ML20043D055
| ML20043D055 | |
| Person / Time | |
|---|---|
| Site: | Clinton  |
| Issue date: | 12/31/1989 |
| From: | Haab L, Kelley W ILLINOIS POWER CO. |
| To: | |
| Shared Package | |
| ML20043D054 | List: |
| References | |
| NUDOCS 9006070059 | |
| Download: ML20043D055 (44) | |
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oppeal, rate case, expense 12 Acid Rain Preposals 17 ManagementtDiesuosien Messeps management and economic Could Hinder Recovery and Analysis Dividend recmrry plan, revised dntlopment.
Clean Air Act revisions could Details on liquidity and capital mission con restore imrstment unfairly penalize Midwestern resources, regulatory matters value.
g Reducing Operating electric customers with higher and operating results.
tapeness rates.
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Aggressive expen e manage-t gg gg rnent and quality service 13 Dereguistion Reshapes The Company restated its philosophy help accelerate Natural Ses business trgission during 1989 to focus on the recmr'ry.
23 hetes to Finsacial quality service and customer
.Ibtal gas deliveries up, but satisfaction, margin declines slightly.
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$* Dividend Recovery Essential to Orswth Plan Center for Site Selection 16 The Geerd W Direchts NWWkWh I'lan for regaining vulue of will help sell an already imystment focuses on court attracthe commodity.
16 Management OrDenization 40 gelected Statistics h
1989 Financial Highlights
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1989 1988 "o increase iMillains escri ret ahate amouniti (DCCfC8%C) kie@tri$ esies ill E....
15,841 15,728 0.7 ens sales in thenns L
(sold and transported) 907 904 0.3
! Operating revenues.
$1,313
$ 1,285 2.2 l
tioctric S 988
$ 950 4.0 ens....
5 325
$ 335 (3.0)
Operating expenses and tones..
$1,067 51,039 2.7
, Opmoting income...............
s 246 5 246 l Not income (less) beters accounting change 5 (288)
S 155 L Not income (less) ofter accounting change...
S (288) 5 189 Averego number of common shares outstanding (thoussads).
75.052 70,900 5.9 garnings (less) per common share beters accounting change....
5(4.34)
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Earnings (less) per commen share after accounting ohenge...
5(4.34) 5 2.14 Dividends deciered per commen share
.66 5 2.64 (75.0) l vt r Illmois IWrt l1989 Annual Report l
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To Our Stockholders:
Financially,1989 was the worst 3rar in Rate Request Filed our Company's 66 vear history. On Match 30.
The setond element m our recostry the Ilknois Cemmerce Commission,ICC strategy - a new rate merease teamst - was issued a rate order that had a devastatmg effect filed on July 13. Ths request, which amounts on earmngs per share and the market value of to 5216 milhon, contams twu t
.ponents -
our comt,on stock. The benefit of a 6 9 percent 5143 milhon to recover costs related to increase in electne rates that the ICC diJ grant the Chnton nuclear plant and 573 milhon was overw helmed by dnallowing about 17 tor mcreases m operaung expenses mer the percent of the cost of buildmg the nuclear 1986 levels reDeeted m currem rates.
generatmg stauon at Chnton, blockmg a I he Commission is expected to rule on our common equny return on miich of the request in June 1990.
remammg investment m that plant and The Company has not been alone in fundmg operatmg expenses at 1986 levelt the light to wm equnable treatment for our hhIy.h
$r p ^g @,p As a result, we recorded a 5346 million Mockholders. Our emplosres have made
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- ML after tax write-off in the first quarter of themsches heard at the Commission's pubhc f
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the 3rar. Earnmps for the 3rar retlect a heanngt AJJitionally, an mdependent group i gj
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loss of $4 34 per share of common stock This called the ConcerneJ Stockholders of Ilknois 3 Md M made it necessary for us to suspend payment of IWrr - whose purpwe is to attam satistactory Nh lWB M9 bes8ed Le the common stock dmdend, mictruptmg a reg :ory treatment -- has become a
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42-3rar history of conunuous dmdendt valuable ally.
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Ahhough we were dmvn, we were not out.
In testimony filed thn january, the wg u g m-At our annual meeung of stockholders on Apnl Commnsion's staff recommended a 514_,
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12 - less than two weeks after the ICC nsued nullion merease m rates The staff found the IINEdM
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us order - we outhned our ibur-pomt strategic nucle. r +nt 100 percent "used and useful"
'M hg 3I u' W' MW program ihr restonng the Company \\ tinancial and to,mmended the followme cosh be Og @
h dEh @gige SI@yterIRW88R03%IRY _
from a hasuly developed response, our milhon to co,er costs related to the Chnton Ng health and the value of wur msestment Far phased m over a penod of tour yearv $124 W yi?f MM W
,3 hhkauf 38 800A 85 gg f Dividend Recovery Ilan n a direct outgrmth plant and an addinonal S23 milhon Ihr
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..h of the strategic planmng minante we mcreased operaung expenses.
b 50 Wl announced at our annual meetmg m 19S3 Thn recommendanon is much more W[h]fq " o s pm l'he cornerstones o! the recowry plan iavorable than the one propmed by the statt.,
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include challengmg the Commission s 19S9 m our lav rate case. It would not, however, j
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rate order in court, tihng a new rate request, provide the required level of tinancial heahh
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reduemg operatmg cests and expandm8 necessary to support near term remstatement f[*E gg,hkhgNgg$h@g%C jd5813bl8Ellilty91B[MQR h,
the already successful economic develop-of a common stock dividend.
NM' W ment program.
i hh Durmg the past 10 months we have made Expense Management Helps Recovery h
~. > VN A sigmticant progress in each of these four Reachmg our tinancial and customer M NW@4 y$" @y,;Py' %
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strategic pursuns service goals depends on a responsive organ-d<Jhhb@v<WW;@,;dh Rate Onler Appealed Udu"n that favorably balances operatmg costs bM @ f%
and compenute concernt Evea
-re the m
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rate order to the Appellate Coun of Ilhnon tor planning a reorganiunon that would be most M
On May 9, we appealed the L,ommnuon,s Commission nsued as rate ordt
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, @,fo g gp mwd Dmm The appeal n based on h,rm e0kute m today's increasmgl compenure 3
legal ground. h addresses the Cimton IWer environment.
Stanon construcuon disallowances and seeks We inund that we could reduce future to have all of the plant's generaung capaeny operatme costs by about 530 milhon a vear'and
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declared "used and usef ul." If we are respond'ettecovely to a more compenove unsuccessful m getung the court to overtun).
maketplace by inmmmg about 11 percent ol the Commission's order, aJdnional w nte-olls our workforte and consohdanng or closmg would be required 13 local ohico We are now hiokmg W other Thn tiru element m the recovery strategy operanonal changes that will merease our has progressed te the pmt where we expect protitabihtv anJ improve the ovtrall quahn i
a court decnion by mid 1990 Whatever the of sere ruimg m the case, n will hkelv be appealed Thne wu reducuons wme ai a um: when to the llknon Supreme Coun. delavmg a tinal carnal spenJmg requiremenn are at a 143rar l
decision unul 1991 1
ULnm he cr 19M Annua! kcror' n2
km, By adding Clinton to our generating greatest efficiency, at the lowest possible cost.
system, we haw adequate power to meet the
%e can see progress in each of the four growing needs of our customers through the elements of our strategy for restoring the 1990s llowever, new clean air legislation that fmancial heahh of the Company. Be assured places an unfair cost burden on Midwestern that wv are Incused on reinstating a common utilities is now being debated in Congress stock dividend and restormg the value of If it becomes law, we could face significant
>uur investment in our Company as soon as capital expenditures for additional pollution we possibly can. We will continue to find contml equipment as early as 1993.
innovative ways to make this utihty the best it can be.
Increasing the sales of electricity and nytural gas is the fourth element in our Very truly wurs, financial recovery strategy. Our marketmg and economic development efibits target commer-cial and industrial customers -- those cus-tomers with the greatest impact on sales. We maint.in the largest prnute sector economic development team in the state. In December W ndell L Kellev 1939, we put our team on the leadmg edge by Chairman and C'hief Ihecutive Officer opemng the Center lor Site Selection - a computerized facility that cuts business h>eation searches from weeks to hours. No other utility in the nation's heartland has this advanced technology
- ~7 Our economic development eftbrts
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continue to produce concrete resuhs. More Larry D. Haab t
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than 2,200 new jobs were created in our service President T' ~ W territory in 1989. More thari 18,000 new jobs h
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haw been created during the last five years as f.%,.c g pm more than A0 businesses mowd into, or
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,d' $ 9 pf hour sales to commercial and industrial
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customers rose 2.5 percent during 1989. This
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un Casunitment to Customet Setisfaction f
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- Qase We realize it would be easy to let financial
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We have skilled emplo>ves who are committed to superior performance and g
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emphasis on our comprehensive Quahty and
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is to deliver the best customer service, with the
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Customer Satisfaction is the Key to Future
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, "p" N lhgh-qualin service and customer 1991 1 rom a smgle facihty losated m Decatur.
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sauslAnon have ahvars been hallmatks ol' customers will be able to receive around the-gh ilhnon Ibwer. As the desade ot' the 194us skick answers to quesuons about bilkng anJ
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%7 commitment to an even higher level of customer and electnc service emergencies With new
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serme at the kmest p>ssible cost Af ter a caref ul, equipment and tewer personnel, this neu s
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M comprehensive analvsis of all phases of its operanon will improve servue anJ kmer d
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operahons anJ of the need n educe costs, operating costs by more than 51 milhon p
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impnnt el'liciency anJ provide the highest per year 7
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quabi) customer service. the Company in in customer service program, the 1
s revised in corporate masion to reaJ Company contmues to provide hm-cost energy
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R lilinois Ibwer will be one of the top audits that help residential anJ businew 1 *. '
companies providing quality energy customen reduse their expenses These 4
services to its customers.
cornputer-based naluanons giw customers w
wntten reports of suggested improvements and Ma In aJopung thn mnsion. the Compans pnoected energs dollar savmps 4:
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Alter caref ul evaluanon, the Company will bemg done, impnnements can always be made p'o' '
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Suparlor Service, Lauer Costs direct computen/ed hnk to llhnon l\\mer, large v
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bthmesses can aJiust natural gas orders momtor E
gie Nghh tw testemas Ik workmg smar er anJ takmg advantage their energs usage, get quicker answers to e
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= eseKheen tfallileejleM)and tmh of new technology, Ilhnon l\\mer can both queshons and determme hou overall demand L A. Briney,linesse le the Geleshug impnnt serne and kmer costs. A good example tor energs nught atlett their service. \\\\ith tho
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n the recenth announced tentrah/eJ telephone mtormation system. mJustnal customers can y P'
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answenng service that will begm operation m operate more et'liciently.
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Customer Satisfaction is the Key to Future arg
}{igh-qv dity senice and customer 1991. From a smgle facihty located m Decatur,
$1mp[pmAmr sg$$ '$@Mp d[M$d dinO satisfaction have always been hallmarks of customers will be able to receive around the-QMMiMMOO Illinois I\\mer. As the decade of the 1990s clock answers to questions about billing and
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begins, the Company is re emphasmng its service installation requests and to report pas
%Nh8M@Y commitment to an ewn higher level of customer and electric service emergencies. With new 3
A semce at the kurst possible cost. Aher a careful, equipment and fewer personnel, this new M*$
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' W eQ comprehensive analysis of all phases of its operation will improve ser, ice and hmer C
h@MY operations and of the need to reduce costs.
operating costs by more than 51 milhon
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N O h %@dy y($ @@@%%( @[P impnwe efliciency and pnnide the highest per year, M@NkN @%hk((' jfhfM.9;;MQ revised its corporate mission to read:
MRQj quahty customer service, the Company in its customer service program, the Company continues to proviJe km cost energy N j/
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Illinois Power will be one of the top audits that help residennal and busmess M
i companies providing quality energy customers reduce their expenses. These Nhi Whf[g %)p'OqMUJhWJBN
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computer-based evaluations give customers hJAg *$dMMT NW WWQ written reports of suggested impnwements and
&g g j o g $s wtM in adopting this mission, the Company protected energy dollar savings.
pgp ph YDok OW recognizes that no mattet bm well the job is Ak careful evaluauon, the Company will
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begm an interactive electrome message service 8
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Superar Service, Lower Costs s
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d N d M f j f e,f e N j $ $ $y/ @Q P E Brissy,Ilmemen la the toisebog impnwe senice and kuvr costs. A good example for energy might affect their service. With this is the recently announced centrah/ed telephone mformation system, industnal customers can
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To gain a better understanding of k
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"""'"e about Ilknois limer to state and tederal legis-lators, the linancial commumtv, the news y g y [ g f g]$[
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media and customers As part ot the program.
Compam representalises wntinue to make personal visits to key elected ofheiah, news
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s-m media and the nation \\ financial commumn.
[ 'edsenes le h seient W eseg me end gim blNs by mklog mekriseuse leipm, weints le
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", W 3the homes of ese4 and disedsentaged testeelesQlwe1gh grants sed metehing feeds,1 u - w ar m
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throughout the service area Special programs G &: -
v' m "ects We'seghest its senice territory. '
" o?proj have been developed for disaJeantaged customers 1-
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anJ older aduhs Compant emplovces reached
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two consumer advnon councils m 19xk. one m N --
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s llelleville and another m Champ.ugnTrbana-L :w-f1 1
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who hase tinanual problems These highh 77) 7"
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7, and fannhes in need bre than 600 customer <
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agencies to help arrange assntance tor individuah f
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have been helped smce the customer assntance E..
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advisor program began m 19*s.
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In early 1955. the Compam expanded y,' ',M';M='..
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and impnwed its commumcations program to
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'Ahah r win as w ah nabnw imsh inm so iho i hswinw whi enITmJe pub!h understandina l'he coal of thn aav u.. --si e o.4m imr>< iwi uii w e ih<
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e mW usu anna to its awasna undkn* *td eftbrt n to proside umeh. ettecuve m' tormanon r<rw* lhat <ksa wr
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about Ilhnon Ibutr to state and lederal legn-lalof% the linancial Commumn. the news x
media and customers.b part of the program.
Compam representames contmue to make M PusWiped uhbHsh me h Mtssa Madsha M h sh lashg personal vaits to kes elected otheiah. news
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taludens la me assent of enagy su sad pam WHs by maWeg matalashn impmemats in media anJ the nanun's financial sommunin The Compam aho organves presentanons J the homes of needy and disadvestaged customers Through greats and mateWag funds, bs emplovees to customer groups at all kmds the Company has given the Foundstlen more than 5705,000 to fund weatherlastles throughout the servac area 5pecul progrann g
g have been Jeseloped ihr dn.shamaged customers and older aJulb (:ompam emplosecs reihhed more thJu CMod untomers In l%9 lilm+ hwr 19 % \\nnu Km r 3
Dividend Recovery Plan The Company faces many chauenges.
Accountmg standards require that a gWg)gpgj ngcy:4g g m W k % @(': WyM Ti aciudmg the effects of the 1989 rate decision disallowance of plant cost be recorded when it which led to the suspensmn of common stock becomes probable and a reasonable estimate of
> j?d diviJends Illmois lWer is meetmg these S MM@Mhy challenges with a four part plan designed to M3L > jiQ the loss can be made. The Company wrote off NfM M M M M @n y " 4 W about 5346 million iafter taxesi m the first gqy
- !yhkyThe Osagesg is agissolvelM restore the Company's common stock dividend quarter of 1989, which dramatically reduced
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and sigmticantly improst its overall financial retained earnings A potential additional (idjppy.
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health. This plan includes the tiilkwving:
wrne off of up to 5674 milhon tafter taxes)
[$q!y SMfenlag.a (Buldenti secess4 p'0 m ao m remains dependent upon the outcome of the w y6 plan BM includes (fy K = Ayeahng the llhnois Commerce n
$ na 4[Q[%MMU dijQgf y Q j b4M gy ; 4mgAMM-Commission's March 30 rate order in court Company's coun appeal and the current rate.
hMMNQMhggl The Company expects the final disposinon of case. This uncertainty forced the Company to this legal challenge m 1991.
suspend common stock dividend payments.
l'he Company appealed the Commission's i hpv e ;heuenging N,,Nunals ',' I 3QqJr
= 1:iling a rate case request based on the 1989 rate decision to the Appellate Court of c... o gnp,u a a me "W
L,imton nuclear pmer plant bemg 100 Uhnois for the.l'hird thstnet The appealis m
%eg~ En - SS CORWRl80 LOR'8 M f percem "used and usef ul" and on operaung based on the Company's contention that the Q[g,$M#Mn MM j@S '
expense mereases smce 19Sn. This case ruhng on the used and usef ulness of iy;;gy/NWletiderinagurt4d Mg b
should be decided in 1990 Chnton is contrary to the state's Public k; p hp m J t M rhk.hbfN Mr Nh C mfu% managmg operaung expenses Utilines Act, and 'on the tact that the hshMfk CNy@@M']M
- Increasing economic development activas Commission's prude ;e disalkwance is 3
hKfin These last two elements of the plan hase unsupported by the evidence, meludmg (Mpj'%ggeding additleneli80 elm the tindings of its own audnors
%.J;EWCW3 long been essentia; parts of the Company's This stage of the appeal will not be Mshk in 8 0800 tot coul(be,$
compenove strategt The contmued success msohed betom nud-1990 A favorable ruimp B +-- > J ' YMd of these two important etforts is enucal in g
J
- M g% Q l 8CII8 @ rid * @ $} j h on some of the issues could dramatically niduce h@Vd?w$$0N % W9"7 -
d restormg common stock dividends and creatmg ll the potennal addinonal wnte-off. On the other iE YWWN.N Y$$ M lasting value for stockholder mvestment.
hanJ an untavorable court decision could tngger Y "s &,yd Court Appeal of the 1989 Rate Case
'smrw o
4.a m m -
addinonal w rne-ofts m 1990. Whatever the w
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% ultIRg Operating 00Elsy M outcome al the Appellate Court, the Company C
M E M t - @b ' O M @N M M mcorpmung the co a 01 buildmg the L{or d "Gbdw
% not pnwd ng a complete plan beheves that the case will be appealed to the
@@h d 9hhh hnton i knois Supreme Court, delaymg the final
- &M W % W!b l\\mer Stanon into rates, the Illmms Commerce demnon unal 1991 b/M Eshencing scoassaic sposth Commisuon's ICC March 1989 rate order ih$ (ky PNe,W!Wg@f g
created an acute earnings problem llow Rate Case Filed gg in the service testitorykg This March 1989 rate order was m
.I,he Company tiled a new rate merease a T@hh@
p response to the Company's rate request made m
.gDMi?%
W%g late 1987, which mduded a mulu vear plan request m July. Based on updated customer Mkey*MMNdhN Mgg l
thm would hase kept rates competiuve and usage figums from 1989, proieeted demand for
~
"4 YMpY' reco' ered the cost of Chn on over a penod of 1990 through 1992 and other factors, the R
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]M MW 'hdMJ i )gb' ' N wars On March 30, hmever, the ICC issued Compam has shown that the power station V,'
an order that tailed to adopt the Company's n Ho percent used and useful under the cruena established by the Commnsion m long-range plan, but granted a one-ume the W rate orden merease of 560.5 milhon, or about 6.9 percent.
The Company's request for $216 milhon The Company began bdimg the new rates in April, suNect to refund, pending appealt mduJes two pnncipal components - $l43
""U '"" NId d '" "*" '"* P k ""Y "I, k
The Commmion's order:
Chnton's cost and about $73 million to cover
. Ihsalhmed 561'. nulhon alter taxes due to operatmg expense mereases over the 1986 levels alleged unreasonable construenon expendi-appnned m the ICC's March 30 rate order tures and denied a common equiit return on In earlv 199u, the ICC staft and intervenors post-construcuon cost deterrals made in the case tiled their tinal tesumony. The between Jan.1,1988 anJ March 31, 1959 Commnsion stall.tound Chnton was H)0
- Demed a common equit) return on about percent used and useful and recommended 73 percent of( hnton\\ cosh considered not that an increase of 5147 milhon be phased m "used anJ usef ul" - w hwh would result m over a four-vear penod The staffs opmion n a wnte-off, as of Dec 31,19X9, of about that 5124 milhon for Chnton-related cosh and 5426 milhon after taxes 523 nulhon m addmonal operaung expenses should be recovered The recommendation of the ICC heanng Ilhn + l h er 1939 \\nnu.d Ikroo as.
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examiner is expected in late April. Under state p g'""# 'V" law, the Commission has a June 1990 deadline R
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o for ruling on the case.
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. The Company and an independent gmup, 9
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the Cmccrned Stockholders of Illinois Ibwer, F.
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T are wrking to ensure tha' the ICC staff, f
la January ilM, Ole NReele Ossumerse Gesualeelen m
commissioners and intenening parties L
-900) eleN tound Sist Gistos see W8 percent "used
._ V A
thoroughly understand IP's financial condition b
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.., and uselul" and gesogenseded tot as lasseems elif '
and that equitable treatment of stocknolders
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. is provided.
m If the Commission follows the recommen-I S'
dations of its staff, it will establish a program
- $147 IRNilos lie phased in Deer a leeriger period.
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fqr reDecting the remaining portion of Clinton P
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in rates, thus reducing the additional potential k
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write offs to which the Company is exposed.
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g le 9epeeled IR lles April.1
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not allcw immediate reinstatement of a common sikk dividend. Until maior uncertainties relating
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a Clinton -including the Appellate Court case
- have been resohed, the Company could still
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s be exposed to additional write offs in excess n
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of retained earnings. Dividends cannot lawfully be paid if the Company has negative
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gg Although earnings will remain depressed
.y until the Clinton ratemaking issues are castructw
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satisfactorily resolved, current cash flow b
Espensitores E4,%*
is adequate to meet operating costs, existing
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debt service and preferred stock dividend In minions ordollars
' qV ' 'p%g obligations. The decision to maintain the P
Qn preferred stock dividend is based on the
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requirement that unpaid preferred dividends F
$1,000
- 4D must accumulate and be paid in full before i
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900 ' x common dividends can be resumed.
gv 800 W ;6 %_.
signi6 cant rate relief, earnings growth depends I
A@s.
f$' 4" ' %[
Without resolution of the appeal and some L
7N ca on increasing sales and expense management.
l f
Fortunately, capital spending require-
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g* 4 gon ments are at a 14 tar low. Independent s
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the Company plans to spend about $125 i ~
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% :/p
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million annually during the early 1990s to F
keep facilities wil maintained and to meet
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309 environmental regulations.
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? Recently proposed changes in the nation's F
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clean air legislation could significantly increase i~
the Company's capital expenditures. The t
b jybd@%1@-
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l* Lbitah d Wd hM@. E(,
>J Q Cornpany could be required to spend between i
o
$300 and $550 million by 1996 for air quality r
control equipment needed to comply with n'ew
})M h, g<y m 86 n 88 89 90 91 92 93 m
- g m Actual M l>rointed*
gg, sulfur dioxide emission standards proposed by v
the Bush Administration, in addition, the f
9
- f.xcludmg the potential cost of comrlymg d i,,,
Company could be required to spend between p
mih en> rosed changes to the Gean Air Act.
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$150 and $300 million by 2001 to comply with in the second phase of the program.
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llhnois IWer 1989 Annual 15rt 71 4L
Reducing Operating Expenses GM muy c a,
1)unng 1989, the Compam inmmed the level of about 4.2(Kl emphnees Nearb 300 Mh[NMj
'l, y
ostrall number of eniphwres anJ closed and emphwres took advimtage of the earh retiremem M D Y[y 3 [( 1 hM onsohdatcJ ollices m an ettort to permanenth pnigram that became ettectnr on Juh 1 This W
reduce annual operatmg costs by about 530 aJJeJ a one ame egense of about 512 milhon
%[4 hk; M million ibntmump cost containment imuatne' in 1989. but trimmed about 511 milhon tnim M,
melude miroducmp a sophnucated linancial the annual pas roll
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h M [llenneth B. Polleenni management Ptem m 1991. placr.g yre ner
^
[ k Nhhs'nesianiedmNatemene suponisd emphasis on the Quahn anJ Producuvin Quality and Productivity Program Program anJ wnsohdaung other aspeco be Compam esubinhed a tormal Quahty J N;j.MdpinPowerstation;inepectsL et te of the operation and Producuun QP Program m 19C QP i\\
4;p m~.~
m,--
4 iustine blades elering a spring.
In miJ-19* the Compam Invc hinng b.ncJ on the behet that those closest in the Mj[ b g! Of meistenema estege; After Then. m Apol 1989, llimon Ibwer began work can Nst iJenuti opportunines tor h essNein(turbine efficiency-reduung emplovnwnt bs about U pum - ~
improsing the qualus of energy serthes
-(@N 'l h J;n,
or about 500 workers - us.ng a wmbmanon 1)unng 19x9 the Compam conducicJ g
y.
fM of earh rentement. utnuon anJ lawlis lh an m depth review of thn program to idenuf>
_10 percentJ 3rar-end. the work torte haJ reached the target lurther improvemenb About 40 percent of the
}% g,M+q l
y A
Companis emplosres have received comprehen-gy o
m,G sive QP trammg Thes hirm emplosee teams that produce specitic suggesuons for impnnmg
=
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9.
on the three maior areas ut the Ct.mpam -
2 g. gg hin.two QP teams now hicus auennon f
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power plano, customer seruce and supporung orgam/anons-1)unng the sear, more than 200 4" -
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s khe
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sertwe and cost control were approved.
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conunues to help the Compam lower costs s
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g me and 9ecial transportanon arrangementt
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the Compam saved about 5400.tKni m 19s9
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And bs moung natural pas meter testmg
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from evers 10 years to a staththal samplmg
/
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H-basis. the Compam eve is to sase about
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$MKI,(Kl0 a scar c
The Busmew and hnancial Managemem
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wstem combmes perhirmance plannmg.
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managemem reportmg th knking thtlereni 4
Jepartments working on the same customer
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prmect. n encourages the kind of perhirmance-
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4 resuh in savings
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- 4 Refinancing Debt Helps Cut Costs
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,i tinanunc wsb and reJuse the rnk of mierest 3
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rate wlatthn. the (.ompam reureJ 510u g g gt
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nulhon of relatneh high mierest 1 urobonds c.
that were Jue to mature m 1992 and reared g g ". g p y
P milhon m vanable-nuerest raic debt My / -
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in aJJinon near the enJ of the w.ir. the
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ampam rnened.unhon/ anon m retinanse m
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Reducing Operating Expenses 1
Dunng 1984, the Company inmmed the level of about 4,200 emplosves. Nearly M0 Kf'T# %g%BWI7 9 @Cy
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mvrail number of empkwtes and closed and emplo ves took advantage of the early returment hbh Nh[ghjgpp Ki g pq g g.tk u ?
consohdated offices m an effort to permanenth pnigram that became effectnv on July 1 This a
g$k w U(G; *% by[g' G W
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reduce annual operatmg costs k about S3a added a one time egense of about 512 milhon yg g g
',F milhon. Continuing cost contamment imuatnes in 1989, but trimmed about 511 milhon from include mimduemg a sophisticated financial the annual payroll.
,m.
d!@ik llenneth B.Pollmana2 ' Mi management system in 1990, placing greater
%[n Nh$tsamepinPuhrBletion[lahthi h b lanissimmiatenense y emphasis on the Quahty and Pmductinty Quality and Productivity Program Pmgram and consohJaung olha aspects The Company estabhshed a formal Qt ahty
- ,, _ m. g g.g of the omvation.
and Productivay QP, Program in 19E Q 'ik q -7 ine hindesiluring a sprin9 M.
in mid 14Sb,Ihe Company im/e hirmg-based on the behef that those closest to the p
. Oq h turb;
.4 kg@g Q,%
m e or w g
asin M estege.Aftse y
.Then, m April 1989, Ilhnois hmer began work can best idenufy opportunnies tbr myk sevis ng tu bi [ i bEeMioMh educmp empW..a b aMut H punt -
improvmg the quahty of energy services k$
or ahmt M0 workers - usmg a comNnanon Dunng 1989, the Company conducted ann h,e7 hgg h[$i. i M jgg of early retirement, attrition and layofts. lly an m-depth review of this program to identify Shi yA y ghkk
$Mh[g
> var-end, the work Drce had reached the target further impr wements. About 40 percent of the
- h. N
- h.,, -.
mpann emp em comprehen-g g ",..
g g'. M M. k".k.
site QP training. I hey torm employee teams a, >w < s y
that produce specilie suggesuons for impnwing customer service at the kwtest praeucal cost.
jp g
=
- g ^ jg,y.)
. y ;,g~
Fift3 -two QP teams now locus attention yi 4
on the three maior areas of the Company -
P@M ;%
3
' i' p mer plants, customer service and supporting f
.,..g /
orgamzations. Dunng the > var, more than 200 j%
~.
Ql, h ' '
.c
,,..JV f [
recommendanons for improvmg the quahty of h'
?'
. 37 g
service and cost control were approved 7 g-The QP approach to decision-makmg R f
^
'.. 4 y
g-contmues to help the Company hver costs.
.i
- q q
7 j Iciy i
.p 7
3 1or example, by consohdating freight carrier
? k w.' ?c f (. /^.
use and special transportanon arrangements,
,~/
c
'a
. ' l1 h
the Company saved about 5400,000 in 19S9.
p p.
j g
,, 4" 3
4C-And by movmg natural gas meter tssimg i
a; j?
from every 10 vears to a stausucal sampimg 4;
-., r..-
x 7r.. ;
y - '
,7
.J. E basis, the Compam ewects to save about
- 7' c.
]
+R 58(0,l00 a svar
- +7; The 14usmess and Emancial Management p
=j-
' ~ -
M System ntw being developed was the recommen-4 - 7e :
dation of a QP team tormed two years ago.
tt 4 -
This computenzed tinancial management P
system comNnes performance planmng,
- y
. 1 "J"
monitoring, buJgeung, and linancial and s
g.
3 -
t.
management reportmg 13y knkmg different gx ;
departments working on the same customer g*,
- - ~
~ -
. d; protect, a encourages the kmJ of performance-1 ]g based operanons that improve efficienes and eg.t 4
result m savmgs
.i
~
f..:$
z, l
f1 Refinancing Debt itelps Cut Costs
\\'
[
- \\s part of the conunumg plan to inm.
f f
'J 1
.g('
k.
finanemp costs and reduce the nsk of mierest p'.?
y $-
rate volauhts, the Compam retired 5100 7,yg M
l.
milhon of relauveh high-mterest Eurobonds a1 that were due io mature m 1992 and reared b
1 M : ' i
$N milhon in sanable-mterest rate JcN s.
g.
g $]
(
In addinon, near the end of the yeai, the t:ompany received authon/ anon to retinance Q. :+,.
N w, g g *%.
gr. -
.s 0
'A up to Wu milhon of exnung debt in
-.N g; -
w x
- - 3c V
~
.+c)
. % -.. > %y? - s%
v'...
..s...
lilm + I W r 1989 Annum Rev
-8
p Mh December, the Company issued $44 million in - about 40 percent, down from about 75 percent MWe"Fm V"7"SE
' $qhh, D C % L F
fixed rate, medium-term notes as the first in 1988.
p f $ ?- '%
step in the program to replace $100 million The Company used the shutdowns p, W., " Z W Of%
M p* ' 4 dfn in variable rate debt.
to complete licensing rnodifications, refuel
'?
M' These actions will cut costs by about Clinton's reactor and conduct preventive Hi
?
l @c -
' $W{d 4] " *. m j s"y :*
' $3.5 million annually - savings that impnnt maintenance that should help enhance future the Company \\ earnings in the same wuy as performance. The plant is scheduled to be out
.g, j@N,y g [y
' cutting operating costs, of service twice in 1990 - first, for a four. week 4
f S;wl3 j1 period beginning in February for planned p :A N M q@@
Setting the Most out of Generating Resources maintenance, and again for three months As temperatures fell in December, customer peginning in September for its second refuel-p{
i gg y
2 demand for electricity reached new winter time ing. In future >vars, the plant should operate g
siectric seien g gv f r about 18 months between eacn refuelmg.
In tsumns or 3
p#@M
- highs. On Dec. 21, demand topped the presious Sales to other utihues decreased by about kumu hours A M.-
winter peak by 9 percent, readiing about.3. 8 million kiloutts; 60 pen'ent fnym the peak rar of 1988, pn.marily q
73g lYak customer demand for electricity because of mdder wrather and the longer than-Q yp during the summer of 1989 declined about 8 anticipated outages at the Clinton Iker h
yl J Station m 1989. Net mterchange sales dur,mg n g percera to 3.2 million kikwatts, down from the
'all time peak demand of more than 3.5 million the > var were more than $33 milhon.
33,73,
4
- g. 4 c
y D MM9 kilowatts established in 1988.
e-L I. QM' 15 50 -
liigh quality corrective and prewntive maintenance drives good performance. During
- f y}'
2 h [ [y%
- ggf (Qggfjp 4y4,hp f, ',
y
%y g.y, Q-p- g the summer of 1989, the equivalent availability p R <, ya y -Q a4 1
h jgg of the Company's fossil generating units was g
gg' N
g4 j
s M g dj g yyGk f qigp%Qgglgb
'95 percent. Equivalent availability is a measure ggf.j Q [h i
u.75.
l..U. b 4 ThM of how well a plant is operated and maintained, T
i t d. P W Ml4 units typically scotr 5 percentage points
[t -
g 3
m L @% W M. Mx 3'
and the Company's coal fired generating 4
14.50.
9..g. p n.
"g g aw
- Y h
?
2 5
t 'W higher than the industrywide average for f
slectric Peak Demand similarly sued umts.
4' sn 14.25. q -
1.
- u. R -
m@; %
in thousands of kihuaus C
q' MS n
i
.Ib postpone the day when expensive new
&q 1* g" j
- ~
i j' i
4 4
electric generating facihties must be added, the p
' Company is maintaining fossil fueled units to 4
,M 1985 86 87 88 89 i MQ 4 *0 -
f%G extend their economic operating liws. One wry g
Gh y$,
g M, pg Wgg y successful effort is the boiler tube leak ar.alysis 4
3,73o.
6, > Q bMQde gm4%a and reduction program started in mid-1988.
a 97 Ph Y ' S,q M2 Production losses attributed to tube leaks 3 5N -
W[M
.1. g. g p
w h(M~gMj[MgMM }hh were reduced by about 35 percent in 1989.
k 3,250. g 3.om. % %
M.
W W :e +A J1 $
2,750.jty%g@a @gy 4 ew,g
,n 6
b f mg dp n k y p t%,i g4@
m 4n gyg qq During 1989, Ciinton produced about 2.5 p
g.
billion kihmatt hours, or about 15 percent of
,8 2,500.,!E.Q.W. a m Wf#y[Ma./ a, M.7,MQ, _ [$; g39y, QSM 2,250. p4, m., am,,, a W M @f<y; m y.p all the electricity that customers needed..I,he q
N
' b* 'Nkdb* p;Wy"%q;c pgg w
,VF 3
m h.:i hja m.
Company's fossil-fueled units provided about 85 percent of all electricity generated in 1989 h;
7 % 4,b bN I
I d NO\\b 2,000 ' W<' '>[4 " M %w n&
?
Yo MM
-n totalof about 16.6 billion kilowatt hours.
6:
d
,Qp Q
4s A
64 pp ' My,
a e
s s
@(y? @@y w[ W M N After an excellent par of operations in 2
1,750..g. 3 N nn. W.M ' i. 9 -
Y f,fn2%
h M
t
,wfM"'j$h 1988, Clinton was taken out of service on f
g3go ',t'L%@t *
- 9$
jark 2,1989, for its first refueling. Preventive p
QM
%$'M.
7' M>
y,'p#g"P<,M $
.,Z
. maintenance and improvements required by p
1,250 v f Wl n
i WW
@uw..a JJ
%+
R,e.
N. e m.
regulations are traditionally done at the sarne ts 1,000 a
m a m #;. v %e
',,% w %"e m
m m,
t.ime. Modifications to electrical components N
m v -Q o g.w-7 '; -
v 1985 8,,
88 89 u
m mside the reactor containment area substanually Ii c4 g,
7 y 9 l; q,3M Mjmf c
.k g;gysfgm extended the outage. The plant was shut down
[
ts summer twk Demand.
g qi P OjY '
- on six other occasions during the Star ihr
[
m Winter Iwk Demand
- 3 ; y.,,,/ M y "i
7>
equipment repairs and maintenance. These f
. noes noi ;,cioae conw.s j.yg 'g i W
,f f
outages cut Clinton's equivalent availability to C
to electric cooperaset
,1 W J,
W WW
& $ b.k$$dl M AE $h.cebknatuadSdbiSI bblYk?b]u Uw tilinois ihr )989, Annual Rcrort b 911 im 1
Economic Development Essential to Gmwth M
M
ilhnois has a mulu-talented lahir pool in 1989. A E. Staley Manufacturmg Co.
- -]m$f; TT" '
The state has one of the best universny. college agreed to buy a signi6 cant portion of us electric
} $; @$ $
i 7
i anJ communit) college systems m the nanon.
reqmrements dunng the Grst war of a fivearar IP ladestrial Average Electric W There is a wrll-developed transportation
,ontract. The contract will return a signi6cani jpe j [k Price Compared te system, including one of the best mterstaie amount of the business that the Company lost s.
highway network's m the country The state when Staley placed a cogeneranon plant into j g}k h
4dwestladustrial Average is noted for innwann busmew 6nancmg service earher in the 3rar.
g i af}
g,3 y
programs And even with a tas merease Ilknon l\\wver was especialk pleased R
4 m 1989 to improve schooh at all levek, when American Steel Foundnes in Granite j$ ' h
- I -
2 2,
I Ilhnois ranks only 38th m total tax burden City returned to operanon m June with about.
1 Ilhnois limer's terrnory has somethmg 200 emphwres. Formerly one of Il"s largest
( ;ce SkTOgt che m its favor - competiuve electnc rates customers the plant had been closed since s
n l%&
j hM.i {M k h q %Q" for industnal customers chmbed about 5 percent to be about 16J100 kilowatts durmg the Grst Ahhough the average pnce per kikman-hour November 1982. Electne demand is expected
}
' f Mnid bc to U3 cents in 1989, thew nun are aNun 3m of producuon, and could gnm substanually hM
.. h,3
@f [
id i
10 percent behm the average among MiJwestern m succeedmg years.
44p
' p h{dh 1
"h utihties and hmer than 33 of the 50 largest M
d.
utihues m the nation.
Center for Site Selection Gives
-p
@g h'{
'hui maior mJustnal customers that recenih IP Unique Advantage h
ik N %h
- . built cogenerahon tacihues have ugned The communines served bs the Company I
@{
p
' fy n
contracts with the Company to supply sigm-compete agamst thousands of others ihr new and o N h
. k heant portions of their electnc load in exnung buunew To help contmce companies
(
le % e o w mid-1958, Archer Daniels Midland Co that ilknon l\\mer's scruce territon n a ADM ugned a Ovequ contract that calk pm6 table phe to do busmess, the Company
! 'g]M e ll'ine ninal e
thr the Company to supph a substanual opened the t. mer tor Sue helecuan near its NF h. st InJuunal p
pornon of ADM s current anJ future Decatur he-ners in December 1989 y
,imm*J G
electne needs.
ay h.S ' l h! Ms
[
k(
h[@YW~nW MN, 'Q, '
g.
s x>
A
+
m e
f g'
Si g:
a m A.. m.. wr j
F-
.e passies slosely with existlesM t
- JIIWlu
- estaae'slh'itsiperhm%
(
i
-t E campseys som devotopeset&
m
-+-,sm s steer't. iime, aevid W. setts, petiM %
s
.wi ammmmmmum,.,
tr c
[
%.... e m.gh m <
s - -
M.
gg M *enelgy M,
-(
ti
+sy q.n.
i v
k M,_hsteh(
e
! 'd M; lantsymfall0esmens 4
l#
7 t
. a s-m
~,
f 5<
It id,I sp
. - g,+
f-i t
g Y
'y
(
r qi. NMl, N,
J
~ ~ ~ u w::: :
,,se
}
r=
a -g 3 9-M cle espplement the eiestrielty e, ;
Ni
-.m
.wt 2y'M by Its eag8sefalles %q.
_.-. M__-
.t
- IIk, W
I' tfeellity.ThisWillkeep Staley..
-,. y[
.a.
/
J
- /)-
. ',,,,;e of milcaspehri Nf f
e i
Me sseines,s. M.h.
m n
a 4
.y r<
q v
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5' w/ /
[
4 4n n
~
k
'}.
l M Mld S y M P !
Mti llhnon I W er 1989 \\nnual kron
Economic Development Essential to Growth pp.JMWWW QWG M L,
Ilknois has a mulu talented labor pool.
In 1989, A.1. Staley Manufactunnp Co.
Ad $
4 The state has one of the best university college agreed to buy a signilicent portion of its electne Sb and communny college systems m the nation requirements dunng the first > var of a live-vear g
IPladestrial Average Electric There is a well-developed transportanon wntract. The contract will return a sigmlicant d%
Price Compared to 1[
system, meluJmg one of the best mterstate amount of the busmew that the Company lost
%%gfi.
Midwestlosestrial Averste huhway networks m the country. The state when 5taley placed a cogenerauon plant mio n
mWa e nN 0nAmg mu dd in de W N hY In tenb rei bkman-hour programt And even wnh a tax merease Ilknois limer was especially pleased p%g hMig s
in 1989 to improve schools at all lesels when Amencan $ teel Foundries m Granite llhnois ranks only 38th m total tax burden Cny returned to operation m June wah about,
MN
! _., y g@h! [lj$a
~
Illmois limer's terruory has somethmg 200 emplosves Formerly one of II"s largest ni s
m DkM t
che m as favor - compenove electnc ratet customert the plant had been closeJ smce N k h @2 h h!! Nh Although the average pnce per kihnvatt-hour November loS1 l'lectnc demanJ is expected
, f[ f ( [y f 4
tiir industrial customers chmbed about 5 percent m be about 16dKKI kikwvatts dunng the lirst m, WO d fhh d5hb to 4 43 cents m 1989. these rates are about year of pniducuon, and could gnm substanually h g!t% Y; y g MUE d
10 percent behm the average among Midwestern in succeeding years li h
utihues and hmer than 33 of the 50 largest
@M & M $
M unhoes m the nanon Center for Site Selection Gives 2 0 vb p p^ @f h
hj
'lwu maior mdustnal customen that recentl3 IP Unique Advantage y%b f,f }hh f;.
buih cogeneration facilines have signed The communnies serve i bs the Comnam
[hhdQ
?
t 9 h
'.""lfdCl' "ith the Compam to supph sign'~
compete agamst thousands of others tor new end h
W; heant pornons of their electne load. In eusung business 'Ib help contmce compames 3.hy o a a m
tw xn c 8.,
w mid 1988, Archer l)amels Midland C" Au lilme limei s service ternton is a
.Al)M : signed a tive-vear contract that calls protitable plu to do bu. mess, the' Company hr M[N.U o IP inausmai for the Compans to supply a substanual opened the Center thr Site Selecuon near as NU
+ %Jwesi ind asmal 94M3 poruon of Al)M s current and future 1)ecatur headquarters m liecember 1989.
, I ""*
gggp electric needs QQy w
Lafg%wa;g u Osw -
3 ypy
, m.
yM.,
di % n d i!% W A V W
<'~M c. y'
- 1m
>s M
i i
- 1...<sy? 1rM@
e 1Wodiles eloseerwith estellegqk l
u N
- 4essemensele&Mtmi b
r, -.
tempseyueusemic deveisposet y
.+
w
~.;
..-~q!,y as,,,,,,,,,,,
t eHert.'llose Beeld W. Bett,e,'(le
[.
J; p>
g a-m + -
< g c
- ~
dhester.seeigy estes, diesseees(
}
4 c..
v.+
s
- E 9-e eOfe millig presses need fly the Q
- .
- ,>w.vm
- .g v
j 4
,i g I
}
h l ,t ?'#'" ""88' "**' A
~;
mZ FA g-4 (J eMed==eki.Derteg'1ges,'Sem,isyM G, u -
- t. n f
.. n
.,a w,c w
- %.. y, Uhkk j p.
0
.(b i
a,
..y,
_ s$teespplementtheesostrielty 9
~
.C~
ir%,
.W
' p Amedliy ne oogenereuenNh O, 7 ;,.teenity M ain s _etnis N W8 11#
e w
m i
r-g.
g
,,,,,,, y,, g,,,,,,,g q top ie easteners'.' WNb a
y
,y i
'f y
Nh A
aw w
m Ilknor Iwer 1989 Annua! Rep,rt 3
- iLlN,a p%
ng]. M 20M3 Pgf information on about 2(0 of the besi i'
o s s n g; kications in Central and Southern llhnois a'.
u Y
'~
asy-to-use computer system Wah this
~
n;gg]lg g i
$g f
4 is programmed into a sophisucated but 7"
3
'4'-
W(pgMg B %
- x fky innovative system a customer can taoroughk
. f M
, f p[
research (ommercial and industrial sees If
+.
through videos, computer generated n'ars g
and a complete data bank of mtiirmanoi
" w%Q,-
i i
F u W With mtormanon presented m English, W
^
Japanese and German, the Center tiir Sne R.h
.s
. ' j %,
( (
y $g
$ election is the only facihty of its kmJ anvu here j
in the Midwest. \\t the center, a potential qustomer can do m two hours what would Q
D, N }k U
B
.M normally take at least two weeks This 4
~
s wm advanced system helps Ilhnois l\\mer mam-L L
u WA 5
f h{h tain its leaJership posnion in econcmic 3{
", pj development. Only tour other utihues in the g
ge-A r
country can offer prospects such sophisticated p
j g@;l kication services n
i The center will help lilmois Ibwer, as p
business allies and kical development commutees h!
{
jMg continue 10 athieve remarkable resultt 4
W g@g In 1989, hl new emplovers located m 4
y lllinois l\\mer's service terruon and M existmg N g
g ',,
N 2 firms expanJed in addnion to the 2,242 new iobs these emphwrs created, studies by the
$)
]y y$jyG University of Ilknois show that each new a
?
manufactunng iob produces an average ol j
y.
%,m ms
< q qp g g @ y ',"y G '
Q9)
Q three new posinons m the commtmn).
' y' jg gp,
y 4M @
lllinois l\\mer adJed a net of 2,295 electne
- mkn.
customers and i,624 natural gas customers in
- EconomicdemolepsentW VpOha
. G,J M
c dilB -"
Jobs created in u
's-1989. Ihmever, the llelleville, Colhnsville and
- b. esseums new kbd met will bring pi %c L -
y q service Territory
@'4.
Eduardsvil!e areas 01 Southern llimois, and the x yo"t to the servlee one,mio na ; e +
u illoommgton N.ormal and Champaign l,rbana w c 7v
.1 yea
.c, areas of the central part of the state conunue to Lessentialpert gf t% e -pamire ;
experience the greatest rates of growth. Nearly i dividend sesevery plan. net effortil MJ
'o 0"o
g E
, f ggy,,,NMy{
7 g
5,900 new customers were added m these areas
~- 4 ow ho*
in 1989 This gnmth, however, was partially (whento Campapeposey f ' e we:
Q g
j,-
offset bv dechnes in some other commumnes Economic deselopment is gettmg more l Center for $lte Selection is teester. '
Wooo a
g
'g"1
(
competmve Although there was actualk a 4tising a sembination et tempster.
higher level of busmess relocation interest y
4,,,,,,,
" r,
@b and acuvus m 1959, concern liir the tuture D oo of the economy seems to hase reduced the
, peepe99gladestrialer\\,
seemerelat eestemer een view?
k A
meerktgeheliding MPS,y,
actual number of decisions to move or to
~'
gg expanJ. Consequentiv,19N9 results Jipped R
3 h
wt utM me unwr.
uo" 2 5(
bs alere, Ellen B. llrohne, empervleeri 3
'4 The true measure ot pertormance must come over the longer term. Since 1955. the commenity'developmentisheesi
%h
~
Company's economic development etiiiri ha'
. Lesette Itayer Peel J, hierphh thie' '
Loo"
~ slow' ef. tim. ort s@m.:
i+n helped bring 124 tirms to the state, and another q
192 busmesses expand - Jirectly creanng Lgg3 more than 18,4(0 new lobs.
5si o
l%;
sh s~
ss h9 Ilhnon IWer 1989 \\nnoM Repon l
- gj
l rom !"N.M fA informauon on about 200 of the twist e
W y
%e * " '"% w%~$@CMl-i M
~
locations in Central and Southern Illineis o
34 is programmed imo a sophisucated but kg
(
}gg;g j%g easy-to7use computer system Wah this mn wauve system, a customer can thoroughk research commercial and mdustnal snes p
~1 4
a.m
,,?
@%g through videos, computer generated niaps
{ and a complete data bank of mformanon.
, w% '
J
< g@h j
With intotmanon presented m 1.nghsh.
Japanese and German, the Center for $ne
' M, P
l
/
,$y Selection is the only tacihts of its kmd anmhere in the Midwest At the senter, a potennal D
4 l [,
q y]Wp
<;ustomer can do m tuo hours uhat woulJ a
normally take ai leasi two weeks This I
MN
~
fk advanced system helps Ilhnois timer mam-ih
{
$f Q A#
tain its leadership pmnion m econonuc
[ j p.
i
}r V
fp development Univ tour other unhoes m the gh countr3 can ofler prmpects such sophisticateJ location services
,g The center will help ilhnois l\\mer. its l thd business alhes and local deselopment commutees le
^~
hh F
contmue to achieve remarkable results J
(jill 4%
in 1989,10 new emplovers hwaied m t
(y%y lilinois lher's semce terrnors and 35 eusung q
~
lirms espanded in addnion to the 2.242 new Y
jobs these emploufrs created, studies bs the g$p Umversits of Ilhnois show that each new AQi ' (
Mhy manutaetunng lob pniduces an average of w
yg
>v'p,
- 3. A o q gm'
-*Po w,j g three new posinons in the sommumts g" y m..
, >, v,,
(
Q, ih llhnois ther added a net ol 2,295 electnc
$.P customers anJ I,624 natural gas customers in
- Eeesemic desele.gan. sat-. -
Jobs Created in d [r m,
1989 Ilowever, the llelleville, Colhnsville and steellag new jobs met ditwing;
,<'m, ec Service Territory Y. mI'**""I"'"'d "
+.o M,a p lidwardsville areas of 50uthern Ilhnois, and the k
bloomington-Normal and Champaign-l'rbana areas of the central part of the state conunue to essential pert of me Cooppent's(
{3h
'00"o
' M-exptnence the greatest rates of growth Neath dividend recovery pies. That ellert.'
q"'
W]g 5,900 new customers were added m these areas g,,,,,,,,g,j,l,'g ggg(
J l*o
-t W
in 1989 This gnmth, however, was partialk
>w&
j# ~ ; -des me Coupear opend he q
]p g
offset bv dechnes m some other commumnes j'W3pj licononne deselopmem is getung more center tot site selecties la neentur<
us *"
g compenove. Ahhough there was actualh a Ilslag o'oembinetten et sempster 7
k@
j$
higher level of business relocation mierest
],, gig, Q
%{p, and activat in 1989, concern for the future
,3
~ ~.
N m
of the economs seems to hase redused the n (propeeuwindustrioler.
h
'~
actual number ot decisions to move or to fcommercial cestemer sea viouri t
200 heildthitesia lP's N
expand Consequenth, l9S9 results Jipped shghtly behm the goal of producing pg nno
,,50 new iobs g
- jiy
~
The true measure of pertormance must
- mm, Ellen L elmime, empenleere come over the longer term $mee 19A the community develeoment, u;eews.
,J[
Company's econonuc Jevelopment eflori has g,g,gi,'ggever Paul J. Merphy this '
10""
W helped bnng 124 hrms to the state. anJ another
. - # #' ' 'I'"'
4 192 busmesses expand - directh creaung am h'
more than 18,400 new iobt s
N ii d
[W xo x'
e x4 h
llhnon Ibwer F)S9 \\nnua Rcron
);11 '
Acid Rain Proposals Could Hinder Flecovery The amendments to the nanon's clean Solvmg the problem of acid ram could hasr M eW@ @
MMF%Q3y S[Mb gg@iegaSa.a.a$qgg;d Q
air legislation now being debated m Congress
'ainful economic consequences - higher energy y
ni p: p could dramatically change the Company's sosts and the loss of many mmmg-related iobs.
$[p$hhTheDtfabekNsifahdate4[3 I
hl expense picture in the 1990s anJ delay financial
'Ib con.,* wah the proposed sulfur dioxide recoverv. It is anticipated that some tbrm of the emissmn stanJad llhnois timer has three q
m o m w e $hki Admmistration's clean air legislanon will be a
h hh M
basic opuons:
N Q]IAINi l 5ee east W unedes eastWped passed by Congress dunng 1990..
= Install expensive sulfur a oxide control b'
else Rudesstem etales, pensellanyg fhis legislanon is mtended to improve air equipment at coal-tired pmvr stations. Called nge ectrisNeiNNNkkh quahty and to help solve the problem of acid
" scrubbers," these systems are actually sophis-
%l' rain. Some saenusts beheve that acid ram is yQQggy ucated chemical plants that remove the sulfur'
. % a y my created when sulfur dioude and nitrogen oxide, dioxide produced when coal is burned.
n e~
m s
- h. M % 88 % PoemhWpedg @y h
3 produced as coal is burned. rise mto the atmos' Scrubbers decrease pmer plant etliciency, M kaunis tealities ter Asid Relobb phere and fall back to earth as rain, snow, tog reduce plant output by about 3 percent and
% hMIgettp[etleshle'glesNg$lh g or dust. llecause the Company annually uses add additional waste disposal costs. Iimestr, q
al ost 6 ilhon hins of relauvely high-suuur scrubbers would alknv continued use of hiiN[g,ir==d kNp WeedqMe$gg Ilknois coal, as generatmg umts are among the dam
~' u m e y pa relatively high sulfur llhnois coa!
tpq c m islamindentbelsessef g M nanon's maior eminers of sulfur dioude.
p b gAW % D $ q h[
5 Switch to more expensive fuels such h[g @hjg$$
p... hp$
t Ep bIM as km -sulfur coal or natural gas liither N
chmce could icopardue minmg and other h
Wig M MH iobs in llhnoit khhhb b stall emerging clean coal technologies. The
=
h9dk i Compam is concerned that these technologies
[MMhg,'
v h%y4
}
]
will not be commeraally proven in time to g
meet con - 2nce deadhnes nau a e
n posed dd""" P d"' *".st of the clean up costs l
MI% '
ICE pd@@A @I e
e e
gh on lust nme states.I he legislation actually QM l
l exempts some states with petroleum and chemical mdustries that are maior sources
' y,' % l
,,,J of sulfur dioxide and mtrogen oude emissions.
The Company has worked closely with o
ue i
L, /.. <
(0311i00[0iSCid MIDhuity
'.ongress, the Unned Mme \\\\brkers and others to reduce the economic impact of meeung
.T these strxt new air quahty standards. Ilknms C
lbwer helped form the Coahuon tor Acid Itun liqun), a \\\\itshington based group designed to keep elected representantes informed on this issue and all us potennal effects on lihnois and the.'lidwest.
The Compm.'is most concerned that this legislauve proposal imposes a large part ot the cost ot a nanonal p igram on electric consumers m Ilknois anu nuts the iobs held by
'p 43.
~
thousands in ieopardy. New pollution contml' m
d i
equipment could cost between 5450 and $850 1-
.%N I', " 9 nulhon by 2001 and raise annual operating '
a
[_
f% F costs about 10 i > 15 percent.
} t h-
~.
r
~,
,a
.,+
s llbnm 1% 19$9 Annum Rcp>rt L12
--winsm-mmmmeis permanently changed bs price volatihty durmg gi g 4 ' g lp N 6.
r -
a g
4 /; q J 3M NM.JM NW@Me Jhh W
the oil embargo. Then deregulation further Myg.;9%gN9C SS see Denvertw altered the gas market in the 1980s.
MF WWDR -
In nulhons of therms a
w b 34 gyp $. 4~
qwjp.
.gu u. x
- v93 %
As a result, customers are instalhng a wiJe ii p[JpM% di QD M JMM[W[%g
(
variety of high-efficiency equipment - gas Q$mmQQgppg
^%'g g
uion chillers, vacuum furnaces and air conditioners 7
(M ggeg c
7
}
[ $[ a 0 M $ k' A%
Q NgM@M,
- as a hedge agamst the type of energy price y
volatility they saw in the mid.197A And wh pps%%ggd$ W it 4 M& M$
y$f. @n
"'o gas prices well behm those carher levelt mamr h@.l permitted to buy from outside supphers.
- @@ f[mw
~
(w { w.[s @[ [m; Wpd d
Q9y G industrial customers across the country are yu
{g!j$
f i
,p y
j Qpj c
p W
w g[ p% g g g @;; Qh@j fs g d consequently. iihnois twer is periormmg mu "oo n rek IM ykhIQ M
QQg h N @[ Q} h ggdjpgQ its traditional role - buymg gas for direct sale gs P
g%y
- and expanding its role of transporting gas W
xso w.
d d
4 M S dh (Ml:P W $yhnb M Dk f!) Wjh k p@d
@[k %qqm that industrial customers have purchased r
! %fdh 6
N 9
EOMM elsewhere. In addition, the Company works L,%
Y3p 4$$%k with large use customers to develop gas supply son M A ta b
. t M 0 Mmq!i arrangements that best meet their needs. These p aM. J g dngm.i %p%g~ S n
syM ggag;,(4 y j a
special contracts pmduce hmer proh.ts thjm gyppgg ive a
r xx o
g w @9 #r% g a W hy$p%a M, traditional sales. but pnwide greater prohts
.i aa,ng inmuesnnienu ues A
k(y $W
,h r.,
k WU $$
Mh?
m a,wM DShq l
than if the etistomer chose an a ternative m
r qa mw % p=>e%,,
3, y
w y
-s i w@ p g g g g qd g g
w%,, gensed_lerseemelge mm e
M>
p m,
m g
[
n.
s
'y r U
a 3
k wm, % gNenefed W 9e sofeW) $ ped VC i
lW t
n
,y 1
q < sese,.u, o ~.u.
en-
+~
Qm m n ;..se. m, es.me,e cm, or..e 4
t ts 4
sy Qe v e wn u e mp hhMl & eeaded sheet 7.0 mulles the gW n
i Y
en,~M M.Ibe M M j ;w.
,* m*
- s... -<
+m+
y[, pjhb e Y
, g.
.s. ssp ".
. r.
- n m.m - a 7 4 Y?
h M sehIeed IF BeNg M' O i
?.
-l r' 'y..
71
%? M y hgau p w m uw m o x nh.h:s e
v y% m,,MIM delege lleid8 eed See.
,..f 4
,y M dp@Q p o.Nesse$ R.ihese,gesM'jM q
<4
.mn em hpipelleen I
r r%.
mw y @L$ bfttleretthehosteegetwe'geW@ g
+.
e
+W*'
+"d
- i 8 Y d. % 4 0 :u p #80dd8b88k8IW8UWE8808IN i
Ndh;ME e yesh,g m}NMmanassegesMeus
. yp mn.
u q pi i
+
$_. hhh N Ab h
^ +f &}qig
~cm v'. -
1 J!$mlQlg%.
n M
i 3
- s oxq W
y
?
40 llhn e l'tmer 1989.\\nmd 14.c p n '
Deregulation Heshapes Natural Gas Business l
The once-stabic gas marketplace was
- Ww
/n 4
permanently changed by pnce volatiht3 Jurmg
@%[.F,m
,, Y, g &, [ @bg
[" ' h
/
the oil embargo Then, Jeregulanon further Gu DeHarin-vi! 1.
ut
. ?">
altered the gas marLet m the 1980s
. e 5
P In nulhons ol therna As a result, customers are installmg a wide
@FO fg ' T 'd lt o g
' " ('
nr N
variety of high-elficiency equipment - gas g
I'"'
chillers, vacuum furnaces anJ air conditioners O f Sint 2 y y.
s
- as a hedge against the type of energ3 pnce 4Q,yJ, d.j M'W: W+ $ [?'
A y;
7 j
y1
.,f volatihty they saw m the nud-1970v AnJ wnh k
"*" C B
1 y
gas pnc'es well below those carher levels, maior 1
j
'I,
~
j@
g %'
industrial customers across the country are r
. Y M
j y
permitted to bu3 rom outside supphers f
< g M,up@ Y y; n
a a
34$
Consequent)v, llhnois Ibwer is performmg ni
{cp L ',
. %Q i -ij J R
[f p/ D p@.
' ' 41 pc its tradaional role - buymg gas for direct sale M)';f B(ly a
+
g y
m 3Jg
- and expanJmg us role of transportmg gas 1
N p Md elsewhere. In aJJinon, the Compam works g Why,4/!M, M h ((/y @Q [i d
- 4!0 that inJustnal customers have purchased W1 e en r
4 d
NT 7
d p
~4 e with large-use customers to develop gas supply yg
- d_ fy "7
,1 s
M M 4
N arrangements that best meet their needs These W'
pf 1
e 1.1*kN~
$4 f 4[ % @%./N special contracts produce lower protits than iou sn c
ss so s
F
. i wa,ny,nma,7,n nm,u.a s,un 2.
truJilional sales, but provide greater profits R M4 h kMO bm M
than if the customer chose an alternative d
MW vM D s
' ydi J NM/.hy N q % L, t qs lhNJd @f,
i i
, 4,1 a a, ng m t.u. g g y"
,7
- m 1
T T
1, my semendin esium see ?
p q
Y t a
4 gg,,g, p,,,,,km.an yM Np; iii.
- -n g
o Ef087 h
k y;yp '
08 i
essen m m e. n,'eene e s
y T
y q'3O n
s W
esaded ehest 7.9 million thenes, s
r jbe @ demand lof M ge.s ( s *
, ~ t.,t s
)
M,,
- o, since MJbe M.. Welt f
g
%Y
! (b endeEsf4 eseds by Reving ges -
s e? R y; 5femstoregel,loidsandlive ;
o l
is s
, y Ma
%,c-e pipelines. llenneth R. trees, goe s, m
c,,.,,
m 5
3 p.
.,w e
~ 1r
.g 7.Rtter elb W W t'
1 g
' 'q sy P,-
G 7
m
,s i.
H<r mensue. pas flees;
+
7 p 7-m.
q h
P, f s
l Yg Qw l
l l
6 1
I W
bi l
l unn. % = unm,w n
l l
energy supplier or source.
also used to help amid additional charges for l %-& c w y m rw e m v m g)
The total volume of natural gas sold reserving sufficient gas supplies. And because g
q; W
L l and transported increased slightly to about the business has become so competitive, the fp g fpv 9 'moest slidig pgeRee d 907 million iberms, up about 3 million therms Company is more closely matching supply f
W 6w N from a war ago, llut revenues from the sale commitments with projected demand.
F gadgd%e %' ehad,gBBM] of gas a'nd gas services declined 60ut The Company continues to buy and store
$04 M ' M, g'[ -
million from about $335 milien m 1988, are passed on to customers tw withdrawing percent in 1989, down to about #325 gas off season when prices are law,These savings x
% w ii^ M h DINED M $
liitter cold weather in december pushed natural gas from storage fields when needs a1- %
... customer demand for nahral gas to levels that are higher. Ily minimizing purchases fwm Z
4:
i '
Land g$kuulksupply,4 J were unprecedented for, hat early in a winter pipeline companies, relying more on open
..m A
4 season Gas usage on Dec. 21 reached about market suppliers and revising supply reserm 4[-@/,c$stegrudige $31985-Slagit, 9 7,9 million therms, the highest single daily tion charges, Illinois !\\mer has saved u
d
-+
M kiad since 1983 and the third highest customers about $113 million since 1983.
m.
Q g Pelser tes 88u50 ced olmels 3 in the Company's history.The record was set Nevertheless, the Company faces the coatinued M' Q, a ggg, g ; g j% jan.10,1982, when customer usage reached challenge of bypass and declining pmfitability about 8.6 milhon therms.
on gas sales and semce,
>c 1
,ni
, m? " xM Five interstate pipelines connect the The bypass threat arose as the Federal Company to the nation's maior gas markets.
linergy Regulatory Commission authorized
%w ; % yK "' Q The Company's eight gas storage fields, reemvry of take-or pay charges from the R
w' M
%yl m' Q %, M 1
h
{
developed 3rars ago to meet peak needs, are late 1970s and early 1980s Since the evra 4
,%L %
charges were incurred to ensure that companies
% y f fg [r; W_ j C, %"9d., m had the gas cusiomers wanted, customers are 7
- , S;g g b ip 6:yit
^
,, - r.y;wm m, w m
l 2>y
.'q now paying those costs. For Illinois l\\mtr o
~" '
5 14 customers, those charges are scheduled to N
4 4
m Q[g[Q @ m' W V'
1 be added to customers' bills through 1994.
.'i@hM
- m l S me large industrial customers can amid,
[$
ses Peak semand s
,a these take or-pay charges by building their qa ff43 in thousank of therms G:
- own pipelines and contracting directly with
$l$$3Mo QRdJp R,
the pipeline companies fbr gas supplies, W
7 thus bypassing the local utility. After
~
9,000 take or pay charges are recovered, the
'.' 1 g4 c,
[ n$ incentive for additional bypass will diminish.
" '8*
@M j g j
- ]1 Illinois l\\myr is working closely with h
8.600
=
2, t
%,Q, p@P h.
.i
.g*,
maior customers to avoid bypass, in 1989, the M
M ' 3EMi+/
8300 D
N
-k.
D3, 1,, B Company signeJ a contract with the University J
4 NmX n of Illinois to retain a portion ofits business, 8'
- if. ?*F Qi tth $.
i The University is building a 20 mile pipeline D ME Mi E.
N M ' M toits campus'at Urbana Champaign.The
% qs4 ' q 8,000 M N"hcn4GNny. W ' k-i
@*G' 7,30o 9
mm mjg mereased delivery capacity of th.e of C,
W-a Company will be able to use som y
7,300 m
9 is new pipeh.ne
.),W M/ "
".g j.
y V
y
- y.
7aoo V.
t Q',~'
WW to better serve other customers in the area. The
,' W @ p?p l
University will e ntinue to use Illinois limer's
.N. I" gh h QNh3N 7,200 c
a,q existmg gas distnbution system, hevertheless, h
y M 'S " $, iWih; MW H +hs g
1
. A' O annual gas rewnues from the University will
.h.k. b h.
7,000 h.b-.Y
' d decline by more than two thirds, or about
^
Nd[b3h k
6,800 p.$
Rb
$ i y k@[M@h,, M W W $1.2 million.
Ajj 6,6m
\\
The Company is now conducting an MR Mpf
%. g.,p,,
l d h,..Tj..
j.. y..$.b.$.
I\\
W A.
in depth study ofits gas operations to identify
[Q 6A00 s
hf M
areas for improved profitability.
6,200 x
j M n
3 75 *m4s p
yi 6,mo iA a d h n 4
i ba W 1982 85 86 87 88 89 j
u,p
- iMC Syy A,
s
% < p - @9; c pfb sj
- p.
'N 4dd; g&:
4 Wi '
la All time l'eak 1)emand L+w 4 dL~
n
$ 4pp -in g-4 i
i 4
h N h.h h,
h if ',
8 y
in <,
Oh ksd ( M6JAit n%ih.
M,MMM
,M v.a u.
mM lilmois ther ')98_9, Annuat IWort M4i k,:4
The Bosni of Dimetors of Illinois Power Company V vQ.wy@m um$ "n -
& h,'
,W My^o~- f ' Apa&an%mm mm.
s.
l Richard R. Berry. 58 (5; Donald S. Perkins,62 < 5 :
PR f"ih x
a Gl?h lgt ggggggqlgggg qgg ag W
RetircJ Hucutne \\Lc Pres Jent and ihreaar of Ohn RennJ Chainnan of the IhvJ and Chwf Eucurnt Corporation, Stamford, Conn 'JurrufwJ Othccr ot]axl Companws, Inr. Chwago Ill V
yQ manufaaurer wnantraud m chemwals, metals and JmwlicJ retado
%' W G,e
Wo W<
aerospace:Jiferue pnducts l;'3lyys M@V mesdages Melton M.1lesund 9p[
Elected 19%.
l,T end W Iber h 80elt. # 5 $m e e#
y
.m MM Robert M. Powers, 58 ( 3,4 )
$ @EaMannigg Q flh h g /jpb6 pj f]h%L Frank W. Considine,68 t 5 i gen,cs p,cysc,y uns cacf f3caa,y ogyc, g, ff^
yQ Chainnan of the Ikard of Amerwan Natwnal Can A E Stah Alanutaaunny Company. ()ecatur. lll Gompary Chwago. Ill packagmg manufacturer gram and od yd pnuessor and reared thecutnr y$
Q&Q G'
\\ un I,rendent of htahy Contmental. Inc Ly w w i 4.n y p m g. j p gyg ;9y p h S g W (d(33(I h inik %q d
Jtrcmfud food company (L s q u s a%
m a
n Larry D. Haab, 52 i I,4 )
Elected 19M g$hk^isNamhanat90RhMR$hl President of the Company, llecatur, Ill Boyd F. Schenk,67 3,4, df M
&y N lq' "gg' 'gg" N ' ', WAG Elected 19%'
g bg ffy PressJent otThe lloyd Group, Inc. Chwago, lil pnvate untcument and consultmg company. rcnred dW ' nw s -
A ajy Grover J. Hansen,66121
\\la Chwrinan of \\mtinan Corporatwn hrn/wd M of O M aags. Sie a ss ' wtotraWg@
j Q)u & " & Q & &e fs Renred ifreudent and Chwt operanng 0llpa of Iint manutaaura, market r ol umsumer and commeraat g!_
ltderalharmp and lam Aswaatwn of thuago.
produas, and renrcd Chaunnan et Irt Irworpraud
&Nj,.Clty 009R8ll Sad 88l98ldlpWhk,g p w n
aum Chwago, Ill proaswr. markewr of food and comunwr pnduar
,w w a,.,.egp g1 m% d M W90 DOWd tdMRh'd w,
Elected 1981 1 lected 19~7 h ' ?o$mWalyees tempan w8w a
Marilou M. Hedlund, 5211,2 -
Walter D. Scott, 58 < l.2 m
y WUl S080 lWWl"999Ef I, N_.~mg %
%hy f y
M Alanagmg ihreaar and Senwr \\la Prendaa of Hdi Pn> tenor of Af anagement and Semor Aumn Itllou, Qf r
R90ID and Knowlton. Chwago, Ill fl. kiloge Graduau $chool at Alanaucment.
vb ew$WU%)fl& ahQh VpW "agegDeest84b%d
- " h """' ' '"''"'3 ' E '" * '"" 1II EleetedInno WW$dicalelM' w
+%
Elected 19w M. deH J. Kelley,63 t 1,4 en vr<
fII*f0**G0R W'gg g* llR*r - am h
Chaurman and Chut ihaunec 01fua ot ggggggggggg
}Q ihr Company, ()aatur. Ilj lhaunte \\ia Prendent at the Compam. I)aatur, ll!
Elected 1%
Elected 197h i p>$guseu,d e O M eer el k W
, g g
ik
,.nm.
Donald E. Lasater,64 ' 1,4, Gordon R. Worley,70 < 1,4 +
RenrcJ Chasnnan of the third and Chut laaunte Renred laannu \\ ia Prendent - Chwt Iinanaal Q
& & Nfi wk}$5805U59 U000 9888ldentWd Oliicer of Aler annie llanuwpranon, Inc ht trun Olk" of Alon'Romm bd & Co I"'
'de' -
wm*
s Alo. r bank holdmg compen 0"cdXo Ill
-i
- b b* del N' " * ' 'W"' ' B"ammal%qq%g Flected 19Xl.
1'1ec'ed 1979 W it d a,,ms--ge.c,Conglemyty&gff a
w y omeer torthsPWahery Vernon K. Zimmerman,61.1,2 Eva jane Milligan,70 t 21 I)ounw or the Gnur tw Inumanonal Mucanon RenrcJ Sonor \\ la Prendent, Genaal Irnonnel Rnard and Aa ounnnc and Dunnguuhed harwe Q yTb8999OGifRBYlDf990lh y
Alanaga of Alanhall fields raada, Prendnu of Pro lanes, inc machanduc wrrue organcanon.
U "K"" "'f""""'d"" I "" '*"N "I U"0W
$fgplggtin&&"W I, b""
Il v$QW lhlion llead Idand' $ L u
14'N&~w
$ elden (weiegnotg g G
Elected 1980 Elected 10 Q/dWBRdklf190 W 84h @ % @
T 'WN 3 M% MD J
- M %,%OH $lNU %s g@3 glg Board Committees M-Ad I hnance ( ommmee qq a n g % _
ys %
, NM,9g$ hgg ggM $3 Q by
.\\uJit Comminet
' WW & ' DOM W 4
'l 3 (ompensanon and Om vanon Commutee 4
aid $!&
4 ( orporate kuvmes t 4 'm ater a n t vm c x a w y s
MMS 4
. yeual (.omnunce
~
s of 70. M wlN m$y h,g s
80 ' s
' de n ii
,ty
- }10 pf9 Wide 001M00188 8[QjMu
$tggtgr gg h. g M M '
,c il(p. Q 2 gQl L,w YH 5%, e <, h,&
p - i wie f
3 v
llimon IWer 1989 Tnnual Repen
w L.mdi b t
h llll8018 h M W M M OR The Board of Directors elected Larry corporate secretary, and J. Stephen Ittry as -
D. Ilaab president at its April 1989 meeting.
vice president (nuclear). Mr, Ibrty succeeds Mr. llaab succeeds Wendell J. Kelley, who had - Donald P. Itall, who retin d in December, been president since 1966. Mr. Kelley will Other officers who retired during the year continue as chairman of the board and shief incluJe Executive Vice President William executive officer.
C. 6erstner, Senior Vice fresidem 'Tilliam -
Other management changes during 1989
, E Warren and Vice President and Cirporate -
include the election of 1.arry E Ahenbaumer as Secretary Arthur E. Gray. As senior officers, controller, Robert A. Schultz as treasurer, leah hey gaw the Company a total of 120 years of Manning Stetzner as general counsel and distinguished, dedicated service.
Wendell J. Kelley,63 J. Stephen 1%rry,51 Chainnan and Chief Execulitt DJIicer ilee President Ratonsible for twelear parr generatiim..
Emph rd 1949.
3 Emph rd 1984.
3 Larry D. Haab,52 Presiden' Robert A. Schultz,49 Respnsiblefor ftnancial mattm, marketing, customer aton agairs, legal manm and corprate s
r limpkgyd 1986.
Empk3rd 1965, Charles W. Wells,55 Rodney A. Smith,42 Executnv \\fu President pee pn.sident Respnsibleprfossil genaation, carpwate and Rnpnsiblefor public a[ lain, tahnical sereias and gas resources, gyg g9gg Empkged 1956, Larry F. Altenbaumer,41 Leah Manning Stetzner,41 Controller General Cotauel and Corporate Scentan\\
Restonsible for aaounting, audaing, budgetmg and Restor.sible for corprate swraan' Jtaics and
\\
legal manen.
lax matters.
Emph rd 1989.
3 Emr.,vd 1970.
Larry S. Brodsky,41 Ibrter J. Womeldorff,56
\\ke President Mee President Respnsiblepr tuhnical sarias-Responsibleprgas roouras andf aninng aetteitia.
l Emph3rd 1975.
Emph3rd 1954.
Wilfred Connell,52
\\ke President Ann H. McEvoy,42 RestorusbleforfossJ pcvr generation.
Assistant suretan.
Currently restumsible Jiw tmtlementing the llusiness'and Emph rd 1983.
3 Iinancial Slanacement Systan.
Larry L. Idleman,51 Empk rd 197/.
3 Ma Praident Ratonsible for corronne sernees.
g,7, g, g,,,7,4y Empk rd 1%9.
3,,j,,
.lbara 3
Paul L. Lang,49 Responsible pr n'sk management.
Emph rd 1969.
3 lice Presiden, Responsible Jor scrna areas, marketing and aonomie deirlopment.
Emph rd 1986.
3 nm Illmois 1%vr !!989 Annuali<crort b
Financial Report i
Management's Discussion and Analysis Reference is made to the Financial Statements and term to allow the Company to meet its operating require-
, related Notes to Financial Statements, Selected Financial-ments and to continue to service its existing debt, preferred Data, cnd Selected Statistics for information concerning stock dividend and sinking fund requirements. Due, however, financial condition and results of operations. The factes to legal constraints affecting the payment of dividends if having significant impact upon financial condition, changes in retained earnings are less than zero and the uncertainties fincncial condition, and results of operations since January 1, surrounding the outcome of the appeal, the Company's 1987 are discussed below, management determined in April 1989 that it was in the best interest of the Company and its stockholders to suspend the
- Liquidity and Capital Resowces e mm n st ck dividend. The results of the appeal of the March 30 rate order and the current rate request discussed Regulatory Matters - On March 30, 1989, the Company below, will determine whether the Company can continue to received an order from the Illinois Commerce Commission pay a preferred stock dividend and when the Campany can (ICC) related to its November 1987 request for an electric resume payment of a common stock dividend.
rate moderation plan to incorporate the Clinton Power Station On J uly 13,1989, the Company filed for an electric retail (Chnton) into rates. The requested rate moderation plan rate increase with the ICC seeking a one time increase in would have increased revenues approximately $256 million, electric rates of $265 million, or approximately 28%. This
_ phased in over ten years. The March 30 order failed to resolve request was subsequently reduced to approximately $216
- Clinton ratemaking issues. The order rejected the Company's million, or approximately a 23% increase in rates. The November 1987 proposed rate moderation plan, and granted reduction primarily reflected revisions in tax calculations.
= instead a one-time increase of $60.5 million, or 6.9%, that The rate increase filing requested a 10.52% overall rate of became effective April 4. The new rates are being billed and return (12.54% return on common equity). The request is
- collected subject to refund pending the outcome of the appeal primarily supported by evidence that Clinton is fully "used discussed below The total amount of revenues billed and and useful" based upon the reserve margin test used by the collected subject to refund for the year 19P3 is approximately ICC in the March 30 rate order, and the recovery of higher
$36 million. The Company does not exrect to be required to levels of operating and maintenance expenses as reflected in refund these revenues.
the forecasted 1990 test year.
As discussed more fully in "Nate 2 - Clinton Power The ICC StalT and the various intervening parties have
. Station" in the " Notes to Financial Statements," the ICC filed their evidence in the case, as discussed more fully ir.
order included various direct and indirect disallowances of
" Note 2 - Clinton Power Station" in the " Notes.o Clinton related costs which the Coripany has appealed to the Financial Statements." The ICC Staff recommends that the Appellate Court of Illinois for the l'hird District. At March remaining 72.8% of Clinton be fully included in rate base and 30,1989, the Company determined that the range of possible proposes an increase in rates of $147 million phased in during loss as a result of the rate order was from $451 million ($346 the next four years with approximately 8% in the first year. If million, net ofincome taxea) to $1.558 billion ($1.127 billion, the ICC orders that such an increase be phased in over a net of income taxes) with no amount within the range period of years rather than granted all at once, the cash flow representing a better estimate than any other amount. While increase from the new revenue will be lessened. This proposal management believes there is a reasonable possibility of reflects an overall rate of return of 10.3% (12% return on reversing various aspects of the order, in accordance with common equity). Ac:ual net capacity of Clinton is 930 generally accepted accounting principles applicable to megawatts rather than the 950 megawatt 6gure previously regulated enterprises, the Company recorded a loss of $451 used by the Company. Due to the reduction in net capacity,
- million ($346 million or $4.61 per share, net ofincome taxes),
the ICC Staff proposed to reduce the Clinton related rate in the first quarter of 1989 related to the order. The base by 2.188%, or, alternatively, to use the higher figure for disallowance will be reflected in rates over the life of Clinton.
purposes of determining the extent to which Clinton is "used l"
A decision in the appealis not expected until at least mid year and useful." If the finalICC order and any subsequent court 1990. Depending on the outcome of the appeal, the Company order includes the ICC Staff's recommendation to further may be required to record additional losses in 1990.
reduce Clinton related rate base, the Company would be Regardless of how the case is decided, it likely will be required to record an additional plant disallowance of about i
appealed to the Illinois Supreme Court; therefore, a final
$65 million ($42 million, net of income taxes). The rate disposition of the case is not likely until sometime in 1991. It decision is due in June 1990.
.is not possible to predict the ultimate outcome of the appeal in November 1988, the ICC issued an order that
- process. Ilowever, if the Company is unsuccessful, it could allowed the Company to fully recover take-or pay costs be required to record additional losses estimated as of allocated to it under rate schedules approved by the Federal
~ December 31,1989, based on current conditions, to be up to Energy Regulatory Commission. In accordance with the ICC
$965 million ($674 million, net ofincome taxes).
order, the Company began billing its customers for such costs The March 1989 ICC rate order results in depressed on February 1,1989. On December 5,1989, the Illinois earnings, but will provide sufficient cash flow in the near-Appellate Court reversed the ICC order and remanded this Ithnois twr Ub Annual Rqon l
LT
p 1
matter to the ICC for further proceedings. The Company has
$100 million of !!urobonds that were to mature ir 1993, and appealed this matter to the lilinois Suprerne Court. If a to repay $74.7 million of the amount outstandi sg under the determination is made that the Company will not be allowed revolving loan agreements. These actions e.e expected to to recover the costs from customers, whether such costs have reduce interest costs by about $3.5 million < a an anr ual basis.
been recovered to date or deferred for future recovery, it' As of December 31, 1989, based upon the most restrictive h
could be required to write off these amounts, which totaled earnings test contained in the Company's Mortgage and Deed approximately $105 million ($64 million, net ofincome taxes) of Trust, the Company would be prohibited from issuing as of December 31,1989. Management does not expect the, additional first mortgage bonds at least until mid 1990. The ultimate outcome of this issue will have a material adverse Company is, however, allowed to refinance existing debt and effect on the Company's financial position or results of issue unsecured debt subject to restrictions in its Restated operations.
Articles ofIncorporation. The amount of available unsecured borrowing capacity totaled $159 million at December 31,.
Capital Resources and Requirements - The Company has 1989. At December 31, 1989, the unused portion of the adequate short and intermediate term bank horrowing Company's total bank lines of credit was $235 million.
capacity, but restricted access to the permanent capital Improvement in the Company's financial flexibility is markets. The Company's debt securities and preferred stock dependent upon the results of the Company's current rate were downgraded by major security rating agencies after case and the outcome of the appeal of the March 30 rate issuance of the ICC's March 30 rate order and are still on the order. In any event, the Company expects to be able to meet
" watch list" of some agencies pending the outcome of the its capital requirements through at least 1992 through internal ICC rate case fled on July 13, 1989, and the appeal of the cash generation.
March 30 rate order discussed on the previous page. The Construction expenditures for the years 1987 through current ratings of the Company's securities by three principal 1989 were approximately $450 million, including approxi.
securities rating agencies are as follows:
mately $80 million of allowance for funds used during construction (AFUDC).
l,"h hay's I >i.-
86.79% of Clinton and Soyland Power Cooperative, Inc.
Clinton was completed in 1987. The Company owns First mangage bonds.
.. BBB.
Baa3 BBB owns the remainder. The Company's net investment in the plant and related facilities is approximately $3.4 billis n, net of o rnercial rl '.T.
u'ff 3 p me 3 recorded disallowed plant costs, exch. ding depreciation, as of These ratings are a barometer of the Company's December 31,1989. Additionally, the Company has an asset -
financial integrity, which is an indication of investor af $415 million relating to Clinton costs that have been confidence in the Company and their willingness to invest in deferred in accordance with an ICC order.
the Company's securities. These security ratitu;s are at levels The Company estimates that $1.303 billion, excluding which could impair the Company's ability to obtain additional costs associated with complying with the proposed clean air needed funds at reasonable costs.
act, will be required for construction and capital requirements The Company's future financialintegrity depends on a during the 19901994 period as follows:
number of factors., including the ultimate outcome of the
,y pending rate increase, the appeal of the March 30 rate order mu%.ro m,>
and litigation as discussed more fully in " Note 2 - Clinten c - =wn=a Power Station" of the " Notes to Financial Statements."
D,"",O ',"U" d'
'p**'
y y
y g
Net cash proGded by operations amounted to $251 million, $225 million, and $224 million for the years 1987, e,i mnes.
n 2.
2a 24 27 1988, and 1989, respectively. Net cash flows from operations l a n===
declined in 1988 and 1989 because the increased operating costs associated with placing Clinton in service exceeded the gl,'di 2;
jj i
eniow ne ume m io io a
u u
increased revenues resuhing from rate orders effective in w-5 i" 5 "' 5 M 5 m 5 2"
1987 and 1989. Funds obtained from external sources during this three-year period totaled $1.037 billion, of which $897 million was used for debt retirements and a preferred stock The above estimates exclude potential costs required to redemption.
comply with anticipated future environmental legislation as During the three-year period, temporary cash require.
discussed further in "linvironmental Matters." Capital costs, ments were provided by short-term borrowings. In assuming the installation of scrubbers to meet clean air act December 1989, a $300 milhon shelf registration of debt requirements, are estimated to be between $450 million and securities was filed with the Securities and fixchange
$850 million by the year 2001, with approximately $300 Commission for the purpose of refinancing high cost and million expected to be required over the next Gye years.
maturing debt over the next two years. As of December 31, Capital costs associated with alternative compliance
'1989, the Company had inued $43.5 million of medium. term measures, such as fuel switching, would signilicantly reduce rotes covered by this repstration and used the proceeds to these estimates, although operating costs, primarily refund a portion of me revolving loan agreements. In associated with higher cost fuels, would increase. The above December 1989, the Company used existing cash to refund amounts for debt retirements do not inchide sinking fund ilhnon IMer 'lW Annual ikport IW w
requirements..The Company has generally met these not be determined until the ICC completes its review, requirements by pledging property additions. For additional The Financial Accounting Standards Board has issued
- inf:rmation see " Note 8-Debt Retirement Provisions" of Statement of Financial Accounting Standards No. 96 "Ac.
- the _" Notes to Financial Statements."
counting for Income Taxes," dated December 1987. This new standard adopts a " liability method" of tax allocation relating to Environonental Matters - The Company's current estimates transactions that affect book and tax incorne in differen:
are that capital expenditures of between $450 million and reporting periods. Although adopting this standard may result
. $850 million would be required by the year 2001, with in a significant increase in assets and liabilities, the Company between $300 million and $550 million required by the end of does not expect a material effect on earnings. T1.e Company 1995 to achieve the emission reductions set forth in the acid will not be required to adora this statement until 1992, rain portion of President Bush's clean air proposal. The proposal, if enacted into law, could require the Company to install scrubbers on up to five generating units. The proposal could tiso require switching from high-sulfur to low sulfur -
ual at some gene ating units and the installation of low.
The Company faces many issues related to Clinton. See
' nitrogen-oxide burners on several generating units. The
" Note 2 - Clinton Power Station" of the " Notes to President's proposal could result in additional annual Financial Statements" for _ information regarding legal
! operating costs, associated with scrubbers, ranging from up proceedings involving the Company, the outcome of which-to $75 million in 1996 increasing to up to $150 million per could materially adversely affect fmancialliquidity, results of year by 2001. It is anticipated that some form of the clean air operations, and financial position.
legislation will be passed by Congress during 1990; it is possible that not all of these costs will be recovered from the Results of Operations Corapar.y's ratepayers. The form of the finallegislation and Earnings declined in 1988 and 1989 and will continue to other factors may change these estimates be depressed unless the operating and capital costs of Clinton The Company, through its predecessor companies,is on are more fully reflected in the Company's rates. As discussed a State of Illinois list of owners and operators of former gas more fully in " Note 2-Clinton Power Stati m" of the " Notes manufacturing sites. The Company,s reqmred to investigate i
to Financial Statements, in the first quarter of 1989 the and, if necessary, resolve environmental concerns associated Company recorded a loss of $451 million ($346 million or with past operation of the gas manufacturing sites. The clean.
$4.61 per share, net ofincome taxes) for disallowed Clinton up will require substantial effort over a number of years The plant costs as a result of the March 30 ICC rate order. The overall costs cannot be estimated at this time; however, the decline in 1988 earnings was offset somewhat by a change in Comp:ny does not anticipate that such costs will have a accounting for unbilled revenues. The after tax effect of the material adverse effect on its financial position. The Company accounting change for 1988 is an increase in net income of $44 his notified certain in3urance carriers of the situation but has million (61e per share). This increase is a combination of an not formally filed claims. The Company miends to seek rate increase of $34 million (48e per share) attributable to the recovery for any costs not recoverable from insurance.
cumulative effect of the accounting change to January 1, 19S8, and an increase of $10 million (lle per share)in 1988 Tax and Accounting Matters - Many aspects of the Tax t sults of operations. Earnings for the years 1987 and 1988 Reform Act of 1986 (Act) have affected the Company during included significant amounts of non-cash items such as the period 1987 through 1989. These melude corporate AFUDC, allowance for deferred Clinton financing costs, and income tax rate reductions, repeal of the mvestment tax the deferral of Clinton operating costs, credit, a new depreciation system for tax purposes, and a corporate alternative minimum tax. Although the corporate Electric Operations - For the three-year period 1987 federal income tax rate decreased from 46% to 40% for 1987, through 1989, clectric revenues increased 21.4%, the compo-and to 34% for 1988 and 1989, and the Company's total book nents of which are summarized as follows:
tax provisions correspondingly decreased, the Company's current federal income tax liability was greater than it would 1989 1988 1987 have been under prior law, by about $31 million and $7 (Millions or Dollars) million for.1987 and 1988, respectively. The Alternative Rate increases m
......... 8 36 5 23 $ 102 Minimum Tax (AMT) provisions of the Act resulted in an Volume and other.
3 18 6
1 uel cost recoveries (1) _
12)
(1I)
AMT net operating loss carryback in 1989 and the Company will request refunds of approximately $36 million for the Revenue inerease (decrea::).
18 $
39 5 97 AMT previously paid in 1987 and 1988. In accordance with Internal Revenue Service requirements, depreciation related During the above peiiods, kilowatt hour sales have been deferred tax balances will continue to be normalized at the affected by weather, favorable economic conditions withm weighted average tax rates at which they were provided.
the Company's service territory ar d ongoing conservation Pursuant to an ICC order, the Company has recorded the efforts. In 1987, the Company experienced an i1.9% increase benefit of the lower federal income tax rates collected from its in revenue primarily due to increases in rates in October 1986 gas utility customers as a liability subject to refund ($13 million and April 1987, partially offset by a one-time provision for at December 31,1989). Ultimate disposition of this liability will rate reduction of approximately $23 million. The increase in pe Illmoit IWer 1989 AnnualItcrort l
]
sales in 1988 reflecta the extremely hot weather daring the directly from the pipelines used the Company's distribution
' summer, as evidenced by a 4.0% increase in kilowatt hour system to transport their gas.
sales to residential customers, in 1989, the Company Gas revenues decreased 12.2% during the three. year L
experienced a 4.0% increase in revenue primarily due to_ the period 1987 through 1989, the components of which are 6,9% rate increase in April and increased sales to industrial summarized as follows:
customers. The industrial kilowatt. hour sales increase was g,,
g,,
g,7 partially offset by decreased residential sales due to more
( * "I'"' ' * *"*)
moderate summer weather in 1989.
Volume and other................. $
18 5 40 $
(64);
The cost of meeting the Company's system require.
Rate 4
ments is reflected in the cost of fuel for electric plants and "8ld h 'EC.
(
(
ns t 4
power purchased and interchanged. net, Changes m these Gas cost recoveries.
(21)
( 7)
(5) costs are summarized as follows:
Revt nue increase (decrease)...... 8 (10) 5 26 5 (61) 1989 1988 1987 (Millions of Therms)
- (Millions of Dollars)
Therms sold......................
642 669 565 Fuel for electric plants Therms transported...............
265-235 327 Volume and other.............. 8 (38)5 37 5 17 P r ic e.........................
1 (15)
( 6)
Tot al,......,...............,
907 904 892 Fuel coat recoveries.............
( 1) 8 (133 (40) 30
( 2)
Even though there have been no revisions to the Power purchased and interchanged-Company's retail base gas rates, changs in overall gas net.........,
50 _ (3_2)
(14) revenues have resulted from entering into special contracts -
Total increase (decreare)....... s to 5 ( 2) 5 (16) with large industrial customers. The major factors affecting Teighted average system generating therm sales for the three. year period were favorable fuel cost ($/MWil).,,,......,,,, 8 15.10 $ 14.50 5 15.10 economic conditions, weather, customer conservation, special coc. tracts and gas transportation arrangements increase (decrease)in MWil discussed above.
ge ne ration..................... (15.8%) 11,5 %
5.1%
Changes m cost of gas purchased for resale are summarized as follows:
oa d the r...............
85%
74 %
91 %
N uc le a r......................,
15 %
26%
9%
1989 1988 1987 E
Changes in the above costs are caused by system load (Millions of Dollars) requirements, availability of generating units to meet those Gas purchased for resale requirements (including the start.up of Clinton in 1987), fuel Cost (excludmg prices, purchased power prices and volumes, power inter.
take.or pay)...
s
( 7) 5 (24)$ (6) change market conditions and recovery of fuel costs through
'l;ake or. pay..................
30 the fuel adjustment clause.
$"cM','c,'G',;'f;;;;';[';
N in 1987, lower fuel prices resuhed from coal contract Totalincrease (decrease)..
8
( 8) 5 22 5 (50t renegotiations and a favorable spot market for coal purchases.
The increase in fuel for electric plants in 1988 reflects Average cost per therm dehvered increased electric generation, primarily due to the operating including take.or. pay...........
30,4e 27.0e 30.4e availability of Clinton and the abity to make additional fixcluding take.or. pay 26.0c 27.0e 30Ae interchange sales During 1989, the decrease in fuel for Over the period 1990 through 1994, total gas sales, electric plants reflects reduced generation associated with including therms transported, are expected to grow approx.
scheduled and unscheduled plant outages. The equivalent imately 0.3% per year. Gas bypass being actively considered availability of Clinton declined to 40% in 1989 from 75% in by several of the Company's large customers could result in 1988 due primarily to the extended refueling and maintenance further reduction of revenue.
outage in 1989; The decrease in interchange sales is also attributable to decreased available generation and reduced Other Expenses and Taxes - A comparison of increases i
demand due to milder summer weather.
(decreases) in other expenses and deferred Clinton costs for s
A month long Clinton maintenance outage will begin in the last three years is presented in the following table:
February 1990. A scheduled three, to four. month outage for
" 88
" 87 reloading nuclear fuel is to commence in Septernber 1990.
Over the period 1990 through 1994 total electric sales (Millions of Dollars) are expected to grow approximately 1.7% per year.
Other operating expenses.
s 95 34 5 58 Maintenance 4
5 22
(
Gas Operations - In 1987, more liberalized interim
[P('j d' "buged
, n transportation rules used by the major pipelmes provided deferred taxes
( 4) some industrial and large commercial customers with the General taxes..
( 4) 11 11 option to choose their gas supplier. Customers purchasing gas Deferred Clinton cosis,
95 (37)
(78) m Illmois IWer 1989 Annualikport i
o
1
> The primary reason for the 1987 and 1988 increase in 13 - Changes in Accounting" of the " Notes to Financial
- ther perating expenses, maintenance, depreciaion and Statements" for further information.
' general taxes is the beginning of Clinton operations on April in 1989, the reduction in Miscellaneous net is primarily 24, 1987. In addition, the Company recorded $78 million, due to the reduction in the allocation of tax benefits to the
- $115 million, and $29 million as reduction to expenses in stockholders as a result of the March 30 ICC order that
- 1987,1988, and 1989, respectively, to reflect the portion of placed the Clinton plant in rate base. The change also reDects
- Clinton depreciation and real estate taxes deferred for future additional interest incom on short. term investments, that recovery in accordance with an ICC order. After issuance of was partially offset ey the settlement of the Soyland
- the March 30 ICC order, such deferrals ceased and ownership percentage of Clinton.
amortization of the, previously deferred post-construction Interest Charges - Interest charges increased $5 million, $9-costs (about $424 million including deferred Chnton financing million, and $9 million in 1987,1988, and 1989, respectively.
- yests) over a 37.5 year period commenced. Amortization of These increases primarily reflect approximately $837 million
$8 million was recorded m 1989. The increase in 1989 in of long term debt issued during the three year period at a
- other operating and maintenance expenses is primarily due to weighted average interest rate of 8.7%. During this period,
- the Clinton extended refueling and maintenance outages. In the Company retired approximately $735 million of long-l 1989, the Company also incurred an early retit ement expense term debt with a weighted average interest rate of 8.6%
I of approximately $12 million, which was part; ally offset by savings reahzed as a result of the Company's cost reduction Change in Method of Accounting for Revenue - on
}
program. The decrease in depreciation for 1989 is due to the January 1,1988, the Company began recording revenue for 4 write off of disallowed plant costs recorded in March 1989.
services provided but not yet billed to more closely match :
The ICC order of March 30 required the Company to revenues with expenses. See " Note 13 - Changes in j
amortize and refund through rates $28 million of excess Accounting" of the " Notes to Financial Statements" for unprotected deferred taxes created by the reduction in the further information.
1
- federal tax rate for certain non depreciation related timing Earnings (Loss) per Common Share - The changes in net differences over live years. Such amortization is reflected in income (loss) applicable to common stock in 1987 through t
Amortization of excess unprotected deferred taxes.
1989 resulted from the interaction of all the factors discussed i
For a detailed analysis of income tax components, see herein, including the retirement of preferred stock. Changes
" Note 5-Income Taxes" in the " Notes to Financial in earnings (loss) per common share also reflect the increased
- Statements,"
number of common shares outstanding in each year. See
" Note 9 - Redeemable Preferred Stock" and " Note 10 -
Other income and Deductions - Total AFUDC, a non cash Common Stock and Retained Earnings" of the " Notes to I
item of income, decreased $146 million and $70 milhon in F nancial Statements" and Statements of Preferred and 1987 and 1988, respedively. AFUDC remained relatively Preterence Stock,
< unchanged from 1988 to 1989. Changes in AFUDC relate to the amounts of construction work in progress not included in lnflal.lon - Intlation, as measured by the Consumer Price rate base and placing Clinton in service on April 24, 1987.
Index, was 3.7%,4.1%, and 4.8% in 1987,1988, and 1989,.
g The amount of Clinton plant cost included in rate base, as respectiv$. The primary effect ofinflation on the Company approved by the ICC, was $1.156 billion in January theorgh is that historical plant costs are recovered in the Company's
- April 1987. In 1987, the AFUDC effective rate was 9%%
rates rather than current costs.
- after tax for Clinton and 11% before tax.for all other j
' construction. AFUDC on Clinton was discontinued effective i
- with the April 24,1987 in service date. The AFUDC effective As required by the Securities and Exchange Commis-before tax rate was 10% in 1988 and 1989.
In accordance with an ICC order, a total of $201 million sion, the Company files an Annual Report on Form 10 K.
of Clinton deferred financing costs were recorded for the The Company will supply a copy of Iorm 10 ls, without period April 24,1987 through March 31,1989. The amounts charge to any stockholder or to any beneficial owner of stock j
- recorded were $129 million, $58 million, and $14 million for f the Company who sends a written request to the Corporate 1987,1988, and 1989, respectively. After the March 30 ICC SCC'C'"'Y-I order was issued, deferral of Clinton financing costs ceased and amortization of previously deferred amounts com.
L menced. Such financing costs were calculated on Clinton deferred costs and plant cests not included in retail rate base, j
Clinton deferred financing costs were calculated using a 9%%
after tax rate through October 1987 and 8%% in November and December 1987. In 1988 and 1989, Clinton deferred i
financing costs were calculated using a 2.75% net ofincome tax rate reflecting only the debt component of the Company's financing costs as required by the adoption of Statement of Financial Accounting Standards No. 92 " Regulated Enterprises-Accounting for Phase in Plans." See " Note em Ilhnon ihr )981 AnnualIk mn i
v l
RSSpe@ 19f lRf0flRStiOR are reliable for preparing financial state nene, c
The financial statements and all information in this The financial statements have been audited by the.
. annual report are the responsibility of management..The Company's independent accountants, Price Waterhouse, in
' financial statements have been prepared in conformity with accordance with generally accepted auditing standards.=
- generally accepted accounting principles consistently Such standards include the evaluation ofimernal controls to applied.' In the opinion of management, the financial establish a basis for developing the scope of the examination -
. statement fairly reflect the Company's financial position, of the financial statements, in addition to the use ofindepen.
results of oper1tions, and cash flows.
dent accountants, the Company maintains a professional
.' The Company maintains. accounting and internal staff of internal auditors who conduct financial, procedural, control systems that are adequate to provide reasonable
' and special audits. To assure their independence, both Price assurance that assets are safeguarded against loss from un.
Waterhouse and the internal auditors have direct access to
- authorized use or disposition; and that the financial records the audit committee of the board of directors.
A Larry D. Ilaab Larry la. Altenbaumer President Controller Report of Independent Accountants Q
Price Waterhouse To the Board of Directors ofIllinois Power Company In our opinion, the financial statements ofIllinois Power Company appearing on pages 23 through 38 of this report present fairly, in all material respects, the financial position of Illinois Power Company at December 31,1989 and 1988, and the results E
. ofits operations and its cash flows for each of the three years in the period ended December 31,1989 in conformity with generally 11
- accepted accounting-principles. These financial statements-are the responsibility of the Company's management; our '
restmnsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts und disclosures in the financial statements, assessing the accounting principles used l
.and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our l
- audits provide a reasonable basis for the opinion expressed above.
As described more fully in Note 2, there are significant uncertainties with respect to various matters related to the Clinton Power Station including the determination of the extent, method, and timing of recovery of its related costs, litigation, and
- J obtaining rates which provide adequate cash flows to allow the Company to maintain financial integrity. Management is unable -
l l
to determine the ultimate outcome of these uncertainties. Accordingly, no provision for any liability or additionalloss that may i 1
- result upon resolution of these matters has been made in the accompanying financial statements.
As discussed in Note 13, the Company in 1988 adopted the new accounting standards relating to disallowances of plant costs and post construction cost deferrals, and changed its method of accounting for unbilled revenues.
& Oh,, o.
1 I
i St. l.ouis, Missouri February 6,1990 Illinois IWvr ht[d Annual Report 72E i
'W J
Statements of income i
sr th3 Ys:rs E2.ded Decernber 31, P
i i987
(
ousands oNars)
' Oper; ting Revenues, l
Electric,..........................................................
987,985 949,931 910,844' Gas....,.........................................................
324,645 334,789 308,679 Total....................................................
1,312,630 1.284,720 1,219,523
.Opehating Expenses and Taxes
' Fuel for electric plants..........................................
252,712 292,772 262,592-Power purchased and interchanged-net...........................
(33,276)
(82,79R).
(50,975)
G as purchased for resale.........................................
203,197 210,917; 188,994 Other operating e x penses.........................................
233,784 224,679 -
190,990
. M ain t e n anc e......................................................
88,988 85,045 80,332
- De pr e ciation......................................................
176,383
-183,700 147,408 Amortization of abandoned plant.................................
6,379 6,379 6,379
- : Amortization of excess unprotected deferred taxes.................
(4,254)
G e ne r al t ax es..................................................
123,856 127,367 115,989
- De fer red Clinton costs...........................................
(20,584)
(115,345)
(78,264)
Incometaxes....................................................
39,400 106,081 122,756 Total......................................
1,066,585 1,038,797 986,201 Ope ra t ing inco me..................................................
246,045 245,923
_ 233,322
- Othir income and Deductions
- Allowance for equity funds-Const r uc tion..........................,..................
1,689 1,702 51,523 91,726 Deferred Clinton financing costs...............................
( Disallowed Clinton plant costs............................,.......
(451,244)
Income tax effects of disallowed costs..............................
105,482 Miscellaneo u s-ne t............,...............................
14,752 60,084 57,083
. Total..................................................
(329,321) 61.786 200,332 income (loss) before interest charges............................
(83,276) 307,709 433,654 Intsrest Charges Interest on long. term debt...............................
216,029 195,438 188,762
,Other interest charges........................
4,566 16,307 14,309
- Allowance for borrowed funds--
Construction 4....
(1,503)
. (1,634)
(21,532)
Deferred Clinton financing costs.................
(13,936)
(57,820)
(37,441)
Total'...............................................
205,156 152,291 144,098 income (loss) before cumulative effect of accounting change (288,432) 155,418 289,556
' Cumulative effect as of January 1,1988 of accruing unbilled revenues, net ofincome taxes of 34,012
$26.5 million (Note 13).................
. Net income (loss)...................
(288,432) 189,430 289,556 Preferred dividend requirements........
37,365 37,540 37.697
- Net income (loss) applicable to common stock...........
$ (325,797) 151,890 251,859 Weighted average number of common shares outstanding
' during the period........
75,052,141 70,900,081 67,250,913 Earnings (loss) per common share before cumulative effect l of accounting change..........
$(4.34)
$1.66
$3.75 Cumulative effect as ofJanuary 1,1988 of accruing
.48 unbillsd revenues. '........
Earnings (loss) per common share.........
$(4.34)
$2.14
$3.7:
Cash dividends declared per common share...
$.66
$2.64
$2.64 Oncludes rmnue.related savs added to customer billings in each of the years 1989,1988, and 1987 in the amount of $59,333,000,362,660.000, and 359,201,000, respectitsly.
Sr notes tofinancial statements uhich are an intgral part of these statements.
l w
tilinois ner 1989 Annual kport YDi La
Balance Sheets D.oe,.l.a,3i, 19,,
19,,
AS4ETS
(" thousands of Dollees)
~ Ut!lley Plant, at orignaal coat L,
1;lectr5 (includes construction work in progrea of $58,749,000 and
$69,743,000,r e spec tive ly)................................................................... 8 5,%9,164 $ 5,789,064 Gas (includes construction work in progress of $6.597,000 and $6,450,000, respectively)...................
499,901 442,792 5,828,665 6,231,876
- 1. css. Accum ulated de pr ecia tion.................................................................. _ 1,309,869 1,254,R33 4,438,796 4,977,023 N uclea r fuel u r der c a pit al k ase..................................................................
105,264 176,590 4,624.060 5,153,613 la vest enent s and 0 the r Asee t a..................................................................
10,090 9,723 Current Anneta Cash and c a sh equiv alents......................................................................
66,253 12,855 Accoums receivable (less allowance for doubtful accounts of $6,500.000).
Service....................................................................................
93.102 b5,56 Other....................................................................................
19,738 33,859 Accr uc d unbilled r eve nue......................................................................
90,315 73,730 Materiah and supphes, at sverage mit l'oullfuel..................................................................................
17,196 27,175 G as in unde r ground st or s pe...................................................................
16,520 15,837 O pe r s t m g ma t e r ials.........................................................................
71,881 67,001 Prepaid and refundable income ta xes............................................................
40,980
$3.877 l'r e ps y m e nt s a nd ot he r.........................................................................
12,423 12,361 428,406 382,471 Deferred Charges De le r t ed C h m o n co st s......................................................................
415,116 380,596 Dc fe r re d purc haird g as costs...................................................................
75.278 62,916 Unamortized deferred abandonment cost...............................
3,824 10,202 U namor t ized de bt e x pe nse.....................................................................
50,702 51,246 Other....................................................................................
1,489 2,321 546,409 507,281 8 5,608,967 5 6,053.088 CAPITAL. AND 1.lAllII.lTIES Capitallantion Common stock-No par value, 100,000,000 and 50,000,000 shares authorized, respectively; 73.55R,263 and 73,463,988 shares outstandmg, respectively, stated at................................ $ 1,423.230 $ 1,389,782 R e t a me d e a r ni n gs.........................................................................
143,046 517,910 i.ess-Ca pit al stoc k e x peme..................................................................
12,501 12,084 Total commo n stoc k eq uity............................................................
l.553,775 1,895,608 Pre fe r r ed and pre fe rence $ toc k..............................................................
315,171 315,171 Redee ma ble pr e fer r ed stock..................................................................
160,000 160,000 t ong term de bt......................
2,351,564 2,341,231 Total ca pitahzation................................................................
4,380,510 4,712,010 C:rrent 1.labilitica A c c o u nts pa y a Ne........................................................................
125,956 103.511 Notespayable................................................................................
2,600 19,365 long icrm debt and lease obhgations maturing within one year.........
30,459 42,063 Dividend s paya Ne..........................................
9,284 57,872 General e nes accrued.......................................
38,152 37,450 I nte r e s t ac c r u e d........................................,...............................
67,697 76,862 Accrued purchased gas costs 27,700 17,286
- Other.......
45,677 5R,834 147,725 413,243 Other Accumulued deferred income taxes......
543,682 588,720 Accumulated defered investment tax credits.
252,021 286,906 Accrued purchased gas costs...................
48,536 39,171 Other................................
36,493 13,038 890,732 927,835 Commitments and Contmgencies (Notes 2 and 3)
$ 5,608,% 7 5 6,053,088 Su notes tofinancial statements tchich are an sntegral art ofilwse statements.
f rt Ilhnois lhr l1989 Annualikport
! 88!
ra
Statements of Long-Term Debt December 31, 1989 1988 First mortgage bonds-(Thousands of Dollars) 4 %% se rie s d u e 199 3....................................................... $
35,000 35,000
$.8 5 % se ries d u e 1996.....................................................
40,000 40,000 6 %% se rie s d u e 199 8.......................................................
25,000 25,000 10 % se ries d uc 199 8.......................................................
75,000 75,000 6%% series d u e 199 8.......................................................
45,000 45,000 8.3 $ % serie s d u c 1999.....................................................
35,n00 35,000 9 % se ries d u e 2 000.......................................................
35,000 35,000 9.60% se rie s d u e 2 001.....................................................
35,000 35,000 7%% series d uc 2 003.......................................................
60,000 60,000 6.60% series due 2004 (Pollution Control Series A).............................
7,900 8,050 9%% se ries d uc 20(64.......................................................
75,000 80,000 104% se rie s d ue 2004.......................................................
50,000 50,000 8 %% series d uc 2 006.......................................................
100,000 100,000 6 % series due 2007 (Pollution Control Series 11)...............................
1;,700 18,700 8 4% s e ries d u e 2007.......................................................
100,000 100,000 8 %% series d u c 2008,......................................................
100,000 100,000 10h% series due 2013 (Pollution Control Series C)...............................
125,000 125,000 I 1 %% series due 2014 (Pollution Control Series D)...............................
75,000 75,000 10%% series due 2015 (Pollution Control Series E)...............................
Il6,245 116,245 10E% se rie s d ue 2 016.......................................................
125,000 125,000 l
9%% s e ries d u e 2 016.......................................................
75,000 75,000 9%% se rie s d u e 2016.......................................................
125,000 125,000 7%% series due 2016 (Pollution Control Series F, G, and 11)......................
150,000 150,000 8.30% series due 2017 (Pollution Control Series 1)...............................
33,755 33.*
Tot al first mortga ge bonds.............................................
1,661,600 1,666,750 I2S% debentures due 1992 #>....
100,000 Revolving loan agreements as...
256,800 200,000 10.75% loan agreement due 1992.................................................
8,930 8,930 1.ong term loan agreement due 1992 t.0............................................
60,000 60,000 8 4% de bt securities d ue 1994.....................................................
100,000 100,000 Mediu m-term notes, series A 9;..................................................
43,500 i
Variable rate long term debt due 2017 t5>...........................,..............
75,000 75,000 2,205,830 2,210,680 Unamortized premium and discount on debt........................................
_ (9,080)
(g554) 2,196,750 2,201,126 Obligation under capital leases.noncurrent............................................_ 154 S14 140,105 Tot al long te r m debt.............................................,..... (2 3 51 564$ 2 341.2231 2 2 1
(1) The debentura ture called ihrember 1.1989 at a callpricc ol$101.5 mil l ion.
(2) In i988, the Compartr entercJ into thrre yNr rewh ing hun agreements totahng $375.000J600 wth the prorbimtfarconversim to a tcwycar term Imn. There uus a $2$6.800.000 rewinng hun wistandmg under the agrwnent at ihrember 31. I939 Reluy:nent < the $25bM%000 im b recuired to begun ihrember 9. I991 teith setrn subsnluent quarterlyluymeras. Interest rates on ihr bcmmengs art, at Ihr Gajuny'. optson, kued up m.he banks' t' rime rate, their 30, 60, 90-Jay Certt cate ofikposst rate, the bornrwing ur at key lunks d: the f.onJan interbank market.
li
. competits. mJ opti<m. or commarialpaper. The mterest rata at Ikemba 31. I989 ranadJmm K$5% to 9. 70%
.'3) b%est rata are adjustcJ on a one, etw, thur, or six month basis at the Company's option anhanedfrom 4 675% to 9.2% e ikwk 31 1939.
(4) In 1989. the Comparty e ntercJ into a series ofJhed rate mcJuum. term notes. At ihrember 31.1989 ehe maturuy data rar.gdfrom 19%1998 arsd the Interest rates rangedfn.m 925% to 9.31%
' (S) Interest rate is adjustalunkly and uus 6 V% at ikcember 31, !989,
&c notes tofinancial statements tehsch are an mtegralpart of thne statements.
m lilinois Iwer 1984 Annual krurt 19i 6
r i
Statements of Preferred end Preference Stock 1
i b"**' II' Serial Preferred Stech, cumulative, $50 par value t'l>- Authorized 5,000,000 shares; 4,2fl0,000 shares outstanding lete leg 2 Series
$ hares
' Redemption prices (T'" of pollars)
- 4.08%
300,000
$51.50.............................................................
15,000 $
15.000 4.26 %
150,000
$1.50.............................................................
7,500 7.500 4.70 %
200.000
$1.50.............................................................
10,000 10,000
'[
4.42%
150,000
$1.50.........................................
7,500 7,500 4.20 %
180,000 52.00.............................................................
0,000 9,000 t
8.24 %
600,000
$1.90.............................................................
30,000 30,000 7.56 %
700,000 51.685............................................................
35,000 35,000 8.94 %
1,000,000 J $ 2.90 prior to Marc h 1,1991 }.......................................
50,000 50,000 t $1.60 thereafter
)
8.00%
1,000,000 l 5 3.29 prior to August 1,1992 }.......................................
50,000 50,000 t $2.29 thercaher J
h Pre miu m on pr e ferred stoc k.......................................................................
1,171 1,171 Total Prefer red Stoc k, $ 50 par value.............................................................
215,171 215,171 Berial Preferred Stock, cumulative, without par value-Authorized 5,000,000 shares; 4,600,000 shares outstanding (includmg 2,600,000 shares of redeemable preferred stock)
F Series
$ hares Redemption prices I 5 m = = i.i9" }.....................................
=
i,..
,0,000 50..
' $1.50 after May 1,1990 and 50,000 50,000 Br3) 1,000,000
( prior to May 1,1995 o....o
"..o.o
..on...o...oo.
50.00 thereafter Total Preferred Stoc k, without par value.........................................................
100,000 100,000 Preferenec $tock, cumulative, without par value-Authorized 5,000,000shates; none outstandmg..................
Total Preferred and Preference Stock........................................................... $
315,171 5 315,171 Redeemable Serial Preferred Seock, cumulative-Series Snares Par Value ll.75%N) 1,000,000 none...............................................
50,000 $
50.000 8.52%(5) 1,000/)00 none............................................................
50,000 50,000 60,000 60,000 B.00%(6) 600,000 none......................................................
Total Redeemable Preferred Stoc k.............................................................. $
160,000 5 160,000 l
l (I) Redamable at the opthm of he Comfuny in uhole or sn furt at any tame utnm not less than thirty days and not more than ssxty days twtice ly t
pubhcatson.
Q) Agustable Rate Seria A issued on March 3. I983. Quarterly dit idend rates are determined based on market mterest ratn of certain U.S. Treasury suurtt 3s. Rates for dwistcruis dalared in i989 urre $0. 75.' $0. 75. $0.75, and $0. 75 sn the first, snonJ, thsrd, and fourth quartm. resprtitriv.
l Rav< for ditidends dalared un i988 urre 50.75,50.75, $0.7563 and $0.75 in the first, swond, thud, andfourth quartm, restatndy. The l
dwsdend ratefor arty dwidendpmmiteill rwt he less than 6% per annum nor greater than i2% per annum applial o the hquidation preference tulue t
l of$50per share.
l (3) Adjustable Rate Senes 11 issued on May 15, I985. Quarterly dwiderulrates are detmnined based on market snoerest rates ofcertain U.S. Treasury swurstics. Rates for Jwiknh dalared m 1989 txre $0.475. 50.9813, $0.875, and 50.875 in the first. snond, thsrd, and fourth quartm, respntitdv. Rata for dmdends dnlared in 1988 urre $0.9563, $0.9375, $0.9875, and $0.95 in the first, suond. thurd, atdfourth quarters, restaritrly. The dwidend rate for arty ductJend trrial tvill twt be less than 7% per annum nor greater than 13:% per annum applied to the V
hquidatwn preferetur tatue of $50per share.
(4) Subjut to mandatory redemptkm m an amount sufficient to retire on each Noirmber I beginning in 1990, 200,000 shares at $50 per share plus
(
a crued dwidends. lleginnmg Norrmber 1.1990. the Company may redum up to 200,000 aJJaional shara cach year at $50per share.
I
- 15) Subjnt to mandatory redemption in an amount suffuknt to retsre on each February 1. begunning in 1992, 200.000 shares at $50 per share plus l'
eterued dreidenJs. lieginnmg February I, I992, the Company may reden up to 200,000 aJJakmal shares each year at $50 per share.
(6) Subjat to mandato*v redernprion in an anwunt sufficsent to retire or. each February I. beganning in 1993, i20,000 shares at $100per share plus aarunt dwidens. flegunntng February J, I993, the Company may redeem up to 120,000 adJttional shares each year at $100 per share.
Sa notes tofinancial statements tchich are an integralpart of these statements.
l pm
!!hnoi. Iwer 1989 Annualluor l
i 3 l
kd 1'
l
'* '6 '
Ead d a s 6 r 3i, Il8198RSRis Of C8sh Flows l'8' 1988 1937 (Thousands of Dollars)
Cash Flows Frean Operations N e t mco me t 1o33 ).............,............................................. s 8 (288,432)
$ 189,430 1 289,556 Items not requirmg (providmg) cash-Disallowed Chnson plant costs, net of income taxes............................
345,762 Cumulative eficci as ofJanuary 1,1988 nf accruing unbilled revenues, net of income taxes..........................
(34,012)
Depreciation and ntnortizatkm..............................................
182,311 193,692 157,399 Allowance for funds used during construction.................................
(3,192)
(3,336)
(73,055)
Deferred ta xes on income, ne t.....................,.......................
75,959 157,638 78,860 De ferred investment ta x credit.......................................
(d,787)
(60,371) 1,282
~ De fe rr ed Clint on cost s.....................................................
(20,$h4)
(115.345, (78,264)
Deferred Cimton financing costs............................................
(13,936)
(5920)
(129,167)
' Amortization of deferred gas costs-take.or pay..............................
29,562 Changes in assets and liabihues-Acc o unt s re ceiva ble......................................................
6,595 (2,793)
(33,208)
U n billed re ve n ue.......................................................
(16,585)
(13.219)
M a t erials and su pplies...................................................
4,416 7,714 (14,841)
A ccou n t s pa yable.........................................................
32,859 11,019 (13,051)
Interest and dividends accrued or declared....................................
(57,753) 10,634 6,843 Accruedtaxes.............................................................
902 2,572 (798)
Other, net.............................................................,
(45,583)
(60,577) 59,755 Ne t ccsh pr ovided by operations.............................................
223,514 225.226 251,31l Cash Flowa From investing Construc tion e x pendit ures..................................................
(M,781)
(115,465)
(237,614)
Allootnce for funds used during construction.....................
3,192 3,336 73,0$$
Sale of ba nk notes........................................................
7,000 Net cash used in investing activities...........................................
(93.589)
(112,129)
(157,559)
Cash Flows From Financing Dividends on preferred and common stock....................................
(166,432)
(226,335)
(215,933)
Redemptions -
Short. term debt................
(16,765)
(83,805)
(25,693)
I,o n g. t e r m d e b t.......................................................
(228,350)
(230,000)
(276,235)
Pre fe r red st oc k...................................
(36,000)
Issuances -
Co mmon s toc k.......................................
33,448 91,575 76,369 Ca pital stoc k expe nse..........................
(417)
(451)
(482) 1.ong term debt..............
223,500 275,000 338,755 M iscellaneou s, net..........................................,......
(1,511) 1,068 (4,264)
Net cash used in fmancing activities.....................
(76,527)
(172,948)
(143,483)
Net Change in Cash and Cash Equivalents....................................
53,398 (59,851)
(49,731)
Ccsh and Cash Equivalents at Heginning of Year................
12,855 72,706 122,437 i
Cash and Cash Equivalents at End of Year....................................
8 66,253 5 12,855
$ 72,706 i
Statements of Retained Earnings i[;;;the Years En e December 31 l
(Thousands of Dollars)
Balence nt Beginning of Year.......
$ 517,910
$ 554,815 5 4S1,192 i
Net income (l.oss).........
_p88,4 32) 189,430 289,556 229,478 744,245 770,74R
- 1. css-Cash dividends-(
Preferred stock..............
37,340 37,472 37,440 C o m mo n s t oc k.....................................................
49,092 188,863 178,493 86,432
,_226,335 215,933 Balance st End of Year.
$ 143,046 5 517,910
$ 554,815 Su notn tofinancial statom nts tthich are an integralpart of these statemens.
Illmois 1%er flhtt9 Annualikport iN!
Notes To Financial Statements-5 Note 1 - Summary of are subject to review and approvai by the ICC. Similarly, Significant Accounting Policies:
take or pay charges from pipeline suppliers are deferred for subsequent recovery from customers. See " Note 3-The Company is subject to regulations of the Illinois Commitments and Contingencies" for further discussion on Commerce Commission (ICC) and the Federal Energy take-or-pay ma,ters.
Regulatory Commission (FERC) and accordmgly, prepares its fmancial statements based upon the concepts of Statement Allowance for Funds Used During Construction - The of Financial Accounting Standards No. 71 " Accounting for FERC Uniform System of Accounts defines AFUDC as the the F fects of CertainTypes of Regulation"(FAS 71), which net costs for the period of construction of borrowed funds require that the effects of the ratemaking process be used for construction purposes and a reasonable rate on other -
recorded. Such effects concern mainly the time at which funds when so used. AFUDC is capitalized at a rate that is various itera enter into the determination of net income in related to the af. proximate weighted average cost of capital.
order to follow *he principle of matching costs and revenues.
In 1987, AFUDC on Clinton was capitalized at a net-of tax The Company's principal accounting policies are described rate, but AFUDC on all other construction was capitalized at
- below, a pre tax rate, and the associated tax effects were deferred. In 1987, the rate used in computing AFUDC was 9%% for Principles Applied in Censolidation - The Financial Clinton construction and 11% for all other construction Statements include the accounts of IPF (Illinois Power Finance) Company NN., a wholly owned subsidiary. All pr jects. In 1988 and 1989, the rate used for all construction projects was 10% (pre tax). Although cash is not currently intercompany transactkms have been eliminated.
realized from such allowance, it is realized under the Utility Plant - The cost of additions to utility pl nt and ratemaking process over the service life of the related replacements for retired property units is capitalized. Cost property through increased revenues resulting from a higher includes labor, material, and an alkication of general and rate base and higher depreciation expenses.
administrative costs plus an allowance for funds used during in accordance with ICC rate orders, the Company construction (AFUDC) as described later in this note.
excluded a portion of construction work in progress (CWIP)
Maintenance and repairs, including replacement of minor from the base on which AFUDC was computed and included items of property, are charged to maintenance expense as that amount of CWIP in rate base. The amount of Clinton incurred. When units of depreciable property are retired, the costs in rate base was increased to $1.54 billion from $1.156 original cost and dismantling charges, less salvage, are billion effective April 22,1987. This increase was authorized charged to accumulated depreciation, in the August 1985 ICC rate order. Because these orders Depreciation - For financial statement purposes, the authorized that Clinton costs be included in the inte base Company depreciates the various classes of depreciable upon which the Company realized revenues, these orders property over their estimated useful lives by applying caused no material effect on net income. On April 24,1987, composite rates on a straight line basis. In 1989,1988,and Clinton was placed in service and AFUDC thereon ceased.
1987 provisions for depreciation were 2.786% of the average Deferred Clinton Costs - According to an ICC order, in depreciable cost for the Clinton Power Station (Clinton) and April 1987 the Company began deferring certain Clinton 3.4% of the average depreciable cost for all other electric post construction operating and financing costs, until rates to plant. Provisiont for depreciation of gas utihty plant, as a reflect such costs were effective (April 1989). After issuance percentage of the average depreciable cost, were equivalent t of the March 30, 1989 ICC order, deferred Clinton post.
4.0% m 1989,1988, and 1987.
construction costs ceased and amortization of the previously Revenue and Energy Cost - Prior to 1988, the Company deferred post construction costs (about $424 million recorded revenue 6 as billed to its customers on a monthly including defer:ed Clinton fmancing costs) over a 37.5 year cycle billing basis. At the end of each month, there was an period commenced. Althcugh cash was not currently realized amount of unbilled electric and gas service that had been from these deferrals, it is realized under the ratemakirtg rendered from the latest date of each cycle billing to the process over the service life of Clinton through increased month end. EITective January 1,1988, the Company began revenues resulting from a higher rate base and higher recording revenues for services provided but not yet billed to amortization expense.
more closely match revenues with expenses. Adoption of the During the deferral period, a deferred fmancing cost was new accounting policy is discussed in " Note 13-Changes in computed on Clinton plant not in rate base and 'he deferred Accounting."
costs. The deferred financing cost for ratemaking purposes The electric fuel adjustment and purchased gas was capitalized at a rate that was similar to AFUDC. The net adjustment clauses provide that changes in allowable energy ofincome tax rate used to compute deferred Clinton financing costs from the Company's filed tariffs are passed on to costs was 9%% through October 1987 and 8%% in November customers. Accordingly, allowable energy costs that are to be and December 1987. Beginning January 1,1988, in passed on to customers in a subsequent accounting period are accordance with Statement of Financial Accounting Standards deferred. The recovery of costs deferred under these clauses No. 92 " Regulated Enterprises-Accounting for Phase-in gy llhnok I W rr :1989 Annual 15n b.
Plans" (FAS 92), the Company was piohibittd from construction that is capitalized for financial statement capitalizing an allowance for carnings on shareholders' purposes, llowever, interest on construction is capitalized for investment as part of post. construction cost deferrals for tax purposes in accordance with applicable tax law.
financial statement purposes. For the period January 1,1988 investment tax credits, which reduce federal income through March 31,1989, the Clinton deferred financing costs taxes, have been deferred and are being amortized to income were calculated using a 2.75% net of income 'ax rate over the life of the property which gave rise to the investment reflecting only the debt component of the Company's tax credits.
financing costs.
Federal and state income taxes are alk>cated between Clinton Power Station Decommissioning - Decommission.
perating and non-operating income and expenses. The tax ing of Clinton will be funded by contributions to an external erects relating to non-operating activities are included m Other income and Deductions-Miscellaneous-net.
trust fund in accordance with an ICC order issued July 15, 1987. The order provides for an annual contribution of $2.1 Statements of Casti Flows - The Company adopted the million over 39% years as estimated to be required to Statement of Financial Accounting Standards No. 95 decommission the Company's share of Clinton. See " Note
" Statement of Cash Flows" in 1988. Cash and cash equiva.
3-Commitments and Contingencies" for further discussion.
lents include can on hand and temporary investments Amortiration et Nuclear Fuel-The Company leases purchased with a maturity of three months or less Capital lease obligations not afTecting cash flow increased (decreased) nuclear fuel from Illinois Power Fuel Company. Amortization of nuclear fuelis determined on a unit of production basis. A.
by $(26,292,000), $11,365,000, and $24,540,000 during provision for spent fuel disposal costs is charged to fuel t@ 1988, and 1987, respectively. Income taxes and interest expense based on kilowatt. hours generated.
paid are a follows:
Unemertired Deferred Abendenment Cost - The ICC Yean Ended
- ** *
- 3I' order of August 7,1985, authorized the Company to amortize and recover through rates $31.9 million ofits investment in 1989
_. tons 19s7 m usands of Dollan)
Clinton Unit 2 over the five year period through August 1990. The Company was not allowed a return on the income taxes.....
8 35' 5 21,124' 5 33,421' Interest.........
8223,805 5:07,102 5207,060 untmortized investment balance.
'ladudes refunds of prior yearv income isses in each of the > ears 1989, Unemortized Debt Expense - Debt issuance costs are 19n,.na i987 m the amoum or $36,779,000, 545,250,000, and amortized over the lives of the related issues. Costs related to 540,601,000, respute ety.
refunded debt are amortized over the lives of the related new debt issues or the remaining life of the old debt issue if no new Financial Statement Reclassification - Certain reclassifica-debt is issued.
tions have been made to prior years' financial statements to laceme Tases - The Company normalizes the income tax conform to the 1989 presentation, effects of transactions causing timing differences between inclusion in the financial statements and taxable income. The Note 2 - Clinton Power Station:
Company computes deferred income taxes based on the statutory income tax rates in effect during the period that the The Company owns 86.79% of the Clinton nuclear timing differences originate. Deferred income taxes are power station, which was placed in service in 1987 and amortized to income as the underlying timing differences represents approximately 19% of the Company's installed reverse.
generation capacity. During 1989, Clinton provided 15% of Principal sources of timing differences giving rise to the Company's total electric generation. Clinton provided the deferred taxes are as follows:
Company with the lowest fuel cost per megawatt hour Use of the most liberalized depreciable lives and generation. The investment in Clinton and its related deferred methods allowed by the Internal Revenue Code.
costs represented about 67% of the Company's total assets at December 31,1989, and 40% of the Company's total 1989 Disallowed Clinton costs not recognized for tax purposes as a current deduction.
ther operating, maintenance, and depreciation expenses.
+
Capitalization of certain construction overheads, During 1988 and 1987, Clinton related deferrals dismantling, and other costs for book purposes that represented 86% 3nd 61% of the Company's 1988 and 1987 are claimed as current deductions for income tax net income befors the effect of an accounting change.
Earm,ngs m 1989, exsluding the $346 million net of mcome purposes.
Revenues and energy costs recognized in different taxes or $4.61 per share write-off of Chnton costs, declined periods for financial statement purposes than for significantly to $20 milliot. or 27c per share. I'he outcome of income tax purposes.
the Company's pending raa request and the appeal of the Alternative minimum tax payable in the current year March 30 rate order, discussed on the next page, will that can be used to offset future tax liabilities, determine the extent to which the investment in Clinton is fully included in rate base and Clinton operating expenses are For income tax rett rn purposes, net depreciable utility fully recovered. Until these items and the legal proceedings as plant does not include the allowance for funds used during discussed later in this note are satisfactorily resolved, earnings i
l n
Illinois ther [1989. Annualikp>ri b
}
will continue ti be depressed,' and the timing cf the of possible loss as a result of the order was from $451 million f
resumption of a common stock dividend that was suspended
($346 million, net of income taxes) to $1.558 billion ($1.127 O April 1989 and the continued payment of a preferred stock billion, net of income taxes) as of the March order date, with i
i dividend will remain uncertain.
no amount within the range representing a better estimate Additionally, ownership of an operating nuclear gener-than any other amount. Therefore, in accordance with ating unit exposes the Company to significant other risks generally accepted accounting principles applicable to including increased and continually changing regulatory, regulated enterprises, the Company recorded a loss of $451 safety, and environmen:al requirements. The Company million ($346 million or $4.61 per share, net ofincome taxes) expects to be allowed to continue to operate Clinton; in the first quarter of 1989, however, if any unforeseen or unexpected developments Based upon the methodology employed by the ICC in would prevent the Company from doing so, the Co'npany determining the amount of Clinton that is used and useful, could be materially adversely affected, updated for current conditions, the Company has determined that the total maximum possible loss as a result of the order Rete end Repletery Metters is $1.416 billion ($1.020 billion, net of income taxes) as of December 31,1989 or $965 million ($674 million, net of 1987 Rate Case income taxes),m addition to the amount recorded m the first in November 1987, the Company requested an electric quarter. A decision in the appeal is not expected until at least rate moderation plan to incorporate Clinton into rates.1.he mid year 1990. Depending on the outcome of the appeal, the requested rate moderation plan would have increased Company may be required to record additional lorses in 1990.
revenues approximately $256 million, phased in over ten llegardless of which way the case is decided by the Appellate years. On March 30, 1989, the ICC issued an order that Court,it willlikely be appealed to the Illinois Supreme Court.
rejected the Company's November 1987 proposal for a 10 Therefore, a final disposition of the case is not likely to occur year rate moderation plan, and granted instead a one-time until sometime in 1991. Each month the 72.8% of the cost of increase of $60.5 million, or 6.9%, that became effective April Clinton deemed reasonable by the ICC is not earning a
- 4. The new rates, as approved in the March 30 order, are common equity return results in a loss of income of being billed and collected subject to refund pending the approximately $9 million.
outcome of the appeal discussed below. The total amount of The March 1989 ICC rate order results in depressed revenues billed and collected subject to refund for tle year carnings, but will provide sufficient cash flow in the near-1989 is approximately $36 milhon. The Company does not m allow the Company to meet its operating require-expect to be required to refund these revenues.
ments and to continue to service its existing debt, preferred in Illinois, the ICC may melude in a utility's rates only stock dividend and sinking fund requirements. Due, however, those costs of a new electric generating plant that are to legal constraints affecting the payment of dividends if determined to be reasonable. Therefore, an audit of Clinton retained earnings are less than zero and the uncertainties construction costs was conducted by auditors under contract
- ounding the outcome of the appeal, the Company's with the ICC. The ICC order included various disallowarm management determined in April 1989 that it was in the best of Clinton related costs that would result in write-offs totaling interest of the Company and its stockholders to suspend the about $615 rmilion, net of income taxes, due to alleged common stock dividend. The results of the appeal of the unreasonable expenditures, as wellas the disallowance of a March 30 rate order and the results of the current rate request common eqmty return on Clinton post construction cost discussed below, will determine whether the Company can deferrals from january 1,1988 through March 31,1989. The contmue to pay a preferred stock dividend and when the ordered disallow race < f,' unreasonable Clinton.related costs Company can resume payment of a common stock dividend.
exceeded the a commended by the auditors under contract with ti..
' rther, the Company believes that 19S9 Rate Cmc the denial of the w of a common equity return on On July 13,1989, the Company filed for an electric retail Clinton po.: unstruction cost deferrals is contrary to a rate increase with the ICC, seeking a one-time increase in previous lCC orac ehat allowed the deferralof such eosts for electric rates of $265 million, or approximately 28%. This future recovery. The ICC order also found approximately request was subsequently reduced to approximately $216
$2.3 billion (72.8%) of the reasonable Clinton costs to be not million, or approximately a 23% rate increase, primarily to.
"used and useful" and denied a common equity return reflect revisions to its tax calculations. The rate increase filing thereon, w hich would have resulted in an additional write-off requested a 10.52% overall rate of return (12.54% return on of approximately $512 million, net ofincome taxes, as of the common equity). The request is primarily supported by March order date. The Company believes that the ICC's evidence that Clinton is fully "used and useful" based upon conclusions are contrary to both the law and evidence in the the reserve margin test used by the ICC in the March 30 rate case and has appealed the order to the Appellate Court of order, and the recovery of higher levels of operating and Illinois for the Third District.
maintenance expenses as reflected in the forecasted 1990 test After consuhation with legal.ounsel, management year.
believes ther; - ' reasonable possibib'y of reversing various The ICC Staff and the various intervening parties have aspects of the March 30 rate order through the appeal siled their evidence in the case. The ICC Staff concludes that process.
.e Company, however, determined that the range Clinton is fully "used and useful" by relying on an analytical lHmois IWrr 1989 Annual Perurt T53 a
methodology essentially the same as the one the ICC rejected they will be required to pay increased energy supply ccts as in the Company's previous rate case that resulted in the ICC's a result of the Company's alleged mismanagement of the March 30 rate order. The ICC Staff recommends that the construction of Clinton. This suit seeks damages suf6eient to remaining 72.8% of Clinton be fully included in rate base and compensate plaintiffs for their injuries, together with cost of proposes an increare in ratcs of $147 million phased in during suit.
the next four years with approximately 8% in the first year.
Scyland Suit -- This suit in an Illinois trial court by the This proposal reflects an overall rate of retum of 10.3% (12%
owner of approximately 13% of the Clinton Power Station in ret:rn on common equity). Actual net capacity of Clinton is an Amended Complaint filed in September 1988 alleges 930 megawatts rather than the 950 megawatt figure breach of contract, breach of fiduciary duties, negligent or presiously useo by the Company. Due to the reduction in net fraudulent misrepresentations, and fraudulent concealment capacity, the ICC Staff proposed to reduce Clinton related by the Company in connection with the construction of
. rate base by 2.188%, or, alternatively to use the higher net Clirton and its performance under the Clinton Ownership capacity figure for purposes of determining the extent to Participation Agreement. The suit seeks damages sufficient to which Clinton is "used and useful." If the fmal ICC order and compensate plaintiffs for their injuries, together with
. a:y subsequent court order includes the ICC Staff's prejudgment interest and costs of suit. The Company has recommendation to further reduce Clinton.related rate base, asserted counterclaims against Soyland to recover approxi.
the Company would be required to record an additional plant mately $270 million in economic benents obtained by Soyland disallowance of about 565 million ($42 millic i, net ofincomc-under a series of interrelated 1984 agreements which the taxes).
Company alleges Soyland has repudiated in part by asserting intervening parties' proposals range from a reduction in its claims against the Company, revenue of $39,327,000 based im only 27.2% of Clinton being
- g. iland Suit - A derivative lawsuit was fded in March c
found to be used and usefur, to a reduction in revenue of 1989 n Federal District Court in !!!inois by a stockholder 58,179,000 corresponding to no more than 41.6% of Clinton a ainst 11 of the Company's 14 Directors and its Director I
being considered used and useful.
Emeritus alleging that the individual defendants ected in bad U positqns of the Company, the ICC Staff and the faith, with a gross abuse of discretion and in breach of their
?
miervenmg parties are not binding upon the ICC and the ICC fiduciary duties in connection with the construction and may accept or reject, is, whole or in part, those positions. An licensing of Clinton. The plaintiff seeks an accounting of the order is due in June 1990.
total Snancial loss to the Company as a result of the if the ICC orders that such an increase be phased m.over complained of acts and damages from the named individual a period of years rather than granted all at once, the cash flow defendants in the amount of at least $455 million or such other meresse from the new revenue will be lessened.,The delayed amount found to be the damages suffered by the Company, A cash Gow would be recovered over the period of the phase in.
Special Comminee of the Bc.ard of Directors of the Company Accounting Matters - Effective January 1,1988, the investigated the allegations (as well as similar allegations Company adopted Statement of Financial Accounting contained in a May 1988 demand letter from the attorney for Standards No. 90 " Accounting for Plant Abandonments and this stockholder and in an April 1989 demand letter from an Disallowances of Plant Costs" (FAS 90). For further individual who claimed to be a stockholder) and issued a i
discussion of this matter refer to " Note 13 - Changes in report fmding that the best interests of the Company require Accounting."
that the Company seek to terminate the suit and that no The Company currently prepares its Gnancial state-claims arising out of the construction of Clintor: be maintained ments in accordance with FAS 71 and therefore accounts for against the Company's directors or officers. A motion to the effects of the ratemaking proecss. Accordingly, the terminate the suit has been filed.
Company records various regulatory assets and tabilities,
//auman Suit - This suit filed in May 1989 in Federal I
such as deferred Clinton costs and overrecoveries of gas costs.
District Court in Illinois was brought by Iwo purchasers of in order for a company to report under FAS 71, the the Company's common stock purporting to act as company's rates must be designed to recover its cost of representatives of a class of such purchasers against the providing service, and the company must be able to collect Company and two current and two former officers of the those rates from customers. Management believes that the Company alleging that there were untrue statements in, and Company currently meets the criteria for continued omissions of material facts from, the Company's fmancial application of FAS 71, but will continue to evaluate statements, reports, news seleases and other communications significant changes in the regulatory and competitive on and after March 31,1987, concerning the Company and its environment to assess their overall consistency with the financial condition, and that as a result the price of the
- criteri: of FAS 71.
Company's common stock was artificially inflated. Plaintiffs Legal Proceedings and Related Matters - There are seek compensatory damages in an unspecified amount. The sever:1 legal-proceedings related to Clinton currently court has certified a class consisting of all persons (other than pending.
defendants or their affiliates) who purchased the Company's
/kvll Suu - This soit, filed in September 1986 in an comrnon stock from March 31,1987 through April 20,1988 tilinois trial court on behalf of a class of all customers of and who still held such stock on the latter date. Notice of the Cooperatives that obtained power from the Company, alleges pendency of this class action will be given to purchasers who pm Ilhnois IWrt 1989 Annual kron i
might be affected during the first quart:r of 1990. Discovery replacement power costs, and/or other cc:ts and expenses h proceeding in this case.
could materially exceed the limits of insurance coverage available.
All nuclear power station operators are subject to the Price Anderson Act. In accordance with the Price Anderson Amendments Act of 1988, public liability for a nuclear The Company beheves that Clinton is needed to meet incident is currently limited to $7.445 billion. Coverage of the current demand and that it has managed the construction of first $200 million is provided by private irnurance. Excess Clinton prudently and efficiently. Therefore, the Company coverage is provided by retrospective premium assessments believes it should be allowed to recover the full cost of that against each licensed nuclear reactor in the United States. The unit through i s rates. I:urther, the Company believes that the Company's liability for such an assessment would be up to a t
legt.1 proceedings against the Company described above are maximur'n of $63 million per incident payable in annual, without merit.
installments of not more than $10 million. Additionally,if the Management is unable to predict the ultimate outcome of sum of all public liability claims and legal costs arising from a the uncertainties discussed in this note which could have a nuclear incident exceed the amount of primary and excess -
material adverse effect on the Company's carnings and/or coverage in force, each licensee can be assessed an additional financial position. Accordingly, no provision for any liability 5 percent ($3.15 million) of the maximum retrospective er additional loss that may result upon resolution of these assessment.
matters has been made in the accompanying financial A Master Worker Policy covers claims by workers who statements.
claim bodily injury, sickness, or disease as a result of initial radiation exposure occurring on or after January 1,1988. TL policy has an aggregate limit of $200 million applying to the Note 3
, Commitments and commercial nuclear industry as a whole. As claims are paid Cont,mgencies:
under the policy, there is a provision for automatic Construction Program - The 1990 construction budgei is reinstatement of p licy limits up i an additi nal $200 million.
$140 million, which includes $72 million for electric facihties, Ihere is also a provision for assessment of additional
$25 million for gas facilities, $20 million for nuclear fuel and premiums if claims exceed funds available in the insurance
$23 million for general plant. The five year construction cmnpanfs reserve acwunts to pay claims. The Company's program for 1990 through 1994 is estimated to be $712 msximum share of addin,onal premiums in future years for million, exclusive of approximately $300 million associated this contingency could be up to approximately $3.2 million.
with complying with the proposed clean ir act.
Decommissioning and Nuclear Fuel Disposal Costs - The lasurance - The Company has insurance coverage for loss Company is responsible for its ownership share of the costs of due to property damage, including contamination, to Clinton.
decommissioning Clinton and for spent nuclear fuel disposal
."I,he establishment of an external trust fund was
'"8*
This insura nce is structured through a level of primary coverage provided by nuclear insurance pools and exces's authorized by the ICC to invest funds for the future coverage from a combination of nuclear insurance pools and dismantlement and decommissioning costs of Clinton, based on current requirements (estimated to be $95 million in 1989 an industry owned mutualinsurance company. The primary d liars). In ace rdance with the 1987 ICC order, decommis-coverage provides limits of $500 million and the excess caverage currently provides limits of $1375 billion, for a total sioning costs were deferred through March 1989 ($0.5 million in 1989, $2.0 million in 1988 and $1.4 million in 1987). The available coverage of $1.875 billion. The Company has replacement power insurance coverage through the industry.
Company began recovering decommissioning expense in its owned mutual insurance company for the extra cost to rates in April 1989. The Company contributed $1.4 million to the external trust fund for decommissioning in 1989. The purchase replacement power in case of an extended accidental shutdown of Clinton. This insurance does not Company anticipates that Nuclear Regulatory C,ommission cover replacement power costs until Clinton has been out of regulau ns will increase the funding requirements by service for 21 weeks. Thereafter, the insurance covers 100%,
approximately 33% The Company is currently seeking and expects t receive ree very fr m ratepayers for any merease of the estimate of the plant's weekly replacement power costs stated in the policy declarations (Weekly Costs), for up to $2 in decommissioning funding requirements.
weeks,67% of the Weekly Costs for up to the next $2 weeks, Under the Nuclear Waste Policy Act of 1982, the U.S.
Department of Energy (DOE) is responsible for the end 33% of the Weekly Costs for up to the next 52 weeks.
A major loss covered under the property damage or permanent st rage and disposal of spent nuclear fuel. DOh replacement power insurance coverages involving Clinton or currently charges one mill per net kilowatt hour generated for other stations insured by the industry-owned mutual future disposal of spent fuel. The Company is recovering this amount through its retes.
hmnce company could result in additional annual premium assessments to the Company of up to approximately $8.8 Talte or Pay Charges - In accordance with a FERC order million, in addition, while the Company has no reason to issued in 1988, the Company's pipeline suppliers have been anticipate a serious nuclear incident at Clinton, if such an allowed to bill the Company for their take or pay costs. At incident should occur, the claims for property damage, December 31,1989, the Company's obligation for such costs m
Illmois Iwer 1989 Annualikpon
' approximately $76 million. Over the next five years, Company. See " Note 2 - Clinton Power Station" for estimated payments under this obligation are $27,700,000 in discussion of other legal proceedmgs.
1990; $18,430,000 in 1991; $19,425,000 in 1992; $9,601,000
- : 1992; and $1,0fi0,000 in 1994.
In November 1988, the ICC issued an order that Note 4-Short-Term Lo8ns allowed the Company to fully recover take or-pay costs SRd(IR88ofCf8dlt*'
allocated to it under rate schedules approved by the FERC.
In accordance with the ICC order, the Company began The Company had total lines of credit represented by billing its customers for such costs on February 1,1989. On bank commitments amounting to $$$4 million of which $235 December 5,1989, the Illinois Appellate Court re"ern.1 the million was unused at December 31, 1989. These bank ICC order and remanded this matter to the ICC.or further commitments support the amount of commercial paper proceedings. The Company has appealed this m Aner to the outstanding at any time and are available to support othet Illinois Supreme Court. If the deterrnination is v.ade that the Company activmes.
Company will not be allowed to re'. aver the costs from The Company has a $50 million revolving loan customers, whether such costs have been reem cred to date or agreement effective through November 13,1992. No deferred for future recovery,it could be regraed to write oft borrowings were made under this agreement during 1989.
approximately $105 million ($64 million, ne. ofincome taxes)
The Company pays a fee basis of 0.15% per anntm for the as of December 31,1989. Management ooes not expect the unused bne of credit. The interest rate on funds borrowed ultimate outcome of this issue will have a material adverse under this agreement is based upon the borrowing rate of key effect on the Company's fin.mcial position or results of banks in the 1.ondon interbank market.
operations, in addition, the Company has a $;00 million, five-year Environmental Matters
'I.he Company,a current estimates revolving loan agreement effective thrm.sh June 4,1992.
There was a $60 million revolving loan outstacting under this are that capital expenditures of between $450 million and agreement at year end. For the unused porOn of the l
$850 million would be required by the year 2001, with commitment, the Company pays a fee of 3/16% per annum, between $300 million and $550 million required by the end of.
The interest rate on borrowings under this agreement is, at
- 1995 to achieve the emission reductions set forth m the acid the Company's option, based upon the lending banks' rain portion of President Bush's clean air proposal. The reference rate, their Certificate of Deposit rate,:he borrowing proposal, if enacted into law, could require the Company to rate of key banks in the 1.ondon interbank market, or a bid imtall scrubbers on up to five generatmg umts. The proposal option.
could also require switching from high sulfur to low sulfur The Company has three-year revolving k>an agreements coal at some generating units and the installation of lo*"
totaling $375 million with banks that include a provision for nitrogen oxide burners on reveral generating units. The conversion to a two year term loan. Fees for these agreements President's proposal could result m additional annual are 1/16% on the unused portion and 1/8% on the entire operating costs, associated with scrubbers, ranging from up fac hty amount. Interest rates on the borrewings are, at the to $75 million in 1996 increasing to up to $150 million per Company's option, based upon the banks' prime rate, their year by 2001. It is anucipated that some form of the clean air 30,60,90 day Certilicate of Deposit rate, the borrowing i
legislauon will be passed by Congreas during 1990. It is roe at key banks in the London interbank market, possible that not all of these costs will be recovered from the competitive bid option, or commercial paper. In May 1989, Company's ratepayers. The form of the fin.-f legislation and these agreements were restructured to include the sale of oth(r factors may change these estimates.
commercial paper as another means of borrowing. The total The Company, through its predecessor compam.es, is on amount outstanding under these agreements was reduced I
a State of Illmms list of owners and operators of former gas from $375 million to $256.8 million during December 1989, i
manufacturing sites. The Company is required to investigate Weighted average borrowings during the year under these and, if necessary, resolve environmental concerns associated agreements were 5352 million.
wnh past operation of the g s manufacturing sites. The clean-The Company has letters of credit in the total amount of up will require substant.al elTort over a number of years. The
$80,547,948 from the Mitsubishi Bank that support $75 overall costs cannot be estimated at this time; however, the million pollution Control Variable Rate Debt. The Company
) Company does not anticipate that such costs will have a pays a fee of 0.3% per annum on the unused amount of the matenal adverse effect on its financial position. The Company credit. Interest rates on unreimbursed drawings under the has notified certain insurance carriers of the situation but has letters of credit are at the Federal Funds rate as defined by the not formally filed claims. The Company mtends to seek rate bank plus 0.5% per annum for up to 30 days, at the bank's recovery for any costs not recoverable from insurance.
prime rate for 31 days through one year and at the bank's Otlier - The company is involved in legal or administrative prime rate plus IN per annum for over one year.
' proceedings before various courts and agencies with respect The Company also has lines of credit totaling approxi.
to matters occurring in the ordinary course of business, some mately $29 million with commercial banki for short. term
! of which involve substantial amounts. Management believes bank borrowings. Bank borrowings under such commitments j
l that the final disposition of these proceedings will not have a have a maximum 360-day maturity from the time ofissuance, material adverse effect on the financial position of the and at the Company's option, carry an interest rate equivalent IlhnohI W er :19N9 Annualikpiri igi ks
t.
a the prime rate in effect at the time fissuance, adjusted to income t;xes are less than the amount which would be the prime rate in effect on the first day of each calendar computed by applying the statutory federal and state income quarter thereafter or at a lower rate agreed to by the banks.
tax rates to pre tax income (38.5% in 1989,38.2% in 1988, The borrowings had a weighted average interest rate of 9.8%
and 43.8% in 1957), the principal differences are as follows:
during 1939.
Yemes Ended For the years 1989,1988, and 1987, the Company had Dece ber st, short term borrowings outstanding at various times (year end 3,,
m, borrowings mature within 30 days) as follows:
(Thousacde or Douars) 19a9 19a8 198.'
CompulcJ tax expense at starviary iederal and staic mcome tax raies..
6(140,sel)
$ 102,$17 5 1 %,691 (Mituans or Dotters, except rates,
"#*' # '" h" """'
Italance at Dnember 31 ines resultmg from-Itank kuris 8 )
$ 48 Anomuwe for funds used durms
$ 19 5 $$
cimuructum, dullowed Commercial paper Chmon plam costi.....
(84318)
Teighted everage imerest Alk'*snu for fumh used rate et December 31 9.1%
9.9%
7.8%
durmg ctmstructam...
690 651 31,610 Maumum amount outstandms t ierred Chnum rmancms costs..
5,%)
22,104
%,%7*
si any month end 8 11 5120
$125 inveumem tem credii, anathmed Ch""" P '"I "' "
U'*
~~
I I
Average daily borrowings
- '"~"""
O'*)
ouinandmg durms the year
$6
$ 73 5104 Totalincome taxeso 8 (7%,108) 5 78,771 5 6s,242 Weighted everage interest rate durms the year.
9.5%
7.6%
7.3%
Combined federal and state effective income tax rates were 20.7%,29.4%, and 19.1% for the years 1989,1988, and 1987, The Company calculated the weighted average interest rates respectively. Investment tax credit carryforwards, unrecord.
by dividing the mterest expense during the period for such ed at December 31, 1989, were approximately $44 million borrowings by the average short term borrowings indicated and may be ut lized by the Company to reduce future income above.
tax liabilities through 1992. At December 31,1989, the Company bad approximately $200 million of net operating loss cerryforwards for tax purposes. Of this amount, $38 million and $162 million may be utilized by the Company to nduce futun ine me tax liabiities through 2003 and 2004, Note 5 - Income Taxes:
i respectively, Income taxes included in the Statements of Income The Company will not be required to adopt Statement of 4
consist of the following components:
Financial Accounting Standards No. 96 " Accounting for viers taded Income Taxes" until 1992. See discussion of this item in D'" *'"' i
Management's Discussion and Analysis on page 19.
1989 1988 19#7 i
(Thousands or Dettars)
]
'"lS",'1"'Enann, Note 6 - Facilities Ayeements:
'" ")
5' 5 d-d in iuEnNe$nkan'd" The Company and Soyland Power Cooperative, Inc.
l naucm m - manneous-(Soyland)-into which Western Illinois Power Cooperative, ;
6,m o 3.690) 64&d' inc. merged-reached a final agreement on the ownership nei......,
1maicurrent uin..
07,o7s) o s.4m o i.voo) percentages in Clinton on November 1,1989. This agree Deford tan-established an ownership in Clinton of 13,21% for Soyland.
I JNe'nIcCE*...
ti on 129.on as,702 Soyland has an investment of $450 million in the direct costs ;
niwuowa chmon riani smu....
(so,9n) of placing Clinton in commercial operation, The Company's )
ownership percentage of 86.79% is reflected in utility plant (at i 3,Ur"n'sNe'nI","d.I.I saco
<io.s2c>
rus3s nefurw Chmon cou 7,2 u 34,7m 24.vn original cost) and in accumulated depreciation on the balance,
Anoname mimmum in.
n.4oi (9,mi 0 #"
sheet, Each participant is responsible for its share of nuclear I lhmk-in revenue and opense wornmon daleren6n.
(4,009) 13,928 (4.49n fuel, ongoing cortsituction and operating and ma.mtenance 1
chmon enn 2 abanaonmem.
(2,629) 0,17n oasu costs. The Company's share of Clinton operating expenses is 20329 3J96 Take.or. pay chargn.
<si,uo) included m. the corresponding operating expenses on its snopuanns6.unngor.a,a.
income statement. See " Note 2 - Clinton Power Station" i l otal deferred inn..
0 2,419) is7.6u 7thsho for information relating to a lawsuit filed by Soyland against Dcfared investmem en credd-net.
(8,787)
(60J7n 1,2s2 Ikfared invesuaent tu credd-the Company.
$,"[,d """* N'"
The Company's net mvestment in Clinton including or,m3 AFUDC, land and related facilities at December 31,1989,is Tmanmeumem in uaa,
as.s9n too,n n i.u2 amma4 W Mg, $1 M mom hahd Nam j
- os,wa) 5 n.ni 5 68.242 costs, excluding depreciation. Agreements between the I
m f
Illinois IWer 1989 Annual Rcron (i M:
..4 t
1
' Company and Soyland provide that the Company has control deposits, as a sinking and property fund, in am:unts not to over construction and operation of the generating station, that
' exceed $6,600,000 in 1990, $7,100,000 in 1991 and 1992, the parties share electricity generated in proportion to their
$7,500,000 in 1993, and $8,750,000 in 1994. These mounts ownership interests, and that the Company will have certain are subject to reduction in accordance with the mortgage and obligations to provide replacement power to Soyland at historically have generally been rnet by pledging property certain times if the Company ceases to operate or reduces additions, output from Clinton.
During the five years after December 31,1989, the Under the provisions of a Power Coordination amounts of debt maturing annually are as follows:
Agreement between Soyland and the Company that became
, j[,$,,,
effective January 1,1985, the Company provides Soyland m.n.,m,
y,,,,
with 10.7% (372 megawatts) of electrical capacity from its m.,,
- 4..r p.n.,.;
fossil fueled generating plants through 1992,8% in 1993 and s-5 s.no s s. iso 1994, and 4% in 1995 through 2004; and transmits energy for
[,
M Soyland through the Company's transmission and subtrans-m num sam in.sm SJ"
.. mission systems, in addition to the capacity Soyland receives as an owner of Clinton. The Company is compensated with capacity ch.rges and for energy costs and variable operating These amounts exclude capital lease requirements. See
. expenses.
" Note 7 - Capital Leases."
The above bonds are secured by a first mortgage lien on s
' Note - C8pital le8SeS:
substantially all of the fixed property, franchises and rights of t... i 'ower Fuel Company (Fuel Company), which is the Company with certain minor exceptions expressly 50% owncd by the Company, was formed in January 1981 for pr vided m the mortgage securing the bonds. The remammg the purpose of leasing to the Company a portion of the balance of net bondable additions at December 31,1989, was approximately $1,431,000,000.
L nuclear fuel requirements of Clinton. Lease payments, which are equal to the Fuel Company's cost of fuel as consumed (including related fmancing costs), began in 1987 when N0te 9 - Redeemable Preferred Stock:
Clinton began pre-commercial operation. Billings under the in 1987, the Company redeemed $36 million of 11.66%
lease agreement during 1989,1988, and 1987 were $29 redeemable serial preferred stock During the five years after million, $59 million, and $27 million, respectively; including December 31, 1989, the amounts of redeemable preferred
$8 million, $8 million, and $9 million, respectively, of stock outstanding at such date, required to be redeemed at financing costs. The Company is obligated to make stated value are as follows:
subordinated loans to the Fuel Company at any time the (Thousands of Dollus) obligations of the Fuel C,ompany that are due and payable 1990
$ 10,000 exceed the funds available to the Fuel Company. The 1991 10,000 Company has an obligation for spent nuclear fuel disposal 1992 20,000 i=
costs ofleased nuclear fuel, 1993 32,000 At December 31,1989 and 1988, current obligations Th fe her under capital lease for nuclear fuel are $28,760,000 and Total
$M,000
$40,528,000, respectively, At December 31,1989 and 1988, current obligations for other property under capitalleases are
$1,699,000 and $1,535,000, respectively.
Note 10 - Common Stock and Oser the next five years projected payments under capittileases are as follows:
Retained Earnin0s:
The Company has an Automanc Reinvestment and (Thousands of Dollars)
Stock Purchase Plan and an Employees Stock Ownership -
iv90
$ 30A59 Plan (ESOP) for which at Deaud-e 31,1989,3,326,843 and
[9}
4[
40,272 shares, respectively, of common stocit were desig.
3 l
1993 33,901 nated for issuance.
1994 24,717 The Company has an Incentive Savings Plan (Piro) for Thereafter 15,599 salaried ernployees. Under the Plan, the Company matches a -
Total
$185,273 portion of the employee contributions. _The Company's matching contribution is used to purchase common stock.
Under this Plan, 45,455 shares of common stock were designated for issuance at December 31,1989.
L Note 8 - Debt Retirement Provisions' Th' ' *P'"Y ""
'"""'ive Savings Pian ror employees covered under a Collectne Bargaining Agreement.
Certain supple.. ental indentures to the Mortgage and At December 31, 1989, 69,167 shares of stock were Deed of Trus' require that the Company make annual designated for issuance.
wn Illinois IWr 1989 AnnualIktort
In February 1989, the Company terminated the Tex the participants or transferred to the participant's account it Reduction Act Stock Ownership Plan (TRASOP). Under this the Company's incentive Savings Plans at the election of the plan, Company contributions of common stock were based participants. The 72,250 unissued shares of common stock on a percentage of payroll costs. Due to the 1986 Tax Reform remaining in the plan at termination were transferred to the Act repeal of tax benefits for Company contributions,1987 Company's incentive Savings Plan for salaried employees.
was the last year the Company contributed stock to the plan.
Changes in common stock during 1989,1988, and 1987 At termination, all assets of the plan were either dit'ributed to were as follows:
im les 1987 J ares Arnount' Shares Amount' Shares Amount' Balam e brgmmng ef par......................
71 461,998 l.W9.782 68,56R.901 5 1.298,207 65,608,876 5 1,221,838 Automauc kemvestment sinisad Purchs,e Plan.
1,il7,e73 30,494 4,575,719 83.536 2.723.149 69,457
- l. SOP....
14.2 18 555 46.251 k85 33.388 856 1 R Ah0P..........
A1,647 1.262 230.434 4.6W I W.659 5.397 Intenuve $avmg51%ns.,
H,417 1.175 22.6N) 455 23.629 657 Balance end of year.
75,%8,.'41 l
I,421.210 73,463.4kt 1,389.782 68,588,901 1.29k.207
- Tiu>uwndr af dollars Under the provisions of SupplementalIndentures to the 1989 that it was in the best interest of the Company and its Company's Mortgage and Deed of Trust none of the stockholders to suspend the common stock dividend due to Company's retained earnings at December 31,1989, were the uncertainties surrounding the outcome of the appeal and rettricted with respect to the declaration of payment of the restrictions placed on earnings resulting from the March dividends. Under the Restated Articles of Incorporation, 30 ICC order. The results of the appeal of the March 30 rate common stock dividends are subject to the preferential rights order and the resuhs of the current rate request will of the holders of Preferred and Preference Stock. As determine whether the Company can continue to pay a described more fully in " Note 2 - Clinton Power Station;"
preferred stock dividend and when the Company can resume however, the Company's management determined in April payment of a common stock dividend.
Note 11 - Pension and Other Post-Employment Benefit Costs:
j The Company has defined benefit pension plans Year Ended covering all offic s and employees. Benefits are based on December ti, years of service and the employee's earnings. The Company's 1989 i988 funding policy is to contribute annually at least the mimmum (Thousands of Doll.n) amount requirtd by government funding standards, but not Actuarial preseni value of:
more than can be deducted for federalincome tax purposes.
Vesied beneni obhgation..
s 141,606 5110,263 Pension costs, a portion of which has been capitalized, for 1989,1988, and 1987 included the following components-5 124.50s Accumulated benent obhganon s 151.690 Proweted benent obbganon.
s(189,917) 5(158,186)
Plan aswts at fair value.
256,923 229.644 gg December 31, liceu of assets over propected benent obhganon....
66,986 71,458 1989 1988 1987 Unamortiied net gain.
(32,460)
(10,132)
(Thousands of Dollars)
Unrecogniicd net anci at transinon...
(59,9'io)
(64,178)
Serviec cost on benents earned Prior servwe eosts.
11,881 1,807 durmg the year.
s 9,021 5 8,225 5 8,911 Accrued pension cost meluded m Accounts Interest cost on proiccted benent Payable.
s (11,641) 5 (1,045) obhgation....
14,076 12,033 11,222 Return on plan assets....
(41,410)
Is,96s (42,713)
The plan assets consisted primarily of common stocks Net amortizauon and deferral 16,6HO (33.180) 20,1 t 0 fixed income securities, cam equivalents, and real estate. The, Total pensien cost (beneno, s (1,611>
s (3,9s73 5 ( 2,4703 actuarial present value of accumulated plan benefits at January 1,1989 and 1.auary 1,1988, were $141,934,000 and
$123,327,000, ropectively (including vested benefits of The 1989 pension cost does not include approximately
$133,759,000 and $109,749,000, respectively).
$12 million for the enhanced retirement program as more The pasion cost for 1989 and 1988 was calculated using fully discussed on the following page.
measurement dates of January 1,1989 and January 1,1988, The estimated funded status of the plans at December respectively, a discount rate of 8%%, rate ofincrease of future 31,1989 and December 31,1988, using measurement dates compensation levels of 6%, and return on assets of 9% The of September 30,1989 and September 30,1988, discount rate pension cost for 1987 was calculated using a measurement of 8%% and rate of increase of future compensation levels of date of January 1,1987, a discount rate of 8%, rate ofincrease 6%, were as follows:
of future compensation levels of 6% and return on assets of m
Illmon Iber 1989 Annual Rcrort fW n.a m
9% The Company did not make eny em h contributions 1989, representing the estimated present value of the.ast of during 1989,1988, and 1987 for the pensio I plan due to its the program.
overfunded status.
In addition, the Company provides certain health care and in 1989, the Company offered an entu need retirement life insurance benefits for substantially all active and retired ple r:m as a roccial incentive for early Ietirement to all employees. These benefits are provided through an insurance employees who n.-t certain eligibility recuirements. The company and premiums are based on actual claims offer, which has exp.' red, was accepted by 285 employees.
experience. The Company recognizes the cost of these
~ Employees who acceped the effer will re cive increased benefits as premiums are paid. Costs for 1989,1988, and pension benefits to be piid from the Company 5 pension trust 1987, net of contributions by both active and retired fund. In accordance wit.) the requirements of Statement of employees, were $12,613,000, $11,050,000, and $8,469,000, Financial Accounting Etandards No. 88 " Employers' respectively. The cost of providing those benefits for 1,360 Accounting for Settlemem3 and Curtailments of Defined retirees is not separable from the cost of providing benefits lienefit Pension Plans and for Termination llenefits," the for 4,114 active employees.
Company recorded $12 million of additional pension cost in Note 12-Segments of Business:
The Company is a public utili:y engaged in the generation, transmission, distribution and sale of electric energy, and the distribution and sale of natural gas, 1989 Itse 1987 Total
'rotal Total 1:lectric Gas Company Electric Gas Company Electric Gas Company (Tliousmode or Dollars)
(Thausands or Iktiers)
(Thousands or thitars)
Operatum infortnaten-Operaung revenues.
..l 987,999 8 324.645 $ l.112,610 949,931 $
3M.789 $ 1,284,720 910,844 $
308,679 $ 1,219,523 Operaung expenws, eutudmg prettaen La *ame tases and defirred Cimtim costs.....
757,% 0 290,229 t,047,769 746,744 299,317 1,048,061 667.519 274,190 941,709 Ikferred Chrma
~
(20,$)
(115.345)
(115,M5)
(78,264)
(78.264) costs.....
(20,484)
Pre tsa operstmg 291,029 M,416 281,449 316.532 35,472 352,004 321,589 M,489 3%6,078 income.................
Allowance for funds -
used durms cim.
structen ( AFUDC)..
2,952 240 1,892 1.165 171 3,3%
72,871 184 73,055 tkferred Cimton 11.9 %
57.820 57,820 129,167 129,167 rmerung costs......
13,9 %
Pre-tsa operstma irxorne, mcludmg AFUDC and deferred i
Chnton rmancmg c osts..........
...l 267,917 8 M,646 302,575 377,517 5 35,643 413,160 $
523.627 $
M,673 558,300 Other onceme) and deductens...
(14.712)
(60.084)
(57,083s IIterest charges....
2Jo,999 211,745 203,071 Prosisen lot mcome 19,400 106,081 122,756 ta xes...........
Dasallowed Chnton plant costs, net of mcome M 4,762 tases.........
Net trxome (kns) tiefore cumulatnt eGect of taountmg change.
(288,412) 155,4I8 289,556 Net inconw (kas) after cumuhuve eGect of accountmg change.
(208,412) 189,430 289.556 00wr informaten-Deprecianon,.........$
199,224 8 17.859 8 176,181 5
167.260 $
16.440 t 183,700 $
131.596 $
15.812 5 147,408 Capitl expenditures.,..
.8 76,174 4 20,607 I 96,7sl 5
91,996 $
23.469 $
115,465 217,921 $
19,693 $
237,614 Inbestment informatma-IJentariabic anets'......$
4.817,172 8 379,021 8 $ 216,397 5 5,M5,8B2 $
%I,337 $ 5,707,219 5.28%,930 $
300,265 5 5.586,195 Nonuuhty plani and other mvestments...
9,688 9,318 9,697 Aswis utilued for overau Company 382,882 336,551 326,842 operstems...,
Total mets....
8 5.60s,967
$ o,05),0R8
$ S.922,734
- Utility plant, nuclearfuel and acquisition adjustment (less accumulated detra-iwion and amortization), materials and supplies, unamortized deferred abandmment cost, deferred Clinton costs, pretaid and d$rred energy costs.
)
s lilinoi= lhr ;1989 Annual Report i
kb
Note 13 - Changes in Accounting:
prior nnanciai siniemems because na raimabie estimaic of Disallowances of Plent Costs-Effective January 1,1988, loss could be made.
the Company adopted FAS 90 under which a partial post. Construction Costs-EITective January 1,1988, the disallowance of plant costs by a regulatory commission must Company adopted FAS 92 under whish an allowance for be recorded as a loss when such disallowance becomes shareholders' investment can no longer be recorded for probable and a reasonable estimate can be determined, nnancial statement purposes as a component of Clinton post.
Additionally, if part of the cost is indirectly disallowed (such construction cost deferrals.
as a disallowance of return on investment of a portion of the Unbilled Revenues-Effective January 1,1988, the plant), an equivalent amount of cost must be deducted from C" ~ pany began recordmg revenue for services provided but the reported cost of the plant and recognized as a loss, As not yet billed to more closely match revenues with expenses.
discussed more fully In" Note 2-Clinton Power Station, the This change also serves to conform the Company's Company recorded a k>ss on disallowed plant costs of $451 accounting treatment with the treatment of unbilled reve.tues '
million ($346 million or $4.61 per share, net ofincome taxes) as taxable undct the Tax Reform Act of 1986. Previously, the m the first quarter of 1989. Although management believes Company recognized revenues when services were billed.
there is a reasonable possibility of reversing various aspects of Unbilled revenues represent the estimated amount customers the March 30 rate order through the appeal process,it 15 not w 11 be billed for service delivered from the time meters were possible to predict the ultimate outcome if the Company is last read to the end of the accounting period. The after tax unsuccessful,it could be required to reco *d additionallosses effect of the accountmg change for the twelve months ended estimated as of December 31, 1989, iased on current gg 39gg g g
gpgg conditions, to be up to $965 million (56)t md, lion, net of (61c per share). This increase is a combination of an increase income taxes). No loss provision for a dtallowance was of $34 million (48c per share), attributable to the cumulative recorded in the 1988 financial statemen s because no ggg g
39g g,
reasonable estimate of the loss could be made. Under ncrease of $10 million (13e per share)in the 1988 results of generally accepted accounting principles c'fective through g
g 1987, a disallowance would not have required an immediate affect cash flow, lInd this change been in effect in prior years, charge lo income unless it resuhed in a negative rate of return the Company's net income would not have been materially on the Company a investment. If the Company had adopted different from that shown m. the accompanying financial FAS 90 prior to 1988, the Company believes that no loss
"I' * '"I5' provision for a disallowance would have been required in Note 14 - Quarterly Financial Information and Common Stock Data (Unaudited):
First Quarter becond Qum.aer 1 hird Quartet i eurth Quarter 1989 gens 198 s 1988 8989 19sa lost 19ps (Thousands or Dollars F.sapt l'arnings (l.o.s) l'er Common $ hare, Common stocs 1* rices and Dividends)
Dperrimg revenues.
8127,144 5333.657
$2N0,lt9 530,h79
$191,811
$ 391.961 till,164 5288.223 Operdmg irw ome....
26,0h4 51,160 44,687 46.492 l19,948 I l4,!3k 4%,126 29,13)
Net mmme (km) behire cumulause encil of acteuntmg change.
(148,440) 211,266 (1,2 18) 25,)h) 62,429 95,936 (1.169) 5,A53 j
het mmme Ass) afict sumulame citut et i
l aucuntmg change..,
(148,44(l) 62,278 (1,2 l8) 25.164 62,421 94,936 (1,169) 5,853 l
Nei miome (km) arrhubir so comnwn ad before tumulanve clico of scuiuntmg clunge.
(197,826) 1 k.5 34 (10,624) 16.0ll 11,106 h6.55 3 (10,492)
(3.520) l Net mwmc (hisC arrikable to cummon sitd cher tumunauve eficet of accounong shange..
(197,826) 52,646 (10,624) 16.nl i 41,106 h6,5 5 3 (10,442)
( 3,% 20 >
i l.arrungs (kasi pet summon shart before sumulatne effect of aaountmg change, 8 ;4.81) 5 27 8
(.14) 23
.70 5 1 21 8
(.14)
( 05) 1.trnmss (loso per sommon share after rumulauve encci of aunumms 6hange.
5 (4.81) 76 8
(.14 )
5
.23
.70 5
1.21 8
(.14)
( 05i Common $iu. k l'rnn and Dwkk rwh thgh.
8 21 %
53%
5 16 %
5.'1 b
$ 17 %
5 20 h 4 19 %
s 20 t m -........
$ 11 %
5n%
5 11 %
$ is u 8 14 %
5 18
$ 16 5 16 %
Dnkicads Dettared.
$.66 5 66 8-
$ em 5 66 8-5.66 Quarterly earntngs (loss) per common sharc are bamt on tverghtcJ a:rrage number of shJrn outstanJang Junng the quaner and the sum of the quarwrs may not equal annual earmngs (toul per wnunon share.
l The 1989first quarter loss reflects recorJmg the prtnmon for Jualhmance of Chnten plant costs of $451 mdlwn (5346 mdhon or 5467per share, t
net ofincome latest Sec " Note 2 - Chnson 1%rr Station."
The wmmon stak n lutcJon the New York Sta k 1% hange and the.thJwest Sta k Euhange The stwk trues abow are the trucs referscJ on the Composuc Tate, There tvere 75,86hcgistmd holders ofwmmon sta k at January 10, I4W The Company's management Jetermmed in April I989 that u tws in the hat mieren of the Company and as stakholders to suspend the wmmon sta k Jrndend liknan IW.er 1989 Annualikport
!#I l
l
Selected Financial Data
- 1989 1988 1987 1986 1985 1964 1979
' Operating revenues Electrie.......................... 8 988 5
950 911 5
814 5
766 5
810 5
479 Gas...............................
325 335 309 370 401 470 273 Total operating revenues.......... 8 1,313 5 1.285 5 1.220
$ 1,184 5 1,167 5 1,280 5
752 Net income (loss) before accounting change 8 (288) $
155 290 5
293 5
240 5
235 5
91 Net income (loss) after accounting change. 8 (288) 5 189 5
290 5
293 5
240 5
235 5
91 Effective income tax rate...............
20.7%
29.4 %
19.1 %
20.5 %
26.2%
34.4 %
35.1 %
Net income (loss) applicable to common stock before accounting change 8 (326) $
118 5
252 5
256 5
207 5
210 76 Net income (loss) applicable to common stock after accounting change. 8 (326) $
152 5
252 5
256 5
207 5
210 5
76
- Earnings (loss) per comrnon share before accounting change........... 8 (4.34) $
l.66 5
3.75 5
3.98 5
3 48 5
4.02 5
2.70 Earnmgs (loss) per common share after accounting change............. 8 (4.34) 5 2.14 5
3.75 5
3.98 5
3.48 5
4.02 5
2.70 Cash dividends declared per common share............................ $
0.66 5
2.64 5
2.64 5
2.64 5
2.64 5
2.64 5
2.28 j
Dividend payout ratio (declared).........
N/A 124.3 %
70.9 %
66.7 %
761 %
66.6 %
85.4 %
flod value per common share.......... 8 20.56 5 25.80 5 26.85 5 25.79 5 24m 5 23.71 5 22.22 Price rarc mminon shares lith..
..................... $ 21 %
$ 25 %
5 31 %
5 32 5 27 %
> 23 4 5 23 %
low.............................. $ 13 %
5 16 %
$ 21 %
$ 23 %
5 21 %
5 17's 5 17 %
Tc;hted average number of common shares outstandmg during the J
period (thousands)..................
75,052 70,900 67.251 64,503 59,619 42,315 27,980 Total asse ts"...................... 8 5,609 5 6,053 5 5,923 5 5,623 5 4,894
! 4,084 5 2,215 Capitahzation Common stock equity.............. 8 1,554 5 1,896 5
1.M 2 5 1,692 5 1,539 5 1,337 5
655 Preferred stock.....................
315 315 315 315 315 265 215 Redeemable preferred stock..........
160 160 160 196 86 86 long. term debt"............
2,352 2,341 2.279 2.246 2,013 1,621 867 Total capitalization"............. 8 4,381 5 4.712 5 4,596 5 4.449 5 3,953 5 3.309 5 1,737 Embedded cost oflong. term debt........
9.4%
9,5%
9.3%
9.1%
10 0%
10.1%
7.8%
Retained earnings..................... $
143 5
518 5
555 5
481 5
399 5
351 169 Capital expendnures................. 8 97 5
115 238 5
706 5
870 5
553 5
292 i
Cash flows from operations........... $
224 5
225 5
251 5
246 5
319 5
265 5
146 l
Al'UDC as a percent of carnings
. applicable to common stock...........
N/A 40.3%
80.3 %
85.5 %
78.2 %
56.6 %
$1.2%
Return on average common equity.....
(18.9)%
8.1%
14.3 %
15.9 %
14.4 %
17.0 %
12.5 %
Ratio of earnings to fixed charges"*.....
(0.52) 1.83 2.51 2.57 2.66 3.15 3.15
'o' Millions of dollars except earnings (loss) per common share, cash dividrnds declared per common share, book value per common share, and price range of common shares.
i C5 Resta:ed for the effect of capitalized nuclear fuellease.
3 l
(" The ratio of carnings to 0xed charges represents the number of times that earnings before income taxes and fixed charges cover the fixed 1
l charges. Earnings used in the calculation of the above ratios include alkmance for funds used during construction and deferred Clinton fmancing costs and are before the deduction ofirrome taxes and 0xed charges that include interest on long. term debt, related amortization of debt discount, premium and expense, other interest, and that portion of rent expense that is estimated to be representative of the interest component. Earnings available for 0xed charges excludes the cumulative eftect as of January 1,1988 of accruing unbilled revenues. See
Note 13-Changes in Accounting." The ratio of c rnings to 0xed charges for 1989 of(0.52) indicates that earnings are inadequate to cover fixed charges. The dollar amount of the coverage deficiency for 1989 is approximately 5375 million. Excluding the loss on disallowed plant costs of $451 million ($346 milhon, net of income taxes) recorded in the Drst quarter of 1989, the ratio of earnings to fixed charges would have been 1.31 for 1989.
- thnoislWr hb AnnualIkport L*)
m Selected Statistics i.
i.
im i.
i.
i979 e
[
Electric Sales in KWH (Millions)
Residential.........................
4,283 4,411 4.241 4,198 3,927 3,977
- 3,737 Commercial.......................
2,962 2,938 2,862 2,821 2,706 2,698 2,408 Ind ustrial..........................
7,653 7,415 7,323 7,341 6,933 6,968 6,739 Other.............
331 338 322 320 315 311 283 Sales. ultimate consumers...........
15,211 15,102 14,748 14,680 13,881 13,954 13,167 Rural cooperatives, municipal and other utihties'.................... _ 610 626 5R8 555 546 1,511 1,059 d5 728
_ 1336 th235 14,427 l$,465 14g Total electric sales.............
J 8j4 4
Electric Revenues (Millions)
.61 Residential......................... $
373 373 352 293 276 279 Comrnercial........................
225 215 209 187 180 179 105 I nd u st rial..........................
339 312 325 290 277 277 174 O t he r.............................
22 21 20 17 16 16 8
Revenues. ultimate consumers.......
959 921 906 787 749 751 448 Rural cooperatives, municipal and other utihtics'....................
13 24 24 22 21 54 28 Miscellaneous......................
0 5
(19) 5 (4) 5 3
Total electric revenues............. $
9HH 950 5
911 5
E14 766 5
810
'5 479 Can Sales in Therms (Millions)
Residential...,....................
379 367 332 357 365 399 465 Commercial.......................
149 148 137 161 166 183 193 s
i nd u s t rial..........................
114 154 96 198 136 230 3NI Sales ultimate consumers...........
642 669 565 716 667 812 1,039 Transportation of customer owned gas.,
265 235 327 253 297 188 Total gas sold and transported.......
907 904 892 969 964 1,000 1,039 Interdepartmental sales.............
10 9
5 l
1 1
13 Total gas delivered...............
917 913 897 970 965 1,001 J 5j C:s Revenues (Millions)
Residential........................ $
201 207 192 5
206 5
228 5
248 126 Co mme r cial.......................
68 71 66 78 89 99 49 l
I nd us t r ial.........................
46 48 34 73 68 110 95 Sales.ultimete consumers.........
315 326 292 357 3*$
457 270 Tramportation of customer owned gas..
11 13 15 11 14 12 Interdepartmentai revenues...........
3 2
1 3
Miscellaneous......................
( 4)
( 6)
I 2
2 1
Total gas revs nues.............. 8 325 5
335 5
309 5
370 401 5
470 5
273 System peak demand (native load)in kw (thousands)*...........
3,245 3,508 3,083 "
3,176 2,929 3 371 3,046 Firm peak demand (native load)in kw (thousands)*...
3,009 3,077 2,923
2,949 2,771 3,217 3,017 Net generating capability in kw (thousands)..................
3,885 3.938 3,400 3,397 3,424 3,774 3,790 Electric customers (end of year)..
548,726 546,431 542,836 540,595 537,047 533,352 516,858 Gas customers (end of year).
386,960 385,336 384,091 383,201 382,442 381,710 377,685 Employees (end of year).......
4,242 4,663 4,616 4,593 4,550 4,236 3,897
!kginning in 1985, peak demands haw decreased compared to prior years due to the Power Coordmation Agreement between Illinois Powe Company and Soyland Power Cooperative, Inc. Sales to Soyland are now classified as power interchanged. net rather than electric revenues.
C* System peak and firm peak demsnd for 1987 did not occur on the same hour.
IlhnoisIwer !!h9 Annualikpri
?n!
bt.
i MNi;Q' Amuel Meeting depending upon the state of residence. Con act 4
I The annual meeting of stockholders will Shatcholder Senices for more information.
be held at 10:00 a.m. or bdnesday, April 11, Facept for shares held in the Automate 1990, at the Company's headquarters,5(O Reinvestment and Stock Purchase Plan, llEC
' pggggg g '
' South 27th Street, Decatur, Illinois 62525. A limer does not buy or sell its mvn securities.
Ossedlue WRese
proxy statement will be mailed to stockholders Such transactions must be handled through a
$00 SM M Su on or about March 8,1990.
registered securities deales.
ggy;gg Phor.c(217)424 6600l gwek CertMosh Repbcomed f
- lilinois Ibweri common stock is listed on Ib replace lost, stolen or destroyed stock j
the New Wrk Stock Exch.mge and the Midwest certificates, notify out transfer agent in writing.
[
hedheMarResedenW(
Stock Exchange. The ofncial New Wrk Stock The cost is appnaimately two pera ni of the WuMeadNeede @ ";
4 lixchange symbol is *lPC" but the Company's market value of the stock being replaced.
- 5
,3 common stock is also listed in the newspaper l#
I under *lllPwr.-
Change of Ahlross y.
Requests for uderss change must be
,W 1ax intennstion submitted in writing i nd should include old
-F m
Illinois Ibwer estimates that 100 percent of and new addresses, ex {ct name(s)in which
[
g the dividends paid to stockholders in 1989 are stock is registered. So ial Security or tas 0
,y
. Patricia E Perkm,.s, fully taxable as dividend income for Federal identification numbe, on the account, and >uur Illinois Ibwer accou,t number. An address Supenisor-Sharehokler Serv,ces,
i income Tax purpmes.
The Company is required to send all change card is ma.ed quarterly.
- Ilknms Power Companyj f[V4 r
5% South 27th Street L
.y hwamr,Emms62$ "{' y registered stockholders a Form 1099 DIY in January showing the dividends paid during Duplicate Mailings F'
the previous year.
Ilecause of a slight ditTerence in suur
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name, addrvss or tax identification number, we
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InvesterReidlene llegistration may have more than one account tbr >uu. We k
.a Upon receipt of uur stock certincates, will be happy to consolidate such accounts
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please verify that the names are correct. If any upon written request signed by all registered h,
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i part of the registration is in ermr, contact owners of the stock.
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E V o-Shareholder Services for assistance.
Automatic fleiavestment and I'
g UM. '* 9
.r a Transfer Agent and Registrar Stock Purchase Plan L
.. Michael R. Heneghani
- g Continental llank N. A, Wu may automatically reinvest suur cash "C*r Investor Relations,
g Shareholder Services Division dividends from common and preferred stock in I
9'lhnm. Power Company.
231 South 1.aSalle Street new shares of Illinois Ibwer common stock g
I s
500 South 27th Streett '
'q Chicago, Illinois 60693 through the Automatic Reinvestment r.nd Stock catur,Illmots 62525 ;
Purchase Plan. The common shares will be e
' Phone (217)424 871$ ' y; h[
Transfer or Sale of Stock purchased at 95 percent of the average market value n the investment date. Through an
% transfer stock or to change the registra-pti n I cash investment featuw, stockholders This report andf,
tion; send the stock certi6cate along with a may purchase additional shares of common
% the financialstatements[ '
transminalletter to our transfer agent.The 7
stock at 100 percent of the average market b ' contained herein are submitted ? '
certificate must be endorsed on the back exactly as the name(s) appears on the face of pu, suNut m hmaations set forth in the
' fd the generalinformation of the 4
IId" P"'P"**' whether or not they reinvest b. stockholders of the Com'pany aC i "
the certificate and the signature (s) reust be dividends on the.ir ceruficated shares. Toere f ? such and are not intended to; guaranteed by a bank or a stock broker.
~
am no bmkerage commissions or service induce, or to be used in,
' We recornmend the mailing be insured for charges for shares purchased through the Plan.
connection with, any sale or w twu percent of the market value of the stock to if >uu hold certi6 cates in suur own name, purchase of secui;ities?
cover certi6eate replacement should it be lost rather than through a broker,3uu are eligible to
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o in the mail.
particip te in the Plan. Contact Shareholder The requirements and documentatbn Services f r more mform tion.
m, necessary to transfer stock from an estate vary
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Agamel Meeting depending upon the state of residence. Contaet p
m The annual meeting of stockholders will Sharehelder Services for more information.
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be held at 10:00 a.m. on Wednesday, April II, Incept for sharts held in the Automatic
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1990, at the Company's headquarters,500 Reimestment and Stock Purchase Plan, Illinois i
W and EsseutseWRees '
South 27th Street, Decatur, Illinois 62525. A limvr does not buy or sell its men securities.
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proxy statement will be mailed to stockholders Such transactions must be handled through a
- 500 South 27th Street J
on or about March 8,1990.
registered securities dealer.
Decatur, Illinois 62525 L
Phone (217)424 6600 Meek Eschenge Ustings Certificate Replacement lilinois l\\mtr's common stock is listed on
'Ib replace losh stolen or destm>vd stock L[
g,ggggg, ( % andi the New Wrk Stock I'xchange and the Midwest cutificates, notify our transfer agent in writing.
Stock Exchange. The official New Wrk Stock The cost is approximately two percent of the l
WWWeedWebushg W w.<
AQ lhchange symbol is *lPC" but the Company's market value of the stock being replaced.
E common stock is also listed in the newspaper i
under "IllPwr.-
Change of Address l_
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Requests for address change must be
[
ha latonnation submitted in writing anJ should include old 1
lilinois l\\mtr estimates that 100 percent of and new addresses, exact name(s)in which l
tne dividends paid to stockholders in 1989 are stock is registered, Social Security or tax L
I,aincta E. Perk,ms:
fully taxable as dividend income for Federal identification number on the account, and suur income'liix purpo es.
Illinois limrt account number. An address
! supemsor-Shareholder Sem,ees The Company is required to send all change card is mailed quarterly,
}
Illmms Power Company 4
N N
registered stockholders a Form 1099 DIV i
ca n
in January shtming the dividends paid during Duplicate Mallings j
the previous year.
llecause of a slight dif ference in >uur heelerRelellens name, address or tax identi6 cation number, we
[J Registration may have more than one account for >uu. We L
o Upon receipt of >uur stock certincates, will be happy to consolidate such accounts
+
please verify that the names are correct. If any upon written request signed by all registered j/r part of the registration is in ermr, contact owners of the stock.
4 Shareholder Services for assistance.
y Automatic Reinvestment and
["
Transfer Atent and Registrar Stock Purchase Plan Michael R. !!cneshan -
Continentalllank N.A.
Wu may automatically reinvest >uur cash e
. Director-Investor Relations' -
Sharehokler Services Division dividenJs from common and preferred stock in 28
- P""F 231 South 1.aSalle Street new shares ofIllinois timer common stock 3
Chicago, Illinois 60693 through the Automatic Reimrstment and Stock pecamr, Mm.
m 62525 Purchase Plan. The common shares will be lhone(217)424 8715; Transfer or Sale of Stock purchased at 95 percent of the average market nlue n the ir. vestment date. Thmugh an To transfer stock or to change the registra-ptional cash investment feamre, stockholders This report and '
tion, send the stock eertiGeate along with a may purchase adJitional shares of common
= the financial statementsL transmittal letter to out transfer ugent. The stock at 100 percent of the average market
. ' contained herein tire submitted :
certi6cate must be endorsed on the back ue, sweet to limitations set forth m the
- for the general information of the -
exactiv as the name(s) appears on the face of the ecititicate and the signature (s) must be
'" E*'P#C**' w hether or not they remvest
- stockholders of the Company as dividends on the.ir certificated shares. There
. such and are not intended to -
guaranteed by a bank or a stock broker.
are n brokerage commissions or service
' induce, or to be used in We recommend the mailing be insured for charges for shares purchased thmugh the Plan.
connection with, any sale or two percent of the market alue of the stock to
" }""
'#"$#8'#* I" }""' " " *"'
_ purch:se of securities.
unrr certificate replacement should it be lost rather than through a broker, >uu are eligible to in the mail.
participate in the Plan. Contact Shareholder The requirements and documentation erdces for more information.
necessary to transfer stock from an estate vary
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