ML20062J825

Requests on Behalf of Util That NRC Give Consent to Proposed Restructuring by Which Util Will Become Wholly Owned Subsidiary of New Holding Company,Currently Named IP Holding Co,Or in Alternative,Disclaim Jurisdiction,Prior to 931214

ML20062J825
Person / Time
Site:	Clinton
Issue date:	11/11/1993
From:	Mark Miller ILLINOIS POWER CO., SIDLEY & AUSTIN
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
NUDOCS 9311170350
Download: ML20062J825 (105)

Text

{{#Wiki_filter:. SInLEY & ATJSTIN ( A PAMTNE MMmP ENCIEDING PHOFENSION AI. CORPORANONS ONE FInsr NATIONAL PUJ.A CIUCAGO, ILLINOIS 60003 l ws Orus 9g TrLnrnONE 012: 853-7000 SIN"*P "E NEW YORK Tm 054304 WASHINGTON, nn FACSIMILE 312:833-7030 roxyo F Ot:N n e n 18 0 0 WRTTER's DIRECT N1'MBER 312: 853-2666 November 11, 1993 l 10 CFR S 50.80 I U.S. Nuclear Regulatory Commission ATTN: Document Control Desk i Washington, D.C. 20555 i RE: Clinton Power Station, Unit 1 (Docket 50-461)

Dear Commissioners:

We are counsel to Illinois Power Company ("IP") in connection with the proposed corporate restructuring described in this letter. On February 9, 1994, the shareholders of IP are scheduled to vote on a proposed restructuring plan by which IP will become a wholly owned subsidiary of a new balding company which currently is named IP HOLDING COMPANY (" Holding Company"). If IP shareholders approve the plan, and necessary regulatory t approvals are obtained, the proposed restructuring is expected to take place on or about April 1, 1994. The restructuring will have no effect upon the management, operation and financing of IP's nuclear facilities. Pursuant to 10 CFR S 50.80 and'the i Commission's practice with respect to such transactions, IP asks that you give consent to its proposed restructuring or disclaim i jurisdiction over the restructuring. In 1987, your staff consented to a corporate restructuring proposed by Consumers Power Company which was nearly identical to IP's proposed restructuring. 1. Description of the Restructuring i If IP's shareholders approve of the proposed restructuring, IP common stock will be converted in a merger, on 1 i 1600Gi s i 9311170350 931111 I"% 5 gDR ADOCK 05000461 [3 g PDR [p

4 SIDLEY & AUSTIN CIUCAGO U. S. Nuclear Regulatory Commission November 11, 1993 Page 2 a share-for-share basis, into common stock of the Holding Company. Holding Company will be the only IP common shareholder. All IP bonds and preferred stock will be unaffected, and will continue to be outstanding securities of IP. The only outstanding securities of Holding Company will be its common stock. The proposed restructuring is more fully described in the enclosed draft Preliminary Prospectus for IP Holding Company and Proxy Statement for Illinois Power Company, dated, November 15, 1993 (hereinafter referred to as " Attachment A"). 2. Effect on IP's Financial Resources The proposed restructuring will not reduce the funds available to IP to carry out activities under its operating licenses for the above-referenced nuclear plants. Under legislation enacted in July 1993, IP is authorized to loan the lesser amount of $10 million or to up to 2.5% of its retained earnings to the Holding Company, and any such loan must be repaid within 240 days after the day on which the restructuring occurs with interest at 10% annually. See Attachment A, pp. 13-14. After the restructuring Holding Company will also become the owner of 100% of the shares of IP Group, Inc. ("IP Group"), which is currently a wholly owned subsidiary of IP. See Attachment A, p. 14. IP Group was formed as an IP subsidiary in 1992 primarily to invest in, develop and operate independent power market projects and facilities, and to perform services in connection with the development and operation of such projects and facilities, directly or through IP Group subsidiaries. IP has invested $6.1 million in IP Group to enable it to purchase an interest in Enrici Power Marketing Limited, which owns rights to sell a portion of the capacity of a cogeneration plant in England. IP has obtained approval from the Illinois Commission to invest up to an additional $75 million in IP Group to enable it to participate in additional independent power market projects and facilities. It is not anticipated that there will be any material. changes between the draft Preliminary Prospectus enclosed with this letter and the Preliminary Prospectus as filed on November 15. In the event such changes do occur, all addressees will be notified by fax no later than Tuesday, November 16, 1993.

SIDLEY & AUSTIN CHICAGO l U. S. Nuclear Regulatory Commission November 11, 1993 Page 3 1 IP's utility operations will continue to be the primary source of revenue and income for IP, and will also constitute the majority of the Holding Company's earning power for the foreseeable future. The Federal Energy Regulatory Commission will continue to regulate IP's wholesale electric rates. The l Illinois Commerce Commission will retain jurisdiction over IP's retail electric rates. See Attachment A, p. 12. I The proposed restructuring, including any Holding Company investments in non-utility affiliates, will not affect { IP's ability to meet future capital requirements related to its l nuclear units through the revenues produced by its utility l business and by the issuance of debt and other securities.

Thus, no change in the amount of revenues, the source of funds, or the ability to obtain the funds necessary to operate IP's nuclear l

plants will result from the restructuring.- To assist you in reviewing the financial aspects of the restructuring, there is enclosed, as Attachment B, a copy of IP's Annual Report and Form 10-K for the year ended December 31, 1992. l 3. Effect on IP Management The restructuring will have no effect on the management of IP's utility operations. Officer responsibilities at the Holding Company level will have no direct effect on Nuclear Operations. See Attachment A, p. 12. 1 I 4. Citizenship of Licensee { The proposed restructuring will not result in IP becoming owned, controlled or dominated by an alien, a foreign corporation, or a foreign government.. Under the restructuring proposal, the present common shareholders of IP will become the common shareholders of Holding Company in the same proportion in which they currently hold IP common stock. Holding Company will become the sole holder of the common stock of IP. IP is and will remain an Illinois corporation. Holding Company, incorporated on November 12, 1993, is also an Illinois corporation. At the time the restructuring becomes effective, the Board of Directors of Holding Company will be comprised of the same persons who are currently members of IP's Board of Directors. See Attachment A, pp. 12, 18.

SIDLEY & AUSTIN CIIICAGO U. S. Nuclear Regulatory Commission November 11, 1993 Page 4 5. Conclusion l Based on the above factors, we conclude that the proposed restructuring will not effect IP's qualifications as a holder of the operating licenses for the above-named nuclear plants. The proposed restructuring is also consistent with applicable provisions of law and the Commission's regulations and orders. Accordingly, we respectfully request that you consent to the proposed restructuring, or, in the alternative, disclaim jurisdiction, as soon as practicable prior to December 14, 1993, I the date on which it is expected that the SEC will declare Holding Company's Registration Statement effective. Please alvise the undersigned if there is anything IP can do to assist you in accommodating this request. We will promptly notify you of the results of the shareholder vote on February 9, 1994. i Yours truly, j SIDLEY & AUSTIN $/h? l 0 hhb a .p bict +- l Michael I. Miller Enclosures i CC: J.E. Dyer, Office of Nuclear Reactor Regulation J.B. Martin, Regional Administrator, Region 3 Douglas Pickett, Project Manager, Office of Nuclear Reactor j Regulation Brent Clayton, Project Manager, Region 3 I Joseph Rutberg, Esq. l i i 4 3 i iu

i i I i SIDLEY & AUSTIN CIUCAGO U. S. Nuclear Regulatory Commission November 11, 1993 Page 5 i s I i l STATE OF ILLINOIS) 'i ) COOK COUNTY ) The undersigned hereby affirms to the best of his knowledge and belief that the information contained in the i foregoing application is truthful and accurate as of the date hereof. 'YU 2 /? () / /$1 '[{luf;,9y 'L. f cKKQ l 3 Subscribed and sworn before me this //n day of

1. A.m a coq 1993.

3 v i v.') }\\QM)aw(' ll4 6/Lillzq{ j f Notary Public p -j 1 =--w__. c "OFHCIAL 5E AL'- l 9l MARGARET M. ERDELY1 1' l Notary Pubit Sut i luincis i

l My Comm ssion Emiru Jan. 10.1994 i ma%...~%q I

i 5 1 1 t i f f i f i 8 4 9 3 I l i ? .-r r.

-~ ~ Attachment A t RAILL CORPOR ATION NETWORK COMPO5fTKW $YSTEM DRASMt'$SEN f/ 11-NOV-93 Da 54 USDt6 lN634 CHI 43 93CH14$M)A48 44 ;14 MGr.5 TFAGER.PSTYLrRK7h1 B571 Igifmi cover fmr Free 14tw DD Foot DIV oD VJ R seg 1 Clr o C Chisum-14475 i i I k As filed with the Securities and Exchange Commission on November 15,1993 4 Registration No. 33 l SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-4 REGISTRATION STATEMENT Under TIIE SECURITIES ACT OF 1933 l IP HOLDING COMPANY (Exact name of registrant as speci$ed in its charter) 1 Illinois 6719 Applied For (State or otherjurisdiction of t" Primary A d.rM industrial (I.R.S. Employer i incorporation or organization) Class 15 cation Code Number) Identincation No.) 500 South 27th Street Leah Manning Stetzner s Decatur, Ilhnois 62525-1805 Secretary and Treasurer (217) 424-6600 IP Holding Company (Address, including zip code, and telephone 500 South 27th Street number. including area code, of registrant's Decatur, Illinois 62525-1805 principal executive offices) (217) 424-6600 (Name, address, including zip code, and telephone number, includmg area code, of ( agent for service) Copics to: c R. TODD VIEREGG, PC. Sidley & Austin One First National Plaza i Chicago, Illinois 60603 312-853-7470 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration l Statement becomes effective and all other conditions to the merger (the " Merger") ofIP Merging Corporatinn with and into Illinois Power Company pursuant to the Merger Agreement described in the enclosed Proxy Statement / Pros;woctus have been satis 5ed or waived. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. O } CAlfULATION OF REGISTRATION FEE l Proposed Maramum Proposed Maumum Amount to be Offering Price Per Aggregate Amoest of i T1ue of Each Class of hecertte 30 tw Registered kegistered telt (1) Offering Prue (1) Registrauen fee Common Stock without par value. 79,100,000 $21.625 $1,710,537,500 $589,841 [ shares (1) Estimated pursuant to Rule 457(f)(1) of the Securities Act of 1933, based upon the market value of the shares of Elinois Power Company Common Stock to be converted in the Merger ($21.625 per share, which is the average of 1 the high and low sales prices of a share ofIllinois Power Company Common Stock on the New York Stock Exchange, Inc. Composite Tepe on November 9,1993). [ { 2 l The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specincally states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall became effective on such date as the Commission, acting pursuant to said Section 8(a), j may determine. . The number of shares of IP Holding Company Common Stock to be issued in the conversion ofIllinois Power I Company Commen Stock in the merger described herein cannot be precisely determined at the time this Registration l Statement becomes efTective because shares of Ulinois Power Company Common Stock may be issued thereafter and t until the effective time of the merger under the D!inois Power Company Automatic Reinvestment and Stock Purchase i Plan; Employee Stock Ownership Plan; Incentive Savings Plan; and Incentive Savings Plan for Employees Covered by a Collective Bar gaining Agreement. This Registration Statement covers a number of shares ofIP Holding Compe.ny i Common Stock which is estimated to be at least as large as the number of shares of Illinois Power Company Common l Stock which is expected to be outstanding at the e*fective time of the merger. See the undertaking in Item 22(4) in Part U of this Registration Statement. [ i sCH14874 ILLINOIS POWER S.4 Proof 2 arrill Corporation / Chicago (312) 930-2700 (JSERS:[P3634CHt93.93CHl4874] A4874A.;14 l l k T f

~i i JERRILL CORPOR ATION NETWORK COMPOSITION 5YSTEM DRASMUS$EN # ll-NOW93 Da M L'SER61P3f.34CH193 93CH1484;fb48MA. 22 ) M AGES fPAGER PSTYtf.51KFM 195T.1 perifmt EIC ARTEST IVT Frec 7W)DM/ oD Fom otw oD VJ R Seq l Car o C OAmm.1944 l t t l IP 11olding Company Cross Reference Sheet Tarsuant to item SDI(b) of Regulation S-K [ term S treen que Captlen Prouw Sistement' Prospectus A. Information about the Tranction l Forepart of Registrat on Statement and Outside 3 i 1. Front Cover Page of Prospectus. Facing Page of Registration i j Statement; Cross Reference Sheet, i Outside Front Cover Page of Prospectus 2. inside Front and Outside Back Caver Pages of Prospectus Available Information; Incorporation of Certain Documents by Reference; Table of Contents 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information. Summary of Restructuring Proposal; Outside Front Cover Page of Prospectus ( Terms of the Transaction.. Summary of Restructuring Proposal; Corporation Restructuririg Plan 5. Pro Forma FinancialInformation Not Applicable 6. Material Contacts with the Company Being Not Applicable Acquired. 7. Additional Information Required for Reofrering by Persons and Parties Deemed to be Underwriters Not Applicable 8. Interests of Named Experts and Counse!. legal Matters; Experts 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.. Not Applicable l IL Information about the Registrant

10. Information with Respect to S-3 Registrants.

Not Applicable i

11. Incorporation of Certain Information by Reference Not Applicable i

12. Information with Respect to S-2 or S-3 Registrants Not Applicable

13. Incorporation of Certain Information by Reference Not Applicable 14.

Information with Respect to Registrants Other l Than S-3 or S-2 Registrants.. Not Applicable i C. Inforr ah, i about the Company Being Acqalred i

15. Inft. nation with Respat to S-3 Companies.

. Incorporation of Certain Documents by Reference I

16. In armation with Respect to S-2 or S-3 Companies Not Applicable

17. Information with Respect to Companies Other thar, S-2 and S-3 Companies..

Not Applicable D. Voting and Management Information l

18. Information if Proxies, Consents or Authorizations j

are to be Sohcited. Incorporation of Certain Documents by Reference; Voting; Outstanding i Voting Securities; Corporate I Restructuring Plan; Rights of l Dissenting Shareholders; j Management;l-roxy Statement; Other Metters i

19. Information if Proxies, Consents or Authorizations j

are not to be Solicited or in an Exchange Offer Not Applicable 1 -I 9 4 33CHl4874 ILt.INOIS POWER S-4 Proof 2 Aerrill Corporation / Chicago (312) 933-2700 tlSER6:[P3634CHl93.93CHl4874]B4874 A.;22 4 4

.m i i m t [ WRRIL1COKPOR ATION NETWORK COMPO1 MON SYSTEM DRARMUSSEN il ll.NOV.9) D4 54 USER 6.!PM34CHl93 93CH14874't\\4s74B. 5 wActs tPAGER PSTY1.ES)Kf%I BST I paritmi E!XRRTE$TFMT Fw %DDM/ oD Foce CD/ oD VJ R 5eq 2 Cir 0 C CWwn: 11575 ? I i [ letterhead ofIlHnois Power Company] i To the Shareholders of Blinois Power Company: j A special meeting of the shareholders ofIllinois Power Company (" Illinois Power") will be held on February 9,1994, to act upon a proposed corporate restructuring in which Illinois Power will become a subsidiary of a new holding company named "IP Holding Company" (" Holding Company"), and to transact such other business as may properly come before the meeting. l The directors of Blinois Power will also become the directors of Holding Company when tLe restructuring is effective, and they will thereafter serve as the directors of both companies. If you i approve the restructuring, you will be considered also to have ratified the election of such persons as i the directors of Holdmg Company. l The Elinois Power Board of Directors unanimmly be!ieves that the proposed restructuring into a holding company system is beneScial because. will permit affiliates of Illinois Power to take advantage of new competitive non-utility business opportunities without the prior approval of, or regulation by, the Blinois Commerce Commission.The restructuring will facilitate financial flexibility, administrative efSciency and enhance managerial accountability for separate business activities. The i holding company system stmeture will insulate the Blinois Power utility business from the risks of the non-utility businesses of its afliliates, and should increase the energy-related expertise, knowledge .{ - and skills of system employees. i To amomplish the restructuring. Holding Company has been organized. The name "IP Holding Company" will be changed prior to the effectiveness of the restructuring to a permanent name which has not yet been determined. It is proposed that outstanding shares of Hlinois Power Common Stock be converted in a merger, on a share-for-share basis, into shares of Holding Company Common Stock. i J, As a result, the holders of Hlinois Power Common Stock will become the owners of Holding Company Common Stock, and Holding Company will become the owner of the Illinois Power Comms a Stock. - [ The outstanding shares of Ulinois Power Preferred Stock will continue to be outstanding securities of Elinois Power after the merger. [ In addition, it is contemplated that following the merger, Illinois Power will transfer ownership of certain ofits non-utility subsidiaries to Holding Company. If the restructuring is effected, it will not be necessary for you to turn in your Ulinois Power Common Stock certincates in exchange for Holding Company Common Stock certificates. The certi6-j i cates for Elinois Tower Common Stock you now hold will automatically represent shares of Holding Company Common Stock. New certi5 cates bearing the name "IP Holding Company" will be issued in ~! the future as certi5 cates for presently outstanding shares of Illinois Power Common Stock are presented for transfer. Even ifyou now expect to attend the special meeting, please sign, date and return the accompany-ing proxy in the enclosed addressed, postage. paid envelope. (You may revoke your proxy at any time g before it is exercised, provided that you so notify the Secretary of Elinois Power in writing before it is exercised). 3 i Sincerely, i 1 l r Larry D. Haab, l Chai. man, Prnident } and Chief Executive 0,9icer { f k t 33CHl4874 ILUNOtS POWER S-4 Proof 2 derrill Corporetton/ Chicago (312) 930-2700 USER 6:[P3634CHl93.93CH14874}B4874B.;$ i ? ~

~ -- b t i 1ERRILLCORPOR AT10N NET %I*K COMPOSITION SYSTEM DRASMU$$EN // 11 NOV.93 08.54 U5f26 fPMMCHN3 93CH&4874}B4t040.10 st ACES !PAGrJt PSTYLf31KFM B57.1 popfnn EDGARTTSTMf7 F,ec 1270t*V oD Fact oD/ DD VJ R Seq 3 Ctr o C Chasma M456 j e i I ILLINOIS POWER COMPAM' f NOTICE OF SPECIAL MEERNG OF SHAREHOLDERS I To Be llend February 9,1994 l To the Preferred and Common Shareholders ofIllinois Power Company: l 3 NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Blinois Power Company will be held at its offices,500 South 27th Street, Decatur, Illinois 62525, on Wednesday, February 9, i 1994, at 10:00 A.M., for the purpose of considering the approval of an Agreement and Plan ofMerger, a copy of which is attached as Exhibit A to the accompanying Proxy Statement, pursuant to which IP Merging Corporation, a subsidiary ofIP Holdmg Company (" Holding Company") will be merged into Illinois I ower, with the result that Illinois Power will become a subsidiary of Holding Company, and i the holders of Illinois Power Common Stock will become the holders of Holdmg Company Common Stock, as described in the accompanying Proxy Statement, and transacting such other business as may properly come before the meeting or any adjournment thereof l Shareholders of record at the close of business on December 13,1993 will be entitled to receive notice of and to vote at the Special Meeting. By Order of the Board of Directors, LEAH MANNING STETZNER, vice President, General Counsel and Corporate Secretary ~l .I Decatur, Elinois December 29,1993 l l IMPORTANT 4 t Illinois Power Company invites each of its approximately 51,000 shareholders to attend the Special Meeting. If you are unable to be present at the meeting, it is important that you, whether the owner of one or many shares, sign and return the enclosed proxy. An entdope on which postage will be paid by Elinois Power is enclosed for that purpose. Returning your executed proxy will make certain you are represented at the Special Meeting. Your cooperation will be greatly appreciated. I i I e u I i iCHl4874 ILLINOIS POWER S-4 Proof 2 erritt Corporation / Chicago (312) 930-2700 USER 6:[P3634CHl93.93CHl4874]B4874C.;10 d i j 4 4

EJtRILL CORPOR ATION NETWORK COMPOSITION SYSTT.M DRASMUSSEN # ll-NOV-93 De $4 USER 6 [P3634CH193 93CH14574)C4574A.17 1 AGEa TPAGER PSTY115)KF%1 B57.1 pegsfan redtemng inn im 190DM/ OD Foot DD/ CD VJ ft Seq I C1r 0 C Clisum 22951 j% PRELI51INARY PROSPECTUS AND PROXY STATE 31ENT DATED F.Ji1 NOVE31BER 15,1993 N,2k i= PROSPECTUS FOR lll IP HOLDING COMPANY 13E PROXY STATEMENT FOR E55 ILLINOIS POWER COMPANY e:s =s = s Common Stock 15 & f.% 8 Zg H E This Prospectus, including the Proxy Statement forming a part hereof, { k has been prepared in connection with the issuance of up to 79,100,000 E j shares of Common Stock without par value ofIP Holding Company, an %j,{ Illinois corporation (" Holding Company"), upon the consummation and under certain stock plans subsequent to, the proposed merger ofIP E Merging Corporation, an Illinois corporation (" Merging Corp.") which is f j$ a wholly owned subsidiary of Holding Company, with and into Illinois 3 {13Ej Power Company, an Illinois corporation (" Illinois Power"). 1 At the effective time of such merger, each share ofIllinois Power j j! Common Stock without par value will automatically be converted into E and, without action on the part of the holder thereof, become one share of {j8 pg Common Stock without par value of Holding Company.

• E~

kli! 52i TnESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED IlY TIIE E!R SECURITIES AND EXCHANGE COhihilSSION OR ANY STATE SECURITIES g}E COhthuSSION NOR ILAS TiiE SECURITIES AND EXCIIANGE COhihilSSION OR t p;.,, j ANY STATE SECURmES C0515flSSION PASSED UPON TIIE ACCURACY j OR ADEQUACY OF TEIIS PROSPECTUS. ANY REPRESENTATION TO i THE CONTRARY IS A CRlhilNAL OITENSE. 5EC The executive offices of Holding Company are located at 500 South M5 27th Street, Decatur, Illinois 62525-1805, and its telephone number at ]g2E such address is (217) 424-6600. v,, 23E E$ % =E The date of this Prospectus and Proxy Statement is December ,1993. m 130Hl4874 ILUNOIS POWER S4 Proof 2 Aerrill Corporatlon Chicego (312) 930-2700 USER 6:{P3634CHf93.93CHl4878]C4B74A.;17

_m-1 err.!LL CORPOR ATION NETWORK cOMPO5fDON SYSTEM DRASMUS$EN // II-NOV.93 bs 54 t'SER6 [PM4 CHI 93 93CHl4874)C4874B.,8 A&GES iPACER PST*'t.E$)KFM B1T.1 pagsfu ndhemng fmt Free 154oDM/ oD Funi DDI oD V)R 5ee 2 Ctr o C CtAsum 12:45 This Prospectus and Proxy Statement incorporates documents by reference which are not presented herein or delivered herraith.These documents are a*ailable upon request from 14ah Manning Stetzner, Vice President, Gent-I Counsel and Corporate Secretary, Illinois Power Company,500 South 27th Street, Decatur, Illinois 625251805 (telephone number 217-424-6600). In order to ensure timely delivery of the l documents, any request should be made by February 4,1994. AVAllABLE INFORh1AT10N Illinois Power is subject to the informational requirements of the Securities and Exchange Act of l 1934, as amended ("1934 Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission ("SEC"). Reports, proxy statements and other information i fded by Elinois Power can be inspected and copied at t'se public reference facilities maintained by the SEC at 450 Fifth Street, N.W Washington, D.C. 20549, and at its Regional Offices located at North-western Atrium Center,500 West Madison Street, Chicago,IL 60661 and Seven World Trade Center, New York, NY 10048. Copies of such material can be obtained from the Public Reference Section of the r SEC, %shington, D.C. 20549 at prescribed rates. In addition, reports, proxy statements and other information concerni.ig Elinois Power may be inspected at the ofEces of the New York Stock Ex- -i change,20 Broad Street, New York, NY and the Chicago Stock Exchange,440 South LaSalle Street, Chicago,IL, the exchanges on which certain of Blinois Power's securities are listed. Holding Company has Sled with the SEC a Registration Statement on Form S-4 under the Securities Act with respect to the shares of Holding Company common stock without par value (" Holding Company Common Stock") ofTered hereby. This Prospectus and Proxy Statement does not contain all of the information set forth in such Registration Statement, certain parts of which are omitted in accordance with the rales and regulations of the SEC. For further information, reference is made to such Registration Statement. i i Holding Company will become subject to the same informational requirements as Illinois Power following the merger described irhis Prospectus and Proxy Statement, and will file reports, proxy statements and other information with the SEC in accordance with the 1934 Act. Such reports will contain financial information that has been examined and reported upon, with an opinion expressed } by an independent public or certi6ed public accountant. 4 t No person has been authorized to give any information or to make any representation not contained in this Prospectus and Pwxy Statement in connection with the offer contained in this Prospectus and Proxy Statement, and. if given or made, such information or representation must not be relied upon as having been authorized. f Neither the delivery of this Prospectus and Proxy Statement nor any distribution of shares of l Holding Company Common Stock made hereunder shall, under any circumstances, create any impli-cation that there has been any change in the affairs of Ulinois Power or Holding Company since the respective dates as of which information is g2ven herem. I f I i f ? t h i 2 v i f i 3CH14874 ILLINO!S POWER S-4 Proof 2 orriti Corporation / Chicago (312) 930-2700 USER 6.[P3634CHf93.93CH14674]C4874B.;8 L

i f tERRD1CORPOR ATION FETWORK COMPO$ MON $Y$7Di DkA$MUSSEN t/13-NOv43 pa 54 L'SDt6]P304 CHI 93 93CH14R74)C4874 Bas MAGESWAGE2 PSTYLISiKrM BST.1 popfrm redhrmnr fra Fue f *RM DD fing oDI DD tJ R $cq 3 C)r o C ChLww 26304 [ .t .i b i i REGISTRATION STATEMEST This Prospectus and Proxy Statement is a prospectus delivered in compliance with the Securities .l Act of 1933, as amended ("1933 Act"), with respect to the shares of11olding Company Common Stock i' ofTered hereby. A Registration F*atement under the 1933 Act has been filed with the SEC *.th respect to the shares ofIIolding Company Common Stock offered hereby. As permitted by the rules and regulations of the SEC, this Prospectus and Proxy Statement omits certain information contained in i the Registration Statement on fue with the SEC. The omitted information can be inspected and copied at the above-described reference facilities maintained by the SEC. INCORPORATION OF CERTAIN INFORNiATION BY REFERENCE The following documents filed by Illinois Power with the SEC &ile No.13004) areincorporated l in this Prospectus and Proxy Statement by reference and made a part hereof: (a) The Illinois Power Annual Report on Form 10.K for the year ended December 31,1992 ("1992 Fo-m 10-K"); (b) The 111inois Power Current Reports on Form 8.K dated January 21,1993, February 2, [ 1993, February 8,1993, March 3,1993, March 15,1993, April 22,1993. May 14,1993, June 9, i 1993, June 9,1993, July 16,1993, September 10,1993, October 15,1993 and November,1993; and (c) the Illinois Power Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30,1993. { All documents subsequently filed by Illinois Power pursuant to Section 13(a),13(c),14 or 15(d) of j the 1934 Act, after the date of this Prospectus and Proxy Statement and prior to the termination of the offer made by this Prospectus and Proxy Statement, shall be deemed to be incorporated in this Prospectus and Proxy Statement by reference and to be a part hereof from the respective dates of i l filing of such documents. Any statement contained in a document incorporated or deemed to be i incorporated by reference in this Prospectus and Proxy Statement shall be deemed to be modified or superseded for purposes of this Prospectus and Proxy Statement to the extent that a statement } contained in this Prospectus and Proxy Statement or in any other subsequently filed document which also is or is deemed to be incorporeted by reference in this Prospectus and Proxy Statement modifies j or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus and Proxy Statement. Illinois Power will provide without charge to each person, including any beneficial owner, to whom this Prospectus and Proxy.Gatement is delivered upon written or oral request of such person, a copy of any or all of the documents that have been or may be incorporated in this Prospartus ar.d Prory Ststement by refcrcna, uther than certam exhibits to such documents. Such requests should be directed to Leah Mannir.g Stetzner, Vice President, General Counsel and Corporate Secretary, Illinois Power Company, 500 South 27th Street, Decatur, Illinois 62525-1805 (telephone number 217-424-6600). I I 4 i e l 3 i - 13CHl0870 llijNOtS POWEF4 S-4 Proof 2 Aerrill Corporstion/ Chicago (312) 930 2700 tlSERG:[P3634CHt93.93CHl4874)C4874B.;8 6

~. - _ _. untt1CORPOR ATION NETWORK COMPO$frlON SYSTEM DRA5MU$5ENis 11-NOV-93 0454 USDt6.IP%34Citte)93CHl4s74)Das74A..tl 1ACf3 lPACFR TSTYLr31KD4 B57.1 fingifnw EDGARTESTFMT Free IW1DMI oD Fant olv DD VJ R hq l Or o C Chkawn It712 h TABLE OF CONTENTS M 5 Summary of Restructuring Proposal 9 Introduction. 9 Solicitation and Revocation of Proxies.. 9 Voting...... Outstanding Voting Securities. 10 'i' Security Ownership of Certain Beneficial Owners... 10 Corporate Restructuring Plan. 11 Reasons for the Restructuring. 11 i 12 Merger Agreement Supplemental Agreement 13 l Required Regulatory Approvals..... 13 13 Ulinois Public Utilities Act... { Transfer ofIllinois Power Assets to Holding Company. 14 Dividend Policy. 15 15 l Treatment of Preferred Stock ' 15 - Amendment or Termination. Rights of Dissenting Shareholders. 16 17 Effectiveness of the Restructuring.. Exchange of Stock Certi5 cates.. 17 Federal Income Tax Consequences.. 17 Listing of Holding Company Common Stock 18 Regulation of Holding Company 18 Management.... 18 19 i Postponement of Annual Meeting Holding Company Capitel Stock.. 19 j Comparative Shareholders' Rights. 19 l Stock Plans.. 21 Transfer Agent and Registrar. 21 Elinois Power Common Stock Market Prices and Dividends. 21 Illinois Power Preferred Stock Market Information 22 l lega! Opinions. 23 Experts 23 23 l Transaction of Other Business Exhibit A - Agreement and Plan of Merger. A-1 d Exhibit B - Supplemental Agreement.. B.1 C.1 Exhibit C - Articles of Incorporation of IP Holding Company. Exhibit D - Provisions of the Blinois Business Corporation Act P. elating to Rights of D.1 l Dissenting Shareholders. l t i l i 4 5 f 4 f (3CHl4874 ILLINOIS POWER S-4 Proof 2 Aerrul CorporattorvChica00 (312) 9302700 USER 6:[P3634 CHID 3.93CHl4874]D4874 A.;11 4 m e , y

a ++ .w >-~ ~ . + = n. I f i 1ERRE 1. CORPORATION STTwoit K cuMro$rTION SYSTEM DRASMU5$EN /f 11.NOV.93 04 $4 l'$ER6 !r%)4CHt93 9)CH)4874]E4574A 27 [ d ACES [ PACER PSTYLF31KTM fist.1 perifmi EliCARTEST rMT Frw 244oDM/ OD Fswe' Oly oD VJ R See ! Ctr o C Chkum 14114 - t r i 8

SUMMARY

OF RESTRUCTURING PROPOSAL ? The following is a summan ofcertain nnformation contained or incorporated by reference in this Prospectus and Proxy Statement and is qualified in its entirety by the unore detailed information l contained or incorporated by trference herein. Proposed Restructuring Holding Company has been organized to become the holding company for, and the direct owner of, j Ilhnois Power and IP Group, Inc. ("IP Group"n. a recently formed subsidiary of Illinois Power. The formation of the holding company structure will be achieved by the merger (" Merger") of a newly formed subsidiary of Holding Company, IP Merging Corporation (" Merging Corp."), into Illinois i Power. In the Merger, the holders of Illinois Power Common Stock will become the holders of Holding Company Common Stock, and Holding Company will become the sole holder of Illincis Power Com- { mon Stock. Following the Merger, Illinois Power will transfer the stock ofIP Group to Holding Company. See " Transfer ofIllinois Power Assets to Holding Company" Holders ofIllinois Power Preferred Stock j will continue to hold such Stock following the Merger, which will not change any rights of such i holders. See " Treatment of Preferred Stock" Illinois Power is engaged in the generation, transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the State of Illinois. i IP Group was formed as an Illinois Power subsidiary in 1992 primarily to invest in, develop and i operate independent power market projects and facilities, and to perform services in connection with j the development and operation of such projects and facilities and other non-utility businesses, directly I or through IP Group subsidiaries. Holding Company will have no material assets other than stock ofits subsidiaries, w hich follow-ing the Merger will consist of all of the Illinois Power Common Stock and IP Group common stock. Holding Company will conduct no business other than the ownership of the stock ofits subsidiaries. The principal executive of5ces of Holding Company and Illinois Power are located at 500 South 27th Street, Da:atur, Illinois 625251805, and their telephone number is 217-424 6600. l Merging Corp. has nominal assets and has been formed for the sole purpose of effoeting the t Merger, at which time it will cease to exist. I I r l t i f r a I I E 5 l A t ) i I 43CH14574 ILLINOIS POWER S-s Proof 2 l Aerftll CorporetlottCNcago (312) 930-2700 US ER673634CHIB3.93CHl4874]E4874 A.;27 i . L

~~ e i 1 f kR!t1CC*FOR ATION hTTWORK CDM*DStrK)N 5YST1.M 11R A$MU55LN # 11.NOV-03 04 $51%I W6 ?P%MCH19191Oll4874!Les74B 4 1AGI3 frACLR PTTYtJ3tKFM MT.1 M fen EDGARTIIT PMT Fere-I 40DMI (O Fwd nry (O VJ k Seq l Or 0 C Chum 4HiS) [ i f t J l j 7 I The following diagr ams illustrate the present and proponed corporate structures ofIllinois Power and its afLliates before the Merger and fluidmg Company and its afhhates following the Merger and j the Illinois Power transfer of IP Group to Holdmg Company Illinois Ibwer will retain its interesta in j its other affuistes l f PRESENT 51RUCTURE i I Illinois h=cr Company l j l .} i Electric Energ), loc. I (2M owed by IP lloiding Company Illinois hewer) . 2, IP Gas Supply Co. IP Merging i (wholly owned by Corporation j !!!inois hmer) t Illinois hmer f uel f Company (50% owned by [ lilinois hmer) i 4 IP Group, Inc. (wholly owned by Illinois 1%=er) PROPOSED STRUCTURE 5 l IP lloiding Company l l I I I l IP Group, Inc. Illinois h wer Canpany (wholly owned by l Iloiding Company) I Electric Energy, loc. 3 (20% owned by Illinois Power) i I IP Gas Supply Co. (whony owned by r Illinois Power) .i tilinois Power ivel '[ Company (50% owned by l Illinois Power) t 6 r J i l 3CHl4874 ILLINOIS POWER S-4 Proof 2 i territt CorporatioWChicago (312) 930-2700 USER 6:[P3634CHl93.93CHl4874]E48748.;8 l I .i ~ _.,..

.-a-. YERRILt.CURPORATION M TWOsK COMPOSITION SYSTDt DRASMt'SSEN//11-NOV 93 oOS USER 6]r3634CM!93 93CH14s74;Eds74C 1 .tAGES (PAGElt PSTYWS!KN BST.1 pagifnu EDG AR1T.5T NT F,w 100D*/ %3D Fcus oly oD U R Seq l Ctr 0 C ChLsum. 249 f ) i } i i ? Exchange of Certificates It will not be necessary for shareholders to turn in their certi5 cates for Blinois Power Common Stock in exchange for certificates for Holding Company Common Stock. The certi5 cates which pres-ently represent outstanding shares of Elinois Power Common Stock will automatically represent -{ shares of Holdmg Company Common Stock following the effectiveness of the Merger. New certificates bearing the name "1P Holding Company" will be issued in the future, if, and as, certi5 cates for { presently outstanding shares of Ulinois Power Common Stock are presented for exchange or transfer. a Stock Exchange IJstmgs Holding Company will apply to list its Common Stock on the New York and Chicago Stock Exchanges. It is expected that such listings will become effective on the effective date of the Merger, subject to the rules of such Exchanges. See " Listing of Holding Company Common Stock." Divideod Policy Dividends on Holding Company Common Stock will depend primarily on the earnings, fmancial 9 condition and capital requirements of Elinois Power and its ability to pay dividends on the Blinois Power Common Stock owned by Holding Company, It is currently contemplated that Holding Com-4 pany will initially pay quarterly dividends on Holding Company Common Stock at the rate most i i= recently paid, and on approximately the same schedule, as dividends have been paid on Illinois Power Common Stock. See " Dividend Policy." Reasons for the Restructuring The Board of Directors of niinois Power unanimously believes that the proposed restructuring is f beneficial because it will permit amliates of Ulinois Power to take advantage of competitive non-utility i business opportunities without the prior approval of, or regulation by, the Blinois Commerce Commis- + sion. The restructuring will facilitate fmancial flexibility and enhance managerial accountability for separate business activities. The holding company system structure will insulate the Illinois Power l utility business from the risks of the non-utility businesses ofits a51iates, and should increase the { energy-related expertise, knowledge and skills of system employees. See " Reasons fnt the { Restructuring." Vote Required l Only holders of shares of Elinois Power Common Stock and Ulinois Power Preferred Stock on l December 13,1993 (" Record Date"), will be entitled to notice of and to vote at the special meeting to j consider approval of the Merger Agreement. As of December 13,1993, there were 75,643,937 shares of i I Ulinois Power Common Stock and 6,540,300 shares ofDlinois Power Preferred Stock outstanding. The afErmative votes of the holders of two-thirds of the outstanding shares of Blinois Power Common Stock and Ulinois Power Preferred Stock, voting together as a single class are required to approve the Merger Agreement. See " Voting." Regulatory Approvals i Applications for approval of the restructuring have been Sled with the SEC under the Public Utility Holding Company Act of 1935 ("1935 Act"), the Federal Energy Regulatory Commission i ("FERC") under the Federal Power Act and the Nuclear Regulatory Commission under the Atomic l Energy Act. Amendments to the Blinois Public Utilities Act which became efTective on July 13,1993, i permit the restructuring to occur without the prior approval of the Blinois Commerce Commission, l' subject to certain condations. See " Required Regulatory Approvals" and "Hlinois Public Utilities Act." Federal Income Tax Consequences f it is intended that the conversion of Blinois Power Common Stock into Holding Company Com. j mon Stock in the Merger will not be taxable under Federal income tax laws, and it is a condition for the i Merger to become efTective that Illinois Power receive either an opinion of counsel or a ruling from the Internal Revenue Service satisfactory to the Illinois Power Board of Directors with respect to the l I E 7 l i [ i-r I '3CHl4874 Itt.WOIS POWER S-4 Proof 2 a brrill Corporation / Chicago (312) 933-2700 t!SER6:[P3634CHl93.93CHl4874]E4874C.;1 e i l w

.. - -,. ~... _. ~ w. -.. = 41.aRR.L CORPOR ATKW NETwM K COMPOStr10N SYSTEM DRASMUSSEN ff IbNOV 93 0435 USERf (PM34CH!93 93CHl4874]E4574C..! - M AGES iP ACER PSTYL.E51KFM BITJ pegsinn EDG ARTESTfMT Fue 2 0DM/ oD Foot oDI oD v1R 5eq 2 Clr o C Ctesum-JWT F 6 i Federal income tax consequences of the Merger. IEinois Power does not expect to apply for such a e ruling because it has received an opinion of Sidiey & Austin, counsel to Illinois Power, with respect to certain tax consequences of the Merger. See " Federal Income Tax Consequences." l Rights of Dhsenting Sharebolders The holders ofIllinois Power Common Stock and Illinois Power Preferred Stock have the right to dissent from consummation of the Merger and, upon compliance with the procedural requirements of I the Illinois Business Corporation Act, to receive the " fair value" of their shares if the Merger is efTected, Any such holders electing to exercise their right of dissent must deliver to Illinois Power i before the vote is taken a written demand for payment of their shares if the Merger is consummated and they did not vote to approve the Merger Agreement. See " Rights of Dissenting Shareholders" and Exhibit D. Postponement of Annual Meeting l The Board of Directors ofIllinois Power has postponed the 1994 Annual Meeting ofits Sharehold-ers until a date which is subsequent to, and will be established by such Board of Directors after, the consummation of the restructuring. The holders of Blinois Power Preferred Stock and Holding Company, as the only holder of Elinois Power Common Stock, will after the restructuring be the only l shareholders entitled to vote at the Illinois Power 1994 Annual Meeting for the election of Illinois i Power directors and any cther matters which may be considered at such meeting. The first annual meeting of the holders of Holding Company Common Stock will be scheduled for April,1995. See " Postponement of Annual Meeting." { i

• 6 3

' ? h t i l I 1 1 I l t i t W i i l 8 f a 13CHl4874 tLLINOIS POWER S.4 P;oot 2 Aarrill Corpordon/ Chicago (312) 930-2700 USER 6:{P3634CHl93.93CHl4874]E.4874C.;1 I J c -.,e v..-- e

c .= n ~ IERRIL1 CORPOR AT10N NETWORK COMPOSITION SYS' TEM DRASML'5SEN # ll-NO%93 0435 l'SER6]r3634CHIO3 93 CHM 874}F4674A.13 f .tAGES teAGER r$TYLESXFM BST.) payifmt EDGARTEST FMT F,ee N1D*i MOD Foss ODi DD V) R srq l Cir o - C ChLsum 1383 O l ~ Introduction Solicitation and Revocotwn ofProzies. The Proxy Statement forming a part hereof is furnished in connection with the solicitation of prox 2es by the Board of Directors ofIllinois Power for use at the Special Meeting of Shareholders to be held at the office of the Company,500 South 27th Stred, 'r Decatur, Ulinois 62525, on Wednesday, February 9,1994, at 10:00 A.M., and at any adjournment thereof ("Special Meeting"). Any shareholder giving a proxy may revoke it at any time by giving a i later prory or by giving written notice of such revocation to the Secretary of Ulinois Power prior to the i S;ecial Meeting. All duly executed proxies received prior to the Special Meeting will be voted in i accordance with the terms of such proxies. Shares credited to the accounts of participants in the Uhnois Power Automatic Reinvestment and Stock Purchase Plan, Employees Stock Ownership ?lan and Incentive Savings Plans will be voted in accordance with the instructions of participants or otherwise in accordance with the terms of szh plans. .l Manner and Cost of Solicitation. Certain of the ofEcers, directors and employees of IHinois F Power toay solicit proxies by correspondence, telephone, telegraph or in person, but without extra compensation. Elinois Power will pay to banks, brokers, nominees and other fiduciaries their reason-able charges and expenses incurred in forwarding the proxy soliciting material to their principals. In addition, Ulinois Power has retained Morrow & Co., Inc. to assist in the solicitation of proxies. Such [ solicitation may be made by mail, telephone, telegraph or in person. It is estimated that the cost of the i services of Morrow & Co., Inc. will not exceed $15,000, plus out of pocket expenses. The cost of the solicitation willinitially be paid by Ulinois Power. If the Merger becomes effective, Holding Company will reimburse Blinois Power for all of the expenses it incurs in the restructuring, including the cost of soliciting proxies. See " Illinois Public Utilities Act" i j Voting Each share of Ulinois Power Common Stock and Dlinois Power Preferred Stock entitles its bolder i to one vote on the proposal to approve the Agreement and Plan of Merger (" Merger Agreement") i between Blinois Power and Merging Corp. Shareholders of record at the close of business on Decem-ber 13,1993, will be entitled to receive notice of and to vote at the Special Meeting. Under Ulinois law, the affirmative votes of the holders of two-thirds of the outstanding shares of Elinois Power Common Stock and Ulinois Power Preferred Stock, voting together as a single class are required to approve the Merger Agreement. 1 The holders of the total outstanding shares of Blinois Power Common Stock and Elinois Power i Preferred Stock who are present in person or by prczy will constitute a quorum for purposes of the Special Meeting. Holders of shares represented at the meeting and entitled to vote on the proposal to 1 approve the Merger Agreement, but who abstain from voting such shares, will in effect be counted against approval of the Merger Agreement. Proxies submitted by brokers for shares beneficially i owned by other persons may indicate that all or a portion of the shares represented by such proxies are not being voted with respect to approval of the Merger Agreement, because the rules of the New York i Stock Exchange do not permit a broker to vote shares held in street name with respect to the Merger Agreement in the absence of instructions from the beneficial owner of such shares. The shares represented by broker proxies which are not voted with respect to the Merger Agreement will not be i counted in determining whether a quorum is present for consideration of approval of the Merger Agreement, and will not be considered represented at the meeting and entitled to vote on approval of the Merger Agreement. la the absence of specific direction, the shares represented by the proxies will be voted at the meeting for approval of the Merger Agreement The Board of Directors ofIllinois Power recommends a vote FOR approval of the Merger Agreement. ?{ i 9 I ~! i i i , SCHl0870 ILIJNOIS POWER S-4 Proof 2 errm Corporstkon/CNcego (312) 930-2700 USER 6:{P3634 CHt93.93CH14874] Fa874 A.;13 i J

-a _ _.~ - - n _ -- i IRRILI.COR.PORAT10N NTTWORK MMPOSITION SYSTEM DRASMUSSDd # tl-NOV-93 04 *5 L'SER6#3634Cm93 93CHlas74]Fas745 :9 1 AGES !PAGER PSTYLES AFM BST.I paFifnm EDGAR 1TST FMT Fne WID* 6A0D For oD/ oD VJ R Seq 2 Ctr o C ChLsum' 166 P i 4 I Outatandmg Vormg Securities. Shareholders of record at the close of business on December 13, j 1993 will be entitled to receive notice of and to vote at the Special Meeting. As of such date, Illinois { Power had outstanding 82,164.237 shares of voting stock, consisting of 4,150,000 shares of Serial i Preferred Stock, $50 par value (consisting of 300,000 shares of 4.08% Cumulative Preferred Stock, j 150,000 shares of 4.26% Cumulative Preferred Stock,200,000 shares of 4.70% Cumulative Preferred l Stock,150,000 shares of 4.42% Cumulative Preferred Stock, 180,000 shares of 4.20% Cumulative l Preferred Stock, 600,000 shares of 8.24% Cumulative Preferred Stock, 700,000 shares of 7.56% Cumulative Preferred Stock, 1,000,000 shares of 8.00% Cumulative Preferred Stock and 870,000 shares of 7.75% Cumulative Preferred Stock),2,390,300 shares of Serial Preferred Stock without par value (consisting of 1,000,000 shares of Adiustable Rate Series A Cumulative Preferred Stock,910.300 t shares of Adjustable Rate Series B Cumulative Preferred Stock and 480,000 shares of 8.00% Cumula- ? tive Preferred Stock), and 75,643,937 shares ofIllinois Power Common Stock. i Security Ownership of Certain Beneficia! Owners. The following are known by Dlinois Power to f be the beneficial owners of more than five percent of any class of the outstandmg stock ofIlhnois i Power as of December 13,1993: Name and Addreas Amount and hature or Peccent i Thle of Class of Benendal Owner Benehdal Ownership of Class 'f Serial Preferred Stock, American Express Co. 386,182 shares (1) 16.2% without par value American Express Tower World Financial Center New York, NY 10255 Serial Preferred Stock, d American General 242,000 shares (2) 5.8% $50 par value Corporation and Subsidiaries b -l 2929 Allen Parkway l Houston, TX 77019 [ Common Stock FMR Corp. 4,768,960 shares (3) 6.3% t 82 Devonshire St. ? E Boston, MA 02109 a Common Stock The Boston Company, Inc. 4,362,080 shares (4) 5.8% [ One Boston Place 3 Boston, MA 02106 0000 i.; 4 (1) American Express Company has advised that as of October 26,1992,it and ita Subsidiaries owned -l 386,182 shares of Serial Preferred Stock, without par value, as to which beneScial ownership is disclaimed, with sole power to vote and dispose of all such sharea. (2) According to its Schedule 13G filing, American General Corporation and Subsidiaries beneScially i owned as of December 31,1992,211,100 shares of 8.00% Cumulative Preferred Stock, $50 par i value, and 30,900 shares of 824% Cumulative Preferred Stork, $50 par value, and have shared power to vote and dispose of all of such shares. { (3) FMR Corp. has advised that as of Octobe-26,1993, it owned 4,768,960 shares ofIllinois Power Common Stock, with sole power to vote shares and sole power to dispose of shares. j (4) According to its August 9,1993 Form 13F filing, as of June 30,1993, The Boston Com;.any,Inc. - I owned 4,362,080 shares of Blinois Power Common Stock, with sole power to vote 3.121,180 shares, shared power to vote 175,500 shares and sole power to dispose of all shares. ? As ofDecember,1993, the 23 Illinois Power ofLeers and directors as a group owned benencially an agg-egate of 66,481 shares ofIllinois Power Common Stock, which isless than 1% of the outstand. ing shares ofIllinois Power Common Stock. 5 L 10 7 I + i

CHl4870 IltmotS POWER S-4 Proof 2 i

,rrill Corporation / Chicago (312) 930-2700 USER 6:[P3634CHl93 93CHl4874}F48748.:9 8 a +

? TERR!Lt CORPOR ATION NTTwORK COMPOi!TKJN SYSTD1 DR ASML'55EN /I RNOV-93 04 M l'5EFb lPMMCH193 03Cm4874)f 4s74B.9 .1 AGES [PAGER PSTv11MFM ttST.1 parifus U0ARTr.ST FMT Fne koDN WJD Fan oDI oD VJ k Seq 3 Ctr o C Chhum M439 Corporate Restructuring Plan Illinois Power comiiders it to be in the best interest ofits shareholders to change the corporate r structure of I!!inois Power so that it will become a separate subsidiary of a new parent holding company, with the present holders of Elinois Power Common Stock becoming the holders of the common stock of the new parent. j To carry out such restructuring, Illinois Power has caused to be incorporated a new Illinois ?' ccrporation, Holdmg Company, which has a nominal amount of stock outstanding and no present business or properties of its own. Holding Company, in turn, has caused to be incorporated a new Illmois corporation, Merging Corp. The outstandmg Holding Company stock is presently owned by Ulinois Power, and the outstandmg Merging Corp. stock is presently owned by Holding Company. Ulinois Power and Mergmg Corp. have entered into the Merger Agreement under which, subject to shareholder and regulatory approvals and the satisfaction or waiver of certain conditions, Illinois Power will become a subsidiary of Holding Company through the Merger of Merging Corp. into Elinois ) Power. In the Merger, the outstanding shares of Elinois Power Common Stock will be converted on a l i share-for-share basis into Holding Company Conunon Stock. A copy of the Merger Agreement is attached to this Prospectus and Proxy Statement as Exhibit A and is incorporated herein by reference. In addition Elinois Power, Holding Company and Merging Corp. have entered into a Supplemen-tal Agreement which provides for the issuance of Holding Company Common Stock in the Merger and pursuant to plans under which participants currently receive Blinois Power Common Stock. A copy of L the Supplemental Agreement is attached to this Prospectus and Proxy Statement as Exhibit B and is incorporated herein by reference. j It is intended that the restructuring will rot have any adverse Federal income tax consequences to present holders of Elinois Power Common Stock or Preferred Stock. See "Tederal Income Tax Consequences." Reasons for the Restructuring Business Opportunities. The primary purpose of the prcposed restructuring into a bolding j company system is to permit Ulinois Power affiliates te take advantage of non utility business oppor-tunities to enhance shareholder value, without the prior approval o#, or regulation by, the Blinois r Commerce Commission (" Illinois Commission"). Such amlistes could-(i) participate in the development of non-utility electric generation plants, in the United States and abroad, which are expected to provide a substantial portion of new generating capacity constructed in the future; (ii) compete with independent business entities to provide unregulated energy and other services and products to independent power producers, Elinois Power customers and others; and I (iii) take advantage of other business opportunities to enhanm the value of the common stock investment of the Holding Company shareholders. I FinanciolFlexibihty. The Holding Company system structure for Illinois Power will permit it to more readily control its capital ratios and thereby minimize it. costs of capital and enhance the stability of its utibty rates. Also, the non-utility subsidiaries of Holding Company would have the flexibility to use various financing techniques suitable for non-utility businesses, without any impact on the capital structure or credit of Ulinois Power. Competition. For several years the electric and gas utility industries have been encountering I increasing competition from non-utility providers of energy and related services. Action by nlinois ) Power in response to or in anticipation of such competition would in most cases require Ulinois Power to obtain +e prior approval of the Elinois Commissicn in proceedings which are frequently lengthy, 1 thus delaymg the implementation and ef5cacy of such action. How ever, non-utility amlistes of Hold- ) ing Company could take prompt and appropriate competitive action because they would not be t I i 11 1 33CHK870 ILUNO!S POWER S-4 Proof 2 AortW. Terporation' Chicago (317) 930 2700 @) USER 64 Pas 34CH193.93CH14874]F4874B.;9 1 I i

4 texan 1 CORPORATION NETWORK COWO5 MON SY$RM DR ASWSSEN # RNOV-93 Os $5 USEM irW4CmH 9Dilds74lFAR74C.7 aces 9 Acta esin.rmrFM B5TJ pgifu UCARTEST FMT Frer 770D* 440D N w DIV DD V) R 5eq d Clr o C Chinum 2983s j l l I required to obtain Elinois Commission authority before taking such action. Purthermore, such affli-stes could adapt their competitive actions to changing conditions more quickly than Illinois Power because the actions of Dlinois Power could be hmited by the terms of Elinois Commission orders. i Effteiencies. Participation in the evolving non-traditional electric generation market should provide the Holding Company system with a more thorough understanding of such market and develop the skills ofits employees in applying, where appropriate, the innovative techniques learned l in project financing, construction, operation, maintenance and marketing, to enhance the efficiency and contain certain costs of the IUinois Power electric utihty business. Business Separation. The Holding Company system will clearly separate the Illinois Power utility business from the non-utility businesses of other Holding Company subsidiaries. Operating management ofUlinois Power will continue to maintain its focus on meeting its public utihty responsi-bilities. The separation of utility and non-utihty activities will (I) facilitate the aDocation of expenses, Gi) protect Ilhnois Power from any adverse efTects of non-utility operations, and (iii) facilitate the = regulation of the Illinois Power utility operations by the Elinois Ccmmission which, with the agree-t snent of Elinois Power, has ordered Elinois Power "..to expeditiously proceed with the formation of a { bolding company.. "in response to concerns ofIUinois Commission Staff and others who believe that I a holding company structure provides certain protections to the utihty customers of Elinois Power. j The Ulinois Power utility business is expected to constitute the predominant part of Holding Company's earning power for the foreseeable future. Ulinois Power operations will continue to be subject to thejurisdiction of the Illinois Commission, FERC and the Nuclear Regulatory Commission, d i and conducted with the same assets and management. The management and Board of Directors of Illinois Power believe that the restructuring will have no adverse effect on Blinois Power,its security holders or its customers. Merger Agreement The Merger Agreement has been approved by the Boards of Directors of Illinois Power and l Merging Corp., and they have executed the Merger Agreement, subject to its approval by the holders Ty;'. of the outstanding Elinois Power Common Stock and Dlinois Power Preferred Stock as described j - under " Voting." In the Merger, j (1) each outstandmg share ofIllinois Power Common Stock will be converted into one new share of Holding Company Common Stock; l e a 6 (2) each outstanding share of Elinois Power Preferred Stock will remain outstanding and ] unchanged (see " Treatment of Preferred Stock")- E (3) the outstanding shares of Merging Corp. common stock wiU be converted into the same number of shares of Elinois Power Common Stock which are outstanding immediately prior to i the efTective time of the Merger, and all of the Plinois Power Cammon Stock willthen be owned by [ Holding Company; and fi (4) the shares of Holdmg Company Common Stock presently held by niinois Power will be f cancelled. / As a result, Elinois Power wiU become a subsidiary of Holding Corcpany, and all of the Holding I Company Common Stoch outstanding immediately after the Merger will be owned by the holders of D1inois Power Common Stock outstanding immediately prior to the Merger. See Exhibit A. ) The Ulinois Power Preferred Stock, mortgage bonds and other long-term debt of Blinch Power will be unchanged and will continue to be outstanding secunties and obligations of Elinois Power after I i the Merger. The Elinois Peer mortgage ber.ds will continue to be secured by mortgage liens on au properties of Illinois Power which are currently subject to such lien. The Elinois Power Restated Articles of Incorporation wiu not be changed as a result of the Merger. I e 12 I k ? I CHl4B74 ILL.lNOIS POWER S-4 Proof 2 i,- trrill CorporstbortChicago (312) 930-2700 USER 6;[P3634CHl93.93CHl4874]F4874C.;7 I l s I f + ...-r ... ~. ~ -e.v-. y--,3 f

~_ l I i { tr.RRalet3PORATION hTrwCAK COMPOSITION SYST!M DRASMU$$tN # 11&OV 93 (d $$ USf3t6 IP3t040093 03C6H4s741F4s74CJ i dATS trAER eSTM.5XFM RST I rg$fna EDGARTEST PMT Free 1s'1W 240D Fan DDt oD VJ R Seq J Ctr o C Chksum 3244s i I i + Supplemental Agrtement { Holding Company, Ulinois Power and Merging Corp. have entered into a Supplemental Agree-1 ment in which (a) Holding Company has agreed to issue Holding Company Common Stock in the Merger and under the Ulinois Power Stock Plans (see " Stock Plans"),(b) Illinois Power and Mergmg Corp. have agreed to merge pursuant to the Merger Ag" cement, and (c) Illinois Power and Mergmg [ Corp. have agreed not to amend the Merger Agreement without the consent of Holding Company. See f Exhibit B. Required Regulatory Approvals } Pubhc Utility Rolding Company Act of1935 Elinois Power owns 20% of the capital stock of [ Electric Energy,Inc., an Ulmois corporation ("EEI"), which was organized to own and operate a steam j electric generating station near Joppa, Elinois tnd related transmission facilities to supply electric energy to the U_S. Department of Energy uranium processing facility near Paducah, Kentucky. EEI is a public utility company under the 1935 Act and Elinois Power is thus a public utility holding company i as well as a public utility company. As a result of the Merger Holding Company will become an afnliate of both Ulinois Power and eel. Section 9(aK2) of the 1935 Act requires the prior approval of the SEC l under Section 10 of the 1935 Act for any person to become an affiliate of more than one public utihty company, and Holding Company has applied for such approval. Holding Company has also applied to the SEC for an order exempting Holding Company from all provisions of the 1935 Act, except Section 9(aX2) thereof. The basis for such exemption is that Holdmg Company and Blinois Power are each organized in Hlinois, Ulinois Power carries on its business substantially in Ulinois, and Holding 1 Company derives no material part of its income from eel, t Tederollwer Act. The FERC has held that the transfer of common stock of a public utility company, such as Blinois Poor, from its existing shareholders to a holdmg company in a transaction such as the Merger constitutes a transfer of the " ownership and control" of the facilities of such utility .i which is subject to FERCjurisdiction under the Federal Power Act ("FPA"), and is thus a " disposition of facilities" subject to FERC review and approval under Section E3 of the FPA; Ulinois Power has applied for such approval. Atomic Energy Act. A provision in the Atomic Energy Act requires Nuclear Regulatory Commis- { sion ("NRC") consent for the transfer of control of NRC licenses. In response to an inquiry from another utility, the NRC Staff has asserted that this provision applies to the creation of a holding company by an NRC-licensed utihty company in a transaction such as the Merger. Elinois Power holds l an operatinglicense for a nuclear generating station and has applied for NRC approval under the l Atomic Energy Act of the transfer of control et such license in the Merger. Condations. The Mergeris conditioned on the receipt of orders satisfactory to Ulinois Power and 'l' Holding Company from the SEC, FERC and NRC in response to the applicat. ions described above. Dlinois Pablic Utilities Act The Illinois Pubhc Utilities Act (" Illinois Act") requires prior Ulinois Commission approval of i . reorganizations of Ulinois public utilities, such as Elinois Power, and the Merger is such a reorganiza-tion. However, Amendments ("1993 Amendments") to the Blinois Act which became effective on j July 13,1993. permit certain Blinois electric utilities, including Ulinois Power, to create and become a { subsidiary of a holding company on or before January 14,1995, without the approval or consent of the i Ulir>ois Commission, except that such date would be extended by a petition for such extension filed with the Elinois Commission on such date, until the Elinois Commission makes certain fmdings and j denies such petition. { The 1993 Amendments were adopted to enable qualifying Illinois electric utilities to reorganize into a holding company system without the approval or consent of the Ulinois Commission in order to i avoid the delays which are inherent in Blinois Commission proceedings on utility roorganization applications; Elinois Commission proceedings on another recent and very similar Blinois utility ] i I i 13 I i 33CHl687t ILUNOtS POWER S.4 Proof 2 Jerrt:1 Corporanon/Chicsgo (312) 930-2700 t?SER6]P3634CHl93.93CH14874]F4874C47

..~u . ~.. 1ERRR1 CORPOR ATION NETWORK (XMPO5TTION 5YSTEM DRA$MUE5EN # IbNOV-93 Os $5 L'SER64rM4CH193.93CH14M4]F4M4C.J MAGESiPAGER PSTYLESlKFM RST 1 pq1fmt EDGARTLSTFMT h sofW 180D Fun DW oD YJ R 5eq 6 Clr o C (hum: 27Ms i i t reorganization appliention endured for more than two and two-thirds years before the Ulinois Com-e mission approved such reorganization. The 1993 Amendments recognize that it is important for Ulinois electrie utilities to form holding companies expeditiously to enable them to respond quickly to current and expected competitive activities of non-utihty entities, as described under Reasons for the Restructuring." i The restructuring of Ulinois Power into a holding company system which is described in this Prospectus and Proxy Statement is a reorganization permitted by the 1993 Amendments and will not l require the approval or consent of the Djinois Commission. -l The 1993 Amendments also permit an Ulinois electric utility which has initiated certain action to j create and become a subsidiary of a holding company pursuant to the 1993 Amendments, to form, invest in, and guarantee obligations of subsidiaries which engage in specified energy related busi- 'i i nesses, without the approval or consent of the Ulinois Commission. The 1993 Amendments also (i) require Holding Company to pay or reimburse Illinois Power for all costs incurred by Elinois Power in connection with the Merger, ifit occurs; (ii) permit Illinois Power to make a loan to Holding Company of up to the lesser of $ 10 million or 2.5% ofIllinois Power retained i earnings as reported in the most recent Annual Report filed by Ulinois Power with the Ulinois Commission, bearing interest at the rate of10% per annum, and require that such loan be repaid not -i later than 240 days after the Merger occurs; (iii) require Holding Company and Illinois Power to file l certain information with the D1inois Commission; (iv) require the Blinois Commission to reduce Illinois Power's rates to reflect additional revenues it would have earned if subsidiaries of Ulinois i Power or Holding Company had not provided services specified in the 1993 Amendments,if the Blinois j Commission finds that there was no reasonable probability that customers for such services would i have obtained such services from other sources or provided such services for themselves (the so-called ) " cherry pickmg" provision); (v) limit the amount of Illinois Power investments in and guarantees of obligations of subsidiaries formed pursuant to the 1993 Amendments; (vi) require Illinois Power to i transfer or liquidate its interest in any subsidiaries formed pursuant to the 1993 Amendments, if - l Illinois Power is not a subsidiary of Holding Company on January 14,1995, or such later date as may be determined in an Blinois Commission order which makes certain findings and denies a petition to extend such date; (vii) provide for Blinois Commission hearings on contracts or arrangements purru-j ant to which Ulinois Power provides services and facilities to its affiliates; and (viii) require Illinois j Power to make any portion ofits electric lis*ribution and transmission facilities which would be used - j by an Ulinois Power afYiliate to make an unregalated sale of electricity, available at the same price and under the same terms and conditions to any other person who offers to make such sale. i Transfer of Illinois Power Assets to Holding Cornpsny l IP Group was formed as an Illinois Power subsidiary in 1992 primarily to invest in, develop and operate independent power market projects and facilities, and to perform services in connection with j the development and operation of such projects and facilities, directly or through IP Group subsidiar. 7 ies. Illinois Power has invested 56.1 million in IP Group to enable it to purchase an interest in Enrici Power Marketing Limited, which owns rights to sell a portion of the capacity of a cogeneration plant in ) England. Ulinois Power has obtained approval from the Ulinois Commission to invest up to an additional $75 million in IP Group to enable it to participate in additional independent power market q projects and facilities. After Elinois Power becomes a subsidiary of Holding Company, Elinois Power will transfer to Holding Company the stock ofIP Group as a dividend on the Dhnois Power Common j Stock held by Holding Company. Except for dividends or other distributions with respect to Illinois Power Common Stock held by l Holding Company, it is not expected that Ulinois Power will transfer any ofits assets without adequate consideration to Holding Company or any Holding Company subsidiaries. Any transactions, other i than dividendr on Ulinois Power Common Stock held by Holding Company and transactions permit-ted by the 1993 Amendments, between Elinois Power and any of its aHiliates, including Holdmg Company, would require the prior approval of the Blinois Commission. 14 l i } l i 93CHl4874 ILUNOIS POWER S 4 Proof 2 -f Morrill Corporation / Chicago (312) 930-2700 LJSERC:[P3634CHl93.93CHl4874]F4874D.;6 j i i ? e

TRRR1 CORPORATION NETWORK COMPO$rrlON SYSTEM DRASMUSSEN 1/ lbNOV.93 os 53 l'SER6 [P3634 CHI 93 91CH14s741Fes74D,6 .1 AGE 5JPAGER rSTY1.ESIKFM BST.I puifer EDGARTEST.FMT Free-390D*/ f40D Foot oIY oD W R Seq 7 Ctr o C Chtsum 3R215 I Dividend Policy Holding Company does not now, nor will it after the Merger, conduct directly any business j operations from which it will derive any revenues. Holding Company plans to obtain funds for its own .l operrFons from dividends paid to Holding Company on the stock ofits subsidiaries, and from sales of securities or debt incurred by Holding Company. Dividends on Holding Company Common Stock will 1 initiaDy depend upon the earnings, fmancial condition and capital requirements ofIllinois Power, and its ability to pay dividends on the Hlinois Power Common Stoc k owned by Holding Company. It is j contemplated that Holding Company will initiaDy pay quarterly dividends on Holding Co:npany -i Common Stock at the rate most recently paid, and on approximately the same schedule, as dividends ) have currently been paid on Blinois Power Common Stock. The most recent dividend paid on Illinois j Power Common Stock was 5.20 per share paid on November 1,1993. Ulinois Power has declared 'l dividends payable on Elinois Power Common Stock through May 1,1994. If the effective date of the l Merger occurs before any such record date, Holding Company will be entitled to receive such dive dends after it becomes the holder ofIllinois Power Common Stock. ] Treatment of Preferred Stock The Merger and restructuring will not result in any change in the outstanding snares of Illinois Power Preferred Stock. The decision to have the Elinois Power Preferred Stock continue as securities ofElinois Power is based upon, among other factors, a desire not to alter or potentiaDy alter the nature of the investment represented by such Stock, as well as the need of Ulinois Power not to foreclose future issuances of Preferred Stock to help meet its capital requirements. The utility operations of Illinois Power presently,. 2stitute, and are expected to continue to constitute, the predominant part of the consolidated assets and earning power of Holding Company. Accordingly, it is believed that the Preferred Stock will retain its current investment ratings, as well as its qualification for legal invest. ment for certain investors, by remaining as stock of Elinois Power. Elinois Power Preferred Stock will continue to rank senior to I"inois Power Common Stock as to dividends and as to assets of Blinois Power upon any liquidation. Although the restructuring is not czpected to affect adversely the holders of Illinois Power Preferred Stock, neither will the assets or earnings of the Holdmg Company subsidiaries be of any potential beneSt to the holders of such Stock if the restructuring is consurr.:nated. See " Transfer of Elinois Power Assets to Holding Company." After the Merge, Elinois Power will continue to be subject to the informational requirements of the 1934 Act, and will be required to hold annual meetings ofits Preferred and Common shareholders. However, Ulinois Power inay decide not to solicit proxies from its Preferred shareholders for the election of directors and other actions not requiring class votes of such shareholders, because the shares of Elinois Power Common Stock to be held by Holding Company will have sufScient voting power to enable Holding Company to elect aD niinois Power directors and to take such action. See " Postponement of Annual Meetire." Amendment or Termination By mutual consent of their respective Boards of Directors, Elinois Power and Merging Corp. may amend any of the terms of the Merger Agreement at any time before or after its approval by their respective shareholders, but no such amendment may,in the solejudgment of the Board of Directors of Blinois Power, materially and adversely afTect the rights of the holders of Illinois Power stock. The Merger Agreement may be terminated and the Merger abandonw! at any time before or after the shareholders of Blinois Power and Mn ging Corp. have approved the Merger Agreement, by action of the Board of Directors of Ulinois Power ifit determines that consummation of the trananctions provided for in the Merger Agreement would, for any reason, be inadvisable or not in the best interests of Illinois Power or its shareholders. 15 3CHL4874 ILUNOIS POWER S-4 Proof 2 1errm Corporationthlce90 (312) 930-2700 USER 6:[P3634CH193.93CH14874]F4874D.;6

2ERRLLCORPORAT10N NETwOPK CVMPOSTTION 5YFrEM DRA$MUSSEN # ll NOV-93 o4S t'SER6 IP3634CH193.93CH14874)F4574D :6 l MCE5iMGER eSTYtf.SWFM MT 1 prifmt EDGARESThrT h 1p*/120D h o!W oD VJ R seg a Clr o C ChLsam $226) i Rights of Dissenting Shareholders Section 11.65 and 11.70 of the Blinois Business Corporation Act are set forth in Exhibit D and provide that the holders of Llinois Power Common Stock and Blinois Power Preferred Stock entitled to vote at the special meeting have the right to dissent from onsummation of the Men:er and obtain the " fair value" d their r.hr.rca K the Merger 2s effected. In order to perfect such dissenters' rights, a shareholder mest !a) deliver to Blinois Power at the ofhee of the corporate secretary,500 South 27th Street, Decatur, Blinois 62525 1805, prior to the takimf the vote of the shareholders upon the approval of the Merger Agreement, a written demand for payment for his or her shares if the Merger is consummated; and (b) not vote his or her shares in favor of the approval of the Merger Agreement. Within 10 days after the Mer;:er becomes effective or 30 days after delivery of the written demand for payment, whichever is later, Illinois Power will advise each shareholder who perfects his or her right to dissent of the o@ ion ofIllinois Power as to the estimated fair value of the shareholder's shares. " Fair vs." with respect to a dissenter's shares means the value of such shares immediately before the consummation of the Merger, excluding any appreciation or depreciation in anticipation of the Merger; unless such exclusion would be inequitable. At such time, Ulinois Power must ekeet to (as make a commitment to purchase such shares at such estimated fair value or (b) instruct such dissenting shareholder to sell his or her shares (which, with respect to Common Stock, wiD have been - converted into shares of Holding Company Common Stock) within 10 days thereafter. Illinois Power may instruct the shareholder to seu shares only if there is a public market on which such shares may be readily sold. Such a market will exist for Common Stock because the Holding Company Common Stock will be listed on the New York and Chicago Stock Exchanges immediately following the Merger. Such a public market will exist for Series ofBlinois Power Preferred Stock which arelisted on the New York Stock Exchange, and may exist for the Series of Ulinois Power Preferred Stock which is not listed on sui t. r change. See "Blinois Power Preferred Stock Market Information."If Blinois Power elects to dir ' ' J dissenting shareholder to sell his or her shares and the shareholder does not sell them within suca 10 day period, the shareholder shall be deemed to have sold such shares of Holding Company Common Stock or Series ofBlinois Power Preferred Stock which are hated on the New York Stock Exchange, at the average closing price of such Stock on ra:h Exchange during such 10-day period, or to have sold his or her shares of other Series of publicly traded Illinois Power Preferred Stock at the average of the bid and asked price for such shares quoted by a principal market maker during such av-day period, as the case may be. A sharebolder who perfects his or her right to dissent retains all rights of a shs. eholder until the Merger is consummated, at which time Illineis Power will pay to each dissenter, if Elinois Power bss not instructed the dissenting shareholders to sell their shares in the public market, the amount Utinois Power estimates to be the fair vabe of such dissenter's shares, plus interest from the date the Merger was consummated until the date of payment, upon receipt by Illinois Power of the certi5 cates representing such shares. DIinois Power will include with such payment a written explanation of the manner by which the interest was calculated. If the shareholder does not agree with the Illinois Power estimated fair value or amount of interest, the shareholder must notify hlinois Power in writing, within 30 days after delivery of the Illinois Power statement of fair value, of the shareholder's estimated fair value of such shares and amount ofinterest, and demand payment of the difference bets sen the shareholder's estimate and (a) the amount paid by Dhnois Power or (b) the proceeds (or the amount deemed to be proceeds) of the sale by the shareholder, whichever is applicable because of the option sele.:ted by Elinois Power, as described above. If, within 60 days after delivery to Ulinois Power of the shareholder's noti 5 cation of estimated fair value and amount ofinterest, Elinois Power and the shareholder have not agreed in writing on the fair value of the shares or amount of interest, Illinois Powe shall either pey the shareholder the difference between the respective estimated values or fila a petition in the Circuit Court of Macon County, Elinois, requesting the Court to determine the fair value of the shares and 16 13CHl4874 It1!NOfS POWER S-4 Proof 2 Vlarrin CorporstWChicago (312) 930-2700 USER 6]P3634CHl93.93CH14874]F487aD.;6

-v- .. ~,. n> ~, ~i ( I 'ERkalCORPORATION NETWOFK COMPOS!OON SYSTEM DRASMUSSEN # ll-NOV-93 04 55 tl5ER6 JP304CH193 01CH14s74)F4BND. 6 4 AGES [ PACER PSTYLr.$1LFM i 5La QQ.GAE1EST FMT f4 e oD*/ oD Fone DDI oD VJ Leq 9 Ctr o C Cl* sum. 2t*51 ,I i amnuM efinterrat. If the Court determines that the fair value of the shares plus interest exceeds the amount paid by Illinois Power or the proceeds of the sale of shares, as the case may be, the dissenting shareholder shall be entitled tojudgment for the amount of the excess. The Court may also assess the costs of the proceeding against either niinois Power or one or more dissenting shareholders, upon making certain findings. j in connection with the Merger, Illinois Power intends to reserve the right to elect, with respect to - .l Common Stock and Preferred Stock for which there is a public market, (a) to offer to pay to dissenting shareholders the original estimate of Ulinois Power of the fair value of such shares and to pay any i additsord amount agreed upon by Illinois Power and the shareholder or ordered by the Court to be paid by Elinois Power to the shareholder as provY ? in the Elinois Business Corporation Act, or (b) to direct a dasenting shareholder to sell his or her L is and to pay only that amount,if any, in excess of the proceeds of such sale (or the amount of proceeu deemed to have been received) as rnay be agreed j upon by Blinois Pcwer and the shareholder or ordered by the Court to be paid by Illinois Power to the shareholder as provided in the Blinois Business Corporation Act. With respect to any Preferred Stock for which there is no public market, Illinois Power does not have the option described in (b) of the pnceding sentence and it will pay to dissenting holders of such sharer the fair value of such shares determined as described herein. I In perfecting a sharebalder's right to dissent, neither a vote against approval of the Merger Agreement nor a proxy directing such a vote will be deemed to satisfy the requirement that a wntten demand for payment be delivered to Ulinois Power pr2or to the taking of the vote thereon. However, a shareholder who has delivered such written demand before the taking of the vote thereon will not be deemed to have waived his or her right to dissent either by failing to vote against approval of the l Merget Agreement or by failing to furnish a proxy directing such vote. Under the Merger Agreement, the H!inois Power Board of Directors has the right to abandon the Merger for any reason (even after shareholder approval), and such right may be exercised if the Elinois Power Board of Directors considers the aggregate cost of purchasing dissenting shares to be unacceptable. s Effectiveness of the Restructuring ) After the Ulinois Power shareholders have approved the Merger Agreement, satisfacton orders cf i the SEC, FERC and NRC have been received, and all other conditions to the Merger have been satis 5ed or waived, Elinois Power and Merging Corp will Ele Articles of Merger with the Ulinois r Secretary of State. The Merger will thereafter become efTective on the date that the Elinois Secretary - 5 [ of State issues a Certificate of Merger in accordance with the Hlinois Business Corporation Act. ] j Exchange of Stock Cc-tificates j If the Merger is effected, it will not be necessary for holders ofIllinois Power Coomon Stock to I exchange their existing stock certificates for certificates for Holding Company Commaa Stock. The 5 certi5 cates which presently represent outstanding shares ofIllinois Power Common Stock will auto. { matically represent shares of Hold'ng Company Common Stock. New certificates bearing the name r "IP Holding Company" will be issued in the future if, and as, certi5 cates representing presently outstanding shares of Blinois Power Common Stock are presented for exchange or transfer. l rederal locome Tax Consequences { The Merger Agreement provides that the proposed restructuring will not occur unless Illinois Power receives either a ruling from the Internal Revenue Service or an opimon of counsel, satisfactory j to the Board of Dinctors, with respect to the Federal income tax consequences of the Merrer. Elinois Power does not expect to apply for such a ruling because it has received an opinion from its counsel, Sidley & Austin, regarding Federal income tax consequences of the Merger, to the effect that: (1) no gain orloss will be recognized by non-dissenting holders of Blinois Power Common f Stock epon the conversion ofIllinois Power Common Stock into Holding Company Common Stock in the Merger; l f l 1s I -t .j 6 i L 33CHl4874 ILtJNOIS POWER S-4 Proof 2 r Gerrill Corporation / Chicago (312) 930-2700 USER 6:[P3634CHf 93.93CHl4874]F48740.;6 l r j 3.e.

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1ERP.111 CDRPOR AT10N hTTWOR K COMPO$rr10N SYSTEM DRA5Mt'SSEN // 11-NOV-9) (A55 USER 6 iPM34CH193 93CH14s74) Gas 74A ;0 f

-f aces teacta PsTYLts1Knt B5T.! pagifra fLGARTEST nf7 Fne ??0D*I MD hwn oW oD VJ R seq I Ctr o C Cthwn 33936 t i ) (2) no gain or loss will be recognized by non-dissenting holders ofIllinois Power Preferred j Stock as a result of the Merger; t '3) the basis of the Holding Company Common Stock deemed received in the Merger by non-i dissenting holders ofIllinois Power Common Stock wdl be the same as the basis of the Illinois -{ Power Common Stock converted into such Holding Company Common Stock in the Merger; [ (4) the bolding period of Holding Company Common Stock deemed received in the Merger f by non-dissenting holders of Ulinois Power Common Stock will melude the period during which they held the Illinois Power Common Stock converted into such Holding Company Common i Stock in the Merger, provided such Illinois Power Common Stock is held as a capit.al asset by such l holders at the effective time of the Merger; i (5) no gain or loss will be recognized by Holding Company or Ulinois Power as a result of the 1 Merger; and (6) Holding Company, Elinois Power and all current Illinois Power subsidiaries will be j entitled to Ele a consolidated Federal income tax return foilowing the Merger. .l Holders of Hlinois Power Common Stock and Ulinois Power Preferred Stock who contemplate dissenting from the Merger should consult their tax advisors concerning t he tax consequences thereof. IJsting of Holding Company Common Stock .{ Holding Company will apply to have its Common Stock listed on the New York and Chicago Stock Exchanges. It is expected that such listings will become efTective on the efTective date of the Merger, subject to the rules of the New York and Chicago Stock Exchanges. )i Regulation of Holding Company Holding Company, as the owner of the Illinois Power Common Stock and, indirectly,20% of the i EEI common stock, will be a holding company under the 1935 Art. However, Holding Company will be exempt from all provisions of the 1935 Act except Section 9(aX2) thereof, which would require prior i SEC approval of the direct or indirect acquisition by Holding Company of 5% or more of the voting securities of any other electric or gas utihty company. There are also linuts on the extent to which Holding Company and its non-utility subsidiaries can enter into businesses which are not " function-l ally related" to the Blinois Power electric or gas utility businesses without raising questions about i Holding Company's exempt status. SEC policies regarding the scope of permissible non-utility activi. ties of a public utility holding company are subject to change but guidelines established in prior 3 decisions of the SEC would require Holding Company to remain engaged primarily and predomi-t nantly in the electric utility business and to limit the size ofits activities outside of such business relative to Holding Company as a whole. [ Holding Company has no present intention of becoming a registered holding company subject to { regulation by the SEC under the 1935 Act. Management The diers of Elinois Power will also become the directors of Holding Company at the efTective time of the Merger, and they will thereafter serm as the directors of both companies. If the Illinois i Power shareholders approve the Merger Agreement, they will be considered also to have ratiSed the i election of such persons as the directors of Holding Company. Until the Merger becomes effective, Larry D. Haab, Chairman, President, Chief Executive OfLcer and a dPector ofIllinois Power, will be the only director of Holding Company. l t f 18 P I i 3CH14874 It.LINots POWER S-4 Proof 2 territt Corporation Chicago (312) 93D 2700 U$ER6:[P3634CHIB3.93CHlaB74)C4874 A.;9 r e p .i i i

- i ? !.RkR1 CORPORATION NL'TWORK COMPO5rr10N sYSTFM DR ASMUSSEN # 11-NOP.9) De !$ USIR6 IPM34CHl93 93CHl4874pO4s7414.6 14CES ff"AoER PSTY!I$)KTM BET.1 pepfrm ELGARTr5T TMT Free dad */ WO Face atv UD U k heq 2 Cir o C Clasonr 32465 ) f f f i I The current executive ofEcers of Holding Company are also executive of5cers of Illinois Power. The Holding Company executive ofheers are: i r Larry D. Haab Chairman, President and l Chief Executive Officer j Leah Manning Stetner Secretary and Treasurer } Information concerning Elinois Power executive officers and Ulinois Power directors elected at -l the 1993 annual meeting ofIllinois Power shareholders is incorporated by reference in the Blinois ) Power Annual Report on Form 10.K for the year ended December 31,1992, which is incorporated .y herein by reference. Postponement of Annual Meeting [ The Board of Directors of Elinois Power has postponed the 1994 Annual Meeting ofits Sharehold-l era until a date which is subsequent to, and will be established by such Board of Directors after, the effective date of the Merger. The holders ofIllinois Power Preferred Stock and Holding Company, as i 7 the only holder of Illinois Power Common Stock, will after the Merger be the only Shareholders entitled to vote at the Ulinois Power 1994 Annual Meeting for the election of Elinois Pe -er directors I and any other matters which may be considered at such meeting. The first annual roceting of the holders of Holding Company Common Stock will be scheduled for April 1995, at which time such holders will be entitled to vote for the election of Holding Company directors. Holding Company Capital Stock t j Aut/2orized. The authorized mpital stock of Holding Company consists of 200 million shares of f Common Stock without par value, the provisions of which are included in the Holdmg Company Artides of Incorporation attached to this Prospectus and Proxy Statement as Exhibit C i Common Stock. Holders of Holding Company Common Stock are entitled to receive (a) dividends when, as and if declared by its Board of Directors, and (b) all of the assets of Holding Company available for distribution on a pro rata basis upon its liquidation, dissolution or winding up, after the payment of all debts and other obligations. 8 Each share of Holding Company Common Stock entitles its holder to one vote on matters properly submitted to a vote of Holding Company shareholders and, like the holders of Elinois Power l Common Stock, they have the right to cumulate their votes in elections of directors. s Except for differences described under " Comparative Shareholders' Rights," the provisions of ,I the Articles ofIncorporation of Holding Company which establish the rights of the holders of its Common Stock are essentially the same as those in the Restated Articles ofIncorporation ofIllinois I* Power. No holder of Holding Company Common Stock 1as any preemptive or preferential nght to subscribe for any additional issue of Holding Company Common Stock or to subscribe for any security convertible into Holding Company Common Stock. No redemption, conversion or sinking fund provi. sions are apphcable to shares of Holding Company Common Stock. i The Holding Company Common Stock issued in the Merger will be fully paid and nonassessable. 1 Comparative Shareholders' Righ6 j Ulinois Power and Holding Umpany are both Illinois corporations. When the Merger becomes effective, holders of Ulinois Power Common Stock will become holders of Holding Company Common Stock, and their rights will be goverr.*d by the Articlea ofIncorporation of Holding Company (" Hold-ing Company Articles")instead of the Restated Articles ofIncorporation of Ulinois Power, as amended ("Ulinois Power Articles"). Holding Company Articles have been prepared in accordance with the Illinois Business Corporation Act and give the Holding Company broad corporate powers to engage in any lawful activity for which a corporation may be formed under the laws of the State ofIllinois. A l copy of Holding Company Articles is attached as Exhibit C to this Prospectus and Proxy Statement. I 5 19 l 6 ) ICH14874 ILLJNOIS POWER S-4 Proof 2 errm CorporationChicago (312) 930-2700 @) USER 6:{P3634CHt93.93CHl4874]G4874B.;6 i .i 1

11 RILL CORPOR ATKW NETWORK COMPOSITION 5YSTEM DRASMUSSEN F llWOV.93 (ASS t.SERfdP3634CHl93 93CHl4s74)Ga874B ;6 uCES {PAGFR PSTYLE5)KFM isST 1 pag %uiTaCARTESTFMT Few MID4 360D Foot oDI OD YJ R Seq 3 Ctr o C Chnt $344 Certain differences between the rights of holders of Holding Company Common Stock and those of holders ofIllinois Power Common Stock are summarized below. Prrferred and Preference Stock. Holding Company Artides do not authorire any class of stock other than Common Stock. In addition to the presently outstanding shares of Elinois Power Preferred Stock, there are currently 3,459,700 and 5,000,000 authorized but unissued shares ofIllinois Power Preferred Stock and Ulinois Power Preference Stock, respectively, which may be issued in series having such rights and preferences as may be designated by the Illinois Power Board of Directors. In addition to actions required by Illinois law to be taken by the Elinois Power Board of Directors, shares of Dhnois Power Preferred Stock may be issued onlyifeither (i) the holders of at least two-thirds of the total number of outstanding shares of Ulinois Power Preferred Stock consent to such issuance, or (ii) the net income ofIllinois Power plus the gross amount deducted for interest on all interest bearing indebtedness of Illinois Power in determining net income for a period of 12 consecutive calendar. months within the 15 calendar months immediately praeding such issuance to be available for the payment ofinterest, is at least one and one. half times the sum the annual interest charges on all interest bearing indebtedness of Ulinois Power and the annual dividend requirements on all outstand-ing shares of Ulinois Power Preferred Stock (including the shares proposed to be issued); the foregoing computation is subject to ad ustments and qualiScations which are set forth in the Illinois Power J Artides. No shares of Elinois Power Preference Stock presently are outstanding, and there are no restrictions on the issuance of such Stock except for actions required by Ulinois law to be taken by the Ulinois Power Board of Directors. Common Stack. Holding Company Articles authorire the issuance of 200,000,000 shares of . Common Stock whereas Elinois Power Articles presently author:ze the issuance of100,000,000 shares i of Common Stock. There are 75,643,937 shares of Ulinois Power Common Stock currently issued and - outstanding. There will be the same number of shares of Holding Company Common Stock issued and outstanding immediately after the Merger, as the number of shares of Elinois Power Common Stock which are issued and outstanding immediately prior to the Merger. The additional authorized but unissued shares of Holding Company Common Stock could be used for stock splits or for acquisitions. Although it is not the intention of Holding Company to issue additional shares immediately, the availability of such additional authorized but unissued shares of Holding Company Common Stock might have certain antitakeover effects, such as discouraging a person from making a tender offer for shares of Holding Company Common Stock or otherwise attempting to obtain control of Holding Company, even though such an attempt could be benencial to Holding Company or its share holders. Indemnification and Liability. Holding Company Articles require Holding Company to indem-nify its directors, ofSeers, employees and agents in certain cases to the full extent permitted by law. Holdmg Company Articles also authorize it to enter into agreements with its ofScers, directors, employees and others to provide for indemnification. Elinois Power Articles contain no provisions relating to indemniScation; however, its Bylaws require Blinois Power to indemnify its directors, ofScers, employees and gents in certain circumstances. Amendments to the Ulinois Business Corporation Act permit Elinois corporations to include in their Articles ofIncorpcention on or after January 1,1994, provisions which eliminate the personal liability of directors for monetary damages for breaches of fiduciary duties as a director, subject to certain exceptions set forth in such Amendments. The Holding Company Articles will be amended by action of Elinois Power, as the sole shareholder of Holding Company, after January 1,1994, and before the effective date of the Merger, to include such provisions; the Holding Company Articles which are attached to this Proxy Statement and Prospectus as Exhibit C include such provisions and will be the Holding Company Articles at the effective date of the Merger. Purpose Clause. Although the Ulinois Power Articles speciScally state that Illinois Power may engage in electric and gas utility and related businesses, the Ulinois Power Articles also authorire 2D 3CH14874 Ilt.INOIS POWER S-4 Proof 2 iemti Corporation' Chicago (312) 930-2700 USER 6]P3634CHl93.93CHl4874]G4674C.;26 c

j i ERRILI. COP.PORATION NETWORK COMPOSITION SYSTEM DRASMUSSEN II li.NOV.93 0435 l'SEF6 fr3634CH193 93C1814874)G4574C.36 f 1 AGES (PAGER PSTYLESlKn1 BST.1 pagtimt EDGARTESTFMT Frer 1320D*/ 36f0D Fms oDr oD VJ R Twq 4 Clr o C Chisum- $5161 r i.j 1 i -{ t Illinois Power to engage in any business which is permitted by Illinois law. Holdmg Company Arti-l cles simply authorize Holding Company, as permitted by the Illinois Business Corporation Act, to engage in any and all. lawful businesses. j Stock Plans If the Merger is consummated, the Illinois Power Automatic Reinvestment and Stock Purchase Plan, Emp!oyee Stock Ownership Plan, Incentive Savings Plan. Incentive Savings Plan for Employees f Covered by a Collective Bargaining Agreement,1992 Long-Term 1ncentive Compensation Plan, Exec. utive Incentive Compensation Plan, Deferred Compensation Plan for Certain Directors, and Stock Plan for Outside Directors will be amended to provide that Holding Company Common Stock (or stock j units) will be delivered instead of Illinois Power Common Stock (or stock units) pursuant to such Plans. By approving the Merger Agreement, the Illinois Power shareholders will be considered also to l have ratified the amendment of such Plans to provide for the delivery of Holding Company Common { Stock thereunder. l Transfer Agent and Registrar The ".ance Agent and Registrar for Illinois Power Common Stock is Illinois Power. The I Transfer Agent and segistrar for Holding Company Common Stock is expected to be -i Illinois Power Common Stock Market Prices and Dividends i Ilhnois Power Common Stock is listed and principally traded on the New York and Chicago Stock Exchanges. The table below sets forth the dividends declared per share and the high and low sales i prices per share of Illinois Power Common Stock for the periods indicated as reported in The Wall Street Journal as New York Stock Exchange - Composite Transactions. N b8' f twends j twed inan to. 1991 30.00 $18% $15% l First Quarter 4 Second Quarter. 0.00 20 18 % [ 0.00 21% 18 % Third Quarter..... j Fourth Quarter. 0.20 24 % 20% 1992 l First Quarter. $0.20 $25 $20% 1 Second Quarter. 0.20 23% 20 % Third Quarter. 0.20 25% 19% i Fourth Quarter. 0.20 22 % 20% 1993 i Pirst Quarter $0.20 $24 $21% .j 0.20 25% 22% Second Quarter. Third Quarter.. 0.20 25% 24 % Fourth Quarter. 020 i fthrough December,1993) 1 1 -l I 21 3CH14874 ILUNots POWER S-4 Proof 2 terrill Corporation / Chicago (312) 930-2700 tlSER6:{P3634CHl93.93CHl4874]G4874C.;26 I -l

TRRE.1 CORPORATION NTTWOP K COMPOSITION SYSTEM DRASMUS50.N // 13-NOV 93 os 55 USER 6 fr)634 CHI 9193CHids14]G4874C.,26 AAGES (P4GER PSTYlI51KFM BST.1 pag $fras EDG ARTTISTFMr Fne-sDD*/ %0D Foot-oIN oD VJ R Seq S Ctr o C Chksunt 31t09 Illinois Power Preferred Stock Market laformation Each Series ofIllinois Power Preferred Stock (except for the 7.75% Series) islisted and principally ' traded on the New York Stock Exchange. The table below sets forth the high and low sales prices per share of Illinois Power Preferred Stock of such Series for the periods indicated as reported in The Wall Street Journal as New York Stock Exchange - Composite Transactions. Uttonis Power Preferred Stock 4.0H 4J6% 4.7W 4.42% 4.2M s.24 % Eertes 6eries Senes $erses fwries Series High 1Aw High Imo High imw H6th Ame High imw High low 1991 First Quarter. , $23% 20% 23% 21 25% 23 24 21 % 24 % 20 % 44 % 39 Second Quarter. 23% 21% 244 22 27 22 25 23% 24 % 22% 45% 43 Third Quarter. 244 22% 25% 23 28% 24% 26% 24 25% 23 48% 43% ~ Fourth Quarter. 26% 24 26% 24 % 28% 25% 27 25 26 24% 49 45% 1992 First Quarter. . $26 24% 26% 25 29% 27% 26% 264 26% 24% 50 47% Second Quarter. 264 23% 26 25% 29% 27 27% 26% 264 25% 50% 47 Third Quarter.. 27 24% 28 25 30% 27% 28% 25% 27 23% 51 46% Fourth Quarter. 26% 24% 28 24 % 30% 25% 28 26 27 25 51 454 1993 First Quarter.. , $27% 25% 29% 25 30 28 29% 26% 28% 25% 51% 47% - Second Quarter.. 30% 254 2B% 26% 34% 29 30 27 30 26% 53 50 Third Quarter. 31 27 32 29 34 % 30 % 32 29% 33 27% 53 50 % Fourth Quarter.. 1 (through December,1993) Ilhness Power Preferred block (conu 7.$n sm%(1) s.9%G) hertes bettes Ser6es heries berles AG) B03 Huth I.aw High 1Ae High 1me High 1sw High 1me 1991 . $41 37 43 39% 93 93 33% 30% 39 35% First Quarter.. Second Quarter 41% 39% 45% 42 - - 34 % 32 43% 37% Third Quarter 44 % 40 47 43 102% 101 36% 33 45 41% Fourth Quarter. 46% 42 48 44% 101 100% 39% 35% 46% 43% 1992 First Quarter... .. $47 44 49% 46% 103% 103 40% 37% 50% 45% Second Quarter.. 47% 44% 49% 48 103% 101 42 39 50% 48% Third Quarter 48 44 % 51 45 104% 101 44 % 37 % 51 48 Fourth Quarter. 47 43 % 51 44 % 103 103 44% 35% 49 45% 1993 First Quar:er. .. $50 44% 52% 47 - 52% 38% 51 47 Second Quarter 52% 47% 52% 50 - - 45% 41% 52% 50% 52 49 52 % 50 103% 1034 47% 44% 53 50% Third Quarter. Fourth Quarter. (through December,1993) (1) $50 par value per share (2) no par value (3) Adjustable Rate The 7.75% Series ofIllinois Power Preferred Stock was issued on June 10,1993, and is traded on a limited and sporadic basis in the over-the-counter market, but prices are not quoted in any automated 22 3CHl4874 ILLINOIS POWE.R S.4 Proof 2 ierrill Corporation / Chicago (312) 9304700 USER 6:[P3634CHt93.93CHH674)G4874C.;26 E .a i

.m ~ ~ - ~ ~, n n.- ~ - ? . CRRILL CORPOR ATION NETWORK COMPO5rriON SY$7EM DRA5MUSSEN # ll-NOLv3 os3$ USER 6JP3634CHf93 93CH14874)G4574CJ6 _ s 1 AGE % [PAGERMTYLE5] KIN B5T.1 fegifnu EICARTESTIMT Fw 2523DM/ oD Font oIW oD V3 R Seg 6 Clr o C Clesum 10403 ~ v i i quotation system. The everage of the high and low per share bid prices for shares of such Se- - ( ries through December ,1993, were 5 and 5 , respectively, based on information provided to Illinois Power by a firm which deals in sharea of such Series. j legal Opinions Certain legal matters relating to the issuance of the Holding Company Common Stock in the [ Merger will be passed upon by Sidley & Austin, One First National Plaza, Chicago, Illinois 60603. Experts 5' The audited financial statements incorporated in this Prospectus by reference to the Company's Annual Report on Form 10-Y, for the year ended December 31,1992 have been so incorporated in reliance on the report (which contains an explanatory paragraph relating to the outcome of various uncertainties related to the Clinton Power Station described in Note 2 to the financial statements) of j Price Waterhouse, independent accountants, given on the authority of said firm as experts in auditing and accounting. l Transaction of Other Business { As of the date of this Prospectus and Proxy Statement, management knows of no matters to be f brought before the Spocial Meeting other than the matter referred to in this Prospectus and Proxy i Statement, If, however, further business is presented, the proxy holders will act in accordance with their best judgment. { By Order of the Illinois Power Board of Directors i LEAH MANNLNG STETZNER, Uce hrsider.t, General Counsel and i ? Corpomte Secirtary Decatur, Illinois December,1993 l d i l 1 i E f i 23 3CH64874 ILLINOIS POWER S-4 Proot 2 errHI Corporation / Chicago (312) 930-2700 USER 6:[P3634CHt93.93CH14874)G4874CJ26

~ i TERR!LL CDRPORATION NI TwORK COMPOSTTION SYSTEM DRASMUSSEN // 11.NOV-93 04:55 U$ER6JP3634CHl93 93CH14874JHH4874A,lo STAGES (PACER PSTYLES)KFM ILET.! pagMna EDG ARTEST FMT Fne s0!W 120D Fom oty CD V3 R Seq l Ctr 0 C ChLsma % 493 i t l t EXHIBIT A AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (" Agreement")is dated as of November 12, i 1993, between Ulinois Power Company, an Illinois corporation (" Illinois Power"), and IP Merging Corporation, an E!inois corporation (" Merging Corp."). ~ + WITNESSETH t %11EREAS, Illinois Power has an authorized capitalization consisting of: f (i) 100,000,000 shares of Common Stock without par value ("Ehnois Power Common Stock"), of which 75,643,937 shares were issued and outstandmg at November 12, 1993; (ii) 5,000,000 shares of Preferred Stock, par value $50 per share, and 5,000,000 shares of ( Preferred Stock without par value (collectively, " Illinois Power Preferred Stock"), of which 4,150,000 shares and 2,390,300 shares, respectively, were issued and outstanding at Novem. 't ber 12,1993; and i (iii) 5,000,000 shares of Preference Stock without par value (" Illinois Power Preference i Stock"), none of which were issued and outstanding at November 12,1993; and MTIEREAS, Merging Corp. has an authorized capitalization consisting of 100 shares of Common l Stock without par value (" Merging Corp. Common Stock"), all of which are issued and outstanding + and owned beneficially and of record by IP Holding Company, an Elinois corporation (" Holding j Company"); and j %71EREAS, Holding Company has an authorized capitalization consisting of 200,000,000 shares of Common Stock without par value (" Holding Company Common Stock"), of which 100 shares are i 'asued and outstanding and owned beneficially and of record by Illinois Power; and i \\ x WHEREAS, the Boards of Directors of Elinois Power, Merging Corp. and Holding Company, deem - j it advisable for Merging Corp. to merge with and into Blinois Power (" Merger".) in accordance with the Illinois Business Corporation Act of 19S3, as amended ("Act"), and this Agreement; and WHEREAS, Elinois Power, Merging Corp. and Holding Company have entered into a Supplemen-tal Agreement dated as of November 12,1993 (" Supplemental Agreement"), pursuant to which Holding Company has agreed, among other things, to issue shares of Holding Company Common Stock upon the conversion of Elinois Power Common Stock in the Merger. j NOW THEREFORE,in consideration of the premises and the representations, warranties and agreements herein contained, Illinois Power and Merging Corp. agree that Merging Corp. shall merge with and into Illinois Power, Elinois Power shall be the corporation surviving the Merger and the terms and cond:tions of the Merger, the mode of carrying it into effect and the manner and basis of j converting shares in the Merger shall be as follows: j t ARTICLE 1 ? Tite MERGER l (a) Subject to and in accordance with the provisions of this Agreement, Articles of Merger shall be executed by Elinois Power and Merging Corp. and filed in the Office of the Secretary of State of Blinois as provided in Section 11.25(a) and 1.10 of the Act. (b) The Merger shall become effective at the time (" Effective Time") the Secretary of State of l Elinois issues a Certificate of Merger in a::cordance with Section 11.25(b) and 11.40 of the Act. (c) At the Effective Time, Merging Corp. shall be merged with and into Ulinois Power, Illinois I Power shall be and is designated as the surviving corporation and shall continue its corporate y l A.1 1 1 3 CHIC 870 ILUNOfS POWER S-4 Proof 2 errill Co'poratiori!CNcago (312) 930-2700 USER 6:[P3634CHt93.93CH14874]HH48748 ;B

_m., . _~ ._m , _ ~. t ERR!LL CORPOR ATION NETWORK COMPOstrlON SYSTEM DRASMt?SSEN // RNOV-93 005175ER61P3634CH193 03CH14B74}HH45748..B - 1 AGES [PAGER PSTYLFS!KFM BST.1 pq5fmr EDGARTIST FMT Frer 243D4 7s0D Fw.: oDr ob VJ R Seq 2 Clr o C Crasum. 42h43 l e I t s ? r . existence under the laws of the State of Elinois and the separate existence ofMerging Corp. shall cesse l (Illinois Power and Merging Corp, are referred to herein as the " Constituent Corporations" and Hlinois Power, the corporation designated as the surviving corporation, is referred to herein as the i " Surviving Corporation"). (d) Prior to and after the EfTeuive Time, Ulinois Power and Merging Corp., respectively, shall take all such action as may be necessary or appropriate in order (i) to effect the Merger, and j (ii) thereaner to carry out the purposes of this Agreement to vest in the Surviving Corp' oration all the j rights, privileges, immunities and franchises, as of a public or a private nature, of each Constituent t Corporation; and all property, real, personal and mixed, and all debts and all chooses in action, and all and every other interest, of or belonpng to or due to, each Constituent Corporation, and the of5cers and directors of each Constituent Corporation as of the Effective Time shall take all such action. AKDCLE H f TEnMs Or cOWERSION OF SHARES f At the Effective Time: (a) Each share of Elinois Power Common Stock issued and outstanding immediately prior to the Effective Time shall thereupon, and without the surrender of the stock certi5cate therefor or any other action on the part of the holder thereof, be changed and converte,d into one fully paid and nonassessable share of Holding Company Common Stock; (b) The shares ofIllinois Power Preferred Stock issued and outstanding immediately prior [ to the Effective Tune shall not be changed, converted or otherwise affected by the Merger, and each such share shall continue to be issued and outstanding and to be one fully paid and

nonassessable share of the particular series of Ulinois Power Preferred Stock of the Surviving n

Corporation; f (c) The ahares of Merging Corp. Common Stock issued and outstanding immediately prior [ to the Effective Time shall be changed and converted into the number of shares of Elinois Power Common Stock issued and outstandmg immediately prior to the Effective Time, which shall thereupon be issued and fully paid and nonassessable shares of the Surviving Corporation; (d) Each share of. Holding Company Common Stock issued and outstanding immediately j prior to the Effective Time shall be cancelled and retired and all rights in respect thereof shall i cease; and j (e) As provided in the Supplemental Agreement, (i) the Illinois Power Company Automatic Reinvestment and Stock Purchase Plan, Employee Stock Ownership Plan, Incentive Savings. l Plan, Incentive Savings Plan for Employees Covered by a Collective Bargaining Agreement,1992 P Long-Term Incentive Compensation Plan, Executive Incentive Compensation Plan, Deferred Compensation Plan for Certain Directors, and Stock Plan for Outside Directors (collectively, the " Plans") will be amended to provide for the delivery of Holding Company Common Stock (or stock units)instead of Illinois Power Common Stock (or stock units) thereunder. Each right to I acquire shares of Dlinois Power Common Stock, including, without limitation, rights (including l 1 stock options) to acquire Illinois Power Common Stock pursuant to any of the Pians, granted and j outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without j any action on the pan of the holder thereof, be converted into and become a right to acquire the } same number of shares of Holding Company Common Stock at the same price per share, and upon i the same terms and subject to the same conditions as were applicable immediatelprior to the .j Effoetive Time under the relevant right; and (ii) Holding Company shall reserve n, umber of I shares of Holding Company Common Stock for purposes of the Plans as is equal tt. # number of I shares of Uhnois Power Common Stock so reserved as of the Effective Time. 1 I A-2 t j h i I f ICHM874 ILLINOIS POWER S 4 Proof 2 l orr!H CorporationChicago (317) 930M00 USER 6:[P3634CHf 93.93CH14874]HH4674EuS l + a c

. ~. .~.- - - n .-~ ~ . u_ a ~. + l ff.RRE1 CORPOR ATION NETWORK CDMPOSrDON SYSTEM DR ASMU$5EN // II.NOV-93 os.55 USER 6 (P%34CH103 93CH14s74)HH4874B ;l 4 - 4AMS {PAGER PSTYLE51KFM BST.! yarlfmt Er0 ARTIIT FMT Frer 1s:lD*f 420D Foca oD/ OD VJ R seg 3 Cir 0 C Chisum 44479 ' i a I 1 J ARTICLE 111 Articles ofincorporation and Bylaws .~1 (a) From and after the E&ctive Time, and until thereafter amended as provided by law, the l Restated Articles of 6:orporation of Ulinois Power as in effect immediately prior to the Effective Time t shall be and continue to be the Restated Articles ofIncorporation of the Surviving Corporation. l 1 (b) From and aner the Effective Time, the Bylaws of Elinois Power as in efTect immediately prior j to the E&ctive Time shall be and centinue to be the Bylaws of the Surviving Corporation until l amended. j i ARTICIIIV Directors and Officers The persons who are directors and officers of Illinois Power immediately prior to the Effective Time shall continue as directors and officers, respectively, of the Surviving Corporation and shall continue to hold office as provided in the Bylaws of the Surviving Corporation. If, at or following the Effective Time a vacancy shall exist in the Board of Directors or in the position of any ofheer of the l Surviving Corporation such vacancy may be filled in the manner provided in the Dylaws of the Surviving Corporation. i ARTICLE V l j Stock Certificates Following the Effective Timt., each holder of an outstanding certi6cate or certificates theretofore representing shares ofIllinois Power Common Stock may, but shall not be required, to surrender the same to Holdmg Company for cancellation and exchange or transfer, and each such holder or trans-feree thereof will be entitled to receive a certificate or certificates representing the same number of shares of Holding Company Common Stock as the number of shares of Elinois Power Common Stock previously represented by the stock certificate or certificates surrendered. Until so surrendered for I canceWtion and exchange or transfer, each outstanding certificate which, prior to the EfTective Time,- i represented shares of Blinois Power Common Stock shall be deemed and treated for all corporate purposes to represent the ownership of the same number of shares of Holding Company Common ? Stock as though such surrender for cancellation and exchange or transfer thereof had taken place. The stock transfer books for Illinois Power Common Stock shall be deemed to be closed at the Effective i Time, and no transfer of shares of Blinois Power Common Stock outstanding immediately prior to the r Effective Time shall thereafter be made on such books. Following the Effective Time, the holders of certificates representing Bhnois Power Common Stock outstanding immediately before the Effective Time shall cease to have any rights with respect to stock of the Surviving Corporation and their sole rights shall be with respect to the Holding Company Common Stock into which their shares of Ulinois Power Common Stock shall have been converted in the Merger, j ARTICII VI ~ Conditions to the Merger Consummation of the Merger is subject to the satisfaction of the following conditions: fa) The Merger shall have received such approval of the shareholders of each Constituent Corporation entitled to vote thereon as is required by the Act and the Articles ofIncorporation of l cach Constituent Corporation. -{ i (b) There shall have been obtained either a ruling of the Internal Revenue Service satisfac-tory to the Board of Directors of Blinois Power and its counsel, or an opinion of counsel satisfac- [ tory to the Board of Directors of D1inois Power, with respect to the tax consequences of the Merger and other transactions incident thereto. l I A-3 i i t 3CHl4874 ILUNOIS POWER S-4 Proof 2 r I - 9errG CorporationtChicago (312) 930-2700 (3; USER 6;{P3634CHf93.93CHl4874]Mn4874C.;11 t t ? -..,. ~

.n. ~,. -.... ~ - -= cn.,.. . r P i 1 ERRn L CORPOR AT10N NETwokK COMPOSTTION 5YSTEM DRA5MU$$EN/I 11.NOV-93 04 $$ USER 6 [PM)4CH193 93OH4B74]HH4814C.11 + 1 AGES iPACEk PSTYllS!KFM BST.I pagUns EDGAR 1TST FMT Free 1323DM/ DD Fuor DDt oD V3 R Seq 4 Or 0 C OAnm 3WuS j i t (c) The Elding Company Common Stock to be issued and to be reserved for issuance as a result of the Merger shall have been approved for listing, upon of5cial notice of issuance, by the New York and Chicago Stock Exchanges.. (d) A registration statement or registration statements relating to the shares of Holding Company Common Stock to be issued or reserved for issuance as a result of the Merger, shall be effective under the Secunties Act of 1933, as amended, and shall not be the subject of any "stop order." (e) Elinois Power shall have received all consents, approvals and legal opinions m form and substance satisfactory to Ulinois Power, that are necessary or appropriate for the consummation of the Merger and all other transactions contemplated thereby. f i (O There shall be no litigation, proceedings or actions ponding or threatened conerning the [ Merger which in the judgment of the Board of Directors ofIllinois Power renders consummation of the Merger inadvisable. r ARTICE VII Amendment, Waiver and Tennination l 'f (a) Illinois Power and Merging Corp. by mutual consent of their respective Boards of Directors may amend, modify or supplement this Agreement or waive any condition set forth in Article VI hereofin such manner as may be agreed upon by them in writing, at any time before or after approval i of this Agreement by the shareholders of Blinois Power:provic ed, however, that no such amendment, u modification, supplement or waiver shall,in the solejudgment of the Board of Directors ofIllinois i Power, materially and adversely affect the rights of the shareholders ofIllinois Power. (b) Consummation of the Merger may be deferred by the Board of Directors of Elinois Power or M-any authorized officer of Illinois Power for a reasonable period of time if said Board or officer determines such deferral would be in the best interest of Illinois Power or its shareholders. (c) This Agreement may be terminated and the Merger and other transactions herein provided I for abandoned at any time, whether before or after approval of this Agreement by the shareholders of I Ilhnois Power, by action of the Board of Directors ofIllinois Power if said Board of Directors deter. i mines for any reason that the consummation of the transactions herein provided for would for any reason be inadvisable or not in the best interests of Illinois Power or its shareholders. } ARTICE VIII Miscellaneous (a) This Agreement may be executed in counterparts, each of which when so' executed shall be i deemed to be an original, and such counterparts shall together constitute but one and the same instrument. (b) This Agreement shall be governed by. and construed in accordance with, the laws of the State of Ilhnois. [ t I i 'T i t i A-4 { t i i I ~ l e 3CH14874 liitNO1S POWER S-4 Proof 2 terrill Corporanonthicago (312) 930 2700 USER 6:[P3634CHl93.93CHl4874]HH4874C.;11 ? t i 1 9 y..nv. r e

.... ~., .. -. -. ~. - -... t ERRR1 EDRM) RATION hTTWORK COMPOSITION SYS17.M DRASMUSSEN t/ 11-NOV-93 o4.53 U$ER673634CH193 9X.HI4s741HH4R74C.,it i 1 AGES IPAGER PSTYLIS:KFM BST.1 pagtfra EDGr kTEST FMT Free 324014tf OD Foot UDI DD Vik Seq $ Gr o C ChLsum: 2493 i 8 IN WITN ESS WHEREOE Illinois Power and Merging Corp., pursuant to approval and authoriza-l tion duly given by resolutions adopted by their respective Boards of Directors, have each caused this Agreement and Plan of Merger to be executed by its Chairman of the Board, its President or one ofits Vice Presidents and attested by its Secretary or one ofits Assistant Secretaries. l Illinois Power Company By Name:

Title:

i Attest: Name: i

Title:

Secreteey { IP Merging Corporation h By Name: [

Title:

Attest: .Name:

Title:

Secretary I i .i + ? [ i i A-5 s 3CH64874 ILt.INOIS POWER S-4 Proof 2

errtti Comoration/ Chicago (312) 930-27tc USER 6:{P3634CHl93.93CH14874]HH4874C.;11 h

u, ._ ~ ~. .m . ~ ,I ~I i .i IRRa1CORPOR ATION NETWORK CDMPOSITION SYSTEM DRASMUSSI'N f/ Il-NOV-93 Da 55 t'$f26F3634CHl43.93CHMF74}H4E744 10 1 ACES 1PAGER PETYLES!KPM RST.1 f*Fifrm EDG ARTESTFMT F,te 10D*/ 300D Fem oIV oD VJ R Sag 1 Or O C Clasum: 34&be. i i I -p .? I'XillBIT B j SUPPLEMDTAL AGREEMEST 4 THIS SUPPLEMENTAL AGREEMENT (" Agreement") is dated as of November 12,1993, be-tween Illinois Power Company, an IDinois corporation (" Illinois Power"), IP Holding Company, an IUinois corporation (" Holding Company") and IP Merging Corporation, an Ulinois corporation j (" Merging Corp."). WITNESSETH t WHEREAS, Elinois Power has an authorized capitalization consisting of: Il -i (i) 100,000.000 shares of Common Stock without par value ("Hiinois Power Common Stock"), of which 75,643,937 shares were issued and outstanding at November 12,1993 I (ii) 5,000,000 shares of Preferred Stock, par value $50 per share, and 5,000,000 shares of Preferred Stock without par value (conectively, "IDinois Power Preferred Stock"), of which 4,150,000 shares and 2,390,300 shares, respectively, were issued and outstanding at Novem-ber 12,1993; and (iii) 5,000,000 shares of Preference Stock without par value ("Blinois Power Preference Stock"), none of which shares were issued and outstanding at November 12,1993; and l 1 WHEREAS, Merging Corp. has an authorized capitalization consisting of 100 shares of Common

• l Stock without par value (" Merging Corp. Common Stock"), all of which are issued and outstanding E<

l' and owned beneScially and of record by Holding Company; and WHEREAS, Holdmg Company has an authorized capitalization consisting of 200,000,000 shares of Common Stock without par value (" Holding Company Common Stock"), of which 100 shares are - issued and outstanding and owned beneficially and of record by Illinois Power; and t WHEREAS, the Boards ofDirectors of Elinois Power, Merging Corp. and Holding Company, deem it advisable for Merging Corp. to merge with and into Dlinois Power (" Merger") in accordance with 9 the Dhnois Business Corporation Act of1983, as amended ("Act"), and the Agreement and Plan of Merger dated as of November 12,1993 (" Merger Agreement"), between Blinois Power and Merging l Corp. in which they have agreed to merge. { NOW THEREPORE,in consideration of the premises and the representations, warranties and agreements herein contained,IDinois Power and Merging Corp. agree that Merging Corp. shall merge i with and into Elinois Power, Ulinois Power shall be the corporation surviving the Merger and the j terms and conditions of the Merger, the mode of carrying it into effect and the manner and basis of j converting shares in the Merger shall be as set forth in the Merger Agreement. ARTICLE I. I TERMS OF CONVERSION OF SILARES At the time that the Merger becomes effective (" Effective Time"): (a) Each share of Elinois Power Common Stock issued and outstandingimmediately prior to .l the Effective Time shah thereupon, and without the surrender of the stock certificate therefor or any other action on the part of the holder thereof, be changed and converted into one fuDy psid and nonassessable share of Holding Company Common Stock; 4 (b) The shares of Merging Corp. Common Stock issued and outstanding immediately prior to the Effective Time shall be changed and converted into the number of shares of Ulinois Power Common Stock issued and outstanding immediately prior to the Effective Time, which shall thereupon be issued and fully paid and nonassessable shares of Elinois Power Common Stock; i B-1 i 33CHK874 ItLINDIS POWER S-4 Proof 2 Werrm Corporation /Chbago (317) 't3427DD USER 6:{P3634CHl93.93CHl4874]D4B748.;6 a (

2 .u ~m.- m_. m. I I

i

'ERRC1 CORPOR ATION NETwOk K COMPOSrrlON 5YSTEM DRASMUSSI.N t/ lbNOVM od 55 USER 6 ]P36MCH193 93CHl404;!!4874B :6 MOES TPACER PSTnIS]KfM BST.I pariftm EDGARTESTFMT Free foD*/ WiD Fxa oDr oD VJ R $eg 2 Clr D C CWum ' 5965 t \\ I l (c) Each share of Holdmg Company Common Stock issued and outstandmg immediately 6 prior to the Effective Time shall be cancelled, retired, and revert to an authorized but unissued t share of Holding Company Common Stock, au rights in respect thereof shall cease, and the . accounts of Holding Company shall be reduced by the $1,000 of capital and surplus applicable to such shares; (d) Holding Company shall deliver shares of Holding Company Common Stock (or stock units) pursuant to the Illinois Power Company Automatic Reinvestment and Stock Purchase l Plan. Employee Stock Owne ship Plan, Incentive Savings Plan, incentive Savings Plan for Emf : ees Covered by a Collective Bargaining Agreement,1992 Long-Term Incentive Compensa-l tion Plan, Executive Incentive Compensation Plan, Deferred Compensation Plan for Certair. Directors, and Stock Plan for Outside Directors (coDectively, the " Plans"). Each right to purchase shares of Illinois Power Common Stock, including, without limitation, rights (including stock l options) to acquire Elinois Power Common Stock (or stock units) pursuant to any of the Ple.ns, i granted and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become a right to acquire the same number of shares of Holding Company Common Stock (or stock units) at the j i same price per share, and upon the same terms and subject to the same conditions as were t applicable immediately prior to the Effective Time under the relevant right; and (e) Holding Company shall reserve such number of shares of Holding Company Common l Stock for purposes of the Plans as is equal to the number of shares of Blinois Power Common [ Stock so reserved as of the Effective Time. { ARTICII11 Directors The persons who are dtrectors of Blinois Power immediately prior to the Effective Time shall at 'j the Effective Time become directors of Holding Company, and shall continue to hold ofSee as provided in the Bylaws of Holding Company, and if, at or following the Effective Time, a vacancy shall exist in i the Board of Directors of Holding Company, such vacancy may be filled in the manner provided in the Bylaws of Holding Company. l ARTICIIIU I Stock Certificates Following the Effective Time, each holder of an outstanding certi5cate or certificates theretofore l representing shares of Ulinois Power Common Stock may, but shall not be required, to surrender the same to Holding Company for cancellation and exchange or transfer, and each such bolder or trans-feree thereof will be entitled to receive a certiScate or certi5 cates representing the same number of l shares of Holding Company Common Stock as the number of shares of Elinois Power Common Stock 'j previously represented by the stock certi6cate or certincates so surrendered. Until so surrendered for cancellation and exchange or transfer, each outstanding certificate which, prior to the Effective Time, i represented shares of Ulinois Power Commen Stock shall be deemed and treated for all corporate purposes to represent the ownership of the same number of shares of Holding Company Common Stock as though such surrender for cancellation and exchange or transfer thereof had taken place. l ARTICI E IV Mhecitaneous (a) This Agreement may be terminated and the transactions herein provided for and the Merger I 1 abandoned at any time, whether before or after approval of the Merger Agreement by the sharehold-I crs of Blinois Power, by action of the Board of Directors ofIllinois Power if said Board of Directors l ~_ determmes for any reason that the consummation of the transactions herein provided for would for l any reason be inadvisable or not in the best interests ofIllinois Power or its shareholders. -) B-2 -3CH14874 lLLINOfS POWER S4 Proof 2 ierrill CorporationtChicago (312) 930-270o @) t!SERS:[P3634CHl93.93CHl4874]Il4874B.;6

~. - +.,. -i i 1 ERR]L.L CORM

• ATION NETWORK COMPO5fT10N SYSTEM DRA$MUSSEN #f Il NOV.93 04.$$ 1l$ER6 [P3634CHf93.93CH14874}Il4514B ;6 f

44GES {PAGER PSTYLI5)KFM DET;f pagifmr EDGAR'IT.57TMT Free 9&nDM/ oD Fmet. oDr oD YJ R seg 3 C1r o ' C ChLsum T'905 ? + i t (b) The Merger Agreement shall not be amended by Illinois Power and Merging Corp. without the written consent of Holdilig Company. .(c) This Agreement may be executed in counterparts, each of which when so exocuted shall be deemed to be an original, and such counterpans shall together constitute but one and the same j instrument. (d) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Illinois. i e IN WITNESS WHEREOE Illinois Power, Holding Company and Merging Corp., pursuant to approval and authorization duly given by resolutions adopted by their respective Boards of Directors, have each caused this Snpplemental Agreement to be executed by its Chairman of the Board,its President or one ofits Vice Presidents and attested by its Secretary or one ofits Assistant Secretaries. Illinois Power h By l Name: i

Title:

Attest: Name:

Title:

Secretary I IP Holding Company l 1 By Name:

Title:

e Attest: -[ Name: _l

Title:

Secretary i IP Merging Corporation By - l Name:

Title:

Attest: Name:

Title:

Secretary t i 4 L a f B3 1 J f I i 3CHl4874 ILLINOt$ POWER S-4 Proof 2 I isrrlit CorporettorvChic#Do (312) 930-2700 USER 6;[P3834CHl93.93CHl4874]Il4874B.;6 i 5 I

~.~- - -~, ,n nRu CORPORATION STTWORK LTJMPOSTTK)N SYSTEM DRASMUSSEN // ll-NOV 93 t?l9 IJSER61P3634CHl03 93CH14874}D4B14 A.15 .lAGt2 !PAGER PSTYLE51KFM BKT.) pag 5fnu EDGARTT.5T.FMT Tm UrP/ 740D Foot ODI DD YJ seq I C1r 0 C CMum 45395 i EXIHBIT C = 't IP HOI. DING COMPANT ARTICLES OF INCORPORATION Which Will Be la Effect On The Effective Date Of The Merger ARTICLE ONE The name of the corporation is IP Holdmg Company. f ARTICLE TWO The name and address of the registered agent and its registered ofYice are: Registered Agent: Ms. Leah Manning Stetzner I Registered Ofhce: 500 South 27th Street i Decatur, Illinois 62525-6600 Macon County ARTICLE THREE The purpose or purposes for which the corporation is organized are to l transact any or all lawful businesses for which corporations may be incorporated under the Business Corporation Act of 1983, as amended from { time to time. l ARTICLE FOUR Paragraph 1. The number of shares which the corporation is authorized to l issue is 200,000,000 shares of Common Stock without par value. Paragraph 2. Initially, the corporation proposes to issue 100 shares of Common Stock in exchange for an aggregate consideration of $1,000. Paragraph 3. The shares of Common Stock shall entitle the holders thereof ? to one vote for each share upon all matters upon which shareholders have - I the right to vote and to cumulative votmg in all elections of directors by vote of shareholders. lj ARTICLE FIVE Paragraph 1. A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (D for any breach of the director's duty ofloyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation oflaw, (iii) under Section 8.65 of the Business Corporation .j Act of the State ofIllinois, or (iv) for any transaction from which the i director derived an improper personal benefit. If the Business Corporation Act of the State of Blinois is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the ax>rporation shall be eliminated or limited to the full extent permitted by the Business Corporation Act of the State of Elinois, as so amended. Any repeal or modi 5 cation of this Paragraph I by the shareholders i of the corporation shall not adversely afYect any right or protection of a director of the corporation existing at the time of such repeal or modi $ cation. Paragraph 2. Each person who is or was or had agreed to become a i director or ofEcer of the corporation, and each person who is or was serving or who had agreed to serve at the request of the Board of Directors or an i otScer of the corporation as an employee or agent of the corporation or as a i director, ofEcer, employee, or agent, trustee or fiduciary of another corporation, partnership, joint venture, trust or other enterprise (including l the heirs, executors, administrators or estate of such person), shall be ndemni5ed by the corporation to the full extent permitted by the Business Corporation Act of the State ofIllinois or any other applicable laws as presently or hereafter in effect. Without limiting the generality of the foregoing,1he corporation may enter into one or more agreements with any I e C.1 t ) 3CH64E74 ILUNOIS POWER S-4 Proof 2 j 1erttu Corporation thicego (312) 930-2700 U SER6 :[P3E34 CHf 93.93CHl4874]JJ4874 A.;15 ] 3 J 1 l

.s. a _ + ~ > ..a .. ~ a ~i l 4 1 TERR.E1CORPOR ATION NETWORK COMPOSITION SYSTEM DRASMU$5EN // 11-NOV-93 o$ 29 USEk6.[P3634CHl93 93CH148741JJ48744 ;l$ M AGES { PACER PSTYLE$)KFM BST.1 pegifrm EDCARTEST.FMT Frw %20l*U OD Fons olv on VJ R seq 2 Cir 0 C Chisum 513M } ) l ~ l t .] i person which provide for indemnification greater or difTerent than that provided in this Paragraph 2. Any repeal or modification of this Paragraph 2 i shall not adversely affect any right or protection existing hereunder immediately prior to such repeal or modification. ARTICLE SIX The undersigned incorporator hereby declares, under penalties of perjury. that the statements made in the foregoing Articles of Incorporation are true. P I t 'f v i i ? i 1 \\ f b 'I I r T 'f I 4 4 .t i i h C-2 i f I 93CH44874 ILLINO!S POWER S4 Proof 2 i Manill CorporatiortChicago (312) 930-2700 USER 6:[P3634CH493 93CHl4874}JJ4874A.;15 3 i t

.~ +. 11R!LL CORK *K ATION NETWORK COMPOSITION SYSTEM DR A$MUSSEN /I 11-NOV 93 0436 L'SER6:!P3634CHl93 93CH14874}KK4874AJ .{ aces (PAGER PSTYtis)KN BSTJ mifm: EDG ARTEST FMT Frer 120D*/ WD Fone oDr oD VJ R Seg 1 Clr o C Ctanum 3833s t 1, t EXIIIBIT D i PROVISIONS OF TIIE ILLINOIS BUSINESS CORPORATION ACT RELATING TO RIGilTS OF DISSENTING SilAREllOLDERS I Section 11.65. Right to dissent. I (a) A shareholder of a corporation is entitled to dissent from, and obtain payment for his or her shares in the event of any of the following corporate actions: (1) consummation of a plan of merger or consolidation or a plan of share exchange to which the corporation is a party if (i) shareholder authorization is required for the merger or consolidation or the share . exchange by Section 11.20 or the articles ofincorporation or t (ii) the corporation is a subsidiary that is merged with its parent or another subsidiary under Section 11.30; .l (2) consummation of sale, lease or exchange of all, or substactia!!y all, of the property and f assets of the corporation other than in the usual and regular course of business; } (3) an amendment of the articles ofincorporation that materially and adversely affects l rights in respect of a distena shares because it: j (i) alters or abolishes a preferential right of such shares; (ii) alters or abolishes a right in respect of redemption, including a provision respecting { a sinking fund for the redemption or repurchase, of such shares; .j (iii) in the case of a corporation incorporated prior to January 1,1982, limits or elimi-nates cumulative voting rights with respect to such shares; or ~{ (4) any other corporate action taken pursuant to a shareholder voteif the articles ofincorpo-ration, by-laws, or a resolution of the board of directors provide that shareholders are entitled to -i d:ssent and obtain payment for their shares in accordeace with the procedures set forth in Section 11.70 or as may be otherwise providad in the articles, by-laws or resolution. (b) A shareholder entitled to dissent and obtain payment for his or her shares under this -i Section may not challenge the corporate action creating his or her entitlement unless the action is j fraudulent with respect to the shareholder or the corporation or constitutes a breach of a 6duciary duty owed to the shareholder, j (c) A record owner of shares may assert dissenters

• rights as to fewer than all the shares recorded in such person's name only if surb person dissents with respect to all shares beneficially owned by any one persor and noti 5es the corporation in writing of the name and address of each person cn whose behalf the record owner asserts dissenters' rights. The rights of a partial dissenter are determined as if the shares as to which dissent is made and the other shares were recorded in the names of different shareholders. A beneScial owner of shares who is not the record owner may assert disser.ters' rights as to shares held on such person's behalf only if the beneScial owner submits to the l

corporation the record owner's written consent to the dissent before or at the same time the benencial l owner asserts dissenters' rights. Amended by PA 65-1269, eiT. Jan.1,1989. l Section 11.70. Procedare to Dissent. i (a) If the corporate action giving rise to the right to dissent is to be approved at a meeting of l shareholders, the notice of meeting shall inform the shareholders of their right to dissent and the procedure to dissent. If, prior to the meeting, the corporation furnishes to the shareholders material information with respect to the transaction that will objectively enable a shareholder to vote on the j transaction and to determine whether or not to exercise dissenters' rights, a shareholder may assert I' D-1 I 3CHt4874 It. LINO!$ POWER S-4 Proof 2 errtil Corporation / Chicago (312) 930-2700 USER 6]P3634CHIB3.93CHl4874]KK4874 A.;7 i j .i

.~ n ~~ 1 i i . TERRE.1 CORPORATION NETwT*K COMPOSITION $YSTD4 DR ASMU$$EN # lbNOV-93 o436 t'$ER6:[P3634CH193 93CHids74]KKas74BJ - M AGES [PACD PSTYLE5*.FM B5T;t pytfrm EDG ARTt37.FMT Frer IsufW 36oD Far oDf oD VJ R Seq 2 Ctr o C Chhum im l 'i'! dissenters' rights only if the shareholder delivers to the corporation before the vote is taken a written demand for payment for his or her shares if the proposed action is consummated, and the shareholder does not vote in favor of the proposed action. (b) If the corporate action giving rise to the right to dissent is not to be approved at a meeting of shareholders, the notice to shareholders describing the action taken under Section 11.30 or Sec. l tion 7.10 shallinform the shareholders of their right to dissent and the procedure to dissent. If, prior to or concurrently with the notice, the corporation furnishes to the shareholders material information with respect to the transaction that will objectively enable a shareholder to determine whether or not to exercise dissenters' rights, a shareholder may assert dissenter's rights only if he or she delivers to -} the corporation within 30 days from the date of mailing the notice a written demand for payment for ~ his or her shares. (c) Within 10 days after the date on which the corporate action giving rise to the right to dissent j is effective or 30 days after the shareholder delivers to the corporation the written demand for j payment, whichever is later, the corporation shall send each shareholder who has delivered a written t demand for payment a statement setting forth the opinion of the corporation as to the estimated fair ,{ value of the shares, the corporation's latest balance sheet as of the end of a Escal year ending not earlier than 16 months before the delivery of the statement, together with the statement ofincome for l that year and the latest available interim Snancial statements, and either a commitment to pay for the j shares of the dissenting shareholder at the estimated fair value thereof upon transmittal to the corporation of the certi6cate or certincates, or other evidence of ownership, with respect to the shares, or instructions to the dissenting shareholder to sell his or her shares within 10 days afler delivery of i . the corporation's statement to the shareholder. The corporation may instruct the shareholder to sell j only if there is a public market for the shares at which the shares may be readily sold. If the shareholder does not sell within that 10 day period after being so instructed by the corporation, for purposes of this Section the shareholder shall be deemed to have sold his or her shares at the average closing price of the shares, iflisted on a national exchange, or the average of the bid and asked price j with respect to the shares quoted by a principal market maker,if not listed on a national exchange,. 'l during that 10 day period. l (d) A shareholder who makes written demand for payment under this Section retains all other rights of a shareholder until those rights are cancelled or modzSed by the consummation of the l proposed corporate action. Upon consummation of that action, the corporation shall pay to each dissenter who transmits to the corporation the certincate or other evidence of owr.ership of the shares the amount the corporation estimates to be the fair value of the shares, plus accrued interest, I accompanied by a written explanation of how the interest was calculated. (e) If the shareholder does not agree with the opinion of the corporation as to the estimated fair value of the shares or the amount of interest due, the shareholder, within 30 days from the delivery of the corporation's statement of value, shall notify the corporation in writing of the shareholder's estimated fair value and amount ofinterest due and demand payment for the difference between the shareholder's estimate of fair value and interest due and the amount of the payment by the corpora-1 tion or the proceeds of sale by the shareholder, whichever is apolicable because of the procedure for l which the corporation opted pursuant to subsection (c). .i (f) If, within 60 days from delivery to the corporation of the shareholder noti 6 cation of estimate j of fair value of the shares and interest due, the corporation and the dissenting shareholder have not agreed in writing upon the fair value of the shares and interest due, the corporation shall either pay the difference in valre demanded by the shareholder, with interest, or file a petition in the circuit court r,f the county in which either the registered ofLee or the principal office of the corporation is located, [ requesting the court to determine the fair value of the shares and interest due. h corporation shall make all dissenters, whether or not residents of this State, whose demands remain unsettled pr.rties to the proceeding as an action against their shares and all parties shall be served with a copy of the D-2 r e 13CHIO874 ILLINOIS POWER S-4 Proof 2 AQrrill CorporattorCChicago (312) 930-2700 tlSER6:{P3634CH;93.93CHl4874]KK4874B.;3 s L 9 n

- ~. -. .-.~ ~.~ -.-.-.-a 1ERRtLt.CORPOP.ATION NETWORK COMPOSTrlON SYSTEM DRA5MUSSEN /r 11-NOV.93 os 56 USEN6]r304CH193 93CH14874JKK4048. 3 ' l f MACES [PAGER PSTYLIS)KTM flST.1 pagifmt EDGARTESTFMT Frw 114:XSt/ OD Fone ODI OD VJ k 5eq 3 Ctr 0 C Chksro s 263 4 1 i ) petition. Nonresidents may be served by registered or certiSed mail or by publication as provided by law. Failure of the corporation to commence an action pursuant to this Section shall not limit or affect l the right of the dissenting shareholders to otherwise commence an action as permitted by law. j (g) Thejurisdiction of the court in which the proceeding is commenced under subsection (f) by a l corporation is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend decision of the question of fair value. The appraisers have the power described in the order appointing them, or in any amendment to it. (h) Each dissenter made a party to the proceedingis entitled tojudgment for the amount,if any, k by which the court Ends that the fair value of his or her shares, plus interest, exceeds the amount paid by the corporation or the proceeds of sale by the shareholder, whichever amount is applicable. (i) The court,in a proceeding commenced under subsection (f), shall determine all costs of the proceeding,includmg the reasonable compensation and expenses of the appraisers,if any, appointed i by the court under subsection (g), but shall exclude the fees and expenses of counsel and experts for i e the respective parties. If the fair value of the shares as determined by the court materially exceeds the ~ amount which the corporation estimated to be the fair value of the shares or if no estimate was made i in accordance with subsection (c), then all or any part of the costs may be assessed against the corporation. If the amount which any dissenter estimated to be the fair value of the shares materially crmeds the fair vMue of thnhares as determined by the court, then all or any part of the costs may be assessed against that dissenter. The court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable, as follows: t (1) Against the corporation and in favor of any or all dissenters if the court Ends that the f corporation did not substantially comply with the requirements of subsections (a), (b), (c), (d), or ' . i (f). ' j (2) Against either the corporation or a dissenter and in favor of any other party if the court i Ends that the party agamst whom the fees and expenses are assessed acted arbitrarily, vexa-l tiously, or not in good faith with respect to the rights provided by this Section. { If the court Ends that the services of counsel for any dissenter were of substantial benent to other f dissenters similarly situated and that the fees for those services should not be assessed against the l corporation, the court may award to that counsel reasonable fees to be paid out of the amounts i awarded to the dissenters who are benented. Except as otherwise provided in this Section, the i practice, procedure, judgment and costs shall be governed by the Code of Civil Procedure. 3 (j) As used in this Suction: f { (1) 'Tair Value", with respect to a dissenter's shares, means the value of the shares immedi-i ately before the consummation of the corporation action to which the dissenter objects excluding 'l any appreciation or depreciation in anticipation of the corporate action, unless exdusion would be inequitable. l (2) " Interest" means interest from the efTective date of the corporate action until the date of j pay;nent, at the average rate currently paid by the corporation on its principal bank loans or,if j none, at a rate that is fair and equitable under all the circumstances. I i 3 n f i ) t i D.3 )i i 3CH14874 lLLINDIS POWER S-4 Proof 2 1errill Corporation! Chicago (312) 930-2700 USER 6:lP3634CHl93.93CHl4874]KK4874B.;3 rwNw-p ,.m w

- - ~ ~, f -i IRRIt1 CDRPORATION NETWOkK COMPOMrlON SY$rEN DRASMUSSEN // 11.NOV.93 D634 tJSER6 fr3634CPJ93 93CM14814]AAA4s744;t$ -t ACES iPAGER P57Ylis1KrM B57.1 pa$fnu EDGARTEiTIMT Frer 2miD*/ SND Ne otv oD VJ R 5g I CV o C Chtum 17627 l J I, P ? PART 11. INFORMATION NOT REQ 1' IRED IN PROSPECIUS j Item 20. Indemnification of Directors and Officers. Certain provisions of the Ulinois Business Corporation Act provide that the Registrant may, and in some circumstances must, indemnify the directors and of6cers of the Registrant and of each subsidiary company against liabihties and expenses incurred by such person by reason of the fact that 'f such person was serving in such capacity, subject to certain limitations and conditions set forth in the i statue. The Registrant's Articles of Incorporation and By. Laws provide that the Registrant wC } indemnify its drectors and ofScers, and may indemnify any person serving as director or officer of another business entity at the Registrant's request, to the extent permitted by the statute.

'l 1:em 21.' Exhibits.

The following exhibits are filed herewith or incorporated herein by reference. Documents indi- 'i cated by an asterisk (') are incorporated herein by reference to the File No. indicated. EthMt Nurnber Descrtption of Daconsent 1 I 2(a) Agreement and Plan of Merger (attached to Prospectus as Exhibit A) 2(b) Supplemental Agreement (attached to Prospectus as Exhibit B) i 3(a) Articles ofIncorporation ofIP Holding Company - } 3(b) Amendment to Articles of Incorporation ofIP Holding Company to be adopted after t January 1,1994, and before the Effective Time of the Merger 3(c) Bylaws of IP Holding Company [ r 4 Rights ofIP Holding Company Common Shareholders (included in Exhibit 3(a)) 5 Opinion of Sidley & Austin .f B Opinion of Sidley & Austin (to be filed by amendment) 23(a) Consent of Sidley & Austin (included in Exhibit 5) 23(b) Consent of Price Waterhouse [ 99 Consents of Persons to be Directors of the Registrant at the Effective Time of the Merger l (to be filed by amendment) _{ ltem 22. Undertakings. The undersigned registrant hereby undertakes: 'j (1) That, for purposes of determining any liability under the Securities Act of1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange f Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to s Section 15(d) of the Securities Exchange Act of1934) that is incorporated by reference in the registra-tion statement shall be deemed to be a new registration statement relating to the securities offered j therem, and the offering of such securities at that time shall be deemed to be the initial bona fide I offering thereof. t (2) To respond to requests for information that is incorporated by reference into the prospectus i pursuant to items 4,10(b),11 or 13 of this form, within one business day of receipt of such request, I and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration f statement through the date of responding to the request. I (3) To supply by means of a post-effective amendment allinformation concerning a transaction, i and the company being acquired involved therein, that was not the subject of ad included in the registration statement when it became effective. [ ? (4) To remove from registration by means of a post-effective amendment any shares of Holding [ Company Common Stock which are not issued in the Merger or issuable thereafter pursuant to t certain Stock Plans. i 11 1 r I e -) } 13CHlOB74 ILLINOIS POWER S-4 Proof 2 i Aerrill Corporsttort'Ctilesgo (312) 930-2700 USER 6:[P3634CHP93.93CHl4874] AAA4874A.;15 h 4

,y-. \\ -I TERR!LL CORPOR ATION NETWOP.K COMPO$rr10N $YSIT.M DR ASMU$5EN // Il-NOV 93 04.54 USER 6 IP3634CH193.93CHies74]AA A4874A.;15 ' ) J AGES [PAGER PSTYLESIKTM B57.1 pagtfun EDGARTT 5T FMT Free 4920DM/ DD Faz O!F oD V3 R Seq 2 Or o C OAsum 46196 { f p i f f f ? Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling perrons of the registrant pursuant to the provisions of the I registrant's articles ofincorporation or bylaws, or otherwise, the registiant has been advised that in the opinion of the Securities and Exchange Commission such indemniScation is egainst pubhc policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemni6 cation against such liabilities (other than the payment by the registrant of expensos incurred or paid by a director, officer or controlling parson of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, ofScer or controlling person in connection with the securities 't being registered, the registrent will, unless in the opinion ofits counsel the matter has been settled by L controlling precedent, submit to a court of appropriatejurisdiction the question whether such indem-ni6 cation by it is against public policy as expressed in the Act and will be governed by the final ~' a(iudication of such issue. ~l l k ? '? ~ ! I 'T h I 4. f 3 i I f C Il-2 I j t 3CHl0874 ll.UNOIS POWER S-4 Proof 2 ? iorrlU Corporation / Chicago (312) 930-2700 USER 6:{P3634CHIB3.93CH14874] AAA4874A.;15 f I i i , ~ ~

_. ~. i Enani CURf0R ATION STTwoRK COMPosmON SYS17.M DRA$Mtis5EN ti if-NOV43 Os $4 USLk6:fr3614 CHI 93 93CHl4514]Hf448'14 A ;1 ' l inors tracra rsT3usmns esT.i par tnw EDcARTEST FMT Free 2VKOMt oDFm OIY o9 VJ R seg 1 Or 0 C Chkum- $1t%4 s t -6 h i SIGNATURES l 7 Pursuant to the requirements of the Securities Act of 1933, the segistrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Decatur, State ofIllinois on November 15,1993. I I IP HOLDING COMPAST t .' t By: Larry D. Haab s Chairman, President, i Chief Executive OSicer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been l signed below by the following persons in the capacities indicated, on Novembe-15,1993. { .y SIGNATI'RF AND TTTLE i Larry D. Haab Chairman, IWsident. Chief Executive Oficer and Sole Director (principal executive officer) i Leah Manning Stetzner Treasurwr (principal uccounting oficer and i principal financial oficer)

}

f l f 1 i l 11 3 1 1 CH14874 ILLINOIS POWER S4 Proot 2 j errill Corporation / Chicago (312) 930-2700 USER 6:{P3634CHt93.93CH64874]BBB4874A.;1

~ t ' SECURITIES AND EXCHANGE COMMISSION l Washington, D. C. 20549 i FORM 10-K j ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF l THE SECURITIES EXCHANGE ACT OF 1934 ] For the Fiscal Year Ended December 31,1992 Commission File Number 1-3004 j i [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 IFEE REOUIRFD1 j For the fiscal year ended December N1.1992 OR j [ ] TRANSITION REPORT PURSUANT TO SECHON 13 OR 15(d) OF THE SECURITIES j EXCHANGE ACT OF 1934 TNO FEE REOUIRED1 -j For the transition period from to U11NOIS POWER COMPANY (Exact name of registrant as specified in its charter) 1 State or other jurisdiction of incorporation or orgamzation State ofIllinois 1.R.S. Employer Identification No. 37-0344645 l Address of principal executive offices 500 South 27th Street, j Decatur, Blinois Zip Code 62525-1805 Registrant's telephone number, including area code 217-424-6600 Securities registered pursuant to Section 12(b) of the Act: e Cumulative Preferred Stock, Cumulative Preferred Stock, l 550 var value no oar value First Mortrace Bonds l (Registered on the New York Stock Exchange) 4.08 % Adjustable' Rate Series A 10.00 % Series due 1998 4.26 % Adjustable Rate Series B 7.60 % Series due 2001 4.70 % 8.52 % 7 5/8% Series due 2003 4.42 % 8.00 % 8 5/8% Series due 2006 4.20 % 81/4% Series due 2007 8.24 % 8 7/8% Series due 2008 7.56% 9 3/8% Series due 2016 8.94 % 8.00 % i i

Common Stock. without car value (Registered on the New York and Midwest Stock Exchanges) Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all repons required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for-such shorter period that the registrant was required to file such repons), and (2) has been subject to =ch filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation i S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Pan III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of the close of business on February 26,1993 was $2,079,129,009. The number of shares of the Registrant's Common Stock, without par value, outstanding on February 26,1993 was 75,643,937. Documents Incorporated by Reference 1. Ponions of Illinois Power Company's 1992 Annual Report. (Pans I, Il and IV of Form 10-K.) 2. Ponions of Illinois Power Company's Proxy Statement for its 1993 Annual Meeting of Stockholders. (Pan III of Form 10-K.) ILLINOIS POWER COMPANY FORM 10-K l For the Fiscal Year Ended December 31,1992 TABLE OF CONTENTS Part 1 PlEC ltem 1. Business 5 Electric Business 6 Power Coordination Agreement With Soyland 7 Fuel Supply 7 Construction Program 12 Clinton Power Station 13 General 13 Rate and Regulatory Matters 14 Accounting Matters 17 i Legal Proceedings and Related Matters 18 Decommissioning and Nuclear Fuel Disposal Costs 18 Dividends 19 Gas Business 19 Gas Supply 21 Environmental Matters 22 Air Quality 22 Clean Air Act 23 i Gas Manufacturing Sites 24 Water Quality 25 Other Issues 26 Electric and Magnetic Fields 27 Environmental Expenditures 27 Research and Development 27 Regulation 27 Executive Officers of the Registrant 29 i Operating Statistics 30 Item 2. Properties 30 Item 3. Legal Proceedings 30 Fuel and Purchased Gas Adjustment Clauses 30 Clinton Power Station 31 Environmental 31 Peabody Coal Company and Arch Coal Sales Company, Inc. 31 Item 4. Submission of Matters to a Vote of Security Holders 31 , r i

TABLE OF CONTENTS (Cont.) Pan II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 32 Item 6. Selected Financial Data 32 Ite m 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 32 Item 8. Financial Statements and Supplementary Data 32 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 32 Part IU Item 10. Directors and Executive Officers of the Registrant 33 Item II. Executive Compensation 33 Item 12. Security Ownership of Certain Beneficial Owners and Management 33 Item 13. Certain Relationships and Related Transactions 33 Part IV Item 14. Exhibits, Financial Statement Schedules, and Repons On Form 8-K 34 1 Signatures 36 Report of Independent Accountants 37 Schedule V - Utility Plant 38 Schedule VI-Accumulated Depreciation 41 Schedule VIII - Valuation and Qualifying Accounts 44 Schedule X - Supplementary Income Statement Information 47 Exhibit Index 48 l l l i

=_. PARTI i 1 a d 1 Item 1. Business { Illinois Power Company (the " Company") was incorporated under the laws of the State of Illinois on May 25, 1923. It is engaged in the generation, transmission, distribution and sale of l ~ electric energy and the distribution, transportation and sale of natural gas in the State ofIllinois. The territory served by the Company comprises substantial areas in northern. central and southern Illinois, including the followirg larger communities (1990 Federal Census data): Class of Cly Population Service Fumishs:d { Decatur.................... 83,885 Eectric and Gas Champaign................ 63,502 Electric and Gas Bloomington.............. 51,972 Electric Belleville.................. 42,785 Electric and Gas i East St. Louis............ 40,944 Gas Norma 1.................... 40,023 Electric Ur' ana.................... 36,344 Electric and Gas j Danville................... 33,828 Electric and Gas Galesburg................. 33,530 Electric and Gas i Granite City.............. 32,862 Electric and Gas e j + The Company holds franchises in all of the 309 incorporated municipalities in which it ) fumishes retail electric service a'd in a3 of the 257 incorporated municipalities in which it ^ furnishes retail gas senrice. Total operating revenus, including sales to other utilities, of the Company for the past three years by classes of service were as follows: 1992 1991 1990 f ] (Millions of dollars) l Electric $1,190.9 $1,186.7 $1,158.4 Gas S 288.6 S 288.2 5 311.1 j Operating iname before income taxes for the past three years by classes of service were as follows-i 4 1222 1991 J220 (Millions of dollars) Electric $348.4 S337.4 $254.5 Gas S 23.9 5 29.7 5 43.7

Item 1, Business (Contir,ued) At Dec,.mber 31,1992, the Company had 4,624 employees. The identifiable assets of the electric business were S4,602.9 million, S4,577.2 million and S4,613.5 million at December 31,1992,1991 and 1990, respectively. The identifiable assets of the gas business were $355.4 millon, $329.0 million and $369.2 million at December 31, 1992, 1991 and 1990, respectively. Electric Busintsi Overview The Company supplies electric. service at.remilio an estimated aggregate population of 1,265,000 in 309 incorporated municipalities, adjacent suburban and rural areas, and numerous unincorporated communities. Electric service at wholesale is supplied for resale to one electric utility and to the Illinois Municipal Electric Agency (IMEA) as agent for 11 municipalities. See the sub-caption Wholesale Electric Service", hereunder, for additional information. The Company also has a power coordination agreement with Soyland Power Cooperative, Inc. (Soyland). See the sub-caption

• Power Coordination Agreement With Soyland" hereunder for additional information. The Company provided interchange power to 12 utilities for resale.

The Company's highest system peak hourly demand (native load) in VM2 was 3,109,280 kilowatts on July 13, 1992. This 1992 peak load compares with the Cortgany's historical high peak load of 3,508,000 in 1988. The Company owns and operates electric generating facilities having a net summer capability of 4,285,000 kilowatts. The major electric generating stations are Clinton power station (Clinton) (930,000 kilowatts, of which 807,000 kilowatts of capability are owned by tne Company and 123,000 kilowatts of capability are owned by Soyland), Baldwin (1,680,000 kilowatts), Havana (645.000 kilowatts), Wood River (570,000 kilowatts), Hennepin (280,000 kilowatts) and Vermilion (165,000 kilowatts). The other generating facilities owned by the Company consist of gas turbine units at three locations which provide peaking service and have an aggregate capability of 138,000 kilowatts. The Company owns 20% of the capital stock of Electric Energy, Inc. (EEI), an Illinois I corporation, which was organized to own and operate a steam electric generating station and related transmission facilities near Joppa, Illinois to supply electric energy to the Department of Energy (DOE) for its project near Paducah, Kentucky. Under a power supply agreement with l eel, the Company has the right to purchase 5.0% of the annual output of the Joppa facility. The Company has the flexibility to schedule the capacity in varying amounts ranging from a nominal 51,000 kilowatts for 52 weeks up to a maximum of 203,000 kilowatts for approximately 13 l weeks. The Company must schedule its annual capacity entitlement by August 1 of the preceding year, and availability of the scheduled capacity is subject to certain other limitations related to scheduling considerations of the other co-owners of the Joppa facility and the DOE, and unit mutages (if any). t i 4 I

Item L Business (Continued) The Company is a participant, together with UnN Electric Company and Central Illinois Public Service Company, in the Illinois-Missouri Powe, Pool which was formed in 1952. The Pool operates under an Interconnection Agreement which provides for the interconnection of transmission lines and contains provisions for the coordination of generating equipment mainte-nance schedules, inter-company sales of firm and non-firm power, and the maintaining of minimum capacity reserves by each panicipant equal to 15% of its peak demand, one-half of its largest unit, or one-half of its largest non-firm purchase, whichever is greater. The Company, Central Illinois Public Service Company and Union Electric Company have a contract with Tennessee Valley Authority (TVA) providing for the interconnection of the TVA system with those of the three companies to exchange economy and emergency power and for other working arrangements. The Company also has interconnections with Indiana Michigan Power Company, Common-wealth Edison Company, Central Illinois Light Company, Iowa-Illinois Gas & Electric Company, Kentucky Utilities Company, Southern Illinois Power Cooperative, Soyland Power Cooperative, Inc. and the City of Springfield, Illinois for various interchanges, emergency services and other working arrangements. The Company is also a member of the Mid-America Interconnected Network, which is one of nine regional reliability councils established to coordinate plans and operations of member companies regionally and nationally. Power Coordination Acreement With Sovland Under a power coordination agreement between the Company and Soyland, as amended in April 1990, the Company has provided Soyland with the output from 10.7 % (372 megawatts) of the electrical capacity from its fossil-fueled generating plants through 1992, and will provide 8% (278 megawatts) in 1993 and 1994, and 12% (417 megawatts) in 1995 and thereafter until the agreement exp%s or is terminated. This capacity is in addition to the 123,000 kilowatts of capacity Soyland receives as co-owner of Clinton. The Company is compensated by Soyland for capacity charges and for energy costs and variable operating expenses. The Company transmits energy for Soyland through the Company's transmission and subtransmission systems. At any time after December 31, 20M, either the Company or Soyland can terminate the Power Coordina-tion Agreement relating to Soyland's right to the output from a portion of the Company's fossil fueled generating capacity and pool operations by giving not less than seven years' prior written notice to the other party. The party to whom termination notice has been given may designate an earlier effective date of termination which shall be not less than twelve months after the date of receipt of such notice. The revenues received from the power supplied to Soyland under the agreement are classified as operating revenues. Soyland supplies electricity to 21 distribution cooperative members who serve approximately 150,000 rural customers in 69 Illinois counties. Fuel Supply The Company used coal to generate 74.7% of the electricity produced during the year ended December 31,1992, with nuclear, oil, gas and tire derived fuel contributing 24.1%, 0.4%, Item 1. Business (Continued) 0.7% and 0.1%, respectively. The respective average costs of these fuels per million Btu during 1992 were: Coal $1.44, Nuclear S.99, Gas $1.79, Oil S3.43 and Tire Derived Fuel SI.11 for a i weighted average cost of S1.33. The weighted average cost of all fuels per million Btu during the l years 1991 and 1990 was $1.37 and 51.46, respectively. Relatively high-sulfur coal mined in Illinois and Indiana provided 75.8% and 5.3%, respectively, of the coal delivered to the Company's electric generating stations in 1992. In addition, the Company received low-sulfur coal from Kentucky, Colorado, West Virginia, Wyoming, Utah and Illinois. l The average cost of primary fuel consumed at the Company's generating stations during the periods indicated was as follows: Averare Cost of Primary Fuel (per million Btu) Stalia Primary Fuel 1922 1921 192Q Baldwin.................... Coal $1.3984 S1.4620 $1.4966 Havana..................... Coal 1.5926 1.5706 1.6228 Henn pin.................. Coal 1.5648 1.5255 1.5193 Vermilion.................. Coal 1.3397 1.3466 1.3018 i Wood River............... Coal 1.4943 1.5546 1.7125 Clinton..................... Uranium 0.9890 1.0381 1.0718 l The Company's rate schedules contain provisions for passing along to its electric customers increases or decreases in the cost of fuels used in its generating stations. These provisions pro-vide for recovery of fossil and nuclear fuel costs based upon the projected fuel costs for the cur-i rent billing month. These provisions further provide for the recovery of the energy portion of purchased power costs, the demand portion of power purchased for economy reasons, an adjust-i ment for the cost of fuel consumed to generate sales for resale and an adjustment to reflect the difference between actuals and p:ojections for the second prior month. Any under-or over-collections from customers Mated to recovery of fuel costs are deferred to be subsequently recov-ered or refunded. The reev. 7 of costs under this clause is subject to an annual review and ap-proval by the Illinois Commerce Commission (ICC). See the sub-caption "1987 Uniform Fuel i Adjustment Clause Reconciliation" on page 17 for additional information. Illinois Senate Bill 629 j amended Section 9-220 of the Public Utilities Act to allow inclusion of the transportation costs of 1 coal purchased under existing coal purchase contracts in effect on the effective date of the amend-l ment (August 27, 1991). Pursuant to Senate Bill 629, the Company requested permission from j the ICC to recover these transportation costs through a revision to its fuel cost adjustment provi-sion (Rider F). The ICC approved the Company's revision to Rider F which was effective in January 1992 and the Company first included allowable transportation costs in its fuel clause filing effective February 1992. Reference is made to the sub caption " Environmental Matters" hereunder for information regarding pollution control matters relating to the Company's fuel supply. fdgl-As shown below, the Company presently has contracts with expiration dates ranging from 1993 to 2004 which will provide about 44 million tons of coal. Rwd upon projected 1993 usage of approximately 6.9 million tons, this is equivalent to about 6.4 years of consumption..

~ Item 1. Business (C:ntinued) The longer-term contracts with Peabody Coal Company (Peabody) and Arch Coal Sales Company, Inc. (Arch) provide for price renegotiations related to current market prices. The shorter-term contracts contain specified annual prices for each year in the contract term. Total contract purchases will be approximately 6.2 million tons of coal in 1993. The sources and quan-tities of coal supplies, contract expiration dates, weighted average cost of coal purchases and anticipated sulfur contents are summanzed in the following table: e Weighted Delivered Cost per Million Btu Expiration Anticipated for the ~ Date of Sulfur Year Ended Primary Content

• Sucolier Statior 12/31/92-Contract (Percent)

Peabody Coal Co.(a) Baldwin $1.3965 2004 3.0 Arch Coal Sales Co., Inc.(b) Baldwin 1.3638 1998 3.0 Peabody Coal Co.(a) Hennepin 1.5379 2004 3.0 Consolidation Coal Co.(c) Wood River 1.5632 1993 0.9 Golden Oak Mining Co.(d) Havana 1.6845 1995 0.6 Northern Coal Company (e) Vermilion 1.2378 1994 3.0 Cyprus Kanawha Corp.(f) Wood River 1.4901 1993 0.9

• High-sulfur content classified as 2.5 percent or greater.

(a) The Company has a contract with Peabody to purchase, in total, 2,500,000 tons per year at Baldwin and Hennepin. The Company has also agreed to purchase and Peabody has agreed to supply through 1995 all coal needs above the Arch and Peabody contract quanti-ties at Baldwin and Hennepin. (b) The Company has contracts with Arch to purchase 2,065,500 tons per year at Baldwin and Hennepin through 1995 and 2,295,000 tons per year plus or minus 10% during 1996 through 1998. All coal under both contracts with Arch is currently consigned to Baldwin Power Station only. (c) This contract will supply 200,000 to 300,000 tons per year. (d) This contract will supply 200,000 to 250,000 tons per year. (e) This contract provides for delivery of 180,000 to 360,000 tons per year in 1993 and 1994 (f) This agreement will provide 300,000 tons per year. See the sub-caption " Environmental Matters" hereunder for additional information regard-2 ing the supply of coal at the Baldwin power station. 9

Item 1. Business (Continued) market. Spot purchases in 1992 represented about 10% of the Company's total coal purchases. ~ When the Company's needs exceed comracted quantities, coal is purchased on the spot The delivered cost of coal purchased on a spot basis during the year varied between $20.39 per ton, or $1.16 per million Btu, and $34.37 per ton, or $1.41 per million Btu. The Company anticipates that the spot market will continue to be a favorable supplemental source of supply for the next few years, and the Company will have adequate supplies of coal. The coal inventory at i December 31,1992 represented a 41 day supply based on the Company's average daily burn pro-jection for 1993. j In December 1992, the Company filed a complaint in the U. S. District Court in St. Lou-l is, Missouri, against Peabody, in which the Company seeks a declaratory judgment and injunctive relief with respect to its contractual rights to test burn and use coal from other suppliers in order to achieve compliance with the Clean Air Act as amended in 1990, if to do otherwise would ex-pose the Company ter higher costs:-- In January 1993, the Company filed a complaint in the U. S. District Court in St. I.ouis, Missouri against Arch seeking a declaratory judgment to enforce provisions in the coal supply contracts with Arch which permit the Company under certain circumstances to negotiate or arbi-trate lower coal prices and if coal is available from other suppliers, at substantially lower cost, to terminate the contracts on one year's notice. In February 1993, Arch and two subsidiaries filed suit against the Company in Perry County, Illinois, seeking a declaratory judgment, specific performance and other relief related to the Company's rights to declare Force Majeure and limit its coal purchases under the existing contracts, State law, and the Clean Air Act, and its declara-tion of certain Force Majeure events in prior years. In accordance with agreements-in-principle executed by the Company with each of these suppliers, all litigation has been temporarily placed on hold, and deadlines for responses extended, while the panies conclude negotiation of terms under which the Company may continue to purchase coal, through amendments to the existing contracts, on a cost <ompetitive basis, during the Phase I compliance period of the Clean Air Act Amendments of 1990. l Qil - The Havana power station (five units totaling 235,000 kilowatts), is the Company's only station which utilizes fuel oil for the generation of electric energy. During 1992, fuel oil require-ments were purchased on a spot basis. The Company anticipates that 1993 requirements will also be met by spot market purchases. t Du - Three generating units (totaling 138,000 kilowatts) at the Wood River power station and two combustion peaking plants (totaling 127,000 kilowatts) are fueled with natural gas. These units have the capability of burning either natural gas or distillate fuel oil. Natural gas is also l used in start-up and as a secondary boiler fuel for two generating units (totaling 280,000 kilo-watts) at the Hennepin power station and as a secondary boiler fuel for one generating unit (total-ing 92,000 kilowatts) at the Wood River power station. The Company anticipates that adequate supplies of gas for these uses will be available for the foreseeable future. See the sub caption i " Gas Business" hereunder. J Nuclear - The Company leases nuclear fuel from Illinois Power Fuel Company (Fuel Company). The Fuel Company, which is 50% owned by the Company, was formed in January 1981, for the purpose of leasing nuclear fuel to the Company for Clinton. Lease payments are equal to the ~ ltem 1. Business (Continued) Fuel Company's cost of fuel as consumed (including related financing and administrative costs). This lease is recorded as a capitalized lease on the Company's books. As of December 31,1992, the Fuel Company had an investment in nuclear fuel of approximately $141 million. The Com-pany is obligated to make subordinated loans to the Fuel Company at any time the obligations of the Fuel Company which are due and payable exceed the funds available to the Fuel Company. At December 31,1992 the Company had no outstanding loans to the Fuel Company. At December 31, 1992, the Company's net investment in nuclear fuel consisted of $42 million of Uranium 308 and $2 million in various stages of processing. This inventory represents fuel for the fourth reload of Clinton which is scheduled to commence in September 1993. The unamortized investment of the nuclear fuel assemblies in the reactor was 597 million. The Company signed two contracts in 1988 for the supply of uranium concentrates begin-ning in 1991. One contract is with U. S. Energy / Crested Co poration and the other contract is with Cameco - a Canadian Mining & Energy Corporation. Each of the two contracts is for l I 1,179,240 lbs. of uranium concentrates, with deliveries from 1991 to 1997. The contracts contain an option for an additional 479,440 ^bs. of uranium concentrates for delivery through 2000. Each ) of the two contracts is to provide an estimated 35% of Clinton's fuel requirements, but each contract contains provisions permitting the Company to purchase 60-100% of Clinton's fuel re-quirements in certain years through the spot market. The decision to utilize these provisions will be made the year before each delivery and will depend on the estimated price and availability 1 i from the spot market versus the estimated contract prices. During 1992, all nuclear fuel purchas-es were settled in United States dollars. Conversion services for the period 1991-2001 are contracted with Sequoyah Fuels. Sequoyah Fuels closed its Oklahoma conversion plant in 1992 and has joined with Allied Chemi-cal Company to form a new marketing company named CoverDyn. All conversion services will be performed at Allied's Metropolis, Illinois facility, but Sequoyah Fuels will retain the contract with Illinois Power. The Company has a Utility Services contract for uranium enrichment re-quirements with the DOE which provides 70% of the enrichment requirements of Clinton through September 1999. The remaining 30% has been contracted with the DOE through its incentive pricing plan through September 1995. A contract with General Electric Company provides fuel fabrication requirements for the initial core and 2,196 fuel bundles (approximately 11 reloads, through 20N). The Company is expecting to complete an amendment to the fuel fabrication contract in the second quarter of 1993. The amendment will add 1,472 fuel bundles, extending the contract to 2017 and will revise other contract terms and conditions. Beyond the stated commitments, the Company may enter into additional contracts for uranium concentrates, conversion to uranium hexafluoride, enrichment and fabrication. Currently, no plants for commercial reprocessing of spent nuclear fuel are in operation in the U.S., and reprocessing cannot commence until appropriate licenses are issued by the Nuclear i Regulatory Commission (NRC). Clinton has on-site high density storage capability which will ) provide spent nuclear fuel storage capacity to meet requirements until the year 2004. Various l governmental agencies are currently reviewing the environmental impact of nuclear fuel repro-cessing and waste management. The Nuclear Waste Policy Act of 1982 was enacted to establish a government policy with respect to disposal of spent nuclear fuel and high-level radioactive --

Item 1. Business (Continued) waste. The Company signed a consract for disposal of spent nuclear fuel and/or high-level radio- ~ active waste on July 6,1984 with the DOE. Under the contract, the Company is required to pay the DOE one mill (one-tenth of a cent) per net kilowatt-hour (one dollar per MWH) of electricity generated and sold. The Company is recovering this amount through rates. The federal govern-ment is required to have a repository in place to accept spent nuclear fuel by January 31, 1998; however, current federal government schedules indicate the year 2010 for the acceptance of the first spent nuclear fuel. The Company expects that it will be able to meet interim storage require-ments through 2009 on-site using existing in-core pool facilities. Under the Energy Policy Act, rigned into law on October 24, 1992, the Company will be responsible for a portion of the cost to decontaminate and decommission the DOE's uranium enrichment facilities. Based on quantities purchased from the DOE facilities prior to passage of the Act, each utility will be usesW an annual fee for a period of fifteen years. The Company recorded its estimated-liability.of $1F million avof-December 31r 1992. According to the Act, these assessments are prudently incurred costs which should be recovered through the Company's rates as a cost of fuel. As a result, this amount has been added to the nuclear fuel inventory on the Company's balance sheet. Construction Program The cost, including allowance for funds used during construction (AFUDC), of the Compa-ny's construction program during 1993 and during the period January 1,1993 to December 31, 1997 is estimated as follows: Five-Year Period 1093 1093-1997 (Millions of dollars) Electric g enerating facilities.............................. S 60.3 $ 226.1 l Electric generating facilities-clean air compliance.... 26.2 92.4 Electric transmission and distribution facilities....... 72.2 306.2 G en eral plant................................................ 53.1 126.2 G as facilities................................................ _51.8 142.8 Total construction........................................ 263.6 893.7 l N u cl ear fuel................................................ 32.7 131.1 4 Total........................................................ $296.3 $1.024.8 The above estimates include potential costs which may be required to comply with the j Clean Air Act as discussed further in " Environmental Matters". See the sub-caption " Clean Air t Act' hereunder on page 23 for additional information. The estimated construction expenditures during the period January 1,1993 to December 31, 1997, together with the repayment at maturity of currently outstanding long-term debt (includ-ing lease payments under capital leases) and redeemable preferred stock, aggregating approxi-l l mately $460 million, and sinking fund requirements of appmximately $26 million (prior to the l March,1993 redemption of $35 million,9 %% series, First Mortgage Bonds, due 2004), are ex-pected to require expenditures by the Company of approximately $1.511 billion. Construction ) and capital requirements are expected to be met through internal cash generation.

Item 1 Business (Continued) In August 1992, the Board authorized a new mortgage which is intended to replace the Company's 1943 hiongage and Deed of Trust. Bonds issued under the new mongage will be secured by a corresponding issue of first mongage bonds under the old mongage until all out-standing first mortgage bonds under the old mongage are retired or redeemed. At December 31, 1992, based upon the most restrictive cainings test contained in the old mortgage, the Company l could issue approximately $648 million additional first mongage bonds for other than nfunding ) purposes. The amount of available unsecured borrowing capacity totaled $154 million at Decem-ber 31,1992. Also at December 31,1992, the unused ponion of the Company's total bank lines of credit was $200 million. The Company is required to maintain unused lines of credit with lending institutions under which the Company shall be entitled to borrow sums of money in an j aggregate amount equal at any time to the total of (a) the aggregate principal amount of the com-mercial paper of the Fuel Company then outstanding (b) plus the aggregate principal amount of commercial paper of the Company then outstanding. At December 31, 1992, such outstanding commercial paper of the Fuel Company. was $54.5 million.- In September 1992, the Company l filed a $350 million shelf registration of debt securities with the Securities and Exchange Commis-r i sion for the purpose of refinancing high cost and maturing dut. This shelf registration became 2 effective in February 1993. On February 24,1993, the Company issued $235 million, 8% series, i New hiongage Bonds, due 2023. On March 9,1993, the Company issued a redemption notice to retire $35 million,9%% series, First hiongage Bonds, due 2004. On hiarch 15, 1993, the Com-l pany issued $40 million, 6%% series, New Mangage Bonds, due 2000 and $70 million, 6K % series, New Mongage Bonds, due 2005. On March 22,1993, the Company issued a redemption ^ notice to retire $65 million, 8%% series, First Mongage Bonds, due 2006. On March 22, the Company retired $100 million, 8%% series, First Mortgage Bonds, duc 2008 and $125 million, 9%% series, First Mongage Bonds, due 2016. l The Company's future financial condition will be influenced by the outcome of its appeal l of the August 7,1992, Rehearing Order, and its appeal of the 1987 Uniform Fuel Adjustment Clause Order, as discussed below. Clinton Power Station I j General i i The Company owns 86.8% of Clinton and Soyland Power Cooperative, Inc. (Soyland) owns the remaining 13.2%. The terms for sharing the con"ruction, ownership and operation of Clinton l are set fonh in several related agreements between the Company and Soyland. Under these agreements, the Company has authority to act on behalf of Soyland for purposes of various mat-ters relating to the design, construction, operation, maintenance and decommissioning of Clinton. See the sub-caption

• Decommissioning and Nuclear Fuel Disposal Costs" hereunder on page 18 for additional information on the decommissioning of Clinton.

The Clinton nuclear power station was placed in service in 1987 and represents approxi-l mately 19% of the Company's installed generation capacity. During 1992, Clinton provided 24% of the Company's total electric generation and had the lowest fuel cost per megawatt-hour genera-tion compared to all other Company-owned power stations. The investment in Clinton and its related deferred costs represented approximately 61% of the Company's total assets at December 31, 1992. Clinton related costs represented 38% of the Company's total 1992 other operating, J i 1 ~,

Item 1. Business (Continued) maintenance and depreciation expenses. Clinton's equivalent availability was 62%, 76% and 47% for 1992,1991 and 1990, respectively. Clinton's equivalent availability was lower in 1992 and 1990 due, in part, to the timing of refueling and maintenance outages. Ownership of an operating nuclear generating unit exposes the Company to significant risks including increased and changing regulatory, safety and environmental requirements, and increases in the future cost of closing and dismantling the unit. The Company expects to be allowed to continue to operate Clinton; however, if any unforeseen or unexpected developments would pmvent the Company from doing so, the Company could be materially adversely affected. For further discussion of insurance limitations, refer to the caption Insurance of " Note 3 - Com-mitments and Contingencies" on page 36 of the Illinois Power Company 1992 Annual Report which is incorporated herein by reference. Rate and Recuhtorv-Metterr~~-- 109.2 Rate Order On February 11, 1992, the ICC issued an order in the Company's 1991 electric rate case approving an increase in electric rates of $100 million or 9.2%. The Com;rany had requested an electric rate increase of $182.5 million or 16.7%. The o. der concluded that Clinton is fully "used and useful" in providing utility service to the Company's ratepayers. The order also included in rate base a total of $233 million, net of income taxes, of deferred Clinton post-construction costs (deferred Clinton costs), consistent with the position taken by the ICC in the Company's two prior electric rate orders. The ICC order did not include in rate base $102 million of deferred Clinton equity retum recorded from January 1988 through March 1989. This amount had not previously been included in rate base in accordance with a prior ICC order. See "1989 Rate Order" for further discussion of this matter. On March 10, 1992, the ICC granted rehearing and reconsid-eration of the February 11, 1992, order to determine the amount of deferred Clinton costs which should be included in rates, in light of a December 1991 Illinois Supreme Court decision in a Commonwealth Edison (CE) proceeding. That proceeding concerned, among other issues, the proper regulatory treatment of CE's deferred nuclear plant post-construction costs. The CE Su-preme Court decision is discussed under 1989 Rate Order below. In filings in the ICC rehearing, the Company stated that it should be allowed to include its entire balance of deferred Clinton costs in rates, including the post-1987 deferred equity retum. On August 7,1992, the ICC issued its order in the rehearing case (Rehearing Order). 'Ihe Rehearing Order denied the Company recovery of certain deferred Clinton post-construction costs, including all deferred depreciation and real estate taxes and 72.8% of the deferred common equity retum. The ICC action ordered a $21.5 million annual reduction in current electric revenues and could result in write-offs totaling approximately $200 million, net of income taxes. The ICC denied the Company's request to rehear the Rehearing Order. The Company believes that the ~ ICC's conclusions in the Rehearing Order denying recovery of certain deferred Clinton post-con-struction costs are contrary to law and to the evidence on rehearing. The Company has appealed the Rehearing Order to the Illinois Third District Appellate Court. Although there is a risk that the Appellate Court may uphold the ICC's decision, and although the CE decision and the ICC's action reduced the Company's assessment of the probability of recovery, the Company continues to believe that its deferred Clinton costs will ultimately be recovered through future rates (i.e. Item 1. Business (Continued) recovery is more likely than not), and thus does not believe a write-off is required pending the appeal. The Company does not expect a ruling from the Appellate Coun before the third quaner of 1993. Commencing April 1,1992, the increased rates authorized by the February 1992 rate order J were being billed and collected, subject to refund, pending the final outcome of the proceedings on rehearing related to the August 7,1992, order. The ICC's order requiring that the increased rates be billed and collected subject to refund expired by its own terms on October 3,1992. The total amount of revenues billed and collected subject to refund for 1992 is approximately $46 million. Unless the August 7 order is changed on appeal, the Company would be required to refund to customers approximately $8 million, including interest, for 1992. Management does not believe such refunds will be required. 1990 Rate Order i On June 6,1990, the ICC issued an order in the Company's 1989 electric rate case approv-ing an annualir.ed increase in electric rates of approximately $75 million, or 7.7%. The order, as amended on July 13, 1990, found that Clinton was 60.7% "used and useful" for rate-making purposes, as compared to 27.2% in the ICC's March 1989 crder, but did not albw the Company to earn a common equity return on the 39.3% of Clinton determmed to be not "used and useful." On July 16, 1990, the Company appealed the June 1990 rate order to the Illinois Appellate Coun, Third District. Other panies also appealed. On June 14, 1991, the Appellate Coun, among other things, reversed and remanded the ICC's "used and useful" determination on the same grounds as it did in its opinion on the appeal of the March 1989 rate order, as described below. On March 27,1992, the Illinois Supreme Coun vacated the Appellate Coun decision and remanded it to the Appellate Coun for funher consideration as discussed under "1989 Rate Or-der," below. On October 30, 1992, the Appellate Coun, on a motion by the appellants in this case, including the Company, dismissed the pending appeals of the June 1990 rate order. 1989 Rate Order The March 30,1989 rate order from the ICC granted a one-time increase of $60.5 million, or 6.9%, that became effective April 4,1989. The ICC order included various disallowances of Clinton-related costs, due to alleged " unreasonable" expenditures, as well as the disallowance of the equity rerum component of Clinton post-construction cost deferrals from January 1,1988 through March 31, 1989. This order also found approximately $2.3 billion (72.8%) of the rea-sonable Clinton costs to be not "used and useful" and denied a common equity retum thereon. In February 1991, the Illinois Appellate Coun, Third District, reversed the portion of the ICC order which had found 72.8% of Clinton not "used and useful," holding that the ICC erred in using reserve margin and economic benefits tests which the Appellate Coun found were not applicable based on pre-1986 Illinois law which govemed the case. The Appellate Coun remand-ed this portion of the order to the ICC to determine whether and/or what portion of Clinton is "used and useful" based on established pre-1986 standards. The Appellate Coun also reversed the ponion of the order which had denied the Company recovery of (approximately $102 million) of deferred Clinton post-construction equity retum recorded after January 1,1988. However, the Item 1. Business (Continued) 4 Appellate Coun did not overturn the order with respect to the ICC's determination that a ponion of the cost of Clinton was " unreasonable cost" and should not be included in rate base. Following the March 1989 rate order, the Company recorded a loss in the first quarter of 1989 of 5346 milliot., net ofincome taxes, or $4.61 per share. Funher, as a result of the Febru-ary 1991 Appellate Coun decision, the Company recorded an additional loss in the founh quarter of 1990 of $137 million, net of income taxes, or $1.82 per share. The losses recorded in both 1990 and 1989 reflect the disallowance of Clinton

• unreasonable costs" from rate base.

l i The Company, the ICC and certain other parties appealed various aspects of the February 1991 Appellate Coun decision to the Illinois Supreme Coun. The Company appealed the Appel-late Coun's affirmance of the ICC's

• unreasonable cost" disallowance. The ICC appealed the Appellate Coun's "used and-useful" decision but not the determination with respect to the Compa-l i

ny's recovery of a deferred Clinton post-construction equity return. Other panies-appealed both the "used and useful" and the deferred Clinton post-construction equity return issues, as well as other issues previously raised in their initial appeals. On December 16, 1991, the Illinois Supreme Court issued its decision regarding appeals f from a March 1991 order of the ICC in a CE rate proceeding. In that decision, the Illinois Su-preme Court held, among other things, that the Illinois Appellate Coun had erred in ruling in the February 1991 decision on the appeal of the ICC's March 1989 rate order for Illinois Power. The Supreme Coun said that the reserve margin and economic benefits test could be applied by the ICC in determining the extent to which a generating station under construction prior to January 1, i 1986 was "used and useful." The Supreme Court also ruled, in the context of the CE rate pro-ceeding before it, that cenain deferred costs associated with three of CE's nuclear plants were not recoverable. On March 27, 1992, the Illinois Supreme Court denied the petitions for leave to appeal filed by the Compmy, the ICC and intervenors from the February 1991 and June 1991 decisions of the Appellate Coun on the appeals from the 1989 and 1990 rate orders. It issued this instruction with respect to each petition: "In the exercise of this Court's supervisory authority, the judgment of the Appellate Coun, Third District...is vacated, and this cause is remanded to the Appellate Coun for further proceedings consistent with Business & Professional People for the Public Interest v. Illinois Commerce Commission (1991),146 Ill. 2d 175." The decision in the " Business & Pro-fessional People for the Public Interest" case is the Supreme Coun's decision in the CE rate pro-ceeding referred to previously. On November 9,1992, the Company and all of the other parties to this case filed a joint motion with the Appellatt Coun requesting entry of an order (1) affirming the ICC's determina-tion, in the March 1989 rate order, of Clinton's " reasonable cost" as of December 31, 1987; (2) reversing the ponion of the March 1989 rate order which had found that deferred post-constnic-tion equity financing costs recorded between January 1,1988, and March 30,1989, would not be allowed for ratemaking purposes because they could not be capitalized for financial reponing purposes, but specifying that this reversal is not a dispositive determination of the amount of deferred post-constniction costs recoverable under the CE decision referred to above; (3) in all other respects dismissing each appellant's appeal; and (4) vacating the Appellate Court's order..-

Item 1. Business (Continued) which mquired the Company to collect the increased rates authorized by the March 1989 rate order " subject to refund" pending completion of the appeals. On December 2,1992, the Appel-late Court granted this motion. Rwd on this action by the Appellate Court, the Company has no obligation to refund any portion of the revenue increase authorized by the ICC in the March 1989 rate order. 1987 Uniform Fuel Adiustment Clause Reconciliation On February 5,1992, the ICC issued an order in the Company's annual Uniform Fuel Ad-justment Clause reconciliation proceeding initiated by the ICC in a docket pertaining to the twelve montns ended December 31,1987. Such proceedings are required by law to be conducted annu-ally by the ICC to reconcile revenues collected by utilities from their customers through operation of the Uniform Fuel. Adjustment Clause. portion of the utility's rate structure with actual costs of fuel and power prudently purchased. The February 1992 order states that carrying costs in the amount of $29.3 million incurred by the Company's nuclear fuel affiliate, Illinois Power Fuel Company, between August 1985 and i April 1987 and added to the balance of nuclear feel inventory during the same period in accor-dance with a previous ICC order were imprudent and that the balance of recoverable nuclear fuel cost should be reduced by that amount. The Company believes the conclusion in the ICC order i lacks legal and factual foundation. On April 15, 1992, the Company appealed the ICC order to the Illinois Appellate Coun, Third District; the briefing was concluded on September 9,1992, and oral arguments in the case were held in November with a decision anticipated in the second quarter of 1993. The Company does not believe it is probable, as defined,by Statement of Fi-nancial Accounting Standards No. 5, " Accounting for Contingencies," that it will be required to record any write-off of nuclear fuel carrying costs upon the ultimate resolution of this matter. Estimates of potential loss range from zero to S26 million, net of income taxes. Accountine Matters The Company currently prepares its financial statements in accordance with FAS 71. Ac-cordingly, the Company records various regulatory assets and liabilities, such as deferred Clinton costs. Management believes that the Company currently meets the criteria for continued applica-tion of FAS 71, but will continue to evaluate significant changes in the regulatory and competitive environment to assess the Company's overall compliance with the criteria of FAS 71. Management is unable to predict the ultimate outcome of the uncertainties discussed in this Clinton Power Station section which could have a material adverse effect on the Company's earn-ings and/or financial position. Accordingly, no provision for any liability or additional loss that may result upon resolution of these matters has been made in the financial statements on pages 26 through 46 of the Illinois Power Company 1992 Annual Report, which is incorporated herein by reference. e

11gg d Business (Continued) Lecal Proceedines and Relate [! Matters A settlement agreement was filed on December 2,1991, with the United Hauman Suit - States District Court for the Central District of Illinois in a class action lawsuit filed in May 1989 by two purchasers of the Company's common stock purporting to act as representatives of a class j of such purchasers against the Company, the Company's independent accountants and one current and three former officers of the Company. The settlement agreement established an 511 million fund to pay plaintiffs' legal expenses and to compensate class members who bought the i Company's common stock between March 31, 1987, and April 20, 1988, and still owned such I stock on the latter date. On April 15, 1992, final court approval of the settlement was granted and the case was dismissed. Final settlement checks (approximately 50.64 per share) to qualified class members were issued in December 1992. Insurance will cover 57 million of the settlement; $4 million was paid by-the Company, but 3 will not be passed through to customers. Performance of the Company's obligations under the settlement agreement did not have a material adverse effect on the Company's financial condition or results of operations. Decommissioninc and N.yclear Fuel Disposal Costs The Company is responsible for its ownership share of the costs of decommissioning Clin- ) ton and for spent nuclear fuel disposal costs. On March 18, 1992, the ICC entered an order in which the ICC expressed concem that the Company take all reasonable action to ensure that Soy-land contributes its ownership share of the current or any revised estimate of decommissioning I costs. The order also states that if the Company becomes liable for decommissioning expenses attributable to Soyland, the ICC will then decide whether that expense should be the responsibility of the Company's stockholders or its customers. Extemal decommissioning trusts, as prescribed under Illinois law and authorized by the ICC, have been established to accumulate funds for the Company's share of future decommissioning of Clinton. Based on NRC regulations that establish ) 4 a minimum funding level, the Company's 86.8% share of decommissioning costs are estimated to i be approximately $166 million (1992 dollars). The NRC minimum is based only on the cost of removing radioactive plant structures. A site-specific study to estimate the costs of dismantling, removal and disposal of Clinton has not been made. At December 31,1992 and 1991, the Com-pany had recorded a liability of $12.3 million and S7.9 million, respectively, for future decom-missioning of Clinton. In February 1992, the ICC approved a formula that permits the Company L to adjust rates annually for changes in decommissioning cost estimates. The Internal Revenue Service has ruled that the payments to a tax qualified nuclear decommissioning trust are deduct-ible for income tax purposes in the current year. For the years 1992,1991 and 1990, the Compa-ny has contributed 53.7 million, 53.4 million and $2.7 million,.respectively, to external tax quali-fled and non-tax qualified nuclear decommissioning trust funds. The balance in these nuclear decommissioning trust funds at December 31,1992 and 1991 were $12.3 million and $7.9 mil-lion, respectively. 4 For a discussion of the Energy Policy Act and nuclear fuel disposal costs, see sub-caption ' Nuclear

• on page 10, under ' Fuel Supply".

-l 8-P e a w s--

t Item 1. Business (Continued) Dividends On October 14, 1992, the Company's Board of Directors declared four quarterly common and preferred stock dividends payable in 1993, totalling approximately 590 million. On February 10, 1993, the Board of Directors declared the common and preferred stock dividends payable in the first quarter of 1994. On hiarch 24,1993, the ICC issued an order in the Company's pending dividend proceeding. The order granted authority for payment of quanerly dividends on the Company's outstanding preferred and common stock for the three remaming quaners of 1993 and the first quaner of 1994, as declared by the Company's Board of Directors, and declaration and payment of quanerly dividends on its outstanding preferred and common stock payable the second quarter of 1994. The order allows payment of these dividends, in the event that write-offs related to the August 1992 ICC rate rehearing order, if ultimately required, produces an accumulated i deficit (negative retained. earnings).sa.lang as cenain otherfmancial tests are met. If payment is otherwise unlawful on the normal payment dates, the Company will be pre-cluded from paying dividends. In this event, under the terms of the Board's declaration, no common stock dividend payments will be made and the payment of preferred stock dividends shall be deferred until such time as payment is lawful. In addition, the Company would be unable to 4 declare additional preferred and common stock dividends until it again had a positive balance of retained ernings sufficient to suppon such declaration. Payment of current and cumulative pre-ferred stock dividends will be made to holders of preferred stock as of the record date specified for the quarter in which payment of dividends first becomes authorized and lawful. l Gas Business The Company supplies natural gas service at retail to an estimated aggregate population of l 920,000 in 257 incorporated municipalities, adjacent suburban areas and numerous unincorporated communities. It does not sell gas for resale. During the twelve months ended December 31, 1992, the Company purchased 70,075,000 hihiBru of natural gas from Panhandle Eastern Pipe Line Company (Panhandle), Natural Gas Pipeline Company of America (Natural), hiississippi River Transmission Corporation (hfississip-pi), Trunkline Gas Company (Trunkline), ANR Pipeline Company (ANR), and in the spot market at a cost of approximately $184 million. The average cost of natural gas purchased by the Com-pany from all suppliers for the years 1992,1991 and 1990 was $2.62, $2.49 and $2.73 per hihiBtu, respectively. i The total cost of natural gas delivered increased 12.6% from 1991 due to increased sales to customers and higher prices. Approximately 53% of total gas purchased was from spot market sources. Gas therm sales, which exclude therms transponed, increased 7.5% in 1992. When transported gas for industrial and commercial customers is included, the total gas delivered (therms sold plus therms transponed) to the Company's customers decreased 0.7% from 1991. L L

Item 1. Business (Continued) The Company's rate schedules contain provisions for passing through to its gas customers increases or decreases in the cost of purchased gas. See the information under the captions Reve-nue and Energy Cost of " Note 1 - Summary of Significant Accounting Policies" on pages 31 and 32 of the Illinois Power Company 1992 Annual Repon which is incorporated herein by reference. The volume of customer-owned gas transported during 1992 decreased 19.4% from that of 1991 due to higher spot market prices resulting in customers purchasing gas directly from the Company. During 1992, approximately 150 industrial and large commercial customers purchased gas directly from gas producers. These customers are charged for the transportation of gas through the Company's system to their plant facilities. The Company has eight underground gas storage fields having a total capacity of approxi-mately 10.7 million MMBtu.and.a~totaldeliverability-on e-peak day of about 272,000 MMBtu. In addition to the capacity of the eight underground storage fields, the Company has contracts with Panhandle for one million MMBru of underground storage capacity and a total deliverability i on a peak day of approximately 20,000 MMBru, with Natural for 1.2 million MMBru of storage capacity and a total delivembility on a peak day of 37,000 MMBtu and with ANR for 173,003 MMBtu of storage capacity and a total deliverability on a peak day of 3,473 MMBtu. Certain of these contract amounts may be reduced as a result of implementation of FERC Orders 636 and 636-A. See discussion under " Gas Supply" below. Operation of underground storage permits the Company to increase deliverability to its customers during peak load periods by taking gas into storage during the off-peak months. J The Company owns three active liquefied petroleum gas plants having an aggregate peak-day deliverability of about 50,000 MMBru for peak-shaving purposes. Gas properties include approximately 7,500 miles of mains. The Company experienced its 1992 peak-day send out of 670,209 MMBru of natural gas on January 15, 1992. The Company's highest peak-day send out was 857,324 MMBru of natural gas j on January 10, 1982. On December 21,1992, the Company filed a petition with the ICC to lower the gas utility plant composite depreciation rate to 3.4%. The proposed reduction is based on new estimates of remaining plant life as developed in a gas depreciation study completed in 1992. The Company is requesting that the new gas composite depreciation rate become effective January 1,1933. The ICC staff is proposing that the new rate not become effective on January 1,1993 but rather be considered in the Company's proposed gas rate case filing. t During the second quaner of 1993, the Company intends to file a gas retail rate increase request with the ICC, seeking to adjust its rates to reflect the impact of rising operation and main-tenance expenses, the effects of lower sales to ultimate customers and the costs associated with the Hillsboro storage field expansion project, discussed under " Gas Supply", below, which is ) scheduled to be in service by April 1994. The Company expects to ask for an annual base rate i increase of approximately 530 million. This rate increase will be partially offset by an annual savings in the cost of gas which will flow back to customers. Thus, the net increase to customers is expected to be approximately 512 million to S15 million annually whi h equates to a 4% to ) c . 1

Item 1. Business (Continued) ~ 5% increase. A final order by the ICC is expected to be issued in 1994. The last Company gas rate increase was effective January 1983, followed by a gas rate decrease in December 1984. Gas Sutmiv Pursuant to Orders 636 and 636-A, issued on April 8,1992, and August 3,1992, respec-tively, FERC approved amendments to its rules which are intended to increase competition among natural gas suppliers by "unbundling" the interstate pipelines' merchant sales service into separate sales and transportation services, and by mandating that the pipelines' firm transportation service be comparable to the transportation service included in their traditional bundled sales service. Under this rule, pipelines are required to unbundle services that they provide today so that pur-chasers of natural gas can select services as needed to meet their energy needs. At this time, the Company is unable to predict the ultimemimpact of these rules on its operations and costs, but believes it will increase the complexity of providing firm gas service. This additional complexity results from the greater number of options available to the Company as well as the added respon-sibility to arrange for acquisition, transpo:tation and storage of natural gas, which were previously bundled into the pipelines' sales service. The Company has firm sales contracts with four ofits five pipeline suppliers for the follow-ing maximum amounts: 92,491 MMBru per day from Panhandle for November through March and lesser amounts during the other months, 65,960 MMBru per day from Natural, 102,000 MhfBtu per day from Mississippi, and 3,600 MMBtu per day from Trunkline. In addition, the Company has firm transportation contracts with Panhandle for 10,493 MMBtu per day, with Natural for 32,760 MMBtu per day and with ANR for 2,842 MMBru per day. Certain of these contract amounts may be reduced as a result of implementation of Orders 636 and 636-A. The Company's storage and interconnected gas systems enable it to maximize purchases, within the limits allowed by the pipeline suppliers' tariffs and certain physical constraints, from the least costly ofits five pipeline suppliers. Historic gas purchases are shown in the following table. The source labeled "Other" below represents purchases from small natural gas fields in Illinois. Contract Purchases i Expiration Years Ended December 31. Source Date LO22 1991 LO2.0 (Millions of MMBtu) Panhandle............ Interim 8.0 10.6 12.9 j Natural.............. 12/01/93 19.3 21.6 19.7 Mississippi.......... 10/31/96 5.4 8.9 8.1 Trunkline............ 11/01/93 0.1 0.1 0.1 A NR.................. Interim 0.1 0.1 0.1 Spot Market......... 37.1 24.0 20.1 Other................. _fL1 Q.1 Ql Total............ 70.I 65.4 61.1 Item 1. Business (Continued) The Panhandle contract expired March 31,1991, and the ANR contract expired October 31, 1992. The Company presently has interim contracts with Panhandle and ANR which will contin-ue until the implementation of FERC Order 636 and 636-A. All pipeline contracts are subject to change with the implementation of FERC Order 636 and 636-A. The Company's present estimated supplies of gas from pipelines and its own storage are sufficient to serve all of its existing firm loads, and to provide best efforts service to interruptible loads. Gas service to interruptible customers was interrupted on one occasion for a total of 20 hours during the year 1992. On this occasion, storage service was made available in lieu of curtailment. Gas service continues to be available to all applicants on a current basis. The Com-pany anticipates that as the above contmets expire they will be renewed, reduced or replaced, as appropriate, to insure that the Company has adequate supplies of gas to serve its customers. The Company is undertaking a three-year project to expand its Hillsboro Storage Field and increase the Company's natural gas supply flexibility. The project includes construction of a 62 mile pipeline from Hillsboro to the Decatur area, as well as additional facilities in the Metro-East area. On October 21,1992, the ICC granted the Company a certificate of public convenience and necessity for the pipeline. The expansion will increase total gas storage capacity by 42 percent and will allow the Company to take maximum advantage of lower summer spot market prices, to reduce pipeline contract demand charges and to increase supplier price competition in the St. l_ouis Metro-East area. Nine new injection-withdrawal wells and two additional compressor units will be constructed to increase the storage capacity. Injection rates will be tripled and deliv-ery/ withdrawal rates will be increased 150 percent to better meet winter peak demand. The $61 million project is scheduled to be in service in April 1994. Environmental Matters The Company is subject to regulation by certain federal and Illinois authorities with respect to environmental matters and may in the future become subject to additional regulation by such authorities or by other federal, state and local governmental bodies. Existing regulations affecting the Company are principally related to air and water quality, hazardous wastes and toxic substanc-es. Air Ouality Pursuant to the Federal Clean Air Act (Act), the United States Environmental Protection Agency (USEPA) has established ambient air quality standards for air pollutants which in its judgment have an adverse effect on public health or welfare. The Act requires each state to adopt laws and regulations, subject to USEPA approval, designed to achieve such standards. Pursuant to the Illinois Environmental Protection Act, the Illinois Pollution Control Board (Board) adopted and, along with the Illinois Environmental Protection Agency (IEPA), is enforcing a.comprehen-sive set of air pollution control regulations which include emission limitations and permitting, monitoring, and reporting requirements. These regulations have, with some modifications, re-ceived USEPA approval and are enforceable by both the Illinois and federal agencies. -

Item L Business (Continued) The air pollution regulations of the Board impose limitations on emissions of paniculates, sulfur dioxide, nitrogen oxides, and various other pollutants. Enforcement of emission limitations is accomplished in part through the regulatory permitting process. To construct a facility which will produce regulated emissions, a construction permit must be obtained, usually on the basis of the design being sufficient to permit operation within applicable emission limitations. Upon com-pletion of construction, an operating permit for the facility must be obtained. Operating permits are granted for various periods, usually within a range of from two to five years. The initial granting or subsequent renewal of operating permits is based upon a demonstration that the facili-ty operates within prescribed limitations on emissions. The Company's practice is to obtain an operating permit for each source of regulated emissions. Presently, it has a total of approximately 100 permits for emission sources at its power stations and other facilities, expiring at various times. In addition to having the requisite operating permits, each source of regulated emissions must be operated withinthe regulatory. limitations.on emissions.. Verification of such compliance is usually accomplished by repons to regulatory authorities and inspections by such authorities. Jointly, the Company and IEPA petitioned the Board to adopt a regulatory amendment providing for a site-specific sulfur dioxide limitation applicable to the Baldwin power station. The Board granted that relief in 1979 and amended it in 1983 to satisfy certain concerns raised by USEPA. In October 1983, the amendment, with supporting information, was submitted to USEPA for approval as part of the State Implementation Plan (SIP). On March 5,1990, USEPA approved the Baldwin SIP allowing the use of local coal up to full capacity of the Baldwin power station. In addition to the sulfur dioxide emission limitations for existing facilities, both the USEPA and the State of Illinois adopted New Source Performance Standards (NSPS) applicable to coal-fired generating units limiting emissions to 1.2 pounds of sulfur dioxide per million Btu of heat input. This standard is applicable to the Company's Unit 6 at the Havana power station. The federal NSPS also limits nitrogen oxides, opacity and particulate emissions and imposes certain monitoring requirements. In 1977 the Act was amended and, as a result, USEPA has adopted more stringent emission standards for new sources. These included requirements for removing sulfur dioxide from the stack gas, with specified removal efficiencies applicable to all new fossil i fuel fired steam electric generating stations, but the amendments adopted in 1990 repealed the removal efficiency requirements. These standards would apply to any new plant constructed by the Company. Clean Air Act On November 15, 1990, the U. S. Congress passed the Clean Air Act Amendments i (Amendments). The Amendments create new programs to control acid rain, protect stratospheric ozone and require permits for most air pollution sources. The Amendments also modify the existing hazardous air pollutant program and imposes new air quality requirements on sources in areas which do not meet the ambient air quality standards. As the regulations implementing the Amendments are developed, the Company will develop and implement plans to maintain compli-ance with any new air pollutant restrictions..

Item 1. Buriness (Continued) The Company began construction of scrubbers on two units at the Baldwin Power Station (Baldwin) in the fall of 1991 to comply with the sulfur dioxide requirements of the acid rain provisions of the Clean Air Act. On August 31, 1992, the Company announced that it had sus-i pended construction of the two scrubbers at Baldwin due to substantial legal and economic uncer-tainties, including questions that had been raised about the constitutionality of the Illinois scrubber legislation in light of a U. S. Supreme Court decision rendered earlier in 1992. On March 15, 1993, the Company announced it had reached agreements-in-principle with Peabody and Arch that provide for the continued use of high-sulfur Illinois coal at Baldwin, sub-ject to certain contingencies. In order to meet the Phase I (1995-99) sulfur dioxide requirements of the acid rain provi-sions of the Clean Air Act, the Company has MW urchase sulfur dioxide emission allow-P ances and continue to utilize coal provided by Peabody and Arch. An a110wance is the authoriza-tion by the USEPA to emit one ton of sulfur dioxide. In order to comply with the Phase 3 sulfur dioxide standards, the Company will have to purchase between 75,000 and 125,000 allowances per year from 1995 through 1999. This plan, which is subject to ICC approval, will defer, at least until 2000, the need for scrubbers or other capital projects associated with sulfur dioxide emission reductions. Additional actions will be required to achieve compliance with the Phase H sulfur dioxide requirements of the Clean Air Act. The Company has expended approximately $35 million through February,1993, on its Baldwin scrubber project. The Company believes that work performed to date can be applied to scrubber or other sulfur dioxide removal technologies which may be utilized to comply with Phase II requirements of the Clean Air Act. The Company plans on filing its plan with the ICC sometime in April,1993. To achieve compliance with the Phase I (1995) nitrogen oxide emission reduction require-ments of the acid rain provisions of the Clean Air Act, the Company is installing low-nitrogen-oxide burners at some generating units. The estimated capital cost for these burners is $25 mil-lion. Additional capital expenditures are anticipated prior to 2000 to comply with the Phase II nitrogen-oxide requirements, as well as potential requirements to further reduce nitrogen-oxide emissions in the St. louis metropolitan area. The Company is also proceeding with installation of continuous emission monitoring systems as required by the acid rain provisions of the Clean Air Act. The estimated capital cost for these monitoring systems is $25 million. Gas Manufacturine Sites The Company, through its predecessor companies, is identified on a State of Illinois list as the responsible party for potential environmental impairment at 25 former manufactured gas plant sites. The Company is investigating each site to determme (1) the type and amount of residues present; (2) whether the residues constitute environmental or health risks and, if present, the extent of those risks; and (3) whether the Company has any responsibility for remedial action. Because of the unknown and unique characteristics of each site (such as amount and type of resi-i' dues present, physical characteristics of the site and the environmental risk), and uncertain regula-tory requirements, the Company is not able to determine its ultimate liability for the investigation and remediation of the 25 sites. However, the Company has estimated that the liability is at a minimum $26 million. Therefore, in accordance with generally accepted accounting principles, -24 i

Item 1. Business (Continued) the Company-recorded a liability of $26 million. The Company is unable to determine at this j J time how much of these costs, if any, will be eligible for recovery from msurance camers. j i The Company has also recorded a regulatory asset in the amount of $26 million, reflecting management's expectation that it will be allowed to recover such costs from its customers in future regulatory proceedings. The Company panicipated in a genede proceeding conducted by the ICC on this subject. This generic proceeding was initiated to consider whether Blinois utilities should be allowed to recover from their customers the costs related to the remediation and resto-l ration of the manufactured gas plant sites and what recovery mechanism should be used if the ICC determines that the costs are recoverable. In prior rate orders, two Illinois utilities have been allowed recovery of such costs from the companies' customers as current and legitimate business [ expenses. These rate orders have been appealed to the Illinois Appellate Coun by certain interve-l nors who are objecting to the cost recoveries. In January 1993, the Illmois Appellate Coun, Third District reversed one of these orders and remanded it to the ICC for funher consideration on the grounds that it was inconsistent with the ICC's subsequent generic order (discussed below). i On September 30, 1992, the ICC issued a generic order addressing the recoverability of costs incurred by utilities in cleaning up coal-tar deposits resulting from the coal gasification i process. The ICC order concluded that utilities will be allowed to collect their prudently incurred costs paid to third parties from customers over a five-year period with no recovery from custom-l ers of carrying costs on the unrecovered balance. Wages and salaries of utility employees are 1 i specifically excluded. On November 10, 1992, the ICC denied all applications for rehearing of the ICC order, including that of the Company. Rawl on the ICC's ruling that carrying costs on unrecovered cleanup costs will not be allowed, the Company has appealed the ICC order to the Illinois Appellate Court, Third District. Other panies have also filed appeals of the ICC order. i The Company has reviewed the order to assess its financial impact and management does not l expect that it will have a material adverse effect on the Company's financial condition or results of operations. On March 5,1993, the Company filed tariffs with the ICC to provide for recovery of its remediation costs incurred subsequent to January 1,1993. This tariff filing is subject to l review and approval by the ICC. l l Water Ouahtv l 3 1 The Federal Water Pollution Control Act Amendments of 1972 require that National Pollut-f l ant Discharge Elimination System permits be obtained from USEPA (or, when delegated, from individual state pollution control agencies) for any discharge into navigable waters. Such dis-i j charges are required to conform with the standards, including thermal, established by USEPA and l also with applicable state standards. l Enforcement of discharge limitations is accomplished in part through the regulatory permit-j ] ting process similar to that described prmously under ' Air Quality". Presently, the Company has approximately two dozen permits for discharges at its power stations and other facilities, ( which must be periodically renewed. i 1 i h l i , J a i ~, _. _ _ _. _. -.,., _. _

Item 1. Business (Continued) In addition to obtaining such permits, each source of regulated discharges must be operated within the limitations prescribed by applicable regulations. Verification of such compliance is t usually accomplished by monitoring results reported to regulatory authorities and inspections by such authorities. The Hennepin NPDES permit was reissued during the third quarter of 1992 and is due for renewal in the third quarter of 1997. The Clinton permit was reissued during the third quaner of 1990 and is due for renewal in the second quarter of 1995. The following permits were reissued in 1991: Vermilion - first quarter; Wood River - third quarter; Havana - fourth quarter. These permits are due for rcnewal in the fourth quarter of 1995. The Baldwin permit expired during the e fourth quarter of 1992. The application to renew this permit has been submitted and the Compa-1 i ny is allowed to continue to operate the plant at currently authorized levels pending approval of the application... Other Issues Hazardous and nonhazardous wastes generated by the Company must be managed in accor-dance with federal regulations under the Toxic Substances Control Act, the Comprehensive Envi-ronmental Response, Compensation and Liability Act, and the Resource Conservation and Recov-ery Act (RCRA) and additional state regulations promulgated under both RCRA and state law. l Regulations promulgated in 1988 under RCRA govern the Company's use of underground storage tanks. The use, storage, and disposal of certain toxic substances, such as polychlorinated biphenyls (PCB's) in electrical equipment, are regulated under the Toxic Substances Control Act. 1 Hazardous substances used by the Company are subject to reporting requirements under the Com-munity-Right-To-Know Act. The State ofIllinois has been delegated authority for enforcement of these regulations under the Illinois Environmental Protection Act and state statutes. These re-quirements impose certain momtoring, recordkeeping, reporting, and operational requirements which the Company has implemented or is implementing to assure compliance. The Company does not anticipate that compliance will have a matenal adverse effect on its financial position or results of operations. j Between June 1983 and January 1985, the Company shipped various materials containing l 5 PCB's to the Martha C. Rose Chemicals, Inc. (Rose) facility in Holden, Missouri for proper ( treatment and disposal. Rose, pursuant to permits issued by USEPA, had undertaken to dispose of PCB materials for the Company and others, but failed in part to do so. As a result of such failure, PCB materials were being stored at the facility. The Company joined with a number of other generators to monitor the situation and provide a mechanism for the efficient and economi-cal cleanup of the facility. The removal and proper disposal of the PCB materials stored at Rose has now been completed. The remedial investigation / feasibility study has also been completed, and the Record of Decision (ROD) has been issued by USEPA. The Steering Committee, con-sisting of the Company and 15 other entities, has submitted the Remedial Design work plan for implementation of the ROD to USEPA. At the present time, the Company does not believe its ratable share of potential liability related to the cost of futur-disposal and cleanup work at the Rose site will have a material adverse effect on its fir.ancial condition or results of operations. USEPA identified approximately 700 additional entities potentially liable for cleanup costs at Rose and about 99% of these entities have entered agreements with and made payments to the Steer-.. _ -.

Item 1. Business (Continued) ing Comminee for their share of the cleanup cost. The Company, along with fourteen other steering committee members, has filed suit against non-participating potentially liable entities to recover their ratable share of these costs. Electric and Marnetic Fields The possibility that exposure to electric and magnetic fields emanating from power lines, household appliances and other electric sources may result in adverse health effects has been a subject of increased public, governmental and media attention. Lawsuits have been filed against several utilities seeking recovery for personal injury or loss of property values allegedly resulting from EMF emanating from power lines or substations, or to have such facilities relocated. A t considerable amount of scientif.c research has been conducted on this topic without definitive results. Research is continuing to resolve scientific uncertainties. It is too soon to tell what, if any, impact these actions may have on the Company's financial condition. Environmental Expenditures i Operating expenses for environmentally-related activities in 1992 were approximately $49 million (including the incremental costs of alternative fuels to meet environmental requirements). The Company's accumulated capital expenditures (including AFUDC) for environmental protec-tion programs since 1969 have reached approximately $764 million. This accumulated amount of capital expenditures through 1992 has been reduced to reflect a pro rata share of the disallowance of Clinton plant costs. Research and Develcoment The Company's research and development expenditures during 1992,1991 and 1990 were approximately S3.7 million, 57.3 million and 54.9 million, respectively. The increase in the 1991 amount is due to incremental coal transportation costs associated with test burns of western low-sulfur coal at Baldwin, Hennepin and Havarca power stations. i Reculation Under the Illinois Public Utilities Act, the ICC has broad powers of supervision and regula-tion with respect to the rates and charges of the Company, its services and facilities, extensions or abandonment of service, classification of accounts, valuation and depreciation of property, issu-ance of securities, and various other matters. The Illinois Public Utilities Act was amended effec-l tive January 1,1986 to include certain provisions specifying criteria for the inclusion of utility t plant investment in rate base. These provisions state in substance that the ICC shall include in a utility's rate base only the value of its investment which is both prudently incurred and used and useful in providing service to customers; that no new electric generating plant or significant addi-l tion to existing facilities shall be included in rate base unless the ICC determines that such plant or facility is reasonable in cost, prudent and used and useful in providing utility service to cus-tomers; and that the ICC is empowered to determine whether a utility's generating capacity is in j excess of that reasonably necessary to provide adequate and reliable service and to make appropri-ate and equitable adjustments to rates upon a finding of excess caoacity, provided that any such j determination and adjustment with respect to generating capacity existing or under construction Item 1. Business (Continued) prior to January 1,1986 shall be limited to the determination and adjustment, if any, appropriate under the law then in effect. Terms underlined in the preceding sentence are specifically defined in these provisions. l The Company is exempt from all the provisions of the Public Utility Holding Company Act of 1935 except Section 9(a)(2) thereof. That section requires approval of the Securities and Ex-change Commission prior to cenain acquisitions by the Company of any securities of other public utility companies or public utility holding companies. The Company is subject to regulation under the Federal Power Act by the Federal Energy Regulatory Commission (FERC) as to rates and charges in connection with the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate com-merce, the issuance.of. debt-securities < maturing ine-more than-12 months, accounting and de-t preciation policies, and certain other matters. l The FERC has declared the Company exempt from the Natural Gas Act and the orders, rules, and regulations of the Commission thereunder. t The Company is subject to the jurisdiction of the Nuclear Regulatory Commission (NRC) with respect to Clinton. NRC regulations control the granting of permits and licenses for the construction and operation of nuclear power stations and subject such stations to continuing re-view and regulation. Additionally, the NRC review and regulatory process covers decommission-ing, radioactive waste, environmental and radiological aspects of such stations. In general, the NRC continues to propose new and revised rules relating to the operations and maintenance as-pects of nuclear facilities. It is unclear whether such proposed rules will be adopted and what effect, if any, such adoption will have on the Company. i i The Company is subject to the jurisdiction of the Illinois Department of Nuclear Safety (IDNS) with respect to Clinton. IDNS and the NRC entered a memorandum of understanding which allows IDNS to review and regulate nuclear safety matters at state nuclear facilities. The IDNS review and regulatory process covers radiation safety, environmental safety, emergency preparedness and emergency response. IDNS continues to propose new and revised state adminis-4 trative code through legislative approval. It is unclear if such proposed rules will be adopted and i what effect, if any, such adoption will have on the Company. However, the NRC has the final l 3 authority over such nuclear facilities. i t i 4 4 1.

Item L Business (Continued) Executive Officers of the Recistrant Effective Date of Election to Present Position Name of Officer Agg Position Chairman, President and Chief Executive Officer Larry D. Haab 55 06-12-91 Executive Vice President Charles W. Wells 58 03-25-76 Senior Vice President and Chief Financial Officer Larry F. Altenbaumer 44 06-15-92 Senior Vice President Paul L. Lang 52 06-15-92 Senior Vice President J. Stephen Pe.ry 54 06-15-92 Vice President Larry S. Brodsky 44 11-01-87 Vice President Wilfred Connell 55 11-01-87 Vice President John G. Cook 45 06-15-92 Vice President Larry L. Idleman 54 04-17-86 Vice President Rodney A. Smith 45 02-01-88 Vice President Porter J. Womeldorff 60 03-29-79 Vice President, General Counsel and Corporate Secretary Leah Manning Stetzner 44 02-10-93 Controller Alec G. Dreyer 35 06-15-92 Treasurer Robert A. Schultz 52 07-01-89 The present term of office of each of the above executive officers extends to the first of the Company's Board of Directors after the Annual Election of Directors. There are relationships among the executive officers and directors of the Company. Each of the above execcdve officers, except for Mr. Smith, Ms. Stetzner, Mr. Dreyer a Mr. Schultz, has been employed by the Company for more than five years in executive or ma agement positions. Prior to election to the positions shown above, the following executive offi-cers held the following positions since January 1,1988. Prior to being elected Chairman on Jun 12, 1991, Chief Executive Officer on April 9,1991 and President on April 11, 1989, Mr. Haab was Executive Vice President and Senior Vice President. Prior to being elected Senior Vice President and Chief Financial Officer on June 15, 1992, and Vice President, Chief Financia Officer and Controller on June 13, 1990, to being r ected Senior Vice President on JuneMt. Altenbaumer was Controller and Treasurer. P 15, 1992, Mr. Lang joined the Company as Vice President on July 21, 1986. Prior to being elected Senior Vice President on June 15,19 Vice President on December 5,1989, Mr. Perry was Assistant Vice President at Clinton an Manager of Nuclear Program Coordination at Clinton. Prior to being elected Vice Presiden June 15,1992, Mr. Cook was Manager of Clinton Power Station and Manager of Nuclear Plan-ning and Support. of Corporate Communications for Virginia Power. Prior to bein Counsel and Corporate Secretary on February 10, 1993, General Counsel and Corporate Secretary on October 3,1989.Ms. Stetzner joined the Com Associate General Counsel with Burlington Northern Railroad Company.Ms. Stetzne Prior to joining the Company on June 15, 1992, Mr. Dreyer was a Senior Audit Manager with Price Waterhouse. Mr. Schultz retired from the U. S. Navy in 1986 and was employed by the Company on O L

~ Business (Continued) Item 1, 6,1986. Prior to being elected Treasurer on July 1,1989, Mr. Schultz w i i f Glob-and Programming at Clinton. On March 1,1993, Mr. Womeldorff assumed the pos j f al Climate Program Executive, and is no longer an elected officer. Oneratine Statinies The information under the captions " Selected Statistics" on page 48 of the Illin Company 1992 Annual Repon is incorporated herein by reference. Item 2. Propenies The Company owns and operates electric generating stations at Havana, W Hennepin, Baldwin, and near Danville, Illinois (designate power station (Clinton) of 86.8% and Soyland Power Cooperative, Inc. ow 3,340,000 13.2%. The Company's ponion of net summer output capability of Clinton is 807,0 The Company also owns other gas turbine generating facilities, at three locations, gate capability of 138,000 kilowatts. The Company owns ar. interconnected electric transmission system of appro volts and a distribution system which includes circuit miles, operating from 69,000 to 345,000 about 36,200 circuit miles of overhead and underground lines. All outstanding first mortgage bonds issued under the Mortgage and Deed of Trust November 1,1943 are secured by a first mongage lien on substantially all of the fixed prope franchises and rights of the Company with cenain exceptions expressly provided in the mortgag All outstanding New Mongage Bonds issued under the General Mortgage securing the bonds. and Deed of Trust dated November 1,1992, are secured by a lien on the Company's p used in the generation, purchase, transmission, distribution and sale of electricity and lien is junior to the lien of the Mongage and Deed of Trust dated November 1,1943. Cenain indebtedness of Illinois Power Fuel Company is secured by a security interest in nuclear fuel owned by it and the related centract rights. Item 3. 12 gal Proceedings Fuel and Purchased Gas Adiustment Clauses The ICC holds annual public hearings to determine whether each utility's fuel adjustment clause and purchased gas adjustment clause reflect actual costs of fuel and gas prude ased and to reconcile amounts collected with actual costs, with the possibility of surcharges or refunds to reflect amounts under-collected or over-collected. See "1987 Uniform Fuel Adjustm Clause Reconciliation" reponed under "Clinton Power Station

• in Item 1 for information re ing a February 1992 order from the ICC.

i. _ m ii

Item 3. Legal Proceedings (Continued) ~ Clinton Power Sention See "Clinton Power Station" reported under " Electric Business" in Item 1 for information regarding certam legal proceedings relating to Clinton. Environmental See " Environmental Matir ts" reported under Item 1 for information regarding legal pro-ceedings concermng environmental matters. EgAbdy Coal Comoany and Arch Coal Sales Comoany. Inc. See " Coal" reported under " Fuel Supply" in Item 1 for information regarding certain legal proceedings relating to the Clean Air Act. Item 4. Submission of Matters to a Vote of Security Holders None. t 4 i t L PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The information under the caption " Quarterly Financial Information and Common Stock Data (Unaudited)" on page 46 of the Illinois Power Company 1992 Annual Report is incorporated herein by reference. Item 6. Selected Financial Data The inforoation under the caption " Selected Financial Data" on page 47 of the Illinois Power Company 1992 Annual Report is incorporated herein by reference. Management is unable to predict the ultimate outcome of the uncertainties discussed in " Note 2 - Clinton Power Station" on pages 32 through 36 of the Illinois; Power Company 4992-Annual Report which is incorporated herein by reference. These uncertainties could have a material adverse effect on the Company's carnmgs and/or fmancial position. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information under the caption " Management's Discussion and Analysis" on pages 18 through 24 of the Illinois Power Company 1992 Annual Report is incorporated herein by refer-ence. Item 8. Financial Statements and Supplementary Data The financial statements on pages 26 through 46 and Report of Independent Accountants on page 25 of the Illinois Power Company 1992 Annual Report are incorporated herein by reference. See also Financial Statement Schedules on pages 38 through 47 and Report of Independent Ac-countants on page 37 of this Form 10-K. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. 1 i i a PART III Item 10. Directors and Executive Officers of the Registrant The information under the capdon " Nominees for Lirectors' on pages 5 through 11 of Blinois Power Company's Proxy Statement for its 1993 Annual Meeting of Stockholders is incor-porated herein by reference. The information relating to executive officers is set forth in Part I of this Annual Report on Form 10-K. Item 11. Executive Compensation The information under the caption " Compensation of Executive Officers" on pages 12 through 16 of Illinois Power Company's Proxy Statement for its 1993 Annual Meeting of Stock-holders is incorponted herein by reference. litaA Security Ownership of Certain Beneficial Owmers and Management The information under the caption " Security Ownership of Certain Beneficial Owners" on pages 2 and 3 and the information regarding securities owned by certain officers and directors under the caption " Nominees for Directors" on pages 5 through 11 of Blinois Power Company's Proxy Statement for its 1993 Annual Meeting of Stockholders is incorporated ;terein by reference. Item 13. Certain Relationships and Related Transactions None. t n i , I

l I 1 l PART IV Item 14. Exhibits, Financial Statement Schedules, and Repons on Form 8-K l (a) Documents filed as pan of this repon. (1) Financial Statements: Page in Annual Report to Stockholders

• Repon ofIndependent Accountants 25 Statements offncome.for thedhree..

years ended December 31,1992 26 Balance Sheets at December 31,1992 and 1991 27 Statements of Cash Flows for the three years ended December 31,1992 28 Statements of Retained Earnings for the three years ended December 31,1992 28 Statements of Preferred and Preference Stock at December 31,1992 and 1991 29 Statements ofI.ong-Term Debt at December 31,1992 and 1991 30 Notes to Financial Statements 31 - 46 Pare in Form 10-K 1 (2) Financial Statement Schedules: Repon ofIndependent Accountants on Financial Statement Schedules 37 V Utility Plant 38 - 40 VI Accumulated Depreciation 41 - 43 VIII Valuation and Qualifying Accounts 44 - 46 X Supplementary Income Statement Information 47 l 1 Incorporated by reference from the indicated pages of the 1992 Annual Repon. All other schedules are omitted because they are not applicable or the required information l is shown in the financial statements or notes thereto. l 34 l

Item 14 Exhibits, Financial Statement Schedules, and Repons on Form 8-K (Continued) (3) Exhibits The exhibits filed with the Form 10-K are listed in the Exhibit Index located elsewhere herein. All management contracts and compensatory plans or arrangements set fonh in such list are marked with a (b) Repons on Form 8-K since September 30,1992: A Current Repon on Form 8-K, dated January 21, 1993, was filed reporting under Item 5, Other Events. A Current Repon on Form 8-K, dated February 2, 1993, was filed reporting under Item 5, Other Events. A Current Repon on Form 8-K, dated February 8, 1993, was filed reporting under item 5, Other Events and Item 7, Financial Statements and Exhibits. A Current Repon on Form 8-K, dated March 3, 1993, was filed reponing under Item 5, Other Events. A Current Repon on Form 8-K, dated March 15, 1993, was filed reponing under Item 5, Other Events. 7 I )

SIGNATURES Pursuant to the requirements of Seesion 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly rand this repon to be signed on its behalf by the undersigned, thereunto duly authorned. 1 ILLINOIS POWER COMPANY (REGISTRANT) By Irty D. Hub Larry D. Haab, Chatrrnan, President j and Chief Executsve Officer 1 Date: March 26.1993 Pursuant to the requirements of the Securities Exchange Act of 1934, this repon has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. Sirnitnee M. g 12m D. H22b Chairman, President, Chief \\ 1mry D. liaab Executive Omcer and Director (Principal Executive Officer) 12rry F Altenbzumer Senior Vice President Larry F. Altenbaumer and Chief Financut! Omcer l (Principal Financial Officer) Alee G. Dreyer Controller Alec G. Dreyer (Principal Accounting Officer) \\ Richan! R Berry i Richard R. Berry Grover L Hm-n Grover L Hansen Donald E.1.asater l Doni!d S. PerEnt > March 26,1993 Donald S. Perk 2ns Robert M. Pow-rs Robert M. Powers I Boyd F. Schenk pu= Director Writer D. Scott Walter D. Scott l Ronz1d L Thommon 3 Ronald L. Thompwn Walter M. Vannny Walter M. Vannoy Mariloir von Ferstel Marilou von Ferstel Chrrles W. We!!s Charles W. Wells Vernon E Zimm-rman Vernon K. Zimmerman /.

Report ofIndependent Accountants on Financial Statement Schedules To the Board of Directors of Illinois Power Company Our audits of the 'finaticial statements referred to in our repon dated Febmary 5,1993 appearing on page 25 of the 1992 Annual Repon to Stockholders ofIllinois Power Company, (which repon and financial statements are incorporated by reference in this Annual Repon on Form 10-K) also included an audit of the Financial Statement Schedules appearing on pages 38 through 47 of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. t As described more fully in Note 2 to the financial statements, there are significant l uncenainties 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, and obtaining rates which provide adequate cash flows to allow the Company to maintain financial integrity. Management is unable to detennine the ultimate outcome of these uncensinties. Accordingly, no provision for any liability or additional loss that may result upon resolution of these matters has been made in these Financial Statement Schedules or the related financial statements. / W eoc PRICE WATERHOUSE l One Boatmen's Plaza St. Louis, Missouri February 5,1993 ILLINOIS POWER COMPANY Col. A _._, SCIIEDULE V - UTILITY PLANT Col. B Col. C Col. D Col. E Col. F Balance at Balance at beginning of Other changes - end of period Additions add (deduct) period plassift_qaj ba January 1. 1992 at cost Retirements describe pLecember 31. 1992 (Millions of Dollars) Electric - Intangible 15.3 5 .8 S 16.1 Steam production 823.5 13.0 2.9 833.6 Nuclear 3,173.0 (7.3) (4.0) 3,169.7 Hydraulic production Internal combustion engine 19.5 19.5 Transmission 283.7 4.0 .2 287.5 Distribution 804.5 43.9 6.3 842.1 General 169.8 16.7 13.3 173.2 Plant held for future une 8.6 21.7 (1) 30.3 Acquisition adjustment 3.9 3.9 Construction work in progress 88.2 110.4 f21.7)(1) 176,_2 Total electric plant 5.390.0 181.5 22.6 5.548 2 t Cas - Intangible w Production 6.2 .5 ( 2.4)(2) 4.3 i' Underground storage 28.7 .5 .1 2.3 (3) 31.4 Local storage Transmission 53.8 .6 .1 ( .3)(2) 54.0 Distribution 370.0 13.9 3.0 300.9 Ceneral 17.1 3.5 2.6 18.0 Plant held for future use 1 2.2 (2) 2.3 construction work in progress 13.8 17.9 31.7 Cas stored underground (noncurrent) 13.6 2.2 (3&4) 15.8 Total gas plant 503.3 36.9 5.8 4.0 538.4 TOTAL 5.893.3 $ 218.4 S 28.4 4.0 S 6.087.3 ( ) Credit (1) Transfer of $21.7 million from CWIP to Plant held for future use due to suspended scrubber project. (2) Transfer of $2.2 million to Plant held for future use and $.5 million to Non-utility propert.y from Production ($2.4 million) and Transmission Plan ($.3 million). (3) Transfer of $2.3 million from Cas stored underground (noncurrent) to Underground storage at the Hillsboro Storage Field. (4) Transfer of $4.5 million from Inventory to Oas stored underground (noncurrent) at the Hillsboro Storage Field. m. m .m.. m.

ILLINOIS POWER COMPANY SCUEDULE V - UTILITY PLANT Col. A Col. B - Col. C Col. D Col. E Col. F Balance at Balance at beginning of Other changes - end of period Additions add (deduct) - period Classification January 1. IM ..at cost Retiremente describe December 31. 1991 (Millions of Dollars) l Electric - Intangible .6 14.7 15.3 Steam production 802.0 25.1 3.6 823.5 Nuclear 3,167.7 9.4 4.1 3,173.0 Hydraulic production Internal combustion engine 19.4 .1 19.5 Transmission 287.8 (3.7) .4 283.7 Distribution 771.5 40.7 7.7 804.5 General 153.4 18.3 3.2 169.8. Plant held for future use 8.6 1.3 (1) 8.6 Acquisition adjustment 3.9 3.9 4 Construction work in progress 70.9 17.3 88.2 t y Total electric plant 5.285.8 121.9 19.0 1.3 5.390.0 cas - Intangible Production 6.2 6.2 Underground storage 25.4 1.2 .1 2.2 (2) 28.7 Local storage Transmission 52.8 1.2 .2 53.8 Distribution 359.1 14.4 3.5 370.0 Ceneral 16.2 1.1 .2 17.1 Plant held for future use .1 .1 Construction work in progress 6.8 7.0 13.8 Gas stored underground (noncurrent) 12.0 1.6 (2&3) 13.6 i Total gas plant 478.6 24.9 4.0 3.8 503.3 'IVTAL 5.764.4 146.8 S 23.0 S 5.1 S 5.893.3 ( ) Credit (1) Reflects acquisition of capital lease property - computers and computer equipment - and their subsequent amortization. (2) Transfer of-$2.2 million from cas stored underground (noncurrent) to Underground storage'at the Hillsboro Storage Field. (3) Transfer of $3.8 million from Inventory to cas stored underground (noncurrent) at the Hillsboro storage Field. , -,., - - ~ - -.. ~ - - - - - - - - - - - - ~,...,, -,, -.. - -.. -..., -. -,.. -...,, - -,,.. - ~ -. - - - -. - ~, -.

ILLINOIS POWER COMPANY SCllEDULE V - UTILITY PLANT Col. A Col. B Col. C Col. D Col. E Col. F Balance at Balance at beginning of other changes - end of period period Additions edd (deduct) Classification January 1. 1990 at cost Retirements describe December 31. 1990 (M111fons of Dollars) Electria: S S .6 S Intangible S .6 S Steam production 789.4 13.4 .8 802.0 Nuclear 3,339.9 6.5 (178.7)(1) 3,167.7 Hydraulic production 19.4 Internal combustion engine 19.4 Transmission 275.5 13.6 1.3 287.8 Distribution 737.1 40.6 6.2 771.5 General 136.0 18.2 2.2 1.4 (2) 153.4 8.6 Plant held for future use 8.6 3.9 Acquisition adjustment 3.9 70.9 Construction work in progress 58.8 12.1 Total electric plant 5.369.2 104.4 10.5 1177.3) 5.285.8 Cas - Intar.gible 6.2 Production 6.2 25.4 Underground storage 23.7 1.7 Local storage Transmission 50.2 2.7 .1 52.8 359.1 Distribution 345.9 17.4 4.2 16.2 Ceneral 14.8 2.6 1.2 .1 Plant held for future use .1 Construction work in progress 6.6 .2 6.8 12.0 Can stored underground (noncurrent) 12.0 478.6 Total gas plant 459.5 24.6 5.5 TOTAL S 5.828.7 5 129.0 S 16.0 (177.3) 5.764.4-( ( ) Credit (1) Reflects the prudence disallowance of Clinton Power Station plant costs. (2) Represents acquisition of capital lease property - computers and computer equipment - and their subsequent amortization.

ILLINOIS POWER COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION __ Col. A Col. B _ Col. C Col. D Col. E Col. F Balance at Additions Balance at beginning of charged to other changes - end of period cost and add (deduct) - period Classification January 1. 1992 _ expenses Retirements describe December.31, 1992 (Millions of Dollars) Electric - Intangible 2.7 3.0 5.7 Steam production 481.7 20.4 3.8 498.3 Nuclear 406.5 88.0 (1.6) 496.1 Hydraulic production Internal combustion engine 16.5 .4 16.9 Transmission 139.4 4.6 (.7) 144.7 Distribution 378.1 19.0 8.5 388.6 3 Ceneral 60.5 4.3 12.9 51.9 i Plant held for future use Acquisition adjustment 3.9 3.9 Construction work in progress Total electric plant 1.489.3 139.7 26.8 1.602.2 cas - Intangible Production 4.9 .2 (.1) 5.2 Underground storage 15.4 .7 16.1 Local storage Transmission 26.6 1.5 .2 27.9 Distribution 139.7 15.7 4.3 151.1 Ceneral 8.5 1.0 2.3 7.2 Plant held for future use Construction work in progress Cas stored underground (noncurrenti Total gas plant 195.1 19.1 6.2 207.5 TOTAL 1.684.4 S 158.8 5 33.5 S S 1.809.7 ( ) Credit .. ~.

- _ ~ ,~ ILLINOIS POWER COMPANY SCHEDULE VI - ACCUMULATED. DEPRECIATION Col. A Col. 8 Col. C Col. D Col. E Col. F Bala.tce at Additions Balance at beginning of charged to other changes - end of period cost and add (deduct) - period Classification January 1. 1991 _ expenses Retirements describe December 31. 1991 (Millions of Dollars) 4 Electric - Intangible .5 2.2 S 2.7 Steam production 460.6 26.7 5.6 481.7 Nuclear 322.8 88.0 4.3 406.5 Hydraulic production Internal combustion engine 15.7 .8 16.5 Transmission 130.3 8.0 ( 1.1) 139.4 Distribution 361.0 26.0 8.9 378.1 General 57.2 6.1 2.8 60.5 8 Plant held for future use Acquisition adjustment 3.9 3.9 l Construction work in progress Total electric plant 1.352.0 157.8 20.5 1.489.3 I cas - Intangible Production 4.6 .3 4.9 Underground storage 15.0 .6 .2 15.4 Local storage Transmission 24.6 1.5 ( .5) 26.6 Distribution 129.3 15.2 4.8 139.7 4 8.5 General 7.8 .8 .1 Plant held for future use Construction work in progress Gas stored underground (noncurrent) ~- Total gas plant 181.3 18.4 4.6. 195.1 TOTAL S 1.533.3 S 176.2 S 25.1 S S 1.684.4 I ( ) Credit l l t ~,..... ~-, -,....... -.,.,,,,,,.,...., ~ _.. ,-,,.n .-.v ...,.,.n,..n..

ILLINOIS POWER COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION Col. A Col. B Col. C - Col. D Col. E Col. F Balance at Additione Balance at beginning of charged to other changes - end of period cost and add (deduct) period Classification January 1. 1990 expensee Retiremente describe December 31. 1990 (Millions of Dollare) Electric - Intangible S .5 S S - S .5 Steam production 435.0 26.2 .6 460.6 Nuclear 248.0 92.8 ( .4) ( 18.4) 322.8 Hydraulic production Internal combustion engine 14.9 8 15.7 Transmiselon 122.6 7.8 .1 130.3 Distribution 342.0 25.0 6.0 361.0 General 53.0 6.1 1.9 57.2 Plant held for future use [ Acquisition adjustment 3.9 3.9 y construction work in progress Total electric plant 1.219.9 158.7 8.2 (18.4) 1.352.0 Cas - Intangible i Production 4.4 2 4.6 Underground storage 14.4 6 15.0 Local storage Transmiselon 23.3 1.4 .1 24.6 Distribution 119.7 14.7 5.1 129.3 General 8.2 8 1.2 7.8 Plant held for future use Construction work in progress cas stored underground (noncurrent) Total gas plant 170.0 17.7 6.4 181 3 t TOTAI. S 1.389.9 S 176.4 S 14.6 (18.4) 1.533.3 ( ) Credit ( ) Reflects the prudence disallowance of Clinton Power Station plant costo. p- .-m -- --, _,.. - -. -...,,. ~. - -... - - - -,. - *. -.. ....-......~.....e,.......-,-m,... w, . ~, -. -. ~.., - - - - -. -.. .. -. ~... ~. - -. - -..

L ILLINOIS POWER COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS Col. A Col. B Col. C Col. D Col. E Additions Balance at Charged to Balance at beginning of Charged to other end of period cost and e.ccounts-Deductions-period Description January 1. 1992 expenses - - describe _ describe December 31. 1992 (Millions of Dollars) Reserve deducted in the balance sheet from the asset to which it applies - Honutility property-Depreciation S 1.7 .1 S .1 S 1.7 8 Unco 11ectible accounts S 6.5 S 3.6 S 6.1 (1) S 4.0 (1) Includes $2.5 million reduction to the reserve for uncollectible accounts. 4 4 -1..*.-e - - ~., - s.-,. s-... .-- -,--,, - +.,,.

ILLINOIS POWER COMPANY SCllEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS Col. A Col. D Col. C Col. D Col. E Additions Balance at Charged to Dalance at beginning of Charged to other end of period cost and accounts-Deductions-period Description January 1. 1991 . expenses describe _ describe December 31. 1991 (Millions of Dollars) Reserve deducted in the balance sheet from the asset to which it applies - Nonutility property-Depreciation S 1.6 S .1 S .1 S 1 S 1.7 Y Unco 11ectible accounts S 6.5 S 8.3 S - S 8.3 6.5 o -. ~. -+ -r c e .--e

ILLINOIS POWER COMPANY SCllEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS Col. A Col. B Col. C Col. D Col. E Additions Balance at Charged to Dalance at beginning of Charged to other end of period cost and accounte-Deductions-period Description January 1. 1990 expenses describe describe December 31. 1990 (Millions of Dollare) Reserve deducted in the balance sheet from the asset to which it applien - Nonutility property-Depreciation 5 1.5 S .1 S S 1.6 LI' Unco 11ectible accountt S 6.5 5 5.9 S 5.9 S 6.5 +- r

~ I213NOIS POWER COMPANY SCHEDULE X - SUPPLEMENTARY INCOME STATEME!PI 2NFORMATION Supplementary Income Statement Information I Following is a tabulation of taxes, other than income taxes charged to expenso for the three year period ended 1992: December 31. 2122. 112.1 1990 (Millions of Dollars) t Taxes, other Than Income Taxes (General Taxes), Charged to operating Expenses: Real Estate $ 20.6 5 23.2 $ 22.3 Illinois Public Utility 47.5 48.3 47.8 Tax on Invested Capital 30.0 31.5 32.8 Payroll 16.3 15.0 14.0 Other 16.9 16.1 15.2 131.3 134.1 132.1 1 Less-charged to other income & balance sheet accounts 9.1 8.4 5.3 Total per Statement of Income 5122.2 5125.7 5126.8 ) t I i I i i

~ t Exhibit Index 1 Exhibit Description Pace Number 3(a) Restated Anicles of Incorporation, as amended through April 19, 1984. Filed as Exhibit 19 to the Quanerly Repon on Form 10-Q under the Securities Exchange Act of 1934 for the quaner ended June 30,1984. (File No.1-3004) + 3(b) Amendment to the Restated Anicles ofIncorporation of the Company, dated April 19, 1989. Filed as Exhibit 19 to the Quanerly Repon on Form 10-Q under the Securities Exchange Act of 1934 for the quarter ended March 31,1989. (File No.1-3004). 3(c) Statement of Resolution Establishing Series of Cumulative Preferred Stock, Adjustable Rate Series B, dated April 29,1985. Filed as Exhibit 4(b) to the Quanerly Repon on Form 10-Q for the quaner ended March 31, 1985. Registration No. 2-90809. 3(d) Statement of Resolution Establishing Series of 8.52% Cumulative Preferred Stock, dated February 20,1986. Filed as Exhibit 4(b) to the Current Repon on Form 8-K dated February 18, 1986. Registration No. 33-2867. 3(e) Statement of Resolution Establishing Series of 8.00% Cumulative Preferred Stock, dated December 18, 1986. Registration No. 33-10683. Filed as Exhibit 3(f) to the Annual Repon on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31,1986. 3(f) By-laws of the Company, as amended through June 10,1992. Filed as Exhibit 3(c) to the Quanerly i Repon on Form 10-Q for the quaner ended June 30, 1992. 4(a) Mongage and Deed of Trust dated November 1, 1943. Filed as Exhibit 2(b) Registration No. 2-14066. -4 8-

~ 4(b) SupplementalIndenture dated January 1,1963. Filed as Exhibit 2(k) Registration No. 2-25533. 4(c) Supplemental Indenture dated October 1,1966. Filed as Exhibit 2(i) Registration No. 2-27783. 4(d) Supplemental Indenture dated January 1,1968. Filed as Exhibit 2(m) Registration No. 2-30155. 4(e) Supplemental Indenture dated October 1,1968. Filed as Exhibit 2(p) Registration No. 2-31131. 4(f) Supplemental Indenture dated October 1,1971. Filed as Exhibit 2(r) Registration No. 2-59465. 4(g) Supplemental Indenture dated June 1,1973. Filed as Exhibit 2(o) Registration No. 2-63750. 4(h) Supplemental Indenture dated May 1,1974. Filed as Exhibit 2(v) Registration No. 2-51674. 4(i) SupplementalIndenture dated July 1,1976. Filed as Exhibit 2(r) Registration No. 2-66682. 40) Supplemental Indenture dated May 1,1977. Filed as Exhibit 2(w) Registration No. 2-59465. 4(k) Supplemental Indenture dated November 1,1977. Filed as Exhibit 2(y) to Post-Effective Amendment No. 3, Registration No. 2-55097. 4(1) Supplemental Indenture dated August 1,1978. Filed as Exhibit 2(u) to the First Amendment to Registration No. 2-62364. 4(m) SupplementalIndenture dated July 1,1979. Filed as Exhibit 2 to the Quarterly Repon on Form 10-Q under the Securities Exchange Act of 1934 for the quaner ended June 30,1979. 4(n) Supplemental Indenture dated December 15, 1983. Filed as Exhibit 4 to the Current Report on Form 8-K dated February 2,1984 (File No. t 1-3004). . i

Exhibit Index (Continued) Exhibit Descriotion Pace Number i 4(o) Supplemental Indenture dated May 15,1984. Filed as Exhibit 4 to the Quanerly Repon on Form 10-Q under the Securities Exchange Act of 1934 for the quaner ended June 30,1984 (File No.1-3004). i ) 4(p) Supplemental Indenture dated March 1,1985. Filed as exhibit 4(a) to the Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934 for the quarter ended March 31,1985 (File No.1-3004). 4(q) Supplemental Indenture dated September 1,1986. Filed as Exhibit 4(a) to the Current Repon on l Form 8-K dated August 25,1986 (File No.1-3004). 1 4(r) Supplemental Indenture No. I dated February 1,1987, providing for $25,000,000 principal amount of 7 5/8% First Mortgage Bonds, Pollution Control Series F, due December 1,2016. Filed as Exhibit 4(ii) to the Annual Repon on Form 10-K under the Securities i Exchange Act of 1934 for the year ended December 31, 1986 (File No.1-3004). 4(s) Supplemental Indenture No. 2 dated February 1,1987, providing for $50,000,000 principal amount of 7 5/8% l First Mongage Bonds, Pollution Control Series G, due December 1,2016. Filed as Exhibit 4(ij) to the Annual Repon on Form 10-K under the Securities l Exchange Act of 1934 for the year ended December 31, ) 1986 (File No.1-3004). 4(t) Supplemental Indenture No. 3 dated February 1,1987, providing for $75,000,000 principal amount of 7 5/8% First Mongage Bonds, Pollution Control Series H, due December 1,2.016. Filed as Exhibit 4(kk) to the 1 Annual Repon on Form 10-K under the Securities I Exchange Act of 1934 for the year ended December 31, 1986 (File No.1-3004). f I i 1 l L__.__--._____

~ 1 Exhibit Index (Continued) Exhibit Descriotion Pace Number 4(u) Supplemental Indenture dated July 1,1987, providing for $33,755,000 principal amount of 8.30% First Mortgage Bonds, Pollution Control Series I, due April 1, 2017. Filed as Exhibit 4(11) to the Annual Report on Form 10-K under the Securities -l and Exchange Act of 1934 for the year ended December 31,1987 (File No.1-3004). 4(v) Supplemental Indenture dated December 13, 1989, providing for $300,000,000 principal amount of Medium-Term Notes, Series A. Filed as Exhibit 4 (nn) to the Annual Repon on Form 10-K under the i Securities and Exchange Act of 1934 for the year ended December 31,1989. (File No.1-3004). j 4(w) Supplemental Indenture dated July 1,1991, providing for $84,710,000 principal amount of 7 3/8% First Mongage Bonds due July 1,2021. Filed as Exhibit 4(mm) to the Annual Report on Form 10-K under the j Securities and Exchange Act of 1934 for the year ended December 31,1991 (File No.1-3004). 4(x) Supplemental Indenture No. I dated June 1,1992. Filed as Exhibit 4(nn) to the Quarterly Repon on Form 10-Q for the quaner ended June 30,1992 (File No.' 1-3004). 4(y) _ Exhibit 4(oo) to the Quanerly Repon on Form 10-Q for the Supplemental Indenture No. 2 dated June 1,1992. Filed as quaner ended June 30,1992 (File No.1-3004). 4(z) SupplementalIndenture No. I dated July 1,1992. Filed as Exhibit 4(pp) to the Quarterly Repon on Form 10-Q for the quaner ended June 30,1992 (File No.1-3004). i 4(aa) Supplemental Indenture No. 2 dated July 1,1992. Filed as Exhibit 4(qq) to the Quanerly Repon on Form 10-Q for the qcaner ended June 30,1992 (File No.1-3004). i m-w'

1 Exhibit Index (Continued) j i ] Exhibit Descriotion Pare Number 4(bb) Supplemental Indenture dated September 1,1992, ] providing for $72,000,000 principal amount of 6%% First Mongage Bonds due September 1,1999. Filed l as Exhibit 4(rr) to the Quanerly Report on Form 10-Q for the quaner ended September 30,1992 (File No.1-3004). I 4(cc) General Mongage Indent-e and Deed of Trust dated as of j November 1,1992. 55 4(dd) Supplemental Indenture dated February 15,1993, to f Mongage and Deed of Trust dated November 1,1943. 223 4(ee) Supplemental Indenture dated February 15,1993, to f General Mongage Indenture and Deed of Trust dated as of November 1,1992. 232 f 4(ff) Supplemental Indenture No. I dated March 15,1993, to i Mongage and Deed of Trust dated November 1,1943. 239 { i 4(gg) Supplemental Indenture No. I dated March 15,1993, to General Mongage Indenture and Deed of Trust dated as of f November 1,1992. 248 4(hh) Supplemental Indenture No. 2 dated March 15,1993, to l Mortgage and Deed of Trust dated November 1,1943. 255 4(ii) Supplemental Indenture No. 2 dated March 15,1993, to General Mongage Indenture and Deed of Trust dated as of November 1,1992. 264 10(a) Group Insurance Benefits for Managerial Employees of l Illinois Power Company as amended January 1,1983. Supersedes the Group Insurance Benefits for l Managerial Employees ofIllinois Power Company as amended April 1,1980 and filed as Exhibit 10(a) to the Annual Repon on Form 10-K under the l Securities Exchange Act of 1934 for the year ended December 31,1983 (File No.1-3004).- s ! i

Exhibit Index (Continued) Exhibit Descriotion Pare Number 10(b) Dlinois Power Company Deferred Compensation Plan for Certain Directors, as amended April 10,1991. Filed as Exhibit 10(b) to the Annual Repon on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31,1991 (File No.1-3004).- 10(c) Illinois Power Company Incentive Savings Trust and Illinois Power Company Incentive Savings Plan and Amen'dment I thereto. Filed as Exhibit 10(d) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31,1984 (File No.1-3004).- 10(d) Illinois Power Company Director Emeritus Plan for Outside Directors. Filed as Exhibit 10(e) to the Annual Repon on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31,1989 (File No.1-3004).- 10(e) Description ofIllinois Power Company's Executive Incentive Compensation Plan. Filed as Exhibit 10(f) to the Annual Repen on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31,1989 (File No.1-3004).- 10(f) lilinois Power Company Employee Retention Plan and Agreement. Filed as Exhibit 10(g) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31,1989 (File No.1-3004).- 10(g) Illinois Power Company Incentive Savings Plan, as amended and restated effective.ianuary 1,1991. Filed as Exhibit 10(h) to the Annual Repon on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31,1990 (File No.1-3004).- Exhibit Infex (Continued) Exhibit Descriotion Pace Number 10(h) Blinois Power Company Stock Plan for Outside Directors as amended and restated by the Board of Directors on April 9,1992.- 271 10(i) Retirement and Consulting Agreement entered into as of June 1,1991 between Blinois Power Company and Wendell J. Kelley. Filed as Exhibit 10(i) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 1 31,1991 (File No.1-3004).- l 100) Hlinois Power Company Retirement Plan for Outside Directors, as amended through December 11,1991. Filed as Exhibit 100) to the Annual Repon on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31,1991 (File No.1-3004).- 10(k) Illinois Power Company 1992 Long-Term Incentive l Compensation Plan. Filed as Exhibit 10(k) to the Quarterly Report on Form 10-Q for the quarter ended March 31,1992 (File No.1-3004).- 12 Computation of ratio of earnings to fixed charges. 273 13 Hlinois Power Company 1992 Annual Report. 274 22 Subsidiaries ofIllinois Power Company. 326 24 Consent ofIndependent Accountants. 327 i Incoiporated herein by reference. Management contract and compensatory plans or arrangements.

ILtImot* POWER COMPAM SIAttMENT OF CopeJTAT1018 CF R4fl3 OF EAsulNGS TO flut0 CMAects (thousande of Dollere) IteL[rwied Deceeber 31. Steelementel ** ttselementel ** IIII IIII IIII III9 lIIE IIII IIII terninge Avellebte for flued thergees set income (tooe) per "Statessent of Incesse" S189,430 St288,432) St288,432) SIT 8,484) StT8,484) 8109,244 5122,CP.8 Adis Income Tenees twrent 35,194 ( 43,5FF) ( 43,577) 21,30T 21,30T 29,369 22,930 Deferred - Not 131,258 98,T64 91,764 36,545 36,545 45,990 63,739 Allocated Incteme tones ( 53,810) ( 9,306) ( 9,306) 2,608 2,608 ( 1,348) ( 6,632) Investment tem credit Deferred ( 60,3T1) ( 8,78T) ( 8,787) ( 14.121) ( 14,121) ( 11) ( 519) Incese tee ef fect of diestleved ceste (105.482) (105,482) ( 24,759) ( 24,T59) Interest on lerg-tere debt 195,438 216,029 216,029 191,559 191,559 176,179 160,T95 Assertitetten of debt empense eruf presolue not, and other Interest cheroes 19,348 T,844 T,846 13,162 13,162 9,004 12,195 One third of ett rentate (tetlasted to be representative of the Interest topperwnt) 3,88T 4,185 4,185 5,053 5,053 4,996 5,1tr Interest en in-Core fuel 8,2T0 8,020 8,020 6,802 6,802 8,862 8,28 ,y elsellowed Clinton plant ceste 451,244 160,328 y Lese Ctsestetive effect es of Jerivery 1,1988 et ocerving tabilled revemee M tornirge (toes) evellable for fleed cheroes M g) M M $320.000 M M flued chergest Interest on larg-tere debt 8195,438 S216,029 1216.029 S191,559 1191,559 8176,179 2160,795 Amortitetten of debt oppense erif preolue-net, and other Interest chersee 38,1T8 27,004 27,004 31,093 31,093 25,555 25.785 One-third of ett rentals (tettmeted to be representative of the Interest etapenent) , 3.04T _._.4.101 __4.105 _ 5.011 .... _5.05 3 . 4.996 __ 5.11T fotet flued theroes M M M M M M M = Rotle of eernines to flued chersee 1.83 W i* J J* 1.41 J J e-a g

• ternings are inedegJete to cover flsed cheroes. Additionel eernirge of $374,958 and 968,033 for 1989 and 1990, respectively, are required to atteln e one to ene retto of ternings to fined Cheroes,
  • 8tgylesiental retle of earnines to fleed cheroes presented to eme(teh nonrecurrine Itese Bleellowed Clinton plant coste.

Arviuol\\echy m . ~

\\ j ~~IP Iv This copy of Illinois Power's 10-K does not include our 1992 Annual Report. If you have not received our 1992 Annual Report and would like one, please let us know. ILLINOIS POWER Attn: Investor Relations, F-10 500 South 27th Street Decatur, IL 62525-1805

e 9 I EXHIBIT 24 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 (No. 2-22068) and in the Prem constituting pan of the Registration Statement on Form S.3 (No. 33-32364) and the Registration Statement on Form S-3 (No. 33-25699) of Blinois Power Company of our repon dated February 5,1993, appearing on page 25 of the Annual Repon to Stockholders which is incorporated.n this Annual Repon on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page 37 of this Fana 10-K. PRICE WATERHOUSE March 26,1993 i i -327-

ILLIN9IS P6 EWER Attachment B i u h , o'- Y, k f)3 + I [. 1 if.. l N 1992 Annual Report THE POWER OF VISION _fh0fbDSf h2

OUR P RO FILE Illmois Power Company n a public utility engaged principally in the generation. ~ l transmission. distribution. and s. le of electnc energy and the distnbution. transponation, and sale of natural pas solely in the $ tate of Ilhnois The Comp.mp. terntory is approsinutely IWO sqture miles. or one-quaner of the sute. The Comtuny serves approum.iiEly %0.000 customers. t Cash Flows from Commonea@ Operations Emson A , m my,,,f gay,y im-Ilhnors Gas at Eie: tnt Ch6cago p3 Y - =.,- P { ,n g - 1;-- [dil Ei;. : d9 - [ ~ ~f' 7U 253 l' . :~ ~

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'~ '~ Z : ' ~r. e: 773 m Hennepin g ; ~ Station i ~~ Arrencan Eetac a Power k., [- A , Centia'tamais g g trit Co g. a.. + l Havana Station - Chnton Station"h... Vermlhon .....* ; Station. q l ,.:U " 'i (f. I 00CBlur f i Springfield - " L.. r-i N -e e .. ood River ' Totalinterest Expense W i Station [ A ,,,,,g,y,n g j g, Centra:Illmois A O - Puth; Serva '2 ' UniMemt v7 3 ~ St. Louis O I Baldwin - Station g 9 A ll smos bw? C%DB'd:Wf f '.Ed Cf'e:3Mng Siahm 4 hne,seg yppy D k sown sm

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atAms excnt ter sharr amconu and summcm $1Mk imit%e l'?C 5*4I l'IM'*VU'

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Operstmg revenues I Elecinc (including mierchmge > $1.190.9 51.1867 04 Gas $ 288.6 52M2 01 j Operatmg expenses and taxes $1,193.4 51.1S'3 1 0.9 Operatmg income 5 286.1 5 291.H (2.0) i Net income $ 122.1 5 109 3 117 1992 Revenues Total assets $ 5,331.7 K218 1.1 ' m i mm" i Cmrunon Stock Data Average number of common shares j outstanding (thousands > 75,6+4 5,644 Earnings per common share 5 1.23 5 1.04 18.3 l Return on awrage common equity 6.5% 55%

18. '

ihk value per common. share $ 18.81 5 19.25 (2 33 { l Common stuck pnces lbgh 5 25% 5 24 - Low 19% 5 1% Close 22% 5 24. Volume Sales Electric sales in kilowatt-hours l t nclud:ng interchangei 18.549 19.432 (4 5) i Gas sales m therms i sold and transported) 81-823 (03 Capitalization i N Ecc755% Common stock equ:ty 3"'% 36,% Pref errcJ simk 10% Ith g gg 39 g Loneterm at bi 53 % V l T, it a; 100 % 100% l l l t 1992 Disposition of Revenues 1992 YEAR IN REVIEW i I ebruary: The lanon Commerte Commnw rn (ICC i grants 5103 milhon j tm tns rate mcrease afi:rnun;' that Chnton Power N. anon n 100 percent ~used and Gb useful ~ However. Commnsion orders rebranna on deferred Chnton costs. June: The I.Jnon Flectnc Insti:ute names I:hnois Poswr wmner of the Ednon AuxJ the r!ecinc t.*:htv mdastr6 lughest honor h..p { July: Uhnon Power opens its hrst compressed natura! pas ft!hng sianon g , m.v August: The ICC reduces its Februart rate order I4 more than 520 m4! hon and dn-pJ j ah s 52f o milhon. net of income t.nes in deferred Chnton costs I!hnon Power k* l soSsequently hies appeal with !!hnon Third Dntlict Appellate Court. i August:!!; non Power suspends construction of scrubnen at Baldwm Power station ;o reuew Clean Air complanc e options. { october:Ilhnon Power Board of D2recors pre-declares common and preferred p p g j stak diuJtnds through 199 seeking n assure conimu2ty of dividend payments-N Gn Ps: nase 511 W N Wam aWaem 257% l October: Ilhnon Power hies request to fund wholly owned subsidiary called Dere::am m::Ammza'an 11 % i IP Group. Inc. to pursue investment opportunines m the mdependent prmer g gg j generair m eurket N deuadv'112% L Net m=ne E h l l i l i

The unexpected, adsen.e ruhng from the Ilknots Commerce Commission fICCI last August hurt earnings and forced us to I reassess our dividend plans. I t The August rate order reduced tw more TO OUR STOCKHOLDERS than 20 percent the increase that lud been appnwed in Februan-We made very good progress in 1992. In the The impact of that order though. was cntical areas of customer service, operations. minor compared to the impact on earnmgs of f and earmngs per share we continued the a full year of mild temperatures These positne trends we estabhshed m 1991. That reduced elec:nc and gas sales by several [ performance earned us the Edison. Award. the percentage po nts each. { electnc utdaty mdustry's highest honor-The result)Instead of reporting an increase in earnings of 60 percem. we were Pursuing a Leadership Role forced to settle for an 1& percent gain. i in 1992 we made sigmficant strides toward our goal of being an mdustry leader. We Looking Ahead I impnnrd our customer sernce and met our Turnmg to 1991 we must mntinue to strategic goals for customer satisfaction. We improve our 6nancial performance; wr must also improved our camings per share bv continue to impnwe our customer servim. more than 18 percent over 1991 tw meetmg arid we must continue to impnwe our abihty power plant effKiency goals. Leepmg to identify and meet the constantly changing operating and rnaintenance expenses close to needs of our customers, These are our top l our target. and reducing our nnancmg costs-pnonties; these are the thmgs we must do to in 1992, our fossil fueled power plants succeed. once agam performed very well This hfied our total system power plant efh-Court to Hear Deferred ciency to nearly 50 percent. exceedmg our Charges Appeal I expectations in a decision last August the ICC disallowed we abo set an aggressnr goal for operat-from consideration for estabhshing rates cer-i ing and m.untenance expenses in 1992. We tain deferred costs at our Chnton h'ower [ came withm 2 percent of mecong that goal. Station and reduced by 52) million the elec-f despite conducting two maior power piant tnc rate increase it appnwed in February { outages dunng the year' 1992. The ICC's ruling reversed twu previous Fmally. we achiesed further reductions m dem which had allowed these costs and i our mierest costs by continumg to take was contrary to the recommendations of the advantage of prevaihng low rates ICC staff and beantig examiners. I am pleased with these achievements: Because we beheve the ICCs decision g9 .g g 39 ,gwig ge l thev affirm that we are on the right track. Nevertheless. I'm disappointed that we didn't Third Distnct Ilhnois Appellate Court. and ) do much better in September that murt took jurisdiction of l our case. Weather, Regulatory Treatment If upheld on appeal. the ICC's decision Frustrate Earnings uvuld force Illinois Power to write off Although our camings per share advanced approximately $200 mt! bon, net of taxes. Te. i sharply in 1992-to 5123 from 5104 do not expect a ruhng from the Appellate in 1991-the gam was short of our Court twfore the third quarter of 1991 expectations in addition, the Fmancial Accounting We began 1992 expecimg normal weather Standards Board s Emerging issues 'Lsk Force and a moderate electnc rate increase, which plans to review the standards by which regu-we recewed in February These two condi-latory assets are retained or wntten ofL The tions would have boosted our earnmgs outcome of this review could cause us to per share by more than 50 cents. liowever, we were disappomted tw both m 1992. 1 i

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,l i l 4 1-e e e m J record the 533 mdhon wnte-di poor ta anv %. g Apptbte Coun decmon Advance Dividends Declared I h. k s ekmg ta assure our stockholden contmuity l e in their dmdend pa)ments in s;ute of the August ICC order. '.ast Oe:aber our R urJ of Direars dedared (ummon and prefer ed simk dinJends through IW3 In Iebruan.. the board < >f Dreann dedared tommon and e,- l l mrterreJ sta k dmJends for the hrst quaner h pq ,4J' a

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y p, l! The h wJ aard to ai!ress (cruin regu'c n,n issues relateJ to < >ur ahihtv n i o innnue I pavmg daidends :! we are ion ed to reflet t a wraco di tha: resuhs m negan'. ~ reu:ned I carr ngs Pas ment of dnidends uqJef Ifm ~ i utuana. requ:res authuno:n in o!' :he KC lorn Haah acupa the fden eu ard the ricarn we expect the IM to raie m Wr,h on ihn mdmin 3 hmbest lumen <m be6a?'</1!!mo 3 s reu ues / bun 34 om em; dom s l Our Goals for the Future systenu we h.ne put in p! ace over the past l In he pet two vears we s e maJe w ha: h.n e sescial years and rnakme them work to our i ct ; ( aaeJ t, JJ~ pro n'e - nres nr:ea ept;ma! aJsanage un in so. k da MenJ hs the enJ of Pol If u. ; e hie inant annu.d report readers a:11 r rand FinO4l din e ISPAer mtia Lus )('u [ Ci ti v Oc crJJ (,I !!!b 'eUeT and then i t'.ier st n :L e tirD er i t 1Jni [$.; if ese Wer turn t?) I!W !' h k ' d Ihr reJh)TI D 1rbj*ct. i ci r}ic !.i N rest is These wi' res icw < ur ', q.: i, US J r as Mies r

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! n e t e. s iou ,m-pro a:cr w e ' S L onnoue to age:essneh-o 3 m.m. m icruists anj ue u!!! uke pan m ic-i s4 1r in ', + - !!!c [ig!,w.c g'gim; [;hjependet11 {n m er {1ri edut - %;M gq - ( l' ' ( t s 4 6 i - h w e: at: t!n !a, s ':e in a nur ket t e '.o, te s e : un t. > ui M i I Making Good Customer Service b a.- ~1 h s s 1 < en u 1 Even Detter L 1993-2000: The Birth of a Lri ~ > une 11:n i s h m e: rn ened the M New industry i.Ls,n b.c.! ~1 hn ree gnuo the one cond g - n i p.cn u h..s >>;niin:ms tus imer sen a c. A r - i sc

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a m .--.....m. . m m_ m. i { l supportmp our communities i u I l l l \\ l i ) f 'I .f J i 1 r m. .I I hl i J l I C i i l l am e s l j ~ 1 Promotmg individual involvemen t f l l I

~ l We stas mvohed in our commuruues through the independent commitment of our empiosees We recogruze and encourage therr erfurt-from paracipanon m Red Cror bk>od drnes to l mied Was campaigns to smaDer h> cal esent-throegh our utunteers our operaung and ma;ntenance budget in of I!!mov Power Award gnen monthly to IW3. we expect these expenses to be Wo i emp! overs u ho make esem;,iarv wninbu-mdhon. about the same as the F3 mdhon total for 1o02 nons to their hica! communion These are a few of the steps we are taking To assnt ihn effort. m mid 1002 we began to in the foundanon for stead) imprwements mtplemen'tmg a re-engmeenng program to n our tostomer sen ne. w hah is a ker cie-redesign our processes. to completely rethmL n ent m om str.negn pLm the way we do our work We are starting rom the ground up by climmating unneces-san work and tw makmg the way we work Power Generation Der second goal to become a low -cost smarter. more cincient. and more cost-ef fechte. ene*cv pros ider is as muc h an imperame as o o a gr u! lc. n cet it. we must operate under These steps wiH aHow us not only to the awumpnon that we w di seek no electne improve our customer sen ice. but also to Jct elerate our bnanCU! momentum rate mcreases ti a the next sev-.t! 3 ears 11 meser. m a stabic rare en ronment a mu - ' r 74 - imprm me i >ur carnmus u :D be M5 tut This investing in Independent >,ma is how w e w in do c Power Projects a% < lo enhance our prontabihn. lHinois Power A " m,- Managing Expenses and Capital pLms to prtiapate in the mdependen: l' m s c r u.->, sas w, J. t, m our.u w, to become a low -cost energv pow er market. prouder m& des bulhne no large eenera-In 1"u1. mdependent power producers ..L m. non 11 Lues tnrouch the end of the decade (IPPsi generated anout MOO megawatts. ( em. em \\u abrw upitat m!cnsn e pro!ctts.md the meenng roughly half of the new clearicity "i..r . a; s w u:ed ree lan :n pro < t %es u di permit us denund in the Uruted ' states over the next 10 '4o f o, mrn our auennon and >ur res. iori es to our years, tndependent power producers are .a. pnnun gi u! of impr: a me ou sen ur expected to account for half of the estimated w e w d i onnnue c,,.et aegreun e go.A f or 100A0 megawatts of addaional capaaty nee c essarv to meet demand m the Umted States. In late October. we hied a request with the - " ~ ~ ICC to allow us to fund a w hour owned sub. sidun We w di use this subsidun-named IP Group. Int -to compete in the mdepen-C ,,i " g dent power market. g - i IP Group wdl pursue two basic mvestment I snatemes in that market. T he 6rst is mvesting - P. g in pro!ccis uut are started f rom the ground (* up The second :s mvesong in ones already 1 under construction or a! ready in operation. l We antiapate that most of these indepen. dent pcmer proiccts will be located outsde our service terntorv IP Group's biggest opportumarts will be in regions with energy J shortages With a non-regulated subsidiarv. we can. m effect, go where the demand i-s 1-l j

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- L ,it .u I l 1 NS.. Om *~ b [, .i a+T/- t j f v... !: ke: m; O id.. A s, ' .- i J k~ en s u e-te n 7 I t t n.; s

9. g r

lu. .. '[ )' I 4 e 2, y 3- %{s, j f t 1 ;c. l l . v-r i ( Ronald L T hom; won. 4 ' ! ! s. a l l-dm1 { f 1.arn it Itaab . c; .6. .r> a i (,P i to u, l l 4 ,t - 1.i1 ; qs l l i un l i

1*!

i t I t.rm er.1 Ilansen. Matter M Tanno). 1 .x. j le" r. mehr terrivr> k 71mmerm:m ;. ten l p H. san sa i Iv val.11 71s om. < r 5

I<

_ _- RIl t Q.- l ,s. n y.* l ~ '. q .m., + a,. l l onsid I. t#. a r. k-!., 6 i j. y -J,d' q 47p? ",.. y 1 - O A' ( uaniou u.n i rnici. ~ .v l M ~ j l l s t ~ 1 l I I h af t.61d % l'r r k u ls. ( harics 4, %e ]lw. i ,1 l ) i i l \\ i \\t rnon h. /inuncrinan. - ' s " r.. n. a loms;.!] J a,,et r u s cr 11 1m,,.-t <., m.._. m,. _,1

11. ;

, <.... -,... _, n 4 i [ u t Nm I l { am a i % he nL - n.,.m n..,nnnn<r. i ( l t d i I 1 [ ~i., >rto,.:,i, 1 c,,,, y.n.,, v i s r, vn I I ,.11 r,,i a n t e,o >< ' f i, a;,e n t s i la e I

i.,

s, l i l i I. . -. - - -..... ~ _. - _.... _ -.., -. _ _ _. _. _ _ _ _ _ _

y,,,,gs Prou er t ompa n s ) PRIN CIP AL OFFICERS i

p. Itaab,66 larry L Idleman. 54 Finaocial Centents larry

\\ he hesMent 1K Maru erment s 1 % usw o d; nr-t ur. Prewent.;nJ Chief hesp ins. hic tot a irp + rare and\\iuhsn J!nt es sen t es t ses.orn t 24 hespindhhts bst g g4ned IM I n4pl n ed jw p Inh imune.n Otarles W. u ells % Paul L lang. %2 2; hervm of Independen' 3 3ccume \\ n c heuJent senv er %ce heuderit .b uionunt-r ge p.nyNe 5 it imm hesponuble F n cuuumcr

• o Natements of Ins ome j

and sen K tc. operanny da suor s portanon ny irart w hnui.sen Kc'and.m nurkenne anJ eo.n. mi' . ILdance sheets I.s4.,g a ed t o;2 des riopment a, statements of Cash i.hm '. I mpk6 ed 1* j tarn I. Ahenhausner. 4 4 2+: Lit nirni-of t s,.n,,. u< r Presaem and J. Mephen Pern. ;4 hetarned I arnmgs pe.a I r.aru u! O!fn er Sene r \\ h e PresMer ' i

u Natemena of PtrierTed pcsP; mvb.c h a m a amnna Ee.P <nuhte i a r.ucicar and heterrace Nos k j

phnn; bu !Jehni Unarh u P

• r!EenciaS"n mm er s in m.mer. t a 1 mphned im

$ ' Statements of g: and o ep cau Long-lerm lh br l e r;opmen Robert A. M huhz. 52 31 N,tes to Iinanua! m p wed H ' - Irrasurer statemenh r hesprinubic h:r br;ancul I tarry A firod+k). 44 ru.mers nJ nsi nu ruarment Director O>nsidine Retires 4' sdected I' man ( ul Data g,,,. h e in;w.ed lu In Apn! FW f r.mk W w ,,, sd wted u c a. L,, ,, na ! . nect :y G:nsid:ne reared from ha ,c1 ! > sts . - 4: s Rodney A. Smith. a; p mu1r,ontDr h urJit W % kholder infomunon t 2 W: hr.;Jen' I mect n. lie t imcJ the ^ h es p. ms.Se f or p-N .M a :r - !kurd m 1 % 1: t > anJ e n einmerJ 't ulu > " W Undne dn' n.'ushed u ilf red Connell. " I n P' ""d W h.msdf as onc of the threr s,.,. mem:wrs of the m tai Ir.ah Manning Stetzner. 4 4

p-s a

s b.a on U nence II.e \\ h r }'r Ndr. (, ggy7.cr M J s ai's HnICd D ' t,enera erunwela~d m.,.q m, sp,1 un.lJe ), e i.rn r,v r sn re:.m i La m a.:ams' :ndn h 'O 2 i 3 nn 0 :r s iirtw ras md hem o h.hn G. ( mk. 4 5 1 s - 2., me ci, w i.. n,J.nc s c,,n una m -m s rated I d u-p.e,s usk n a de M-i i

e. i ses crai hundirJs. d I n *u r s PorterJ. uomoldorf f. W

• w < ri det acJ t > t he l

+-N. i 1. - h u i, ni resear h aruh ses and prepa-Fry s.e a t !. ra n. i d inc o rm'nmer s l er i r ment.i a'u:r s rep m t 4 Altt G.Ittr?rr.3e "'irm Nan N a' ' ' ' 1 h A > s, n e J v in P l-n w rJ I' A + n jt ;.;,perar r. ns er and the O erp arau I . : ; i u Nrs

f. i 4l }r9 t'le" n

\\\\ r s. nh t > cipress ow prau- , i : l'_ tu .md appret unors t n Mr i wImesimr;:nn Jmrun. i s4 an i oco,n,in to the u dure tdthr(dntlLIM JnJ: u > v.h< Urn us er hn in c I . ears < 4 cxempLn sen h e i I I t l' 1 b i

a 1 1 i ; MANAGEMENT'S DISCUSSIOM AND A N A LY S I S lis en s s f*o ati r t o m f>e rn a \\ Flertric Operations I rom 1000 thniuch 10"2. elecun t l In tha trport we make referen,e to the F2nanc ul Na'c-rnenues. mdudtne mienhange, increased 11 a, and the mentt relred Notes to Fmanc:af Naremens.sdccted grow mrgm on electnc re\\ coues int reased as follow 5 Emara ul Data anJ 3clected stansucs hr mturmanon 1 u,ncernmg haarn ui tondinon and awab of opcahons fblhasof Ma'u 3"2 1991 3*" ) 1he tamrs haurm w"A mt m:pa,t uni n fmant ui wndi-i 4.13".9 51J 012 51 om n i osmi.elanuan 1 1"'M are uranc rewnur, {

n.,n arni resuhs of o; n

.4 o Ms 14 k l inicrdunge rewnue, discussed tww l uel cost & pow er part herd 12 2m (291 M 041 Ils f

• um 5 se4 5 W2 Denntnurnn Results of Operations (nenicw 1992 Sources of Electric Revenues Net mcome pphcahie ts i ( omna m slot k w as 5'M ndnin

UH 8'"I # i' L si l' P d g ompaird h ) O IIHNnin h5r l'NI and a nCt b Ws i mi .. + apph< aNe t > t ommon stot k of 511; nuihon h et e g) g $I ) s L k e

sweia,

x. p.

l m Al n e pc (innanin share m IW1 and a 51 i4 iou per __ #^ t i nun.in sbarr in U"a The IWJ e.trrunes mt rease wa-prmunh due t 1 the i chruan l1 luu2 bhnon (.onunen e .~+, n m - m..- c- ~_

1. g r.it ts ( A ')

w f ut h w as n R h bbed (in AURibt '. lO'C g; "*'C"7" 6% i icsu!nne m a net matase s it '.." Mhnonalh in UK a a me com;un\\ reantcJ e mreteu cyrnse N rennns g.,, m and wtman ng i rn.un lone term Jcht and 14urred n' a resuh of L r depus uun r.cr ep:cor n in emense as lhe uimponenS ut annual thanges m elettnc rnenues are t appo n cd m nr lue rak i.rder The lw! ca:nmgs suniman7ed as h e m s

trau w.nle mad due t., a w n

c oh rec. eJed u, loon

/ m LG m m ton.ts u s tht thca (,f the hme IWI lWI I ' N E *N'M J l "'ll ) i1m v It"J w. u k 't'asetI ak a f.al d P 6 (d Jrner.C Mig 1 in a ct o'raer:.u s e es; rn es mii a er amerc< i 4 btr mt rusca. T 5 M-5N- ' r.i L blume and other egm _4 4 - my. I I s dei <

b. d n uswJ n e > 'funi

.ite 2 - s i uC illsI rCt Ulef frh l J4 [ ] j[ N) jj* ggf s [j](9)( ty s f Np ' a]("s ?, ! p g), 45'i %,[ D, 7f ; g s m-5 Hie S *4i e i o; s ci n ica a L .,s < >f s 1.4~ n, S. i, e s } C ;.t r b enur int rree ome ta \\cs m tle h9mh r me 5T .d t 19 <J: i t $ 1 t!? m t %I *.i i nn ['s w c! %t u n g f (lm in t Il" I lhh 'UCh U # C!CLlH'. $JIt'. eM ludmg inter. l' 8' j it u I chr'un 109 lin. u are expe, ted ti a grow appa sinutch 2N per 3 eat b a-nii 6 ( bange ) -(i r r 3 4 i \\; i l'f)) 'Ilic Ctinjun\\ eXpetierncd J lU llh TUJsc in e$ct - a on ra ,auun. an h. tra f rienues prunJnh due b the 9 2" rate increase in oc o s i,ap i l . toc e i u inc i t eta;! em h.t: a,.n I Chruari l'#M. w hh h WJs nb sthhed t G.\\uRust '. lW2. I ' i f I." t lutecr! h ' !!Pr 4!U af.J dem er'. 4 -4 tesuh'nR m a net int rease e d ' J ', < dtset k dc(rea ed s ..n.m J nat ur2 g is wn i c l hew r.ecs ar Jcwretj usate due h a unusua'N nald wcather lotd iaiowatt-hour i a un i nt 4 4 sen n e and t:., :m sn w k ni cJen. i sahw t ruiudme noen hanne sales to other unhocs and 1. be a m t-J h n71 den:u! sa$Cs i III i ' ' Jud t ( >mmet cul saleN ( l D I w Crf j - er n.r u saic w 1 ( en h.e t due b > IIm unusuahV (

• sf >l l'?)2 summer as U impared to a is r u,ne4 in s o epet n; tm s 4. i es m

t

dant m. a.ia, Wm g.n b. p. ss warmer Iml sununer season and 1(i a mdd IW2 wmter t u+ +mer n nu s iiau

..n s 'quni ti msen.lt h in Cl h en and (, e i A ttah 11 ( % )f 1 s/astin as e imp.ned to t oMer w mter wcather in lo91 n

13. ' ( <

i c ( <,mi on, s sen ice rcrno in lndilst rial sJ es uh TCJ't'd 5.W e l >r(Juse t >f hiRher usage ( l > 3 f r4 FH snerJl 6 d !!W O trHpan\\ s large! cush erners The la '. Lici trJw m mlertlun2" rC\\churs tius Vc.1r as compared to Iwl was a:tnbutahic tc, the nulJc' weather r i e

Changes in these cost were caused b1 etem loaJ requin Numt>er of Cooling Degree Days 'nents cencraung unit ycadabm, tv. f uet pra e. purt haset,. pimer pnte3 and fuel co t reco\\en inrouch the I n:t ir: i 6 I ue! Asustment Clause 1995 . - gg3 Normat /Twwer avease d ' 4H tprm ers:sqw ert gent,utrun. M[h% 4 %.6 p;: 199/ The1; mcre.6e m eiecinc resenues was pnman _A %n Coa s ee w .a 3 c ik dur to a 2 +; inacase m idowmi-hour saie t euluJmg a..e dg%,(f i .f intert hange sales to other utJmes anJ sales to munupah wow 1 oc aw ,{- ties'. reflecting warmer surnmer eason and the ettect a ,w%w% q "b *, - ^ ' r* w., I cas 1 sc.au M the hn> rate ms reasr ;wnMh utfe b\\ lower tuu cost v.f, y s rettnenes unJer the I'mform fuel Ad;ustment Clause Y< >iame macases u ere due to ' Ther residennai sale-v y* + - o, ut g,. io o a and wn.rneraal s. des ia 4 t paruaik of f se: in dn reased mdostrul sMes i I a ' t Jnd dedeJsed saics to nunx pahm - i 4 4 The deocase m sales to mann:pt Changes m factm. attecima the cost of fuel for electne ' uparn s comtrt w ch urr Gno s W ncipa! U W n u \\ pena A 1; * < mcrease :n I"2 IW1 l'M mtch t.mac tes enut s was a:n huubb b 3 the h;gher as.ui-Int reer met reasc i an gneratnin F.m.a lo e ( I we aNhry < a some gener anc unns w hich an rela:nch noneraaon ma b m 4 < >st on. Jag ii chc nccv Loal and other w W M1% s s utirar 2% r. tire 19WA isectru fn t iues increased O H - refirctmg a ~ Punt equn1.irm audatnhts md a is 9 f.Pe mcrease m Apn! I msd Mt MIS V rJR s

iu 160' le }.L man :,.d es I ute consumer-w ere s.uc le.tr v.

Y c.. i m

• e inn anc r enue*

n m ei - nae dcctease inu .n man.in ! some cer ras / 99., i ne tud oist decreavt ref }ected hmer generainin "2"M'

• r n fossd phers due n e m!!J ueather and a tred:1 ref und i

t r-in a or t s ui upphet partuih of t.et b\\ the ef!cas (if the Major Sources of Dectric Energy I nc, m i ut :' AJrustment Clause The ueda retund resuhed .u,_.. t uu n. lo m, a P we r ducta in arrned at thrc euch ath:trahon unJer I.' M ' d h Mii' t t JM supp}\\ i. ( fn!TJCI (jlrWin 'e!1trned t() .u3 sen nc,m lurn 2 PM aner u >rr plenng a retochng anJ .. -.. s M ': m ::rderant e outJac th ! began e in i enruan.,.. PN,.,. The neu clue:mg and mamu ;anc - < >uuge s st hedulcJ ta ( s fu .g>=4 of '] P fq !p ]g f jf p 's Qyl}j yt y )tk * ~ fs I ! r c[ciIf R t i!.lrF s MY s if h !ui\\es ira lsJ U ITu!U d (I rst s 1990 aw h utesl w db icq liurns e d h m. sulf ur (s ui al lidhs :n m.l 9 : dir in (,f aJJna inM tud expense aw.cuted w nb ij r" (IW n\\ s iUe} rectlnt i i Ch)n pT(s et Jtnas !< >r the rears IN I

lOJ l' W DF %

ENo ' 4 Fu e- /99/ lr;s icJv s re?ltcle !Ing!!ct ger Jf a 0 pJrtulh r di- -ir

o : i t4 gu m s -

' r.;:cmer s n ct - < ! II n, I. n;t M'!; r url, fgigts?njen? ( lJase ifM !!v s m c, rr ;u an n s - s r pu ! < J m mg a st hea, d terud-2nd n..xer.n eraae fari o>sts me mman/c + a s ti 6 m s t :. s n>s 5 ~s art s ne and tr.a:nn 'unte (iuua Onn a returned t > sen h e rin Ma' t P",4 md we m senw e sune.tuin thisbut , u,,. m. .n..m om iw pm 'c:; > mder ( >f t he y ear The det rease in p-a i er pup I14 I I ir t in fru %ams g, g,, g u na.mai her s ti., s ro t s<j2t, lht-U cgu:n s cerjeralm; un a en< < em m o, sa IIM l ( i i fu t a rnt % ~% fj%As jts A I - F u t'T [nm hased (Q"p I J* I ) 4 () be n mc r.f r Wn f t as i s e3% r,, s t 19 0, t, to n r % WrJ.ru rm u Mrn. crorrstme t.r ( < m f S 31\\\\ H e 3 q -- S 34tr> % } :, i, s p, ~

. =. as221able to these custamen, through the use of special am-The incmase m fuel for electnc plants reflened tracts. in an attempt to minimae the potennal kiss in cam-1990 higher fuel costs. partially offset tw low er generanon ings in May 19% the Company recurded a cred t for f reflecung the hmer equnaient availabihrv of some fossil natural gas revenues collected pursuant to an ICC order but generatmg uruts and Chnton Chnton's knv equwalent avai!- not reported a' mcome from.lanuarv 19r through Apri! abihrv was caused bv outages. mcludmg a refuehng and 1090 The credit resuhed from an ICC decision analyzing a 9 maintenance outage that began on October 19. IW.t change in the corporate federal income tax rate. and i ended Msch 9.1W1 From 1WO through IW2. gas rne-Number of Heating Degree Days Cas O/seratiorrs 4 f nues decreased 11.1% and the grtns margm on gas as2 revenues changed as follow' j t l%2 1%) 1nn M q ?T 3 (Muuwns of dMan) $ 2M1.8 52'90 53014 peormal (Diern,-. war averaxi has trvenun g.- ) o sm arc si us2 n t,as um 6.8 92 96 T raraportation revenues Changes in the cost of gas purchased for resale are summa-3 032) cas revenue cred'( nred as follows no-51204 5 us-4,as marun tw2 anyl swo (Mmwns of dsatana 1992 Sources of Gas Revenues Gas purchased for resale I tm p.rwe Cost texcludtng take<>r pas ) 5 1.0 5(10.2) 5 13 o ( t h.0) (18 6) C3 Taktor-pas ctsts 16.5 n9 (18 3) W Volume 16 14 0 (lW l Gas cost recmenn Fescentia! C2 7"* y lota: metrase (decrease) 4 tl 5(I43) 5(28.1) l c.tec oai 21 0 % (Q E {-- Q gJ~- ~ Average cost per therm delncred Includmg takrer-par 2n.tu 25 or 32 se 26.2< 2ti or 2'.a s l t xcludmg takrer pa hanswtaih7s crw_.m Sources of Gas Purchases e shihmu vf theerus 1002 twl 1U90 mg e thihmu rgf rhmen o ,,,n_ i ] on3 s~n su Therms w ad ] Thrrms tranpint d 20# 254 269 y M1-H23 824 bla s omumpiu m S 90 - me h e: W gas inenacs b.n r been nee.cn el> anected by ( 1 f ilu siet.,.' h ea*.! tet. ess p 1mn t(it uhtitirls, pas bypass. qe l a twatt aw t u! t on: rat' and m:pu ned end-user tiftaenues Gas j !w paw I! e. t, ennectnin bv the natural ge customer 1)anng IW2. approumately 5.% of the total natural gas l ti.e Nn t; > a p:pchne n wnanues to be actneh corm ere purcheed was pun heed on the spot market. Spot market d d 1 = iJ t 'Hard M *neral of the ( omp.mv s large customer 3 purchae are expened to remain at tha level as long as l 4 hemer gas tNpaw is implene ited. or defern d through a market pnt es remain constant. The 1992 increase in the s;wti.d mntrat w th the Conipany. rnenue reduaions are c ost of ge purchased was due to increased sales to cus-espet enced by the Co: num The Compant has haJ suc. an increase in the erwt of purchased gas and the tomers rew m awessnek (ompenng w nh the hvpass opnons cHects of the Uruform Gas Adiustment Clause, partiali) off-set by the underrecovery of take-or-pay costs and lower amoruzanon of previousiv deferred take-or-pay costs.

i d I l The PNI decrease in the (ost ut gas purt tusej was cue ti. Operating and Maintenance Expensos i h >uer auertaatsn of previous de!crTed t.ie-or. par uisN mio.m w oe j anda eu er t o t n' pan t.a ed gas parna!h otbet tn the ~ ~ D" s i enn b i ; the i ne >nn Ge AA ment Gause I act< >& W { a!!c une dw P'" $ deccaw m the u N of ce pa :he"d u cre e o er s.m s t: -

• smers and the cMccis of Mic W

" ' ' Et { j ~ m 322 t j I ra!or:r u 4 A mus!me n G a e r pane ! t1 ci in an ms

st the N 0: ;w heed ce i r.a, P m tt such ses -

r9-l i i 1"". t< >u:.mnu.n & sa res 1 es tuine therns transps >ned 6 l PPC ne w. i nr r\\pnirJ to re ua si - ., ta. aliou ant c 1: >r Uther im usue ami Deductions s s, r I (sths r Lxfecuses and Taxes A companson of Me:ute f unds uwd danne conurucnon t MUl K ' a non-casti orm l i 1 ~ intsi . Int f r.tsed in P N2 Js ( ouijured li > P" 'l Jnd j In + td ed Chi'UnTs and utTrn

an! t :t it.tst s det tr av s!

t G n!r > (i m. t.. hc let u ec s eats is presented m the im because of mcteawd cap:tal expendautes. partuik ( i i >lu m ne uhe itbei in a lou rt ret The Af't h ettectne ratt wa.* i s

• . M and lu d > - m 1"02.1901.md P? O resprs t n eis i

} , wh+ of Miam tW em U+ j The pnnun reason for the 1""2 thaner u. \\hst eLneou- [ r" s *. s s i nM h m o*dg u uim m.wW u e IP Wup nowr orwraor$ nrwnv s a i v.nm o runn a4" tu% 41 - The lwl t tunge m, bst edaneou-net was prm( 2palh Ins j ' l '. E ' 2 t $ or i mpf t11ahi m dw b du moth of M nulon wpwwnnne the ptwrrn! um .6 H 4,

uL q

~_._ _.-._..__ g ,a,y oc g my m y g y.Oni'tm-1 6 m n b e-l iM fn pursuant hs J SeMirmen' Jtwement filed u:th die i -G .tM Hg.ru me upc at; i h :c h' I n.1 J su:es l hsun t Coun on Dec ember ' 1""1 The DMI [ m rm e i ! ger.cr.n mp m es m t iscJ o > r<.;rr* s h.mee iso w'iem d h ew n were3t mtome on short-term { 4 r i t c c3,enses m 1 * '_ The 1"il dn wase m yn ng jn ps i. On wdac'mn m h ebncownd j ci + + i i e ' ~ - 1 , e a'n t ex penses p nu ne prmunh dat to the redattnin m the aih an in iit ux .<d., ] , s e aun un e ex pen' s t. g the wr. u e '>cm ho t um 4 t b ilden c. a wsuit (if the Man h lum j > 1: ' r p m e p'.m s 1r 1 n-g c, yge,,,w pM d the Cicon plant m rJIt hase The a i & t., s , e.e wgg.g gg .g, g m :cw v, r> n un,, expens..um p,o, y, i o ir 1 Unt*tnic , paMud s ( diset ln the c\\f tribes wlJ1cd it ) 4 m, - . c. 7 ~..,s. ..t., i n' e- ,w 1t, . p~u n ya espenc y gy, a u d a-N is & d P m % u u h iu ja m 1; <mu. s,,. m l > < m nm@ m mm n Cim i ; l .e: o mt > 1 a s# n r o c.e k rc% l"Ivrest ( har: es Inter"4 s! s decwawd '12 4 r:ui J<~,1., c3 . l m !"M '2 > " nuhn >n m 1"91 and slo m numon m l 1 s u ,g,, l h' P " '- I"'! "d I""a da mec' w em purrunh P

.m

.p; e u J n mt s' ' t + me rt inunt me t >t cust:ne h cher sin dcht anJ in s, .m.A 4 g or e rh rt m ment !(r" m debt I n im I'91 1 P W the 1 c 'c" u' uru ed N ' r a in u b ing ten l a ua s u r 1 M cu ioJ-tm wmh me lo m acwcmem. w d b a g j ( s.. .t-y,, ,,s cmed reac~ m r"qt.ccetoo-e I t i In//.itson In duo e n we u w.j b\\ t he l r st me!Pnu ' ! 4 ' ;

L -t h.

et s s,na3o i; and ; r m Pit Pr4 a d P % ' s - ' i q I q '.. 'nti 4 he rnnun rMn t ' f mil.H e in i-n t he c g.. .n ni o + ' u.a 'I 4

, gqg

,7; j g,, 7 g '~' 1 3<- '.k I 3 tt. t O t ~' O ' l l 1C l 6dl 'Wii s r2e-r. { Os fs 4 3 .e sc x t i Liquidity and Capital Resources I l.i J(k-a-5 1s 4 NCVillait ern MJttef% f - jt; m-L s ,j . 'i e-see vir;-U on Pou a st. hon'.;the N,'es t, I i: un i ! sul mer -S b it a d:wusm i ; i >t appc. s of the j j' M ) < b r >,, ; } t lyj 7,pe. g gen g g pg; ( q g } g ]%- 4husnnen:', f.n r in. dun in 6 ede ;md i ur Ir 1 a s ass u 1.2 1 u a ' t he i u, u m - a,, < > ng b a iS do - ! t i:t i l p is s r ing rum in t ' N s 4 e I i, B 4 4 .-, I s s l I a y

i i 1 Dunng the second quarter of 1993, the Company intends payment dates in 1993 and 1% If retained earnmgs are i to hie a ps ret.u! rate increase request with the ICC. seek-negaine and if ICC authonzation is not recen ed or p.n - ~ mg cost rectwerv from the impact of nsmg operanon and ment is otherwise unlawful on the nomu! pavment dates. i mamtenanc e expenses. the ef fects of lower sales to ulti-the Company w til be precluded frten pavmg diuJends in I mate customers and the costs associated with the liillsborn this event. under the terms of the Boards declaration. no storage held expansion prtnect wtuch is scheduled to tv common stock dindend payments will be made and the i tested and m semce ly April lh The Company expects pavment of preferred stock dnidends shall tw deferred 5 to ask for an annual rate increase of anproximately 530 nul-until such time as pavment is lawful. Payment of curwnt hon to 5.% mdhon This rate increase wdl be partully otiset and cumulauve prefermd stock dnadends will be made to j try an annual savings in the cost of gas which will flow holders of preferred stock as of the record date spec 6ed j back to customers Thus. the net increase to customers is for the quarter m which payment of dnidends first j becomes authonzed and lawful l expected to be apprtnunately 512 milhon to $15 mdhon annua!!v w tuch equates to a A to 5% increase. A hnal Capital Resourtes and Requirrrnents f order bv the ICC is expected to be issued in im The last company gas rate merease was effective January 19b3. fo!- The Company needs cash for operatmg expenses. the pay-l j kmed bv a gas rate decrease in December Ih ment of mterest and dnidends retirement of debt and l 5 certam preferred stocks and for its construaion program 1 TERC Order 636 Pursuant to Orders ta6 and (NA. To meet these nenh. the Company has used miernally ~ issued on April K 14)2. and August 3.1992. mspectneh; generated funds and external hnancings such as the sale r e FERC approved amendments to its rules which are of common stock. preferred stock. debt and revohing hnes i j [ mienJed to increase compennon among natural gas supph-of credit. The timing and amount of external hnancings 4 L ers by 'unbundhna the merstate p pehnes' merchant sales depend pnmaniv upon economic and hnancial market 1, i seruce imo separate sales and transpmunon semces and condinons. the Company s cash needs and capitahzan. g on j o bv mandatme that the pipeh.nes hnn transportation semte rano obiectives In part, the availabihty and cost of external 1 1 be comparable to the transportanon semce included m Enancmg depend upon the hnancial heahh of the company their tradmonal bundled sales semce L. der this rule. seekmg those funds. i n a p: prime-are requued to unbundle senices that thev pro-j ude tod.n so that purchasers of nn n! gas can select Short-term debt is used to meet temporary cash needs for f j scruces as needed to meet their energv needs. At tlus urne, operations or to meet capital requuements untd the timmg the Company is unable to predict the ulumate impact of is considered appropriate to issue long-term secunties. these ndes on its operanons and costs. but beheves it uill Cash flow from operanons dunng the current year pro-mcrease the complenn of proudmg firm gas semce Tfus vided suiheient working capital to meet ongomg operating i 4 i adJmonal mmpleutv resub from the greater number of and construccon rtquirementx to allow for the contmua-i opuons atadable to the Compam as we.d a-the added [ uon of a common stock dividend and to semce custing i I remonsbbn to crange for at qumuon. transportanon and preferred stock dmdends and debt regwrements. On vage of natural gas. w hwh we piruously bundicJ mto August N 1492, as a result of adverse indications in the i une ppm nes sales seruce ICC dehberanons over the Company s electric rate pubht Db idends use wheanng. Moody's placed the CompanVs secunties under renew for possiNe downgrade, and Duff & Phelps 4 m ( x t+ct 14 I M the(.ompant 3 Hoard of threco s plamJ the Company's prelermd stock on its

• watch hst 1

)i 3 Jew.reJ !mi Wanerb mmmon and preferred stock dn e twnd unfavorable ~ for possible downgrade On August h, i denA nnabic m Pm Tou:hne approumatriv 5% rndhon i ^"N"^

1. "US j

( >n I ebraan' It i PW the b< urd of Directors dedared the wnhrmed all rannes. with the exepuon of preferred stock. mon anJ prefened um dmdends pavable for the hrst which remains under revn The curwnt raungs of the 7 m omer of P% 1he, Hond of Directors acted to resohe b"""E" " b I ) umertunties about the Compano abihty to dedare and uencies are as fo!)ows j 1 l p.n mmmon and preterred stoc k diudends m the es ent -~ 7 { tb d w rne-t e re!xed to the August lW2 lCC rate rehearint DuffE-Mandard ? <irdet d ulhmateiv required pridKe an awumulated dehm g, g ', g l r 1neuene reumed camingsi in the esent of an accumu-( mmM>ne bHB baa2 BBB+ 3 tated defh n. the payment of drudends is motmgent on ICC Preferred simL BB+ baa3 BB!t 7 r aamonzauon and lawiulness at the urne payment :s made Grnmerrial paper N/R* P2 A2 i sat h ICC authonzanon has been sought and a mhng is -'nM rawd ] 1 expcord by the end of March. lW31CC staff tesumony e I l supp.trts the Compant s requested authiinzauon These ratmgs are an mdicator of the Company's Snancial bsummu that reuined earmngs are pwine or that ICC condinen and may affect the cost of secunties as well as authonzanon is obumed in the instance of negante a TetJIned c.stning the dn idends de(lared on Octohe; ]( I PN2 and i ebruary 10 lWi w H! be paid on the normal i i } 8 l ~.. ~,

i the uilhngness of investors to invest m secunties. Under Addauonalh. m.lanuary lo9& the Company retired 53; mii. current market conditions. these ratmgs are unhkely to lion of 4% senes Erst mortgage bond. and in Februan impair the Companvi abihtv and or sigruncantly mcreaw 1993. the Company redeemed 510 milhon of nundatonk the cost of obtaming additonal permanent Snanang. redeemable M2N senal preferred stock and 512 milhon o: The Company has adequate short-and miermediate-term mandaronly redeemable 8% senal preferred stock ( tunk borrowmg capaaty The Companyi future hnancial In August 1992. the ikurd authonzed a new mortgage condinon will be influenced by the outmnr of its appea! which is mtended to replxe the Compam. 19e 6 s of the August 11992, reheanng rate order. the appert of Mortgage and Deed of Trust. Bonds mued under the the 198~ l'mform Fuel Adiustment Clause order and new mangage will be secutrd bv a conespondmg issue actions taken by the f.inanual Acmuntmg $tandards of first mortgage bonds under the old mortgage until all i Board s GA51N Emeremp issues _ask Force as discuswJ outstandmg nrst mortgage bonds under the olJ mortgage in -Note 2 - Chntun Powrr Stanon of the "N.otes to are retired or redeemed. The new mortgage o expected to Financuls.tatements. pnmde the Company with greater fmancial flexibihtt At During 1492. the Company contmued its program to refd December 31.1992. bawd upon the most restncine earn-nance higher cost debt with hmer cost debi inJune IW2. mgs test contained m the old mortgage. the Company j the Company entered into forward contracts providmg for could issue approximarch Smh milhon of addioonal hrst the total sale of $119 x m21 hon of tax-exempt debt in 1494 mortgage bonds for other than ref undmg purpo es. The j and 190;. u hich will refund 5.Ro mill on of 11W senes amount of available unsecured borrow mg capacity totaled hnt mortgage bonds due 2014 and 58+1 milhon of 107 51% milhon at December 31.1492. Also at December 31. senes first mortgage bonds due 2015 w nh the same pnno-1992, the unused portion of the Company's total bank hnes pai amount hrst mongage bonds due 2024 at ~.3% and of credit was 5200 milhon In $eptember 1992, the %. respectnely in July 1992. the Company issued 519' Company filed a 5350 million shelf registration of debt nuthon of debt mnetmg of 5 2 milhon of19% senes secunties mth the Securnies and Exchange Commission for hrst mortgage bonds due 2004 and 512; mdhon of WA the purpose of rehnanang high cost and matunng debt. senes firsi mortgage bonds due 2021 The proceeds wrze This shelf registrauon became effectwe in February 1991 used to refund Nn; milhon of the 4V > wnes Erst mon-On October 28.1992. the Company filed a request with the gage bonds doe 2nlo and v118 milhon of 10 A wnes nrst ICC to fund up to 5'5 milhon for a newly created unregu-mortgage bi.nJs due 2016. In september 2002. the lated subsidiary. IP Group. Inc. The purpose of the Compam nsued F2 nulhon of eY o senes hrst rnortgai:e subsidiarv is to engage in any lawful busmess. how e\\ er n i bond due 1000 The protteds were used in October 1992 will concentrate on partiap_. tion in the independent pourt to tetund 5M nuibon of the A3% sents hrst mortgage market. An order from the ICC n expected sometime in the bond due loo" and 53; milhon of the % senes nrst mort-third quarter of 1093 gage bond due 2h Addioonalh; m Ostober 1"92. the Compam redeemed $2; nulhon ol its F; milbon lm. Construaion expendnures for the yean 1990 through 1992 wnc hr t m< ingage bonds duc 190s wrre approumately 5510.2 rmlbon. including approxi-in Aueou lon2. the Compam s Board of thrector gramed aa:h, rn t; mur up to 59o nulhon of long-term debt and The Company esumates that 51.3;8 bilhon will be required l e w.M m or preferred sin k to pursue additional.ren-for construaion and capital requirements dunng the 1993-s un w ( Jn ( u ber 2N 1902 the ICC iwued an order 199 penod as follows-jw canhne the t a rmpJnk authonn til twue up to b3M milbon fW a mn# under emm the compam ~ new mongage ides nhed licir m i air the currenth exhting MortgJge and r 1hibuns of tiollarsb 1%3 IW A IUT 1)eeJ of 1ru+ md b y mue 5100 nuihiin of preferred st< wk tonstruction sequarments I i n Ihe \\ cJ;s PNJ J 00} and }uoq the Company s redut, tjenrx generating facibuts 5 603 5 22h! j m2: of lancienn debt and preferred siwk oubtandmg. Iketra pencraung fauhurs - l mt!udme nsirntd matunhes.tnd electne redempf u nd was t irrtric transmmon and

1. b*

dNr bunon fauhters "'2 2 %h2 orneral plant 43 1 126.2 sthnmin nfa,,haru IW2 twl p)90 Ga laciburs %).M 142 H f Ju ~ 5 %% 2 5 2n - lotal runstructum I s other longterm h bi b; 9 35 og requirernents 26 A 6 893 - Prrterred ste f ut og 2a 4 Nuclear f uel 32 - 131.1 [ ~-~~ t)cht reurrments 40.2 23L] i ht al s 9h6 5 92 4 5 t24 8 Tota! 5.4% 5 51,3%* 9 i l a. I L 6

These esumates include potential costs that may be requurd The Internal Revenue Service is currently auditmg the Company's federal income tax returns for the years IWo to aimply with the Clean Air Aa. however. the Company through 1988. The audit has pnmarily centered on tax has not made a hnal decision on its mmphance strategy for assues related to Cimton. At this time the ultimate outcome i l the Clean Air Act. As a result, the Company's esumated con- { strucuon and capital requurments for the penod 1993-in9' of the audit cannot be determined; howestr. management j could be szgruScantly impacted tw this dectsion See " Note does not expect the results will have a material adverse efica on the Company's finanaal position or results of 3 - Commitments and Contmgencies" of the Notes to l i Financial Statements" for further disnissica Construcion operauons. and capital requirements are expected to be met through The FASB issued Statement of Fmannal Accounting internal cash generanon. g (FA510% in Februarv 1992. which will have an impact on The amounts shown m the table above for debt returments do not include all smkmg fund requurments The Company the Company's future fmancial statements. The Company has generally met these requurments by pledging property plans to adopt FAS 109 dunng the hrst quarter of 1993 and add tions as permated under the old mortgage For will recogntze a cumulatne effect ad ustment which is esti-i mated to mcrease assets and habihues by approximately I addnional informauon. see ' Note 8 - Debt Retirement Pr:wisions' and ' Note 9 - Mandatonly Redeemable $2;0 million. but is not expected to have a matenal effect i on the Company's results of operations. l Preferred Stoc k' of the -Notes to financial Statements i see -Note 3 - Commitments and Contingencies' of the In November 1992, the FASU issued Statement of Financial t .N.otes to financial Statements. for information related to Acc unting Standards N.o.112.

• Employers' Accounting for i

l coal and gas purchases and nuclear fuel commitments. Postemplovment lienefits." which rtquires the recognition f postemployment benefits (includmg heahh and welfair Environmental Matters benents) provided to former or inactive empknres on an see -Note 4 - Commitments and Conungenctei of the accrual basis. The Cornpany anticipates adopting this -Notes to Finanaal Statements' for a dxusuon of the Clean acc untmg standard m 1994; however. it does not expea Air Aa and gas manufanunng sites. adopuon to have a matenal adverse effect on the j Company's results of operations. See ' Note 11 - Pension Tax and Accounting Matters and Other Beneht Costi of the " Notes to Fmancial .rhe Company was subiect to the Ahernauve Mirumum Tax Statements for addiuonal informanon related to the i i AMTi promons of the Internal Resenue Code for IW2. Company's adoption of Statement cf Fmancial Accounting 1991 and 19% As a result, federal income tax habihues Standards No.106. -Empk>yers' Accounting for were approximately $24 milhon. 528 mdhon and $16 milhun, Postretirement Benefits Other Than Pensions" in 1992. respeanely. greater than they would have been had the Company not been subtect to the AMT. As of December

31. !W2 the Company had approxmutely 509 mdhon of AMT credit arnionvards that can be camed forward indeh-mie!) This credit is available to offset regular tax habihues m eu ess ot' the tentative minimum tax In 1992. the Company mnanued to utihze a pornon of its tax net oper-aung loss cam 1orward and its insestment tax credit j

arrvionvard. As of Detember 31.1092. these balances j wm approumately 5189 milhon and 518 mdhon. respec-ot a detaded dm usuon of income taxes. see Note r In m n - Intome Tnec of the " Notes to Fmannal statements ' f i h l i I l i j a

Ilhnon Pou er Compani RESPONSIDILITY FOR REPORT OF INDEPENDENT IN FO R M ATlO N ACCOUNTANTS The fmanci d statements and all infonnanon m this annual fMpllg/muW report are the responsibihty of management The financial statements hase been prepared in conformay w dh gener-To the Ibasti of Directors ofIllinois Power Company a!!y accepted accounting pnnciples apphed on a consistent in our opmion. the hnancial sutements of Ilhnois Power hasts The hnanaal statements include amounts that are Company appeanng on paces 20 through e of this report based on management s best esumates and tudgments. present fairk in all materul respects. the hnancul positon Management also prepared the other informauon m the of 11hnois Power Compans at Detember 3L 1492 and annual report and is responsible for its accuracy and mn-1991, and the results of its operanons and as cash Ikm s for sistency wnh the hnancui statements in the opmion of each of the three years in the penod ended December 31. management. the Snancal statements fairly reflect the 1992. in conformity with genera!k accepted accounting Company's nnanual posioon. resuhs of operations and pnnaples. These hnancul statements are the trsponsibihty cash (kms of the Company's management; our responsihihtv is to express an opinion on these financial statements tused on Tbc Company beheves th t it mamums accounting and our audits. H.e conducted our auJas of these statements in imernal accounting control systems that proude reasonah.ie accordance with generalk accepted auduing standards assurante that asset 3 are safeguarded agamst loss f. rom unauthonzed use or disposition and that the fuuncui which require that w e plan and perform the audit to obtain reasonable assurance about w hether the hnancial state-records am rrhable for prepanna mancial surements. f ments are tree of material misstatement. An auda mcludes The hnancui statements have been audned by the examming. on a test basis, eudence supporung the Company s independent accountants. Pnce Waterhouse. m amounts and disclosures m the hnancial sutements. assess-accordance wah generally act epted au<htmg standards. mg the accuunting pnnaples used and significant estimates such standards melude the ecaluation of internal account-rrude by manage nent. and evahuting the overall hnancial me controls to estabhsh a basis for deveh>pmg the scope of statement presentation We behese that our audus proude the exanunanon of the hnancial sutements. In addnion to a reasonable basis for the opinion expressed above. the use of independent accountants. the Company mam-ums a professional suff of internal audaors who conduct As desenhed more fully in N.ote 2. their are sigmficant uncer-hnanaal pnxedural and specul audas. To assure their rainoes with respect to ninous matten sulated to the Chnton mdependence. both Pnce Waterhouse and the mternal Power $tation including the detemunation of the extent, methodt and uming of recca ery of us related msts. and audnors base durct actess to the Audd C.ommmee of the Ik urd of Direuors ohum ng rates which pronde adequate cash flows to alkm-the Company to mainuin hnancial integnty Management is lhe Auda Commmec is mmpowd of hur members of the uruble to determme the ulamate outcome of these uncertain-10 urd i d Diredars a ho are not anne or retired emph wees nes Accordingly. no prtwision for any habihty or addinonal of the Uimpam lhe Audd Commatee meets wnh Pnce loss that may result upon resolution of these matters has lwn waterbeiuse and the miemal audnors and makes recom-made in the accompanying hnancial statements. menJan ins to the Ib urJ of threctors < onc erning the g ep4 unnoent < d the mdependent aaountants and senices l e, he performed AdJinona!!v. the Auda Commmee meets ! AR4 bij f MW " ' u ch Pin e 4.ncrhouse t i discus-the results of their annual auJa the Congunn mternal accounung controh and N ' **"O""* $t Louis. Wsouri fmano.d repsinmg maners,he Audit Commntee meets t wn the imemal auda us to retwu the proposed audd plan Ichnurv 5.10n3 anJ esew the mrernal audit work performed. mcluding tests < 0 miern.d ac counung controls %J sy ABh 7 Larn D ILuh Larrs E Altenhaurner Ch.urman PreuJent and $ernor Vice President C hief IAccuin e Offu er and Cluef f man (ui Offhrr 3

p 'i I Jthnots Power Compens 1 S T AT E M E N T S OF INCOME (Milhans ofdollars rwcept, r sbarr arnounts t I W.*

I991 1 y

for the ) ears Ended Deteenber 31. Operating Revenues 5 1.11".9 5 1.101.2 5 1.084.6 - i Electnc 73.0 85.6 38 j Dectnc interchange 288.6 288 2 311.1 l Gas i 1.4'9.5 1.4'4 0 1.49.5 L Total I Operating lapenses and lnes 248.8 2tc o 259 4 !l O Fuel for electnc plants 24.0 2C 51.s Power purchased 11.9 167.8 182.1 1 Gas purchased for resale 21.3 253 4 244.9. Other operating expenses 102.1 8'.2 120.7 Maintenance 161.3 176.8 l'6.6 l Deprectauon (5.6) (5.6) 15.6) Amorttzauon of excess unprotected defenrd taxes 122.2 125." 32o.8 General taxes 11.2 11.2 14.6 Deferred Chnton costs 86.2 75.3 43.' income taxe-1.193.4 1.183 1 ' 2 ? E _O 'Iotal 286.1 291.8 . 4.5 Operating insome Other Income and Deductions Allowance for equiry funds used 1.5 1.5 1.7 dunng construcunn Disallowed Chnton plant costs ' 60.4) 24.8 Income tax effects of disallowed costs (.6) (4 5) .3 Miscellaneous-net .9 ( 3.0) (133.6) Total 28".o 28H 8 120.9 income irfore interest charge. Interrst Charges 160.8 176.2 191.6 Interest on long-term debt ".8 4.7 9,3 Cnhet interest charges Allowanse for horrowed funds used ( 3.7 ) (1 A) ( 1.% _danne construction 164.9 170 ; 199.4 bial 122.1 109.3 (78.5) Net income Gosu 28.9 30 9 36.8 l l Preter*ed daidend requnements 5 93.2 5 'H. 4 5 (11; 3) t Net luc (ime 4 lossi Jpphcable to common stock {. Veighted astrage number of common shares outstanding 5.643.93" 5.643,937 75.612.759 dunng ihe pern d 5 1.23 5 1.04 5 ( 1.53) 1.amind dossi per common share 5 1.40 5 .40 5 Cah daidends declared per common share 5 .80 .20 3 Cash dn dends paid per common share \\ce niacs to pnannat staternents u bach avr av sutgralfuert of une statements Ii i }s i t 4 litterots Poarer (nmpans BALANCE SHEETS 3 i i t Gfsilums afdollarss December 31. t =r:: 1991 i Assets Etihrv Plant at onginal cost I'leanc uncludes construction work in progress of SI*o 4 milhon and SK8 2 rmthon. respectnelv) M.5 # 5.4 55.390 0 Gas Oncludo construanin work in progress of $31 milhon and 513 8 nulhon. respectivelvi $3N.4 403.3 i 6.ON".3 5.803.3 1.es--accumulated depreciatnin 1.809.- 1 x,84 4 4.2-~.6 4.208 o Nuclear fuel in procm 10.5 Nutlear fuel under capnal lease 141.2 162.3 4.429.3 4.31.2 i investments and Other Aweis 9.5 g-( Lurrrnt Awets t Cash and cash equnalents 8.- 11,0 Accounts recenable 4less allowance for doubtful accounts of 54 0 milhon and 56.5 milhon. respectnely) $en ice 80a %.3 Other 21.0 28 0 Accrued unbilled resenue 91.4 g2 i Notes recenable from IUmots Power l'uel Company 2.3 l M.nenals and supphes. at average cost f ossil f uel 2.4 33.- Gas m underground storage 21.1 17.5 Operaung matenak M9.3 84.- Prepaid and retundable income tnes IM 3 18.8 Prepavments and other 11.2 10 9 369.3 3904 incierrvd ( harmes I >ererred Chnn >n cost-38.1 389.3 L namortaeJ debt expense (35.3 i Other 6.8 4.9 523.6 501.A H,3 41.- M.2'1.8 ? Capital and 1.iabilities Ca;inah7ata in i G imns in sk A k-I N i p.u value Inu b H (m o slures authonzed 7N3.93~ shares outsunding suted at 51a 24.6 51.424.6 ke-1 >etencJ t ompens.u n >n-I SOP 31.3 32.- Keuined e.immas 41.0 ~ 5.8 Irw-Lapua! siwk expense i 1.6 11.6 j liui o mind m sb +ck equin 1.422? 1 Ahl PretencJ and nreterente st.a 303.1 303.1 l Rina. t ink redeemah:e preterred stot k I00.0 110 0 1 on.2 ienn deb'

• 01'"A 2.153 1

'b.u! capiuht.u n in 3.N13.2 4 022.3 ( urn-nt I.iabilities A counn pauble 115,0 jog 3 %ies p.iul de 6".1 1.o bine-tenn dele.md lease ohhg.nions nutunng within one scar h0.9 58 6 I)n idend, dectired 90.0 22.- lise.u rued 35.9 M2 i interest.a crued 64.3 63.3 uthe: 0? 49.6 522.9 lieferred On-dits 351.- i trumu!.ited delened mcome ines 669.1 612.3 A curnul.neJ deterred investment us credits 241.1 242.5 8xher M.4 43.0 i 965.6 H97.M l L omnunnent and Contmeern ses f Notes 2 and 31 %.3 31.- M.2 1.8 I %. mores tapnanaarstatements ulmb an an osaegralpar: of these statements I I .I i l l I I .~m l l e IIttnois Pou er Company I S T AT E M E N T,S OF CASH FLOWS I 'n Olithons of duuarsI I-194.' 1991 19 % l l Jur tle lears Ended December 31. Cash Ilows f rom 0. crating Activities 1 $ 122.1 5 109.3 S F8.5) l Net income (loss) l j hems not requin tg (prondingi cash-Dasallowed Chnton plant costs. net of income taxes 135.6 1 15"." 1 +9 I?8.- Depreciation and amorttzatu.m ( 5.2) (2.9) (3.2 ) I Allowance for funds used dunng construcuon 57.9 45 3 30.8 l Deferred taxes on income, net (1.3) (,1 ) (14.1) Deferred investment tax credit 11.2 11.2 146 Deferred Clinton costs Changes in assets and liabihtie. 22.8 (8.6 ) (2.8) f Accounts recewable ( 4.7 ) 16~ (13.6) j Accrued unbilkd revenue 2.3 3.7 (12.0) I Notes treewable (2.2) (21 1) (12.9) i I Matenals and supphes 6.7 (36.11 9.9 Accounts payable (3,3) (1.0) interest accrued ".2 18.1 26.1 Taxes accrued and other. net T 4.5 3131 252.6 Net cash prouded bv operatmg activities j Cash I'tous from investing Activities (244d) (141.2) (130.6) j Construcikm expenditures 5.2 2.9 3.2 Alkmance kg funds used dunng constmetion 9." 14.3 (13.9) Other investing actwities l (229.5) (124 0) (141.3) Net cash used m imrsting actwities Cmh Ilow s irotn Financing Activities (90.2 ) (4&9) (37,23 Dnidends on preferred and common stock liedernption-(221.6) (120.71 (37.6) Short-term debt (480.6) (348.2) (213.7) Leng. term debt (10.0 ) (35.8) (26.3) Prefened stock lwuances -- 412.7 118.7 38 0 5hort-term debt 269.0 291.5 116.2 Long term debt 1.4 Common stoc k Loan to treter-E50P (35.0) ( 14.6) (19.1 ) Premium p.ud on redemption of long-term debt ( 12.0) (2.2 ) 1.2 Other 6n.ineme actames (147.3) (19~ 7) (158.01 l Net cash used in fmancing actinnes ) ( 2.3) (8.6) (46.7 ) i Net change in cash and cash equn. dents 11.0 19.6 66.3 j i C.ish and cash equwalents at irgmning of tear 5 PL" 5 11.0 $ 19.6 i Cash and cash equnalents at end of year STAT E M E N T S OF RETAINED E A RNING S Oltthons of dottars) sv

yyj yyy tur the ) cars I nded Darember 3 L

$ 75.8 5 1.2 $ 143.1 luiance at Begmning of Year 122.1 109 3 (7g 5). ! Net inmme 4 kW 19".9 1105 64.6 j Les-invidend-51.6 4.6 63.4 Preferred stock 105.3 30 1 1 Common % k I56.9 34.7 63.4 5 -41.0 $ MS 1.2 ltdance at End of Year see noses topnanaalstatements u hich avr an sntegralpart of nese statements ~! l b !!hrsens hou vr Cornizar; S TAT E M E N T S OF PREFERRED AND PREFERENCE STOCK t.1tilhems of dollars) DeserrdnerJ1. I'rd 199i Aerial Prrierrrd Stock. mmulatn e. 5;0 par value (1 x 2 L Authonzed 510) 000 shares. 9.128.320 shares outstanJing Series Shates Redemption prices +0% 3001100 551.;0 s 15.0 5 lio 4 20% 150.000 51 60 ,5 1; l'% 200.000 51 ;0 10.0 10.0 +92% 150DK) 51 ;0 ,5 n; +2(N 180ik s0 52 00 9.0 9.0 826 OOOD U 51(O 30.(t 30 0 ~. ;0% '00.000 il W 35.0 350 8%% 8 4.320 41.00 42.4 42.4 8.41+ 1000ino 52 3 30.0 60.0 Prenuum on preferred stoc k 1.2 1.2 Total Pteferred Swk. 550 par value 20.6 20' 6 serial Prriermd stock. cumulative. without par ulue-Authonzed 5XKn000 shares. 3310.300 and 3.510300 shares outstand. mg, respectwely Onc ludmg 1.900DM and 1 MM 000 shares. tespectn el% of redeemable pwierred stock k 2) Series Sharrs Redemption prices M3t 1.OW 000 55150 pnor to Februan 1. P93 50 00 thereafterl 50.0 50.0 10 a l 910.300 $5150 pnor to M.iy 1.1995

o 00 thereaher!

4s.s di bial Preferred 5tnL. without par ulue 9s.; 45 5 Prrierence Stock, cumulauve. without par value-Authonfed 5fomi shares none outstandmp Tical Nerul Preferred and Preference Stock uO 4.1 5303 1 Mandatorily Redeemable serial Ptrierrrd 5 m L. cumulainv f 2 L Series Shares Par Value 8 52N O Nod 000 none $ 40.0 & 50 0 K ON 6 h00 (p) none 60.0 00.0 bial Mandaroniv Redeemable 'enal Preferred 5td 4 00.0 51100 t Ii Nedermalde at the ofstron of the { ompany on u hole or in part at arn tune u;>on not less than thirty days and not enorr than sixty dap nutu e bypubluatoon i2o un i n toher 1 t i9V2. the finard of Ihrrctors det laredpmr quarterly cornmon andpreferrrd sten k dirsdendsfor 1993 Dutdends trill be pand on the normalpayment dates on sbarrs <mtstanding on upphcable rtemidates The ratespor the Adjustalde Rate Senes A and B u rw det lavrd att the l>asts of $ 100 and $ 1 125 per sharr. rrspectnsly for each of slwfimr quarters. floursvr. the actual amounts paid man a uri. based on market unterrst rates on the no*maidetlaration dates (3) Ashtarable kate \\enes A assued ort Starch J. !9N3 Cuarter!r du idend rates art defernnv>ed based on snartvlinterest rates ofcertain (!$ Trrasun wcunnes katesjur du tdends declartclin 19'j]an i1991 uver $0. Mjar each quarter Tiw dntdend ratefor any dusdend period u nll not tw less than b%[wr annum nor got ater than 12% fnv annum afiphed to the hquidatsonpreferrnte e alue of 550per sbarr. 4-n Adjusta? ale Rate \\crues B sssued on Alan 15 19M5 Quarterb duidend rates are determined based on market inteerst rates of certarn (:S Irrasun m urstres Ratesfor dutaends destarrd en 1992 nvrr 30HMofor cath of thefimr quarters Katesfor dre,dends declarwi tn l'PJJ uvrr 50 96Mi. $O 9125, $O 9mM) and $t) 9J13 :n theprit. wcond. Ihrrd andfourth quarttTs. trspecturly lhe duiderul ratefor an y duidendpertad nesil not be less than '% per annum rear greater than in%.per annutn apphed to the liqusdatum priferrmt talur ut55opersbarr t 5> \\ubject to mandatory trdernptson sn an arnount sufficwns to retsrr on each Irbruary 1. beginnsng on i992,2OO.OtM1sharts at 3 50lwr shaveplus atcrueddn'edends Also. beginntng iebruary J. I992 %e Cornpanr may redeem up to 2OOJMM) additionalsharts eachyrar at 3 %Dper sbart Un february itL 1992,2OOjoun shaors urre t a vmedfor 3 50per share On ivbruary 1,1993. 2OOJMMIsharrs uvre vrdeemedfor 3 %Oper shaw e 6) \\ulpect to mandatory rrdemptson un an amount sufpcwnt to vrture om each lebruary 1. begrnenng an I993120Ank) shares at $100per sharrplus alcndeddn4dends Also. begrnn:Ng lebruary 1,199]. the Onapany may redeern up to 120A000 a$datinNalsharts each) tar at Sit >Hper share On ivbruarY 1.1993.120 0(M) shares urre trueemedfor $ looper sharr. .\\ee no;es lofmanual statements u'bsch are an integralpart of thew statements i 29 itsinois Ponrev l'empany S TAT E M E N T S OF LO N G-T E R M DEDT iSillhons of dollars a 1me !Yyi Decembec 31. First mortgage bond-35.0 $ 35 0 4M% senes due 1993 40.0 40 0 5 85% senes due 1996 25.0 25.0 6%% senes due 1998 50.0 5.0 + 10% senes due 1998 (1) 45.0 45.0 6% senes due 1998 2.0 i 6% senes due 1949 (2) 35 0 8 35% senes due 1999 (2) 9% senes due 2000 (2 r 35.0 i 35.0 35.0 7 60% senes due 2001 60.0 60.0 7%% senes due 2003 .4 7.6 6 60% senes due 2004 (Polluuon Control Senes A) 55.0 65.0 9%% senes due 200-i 2.0 .45% senes duc 2004 (3) 100.0 100.0 8Y% senes due 2000 6% senes due 2007 (Pollution Control Series ID 18.- 18.7 100.0 100.0 4 tG% senes due 2007 100.0 100.0 82% senes due 2008 10%% senes due 2013 (Polluuon Control Senes C) 111.8 111.8 lik% series due 2014 (Pollution Contrul Senes D) H) 35.6 35 6 10%% senes due 2015 (Polluuon Control benes D (5) 84.1 84.1 i 104% senes due 2016 (3) 118.0 9h senes due 2016 (3) 66.5 9% senes due 2016 125.0 125.0 k senes due 201MPo!!ution Control benes E G and 11) 150.0 180.0 8 $h senes due 201- (Pollunon Control $eries ' ) 33.8 33.8 % series due 2021 (Polluuon Control $enes Ai M.- 84.7 W. senes due 2021 (3) 125.0 Toul Erst mongage bonds 1.565.1 1.585.8 Revohmg loan agreement (6) 182.0 10 5%)oan agreemtnt (') 8.9 $hort-term debt to be rc Snanced as long-term debt (H) 125.0 8.% debt secunnes due 1994 100.0 100.0 Medium-term note' senes A (9) 100.0 100.0 unable rate lonperm debt due 201' (10) 5.0 5.0 1,965.1 2.051.7 ( 10.0) (9.11 1 namorttred premmm and dncount on debt 1,955.1 2.042.6' obbeanon under capital leases 143.2 169.1 4 2.098.3 2.211.7 1onsterm debt and lease obirganons matunng uithm one year ( 80.9 ) (58 6) l Toul loneterm debt $ 2.01 .4 52.153.1 } (11 (rn OctMoer 21.1991325 milhon of kmg4erm det>I uns artered i 121 On September 1,1992, the Company tssued $ ~2 millson. 64% ser o >. due 1999. Un October 13. I992, this new issue rrfinanced $35 milhon 8 35% series due 1999 and $3 % milbrm. 9% senes duc 20W). (3) inJuly 1992, the Company retmanced 5118 molhon.10s% senes and 566.5 milhan. V:?. serses. bush due in 2016. settb $72 million. ~ 95 T-serses due 2004 and $125 msthan, ita senes dur 2021. 7 44s On Slar i5.1994 the Company wdl reftnance thus sssue wtth a 535 6 milhon, *.30% so nes <!ue 2021 Dwsepollutson contnd bemds se ill be suurd frbruary 15.1944 (5) On Starch J. !495. the Cornpany u di nfmance !!ns assue with a $N41 mulhon. T 40% senes due 2024. Desepollutsun cumtrnt bemds u ill be assued December 1.1994 [ (6) Durtng 1992. Outstandsng bank hans under the travls ang loan agrwrnent urrepand try ussuing tummercsalpaper floatsng rule i notes aru!other shortlerm debt j t-) ivan agreerm nt matured and u as pmd December 31,1992 ( tM) Short4erm debt to be refinanced as hmg4erm debt conststs of com mercsalpaper and other short-term instruments that will be srneurd regularly em a long-terin basss Ongosng credst support ss prut ided try the Comparty' 5200 milhon retuh ing tiedit s agrwrtwn! (9) in i9N9 and 1991. the Cennparty enterrd snto a series ofpxed rate medsumterm notes At December 31. I992. the maturity dates un these notes rangedjnnm 1996-1998 and the Interest rates rangedfrvm 9 U0% to 9.31% ()Of interest rates adlusted utekiy and ranRedfunm 3 50% to 4 f(1% at December 31,1992. Eficctste October 2' 1992, the Cornparry enterrd snto an unterrst rase su ap agreernentfor six months parung a fixed rate and recett sng afhaating rate. See notes tof:nancial statements u huch are an sntegralpart of these statements o i i e Inanoo Power conmpens NOTES TO FIN A N CI A L S TAT E M E N T S t Note 1 Summary of Significant Prtwswins for depreciatnin of gas unhty plant. as a percent-Accounting Policies age of the average depreciable cost wrre equivalent to Regulation The Company is subtect to regulat92n bv the 4 (N m 1092.1991 and 14h On December 21.1W2. the Ihanois Commerce Commnsion (ICC: and the Federal Company hied a pention with the ICC to lower the ps util. Energy Regulatory Commission (ITRC) and accordmgly. ity plans composne depirciatwin rate so 3 (m The prepares sts hnancial statements based upon the concepts proposed reducton is based on new esumates of remain-of Statement of hnancial Accountmg Stand .s No. 71 ing plant hfe as desek7 ped m a gas depreoation study Accounung for the Effects of Certam Types of Reaulation7 completed m 1992. The Company n requestmg that the (FAS 1 L wluch require that the ef fects of the ratemaking new gas composite deprecuuan rate becomes effecine process be remrded such effects pnnurily concern the .lanuary 1,1991 ume at which vanous nenn enter mio the determination of Amorti-ation of A.uclear i uct The Company leases + net inctnne in order to folknv the pnnaple of matchmg i nucicar fuel from 11hnois Power liuel C.ompany under a (osts and revenues The C.ompant s pnncipal accounting capital lease. Amoruzauon of nuclear fuel uncludmg pohues are-related 6nancing costs)is determined on a umt of produc. Utility />letut The cost of addmons to utihty plant and tion basis. see

• Note 3-Commitments and Contmgenoec

( replacements for reared propertv uruts n capitahred Cost for discussion of decommissionmg and Nuclear fuel mcludes labor. materuls and an alh> canon of general and disposal cost.s A prmnion for spent fuel disposal costs admmistranve (osts. plus an aHowance for funds used n clurged to fuel expense tused on kilowatFhours dunng mnstructum t AITDC) as desenhed Irlow Ma nic-generated. nant e and repairs. mcludmg replacement of mmor nems of Ikfermt Clinton Costs Accordmg to an ICC order in properrt are charged to numtenance expen3e as mcurred 19>r the Companv began defernng certain Clinton When depretuhle propert) units are retned the ongiru! post <onstructon operaung and 6nanong msts unal rates iost and domanthng charges. less sahage salue. are to reflect sut h costs became etfecuve ( Apnl 1989L After ciurgni to accumulated depn nation ssuance of the March 30.1989. ICC rate order. deft-tral of Allon ancefor I unds Usest During Construction Chnton post-construction costs reased and amoruz.ation of The ITi<C 1 mform $vstem of Atcounts dehnes AITDC as the prenously deferred post-wrcirucunn msts oser a 375 the net msts hn the penod of construcuon of borrowed year penod commenced. Ahhouga ash n not currently f unds used for mostruction purposes and a reasonable rate reahzed from these deferrals. P n calized under the rate-on other f unds when so used AITDC n capitahred at a makmg prwess oser the senke hie of Chnton tim > ugh rate th.n n related to the approumate wciphted aserace mcreased res enues resulung hom a higher rate base and j et of upital in IW2 lW1 and.1000. the pre-tax rate higher amortization expense. $ce -Note 2 - Chnton Power uscJ tor au construcuan protects was 'A. 8 2% and Stanon' for docussion of the 1992 Rate Order and 19M9 lu m re'pectneh Ahhough cash n nm currentiv reabied lute Order hom the ahowani e, n is teahied under the ratemakmg ( %MNI mM l'n mium M m'.i css os er the sen we hte of the related propertv through Expense Dixount. prenuum and expense associated na reerd rewnun resulung f rom a hwher rate base and W da w med mr & % d k hmher depreathon expenso lated nsues Losts related to refunded di re amoruzal /kprev mtion i or fitunual statement purposes. the <ner the ines of the related new debt osut

• ths. remam-(ompara deprn utes the sanous tlasses of deprecuble ing hfe of the old debt osue if no new debt n issued propent in ei their esunuted usef ul htes tw appinng mm.

,g7 g gg g posne rates on a str.ught-hne haso in IW2.1W1 and resenue for scruces prrnided but not vet bided to more 1m pros mons for deprecuniin u ere 2 h of the as eraer L h Wel) rUatch renenut s with expernes I billed revenut s n Jepres uNe tost for the Chnton Power stanon ichnroro represent the estimated amount customers wiH be billed for Psin mons f< t deprecunon for aH other riearn plant were senic e dehvered from the tmic meters were last read to the J6' $ % and 4 6 m IW2.1991 and LWR respectneh end of the accounting penod Operaung revenues mclude The 1092 puniuon for depreaaton reflects the unuposite related taxn that base been bi!!cd to customers m the years i rate granted in the 1992 rate order for other electra plant 1 i f M i t v d 1992,1991 and 1990 in the amount of $61 milhon. 561 mil-Preferwsf Diridenst Requirements Preferred divi-tion and 500 milhon. respeantly. The cost of fuel for the dend requirements reflected m the income statement are generation of elecmcity, purchased power and gas pur-recorded on the accrual basis and relate to the penod for chased for resale is reanvred from customers pursuant to which the dmdends are applicable. the eleone fuel adjustment and purchased gas adiustment rnents of Cash non s Cash and cash egmealents clauses. Acturdmgh, allowable energy costs that are to be include cash on hand and temporarv investments pur-passed on to customers in a subsequent accounting perv>d chased with an initial matunty of three months or less are deferred The recovery of costs deferred under these Capital lease obhgations not affectmg cash thw increased clauses is subject to rewew and apprtwal by the ICC. See by 513.7 milhon. 535.7 milhon and 523.9 milhon dunng Note 2 - Chnton Power 5tation" for discussion of the 198~ 1992,1991 and 1990, respectnch Income taxes and mter-i i d Umform Fuel Adjustment Clause Reconca.hation. est paid are as follows g ii Incogne Taxes The Company normahzes the incorne 3,,,,,,,,, fy,,,,,r,,,, tax effects of transacuons recognized for financial account-s i N#""' / d"#"* 3*

1. 3 8N ing purpose 3 in periods that differ from those for inctne r

tax purposes. The Company computes deferred income income tam s 2.5 s 2s? 5 20y taxe.s based on the statutory mcome tax rates in effect dur-iniemi m3 s191 2 s202.s jf mg the period that the timing differences onginate.

• uctude, gunds yperpav mmme saxes en 1991 and 19w> sn U

Defened income taxes are amortized to income as the the amount of sa i mmmn ami sn2 mutmn enprernetr !l undedvmg tmung ddferences reverse. I forrrard Contracts Reahzed and unreahzed gains and Pnncipal sources of timmg chfferences giving nse to losses on forward contracts designated and effectnr as o deferred tnes are as follows hedges of interest rate exposure are deferred and recog- + Ese of accelerated deprecianon and methods allowable ruzed as interest expense over the Ines of the hedged under tax laws in effen at the time. liabihues.

• Disallowed construction costs of Chnion not recognized financial Staternent Reclassification Certam i

as a cunrnt deducuan for ux purposes. reclassifications have been made to pnor years fmancial matemens to mnfonn to 6e W puntath . Dismanthng costs and repair allowances recognized as current deducuans for income tax purpoe Note 2 Clinton Power Station i I + Recogmuon of revenues and energy costs m dtfferent The uompany owns MW of Chnton, which was placed in penods for hnancui statement purposes than for mcome servnr in 1987 and represents approximately 19+c of the l tax purposes. Companys installed generanon capaaty. During 1992. Clinton provided 2& of the Company's total electnc gen-Alternatne Minimum Tax for the current year ttut is eranon and had the lowest fuel cost per megawatt-hour a!!owable to off set future regular mcome tax habihties generanon comp.tred to all other Company-ownni powrr Net operaung kr.ses available to reduce future tax stanons The investment in Chnton and its related deferred luh nes costs represented approximately 61% of the Company's total assets at December 31,1992. Chnton related costs rep-1 or msome us return purposes. net deprecuble utthty resented 3% of the Companyh total 1992 other operating, piant does not mdude the An.DC that is capiuhred for mamtenance and depreciat on expense:t Chntons equna-tmaru u! sutement purposes. lionever. nterest on con-lent availabihry was 62%. _,6% and 47% for 1992.1991 and strucnon costs is a:p:uhred for tn purposes m accordance 19w. respectively Chnton's equnalent w' abihty was u ith the Internal kes enue O de. lower in 1992 an 1990 due. m part to re. ,ing anc im ewment tn credits used to reduce federal mcome taxes mamtenance outagt. l iuse been defened and are being amortized to income Ownership of an operating nuclear generating unit exposes oser the bic of the properts that gar nse to the crechts, the Company to significant nsks mcludmg increased and j Federal and sute mcome tnes are alkicated between clunging regulatory, saferv and envmsnmental reqwrements. operanng and non-operanng income and expen.es. The and increases in the future mst of closmg and dismantling l tn effects relanng to non-operaung activmes are mduded the urut The Company expects to be allowed to contmue to m -O:her Income and Deductions - Miscellaneou-net " operate Chnton. hownrr. if any unforeseen or unexpened j detek)pnients would prevent the Company frora doing so, the Company could be matenally adversely affected. 6 ~ ? i Rate and Regulatory Matters reanery of these deferred costs and notnithstandmg the j Ilhnois Supreme Court dension m the CE pnweedmu which disallowed certain of CEs deferred post-construction 1992 Rate Order On February 11.1992, the ICC issued an order to the Corr lpanyt 1991 electric rate case appror-costs on the basis of facts the Company beheves to Iv l ing an increase m esectnc rates of 5100 trulbon c,r 9 % learly distinguishable. The Compant has appealed the i The Company had requested an ejectric rate mcrease of Reheanng Order to the Ilhnois Third Ihstrict Appellate h 5182.6 milhon or 16%. The order concluded that Chnton Court and conunues to beheve that its deferred Chnton is fully *used and useful.m pronding electric senice costs will ultimately be recoveird through tutore rates (i.e. ratepavers. The order also included in rate base a total of hMy than not t The Company does nor .i 5233 milhon. net of mcome taxcx of deferred Chnton post + expect a ruhng trom the AppellJte Court before the third i construcuan costs, tdeferred Chnton costs) consistent with quarter of 1993' the posinon taken by the ICC in the Companys two pnor elecinc rate orders. The ICC order did not include m rate The matter under discussion with the SEC staff invok es [ base $102 mt! bon of deferred Cimton equiry rerum a question of how to apply FA5 '1. That dutement w clear l recorded fromJanuary 19M through March 1989. This in its requirement that before a regulatorv awet is imtully amount had not previously been included in rate base in recorded, it must be probable of recovery m future rates m l anordance w ith a poor ICC order See 1989 Rate Order ~ an amount at least equal to the capitahied cost. The l for further discussion of this matter On March 10.1902. the Company made such assessment.and concluded that the - [ ICC granted reheanng and reconsideranon of the f ebruart deferred Chnton costs were probable of reanrry w ben i 11.1992. order to deterrmne the amount of deferred ther were origmally reargmzed as a regulatorv asset pur-Cimion costs n hich,should be mcluded in rates. in hght of suant to orders from the ICC. The question of reanrrabihtv a December 199111hnois Supreme Court dension m a has ansen as a result of the Reheanng Order subsequent to Commonwealth Edison <CE) proceedmg. That proceedmg such recogmt on. The SEC staff ts questiomng what the concerned. amonst other issues. the proper regulatorv treat-appropnate accountmg practice is in accountmg for FAS il i ment of CE s deferred nuclear plant post-construaion costs. regulatory assets subseg ant to their amual recogninon. l The CE Supreme Court deosion o discussed under 1989 Specihcally. should such assets be subiected to an impair-l ll l Rate Order below in filings in the ICC rehearmg. the ment assessment (and wnte-down) the same as for assets Compant stated that it should be allowed to include its for enterpnses in general. or does the assessment of proba-l enure balance of deherred Chnton costs in rates. includmg bihty of recostry that was required at the ume of imtial the po+19C deferred equity return. recognition conunue to be required throug:n ut the penod the aret is remgmzed. The Company beheres that the l On August..1992. the ICC hsued its order in the re. hear-assessment of potennal impairment is the same as for r ine case ikeheanng Order L The Reheanng Order derned assets for enterpnses m pencral and that such pracuce an s the Company reunery of certam deferred Chnton post-forms with generally accepted accounung pnnapies. As. c onstnn tion costs. mcluding all deierred depreaanon and r stated previously the Company beheses that the deferred t real esute tases and.2h.of the defened common equny Chnton costs will ultimately be recovered (i e. recovery is return The ICC xuon ordered a $21.,. mtlhon annual more likelv than not) and are then fore not pnduble of. redut to in m ( urrent electrn resenues and could result m loss. Hou ever. The Company acknowledges that its awew-i n nir-o:b tou!mg approxmuteh $290 mdhon. net of ment of the hkelihood of.reanery of the deferred Chnton nome uses The ICC denied the Compant s request to costs is lower as a resuh of the CE Supreme Court dension r reha the Reheanng Order The Company behetes that the and the Reheanng Order than w hen the regulatort awet s unclusion-m the Keheanne Order denving recoven la.s i was mitully recognized. such that the Company could no i M i erum detened Chnton pmt-undtrucuan wstcare con-longer condode that the deferred Chnton costs are proha-tun to Lm and to tue eudente on reheannu ble of recostrv m f uture rates as was requurd bv Ee 1 at a The sutt of the 1 S secunnes and Exchange Commission the ume of mitul remgn non afD he quesuoned the Compants account ng for o h Gm ny understands that the rmancul Accounung i detened Gm in msts u hich the ICC disallow ed in the I sundards lioard s < TAW l' merging twues Task i ort e kehe.mng order The Comlunt ongmath recorded the iEITT s n di consider the question of how to account for E% j anened t hnton costs u hen the costs were trhesed proha-Ne or reu nen through f uture rates based on poor ICC e13 subsequent to their muul recogmuon ) ,n. a j a:ueiv Nnse then the Company has conunued to carn me-c msts e a segulatarr awet for hnancial statement por l pm based upon subsequent 1CC rate orders and a i deusion from the Uhnon Appellate Court addrewmg the I i h h t N i i I i ) 4 1990. ksund that CJmion was 60%

• used and usefur hit Discussion of this quesuon is expected at the 13TT% next rate-makmg purposes, as compared to 2~.2% m the ICC-meetmg which is scheduled for March 16,1993. Should the March 19% order. but it did not allow the Compam to cani 4

EITT decide that a regulatory awet. once recorded. must a common equay rerum on the 39.3% of Chnion detee contmue to be subected to the same recoverabihty assess-mmed to be not 'used and useful.~ ment as was required at its initial rnognition. the Company wtH record a non< ash auounung loss. unless the On July 16.1990. the Company appealed the lune Iwo Company) awessment of the probabihty of recovery has order to the Ilhnois Appellate Court Third District. Other changed as a result of a favorable Appellate Court decison pames also appeakd On June 1( 1991. the Appe!! ate ) rendered pnor to the EITTs deterrmnabon. As previously other tlungs. reversed and remanded the dacowed. the wnte-off associated with the deferred ICC's *used and usefut detemunation on the ume grounds i Chnton com would be appnmmately 5200 mu.. hon, net of as m its i:ebruary 1991 opinion on the appeal of the March [ income taxes (approximately 52.65 per sharet 1989 rate order. as desenbed beh% On March 27,1992. { the libnois Supreme Court vacated the Appellate Court I If the Company were to record a loss of approximately decision and remanded it to the Appellate Court for further f 5200 milhon of deferred Clinton costs at March 31.1993. n considerauon as discussed under "19W Rate OrderJ below. j would result in an accumulated dehen tnegatne retamed On October 30,1992, the Appe!! ate Court, on a motion by rarnmgst A negauve retained carrungs balance could pre- [ clude the Company from declanng and paymg future the appellants in this case, includmg the Company. da-l dnidends under federal and state law The Company has missed the pendmg appeals of the June 1990 rate order. filed a peuuon with the ICC for authonty to pay the pre-19#9 Rate Order The March 30.1989. ICC rate order I ferred and common stock dnidends declard on October granted a one-ume increase of $60.5 rnilhon. or 69% that It 1992. for the four quarter of 1993, and to declare and became effective April 4.1989. The ICC order mcluded pay prefened and common stock dividends in the hrst and vanous disallowances of Chnton-related aists, due to second quarters of 19% even if the Companys balance of aHeged ' unreasonable' expenditures, as well as the retained earnings s negaine. so long as cenain other disaHowance of the equity return component of Chnton hnancial tests are met. ICC staff testimony recommends. post-construction cost deferrals hum January 1,19M, that such authonry be granted and also proposes an addi-through March 31,1989. This order also found approxi-nonal capitahzauon and cammgs test w htch would appir mately $2.3 bilhon C2.8Y of the reasonable Chnton e + on!) after retamed earnmgs were agam posmve and would to not h and useful, aW &nW a common qmy potennally hmit future dmdend mcreases. This proposal is I besng opposed 15 the Compam A hnal order is expected in i ebruary 1991, the Ilhnois Appe!! ate Court Third by wrch 31. JW3 On Ichruary 10. lW3 the Boani of ihrectors det Lired wmmon and pretened stoc k dmdenJs Distnct. reversed the poruon of the ICC order which had found 72 A of Chnton not 'used and usefulf holdmg that i for the hrst quarter of IW+ the ICC ened m usmg reserse margin and economic bene-Commencing Apnl 1.1992. the mcreased rees authonzed us em v the Appd.ne Coun found une not hs the iebruan 1W2 rate order were bemg billed and col-m pm-1Wi llhnois law which governs c e icued suhic(t to refund, pendmg the hnal outcome of the em e App ate Court temanded this pomon of the prot cedmgs on wheanng related to the August. lW2. tk E to Menh wNed amor what pone er order T he ICC s order reymnng that the mcreased rates be

• #d P'#'

bined rd mUeded suh ect to refund expm-d hv its own 19dti standards The Appellate Court also reversed the t temo on Oc hber 3. IW2 The total amount of resenues pomon t on w hich had demed the Company hined and muected subrect to refund for 1992 is approxi-an quny mum tappmem teh 5102 nuHinn) mmw nutch 5 en mihion i niess the August ~ order is changea on deferred Chnton post-construenon costs recorded after on appeal the tompam would be requned to retund an m L However. the Appellate Court did not u ouuomers ap;,rmmmeh % rmlison. mclothng mterest. osenutn the order w ch respect to the ICCh determination i l tor 1002 that a porbon of the cost of Chnton was " unreasonable 199tA Rafe Orater On June 6. IWn the ICC sssued an (ost-and should not be mduded in rate base. ) udet m the Compam s 19m elecinc rate case appt r.ing o annuahied mcwase m elecinc rates of approunutely M mdhiR fir ~ % The orde r a* amended on _lah 13 i l i 1 Followmg the alarch 1989 rate ordet the Company recorded ' reasonable cost' as of December 31.19C tb reserstn a ims m the hrst quaner of l'M49 of $3e mdhon. net of the portion of the Slarch 19N9 rate order which h.hl touk"d i inname use.s. or 5dl per share. Funber. as a result of the that deferred piwt-a mstruenon equitv finanong iost-fchruarv IW1 Appellate Coun deosion.11w Company recortled betw een lanuan 1.198h. and slarch 30.1989. recorded an addinonal loss in the founh quarter of 1990 of would not be allowed for ratemakmg purpows N cauw Sir milhon. net of income taxes. or 51E2 per share. The ther could not be capsuhred for hnancul wponmg pur-lowes recorJed in both 1990 and 19H9 reflect the do-poses. but sprofying that this reversal is not a dispNtne allowante of Chnton " unreasonable coste imm rate base. deternunanon of theamount of detened post <onstruaion j costs rean etable under the CE decision referred io alu n e: i The Company. the ICC and cenam other parnes appealed @ in all other respects danussmg each appellantv appeal. l ratious aspects of the february 1991 Appellate C.ourt deu. and W vacaung the Appellate C.oun s order w hk,h required i sion to the Ilhnois Supreme Court. The Companv appealeJ the Appellate Court s afhrmance of the ICC s ' unreasonable the Company to collect the increased rates authontal tw t the March 19H9 rate order subiert to refund. pending i cost. dnallowance. The ICC appealed the Appellate Court s used and useful' decidon but not the deternunatum nith

• P """

"PP re pect to the Companys recovert of an equity return on ^PP"""# """ M## " ' * " " " " ~ deferred Chnton post-construction costs Other panies h

1. ^PI "'" " " " ' #C"*P"""'"'""

N# " " '" i appealed both the used and usetup and the determd ind any poman of ik tmme mcmaw authonM h the ICC in the March 1989 rate order i Chnton post-constmaion equity return osues, as well as l other osues rai ed in their mitul appeah /Wl niforut fue/Jdjustment Clarrse Reconciliation On Februan 5. W92. the ICC issued an On December 10. JW1. the Ilhnon $upreme Coun nsued . mpan annu m ni Fud Musunent t its dernion regardmg appeak from a Slarch 1991 ICC order j uw m on sanonp n e ng Fnmng to tk tweke .[ in a CL rate pn weethng in that decision, the Ilknon P" "P "* l Supreme Coun held. among other thmgs, that the Ilhnon Appellaw Coun haJ erred m its lebruary IW1 deosion on mqmm aw to be conduced annually by the ICC to """U" '"* " ' " " the appeal of the ICC s Slarch IW4 rate order for !!bnon mm mug oFranon of I n unn Fuel Adtustment Pow er The s preme Coun said that the reserve margm and u emnomic benefits test could be apphed b the ICC m W pomon e un Me mum suth adual eo ponw pm n pun cd deternunme the extent to which a generaung sunon under tonstrucoon prnn to lanuary 1.19xh was used and use-The ichruan IW2 order states that carn mg costs of 5293 i tul' and in the context of the CE rate pmceedmg before it. rmlhon ncurred by the Companti nudear f uel affihate. ruled that ten.nn deferred costs associ.ned uith three of Dhnon Power fuel Company between August 19M and CEs nutlear plann were not recoserable. Apol 199 and added to the balance of nuclear fuel inven-un \\lan h T !W2. the Ilhnon supreme Coun denied the tory donng the same penod in accordance w ith a prenous penoons im icas e to appeal hied by the Company the ICC ICC order. were smprudent and that the balance of woner-and miers enon nom the } chroan JWI and, lune IW1 able nuc lear fuel cost should be reduced by that amount da nrons ot toe Appellate Court on the appeah from the 1.he Compam beheves the conclusion m the ICL. order i PM and I"u" ute orden. h osued tho mstruction with dan m W R PE & i i vespect to ex n penn< in-In the ewrt ne of thn Court

• Compant appealed the ICC order to the Ilhnois Appellate wen non authonn. the indument of the Appeliar Court.

Court. Tlurd Dotnet. the bnenny was concluded on n s oued and tius cause o remanded to Neptemhe: 9. PN2. and oul arguments in the case uew mnd 1 mino a a the Appchw Coun for turther proteedmgs consistent uith held m Nosember soth a dernion annapated m the hrst l ihnew A Protewonal People for the Pubht interest t quaner of Pm '!he Company does not be, ese n n pnnw n i hhnon Conunene Comnuwon < !wl t I m 111 a.d IS.. ahic..n defmed in Statement of I.manaal Accounnnu i Tht deemon m the 'ltusme-A Protemonal People for the Standards No 5. ~ Accountmg for Conungenues.' that it u ill - Puhh, Intere< use o the Supreme Court s dn on in m the lic reflulTed til rett frd any % rite-()ll fii thitlear f uel caTN ing M ra'e pm t nhng retened t1i pre u iush coso op en the ulunute renlunon < >f thm maner L.stimates < >f p >tentul h $w range inini zero !< i Vn nulln in, net of t m Nosen:oci 9. lW1 the f.omparn and all e4 the other mt f une lawv paroes to thn t ase filed a tomt monon with the Appellate Coun reyucsong enin of an onter 4 I) affinrung the ICC s l detruununon in the 31anh PN9 rate order, of Chntons ? l l y l ) ,r_ Accounting Matters The Company currently prepares Company and Soyland for certain losses imu!ving the its hnancial statements in accordance with FAS 71. Accord-operation of Cimton The insurance for physical damage is ingly the Company records vanous regulatory assets and structured through a level of pnmarv ccnrrage prtwided tw ~ { nuclear insurance pools and excess coverage from a combi-habihties. such as deferred Chnton costs. Management nation of nuclear insurance pools and an industrycntned beheves that the Company currently meets the entena for continued application of FAS 71, but will continue to enlu-mutualinsurance company The pnmary awerage prtnides hmits of $500 milhon and the excess etwerage currently l ate significant changes in the regulatorv and compeutive envuonment to assess the Company's (nvrall comphance prtwides linuts of 52 09 billion, for a total available an er-I age of $259 bilhon. Nuclear Regulatory Commission (NRC) with the cntena of FAS 71. regulations require that, in the event of an accident, when-ever the estimated costs of reactor stabilization and site Management is unable to predict the ultimate outcome of decontamination exceed $100 milhon, the insurance pro-the uncertainties discussed in tius note which could have creds must be dedicated. and used first, to retum the a material acherse effect on the Company's eamings and? reactor to. and maintain it in, a safe and stable condiuon a or fmancial position. Accordingly, no prtnision for anY and second, to decontaminate the reactor and reactor sta-liability or additional loss that may result upon resoluuon tion site in accordance with a plan apprtwed by the NRC. of these matters has been made m the accompanying The insurers then would indemnify for property damage financial statements. up to 52.27 billion, less any amounts used for stabilization l-and decontamination. The remaimng 5320 million would l Note 3 Commitments and Contingencies ccwer decommissioning costs in excess of funds already + Commitments Estimated capital expenditures in 1093 codected for decommissioning, as discussed later. In the 4 are 5296 milhon. which includes $158 milhon for electric event insurance hmits are not exhausted. the excess ctwer-j facihties (526 milhon for clean air compliancet 552 milhon age may also be applied to a poruon of the value of the for gas facihties. 533 milhon for nuclear fuel and $53 mil-undamaged property. hon for general plant. The hvegrar construction program The Company has elected to maintain extra expense-for 1993 through 1997 is esumated to be $1025 bdhcn insurance coverage for its ownership share of Chnton in addinon, the Company has substantial comnutments for through the industry owned mutual insurance company in the purchase of coat under long-term contracts Coal con-case of an extended accidental shutdown of Chnton.This tract commitments for 1993 through 1997 are esumated to insurance does not cover extra expense" costs until be 5756 milbon (excludmg contract escalation provisionst Chnton has been out of senice for 21 weeks. Thereafter, I Total coal purchases for 1992.1991 and 1990 were 51% the insurance covers 100% of the estimate of the plant's milhon. 5184 milhon and 5182 milhon, respectively The weekly ' extra expense" costs stated in the pohcy declara- { Company also has existing contracts with fwe pipchne tions for up to 52 weeks and 67% of the weekly costs for i supphers to pnwide natural gas in addinon to spot market up to the next 104 weeks. } purchases. Total natural gas purchased for 1492,1WI and Multiple major losses covered under the current properry low was 5184 mdhon. 5163 mdhon and 516~ milhon. damage and ' extra expense" insurance awerages imulving respectnely Cmtracted natural gas supply costs for 1993 Cimion or other stauons insured by the industry-owned are estunated to be 531 mdhon The Compants share of mutual insurance company could result in retrospedive nut lear tuel commitments for Chnton are approximatelv premium assessments of up to approximately $15 mdhon. 52n nulhon for uraruum concentrates through 199-In addition, whde the Company has no reason to anticipate 55 nulhon for comersion through 2001. 552 milhon for a senous nuclear incident at Chnton. if such an incident ennchment through Pm and 5138 milbm for fabncanon should occur. the claims for property damage. " extra through 2011 !! is anticipated that all of.aese costs will be expeme a>sts. and/or other costs and expenses could reuwerable under the Companvs electnc fuel and pur-materially exceed the limits of insurance awerage avadable. chased gas adiustment clauses [if found by the ICC to be prudendy mcurred All I'mted States nuclear power station operators are sub-iect 10 the Price Anderson Act. In accordance with that Act, Insumuce Ownership and operation of a nuclear gen, pubhc liabihty for a nuclear incident is currently hmited to craung urut subsect the Compant to sigruficant speoal 57M bilhon. Cowrage of the first 5200 milhon is pro-nsks The Company m.unnuns insurance on behalf of the vided by pnvate insurance. Excess crwerage is provided by [ retrospective premium assessments against each licensed i nuclear teat tot in the Uruted States. Currently, the habihty to these reactor operators. owners for such an assessment would be up to 566 milhon per incident. payable in annual installments of not more than 510 milhon. Once ewry fwe i s b ) years the Pnce-Anderson Ac1 provides for an inflationarv Februarc IW2. the ICC apprwed a formula that penmts adiustment to determme the maximum retrmpectnr pre-the Company to adiust rates annuaHy for chanen m ~ nuum assessments again<.t each hcensed nuclear reactor m decommnsionmg cost estimates The internal Resenue the United States Dus adiustment will be deterrmned and demce fus ruled that the payments to a tas quahhed become effectne in mid-1991 the current esumate for the nuclear decommissioning trust are deductible for mcome reused assessment is approximateh Sm milhon tax purposes m the current year for the years 1992.1991 and 1%1 the Company has contnbuted 51 milhon. 5M A Master Erket Pohn covers claims tw workers u ho milhon and 52._ milhon, respectneh: to external tax quah. j (laun boddy miurv. sic kness or disease as a result of imtul fied and non-tax quahn. d nuclear decummiwonmg trust . e radunon exposure occurnng on or af ter lanuarv L 10% t tunds T.he balance m these nuclear decommnsionmg trust The puhev has an aggregate hmn of $200 nu.lhon apph-ing funds at December 31.1992 and 1991 wcre 5123 milhon i to the commercial nuclear m. dustrv as a whole. As claims and Y 9 milhon. respectiveh: are paid under the pdin there n a prmwon for automauc reinstatement of poher hmits up to an addinonal 5200 mil-Under the Energy Pohcv Act signed into law on October r hon There is ako a proswon for retrospectnr assessment 2( 1992. the Company will be respormble for a portion of of additional premiums if clae exc eed f unds available in the mst to decontanunate and decommission the US the insurance compam 's reserve accounts to pas claims. Department of Energy's (DOE's) uranium ennchment facih-The maumum retn npectne premium assessment for thn t e3. !!ased on quannues purchased from the DOE tacibue.s conungenn is approximatch 512 milhon Any retrospee pnor to passage of the Act, each utihty wdl be assessed an ute premium assessments pert;uning to the Master hrker annual fee for a period of hheen years In accordance with Pohn or the Pnce-Anderson Act are sub ect to the owner-generally accepted accounting pnnciples. the Company slup mterest m Chnton between the Cornpany and Wland recorded its estmuted habihty of 511 milhon as of December 31.1992. Accordmg to the Act, these asses + other nsks to which the Company m.iy be subiect nuv ments are prudently incurred costs which should be not he insurabic or the amount of msurance carned as to recovered through the Company's rates as a cost of fuel. As the various nsks mas not he sufhoent to meet potential a result, this amount has been added to the nuclear tuel habshues and lowes. There h aho no assurance that the mventory on the Company;s balance sheet. Company w dl be ahic io mamtun msurance coverages at their inesent lesch ! nder those circunntances such losses Under the Suclear Este Policv Act of 1982. the DOI. n I or habihues uould b.ne a sen substantul adscrse eflect on responsible for the permanent storage and disposal of the Company s imancial condinon spent nuclear fuel The DOE currently charges one mdl Decomminionin.t: and A uclear 1 nel Disposal 60 0011 per net Ldowau-bour (one dollar per MWI!) gen-i crated and sold for future dnposal of spent fuel. The C m is l he ( ompam n responsible for its on nershin Company is recovering this amount through rates. share of the mst* of decommnsiumng Chnton and for spent noticar tuel dnpos.d co ts. On March IN 1992. the Environmental Matters K L entered an order in which the ICC exprewed mnt ern Clean Air Ad The Company began construction of that the Compam the ah. reasonable acnon to ensure that saubbers on two units at the Ibidwm Power Stanon t N n land mnmbutes as ou nership share of the c urrent or (Isaldw in)in the fall of 1991 to comply with the sultur diou am res ned esumme of demmnussioninn costv The order .du. 4.00 that u the compant bn omes hable for da om-ide requirements of the aad rain pnwnK)ns of the Clean Air nuwi. eng espernes annhutable 1o wland the ICL w d, Act. On August 31.1o92. the Company announced that it i had suspended construcuan of the two sembbers at then an ah w hether that expense shoo!J be the response Ib!dwm due to substanual legal and regulatorv uncertam-ui i s me ( ompam s stot kholden or as customers n urs. Induding questiorn that hase been raised about the I stema! det ommnso mng trusts as prescnhed under Nhn e un and aum'in/cd in the ICC. hac been estab. consututninahty of the libnois. scrubber legislation m hght hsued to au umatme runds for tue furure dnomnussiomnc of a U $ Supreme Court decmon rendered earber in 1992 <.t dnion luscJ on \\lt regulanons thm esuhibh a mme The C,ompany a explonng all of its ahernauves to comph' mam tundme snel the Compam s M N. share of with Phase I(beginnmnJanuary 1. PFM of the Clean Air i i Aa. includ ng mnonued construmon or scruhhers at n onu monme msts are esumated to oc appmumatei,, r r Ibidu in burmng coal w nh a knver sulfur content and the

• nu! hon i PW dollarsi The NI:C mimmum n based unhxauun of enussion allowancet A hnal decision concern-ook on th. sou of removing ra hoactive piant urut tures A sue specim studt to esumate the costs of dnmanthng.

remosal and dnpwl of Chnton has not been made At i 1)n ember 31.19t and IW1 the Company had recorded nahrba of 51/ 3 nulhon and 5 9 mdhon. respermely her a tu:me dnomnuwsorung of Chmon. In i L l 3-P 4 J l ing the Companyi compliance strategy is expected to be such costs fmm the compames' customers as current and prmided to the ICC by the second quaner of 1993. De legitimate business expenses These rate orders have been Company has expended approximately 535 milhon through appealed to the Ilhnois Appellate Coun Iw cenam inter-l 1992 on the scrubber project. senors who are olyectmg to the cost rectnenex In lanuan 1993, the Ilhnois Appellate Court. Third Distnct resersed % achieve comphance with the Phase 1 Un95) nitrogen-one of these orders and remanded a to the ICC for further oxide enussion reduction regtnrements of the aad rain consideration on the grounds that it was inconsistent with provisions of the Clean Air Act the Company is instalhng gg g g ggg low-rutrogen-oxide burners at some generatmg units. The j estunated capital cost for these bumers is 525 milhon On September 30,1992, the ICC issued a genene order Additional capital expenditures are antiapated pnor to addresstng the recoverabihry of costs incurred by utihties in 2000 to comply with the Phase 11 nitrogen-oxide require-cleaning up coal-tar deposits resultmg from the cual gasth-ments. as well as potential requirements to further reduc e cation process. The ICC order (uncluded that utilities will i mtmgen-oxide emissions in the $t. Inte metropohtan area. be allowed to collect their prudently incurred (nsts from The Company is also proceeding with installauon of con-customers over a five-year period with no recovery from i ttnuous emission monitonng sptems as required by the customers of carrying costs on the unreccwered balance, i f aad ram pnwisions of the Clean Air Act. The estimated On Nmember 10.1992, the ICC denied all applications for capital cost for these monitonng systems is 525 million. rehearing of the ICC order. includmg that of the Company 13ased on the ICCi ruling that carrvmg costs on unrecov- ) Gas Marnefacturing Sites The Company. through tts ered cleanup costs will not be alk>wed, the c.ompany has 1 q predecessor compaines. is idenu.hed on a State of Ilhnois gg 2 hst as the responsible party for potennal environmental Tinrd District. Other parties have also filed appeals of the L. impairment at 25 former manufactured gas plant snes The ICC order. The Company has reviewed the order to assess Company is mvesugaung each site to determine (I) the as n ncial impact and management does not expect that f type and' amount of residues present. (2) whether the it will have a matenal adverse effect on the Companys t residues constitute entmsnmental or health nsks and, if hnancial condinon or results of operations. In February present. the extent of those nsks, and (3) whether the 1993, the Company intends to file a petition with the ICC l Company lus any responsibihty for remedial actum to recover its remediation costsc j liccause of the unknown and un que charactensucs of l each sue isuch as amount and type of residues present. Ucctric and.11agnetic Delds The possibility that physical (haractenstics of the site and the entm>nmental exposure to electnc and magneuc fields emanating from - nskt and uncertam regulatort requirements. the Company power hnes, household apphances and other electric 4 is not able to determme its ulumate lubihty for the invesu-sources may resuh in adverse health effects has been a j i gation and remedunon of the 25 saes However. the subject of increased public, governmental and media anen-Company has esumated that the habihty is at a mmimum non. A considerable amount of scientihc research has been 52u milhon Therefore. in accordance with generally conducted on this topic without debrutive results. Research anepted accounung pnnapies. the Company has recorded is contmumg to resolve scientific uncertainties. It is too i a lubthr) of 526 milhon The Company is un ble to deter-soon to tell what. if any, impact these actions may have on nune at tlus time w hat portion of these costs. if any will be the Companyi fmancial condinon. chgible for reunerv from msurance carners. Irgal Proceedings and Itelated 51atters i The compam has also recorded a regulatory awet in the 1/auman Anit A settlement agreement was filed on amoum of sin mil bon. reflectmg marugement s expecta-ecem w m States htna Cmn fm non that it w all be aHoued to reamer such costs from its the Central Distnct of Ilhnois in a class action lawsuit hied cuvomers in future revulatory proceedmgs. The Company in Stay 1989 by tsu purchasers of the Company's common p.irtiopated m a genenc proceedmg conducted by the ICC purpomng to ad as mpumakes d a clan d sus l on ttus subiect This genenc proceed ng was imtrated to purchasers agamst the Company the Company's indepen-l i onsider whethec Ilhnois utihues should be allowed to m annuntants. and one current and three former othcers reaner from their customers the costs related to the reme-

• P.any The settlement agreement established an j

duuon and restoranon of the manufactured gas plant snes 511 million f und to pay plamuffs' legal expenses and to j and what recoserv mechanism should be used if the ICC compeme claw mem w ho bought the Companyi determmes that the costs are recoverable. In pnor rate common stock between Starch 31,196~. and April 20, orders two Ilhnois utthnes have been allowed renwerv of I 19% and still owned such stock on the lauer date. On i April 15.1992. final court approval of the settlement was granted and the case was dismissed. Final settlement checks (approximately 50 M per share) to quahfied class r members were issued in December 1992. 5 i 8 1 r Insurance will crnrr 5 milhon of the senlement; 54 mil-from Contmental llank. Na u hich support self msurance hon was paid bv the Company. but will not be passed pnwisions for wurkeri compensauon and general iubihn 4 through to customers Performance of the Company

• insurance. The Company pays a fee of o A and 0 i

ohhganons under the setdement agreement did not hee - respectncly. per annum on the unuscJ amount of creda matenal adverse effect on the Companvh financul condr Interest rates on unreimbursed draw mgs under the lenets non or results of operations of creda are at the Federal Funds rar-as defmed bv cach opeme had plus 1 A pa annum unal pad m tuH Other The Company seus electnc energv and natural gas to residennat mmmercul and industru! customers The Company also lus leners of crrdit m the total amount throughout Ilhnow At December 31.1992. 4h 2.% and of 580 ; mdhon from the 4tsubnhi liank, Inng Tenn 2 % of accounts receivable were from residential commer-Creda llank of Japan..%tsui Trust and Fuii 15ank that sup-cul and industnal customers. respectarly. The Company port 57 milhon of Polluuon Control Vanable Rate Debt mamtams reserves for potental creda losses and such The Comparn pays a fee of ni% per annum on the losses h.n e been withm management s expectations. unused amount of credn. Interest rato on unreimbursed drawmgs under the leuers of creda are at the federal The Company is mvolved in leg.d or admmistratis e pro-F.unds rate as detmeo. by each repecuve bank plus 0% (ecdmgs before vanous courts and agencies with respect per annum for up to 30 days, at the banks. pnme rate for to maners occumng in the ordmart course of busmess. 31 days through one year and at the banki pnme rate plus some of which irnohe substanual amounts Management 114 per annum for over one year behises that the fmal dispusinon of thee proceedmgs w di not he e a matenal adverse ef feet on the fmancial posnion in addnion. the Company has two short-term fmancmg or results of operations of the Company options to obt.un funds not to exceed 580 mdhon These fundmg opoons are available uith Premium Fundmg. Inc. Note 4 Lines of Credit and Short-Term Loans and Nicollet Fundmg Corp m the amount of 550 milhon The Company has total hnes of credit represented by bank and $30 milhon. respectnvly. There are no fees paid for mmnutments amountmg to 5203 mdhon. of w hich $200 these uncommitted facihties and f undmg is subret to avail-mdhon was unused at December 31.1W2 These bank abihty upon request. iommameno support the amount of commercial paper Ior the years 1992.1991 and 1900 the Company had outstandmg at an3 ome. hmned only bv the amount of short-term borrowings consisting of. bank loans and com-unused ban.h eummitments. and are avadable to support mercul paper outstandmg at vanous tin es as followv other company actnnies. At (M ember.4 /, IVaJ 1992 l'All 1990 t tidinom yt didiars exapt ratvYo ighked Nverage i thshons of thdlars. exopt rates) 1.mrs of trrdu lotA I sed A adable horrowmg* Rate 11alanic at Dccember 31 k r.ir revoh mg bank loans s 3.0 5 - $ 30 man en tment' 5240 L 52ml 5%6 % 11 Commerrtal paper s hl $ 10 ( ommers ul banks for short Irrm urighted astrage anterest terrow inga, 4 4 2H a 1% rate at ihember 31 1HN % l a, H H% ~] t e d $ 2i 64 s4 $200 Maiumum amount outstanding at am month rnd

• l N I.4 5'% 1 SARO l f4 < rn r ihmuch %pirmher 5 /99t> The ('ompantpars a faohn tra of u 24 per arunsm. rryaratru of usayr The snternt nue un Imrnnrmp suruber ihnc agerements ss at few Comparty 5 option

%scrage dash twrrtm sngs hawa uinm theirradmy hanks n lewm e rate, theor c ertituatr of outstandmg dunng the y rar s11 %) $3~ 3 $ 12 0 th Imrt rate the horma my ratr of kri banks un Ihr iemdon snter-4 righted average mtertwt h.nsk mar *ct or omsperfsne but fait durmg the star d". 60% HN% The ( ompam h.n leaers of i reda m the soul amount of s' I ma >n nom the Indosmal bank of Japan and 52 a mdhon The Cinnpany (a!cul.ned the w etehted merage interest rates bv dniding the interest expense dunng the penod for such borrowings by the merage short-icrm borrow mg* mda ated ahore. l 1 y, ) i i l l i = Nrt) 5 Frcilitias A;resm:nts Nrta 6 incam2 T:xas The Company and Soylar'd share ownen hip of Cimton, Income taxes included m the Statement-of Income consist -' I wnh the Company owrung 86.t% and Soyland owmng of the fdlowing components: ) cars E adut Derrmsw 31. 13h Soyland has an investment of 5450 million in the direct costs of placing Chnton m commercial operation-ofmums ofdouaro 1992 twt two The Company's ownership percentage of 86 8% is reflected in utilny plant (at original cost) and in accumulated depre-d m cianon on the balance sheet. Each owner is responsible for t.xpenses and Taxes 5 22.9 s 29.4 s 21.3 its share of nuclear fuel decommissioning, ongoing con" included m Other income and i I structon. financing and operaung and maintenance costs. Deduenons-heetiancom-net (.6) a4 pl The Company's share of Chnton operating expertses is Totalcurnra mes n9 M8 m-l included in the correspondmg operaung expenses on its Deterred tasch ncome statement. rw.oL4ax depreciation differencn-net 67 65 8 2.- The Company % net irwestment in Chnton. includmg Disait wed Chnson plant costs 10.6 10.- (.4) AFl?DC. land and related facilities at December 31,1992, O*'" ""*dd***1"* *"d i was approxmutelv 53.2 bilhon, net of recorded disalkmed other costs capitataed-net t 4.91 (3.3) 5H plant costs The Company's accumulated depreciation for d amton costs e i.si (1.s) (3 D Clinton was $%9 million at December 31,1992. Agreements Alternauve mirumum tax (31.41 (39.2) (22 5) between the Company and Sovland provide that the booL4ax revenue and expense j Company has control over mnstructum and operation of recogrution dirterencn ( 1.2) 32 (51) Chrnon Una 2 abandonment (1.5) the generanng station. that the parues share electncny gen. Gairvloss on reacquired debt 4.N

• 6

( 9) erated in proportica to their ownership mterests and that l the Company wdl have cert;un obhgauons to provide f replacement power to Sovland at certatn times if the Company Total deferred taan 5.9 45.3 10.4 ceases to operate or reduces output from Chnton. Deferred knvestment tax eredit-net ( 1.3) 01) (14.1) i Under the provisions of a Power Coordmanon Agreement Deserted invntment tax creda-4 PCA) between Soyland and the Company dated October 5. Disalkwed ainion plant costs (4 4) 19% as amended, the Company was requ: red to provide I '* * ""*****Cd" U# W II" N % land w nh 10% (L megawatts of electncal capacity f rom as food-fueled y 3 plants through 1992. 5uch Total mcume taxn s 9.5 s 40 s 21.6 ( tequ:rement w dl drop to e, m 1993 and 1999 and then mcrease to 12% m 1995 and each year thereaher unul the The reconcihanons ofincome tax expense to amounts com-agreement expires or is termmated. Tius is in addnion to puted by applymg the statutory tax rate to reported pretax the capacity Soriand recenes as an owner of Chnton The resuhs for the penod are set forth bek>w: Company is com;)ensated with capacity charges and for kars tuded ocremticr 31. energ) (ous and vanable operaung expenses. The Compant transmas energy for N>vland through the tumums y/d,warss 1992 1991 1990 Compans s transmission and subtranstmssion sy. stems-Income m cWnw at the Under pn amons of the PCA. $orland wdi share in capital federal statutory tax rate 6 hMA 5623 5(19 3) expendnutes includ ng those which are necessary to increascu necreasnun taxes .nhiese the emiwon reducDons set forth in the acid rain resutung frum-section of the Clean Air Act. See

• Note 3 - Commitments state taxes. net of federal eficct iI3 10 6 50 and Contmgencies for discussion of the Clean Air Act At Alkmance for funds used d"'*8'"""*"'*-

.ms time aber Dn ember 31 2W either the Company or bland can terminate the PCA by gning not less than 393 een years poor wotten notice io the other party The Amtstmeni tax creda. daatio.ed parn to w hom termmanon nonce has been given may des-omion plant costs (4 4) wn.ur an earher effectne date of terminanon which shall Inmtmeni tax creda (N 4) (9 6) (H D be not lew than twehe Inonths aher the date of receipt of Drpreoanon not normalued 9.4 13.4 10 0 Deterred omton costs 2.0 2.2 2.3 such notae other-nrt t 3.31 (2.9) (3 4) Total mcome taan 4 '9 A 5*40 6 21.6 i i I Yl [ l h r Combined federal and state effecuve income tax rates were At Decemher 31.1992 and 1991, currern obbgations under 39A%,40 A% and (37.9M for the years 1992,1991 and capital lease for nuclear fuel were 5387 milhon and $39B 1990. respenn ely milhon. respectnvly. At December 31.1992 and 1991. cur-rent obhganons for other propern under capital leases At Decemter 31.1992, the Comparn had approumately were 52 0 milhon and 54.8 rrulhon. respectnely t 5189 milhon of federal mcome tax net operating loss carn-forwards wailable to offset future taxable income. Over the next fnr )rars estimated payments under capital t Approximately 5145 milhon of these carryforwards expire leases are as follows: in 2005 and 544 mdhon expire m 2006 Willsons of d<dLm) The Company has been sutwect to the provmons of the

1. 5 5*

Ahernauve Mmimum Tax System ( AMT) since it became M4 41 9 effective in 198~. As a result. the Company has an alterna~ N2 ms uve minimum tax credit carrvforward at December 31. Im 22 4 1992, of approximately 599 mdhon. This credit can be car-m- 14 5 ned forward indefmnely to offset future regular mcome tax 1hereaher s.2 habihnes in excess of the tentauve mmtmum tat goa Im ininna 116 Investment tax credit canyforwards. unrecorded at Total 5143.2 December 31,1992. were approximately 518 milhon These credits are available to offset future income tax habihaes. Of these credits, approximately SH milhon expire in 2002. Note 8 Debt Retirement Provisions and approumately 510 milhon expire in 2003 The Finan-Certam supplemental indentures to the Mortgage and Deed cial Accounung. standards Board OASB) issued Statement of 1 rust require that the Company make annual deposits as of Fmancial Accounung Standards No.109. " Accounting for a sinking and property fund, in amounts not to exceed Income Taxes" O AS 10W. in February 1992. which will 55 mdhon m 1993. 56 milhon in 1994. 59 milhon in 1995, have an impact on the Companyh future fmancial state-58 million in 1996 and $11 milhon in 1997. These amounts ments. The Company plans to adopt IA$ 109 dunng the are subpect to reduction and histancally have generally hrst quaner of 1o93 and will recogmze a cumulante effect been met by pledgmg property idditions, as permmed by adtustment w hich n est mated to mcrease assets and the Mortgage and Deed of Trust. hahahties by approximately 5250 milhon. but is not expected to have a material effect on the Company s resuhs Dunng the five years after December 31,1992, the amounts of operaturns of debt matunng annually are as foDows Note 7 Capital Leases

• dl""/ d'##"*

llhnon Power Iocl Company t Fuel Company L which is cash Mnung 50% owned tw the Company. was formed m.lanua v 1941 hiaturhien f und Requirements Total for the purpose of leasmg nuclear fuel to the Company for m3 5 35o 55.2 5 40.2 Chnhin Lease payments are equal to the Fuel Company 3 iu94 non o 52 105.2 tost of fuel as consumed uncludmg related hnancmg anJ ms 5.2 5.2 admmntratne costs t Elhngs under the lease agreement im 6a 5.2 C 30 ' 35 " dunna IW2. FN1 and 1900 were se milhon. 554 mdhon and s33 mdhon respectady. indudmg hnancmg msts of Total 52nio 526 1 52331 % mdhon. 59 mdhon and 5' milhon. respectnelv The Compam o ohhgated to make subordmated loans to the T.hese amounts exclude capital lease requirements. See Fod Company at any ume the ohhganons of the Fuel -Note -Capital trasesJ The Company % First Mortgage Compam that are due and payable exceed the funds avail-Honds are secured by a hrst mortgage hen on substantially able to the f uel Company At December 31.1941. the all of the hxed property. franchises and nghts of the Companv had a note ret rivable from the i uci Company in Company with certam nunar excepuons expressiv pni-the annunt of 52 3 nulhon The Company has an obhga vided in the Mortgage and Deed of Trust The remainmg non for nuclear f uel dnposal costs of leased no(lear fuel halance of net bondable additions at December 31.1992, I see Sote 3-Commitments and Conungencies. for discuo was approximately 51 A bilhon w >n of decommnssonmg and nuclear fuel dnposal costs Nudear f uel lease payments a c mcluded with fuel for det-Inc plants on the Company's Statements of Income 1. case p.n ments for other propertv under capit;d leases are mtluded wah other operatmg egenses on the Companyt statements of Income I 41 fe M:nd:tsrily R2dasm:bla 2.049.9'5 shares of the Company's common stock on the N: tao a Preferred Stock open market. These shaRs 'an'htTd in a suspense account 1 In February 1901 the Company redeemed 540 milhon of under the Plans and are bemg distnbuted to the accuunts f 11.75% rrundatoniy redeemable senal preferred stock. In of participating emplovees as the kun o repan! by the g lebruary 1992, the Company redeemed 510 milhon of Trustee with funds contnbuted by the Company. together j 4 8 52% mandatonly redeenable serial preferred stock. In with dwidends on the shares acquired with the loan pn>- February 1493. the Company redeemed 510 milhon of ceeds. The Company hnanced the loan with funds ) 8 52% and 512 nulhon of 8m% mand 2tonly redeemable borrowed under its bank credit agreement.s l ) senal preferred stock. Dunng the fwe years aher December As of D.ecember 31. 1992. 30.204 shares have been a.k> i i

31. IW2. the amounts of mandatonly redeemable preferred cared to salaned empkwees and 32.304 shares alk>cated to 4

p p-suic k outstandmg uncluding the Februarv 1993 redempnonsi emplovees ccwered under the Collectwe Barcammg k i p required to be redeemed at stated calue are as follows: Agreement hrough th-mmching contnbutxm feature of i 6 m mangegney Under the mcentive compensation prmmns ofdonani q featureT107.9 o snares have been alkicattd to empkwees.

I s ;u During 1992, the Company mntributed 53.~ milhon to the tw3

{, ESOP and using the shares allocated method. recognized 541 milhon of expense. Interest incurred on the ESOP y,% n wr u debt was approximatelv S2.8 milbon in 1992 and dnidends used for debt seruce were approxinutely 51h milhon. w m, The Company hwan Automanc Reimestment and Stock ' Purchase Planbn 15Ephwee sim k ownership Plan for Note 10 Common Stock and Retained Earnings ' 7thTM at Decembd 31,199.'. 370.230 and 29.115 shares. The c.ompany has an incentu e NwW P' ' ' To " for respectwely, of common stock were designa:cd for ,--,.' salaned er@ wers. The Company s matchmg mntnbunon nsuance. In September 1990, the Company assumed the is used to purthase common stock. Under thn Plan. _.,, m.. responGibrv for admmistenng both of these plans and the shares of common stock were designated for issuance at plans were also amended to allow purchases of shares on 4 Det ember 31. 1092. the open market. as n eil as purchases of new issue shares The Company has an incentn e Nwmes Plan for EmplonTs directly from the Company. C'oscred 1:nder a Collectwe Barc m sm At In 1992, the Board adopted a Long-Term incenove Tietember 31. lou n9.lb sh.m s of simk were designated Compensation Plan t the Plani for ofhcers or empkwee f,ir nsuance. Lliectne.lanuary 1.1991. the Companv4 members of the Board, but excludmg directors w ho are not rnathing contnbunon was extended to include the emplov-officers or empkwees The types of awards that may be ees (overed under a L..,ouectwe Bargainmg Agreement gramed under the Plan are restricted stock, mcentwe stock in October 1000. the Board of Dnectors authon7ed amend opnons. non-quahned stock options stock appreciation /- " ' " - Plans to nghts. dwidend equivalents and other stoc k-based awards. ments to the compand tnlm proude for 14,Weca.quon of an Employee stod The Plan pnwides that any one or more types of awards ow nership Piar@QPleangement This arrangement may be granted for up to IRWiOO shares of the Company's mtludes an mtentne compensation feature which o ned to common stock. OnJune li.1992. non-quahfied stock emph n ee as hies ement of speuhed perturnunte goak options totahng 62.0u0 shares were granted at a pnce of I nder thn arrangement. the Compam. pursuant to authn 529 per share. These stock options are not exercisable n7 anon granted bs the ICC. in.lanuart 100). loaned untd 19% W mdhiin to ne buure of the Plans w ho used the 1. an Changes m common stock dunng 1992.1991 and 1990 pn n ceds phn interest on the laan proceeds to pun base-were as followv tW 1491 1990 sharts AmouM* sharrs Amount

• shares Amount
• n of sear M64 4M r
• > l. 4h b

'S bd93* $1 A24 b

• t %H.263 51.423.2 ItEnt e. t Automaut Remvestment and stoci Purthase Plan

% 6u" .9 LsOP 11.15? .2 Intrnuvr 5anngs Plans l'.910 3 balance entl ot scar Nh43 97 s 1.4 h.b N NL99 SI A24 6

• tM39T SI A24 6 Mrt/ huns of doll.m s:

t The prtwisions of supplemental Indentures to the 1991 and 1990 was calculated usmg measurenwnt dates of Companv s General Mortgage Indenture and Deed of Trust December 31.1991,1990 and 1989. respectn ely. a discount contam certam restnctions with respect to the declaranon rate of M% for 1491 W for 1W1 and 8% for 10% a rate and pavment of dividends The Company was not hmned of merease of future compensanon levels of 5% for 1992 by any of these restncuons at December 31.1992. Under and 6% for 1991 and 1990. and a return on assets of W for the Restated Arucles of incorporanon. common stock dm-1992. 9% for 1991 and 9% for 1990. The unrecognized dends are sub ect to the preferennal nghts of the holders of net asset at transinon and pnor service costs are amortized i preferred and preference stock. on a straight-hne basis <ner the average remaming seruce penod of emplovees w ho are expected to receive benehts Note 11 Pension and Other Benefit Costs under tir plan. The Company made a cash contnbution of The Company has denned benent pension plans c(wertng 53 milhon dunng 1992. however. the Company did not all offwers and employees. lienents are based on years of make any cash contributions dunng 1991 and 1990 for the serw(e and the employee's earrungs. The Company's fund-pension plan due to sts overfunded status ing pohcy is to contnbute annually at least the minimum amount requized by government fundmg standards, but in December 1990. FASB tssued $tatement of Fmancial not more than can be deducted for federal mcome tax Accountmg Standeds N.o.106. i_mpkwers' Accounting for Postreurement lienents Other Than Pensions.* (FAS 106). P"TP"" which requires the recogmtion of postretirement t nents Pension costs. a pornon of which have been capitahzed, for for current and reured emplovees. including health and 1992.1991 and 1990 mcluded the followmg components: welfare benents. on an accrual basis. In 1992, approxi-Sears i ndedIkurmber 31, p. pany provides heahh care and hfe insurance benents to certain r im/mns opstaru tw2 iwi Iw" reared employees, includmg their eligible dependents, sen a e cost on benenn earned who attam specahed ages and years of service under the dunng ine year s 9a 5 81 s 8o terms of the denned bencht plans. In 1991 and pnor years, interru cow on pnnerica twnerit the cost of such benents was recogruzed as claims were nbhanon 18.3 I~ 2 isI paid. The Company adopted FAS 100 as of January 1.1992. Return on pian asseis Wu.9 ) O' 5 i IL Postretirement ben'ents. a portion of which have been sei amormanon and deterral a sm ns o n.o capitahird. for 1992 included the followmg components: Ltal penwm t ost (twnrno

• > l.M 5(

") s C 1) { tiilhonwfdollars} }earindedik ccmber 31.1992 The estmiated funded status of the plans at December $1. semcc cost on benefits carned 1992 and 1091. usmg measwement dates of 5eptember 30. durmg the sm 5 2A 1092 and lwl. dncount rates of H.2% and MN. respec-I"*""* '"*' "" P""#Cd * "C" In ch. and a 7, e rate of arcrease of future compensanon obhption 5.M les els w ere as h ill'"' Amonuanon of unrecognued ) cars E nded Ikurmber 31.

3. 4 l

transioon obhganon ) Total pmtreurement benrht c os 511 A i i thiltum of edlars > lU42 lwl 4(iuanal ptrv nt salur of { v aaorntniowuponn s 2nu 5 iss 2 The net penodic posireurement beneht cost m the table above includes amortizauon of the prenousiv unrecog-Au umui.nrJ benent onhunon 2ns.4 5 iNo 5 mied accumulated postrenrement beneht obhgation. N wo usornria onhanon san si su22 m which was %6 a milhon as ofJanuary 1.1991 over twenty pun awen ai ter uiue an.2 254 2 sears on a straight-hne basts. Adoption of FAS 106 did not N ew or a w a over proiri ta d have a material adverse effect on earnmgs because the twneni ohnpoon 21.~ 31.4 February 19921CC rate order lkmed the Company to 1 namormed net om 4ito <11 m re uwer these costs timiugh its electnc rate.s. I nrn oenard not awr ai tranunun f4~. 4 : (sl s) enor en a e t o n Ja o 21 4 The Company has estabbshed two separate trusts for its col-Au ruro ponen row mciuard in lectneh bargamed retsrees and non-collecurely bargained xiounn pas ahir s i x 4, s im reinees to f und ret ree health care and hfe insurance benehts. The Company s fundmg pohcy is to contribute The plan asset consst pnmaniv of common slot ks fned annually an amount at least equal to the resenues collected i for the amount of postreurement beneht costs alknved m mu.mc secunnes cash equivalents and real estate. The annanal present vahie of ammulated plan benefus at rates The rian assets consist of cash at December 31,1992. j lanuars 1. JW2 and 1991, were $181 nn!!nin and 5169 mil-j hon n+pectneh; mcludmg vested benents of 51HO rnilhon I and sloh nulhon respectneh The pension cost for 1991 1 43 s I The estimated funded status of the plans at December 31. benefits. The trend rates for pre-65 benehts decrease. 1992 usmg a measurement date of December 31.1992 and through 2004 to an ultimate rate of 6% for 2004 and suNe. a weighted average discraunt rate of 8 2%. urre as follows. quent tears. The trend rate for postM benehts v.1.% for "U '*

• O ' 'U'* U
• N i"*~' 5" # U " WN Y

oralwm ofdottars) Year Ended December.I1. i99: assumed health care cost trend rates increases the sernce Mcumutated pentrete ment and mierest cost from 58.2 milhon to 59.2 milhon and the bench obhganon accumulated postretirement benent obhgatico from Stb Retarres 5(32.5) miDon to QmWron. Other funy chgibic parucipants (15.01 other acuve plan paructpants ( 31.2) in Nos ember 1992 the I ASB issued Statement of !~tnancial ~ ( H.?! Accounting $tandards No 112. *Empkwers' Accounting for f Total benefit obbganon Postemployment Benehts? IFAS 112). which requires the. i salan awets at fair value 4.* recogmtion of postempkwment benents. meluding health. f unded status ( 4.3) rnrecogrured transioon obhgauon 63.1 and welfare benents, pnuled to former or inactne cmplovees on an accrual basis. The Company currently ( bnrecogmred net luu 9.* recogni2es the cost of sich benehts as the y are paid. Accrued prestreturment beneht cost mcluded in accounts papble $ (l.5) Adoption of FAS 112 is mandatory for fiscal years beginning l aher Decemler 15,1993. The Company anticipates adopt-i ing this accounting standard in 19% hourver. it does not i I The assumed 1993 health care cost trend rates used to expect adoption to have a matenal adverse effect on the measure the expected cost of benents covered by the plans Company's resuhs of operations. l are UN for the pre-65 benefits and 1% for post-65 4 Note 12 Segments of Business The Company is a pubbc utihty engaged in the generation, transmissi distnbution and sale of ekctnc energy, and the distnbution. transportation and sale of natural gas. l t tralsons of dedlars) i I992 1991 1990 Total Total Tusar p Dectnc Gas Campans Dectnc Gas Company Dertnc Gas Compant i Operanon miocmanon-Oprraung rrunues $ 1,190.9 52kM.6 51.4"9.5 S t.l H(t 52HH 2 51#49 51.158 4. 5411.1 51 A69.5 l Operdtmg rapcoset ricluding prm mon for mrome tasts and deterrrd Chnson costs H313 - 261.? 1.O'Mt0 MAR 1 2%H 5 1.096 6 HM9 3 26" 4 1.156 ? I jkfrrrrd Chitton LDst5 11.2 1I.2 11.2 11.2 34.6 I46 f twaas operatmp mmrnr 348.4 23.9 32.3 33? 4 29 ? ' 307.8 254 5 44? 298.2 Albmantt for funds uwd dunng 4 onstruction t AlYDCs 4.5 or 5.2 26 03 29-2.9 03 3.2 L (135 6) I Inullowed Chnson plant tosts (135 6) i r Iw tan operaung moome. ancludmg AFI DC a and disallowed Chnson plant costs S 452.9 42 e.6 3**.$ 5 4400 5300 3*U O 5 121 H 5 440 165.8 { Othrt imrome) and deducuan* .2 58 (2.9) interest (haryrs ibm.6 IMO 9 200.9 1*rovmon for income ta xes '9.6 "40 46 3 o Net mmmr thiwi 4 122.8 '5 1093 5 ("H.5) a o 4 ( H hrt mtormanon-1 1seprertanon 4 1433 s 2h0 4 1613 5 1 %' 3 $ 19 5 5 l*6 H 5 154." $ Ik.1 5 172.8 Capital expenditures 5 203.I $ 413 5 244.4 5 lib 3 5 249 5 141.2 5 106.0 5 246 5 1306 Insrstment mforman m-idennhable awrte 44.642.9 53 %.4 $ 4 3' M.3 54.P2 5429 0 $4.9Wt2 5 [ 613 % $369.2 54 S82.7 Nonutihrt plant and other mvestrnents 9.3 84 IH $ Aerts utihred for overall Compant operauons 44.1 357.2 344.3 Total asset

• 55,331.7 5 5.2 =1 M S g,345.5

= t rairr plant nsairarjuet and acquasssson adjustment riess acc umsaared depreaatson and amorrt.raturm). matenats and su ptsen. deferrrd ainton r cusu andpngmsd and dejened energy cuts 2 i r 44 t 1 Nsta 13 Fin:nci:1 in:ttrumxnts hres Payable The cam-ing amount of notes pacable The following methods and assumptions were used to est' approximates fair value due to the short matunty of these mate the fair value of each class of financial instrument instruments hsted in the table telow j

• '#""""I'""'

Nuclear Decennntissioning Trust f unds The fant values of debt secunnes held ty the Nuclear Decomnm- '* *"*" H N 02rrung value D.unmed f air s alue sunung Trust were obtamed from a bmker. Fair values were Nuclear Decommimonmg estimated bv calculating market prenuums or discounts to Trusiiund$ 5 12 3 5 13.2 face value for each issue based on benchmark interest cah and Cash Equnalents 8-g- M*"d " " *d* *" rates The benchmark used is the rate for simdar e, sues of Pretened $tcxi 100 0 1ml6 i secunties and m.cludes adiustments for unanons in indus. L'nR Term Det" 19 t 2.0 so 9 try, debt matunty. credit raungs and tradmg acurity snic, u.ar,ic

y.,

33 Gish cand Casb Equit alents The carrving amount of cash and cash equivalents appruumates fatt value due to in June 1992, the Company entered into forward contracts the short matunty of these instruments providmg for the total sale of 5119 8 million of tn-exempt .tlandatori/r Redeensable Serial Pre /i rrvd Atock debt in 1994 and 1995, which will refund 535h milhon of { und 1.ong-Nrin Debt The fair values of mandaronlv current 11% senes first mortgage bonds due 2014 and redeemable prcierred stoc k and long-term debt were ' 58+1 milhon of 10%% senes first mortgage txinds due 2015 obtamed from a bruker Fair values were esumated h. c.al-with the same principal amount hrst mortgage bonds due culanng market premiums or discounts to fate value for 20h at.3% and .4%. respectively. Smce these forward each issue based on benchmark interest rates The bench-contracts are for delayed delivery of Illinois Power first mask used is either the rate for current t,S Treasur. issues mangage bonds at the 3 ields noted. the Company is or the rate for similar corporate issues, and includes adiust-exposed to nsks ariung i.mm the possible nonperformance ments for vananons in industry. debt matunty. credit raungs of coumerpames m the tenns of the contracts credit nsk) and tradmg actiutt and from changes in secunties values and interest rates d me M of -[ 1 orn ard Contracts Tir estimated fair values (included the forward contracts bv obtaining letters of credit which. in m long term debt i of lornard contracts related to future the event that the munterparties to the (untracts are unable ~ retunthng anJ sale of hing-icrm debt were based on con-to perform accordmg to the contract terms. guarantee that sideranon of current municipal bond mterest rates. the spot the Company w ill be in substantially the same position as if mxket value of ymilar bonds the forward dehvery dates of perform: ve of the contracts had occuard. There is no each bond senes and the legal and hnancui structure of sigmficant incentration of credit risk with individual 7 the forward contracts counterparnes or groups of counterpart es to the contracts. f I t b f i f i -+ I i t- 1 l N:ta 14 Cuirtirly F6n nci:1 Int:rm:ti:n en:1 Camm:n Ctsck D:ta (Unruditsd) i 9 Afflisons of dolkers est rpt(n*t tumonon sbarr announts t f urst truaner set vrut guarser 7 turd Lsuaner fourth Louaner i l 1992 14792 1992 1992 Olvranng revenon 53H31 5335A $394.9 53653 s'.0 61.9 10'2 60.0 Operaong inctnne lh Net inunne 14.9 20.6 6 5.~ 20.9 "6 13.4 SMA 13." l Net mmrne applaable to anununi stoc k th Lirnmgs per osmmeto sture 5 .10 5 .1H 5.-~ 5 .18 Cominon sitxk prwes and divhicods l ] lhgh 5 25 $ 23'. 5 25'- 5 22k low 20'. 5 2 0 '<. 5 19% $ 20% Dmdends dedated .20 .20 .20 .80 1Irst Quarter %sond Quarter lhtnf Quarter fourth Quarter !991 1Wi I99) tuvi l Operating resenues $ 3" O 5 32H 0 $ e03 0 $ 3his O Opelanng irn ome %2 (4 ) ]O'A

t. g.1 Net innime H9

]() 3 63 9 l' 2 Net unome ippla ahic to < ornnuin 5.tock O." l) 6 %63 ()_H Lunings per ttemmon share 5 01 s .1; s 7 .13 Oininp rn stot k prh es and do idends lhgh $ 184 s 20 s 23:, s 24 lam 5 1%b 5 186 5 181 5 20i Dn idends detlired 5 - 5 3 $ 30 Quarterly rarntrrgs per iurnmon sharr arr based on urtyhted attrage numin r sof sbarrs outstandsng dunrtg Itw quarter and the surn of the qtsarters ruay not equalanot*Ja!varntngs per e ornunon shart. the t varinson sin n k ss hsted ort the \\ru lork Stot k 1 tr hange and the.11sdu vst \\l<n k is t hartyr.11w stock foru as abor r uvr the prit v.s nported on rise 4 ontposste lajn' There tirev t'.Nf)' trgesterrd holders ofitornant>n s1<& at}antoary 1J.1*f)4 The liuarsiauf L)tertitors twated on a k lohrt 9 l'f91 to resume jurung a itartmon slot k du sdend On ik^talarr it !992. Ifn* lleurtl ref ihrrtfors detletnvlfour quarterir quen-man t5 2fsper sharv for von b quarterp anct preferrrd slot k dn udends for 1493 l l .ps. l l a f { tiltouns Pou er Crompany SELECTED FIN A N CI A L DATA

• 1992 1491 14Wh IVM9 198R 198~

14M.? l Operating revenues t I Dectnc 51.11?.9 51.101.2 51.0846 5 9880 5 949.4 5 910 8 5 685; Flectnc mterchange ~3.0 85 ; '38 81.2 1097 92.-e 510 j Gas 288.6 2M2 311.1 32+b 33t8 308 - ! 421.2 l lotal operatmg retenues $ 1.4*9A 51 # 4.9 51469; 51.393 8 51.W4 4 51.311.9 ' 51.164 3 Net income (loss) before { accounting change 5 122.1 5 109 3 5 ( ~8.51 5 (288 41 5 15i4 5 289 6: 5 1;64 Net mcome (kiss) after i I accounting c hange 5 122.1 5 109.3 5 (~8.5 ) 5 (2M8S 5 1891 5 2816i 5 1%4 Effectne income tax rare 39.4% 40.4% ( 3'.9 N 207N 29 4 % 19.1% ' 34.2% t Net income (h>ss) apphcable l j to common sto( k before i accountmg (hange 5 93.2 5 ~8.4 5 (115 3> 5 (325.8) 5 1 1 ~.9 5 2519 l 5 136.5 Set inmme (loss) apphcable to common stock af ter accountmg (hange 93.2 5 ~8 4 5 (11;.3) 5 (325 8) 5 151.9 5 251 9i 5 1363 i 1:arnmgs dowi per emnmon share i 4 before a< counting change 5 1.23 5 1 04 5 (1 ;3) 5 (.e.34 ) 5 1 66 5 375: 5 3 04 Larmngs (loss) per common share after accounung change 5 1.23 5 1 04 5 ( 1.53) 5 R3 4) 5 2 14 5 375 5 3.04 i l Cash dnidends declared per t (ommon share 5 1.40 .40 5 66 5 2 64 5 2 64 5 2AH j Dnadend p.nuut rano (declart-d) 112.9 % 38a% N'A 12(3 % 70.9% } 83.5 % lbok value per common share $ 18.M1 5 14.2; 5 1870 5 20 ;6 5 2i80 5 26.85 j 5 21.63 Pnte range of common shares Rgh 5 2W 5 2(- 5 191 5 21 '. 5 2W 5 31% l 5 231. 1.on 5 199. 5 151 5 120 5 13 % 5 16; 5 21t.j 5 18'/,. Weighted acerage number of common shares out-tandmg dunng the j penod i thous mdu 5.644 i6+# ';.614 ~i052 0,900 6' 251 ' 44.840 Total awets" $ 5.33 L' 5%2 18 5 ;.3ns 5; 6n9.0 50.053 1 Si9227 ; 51189 5 } Lapaahranon Common stm L equm $ 1. 4 2 2.- 51 a 561 51.41+9 51.;;3 8 51.89i6 $1.841a l 51.013 4 Prefencd sto(k 303.1 303 1 308 9 315 2 315.2 315.2 l 215.2 \\t.md.nonh redeemable pretened stot k 100.0 I10 0 140 0 160 0 160 0 160.0 ; 36.0 I t eracrm dcht" 2.01 2.1511 2a9Ku 2.3.#' O 2.330 0 2.2 4 0 ~ 1.26+0 lital capitahrnion" s3.8e4.2 40223 s (062 ~ $t4 o0 S('Of H 54 9)O 6! $2.;28 6 l.mhedded t t WI of i,ing. term debt M.3% N '"i 93% 94'i 93% 9.3% : 9.4% Retamed carnmus 5 41.0 5 ~;8 5 1.2 5 144 1 5 51'.9 5 554 8 ; 5 220.3 Lapnal expendames s 244.4 5 141.2 5 130 6 5 90.8 5 115.5 5 237.O j $ 412.8 Lash Hou s f rom operanons 5 34.5 5 3131 5 252h 5 2~21 5 223.2 5 251.3 5 233.3 M 1'DC as a percent of earmngs appht able to mmmon simk 5.6% 3% NA NA 40 3% 80.3% 5' 4% i lh1 urn on.netage t ommun equi!) 63%

V

(~ 8 h ( 1 h.9 N NIN 1(3%l 146% i Ratio of carnmes to hsed (harges*" 2.02 1 N; ~o (0 921 1 83 2 51 3 04

• tidinons of dallars ext ept eartungs closs)f>er comanon sharr tash du sdends sletlawdper connmort share henok rulueper tumrmm share I

andprn e range of common sbarrs

• 'Restatedfor the vpect of tajntalt:vd nutlearfuellease t
• *
• Doc ratto of earntngs toJtxed iharges reprrsents the number of times that canungs beforr encome taxes andJLted charge 5 caterlie jard iharges Iarrangs used en the calculatuan of the alune ratons unlude allou unceforfunds used durtng construction ana deferwd 7

Citntonfmancing ussts and arr before tlw deduction out incenne ta.ws am.fLWd charges thal GNclude !nterrst on long IFYm debl. rVlated l amorts: anon of debt descount.prrmsum arul exfense. ottwr Interest and thatjuortion of rent exfense that is estunated to be reprewnlattse y of the unterrst comfsonent Larntngs atuitableforjurd charges extludes the cumulattre efect as offanuary 1. I9HM. of accruing unbilled rrwnues Dw ratin of ranstngs tofixed chargesfor 19Wland 19M9 0f u ~O and 40 $2). rrspecturrin trutuales that earntngs urre inade-quate tu <ogvr fard a barges Dw dollar amount ofIbe cutvrage deftc tencyfor J 990 and iVM9 seas apfmstemately 568 millton and $3?5 milhon. rrstntturly Ltcludmg the loss on dtsallourdplant costs of $13~ mdhon, net of encome laxes recordeden thejuurth quarter of i 14W1. the rarm of cantings toJLYed Charges u vuld hatr horn 141for i99a Lntludung Ilw loss em dssaltourdplant costs of $346 million. net of mcome taxes. reamled an the strst quarter of 1$1H9. the ratto of varmngs Infixed t harges u vuld hate been 1.3 ifor !989 47 l f e 5 filanuns Power contpany 1 _ SELECTED STATIS TIC S b 192 1991 1990 19M9 19NM 198~ 19M2 Liectric sales in KWil (Mdhons) Residenual 4.13M 4.620 4.223 4.283 4.411 4.241 3.~~3 Commeraal 3.055 3.111 2.981 2.902 2.938 2.862 2.4'9 Industnal H.083 7.642 ' 51 7.653 .415 ' 323 6.218 Other 306 339 328 333 338 322 304 Sales-ultimate consumers 15.582 15.~12 15.M3 15.231 15.102

14. 48 127~4 Rural cooperatwes. muniapal and other utihties 2.96'

3. 20 3.374 3.913 5.529 4.2~0 3 199 Total ciectnc sales 18.549 19.432 18.65-19.144 20.631 19.01k 15.9'3 Electric Hevenues ( Mdhonsi Residential 435 5

44' S 411 5 373 5 373 5 352, 5 232 Commercial 263 251 246 225 215 209 151 Industrial 381 355 373 339 312 325 243 Other 25 25 24 22 21 20 14 Revenues-ulumate consumers 1.104 1.0 H 1.054 959 921 906. 640 I i i Rural cooperatives. mumapal and l i other utiboes '9 102 99 104 134 116 ! 98 Ecellaneous 8 6 6 5 (19)i 5 Total electnc revenues A 1.191 5 1.18' 5 1.159 5 1.009 5 1MO 5 1.003 5 743 6as sales in Therms i Muonsi Hesidennal 339 339 322 39 36~ 332 ; 418 } Commerual 13M 133 134 149 148 13' i 186 Industrul 136 48 99 114 154 96 403 sales-olumate consumers 613 50 555 642 669 565 1.007 bnsport.:non of ( ustomer os ned gas 204 2;3 209 26; 255 3" ' 1 Total ;:as sold and transported H1~ 823 H24 9C 904 892, 1.007 I interdepartmental sales 12 8 1H 10 9 5l 1 htal e.n dehserexl H29 H) 842 91-915 H9-1.008 f Gas l(et erme% i Mdln ins i Feudentu! s 181 5 184 5 180 5 201 5 207 5 192 l 5 192 Commen ui 61 61 62 68 71 (m i i Industrul 3-31 42 46 48 34 ; 151 Salev uittmate (unsumers 29 26 284 31; 326 292, 420 i ~Iransportanon of customer 4ntned gas 9 10 11 13 15 i Imerdepartmental tevenues 1 2 3 3 2 1 1 h tchaneou-2 1 la (4) (6) 1 ! 1 I Total cas res erues 4 2H9 5 2% 5 311 5 32; 5 33; 5 309 5 421 5vstem peak denund 4 nause loadi in kw ithousandu 3.109 3.T2 3.394 3.24; 3.508 3.083* 3.025 1:rm peak demand a native loadi I m Lu (thousands > 2.925 3.108 3.1k0 3 009 3.0-~ 2.923* l 2,946 Net generaung capabihrt l l I m kw (thousands: 4.052 3 (AN 3.891 3.885 3.938 3.400 3.690 I Electnc customers iend of yead 549.391 505.421 560.045 548.738 5-e6.443 542,848 l 526,263 3 Gas customers t end ot ) ear) 386.261 -,01. 63 398.s91 386.960 385.336 384.091 ! 383.097 ) Emplovres (end of tear 1 4.624 4.514 4.402 4.242 4 663 4.616 I 3.993 %sstem jnwk andfrrm fnwk demandfor 19H~ did wat entur im tow surne lorsur 4 i i lit r ou n t. V.ar to t mnpa rt s STOCKHOLDER IN F 0 R M ATIO N 4 4 i Annual Meetisig ta i itwie.t e tiseir unt%trisent ni tiie (a ntp. ins The anntul nrenna of sin kh> > kien u di tv hekt at to a m I nder the PLm drudenik hom o mmiin arnt pictened on hdnesdas Apnl 14. 10"3.n the t.i unjum - he.n b nur slus t% nta he auti rnuth ah.i ai)lmed ti m.utl the purcluse i fers m south 2_th street I fee.nei !Wne us <d.N. Ixo. of IUini.is h mer a nnmon sb u k l.hn > ugh an opnonal c.sh Ic.aun. b it khoider nu3 aN purciu-c.nkhnonal 4ure-Aim A Lu hange L. t.is mg* of O U nnh in slot h M ltiH nH p.n 60% hn sket age kes.hanw lNif H th l't nici % (timmt ul.Hhl pf clCrical %D A k.He bsled t 10 l ilitsi nb Jre solitt*Cl hi hnH! ate *f h set li n'th in itse plin the Nm b1k % n k I klunue 'I.,ne C,ompam

• tununon pn,speer a-s!s A k b ah I hsled 4 3D t!)e Ddu c-i % n k I si lunge.I l se j

ottu ul %m %ik w n k IN hance w m! > el i. -IPC. htn the it uin.ne a st, n Lh. kler of seu erd and are interested m t e imjum s sti n L, are als., Inted m some new -super-pannip.ning m the Aub > math Ramestment and st.s L m itT K!cl ' lllI M I ' Purt lune PbW. ti ulkk t %l1.trelH ddet se!T h(% h it f ut tre ~ Inlot nutp 10 i Quarterh Itepon* to Nockholden in.m t non to inluce iost-but sni! pn n nie inhirnunon las Information desn eti hs ivut o x klu dden beennme the quanet enthnu libnor h met estmute tiut too peu ent < d the dn niend-iLin h 41. IM iWni us hiuei nil! nui! u-Vuanah p.ud to stot khi dder in lo"2.uc tu n uuhie.n dmJend Hep in t i w a k hiiklen b + iinh those.ti n Lh dda-in pic+ mu ime b it l'ederal tuo une 'las poip. e The company me e it u >u c.ould hLe to in en e the tut.nlet h rep ut hui m.nled all iegniered iommiin and pretened -te n Lholders a shd ne c teturn the t unerb Tep in reque.I oud erw I -ed I oun Iu'N m.lanuan !""3 shim mg da klends p.ud dunng u nh the ~l had Quann Repon to % n kh< JJer t< n the t he s e.u P.n t k ipana in t he Auton ut h Kamestment and l Pen.,d i nded sepicin!'et W 1902. pica ~c o inta i w n L Purchase PLm u hi s reunested t.bh dn niends or %ut h. dda sen n es nude i >ptional cash p.n mens b n -lures ilu. u ne pui-k iL!%cd k In The $ Ipen NLn kI1 u c5e Nbuted a )'iif h lt r N ik h stot kholder inquiric* in ounae.n tedera! !.isable mu tme the alb wahle -lure of 7 % Lh4 dJen desn ma.r stox e u ch lost a o den + n L am biokesaue tec.md t omnnwp ins mt uned to purcluse e c: t!!n.ncs.. Jn idenJ t on ks n.nne ilunees 4 % L t an-such sh.ucs,8 *Lned in the Plan pio pectus Nockholders W mi m uu. m,in t he \\ub nut n Leon estmen:.md w n L sin vokl onsuh n oh then ou n us ath hon lor lunher Pu n. h.~ PLm. n 4 a hn w.. nen n ut t < inus t W un h. dJet mh u nute in u nh ir-pal to tas t unsetpient e. 5 il Hig !!h'H i d i n e ! b 'Lil* l '? t h a j ni le n l 1 p 11; N H es t - t I t ' l '.I *,6 l !!il ( \\ b Ill1!.n I I a S l'.* ' t l l hI.o CII cI. FNI EINd iti"Ni"$C$I i b td -l ? t.", leh, ;M P Hic lI lt!N h f 1NP4NN'Nj)' ll lf b i Ib M ei(i)IIIlufu ' i I W n.,u oc 21% el eu r., siutchi skler s n s e. e It n n n 4.d ' ! = A k hewed b e b e s wh fth street S < 4 I I h't.dlil. Ik!nh 81'* I 1 INN f. Ib ' f aCl l1 l' fi ea:. i na s, -i i ti o ! N s n es l strIII l(B Ig st: n k } H d(leh libn a rl)Lun. U. IIII pul (furer attpi(d 7' s i a, 4 i i w. ...;-> Im s ). ! n, b) h as hied in the t ;impJm u dh the set untie % is i,- ,s . mil l u lunee ( omun-n in in senJme a icquest b i ( b.mo of hidrew im c4 r Relan. nu-Lip, su r i. h en < hm a n n 4 h. -ul u mn 11 m n i mn : ou5i n hat e eLI.md neu.u k h e*ss % cu i n m i '-i huestter Relatiotts .c; s 'O4

• li es e t*

I t, '***i i (!.i'i ! N it l ' I s: 'i l i'di 8<l \\ f 113 f f kli 11L n l! i 1 4 \\ u M tn[ l l e.h t ! rd vi t Mili d n 's i c i lin,itgiHU1 (1. h h ** e { 6 uf 1 e i m.uh d ipunn h linn h olm e-ti n ReLo v ins b. ' i~ sieuth Tth street ~" I Au t oti tJt it IteltlWAtmefit Jud % tot k Purl ba%c Pl.W I In.m d Ilbni ns h2525 l N $ lb dt 3 i il i d i.,, tics til \\ i rtlf s m !1 tiJ;ne. ! Jii e,1 ilu!! leh gy p ene t j l* : gj e Cl5 ll 1s (4 m v ei. Iv..La s.,a.uc cheil de 9 ;un a ip.uc m t he .I hr icpi ni and the hn. int ul sulemenh ii ent uned herem \\.m ml i s Nen n es!!aen'.tnd % h h l't H 6 1use 1" m.I.'b' .nc *u! *n nnni b u the :.'ener.d mb irn tatn in s it the e n Lhe 4d. h m e inen sn.. u n, Lies a o m emm a and n on.mu i u.n e s it ih- (.omp.un anJ as ui h.nc not miended to.oht n. w tr > lac u-ed in u innn19 in u uh am sale i n pun luse of s At i L H il k% i e s s. t$ forf e sfd m. s s04

lis, H nqexHe &

f r-F, *f 10 90 in !4 c JF 4 -r,->- , i. m-- .l Ilhn<xs Pouvr Cr>mpant 'u> Nouth 2'th.strtxt + leecatut libnois 6252; i I l i I l 1 I I l I I i l I i l I l I l _ _.. -, _ _.}}