ML20069F678

Annual Financial Rept 1982

ML20069F678
Person / Time
Site:	Clinton
Issue date:	02/23/1983
From:	Kelley W ILLINOIS POWER CO.
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ML20069F668	List: ML20069F665 ML20069F673 ML20069F678
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.

Our Annual Report for 19 8 2 1

l lLLINOIS POWER COMPANY l

l8R88ES o!888&

PDR

ILLINOIS POWER COMPANY lilinois Power Company is a public utility (ngaged primarily in the generation, transmission, distribution and sale of electric energy and the distribution and sale of natural gas in the State of Illinois.

Principal Office Monticello, Illinois 61856 Executive Office 500 South 27th Street, Decatur, Illinois 62525 Phone (217) 424-6600 Transfer Agent and Registrar Continental Illinois National Bank and Trust Company of Chicago 231 South LaSalle Street, Chicago, Illinois 60693 Stockholder Records and Dividend Disbursing Office Shareholder Services Section Illinois Power Company 500 South 27th Street Decatur, Illinois 62525 (217) 424-6609 Annual Stockholders' Meeting The annual stockholders' meeting will be held April 21,1983, at the executive office of the Company at 10 A.M. Proxles for this meeting will be requested by the Board of Directors. A proxy statement will be mailed to stockholders about March 17,1983.

IP ILLINOIS POWER COMPANY ANNUAL REPORT 1982 l

page Contents Highlights of 1982 2

Letter to Stockholders 3

1 Earnings, Revenues, and Sales 4

Financings 5

Rates 6

Electric Service and Fuel Supply 6

Gas Service and Supply 6

Customer Services 7

Cost Reduction Activities 7

Environmental Activities 8

Construction 8

Clinton Power Station 10 Energy Assistance Foundation 10 Merger with Mt. Carmel Public Utility Co.

10 Research and Development 10 Responsibility for information 11 New Company Officer 11 Board of Directors 11 Management's Discussion and Analysis of Fmancial Condition and Results of Operations 12 Financial Statements 15 Two-Year Dividends and Stock Prices L

by Quarters 27 Selected Financial Data 27 Supplementary Information to Disclose the Effects of Changing Prices 28 Operating Statistics 30 The Board and Officers 32 This report and the financial statements contained herein are submitted for the general information of the stock-holders of the Company as such and are not intended to induce, or to be used in connection with, any safe or purchase of securities.

1

^

Highlights cf 1982 1981 1982 increase 14.213 13,978 (1.7).

Electric sales-kilowatt-hours (millions)

$620.968

$ 685,544 10.4 Electric revenues (thousands) 952 1,008 5.8 Gas sales-therms (millions)

$343,324

$ 421,231 22.7 Gas revenues (thousands) 5964,292

$1,106,775 14.8 Total operating revenues (thousands)

$127,413

$ 156,395 22.7 Net income (thousands)

$107.516

$ 136,498 27.0 Earnings available for common stock (thousands) 37,844 44,840 18.5.

Average number of shares outstanding (thousands)

S2.84

$3.04 7.0 Earnings per share of common stock We Received 1981 1982 1982 %

(Thousands of Dollars) 5620,968

$ 685,544 61.9 Sales of electricity 343.324 421,231 38.1 Sales of gas S964.292

$1,106,775 100.0 We Paid Out or Set Aside 1981 1982 1982 %

(Thousands of Dollars)

$ 79,105

$ 84,116 7.6.

Payrolls and benefits to employees engaged in operations 257,427 313,788 28.4 Gas purchased for resale 18.970 33,314 3.0 Power purchased for resale (55.684)

(35,989)

(3.3)

Power interchanged-net 245,626 236,460 21.4 Fuel for electric plants 59,772 61,751 5.6 Materials and other expenses 60,031 61,521 5.6 Recovery of cost of property due to wear and obsolescence 124.197 148,165 13.4 Taxes-federal, state and local 21,419 22,227 2.0 investment tax credit deferred-net Use of funds invested in our business-(61,411)

(78,409)

(7.1)

Allowance for funds used during construction 87,427 103,436 9.3 Interest-including short-term loans

~

19,897 19,897 1.8 Preferred stock dividends 92.814 113,972 10.3 Common stock dividends 14.702 22,526 2.0 Future use in our business

$964.292

$1,106,775 100.0 2

To Our Stockholders:

Our earnings for 1982 were up 20c per share of show its relative strength, due primarily to the diver-common stock from the $2.84 we earned in 1981.

sity of industrial, educational, and commercial enter-The $3.04 earned in 1982 reflects increased electric prises located here. Although we did experience a rates and increased gas therm sales offset by a decline in total electric sales, our residential and reduction in kilowatt-hour sales of electricity, higher commercial sales were up 0.8 percent and 1.2 per-operating costs, and increased financing costs.

cent, respectively, and industrial sales were down by On February 19,1982 we filed for increases in both 5.1 percent. Gas sales for residential and commercial our electric and gas rates and presented testimony customers were up 6.9 percent and 7.7 percent, re-before the Illinois Commerce Commission in support spectively. Industrial sales were up 4.8 percent. To of our need. On January 12,1983 the Commission maintain and improve this valued diversity of busi-granted us increases of 10.3 percent in our electric ness, we are committed to an active program to help rates and 7.2 percent in our gas rates. The Com-communities retain and expand existing industry and mission's decision includes $625 million of con-to bring in new employers.

struction work in progress in our electric rate base.

In addition to our ongoing efforts to help all With these increases in effect, our electric rates classes of customers get more efficient use of elec-will continue to be the lowest of any major utility in tricity and gas, we have launched a new program the state, and our gas rates will be about average.

that we believe is a unique way of helping elderly, j

Our managcrial efforts at the Clinton power station handicapped, and economically-distressed custom-have been to proceed with the completion of con-ers better manage and pay their electric and gas struction with utmost urgency consistent with the bills. Our Board of Directors authorized an initial Nuclear Regulatory Commission's standards of grant of $250,000 to launch the Energy Assistance quality assurance. Construction at Clinton continued Foundation, a not-for-profit corporation. With an in-at a reduced pace during 1982 as a result of stop dependent Board of Directors-with me as the only work orders issued during the first half of the year.

representative of our Company-the Foundation Although plans have been implemented to permit a plans to fund programs of existing community or-full resumption of construction, the Company will not ganizations to help needy individuals and families to be able to determine the extent of the impact upon reduce and better manage their utility bills. As the the cost estimate and construction schedule until program develops, our Company is prepared to the stop work orders have been lifted.

match contributions from individuals, companies, Our internal Cost Reduction Task Force, estab-and charitable organizations with an additional grant lished in 1981, again identified and recommended of up to another $250,000.

ways to improve cash flow by limiting and deferring These and other matters, together with financial expenditures wherever possible. Reductions in 1982 and statistical information, are presented in detail in came to $48 million, with another $36 million ex-this report.

pected for 1983.

We proceed into the uncertainties of 1983, the The increase in our operating revenues-up 10.4 60th year of Illinois Power Company's service to the percent for electric and 22.7 percent for gas-n not people of our territory, with realistic confidence that indicative of the impact of the economic reces; ion we can continue to maintain a fair and mutually i

on our sales and consequent earnings.

beneficial balance between the needs of our cus-Our kilowatt-hour sales were 1.7 percent lower tomers and those of the owners of our business.

than in 1981, when the decline began. Several factors were involved, including consumer conservation and temperate summer weather, but the main factor was Sincerely, the recession.

Due mainly to the severe cold of the first quarter, g

gas therm sales increased by 5.8 percent for the

/

year, with industrial increases lagging behind those of residential and commercial.

Wendell J. Kelley The national economic recession has greatly Chairman and President affected business conditions in Illinois. Our service area did not escape this decline but continues to February 23,1983 3

Earnings, Revenues, and Sales Earnings per common share were $3.04 for 1982, and represent a 7.0 percent improvement over the

$2.84 per share earned in 1981. The major factors contributing to the 1982 earnings improvement were the elec'ric rate increase authorized in July,1981 by the lilinois Commerce Commission and the increase BecMc Remmes in gas therm sales. However, earnings per share also reflect the adverse effects of several other factors, including a decrease in electric kilowatt-hour sales 700 to our industrial customers, a decrease in net sao interchange sales, higher operating costs, and the eso e40 capital costs associated with the financing e2o requirements for our ongoing construction program.

soo Operating revenues increased 14.8 percent over 1981, to $1.1 billion. In 1982 electric and gas g g 'o sa revenues increased 10.4 percent and 22.7 percent, E E E '540 respectively. Electric revenues were $686 million g g g

and reflect the 1981 rate increase and the recovery EEE SN of increased fuel costs, partially offset by reduced ggg kilowatt-hour sales. The increase in gas revenues a E E E '*

to $421 million resulted primarily from the recovery E E E E

of higher natural gas costs through the purchased E E E E E "20 4

gas adjustment clause and increased therm sales.

g g g g g '*

Kilowatt-hour sales of electricity decreased 1.7 EEEEE percent in 1982, which has been a year marked by E E E E E E '**

economic recession. This sales decline compares t EEEEEE^

a 1.9 percent decrease during 1981. The decrease in EEEEEE

___ E E E E E E '

kilowatt-hour sales reflects such factors as the mild 1982 summer weather, customer conservation, and E E E E E E E **

the continuing poor economy. Sales to residential, m E E E E E E E '2so commercial, and wholesale customers were up 0.8 g

24a percent,1.2 percent, and 2.8 percent, respectively, 3

c while sales to industrial customers decreased l

lllllllll 5.1 percent. Net interchange sales of electricity 180 l l l l lll l

decreased $19.7 million when compared to 1981, reflecting a weakened market for sales to l ll l lllll other utilities.

l l ll lll3 l Gas therm sales increased 5.8 percent from 1981.

lll l l l ltl l Sales to residential, commercial, and industrial llllllll l customers increased 6.9 percent,7.7 percent, and l,lllllll l _ gg 4.8 percent, respectively, reflecting the impact of Ill l llll l 4g the severe winter weather during the first quarter lllllllll 20 of 1982, offset by poor economic conditions and lllllllll g

customer conservation.

73 74 Ts 7s 77 7s 7s so si s2 4

Financings Money to finance our 1982 construction program j

and to retire $20 million of first mortgage bonds was I

raised through internally generated funds and outside financings consisting of the sale of common stock, debentures and first mortgage bonds, and proceeds from various reinvestment and stock Gas Revenues exwons or couns) purchase plans.

Four million shares of common stock were sold at 75

$20 per share on March 1. Proceeds to us were 60

$19.53 a share, or a total of $78 million.

6*

We made our first entry into the European capital j

64 markets on June 2 through IPF (Illinois Power e2 F nance) Company N.V., our Netherlands Antilles 6

financing subsidiary. We sold $50 million of 14%

[g percent debentures due in 1989 through a group of European banks, with proceeds of $49 million.

54 We were the first utility in the country to issue 52 bonds using the competitive bidding features of the new " shelf" registration. ( A shelf registration allo vs a company to obtain advance approval from the

'6 Securities and Exchange Commission to sell

,,3 securities, and later to take immediate advantage E

,,g of favorable market conditions.) On July 9 we sold E

,gg

$75 million of 14% percent first mortgage bonds due gg E

in 1990, with proceeds to us of $73 million.

3g

_E A second " shelf" registration sale-$75 million of EE first mortgage bonds at 12 percent due in 2012-MEE was made on November 5 for proceeds of $74 EEE million.

2ao EEE The capital provided through our Automatic E E E E,pgg Reinvestment and Stock Purchase Plan, Employees

,o EEEE Stock Ownership Plan, and Tax Reduction Act Stock 220 E

EE Ownership Plan and Trust continues to increase.

gg EEEEE These plans provided about $54 million in 1982 l

E E E E E E

,g from the sale of 2,770,769 shares of new common m E E E E E E

,go stock. Nearly 21,200 security holders are now e E E E E E E E

,40 participating in the Automatic Reinvestment and E E E E E E E E

,20 Stock Purchase Plan, an increase of about 7,800 l

200 over 1981, primarily due to more liberal provisions en lIlll llIl in the federal income tax laws. Effective for the years so iIIIOIIlI 1982 through 1985, the changes allow individual 40 lllIlIe I stockholders who reinvest dividends in common 20 IIIIIIIII stock to defer payment of income taxes on such a

dividends up to $750 a year ($1,500 on a joint i

73 74 75 76 77 78 79 80 81 82 J

l 1

5 l

1

raturn). If these shares are held more than a year, passed on to our customers. Commission hearings the reinvested dividends will be taxed as a capital on this matter have been suspended pending a gain when the shares are sold.

decision by federal agencies concerning high-cost -

We completed credit agreements in 1982 with four liquefied natural gas supplies from certain of our Chicago banks totaling $180 million, replacing pipeline suppliers.

former agreements with the same banks amounting to $140 million. Each of the new agreements provides three-year revolving credit with an annual renewal option and a provision for conversion to a three-year Electric Service and Fuel Supply m loan.

Because of the economic recession, continued We estimate construction requirements for 1983 to be $360 million and refunding requirements to be normal summer in 1982, our annual electric firm

$20 million. We expect to fund these requirements eak demand was 4.8 percent under the 1981 peak.

with $245 million of outside financing, with the Re m's firm demand peaked at 2,950,822 remainder coming from internal sources.

kilowatts on August 3,1982.

The 1981-82 winter peak on our system, coming on January 11,1982, was 2,466,000 kilowatts,0.2 percent less than the record winter peak of the Rates previous year.

On January 12,1983 the lilinois Commerce Tornado-like winds in April toppled about 10 milec Commission granted us a 10.3 percent increase in of 345-kilovolt line between Decatur and Champaign.

electric rates and a 7.2 percent increase in gas rates.

Extraordinary efforts were made to place the line This is expected to provide additional annual back in service quickly because of its importance to revenues of about $70 million for electric and $36 our transmission system. The job was accomplished million for gas. The Company and certain intervenors in 27 days at a cost of $2 million.

have petitioned the Commission for a rehearing of Coal was used to generate 99.2 percent of the this decision.

electricity produced at our power plants. Oil, gas, The Commission authorized an overall rate of and hydro accounted for the remainder. Our five return on common equity of 15.5 percent based on power plants used 6.8 million tons of coal, of which a fully forecasted test year ending December 31, 75.9 percent came from Illinois mines. Low-sulfur 1983. Also approved was the inclusion of a total of coal from Colorado and Kentucky was used at power

$625 million of construction work in progress in our plants which are under strict air emission standards.

electric rate base. This represents 44 percent of Long-term contracts and extension clauses will our investment in Clinton Unit 1 as of provide us with about 112 million tons of coal,97.5 December 31,1982.

percent of which will come from Illinois mines.

Even with this increase, our electric rates will Based on 1982 usage, this is enough to meet our continue to be the lowest of the major utilities in needs for about 17 years.

lilinois.

During 1982 we implemented a new method to calculate the fuel adjustment clause. The fuel adjustment clause provides for the recovery of purchased power costs and nuclear fuel costs not Gas Service and Supply included in the previous fuel adjustment clause.

During the severe winter of 1981-82, our natural gas The Commission directed gas utilities to begin sales reached a record high on January 10,1982 of using a uniform method for calculating purchased 857,324,000 cubic feet per day, surpassing the 1981 gas adjustments by the spring of 1983. This new level by 13 percent.

clause will improve the method of recovery of The availability of future gas supplies looks bright, purchased gas costs.

but at escalating prices from our pipeline suppliers.

The Federal Energy Regulatory Commission We have been an active participant in gas pipeline approved an increase in our wholesale rates to nine rate hearings, including those dealing with the effect electric cooperatives of 8 percent, or $2 million of high-cost gas on the purchased gas adjustment annually, effective June 1,1982.

clauses of our pipeline suppliers. We havo opposed A citation of the Illinois Commerce Commission the importation of liquefied natural gas f rom required all Illinois gas utilities to show why the Algeria by Trunkline Gas Company. We also have cost of certain high-cost gas supplies should be supported legislation to make the price we pay for 6

gas more responsive to the market demand.

Our storage and interconnected gas systems enabled us to maximize purchases from the least costly of our five pipeline suppliers.

l Customer Services To lessen the effects of increasing energy prices on our customers, we continued to help them use OE Electric Peak Loads (IN THOUSANDS OF KW) performed free energy audits since 1977, J

starting in late 1981 we were required to charge a a2%

$15 fee and to change the program to comply with

,,[]g a mo state and federal mandates. Some 2,500 residential n r:4 yb $

2m audits were performed in 1982, for a total of 82,500

$e,t!

2m since 1977.

e p4 s4 a m vi a 2.4%

A program of free energy audits for community 7 g4ggggg g 22

• institutions was provided to churches in 1982. We j

i, b i u a eq e m mu 2"

a a i a ni L a N M W n a m audited 283 churches. In addition, we conducted g a t 1 n ta rA r 3 M a e ?

energy management courses for 55 commercial 1

6*

.. i a H r s ni u n s - H r1 and industrial customers.

f ; i M M ra th & Li H H We contacted 98 industries and businesses to i

'2*

g ; ra g > u u N t t t-a m n encourage them to remain or expand operations in nxauaM aiaHH*:

the communities we serve. Since 1981, about 1,200 8*

aaWHunaonau businesses and industries have been contacted 6*

< q H pi Lil e h s ? k i H t:4 through this program. We also conducted industrial y :. e a r-a M rd H t a ec-t e t a development training programs in fourteen 2"

y 4 m t., w M e a N N

• t i i a communities to encourage economic development in their areas. Forty-seven communities have 73 74 75 76 77 7s 79 80 s1 s2 participated in these activities since 1974.

Gas Peak Loads (IN THOUSANDS OF THERMS)

We reduced expenditures in 1982 by $48 million through recommendations of an internal Cost 86*

Reduction Task Force.

8" The task force was formed in 1981 to determine 84*

ways for improving 1982 cash flow by eliminating or 7"

deferring expenditures wherever possible. Successful 7#*

gggg in the 1982 project, the task force's efforts were esm

. M gggggg extended to determine cost reduction possibilities EEEEEEIEE for 1983 and 1984.

m ggggggl lg in 1982 construction expenditures were reduced

,,gg j EEEEEIEE

$20 million; oil inventories were reduced by $4 u,

'{- E E I E E I E E dum p wwMe mm exw we=W 3,00 IEIEEEIEE

$18 million; and operation and maintenance 3,

IEEEEEIEE expenditures were reduced by $6 million.

l3E.EEEIEE 2[e,m, The task force identified possible savings of $36

- $ l E.l l l l l E million in 1983 and $48 million in 1984 by reductions

,,g 5 5 E E E-E E I E

~in personnel, construction, and inventory. The e,

555-5EEIEE elimination of 121 positions, a deferral of salary g

n 74 rs 7s 77 rs 7s so si s2 increases for a minimum of six months in 1983 for 7

ali non-union personnel, and retirement of eleven regulations that protect the public at reasonable small diesel powered generating units should result cost to our customers. We advised Congress that in personnel savings of $5 million in 1983 and $5 the actions being considered in pending federal million in 1984. A deferral of salary increases for legislation to combat " acid rain" are not justified non-union construction personnel at the Clinton by technical data.

power station for at least six months; reduction We have implemented a self-auditing program and deferral of Clinton architect / engineering and to evaluate our efforts to comply with environmental general contractor costs, plant operation and regulations.This program is used to reinforce our start-up costs, and Clinton Lake recreation costs; compliance capabilities through education and and the leasing of some equipment will reduce identification of any potential systematic weaknesses construction costs by $27 million in 1983 and before problems might develop.

$23 million in 1984. Changes in inventory levels and other items will reduce costs by $4 million in 1983 and $20 million in 1984.

Construction Our construction and related expenditures in 1982 totaled $413 million, the most for any year in our history. Of the total, $297 million was for construction Environmental Activities at the Clinton power station, $49 million for nuclear Construction of the Kilngas coal gasification fuel, $50 million for other electric facilities, and $17 demonstration unit at our Wood River power station million for gas facilities. In 1983 we estimate $360 is proceeding toward expected start-up in 1983.

million will be spent on construction projects, of The $137 million project is being funded by which $274 million will be for the Clinton power Allis-Chalmers Corporation, the State of Illinois, station, $5 million for nuclear fuel, $63 million for Electric Power Research Institute, and a consortium other electric projects, and $18 million for of 12 electric utilities. Our share is $5.5 million for gas projects.

a five-year period ending in 1984. This project will Our estimate for the five-year construction convert high-sulfur coal into clean burning low-Btu program from 1983 through 1987 is $990 million-gas to be burned in the 50-megawatt Wood River

$864 million for electric and $126 million for gas.

power station Unit 3. The successful demonstration This estimate is based upon commercial operation of the Kilngas technology could make use of of Clinton Unit 1 in August,1984. This estimate also high-sulfur coal more acceptable, provide a boost includes no expenditures for additional generating to the Illinois coal industry, and provide an facilities after Clinton Unit 1.

alternative technology for the future production After seven years of regulatory and court of electric energy.

proceedings, we began construction in April on As a part of the Kilngas unit, a combustion turbine 35.5 miles of 345-kilovolt line between Sidney program is being designed by Allis-Chalmers, and Kansas, Illinois. The new line will provide a Sargent & Lundy Engineers, and General Electric long-needed reinforcement to the major electric Company. The turbine would be placed at Wood transmission systems in the Champaign and Danville River for further demonstration work following service areas. Construction was halted in August completion of the present program. On October 31, pending further negotiations with property owners Gov. James R. Thompson announced that the State over the possible use of single pole structures on a of Illinois would provide $6 million toward this 15-mile segment of the line.

j

$42 million (estimated) project. The remaining funds We expect construction to begin in 1983 on 17.5 will come from other utilities.

miles of 138-kilovolt lines in the Belleville and We have again requested a rule change from LaSalle service areas.

the U.S. Environmental Protection Agency so we Extension and replacement of 120 miles of gas j

can continue to burn Illinois coal at the Baldwin mains and services were completed in 1982 in power station.

various locations throughout our service territory.

Because of federal restrictions on the use of Construction of the new building for the central polychlorinated biphenyl (PCB) capacitors in areas electric and gas dispatch center in Decatur is accessible to the public, about half of our capacitors now complete. Remote terminals for the Supervisory will be replaced in a six-year program estimated Control and Data Acquisition System will be to cost $5 million.

installed in 1983. The new center will enable us to We worked with utility industry organizations dispatch our electric and gas systems more to achieve federal and state environmental efficiently and provide better service.

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The Kilngas coal gasification demonstration unit, scheduled for start-up during 1983, nears the comple-tion of construction at our Wood River power station. A consortium of utilities, Allis-Chalmers Corp. and the State of Illinois are sponsoring the $137 million project to demonstrate the conversion of high-sulfur coalinto gas for generating electricity. A rotating kiln, being inspected below, will convert the coal to low-Btu gas.

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Clinton Power Station primary purpose is to provide funds to existing Two major changes in management of construction community organizations who will help reduce at the Clinton nuclear power station site were high-bill problems through home improvements.

made during the year. In September responsibility The r~oundation will achieve its objectives by for all quality assurance programs was assigned to working with social agencies, charitable and

- a new Company vice president, Mr. Donald P. Hall.

consumer groups, churches, and other community in October we obtained the services of Stone organizations throughout the general area served and Webster Engineering Corporation to augment by Illinois Power Company.

project management at the construction site during the criticallater phases of construction and preparation for operation of the plant. Stone and Webster personnel report to our management.

Merger with Mt. Carmel Public Utility Co.

Stone and Webster has completed ten nuclear Illinois Commerce Commission hearings on our -

plants for seven utilities and currently is working on November,1981 proposal to acquire the Mt. Carmel five other nuclear plants.

Public Utility Co. through merger ended in November, Construction at the site proceeded at a reduced 1982. Central Illinois Public Service Company rate in several areas during much of the year intervened in the proceedings to oppose the because of several stop work orders affecting acquisition through the merger agreement. The specific jobs. The stop work orders resulted from Commission denied our proposal and stated that concerns that, in general, inspection and the acquisition was not in the public interest. In documentation of completed work was not February,1983 we and the Mt. Carmel utility filed adequately keeping pace with construction.The suit in the circuit court of Wabash County craft work force at the plant was reduced by about challenging the Commission decision.

one-fourth because of the stop work orders.

Although work is being resumed, with the Nuclear Regulatory Commission's approval, on an incremental basis in each of the areas affected by Research and Development the orders, the Company will not be able to To better meet the future needs of our customers, determ,me the extent of the impact upon the cost we spent about $4 million for research in 1982.

estimate and construction schedule until the stop The major expenditure for the year was about work orders have been lifted. The current estimated

$2.4 million for Electric Power Research Institute cost is $1.8 bill ion for the Company's 80 percent (EPRI) projects. EPRI was founded by electric interest in Clinton Unit 1, based on commercial utilities to develop and manage a technology operation of the plant in August,1984; however, t research program to improve power production, i

is probable that the date of commercial operation distribution, and utilization.

,Il be delayed, and as a result the cost will Our internal electric research projects were aimed at controlling peak loads, shifting energy usage Two major licensing milestones were reached to off-peak periods, and utilizing waste heat as an in 1982: the issuance of the Safety Evaluation Report energy s ur e.These research projects can by the NRC, followed by reviews and a favorable demonstrate the capability to defer future power letter by the Advisory Committee on Reactor plants and related system improvements through Safeguards. Each concluded the Clinton power management of elede energy usage.

station can be operated without undue risk to the 1

One of our natural gas projects involved the r

health and safety of the public.

conversion of 35 service area vehicles to run on compressed natural gas. If this project is successful, it could lead to the conversion of the remainder of ourvehicles and eventually the promotion Energy Assistance Foundation of natural gas as a fuel for use by our customers.

We pledged an initial $250,000 to launch the in addition to the Kilngas project (see Energy Assistance Foundation, a not-for-profit

" Environmental Activities"), other research includes organization, to help residential customers manage a greenhouse facility at our Baldwin power station their gas and electric utility bills. In addition, we in which the temperature control is assisted by will match contributions to the Foundation from condenser cooling water, and the re-use of water charitable groups, other companies, and individuals from the ash pond of our Wood River power station up to an additional $250,000. The Foundation's by an adjoining industry.

10

We are selling fly ash frorn the Baldwin power New Company Officer station for use as an ingredient in concrete.

On September 7 Mr. Donald P. Hall was named a Boiler bottom ash is being sold for use as a vice president, with responsibility for Clinton substitute material for sandblasting, as a snow and power station quality assurance activities.

ice antiskid abrasive, as roofing granules, and as Subsequently, he assumed responsibility for start-up a bituminous aggregate substitute for asphalt and operations of the plant, and for the nuclear p;ving materials. The potential market for both fly station engineering department. Mr. Hall is a retired ash and bottom ash is encouraging.

U.S. Navy Rear Admiral with experience in management of the Defense Department's largest weapons program and civilian experience in the Responsibility for Information man gement of nuclear energy programs. He retired from the Navy after 36 years service.

The financial statements and all information in this annual report are the responsibility of management.The financial statements have been prepared in conformity with generally accepted accounting principles consistently applied in the Board of Directors opinion of management, the financial statements The Directors of the Company are elected each fairly reflect the Company's financial position, year by stockholders at the annual meeting.

results of operations, and sources of funds provided All twelve Directors were re-elected at the meeting for gross property additions.

on April 15,1982.

We maintain accounting and internal control Members of the Board of Directors serve on systems which we believe are adequate to provide committees established to address various issues of reasonable assurance that assets are safeguarded management. Recommendations of the committees against loss from unauthorized use or disposition; are presented to the full Board for discussion and and we believe that the financial records are final determination. Current committees and their reliable for preparing financial statements.

memberships are:

The financial statements have been audited by Finance Committee-Th.is committee meets to our independent accountants, Price Waterhouse, review the Company's financial forecast, financing in accordance with generally accepted auditing plans, and pension fund investments, and it makes standards. Such standards include the study recommendations to the Board concerning such and evaluation of internal control to establish a matters. Members of the committee are:

basis for developing the scope of the examination Gordon R. Worley, chairman, William C. Gerstner, of the financial statements. In addition to the Grover J. Hansen, Wendell J. Kelley, Keith R.

use of independent accountants, we maintain a Potter, Boyd F. Schenk, Richard P. Stone, Charles professional staff of internal auditors who conduct W. Wells, and Vernon K. Zimmerman.

financial, procedural, and special audits. The system of internal controls consists of several important Audit Committee-This committee, which consists elements, including selection and training of entirely of non-management directors, recommends qualified personnel, continuing maintenance and the appointment of the Company's independent use of accounting and administrative policies and accountants, confers with the independent procedures, and the internal auditing programs.

accountants, and reviews the scope of the audit, The Audit Committee of the Board of Directors, the results of auditors' examinations, and the consisting solely of non-management directors, activities of the Company's internal auditors. The meets periodically with management, the internal members are: Vernon K. Zimmerman, chairman, i

auditors, and the independent accountants to Robert J. Burow, Grover J. Hansen, Donald E.

discuss accounting, auditing, and financial reporting Lasater, Eva Jane Milligan, and Richard P. Stone.

matters. To assure thcir independence, both Compensation and Organization Committee-This Price Waterhouse and the internal auditors have committee reviews and recommends compensation direct access to the Audit Committee.

of elected Company officers, reviews benefit plans, and recommends nominees to fill vacancies on the Board of Directors.The members are:

Keith R. Potter, chairman, Robert J. Burow, Wendell J. Kelley, Donald E. Lasater, Eva Jane Milligan, Boyd F. Schenk, and Gordon R. Worley.

11

Managemenfs Discussion and Analysis of Financial Condition and Results of Operations R ference is made to the Financial Statements and proceeds of which were contributed to the capital of Electric and Gas Operating Statistics for information IPF and were subsequently reinvested by the sub-concerning financial condition and results of opera-sidiary.

[

tions. The factors having significant impact upon fi-Obtaining the future capital necessary for our on-nancial condition, changes in financial condition and going construction program will require the Company results of operations since January 1,1980 are as to achieve and maintain the financial standards neces-follows:

sary for flexible access to financial markets. While our common stock continues to be rated A, our first mort-gage bonds and preferred stock were reduced to AA-Liquidity and Capital Resources from AA in April,1982 and to A in February,1983 by During the three-year period 1980 through 1982, con-Standard & Poor's Corporation. Moody's investors struction expenditures were $315.6 million, $349.5 Service rates our first mortgage bonds Aa3 and our million and $412.9 million, respectively, in addition, preferred stock aa3. Duff and Phelps, Inc. rates our

$30 million was required for bond refunding during first mortgage bonds 3 and our preferred stock 4.

this period.

On January 12,1983 we received a rate order from The major item of construction is the Clinton nuclear the Illinois Commerce Commission (ICC). The new power station which acccunted for approximately 74%

electric and gas retail rates are estimated to provide of the total construction expenditures in this three-year additional annual revenue of $106 million, based upon period. Our 80% ownership interest in Clinton Unit 1 a forecasted test year ending December 31,1983. Also, is estimated to cost $1.8 billion and will require addi-the order provided for the inclusion of a total of $625 tional capital expenditures of about $362 million based million of construction work in progress (CWIP) ex-upon commercial operation in August,1984. These penditures in electric rate base. The increase from expenditures are about 33% of the $1.1 billion pro-

$375 million to $625 million of CWIP expenditures in-jected capital requirements for the five-year period ciuded in the rate base is important because this rate-1983-1987.

making treatment will provide immediate cash to pay Cash flow from operations has provided sufficient the construction financing costs on that portion of the liquidity to meet ongoing operating requirements and construction expenditures. While we capitalize an al-to provide a portion of the funds for the construction Iowance for funds used during construction (AFUDC) program. In addition, funds obtained from external on CWIP expenditures not included in rate base, this sources during this three-year period totalled $660 non-cash credit to income does not provide immediate million. When Clinton Unit 1 begins commercial oper-cash to pay the related construction financing costs.

ation, we anticipate a reduction in the need for ex-It is important that we maintain our overall financial ternal capital.

strength, particularly with respect to maintaining the During this three-year period, we used short-term interest coverage ratios required by the Mortgage and borrowings to meet interim cash requirements. These Deed of Trust for the issuance of additional first mort-snort-term obligations were repaid from long-term fi-gage bonds. A deficiency could require alternative, nancings, and, at December 31, 1982 there were no and potentially higher cost, financing methods to pro-outstanding short-term borrowings.

vide the projected capital requirements associated with Lines of credit with commercial banks are main-our ongoing construction program and other working tained to meet interim cash requirements. At Decem-capital needs. At December 31,1982, based upon the ber 31,1982 our total line of credit was $394 million.

most restrictive eamings test contained in the Com-Included in our line of credit is $125 million to support pany's Mortgage and Deed of Trust, approximately our commitment to IP Fuel Company.

$188 million of additional first mortgage bonds could in addition to the above lines of credit, we estab-be issued at an assumed interest rate of 12%.

lished a foreign financing subsidiary, IPF (Illinois Power Finance) Company N. V. in October,1981. The pur-Results of Operations pose of this new subsidiary is to provide the option Electric Operations-Electric revenues increased 43.1 %

of issuing lower cost debt in the European financial from the beginning of 1980 through 1982, primarily re-market. IPF issued $50 million of 14%% Guaranteed sulting from rate increases, recovery of increased fuel Debentures in June,1982. In conjunction with the sale costs, and the net impact of changes in kilowatt-hour of the debentures, the Company obtained $17 million sales. Component 3 of the annual revenue increases through the issuance of long-term bank notes, the were approximately as follows:

12 l

[

ILLINols Po'NER COMPANY / ANNUAL REPORT 1982 1982 1981 1980 During 1982 fuel for electric plants and power pur-Revenue increase (Thousands of dollars)

S64.576 553.612 $88.304 chased for resale increased in the aggregate by $5.1 comEnc"re"as*e [Q ""

million. The principal factors affecting this increase Rate increases.

91 %

88 %

53 %

were higher prices paid for fuel, additional power pur-Recovery of increased chased from Electric Energy, Inc., and a decrease in s

s s ad Mdange maMs.

Kilo ur sales

( )

()

In March,1982 we implemented a new electric fuel 100 %

100 %

100 %

adjustment clause, as ordered by the ICC. As a re-Revenue growth from rate changes reflects the general sult, S4.1 million, subject to recovery through such retail rate increases of 10.9% effective November, clause in a later period, is not included in fuel costs.

1979 and 19.9% effective July,1981, as granted by Sales of interchange power fluctuate as a direct the ICC. The 1983 order granted a 10.3% increase in result of market demand based upon the needs of electric rates which is expected to provide additional other utilities and the availability of our generating annual revenues of about $70 million.

capacity to serve those needs. The credit for power Kilowatt-hour sales increased 1.8% in 1980 and interchanged-net decreased about $18 million in 1980, declined 1.9% in 1981 and 1.7% in 1982. Declining increased about $15.2 million in 1981, and decreased annual sales, or nominal growth, reflect the impact of about $19.7 million in 1982. During 1982 the decline the current economic recession, customer conserva-in sales to other utilities was primarily due to a weak-tion efforts, and changes in seasonal weather such as ened market for such " opportunity sales" we experienced with mild summers in 1981 and 1982 Gas Operations-Gas revenues increased in each as contrasted to the abnormally hot summer of 1980.

of the years 1980,1981, and 1982, principally re-The most significant portion of the 1982 sales decline flecting recovery of the increased cost of natural gas occurred in the industrial customer category which through the purchased gas adjustment clause. Other had a 5.1% decrease. The diversification of our in-factors affecting gas revenues were the 7.9% rate dustrial, commercial, and educational base moderated increase granted by the ICC in November,1979 and the effects of the recession.

Changes in therm sales. The components of the annual The cost of fuel for electric plants increased $15 mil-revenue increases were approximately as follows:

lion in 1980 and S5 million in 1981, and decreased S9.2

_1982 1981 1980 Re e inc ea million in 1982. Power purchased for resale increased S.4 million in 1980, $12.4 million in 1981, and $14.3 components of revenue million in 1982. Changes in both fuel costs and power increase (%)-

rec increased purchased for resale are affected by kilowatt-hour ga generation, availability of generating units, fuel price Rate increases.

36 increases, prices paid for purchased power, and re-Therm sales 16 (29)

(36) 100 %

100 %

100 %

covery of fuel costs through the fuel adjustment clause.

Kilowatt-hour generation decreased in 1980, 1981 During this three-year period, improvements in availa-and 1982 by 3.1 %,3.8%, and 8.3%, respectively. Coal, bility of gas from our pipeline suppliers and conserva-which is our primary fuel, constituted about 97.3%,

tion efforts of our customers have enabled significant 98.7%, and 99.2% of fuel used for generation in volumes of gas to be available to meet all customer 1980,1981, and 1982, respectively. The weighted aver-requests for additional gas service. We believe that, age cost per ton of coal burned increased 13.4% in for the next few years. growth in therm sales will be 1980, 6.7% in 1981, and 6.6% in 1982.

affected by market demand rather than gas supply.

Fuel costs for 1981 reflect the impact of the United The increase in gas supply, changes in economic Mine Workers of America strike (March 27 through and weather conditions, and customer conservation June 7) during which period it was necessary to efforts were the major factors affecting therm sales, utilize our higher cost generating units because of the which decreased 6.3% in 1980 and 3.4% in 1981, and unavailability of coal deliveries to the Baldwin power increased 5.8% in 1982. The increase in 1982 therm station, our most efficient generating station. This fuel sales primarily reflects the severe winter weather dur-cost increase was moderated by a decrease in gen-ing the early part of the year.

eration and a $12.4 mi!! ion increase in power pur-The 1983 gas rate order from the ICC granted a chased for resale as a result of the availability of 7.9% revenue increase, which is expected to provide additional power from Electric Energy, Inc.

aoditional annual revenues of about $36 million.

13

Management's Discussiori and Analysis of Financial Condition and Results of Operations (Continued)

The cost of gas purchased for resale increased $27.7 July 1,1979 these taxes were replaced with both a tax million, $38.4 million, and $56.4 million in 1980,1981, on invested capital and an additional tax on income.

and 1982, respectively. The annual cost increases were The Company's effective federal and state income primarily attributable to higher prices paid for gas. The tax rate has been 36.2% for 1980,34.4% for 1981, and average cost per therm delivered to our customers 34.2% for 1982. For a detailed analysis of income tax increased 20.2%, 22.8%, and 15.9% for 1980,1981, components, see Note 5 of the " Notes to Financial and 1982, respectively. During 1982, the financial im-Statements" pact of both higher prices for gas purchased from Other income-Total AFUDC increased approxi-pipeline suppliers and a 5.2% increase in customer mately S12.5 million, $10.2 million and $17.0 million requirements was lessened through greder withdrawals during 1980 through 1982, respectively. Increases in of lower priced gas from our storage fields.

AFUDC relate to the AFUDC rate, the amount of CWIP Other Expenses and Taxes-Since 1980 the Com-and discontinuance of the capitalization of AFUDC on pany has experienced increases in other operating ex-CWIP amounts included in rate base.

penses, maintenance, and general taxes as follows:

During the three-year period, amounts of CWIP in-cluded in rate base related to Clinton Unit 1 amounted 1982 1981 1980 to $97.1 million through June,1981, and $375 million (Thousands of Dollus) since July,1981. In accordance with the January,1983 Other operating expenses S 7,696 $9.567 $12.097 ICC rate order, a total of $625 million of CWIP is in-264 4,549 2.419 Maintenance..

cluded in electric rate base effective January,1983 and 1,490 2.196 1.868 Depreciation...

will be excluded from the capitalization of AFUDC.

General taxes 10,155 6,348 17.164 The increased amounts of AFUDC also reflect in-Other operating and maintenance expense increases creases in the AFUDC effective after-tax rate which was reflect increased employee wages and benefits as well increased from 7% to 7%% beginning May 1,1980, as the continuing impact of inflation.

and from 7%% to 8%% effective July 1,1981 and Inflation, as measured by the average Consumer continued through 1982.

Price Index, increased about 13.5% in 1980,10.4% in The increases in miscellaneous-net reflect increased 1981, and 6.1% in 1982.

income tax reductions applicable to non-operating ac-During the period, through both the timing and tivities, principally construction projects.

scope of our rate requests, we have attempted to re-Interest Charges-Interest charges have increased duce the financial impact of inflation. In ICC rate orders

$13.2 million in 1980, $10.4 million in 1981, and $16.0 received in both November,1979 and July,1981, we million in 1982. These increases primarily reflect the were allowed to adjust other operating and mainte-

$342 million of long-term debt issued during the period nance expenses to partially recover such expenses at at a weighted average interest rate of 13.0%. During the level projected through the first year of the new this period we retired $30 million of long-term debt rates. The January,1983 rate order also provides for with a weighted average interest rate of 3.3%.

the recovery of increases in expenses through the use Earnings per Common Share-The increases in net of a 1983 forecasted test year.

income applicable to common stock in 1980 through During 1981 and 1982 we have continued to exert 1982 resulted from the interaction of all the factors stringent budget control over operating and mainte-discussed herein, including the issuance of additional nance expenses through our internal Cost Reduction preferred stock. Changes in earnings per common Task Force, established in 1981. The reduction in growth share also reflect the increased number of common of operating expenses in 1982 reflects both the efforts shares outstanding in each year. (See Notes 9,10, of the task force and the reduction in the 1982 annual and 11 in " Notes to Financial Statements").

I rate of inflation.

During each of the three years, we have incurred inflation increases in both the state and municipal utility tax The high rates of inflation which have been experi-components of general taxes resulting from the growth enced in recent years, particularly 1980 and 1981, in operating revenues. The most significant change in have had an impact on our reported earnings, share-general taxes in 1980 reflected the implementation of holders equity, and other financial information that is the lilinois Corporate Personal Property Replacement not measured by traditional accounting methods. For Tax Law. This new law eliminated both personal prop-supplementary information to disclose the effects of erty and capital stock taxes as of January 1,1979. On changing prices, see pages 28 and 29.

14

f ILLINOIS POWER COMPANY /ANMUAL REPORT 1982 BALANCE SHEETS December 31, 1982 1981 ASSETS (Thousands of Dollars)

Utility Plant, at original cost Electric (includes construction work in progress of $1,469,018,000 and

$1,191,374,000, respectively)

$3,136,774 S2,802,500 Gas (includes construction work in progress of $6,431,000 and $5,829,000, respectively) 357,106 343,596 3,493,880 3,146,096 Less-Accumulated depreciation 709,329 G60,623 2,784,551 2,485,473 Nuclear fuel 48,717 Acquisition adjustment (less amortization of $2,171,000 and $1,925,000, respectively).

1,761 2,007 2,835,029 2,487,480 investments and Other Assets 25,616 8,651 Current Assets 8,983 11,070 Cash Temporary cash investments, at cost, which approximates market 8,000 2,000 Accounts receivable (less allowance for doubtful accounts of S4,000,000 and

$3,500,000, respectively) 74,808 72,522 Materia!s and suppl!es, at average cost 54,487 51,099 Fuel Gas in underground storage 24,039 31,286 22,442 23,290 Operating materials Prepayments and miscellaneous accounts receivable 32,188 30,242 224,947 221,509 Deferred Charges Unamortized debt expense 5,647 3,566 Other 1,283 1,289 6,930 4,855

$3,092,522

$2.722,495 CAPITAL AND LIABILITIES Capitalization Common stock-No par value,60,000,000 shares authorized:

46,858,457 and 40,087,688 shares outstanding, respectively, stated at

$ 798,706

$ 665,921 Retained earnings 220,288 197,762 Less-Capital stock expense 5,532 5,067 Total common stock equity 1,013,462 858,616 Preferred and preference stock 215,171 215,171 Redeemable preferred stock 36,000 36,000 Long-term debt 1,166,980 971,639 Total capitalization 2,431,613 2,081,426 Current Liabilities Accounts payable 105,495 86,106 Notes payable 70,500 Long-term debt maturing within one year 20,000 20,000 Dividends payable 34,162 29,947 i

income taxes accrued 16,966 7,832 General taxes accrued 31,623 28,500 Interest accrued 39,492 28,747 Other 21,387 21,230 Other

, 269,125 292.862 Accumulated deferred income taxes 214,811 193,461 Accumulated deferred investment tax credit 176,973 154,746 391,784 348,207 Commitments (Note 7)

$3,092,522

$2,722,495 he notes to Hnancial statements wn:ch are an integral part at these statements.

15

STATEMENTS OF INCOME For the Years Ended December 31, 1982 1981 1980 Operating Revenues

• 8 685,544

$620,968

$567,356 Electric..........

421,231 343,324 316.014 Gas Total 1,106,775 964,292 883,370 Operating Expenses and Taxes Fuel for electric plants.....................................

236,460 245,626 240,601 Power purchased for resale...............

33,314 18.970 6,527 Power interchanged-net.................

(35,989)

(55,684)

(40,452)

Gas purchased for resale 313,788 257.427 218,998 102,891 95,195 85.628 Other operating expenses 44,995 44.731 40,182 Maintenance 61,521 60,031 57.835 Depreciation 88,892 78,737 72,389 General taxes.

State income taxes-current 11,257 8,014 7,983 2,384 3.239 3,169 deferred (net)................

50,909 32.215 27,210 Federal income taxes-current deferred (net).....

14,202 17.594 15,683 22,227 21.419 23.071 investmenttaxcredit-deferred (net)

Total 946,851 827,514 758,824 159,924 136,778 124,546 Operating income Other income Allowance for funds used during construction-All funds-prior to January 1,1977..

Other funds-after December 31, 1976 57,841 45.101 36,567 21,498 16,651 14,798 Miscellaneous-net..

79,339 61.752 51.365 Total 239,263 198,530 175,911 income before interest charges Interest Charges 93,599 82,318 72,952 Interest on long-term debt 9,837 5,109 4,050 Other interest charges Allowance for borrowed funds used during construction-after December 31, 1976 (20,568)

(16,310)

(14,653)

Total 82,865 71,117 62,349 Net income 156,395 127.413 113,562 Preferred dividend requirements 19,897 19,897 19,069 Net income applicable to common stock

$ 136.498

$107,516

$ 94,493 Weighted average number of common shares outstanding during the period 44,839,807 37.843,513 32.906,017 Earnings per common share..

$3.04

$2.84

$2.87 Cash dividends declared per common share

$2.48

$2.405

$2.355

• Includes revenue related taxes added to customer billings in each of the years 1973 through 1982. In 1982,1981 and 1980 these revenue related taxes were $27,860,000, S23,162,000 and $20,643,000, respectivcly.

RETAINED EARNINGS 3

For the Years Ended December 31, 1982 1981 1980 (Thousands of Dollars)

$ 197,762

$183,060

$168,553 Balance at Beginning of Year 1

Net income 156,395 127,413 113,562 354,157 310,473 282.115 Less-Cash dividends-Preferred stock 19,897 19,897 19,419 Common stock.

113,972 92,814 79,636 133,869 112,711 99,055

$ 220,288

$197.762

$183,060 Balance at End of Year.

see notes to tanancial statements which are an integral part of these statements.

16

4 ILLINolS POWER COMPANY / ANNUAL REPORT 1983 i

1979 1978 1977 1976 1975 1974 1973 (Thousands of Dollars)

$479,052

$452,207

$383,567

$303,066

$275,809

$221,126

$199,489 272,770 219,807 183,820 158,595 133,142 108,789 94,953 751,822 672,014 567,387 461,661 408,951 329,915 294,442 225,621 207,082 148,553 123,782 88,725 63,013 41,408 6.171 5,505 8,664 7,092 5.591 4,727 4,179 (58,498)

(47,078)

(30,855)

(51,484)

(29,522)

(18,321)

(10,547) 191.296 145,486 117,812 91,476 71,288 56,539 47,728 73,531 70,463 59,827 53,295 49,631 41,083 37,649 37,763 33,954 28,919 25,726 19,506 17,584 16,131 55,967 51,569 47,188 45,556 42,911 39,282 36,103 55,225 54,325 46,974 40,368 37,036 31,210 28,833 l

4,820 2,697 3.188 2,444 2,381 1,717 1,732 2,090 1,846 980 1,199 1,166 817 813 14,231 6,812 15,760 16,001 11,575 15,831 14,099 15,329 18,638 9,053 11,433 11,681 7,367 7,199 21,958 22,793 19,573 10,994 15,034 1,706 5,118 645,504 574,092 475,636 377,882 327,003 262,555 230.445 106,318 97,922 91,751 83,779 81,948 67,360 63,997 4

10,503 7,459 7,960 7,189 27,520 21.321 15,137 10,043 9,402 5,709 3,174 1,967 2,231 2,143 37,563 30,723 20,846 13,677 9,426 10,191 9,332 143.881 128,645 112,597 97,456 91,374 77,551 73,329 62,005 52,453 42,091 35,927 33,144 28,779 25,237 1,752 1,439 1,888 1,744 1,,508 4,122 891

_ 11,211)

(7408)

(

46,284 38.933 37,671 34,652 32,901 26.128

_ _5,046)

(

52,546 91,335 82,361 73,664 59,785 56,722 44,650 47,201 15.699 15,699 13,257 10,606 7,229 7,229 7.229

$ 75,636

$ 66.662

$ 60,407

$ 49,179

$ 49,493

$ 37,421

$ 39,972 27,979,606 24,302,139 22,521.013 20,369,958 18,277,397 16,544,110 15,940,000

$2.70

$2.74

$2.68

$2.41

$2.71

$2.26

$2.51

$2.28

$2.28

$2.22

$2.20

$2.20

$2.20

$2.20

),

Eb"*","sA"

],

FICC IICI'IMRISC

• =

l To the Board of Directors of Illinois Power Company:

In our opinion, the accompanying balance sheets and the related statements of income, of retained eamings and of sources of funds provided for gross property additions present fairly the financial posi-tion of Illinois Power Company at December 31,1982 and 1981, and the results of its operations and REPORT OF the sources of funds provided for gross property additions for each of the three years in the period INDEPENDENT ended December 31, 1982, in conformity with generally accepted accounting principles consistently applied. Also, in our opinion, the statements of income and of sources of funds provided for gross ACCOUNTANTS property additions for each of the seven years in the period ended December 31, 1979, which have been prepared from the applicable statements covered by our reports on each of those yeurs, present fairly the financial information included therein. Our examinations of these statements were made in ac-cordance with generally accepted auditing standards and accordingly included such tests of the ac-counting records and such other auditing procedures as we considered necessary in the circumstances.

February 1,1983

& &M n a,

17

STATEMENTS OF SOURCES OF FUNDS PROVIDED FOR GROSS PROPERTY ADDITIONS For the Years Ended December 31, 1982 1981 1980 Funds Provided from Operations N t in c o m e................................................ $ 156,395

$127,413

$113,562 liems not requiring working capital-Depreciation and amortization 64,520 62,659 59,967 Deferred income taxes-net.

21,350 20,240 19,922 Investment tax credit--deferred (net)...

22,227 21,419 23,071 Allowance for funds used during construction....................

(78,409)

(61,411)

(51.220)

Total funds provided from operations.

186,083 170,320 165.302 Dividends on-Preferred stock (19,897)

(19,897)

(19,419)

Common stock (113,972)

(92,814)

(79,636)

Net funds provided from operations Sf214 57,609 66.247 Funds Obtained from External Sources Proceeds from sales of-Common stock..........

132,785 93,236 82.146 Preferred stock 36,000 Capital stock expense.

(465)

(427)

(845)

Proceeds from sales of bonds 150,000 125,000 Proceeds from sale of debentures.

50,000 Proceeds from sale of nuclear fuel 39,810.

Proceeds from long-term bank notes...

17,000 Pollution control construction funds held by trustee..............

Proceeds from sale of ownership interests in the Clinton power station N t increase (decrease) in notes payable (70,500) 70,500 (34,145)

Retirement of bonds..

(20,000)

(10,000)

Total funds obtained from external sources.....

258,820 203.119 198,156 Other Funds Provided (Used)

Net decrease (increase) in working capital

• 43,325 23,565 414 investment in long-term bank notes (17,440)

Miscellaneous-net (2,444) 3.811 (474)

Total other funds provided (used) 23,441 27.376 (60)

Total funds from above sources 334,475 288,104 264,343 Allowance for funds used during construction 78,409 61.411 51.220 Gross Property Additions...

$ 412,884

$349.515

$315,563 Decrease (Increase) in Components of Working Capital

• Cash and temporary investments

$ (3,913)

$ 3,371

$ (3,406)

Accounts receivable...

(2,286)

(8,656) 4,328 Materials and supplies 4,707 2,200 1,707 Accounts payable.

19,389 21,092 (22,799)

Dividends payable 4,215 4,299 4,825 i

Accrued taxes 12,257 1,61 2 12,148 Interest accrued 10,745 31 7,202 Other-net

.y..

(1,789)

(384)

(3.591) "

$ 43,325

$ 23,565 414

• Excluding notes payable and long-term debt maturing within one year.

GROSS PROPERTY ADDITIONS AND RETIREMENTS For the Years Ended December 31, 1982 1981 1980 Additions -Electric

$ 396,233

$330,470

$297,157 Gas....

16,651 19,045 18,406

$ 412,884

$349,515

$315.563 Retirements-Electric......

$ 12 027

$ 7,420 3 5,607 Gas 2,869 3.139 2.943

$ 14,896

$ 10.559

$ 8.550 See notes to financial staternents which are an integral part of these statements.

18

w ILLINols power COMPANY /ANNU4L REPOD? 1982

,5 l

~

1974

'1973 1979 1978 1977 1976 1975 (Thousands of Dollars)

$ 91,335

$ 82,361

$ 73,664

$ 59,785

$ 56,722

$ 44,650

$ 47,201 57,653 53,003 49,761 49,845 44,810 41,216 37,532 18,635 20,275 14,099 12,632 12,847 8,184 8,012 21,958 22,793 19,573 10,994 15,034 1,706 5,118 g

(38,731)

(28,929)

(20.183)

(10,503)

(7,459)

(7,960)

(7,189) i 150,850 149,503 136,914 122,753 121,954 87,796 90,674 (15,699)

(15,699)

(13,590)

(10,979)

(7,229)

(7,229)

(7,229)

__ 36,993)

(35,068)

(

J64.615)

(56,252)

(50,051)

(45,226)

(41,338) 70,536 77,552 73,273 66,548 73,387

-43,574 48,377 85,451 67,870 3,788 63,712 47,256 27,894 50,450 50,100 (368)

(379)

(275)

(525)

(186)

(139) 100,000 100,000 118,700 100,000 58,500 -

60,000 2,999 (2,999) 33,926 42,855 27,199 24,145 10,000 (10,000)

(12,000) 19.000 (6,000)

(15,000)

(15,000)

(45,000)

.s

-t 194,228 199,416 212,519 185,486 35,070 105.255 54,000 (11,048) 7.345 (23,480)

(13,177) 7,378 (27,781)

-4,546 s (835)

(814) 1,371 965 (407)

(1,238)

(1,743)

(11,883) 6,531 (22.109)

(12,215) 6,971 (29,019) 2,803 252,881 283,499 263,683 239,822 115,428 119,810 105,180 38,731 28,929 20,183 10,503 7,459 7,960 7,189

$291.612

_S312,428

$283.866

$250,325

$122,887

$127,770

$112,369

$ (5,146)

$ 22,231

$ (534)

$(17,997)

$ 1,996

$ (3,873)

$ 1,985 (11,673)

(10,466)

(3,632)

(8,313) 12,749 (25,792)'

1,842 (19,228)

(14,253)

(24,868)

(11,149)

(9.134)

(11,944)

(1,348)

~

27,781 10,884 9,832 6,429 6,983 3,186 (2,896) 2,365 1,650 1,528 2,533 1,210 962 (3,455) 178 (4,466) 5,529 (6,330) 5,101 4,094 3,286 3,711 692 6,520 (402) 2,827 379 ~

(4,978)

(6,590)

(2,032) 3,271 306 1,752 490

$(11,048)

$ 7,345

$(23.480)

$(13,177)

$ 7,378

$(27,781 )

$ 4,546 1979 1978 1977 1976 1975 1974 1973 (Thousands of Dohars)

$270,806

$296,597

$272,462

$239,936

$112,234

$116,637

$ 98,646 20,806 15,831 11,404 10.389 10,653 11,133 13,723

$291,612

$312,428

$283,866

$250,325

$122,887

$127,770

$112,369 5 6,743

$ 6,247

$ 5,040

$ 8,010

$ 7,420 T-B,M

$ 5,742 2,218 2,280 1,746 2,034 1,695 2,014 2,126

$ 7.966

$ 8,527

$ 6,786

$ 10,044

$ 9,115

$ 8,278

$ 7,868 19

- y y'

NOTES TO FINANCIAL STATEMENTS m

y%

7 Nate 1-Summary of Accounting Policies:

For income tax return purposes, net depreciable utility The Company is subject to regulat;ons of the lilinois plant does not include the allowance for funds used

- ' ' CommeredCommission (ICC) and the Federal Energy during construction which is capitalized for financial statement purposes. The tax effect resulting from this Regulatory Commission. Because of the rate-making difference and certain other differences in the deprecia-process, certain differences arise in the application of tion bases is reflected currently in net income.

generally accepted accounting principles as between The Company records revenue as billed to its cus-regulated and non-regulated businesses. Such differ.

tomers on a monthly cycle billing basis. At the end of ences concern mainly the time at which various items each month, there is an undetermined amount of un-l enter into the determination of net income in order to billed electric and gas service which has been rendered follow the principle of matching costs and revenues.

from the latest date of each cycle billing to the month The Company's principal accounting policies are de, end. Revenues as determined by meters read but not i

scribed below.

billed at year end are subject to income taxes. The Utility Plant-The cost of additions to utility plant income tax effect of this book-tax timing difference in and replacements for retired property units is capi-the recognition of revenues is normalized as are other talized. Cost includes labor, material and an allocation minor book-tax timing differenccs.

of' general and administrative costs plus an allowance Investment tax credits which reduce federal income i

for funds used during construction as described later taxes have been deferred and are being amortized to in this note. Maintenance and repairs, incluoing re-income over the life of the property which gave rise placement of minor items of property, are charged to to the investment tax credits, maintenance expense as incurred. When units of de-Federal and state income taxes are allocated be-preciable property are retired, the original cost and tween operating and non-operating income and ex-dismantling charges, less salvage, are charged to ac, penses. The tax effects relating to non-operating cumulated depreciation.

activities are included in Other Income-Miscel-Depreciation-For financial statement purposes, de-laneous-net.

I preciation is provided over the estimated lives of the various classes of depreciable property-by applying Allowance for Funds Used During Construction-The composite rates on a straight-line basis. Provisions for Federal Energy Regulatory Commission (FERC) Uniform depreciation of electric utility plant in 1982,1981, and System of Accounts defines Affowance for Funds Used 1980 were equivalent to 3.4% of the average depre-During Construction (AFUDC) as the net cost for the ciab(e cost. Provisions for depreciation of gas utility period of construction of borrowed funds used for con-plant, as ~a percent of the average depreciable cost, struction purposes and a reasonable rate on other funds 3

were equivalent to 3.0% in 1982 and 2.9% in 1981 and when so used. AFUDC is capitalized at a rate which is 1980.

related to the approximate weighted average cost of i

income Taxes-For income tax purposes, the Com-capita reduced by the income tax effect of the interest pany computes depreciation using the most liberalized portion thereof. While cash is not realized currently from lives and methods allowed by the Internal Revenue such allowance, it is realized under the rate-making Code.

process over the service hfe of the related property The tax effect of additional deductions for income through increased revenues resulting from higher rate l

l tax purposes, which recult from (a) the use of liberal-base and higher depreciation expense.

l' Ized depreciation methods and use of different book The rate used in computing AFUDC by the Company, and tax depreciable lives, including the Class Life which is an after-tax rate compounded semi-annually, (ADR) System for astett placed in service prior to was 7% from January through April,1980,7%% from a

1981 and the ACRS system for assets placed in service May,1980 through June,1981, and 8%% through subsequent to 1980, and (b) the amortization of cer-December,1982.

js l

tain facilities, is deferred and recognized in determina-In accordance with ICC rate orders, the Company

['

, tion of ' net income for financial statement purposes excluded $97,064.000 of electric plant construction i

when book provisions exceed deductions taken for work in progress (CWIP) from the base on which l

tarpurposes.

AFUDC is computed for the Clinton power station Certain overhead, dismantling and other costs which Unit 1 from January,1980 through June,1981 and are capitalized for book purposes, but claimed cur-S375,000,000 from that date through December,1982.

rently_ as deductions for income tax purposes, are Since these orders authorized the inclusion of such normalized.

expenditures in the rate base upon which the Com-20

f ILUNols POWER COMPANY / ANNUAL REPORT 1982 pany realized revenues, there was no material effect commitment. Interest rates on borrowings are, at the on net income.

Company's option, based upon the banks' prime rate, or the borrowing rate at key banks in the London interbank market. At December 31,1982 and 1981, Note 2-investments:

Fuel Company had commercial paper outstanding of included in the financial statements are S17,440,000 of

$96,000,000 and $57,040,000, respectively.

Guaranteed Floating Rate Bank Notes owned by IPF Another credit agreement provides for a revolving (Illinois Power Finance) Company N.V. (IPF), the loan commitment of $50 million through December 7, Company's wholly-owned financing subsidiary. These 1984. No borrowings have been made under this agree-bank notes, maturing in 1994, eam interest at a rate ment through 1982. The agreement is on a fee basis of which varies with the London interbank and Euro-dollar

%% of the unused line of credit. The interest rate rates. IPF, organized under the laws of the Netherlands under this agreement is based upon the borrowing rate Antilles, was established for the purpose of borrowing of key banks in the London interbank market.

. funds outside of the United States (see " Note 12-The Company also has lines of credit totaling ap-Long-term Debt"). The accounts of IPF are consoli-proximately $39 million with commercial banks for dated in the financial statements and all intercompany short-term bank borrowings. Bank borrowings under balances and transactions have been eliminated, such commitments have a maximum 360-day maturity IP Gas Supply Company, a wholly-owned subsidiary, from the time of issuance and carry an interest rate was organized for the purpose of exploration to in-equivalent to the prime rate in effect at the time of crease available natural gas supplies through one of issuance, adjusted to the prime rate in effect on the the Company's pipeline suppliers. In accordance with first day of each calendar quarter thereafter.

an order from the ICC, the accounts of the subsidiary At December 31,1982 and 1980 there were no out-are accounted for as an investment on the equity standing notes payable. At December 31,1981 notes accounting method. The Company's investment at payable consisted of $70,500,000 in commercial paper December 31,1982 and 1981 was $3,990,000 and bearing interest at an average rate of 12.6% which

$3.809,000, respectively.

matured between January 4,1982 and January 29, 1982.

Note 3-Short-Term Loans and Compensating The maximum aggregate amount of short-term bor-Balances:

rowings at any month end during 1982,1981, and 1980 The Company had total lines of credit represented by was $105.0 million, $70.5 million, and $77.6 million, bank commitments amounting to $394 million at De-respectively. The average daily short-term borrowings cember 31, 1982. These bank commitments support during these periods approximated $56.4 million, $21.2 the amount of commercial paper outstanding at any million, and S30.1 million, respectively (calculated as time.

an average of the daily borrowings outstanding), with On April 1,1982 the Company replaced its $80 mil-a weighted average interest rate of 13.3 %, 15.6%,

lion line of credit and $60 million loan agreement with and 11.8%, respectively (calculated by dividing the a $180 million three-year revolving loan agreement interest expense during the period for such borrow-which has a provision for conversion to an additional ings by the average short-term borrowings indicated three-year term loan. No borrowings were made under above),

this agreement in 1982. For the unused portion of the commitment, the Company pays an annual fee of % %,

partially offset by a credit related to average balances Note 4-Jointly Owned Facilities:

maintained at the banks. The interest rate on borrow.

Pursuant to agreements entered into in August,1976, ings under this agreement is, at the Company's option, Soyland Power Cooperative, Inc. and Western Illinois based upon the lending banks' prime rate, their 90-day Power Cooperative, Inc. have a 10.5% and a 9.5%

Certificate of Deposit rate, or the borrowing rate of key interest in the Clinton power station, respectively. Each banks in the London interbank market.

party is responsible for its portion of financing and con-In addition, the Company has a credit agreement struction expenditures. The Company's 80% interest which provides for a revolving loan commitment of $125 in the power station including land, nuclear fuel in million through December 31, 1985. The Company in-process, and allowance for funds used during construc-tends to maintain this agreement to support its com-tion applicable to the Company's interest at Decem-mitment to Illinois Power Fuel Company (Fuel Com-ber 31, 1982 and 1981 was $1,524,334,000 and pany). See " Note 7-Commitments" Fees for this S1,176,743,000, respectively. The agreements include agreement are primarily based on % % of the loan the provisions that the Company will exercise control 21

Notes (Continued) i l

over construction and operation of the generating sta-prior service costs which are being amortized over a tion, the parties will share electricity generated in pro-period of about 25 years. Actuarial cssumptions were portion to their interests, and the Company will have revised in 1981 upon recommendations by the Com-certain obligations to provide replacement power to pany's independent actuary to reflect both actual Plan the Cooperatives when the units are out of service.

experience and actuarial projections resulting in a decrease of approximately $8,600,000 in unfunded N:le 5-income Taxes:

prior service costs. The cost of the pension plans was Income taxes included in the Statements of income

$7,332,000, $5,808,000 and $6,839,000 during 1982, consist of the following components:

1981 and 1980, respectively.

Year Ended Following is a comparison of accumulated plan December 31, benefits and plan net assets as of January 1, the most 1982 1981 1980 recent information date for which the data is available:

(Thousands of Dollars) 1982 1981 Current taxes-(Thousands of Dollars) included in Operating Expenses and Taxes

$62,166 $40,229

$35,193 Actuarial present vclue of accumulated pan Nnds-included in Other income-Vested.

$ 79,923

$ 70,172 Misce!!aneous-net (19,522) (15.648) (12.685)

Non-vested..

10,178 8.996 Total current taxes.

42,644 24.581 22 508 M',2441M

$ 79,168 Deferred taxes-

$123

$124.713 Book-tax depreciation Net assets available for benefits...

differences-net.

13,284 10,673 14.398 Certain overhead, dismanthng The assumed rate of return used in determining actu-and other costs capita!! zed-net 9.497 9,144 5.524 anal present value was 75 Book-tax revenue recognition differences (6,195) 1,016 (1,070)

Total deferred taxes.

16,586 20.833 18.852 investment tax cred;t-Illinois Power Fuel Company, which is 50% owned by deferred (net) 22,227 21.419 23.071 the Company, was formed in January,1981 for the Total income taxes.

S81,457

$66.833

$64.431 purpose of financing a portion of the nuclear fuel Income taxes are less than the amount which would requirements of the Clinton power station. The Com-be computed by applying the statutory federal and pany entered into a lease agreement with the Fuel state income tax rates to pre-tax income; the principal Company under which the Company will lease nuclear differences are as follows:

fuel. Lease payments, which will be equal to the Fuel Year Ended Company's cost of fuel as consumed, will begin when Decernber 31, the Clinton power station commences pre-commercial 1982 1981 1980 operation. The Company is obligatea to make sub-ordinated loans to the Fuel Company at any time the (Thousandsof Dollars)

Computed ta< expense at obligations of the Fuel Company which are due and incb" e3a'xNe' payable exceed the funds available to the Fuel Com-

$1

• 7,632

$96.066 $88.356 Reductions (increase) in pany. The Company's investment of $50,000 is ac.

income taxes resu! ting from-counted for under the equity method and the lease ur!ng chns r"ucIo"n 38,778 30,371 25.425 is accounted for as an operating lease in accordance Other-net (2,603)

(1,138)

(1.500) with an ICC order. Had the Company accounted for Totat income taxes.

$ 81,457 566.833

$64,431 the nuclear fuel lease as a capital lease, both total assets and liabilities would have been increased by Note 6-Pension Costs:

approximately $97,000.000 at December 31, 1982.

The Company has pension plans covering all officers Reference should be made to " Construction" in the and employees. Pension costs, which are funded as forepart of this annual report for information concern-accrued, include current service costs plus unfunded ing construction expenditures.

22

[

ILLtMols POWER COMPANY / ANNUAL REPoRV 1902 l

[

Note 8-Quarterly Financiallnformation (Unaudited):

First Quarter Second Quarter Third Quarter Fourth Quarter 1982 1981 1982 1981 1982 1981 1982 1981 (Thousands of Dollars Eacept Earnings Per Common Share)

Operating revenues

$340,855 $271,252 $245.517 $198,693

$245,119 $239,724 $275,284 M54,623 Operating income 49,775 38,535 37.913 25.580 43,365 43,228 28,671 29,435 Net incomo 47,012 37,078 37,003 25.130 43,226 39.351 29,154 25.854 l

Not income applicable to common stock.

42,038 32.104 32,029 20.156 38,252 34,377 24,179 20,879 Earnings per common share.

$1,01 92c 71c 54c 83c 88c 52c 52c Quarterly earnings per common share are based on weighted average number of shares outstanding during the quarter and the sum of the quarteid may not equal annual earnings per common share.

Note 9-Common Stock and Retained Earnings:

The Company has an Automatic Reinvestment and Stock Purchase Plan and an Employees Stock Ownership Plan (ESOP) for which 2,620,985 and 39,976 shares, respectively, of commcn stock were designated for issuance at December 31, 1982.

The Company also has a Tax Reduction Act Stock Ownership Plan (TRASOP), perra!!!ing the Company a maximum additional investment tax credit of 1% provided common stock of the Company equal in value to the additional credit is contributed to the Trust. The TRASOP allows an additional investment tax credit up to %%

provided that such amount is matched by employee contributions and that common stock of the Company equal in value to the additional credit and the employee contributions is contributed to the Trust. Under this plan,920,582 shares of common stock were designated for issuance at December 31,1982.

Changes in common stock during 1982,1981, and 1980 were as follows:

1982 1981 1980 Shares Amount

• Shares Amount

• Shares Amount

• Ba!ance beginning of year.

40.087,688

$665.921 34,507,851

$572,685 29,487,643

$490.539 Pubhc offerings.

4,000,000 78.120 3,000.000 48,165 3,000,000 45,075 Automatic Reinvestment and Stock Purchase Plan 2,375,662 46,162 2.222,506 38,399 1,676,155 30.369 ESOP 33.014 667 33,020 595 31,053 569 t

TRASOP.

362,093 7,836 324,311 6,077 313.000 6.133 Balance end of year 46,858,457

$798,706 40.087,688

$665.921 34,507,851

$572,685

• Thousands of dollars None of the Company's retained earnings at December 31, 1982, was restricted with respect to the declaration or payment of dividends.

23

4 N:tes (Continued)

N:te 10-Preferred and Preference Stock:

The following tabulation shows preferred and preference stock, issued and outstanding at December 31, 1982, 1981, and 1980, and the redemption prices (exclusive of accrued dividends) applicable to each series.

Serial preferred stock, cumulative,550 par value-Authorized and outstanding 5,000,000 shares (including 720,000 shares of redeemable preferred stock-see Note 11):

1982 1981 1980 Series Shares Redemption prices (Thoussads of Dollars) 4.08 %

300,000

$51.50..

$ 15,000 S 15,000 S 15,000 4.26 %

150,000 51.50 7,500 7,500 7,500 4.70 %

200,000 51.50 10,000 10,000 10,000 4.42 %

150,000 51.50 7,500 7,500 7,500 4.20 %

180,000 52.00 9,000 9,000 9,000 f

P

^

t1,1986 30,000 30,000 30,000 8 24 %

600,000 th ter f

P 35,000 35,000 35,000 7.56 %

700,000 5 t crea 54.25 prior to March 1,1986 8.94 %

1,000,000 52.90 thereafter and prior to March 1,1991 50,000 50,000 50,000 51.60 thereafter j

54.29 prior to August 1,1987 8.00 %

1,000,000 53 29 thereafter and prior to August 1,1992 50,000 50,000 50.000 52.29 thereaf ter Premium on preferred stock 1,171 1,171 1,171 S: rial preferred stock, cumulative, without par value-Authorized 5,000,000 shares; none outstanding Total preferred stock 215,171 215,171 215,171 Priference stock, cumulative, without par value-Authorized 5,000,000 shares; none outstanding Total preferred and preference stock

$215,171 5215,171 5215,171 The above outstanding issues of preferred stock, $50 par value, are redeemable at the option of the Company in whole or in part at any time upon not less than thirty days and not more than sixty days notice by publication.

N;te 11-Redeemable Preferred Stock:

On March 13,1980 the Company issued 720,000 shares of 11.66% serial preferred stock (par value $50), subject to mandatory redemption in an amount sufficient to retire on each February 1, beginning in 1988, 19,800 shares and February 1,2020,86,400 shares at $50 per share plus accrued dividends. The Company has after February 1, 1988 the noncumulative option to redeem up to 19,800 additional shares in each such year.

l 24

ILLINots POWER COMPANY /AN,NuAL REPORT 1982 f N:te 12-Long-Term Debt:

Long-term debt was represented by:

December 31, 1982 1981 (Thousandsof DoHars)

First mortgage bonds-3%% series duc 1982 S 20,000 20,000 20,000 3% % series due 1983 20,000 20,000 3%% series due 1986 75,000 75,000 11%% series due 1987.

4% serics due 1988.

25,000 25,000 75,000 14% % series due 1990 4% % series due 1993 35,000 35,000 5.85% series due 1996 40,000 40,000 6%% series due 1998 25,000 25,000 45,000 45,000 6%% series due 1998 35,000 35,000 8.35% series due 1999 9% series due 2000 35,000 35,000 7.60% series due 2001 35,000 35,000 7%% series duo 2003 60,000 60,000 6.60% series due 2004 (Pollution Control Series A) 8,500 8,500 97y,o/o series due 2004 100,000 100,000 10% % series duc 2004 50,000 50,000 8%% series due 2006.

100,000 100,000 6% series due 2007 (Pollution Control Series B) 18,700 18,700 100,000 100,000 8% % series due 2007 8% % series due 2008 100,000 100,000 12%% series due 2010 50,000 50,000 12% series due 2012.

75,000 Total first mortgage bonds 1,127,200 997,200 14%% debentures due 1989*.

50,000 Long-term bank notes due 1987**

17,000 Total long-term debt 1,194,200 997,200 Unamortized premium and discount on debt (7,220)

(5,561) 1,186,980 991,639 Less first mortga0e bonds maturing within one year.

20,000 20.000

$1,166,980

$971,639

• The debentures, issued by IPF, are guaranteed as to payment of principal and interest by the Company.

• Interest rate, which is based upon the borrowing rate of key banks in the London interbank market plus a margin of %%,

is adjusted quarterly and was 9% % at December 31,1982.

Certain supplemental indentures to the Mortgage and Deed of Trust require that the Company, beginning in 1985, deposit annually in cash as a sinking and property fund S5,000,000 for the 9%% series due 2004 and $100,000, and increasing S25.000 every two years, for the 6.60% series due 2004 (Pollution Control Series A), which amounts are not subject to reduction. Certain other supplemental indentures require that the Company deposit annually in t

cash as a sinking and property fund amounts not to exceed $2.950,000 in 1983, $3,550.000 in 1984, $4.050,000 in 1985, $3,850,000 in 1986 and $4,850,000 in 1987, which amounts are subject to reduction in accordance with cer-tain terms of the mortgage; historically these requirements have oeen met by pledging property additions.

The above bonds are secured by a first mortgage lien on substantially all of the fixed property, franchises and rights of the Company with certain minor exceptions expressly provided in the mortgage securing the bonds. The remaining balance of net bondable additions at December 31,1982 was approximately S918,000,000.

25

N;tes (C::ntinued) -

N:te 13-Segments of Business:

The Company is a public utility engaged in the generation, transmission, distribution and sale of electric energy and the distribution and sata of natural gas.

1982 1981 1980 Total Titel Total Electric Gas Company Electric Gas Company Electric Gas Company (Thousands of Dollars)

(Thousands of Dollars)

(Thousands of Dollars)

Operating information--

Operating revenues.. $ 685,544 $421.231 $1,106,775 $ 620,968 $343,324 $ 964,292 $ 567,356 $316.014 $ 883,370 Operating expenses, excluding provision for incomo taxes..

456,179 389.693 845.872 419.079 325.954 745.033 401,517 280,191 681,708 Pre-tax operating income.

229,365 31,538 260,903 201,889 17,370 219.259 165,839 35,823 201,662 Allowance for funds used during con-struction (AFUDC) 78,216 193 78,409 61,356 55 61,411 51,032 188 51,220 Pre-tax cperating income, including AFUDC....

$ 307,581 $ 31,731 339,312 $ 263.245 $ 17,425 280.670 $ 216,871 $ 36,011 252,882 Other (income) and deductions.....

(21,498)

(16,651)

(14,798)

Interest charges 103,436 87,427 77,002 Provision for income taxes 100,979 82,481 77,116 Net income per accompanying state-ments of income..

$ 156.395

$ 127,413

$ 113,562 Other information-Depreciation

$ 51,581 $ 9.940 $ 61.521

$ 50.522 $ 9.509 $ _ 60 031 $ 48.838 $ 8.997 $ 57.835 Capital expenditures. $ 396 233 $ 16.651 $ 412 884 $ 330.470,$ 19.045 $ 349 515 $ 297,157 $ 18.406 $ 315.563 Investment information-Identifiable assets *

$2,651,015 $284,929 $2,935,944 $2,307,598 $285.489 $2,593,087 $2,088,962.,$269.619 $2,358,581 Nonutility plant and other investments 25,616 8,651 8,596 Assets utilized for overall Company operations..

130.962 120,757 100,014 Total assets.

$3.092.522

$2,722.495

$2.467,191

• Utility plant, nuclear fuel and acquisition adjustment less accumulated depreciation and amortization, fuel, natural gas stored underground, and materials and supplies, t

4 26

I f

ILLINolS POWER COMPANY / ANNUAL REPORT 1982 i

i Two-Year Dividends and Stock Prices by Quarters The common stock is listed on the New York Stock Exchange and the Midwest Stock Exchange. The prices below are the prices reported on the Composite Tape. The preferred stocks are listed on the New York Stock Exchange j

and the prices below are the prices on that Exchange.

j l

1982 Stock Prices 1981 Stock Prices l

1 2

3 4

1 2

3 4

Dividends

• High Low High Low High Low High Low High Low High Low High Low High Low Common 22 185/s 21 % 19 % 22 % 18 % 237/s 205/s 19 % 17 19 % 16 % 20 17 % 21 % 17 %

4.08% Pfd.

$.51 14% 13W 16 14 16 % 13 % 18 15 % 16 % 14 % 16 14 % 16 13W 15W 14 4.26% Pfd.

.53 %

16 % 13 % 16 13 % 18 14 % 20 16 % 16 % 14 % 17 15 % 17 15 % 16 14 %

4.70% Pfd.

.58%

17 % 14 % 17 % 16 18 % 16 20 % 18 % 18W 16 18W 16% 17W 15W 17% 15%

4.42% Pfd.

.55%

17 % 14 16 % 15 % 18 15 19 % 16 % 17 15W 17 15% 17W 14% 16 14 %

4.20% Pld.

.52%

15 % 13 % 17 15 18 14W 19% 17% 16% 14% 155/s 14W 15% 14W 15% 14 8.24% Pfd.

1.03 29 % 24 % 32 % 28 % 34 28 37 31 % 31 % 29 30% 28% 30W 27 30 25 %

7.56% Pfd.

.94 W 27% 24% 29W 255/s 31 25 % 33 % 29 31 27 28 26 % 27 % 25 % 27 % 24 8.94% Pfd.

1.11 %

32 28 % 33 % 30 36 % 31 39 % 35 33W 32 34 % 31 31 % 29 32W 28%

8.00% Pfd.

1.00 28W 25W 30% 27% 32% 27 35 % 30 % 30 % 27 % 31 % 28 29 % 28 28 26 11.66% Pfd.

1.45 %

45 43 % 49 42 % 48 455/s 54W 49 50 % 49 48 % 48 % 49 46 47% 43W

• The amount declared in each quarter during 1981 and 1982.

' $.59h per common share in first quarter 1981 through third quarter 1981 and S.62 in fourth quarter 1981 through fourth quarter 1982.

There were 80,005 registered record holders of common stock at January 10,1983.

S:lected Financial Data

• 1982 1981 1980 1979 1978 Total operating revenues

$1,106,775

$ 964,292 5 883,370 S 751,822 S 672,014 Not income..

S 156,395 S 127,413 S 113,562 S 91,335 5 82,361 Not income applicable to common stock S 136,498

$ 107,516 S 94,493

$ 75,636 S 66,662 Earnings per common share S

3.04 S

2.84 S

2.87 2.70 2.74 Cash dividends declared per common share 2.48 5

2.405 5

2.355 2.28 2.28 i

l Total assets.

S3,092,522 S2,722,495 52,467,191 S2.214,652 S1,938.506 Long-term debt

$1,166,980

$ 971,639 S 991,402 S 866,747

$ 776,559 Redeemable preferred stock S 36,000 S 36,000

$ 36,000 Ratio of earnings to fixed charges" 3.04 3.16 3.25 3.15 3.34

• Thousands of dollars except earnings per common share, cash dividends declared per common share and ratio of eamings to fixed charges.

• • The ratio of earnings to fixed charges represents the number of times that earnings before income taxes and fixed charges cover the fixed charges. Earnings used in the calculation of the above ratios include allowance for funds used I

during construction and are before the deduction of income taxes and fixed charges which include interest on long-term i

debt, related amortization ot debt discount, premium and expense, other interest, and that portion of rent expense which is estimated to be representative of the interest component.

I I

I l

l 27 i

l

Supplementary Information to Disclose the Effects of Changing Prices The unaudited supplementary information presented entitled. Therefore, the excess of the cost of utility plant herein is intended to provide a perspective as to the stated in terms of constant dollars or current cost that approximate effect of inflation upon our Company as a exceeds the historical cost of utility plant is not pres-regulated utility. This information is not intended as a ently being recovered in the Company's rates, and is substitute for carnings reported on a historical cost reflected as a reduction to net recoverable cost.

basis. The information has been prepared as prescribed Both the January,1983 and the July,1981 ICC rate by the Statement of Financial Accounting Standards orders considered both the " fair value" and historical No. 33, Financial Reporting and Changing Prices. This cost of utility plant. However, since the allowed de-statement requires adjustments to historical costs to preciation was based upon historical cost, the need to estimate the effects that general inflation (Constant reflect a reduction to not recoverable cost remains un-Dollar) and changes in specific prices (Current Cost) changed.

have had on the Company's results of operations.

Gain from the Decline in Purchasing Power of Utility Plant and Depreciation Net Amounts Owed For the following presentation, utility plant has been To properly reflect the economics of rate regulation restated on both a constant dollar and a current in the Statement of Income Adjusted for Changing cost basis. Constant dollar amounts represent histori-Prices, the reduction of net utility plant to not recover-cal costs stated in terms of dollars of equal purchasing able cost should be offset by the gain from the decline power as measured by the Consumer Price Index for in purchasing power of net amounts owed. During a all Urban Consumers (CPI-U). Current cost amounts period of inflation, holders of monetary assets (such reflect the changes in specific prices of plant from the as receivables) suffer a decline in general purchasing date the plant was acquired to the present and are an power because the amounts of cash received for these estimate of the cost of currently reproducing existing items in the future will purchase less. Conversely,1s-plant. Constant and current dollar amounts differ to the suers of monetary liabilities (such as long-term debt, extent that specific prices of utility plant have increased preferred stock and accounts payable) experience a more or less rapidly than prices in general.

gain because future payments will be made with dollars The current cost of utility plant, which includes land, having less purchasing power. The Company has sub-land rights, intangible plant, property held for future stantial amounts of debt and preferred stock and, use, construction work in progress, and nuclear fuel therefore, for purposes of these calculations, has a net was determined by indexing surviving plant using the gain from holding monetary liabilities in excess of Handy-Whitman Index of Public Utility Construction monetary assets.

Costs. Accumulated depreciation was calculated by applying the historical depreciation rates to the esti-Inventories and Taxes mated current costs of depreciable properties by year Fuel inventon.es, the cost of fuel used in generation of addition.The current year's provision for depreciation and gas purchased for resale have not been restated stated in constant dollars and current costs was deter-from the,r historical costs. Regulation limits the re-i mined by applying the Company's composite depre-covery through the operation of adjustment clauses in ciation rates to the indexed utility plant amounts.

basic rate schedules to the actual costs of fuel and The increase in depreciation expense on utility plant, purchased gas. For this reason, fuel inventories are restated for the effects of changing prices, represents considered monetary assets, the excess of depreciation expense in terms of con-As prescribed in the Statement of Financial Account-stant dollars and current cost over historical deprecia-ing Standards No. 33, income taxes were not adjusted.

tion expense ($61.5 million) used for financial state-Present income tax laws ignore the effects of inflation ment purposes.

in measuring taxable income. Higher depreciation ex-pense under constant dollar and current cost account-Reduction to Net Recoverable Cost ing is not tax deductible. Therefore, the Company's Under the rate-making procedures prescribed by the effective federal and state income tax rate, when regulatory commissions, to which the Company is sub-adjusted for inflation, is 52.8% under constant dollar ject, the historical cost of utility plant has been re-and 57.8% under current cost for 1952 each of which flected in the rate base used in recent years to deter-exceeds the reported effective tax rate of 34.2% and mine the amour,t of return to which the Company is the statutory federal and state rate of 49.5%.

28

[

ILLINOIS POWER COMPANY / ANNUAL REPORT 1982 St:tement of Income Adjusted for Changing Prices For the Year Ended December 31,1982 Constant Dollar Current Cost Average Average 1982 Dollars 1982 Dollars (Thousands of Dollars)

$156.395

$156,395 i

Net income, as reported.

Increase in depreciation expence on utility plant as restated for the effects of changing prices......

83,398 97.038 S 72.997*

$ 59,357 Net income (excluding reduction to net recoverabfe cost) increase in specific prices (current cost) of utility plant held during the year **

$133,828 Less increase in cost of utility plant adjusted for changes in general price level 160.149 Excess of increase in general price level over increase in specific prices (26,321)

Reduction to net recoverable cost.

$(18,182) 21,779 (4,542)

Gain from decline in purchasing power of net amounts owed.

58.884 58.884 M0,702

$ 54.342 Net price level adjustment

• Including the reduction to net recoverable cost. the net gain on a constant dollar basis would have been approximately $55 million for 1982.

' At December 31,1982, current cost of utility plant, nct of accumulated depreciation, was approximately $4.4 billion, while net historical cost secoverable through depreciation was approximately $2.8 billson.

Five-Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices

• For the Years Ended December 31, 1982 1981 1980 1979 1978 Operating revenues-Historical cost

$1,106,775

$ 964,292 $ 883,370 $751,822 $672,014 Adjusted for general inflation..

1.106,775 1,023,410 1,034.774 999,778 994,264 H' torical cost information adjusted for general inflation a

income from operations (excluding reduction to net recoverable cost) 72,997 54,951 53,102 50,063 Income per common share (after preferred stock dividend require-ments and excluding reduction to net recoverable cost) 1.18

.89

.93 1.04 Net assets at year end at net recoverab!e cost 1.003,182 883,000 840,343 821,269 Current cost information income from operations (excluding reduction to net recoverab!e cost) 59.357 41,928 34,468 27,110 Income per common share (after preferred stock dividend require-ments and excluding reduction to not receverable cost)

.88

.55

.36

.22 Excess of increase in general price level over increase in specific

}

prices after reduction to net recoverable cost 4,542 168,973 178,563 233,433 Net assets at year end at net recoverable cost 1,003,182 883,000 840,343 821,269 General information Gain from decline in purchasing power of net amounts owed 58.884 129.527 168,646 204,569 Cash dividends declared per common share--

2.48 2.405 2.355 2.28 2.28 Historical cost Adjusted for general inflation 2.48 2.55 2.76 3.04 3.37 Market price per common share at year end-Historical cosi 23.75 20.625 17.88 19.13 22.75 Adjusted for general inflation 23.48 21.18 20.00 24.06 32.42 289.1 272.4 246.8 217.4 195.4 Average consumer price index..

292.4 281.5 258.4 229.9 202.9 Year-end consumer price index...

• In thousands of average 1982 dollars except per share data and indices.

29

ELECTRIC OPERATING STATISTICS 1982 1981 1980 1979 1978 R; venues (Thousands of Dohars)

$ 232,066

$ 209,310

$ 199,124 S 160,355 S 159,493 Residential 151,167 134,968 123,463 105.262 102,170 Commercial and small power Large power and light 243,016 223,950 198,177 174,315 158,611 Other 13,587 11,430 9,897 8,137 7,631 Revenues-ultimate consumers 639,836 579,658 530,661 448,069 427,905 Rural cooperatives and municipal utilities 40,648 35,826 33,236 27,790 21,448 Other electric utilities,

66 47 68 59 66 Miscellaneous 4,994 5.437 3,391 3,134 2,788

$ 685,544 5 620.968

$ 567,356

$ 479,052 S 452,207 Cu:tomers at End of Year Residential 470,318 469,452 466,546 461,966 455,014 Commercial and small power 54,873 54,895 54,546 53,804 53,051 Large power and light 348 361 359 374 368 Other..

712 718 715 714 699 526,251 525,426 522.166 516,858 509,132 SIIes in KWH (Thousands)

Residential 3,772,690 3,741,175 4,003,563 3,737,245 3,770,703 Commercial and small power 2,479,246 2,449,342 2.492,930 2.408,131 2,383,521 Large power and light 6,218,009 6,555,190 6,507,468 6,738,321 6,271,872 Other 304,168 295,922 290,851 282,848 271,853 Sales-ultimate consumers 12,774,113 13,041,629 13,294,812 13,166,545 12,697,949 Rural cooperatives and municipal utihtees 1,201,814 1,169,163 1,189,702 1,057,113 874,452 Other electric utihties 1,772 1,758 1,961 1,874 2,004 13,977,699 14,212,550 14,486,475 14,225,532 13,574,405 Gsnerated and Purchased in KWH (Thousands)

Generated-Steam 14,431,747 15,710,540 16,300,993 16,840,214 15,770,060 Hydro and internal combustion 10,122 35,447 61,914 55,241 38,039 Total generated.

14,441,869 15,745,987 16,368,907 16,895.455 15,808,099 Purchased and interchanged-net 452,761 (616,437)

(838,615)

(1,666,889)

(1,256,163)

Total output 14,894,630 15,129,550 15,530.292 15,228,566 14,551,936 Less-used and unaccounted for 916,931 917,000 1,043,817 1,003,034 977,531 13,977,699 14.212.550 14,486,475 14,225,532 13,574,405 Firm Peak Demand (native load) in KW(Tnousands) 2,951 3,100 3,150 3.019 2,825 Nst Generating Capability in KW (thousands) 3,806 3,815 3,815 3,815 3,815 30

[

ILLINOIS POWER COMPANY / ANNUAL REPORT 1982 GAS OPERATING STATISTICS 1982 1981 1980 1979 1978 R1 venues (Thousands of Dottars)

Residential -without space heating 2,347 2,372 2,201 2,056 1,758 with space heating.

189,389 156,378 142,050 124,354 105,484 Commercial-without space heating 4,160 4,040 2,265 2,858 1,722 with space heating 73,055 57,602 52,976 46,010 37,536 Industrial -non-interruptible 147,446 114,944 76,743 43,714 30,910 interruptible 3,516 6,803 31,951 51,354 40,906 Revenues-ultimate consumers 419,913 342.139 308,186 270,346 218,316 Interdepartmental revenues-interruptible 281 1,074 1,825 2,365 1,058 1,037 111 6,003 59 433 Miscellaneous.

$ 421,231 S 343,324

$ 316.014

$ 272,770

$ 2"),807 Cust:mers at End of Year Residential -without space heating 12,480 13,470 16.040 18,251 19,834 with space heating 337,011 336,504 332.695 326,816 319,968 Commercial-without space heating 1,556 1,624 1,891 2,048 2,112 with space heating 31,567 31,387 30,725 30,032 29,522 Industrial -non-interruptible..

477 482 474 480 470 interruptible 6

7 24 58 80 383,097

_ 383.474 381,849 377,685 371,986 Silts in Therms (Thousands)

Residential -without space heating 3,848 4,487 5,165 6.231 6,172 with space heating 414,062 386,282 414,405 459,329 469,906 Commercial-without space heating 8,742 10,792 6,749 10,586 7,986 with space heating 176,976 161,720 168,563 182,212 181,960 Industrial -non-interruptible 394,635 363,633 280,471 194,310 181,029 interruptible 8,716 21,183 101,935 186,264 180,138 Sales-uitimate consumers.

1,006,979 948,097 977,288 1,038,932 1,027,191 Interdepartmental sales-interruptible 801 4,360 8.853 13 3 8.034 1,007,780 952,457 986,141 1,052,073 1.035.225 Purchased and Produced-Therms (Thousands)

Purchased 994,815 1.040,091 980,426 1,118,246 1,087,749 Storage-net of (injected) and withdrawn.

48,400 (48,047) 55,525 (30,203)

(14,998)

T Purchased gas delivered 1,043,215 992,044 1,035,951 1,088,043 1,072,751 Produced 279 21 99 69 24 Total 1,043,494 992,065 1,036,050 1,088,112 1,072,775 Less-used and unaccounted for 35,714 39,608 19,909 36,039 37,550 1,007,780 952,457 986,141 1,052.073 1,035,225 31

Board of Directors Officers Wendell J. Kelley Robert J. Burow Chairman and President Consultant and Retired Publisher of The Commercial-News Danville, Illinois William C. Gerstner William C. Gerstner Executive Vice President of the Company Executive Vice Decatur, Illinois President Grover J. Hansen Charles W. Wells President and Chief Oparating Officer of First Federal Savings & Loan Association Executive Vice of Chicago President Chicago, Illinois Wendell J. Kelley Chairman and President of the Company Arthur E. Gray Decatur, Illinois Vice President and Donald E. Lasaler Secretary Chairman of the Board and Chief Executive Officer of Larry D. Haab Mercantile Bancorporation Inc.

Vice President and (a bank holding company)

Treasurer St. Louis, Missouri Donald P. Hall Eva Jane Milligan Vice President Consultant to and Retired Senior Vice President. General Personnel Manager of Marshall Field & Company Leonard J. Koch (a retailer); President of Pro Lines, Inc.

Vice President (a merchandise service organization)

Chicago, Illinois James O. McHood Keith R. Potter Vice President Consultant and Retired Vice Chairman of International Harvester Company William E. Warren (manufacturer of trucks; agricultural, construction, Vice President and industrial equipment; and gas turbines)

Easton, Maryland Porter J. Womeldorff Boyd F. Schenk Vice President President and Chief Executive Officer of Pet incorporated (processor and marketer of food products and other consumer goods)

St. Louis, Missouri Larry F. Altenbaumer Assistant Treasurer RIM P.SW Grain and Seed Farm Operator John B. Burdick Spnngfield, Illinois Charles W. Wells Executive Vice President of the Company Decatur, Illinois

}

Gordon R. Worley Executive Vice President--Chief Financial Officer of Montgomery Ward & Co.,

incorporated (a retailer)

Chicago, Illinois Vernon K. Zimmerman Dean. College of Commerce and Business Administration University of Illinois Urbana, Illinois Note: The principal occupation of each director and officer of Illinois Power Company is that listed.

32

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