ML20129E535

Application for Amend to License NPF-62,requesting Consent to Proposed Transfer of Soyland Power Cooperative 13.21% Minority Ownership Interest in Plant to Illinova Power Inc

ML20129E535
Person / Time
Site:	Clinton
Issue date:	10/17/1996
From:	Connell W ILLINOIS POWER CO.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
L47-96(10-17)LP, WC-313-96, NUDOCS 9610280089
Download: ML20129E535 (139)

Text

{{#Wiki_filter:- lilinois Power Company C ;a's Pow 2r Station l P.o. Box 978 Clinton. IL ?1727 Tel 217 935^623 Fax 217 935-4032 Wilfred Connell EUNMS Vice President P6WER u 6o2648 L47-%(10-17 )LP 8E.100a WC-313-96 October 17, 1996 Docket No. 50-461 10CFR50.90 10CFR50.80 10CFR50.75 Document Control Desk Nuclear Regulatory Commission (NRC). Washington, D.C. 205.i5 Subject' Clintor. Power Station Request for Amendment to Facility Dperating License NPF-62 (LS-96-01 D

Dear Madam or Sir:

Pursuant to 10CFR50.80 and 10CFR50.90, Illinois Power Company (Illinois ' Power) hereby requests (a) the NRC's consent to the proposed transfer of Soyland Power Cooperative's 13.21% minority ownership interest in the Clinton Power Station (CPS) to Illinova Power Marketing, Inc. (IPMI), the unregulated power marketing affiliate of Illinois Power, and a wholly owned subsidiary ofIllinova Corporation (Illinova), and (b) the NRC's approval for an amendment to Facility Operating License NPF-62 for CPS associated with this transfer. Attachment I to this letter contains an affidavit supporting the facts set forth herein. Justification for Proposed Change Soyland is a minority owner of CPS with an ownership share of 13.21%. Due to f j so cre financial difficulties arising in large part because ofits CPS-related debt, Soyland j has been forced to seek significant refinancing ofits outstanding obligations. As a condition precedent tr, said refinancing, the U.S. government, acting through the j; Administrator oft!.e Rural Utilities Services, required Soyland to completely divest itself / of any ownership of, or responsibility for, CPS. As a result, Soyland and Illinova entered into an agreement wherein Illinova assumed full financial responsibility for Soyland's CPS M/p'{' obligations as of September 1,1996, and Soyland agreed to transfer its entire ownership / interest in CPS to Illinova, subject to receipt of all necessary regulatory approvals. It has been decided that while Illinova has agreed to be financially responsible for CPS, the "1103500e9 961017 ^ 9PL1 ADOCK 05000461 p PDR I- .._m.

m _. _. _ _ _. _ _.. -.. _ _ - _. _ _ _ U-602648 l Page 2 t i transfer of ownership should be made to IPMI, who will assume financial responsibility upon approval. Under the terms of this agreement and the transactions related thereto, Soyland's ownership interest will be transferred directly to IPMI, and in accordance with a l Power Sales Agreement (PSA) currently being established, IPMI will sell the entire output l ofits share of CPS to Soyland for a period of at least ten years. The proposed license. transfer and amendment will not affect Illinois Power's existing 86.79% ownership interest in CPS and will not result in any change in the management and operation ofIllinois l Power or CPS. Because the proposed transfer will not involve any operational changes at CPS, and since the transfer of Soyland's ownership inteNst will result in a more financially l viable minority ownership interest in CPS, Illinuis Power believes that there will be no resultant adverse impact on, or changes with respect to, the common defense and security, public health and safety, or the environment. As further discussed in Attachment 3(e) of this letter, and with respect to the financial qualifications of the proposed transferee l (IPMI) and the continued assurance of the i vailability of funds for decommissionirm, tha proposed transfer of ownership to IPMI requires and supports continued compliancs ,..a j applicable regulatory requirements (i.e.,10CFR50.75). In accordance with 10CFR50.80, l-and to ensure that applicable information related to assurance of decommissioning funds is updated, Illinois Power is preparing a revision to the decommissioning report required by 10CFR50.75(b) and 10CFR50.33(k). The revision to that report will be provided in the near future. In support of this request, Illinois Power has attached copies of the following documents as Attachment 3: (a) the agreement pursuant to which Soyland proposes to l transfer its ownership interest in CPS to Illinova; (b) Illinova's most recent financial l statement, (c) Illinois Power's most recent Securities and Exchange Commission forms 8-l K,10-Q, and 10-K; (d) Illinova's most recent Annual Report; and (e) supplemental l information provided to address the requirements of 10CFR50.80. Illinois Povier intends l to also provide a copy of the PSA being negotiated between IPMI and Soyland. Because j i the PSA is still being negotiated, a copy is not available for submission at this time. A l copy will therefore be provided as a supplement to this application, as soon as it is available. With respect to the schedule for completing the proposed transfer of ownership, Soyland's refinancing has already occurred in accordance with its commitments. The i NRC's consent for the proposed transfer is therefore desired as soon as possible. On that basis, Illinois Power respectfully requests issuance of the required license amendment prior to December 31,1996. 1 i i

U-602648 Page 3 i Description of Proposed Amendment Two pages of the CPS Operating License will require revision to reflect Soyland's transfer ofits ownership in CPS to IPMI. This revision will consist of removing the references to Soyland and replacing them with references to IPMI. Marked-up copies of these two pages from the CPS Operating License are provided as Attachment 2 to this letter. Basis for No Significant Hazards Consideration According to 10CFR50.92, a proposed change to the Operating License involves no significant hazards consideration if operation of the facility in accordance with the proposed change would not (1) involve a significant increase in the probability or consequences of an accident previously evaluated, (2) create the possibility of a new or different kind of accident from accident previously evaluated, or (3) involve a significant reduction in a margin of safety. The amendment requested herein involves only the transfer of a minority ownership interest in CPS to a subsidiary of the parent holding company for the existing principle owner and licensed operator for CPS. The transfer will in no way affect the provisions of the CPS Ownership Participation Agreement with respect to the operation and control of CPS. Illinois Power will thus continue to have exclusive responsibility and control over the operation and maintenance of the facility. In addition, the design and construction of the facility is unaffected by the proposed amendment. 1. The proposed amendment does not involve a significant increase in the probability or consequences of an accident previously evaluated because it l merely revises the Operating License to indicate the transfer of a minority ownership interest to the corporate parent of the majority owner and licensee. This proposed amendment represents an administrative rather than operational change and, therefore, has no impact on accidents previously evaluated. 2. The proposed amendment does not create the possibility of a new or different kind of accident from any accident previously evaluated because Illinois Power will continue to be the operator of CPS, and further, there l will be no change to the plant's physical configuration or operating philosophy as a result of this proposed amendment. 3. The proposed amendment does not involve a significant reduction in the margin of safety because it is only an administrative change and will have no impact on any margin of safety related to the design or operation of the facility.

. -.. - ~ - U-602648 l Page 4 i i The proposed amendment does not, therefore, involve a significant hazards consideration. Additional Considerations l l Illinois Power has reviewed the proposed amendment to the Operating License against the criteria of 10CFR51.22 for environmental considerations. The proposed l amendment does not involve a significant hazards consideration, does not significantly l increase the types and amounts or change the types ofeffluents that may be rele' <xi l offsite, nor does it significantly increase individual or cumulative occupational re istion j l exposures. Based on the foregoing, Illinois Power concludes that the proposed Operating License amendment meets the criteria given in 10CFR51.22(c)(9) for categorical exclusion from the requirements for an Environmental Impact Statement. l In accordance with 10CFR50 30 and 10CFR170.12, one signed original of this application is enclosed with the understanding that Illinois Power will be assessed tim full cost of evaluating this request upon completion. In addition, pursuant to 10CFR50.91(b)(1), a copy of this request for amendment has been sent to the Illinois Department ofNuclear Safety. Sincerely yours, b Wilfred Connell Vice President i r TBE/csm Enclosures cc: NRC Clinton Licensing Project Manager NRC Resident Office, V-690 j l Regional Administrator, Region III, USNRC Illinois Department of Nuclear Safety

l to U-602648 l l l l Wilfred Connell, being first duly sworn, deposes and says: That he is Vice President of l 1 Illinois Power; that this proposed amendment of Facility Operating License NPF-62 has l been prepared under his supervision and direction; that he knows the contents thereof; and l that to the best of his knowledge and belief said letter and the facts contained therein are l true and correct. l d Date: This /7 day of October 1996, l l l Signed:

1. / MOM #

%dfred Connell I

• omCIAL SEAL' l

STATE OF ILLINOIS l SS. pg,gegges f N da y h t % S hes of s h ds dru[r COUNTY j u NNW% j Subscribed and sworn to before me this /'7 day of October 1996. d <.wu d M N a u / [otaryPublic) 3

to U-602648 n LS-96-011 / o,, UNITED STATES Page 1 of 2 h a NUCLEAR REGULATORY COMMISSION r, t WASHINGTON, D. C. 20S55 4 , FM ILLINOIS POWER COMPANY S0Y UJC P0"CP, C OPEP4 TIYC INC. l DOCKET NO. 50-461 nuNoVA POWER MARKETING, CLINTON POWER STATION, UNIT NO. 1 i FACILITY OPERATING LICENSE License No. NPF-62 1. The Nuclear Regulatory Commission (the Comission or the NRC) has found i Illinova { Marketing, acting on behalf of itself and as agent for 0;!r Power Cx;;;;.t}..d The application for license filed by Illinois Power ompany*(IP), l A. l l Inc. (licensees) complies with the standards and requirements of the l Atomic Energy Act of 1954, as amended (the Act), and the Comission's l regulations set forth in 10 CFR Chapter I, and all required notifica-l tions to other agencies or bodies have been duly made; B. Construction of the Clinton Power Station, Unit No.1 (the facility) has been substantially completed in conformity with Construction Permit No. CPPR-137 and the application, as amended, the provisions of the l Act and the regulations of the Comission; C., The facility will operate in conformity with the application, as l amendec, the provisions of the Act, and the regulations of the Comis-l sion (except as exempted from compliance in Section 2.0. below); l D. There is reasdnable assurance: (1)thattheactivitiesauthorizedby this operating license can be conducted without endangering the health and safety of the public; and (ii) that such activities will be con-l ducted in compliance with the Conaission's regulations set forth in l 10 CFR Chapter I (except as exempted from compliance in Section 2.D. below); E. Illinois Power Company is technically qualified to engage in the activ-ities authorized by this operating license in accordance with the Com-niission's regulations set forth in 10 CFR Chapter I; f. The licensees have satisfied the applicable provisions of 10 CFR Part 140, " Financial Protection Requirements and Indemnity Agreements," of the Comi'ssion's regulations; QIllinova

• Illinois Power Company is authorized to act as ageni. forb.,!=d Power Crepe ~

HvJ, Inc. and has exclusive responsibility and control over the physical construction, operation and maintenance of the facility. l Marketing,

.- -.- - ~ -... - - - -. -. -. - 1 to U-602648 LS-96-011 Page 2 of 2 I G. The issuance of this license will not be inimical to the common defense and security or to the health and safety of the public; l l H. After weighing the environmental, economic, technical, and other l benefits of the facility against environmental and other costs and l considering available alternatives, the issuance of Facility Operating l License No. NPF-62, subject to the conditions for protection of the environment set forth in the Environmental Protection Plan attached as 1 Appendix B, is in accordance with 10 CFR Part 51 of the Commission's regulations and all applicable requirements have been satisfied; and i i l I. The receipt, possession, and use of source, byproduct and special l nuclear material as authorized by this license will be in accordance l with the Commission's regulations in 10 CFR Parts 30, 40, and 70. I 2. Based on the foregoing findings regarding this facility, and pursuant to approval by the Nuclear Regulatory Commission at a meeting on April 10, 1987, Facility Operating License No. NPF-62, which supersedes the license for fuel loading and low power testing, License No. NPF-55, issued on September 29,# i 1986 j ,M, is hereby issued to Illinois Power company and SyM Power C :;:= Inc. (the licensees), to read as follows: Illinova l A. This license applies to the Clinton Power Station, Unit No.1, a boil-ing water nuclear reactor and associated cuipment (the facility),

Markting, The facility is located in Harp Township, DeWitt County, approximately]

owned by Illinois Power Company and SyhdPower Cx;: nth:hJnc. l six miles east of the city of Clinton in east-central Illinois and is described in the licensees' Final Safety Analysis Report, as supple-mented and amended, and in the licensees' Environmental Report-Operating License Stage, as supplemented and amended. MaMig B. Subject to the conditions and requirements incorporated herein, the Commission hereby licenses i (1) Illinois Power Company (IP), pursuant to Section 103 of the Act and 10 CFR Part 50, to possess, use and operate the facility at the designated location in Harp Township, DeWitt County, Illinois, l In accordance with the procedures and limitations set forth in i this license; Marketing, (2) %;h:8 Power _r;;=th:I Inc., pursuant to Section 103 of the l Act and 10 CFR Part 50, to possess the facility at the above desig-l l Illinova nated location in accordance with the procedures and ifmitations set forth in this license; (3) IP, pursuant to the Act and 10 CFR Part 70, to receive, possess and to use at any time special nuclear material as reactor fuel, in accordance with the limitations for storage and amounts re- , quired for reactor operation, as described in the Final Safety Analysis Report, as supplemented and amended; i >v

- (a) to U-602648 LS-96-011 i i ) Memorandum of Understanding / Agreement j Between Soyland and Illinova Regarding Transfer of Ownership Interest in CPS ) I l 1

00T.16-96 WED 04:03 PM IP LEGAL SERVICES FAX N0. 2173627458 P.02/17 '. :..v. S. j MEMORANDUM OF UNDERSTANDING l ENIERED INTO THIS lith day of September,1996, by and bethew. SOYLAND POWER COOPERATIVE, INC., an Illinois not-for proSt corporation ("Soyland"); U11NOIS POWER ANY, an k!!inois corporation (" Illinois Power"); ILLINOVA POWER MARKETING COI I a Delaware corporation ("IPMI"); and ILLINOVA CORPORATION, an Illinois corporation ("Illinova"). 1 WHEREAS, Soyland is a rural electric generation and transmission cooperative engaged in l the generation and transmission of electric energy and is the all-requirements power supplier to its twenty-one member rural electric distribution cooperatives; and WHEREAS, Illinois Power is a public utility engaged as to its electric utility business in the l generation, transmission, distribution and sale of electric energy and service principally to retail customers located within the State ofIllinois; and WHEREAS, IPMIis the unraeda'd power marketing mEinta of Blinois Power, and is fully u licensed by the Federal Energy Regulatory Commission ("FERC") to sell electricity to wholesale customers throughout the Unite'd States; and WHEREAS, Blinova is the exempt public utility holding company that is the parent of both Blinois Power andIPMI; and WHEREAS, Soyland, having stated that a restruemring of its electric supply and transmission arrangements under which it has operated with Blinois Power since 1984, and the P divestiture of its ownership interest in Illinois Power's nuclear plant, the Clinton Power Station i J l (" CPS") were the only alternatives to it seeking protection from its creditors under the United States j l I a i .\\

00T.16-96 WED 04:04 PM IP LEGAL SERVICES FAX N0. 2173627458 P.03/17 Bankmptcy Code, entered into negotiations with Illinois Power, IPMI, Illinova, and other utilities and power marketers, to obtain the benefits of said restructuring and divestiture ofits interest in CPS; and WHEREAS, those negotiations with Illinois Power, IPMI, and Illinova having been successfbl, the parties have agreed to restructure the existing electric supply and transmission m.gw. sits, and effect a transfer of Soyland's CPS ownership interest and associated liability; and WHEREAS, it being essential to Soyland that the restructured electric supply and transmission arrangement be effective as of September 1,1996, and that the transfer of the CPS cwnership interest be efreedve as of September 1,1996, and, further, it being unlikely that the { partio will have -**d and obtained the necessary regulatory approvals for the final restmeturing agreements prior to that date, the parties have agreed to enter into this interim Memorandum of Underending (" Memorandum") to implement the agreed upon restructuring and to relieve Soyland offurther CPS obligations pending approval of the final agreements, the future preparation of which are contemplated herein. NOW, THEREFORE, IN CONSIDERATION of the mutual promises herein set forth, the parties hereto agree as follows:

1. Term Sheet. This memorandum is intended by the parties to be an interim agreement under which the proposed restructuring may become effective as of September 1,1996, ano prior to the execution, filing and approval of the final tansaction documents. The parties acknowledge and

'agro(that fbrther negotiations may be required to complete said agreements, and that additional ( agreements not contemplated herein may be required to implement the proposed restructuring. The j t parties agree that, in any event, the terms and conditions set forth on the agreed upon Term Sheet, f 2 I

__00T-16-96 WED 04:04 PM IP LEGAL SERVICES FAX NO 2173627458 P.04/17 l -u; + P

• =d*i hereto as Exhibit A, shall govern both the operation of this Memorandum, and, to the extent that it applies, to the preparation of the fmal transaction documents. Any deviation from or changes i

to the terms and conditions set forth on Exhibit A shall be effective only upon written, mutual consent.

2. Transfer of Clinton Power Station Ownershio Interest. Soyland agrees that it shall, withoht the receipt of any cash, transfer to Illinova its entire ownership interest in the CPS, free and i

clear of any liens or other encumbrances. While Soyland and Blinova acknowledge that said transfer shall not be effective until such time that the Nuclear Regulatory Commission ("NRC"), and if t necessary, FERC, approve of same, each agrees that Blinova shall assume fmancial responsibility for Soyland's ownership interest in CPS as of September 1,1996. To implement Blinova's f t assumption of fmancial responsibility for Soyland's CPS ownership interest, Soyland and Blinova previously entered into an interim Agreement, dated August 30,1996, setting forth the terms and i conditions under which Blinova would assume such financial responsibility prior to the execution of this Memorandum of Understanding, and the execution and approval of the final transfer l documents. A copy of this interim Agreement is attached hereto as Exhibit B, and by this reference j k incorporated herein, specifically amended to delete the provisions ofParagraph 4 thereof, and made i a part herect The parties further agree that each shall execute such documents as may be necessary to effect Soyland's transfer ofits CPS ownership interest to Elinova, and that each shall fully cooperate with the other in obtaining the necessary regulatory approvals thereof

3. Ownershio ofNuclear Fuel and Soare Parts inventerv. The parties acknowledge that i

there remain unresolved issues pertaining to the ownership of nuclear fuel, nuclear fuel materials, and CPS spare parts inventory. These issues shall be the subject of further negotiations, and shall 1 3 i o

OCT-16-96 WED 04:05 Ptl IP LEGAL SERVICES FAX NO. 2173627458 P.05/17 4 be resolved prior to the preparation of the final CPS transfer documents. i.

• 4. CPS Decommissionina Liability Oh or before the date on which the actual transfer of Soyland's CPS ownership interest to Illinova becomes effective, Soyland agrees to direct the Trustee of a certain CPS D'ecommissioning Trust, established in accordance with NRC regulations, to take l

such action as may be necessary to permit Illinova to assume Soyland's obligations under said trust agreement and to become the S :ccessor Settlor of said trust. Subject to' the terms of said Trust, Illinova agrees to assume Soyland's obligations thereunder as Successor Settlor, and continue to fund the trust in accordance with the applicable rules and regula'tions ofthe NRC. Soyland and Illinova each agree to cooperate fullyin the preparation and execution of any documents required to effect the changes contemplated under this paragraph. i,

5...Eower Coordination Acreement. Soyland and IPhD agree that they will seek FERC appro 21 of amendments to a certain Power Coordination Agreement ("PCA") between Soyland and Illinois Power, as previously amended, to provide for the termination of said PCA on December 31, 1

2000; and for the termination of all transmission related provisions set forth therein as of September l 1,1996 - the parties opting instead to proceed under Illinois Power's standard IPC FERC 888 Tariff i terms and conditions as revised to be applicable to Soyland, including, among other things, the l acceptance ofrates which Illinois Power has proposed to cover the voltage levels at which Soyland receives transmission service from I3ncis Power, and development of a Network Operating Agreement that addresses the specific system configuration and obligations that Illinois Power and l l-Soyland currently share under the existing PCA. l

6. Arnointment of IPMI As Agent for PCA Obligations. Soyland shall enter into an agreement with IPAU wherein IPha shall, as Soyland's agent, fu!1y perform Soyland's obligations 4

I

00T-16-96 WED 04:05 PM IP LEGAL SEn'1dS FAX NO. 2173627458 P.06/17 l under the PCA, including compensation for Soyland's investment m enussion allowances as of September 1,1996, and provided tha't said PCA is amended as contemplated in this Memorandum. As compensation for said performance, Soyland agrees to enter into a Power Sales Agreement with IPMI, as more fully described in Paragraph 7, below. In the event that the PCA cannot be amended as contemplated in Paragraphs 5, 6, 7, 8, 9, and 10 of this Memorandum, the parties agree that IPMI shall no longer be bound to act on behalf of or for the benefit of Soyland with respect to the PCA, or any other obligation assumed in anticipation of the PCA being araended, including those 5I' agreebents more fully described in Paragraphs 7, 8, 9 and 10, below.

7. Purchase of Electric Enerev. Soyland shall enter into a Power Sales Agreement with IPMI for a period of ten years, wherein IPMI shall be Soyland's sole and exclusive supplier of capacity and energy for all ofits energy requirements, except for the specific transactions referred to in Exhibit A. Soyland and IPMI each agree that said term may be extended for an additional ten year period upon mutual agreement. The Power Sales Agreement shall be drafted in accordance with the terms and conditions set forth on Exhibit A.

Soyland and IPMI agree that each shall execute such documents as may be necessary to obtain regulatory approval of said Power Sales Agreement, ifnecessary, and that each shall cooperate fully in the process.

8. Sovland Capacity Assianment. Soyland and IPMI agree that Soyland shall assign to IPMI

~' ps Soyland's remaining capacity for a period of ten years. The terms and conditions of this assignment siell be in accordance with Exhibit A.

9. Capacity Reservation Fee and Canacity Reservation Ootion Feez (A)

As part ofits obligation to purchase electric energy from IPMI during the initial ten year term of their Power Sales Agreement, as provided for in paragraph 7, above, and in 5 i

l OCT-16-96 WED 04:06 PM IP LEGAL SERVICES FAX N0. 2173627458 P.07/17 l accordance with Exhibit A, Soyland agrees to pay to IPhG a monthly Capacity Reservation Option Fee of$1.25 per kilowatt month for the first 500,000 kilowatts, plus $1.80 per kilowatt as a Capacity Reservation Fee for the capacity reserved for the then current year. Regardless ofwhether Soyland io and IPhG agree to extend the term of the aforesaid Power Sales Agreement for an additional ten year term, Soyland agrees that for a period of ten years after the expiration ofthe initial tenn, Soyland l shall continue to pay to IPhU a Capacity Reservation Option Fee of $1.25 per kilowatt month in exchange for IPhD agreeing to have available on an as needed basis the first 500,000 kilowatts of i Soyland's required capacity, to be purchased on tenns mutually agreed upon by the parties at the time ofpurchase. The Capacity Reservation Option Fee shall be escalated from the commencement of the initial term of the Power Sales Agreement in accordance with the indices to be agreed upon pursuant to Exlutit A. (B) In the event that any one of Soyland's member distribution cooperatives 1 should be released ofits obligation to purchase all ofits required energy and capacity from Soyland, and in the event that any one of Soyland's member distribution cooperatives does so purchase its capacity and energy requirements from some source other than Soyland, Soyland agrees to make it a condition precedent to any such release that the member distribu, tion cooperative being released ofits obligations shall pay to IPMI the net present value ofits share of the remaining Capacity - l l Reservation Fee and the Capacity Reservation Option Fee at $1.25 per kilowatt month. In the event l that said release would occur during the initial term of the Power Sales Agreement, the me'mber distribution cooperative being released shall also pay to IPMI the associated energy margin of 0.05 cents per kilowatt hour for the remainder of the initial term of the Power Sales Agreement.. The total energy margin due IPMI shall be calculated using that cooperative's forecast load factor. The 6 1

OCT-16-96 WED 04:06 Pti IP LEGAL SERVICES FAX N0. 2173627458 P 08/17 l i i present value charges shall be based on an 8.75% discount rate and, with the exception of the ) associated energy margin, all such charges shall be escalated from the then current value of the distdbution cooperative's share of the remaining Capacity Reservation Fee and the Capacity Reservation Option Fee'(as determined in accordance with the indices to be agreed upon pursuant to Exhibit A), at the rate of 3.5% per year. Upon payment of these charges by the member distribution cooperative being released ofits obligations to IPMI, Soyland's minimum capacity reservation requirement will be reduced proportionately.

10. Effective Dates of Astreements. It is the intent of the parties that the aforesaid 4

restructuring inure to their beneSt as of September 1,1996. To the extent that the amendment of g the.PCA, as pmvided for in Paragraph 5, and the other agreements provided for in Paragraphs 7 and 8 have yet to be executed, and submitted to FERC for approval, the parties agree that each shall. endeavor to obtain effective dates of September 1,1996.

11. Transmission.

Soyland and Illinois Power agree that each shall enter into a Transmission Services Agreement, to be effective upon amendment of the transmission provisions of th'e PCA, as provided for above, and which shall be based on IPC FERC 888 Tariff terms and conditions as revised to be applicable to Soyland.

12. Member Contracts Soyland covenants and warrants to IPMI that so long as it remains obligated to pay to IPM1 a Capacity Reservation Fee, or a Capacity Reservation Option Fee, Soyland shall not consent to the modification of any agreement entered into with any member distribution ib coopdrative that would matedally effect Soyland's ability satisfy its obligations under this, or any other agreement entered into with IPMI, Elinois Power, or Illinova.

I

13. Costs. Each party agrees that it shall bear its own costs in obtaining the necessary

[ 7

00T.-16-96 WED 04:06 PM IP LEGAL SERVICES FAX NO. 2173627458 P.09/17 regulatory approvals of the final agreements implementing the restructured power supply l arrangement and tansferring ownership of CPS.

14. Reculated Anorovait Whife'the partiesintend for this interim Memorandum to become' l

effective upon execution, it is expressly understood and agreed that the fmal transaction documents sha!! not become effective unless and until those agreements, or the portions thereof requiring , J., regulatory approval, have been submitted to the appropriate regulatory agency, and that said agency does so approve the documents without condition. If approval cannot be obtained from the l appropriate regulatory agency, the parties agree to make such reasonable modifications to the f agreements as may be necessary to secure the approval thereof, provided that the economic benefit i for any one party to the restructuring is not materially reduced thereby. In that event, the parties may agree to the termination of this Memorandum ofUnderstanding, and of any agreements entered into as a result thereof.

15. Preparation and Filine of Transaction Documents. The parties agree that the fmal 1

Transaction Documents shall be filed with the appropriate regulatory agencies no later than October l l, 14,1996. Nr INWITNESS WHEREOF, the parties hereto have, by their duly authorized representative, executed this Memorandum ofUnderstanding as of the date first above en. ~ SOYLAND POWER COOPERATIVE, INC. ANY l d Y 8 0 ILLINOVA POWER MARKETING,INC. ILLINOVA RPORATION h/ A 1 M / 8 i i

001-15-96jiEDd4i07Pli~FLE6ALSERVIEET~ FA)I OI2i7362i458 " P. [0/lf ~ ~ .1__.:.:n.m ~ 4 Exhibit A .{ TERM SHEET FOR POWER SALES AGREEMENT l-BETWEEN ILL! NOVA POWER MARKETING, INC. l AND l SOYLAND POWER COOPERATIVE,1NC. Parties: !!!! nova Power Marketing, Inc. (IPMI), s aubsidiary of Illinova Corporation (!!!inova) and Scyland Power Cooperative, Inc. on behalf of its members. / l Term: This agreement shall be for a ten year term beginning September 1,1996 through December 31,2006, with an optfon to extend an additional ten years l by mutual agreement. Services: Soyland Power Cooperative (Soyland) on behalf of its members, appoints lilinova Power Marketing, Inc. (IPMI) as exclusive supplier of capacity and j*, energy to all Soyland loads, and exclusive assignee of Soyland's remaining l..m capacity and energy for a term of not less than 10 years, except that nothing NU, herein shes effect soyland's obligation to purchase capacity and/or energy from Qualified Facilities, pursuant to PURPA. By mutual agreement, this service may I l be extended for an additional period of ten years. (Soyland's previously I contracted for purchase from Louisvule Power Marketing, Inc. of 50 MW ATC and 40 MW on peak through December 31,1996, and the previously existing contract by Scyland for the Sale of 90 MW of capacity and energy to Southwestem sectric Cooperative through September 30,1996 are permitted l to cominue through those dates. All new Soyland load after the effective date of this Agreement shaR be served exclusively by IPMI, except specific loads of Soyland member systems with which Soyland members were verifiably engaged in contract negotlations with capacity and energy suppliers other that IPMI prior to the effective date of this Agreement, or by mutual agreement of both parties. Points of i j DeEvery: Approved Interconnection points on the systems of !!!inois Power Company l (IPC), Centrailllinois Public Service (CIPS), or Central Illinois Lighting Company (CILCO) and others as may be required to serve Soyland load. Contingent Agreements: This offer is centingent upon reaching agreement between Soyland and IPMI or ) its affiliates on the following Issues: l

4

} Clinton Power Statig.Q: Costs and liability relating to Soyland's share of Clinton i f Power Station shall be transferred to lilinova 'or one of its subsidiaries at 2400 I 1

OCTr16-96 WED 04:07 Ptt IP LEGAL SERVICES FAX NO. 2173627458 P.11/17 [ l l .c t l Exhibit A t hours Central Dayught time on August 31.1996. Both parties shall make good. I faith efforts to affect ownership title transfer as soon as possible. Decommissionino: Illinova or one of its subsidiaries will, subject to the terms of the existing trust agreement, supplant Soyland as the settler of said trust, i and continue to fund the trust in accordance with NRC regulations. The Parties would agree to take such steps as may be reasonably necessary to make lilinova or one of its subsidiaries as successor settler of the Soyland decommissioning trust, t l Soviand/IPC Power coordination Aoreement (PCA): The PCA shall be terminated or amended to accommodate this agreement, effective as of September 1,1996. Any funds advanced to !!!! nova by Soyland for working p; capital / fuel loventory or emisalen aDowances shall be retumed to Soyland. ( 1 IPC Transmissien Tadff: Agreement shall be reached between Soyland and IPC / consistent with FERC Order 888 Tariff terms and conditions. Soyland shall be responsible for all transmission charges related to the delivery of capacity and. energy to Scyland loads on !!!!nois Power's transmission system, including I'* applicable ancillary services required under the Tariff of the Transmission Provider. Energy imbalance services shall be the responsibility of IPMI. If an I Independent System Operator (! Sol or almilar organization is developed and IPC j is a member, any better overall transmission pricing shall be made available to. J

Soyland, j

1 l Product: Determination of Capacity Recuirements: Scyland shall specify its capacity reservation by December 31, each year for the.following year. Said reservation shall be Soyland's best forecast of the highest total 60 minute clock hour everage KW load required to serve aR Soyland's loads daring the annual Soyland r i system peak. Such load forecast shall be adjusted to reflect the benefit of l Soyland load management programs. An hourly capacity or energy requirements which may occur above Soyland's capacity reservation may be l purchased from the market by Soyland with rights of first refusal reserved to i IPMI. l nN, ' Schedding: Scyland shall provide to IPMI, or its designated scheduling agent, Annual i forecasts of its monthly load profiles, monthly load forecasts of its daily load profiles and on a daily basis, Soyland shall provide by 10:00 a.m., Central f Prevailing Time, ho'urly forecasted usage for the next day, for Soyland's loads ' on the IP, CIPS, and CILCO systems, or any other specific load which may be required to perform scheduling. l Pricing: Canacity Pavment: Sc' land's monthly capacity charge shall be equal to $1.80 per kW of capacity reservation, annually adjusted to reflect market index price changes. f 2

- 00T.-16-96 WED 04:08 Pli IP LEGAL SERVICES FAX N0. 2173627458 P.12/17 .e -- 1

.. - wn ~

p. l l l ] Exhibit A Enerov Cha' roe: Soyland's energy charge shall be equal to 1.7' cents per kwh ~ delivered to the points of delivery, annually adjusted to reflect market Index i ' price changes. ' Capacity Soviand Canacity: Soyland shall assign all of its remaining' capacity supply to Assignment: IPMI. Soyland's remaining capacity supply shall be as per MAIN accreditatfort rules. The result may va,ry from month to month, but is currendy as follows: Base Capacity: CIPS Participation 102MW 1996-1999' Pearl Stream 22MW Peakina Canacity: / Peart GT 22MW Pittsfield Diesel SMW IPMI shall have the exclusive right to schedule avail.able output from this capacity and shall reimburse Soyland for fuel, incremental O, #c M, and incremental transmisalon expenses associated with such sale. Soyland agrees to allow IPMI, if IPMI so chooses, to supply fuel to the Soyland owned units after any current Soyland fuel purchase commitments have been met. ] IPMI shall credit Soyland for accredited capacity supplied as follows: -l Base Capacity: $1.80 Kw/mo i Peaking Capacity: $1.50 Kwlmo q^ '. Soyland's credit shall be reduced each month for capacity unavailable, if any such reduction occurs, at the time of the Soyland system monthly peak load. Availability of Soyland's accredited capacity shall be determined from MAIN after the fact reports, which shah be provided to IPMI montNy by Soyland, or any other mutually agreeable source. Annual Indexing: It is the intent of Soyland and IPMI that the capacity, energy and capacity I credits reflect market price changes for comparable services. Soyland and IPMI i .wlH jointly prepare a request for proposal that will be submitted to a mutuaRy i agreed upon list of organisations who have expertise in evaluating wholassia power markets. The request for proposal wRI seek to ' develop a current benchmark for services comparable to that provide' by IPMI. The mutuaRy d agreed successful bidder wiR annuaDy update their analysis and the charges for capacity, energy, and capacity credits will be increased or decreased by the j percentage change in the updated analysis as compared to the prior years' analysis. Starting December 31,1997, capacity, energy, and capacity credits prices will be adjusted by this methodology on December 31 of each year for y the following year until a mutually accepted market index has been established. I hl - 3 f

00T,-16-96 WED 04:08 PM IP LEGAL SERVICES FAX NO. 2173627458 P.13/17 l..'.- l* { Exhibit A l I Curtailments: TNs transacdon is firm; p'erformance is excused only if rendered impossible by' uncontrouable forces.. l Damages: If IPWE faEs to deEver contract capacity,and energy other thaN fdr curtaEments atated above, IPMI shaR be liable to Scyland for all such capacity and energy. The tablHty shaR be calculated as the difference between 1) the contract price and 2) the cost of replacement capacity and energy, to the extent that the calculation of damages in this manner results in a positive number. If Soyland fails to accept delivery of contract capacity and energy other than for the curtallments stated above, Soyland shau be Emble to IPMI for all such capacity and energy. The liabEity shaB be calculated as the difference between f

1) the prica and 2) the total revenue that IPMI received in selung the capacity I

and energy that Soyland faHed to accept, if any, to the extent that the calculadon of damages results in a positive number. p4 Neither party shan be liable to the.other for any consequendal, incidental, punitive, or special damages for failure to take or receive energy in accordance with the contusions' stated above. Tax 1.labitty: Transactions may be subject to any applicable sales, u'se, franchise, excise, ad valorem or other simBar tax. Recalpt of satisfactory evidence of exemption may be required to avoid any applicable taxation. t F i $ri l 4 i

00I-16-98 WED 04:09 Pli IP LEGAL SERVICES FAX NO. 2173627458 P.14/17 i ... f.. 1 i t .,. Exhibit B-i~ AGREEMENT MADE THIS,30th day.of August, 1996, 'tiy and behveen ILLINOVA l ' CORPORATION, an lilinois corporation' ("Illinova"), and SOYl AND POWER-l COOPERATIVE, INC., an Illinois not-for-profit corporation. Witnesseth: t WHEREAS, ll!! nova and Soyland are in the pr'ocess of completing negotiations that 'are' intended to lead to an overall restructuring of the relationship between mf. Soyland and lillnova, and its subsidiaries; and WHEREAS, as part of those negotiations, the parties have agreed that Soyland will transfer its 13.21 % ownership Interestin !!!!nols Power Company's Clinton Power l Station to Illinova, effective as of September 1,1996; and WHEiiEAS, the parties, having been unable to complete the preparation of the documents required to execute said transfer before September 1,1996, have, nonetheless, agreed to enter into an interim Agreement, under which Illinova will assume responsibility for all of Soyland's obligations arising In any way from its i ownership Interest in the Clinton Power Station. NOW, THEREFORE, IN CONSIDERATION of'the mutual promises set forth below, the parties hereto agree as follows: i 1. At precisely 24:00 hours on August 31,1996, Illinova shall assume and be responsible for all obligations, liabilities, and duties which Soyland currently owes i to Illinois Power Company pursuant to a certain Clinton Station Ownership j Participation Agreement, dated August 19,1976, as amended, except that nothing 9M herein~shall relieve Soyland ofits obilgation to maintain all existing Irisurance policies covering all risks associated wlth its ownership Interest in the Clinton Power Station until such time that the transfer thereof to !!!! nova has received final approval from all regulatory agencies having jurisdiction over said transfer. j 2. At precisely 24:00 hours on August 31,1996, Soyland sha!!,in favor of j lilinova, fully and forever release and waive any and all, interests, rights, entitlements or privileges that it has had, now has,'or may have had, in the'Clinton Power Station, pursuant to the aforesaid Clinton Station Ownership Participation Agreement. 3. Soyland and Illinova agree that the documents required to complete the l , transfer contemplated in this Interim Agreement shall be prepared, executed. and filed for approval with the appropriate regulatory agencies in a timely manner. The parties j funher agree that each shall use its best efforts and commit sufficient resources to j securing the approval of the aforesaid documents. g i

~ j-l'B-96 WED 0 U09 PM IP1.EGAl. SERVICED FAX N0. 2173627458 P.15/17 L 00 ...... ~..

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y.,., ;.., e, p.,;. 1 \\. ~ 2 p. This interim agreement shall expire automatically upon th,e earlier of the j 4. i.. execution of a Mernorandum.of Understanding by and between all parties to the aforesaid restructuring of. the ' relationship between, Soyland, Illinova, a.nd its subsidiaries, or September 15,1996. In the event that the parties do not execute the aforesaid Memorandum of Understanding on or before September 15,1996, the transfer contemplated in this interim Agreement sha!! be abandoned, and Soyland shall l resume full responsibirity for its ownership interest in the Clinton Power Station, pursuant to the Clinton Stadon Ownership Participation Agreement, as amended, and be liable to lilinova for any costs, expenses, or liabilities incurred during the pendency of this interim Agreement. \\ l 5., This interirh Agreement may be amended only by the writtan agreernent of the parties. t IN WITNESS WHEREOF, the parties hereto have, by their duly authorized representatives, set their hands to this Agreeinent as.cf the date first above written. iLLINOVA CORPORATION SO.Yl.AND POWER COOPERATIVE, INC. d!fd:s dra x O ~ Larry F. A!ter.Laumer Robert K. Harbour ~ Ch'ief Financial Officer, Treasurer, . Vice President and Controller ~ e 9 e e e b l f: ~ 9 4

00T-16-96WED04:10PM IP LEGAL SERVICES FAX H0. 2173627458 P.16/17 7..-............. ~... _ ...,.....,m..,_ l zw we co% E SCEf12hh SPett it. 5251803 September 12,1996 VIA FACSIMil.E Mr. Joseph F. Firllt President and CEO Soyland Power Cooperative, Inc. p; 788'N. Sunnyside Rd. j Decatur, IL 62522 in Re: Memorandum of Understanding. Agreed Upon Revisions

Dear Joe:

Pursuant to our telephone conversation of earlier today, I have set forth below the agreed upon revisions to the abovo-referenced document. In lieu of inserting replacement pages into the duplicate originals of the Memorandum, this letter shall serve as a written amendment to the terms thereof, and sha!! be incorporated the ) same as if originally set forth therein. The parties agree, therefore, that: l 1. The first sentence of Paragraph 2 shall be amended to read: "Soyland agrees that it shall, without the receipt of any cash, transfer to Illinova its entire ownership interest in the CPS, free and clear of any liens or i encumbrances, except for general real estate taxes payable after September 1,1996, for which Illinova shall assume full responsibility." i 2. The last sentence of Paragraph 9(A) shall be amended to read: "The 3ps Capacity Reservation Option Fee sha!! be adjusted from the commencement of the initial term of the Power Sales Agreement in accordance with the indices to be agreed upon pursuant to Exhibit A.' i 3. Paragraph 12 shall be amended by inserting the word "to" between the words " ability" and " satisfy"in the fourth line thereof. 4. Exhibit A shall be amended to delete the word "that"in the fifteenth l line of the paragraph captioned " Services", and to place in its stead the word '*than". i With the exception of the foregoing, the Memorandum of Understanding, dated as f of September 11,1996, shall remain in full force and effect as between the j

00T-16-96WED04:10PM IP LEGAL SERVICES FAX N0. 2173627458 P.17/17 ^ d $$y%: Mr: Joseph F. Firlit. September 12,1996 Page Two parties, and may only be amended further by written agreement. If you agree with the revisions set forth above, please indicate same by signing the facsimile of this letter, and returning it to me via facsimile at (217) 362-7458. Upon your return from Washington, we can exchange original signatures. Sincer '/ w Michael S. Beer Senior Attorney cc: Miro P. Mladiner Agreed: Soyland Power Cooperative, Inc. M7Jh f [/ Jose'ph F. Firlit President and CEO O th,h* * /

. (b) to U-602648 LS-96-011 Illinova 3rd Quarter 1996 Financial Statement

Mmova October 9,1996 Financial Review for the 3rd Quarter 1996 3rd Quarter Earnings Illinova's earnings per share for the quarter were from a year ago. O & M expenses for the first half $1.20 versus $1.18, or 2% higher than for the same period ofl995 included costs associated with the Clinton a year ago. Year-to-date earnings were $2.25 per share refueling outage. The Clinton Power Station us shut compared to $1.% per share for the same period a year down on September 6,19% to repair a leaking reactor ago. The results reflect reductions in operating and rectreulation pump seal. The plant will remain shut down financing costs as part of the company's ongoing cost through a refueling outage which is scheduled to begin management efforts and an increase in interchange sales. October 13. As shown by the chart below, weather had a positive Interest charges for the year were $15 million lower impact on earnings during the first nine months of 19% in 1996 compared to 1995, due to the Company's over the same period in 1995, with most of the impact refinancing and capitalization reduction efforts, as well as occurring during the first half of 1996. This was a major lower short-term interest rates. factor for natural gas sales that were up approximately Interchange sales and revenues continue to be strong 17% year to date 19% as compared to 1995. during 1996 primarily due to higher system availability At approximately $84 million, operation and and interchange prices. Interchange revenues were up 6% maintenance expenses for the quarter were down $2 for the quarter and 24% for the year as compared to 1995. million from a year ago. Through the third quarter of The variance in Other includes increased depreciation 19%, O & M expenses were down nearly $23 milhon and the impact of non-utility subsidiaries. G43 ($3A G2Q G1Q $2 1 10 $20 sm 140 ""W .m. l0 GMExpense Quana f D Finutt CbdRuidon 3 0 sammrp 9, awe ..,0 J '# M CPw .m q 5 YDerrrgr Cbngnrts d s29 hcreme frcms125 b 1E6 b s225 in 1996 0 krud earrup: Orrponsts d $20 consanas rnemae f rcrn19F6 m 1996 Larry F. Altenbaumer (217)424-6678 Paul G. Blair (217) 424-8715 Chief Financial Officer, Treasurer and Controller Director -Investor Relations D. L. Mortland (217) 424-7568 Sheri L. Scranton (217) 424-7174 Assistant Treasurer - Illinois Power Company

Illmova i Condensed Consolidated Statenients ofIncome Three Months Ended Nine MontLe Sade! Twelve Mende Ended M- - - 30, seg september:s, ' Change % Change f % Change Favl Fav/ Fav/ i M E E!BI8d M M S/BI8d M M SlBI8d esmemo Dams.o esm o 1 Operahng Itevenues Electric 377.1 8 410.5 (8) % $ 938.4 $ 977.2 (4) % $ 1,213J $ 1,242J Q) % Electric' : " _ 43J 40.8 6 108.8 87.8 24 137J 115.0 19 Gas 38.0 34.8 9 223. ( __ 190.9 17 305.2 266.9 14 Total 45R,.4_ 486.1 (6) 1,270.8 1.255.9 1 _ 1,656.3 1,624.1 2 Operating Expmuss and Tases Real for eiestric plants 59.8 77.2 .23 185.9 199.8 7 260.0 260J Power purehased 25.0 20J (23) 48.1 49.4 3 58.2 62J 7 Gas purdiased for resale 12.E 15.2 16 118.6 94.4 06) 163.0 136.8 09) j Other operados and mainaanance 84.0 86.* 3 247.8 270.7 8 336.8 366J 8 Early retireuneet and severance 37J E. - '"'- and assortisation 48.5 4!.4 U) 144.9 136.0 C) 195.4 182.2 (7) General taxes 32.6 - 34.7 6 102.0 104.0 2 133.0 134.2 1 l Inesme tases 62.4 69 9 11 127.2 119.0 U) 134.0 134J f 348.( Total 325.1 7 974.5 973J 1,318.2 1,276J D) Operating Income 133.3 137.2 (3) 296.3 282.6 5 338.1 347.6 0) i Otherlaceae and Deductions ABowance for equity funds used during construction 0.2 0J (0.5) 1.3 038) Mi,anananne. net (5.3) (6.3) 16 03.1) U.2) (82) G3.0) (6.6) @7) Total (5.3) (6.1) 13 03.1) (6.7) 96) G3.5) (5.3) (155) Imemme before laterest charges 12l 0 _ 131.1 (2) 283.2 275.9 3 324.6 342J (5) Interest Charges Interest e=pana. 33 1 36.9 10 100.6 112J 11 136.1 1@.9 9 AMowance for borrowed funds used dunns construction (1.6, 0.5) 7 (5.2) (4.0) 30 U.2) (5.2) 38 Pnferred dividend.. 5.5 5.3 5 16.8 18.8 11 21.7 25.8 16 efsubsidiary Total 37.0 41.;! 10 112.2 127.3 12 150.6 170.5 12 Net Enemme 91.0 39.9 1 171.0 14.6 15 174.0 171.8 1 Carrying asaount over (under) emuideraties for raa- -ad preferred of subsidiary (0.3) (0.8) fd,31 6.4 (167) Netincamma Applicable to Comunen Stock 90.7 $ 89.9 1 S 170.2 $ 148.6 15 169.7 $ 178.2 (5) Wai head average can==an shares 75.7 75.6 75.7 75.6 75.7 75.6 t Earnings per c4=nman share $1.20 $1.18 2 $2.25 $1.96 15 $2.25 nr $2J5 (4) Cash dividends deciered per - share 90.28 $0.25 12 30.84 $0.75 12 $1.12 $1.00 12 l Cash Cividseds paid per - share 30.28 - 30.25 12 S0.84 S0.75 12 $1.09 $0.95 15 t/ laatudes e 9e.30 aAerans early retiremuut med osveranse east and o Se.05 loss em the redemptism of preferred sted. These ammedead are subaelmed as a summer of generet informenLua and are met imaanded to induse, er to be essed in week, any emie er persense of sesurtties. I These ~ should be read in -M-meh Blinova's med Bliness Power Casupany's 1996 Quartssty Reports em Feris 104 and Fann HC fulass to the sesurtises amd Emshamse . lilinova's 1995 Ammuni Report to Shareholders Oncluded le the Frery en=sh) and Disnova's and Blimais Power Camepmay's 1995 Fenn 104 fumes to the l Serustuss med Eastmageeh

llim@'va Condensed Consolidated Balance Sheets September 30, December 31, 1996 1995 (Millions of Dollars) j Assets Plant med property 56,935.9 56,814.9 Less. accumelsted depreciation 2,379.9 2.251.7 Net utility p. ant 4,556.0 4,563.2 Nuclear fuel uader capits!).an 100.6 100.9 InvuNeots and other asset, 132.2 65.8 Curswd sssets 439.3 400.6 I C#,rre i charges 417.5 479.3 Total 55,645.6 55,609.8 Capital and Liabilities Common stock $1,417.5 51,415.8 ~ Deferred compensation - ESOP (15.2) (18.4) l Retained earnings 234.0 129.6 Pnferred stock of subsidiary 96.6 125.6 I hiudatoriy redeemable pnfernd stock of subsidiary 197.0 97.0 Imag tern. debt of subsidiary 1,60.4_ 1,739.3 Total cajitalization 3,579 I 3,488.9 Current Esbilities 668.1 747.5 Dd:md credits and other noncurrent liabilities 1,3f1 1,373.4 Total 55,645.C $5,609.8 l Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 1996 1995 (Millions of Dollars) Cash Hows fron Operating Activit'es i Net lacome $170.2 $148.6 Items not requiring cash, net 192.7 195.9 Changes la assets and liabilities (24.9) (41.8) Net cash provided by operating activities 338.0 302.7 Cash Mows from Investing Activities Construc. ion expenditures (129.2) (147.7) Other lavesting activities (66.8) (12.5) Net cash used in investing activities (196.0) (160.2) Cash Hows from Financing Activities Dividends on common stock (63.6) (56.7) Retirement of bonds and other debt of subsidiary (473.1) (198.7) Issusace of bonds and other debt of subsidiary 416.3 77.1 Other financing activities (0.7) 1.6 Net cash used in financing activities (121.1) (176.7) Net change in cash and cash equivalents 20.9 (34.2) Cach and cash equivalents at beginning of year 11.4 50.7 Cash and cash equivalents at end of period $32.3 $16.5

_Ilhnova Operating Statistics % Chase tran % Chance Fran % Chase From N' e Months Twelve Months Twdve Months Three Months nree Months Nine Months m Ended Ended Ended Ended Ended Ended septanber 30, september 30 semanber 30, septanber 30, septanber 30, e r- " r 30, 7996 1995 1996 1995 1996 1995 Electric Sala in KM11 (Millions) Residaatial 1,464 (12.4) % 3,773 (0.1) % 4,750 0.4 % Comnercial 1,044 0.6) 2,951 1.6 3,850 1.3 Industrial 2,075 0.2) 6,385 G.5) 8,572 (0.6) Other 94 (4.1) 279 G.1) 364 04.9) Sales ultimate consumen 4,677 (6.4) 13,388 (0.4) 17,536 (1.0) Interchange 1,492 0.9 4,200 24.9 5,280 15.2 whsfine 318 10.0 649 31.6 798 24.1 l Total electric sales 6.487 (4.1) % 18.237 5.4 % 23.614 2.9 % Revenues (Millions) Residential $164.9 (12.1) % $385.4 (4.3) % $482.9 Q.9) % Canunercial 97.7 0.7) 245.6 G.4) 317J IaA=# rial 100.6 (9.6) 275J (6.9) 369.0 0.6) Other 12.7 42.7 29.7 6.5 41.1 4.3 Revenues ultimate - 375.9 (8.2) 936.0 (4.0) 1,210.8 Q.1) Interchange 43.3 6.1 108J 23.9 137.3 19.4 2.4 26.3 3.0 (44.4) %%=line 1.2 Total electric revenues $420.4 (6.8) % $1,047.2 (1.7) % $1,351.1 (0.4) % Gas Sales la therms (Millions) 279 16.7 % 396 17.9 % Resid-timi 20 117 20.6 163 18.1 Conamercial 10 ladustnal 12 04.3) 69 16.9 98 21.0 Sales ultimate consumers 42 (4.5) 465 17.7 657 18.4 Transportation of customer. owned gas $5 (9.8) 179 Q1.8) 249_ (14.1) Total gas sold and tramported 97 (7.6) % 644 7.7 % 906 7.2 % Revenues (Millions) Residential $21.1 11.6 % $139.6 17.1 % $193.1 15.6 % Commercial 7.3 17.7 47.7 10.7 65.3 7.8 Industnal 5.7 11.8 26.0 53J 33.4 47.8 Revenues ultimate consu.nen 34.1 12.9 213.3 19.0 291.8 16.6 Transportation of constomer. owned gas 1.8 5.9 4.8 (15.8) 7.1 Q6.0) p:u.atmaa-a 2.1 _ Q7.6) 5.5 (8.3) 6.3 01J) 1 Total gas sold and transported $38.0 9.2 % $223.6__ 17.1 % $305.2 14J % Financial Ratios & Data sepember 30, septanber 30, 1986 2995 Capitalization Ratios 45.7 % 49.2 % I.ang-term debt Preferred stock 8.2 % 8.7 % Comunon stock equity 46.1 % 42.1 % Common Stock Data Return on average camman equit/ G2. month pedod) 10.7 % 12.0 % Book value per disre $21.62 $20.42 Closing market price $261/2 $271/8 Earnings per share (3. month period) $1.20 $1.18 sbans outstanding 75,(.81,937 75,643,937 Generaden Mix 02. month pedad) Fossil 62.6 % 61.8 % Nudear 25.8 % 22.7 % 11.6 % 15.5 % Purchases 1 (c) to U-602648 LS-96-011 Securities and Exchange Commission Forms 8-K,10-Q, and 10-K 1 l l l

\\ i l 6 SECURITIES AND EXCHANGE COMMISSION t Washington, D.C. 20549 l 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the j l Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) August 22, 1996 Commission Registrants; State of Incorporation; IRS Employer File Number Address; and Telephone Company Identification No. L 3-11327 Illinova Corporation 37-1319890 (an Illinois Corporation) 500 S. 27th Street Decatur, IL 62525 (217) 424-6600 f 1-3004 Illinois Power Company 37-0344645 (an Illinois Corporation) 500 S. 27th Street Decatur, IL 62525 (217) 424-6600 I Total number of sequentially numbered pages is 3. t i i i l 1 i I l

Item 5. .Other Events On August 14, 1996, the Boards of Directors of Illinova Corporation (Illinova) and Illinois Power Company (IP) authorized IP to adopt a decommissioning plan for the Clinton Nuclear Power l Station, pursuant to a site-specific study of decommissioning alternatives and costs. The study and the plan approved by the Boards assume that the Clinton Power Station.will continue to operate until September of 2026, when its current license expires. Of the three currently used decommissioning approaches, the DECON l approach was chosen. The DECON approach allows for unrestricted use of the site shortly after cessation of operations, in contrast to the other approaches which contemplate either mothballing, or entombment, and delayed dismantlement. The DECON l approach is estimated to cost approximately $545 million in 1996 dollars, compared to the $434 million current level of minimal, l generic funding specified by the Nuclear Regulatory Commission. As a majority co-owner of the Clinton Power Station, IP is responsible for 86.79% of such costs. It currently recovers such costs from electric service customers pursuant to a tariff rider. IP will seek from the Illinois Commerce Commission approval of an increase in that rider, to reflect the results of the site-specific study and adoption of the DECON decommissioning approach. r 1 i 4

l SIGNATURES i Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on l its behalf by the undersigned thereunto duly authorized. ILLINOVA CORPORATION (Registrant) By/s/ Larry F. Altenbaumer Larry F. Altenbaumer Chief Financial Officer Treasurer and Controller on behalf of i Illinova Corporation Date: August 21, 1996 l l l SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ILLINOIS POWER COMPANY (Registrant) By/s/ Larry F. Altenbaumer Larry F. Altenbaumer Senior Vice President, Chief Financial Officer and Treasurer on behalf of Illinois Power Company l Date: August 21, 1996 l i I 4 s l l l l l

l. o i I i SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 l 1 8-K i l l l l l CURRENT REPORT j l l Pursuant to Section 13 or 15(d) of the 1 l Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) i September 13, 1996 l Commission Registrants; State of Incorporation; IRS Employer File Number Address; and Telephone Company Identification No. 1-11327 Illinova Corporation 37-1319890 (an Illinois Corporation) l 500 S. 27th Street j Decatur, IL 62525 (217) 424-6600 i 1-3004 Illinois Power Company 37-0344645 (an Illinois Corporation) 500 S. 27th Street Decatur, IL 62525 (217) 424-6600 j Total number of sequentially numbered pages is 3. 1

l Item 5. Other Events Illinova Corporation (Illinova), parent of Illinois Power Company (IP) and Illinova Power Marketing, Inc. (IPMI), announced an agreement in principle with Soyland Power Cooperative (Soyland) to replace the existing (Clinton) Ownership Participation i Agreement (OPA) and the Power Coordination Agreement (PCA) between IP and Soyland, with a new agreement. Under terms of the yet to be finalized agreement, a subsidiary of Illinova would I acquire Soyland's 13% ownership share of IP's Clinton Power Station (Clinton), a nuclear generation facility, with no capital outlay. Soyland's nuclear decommissioning trust also will be transferred to the Illinova subsidiary acquiring Soyland's share of Clinton. The acquiring subsidiary would assume certain obligations related to Soyland's ownership share of Clinton, including those related to decommissioning. Under the agreement in principle, IPMI would become the exclusive agent for all of Soyland's capacity and energy needs for a period of ten to twenty years. Soyland's energy needs would be met under the terms of a full requirements power purchase agreement [ which would replace the energy currently acquired by Soyland from its share of Clinton's generation under the OPA and from IP's fossil fuel-based generating capacity under the PCA. Under the new agreement, Soyland would be charged fixed fees designed to compensate Illinova for Clinton costs currently recovered from Soyland pursuant to the OPA. Furthermore, the new agreement would replace energy currently provided to Soyland by Central Illinois Public Service Company under its Power Supply Agreement (PSA) when the PSA expires at the end of 1999. During 1996, Soyland has developed and evaluated proposals to reduce its debt to the Rural Utilities Service (RUS). Soyland's board of directors has approved a bankruptcy filing if the situation cannot be resolved. The RUS has agreed to a debt reduction if Soyland obtains financing for the stipulated debt restructuring and discontinues its nuclear ownership. l The new agreement is expected to avoid a Soyland bankruptcy while providing incremental value to Illinova over a ten-year time l period. Additionally, the agreement will establish IPMI as a major power marketing presence in the Midwest. l l l.

. _ _.. _. ~ _ i i l l o l 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ILLINOVA CORPORATION (Registrant) By /s/ Larry F. Altenbaumer t l l Larry F. Altenbaumer Chief Financial Officer, l Treasurer and Controller l on behalf of Illinova Corporation l l Date: September 13, 1996 SIGNATURES l Pursuant to the requirements of the Securities Exchange Act of l 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ILLINOIS POWER COMPANY (Registrant) l l By /s/ Larry F. Altenbaumer l Larry F. Altenbaumer l Senior Vice President, l Chief Financial Officer and Treasurer on behalf of Illinois Power Company i i Date: September 13, 1996 i l l l Y l

.n SECURITIES AND EXCRANGE COMMISSION I Washington, D. C. 20549 Form 10-0 (X) QUARTERLY REPORT PUROCANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1996 l OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) l OF THE SECURITIES EXCHANGE ACT OF 1934 l For the transition period from to l Commission Registrants; State of Incorporation; IRS Employer l File Number Address; and Telephone Number Identification No. l 1-11327 Illinova Corporation 37-1319890 (an Illinois Corporation) 500 S. 27th Street I Decatur, IL 62525 (217) 424-6600 1-3004 Illinois Power Company 37-0344645 (an Illinois Corporation) 500 S. 27th Street l Decatur, IL 62525 l (217) 424-6600 Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) have been subject to such filing requirements for the past 90 days. Illinova Yes X No Corporation Illinois Power Yes X No Company l Indicate the number of shares outstanding of each of the issuers' ( classes of common stock, as of the latest practicable date: i 1111 nova Corporation Common stock, no par value, 75,681,937 l shares outstanding at July 31, 1996 Illinois Power Company Common stock, no par value, 72,233,040 shares outstanding held by Illinova Corporation at July 31, 1996 a s

ILLINOVA CORPORATION ILLINOIS POWER COMPANY This combined Form 10-Q is separately filed by Illinova Corporation and Illinois Power Company. Information contained herein relating to Illinois Power Company is filed by Illinova Corporation and separately by Illinois Power Company on its own behalf. Zilinois Power Company makes no representation as to information relating to Illinova Corporation or its subsidiaries, except as it may relate to Illinois Power Company. FORM 10-0 FOR THE QUARTER ENDED JUNE 30, 1996 INDEX PAGE NO. Part I. FINANCIAL INFORMATION Item 1. Financial Statements Illinova Corporation Consolidated Balance Sheets 3-4 Consolidated Statements of Income 5 Consolidated Statements of Cash Flows 6 Illinois Power Company l Consolidated Balance Sheets 7-8 Consolidated Statements of Income 9 Consolidated Statements of Cash Flows 10 Notes to Consolidated Financial Statements of Illinova Corporation and Illinois Power Company 11 - 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for Illinova Corporation and Illinois Power Company 13 - 17 Part II. OTHER INFORMATION Item 1: Legal Proceedings 18 Item 6: Exhibits and Reports on Form 8-K 18 Signatures 19 - 20 Exhibit Index 21 i I h i 2

l PART I. FINANCIAL INFORMATION l ILLINOVA CORPORATION i CONSOLIDATED BALANCE SHEETS (See accompanying Notes to Consolidated Financial Statements) JUNE 30, DECEMBER 31, 1996 1995 ASSETS (Unaudited) (Millions of Dollars) Utility Plant, at original cost Electric (includes construction work in progress of $232.1 million and $199.8 million, respectively) S 6,267.2 S 6,189.0 l Gas (includes construction work l in progress of $11.8 million and l S10.2 million, respectively) 633.1 625.9 l 6,900.3 6,814.9 Less-Accumulated depreciation 2,341.2 2,251.7 l 4,559.1 4,563.2 Nuclear fuel in process 5.4 5.7 I Nuclear fuel under capital lease 93.9 95.2 l Total utility plant 4,658.4 4,664.1 l l Investments and Other Assets 123.9 65.8 Current Assets l Cash and cash equivalents 22.0 11.3 'j l Notes receivable 6.1 Accounts receivable (less allowance l for doubtful accounts of $3.0 million) Service 121.2 129.4 Other 36.4 13.2 Accrued unbilled revenue 78.8 89.1 Materials and supplies, at average cost 105.5 111.1 Prepayments and other 29.3 40.4 Total current assets 393.2 400.6 l l Deferred Charges l Deferred Clinton costs 105.6 107.3 Recoverable income taxes 107.9 128.7 Other 230.3 243.3 Total deferred charges 443.8 479.3 $ 5,619.3 5,609.8 I i O 3 i i

l ILLINOVA CORPORATION CONSOLIDATED BALANCE SHEETS (See accompanying Notes to Consolidated Financial Statements) JUNE 30, DECEMBER 31, 1996 1995 CAPITAL AND LIABILITIES (Unaudited) (Millions of Dollars) Capitalization Common stock - No par value, 200,000,000 shares authorized; 75,681,937 and 75,643,937 shares outstanding, respectively, stated at S 1,425.7 S 1,424.6 Less - Deferred compensation - ESOP 16.2 18.4 Retained earnings 166.9 129.6 Less - Capital stock expense 8.3 8.8 Preferred stock of subsidiary 104.4 125.6 Mandatorily redeemable preferred stock of subsid4ary 197.0 97.0 Long-term debt of subsidiary 1,664.8 1,739.3 Total capitalization 3,534.3 3,488.9 Current Liabilities Accounts payable 141.1 119.9 Notes payable 341.5 359.6 Long-term debt and lease obligations maturing within one year 95.6 95.0 Other 127.0 173.0 Total current liabilities 705.2 747.5 Deferred Credits Accumulated deferred income taxes 1,012.0 1,012.8 Accumulated deferred investment tax credits 219.4 222.8 Other 148.4 137.8 Total deferred credits 1,379.8 1,373.4 S 5,619.3 S 5,609.8 e 4 l

_m l ILLINOVA CORPORATION CONSOLIDATED STATEMENTS OF INCOME ( (See accompanying Notes to Consolidated Financial Statements) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1996 1995 1996 1995 (Unaudited) (Millions except per share) Oparating Revenues: Electric S 282.6 S 278.6 S 561.3 566.7 l Electric interchange 33.6 24.6 65.5 47.0 Gas 49.5 41.1 185.6 156.1 Total 365.7 344.3 812.4 769.8 __________2__ Oparating Expenses and Taxes: Fuel for electric plants 59.5 58.3 126.1 122.6 Power purchased 13.3 15.1 23.1 29.1 Gas purchased for resale 32.8 14.6 105.8 79.2 ( Other operating expenses 53.3 63.5 119.0 127.7 l Maintenance 24.3 28.7 44.8 56.8 Depreciation & amortization 48.3 45.3 96.4 90.6 Gsneral taxes 31.6 31.1 69.4 69.3 ) Income taxes 27.7 20.6 64.8 49.1 Total 290.8 277.2 649.4 624.4 Oparating Income 74.9 67.1 163.0 145.4 Othar Income and Deductions: Allowance for equity funds used during construction 0.1 0.3 Miscellaneous - net (0.7) 1.5 (7.8) (0.9) l Total (0.7) 1.6 (7.8) (0. 6) i Income Before Interest Charges 74.2 68.7 155.2 144.8 Interest Charges: j l Interest on long-term debt 30.0 33.3 61.2 67.8 i Other interest charges 3.7 3.9 6.3 7.8 l Allowance for borrowed funds used during construction (1.9) (1.3) (3.6) (2.5) Preferred dividend ( rsquirements of subsidiary 6.2 6.5 11.8 13.0 i Total 38.0 42.4 75.7 86.1 ? l Nst Income 36.2 S 26.3 S 79.5 S 58.7 Earnings per common share S0.48 S0.35 $1.05 $0.78 Cash dividends declared per common share S0.28 $0.25 $0.56 $0.50 Csth dividends paid per common share $0.28 S0.25 S0.56 S0.50 Waighted average number of common shares outstanding during period 75,681,937 75,643,937 75,678,225 75,643,937 5 i l l

I ILLINOVA CORPORATION l CONSOLIDATED STATEMENTS OF CASH FLOWS e (See accompanying Notes to Consolidated Financial Statements) SIX MONTHS ENDED JUNE 30, l. 1996 1995 (Unaudited) (Millions of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income 79.5 58.7 i Items not requiring cash, net 114.8 118.0 l Changes in assets and liabilities 12.6 (21.5) Net cash provided by operating activities 206.9 155.2 CASH ~ FLOWS FROM INVESTING ACTIVITIES: Construction expenditures (86.9) (93.3) l Other investing activities (56.5) (9.5) l l Net cash used in investing j activities. .(143.4) (102.8) l CASH FLOWS FROM FINANCING ACTIVITIES: Dividends on common stock (42.4) (37.5) Exercise of stock options 1.1 Redemptions - Short-term debt (303.0) (97.4) l Long-term debt of subsidiary (74.1) (0.2) l Preferred stock of subsidiary (21.2) (39.2) Issuances - Short-term debt 284.9 75.3 Preferred Stock of subsidiary 100.0 Other financing activities 1.9 1.0 Net cash used in financing activities (52.8) (98.0) 1 I NET CHANGE IN CASH AND l CASH EQUIVALENTS 10.7 (45.6) l CASH AND CASH EQUIVALENTS j AT BEGINNING OF YEAR 11.3 50.7 CASH AND CASH EQUIVALENTS AT END OF PERIOD S 22.0 S 5.1 I 6 l l

ILLINOIS POWER COMPANY CONSOLIDATED BALANCE SHEETS (See-accompanying Notes to Consolidated Financial Statements) JUNE 30, DECEMBER 31, 1996 1995 ASSETS (Unaudited) (Millions of Dollars) Utility Plant, at origi'nal cost Electric (includes construction work in progress of $23?.1 million-and S199.8 million, tispectively) S 6,267.2 S 6,189.0 Gas (includes constinction work in progress of $11.8 million and ) .S10.2 million, respectively) 633.1 625.9 6,900.3 6,814.9 Less-Accumulated depreciation 2,341.2 2,251.7 4,559.1 4,563.2 l Nuclear fuel in process 5.4 5.7 j. Nuclear fuel under capital lease 93.9 95.2 Total utility plant _ _ _ __' 4, 6 5 8. 4_______ 4,664.1 ) i Investments and Other Assets 16.2 16.4 Current Assets l Cash and cash equivalents 8.7 4.3 Accounts receivable (less allowance for doubtful accounts of $2.0 million) Service 121 2 129.4 Other 31.7 18.2 Accrued unbilled revenue 78.8 89.1 Materials and supplies, j at average cost 104.9 111.1 Prepayments and other 28.6 40.4 Total current assets 373.9 392.5 Deferred Charges Deferred Clinton costs 105.6 107.3 Recoverable income taxes 107.9 128.7 Other 243.6 258.2 Total deferred charges 457.1 494.2 5,505.6 S 5,567.2 7

ILLINOIS POWER COMPANY CONSOLIDATED BALANCE SHEETS (See accompanying Notes to Consolidated Financial Statements) JUNE 30, DECEMBER 31, 1996 1995 CAPITAL AND LIABILITIES (Unaudited) (Millions of Dollars) { Capitalization Common stock - No par value, 100,000,000 shares authorized; 75,643,937 shares issued, 1 stated at S 1,424.6 1,424.6 Retained earnings 173.3 129.6 Less - Capital stock expense 8.3 8.8 i Less - 3,410,.897 and 2,696,086 shares of l common stock in treasury, respectively, at cost 86.2 67.3 l Preferred stock 104.4 125.6 Mandatorily redeemable preferred stock 197.0 97.0 Long-term debt 1,664.8 1,739.3 Total capitalization 3,469.6 3,440.0 Current Liabilities Accounts payable 131.1 119.9 Notes payable 295.5 359.6 Long-term debt and lease obligations maturing l within one year 95.6 95.0 l Other 126.3 173.0 l Total current liabilities 648.5 747.5 Deferred Credits Accumulated deferred income taxes 1,024.2 1,019.1 Accumulated deferred investment l tax credits 219.4 222.8 l Other 143.9 137.8 l Total deferred credits 1,387.5 1,379.7 l S 5,505.6 5,567.2 1 ? A 5 8

__2 f ILLINOIS POWER COMPANY CONSOLIDATED STATEMENTS OF INCOME (See accompanying Notes to Consolidated Financial Statements) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, l 1996 1995. 1996 1995 (Unaudited) (Millions of Dollars) Op3 rating Revenues: Electric 282.6 S 278.6 S 561.3 566.7 Electric interchange 33.6 24.6 65.5 47.0 l Gas 49.5 41.1 185.6 156.1 l l l-Total 365.7 344.3 812.4 769.8 Op3 rating Expenses and Taxes: Fual for electric plants 59.5 58.3 126.1 122.6 Power purchased 13.3 15.1 23.1 29.1 Gas purchased for resale 32.8 14.6 105.8 79.2 ~3 Other operating expenses 53.3 63.5 119.0 127.7 Maintenance 24.3 28.7 44.8 56.8 Dapreciation & amortization 48.3 45.3 96.4 90.6 G2neral taxes 31.6 31.1 69.4-69.3 Income taxes 27.7 20.6 64.8 49.1 Total 290.8 277.2 649.4 624.4 Operating Income 74.9 67.1 163.0 145.4 i Oth*r Income and Deductions: Allowance for equity funds used during construction 0.1 0.3 Miscellaneous - net 5.6 3.1 (1.3) 3.6 l Total -5.6 3.2 (1.3) 3.9 i Income Before Interest Charges 80.5 70.3 161.7 149.3 Interest Charges and Other: Interest on long-term debt 30.0 33.3 .61.2 67.8 Other interest charges 3.7 3.9' 6.3 7.8 Allowance for borrowed funds used during construction (1. 9) (1.3) (3.6) (2.5) Total 31.8 35.9 63.9 73.1 Nat Income 48.7 34.4 97.8 76.2 Preferred dividend J requirements 6.2 6.5 11.8 13.0 Nat Income applicable to common stock S 42.5 S 27.9 86.0 63.2 i 1 i. I l i 9

i 1 i l i ILLINOIS POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS l (See accompanying Notes to Consolidated Financial Statements) l l SIX MONTHS ENDED l JUNE 30, i 1996 1995 l (Unaudited) l (Millions of Dollars) l l CASH FLOWS FROM OPERATING ACTIVITIES: Net Income 97.8 S 76.2 Items not requiring cash, net 120.7 119.4 l Changes in assets and liabilities (1.2) 3.0 l Net cash provided by operating 217.3 198.6 activities CASH FLOWS FROM INVESTING ACTIVITIES: l Construction expenditures (86.9) (93.3) l Other investing activities 1.8 (1.2) Net cash used in investing (85.1) (94.5) l activities l CASH FLOWS FROM FINANCING ACTIVITIES: Dividends on preferred and common (51.4) (50.7) stock Repurchase of common stock (18. 9) (39.1) Redemptions - Short-term debt (303.0) (97.4) Long-term debt (74.1) (0.2) Preferred Stock (21.2) (39.2) Issuances Short-term debt 238.9 75.3 i Preferred Stock 100.0 other financing activities 1.9 1.0 Net cash used in financing activities (127.8) (150.3) NET CHANGE IN CASH AND CASH 4.4 (46.2) EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING 4.3 47.9 OF YEAR CASH AND CASH EQUIVALENTS AT END $____ _ _ ___ _ _ 8 _7_ _ _$_ _ _ _ _ _ _ _ _ _1,._7_ 2

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OF PERIOD 1 1 i 4 e l 10

I l 1 ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS l l GENERAL Financial Statement note disclosures, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted from this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. i However, in the opinion of Illinova Corporation (Illinova) and Illinois l Power Company (IP), the disclosures and information contained in this Form 10-0 are adequate and not misleading. See the consolidated financial statements and the accompanying notes in Illinova's 1995 l Annual Report to Shareholders (included in the Proxy Statement), the consolidated financial statements and the accompanying notes in IP's l 1995 Annual Report to Shareholders (included in the Information Statement), Illinova's and IP's 1995 Form 10-K filings to the Securities and Exchange Commission, and I111 nova's and IP's Report on Form 10-0 for the quarter ended March 31, 1996, for information relevant to the consolidated financial statements contained herein, including information as to certain regulatory and environmental matters and as to i the significant accounting policies followed. In the opinion of Illinova, the accompanying unaudited I consolidated financial statements for Illinova reflect all adjustments i necessary to present fairly the Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995, the Consolidated Statements of Income for the three months and six months ended June 30, 1996 and 1995, and the Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995. In addition, it is Illinova's and IP's opinion that i the accompanying unaudited consolidated financial statements for IP i reflect all adjustments necessary to present fairly the Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995, the Consolidated Statements of Income for the three months and the six months ended June 30, 1996 and 1995, and the Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995. Due to seasonal and other factors which are characteristic of electric and gas utility operations, interim period results are not necessarily l indicative of results to be expected for the year. ACCOUNTING MATTERS CONSOLIDATION The consolidated financial statements of Illinova include the accounts of Illinova, IP, Illinova Generating Company (IGC), Illinova Power Marketing, Inc. (IPMI) and Illinova Energy Partners, Inc. (IEPI). All significant intercompany balances and transactions have been eliminated from the consolidated financial statements. All non-utility operating transactions are included in the section titled Other Income and Deductions, " Miscellaneous-net" in Illinova's and IP's Consolidated Statements of Income. The consolidated financial statements of IP include the accounts of Illinois Power Capital, L.P. and the accounts of Illinois Power Financing I (IPFI). All significant intercompany balances and transactions have been eliminated from the consolidated financial statements. IP's consolidated financial position and results of operations are currently the principal factors affecting Illinova's consolidated financial position and results of operations. 11

I REGULATORY AND LEGAL MATTERS MANUFACTURED GAS PLANT SITES IP's current estimate of liability for Manufactured Gas Plant (MGP) site remediation is S72.9 million. This amount represents IP's current best estimate of its remaining costs to remediate the 24 MGP sites for which it is responsible. Because of the unknown and unique characteristics of each site, IP is not able to determine its ultimate l liability for remediation. IP is recovering MGP site cleanup costs from its customers through tariff riders approved by.the Illinois Commerce Commission (ICC) in March 1996. In anticipation of full recovery of MGP site costs, IP has recorded a regulatory asset to counter its liability. Changes in the law, the nature and timing of which are uncertain, could affect IP's ability to continue to recover these costs. IP has begun settlement discussions with its insurance carriers regarding the recovery of estimated MGP site remediation costs. A l settlement has been reached with three carriers, and negotiations are l scheduled with two other carriers. Litigation related to a suit filed by IP in October 1995 seeking a declaratory judgment and damages regarding insurance coverage for four NGP sites is in progress. Any insurance recoveries received will cause the regulatory asset to reduce by a corresponding amount. SPENT NUCLEAR FUEL l On June 20, 1994, IP and 13 other utilities filed an action in the D.C. Circuit Court of Appeals asking the Court to rule that the U.S. j Department of Energy (DOE) is obligated to take responsibility for spent nuclear fuel by January 31, 1998, under the Nuclear Waste Policy Act of 1982. IP based its decision to build the Clinton Power Station, in part, on the assurance that a federal repository would be built and operated by the DOE, and, under the Act, the DOE has been collecting money from IP to pay for such a repository. The utilities asked the Court to confirm the l DOE's commitment and to order the DOE to develop a compliance program with appropriate deadlines. The utilities also asked for relief from the ongoing funding requirements or to have an escrow account established for future funds paid to DOE. On July 23, 1996, the D.C. Circuit Court of Appeals issued a decision in this case. It ruled that the DOE has an unconditional obligation to accept responsibility for disposal of spent nuclear fuel in 1998. The Court did not specify damages or a remedy should the DOE fail to perform in 1998, but remanded the matter to the DOE for further proceeoings consistent with the Court's opinion. TREASURY STOCK IP repurchased 281,597 shares of its common stock from Illinova on March 31, 1996; 370,806 shares on May 31, 1996; and 62,408 shares on June 28, 1996. Through June 30, 1996, IP has purchased 3,410,897 shares of its common stock, all of which are held as treasury stock and are deducted from common equity at the cost of the shares. I ENRANCED SEVERANCE IP offered a voluntary enhanced severance program to certain eligible employees during the fourth quarter of 1995. In December 1995, IP recorded a liability of $11.0 million to reflect the anticipated costs of the program, based on the number of employees accepting severance. Payments made to severed employees during the first six months of 1996 have reduced the liability by $7.3 million. 12

I. ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY i MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reference is made to the Notes to the Consolidated Financial Statements and Management's Discussion and Analysir. of Financial j Condition and Results of Operations presented in Illinova's 1995 Annual Report to Shareholders (included in the Proxy Statement), the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations presented in IP's 1995 Annual Report to Shareholders (included in the Information Statement), and Illinova's and IP's Form 10-K for the year ended December 31, 1995, and Illinova's and IP's Report on Form 10-0 for the quarter ended March 31, 1996. ILLINOVA SUBSIDIARIES IP is the primary business and subsidiary of Illinova and engages ] in the generation, transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the State of Illinois. IGC is a wholly-owned independent power subsidiary of Illinova and invests in energy supply projects throughout the world. IGC's strategy is to invest in and develop "greenfield" power plants, acquire existing generation facilities and provide power plant operations and maintenance services. l l IPMI is a wholly-owned subsidiary of Illinova and engages in the I brokering and marketing of electric power and gas. IPMI commenced j operations in wholesale electricity transactions in the western United States in September 1995. In May 1996, IPMI expanded operations to include the Midwestern United States. IEPI is a wholly-owned subsidiary of Illinova formed in May 1996. IEPI develops and markets energy-related services to the unregulated energy market throughout the United States. IEPI has incorporated the project management practice of the Illinova Energy Services group, a division within Illinova. LIQUIDITY AND CAPITAL RESOURCES CAPITAL RESOURCES AND REQUIREMENTS Cash flows from operations during the first six months of 1996 provided sufficient working capital to meet ongoing operating ~ requirements, to service existing common and IP preferred stock dividends and debt requirements and all of IP's construction j requirements. Additionally, Illinova expects 1996 cash flows will i enable it to meet operating requirements and continue to service IP's existing debt, -IP's preferred and Illinova's common stock dividends, IP's sinking fund requirements and IP's anticipated construction requirements. IP periodically repurchases shares of its common stock from Illinova to provide Illinova cash for operations, in accordance with authority granted by the ICC. During the first six months of 1996, IP made purchases of 281,597 shares on March 31, 370,806 shares on May 31, and 62,408 shares on June 28. Illinois Power Financing I (IPFI) is a statutory business trust in which IP serves as sponsor. IPFI issued $100 million of trust originated preferred securities (TOPrS) at 8% (4.8% after-tax rate) in January 1996. IPFI issued the TOPrS and invested the proceeds in an equivalent amount of IP subordinated debentures due in 2045. IP used the proceeds to repay short-term indebtedness on varying dates on or 13

l before March 1, 1996. IP incurred the indebtedness in December 1995, to redeem S95.3 million (principal value) of higher-cost outstanding preferred stock of IP. On May 15, 1996, IP redeemed $20.5 million of its Adjustable Rate Series B Preferred Stock. Additionally, since the beginning of 1996, IP has redeemed approximately $89.4 million of bonds and preferred stock through open-market purchases. IP has been actively reducing its long-term debt as cash flows from operations and short-term debt borrowings allow. IP's capital requirements for construction were approximately S87 million and $93 million during the six months ended June 30, 1996 and 1995, respectively. Illinova and IP currently have total lines of credit represented by bank commitments of $150 million and S354 million, respectively. Both Illinova and IP have adequate short-and intermediate-term bank borrowing capacity. In June 1996 Illinova entered into a 364-day $150 l million line of credit with nine banks. Currently, Illinova has l borrowed $46 million under this line of credit to support financing requirements of its non-regulated subsidiaries. On July 1, 1996, Moody's Investors Service upgraded the credit ratings of IP based on the expected improvement in IP's financial profile. In addition, Moody's stated that IP's business risk has diminished due to significant reductions in electric power production costs. Moody's raised IP's mortgage bonds rating from Baa2 to Baal and IP's preferred stock rating from Baa3 to Baa2. At present, IP's mortgage bonds are rated BBB+ by Duff & Phelps and BBB by Standard & Poor's. IP's preferred stock currently is rated BBB-by both Duff & l Phelps and Standard & Poor's. l l In August 1995, IP announced an agreement in principle with l Soyland Power Cooperative, Inc. (Soyland) for the possible purchase of l Soyland's assets. Because certain conditions could not be met, agreement was not reached, and the agreement in principle expired at the i end of 1995. Currently, IP and Soyland are negotiating a possible new arrangement for meeting the bulk power needs of the twenty-one electric distribution cooperatives who are members of and have requirements contracts with Soyland. Soyland's member cooperatives serve approximately 160,000 customers in Illinois. REGULATORY MATTERS OPEN ACCESS AND WHEELING l On April 25, 1996, IP began an open-energy access experiment that l will operate until December 31, 1999. Under the experiment, certain j industrial customers purchase electricity from suppliers other than IP and have it transmitted (" wheeled") from the source to an IP transmission system. Currently, the electricity wheeled is about 80% of the maximum load permitted under the experiment. The maximum load permitted represents about one percent of IP's total load. At this time, IP has not conducted a full study of the actual revenue impact of this experiment; however, IP's original estimate of an annual loss of S3.0 million to S7.5 million in revenue continues to appear reasonable. IP believes that the experiment will have a minimal impact on earnings. Any losses in revenue due to the experiment should 4 be partially compensated by revenues obtained through selling the surplus energy and capacity on the open market. l 14 l l

INTERCOMPANY TRANSACTIONS I l On July 17, 1996, the Federal Energy Regulatory Commission (FERC) I approved a tariff allowing IP to sell electricity to IPMI on an ongoing basis. Previously, IP was required to obtain FERC approval for each transaction with IPMI. Because hourly price fluctuations may be the basis for some of IPMI'c transactions, the prior approval requirement restricted the ability of IPMI to purchase electricity from IP. The new j tariff places IP on an equal footing with other utilities and power j producers who can market their electricity through IPMI. ENVIRONMENTAL MATTERS l GAS MANUFACTURING SITES l See " Manufactured Gas Plant Sites" under " Regulatory and Legal l Matters" of the Notes to Consolidated Financial Statements on page 12. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 AND 1995 l Electric Operations - The electric margin (revenue less cost of l fuel and purchased power) for the second quarter of 1996 increased by l 513.6 million compared to the second quarter of 1995. This increase in l margin was caused by two major factors. First, electric revenues for the current quarter increased by S4.0 million, representing a 5.9% l increase in kwh sales. This increase is primarily due to a 16.2% l increase in kwh sales to the temperature-sensitive residential market, j resulting in a $6.0 million increase in revenues. The increase in l revenues has been somewhat offset by a decline in industrial revenues. Sales to the commercial sector have been relatively stable from 1995 to 1996. The second factor is the greater availability of IP's generating stations which facilitated a $9.0 million increase in interchange revenues while also allowing IP to cut the cost of purchased power by S1.8 million during the second quarter. The equivalent availability of IP's Clinton Power Station (Clinton) was 92.4% and 53.7% for the three months ended June 30, 1996 and 1995, respectively. The lower equivalent availability for Clinton in 1995 was due to a 49-day scheduled maintenance and refueling outage that began in March and was completed in April. The equivalent availability for IP's coal-fired plants was 79.6% and 77.0% for the l three months ended June 30, 1996 and 1995, respectively. Gas Operations - Gas revenues increased $8.4 million in the second quarter of 1996. Therm sales increased 27.1% (21.8 million therms) and therms transported decreased resulting in an increase in gas consumption of 13.5% (20.5 million therms). Residential sales increased 44.7% (16.5 million therms), commercial sales and transport increased 60.0% (9.4 million therms) and industrial sales and transport decreased 11.1% (5.4 million therms). The increase in gas sales is due primarily to the weather in 1996 being closer to normal than it was in 1995. l The cost of gas purchased for resale increased S18.2 million in j the second quarter. Higher prices increased the cost of gas by $8.1 l million and an increase in the volume sold further increased the cost of I These increases were compounded by the effects of the Uniform Gas gas. Adjustment Clause (UGAC). Operation and Maintenance Expense - The current quarter decrease 4 of $14.6 million dollars is primarily due to lower labor expenses resulting from IP's reengineering ef forts and the absence of costs associated with a Clinton refueling outage completed in the second quarter of 1995. These savings have been partially offset by increases 15 1

in the use of contract labor. Additionally, new tariff riders approved l by the ICC in March 1996 havo resulted in the accelerated recognition of MGP site remediation costs. While this has had the effect of increasing operation expense, the increase has been offset by increased revenues l collected under the riders. Miscellaneous - Net - The current quarter decrease of $2.2 million is due to increased operating costs at Illinova and its unregulated i subsidiaries. i l Interest Charges - Total interest charges decreased by $4.4 l million due to lower short-term interest rates and the impact of l refinancing efforts and capitalization reduction during the second quarter of 1996. Earnings per Common Share - The earnings per common share for Illinova during the second quarter of 1996 and 1995 resulted from the interaction of all other factors discussed herein. SIX MONTHS ENDED JUNE 30, 1996 AND 1995 Electric Operations - The electric margin (revenue less cost of fuel and purchased power) for the first six months of 1996 increased by $15.6 million compared to the same period of 1995. This increase in margin was primarily caused by favorable changes in interchange transactions. First, the greater availability of IP's generating stations and improved sales opportunities in 1996 resulted in an S18.5 million increase in interchange revenues. Additionally, the same increase in availability also allowed IP to cut the cost of purchased power by $6.0 million during the current period. l The margin was unfavorably impacted by a decrease in industrial revenues. Led by declining sales in the foods, metals and mining segments, industrial' revenues decreased by 6.6%. However, total residential revenues increased 2.6% while commercial revenues remained constant. The increase in residential revenue is largely due to a greater number of cooling degree days in 1996. The equivalent availability of IP's Clinton Power Station j (Clinton) was 96.1% and 59.9% for the six months ended June 30, 1996 and ( 1995, respectively. The lower equivalent availability for Clinton in l 1995 was due to a 49-day scheduled maintenance and refueling outage. The equivalent availability for IP's coal-fired plants was 81.8% and 77.8% for the six months ended June 30, 1996 and 1995, respectively. The i increased availability is due to fewer planned outages and the shorter duration of those planned outages, which resulted in plants operating at closer to full capacity. Gas Operations - Gas revenues increased $29.5 million in the first half of 1996. Therm sales increased 20.5% (71.9 million therms) and therms transported decreased resulting in an increase in gas consumption l of 10.9% (53.7 million therms). Residential sales increased 18.3% (40.3 l million therms), commercial sales and transport increased 23.0% (20.1 million therms) and industrial sales and transport decreased 26.7% (6.7 million therms). The increase in gas sales is due primarily to colder winter weather as compared to 1995, which had a milder than normal winter. 3 The cost of gas purchased for resale increased $26.6 million in the second quarter. Higher prices increased the cost of gas by $22.8 million and an increase in the volume sold further increased the cost of gas. These increases were partially offset by the effects of the UGAC. Operation and Maintenance Expense - The decrease of $20.7 million l 16

dollars is primarily due to lower labor expenses resulting from IP's reengineering efforts and the absence of costs associated with a Clinton refueling outage occurring in the first half of 1995. These savings have been partially offset by increases in the use of contract labor. Additionally, new tariff riders approved by the ICC in March 1996 have resulted in the accelerated recognition of MGP site remediation costs. While this has had the effect of increasing operation expense, the increase has been offset by increased revenues collected under the riders. Miscellaneous - Net - The increase in net deductions of $6.9 million is due to increased operating costs at Illinova and its unregulated subsidiaries, partially offset by increased equity earnings of the subsidiaries. Interest Charges - Total interest charges decreased by $10.4 million due to lower short-term interest rates and the impact of refinancing efforts and capitalization reduction during the first'six months of 1996. Earnings per Common Share - The earnings per common share for Illinova during the first six months of 1996 and 1995 resulted from the interaction of all other factors discussed herein. 17 u

i i N PART II. OTHER INFOPEATION ITEM 1. Legal Proceedings See " Notes to Consolidated Financial Statements" in Part I for a discussion of certain legal proceedings related to manufactured gas plant sites and spent nuclear fuel. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits The Exhibits filed with this 10-0 are listed on the Exhibit Index. (b) Reports on Form 8-K since March 31, 1996: None. j a 1 e k i O 18 2

l SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ILLINOVA CORPORATION (Registrant) r By /s/ Larry F. Altenbaumer Larry F. Altenbaumer, Chief Financial Officer, Treasurer and Controller on behalf of Illinova Corporation Date: August 7, 1996 i S 19

- -. - - - - - -. - ~....... - - ~.... - ~ - - - - - - - - - - - - -. - - ~. j i l i SIGNATURES 1 Pursuant'to the requirements of the Securities Exchange Act of 1934, the ' registrant has duly caused this report to be signed on its behalf by the l undersigned thereunto duly authorized. i i ILLINOIS POWER COMPANY j (Registrant) l d i 4 i By /s/ Larry F. Altenbaumer a ' Larry F. Altenbaumer, I Senior Vice President, f Chief Financial Officer and j Treasurer on behalf of 4-Illinois Power Company [ l ^ t i Date: August 7, 1996 i a i i. i i I 4 't { 3 i O l I i l i 20

. ~ t [ EXHIBIT INDEX e PAGE NO. WITilIN SEQUENTIAL NUMBERING EXHIBIT DESCRIPTION SYSTEM i 27 Financial Data Schedule UT (filed herewith) l l 21

I I SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549-1004 FCE4M 10-K l l (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF j THE SECURITIES EXCHANGE ACT OF 1934 [ FEE REQUIPID) i l l For the Fiscal Year F.nded December 31, 1995 l Or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED) For the transition period from to Registrants, State of Incorporation, Address Comnission of Principal Executive I.R.S. Employer File Number Of.' ices and Telephone Number Identification No. l l 1-11327 37-1319890 ILLINOVA coRPC5tATIcel l (an Illinois Corporation) 500 S. 27th Street Decatur, IL 62525-1805 (217) 424-6600 1-3004 37-0344645 ILLINOIS POWER COMPANY (an Illinois Corporation) 500 S. 27t.h street Decatur, IL 62525-1315 (217) 424-6600 l l 1.

=. l Ie l l l Securities registered pursuant to Section 12(b) of the Act: Each of the following securities registered pursuant to Section 12 (b) of the Act are listed on the New York Stock Exchange. l Title of each class Registrant Common Stock (a) Illinova Corporation l l Preferred stock, cumulative, Illinois Power Company $50 par value l 4.08% Series 4.26% Series 4.70% Series 4.20% Series 4.42% Series ) l Preferred stock, cumulative, I no par value I l Adjustable Rate Series A Adjustable Rate Series B Mandatorily redeemable preferred securities of subsidiary t (Illinois Power Capital, L.P.) 9.45% Series First mortgage bonds 6 1/2% Series due 1999 8 3/4% Series due 2021 7.95% Series due 2004 New nortgage bonds 6 1/8% Series due 2000 6 3/4% Series due 2005 5 5/8% Series due 2000 8% Series due 2023 6 1/2% Series due 2003 7 1/2% Series due 2025 (a) Illinova Common Stock is also listed on the Chicago Stock Exchange. Indicate by check nark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Illinova Corporation Yes (X) No Illinois Power Company Yes [X] No Indicate by check mark if disclosure of delinquent filers pursuant I to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or infornation statements incorporated by reference in Part III ef this Form 10-K or ariy amendment to this Fonn 10-K. Illinova Corporation [X] Illinois Power Coupany [X) The aggregate market value of the voting common stock held by non-1 affiliates of Illinova Corporation at February 29, 1996 was approximately S2.2 billion. Illinova Corporation is the sole holder of the common stock 1 of Illinois Power Conpany. The aggregate market value of the voting _2-1 i

preferred stock held by non-affiliates of Illinois Power Company at February 29, 1996, was approximately $99 ndllion. The determination of stock ownership by non-affiliates was made solely for the purpose of responding to this requirement and the registrants are not bound by this determination for any other purpose. l The number of shares of Illinova corporation common Stock, without par l value, outstanding on February 29, 1996 was 75,674,937. Documents Incorporated by Reference t 1. Portions of the 1995 Annual Report to Shareholders of Illinova l Corporation in the appendix to the Illinova Corporation Proxy l Statement. (Parts I, II, III and IV of Fonn 10-K) 2. Portions of the 1995 Annual Report to Shareholders of Illinois Power Company in the appendix to the Illinois Power Company Information Statement. (Parts I, II, III and IV of Form 10-K) I 3. Portions of the Illinova 1995 Proxy Statement. (Part III of Form 10-K) 4. Portions of the Illinois Power 1995 Information Statement. (Part III of Form 10-K) l ILLIMOVA CORPORATION ILLINOIS POWER COMPANY FORM 10-K For the Fiscal Year Ended December 31, 1995 This combined Fona 10-K is separately filed by Illinova Corporation and Illinois Power Company. Prior to the filing of the combined 10-Q for the quarter ended June 30, 1994, Illinova Corporation was not a reporting company for purposes of the Securities Exchange Act of 1934 and Illinois Power Company filed its own separate reports on Form 10-K. Information contained herein relating to Illinois Power Company is filed by I111 nova Corporation and separately by Illinois Power Company on its own behalf. Illinois Power Company makes no representation as to information relating to Illinova Corporation or its subsidiaries, except as it may relate to Illinois Power Company. TABLE OF CONTENTS Part I Page Item 1. Business 6 General 6 Competition 7 Customer and Revenue Data 8 Electric Business 9 overview 9 i Power Coordination Agreement With Soyland 10 Fuel Supply 10 Construction Program 12 Clinton Power Station 13 General 13 Decommissioning Costs 13 Accounting Matters 13 Dividends 14 Gas Business 14 Gas Supply 14 Environmental Matters 15 Air Quality 15 Clean Air Act 16 Manufactured-Gas Plant (MGP) Sites 16 Water Quality 16 Other Issues 17 Electric and Magnetic Fields 17 Environmental Expenditures 17 Research and Development 17 Regulation 18 Executive Officers of Illinova Corporation 18 Executive Officers of Illinois Power Company 19 Operating Statistics 20 i Item 2. Properties 20 ( Item 3. Legal Proceedings 20 l Environmental 21 Item 4. Submission of Matters to a Vote of Security Holders 21 Part II Item 5. Market for Registrants' Common Equity and Related Stockholder Matters 22 Item 6. Selected Financial Data 22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22 i l

... - ~. -. -... ~.... - _. ~,..... -. ~. _. -. -. - -.... -. -.. -... ~.. -. -. -.. _. ..... ~, 1 i TABLE OF CONTENTS (Continued) { i Item 8. Financial Statements and Supplementary l Data 22 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 23 Part III Item 10. Directors and Executive Officers of the Registrants 24 Item 11. Executive Compensation 24 h Item 12. Security ownership of Certain i Beneficial Owners and Management 24 ( Item 13. Certain Relationships and Related Transactions 24 Part IV i Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 25 Signatures 27-28 I . Exhibit Index 29 l i l l l l I I -s-

1 PART I 1 - ITEM 1. Business j General Illinois Power Company (IP) was incorporated under the laws of the State of l Illinois on Nhy 25, 1923. Illinova Corporation (Illinova) was incorporated under the laws of the State of Illinois on May 27, 1994 and currently serves as the parent holding company of three principal operating subsidiaries: IP, Illinova Generating Company (IGC) and Illinova Power Marketing, Inc. (IPMI). IP is the primary business and principal subsidiary of Illinova and is engaged in the generation, transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the State of Illinois. Several developments have occurred recently at IP that are related to the increasingly competitive nature of the utility industry and IP's efforts to position itself to benefit from the opportunities emerging on the horizon. In 1995, IP was a participant in the development of Energy choice 2000, a legislative proposal designed to reform utility regulation in Illinois. Furthermore, IP designed and proposed an open energy access experLment which would allow approximately 20 industrial customers to purchase electricity and related services from other sources. IP plans to use this experiment to evaluate the financial, operational and service impacts of transporting power from other suppliers to customers. For a more detailed discussion of these developments, refer to the " Competition" section of this item. In December 1994, IP announced plans for voluntary enhanced retirement and severance programs. During the fourth quarter of 1995, 727 employees elected to accept either enhanced retirement or enhanced severance. These two programs resulted in a pre-tax charge of $38 million against fourth quarter 1995 earnings but are expected to generate savings of approximately $36 million annually beginning in 1996. IP provides funds to Illinova for operations and investments. Illinova accrues interest due to IP on these funds at a rate equal to the higher of the rate that Illinova would have to pay if it used a currently outstanding line of credit, or IP's actual cost of the funds provided. At the end of each l quarter, IP effects a common stock repurchase from Illinova by accepting shares equal in market value to the amount of the funds provided to Illinova l during the quarter plus the accrued interest for the quarter. During 1995, IP provided approximately $34 million in funds to Illinova. Since Illinova's i inception in 1994, IP has provided approximately $54 million to Illinova. For further information on IP common stock repurchases, see Item 7 " Management's Discussion and Analysis of Financial Condition and Results of Operation" of i this report. IP's financial position and results of operations are currently the principal factors affecting Illinova's consolidated financial position and results of operations. IGC is Illinova's wholly-owned independent power subsidiary that invests 4 l .in energy-related projects throughout the world and competes in the independent power market. IGC is an equity partner with Tenaska, Inc. in four 1 natural gas-fired generation plants. Tenaska, Inc. is a developer of independent power projects and is based in Omaha, Nebraska. IGC also owns 50 percent of the North American Energy Services Company (NAES), which supplies a broad range of operations, maintenance and support services to the world-wide independent power generation industry. NAES will operate the Tenaska generation' plants in which IGC has an equity position. IGC is an equity.

l l. t partner in the Indeck North Jun3rican Powar Fund (Fund). The Fund has l generation projects in Long Beach, California, and Pepperell, Massachusetts. 7 In addition to these ventures, IGC is involved in generation projects in l . Teesside, England; Puerto Cortez, Honduras; Zhejiang Province, People's Republic of China; Aguaytia, Peru; and Old Harbour, Jamaica. IGC also has l l invested in a coal-drying facility in Gillette, Wyoming. l IPMI is Illinova's wholly-owned subsidiary that is in the business of marketing energy and energy-related services. On May 16, 1995, IPMI obtained approval from the Federal Energy Regulatory Commission (FERC) to conduct I business as a marketer of electric power and gas to various customers outside - of IP's present service territory. In September 1995, IPMI began buying and selling wholesale electricity in the western United States. IPMI owns 50 l percent of Tenaska Marketing Ventures (TMV). IPMI and TMV have formed Tenaska l Marketing Canada to market natural gas in Canada. l On December 13, 1995, the Illinova Board of Directors approved the formation of a captive insurance subsidiary of Illinova. The purpose of the l insurance subsidiary will be to provide insurance coverage to IP that is not j available in the commercial market, to provide greater financial flexibility for Illinova and to reduce IP's risk management costs. It is anticipated that i the insurance subsidiary will be created in mid-1996. i l Competition l j Competition has become a dominant issue for the electric utility industry. It has been promoted by federal legislation, starting with the Public Utility Regulatory Policies Act of 1978, which facilitated the development of co-generators and independent power producers. Federal promotion of competition continued with enactment of the Energy Policy Act of 1992, which authorized the FERC to mandate wholesale wheeling of electricity j by utilities at the request of certain authorized generating entities and electric service providers. Wheeling is the transport of electricity generated by one entity over transmission and distribution lines belonging to another entity. For many years prior to enactment of the Energy Policy Act, the FERC imposed wholesale wheeling obligations as a condition of approving mergers and granting operating privileges, which is a practice that continues. Competition arises not only from co-generation or independent power production, but also from municipalities seeking to extend their service boundaries to include customers being served by IP. The right of municipalities to have power wheeled to them by utilities was established in 1973. IP has been obligated to ;.haal power for municipalities and cooperatives in its territory since li,C Thi Illinois Commerce Commission (ICC) has been supportive of IP's attemptJ to reintain its customer base through approval of special contrsets and flexible pricing that help IP to l compete with existing municipal provid:Is. Further competition may be introduced by state action or by federal regulatory action. While the Energy Policy Act precludes the FERC from mandating retail wheeling, state regulators and legislators could open utility franchise territories to full competition at the retail leyel. Legislative action would be required for retail wheeling to occur in Illinois. Retail wheeling involves the transport of electricity to end-use residential, commercial or industrial customers. Such a change would be a significant departure from existing regulation in which public utilities have a universal j i obligation to serve the public in return for relatively protected service j territories and regulated pricing which is designed to allow a reasonable l ' return on prudent investment and recovery of operating costs. States' ] { attempts to lay the groundwork for retail wheeling have been hampered by i j opposition from various interest groups, as well as the complexity of related issues, including recovery of costs associated with existing generation ( investment. j l i 1, i I

l.' 1 In March 1995, IP was instrumental in developing a legislative proposal, Entsrgy Choice 2000, which is designed to reform Illinois' regulatory laws gnverning utilities. Energy Choice 2000 establishes the framework for a managed transition for utilities to operate in a competitive market. -The proposal outlines a time frame for all classes of customers to benefit from competition, beginning in the year 2000. In May 19S5, the Illinois General Assembly passed Senate Joint Resolution 21, which established the Joint i Committee on Electric Utility Regulatory Reform and directed it to use Energy choice 2000 *as a key element for developing legislative proposals for l reducing regulation, increasing customer choice and promoting and facilitating l competition in Illinois' electric utility industry." The Joint Committee on l Electric Utility Regulatory Reform is directed to provide a final legislative proposal during the fourth quarter of 1996. On September 11, 1995, IP filed a proposal with the ICC seeking approval to conduct an open-energy access experiment beginning in 1996. The experiment would allow approximately 20 industrial customers to purchase electricity and related services'from other sources. IP would transmit (wheel) the electricity over its lines. IP received approval for the experiment from the ICC on March 13, 1996. IP expects to receive approval from the FERC by April 15, 1996. i The maximum total load involved in this experiment represents approximately 1 percent of IP's total load, or about $7.5 million in net annual revenue. IP expects the earnings impact to be immaterial. Any loss of sales would be partially offset by revenues obtained by selling the surplus energy and capacity on the open market and by transmission and ancillary service charges necessary for customers to obtain energy from an alternative supplier, as well as by corresponding reductions in fuel and other variable l operating costs. l The open-access experiment will allow IP to evaluate the financial, operational and service impacts of transporting power from other suppliers to l customers. Additionally, regulators and legislators will benefit from the experiment by observing open-energy access in a " laboratory setting" while they look for ways to bring the benefits of competition to all customers. Finally, it will give customers opportunity to gain experience in arranging their power supplies and transmission requirements and managing their operations under an open-energy access scenario. At this time, the ultimate effect of competition in the electric utility industry on I111 nova's consolidated financial position and results of l operations is uncertain. Customer and Revenue Data Approximately 83 percent and 17 percent of I111 nova's and its subsidiaries' operating revenues are derived from the sale of electricity and the sale and transportation of natural gas, respectivel y. The territory served by IP L comprises substantial areas in northern. central and southern Illinois, including ten cities with populations greater th,m 30,000 (1990 Federal Census data). IP supplies electric service at retail to an estinated aggregate population of 1,265,000 in 310 incorporated municipalities, adjacent suburban and rural areas, and numerous unincorporated conmunities and retail natural gas service to an estimated population of 920,000 in 257 incorporated municipalities and adjacent areas. IP holds franchises in all of the 310 incorporated municipalities in which it furnishes retail electric service and in all of the 257 incorporated municipalities in which it furnishes retail gas service. At February 29, 1996, 4 IP served 629,351 active electric customers and 402,775 active gas customers. } These numbers do not include non-metered customers such as street lights. Sales of electricity and gas sales and transportation are affected by seasonal weather i l patterns, and, therefore, operating revenues and associated operating expenses l are not distributed evenly during the year.,

For rare information, sce " Note 13 - Sagmznts of Business" on page A-30 of the 1995 Innual heport to Shareholders in the appendix to the Illinova Proxy Statenent which is incorporated herein by reference. To the extent that information incorporated by reference herein appears identically in both the 1995 Annual Report to Shareholders of Illinova Corporation and the 1995 Annual Report to Shareholders of Illinois Power Company, reference will be made herein only to the 1995 Annual Report to Shareholders of Illinova corporation, and such reference will be deemed to include a reference to the 1995 Annual Report of l I Illinois Power Company. Electric Business Overview ) l IP supplies electric service at retail to residential, commercial and industrial consumers in substantial portions of northern, central and southern Illinois. Electric service at wholesale is supplied for resale to one electric j utility and to the Illinois Municipal Electric Agency (IMEA) as agent for 11 municipalities. IP also has a power coordination agreement with Soyland Power i Cooperative, Inc. (Soyland). See the sub-caption " Power Coordination Agreement With Soyland" hereunder for additional information. In 1995, IP provided interchange power to 21 entities, including 7 power marketers. IP's highest system peak hourly demand (native load) in 1995 was 3,666,738 kilowatts on July 13, 1995. This 1995 peak load set a new company record, surpassing IP's previous high of 3,508,000 kilowatts set in 1988. IP owns and operates generating facilities with a total net summer capability of 4,443,000 kilowatts. The generating capability comes from six major steam generating plants and three peaking service combustion turbine plants. See Item 2 " Properties" for further information. ) IP owns 20% of the capital stock of Electric Energy, Inc. (EEI), an Illinois corporation. EEI was organized to own and operate a steam electric generating station and related transmission facilities near Joppa, Illinois to I supply electric energy to the U.S. Department of Energy (DOE) for its project j near Paducah, Kentucky. Under a power supply agreement with EEI, IP has the right to purchase 5.0% of the annual output of the Joppa facility. IP has the flexibility to schedule the capacity in varying amounts ranging from a nominal 51,000 kilowatts for 52 weeks up to a maxLmwn of 203,000 kilowatts for approximately 13 weeks. IP must schedule its annual capacity entitlement by August 1 of the preceding year, and availability of the scheduled capacity is subject to certain other limitations related to scheduling considerations of the other co-owners of the Joppa facility and the DOE, and any planned unit outages. The power supply agreement is effective until December 31, 2005, unless amended, changed, or canceled by mutual agreement of all parties. IP is a participant, together with Union Electric Company ('E) and Central U Illinois Public Service Company (CIPS), in the Illinois-Missouri Power Pool which was formed in 1952. The Pool operates under an interconnection agreement which provides for the interconnection of transmission lines. Additionally, the agreement contains provisions for the coordination of generating equipment maintenance schedules, inter-company sales of firm and non-firm power, and the maintenance of mintmmm capacity reserves by each participant. These capacity reserver are equal to the greater of 15% of its peak demand, one-half of its largest unit, or one-half of its largest non-firm purchase. This agreement has l no expiration date, but any party may withdraw from the agreement by giving 36 months notice to the other parties, i IP, CIPS and UE have a contract with the Tennessee Valley Authority (TVA) l providing for the interconnection of the TVA system with those of the three I companies to exchange economy and emergency power and for other working _g_ l

i. arrengaments. This contract has no expiration date, but any party may withdrew 1 from the agreement by giving 5 years written notice to the other parties. IP also has interconnections with Indiana-Michigan Power Company, common-l wealth Edison Company, Central Illinois Light Company, Mid-American Energy l Corporation, Kentucky Utilities Company, Southern Illinois Power Cooperative, EEI, Soyland and the City of Springfield, Illinois. IP is also a member of the Mid-America Interconnected Network, which is one of nine regional reliability councils established to coordinate plans and l operations of member companies regionally and nationally. Power coordination Agreement With Soyland l l Under the proviszans of the 1984 Power Coordination Agreement (PCA) between IP and Soyland, IP is required to provide Soyland with 12.0% of the electrical l capacity from its fossil-fueled generating plants until the agreement expires or l 1s terminated. IP transmits energy for Soyland through IP's transmission and subtransudssion systens and is compensated by Soyland with capacity charges and for energy and variable operating costs. For more information on the PCA, see " Note 6 - Facilities Agreements" on page A-23 of the 1995 Annual Report to l Shareholders in the appendix to the Illinova Proxy Statement which is l ' incorporated herein by reference. l l l Fuel Supply l l Coal was used to generate 72.7% of the electricity produced by IP during i l 1995, with nuclear and oil and gas contributing 26.8% and 0.5%, respectively. l Based on current forecasts, the percentages of generation attributable to coal, nuclear, oil and gas in 1995 should remain essentially the same in future years. The percentage attributable to nuclear is projected to increase to around 31.0%, j while the percentage attributable to coal should decline to about 68.0%, during those years in which there is not a scheduled refueling outage for the Clinton Power Station (Clinton). j IP's rate schedules contain provisions for passing along to its electric ) l customers increases or decreases in the cost of fuels used in its generating stations. For additional information see the information under the sub-captions " Revenue and Energy Cost" of " Note 1 - Summary of Significant Accounting Policies" on page A-15 of the 1995 Annual Report to Shareholders in the appendix i l to the Illinova Proxy Statement which is incorporated herein by reference. COAL - Coal is expected to be a major source of fuel for future generation. Through both long-term and short-term contracts, IP has obtained connitments for the major portion of future coal requirements. IP has chort-term contracts with four suppliers which last through 1997 and long-term contracts with two suppliers which last through 1999 and 2010. Contracts renegotiated in 1993 and 1994 have i provided for the continued economic use of high sulfur Illinois coal while IP complies with Phase I of the Clean Air Act Amendments that became effective January 1, 1995. Spot purchases of coal in 1995 represented less than 1% of IP's total coal purchases. IP believes that it will be able to obtain sufficient coal to meet its future generating requirements. However, IP is unable to predict the extent to which coal availability and price may fluctuate in the future. Coal inventories on hand at December 31, 1995 represented a 27-day supply based on IP's average daily burn projections for 1996, j IP continues to evaluate and obtain alternate fuel delivery and unloading facilities for greater flexibility of fuel supplies. New rail unloading facilities at the Havana Station (Havana) are expected to be operational in 1996. NUCLEAR - IP leases nuclear fuel from Illinois Power Fuel Company (Fuel Company). The Fuel Company, which is 50% owned by IP, was formed in 1981 for the purpose of i ( ' i

leasing nuclear fuel to IP for C1 on. Lease payments are equal to the Fuel Company's cost of fuel as consu=e (including related financing and i administrative costs). As of December 31, 1995, the Fuel Corpany had an invest-J ment in nuclear fuel of approximately $95 ndllion. IP is obligated to nake J subordinated loans to the Fuel Company at any time the obligations of the Fuel Company which are due and payable exceed the funds available to the Fuel Conpany. At December 31, 1995, IP had no outstanding loans to the Fuel Company. At December 31, 1995, IP's net investment in nuclear fuel consisted of $10 million of Uranium 308. This inventory represents fuel to be used in connection with the sixth reload of Clinton which is scheduled to begin in October 1996 and l expected to last approximately six weeks. At December 31, 1995, the unamortized investment of the nuclear fuel assemblies in the reactor was $85 ndllion. IP has two long-term contracts for the supply of uranium concentrates. One contract is with Cameco, a Canadian corporation. The Cam-co contract was renegotiated in 1994 to lower the price and provide 55% to 65% of Clinton's estimated fuel requirements through 2000. The decision to utilize Cameco for the additional 10% of Clinton's fuel requirements is made the year before each delivery and depends on the estimated price and availability from the spot market versus the estimated contract prices. The contract with Cameco is stated in terum of U. S. Dollars. The second uranium contract is with U.S. Energy / Crested Corporation. Originally, it was for 1,179,240 pounds of uranium concentrates with deliveries through 1998. IP purchased approximately one half of the uranium concentrates i supply under this contract before it was terminated in September 1993. In October 1993, IP filed suit in U.S. District Court, Central District of Illinois, Danville, seeking a declaration that IP's tenmination of the U.S. Energy contract was permitted by the terms of the contract as they relate to rights of termination in the event of certain receivership proceedings. On September 1, 1994, the Court granted defendants' notions for summary judgment and ruled that the termination constituted a breach of contract. On June 15, 1995, i IP concluded a negotiated settlement with U.S. Energy / Crested Corporation. That settlement reduced the quantity to be purchased and shortened the contract term by one year, while increasing the price per pound. J Conversion services for tha period 1991-2001 are contracted with Sequoyah Fuels. Sequoyah Fuels closed its Oklahoma conversion plant in 1992 and joined with Allied Chemical Company to form a marketing company named coverDyn. All j conversion services will be performed at Allied's Metropolis, Illinois facility, but Sequoyah Fuels retains the contract with IP. IP has a Utility Services con-I tract for uranium enrichment requirements with the DOE which provides 70% of the enrichment requirements of Clinton through September 1999. The remaining 30% has been contracted with the DOE through an amendment to its incentive pricing plan through 1999. This amendment allows IP to either purchase the enrichment services at the DOE's incentive price or provide electricity at DOE's Paducah, l Kentucky enrichment plant at an agreed exchange rate. In addition, legislation was passed to create a new private government corporation, the United States Enrichment Corporation (USEC), for enrichment services. All of the DOE's assets including all contracts, were transferred to the USEC as of July 1993. A contract with General Electric Company provides fuel fabrication require-ments for the initial core and approximately 11 reloads, or through 2004. In 1993, an amindment was signed with the General Electric Company to add 67% nore fuel bundles to 'cne contract and to change the existing price and other terne and conditions. Th3 additional fuel bundles are expected to cover fuel fabrication requirements tnrough 2017. 1 Beyond the stated conndtments, IP may enter into additional contracts for uranium concentrates, conversion to uranium hexafluoride, enrichment and fabrication. Currently, no plants for commercial reprocessing of spent nuclear fuel are j in operation in the U.S., and reprocessing cannot begin until appropriate ..- -.-.-.. - -. ~ licanses are issusd by the Nuclear Regulatory Commission (NRC). Various governmental agencies are currently reviewing the environmental impact of nuclear fuel reprocessing and waste management. The Nuclear Waste Policy Act of 1982 was enacted to establish a government policy with respect to disposal of spent nuclear fuel and high-level radioactive waste. On July 6, 1984, IP signed a contract with the DOE for disposal of spent nuclear fuel and/or high-level radio-active waste. Under the contract, IP is required to pay the DOE one ndil (one-tenth of a cent) per net kilowatt-hour (one. dollar per MWH) of electricity gen-i erated and sold. IP is recovering this amount through rates charged to customers. on June 20, 1994, IP and 13 other utilities filed an action in the D.C. ~ Circuit Court of Appeals asking the Court to rule that the DOE is obligated to take responsibility for spent nuclear fuel by January 31, 1998 under the Nuclear i l Waste Policy Act of 1982. IP based its decision to build Clinton, in part, on l the' assurance that a federal repository would be built and operated by the DOE, i and, under the Act, the DOE has been collecting money from IP to pay for such a repository. The utilities are asking the Court to confirm the DOE's conadtment i and to order the DOE to develop a compliance program with appropriate deadlines, The utilities also have asked for relief from the ongoing funding requirements or to have an escrow account established for future funds paid to DOE. Oral arguments in this case were held in January 1996. A decision from the Court is expected sometime in 1996. IP has on-site storage capacity that will accommodate its spent fuel storage needs until the year 2004, based on current operating levels. If by that date the U.S. Government has not complied witn to its statutory obligation to dispose of spent fuel, and IP has continued to operate the plant at current levels, IP will have to use alternative means of disposal, such as dry storage in casks on site or transportation of the fuel rods to private or collectively-owned utility repositories. IP currently is an equity partner in an effort to develop a private storage facility in conjunction with the Mescalaro Apaches on their reservation in New Mexico. Continued participation in the partnership will depend on the technological and economic viability of the project. Current i technology allows safe, dry, on-site storage, subject to licensing and local permitting requirements. Under the Energy Policy Act of 1992, IP is responsible for a portion of the cost to decontaminate and decommission the DOE's uranium enrichment facilities. Each utility will be assessed an annual fee for a period of fifteen years based on quantities purchased from the' DOE facilities prior to passage of the Act. At December 31, 1995, IP har a remaining liability of $5.1 million representing future assessments. IP is recovering these costs, as amortized, through its fuel adjustment clause. I OIL and GAS - IP used natural gas and oil to generate 0.5% of the electricity produced in 1995. IP has not esperienced difficulty in obtaining adequate supplies of these resources. Eowever, IP is unable to predict the extent to which oil and gas availability and price may fluctuate in the future. Reference is nade to the sub-caption " Environmental Matters" hereunder for infornation regarding pollution control matters relating to IP's fuel supply. Construction Program Illinova and IP need cash for construction programs. To meet anticipated needs, Illinova and IP have used internally generated funds and external financings. The timing and amount of external financings depend primarily on q l economic and financial market conditions, cash needs and capitalization ratio 1 objectives, i For more information on Illinova's construction program and liquidity, see " Note 4 - Commitments and Contingencies" on page A-18 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement which is incorporated herein by reference; " Note 5 - Lines of Credit and Short-Term Loans" ' l

on page A-22 of the 1995 Annual Raport to Shareholdars in the appendix to the Illinova Proxy Statement which is incorporated herein by reference; and " Capital i Resources and Requirements" in

• Management's Discussion and Analysis" on page A-7 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement which is incorporated herein by reference.

i For nere information on IP's construction program and liquidity, see " Note 3 - Connitnents and Contingencies" on page A-18 of the 1995 Annual Report to Shareholders in the appendix to the Illinois Power Information Statement which is incorporated herein by reference; " Note 4 - Lines of Credit and Short-Term Loans" i .on page A-22 of the 1995 Annual Report to Shareholders in the appendix to the. i Illinois Power Information Statement which is incorporated herein by reference; and " Capital Resources and Requirements" in " Management's Discussion and Analysis" on page A-7 of the 1995 Annual Report to Shareholders in the appendix to the Illinois Power Infornation Statement which is incorporated herein by l l reference. Clinton Power Station j l General j i i IP and Soyland share ownership of Clinton, with IP owning 86.8% and Soyland owning 13.2%. Clinton was placed in service in 1987 and represents approxinately 18% of IP's installed generation capacity. For nore information on the Clinton Power Station, see " Note 3 - Clinton Power Station" on page A-17 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement j l which is incorporated herein by reference. t 1 Deconndssioning Costs IP is responsible for its ownership share of the costs of decommissioning Clinton and for spent nuclear fuel disposal costs. IP is collecting future i decommissioning costs through its electric rates based on an ICC-approved formula j that allows IP to adjust rates annually for changes in decommissioning cost estimates. For more information on the decommissioning costs related to the i Clinton Power Station, see " Note 4 - Commitments and Contingencies" on page A-18 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement which is incorporated herein by reference. i Accounting Fhtters The Illinova consolidated financial statements include the accounts of Illinova Corporation, a holding company; IP, a combination electric and gas utility; IGC, a wholly-owned subsidiary that invests in energy-related projects and competes in the independent power market; and IPMI, a wholly-owned subsidiary that markets energy and energy-related services. t IP's consolidated financial position and results of operations are currently the principal factors affecting Illinova's consolidated financial position and results of operations. All significant intercompany balances and transactions have been eliminated from the consolidated financial statements. l All non-utility operating transactions are included in the section titled Other Income and Deductions, " Miscellaneous-net" in the Consolidated i Statements of Income. Prior year amounts have been restated on a basis l consistent with the December 31, 1995, presentation. The IP consolidated financial statements include the accounts of Illinois Power Capital, L.P., a limited partnership in which IP serves as the general j partner. l IP currently prepares its financial statements in accordance with Statement of Financial Accounting Standards No. 71, " Accounting for the Effects of Certain i 1,

Types of Ragulation" (EAS 71). Accordingly, IP records various regulatory assets and liabilities to reflect the actions of regulators. Management believes that I IP currently meets the criteria for continued application of EAS 71 but will l continue to evaluate significant changes in the regulatory and competitive I environment to assess IP's overall compliance with such criteria. These criteria include:

1) whether rates set by regulators are designed to recover the specific costs of providing regulated services and products to customers and 2) whether regulators continue to establish rates based on cost.

In the i event that management determines that IP no longer meets the criteria for application of EAS 71, an extraordinary non-cash charge to income would be j recorded in order to remove the effects of the actions of regulators from the consolidated financial statements. The discontinuation of application of EAS 71 would likely have a naterial adverse effect on Illinova's and IP's consolidated financial position and results of operations. Dividends On December 13, 1995, Illinova increased the quarterly common stock dividend 12%, to S.28 per share from S.25 per share, effective with the common stock dividend for the first quarter of 1996. i Gas Business _=-__ IP supplies retail natural gas service to an estimated aggregate population of 920,000 in 257 incorporated municipalities, adjacent suburban areas and numerous unincorporated communities. IP does not sell gas for resale. IP's rate schedules contain provisions for passing through to its gas customers increases or decreases in the cost of purchased gas. For information on revenue and energy costs, see the sub-caption " Revenue and Energy Cost" of " Note 1 - Summary of Significant Accounting Policies" on page A-15 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement that is incorporated herein by reference. IP has eight underground gas storage fields having a total capacity of approximately 15.2 ndllion FFBtu and a total deliverability on a peak day of about 347,000 MNBtu. In addition to the capacity of the eight underground storage fields, IP has contracts with various natural gas suppliers and producers for 11.0 million NHBtu of underground storage capacity and a total deliverability on a peak day of 160,000 NFBtu. Operation of underground storage permits IP to increase deliverability to its customers during peak load periods by taking gas into storage during the off-peak months. IP owns two active liquefied petroleum gas plants having an aggregate peak-day deliverability of about 40,000 MMBtu for peak-shaving purposes. Gas properties include approximately 7,800 ndles of mains. IP experienced its 1995 pr,ak-day send out of 666,200 MHBtu of natural gas on Decenber 9, 1995. This comr. ares with IP's record peak-day send out of 857,324 NNBtu of natural gas on Januar.y 10, 1982. Gas Supply Pursuant to orders 6L6 and 636-A, issued in April and August 1992, respectively, the FERC app:oved amendments to rules intended to increase competition among natural gas suppliers by "unbundling" the interstate pipelines' merchant sales service into separate sales and transportation services and by mandating that the pipelines' firm transportation service be comparable to the transportation service included in their traditional bundled sales service. Under this rule, pipelines are required to unbundle services that they provided so that natural gas purchasers can select services as needed to meet their energy requirements. As of December 31, 1993, all of IP's pipeline suppliers had i

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1 restructured their sarvica offerings to conform with the requiremsnts of Ordars l 636 and 636-A. These rules have increased the complexity of providing firm gas service. This additional complexity results from the greater number of options available to IP, as well as the added responsibility to arrange for the acquisition, transportation and storage of natural gas, which was previously bundled into the pipelines' sales service. As a result of Orders 636 and 636-A, the pipelines are charging their customers ' transition" costs, which arise from unbundling l services. IP estimates that it will incur approximately $10.5 million in transition costs through 1998. In 1993, IP began to pay transition costs billed by gas pipelines and to recover these payments through a tariff rider. On September 23, 1994, the ICC issued a final order approving recovery of order 636 transition costs. Under Order 636, IP has entered into firm transportation agreements with the pipelines that feed its system. IP has contracts with five suppliers through 199C. IP's present estimated supplies of gas from pipelines and its own storage are sufficient to serve all of its existing firm loads. When gas service to interruptible customers is interrupted, storage service is made available in lieu of curtailment. Gas service continues to be available to all applicants on a current basis. Environmental Matters IP is subject to regulation by certain federal and Illinois authorities with respect to environmental matters and may in the future become subject to additional regulation by such authorities or by other federal, state and local governmental bodies. Existing regulations affecting IP are principally related to air and water quality, hazardous wastes and toxic substances. Air Quality r Pursuant to the Federal Clean Air Act (Act), the United States Environmental Protection Agency (USEPA) has established ambient air quality standards for air pollutants which, in its judgment, have an adverse effect on public health or welfare. The Act requires each state to adopt laws and regulations, subject to USEPA approval, designed to achieve such standards. Pursuant to the Illinois Environmental Protection Act, the Illinois Pollution control Board (Board) adopted and, along with the Illinois Environmental Protection Agency (IEPA), is enforcing a comprehensive set of air pollution control regulations which include emission limitations and permitting and monitoring and reporting requirements. i The air pollution regulations of the Board impose limitations on emissions ) i l of particulate, sulfur dioxide, carbon monoxide, nitrogen oxides and various l other pollutants. Enforcement of emission limitations is accomplished in part through the regulatory permitting process. IP's practice is to obtain an l operating permit for each source of regulated emissions. Presently, it has a j l total of approxinately 100 permits for emission sources at its power stations and other facilities, expiring at various times. In addition to having the requisite l operating permits, each source of regulated emissions must be operated within the l regulatory lLmitations on emissions. Verification of such compliance is usually accomplished by reports to regulatory authorities and inspections by such authorities. In accordance with the requirements of the Illinois Clean Air Act Permit Program (CAAPP), IP submitted new air permit applications for each of its generating facilities in 1995. The IEPA will review these applications and is expected to issue CAAPP permits in 1996 or 1997. In addition to the sulfur dioxide emission limitations for existing facilities, both the USEPA and the State of Illinois adopted New Source, l

~. - ~. _ - _ - -~. ) i. Performanca Stendards (NSPS) applicable to coal-fired ganarating units limiting emissions to 1.2 pounds of sulfur dioxide per million Btu of heat input. This standard is applicable to IP's Unit 6 at the Havana power station. The federal NSPS also 1Luit nitrogen oxides, opacity and particulate emissions and imposes certain monitoring requirements. In 1977 and 1990 the Act was amended and, as a result, USEPA has adopted more stringent emission standards for new sources. l These standards would apply to any new plant constructed by IP. 1 Clean Air Act ) I For information on the impacts of the Clean Air Act Amendments of 1990, see l " Note 4 - Comnitments and Contingencies" on page A-18 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement which is incorporated herein by reference. l Manufactured-Gas Plant (MGP) Sites l.

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==- For infornation on MGP sites, see " Note 4 - Commitments and Contingencies" on page A-18 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement which is incorporated herein by reference. l Water Quality i l -= j The Federal Water Pollution Control Act Amendments of 1972 require that ) l National Pollutant Discharge Elimination System (NPDES) permits be obtained from l USEEA (or, when delegated, from individual state pollution control agencies) for l any discharge into navigable waters. Such discharges are required to conform l with the standards, including thermal, established by USEPA and also with l applicable state standards. Enforcement of discharge limitations is accomplished in part through the regulatory permitting process similar to that described previously under " Air Quality". Presently, IP has approximately two dozen perndts for discharges at l its power stations and other facilities, which must be periodically renewed. In addition to obtaining such permits, each source of regulated discharges must be operated within the limitations prescribed by applicable regulations. Verification of such compliance is usually accomplished by monitoring results reported to regulatory authorities and inspections by such authorities. The Baldwin power station (Baldwin) NPDES permit was reissued during the fourth quarter of 1993 and is due for renewal in the fourth quarter of 1997. The Hennepin power station (Hennepin) permit was reissued in 1992 and is due for l renewal in the third quarter of 1997. The application to renew the Clinton l perndt has been submitted and IP is allowed to continue to operate the plant at i currently authorized levels. IP expects the permit to be reissued in the second quarter of 1996. The Verndlion power station (Vermilion), Wood River power station (Wood River) and Havana permits were reissued in 1991 and were due for renewal in the fourth quarter of 1995. IP submitted all three applications for reissuance. The Havana permit was reissued effective March 1, 1996, and the Wood River perndt is expected during the second quarter of 1996. The IEPA has not begun reviewing the Vermilion application; therefore, no realistic estimation can be made regarding its reissuance date. Because the applications have been filed, all three plants can continue operations without reissued permits. 4 The Baldwin NPDES permit has been modified to extend the compliance schedule for achieving compliance with the boron effluent limit for its ash pond discharge. The initial date for achieving compliance was October 1996; however, i because of delays caused by the flooded Kaskaskia River, necessary mixing zones studies could not be completed as anticipated. IEPA modified the permit to 4 i extend the compliance schedule until December 1, 1997, which allowed IP sufficient time to complete all necessary studies. ) 4

j Other Issuns \\ Hazardous and non-hazardous wastes generated by IP must be nanaged in accordance with federal regulations under the Toxic Substances control Act (TSCA), the Comprehensive Environmental Response, Compensation and Liability Act and the Resource Conservation and Recovery Act (RCRA) and additional state regulations promulgated under both RCRA and state law. Regulations pror*0 gated in 1988 under RCRA govern IP's use of underground storage tanks. The use, storage, and disposal of certain toxic substances, such as polychlorinated biphenyls (PCBs) in electrical equipment, are regulated under the TSCA. Hazardous substances used by IP are subject to reporting requirements under the Emergency Planning and Community-Right-To-Know Act. The State of Illinois has been delegated authority for enforcement of these regulations under the Illinois Environmental Protection Act and state statutes. These requirements inpose certain monitoring, recordkeeping, reporting and operational requirements which IP has implemented or is inplementing to assure compliance. IP does not anticipate that compliance will have a material adverse effect on its financial position or results of operations. Between June 1983 and January 1985, IP shipped various materials containing PCBs to the Nbrtha C. Rose Chemicals, Inc. (Rose) facility in Holden, Missouri for proper treatment and disposal. Rose, pursuant to permits issued by USEPA, had undertaken to dispose of PCB materials for IP and others, but failed in part to do so. As a result of such failure, PCB materials were being stored at the facility. In 1986, IP joined with a number of other generators to efficiently and economically cleanup the facility. The Steering Committee, consisting of IP and 15 other entities, has successfully implemented the Remedial Design Work ) Plan. The Steering Committee is required to monitor ground water at the site from a minimum of five years to a maximum of ten years after, completion of the plan. Based upon data collected during the first year of ground water monitoring, the Steering Committee has petitioned the USEPA to amend the record of decision to negate additional ground water monitoring. This will allow the USEPA to end the Committee's liability at the Rose site. At the present time, management does not believe its ratable share of potential liability related to the cost of future activities at the Rose site will have a material adverse effect on Illinova's or IP's consolidated financial position or results of operations. Electric and Magnetic Fields For information on Electric and Magnetic Fields, see " Note 4 - Commitments and Contingencies" on page A-18 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement which is incorporated herein by reference. Environmental Expenditures

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- =_ _ Operating expenses for enviromnentally-related activities in 1995 were approximately $22 million (including the incremental costs of alternative fuels to meet environmental requirements). IP's accumulated capital expenditures 1 l (including AIUDC) for environmental protection programs since 1969 have reached approximately $814 ndllion. Research and Development Illinova's research and development expenditures, consisting entirely of IP's research and development expenditures, during 1995, 1994 and 1993 were approximately $5.5 ndllion, $5.5 ndllion and $6.4 million, respectively. The higher research and development costs in 1993 were due primarily to increased dues to the Electric Power Research Institute and increased alternate fu;l testing at the Baldwin power station. The lower research and develcpmert costs i j 1 l

_. _ _ _ _ _. _ _.. _ _ _ __ _ _ _ _ _ _~ i l I during 1994 and 1995 ware because of dacreased alternate fuel testing at the l Baldwin power station and an overall reduction in discretionary spending at IP. Regulation r l l Under the Illinois Public Utilities Act, the ICC has broad powers of super-vision and regulation with respect to the rates and charges of IP, its services i and facilities, extensions or abandonment of service, classification of accounts, valuation and depreciation of property, issuance of securities and various other matters. Before a new electric generating plant or a significant addition to an existing facility may be included in IP's rate base, the ICC must determine that the plant or addition is reasonable in cost, prudent and used and useful in j providing utility service to customers. Illinova and IP are exempt from all the provisions of the Public Utility Holding Company Act of 1935 except Section 9 (a) (2) thereof. That section requires approval of the Securities and Exchange Commission prior to certain acquisitions of any securities of other public utility companies or public utility holding companies. l IP is subject to regulation under the Faderal Power Act by the FERC as to l rates and charges in connection with the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate com-merce, the issuar.ce of debt securities naturing in not more than 12 months, accounting and depreciation policies, and certain other natters. The FERC has declared IP exempt from the Natural Gas Act and the orders, rules and regulations of the Commission thereunder. 1 IP is subject to the jurisdiction of the NRC with respect to Clinton. NRC regulations control the granting of permits and licenses for the construction and i operation of nuclear power stations and subject such stations to continuing re-view and regulation. Additionally, the NRC review and regulatory process covers l decommissioning, radioactive waste, environmental and radiological aspects of such stations. In general, the NRC continues to propose new and revised rules 1 relating to the operations and maintenance aspects of nuclear facilities. It is l l unclear whether such proposed rules will be adopted and what effect, if any, such l adoption will have on IP. IP is subject to the jurisdiction of the Illinois Department of Nuclear Safety (IDNS) with respect to Clinton. IDNS and the NRC entered a memorandum of l understanding which allows IDNS to review and regulate nuclear safety matters at l state nuclear facilities. The IDNS review and regulatory process covers l radiation safety, environmental safety, non-nuclear pressure vessels, emergency i preparedness and emergency response. IDNS continues to propose new and revised state adninistrative code. It is unclear if such proposed rules will be adopted and what effect, if any, such adoption will have on IP. i Executive Officers of Illinova Corporation l t Name of Officer Age Position Larry D. Haab 58 Chairman, President and Chief Executive Officer Larry F. Altenbaumer 48 Chief Financial Officer, Treasurer and Controller l Leah Manning Stetzner 47 General Counsel and Corporate Secretary Mr. Haab was elected Chairman, President and Chief Executive Officer in December 1993. Mr. Altenbaumer was elected Chief Financial Officer, Treasurer and Controller in June 1994. Ms. Stetzner was elected General Counsel and Corporate Secretary in June 1994. i [ Executive Officers of Illinois Power Company Name of Officer Age Position l Larry D. Haab 58 Chairnan, President and Chief Executive Officer 4 Larry F. Altenbaumer 48 Senior Vice President, Chief Financial Officer and Treasurer David W. Butts 41 Senior Vice President John G. Cook 48 Senior Vice President } Paul L. Lang 55 Senior Vice President J Wilfred Connell 58 Vice President Richard W. Eimer, Jr. 47 Vice President Leah Manning Stetzner 47 Vice President, General Counsel and Corporate Secretary Ralph F. Tschantz 43 Vice President i Cynthia G. Steward 38 Controller Each of the IP executive officers, except for Mr. Tschantz, has been i employed by IP or another subsidiary of Illinova for more than five years in j executive or nanagement positions. Prior to election to the positions shown J above, the following executive officers held the following positions since j i January 1, 1991. i Mr. Haab was elected Chairman in June 1991. Prior to being elected Chief Executive Officer in April 1991, Mr. Haab was President. Mr. Altenbaumer was elected Senior Vice President, Chief Financial Officer and Treasurer in September 1995. Prior to being elected Senior Vice President .and Chief Financial Officer in June 1992, Mr. Altenbaumer was Vice' President, Chief Financial Officer and Controller. Mr. Butts was elected Senior Vice President in September 1995. Prior to being elected President of IGC in 1993, Mr. Butts was a Division Vice President of IP. Mr. Cook was elected Senior Vice President in December 1995. Prior to being elected Vice President in 1992, Mr. Cook was Manager of Clinton Power Station. Mr. Lang was elected Senior Vice President in June 1992. He joined IP as Vice President in July 1986. Mr. Eimer was elected Vice President in December 1995. He previously held the positions of Assistant to the Vice President and Manager of Marketing. Nb. Stetzner was elected Vice President, General Counsel and Corporate Secretary in February 1993. She joined IP as General Counsel and Corporate Secretary in October 1989. Mr. Tschantz joined IP as Vice President in March 1995. He previously was a Regional Account Management Director with Keebler company since 1993 and Group Director, Sales, Systens and Planning since 1990. Nb. Steward was elected Controller in September 1995. She previously held the positions of Manager of Employee Services and Director of Accounting. -

The prssant tarm of offica of each of the abova executiva officers extends to the first meeting of Illinova's and IP's Board of Directors after the Annual Election of Directors. There are no family relationships among any of the executive officers and directors of Illinova and IP. l l Operating Statistics For Illinova the information under the caption " Selected Illinois Power Company Statistics" on page A-33 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement is incorporated herein by reference. For IP the infornation under the caption " Selected Statistics" on page A-33 of the 1995 Annual Report to Shareholders in the appendix to the IP Information Statement is incorporated herein by reference. i Item 2. Properties IP owns and operates six steam generating stations with composite net summer capacity of 4,296,000 kilowatts. In addition, IP owns nine quick start combustion turbine peaking units at three locations with a combined net summer l capacity of 147,000 kilowatts. The total IP owned system net summer capability I is 4,443,000 kilowatts. I All of the generating stations are in the State of Illinois and are wholly-owned by IP, except for 13.2% of the Clinton power station owned by Soyland. l Clinton is IP's only nuclear generating station. IP owns 807,000 kilowatts (86.8%) of the 930,000 kilowatt station. The major coal fired units at Baldwin, Havana, Hennepin and Wood River make up 2,936,000 kilowatts of capacity. Units comprising 377,000 kilowatts of capacity at the Wood River and Havana stations currently are not staffed but are available to meet reserve requirements with a maximun of four months notice. During 1995, natural gas firing capability was added to the Vermilien station. Verudlion now has the capability for either coal or natural gas firing l to achieve its capacity of 176,000 kilowatts. Vermilion now is operated as a peaking plant, mainly during the summer season. IP owns an interconnected electric transmission system of approximately 2,800 circuit miles, operating fro:m 69,000 to 345,000 volts and a distribution system which includes about 37,200 circuit ndles of overhead and underground lines. All outstanding first mortgage bonds issued under the Mortgage and Deed of Trust dated November 1, 1943 are secured by a first mortgage lien on substantial-l l ly all of the fixed property, franchises and rights of IP with certain exceptions expressly provided in the mortgage securing the bonds. All outstanding New Mortgage Bonds issued under the General Mortgage and Deed of Trust dated November 1,1992, are secured by a lien on IP's properties used in the generation, purchase, transmission, distribution and sale of electricity and gas, which lien is junior to the lien of the Mortgage and Deed of Trust dated November 1,1943. I Item 3. Legal Proceedings See discussion of legal proceedings under Item 1 "CompotAtion" of this report and in " Manufactured-Gas Plant (MGP)" in " Note 4 - Commitments and Contingencies" on page A-21 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement which is incorporated herein by reference. O A Environmental 1 I l See " Environmental Matters" reported under Item 1 of this report for l infonnation regarding legal proceedings concerning environmental matters. Item 4. Submission of }etters to a Vote of Security Holders Neither Illinova nor IP submitted any matter to a vote of security holders j during the fourth quarter of the fiscal year ended December 31, 1995. l l i 1 l 1 i l l l l 1 i -.____m.. PART II Item 5. Market for Registrants' Common Equity and Related Stockholder Matters For Illinova the information under the caption " Quarterly Consolidated Financial Information and Common Stock Data (Unaudited)" on page A-31 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement is incorporated herein by reference. For IP the information under the caption " Quarterly Consolidated Financial Information and Common Stock Data (Unaudited)" on page Ac31 of the 1995 Annual Report to Shareholders in the appendix to the IP Information Statement is incorporated herein by reference. Item 6. Selected Financial Data For Illinova the information under the caption " Selected Consolidated i Financial Data" on page A-32 of the 1995 Annual Report to Shareholders in the { appendix to the Illinova Proxy Statement is incorporated herein by reference. For IP the information under the caption " Selected Consolidated Financial i Data" on page A-32 of the 1995 Annual Report to Shareholders in the appendix to the IP Inforumtion Statement is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations i For Illinova the information under the caption " Management's Discussion and l Analysis" on pages A-2 through A-9 of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement is incorporated herein by reference. j For IP the information under the caption " Management's Discussion and Analysis" on pages A-2 through A-9 of the 1995 Annual Report to Shareholders in the appendix to the IP Information Statement is incorporated herein by reference. i In Decenber 1994, IP filed a petition with the ICC seeking approval of a program whereby IP will reacquire shares of its common stock from Illinova, from time to time, at prices determined to be equivalent to current market value. The reacquired stock will be retained as treasury stock or canceled. On March 22, l 1995, the ICC approved the common stock repurchase program. The ICC specified that IP may initiate the repurchase of shares of its common stock from Illinova subject to nmeting certain financial tests. The ICC did not set a limit on the number of shares of common stock that can be repurchased. During 1995, IP repurchased 2,696,086 shares for a total of $67.3 million, averaging about $25 per share. For information regarding the redenption of IP preferred stock, see " Note 10 - Preferred Stock of Subsidiary" in the " Notes to Consolidated Financial 1 Statements" in the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statenent or " Note 9 - Preferred Stock" in the " Notes to Consolidated Finar.cial Statements" in the 1995 Annual Report to Shareholders in the appendix to the IP Information Statement. Item 8. Financial Statements and Supplementary Data For Illinova the consolidated financial statements and related notes on I A pages A-ll through A-31 and Report of Independent Accountants on page A-10 of the i 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy l Statement are incorporated herein by reference. With the exception of the aforementioned information and the information incorporated in Items 1, 3, 5, 6 l and 7, the 1995 Annual Report to Shareholders in the appendix to the Illinova , I

.m. ..m__. - -. _ _. _ _ _ _ _ _ _ _ _ _ _.. _.__ ___.._ __._.__-_... ____ _..._-_ _ m. i: I i Proxy Statement iN not to be dacmad filed as part of this Form 10-K Annual Report. For IP the consolidated financial statements and related notes on pages A-11 through A-31 and Report of Independent Accountants on page A-10 of the 1995 i Annual Report to Shareholders in the appendix to the IP Information Statement are incorporated herein by reference. With the exception of the aforementioned information and the information incorporated in Items 1, 3, 5, 6 and 7, the 1995 Annual Report to Shareholders in the appendix to the IP Information Statement is not to be deemed filed as part of this form 10-K Annual Report. t item 9. Changes in and Disagreements With Accountants on = = - - - Accounting and Financial Disclosure l lione. i 1 i I I 1 1 I i. - 1

__..._m PART III Item 10. Directors and Executive Officers of the Registrants For Illinova the information under the caption " Board of Directors" on pages. 3 through 7 of Illinova's Proxy Statement for its 1996 Annual Meeting of Stockholders is incorporated herein by reference. The information relating to I111 nova's executive officers is set forth in Part I of this Annual Report on Form 10-K. For IP the information under the caption " Board of Directors" on pages 4 l l through 7 of IP's Information Statement for its 1996 Annual Meeting of i Stockholders'is incorporated herein by reference. The information relating to Illinois Power Company's executive officers is set forth in Part I of this Annual Report on Form 10-K. 1 Item 11. Executive Compensation For Illinova the information under the caption " Executive Compensation" on pages 8 through 12 of Illinova's Proxy Statement for its 1996 Annual Meeting vf Stockholders is incorporated herein by reference. For IP the information under the caption " Executive Compensation" on pages 8 through 13 of IP's Information Statement for its 1996 Annual Meeting ) of Stockholders is incorporated herein by reference. Item 12. Security ownership of certain Beneficial owners and Management i l For Illinova the information under the caption " Security ownership of Management and Certain Beneficial Owners" on page 7 and the information regarding securities owned by certain officers and directors under the caption " Board of Directors" on pages 3 through 7 of Illinova's Proxy Statement for its 1996 Annual Meeting of Stockholders is incorporated herein by reference. l For IP the information under the caption " Security ownership of Management and certain Beneficial Owners" on page 7 and the information regarding securities owned by certain officers and directors under the caption l I " Board of Directors" on pages 4 through 7 of IP's Information Statement for i its 1996 Annual Meeting of Stockholders is incorporated herein by reference. I Item 13. Certain Relationships and Related Transactions None. i

1 l PART IV Item 14. Exhibits, Financial Statement Schedules, and' Reports on Form 8-K (a) Documents filed as part of this report. (la) Financial Statements: Page in 1995 Annual Report to Shareholders in the appendix ~to the Illinova Proxy Statement

• Report of Independent Accountants A-10

[ Consolidated Statements of Income for the three years ended December 31, 1995 A-11 i consolidated Balance Sheets at De: ember 31, 1995 and 1994 A-12 consolidated Statements of Cash Flows for the three years ended December 31, 1995 A-13 consolidated Statements of Retained Earnings (Deficit) for the three years ended December 31, 1995 A-13 Notes to Consolidated Financial Statements A A-31 1 I Incorporated by reference from the indicated pages of the 1995 Annual Report to Shareholders in the appendix to the Illinova Proxy Statement, (1b) Financial Statements: I Page in 1995 Annual Report to Shareholders in the appendix to the IP Information Statement ** l i Report of Independent Accountants A-10 Consolidated Statements of Income for the three years ended December 31, 1995 A-11 Consolidated Balance Sheets at December 31, 1995 and 1994 A-12 Consolidated Statements of Cash Flows for the three years ended December 31, 1995 A-13 Consolidated Statements of Retained Earnings (Deficit) for the three years ended December 31, 1995 A-13 Notes to Consolidated Financial Statements A A-31 Incorporated by reference from the indicated pages of the 1995 Annual Report to Shareholders in the appendix to the IP Information Statement (See page 21 of this Form 10-K). -

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued) (2) Financial Statement Schedules: All Financial Statement Schedules are omitted because they are not applicable or the-required information is shown in the financial statements-or notes thereto. (3) Exhibits The exhibits filed with this Form 10-K are listed in the Exhibit Index located elsewhere herein. All management contracts and compensatory plans or arrangements set forth in such list are marked with a (b) Reports on Form 8-K since September 30, 1995: None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. i ILLINOVA CORPORATION (REGISTRANT) By__I2rry D. H==h l larry D. Haab, Chairman, President and Chief Executive Officer Date: March 29.1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed j below by the following persons on behalf of the registrant and in the capacities on the dates L indicated. Signature Iitic Dalc i I2rry D Hamh Chairman, President, Chief Iarry D. Haab Executive Offar and Director l (Principal Executive Offur) 12rry F. Alt.-.'._..w - Chief Financial Ofrar, ~ Larry F. Altenbaumer Treasurer and Controller (Principal Financial i and Accounting Ofrar) l Pichned R. Berry Richard R. Berry l l l D' nam E. I mestar Dow:3 E. i =<=rer I Dan =M S. Pericine Donald S. Perkins - March 29,1996 { Robert M. Powers Robert M. Powers l Waltar D. 5:enet l Walter D. Scott Director l. EnnnM L. Thnmn<nn Ronald L. Thompson j Wattar M. V=nntw Walter M. Vannoy Marilou von Ferstel Marilou von Ferstel John D. 7eolit John D. Zeglis Vernon K. 7:.,...-... r. Vernon K. Zimmerman 4 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the wA44&id, thermnto duly authorized. i ILLINOIS POWER COMPANY (REGISTRANT) By I2rry D. Hamh larry D. Haab, Chairman, President and Chief Executive Officer Date: March 29.1996 i Pursuant to the requirements of the Securities Exchange Act of 1934, this repo.t has been signed below by the following persons on behalf of the registrant and in the captrities on the dates indicated. Signature Ig[g pgg 12rry D Hanh r h.1r==n. President, Chief Larry D. Haab Executive Offser and Director (Principal Executive Officer) Imrry F. Ahenhanmer Senior Vice President, Larry F. Altenbaumer Chief Financial Officer (Principal Financial Offser) and Treasurer Cynthin G. Steward Controller Cynthia G. Steward (Principal Accounting O' ricer) 1 Richard R. tk.,r Rachard R. Betry Dnns1d F I sentar Donald E. lasater \\ Dnnn1A S Perkine 1 Donald S. Perkins -;.i rch 29,1996 Rohrt M. Powers Robert M. Nwers W=h-c D. N Walter D. Scott Director Rnnn1d L Thnmnenn f Ronald L. Thompsoa i Waher M. Vannny l Walter M. Vannoy Marilnu von Ferstel Marilou von Fcrstel John D_ 7eolin John D. Zeglis Vernon K 7L ..a. n Vernon K. Zimrnerman - -.., m

I Exhibit Index Exhibit Page Number (3) (i) Articles of Incorporation f I Illinova Corporation i (a) (1) Articles of Amendment to the Articles of Incorporation of Illinova Corporation, filed as of October 31, 1994. Filed as Exhibit 3(a) to the Quarterly Report on Form 10-Q under the i Securities Exchange Act of 1934 for the quarter ended September 30, 1994 (File No. 1-3004). + (a) (2) Statement of Correction to the Articles of Incorporation of Illinova corporation, filed as of October 31, 1994. - Filed as Exhibit 3 (b) to the Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934 for the quarter l ended September 30, 1994 (File No. 1-3004). Illinois Power Company (b) (1) Amended and Restated Articles of Incorporation of Illinois Power Company, dated September 7, 1994. Filed as Exhibit 3fa) to the Current Report on 1 Form 8-K dated September 7, 1994 (File No. 1-3004). (3) (11) By-Laws i (a) By-laws of Illinova Corporation, as amended through December 14, 1994. Filed as Exhibit 3 (b) (2)to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the j year ended December 31, 1994 (File No. 1-3004). (b) By-laws of Illinois Power Company, as amended through December 14, 1994. Filed as Exhibit 3 (b) (1) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1994 (File No. 1-3004). i (4) Instruments Defining Rights of Security Holders, Including Indentures l Illinova Corporation (a) See (4) (b) below for instruments defining the rigsts of holders of long-term debt of Illinois Power Ccapany. Illinois Power Company (b) (1) Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 2(b) Registration No. 2-14066. (b) (2) Supplemental Indenture dated October 1, 1966. Filed as Exhibit 2 (1) Registration No. 2-27783.

_- -.__.~ - - -.- -.. ~.- i Exhibit Indsx (Continued) Exhibit Description Page Number l (b)(3) Supplemental Indenture dated May 1, 1974. Filed as Exhibit 2 (v) Registration No. 2-51674. l (b) (4) Supplemental Indenture dated May 1, 1977. Filed as Exhibit 2 (w) Registration No. 2-59465. 1 (b)(5) Supplemental Indenture dated July 1, 1979. Filed as Exhibit 2 to the Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934 for the quarter ended June 30, 1979. (b) (6)- Supplemental Indenture dated March 1, 1985. Filed as exhibit 4(a) to the Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934 for the quarter ended March 31, 1985 (File No. 1-3004). (b)(7) Supplemental Indenture No.1 dated February 1, 1987, providing for $25,000,000 principal amount of 7 5/8% First Mortgage Bonds, Pollution Control Series F, due December 1, 2016. Filed as Exhibit 4 (11) to the l Annual Report on Form 10-K under the Securities c l Exchange Act of 1934 for the year ended December 31, 1986 (File No. 1-3004). (b) (8) Supplemental Indenture No. 2 dated February 1, 1987, l providing for $50,000,000 principal amount of 7 5/8% l First Mortgage Bonds, Pollution Control Series G, due December 1, 2016. Filed as Exhibit 4 (jj) to the l Annual Report on Form 10-K under the Securities i i Exchange Act of 1934 for the year ended December 31, i I 1986 (File No. 1-3004). (b)(9) Supplemental Indenture No. 3 dated February 1, 1987, r providing for $75,000,000 principal amount of 7 5/86 i First Mortgage Bonds, Pollution Control Series H, due December 1, 2016. Filed as Exhibit 4 (kk) to the Annual Report on Form 10-K under the Securities l Exchange Act of 1934 for the year ended December 31, 1986 (File No. 1-3004). (b) (10) Supplemental Indenture dated July 1, 1987, providing for $33,755,000 principal amount of 8.30% First Mortgage Bonds, Pollution Control Series I, due April 1, 2017. Filed as Exhibit 4(11) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1987 (File No. 1-3004). (b) (11) Supplemental Indenture dated December 13, 1989, providing for $300,000,000 principal amount of Medium-Term Notes, Series A. Filed as Exhibit 4(nn) ( to the Annual Report on Fonn 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1989 (File No. 1-3004). i i i i ,r,c- - + .m-, ,--~y ., - - -, -, ~ -.

1 Exhibit Index (Continued) i Exhibit Description Page Number (b) (12 ) Supplemental Indenture dated July 1, 1991, providing for $84,710,000 principal amount of 7 3/8% First Mortgage Bonds due July 1, 2021. Filed as Exhibit 4(mm) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1991 (File No. 1-3004). (b) (13 ) Supplemental Indenture No. 1 dated June 1, 1992. Filed as Exhibit 4(nn) to the Quarterly Report i on Form 10-Q for the quarter ended June 30, 1992 (File No. 1-3004). (b) (14 ', Supplemental Indenture No. 2 dated June 1, 1992. Filed as Exhibit 4 (oo) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1592 (File No. 1-3004). (b) (15 ) Supplemental Indenture No. 1 dated July 1, 1992. Filed as Exhibit 4 (pp) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 (File No. 1-3004). (b) (16) Supplemental Indenture No. 2 dated July 1, 1992. Filed as Exhibit 4 (qq) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 199,2 (File No. 1-3004). (b) (17 ) Supplemental Indenture dated September 1,

1992, providing for $72,000,000 principal amount of 6H%

First Mortgage Bonds due September 1, 1999. Filed as Exhibit 4 (rr) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 (File No. 1-3004). (b) (18 ) General Mortgage Indenture and Deed of Trust dated I as of November 1, 1992. Filed as Exhibit 4 (ce) to i the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December i 31, 1992 (File No. 1-3004). (b) (19) Supplemental Indenture dated February 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4 (dd) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). (b) (20) Supplemental Indenture dated February 15, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4 (ee) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). (b) (21) Supplemental Indenture No. I dated March 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4 (ff) to the Annual Report on Form l 10-K under the Securities Exchange Act of 1934 for j the year ended December 31, 1992 (File No. 1-3004). l 2 Exhibit Index (Continued) Exhibit Description Page Number (b) (22) Supplemental Indenture No. 1 dated March 15, 1993, l to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4 (gg) to the Annual Report on Form 10-K under the l Securities Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). (b) (23) Supplemental Indenture No. 2 dated March 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(hh) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). (b) (24 ) Supplemental Indenture No. 2 dated March 15, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4(11) to the Ar.nual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1992 (File No. 1-3004). (b) (25) Supplemental Indenture dated July 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4 (jj) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (File No. 1-3004). (b) (26) Supplemental Indenture dated July 15, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4 (kk)to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (file No. 1-3004). (b) (27) Supplemental Indenture dated August 1, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4 (11) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (File No. 1-3004). (b) (2 8) Supplemental Indenture dated August 1, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4 (mm) to the Quarterly Report on Fonn 10-Q for the quarter ended June 30, 1993 (File No. 1-3004). (b) (29) Supplemental Indenture dated October 15, 1993, to Mortgage and Deed of Trust dated November 1, 1943. i Filed as Exhibit 4(nn) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (File No. 1-3004). (b) (30) Supplemental Indenture dated October 15, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 1992. Filed as Exhibit 4 (oo) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (File No. 1-3004). d s Exhibit Indax (Continued) Exhibit Description Page Number (b) (31) Supplemental Indenture dated November 1, 1993, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(pp) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (File No. 1-3004). (b) (32) Supplemental Indenture dated November 1, 1993, to General Mortgage Indenture and Deed of Trust dated as of November 1, 199? Filed as Exhibit 4(qq) to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (File No. 1-3004). (b) (33) Supplemental Indenture dated February 1, 1994, to Mortgage and Deed of Trust dated November 1, 1943. Filed as Exhibit 4(hh) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1993 (File No. 1-3004). (b) (34) Indenture dated October 1, 1994 between Illinois Power Company and the First National Bank of Chicago. Filed as Exhibit 4(a) to the Quarterly Report on Form 10-0 for the quarter ended September 30, 1994 (File No. 1-3004). (b) (35) Supplemental Indenture dated October 1, 1994, to i Indenture dated as of october 1, 1994. Filed as Exhibit 4(b) to the Quarterly Report on Form ) 10-Q for the quarter ended Septen6er 30, 1994 i ) (File No. 1-3004). (b) (36) Indenture dated January 1, 1996 between Illinois Power Company and Wilndngton Trust Company. 37 (b) (37) First Supplemental Indenture dated January 1, 1996, between Illinois Power Company and Wilmington Trust Company. 97 l (10) Material Contracts Illinova Corporation (a) (1) Illinova Corporation Deferred Compensation Plan for Certain Directors, as amended April 10, 1991. Filed as Exhibit 10(b) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1991 (File No. 1-3004).~ (a) (2) Illinova Corporation Director Emeritus Plan for outside Directors. Filed as Exhibit 10(e) to l the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1989 (File No. 1-3004).~ f 1 c l

(~ l Exhibit Indsx (Continued) Exhibit Description Page Number (a) (3) Illinova Corporation Stock Plan for Outside I Directors as amended and restated by the Board of l Directors on April 9, 1992 and as further amended April 14, 1993. Filed as Exhibit 10(h) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December l 31, 1993 (F13 a No. 1-3004).- l (a) (4) Illinova Corporation Retirement Plan for Outside Directors, as amended through December 11, 1991. Filed as Exhibit 10(j) to the Annual Report on Form l 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1991 (File No. 1-3004).~ l (a) (5) Illinova Corporation 1992 Long-Term Incentive l Compensation Plan. Filed as Exhibit 10(k) to the i Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 1-3004).~ { (a) (6) Illinova Corporation comprehensive Deferred Stock Plan for Outside Directors, as approved by the Board of Directors on February 7, 1996. Supersedes the Illinova Corporation Retirement Plan for Outside Directors, as amended through December 11, 1991 and filed as Exhibit 10(j) to the Annual Report on, Form 10-K under the Securities Exchange Act of 1934 for-the year ended December 31, 1991 (File No. 1-3004).- 126 (a) (7) Form of Employee Retention Agreement in place between i Illinova Corporation and its elected officers, l Illinois Power Company's elected of ficers, and the Presidents of Illinova Corporation's subsidiaries. l Filed as Exhibit 10(g) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1989 (File no. 1-3004). l Illinois Power Company i ' (b) (1) Group Insurance Benefits for Managerial Employees of Illinois Power Company as amended January 1, 1983. l Filed as Exhibit 10(a) to the Annual Report on Form l 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1983 (File No. 1-3004).~ (b) (2) Illinois Power Company Incentive Savings Trust and Illinois Power Company Incentive Savings Plan and l Amendment I thereto. Filed as Exhibit 10(d) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, l 1984 (File No. 1-3004).~ (b) (3) Illinois Power Company's Executive Incentive Compensation Plan. Filed as Exhibit 10 (f) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1989 (File No. 1-3004).~ I i i

t i Exhibit Index (Continued) Exhibit Description Page Number (b) (4) Illinois Power Company Incentive Savings Plan, as amended and restated effective January 1, 1991. Filed as Exhibit 10(h) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1990 i (File No. 1-3004).- .(b) (5) Retirement and Consulting Agreement entered into as of June 1, 1991 between Illinois Power Company and Wendell J. Kelley. Filed as Exhibit 10(I) to i the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1991 (File No. 1-3004).- l (b) (6) Illinois Power Company Executive Deferred Compensation Plan. Filed as Exhibit 10(1) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1993. (File No. 1-3004)~ (b) (7) Illinois Power Company Retirement Income Plan for salaried employees as amended and restated effective January 1, 1989, as further amended through January 1, 1994. Filed as Exhibit 10(m) to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1994 (File No. 1-3004).- (b) (8) Illinois Power Company Retirement Income Plan for employees covered under a collective bargaining agreement as amended and restated effective as of January 1, 1994. Filed as Exhibit 10(n)to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1994 (File No. 1-3004).~ (b) (9) Illinois Power Company Incentive Savings Plan as amended and restated effective January 1, 1991 and as further amended through amendments adopted December 28, 1994. Filed as Exhibit 10(o)to the Annual Report on Form 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1994 (File No. 1-3004).~ (b) (10) Illinois Power Company Incentive Savings Plan for employees covered under a collective bargaining agreement as amended and restated effective January 1, 1991 and as further amended through amendments adopted December 28, 1994. Filed as Exhibit 10(p) to the Annual Report on Fons 10-K under the Securities Exchange Act of 1934 for the year ended December 31, 1994 (File No. 1-3004).- (12) Statesment Re Computation of Ratios (a) Computation of ratio of earnings to fixed charges for Illinova Corporation. 133 ) i ~

( l I Exhibit Index (Continued) i l Exhibit Description Page Number =_ (b) Computation of ratio of earnings to fixed charges for Illinois Power Company. 134 (13) Annual Reports to Shareholders (a) Illinova Corporation Proxy Statement and 1995 l Annual Report to Shareholders. 135 (b) Illinois Power Company Information Statement and 1995 Arinual Report to Shareholders. 183 (21) subsidiaries of Registrants (a) Subsidiaries of Illinova Corporation and Illinois Power Company. 230 (23) Consents of I2perts (a) Consent of Independent Accountants for Illinova Corporation. 232 ) l (b) Consent of Independent Accountants for Illinois l Power Company. 233 l l Incorporated herein by reference. Management contract and compensatory plans or arrangements. l t 1 i 4 1 l.- _,

ILLINOVA CORPORATION STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Thousands of Dollars) Year Ended December 31, Supplemental" 1991 1992 1993 1993 1994 1995 ' Earnings Available for Fixed Charges: Net income (Loss) $78,378 $93,234 ($81,874) ($81,874) $151,786 $151,601 Add: Income Taxes: Current 29,369 22,930 25,260 25,260 58,354 98,578 Deferred - Net 45,990 63,739 82,057 82,057 71,177 34,137 Allocated income taxes (1,348) (6,632) (12,599) (12,599) (8,285) (11,851) Investment tax credit - deferred (11) (519) (782) (782) (11,331) (6,894) Income tax effect of disaHowed costs (70,638) (70,638) Interest on long-term debt 176,179 160,795 154,110 154,110 135,115 125,581 Amortization of debt expense and premium-net, and other interest charges 9,004 12,195 17,007 17,007 15,826 29,558 One-third of al rentals (Estimated to be representative of the interest component) 4,996 5,117 5,992 5,992 5,847 5,221 d. Interest on in-core fuel 8,862 8,278 6,174 6,174 7,185 6,716 Disallowed Clinton plant costs 270,956 Earnings (loss) available for fixed charges $351,419 $359,137 $124,707 $395,663 $425,674 $432,647 Fixed charges: Interest on long-term debt $176,179 $160,795 $154,110 $154,110 $135,115 $125,581 Amortization of debt expense and premium-net, and other interest charges 25,553 25,785 27,619 27,619 25,381 38,147 One-third of all rentals (Estimated to be representative of the interest component) 4,996 5,117 5,992 5,992 5,847 5,221 Total Fixed Charges $206,728 $191,697 $187,721 $187,721 $166,343 $168,949 p d Ratio of eamings to fixed charges 1.70 1.87 0.66

• 2.11 2.56 2.56 C

E

• Eamings are inadequate to cover fixed charges. Additional eamings (thousands) of $63,014 for 1993, are required to attain a one-to-one ratio of Eamings to Fixed Charges.

" Supplemental ratio of eamings to, fixed charges presented to exclude nonrecurring item - Disallowed Clinton plant costs.

ILLINOIS POWER COMPANY STATEMENT OF COMPUTATION OF RATIO OF EARN!NGS TO FIXED CHARGES (Thousands of Dollars) Year Ended December 31, Supplemental " 1991 1992 1993 1993 1994 1995 Earnings Available for Fixed Charges: Net income (Loss) $109,244 $122,088 ($56,038) ($56,038) $180,242 $182,713 Add: Income Taxes: Current 29,369 22,930 25,260 25,260 58,354 98,578 Deferred - Net 45,990 63,739 82,057 82,057 71,177 34,137 Allocated income taxes (1,348) (6,632) (12,599) (12,599) (8.285) (8,417) Investment tax credit - deferred (11) (519) (782) (782) (11,331) (6,894) income tax effect of disallowed costs (70,638) (70,638) Interest on long-term debt 176,179 160,795 154,110 154,110 135,115 125,581 Amortization of debt expense and premium-net, and other interest charges 9,004 12,195 17,007 17,007 15,826 29,558 One-third of all rentals (Estimated to be ,8, representative of the interest component) 4,996 5,117 5,992 5,992 5,847 5,221 y Interest on in-core fuel 8,862 8,278 6,174 6,174 7,185 6,716 Disallowed Clinton plant costs 270,956 Earnings (loss) available for fixed charges $382,285 $387,991 $150,543 $421,499 $454,130 $467,193 Fixed charges: Interest on long-term debt $176,179 $160,795 $154,110 $154,110 $135,115 $125.581 Amortization of debt expense and premium-net, and other interest charges 25,553 25,785 27,619 27,619 25,381 38,147 One-third of all rentals (Estimated to be representative of the interest component) 4,996 5,117 5,992 5,992 5,847 5,221 Total Fixed Charges $206,728 $191,697 g $187,721 $166,343 $168,949 Ratio of earnings to fixed charges 1.85 2.02 0.80

• 2.25 2.73 2.77 p

U 9

• Earnings are inadequate to cover fixed charges. Additional eamings (thousands) of $37,178 for 1993, are required to attain a one-to-one ratio of Eamings to Fixed Charges.

1 " Supplemental ratio of earnings to fixed charges presented to exclude nonrecurring item - Disallowed Clinton plant costs. -m m i-.

1 i NOTICE This copy of Illinova Corporation's and Illinois Power Company's 10-K does not include the Illinova Proxy Statement and 1995 Annual Report to Shareholders or the Illinois Power Company Information Statement and the 1995 Annual Report to Shareholders. If you have not received these reports and would like one, please let us know. ILLINOIS POWER COMPANY l Attn: Investor Relations, F-10 500 South 27th Street Decatur, IL 62525-2805 l i-l

-m.. _..m j Exhibit 21(a) l 1 Subsidiaries of Illinova Corporation and Illinois Power Company i State or Jurisdiction Name of Incorporation Illinova. Corporation Illinois Illinois Power Company Illinois IP Gas Supply Company Illinois Illinois Power Fuel Company (1) Illinois Electric Energy, Inc. (2) Illinois Illinois Power Capital, L.P. (3) Delaware Illinois Power Financing I Delaware Illinova Generating Company Illinois IPG Canfield Co. Illinois IPG Dominguez Co. Illinois j IPG Eastern, Inc. Illinois IPG Ferndale, Inc. Illinois IPG Frederickson, Inc. Illinois IGC Solutions, Inc. (formerly IPG LAP Cogen, Inc.) Illinois t IPG Panorama Co. Illinois IPG Paris, Inc. Illinois IPG Western, Inc. Illinois l IGC Acquisition Co. l-(formerly IPG Aztec Co. ) Illinois IGC Brazos, Inc. Illinois l IGC Development Company Illinois l IGC International, Inc. Cayman Islands IGC Sub Co., Inc. Illinois ICG White Oak Energy Investors, Inc. Illinois ECI Energy, Ltd. (4) Delaware i North American Energy services Co. (5) Washington IGC ELCO Partnership, LLC (6) Cayman Islands IGC Aguaytia Partners, LLC (7) Cayman Islands IGC Jamaica Partnership, LLC (8) Cayman Islands l IGC International II, Inc. Cayman Islands L IGC Flores Partnership, LLC (9) Cayman Islands IGC Flores Partnership II, LLC (10) Cayman Islands i FIG Leasing International, LLC (11) Cayman Islands 1 l Sinam International, Ltd. (12) New York -Illinova Power Marketing, Inc. Delaware l Tenaska Marketing Ventures (13) Nebraska l I (1) Illinois Power Company owns 50% of the common stock of Illinois l Power Fuel Company. (2) Illinois Power Company owns 20% of the common stock of EEI. (3) Illinois Power Company is the general partner in Illinois Power

capital, L.P.,

with a 3% equity ownership share. Illinois Power capital is consolidated in the accounts of Illinois Power Company. (4) Illinova Generating Company owns 47.5% of the voting common stock i of BCI Energy, Ltd.. f l -230-

- ~. -.. Exhibit 21(a) i (5) Illinova Generating Company owns 50% of the common stock of North l American Energy Services Company. (6) Illinova Generating Company owns 1% and IGC International, Inc. (a wholly-owned subsidiary of Illinova Generating Company) owns 99% l of ELCO Partnership LLC. i l (7) IGC International, Inc. (a wholly-owned subsidiary of Illinova I Generating Company) owns 99% and IGC International II, Inc. (a wholly-owned subsidiary of Illinova Generating Company) owns 1% of [ IGC Aguaytia Partners, LLC. l (8) IGC International, Inc. (a wholly-owned subsidiary of Illinova Generating Company) owns 99% and IGC International II, Inc. (a wholly-owned subsidiary of Illinova Generating Company) owns 1% of IGC Jamaica Partnership, LLC. l (9) IGC International, Inc. (a wholly-owned subsidiary of Illinova Generating Company) owns 99% and IGC International II, Inc. (a wholly-owned subsidiary of Illinova Generating Company) owns 1% of f IGC Flores Partnership, LLC. (10) IGC International, Inc. (a wholly-owned subsidiary of Illinova Generating Company) owns 99% and IGC International II, Inc. (a wholly-owned subsidiary of Illinova Generating Company) owns 1% of IGC Flores Partnership II, LLC. I (11) IGC Flores Partnership, LLC (a subsidiary of IGC International, Inc. and IGC International II, Inc.) owns 50% and IGC Flores Partnership II, LLC (a subsidiary of IGC International Inc. and-IGC International II, Inc.) owns 50% of FIG Leasing International, LLC. (12) IGC International II, Inc. (a wholly-owned subsidiary of Illinova Generating Company) owns 100% of Siram International, Ltd.. l l (13) Illinova Power Marketing, Inc. owns 50% of the equity of Tenaska l Marketing Ventures. I f I f. 4 -231-i.

i EXHIBIT 23(s) l l l t I CONSENT OF INDEPENDENT ACCOUNTAN'IS 1 l ~ We hereby consent to the incorporation by refemnce in the Registration Statement on Form S-8 l (No. 33-22068), the Registration Statement on Form S-8 (No. 33-60278), the Registration Statement on Form S-8 (No. 33-66124), the bspectus constituting pan of the Registration Statement on Form S-3 (No. 33-25699), the Nspectus constituting part of the Registration Statement on Fonn S-3 (No. 33-l i 50173), the Pmspectus constituting pan of the Registration Statement on Form S-3 (No. 33-52048), j l and the Nspectus constituting pan of the Registration Statement on Fonn S-3 (No. 33-62506) of our l report dated Febmary 2,1996, appearing on page A-10 of the Annual Report to Shamholders in the appendix to the Illinova Corporation Nxy Statement which is incorporated in this Annual Report on Form 10-K. l M M A# ' kkf PRICE WNIERHOUSE I1P Man:h 27,1996 -232-

. - =. 'O i EXHIBIT 23(b) l CONSENT OFINDEPENDENT ACCOUNTANTS l i I 1 We hereby consent to the incorporation by reference in the Pmspectus constituting part of the l l Registration Statement on Form S-3 (No. 33-50173), the Pmspectus constituting part of the i Registration Statement on Form S-3 (No. 33-52048), and the Pmsper.us constituting part of the j Registration Statement on Fonn S-3 (No. 33-625%) of our report dated February 2,1996, appearing on page A-10 of the Annual Report to Shareholders in the appendix to the Illinois Power Company Information Statement which is incorporated in this Annual Report on Form 10-K. l j l i b IM PRICE WATERHOUSE LLP l l March 27,1996 I 1 j -233-l

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i ILL8 Nova 1995 ANNUAL R r p o se v k / MEASURES OF OUR SUCCESS IN 1995, GY N E A R LY EVERY C O N C EIV A B L E MEASURE, WE WERE BETTER THAN WE WERE IN 1994. TO BE THE BEST BY THE YEAR 2000 WE MueT er NETTER THAN OUR COMPETITORS. THAT'E THE ONE ME BURE ALL OTHER MEASURES MUBT LEAD US TO.

. _ _ _ _. _ _ _ ~ _ _. _ _. 4 1 4 l g. i i j S ILLIN G v 4 199S ANNUAL REPont j i I t i i 'L y W [E i f o much for sophomore jinx. an annualized basis beginning with the in our second year as an energy ser-February 1,1996, payment. Qg@Ob' Ill{cova turned in another outstan "t'4 % vices holding company, the employees of Yet not withstanding our many suc-cesses in 1995,I'm ontain that we have ,qa i#.% ;-r==a Infact,oursuaessesin1995 potential for even g* tater results. We are m i werepcomprehensive that the market, still reshaping ourselves, re-engineering whichhMign skeptical of our prospects, our processes, and redefining our markets. l rewarQIllinova stockholders with a 37-We're moving forward quickly, to be sure, pp perca* increase in their investment. but I don't think we've hit our stride yet. kkg,;8" M E AsuRING PROGRESS

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TowARo 2000 rQR FUTURE SUCCESS j { Annual reports have a reputation for Over the past few years, we've proven ~ f putting the best possible face on things our ability to reduce costs and we have - emphasizing good points; down-completed many of our efforts to do so. playing or ignoring bad ones. But this Now, we have a solid foundation in place i year,1 believe we can look at virtu-to build the human skills necessary to l ally any measure from almost any excel in a competitive marketplace, and perspective and be pleased with our plans to grow our business through the results, new subsidiaries and new energy services Fromthe finanaalmu-norA in our utility business are well underway. j { perspwtive,we madethekeynum-I'm particularly optimistic about our j bers: we showed revenuegrowth Potennal because so much of what we f l wnhouta rateincrease,wereduced accomplished in 1995 will have its biggest impact in subsequent years. j operatingandmanuenancecxpenses Perhaps the most prominent are our j enough to absorb most of the cost enhanced retirement and severance pro-of a refueling outage at our nuclear grams."Ibe $38-million price tag of these plant, and our earnings per share were pr grams in 1995 obscures their true up by a double <hgit magpn before reflect-value, which is $36 million in ongoing

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,,,,,, g,,,;,,, annanzed savings @ning in 1N I! ment and severance programs and the Investors who have followed us for awhile charge for the premium for redeeming will recall that in 1989 we also offered lilinois Power preferred stock. an early retirement program.That pro-From our customers' perspective, we gram was unsuccessful because we were t ,I j revaroped mz approach to serymg them' e do h kI M A l we earned improved overall scores on our ang employees. This time, however, we f I customer satisfaction surveys, and we re-engineered our processes to substan-i l { proposed legislation that would revolu-tially reduce - and in some cases com-tionize electric service in Illinois. pletely chmmate-thework pmia2,n21 j And from our stockholders' perspec-to the number of reannger severed employ-l ove, mr share price appreciatim and div-ces.This time we are prepared, and we { idend provided a total return in 1995 of will reap significant benefits. I 41 ercent,and in December our Board Also,to help sharpen our focus on cre-f of Directors voted to raise the common sting value for our shareholders,in 1995 l P j stock dividend 13 percent to $1.12 on we began implementing a financial per-l te a e. 1 A g E.

i b A J Measunsa or oua sumasas a ) } C H AIR M AN'S LETTER TO BTDCKHOLDERS i l l j formance measurement called shareholder a Working together as a team value-added, and we should see increas- = Finding new ways to do things ing benefits in 1996 and beyond. = Building trust based on integrity ~ 1.ast summer,we negotiated new con-and honesty tracts with our unions. Along with a good = Feingcourageous l wages and benefits package, these new Adopting these beliefs woni transform j contracts include provisions that will alk/w our company or our corporate culture our union employees to be more flexible overnight. But adopting them will help us l and more responsive in meeting our cus-make the transition to a company that j tomers'needs.%ese agreements are good longs to compete-and expects to win. I for Illinova, good for our employees, and, l especially, good for our customers. In 1995, we also reorganized the As I said at the begmning of this letter, way we interact with our customers. 1995 was a great year for Illinova: by I l instead of maintaining high-cost offices, almost every conceivable measure, we we arranged with scores of local retail-met orM mrown very high expec-ers to accept customers' bill payments, tations. And we are poised to repeat that I We discuss these and our other cfforts performance in 1996 with a third straight ( to improve operations later in the report, year of double-digit growth m cammgs l but you can see even from these few and common stock dividends. brief examples that we have much to look Still,in spite of the good results in i forward to in 1996 and beyond. 1995, there is work ahead of us.We remain committed to being the best by the year oLR yS@N 2000. To do that, we must stick to our C3 l Implementing new systems and re-engi- '""*' el p nghumanresarceswi6 ' neering old ones, searching out new busi-the necessary skills and abihties, becom-i ness opportunities and servicing old ones mg a low cost and low-price provider, f will be exciting and challenging work, and identifying and exploiting new mar-But I think our greatest challenge will kets, new opportunities. come within Illino*va, within ourselves. Because we have set a high standard %at challenge is focusing on our vision f r ourselves-that of being the best-to be the best and maintaining our com-I think we can look back at 1995 with i I mitment to achieve that vision - keep. enormous pride and a well earned sense i ing our eye on the prize. nat challenge of achievement, but perhaps not with is for every individual employee to accept complete satisfaction. I think we can look t and to meet. back with complete satisfaction m!y when s To help guide each of us toward our we can also look back and see the rest of

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vision and to help us maintain our focus, the industry - following us to be the best. j we developed eight corporate beliefs: Sincerely, l e Doing better today than ut i didyesterday / ), } e Serving customers bener than j any other Larry D. Haab l e Making the company ours Chairman, President, and e Knowing that our employees make ChiefExecutive Officer the difference February 15,1996

f.y,e Me.., m gw.m pg ,4 m x T .&. w,,, w ~ l.? .l .u..... o., n.e.- t l 1995: ANOTHER STEP TOWARD B EIN G THE BEST BY THE YEAR 2000 I wvesm p l f.hiv i W QC 29) or Illinova,1995 was an exceptional year. In our industry,Illinova is unique for Eatnings per share for the year were its ability in recent years to grow earn- $w'g' h $1.96. However, that figure includes ings at a double-digit rate and to make \\ -- t smuhr mereases toits dividend while still { l a one-time expense'of $.30 per share, 1 recorded in the fourth quarter, for our maintaining a strong financial position. j& I~ i en6ncaA reurement and severance pro-agM) i (-- grams, as well as a $.05 per share charge c a.c o r n i a s ai.c s Move l roawA=o M o o e a vi.Y for the premium for radeeming IP pre-Illinois Power, Illinova's electric and ferred stock in December. Without natural gas utility, had higher electric 'l l ) l t.a.r uoveu.en, rne those expenses, earnings per share for sales in 1995. The 2-percent increase, l ] w a i. i. av=c r.sou==*o b 1995 would have been $2.31, a nearly though,was modest compared to the 6-1 ,,uo,,o ,,ouo h 15-percent increase over the earmngs per percent rise a year earlier 'Ihe increase ]' a u i.v. v. A Y I N G, share from operations in 1994. in 1995 sales wasled by strong growth jf ) ,There are now two types In 1995,we also maintained our pol. inthecommercialsegment,wherekilo, l of utilities: Those having icy of raisingcommon stock dividendsin watt-hour sales were up more than 8 per-j no upsid,, and tho,, step with our eanungs growth. In Decem-cent, and the residential segment, where [ having only downside.. ber, the Illinova Board of Directors voted sales climbed almost 5 p'ercent. These to increase divxlends 12 percent to $1.12 results received a boost from unusually [ ""b ma m M M We%M6 wankdWh M qm >a n I .svisa w a tc s rwar 4 7*""****" the February 1,1996, payment-Electncsalestotheindustrialsegment, ~ ] 1 Even after raising the dividend, our meanwhile, remained virtually flat as UTIL0T0E.. l f dividend payoutlevel remams at approx. growth in the regional economy leveled l [ imately 50 percent of earnings. We esti-off after two years of solid expansion., mate this is the level at which we can Naturalgas sales tocommercialand i l sustain payments and still allow maxi-residentialcustomersdechnednominally ~. mum flexibility to meet the challenges in 1995,0.5 percent and 0.8 percent, ; j presented by the rapidly changmg elec-respectively. But these results were off-l I tric and natural gas utility industry, set by a better than 9-percent increase j t m therms sold to industrial customers 1 I (excluding gas transported for others). \\

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J i k Y l 9j.u,-o.. i .....-~..,....., 3 1 4 I 0==a-a w.o u, c0ST MANAGEMENT the NRC boosted Clinton's rating for C O N T1N U E 5 TO EXOEL sh,/s ruh-a non-, rouw mt,o. bdgmpumpdmamo y,, e to maintain solid earnings rowth, Clinton's stage pufonnance was a CPPORTUNSTY 70 i c mpany remrd, but our Havana plant desP te the twin Pressures of relativelY WROADEN MY S K 8 L L 5. slow owth in our utility territo and did Clinton one better by setting a world 17 OPENE LOTE increasing hostility to rate increases from remrd.%e production team at the Havana OF DOORS." regulators and, of course, customers. O ur Power Station started Unit 6 for the 2,500th strategy is three-fold, emphasizing human time, a world record for coal-fired boil- .arr xou.=e, War P'ored Ma*'i". resources, aggressive cost management, ers ofits size and type. and market expansion. As the benefits in all, the efforts to cut costs while from mst management begin to diminish maintaining high efficiency and excellent from natural limitations,the benefits fmm customer service reduced year-to-year our market expansion efforts will grow O&M expenses by 3 percent excluding vO cOwOuor Ouvaaee, awO w e'R e O r riwirc Lv to taye 4eir pl ace. 1995's refueling outage at Clinton. In 1995,Illinova saw substantial ~ ^* * " ^ wNERE wE sTANo oN benefits from its early efforts to trim JANUARY 1, 1996 costs. Perhaps the best example of this is 1 After watch.mgIllinova turn in two con-i last spring's refueling outage at Clinton secutive years of excepuonal performances, Power Station. investors who are familiar with our indus-1 Clinton replaced one-third of the fuel try's history of conservative growth may i bundles in its reactor and completed an be ternpted to think that the best is now aggressive maintenance schedule in just d behind us. We couldn't disagree more. 1 49 days,35 percent fewer than were nec-We began 1995 with strong momen-essary for its previous outage. Thanks to the shorter outage duration, the plant cut tum, excellent cash flows, superior cost its outage expenditures by nearly a fifth. management, improving customer ser. '*' *#'*'"* * "E #E "**""E' *EE'" The Clinton Power Station's extraor-sive marketing, and growing independent dinary -and successful-efforts to trim subsidiaries. We finished 1995 exactly as costs did not come at the expense of effi-we started - only better. ciency or safety. In August, the Nuclear Regulatory Commission issued its latest We begin 1996 poised to match and Systematic Assessment of Licensee Per-then surpass our 1995 performance, and formance in which it gave Clinton all we explain how we will do that in the ' excellent' and ' good' marks. In its report, following pages.

- - - ~. -~ 5 o i 1 + 4 success l7 1 Mramunne or oun 4 i l I 4 M AKIN G OUR TR ADITIO N AL BUSINESS BETTER + 1 i cavavak Ro ss suitw 1 Customer Relatsons Manager, East st. imu 1 Several years ago,we recognized that the increase shareholder value, but Illinova } ground was shifting under our industry is taking cost reduction a step further. and that before it was finished shifting Shareholder value-added, or SVA,is -if ever-the nature of our business a f nancial performance measure that j would be dramatically different. helps ensure that every dollar we spend } In this new industry, familiar ways achieves the maximum return for our of doing things will be replaced by new shareholders by focusing our resources 2 and dtfficu!t challenges. Regulated monop-squarely on greater growth and more i olies? Gone. Rate base, rate-of-return efficient asset management. We've devel-j ratemaking? Gone. Friendly exchanges oped three principal strategies for increas- ^ of technical and marketing ideas and ing our SVA. First, we will make decisions data? Gone. that grow economically profitable busi- { . In their place: competition. ness. Second, we will invest more in exist- "'^"' ^ " " " * " ' ' ' ' 1 q l We're not there yet, not coraph:tely, ing businesses with higher rates of retum. ~ i but the movement in that direction is And third, we will reduce investments inexorable and it is picking up speed, in projects that return less than our cost AND OT's A GREAT 1 Toprepareourselves for thedaywhen f capital. OPPORTUNITY fr D R i . we must sink or swim in the free mar. SVA eventually will guide the dispo-l j ketplace, we developed a model of the sition of every dollar at Illinova. His j energy services company of the future - focus on shareholder value-added has low <ost and low-price, opportunistic, been the springboard for outstanding entrepreneurial, customer-focused, fast, financial performances at other large i ui~ oi S { and flexible. We also created a vision: companies, and we expect nothing less POWER s e,y,o e To meet customers' energy and than that at Illinova. T'""" i related service needs better than I customer S E RVIC E GETS any other. To be the best bv the n.o, e, c a c.c ~ o, u, e R,~ o 1 4 i year 2000. In 1995,Illi.iois Power rolled out major i We are makingoutstanding progress portions of its ambitious project to toward making ourselves into that model re-engineer its business. %e benefits - company and achieving that vision. and challenges - of this project will emerge clearly in 1996. i MAKIN. EVERY - ! o o n. L A R couuT Among the many steps we're taking Reducingtheamountofmoney we spend to improve our customer service is the [ to conduct our business is one way to complete overhaul of our area offices. w w

a N rs l Gl) l \\" v-I . A \\ p 4 goo i o e ~ 40 7,ot e . jd. f gAO i l l $60 W W., L These offices,32 in all, were scattered At the other end of the spectrum, we patch Center to help respond to our cus-throughout our service territory and have customers whc, not t,..ty do not wish tomers' needs morc efficiendy and quickly. served mainly as bill collection centers. to pay their bills in person, but also find " ' ^ s,r S CHANGE, Too But because they served only a small per. regular mail unsatisfactory. For thern, centage of our customers, we closed the we're putting electronic funds transfer, Our vision to be the best, as well as or EFT, through its paces. If the pilot competitive pressures from neighbor-offices and made arrangements for EFT programs run smoothly, Illinois ing utilities with low generation costs kical merchants to collect bill payments and from. dependent power produc-Power will offer EFT to all customers. m for us. Now,instead of having to go to ers with newer technology and lower We're also implementing some inno-an Illinois Power office during daytime O&M expenses motivated us ro undergo vative work practices. For example, some business hours, customers ca n go to any si nificant re-engineerin8 of o'ur own E mamtenance and construction crews will one of approximately 100 designated l be driving directly to job sites, rather than generating system. F local retailers with extended hours. l first reporting to an llhno.is Power facil. The first major changes were made i This new arrangement should be good ity and then driving to the site,in some as a result of the effect our Clean Air for customers as well as for lihnois Power. caws wing more than an hour each day. Act compliance strategy had on plant An additional benefit is that the man-operations. We clowd down or sharply j y agers and other staff from many of those well. In 1996, some of our trutks wdl he ct.t back operations at smaller units with closed offices are now serving as omhuds' equipped with terminals that employees high costs and enmions levels or plants men and key parts of our sales force, vis can use to record the work as soon as it's w nh low production levels. l iting customers and kical officials and done, giving disparthers real-time infor-Next we tackled the structure of our i .,,ng g_ny as,ep_ ems a, u. m m. ip wnd,h _,o o,he, k.,sa,,, _.,c,hg g m,,,,, _,, l for Illinois power. pibs. We've also treated a Central lbs-mto three groups: plants, plant wrutes, ,w-. ,..m_...

i l ......pi ~ ~.o ..., o. s l and business center These latter changes ENERGV C H QlQ E 2OOO L.E A o a R E o u L. A y a R Y p were made possible by a labor agreement REFGRM EFFGRT whose centerpiece is efficiency, flexibil-Illinois Power has been particularly aggres-ity, teamwork, and customer service, sive in its efforts to reform the regulations Now,using20-percent feweremploy. tnd laws governing Illinois utilities. In the { ees, the plants are leading the way by first half of the year, we proposed form-operating with empowered employees ing a generating division or company that on multidisciplinary teams, competitive w uld wn all ofIllinois Power's gener-maintenance forces freed from traditional ating assets. We've also proposed aban-craft and department boundaries, work-d mng h manentCause, ing supervisors, and engineering that is which would provide incentives for utili-l in the field, closer to the work. ties to bener manage their fuel costs. At Clinton, our re-engineering efforts These efforts were ad hoc proposals, over the past 18 months have led to flering incremental improvements to a improved operations, including lower regulatory system decades old and ill-I ceas and an approximately 10-percent suited to accommodate an industry run-reduction in staff. ning headlong into competition. i In the last two months of 1995, we I"ast spring, however, Illinois Power oeaeoeiriou conducted a diagnostic review of the plant. introduced Iegislation to make sweep-Based on the results of that diagnostic,in ing and comprehensive changes to the 1996 and beyond we expect to make sig. way Illinois electric utilities are regu-nificant improvements in our mainte_ lated. The plan, called Energy Choice nance, modification, and commitment 2000,is unique among competing pro-l systems. In maintenance, we will continue p salswidiinthestate-andevennation-t, to identify ways to make our activities wide - because it is comprehensive, it more efficient and more cost-effective. balances the interests of energy suppli-menwnance-22% We will also streamline the analysis and ers and their customers, and it was crafted ] 'd "tirea"n - 2% simplify the administrative procedures I" C Peration with representatives from purchased power - 20% D a es 1 that go into our mbdification program, large industrial customers throughout i which involves the design of new or replace-the state and supported by an alliance of p, o,p,,ci,,;,,,,a ment equi ment for the plant. more than4,000 mediumandlarge man-

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""i*ioa- "% I P ufactunngC mPames. The third major area we'll seek to n, m,,,co,,,,,,g,g, ' """ " u ~

• improve is our commitment systems. din-Energy Choice 2000 offers alterna-ton and all other nuclear facilities work tive regulation, competitive services, direct with the Nuclear Regulatory Commis.

access to suppliers, the formation of elec-k sion and other agencies to develop com. tric generating companies, recovery of 3 mnments-commitments fur perfonnance, transition costs, and a streamlined reg-maintenance, etc. Now, working with ulatory process. With Energy Choice these agencies, Clinton is reviewing the 2000,Illinoir Power hopes to clear the administration of these commitments, as way for cxnpeting effectively in the emerg-well as the commitments themselves, i% energy services marketplace. retaining those that add value to our oper. ation of the plant and eliminating those ' oflesser value.

7 IO l i L o e N O v a199S ANNUAL n& PORT EXPANDING DUR UNIVERSE U TILIT Y M AR KETIN GI lLLIN O V A ENERGY DXYMDRON No MORE SERVICES RESPOND 5 TO CUSTOMER NEEDs With the exception of a handful of large In a further effort to expand its markets, mdustrial companies, Illm.ois Power's Illinova launched the Energy Services divi. customers aren't free to choose thek energy sion to seek opportunities u.:a.s well servies suppliec However; that will change as outside our traditional service territory. sometime in the next decade, perhaps sometime in the next several years. Illin vaEnergyServicesisgoingbeyond the delivery of kilowatt-hours and therms Wehave been anticipatingthe advent to provide customers with custom, turn-Last Noyambar of choice in our industry for several years key solutions to their energy-related needs. in a page 1 article titled and recently we accelerated our efforts to C[oncentrating on the commercial and Tew Blood Neededf adapt to the change. Our marketmg orga- . dustrial customer markets, Illinova m Power Companies nization is surveying customers to iden-Energy Services is offering engineering, look Outside for tify needs and discover opportumties, construction, operations and maintenance, Executives,' the wall putting employees through rigorous sales and financing services related to light-Street Journal noted trammg, assignmg account execuuves to .mg, motors, energy management systems, specific customer segments - all fairly -Ra6ew r. T e a w a w r z and heating and cooling systems at cus-ordinary marketing activities, except in tomers' facilities. aaLo Teoe, eeeei 4so the utih.ty mdustry. vwaw Kze a oea eoox. Commercial and industrialcustomers Oneillustratonofour newapproach eam. Now w c i..st6 faced with m.creasmgly constrained cap-is our research into a concept called e n e ' n o t as w arv.s a u n e ital and human resource budgets are look- " premise management.' Years ago we ing for alternate ways to manage their avis wava c o n e., conceived a time '. Hn,instead of pur-oeoavun,eoL., energy-related needs. This presents lih.- chasing kilowatt-hours and therms, cus-nova Energy Services with a significant tomers would purchase somethingloosely opportunity for growth. defined as " energy comfort" - perhaps a package offering a consistent indoor temperature, appliances that are moni-tored and serviced, and other energy-related services. Whatever shape the future of energy services takes, Illinois Power is preparing to be the provider of choice.

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l -.. _ l l tsl S L LIN O V A199S ANNUAL M$ PORT l r l l l acoucauer. AE Meamcas c o w w o N PL Ac c, ings from eliminating duplicate functions. BUT NOT coMPUL5oRY This is a valid consideration. However, aoiwa To aavE To Years ago when we first began talking our re-engineering effons over the past oou .wE To e u a v.v E. about competition in the electric utility l THERE ANE 150 few years Will produce Cumulative sav-l mdustry, we pointed to the airline, l mgs over the next 10 years of more than c o a aaaiE = ia TaE trucking, telecommunications, natural $600 million.'lhis relative level of O&M .u o u.T a v, Aao TwEaE gas, and bankm.g mdustries as examples savings exceeds those projected for virtually SHouLo eE So." of what to look forward to. In each of every one of the more than 20 utility es.,,s T.,,si.... a. ty.,,, those m. dustries we saw an explosion of t u,, r,,, Ju.,u,n

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mergers that have already been announced i a' 'a" a a ="r aa" =a' ,o........u s",.,6, A."g ee n J ' product offerings and a decline in prices, or Completed in our industry.

1. 995, se. L mas Post-Dispeech.

33 we[] as a spate of mergers and acqui-l sitions.Forinstance,of the.$0less-than. We believe that the real benefit of a l truckload trucking companies operating merger is its adding significant value to in 1967, fewer than 10 remained in 1990. cur primary strategy of becoming a pre-

• i *"EY S*'"IC ' *P""Y' In 1995, consolidation in the electric utility industry began in earnest. Some ILLINoVA o c N c R ATIN G mergers were far flung, as when Texas ooea oLoaAL d

Utilities Co. purchased Eastern Energy, Two years ago,Illinova announced the e state-owned Australian electricity formation of a subsidiary to operate in distributor. Others were closer to home: the independent power industry. Today, Union Electric, headquartered in St. Iouis, Illinova Generating Company has invest-announced it would merge with Spring-ments totaling more than 300 megawatts field, Ill.-based CIPSCO, two utilities of electric generating capacity stationed whose service territories adjoin our own. in seven countries on four continents. In One of the traditional reasons for merg-the last half of 1995 alone, the company ing with or acquiring another company closed deals in the U.S., China, Jamaica, is the prospect of creating substantial sav-and Peru. l l I i f awe'nt TRysNs To mEronM STATUTES ANo REouLAToMY Reg,,f.,so,y Asform Protect M,n.ger, LAwm. ANo To oo T H AT e ALL or THE a Y A at E M o L o E R a l f'"'"I 8"8'"'88 C'0"P musT ALeo et PamTNEmm sw THE mEronu.a r

.. _ _..... ~ n, .. _ - --. = -. ~ - - -.. -,.... +.-. I 1 I "T HI S IS E XCiv$ NG AND CHALLENG0NG WONK BECAUSE wE'RE COGNG SOMEvH5NO DIFFE R E NT EVERv Day." Despite its relatively short existence, tion in Omaha-based Tenaska Market-the independent power producer indus-ing Ventures, a firm whose natural gas try is crowded with players. Illinova Gen-sales in 1995 exceeded $360 million. In crating is keeping its principal focus on short,IPMI has alread,y positioned itself three regions -- Latin America, the Far to be a strong energy and energy services East, and the U.S. - and it is distin-marketer in the Western United States. guishing itself from competitors by its in 1996 and beyond, IPMI will sig-small but broadly experienced staff. Illi-nificantly expand its wholesale electric nova Generating's employees have sig-business and will begin marketing energy nificantrechnnf@lsiuseinnatural and energy-related services to retail cus-D gas and coal generation and extensive comers throughout the United States. expertise in orchestrating difficult and In January 1996, IPMI announced .u o wa o o.. complex transacuans. y a f g gg w u,,uir,r, The subsidiary's staff has set a goal American Energy Services and Utility Net-to be among the top 25 independent work Services that will bring a utility power producers in the world by the year resource management service-covering 2000, and they are well on their way to electric, gas, water, and waste - to indus-achieving that goal. trial and commercial customers under the By limiting its investments to projects service mark SourceCom.This service will in which the risk-adjusted retum is greater include real-time measurement and mon-than that offered by sir'nitar investments itoring of utility usage and two-way inter-in Illinois Power's business,Illinova Gen-active communications systems to help the erating expects to begin making contri-customer become a more sophisticated util-butions to Illinova's bottom line as soon ity resource consumet SourceCom'" will cs 1997. also provide billing consolidation, two-H<adeunraers: way paging, real-time wireless messaging NN"sccNwa,Yw'c". or dispatching, and security monitoring. last summer,Illinova Power Marketing, The first SourceCom'" customers are the our energy marketing subsidiary, began Hospital Association of Northem and Cen-executing wholesale electric transacions. tral California's 200 member hospitals, t,,,,,p,,,, later,lPMi established a presence in the IPMI will continue to promote dereg-xi ~ C w a ~ a, c win a natural gas market by taking a 50-per-ulation of the electric utihty markets and Lo~aieuoE i a i c, cent ownership and management posi-will work closely with other Illinova sub-eavvuoE ae+w, sidiaries to expand the portfolio of value-o= = a u a u ov waor added energy services offered to customers. a wa=6o awav.

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1 \\ a 1 i s u c c g e s lis Mgasunse or Que i ? POWER TO THE PEOPLE i I a f 4 I It's a delightful irony that one of the catch-decisions are freed to do other things.The 1 phrases of the '60s counter-culture - result is a structure that requires far fewer Power to the people - should find itself traditional managers and that consequently embraced, a generation later, by an elec-has far fewer " career tracks" - which is i tric and gas utility, t.he epitome of cor-another way of saying there are fewer car-1 porate conservatism. It's not quite so ironic rots to motivate employees. l as it appears, though, because Illinova, l while not exactly counter-culture, is increas-We're replacing those old carrots with ingy something very different from the such new ones as broader salary bands. w j traditional utility. By reducing the number of salary bands j No one at Illinova - no one we're from 16 to just four, we've created plenty j aware of, anyway-uses the slogan " Power of room within each band for employees j. to the people." But regardless of how we to continue increasing their financial j descnbe it, that is exactly what we're doirW rewards without necessarily changing j giving power to the people, to our employ-obs. The new salary bands also allow ces. We're doing it through empowerment employees to move withm.the company and through dozens of other smaller, un-to explore different interests or to broaden i named, unheralded, inconspicuous ways, 0*I' I'*PI*"** 'Y8*** all with the goal of putting more respon-sibility and authority in the hands of the uslyis g df rempi yees,andit'salso l people closest to th'e work. good for the company because it encour-Getting empowerment to work requires ages employees to gain broad experience flattening the organization. When deci. and it also rewards specialists who oth-sions are being made at the front line, erwise might have felt forced to go into O managers who traditionally made those management to advance their fortunes. TgRay F e a w K g e, h fattiv, Belletalle " C O M M U NIC ATIO N S AND CO O PE R ATtD N ARE THE KEva TO Oum s u c c E s s." O a r ia L a v g n, laneman, Champangst "WEeRE ALL WORK 0Ns HAND TO MAKE THIs NEW system WORK."

l l l l l l i.liu.~ov. i,. 4~~u.6 R ,o., l l l i 1 We'gg g]so placing a strong emphasis lic Affairs to publicize an increase in stock l PREFERRED D1VID E N D l neou1Reuewv on teamwork, and we're trying to facil-dividends, we're breaking down the walls (""#' "' Id #'"> itate it in a number of ways. One way is between employees who need to work 31 by establishing teamwork as a basis for with each other to get the job done fast, 29 part of our employee incentive compen-cost-effectively, and right. 26-25 sation program. Another is that we're Thesenew waysofdoing things rede-24 using Full Circle Feedback, a tool that, fine the traditional relationship between unlike the traditional top-down review, companies in our industry and their i allows team members to receive input on employees. Utilities customarily provided their work from each other, from the bot-relatively steady, predictable work. But tom up, and from the top down. Illinova has ambitions higher than being We're dissolving the barriers between steady and predictable. We expect great managers and line employees, and things from our employees. In return, ,1. .~4 we're also dissolving the barriers between we offer employees the chance to grow departments. through training and cross-functional Many tasks at Illinova require input experience, to become owners of the from more than one department or even company through 401(k) matches, and awrNe^r' more than one business group. Whether to receive healthy incentive compensa-it's linemen working with gas crews to tion payouts. ) (min,ons of fo tan) install utility service in a new subdivision in short, we recognize that for Illi-I l 181

• or Financial Services working with Pub-nova to meet its commitment to be the 169 165 best, our employees must also be the 3y in best. To us, the best employees are the ones who are multi-skilled, flexible, com-petitive-spirited, and team-oriented, and we certainly are trying to attract and retain employees who are all of those l

things. We will do whatever it takes to l build and retain a work force that is com-mitted and prepared to be the best by the year 2000. .i.: es ,4 ,o l l

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l b liu,-ov. i... 4 -o.o nuo., .u................ R E S P O N BlBILITY FOR IN FO R M ATIO N The condensed consolidated financial safeguarded against loss from unautho-nal auditors and makes recommenda-statements in this sammary annual report rized use or disposition and that the fman-tions to the Board of Directors concermng were derived from the consolidated finan-cial records are reliable for preparing the the appointment of the independent cial statements that appear in the Appen-consolidated financial statements. accountants and services to be performed. Additionally,the Audit Cammittee meets dix to the proxy statement for the 1996 The consolidated financial statements with Price Waterhouse LLP to discuss annual meeting of shareholders. Man-have been audited by lilinova's inde-the results of their annual audit,Illinova's agement is responsible for preparing pendent accountants, Price Waterhouse the consolidated financial statements and internal accounting controls and finan-11P,in accodance with generally acaptd cial reporting matters. The Audit Com-for maintaining and monitoring Illinova's auditing standaMs. Sd standads include mittee meets with the internal auditors system of mternal accounting controls. the evduation of internal accouming The consolidated financial statements t assess the internal audit work per-comrds to eselish a basis for devel-are in conformity with generally accepted formed, including tests ofintemal account-oping the scope of the examination of accounting principles applied on a con-ing controls. the consolidated financial statements. In sistent basis and include amounts based addition to the use ofindependent accoun-on management's best estimates and judg-

• • " IIII" ** **I"'*I"'
• P' f***I "*I gj ments. Management also prepared the staff f internal auditors who conduct y

other information in the annual repon financial,pr ceduralandspecialaudits. Lirry D. Haab and is responsible for its accuracy and To assure their independence, both Price Chairman, President, consistency with the consolidated finan-Waterhouse LLP and the internal audi-and Chief Executive Officer cial statements. In the opinion of man. cors have direct access to the Audit Com-agement, the consolidated financial mittee of the Board of Directors. statements fairly reflect Illinova's finan-cial position, results of operations, and The Audit Committee is composed [ cash flows. of members of the Board of Directors Illinova believes its accounting and who are not active or retired employees Larry E Altenbaumer internal accounting control systems pro-ofIllinova.The Audit Committee meets Chief FinancialOfficer, } vide reasonable assurance that assets are with Price Waterhouse 11P and the inter-Treasurer, and Controller eu, ov. .....v,o. REPORT OF INDEPENDENT ACCOUNTANTS PRICE W AT E R H O u s E LLP IS[o. c o.I.o.'."$o', " ment for the 1996 annual meeting of in conjunction with the consolidated o shareholders of the Corporation (which financial statements from which it has We have a udited, in accordance w th gen-l statements are not presented herein); and been derived,is fairly stated in all mate-erally accepted auditing standards, the in our report dated February 2,1996, rial respxts m relation thereto. consolidated financial statements of we expressed an unqualified opinion on a of e her 3, 5and1 ments. In our opinion, the mformation and for each of the three years in the set forth in the accompanying condensed Price Waterhouse LLP I l period ended Deember 31,1995, appear-consolidated financial statements appear. St. louis, Missouri ing in the Appendix to the proxy state-ing on pages 19 through 22, when read February 2,1996

l S o c o... p, l o, om. .m. -. o......... CONDENSED C O N S O LI D AT E D STATEMENTS OF INCOME (Mdhons of dollars except per share amounts) For the Years Ended December 31, 1995 1994 1993 Q P ER ATI N G REVENUES Electric 1,252.6 $ 1,177.5 $ 1,135.6 Electric interchange 116.3 110.0 130.8 Gas 272.5 302.0 314.8 Total 1,641.4 1,589.5 1,581.2 Q P EG ATlN G EXPENSES AND TAXES Fuel for electric plants 273.9 266.6 235.1 Power purchased 593 52.6 78.5 Gas purchased for resale 138.5 1 72.4 187.3 Other operation and maintenance 359.7 349.6 370.0 Enhanced retirement and severance 37.8 Depreciation and amorozation 186.5 179.3 172.9 General taxes 135.0 1303 125.6 l Income taxes 125.8 118.3 106.5 Total 1,317.0 1,269.1 1,275.9 Operatingincome 324.4 320.4 305.3 QTH3R INCOME AND D E D U CTIO N S Allowance for equity funds used during construction 3.8 2.7 Duallowed Qinton costs (271.0) Inmme tax effeca of disallowed costs 70.6 Miscellaneous-net (7.1) (9.1) (3.0) Total (7.1) (53) (200.7) Income before interest charges 317 3 315.1 104.6 lNTEREST CHARGES Interest expense 148.0 143.9 164.9 Allowance for borrowed funds used during cewiun (6.0) (53) (4.5) Prefernd dwidend requirements of subsidiary 23.7 24.9 26.1 Total 165.7 163.3 186.5 Net inmme (loss) 151.6 151.8 (81.9) Carrying amount over (under) consideration paid for redeemed preferred stock of subsidiary (3.5) 6.4 - Net income (loss) applicable to common stock 148.1 5 158.2 $ (81.9) Eamings (loss) per common share 1.96 5 2.09 $ (1.08) Cash dividends declared per common share 1.03 .65 .40 Cash dmdends paid per common share 1.00 .80 .80 Weighted average common shares 75,64!;937 75,643,937 75,643,937 See the accompanying Condensed Notes to Condensed Consolidated FinancialStatements

r w f l20 l I L L 9 N O V A 199$ ANNUAL REPa.v ........ o.......... CONDENBED C O N S O LI D AT E D BALANCE SHEETS (Mdlwns ofdollars) December 31 December 31, 1995 1994 Assets Plant and property $ 6,814.9 $ 6,629.2 less - aaumulated depreciation 2,251.7 2,102.7 Net utihty plant 4,563.2 4,526.5 Nuclear fuelunder capitallease 100.9 117.7 Investments and other assets 65.8 37.4 11.3 50.7 Cash and cash equivalents Other current assets 389.3 388.7 Deferred charges 479.3 455.7 Total $ 5,609.8 $ 5,576.7 C APITAL AND LI A BILITIE S Common stock $ 1,415.8 $ 1,414.9 Deferred compensation-ESOP (18.4) (23.5) 129.6 58.8 Retained earnmgs Preferred stock of subsidiary 125.6 224.7 97.0 133.0 Mandatorily redeemable preferred stock of subsidiary Long-term debt of subsidiary 1,739.3 1,946.1 Totalcapitalization 3,488.9 3,754.0 Current habibries 747.5 530.4 Deferred credits and other noncurrent habihties 1,373.4 1,292.3 Total $ 5,609.8 $ 5,576.7 CONDENSED C O N S O LI D AT E D S TAT E M E N T S OF CASH FLOWS (Mdlions c(dollars) For the Years Ended Decernber 31, 1995 1994 1993 CAEH FLOWS FROM Q P E R AT B N D ACTIVITIES Net income (loss) 151.6 151.8 (81.9) Items not requiring (provides) cash, net 260.9 209.4 437.7 N-ce in assets and liabihties .7 (92.6) 13.9 Net cash provded by operating activities 413.2 268.6 369.7 CABH F L. D W B FROM INVESTING ACTIVITIES Construction expenditures (203.3) (184.4) (270.5) Other investing activities (34.9) (19.7) (8.2) Net cash used in investing activities (238.2) (204.1) (278.7) CASH FLOWS FROM FIN ANCIN s ACTIVITIE D Dividends on common stock (75.6) (60.5) (60 3) Retirement of bonds and other dels of subsidiary (353.3) (580.3) (1,180.9) 1ssuances of bonds and other debt of subsidiary 209.5 622.6 1,190.0 5.0 (5.5) (38.4) Other fmancing activities Net cash used in financing activities (214.4) (23.7) (89.8) Net change in cash and cash equivalents (39.4) 40.8 1.2 50.7 9.9 8.7 Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 11.3 50.7 9.9 See the accompanying Condensed Notes to Condensed Consolidated FinancialStatements j

I i 1 l s u c c e s s l 21 l MEasunts or Oum .m................ C O N S O LI D AT E D STATEMENTS O 'F R ETAI N E D E AR NIN G S (D E FICIT) fMillions ofdollars) For the Years Ended December 31, 1995 1994 1993 Ba'ance (deficit) at beginning of year 58.8 (64.6) 41.0 Net inctxne (loss) before dividends 175.3 176.7 (55.8) 234.1 112.1 (14.8) less-Dividends-Preferred stack of subsidiary 23.6 11.1 20.1 Common stock 77.4 48.6 29.7 Plus-Carrying amount over (under) consideration paid for redeemed preferred stock of subsidiary (3.5) 6.4 (104.5) (53.3) (49.8) Balance (deficit) at end of year 129.6 5 58.8 (64.6) See the accompanying Condensed Notes to Condensed Consolidated Financial Statements CONDENBED NOTES TO CONDENBED C O N E O LI D AT E D FIN ANCI AL STATEMENTS This 1995 Summary Annual Report to L" T,",,1,,7,,8",","^"Y IP is subject to regu-a e a u 64vio-Shareholders provides an overview of ^ccouuviwa e o t. e i e a lation by the Illinois Commerce Com-the consolidated financial position and P aia e

• e'c = ar c o a = o u o ^-

mission (ICC) and the Federal Energy TheConsolidated financialstate-Regulatory Commission (FERC) and, results of operations of Illinova Corpo-Tion ration and 'ts subsidiaries. More detailed ments include the accounts of Illinova, accordingly, prepares its consolidated i financialinformation appears: 1) within Illinois Power (IP), Illinova Generating financial statements based on the con-the Illinova Proxy Statement mailed with Company (IGC) and Illinova Power Mar-cepts of Statement of Financial Account-this Summary Annual Report to all com-keting, Inc. 6PMI). IP, the primary busi-ing Standards No. 71, " Accounting for mon shareholders of record at the close ness and subsidiary ofIllinova,is engaged the Effects of Certain Types of Regula-cf business on Feb'ruary 12,1996, and in the generation, transmission, distrib-tion," which requires that the effects of

2) within the Illinois Power Company ution, and sale of electric energy and the the ratemaking process be recorded.

Information Statement mailed with this distribution, transportation, and sale of Accordingly,IP records various regula-Summary Annual Report to all lilinois natural gas in the State of Illinois. IP's tory assets and liabilities to reflect the P:wer Company preferred sharehold-consolidated financial position and results actions of regulators. Illinova's principal ers of record at the close of business on of operations are currently the principal accounting policies are: February 12,1996, in accordance with factors affecting Illinova's consolidated uviuvv Pcawv The cost of addi-the regulations of the Securities and financial position and results of opera-tions to utility plant and replacements Exchange Commission, tions. IGC is a wholly owned subsidiary for retired property units is capitalized, of Illinova that invests in energy-related Cost includes labor, materials, and an allo-projects and competes in the independent cation of general and administrative costs, power market. IPMIis a wholly owned plus the cost of borrowed funds used for subsidiary of Illinova that is in the busi-construction purposes and a reasonable ness of marketing energy and energy-ratedfundswhenso@-M related services to various customers out-l side the Illinois Power franchise territory.

~ l l:lito,uova io. Au~u o

==,o., Signifi-Ownership of an operating nuclear from customers. IP is currently recover-ncauoavoay A..cv cant regulatory assets include deferred generating unit exposes IP to significant ing MGP site clean-up costs from its cus-Clinton Power Station (Chnton) post-risks, including increased and changing tomers as approved by the ICC. construction costs, unamortized losses regulatory, safety and environmental NOTE S' "'" ^" on reacquired debt, recoverable income requirements and the uncertain future c7, o N S ns taxes and manufactured-gas plant site cost of closing and dismantling the unit. g IP expects to continue to operate Clin-fourth quarter of 1995,IP offered vol-cleanup costs.

• "O **** E *"Y ""I '**" " "**

untary enhanced retirement and sever-Forfinancialstate-oeeaeosaviow Pected developments prevent IP from m b @p & ment purposes,IP depreciates the vari. doing so,Illinova and IP would be mate-comb. d enhanced retirement and sev-me ous classes of depreciable property over rially adversely affected. erance programs ger.erated a pre-tax their estimated useful lives by applym.g charge of $38 million against fourthquar-composite rates on a straight-line basis. y,,, 3 _ c,,,,,,,,,, ^N C NT8NaENc'Ea ter 1995 earnings and are expected to aevcuua Auo eue=ay comv generate annual savings of approximately "iaa aa IP records revenue for services provided $36 million, beginningin 1996. Nuo'=^a ru=' '=*

a' but not yet billed. IP is allowed to recover IPis responsible for its own-ioe4 oA= aave oaoe= On ea.v

fuel-related costs, purchased power and ership share of the costs of decommis-April 6,1994, the ICC approved an gas purchased from its customers pur-si ning Clinton and for spent nuclear increase of $18.9 million, or 6.1%,in suant to the electric fuel and purchased fueldisposalcosts. Aliabilityfordecom-IP's gas base rates. gas adjustment clauses. missioning costs is being accrued ratably REDEMPTION or IP PREFEnnto INCOME TAxEm Under btatement over the expected service life of Clinton. IP redeemed $95.3 million avoox of Financial Accounting Standards No. IP.is collecting future decommissionmg and $79.1 million (principal value) pre-109, " Accounting for Income Taxes," costs through its electric rates based on ferred stock and recorded the $(3.5) mil-deferred tax assets and liabilities are rec-an ICC-approved formula that allows IP lion and $6.4 million carrying amount ognized for the tax consequences of trans-to adjust rates annually for changes m. over (under) consideration pa.d in equity i actions treated differently for financial decommissioning cost estimates. and also m. eluded these amounts in net reporting and tax return purposes, income applicable to common stock in " ^ " " ' ^ " " " " -"^" "'^"' measured on the basis of the statutory aiyaa M o Pi IPisresponsiblefor December 1995 and December 1994, tax rates, potential environmental impairment at 7,,pec,;y,;y, 24 former manufactured-gas plant sites. o L1NT D N ' " ^ " " ' NOTE 2 DeCause of the unknown and unique Char-In the third quarter of 1993,IP recorded POWER S T AT IO N IP owns 86.8% of Clinton, which was acteristics of each site and uncertain reg-E*' " l placed in service in 1987 and represents ulatory requirements, IP is not able to finc me taxes, for the writemff of net approximately 18% ofIP's installed gen-determine its ultimate liability for reme-deferred Clinton post-construction costs eration capacity.The investment in Clin-diation of the sites. IP recorded a liabil-as a result of a September 1993 Illinois ton and its relatd deferred casts represented ity of $76 million, representing its best Appellate Court decision. approximately 51% ofIllinova's total estimate of the cost to remediate MGP assets at December 31,1995. Clinton-sites for which it is responsible. A regu-related costs represented 34% of Illi-latory asset in the same amount has been l nova's total 1995 other operating, main-recorded, reflecting management's expec-tation that these costs will be recovered tenance and depreciation expenses. l

} _ _. - - - - _ _ _. ~. - -... s ( 1 i l j j M e a r. u u r a os ou& succe.-, n in,-o.. co...... . m. ,u~o.. ....., co... ODARD OF DIRECTORS { -[ ~ ~ ' ' '~ T ~ ' Ti rTi 7 -- wico.wo n. niwui. <,4 s : k Renred f secutne Vwe l'rcudent anJ thrutor g j of Ohn Corporanon, Stamford, Conn. ,

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• I' N, h (diverutied manulatturer tuntentr.ned m i

I I 3 themicah, metals and aenispace/Jelense f _ _f f pniductst Elected 19u. s ] t u+r, LAWNY D. HaAu. No4" I Chairman, Preudent, and Chwf het unve Ofhcer of the Company. Decatur, lil fJected I986. \\ h oos.to c. L*..t=, mei o Renred Chairman of the Ibard and Chief Executive Ofhcer of Mercantdc Bancor-t poranon, hw., St. I ouis, Mo. (hank holdmg l company). fletted 1981. N oo~.co s. va a. i ~ s, e,# r r. o Retired Chairman of the Ibard and Chief l Executive Of6cer of jewel Compames, Inc., Chicago,Ill. (diversihed retader). f. luted 1988. I ( N i o

nomeo, M.

e o. c = =, 64.t u, Reored Pscsident and Chief Enecunvc of6cer (Left to nght) Walter M. Vannoy, Marilou von Ferstel, Donald S. Perkins, Robert M. Powers, of A.L Staley Manufactunng Company, Larry D. Haab, Ronald L Thompson, Vernon K. Zunmerman, Charles W Wells, Decatur,Ill. (gram and oil seed pnucessork Richard R. Berry, Walter D. Scott, andJohn D. Zeglis. (Not pictured: Donald L lasater) Elected 1984 I L L I tw D V A - B o e N O WALTEe o. D c LI T F, 64 f f. I 4/ MANtLDU v0N FERETLL, U ll l 43 ( Profenor of Management and Semor Ausun Execunve Vue Preudent and General Manager (1) Imance Comnunce Fellow, JL Kellogg Graduate School of of Ogdvy Adams & Rmehart (pubhc relanons (2) Auda Commutee Management, Northwestern Umverury, hrm), Chicago, Ill. thcted 1990. O) Compensanon and Evanston, Ill. Elected 1990, Nummanng Comnunce aaw~ o. z E a o, m, 4 0 u. W Busincu Development Commatee u o w a i. o L, r s a u e a o =, 46 e t 4' Senior Execatne Mce Preudent General (5) Nudear Operanons Commntec Chairman and Chief Execunve Ofhcer of Counsel, Government Affairs and Pohcy (llhnois Power only) MiJwest Sumping and Manufacturmg Co. Development of AT&T, Baskmg Ridge, N.J. ' Chairman of comnunce (manufacturer of automouve parts), f luted 199 L c, based m Ibwhng Green, Olun. Elected 1991. iei ~ ova oc~caa*i~n vtawo~ w. z.- -c o - * ~,ti7 P ' co=**wv j watTe. M. v A w ~ o,, e,# a m Director of the Center for Internanonal 1.arry D. llaab, Cb.urman Renred Chairm.m and Chief I xecurne Othcer Idutanon Reseanh and Aaounnng and 9,y,3 y ggm of figpe Internanonal, Int.. Idiverufrd mmpan/ Dnnngunbed servwe Profev.or of Accountang, DonalJ 5. Perkms uvmg consumer, mdustrial, techmcal, and Umveruty of Ilknon, Urbana, Ill I.lected 1971-her D. 5 con servwe markers worldwidet Olloughby, Ohio. Ronald 1 l'hompum f fketed 1990. Waher M. Vannov lohn D. /cghs ( CHARLEB W, WLLLG NEYIRED FHDM iLLINDVA H o a p te ne D e s ' s c o ne s iaiaNovA Powe H M & to e' I IsNb. I e., t.. j AND T H t' OLL4NUVA oOAHD Uf D1NEC7OWB g g bHAU NCIkIHN AT 't H E (ND DF 1996, Wf A N E. OEEPLY wy Waher D. %on G W A T E 7 LJ t. fop HIS 4O YtARS Or B r H VIC E 4 Wahrr M Vanii.o to Twr couraawv Ano w>s 20 vtAus or w s.ruVece As A r, s u r. c T o u na t n s. cu ur.Aw y. 1

l l24l 4 L Le c O v A1995 ANNUAL nEPOaT 4LLINOvA OO a PO a AeiO N PRINCIPAL O FFIC E R S i l l Lanny o. H A A s,58 LAnny r. A LT E N e a u w E n 4 7 LEAM MANNING EvEvENEn,47 Gairman, President, and Gief Executiw OWscer Gief Fmancial Officer, Treasurer, and Controller General Counseland Corporate Secretary BLLtNOtB POWE. COMPANv PRINCIPAL O FFI C E R S l Lanny o. HAAs J8 JOHN n. c OD E. 48 niowAnD w. EwEn an. 47 Gairman, President, and Gief Executiw Officer Senior %ce President %ce Presdent Employed 1965. Responsible for electric generation, electric and Responsible for fossil power generation, l gas supply, power plant engineering and train-includmg power plants, fuel, and planning. LAaav r. A Lv E N e A u u E n, 4 7 ing, and fuel purchasing. Employed 1975. Employed 1971. I Senior Vice President, Gief Financial Officer, t ( gnd Treasurer PAUL L. L A N G, 38 LEAH MANNING ETEvaNE=,47 Responsible for financial, regulatory, tax, and Senior %ce President Mce President, GeneralCounsel, and ( legal matters; auditing, investor relations, and Responsible for customer service, electric Corporate Secretary corporate development. Employed 1970, and gas operations, marketing, energy services, Responsible for corporate secretary activities l economic development, and transmission and and legal matters. Employed 1989, o AviO w. m u vv e, 41 distribution engineering. Employed 1986. Senior Mce President nAL,w r. T e a w A N v E, 4 2 Responsible for public affairs, information wiLra E O c O N N E L L. 58 Mce President technology, environmental affairs, employee %ce President t Responsible for sales and marketing. services, supply services, administrative Responsible for operations, maintenance, Employed 1995, services, and research and development. radiation protection, and training at Clmton Employed 1978. Power Station. Employed 1983. cvNew A o. s v E w A = 0, 38 l Controller l Responsible for accounting, budgeting, l risk mitiganon, and financial reporting. l Employed 1980. I ) i O L Lt N O V A e G E N E = Av f M G COMPANv l PRINCIPAL O FFIC E R S Lanny D. H A A h, 58 ALEa n. o n E v E n. 37 aAny L. H e c E E v, 44 Garrman President %ce President-Project Dewlopment Employed 1965. Employed 1992. Employed 1976. MecHAEL R, H E N E G M A N, 49 MICHAEL S. S E E n. 37 Vice President - Fmance, and Treasurer Corporate Secretary Employed 1985. Employed 1992. l 6LLONOVA POWEn MAnEErlNG, $NO. PRINCIPAL O FFIC E R S LAnny o. H A A s. 38 nosEnv A. s c u u Lv E. JJ TwCMAm M. m AiN w Av E n,37 Garrman President Vce Pressdent-Marketmg Employed 1965. Employed 1986. Employed 1993. aE ALO P. o c D N N O n 44 Mec-AE6 m. e E E n,37 %ce Pressdent - Finance and Admmistratton Corporate Secretary Employed 1995. Employed 1992. i I i

,LLINOVA CORPONATSON ANO OLLihOdB POWER COMPANY STOCKHOLDER I N F O R M A'7 s O N ANNUAL M E E TIN u Written communication regarding Ilhnova TAX 1NFDRMATION ne Annual Meetings of Illinova Corpora' Corporation and Ilhnois Power Company Illinova Corporation and ilhnois Power tion and !!!inois Power Company will be held stock should be addressed to: Company estimate that 100 percent of the at 10 a.m. Wednesday, April 10,1996, at dividends paid to stockholders in 1995 is Patricia E. Perkins Shilhng Auditorium on the campus of Rich. fully taxable as dividend income for Federal land Community College, One College Park, Supervisor-Shareholder Services income Tax purposes. Form 1099s were Decatut, Illinois 62525. Directions to Shilling Illinois Power Company mailed to all registered common and Auditorium are provided in Illinova's Proxy 500 South 27th Street preferred stockholders in January 1996 show-and Notes to Financial Statements. Decatur, Illinois 62525-1805 ing dividends paid during the year. Partici-pants in the Automatic Reinvestment and svocx excNANoE cNANoE or ADDREES "7'N Requests for address changes must be sub-1 Ilhnova's common stock is listed on the New dividends or made optional cash payments mitted in writing and should include old and f r shares that were purchased on the open York Stock Exchange and the Chicago Stock new addresses, exact name(s) in which the

• I Exchange. Illinois Power's preferred stock, stock is registered, and Social Security or tax nize as federal taxable income the allocable with the exception of the 7.75% issue, is identification number on the account. An listed on the New York Stock Exchange. ne share of any brokerage fees and commissions address change form is mailed quarterly to official New York Stock Exchange symbol incurred to purchase such shares as stated j

all registered stockholders. for Illinova is ILN, but its stock is hsted in in the Plan prospectus. Stockholders should some newspapers as ILNova. The official Consult with their own tax advisors for A U T O M AT 1 e New York Stock Exchange symbol for REiNVEBTMENT AND funher information on tax consequences.

• """""^"" ""

Illinois Power is 'IPC,' but the Company's If you hold certificates in your own name stocks are also listed in some newspapers TRANBFER AoENT & rather than through a broker, you are nEoeaTaAn roa eoNoyA under 'IllPwr., U cligible to participate in the Automatic c. "((,, 5 w"c,^ "a o y,,, y "^ Mnme kd a hehnOgg o u A aT E n Ly r I 1NFQRMATION Plan offers stockholders a convenient and Shareholder Senices in an effort to make information available to economical way to increase their investment 500 South 27th Street shneholders more promptly,Illinova has dis-in Illinova. Under the plan, dividends from Decatur, Illinois 625251805 continued its Quanctly Report to Stock-Illinova common and Illinois Power preferred holden and begun plaaing finanaal infonation shares may be automatically applied toward ronM ioK l on its home page on the World Wide Web. the purchase of Illinova common stock. Stockholders may obtain, without charge, j Shareholders can access this information at Through an optional cash feature, stock-a copy of Form 10K as filed with the Secu-http://www.illinova.com. Shareholders with-holders may also purchase additional rities and Exchange Commission by send-l out access to the Internet may call Illinova shares of common stock without paying ing a request to Shareholder Services. Shareholder Services at 1-800-800-8220 for brokerage fees. Transactions are subject quanerlyinf mation. to limitations set forth in the Plan prospec-CherylL. Nalefski tus. For more information, plear,e contact arocnNoeoEn Director-Investor Relations Iwa uia e E a Shareholder Services. 500 South 27th Street Stockholders desiring assistanee with lost Participants m the Plan may also deposit Duatur, Ulinois 6252M805 or stolen stock cenificates or dividend checks, the common stock certificates they are i Teyone F2W208m name changes, stock transfers, information holding into their Plan accounts for safe. Fax number 1217-424-6913 on the Automatic Reinvestment and Stock keeping. If you are a Plan panicipant and Purchase Plan, or other matters may con-are interested in this service, please send a This report and the condensed consolidated tact Shareholder Services during their office written request to Shareholder Se vices for financial statements contained herein are hours of 7 a.m. to 4:45 p.m., Central time, additionalinformation. submitted for the general information of Monday through Friday. the stockholders ofIllmova and Ilhnois Power Tollfree telephone 1 800-800-8220 Company and as such are not intended to Decatur, Illinois, area 424-6464 solicit or to be used in connection with any Fax. .1 217-424-6913 sale or purchase of securities. l I The pages of thus anmn.d repowt are prunted on recyded paper Desugned and pmdwed by Odwrn e' Delnng i l

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l (e) to U-602648 LS-96-011 l Page1of10 I i l Supplemental Information Concerning Proposed Transfer of Soyland's Ownership Interest Pursuant to 10CFR50.80 i Contents I. Background Information Concerning Illinova, Illinois Power, Illinova Power l Marketing, and Soyland 4 II. Reasons for the Proposed Transfer, and Description of the Transactions Associated With the Transfer III. Summary of the Impact of the Proposed Transfer on Illinois Power and Clinton Power Station IV. Required Regulatory Approvals V. General Information Concerning Licensees VI. Financial Qualifications

VII, Decommissioning Funding for CPS Vill. Technical Qualifications j

IX. Antitrust Considerations X. Access to Restricted Data I 4

l (e) to U-602648 LS-96-011 Page 2 of10 I. Background Information Concerning Illinova, Illinois Power. Illinova Power Marketina. and Sovland A. Illinova Corporation ("Illinova") is an exempt, public utility holding company located at 500 S. 27th Street, Decatur, Illinois 62525. Illinova wholly owns the following subsidiaries: Illinois Power Company (" Illinois Power"), Illinova Generating Company, Illinova Power Marketing, Inc. ("IPMI"), and Illinova Energy Partners, Inc. B. Illinois Power is an Illinois public utility that provides electric and natural gas utility services to approximately 560,000 consumers throughout the State ofIllinois. Illinois Power is the majority owner and licensee of the Clinton Power Station (" CPS"), a nuclear generating station located in DeWitt County, Illinois. Soyland Power Cooperative, Inc. ("Soyland") is the minority owner and co-licensee of CPS. Illinois Power and Soyland are parties to the following agreements: a) an Ownership Participation Agreement ("OPA"), which pertains to the ownership and operation of . CPS; and b) a Power Coordins. ion Agreement ("PCA"), which entitles Soyland to the output from 12% ofIllinois Power's fossil generation, and i related transmission services. C. In 1995, the Federal Energy Regulatory Commission ("FERC") issued a power marketing license to IPMI. As the unregulated power marketing subsidiary ofIllinova, IPMI is engaged in the wholesale marketing of i electricity and natural gas in the western and central United States. As part of an overall restructuring of the agreements between Illinois Power and Soyland, IPMI will assume responsibility for performing Soyland's j obligations under the PCA, in exchange for which Soyland, under the new Power Sales Agreement (PSA) being established with IPMI, will agree to designate IPMI as its all-requirements power supplier for a period of ten years, with the option for an additional ten-year commitment. Furthermore, it is proposed that Soyland will transfer its interest in CPS to IPMI pursuant to the restructuring referenced above. D. Soyland is a rural electric generation and transmission cooperative which is comprised of twenty-one member rural electric distribution cooperatives. The Rural Utilities Service ("RUS") recently restructured Soyland's CPS i l related debt obligations to the federal government in exchange for Soyland's commitment to divest itself ofits ownership in CPS. As part of the debt restructuring, the RUS permitted Soyland to refmance its remaining RUS guaranteed debt, thus eliminating Soyland's status as an I RUS borrower. Soyland is now subject to FERC jurisdiction. I

_-. _ _. (e) to U-602648 LS-96-011 Page 3 of10 4 Additional information concerning Illinova and Illinois Power is contained in the accompanying attachments. l l 11. Reasons for the Proposed Transfer, and Description of the i l Transactions Associated with the Transfer L 4 Due to severe financial difficulties arising from its CPS-related debt service l obligations, as well as CPS ownership, operation and maintenance obligations, Soyland determined that it must seek protection from its creditors under the ] United States Bankruptcy Code. In 1995, the Soyland Board of Directors l authorized its attorneys to prepare to file such a petition with the U.S. Bankmptcy l Court. In an effort to avoid bankruptcy, Soyland began negotiating with the RUS l to restmeture its CPS-related debt, and with a number of electric utilities and power marketers to identify possible alternatives to its existing power supply i L agreements. Illinova, Illinois Power and IPMI were parties with whom Soyland l agreed to negotiate. Soyland's negotiations with the RUS led to an agreement pursuant to which the RUS would agree to forgive a substantial portion of Soyland's debt and allow it to " buy out" of the RUS program in exchange for Soyland's agreement to divest itself completely ofits CPS ownership interests. ' Soyland issued a Request for Proposal seeking offers for the purchase ofits CPS interest, and for alternative power supply arrangements. While a number of entities submitted proposals for alternative power supply arrangements, only one proposal provided for the purchase of Soyland's CPS interest. Because that proposal was not acceptable to l Soyland, negotiations resumed between Soyland and representatives ofIllinova, l Illinois Power and IPMI to identify a solution to Soyland's problem. l The result of these negotiations was an agreement that provided for a transfer of i Soyland's CPS interest to IPMI, and a restructuring of the existing power supply agreements. The parties proposed that IPMI will supplant Soyland as the minority owner of CPS and assume all of Soyland's obligations under the OPA. IPMI will also assume Soyland's obligations under the PCA in exchange for Soyland agreeing that IPMI shall be its all requirements power supplier for an initial period of ten years, with an option for an edditional ten year commitment. IPMI will sell capacity and energy to Soyland at market based rates pursuant to the PSA currently being finalized between the parties. Illinova will guaranty all ofIPMI's performance obligations under the OPA, the PCA, and the planned PSA. The transfer of Soyland's 13.21% interest in CPS will have no impact on the management or operation of the plant. Because the OPA will remain in effect, the transfer will be transparent to Illinois Power. Furthermore, the transfer will result 4 in a significantly more viable minority owner.

1 (e) to U-602648 LS-96-011 l Page 4 of10 Additional information concerning the transactions associated with the proposed i transfer is contained in Attachment 3(a). III. Summary of the Impact of the Proposed Transfer on Illinois Power and Clinton Power Station The proposed transfer will have no impact on the management and operation of Illinois Power or the rnanagement and operation of CPS following the transfer. i (1) Illinois Power will remain a wholly owned subsidiary ofIllinova. (2) The officers and directors ofIllinois Power will remain unchanged and there will be no change in the management or technical qualifications of l l Illinois Power's nuclear organization. 1 l (3) Illinois Power will continue to hold an 86.79% ownership interest in CPS and will remain the licensed operator of CPS. (4) Illinois Power will continue to own and operate CPS in accordance with i l the terms and conditions of the CPS Operating License NPF-62. i I (5) Illinois Power will continue to be an " electric utility" within the meaning of ) 10CFR50.2, subject to regulation by the Illinois Commerce Commission (ICC) and the Federal Energy Regulatory Commission (FERC). There will be no change in Illinois Power's source of funds or ability to obtain funds to support the operation, maintenance, and decommissioning of CPS. i l IV. Required Renulatory Approvals The proposed transfer of Soyland's CPS ownership interest, and the related restmeturing of the power supply agreements, shall require the following approvals: l A. The PSA, and those sections of the PCA requiring amendment, shall be submitted to FERC for approval. In addition, a new open-access transmission services agreement between Soyland and Illinois Power shall be filed with FERC for approval. These filings are in the process of being l prepared with an anticipated filing date being not later than November 15, 1996. It is expected that FERC will approve these agreements within mnety days offiling. B. No part of this transaction requires approval from the Securities and l Exchange Commission.

_ _. _ _. _ = _. -. _.. _. _ _ _ -. _ _ _. _ _ _ _ _. _ _. _ t (e) l to U-602648 l LS-96-011 Page 5 of10 C. The Illinois Commerce Commission shall have jurisdiction over the affiliated transaction that will arise from IPMI's assumption of Soyland's obligations under the OPA. This approval will not be sought until such time that the NRC approves the transfer of the CPS operating license to IPMI. It is expected that this transaction will be approved within ninety days from the initial filing. V. General Information Concerning Licensees Upon the completion of the proposed transfer, IP and Illinova will be the only licensees of CPS. General information concerning IP and Illinova is set forth below: (1) Name of Company Illinois Power Company /Illinova Corporation (2) Address of Company l 500 South 27th Street Decatur, Illinois 62525 (3) Description of Business of Company See Section I of this attachment, and related attachments. l (4) NRC License Involved l NRC Licensee NPF-62 authorizing (a) Illinois Power to hold an 86.79% ownership interest in CPS and to operate CPS; and (b) IPMI to hold a 13.21% ownership interest in CPS. l (5) Ornanization and Management of Company Illinois Power is an Illinois corporation. IPMI is a Delaware corporation with offices in Salt Lake City, Utah, and Oak Brook, Illinois. The names, titles, and addresses of the directors and principal officers of each company, all ofwhom are citizens of the United States, are set forth below: i i

_ (e) to U-602648 LS-96-011 Page 6 of10 l Illinois Power i NAME OFFICE NUMBER AND STREET CITY. STATE & ZIP ) L. D. Haab Chairman, President, 89 N. Country Club Road Decatur, IL 62521 l Chief Executive OfEcer ) & Director I i l L. F. Altenbaumer Senior Vice President, 4651 Cresthaven Lane Decatur, IL 62526 j Chief Financial Officer l & Treasurer D. W. Butts Senior Vice President 16 Tall Oaks Lane Decatur,IL 62521 l l J. G. Cook Senior Vice President R. R. I Box 222 Maroa,IL 61756 P.L.Lang Senior Vice President 146 Hightide Drive Decatur,IL 62521 W. Connell Vice President 2899 Forrest Lane Decatur,IL 62521 l R. W. Eimer Vice President 33 Dellwood Ct. Decatur,IL 62521 l R. D. Reynolds .Vic.e President 1893 W. Sunset Ave. Decatur,IL 62522 l i l L. Manning Stetzner Vice President, General 2940 Olympia Drive Decatur, IL 62521 l Counsel & Corporate Secretary t i C. G. Steward Controller R. R.1, Box 295 Sullivan,IL 61951 i l D. L. Mortland Assistant Treasurer R. R. Berry Director 813 Timberlake Drive Edwardsville, IL 62025 l l C. S. McMillan Director 20 E. Cedar,10C Chicago,IL 60611 l D. S. Perkins Director 969 HillRoad Winnetka,IL 60093 R. M. Powers Director 2 Allen Bend Place Decatur,IL 62521 l I W. D. Scott Director 55 Meadowview Drive Northfield,IL 60093 W. M. Vannoy Director 4709 John Scott Drive Lynchburg, VA 24503 i M. von Ferstel Director 1550 N. State Parkway Chicago,IL 60610 J. D. Zeglis Director One Colonial Way Madison,N 07940 i V. K. Zimmerman Director 11 Carriage Place Champaign,IL 61821 l l

i (e) to U-602648 [ LS-96-011 Page 7 of10 JHinova NAME OFFICE NUMBER AND STREET CITY. STATE & ZIP L. D. Haab Chairman, President, 89 N. Country Club Road Decatur,IL 62521 Chief Executive Officer l A Director l L. F. Altenbaumer Chief Financial Officer, 4651 Cresthaven Lane Decatur,IL 62526 ) Treasurer and Controller i L. Manning Stetzner General Counsel & 2940 Olympia Drive Decatur,IL 62521 Corporate Secretary j R. R. Berry Director 813 Timberlake Drive Edwardsvitic,IL 62025 C. S. McMillan Director 20 E. Cedar,10C Chicago,IL 60611 D. S. Perkins Director %9 HillRoad Winnetka,IL 60093 R. M. Powers Director 2 Allen Bend Place Decatur, IL 62521 W. D. Scott Director 55 Meadowview Drive Northfield,IL 60093 o L. Thompson Director 558 Pinella Point Holland, OH 43528 W. M. Vannoy D;.cctor 4709 John Scott Drive Lynchburg, VA 24503 l M. von Ferstel Director 1550 N. State Parkway Chicago,IL 60610 j i J. D. Zeglis Director One Colonial Way Madison, NJ 07940 V. K. Zimmerman Director 11 Carriage Place Champaign,IL 61821 JLLINOVA POliERMARKETING NAME OFFICE NUMBER AND STREET CITY. STATE & ZIP l R. A. Schultz President 2593 Legacy Drive Aurora,IL 60504 l G. P. O'Connor Vice President 1300 E. Gartner Rd. Naperville,IL 60540 M. S. Beer Corporate Secretary 1434 Meadowview Dr. Decatur,IL 62526 L. D. Haab Director 89 N. Country Club Road Decatur,IL 62521 C. S. McMillan Director 20 E. Cedar,10C Chicago,IL 60611 D. S. Perkins Director %9 Hill Road Winnetka,IL 60093

_._ (e) to U-602648 LS-%-011 Page 8 of10 Ill2 NOVA POWER MARKETING (continued) NAM _E OFFICE NUMBER AND STREET CITY. STATE & ZIP W. D. Scott Director 55 Meadowview Drive Northfield,IL 60093 R. L. Thompson Director 558 Pinella Point Holland, OH 43528 W. M. Vannoy Director 4709 John Scott Drive Lynchburg, VA 24503 J. D. Zeglis Director One Colonial Way Madison, NJ 07940 1 i Additional information concerning the organization and management ofIP j and Illinova is contained in Attachment 3(d). (7) Foreign Ownership and Control The shares of common stock ofIllinova are publicly traded and widely held. Illinois Power and IPMI are wholly owned subsidiaries ofIllinova. The directors and officers of both of these companies are U.S. citizens. ( Neither Illinova, Illinois Power, nor IPMI is owned, controlled or 4 dominated by any alien, foreign corporation, or foreign government. VI. Financial Oualifications As specified in its NRC license, IP is licensed pursuant to Section 103 of the Atomic Energy Act of 1954, as amended (AEA), and 10CFR50, to own and operate CPS. " Electric utilities" licensed pursuant to Section 103 of the AEA are exempt from the requirement to demonstrate financial qualifications. Illinois l Power is and will remain an " electric utility" within the meaning of 10CFR50.2 following the transfer and will remain an " entity that generates or distributes i electricity and which recovers the cost of this electricity, either directly or indirectly, through rates established by the entity itself or by a separate regulatory authority." The business ofIllinois Power will remain essentially unchanged after the transfbr, and its rates will continue to be regulated by the ICC and FERC. IPMI will also be an " electric utility company" within the meaning of 10CFR50.2 since it will recover its CPS-related costs under the PSA with Soyland. The wholesale rates set forth in the PSA have been negotiated pursuant to IPMI's authority to engage in wholesale electric sales at market based rates. Under the PSA, IPMI will utilize its CPS capacity to satisfy a portion of Soyland's native load l requirements. Illinova will guaranty IPMI's performance ofits obligations under both the PCA and the OPA. i

_ _ _ _. _. _ _ _ _ _ _ _ _ _ _ (e) to U-602648 LS-96-011 Page 9 of10 The proposed transfer will therefore not adversely affect the ability of any licensee to obtain the funds necessary to cover its share of costs for the safe operation, maintenance, repair, decontamination and decommissioning of CPS. Additional financial information related to Illinois Power and Illinova is contained in Attachments 3(b) and 3(d). l VII. Decommissioninn Funding for CPS As explained above, the collective financial qualifications of the licensees will not l be adversely affected by the proposed transfer; they will be enhanced. Similarly, . the transfer will not affect the ability ofIllinois Power to assure that the funds necessary to cover the costs for decontamination and decommissioning of CPS will l be available upon decommissioning. No changes in the CPS decommissioning funding plan are anticipated due to the transfer. However, to provide additional i assurance of the availability of funds for decommissioning, Illinois Power and l IPMI agree to provide the Director ofReactor Regulation with a copy of any application to any other regulatory authority, at the time it is filed, to transfer (excluding grants of a security interest or liens) from either company to its parent company, or any other affiliated company, facilities for the production, transmission or distribution of electric energy having a depreciated book value exceeding one percent (1%) of either company's consolidated net utility plant, as recorded on such company's books of account. Soyland will assign its Nuclear Decommissioning Non-Qualified Trust to IPMI at the current market value as of August 31,1996. There will be no future contributions to this trust. IPMI will l establish a new qualified decommissioning trust and fund contributions to that trust out of proceeds from the PSA. Illinova will guaranty IPMI's performance ofits decommissioning trust obligations. VIII. Technical Oualifications The proposed transfer will not result in any change in the design or operation of CPS, nor any change in the technical aspects of the CPS license or Technical i Specifications. The personnel at Illinois Power having control over licensed j activities at CPS will not change as a result of the transfer. There will also be no other changes in the management or operation of CPS or Illinois Power as a result of the transfer. l IX. Antitrust Considentions j Illinois Power is licensed, pursuant to Section 103 of the AEA, to own and operate CPS. Upon the completion of the transfer, Illinois Power will remain the principal owner and sole licensed operator of CPS and remain entitled to 86.79% of the power output of CPS As a result of the transfer, Illinova (IPMI) will acquire r l L

Attachm:nt 3(e) to U-602648 LS-96-011 i Page 10 of10 rights to a total generating capacity ofless than 200 MW. Moreover, IPMI will sell the entire output ofits 13.21% share of CPS power back to Soyland for a period of 10 years under the PSA. The submission of antitrust information is not required in connection with licensing actions that do not involve the transfer of generating capacity in excess of 200 MW or the entitlement to the power output from a nuclear generating facility, or do not otherwise involve a "significant change" in licensed activities. [Sec gg, North Atlantic Energy Service Coro.. et. al(Seabrook), Amend. No. 23 to NRC Lic. N. NPF-86 (Aug.16,1993); SECY-91-246 (Aug. 7,1991) " Antitrust Considerations for License Amendments Authorizing New Operating Entities."] i X. Access to Restricted Data The proposed transfer does not contain any Restricted Data or other Classified Defense Information or any change in access to such Restricted Data or Classified Defense Information. Illinois Power's existing restrictions on access to Restricted Data and Classified Defense Information will be unaffected by the proposed transfer. I L}}