expenses Power Production Oper Exp 102,475,419 Power Production Maint Exp 14,994,641 Purchased Power Exp 10,906,845 Transmission Oper Exp 585,277 Transmission Maint Exp 400,547 Transmission Exp TOTAL 985,824 Distribution Oper Exp 6,885,777 Distribution Maint Exp 6,095,231 Distribution Exp TOTAL 12,981,008 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 172,385 7.10 9,936 Commercial 21,013 6.46 74,413 Industrial 177 3.72 Other 14 TOTAL Elec Cust 193,589 Elec (FT/PT) Employees: 913 TOTAL (FT/PT) Employees: 1,377 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 6,018,365 Pwr Purchased (MWh) 377,395 Elec Sales (MWh) 6,395,880 Heat Rate (BTU/kWh) 10,158 Generating Cap (MW) 1,257.3 Summer System Peak (MW) 1,148.0 Winter System Peak (MW) 982.0 Meters (#) 204,937 Distr Line Transformers (#) 65,860 Distr LT Capacity (MVa) 3,139.0 Incoming Substa Capacity (MVa) 3,724.2 Distr (OH) Pole Miles 7,802.6 Disstr (UG) Cir Miles 2,007.7 Distr TOTAL (5/15/25/35 kV) Miles 9,810.3 Trans (OH) Pole Miles 331.3 Trans (UG) Cir Miles 1.6 Trans TOTAL (115/345 kV) Miles 332.8 MAJOR INTERCONNECTIONS Utility (Location) Tie Voltages (kV) Max Tie (MVa) Cent Ill Pub Svc 345 717 Commonwealth Ed 138 178 Commonwealth Ed 345 1,195 Illinois Pwr 138 208 Springfield, City of 138 220 _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC -- DUCK CREEK 309-672-5271 300 Liberty St, Peoria, IL 61602 Plt Mgr...............................................................L.K. Arndt o DUCK CREEK I Unit, ST/COAL, 1976, 441 MW 96 Net Generation 2,260,938 MWh Cap Fact (%): 58.37 ED EDWARDS 309-697-1412 300 Liberty St, Peoria, IL 60602 Plt Mgr.............................................................Craig Gilson o ED EDWARDS 3 Units, ST/COAL, 1960/1972, 780.3 MW 96 Net Generation 3,741,397 MWh Cap Fact (%): 54.59 STERLING AVENUE /\ - -- STERLING AVENUE GT 2 Units, GT/GAS, 1967, 36 MW 96 Net Generation 845 MWh Cap Fact (%): 0.41 SERVICE AREA City/Town: Allentown, Alta, Armington, Atlanta 1,616, Atwood 1,253; Barclay, Bartonville 6,756, Bayview Gardens, Beason, Bellevue 1,491, Bement 1,668, Berlin, Berry, Bradford, Bradfordton, Breckenridge, Brimfield, Broadwell, Buckhart, Burtonview; Camp Grove, Castleton, Catlin 2,173, Cazenovia, Chestnut, Chillicothe 5,959, Clear lake, Cornland, Cramer, Creve Coeur 5,938, Cruger, Curran; Dahinda, Deer Creek, Delavan 1,642, Dillon, Douglas, Duncan, Dunlap; E. Peoria 21,378, Edelstein, Eden, Edwards, Elkhart, Elmore, Elmwood 1,841, Emden, Eureka 4,435; Fairmount, Fairview, Farmingdale, Farmington 2,535; Garrett, Germantown Hills 1,195, Grandview 1,647, Green Valley, Groveland; Hallsville, Hammond, Hanna City 1,205, Hartsburg, Henry 2,591, Heyworth 1,627, Homer 1,264, Hopedale, Hopewell; Ivesdale; Jamaica; Kenney, Kickapoo, Kingston Mines; La Rose, Lacon 1,986, Lake Fork, Latham, Laura, Lawn Ridge, Lawndale, Lincoln 15,418, London Mills, Lowpoint; Manito 1,711, Mapleton, Maquon, Marquette Hts 3,077, McLean, Metamora 2,520, Middlegrove, Midland City, Minier 1,155, Monica, Morton 13,799, Mossville, Mt. Pulaski 1,610; N. Pekin 1,556, Norwood; Oak Hill, Oakwood 1,533, Orchard Mines; Pekin 32,254, Peoria 113,504, Peoria Hts 6,830, Philo 1,028, Pierson Station, Pottstown, Princeville 1,421, Putnam; Randolph, Rapatee, Roanoke 1,910, Rochester 2,676, Rome 2,744; S. Pekin 1,184, Salisbury, San Jose, Sherman 2,080, Sidney, Smithville, Sparland, Spaulding, Speer, Spring Bay, St. Joseph 2,052; Toulon 1,328, Tremont 2,088, Trivoli; Varna; Washburn 1,075, Washington 10,099, West Jersey, West Peoria 6,873, Williamsfield, Williamsville 1,140, Wyoming 1,462; Yates City CENTRAL ILLINOIS PUBLIC SERVICE CO IOU Parent/Owner: Cipsco Inc. IL 607 E. Adams St. Springfield, IL 62739 Phone: 217-523-3600 Fax: 217-525-5825 Internet: www.fgi.net/cipsco/cips.html Service: Electric (Gen/T&D) & Gas (T&D) Has announced plans to merge with Union Electric Co KEY PERSONNEL Pres & CEO............................................Clifford L. Greenwalt Comptr.........................................................L.E. Marlett Treas & Asst Sec............................................Craig D. Nelson VP, Corp Svcs................................................D.R. Patterson VA, Fin & Sec...........................................William A. Koertner VP, Pwr Gen....................................................J.T. Birkett VP, Pwr Supply.................................................G.W. Moorman Dir, HR..........................................................G.B. Fritz Mgr, Cust Expansion & Retention.............................Ray M. Thompson Mgr, Cust Svcs.................................................R.M. Pohlman Mgr, Elec Sys Engrg.............................................T.J. Barker Mgr, Elec T&D..............................................Martin J. Megett Mgr, Energy & Env Svcs......................................Mark S. Cochran Mgr, Gas Dept....................................................J.L. Davis Mgr, Gen Oper..............................................Donald D. Wilson Mgr, Gen Svcs.................................................Mark Harbaugh Mgr, Indst Rel................................................C.M. Baughman Mgr, Info Sys................................................John R. Curtis Mgr, Internal Audit...............................................J.E. Durr Mgr, Mktg Svcs..........................................John W. Hendrickson Mgr, PR............................................................S.R. Poe Mgr, Pub Affairs..................................................Kay Smith Mgr, Purch & Stores..............................................S.A. Moore Mgr, Reg.....................................................Robert J. Mill Mgr, Transm Svcs............................................M.W. Westendorf Reg Mgr.......................................................S.E. Bradshaw Reg Mgr...........................................................R.S. Dial Reg Mgr.........................................................J.D. Herren Reg Mgr, Wabash...............................................E.F. Eversman Div Eng........................................................G.A. Tingley Staff Air Qual Eng......................................Steven C. Whitworth Staff Env Eng................................................John C. Romang Staff Proj Eng...............................................Mark B. Bryant Supv. Air Qual..............................................Steve J. Harvey Supv, Land.............................................Donald L. Richardson Supv, Meter Engrg...............................................Greg Lovett Supv, Wtr & Chem...............................................Mark A. Dyer CORPORATE FINANCIAL DATA ($) FY'96 Assets & Debits 1,835,118,992 Elec Plant in Service Generation 1,138,292,096 Transmission 405,280,330 Distribution 564,879,720 Other 119,642,609 TOTAL 2,228,146,099 Electric Revenue 725,750,245 Electric Operating Expenses Power Production Oper Exp 251,386,422 Power Production Maint Exp 33,417,972 Purchased Power Exp 53,279,057 Transmission Oper Exp 5,412,708 Transmission Maint Exp 4,743,656 Transmission Exp TOTAL 10,156,364 Distribution Oper Exp 9,548,301 Distribution Maint Exp 13,540,846 Distribution Exp TOTAL 23,089,147 Net Inc/Earnings 77,392,917 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 275,683 801 10,408 Commercial 43,386 677 63,640 Other 32 TOTAL Elec Cust. 320,414 Elec (FT/PT) Employees 2,035 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 12,249,225 Pwr Purchased (MWh) 2,658,029 Elec Slaes (MWh) 14,950,071 Heat Rate (BTU/kWh) 10,512 Generating Cap (MW) 3,155.5 Summer System Peak (MW) 1,845.0 Winter System Peak (MW) 1,473.0 Meters (#) 332,721 Distr Line Transformers (#) 110,352 Distr LT Capacity (MVa) 4,482.0 Distr (OH) Pole Miles 9,068.5 Distr (UG) Cir Miles 939.9 Distr TOTAL (5/15/25/35 kv) Miles 10,008.4 Trans (OH) Pole Miles 4,045.9 Trans (UG) Cir Miles 1,430.0 Trans TOTAL (69/138/161/230/345 kV) Miles 5,475.9 MAJOR INTERCONNECTIONS Utility (Location) Tie Voltages (kV) Max Tie (MVa) Cent Ill Light 345 Commonwealth Ed 345 Elec Energy 161 Illinois Pwr 138/230/345 Ind & Mich Elec 345 Iowa Elec L&P 69 Kentucky Util 161 No Indiana Pub Sv 138 Pub Svc Indiana (1) 138/345 So Illinois Pwr Coop 138/161 Springfield, City of 138 Springfield, City of 138 TVA 345 Union Elec 138/161 _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC -- COFFEEN 217-534-2363 PO Box 306, Coffeen, IL 62017 Plt Mgr................................................................R. Kulhan o COFFEEN 2 Units, ST/COAL, 1965/1972, 1005 MW 96 Net Generation 4,017,864 MWh Cap Fact (%): 45.51 GRAND TOWER 618-565-2318 Power Plant Rd, PO Box 286, Grand Tower, IL 62942 Plt Mgr.........................................................Robert S. Butler o GRAND TOWER 2 Units, ST/COAL, 1951/1958, 199 MW 96 Net Generation 743,930 MWh Cap Fact (%) 42.56 HUTSONVILLE 618-563-4303 Plt Mgr...........................................................L.K. Henderson o HUTSONVILLE 2 Units, ST/COAL, 1953/1954, 150 MW 96 Net Generation 764,209 MWh Cap Fact (%) 58.00 /\ - -- HUTSONVILLE IC 1 Unit, IC/OIL, 1968, 3 MW MEREDOSIA 217-584-1173 Supt. Prodn............................................................Rich Kopp Sta. Mgr........................................................Jerry L. Simpson o MEREDOSIA 4 Units, ST/COAL, 1948/1975, 564 MW 96 Net Generation 1,261,305 MWh Cap Fact (%) 25.46 NEWTON 618-783-8402 RR-4 Box 260, Newton, IL 62448 Plt Supt............................................................F.R. Kennedy o NEWTON 2 Units, ST/COAL, 1977/1982, 1235 MW 96 Net Generation 5,461,877 MWh Cap Fact (%) 50.35 SERVICE AREA City/Town Albion 2,116, Anna 4,805, Arcola 2,678, Arthur 2,112, Ashland 1,257, Assumption 1,244, Astoria 1,205, Athens 1,404, Auburn 3,724; Barry 1,391, Beardstown 5,270, Benton 7,216, Blue Mound 1,161, Bridgeport 2,118, Brookport 1,070, Bushnell 3,288; Cambria 1,230, Camp Point 1,230, Canton 13,922, Carbondale 27,033, Carrier Mills 1,991, Carrollton 2,507, Carterville 3,630, Carthage 2,657, Charleston 20,398, Chatsworth 1,186, Chebanse 1,082, Christopher 2,774, Clay City 919, Clifton 1,347, Cobden 1,090, Colchester 1,645, Cuba 1,440; Dallas City 1,037, De Soto 1,500, Divernon 1,178; Edinburg 982, Effingham 11,851, Energy 1,106; Fairbury 3,643, Fisher 1,526, Forrest 1,124; Galatia 983, Gibson City 3,396, Gilman 1,816, Girard 2,164, Glasford 1,115, Grafton 918, Grayville 2,043, Greenfield 1,162, Griggsville 1,218; Hamilton 3,281, Hardin 1,071, Harrisburg 9,289, Havana 3,610, Herrin 10,857, Hoopeston 5,871; Jerseyville 7,382, Johnston City 3,706, Jonesboro 1,728; Kincaid 1,353; Lawrenceville 4,897, Lewistown 2,572, Louisville 1,098, Lovington 1,143; Macomb 19,952, Macon 1,282, Marion 14,545, Martinsville 1,161, Mason City 2,323, Mattoon 18,441, Mendon 854, Meredosia 1,134, Milford 1,512, Mound City 765, Mounds 1,407, Moweaqua 1,785, Mt. Sterling 1,922, Murphysboro 9,176; Nauvoo 1,108, Neoga 1,678, Newman 960, Nokomis 2,534, Norris City 1,341; Oakland 996, Oblong 1,616, Olney 8,664, Onarga 1,281; Palestine 1,619, Pana 5,976, Paris 8,987, Pawnee 2,384, Paxton 4,289, Payson 1,114, Petersburg 2,261, Pittsfield 4,231, Pleasant Hill 1,030; Quincy 39,681; Robinson 6,740, Roodhouse 2,139, Roseville 1,151, Rossville 1,334, Royalton 1,191, Rushville 3,229; Savoy 2,674, Sesser 2,087, Shelbyville 4,943, Sheldon 1,109, St. Elmo 1,473, St. Francisville 851, Sumner 1,083; Taylorville 11,133, Teutopolis 1,417, Toledo 1,199, Tolono 2,605, Tuscola 4,155; Vienna 1,446, Villa Grove 2,734, Virden 3,635, Virginia 1,767; W. Frandfort 8,526, W. Salem 1,042, Warsaw 1,882, Watseka 5,424, Waverly 1,402, White Hall 2,814, Winchester 1,769, Windsor 1,143; Zeigler 1,746 CILCORP INC HOLD 300 Hamilton Blvd Ste 300 Peoria IL 61602 Phone: 309-675-8850 Controls Central Illinois Light Co. KEY PERSONNEL Pres & CEO..................................................Robert O. Viets Contr..................................................Thomas D. Hutchinson Dir, Fin Analysis.........................................Michael D. Austin Dir, Invest Rel................................................Gary Ebeling CIPSCO INC HOLD 607 East Adams St. Springfield, IL 62739 Phone: 217-788-8720 Controls Central Illinois Public Service Co, Electric Energy, Inc (owned jointly with Kentucky Utilities, Illinois Power and Union Electric) KEY PERSONNEL Pres & CEO............................................Clifford L. Greenwalt COMMONWEALTH EDISON CO IOU Parent/Owner: UNICOM Corp. IL 10 South Dearborn St Chicago, IL 60603 Phone: 312-394-4321 Fax: 312-394-4466 Internet: www.ceco.com/ Service: Electric (Gen/T&D) Subsidiaries: Commonwealth Edison Co of Indiana Inc, Hammond IN, Cotter Corp, Lakewood, CO; Edison Development Co, Chicago, IL, Commonwealth Research Corp Inc, Chicago, IL, Com Ed Financing I, Concomber Ltd, Bermuda, Edison Development Canada, Inc, CN, Com Ed Financing I, Chicago, IL KEY PERSONNEL Chmn & CEO................................................James J. O'Connor Asst VP...................................................Arlene A. Juracek Comptr......................................................Roger F. Kovack Dep Genl Counsel..........................................Gerald J. Porento Exec VP....................................................Thomas J. Maiman Exec VP...................................................Robert J. Manning Mgr, Alliances.................................................John T. Long Mgr, Nuc Support.............................................Thomas P Joyce Pres......................................................Samuel K. Skinner Sec.........................................................David A. Scholz Site VP, Braidwood Sta..................................Gene Harold Stanley Site VP, Byron Sta......................................Kenneth L. Graesser Site VP, LaSalle Sta.............................William T. .Subuluski, Jr. Site VP, Quad Cities Sta...............................Edward S. Kraft, Jr. Site VP, Zion Sta........................................John Henry Mueller Sr VP......................................................Donald A. Petkus Sr VP....................................................Michael J. Wallace Treas.....................................................Dennis F. O'Brien V Chmn........................................................Leo F. Mullin VP............................................................J.C. Bukovski VP.........................................................John T. Costello VP.......................................................Louis O. DelGeorge VP........................................................William H. Downey VP...................................................William H. Dunbar, Jr. VP........................................................J. Stanley Graves VP......................................................Thomas J. McCaffrey VP.........................................................J. Stephen Perry VP...........................................................James A. Small VP & Genl Counsel.........................................Pamela B. Strobel VP, Distr Sys..............................................Ernest F. Wayman VP, Empl Rels............................................William C. Roberts VP, Energy Svcs.............................................Paul R. Werther VP, Engrg....................................................John P. Hosmer VP, Fossil Oper.......................................Emerson W. Lacey, Jr. VP, GovtAffairs..............................................Frank M. Clark VP, Mktg.....................................................Jerry L. White VP, Nuc HR...................................................Virginia Brown VP, Nuc Oper...............................................Harold W. Keiser VP, Nuc Support..................................................John Brons VP, Nuc Support.................................................David Sager VP, Purch..................................................T. Oliver Butler VP, T&D Oper..................................................Paul D. McCoy VP, Transm Sys.............................................Linda S. Manning GM, Decommissioning......................................Richard P. Tuelken GM, Nuc Supply............................................Michael D. Lyster Mgr, Bulk Pwr Mktg..........................................Robert E. Tyler Mgr, Fin Reptg...........................................Robert E. Berdelle Mgr, Fuels.................................................Roland L. Kraatz Mgr, IS.....................................................George M. Orlov Mgr, Invs...............................................Richard P. Schwartz Mgr, Mall Engrg..........................................William E. Everson CORPORATE FINANCIAL DATA ($) FY'96 Assets & Debits 24,159,255,020 Elec Plant in Service Generation 17,649,393,402 Transmission 2,584,893,542 Distribution 5,549,578,395 Other 80,375 TOTAL 26,593,087,473 Elec Plant Construction Budget ('97) Generation 420,000,000 Transmission 421,000,000 Other 141,000,000 TOTAL 982,000,000 Electric Revenue 6,934,547,492 Electric Operating Expenses Power Production Oper Exp. 859,099,071 Power Production Maint Exp 136,620,580 Power Production Exp TOTAL 1,343,778,516 Purchased Power Exp 239,436,796 Transmission Oper Exp 25,913,134 Transmission Maint Exp 19,526,573 Transmission Exp TOTAL 45,439,707 Distribution Oper Exp 82,206,866 Distribution Maint Exp 124,931,697 Distribution Exp TOTAL 207,138,563 Net Inc/Earnings 743,368,404 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 3,092,859 11.39 7,213 Commercial 289,312 8.41 86,864 Other 33 TOTAL Elec Cust 3,395,835 TOTAL (FT/PT) Employees 16,681 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 91,195,870 Pwr Purchased (MWh) 7,921,051 Elec Sales (MWh) 99,187,778 Heat Rate (BTU/kWh) 10,692 Generating Cap (MW) 24,996.4 Summer System Peak (MW) 18,916.0 Winter System Peak (MW) 14,015.0 Meters (#) 3,814,792 Distr Line Transformers (#) 558,810 Distr LT Capacity (MVa) 13,130.0 Incoming Substa Capacity (MVa) 82,555.0 Distr (OH) Pole Miles 38,039.0 Distr (UG) Cir Miles 35,598.0 Distr TOTAL (5/15/25/35 kV) Miles 73,637.0 Trans (OH) Pole Miles 5,165.0 Trans (UG) Cir Miles 368.0 Trans TOTAL (345/69/138/345/765/HVDC kV) Miles 5,533.0 MAJOR INTERCONNECTIONS Utility (Location) Tie Voltages (kV) Max Tie (MVa) IPC 34/138/345 Ind Mich Pwr 345/765 Interstate Pwr 138/345 MidAmerican Energy Co/CIPSC 345 No Indiana Pub Svc 138/345 Wisconsin Elec Pwr/CILCO 138/345 Wisconsin P&L 345 _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC -- BLOOM BLOOM GT 4 Units, GT/OIL, 1971, 95 MW 96 Net Generation 2,261 MWh Cap Fact (%) 0.12 BRAIDWOOD 815-458-2801 RR1 Box 84, Braceville, IL 60407-9619 Site VP........................................................Harold G. Stanley Sta Mgr.........................................................Timothy J. Tulon * BRAIDWOOD 2 Units, ST/Nuc, 1987/1988, 2450 MW 96 Net Generation 15,611,178 MWh Cap Fact (%) 72.54 BYRON 815-234-5441 4450 N. German Church Rd Byron, IL 61010-9794 Site VP......................................................Kenneth L. Graesser Sta Mgr...........................................................Kurt L. Kofron * BYRON 2 Units, ST/Nuc, 1985/1987, 2450 MW 96 Net Generation 14,673,099 MWh Cap Fact (%) 68.18 CALUMET /\ - -- CALUMET GT 10 Units, GT/GAS/OIL, 1969/1970, 205 MW 96 Net Generation 8,184 MWh Cap Fact (%) 0.46 COLLINS 815-942-4500 4200 E Pine Bluff Rd, Morris, IL 60450-9558 Plt Mgr......................................................Napoleon M. Terrell o COLLINS 5 Units, ST/GAS/OIL, 1977/1979, 2650 MW 96 Net Generation 1,775,536 MWh Cap Fact (%) 7.63 CRAWFORD 312-247-7272 3501 S Pulaski Rd, Chicago, IL 60623-4987 Plt Mgr...........................................................James M. Nolan o CRAWFORD 2 Units, ST/COAL, 1958/1969, 598 MW 96 Net Generation 1,994,693 MWh Cap Fact (%) 37.97 /\ - -- CRAWFORD GT 12 Units, GT/GAS/OIL, 1968, 208 MW 96 Net Generation 26,609 MWh Cap Fact (%) 0.82 DIXON _ |_| DIXON HY 5 Units, HY, 1925, 3 MW 95 Net Generation 15,494 MWh Cap Fact (%) 58.96 DRESDEN 815-942-2920 6500 N Dresden Rd, Morris, IL 60450-9765 Sta Mgr..........................................................John M. Heffley Site VP.........................................................J. Stephen Perry * DRESDEN 2 Units, ST/Nuc, 1970/1971, 1657 MW 96 Net Generation 5,073,544 MWh Cap Fact (%) 34.86 ELECTRIC JUNCTION /\ - -- ELECTRIC JUNCTION GT 12 Units, GT/GAS, 1970/1971, 228 MW 96 Net Generation 11,175 MWh Cap Fact (%) 0.76 FISK 312-738-4122 1111 W Cermak Rd, Chicago, IL 60608-4594 Plt Mgr...........................................................Karen A. House o FISK 1 Unit, ST/COAL/GAS, 1959, 374 MW 96 Net Generation 902,423 MWh Cap Fact (%) 27.47 /\ - -- FISK GT 6 Units, GT/OIL, 1968, 304 MW 96 Net Generation 27,785 MWh Cap Fact (%) 0.54 /\ - -- FISK IC 5 Units, IC/OIL, 1966, 10 MW JOLIET 815-741-2900 1800 Channahon Rd, Joliet, IL 60436 Plt Mgr.........................................................Bruce A. Renwick o JOLIET 3 Units, ST/COAL/GAS, 1959/1966, 1680 MW 96 Net Generation 6,070,771 MWh Cap Fact (%) 41.14 /\ - -- JOLIET GT 8 Units, GT/GAS/OIL, 1969, 147 MW 96 Net Generation 13,161 MWh Cap Fact (%) 1.29 /\ - -- JOLIET IC 5 Units, IC/OIL, 1967, 10 MW 96 Net Generation 18 MWh Cap Fact (%) 0.02 KINCAID 217-237-4311 PO Box 80, Kincaid, IL 62540-0080 Plt Mgr.........................................................Ronald R. Tanton o KINCAID 2 Units, ST/COAL, 1967/1968, 1319 MW 96 Net Generation 3,300,259 MWh Cap Fact (%) 28.48 LASALLE 2601 N 21st Rd., Marseilles, IL 61341-9757 Sta Mgr...........................................................Fred R. Dacimo Site VP.....................................................William t. Subalusky *LASALLE 2 Units, St/Nuc; 1982/1984' 2341 MW 96 Net Generation 8,883,046 MWh Cap Fact (%) 43.20 LOMBARD /\ - -- LOMBARD GT 3 Units, GT/GAS, 1969, 89 MW 96 Net Generation 4,464 MWh Cap Fact (%) 1.15 POWERTON 309-346-2165 13082 E. Manito Rd, Pekin IL 61554-8587 Plt Mgr..........................................................Thomas O. Hoppe o POWERTON 2 Units ST/COAL, 1972/1975, 1786 MW 96 Net Generation 6,900,426 MWh Cap Fact (%) 43.98 QUAD CITIES 309-654-2241 PO Box 216, Cordova, IL 61242-0216 Site VP.....................................................Edward S. Kraft, Jr. Sta Mgr. L. William Pearce *QUAD CITIES 2 Units, St/Nuc., 1973, 1656, 6 MW Ownership % 75 MIDAMERICAN ENERGY CO %; 25 96 Net Generation 7,296,711 MWh Cap Fact (%) 50.14 SABROOKE /\ - -- SABROOKE GT 7 Units, GT/Oil; 1969/1970, 131 MW 96 Net Generation 9,821 MWh Cap Fact (%) 0.66 WAUKEGAN 10 Greenwood Ave & Lake Michigan, Waukegan, IL 60087-5197 Plt Mgr..........................................................Jerry L. Payton o WAUKEGAN 3 Units, ST/ COAL/GAS, 1952/1962, 803MW 96 Net Generation 3,201,286 MWh Cap Fact (%) 45.39 /\ - -- WAUKEGAN GT 4 Units, GT/OIL, 1968, 152 MW 96 Net Generation 16, 338 MWh Cap Fact (%) 0.91 WILL COUNTY 815-886-1010 529 E. Romeo Rd, Romeoville,IL 60441-1538 Plt Mgr...............................................................Gary Spedl o WILL COUNTY 4 Units, ST/COAL, 1955/1963, 1269 MW 96 Net Generaton 4,317,611 MWh Cap Fact (%) 38.73 ZION 847-746-2084 101 Shiloh Blvd & Lake Michigan, Zion IL 60099-2797 Site VP..........................................................John H. Mueller Sta Mgr........................................................Robert S. Starkey *ZION 2 Units, ST/Nuc; 1973/1974, 2196 MW 96 Net Generation 12,910,457 MWh Cap Fact (%) 66.93 SERVICE AREA Area Blue Island 21,203 City/Town: Addison 32,058; Adeline 141; Algonquin 11,663; Alsip 18,227; Amboy 2,377; Antioch 6,105; Apple River 414; Arlington Hts 75,460; Aroma Park 690; Ashton 1,042; Aurora 99,581; Bannockburn 1,388; Barrington 9,504; Barrington Hills 4,202; Bartlett 19,373; Beach Park 9, 513; Bedford Park 566; Beecher 2,032; Bellwood 20,241, Belvidere 15,958, Bensenville 17,767; Benson 410; Berkeley 5,137; Berwyn 45,426; Bloomingdale 16,614; Bolingbrook 40,483; Bonfield 299; Bourbonnais 13,934; Braceville 581, Bradley 10,792; Braidwood 3,584 Bridgeview 14,402; Broadview 8,713; Brookfield 18,876; Buckingham 340, Bullalo Grove 36,427, Bull Valley 574, Burbank 27,600; Burlington 400; Burnham 3,916, Burr Ridge 7,669; Byron 2,284; Cabery 268; Calumet City 37,840; Calumet Park 8,418; Campus 137; Canon 682, Carbon Hill 362, Carol Stream 31,716, Carpentersville 23,049; Cary 10,043; Cedarville 751; Central City 1,390; Channahon 4,266, Cherry Valley 1,615; Chicago 2,783,726; Chicago Hts 33,072; Chicago Ridge 13,643; Cicero 67,436, Clarendon Hills 6,994, Coal City 3,907, Coleta 154; Compton 343, Cornell 556, Cortland 963, Country Club Hills 15,431; Countryside 5,716; Crest Hill 10,643; Crestwood 10,823; Crete 6,113, Crystal Lake 24,512, Dakota 549; Dana 165; Darien 18,341, Davis 541, Davis Junction 246, De Kalb 34,925; Deer Grove 44, Deer Park 2,887, Deerfield 17,327; Des Plaines 53,223; Diamond 1,077, Dixmoor 3,647; Dixon 15,144, Dolton 23,930, Downers Grove 46,858, Durand 1,100, Dwight 4,230; E Brooklyn 80; E Dundee 2,721, E Hazel Crest 1,510; Earlville 1,435, Elburn 1,275, Elgin 77,010; Elk Grove Village 33,429; Elmhurst 42,029; Elmwood Park 23,206, Elwood 951; Emington 135, Erie 1,572, Essex 482, Evanston 73,233, Evergreen Park 20,874, Flossmoor 8,651; Ford Heights 4,259, Forest Park 14,918, Forest View 743; Forreston 1,361, Fox Lake 7,478, Fox River Grove 3,551, Fox River Valley Gardens 665, Frankfort 7,180, Franklin Grove 968, Franklin Park 18,485, Freeport 25,840, Fulton 3,698, Gardner 1,237, Genoa 3,083, German Valley 480; GiIberts 987, Glen Ellyn 24,944, Glencoe 8,499, Glendale Hts 27,973; Glenview 37,093; Glenwood 9,289; Godley 322, Golf 454; Grand Ridge 560, Grant Park 1,024, Grayslake 7,388, Green Oaks 2,101; Greenwood 240; Gurnee 13,701, Hainesville 134, Hampshire 1,843, Hanover Park 32,895; Harmon 186, Harvard 5,975, Harvey 29,771, Harwood Hts 7,680; Hawthorne Woods 4,423, Hazel Crest 13,334, Hebron 809, Herscher 1,218, Hickory Hills 13,021, Highland Park 30,575, Highwood 5,331, Hillside 7,672, Hinckley 1,682; Hinsdale 16,029; Hodgkins 1,963, Hoffman Est 46,561, Holiday Hills 801, Hometown 4,769, Homewood 19,278; Hooppole 196, Hopkins Park 601, Huntley 2,453, Indian Creek 247, Indiana Head Park 3,503, Inverness 6,503; Irwin 50, Island Lake 4,449, Itasca 6,947, Johnsburg 1,529, Joliet 76,836, Juslice 77,137, Kangley 250, Kankakee 27,575; Kempton 219, Kenilworth 2,402, Kildeer 2,257, Kingston 562, Kinsman 112, Kirkland 1,011, La Grange 15,362, La Grange Park 12,861, Lake Barrington 3,855, Lake Bluff 5,513, Lake Forest 17,836; Lake Villa 2857, Lake Zurich 14,947, Lake-In-The-Hills 5,866, Lakemoor 1,322, Lakewood 1,609; Lanark 1382, Lansing 28,086, Leaf River 546, Lee 319, Leland 862, Lemont 7,348, Lena 2,605, Leonore 134, Libertyville 19,174, Lily Lake 418, Lincolnshire 4,931, Lincolnwood 11,365, Lindenhurst 8,038, Lisbon 216, Lisle 19,512, Lockport 9,401, Lombard 39,408, Long Grove 4,740, Long Point 208, Lostant 510, Loves Park 15,462, Lyndon 615, Lynwood 6,535, Lyons 9,828, Machesney Park 19,033, Malta 865, Manhattan 2,059, Manteno 3,488, Maple Park 641, Marengo 4,168, Markham 13,136, Matteson 11,378, Maywood 27,139, Mazon 764, McCook 235, McCullom Lake 1,033, McHenry , 16, 177, Melrose Park 20,859, Mendota 7,018,Merrionette Park 2,065, Mettawa 348, Midlothian 14,372, 2,919; Mt Prospect 53,170, Mundelein 21,215, N Aurora 5,940, N Barrington 1,787; N Chicago 34,978, N Riverside 6,005, Nelson 200; New Lenox 9,627, New Millford 463, Niles 28,284, Nora 162; Norridge 14,459, Northbrook 32,308, Northfield 4,635; Northlake 12,505; Oak Brook 9,178, Oak Forest 26,203, Oak Lawn 56,182; Oak Park 53,648, Oakbrook Terrace 1,907; Oakwood Hills 1,498, Odell 1,030, Ohio 426, Old Mill Creek 73, Olympia Fields 4,248; Orangeville 451, 0regon 3,891; Orland Hills 5,510; Orland Park 35,720, Oswego 3,876; Palatine 39,253; Palos Hills 17,803, Palos Hts 11,478; Palos Park 4,199; Park City 4,677, Park Forest 24,656; Park Ridge, 36,175, Paw Paw 791; Pearl City 670, Pecatonica 1,760; Peotone 2,941; Phiienir 2,217, Pingree Grove 138, Plainfield 4,557, Plano 5,104; Polo 2,514, Pontiac 11,428; Poplar Grove 743, Posen 4,226, Prairie Grove 654, Prophetstown 1,749, Prospect Hts 15,239; Ransom 438, Reddick 208, Richmond 1,106, Richton Park 10,523; Ridott 156, River Forest 11,669; River Grove 9,961; Riverdale 13,671, Riverside 8,114, Riverwoods 2,868, Robbins 7,498, Rock City 286, Rock Falls 9,654, Rockdale 1,709; Rockford 139,426, Rolling Meadows 22,591, Romeoville 14,014, Roscoe 2,079, Roselle 20,819, Rosemont 3,995; Round Lake 3,550, Round Lake Bch 16,434, Round Lake Hts 1,251; Round Lake Park 4,045; Rut1and 391, S Barrington 2,931; S Chicago Hts 3,597; S Elgin 7,474, S Holland 22,105, S Wilmington 698, Sandwich 5,567, Sauk Village 9,926, Saunemin 399, Scales Mound 388, Schaumburg 68,586, Schiller Park 11,189, Seneca 1,878, Shabbona 897, Shannon 887; Shorewood 6,264; Skokie 59,432, Sleepy Hollow 3,241, Somonauk 1,263; Spring Grove 1,066, St Anne 1,153, Steger 8,584, Sterling 15,132, Steward 282, Stickney 5,678, Stillman Valley 848; Stockton 1,871, Stone Park 4,383, Streamwood 30,987; Streator 14,121, Sublette 394; Sugar Grove 2,005, Summit 9,971; Sun River Terrace 532, Sycamore 9,708, Symerton 110, Tampico 833, Third Lake 1,248, Thornton 2,778, Tinley Park 37,121, To1uca 1,315, Tonica 715, Tower Lakes 1,333, Trout Valley 612, Union 542, Union Hill 37, University Park 6,204, Vernon Hills 15,319; Verona 242, Villa Park 22,253, Virgil 249; Volo 253; W Brooklyn 164, W Chicago 14,796, W Dundee 3,728, Wadsworth 1,826, Walnut 1,463, Warren 1,550, Warrenville 11,333, Waterman 1,074, Wauconda 6,294, Waukegan 69,392, Wayne 1,541, Wenona 950, Westchester 17,301, Western Spgs 11,984, Westmont 21,228, Wheaton 51,464, Wheeling 29,911, Willow Spgs 4,509, Willowbrook 8,598; Wilmette 26,690, Wilmington 4,743, Winfield 7,096, Winnebago 1,840, Winslow 317, Winthrop Harbor 6,240, Wonder Lake 1,024, Wood Oale 12,425, Woodridge 26,256, Woodstock 14,353; Worth 11,208, Yorkville 3,925, Zion 19,775 COMMONWEALTH EDISON CO OF INDIANA IOU Parent/Owner UNICOM Corp. IL PO BOX 767 One First National Plaza Chicago, IL 60690-0767 Phone: 312-394-4321 Internet: www.ceco.com/ucm/info/comed.html Service Electric (G&T) Cross Reference IL IN KEY PERSONNEL Pres Emerson W. Lacey, Jr. Auditor & Asst Sec Thomas M Panfil CORPORATE FINANCIAL DATA ($) FY '96 Assets & Debits 103,485,727 Elec Plant in Service General 174,735,560 Transmission 25,201,806 TOTAL 201,504,726 Electric Revenue 94,431,506 Electric Operating Expenses Power Production Oper Exp 61,730,901 Power Production Mant exp 10,679,004 Power Production Exp. TOTAL 72,409,905 Transmission Oper Exp 239,443 Transmission Mant Exp 107,263 Transmission Exp TOTAL 36,706 Net Inc/Earnings 5,990,768 CUSTOMER/EMPLOYER DATA Electric Customers Total Elec Cust 1 TOTAL (FT/PT) Employees 164 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 1,851,957 Elec Sales (MWh) 1,851,957 Heat Rate (BTU/kWh) 10,467 Generating Cap (MW) 614 0 Summer System peak (MW) 444 0 Incoming Substa Capacity (MVa) 1,200 0 _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC STATE LINE -- 219-659-0036 PO BOX 17589, Chicago, IL 60617-0589 Plt Mgr..........................................................Warren E. Vahle o STATE LINE 2 Units, ST/COAL, 1955/1962 614 MW 96 Net Generation 1,851,957 MWh Cap Fact (%) 34 34 ELECTRIC ENERGY INC. WGEN Parent/owner: Copsco Inc. M. P.O. Box 165 Joppa, IL 62953 Phone: 618-543-7531 Fax: 618-543-7420 Service: Electric (Gen/T&D) Owned jointly by Central Illinois Public Service Co., Kentucky Utilities Co., Illinois Power Co., Union Electric Co. Subsidiaries Joppa & Eastern Railroad Co., Joppa, IL, Met south Inc. Joppa, IL KEY PERSONNEL Pres..........................................................R. Alan Kelly Sec. & Treas. Actg Svcs.......................................James M. Helm VP.........................................................Robert L. Powers Asst Supt. Oper............................................Stephen v. Wolfe Envir Eng.......................................................Rick Meyers Envir Eng......................................................Bruce Parker Supv. Empl. Ref..................................................D. Baggett Supv. Engrg.....................................................W.L. Carter Supv. Engrg.....................................................Mark Curtis CORPORATE FINANCIAL DATA ($) FY'96 Assets & Debits 160,280,952 Elec Plant in Service General 326,972,434 Transmission 15,822,739 Distribution 1,652 Other 56,668 TOTAL 343,905,842 Electric Revenue 223,017,518 Electric Operating Expenses Power Production Oper Exp 85,942,318 Power Production Mant Exp 16,790,651 Purchase Power Exp. 61,387,447 Transmission Oper Exp 993,714 Transmission Mant Exp 319,279 Transmission Exp TOTAL 1,312,993 Distribution Oper Exp. 16,165 Net Inc/Earnings 12,188,346 CUSTOMER/EMPLOYER DATA Electric Customers Other 4 Total Elec Cust 5 TOTAL (FT/PT) Employees 305 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 7,875,468 Pwr Purchased (MWh) 3,948,268 Elec Sales (MWh) 11,823,736 Heat Rate (BTU/kWh) 10,307 Generating Cap (MW) 1,100.0 Summer System Peak (MW) 1,513.0 Winter System Peak (MW) 1,667.0 Trans (OJ) (161 KW) Pole Miles 52.0 MAJOR INTERCONNECTIONS Utility (Location) Tie Voltages (kV) Max Tie (MVa) Central Ill Pub Svc 161 920 Kentucky Util 161 335 TVA 161 1,752 Union Elec 161 323 _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC JOPPA -- 619-543-7531 P.O. Box 165, Joppa, IL 62953-0165 Plt Mgr.........................................................William Sheppard o JOPPA 6 Units, ST/COAL, 1951/1955, 1100 MW 96 Net Generation 7,875, 488 MWh Cap Fact (%) 8151 ILLINOIS POWER CO IOU Parent/Owner: Illinova Corp. IL PO Box 511 500 south 27th St Decatur, IL 62525-1805 Phone: 217-424-6600 Fax: 217-424-6978 Internet: www.Illinova.com/illpower/illpow.html Service: Electric (Gen/T&D) & Gas (LDC) Subsidiaries IP Gas Supply Co., Decatur, IL., Illinois Power Fuel CO., Decatur, IL, Electric Energy Inc., Joppa, IL (held jointly with CIPSCO, Kentucy Utilities and Union Electric) KEY PERSONNEL Chmn, Pres & CEO..............................................Larry D. Haab Asst Treas......................................................D. Mortland Comptr...................................................Cynthia G. Steward Exec VP..........................................................C.W. Wells Sr VP............................................................D.W. Butts Sr VP..........................................................John G. Cook Sr VP..........................................................Paul L. Lang Sr VP & CFO............................................Larry F. Attenbaumer Treas........................................................Eric B. Weekes VP..........................................................Wilfred Connell VP....................................................Richard W. Elmer, Jr. VP.......................................................Robert D. Reynolds VP Genl Counsel & Corp Sec............................Leah Manning Stetzner VP, Public Affairs..........................................Rodney A. Smith CORPORATE FINANCIAL DATA ($) FY'96 Assets & Debits 6,033,501,545 Elec Plant in Service General 4,400,084,805 Transmission 321,600,153 Distribution 1,044,430,435 Other 55,298,519 TOTAL 6,097,515,381 Electric Revenue 1,340,496,274 Electric Operating Expenses Power Production Oper Exp 238,295,818 Power Production Mant Exp 27,548,963 Purchase Power Exp. TOTAL 128,242,354 Purchase Power Exp. 65,206,354 Transmission Oper Exp 3,281,294 Transmission Mant Exp 10,403,429 Transmission Exp TOTAL 13,684,723 Distribution Oper Exp. 12,618,098 Distribution Main Exp. 23,356,542 Distribution Exp TOTAL 40,974,640 Net Inc/Earnings 228,617,611 CUSTOMER/EMPLOYER DATA Electric Customers Avg. Rate Avg Use Residential 495,855 1010 9.645 Commercial 56,792 816 68,562 Other 48 TOTAL Elec Cust. 557,686 Elec (FT/PT) Employees: 3,114 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 20,848,007 Pwr Purchased (MWh) 3,361,810 Elec Sales (MWh) 24,209,817 Generating Cap (MW) 4,784.4 Summer System Peak (MW) 3,453.0 Winter System Peak (MW) 2,659.0 Meters (#): 616,590 Distr Line Transformers (#) 192,956 Distr LT Capacity (MVa) 8,949.0 Incoming Substa Capacity (MVa) 200.0 Distr (OH) Pole Miles 18,963.0 Distr (UG) Cir Miles 2010.0 Distr TOTAL (5/15/25/35 kV) Miles 20,973.0 Trans (OH) (69/138/230/345 kV) Pole Miles 2,829.0 MAJOR INTERCONNECTIONS Utility (Location) Tie Voltages (kV) Max Tie (MVa) Central Ill Light 69/138 Central Ill Pub Svc 345/69/138/345 Commonwealth Ed 345/138/345 Elec Energy 161 Ind. Mic Pwr 345 Kentucky Util 161 MidAmerican Energy 138 So Illinois Pwr Coop 138 Springfield (IL) City of 69/138 TVA 345 Union Elec 345/69/138/230/345 _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC -- BALDWIN 618-785-2294 P.O. Box 146, Baldwin, IL 62217 Plt Mgr.......................................................Keith A. McFarland o BALDWIN 3 Units, ST/COAL/TIRE 1970/1975, 1892 05 MW 96 Net Gneration 10,603,030 MWh Cap Fact (%) 63 80 CLINTON 217-935-8881 PO Box 678, Clinton , IL 61727 Mgr, Clinton Pwr Sta........................................Roger W. Morgenstern Contr...........................................................Elmner R. Turner * CLINTON 1 Unit, ST/Nuc: 1987, 985 MW Ownership %: 86.79 SOYLAND POWER COOP % 1321 96 Net Generation 5,288,900 MWh Cap Fact (%) 61 13 HAVANA 15260 State Rte 78, Havana, IL 62644 Plt Mgr......................................................Kenneth B. Pollmann o HAVANA 6 Units, ST/COAL, 1947/1978, 718 48 MW 96 Net Generation: 1,575,852 MWh Cap Fact (%) 24.97 HENNEPIN 815-339-9200 RR 1 Box 200AA, Hennepin, IL 61327-9737 Plt Mgr.........................................................William M. Clark o HENNEPIN 2 Units, ST/COAL, 1953/1959, 306 25 MW 96 Net Generation 1,726,632 MWh Cap Fact (%) 64 18 OGLESBY OGLESBY GTAS 4 Units, GT/GAS, 1970, 95.2 MW 95 Net Generation, 1,431 MWh Cap Fact (%) 0 17 STALLINGS STALLINGS gt 4 Units, GT/GAS, 1970, 95 2 MW 95 Net Generation, 1,431 MWh Cap Fact (%) 017 VERMILION P.O. Box 250, Oakwood, IL 61858 Plt Mgr......................................................Kenneth B. Pollmann o VERMILION 2 Units, ST/GAS/COAL 1955/1956 182 3 MW 96 Net Generation, 96,472 MWh Cap Fact (%) 540 VERMILION GT 1 Unit, GT/OIL, 1967, 15 MW 95 Net Generation 13 MWh Cap Fact (%) 0 01 WOOD RIVER (IL) 618-462-9251 1 Chessen La, Alton, IL 62002-2048 Mgr................................................................Phil E. Ellis Mgr..............................................................I M Muehlenkamp Plt Mgr................................................................S E Rasor Mgr....................................................................C G Smith o WOOD RIVER (IL) 5 Units, ST/COAL/GAS, 1949/1964, 650 1 MW 96 Net Generation, 2,276,697 MWh Cap Fact (%) 3987 SERVICE AREA City/Town Abingdon 4,210, Aledo 3,881; Alexis 1,076, Atkinson 1,138, Avon 1,019, Beckemeyer 1,119, Belleville 42,150, Benld 1,638, Bethalto 8,630; Bloomington 51,972; Brighton 2,364, Brooklyn 1,233, bunker Hill 1,700, Cahokia 17,550, Cambridge 2,217, Carlinville 5,439, Caseyville 4,308; Central City 1,505; Centralia 15,126, Centerville 7,489, Cerro Gordo 1,553; Champaign 63,502, Chenoa 1,847; Chester 8,027; Chrisman 1,413, Clinton 8,014; Collinsville 22,446; Columbia 5,524; Coulterville 1,118, Danville 33,828; De Pue 1,873, Decatur 83,885; DuQuoin 6,594, Dupo 3,039; E alton 7,123, Edwardsville 14,579, El Paso 2,676, Eldorado 5,198; Fairview Hts 14,351; Farmer city 2,252, Forsyth 1,072, Freeburg 2,989, Galesburg 33,530; Galva 3,185; Georgetown 4,220; Germantown 1,191; Gillespie 3,740; Glen Carbon 7,731, Granite City 32,862, Granville 1,537, Greenville 5,271, Gridley 1,246; Harristown 1,456; Hegeler 1,595; Hillsboro 4,408, Illiopolis 1,118; Jacksonville 20,284, Kewanee 12,969, Kirkwood 1,008; Knoxville 3,432, La Harpe 1,471; La Salle 10,347, LeRoy 2,870; Lebanon 3,245, Lexington 1,806; Litchfield 7,204; Mackinaw 1,354; Madison 4,629; Mahomet 3,103, Marissa 2,568; Maroa 1,760; Marseilles 4,766; Maryville 1,937, Millstadt 2,736, Monmouth 9,489, Monticello 4,573, Morrisonvile 1,208; Mt Olive 2,357; Mt Vernon 16,995, Mt Zion 4,563, N Utica 1,067, Nashville 3,186; New Athens 1,937, New Baden 2,476, Normal 40,023, O'Fallon 16,073, Odin 1,285, Okawville 1,337; Oquawka 1,533, Ottawa 18,166, Percy 1,053, Peru 9,302, Pinckneyville 3,319, Pontoon Bch 3,336; Princeton 7,342, Ramsey 1,058; Ridge Farm 1,096, Ridgway 1,245; Roxana 1,587; S Jacksonville 3,382; S Roxana 2,286, Salem 7,813, Sandoval 1,734, Savoy 2,126, Shawneetown 1,841, Sheffield 1,130, Shiloh 2,655, Smithton 1,447; Sparta 4,957, Spring Valley 5,822; Staunton 4,744, Steeleville 2,240; Swansea 8,201, Thomasboro 1,242, Tilden 1,025, tilton 2,405, Trenton 2,504, Troy 6,046; Urbana 35,978, Vandalia 5,338; Venice 3,480, Viola 1,144, Wamac 1,665, Warrensburg 1,372, Westville 3,573, Witt 1,205, Wood River 12,449, Wyanet 1,069 Total Population Served (Elec) 1,265,000, Total Population Served (Gas) 920,000 ILLINOVA CORP HOLD 500 South 27th St Decatur, IL 62525-1805 Phone: 217-362-7443 Internet: www.illinova.com Subsidiaries Illinois Power Co, Illinova Generating Co, Illinova Power Marketing Inc, Illinova Energy Partners KEY PERSONNEL Chmn, Pres & CEO...............................................Larry D Haab CFO, Treas & Contr......................................Larry F Altenbaumer VP, Genl Counsel & Corp Sec...........................Leah Manning Stetzner CORPORATE FINANCIAL DATA ($) FY'95 Elec Plant in Service Generation................................................4,352,900,000 Transmission................................................326,300,000 Distribution................................................992,800,000 TOTAL.....................................................5,672,000,000 Elec Plant Construction Budget ('96) Generation...................................................53,000,000 Transmission.................................................10,000,000 Distribution.................................................65,000,000 Other........................................................35,000,000 TOTAL.......................................................163,000,000 Electric Revenue...................................................1,368,900,000 Net Inc/Earnings.....................................................148,100,000 INDIANA MICHIGAN POWER CO IOU Parent/Owner: American Electric Power Co In OH One Summit Square PO Box 60 Fort Wayne, IN 46801 Phone: 219-425-2111 Fax: 219-425-2112 Service: Electric (Gen/T&D) Michigan Power Co merged into Indiana Michigan Power Co on 2/29/92 Owns Blackhawk Coal Co, Price river Coal Co See listing in IN for pertinent information INTERSTATE POWER CO IOU 1000 Main St PO Box 769 Dubuque, IA 52004-0769 Phone: 319-582-5421 Fax: 319-557-2202 Internet: www.ghpc.orgintersta.html Service: Electric (Gen/T&D) & Gas (T&D) Subsidiary IPC Development Co, Dubuque, IA See listing in IA for pertinent information SERVICE AREA City/Town East Dubuque 1,914, Galena 3,647, Mt Carroll 1,726, Savanna 3,819 IOWA-ILLINOIS GAS AND ELECTRIC CO IOU 106 E Second St PO Box 4350 Davenport, IA 52808 Phone: 319-333-8009 Fax: 319-333-8229 Service: Electric (Gen/T&D) & Gas (LDC) Iowa-Illinois Gas & Electric Co and Midwest Power Systems merged to create MidAmerican Energy Subsidiary InterCoast Energy Co, Davenport, IA Iowa Illinois Gas & Electric and Midwest Power Systems merged to become MidAmerican Energy See listing in IA for pertinent information MIDAMERICAN ENERGY CO IOU PO Box 657 666 Grand Ave Des Moines, IA 50303-0657 Phone: 515-281-4300 Internet: www.midamerican.com Service: Electric (Gen/T&D) & Gas (LDC) Distr Line Transformers (B) 950 Distr LT Capacity (MVa) 53.3 Incoming Substa Capacity (MVa) 56.0 Distr (OH) Pole Miles 73.0 Distr (UG) Cir Miles 10.0 Distr TOTAL (5/15/35 kV) Miles 83.0 Trans (OH) (34 kV) Pole Miles 19.0 PURCHASED POWER SOURCES(S) Illinois Munic Elec Agcy _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC PERU (IL) 815-223-0044 1415 Water St, PO Box 299, Peru, IL 61354 Plt Supt..............................................................Joe Prazen o PERU (IL) 1 Unit, ST/GAS, 1960, 7.5 MW PERU (IL) GT 1 Unit, GT/OIL, 1968, 12 MW PERU (IL) IC 1 Unit, IC/OIL, 1973, 6.3 MW STARVED ROCK o STARVED ROCK 4 Units, HY, 1996, 7.6 MW SERVICE AREA City/Town Peru 9,302 PRINCETON (IL) MUNICIPAL UTILITIES DEPT MUNI 2 S main St Princeton, IL 61356 Phone: 815-872-5551 Fax: 815-875-6235 Service: Electric (Gen/T&D) KEY PERSONNEL Supt, Elec Distr................................................Terry Maloy CORPORATE FINANCIAL DATA ($) FY '95 Elec Plant in Service Generation 4,113,150 Distribution 419,571 Other 987,154 TOTAL 5,519,875 Electric Revenue 6,895,075 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 3,393 800 7,969 Commercial 627 Industrial 78 TOTAL Elec Cust 4,098 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 3,632 Pwr Purchased (MWh) 107,998 Elec Sales (MWh) 95,620 Generating Cap (MW) 38.0 Summer System Peak (MW) 26.2 Winter System Peak (MW) 17.2 Distr LT Capacity (MVa) 50.0 Incoming Substa Capacity (MVa) 26.0 Distr (OH) (5/15 kV) Pole Miles 28.0 _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC PRINCETON (IL) PRINCETON (IL) IC 8 Units, IC/GAS/OIL, 1953/1976, 37 99 MW SERVICE AREA City/Town: Princeton 7,200 RANTOUL LIGHT & POWER DEPT MUNI PO Box 38 200 West Grove St Rantoul, IL 61866 Phone: 217-892-2178 Fax: 217-892-8710 Service: Electric (Gen/T&D) KEY PERSONNEL Supt...........................................................Herb Bennett Mgr, Commun.....................................................Ken Modglin Elec Engr.......................................................Dennis Hill Supt, T&D......................................................Bill Magrini CORPORATE FINANCIAL DATA ($) FY '95 Electric Revenue 8,904,000 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers (g/kWh) (kWh/yr) Residential 4,910 700 7,680 Commercial 437 Industrial 74 TOTAL Elec Cust 5,421 TOTAL (FT/PT) Employees 30 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 14 Pwr Purchased (MWh) 166,842 Elec Sales (MWh) 155,841 Generating Cap (MW) 17.0 Summer System Peak (MW) 35.5 Winter System Peak (MW) 22.8 Incoming Substa Capacity (MVa) 87.0 Distr (OH) Pole Miles 75.0 Distr (UG) Cir Miles 40.0 Distr TOTAL (5/15 kV) Miles 115.0 Trans (OH) (69 kV) Pole Miles 9.0 PURCHASED POWER SOURCE(S) Illinois Munic Elec Agcy _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC RANTOUL -- RANTOUL, IC 8 Units, IC/OIL, 1951/1967, 17 MW SERVICE AREA City/Town Rantoul 17,500 RED BUD MUNICIPAL POWER PLANT MUNI 525 Power St Red Bud, IL 62278 Phone: 618-282-3339 Fax: 618-282-3898 Service: Electric (Gen/T&D) KEY PERSONNEL City Supt.....................................................David Diewald CORPORATE FINANCIAL DATA ($) FY'95 Electric Revenue 2,108,000 CORPORATE/EMPLOYEE DATA Electric Avg Rate Avg Use Customers (g/kWh) (kWh/yr) Residential 1,330 6.01 10,098 Commercial 260 Industrial 1 TOTAL Elec Cust 1,591 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 71 Pwr Purchased (MWh) 37,670 Elec Sales (MWh) 34,925 Generating Cap (MW) 11.0 Summer System Peak (MW) 8.7 Winter System Peak (MW) 7.8 Incoming Substa Capacity (WVa) 10.0 Distr (OH) Pole Miles 28.2 Distr (UG) Cir Miles 11.0 Distr TOTAL (5/15 kV) Miles 39.2 Trans (OH) (69 kV) Pole Miles 5.0 PURCHASED POWER SOURCE(S) So Illinois Pwr Coop _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC RED BUD RED BUD IC 6 Units, IC/G/O/OIL, 19948/1973, 11 016 MW SERVICE AREA City/Town Red Bud 3,007 RIVERTON (IL) ELECTRIC LIGHT MUNI 313 East Jefferson St Riverton, IL 62561 Phone: 217-629-9122 Service: Electric (Distr) KEY PERSONNEL Supt.........................................................Michael Brewer CORPORATE FINANCIAL DATA ($) FY '95 Electric Revenue 1,140,000 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 1,437 700 8,164 Commercial 25 TOTAL Elec Cust 1,462 SYSTEM DESIGN/PERFORMANCE Pwr Purchased (MWh) 16,464 Elec Sales (MWh) 16,040 Summer System Peak (MW) 5.4 Winter System Peak (MW) 2.4 PURCHASED POWER SOURCE(S) Cen Illinois Lt SERVICE AREA City/Town: Riverton 2,783 ROCHELLE MUNICIPAL UTILITIES MUNI 333 Lincoln Hwy Rochell, IL 61068 Phone: 815-562-4155 Fax: 815-562-5861 Service: Electric (Gen/T&D) KEY PERSONNEL GM......................................................Ray D. Schwartz, PE Ch Fin Mgr........................................Kevin G. Storl. CPA, CGFM Eng............................................................Robert Rogde Mgmt Analyst...................................................Donna Kenyon Supt, T&D....................................................Joe Orlikowski Supv, Gen.......................................................Don Schultz CORPORATE FINANCIAL DATA ($) FY '96 Assets & Debts 32,100,402 Elec Plant in Service Generation 17,033,405 Transmission 1,687,376 Distribution 11,187,119 Other 1,733,148 TOTAL: 31,641,048 Elec Plant Construction Budget ('97) Generation 255,800 Transmission 3,500,000 Distribution 6,256,000 TOTAL 10,011,800 Electric Revenue Electric Operating Expenses Power Production Oper Exp 2,275,345 Power Production Maint Exp 517,602 Power Production Exp TOTAL 2,792,947 Purchased Power Exp 5,631,039 Transmission Oper Exp 2,029 Distribution Oper Exp 285,038 Distribution Maint Exp 198,198 Distribution Exp TOTAL 483,236 Net Inc/Earnings 2,091,835 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 5,443 8.47 8,117 Commercial 747 Industrial 21 Other 4 TOTAL Elec Cust 6,215 TOTAL (FT/P) Employees 43 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) (80.7) Pwr Purchased (MWh) 180,055 Elec Sales (MWh) 167,138 Generating Cap (MW) 36.0 Summer System Peak (MW) 38.0 Winter System Peak (MW) 28.4 Meters (B) 6,600 Distr Line Transformers (B) 3,000 Distr LT Capacity (MVa) 75.0 Incoming Substa Capacity (MVa) 45.0 Distr (OH) Pole Miles 165.0 Distr (UG) Cir Miles 15.0 Distr TOTAL (5/15 kV) Miles 180.0 Trans (OH) (138 kV) Pole Miles 6.0 MAJOR INTERCONNECTIONS Utility (Location) Tie Voltages (kV) Max Tie (MVa) Commonwealth Edison 138 135 PURCHASED POWER SOURCE(S) Commonwealth Edison _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC NORTH NINTH STREET -- NORTH NINTH STREET IC 10 Units, IC/G/O/OIL, 1936/1989, 19.5 MW ROCHELLE 815-562-4003 333 Lincoln Hwy, Rochelle, IL 61068 o ROCHELLE 1 Unit, ST/GAS/COAL, 1961, 11.5 MW 96 Net Generation (1,768) MWh SOUTH MAIN STREET SOUTH MAIN STREET IC 2 Units, IC/GAS/OIL, 1967, 5 MW SERVICE AREA City/Town Creston 500, Hillcrest 800, Rochelle 8,850 ROCK FALLS ELECTRIC DEPT MUNI 205 East Third St Rock Falls, IL 61071 Phone: 815-622-1145 Fax: 815-622-1113 Service: Electric (Gen/T&D) KEY PERSONNEL Mgr........................................................Robert O'Donnell CORPORATE FINANCIAL DATA ($) FY '96 Elec Plant in Service Generation 7,000,000 Transmission 1,000,000 Distribution 21,000,000 TOTAL 29,000,000 Elec Plant Construction Budget ('97) Distribution 1,500,000 Electric Revenue 6,500,000 Electric Operating Expenses Purchased Power Exp 3,357,993 Distribution Oper Exp 100,000 Distribution Maint Exp 70,000 Distribution Exp TOTAL 170,000 Net Inc/Earnings 6,554,533 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers (g/kWh) (kWh/yr) Residential 4,547 8.00 7,200 Commercial 448 Industrial 40 Other 23 TOTAL Elec Cust 5,058 TOTAL (FT/PT) Employees 12 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 10 Pwr Purchased (MWh) 75 Elec Sales (MWh) 77 Generating Cap (MW) 2.0 Summer System Peak (MW) 19.3 Winter System Peak (MW) 12.8 Distr Line Transformers (B) 960 Distr LT Capacity (MVa) 50.0 Incoming Substa Capacity (MVa) 40.0 Distr (OH) Pole Miles 131.0 Distr (UG) Cir Miles 800.0 Distr TOTAL Miles 931.0 Trans (OH) Pole Miles 12.0 Trans (UG) Cir Miles 10.0 Trans TOTAL (34.5 kV) Miles 22.0 MAJOR INTERCONNECTIONS Utility (Location) Tie Voltages (kV) Max Tie (MVa) Commonwealth Edison Co 34.5 40 PURCHASED POWER SOURCE(S) Illinois Munic Elec Agcy SERVICE AREA City/Town Rock Falls/Coloma Twp 10,000 ROODHOUSE MUNICIPAL POWER & LIGHT MUNI City Hall Roodhouse, IL 62082 Phone: 217-589-4635 Service: Electric (Distr) KEY PERSONNEL Supt..........................................................Dannie Monroe CORPORATE FINANCIAL DATA ($) FY '95 Electric Revenue 920,000 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) TOTAL Elec Cust 1,041 SYSTEM DESIGN/PERFORMANCE Pwr Purchased (MWh) 12,755 Elec Sales (MWh) 11,249 Summer System Peak (MW) 3.2 Winter System Peak (MW) 2.0 SERVICE AREA City/Town Roodhouse 2,437 Springfield (IL) Water Light & Power Dept MUNI 201 Municipal Bldg Springfield, IL 62757 Phone: 217-789-2000 Fax: 217-789-2136 Internet: kohlrusk@cencom.net Service: Electric (Gen/T%D) KEY PERSONNEL GM.......................................................Lynn A. Frasco, PE Dir Fin Alan R. Monson Dir,HR........................................................Gina Marshall Mgr, Commun Office...............................................Lois Wolff Mgr Elec Div...............................................James J. Rechner Mgr, Envir Health & Safety...................................S David Farris Mgr, Inventory..................................................Dave Barker Mgr, Util Engrg Proj.............................................C Saladino Econ Planner..................................................Shawn McBride Fin Plan Coord..................................................Craig Burns Fiscal Offcr...................................................Sara E Graue Reg Affairs Mgmt..........................................Willaim A. Murray Supt, Distr & Genl Svcs........................................George Perko Supt, Elec Maint............................................Mike Hohenstein Supt, Gen, Elec T&D..............................................J Requarth Supt, Interconnected Oper.........................................L Gladish Supt, Sys Oper.....................................................M Hickey Supv, Plan...................................................Karl E Kohlrus CORPORATE FINANCIAL DATA ($) FY '96 Assets & Debits 309,546,441 Elec Plant in Service Generation 190,118,784 Transmission 38,363,695 Distribution 126,264,734 Other 32,061,091 TOTAL 386,808,304 Elec Plant Construction Budget ('97) Generation 16,628,111 Transmission 6,264,051 Distribution 6,649,051 Other 6,022,795 TOTAL 35,564,008 Electric Revenue Electric Operating Expenses Power Production Oper Exp 33,715,759 Power Production Maint Exp 11,622,913 Power Production Exp TOTAL 45,338,672 Purchased Power Exp 754,562 Transmission Oper Exp 606,755 Transmission Maint Exp 633,536 Transmission Exp TOTAL 1,240,291 Distribution Oper Exp 3,164,444 Distribution Maint Exp 3,051,992 Distribution Exp TOTAL 6,216,436 Net Inc/Earnings CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 55,658 5.26 10,942 Commercial 6,916 Industrial 1 Other 2,863 TOTAL Elec Cust 65,438 Elec (FT/PT) Employees 415 TOTAL (FT/PT) Employees 582 SYSTEM DESIGN/PERFORMANCE Net Generation (MWh) 2,039,983 Pwr Purchased (MWh) 78,259 Elec Sales (MWh) 379,133 Heat Rate (BTU/kWh) 11,482 Generating Cap (MW) 507.1 Summer System Peak (MW) 399.0 Winter System Peak (MW) 298.0 Meters (B) 66,047 Distr Line Transformers (B) 14,806 Distr LT Capacity (MVa) 1,109.0 Incoming Substa Capacity (MVa) 885.4 Distr (OH) Pole Miles 535.1 Distr (UG) Cir Miles 283.3 Distr TOTAL Miles 818.5 Trans (OH) Pole Miles 129.8 Trans (UG) Cir Miles 0.7 Trans TOTAL (34.5/69/138 kV) Miles 130.4 MAJOR INTERCONNECTIONS Utility (Location) Tie Voltages (kV) Max Tie (MVa) Cent Ill Light 138 276 Cent Ill Pub Svc 138 279 Illinois Pwr 138 210 Illinois Pwr 69 30 PURCHASED POWER SOURCE(S) CILCO, Cent Ill Pub Svc, Continental Pwr Exchange, Illinois Pwr, Marketers _ PLANT INFORMATION |_| HY o ST /\CT,GT,IC,CC *NUC -- DALLMAN 217-786-3957 3100 Stevenson Dr, Springfield, IL 62707 Supt, Gen................................................................Tom Bee o DALLMAN 3 Units, ST/COAL, 1968/1978, 443 MW 96 Net Generation, 1,964,475 MWh Cap Fact (%) 50.48 FACTORY /\ - -- FACTORY GT 1 Unit, GT/OIL, 1973, 23 MW 96 Net Generation 371 MWh Cap Fact (%) 0.10 LAKESIDE (IL) 217-786-3957 o LAKESIDE (IL) 2 Units, ST/COAL, 1961/1965, 79.5 MW 96 Net Generation 119,836 MWh Cap Fact (%) 17.16 REYNOLDS /\ - -- REYNOLDS GT 1 Unit, GT/OIL, 1970, 18.1 MW 96 Net Generation 292 MWh Cap Fact (%) 0.14 SERVICE AREA City/Town Jerome 1,700, Leland Grove 1,640, Southern View 2,044, Springfield 117,044 Service Electric (T&D) KEY PERSONNEL GM...........................................................Alan W Wattles CORPORATE FINANCIAL DATA ($) FY'95 Assets & Debits: 8,652,821 Elec Plant m Service Distribution 7,569,728 Elec Plant construction Budget ('96) Distribution 550,000 Electric Revenue 4,094,441 Electric Operating Expenses Purchased Power Exp 2,777,630 Distribution Oper Exp 62,564 Distribution Maint Exp 193,877 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 2,526 12.30 10,782 Comm/Ind 280 Other 163 TOTAL Elec Cust 2,969 TOTAL (FT/PT) Employees 16 SYSTEM DESIGN/PERFORMANCE Pwr Purchased (Mwh) 35,927 Elec sales (Mwh) 32,023 Summer System Peak (MW) 83 Winter System Peak (MW) 62 Distr Line Transformers (#) 67,653 Incoming Substa Capacity (Mva) 9,516 Distr (OH) Pole Miles 9,028 Distr (UG) Cir Miles 125 Distr TOTAL Miles 9,153 Trans (OH) Pole Miles 138 Trans TOTAL (69kV) Miles 138 CLINTON (IL) COUNTY ELECTRIC COOP INC COOP PO Box 40 475 N Main St Breese, IL 62230-0040 Phone: 618-526-7282 Fax: 618-526-4561 Service: Electric (T&D) KEY PERSONNEL GM...........................................................James B Riddle CORPORATE FINANCIAL DATA ($) FY'95 Assets & Debits 11,180,661 Elec Plant in Service Distribution 12,656,287 Elec Plant Construction Budget ('96) Distribution 600,000 Electric Revenue 8,906,487 Electric Operating Expenses Purchased Power Exp 6,785,981 Distribution Oper Exp 68,004 Distribution Maint Exp 270,174 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 4,572 10.46 13,116 Comm/Ind 494 Other 19 TOTAL Elec Cust 5,085 TOTAL (FT/PT) Employees 18 SYSTEM DESIGN/PERFORMANCE Pwr Purchased (Mwh) 104,163 Elec Sales (Mwh) 96,983 Summer System Peak (MW) 22.2 Winter System Peak (MW) 22.2 Distr Line Transformers (#) 4,570 Distr LT Capacity (Mva) 82.0 Incoming Substa Capacity (MVa) 47.7 Distr (OH) Pole Miles 8,364 Distr (UG) Cir Miles 90.8 Distr TOTAL Miles 9,272 Trans (OH) (69kV) Pole Miles 26.1 SERVICE AREA County: Clinton, Fayette, Madison, Marion, St Clair COLES-MOULTRIE ELECTRIC COOP COOP PO Box 709 E Rt 316 & Logan St Mattoon, IL 61938-0709 Phone: 217-235-0341 Fax: 217-234-8342 Service: Electric (T&D) KEY PERSONNEL Mgr..........................................................David G Finley Contr...........................................................Shelia Doty Dir, Mktg & Member Svcs.........................................Ray C Weiss Dir, Plt Oper..........................................Meredith L Christman Elec Engr................................................Steven G Underwood CORPORATE FINANCIAL DATA ($) FY'96 Assets & Debits 23,010,416 Elec Plant in Service TOTAL 25,931,010 Elec Plant Construction Budget ('97) Distribution 2,270,045 Electric Revenue 14,305,287 Electric Operating Expenses Purchased Power Exp 9,703,614 Transmission Maint Exp 5,091 Distribution Oper Exp: 339,142 Distribution Maint Exp: 665,595 Distribution Exp TOTAL: 1,004,737 Net Inc/Earnings 894,851 CUSTOMER/EMPLOYEE DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 7,456 11.04 12,253 Commercial 665 Industrial 5 Other 26 TOTAL Elec Cust 8,152 TOTAL (FT/PT) Employees 36 SYSTEM DESIGN/PERFORMANCE Pwr Purchased (MWh): 164,644 Elec Sales (MWh) 152,366 Summer System Peak (MW) 33.0 Winter System Peak (MW) 29.6 Meters (#): 10,061 Distr Line Transformers (#) 6,463 Distr LT Capacity (MVa) 145.8 Incoming Substa Capacity (MVa) 57.8 Distr (OH) Pole Miles 1,655.6 Distr (UG) Cir Miles 107.5 Distr TOTAL Miles 1,763.0 Trans (OH) (69kV) Pole Miles 43.3 SERVICE AREA City/Town: Arcola 2,678, Charleston 20,398, Mattoon 18,441 County Clark 15,921; Coles 51,644; Cumberland 10,670; Douglas 19,464; Edgar 19,595; Moultrie 13,930; Piatt 15,548; Shelby 22,261 CORN BELT (IL) ELECTRIC COOP INC. COOP PO Box 816 1502 Morrtssey Dr Bloomington, IL 61702 Phone: 309-662-5330 Fax: 309-663-4516 Service: Electric (T&D) KEY PERSONNEL Pres & GM.................................................Jeffrey D. Reeves Asst Mgr............................................................R Stack Mgr Engrg......................................................Lyle Hinshaw Mgr, Member Svcs...............................................J. Durlinger Mgr Office Svcs................................................R. Fischbach Mgr Oper.........................................................A Campbell CORPORATE FINANCIAL DATA ($) FY'96 Assets & Debits: 53,969,250 Elec Plant in Service Transmission 1,840,599 Distribution 52,889,726 Other 5,315,884 TOTAL 60,046,209 Elec Plan Construction Budget ('97) Distribution 3,000,000 Electric Revenue 25,055,413 Electric Operating Expenses Purchased Power Exp 15,752,888 Distribution Oper Exp 176,481 Distribution Maint Exp 1,803,303 Distribution Exp TOTAL 1,979,784 CUSTOMER/EMPLOYER DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 15,364 11.36 10 Commercial 935 Other 31 TOTAL Elec Cust 16,330 TOTAL (FT/PT) Employees 61 SYSTEM DESIGN/PERFORMANCE Pwr Purchased (MWh) 255,057 Elec Sales (MWh) 213,861 Summer System Peak (MW) 63.5 Winter System Peak (MW) 46.3 Distr Line Transformers (#) 11,700 Distr LT Capacity (MVa) 265.0 Incoming Substa Capacity (MVa) 124.0 Distr (OH) Pole Miles 1,235.0 Distr (UG) Cir Miles 261.0 Distr TOTAL Miles 1,496.0 Trans (OH) (69 kV) Pole Miles 51.0 SERVICE AREA County Champaign; De Witt, Ford, Livingston, Logan, Macon, McLean, Piatt, Tazewell, Woodford EASTERN ILLINI ELECTRIC COOP COOP PO Box 96 330 West ottawa Paxton, IL 60957 Phone: 217-379-2131 Fax: 217-379-2936 Service: Electric (T&D) KEY PERSONNEL Pres............................................William David Champion, Jr. Mgr. Fin Svcs............................................J. Brandon Jackson Mgr HR.....................................................Wenona G. Gumbel Mgr Info Svcs..............................................Jeannie Kingston Mgr Mktg & Member Svcs............................................Dale Kuhn Mgr Oper & Engrg Svcs.....................................Steven H. Hancock Purch Agt................................................Floyd L. Woolridge CORPORATE FINANCIAL DATA ($) FY'96 Assets & Debits: 47,460,496 Elec Plant in Service Transmission 1,787,914 Distribution 45,868,696 Other 5,991,933 TOTAL 53,648,543 Elec Plan Construction Budget ('97) Distribution 2,400,000 Electric Revenue 20,499,514 Electric Operating Expenses Distribution Oper Exp 748,620 Distribution Maint Exp 946,425 Distribution Exp TOTAL 1,695,045 CUSTOMER/EMPLOYER DATA Electric Avg Rate Avg Use Customers ((cent)/kWh) (kWh/yr) Residential 12,221 11.28 12,494 Commercial 775 Industrial 2 Other 14 TOTAL Elec Cust 13,017 TOTAL (FT/PT) Employees 68
1998 ELECTRIC WHOLESALE SUMMARY JANUARY 1998 THROUGH DECEMBER 1998 SALES TO PURCHASES FROM MARKETER MWH MWH American Electric Power Service Corp. 16,000 800 Ameren/CIPS 2,320 644,827 Aquila Power Corporation 23,894 25,001 Cargill-Alliant, LLC 21,281 4,275 Citizens Power Sales 65,600 1,600 Commonwealth Edison Company (CE) 155,301 52,491 Columbia Energy Power Marketing Corp. 48,126 700 Coral Power, LLC 35,649 21,266 City Water Light and Power (CWLP) 16,446 11,402 Duke Energy Trading & Marketing L.L.C. 6,400 800 Electric Clearinghouse Inc. (ECI) 1,600 0 Engage Energy US, L.P. 1,823 250 Enron Power Marketing, Inc. 76,154 20,077 Entergy Power Marketing Corp. 1,500 0 Griffin Energy Marketing, L.L.C. 2,396 0 Illinois Power Company (IP) 27,315 10,861 Koch Energy Trading Inc. 4,914 3,124 Merchant Energy Group of the Americas, Inc. (MEGA) 2,501 100 NESI Power Marketing, Inc. 1,103 125 Noram Energy Services, Inc. 2,000 800 Power Company of America (PCA) 256 0 QST (IP Retail Apr. 1998-Oct. 1998 & CILCO Retail) 25,608 0 Rainbow Energy Marketing Corporation 8,555 12,081 Sonat Power Marketing LP 13,503 2,400 Southern Company Energy Marketing L.P. 51,052 16,800 Tenaska Power Services Co. 36,244 35,665 Wisconsin Electric Power Company (WEPCO) 694 200 Williams Energy Marketing & Trading Company (WESCO) 5,758 0 Wisconsin Power & Light (WP&L) 1,600 0 ------- ------- TOTAL 755,593 865,645
CIM's Investment in the Energy Investors Fund CIM Energy CIM Energy Capacity Investment's Investment's Project Name (MW) EIF Share EIF Interest Share of EIF MW Ownership Cambria 85.0 41.8% 35.5 2.476% 0.88 Multitrade 79.5 25.0% 19.9 2.476% 0.49 Saguaro 90.0 21.0% 18.9 2.476% 0.47 Curtis-Palmer 58.0 4.0% 2.3 2.476% 0.06 South Glen Falls 13.8 39.6% 5.5 2.476% 0.14 Hudson Falls 36.1 39.6% 14.3 2.476% 0.35 Crockett 240.0 5.0% 12.0 2.476% 0.30 Windpower 1987 * 1988 80.0 8.0% 6.4 2.476% 0.16 Kingsburg 34.5 99.0% 34.2 2.476% 0.85 Consolidated Windpower 71.0 64.4% 45.7 2.476% 1.13 BCH 15.4 69.3% 10.7 2.476% 0.26 Total 803.3 205.3 5.08
Exhibit MAE-300 Page 1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION MidAmerican Energy Company ) and ) Docket No. EC98-__________-000 MidAmerican Energy Holdings Company ) PREPARED DIRECT TESTIMONY AND EXHIBITS OF WILLIAM H. HIERONYMUS Q. Please state your name and business address. A. My name is William H. Hieronymus. I am a managing director of Putnam, Hayes & Bartlett, Inc. ("PHB") in its office at One Memorial Drive, Cambridge, MA 02142. I. QUALIFICATIONS Q. What is your educational and professional background? A. I received a bachelor's degree from the University of Iowa in 1965, a master's degree in economics in 1967, and a doctoral degree in economics in 1969 from the University of Michigan, where I was a Woodrow Wilson Fellow and National Science Foundation Fellow. After serving in the US Army, I began my consulting career. In 1973, I joined Charles River Associations (Inc. and specialized initially in antitrust economics. By the mid-1970s, my focus was principally on the economics of energy and network industries. In 1978, I joined PHB where my consulting practice has continued to focus on network industries, particularly electric utilities. During the past twenty-off years, I have completed numerous assignments for electric utilities, state and federal government agencies and regulatory bodies; energy and
Exhibit __MAE-311 Page 2 of 2 Total Capacity (with 1,000 MW Purchase) 1999 2000 2001 - ---------------------------------------------------------------------------------------------------------------------------------- Total Market Total Market Total Market Capacity Share HHI Capacity Share HHI Capacity Share HHI ---------------------------------------------------------------------------------------- Applicants MidAmerican Energy 4,320 5.89 4,364 5.85 4,398 5.77 MidAmerican Energy Merchant 230 0.30 1,000 MW Purchase 1,000 1.31 MidAmerican Subtotal 4,320 5.89 35 4,364 5.85 34 5,628 7.38 54 Cal Energy (Retained Share) 45 0.06 0 Other Cal Energy 184 0.24 0 First Tier AECI 3,544 4.83 23 3,519 4.72 22 3,627 4.76 23 ALLIANT 6,144 8.38 70 6,135 8.23 68 5,956 7.81 61 AMEREN 11,373 15.51 241 11,548 15.49 240 11,694 15.33 235 COMED 22,597 30.82 950 22,853 30.66 940 22,133 29.02 842 IP 4,683 6.39 41 4,592 6.16 38 4,589 6.02 36 KCPL 3,779 5.15 27 3,803 5.10 26 3,857 5.06 26 LES 648 0.88 1 648 0.87 1 648 0.85 1 MPW 262 0.36 0 262 0.35 0 262 0.34 0 NPPD 1,937 2.64 7 2,009 2.70 7 2,099 2.75 8 NSP 8,425 11.49 132 8,445 11.33 128 8,536 11.19 125 OPPD 2,063 2.81 8 2,073 2.78 8 2,073 2.72 7 STJO 403 0.55 0 438 0.59 0 448 0.59 0 WAPA 2,708 3.69 14 2,708 3.63 13 2,708 3.55 13 1998 NRG Energy (IL) 15 0.02 0 15 0.02 0 15 0.02 0 1999 Duke Energy and AECI (MO) 125 0.17 0 125 0.17 0 125 0.16 0 1999 Peoples and Dominion (IL) 300 0.41 0 300 0.40 0 300 0.39 0 2000 KLT Power and BVP (MO) 0 0.00 0 700 0.94 1 700 0.92 1 2001 Houston Industries (IL) 0 0.00 0 0 0.00 0 634 0.83 1 Total 73,326 100 1548 74,537 100 1527 76,262 100 1433 Pre-Merger HHI 1548 1527 1433 Delta HHI (2ab) 0 0 1 Post-Merger HHI 1548 1527 1434
Exhibit __MAE-312 Page 1 of 2 Uncommitted Capacity 1999 2000 2001 - ---------------------------------------------------------------------------------------------------------------------------------- Uncommitted Market Uncommitted Market Uncommitted Market Capacity Share HHI Capacity Share HHI Capacity Share HHI ---------------------------------------------------------------------------------------- Applicants MidAmerican Energy 175 7.51 148 5.49 104 2.98 2000 MidAmerican Energy Merchant 230 6.60 MidAmerican Subtotal 175 7.51 56 148 5.49 30 334 9.58 92 2000 Cal Energy (Retained Share) 46 1.32 2 2000 Other Cal Energy 184 5.28 28 First Tier AECI 30 1.29 2 0 0.00 0 0 0.00 0 ALLIANT 157 6.74 45 140 5.19 27 0 0.00 0 AMEREN 52 2.24 5 116 4.31 19 178 5.10 26 COMED 0 0.00 0 0 0.00 0 0 0.00 0 IP 285 12.23 150 24 0.89 1 0 0.00 0 KCPL 153 6.57 43 86 3.19 10 73 2.09 4 LES 33 1.42 2 18 0.67 0 0 0.00 0 MPW 76 3.26 11 72 2.57 7 69 1.98 4 NPPD 152 6.53 43 177 6.56 43 223 6.40 41 NSP 289 12.39 154 266 9.86 97 81 2.32 5 OPPD 0 0.00 0 0 0.00 0 0 0.00 0 STJO 30 1.30 2 24 0.89 1 29 0.83 1 WAPA 457 19.63 385 486 18.02 325 496 14.22 202 1998 NRG Energy (IL) 15 0.64 0 15 0.58 0 15 0.43 0 1999 Duke Energy and AECI (MO) 125 5.37 29 125 4.63 21 125 3.58 13 1999 Peoples and Dominion (IL) 300 12.88 166 300 11.12 124 300 8.60 74 2000 KLT Power and BVP (MO) 0 0.00 0 700 25.95 574 700 20.07 403 2001 Houston Industries (IL) 0 0.00 0 0 0.00 0 634 18.18 331 Total 2,330 100 1092 2,697 100 1379 3,487 100.00 1226 Pre-Merger HHI 1092 1379 1226 Delta HHI (2ab) 0 0 25 Post-Merger HHI 1092 1379 1251 - ----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C 1 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION - -----------------------------------) ) Central Illinois Light Company, ) on its own behalf ) Docket No EC99-___ and on behalf of ) The AES Corporation ) - ----------------------------------- AFFIDAVIT OF THOMAS A. TRIBONE I, Thomas A. Tribone, being duly sworn, depose and state as follows: 1. I am Executive Vice President of The AES Corporation, Inc. ("AES") and President of AES Americas, Inc., a wholly owned subsidiary of AES. AES Americas, Inc. is responsible for business development in Brazil and throughout Latin America. 2. The purpose of this affidavit is to summarize certain facts pertaining to AES that are used in the market power evaluation associated with its acquisition of CILCORP. AES is a leading power company with interests in projects in many countries around the world. AES' U.S. and Canadian holdings are summarized in Table TAT-1. 3. AES is in the process of acquiring six generating stations from New York State Electric & Gas Corporation ("NYSEG") in a transaction that is expected to close at the end of March 1999. AES will have a three-year contract with NYSEG for all of the capacity, but none of the energy associated with the six stations it is acquiring. AES' pending acquisition of a 610 MW Indian River project in Florida does not have a long term power sale contract in place, but 2 it is hoped that such a contract will be signed before the transaction closes in May 1999. 4. AES's subsidiary, AES Power, Inc. ("AES Power") is a Commission-authorized wholesale power marketer that sells power throughout the U.S., including the Mid-America Interconnected Network ("MAIN") North American Electric Reliability Council ("NERC") region. AES Power has a 45 percent ownership interest in Northern/AES Energy, LLC ("Northern AES"), another Commission-authorized, wholesale power marketer with operations generally in the northern plains states. Neither AES Power nor Northern AES owns or controls power supplies under long-term contract that has not already been committed to other buyers. 5. AES has an interest in one electric transmission facility, a 3 kilometer line in Ontario, Canada that connects the Kingston unit to the transmission grid. AES does not own or control any fuel supplies or transportation facilities that are not necessary for the operation of its own electric generation facilities. AES either controls or otherwise has an interest in property rights associated with generation projects in Texas, California, Arkansas, Connecticut, New Hampshire and New Jersey. AES is developing a generation project in southern Indiana, and has submitted an application for a certificate of convenience and necessity to the Indiana Utility Regulatory Commission for a station of up to 400 MW. At this time, AES does not have rights to a specific generation site, does not have a contract for procurement of the combustion turbine, has not made an application for any other permits, and has not arranged for financing. While the application covered operations of the new facility as early as June of 1999, it is unlikely that the unit could be in 3 operation before the spring of 2000. According to the application, the beneficiaries of the facility will be Hoosier Energy Rural Electric Cooperative, Inc., and an unnamed unaffiliated power marketer(s). It is AES's objective to develop the project after signing a long-term power sale agreement for the full output of the facility, and it is expected that the unit will be less than 200 MW in its initial phase. As part of its ongoing operations, AES may consider other project development opportunities at any time. 6. AES does not have any emission permits or related rights beyond those needed for its own, ongoing operations which it can withhold from potential competitors. AES is expected to obtain a little over 130,000 tons of SO2 emission allowances through its NYSEG transaction. The foregoing facts are true of my own knowledge. Date: February 17, 1999 /s/ Thomas A. Tribone -------------------------- Thomas A. Tribone Executive Vice President The AES Corporation
Table TAT - I AES Resources AES Generation Stations in U.S. and Canada - ------------------------------------------------------------------------------------------------------------------------------------ Non- Contracted AES Contract Generating Interconnected Capacity Capacity Start Date Ownership Purchaser Expiration Plant Location Utility Fuel (MW) (MW) - ------------------------------------------------------------------------------------------------------------------------------------ Shady Point OK Oklahoma G&E Coal 320 0 Operating 100% Oklahoma G&E 2008 Beaver Valley PA West Penn Power Coal 125 0 Operating 80% West Penn Power 2017 Ironwood PA General Public Coal 700 0 4/2001 est 100% The Williams 2021 Utilities Energy Co. Warrior Run MD Potomac Edison Coal 180 0 10/99 est 100% Potomac Edison 2029 est Deepwater TX Houston Lighting Pet 143 3-8 Operating 100% Dynegy, The Williams 1231.01 & Power Coke Energy Co. and Texas Utilities Thames CT Connecticut Light Coal 181 0 Operating 100% Connecticut Light 2015 & Power & Power Alamitos CA Southern California Gas 2,083 0 Operating 100% The Williams Co. Beyond 2003 (2) Edison Co Huntington CA Southern California Gas 563 0 Operating 100% The Williams Co. Beyond 2003 (2) Beach Edison Co Redondo Beach CA Southern California Gas 1,310 0 Operating 100% The Williams Co. Beyond 2003 (2) Edison Co Placenta CA Southern California Gas 120 0 Operating 100% Southern California 2014 Edison Co Co Hawaii HI Hawaiian Electric Coal 180 0 Operating 100% Hawaiian Electric 2023 Co Co Kingston Ontario Ontario Hydro Gas 110 0 Operating 50% Ontario Hydro 2017 --- Subtotal, Varies by Year 5.135-6.015 3-8 Additional Generating Units that AES is in the Process of Acquiring - ------------------------------------------------------------------- Kintigh NY New York State E&G Co 675 0 Operating 100% New York State Apr-01 3 Milliken NY New York State E&G Co 306 0 Operating 100% New York State Apr-01 3 Goudey NY New York State E&G Co 126 0 Operating 100% New York State Apr-01 3 Greenidge NY New York State E&G Co 161 0 Operating 100% New York State Apr-01 3 Hickling NY New York State E&G Co 85 0 Operating 100% New York State Apr-01 3 Jennison NY New York State E&G Co 71 0 Operating 100% New York State Apr-01 3 Indian River FL Orlando Utilities Oil/gas 610 610 Operating 100% None - Commission Subtotal 2,034 610 Total, Vanes by Year 7,169-8,049 613-618 Notes: (1) Deepwater has contracts to sell 110 MW to Dynegy and 25 MW to Williams through 1999. It also has a contract to sell 140 MW to Texas Utilities for 2000 and 2001. (2) The exact duration of the contract is confidential. AES is a processing facility in which Williams delivers the gas and takes control of the entire energy output from the plant. (3) The NYSEG also covers all of the capacity, but none of the energy, from their six facilities.
EXHIBIT D UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION - -----------------------------------) Central Illinois Light Company ) on its own behalf ) Docket No. EC99-____ and on behalf of ) The AES Corporation ) - ----------------------------------- AFFIDAVIT OF WILLIAM M. SHAY I, William M. Shay, being duly sworn, depose and state as follows: 1. I am a Senior Vice-President of Central Illinois Light Company ("CILCO"). My business address is 300 Hamilton Square, Peoria, Illinois, 61602. I received a Bachelor of Science degree in Accounting from Bradley University in 1974 and a Juris Doctorate from the University of Illinois College of Law in 1978. I am a Certified Public Accountant, and I am admitted to practice law in the State of Illinois. 2. I joined CILCO in 1974 as an accountant while still at Bradley University, and became a budget analyst following graduation. I left CILCO in 1975 to attend law school, and served as a judicial clerk to an Illinois Supreme Court Justice for two years following graduation from law school. In 1980, I joined the Chicago law firm of Isham, Lincoln & Beale, where I concentrated on utility regulation. 3. In late 1982, I returned to CILCO and created its legal department, subsequently becoming General Counsel. In August 1988, I was promoted to Vice President and Chief Financial Officer of CILCORP Inc. ("ClLCORP"), CILCO's parent. During the period from 1992 through 1995, I was responsible for electric operations at CILCO, initially distribution and thereafter all of electric generation, transmission and distribution. I became the President of QST Enterprises Inc. in December 1995, when CILCORP formed that entity. I moved back to CILCORP at the end of 1996, primarily to lead strategic development activities. I was named to my present position in August 1998. My current position gives me oversight responsibility for Sales and Marketing, Finance and Accounting, Corporate Services, and Call Center and Billing Services. I am also responsible for strategic development matters. 4. The purpose of this affidavit is to summarize certain facts pertaining to CILCORP that are used in the market power evaluation associated with The AES Corporation, Inc.'s ("AES") acquisition of CILCORP. 5. CILCO is an Illinois corporation engaged in the generation, transmission, distribution and sale of electricity to the public in the State of Illinois, and in the transmission, distribution and sale of natural gas to the public in the State of Illinois. CILCO is a public utility subject to the jurisdiction of the Illinois Commerce Commission. CILCORP is an Illinois 2 corporation and owns all the common stock of CILCO. CILCO became a subsidiary of C1LCORP in 1985. CILCO's projected generating resources and load are summarized in Table WMS-l as well as the Company's transmission capabilities. The load forecast does not assume any loss of customers from retail open access, even though the Electric Service Customer Choice and Rate Relief Law of 1997 calls for a phased transition to retail competition during the 1999- 2002 period. 6. Through its unregulated subsidiaries, CILCORP also has two passive investments in fully committed generation facilities. It has a 7.4257 percent undivided interest in Springerville Unit l, a 380 MW generation station that is located in Arizona and leased to Tuscon Electric Power until 2015. CILCORP also has a 2.476 percent limited partnership interest in the Energy Investors Fund, L.P. ("EIF"), which in turn has passive investments in eleven power projects, all of which are fully committed under contracts that last until at least 2011. 7. Through other subsidiaries, CILCORP has been involved in competitive electricity sales at both the retail and wholesale levels. Specifically, QST Energy Inc. ("QST Energy") has participated in a few retail markets by selling energy (both electricity and gas) in Illinois, Pennsylvania and California. For strategic reasons, QST Energy is de-emphasizing its activities outside of Illinois. It has already sold off its electric and gas accounts in Pennsylvania and, with the exception of a few contracts that could 3 not be transferred, has exited this market. it is evaluating similar options regarding its California activities. QST Energy Trading Inc. ("QST Trading") is a subsidiary of QST Energy and is a Commission-authorized, wholesale power marketer of electricity that also markets gas. As a result of recent strategy changes, QST Trading is no longer focused on new trading activities and is only balancing its physical and financial portfolio in order to fulfill prior commitments. 8. CILCO is a regulated gas utility with retail sales in central Illinois. Among CILCO's gas customers are five power generators. Table WMS-2 provides summary statistics on the size and 1998 gas purchases by these generators. CILCO controls two sites that could be used for new power generation facilities, the Hallock site near Chillicothe, Illinois, and additional space at the Duck Creek station near Dumfermline, Illinois. 9. CILCO does not have any emission permits or related rights beyond those needed for its ongoing operations. /s/ William M. Shay ---------------------------------------- William M. Shay Subscribed and sworn to before me this ______ day of February, 1999. - ----------------------- Notary Public Commission expires: 4 Page 1 of 2
TABLE WMS - 1 CENTRAL ILLINOIS LIGHT CO.'S (CILCO'S) RESOURCES CILCO'S GENERATING PLANTS - -------------------------------------------------------------------------------- NERC Plant County State Region Fuel Capacity - -------------------------------------------------------------------------------- (MW) -------- E D Edwards 1-3 Peoria IL MAIN Coal 740 Sterling Avenue 1-2 Peoria IL MAIN Gas 30 Duck Creek Fulton IL MAIN Coal 366 Cogen 1 Tazewell IL MAIN Gas 16 ------- Total 1,152
CILCO'S PROJECTED LOAD AND RESOURCES Capacity ---------------------------------- Resource 1999 2000 2001 ---------------------------------- (MW) (MW) (MW) Owned Capacity 1,152 1,152 1,152 Non-Utility & Standby Generation 35 35 35 - -------------------------------- -- -- -- Total Resources 1,187 1,187 1,187 Peak Demand (Net of DSM) 1,154 1,169 1,182 Purchases1 150 150 150 - --------- ------ ------ ------ Net Internal Demand 1,004 1,019 1,032 Required Capacity2 1,155 1,202 1,218 Excess Capacity 32 (15) (31) Notes
(1) Two separate contracts with Ameren Corporation ("Ameren"), consisting of a 100 MW contract that expires in May 2002, and a 50 MW contract that expires in 2009. (2) Based on 15 percent Reserve Margin Requirements for 1999 and 18 percent for 2000 and 2001. Page 2 of 2
TABLE WMS-1 (CON'T) CILCO'S INTERCONNECTED UTILITIES --------------------------------------------------------- Tieline Cap Utility Name (MW) --------------------------------------------------------- Commonwealth Edison 2,464 Ameren 448 Illinois Power 572 Springfield City Water Light & 287 Power Riverton 13 Corn Belt 12
TABLE WMS-2 CILCO'S NATURAL GAS RETAIL SALES TO ELECTRIC GENERATING FACILITIES (1998)1 CUSTOMER GENERATOR SIZE GAS SALES (KW) (Therms) 64,000 0 6,730 0 28 1,614 155 19,601 62 0 ------- ------ Total 21,215
Note: (1) Gas supplies arranged by the generator that are not purchased from CILCO are not reported on this table, even though CILCO may have provided gas transportation services for their supplies. EXHIBIT E CILCORP | |--| |-------- Central Illinois Light Company | | | |--- CILCO Exploration and | | Development Company | | | |--- CILCO Energy Corporation | | |-------- CILCORP Ventures, Inc. | | | |--- CILCORP Energy Services Inc | | | |--- Agricultural Research and | Development Corp.* | | |-------- CILCORP Investment Management Inc. | | | |--- CIM Energy Investments Inc. | | | |--- CIM Leasing Inc. | | | |--- CIM Air Leasing Inc. | | | |--- CILCORP Lease | Management Inc. | | | |--- CLM Inc. - IV | | | |--- CLM Inc. - VI | | | |--- CLM Inc. - VII | | | |--- CLM Inc. - VIII | | |-------- QST Enterprises Inc. | |--- CILCORP Infraservices Inc. | |--- QST Energy Inc. | | | |--- QST Energy | Trading Inc. | |--- QST Environmental Inc. | |--- Chemrox Inc. | |--- Environmental | Staffing Solutions Inc | |--- QST Architectural | Services, Inc. | |--- ESE Biosciences, Inc. | |--- Environmental Science | & Engineering, Inc. | (DE) | |--- Environmental Science | & Engineering, Inc. | (MI) | |--- ESE New York, P.C. * | |--- ESE, Inc. * | |--- Keck Instruments Inc. | |--- National Professional | Casualty Co. | |--- ESE Land Corporation | |--- Savannah | Resources Corp. | | | | | |- McCadden | Development, | LLC * | |--- ESE Placentia | Development Corp. | |--- ELC Makena I, | L.L.C. * | |--- Wilmington | Land Co. | |--- California/Nevada | Development, | LLC * | |--- Future Developments LLC * * Not a wholly-owned subsidiary January, 1999 AES Corporation | |--| |-------- Six US Power Plants Owned | by Second Tier US Companies | |-------- Three US Power Plants Owned | by Third Tier US Companies | |-------- Four Foreign Power Plants Owned | by Second Tier Foreign Companies | |-------- Six Foreign Power Plants Owned | by Third Tier Foreign Companies | |-------- Eight Foreign Power Plants Owned | by Fourth Tier Foreign Companies | |-------- Fifty-Six Foreign Power Plants Owned | by Fifth Tier Foreign Companies | |-------- Six Foreign Power Plants Owned | by Sixth Tier Foreign Companies | |-------- One Foreign Power Plant Owned | by Seventh Tier Foreign Companies | |-------- Five Foreign Distribution | Companies Owned by Fourth | Tier Foreign Companies | |-------- Three Foreign Distribution | Companies Owned by Fifth | Tier Foreign Companies | |-------- One Foreign Distribution | Company Owned by Sixth | Tier Foreign Companies | |-------- Midwest Energy, Inc. (100% Owned First Tier US Subsidiary) - - AES has approximately 100 additional US companies used as holding companies, development companies, and for other purposes. - - AES has approximately 125 additional foreign companies used as holding companies, development companies, and for other purposes. EXHIBIT F [CILCO Letterhead] December 11, 1998 Ms. Donna M. Caton, Chief Clerk Illinois Commerce Commission 527 E. Capitol Springfield, Illinois 62794 Re: Central Illinois Light Company Petition Pursuant to Sec. 16-111(g) to Decline Jurisdiction over Proposed Reorganizations, or, in the Alternative, to Approve the Reorganizations Pursuant to Sec. 7-204 Dear Ms. Caton: Enclosed for filing are the original and four copies of the verified Petition of Central Illinois Light Company (CILCO) requesting the Illinois Commerce Commission (Commission), pursuant to Section 16-111(g) of the Public Utilities Act (Act), to decline pre-approval jurisdiction over certain proposed reorganizations described in the Petition. In the alternative, CILCO requests the Commission to approve the proposed reorganizations with respect to CILCO's gas operations pursuant to the provisions of Section 7-204 of the Act. Contemporaneous with this filing, CILCO is making a separate filing with the Commission of a Notice of Reorganizations. That Notice is being filed pursuant to the provisions of Section 16-111(g) of the Act, which authorize electric utilities to reorganize through mergers without Commission approval, but requires notice of any proposed reorganization to be filed with the Commission not less than thirty days prior to the implementation of the reorganization. CILCORP Inc., CILCO's parent company, negotiated proposed mergers with the understanding that under Section 16-111(g) of the Act, Commission approval of the mergers would not be required. CILCO first became aware on November 22, 1998, that it is the Commission Staff's position that Commission approval of the proposed mergers will still be required in connection with CILCO's gas operations. For that reason, CILCO is filing the enclosed Petition, requesting a finding that Commission approval of the proposed reorganizations is not required with respect to CILCO's gas operations, or, in the alternative, requesting approval of the proposed reorganizations with respect to CILCO's gas operations. Ms. Donna Caton December 11, 1998 Page 2 Because the merger timetables did not include any requirement for Commission approval, it is essential to the timely completion of the mergers that CILCO obtain Commission action on the Petition as quickly as possible. Accordingly, CILCO is requesting the Commission to act on the enclosed Petition on an expedited basis, with a determination being made at the earliest possible date. To permit immediate consideration of the Petition, CILCO is filing with the Petition three copies of the Prepared Direct Testimony and Exhibits of William M. Shay, Nicholas T. Shea, and Robert J. Sprowls. The purpose of the testimony is to support the request for approval in the event the Commission determines that approval is necessary with respect to CILCO's gas operations. Please acknowledge receipt and filing of the enclosed Petition by stamping and returning one copy of this letter, one copy of the Petition, and a copy of the complete set of testimony and exhibits. Thank you for your attention to this matter. Sincerely, Central Illinois Light Company By: /s/ N. T. Shea ----------------------------------- N. T. Shea Director-Rates and Regulatory Affairs NTS/lh cc: Mr. Bob Bishop Ms. Barbara Rogers Mr. William M. Shay Mr. Robert J. Sprowls Mr. Thomas D. Hutchinson Mr. Thomas S. Romanowski Mr. E. J. Griffin CILCO Exhibit No. 1.2 STATE OF ILLINOIS ILLINOIS COMMERCE COMMISSION CENTRAL ILLINOIS LIGHT COMPANY ) ) Petition pursuant to Section ) 16-111(g) of the Public Utilities ) Act requesting the Illinois ) Commerce Commission to enter ) an order finding it has no pre- ) Docket No. 98-_____ approva1 jurisdiction over certain ) reorganizations, or, in the ) alternative, approving the ) reorganizations with respect to ) the gas operations of Central ) Illinois Light Company pursuant ) to the provisions of Section ) 7-204 of the Public Utilities Act. ) PETITION Central Illinois Light Company (CILCO) requests the Illinois Commerce Commission (Commission) to enter an order finding that the Commission has no pre-approval jurisdiction over certain proposed reorganizations, hereinafter described, in accordance with the provisions of Section 16-111(g) of the Public Utilities Act (Act) or, in the alternative, to set this matter for immediate hearing and thereafter enter an order approving the proposed reorganizations with respect to the gas operations of CILCO pursuant to Section 7-204 of the Act. For the reasons hereinafter set forth, CILCO requests that this Petition be considered on an expedited basis. 1 In support of this Petition, CILCO shows to the Commission as follows: 1. CILCO is engaged in the business of generating, transmitting, distributing and selling electricity to the public at retail in the State of Illinois, and is a public utility as defined in Section 3-105 of the Act. CILCO is also engaged in the transmission, delivery and sale of natural gas to the public at retail in the State of Illinois. CILCO is subject to the regulatory jurisdiction of the Commission. 2. A majority of the voting capital stock of CILCO is owned by CILCORP Inc., an Illinois corporation. CILCO has been a subsidiary of CILCORP Inc. since 1985. As a result of the timing of the formation of CILCORP Inc., the provisions of Section 7-204A of the Act are not applicable to this Petition. Further, to the extent that pre-approval of the proposed reorganizations is required under Section 7-204, that Section specifies that no other Commission approvals are required for the mergers described herein. 3. CILCORP Inc. will implement the following merger transaction, which constitutes a reorganization under Section 16-111(g) of the Act. This transaction will involve the merger of Midwest Energy, Inc., an Illinois corporation and a wholly-owned subsidiary of The AES Corporation, into CILCORP Inc. CILCORP Inc. will be the surviving corporation of this merger, and The AES Corporation will become the owner of all the capital stock of CILCORP Inc. But 2 for the provisions of Section 16-111(g) of the Act, this change in ownership of all the capital stock of CILCORP Inc. would constitute a reorganization as defined in Section 7-204 of the Act. 4. A second proposed merger may follow completion of the first merger described above. At the discretion of The AES Corporation, CILCORP Inc. will be merged into The AES Corporation, CILCORP Inc. will cease to exist, and The AES Corporation will become the owner of a majority of the voting capital stock of CILCO. But for the provisions of Section 16-111(g) of the Act, this merger transaction would constitute a reorganization as defined in Section 7-204 of the Act. 5. Section 7-204 of the Act states that no reorganization, as defined in that Section, shall take place without prior Commission approval granted after notice and hearing. However, Section 7-204 is subject to the provisions of Section 16-111(g) of the Act, which states, in pertinent part, as follows: (g) During the mandatory transition period, an electric utility may, without obtaining any approval of the Commission other than that provided for in this subsection and notwithstanding any other provision of this Act or any rule or regulation of the Commission that would require such approval: (1) implement a reorganization, other than a merger of 2 or more public utilities as defined in Section 3-105 or their holding companies. . . . (Emphasis supplied.) 3 6. CILCO is an "electric utility" as defined in Section 16-102 of the Act and as that phrase is used in Section 16-111(g) of the Act. Neither Midwest Energy, Inc. nor The AES Corporation is a public utility as defined in Section 3-105 of the Act. Therefore, pursuant to the specific provisions and plain intent of Section 16-111(g) of the Act, CILCO is not required, during the mandatory transition period, to obtain any approval of the Commission for the reorganizations described above, and the Commission should enter an order, as requested herein, finding that the Commission has no pre-approval jurisdiction over the proposed reorganizations. 7. The Commission Staff has advised CILCO that in the Staff's opinion, the provisions of Section 16-111(g) of the Act do not eliminate all requirements of Section 7-204 of the Act applicable to the proposed reorganizations, and that Commission approval of the reorganizations is still required with respect to CILCO's gas operations. Therefore, the Commission Staff has requested that CILCO seek Commission approval of the proposed reorganizations under Section 7-204 of the Act with respect to CILCO's gas operations. 8. CILCO respectfully submits that the Commission should find that it does not have pre-approval jurisdiction over any part of the proposed reorganizations, because claiming such jurisdiction would constitute an unreasonable and incorrect interpretation of and limitation on the provisions of Section 16-111(g) of the Act, and produce illogical, unintended and unfair 4 results. Section 16-111(g) is applicable to all electric utilities, "notwithstanding any other provisions of this Act. The defining element is that CILCO is an electric utility, and there is nothing in Section 16-111(g) that suggests the Section does not apply fully to electric utilities that also provide gas service. Section 16- 111(g) is intended to allow electric utilities to reorganize during the transition period without the expense and delay incident to seeking Commission approval. There is no provision in Section 16-111(g) for Commission disapproval of the reorganizations described herein. If CILCO is required to seek approval of the proposed reorganizations under Section 7-204 because it is a gas utility in addition to being an electric utility, Section 16-111(g) will be emasculated and become a nullity with respect to CILCO's electric operations. Even though the Commission, under the Staff's proposal, would purport to assert jurisdiction over the reorganizations only with respect to CILCO's gas service, Section 7-204 authorizes the Commission to place conditions upon reorganizations and to block reorganizations in their entirety by denying approval with respect to gas service. Such a result would effectively give the Commission pre-approval jurisdiction over the reorganization of an electric utility, and would be plainly contrary to the intention of the legislature in approving Section 16-111(g). 9. The only electric utility in Illinois that does not have gas operations is Commonwealth Edison Company. If the Commission asserts 5 jurisdiction in this case, the Commission would be effectively concluding that Section 16-111(g) is intended to permit Commonwealth Edison Company, but no other electric utility in Illinois, to reorganize without Commission approval. This could not reasonably have been the intent of the legislature. 10. CILCO further shows to the Commission that in response to a request from the President of the Illinois Senate, the Commission furnished to the Senate a Report and analysis dated August 15, 1998, with respect to then-pending legislative changes to the Act, including the addition of Section 16-111(g) as now included in the Act. In the Report, which should be considered part of the legislative history of the Act, the Commission discussed Section 16-111(g) at pages 21 and 22 as follows: Removal of Commission authority over financial transactions. As discussed above in Section II, Changes to Commission Authority, many activities that are currently subject to Commission approval would become exempt from such approval under Section 16-111(g) and as a result of changes to existing Sections of the Act. Commission oversight of reorganizations (excluding mergers between Illinois utilities or the holding companies of Illinois utilities, which remain regulated, but including mergers between Illinois utilities or their holding companies and any corporation which is not an Illinois utility or the holding company of an Illinois utility); retirement of generating plants; sale, assignment, lease or other transfers of assets and agreements with transferees is reduced. The proposed changes would generally reduce the costs associated with regulation and increase the possibility of electric customers subsidizing non-utility activities. The Commission Report refers to "utilities" in the plural, not just Commonwealth Edison Company, and does not even hint that combination electric and gas 6 utilities will still be required to obtain approval of reorganizations because of their gas operations. Similarly, on page 26 of the Report, the Commission stated that "[The] only Commission approval required for any of these acts (enumerated in Section 16-111(g), including reorganizations) is that if generation, transmission, or distribution assets in excess of certain stated thresholds are transferred, the Commission may hold a 90-day proceeding after notice and hearing and prohibit the proposed transaction. . . ." (Underlining supplied.) In this statement, the Commission was careful to point out the exceptions that continue to require pre-approval under Section 16-111(g) of the Act. If the Commission had believed at that time that every electric utility in the State of Illinois, except Commonwealth Edison Company, would still have to obtain approval of any reorganization, surely the Commission would have said so. Having been advised by the Commission that only the transfer of a threshold amount of generation, transmission or distribution assets, or a merger involving two or more Illinois public utilities or their holding companies, could result in a Commission review and possible disapproval of a reorganization by an electric utility under Section 16-111(g), the legislature approved the Section without change. Accordingly, it must be concluded that the legislature intended that those situations specified in the Report be the only circumstances under which Commission approval must be sought. For this reason and all the other 7 reasons set forth above, the Commission should find that it has no pre-approval jurisdiction over the reorganizations described herein. 11. In the alternative, and without waiving its contention that the Commission does not have jurisdiction to approve the reorganizations, CILCO requests that if the Commission denies CILCO's request to disclaim jurisdiction over the reorganizations described herein, the Commission approve the proposed reorganizations pursuant to the provisions of Section 7- 204 of the Act with respect to CILCO's gas operations. 12. In accordance with Section 7-204 of the Act, CILCO shows to the Commission that the proposed reorganizations will not have an adverse effect upon CILCO's ability to perform its duties under the Act with respect to CILCO's gas operations. Specifically responding to the tests set forth in subparagraphs (1) through (7) of paragraph (b) of Section 7-204, CILCO shows to the Commission as follows: (1) The proposed reorganizations will not have any impact upon CILCO other thin a change in the ownership of the capital stock of its parent and, thereafter, if the second merger is effectuated, a change in the ownership of the common stock of CILCO. There will be no change in CILCO's assets or gas operations or capital structure as a result of the proposed reorganizations. Therefore, the proposed reorganizations will not have an adverse effect upon CILCO's ability to provide adequate, reliable, efficient, safe and least-cost gas utility service. 8 (2) Transactions under which CILCO provides any service or thing of value to its affiliates are covered by accounting and cost-allocation procedures approved by and on file with the Commission. Those procedures assure that CILCO and its customers will not unjustifiably subsidize CILCO's affiliates. Following the reorganizations, the accounting and cost-allocation procedures will continue to be applicable to transactions between CILCO and its affiliates. Further, pursuant to the requirements of the Commission's recently adopted rule, 83 Ill. Adm. Code, Part 506, Accounting for Nonpublic Utility Business of Gas Utilities, CILCO has filed with the Commission guidelines for allocating revenues and charges between the public utility business and the non-utility activities of CILCO's gas operations. These guidelines will also continue to be applicable following the reorganizations. CILCO further shows to the Commission that CILCO has just completed and filed with the Commission an audit of CILCO's compliance with the procedures covering affiliate transactions and other non-utility transactions, and the auditors determined that CILCO is acting in compliance with those procedures. Therefore, the reorganizations will not result in the unjustified subsidization of non-utility activities by CILCO or its gas customers. (3) As described in the immediately preceding subparagraph, CILCO has recently completed and filed with the Commission an audit of CILCO's 9 compliance with the requirements of the Commission's newly-adopted accounting rules for non-utility transactions by gas utilities. (83 Ill. Adm. Code 506) The audit found CILCO to be in compliance with the Commission's rules. The proposed reorganizations will not result in any changes in CILCO's activities or obligations to comply with the requirements of the Commission's rules, which require CILCO to record all non-utility transactions in sub-accounts. Accordingly, costs and facilities will continue to be fairly and reasonably allocated between utility and non-utility activities in such a manner that the Commission may identify those costs and facilities which are properly included by CILCO for gas ratemaking purposes. (4) The proposed reorganizations will not change the capital structure or the gas operations of CILCO in any manner, and, therefore, will not impair CILCO's ability to raise necessary capital for its gas operations on reasonable terms or CILCO's ability to maintain a reasonable capital structure for its gas operations. CILCO's ability to issue debt and preferred stock will not be impaired, and, with a larger and stronger parent company as a result of the reorganizations, CILCO should have improved ability to raise common equity following the reorganizations. (5) The proposed reorganizations will not in any manner change CILCO's status as a public utility subject to the jurisdiction of the Commission. 10 Therefore, CILCO's gas service will remain subject to all the applicable laws, regulations, rules, decisions and policies governing the regulation of Illinois public utilities. (6) The AES Corporation owns no facilities for the production, distribution or transmission of natural gas in the State of Illinois or adjoining states, and is not engaged in the delivery or sale of natural gas within the State of Illinois or adjoining states. Therefore, the proposed reorganizations will not have a significant or any adverse effect on competition in the gas markets over which the Commission has jurisdiction. (7) The proposed reorganizations will not directly affect CILCO or its gas operations, and will not result in any increase in the costs incurred by CILCO in providing gas service. Therefore, the proposed reorganizations will not result in any adverse rate impacts on retail gas customers. 13. Paragraph (c) of Section 7-204 of the Act provides that the Commission shall not approve a reorganization without ruling on the allocation of any savings resulting from the proposed reorganization. CILCO shows to the Commission that The AES Corporation is not a regulated public utility and does not own or operate any regulated public utility in the United States. In contrast to a merger of two public utilities or their holding companies, the proposed reorganizations are not intended to, nor will they, result in the achievement of operational "synergies" or efficiencies through the combination 11 and elimination of duplicative resources, functions, or personnel. No merger-related savings will occur, other than possibly a nominal amount of expenses pertaining to federal income tax filings and some shareholder communications activities. CILCO will remain a- public, SEC reporting company due to the existence of its preferred stock, which is publicly traded. The proposed reorganization is strategic in nature, both for CILCO and for The AES Corporation. Therefore, the Commission should find that there are no savings to be allocated as a result of the proposed reorganizations. 14. The Commission is further required by Paragraph (c) of Section 7-204 to determine whether CILCO should be allowed to recover any costs incurred in accomplishing the proposed reorganizations, and if so, the amount of those costs eligible for recovery and how the costs will be recovered. CILCO shows to the Commission that CILCORP Inc. and CILCO have incurred and will continue to incur significant transaction costs in connection with the proposed reorganizations, including investment banking fees, financial consulting costs, accountants' charges, printing, postage, proxy solicitation, filing fees and legal fees, including the cost of this proceeding and the cost of obtaining other regulatory approvals. CILCO estimates that the total transaction costs incurred and to be incurred by CILCO and CILCORP Inc. in connection with the reorganizations will exceed $6 million. In addition, based upon the market price of the common stock of CILCORP Inc. at the close of business preceding the 12 announcement of the reorganizations, The AES Corporation will pay a premium of more than $157 million for the common stock of CILCORP Inc. The transaction costs and the premium to be paid are necessary expenses to accomplish the reorganizations, and CILCO believes they are properly recoverable from utility customers, at least as an offset to any savings, if there were any savings that would accrue to the customers as a result of the reorganizations. However, the lack of any savings makes this issue moot. Moreover, CILCO represents to the Commission that CILCO will not, in this proceeding or in any future gas rate case, seek recovery of the transaction costs or the premium other than as an offset to any savings in the event that the Commission should determine that savings exist as a result of the reorganizations. Therefore, it is appropriate for the Commission to find in this proceeding that the transaction costs incurred by CILCO and CILCORP Inc. and the premium to be paid by The AES Corporation are eligible for recovery, but recovery will not be allowed except to the extent that the Commission attributes any savings to the reorganizations. 15. CILCO further shows to the Commission that although it is not necessary for the Commission to find that the proposed reorganizations are in the public interest, the reorganizations are in the public interest and the public will be benefitted and convenienced by the reorganizations. The State of Illinois has legislatively determined that all retail electric customers shall have the opportunity to select their respective suppliers of electricity not 13 later than May 1, 2002. Non-residential retail gas customers have had the ability to choose their respective gas suppliers for many years, and customer participation in the competitive gas market is likely to grow in the future. CILCO is the demonstrated leader in offering all customers, including residential customers, freedom of choice through electric and gas pilot open access programs in Illinois. Moreover, CILCO has consistently been the low-cost provider of electric and gas service among the major Illinois utilities. Therefore, it is in the public interest that CILCO have the size and resources to survive and compete in the developing competitive markets. The reorganizations described in the Petition will combine CILCO with a large and growing energy company, and provide the customers of CILCO and the people of the State of Illinois assurance that CILCO will continue to exist as a separate utility and will continue to compete with other suppliers of energy, utilities and non-utilities, in the competitive markets that are currently developing. 16. If the Commission concludes that it should exercise pre-approval jurisdiction over the reorganizations described above, then CILCO requests that this matter be heard and an order entered on an expedited basis. CILCO shows to the Commission that neither CILCORP Inc. nor The AES Corporation was aware until immediately prior to the public announcement of the reorganizations described herein that the Commission Staff would request that CILCO seek approval of the reorganizations in connection with CILCO's gas operations. It was and remains 14 important that all approvals be obtained so that the mergers can be closed prior to mid-1999. Among other factors, this timing is essential to allow CILCO to compete effectively for the business of those customers that, as of October 1999, are initially eligible for electric delivery service in Illinois. For these reasons, the understanding that no approval process would be necessary in Illinois was a major factor in the decision of CILCORP Inc. and The AES Corporation to go forward with the mergers. Commission approval was not a part of the original merger timetables, and if CILCO is required to obtain Commission approval, the failure to obtain that approval promptly could upset the timing of the proposed reorganizations and could jeopardize the completion of the transactions. For these reasons, CILCO seeks an expedited determination of this Petition. WHEREFORE, for all the reasons set forth above, Central Illinois Light Company respectfully requests the Illinois Commerce Commission to enter an order finding that the Commission does not have pre-approval jurisdiction over the reorganizations described in the above and foregoing Petition. In the alternative, without waiving its contention that the Commission does not have pre-approval jurisdiction over the reorganizations, Central Illinois Light Company requests the Commission to set this matter for immediate hearing, and 15 following such hearing enter an order approving the proposed reorganizations in connection with the gas operations of Central Illinois Light Company. Respectfully submitted, CENTRAL ILLINOIS LIGHT COMPANY By: /s/ William M. Shay ----------------------------------- Senior Vice President Edward J. Griffin W. Michael Seidel Michael H. Erdman Defrees & Fiske Suite 1100 200 S. Michigan Avenue Chicago, Illinois 60604 (312) 372-4000 16 State of Illinois ) ) SS County of Peoria ) AFFIDAVIT William M. Shay, being first duly sworn, upon oath deposes and states that he is a Senior Vice President of Central Illinois Light Company, that he has read the above and foregoing Petition, and is familiar with the facts stated therein, and the same are true to the best of his knowledge and belief. /s/ William M. Shay ---------------------------------------- William M. Shay Subscribed and sworn to before me this 11th day of December, 1998. /s/ Linda Ilene Heitzman - ------------------------ Notary Public 17 CILCO Exhibit No. 1.0 PREPARED DIRECT TESTIMONY OF WILLIAM M. SHAY ON BEHALF OF CENTRAL ILLINOIS LIGHT COMPANY DOCKET NO. 98- Q. Please state your name and business address. A. William M. Shay, 300 Hamilton Square, Peoria, Illinois, 61602. Q. By whom are you employed and in what capacity? A. I am a Senior Vice-President of Central Illinois Light Company (CILCO). Q. Please describe briefly your educational background and work experience. A. I received a Bachelor of Science degree in Accounting from Bradley University in 1974 and a Juris Doctorate from the University of Illinois College of Law in 1978. I am a Certified Public Accountant, and I am admitted to practice law in the State of Illinois. I joined CILCO in 1974 as an accountant while still at Bradley University, and became a budget analyst following graduation. I left CILCO in 1975 to attend law school, and served as a judicial clerk to an Illinois Supreme Court Justice for two years following graduation from law school. In 1980, I joined the Chicago law firm of Isham, Lincoln & Beale, where I concentrated on utility regulation. In late 1982, I returned to CILCO and created its legal department, subsequently becoming General Counsel. In August 1988, I was promoted to Vice President and Chief Financial Officer of CILCORP Inc. (CILCORP), CILCO's parent. During the period from 1992 through 1995, I was responsible for electric operations at CILCO, initially distribution and thereafter all of electric generation, transmission and distribution. I became the President of QST Enterprises Inc. in December 1995, when CILCORP formed that entity. I moved back to CILCORP at the end of 1996, primarily to lead strategic development activities. I was named to my present position in August 1998. Q. What are your responsibilities in your present position? A. I have oversight responsibility for Sales and Marketing, Finance and Accounting, Corporate Services, and Call Center and Billing Services. I am also responsible for strategic development matters. Q. Please describe CILCO and its relationship to CILCORP. A. CILCO is an Illinois corporation engaged in the generation, transmission, distribution and sale of electricity to the public in the State of Illinois, and in the transmission, distribution and sale of natural gas to the public in the State of Illinois. CILCO is a public utility subject to the jurisdiction of the Illinois Commerce Commission. CILCORP is an Illinois corporation and owns all the common stock of CILCO. CILCO became a subsidiary of CILCORP in 1985. Q. What is the purpose of your testimony in this proceeding? 2 A. CILCORP has entered into an agreement with The AES Corporation (AES) pursuant to which Midwest Energy, Inc., an Illinois corporation and a wholly-owned subsidiary of AES, will be merged into CILCORP. CILCORP will be the surviving corporation, and AES will be the owner of all the common stock of CILCORP. Under the agreement, a second proposed merger may occur at the discretion of AES. In the second merger, CILCORP will be merged into AES, CILCORP will cease to exist, and AES will become the owner of all the common stock of CILCO. Under Section 7-204 of the Public Utilities Act (Act), both these merger transactions would constitute reorganizations requiring Commission approval. However, Section 16-111(g) of the Act specifies that during the mandatory transition period - which began on December 16, 1997, the effective date of the Electric Service Customer Choice and Rate Relief Law of 1997, and continues through January 1, 2005 - electric utilities and their holding companies may, without seeking Commission approval, implement mergers with entities that are not public utilities or parents of public utilities. The only requirement under Section 16-111(g) is that the electric utility file notice of any proposed merger and furnish certain information to the Commission not less than 30 days prior to implementing the merger. Neither Midwest Energy, Inc. nor AES is a public utility or the parent of a public utility. However, because CILCO is a combination gas and electric utility, the Commission Staff has taken the position that in addition to filing the notice specified in Section 16-111(g), CILCO is required to obtain Commission approval of the 3 proposed mergers with respect to CILCO's gas operations, in accordance with the provisions of Section 7-204 of the Act. In my testimony, I will address some of the requirements of Section 7-204 that must be considered and ruled upon by the Commission before approving the mergers. Q. Has CILCO filed the notice and furnished the information required by Section 16-111(g) for mergers by electric utilities? A. Yes. CILCO Exhibit No. 1.1 is a copy of the Notice of Reorganizations and the attachments filed with the Commission by CILCO pursuant to Section 16-111(g) of the Act. Q. Please describe CILCO Exhibit No. 1.2. A. CILCO Exhibit No. 1.2 is a copy of the verified Petition filed by CILCO in this proceeding. To the best of my knowledge and belief, the facts contained in the Petition are true and correct. Q. Please describe CILCO Exhibit No. 1.3. A. CILCO Exhibit No. 1.3 is a copy of the merger agreement between CILCORP and AES dated November 22, 1998. The document was filed with the Securities and Exchange Commission as part of an 8-K filing by CILCORP, and is a public document. The schedules referred to in the agreement contain confidential information, and are not public information, and are not included in Exhibit No. 1.3. Q. Please briefly describe AES and the reasons for the proposed mergers. A. AES is a leading global energy company, and operates electric generation facilities in the United States and in numerous other countries. AES also 4 owns foreign electric distribution businesses, mostly in South America, and a small amount of natural gas distribution in foreign countries. AES does not own or operate any regulated utilities in the United States and most of its generating assets are located in other countries. With the growing trend of electric deregulation in the United States, AES determined that now is the appropriate time to become more involved in the energy markets in the United States. Illinois was particularly attractive because of the aggressive legislative mandate for choice under the Electric Service Customer Choice and Rate Relief Law of 1997. Following the reorganizations described above, AES plans to grow and expand its energy activities in the deregulated markets in Illinois pursuant to the provisions of the customer choice law and the Commission's regulations. For CILCO, the proposed reorganizations provide an enlarged financial base and access to the extensive experience of AES in energy markets around the world. These are important benefits in assuring that CILCO will continue to operate as a separate entity in competition with other energy companies in Illinois. Q. Why is it important for CILCO to be a competitor in the deregulated energy markets in Illinois? A. CILCO has demonstrated that it is an efficient, low-cost provider of energy. CILCO has also demonstrated its commitment to the deregulation of energy markets through its strong leadership in offering choice to all customers, including residential customers, through pilot open access programs for both natural gas and electricity. These are factors that are 5 important in the competitive markets, and can influence other participating sellers to meet CILCO's challenge, to the benefit of all consumers. As a competitor, CILCO will provide customers throughout the state an additional option when it comes to securing competitive energy services. However, if CILCO is unable to enlarge its financial and skill base, there will be less assurance that CILCO can remain a viable, separate competitor in Illinois. Therefore, the proposed reorganizations are in the public interest as well as the interests of CILCO. Q. Paragraph (b) of Section 7-204 specifies that the Commission shall not approve any proposed reorganization if the Commission finds, after notice and hearing, that the reorganization will adversely affect the utility's ability to perform its duties under the Act. What is your response? A. The proposed reorganizations will have no direct effect upon CILCO other than a change in the ownership of the capital stock of CILCO's parent, and, thereafter, a possible change in the direct ownership of CILCO's common stock. CILCO's gas utility operations and assets and CILCO's capital structure will not change as a result of the reorganizations, and CILCO's ability to perform its duties under the Act will not be impaired. In all likelihood, CILCO's abilities will be enhanced. Q. Section 7-204(b) sets out seven specific issues the Commission must address in considering any reorganization. Who will address those items on behalf of CILCO? A. I will discuss items (1) and (6) of Section 7-204(b), Mr. Shea will discuss items (2), (3), (5) and (7), and Mr. Sprowls will address item (4). I will also address the two matters on which the Commission must rule pursuant to 6 Section 7-204(c) of the Act before approving any reorganization. Q. Item (1) of Section 7-204(b) requires the Commission to find that the two mergers you have described will not diminish CILCO's ability to provide adequate, reliable, efficient, safe and least-cost public utility service. How do you respond? A. As I stated previously, the proposed mergers will involve only CILCORP, Midwest Energy, Inc., and AES. CILCO and CILCO's gas operations will not be changed in any way, other than improvements that we will seek to make in the ordinary course of preparing for a more competitive future business environment. Therefore, CILCO's ability to provide adequate, reliable, efficient, safe and least- cost service to its gas customers will not be diminished in any way. Q. Item (6) of Section 7-204(b) of the Act requires the Commission to determine that the merger will not have an adverse effect on competition in those markets over which the Commission has jurisdiction. In your opinion, will there be any adverse effect on competition as a result of the proposed reorganizations? A. No, there will not. For purposes of this proceeding, the relevant markets over which the Commission has asserted jurisdiction are the retail gas sales markets in Illinois. AES is not engaged in the sale or delivery of gas at wholesale or retail to any customers in Illinois or adjoining states, and AES does not own or operate any gas facilities in Illinois or adjoining states. Therefore, the proposed mergers will not diminish the level of competition in Illinois gas markets in any manner. To the contrary, as I indicated previously, the proposed reorganizations are more 7 likely to have a positive effect on competition in Illinois. CILCO will be part of a larger and economically stronger corporate system, and that should enhance CILCO's ability to remain a separate utility and compete with other gas utilities and marketers operating in Illinois. Q. Section 7-204(c) of the Act provides that the Commission shall not approve a reorganization without ruling on the allocation of any savings resulting from the proposed reorganization. Does CILCO expect to realize any savings as a result of the reorganizations proposed in this proceeding? A. Any savings that CILCO may experience as a result of the proposed reorganizations will not be material in amount, and will have no measurable effect upon CILCO's gas operations. AES is not a regulated public utility and does not own or operate any regulated public utility in the United States. CILCO will remain a separate, public, SEC-reporting company, with preferred stock that is publicly traded. The proposed mergers involving CILCORP and AES are different from situations in which two public utilities or their holding companies merge. In those cases, it is often possible to reduce operating costs and produce savings by combining operations and eliminating duplicative resources, functions or personnel. No such operational synergies or efficiencies will occur as a result of the mergers proposed in this proceeding, and none are intended. As I explained earlier, the proposed mergers are strategic in nature, to provide AES a mid-west energy presence and a base from which to grow in the Illinois energy markets, and perhaps beyond, and to provide CILCO a broader financial base and an assured future as a separate operating utility. For these reasons, 8 the Commission should find that there are no savings to be allocated as a result of the proposed reorganizations. Q. Section 7-204(c) further requires the Commission to determine whether CILCO should be allowed to recover any costs incurred in accomplishing the proposed reorganizations, and if so, the amount of those costs eligible for recovery, and how they will be recovered. What costs will be incurred to accomplish the proposed reorganizations? A. CILCO and CILCORP have incurred and will incur transaction costs in the form of investment banking fees, financial consulting costs, accountants' charges, printing, postage, proxy solicitations, filing fees, and legal fees, including the cost of this proceeding and the cost of obtaining other regulatory approvals. CILCO estimates that the total transaction costs incurred and to be incurred by CILCO and CILCORP to accomplish the reorganizations will exceed $6 million. In addition, based upon the market price of the common stock of CILCORP at the close of business preceding the announcement of the reorganizations, AES will pay a premium of more than $157 million for the common stock of CILCORP. The transaction costs and the premium are necessary expenses to accomplish the reorganizations, and are properly recoverable from CILCO's customers, at least to the extent of any savings that may be realized by CILCO as a result of the reorganizations, if such savings existed. Q. What findings does CILCO propose the Commission make with respect to the costs incurred to accomplish the reorganizations? A. The lack of any savings as a result of the reorganizations effectively 9 renders this issue moot. However, to permit a definitive finding on this issue in response to the requirements of Section 7-204(c), CILCO represents to the Commission that CILCO will not, in this proceeding or in any future gas rate case, seek recovery of any portion of the transaction costs or the premium paid by AES other than as an offset to any savings in the event that the Commission should determine that savings exist as a result of the reorganizations. Therefore, it is appropriate for the Commission to find in this proceeding that transaction costs in excess of $6 million and a premium in excess of $157 million have been incurred to accomplish the reorganizations, and are eligible for recovery. The Commission should further find that no recovery of these costs will be authorized in this proceeding, but in the event the Commission finds in any future CILCO gas rate case proceeding that there are any savings as a result of the reorganizations, CILCO may request at that time that it be permitted to offset the savings against the gas-related transaction costs and the premium paid to accomplish the reorganizations. Q. Mr. Shay, please explain why CILCO has requested expedited consideration of its Petition in this proceeding. A. CILCORP and AES had not expected that a separate approval proceeding would be required in Illinois, and had planned to have all other regulatory approvals secured so that the mergers could be finalized prior to the middle of 1999. A closing prior to that time is essential, among other reasons, for CILCO's participation in the initial opening of the Illinois electricity markets on October 1, 1999. The expectation that no regulatory 10 approval would be required in Illinois was part of the attraction of the merger transactions for AES and for CILCORP. The requirement for an additional regulatory approval necessarily adds uncertainty to the proposed mergers. Therefore, it is important to CILCO that this proceeding be considered on an expedited basis to assure that it does not interfere with the merger timetable that has been established and anticipated, or endanger the closing of the merger transactions. CILCO is also aware that federal regulators may wait until state regulators have completed their review before acting on merger proposals. State approval may also become crucial in soliciting stockholder approvals. For all these reasons, it is important that this proceeding be decided as quickly as possible. Q. Does this complete your prepared direct testimony? A. Yes, it does. 11 CILCO Exhibit No. 1.1 December 11, 1998 Ms. Donna M. Caton, Chief Clerk Illinois Commerce Commission 527 E. Capitol Springfield, Illinois 62794 Re: Central Illinois Light Company Notice of Reorganizations Dear Ms. Caton: Section 16-111(g) of the Public Utilities Act (Act) requires that notice be given to the Illinois Commerce Commission (Commission) of any proposed reorganization of an electric utility at least 30 days prior to the implementation of the reorganization. CILCORP Inc., the parent of Central Illinois Light Company, proposes to enter into a merger transaction as a result of which The AES Corporation will become the owner of all the capital stock of CILCORP Inc. This will constitute a reorganization as that term is defined in the Act. A second merger may follow the first. At the discretion of The AES Corporation, CILCORP Inc. may be merged into The AES Corporation, CILCORP Inc. would cease to exist, and The AES Corporation would become the owner of a majority of the voting capital stock of CILCO. If the second merger occurs, it will constitute a reorganization as that term is defined in the Act. Accordingly, pursuant to the requirements of Section 16-111(g) of the Act, Central Illinois Light Company, herewith provides to the Commission an original and four copies of Notice of Reorganizations, which describes the reorganizations which CILCORP Inc. proposes to implement. The Notice of Reorganizations is dated November 23, 1998, but filing was delayed until now in order to consider certain information received from the Commission Staff. Included in or attached to the Notice are the information and the certifications that Section 16-111(g) requires in connection with the notice of any proposed reorganization. No sale, assignment, lease or other transfer of utility assets will be effected by the reorganizations described in the Notice. Therefore, no proceeds of a sale, assignment, lease or other transfer will accrue to Central Illinois Light Company as a result of the reorganizations. Ms. Donna M. Caton December 11, 1998 Page 2 Please acknowledge receipt and filing of the Notice of Reorganizations by stamping and returning one copy of this letter and one copy of the Notice of Reorganizations. Thank you for your attention to this matter. Sincerely, Central Illinois Light Company By: /S/ Thomas D. Hutchinson ----------------------------------- Thomas D. Hutchinson, Controller CILCO Exhibit No. 1.1 STATE OF ILLINOIS ILLINOIS COMMERCE COMMISSION CENTRAL ILLINOIS LIGHT COMPANY ) ) Notice of a reorganization ) resulting in a change in the ) ownership or control of an ) entity which owns a majority ) of the capital stock of Central ) Illinois Light Company, and of a ) further reorganization resulting ) in a change in the ownership of ) a majority of the capital stock ) of Central Illinois Light ) Company ) NOTICE OF REORGANIZATIONS To: The Illinois Commerce Commission Pursuant to the provisions of Section 16-111(g) of the Public Utilities Act (220 ILCS 5/16-111(g)), Central Illinois Light Company hereby provides to the Illinois Commerce Commission (Commission) not less than 30 days notice of two proposed reorganizations. The first reorganization will involve the merger of Midwest Energy, Inc., an Illinois corporation and a wholly owned subsidiary of The AES Corporation, into CILCORP Inc., an Illinois corporation and the owner of a majority of the voting capital stock of Central Illinois Light Company. CILCORP Inc. will be the surviving corporation of this merger, and The AES Corporation will become the owner of all the capital stock of CILCORP Inc. Following the reorganization described above, a further reorganization may take place. In that reorganization, at the discretion of The AES Corporation, CILCORP Inc. may be merged into The AES Corporation. If that reorganization occurs, CILCORP Inc. would cease to exist, and The AES Corporation would become the owner of a majority of the capital stock of Central Illinois Light Company. Neither reorganization described in this Notice involves a merger between two or more public utilities, as that term is defined in Section 3-105 of the Act, or a merger of the holding companies of two or more public utilities. In accordance with the requirements of Section 16- 111(g) of the Act, Central Illinois Light Company provides the following information to the Commission: 1. A complete statement of the entries that Central Illinois Light Company will make on its books and records of account to implement the proposed reorganizations: No entries are required on the books and records of account of Central Illinois Light Company to implement the proposed reorganizations. 2. A certification from an independent certified public accountant that such entries are in accord with generally accepted accounting principles: Attached hereto as Appendix A is a certification by Arthur Andersen LLP, independent certified public accountants, that no entries are required on the books and records of account of Central Illinois Light Company to implement the proposed reorganizations. 3. A certification from the Chief Accounting Officer of Central 2 Illinois Light Company that such entries are in accord with previously approved guidelines for cost allocations between Central Illinois Light Company and its affiliates: Attached hereto as Appendix B is a certification by Thomas D. Hutchinson, Controller and Manager of Accounting of Central Illinois Light Company, that no entries are required on the books and records of account of Central Illinois Light Company to remain in compliance with previously approved guidelines for cost allocations between Central Illinois Light Company and its affiliates. 4. A list of all federal or state approvals that will be obtained before the proposed reorganization is implemented: Attached hereto as Appendix C is a list of the federal agencies and commissions from which approvals will be obtained before the proposed reorganizations are implemented. Certain filings will be made with the Illinois Secretary of State to implement the reorganizations. Central Illinois Light Company believes that no approvals, as such, are required from any state agency. However, as a cautionary measure, Central Illinois Light Company intends to file a separate petition to request the Commission to decline jurisdiction over the reorganizations, or, in the alternative, approve the reorganizations with respect to Central Illinois Light Company's gas operations. 5. An irrevocable commitment that Central Illinois Light Company will not, as a result of the proposed reorganizations, impose any stranded cost charges that it might otherwise be allowed to charge retail customers under federal law or increase the transition charges that Central Illinois Light 3 Company is otherwise entitled to collect under Article XVI of the Public Utilities Act: Central Illinois Light Company hereby irrevocably commits that it will not, as a result of the proposed reorganizations, impose any stranded cost charges that it might otherwise be entitled to charge retail customers under federal law and will not increase the transition charges that it is otherwise entitled to collect under Article XVI of the Public Utilities Act. Dated: November 23, 1998 CENTRAL ILLINOIS LIGHT COMPANY By: /s/ Thomas D. Hutchinson -------------------------------- Thomas D. Hutchinson, Controller APPENDIX A ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of CILCORP Inc. We have examined the accompanying statement from Central Illinois Light Company that no entries are required on its books and records of account to implement the proposed reorganization of CILCORP Inc., addressed in the Central Illinois Light Company Notice of Reorganizations with the State of Illinois Commerce Commission (dated November 23, 1998). Our examination was made in accordance with standards established by the American Institute of Certified Public Accountants and, accordingly, included such procedures as we considered necessary in the circumstances. In our opinion, the statement from Central Illinois Light Company referred to above is in conformity with generally accepted accounting principles. This report is intended solely for the use of CILCORP Inc. and the Illinois Commerce Commission and should not be used for any other purpose. /s/ Arthur Andersen LLP ------------------------ ARTHUR ANDERSEN LLP Chicago, Illinois November 23, 1998 APPENDIX B TO CENTRAL ILLINOIS LIGHT COMPANY'S NOTICE OF REORGANIZATIONS CERTIFICATION To: The Illinois Commerce Commission Pursuant to the provisions of Section 16-111(g) of the Public Utilities Act, Thomas D. Hutchinson certifies to the Illinois Commerce Commission as follows: 1. He is the Controller and Manager of Accounting of Central Illinois Light Company, and is the chief accounting officer of Central Illinois Light Company. 2. He is familiar with the terms of the reorganizations described in the Notice of Reorganizations to which this Certification is attached, and is familiar with the guidelines approved by the Illinois Commerce Commission for cost allocations between Central Illinois Light Company and its affiliates. 3. No entries are required on the books and records of account of Central Illinois Light Company in connection with or as a result of the reorganizations described in the Notice of Reorganizations in order for Central Illinois Light Company to remain in compliance with the guidelines approved by the Illinois Commerce Commission for cost allocations between Central Illinois Light Company and its affiliates. Dated: November 23, 1998 /s/ Thomas D. Hutchinson ---------------------------------------- Thomas D. Hutchinson, Controller Central Illinois Light Company APPENDIX C TO CENTRAL ILLINOIS LIGHT COMPANY'S NOTICE OF REORGANIZATIONS The following is a list of all federal agencies and commissions from which Central Illinois Light Company or CILCORP Inc. will obtain approvals before the proposed reorganizations are implemented: 1. Federal Energy Regulatory Commission 2. Securities and Exchange Commission 3. Department of Justice or Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 Dated: November 23, 1998 CILCO Exhibit No. 2.0 PREPARED DIRECT TESTIMONY OF NICHOLAS T. SHEA ON BEHALF OF CENTRAL ILLINOIS LIGHT COMPANY DOCKET NO. 98- Q. Please state your name and business address. A. My name is Nicholas T. Shea, and my business address is 300 Liberty Street, Peoria, Illinois 61602. Q. By whom are you employed and in what capacity? A. I am employed by Central Illinois Light Company (CILCO or Company) as the Director of Rates and Regulatory Affairs. Q. Please briefly describe your educational background and work experience. A. I am a graduate of Western Illinois University, with a Bachelor of Science degree and a Masters of Business Administration degree. I began my employment with CILCO in the accounting unit in 1972, and held several management positions within that area. Thereafter, I held positions in the Human Resources, Internal Audit, Information Technology, and Fuel Supply areas of the Company. I was promoted to my current position in late 1995. Q. Please describe your duties in your present position. A. I am responsible for the development of rates, terms, conditions and programs for the provision of public utility service, and for ensuring their implementation. My duties involve the evaluation of the impact of regulatory issues on CILCO, and the development and advocacy of CILCO's position in regulatory proceedings. I have responsibility for implementing the rules and regulations of the Illinois Commerce Commission (Commission) applicable to the Company, and for assuring compliance by the Company with regulatory requirements. Q. What is the purpose of your testimony in this proceeding? A. I will address the issues set forth in paragraphs (2), (3), (5) and (7) of Section 7-204(b) of the Public Utilities Act (Act), on which the Commission must make findings prior to approving the reorganizations described in the testimony of Mr. Shay in this proceeding. Q. Paragraph (2) of Section 7-204(b) requires the Commission to determine whether the proposed reorganizations will result in the unjustified subsidization of non-utility activities by the utility or its customers. What is your response? A. As Mr. Shay points out in his testimony, the proposed reorganizations will directly affect only the parent of CILCO. The only effect on CILCO is a change in the ownership of the capital stock of CILCO's parent corporation and, at the discretion of The AES Corporation (AES), a change in the ownership of CILCO's common stock. All the guidelines and procedures currently applicable to CILCO's non-utility transactions will remain applicable after the reorganizations and will assure that there is no subsidization of non-utility activities by CILCO or its customers. 2 Q. What guidelines and procedures are currently in place at CILCO with respect to non-utility activities? A. CILCO has on-file with the Commission guidelines and procedures covering transactions between CILCO and its affiliates. These guidelines were adopted and filed pursuant to the Commission's Order in Docket No. 84-0413. In addition, CILCO has filed guidelines and procedures with the Commission applicable to all non-utility activities of CILCO. These guidelines were adopted pursuant to the rule recently approved by the Commission at 83 Ill. Admin. Code, Part 506, Accounting for Non-Public Utility Business of Gas Utilities. Both sets of procedures assure that there will be no subsidization of affiliate or other non-utility transactions. CILCO is also required by the Commission's rules to make biennial audits of its compliance with these procedures. CILCO recently completed those audits and filed them with the Commission on December 1, 1998. The audit reports found that CILCO was in compliance with the guidelines covering affiliate and other non-utility transactions. These audits will be performed at two-year intervals in the future, and provide continuing assurance that there will be no subsidy of non-utility activities by CILCO or its customers. Q. Paragraph (3) of Section 7-204(b) requires the Commission to determine that costs and facilities will be fairly and reasonably allocated between utility and non-utility activities in such a manner that the Commission may identify those costs and facilities which are properly included by the utility for ratemaking purposes. How is this requirement satisfied? 3 A. The guidelines and procedures I previously described, together with the biennial audits required by Commission rules to determine compliance with those guidelines and procedures, provide assurance that the costs and facilities with respect to non-utility transactions will be fairly and reasonably allocated between utility and non-utility activities. The procedures applicable under 83 Ill. Adm. Code, Part 506, require that all non-utility transactions be recorded in sub-accounts. This makes it easier for the Commission as well as CILCO's own auditors to review CILCO's non-utility activities to assure there is proper allocation of costs and facilities for ratemak1ng purposes. Q. Mr. Shea, paragraph (5) of Section 7-204(b) requires that before approving the proposed reorganizations, the Commission must determine that CILCO will remain subject to all applicable laws, regulations, rules, decisions and policies governing the regulation of Illinois public utilities. Will CILCO remain subject to all these regulatory requirements after the reorganizations? A. Yes. CILCO will continue to operate as a regulated public utility after the reorganizations, and will remain subject to all requirements applicable to public utilities. The reorganizations will cause no change whatsoever affecting the regulation of CILCO as a public utility. Q. Paragraph (7) of Section 7-204(b) of the Act requires that before approving the proposed reorganizations, the Commission must determine that there will be no adverse rate impacts on retail customers as a result of the reorganizations. What is your response? 4 A. The proposed reorganizations will not directly affect CILCO or its gas operations, and will not result in any increase in the costs incurred by CILCO in providing gas service. Therefore, there will be no adverse rate impacts on CILCO's retail gas customers. Q. Does this complete your prepared direct testimony? A. Yes, it does. 5 A. Yes. Both Moody's and Standard & Poor's placed CILCO's ratings on credit watch with negative implications after the proposed mergers were announced. However, this is a normal practice by the rating agencies after such announcements, and the ratings will be more carefully analyzed after the rating agencies receive more details of the proposed mergers. I do not expect the credit watch listing to have any material effect on CILCO's ability to finance on reasonable terms after the mergers are completed. Q. How does CILCO presently gain access to common equity capital? A. Common equity capital is provided to CILCO through retained earnings. If common equity capital is required in greater amounts than usual, CILCO can reduce the amount of dividends paid to its holding company. If common equity capital is required by CILCO in excess of the earnings on common equity, the parent corporation would have to invest additional capital, either out of cash flow, retained earnings, borrowings, or the issuance of common equity or preferred stock by the parent. CILCO has not required an investment of common equity capital beyond its own earnings since it became a subsidiary of CILCORP Inc., and CILCO does not anticipate the need for the investment of common equity capital for its gas operations within the foreseeable future. However, if investments of common equity capital were required in the future, the larger financial base of AES would likely make it easier to obtain any needed capital after the proposed mergers. Q. Does this complete your prepared direct testimony? A. Yes, it does. 4 CILCO Exhibit No. 3.0 PREPARED DIRECT TESTIMONY OF ROBERT J. SPROWLS ON BEHALF OF CENTRAL ILLINOIS LIGHT COMPANY DOCKET NO. 98- Q. Please state your name and business address. A. Robert J. Sprowls, 300 Hamilton Square, Peoria, Illinois 61602. Q. By whom are you employed and in what capacity? A. I am a Vice President and the Chief Financial Officer of Central Illinois Light Company (CILCO). Q. Please briefly describe your educational background and work history. A. I received a Bachelor's degree in Economics and Business Administration from Knox College, and a Master of Business Administration degree, with a concentration in Accounting and Finance, from Bradley University. I am a Certified Public Accountant and a Certified Management Accountant. I joined CILCO in 1982 as an Economic Analyst. Thereafter, I served in various positions, including Senior Budget Analyst at CILCO, Supervisor - Budgeting and Forecasting at CILCO, Treasurer of CILCO, Treasurer of CILCORP Inc. (CILCORP), CILCO's parent company, Vice President - Strategic Services Division at CILCO, and Assistant to the CEO at CILCORP. In August of 1996, I was named Vice President of Finance of QST Enterprises Inc., a CILCORP subsidiary, and in May of 1997, I was elected Senior Vice President and Chief Financial Officer of QST Enterprises. I was elected to my present position in August of 1998. Q. What are your duties as Vice President and Chief Financial Officer of CILCO? A. I am responsible for the Accounting, Treasury, Corporate Investments, Internal Audit, and Shareholder Records functions of the Company. Q. What is the purpose of your testimony in this proceeding? A. I will address the issues set forth in paragraph (4) of Section 7-204(b) of the Public Utilities Act (Act), on which the Illinois Commerce Commission (Commission) must make findings prior to approving the reorganizations described in the testimony of Mr. Shay in this proceeding. Q. Under paragraph (4) of Section 7-204(b), before approving the merger transactions described by Mr. Shay, the Commission must find that the transactions will not significantly impair CILCO's ability to raise necessary capital on reasonable terms or to maintain a reasonable capital structure. What is your response? A. In my opinion, the proposed mergers will not impair CILCO's ability to raise capital on reasonable terms, and will not impair CILCO's ability to maintain a reasonable capital structure. My conclusion is based upon two important facts. First, the balance sheet and capitalization of CILCO will not be changed by the proposed mergers. Second, CILCO's financial ratios will not be changed as a result of the proposed mergers. Q. How will CILCO raise capital after the mergers? A. In the same way it does today. CILCO can raise capital through the issuance 2 of short-term debt or bank lines of credit, and, with the Commission's approval, through the issuance of long-term debt. CILCO also raises capital through the issuance of preferred stock. CILCO will have the same ability to borrow and to issue preferred stock after the proposed mergers are completed. Q. What factors determine the ability of a utility to issue debt or preferred stock on reasonable terms? A. The overall financial strength of the utility is the primary factor, and is related to the utility's current and expected capital structure, interest and preferred dividend coverages, and business risk, along with other, similar factors. The financial strength is normally reflected through ratings by agencies such as Moody's, Standard & Poor's, and Duff & Phelps. Q. What are the current ratings for CILCO's mortgage bonds, unsecured debt, and preferred stock? A. CILCO's secured debt is currently rated Aa2 by Moody's and AA- by Standard & Poor's. The ratings for CILCO's preferred stock are Aa3 by Moody's and A+ by Standard & Poor's. All these ratings are within the "investment grade" category that permits utilities to localize the most favorable terms and widest investment audience when issuing securities. It is expected that the ratings will remain at investment grade levels after the mergers are completed. Q. Has CILCO been placed on a "credit watch" list, indicating that the ratings of CILCO's securities may be reviewed as a result of the proposed mergers? 3 EXHIBIT G UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION Central Illinois Light Company, ) on its own behalf ) Docket No. EC99-____________ and on behalf of ) The AES Corporation ) VERIFICATION State of Illinois ) County of Peoria ) ss.: WILLIAM M. SHAY, being duly sworn, deposes and says: 1. I am Senior Vice president of Central Illinois Light Company ("CILCO") and am authorized to execute this Verification. 2. I have read the attached Application for Authorization for the Disposition of Jurisdictional Facilities Under Section 203 of the Federal power Act and Request for Expedited Treatment and know the contents thereof. 3. The statements made therein pertaining to CILCO are true and correct to the best of my knowledge, information and belief. /s/ William M. Shay ---------------------------- (Signature) Sworn to and subscribed before me this 18th day of February, 1999. Melissa M. Kelly - --------------------------- Notary Public [Seal of Melissa M. Kelly, Notary Public, State of Ilinois My Commission Expires 11/21/01] EXHIBIT H UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Central Illinois Light Company, ) Docket No. EC99-______ on its own behalf ) and on behalf of ) The AES Corporation ) NOTICE OF FILING Take notice that on February 19, 1999, Central Illinois Light Company ("CILCO") and The AES Corporation ("AES") submitted for filing, pursuant to section 203 of the Federal Power Act and Part 33 of the Commission's regulations, an application for the approval of the merger of CILCO's parent, CILCORP Inc. ("CILCORP"), into and with Midwest Energy, Inc. ("Midwest"), a wholly-owned subsidiary of AES, with CILCORP being the surviving entity, and thereafter, at the option of AES, the merger of CILCORP into AES. A copy of the filing has been served upon the regulatory agency of the affected state, the Illinois Commerce Commission. Any person desiring to be heard or to protest said application should file a petition to intervene or protest with the Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426 in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedures (18 C.F.R. Sections 385.211, 385.214). All such motions or protests should be filed on or before ________________. Protests will be considered by the Commission in determining the appropriate action to be taken but will not serve to make the protesters parties to the proceeding. Any person wishing to become a party must file a motion to intervene. Copies of this filing are on file with the Commission and are available for public inspection. David P. Boergers Secretary EXHIBIT I [MAP OF CENTRAL ILLINOIS LIGHT CO. TRANSMISSION AND SUB-TRANSMISSION SYSTEM SYSTEM ENGINEERING DEPT.] EXHIBIT J LIST OF PERSONS ON WHOM SERVICE HAS BEEN MADE Ms. Donna M. Caton, Chief Clerk Illinois Commerce Commission 527 East Capitol Springfield, Illinois 62794 Chairman, Utilities Committee Village of Riverton P.O. Box 620 Riverton, Illinois 62561 EX-99.8 9 EXHIBIT H-1 PROPOSED FORM OF NOTICE EXHIBIT H-1 UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 Release No. / , 1999 - ------------------------------------ ) In the Matter of ) ) The AES Corporation ) 1001 North 19th Street ) Arlington, VA 22209 ) ) (70- ) ) - ------------------------------------) The AES Corporation ("AES"), a Delaware Corporation, has filed an Application on Form U-1 for an exemption from the provisions of the Public Utility Holding Company Act of 1935 (the "Act"). AES seeks an order from the Commission to the effect that, upon consummation of the merger transaction described therein, the resulting public utility holding company, and every subsidiary company thereof as such, will be exempt from the provisions of the Act, other than Section 9(a)(2), pursuant to Section 3(a)(5) of the Act. AES intends to merge its wholly-owned subsidiary, Midwest Energy, Inc. ("Midwest Energy"), an Illinois corporation, with and into CILCORP Inc. ("CILCORP"), a utility holding company in the State of Illinois, with CILCORP as the surviving corporation (the "Transaction"). Following the Transaction, CILCORP will be a first-tier, direct subsidiary of AES, and CILCORP's subsidiaries will maintain their current structure as direct or indirect subsidiaries, as the case may be, of CILCORP. CILCORP will continue to be an Illinois corporation with its principal executive office in Peoria, Illinois and AES will continue to be a Delaware corporation with its principal executive offices in Arlington, Virginia. AES is a United States-based multinational electric power generation and energy distribution company, with operations in 17 countries worldwide. AES is not currently a holding company subject to the provisions of the Act because none of its subsidiaries is a public utility company as defined by the Act. AES is engaged principally in the development, ownership, and operation of electric generating plants and electric and gas distribution companies. AES currently owns and/or operates (entirely or in part) a diverse international portfolio of electric power plants with a total capacity of 24,076 megawatts ("MW"), including plants that are part of distribution companies in which AES has an interest. CILCORP is an intrastate holding company exempt from the Act, except for Section 9(a)(2), under Section 3(a)(1) and Rule 2. CILCORP is the parent of four first-tier subsidiaries: Central Illinois Light Company ("CILCO"), QST Enterprises Inc., CILCORP Investment Management Inc., and CILCORP Ventures Inc. CILCO is the primary business subsidiary of CILCORP and is a utility subsidiary principally engaged in the generation, transmission, distribution and sale of electric energy in an area of approximately 3,700 square miles in central and east-central Illinois, and the purchase, distribution, transportation and retail sale of natural gas in an area of approximately 4,500 square miles in central and east-central Illinois. The merger of CILCORP with and into Midwest Energy will be governed by the terms of an Agreement and Plan of Merger dated as of November 22, 1998 (the "Merger Agreement"), by and among AES, CILCORP and Midwest Energy. As a result of the Transaction, each outstanding share of common stock of CILCORP and each associated purchase right under the Rights Agreement, dated as of October 29, 1996, between Continental Stock Transfer and Trust Company and CILCORP will be converted into the right to receive $65.00 (subject to adjustment as described in the Merger Agreement). Following the Transaction, CILCORP will remain predominantly an intrastate holding company that will not derive any material part of its income from an out-of-state utility subsidiary. Accordingly, CILCORP will continue to claim an exemption from registration under PUHCA pursuant to Section 3(a)(1) and Rule 2. AES seeks an order from the Commission that AES will be exempt from registration pursuant to Section 3(a)(5) of the Act. AES states that following the Transaction it will meet the statutory requirements of the Section 3(a)(5) exemption because it will not be and will not derive a material part of its income, directly or indirectly, from any one or more subsidiary companies which are, a company or companies the principal business of which within the U.S. is that of a public utility company. AES also states that following the Transaction, AES will be a holding company system with significant foreign operations whose U.S. utility operations do not account for a material part of the holding company's income and are small in size. Accordingly, exemption under Section 3(a)(5) is appropriate and in the public interest. The Application and any amendments thereto are available for public inspection through the Commission's Office of Public Reference. Interested persons wishing to comment or request a hearing should submit their views in writing by _______, 1999, to the Secretary, Securities and Exchange Commission, Washington, D.C. 20549, and serve a copy on AES at the address specified above. Proof of service (by affidavit or, in case of an attorney at law, by certificate) should be filed with the request. Any request for hearing shall identify specifically the issues of fact or law that are disputed. A person who so requests will be notified of any hearing, if ordered, and will receive a copy of any notice or order issued in the manner. After said date, the Application, as filed or as amended, may be granted and/or permitted to become effective. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jonathan G. Katz Secretary EX-99.9 10 EXHIBIT K-1 AES EMPLOYEES Exhibit K-1 AES Employees [Two Pie Charts Placed Side-by-Side] The first pie chart is entitled "By First Language" and is placed to the left of the second pie chart. This pie chart reflects the fact that the first language of six percent of AES employees is English (as shown by a red slice). The first language of ninety-four percent of AES employees is a language other than English(as shown by a blue slice). The second pie chart is entitled "By Work Location" and is placed to the right of the first pie chart. This pie chart reflects the fact that four percent of AES employees are located in the United States (as shown by a red slice). Ninety-six percent of AES employees are located outside of the United States (as shown by a blue slice). EX-99.10 11 EXHIBIT K-2 AES SUBSIDIARIES EXHIBIT K-2 AES Subsidiaries
Subsidiary Jurisdiction - ---------- ------------ AES - MS Pty Ltd. Australia AES Acquisition Co. Ltd. Bermuda AES Alamitos, L.L.C. Delaware AES Allegheny, Inc. Delaware AES America's Holdings, Inc. Delaware AES Americas International Holdings, Limited Bermuda AES Americas Investments, Inc. Delaware AES Argentina Operations, Ltd. Cayman Islands AES Argentina, Inc. Delaware AES Australia Holding B.V. Netherlands AES Australian Energy Finance Pty Limited Australia AES Balboa, Inc. Delaware AES Bandeirante, Ltd. Cayman Islands AES Barry Operations Ltd. United Kingdom AES Barry, Ltd. United Kingdom AES Beaver Valley, Inc. Delaware AES Borsodi Avamtermelo Kft Hungary AES Brasil Ltda. Brazil AES Brazil Holdings, Inc. Delaware AES Brazil International Holdings, Limited Bermuda AES Bucks County, Inc. Delaware AES California Management Co., Inc. Delaware AES Campos Novos Inc. Cayman Islands AES Canada, Inc. Delaware AES Caribbean Holdings, Inc. Delaware AES Caribbean Services, Inc. Delaware AES Cayman Guaiba, Ltd. Cayman Islands AES Cayman I Cayman Islands AES Cayman II Cayman Islands AES Cayman Islands Holdings, Ltd. Cayman Islands AES Cayman Pampas, Ltd. Cayman Islands AES Cemig Empreendimentos Inc. Cayman Islands AES Cemig Funding Corporation Delaware AES Cemig Holdings, Inc. Delaware AES Chigen Company (L) Limited Malaysia AES China Generating Co. Ltd. Bermuda AES Connecticut Management, Inc. Delaware AES Constructors, Inc. Delaware AES Coral Reef, LLC Cayman Islands AES Deepwater, Inc. Delaware AES Distribucion Dominicana, Ltd. Cayman Islands AES Dominican Holdings, Inc. Delaware AES El Salvador, Ltd. Cayman Islands AES Electric Investments, Limited Bermuda AES Elsta B.V. Netherlands AES Energen, Ltd. Cayman Islands AES Energy (Asia) Pte Ltd. Singapore AES Energy Canada, Inc. Canada AES Energy Mexico, Inc. Delaware AES Energy of Colombia, Inc. Delaware AES Energy, Ltd. Bermuda AES Engineering, Inc. Cayman Islands AES Europe S.A. France AES Forca, Ltd. Cayman Islands AES FSC Corporation Barbados AES Gas Power, Inc. Delaware AES Global Power Holdings, B.V. Netherlands AES GPH, L.L.C. Delaware AES Guaiba Empreedementos Ltda. Brazil AES Guaiba II Empreedementos Ltda. Brazil AES Harriman Cove, Inc. Delaware AES Hawaii Management Company, Inc. Delaware AES Hawaii, Inc. Delaware AES Hazleton, Inc. Delaware AES HGP, Inc. Delaware AES HLP, Inc. Delaware AES Holdings Limited Cayman Islands AES Hungary Limited United Kingdom AES Intercon II, Ltd. Cayman Islands AES Intercon, Ltd. Cayman Islands AES Interenergy, Ltd. Cayman Islands AES International Development, Ltd. Cayman Islands AES International Holdings II, Ltd. British Virgin Islands AES International Holdings, Inc. Delaware AES International Holdings, Ltd. British Virgin Islands AES Investments II, Ltd. Cayman Islands AES Investments Limited Cayman Islands AES Jericoacoara Ltda. Brazil AES Joshua Tree, Inc. Delaware AES Juniata, Inc. Delaware AES Kingston, Inc. Canada AES Lal Pir Limited Pakistan AES Las Mareas, Inc. Delaware AES Latin America, Inc. Delaware AES Latrobe Valley, BV Netherlands AES Light II, Inc. Delaware AES Light, Inc. Delaware AES Los Mina Finance Company Cayman Islands AES Los Mina Holdings, Inc. Delaware AES Mayan Holdings, S. de R.L. de C.V. Mexico AES Medway Electric Limited United Kingdom AES Medway Operations Limited United Kingdom AES Merida B.V. Netherlands AES Merida III, S. de R. L. de C. V. Mexico AES Merida Management Services, S. de R.L. de C.V. Mexico AES Merida Operations Cayman Islands AES Mexico Development, S. de R.L. de C.V. Mexico AES Mexico Farms, Inc. Delaware AES Miskolc, Inc. Delaware AES Monterey, Inc. Delaware AES Mt. Stuart B.V. Netherlands AES Ocean Springs, Ltd. Cayman Islands AES Oklahoma Management Co., Inc. Delaware AES Orissa Operations Private Limited India AES Pak Gen (Pvt) Company Pakistan AES Pak Gen Holdings, Inc. Mauritius AES Pakistan (Holdings) Limited United Kingdom AES Pakistan (Pvt) Ltd. Pakistan AES Pakistan Holdings Mauritius AES Pakistan Operations, Ltd. Delaware AES Partington Ltd. United Kingdom AES Pasadena, Inc. Delaware AES Piedmont II, Inc. Delaware AES Piedmont, Inc. Delaware AES Placerita, Inc. Delaware AES Power North, Inc. Delaware AES Power, Inc. Delaware AES Prachinburi Holdings B.V. Netherlands AES Rio Diamante, Inc. Delaware AES Rio Ozama Holdings, Ltd. Cayman Islands AES Riverside, Inc. Delaware AES San Nicolas, Inc. Delaware AES Shady Point, Inc. Delaware AES Silk Road Ltd. United Kingdom AES Silk Road, Inc. Delaware AES South City, L.L.C. Delaware AES ST Ekibastuz, LLP Kazakhstan Companhia Centro-Oeste de Distribuicao de Energia Eletrica (D.B.A."AES Sul") Brazil AES Sul Distribuidora Gaucha de Energia S.A. Brazil AES Summit Generation Ltd. United Kingdom AES Suntree Power Ltd. Ireland AES Terneuzen Engineering B.V. Netherlands AES Terneuzen Management Services B.V. Netherlands AES Thames, Inc. Delaware AES Transpower, Inc. Delaware AES Transpower, Inc. Mauritius AES Treasure Cove, Ltd. Cayman Islands AES Trust I Delaware AES Trust II Delaware AES Turbine Equipment, Inc. Delaware AES Tyneside Ltd. United Kingdom AES UK Energy Holdings Ltd. United Kingdom AES UK Holdings, Ltd. United Kingdom AES Victoria Holdings BV Netherlands AES Victoria Partners B.V. Netherlands AES Warrior Run, Inc. Delaware AES Western Maryland Management Co., Inc. Delaware AES WR Limited Partnership Delaware AES Yucatan, S. de R.L. de C.V. Mexico AES/Sonat Adelanto, Inc. Delaware AES/Sonat Power, L.L.C. Virginia AESEBA Funding Corporation Delaware AESEBA S.A. Argentina Altai Power LLP Kazakhstan Anhui Liyuan - AES Power Co., Ltd. China Australian Power Holdings Netherlands Australian Power Partners B.V. Netherlands Bitacora B.V. Netherlands Borsod Energetikia, Kft. Hungary BV Partners Delaware Cavanal Minerals, Inc. Delaware Central Termica San Nicolas S.A. Argentina Cloghan Limited Northern Ireland Cloghan Point Holdings Limited Northern Ireland CMS Generation San Nicolas Company Michigan Coal Creek Minerals, Inc. Delaware DOC Dominicana, S.A. Dominican Republic DOC Guatemala S.A. Guatemala Dominican Power Metering, Ltd. Cayman Islands Dominican Power Partners LDC Cayman Islands Emerald Power Holdings C.V. Netherlands Empresa Distribuidora de Energia Norte S.A. Argentina Empresa Distribuidora de Energia Sur S.A. Argentina European Power Holdings B.V. Netherlands Gippsland Australia Global Power Holdings CV Netherlands Hazelwood Finance Limited Partnership Australia Hefei Zhongli Energy Co. Ltd. China Hidroelectrica Rio Juramento S.A. Argentina Hidrotermica San Juan S.A. Argentina Hunan Xiangci-AES Hydro Power Company Ltd. China Indian Queens Power Ltd. United Kingdom Inversora AES Americas S.A. Argentina Inversora de San Nicolas S.A. Argentina Jiaozuo Wan Fang Power Company Ltd. China Kingston Cogen Limited Partnership Canada Kingston Northern Lights, Inc. Canada Kingston Power Partners, Inc. Canada Kokomo Holdings Ltd. Cayman Islands Loy Yang Finance Corporation Pty Ltd Australia Morwell Australia Mountain Minerals, Inc. Delaware Mt. Stuart General Partnership Australia Nogradszen Kft Hungary Northern/AES Energy, LLC Minnesota Placerita Oil Co., Inc. Delaware Sichuan Fuling Aixi Power Company Ltd. China Tau Power Holdings BV Netherlands Terneuzen Cogen B.V. Netherlands Tisza Eromu Rt. Hungary Twin Rivers Power, Inc. Delaware UK Asset Management Services, Ltd. United Kingdom UK Energy Holdings Limited United Kingdom UK Power Finance Ltd United Kingdom Wuxi AES CAREC Gas Turbine Power Company Ltd. China Wuxi AES Zhong Hang Power Company Limited China Zarnowicka Elektrownia Gazowa S.A. Poland
EX-99.11 12 EXHIBIT K-3 GENERATING PLANTS IN OPERATION
Exhibit K-3 GENERATING PLANTS IN OPERATION AES Capacity AES Equity Regulatory Company Country (MW) Interest (%) (MW) Status - ------- ------- ---- ------------ ---- ------ AES Deepwater USA 143 100.00 143.00 QF AES Beaver Valley USA 125 80.00 100.00 QF AES Placerita USA 120 100.00 120.00 QF AES Thames USA 181 100.00 181.00 QF AES Shady Point USA 320 100.00 320.00 QF AES Hawaii USA 180 100.00 180.00 QF AES Alamitos USA 2,083 100.00 2,083.00 EWG AES Redondo Beach USA 1,310 100.00 1,310.00 EWG AES Huntington Beach USA 563 100.00 563.00 EWG AES Kingston Canada 110 50.00 55.00 EWG AES San Nicolas Argentina 650 69.00 448.50 EWG AES Cabra Corral Argentina 102 98.00 99.96 FUCO AES El Tunal Argentina 10 98.00 9.80 FUCO AES Sarmiento Argentina 33 98.00 32.34 FUCO AES Ullum Argentina 45 98.00 44.10 FUCO AES Quebrada Argentina 45 100.00 45.00 FUCO Fontes Nova - Light Brazil 144 13.75 19.80 FUCO Ilha dos Pombos - Light Brazil 164 13.75 22.55 FUCO Nilo Pecanha - Light Brazil 380 13.75 52.25 FUCO Pereira Passos - Light Brazil 100 13.75 13.75 FUCO CEMIG (37 plants) Brazil 5,668 21.65 1,227.01 FUCO EGE Bayano (2 plants) Panama 192 49.00 94.08 FUCO EGE Chiriqui Panama 90 49.00 44.10 FUCO AES Los Mina Dom. Rep. 210 100.00 210.00 EWG AES Mt. Stuart Australia 288 100.00 288.00 FUCO AES Xiangci - Cili China 26 51.00 13.26 FUCO AES Wuxi China 63 55.00 34.65 FUCO Wuhu China 250 25.00 62.50 FUCO Yangchun China 15 25.00 3.75 FUCO Chengdu Lotus City China 48 35.00 16.80 FUCO AES Jiaozou China 250 70.00 175.00 FUCO AES Hefei China 115 70.00 80.50 FUCO AES Fuling Aixi China 50 70.00 35.00 FUCO AES Ekibastuz Kazakhstan 4,000 70.00 2,800.00 FUCO AES Ust-Kamenogorsk GES Kazakhstan 332 85.00 282.20 FUCO AES Shulbinsk GES Kazakhstan 702 85.00 596.70 FUCO AES Ust-Kamenogorsk TETS Kazakhstan 240 85.00 204.00 FUCO AES Leninogorsk TETS Kazakhstan 50 85.00 42.50 FUCO AES Sogrinsk TETS Kazakhstan 50 85.00 42.50 FUCO AES Semipalatinsk TETS Kazakhstan 10 85.00 8.50 FUCO OPGC India 420 49.00 205.80 FUCO AES Lal Pir Pakistan 351 90.00 315.90 FUCO AES Pak Gen Pakistan 344 90.00 309.60 FUCO AES Borsod Hungary 171 96.00 164.16 FUCO AES Tisza II Hungary 860 96.00 825.60 FUCO AES Tiszapalkonya Hungary 250 96.00 240.00 FUCO AES Elsta Netherlands 405 50.00 202.50 FUCO Medway U.K. 688 25.00 172.00 FUCO AES Indian Queens U.K. 140 100.00 140.00 EWG Kilroot U.K. 520 47.00 244.40 FUCO Belfast West U.K. 240 47.00 112.80 FUCO AES Barry U.K. 230 100.00 230.00 FUCO TOTALS 24,076 15,266.86 Percentage of Foreign Generation 79.13% 67.25%
DISTRIBUTION COMPANIES Company Location AES Interest Regulatory Status - ------- -------- ------------ ----------------- AES EDEN Argentina Majority FUCO AES EDES Argentina Majority FUCO AES EDELAP Argentina Majority FUCO AES Sul Brazil Majority FUCO Light Servicios de Electricidade, S.A. Brazil Minority FUCO o Electropaulo Metropolitana, S.A. Cemig, S.A. Brazil Minority FUCO AES CLESA El Majority FUCO Salvador AES Telasi Georgia Majority FUCO
EX-99.12 13 EXHIBIT K-4 GLOBAL MAP Exhibit K-4 [Map] Map of the world, including national borders. The map identifies the location of AES's generating plants (designated by purple triangles), distribution companies (designated by red squares), projects under construction or advanced development (designated by orange circles with orange borders) and pending acquisitions (designated by black squares). In cases where numerous generating plants are located in the same country or region within a country, the multiple plants may be designated by a large purple triangle and footnoted in order to identify the number of generating plants represented by such box. AES has eighty-nine generating plants located in the following countries: the United States - nine, Canada - one, Panama - three, the Dominican Republic - one, Argentina - six, Brazil - forty-one, the United Kingdom - five, the Netherlands - one, Hungary - three, Pakistan - two, India - one, Kazakhstan - seven, China - eight, Australia - one. AES has nine distribution companies located in the following countries: Brazil - four, Argentina - three, El Salvador - one, Georgia - one. AES has eighteen projects under construction or advanced development located in the following countries; the United States - three, Mexico - one, Puerto Rico - one, Brazil - one, Argentina - two, the United Kingdom - two, Hungary - one, Poland - one, Egypt - one, India - one, Sri Lanka - one, Bangladesh - two, China - one. AES has two pending acquisitions in the United States. EX-99.13 14 EXHIBIT K-5 CILCO CONTRIBUTIONS
EXHIBIT K-5 CILCO Contributions To AES/CILCORP Consolidated Holding Company (GAAP BASIS) 1996 1997 1998 GROSS REVENUES 35.44% 22.91% 18.00% AES ($MM) 835 1,411 2,398 CILCO ($MM) 519 547 532 AES/ CILCORP ($MM) 1,463 2,387 2,957 NET OPERATING REVENUES 30.61% 19.10% 15.69% AES ($MM) 614 973 1,824 CILCO ($MM) 320 331 344 AES/ CILCORP ($MM) 1,043 1,734 2,195 OPERATING INCOME 19.72% 17.40% 11.27% AES ($MM) 278 368 732 CILCO ($MM) 70 74 93 AES/ CILCORP ($MM) 353 424 824 NET INCOME 29.51% 26.32% 11.89% AES ($MM) 125 185 307 CILCO ($MM) 45 53 41 AES/ CILCORP ($MM) 153 201 345 NET ASSETS 21.11% 9.98% 8.53% AES ($MM) 3,622 8,909 10,688 CILCO ($MM) 1,036 1,022 1,024 AES/ CILCORP ($MM) 4,908 10,244 12,001
EX-99.14 15 EXHIBIT K-6 MARKET SHARES FOR ELECTRIC CO. Exhibit K-6 Market Shares for Electric Companies in Illinois and Bordering States (Companies Listed in Order of Customers Served) [Vertical Bar Chart] X-Axis (bottom of chart): Electric Companies in Illinois and Bordering States. Y-Axis: (left side of the chart): Market shares ranging from 0 percent to 25 percent. Three sets of data are graphed: Market shares in terms of assets (represented by green bars), market shares in terms of revenues (represented by blue bars) and market shares in terms of the number of customers (represented by red bars). The data points for each of these sets of data are provided below.
Number of Holding Company Assets Revenue Customers - --------------- ------ ------- --------- Unicom Corp. 23.0% 19.7% 19.6% American Elec. Power Co., Inc. 15.7% 19.1% 17.0% Ameren Corp. 9.1% 7.9% 8.6% Northern States Power Co. 6.0% 6.8% 8.4% Cinergy Corp. 7.8% 11.1% 8.0% Wisconsin Energy Corp. 4.3% 3.9% 5.6% Alliant Energy Corp. 4.1% 4.2% 5.1% MidAmerican Energy Holdings Co. 3.4% 3.1% 3.7% Illinova Corp. 5.6% 3.9% 3.2% KU Energy Corp. 2.2% 2.0% 2.7% Kansas City Power & Light Co. 3.0% 2.5% 2.5% IPALCO Enterprises, Inc. 2.4% 2.0% 2.4% NIPSCO Industries, Inc. 3.4% 2.8% 2.4% WPS Resources Corp. 1.2% 1.3% 2.1% UtiliCorp United, Inc. 1.2% 1.5% 2.1% LG&E Energy Corp. 2.0% 1.7% 2.0% Cilcorp, Inc. 1.0% 0.9% 1.1% Everyone else combined 3.5% 3.0% 3.5%
MARKET SHARE FOR ELECTRIC COMPANIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY REVENUE Holding Company Revenue Rank Share of Cumulative (millions of $) Total Share - ------------------------------------------------------------------------------------------- Unicom Corp. 7,176 1 19.7% 19.7% American Electric Power Co., Inc. 6,979 2 19.1% 38.8% Cinergy Corp. 4,059 3 11.1% 49.9% Ameren Corp. 2,889 4 7.9% 57.9% Northern States Power Co. 2,483 5 6.8% 64.7% Alliant Energy Corp. 1,524 6 4.2% 68.8% Illinova Corp. 1,420 7 3.9% 72.7% Wisconsin Energy Corp. 1,412 8 3.9% 76.6% MidAmerican Energy Holdings Co. 1,126 9 3.1% 79.7% NIPSCO Industries, Inc. 1,017 10 2.8% 82.5% Kansas City Power & Light Co. 896 11 2.5% 84.9% IPALCO Enterprises, Inc. 738 12 2.0% 87.0% KU Energy Corp. 716 13 2.0% 88.9% LG&E Energy Corp. 615 14 1.7% 90.6% UtiliCorp United, Inc. 557 15 1.5% 92.1% Minnesota Power, Inc. 491 16 1.3% 93.5% WPS Resources Corp. 479 17 1.3% 94.8% Ohio Valley Electric Corp. 450 18 1.2% 96.0% CILCORP, INC. 338 19 0.9% 97.0% Everyone else combined 1,107 3.0% 100.0% Total 36,474
MARKET SHARE FOR ELECTRIC COMPANIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY ASSETS Holding Company Assets Rank Share of Cumulative (millions of $) Total Share - ------------------------------------------------------------------------------------------- Unicom Corp. 26,322 1 23.0% 23.0% American Electric Power Co., Inc. 17,993 2 15.7% 38.7% Ameren Corp. 10,446 3 9.1% 47.8% Cinergy Corp. 8,951 4 7.8% 55.6% Northern States Power Co. 6,866 5 6.0% 61.6% Illinova Corp. 6,465 6 5.6% 67.2% Wisconsin Energy Corp. 4,969 7 4.3% 71.5% Alliant Energy Corp. 4,682 8 4.1% 75.6% NIPSCO Industries, Inc. 3,911 9 3.4% 79.0% MidAmerican Energy Holdings Co. 3,876 10 3.4% 82.4% Kansas City Power & Light Co. 3,497 11 3.0% 85.5% IPALCO Enterprises, Inc. 2,695 12 2.4% 87.8% KU Energy Corp. 2,553 13 2.2% 90.0% LG&E Energy Corp. 2,242 14 2.0% 92.0% WPS Resources Corp. 1,409 15 1.2% 93.2% UtiliCorp United, Inc. 1,403 16 1.2% 94.4% Minnesota Power, Inc. 1,231 17 1.1% 95.5% CILCORP, INC. 1,187 18 1.0% 96.5% Everyone else combined 3,958 3.5% 100.0% Total 114,656
MARKET SHARE FOR ELECTRIC COMPANIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY NUMBER OF CUSTOMERS Holding Company Customers Rank Share of Cumulative (thousands) Total Share - ------------------------------------------------------------------------------------------ Unicom Corp. 3,420 1 19.6% 19.6% American Electric Power Co., Inc. 2,958 2 17.0% 36.6% Ameren Corp. 1,495 3 8.6% 45.1% Northern States Power Co. 1,474 4 8.4% 53.6% Cinergy Corp. 1,401 5 8.0% 61.6% Wisconsin Energy Corp. 973 6 5.6% 67.2% Alliant Energy Corp. 892 7 5.1% 72.3% MidAmerican Energy Holdings Co. 644 8 3.7% 76.0% Illinova Corp. 559 9 3.2% 79.2% KU Energy Corp. 464 10 2.7% 81.9% Kansas City Power & Light Co. 443 11 2.5% 84.4% IPALCO Enterprises, Inc. 417 12 2.4% 86.8% NIPSCO Industries, Inc. 414 13 2.4% 89.2% WPS Resources Corp. 371 14 2.1% 91.3% UtiliCorp United, Inc. 366 15 2.1% 93.4% LG&E Energy Corp. 355 16 2.0% 95.4% CILCORP, INC. 194 17 1.1% 96.5% Everyone else combined 606 3.5% 100.0% Total 17445.92
EX-99.15 16 EXHIBIT K-7 MARKET SHAARES FOR GAS CO. Exhibit K-7 Market Shares for Gas Companies in Illinois and Bordering States (Companies Listed in Order of Customers Served) [Vertical Bar Chart] X-Axis (bottom of chart): Gas Companies in Illinois and Bordering States. Y-Axis: (left side of the chart): Market shares ranging from 0 percent to 12 percent. Three sets of data are graphed: Market shares in terms of revenues (represented by green bars), market shares in terms of assets (represented by blue bars) and market shares in terms of the number of customers (represented by red bars). The data points for each of these sets of data are provided below.
Number of Holding Company Assets Revenue Customers - --------------- ------ ------- --------- Columbia Energy Group, Inc. 12.0% 17.3% 14.7% Nicor, Inc. 14.6% 13.1% 14.0% Southern Union Co. 7.5% 6.7% 7.5% Peoples Energy Corp. 10.3% 9.4% 7.3% UtiliCorp United, Inc. 4.7% 2.1% 5.9% NIPSCO Industries, Inc. 6.1% 5.8% 5.2% Laclede Gas Co. 3.9% 4.6% 4.7% MidAmerican Energy Holdings Co. 3.8% 4.1% 4.6% Wicor, Inc. 3.9% 4.1% 3.9% Atmos Energy Corp. 3.4% 3.8% 3.8% Indiana Energy, Inc. 4.2% 4.0% 3.6% Cinergy Corp. 3.7% 3.8% 3.4% Northern States Power Co. 3.0% 3.8% 3.3% Illinova Corp. 3.1% 2.7% 3.0% Alliant Energy Corp. 2.5% 3.1% 2.9% Ameren Corp. 2.2% 1.9% 2.2% LG&E Energy Corp. 1.7% 2.1% Citizens Gas & Coke Utility 3.4% 2.1% 1.9% WPS Resources Corp. 1.6% Cilcorp, Inc. 1.9% 1.7% 1.5% Everyone else combined 5.7% 4.4% 2.9%
MARKET SHARES FOR GAS COMPANIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY REVENUE Holding Company Revenue Rank Share of Cumulative (millions of $) Total Share - ----------------------------------------------------------------------------------------------- Columbia Energy Group, Inc. 2,282 1 17.3% 17.3% Nicor, Inc. 1,731 2 13.1% 30.4% Peoples Energy Corp. 1,238 3 9.4% 39.8% Southern Union Co. 882 4 6.7% 46.4% NIPSCO Industries, Inc. 772 5 5.8% 52.3% Laclede Gas Co. 602 6 4.6% 56.8% Wicor, Inc. 537 7 4.1% 60.9% MidAmerican Energy Holdings Co. 536 8 4.1% 65.0% Indiana Energy, Inc. 528 9 4.0% 69.0% Northern States Power Co. 505 10 3.8% 72.8% Atmos Energy Corp. 502 11 3.8% 76.6% Cinergy Corp. 496 12 3.8% 80.3% Alliant Energy Corp. 408 13 3.1% 83.4% Illinova Corp. 354 14 2.7% 86.1% UtiliCorp United, Inc. 276 15 2.1% 88.2% Citizens Gas & Coke Utility 275 16 2.1% 90.3% Ameren Corp. 250 17 1.9% 92.2% LG&E Energy Corp. 231 18 1.7% 93.9% CILCORP, INC. 219 19 1.7% 95.6% Everyone else combined 585 4.4% 100.0% Total 13,206
MARKET SHARES FOR GAS COMPANIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY ASSETS Holding Company Assets Rank Share of Cumulative (millions of $) Total Share - ----------------------------------------------------------------------------------------------- Nicor, Inc. 2,956 1 14.6% 14.6% Columbia Energy Group, Inc. 2,424 2 12.0% 26.7% Peoples Energy Corp. 2,083 3 10.3% 37.0% Southern Union Co. 1,518 4 7.5% 44.5% NIPSCO Industries, Inc. 1,230 5 6.1% 50.6% UtiliCorp United, Inc. 954 6 4.7% 55.3% Indiana Energy, Inc. 847 7 4.2% 59.5% Wicor, Inc. 787 8 3.9% 63.4% Laclede Gas Co. 781 9 3.9% 67.3% MidAmerican Energy Holdings Co. 769 10 3.8% 71.1% Cinergy Corp. 739 11 3.7% 74.8% Citizens Gas & Coke Utility 688 12 3.4% 78.2% Atmos Energy Corp. 684 13 3.4% 81.6% Illinova Corp. 634 14 3.1% 84.7% Northern States Power Co. 608 15 3.0% 87.7% Alliant Energy Corp. 495 16 2.5% 90.2% Ameren Corp. 447 17 2.2% 92.4% CILCORP, INC. 383 18 1.9% 94.3% Everyone else combined 1,149 5.7% 100.0% Total 20,175
MARKET SHARES FOR GAS COMPANIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY NUMBER OF CUSTOMERS Holding Company Customers Rank Share of Cumulative (thousands) Total Share - ---------------------------------------------------------------------------------------------- Columbia Energy Group, Inc. 1,940 1 14.7% 14.7% Nicor, Inc. 1,848 2 14.0% 28.6% Southern Union Co. 988 3 7.5% 36.1% Peoples Energy Corp. 963 4 7.3% 43.4% UtiliCorp United, Inc. 786 5 5.9% 49.3% NIPSCO Industries, Inc. 688 6 5.2% 54.5% Laclede Gas Co. 620 7 4.7% 59.2% MidAmerican Energy Holdings Co. 612 8 4.6% 63.8% Wicor, Inc. 513 9 3.9% 67.7% Atmos Energy Corp. 501 10 3.8% 71.5% Indiana Energy, Inc. 477 11 3.6% 75.1% Cinergy Corp. 453 12 3.4% 78.5% Northern States Power Co. 443 13 3.3% 81.8% Illinova Corp. 394 14 3.0% 84.8% Alliant Energy Corp. 380 15 2.9% 87.7% Ameren Corp. 294 16 2.2% 89.9% LG&E Energy Corp. 281 17 2.1% 92.0% Citizens Gas & Coke Utility 254 18 1.9% 93.9% WPS Resources Corp. 218 19 1.6% 95.6% CILCORP, INC. 200 20 1.5% 97.1% Everyone else combined 386 2.9% 100.0% Total 13,238
EX-99.16 17 EXHIBIT K-8 MARKET SHARES FOR COMBINED CO. Exhibit K-8 Market Shares for Combined Gas and Electric Companies in Illinois and Bordering States (Companies Listed in Order of Customers Served) [Vertical Bar Chart] X-Axis (bottom of chart): Gas and Electric Companies in Illinois and Bordering States. Y-Axis: (left side of the chart): Market shares ranging from 0 percent to 25 percent. Three sets of data are graphed: Market shares in terms of revenues (represented by green bars), market shares in terms of assets (represented by blue bars) and market shares in terms of the number of customers (represented by red bars). The data points for each of these sets of data are provided below.
Number of Holding Company Assets Revenue Customers - --------------- ------ ------- --------- Northern States Power Co. 12.1% 13.6% 14.1% Cinergy Corp. 15.7% 20.7% 13.6% Ameren Corp. 17.7% 14.3% 13.2% Alliant Energy Corp. 8.4% 8.8% 9.4% MidAmerican Energy Holdings Co. 7.5% 7.6% 9.2% UtiliCorp United, Inc. 3.8% 3.8% 8.5% NIPSCO Industries, Inc. 8.3% 8.1% 8.1% Illinova Corp. 11.5% 8.1% 7.0% LG&E Energy Corp. 4.2% 3.8% 4.7% WPS Resources Corp. 2.7% 3.1% 4.3% CILCORP, INC. 2.5% 2.5% 2.9% Everyone else combined 5.5% 5.6% 5.0%
MARKET SHARE FOR COMBINED GAS AND ELECTRIC COMPANIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY REVENUE Holding Company Revenue Rank Share of Cumulative (millions of $) Total Share - ------------------------------------------------------------------------------------------------- Cinergy Corp. 4,555 1 20.7% 20.7% Ameren Corp. 3,139 2 14.3% 35.0% Northern States Power Co. 2,988 3 13.6% 48.5% Alliant Energy Corp. 1,932 4 8.8% 57.3% NIPSCO Industries, Inc. 1,789 5 8.1% 65.5% Illinova Corp. 1,774 6 8.1% 73.5% MidAmerican Energy Holdings Co. 1,663 7 7.6% 81.1% LG&E Energy Corp. 846 8 3.8% 84.9% UtiliCorp United, Inc. 833 9 3.8% 88.7% WPS Resources Corp. 690 10 3.1% 91.8% CILCORP, INC. 557 11 2.5% 94.4% Everyone else combined 1,239 5.6% 100.0% Total 22,004
MARKET SHARE FOR COMBINED GAS AND ELECTRIC COMPANIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY ASSETS Holding Company Assets Rank Share of Cumulative (millions of $) Total Share - ------------------------------------------------------------------------------------------------- Ameren Corp. 10,893 1 17.7% 17.7% Cinergy Corp. 9,690 2 15.7% 33.4% Northern States Power Co. 7,474 3 12.1% 45.5% Illinova Corp. 7,099 4 11.5% 57.0% Alliant Energy Corp. 5,177 5 8.4% 65.4% NIPSCO Industries, Inc. 5,141 6 8.3% 73.7% MidAmerican Energy Holdings Co. 4,645 7 7.5% 81.3% LG&E Energy Corp. 2,578 8 4.2% 85.4% UtiliCorp United, Inc. 2,357 9 3.8% 89.3% WPS Resources Corp. 1,640 10 2.7% 91.9% CILCORP, INC. 1,570 11 2.5% 94.5% Everyone else combined 3,416 5.5% 100.0% Total 61,680
MARKET SHARE FOR COMBINED GAS AND ELECTRIC COMPANIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY NUMBER OF CUSTOMERS Holding Company Customers Rank Share of Cumulative (thousands) Total Share - ------------------------------------------------------------------------------------------------ Northern States Power Co. 1,917 1 14.1% 14.1% Cinergy Corp. 1,853 2 13.6% 27.7% Ameren Corp. 1,789 3 13.2% 40.9% Alliant Energy Corp. 1,271 4 9.4% 50.2% MidAmerican Energy Holdings Co. 1,256 5 9.2% 59.5% UtiliCorp United, Inc. 1,152 6 8.5% 68.0% NIPSCO Industries, Inc. 1,102 7 8.1% 76.1% Illinova Corp. 953 8 7.0% 83.1% LG&E Energy Corp. 636 9 4.7% 87.8% WPS Resources Corp. 589 10 4.3% 92.1% CILCORP, INC. 395 11 2.9% 95.0% Everyone else combined 681 5.0% 100.0% Total 13,594
EX-99.17 18 EXHIBIT K-9 MARKET SHARES FOR UTILITIES Exhibit K-9 Market Shares for Utilities in Illinois and Bordering States (Companies Listed in Order of Customers Served) [Vertical Bar Chart] X-Axis (bottom of chart): Utilities in Illinois and Bordering States. Y-Axis: (left side of the chart): Market shares ranging from 0 percent to 25 percent. Three sets of data are graphed: Market shares in terms of assets (represented by green bars), market shares in terms of revenues (represented by blue bars) and market shares in terms of the number of customers (represented by red bars). The data points for each of these sets of data are provided below.
Number of Holding Company Assets Revenue Customers - --------------- ------ ------- --------- Unicom Corp. 19.5% 14.4% 11.2% American Elec. Power Co., Inc. 13.3% 14.0% 9.7% Columbia Energy Group, Inc. 1.8% 4.6% 6.3% Northern States Power Co. 5.5% 6.0% 6.3% Cinergy Corp. 7.2% 9.1% 6.1% Nicor, Inc. 2.2% 3.5% 6.0% Ameren Corp. 8.1% 6.3% 5.8% Alliant Energy Corp. 3.8% 3.9% 4.2% MidAmerican Energy Holdings Co. 3.4% 3.3% 4.1% UtiliCorp United, Inc. 1.7% 1.7% 3.8% NIPSCO Industries, Inc. 3.8% 3.6% 3.6% Southern Union Co. 1.8% 3.2% Wisconsin Energy Corp. 3.7% 2.8% 3.2% Peoples Energy Corp. 1.5% 2.5% 3.1% Illinova Corp. 5.3% 3.6% 3.1% LG&E Energy Corp. 1.9% 1.7% 2.1% Laclede Gas Co. 1.2% 2.0% WPS Resources Corp. 1.2% 1.4% 1.9% Wicor, Inc. 1.7% Atmos Energy Corp. 1.6% Indiana Energy, Inc. 1.6% KU Energy Corp. 1.9% 1.4% 1.5% Kansas City Power & Light Co. 2.6% 1.8% 1.4% IPALCO Enterprises, Inc. 2.0% 1.5% 1.4% CILCORP, INC. 1.2% 1.1% 1.3% Everyone else combined 8.4% 8.8% 3.9%
MARKET SHARE FOR UTILITIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY REVENUE Holding Company Revenue Rank Share of Cumulative (millions of $) Total Share - ---------------------------------------------------------------------------------------------------- Unicom Corp. 7,176 1 14.4% 14.4% American Electric Power Co., Inc. 6,979 2 14.0% 28.4% Cinergy Corp. 4,555 3 9.1% 37.6% Ameren Corp. 3,139 4 6.3% 43.9% Northern States Power Co. 2,988 5 6.0% 49.9% Columbia Energy Group, Inc. 2,282 6 4.6% 54.5% Alliant Energy Corp. 1,932 7 3.9% 58.3% NIPSCO Industries, Inc. 1,789 8 3.6% 61.9% Illinova Corp. 1,774 9 3.6% 65.5% Nicor, Inc. 1,731 10 3.5% 69.0% MidAmerican Energy Holdings Co. 1,663 11 3.3% 72.3% Wisconsin Energy Corp. 1,412 12 2.8% 75.2% Peoples Energy Corp. 1,238 13 2.5% 77.6% Kansas City Power & Light Co. 896 14 1.8% 79.4% Southern Union Co. 882 15 1.8% 81.2% LG&E Energy Corp. 846 16 1.7% 82.9% UtiliCorp United, Inc. 833 17 1.7% 84.6% IPALCO Enterprises, Inc. 738 18 1.5% 86.1% KU Energy Corp. 716 19 1.4% 87.5% WPS Resources Corp. 690 20 1.4% 88.9% Laclede Gas Co. 602 21 1.2% 90.1% CILCORP, INC. 557 22 1.1% 91.2% Everyone else combined 4,375 8.8% 100.0% Total 49,792
MARKET SHARE FOR UTILITIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY ASSETS Holding Company Assets Rank Share of Cumulative (millions of $) Total Share - ------------------------------------------------------------------------------------------------------ Unicom Corp. 26,322 1 19.5% 19.5% American Electric Power Co., Inc. 17,993 2 13.3% 32.8% Ameren Corp. 10,893 3 8.1% 40.9% Cinergy Corp. 9,690 4 7.2% 48.0% Northern States Power Co. 7,474 5 5.5% 53.6% Illinova Corp. 7,099 6 5.3% 58.8% Alliant Energy Corp. 5,177 7 3.8% 62.6% NIPSCO Industries, Inc. 5,141 8 3.8% 66.4% Wisconsin Energy Corp. 4,969 9 3.7% 70.1% MidAmerican Energy Holdings Co. 4,645 10 3.4% 73.6% Kansas City Power & Light Co. 3,497 11 2.6% 76.1% Nicor, Inc. 2,956 12 2.2% 78.3% IPALCO Enterprises, Inc. 2,695 13 2.0% 80.3% LG&E Energy Corp. 2,578 14 1.9% 82.2% KU Energy Corp. 2,553 15 1.9% 84.1% Columbia Energy Group, Inc. 2,424 16 1.8% 85.9% UtiliCorp United, Inc. 2,357 17 1.7% 87.7% Peoples Energy Corp. 2,083 18 1.5% 89.2% WPS Resources Corp. 1,640 19 1.2% 90.4% CILCORP, INC. 1,570 20 1.2% 91.6% Everyone else combined 11,391 8.4% 100.0% Total 135,147
MARKET SHARE FOR UTILITIES IN ILLINOIS AND BORDERING STATES COMPANIES SORTED BY NUMBER OF CUSTOMERS Holding Company Customers Rank Share of Cumulative (thousands) Total Share - ----------------------------------------------------------------------------------------------- Unicom Corp. 3,420 1 11.2% 11.2% American Electric Power Co., Inc. 2,958 2 9.7% 20.8% Columbia Energy Group, Inc. 1,940 3 6.3% 27.2% Northern States Power Co. 1,917 4 6.3% 33.4% Cinergy Corp. 1,853 5 6.1% 39.5% Nicor, Inc. 1,848 6 6.0% 45.5% Ameren Corp. 1,789 7 5.8% 51.4% Alliant Energy Corp. 1,271 8 4.2% 55.5% MidAmerican Energy Holdings Co. 1,256 9 4.1% 59.6% UtiliCorp United, Inc. 1,152 10 3.8% 63.4% NIPSCO Industries, Inc. 1,102 11 3.6% 67.0% Southern Union Co. 988 12 3.2% 70.2% Wisconsin Energy Corp. 973 13 3.2% 73.4% Peoples Energy Corp. 963 14 3.1% 76.5% Illinova Corp. 953 15 3.1% 79.6% LG&E Energy Corp. 636 16 2.1% 81.7% Laclede Gas Co. 620 17 2.0% 83.7% WPS Resources Corp. 589 18 1.9% 85.6% Wicor, Inc. 513 19 1.7% 87.3% Atmos Energy Corp. 501 20 1.6% 89.0% Indiana Energy, Inc. 477 21 1.6% 90.5% KU Energy Corp. 464 22 1.5% 92.0% Kansas City Power & Light Co. 443 23 1.4% 93.5% IPALCO Enterprises, Inc. 417 24 1.4% 94.8% CILCORP, INC. 395 25 1.3% 96.1% Everyone else combined 1,186 3.9% 100.0% Total 30,624
EX-99.18 19 EXHIBIT K-10 MARKET SHARES FOR ELECTRIC CO.
Exhibit K-10 MARKET SHARES FOR ELECTRIC COMPANIES IN THE U.S. Parameter Units Cilcorp's Cilcorp's Number of Portion of Market Served Statistics Share Larger by Cilcorp and Larger Companies Companies - ----------------------------------------------------------------------------------------------- Customers thousands 194 0.2% 76 98.1% Assets $millions 1,187 0.2% 74 97.8% Revenues $millions 338 0.2% 79 98.4%
COMPARISON OF CILCORP, INC. TO LARGE ELECTRIC UTILITIES Parameter Units Number of Utilities Average Size Ratio of Average Large Necessary for 50% of of These Utility to Cilcorp U.S. Utilities - --------------------------------------------------------------------------------------------- Customers thousands 17 2,690 14 Assets $millions 16 18,148 15 Revenues $millions 17 5,863 17
Parameter Units Number of Utilities Average Size Ratio of Average Large Necessary for 80% of of These Utility to Cilcorp U.S. Utilities - ---------------------------------------------------------------------------------------------- Customers thousands 39 1,884 10 Assets $millions 38 18,148 15 Revenues $millions 38 4,139 12
MARKET SHARES FOR ELECTRIC COMPANIES IN THE UNITED STATES COMPANIES SORTED BY NUMBER OF CUSTOMERS Holding Company Customers Rank Share of Cumulative Share (thousands) Total - ---------------------------------------------------------------------------------------------------------- PG&E Corp. 4,486 1 4.9% 4.9% Edison International 4,235 2 4.6% 9.5% Southern Company 3,683 3 4.0% 13.6% FPL Group, Inc. 3,615 4 4.0% 17.5% Unicom Corp. 3,420 5 3.7% 21.2% Consolidated Edison, Inc. 3,010 6 3.3% 24.5% American Electric Power Co., Inc. 2,958 7 3.2% 27.8% Texas Utilities Co. 2,459 8 2.7% 30.4% Entergy Corp. 2,447 9 2.7% 33.1% FirstEnergy Corp. 2,151 10 2.4% 35.5% DTE Energy Co. 2,039 11 2.2% 37.7% GPU, Inc. 2,008 12 2.2% 39.9% Dominion Resources, Inc. 1,977 13 2.2% 42.1% Duke Energy Corp. 1,919 14 2.1% 44.2% Public Service Enterprise Group, Inc. 1,897 15 2.1% 46.2% Central & South West Corp. 1,712 16 1.9% 48.1% Northeast Utilities 1,706 17 1.9% 50.0% CMS Energy Corp. 1,603 18 1.8% 51.7% Reliant Energy, Inc. 1,558 19 1.7% 53.4% New Century Energies, Inc. 1,557 20 1.7% 55.1% Niagara Mohawk Power Corp. 1,554 21 1.7% 56.8% Ameren Corp. 1,495 22 1.6% 58.4% PECO Energy Co. 1,482 23 1.6% 60.1% Northern States Power Co. 1,474 24 1.6% 61.7% PacifiCorp 1,421 25 1.6% 63.2% Cinergy Corp. 1,401 26 1.5% 64.8% Allegheny Energy, Inc. 1,395 27 1.5% 66.3% New England Electric System 1,337 28 1.5% 67.7% Florida Progress Corp. 1,314 29 1.4% 69.2% PP&L Resources, Inc. 1,240 30 1.4% 70.5% Sempra Energy 1,168 31 1.3% 71.8% Carolina Power & Light Co. 1,138 32 1.2% 73.1% Baltimore Gas & Electric Co. 1,109 33 1.2% 74.3% Long Island Power Authority 1,037 34 1.1% 75.4% Wisconsin Energy Corp. 973 35 1.1% 76.5% Conectiv 926 36 1.0% 77.5% Alliant Energy Corp. 892 37 1.0% 78.4% Puget Sound Energy, Inc. 864 38 0.9% 79.4% Energy East Corp. 811 39 0.9% 80.3% Pinnacle West Capital Corp. 748 40 0.8% 81.1% OGE Energy Corp. 687 41 0.8% 81.8% Potomac Electric Power Co. 685 42 0.7% 82.6% Enron Corp. 679 43 0.7% 83.3% BEC Energy 669 44 0.7% 84.1% MidAmerican Energy Holdings Co. 644 45 0.7% 84.8% Western Resources, Inc. 614 46 0.7% 85.4% DQE, Inc. 581 47 0.6% 86.1% Illinova Corp. 559 48 0.6% 86.7% CMP Group, Inc. 525 49 0.6% 87.3% TECO Energy, Inc. 518 50 0.6% 87.8% Nevada Power Co. 504 51 0.6% 88.4% SCANA Corp. 499 52 0.5% 88.9% DPL, Inc. 482 53 0.5% 89.5% KU Energy Corp. 464 54 0.5% 90.0% Kansas City Power & Light Co. 443 55 0.5% 90.4% IPALCO Enterprises, Inc. 417 56 0.5% 90.9% NIPSCO Industries, Inc. 414 57 0.5% 91.4% Hawaiian Electric Industries, Inc. 385 58 0.4% 91.8% WPS Resources Corp. 371 59 0.4% 92.2% Commonwealth Energy System 367 60 0.4% 92.6% UtiliCorp United, Inc. 366 61 0.4% 93.0% Idaho Power Co. 357 62 0.4% 93.4% LG&E Energy Corp. 355 63 0.4% 93.8% PSC of New Mexico 346 64 0.4% 94.1% Rochester Gas & Electric Corp. 343 65 0.4% 94.5% Eastern Utilities Associates 316 66 0.3% 94.9% UniSource Energy Corp. 314 67 0.3% 95.2% United Illuminating Co. 312 68 0.3% 95.5% Washington Water Power Co. 297 69 0.3% 95.9% Sierra Pacific Resources 283 70 0.3% 96.2% El Paso Electric Co. 282 71 0.3% 96.5% Montana Power Co. 279 72 0.3% 96.8% Orange & Rockland Utilities, Inc. 268 73 0.3% 97.1% Central Hudson Gas & Electric Corp. 266 74 0.3% 97.4% Cleco Corp. 234 75 0.3% 97.6% TNP Enterprises, Inc. 221 76 0.2% 97.9% CILCORP, INC. 194 77 0.2% 98.1% Everyone else combined 1,758 1.9% 100.0% Total 91,521
MARKET SHARES FOR ELECTRIC COMPANIES IN THE UNITED STATES COMPANIES SORTED BY ASSETS Holding Company Assets Rank Share of Cumulative (millions of $) Total Share - ----------------------------------------------------------------------------------------------------- Southern Company 30,208 1 5.2% 5.2% Unicom Corp. 26,322 2 4.6% 9.8% PG&E Corp. 23,988 3 4.2% 14.0% Entergy Corp. 22,637 4 3.9% 17.9% Texas Utilities Co. 22,328 5 3.9% 21.8% Edison International 20,723 6 3.6% 25.4% American Electric Power Co., Inc. 17,993 7 3.1% 28.5% FPL Group, Inc. 16,643 8 2.9% 31.4% Duke Energy Corp. 14,760 9 2.6% 34.0% Dominion Resources, Inc. 14,545 10 2.5% 36.5% FirstEnergy Corp. 14,289 11 2.5% 39.0% DTE Energy Co. 14,123 12 2.5% 41.5% PECO Energy Co. 13,805 13 2.4% 43.8% Public Service Enterprise Group, Inc. 13,648 14 2.4% 46.2% Reliant Energy, Inc. 12,614 15 2.2% 48.4% Consolidated Edison, Inc. 11,739 16 2.0% 50.5% PacifiCorp 11,417 17 2.0% 52.4% Central & South West Corp. 11,314 18 2.0% 54.4% Ameren Corp. 10,446 19 1.8% 56.2% Carolina Power & Light Co. 10,090 20 1.8% 58.0% PP&L Resources, Inc. 9,957 21 1.7% 59.7% GPU, Inc. 9,896 22 1.7% 61.4% Northeast Utilities 9,751 23 1.7% 63.1% Cinergy Corp. 8,951 24 1.6% 64.7% Niagara Mohawk Power Corp. 8,734 25 1.5% 66.2% Allegheny Energy, Inc. 7,977 26 1.4% 67.6% Pinnacle West Capital Corp. 6,923 27 1.2% 68.8% Baltimore Gas & Electric Co. 6,908 28 1.2% 70.0% Northern States Power Co. 6,866 29 1.2% 71.2% New Century Energies, Inc. 6,639 30 1.2% 72.3% Illinova Corp. 6,465 31 1.1% 73.4% New England Electric System 6,246 32 1.1% 74.5% Potomac Electric Power Co. 6,211 33 1.1% 75.6% Florida Progress Corp. 6,158 34 1.1% 76.7% CMS Energy Corp. 5,788 35 1.0% 77.7% Conectiv 5,593 36 1.0% 78.7% Energy East Corp. 5,160 37 0.9% 79.6% Wisconsin Energy Corp. 4,969 38 0.9% 80.4% Western Resources, Inc. 4,722 39 0.8% 81.2% Alliant Energy Corp. 4,682 40 0.8% 82.1% Sempra Energy 4,502 41 0.8% 82.8% DQE, Inc. 4,334 42 0.8% 83.6% BEC Energy 4,295 43 0.7% 84.3% SCANA Corp. 4,280 44 0.7% 85.1% Long Island Power Authority 3,998 45 0.7% 85.8% NIPSCO Industries, Inc. 3,911 46 0.7% 86.5% MidAmerican Energy Holdings Co. 3,876 47 0.7% 87.1% TECO Energy, Inc. 3,626 48 0.6% 87.8% OGE Energy Corp. 3,609 49 0.6% 88.4% Puget Sound Energy, Inc. 3,498 50 0.6% 89.0% Kansas City Power & Light Co. 3,497 51 0.6% 89.6% DPL, Inc. 3,261 52 0.6% 90.2% Enron Corp. 3,014 53 0.5% 90.7% IPALCO Enterprises, Inc. 2,695 54 0.5% 91.2% Idaho Power Co. 2,606 55 0.5% 91.6% KU Energy Corp. 2,553 56 0.4% 92.1% Rochester Gas & Electric Corp. 2,436 57 0.4% 92.5% Nevada Power Co. 2,378 58 0.4% 92.9% El Paso Electric Co. 2,259 59 0.4% 93.3% LG&E Energy Corp. 2,242 60 0.4% 93.7% UniSource Energy Corp. 2,189 61 0.4% 94.1% Hawaiian Electric Industries, Inc. 2,084 62 0.4% 94.4% PSC of New Mexico 1,949 63 0.3% 94.8% United Illuminating Co. 1,819 64 0.3% 95.1% Montana Power Co. 1,798 65 0.3% 95.4% CMP Group, Inc. 1,689 66 0.3% 95.7% Washington Water Power Co. 1,576 67 0.3% 95.9% Sierra Pacific Resources 1,543 68 0.3% 96.2% Cleco Corp. 1,446 69 0.3% 96.5% WPS Resources Corp. 1,409 70 0.2% 96.7% UtiliCorp United, Inc. 1,403 71 0.2% 97.0% Minnesota Power, Inc. 1,231 72 0.2% 97.2% TNP Enterprises, Inc. 1,225 73 0.2% 97.4% Central Hudson Gas & Electric Corp. 1,194 74 0.2% 97.6% CILCORP, INC. 1,187 75 0.2% 97.8% Everyone else combined 12,682 2.2% 100.0% Total 575,521
MARKET SHARES FOR ELECTRIC COMPANIES IN THE UNITED STATES COMPANIES SORTED BY REVENUE Holding Company Revenue Rank Share of Cumulative (millions of $) Total Share - ----------------------------------------------------------------------------------------------------- Southern Company 9,076 1 4.6% 4.6% Edison International 7,933 2 4.0% 8.7% PG&E Corp. 7,700 3 3.9% 12.6% Entergy Corp. 7,649 4 3.9% 16.5% Unicom Corp. 7,176 5 3.7% 20.1% American Electric Power Co., Inc. 6,979 6 3.6% 23.7% Texas Utilities Co. 6,210 7 3.2% 26.8% FPL Group, Inc. 6,132 8 3.1% 30.0% Consolidated Edison, Inc. 5,647 9 2.9% 32.8% FirstEnergy Corp. 5,172 10 2.6% 35.5% Dominion Resources, Inc. 4,628 11 2.4% 37.8% Duke Energy Corp. 4,361 12 2.2% 40.1% Northeast Utilities 4,297 13 2.2% 42.2% Reliant Energy, Inc. 4,251 14 2.2% 44.4% PECO Energy Co. 4,191 15 2.1% 46.5% Public Service Enterprise Group, Inc. 4,167 16 2.1% 48.7% GPU, Inc. 4,096 17 2.1% 50.8% Cinergy Corp. 4,059 18 2.1% 52.8% New England Electric System 3,989 19 2.0% 54.8% PacifiCorp 3,684 20 1.9% 56.7% DTE Energy Co. 3,619 21 1.8% 58.6% Central & South West Corp. 3,427 22 1.7% 60.3% Niagara Mohawk Power Corp. 3,308 23 1.7% 62.0% PP&L Resources, Inc. 3,048 24 1.6% 63.5% Carolina Power & Light Co. 3,024 25 1.5% 65.1% Ameren Corp. 2,889 26 1.5% 66.6% Allegheny Energy, Inc. 2,655 27 1.4% 67.9% CMS Energy Corp. 2,513 28 1.3% 69.2% Northern States Power Co. 2,483 29 1.3% 70.5% Long Island Power Authority 2,481 30 1.3% 71.7% New Century Energies, Inc. 2,452 31 1.2% 73.0% Florida Progress Corp. 2,448 32 1.2% 74.2% Baltimore Gas & Electric Co. 2,222 33 1.1% 75.3% Conectiv 2,083 34 1.1% 76.4% Potomac Electric Power Co. 1,864 35 0.9% 77.4% Energy East Corp. 1,792 36 0.9% 78.3% Pinnacle West Capital Corp. 1,790 37 0.9% 79.2% Sempra Energy 1,776 38 0.9% 80.1% BEC Energy 1,769 39 0.9% 81.0% Alliant Energy Corp. 1,524 40 0.8% 81.8% Illinova Corp. 1,420 41 0.7% 82.5% Enron Corp. 1,419 42 0.7% 83.2% Wisconsin Energy Corp. 1,412 43 0.7% 83.9% Puget Sound Energy, Inc. 1,231 44 0.6% 84.6% Western Resources, Inc. 1,228 45 0.6% 85.2% SCANA Corp. 1,203 46 0.6% 85.8% TECO Energy, Inc. 1,202 47 0.6% 86.4% OGE Energy Corp. 1,192 48 0.6% 87.0% DQE, Inc. 1,147 49 0.6% 87.6% MidAmerican Energy Holdings Co. 1,126 50 0.6% 88.2% NIPSCO Industries, Inc. 1,017 51 0.5% 88.7% DPL, Inc. 1,015 52 0.5% 89.2% CMP Group, Inc. 977 53 0.5% 89.7% Hawaiian Electric Industries, Inc. 938 54 0.5% 90.2% Kansas City Power & Light Co. 896 55 0.5% 90.6% Eastern Utilities Associates 829 56 0.4% 91.1% Commonwealth Energy System 812 57 0.4% 91.5% Nevada Power Co. 799 58 0.4% 91.9% Idaho Power Co. 749 59 0.4% 92.3% IPALCO Enterprises, Inc. 738 60 0.4% 92.6% UniSource Energy Corp. 730 61 0.4% 93.0% Washington Water Power Co. 726 62 0.4% 93.4% PSC of New Mexico 722 63 0.4% 93.7% KU Energy Corp. 716 64 0.4% 94.1% United Illuminating Co. 710 65 0.4% 94.5% Rochester Gas & Electric Corp. 700 66 0.4% 94.8% LG&E Energy Corp. 615 67 0.3% 95.1% El Paso Electric Co. 594 68 0.3% 95.4% TNP Enterprises, Inc. 581 69 0.3% 95.7% UtiliCorp United, Inc. 557 70 0.3% 96.0% Orange & Rockland Utilities, Inc. 554 71 0.3% 96.3% Sierra Pacific Resources 541 72 0.3% 96.6% Montana Power Co. 508 73 0.3% 96.8% Minnesota Power, Inc. 491 74 0.3% 97.1% WPS Resources Corp. 479 75 0.2% 97.3% Cleco Corp. 456 76 0.2% 97.6% Ohio Valley Electric Corp. 450 77 0.2% 97.8% Central Hudson Gas & Electric Corp. 416 78 0.2% 98.0% Central Vermont Public Service Corp. 372 79 0.2% 98.2% CILCORP, INC. 338 80 0.2% 98.4% Everyone else combined 3,214 1.6% 100.0% Total 196,386
EX-99.19 20 EXHIBIT K-11 MARKET SHARES FOR GAS COMPANIES
Exhibit K-11 MARKET SHARES FOR GAS COMPANIES IN THE U.S. Parameter Units Cilcorp's Cilcorp's Number of Portion of Market Served Statistics Share Larger by Cilcorp and Larger Companies Companies - ----------------------------------------------------------------------------------------------- Customers thousands 200 0.4% 58 94.0% Assets $millions 383 0.5% 57 91.5% Revenues $millions 219 0.5% 60 92.7%
COMPARISON OF CILCORP, INC. TO LARGE GAS UTILITIES Parameter Units Number of Utilities Average Size Ratio of Average Large Necessary for 50% of of These Utility to Cilcorp U.S. Utilities - ---------------------------------------------------------------------------------------------- Customers thousands 13 1,995 10 Assets $millions 15 2,713 7 Revenues $millions 16 1,561 7
Parameter Units Number of Utilities Average Size Ratio of Average Large Necessary for 80% of of These Utility to Cilcorp U.S. Utilities - ----------------------------------------------------------------------------------------------- Customers thousands 36 1,122 6 Assets $millions 40 1,611 4 Revenues $millions 40 965 4
MARKET SHARES FOR GAS COMPANIES IN THE UNITED STATES COMPANIES SORTED BY NUMBER OF CUSTOMERS Holding Company Customers Rank Share of Cumulative (thousands) Total Share - ---------------------------------------------------------------------------------------------------------- Sempra Energy 5,508 1 11.0% 11.0% PG&E Corp. 3,680 2 7.4% 18.4% Houston Industries, Inc. 2,075 3 4.1% 22.5% Columbia Energy Group, Inc. 1,940 4 3.9% 26.4% Nicor, Inc. 1,848 5 3.7% 30.1% Consolidated Natural Gas Co. 1,786 6 3.6% 33.6% Public Service Enterprise Group, Inc. 1,531 7 3.1% 36.7% CMS Energy Corp. 1,511 8 3.0% 39.7% AGL Resources, Inc. 1,361 9 2.7% 42.4% Texas Utilities Co. 1,355 10 2.7% 45.1% MCN Energy Group, Inc. 1,178 11 2.4% 47.5% MarketSpan Corp. 1,132 12 2.3% 49.8% Consolidated Edison, Inc. 1,033 13 2.1% 51.8% New Century Energies, Inc. 1,006 14 2.0% 53.8% Southern Union Co. 988 15 2.0% 55.8% Peoples Energy Corp. 963 16 1.9% 57.7% Washington Gas Light Co. 790 17 1.6% 59.3% UtiliCorp United, Inc. 786 18 1.6% 60.9% ONEOK, Inc. 744 19 1.5% 62.4% National Fuel Gas Co. 712 20 1.4% 63.8% NIPSCO Industries, Inc. 688 21 1.4% 65.2% Questar Corp. 626 22 1.3% 66.4% Laclede Gas Co. 620 23 1.2% 67.7% MidAmerican Energy Holdings Co. 612 24 1.2% 68.9% Eastern Enterprises 570 25 1.1% 70.0% Baltimore Gas & Electric Co. 565 26 1.1% 71.1% Niagara Mohawk Power Corp. 526 27 1.1% 72.2% Wicor, Inc. 513 28 1.0% 73.2% Puget Sound Energy, Inc. 510 29 1.0% 74.2% Atmos Energy Corp. 501 30 1.0% 75.2% Indiana Energy, Inc. 477 31 1.0% 76.2% Southwest Gas Corp. 468 32 0.9% 77.1% Cinergy Corp. 453 33 0.9% 78.0% NW Natural (Northwest Natural Gas Co.) 443 34 0.9% 78.9% Northern States Power Co. 443 35 0.9% 79.8% Piedmont Natural Gas Co., Inc. 440 36 0.9% 80.7% PECO Energy Co. 405 37 0.8% 81.5% PSC of New Mexico 401 38 0.8% 82.3% Illinova Corp. 394 39 0.8% 83.1% Alliant Energy Corp. 380 40 0.8% 83.8% New Jersey Resources Corp. 367 41 0.7% 84.6% NUI Corp. 339 42 0.7% 85.3% PSC of North Carolina, Inc. 310 43 0.6% 85.9% Ameren Corp. 294 44 0.6% 86.5% LG&E Energy Corp. 281 45 0.6% 87.0% Rochester Gas & Electric Corp. 281 46 0.6% 87.6% Citizens Utilities Co. 277 47 0.6% 88.1% Bay State Gas Co. 270 48 0.5% 88.7% South Jersey Industries, Inc. 260 49 0.5% 89.2% Equitable Resources, Inc. 260 50 0.5% 89.7% UGI Corp. 254 51 0.5% 90.2% Citizens Gas & Coke Utility 254 52 0.5% 90.7% SCANA Corp. 249 53 0.5% 91.2% Washington Water Power Co. 241 54 0.5% 91.7% Energy East Corp. 240 55 0.5% 92.2% Commonwealth Energy System 235 56 0.5% 92.7% TECO Energy, Inc. 234 57 0.5% 93.1% WPS Resources Corp. 218 58 0.4% 93.6% CILCORP, INC. 200 59 0.4% 94.0% Everyone else combined 3,024 6.0% 100.0% Total 50,053
MARKET SHARES FOR GAS COMPANIES IN THE UNITED STATES COMPANIES SORTED BY ASSETS Holding Company Assets Rank Share of Cumulative (millions of $) Total Share - ----------------------------------------------------------------------------------------------------------- Sempra Energy 6,652 1 8.3% 8.3% PG&E Corp. 5,985 2 7.4% 15.7% Nicor, Inc. 2,956 3 3.7% 19.4% Consolidated Natural Gas Co. 2,705 4 3.4% 22.7% Public Service Enterprise Group, Inc. 2,697 5 3.3% 26.1% MCN Energy Group, Inc. 2,541 6 3.2% 29.2% Columbia Energy Group, Inc. 2,424 7 3.0% 32.2% Peoples Energy Corp. 2,083 8 2.6% 34.8% CMS Energy Corp. 1,926 9 2.4% 37.2% AGL Resources, Inc. 1,885 10 2.3% 39.6% Washington Gas Light Co. 1,832 11 2.3% 41.8% MarketSpan Corp. 1,827 12 2.3% 44.1% Houston Industries, Inc. 1,764 13 2.2% 46.3% Consolidated Edison, Inc. 1,740 14 2.2% 48.5% Texas Utilities Co. 1,677 15 2.1% 50.5% Southern Union Co. 1,518 16 1.9% 52.4% NIPSCO Industries, Inc. 1,230 17 1.5% 53.9% Piedmont Natural Gas Co., Inc. 1,227 18 1.5% 55.5% Long Island Lighting Co. 1,219 19 1.5% 57.0% National Fuel Gas Co. 1,187 20 1.5% 58.5% Puget Sound Energy, Inc. 1,169 21 1.5% 59.9% Niagara Mohawk Power Corp. 1,132 22 1.4% 61.3% NW Natural (Northwest Natural Gas Co.) 1,129 23 1.4% 62.7% New Century Energies, Inc. 1,124 24 1.4% 64.1% Eastern Enterprises 955 25 1.2% 65.3% UtiliCorp United, Inc. 954 26 1.2% 66.5% PECO Energy Co. 878 27 1.1% 67.6% Baltimore Gas & Electric Co. 847 28 1.1% 68.6% Indiana Energy, Inc. 847 29 1.1% 69.7% Questar Corp. 836 30 1.0% 70.7% ONEOK, Inc. 826 31 1.0% 71.7% New Jersey Resources Corp. 810 32 1.0% 72.7% Wicor, Inc. 787 33 1.0% 73.7% Laclede Gas Co. 781 34 1.0% 74.7% MidAmerican Energy Holdings Co. 769 35 1.0% 75.6% Southwest Gas Corp. 747 36 0.9% 76.6% Cinergy Corp. 739 37 0.9% 77.5% Citizens Gas & Coke Utility 688 38 0.9% 78.3% Atmos Energy Corp. 684 39 0.8% 79.2% PSC of North Carolina, Inc. 671 40 0.8% 80.0% UGI Corp. 638 41 0.8% 80.8% Illinova Corp. 634 42 0.8% 81.6% Bay State Gas Co. 622 43 0.8% 82.4% South Jersey Industries, Inc. 616 44 0.8% 83.1% Northern States Power Co. 608 45 0.8% 83.9% NUI Corp. 607 46 0.8% 84.7% Equitable Resources, Inc. 567 47 0.7% 85.4% Energy East Corp. 563 48 0.7% 86.1% Yankee Energy System, Inc. 524 49 0.7% 86.7% Alliant Energy Corp. 495 50 0.6% 87.3% TECO Energy, Inc. 460 51 0.6% 87.9% Ameren Corp. 447 52 0.6% 88.4% PSC of New Mexico 441 53 0.5% 89.0% Cascade Natural Gas Corp. 423 54 0.5% 89.5% Rochester Gas & Electric Corp. 417 55 0.5% 90.0% CTG Resources, Inc. 406 56 0.5% 90.5% Connecticut Energy Corp. 396 57 0.5% 91.0% CILCORP, INC. 383 58 0.5% 91.5% Everyone else combined 6,837 8.5% 100.0% Total 80,532
MARKET SHARES FOR GAS COMPANIES IN THE UNITED STATES COMPANIES SORTED BY REVENUE Holding Company Revenue Rank Share of Cumulative (millions of $) Total Share - ----------------------------------------------------------------------------------------------------------- Sempra Energy 3,196 1 6.6% 6.6% Columbia Energy Group, Inc. 2,282 2 4.7% 11.4% Consolidated Natural Gas Co. 2,027 3 4.2% 15.6% Public Service Enterprise Group, Inc. 1,937 4 4.0% 19.6% PG&E Corp. 1,892 5 3.9% 23.5% Nicor, Inc. 1,731 6 3.6% 27.1% Houston Industries, Inc. 1,695 7 3.5% 30.6% MarketSpan Corp. 1,310 8 2.7% 33.3% Peoples Energy Corp. 1,238 9 2.6% 35.9% MCN Energy Group, Inc. 1,227 10 2.5% 38.4% CMS Energy Corp. 1,195 11 2.5% 40.9% AGL Resources, Inc. 1,120 12 2.3% 43.2% Consolidated Edison, Inc. 1,096 13 2.3% 45.5% Washington Gas Light Co. 1,079 14 2.2% 47.7% National Fuel Gas Co. 986 15 2.0% 49.7% Texas Utilities Co. 969 16 2.0% 51.8% Southern Union Co. 882 17 1.8% 53.6% Piedmont Natural Gas Co., Inc. 784 18 1.6% 55.2% NIPSCO Industries, Inc. 772 19 1.6% 56.8% Eastern Enterprises 756 20 1.6% 58.4% Long Island Lighting Co. 705 21 1.5% 59.8% Niagara Mohawk Power Corp. 659 22 1.4% 61.2% New Century Energies, Inc. 637 23 1.3% 62.5% Laclede Gas Co. 602 24 1.2% 63.8% ONEOK, Inc. 600 25 1.2% 65.0% New Jersey Resources Corp. 574 26 1.2% 66.2% Wicor, Inc. 537 27 1.1% 67.3% MidAmerican Energy Holdings Co. 536 28 1.1% 68.4% Indiana Energy, Inc. 528 29 1.1% 69.5% Baltimore Gas & Electric Co. 522 30 1.1% 70.6% Northern States Power Co. 505 31 1.0% 71.6% Atmos Energy Corp. 502 32 1.0% 72.7% Cinergy Corp. 496 33 1.0% 73.7% NUI Corp. 455 34 0.9% 74.6% PECO Energy Co. 451 35 0.9% 75.6% Questar Corp. 448 36 0.9% 76.5% Bay State Gas Co. 442 37 0.9% 77.4% Equitable Resources, Inc. 410 38 0.9% 78.3% Puget Sound Energy, Inc. 409 39 0.8% 79.1% Alliant Energy Corp. 408 40 0.8% 80.0% UGI Corp. 368 41 0.8% 80.7% Illinova Corp. 354 42 0.7% 81.5% NW Natural (Northwest Natural Gas Co.) 352 43 0.7% 82.2% PSC of North Carolina, Inc. 348 44 0.7% 82.9% Energy East Corp. 338 45 0.7% 83.6% Rochester Gas & Electric Corp. 336 46 0.7% 84.3% Commonwealth Energy System 331 47 0.7% 85.0% South Jersey Industries, Inc. 325 48 0.7% 85.7% Yankee Energy System, Inc. 319 49 0.7% 86.3% PSC of New Mexico 295 50 0.6% 86.9% CTG Resources, Inc. 285 51 0.6% 87.5% UtiliCorp United, Inc. 276 52 0.6% 88.1% Citizens Gas & Coke Utility 275 53 0.6% 88.7% Southwest Gas Corp. 258 54 0.5% 89.2% Connecticut Energy Corp. 252 55 0.5% 89.7% Ameren Corp. 250 56 0.5% 90.2% TECO Energy, Inc. 250 57 0.5% 90.8% SCANA Corp. 234 58 0.5% 91.3% SEMCO Energy, Inc. 233 59 0.5% 91.7% LG&E Energy Corp. 231 60 0.5% 92.2% CILCORP, INC. 219 61 0.5% 92.7% Everyone else combined 3,541 7.3% 100.0% Total 48,267
EX-99.20 21 EXHIBIT K-12 MARKET SHARES FOR COMBINED CO.
Exhibit K-12 MARKET SHARES FOR COMBINED GAS AND ELECTRIC COMPANIES IN THE U.S. Parameter Units Cilcorp's Cilcorp's Number of Portion of Market Served Statistics Share Larger by Cilcorp and Larger Companies Companies - ----------------------------------------------------------------------------------------------- Customers thousands 395 0.7% 27 96.1% Assets $millions 1,570 0.7% 28 96.8% Revenues $millions 557 0.7% 29 97.2%
COMPARISON OF CILCORP, INC. TO LARGE UTILITIES Parameter Units Number of Utilities Average Size Ratio of Average Large Necessary for 50% of of These Utility to Cilcorp U.S. Utilities - ---------------------------------------------------------------------------------------------- Customers thousands 6 4,665 12 Assets $millions 8 14,510 9 Revenues $millions 8 5,535 10
Parameter Units Number of Utilities Average Size Ratio of Average Large Necessary for 80% of of These Utility to Cilcorp U.S. Utilities - ----------------------------------------------------------------------------------------------- Customers thousands 17 2,668 7 Assets $millions 17 10,343 7 Revenues $millions 17 3,971 7
MARKET SHARES FOR COMBINED GAS AND ELECTRIC COMPANIES IN THE UNITED STATES Companies Sorted by Number of Customers Holding Company Customers Rank Share of Cumulative (thousands) Total Share - ----------------------------------------------------------------------------------------------------- PG&E Corp. 8,167 1 14.6% 14.6% Sempra Energy 6,676 2 11.9% 26.6% Consolidated Edison, Inc. 4,043 3 7.2% 33.8% Public Service Enterprise Group, Inc. 3,428 4 6.1% 39.9% CMS Energy Corp. 3,115 5 5.6% 45.5% New Century Energies, Inc. 2,563 6 4.6% 50.1% Niagara Mohawk Power Corp. 2,080 7 3.7% 53.8% Northern States Power Co. 1,917 8 3.4% 57.2% PECO Energy Co. 1,887 9 3.4% 60.6% Cinergy Corp. 1,853 10 3.3% 63.9% Ameren Corp. 1,789 11 3.2% 67.1% Baltimore Gas & Electric Co. 1,674 12 3.0% 70.1% Puget Sound Energy, Inc. 1,374 13 2.5% 72.6% Alliant Energy Corp. 1,271 14 2.3% 74.9% MidAmerican Energy Holdings Co. 1,256 15 2.2% 77.1% UtiliCorp United, Inc. 1,152 16 2.1% 79.2% NIPSCO Industries, Inc. 1,102 17 2.0% 81.1% Energy East Corp. 1,051 18 1.9% 83.0% Long Island Power Authority 1,037 19 1.9% 84.9% Conectiv 1,028 20 1.8% 86.7% Illinova Corp. 953 21 1.7% 88.4% SCANA Corp. 748 22 1.3% 89.8% PSC of New Mexico 747 23 1.3% 91.1% LG&E Energy Corp. 636 24 1.1% 92.2% Rochester Gas & Electric Corp. 623 25 1.1% 93.4% WPS Resources Corp. 589 26 1.1% 94.4% Washington Water Power Co. 538 27 1.0% 95.4% CILCORP, INC. 395 28 0.7% 96.1% Everyone else combined 2,190 3.9% 100.0% Total 55,883
MARKET SHARES FOR COMBINED GAS AND ELECTRIC COMPANIES IN THE UNITED STATES COMPANIES SORTED BY ASSETS Holding Company Assets Rank Share of Cumulative (millions of $) Total Share - ---------------------------------------------------------------------------------------------- PG&E Corp. 29,973 1 13.7% 13.7% Public Service Enterprise Group, Inc. 16,345 2 7.5% 21.2% PECO Energy Co. 14,682 3 6.7% 27.9% Consolidated Edison, Inc. 13,479 4 6.2% 34.0% Sempra Energy 11,154 5 5.1% 39.1% Ameren Corp. 10,893 6 5.0% 44.1% Niagara Mohawk Power Corp. 9,865 7 4.5% 48.6% Cinergy Corp. 9,690 8 4.4% 53.0% New Century Energies, Inc. 7,763 9 3.5% 56.6% Baltimore Gas & Electric Co. 7,755 10 3.5% 60.1% CMS Energy Corp. 7,714 11 3.5% 63.6% Northern States Power Co. 7,474 12 3.4% 67.0% Illinova Corp. 7,099 13 3.2% 70.3% Conectiv 5,835 14 2.7% 73.0% Energy East Corp. 5,723 15 2.6% 75.6% Long Island Power Authority 5,217 16 2.4% 78.0% Alliant Energy Corp. 5,177 17 2.4% 80.3% NIPSCO Industries, Inc. 5,141 18 2.3% 82.7% Puget Sound Energy, Inc. 4,667 19 2.1% 84.8% MidAmerican Energy Holdings Co. 4,645 20 2.1% 86.9% SCANA Corp. 4,632 21 2.1% 89.0% Rochester Gas & Electric Corp. 2,853 22 1.3% 90.3% LG&E Energy Corp. 2,578 23 1.2% 91.5% PSC of New Mexico 2,390 24 1.1% 92.6% UtiliCorp United, Inc. 2,357 25 1.1% 93.7% Washington Water Power Co. 1,941 26 0.9% 94.6% Sierra Pacific Resources 1,690 27 0.8% 95.3% WPS Resources Corp. 1,640 28 0.7% 96.1% CILCORP, INC. 1,570 29 0.7% 96.8% Everyone else combined 6,986 3.2% 100.0% Total 218,929
MARKET SHARES FOR COMBINED GAS AND ELECTRIC COMPANIES IN THE UNITED STATES Companies Sorted by Revenue Holding Company Revenue Rank Share of Cumulative (millions of $) Total Share - ------------------------------------------------------------------------------------------------- PG&E Corp. 9,592 1 11.5% 11.5% Consolidated Edison, Inc. 6,743 2 8.1% 19.5% Public Service Enterprise Group, Inc. 6,103 3 7.3% 26.8% Sempra Energy 4,973 4 5.9% 32.8% PECO Energy Co. 4,642 5 5.6% 38.3% Cinergy Corp. 4,555 6 5.4% 43.8% Niagara Mohawk Power Corp. 3,967 7 4.7% 48.5% CMS Energy Corp. 3,708 8 4.4% 53.0% Long Island Power Authority 3,185 9 3.8% 56.8% Ameren Corp. 3,139 10 3.8% 60.5% New Century Energies, Inc. 3,090 11 3.7% 64.2% Northern States Power Co. 2,988 12 3.6% 67.8% Baltimore Gas & Electric Co. 2,743 13 3.3% 71.1% Conectiv 2,236 14 2.7% 73.8% Energy East Corp. 2,130 15 2.5% 76.3% Alliant Energy Corp. 1,932 16 2.3% 78.6% NIPSCO Industries, Inc. 1,789 17 2.1% 80.8% Illinova Corp. 1,774 18 2.1% 82.9% MidAmerican Energy Holdings Co. 1,663 19 2.0% 84.9% Puget Sound Energy, Inc. 1,641 20 2.0% 86.8% SCANA Corp. 1,436 21 1.7% 88.5% Rochester Gas & Electric Corp. 1,037 22 1.2% 89.8% PSC of New Mexico 1,017 23 1.2% 91.0% Washington Water Power Co. 892 24 1.1% 92.1% LG&E Energy Corp. 846 25 1.0% 93.1% UtiliCorp United, Inc. 833 26 1.0% 94.1% Orange & Rockland Utilities, Inc. 722 27 0.9% 94.9% WPS Resources Corp. 690 28 0.8% 95.8% Sierra Pacific Resources 611 29 0.7% 96.5% CILCORP, INC. 557 30 0.7% 97.2% Everyone else combined 2,373 2.8% 100.0% Total 83,607
EX-99.21 22 EXHIBIT K-13 MARKET SHARES FOR UTILITY CO.
Exhibit K-13 MARKET SHARES FOR UTILITY COMPANIES IN THE U.S. Parameter Units Cilcorp's Cilcorp's Number of Portion of Market Served Statistics Share Larger by Cilcorp and Larger Companies Companies - --------------------------------------------------------------------------------------------------------- Customers thousands 395 0.3% 84 92.4% Assets $millions 1,570 0.2% 78 93.7% Revenues $millions 557 0.2% 88 93.9%
COMPARISON OF CILCORP, INC. TO LARGE UTILITIES Parameter Units Number of Utilities Average Size Ratio of Average Large Necessary for 50% of of These Utility to Cilcorp U.S. Utilities - ----------------------------------------------------- ------------------------------------------ Customers thousands 22 3,265 8 Assets $millions 18 18,213 12 Revenues $millions 21 5,961 11 Parameter Units Number of Utilities Average Size Ratio of Average Large Necessary for 80% of of These Utility to Cilcorp U.S. Utilities - ----------------------------------------------------- ------------------------------------------ Customers thousands 55 2,069 5 Assets $millions 45 11,703 7 Revenues $millions 51 3,850 7
MARKET SHARE FOR UTILITIES IN THE U.S. COMPANIES SORTED BY NUMBER OF CUSTOMERS Holding Company Customers Rank Share of Cumulative (thousands) Total Share - --------------------------------------------------------------------------------------------------------- PG&E Corp. 8,167 1 5.8% 5.8% Sempra Energy 6,676 2 4.7% 10.5% Edison International 4,235 3 3.0% 13.5% Consolidated Edison, Inc. 4,043 4 2.9% 16.3% Texas Utilities Co. 3,814 5 2.7% 19.0% Southern Company 3,683 6 2.6% 21.6% Houston Industries, Inc. 3,633 7 2.6% 24.2% FPL Group, Inc. 3,615 8 2.6% 26.7% Public Service Enterprise Group, Inc. 3,428 9 2.4% 29.2% Unicom Corp. 3,420 10 2.4% 31.6% CMS Energy Corp. 3,115 11 2.2% 33.8% American Electric Power Co., Inc. 2,958 12 2.1% 35.9% New Century Energies, Inc. 2,563 13 1.8% 37.7% Entergy Corp. 2,447 14 1.7% 39.4% FirstEnergy Corp. 2,151 15 1.5% 40.9% Niagara Mohawk Power Corp. 2,080 16 1.5% 42.4% DTE Energy Co. 2,039 17 1.4% 43.8% GPU, Inc. 2,008 18 1.4% 45.3% Dominion Resources, Inc. 1,977 19 1.4% 46.7% Columbia Energy Group, Inc. 1,940 20 1.4% 48.0% Duke Energy Corp. 1,919 21 1.4% 49.4% Northern States Power Co. 1,917 22 1.4% 50.7% PECO Energy Co. 1,887 23 1.3% 52.1% Cinergy Corp. 1,853 24 1.3% 53.4% Nicor, Inc. 1,848 25 1.3% 54.7% Ameren Corp. 1,789 26 1.3% 55.9% Consolidated Natural Gas Co. 1,786 27 1.3% 57.2% Central & South West Corp. 1,712 28 1.2% 58.4% Northeast Utilities 1,706 29 1.2% 59.6% Baltimore Gas & Electric Co. 1,674 30 1.2% 60.8% PacifiCorp 1,421 31 1.0% 61.8% Allegheny Energy, Inc. 1,395 32 1.0% 62.8% Puget Sound Energy, Inc. 1,374 33 1.0% 63.8% AGL Resources, Inc. 1,361 34 1.0% 64.7% New England Electric System 1,337 35 0.9% 65.7% Florida Progress Corp. 1,314 36 0.9% 66.6% Alliant Energy Corp. 1,271 37 0.9% 67.5% MidAmerican Energy Holdings Co. 1,256 38 0.9% 68.4% PP&L Resources, Inc. 1,240 39 0.9% 69.3% MCN Energy Group, Inc. 1,178 40 0.8% 70.1% UtiliCorp United, Inc. 1,152 41 0.8% 70.9% Carolina Power & Light Co. 1,138 42 0.8% 71.7% MarketSpan Corp. 1,132 43 0.8% 72.5% NIPSCO Industries, Inc. 1,102 44 0.8% 73.3% Energy East Corp. 1,051 45 0.7% 74.0% Long Island Power Authority 1,037 46 0.7% 74.8% Conectiv 1,028 47 0.7% 75.5% Southern Union Co. 988 48 0.7% 76.2% Wisconsin Energy Corp. 973 49 0.7% 76.9% Peoples Energy Corp. 963 50 0.7% 77.6% Illinova Corp. 953 51 0.7% 78.2% Washington Gas Light Co. 790 52 0.6% 78.8% TECO Energy, Inc. 753 53 0.5% 79.3% Pinnacle West Capital Corp. 748 54 0.5% 79.8% SCANA Corp. 748 55 0.5% 80.4% PSC of New Mexico 747 56 0.5% 80.9% ONEOK, Inc. 744 57 0.5% 81.4% National Fuel Gas Co. 712 58 0.5% 81.9% OGE Energy Corp. 687 59 0.5% 82.4% Potomac Electric Power Co. 685 60 0.5% 82.9% Enron Corp. 679 61 0.5% 83.4% BEC Energy 669 62 0.5% 83.9% LG&E Energy Corp. 636 63 0.4% 84.3% Questar Corp. 626 64 0.4% 84.7% Rochester Gas & Electric Corp. 623 65 0.4% 85.2% Laclede Gas Co. 620 66 0.4% 85.6% Western Resources, Inc. 614 67 0.4% 86.1% Commonwealth Energy System 602 68 0.4% 86.5% WPS Resources Corp. 589 69 0.4% 86.9% DQE, Inc. 581 70 0.4% 87.3% Eastern Enterprises 570 71 0.4% 87.7% Washington Water Power Co. 538 72 0.4% 88.1% CMP Group, Inc. 525 73 0.4% 88.5% Wicor, Inc. 513 74 0.4% 88.8% Nevada Power Co. 504 75 0.4% 89.2% Atmos Energy Corp. 501 76 0.4% 89.5% DPL, Inc. 482 77 0.3% 89.9% Indiana Energy, Inc. 477 78 0.3% 90.2% Southwest Gas Corp. 468 79 0.3% 90.5% KU Energy Corp. 464 80 0.3% 90.9% NW Natural (Northwest Natural Gas Co.) 443 81 0.3% 91.2% Kansas City Power & Light Co. 443 82 0.3% 91.5% Piedmont Natural Gas Co., Inc. 440 83 0.3% 91.8% IPALCO Enterprises, Inc. 417 84 0.3% 92.1% CILCORP, INC. 395 85 0.3% 92.4% Everyone else combined 100% Total 141573.42
MARKET SHARE FOR UTILITIES IN THE U.S. COMPANIES SORTED BY ASSETS Holding Company Assets Rank Share of Cumulative (millions of $) Total Share - ------------------------------------------------------------------------------------------------------- Southern Company 30,208 1 4.6% 4.6% PG&E Corp. 29,973 2 4.6% 9.2% Unicom Corp. 26,322 3 4.0% 13.2% Texas Utilities Co. 24,004 4 3.7% 16.8% Entergy Corp. 22,637 5 3.5% 20.3% Edison International 20,723 6 3.2% 23.5% American Electric Power Co., Inc. 17,993 7 2.7% 26.2% FPL Group, Inc. 16,643 8 2.5% 28.7% Public Service Enterprise Group, Inc. 16,345 9 2.5% 31.2% Duke Energy Corp. 14,760 10 2.2% 33.5% PECO Energy Co. 14,682 11 2.2% 35.7% Dominion Resources, Inc. 14,545 12 2.2% 37.9% Houston Industries, Inc. 14,378 13 2.2% 40.1% FirstEnergy Corp. 14,289 14 2.2% 42.3% DTE Energy Co. 14,123 15 2.2% 44.5% Consolidated Edison, Inc. 13,479 16 2.1% 46.5% PacifiCorp 11,417 17 1.7% 48.2% Central & South West Corp. 11,314 18 1.7% 50.0% Sempra Energy 11,154 19 1.7% 51.7% Ameren Corp. 10,893 20 1.7% 53.3% Carolina Power & Light Co. 10,090 21 1.5% 54.9% PP&L Resources, Inc. 10,049 22 1.5% 56.4% GPU, Inc. 9,896 23 1.5% 57.9% Niagara Mohawk Power Corp. 9,865 24 1.5% 59.4% Northeast Utilities 9,751 25 1.5% 60.9% Cinergy Corp. 9,690 26 1.5% 62.4% Allegheny Energy, Inc. 7,977 27 1.2% 63.6% New Century Energies, Inc. 7,763 28 1.2% 64.8% Baltimore Gas & Electric Co. 7,755 29 1.2% 66.0% CMS Energy Corp. 7,714 30 1.2% 67.1% Northern States Power Co. 7,474 31 1.1% 68.3% Illinova Corp. 7,099 32 1.1% 69.4% Pinnacle West Capital Corp. 6,923 33 1.1% 70.4% New England Electric System 6,246 34 1.0% 71.4% Potomac Electric Power Co. 6,211 35 0.9% 72.3% Florida Progress Corp. 6,158 36 0.9% 73.2% Conectiv 5,835 37 0.9% 74.1% Energy East Corp. 5,723 38 0.9% 75.0% Long Island Power Authority 5,217 39 0.8% 75.8% Alliant Energy Corp. 5,177 40 0.8% 76.6% NIPSCO Industries, Inc. 5,141 41 0.8% 77.4% Wisconsin Energy Corp. 4,969 42 0.8% 78.1% Western Resources, Inc. 4,722 43 0.7% 78.9% Puget Sound Energy, Inc. 4,667 44 0.7% 79.6% MidAmerican Energy Holdings Co. 4,645 45 0.7% 80.3% SCANA Corp. 4,632 46 0.7% 81.0% DQE, Inc. 4,334 47 0.7% 81.6% BEC Energy 4,295 48 0.7% 82.3% TECO Energy, Inc. 4,086 49 0.6% 82.9% OGE Energy Corp. 3,609 50 0.6% 83.5% Kansas City Power & Light Co. 3,497 51 0.5% 84.0% DPL, Inc. 3,261 52 0.5% 84.5% Enron Corp. 3,014 53 0.5% 85.0% Nicor, Inc. 2,956 54 0.5% 85.4% Rochester Gas & Electric Corp. 2,853 55 0.4% 85.8% Consolidated Natural Gas Co. 2,705 56 0.4% 86.3% IPALCO Enterprises, Inc. 2,695 57 0.4% 86.7% Idaho Power Co. 2,606 58 0.4% 87.1% LG&E Energy Corp. 2,578 59 0.4% 87.5% KU Energy Corp. 2,553 60 0.4% 87.8% MCN Energy Group, Inc. 2,541 61 0.4% 88.2% Columbia Energy Group, Inc. 2,424 62 0.4% 88.6% PSC of New Mexico 2,390 63 0.4% 89.0% Nevada Power Co. 2,378 64 0.4% 89.3% UtiliCorp United, Inc. 2,357 65 0.4% 89.7% El Paso Electric Co. 2,259 66 0.3% 90.0% UniSource Energy Corp. 2,189 67 0.3% 90.4% Hawaiian Electric Industries, Inc. 2,084 68 0.3% 90.7% Peoples Energy Corp. 2,083 69 0.3% 91.0% Washington Water Power Co. 1,941 70 0.3% 91.3% AGL Resources, Inc. 1,885 71 0.3% 91.6% Washington Gas Light Co. 1,832 72 0.3% 91.9% MarketSpan Corp. 1,827 73 0.3% 92.1% United Illuminating Co. 1,819 74 0.3% 92.4% Montana Power Co. 1,798 75 0.3% 92.7% Sierra Pacific Resources 1,690 76 0.3% 93.0% CMP Group, Inc. 1,689 77 0.3% 93.2% WPS Resources Corp. 1,640 78 0.2% 93.5% CILCORP, INC. 1,570 79 0.2% 93.7% Everyone else combined 100% Total 656,052
MARKET SHARE FOR UTILITIES IN THE U.S. COMPANIES SORTED BY REVENUE Holding Company Revenue Rank Share of Cumulative (millions of $) Total Share - ------------------------------------------------------------------------------------------------------ PG&E Corp. 9,592 1 3.9% 3.9% Southern Company 9,076 2 3.7% 7.6% Edison International 7,933 3 3.2% 10.9% Entergy Corp. 7,649 4 3.1% 14.0% Texas Utilities Co. 7,179 5 2.9% 16.9% Unicom Corp. 7,176 6 2.9% 19.9% American Electric Power Co., Inc. 6,979 7 2.9% 22.7% Consolidated Edison, Inc. 6,743 8 2.8% 25.5% FPL Group, Inc. 6,132 9 2.5% 28.0% Public Service Enterprise Group, Inc. 6,103 10 2.5% 30.5% Houston Industries, Inc. 5,946 11 2.4% 32.9% FirstEnergy Corp. 5,172 12 2.1% 35.0% Sempra Energy 4,973 13 2.0% 37.1% PECO Energy Co. 4,642 14 1.9% 39.0% Dominion Resources, Inc. 4,628 15 1.9% 40.8% Cinergy Corp. 4,555 16 1.9% 42.7% Duke Energy Corp. 4,361 17 1.8% 44.5% Northeast Utilities 4,297 18 1.8% 46.2% GPU, Inc. 4,096 19 1.7% 47.9% New England Electric System 3,989 20 1.6% 49.5% Niagara Mohawk Power Corp. 3,967 21 1.6% 51.2% CMS Energy Corp. 3,708 22 1.5% 52.7% PacifiCorp 3,684 23 1.5% 54.2% DTE Energy Co. 3,619 24 1.5% 55.7% Central & South West Corp. 3,427 25 1.4% 57.1% Long Island Power Authority 3,185 26 1.3% 58.4% Ameren Corp. 3,139 27 1.3% 59.7% PP&L Resources, Inc. 3,107 28 1.3% 60.9% New Century Energies, Inc. 3,090 29 1.3% 62.2% Carolina Power & Light Co. 3,024 30 1.2% 63.4% Northern States Power Co. 2,988 31 1.2% 64.6% Baltimore Gas & Electric Co. 2,743 32 1.1% 65.8% Allegheny Energy, Inc. 2,655 33 1.1% 66.9% Florida Progress Corp. 2,448 34 1.0% 67.9% Columbia Energy Group, Inc. 2,282 35 0.9% 68.8% Conectiv 2,236 36 0.9% 69.7% Energy East Corp. 2,130 37 0.9% 70.6% Consolidated Natural Gas Co. 2,027 38 0.8% 71.4% Alliant Energy Corp. 1,932 39 0.8% 72.2% Potomac Electric Power Co. 1,864 40 0.8% 73.0% Pinnacle West Capital Corp. 1,790 41 0.7% 73.7% NIPSCO Industries, Inc. 1,789 42 0.7% 74.4% Illinova Corp. 1,774 43 0.7% 75.1% BEC Energy 1,769 44 0.7% 75.9% Nicor, Inc. 1,731 45 0.7% 76.6% MidAmerican Energy Holdings Co. 1,663 46 0.7% 77.2% Puget Sound Energy, Inc. 1,641 47 0.7% 77.9% TECO Energy, Inc. 1,451 48 0.6% 78.5% SCANA Corp. 1,436 49 0.6% 79.1% Enron Corp. 1,419 50 0.6% 79.7% Wisconsin Energy Corp. 1,412 51 0.6% 80.3% MarketSpan Corp. 1,310 52 0.5% 80.8% Peoples Energy Corp. 1,238 53 0.5% 81.3% Western Resources, Inc. 1,228 54 0.5% 81.8% MCN Energy Group, Inc. 1,227 55 0.5% 82.3% OGE Energy Corp. 1,192 56 0.5% 82.8% DQE, Inc. 1,147 57 0.5% 83.3% Commonwealth Energy System 1,144 58 0.5% 83.7% AGL Resources, Inc. 1,120 59 0.5% 84.2% Washington Gas Light Co. 1,079 60 0.4% 84.6% Rochester Gas & Electric Corp. 1,037 61 0.4% 85.0% PSC of New Mexico 1,017 62 0.4% 85.5% DPL, Inc. 1,015 63 0.4% 85.9% National Fuel Gas Co. 986 64 0.4% 86.3% CMP Group, Inc. 977 65 0.4% 86.7% Hawaiian Electric Industries, Inc. 938 66 0.4% 87.1% Kansas City Power & Light Co. 896 67 0.4% 87.4% Washington Water Power Co. 892 68 0.4% 87.8% Southern Union Co. 882 69 0.4% 88.2% LG&E Energy Corp. 846 70 0.3% 88.5% UtiliCorp United, Inc. 833 71 0.3% 88.8% Eastern Utilities Associates 829 72 0.3% 89.2% Nevada Power Co. 799 73 0.3% 89.5% Piedmont Natural Gas Co., Inc. 784 74 0.3% 89.8% Eastern Enterprises 756 75 0.3% 90.1% Idaho Power Co. 749 76 0.3% 90.4% IPALCO Enterprises, Inc. 738 77 0.3% 90.7% UniSource Energy Corp. 730 78 0.3% 91.0% Orange & Rockland Utilities, Inc. 722 79 0.3% 91.3% KU Energy Corp. 716 80 0.3% 91.6% United Illuminating Co. 710 81 0.3% 91.9% WPS Resources Corp. 690 82 0.3% 92.2% Sierra Pacific Resources 611 83 0.2% 92.5% Laclede Gas Co. 602 84 0.2% 92.7% ONEOK, Inc. 600 85 0.2% 92.9% El Paso Electric Co. 594 86 0.2% 93.2% TNP Enterprises, Inc. 581 87 0.2% 93.4% New Jersey Resources Corp. 574 88 0.2% 93.7% CILCORP, INC. 557 89 0.2% 93.9% Everyone else combined 100% Total 244,653
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