ILLINOIS POWER CO, S-3, 1994-08-22

ILLINOIS POWER CO
S-3, 1994-08-22
ELECTRIC & OTHER SERVICES COMBINED

Previous: IDS GROWTH FUND INC, PRE 14A, 1994-08-22

Next: IDS SELECTIVE FUND INC, PRE 14A, 1994-08-22

<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 1994

REGISTRATION NOS. 33-
33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------

ILLINOIS POWER COMPANY
(Exact name of registrant as specified in its charter)
ILLINOIS
(State or other jurisdiction of incorporation or organization)
37-0344645
(I.R.S. Employer Identification No.)
LARRY D. HAAB
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ILLINOIS POWER COMPANY
500 SOUTH 27TH STREET
DECATUR, ILLINOIS 62525
(217) 424-6600

ILLINOIS POWER CAPITAL, L.P.
(Exact name of registrant as specified in Limited Partnership Agreement)
DELAWARE
(State or other jurisdiction of incorporation or organization)
APPLIED FOR
(I.R.S. Employer Identification No.)
C/O LARRY D. HAAB
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ILLINOIS POWER COMPANY
500 SOUTH 27TH STREET
DECATUR, ILLINOIS 62525
(217) 424-6600

(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices and agent for service)

PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:

ROBERT J. REGAN, ESQ.
SCHIFF HARDIN & WAITE
7200 SEARS TOWER
CHICAGO, ILLINOIS 60606
(312) 876-1000

KEVIN STACEY, ESQ.
REID & PRIEST
40 WEST 57TH STREET
NEW YORK, NEW YORK
(212) 603-2144

------------------

Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
------------------

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /

IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX: /X/

------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE PER UNIT OFFERING PRICE REGISTRATION
TO BE REGISTERED REGISTERED(1) (1)(2)(3) (1)(2)(3) FEE(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois Power Capital, L.P. Preferred Securities.....
- ------------------------------------------------------------------------------------------------------------------------
Illinois Power Company Subordinated Debentures(4).....
- ------------------------------------------------------------------------------------------------------------------------
Illinois Power Company Guarantee with respect to
Illinois Power Capital, L.P. Preferred
Securities(4).......................................
- ------------------------------------------------------------------------------------------------------------------------
Total................................................. $100,000,000.00 100% $100,000.00 $34,483
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Pursuant to Rule 457(o) under the Securities Act of 1933, which permits the
registration fee to be calculated on the basis of the maximum offering price
of all the securities listed, the table does not specify by each class
information as to the amount to be registered, proposed maximum offering
price per unit or proposed maximum aggregate offering price.
(2) Estimated solely for the purpose of determining the registration fee.
(3) Exclusive of accrued interest and dividends, if any.
(4) No separate consideration will be received for Illinois Power Company's
Subordinated Debentures or its Guarantee.
------------------

The Registrants hereby amend this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrants shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

EXPLANATORY NOTE

This Registration Statement contains two forms of Prospectus Supplement to
the Prospectus included herein: the first form is to be used in connection with
an offering by Illinois Power Capital, L.P. of fixed rate Cumulative Monthly
Income Preferred Securities, and the second form is to be used in connection
with an offering by Illinois Power Capital, L.P. of adjustable rate Cumulative
Monthly Income Preferred Securities.
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED AUGUST 19, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST , 1994

PREFERRED SECURITIES
ILLINOIS POWER CAPITAL
% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES ("MIPS"*), SERIES A
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT ILLINOIS POWER CAPITAL
HAS FUNDS AS SET FORTH HEREIN BY
ILLINOIS POWER COMPANY
------------------------------

The % Cumulative Monthly Income Preferred Securities, Series A (the
"Series A Preferred Securities"), representing the limited partner interests
offered hereby, are being issued by Illinois Power Capital, L.P., a limited
partnership formed under the laws of the State of Delaware ("Illinois Power
Capital"). All of the general partner interests in Illinois Power Capital are
owned by Illinois Power Company, an Illinois corporation (the "Company").
Illinois Power Capital exists for the sole purpose of issuing its partner
interests and using the proceeds thereof to purchase certain debt securities of
the Company. The proceeds of the Series A Preferred Securities will be used by
Illinois Power Capital to purchase the Company's % Subordinated Deferrable
Interest Debentures, Series A (the "Series A Subordinated Debentures"). The
limited partner interests represented by the Series A Preferred Securities will
have a preference with respect to cash distributions and amounts payable on
liquidation over the general partner interests in Illinois Power Capital.

Holders of the Series A Preferred Securities will be entitled to receive
cumulative preferential cash distributions at an annual rate of % of the
liquidation preference of $25 per Series A Preferred Security, accruing from the
date of original issuance and payable monthly in arrears on the last day of each
calendar month of each year, commencing , 1994 ("dividends"). The
payment of dividends and payments on liquidation of Illinois Power Capital or
the redemption of Series A Preferred Securities, to the extent that Illinois
Power Capital has sufficient cash on hand to permit such payments and funds
legally available therefor, are guaranteed by the Company to the extent set
forth herein and in the accompanying Prospectus (the "Guarantee"). See
"Description of the Guarantee" in the accompanying Prospectus. If the Company
fails to make interest payments on the Series A Subordinated Debentures
purchased by Illinois Power Capital with the proceeds of this offering, Illinois
Power Capital will have insufficient funds to pay dividends on the Series A
Preferred Securities. The Guarantee does not provide for payment by the Company
directly of dividends for which Illinois Power Capital does not have sufficient
funds available. In such event, the remedy of a holder of Series A Preferred
Securities is to enforce Illinois Power Capital's rights under the Series A
Subordinated Debentures purchased by Illinois Power Capital from the Company.

The obligations of the Company under the Guarantee are subordinate and
junior in right of payment to all liabilities of the Company, and the Company's
obligations under the Series A Subordinated Debentures are subordinate and
junior in right of payment to all present and future Senior Indebtedness (as
defined in the accompanying Prospectus) of the Company. At June 30, 1994, Senior
Indebtedness of the Company aggregated approximately $2.2 billion.

The Series A Preferred Securities are redeemable at the option of Illinois
Power Capital, in whole or in part, from time to time, on or after ,
1999, at $25 per Series A Preferred Security plus any accumulated and unpaid
dividends thereon to the date fixed for redemption (the "Redemption Price"), and
will be redeemed at such price from the proceeds of any repayment or redemption
of the Series A Subordinated Debentures. See "Description of Series A Preferred
Securities -- Optional Redemption" and "-- Mandatory Redemption." In addition,
upon the occurrence of certain special events arising from a change in law or a
change in legal interpretation, the Series A Preferred Securities are redeemable
in whole at the Redemption Price at the option of the Company, in its capacity
as the general partner of Illinois Power Capital (the "General Partner"), or the
General Partner may dissolve Illinois Power Capital and cause Series A
Subordinated Debentures to be distributed to the holders of the Series A
Preferred Securities in liquidation of their interests in Illinois Power
Capital. See "Description of Series A Preferred Securities -- Special Event
Redemption or Distribution" and "Description of the Series A Subordinated
Debentures." If the Series A Subordinated Debentures are so distributed, the
Company will use its best efforts to have them listed on the same exchange on
which the Series A Preferred Securities are then listed.

In the event of the dissolution of Illinois Power Capital, the holders of
Series A Preferred Securities will be entitled to a liquidation preference for
each Series A Preferred Security of $25 plus any accumulated and unpaid
dividends thereon to the date of payment, subject to certain limitations,
unless, in connection with such dissolution, Series A Subordinated Debentures
are distributed to the holders of the Series A Preferred Securities. See
"Description of Series A Preferred Securities -- Liquidation Distribution Upon
Dissolution."

SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD
DURING WHICH AND CIRCUMSTANCES UNDER WHICH PAYMENT OF DIVIDENDS ON THE SERIES A
PREFERRED SECURITIES MAY BE DEFERRED.

Application will be made to list the Series A Preferred Securities on the
New York Stock Exchange.
------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO ILLINOIS POWER
OFFERING PRICE COMMISSION(1) CAPITAL(2)(3)
-------------- ------------- --------------------------
<S> <C> <C> <C>
Per Series A Preferred Security.................................. $ (2) $
Total............................................................ $ (2) $
</TABLE>

- ------------------

(1) Illinois Power Capital and the Company have agreed to indemnify the several
Underwriters against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."

(2) As the proceeds of the sale of the Series A Preferred Securities will be
loaned to the Company, the Company has agreed in the Underwriting Agreement
to pay to the Underwriters $ per Series A Preferred Security (or $ in
the aggregate); provided that such payment will be $
per Series A Preferred Security sold to certain institutions. Therefore, to
the extent that Series A Preferred Securities are sold to such institutions,
the actual amount of Underwriters' compensation will be less than the amount
specified in the preceding sentence and the Proceeds to Illinois Power
Capital will be greater than the amount set forth in the table above. See
"Underwriting."

(3) Expenses of the offering which are payable by the Company are estimated to
be $ .
------------------------------

The Series A Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of certificates for the Series A Preferred Securities
will be made only in book-entry form through the facilities of The Depository
Trust Company on or about , 1994.
- ------------------

* An application has been filed by Goldman, Sachs & Co. with the United
States Patent and Trademark Office for the registration of the MIPS
servicemark.
GOLDMAN, SACHS & CO.

The date of this Prospectus Supplement is , 1994.
<PAGE> 4

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

S-2
<PAGE> 5

CERTAIN INVESTMENT CONSIDERATIONS

Prospective purchasers of Series A Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and in
the accompanying Prospectus and should particularly consider the following
matters. Capitalized terms used and not otherwise defined in this Prospectus
Supplement shall have the meanings ascribed thereto in the accompanying
Prospectus.

SUBORDINATION OF GUARANTEE AND SERIES A SUBORDINATED DEBENTURES. The
Company's obligations under the Guarantee are subordinate and junior in right of
payment to all other liabilities of the Company. The obligations of the Company
under the Series A Subordinated Debentures are subordinate and junior in right
of payment to all present and future Senior Indebtedness of the Company. At June
30, 1994, Senior Indebtedness of the Company aggregated approximately $2.2
billion. There are no terms in the Series A Preferred Securities, the Series A
Subordinated Debentures or the Guarantee that limit the Company's ability to
incur additional indebtedness, including indebtedness that ranks senior to the
Series A Junior Subordinated Debentures and the Guarantee. See "Description of
the Guarantee -- Status of the Guarantee" and "Description of the Subordinated
Debentures -- Subordination" in the accompanying Prospectus.

OPTION TO EXTEND INTEREST PAYMENT PERIOD. The Company has the right under
the Indenture to extend the interest payment period from time to time on the
Series A Subordinated Debentures to a period not exceeding 60 consecutive
months, and, as a consequence, monthly dividends on the Series A Preferred
Securities would be deferred (but would continue to accrue with interest
thereon) by Illinois Power Capital during any such extended interest payment
period. In the event that the Company exercises this right, the Company may not
declare or pay dividends on, or redeem, purchase or acquire, any of its capital
stock until the deferred interest on the Series A Subordinated Debentures is
paid in full. Prior to the termination of any such extension period, the Company
may further extend the interest payment period, provided that such extension
period together with all such previous and further extensions thereof may not
exceed 60 consecutive months. Upon the termination of any extension period and
the payment of all amounts then due, the Company may select a new extension
period, subject to the above requirements. The Company has no current intention
of extending the interest payment period on the Series A Subordinated Debentures
since it desires to continue the declaration and payment of dividends on its
capital stock. See "Description of the Series A Preferred Securities --
Dividends" and "Description of the Series A Subordinated Debentures -- Option to
Extend Interest Payment Period."

Should an extended interest payment period occur, Illinois Power Capital
will continue to accrue income for United States federal income tax purposes
which will be allocated, but not distributed, to holders of record of Series A
Preferred Securities. As a result, such a holder will include such interest in
gross income for United States federal income tax purposes in advance of the
receipt of cash, and will not receive the cash from Illinois Power Capital
related to such income if such a holder disposes of his or her Series A
Preferred Securities prior to the record date for payment of dividends. See
"United States Taxation -- Potential Extension of Interest Payment Period."

SPECIAL EVENT REDEMPTION OR DISTRIBUTION. Upon the occurrence of a Special
Event (as defined herein), the General Partner will elect to either (i) redeem
the Series A Preferred Securities in whole or (ii) dissolve Illinois Power
Capital and cause Series A Subordinated Debentures to be distributed to the
holders of the Series A Preferred Securities in liquidation of their interests
in Illinois Power Capital. The Series A Subordinated Debentures will initially
be issued at face value as a Global Security (as defined herein) and will be
limited in aggregate principal amount to approximately $ million, such amount
being the sum of the aggregate liquidation preference of the Series A Preferred
Securities and the General Partnership Payment (as defined herein). In the case
of a Tax Event (as defined herein), the General Partner may also elect to cause
the Series A Preferred Securities to remain outstanding. See "Description of the
Series A Preferred Securities -- Special Event Redemption or Distribution" and
"Description of the Series A Subordinated Debentures -- General."

Under current United States federal income tax law, the distribution of
Series A Subordinated Debentures in connection with the dissolution of Illinois
Power Capital would not be a taxable event to

S-3
<PAGE> 6
holders of the Series A Preferred Securities. Under a change in law, a change in
legal interpretation or the other circumstances giving rise to a Special Event,
however, the dissolution of Illinois Power Capital and the distribution of
Series A Subordinated Debentures in connection with the dissolution of Illinois
Power Capital could be a taxable event to holders of the Series A Preferred
Securities. In the judgment of tax counsel to the Company and Illinois Power
Capital, the series of events which would result in the recognition of taxable
gain by holders of the Series A Preferred Securities, by reason of a dissolution
of Illinois Power Capital in response to a Special Event, is unlikely to occur.
There can be no assurance in this regard, however. See "United States Taxation
- -- Receipt of Series A Subordinated Debentures Upon Dissolution of Illinois
Power Capital."

ILLINOIS POWER COMPANY

The Company was incorporated under the laws of the State of Illinois on May
25, 1923. Effective May 27, 1994, the Company became a subsidiary of Illinova
Corporation, an exempt holding company under the Public Utility Holding Company
Act of 1935, as amended, pursuant to a merger in which each outstanding share of
the Company's Common Stock was converted into one share of common stock of
Illinova Corporation. The Company is engaged in the generation, transmission,
distribution and sale of electric energy and the distribution and sale of
natural gas in the State of Illinois. Its service area is a widely diversified
industrial and agricultural area comprising approximately 15,000 square miles in
northern, central and southern Illinois. Electric service is provided at retail
to 309 incorporated municipalities, adjacent suburban and rural areas and
numerous unincorporated municipalities having an aggregate population of
approximately 1,283,000. Gas service is provided to 257 incorporated
municipalities, adjacent suburban areas and numerous unincorporated
municipalities having an aggregate population of approximately 935,000. The
larger cities served include Decatur, East St. Louis (gas only), Champaign,
Danville, Belleville, Granite City, Bloomington (electric only), Galesburg,
Urbana and Normal (electric only). The executive offices of the Company are
located at 500 South 27th Street, Decatur, Illinois 62525, and the Company's
telephone number is (217) 424-6600.

ILLINOIS POWER CAPITAL

Illinois Power Capital is a limited partnership formed under the Delaware
Revised Uniform Limited Partnership Act, as amended (the "Partnership Act").
Illinois Power Capital exists for the sole purpose of issuing its partner
interests, including the Series A Preferred Securities, and using the proceeds
thereof to purchase certain debt securities of the Company, including the Series
A Subordinated Debentures. The Company is the sole general partner (the "General
Partner") of Illinois Power Capital and will manage all of the business and
affairs of Illinois Power Capital. Holders of Series A Preferred Securities will
be limited partners of Illinois Power Capital. The Company, as the General
Partner of Illinois Power Capital, will make capital contributions to Illinois
Power Capital from time to time to the extent required so that the total
contributions made by the General Partner shall at all times be at least equal
to 3% of the total contributions made by all partners. The rights and
obligations of the General Partner and the limited partners of Illinois Power
Capital will be governed by the Partnership Act and by an Amended and Restated
Agreement of Limited Partnership of Illinois Power Capital (the "Partnership
Agreement") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and the accompanying Prospectus
form a part.

USE OF PROCEEDS

The proceeds to be received by Illinois Power Capital from the sale of the
Series A Preferred Securities will be used to purchase Series A Subordinated
Debentures of the Company and will be applied by the Company to the payment or
provision for payment at maturity, the purchase or the redemption of outstanding
securities of the Company and for general corporate purposes.

S-4
<PAGE> 7

SUMMARY FINANCIAL INFORMATION OF THE COMPANY
(THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)

<TABLE>
<CAPTION>
12 MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------------------- JUNE 30, 1994
1989 1990 1991 1992 1993(A) (UNAUDITED)(A)(B)
---------- ---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues..... $1,393,778 $1,469,480 $1,474,905 $1,479,449 $1,581,190 $ 1,628,094
Net Income............. (288,432) (78,484) 109,244 122,088 (56,038) (42,031)
Preferred Dividend
Requirements......... 37,365 36,839 30,866 28,854 26,123 24,283
Net Income Applicable
to Common Stock...... (325,797) (115,323) 78,378 93,234 (82,161) (66,314)
Earnings Per Share of
Common Stock......... (4.34) (1.53) 1.04 1.23 (1.08) (0.91)
Ratio of Earnings to
Fixed Charges(c)..... (0.52)(d) 0.70(d) 1.85 2.02 0.80(d) 0.93(d)
Ratio of Earnings to
Combined Fixed
Charges and Preferred
Stock Dividend
Requirements(c)...... (0.45)(e) 0.60(e) 1.48 1.61 0.70(e) 0.82(e)
</TABLE>

<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
---------- ----------
<S> <C> <C>
CAPITALIZATION AT JUNE 30, 1994:
Long-Term Debt............................................................... $1,868,191 52.2%
Preferred Stock (not subject to mandatory redemption)........................ 303,705 8.5
Preferred Stock (subject to mandatory redemption)............................ 36,000 1.0
Common Stock Equity.......................................................... 1,368,858 38.3
---------- ----------
Total Capitalization..................................................... $3,576,754 100.0%
========= =========
</TABLE>

- ---------------
(a) Subsequent to the Company's merger with Illinova Corporation, net assets of
Illinova Generating Company (formerly IP Group, Inc.) were transferred in
the form of a dividend from the Company to Illinova Corporation. The income
statement data contained herein has been restated to reflect the financial
results of the Company's current operations.

(b) In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
unaudited twelve-month period ended June 30, 1994, have been made.

(c) Earnings used in the calculation of the ratio of earnings to fixed charges
and the ratio of earnings to combined fixed charges and preferred stock
dividend requirements include the allowance for funds used during
construction and the deferred financing costs associated with the Company's
Clinton Power Station, and are before deduction of income taxes and fixed
charges. Fixed charges include interest on long-term debt, related
amortization of debt discount, premium, and expense, other interest and that
portion of rent expense which is estimated to be representative of the
interest component. Preferred stock dividend requirements have been
increased to an amount representing the pre-tax earnings required to cover
such dividend requirements.

(d) The ratios of earnings to fixed charges for the twelve months ended June 30,
1994 and for the years ended December 31, 1993, 1990 and 1989 of 0.93, 0.80,
0.70 and (0.52), respectively, indicate that earnings were inadequate to
cover fixed charges. The dollar amounts of the coverage deficiency for the
twelve months ended June 30, 1994, and for the years ended 1993, 1990 and
1989 were approximately $13 million, $37 million, $68 million and $375
million, respectively. Excluding the loss on disallowed plant costs of $200
million, net of income taxes, recorded in the

S-5
<PAGE> 8
third quarter of 1993, the ratio of earnings to fixed charges would have
been 2.42 for the twelve months ended June 30, 1994 and 2.25 for the year
ended 1993. Excluding the loss on disallowed plant costs of $137 million,
net of income taxes, recorded in the fourth quarter of 1990, the ratio of
earnings to fixed charges would have been 1.41 for the year ended 1990.
Excluding the loss on disallowed plant costs of $346 million, net of income
taxes, recorded in the first quarter of 1989, the ratio of earnings to fixed
charges would have been 1.31 for the year ended 1989.

(e) The ratios of earnings to combined fixed charges and preferred stock
dividend requirements for the twelve months ended June 30, 1994 and for the
years ended December 31, 1993, 1990 and 1989 of 0.82, 0.70, 0.60 and (0.45),
respectively, indicate that earnings were inadequate to cover combined fixed
charges and preferred stock dividend requirements. The dollar amounts of the
coverage deficiency for the twelve months ended June 30, 1994, and for the
years ended 1993, 1990 and 1989 were approximately $38 million, $63 million,
$105 million and $412 million, respectively. Excluding the loss on
disallowed plant costs of $200 million, net of income taxes, recorded in the
third quarter of 1993, the ratio of earnings to combined fixed charges and
preferred stock dividend requirements would have been 1.98 for the twelve
months ended June 30, 1994 and 1.83 for the year ended 1993. Excluding the
loss on disallowed plant costs of $137 million, net of income taxes,
recorded in the fourth quarter of 1990, the ratio of earnings to combined
fixed charges and preferred stock dividend requirements would have been 1.09
for the year ended 1990. Excluding the loss on disallowed plant costs of
$346 million, net of income taxes, recorded in the first quarter of 1989,
the ratio of earnings to combined fixed charges and preferred stock dividend
requirements would have been 1.06 for the year ended 1989.

S-6
<PAGE> 9

DESCRIPTION OF THE SERIES A PREFERRED SECURITIES

GENERAL

All of the partnership interests in Illinois Power Capital, other than the
Series A Preferred Securities offered hereby, are owned by the General Partner.
The Partnership Agreement authorizes and creates the Series A Preferred
Securities, which represent limited partner interests in Illinois Power Capital
(the "Preferred Securities"). Preferred Securities may be issued from time to
time in one or more series as described in the accompanying Prospectus. The
limited partner interests represented by the Series A Preferred Securities will
have a preference with respect to dividends and amounts payable on liquidation
over the General Partner's interest in Illinois Power Capital. The Partnership
Agreement does not permit the issuance of any Preferred Securities ranking, as
to participation in profits and dividends and in the assets of Illinois Power
Capital, senior or junior to the Series A Preferred Securities or the incurrence
of any indebtedness by Illinois Power Capital. The summary of certain terms and
provisions of the Series A Preferred Securities set forth below does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
the Partnership Agreement and the Partnership Act.

DIVIDENDS

The dividends payable on each Series A Preferred Security will be fixed at
a rate per annum of % of the liquidation preference of $25 per Preferred
Security. Dividends in arrears for more than one month will bear interest
thereon at the rate per annum of % thereof. The term "dividends" as used
herein includes any such interest payable unless otherwise stated. The amount of
dividends payable for any period will be computed on the basis of a 360-day year
of twelve 30-day months.

Dividends on the Series A Preferred Securities will be cumulative, will
accrue from the date of initial issuance and will be payable monthly in arrears,
on the last day of each calendar month of each year, commencing , 1994,
when, as and if available and determined to be so payable by the General
Partner, except as otherwise described below. The Company has the right under
the Indenture to extend the interest payment period from time to time on the
Series A Subordinated Debentures to a period not exceeding 60 consecutive
months, and, as a consequence, monthly dividends on the Series A Preferred
Securities would be deferred (but would continue to accrue with interest) by
Illinois Power Capital during any such extended interest payment period. In the
event that the Company exercises this right, the Company may not declare or pay
dividends on, or redeem, purchase or acquire, any of its capital stock. Prior to
the termination of any such extension period, the Company may further extend the
interest payment period, provided that such extension period together with all
such previous and further extensions thereof may not exceed 60 consecutive
months. Upon the termination of any extension period and the payment of all
amounts then due, the Company may select a new extension period, subject to the
above requirements. See "Description of the Series A Subordinated Debentures --
Interest" and "-- Option to Extend Interest Payment Period."

Dividends on the Series A Preferred Securities must be paid on the dates
payable to the extent that Illinois Power Capital has (i) funds legally
available for the payment of such dividends and (ii) cash on hand sufficient to
permit such payments. It is anticipated that Illinois Power Capital's earnings
available for distribution to the holders of the Series A Preferred Securities
will be limited to payments under the Series A Subordinated Debentures in which
Illinois Power Capital will invest the proceeds from the issuance and sale of
the Series A Preferred Securities and the General Partner's capital
contribution. See "Description of the Series A Subordinated Debentures." The
payment of dividends, out of moneys held by Illinois Power Capital, are
guaranteed by the Company as set forth under "Description of the Guarantee" in
the accompanying Prospectus.

S-7
<PAGE> 10

"Book-Entry-Only Issuance -- The Depository Trust Company" below. In the event
the Series A Preferred Securities shall not continue to remain in
book-entry-only form, the General Partner shall have the right to select
relevant record dates which shall be more than one Business Day prior to the
relevant payment dates. In the event that any date on which dividends are
payable on the Series A Preferred Securities is not a Business Day, then payment
of the dividend payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. A
"Business Day" shall mean any day other than a day on which banking institutions
in The City of New York are authorized or required by law to close.

CERTAIN RESTRICTIONS ON ILLINOIS POWER CAPITAL

If dividends have not been paid in full on the Series A Preferred
Securities, Illinois Power Capital shall not:

(i) pay, or set aside for payment, any dividends on any other series
of Preferred Securities, unless the amount of any dividends declared on any
other series of Preferred Securities is paid on such other series of
Preferred Securities and the Series A Preferred Securities on a pro rata
basis on the date such dividends are paid on such other series of Preferred
Securities, so that

(x) the aggregate amount of dividends paid on the Series A
Preferred Securities bears to the aggregate amount of dividends paid on
such other series of Preferred Securities the same ratio as

(y) the aggregate of all accumulated and unpaid dividends in
respect of the Series A Preferred Securities bears to the aggregate of
all accumulated and unpaid dividends in respect of such other series of
Preferred Securities; or

(ii) redeem, purchase or otherwise acquire any other Preferred
Securities;

until, in each case, such time as all accumulated and unpaid dividends on the
Series A Preferred Securities shall have been paid in full for all dividend
periods terminating on or prior to, in the case of clause (i), such payment and,
in the case of clause (ii), the date of such redemption, purchase or
acquisition.

As of the date of this Prospectus Supplement, there are no series of
Preferred Securities outstanding.

OPTIONAL REDEMPTION

The Series A Preferred Securities are redeemable, at the option of Illinois
Power Capital, in whole or in part, from time to time, on or after ,
1999, upon not less than 30 nor more than 60 days' notice, at the Redemption
Price. In the event that fewer than all the outstanding Series A Preferred
Securities are to be so redeemed, the Series A Preferred Securities to be
redeemed will be selected as described under "Book-Entry-Only Issuance -- The
Depository Trust Company" below. If a partial redemption would result in the
delisting of the Series A Preferred Securities, Illinois Power Capital may only
redeem the Series A Preferred Securities in whole.

SPECIAL EVENT REDEMPTION OR DISTRIBUTION

S-8
<PAGE> 11
General Partner, the General Partner will pursue such measure in lieu of
redemption, or (ii) dissolve Illinois Power Capital and, after satisfaction of
liabilities of creditors as required by the Partnership Act, cause Series A
Subordinated Debentures to be distributed to the holders of the Series A
Preferred Securities in liquidation of their interests in Illinois Power
Capital, within 90 days following the occurrence of such Special Event. In the
case of a Tax Event, the General Partner may also elect to cause the Series A
Preferred Securities to remain outstanding.

"Tax Event" means that the General Partner shall have obtained an opinion
of nationally recognized independent tax counsel experienced in such matters to
the effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, (b) any amendment to or change in an interpretation or application of
such laws or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination on or after
such date) or (c) any interpretation or pronouncement that provides for a
position with respect to such laws or regulations that differs from the
generally accepted position on , 1994, which amendment or change is
effective or such interpretation or pronouncement is announced on or after
, 1994, there is more than an insubstantial risk that (i) Illinois Power
Capital is subject to federal income tax with respect to interest received on
the Series A Subordinated Debentures, (ii) interest payable to Illinois Power
Capital on the Series A Subordinated Debentures will not be deductible for
federal income tax purposes or (iii) Illinois Power Capital is subject to more
than a de minimis amount of other taxes, duties or other governmental charges.

"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that Illinois Power Capital
is or will be considered an "investment company" which is required to be
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), which Change in 1940 Act Law becomes effective on or after , 1994;
provided, that no Investment Company Event shall be deemed to have occurred if
the General Partner obtains a written opinion of nationally recognized
independent counsel experienced in practice under the 1940 Act to the effect
that the General Partner has successfully issued an additional or supplemental
irrevocable and unconditional guarantee (x) of accrued and unpaid dividends
(whether or not determined to be paid out of moneys legally available therefor)
on the Series A Preferred Securities and (y) of the full amount of the
Liquidation Distribution (as hereinafter defined) on the Series A Preferred
Securities upon a liquidation of Illinois Power Capital (regardless of the
amount of assets of Illinois Power Capital otherwise available for distribution
in such liquidation) to avoid such Change in 1940 Act Law so that in the opinion
of such counsel, notwithstanding such Change in 1940 Act Law, Illinois Power
Capital is not required to be registered as an "investment company" within the
meaning of the 1940 Act.

After the date fixed for any distribution of Series A Subordinated
Debentures, upon dissolution of Illinois Power Capital, (i) the Series A
Preferred Securities will no longer be deemed to be outstanding, (ii) The
Depository Trust Company (the "Depository" or "DTC") or its nominee, as the
record holder of the Series A Preferred Securities, will receive a registered
global certificate or certificates representing the Series A Subordinated
Debentures to be delivered upon such distribution and (iii) any certificates
representing Series A Preferred Securities not held by DTC or its nominee will
be deemed to represent Series A Subordinated Debentures having a principal
amount equal to the aggregate liquidation preference of such Series A Preferred
Securities until such certificates are presented to the Company or its agent for
transfer or reissuance.

MANDATORY REDEMPTION

Upon the repayment of the Series A Subordinated Debentures at maturity, the
proceeds from such repayment will be applied to redeem the Series A Preferred
Securities, in whole, upon not less than 30 nor more than 60 days' notice, at
the Redemption Price.

S-9
<PAGE> 12

REDEMPTION PROCEDURES

Illinois Power Capital may not redeem fewer than all the outstanding Series
A Preferred Securities unless all accumulated and unpaid dividends have been
paid on all Series A Preferred Securities for all monthly dividend periods
terminating on or prior to the date of redemption.

If Illinois Power Capital gives a notice of redemption in respect of Series
A Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the redemption date, Illinois Power Capital will irrevocably
deposit with DTC funds sufficient to pay the applicable Redemption Price and
will give DTC irrevocable instructions and authority to pay the Redemption Price
to the holders of the Series A Preferred Securities. See "Book-Entry-Only
Issuance -- The Depository Trust Company." If notice of redemption shall have
been given and funds deposited as required, then upon the date of such deposit,
all rights of holders of such Series A Preferred Securities so called for
redemption will cease, except the right of the holders of such Series A
Preferred Securities to receive the Redemption Price, but without interest on
such Redemption Price. In the event that any date fixed for redemption of Series
A Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the Redemption Price in respect of Series A Preferred Securities
is improperly withheld or refused and not paid either by Illinois Power Capital
or by the Company pursuant to the Guarantee described under "Description of the
Guarantee" in the accompanying Prospectus, dividends on such Series A Preferred
Securities will continue to accrue at the then applicable rate, from the
original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.

Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time and from time to time purchase outstanding Series A Preferred
Securities by tender, in the open market or by private agreement.

LIQUIDATION DISTRIBUTION UPON DISSOLUTION

In the event of any voluntary or involuntary dissolution, winding-up or
termination of Illinois Power Capital, the holders of the Series A Preferred
Securities at the time will be entitled to receive out of the assets of Illinois
Power Capital available for distribution to partners, after satisfaction of
liabilities of creditors as required by the Partnership Act, before any
distribution of assets is made to the General Partner, but together with the
holders of every other series of Preferred Securities outstanding, an amount
equal to, in the case of holders of Series A Preferred Securities, the aggregate
of the liquidation preference of $25 per Series A Preferred Security and all
accumulated and unpaid dividends thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such dissolution,
winding-up or termination, Series A Subordinated Debentures in an aggregate
principal amount equal to the Liquidation Distribution have been distributed on
a pro rata basis to the holders of the Series A Preferred Securities.

If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because Illinois Power Capital has insufficient assets available to
pay in full the aggregate Liquidation Distribution and the aggregate maximum
liquidation distributions on any other series of Preferred Securities, then the
amounts payable directly by Illinois Power Capital on the Series A Preferred
Securities and on such other series of Preferred Securities shall be paid on a
pro rata basis, so that

(i) the aggregate amount paid in respect of the Liquidation
Distribution bears to the aggregate amount paid as liquidation
distributions on the other series of Preferred Securities the same ratio as

(ii) the aggregate Liquidation Distribution bears to the aggregate
maximum liquidation distributions on the other series of Preferred
Securities.

S-10
<PAGE> 13

Pursuant to the Partnership Agreement, Illinois Power Capital shall be
dissolved and its affairs shall be wound up: (i) upon the expiration of the term
of Illinois Power Capital on December 31, 2047, (ii) upon the bankruptcy or
withdrawal of the General Partner, (iii) upon the assignment by the General
Partner of its entire interest in Illinois Power Capital when the assignee is
not admitted to Illinois Power Capital as a general partner of Illinois Power
Capital in accordance with the Partnership Agreement, or the filing of a
certificate of dissolution or its equivalent with respect to the General
Partner, or the revocation of the General Partner's charter and the expiration
of 90 days after the date of notice to the General Partner of revocation without
a reinstatement of its charter, or any other event occurs which causes the
General Partner to cease to be a general partner of Illinois Power Capital under
the Partnership Act, unless the business of Illinois Power Capital is continued
in accordance with the Partnership Act, (iv) in accordance with the provisions
of the Series A Preferred Securities, (v) upon the entry of a decree of a
judicial dissolution or (vi) upon the written consent of all partners of
Illinois Power Capital.

MERGER, CONSOLIDATION OR AMALGAMATION OF ILLINOIS POWER CAPITAL

Illinois Power Capital may not consolidate, amalgamate, merge with or into,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. Illinois Power Capital may, without the consent of the holders
of the Series A Preferred Securities, consolidate, amalgamate, merge with or
into, or be replaced by a limited liability company, a limited partnership or a
trust organized as such under the laws of any state of the United States;
provided, that (i) such successor entity either (x) expressly assumes all of the
obligations of Illinois Power Capital under the Series A Preferred Securities or
(y) substitutes for the Series A Preferred Securities other securities having
substantially the same terms as the Series A Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank, with respect
to participation in the profits and dividends or in the assets of the successor
entity, at least as high as the Series A Preferred Securities rank with respect
to participation in the profits and dividends or in the assets of Illinois Power
Capital, (ii) the Company expressly acknowledges such successor entity as the
holder of the Series A Subordinated Debentures, (iii) the Series A Preferred
Securities or any Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or other organization on which the Series A Preferred Securities are
then listed, (iv) such merger, consolidation, amalgamation or replacement does
not cause the Series A Preferred Securities to be downgraded by any "nationally
recognized statistical rating organization," as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Securities Act, or cause any
Successor Securities to be rated lower than the Series A Preferred Securities
immediately prior to such merger, consolidation, amalgamation or replacement,
(v) such merger, consolidation, amalgamation or replacement does not adversely
affect the powers, preferences and other special rights of the holders of the
Series A Preferred Securities in any material respect, (vi) such successor
entity has a purpose substantially identical to that of Illinois Power Capital
and (vii) prior to such merger, consolidation, amalgamation or replacement, the
Company has received an opinion of nationally recognized independent counsel to
Illinois Power Capital experienced in such matters to the effect that (x) such
successor entity will be treated as a partnership for federal income tax
purposes, (y) following such merger, consolidation, amalgamation or replacement,
the Company and such successor entity will be in compliance with the 1940 Act
without registering thereunder as an investment company and (z) such merger,
consolidation, amalgamation or replacement will not adversely affect the limited
liability of the holders of the Series A Preferred Securities.

VOTING RIGHTS

Except as provided below and under "Description of the Guarantee --
Amendments and Assignment" in the accompanying Prospectus and as otherwise
required by law and the Partnership Agreement, the holders of the Series A
Preferred Securities will have no voting rights.

S-11
<PAGE> 14

If (i) Illinois Power Capital fails to pay dividends in full on the Series
A Preferred Securities for 18 consecutive monthly dividend periods; (ii) an
Event of Default (as defined in the Indenture) occurs and is continuing on the
Series A Subordinated Debentures; or (iii) the Company is in default on any of
its payment or other obligations under the Guarantee (as described under
"Description of the Guarantee -- Certain Covenants of the Company" in the
accompanying Prospectus), then the holders of the Series A Preferred Securities,
together with the holders of any other series of Preferred Securities having the
right to vote for the appointment of a special representative of Illinois Power
Capital and the limited partners (a "Special Representative") in such event,
acting as a single class, will be entitled by the majority vote of such holders
to appoint and authorize a Special Representative to enforce Illinois Power
Capital's creditor rights under the Series A Subordinated Debentures, to enforce
the rights of the holders of the Series A Preferred Securities under the
Guarantee and to enforce the rights of the holders of the Series A Preferred
Securities to receive dividends on the Series A Preferred Securities. The
Special Representative shall not be admitted as a partner in Illinois Power
Capital or otherwise be deemed to be a partner in Illinois Power Capital and
shall have no liability for the debts, obligations or liabilities of Illinois
Power Capital. For purposes of determining whether Illinois Power Capital has
failed to pay dividends in full for 18 consecutive monthly dividend periods,
dividends shall be deemed to remain in arrears, notwithstanding any payments in
respect thereof, until full cumulative dividends have been or contemporaneously
are paid with respect to all monthly dividend periods terminating on or prior to
the date of payment of such full cumulative dividends. Not later than 30 days
after such right to appoint a Special Representative arises, the General Partner
will convene a meeting for the purpose of appointing a Special Representative.
If the General Partner fails to convene such meeting within such 30-day period,
the holders of 10% in liquidation preference of the outstanding Preferred
Securities will be entitled to convene such meeting. The provisions of the
Partnership Agreement relating to the convening and conduct of the meetings of
the partners will apply with respect to any such meeting. Any Special
Representative so appointed shall cease to be a Special Representative of
Illinois Power Capital and the limited partners if Illinois Power Capital (or
the Company pursuant to the Guarantee) shall have paid in full all accrued and
unpaid dividends on the Preferred Securities or such default or breach, as the
case may be, shall have been cured, and the General Partner shall continue the
business of Illinois Power Capital without dissolution. Notwithstanding the
appointment of any such Special Representative, the Company shall continue as
General Partner and shall retain all rights under the Indenture, including the
right to extend the interest payment period from time to time to a period not
exceeding 60 consecutive months as provided under "Description of the Series A
Subordinated Debentures -- Option to Extend Interest Payment Period."

If any proposed amendment to the Partnership Agreement provides for, or the
General Partner otherwise proposes to effect, (i) any action which would
adversely affect the powers, preferences or special rights of the Series A
Preferred Securities, whether by way of amendment to the Partnership Agreement
or otherwise (including, without limitation, the authorization or issuance of
any limited partner interests in Illinois Power Capital ranking, as to
participation in the profits and dividends or in the assets of Illinois Power
Capital, senior to the Series A Preferred Securities), or (ii) the dissolution,
winding-up or termination of Illinois Power Capital, other than (x) in
connection with the distribution of Series A Subordinated Debentures upon the
occurrence of a Special Event or (y) as described under "Merger, Consolidation
or Amalgamation of Illinois Power Capital" above, then the holders of
outstanding Series A Preferred Securities will be entitled to vote on such
amendment or proposal of the General Partner (but not on any other amendment or
proposal) as a class with all other holders of series of Preferred Securities
similarly affected, and such amendment or proposal shall not be effective except
with the approval of the holders of 66 2/3% in liquidation preference of such
outstanding Preferred Securities having a right to vote on the matter; provided,
however, that no such approval shall be required if the dissolution, winding-up
or termination of Illinois Power Capital is proposed or initiated upon the
initiation of proceedings, or after proceedings have been initiated, for the
dissolution, winding-up, liquidation or termination of the Company.

S-12
<PAGE> 15
participation in the profits and dividends or in the assets of Illinois Power
Capital. Holders of Series A Preferred Securities have no preemptive rights.

So long as any Series A Subordinated Debentures are held by Illinois Power
Capital, the General Partner shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or executing
any trust or power conferred on the Trustee with respect to such series, (ii)
waive any past default which is waivable under Section 6.06 of the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Series A Subordinated Debentures shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture, where
such consent shall be required, without, in each case, obtaining the prior
approval of the holders of at least 66 2/3% in liquidation preference of all
series of Preferred Securities affected thereby, acting as a single class;
provided, however, that where a consent under the Indenture would require the
consent of each holder affected thereby, no such consent shall be given by the
General Partner without the prior consent of each holder of all series of
Preferred Securities affected thereby. The General Partner shall not revoke any
action previously authorized or approved by a vote of any series of Preferred
Securities. The General Partner shall notify all holders of the Series A
Preferred Securities of any notice of default received from the Trustee with
respect to the Series A Subordinated Debentures.

Any required approval of holders of Series A Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for such
purpose, at a meeting of all of the partners in Illinois Power Capital or
pursuant to written consent. Illinois Power Capital will cause a notice of any
meeting at which holders of Series A Preferred Securities are entitled to vote,
or of any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Series A Preferred Securities.
Each such notice will include a statement setting forth (i) the date of such
meeting or the date by which such action is to be taken, (ii) a description of
any resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.

No vote or consent of the holders of Series A Preferred Securities will be
required for Illinois Power Capital to redeem and cancel Series A Preferred
Securities in accordance with the Partnership Agreement.

Notwithstanding that holders of Series A Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Series A Preferred Securities and any other series of Preferred Securities that
are entitled to vote or consent with such Series A Preferred Securities as a
single class at such time that are owned by the Company or any entity owned more
than 50% by the Company, either directly or indirectly, shall not be entitled to
vote or consent and shall, for purposes of such vote or consent, be treated as
if they were not outstanding.

Holders of the Series A Preferred Securities will have no rights to remove
or replace the General Partner.

BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY

DTC will act as securities depository for the Series A Preferred
Securities. The Series A Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Series A Preferred Security
certificates will be issued, representing in the aggregate the total number of
Series A Preferred Securities, and will be deposited with DTC.

S-13
<PAGE> 16
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by The New York Stock Exchange,
Inc. (the "New York Stock Exchange"), the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.

Purchases of Series A Preferred Securities within the DTC system must be
made by or through Direct Participants, which will receive a credit for the
Series A Preferred Securities on DTC's records. The ownership interest of each
actual purchaser of each Series A Preferred Security ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Series A Preferred Securities. Transfers of ownership interests in the
Series A Preferred Securities are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in Series A
Preferred Securities, except in the event that use of the book-entry system for
the Series A Preferred Securities is discontinued.

DTC has no knowledge of the actual Beneficial Owners of the Series A
Preferred Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Series A Preferred Securities are credited,
which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.

Redemption notices shall be sent to Cede & Co. If less than all of the
Series A Preferred Securities are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each Direct Participant in such series to
be redeemed.

Although voting with respect to the Series A Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will itself consent or vote with respect to Series A Preferred Securities. Under
its usual procedures, DTC would mail an Omnibus Proxy to Illinois Power Capital
as soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Series A Preferred Securities are credited on the record date (identified in
a listing attached to the Omnibus Proxy).

Dividend payments on the Series A Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility of
such Participant and not of DTC, Illinois Power Capital or the Company, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of dividends to DTC is the responsibility of Illinois Power
Capital, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with
respect to the Series A Preferred Securities at any time by giving reasonable
notice to Illinois Power Capital. Under such

S-14
<PAGE> 17

circumstances, in the event that a successor securities depository is not
obtained, Series A Preferred Security certificates are required to be printed
and delivered. Additionally, Illinois Power Capital (with the consent of the
Company) may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depository). In that event, certificates for the
Series A Preferred Securities will be printed and delivered. In each of the
above circumstances, the General Partner will appoint a paying agent with
respect to the Series A Preferred Securities.

The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Illinois Power Capital believes to be
reliable, but Illinois Power Capital takes no responsibility for the accuracy
thereof.

REGISTRAR AND TRANSFER AGENT

The Company will act as registrar and transfer agent for the Series A
Preferred Securities.

Registration of transfers of Series A Preferred Securities will be effected
without charge by or on behalf of Illinois Power Capital, but upon payment (with
the giving of such indemnity as Illinois Power Capital or the Company may
require) in respect of any tax or other government charges which may be imposed
in relation to it.

Illinois Power Capital will not be required to register or cause to be
registered the transfer of Series A Preferred Securities after such Series A
Preferred Securities have been called for redemption.

MISCELLANEOUS

Application will be made to list the Series A Preferred Securities on the
New York Stock Exchange.

The General Partner is authorized and directed to conduct its affairs and
to operate Illinois Power Capital in such a way that (i) Illinois Power Capital
will not be deemed to be an "investment company" required to be registered under
the 1940 Act, (ii) Illinois Power Capital will be taxed as a partnership for
federal income tax purposes and (iii) the Series A Subordinated Debentures will
be treated as indebtedness of the Company for federal income tax purposes. In
this connection, the General Partner is authorized to take any action, not
inconsistent with applicable law, the certificate of limited partnership or the
Partnership Agreement, that the General Partner determines in its discretion to
be necessary or desirable for such purposes, as long as such action does not
adversely affect the interests of the holders of the Series A Preferred
Securities.

S-15
<PAGE> 18

DESCRIPTION OF THE SERIES A SUBORDINATED DEBENTURES

Set forth below is a description of the specific terms of the Series A
Subordinated Debentures in which Illinois Power Capital will invest with the
proceeds of the issuance and sale of (i) the Series A Preferred Securities and
(ii) the General Partner's capital contribution with respect to the Series A
Preferred Securities (the "General Partnership Payment"). This description
supplements the description of the general terms and provisions of the
Subordinated Debentures set forth in the accompanying Prospectus under the
caption "Description of the Subordinated Debentures." The following description
does not purport to be complete and is qualified in its entirety by reference to
the description in the accompanying Prospectus and the Indenture between the
Company and The First National Bank of Chicago, as Trustee, as supplemented by a
First Supplemental Indenture (the Indenture, as so supplemented, is hereinafter
referred to as the "Indenture").

Under certain circumstances involving the dissolution of Illinois Power
Capital following the occurrence of a Special Event, Series A Subordinated
Debentures may be distributed to the holders of the Series A Preferred
Securities in liquidation of Illinois Power Capital. See "Description of the
Series A Preferred Securities -- Special Event Redemption or Distribution."

GENERAL

The Series A Subordinated Debentures will be issued as a series of
Subordinated Debentures under the Indenture. The Series A Subordinated
Debentures will be limited in aggregate principal amount to approximately
$ million, such amount being the sum of the aggregate liquidation
preference of the Series A Preferred Securities and the General Partnership
Payment.

The entire principal amount of the Series A Subordinated Debentures will
become due and payable, together with any accrued and unpaid interest thereon,
including Additional Interest (as hereinafter defined), if any, on , 2043.

The Series A Subordinated Debentures if distributed to holders of Series A
Preferred Securities upon the dissolution of Illinois Power Capital will
initially be so issued as a Global Security (as defined below). As described
herein, under certain limited circumstances Series A Subordinated Debentures may
be issued in certificated form in exchange for a Global Security. See
"Book-Entry and Settlement" below. In the event that Series A Subordinated
Debentures are issued in certificated form, such Series A Subordinated
Debentures will be in denominations of $25 and integral multiples thereof and
may be transferred or exchanged at the offices described below.

Payments on Series A Subordinated Debentures issued as a Global Security
will be made to DTC, as the depository for the Series A Subordinated Debentures.
In the event Series A Subordinated Debentures are issued in certificated form,
principal and interest will be payable, the transfer of the Series A
Subordinated Debentures will be registrable and the Series A Subordinated
Debentures will be exchangeable for Series A Subordinated Debentures of other
denominations of a like aggregate principal amount at the corporate trust office
of the Trustee in The City of New York; provided, that payment of interest may
be made at the option of the Company by check mailed to the address of the
persons entitled thereto.

If the Series A Subordinated Debentures are distributed to the holders of
Series A Preferred Securities upon the dissolution of Illinois Power Capital,
the Company will use its best efforts to list the Series A Subordinated
Debentures on the New York Stock Exchange or on such other exchange as the
Series A Preferred Securities are then listed and traded on the same part of any
such exchange.

MANDATORY PREPAYMENT

If Illinois Power Capital redeems Series A Preferred Securities in
accordance with the terms thereof, the Series A Subordinated Debentures will
become due and payable in a principal amount equal to the aggregate liquidation
preference of the Series A Preferred Securities so redeemed, together with all
accrued and unpaid interest, including Additional Interest, if any. Any payment
pursuant to this provision

S-16
<PAGE> 19

shall be made prior to 12:00 noon, New York time, on the date of such redemption
or at such other time on such earlier date as the parties thereto shall agree.

OPTIONAL REDEMPTION

If there shall be no Series A Preferred Securities outstanding, the Company
shall have the right to redeem the Series A Subordinated Debentures, in whole or
in part, from time to time, on or after , 1999, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to 100% of
the principal amount to be redeemed plus any accrued and unpaid interest,
including Additional Interest, if any, to the redemption date.

INTEREST

Each Series A Subordinated Debenture will bear interest at the rate of
% per annum from the original date of issuance until the principal of such
Series A Debenture becomes due and payable, and on any overdue principal and (to
the extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest at the same rate per annum, payable monthly
in arrears on the last day of each calendar month of each year (each, an
"Interest Payment Date"), commencing , 1994, to the person in
whose name such Series A Subordinated Debenture is registered, subject to
certain exceptions, at the close of business on the Business Day next preceding
such Interest Payment Date. In the event the Series A Subordinated Debentures
shall not continue to remain in book-entry-only form, the Company shall have the
right to select record dates which shall be more than one Business Day prior to
the Interest Payment Date.

The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and for any period shorter than a full
month on the basis of actual days elapsed in such period. In the event that any
date on which interest is payable on the Series A Subordinated Debentures is not
a Business Day, then payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.

OPTION TO EXTEND INTEREST PAYMENT PERIOD

So long as the Company is not in default in the payment of interest on any
series of Subordinated Debentures issued under the Indenture, the Company shall
have the right at any time during the term of the Series A Subordinated
Debentures to extend the interest payment period from time to time to a period
not exceeding 60 consecutive months (the "Extension Period"), at the end of
which Extension Period the Company shall pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Series A
Subordinated Debentures to the extent permitted by applicable law); provided,
that, during any such Extension Period, the Company shall not declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with respect
to the foregoing (other than payments on the Guarantee); and provided further
that any such extended interest payment period may only be selected with respect
to the Series A Subordinated Debentures if an extended interest payment period
of identical length is simultaneously selected for all Subordinated Debentures
then outstanding under the Indenture. Prior to the termination of any such
Extension Period, the Company may further extend the interest payment period,
provided that such Extension Period together with all such previous and further
extensions thereof may not exceed 60 consecutive months. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
select a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.

S-17
<PAGE> 20
Stock Exchange or other applicable self-regulatory organization or to holders of
the Series A Preferred Securities of the record date or the date such dividend
is payable, but in any event not less than one Business Day prior to such record
date. The Company shall cause Illinois Power Capital to give notice of the
Company's selection of such Extension Period to the holders of the Series A
Preferred Securities. If Illinois Power Capital shall not be the sole holder of
the Series A Subordinated Debentures, the Company shall give the holders of the
Series A Subordinated Debentures notice of its selection of such Extension
Period ten Business Days prior to the earlier of (i) the next succeeding
Interest Payment Date or (ii) the date the Company is required to give notice to
the New York Stock Exchange or other applicable self-regulatory organization, or
to holders of the Series A Subordinated Debentures, of the record or payment
date of such related interest payment, but in any event not less than two
Business Days prior to such record date.

ADDITIONAL INTEREST

So long as any Subordinated Debentures remain outstanding, if at any time
Illinois Power Capital shall be required to pay any interest on dividends in
arrears in respect of the Series A Preferred Securities pursuant to the terms
thereof, then the Company will pay as interest to Illinois Power Capital as the
holder of the Series A Subordinated Debentures ("Additional Interest") an amount
equal to such interest on dividends in arrears. In addition, if Illinois Power
Capital would be required to pay any taxes, duties, assessments or governmental
charges of whatever nature (other than withholding taxes) imposed by the United
States, or any other taxing authority, then, in any such case, the Company also
will pay as Additional Interest such amounts as shall be required so that the
net amounts received and retained by Illinois Power Capital after paying any
such taxes, duties, assessments or governmental charges will be not less than
the amounts Illinois Power Capital would have received had no such taxes,
duties, assessments or governmental charges been imposed.

SET-OFF

Notwithstanding anything to the contrary in the Indenture, the Company
shall have the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Guarantee.

EVENTS OF DEFAULT

In the case any Event of Default (as defined in the Indenture) shall occur
and be continuing, Illinois Power Capital will have the right to declare the
principal of and the interest on the Series A Subordinated Debentures (including
any Additional Interest) and any other amounts payable under the indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Series A Subordinated Debentures. See "Enforcement of Certain
Rights by Special Representative" below for a discussion of certain rights
available to holders of the Series A Preferred Securities upon the occurrence of
an Event of Default.

ENFORCEMENT OF CERTAIN RIGHTS BY SPECIAL REPRESENTATIVE

If (i) Illinois Power Capital fails to pay dividends in full on the Series
A Preferred Securities for 18 consecutive monthly dividend periods; (ii) an
Event of Default occurs and is continuing on the Series A Subordinated
Debentures; or (iii) the Company is in default on any of its payment or other
obligations under the Guarantee, under the terms of the Series A Preferred
Securities, the holders of outstanding Series A Preferred Securities will have
the rights referred to under "Description of the Series A Preferred Securities
- -- Voting Rights," including the right to appoint a Special Representative,
which Special Representative shall be authorized to exercise Illinois Power
Capital's right to accelerate the principal amount of the Series A Subordinated
Debentures and to enforce Illinois Power Capital's other creditor rights under
the Series A Subordinated Debentures. Notwithstanding the appointment of any
such Special Representative, the Company shall continue as General Partner and
shall retain all rights under

S-18
<PAGE> 21
the Indenture, including the right to extend the interest payment period from
time to time to a period not exceeding 60 consecutive months.

BOOK-ENTRY AND SETTLEMENT

If distributed to holders of Series A Preferred Securities in connection
with the dissolution of Illinois Power Capital as a result of the occurrence of
a Special Event, the Series A Subordinated Debentures will be issued in the form
of one or more global certificates (each, a "Global Security") registered in the
name of a nominee of DTC. Except under the limited circumstances described
below, Series A Subordinated Debentures represented by the Global Security will
not be exchangeable for, and will not otherwise be issuable as, Series A
Subordinated Debentures in definitive form. The Global Securities described
above may not be transferred except by DTC to a nominee of DTC or by a nominee
of DTC to DTC or another nominee of DTC or to a successor depository or its
nominee.

The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.

Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Series A
Subordinated Debentures in definitive form and will not be considered the
Holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Series A Subordinated Debentures
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of DTC or its nominee or to a successor
depository or its nominee. Accordingly, each beneficial owner must rely on the
procedures of DTC and, if such person is not a Participant, on the procedures of
the Participant through which such person owns its interest, to exercise any
rights of a Holder under the Indenture.

THE DEPOSITORY. DTC will act as security depository for the Series A
Subordinated Debentures. For a description of DTC and the specific terms of the
depository arrangements, see "Description of the Series A Preferred Securities
- -- Book-Entry-Only Issuance -- The Depository Trust Company." As of the date of
this Prospectus Supplement, the description therein of DTC's book-entry system
and DTC's practices as they relate to purchases, transfers, notices and payments
with respect to the Series A Preferred Securities apply in all material respects
to any debt obligations represented by one or more Global Securities held by
DTC.

Neither the Company, the Trustee, any paying agent nor any other agent of
the Company or the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security for such Series A Subordinated
Debentures or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.

DISCONTINUANCE OF THE DEPOSITORY'S SERVICES. A Global Security shall be
exchangeable for Series A Subordinated Debentures registered in the names of
persons other than DTC or its nominee only if (i) DTC notifies the Company that
it is unwilling or unable to continue as a depository for such Global Security
and no successor depository shall have been appointed, or if any time DTC ceases
to be a clearing agency registered under the Exchange Act at a time when DTC is
required to be so registered to act as such depository, (ii) the Company in its
sole discretion determines that such Global Security shall be so exchangeable or
(iii) there shall have occurred an Event of Default with respect to such Series
A Subordinated Debentures. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for Series A Subordinated
Debentures registered in such names as the Depository shall direct. It is
expected that such instructions will be based upon directions received by the
Depository from its Participants with respect to ownership of beneficial
interests in such Global Security.

S-19
<PAGE> 22

MISCELLANEOUS

For restrictions on certain actions of the General Partner with respect to
Series A Subordinated Debentures held by Illinois Power Capital, see
"Description of the Series A Preferred Securities -- Voting Rights."

EFFECT OF OBLIGATIONS UNDER THE
SERIES A SUBORDINATED DEBENTURES AND THE GUARANTEE

As set forth in the Partnership Agreement, the sole purpose of Illinois
Power Capital is to issue partner interests in Illinois Power Capital,
including, without limitation, the Series A Preferred Securities, and to use the
proceeds thereof to purchase the Series A Subordinated Debentures or other
similar debt securities of the Company.

As long as payments of interest and other payments are made when due on the
Series A Subordinated Debentures, such payments will be sufficient to cover
dividends and payments due on the Series A Preferred Securities primarily
because (i) the aggregate principal amount of Series A Subordinated Debentures
will be equal to the sum of the aggregate liquidation preference of the Series A
Preferred Securities and the General Partnership Payment; (ii) the interest rate
and interest and other payment dates on the Series A Subordinated Debentures
will match the dividend rate and dividend and other payment dates for the Series
A Preferred Securities; (iii) the Partnership Agreement provides that the
Company, as General Partner, shall pay for all, and Illinois Power Capital shall
not be obligated to pay, directly or indirectly, for any, costs and expenses of
Illinois Power Capital; and (iv) the Partnership Agreement further provides that
the General Partner shall not cause or permit Illinois Power Capital to, among
other things, engage in any activity that is not consistent with the purposes of
Illinois Power Capital.

If the Company fails to make interest or other payments on the Series A
Subordinated Debentures when due, the Partnership Agreement provides a mechanism
whereby the holders of the Series A Preferred Securities may enforce the rights
of Illinois Power Capital under the Series A Subordinated Debentures through the
appointment of a Special Representative. Payments of dividends and other
payments due on the Series A Preferred Securities out of moneys held by Illinois
Power Capital are guaranteed by the Company to the extent set forth under
"Description of the Guarantee" in the accompanying Prospectus. The Partnership
Agreement also provides, and the Company, under the Guarantee, acknowledges,
that a Special Representative may be appointed to enforce the Guarantee if the
Company is in default on any of its payment obligations under the Guarantee. In
addition, if the General Partner or the Special Representative fails to enforce
the Guarantee, a holder of a Series A Preferred Security may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against Illinois Power
Capital or any other person or entity.

The Company and Illinois Power Capital believe that the above mechanisms
and obligations, taken together, are substantially equivalent to a full and
unconditional guarantee by the Company of payments due on the Series A Preferred
Securities.

UNITED STATES TAXATION

GENERAL

This section is a summary of certain United States federal income tax
considerations that may be relevant to prospective purchasers of Series A
Preferred Securities and represents the opinion of Schiff Hardin & Waite, tax
counsel to the Company and Illinois Power Capital, insofar as it relates to
matters of law and legal conclusions. This section is based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
existing and proposed regulations thereunder and current

S-20
<PAGE> 23
administrative rulings and court decisions, all of which are subject to change.
Subsequent changes may cause tax consequences to vary substantially from the
consequences described below.

No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Series A
Preferred Securities. Moreover, the discussion focuses on holders of Series A
Preferred Securities who are individual citizens or residents of the United
States and has only limited application to corporations, estates, trusts or
non-resident aliens. Accordingly, each prospective purchaser of Series A
Preferred Securities should consult, and should depend on, his or her own tax
advisor in analyzing the federal, state, local and foreign tax consequences of
the purchase, ownership or disposition of Series A Preferred Securities.

INCOME FROM SERIES A PREFERRED SECURITIES

In the opinion of Schiff Hardin & Waite, Illinois Power Capital will be
treated as a partnership for federal income tax purposes. Accordingly, each
holder of Series A Preferred Securities (a "Preferred Securityholder") will be
required to include in gross income such holder's distributive share of the net
income of Illinois Power Capital. Such income will not exceed dividends received
on such Series A Preferred Securities, except in limited circumstances as
described below under "Potential Extension of Interest Payment Period." No
portion of such income will be eligible for the dividends received deduction.

DISPOSITION OF SERIES A PREFERRED SECURITIES

Gain or loss will be recognized on a sale (including a redemption for cash)
of Series A Preferred Securities in an amount equal to the difference between
the amount realized and the Preferred Securityholder's tax basis for the Series
A Preferred Securities sold. Gain or loss recognized by a Preferred
Securityholder on the sale or exchange of a Series A Preferred Security held for
more than one year will generally be taxable as long-term capital gain or loss.

RECEIPT OF SERIES A SUBORDINATED DEBENTURES UPON DISSOLUTION OF ILLINOIS POWER
CAPITAL

Under certain circumstances, as described under the caption "Description of
the Series A Preferred Securities -- Special Event Redemption or Distribution,"
Series A Subordinated Debentures may be distributed to the holders of the Series
A Preferred Securities in connection with the dissolution of Illinois Power
Capital. Under current United States federal income tax law, such a distribution
would be treated as a non-taxable exchange to each holder of Series A Preferred
Securities and would result in the holder of Series A Preferred Securities
receiving an aggregate tax basis in the Series A Subordinated Debentures equal
to such holder's aggregate tax basis in its Series A Preferred Securities. A
holder's holding period in the Series A Subordinated Debentures so received in
connection with the dissolution of Illinois Power Capital would include the
period for which the Series A Preferred Securities were held by such holder.
Under a change in law, a change in legal interpretation or the other
circumstances giving rise to a Special Event, however, the dissolution of
Illinois Power Capital and the distribution of Series A Subordinated Debentures
in connection with the dissolution of Illinois Power Capital could be a taxable
event to holders of the Series A Preferred Securities. In the judgment of tax
counsel to the Company and Illinois Power Capital, the series of events which
would result in the recognition of taxable gain by holders of the Series A
Preferred Securities, by reason of a dissolution of Illinois Power Capital in
response to a Special Event, is unlikely to occur. There can be no assurance in
this regard, however.

ILLINOIS POWER CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES

The General Partner will furnish each Series A Preferred Securityholder
with a Schedule K-1 each year setting forth such Preferred Securityholder's
allocable share of income for the prior calendar year. The General Partner is
required to furnish such schedules as soon as practicable following the end of
the year, but in any event prior to March 31.

Any person who holds Series A Preferred Securities as a nominee for another
person is required to furnish to Illinois Power Capital (a) the name, address
and taxpayer identification number of the

S-21
<PAGE> 24
beneficial owner and the nominee; (b) information as to whether the beneficial
owner is (i) a person that is not a United States person, (ii) a foreign
government, an international organization or any wholly owned agency or
instrumentality of either of the foregoing, or (iii) a tax-exempt entity; (c)
the amount and description of Series A Preferred Securities held, acquired or
transferred for the beneficial owner; and (d) certain information including the
dates of acquisitions and transfers, means of acquisitions and transfers, and
acquisition cost for purchases, as well as the amount of net proceeds from
sales. Brokers and financial institutions are required to furnish additional
information, including whether they are United States persons and certain
information on Series A Preferred Securities they acquire, hold or transfer for
their own accounts. A penalty of $50 per failure (up to a maximum of $100,000
per calendar year) is imposed by the Code for failure to report such information
to Illinois Power Capital. The nominee is required to supply the beneficial
owners of Series A Preferred Securities with the information furnished to
Illinois Power Capital.

POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD

Under the terms of the Indenture, the Company has the right to extend from
time to time the interest payment period on the Series A Subordinated Debentures
to a period not exceeding 60 consecutive months. In the event that the Company
exercises this right, the Company may not, among other things, declare or pay
dividends on any of its capital stock. The Company has no current intention of
extending the interest payment period on the Series A Subordinated Debentures
since it desires to continue the declaration and payment of dividends on its
capital stock. In the event that the interest payment period is extended,
Illinois Power Capital will continue to accrue income equal to the amount of the
interest payment due at the end of the Extension Period pursuant to the Code and
Treasury Regulation provisions applicable to original issue discount.

Accrued income will be allocated, but not distributed, to holders of record
on the Business Day preceding the last day of each calendar month. As a result,
holders of record during an Extension Period will include interest in gross
income in advance of the receipt of cash, and any such holders who dispose of
Series A Preferred Securities prior to the record date for the payment of
dividends following such Extension Period will include interest in gross income
but will not receive any cash related thereto from Illinois Power Capital. The
tax basis of a Series A Preferred Security will be increased by the amount of
any interest that is included in income without a receipt of cash, and will be
decreased when and if such cash is subsequently received from Illinois Power
Capital. The subsequent receipt of such cash will not be includible in gross
income.

UNITED STATES ALIEN HOLDERS

For purposes of this discussion, a "United States Alien Holder" is any
holder who or which is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership, estate or trust, in either case not subject to United
States federal income tax on a net income basis in respect of a Series A
Preferred Security.

Under current United States federal income tax law, subject to the
discussion below with respect to backup withholding, and assuming satisfaction
by the Company of its withholding tax obligations, if any:

(i) Payments by Illinois Power Capital or any of its paying agents to
any holder of a Series A Preferred Security who or which is a United States
Alien Holder will not be subject to United States federal withholding tax
provided that (a) the beneficial owner of the Series A Preferred Security
does not actually or constructively own 10% or more of the total combined
voting power of all classes of capital stock of the Company, (b) the
beneficial owner of the Series A Preferred Security is not a controlled
foreign corporation that is related to the Company or Illinois Power
Capital through stock ownership, and (c) either: (x) the beneficial owner
of the Series A Preferred Security certifies to Illinois Power Capital or
its agent, under penalties of perjury, that it is a United States Alien
Holder and provides its name and address or (y) the holder of the Series A
Preferred Security is a securities clearing organization, bank or other
financial institution that holds customers' securities in

S-22
<PAGE> 25
the ordinary course of its trade or business (a "financial institution"),
and such holder certifies to Illinois Power Capital or its agent, under
penalties of perjury, that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes Illinois Power Capital or its agent with a
copy thereof; and

(ii) a United States Alien Holder of a Series A Preferred Security
will generally not be subject to United States federal withholding tax on
any gain realized on the sale or exchange of a Series A Preferred Security
unless such holder is present in the United States for 183 days or more in
the taxable year of sale and either has a "tax home" in the United States
or certain other requirements are met.

BACKUP WITHHOLDING AND INFORMATION REPORTING

In general, information reporting requirements will apply to payments of
the proceeds of the sale of Series A Preferred Securities within the United
States to noncorporate United States holders, and "backup withholding" at a rate
of 31% will apply to such payments if the United States holder fails to provide
an accurate taxpayer identification number.

Payments of the proceeds from the sale by a United States Alien Holder of
Series A Preferred Securities made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except that,
if the broker is a United States person, a controlled foreign corporation for
United States tax purposes or a foreign person 50% or more of whose gross income
is effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payments. Payments of
the proceeds from the sale of Series A Preferred Securities to or through the
United States office of a broker is subject to information reporting and backup
withholding unless the holder or beneficial owner certifies as to its non-United
States status or otherwise establishes an exemption from information reporting
and backup withholding.

S-23
<PAGE> 26

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, Illinois
Power Capital has agreed to sell to each of the several Underwriters named
below, and each of the Underwriters, for whom Goldman, Sachs & Co. and
are acting as Representatives, has severally agreed to purchase from
Illinois Power Capital the respective number of Series A Preferred Securities
set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SERIES A
PREFERRED
UNDERWRITER SECURITIES
----------------------------------------------------- -------------
<S> <C>
Goldman, Sachs & Co. ................................
-------------
Total......................................
=============
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Series A Preferred
Securities offered hereby, if any are taken.

The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $ per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per Series A Preferred Security to certain brokers
and dealers. After the Series A Preferred Securities are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the Representatives.

As the proceeds of the sale of the Series A Preferred Securities will be
loaned to the Company, the Company has agreed in the Underwriting Agreement to
pay to the Underwriters $ per Series A Preferred Security ($ per
Series A Preferred Security sold to certain institutions) for the accounts of
the several Underwriters.

The Company and Illinois Power Capital have agreed, during the period
beginning from the date of the Underwriting Agreement and continuing to and
including the earlier of (i) the date, after the closing date, on which the
distribution of the Series A Preferred Securities ceases, as determined by the
Underwriters, or (ii) 30 days after the closing date, not to offer, sell,
contract to sell, or otherwise dispose of any Series A Preferred Securities, any
limited partner interests of Illinois Power Capital, or any preferred stock or
any other securities of Illinois Power Capital or the Company which are
substantially similar to the Series A Preferred Securities, or any securities
convertible into or exchangeable for Series A Preferred Securities, limited
partner interests, preferred stock or such substantially similar securities of
either Illinois Power Capital or the Company without the prior written consent
of the Underwriters.

Prior to this offering, there has been no public market for the Series A
Preferred Securities. In order to meet one of the requirements for listing the
Series A Preferred Securities on the New York Stock Exchange, the Underwriters
will undertake to sell lots of 100 or more Series A Preferred Securities to a
minimum of 400 beneficial holders.

Illinois Power Capital and the Company have agreed to indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act.

Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, the Company and its affiliates in the ordinary
course of business.

S-24
<PAGE> 27

LEGAL OPINIONS

Certain legal matters will be passed upon for the Company and Illinois
Power Capital by Schiff Hardin & Waite, Chicago, Illinois, and for the
Underwriters by Reid & Priest, New York, New York. Certain matters of Delaware
law relating to the validity of the Series A Preferred Securities will be passed
upon by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware
counsel to the Company and Illinois Power Capital. Schiff Hardin & Waite and
Reid & Priest may rely on the opinion of Richards, Layton & Finger, P.A. as to
certain matters of Delaware law, Schiff Hardin & Waite may rely on the opinion
of Reid & Priest as to all matters of New York law, and Reid & Priest may rely
on the opinion of Schiff Hardin & Waite as to all matters of Illinois law.

S-25
<PAGE> 28

- ------------------------------------------------------
- ------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
------------------

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Investment Considerations.... S-3
Illinois Power Company............... S-4
Illinois Power Capital............... S-4
Use of Proceeds...................... S-4
Summary Financial Information of
the Company........................ S-5
Description of the Series A Preferred
Securities......................... S-7
Description of the Series A
Subordinated Debentures............ S-16
Effect of Obligations under the
Series A Subordinated Debentures
and the Guarantee.................. S-20
United States Taxation............... S-20
Underwriting......................... S-24
Legal Opinions....................... S-25
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Illinois Power Company............... 3
Illinois Power Capital............... 3
Use of Proceeds...................... 3
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividend Requirements.............. 4
Description of the Preferred
Securities......................... 5
Description of the Guarantee......... 5
Description of the Subordinated
Debentures......................... 7
Plan of Distribution................. 12
Legal Opinions....................... 13
Experts.............................. 13
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

PREFERRED SECURITIES

ILLINOIS POWER
CAPITAL

GUARANTEED TO THE EXTENT
ILLINOIS POWER CAPITAL
HAS FUNDS AS SET
FORTH HEREIN BY

[IP LOGO]

ILLINOIS POWER COMPANY

% CUMULATIVE
MONTHLY INCOME PREFERRED
SECURITIES, SERIES A

------------------------
PROSPECTUS SUPPLEMENT
------------------------

GOLDMAN, SACHS & CO.
REPRESENTATIVES OF THE UNDERWRITERS

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 29

SUBJECT TO COMPLETION, DATED AUGUST 19, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST , 1994

PREFERRED SECURITIES
ILLINOIS POWER CAPITAL
CUMULATIVE ADJUSTABLE RATE MONTHLY INCOME PREFERRED SECURITIES ("MIPS"*), SERIES
A
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT ILLINOIS POWER CAPITAL
HAS FUNDS AS SET FORTH HEREIN BY
ILLINOIS POWER COMPANY
------------------------------

The Cumulative Adjustable Rate Monthly Income Preferred Securities, Series A
(the "Series A Preferred Securities"), representing the limited partner
interests offered hereby, are being issued by Illinois Power Capital, L.P., a
limited partnership formed under the laws of the State of Delaware ("Illinois
Power Capital"). All of the general partner interests in Illinois Power Capital
are owned by Illinois Power Company, an Illinois corporation (the "Company").
Illinois Power Capital exists for the sole purpose of issuing its partner
interests and using the proceeds thereof to purchase certain debt securities of
the Company. The proceeds of the Series A Preferred Securities will be used by
Illinois Power Capital to purchase the Company's Adjustable Rate Subordinated
Deferrable Interest Debentures, Series A (the "Series A Subordinated
Debentures"). The limited partner interests represented by the Series A
Preferred Securities will have a preference with respect to cash distributions
and amounts payable on liquidation over the general partner interests in
Illinois Power Capital.

Holders of the Series A Preferred Securities will be entitled to receive
cumulative cash distributions accruing from the date of original issuance and
payable monthly in arrears on the last day of each calendar month of each year,
commencing , 1994 ("dividends"). The dividend rate will be adjusted
quarterly. The rate for the initial period from the date of initial issuance to
, 1994 will be % per annum, which is equivalent to $ per Series A
Preferred Security per annum. Thereafter, dividends on the Series A Preferred
Securities will be payable at the "Applicable Rate" from time to time in effect.
The Applicable Rate for any quarter will be equal to % of the highest of the
"Treasury Bill Rate," the "Ten Year Constant Maturity Rate" and the "Thirty Year
Constant Maturity Rate" determined in advance of such quarter. The Applicable
Rate for any quarter will not be less than % per annum nor greater than %
per annum. See "Description of the Series A Preferred Securities -- Dividends."

The payment of dividends and payments on liquidation of Illinois Power
Capital or the redemption of Series A Preferred Securities, to the extent that
Illinois Power Capital has sufficient cash on hand to permit such payments and
funds legally available therefor, are guaranteed by the Company to the extent
set forth herein and in the accompanying Prospectus (the "Guarantee"). See
"Description of the Guarantee" in the accompanying Prospectus. If the Company
fails to make interest payments on the Series A Subordinated Debentures
purchased by Illinois Power Capital with the proceeds of this offering, Illinois
Power Capital will have insufficient funds to pay dividends on the Series A
Preferred Securities. The Guarantee does not provide for payment by the Company
directly of dividends for which Illinois Power Capital does not have sufficient
funds available. In such event, the remedy of a holder of Series A Preferred
Securities is to enforce Illinois Power Capital's rights under the Series A
Subordinated Debentures purchased by Illinois Power Capital from the Company.

Application will be made to list the Series A Preferred Securities on the
New York Stock Exchange.
------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO ILLINOIS POWER
OFFERING PRICE COMMISSION(1) CAPITAL(2)(3)
-------------- ------------- --------------------------
<S> <C> <C> <C>
Per Series A Preferred Security.................................. $ (2) $
Total............................................................ $ (2) $
</TABLE>

- ------------------

(3) Expenses of the offering which are payable by the Company are estimated to
be $ .
------------------------------

The date of this Prospectus Supplement is , 1994.
<PAGE> 30

S-2
<PAGE> 31

CERTAIN INVESTMENT CONSIDERATIONS

Under current United States federal income tax law, the distribution of
Series A Subordinated Debentures in connection with the dissolution of Illinois
Power Capital would not be a taxable event to

S-3
<PAGE> 32
holders of the Series A Preferred Securities. Under a change in law, a change in
legal interpretation or the other circumstances giving rise to a Special Event,
however, the dissolution of Illinois Power Capital and the distribution of
Series A Subordinated Debentures in connection with the dissolution of Illinois
Power Capital could be a taxable event to holders of the Series A Preferred
Securities. In the judgment of tax counsel to the Company and Illinois Power
Capital, the series of events which would result in the recognition of taxable
gain by holders of the Series A Preferred Securities, by reason of a dissolution
of Illinois Power Capital in response to a Special Event, is unlikely to occur.
There can be no assurance in this regard, however. See "United States Taxation
- -- Receipt of Series A Subordinated Debentures Upon Dissolution of Illinois
Power Capital."

ILLINOIS POWER COMPANY

ILLINOIS POWER CAPITAL

USE OF PROCEEDS

S-4
<PAGE> 33

SUMMARY FINANCIAL INFORMATION OF THE COMPANY
(THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)

<TABLE>
<CAPTION>
12 MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------------------- JUNE 30, 1994
1989 1990 1991 1992 1993(A) (UNAUDITED)(A)(B)
---------- ---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues..... $1,393,778 $1,469,480 $1,474,905 $1,479,449 $1,581,190 $ 1,628,094
Net Income............. (288,432) (78,484) 109,244 122,088 (56,038) (42,031)
Preferred Dividend
Requirements......... 37,365 36,839 30,866 28,854 26,123 24,283
Net Income Applicable
to Common Stock...... (325,797) (115,323) 78,378 93,234 (82,161) (66,314)
Earnings Per Share of
Common Stock......... (4.34) (1.53) 1.04 1.23 (1.08) (0.91)
Ratio of Earnings to
Fixed Charges(c)..... (0.52)(d) 0.70(d) 1.85 2.02 0.80(d) 0.91(d)
Ratio of Earnings to
Combined Fixed
Charges and Preferred
Stock Dividend
Requirements(c)...... (0.45)(e) 0.60(e) 1.48 1.61 0.70(e) 0.82(e)
</TABLE>

S-5
<PAGE> 34

third quarter of 1993, the ratio of earnings to fixed charges would have
been 2.42 for the twelve months ended June 30, 1994 and 2.25 for the year
ended 1993. Excluding the loss on disallowed plant costs of $137 million,
net of income taxes, recorded in the fourth quarter of 1990, the ratio of
earnings to fixed charges would have been 1.41 for the year ended 1990.
Excluding the loss on disallowed plant costs of $346 million, net of income
taxes, recorded in the first quarter of 1989, the ratio of earnings to fixed
charges would have been 1.31 for the year ended 1989.

S-6
<PAGE> 35

DESCRIPTION OF THE SERIES A PREFERRED SECURITIES

GENERAL

DIVIDENDS

Dividends on the Series A Preferred Securities will be cumulative, will
accrue from the date of initial issuance thereof and will be payable monthly in
arrears, on the last day of each calendar month of each year, commencing
, 1994, when, as and if available and determined to be so payable by
the Company, as the General Partner, except as otherwise described below.
Dividends in arrears for more than one month will bear interest thereon at the
rate per annum equal to the dividend rate during the period of arrearage. The
term "dividends" as used herein includes any such interest payable unless
otherwise stated. The amount of dividends payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.

The dividend rate will be adjusted quarterly. The rate for the initial
period from the date of initial issuance to , 1994 will be % per
annum, which is equivalent to $ per Series A Preferred Security per annum.
Thereafter, dividends on the Series A Preferred Securities will be payable at
the "Applicable Rate" (as defined below) from time to time in effect.

The Company has the right under the Indenture to extend the interest
payment period from time to time on the Series A Subordinated Debentures to a
period not exceeding 60 consecutive months, and, as a consequence, monthly
dividends on the Series A Preferred Securities would be deferred (but would
continue to accrue with interest) by Illinois Power Capital during any such
extended interest payment period. In the event that the Company exercises this
right, the Company may not declare or pay dividends on, or redeem, purchase or
acquire, any of its capital stock. Prior to the termination of any such
extension period, the Company may further extend the interest payment period,
provided that such extension period together with all such previous and further
extensions thereof may not exceed 60 consecutive months. Upon the termination of
any extension period and the payment of all amounts then due, the Company may
select a new extension period, subject to the above requirements. See
"Description of the Series A Subordinated Debentures -- Interest" and "-- Option
to Extend Interest Payment Period."

S-7
<PAGE> 36

Dividends on the Series A Preferred Securities will be payable to the
holders thereof as they appear on the books and records of Illinois Power
Capital on the relevant record dates, which, as long as the Series A Preferred
Securities remain in book-entry-only form, will be one Business Day (as defined
below) prior to the relevant payment dates. Subject to any applicable laws and
regulations and the provisions of the Partnership Agreement, each such payment
will be made as described under "Book-Entry-Only Issuance -- The Depository
Trust Company" below. In the event the Series A Preferred Securities shall not
continue to remain in book-entry-only form, the General Partner shall have the
right to select relevant record dates which shall be more than one Business Day
prior to the relevant payment dates. In the event that any date on which
dividends are payable on the Series A Preferred Securities is not a Business
Day, then payment of the dividend payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. A "Business Day" shall mean any day other than a day on which
banking institutions in The City of New York are authorized or required by law
to close.

Except as provided below in this paragraph, the "Applicable Rate" for any
quarter (other than the initial period) will be equal to % of the Effective
Rate (as defined below), but not less than % per annum nor more than % per
annum. The "Effective Rate" for any quarter will be equal to the highest of the
Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year
Constant Maturity Rate (each as defined below) for such quarter. The Applicable
Rate will be rounded to the nearest five hundredths of a percent. In the event
that Illinois Power Capital determines in good faith that for any reason:

(i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate or the Thirty Year Constant Maturity Rate cannot be determined for any
quarter, then the Effective Rate for such quarter will be equal to the
higher of whichever two of such rates can be so determined;

(ii) only one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate and the Thirty Year Constant Maturity Rate can be determined
for any quarter, then the Effective Rate for such quarter will be equal to
whichever such rate can be so determined; or

(iii) none of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Thirty Year Constant Maturity Rate can be determined for any
quarter, then the Effective Rate for the preceding quarter will be
continued for such quarter.

Except as described below in this paragraph, the "Treasury Bill Rate" for
each quarter will be the arithmetic average of the two most recent weekly per
annum secondary market discount rates (or the one weekly per annum secondary
market discount rate, if only one such rate is published during the relevant
Calendar Period (as defined below)) for three-month U.S. Treasury bills, as
published weekly by the Federal Reserve Board (as defined below) during the
Calendar Period immediately preceding the last ten calendar days preceding the
quarter for which the dividend rate on the Series A Preferred Securities is
being determined. In the event that the Federal Reserve Board does not publish
such a weekly per annum secondary market discount rate during any such Calendar
Period, then the Treasury Bill Rate for such quarter will be the arithmetic
average of the two most recent weekly per annum secondary market discount rates
(or the one weekly per annum secondary market discount rate, if only one such
rate is published during the relevant Calendar Period) for three-month U.S.
Treasury bills, as published weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or agency selected by Illinois
Power Capital. In the event that a per annum secondary market discount rate for
three-month U.S. Treasury bills is not published by the Federal Reserve Board or
by any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Treasury Bill Rate for such quarter will
be the arithmetic average of the two most recent weekly per annum secondary
market discount rates (or the one weekly per annum secondary market discount
rate, if only one such rate is published during the relevant Calendar Period)
for all of the U.S. Treasury bills then having remaining maturities of not less
than 80 nor more than 100 days, as published during

S-8
<PAGE> 37
such Calendar Period by the Federal Reserve Board, or if the Federal Reserve
Board does not publish such rates, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by Illinois Power Capital. In the event
that Illinois Power Capital determines in good faith that for any reason no such
U.S. Treasury bill rates are published as provided above during such Calendar
Period, then the Treasury Bill Rate for such quarter will be the arithmetic
average of the per annum secondary market discount rates based upon the closing
bids during such Calendar Period for each of the issues of marketable
non-interest-bearing U.S. Treasury securities with a remaining maturity of not
less than 80 nor more than 100 days from the date of each such quotation, as
chosen and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to Illinois Power
Capital by at least three recognized dealers in U.S. Government securities
selected by Illinois Power Capital. In the event that Illinois Power Capital
determines in good faith that for any reason Illinois Power Capital cannot
determine the Treasury Bill Rate for any quarter as provided above in this
paragraph, the Treasury Bill Rate for such quarter will be the arithmetic
average of the per annum secondary market discount rate based upon the closing
bids during such Calendar Period for each of the issues of marketable
interest-bearing U.S. Treasury securities with a remaining maturity of not less
than 80 nor more than 100 days, as chosen and quoted daily for each business day
in New York City (or less frequently if daily quotations are not generally
available) to Illinois Power Capital by at least three recognized dealers in
U.S. Government securities selected by Illinois Power Capital.

Except as described below in this paragraph, the "Ten Year Constant
Maturity Rate" for each quarter will be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (as defined below) (or the one
weekly per annum Ten Year Average Yield, if only one such yield is published
during the relevant Calendar Period), as published weekly by the Federal Reserve
Board during the Calendar Period immediately preceding the last ten calendar
days preceding the quarter for which the dividend rate on the Series A Preferred
Securities is being determined. In the event that the Federal Reserve Board does
not publish such a weekly per annum Ten Year Average Yield during such Calendar
Period, then the Ten Year Constant Maturity Rate for such quarter will be the
arithmetic average of the two most recent weekly per annum Ten Year Average
Yields (or the one weekly per annum Ten Year Average Yield, if only one such
yield is published during the relevant Calendar Period), as published weekly
during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by Illinois Power Capital. In the event
that a per annum Ten Year Average Yield is not published by the Federal Reserve
Board or by the Federal Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Ten Year Constant Maturity Rate for
such quarter will be the arithmetic average of the two most recent weekly per
annum average yields to maturity (or the one weekly per annum average yield to
maturity, if only one such yield is published during the relevant Calendar
Period) for all of the actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities (as defined below)) then having
remaining maturities of not less than eight nor more than twelve years, as
published during such Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board does not publish such yields, by any Federal Reserve Bank
or by any U.S. Government department or agency selected by Illinois Power
Capital. In the event that Illinois Power Capital determines in good faith that
for any reason Illinois Power Capital cannot determine the Ten Year Constant
Maturity Rate for any quarter as provided above in this paragraph, then the Ten
Year Constant Maturity Rate for such quarter will be the arithmetic average of
the per annum average yields to maturity based upon the closing bids during such
Calendar Period for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) with a
final maturity date not less than eight or more than twelve years from the date
of each such quotation, as chosen and quoted daily for each business day in New
York City (or less frequently if daily quotations are not generally available)
to Illinois Power Capital by at least three recognized dealers in U.S.
Government securities selected by Illinois Power Capital.

S-9
<PAGE> 38

during the Calendar Period immediately preceding the last ten calendar days
preceding the quarter for which the dividend rate on the Series A Preferred
Securities is being determined. In the event that the Federal Reserve Board does
not publish such a weekly per annum Thirty Year Average Yield during such
Calendar Period, then the Thirty Year Constant Maturity Rate for such quarter
will be the arithmetic average of the two most recent weekly per annum Thirty
Year Average Yields (or the one weekly per annum Thirty Year Average Yield, if
only one such yield is published during the relevant Calendar Period), as
published weekly during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by Illinois Power Capital. In
the event that a per annum Thirty Year Average Yield is not published by the
Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Thirty Year Constant
Maturity Rate for such quarter will be the arithmetic average of the two most
recent weekly per annum average yields to maturity (or the one weekly per annum
average yield to maturity, if only one such yield is published during the
relevant Calendar Period) for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) then
having remaining maturities of not less than twenty-eight nor more than
thirty-two years, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board does not publish such yields, by
any Federal Reserve Bank or by any U.S. Government department or agency selected
by Illinois Power Capital. In the event that Illinois Power Capital determines
in good faith that for any reason Illinois Power Capital cannot determine the
Thirty Year Constant Maturity Rate for any quarter as provided above in this
paragraph, then the Thirty Year Constant Maturity Rate for such quarter will be
the arithmetic average of the per annum average yields to maturity based upon
the closing bids during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than twenty-eight nor
more than thirty-two years from the date of each such quotation, as chosen and
quoted daily for each business day in New York City (or less frequently if daily
quotations are not generally available) to Illinois Power Capital by at least
three recognized dealers in U.S. Government securities selected by Illinois
Power Capital.

The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty
Year Constant Maturity Rate will each be rounded to the nearest one hundredth of
a percent.

The Applicable Rate with respect to each quarter (other than the initial
period) will be calculated as promptly as practicable by Illinois Power Capital
according to the appropriate method described above. Illinois Power Capital will
cause each Applicable Rate to be published in a newspaper of general circulation
in New York City before the commencement of the quarter to which it applies and
will cause notice of such Applicable Rate to be given to The Depository Trust
Company (the "Depository" or "DTC"), New York, New York, the securities
depository for the Series A Preferred Securities. See "Book-Entry-Only Issuance
- -- The Depository Trust Company" below.

As used above, the term "Calendar Period" means a period of fourteen
calendar days; the term "Federal Reserve Board" means the Board of Governors of
the Federal Reserve System; the term "Special Securities" means securities which
can, at the option of the holder, be surrendered at face value in payment of any
federal estate tax or which provide tax benefits to the holder and are priced to
reflect such tax benefits or which were originally issued at a deep or
substantial discount; the term "Ten Year Average Yield" means the average yield
to maturity for actively traded marketable U.S. Treasury fixed interest rate
securities adjusted to constant maturities of ten years; and the term "Thirty
Year Average Yield" means the average yield to maturity for actively traded
marketable U.S. Treasury fixed interest rate securities adjusted to constant
maturities of thirty years.

CERTAIN RESTRICTIONS ON ILLINOIS POWER CAPITAL

If dividends have not been paid in full on the Series A Preferred
Securities, Illinois Power Capital shall not:

(i) pay, or set aside for payment, any dividends on any other series
of Preferred Securities, unless the amount of any dividends declared on any
other series of Preferred Securities is paid on

S-10
<PAGE> 39

such other series of Preferred Securities and the Series A Preferred
Securities on a pro rata basis on the date such dividends are paid on such
other series of Preferred Securities, so that

(x) the aggregate amount of dividends paid on the Series A
Preferred Securities bears to the aggregate amount of dividends paid on
such other series of Preferred Securities the same ratio as

(ii) redeem, purchase or otherwise acquire any other Preferred
Securities;

As of the date of this Prospectus Supplement, there are no series of
Preferred Securities outstanding.

OPTIONAL REDEMPTION

SPECIAL EVENT REDEMPTION OR DISTRIBUTION

If a Tax Event or an Investment Company Event (each, as defined below, and,
each, a "Special Event") shall occur and be continuing, the General Partner
shall elect to either (i) redeem the Series A Preferred Securities in whole (and
not in part), upon not less than 30 or more than 60 days' notice at the
Redemption Price within 90 days following the occurrence of such Special Event;
provided, that, if at the time there is available to the General Partner the
opportunity to eliminate, within such 90-day period, the Special Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure, which has no adverse effect on
Illinois Power Capital or the General Partner, the General Partner will pursue
such measure in lieu of redemption, or (ii) dissolve Illinois Power Capital and,
after satisfaction of liabilities of creditors as required by the Partnership
Act, cause Series A Subordinated Debentures to be distributed to the holders of
the Series A Preferred Securities in liquidation of their interests in Illinois
Power Capital, within 90 days following the occurrence of such Special Event. In
the case of a Tax Event, the General Partner may also elect to cause the Series
A Preferred Securities to remain outstanding.

S-11
<PAGE> 40
respect to interest received on the Series A Subordinated Debentures, (ii)
interest payable to Illinois Power Capital on the Series A Subordinated
Debentures will not be deductible for federal income tax purposes or (iii)
Illinois Power Capital is subject to more than a de minimis amount of other
taxes, duties or other governmental charges.

MANDATORY REDEMPTION

REDEMPTION PROCEDURES

S-12
<PAGE> 41

payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of Series A Preferred Securities is improperly withheld or refused and
not paid either by Illinois Power Capital or by the Company pursuant to the
Guarantee described under "Description of the Guarantee" in the accompanying
Prospectus, dividends on such Series A Preferred Securities will continue to
accrue at the then applicable rate, from the original redemption date to the
date of payment, in which case the actual payment date will be considered the
date fixed for redemption for purposes of calculating the Redemption Price.

LIQUIDATION DISTRIBUTION UPON DISSOLUTION

(i) the aggregate amount paid in respect of the Liquidation
Distribution bears to the aggregate amount paid as liquidation
distributions on the other series of Preferred Securities the same ratio as

(ii) the aggregate Liquidation Distribution bears to the aggregate
maximum liquidation distributions on the other series of Preferred
Securities.

MERGER, CONSOLIDATION OR AMALGAMATION OF ILLINOIS POWER CAPITAL

S-13
<PAGE> 42

body, except as described below. Illinois Power Capital may, without the consent
of the holders of the Series A Preferred Securities, consolidate, amalgamate,
merge with or into, or be replaced by a limited partnership or a trust organized
as such under the laws of any state of the United States; provided, that (i)
such successor entity either (x) expressly assumes all of the obligations of
Illinois Power Capital under the Series A Preferred Securities or (y)
substitutes for the Series A Preferred Securities other securities having
substantially the same terms as the Series A Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank, with respect
to participation in the profits and dividends or in the assets of the successor
entity, at least as high as the Series A Preferred Securities rank with respect
to participation in the profits and dividends or in the assets of Illinois Power
Capital, (ii) the Company expressly acknowledges such successor entity as the
holder of the Series A Subordinated Debentures, (iii) the Series A Preferred
Securities or any Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or other organization on which the Series A Preferred Securities are
then listed, (iv) such merger, consolidation, amalgamation or replacement does
not cause the Series A Preferred Securities to be downgraded by any "nationally
recognized statistical rating organization," as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Securities Act, or cause any
Successor Securities to be rated lower than the Series A Preferred Securities
immediately prior to such merger, consolidation, amalgamation or replacement,
(v) such merger, consolidation, amalgamation or replacement does not adversely
affect the powers, preferences and other special rights of the holders of the
Series A Preferred Securities in any material respect, (vi) such successor
entity has a purpose substantially identical to that of Illinois Power Capital
and (vii) prior to such merger, consolidation, amalgamation or replacement, the
Company has received an opinion of nationally recognized independent counsel to
Illinois Power Capital experienced in such matters to the effect that (x) such
successor entity will be treated as a partnership for federal income tax
purposes, (y) following such merger, consolidation, amalgamation or replacement,
the Company and such successor entity will be in compliance with the 1940 Act
without registering thereunder as an investment company and (z) such merger,
consolidation, amalgamation or replacement will not adversely affect the limited
liability of the holders of the Series A Preferred Securities.

VOTING RIGHTS

S-14
<PAGE> 43
cumulative dividends. Not later than 30 days after such right to appoint a
Special Representative arises, the General Partner will convene a meeting for
the purpose of appointing a Special Representative. If the General Partner fails
to convene such meeting within such 30-day period, the holders of 10% in
liquidation preference of the outstanding Preferred Securities will be entitled
to convene such meeting. The provisions of the Partnership Agreement relating to
the convening and conduct of the meetings of the partners will apply with
respect to any such meeting. Any Special Representative so appointed shall cease
to be a Special Representative of Illinois Power Capital and the limited
partners if Illinois Power Capital (or the Company pursuant to the Guarantee)
shall have paid in full all accrued and unpaid dividends on the Preferred
Securities or such default or breach, as the case may be, shall have been cured,
and the General Partner shall continue the business of Illinois Power Capital
without dissolution. Notwithstanding the appointment of any such Special
Representative, the Company shall continue as General Partner and shall retain
all rights under the Indenture, including the right to extend the interest
payment period from time to time to a period not exceeding 60 consecutive months
as provided under "Description of the Series A Subordinated Debentures -- Option
to Extend Interest Payment Period."

The rights attached to the Series A Preferred Securities will be deemed not
to be adversely affected by the creation or issue of, and no vote will be
required for the creation of, any further limited partner interests of Illinois
Power Capital ranking pari passu with the Series A Preferred Securities with
regard to participation in the profits and dividends or in the assets of
Illinois Power Capital. Holders of Series A Preferred Securities have no
preemptive rights.

S-15
<PAGE> 44

Holders of the Series A Preferred Securities will have no rights to remove
or replace the General Partner.

BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY

DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by The New York Stock Exchange, Inc. (the "New York
Stock Exchange"), the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.

S-16
<PAGE> 45
by entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Series A Preferred Securities, except in the event that
use of the book-entry system for the Series A Preferred Securities is
discontinued.

DTC may discontinue providing its services as securities depository with
respect to the Series A Preferred Securities at any time by giving reasonable
notice to Illinois Power Capital. Under such circumstances, in the event that a
successor securities depository is not obtained, Series A Preferred Security
certificates are required to be printed and delivered. Additionally, Illinois
Power Capital (with the consent of the Company) may decide to discontinue use of
the system of book-entry transfers through DTC (or a successor depository). In
that event, certificates for the Series A Preferred Securities will be printed
and delivered. In each of the above circumstances, the General Partner will
appoint a paying agent with respect to the Series A Preferred Securities.

REGISTRAR AND TRANSFER AGENT

The Company will act as registrar and transfer agent for the Series A
Preferred Securities.

S-17
<PAGE> 46

MISCELLANEOUS

Application will be made to list the Series A Preferred Securities on the
New York Stock Exchange.

The General Partner is authorized and directed to conduct its affairs and
to operate Illinois Power Capital in such a way that (i) Illinois Power Capital
will not be deemed to be an "investment company" required to be registered under
the 1940 Act (ii) Illinois Power Capital will be taxed as a partnership for
federal income tax purposes and (iii) the Series A Subordinated Debentures will
be treated as indebtedness of the Company for federal income tax purposes. In
this connection, the General Partner is authorized to take any action, not
inconsistent with applicable law, the certificate of limited partnership or the
Partnership Agreement, that the General Partner determines in its discretion to
be necessary or desirable for such purposes, as long as such action does not
adversely affect the interests of the holders of the Series A Preferred
Securities.

S-18
<PAGE> 47

DESCRIPTION OF THE SERIES A SUBORDINATED DEBENTURES

GENERAL

MANDATORY PREPAYMENT

S-19
<PAGE> 48

shall be made prior to 12:00 noon, New York time, on the date of such redemption
or at such other time on such earlier date as the parties thereto shall agree.

OPTIONAL REDEMPTION

INTEREST

Each Series A Subordinated Debenture shall bear interest at an interest
rate which will be adjusted quarterly. The rate for the initial period from the
date of initial issuance to , 1994 will be % per annum. Thereafter,
interest on the Series A Subordinated Debentures will be payable at the
"Applicable Rate" in effect from time to time. The Applicable Rate for any
quarter will be equal to % of the highest of the "Treasury Bill Rate," the
"Ten Year Constant Maturity Rate" and the "Thirty Year Constant Maturity Rate"
determined in advance of such quarter. The Applicable Rate for any quarter will
not be less % per annum nor greater than % per annum. The "Treasury Bill
Rate," the "Ten Year Constant Maturity Rate" and the "Thirty Year Constant
Maturity Rate" with respect to any quarter shall be determined by Illinois Power
Capital in the same manner as, and consistent with its determinations with
respect to, quarters for the purposes of dividends payable on the Series A
Preferred Securities. See "Description of the Series A Preferred Securities --
Dividends."

Such interest is payable monthly in arrears on the last day of each
calendar month of each year (each, an "Interest Payment Date"), commencing
, 1994, to the person in whose name such Series A Subordinated
Debenture is registered, subject to certain exceptions, at the close of business
on the Business Day next preceding such Interest Payment Date. In the event the
Series A Subordinated Debentures shall not continue to remain in book-entry-only
form, the Company shall have the right to select record dates which shall be
more than one Business Day prior to the Interest Payment Date.

The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and for any period shorter than a full
month, on the basis of actual days elapsed in such period. In the event that any
date on which interest is payable on the Series A Subordinated Debentures is not
a Business Day, then payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.

OPTION TO EXTEND INTEREST PAYMENT PERIOD

S-20
<PAGE> 49

Extension Period, the Company may further extend the interest payment period,
provided that such Extension Period together with all such previous and further
extensions thereof may not exceed 60 consecutive months. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
select a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.

If Illinois Power Capital shall be the sole holder of the Series A
Subordinated Debentures, the Company shall give Illinois Power Capital notice of
its selection of such Extension Period one Business Day prior to the earlier of
(i) the next succeeding date on which the dividends on the Series A Preferred
Securities are payable or (ii) the date Illinois Power Capital is required to
give notice to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Series A Preferred Securities of the record
date or the date such dividend is payable, but in any event not less than one
Business Day prior to such record date. The Company shall cause Illinois Power
Capital to give notice of the Company's selection of such Extension Period to
the holders of the Series A Preferred Securities. If Illinois Power Capital
shall not be the sole holder of the Series A Subordinated Debentures, the
Company shall give the holders of the Series A Subordinated Debentures notice of
its selection of such Extension Period ten Business Days prior to the earlier of
(i) the next succeeding Interest Payment Date or (ii) the date the Company is
required to give notice to the New York Stock Exchange or other applicable self-
regulatory organization, or to holders of the Series A Subordinated Debentures,
of the record or payment date of such related interest payment, but in any event
not less than two Business Days prior to such record date.

ADDITIONAL INTEREST

SET-OFF

EVENTS OF DEFAULT

S-21
<PAGE> 50

ENFORCEMENT OF CERTAIN RIGHTS BY SPECIAL REPRESENTATIVE

BOOK-ENTRY AND SETTLEMENT

S-22
<PAGE> 51
Security and no successor depository shall have been appointed, or if any time
DTC ceases to be a clearing agency registered under the Exchange Act at a time
when DTC is required to be so registered to act as such depository, (ii) the
Company in its sole discretion determines that such Global Security shall be so
exchangeable or (iii) there shall have occurred an Event of Default with respect
to such Series A Subordinated Debentures. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for Series
A Subordinated Debentures registered in such names as the Depository shall
direct. It is expected that such instructions will be based upon directions
received by the Depository from its Participants with respect to ownership of
beneficial interests in such Global Security.

MISCELLANEOUS

EFFECT OF OBLIGATIONS UNDER THE
SERIES A SUBORDINATED DEBENTURES AND THE GUARANTEE

S-23
<PAGE> 52

UNITED STATES TAXATION

GENERAL

INCOME FROM SERIES A PREFERRED SECURITIES

DISPOSITION OF SERIES A PREFERRED SECURITIES

RECEIPT OF SERIES A SUBORDINATED DEBENTURES UPON DISSOLUTION OF ILLINOIS POWER
CAPITAL

S-24
<PAGE> 53

ILLINOIS POWER CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES

Any person who holds Series A Preferred Securities as a nominee for another
person is required to furnish to Illinois Power Capital (a) the name, address
and taxpayer identification number of the beneficial owner and the nominee; (b)
information as to whether the beneficial owner is (i) a person that is not a
United States person, (ii) a foreign government, an international organization
or any wholly owned agency or instrumentality of either of the foregoing, or
(iii) a tax-exempt entity; (c) the amount and description of Series A Preferred
Securities held, acquired or transferred for the beneficial owner; and (d)
certain information including the dates of acquisitions and transfers, means of
acquisitions and transfers, and acquisition cost for purchases, as well as the
amount of net proceeds from sales. Brokers and financial institutions are
required to furnish additional information, including whether they are United
States persons and certain information on Series A Preferred Securities they
acquire, hold or transfer for their own accounts. A penalty of $50 per failure
(up to a maximum of $100,000 per calendar year) is imposed by the Code for
failure to report such information to Illinois Power Capital. The nominee is
required to supply the beneficial owners of Series A Preferred Securities with
the information furnished to Illinois Power Capital.

POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD

Under the terms of the Indenture, the Company has the right to extend from
time to time the interest payment period on the Series A Subordinated Debentures
to a period not exceeding 60 consecutive months. In the event that the Company
exercises this right, the Company may not, among other things, declare dividends
on any of its capital stock. The Company has no current intention of extending
the interest payment period on the Series A Subordinated Debentures since it
desires to continue the declaration and payment of dividends on its capital
stock. In the event that the interest payment period is extended, Illinois Power
Capital will continue to accrue income equal to the amount of the interest
payment due at the end of the Extension Period pursuant to the Code and Treasury
Regulation provisions applicable to original issue discount.

UNITED STATES ALIEN HOLDERS

(i) Payments by Illinois Power Capital or any of its paying agents to
any holder of a Series A Preferred Security who or which is a United States
Alien Holder will not be subject to United States

S-25
<PAGE> 54
federal withholding tax provided that (a) the beneficial owner of the
Series A Preferred Security does not actually or constructively own 10% or
more of the total combined voting power of all classes of capital stock of
the Company,(b) the beneficial owner of the Series A Preferred Security is
not a controlled foreign corporation that is related to the Company or
Illinois Power Capital through stock ownership, and (c) either: (x) the
beneficial owner of the Series A Preferred Security certifies to Illinois
Power Capital or its agent, under penalties of perjury, that it is a United
States Alien Holder and provides its name and address or (y) the holder of
the Series A Preferred Security is a securities clearing organization, bank
or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial institution"), and
such holder certifies to Illinois Power Capital or its agent, under
penalties of perjury, that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes Illinois Power Capital or its agent with a
copy thereof; and

BACKUP WITHHOLDING AND INFORMATION REPORTING

S-26
<PAGE> 55

UNDERWRITING

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Series A Preferred
Securities offered hereby, if any are taken.

As the proceeds of the sale of the Series A Preferred Securities will be
loaned to the Company, the Company has agreed in the Underwriting Agreement to
pay to the Underwriters $ per Series A Preferred Security ($ per Series
A Preferred Security sold to certain institutions) for the accounts of the
several Underwriters.

Illinois Power Capital and the Company have agreed to indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act.

Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, the Company and its affiliates in the ordinary
course of business.

S-27
<PAGE> 56

LEGAL OPINIONS

Certain legal matters will be passed upon for the Company and Illinois
Power Capital by Schiff Hardin & Waite, Chicago, Illinois, and for the
Underwriters by Reid & Priest, New York, New York. Certain matters of Delaware
law relating to the validity of the Series A Preferred Securities will be passed
upon by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware
counsel to the Company and Illinois Power Capital. Schiff Hardin & Waite and
Reid & Priest may rely on the opinion of Richards, Layton & Finger, P.A. as to
certain matters of Delaware law. Schiff Hardin & Waite may rely on the opinion
of Reid & Priest as to all matters of New York law, and Reid & Priest may rely
on the opinion of Schiff Hardin & Waite as to all matters of Illinois law.

S-28
<PAGE> 57

- ------------------------------------------------------
- ------------------------------------------------------

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Investment Considerations.... S-3
Illinois Power Company............... S-4
Illinois Power Capital............... S-4
Use of Proceeds...................... S-4
Summary Financial Information of
the Company........................ S-5
Description of the Series A Preferred
Securities......................... S-7
Description of the Series A
Subordinated Debentures............ S-19
Effect of Obligations under the
Series A Subordinated Debentures
and the Guarantee.................. S-23
United States Taxation............... S-24
Underwriting......................... S-27
Legal Opinions....................... S-28
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Illinois Power Company............... 3
Illinois Power Capital............... 3
Use of Proceeds...................... 3
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividend Requirements.............. 4
Description of the Preferred
Securities......................... 5
Description of the Guarantee......... 5
Description of the Subordinated
Debentures......................... 7
Plan of Distribution................. 12
Legal Opinions....................... 13
Experts.............................. 13
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

PREFERRED SECURITIES

ILLINOIS POWER
CAPITAL

GUARANTEED TO THE EXTENT
ILLINOIS POWER CAPITAL
HAS FUNDS AS SET
FORTH HEREIN BY

[IP LOGO]

ILLINOIS POWER COMPANY

CUMULATIVE ADJUSTABLE RATE
MONTHLY INCOME
PREFERRED SECURITIES,
SERIES A

------------------------
PROSPECTUS SUPPLEMENT
------------------------

GOLDMAN, SACHS & CO.
REPRESENTATIVES OF THE UNDERWRITERS

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 58

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there by any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.

PROSPECTUS SUBJECT TO COMPLETION, DATED AUGUST 19, 1994
$100,000,000

ILLINOIS POWER CAPITAL

PREFERRED SECURITIES
GUARANTEED TO THE EXTENT ILLINOIS POWER CAPITAL HAS FUNDS
AS SET FORTH HEREIN BY

ILLINOIS POWER COMPANY
------------------

Illinois Power Capital, L.P. ("Illinois Power Capital"), a Delaware limited
partnership, all of the general partner interests in which are owned by Illinois
Power Company (the "Company"), may offer, from time to time, its preferred
securities, representing limited partner interests ("Preferred Securities"), in
one or more series. The payment of periodic cash distributions ("dividends")
with respect to Preferred Securities of any series, out of funds held by
Illinois Power Capital and legally available therefor, and payments on
liquidation or redemption with respect to the Preferred Securities are
guaranteed by the Company to the extent described herein (the "Guarantee"). The
Company's obligations under the Guarantee are subordinate and junior in right of
payment to all other liabilities of the Company. Subordinated Deferrable
Interest Debentures of the Company ("Subordinated Debentures") will also be
issued and sold from time to time in one or more series by the Company to
Illinois Power Capital in connection with the investment of the proceeds from
the offering of Preferred Securities. Subordinated Debentures subsequently may
be distributed to holders of Preferred Securities in connection with a
dissolution of Illinois Power Capital upon the occurrence of certain events as
may be described in an accompanying Prospectus Supplement (a "Prospectus
Supplement"). The Subordinated Debentures will be unsecured and subordinate and
junior in right of payment to all present and future Senior Indebtedness of the
Company.

The specific designation, number of Preferred Securities, dividend rate (or
method of determination thereof), and any other rights, preferences, privileges,
limitations and restrictions relating to the Preferred Securities of the
particular series in respect of which this Prospectus is being delivered will be
set forth in a Prospectus Supplement pertaining to such series.

The Preferred Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Preferred Securities offered hereby shall
not exceed $100,000,000.
------------------

The Preferred Securities may be sold to or through underwriters or dealers
as designated from time to time. See "Plan of Distribution." The names of any
such underwriters or dealers involved in the sale of the Preferred Securities of
the particular series in respect of which this Prospectus is being delivered,
the number of Preferred Securities to be purchased by any such underwriters or
dealers and any applicable commissions or discounts will be set forth in the
Prospectus Supplement. The net proceeds to the Company will also be set forth in
the Prospectus Supplement.
------------------

The date of this Prospectus is August , 1994.
<PAGE> 59

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661 and at 13th Floor,
Seven World Trade Center, New York, New York 10048. Copies of such material may
be obtained from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports, proxy
statements and other information concerning the Company may also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005 and the Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60605, on which exchanges certain of the Company's securities are
listed. In addition, such reports, proxy statements and other information
concerning the Company can be inspected at the principal office of the Company,
500 South 27th Street, Decatur, Illinois 62525.

This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement"), which the Company and Illinois Power
Capital have filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). Statements contained or incorporated by
reference herein concerning the provisions of documents are necessarily
summaries of such documents, and each statement is qualified in its entirety by
reference to the Registration Statement.

No separate financial statements of Illinois Power Capital have been
included herein. The Company and Illinois Power Capital do not consider that
such financial statements would be material to holders of Preferred Securities
because Illinois Power Capital is a newly formed special purpose entity, has no
operating history and no independent operations and is not engaged in, and does
not propose to engage in, any activity other than as set forth below. See
"Illinois Power Capital."

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:

1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1993;

2. The Company's Current Reports on Form 8-K dated February 9, 1994
and May 27, 1994; and

3. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994 and June 30, 1994.

All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the Preferred Securities offered
hereby, shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in the Prospectus Supplement modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY
OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN
OR MAY BE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO
SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION THAT THE PROSPECTUS INCORPORATES. REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO MR. ALEC G. DREYER, CONTROLLER, ILLINOIS POWER COMPANY, 500 SOUTH
27TH STREET, DECATUR, ILLINOIS 62525, TELEPHONE NUMBER: (217) 424-6600.

2
<PAGE> 60

ILLINOIS POWER COMPANY

The Company was incorporated under the laws of the State of Illinois on May
25, 1923. Effective May 27, 1994, the Company became a subsidiary of Illinova
Corporation, an exempt holding company under the Public Utility Holding Company
Act of 1935, as amended, pursuant to a merger in which each outstanding share of
the Company's Common Stock was converted into one share of common stock of
Illinova Corporation. The Company is engaged in the generation, transmission,
distribution and sale of electric energy and the distribution and sale of
natural gas in the State of Illinois. Its service area is a widely diversified
industrial and agricultural area comprising approximately 15,000 square miles in
northern, central and southern Illinois. Electric service is provided at retail
to 309 incorporated municipalities, adjacent suburban and rural areas and
numerous unincorporated municipalities having an aggregate population of
approximately 1,283,000. Gas service is provided to 257 incorporated
municipalities, adjacent suburban areas and numerous unincorporated
municipalities having an aggregate population of approximately 935,000. The
larger cities served include Decatur, East St. Louis (gas only). Champaign,
Danville, Belleville, Granite City, Bloomington (electric only), Galesburg,
Urbana and Normal (electric only). The executive offices of the Company are
located at 500 South 27th Street, Decatur, Illinois 62525, and the Company's
telephone number is (217) 424-6600.

ILLINOIS POWER CAPITAL

Illinois Power Capital is a limited partnership formed under the Delaware
Revised Uniform Limited Partnership Act, as amended (the "Partnership Act").
Illinois Power Capital exists for the sole purpose of issuing its partner
interests and using the proceeds thereof to purchase certain debt securities of
the Company. The Company is the sole general partner (the "General Partner") of
Illinois Power Capital and will manage all of the business and affairs of
Illinois Power Capital. Holders of Preferred Securities will be limited partners
of Illinois Power Capital. The Company, as the General Partner of Illinois Power
Capital, will make capital contributions to Illinois Power Capital from time to
time to the extent required so that the total contributions made by the General
Partner shall at all times be at least equal to 3% of the total contributions
made by all partners. The rights and obligations of the General Partner and the
limited partners of Illinois Power Capital will be governed by the Partnership
Act and by an Amended and Restated Agreement of Limited Partnership of Illinois
Power Capital (the "Partnership Agreement") substantially in the form filed as
an exhibit to the Registration Statement of which this Prospectus and the
accompanying Prospectus Supplement form a part.

Illinois Power Capital's principal place of business and registered office
in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801,
telephone: (302) 658-7581.

USE OF PROCEEDS

The proceeds to be received by Illinois Power Capital from the sale of the
Preferred Securities will be used to purchase Subordinated Debentures of the
Company and, unless otherwise specified in any Prospectus Supplement, will be
applied by the Company to the payment or provision for payment at maturity, the
purchase or the redemption of outstanding securities of the Company and for
general corporate purposes.

3
<PAGE> 61

RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 12 MONTHS
------------------------------------------------ ENDED
1989 1990 1991 1992 1993(A) JUNE 30, 1994(A)
----- ---- ---- ---- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges(b).................. (0.52)(c) 0.70(c) 1.85 2.02 0.80(c) 0.93(c)
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividend
Requirements(b)............. (0.45)(d) 0.60(d) 1.48 1.61 0.70(d) 0.82(d)
</TABLE>

- ---------------

(a) Subsequent to the Company's merger with Illinova Corporation, net assets of
Illinova Generating Company (formerly IP Group, Inc.) were transferred in
the form of a dividend from the Company to Illinova Corporation. The
information contained herein has been restated to reflect the financial
results of the Company's current operations.

(b) Earnings used in the calculation of the ratio of earnings to fixed charges
and the ratio of earnings to combined fixed charges and preferred stock
dividend requirements include the allowance for funds used during
construction and the deferred financing costs associated with the Company's
Clinton Power Station, and are before deduction of income taxes and fixed
charges. Fixed charges include interest on long-term debt, related
amortization of debt discount, premium, and expense, other interest and
that portion of rent expense which is estimated to be representative of the
interest component. Preferred stock dividend requirements have been
increased to an amount representing the pre-tax earnings required to cover
such dividend requirements.

(c) The ratios of earnings to fixed charges for the twelve months ended June 30,
1994 and for the years ended December 31, 1993, 1990 and 1989 of 0.93,
0.80, 0.70 and (0.52), respectively, indicate that earnings were inadequate
to cover fixed charges. The dollar amounts of the coverage deficiency for
the twelve months ended June 30, 1994, and for the years ended 1993, 1990
and 1989 were approximately $13 million, $37 million, $68 million and $375
million, respectively. Excluding the loss on disallowed plant costs of $200
million, net of income taxes, recorded in the third quarter of 1993, the
ratio of earnings to fixed charges would have been 2.42 for the twelve
months ended June 30, 1994 and 2.25 for the year ended 1993. Excluding the
loss on disallowed plant costs of $137 million, net of income taxes,
recorded in the fourth quarter of 1990, the ratio of earnings to fixed
charges would have been 1.41 for the year ended 1990. Excluding the loss on
disallowed plant costs of $346 million, net of income taxes, recorded in
the first quarter of 1989, the ratio of earnings to fixed charges would
have been 1.31 for the year ended 1989.

(d) The ratios of earnings to combined fixed charges and preferred stock
dividend requirements for the twelve months ended June 30, 1994 and for the
years ended December 31, 1993, 1990 and 1989 of 0.82, 0.70, 0.60 and
(0.45), respectively, indicate that earnings were inadequate to cover
combined fixed charges and preferred stock dividend requirements. The
dollar amounts of the coverage deficiency for the twelve months ended June
30, 1994, and for the years ended 1993, 1990 and 1989 were approximately
$38 million, $63 million, $105 million and $412 million, respectively.
Excluding the loss on disallowed plant costs of $200 million, net of income
taxes, recorded in the third quarter of 1993, the ratio of earnings to
combined fixed charges and preferred stock dividend requirements would have
been 1.98 for the twelve months ended June 30, 1994 and 1.83 for the year
ended 1993. Excluding the loss on disallowed plant costs of $137 million,
net of income taxes, recorded in the fourth quarter of 1990, the ratio of
earnings to combined fixed charges and preferred stock dividend
requirements would have been 1.09 for the year ended 1990. Excluding the
loss on disallowed plant costs of $346 million, net of income taxes,
recorded in the first quarter of 1989, the ratio of earnings to combined
fixed charges and preferred stock dividend requirements would have been
1.06 for the year ended 1989.

4
<PAGE> 62

DESCRIPTION OF THE PREFERRED SECURITIES

Illinois Power Capital may issue, from time to time, Preferred Securities,
in one or more series, having terms described in the Prospectus Supplement
relating thereto. The limited partnership agreement of Illinois Power Capital
will be amended and restated (as so amended and restated, the "Partnership
Agreement") to authorize the establishment of one or more series of Preferred
Securities, having such terms, including dividends, redemption, voting,
liquidation rights and such other preferred, deferred or other special rights or
such restrictions as shall be set forth therein or otherwise established by the
General Partner pursuant thereto. Reference is made to the Prospectus Supplement
relating to the Preferred Securities of a particular series for specific terms,
including (i) the distinctive designation of such series which shall distinguish
it from other series; (ii) the number of Preferred Securities included in such
series, which number may be increased or decreased from time to time unless
otherwise provided by the General Partner in creating the series; (iii) the
annual dividend rate (or method of determining such rate) for Preferred
Securities of such series and the date or dates upon which such dividends shall
be payable; provided, however, dividends on any series of Preferred Securities
shall be payable on a monthly basis to holders of such series of Preferred
Securities as of a record date in each month during which such series of
Preferred Securities are outstanding; (iv) whether dividends on Preferred
Securities of such series shall be cumulative, and, in the case of Preferred
Securities of any series having cumulative dividend rights, the date or dates or
method of determining the date or dates from which dividends on Preferred
Securities of such series shall be cumulative; (v) the amount or amounts which
shall be paid out of the assets of Illinois Power Capital to the holders of
Preferred Securities of such series upon voluntary or involuntary dissolution,
winding-up or termination of Illinois Power Capital; (vi) the price or prices at
which, the period or periods within which and the terms and conditions upon
which Preferred Securities of such series may be redeemed or purchased, in whole
or in part, at the option of Illinois Power Capital or the General Partner;
(vii) the obligation, if any, of Illinois Power Capital to purchase or redeem
Preferred Securities of such series and the price or prices at which, the period
or periods within which and the terms and conditions upon which Preferred
Securities of such series shall be purchased or redeemed, in whole or in part,
pursuant to such obligation; (viii) the voting rights, if any, of Preferred
Securities of such series in addition to those required by law, including the
number of votes per Preferred Security and any requirement for the approval by
the holders of Preferred Securities, or of Preferred Securities of one or more
series, or of both, as a condition to specified action or amendments to the
Partnership Agreement; and (ix) any other relative rights, preferences,
privileges, limitations or restrictions of Preferred Securities of the series
not inconsistent with the Partnership Agreement or with applicable law. All
Preferred Securities offered hereby will be guaranteed by the Company to the
extent set forth below under "Description of the Guarantee." Any applicable
federal income tax considerations applicable to any offering of Preferred
Securities will be described in the Prospectus Supplement relating thereto.

DESCRIPTION OF THE GUARANTEE

Set forth below is a summary of information concerning the Guarantee which
will be executed and delivered by the Company for the benefit of the holders
from time to time of Preferred Securities. The summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the Guarantee, which is filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.

GENERAL

The Company will irrevocably and unconditionally agree, to the extent set
forth herein, to pay in full, to the holders of the Preferred Securities of each
series, the Guarantee Payments (as defined below) (except to the extent paid by
Illinois Power Capital), as and when due, regardless of any defense, right of
set-off or counterclaim which Illinois Power Capital may have or assert. The
following payments with respect to any series of Preferred Securities to the
extent not paid by Illinois Power Capital (the "Guarantee Payments") will be
subject to the Guarantee (without duplication): (i) any accumulated and unpaid
dividends which are required to be paid on the Preferred Securities of such
series, to the

5
<PAGE> 63
extent Illinois Power Capital shall have sufficient cash on hand to permit such
payment and funds legally available therefor, (ii) the redemption price,
including all accumulated and unpaid dividends (the "Redemption Price"), payable
with respect to any Preferred Securities called for redemption by Illinois Power
Capital to the extent Illinois Power Capital shall have sufficient cash on hand
to permit such payment and funds legally available therefor, and (iii) upon a
liquidation of Illinois Power Capital, the lesser of (a) the aggregate of the
liquidation preference and all accumulated and unpaid dividends on the Preferred
Securities of such series to the date of payment and (b) the amount of assets of
Illinois Power Capital remaining available for distribution to holders of
Preferred Securities of such series in liquidation of Illinois Power Capital.
The Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of Preferred
Securities or by causing Illinois Power Capital to pay such amounts to such
holders.

CERTAIN COVENANTS OF THE COMPANY

In the Guarantee, the Company will covenant that, so long as any Preferred
Securities remain outstanding, the Company will not declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock or make any guarantee payment with respect to the
foregoing if at such time the Company shall be in default with respect to its
payment or other obligations under the Guarantee or there shall have occurred
and is continuing any event that would constitute an Event of Default under the
Indenture.

AMENDMENTS AND ASSIGNMENT

Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
Guarantee may be changed only with the prior approval of the holders of not less
than 66 2/3% in liquidation preference of the outstanding Preferred Securities
of each affected series (voting together as one class). The manner of obtaining
any such approval of holders of the Preferred Securities of each series will be
as set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in the Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Preferred Securities then outstanding.

TERMINATION OF THE GUARANTEE

The Guarantee will terminate and be of no further force and effect as to
the Preferred Securities of any series upon full payment of the Redemption Price
of all Preferred Securities of such series, and will terminate completely upon
full payment of the amounts payable upon liquidation of Illinois Power Capital.
The Guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time any holder of Preferred Securities of any series must
restore payment of any sums paid under such series of Preferred Securities or
the Guarantee.

STATUS OF THE GUARANTEE

The Guarantee will constitute an unsecured obligation of the Company and
will rank (i) subordinate and junior in right of payment to all liabilities of
the Company, (ii) pari passu with the most senior preferred or preference stock
now or hereafter issued by the Company and with any guarantee now or hereafter
entered into by the Company in respect of any preferred or preference stock of
any affiliate of the Company and (iii) senior to the Company's common stock. The
Partnership Agreement provides that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of the
Guarantee.

The Guarantee will constitute a guarantee of payment and not of collection.
The Guarantee will be deposited with the General Partner to be held for the
benefit of the holders of each series of the Preferred Securities. In the event
of the appointment of a Special Representative to, among other things, enforce
the Guarantee, the Special Representative may take possession of the Guarantee
for such purpose. If no

6
<PAGE> 64
Special Representative has been appointed to enforce the Guarantee, the General
Partner has the right to enforce the Guarantee on behalf of the holders of each
series of the Preferred Securities. The holders of not less than 10% in
aggregate liquidation preference of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available in respect of the Guarantee, including the giving of directions to the
General Partner or the Special Representative, as the case may be. If the
General Partner or the Special Representative fails to enforce the Guarantee as
above provided, any holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee, without first instituting a legal proceeding against Illinois Power
Capital or any other person or entity. The Guarantee will not be discharged
except by payment of the Guarantee Payments in full to the extent not paid by
Illinois Power Capital and by complete performance of all obligations under the
Guarantee.

GOVERNING LAW

The Guarantee will be governed by and construed in accordance with the laws
of the State of Illinois.

DESCRIPTION OF THE SUBORDINATED DEBENTURES

Subordinated Debentures may be issued from time to time in one or more
series under an Indenture, (the "Indenture"), between the Company and The First
National Bank of Chicago, as Trustee (the "Trustee"). The following summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Indenture, which is filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. Whenever particular provisions or defined terms in the Indenture are
referred to herein, such provisions or defined terms are incorporated by
reference herein. Section and Article references used herein are references to
provisions of the Indenture unless otherwise noted.

GENERAL

The Subordinated Debentures will be unsecured, subordinated obligations of
the Company. The Indenture does not limit the aggregate principal amount of
Subordinated Debentures which may be issued thereunder and provides that the
Subordinated Debentures may be issued thereunder from time to time in one or
more series.

The Subordinated Debentures are issuable in one or more series pursuant to
an indenture supplemental to the Indenture or a resolution of the Company's
Board of Directors or an authorized committee thereof (each, a "Supplemental
Indenture"). The aggregate principal amount of Subordinated Debentures relating
to Preferred Securities of any series will be set forth in the Prospectus
Supplement for such series and will be equal to the sum of the aggregate
liquidation preference of the Preferred Securities for such series and the
General Partner's capital contribution with respect to the Preferred Securities
for such series. Subordinated Debentures relating to Preferred Securities of any
series subsequently may be distributed pro rata to holders of Preferred
Securities of such series in connection with the dissolution of Illinois Power
Capital upon the occurrence of certain events described in the Prospectus
Supplement relating to the Preferred Securities of such series.

The Restated Articles of Incorporation, as amended, of the Company limit
the amount of unsecured indebtedness that the Company may issue or assume,
without the consent of the holders of a majority of the total number of shares
of preferred stock then outstanding, to 20% of the aggregate of the total
principal amount of all outstanding bonds or other securities representing
secured indebtedness of the Company and the capital and surplus of the Company
as then stated on the Company's books. At July 31, 1994, the Company could have
issued approximately $210 million of unsecured indebtedness (such as the
Subordinated Debentures) without violating this provision.

Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Subordinated Debentures
being offered thereby: (i) the specific title of

7
<PAGE> 65

such Subordinated Debentures; (ii) any limit on the aggregate principal amount
of such Subordinated Debentures; (iii) the date or dates on which the principal
of such Subordinated Debentures is payable or the method of determination of
such date or dates; (iv) the rate or rates at which such Subordinated Debentures
will bear interest or the method of determination of such rate or rates
(including the rates at which overdue principal shall bear interest, if
different, and, if applicable, the rate or rates at which overdue premiums or
interest shall bear interest, if any); (v) the date or dates from which such
interest shall accrue, the interest payment dates on which such interest will be
payable or the manner of determination of such interest payment dates and the
record dates for the determination of holders to whom interest is payable on any
such interest payment dates; (vi) the right, if any, to extend the interest
payment periods and the maximum duration of any such extension; (vii) the period
or periods within which, the price or prices at which and the terms and
conditions upon which such Subordinated Debentures may be redeemed, in whole or
in part, at the option of the Company; (viii) the obligation, if any, of the
Company to redeem or purchase such Subordinated Debentures pursuant to any
sinking fund or analogous provisions or at the option of the holder thereof and
the period or periods, the price or prices at which, and the terms and
conditions upon which, such Subordinated Debentures shall be redeemed or
purchased, in whole or part, pursuant to such obligation; (ix) the form of such
Subordinated Debentures; (x) if other than denominations of $25 or any integral
multiple thereof, the denominations in which such Subordinated Debentures shall
be issuable; (xi) any and all other terms with respect to such series; and (xii)
whether such Subordinated Debentures are issuable as a global security, and in
such case, the identity of the depository.

The Indenture does not contain any provisions that afford holders of
Subordinated Debentures protection in the event of a highly leveraged
transaction involving the Company.

SUBORDINATION

The Indenture provides that the Subordinated Debentures are subordinate and
junior in right of payment to all Senior Indebtedness (as defined below) of the
Company as provided in the Indenture. No payment of principal of (including
redemption and sinking fund payments), premium, if any, or interest on, the
Subordinated Debentures may be made if any Senior Indebtedness is not paid when
due, any applicable grace period with respect to such default has ended and such
default has not been cured or waived or has ceased to exist, or if the maturity
of any Senior Indebtedness has been accelerated because of a default. Upon any
distribution of assets of the Company to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or involuntary or
in bankruptcy, insolvency, receivership or other proceedings, all principal of,
and premium, if any, and interest due or to become due on, all Senior
Indebtedness must be paid in full before the holders of the Subordinated
Debentures are entitled to receive or retain any payment. The rights of the
holders of the Subordinated Debentures will be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions applicable
to Senior Indebtedness until all amounts owing on the Subordinated Debentures
are paid in full.

The term "Senior Indebtedness" shall mean the principal of, premium, if
any, interest on and any other payment due pursuant to any of the following,
whether outstanding at the date of execution of the Indenture or thereafter
incurred, created or assumed:

(a) all indebtedness of the Company (other than non-recourse
indebtedness and indebtedness issued under the Indenture) evidenced by
notes, debentures, bonds or other securities sold by the Company for money;

(b) all indebtedness of others of the kinds described in the preceding
clause (a) assumed by or guaranteed in any manner by the Company (other
than the Guarantee) or in effect guaranteed by the Company by an agreement
to purchase, contingent or otherwise; and

(c) all renewals, extensions or refundings of indebtedness of the
kinds described in any of the preceding clauses (a) and (b) unless, in the
case of any particular indebtedness, renewal, extension or refunding, the
instrument creating or evidencing the same or the assumption or

8
<PAGE> 66
guarantee of the same expressly provides that such indebtedness, renewal,
extension or refunding is not superior in right of payment to or is pari
passu with the Subordinated Debentures.

Such Senior Indebtedness shall continue to be Senior Indebtedness and to be
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.

The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued. As of June 30, 1994, Senior Indebtedness of the Company
aggregated approximately $2.2 billion.

CERTAIN COVENANTS OF THE COMPANY

The Company will covenant that it will not declare or pay any dividend on,
or redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its capital stock, if at such time (i) there shall have
occurred and be continuing any event that would constitute an Event of Default
under any Indenture, (ii) the Company shall be in default with respect to its
payment or any obligations under the Guarantee or (iii) the Company shall have
given notice of its selection of an extended interest payment period as provided
in the Indenture and such period, or any extension thereof, shall be continuing.
The Company will also covenant (i) to remain the sole general partner of
Illinois Power Capital and maintain 100% ownership of the general partner
interests thereof; provided that any permitted successor of the Company under
the Indenture may succeed to the Company's duties as General Partner, (ii) to
contribute capital to the extent required to maintain its capital at an amount
equal to at least 3% of the total capital contributions to Illinois Power
Capital, (iii) not to voluntarily dissolve, wind-up or terminate Illinois Power
Capital, except in connection with the distribution of Subordinated Debentures
to the holders of Preferred Securities in liquidation of Illinois Power Capital
and in connection with certain mergers, consolidations or amalgamations
permitted by the Partnership Agreement, (iv) to timely perform all of its duties
as the general partner in Illinois Power Capital (including the duty to pay
dividends on the Preferred Securities) and (v) to use its reasonable efforts to
cause Illinois Power Capital to remain a limited partnership and otherwise
continue to be treated as a partnership for United States federal income tax
purposes.

FORM, EXCHANGE, REGISTRATION AND TRANSFER

Subordinated Debentures of each series will be issued in registered form
and either in certificated form or will be represented by one or more global
securities. If not represented by one or more global securities, Subordinated
Debentures may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) or exchange, at the office of the
Debenture Registrar, without service charge and upon payment of any taxes and
other governmental charges. Such transfer or exchange will be effected upon the
Company or the Debenture Registrar being satisfied with the documents of title
and identity of the person making the request. The Company has appointed the
Trustee as Debenture Registrar with respect to the Subordinated Debentures.

The Company shall not be required to (i) issue, register the transfer of or
exchange any Subordinated Debenture during a period beginning at the opening of
business 15 days before any mailing of Notice of Redemption of less than all the
outstanding Subordinated Debentures of the series of which such Subordinated
Debenture is a part, and ending at the close of business on the day of such
mailing or (ii) register the transfer of or exchange any Subordinated Debentures
called for redemption.

PAYMENT AND PAYING AGENTS

Payment of principal of and premium, if any, on any Subordinated Debenture
will be made only against surrender to the Paying Agent of such Subordinated
Debenture. Principal of and any premium and interest, if any, on Subordinated
Debentures will be payable, subject to any applicable laws and regulations, at
the office of such Paying Agent or Paying Agents as the Company may designate
from time to time, except that at the option of the Company payment of any
interest may be made by check mailed to the address of the person entitled
thereto as such address shall appear in the Debenture

9
<PAGE> 67
Register with respect to such Subordinated Debentures. Payment of interest on a
Subordinated Debenture on any Interest Payment Date will be made to the person
in whose name such Subordinated Debenture (or Predecessor Security) is
registered at the close of business on the Regular Record Date for such interest
payment.

The Company will act as Paying Agent with respect to the Subordinated
Debentures. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agents or approve a change in the office
through which any Paying Agent acts, except that the Company will be required to
maintain a Paying Agent in each Place of Payment for each series of the
respective Subordinated Debentures.

All moneys paid by the Company to a Paying Agent for the payment of the
principal of or premium or interest, if any, on any Subordinated Debenture of
any series which remain unclaimed at the end of two years after such principal,
premium, if any, or interest shall have become due and payable will be repaid to
the Company and the holder of such Subordinated Debenture will thereafter look
only to the Company for payment thereof.

GLOBAL DEBENTURES

If any Subordinated Debentures of a series are represented by one or more
global securities, the applicable Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
Global Debenture may exchange such interests for Subordinated Debentures of such
series and of like tenor and principal amount in any authorized form and
denomination. Principal of and any premium and interest on a Global Debenture
will be payable in the manner described in the applicable Prospectus Supplement.

The specific terms of the depository arrangement with respect to any
portion of a series of Subordinated Debentures to be represented by a Global
Debenture will be described in the applicable Prospectus Supplement.

MODIFICATION OF THE INDENTURE

The Indenture contains provisions permitting the Company and the Trustee,
with consent of the holders of not less than a majority in principal amount of
the Subordinated Debentures of each series which are affected by the
modification, to modify the Indenture or any Supplemental Indenture affecting
that series or the rights of the holders of that series of Subordinated
Debentures; provided, that no such modification may, without the consent of the
holder of each outstanding Subordinated Debenture affected thereby, (i) extend
the fixed maturity of any Subordinated Debentures of any series, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any premium payable upon the redemption thereof,
without the consent of the holder of each Subordinated Debenture so affected or
(ii) reduce the percentage of Subordinated Debentures, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of each Subordinated Debenture then outstanding and affected
thereby.

In addition, the Company and the Trustee may execute, without the consent
of any holder of Subordinated Debentures, any Supplemental Indenture for certain
other usual purposes including the creation of any new series of Subordinated
Debentures.

10
<PAGE> 68

EVENTS OF DEFAULT

The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to each series of Subordinated Debentures:

(a) failure for 10 days to pay interest on the Subordinated Debentures
of that series, including any Additional Interest in respect thereof, when
due, provided that a valid extension of an interest payment period by the
Company in accordance with a Supplemental Indenture shall not constitute a
failure to pay interest for this purpose; or

(b) failure to pay principal or premium, if any, on the Subordinated
Debentures of that series when due, whether at maturity, upon redemption by
declaration or otherwise, or to make any sinking fund payment with respect
to that series; or

(c) failure to observe or perform any other covenant (other than those
specifically relating to another series) contained in the Indenture for 90
days after notice; or

(d) the dissolution, winding-up or termination of Illinois Power
Capital, except in connection with the distribution of Subordinated
Debentures to the holders of Preferred Securities in liquidation of
Illinois Power Capital and in connection with certain mergers,
consolidations or amalgamations permitted by the Partnership Agreement; or

(e) certain events in bankruptcy, insolvency or reorganization of the
Company or Illinois Power Capital.

The holders of a majority in aggregate outstanding principal amount of any
series of the Subordinated Debentures have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
for that series. The Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of any particular series of the Subordinated
Debentures (unless the principal of all of the Subordinated Debentures of that
series have been declared due and payable) may declare the principal due and
payable immediately on default with respect to such series, but the holders of a
majority in aggregate outstanding principal amount of such series may annul such
declaration and waive the default if the default has been cured and a sum
sufficient to pay all matured installments of interest and principal and any
premium has been deposited with the Trustee.

The holders of a majority in aggregate outstanding principal amount of all
series of the Subordinated Debentures affected thereby may, on behalf of the
holders of all the Subordinated Debentures of such series, waive any past
default, except a default in the payment of principal, premium, if any, or
interest. The Company is required to file annually with the Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants under the Indenture.

CONSOLIDATION, MERGER AND SALE

The Indenture does not contain any covenant which restricts the Company's
ability to merge or consolidate with or into any other corporation, sell or
convey all or substantially all of its assets to any person, firm or corporation
or otherwise engage in restructuring transactions.

DEFEASANCE AND DISCHARGE

Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Subordinated Debentures of any series
(except in each case for certain obligations to register the transfer or
exchange of Subordinated Debentures, replace stolen, lost or mutilated
Subordinated Debentures, maintain paying agencies and hold moneys for payment in
trust) if the Company deposits with the Trustee, in trust, moneys or Government
Obligations, in an amount sufficient to pay all the principal of, and interest
on, the Subordinated Debentures of such series on the dates such payments are
due in accordance with the terms of such Subordinated Debentures.

11
<PAGE> 69

GOVERNING LAW

The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the laws of the State of New York.

INFORMATION CONCERNING THE TRUSTEE

The Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provision, the Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
holder of Subordinated Debentures, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Trustee is not required to expand or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
the Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.

The Company maintains a deposit account and banking relationship with the
Trustee.

MISCELLANEOUS

The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of the Company; provided, that, in the event of any such assignment, the Company
will remain liable for all such obligations. Subject to the foregoing, the
Indenture will be binding upon and inure to the benefit of the parties thereto
and their respective successors and assigns. The Indenture provides that it may
not otherwise be assigned by the parties thereto.

PLAN OF DISTRIBUTION

Illinois Power Capital may offer or sell Preferred Securities to one or
more underwriters for public offering and sale by them. Illinois Power Capital
may sell Preferred Securities as soon as practicable after effectiveness of the
Registration Statement, provided that favorable market conditions exist. Any
such underwriter involved in the offer and sale of the Preferred Securities will
be named in an applicable Prospectus Supplement.

Underwriters may offer and sell the Preferred Securities at a fixed price
or prices, which may be changed, or from time to time at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. In connection with the sale of Preferred
Securities, underwriters may be deemed to have received compensation from the
Company and/or Illinois Power Capital in the form of underwriting discounts or
commissions. Underwriters may sell Preferred Securities to or through dealers,
and such dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters.

Any underwriting compensation paid by the Company and/or Illinois Power
Capital to underwriters in connection with the offering of Preferred Securities,
and any discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in an applicable Prospectus Supplement.
Underwriters and dealers participating in the distribution of the Preferred
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Preferred
Securities may be deemed to be underwriting discounts and commissions, under the
Securities Act. Underwriters and dealers may be entitled, under agreement with
the Company or Illinois Power Capital, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act, and to reimbursement by the Company and/or Illinois Power
Capital for certain expenses.

Underwriters and dealers may engage in transactions with, or perform
services for, the Company and/or Illinois Power Capital and/or any of their
affiliates in the ordinary course of business.

12
<PAGE> 70

Each series of Preferred Securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom Preferred
Securities are sold by Illinois Power Capital for public offering and sale may
make a market in such Preferred Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. The Preferred Securities may or may not be listed on a national
securities exchange. No assurance can be given as to the liquidity of or the
trading markets for any Preferred Securities.

LEGAL OPINIONS

Certain legal matters will be passed upon for the Company and Illinois
Power Capital by Schiff Hardin & Waite, Chicago, Illinois, and for any
underwriters by Reid & Priest, New York, New York. Certain matters of Delaware
law relating to the validity of the Preferred Securities will be passed upon by
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel
to the Company and Illinois Power Capital. Schiff Hardin & Waite and Reid &
Priest may rely on the opinion of Richards, Layton & Finger, P.A. as to certain
matters of Delaware law. Schiff Hardin & Waite may rely on the opinion of Reid &
Priest as to all matters of New York law, and Reid & Priest may rely on the
opinion of Schiff Hardin & Waite as to all matters of Illinois law.

EXPERTS

The financial statements incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-K for the year ended December 31, 1993
have been so incorporated in reliance on the report (which contains an
explanatory paragraph relating to the Company's change in its method of
accounting for income taxes, as discussed in Note 1 to the financial statements)
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

13
<PAGE> 71
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........................ $ 34,483*
New York Stock Exchange listing fees....................................... 45,000
Printing expenses.......................................................... 50,000
Legal fees and expenses.................................................... 125,000
Independent accountant's fees and expenses................................. 15,000
Blue Sky and legal investment fees and expenses............................ 15,000
Rating agencies fees and expenses.......................................... 50,000
Indenture Trustee fees and expenses........................................ 5,000
Miscellaneous.............................................................. 10,517
--------
Total.................................................................... $350,000
========
</TABLE>

- ---------------

* Actual. All other expenses are estimated.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Under Section 8.75 of the Illinois Business Corporation Act of 1983, the
Company is empowered, subject to the procedures and limitations stated therein,
to indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with any threatened, pending or completed action, suit or
proceeding to which such person is made a party or threatened to be made a party
by reason of such person being or having been a director, officer, employee or
agent of the Company, or serving or having served at the request of the Company
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise. Section 8.75 further provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors, or otherwise, and that such
indemnification shall continue as to a director, officer, employee or agent of
the Company who has ceased to serve in such capacity, and shall inure to the
benefit of the heirs, executors and administrators of such a person.

The Company's By-Laws provide, in substance, that the Company shall
indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
such person is made a party or threatened to be made a party by reason of such
person being or having been a director, officer, employee or agent of the
Company, or serving or having served at the request of the Company in one or
more of the foregoing capacities with another corporation, partnership, joint
venture, trust or other enterprise. The indemnification is not exclusive of
other rights and shall continue as to a person who has ceased to be a director,
officer, employer or agent and shall inure to the benefit of his heirs,
executors and administrators.

The Company presently has an insurance policy which, among other things,
includes liability insurance coverage for officers and directors under which
officers and directors are covered against any "loss" arising from any claim or
claims made against them by reason of any "wrongful act" in their respective
capacities of directors or officers. "Loss" is specifically defined to exclude
fines and penalties, as well as matters deemed uninsurable under the law
pursuant to which the insurance policy shall be construed. The policy also
contains other specific exclusions, including illegally obtained personal profit
or advantages, and dishonesty. The policy also provides for reimbursement to the
Company for loss
<PAGE> 72
incurred by having indemnified officers or directors as authorized by state
statute, the Company's By-Laws or any other agreement.

The Partnership Agreement provides, in part, as follows:

"Section 9.6 Indemnification. To the fullest extent permitted by
applicable law, the Partnership shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage or claim incurred by such
Indemnified Person by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Partnership and in a manner
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Agreement, except that no Indemnified Person shall be
entitled to be indemnified in respect of any loss, damage or claim incurred by
such Indemnified Person by reason of gross negligence or willful misconduct,
with respect to such acts or omissions; provided, however, that any indemnity
under this Section 9.6 shall be provided out of and to the extent of Partnership
assets only, and no Covered Person shall have any personal liability on account
thereof. To the fullest extent permitted by applicable law, expenses (including
legal fees) incurred by an Indemnified Person in defending any claim, demand,
action, suit or proceeding shall, from time to time, be advanced by the
Partnership prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Partnership of an undertaking by or on behalf
of the Indemnified Person to repay such amount if it shall be determined that
the Indemnified Person is not entitled to be indemnified as authorized in
Section 9.6."

Applicable Delaware partnership law provides authority for limited
partnerships to indemnify under certain circumstances any partner or other
person from and against any and all claims and demands.

The foregoing rights of indemnification shall apply to any liability of any
director or officer, partner or other person (or his legal representatives)
arising under any of the provisions of the Securities Act of 1933, as amended,
only to the extent that such rights of indemnification may be determined to be
valid by a court of competent jurisdiction.

ITEM 16. LIST OF EXHIBITS.

The exhibits to this Registration Statement are listed in the Exhibit Index
elsewhere herein.

ITEM 17. UNDERTAKINGS.

The undersigned registrants hereby undertake:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");

(b) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and

(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;

provided, however, that paragraphs 1(a) and 1(b) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrants pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that are incorporated by reference in this Registration Statement;

II-2
<PAGE> 73

(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering; and

(4) That for purposes of determining any liability under the Securities
Act, each filing of the Company's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions referred to in Item 15 above, or
otherwise, the registrants have been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.

The undersigned registrants hereby further undertake that:

(1) for purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and (2) for the purpose of
determining any liability under the Securities Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

II-3
<PAGE> 74

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Illinois Power
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Decatur, and State of Illinois on the 19th day of
August, 1994.

ILLINOIS POWER COMPANY
(Registrant)

By: /s/ LARRY D. HAAB

-----------------------------------
Larry D. Haab
Chairman, President and Chief
Executive
Officer

II-4
<PAGE> 75

Pursuant to the requirements of the Securities Act of 1933, Illinois Power
Capital, L.P. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Decatur, and State of Illinois on the 19th day of
August, 1994.

ILLINOIS POWER CAPITAL, L.P.
(Registrant)
By: Illinois Power Company, its
general partner

By: /s/ LARRY D. HAAB

-----------------------------------
Larry D. Haab
Chairman, President and Chief
Executive Officer

II-5
<PAGE> 76

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that Illinois Power Company, Illinois Power
Capital, L.P. and each of the undersigned officers and directors of Illinois
Power Company hereby constitute and appoint each of Larry D. Haab, Larry F.
Altenbaumer and Alec G. Dreyer the true and lawful attorney-in-fact and agent of
the undersigned, with full power of substitution and resubstitution for and in
the name, place and stead of the undersigned, in any and all capacities, to sign
all or any amendments (including post-effective amendments) of and supplements
to this Registration Statement on Form S-3 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each such attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, to all intents and
purposes and as fully as said corporation itself and each said officer or
director might or could do in person, hereby ratifying and confirming all that
each such attorney-in-fact and agent, or his substitutes, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on behalf of each of Illinois Power
Company and Illinois Power Capital, L.P. by the following persons in their
capacities as officers or directors, as indicated below, of Illinois Power
Company and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------- ----------------
<S> <C> <C>
/s/ LARRY D. HAAB Chairman, President, Chief Executive
- ------------------------------------- Officer and Director
Larry D. Haab
(Principal Executive Officer)

/s/ LARRY F. ALTENBAUMER Senior Vice President and Chief
- ------------------------------------- Financial Officer
Larry F. Altenbaumer
(Principal Financial Officer)
August 19, 1994

/s/ ALEC G. DREYER Controller
- -------------------------------------
Alec G. Dreyer
(Controller)

/s/ RICHARD R. BERRY Director
- -------------------------------------
Richard R. Berry

/s/ DONALD E. LASATER Director
- -------------------------------------
Donald E. Lasater

/s/ DONALD S. PERKINS Director
- -------------------------------------
Donald S. Perkins
</TABLE>

II-6
<PAGE> 77

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------- ----------------
<S> <C> <C>
/s/ ROBERT M. POWERS Director
- -------------------------------------
Robert M. Powers

/s/ WALTER D. SCOTT Director
- -------------------------------------
Walter D. Scott

/s/ RONALD L. THOMPSON Director
- -------------------------------------
Ronald L. Thompson

/s/ WALTER M. VANNOY Director
- -------------------------------------
Walter M. Vannoy
August 19, 1994

/s/ MARILOU VON FERSTEL Director
- -------------------------------------
Marilou von Ferstel

/s/ CHARLES W. WELLS Director
- -------------------------------------
Charles W. Wells

/s/ JOHN D. ZEGLIS Director
- -------------------------------------
John D. Zeglis

Director
- -------------------------------------
Vernon K. Zimmerman
</TABLE>

II-7
<PAGE> 78

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
--------- ------------------------------------------------------------------- ----
<S> <C> <C>
1 Form of Underwriting Agreement.*
3(a) Restated Articles of Incorporation of the Company, as amended
through April 19, 1984. Filed as Exhibit 19 to the Company's
Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1984.
File No. 1-3004.**
3(b) Amendment to the Restated Articles of Incorporation of the Company
dated April 19, 1989. Filed as Exhibit 19 to the Company's
Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1989.
File No. 1-3004.**
3(c) Statement of Resolution Establishing the Series of Serial Preferred
Stock, without par value, designated as Cumulative Preferred Stock,
Adjustable Rate Series B. Filed as Exhibit 4(b) to the Company's
Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1985.
File No. 1-3004.**
3(d) Statement of Resolution Establishing the Series of Serial Preferred
Stock, $50 par value, designated as 8.00% Cumulative Preferred
Stock. Filed as Exhibit 3(f) to the Company's Annual Report on Form
10-K for the Year Ended December 31, 1986. File No. 1-3004.**
3(e) Statement of Resolution Establishing the Series of Serial Preferred
Stock, $50 par value, designated as 7.75% Cumulative Preferred
Stock. Filed as Exhibit 3(g) to the Company's Annual Report on Form
10-K for the Year Ended December 31, 1986. File No. 1-3004.**
3(f) By-Laws of the Company, as amended. Filed as Exhibit 3(f) to the
Company's Quarterly Report on Form 10-Q for the Quarter Ended March
31, 1993. File No. 1-3004.**
4(a) Certificate of Limited Partnership of Illinois Power Capital, L.P.
4(b) Agreement of Limited Partnership of Illinois Power Capital, L.P.
4(c) Form of Amended and Restated Agreement of Limited Partnership of
Illinois Power Capital, L.P.
4(d) Form of Action of the Company, as the General Partner of Illinois
Power Capital, L.P., Creating Series A Preferred Securities.
4(e) Form of Indenture between the Company and The First National Bank
of Chicago.
4(e)(1) Cross-reference sheet showing the location in the Indenture of the
provisions of Sections 310 through 318(a) of the Trust Indenture
Act of 1939, as amended.
4(f) Form of Supplemental Indenture to Indenture to be used in
connection with the issuance of Subordinated Debentures and fixed
rate Preferred Securities.
4(g) Form of Supplemental Indenture to Indenture to be used in
connection with the issuance of Subordinated Debentures and
adjustable rate Preferred Securities.
4(h) Form of Preferred Security Certificate (contained in the Form of
Amended and Restated Agreement of Limited Partnership of Illinois
Power Capital filed as Exhibit 4(c) to this Registration
Statement).
</TABLE>

- ---------------

* To be filed by amendment.

** Incorporated herein by reference.
<PAGE> 79

<TABLE>
<S> <C> <C>
4(i) Form of Subordinated Debenture (contained in the Form of Indenture
filed as Exhibit 4(e) to this Registration Statement).
4(j) Form of Guarantee Agreement with respect to the Preferred
Securities.
5(a) Opinion of Schiff Hardin & Waite.
5(b) Opinion of Richards, Layton & Finger, P.A.
8 Tax opinion of Schiff Hardin & Waite (contained in its opinion
filed as Exhibit 5(a) to this Registration Statement).
12 Statement of Computations of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividend Requirements.
23(a) Consent of Schiff Hardin & Waite (contained in its opinion filed as
Exhibit 5(a) to this Registration Statement).
23(b) Consent of Richards, Layton & Finger, P.A. (contained in its
opinion filed as Exhibit 5(b) to this Registration Statement).
23(c) Consent of Price Waterhouse, LLP.
24 Powers of Attorney (set forth on the signature page of this
Registration Statement).
25 Statement of Eligibility of Trustee under the Trust Indenture Act
of 1939, as amended.
</TABLE>

<PAGE> 1
EXHIBIT 4(A)

CERTIFICATE OF LIMITED PARTNERSHIP
OF
ILLINOIS POWER CAPITAL, L.P.

This Certificate of Limited Partnership of Illinois Power Capital, L.P.
(the "Partnership"), dated as of August 17, 1994 is being duly executed and
filed by Illinois Power Company, an Illinois corporation, as general partner,
to form a limited partnership under the Delaware Revised Uniform Limited
Partnership Act (6 Del.C. Section 17-101, et seq.), as amended from time to
time.

1. Name. The name of the limited partnership formed hereby is Illinois
Power Capital, L.P.

2. Registered Office. The address of the registered office of the
Partnership in the State of Delaware is c/o The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.

3. Registered Agent. The name and address of the registered agent for
service of process on the Partnership in the State of Delaware is The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.

4. General Partner. The name and the business address of the sole general
partner of the Partnership is:

Illinois Power Company
500 South 27th Street
Decatur, Illinois 62525

IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Limited Partnership as of the date first above written.

ILLINOIS POWER COMPANY

By: /s/ Alec G. Dreyer
Name: Alec G. Dreyer
Title: Controller

<PAGE> 1
EXHIBIT 4(B)

AGREEMENT OF LIMITED PARTNERSHIP
OF
ILLINOIS POWER CAPITAL, L.P.

This Agreement of Limited Partnership of Illinois Power Capital, L.P.
(the "Agreement"), is entered into by and between Illinois Power Company, an
Illinois corporation, as general partner (the "General Partner"), and Illinova
Corporation, an Illinois corporation, as limited partner (the "Initial Limited
Partner").

The General Partner and the Initial Limited Partner hereby form a
limited partnership pursuant to and in accordance with the Delaware Revised
Uniform Limited Partnership Act (6 Del.C. Section 17-101, et seq.), as amended
from time to time (the "Act"), and hereby agree as follows:

1. Name. The name of the limited partnership formed hereby is Illinois
Power Capital, L.P. (the "Partnership").

2. Purpose. The Partnership is organized for the sole purpose of issuing
its interests in the Partnership, including, without limitation, its general
partner interests and its limited partner interests (the latter, the "Limited
Partner Interests"), and using the proceeds thereof to purchase certain debt
securities ("Debentures") of the General Partner, and to engage in any and all
activities necessary, advisable or incidental thereto.

3. Registered Office. The registered office of the Partnership in the
State of Delaware is c/o The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.

4. Registered Agent. The name and address of the registered agent for
service of process on the Partnership in the State of Delaware is The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.

5. Partners. The names and the business addresses of the General Partner
and the Initial Limited Partner are as follows:

General Partner:

Illinois Power Company
500 South 27th Street
Decatur, Illinois 62525

Initial Limited Partner:

Illinova Corporation
500 South 27th Street
Decatur, Illinois 62525
<PAGE> 2
6. Powers. The powers of the General Partner include all powers, statutory
and otherwise, possessed by general partners under the laws of the State of
Delaware.

7. Dissolution. The Partnership shall dissolve, and its affairs shall be
wound up, on December 31, 2044, or at such earlier time as (a) all of the
partners of the Partnership approve in writing, (b) an event of withdrawal of
the General Partner has occurred under the Act, or (c) an entry of a decree of
judicial dissolution has occurred under Section 17-802 of the Act.

8. Capital Contributions. The partners of the Partnership have
contributed the following amounts, in cash, and no other property, to the
Partnership:

General Partner: $1.00

Initial Limited Partner: $1.00

9. Additional Contributions. No partner of the Partnership is required to
make any additional capital contribution to the Partnership.

10. Allocation of Profits and Losses. The Partnership's profits and losses
shall be allocated in proportion to the capital contributions of the partners
of the Partnership.

11. Distributions. Distributions shall be made to the partners of the
Partnership at the time and in the aggregate amounts determined by the General
Partner, but at least once during each fiscal year of the Partnership the
General Partner shall cause the Partnership to distribute any cash held by it
which is not reasonably necessary for the operation of the Partnership.
Distributions shall be allocated among the partners of the Partnership in the
same proportion as their then capital account balances.

12. Assignments.

(a) The Initial Limited Partner may assign all or any part of its
Limited Partner interest in the Partnership and may withdraw from the
Partnership only with the consent of the General Partner. The Initial Limited
Partner has no right to grant an assignee of its Limited Partner Interest the
right to become a substituted limited partner in the Partnership.

(b) The General Partner may not assign its interest in the Partnership
in whole or in any part under any circumstances, except to a permitted
successor of the General Partner under any instrument under which Debentures
are issued.

13. Withdrawal. Except to the extent set forth in Section 12, no right is
given to any partner of the Partnership to withdraw from the Partnership.

-2-
<PAGE> 3
14. Additional Partners.

(a) Without the approval of the Initial Limited Partner, the General
Partner may admit additional limited partners to the Partnership.

(b) After the admission of any additional limited partners to the
Partnership pursuant to this Section 14, the Partnership shall continue as a
limited partnership under the Act.

(c) The admission of any additional limited partners to the Partnership
pursuant to this Section 14 shall be accomplished by the amendment of this
Agreement.

15. Liability of Initial Limited Partner. The Initial Limited Partner
shall not have any liability for the obligations or liabilities of the
Partnership except to the extent provided in the Act.

16. Governing Law. This Agreement shall be governed by, and construed
under, the laws of the State of Delaware, all rights and remedies being
governed by said laws.

17. Counterparts. The Agreement may be executed in one or more
counterparts, each of which counterparts shall be an original and all of which
together shall constitute one and the same Agreement.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed this Agreement of Limited Partnership as of the 17th
day of August, 1994.

General Partner:

ILLINOIS POWER COMPANY

By:
Name:
Title:

Initial Limited Partner:

ILLINOVA CORPORATION

By:
Name:
Title:

-3-

<PAGE> 1

EXHIBIT 4(C)

AMENDED AND RESTATED AGREEMENT

LIMITED PARTNERSHIP

ILLINOIS POWER CAPITAL, L.P.
<PAGE> 2
TABLE OF CONTENTS

ARTICLE I

FORMATION AND CONTINUATION OF THE PARTNERSHIP;
ADMISSION OF PREFERRED SECURITY HOLDERS;
RETURN OF INITIAL LIMITED PARTNER'S CAPITAL CONTRIBUTION

Section 1.1. Formation and Continuation of the Partnership . . . . . . 1
Section 1.2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. Business of the Partnership . . . . . . . . . . . . . . . 2
Section 1.4. Term . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Registered Agent and Office . . . . . . . . . . . . . . . 2
Section 1.6. Principal Place of Business . . . . . . . . . . . . . . . 2
Section 1.7. Name and Business Address of General Partner . . . . . . 2
Section 1.8. Admission of Holders of Preferred Securities . . . . . . 2

ARTICLE II

DEFINED TERMS

Section 2.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2. Headings . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE III

CAPITAL CONTRIBUTIONS, REPRESENTATION OF
PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS

Section 3.1. Capital Contributions . . . . . . . . . . . . . . . . . . 8
Section 3.2. Preferred Security Holder's Interest Represented by
Preferred Securities . . . . . . . . . . . . . . . . . . 8
Section 3.3. Capital Accounts . . . . . . . . . . . . . . . . . . . . 9
Section 3.4. Interest on Capital Contributions . . . . . . . . . . . . 9
Section 3.5. Withdrawal and Return of Capital Contributions . . . . . 9

ARTICLE IV

ALLOCATIONS

Section 4.1. Profits and Losses . . . . . . . . . . . . . . . . . . . 9
Section 4.2. Other Allocation Provisions . . . . . . . . . . . . . . . 10
Section 4.3. Allocations for Income Tax Purposes . . . . . . . . . . . 11
Section 4.4. Withholding . . . . . . . . . . . . . . . . . . . . . . . 11

-i-
<PAGE> 3
ARTICLE V

DIVIDENDS

Section 5.1. Dividends . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.2. Limitations on Distributions . . . . . . . . . . . . . . 12

ARTICLE VI

ISSUANCE OF PREFERRED SECURITIES

Section 6.1. General Provisions Regarding Preferred Securities . . . . 12
Section 6.2. Voting Rights . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.3. Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE VII

BOOKS OF ACCOUNT, RECORDS AND REPORTS

Section 7.1. Books and Records . . . . . . . . . . . . . . . . . . . . 17
Section 7.2. Accounting Method . . . . . . . . . . . . . . . . . . . . 18

ARTICLE VIII

POWERS, RIGHTS AND DUTIES
OF THE LIMITED PARTNERS
Section 8.1. Limitations . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.2. Liability . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.3. Priority . . . . . . . . . . . . . . . . . . . . . . . . 18

ARTICLE IX

POWERS, RIGHTS AND DUTIES
OF THE GENERAL PARTNER

Section 9.1. Authority . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.2. Powers and Duties of General Partner . . . . . . . . . . 19
Section 9.3. Liability . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.4. Exculpation . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.5. Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . 20
Section 9.6. Indemnification . . . . . . . . . . . . . . . . . . . . . 21
Section 9.7. Outside Businesses . . . . . . . . . . . . . . . . . . . 21
Section 9.8. Limits on General Partner's Powers . . . . . . . . . . . 22
Section 9.9. Tax Matters Partner . . . . . . . . . . . . . . . . . . . 22
Section 9.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . 22

-ii-
<PAGE> 4
ARTICLE X

TRANSFERS OF INTERESTS BY PARTNERS

Section 10.1. Transfer of Interests . . . . . . . . . . . . . . . . . 23
Section 10.2. Transfer of LP Certificates . . . . . . . . . . . . . . 23
Section 10.3. Persons Deemed Preferred Security Holders . . . . . . . 23
Section 10.4. Book Entry Interests . . . . . . . . . . . . . . . . . 24
Section 10.5. Notices to Clearing Agency . . . . . . . . . . . . . . 24
Section 10.6. Appointment of Successor Clearing Agency . . . . . . . 24
Section 10.7. Definitive LP Certificates; Appointment of Paying
Agent(s) . . . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE XI

WITHDRAWAL; DISSOLUTION;
LIQUIDATION AND DISTRIBUTION OF ASSETS

Section 11.1. Withdrawal of Partners . . . . . . . . . . . . . . . . 25
Section 11.2. Dissolution of the Partnership . . . . . . . . . . . . 25
Section 11.3. Liquidation . . . . . . . . . . . . . . . . . . . . . . 26
Section 11.4. Distribution in Liquidation . . . . . . . . . . . . . . 27
Section 11.5. Rights of Limited Partners . . . . . . . . . . . . . . 27
Section 11.6. Termination . . . . . . . . . . . . . . . . . . . . . . 27

ARTICLE XII

AMENDMENTS AND MEETINGS

Section 12.1. Amendments . . . . . . . . . . . . . . . . . . . . . . 27
Section 12.2. Amendment of Certificate . . . . . . . . . . . . . . . 27
Section 12.3. Meetings of the Partners . . . . . . . . . . . . . . . 27

ARTICLE XIII

MISCELLANEOUS

Section 13.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 13.2. Entire Agreement . . . . . . . . . . . . . . . . . . . 29
Section 13.3. Governing Law . . . . . . . . . . . . . . . . . . . . . 29
Section 13.4. Effect . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 13.5. Pronouns and Number . . . . . . . . . . . . . . . . . . 29
Section 13.6. Captions . . . . . . . . . . . . . . . . . . . . . . . 29
Section 13.7. Partial Enforceability . . . . . . . . . . . . . . . . 29
Section 13.8. Counterparts . . . . . . . . . . . . . . . . . . . . . 30
Section 13.9. Waiver of Partition . . . . . . . . . . . . . . . . . . 30
Section 13.10. Remedies . . . . . . . . . . . . . . . . . . . . . . . 30

-iii-
<PAGE> 5
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP

ILLINOIS POWER CAPITAL, L.P.

This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of Illinois Power
Capital, L.P. (the "Partnership"), dated as of , 1994, among Illinois Power
Company, an Illinois corporation ("Illinois Power"), as the general partner,
Illinova Corporation, an Illinois corporation, as the initial limited partner
(the "Initial Limited Partner") and such other Persons (as defined herein) who
become Limited Partners (as defined herein) as provided herein;

WITNESSETH:

WHEREAS, Illinois Power and the Initial Limited Partner entered into an
Agreement of Limited Partnership, dated as of August 17, 1994, (the "Original
Limited Partnership Agreement");

WHEREAS, the Certificate of Limited Partnership of the Partnership was filed
with the Office of the Secretary of State of the State of Delaware on August
17, 1994; and

WHEREAS, the Partners (as defined herein) desire to continue the Partnership
as a limited partnership under the Act (as defined herein) and to amend and
restate the Original Limited Partnership Agreement in its entirety;

NOW, THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree to amend and restate
the Original Limited Partnership Agreement in its entirety and hereby agree as
follows:

ARTICLE I

FORMATION AND CONTINUATION OF THE PARTNERSHIP;
ADMISSION OF PREFERRED SECURITY HOLDERS;
RETURN OF INITIAL LIMITED PARTNER'S CAPITAL CONTRIBUTION

Section 1.1. Formation and Continuation of the Partnership. The
Partnership was formed as a limited partnership under the Act by the filing by
the General Partner (as defined herein) of the Certificate (as defined herein)
with the Office of the Secretary of State of the State of Delaware on August
17, 1994 and the entering into by the General Partner and the Initial Limited
Partner of the Original Limited Partnership Agreement. The parties hereto
agree to continue the Partnership as a limited partnership under the Act. The
General Partner, for itself and as agent for the Limited Partners, shall make
every reasonable effort to assure that all certificates and documents are
properly executed and shall accomplish all filing, recording, publishing and
other acts necessary or appropriate for compliance with all the requirements
for the continuation of the Partnership as a limited partnership under the Act
and under all other laws of

-1-
<PAGE> 6
the State of Delaware or such other jurisdictions in which the General Partner
determines that the Partnership may conduct business. The rights, liabilities
and duties of the Partners shall be as provided in the Act except as modified
by this Agreement. Where not otherwise specified in this Agreement, the Act
governs the rights and obligations of the parties to this Agreement.

Section 1.2. Name. The name of the Partnership is "Illinois Power Capital,
L.P.", as such name may be modified from time to time by the General Partner
following written notice to the Limited Partners. The Partnership business may
be conducted under the name of the Partnership or any other name deemed
advisable by the General Partner.

Section 1.3. Business of the Partnership. The sole purpose of the
Partnership is (a) to issue partnership interests in the Partnership,
including, without limitation, Preferred Securities (as defined herein), and to
use the proceeds thereof to purchase Subordinated Debentures (as defined
herein) or other similar debt securities of Illinois Power and (b) except as
otherwise limited herein, to enter into, make and perform all contracts and
other undertakings, and engage in all activities and transactions as the
General Partner may reasonably deem necessary or advisable to the carrying out
of the foregoing purpose of the Partnership.

Section 1.4. Term. The term of the Partnership commenced on the date the
Certificate was filed with the Secretary of State of the State of Delaware and
shall continue until December 31, 2047, unless the Partnership is dissolved
before such date in accordance with the provisions of this Agreement.

Section 1.5. Registered Agent and Office. The Partnership's registered
agent and office in the State of Delaware shall be The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. At any time, and from time to time, the General
Partner may designate another registered agent and/or registered office.

Section 1.6. Principal Place of Business. The principal place of business
of the Partnership shall be at c/o The Corporation Trust Company, Corporation
Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware
19801. Upon 10 days written notice to the Limited Partners, the General
Partner may change the location of the Partnership's principal place of
business.

Section 1.7. Name and Business Address of General Partner. The name and
business address of the General Partner are as follows:

Illinois Power Company
500 South 27th Street
Decatur, Illinois 62525
Attention: President

The General Partner may change its name or business address from time to time,
in which event the General Partner shall promptly notify the Limited Partners
of any such change.

Section 1.8. Admission of Holders of Preferred Securities.

(a) Without the necessity of executing this Agreement, upon receipt by a
Person of an LP Certificate (as defined herein) and payment of the Purchase
Price (as defined herein) for the Preferred Securities represented by such LP
Certificate in connection with the initial issuance

-2-
<PAGE> 7
by the Partnership of such Preferred Securities, which shall be deemed to
constitute a request by such Person that the books and records of the
Partnership reflect such Person's admission as a Limited Partner, such Person
shall be admitted to the Partnership as a Limited Partner and shall become
bound by this Agreement.

(b) Following the first admission of a Preferred Security Holder (as
defined herein) to the Partnership as a Limited Partner pursuant to paragraph
(a) above, the Initial Limited Partner shall receive the return of his capital
contribution without interest or deduction, but will continue to be a limited
partner of the Partnership. While the Initial Limited Partner shall continue
to be a limited partner of the Partnership, the Initial Limited Partner shall
only have such rights, if any, as are expressly provided to the Initial Limited
Partner pursuant to this Agreement.

(c) The name and mailing address of each Partner and the amount contributed
by such Partner to the capital of the Partnership shall be listed on the books
and records of the Partnership. The General Partner shall be required to
update the books and records from time to time as necessary to accurately
reflect the information therein.

ARTICLE II

DEFINED TERMS

Section 2.1. Definitions. Unless the context otherwise requires, the terms
defined in this Article II shall, for the purposes of this Agreement, have the
meanings herein specified.

"Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del.C.
Section 17-101, et seq., as amended from time to time.

"Action" has the meaning set forth in Section 6.1(b).

"Adjusted Capital Account" has the meaning set forth in Section 4.2(d)(i).

"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person, and (f)
if the specified Person is an officer, director, general partner or employee,
any other entity for which the specified Person acts in any such capacity.

"Agreement" means this Amended and Restated Agreement of Limited Partnership
of the Partnership, as amended, modified, supplemented or restated from time to
time.

"Book Entry Interests" means a beneficial interest in the LP Certificates,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 10.4.

-3-
<PAGE> 8
"Business Day" means any day other than a day on which banking institutions
in The City of New York are authorized or required by law to close.

"Capital Account" has the meaning set forth in Section 3.3.

"Certificate" means the Certificate of Limited Partnership of the
Partnership filed with the Secretary of State of the State of Delaware on
August 17, 1994, and any and all amendments thereto and restatements thereof.

"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depository for
the Preferred Securities and in whose name shall be registered a global LP
Certificate and which shall undertake to effect book entry transfers and
pledges of the Preferred Securities.

"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Clearing Agency
effects book entry transfers and pledges of securities deposited with the
Clearing Agency.

"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section (Section) of the Code refers not
only to such specific section but also to any corresponding provision of any
federal tax statute enacted after the date of this Agreement, as such specific
section or corresponding provision is in effect on the date of application of
the provisions of this Agreement containing such reference.

"Covered Person" means any Partner, any Affiliate of a Partner or any
officers, directors, shareholders, partners, members, employees,
representatives or agents of a Partner or its respective Affiliates, or any
employee or agent of the Partnership or its Affiliates or any Special
Representative.

"Definitive LP Certificates" has the meaning set forth in Section 10.4.

"Dividends" means the distributions of income paid or payable to any Limited
Partner who is a Preferred Security Holder pursuant to the terms of the
Preferred Securities held by such Limited Partner, including any interest
payable in respect of arrears.

"DTC" means The Depository Trust Company, the initial Clearing Agency.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Fiscal Year" means (i) the period commencing upon the formation of the
Partnership and ending on December 31, 1994, and (ii) any subsequent twelve
(12) month period commencing on January 1 and ending on December 31.

"General Partner" means Illinois Power, in its capacity as general partner
of the Partnership, and any additional or successor general partner in the
Partnership admitted as a general partner of the Partnership pursuant to this
Agreement.

"Guarantee" means the Guarantee Agreement dated as of ________________, 1994
of Illinois Power in respect of the Preferred Securities.

-4-
<PAGE> 9
"Holders" means, with respect to a series of Preferred Securities, Preferred
Security Holders in whose name an LP Certificate representing Preferred
Securities of such series is registered.

"Illinois Power" has the meaning set forth in the forepart of this Agreement.

"Indemnified Person" means the General Partner, any Special Representative,
any Affiliate of the General Partner or any Special Representative, or any
officers, directors, shareholders, partners, members, employees,
representatives or agents of the General Partner or any Special Representative,
or any employee or agent of the Partnership or its Affiliates.

"Indenture" means the Indenture dated as of _____________, 1994 between
Illinois Power and The First National Bank of Chicago, as trustee (the
"Trustee"), pursuant to which the Subordinated Debentures are issued in one or
more series.

"Initial Limited Partner" means Illinova Corporation.

"Initial Preferred Limited Partners" means the Persons admitted as Limited
Partners pursuant to Section 1.8(a) in connection with the initial issuance by
the Partnership of Preferred Securities.

"Interest" means the entire ownership interest of a Partner in the
Partnership at any particular time, including, without limitation, its interest
in the capital, profits, losses and distributions of the Partnership.

"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 40 Act Law") to the effect that the Partnership is or
will be considered an "investment company" which is required to be registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), which
Change in 40 Act Law becomes effective on or after __________________, 1994;
provided, however, that no Investment Company Event shall be deemed to have
occurred if the General Partner obtains a written opinion of nationally
recognized independent counsel to the Partnership experienced in practice under
the 1940 Act to the effect that the General Partner has successfully issued an
additional or supplemental irrevocable and unconditional guarantee (i) of
accrued and unpaid dividends (whether or not determined to be paid out of
monies legally available therefor) on the Preferred Securities and (ii) of the
full amount of the Liquidation Distribution on the Preferred Securities upon a
liquidation of the Partnership (regardless of the amount of assets of the
Partnership otherwise available for distribution in such liquidation) to avoid
such Change in 40 Act Law so that in the opinion of such counsel,
notwithstanding such Change in 40 Act Law, the Partnership is not required to
be registered as an "investment company" within the meaning of the 1940 Act.

"Limited Partner" means any Person who is admitted to the Partnership as a
limited partner of the Partnership pursuant to the terms of this Agreement,
including the Preferred Security Holders, in each such Person's capacity as a
limited partner of the Partnership.

"Liquidation Distribution" has the meaning set forth in the applicable
Action relating to a series of Preferred Securities.

-5-
<PAGE> 10
"Loss Carried Forward Amount" means as of the first day of any month for any
series, an amount equal to the excess of (x) all Net Loss allocated to the
Holders of such series of Preferred Securities from the date of issuance of
such series of Preferred Securities through and including the day prior to the
first day of such month pursuant to Section 4.1(b)(ii) over (y) the amount of
Net Income allocated to the Holders of such series of Preferred Securities
pursuant to Section 4.1(a)(ii) in all prior calendar months.

"LP Certificate" means a certificate of partnership interest substantially
in the form attached hereto as Annex A, evidencing the Preferred Securities
held by a Limited Partner, with such modifications to such form as may be
necessary to reflect the specific terms and provisions of a particular series
of Preferred Securities.

"Majority in liquidation preference of the Preferred Securities" means
Holder(s) of a series of Preferred Securities or, as the context may require,
Holder(s) of more than one series of Preferred Securities voting as a class,
who are the record owners of Preferred Securities whose liquidation preference
(including the preference amount that would be paid on redemption or maturity,
plus accumulated and unpaid dividends, whether or not declared, to the date
upon which the voting percentages are determined) represents more than 50% of
the above liquidation preference of all Preferred Securities of such series or,
as applicable, multiple series.

"Net Income" and "Net Loss", respectively, for any period means the income
and loss, respectively, of the Partnership for such period as determined in
accordance with the method of accounting followed by the Partnership for
federal income tax purposes, including, for all purposes, any income exempt
from tax and any expenditures of the Partnership which are described in Code
Section 705(a)(2)(B); provided, however, that any item allocated under Section
4.2 shall be excluded from the computation of Net Income and Net Loss.

"Partners" means the General Partner and the Limited Partners, collectively,
where no distinction is required by the context in which the term is used.

"Partnership" means the limited partnership heretofore formed and continued
under this Agreement under the name "Illinois Power Capital, L.P."

"Paying Agent" has the meaning set forth in Section 10.7.

"Person" means any individual, corporation, limited liability company,
association, partnership, trust or other entity.

"Preferred Securities" means the limited partner interests in the
Partnership described in Article VI.

"Preferred Security Holder" has the meaning set forth in Section 10.3.

"Preferred Security Owner" means, with respect to a Book Entry Interest, a
Person who is the beneficial owner of such Book Entry Interest, as reflected on
the books of the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency Participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency).

-6-
<PAGE> 11
"Purchase Price" for any Preferred Security means the amount paid for such
Preferred Security in the initial sale by the Partnership of such Preferred
Security.

"Regulations" means the income tax regulations, including temporary
regulations, promulgated under the Code, as such regulations may be amended
from time to time.

"Securities Act" means the Securities Act of 1933, as amended.

"66-2/3% in liquidation preference of the Preferred Securities" means
Holder(s) of a series of Preferred Securities or, as the context may require,
Holder(s) of more than one series of Preferred Securities voting as a class,
who are the record owners of Preferred Securities whose liquidation preference
(including the preference amount that would be paid on redemption or maturity,
plus accumulated and unpaid dividends, whether or not declared, to the date
upon which the voting percentages are determined) represents more than 66-2/3%
of the above liquidation preference of all Preferred Securities of such series
or, as applicable, multiple series.

"Special Event" means a Tax Event or an Investment Company Act Event.

"Special Representative" has the meaning specified in Section 6.2.

"Subordinated Debentures" means any series of subordinated debentures issued
by Illinois Power under the Indenture.

"Successor Securities" has the meaning specified in Section 6.3.

"Tax Event" means that the General Partner shall have obtained an opinion of
nationally recognized independent tax counsel experienced in such matters to
the effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, (b) any amendment to or change in an interpretation or application of
such laws or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination on or after
such date), or (c) any interpretation or pronouncement that provides for a
position with respect to such laws or regulations that differs from the
generally accepted position on _______ , 1994, which amendment or change is
effective or such interpretation or pronouncement is announced on or after
_____ , 1994, there is more than an insubstantial risk that (i) the Partnership
is subject to federal income tax with respect to interest received on the
Subordinated Debentures, (ii) interest payable to the Partnership on the
Subordinated Debentures will not be deductible by the payor for federal income
tax purposes or (iii) the Partnership is subject to more than a de minimus
amount of other taxes, duties or other governmental charges.

"Tax Matters Partner" means the General Partner designated as such in
Section 9.9.

"10% in liquidation preference of the Preferred Securities" means Holders(s)
of a series of Preferred Securities or, as the context may require, Holder(s)
of more than one series of Preferred Securities voting as a class, who are the
record owners of Preferred Securities whose liquidation preference (including
the preference amount that would be paid on redemption or maturity, plus
accumulated and unpaid dividends, whether or not declared, to the date upon
which the voting percentages are determined) represents more than 10% of the
above liquidation preference of all Preferred Securities of such series or, as
applicable, multiple series.

-7-
<PAGE> 12
"Underwriting Agreement" means an Underwriting Agreement among the
Partnership and the underwriters named therein relating to the issuance and
sale of the Preferred Securities.

Section 2.2. Headings. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.

ARTICLE III

CAPITAL CONTRIBUTIONS, REPRESENTATION OF
PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS

Section 3.1. Capital Contributions.

(a) The General Partner has, on or prior to the date hereof, contributed an
aggregate of $______________ to the capital of the Partnership, which amount is
equal to at least 3% of the total capital contributions to the Partnership on
the date hereof, after taking into account the contribution of the Initial
Preferred Limited Partners referred to in paragraph (c) of this Section 3.1.
Subject to Section 4.1(c), the General Partner shall from time to time make
such additional capital contributions as are necessary to maintain its Capital
Account balance at least equal to 3% of the aggregate positive Capital Account
balances of all Partners.

(b) The Initial Limited Partner has, prior to the date hereof, contributed
the amount of $1 to the capital of the Partnership which amount is being
returned to the Initial Limited Partner.

(c) Each of the Initial Preferred Limited Partners has, on the date hereof,
contributed to the capital of the Partnership an amount equal to the Purchase
Price for the Preferred Securities acquired by it.

(d) Each Person who acquires a Preferred Security after the date hereof in
connection with the initial issuance by the Partnership of such Preferred
Security shall, in connection with the acquisition of such Preferred Security,
contribute to the capital of the Partnership an amount equal to the Purchase
Price for such Preferred Security.

(e) No Limited Partner shall at any time be required to make any additional
capital contributions to the Partnership.

Section 3.2. Preferred Security Holder's Interest Represented by Preferred
Securities. A Preferred Security Holder's interest in the Partnership shall be
represented by the Preferred Securities held by such Preferred Security Holder.
Each Preferred Security Holder's respective Preferred Securities shall be set
forth on the books and records of the Partnership. Each Limited Partner,
including a Preferred Security Holder, hereby agrees that its interest in the
Partnership and in its Preferred Securities shall for all purposes be personal
property. No Limited Partner, including a Preferred Security Holder, shall
have an interest in specific Partnership property.

-8-
<PAGE> 13
Section 3.3. Capital Accounts. An individual capital account (a "Capital
Account") shall be established and maintained on the books of the Partnership
for each Partner in compliance with Section Section 1.704-1(b)(2)(iv) and
1.704-2 of the Regulations. Subject to the preceding sentence, each Capital
Account will be credited with the capital contributions made and the profits
allocated to such Partner (or predecessor in interest) and debited by the
distributions made and losses allocated to the Partner (or predecessor
thereof).

Section 3.4. Interest on Capital Contributions. No Partner shall be
entitled to interest on or with respect to any capital contribution to the
Partnership.

Section 3.5. Withdrawal and Return of Capital Contributions. No Partner
shall be entitled to withdraw any part of such Partner's capital contribution
to the Partnership or to receive any distributions from the Partnership, except
as provided in this Agreement.

ARTICLE IV

ALLOCATIONS

Section 4.1. Profits and Losses. Except as provided in Section 4.2,

(a) the Partnership's Net Income for each calendar month shall be allocated
as follows:

(i) First, to the Holders of each series of Preferred Securities as of
the record date in such calendar month for the payment of Dividends on such
series of Preferred Securities in an amount equal to the excess of (x) all
Dividends accumulated on such series of Preferred Securities (in accordance
with the Action creating such series) from their date of issuance through and
including the close of such calendar month over (y) the amount of Net Income
allocated to the Holders of such series of Preferred Securities pursuant to
this Section 4.1(a)(i) in all prior calendar months; provided, however, that
(A) as to any series of Preferred Securities as to which Dividends are not
cumulative, no Dividend shall be deemed to accumulate until the Partnership
has actually paid (or set aside money to pay) such Dividend and (B) Dividends
as to Preferred Securities that are cumulative and are not payable at the end
of each calendar month shall be deemed to accumulate in a manner consistent
with the Action creating such Preferred Securities. Amounts allocated to all
Holders of any series of Preferred Securities shall be allocated among such
Holders in proportion to the number of Preferred Securities of such series
held by such Holders.

(ii) Second, 100% to the Holders of any series of Preferred Securities
up to an amount equal to the Loss Carried Forward Amount for such series as
of the first day of such month. Amounts allocated to all Holders of any
series of Preferred Securities shall be allocated among such Holders in
proportion to the number of Preferred Securities of such series held by such
Holders.

(iii) Any remaining Net Income shall be allocated to the General
Partner.

(b) The Partnership's Net Loss for any Fiscal Year shall be allocated as
follows:

-9-
<PAGE> 14
(i) First, to the General Partner until the General Partner's Capital
Account is reduced to zero; provided, however, that the aggregate amount of
Net Losses allocated to the General Partner pursuant to this Section 4.1(b)(i)
shall not exceed the sum of 3% of the total capital contributions of all
Partners plus the aggregate Net Income allocated to the General Partner
pursuant to Section 4.1.

(ii) Second, to the Holders of each series of Preferred Securities in
proportion to the aggregate Capital Account balances of the Holders of such
series of Preferred Securities (calculated taking into account only
contributions, distributions and allocations related to such series), until
the Capital Account balances of such Holders are reduced to zero; provided,
however, that the General Partner shall make appropriate adjustments in these
allocations, in accordance with Section 4.1(c) with respect to any Preferred
Securities as to which Net Income has been allocated with respect to
Dividends that accrued but were not paid. Amounts allocated to the Holders
of any series of Preferred Securities shall be allocated among such Holders
in proportion to the number of Preferred Securities of such series held by
such Holders.

(iii) Any remaining Net Loss shall be allocated to the General Partner.

(c) The General Partner shall make such changes to the allocations in
Sections 4.1(a) and 4.1(b) in the year of the Partnership's liquidation as it
deems reasonably necessary so that amounts distributed to the Preferred
Security Holders in such year in accordance with Section 11.4(a)(ii) shall
equal their Liquidation Distributions; provided, however, that no allocation
pursuant to this Section 4.1(c) may result in the General Partner being
required to make any Capital Contributions pursuant to Section 3.1.

Section 4.2. Other Allocation Provisions.

(a) For purposes of determining the profits, losses or any other items
allocable to any period, profits, losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the General
Partner using any method that is permissible under Section 706 of the Code and
the Regulations.

(b) The Partners are aware of the income tax consequences of the
allocations made by this Article IV and hereby agree to be bound by the
provisions of this Article IV in reporting their shares of Partnership income
and loss for income tax purposes.

(c) Notwithstanding anything to the contrary that may be expressed or
implied in this Article IV, the interest of the General Partner in each item of
income, gain, loss, deduction and credit will be equal to at least (i) at any
time that aggregate capital contributions to the Partnership are equal to or
less than $50,000,000, 1% of each such item and (ii) at any time that aggregate
capital contributions to the Partnership are greater than $50,000,000, at least
1%, multiplied by a fraction (not exceeding one and not less than 0.2), the
numerator of which is $50,000,000 and the denominator of which is the lesser of
the aggregate Capital Account balances of the Capital Accounts of all Partners
at such time and the aggregate capital contributions to the Partnership of all
Partners at such time, of such item.

(d) (i) If during any taxable year, a Partner unexpectedly receives an
adjustment, allocation or distribution described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, which causes or
increases a deficit balance in the Partner's Adjusted Capital Account

-10-
<PAGE> 15
(as defined below), there shall be allocated to the Partner items of
Partnership income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain for such year) in an amount
and manner sufficient to eliminate such deficit. The foregoing is intended to
be a "qualified income offset" provision as described in Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted and applied in
all respects in accordance with that Regulation.

A Partner's "Adjusted Capital Account" at any time shall equal the Partner's
Capital Account at such time (x) increased by the sum of (A) the amount of the
Partner's share of Partnership minimum gain (as defined in Section Section
1.704-2(g)(1) and (3) of the Regulations) and (B) the amount of the Partner's
share of the minimum gain attributable to a "partner non-recourse debt" (as
defined in Regulations Section 1.704-2(i)(5)) and (y) decreased by reasonably
excepted adjustments, allocations and distributions described in Section
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.

(ii) While this Agreement does not contain certain provisions required
by Section Section 1.704-1(b) and 1.704-2 of the Regulations because those
provisions apply to transactions that are not expected to occur, the Partners
intend that the allocations under Section 4.1 conform to Section Section
1.704-1(b) and 1.704-2 of the Regulations (including, without limitation, the
minimum gain chargeback, chargeback of partner nonrecourse debt minimum gain
and partner nonrecourse debt provisions of such Regulation), and the General
Partner shall make such changes in the allocations under Section 4.1 as it
believes are reasonably necessary to meet the requirements of such Regulations.

(e) Solely for the purpose of adjusting the Capital Accounts of the
Partners, and not for tax purposes, if any property is distributed in kind to
any Partner, the difference between its fair market value and its book value at
the time of distribution shall be treated as gain or loss recognized by the
Partnership and allocated pursuant to the provisions of Section 4.1; provided,
however, that Net Income and Net Loss allocated as a result of the distribution
of any series of Subordinated Debentures to the Holders of any series of
Preferred Securities or to the General Partner (or both) shall be allocated to
the Partner receiving the Subordinated Debentures in proportion to the amount
of Subordinated Debentures distributed to them. For this purpose, the fair
market value of any property shall be determined by the General Partner in its
sole discretion, provided, however, that the value of any Subordinated
Debenture shall at all times be treated as equal to the value of any Preferred
Security if the interest rate on and principal amount of the Subordinated
Debenture is the same as the Dividend payable on and the liquidation preference
with respect to the Preferred Security.

Section 4.3. Allocations for Income Tax Purposes. The income, gains,
losses, deductions and credits of the Partnership shall be allocated in the
same manner as the items entering into the computation of Net Income and Net
Loss were allocated under Sections 4.1 and 4.2; provided, however, that solely
for federal, state and local income and franchise tax purposes and not for book
or Capital Account purposes, income, gain, loss and deduction with respect to
any property properly carried on the Partnership's books at a value other than
the tax basis of such property shall be allocated in a manner determined in the
General Partner's discretion, so as to take into account (consistently with
Code Section 704(c) principles) the difference between such property's book
value and its tax basis.

Section 4.4. Withholding. The Partnership shall comply with withholding
requirements under federal, state and local law and shall remit amounts
withheld to and file required forms with applicable jurisdictions. To the
extent that the Partnership is required to

-11-
<PAGE> 16
withhold and pay over any amounts to any authority with respect to
distributions or allocations to any Partner, the amount withheld shall be
deemed to be a distribution in the amount of the withholding to the Partner.
In the event of any claimed over-withholding, Partners shall be limited to an
action against the applicable jurisdiction. If the amount withheld was not
withheld from actual distributions, the Partnership may reduce subsequent
distributions by the amount of such withholding. Each Partner agrees to
furnish the Partnership with any representations and forms as shall reasonably
be requested by the Partnership to assist it in determining the extent of, and
in fulfilling, its withholding obligations.

ARTICLE V

DIVIDENDS

Section 5.1. Dividends. Limited Partners shall receive periodic Dividends,
if any, redemption payments and Liquidation Distributions in accordance with
the applicable terms of the Preferred Securities. Subject to the rights of the
Preferred Securities, all remaining cash shall be distributed to the General
Partner at such time as the General Partner shall determine.

Section 5.2. Limitations on Distributions. Notwithstanding any provision
to the contrary contained in this Agreement, the Partnership shall not make a
distribution to any Partner on account of its interest in the Partnership if
such distribution would violate Section 17-607 of the Act or other applicable
law.

ARTICLE VI

ISSUANCE OF PREFERRED SECURITIES

Section 6.1. General Provisions Regarding Preferred Securities.

(a) The aggregate number of Preferred Securities which the Partnership
shall have authority to issue is unlimited.

(b) The designations, powers, rights, preferences, privileges, limitations
and other terms and provisions of the Preferred Securities shall be as follows:

(i) The payment of Dividends and payments on dissolution of the
Partnership or on redemption in respect of Preferred Securities shall
be guaranteed by Illinois Power pursuant to the Guarantee. The Preferred
Security Holders hereby authorize the General Partner to hold the Guarantee
on behalf of the Preferred Security Holders. In the event of the
appointment of a Special Representative to, among other things, enforce the
Guarantee, the Special Representative may take possession of the Guarantee
for such purpose. If no Special Representative has been appointed to
enforce the Guarantee, the General Partner has the right to enforce the
Guarantee on behalf of the Preferred Security Holders. The Holders of not
less than 10% in liquidation preference of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for
any remedy available in respect of the Guarantee including the giving of
directions to the General Partner or the Special Representative, as the case
may be. If the General Partner or the Special Representative fails to
enforce the Guarantee as above provided, a

-12-
<PAGE> 17

Preferred Security Holder may institute a legal proceeding directly
against the Guarantor to enforce its rights under the Guarantee, without
first instituting a legal proceeding against the Partnership or any other
Person. The Preferred Security Holders, by acceptance of such Preferred
Securities, hereby agree to the subordination provisions and other terms of
the Guarantee;

(ii) The General Partner on behalf of the Partnership is authorized to
issue from time to time limited partner interests in the Partnership
(the "Preferred Securities") in one or more series having such designations,
powers, rights, preferences, privileges, limitations and other terms and
provisions as may from time to time be established in the written action or
actions (each, an "Action") of the General Partner providing for the issue
of that series. In connection with the foregoing, the General Partner is
expressly authorized, prior to issuance, to set forth in an Action or
Actions providing for the issue of such series, the following:

(A) the distinctive designation of such series which shall distinguish
it from other series;

(B) the number of Preferred Securities included in such series, which
number may be increased or decreased from time to time unless otherwise
provided by the General Partner in creating the series;

(C) the annual Dividend rate (or method of determining such rate) for
Preferred Securities of such series and the date or dates upon which such
Dividends shall be payable, provided, however, Dividends on any series of
Preferred Securities shall be payable on a monthly basis to Holders of such
series of Preferred Securities as of a record date in each month during
which such series of Preferred Securities are outstanding;

(D) whether Dividends on the Preferred Securities of such series shall
be cumulative, and, in the case of Preferred Securities of any series
having cumulative Dividend rights, the date or dates or method of
determining the date or dates from which Dividends on the Preferred
Securities of such series shall be cumulative;

(E) the amount or amounts which shall be paid out of the assets of the
Partnership to the Holders of the Preferred Securities of such series upon
voluntary or involuntary dissolution, winding up or termination of the
Partnership;

(F) the price or prices at which, the period or periods within which and
the terms and conditions upon which the Preferred Securities of such series
may be redeemed or purchased, in whole or in part, at the option of the
Partnership or the General Partner;

(G) the obligation, if any, of the Partnership to purchase or redeem
Preferred Securities of such series and the price or prices at which, the
period or periods within which and the terms and conditions upon which the
Preferred Securities of such series shall be purchased or redeemed, in
whole or in part, pursuant to such obligation;

-13-
<PAGE> 18
(H) the voting rights, if any, of the Preferred Securities of such
series in addition to those required by law, including the number of
votes per Preferred Security and any requirement for the approval by the
Holders of Preferred Securities, or of the Preferred Securities of one or
more series, or of both, as a condition to specified action or amendments
to this Agreement; and

(I) any other relative rights, powers, preferences or limitations of the
Preferred Securities of the series not inconsistent with this Agreement or
with applicable law.

In connection with the foregoing and without limiting the generality
thereof, the General Partner is hereby expressly authorized, without the vote
or approval of any Preferred Security Holder, (i) to take any Action to
create under the provisions of this Agreement a series of Preferred
Securities that was not previously outstanding and (ii) to admit Preferred
Security Holders as limited partners of the Partnership. Without the vote or
approval of any Preferred Security Holder, the General Partner may execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection with the issue from time to time of Preferred
Securities in one or more series as shall be necessary, convenient or
desirable to reflect the issue of such series. The General Partner shall do
all things it deems to be appropriate or necessary to comply with the Act and
is authorized and directed to do all things it deems to be necessary or
permissible in connection with any future issuance, including compliance with
any statute, rule, regulation or guideline of any federal, state or other
governmental agency or any securities exchange.

Any Action or Actions taken by the General Partner pursuant to the
provisions of this paragraph (ii) shall be deemed an amendment and supplement
to and part of this Agreement.

(iii) The proceeds received by the Partnership from the issuance of any
series of Preferred Securities, together with the proceeds of any capital
contribution of the General Partner made at the time of such issuance, shall
be invested by the Partnership in Subordinated Debentures with (A) an
aggregate principal amount equal to such aggregate proceeds and (B) an
interest rate equal to the Dividend rate of such series of Preferred
Securities.

(iv) So long as any series of Subordinated Debentures are held by the
Partnership, the General Partner shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee with respect to
such series, (ii) waive any past default which is waivable under Section 6.06
of the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Subordinated Debentures of such series shall be
due and payable or (iv) consent to any amendment, modification or termination
of the Indenture without, in each case, obtaining the prior approval of the
Holders of at least 66 2/3% in liquidation preference of all series of
Preferred Securities affected thereby, acting as a single class; provided,
however, that where a consent under the Indenture would require the consent
of each holder of Subordinated Debentures affected thereby, no such consent
shall be given by the General Partner without the prior consent of each
Holder of all series of Preferred Securities affected thereby. The General
Partner shall not revoke any action previously authorized or approved by a
vote of any series of Preferred Securities affected thereby. The General
Partner shall notify all Holders of any series of Preferred Securities

-14-
<PAGE> 19
of any notice of default received from the Trustee with respect to the related
series of Subordinated Debentures.

(v) The Partnership may not issue any limited partner interests in the
Partnership, unless such series of Preferred Securities ranks pari passu with
each other series of Preferred Securities then outstanding as regards (A)
participation in profits and Dividends of the Partnership and (B)
participation in the assets of the Partnership. All Preferred Securities
shall rank senior to the General Partner's Interest in respect of the right
to receive Dividends and the right to receive payments out of the assets of
the Partnership upon voluntary or involuntary dissolution, winding up or
termination of the Partnership. All Preferred Securities redeemed, purchased
or otherwise acquired by the Partnership (including Preferred Securities
surrendered for conversion or exchange) shall be canceled.

(vi) No Holder of a Preferred Security shall be entitled as a matter of
right to subscribe for or purchase, or have any preemptive right with
respect to, any part of any new or additional issue of Preferred Securities
of any class whatsoever, or of securities convertible into any Preferred
Securities of any class whatsoever, whether now or hereafter authorized and
whether issued for cash or other consideration or by way of a Dividend.

Section 6.2. Voting Rights. If (i) the Partnership fails to pay Dividends
in full on the Preferred Securities for 18 consecutive monthly Dividend
periods, (ii) an event of default occurs and is continuing on the Subordinated
Debentures or (iii) Illinois Power is in default on any of its payment or other
obligations under the Guarantee, then the Holders of any series of the
Preferred Securities having the right to vote for the appointment of a special
representative of the Partnership and the Limited Partners (the "Special
Representative") in such event, acting as a single class, will be entitled by
the majority vote of such Holders to appoint and authorize a Special
Representative to enforce the Partnership's creditor rights under the
Subordinated Debentures, enforce the rights of the Preferred Security Holders
under the Guarantee and enforce the rights of the Preferred Security Holders to
receive Dividends on Preferred Securities. Illinois Power agrees to execute
and deliver such documents as may be necessary, appropriate or convenient for
the Special Representative to enforce such rights and obligations.

In furtherance of the foregoing, and without limiting the powers of any
Special Representative so appointed and for the avoidance of any doubt
concerning the powers of the Special Representative, any Special
Representative, in its own name and as Special Representative of the
Partnership, may institute a proceeding, including, without limitation, any
suit in equity, an action at law or other judicial or administrative
proceeding, to enforce the Partnership's rights directly against Illinois
Power, or any other obligor on behalf of the Partnership, and may prosecute
such proceeding to judgment or final decree, and enforce the same against
Illinois Power or any other obligor and collect, out of the property, wherever
situated, of Illinois Power or any such other obligor upon its obligations, the
monies adjudged or decreed to be payable in the manner provided by law. The
Special Representative shall not be admitted as a Partner or otherwise be
deemed to be a Partner and shall have no liability for the debts, obligations
or liabilities of the Partnership.

For purposes of determining whether the Partnership has failed to pay
Dividends in full for 18 consecutive monthly Dividend periods, Dividends shall
be deemed to remain in arrears, notwithstanding any payments in respect
thereof, until full cumulative Dividends have been or contemporaneously are
declared and paid with respect to all monthly Dividend periods terminating on
or prior to the date of payment of such full cumulative Dividends. Not later
than

-15-
<PAGE> 20
30 days after such right to appoint a Special Representative arises, the
General Partner will convene a meeting for the purpose of appointing a Special
Representative. If the General Partner fails to convene such meeting within
such 30-day period, the Holders of 10% in liquidation preference of the
Preferred Securities will be entitled to convene such meeting. The provisions
of Section 12.3 relating to the convening and conduct of meetings of the
Partners will apply with respect to any such meeting. Any Special
Representative so appointed shall cease to be a representative of the
Partnership and the Limited Partners if the Partnership (or Illinois Power
pursuant to the Guarantee) shall have paid in full all accumulated and unpaid
Dividends on the Preferred Securities or such default or breach, as the case
may be, shall have been cured, and Illinois Power, as the General Partner, is
hereby authorized to and shall continue the business of the Partnership without
dissolution. Notwithstanding the appointment of any such Special
Representative, Illinois Power retains all rights under the Indenture,
including the right to extend the interest payment period, and shall continue
to be a General Partner.

If any proposed amendment of this Agreement provides for, or the General
Partner otherwise proposes to effect (pursuant to an Action or otherwise), (x)
any action which would adversely affect the powers, preferences or special
rights of the Preferred Securities, whether by way of amendment of this
Agreement or otherwise (including, without limitation, the authorization or
issuance of any interests ranking, as to participation in the profits and
Dividends or in the assets of the Partnership, senior or junior to the
Preferred Securities), or (y) the dissolution, winding up or termination of the
Partnership, other than (A) a dissolution, winding up or termination in
connection with which the Partnership distributes the Subordinated Debentures
to the Preferred Security Holders upon the occurrence of a Special Event or (B)
as described in Section 6.3 below, then the Preferred Security Holders will be
entitled to vote on such amendment or proposal of the General Partner (but not
on any other amendment or proposal) as a class with all other Holders of
Preferred Securities similarly affected, and such amendment or proposal shall
not be effective except with the approval of Holders of 66 2/3% in liquidation
preference of such Preferred Securities having a right to vote on the matter;
provided however, that no such approval shall be required if the dissolution,
winding up or termination of the Partnership is proposed or initiated pursuant
to Section 11.2 hereof or upon the initiation of proceedings, or after
proceedings have been initiated, for the dissolution, winding up or termination
of Illinois Power.

The rights attached to the Preferred Securities will be deemed not to be
adversely affected by the creation or issue of, and no vote will be required
for the creation of, any further Preferred Securities ranking pari passu with,
the Preferred Securities with regard to participation in the profits and
Dividends or in the assets of the Partnership.

Any required approval of Holders of Preferred Securities may be given at a
separate meeting of such Holders convened for such purpose, at a meeting of all
of the Partners or pursuant to written consent. The Partnership will cause a
notice of any meeting at which Limited Partners holding Preferred Securities
are entitled to vote, or of any matter upon which action by written consent of
such Holders is to be taken, to be mailed to each Holder of Preferred
Securities. Each such notice will include a statement setting forth (i) the
date of such meeting or the date by which such action is to be taken, (ii) a
description of any matter on which such Holders are entitled to vote or upon
which written consent is sought and (iii) instructions for the delivery of
proxies or consents. No vote or consent of the Holders of Preferred Securities
will be required for the Partnership to redeem and cancel Preferred Securities
in accordance with this Agreement.

Notwithstanding that Holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any series of Preferred
Securities that is owned

-16-
<PAGE> 21
by Illinois Power or any entity owned more than 50% by Illinois Power, either
directly or indirectly, shall not be entitled to vote or consent and shall, for
the purposes of such vote or consent, be treated as if it were not outstanding.

Section 6.3. Mergers. The Partnership shall not consolidate, amalgamate,
merge with or into, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to any corporation or other
body, except as described below. The Partnership may, without the consent of
the Holders of the Preferred Securities, consolidate, amalgamate, merge with or
into, or be replaced by a limited liability company, a limited partnership or a
trust organized as such under the laws of any state of the United States;
provided, that (i) such successor entity either (x) expressly assumes all of
the obligations of the Partnership under the Preferred Securities or (y)
substitutes for the Preferred Securities other securities having substantially
the same terms as the Preferred Securities (the "Successor Securities") so long
as the Successor Securities rank, with respect to participation in the profits
and Dividends or in the assets of the successor entity, at least as high as the
Preferred Securities rank with respect to participation in the profits and
Dividends or in the assets of the Partnership, (ii) Illinois Power expressly
acknowledges such successor entity as the Holder of the Subordinated
Debentures, (iii) the Preferred Securities or the Successor Securities are
listed, or will be listed on notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then listed, (iv) such merger, consolidation, amalgamation or replacement does
not cause the Preferred Securities to be downgraded by any nationally
recognized statistical rating organization, as that term is defined by the
Securities and Exchange Commission for purposes of Rule 436(g)(2) under the
Securities Act, or cause any Successor Securities to be rated lower than the
Preferred Securities immediately prior to such merger, consolidation,
amalgamation or replacement, (v) such merger, consolidation, amalgamation or
replacement does not adversely affect the powers, preferences and special
rights of Holders of Preferred Securities in any material respect, (vi) such
successor entity has a purpose substantially identical to that of the
Partnership and (vii) prior to such merger, consolidation, amalgamation or
replacement, Illinois Power has received an opinion of nationally recognized
independent counsel to the Partnership experienced in such matters to the
effect that (x) such successor entity will be treated as a partnership for
Federal income tax purposes, (y) following such merger, consolidation,
amalgamation or replacement, Illinois Power and such successor entity will be
in compliance with the 1940 Act without registering thereunder as an investment
company, and (z) such merger, consolidation, amalgamation or replacement will
not adversely affect the limited liability of Holders of Preferred Securities.

ARTICLE VII

BOOKS OF ACCOUNT, RECORDS AND REPORTS

Section 7.1. Books and Records.

(a) Proper and complete records and books of account of the Partnership
shall be kept by the General Partner in which shall be entered fully and
accurately all transactions and other matters relative to the Partnership's
business as are usually entered into records and books of account maintained by
Persons engaged in businesses of a like character, including a Capital Account
for each Partner. The books and records of the Partnership, together with a
copy of this Agreement and a certified copy of the Certificate, shall at all
times be maintained at the principal office of the Partnership and shall be
open to the inspection and examination of the Limited

-17-
<PAGE> 22
Partners or their duly authorized representatives for any purpose reasonably
related to their Interests during reasonable business hours.

(b) Notwithstanding any other provision of this Agreement, the General
Partner may, to the maximum extent permitted by applicable law, keep
confidential from the Partners any information the disclosure of which the
General Partner reasonably believes is not in the best interests of the
Partnership or is adverse to the interests of the Partnership or which the
Partnership or the General Partner is required by law or by an agreement with
any Person to keep confidential.

(c) Within three months after the close of each Fiscal Year, the General
Partner shall transmit to each Partner, a statement indicating such Partner's
share of each item of Partnership income, gain, loss, deduction or credit for
such Fiscal Year for federal income tax purposes.

Section 7.2. Accounting Method. For both financial and tax reporting
purposes and for purposes of determining profits and losses, the books and
records of the Partnership shall be kept on the accrual method of accounting
applied in a consistent manner and shall reflect all Partnership transactions
and be appropriate and adequate for the Partnership's business.

ARTICLE VIII

POWERS, RIGHTS AND DUTIES
OF THE LIMITED PARTNERS

Section 8.1. Limitations. The Limited Partners shall not participate in
the management or control of the Partnership's business, property or other
assets nor shall the Limited Partners transact any business for the
Partnership, nor shall the Limited Partners have the power to act for or bind
the Partnership, said powers being vested solely and exclusively in the General
partner. The Limited Partners shall have such rights as are set forth in this
Agreement or in any Action, and as are set forth in the Guarantee and the
Indenture. The Limited Partners shall have no interest in the properties or
assets of the General Partner, or any equity therein, or in any proceeds of any
sales thereof (which sales shall not be restricted in any respect), by virtue
of acquiring or owning an Interest.

Section 8.2. Liability. Subject to the provisions of the Act, no Limited
Partner shall be liable for the repayment, satisfaction or discharge of any
debts or other obligations of the Partnership in excess of the Capital Account
balance of such Limited Partner.

Section 8.3. Priority. No Limited Partner shall have priority over any
other Limited Partner as to Partnership allocations or distributions.

-18-
<PAGE> 23
ARTICLE IX

POWERS, RIGHTS AND DUTIES
OF THE GENERAL PARTNER

Section 9.1. Authority. Subject to the limitations provided in this
Agreement, the General Partner shall have exclusive and complete authority and
discretion to manage the operations and affairs of the Partnership and to make
all decisions regarding the business of the Partnership. Any action taken by
the General Partner shall constitute the act of and serve to bind the
Partnership. In dealing with the General Partner acting on behalf of the
Partnership, no Person shall be required to inquire into the authority of the
General Partner to bind the Partnership. Persons dealing with the Partnership
are entitled to rely conclusively on the power and authority of the General
Partner as set forth in this Agreement.

Section 9.2. Powers and Duties of General Partner. Except as otherwise
specifically provided herein, the General Partner shall have all rights and
powers of a general partner under the Act, and shall have all authority, rights
and powers in the management of the Partnership business to do any and all
other acts and things necessary, proper, convenient or advisable to effectuate
the purposes of this Agreement, including by way of illustration but not by way
of limitation, the following:

(a) to secure the necessary goods and services required in performing the
General Partner's duties for the Partnership;

(b) to exercise all powers of the Partnership, on behalf of the
Partnership, in connection with enforcing the Partnership's rights and interest
under the Subordinated Debentures and the Guarantee;

(d) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including with respect to
Dividends and voting rights and to make determinations as to the payment of
Dividends, and make all other required payments to Preferred Security Holders
and to the General Partner as the Partnership's paying agent;

(e) to open, maintain and close bank accounts and to draw checks and other
orders for the payment of money;

(f) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the
Partnership;

(g) to deposit, withdraw, invest, pay, retain and distribute the
Partnership's funds in a manner consistent with the provisions of this
Agreement;

(h) to take all action which may be necessary or appropriate for the
preservation and the continuation of the Partnership's valid existence, rights,
franchises and privileges as a limited partnership under the laws of the State
of Delaware and of each other jurisdiction in which such existence is necessary
to protect the limited liability of the Limited Partners or to enable the
Partnership to conduct the business in which it is engaged;

-19-
<PAGE> 24
(i) to take all action not inconsistent with applicable law, the
Certificate or this Agreement as long as such action does not adversely affect
the interests of the Preferred Security Holders, necessary to conduct its
affairs and to operate the Partnership in such a way that (x) the Partnership
would not be deemed an "investment company" required to be registered under the
1940 Act, (y) the Partnership will be taxed as a partnership for federal income
tax purposes, and (z) the Subordinated Debentures will be treated as
indebtedness of Illinois Power for federal income tax purposes;

(j) to cause the Partnership to enter into and perform, on behalf of the
Partnership Underwriting Agreements and to cause the Partnership to purchase
the Subordinated Debentures without any further act, vote or approval of any
Partner; and

(k) to execute and deliver any and all documents or instruments, perform
all duties and powers and do all things for and on behalf of the Partnership in
all matters necessary or desirable or incidental to the foregoing.

Section 9.3. Liability. Except as expressly set forth in this Agreement,
(a) the General Partner shall not be personally liable for the return of any
portion of the capital contributions (or any return thereon) of the Limited
Partners; (b) the return of such capital contributions (or any return thereon)
shall be made solely from assets of the Partnership; and (c) the General
Partner shall not be required to pay to the Partnership or to any Limited
Partner any deficit in any Limited Partner's Capital Account upon dissolution
or otherwise.

Section 9.4. Exculpation. (a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Partnership or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on
behalf of the Partnership and in a manner reasonably believed to be within the
scope of the authority conferred on such Indemnified Person by this Agreement
or by law except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence or willful misconduct with respect to such acts or omissions.

(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Partnership and upon such information, opinions,
reports or statements presented to the Partnership by any Person as to matters
the Indemnified Person reasonably believes are within such other Persons's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Partnership, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which distributions to Partners might properly be paid.

Section 9.5. Fiduciary Duty.

(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to any other Covered Person, an Indemnified Person acting under
this Agreement shall not be liable to the Partnership or to any other Covered
Person for its good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity,
are agreed by the parties hereto to replace such other duties and liabilities
of such Indemnified Person.

-20-
<PAGE> 25
(b) Unless otherwise expressly provided herein, (i) whenever a conflict of
interest exists or arises between Covered Persons, or (ii) whenever this
Agreement or any other agreement contemplated herein or therein provides that
an Indemnified Person shall act in a manner that is, or provides terms that
are, fair and reasonable to the Partnership or any Partner, the Indemnified
Person shall resolve such conflict of interest, take such action or provide
such terms, considering in each case the relative interest of each party
(including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any
customary or accepted industry practices, and any applicable generally accepted
accounting practices or principles. In the absence of bad faith by the
Indemnified Person, the resolution, action or term so made, taken or provided
by the Indemnified Person shall not constitute a breach of this Agreement or
any other agreement contemplated herein or of any duty or obligation of the
Indemnified Person at law or in equity or otherwise.

(c) Whenever in this Agreement an Indemnified Person is permitted or
required to make a decision (i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider only such
interests and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any interest of or
factors affecting the Partnership or any other Person, or (ii) in its "good
faith" or under another express standard, the Indemnified Person shall act
under such express standard and shall not be subject to any other or different
standard imposed by this Agreement or other applicable law.

Section 9.6. Indemnification.

(a) To the fullest extent permitted by applicable law, the Partnership
shall indemnify and hold harmless each Indemnified Person from and against any
loss, damage or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in good faith on
behalf of the Partnership and in a manner reasonably believed to be within the
scope of authority conferred on such Indemnified Person by this Agreement,
except that no Indemnified Person shall be entitled to be indemnified in
respect of any loss, damage or claim incurred by such Indemnified Person by
reason of gross negligence or willful misconduct with respect to such acts or
omissions; provided, however, that any indemnity under this Section 9.6 shall
be provided out of and to the extent of Partnership assets only, and no Covered
Person shall have any personal liability on account thereof.

(b) To the fullest extent permitted by applicable law, expenses (including
legal fees) incurred by an Indemnified Person in defending any claim, demand,
action, suit or proceeding shall, from time to time, be advanced by the
Partnership prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Partnership of an undertaking by or on behalf
of the Indemnified Person to repay such amount if it shall be determined that
the Indemnified Person is not entitled to be indemnified as authorized in
Section 9.6(a).

Section 9.7. Outside Businesses. Any Covered Person may engage in or
possess an interest in other business ventures of any nature of description,
independently or with others, similar or dissimilar to the business of the
Partnership, and the Partnership and the Partners shall have no rights by
virtue of this Agreement in and to such independent ventures or the income or
profits derived therefrom and the pursuit of any such venture, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper. No Covered Person shall be obligated to present any particular
investment opportunity to the Partnership even if such opportunity is of a
character that, if presented to the Partnership, could be taken by the
Partnership,

-21-
<PAGE> 26
and any Covered Person shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment opportunity.

Section 9.8. Limits on General Partner's Powers. Anything in this
Agreement to the contrary notwithstanding, the General Partner shall not cause
or permit the Partnership to

(a) acquire any assets other than as expressly provided herein,

(b) possess Partnership property for other than a Partnership purpose;

(d) make any loans to the General Partner or its Affiliates, other than
loans represented by the Subordinated Debentures or other similar debt
instruments of Illinois Power;

(e) perform any act that would subject any Limited Partner to liability as
a general partner in any jurisdiction;

(f) engage in any activity that is not consistent with the purposes of the
Partnership, as set forth in Section 1.3;

(g) confess a judgment against the Partnership;

(h) without the written consent of 66-2/3% in liquidation preference of the
Preferred Securities have an order for relief entered with respect to the
Partnership or commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consent to the
entry of an order for relief in an involuntary case under any such law, or
consent to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of the Partnership's property, or
make any assignment for the benefit of creditors of the Partnership; it being
understood that nothing in this paragraph (h) is to effect the ability of the
Partnership to dissolve pursuant to this Agreement; or

(i) subject to Section 1.3, borrow money or become liable for the
borrowings of any third party or to engage in any financial or other trade or
business.

Section 9.9. Tax Matters Partner. (a) For purposes of Code Section
6231(a)(7), the "Tax Matters Partner" shall be Illinois Power as long as it
remains the general partner of the Partnership. The Tax Matters Partner shall
keep the Limited Partners fully informed of any inquiry, examination or
proceeding involving any taxing authority.

(b) The General Partner shall not make an election in accordance with
Section 754 of the Code.

(c) The General Partner and the Preferred Security Holders acknowledge that
they intend, for United States federal income tax purposes, that the
Partnership shall be treated as a partnership and that the General Partner and
the Preferred Security Holders shall be treated as Partners of such Partnership
for such purposes.

Section 9.10. Expenses. The General Partner shall pay for all, and the
Partnership shall not be obligated to pay, directly or indirectly, for any,
costs and expenses of the Partnership

-22-
<PAGE> 27
(including, but not limited to, costs and expenses relating to the organization
of, and offering of limited partner interests in, the Partnership and costs and
expenses relating to the operation of the Partnership, including without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and costs
and expenses incurred in connection with the acquisition, financing, and
disposition of Partnership assets).

ARTICLE X

TRANSFERS OF INTERESTS BY PARTNERS

Section 10.1. Transfer of Interests. (a) Preferred Securities shall be
freely transferable by a Preferred Security Holder.

(b) The General Partner may not assign its interest in the Partnership in
whole or in part under any circumstances except to a successor of Illinois
Power by virtue of operation of law and, even then, only to the extent
permitted by the Indenture. The admission of such successor as a general
partner of the Partnership shall be effective upon the filing of an amendment
to the Certificate with the Secretary of State of the State of Delaware which
indicates that such successor has been admitted as a general partner in the
Partnership. If the General Partner assigns its entire Interest to a successor
of Illinois Power in accordance with this Agreement, the General Partner shall
cease to be a general partner in the Partnership simultaneously with the
admission of the successor as a general partner in the Partnership. Any such
successor general partner in the Partnership is hereby authorized to and shall
continue the business of the Partnership without dissolution.

(c) No Interest shall be transferred, in whole or in part, except in
accordance with the terms and conditions set forth in this Agreement. Any
transfer or purported transfer of any Interest not made in accordance with this
Agreement shall be null and void.

Section 10.2. Transfer of LP Certificates. The General Partner shall
provide for the registration of LP Certificates and of transfers of LP
Certificates. Upon surrender for registration of transfer of any LP
Certificate, the General Partner shall cause one or more new LP Certificates to
be issued in the name of the designated transferee or transferees. Every LP
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the General Partner duly
executed by the Preferred Security Holder or his or her attorney duly
authorized in writing. Each LP Certificate surrendered for registration of
transfer shall be canceled by the General Partner. A transferee of an LP
Certificate shall be admitted to the Partnership as a Limited Partner and shall
be entitled to the rights and subject to the obligations of a Preferred
Security Holder hereunder upon the receipt by a transferee of an LP
Certificate. By acceptance of an LP Certificate, each transferee shall be
deemed to have requested admission as a Limited Partner and to have agreed to
be bound by this Agreement. The transferor of an LP Certificate, in whole,
shall cease to be a Limited Partner at the time that the transferee of such LP
Certificate is admitted to the Partnership as a Limited Partner in accordance
with this Section 10.2.

Section 10.3. Persons Deemed Preferred Security Holders. The Partnership
may treat the Person in whose name any LP Certificate shall be registered on
the books and records of the Partnership as the sole holder of such LP
Certificate and of the Preferred Securities represented

-23-
<PAGE> 28
by such LP Certificate (the "Preferred Security Holder") for purposes of
receiving Dividends and for all other purposes whatsoever and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such LP Certificate or in the Preferred Securities represented by such LP
Certificate on the part of any other Person, whether or not the Partnership
shall have actual or other notice thereof.

Section 10.4. Book Entry Interests. The LP Certificates, on original
issuance, will be issued in the form of a global LP Certificate or LP
Certificates representing the Book Entry Interests, to be delivered to DTC, the
initial Clearing Agency, by, or on behalf of, the Partnership. Such LP
Certificate or LP Certificates shall initially be registered on the books and
records of the Partnership in the name of Cede & Co., the nominee of DTC, and
no Preferred Security Owner will receive a definitive LP Certificate
representing such Preferred Security Owner's interests in such LP Certificate,
except as provided in Section 10.7. Unless and until definitive, fully
registered LP Certificates (the "Definitive LP Certificates") have been issued
to the Preferred Security Owners pursuant to Section 10.7:

(i) The provisions of this Section shall be in full force and effect;

(ii) The Partnership and the General Partner shall be entitled to deal with
the Clearing Agency for all purposes of this Agreement (including the payment
of Dividends on the LP Certificates and receiving approvals, votes or
consents hereunder) as the Preferred Security Holder and the sole holder of
the LP Certificates and shall have no obligation to the Preferred Security
Owners;

(iii) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control; and

(iv) The rights of the Preferred Security Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by law
and agreements between such Preferred Security Owners and the Clearing Agency
and/or the Clearing Agency Participants. DTC will make book entry transfers
among the Clearing Agency Participants and receive and transmit payments of
Dividends on the LP Certificates to such Clearing Agency Participants.

Section 10.5. Notices to Clearing Agency. Whenever a notice or other
communication to the Preferred Security Holders is required under this
Agreement, unless and until Definitive LP Certificates shall have been issued
to the Preferred Security Owners pursuant to Section 10.7, the General Partner
shall give all such notices and communications specified herein to be given to
the Preferred Security Holders to the Clearing Agency, and shall have no
obligations to the Preferred Security Owners.

Section 10.6. Appointment of Successor Clearing Agency. If any Clearing
Agency elects to discontinue its services as securities depository with respect
to the Preferred Securities, the General Partner may, in its sole discretion,
appoint a successor Clearing Agency with respect to the Preferred Securities.

Section 10.7. Definitive LP Certificates; Appointment of Paying Agent(s).
If (i) a Clearing Agency elects to discontinue its services as securities
depository with respect to the Preferred Securities and a successor Clearing
Agency is not appointed within 90 days after such discontinuance pursuant to
Section 10.6 or (ii) the Partnership elects to terminate the book entry

-24-
<PAGE> 29
system through the Clearing Agency, then (a) Definitive LP Certificates shall
be prepared by the Partnership and (b) the General Partner shall authorize one
or more Persons (each, a "Paying Agent") to pay Dividends, redemption payments
or liquidation payments on behalf of the Partnership with respect to the
Preferred Securities. Upon surrender of the global LP Certificate or LP
Certificates representing the Book Entry Interests by the Clearing Agency,
accompanied by registration instructions, the General Partner shall cause
Definitive LP Certificates to be delivered to Preferred Security Owners in
accordance with the instructions of the Clearing Agency. Neither the General
Partner nor the Partnership shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying
on, such instructions. Any Person receiving a Definitive LP Certificate in
accordance with this Article X shall be admitted to the Partnership as a
Limited Partner upon receipt of such Definitive LP Certificate and shall be
registered on the books and records of the Partnership as a Preferred Security
Holder. The Clearing Agency or the nominee of the Clearing Agency, as the case
may be, shall cease to be a Limited Partner under this Section 10.7 at the time
that at least one additional Person is admitted to the Partnership as a Limited
Partner in accordance with this Section 10.7. The Definitive LP Certificates
shall be printed, lithographed or engraved or may be produced in any other
manner as is reasonably acceptable to the General Partner, as evidenced by its
execution thereof.

ARTICLE XI

WITHDRAWAL; DISSOLUTION;
LIQUIDATION AND DISTRIBUTION OF ASSETS

Section 11.1. Withdrawal of Partners. Subject to the further provisions
of this Section 11.1 and except as provided in Article X, no Partner shall at
any time withdraw from the Partnership. Any Partner withdrawing in
contravention of this Section 11.1, shall indemnify, defend and hold harmless
the Partnership and the other Partners from and against any losses, expenses,
judgments, fines, settlements or damages suffered or incurred by the
Partnership or such other Partners arising out of or resulting from such
withdrawal. No permitted transfer of all or any portion of a Partner' s
Interest in the Partnership in accordance with Article X shall constitute a
withdrawal in violation of this Section 11.1. Further, the withdrawal of a
Holder in connection with the redemption of its entire Interest in the
Partnership, in accordance with the terms hereof, or of an Action, shall not
constitute a violation of this Section 11.1.

Section 11.2. Dissolution of the Partnership.

(a) The Partnership shall not be dissolved by the admission of additional
or successor Partners in accordance with the terms of this Agreement. The
death, withdrawal, bankruptcy or dissolution of a Limited Partner, or the
occurrence of any other event which terminates the Interest of a Limited
Partner in the Partnership, shall not, in and of itself, cause the Partnership
to be dissolved and its affairs wound up. To the fullest extent permitted by
applicable law, upon the occurrence of such event, the General Partner may,
without any further act, vote or approval of any Partner, admit any Person to
the Partnership as an additional or substitute limited partner in the
Partnership, which admission shall be effective as of the date of the
occurrence of such event, and the business of the Partnership shall be
continued without dissolution.

(b) The Partnership shall be dissolved and its affairs shall be wound up
upon the occurrence of any of the following events:

-25-
<PAGE> 30
(i) The expiration of the term of the Partnership, as provided in Section
1.4 hereof;

(ii) Upon the bankruptcy or withdrawal of the General Partner;

(iii) Upon the assignment by the General Partner of its entire interest
in the Partnership when the assignee is not admitted to the Partnership as a
general partner of the Partnership in accordance with Section 10.1, or the
filing of a certificate of dissolution or its equivalent with respect to the
General Partner, or the revocation of the General Partner's charter and the
expiration of 90 days after the date of notice to the General Partner of
revocation without a reinstatement of its charter, or any other event occurs
which causes the General Partner to cease to be a general partner of the
Partnership under the Act, unless the business of the Partnership is
continued in accordance with the Act (any remaining general partner of the
Partnership is hereby authorized to and shall continue the business of the
Partnership without dissolution);

(iv) In accordance with any Action;

(v) the entry of a decree of judicial dissolution under Section 17-802
of the Act; or

(vi) the written consent of all Partners.

(c) Upon dissolution of the Partnership, the Liquidator (as defined below)
shall promptly notify the Partners of such dissolution.

Section 11.3. Liquidation. (a) In the event of the dissolution of the
Partnership for any reason, the General Partner (or, if the Partnership is
dissolved pursuant to Section 11.2(b)(ii) or (iii), then a liquidating trustee
appointed by 66 2/3% in liquidation preference of the Preferred Securities (the
General Partner or such Person so appointed is hereinafter referred to as the
"Liquidator")), shall commence to wind up the affairs of the Partnership and to
liquidate the Partnership's assets; provided, however, that a reasonable time
shall be allowed for the orderly liquidation of the assets of the Partnership
and the satisfaction of liabilities to creditors so as to enable the Partners
to minimize the normal losses attendant upon liquidation. The Partners shall
continue to share all income, losses and distributions during the period of
liquidation in accordance with Articles IV and V. Subject to the provisions of
this Article XI, the Liquidator shall have full right and unlimited discretion
to determine the time, manner and terms of any sale or sales of Partnership
property pursuant to such liquidation, giving due regard to the activity and
condition of the relevant market and general financial and economic conditions.

(b) The Liquidator shall have all of the rights and powers with respect to
the assets and liabilities of the Partnership in connection with the
liquidation and termination of the Partnership that the General Partner would
have with respect to the assets and liabilities of the Partnership during the
term of the Partnership, and the Liquidator is hereby expressly authorized and
empowered to execute any and all documents necessary or desirable to effectuate
the liquidation and termination of the Partnership and the transfer of any
assets.

(c) Notwithstanding the foregoing, a Liquidator which is not the General
Partner shall not be deemed a Partner in the Partnership and shall not have any
of the economic interests in the Partnership of a Partner; and such Liquidator
may be compensated for its services to the

-26-
<PAGE> 31
Partnership at normal, customary and competitive rates for its services to the
Partnership as reasonably determined by a majority in liquidation preference
of the Preferred Securities.

Section 11.4. Distribution in Liquidation.

(a) Upon the winding up of the Partnership, the assets of the Partnership
shall be distributed in the following order of priority:

(i) to creditors of the Partnership, including Preferred Security Holders
who are creditors, to the extent permitted by law, in satisfaction of the
liabilities of the Partnership (whether by payment or the making of
reasonable provision for payment thereof); and

(ii) to the Partners in proportion to the Partners' positive Capital
Account balances.

Section 11.5. Rights of Limited Partners. Each Limited Partner shall look
solely to the assets of the Partnership for all distributions with respect to
the Partnership and such Partner's capital contribution (including return
thereof), and such Partner's share of profits or losses thereof, and shall have
no recourse therefor (upon dissolution or otherwise) against the General
Partner. No Partner shall have any right to demand or receive property other
than cash upon dissolution and termination of the Partnership.

Section 11.6. Termination. The Partnership shall terminate when all of
the assets of the Partnership shall have been disposed of and the assets shall
have been distributed as provided in Section 11.4, and the Liquidator has
executed and caused to be filed a certificate of cancellation of the
Certificate.

ARTICLE XII

AMENDMENTS AND MEETINGS

Section 12.1. Amendments. Except as otherwise provided in this Agreement
or by any applicable terms of any Action establishing a series of Preferred
Securities, this Agreement may be amended by, and only by, a written instrument
executed by the General Partner; provided, however, that (i) no amendment shall
be made, and any such purported amendment shall be void and ineffective, to the
extent the result thereof would be to cause the Partnership to be treated as
anything other than a partnership for purposes of United States income taxation
and (ii) any amendment which would adversely affect the powers, preferences or
special rights of any series of Preferred Securities may be effected only as
permitted by the terms of such series of Preferred Securities.

Section 12.2. Amendment of Certificate. In the event this Agreement shall
be amended pursuant to Section 12.1, the General Partner shall amend the
Certificate to reflect such change if it deems such amendment of the
Certificate to be necessary or appropriate.

Section 12.3. Meetings of the Partners.

(a) Meetings of the Limited Partners who are Holders of any series or, in
the case of a class vote, of multiple series of Preferred Securities may be
called at any time by the

-27-
<PAGE> 32
General Partner (or as provided in any Action establishing a series of
Preferred Securities) to consider and act on any matter on which Limited
Partners are entitled to act under the terms of this Agreement or the Act. The
General Partner shall call a meeting of Holders of any series or, in the case
of a class vote, multiple series, if directed to do so by Holders of not less
than 10% in liquidation preference of the Preferred Securities of that series
entitled to vote at the meeting. Such direction shall be given by delivering
to the General Partner one or more calls in writing stating that the signing
Limited Partners wish to call a meeting and indicating the general or specific
purpose for which the meeting is to be called. Any Limited Partner calling a
meeting shall specify in a writing the LP Certificates held by the Limited
Partners exercising the right to call a meeting and only those specified
Interests shall be counted for purposes of determining whether the required
percentage set forth in the proceeding sentence has been met. Except to the
extent otherwise provided in any such Action, the following provisions shall
apply to meetings of Partners.

(b) Notice of any such meeting shall be given to all Limited Partners
having a right to vote thereat not less than seven Business Days nor more than
60 days prior to the date of such meeting. Whenever a vote, consent or approval
of Limited Partners is permitted or required under this Agreement, such vote,
consent or approval may be given at a meeting of Limited Partners. Further,
any action that may be taken at a meeting of the Limited Partners may be taken
without a meeting if a consent in writing setting forth the action so taken is
signed by Limited Partners owning not less than the minimum Interests that
would be necessary to authorize or take such action at a meeting at which all
Limited Partners having a right to vote thereon were present and voting.
Prompt notice of the taking of action without a meeting shall be given to the
Limited Partners entitled to vote who have not consented in writing. The
General Partner may specify that any written ballot submitted to the Limited
Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time specified by the General Partner.

(c) Each Limited Partner may authorize any Person to act for it by proxy on
all matters in which a Limited Partner is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Limited Partner executing it. Except as otherwise provided
herein, in any Action or pursuant to Section 12.3(e), all matters relating to
the giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Partnership were a Delaware corporation
and the Limited Partners were stockholders of a Delaware corporation.

(d) Each meeting of Partners shall be conducted by the General Partner or
by such other Person that the General Partner may designate.

(e) The General Partner, in its sole discretion, shall establish all other
provisions relating to meetings of Limited Partners, including notice of the
time, place or purpose of any meeting at which any matter is to be voted on by
any Limited Partners, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the exercise of any such
right to vote.

-28-
<PAGE> 33
ARTICLE XIII

MISCELLANEOUS

Section 13.1. Notices. All notices provided for in this Agreement shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:

(a) if given to the Partnership, in care of the General Partner at the
Partnership's mailing address set forth below:

(b) if given to the General Partner, at its mailing address set forth below:

Illinois Power Company
500 South 27th Street
Decatur, Illinois 62525
Attention: President

All such notices shall be deemed to have been given when sent.

Section 13.2. Entire Agreement. This Agreement constitutes the entire
agreement among the parties. It supersedes any prior agreement or
understandings among them, and it may not be modified or amended in any manner
other than as set forth herein.

Section 13.3. Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the law of
the State of Delaware and all rights and remedies shall be governed by such
laws without regard to principles of conflict of laws.

Section 13.4. Effect. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of the parties
and their legal representatives, successors and assigns.

Section 13.5. Pronouns and Number. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in either the
masculine, feminine or neuter shall include the masculine, feminine and neuter.

Section 13.6. Captions. Captions contained in this Agreement are inserted
only as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision hereof.

Section 13.7. Partial Enforceability. If any provision of this Agreement,
or the application of such provision to any Person or circumstance, shall be
held invalid, the remainder of this Agreement, or the application of such
provision to Persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.

-29-
<PAGE> 34
Section 13.8. Counterparts. This Agreement may contain more than one
counterpart of the signature page and this Agreement may be executed by the
affixing of the signature of each of the Partners to one of such counterpart
signature pages. All of such counterpart signatures pages shall be read as
though one, and they shall have the same force and effect as though all of the
signers had signed a single signature page.

Section 13.9. Waiver of Partition. Each Partner hereby irrevocably waives
any and all rights (if any) that such Partner may have to maintain any action
for partition of any of the Partnership's property.

Section 13.10. Remedies. The failure of any party to seek redress for
violation of, or to insist upon the strict performance of, any provision of
this Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation. The
rights and remedies provided by this Agreement are cumulative and the use of
any one right or remedy by any party shall not preclude or waive its right to
use any or all other remedies. Said rights and remedies are given in addition
to any other rights the parties may have by law, statute, ordinance or
otherwise.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above stated.

General Partner:

ILLINOIS POWER COMPANY,
an Illinois corporation

By:______________________
Name:
Title:

Initial Limited Partner:

ILLINOVA CORPORATION,
an Illinois corporation

By:_______________________
Name:
Title:

-30-
<PAGE> 35
Annex A

Certificate Number

R-1

CUSIP NO.

Certificate Evidencing Preferred Securities

Illinois Power Capital, L.P.*

________________ Monthly Income Preferred Securities, Series _______
(liquidation preference $25 per Preferred Security)

Illinois Power Capital, L.P., a limited partnership formed under the laws of
the State of Delaware (the "Partnership"), hereby certifies that __________
(the "Holder") is the registered owner of _______ (____) preferred securities of
the Partnership representing limited partner interests in the Partnership of a
series designated the ______________ Monthly Income Preferred Securities,
Series _____ (liquidation preference $25 per Preferred Security) (the
"Preferred Securities"). The Preferred Securities are fully paid and
nonassessable limited partner interests in the Partnership, as to which the
limited partners in the Partnership who hold the Preferred Securities (the
"Preferred Security Holders"), as limited partners in the Partnership, will,
assuming such Preferred Security Holders do not participate in the control of
the business of the Partnership, have no liability in excess of their
obligations to make payments provided for in the Limited Partnership Agreement
(as defined below) and their share of the Partnership's assets and
undistributed profits (subject to the obligation of a Preferred Security Holder
to repay any funds wrongfully distributed to it) and are transferable on the
books and records of the Partnership, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in proper form
for transfer. The powers, preferences and special rights and limitations of the
Preferred Securities are set forth in, and this certificate and the Preferred
Securities represented hereby are issued and shall in all respects be subject
to the terms and provisions of, the Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of __________ 1994, as the same may be
amended from time to time (the "Limited Partnership Agreement"), and the Action
of the General Partner taken pursuant thereto authorizing the issuance of the
Preferred Securities and determining the designations, powers, rights,
preferences, privileges, limitations and other terms and provisions, regarding
Dividends, voting, return of capital and otherwise, and other matters relating
to the Preferred Securities. Capitalized terms used herein but not defined
shall have the meaning given them in the Limited Partnership Agreement or the
Action. The Holder is entitled to the benefits of the Guarantee Agreement of
Illinois Power Company, an Illinois corporation ("Illinois Power"), dated as of
____________________, 1994 (the "Guarantee"), and the Subordinated Debentures
of Illinois Power issued pursuant to the Indenture dated as of ______________,
1994

_______________

*The form of this Certificate may be modified to reflect the specific
terms and provisions of a particular series of Preferred Securities.
<PAGE> 36
between Illinois Power and The First National Bank of Chicago, as Trustee (the
"Indenture"), in each case to the extent provided therein. The Partnership
will furnish a copy of the Limited Partnership Agreement, the Action, the
Guarantee and the Subordinated Debentures to the Holder without charge upon
written request to the Partnership at its principal place of business or
registered office.

The Holder, by accepting this certificate, is deemed to have agreed that (i)
the Subordinated Debentures acquired by the Partnership with the proceeds from
the issuance of the Preferred Securities are subordinate and junior in right of
payment to all Senior Indebtedness of Illinois Power as and to the extent
provided in the Indenture, and (ii) the Guarantee ranks subordinate and junior
in right of payment to all liabilities of Illinois Power, pari passu with the
most senior preferred or preference stock now or hereafter issued by Illinois
Power and with any guarantee now or hereafter issued by Illinois Power in
respect of any preferred or preference stock of any Affiliate of Illinois
Power, and senior to Illinois Power's common stock, as and to the extent
provided in the Guarantee. Upon receipt of this certificate, the Holder is
admitted to the Partnership as a Limited Partner, is bound by the Limited
Partnership Agreement and the Action and is entitled to the benefits
thereunder.

IN WITNESS WHEREOF, the Partnership has executed this certificate this day of
___________, 199__

ILLINOIS POWER CAPITAL, L.P.

By: ILLINOIS POWER COMPANY,
its General Partner

By:_________________________

-2-

<PAGE> 1
EXHIBIT 4(D)

ACTION OF GENERAL PARTNER

ILLINOIS POWER COMPANY, an Illinois corporation ("Illinois Power"), as
General Partner of Illinois Power Capital, L.P., a Delaware limited partnership
(the "Partnership"), in accordance with Section 6.1(b)(ii) of the Amended and
Restated Agreement of Limited Partnership of the Partnership dated as of
_________________, 1994 (the "Partnership Agreement"), does hereby establish a
new series of Preferred Securities having the following designation, powers,
rights, preferences, privileges, limitations and other terms and provisions
(capitalized terms used herein without definition having the meanings specified
in the Partnership Agreement):

(a) Designation. __________ (_____________) Preferred Securities,
with a liquidation preference of $25 per Preferred Security, are hereby
designated as ["_____% Cumulative Monthly Income Preferred Securities, Series
A"] ["Cumulative Adjustable Rate Monthly Income Preferred Securities, Series
A"] (the "Series A Preferred Securities").

(b) Dividends. (i) The Limited Partners who hold the Series A
Preferred Securities shall be entitled to receive, when, as and if available and
determined to be so distributed by the General Partner (the General Partner's
discretion to be subject to (b)(ii) below), cumulative dividends at a [rate per
annum of ____% of the liquidation preference of $25 per Preferred Security,
calculated on the basis of a 360-day year of twelve 30-day months,] [rate per
annum of ___% from the date of initial issuance to _________________, 1994, and
thereafter at the Applicable Rate (as defined in the Prospectus Supplement
relating to the offering of the Series A Preferred Securities) from time to time
in effect], and payable in United States dollars monthly in arrears on the last
day of each calendar month of each year, commencing _________________, 1994.
Such Dividends will accumulate and be cumulative whether or not they have been
determined to be made and whether or not there are funds of the Partnership
legally available for the payment of Dividends. Dividends on the Series A
Preferred Securities shall be cumulative from the date of original issue, and
the cumulative portion from such date to _________________, 1994 shall be
payable on _________________, 1994. In the event that any date on which
Dividends are payable on the Series A Preferred Securities is not a Business
Day, then payment of the Dividends payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. [Dividends in arrears for more than one month will bear interest
thereon at the rate per annum of ____% thereof.]

(ii) Dividends on the Series A Preferred Securities must be paid
on the date such Dividends are payable to the extent that the Partnership has,
on the date such Dividends are payable, (x) funds legally available for the
payment of such Dividends and (y) cash on hand sufficient to permit such
payments. Dividends will be payable to the Preferred Security Holders as they
appear on the books and records of the Partnership on the relevant record
dates, which, as long as the Series A Preferred Securities remain in
book-entry-only form, will be one Business Day prior to the relevant
payment dates. In the event the Series A Preferred Securities shall not
continue to remain in book-entry-only form, the General Partner shall have the
right to select relevant record dates which shall be more than one Business Day
prior to the relevant payment dates.
<PAGE> 2
(iii) The Partnership shall not:

(A) pay, or set aside for payment, any Dividends with
respect to any other Preferred Securities, unless the amount of any Dividends
declared on such other Preferred Securities is paid on such other such
Preferred Securities and the Series A Preferred Securities on a pro rata basis
on the date such dividends are paid on such other Preferred Securities, so that

(x) the aggregate amount of Dividends paid on the
Series A Preferred Securities bears to the aggregate amount
of Dividends paid on such other Preferred Securities the same
ratio as

(y) the aggregate of all accumulated and unpaid
Dividends in respect of the Series A Preferred Securities
bears to the aggregate of all accumulated and unpaid
Dividends in respect of such other Preferred Securities; or

(B) redeem, purchase or otherwise acquire any other Preferred
Securities;

until, in each case, such time as all accumulated and unpaid Dividends on the
Series A Preferred Securities shall have been paid in full for all Dividend
periods terminating on or prior to , in the case of clause (A), such payment
and, in the case of clause (B), the date of such redemption, purchase or
acquisition.

(c) Redemption. (i) The Series A Preferred Securities are redeemable,
at the option of the Partnership, in whole or in part from time to time, on or
after _____, 1999, upon not less than 30 nor more than 60 days' notice, at the
Redemption Price (as hereinafter defined). If a partial redemption would
result in a delisting of the Series A Preferred Securities, the Partnership may
only redeem the Series A Preferred Securities in whole.

(ii) Upon repayment of the Series A Subordinated Debentures at
maturity or earlier, the proceeds from such repayment shall be applied to
redeem the Series A Preferred Securities, in whole, at the redemption price of
$25 per Preferred Security plus accumulated and unpaid Dividends (whether or
not declared) to the date fixed for redemption (the "Redemption Price") upon
not less than 30 nor more than 60 days' notice.

(iii) If a Special Event shall occur and be continuing, the General
Partner shall elect to either (A) redeem the Series A Preferred Securities in
whole (and not in part), upon not less than 30 or more than 60 days' notice at
the Redemption Price within 90 days following the occurrence of such Special
Event; provided, that if at the time there is available to the General Partner
the opportunity to eliminate, within such 90-day period, the Special Event by
taking some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure which has no adverse effect on
the Partnership or the General Partner, the General Partner will pursue such
measure in lieu of redemption, or (B) dissolve the Partnership and, after
satisfaction of liabilities of creditors as required by the Partnership Act,
cause to be distributed to Series A Preferred Security Holders in liquidation
of the Partnership, within 90 days following the occurrence of such Special
Event, Series A Subordinated Debentures having a

-2-
<PAGE> 3
principal amount equal to the aggregate liquidation preference of the
outstanding Series A Preferred Securities and with accrued interest in an
amount equal to any unpaid Dividends on the Series A Preferred Securities. In
the case of a Tax Event, the General Partner may also elect to cause the Series
A Preferred Securities to remain outstanding.

After the date fixed for any distribution of Series A Subordinated
Debentures upon dissolution of the Partnership, (i) the Series A Preferred
Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee,
as the record Holder of the Series A Preferred Securities, will receive a
registered global certificate or certificates representing the Series A
Subordinated Debentures to be delivered upon such distribution, and (iii) any
certificates representing Series A Preferred Securities not held by DTC or its
nominee will be deemed to represent Series A Subordinated Debentures having a
principal amount equal to the aggregate liquidation preference of such Series A
Preferred Securities until such certificates are presented to the General
Partner or its agent for transfer or reissuance.

(d) Redemption Procedures. (i) Notice of any redemption (a "Notice of
Redemption") of the Series A Preferred Securities will be given by the
Partnership by mail to each record Holder to be redeemed not fewer than 30 nor
more than 60 days prior to the date fixed for redemption thereof. For purposes
of the calculation of the date of redemption and the dates on which notices are
given pursuant to this paragraph (d)(i), a Notice of Redemption shall be deemed
to be given on the day such notice is first mailed by first-class mail, postage
prepared, to Preferred Security Holders who hold Series A Preferred Securities.
Each Notice of Redemption shall be addressed to the Preferred Security Holders
who hold Series A Preferred Securities at the address of the Holder appearing
in the books and records of the Partnership. No defect in the Notice of
Redemption or in the mailing thereof or publication of its contents shall
affect the validity of the redemption proceedings.

(ii) In the event that fewer than all the outstanding Series A
Preferred Securities are to be redeemed in the case of a redemption pursuant to
(c)(i) above, the Series A Preferred Securities to be redeemed will be selected
in accordance with paragraph (d)(iv) hereof. The Partnership may not redeem
fewer than all the outstanding Series A Preferred Securities unless all
accumulated and unpaid Dividends have been paid on all Series A Preferred
Securities for all monthly Dividend periods terminating on or prior to the
date of redemption.

(iii) If the Partnership gives a Notice of Redemption in respect
of Series A Preferred Securities, then, (A) by 12:00 noon, New York time, on the
redemption date in the case of Clauses (I) and (II) below, or (B) prior to the
close of business on the Business Day immediately preceding the redemption date
in the case of Clause (III) below, the Partnership will irrevocably deposit
with (I) DTC, is the Clearing Agency on the date such Notice of Redemption is
given, (II) such other Person which is the Clearing Agency on the date such
Notice of Redemption is given, or (III) if there is no Clearing Agency with
respect to the Series A Preferred Securities on the date such Notice of
Redemption is given, the Paying Agent or Paying Agents appointed by the General
Partner pursuant to Section 10.7 of the Partnership Agreement, funds sufficient
to pay the applicable Redemption Price and will give DTC, such other Clearing
Agency or the Paying Agent or Paying Agents, as the case may be, irrevocable
instructions and authority to pay the Redemption Price to the Holders of the
Series A Preferred Securities. If Notice of Redemption shall have been given
and funds deposited as required, then upon the date of such deposit, all rights
of the Preferred Security Holders who hold such Series A Preferred Securities
so called for redemption

-3-
<PAGE> 4
will cease, except the right of the Holders of such securities to receive the
Redemption Price, but without interest on such Redemption Price. In the event
that any date fixed for redemption of Series A Preferred Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding day which is a Business Day (and without interest
or other payment in respect of any such delay), except that, if such Business
Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Series A Preferred Securities is improperly
withheld or refused and not paid either by the Partnership or by Illinois Power
pursuant to the Guarantee, Dividends on such Series A Preferred Securities will
continue to accumulate at the then applicable rate, from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of calculating
the Redemption Price.

(iv) Notices of Redemption shall be sent to (A) Cede & Co. or any
successor nominee of DTC, in either case so long as DTC is the Clearing Agency,
(B) the nominee of any Clearing Agency other than DTC or (C) any Paying Agent
or Paying Agents appointed by the General Partner pursuant to Section 10.7 of
the Partnership Agreement. If less than all the Series A Preferred Securities
are being redeemed, interests to be redeemed shall be determined as follows:
(x) in accordance with DTC's practice, as long as DTC is the Clearing Agency,
(y) in accordance with the practice of any other Clearing Agency or (z) if, at
the time such redemption notice is sent, there is no Clearing Agency, the
Paying Agent or Paying Agents shall select, by lot or in such other manner as
the Paying Agent or Paying Agents shall deem appropriate and fair, in their
discretion, the Series A Preferred Securities to be redeemed.

(e) Liquidation Distribution. In the event of any voluntary or
involuntary dissolution, winding up or termination of the Partnership,
Preferred Security Holders who hold the Series A Preferred Securities at the
time will be entitled to receive out of the assets of the Partnership available
for distribution to Partners, after satisfaction of liabilities of creditors as
required by the Partnership Act, before any distribution of assets is made to
the General Partner, but together with the Holders of every other series of
Preferred Securities outstanding, if any, an amount equal to, in the case of
Holders of Series A Preferred Securities, the aggregate of the liquidation
preference of $25 per Preferred Security and accumulated and unpaid Dividends
thereon (whether or not declared) to the date of payment (the "Liquidation
Distribution"), unless in connection with such dissolution, winding up or
termination, Series A Subordinated Debentures in an aggregate principal amount
equal to the Liquidation Distribution have been distributed on a pro rata basis
to the Holders of the Series A Preferred Securities.

If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Partnership has insufficient assets available to pay
in full the aggregate Liquidation Distribution and the aggregate maximum
liquidation distributions on any other series of Preferred Securities, then the
amounts payable directly by the Partnership on the Series A Preferred
Securities and on such other series of Preferred Securities shall be paid on a
pro rata basis, so that

(i) the aggregate amount paid in respect of the Liquidation
Distribution bears to the aggregate amount paid as liquidation
distributions on such other series of Preferred Securities the same
ratio as

(ii) the aggregate Liquidation Distribution bears to the
aggregate maximum liquidation distributions on such other series of
Preferred Securities.

-4-
<PAGE> 5
* * * *

This written Action of General Partner shall constitute an Action
within the meaning of Section 6.1(b)(ii) of the Partnership Agreement.

IN WITNESS WHEREOF, the undersigned has executed this Action of General
Partner this ____ day of ___________, 1994.

GENERAL PARTNER

Illinois Power Company

By:
Name:
Title:

-5-

<PAGE> 1

EXHIBIT 4(e)

INDENTURE

BETWEEN

ILLINOIS POWER COMPANY

AND

THE FIRST NATIONAL BANK OF CHICAGO

RELATING TO THE ISSUANCE OF
UNSECURED SUBORDINATED DEBENTURES

Dated as of __________ 1, 1994
<PAGE> 2
TABLE OF CONTENTS

Page

ARTICLE ONE -- Definitions . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE TWO -- Issue, Description, Terms, Execution,
Registration and Exchange of
Debentures . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE THREE -- Redemption of Debentures and Sinking
Fund Provisions . . . . . . . . . . . . . . . . . . 16

ARTICLE FOUR -- Particular Covenants of the Company . . . . . . . . . 19

ARTICLE FIVE -- Debentureholders' Lists and Reports
by the Company and the Trustee . . . . . . . . . . . 21

ARTICLE SIX -- Remedies of the Trustee and
Debentureholders on Event of
Default . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE SEVEN -- Concerning the Trustee . . . . . . . . . . . . . . . 28

ARTICLE EIGHT -- Concerning the Debentureholders . . . . . . . . . . . 35

ARTICLE NINE -- Supplemental Indentures . . . . . . . . . . . . . . . 37

ARTICLE TEN -- Consolidation, Merger and Sale . . . . . . . . . . . 39

ARTICLE ELEVEN -- Satisfaction and Discharge of
Indenture; Unclaimed Moneys . . . . . . . . . . . . . 40

ARTICLE TWELVE -- Immunity of Incorporators,
Stockholders, Officers and
Directors . . . . . . . . . . . . . . . . . . . . . . 44

ARTICLE THIRTEEN -- Miscellaneous Provisions . . . . . . . . . . . . . . 44

ARTICLE FOURTEEN -- Subordination of Debentures . . . . . . . . . . . . . 46

- i -
<PAGE> 3
THIS INDENTURE, dated as of the 1st day of ________, 1994, between
ILLINOIS POWER COMPANY, a corporation duly organized and existing under the
laws of the State of Illinois (the "Company"), and THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association organized and existing under the laws
of the United States of America, as trustee (the "Trustee"):

WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of unsecured debentures (the "Debentures"), in an unlimited aggregate
principal amount to be issued from time to time in one or more series as in
this Indenture provided as registered Debentures without coupons, to be
authenticated by the certificate of the Trustee;

WHEREAS, to provide the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture;

WHEREAS, the Debentures and the certificate of authentication to be
borne by the Debentures (the "Certificate of Authentication") are to be
substantially in such forms as may be approved by the Board of Directors (as
defined below) or set forth in any indenture supplemental to this Indenture;

AND WHEREAS, all acts and things necessary to make the Debentures
issued pursuant to this Indenture, when executed by the Company and
authenticated and delivered by the Trustee as in this Indenture provided, the
valid, binding and legal obligations of the Company, and to constitute these
presents a valid indenture and agreement according to its terms, have been done
and performed or will be done and performed prior to the issuance of such
Debentures, and the execution of this Indenture and the issuance under this
Indenture of the Debentures have been or will be prior to issuance in all
respects duly authorized, and the Company, in the exercise of the legal right
and power in it vested, executes this Indenture and proposes to make, execute,
issue and deliver the Debentures;

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That in order to declare the terms and conditions upon which the
Debentures are and are to be authenticated, issued and delivered, and in
consideration of the premises, of the purchase and acceptance of the Debentures
by their holders and of the sum of one dollar ($1.00) to it duly paid by the
Trustee at the execution of these presents, the receipt of which is hereby
acknowledged, the Company covenants and agrees with the Trustee, for the equal
and proportionate benefit (subject to the provisions of this Indenture) of the
respective holders from time to time of the Debentures, without any
discrimination, preference or priority of any one Debenture over any other by
reason of priority in the time of issue, sale or negotiation of the Debentures,
or otherwise, except as provided in this Indenture, as follows:

ARTICLE ONE

DEFINITIONS

The terms defined in this Article (except as in this Indenture
otherwise expressly provided or unless the context otherwise requires) for all
purposes of this Indenture, any
<PAGE> 4
resolution of the Board of Directors of the Company and of any indenture
supplemental to this Indenture shall have the respective meanings specified in
this Section. All other terms used in this Indenture which are defined in the
Trust Indenture Act, or which are by reference in such Act defined in the
Securities Act (except as otherwise expressly provided in this Indenture or
unless the context otherwise requires, shall have the meanings assigned to such
terms in the Trust Indenture Act and in the Securities Act as in force at the
date of the execution of this instrument.

ADDITIONAL INTEREST:

The term "Additional Interest" shall have the meaning ascribed to such term in
Section 2.13.

AFFILIATE:

The term "Affiliate" of the Company shall mean any company at least a majority
of whose outstanding voting stock shall at the time be owned by the Company, or
by one or more direct or indirect subsidiaries of or by the Company and one or
more direct or indirect subsidiaries of the Company. For the purposes only of
this definition of the term "Affiliate," the term "voting stock," as applied to
the stock of any company, shall mean stock of any class or classes having
ordinary voting power for the election of a majority of the directors of such
company, other than stock having such power only by reason of the occurrence of
a contingency.

AUTHENTICATING AGENT:

The term "Authenticating Agent" means an authenticating agent with respect to
all or any of the series of Debentures, as the case may be, appointed with
respect to all or any series of the Debentures, as the case may be, by the
Trustee pursuant to Section 2.10.

BOARD OF DIRECTORS:

The term "Board of Directors" shall mean the Board of Directors of the Company,
or any duly authorized committee of such Board.

BOARD RESOLUTION:

The term "Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors or any duly authorized committee of such Board and to be
in full force and effect on the date of such certification.

BUSINESS DAY:

The term "business day," with respect to any series of Debentures, shall mean
any day other than a day on which banking institutions in New York, New York
are authorized or obligated by law or executive order to close.

- 2 -
<PAGE> 5
CERTIFICATE:

The term "Certificate" shall mean a certificate signed by the principal
executive officer, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the principal financial officer or the principal
accounting officer of the Company. The Certificate need not comply with the
provisions of Section 13.06.

COMMISSION:

The term "Commission" shall mean the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time of the date of execution and delivery of this Indenture the Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body, if any, performing such duties at such time.

COMPANY:

The term "Company" shall mean Illinois Power Company, a corporation duly
organized and existing under the laws of the State of Illinois, and, subject to
the provisions of Article Ten, shall also include its successors and assigns.

CORPORATE TRUST OFFICE:

The term "Corporate Trust Office" shall mean the office of the Trustee at which
at any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this Indenture is
located at One First National Plaza, Suite 0126, Chicago, Illinois 60670,
Attention: Corporate Trust Services Department.

DEBENTURE OR DEBENTURES:

The term "Debenture" or "Debentures" shall mean any Debenture or Debentures, as
the case may be, authenticated and delivered under this Indenture.

DEBENTUREHOLDER:

The term "Debentureholder," "holder of Debentures," "registered holder" or
other similar term shall mean the person or persons in whose name or names a
particular Debenture shall be registered on the books of the Company kept for
that purpose in accordance with the terms of this Indenture.

DEBENTURE REGISTER:

The term "Debenture Register" shall have the meaning ascribed to such term in
Section 2.05(b).

- 3 -
<PAGE> 6
DEBENTURE REGISTRAR:

The term "Debenture Registrar" shall have the meaning ascribed to such term in
Section 2.05(b).

DEFAULT:

The term "Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.

DEFAULTED INTEREST:

The term "Defaulted Interest" shall have the meaning ascribed to such term in
Section 2.03.

DEPOSITORY:

The term "Depository" shall mean, with respect to Debentures of any series for
which the Company shall determine that such Debentures will be issued as a
Global Debenture, The Depository Trust Company, New York, New York, another
clearing agency, or any successor registered as a clearing agency under the
Exchange Act, or other applicable statute or regulation, which in each case,
shall be designated by the Company pursuant to either Section 2.01 or 2.11.

EVENT OF DEFAULT:

The term "Event of Default" with respect to Debentures of a particular series
shall mean any event specified in Section 6.01, continued for the period of
time, if any, designated in that Section.

EXCHANGE ACT:

The term "Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.

GLOBAL DEBENTURE:

The term "Global Debenture" shall mean, with respect to any series of
Debentures, a Debenture executed by the Company and delivered by the Trustee to
the Depository or pursuant to the Depository's instruction, all in accordance
with the Indenture, which shall be registered in the name of the Depository or
its nominee.

GOVERNMENTAL OBLIGATIONS:

The term "Governmental Obligations" shall mean securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a person controlled by,
supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer of such obligations,
and shall also include

- 4 -
<PAGE> 7
a depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any such Governmental Obligation
or a specific payment of principal of or interest on any such Governmental
Obligation held by such custodian for the account of the holder of such
depository receipt; provided that (except as required by law) such custodian is
not authorized to make any deduction from any amount received by the custodian
in respect of the Governmental Obligation or the specific payment of principal
of or interest on the Governmental Obligation evidenced by such depositary
receipt.

GUARANTEE:

The term "Guarantee" shall mean any guarantee that the Company may enter into
with Illinois Power Capital or other persons directly or indirectly for the
benefit of holders of limited partnership interests issued by Illinois Power
Capital.

INDENTURE:

The term "Indenture" shall mean this instrument as originally executed, or, if
amended or supplemented as provided in this Indenture, as so amended or
supplemented.

INTEREST PAYMENT DATE:

The term "Interest Payment Date" when used with respect to any installment of
interest on a Debenture of a particular series shall mean the date specified in
such Debenture or in a Board Resolution or in an indenture supplemental to this
Indenture with respect to such series as the fixed date on which an installment
of interest with respect to Debentures of that series is due and payable.

ILLINOIS POWER CAPITAL:

The term "Illinois Power Capital" shall mean Illinois Power Capital, L.P., a
Delaware limited partnership.

LIMITED PARTNERSHIP AGREEMENT:

"Limited Partnership Agreement" shall mean the Amended and Restated Agreement
of Limited Partnership of Illinois Power Capital, dated __________, as amended
from time to time.

NOTICE OF DEFAULT:

The term "Notice of Default" shall have the meaning ascribed to such term in
Section 6.01(a)(3).

OFFICERS' CERTIFICATE:

The term "Officers' Certificate" shall mean a certificate signed (i) by the
President or a Vice President and (ii) the Treasurer or an Assistant Treasurer
or the Controller or an Assistant Controller or the Secretary or an Assistant
Secretary of the Company. Each such certificate

- 5 -
<PAGE> 8
shall include the statements provided for in Section 13.06, if and to the
extent required by the provisions of that Section.

OPINION OF COUNSEL:

The term "Opinion of Counsel" shall mean an opinion in writing signed by legal
counsel, who may be an employee of or counsel for the Company. Each such
opinion shall include the statements provided for in Section 13.06, if and to
the extent required by the provisions of that Section.

OUTSTANDING:

The term "outstanding," when used with reference to Debentures of any series,
shall, subject to the provisions of Section 8.04, mean, as of any particular
time, all Debentures of that series previously authenticated and delivered by
the Trustee under this Indenture, except (a) Debentures previously canceled by
the Trustee or any paying agent, or delivered to the Trustee or any paying
agent for cancellation or which have previously been canceled; (b) Debentures
or portions of Debentures for the payment or redemption of which moneys or
Governmental Obligations in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by the Company (if the
Company shall act as its own paying agent); provided, however, that if such
Debentures or portions of such Debentures are to be redeemed prior to their
maturity, notice of such redemption shall have been given as in Article Three
provided, or provision satisfactory to the Trustee shall have been made for
giving such notice; and (c) Debentures in lieu of or in substitution for which
other Debentures shall have been authenticated and delivered pursuant to the
terms of Section 2.07.

PREDECESSOR DEBENTURE:

The term "Predecessor Debenture" of any particular Debenture shall mean every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 2.07 in
lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the
same debt as the lost, destroyed or stolen Debenture.

PREFERRED SECURITIES:

The term "Preferred Securities" shall mean any limited partnership interests
issued by Illinois Power Capital or similar securities issued by a permitted
successor to Illinois Power Capital in accordance with the Limited Partnership
Agreement.

RESPONSIBLE OFFICER:

The term "Responsible Officer" when used with respect to the Trustee shall mean
any officer of the Trustee assigned by the Trustee to administer its corporate
trust matters.

- 6 -
<PAGE> 9
SECURITIES ACT:

The term "Securities Act" shall mean the Securities Act of 1933, as amended.

SENIOR INDEBTEDNESS:

The term "Senior Indebtedness" of the Company shall mean the principal of,
premium, if any, interest on and any other payment due pursuant to any of the
following, whether outstanding at the date of execution of this Indenture or
thereafter incurred, created or assumed: (a) all indebtedness of the Company
(other than non-recourse indebtedness and indebtedness issued under this
Indenture) evidenced by notes, debentures, bonds or other securities sold by
the Company for money, (b) all indebtedness of others of the kinds described in
the preceding clause (a) assumed by or guaranteed in any manner by the Company
(other than any Guarantee) or in effect guaranteed by the Company through an
agreement to purchase, contingent or otherwise, and (c) all renewals,
extensions or refundings of indebtedness of the kinds described in any of the
preceding clauses (a) and (b) unless, in the case of any particular
indebtedness, renewal, extension or refunding, the instrument creating or
evidencing the same or the assumption or guarantee of the same expressly
provides that such indebtedness, renewal, extension or refunding is not
superior in right of payment to or is pari passu with the Debentures.

SUBSIDIARY:

The term "Subsidiary" shall mean any corporation at least a majority of whose
outstanding voting stock shall at the time be owned by the Company or by one or
more Subsidiaries or by the Company and one or more Subsidiaries. For the
purposes only of this definition of the term "Subsidiary," the term "voting
stock," as applied to the stock of any corporation, shall mean stock of any
class or classes having ordinary voting power for the election of a majority of
the directors of such corporation, other than stock having such power only by
reason of the occurrence of a contingency.

TRUSTEE:

The term "Trustee" shall mean The First National Bank of Chicago and, subject
to the provisions of Article Seven, shall also include its successors and
assigns, and, if at any time there is more than one person acting in such
capacity under this Indenture, "Trustee" shall mean each such person. The term
"Trustee" as used with respect to a particular series of the Debentures shall
mean the trustee with respect to that series.

TRUST INDENTURE ACT:

The term "Trust Indenture Act" shall mean, as of any time, the Trust Indenture
Act of 1939, or any successor statute, as in effect at such time.

- 7 -
<PAGE> 10
ARTICLE TWO

ISSUE, DESCRIPTION, TERMS, EXECUTION,
REGISTRATION AND EXCHANGE OF DEBENTURES

SECTION 2.01. The aggregate principal amount of Debentures which
may be authenticated and delivered under this Indenture is unlimited.

The Debentures may be issued in one or more series up to the aggregate
principal amount of Debentures of that series from time to time authorized by
or pursuant to a Board Resolution or pursuant to one or more indentures
supplemental to this Indenture adopted or executed prior to the initial
issuance of Debentures of a particular series. Prior to the initial issuance
of Debentures of any series, there shall be established in or pursuant to a
Board Resolution, and set forth in an Officers' Certificate, or established in
one or more indentures supplemental to this Indenture:

(1) the title of the Debentures of the series (which
shall distinguish the Debentures of the series from all other Debentures);

(2) any limit upon the aggregate principal amount of the
Debentures of that series which may be authenticated and delivered under this
Indenture (except for Debentures authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Debentures of that
series);

(3) the date or dates on which the principal of the
Debentures of the series is payable or any formulary or other method or means
by which such date or dates will be determined, by reference or otherwise
(without regard to any provision for redemption, prepayment, acceleration,
purchase or extension);

(4) the rate or rates at which the Debentures of the
series shall bear interest or the manner of calculation of such rate or rates,
if any (including the rate or rates at which overdue principal shall bear
interest, if different from the rate or rates at which such Debentures shall
bear interest prior to maturity, and, if applicable, the rate or rates at which
overdue premium or interest shall bear interest, if any);

(5) the date or dates from which such interest shall
accrue, the Interest Payment Dates on which such interest will be payable or
the manner of determination of such Interest Payment Dates and the record date
for the determination of holders to whom interest is payable on any such
Interest Payment Dates;

(6) the right, if any, to extend the interest payment
periods and the maximum duration of any such extension;

(7) the period or periods within which, the price or
prices at which and the terms and conditions upon which, Debentures of the
series may be redeemed, in whole or in part, at the option of the Company;

- 8 -
<PAGE> 11
(8) the obligation, if any, of the Company to redeem or
purchase Debentures of the series pursuant to any sinking fund or analogous
provisions (including payments made in cash in anticipation of future sinking
fund obligations) or at the option of a holder of Debentures and the period or
periods within which, the price or prices at which, and the terms and
conditions upon which, Debentures of the series shall be redeemed or purchased,
in whole or in part, pursuant to such obligation;

(9) the form of the Debentures of the series including
the form of the Certificate of Authentication for such series.

(10) if other than denominations of $25 or any integral
multiple of $25, the denominations in which the Debentures of the series shall
be issuable;

(11) any and all other terms with respect to such series
(which terms shall not be inconsistent with the terms of this Indenture); and

(12) whether the Debentures are issuable as a Global
Debenture and, in such case, the identity for the Depository for such series.

All Debentures of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or
pursuant to any such Board Resolution or in any indentures supplemental to this
Indenture.

If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.

SECTION 2.02. The Debentures of any series and the Trustee's
certificate of authentication to be borne by such Debentures shall be
substantially of the tenor and purport as set forth in one or more indentures
supplemental to this Indenture or as provided in a Board Resolution and as set
forth in an Officers' Certificate, and may have such letters, numbers or other
marks of identification or designation and such legends or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant to
such law or with any rule or regulation of any stock exchange on which
Debentures of that series may be listed, or to conform to usage.

SECTION 2.03. The Debentures shall be issuable as registered
Debentures and in the denominations of $25 or any integral multiple of $25,
subject to Section 2.01(10). The Debentures of a particular series shall bear
interest payable on the dates and at the rate specified with respect to that
series. The principal of and the interest on the Debentures of any series, as
well as any premium on such Debentures in case of their redemption prior to
maturity, shall be payable in the coin or currency of the United States of
America which at the time is legal tender for public and private debt, at the
office or agency of the Company maintained for that purpose in Decatur,
Illinois. Each Debenture shall be dated the date of its authentication,
subject to Section 2.01.

- 9 -
<PAGE> 12
The interest installment on any Debenture which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date for
Debentures of that series shall be paid to the person in whose name said
Debenture (or one or more Predecessor Debentures) is registered at the close of
business on the regular record date for such interest installment. In the
event that any Debenture of a particular series or portion of such Debenture is
called for redemption and the redemption date is subsequent to a regular record
date with respect to any Interest Payment Date and prior to such Interest
Payment Date, interest on such Debenture will be paid upon presentation and
surrender of such Debenture as provided in Section 3.03.

Any interest on any Debenture which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date for Debentures of the
same series ("Defaulted Interest") shall immediately cease to be payable to the
registered holder on the relevant regular record date by virtue of having been
such holder; and such Defaulted Interest shall be paid by the Company, at its
election, as provided in clause (1) or clause (2) below:

(1) The Company may make payment of any Defaulted
Interest on Debentures to the persons in whose names such Debentures
(or their respective Predecessor Debentures) are registered at the
close of business on a special record date for the payment of such
Defaulted Interest, which shall be fixed in the following manner: the
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each such Debenture and the date of
the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior
to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the persons entitled to such
Defaulted Interest as in this clause provided. Upon satisfaction of
the conditions set forth in the immediately preceding sentence, the
Trustee shall fix a special record date for the payment of such
Defaulted Interest which shall not be more than 15 nor less than 10
days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee promptly shall notify the Company of such
special record date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the special record date for such payment to be mailed,
first class postage prepaid, to each Debentureholder at such
Debentureholder's address as it appears in the Debenture Register (as
defined below), not less than 10 days prior to such special record
date. Notice of the proposed payment of such Defaulted Interest and
the special record date for such payment having been mailed as
provided above, such Defaulted Interest shall be paid to the persons
in whose names such Debentures (or their respective Predecessor
Debentures) are registered on such special record date and shall be no
longer payable pursuant following clause (2).

(2) The Company may make payment of any Defaulted
Interest on any Debentures in any other lawful manner not inconsistent
with the requirements of any securities exchange on which such
Debentures may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee of
the proposed payment pursuant to this clause, such manner of payment
shall be deemed practicable by the Trustee.

- 10 -
<PAGE> 13
Unless otherwise set forth in a Board Resolution or one or more
indentures supplemental to this Indenture establishing the terms of any series
of Debentures pursuant to Section 2.01, the term "regular record date" as used
in this Section with respect to a series of Debentures with respect to any
Interest Payment Date for such series shall mean either the fifteenth day of
the month immediately preceding the month in which an Interest Payment Date
established for such series pursuant to Section 2.01 shall occur, if such
Interest Payment Date is the first day of a month, or the last day of the month
immediately preceding the month in which an Interest Payment Date established
for such series pursuant to Section 2.01 shall occur, if such Interest Payment
Date is the fifteenth day of a month, whether or not such date is a Business
Day.

Subject to the foregoing provisions of this Section, each Debenture of
a series delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Debenture of such series shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Debenture.

SECTION 2.04. The Debentures shall, subject to the provisions of
Section 2.06, be printed on steel engraved borders or fully or partially
engraved, or legibly typed, as the proper officers of the Company may
determine, and shall be signed on behalf of the Company by its Chairman or one
of its Vice Presidents, under its corporate seal attested by its Secretary or
one of its Assistant Secretaries. The signature of the Chairman or a Vice
President and/or the signature of the Secretary or an Assistant Secretary in
attestation of the corporate seal, upon the Debentures, may be in the form of a
facsimile signature of a present or any future Chairman or Vice President and
of a present or any future Secretary or Assistant Secretary and may be
imprinted or otherwise reproduced on the Debentures and for that purpose the
Company may use the facsimile signature of any person who shall have been a
Chairman or Vice President, or of any person who shall have been a Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Debentures
shall be authenticated and delivered or disposed of such person shall have
ceased to be the Chairman or a Vice President, or the Secretary or an Assistant
Secretary, of the Company, as the case may be. The seal of the Company may be
in the form of a facsimile of the seal of the Company and may be impressed,
affixed, imprinted or otherwise reproduced on the Debenture.

Only such Debentures as shall bear on them a Certificate of
Authentication substantially in the form established for such Debentures,
executed manually by an authorized signatory of the Trustee, or by any
Authenticating Agent with respect to such Debentures, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate executed by the Trustee, or by any Authenticating Agent appointed
by the Trustee with respect to such Debentures, upon any Debenture executed by
the Company shall be conclusive evidence that the Debenture so authenticated
has been duly authenticated and delivered under this Indenture and that the
holder is entitled to the benefits of this Indenture.

In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 7.01) shall be
fully protected in relying upon, an Opinion of Counsel stating that the form
and terms of such Debentures have been established in conformity with the
provisions of this Indenture.

- 11 -
<PAGE> 14
The Trustee shall not be required to authenticate such Debentures if
the issue of such Debentures pursuant to this Indenture will affect the
Trustee's own rights, duties or immunities under the Debentures and this
Indenture or otherwise in a manner which not reasonably acceptable to the
Trustee.

SECTION 2.05. (a) Debentures of any series may be exchanged
upon their presentation at the office or agency of the Company designated for
such purpose in Decatur, Illinois, for other Debentures of such series of
authorized denominations, and for a like aggregate principal amount, upon
payment of a sum sufficient to cover any tax or other governmental charge in
relation to such exchange, all as provided in this Section. In respect of any
Debentures so surrendered for exchange, the Company shall execute, the Trustee
shall authenticate and such office or agency shall deliver in exchange for the
Debenture or Debentures so surrendered a Debenture or Debentures of the same
series which the Debentureholder making the exchange shall be entitled to
receive, bearing numbers not contemporaneously outstanding.

(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose in Decatur, Illinois, or such other location
designated by the Company, a register or registers (the "Debenture Register")
in which, subject to such reasonable regulations as it may prescribe, the
Company shall register the Debentures and the transfers of Debentures as in
this Article provided and which at all reasonable times shall be open for
inspection by the Trustee. The registrar for the purpose of registering
Debentures and transfer of Debentures as provided in this Indenture shall be
the Trustee or such other registrar as may be appointed pursuant to a Board
Resolution (the "Debenture Registrar").

Upon surrender for transfer of any Debenture at the office or agency
of the Company designated for such purpose in Decatur, Illinois, the Company
shall execute, the Trustee shall authenticate and such office or agency shall
deliver in the name of the transferee or transferees a new Debenture or
Debentures of the same series as the Debenture presented for a like aggregate
principal amount.

All Debentures presented or surrendered for exchange or registration
of transfer, as provided in this Section, shall be accompanied (if so required
by the Company or the Debenture Registrar) by a written instrument or
instruments of transfer, in form satisfactory to the Company or the Debenture
Registrar, duly executed by the registered holder or by his duly authorized
attorney in writing.

(c) No service charge shall be made for any exchange or
registration of transfer of Debentures, or issue of new Debentures in case of
partial redemption of any series, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge in relation to such
exchange, registration or issue, other than exchanges pursuant to Section 2.06,
the second paragraph of Section 3.03 and Section 9.04 not involving any
transfer.

(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of less than all the outstanding Debentures of the same series and
ending at the close of business on the day of such mailing or (ii) to register

- 12 -
<PAGE> 15
the transfer of or exchange any Debentures of any series or portions of such
Debentures called for redemption. The provisions of this Section are, with
respect to any Global Debenture, subject to Section 2.11.

SECTION 2.06. Pending the preparation of definitive Debentures of
any series, the Company may execute, and the Trustee shall authenticate and
deliver, temporary Debentures (printed, lithographed or typewritten) of any
authorized denomination, and substantially in the form of the definitive
Debentures in lieu of which they are issued, but with such omissions,
insertions and variations as may be appropriate for temporary Debentures, all
as may be determined by the Company. Every temporary Debenture of any series
shall be executed by the Company and be authenticated by the Trustee upon the
same conditions and in substantially the same manner, and with like effect, as
the definitive Debentures of such series. Without unnecessary delay the
Company will execute and will furnish definitive Debentures of such series and
after that any or all temporary Debentures of such series may be surrendered in
exchange of such definitive Debentures (without charge to the holders), at the
office or agency of the Company designated for the purpose in Decatur,
Illinois, and the Trustee shall authenticate and such office or agency shall
deliver in exchange for such temporary Debentures an equal aggregate principal
amount of definitive Debentures of such series, unless the Company advises the
Trustee to the effect that definitive Debentures need not be executed and
furnished until further notice from the Company. Until so exchanged, the
temporary Debentures of such series shall be entitled to the same benefits
under this Indenture as definitive Debentures of such series authenticated and
delivered under this Indenture.

SECTION 2.07. In case any temporary or definitive Debenture shall
become mutilated or be destroyed, lost or stolen, the Company (subject to the
next succeeding sentence) shall execute, and upon its request the Trustee
(subject as aforesaid) shall authenticate and deliver, a new Debenture of the
same series bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated Debenture, or in lieu of and in substitution for
the Debenture so destroyed, lost or stolen. In every case the applicant for a
substituted Debenture shall furnish to the Company and to the Trustee such
security or indemnity as may be required by them to save each of them harmless,
and, in every case of destruction, loss or theft, the applicant shall also
furnish to the Company and to the Trustee evidence to their satisfaction of the
destruction, loss or theft of the applicant's Debenture and of the ownership of
such Debentures. The Trustee may authenticate any such substituted Debenture
and deliver the same upon the written request or authorization of any officer
of the Company. Upon the issuance of any substituted Debenture, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation to such issuance and any
other expenses (including the fees and expenses of the Trustee) connected with
such issuance. In case any Debenture which has matured or is about to mature
shall become mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Debenture, pay or authorize the payment of the
same (without surrender of that Debenture except in the case of a mutilated
Debenture) if the applicant for such payment shall furnish to the Company and
to the Trustee such security or indemnity as they may require to save them
harmless, and, in case of destruction, loss or theft, evidence to the
satisfaction of the Company and the Trustee of the destruction, loss or theft
of such Debenture and of the ownership of such Debenture.

- 13 -
<PAGE> 16
Every Debenture issued pursuant to the provisions of this Section in
substitution for any Debenture which is mutilated, destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether
or not the mutilated, destroyed, lost or stolen Debenture shall be found at any
time, or be enforceable by anyone, and shall be entitled to all the benefits of
this Indenture equally and proportionately with any and all other Debentures of
the same series duly issued under this Indenture. All Debentures shall be held
and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Debentures, and shall preclude (to the extent lawful) any and
all other rights or remedies, notwithstanding any law or statute now existing
or enacted after the date of this Indenture to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.

SECTION 2.08. All Debentures surrendered for the purpose of
payment, redemption, exchange or registration of transfer shall, if surrendered
to the Company or any paying agent, be delivered to the Trustee for
cancellation, or, if surrendered to the Trustee, shall be canceled by it, and
no Debentures shall be issued in lieu of such Debentures except as expressly
required or permitted by any of the provisions of this Indenture. On request
of the Company, the Trustee shall deliver to the Company canceled Debentures
held by the Trustee. In the absence of such request the Trustee may dispose of
canceled Debentures in accordance with its standard procedures and deliver a
certificate of disposition to the Company. If the Company shall otherwise
acquire any of the Debentures, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debentures
unless and until the same are delivered to the Trustee for cancellation.

SECTION 2.09. Nothing in this Indenture or in the Debentures,
express or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties to this Indenture and the holders of the
Debentures, any legal or equitable right, remedy or claim under or in respect
of this Indenture, or under any covenant, condition or provision contained in
this Indenture; all such covenants, conditions and provisions being for the
sole benefit of the parties to this Indenture and of the holders of the
Debentures.

SECTION 2.10. So long as any of the Debentures of any series remain
outstanding there may be an Authenticating Agent for any or all such series of
Debentures which the Trustee shall have the right to appoint. Said
Authenticating Agent shall be authorized to act on behalf of the Trustee to
authenticate Debentures of such series issued upon their exchange, transfer or
partial redemption, and Debentures so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes
as if authenticated by the Trustee under this Indenture. All references in
this Indenture to the authentication of Debentures by the Trustee shall be
deemed to include authentication by an Authenticating Agent for such series
except for authentication upon original issuance or pursuant to Section 2.07.
Each Authenticating Agent shall be acceptable to the Company and shall be a
corporation which has a combined capital and surplus, as most recently reported
or determined by it, sufficient under the laws of any jurisdiction under which
it is organized or in which it is doing business to conduct a trust business,
and which is otherwise authorized under such laws to conduct such business and
is subject to supervision or examination by federal or state authorities. If
at any time any Authenticating Agent shall cease to be eligible in accordance
with these provisions, it shall resign immediately.

- 14 -
<PAGE> 17
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at
any time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint
an eligible successor Authenticating Agent acceptable to the Company. Any
successor Authenticating Agent, upon acceptance of its appointment under this
Indenture, shall become vested with all the rights, powers and duties of its
predecessor under this Indenture as if originally named as an Authenticating
Agent pursuant to this Section.

SECTION 2.11. (a) If the Company shall establish pursuant to
Section 2.01 that the Debentures of a particular series are to be issued as a
Global Debenture, then the Company shall execute and the Trustee shall, in
accordance with Section 2.04, authenticate and deliver, a Global Debenture
which (i) shall represent, and shall be denominated in an amount equal to the
aggregate principal amount of, all of the Outstanding Debentures of such
series, (ii) shall be registered in the name of the Depository or its nominee,
(iii) shall be delivered by the Trustee to the Depository or pursuant to the
Depository's instruction and (iv) shall bear a legend substantially to the
following effect: "Except as otherwise provided in Section 2.11 of the
Indenture, this Debenture may be transferred, in whole but not in part, only to
another nominee of the Depository or to a successor Depository or to a nominee
of such successor Depository."

(b) Notwithstanding the provisions of Section 2.05, the Global
Debenture of a series may be transferred, in whole but not in part and in the
manner provided in Section 2.05, only to another nominee of the Depository for
such series, or to a successor Depository for such series selected or approved
by the Company or to a nominee of such successor Depository.

(c) If at any time the Depository for a series of Debentures
notifies the Company that it is unwilling or unable to continue as Depository
for such series or if at any time the Depository for such series shall no
longer be registered or in good standing under the Exchange Act, or other
applicable statute or regulation and a successor Depository for such series is
not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such condition, as the case may be, this Section
2.11 shall no longer be applicable to the Debentures of such series and the
Company will execute, and subject to Section 2.05, the Trustee will
authenticate and deliver Debentures of such series in definitive registered
form without coupons, in authorized denominations, and in an aggregate
principal amount equal to the principal amount of the Global Debenture of such
series in exchange for such Global Debenture. In addition, the Company may at
any time determine that the Debentures of any series shall no longer be
represented by a Global Debenture and that the provisions of this Section 2.11
shall no longer apply to the Debentures of such series. In such event the
Company will execute and subject to Section 2.05, the Trustee, upon receipt of
an Officers' Certificate evidencing such determination by the Company, will
authenticate and deliver Debentures of such series in definitive registered
form without coupons, in authorized denominations, and in an aggregate
principal amount equal to the principal amount of the Global Debenture of such
series in exchange for such Global Debenture. Upon the exchange of the Global
Debenture for such Debentures in definitive registered form without coupons, in
authorized denominations, the Global Debenture shall be canceled by the
Trustee. Such Debentures in definitive registered form issued in exchange

- 15 -
<PAGE> 18
for the Global Debenture pursuant to this Section 2.11(c) shall be registered
in such names and in such authorized denominations as the Depository, pursuant
to instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Debentures to the
Depository for delivery to the persons in whose names such Debentures are so
registered.

SECTION 2.12. Except as otherwise specified as contemplated by
Section 2.01 for Debentures of any series, interest payable on the Debentures
of each series for any period will be computed on the basis of a 360-day year
consisting of twelve 30-day months and for any period shorter than a full
month, on the basis of actual number of days elapsed in such period. In the
event that any date on which interest is payable on any series of Debentures is
not a Business Day, then payment of interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.

SECTION 2.13. So long as any Debentures remain outstanding, if
Illinois Power Capital shall be required to pay any interest on dividends in
arrears in respect of Debentures of any series pursuant to the terms of such
Debentures, then the Company will pay as interest ("Additional Interest") an
amount equal to such interest on dividends in arrears. In addition, if
Illinois Power Capital would be required to pay any taxes, duties, assessments
or governmental charges of whatever nature (other than withholding taxes)
imposed by the United States, or any other taxing authority, then, in any such
case, the Company shall also pay as Additional Interest such amounts as shall
be required so that the net amount received and retained by Illinois Power
Capital after paying any such taxes, duties, assessments or governmental
charges will not be less than the amounts Illinois Power Capital would have
received had no such taxes, duties, assessments or governmental charges been
imposed.

ARTICLE THREE

REDEMPTION OF DEBENTURES AND SINKING FUND PROVISIONS

SECTION 3.01. The Company may redeem the Debentures of any series
issued under this Indenture on and after the dates and in accordance with the
terms established for such series pursuant to Section 2.01.

SECTION 3.02. (a) In case the Company shall desire to exercise
such right to redeem all or, as the case may be, a portion of the Debentures of
any series in accordance with the right reserved so to do, it shall give notice
of such redemption to holders of the Debentures of such series to be redeemed
by mailing, first class postage prepaid, a notice of such redemption not less
than 30 days and not more than 60 days before the date fixed for redemption of
that series to such holders at their last addresses as they shall appear upon
the Debenture Register. Any notice which is mailed in the manner provided in
this Indenture shall be conclusively presumed to have been duly given, whether
or not the registered holder receives the notice. In any case, failure duly to
give such notice to the holder of any Debenture of any series designated for
redemption in whole or in part, or any defect in the

- 16 -
<PAGE> 19
notice, shall not affect the validity of the proceedings for the redemption of
any other Debentures of such series or any other series. In the case of any
redemption of Debentures prior to the expiration of any restriction on such
redemption provided in the terms of such Debentures or elsewhere in this
Indenture, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with any such restriction.

Each such notice of redemption shall specify the date fixed for
redemption and the redemption price at which Debentures of that series are to
be redeemed, and shall state that payment of the redemption price of such
Debentures to be redeemed will be made at the office or agency of the Company
in Decatur, Illinois, upon presentation and surrender of such Debentures, that
interest accrued to the date fixed for redemption will be paid as specified in
said notice, that from and after said date interest will cease to accrue and
that the redemption is for a sinking fund, if such is the case. If less than
all the Debentures of a series are to be redeemed, the notice to the holders of
Debentures of that series to be redeemed in whole or in part shall specify the
particular Debentures to be so redeemed. In case any Debenture is to be
redeemed in part only, the notice which relates to such Debenture shall state
the portion of the principal amount of such Debenture to be redeemed, and shall
state that on and after the redemption date, upon surrender of such Debenture,
a new Debenture or Debentures of such series in principal amount equal to the
unredeemed portion of such Debenture or Debentures will be issued.

(b) If less than all the Debentures of a series are to be
redeemed, the Company shall give the Trustee at least 45 days' notice in
advance of the date fixed for redemption as to the aggregate principal amount
of Debentures of the series to be redeemed, and upon receipt of such notice the
Trustee shall select, by lot or in such other manner as it shall deem
appropriate and fair in its discretion and which may provide for the selection
of a portion or portions (equal to $25 or any integral multiple of $25, subject
to Section 2.01(10)) of the principal amount of such Debentures of a
denomination larger than $25 (subject to Section 2.01(10)), the Debentures to
be redeemed and promptly shall notify the Company in writing of the numbers of
the Debentures to be redeemed, in whole or in part.

The Company may, if and whenever it shall so elect, by delivery of
instructions signed on its behalf by its Chairman or any Vice President,
instruct the Trustee or any paying agent to call all or any part of the
Debentures of a particular series for redemption and to give notice of
redemption in the manner set forth in this Section, such notice to be in the
name of the Company or its own name as the Trustee or such paying agent may
deem advisable. In any case in which notice of redemption is to be given by
the Trustee or any such paying agent, the Company shall deliver or cause to be
delivered to, or permit to remain with, the Trustee or such paying agent, as
the case may be, such Debenture Register, transfer books or other records, or
suitable copies or extracts from the Debenture Register, sufficient to enable
the Trustee or such paying agent to give any notice by mail that may be
required under the provisions of this Section.

SECTION 3.03. (a) If the giving of notice of redemption shall
have been completed as provided above, the Debentures or portions of Debentures
of the series to be redeemed specified in such notice shall become due and
payable on the date and at the place stated in such notice at the applicable
redemption price, together with interest accrued to the date fixed for
redemption and interest on such Debentures or portions of Debentures shall

- 17 -
<PAGE> 20
cease to accrue on and after the date fixed for redemption, unless the Company
shall default in the payment of such redemption price and accrued interest with
respect to any such Debentures or portion of such Debentures. On presentation
and surrender of such Debentures on or after the date fixed for redemption at
the place of payment specified in the notice, said Debentures shall be paid and
redeemed at the applicable redemption price for such series, together with
interest accrued on them to the date fixed for redemption (but if the date
fixed for redemption is an interest payment date, the interest installment
payable on such date shall be payable to the registered holder at the close of
business on the applicable record date pursuant to Section 2.03).

(b) Upon presentation of any Debenture of such series which is to
be redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Debenture is presented shall
deliver to the holder of such Debenture, at the expense of the Company, a new
Debenture or Debentures of the same series, of authorized denominations in
principal amount equal to the unredeemed portion of the Debenture so presented.

SECTION 3.04. The provisions of Sections 3.04, 3.05 and 3.06 shall
be applicable to any sinking fund for the retirement of Debentures of a series,
except as otherwise specified as contemplated by Section 2.01 for Debentures of
such series.

The minimum amount of any sinking fund payment provided for by the
terms of Debentures of any series is a "mandatory sinking fund payment," and
any payment in excess of such minimum amount provided for by the terms of
Debentures of any series is an "optional sinking fund payment." If provided
for by the terms of Debentures of any series, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section 3.05. Each
sinking fund payment shall be applied to the redemption of Debentures of any
series as provided for by the terms of Debentures of such series.

SECTION 3.05. The Company (i) may deliver Outstanding Debentures of
a series (other than any previous called for redemption) and (ii) may apply as
a credit Debentures of a series which have been redeemed either at the election
of the Company pursuant to the terms of such Debentures or through the
application of permitted optional sinking fund payments pursuant to the terms
of such Debentures, in each case in satisfaction of all or any part of any
sinking fund payment with respect to the Debentures of such series required to
be made pursuant to the terms of such Debentures; provided that such Debentures
have not been previously so credited. Such Debentures shall be received and
credited for such purpose by the Trustee at the redemption price specified in
such Debentures for redemption through operation of the sinking fund and the
amount of such sinking fund payment shall be reduced accordingly.

SECTION 3.06. Not less than 45 days prior to each sinking fund
payment date for any series of Debentures, the Company will deliver to the
Trustee an Officers' Certificate specifying the amount of the next ensuing
sinking fund payment for that series pursuant to the terms of that series, the
portion of such payment, if any, which is to be satisfied by delivering and
crediting Debentures of that series pursuant to Section 3.05 and the basis for
such credit and will, together with such Officers' Certificate, deliver to the
Trustee any Debentures to be so delivered. Not less than 30 days before each
such sinking fund payment

- 18 -
<PAGE> 21
date the Trustee shall select the Debentures to be redeemed upon such sinking
fund payment date in the manner specified in Section 3.02 and cause notice of
the redemption of such Debentures to be given in the name of and at the expense
of the Company in the manner provided in Section 3.02. Such notice having been
duly given, the redemption of such Debentures shall be made upon the terms and
in the manner stated in Section 3.03.

ARTICLE FOUR

PARTICULAR COVENANTS OF THE COMPANY

The Company covenants and agrees for each series of the Debentures as
follows:

SECTION 4.01. The Company will duly and punctually pay or cause to
be paid the principal of (and premium, if any) and interest on the Debentures
of that series at the time and place and in the manner provided in this
Indenture and established with respect to such Debentures.

SECTION 4.02. So long as any series of the Debentures remains
outstanding, the Company agrees to maintain an office or agency in Decatur,
Illinois, with respect to each such series and at such other location or
locations as may be designated as provided in this Section 4.02, where (i)
Debentures of that series may be presented for payment, (ii) Debentures of that
series may be presented as authorized above for registration of transfer and
exchange, and (iii) notices and demands to or upon the Company in respect of
the Debentures of that series and this Indenture may be given or served, such
designation to continue with respect to such office or agency until the Company
shall, by written notice signed by its President or a Vice President and
delivered to the Trustee, designate some other office or agency for such
purposes or any of them. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address of such office, such presentations, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, notices
and demands.

SECTION 4.03. (a) If the Company shall appoint one or more
paying agents for all or any series of the Debentures, other than the Trustee,
the Company will cause each such paying agent to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section:

(1) that it will hold all sums held by it as such agent
for the payment of the principal of (and premium, any) or interest on
the Debentures of that series (whether such sums have been paid to it
by the Company or by any other obligor of such Debentures) in trust
for the benefit of the persons entitled thereto;

(2) that it will give the Trustee notice of any failure
by the Company (or by any other obligor of such Debentures) to make
any payment of the principal of (and premium, if any) or interest on
the Debentures of that series when the same shall be due and payable;

- 19 -
<PAGE> 22
(3) that it will, at any time during the continuance of
any failure referred to in clause (2) above, upon the written request
of the Trustee, immediately pay to the Trustee all sums so held in
trust by such paying agent; and

(4) that it will perform all other duties of paying agent
as set forth in this Indenture.

(b) If the Company shall act as its own paying agent with respect
to any series of the Debentures, it will on or before each due date of the
principal of (and premium, if any) or interest on Debentures of that series,
set aside, segregate and hold in trust for the benefit of the persons entitled
to receive such principal, premium or interest, a sum sufficient to pay such
principal (and premium, if any) or interest so becoming due on Debentures of
that series until such sums shall be paid to such persons or otherwise disposed
of as provided in this Indenture and will promptly notify the Trustee of such
action, or any failure (by it or any other obligor on such Debentures) to take
such action. Whenever the Company shall have one or more paying agents for any
series of Debentures, it will, prior to each due date of the principal of (and
premium, if any) or interest on any Debentures of that series, deposit with the
paying agent a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due, such sum to be held, in trust for the benefit of the
persons entitled to such principal, premium or interest, and (unless such
paying agent is the Trustee) the Company promptly will notify the Trustee of
its action or failure so to act.

(c) Anything in this Section to the contrary notwithstanding, (i)
the agreement to hold sums in trust as provided in this Section is subject to
the provisions of Section 11.05, and (ii) the Company may at any time, for the
purpose of obtaining the satisfaction and discharge of this Indenture or for
any other purpose, pay, or direct any paying agent to pay, to the Trustee all
sums held in trust by the Company or such paying agent, such sums to be held by
the Trustee upon the same terms and conditions as those upon which such sums
were held by the Company or such paying agent; and, upon such payment by any
paying agent to the Trustee, such paying agent shall be released from all
further liability with respect to such money.

SECTION 4.04. The Company, whenever necessary to avoid or fill a
vacancy in the office of Trustee, will appoint, in the manner provided in
Section 7.10, a Trustee, so that there shall at all times be a Trustee under
this Indenture.

SECTION 4.05. The Company will not, while any of the Debentures
remain outstanding, consolidate with, or merge into, or merge into itself, or
sell or convey all or substantially all of its property to any other company
unless the provisions of Article Ten are complied with.

SECTION 4.06. The Company will not declare or pay any dividend on,
or redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its capital stock if at such time (i) there shall have
occurred and be continuing any event that would constitute an Event of Default
under the Indenture, (ii) the Company shall be in default with respect to its
payment of any obligations under any Guarantee, if issued or (iii) the Company
shall have given notice of its selection of an extended interest payment period
as

- 20 -
<PAGE> 23
provided in Section 2.01 of this Indenture and such period, or any extension of
such period, shall be continuing.

ARTICLE FIVE

DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE

SECTION 5.01. Semiannually, not later than June 30 and December 1
in each year, commencing __________ ___, 199__, and at such other times as the
Trustee may request in writing, the Company will furnish or cause to be
furnished to the Trustee a list, in such form as the Trustee may reasonably
require, of the names and addresses of the holders of each series of Debentures
as of such regular record date, provided, that the Company shall not be
obligated to furnish or cause to be furnished such list at any time that the
list shall not differ in any respect from the most recent list furnished to the
Trustee by the Company; provided, further, that no such list need be furnished
for any series of Debentures for which the Trustee shall be the Debenture
Registrar.

SECTION 5.02. Not later than December 31 in each year, the Trustee
shall transmit to the Debentureholders and the Commission a report with respect
to any events and other matters described in Section 313(a) of the Trust
Indenture Act, in such manner and to the extent required by the Trust Indenture
Act. The Trustee shall transmit to the Debentureholders and the Commission,
and the Company shall file with the Trustee (within 30 days after filing with
the Commission in the case of reports which pursuant to the Trust Indenture Act
must be filed with the Commission and furnished to the Trustee) and transmit
to the Debentureholders, such other information, reports and other documents,
if any, at such times and in such manner, as shall be required by the Trust
Indenture Act.

ARTICLE SIX

REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT

SECTION 6.01. (a) Whenever used in this Indenture with respect
to Debentures of a particular series, "Event of Default" means any one or more
of the following events which has occurred and is continuing:

(1) default in the payment of any installment of
interest, including any Additional Interest, upon any of the
Debentures of that series, as and when the same shall become due and
payable, and continuance of such default for a period of 10 days
(whether or not payment is prohibited by the provisions of Article
Fourteen of this Indenture); provided, however, that a valid extension
of the interest payment period by the Company pursuant to Section
2.01(6) shall not constitute a failure to pay interest for this
purpose;

- 21 -
<PAGE> 24
(2) default in the payment of the principal of (or
premium, if any, on) any of the Debentures of that series as and when
the same shall become due and payable whether at maturity, upon
redemption, by declaration or otherwise, or in any payment required by
any sinking or analogous fund established with respect to that series
(whether or not payment is prohibited by the provisions of Article
Fourteen of this Indenture);

(3) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company with respect to that series contained in such Debentures or
otherwise established with respect to that series of Debentures
pursuant to Section 2.01 or contained in this Indenture (other than a
covenant or agreement which has been expressly included in this
Indenture solely for the benefit of one or more series of Debentures
other than such series) for a period of 90 days after the date on
which written notice of such failure, requiring the same to be
remedied and stating that such notice is a "Notice of Default" under
this Indenture, shall have been given to the Company by the Trustee,
by registered or certified mail, or to the Company and the Trustee by
the holders of at least 25% in principal amount of the Debentures of
that series at the time outstanding;

(4) a decree or order by a court having jurisdiction in
the premises shall have been entered adjudging the Company or Illinois
Power Capital a bankrupt or insolvent, or approving as properly filed
a petition seeking liquidation or reorganization of the Company under
the Federal Bankruptcy Code or any other similar applicable federal or
state law, and such decree or order shall have continued unvacated and
unstayed for a period of 90 consecutive days; or an involuntary case
shall be commenced under such Code in respect of the Company or
Illinois Power Capital and shall continue undismissed for a period of
90 days or an order for relief in such case shall have been entered;
or a decree or order of a court having jurisdiction in the premises
shall have been entered for the appointment on the ground of
insolvency or bankruptcy of a receiver or custodian or liquidator or
trustee or assignee in bankruptcy or insolvency of the Company or
Illinois Power Capital or a substantial portion of its property, or
for the winding up or liquidation of its affairs, and such decree or
order shall have remained in force unvacated and unstayed for a period
of 90 consecutive days;

(5) the Company or Illinois Power Capital shall institute
proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy proceeding against it, or shall file a
petition or answer or consent seeking liquidation or reorganization
under the Federal Bankruptcy Code or any other similar applicable
federal or state law, or shall consent to the filing of any such
petition, or shall consent to the appointment on the ground of
insolvency or bankruptcy of a receiver or custodian or liquidator or
trustee or assignee in bankruptcy or insolvency of it or of its
property, or shall make an assignment for the benefit of creditors; or

(6) so long as any series of Debentures issued in
connection with the application of the proceeds from the issuance and
sale of a series of Preferred Securities of Illinois Power Capital
remain outstanding, Illinois Power Capital shall have dissolved, wound
up its business or otherwise terminated its existence except in
connection with the distribution of Debentures to limited partners of
Illinois Power

- 22 -
<PAGE> 25
Capital in liquidation of their interests in Illinois Power Capital
and in connection with certain mergers, consolidations or
amalgamations permitted by the Limited Partnership Agreement.

(b) In each and every such case, unless the principal of all the
Debentures of that series shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of
the Debentures of that series then outstanding under this Indenture, by notice
in writing to the Company (and to the Trustee if given by such
Debentureholders), may declare the principal of all the Debentures of that
series to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due and payable, anything contained
in this Indenture or in the Debentures of that series or established with
respect to that series pursuant to Section 2.01 to the contrary
notwithstanding.

(c) This provision, however, is subject to the condition that if,
at any time after the principal of the Debentures of that series shall have
been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as provided
below, the Company shall pay or shall deposit with the Trustee a sum sufficient
to pay all matured installments of interest upon all the Debentures of that
series and the principal of (and premium, if any, on) any and all Debentures of
that series which shall have become due otherwise than by acceleration (with
interest upon such principal and premium, if any, and, to the extent that such
payment is enforceable under applicable law, upon overdue installments of
interest, at the rate per annum expressed in the Debentures of that series to
the date of such payment or deposit) and the amount payable to the Trustee
under Section 7.06, and any and all defaults under the Indenture, other than
the nonpayment of principal on Debentures of that series which shall not have
become due by their terms, shall have been remedied or waived as provided in
Section 6.06 then and in every such case the holders of a majority in aggregate
principal amount of the Debentures of that series then outstanding, by written
notice to the Company and to the Trustee, may rescind and annul such
declaration and its consequences; but no such rescission and annulment shall
extend to or shall affect any subsequent default, or shall impair any right
consequent thereon.

(d) In case the Trustee shall have proceeded to enforce any right
with respect to Debentures of that series under this Indenture and such
proceedings shall have been discontinued or abandoned because of such
rescission or annulment or for any other reason or shall have been determined
adversely to the Trustee; then and in every such case the Company and the
Trustee shall be restored respectively to their former positions and rights
under this Indenture, and all rights, remedies and powers of the Company and
the Trustee shall continue as though no such proceedings had been taken.

SECTION 6.02. (a) The Company covenants that (1) in case
default shall be made in the payment of any installment of interest on any of
the Debentures of a series, or any payment required by any sinking or analogous
fund established with respect to that series as and when the same shall have
become due and payable, and such default shall have continued for a period of
10 Business Days or (2) in case default shall be made in the payment of the
principal of (or premium, if any, on) any of the Debentures of a series when
the same shall have become due and payable, whether upon maturity of the
Debentures of a series or upon redemption or upon declaration or otherwise,
then, upon demand of the Trustee, the

- 23 -
<PAGE> 26
Company will pay to the Trustee, for the benefit of the holders of the
Debentures of that series, the whole amount that then shall have become due and
payable on all such Debentures for principal (and premium, if any) or interest,
or both, as the case may be, with interest upon the overdue principal (and
premium, if any) and (to the extent that payment of such interest is
enforceable under applicable law) upon overdue installments of interest at the
rate per annum expressed in the Debentures of that series; and, in addition to
the foregoing amounts, such further amount as shall be sufficient to cover the
costs and expenses of collection, and the amount payable to the Trustee under
Section 7.06.

(b) In case the Company shall fail immediately to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any action or proceedings
at law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or other obligor
upon the Debentures of that series and collect in the manner provided by law
out of the property of the Company or other obligor upon the Debentures of that
series wherever situated the moneys adjudged or decreed to be payable.

(c) In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement, composition or other
judicial proceedings affecting the Company, any other obligor on such
Debentures, or the creditors or property of either, the Trustee shall have
power to intervene in such proceedings and take any action in such proceedings
that may be permitted by the court and shall (except as may be otherwise
provided by law) be entitled to file such proofs of claim and other papers and
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the holders of Debentures of such series allowed for the entire
amount due and payable by the Company or such other obligor under the Indenture
at the date of institution of such proceedings and for any additional amount
which may become due and payable by the Company or such other obligor after
such date, and to collect and receive any moneys or other property payable or
deliverable on any such claim, and to distribute the same after the deduction
of the amount payable to the Trustee under Section 7.06; and any receiver,
assignee or trustee in bankruptcy or reorganization is authorized by each of
the holders of Debentures of such series to make such payments to the Trustee,
and, in the event that the Trustee shall consent to the making of such payments
directly to such Debentureholders, to pay to the Trustee any amount due it
under Section 7.06.

(d) All rights of action and of asserting claims under this
Indenture, or under any of the terms established with respect to Debentures of
that series, may be enforced by the Trustee without the possession of any of
such Debentures, or the production of such Debentures at any trial or other
proceeding relative to such Debentures, and any such suit or proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after provision for payment
to the Trustee of any amounts due under Section 7.06, be for the ratable
benefit of the holders of the Debentures of such series.

In case of an Event of Default under this Indenture, the Trustee may
in its discretion proceed to protect and enforce the rights vested in it by
this Indenture by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any of

- 24 -
<PAGE> 27
such rights, either at law or in equity or in bankruptcy or otherwise, whether
for the specific enforcement of any covenant or agreement contained in the
Indenture or in aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.

Nothing contained in this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Debentureholder any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures of that series or the rights of any holder
of such Debentures or to authorize the Trustee to vote in respect of the claim
of any Debentureholder in any such proceeding.

SECTION 6.03. Any moneys collected by the Trustee pursuant to
Section 6.02 with respect to a particular series of Debentures shall be applied
in the order following, at the date or dates fixed by the Trustee and, in case
of the distribution of such moneys on account of principal (or premium, if any)
or interest, upon presentation of the several Debentures of that series, and
stamping thereon the payment, if only partially paid, and upon surrender of
such Debenture if fully paid:

FIRST: To the payment of costs and expenses of collection and
of all amounts payable to the Trustee under Section 7.06; and

SECOND: To the payment of the amounts then due and unpaid
upon Debentures of such series for principal (and premium, if any) and
interest, in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Debentures for
principal (and premium, if any) and interest, respectively.

SECTION 6.04. No holder of any Debenture of any series shall have
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture or for the appointment of a receiver or trustee,
or for any other remedy under this Indenture, unless such holder previously
shall have given to the Trustee written notice of an Event of Default and of
the continuance of such Event of Default with respect to Debentures of such
series specifying such Event of Default, as provided above, and unless also the
holders of not less than 25% in aggregate principal amount of the Debentures of
such series then outstanding shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name as trustee under
this Indenture and shall have offered to the Trustee such reasonable indemnity
as it may require against the costs, expenses and liabilities to be incurred in
such action, suit or proceeding, and the Trustee for 60 days after its receipt
of such notice, request and offer of indemnity, shall have failed to institute
any such action, suit or proceeding; it being understood and intended, and
being expressly covenanted by the taker and holder of every Debenture of such
series with every other such taker and holder and the Trustee, that no one or
more holders of Debentures of such series shall have any right in any manner
whatsoever by virtue or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of the holders of any other of such
Debentures, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner provided in this Indenture and for the equal, ratable and common benefit
of all holders of Debentures of such series. For the protection and

- 25 -
<PAGE> 28
enforcement of the provisions of this Section, each and every Debentureholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.

Notwithstanding any other provisions of this Indenture, however, the
right of any holder of any Debenture to receive payment of the principal of
(and premium, if any) and interest on such Debenture, as provided in such
Debenture, on or after the respective due dates expressed in such Debenture (or
in the case of redemption, on the redemption date), or to institute suit for
the enforcement of any such payment on or after such respective dates or
redemption date, shall not be impaired or affected without the consent of such
holder.

SECTION 6.05. (a) All powers and remedies given by this Article
to the Trustee or to the Debentureholders shall, to the extent permitted by
law, be deemed cumulative and not exclusive of any other of such powers and
remedies or of any other powers and remedies available to the Trustee or the
holders of the Debentures, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to such Debentures.

(b) No delay or omission of the Trustee or of any holder of any of
the Debentures to exercise any right or power accruing upon any Event of
Default occurring and continuing as aforesaid shall impair any such right or
power, or shall be construed to be a waiver of any such default or an
acquiescence in such default; and, subject to the provisions of Section 6.04,
every power and remedy given by this Article or by law to the Trustee or to the
Debentureholders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Debentureholders.

SECTION 6.06. The holders of a majority in a principal amount of
the Debentures of any series at the time outstanding, determined in accordance
with Section 8.04, shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee with respect to such
series; provided, however, that such direction shall not be in conflict with
any rule of law or with this Indenture or unduly prejudicial to the rights of
holders of Debentures of any other series at the time outstanding determined in
accordance with Section 8.04 not parties to such proceeding. Subject to the
provisions of Section 7.01 the Trustee shall have the right to decline to
follow any such direction if the Trustee in good faith shall, by a Responsible
Officer or Officers of the Trustee, determine that the proceeding so directed
would involve the Trustee in personal liability. The holders of a majority in
aggregate principal amount of the Debentures of all series at the time
outstanding affected by such waiver, determined in accordance with Section
8.04, may on behalf of the holders of all of the Debentures of such series
waive any past default in the performance of any of the covenants contained in
this Indenture or established pursuant to Section 2.01 with respect to such
series and its consequences, except a default in the payment of the principal
of, or premium, if any, or interest on, any of the Debentures of that series as
and when the same shall become due by the terms of such Debentures or a call
for redemption of Debentures of that series. Upon any such waiver, the default
covered by such waiver shall be deemed to be cured for all purposes of this
Indenture and the Company, the Trustee and the holders of the Debentures of
such series shall be restored to their former positions and rights under this
Indenture,

- 26 -
<PAGE> 29
respectively; but no such waiver shall extend to any subsequent or other
default or impair any right consequent on such waiver.

SECTION 6.07. The Trustee shall, within 90 days after the
occurrence of a default with respect to a particular series, transmit by mail,
first class postage prepaid, to the holders of Debentures of that series, as
their names and addresses appear upon the Debenture Register, notice of all
defaults with respect to that series known to the Trustee, unless such defaults
shall have been cured before the giving of such notice (the term "defaults" for
the purposes of this Section being the events specified in subsections (1),
(2), (3), (4), (5) and (6) of Section 6.01(a), not including any periods of
grace provided for in Section 6.01(a) and irrespective of the giving of notice
provided for by subsection (3) of Section 6.01(a)); provided, that, except in
the case of default in the payment of the principal of (or premium, if any) or
interest on any of the Debentures of that series or in the payment of any
sinking fund installment established with respect to that series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors and/or
Responsible Officers, of the Trustee in good faith determine that the
withholding of such notice is in the interests of the holders of Debentures of
that series; provided further, that in the case of any default of the character
specified in Section 6.01(a)(3) with respect to Debentures of such series no
such notice to the holders of the Debentures of that series shall be given
until at least 30 days after the occurrence of such default.

The Trustee shall not be deemed to have knowledge of any default,
except (i) a default under Section 6.01 (a)(1) or (a)(2) as long as the Trustee
is acting as paying agent for such series of Debentures or (ii) any default as
to which the Trustee shall have received written notice or a Responsible
Officer charged with the administration of this Indenture shall have obtained
written notice.

SECTION 6.08. All parties to this Indenture agree, and each holder
of any Debentures by his or her acceptance of such Debenture shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by,
any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made
by such party litigant; but the provisions of this Section shall not apply to
any suit instituted by the Trustee, to any suit instituted by any
Debentureholder, or group of Debentureholders, holding more than 10% in
aggregate principal amount of the outstanding Debentures of any series, or to
any suit instituted by any Debentureholder for the enforcement of the payment
of the, principal of (or premium, if any) or interest on any Debenture of such
series, on or after the respective due dates expressed in such Debenture or
established pursuant to this Indenture.

- 27 -
<PAGE> 30
ARTICLE SEVEN

CONCERNING THE TRUSTEE

SECTION 7.01. (a) The Trustee shall have and be subject to all
the duties and responsibilities specified with respect to an indenture trustee
under the Trust Indenture Act.

(b) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:

(1) prior to the occurrence of an Event of Default with
respect to Debentures of a series and after the curing or waiving of
all such Events of Default with respect to that series which may have
occurred:

(i) the duties and obligations of the Trustee
shall with respect to Debentures of such series be determined
solely by the express provisions of this Indenture, and the
Trustee shall not be liable with respect to Debentures of such
series except for the performance of such duties and
obligations as are specifically set forth in this Indenture,
and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and

(ii) in the absence of bad faith on the part of
the Trustee, the Trustee may with respect to Debentures of
such series conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed in
such Debenture, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this
Indenture; but in the case of and such certificates or
opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be
under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;

(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;

(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the holders of not less than a majority in
principal amount of the Debentures of any series at the time
outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee under this Indenture with
respect to the Debentures of that series; and

(4) None of the provisions contained in this Indenture
shall require the Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or
liability

- 28 -
<PAGE> 31
is not reasonably assured to it under the terms of this Indenture or
adequate indemnity against such risk is not reasonably assured to it.

SECTION 7.02. Except as otherwise provided in Section 7.01 and in
the Trust Indenture Act:

(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, security or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;

(b) Any request, direction, order or demand of the Company
mentioned in this Indenture shall be sufficiently evidenced by a Board
Resolution or an instrument signed in the name of the Company by the Chairman
or any Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer (unless other evidence in respect such
request, direction, order or demand is specifically prescribed in this
Indenture);

(c) The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted under this
Indenture in good faith and in reliance on such advice or opinion;

(d) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Debentureholders, pursuant to the provisions of this
Indenture, unless such Debentureholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred in the exercise of such rights or power; nothing
contained in this Indenture shall, however, relieve the Trustee of the
obligation, upon the occurrence of an Event of Default with respect to a series
of the Debentures (which has not been cured or waived) to exercise with respect
to Debentures of that series such of the rights and powers vested in it by this
Indenture, and to use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs;

(e) The Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Indenture;

(f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
security, or other papers or documents, unless requested in writing so to do by
the holders of not less than a majority in principal amount of the outstanding
Debentures of the particular series affected by such facts or matters
(determined as provided in Section 8.04); provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such costs, expenses or liabilities as a condition
to so

- 29 -
<PAGE> 32
proceeding. The reasonable expense of every such examination shall be paid by
the Company or, if paid by the Trustee, shall be repaid by the Company upon
demand; and

(g) The Trustee may execute any of the trusts or powers under this
Indenture or perform any duties under this Indenture either directly or by or
through agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
due care by it under this Indenture.

SECTION 7.03. (a) The recitals contained in this Indenture and
in the Debentures (other than the Certificate of Authentication on the
Debentures) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same.

(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Debentures.

(c) The Trustee shall not be accountable for the use or
application by the Company of any of the Debentures or of the proceeds of such
Debentures, or for the use or application of any moneys paid over by the
Trustee in accordance with any provision of this Indenture or established
pursuant to Section 2.01, or for the use or application of any moneys received
by any paying agent other than the Trustee.

SECTION 7.04. The Trustee or any paying agent or Debenture
Registrar, in its individual or any other capacity, may become the owner or
pledgee of Debentures and, subject to Sections 7.08 and 7.13, may otherwise
deal with the Company with the same rights it would have if it were not the
Trustee, paying agent or Debenture Registrar.

SECTION 7.05. Subject to the provisions of Section 11.03, all money
received by the Trustee shall, until used or applied as provided in this
Indenture, be held in trust for the purposes for which it was received, but
need not be segregated from other funds except to the extent required by law.
The Trustee shall be under no liability for interest on any money received by
it under this Indenture except such as it may agree with the Company to pay on
such money.

SECTION 7.06. (a) The Company covenants and agrees to pay to
the Trustee from time to time, and the Trustee shall be entitled to, reasonable
compensation (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) for all services rendered by
it in the execution of the trusts created by this Indenture and in the exercise
and performance of any of the powers and duties of the Trustee under this
Indenture, and the Company will pay or reimburse the Trustee upon its request
for all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Indenture (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify the Trustee (and its officers, agents,
directors and employees) for, and to hold it harmless against, any loss,
liability or expense incurred without negligence, willful misconduct or bad
faith on the part of the Trustee and arising out of or in connection with the
acceptance or administration of this

- 30 -
<PAGE> 33
trust, including the costs and expenses of defending itself against any claim
of liability in the premises.

(b) The obligations of the Company under this Section to
compensate and indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
under this Indenture. Such additional indebtedness shall be secured by a lien
prior to that of the Debentures upon all property and funds held or collected
by the Trustee as such, except funds held in trust for the benefit of the
holders of particular Debentures.

SECTION 7.07. Except as otherwise provided in Section 7.01,
whenever in the administration of the provisions of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or established
prior to taking or suffering or omitting to take any action under this
Indenture, such matter (unless other evidence in respect of such matter be
specifically prescribed in this Indenture) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered or
omitted to be taken by it under the provisions of this Indenture upon the faith
of such Officers' Certificate.

SECTION 7.08. If the Trustee has or shall acquire any conflicting
interest within the meaning of the Trust Indenture Act, it shall either
eliminate such conflicting interests or resign to the extent, in the manner and
with the effect, and subject to the conditions, provided in the Trust Indenture
Act or this Indenture. For purposes of Section 310(b)(1) of the Trust
Indenture Act and to the extent permitted by that Section, the Trustee, in its
capacity as trustee in respect of the Debentures of any series, shall not be
deemed to have a conflicting interest arising from its capacity as trustee in
respect of the Debentures of any other series.

SECTION 7.09. There shall at all times be a Trustee with respect to
the Debentures issued under this Indenture which shall at all times be a
corporation organized and doing business under the laws of the United States of
America or any state or territory of the United States or of the District of
Columbia, or a corporation or other person permitted to act as trustee by the
Commission, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least 50 million dollars, subject
to supervision or examination by federal, state, territorial, or District of
Columbia authority and qualified and eligible under the Trust Indenture Act.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of such supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. The Company may not, nor
may any person directly or indirectly controlling, controlled by, or under
common control with the Company, serve as Trustee. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 7.10.

SECTION 7.10. (a) The Trustee or any successor hereafter
appointed, may at any time resign with respect to the Debentures of one or more
series by giving written notice

- 31 -
<PAGE> 34
of such resignation to the Company and by transmitting notice of resignation by
mail, first class postage prepaid, to the Debentureholders of such series, as
their names and addresses appear upon the Debenture Register. Upon receiving
such notice of resignation, the Company shall by Board Resolution promptly
appoint a successor trustee with respect to Debentures of such series. If no
successor trustee shall have been so appointed and have accepted appointment
within 30 days after the mailing of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee with respect to Debentures of such series, or any
Debentureholder of that series who has been a bona fide holder of a Debenture
or Debentures for at least six months may, subject to the provisions of Section
6.08, on behalf of himself and all others similarly situated, petition any such
court for the appointment of a successor trustee. Such court may thereupon
after such notice, if any, as it may deem proper and prescribe, appoint a
successor trustee.

(b) If at any time:

(1) the Trustee shall fail to comply with the provisions
of subsection (a) of Section 7.08 after written request therefor by
the Company or by any Debentureholder who has been a bona fide holder
of a Debenture or Debentures for at least six months; or

(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 7.09 and shall fail to resign after
written request therefor by the Company or by any such Debentureholder
of Debentures; or

(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation;

then, in any such case, the Company by a Board Resolution may remove the
Trustee with respect to all Debentures and appoint a successor trustee, or,
subject to the provisions of Section 6.08, unless the Trustee's duty to resign
is stayed as provided in this Indenture, any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it
may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.

(c) The holders of a majority in aggregate principal amount of the
Debentures of any series at the time outstanding may at any time remove the
Trustee with respect to such series and appoint a successor trustee.

(d) No resignation or removal of the Trustee and no appointment of
a successor trustee with respect to the Debentures of a series pursuant to any
of the provisions of this Section shall become effective until acceptance of
appointment by the successor trustee as provided in Section 7.11.

- 32 -
<PAGE> 35
(e) Any successor trustee appointed pursuant to this Section may
be appointed with respect to the Debentures of one or more series or all of
such series, and at any time there shall be only one Trustee with respect to
the Debentures of any particular series.

(f) The Company shall give notice of such resignation with respect
to the Debentures of any series and each appointment of a successor trustee
with respect to the Debentures of any series by mailing written notice of such
event by first-class mail, postage prepaid, to all Debentureholders of such
series as their names and addresses appear in the Debenture Register. Each
notice shall include the name of the successor trustee with respect to the
Debentures of such series and the address of its corporate trust office. If
the Company fails to transmit such notice within ten days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be transmitted at the expense of the Company.

SECTION 7.11. (a) In case of the appointment under this
Indenture of a successor trustee with respect to all Debentures, every such
successor trustee so appointed shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and upon such delivery the resignation or removal of the retiring Trustee shall
become effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Company or the successor
trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor trustee all the rights,
powers, and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor trustee all property and money held by such retiring
Trustee under this Indenture.

(b) In case of the appointment under this Indenture of a successor
trustee with respect to the Debentures of one or more (but not all) series, the
Company, the retiring Trustee and each successor trustee with respect to the
Debentures of one or more series shall execute and deliver an indenture
supplemental to this Indenture in which each successor trustee shall accept
such appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor trustee all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Debentures of that or those series to which the
appointment of such successor trustee relates, (2) shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Debentures of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee and (3) shall add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts under this Indenture
by more than one Trustee, it being understood that nothing in this Indenture or
in such supplemental indenture shall constitute such Trustees co-trustees of
the same trust, that each such Trustee shall be trustee of a trust or trusts
under this Indenture separate and apart from any trust or trusts under this
Indenture administered by any other such Trustee and that no Trustee shall be
responsible for any act or failure to act on the part of any other Trustee
under this Indenture; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided in such supplemental indenture, such retiring
Trustee shall with respect to the Debentures of that or those series to which
the appointment of such successor trustee relates have no further

- 33 -
<PAGE> 36
responsibility for the exercise of rights and powers or for the performance of
the duties and obligations vested in the Trustee under this Indenture, and each
such successor trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Debentures of that or those series to which the
appointment of such successor trustee relates; but, on request of the Company
or any successor trustee, such retiring Trustee shall duly assign, transfer and
deliver to such successor trustee, to the extent contemplated by such
supplemental indenture, the property and money held by such retiring Trustee
under this Indenture with respect to the Debentures of that or those series to
which the appointment of such successor trustee relates.

(c) Upon request of any such successor trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor trustee all such rights, powers and trusts
referred to in paragraph (a) or (b) of this Section, as the case may be.

(d) No successor trustee shall accept its appointment unless at
the time of such acceptance such successor trustee shall be qualified and
eligible under this Article.

SECTION 7.12. Any corporation into which the Trustee may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of the
Trustee, shall be the successor of the Trustee under this Indenture; provided
such corporation shall be qualified under the provisions of Section 7.08 and
eligible under the provisions of Section 7.09, without the execution or filing
of any paper or any further act on the part of any of the parties to this
Indenture, anything in this Indenture to the contrary notwithstanding. In case
any Debentures shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Debentures
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Debentures.

SECTION 7.13. If the Trustee shall be or shall become a creditor,
directly or indirectly, secured or unsecured, of the Company or any other
obligor upon the Debentures (other than by reason of a relationship described
in Section 311(b) of the Trust Indenture Act), the Trustee shall be subject to
any and all applicable provisions of the Trust Indenture Act regarding the
collection of claims against the Company or such other obligor. For purposes
of Section 311(b) of the Trust Indenture Act:

(a) the term "cash transaction" shall mean any
transaction in which full payment for goods or securities sold is made
within seven days after delivery of the goods or securities in
currency or in checks or other orders drawn upon banks or bankers and
payable upon demand; and

(b) the term "self-liquidating paper" shall mean any
draft, bill of exchange, acceptance or obligation which is made,
drawn, negotiated or incurred by the Company for the purpose of
financing the purchase, processing, manufacture, shipment, storage or
sale of goods, wares or merchandise and which is secured by documents
evidencing title to, possession of, or a lien upon, the goods, wares
or merchandise or the

- 34 -
<PAGE> 37
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the
security is received by the Trustee simultaneously with the creation
of the creditor relationship with the Company arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation.

ARTICLE EIGHT

CONCERNING THE DEBENTUREHOLDERS

SECTION 8.01. Whenever in this Indenture it is provided that the
holders of a majority or specified percentage in aggregate principal amount of
the Debentures of a particular series may take any action (including the making
of any demand or request, the giving of any notice, consent or waiver or the
taking of any other action), the fact that at the time of taking any such
action the holders of such majority or specified percentage of that series have
joined in such action may be evidenced by any instrument or any number of
instruments of similar tenor executed by such holders of Debentures of that
series in person or by agent or proxy appointed in writing.

If the Company shall solicit from the Debentureholders of any series
any request, demand, authorization, direction, notice, consent, waiver or other
action, the Company may, at its option, as evidenced by an Officers'
Certificate, fix in advance a record date for such series for the determination
of Debentureholders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Debentureholders of record at the
close of business on the record date shall be deemed to be Debentureholders for
the purposes of determining whether Debentureholders of the requisite
proportion of outstanding Debentures of that series have authorized or agreed
or consented to such request, demand, authorization, direction, notice,
consent, waiver or other action, and for that purpose the outstanding
Debentures of that series shall be computed as of the record date; provided
that no such authorization, agreement or consent by such Debentureholders on
the record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six months after
the record date.

SECTION 8.02. Subject to the provisions of Section 7.01, proof of
the execution of any instrument by a Debentureholder (such proof will not
require notarization) or his agent or proxy and proof of the holding by any
person of any of the Debentures shall be sufficient if made in the following
manner:

(a) The fact and date of the execution by any such person
of any instrument may be proved in any reasonable manner acceptable to
the Trustee.

(b) The ownership of Debentures shall be proved by the
Debenture Register of such Debentures or by a certificate of the
Debenture Registrar of such ownership.

- 35 -
<PAGE> 38
(c) The Trustee may require such additional proof of any
matter referred to in this Section as it shall deem necessary.

SECTION 8.03. Prior to the due presentment for registration of
transfer of any Debenture, the Company, the Trustee, any paying agent and any
Debenture Registrar may deem and treat the person in whose name such Debenture
shall be registered upon the books of the Company as the absolute owner of such
Debenture (whether or not such Debenture shall be overdue and notwithstanding
any notice of ownership or writing on such Debenture made by anyone other than
the Debenture Registrar) for the purpose of receiving payment of or on account
of the principal of, premium, if any, and (subject to Section 2.03) interest on
such Debenture and for all other purposes; and neither the Company nor the
Trustee nor any paying agent nor any Debenture Registrar shall be affected by
any notice to the contrary.

SECTION 8.04. In determining whether the holders of the requisite
aggregate principal amount of Debentures of a particular series have concurred
in any direction, consent or waiver under this Indenture, Debentures of that
series which are owned by the Company or any other obligor on the Debentures of
that series or by any person directly or indirectly controlling or controlled
by or under common control with the Company or any other obligor on the
Debentures of that series (unless the Company or such other obligor or person
directly or indirectly controlling or controlled by or under common control
with the Company or such other obligor owns all Debentures outstanding or all
Debentures of such series, as the case may be) shall be disregarded and deemed
not to be outstanding for the purpose of any such determination, except that
for the purpose of determining whether the Trustee shall be protected in
relying on any such direction, consent or waiver, only Debentures of such
series which the Trustee actually knows are so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section, if the pledgee shall establish to
the satisfaction of the Trustee the pledgee's right so to act with respect to
such Debentures and that the pledgee is not a person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Company or any such other obligor. In case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.

SECTION 8.05. At any time prior to (but not after) the evidencing
to the Trustee, as provided in Section 8.01, of the taking of any action by the
holders of the majority or percentage in aggregate principal amount of the
Debentures of a particular series specified in this Indenture in connection
with such action, any holder of a Debenture of that series which is shown by
the evidence to be included in the Debentures the holders of which have
consented to such action may, by filing written notice with the Trustee, and
upon proof of holding as provided in Section 8.02, revoke such action so far as
concerns such Debenture. Except as aforesaid any such action taken by the
holder of any Debenture shall be conclusive and binding upon such holder and
upon all future holders and owners of such Debenture, and of any Debenture
issued in exchange for such Debenture, on registration of transfer of such
Debenture or in place of such Debenture, irrespective of whether or not any
notation in regard to such Debenture is made upon such Debenture. Any action
taken by the holders of the majority or percentage in aggregate principal
amount of the Debentures of a particular series specified in this Indenture in
connection with such action shall be conclusively binding upon the Company, the
Trustee and the holders of all the Debentures of that series.

- 36 -
<PAGE> 39

ARTICLE NINE

SUPPLEMENTAL INDENTURES

SECTION 9.01. In addition to any supplemental indenture otherwise
authorized by this Indenture, the Company, when authorized by a Board
Resolution, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental to this Indenture (which shall conform to
the provisions of the Trust Indenture Act), without the consent of the
Debentureholders, for one or more of the following purposes:

(a) to evidence the succession of another corporation to
the Company, and the assumption by any such successor of the covenants
of the Company contained in this Indenture or otherwise established
with respect to the Debentures; or

(b) to add to the covenants of the Company such further
covenants, restrictions, conditions or provisions for the protection
of the holders of the Debentures of all or any series as the Board of
Directors and the Trustee shall consider to be for the protection of
the holders of Debentures of all or any series, and to make the
occurrence, or the occurrence and continuance, of a default in any of
such additional covenants, restrictions, conditions or provisions a
default or an Event of Default with respect to such series permitting
the enforcement of all or any of the several remedies provided in this
Indenture as set forth in it; provided, however, that in respect of
any such additional covenant, restriction, condition or provision such
supplemental indenture may provide for a particular period of grace
after default (which period may be shorter or longer than that allowed
in the case of other defaults) or may provide for an immediate
enforcement upon such default or may limit the remedies available to
the Trustee upon such default or may limit the right of the holders of
a majority in aggregate principal amount of the Debentures of such
series to waive such default; or

(c) to cure any ambiguity or to correct or supplement any
provision contained in this Indenture or in any supplemental indenture
which may be defective or inconsistent with any other provision
contained in this Indenture or in any supplemental indenture, or to
make such other provisions in regard to matters or questions arising
under this Indenture as shall not be inconsistent with the provisions
of this Indenture and shall not adversely affect the interests of the
holders of the Debentures of any series; or

(d) to change or date any of the provisions of this
Indenture, provided that any such change or elimination shall become
effective only when there is no Debenture outstanding of any series
created prior to the execution of such supplemental indenture which is
entitled to the benefit of such provision.

The Trustee is authorized to join with the Company in the execution of
any such supplemental indenture, and to make any further appropriate agreements
and stipulations which may be contained in such supplemental indenture, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.

- 37 -
<PAGE> 40
Any supplemental indenture authorized by the provisions of this
Section may be executed by the Company and the Trustee without the consent of
the holders of any of the Debentures at the time outstanding, notwithstanding
any of the provisions of Section 9.02.

SECTION 9.02. With the consent (evidenced as provided in Section
8.01) of the holders of not less than a majority in aggregate principal amount,
of the Debentures of each series affected by such supplemental indenture or
indentures at the time outstanding, the Company, when authorized by a Board
Resolution, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental to this Indenture (which shall conform to
the provisions of the Trust Indenture Act) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the holders of the Debentures of such series under this
Indenture; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Debentures of any series, or reduce the
principal amount of such Debenture, or reduce the rate or extend the time of
payment of interest on such Debenture, or reduce any premium payable upon the
redemption of such Debenture, without the consent of the holder of each
Debenture so affected or (ii) reduce the aforesaid percentage of Debentures,
the holders of which are required to consent to any such supplemental
indenture, without the consent of the holders of each Debenture then
outstanding and so affected.

Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Debentureholders required
to consent to such supplemental indenture as provided above, the Trustee shall
join with the Company in the execution of such supplemental indenture unless
such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion but shall not be obligated to enter into such supplemental
indenture.

It shall not be necessary for the consent of the Debentureholders of
any series affected by a supplemental indenture under this Section to approve
the particular form of any proposed supplemental indenture, but it shall be
sufficient if such consent shall approve the substance of such supplemental
indenture.

Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, setting forth in
general terms the substance of such supplemental indenture, to the
Debentureholders of all series affected by such supplemental indenture as their
names and addresses appear upon the Debenture Register. Any failure of the
Trustee to mail such notice, or any defect in such notice, shall not, however,
in any way impair or affect the validity of any such supplemental indenture.

SECTION 9.03. Upon the execution of any supplemental indenture
pursuant to the provisions of this Article or of Section 10.01, this Indenture
shall, with respect to such series, be and be deemed to be modified and amended
in accordance with such supplemental indenture and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holders of Debentures of the series
affected by such supplemental indenture shall thereafter be determined,
exercised and

- 38 -
<PAGE> 41
enforced under this Indenture subject in all respects to such modifications and
amendments, and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.

SECTION 9.04. Debentures of any series affected by a supplemental
indenture, authenticated and delivered after the execution of such supplemental
indenture pursuant to the provisions of this Article or of Section 10.01, may
bear a notation in form approved by the Company, provided such form meets the
requirements of any exchange upon which such series may be listed, as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Debentures of that series so modified as to conform, in the
opinion of the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared by the Company,
authenticated by the Trustee and delivered in exchange for the Debentures of
that series then outstanding.

SECTION 9.05. The Trustee, subject to the provisions of Section
7.01, may receive an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article is authorized or
permitted by, and conforms to, the terms of this Article and that it is proper
for the Trustee under the provisions of this Article to join in the execution
such supplemental indenture.

ARTICLE TEN

CONSOLIDATION, MERGER AND SALE

SECTION 10.01. Nothing contained in this Indenture or in any of the
Debentures shall prevent any consolidation or merger of the Company with or
into any other corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance, transfer or other disposition of the property of the Company or its
successor or successors as an entirety, or substantially as an entirety, to any
other corporation (whether or not affiliated with the Company or its successor
or successors) authorized to acquire and operate the same; provided, however,
the Company hereby covenants and agrees that, upon any such consolidation,
merger, sale, conveyance, transfer or other disposition, the due and punctual
payment of the principal of (premium, if any) and interest on all of the
Debentures of all series in accordance with the terms of each series, according
to their tenor, and the due and punctual performance and observance of all the
covenants and conditions of this Indenture with respect to each series or
established with respect to such series pursuant to Section 2.01 to be kept or
performed by the Company, shall be expressly assumed, by supplemental indenture
(which shall conform to the provisions of the Trust Indenture Act) satisfactory
in form to the Trustee executed and delivered to the Trustee by the entity
formed by such consolidation, or into which the Company shall have been merged,
or by the entity which shall have acquired such property.

SECTION 10.02. (a) In case of any such consolidation, merger,
sale, conveyance, transfer or other disposition and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of, premium, if any,

- 39 -
<PAGE> 42
and interest on all of the Debentures of all series outstanding and the due and
punctual performance of all of the covenants and conditions of this Indenture
or established with respect to each series of the Debentures, pursuant to
Section 2.01 to be performed by the Company with respect to each series, such
successor corporation shall succeed to and be substituted for the Company, with
the same effect as if it had been named in this Indenture as the party of the
first part, and upon satisfaction of the foregoing conditions the predecessor
corporation shall be relieved of all obligations and covenants under this
Indenture and the Debentures. Such successor corporation may cause to be
signed, and may issue either in its own name or in the name of the Company or
any other predecessor obligor on the Debentures, any or all of the Debentures
issuable under this Indenture which prior to that time shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of such
successor company, instead of the Company, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Debentures which previously shall have been
signed and delivered by the officers of the predecessor Company to the Trustee
for authentication, and any Debentures which such successor corporation shall
after that cause to be signed and delivered to the Trustee for that purpose.
All the Debentures so issued shall in all respects have the same legal rank and
benefit under this Indenture as the Debentures previously or thereafter issued
in accordance with the terms of this Indenture as though all of such Debentures
had been issued at the date of the execution of this Indenture.

(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not in
substance) may be made in the Debentures thereafter to be issued as may be
appropriate.

(c) Nothing contained in this Indenture or in any of the
Debentures shall prevent the Company from merging into itself or acquiring by
purchase or otherwise all or any part of the property of any other corporation
(whether or not affiliated with the Company).

SECTION 10.03. The Trustee, subject to the provisions of Section
7.01, may receive an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, conveyance, transfer or other disposition, and any
such assumption, comply with the provisions of this Article.

ARTICLE ELEVEN

SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS

SECTION 11.01. Any Debenture or Debentures, or any portion of the
principal amount of any Debenture or Debentures, shall be deemed to have been
paid for all purposes of this Indenture, and the entire indebtedness of the
Company in respect of any Debenture or Debentures shall be deemed to have been
satisfied and discharged, if there shall have been irrevocably deposited with
the Trustee or any paying agent (other than the Company), in trust:

(a) money in an amount which shall be sufficient, or

- 40 -
<PAGE> 43
(b) in the case of a deposit made prior to the Stated Maturity of
such Debentures or portions of such Debentures, Governmental Obligations, which
shall not contain provisions permitting the redemption or other prepayment of
such Governmental Obligations at the option of the issuer of such Governmental
Obligations, the principal of and the interest on which when due, without any
regard to reinvestment of such Governmental Obligations, will provide moneys
which, together with the money deposited with or held by the Trustee or such
paying agent, shall be sufficient or

to pay when due the principal of and premium, if any, and interest, if any, due
and to become due on such Debentures or portions of such Debentures on or prior
to Stated Maturity; provided, however, that in the case of the provision for
payment or redemption of less than all the Debentures of any series, such
Debentures or portions of such Debentures shall have been selected by the
Debenture Registrar as provided in this Indenture and, in the case of a
redemption, the notice requisite to the validity of such redemption shall have
been given or irrevocable authority shall have been given by the Company to the
Trustee to give such notice, under arrangements satisfactory to the Trustee;
and provided, further, that the Company shall have delivered to the Trustee and
such paying agent:

(x) if such deposit shall have been made prior to the
Stated Maturity of such Debentures, a Certificate stating that the
money and Governmental Obligations deposited in accordance with this
Section shall be held in trust, as provided in Section 11.03; and

(y) if Governmental Obligations shall have been
deposited, an Opinion of Counsel that the obligations so deposited
constitute Governmental Obligations and do not contain provisions
permitting the redemption or other prepayment at the option of the
issuer of such Governmental Obligations, and an opinion of an
independent public accountant of nationally recognized standing,
selected by the Company, to the effect that the requirements set forth
in clause (b) above have been satisfied; and

(z) if such deposit shall have been made prior to the
Stated Maturity of such Debentures, an Opinion of Counsel to the
effect that the holders of such Debentures will not recognize income,
gain or loss for federal income tax purposes as a result of the
satisfaction and discharge of the Company's indebtedness in respect of
such Debentures, and such holders will be subject to federal income
taxation on the same amounts and in the same manner and at the same
times as if such satisfaction and discharge had not occurred.

Upon the deposit of money or Governmental Obligations, or both, in
accordance with this Section, together with the documents required by clauses
(x), (y) and (z) above, the Trustee shall, upon receipt of a Certificate,
acknowledge in writing that the Debenture or Debentures or portions of such
Debenture or Debentures with respect to which such deposit was made are deemed
to have been paid for all purposes of this Indenture and that the entire
indebtedness of the Company in respect of such Debenture or Debentures has been
satisfied and discharged as contemplated in this Section. In the event that
all of the conditions set forth in the preceding paragraph shall have been
satisfied in respect of any Debentures or

- 41 -
<PAGE> 44
portions of such Debentures except that, for any reason, the Opinion of Counsel
specified in clause (z) shall not have been delivered, such Debentures or
portions of such Debentures shall nevertheless be deemed to have been paid for
all purposes of this Indenture, and the holders of such Debentures or portions
of such Debentures shall nevertheless be no longer entitled to the benefits of
this Indenture or of any of the covenants of the Company under Article Four
(except the covenants contained in Sections 4.02 and 4.03 or any other
covenants made in respect of such Debentures or portions of such Debentures as
contemplated by Section 2.01, but the indebtedness of the Company in respect of
such Debentures or portions of such Debentures shall not be deemed to have been
satisfied and discharged prior to Stated Maturity for any other purposes, and
the holders of such Debentures or portions of such Debentures shall continue to
be entitled to look to the Company for payment of the indebtedness represented
by such Debentures; and, upon receipt of a Certificate, the Trustee shall
acknowledge in writing that such Debentures or portions of such Debentures are
deemed to have been paid for all purposes of this Indenture.

If payment at Stated Maturity of less than all of the Debentures of
any series is to be provided for in the manner and with the effect provided in
this Section, the Debenture Registrar shall select such Debentures, or portions
of principal amount of such Debentures, in the manner specified by Section
3.02(b) for selection for redemption of less than all the Debentures of a
series.

In the event that Debentures which shall be deemed to have been paid
for purposes of this Indenture, and, if such is the case, in respect of which
the Company's indebtedness shall have been satisfied and discharged, all as
provided in this Section, do not mature and are not to be redeemed within the
sixty (60) day period commencing with the date of the deposit of moneys or
Governmental Obligations, as provided above, the Company shall, as promptly as
practicable, give a notice, in the same manner as a notice of redemption with
respect to such Debentures, to the holders of such Debentures to the effect
that such deposit has been made and the effect of such deposit.

Notwithstanding that any Debentures shall be deemed to have been paid
for purposes of this Indenture, as provided above, the obligations of the
Company and the Trustee in respect of such Debentures under Sections 2.04,
2.05, 2.06, 2.07, 2.08, 2.10, 3.02, 3.04, 3.05, 4.01, 4.03 and 7.06 and this
Article Eleven shall survive.

The Company shall pay, and shall indemnify the Trustee or any paying
agent with which Governmental Obligations shall have been deposited as provided
in this Section against, any tax, fee or other charge imposed on or assessed
against such Governmental Obligations or the principal or interest received in
respect of such Governmental Obligations, including, but not limited to, any
such tax payable by any entity deemed, for tax purposes, to have been created
as a result of such deposit.

Anything herein to the contrary notwithstanding, (a) if, at any time
after a Debenture would be deemed to have been paid for purposes of this
Indenture, and, if such is the case, the Company's indebtedness in respect of
such Debenture would be deemed to have been satisfied and discharged, pursuant
to this Section (without regard to the provisions of this paragraph), the
Trustee or any paying agent, as the case may be, shall be required to return
the money or Governmental Obligations, or combination of such money or
Governmental

- 42 -
<PAGE> 45
Obligations, deposited with it as provided below to the Company or its
representative under any applicable federal or state bankruptcy, insolvency or
other similar law, such Debenture shall thereupon be deemed retroactively not
to have been paid and any satisfaction and discharge of the Company's
indebtedness in respect of such Debenture shall retroactively be deemed not to
have been effected, and such Debenture shall be deemed to remain outstanding
and (b) any satisfaction and discharge of the Company's indebtedness in respect
of any Debenture shall be subject to the provisions of the last paragraph of
Section 4.03.

SECTION 11.02. SATISFACTION AND DISCHARGE OF INDENTURE.

This Indenture shall upon receipt of a Certificate cease to be of
further effect (except as expressly provided below), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when

(a) no Debentures remain outstanding under this Indenture; and

(b) the Company has paid or caused to be paid all other sums
payable under this Indenture by the Company;

provided, however, that if, in accordance with the last paragraph of Section
11.01, any Debenture, previously deemed to have been paid for purposes of this
Indenture, shall be deemed retroactively not to have been so paid, this
Indenture shall thereupon be deemed retroactively not to have been satisfied
and discharged, as provided above, and to remain in full force and effect, and
the Company shall execute and deliver such instruments as the Trustee shall
reasonably request to evidence and acknowledge the same.

Notwithstanding the satisfaction and discharge of this Indenture as
provided above, the obligations of the Company and the Trustee under Sections
2.04, 2.05, 2.06, 2.07, 2.08, 2.10, 3.02, 3.04, 3.05, 4.01, 4.03 and 7.06 and
this Article Eleven shall survive.

Upon satisfaction and discharge of this Indenture as provided in this
Section, the Trustee shall assign, transfer and turn over to the Company,
subject to the lien provided by Section 7.06, any and all money, securities and
other property then held by the Trustee for the benefit of the holders of the
Debentures other than money and Governmental Obligations held by the Trustee
pursuant to Section 4.03.

SECTION 11.03. APPLICATION OF TRUST MONEY.

Neither the Governmental Obligations nor the money deposited pursuant
to Section 11.01, nor the principal or interest payments on any such
Governmental Obligations, shall be withdrawn or used for any purpose other
than, and shall be held in trust for, the payment of the principal of and
premium, if any, and interest, if any, on the Debentures or portions of
principal amount of such Debentures in respect of which such deposit was made,
all subject, however, to the provisions of Section 4.03; provided, however,
that, so long as there shall not have occurred and be continuing an Event of
Default any cash received from such principal or interest payments on such
Governmental Obligations, if not then needed for such purpose, shall, to the
extent practicable, be invested in Governmental Obligations of the type
described in clause (b) in the first paragraph of Section 11.01 maturing at
such times and

- 43 -
<PAGE> 46
in such amounts as shall be sufficient to pay when due the principal of and
premium, if any, and interest, if any, due and to become due on such Debentures
or portions of such Debentures on and prior to the Stated Maturity of such
Debentures, and interest earned from such reinvestment shall be paid over to
the Company as received, free and clear of any trust, lien or pledge under this
Indenture except the lien provided by Section 7.06; and provided, further,
that, so long as there shall not have occurred and be continuing an Event of
Default, any moneys held in accordance with this Section on the Stated Maturity
of all such Debentures in excess of the amount required to pay the principal of
and premium, if any, and interest, if any, then due on such Debentures shall be
paid over to the Company free and clear of any trust, lien or pledge under this
Indenture except the lien provided by Section 7.06; and provided, further, that
if an Event of Default shall have occurred and be continuing, moneys to be paid
over to the Company pursuant to this Section shall be held until such Event of
Default shall have been waived or cured.

ARTICLE TWELVE

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS

SECTION 12.01. No recourse under or upon any obligation, covenant or
agreement of this Indenture, or of any Debenture, or for any claim based on
such obligation, covenant or agreement or otherwise in respect thereof, shall
be had against any incorporator, stockholder, officer or director, past,
present or future as such, of the Company or of any predecessor or successor
corporation, either directly or through the Company or any such predecessor or
successor corporation, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that this Indenture and the obligations issued under
this Indenture are solely corporate obligations, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Company or
of an predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Debentures or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of
the obligations, covenants or agreements contained in this Indenture or in any
of the Debentures or implied therefrom, are hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issuance of such Debentures.

- 44 -
<PAGE> 47
ARTICLE THIRTEEN

MISCELLANEOUS PROVISIONS

SECTION 13.01. All the covenants, stipulations, promises and
agreements in this Indenture contained by or on behalf of the Company shall
bind its successors and assigns, whether so expressed or not.

SECTION 13.02. Any act or proceeding by any provision of this
Indenture authorized or required to be done or performed by any board,
committee or officer of the Company shall and may be done and performed with
like force and effect by the corresponding board, committee or officer of any
corporation that shall at the time be the lawful sole successor of the Company.

SECTION 13.03. The Company by instrument in writing executed by
authority of two-thirds of its Board of Directors and delivered to the Trustee
may surrender any of the powers reserved to the Company and thereupon such
power so surrendered shall terminate both as to the Company and as to any
successor corporation.

SECTION 13.04. Except, as otherwise expressly provided in this
Indenture any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Debentures to or on the Company may be given or served by being deposited first
class postage prepaid in a post-office letterbox addressed (until another
address is filed in writing by the Company with the Trustee), as follows:
Illinois Power Company, 500 South 27th Street, Decatur, Illinois 62525,
Attention: Secretary. Any notice, election, request or demand by the Company
or any Debentureholder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or made in writing at
the Corporate Trust Office of the Trustee.

SECTION 13.05. This Indenture and each Debenture shall be deemed to
be a contract made under the laws of the State of New York, and for all
purposes shall be construed in accordance with the internal laws of said state.

SECTION 13.06. (a) Upon any application or demand by the Company
to the Trustee to take any action under any of the provisions of this
Indenture, the Company shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent provided for in this Indenture relating
to the proposed action have been complied with and an Opinion of Counsel
stating that in the opinion of such counsel all such conditions precedent have
been complied with, except that in the case of any such application or demand
as to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or demand,
no additional certificate or opinion need be furnished.

(b) Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or
covenant in this Indenture (other than the certificate provided pursuant to
Section 5.03(d) of this Indenture) shall include (1) a statement that the
person making such certificate or opinion has read such covenant or condition;
(2) a, brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; (3)

- 45 -
<PAGE> 48
a statement that, in the opinion of such person, he has made such examination
or investigation as is necessary to enable him to express an informed opinion
as to whether or not such covenant or condition has been complied with; and (4)
a statement as to whether or not, in the opinion of such person, such condition
or covenant has been complied with.

SECTION 13.07. Except as provided pursuant to Section 2.01 pursuant
to a Board Resolution, and as set forth in an Officers' Certificate, or
established in one or more indentures supplemental to the Indenture, in any
case where the date of maturity of interest or principal of any Debenture or
the date of redemption of any Debenture shall not be a Business Day then
payment of interest or principal (and premium, if any) may be made on the next
succeeding Business Day with the same force and effect as if made on the
nominal date of maturity or redemption, and no interest shall accrue for the
period after such nominal date.

SECTION 13.08. If and to the extent that any provision of this
Indenture limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act such imposed duties shall
control.

SECTION 13.09. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.

SECTION 13.10. In case any one or more of the provisions contained
in this Indenture or in the Debentures of any series shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Indenture or of such Debentures, but this Indenture and such Debentures shall
be construed as if such invalid or illegal or unenforceable provision had never
been contained in this Indenture or in such Debentures.

SECTION 13.11. The Company will have the right at all times to
assign any of its rights or obligations under the Indenture to a direct or
indirect wholly owned subsidiary of the Company; provided that, in the event
of, any such assignment, the Company will remain liable for all such
obligations. Subject to the foregoing, this Indenture is binding upon and
inures to the benefit of the parties to it and their respective successors and
assigns. This Indenture may not otherwise be assigned by the parties to it.

ARTICLE FOURTEEN

SUBORDINATION OF DEBENTURES

SECTION 14.01. The Company covenants and agrees, and each Holder of
Debentures issued under this Indenture by such Holder's acceptance of such
Debentures likewise covenants and agrees, that all Debentures shall be issued
subject to the provisions of this Article Fourteen; and each Holder of a
Debenture, whether upon original issue or upon transfer or assignment of such
Debenture, accepts and agrees to be bound by such provisions.

The payment of the principal of, premium, if any, and interest on all
Debentures issued under this Indenture shall, to the extent and in the manner
set forth below, be subordinated

- 46 -
<PAGE> 49
and subject in right of payment to the prior payment in full of all Senior
Indebtedness, whether outstanding at the date of this Indenture or incurred
after such date.

No provision of this Article Fourteen shall prevent the occurrence of
any default or Event of Default under this Indenture.

SECTION 14.02. In the event and during the continuation of any
default in the payment of principal, premium, interest or any other payment due
on any Senior Indebtedness continuing beyond the period of grace, if any,
specified in the instrument evidencing such Senior Indebtedness, unless and
until such default shall have been cured or waived or shall have ceased to
exist, and in the event that the maturity of any Senior Indebtedness has been
accelerated because of a default, then no payment shall be made by the Company
with respect to the principal (including redemption and sinking fund payments)
of, or premium, if any, or interest on the Debentures.

In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any holder when such payment is prohibited by the
preceding paragraphs of this Section 14.02, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee within 90 days of such payment
of the amounts then due and owing on the Senior Indebtedness and only the
amounts specified in such notice to the Trustee shall be paid to the holders of
Senior Indebtedness.

SECTION 14.03. Upon any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding-up or liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due upon all Senior Indebtedness shall first be paid in full, or
payment of such Senior Indebtedness provided for in money in accordance with
its terms, before any payment is made on account of the principal (and premium,
if any) or interest on the Debentures; and upon any such dissolution or
liquidation or reorganization any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders of the Debenture or the Trustee would be
entitled, except for the provisions of this Article Fourteen, shall by paid by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, or by the Holders of
the Debentures or by the Trustee under this Indenture if received by them or
it, directly to the holders of Senior Indebtedness (pro rata to such holders on
the basis of the respective amounts of Senior Indebtedness held by such
holders) or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
Senior Indebtedness may have been issued, as their respective interests may
appear, to the extent necessary to pay all Senior Indebtedness in full, in
money or money's worth, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness, before any payment
or distribution is made to the holders of Debentures or to the Trustee.

- 47 -
<PAGE> 50
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee or the holders of the Debentures before all Senior Indebtedness is
paid in full, or provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust for the benefit
of and shall be paid over or delivered to the holders of Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any Senior
Indebtedness may have been issued, as their respective interests may appear,
for application to the payment of all Senior Indebtedness remaining unpaid to
the extent necessary to pay all Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness.

For purposes of this Article Fourteen, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Article Fourteen with respect to the Debentures to the payment of all Senior
Indebtedness which may at the time be outstanding; provided that (i) the Senior
Indebtedness is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of the
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the Company with, or
the merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon
the terms and conditions provided for in Article Ten hereof shall not be deemed
a dissolution, winding-up, liquidation or reorganization for the purposes of
this Section 14.03 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article Ten hereof. Nothing in Section 14.02 or in this Section
14.03 shall apply to claims of, or payments to, the Trustee under or pursuant
to Section 7.06.

SECTION 14.04. Subject to the payment in full of all Senior
Indebtedness, the rights of the holders of the Debentures shall be subrogated
to the rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Indebtedness until the principal of (and premium, if any) and interest
on the Debentures shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holders of the
Debentures or the Trustee would be entitled except for the provisions of this
Article Fourteen, and no payment over pursuant to the provisions of this
Article Fourteen, to or for the benefit of the holders of Senior Indebtedness
by holders of the Debentures or the Trustee, shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Debentures, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness. It is understood that the provisions of this Article
Fourteen are and are intended solely for the purposes of defining the relative
rights of the holders of the Debentures, on the one hand, and the holders of
the Senior Indebtedness on the other hand.

- 48 -
<PAGE> 51
Nothing contained in this Article Fourteen or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness, and the
holders of the Debentures, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Debentures the principal of (and
premium, if any) and interest on the Debentures as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the holders of the Debentures and creditors
of the Company other than the holders of the Senior Indebtedness, nor shall
anything in this Indenture or in such Debentures prevent the Trustee or the
holder of any Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, under this Article Fourteen of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.

Upon any payment of distribution of assets of the Company referred to
in this Article Fourteen, the Trustee, subject to the provision of Section
7.01, and the holders of the Debentures shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other person making such payment or distribution, delivered to the
Trustee or to the Holders of the Debentures, for the purposes of ascertaining
the persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, the amount hereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Fourteen.

SECTION 14.05. Each Holder of a Debenture by his acceptance of such
Debenture authorizes and directs the Trustee in his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Fourteen and appoints the Trustee his attorney-in-fact for any and
all such purposes.

SECTION 14.06. The Company shall give prompt written notice to a
Responsible Officer of the Trustee of any fact known to the Company which would
prohibit the making of any payment of monies to or by the Trustee in respect of
the Debentures pursuant to the provisions of this Article Fourteen.
Notwithstanding the provisions of this Article Fourteen or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment of monies
to or by the Trustee in respect of the Debentures pursuant to the provisions of
this Article Fourteen, unless and until a Responsible Officer of the Trustee
shall have received written notice of such acts at the Principal Office of the
Trustee from the Company or a holder or holders of Senior Indebtedness or from
any trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 7.01, shall be entitled in all
respects to assume that no such facts exist; provided that if the Trustee shall
not have received the notice provided for in this Section 14.06 at least two
Business Days prior to the date upon which by the terms hereof any money may
become, payable for any purpose (including, without limitation, the payment of
the principal of (or premium, if any) or interest on any Debenture), then,
anything contained in this Indenture to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purposes for which they were received, and shall not be
affected by any notice to the contrary which may be received by it within two
Business Days prior to such date.

- 49 -
<PAGE> 52
The Trustee, subject to the provisions of Section 7.01, shall be
entitled to rely on the delivery to it of a written notice by a person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness or a trustee on behalf of any such holder or holders.
In the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Fourteen, the Trustee may request such person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such person, the extent to which such person is entitled
to participate in such payment or distribution and any other facts pertinent to
the rights of such person under this Article Fourteen, and if such evidence is
not furnished the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.

SECTION 14.07. The Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article Fourteen in respect of any
Senior Indebtedness at any time held by it, to the same extent as and other
holder of Senior Indebtedness, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder.

With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Fourteen, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and,
subject to the provisions of Section 7.01, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Debentures, the Company or any other person money or assets to which any holder
of Senior Indebtedness shall be entitled by virtue of this Article Fourteen or
otherwise.

SECTION 14.08. No right of any present or future holder of any
Senior Indebtedness to enforce subordination as provided in this Indenture
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge of such
act or failure to act which any such holder may have or otherwise be charged
with.

Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the holders of the
Debentures, without incurring responsibility to the holders of the Debentures
and without impairing or releasing the subordination provided in this Article
or the obligations under this Indenture of the holders of the Debentures to the
holders of Senior Indebtedness, do any one or more of the following: (i)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any
manner Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (iii) release any person liable in any manner for
the collection

- 50 -
<PAGE> 53
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other person.

The First National Bank of Chicago, as Trustee hereby accepts the
trusts in this Indenture declared and provided, upon the terms and conditions
set forth above.

- 51 -
<PAGE> 54
IN WITNESS WHEREOF, the parties to this Indenture have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.

ILLINOIS POWER COMPANY

By_______________________________
Vice President

Attest:

By____________________________________
Secretary

THE FIRST NATIONAL BANK OF CHICAGO
as Trustee

By_______________________________
Vice President

Attest:

By____________________________________
Trust Officer

- 52 -
<PAGE> 55
STATE OF ILLINOIS )
ss.:
COUNTY OF MACON )

On ___________ ____, 1994 before me, ________________, Notary
Public, personally appeared _________________ and ________________.

/ / personally known to me - OR -

/ / proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

Witness my hand and official seal.

______________________________________
Signature of Notary

CAPACITY CLAIMED BY SIGNER

/ / INDIVIDUAL(S) ________________

/ / CORPORATE OFFICER(S)___________

/ / PARTNER(S)

/ / ATTORNEY-IN-FACT

/ / TRUSTEE(S)

/ / GUARDIAN/CONSERVATOR

/ / OTHER:

SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)

ILLINOIS POWER COMPANY

- 53 -
<PAGE> 56
STATE OF ILLINOIS )
ss.:
COUNTY OF C O O K )

On ___________ ____, 1994 before me, ________________, Notary
Public, personally appeared ________________ and _________________.

/ / personally known to me - OR -

Witness my hand and official seal.

______________________________________
Signature of Notary

CAPACITY CLAIMED BY SIGNER

/ / INDIVIDUAL(S) ________________

/ / CORPORATE OFFICER(S) TRUST OFFICER

/ / PARTNER(S)

/ / ATTORNEY-IN-FACT

/ / TRUSTEE(S)

/ / GUARDIAN/CONSERVATOR

/ / OTHER:

SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)

THE FIRST NATIONAL BANK OF CHICAGO

- 54 -

<PAGE> 1

EXHIBIT 4(e)(1)
ILLINOIS POWER COMPANY

CROSS-REFERENCE TABLE

<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Indenture
- ------------------- ---------
<S> <C>
310(a) . . . . . . . . . . . . . . . . . . . . 7.09
310(b) . . . . . . . . . . . . . . . . . . . . 7.08
7.10
310(c) . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . 7.13
311(b) . . . . . . . . . . . . . . . . . . . . 7.13
311(c) . . . . . . . . . . . . . . . . . . . . 7.13
312(a) . . . . . . . . . . . . . . . . . . . . 5.01
312(b) . . . . . . . . . . . . . . . . . . . . 5.01
312(c) . . . . . . . . . . . . . . . . . . . . 5.01
313(a) . . . . . . . . . . . . . . . . . . . . 5.02
313(b) . . . . . . . . . . . . . . . . . . . . 5.02
313(c) . . . . . . . . . . . . . . . . . . . . 5.02
313(d) . . . . . . . . . . . . . . . . . . . . 5.02
314(a) . . . . . . . . . . . . . . . . . . . . 5.02
314(b) . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . 13.06
314(d) . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . 13.06
314(f) . . . . . . . . . . . . . . . . . . . . Inapplicable
315(a) . . . . . . . . . . . . . . . . . . . . 7.01(a)
7.02
315(b) . . . . . . . . . . . . . . . . . . . . 6.07
315(c) . . . . . . . . . . . . . . . . . . . . 7.01
315(d) . . . . . . . . . . . . . . . . . . . . 7.01
315(e) . . . . . . . . . . . . . . . . . . . . 6.08
316(a) . . . . . . . . . . . . . . . . . . . . 6.06
8.04
316(b) . . . . . . . . . . . . . . . . . . . . 6.04
316(c) . . . . . . . . . . . . . . . . . . . . 8.01
317(a) . . . . . . . . . . . . . . . . . . . . 6.02
317(b) . . . . . . . . . . . . . . . . . . . . 4.03
318(a) . . . . . . . . . . . . . . . . . . . . 13.08
</TABLE>

<PAGE> 1

EXHIBIT 4(f)

ILLINOIS POWER COMPANY

AND

THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE

________________

FIRST SUPPLEMENTAL INDENTURE

DATED AS OF ____________ ___, 1994

INDENTURE

DATED AS OF ___________ 1, 1994

_________________

____% SUBORDINATED DEBENTURES, SERIES A, DUE ________

<PAGE> 2

THIS FIRST SUPPLEMENTAL INDENTURE, dated as of the _____ day of ___________,
1994 (this "First Supplemental Indenture"), between ILLINOIS POWER COMPANY, a
corporation duly organized and existing under the laws of the State of Illinois
(the "Company"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association organized and existing under the laws of the United States of
America, as trustee (the "Trustee") under the Indenture dated as of ________ 1,
1994 between the Company and the Trustee (the "Indenture"). All terms used and
not defined this First Supplemental Indenture are used as defined in the
Indenture.

WHEREAS, the Company executed and delivered the Indenture to the Trustee to
provide for the future issuance of its subordinated debentures (the
"Debentures"), said Debentures to be issued from time to time in series as
might be determined by the Company under the Indenture, in an unlimited
aggregate principal amount which may be authenticated and delivered under the
Indenture as provided in the Indenture; and

WHEREAS, pursuant to the terms of the Indenture, the Company desires to
provide for the establishment of a new series of its Debentures to be known as
its ____% Subordinated Debentures, Series A, due _____ (the "Series A
Debentures"), the form and substance of such Series A Debentures and the terms,
provisions and conditions of such Series A Debentures to be set forth as
provided in the Indenture and this First Supplemental Indenture; and

WHEREAS, Illinois Power Capital, L.P., a Delaware limited partnership
("Illinois Power Capital"), has offered to the public its ____% Cumulative
Monthly Income Preferred Securities, Series A (the "Series A Preferred
Securities"), representing limited partnership interests in Illinois Power
Capital and proposes to invest the proceeds from such offering in the Series A
Debentures; and

WHEREAS, upon the occurrence of a Special Event (as defined in the Amended
and Restated Agreement of Limited Partnership of Illinois Power Capital, dated
____________ ___, 1994 (the "Limited Partnership Agreement")), the Company may
dissolve Illinois Power Capital and cause to be distributed to the holders of
the Series A Preferred Securities, on a pro rata basis, Series A Debentures (a
"Dissolution Event"); and

WHEREAS, the Company desires and has requested the Trustee to join with it
in the execution and delivery of this First Supplemental Indenture, and all
requirements necessary to make this First Supplemental Indenture a valid
instrument, in accordance with its terms, and to make the Series A Debentures,
when executed by the Company and authenticated and delivered by the Trustee,
the valid obligations of the Company, have been performed and fulfilled, and
the execution and delivery of this First Supplemental Indenture have been in
all respects duly authorized:

NOW THEREFORE, in consideration of the purchase and acceptance of the Series
A Debentures by their holders, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Series A Debentures
and the terms, provisions and conditions of them, the Company covenants and
agrees with the Trustee as follows:

- 1 -
<PAGE> 3
ARTICLE ONE

GENERAL TERMS AND CONDITIONS OF
THE SERIES A DEBENTURES

SECTION 1.01. There shall be and is authorized a series of Debentures
designated the "_____% Subordinated Debentures, Series A, Due ____", limited in
aggregate principal amount to (i) $________ plus (ii) the amount of capital
contributions made by the Company from time to time as general partner of
Illinois Power Capital, which amount shall be as set forth in any written order
of the Company for the authentication and delivery of Series A Debentures. The
Series A Debentures shall mature and the principal shall be due and payable
together with all accrued and unpaid interest on them, including Additional
Interest (as defined below) on __________ ___, ____, and shall be issued in the
form of registered Series A Debentures without coupons.

SECTION 1.02. Except as provided in Section 1.03, the Series A Debentures
shall be issued in certificated form. Principal of and interest on the Series
A Debentures issued in certificated form will be payable, the transfer of such
Series A Debentures will be registrable and such Series A Debentures will be
exchangeable for the Series A Debentures bearing identical terms and provisions
at the office or agency of the Company in Decatur, Illinois; provided, however,
that payment of interest may be made at the option of the Company by check
mailed to the registered holder at such address as shall appear in the
Debenture Register. Notwithstanding the foregoing, so long as the holder of
the Series A Debentures is Illinois Power Capital, the payment of the principal
of and interest (including Additional Interest, if any) on the Series A
Debentures will be made at such place and to such account as may be designated
by Illinois Power Capital.

SECTION 1.03. In connection with a Dissolution Event, the Series A
Debentures in certificated form may be presented to the Trustee by Illinois
Power Capital in exchange for a Global Debenture in an aggregate principal
amount equal to all Outstanding Series A Debentures, to be registered in the
name of the Depository, or its nominee, and delivered by the Trustee to the
Depository for crediting to the accounts of its participants. The Company upon
any such presentation shall execute a Global Debenture in such aggregate
principal amount and deliver the same to the Trustee for authentication and
delivery as provided above and in the Indenture. Payments on the Series A
Debentures issued as a Global Debenture will be made to the Depository. The
Depository for the Series A Debentures shall be The Depository Trust Company,
New York, New York.

SECTION 1.04. Each Series A Debenture will bear interest at the rate of
_____% per annum from the original date of issuance until the principal of such
Series A Debenture becomes due and payable, and on any overdue principal and
(to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the same rate per annum, payable
monthly in arrears on the last day of each calendar month of each year (each,
an "Interest Payment Date," commencing on ___________, 1994), to the person in
whose name such Series A Debenture or any predecessor Series A Debenture is
registered, at the close of business on the regular record date for such
interest installment, which shall be the close of business on the Business Day
next preceding that Interest Payment Date. If pursuant to the provisions of
Section 2.11(c) of the Indenture the Series A

- 2 -
<PAGE> 4
Subordinated Debentures are no longer represented by a Global Debenture, the
Company may select a regular record date for such interest installment which
shall be any date not later than fifteen days preceding an Interest Payment
Date. Any such interest (including Additional Interest) not punctually paid or
duly provided for shall immediately cease to be payable to the registered
holders on such regular record date, and may be paid to the person in whose
name the Series A Debenture (or one or more Predecessor Debentures) is
registered at the close of business on a special record date to be fixed by the
Trustee for the payment of such defaulted interest, notice of which special
record date shall be given to the registered holders of the Series A Debentures
not less than 10 days prior to such special record date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Series A Debentures may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.

ARTICLE TWO

MANDATORY PREPAYMENT AND OPTIONAL REDEMPTION
OF THE SERIES A DEBENTURES

SECTION 2.01. If Illinois Power Capital redeems the Series A Preferred
Securities in accordance with their terms, the Series A Debentures will become
due and payable in a principal amount equal to the aggregate liquidation
preference of the Series A Preferred Securities so redeemed, together with all
accrued and unpaid interest on them, including Additional Interest, if any (the
"Mandatory Prepayment Price"). Any payment pursuant to this provision shall be
made prior to 12:00 noon, New York time, on the date of such redemption or at
such earlier time as the Company and Illinois Power Capital shall agree.

SECTION 2.02. At such time as there are no Series A Preferred Securities
remaining outstanding and subject to the terms of Article Three of the
Indenture, the Company shall have the right to redeem the Series A Debentures,
in whole or in part, from time to time, on or after ___________, 1999, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest on them, including any Additional Interest, if any,
to the date of such redemption (the "Optional Redemption Price"). Any
redemption pursuant to this paragraph will be made upon not less than 30 nor
more than 60 days' notice, at the Optional Redemption Price. If the Series A
Debentures are only partially redeemed pursuant to this Section, the Debentures
will be redeemed pro rata or by lot or by any other method utilized by the
Trustee; provided, that if at the time of redemption, the Series A Debentures
are registered as a Global Debenture, the Depository shall determine by lot the
principal amount of such Series A Debentures held by each Series A
Debentureholder to be redeemed.

ARTICLE THREE

EXTENSION OF INTEREST PAYMENT PERIOD

SECTION 3.01. So long as the Company is not in default in the payment of
interest on any series of Debentures issued under the Indenture, the Company
shall have the

- 3 -
<PAGE> 5
right, at any time during the term of the Series A Debentures, from time to
time to extend the interest payment period of such Series A Debentures for up
to 60 consecutive months (the "Extended Interest Payment Period"), at the end
of which period the Company shall pay all interest accrued and unpaid on such
Series A Debentures (together with interest on such accrued and unpaid interest
at the rate specified for the Series A Debentures to the extent permitted by
applicable law); provided that, during such Extended Interest Payment Period
the Company shall not declare or pay any dividend on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
or make any guarantee payments with respect to the foregoing (other than
payments on the Guarantee); and provided further that any such extended
interest payment period may only be selected with respect to the Series A
Debentures if an extended interest payment period of identical length is
simultaneously selected for all Debentures then outstanding under the
Indenture. Prior to the termination of any such Extended Interest Payment
Period, the Company may further extend such period, provided that such period
together with all such further extensions of it shall not exceed 60 consecutive
months. Upon the termination of any Extended Interest Payment Period and upon
the payment of all accrued and unpaid interest and any Additional Interest then
due, the Company may select a new Extended Interest Payment Period, subject to
the foregoing requirements. No interest shall be due and payable during an
Extended Interest Payment Period, except at the end of such Period.

SECTION 3.02. (a) If Illinois Power Capital is the sole holder of the
Series A Debentures at the time the Company selects an Extended Interest
Payment Period, the Company shall give both Illinois Power Capital and the
Trustee written notice of its selection of such Extended Interest Payment
Period one Business Day prior to the earlier of (i) the next succeeding date on
which dividends on the Series A Preferred Securities are payable or (ii) the
date Illinois Power Capital is required to give notice of the record date or
the date such dividends are payable to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Series A Preferred
Securities, but in any event not less than one Business Day prior to such
record date. The Company shall cause Illinois Power Capital to give notice of
the Company's selection of such Extended Interest Payment Period to the holders
of the Series A Preferred Securities.

(b) If Illinois Power Capital is not the sole holder of the Series A
Debentures at the time the Company selects an Extended Interest Payment Period,
the Company shall give the holders of the Series A Debentures and the Trustee
written notice of its selection of such Extended Interest Payment Period 10
Business Days prior to the earlier of (i) the next succeeding Interest Payment
Date or (ii) the date the Company is required to give notice of the record or
payment date of such interest payment to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Series A
Debentures, but in any event not less than two Business Days prior to such
record date.

(c) The month in which any notice is given pursuant to paragraphs (a) or
(b) of this Section shall constitute one of the 60 mouths which comprise the
maximum Extended Interest Payment Period.

- 4 -
<PAGE> 6
ARTICLE FOUR

RIGHT OF SET-OFF

SECTION 4.01. Notwithstanding anything to the contrary in the Indenture or
in this First Supplemental Indenture, the Company shall have the right to
set-off any payment it is otherwise required to make under the Indenture or
hereunder with and to the extent the Company has previously made, or is
concurrently on the date of such payment making, a payment under the Guarantee,
dated as of ____________, 1994, executed by the Company and furnished to
Illinois Power Capital for the benefit of the holders of the Series A Preferred
Securities.

ARTICLE FIVE

COVENANT TO LIST ON EXCHANGE

SECTION 5.01. If the Series A Debentures are to be issued as a Global
Debenture in connection with the distribution of the Series A Debentures to the
holders of the Series A Preferred Securities upon a Dissolution Event, the
Company will use its best efforts to list such Debentures on the New York Stock
Exchange or on such other exchange as the Series A Preferred Securities are
then listed and traded on the same part of any such exchange.

ARTICLE SIX

FORM OF SERIES A DEBENTURE

SECTION 6.01. The Series A Debentures and the Trustee's Certificate of
Authentication to be endorsed on them are to be substantially in the following
forms:

(FORM OF FACE OF DEBENTURE)

[If the Series A Debenture is to be a Global Indenture, insert -- This
Debenture is a Global Debenture within the meaning of the Indenture referred to
below and is registered in the name of a Depository or a nominee of a
Depository. Except as otherwise provided in Section 2.11 of the Indenture,
this Debenture may be transferred, in whole but not in part, only to another
nominee of the Depository or to a successor Depository or to a nominee of such
successor Depository.

Unless this Debenture is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York) to the issuer or its agent
for registration of transfer, exchange or payment, and any Debenture issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE OF THIS SERIES
A DEBENTURE FOR VALUE OR OTHERWISE BY A

- 5 -
<PAGE> 7
PERSON IS WRONGFUL since the registered owner of this First Supplemental
Indenture, Cede & Co., has an interest in this Debenture.]

No._______________ $_______________

CUSIP No._________

ILLINOIS POWER COMPANY

_______% SUBORDINATED DEBENTURE, SERIES A, DUE ____

ILLINOIS POWER COMPANY, a corporation duly organized and existing under the
laws of the State of Illinois (the "Company," which term includes any successor
corporation under the Indenture), for value received, hereby promises to pay to
_______________ or registered assigns, the principal sum of
__________________________ Dollars on ____________, _____, and to pay interest
on said principal sum from ______________, 1994 or from the most recent
interest payment date (each such date, an "Interest Payment Date") to which
interest has been paid or duly provided for, monthly in arrears on the last day
of each calendar month of each year commencing _________________, 1994 at the
rate of ______% per annum plus Additional Interest, if any, until the principal
of this Debenture shall have become due and payable, and on any overdue
principal and premium, if any, and (to the extent that payment of such interest
is enforceable under applicable law) on any overdue installment of interest at
the same rate per annum. The amount of interest payable on any Interest
Payment Date shall be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on this
Debenture is not a Business Day, then payment of interest payable on such date
will be made on the next succeeding day which is a Business Day (and without
any interest or other payment in respect of any such delay), except that, if
such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. The interest installment so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the person in whose name this Debenture
(or one or more Predecessor Debentures, as defined in the Indenture) is
registered at the close of business on the regular record date for such
interest installment[, which shall be the close of business on the Business Day
next preceding such Interest Payment Date.] If pursuant to the provisions of
Section 2.11(c) of the Indenture the Series A Debentures are no longer
represented by a Global Debenture, the regular record date shall be the close
of business on the ____ Business Day next preceding such Interest Payment
Date.] Any such interest installment not punctually paid or duly provided for
shall immediately cease to be payable to the registered holders on such regular
record date, and may be paid to the person in whose name this Debenture (or one
or more Predecessor Debentures) is registered at the close of business on a
special record date to be fixed by the Trustee for the payment of such
defaulted interest, notice of which special record date shall be given to the
registered holders of this series of Debentures not less than 10 days prior to
such special record date, or may be paid at any time in any other lawful manner
not

- 6 -
<PAGE> 8
inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. The principal of (and
premium, if any) and the interest on this Debenture shall be payable at the
office or agency of the Company maintained for that purpose in Decatur,
Illinois, in any coin or currency of the United States of America which at the
time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the registered holder at such address as shall
appear in the Debenture Register. Notwithstanding the foregoing, so long as
the holder of this Debenture is Illinois Power Capital, L.P. ("Illinois Power
Capital"), the payment of the principal of (and premium, if any) and interest
(including Additional Interest, if any) on this Debenture will be made at such
place and to such account as may be designated by Illinois Power Capital.

The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Debenture is issued subject to the
provisions of the Indenture with respect such Senior Indebtedness. Each Holder
of this Debenture, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on such Holder's behalf
to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Trustee such
Holder's attorney-in-fact for any and all such purposes. Each Holder of this
Debenture, by such Holder's acceptance of this Debenture, waives all notice of
the acceptance of the subordination provisions contained in this Debenture and
in the Indenture by each holder of Senior Indebtedness, whether now outstanding
or incurred after the date of this Indenture, and waives reliance by each such
Holder upon said provisions.

This Debenture shall not be entitled to any benefit under the Indenture, be
valid or become obligatory for any purpose until the Certificate of
Authentication on this Debenture shall have been signed by or on behalf of the
Trustee.

Unless the Certificate of Authentication on this Debenture has been executed
by the Trustee referred to on the reverse side of this Debenture, this
Debenture shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.

The provisions of this Debenture are contained on the reverse side of it
and such continued provisions shall for all purposes have the same effect as
though fully set forth at this place.

- 7 -
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Instrument to be executed.

Dated___________________

ILLINOIS POWER COMPANY

By: ___________________________
Chairman

Attest:

___________________________
Secretary

(FORM OF CERTIFICATE OF AUTHENTICATION)

CERTIFICATE OF AUTHENTICATION

This is one of the Debentures of the series of Debentures described in the
within-mentioned Indenture.

The First National Bank of Chicago

___________________________ ___________________________
as Trustee or as Authentication Agent

By_________________________ By ________________________
Authorized Signatory Authorized Signatory

(FORM OF REVERSE OF DEBENTURE)

This Debenture is one of a duly authorized series of Debentures of the
Company (the "Debentures"), specified in the Indenture, all issued or to be
issued in one or more series under and pursuant to an Indenture dated as of
_______ 1, 1994 duly executed and delivered between the Company and The First
National Bank of Chicago, a national banking association duly organized and
existing under the laws of the United States of America, as Trustee (the
"Trustee"), as supplemented by the First Supplemental Indenture dated as of
___________, 1994 between the Company and the Trustee (as so supplemented, the
"Indenture"), to which Indenture and all indentures supplemental to it
reference is made for a description of the

- 8 -
<PAGE> 10
rights, limitations of rights, obligations, duties and immunities under it the
Indenture of the Trustee, the Company and the holders of the Debentures. By
the terms of the Indenture, the Debentures are issuable in series which may
vary as to amount, date of maturity, rate of interest and in other respects as
provided in the Indenture. This series of Debentures is limited in aggregate
principal amount as specified in said First Supplemental Indenture.

If Illinois Power Capital redeems its __% Cumulative Monthly Income
Preferred Securities, Series A (the "Series A Preferred Securities") in
accordance with their terms, the Debentures will become due and payable in a
principal amount equal to the aggregate stated liquidation preference of the
Series A Preferred Securities so redeemed, together with any interest accrued
on them, including Additional Interest (the "Mandatory Prepayment Price"). Any
payment of such Mandatory Prepayment Price shall be made prior to 12:00 noon,
New York time, on the date of such redemption or at such earlier time as the
Company and Illinois Power Capital shall agree. At such time as there are no
Series A Preferred Securities remaining outstanding and subject to the terms of
Article Three of the Indenture, the Company shall have the right to redeem this
Debenture at the option of the Company, without premium or penalty, in whole or
in part at any time on or after ___________, 1999 (an "Optional Redemption"),
at a redemption price equal to 100% of the principal amount of this Debenture
plus any accrued but unpaid interest, including any Additional Interest, if
any, to the date of such redemption (the "Optional Redemption Price"). Any
redemption pursuant to this paragraph will be made upon not less than 30 nor
more than 60 days' notice, at the Optional Redemption Price. If the Debentures
are only partially redeemed by the Company pursuant to an Optional Redemption,
the Debentures will be redeemed pro rata or by lot or by any other method
utilized by the Trustee; provided that if at the time of redemption, the
Debentures are registered as a Global Debenture, the Depository shall determine
by lot the principal amount of such Debentures held by each Debentureholder to
be redeemed.

In the event of redemption of this Debenture in part only, a new Debenture
or Debentures of this series for the unredeemed portion of this Debenture will
be issued in the name of the Holder of this Debenture upon the cancellation of
this Debenture.

In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the
Indenture.

The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Debenture upon compliance by the Company with certain
conditions set forth in the Indenture.

The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Debentures of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the Holders of the
Debentures; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Debentures of any series, or reduce the
principal amount of them, or reduce the rate or extend

- 9 -
<PAGE> 11
the time of payment of interest on them, or reduce any premium payable upon the
redemption of them, without the consent of the holder of each Debenture so
affected or (ii) reduce the aforesaid percentage of Debentures, the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of each Debenture then outstanding and affected by such
reduction. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Debentures of all series at the
time outstanding affected thereby, on behalf of the Holders of the Debentures
of such series, to waive any past default in the performance of any of the
covenants contained in the Indenture, or established pursuant to the Indenture
with respect to such series, and its consequences, except a default in the
payment of the principal of or premium, if any, or interest on any of the
Debentures of such series. Any such consent or waiver by the registered Holder
of this Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of this Debenture and of any Debenture issued in exchange for or in place of
this Debenture (whether by registration of transfer or otherwise), irrespective
of whether or not any notation of such consent or waiver is made upon this
Debenture.

No reference in this Debenture to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time and place and at
the rate and in the money prescribed in this Debenture.

The Company shall have the right at any time during the term of the
Debentures, from time to time to extend the interest payment period of such
Debentures to up to 60 consecutive months (the "Extended Interest Payment
Period"), at the end of which period the Company shall pay all interest then
accrued and unpaid (together with interest on such accrued and unpaid interest
at the rate specified for the Debentures to the extent that payment of such
interest is enforceable under applicable law); provided that, during such
Extended Interest Payment Period the Company shall not declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with
respect to the foregoing (other than payments on the Guarantee); and provided
further that any such extended interest payment period may only be selected
with respect to the Series A Debentures if an extended interest payment period
of identical length is simultaneously selected for all Debentures then
outstanding under the Indenture. Prior to the termination of any such Extended
Interest Payment Period, the Company may further extend such Extended Interest
Payment Period, provided that such Period together with all such further
extensions of it shall not exceed 60 consecutive months. At the termination of
any such Extended Interest Payment Period and upon the payment of all accrued
and unpaid interest and any additional amounts then due, the Company may select
a new Extended Interest Payment Period.

As provided in the Indenture and subject to certain limitations set forth in
it, this Debenture is transferable by the registered holder of this Debenture
on the Debenture Register of the Company, upon surrender of this Debenture for
registration of transfer at the office or agency of the Company in Decatur,
Illinois accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
holder of this Debenture or such holder's attorney duly authorized in writing,
upon which one or more new Debentures of authorized denominations and for the
same

- 10 -
<PAGE> 12
aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such
transfer, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in relation to such transfer.

Prior to due presentment for registration of transfer of this Debenture, the
Company, the Trustee, any paying agent and any Debenture Registrar may deem and
treat the registered holder of this Debenture as the absolute owner of this
Debenture (whether or not this Debenture shall be overdue and notwithstanding
any notice of ownership or writing on this Debenture made by anyone other than
the Debenture Registrar) for the purpose of receiving payment of or on account
of the principal of this Debenture and premium, if any, and interest due on
this Debenture and for all other purposes, and neither the Company nor the
Trustee nor any paying agent nor any Debenture Registrar shall be affected by
any notice to the contrary.

No recourse shall be had for the payment of the principal of or the interest
on this Debenture, or for any claim based on this Debenture, or otherwise in
respect of this Debenture, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise, all such liability being, by the
acceptance of this Debenture and as part of the consideration for the issuance
of this Debenture, expressly waived and released.

The Debentures of this series are issuable only in registered form without
coupons in denominations of $25 and any integral multiple of $25. This Global
Debenture is exchangeable for Debentures in definitive form only under certain
limited circumstances set forth in the Indenture. Debentures of this series so
issued are issuable only in registered form without coupons in denominations of
$25 and any integral multiple of $25. As provided in the Indenture and subject
to certain limitations set forth in this Debenture and the Indenture,
Debentures of this series so issued are exchangeable for a like aggregate
principal amount of Debentures of this series of a different authorized
denomination, as requested by the Holder surrendering the same.

All terms used in this Debenture which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

ARTICLE SEVEN

ORIGINAL ISSUE OF SERIES A DEBENTURES

SECTION 7.01. Series A Debentures in the aggregate principal amount of
$__________ plus the amount of capital contributions made by the Company from
time to time as general partner of Illinois Power Capital, may, upon execution
of this First Supplemental Indenture, or from time to time thereafter, be
executed by the Company and delivered to the Trustee for authentication, and
the Trustee shall upon such execution and delivery authenticate and deliver
said Debentures to or upon the written order of the Company, signed

- 11 -
<PAGE> 13
by its Chairman, or any Vice President and its Treasurer or an Assistant
Treasurer, without any further action by the Company.

ARTICLE EIGHT

SPECIAL COVENANTS OF THE COMPANY

SECTION 8.01. So long as any Debentures issued in connection with the
application of the proceeds from the issuance and sale of a series of Series A
Preferred Securities of Illinois Power Capital remain outstanding, the Company
will (i) remain the sole general partner of Illinois Power Capital and maintain
100%-ownership of the general partner interests of Illinois Power Capital;
provided that any permitted successor of the Company under the Indenture may
succeed to its duties as general partner, (ii) contribute capital to the extent
required to maintain its capital at an amount equal to at least 3% of the total
capital contributions to Illinois Power Capital, (iii) not voluntarily
dissolve, wind-up or terminate Illinois Power Capital, except in connection
with a distribution of Debentures and in connection with certain mergers,
consolidations or amalgamations permitted by the Limited Partnership Agreement,
(iv) timely perform all of its duties as General Partner (including the duty to
pay dividends on the Preferred Securities of Illinois Power Capital) and (v)
use its reasonable efforts to cause Illinois Power Capital to remain a limited
partnership except in connection with a distribution of Debentures and in
connection with certain mergers, consolidations or amalgamations permitted by
the Limited Partnership Agreement, and otherwise continue to be treated as a
partnership for United States federal income tax purposes except in connection
with a distribution of Debentures.

ARTICLE NINE

SUNDRY PROVISIONS

SECTION 9.01. Except as otherwise expressly provided in this First
Supplemental Indenture or in the form of Series A Debenture or otherwise
clearly required by the context of this First Supplemental Indenture or the
form of Series A Debenture, all terms used in this First Supplemental Indenture
or in said form of Series A Debenture that are defined in the Indenture shall
have the several meanings respectively assigned to them by the Indenture.

SECTION 9.02. The Indenture, as supplemented by this First Supplemental
Indenture, is in all respects ratified and confirmed, and this First
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent provided in this First Supplemental Indenture or in the
Indenture.

SECTION 9.03. The recitals contained in this First Supplemental Indenture
are made by the Company and not by the Trustee, and the Trustee assumes no
responsibility for the correctness of them. The Trustee makes no
representation as to the validity or sufficiency of this First Supplemental
Indenture.

- 12 -
<PAGE> 14
SECTION 9.04. This First Supplemental Indenture may be executed in any
number of counterparts each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
affixed unto this First Supplemental Indenture and attested, on the date or
dates indicated in the acknowledgments and as of the day and year first above
written.

ILLINOIS POWER COMPANY

By: _______________________________
Vice President

Attest:

_______________________________
Secretary

THE FIRST NATIONAL BANK OF CHICAGO
as Trustee

By: _______________________________
_______________________________
Attest:

_______________________________
Assistant Treasurer

- 13 -
<PAGE> 15
STATE OF ILLINOIS )
COUNTY OF ______ ) ss.: _____________ ___, 1994

On the ____ day of _____________, in the year one thousand nine hundred
ninety-four, before me personally came ___________________ to me known, who,
being by me duly sworn, did depose and say that he is ____________ of ILLINOIS
POWER COMPANY, one of the corporations described in and which executed the
above instrument; that he knows the corporate seal of said corporation; that
the seal affixed to the said instrument is such corporation seal; that it was
so affixed by authority of the Board of Directors of said corporation, and that
(s)he signed her/his name thereto by like authority.

___________________________________

NOTARY PUBLIC

My Commission Expires _____________

STATE OF ILLINOIS )
COUNTY OF COOK ) ss.: _______________ ___, 1994

On the ____ day of __________, in the year one thousand nine hundred
ninety-four, before me personally came _____________________ to me known, who,
being by me duly sworn, did depose and say that (s)he is _____________________
of THE FIRST NATIONAL BANK OF CHICAGO, one of the corporations described in and
which executed the above instrument; that (s)he knows the corporate seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation and that (s)he signed her/his name to the instrument by like
authority.

___________________________________

NOTARY PUBLIC

My Commission Expires______________

- 14 -

<PAGE> 1
EXHIBIT 4(g)

ILLINOIS POWER COMPANY

AND

THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE

_________________

FIRST SUPPLEMENTAL INDENTURE

DATED AS OF _______ __, 1994

INDENTURE

DATED AS OF _________ 1, 1994

CUMULATIVE ADJUSTABLE RATE SUBORDINATED DEBENTURES,
SERIES A, DUE _____

<PAGE> 2
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of the ____ day of
________, 1994 (this "First Supplemental Indenture"), between ILLINOIS POWER
COMPANY, a corporation duly organized and existing under the laws of the State
of Illinois (the "Company"), and THE FIRST NATIONAL BANK OF CHICAGO, a national
banking association organized and existing under the laws of the United States
of America, as trustee (the "Trustee") under the Indenture dated as of
__________ 1, 1994 between the Company and the Trustee (the "Indenture"). All
terms used and not defined this First Supplemental Indenture are used as
defined in the Indenture.

WHEREAS, the Company executed and delivered the Indenture to
the Trustee to provide for the future issuance of its subordinated debentures
(the "Debentures"), said Debentures to be issued from time to time in series as
might be determined by the Company under the Indenture, in an unlimited
aggregate principal amount which may be authenticated and delivered under the
Indenture as provided in the Indenture; and

WHEREAS, pursuant to the terms of the Indenture, the Company
desires to provide for the establishment of a new series of its Debentures to
be known as its Adjustable Rate Subordinated Debentures, Series A, due _____
(the "Series A Debentures"), the form and substance of such Series A Debentures
and the terms, provisions and conditions thereof to be set forth as provided in
the Indenture and this First Supplemental Indenture; and

WHEREAS, Illinois Power Capital, L.P., a Delaware limited
partnership ("Illinois Power Capital"), has offered to the public its
Cumulative Adjustable Rate Monthly Income Preferred Securities, Series A (the
"Series A Preferred Securities"), representing limited partnership interests in
Illinois Power Capital and proposes to invest the proceeds from such offering
in the Series A Debentures; and

WHEREAS, upon the occurrence of a Special Event (as defined in
the Amended and Restated Agreement of Limited Partnership of Illinois Power
Capital, dated _________ __, 1994 (the "Limited Partnership Agreement")), the
Company may dissolve Illinois Power Capital and cause to be distributed to the
holders of the Series A Preferred Securities, on a pro rata basis, Series A
Debentures (a "Dissolution Event"); and

WHEREAS, the Company desires and has requested the Trustee to
join with it in the execution and delivery of this First Supplemental
Indenture, and all requirements necessary to make this First Supplemental
Indenture a valid instrument, in accordance with its terms, and to make the
Series A Debentures, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company, have been
performed and fulfilled, and the execution and delivery of this First
Supplemental Indenture have been in all respects duly authorized:

NOW THEREFORE, in consideration of the purchase and acceptance
of the Series A Debentures by their holders, and for the purpose of setting
forth, as provided in the Indenture, the form and substance of the Series A
Debentures and the terms, provisions and conditions of them, the Company
covenants and agrees with the Trustee as follows:

<PAGE> 3
ARTICLE ONE

GENERAL TERMS AND CONDITIONS OF
THE SERIES A DEBENTURES

SECTION 1.01. There shall be and is authorized a series of
Debentures designated the "Adjustable Rate Subordinated Debentures, Series A,
Due ____," limited in aggregate principal amount to (i) $___________ plus
(ii) the amount of capital contributions made by the Company from time to time
as general partner of Illinois Power Capital, which amount shall be as set
forth in any written order of the Company for the authentication and delivery
of Series A Debentures. The Series A Debentures shall mature and the principal
shall be due and payable together with all accrued and unpaid interest on them,
including Additional Interest (as defined below) on ______ ___, _____, and
shall be issued in the form of registered Series A Debentures without coupons.

SECTION 1.02. Except as provided in Section 1.03, the Series
A Debentures shall be issued in certificated form. Principal of and interest
on the Series A Debentures issued in certificated form will be payable, the
transfer of such Series A Debentures will be registrable and such Series A
Debentures will be exchangeable for the Series A Debentures bearing identical
terms and provisions at the office or agency of the Company in Decatur,
Illinois; provided, however, that payment of interest may be made at the option
of the Company by check mailed to the registered holder at such address as
shall appear in the Debenture Register. Notwithstanding the foregoing, so long
as the holder of the Series A Debentures is Illinois Power Capital, the payment
of the principal of and interest (including Additional Interest, if any) on the
Series A Debentures will be made at such place and to such account as may be
designated by Illinois Power Capital.

SECTION 1.03. In connection with a Dissolution Event, the
Series A Debentures in certificated form may be presented to the Trustee by
Illinois Power Capital in exchange for a Global Debenture in an aggregate
principal amount equal to all Outstanding Series A Debentures, to be registered
in the name of the Depository, or its nominee, and delivered by the Trustee to
the Depository for crediting to the accounts of its participants. The Company
upon any such presentation shall execute a Global Debenture in such aggregate
principal amount and deliver the same to the Trustee for authentication and
delivery as provided above and in the Indenture provided. Payments on the
Series A Debentures issued as a Global Debenture will be made to the
Depository. The Depository for the Series A Debentures shall be The Depository
Trust Company, New York, New York.

SECTION 1.04. Each Series A Debenture shall bear interest at
a variable rate from the date it is made until maturity. The interest rate
will be adjusted quarterly. The rate for the initial period from the original
date of issuance to _______ ___, 1994 will be ___% per annum. After that,
interest on the Series A Debentures will be payable at the "Applicable Rate"
(as defined below) from time to time in effect. The interest rate on any
overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest will
be at the same rate per annum, during such overdue period. Interest is payable
monthly in arrears on the last day of each calendar month of each year (each,
an "Interest Payment Date," commencing on ______, 1994), to the person in whose
name such Series A Debenture or any predecessor Series A Debenture is
registered,

-2-

<PAGE> 4
at the close of business on the regular record date for such interest
installment, which shall be the close of business on the Business Day next
preceding that Interest Payment Date. If pursuant to the provisions of Section
2.11(c) of the Indenture the Series A Debentures are no longer represented by a
Global Debenture, the Company may select a regular record date for such
interest installment which shall be any date not later than fifteen days
preceding an Interest Payment Date. Any such interest (including Additional
Interest) not punctually paid or duly provided for shall immediately cease to
be payable to the registered holders on such regular record date, and may be
paid to the person in whose name the Series A Debenture (or one or more
Predecessor Debentures) is registered at the close of business on a special
record date to be fixed by the Trustee for the payment of such defaulted
interest, notice of which special record date shall be given to the registered
holders of the Series A Debentures not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Series A Debentures may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture.

Except as provided below in this paragraph, the "Applicable
Rate" for any quarter (other than the initial period) will be equal to ___% of
the Effective Rate (as defined below), but not less than ____% per annum nor
more than ___% per annum. The "Effective Rate" for any quarter will be equal
to the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate
and the Thirty Year Constant Maturity Rate (each as defined below) for such
quarter. The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Thirty Year Constant Maturity Rate with respect to any quarter shall be
determined by Illinois Power Capital in the same manner as, and consistent with
its determinations with respect to quarters for the purpose of dividends
payable on the Series A Preferred Securities, as described below. The
Applicable Rate will be rounded to the nearest five hundredth of a percent. In
the event that Illinois Power Capital determines in good faith that for any
reason:

(i) any one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate cannot be determined
for any quarter, then the Effective Rate for such quarter will be equal to the
higher of whichever two of such rates can be so determined;

(ii) only one of the Treasury Bill Rate, the Ten Year
Constant Maturity Rate or the Thirty Year Constant Maturity Rate can be
determined for any quarter, then the Effective Rate for such quarter will be
equal to whichever such rate can be so determined; or

(iii) none of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate can be determined for
any quarter, then the Effective Rate for the preceding quarter will be
continued for such quarter.

- 3 -
<PAGE> 5
event that the Federal Reserve Board does not publish such a weekly per annum
secondary market discount rate during any such Calendar Period, then the
Treasury Bill Rate for such quarter will be the arithmetic average of the two
most recent weekly per annum secondary market discount rates (or the one weekly
per annum secondary market discount rate, if only one such rate is published
during the relevant Calendar Period) for three-month U.S. Treasury bills, as
published weekly during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by Illinois Power Capital.
In the event that a per annum secondary market discount rate for three-month
U.S. Treasury bills is not published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Treasury Bill Rate for such quarter will be the
arithmetic average of the two most recent weekly per annum secondary market
discount rates (or the one weekly per annum secondary market discount rate, if
only one such rate is published during the relevant Calendar Period) for all of
the U.S. Treasury bills then having remaining maturities of not less than 80
nor more than 100 days, as published during such Calendar Period by the Federal
Reserve Board, or if the Federal Reserve Board does not publish such rates, by
any Federal Reserve Bank or by any U.S. Government department or agency
selected by Illinois Power Capital. In the event that Illinois Power Capital
determines in good faith that for any reason no such U.S. Treasury bill rates
are published as provided above during such Calendar Period, then the Treasury
Bill Rate for such will quarter will be the arithmetic average of the per annum
secondary market discount rates based upon the closing bids during such
Calendar Period for each of the issues of marketable non-interest-bearing U.S.
Treasury securities with a remaining maturity of not less than 80 nor more than
100 days from the date of each such quotation, as chosen and quoted daily for
each Business Day in New York City (or less frequently if daily quotations are
not generally available) to Illinois Power Capital by at least three recognized
dealers in U.S. Government securities selected by Illinois Power Capital. In
the event that Illinois Power Capital determines in good faith that for any
reason Illinois Power Capital cannot determine the Treasury Bill Rate for any
quarter as provided above in this paragraph, the Treasury Bill Rate for such
quarter will be the arithmetic average of the per annum secondary market
discount rates based upon the closing bids during such Calendar Period for each
of the issues of marketable interest-bearing U.S. Treasury securities with a
remaining maturity of not less than 80 nor more than 100 days, as chosen and
quoted daily for each Business Day in New York City (or less frequently if
daily quotations are not generally available) to Illinois Power Capital by at
least three recognized dealers in U.S. Government securities selected by
Illinois Power Capital.

- 4 -

<PAGE> 6
Year Average Yield is not published by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar Period, then the Ten Year
Constant Maturity Rate for such quarter will be the arithmetic average of the
two most recent weekly per annum average yields to maturity or (the one weekly
per annum average yield to maturity, if only one such yield published during
the relevant Calendar Period) for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities (as
defined below)) then having remaining maturities of not less than eight nor
more than twelve years, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board does not publish such yields, by
any Federal Reserve Bank or by any U.S. Government department or agency
selected by Illinois Power Capital. In the event that Illinois Power Capital
determines in good faith that for any reason Illinois Power Capital cannot
determine the Ten Year Constant Maturity Rate for any quarter as provided above
in this paragraph, then the Ten Year Constant Maturity Date for such quarter
will be the arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for each of the issues
of actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not less than eight
or more than twelve years from the date of each such quotation, as chosen and
quoted daily for each Business Day in New York City (or less frequently if
daily quotations are not generally available) to Illinois Power Capital by at
least three recognized dealers in U.S. Government securities selected by
Illinois Power Capital.

Except as described below in this paragraph, the "Thirty Year
Constant Maturity Rate" for each quarter will be the arithmetic average of the
two most recent weekly per annum Thirty Year Average Yields (as defined below)
(or the one weekly per annum Thirty Year Average Yield, if only one such yield
is published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately preceding the last
ten calendar days preceding the quarter for which the interest rate on the
Series A Debentures is being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum Thirty Year Average Yield during
such Calendar Period, then the Thirty Year Constant Maturity Rate for such
quarter will be the arithmetic average of the two most recent weekly per annum
Thirty Year Average Yields (or the one weekly per annum Thirty Year Average
Yield, if only one such yield is published during the relevant Calendar
Period), as published weekly during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency selected by Illinois Power
Capital. In the event that a per annum Thirty Year Average Yield is not
published by the Federal Reserve Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during such Calendar Period, then the
Thirty Year Constant Maturity Rate for such quarter will be the arithmetic
average of the two most recent weekly per annum average yields to maturity (or
the one weekly per annum average yield to maturity, if only one such yield is
published during the relevant Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) then having remaining maturities of not less than twenty-eight nor
more than thirty-two years, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board does not publish such
yields, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by Illinois Power Capital. In the event that Illinois Power
Capital determines in good faith that for any reason Illinois Power Capital
cannot determine the Thirty Year Constant Maturity Date for any quarter as
provided above in this paragraph, then the Thirty Year Constant Maturity Rate
for such quarter will be the arithmetic average of the per annum

- 5 -
<PAGE> 7
average yields to maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) with a final maturity
date not less than twenty-eight nor more than thirty-two years from the date of
each such quotation, as chosen and quoted daily for each Business Day in New
York City (or less frequently if daily quotations are not generally available)
to Illinois Power Capital by at least three recognized dealers in U.S.
Government securities selected by Illinois Power Capital.

The Treasury Bill Rate, the Ten Year Constant Maturity Rate
and the Thirty Year Constant Maturity Rate will each be rounded to the nearest
one hundredth of a percent.

The Applicable Rate with respect to each quarter (other than
the initial period) will be calculated as promptly as practicable by Illinois
Power Capital according to the appropriate method described above. Illinois
Power Capital will cause each Applicable Rate to be published in a newspaper of
general circulation in New York City before the commencement of the quarter to
which it applies and will cause notice of such Applicable Rate to be given to
the Depository Trust Company ("DTC"), New York, NY, the securities depository
for the Series A Debentures.

As used above, the term "Calendar Period" means a period of
fourteen calendar days; the term "Federal Reserve Board" means the Board of
Governors of the Federal Reserve System; the term "Special Securities" means
securities which can, at the option of the holder, be surrendered at face value
in payment of any federal estate tax or which provide tax benefits to the
holder and are priced to reflect such tax benefits or which were originally
issued at a deep or substantial discount; the term "Ten Year Average Yield"
means the average yield to maturity for actively traded marketable U.S.
Treasury fixed interest rate securities (adjusted to constant maturities of ten
years); and the term "Thirty Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of thirty years).

ARTICLE TWO

MANDATORY PREPAYMENT AND OPTIONAL REDEMPTION
OF THE SERIES A DEBENTURES

SECTION 2.01. If Illinois Power Capital redeems the Series A
Preferred Securities in accordance with these terms, the Series A Debentures
will become due and payable in a principal amount equal to the aggregate
liquidation preference of the Series A Preferred Securities so redeemed,
together with all accrued and unpaid interest on them, including Additional
Interest, if any (the "Mandatory Prepayment Price"). Any payment pursuant to
this provision shall be made prior to 12:00 noon, New York time, on the date of
such redemption or at such earlier time as the Company and Illinois Power
Capital shall agree.

- 6 -
<PAGE> 8
be redeemed plus any accrued and unpaid interest on them, including any
Additional Interest, if any, to the date of such redemption (the "Optional
Redemption Price"). Any redemption pursuant to this paragraph will be made
upon not less than 30 nor more than 60 days' notice, at the Optional Redemption
Price. If the Series A Debentures are only partially redeemed pursuant to this
Section, the Debentures will be redeemed pro rata or by lot or by any other
method utilized by the Trustee; provided, that if at the time of redemption,
the Series A Debentures are registered as a Global Debenture, the Depository
shall determine by lot the principal amount of such Series A Debentures held by
each Series A Debentureholder to be redeemed.

ARTICLE THREE

EXTENSION OF INTEREST PAYMENT PERIOD

SECTION 3.01. So long as the Company is not in default in the
payment of interest on any series of Debentures issued under the Indenture, the
Company shall have the right, at any time during the term of the Series A
Debentures, from time to time to extend the interest payment period of such
Series A Debentures for up to 60 consecutive months (the "Extended Interest
Payment Period"), at the end of which period the Company shall pay all interest
accrued and unpaid on such Series A Debenture (together with interest on such
accrued and unpaid interest at the rate specified for the Series A Debentures
to the extent permitted by applicable law); provided that, during such Extended
Interest Payment Period the Company shall not declare or pay any dividend on,
or redeem, purchase, acquire or make a liquidation payment with respect to, any
of its capital stock or make any guarantee payments with respect to the
foregoing (other than payments on the Guarantee); and provided further that any
such extended interest payment period may only be selected with respect to the
Series A Debentures if an extended interest payment period of identical length
is simultaneously selected for all Debentures then outstanding under the
Indenture. Prior to the termination of any such Extended Interest Payment
Period, the Company may further extend such period, provided that such period
together with all such further extensions of it shall not exceed 60 consecutive
months. Upon the termination of any Extended Interest Payment Period and upon
the payment of all accrued and unpaid interest and any Additional Interest then
due, the Company may select a new Extended Interest Payment Period, subject to
the foregoing requirements. No interest shall be due and payable during an
Extended Interest Payment Period, except at the end of such period.

SECTION 3.02. (a) If Illinois Power Capital is the sole
holder of the Series A Debentures at the time the Company selects an Extended
Interest Payment Period, the Company shall give both Illinois Power Capital and
the Trustee written notice of its selection of such Extended Interest Payment
Period one Business Day prior to the earlier of (i) the next succeeding date on
which dividends on the Series A Preferred Securities are payable or (ii) the
date Illinois Power Capital is required to give notice of the record date or
the date such dividends are payable to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Series A Preferred
Securities, but in an event not less than one Business Day prior to such record
date. The Company shall cause Illinois Power Capital to give notice of the
Company's selection of such Extended Interest Payment Period to the holders of
the Series A Preferred Securities.

- 7 -
<PAGE> 9
(b) If Illinois Power Capital is not the sole holder of
the Series A Debentures at the time the Company selects an Extended Interest
Payment Period, the Company shall give the holders of the Series A Debentures
and the Trustee written notice of its selection of such Extended Interest
Payment Period 10 Business Days prior to the earlier of (i) the next succeeding
Interest Payment Date or (ii) the date the Company is required to give notice
of the record or payment date of such interest payment to the New York Stock
Exchange or other applicable self-regulatory organization or to holders of the
Series A Debentures, but in any event not less than two Business Days prior to
such record date.

(c) The month in which any notice is given pursuant to
paragraphs (a) or (b) of this Section shall constitute one of the 60 months
which comprise the maximum Extended Interest Payment Period.

ARTICLE FOUR

RIGHT OF SET-OFF

SECTION 4.01. Notwithstanding anything to the contrary in the
Indenture or in this First Supplemental Indenture, the Company shall have the
right to set-off any payment it is otherwise required to make under the
Indenture or hereunder with and to the extent the Company has previously made,
or is concurrently on the date of such payment making, a payment under the
Guarantee, dated as of _____________, 1994, executed by the Company and
furnished to Illinois Power Capital for the benefit of the holders of the
Series A Preferred Securities.

ARTICLE FIVE

COVENANT TO LIST ON EXCHANGE

SECTION 5.01. If the Series A Debentures are to be issued as
a Global Debenture in connection with the distribution of the Series A
Debentures to the holders of the Series A Preferred Securities upon a
Dissolution Event, the Company will use its best efforts to list such
Debentures on the New York Stock Exchange or on such other exchange as the
Series A Preferred Securities are then listed and traded on the same part of
any such exchange.

ARTICLE SIX

FORM OF SERIES A DEBENTURE

SECTION 6.01. The Series A Debentures and the Trustee's
Certificate of Authentication to be endorsed on them are to be substantially in
the following forms:

(FORM OF FACE OF DEBENTURE)

- 8 -
<PAGE> 10
[If the Series A Debenture is to be a Global Indenture, insert
- -- This Debenture is a Global Debenture within the meaning of the Indenture
referred to below and is registered in the name of a Depository or a nominee of
a Depository. Except as otherwise provided in Section 2.11 of the Indenture,
this Debenture may be transferred, in whole but not in part, only to another
nominee of the Depository or to a Successor depository or to a nominee of such
successor Depository.

Unless this Debenture is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York) to
the issuer or its agent for registration of transfer, exchange or payment, and
any Debenture issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of The Depository Trust Company
and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
OF THIS SERIES A DEBENTURE FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since
the registered owner of this First Supplemental Indenture, Cede & Co., has an
interest in this Debenture.]

No. _______________ $_______________

CUSIP No._______________

ILLINOIS POWER COMPANY

ADJUSTABLE RATE SUBORDINATED DEBENTURE, SERIES A, DUE ______

- 9 -
<PAGE> 11
made on such date. The interest installment so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the person in whose name this Debenture (or one or more
Predecessor Debentures, as defined in the Indenture) is registered at the close
of business on the regular record date for such interest installment[, which
shall be the close of business on the Business Day next preceding such Interest
Payment Date.] [If pursuant to the provisions of Section 2.11(c) of the
Indenture the Series A Debentures are no longer represented by a Global
Debenture, the regular record date shall be the close of business on the ___
Business Day next preceding such Interest Payment Date.] Any such interest
installment not punctually paid or duly provided for shall immediately cease to
be payable to the registered holders on such regular record date, and may be
paid to the person in whose name this Debenture (or one or more Predecessor
Debentures) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
which special record date shall be given to the registered holders of this
series of Debentures not less than 10 days prior to such special record date,
or may be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Debentures may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. The principal of (and premium, if any) and the
interest on this Debenture shall be payable at the office or agency of the
Company maintained for that purpose in Decatur, Illinois, in any coin or
currency of the United States of America which at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
registered holder at such address as shall appear in the Debenture Register.
Notwithstanding the foregoing, so long as the holder of this Debenture is
Illinois Power Capital, L.P. ("Illinois Power Capital"), the payment of the
principal of (and premium, if any) and interest (including Additional Interest,
if any) on this Debenture will be made at such place and to such account as may
be designated by Illinois Power Capital.

The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect such Senior
Indebtedness. Each Holder of this Debenture, by accepting the same, (a) agrees
to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to acknowledge or effectuate the subordination so provided and (c)
appoints the Trustee such Holder's attorney-in-fact for any and all such
purposes. Each Holder of this Debenture, by such Holder's acceptance of this
Debenture, waives all notice of the acceptance of the subordination provisions
contained in this Debenture and in the Indenture by each holder of Senior
Indebtedness, whether now outstanding or incurred after the date of this
Debenture, and waives reliance by each such Holder upon said provisions.

This Debenture shall not be entitled to any benefit under the
Indenture, be valid or become obligatory for any purpose until the Certificate
of Authentication on this Debenture shall have been signed by or on behalf of
the Trustee.

Unless the Certificate of Authentication on this Debenture has
been executed by the Trustee referred to on the reverse side of this Debenture,
this Debenture shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.

- 10 -
<PAGE> 12
The provisions of this Debenture are contained on the reverse
side of it and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.

IN WITNESS WHEREOF, the Company has caused this Instrument to
be executed.

Dated__________________

ILLINOIS POWER COMPANY

By:_________________________________
Chairman

Attest:

_________________________________
Secretary

(FORM OF CERTIFICATE OF AUTHENTICATION)

CERTIFICATE OF AUTHENTICATION

This is one of the Debentures of the series of Debentures
described in the within-mentioned Indenture.

The First National Bank of Chicago __________________________
as Trustee or as Authentication Agent

By_________________________________ By__________________________
Authorized Signatory Authorized Signatory

(FORM OF REVERSE OF DEBENTURE)

This Debenture is one of a duly authorized series of
Debentures of the Company (the "Debentures"), specified in the Indenture, all
issued or to be issued in one or more series under and pursuant to an Indenture
dated as of ________ 1, 1994 duly executed and delivered between the Company
and The First National Bank of Chicago, a national banking association duly
organized and existing under the laws of the United States of America, as
Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture
dated as of _____________, 1994 between the Company and the Trustee (as so
supplemented, the "Indenture"), to which Indenture and all indentures
supplemental to it reference is made for a description of the

- 11 -
<PAGE> 13
rights, limitations of rights, obligations, duties and immunities under it of
the Trustee, the Company and the holders of the Debentures. By the terms of
the Indenture, the Debentures are issuable in series which may vary as to
amount, date of maturity, rate of interest and in other respects as provided in
the Indenture. This series of Debentures is limited in aggregate principal
amount as specified in said First Supplemental Indenture.

If Illinois Power Capital redeems its Cumulative Adjustable
Rate Monthly Income Preferred Securities, Series A (the "Series A Preferred
Securities") in accordance with their terms, the Debentures will become due and
payable in a principal amount equal to the aggregate liquidation preference of
the Series A Preferred Securities so redeemed, together with any interest
accrued on them, including Additional Interest (the "Mandatory Prepayment
Price"). Any payment of such Mandatory Prepayment Price shall be made prior to
12:00 noon, New York time, on the date of such redemption or at such earlier
time as the Company and Illinois Power Capital shall agree. At such time as
there are no Series A Preferred Securities remaining outstanding and subject to
the terms of Article Three of the Indenture, the Company shall have the right
to redeem this Debenture at the option of the Company, without premium or
penalty, in whole or in part at any time on or after _________, 1999 (an
"Optional Redemption"), at a redemption price equal to 100% of the principal
amount of this Debenture plus any accrued but unpaid interest, including any
Additional Interest, if any, to the date of such redemption (the "Optional
Redemption Price"). Any redemption pursuant to this paragraph will be made
upon not less than 30 nor more than 60 days' notice, at the Optional Redemption
Price. If the Debentures are only partially redeemed by the Company pursuant
to an Optional Redemption, the Debentures will be redeemed pro rata or by lot
or by any other method utilized by the Trustee; provided that if at the time of
redemption, the Debentures are registered as a Global Debenture, the Depository
shall determine by lot the principal amount of such Debentures held by each
Debentureholder to be redeemed.

In the event of redemption of this Debenture in part only, a
new Debenture or Debentures of this series for the unredeemed portion of this
Debenture will be issued in the name of the Holder of this Debenture upon the
cancellation of this Debenture.

In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal of all of the Debentures
may be declared, and upon such declaration shall become, due and payable, in
the manner, with the effect and subject to the conditions provided in the
Indenture.

The Indenture contains provisions for defeasance at any time
of the entire indebtedness of this Debenture upon compliance by the Company
with certain conditions set forth in the Indenture.

The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Debentures of each series affected at the
time outstanding, as defined in the Indenture, to execute supplemental
indentures for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Debentures; provided, however, that no such supplemental indenture shall
(i) extend the fixed maturity of any Debentures of any series, or reduce the
principal amount of them, or reduce the rate or extend

- 12 -
<PAGE> 14
the time of payment of interest on them, or reduce any premium payable upon the
redemption of them, without the consent of the holder of each Debenture so
affected or (ii) reduce the aforesaid percentage of Debentures, the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of each Debenture then outstanding and affected by such
reduction. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Debentures of all series at the
time outstanding affected thereby, on behalf of the Holders of the Debentures
of such series, to waive any past default in the performance of any of the
covenants contained in the Indenture, or established pursuant to the Indenture
with respect to such series, and its consequences, except a default in the
payment of the principal of or premium, if any, or interest on any of the
Debentures of such series. Any such consent or waiver by the registered Holder
of this Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of this Debenture and of any Debenture issued in exchange for or in place of
this Debenture (whether by registration of transfer or otherwise), irrespective
of whether or not any notation of such consent or waiver is made upon this
Debenture.

No reference in this Debenture to the Indenture and no
provision of this Debenture or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and premium, if any, and interest on this Debenture at the time
and place and at the rate and in the money prescribed in this Debenture.

The Company shall have the right at any time during the term
of the Debentures, from time to time to extend the interest payment period of
such Debentures to up to 60 consecutive months (the "Extended Interest Payment
Period"), at the end of which period the Company shall pay all interest then
accrued and unpaid (together with interest on such accrued and unpaid interest
at the rate specified for the Debentures to the extent that payment of such
interest is enforceable under applicable law); provided that, during such
Extended Interest Payment Period the Company shall not declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with
respect to the foregoing (other than payments on the Guarantee); and provided
further that any such extended interest payment period may only be selected
with respect to the Series A Debentures if an extended interest payment period
of identical length is simultaneously selected for all Debentures then
outstanding under the Indenture. Prior to the termination of any such Extended
Interest Payment Period, the Company may further extend such Extended Interest
Payment Period, provided that such Period together with all such further
extensions of it shall not exceed 60 consecutive months. At the termination of
any such Extended Interest Payment Period and upon the payment of all accrued
and unpaid interest and any additional amounts then due, the Company may select
a new Extended Interest Payment Period.

As provided in the Indenture and subject to certain
limitations set forth in it, this Debenture is transferable by the registered
holder of this Debenture on the Debenture Register of the Company, upon
surrender of this Debenture for registration of transfer at the office or
agency of the Company in Decatur, Illinois, accompanied by a written instrument
or instruments of transfer in form satisfactory to the Company or the Trustee
duly executed by the registered holder of this Debenture or such holder's
attorney duly authorized in writing, upon which one or more new Debentures of
authorized denominations and for the same

- 13 -
<PAGE> 15
aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such
transfer, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in relation to such transfer.

Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and any Debenture
Registrar may deem and treat the registered holder of this Debenture as the
absolute owner of this Debenture (whether or not this Debenture shall be
overdue and notwithstanding any notice of ownership or writing on this
Debenture made by anyone other than the Debenture Registrar) for the purpose of
receiving payment of or on account of the principal of and premium, if any, and
interest due on this Debenture and for all other purposes, and neither the
Company nor the Trustee nor any paying agent nor any Debenture Registrar shall
be affected by any notice to the contrary.

No recourse shall be had for the payment of the principal of
or the interest on this Debenture, or for any claim based on this Debenture, or
otherwise in respect of this Debenture, or based on or in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or of any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance of this Debenture and as part of the
consideration for the issuance of this Debenture, expressly waived and
released.

The Debentures of this series are issuable only in registered
form without coupons in denominations of $25 and any integral multiple of $25.
This Global Debenture is exchangeable for Debentures in definitive form only
under certain limited circumstances set forth in the Indenture. Debentures of
this series so issued are issuable only in registered form without coupons in
denominations of $25 and any integral multiple of $25. As provided in the
Indenture and subject to certain limitations set forth in this Debenture and
the Indenture, Debentures of this series so issued are exchangeable for a like
aggregate principal amount of Debentures of this series of a different
authorized denomination, as requested by the Holder surrendering the same.

All terms used in this Debenture which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

ARTICLE SEVEN

ORIGINAL ISSUE OF SERIES A DEBENTURES

SECTION 7.01. Series A Debentures in the aggregate principal
amount of $_______ plus the amount of capital contributions made by the Company
from time to time as general partner of Illinois Power Capital, may, upon
execution of this First Supplemental Indenture, or from time to time
thereafter, be executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall upon such execution and delivery
authenticate and deliver said Debentures to or upon the written order of the
Company, signed

- 14 -
<PAGE> 16
by its Chairman, or any Vice President and its Treasurer or an Assistant
Treasurer, without any further action by the Company.

ARTICLE EIGHT

SPECIAL COVENANTS OF THE COMPANY

SECTION 8.01. So long as any Debentures issued in connection
with the application of the proceeds from the issuance and sale of a series of
Series A Preferred Securities of Illinois Power Capital remain outstanding, the
Company will (i) remain the sole general partner of Illinois Power Capital and
maintain 100%-ownership of the general partner interests of Illinois Power
Capital; provided that any permitted successor of the Company under the
Indenture may succeed to its duties as general partner, (ii) contribute capital
to the extent required to maintain its capital at an amount equal to at least
3% of the total capital contributions to Illinois Power Capital, (iii) not
voluntarily dissolve, wind-up or terminate Illinois Power Capital, except in
connection with a distribution of Debentures and in connection with certain
mergers, consolidations or amalgamations permitted by the Limited Partnership
Agreement, (iv) timely perform all of its duties as General Partner (including
the duty to pay dividends on the Preferred Securities of Illinois Power
Capital) and (v) use its reasonable efforts to cause Illinois Power Capital to
remain a limited partnership except in connection with a distribution of
Debentures and in connection with certain mergers, consolidations or
amalgamations permitted by the Limited Partnership Agreement, and otherwise
continue to be treated as a partnership for United States federal income tax
purposes except in connection with a distribution of Debentures.

ARTICLE NINE

SUNDRY PROVISIONS

SECTION 9.01. Except as otherwise expressly provided in this
First Supplemental Indenture or in the form of Series A Debenture or otherwise
clearly required by the context of this First Supplemental Indenture or the
form of Series A Debenture, all terms used in this First Supplemental Indenture
or in said form of Series A Debenture that are defined in the Indenture shall
have the several meanings respectively assigned to them by the Indenture.

SECTION 9.02. The Indenture, as supplemented by this First
Supplemental Indenture, is in all respects ratified and confirmed, and this
First Supplemental Indenture shall be deemed part of the Indenture in the
manner and to the extent provided in this First Supplemental Indenture or in
the Indenture.

SECTION 9.03. The recitals contained in this First
Supplemental Indenture are made by the Company and not by the Trustee, and the
Trustee assumes no responsibility for the correctness of them. The Trustee
makes no representation as to the validity or sufficiency of this First
Supplemental Indenture.

- 15 -
<PAGE> 17
SECTION 9.04. This First Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original; but
such counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate
seals to be affixed unto this First Supplemental Indenture and attested, on the
date or dates indicated in the acknowledgments and as of the day and year first
above written.

ILLINOIS POWER COMPANY

By: _____________________________
Vice President

Attest:

_______________________________
Secretary

THE FIRST NATIONAL BANK OF CHICAGO
as Trustee

By: _____________________________
_____________________________

Attest:

_____________________________
Assistant Treasurer

- 16 -

<PAGE> 18
STATE OF ILLINOIS )
COUNTY OF ______ ) ss.: _____________ ___, 1994

On the ____ day of _____________, in the year one thousand
nine hundred ninety-four, before me personally came ___________________ to me
known, who, being by me duly sworn, did depose and say that he is ____________
of ILLINOIS POWER COMPANY, one of the corporations described in and which
executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to the said instrument is such corporation
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that (s)he signed her/his name thereto by like authority.

___________________________________
NOTARY PUBLIC

My Commission Expires_____________

STATE OF ILLINOIS )
COUNTY OF COOK ) ss.: _______________ ___, 1994

On the ____ day of __________, in the year one thousand nine
hundred ninety-four, before me personally came _____________________ to me
known, who, being by me duly sworn, did depose and say that (s)he is
_____________________ of THE FIRST NATIONAL BANK OF CHICAGO, one of the
corporations described in and which executed the above instrument; that (s)he
knows the corporate seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation and that (s)he signed her/his name
thereto by like authority.

___________________________________
NOTARY PUBLIC

My Commission Expires _______________

- 17 -

<PAGE> 1

EXHIBIT 4(j)

GUARANTEE AGREEMENT

THIS GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of
_____, 1994, is executed and delivered by Illinois Power Company, an Illinois
corporation (the "Guarantor"), for the benefit of the holders from time to time
of the Preferred Securities (as defined in the Partnership Agreement described
below) of Illinois Power Capital, L.P, a Delaware limited partnership (the
"Issuer").

WHEREAS, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of today's date, of the Issuer (the "Partnership
Agreement"), the Issuer may issue one or more series of Preferred Securities;

WHEREAS, pursuant to the Partnership Agreement, the proceeds
received by the Issuer from the issuance and sale of any such Preferred
Securities will be invested by the Issuer in Subordinated Debentures (as
defined in the Partnership Agreement); and

WHEREAS, the Guarantor, as incentive for the Holders (as
defined below) to purchase Preferred Securities, desires irrevocably and
unconditionally to agree to the extent set forth in this Guarantee Agreement to
pay to the Holders the Guarantee Payments (as defined below) and to make
certain other payments on the terms and conditions set forth in this Guarantee
Agreement.

NOW, THEREFORE, in consideration of the purchase by each
Holder of one or more Preferred Securities, which purchase the Guarantor agrees
shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders.

ARTICLE ONE

As used in this Guarantee Agreement, the terms set forth below
shall, unless the context otherwise requires, have the following meanings.
Capitalized terms used but not otherwise defined in this Guarantee Agreement
shall have the meanings assigned to such terms in the Partnership Agreement.

"Guarantee Payments" shall mean the following payments,
without duplication, with respect to any series of Preferred Securities, to the
extent not paid by the Issuer: (i) any accumulated and unpaid dividends which
are required to be paid on such series of Preferred Securities, to the extent
the Issuer shall have sufficient cash on hand to permit such payment and funds
legally available for such payment, (ii) the redemption price, including all
accumulated and unpaid dividends (the "Redemption Price"), payable with respect
to any Preferred Securities called for redemption by the Issuer, to the extent
the Issuer shall have sufficient cash on hand to permit such payment and funds
legally available for such payment and (iii) upon a liquidation of the Issuer,
the lesser of (a) the aggregate of the liquidation

<PAGE> 2

preference and all accumulated and unpaid dividends on the Preferred Securities
of such series to the date of payment (the "Liquidation Distribution") and (b)
the amount of assets of the Issuer legally available for distribution to
Holders in liquidation of the Issuer.

"Holder" shall mean any holder, as registered on the books and
records of the Issuer, of any series of Preferred Securities; provided,
however, that in determining whether the holders of the requisite percentage of
Preferred Securities have given any request, notice, consent or waiver under
this Guarantee Agreement, "Holder" shall not include the Guarantor or any
entity owned more than 50% by the Guarantor, either directly or indirectly.

ARTICLE TWO

SECTION 2.01. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments, as and when due
(except to the extent paid by the Issuer), regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Guarantor to the Holders or by causing the Issuer
to pay such amounts to the Holders.

SECTION 2.02. The Guarantor waives notice of acceptance of
this Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first
against the Issuer, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.

SECTION 2.03. The obligations, covenants, agreements and
duties of the Guarantor under this Guarantee Agreement shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:

(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer of any
express or implied agreement, covenant, term or condition relating to
any series of Preferred Securities to be performed or observed by the
Issuer;

(b) the extension of time for the payment by the Issuer
of all or any portion of the dividends, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of any series
of Preferred Securities or the extension of time for the performance
of any other obligation under, arising out of, or in connection with,
any series of Preferred Securities;

(c) any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of any series of Preferred Securities, or any action on the part
of the Issuer granting indulgence or extension of any kind:

(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors,

-2-
<PAGE> 3
reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;

(e) any invalidity of, or defect or deficiency in, any
series of Preferred Securities;

(f) the settlement or compromise of any obligation
guaranteed by this Guarantee Agreement or by this Guarantee Agreement
incurred; or

(g) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a
guarantor, it being the intent of this Section 2.03 that the
obligations of the Guarantor under this Guarantee Agreement shall be
absolute and unconditional under any and all circumstances.

There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 2.04. The Guarantor expressly acknowledges that:
(i) this Guarantee Agreement will be deposited with the General Partner to be
held for the benefit of the Holders; (ii) in the event of the appointment of a
Special Representative to, among other things, enforce this Guarantee
Agreement, the Special Representative may take possession of this Guarantee
Agreement for such purpose; (iii) if no Special Representative has been
appointed, the General Partner has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iv) the Holders of not less than 10% in
aggregate liquidation preference of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available in respect of this Guarantee Agreement, including the giving of
directions to the General Partner or the Special Representative, as the case
may be; and (v) if the General Partner or Special Representative fails to
enforce this Guarantee Agreement as provided above, any Holder may institute a
legal proceeding directly against the Guarantor to enforce its rights under
this Guarantee Agreement, without first instituting a legal proceeding against
the Issuer or any other person or entity.

SECTION 2.05. This Guarantee Agreement is a guarantee of
payment and not of collection. This Guarantee Agreement will not be discharged
except by payment of the Guarantee Payments in full to the extent not paid by
the Issuer and by complete performance of all obligations under this Guarantee
Agreement.

SECTION 2.06. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement and shall have the
right to waive payment by the Guarantor pursuant to Section 2.01; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights
which it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of a payment under this Guarantee
Agreement, if, at the time of any such payment, any amounts are due and unpaid
under this Guarantee Agreement. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to hold such amount
in trust for the Holders and to pay over such amount to the Holders.

- 3 -
<PAGE> 4
SECTION 2.07. The Guarantor acknowledges that its
obligations under this Guarantee Agreement are independent of the obligations
of the Issuer with respect to the Preferred Securities and that the Guarantor
shall be liable as principal and sole debtor under this Guarantee Agreement to
make Guarantee Payments pursuant to this Guarantee Agreement notwithstanding
the occurrence of any event referred to in subsections (a) through (f),
inclusive, of Section 2.03.

ARTICLE THREE

SECTION 3.01. So long as any Preferred Securities remain
outstanding, the Guarantor will not declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or make any guarantee payments with respect to the foregoing if
at such time the Guarantor shall be in default with respect to its payment or
other obligations under this Guarantee Agreement or there has occurred and is
continuing any event that would constitute an Event of Default under the
Indenture.

SECTION 3.02. This Guarantee Agreement will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to all liabilities of the Guarantor, (ii) pari passu with
the most senior preferred or preference stock now or after the date of this
Guarantee Agreement issued by the Guarantor and with any guarantee now or after
the date of this Guarantee Agreement entered into by the Guarantor in respect
of any preferred or preference stock of any affiliate of the Guarantor and
(iii) senior to the Guarantor's common stock.

SECTION 3.03. So long as any Preferred Securities remain
outstanding, the Guarantor will: (i) not voluntarily (to the extent permitted
by law) dissolve, liquidate or wind-up the Issuer; (ii) remain the sole General
Partner (as defined in the Partnership Agreement) of the Issuer and timely
perform all of its duties as General Partner of the Issuer (including the duty
to declare and pay dividends on the Preferred Securities), provided that any
permitted successor of the Guarantor under the Indenture may succeed to the
Guarantor's duties as General Partner; and (iii) use its reasonable efforts to
cause the Issuer to remain a limited partnership (or permitted successor under
the Partnership Agreement) and otherwise continue to be treated as a
partnership for federal income tax purposes.

ARTICLE FOUR

This Guarantee Agreement shall terminate and be of no further
force and effect, as to the Preferred Securities of any series, upon full
payment of the Redemption Price of all of Preferred Securities of such series,
and will terminate completely upon full payment of the amounts payable upon
liquidation of the Issuer. This Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid under any series of Preferred Securities
or this Guarantee Agreement.

ARTICLE FIVE

- 4 -
<PAGE> 5
SECTION 5.01. All guarantees and agreements contained in
this Guarantee Agreement shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit of
the Holders of the Preferred Securities then outstanding.

SECTION 5.02. Except with respect to any changes which do
not adversely affect the rights of Holders (in which case no consent of Holders
will be required), this Guarantee Agreement may only be amended with the prior
approval of the Holders of not less than 66-2/3% in liquidation preference of
all the outstanding Preferred Securities of each affected series (voting
together as one class).

SECTION 5.03. Any notice, request or other communication
required or permitted to be given under this Guarantee Agreement to the
Guarantor shall be given in writing by delivering the same against receipt for
such communication by facsimile transmission (confirmed by mail), addressed to
the Guarantor, as follows (and if so given, shall be deemed given when mailed):

Illinois Power Company
500 South 27th Street
Decatur, Illinois 62525
Facsimile No.: (217) 425-4152
Attention: Controller

Any notice, request or other communication required or
permitted to be given under this Guarantee Agreement to the Holders shall be
given by the Guarantor in the same manner as notices sent by the Issuer to the
Holders.

SECTION 5.04. This Guarantee Agreement is solely for the
benefit of the Holders and is not separately transferable from the Preferred
Securities.

SECTION 5.05. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS.

THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.

ILLINOIS POWER COMPANY

By:
________________________
Name:
Title:

- 5 -

<PAGE> 1

Robert J. Regan
(312) 258-5606

EXHIBIT 5(A)

August 19, 1994

Illinois Power Company
500 S. 27th Street
Decatur, IL 62525-1805

Ladies and Gentlemen:

We are acting as counsel for Illinois Power Company, an Illinois corporation
(the "Company"), in connection with the proposed issuance and sale from time to
time of up to $100,000,000 of (i) Cumulative Monthly Income Preferred
Securities (the "Preferred Securities") of Illinois Power Capital, L.P., a
limited partnership organized under the laws of the State of Delaware (the
"Partnership"), which represent limited partner interests in the Partnership,
(ii) a Guarantee of the Company to be issued for the benefit of the holders
from time to time of the Preferred Securities, and (iii) Subordinated
Debentures of the Company to be issued to the Partnership under an Indenture of
the Company (the "Indenture") to The First National Bank of Chicago, as trustee
(the "Trustee"), all as contemplated by the Registration Statement on Form S-3
(the "Registration Statement") proposed to be filed by the Company and the
Partnership with the Securities and Exchange Commission on or about the date
hereof for the registration of the Preferred Securities, the Guarantee and the
Subordinated Debentures under the Securities Act of 1933, as amended (the
"Act"), and for the qualification of the Indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").

As counsel for the Company, we have examined such corporate records,
certificates and other documents of the Company and have made such inquiry and
further investigation as we deemed necessary in order to enable us to render
this opinion. We have assumed the continued exemption of the contemplated
transactions from the requirements of the Public Utility Holding Company Act of
1935, as amended, the genuineness of all signatures, the authenticity of all
documents submitted to us as original counterparts, and the conformity to the
originals of all documents submitted to us as certified or photostatic copies.

Based upon the foregoing, we are of the opinion that the Company is a
corporation validly organized and existing under and by virtue of the laws of
the State of Illinois. We are also of the opinion that when:

(a) The Registration Statement, as it may be amended, shall have become
effective under the Act and no stop order shall have been issued by the
Securities and Exchange Commission relating thereto, and any applicable
state securities or Blue Sky laws shall have been complied with, and the
Indenture shall have become qualified under the Trust Indenture Act;
<PAGE> 2

Illinois Power Company
August 19, 1994
Page Two

(b) the Illinois Commerce Commission shall have entered an order authorizing
the Company to execute and deliver the Indenture and any supplemental
indentures thereto and to issue the Subordinated Debentures and the Guarantee,
and such order shall remain in effect;

(c) the Company's Board of Directors, or a duly authorized committee
thereof, shall have taken such action as may be necessary to authorize the
issuance by the Company of the Subordinated Debentures and the Guarantee on
the terms set forth in or contemplated by the Registration Statement, as it
may be amended, and the exhibits thereto;

(d) the Indenture and any supplemental indentures thereto shall have been
appropriately executed and delivered by the Company and the Trustee, the terms
of the Subordinated Debentures shall have been duly established and the
Subordinated Debentures shall have been issued and authenticated in accordance
with the applicable provisions of the Indenture, any supplemental indentures
thereto and all necessary corporate authorizations;

(e) the terms of the Guarantee shall have been duly established in
accordance with applicable law and the Guarantee shall have been appropriately
executed and delivered by the Company;

(f) the Preferred Securities to which the Guarantee and the Subordinated
Debentures relate shall have been duly issued and sold and the purchase price
therefor shall have been received by the Partnership; and

(g) The Company shall have received the consideration payable for the
Subordinated Debentures;

the Subordinated Debentures and the Guarantee will be legal, valid and binding
obligations of the Company enforceable in accordance with their terms, subject,
as to enforcement, to laws relating to or affecting generally the enforcement
of creditors' rights, including, without limitation, bankruptcy and insolvency
laws, and to general principles of equity.

We confirm our opinion as set forth under the caption "United States
Taxation" in each Prospectus Supplement constituting a part of the Registration
Statement.

We hereby consent to the use of this opinion as an exhibit to the
Registration Statement to be filed with the Securities and Exchange Commission
under the Act and to the reference to this firm under the caption "Legal
Opinions" in the Prospectus and each Prospectus Supplement constituting a part
of the Registration Statement.
<PAGE> 3
Illinois Power Company
August 19, 1994
Page Three

We are members of the Illinois Bar and do not hold ourselves out as experts
on the laws of any other state. Accordingly, in rendering this opinion, we
have relied, as to all matters governed by the laws of the State of Delaware,
upon the opinion of even date herewith of Richards, Layton & Finger, P.A.,
special Delaware counsel for the Company and the Partnership, which is being
filed as an exhibit to the Registration Statement.

Very truly yours,

SCHIFF HARDIN & WAITE

By: ________________________________
Robert J. Regan

RJR:ck

<PAGE> 1

August 19, 1994

Illinois Power Capital, L.P.
c/o Illinois Power Company
500 South 27th Street
Decatur, Illinois 62525

Illinois Power Company
500 South 27th Street
Decatur, Illinois 62525

Re: Illinois Power Capital, L.P.

Ladies and Gentlemen:

We have acted as special Delaware counsel for Illinois Power
Company, an Illinois corporation ("Illinois Power"), and Illinois Power
Capital, L.P., a Delaware limited partnership (the "Partnership"), in
connection with the matters set forth herein. At your request, this opinion is
being furnished to you.

For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of executed or
conformed counterparts, or copies otherwise proved to our satisfaction, of the
following:
<PAGE> 2
Illinois Power Capital, L.P.
Illinois Power Company
August 19, 1994
Page 2

(a) The Certificate of Limited Partnership of the
Partnership, dated as of August 17, 1994 (the "Certificate"), as filed in the
office of the Secretary of State of the State of Delaware (the "Secretary of
State") on August 17, 1994;

(b) The Agreement of Limited Partnership of the
Partnership, dated as of August 17, 1994;

(c) The registration statement (the "Registration
Statement") on Form S-3, including a preliminary prospectus (the "Prospectus")
and two preliminary prospectus supplements (the "Prospectus Supplements"),
relating to the Preferred Securities, as proposed to be filed by Illinois Power
and the Partnership with the Securities and Exchange Commission on August 19,
1994;

(d) A form of Amended and Restated Agreement of Limited
Partnership of the Partnership, attached as an exhibit to the Registration
Statement (the "Agreement");

(e) A form of Action of Illinois Power, as general
partner of the Partnership, relating to the Preferred Securities (the
"Action"); and

(f) A Certificate of Good Standing for the Partnership,
dated August 18, 1994, obtained from the Secretary of State.

The Agreement as amended and supplemented by the Action is
hereinafter referred to as the "Partnership Agreement." Initially capitalized
terms used herein and not otherwise defined are used as defined in the
Partnership Agreement.

For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (f) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (f) above) that is referred to in or
incorporated by reference into the Partnership Agreement or the Registration
Statement. We have assumed that there exists no provision in any document that
we have not reviewed that is inconsistent with the opinions stated herein. We
have conducted no independent factual investigation of our own but rather have
relied solely upon the foregoing documents, the statements and information set
forth therein and the additional matters recited or assumed herein, all of
which we have assumed to be true, complete and accurate in all material
respects.

<PAGE> 3
Illinois Power Capital, L.P.
Illinois Power Company
August 19, 1994
Page 3

With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.

For purposes of this opinion, we have assumed (i) that the
Partnership Agreement constitutes the entire agreement among the parties
thereto with respect to the subject matter thereof, including with respect to
the admission of partners to, and the creation, operation and termination of,
the Partnership, and that the Partnership Agreement and the Certificate are in
full force and effect and have not been amended, (ii) except to the extent
provided in paragraph 1 below, the due organization or due formation, as the
case may be, and valid existence in good standing of each party to the
documents examined by us under the laws of the jurisdiction governing its
organization or formation, (iii) the legal capacity of natural persons who are
parties to the documents examined by us, (iv) that each of the parties to the
documents examined by us has the power and authority to execute and deliver,
and to perform its obligations under, such documents, (v) the due
authorization, execution and delivery by all parties thereto of all documents
examined by us, including the Agreement and the Action, (vi) the receipt by
each Person to be admitted to the Partnership as a limited partner of the
Partnership in connection with its purchase of Preferred Securities (each, a
"Preferred Security Holder" and collectively, the "Preferred Security Holders")
of an LP Certificate and the payment for the Preferred Securities acquired by
it, in accordance with the Partnership Agreement, (vii) that the books and
records of the Partnership set forth all information required by the
Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act
(6 Del. C. Section 17-101, et seq.) (the "Act"), including all information
with respect to all Persons to be admitted as Partners and their contributions
to the Partnership, and (viii) that the Preferred Securities are issued and
sold to the Preferred Security Holders in accordance with the Registration
Statement and the Partnership Agreement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.

This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our
opinions are rendered only with respect to Delaware laws and rules, regulations
and orders thereunder which are currently in effect.

Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or
<PAGE> 4
Illinois Power Capital, L.P.
Illinois Power Company
August 19, 1994
Page 4

appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:

1. The Partnership has been duly formed and is validly
existing in good standing as a limited partnership under the laws of the State
of Delaware.

2. Assuming that the Preferred Security Holders, as
limited partners of the Partnership, do not participate in the control of the
business of the Partnership, upon issuance and payment as contemplated by the
Partnership Agreement, the Preferred Securities will represent valid and,
subject to the qualifications set forth herein, will be fully paid and
nonassessable limited partner interests in the Partnership, as to which the
Preferred Security Holders, as limited partners of the Partnership, will have
no liability in excess of their obligations to make payments provided for in
the Partnership Agreement and their share of the Partnership's assets and
undistributed profits (subject to the obligation of a Preferred Security Holder
to repay any funds wrongfully distributed to it).

3. There are no provisions in the Partnership Agreement
the inclusion of which, subject to the terms and conditions therein, or,
assuming that the Preferred Security Holders, as limited partners of the
Partnership, take no action other than actions permitted by the Partnership
Agreement, the exercise of which, in accordance with the terms and conditions
therein, would cause the Preferred Security Holders, as limited partners of the
Partnership, to be deemed to be participating in the control of the business of
the Partnership.

We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading "Legal Opinions" in the
Prospectus Supplements and the Prospectus. We hereby consent to the reliance
by Schiff Hardin & Waite upon this opinion as to matters of Delaware law for
purposes of its opinion being rendered in connection with the Registration
Statement. In giving the foregoing consents, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.

Very truly yours,
PMA/lds

<PAGE> 1

EXHIBIT 12
ILLINOIS POWER COMPANY
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>

YEAR ENDED ** **
DECEMBER 31, SUPPLEMENTAL SUPPLEMENTAL
--------------------------------------------------------------------------------
1989 1989 1990 1990 1991 1992
------------ ------------ -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings Available for Fixed Charges and
Preferred Stock Dividend Requirements:
Net Income (Loss) per "Statement of
Income".................................... $ (288,432) $ (288,432) $(78,484) $(78,484) $109,244 $122,088
Add:
Income Taxes:
Current................................ (43,577) (43,577) 21,307 21,307 29,369 22,930
Deferred -- Net........................ 91,764 91,764 36,545 35,545 45,990 63,739
Allocated income taxes................... (9,306) (9,306) 2,608 2,608 (1,348) (6,632)
Investment tax credit -- deferred........ (8,787) (8,787) (14,121) (14,121) (11) (519)
Income tax effect of disallowed costs.... (105,482) (105,482) (24,759) (24,759) -- --
Interest on long-term debt............... 216,029 216,029 191,569 191,569 176,179 160,795
Amortization of debt expense and premium
-- net, and other interest charges..... 7,846 7,846 13,162 13,162 9,004 12,195
One-third of all rentals (Estimated to be
representative of the interest
component)............................. 4,185 4,185 5,053 5,053 4,996 5,117
Interest on In-Core Fuel................. 8,020 8,020 6,802 6,802 6,862 6,278
Disallowed Clinton Plant Costs........... -- 451,244 -- 160,328 -- --
------------ ------------ -------- ------------ -------- --------
Earnings (loss) available for fixed charges
and preferred stock dividend
requirements............................... $ (127,740) $ 323,504 $159,672 $320,000 $382,285 $387,991
============ ============ ========= ============ ========= =========
Fixed charges:
Interest on long-term debt................. $ 216,029 $ 216,029 $191,559 $191,559 $176,179 $160,795
Amortization of debt expense and premium --
net, and other interest charges.......... 27,004 27,004 31,093 31,093 25,553 25,765
One-third of all rentals (Estimated to be
representative of the interest
component)............................... 4,185 4,185 5,053 5,053 4,996 5,117
------------ ------------ -------- ------------ -------- --------
Fixed charges................................ $ 247,218 $ 247,218 $227,705 $227,705 $206,728 $191,697
============ ============ ========= ============ ========= =========
Ratio of earnings to fixed charges........... (0.52)* 1.31 0.70* 1.41 1.85 2.02
===== ==== ==== ==== ==== ====

<CAPTION>
**
SUPPLEMENTAL
** 12 MONTHS 12 MONTHS
SUPPLEMENTAL ENDED ENDED
------------------------- JUNE 30, JUNE 30,
1993 1993 1994 1994
-------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Earnings Available for Fixed Charges and
Preferred Stock Dividend Requirements:
Net Income (Loss) per "Statement of
Income".................................... ($56,038) ($56,038) ($42,031) ($42,031)
Add:
Income Taxes:
Current................................ 25,260 25,260 35,390 35,390
Deferred -- Net........................ 82,057 82,057 82,985 82,985
Allocated income taxes................... (12,599) (12,599) (11,479) (11,479)
Investment tax credit -- deferred........ (782) (782) (3,968) (3,968)
Income tax effect of disallowed costs.... (70,638) (70,638) (70,638) (70,638)
Interest on long-term debt............... 154,110 154,110 146,168 146,168
Amortization of debt expense and premium
-- net, and other interest charges..... 17,007 17,007 18,042 18,042
One-third of all rentals (Estimated to be
representative of the interest
component)............................. 5,992 5,992 6,421 6,421
Interest on In-Core Fuel................. 6,174 6,174 6,696 6,696
Disallowed Clinton Plant Costs........... -- 270,956 -- 270,956
-------- ------------ --------- ------------
Earnings (loss) available for fixed charges
and preferred stock dividend
requirements............................... $150,543 $421,499 $167,586 $438,542
========= ============ ========= ============
Fixed charges:
Interest on long-term debt................. $154,110 $154,110 $146,168 $146,168
Amortization of debt expense and premium --
net, and other interest charges.......... 27,619 27,619 28,287 28,287
One-third of all rentals (Estimated to be
representative of the interest
component)............................... 5,992 5,992 6,421 6,421
-------- ------------ --------- ------------
Fixed charges................................ $187,721 $187,721 $180,876 $180,876
========= ============ ========= ============
Ratio of earnings to fixed charges........... 0.80* 2.25 0.93 * 2.42
==== ==== ==== ====
</TABLE>

- ------------------
* Earnings are inadequate to cover fixed charges. Additional earnings
(thousands) of $374,958, $68,033, $37,178, and $13,290 for 1989, 1990, 1993
and the twelve months ended June 30, 1994, respectively, are required to
attain a one-to-one Ratio of Earnings to Fixed Charges.
** Supplemental Ratio of Earnings to Fixed Charges presented to exclude
nonrecurring item -- Disallowed Clinton plant costs.
<PAGE> 2

ILLINOIS POWER COMPANY
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>

YEAR ENDED ** **
DECEMBER 31, SUPPLEMENTAL SUPPLEMENTAL
------------------------------------------------------------------------------
1989 1989 1990 1990 1991 1992
------------ ------------ -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings Available for Fixed Charges and
Preferred Stock Dividend Requirements:
Net Income (Loss) per "Statement of
Income".................................... ($288,432) ($288,432) ($78,484) ($78,484) $109,244 $122,088
Add:
Income Taxes:
Current................................ (43,577) (43,577) 21,307 21,307 29,369 22,930
Deferred -- Net........................ 91,764 91,764 36,545 36,545 45,990 63,739
Allocated income taxes................... (9,306) (9,306) 2,608 2,608 (1,348) (6,632)
Investment tax credit -- deferred........ (8,787) (8,787) (14,121) (14,121) (11) (519)
Income tax effect of disallowed costs.... (105,482) (105,482) (24,759) (24,759) -- --
Interest on long-term debt............... 216,029 216,029 191,559 191,559 176,179 160,795
Amortization of debt expense and premium
-- net, and other interest charges..... 7,846 7,846 13,162 13,162 9,004 12,195
One-third of all rentals (Estimated to be
representative of the interest
component)............................. 4,185 4,185 5,053 5,053 4,996 5,117
Interest on In-Core Fuel................. 8,020 8,020 6,802 6,802 8,862 8,278
Disallowed Clinton Plant Costs........... -- 451,244 -- 160,328 -- --
------------ ------------ -------- ------------ -------- --------
Earnings (loss) available for fixed charges
and preferred stock dividend
requirements............................... ($127,740) $ 323,504 $159,672 $320,000 $382,285 $387,991
============ ============ ========= ============ ========= =========
Fixed charges and preferred stock dividend
requirements:
Interest on long-term debt................. $ 216,029 $ 216,029 $191,559 $191,559 $176,179 $160,795
Amortization of debt expense and premium --
net, and other interest charges.......... 27,004 27,004 31,093 31,093 25,553 25,785
One-third of all rentals (Estimated to be
representative of the interest
component)............................... 4,185 4,185 5,053 5,053 4,996 5,117
Earnings required (before taxes) for
preferred stock dividends)............... 37,365*** 56,979 36,839*** 66,743 52,023 48,691
------------ ------------ -------- ------------ -------- --------
Fixed charges and preferred stock dividend
requirements............................... $ 284,583 $ 304,197 $264,544 $294,448 $258,751 $240,388
============ ============ ========= ============ ========= =========
Ratio of earnings to fixed charges and
preferred stock dividend requirements...... (0.45)* 1.06 0.60* 1.09 1.48 1.61
===== ==== ==== ==== ==== ====

<CAPTION>
**
SUPPLEMENTAL
** 12 MONTHS 12 MONTHS
SUPPLEMENTAL ENDED ENDED
------------------------- JUNE 30, JUNE 30,
1993 1993 1994 1994
-------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Earnings Available for Fixed Charges and
Preferred Stock Dividend Requirements:
Net Income (Loss) per "Statement of
Income".................................... ($56,038) ($56,038) ($42,031) ($42,031)
Add:
Income Taxes:
Current................................ 25,260 25,260 35,390 35,390
Deferred -- Net........................ 82,057 82,057 82,985 82,985
Allocated income taxes................... (12,599) (12,599) (11,479) (11,479)
Investment tax credit -- deferred........ (782) (782) (3,968) (3,968)
Income tax effect of disallowed costs.... (70,638) (70,638) (70,638) (70,638)
Interest on long-term debt............... 154,110 154,110 146,168 146,168
Amortization of debt expense and premium
-- net, and other interest charges..... 17,007 17,007 18,042 18,042
One-third of all rentals (Estimated to be
representative of the interest
component)............................. 5,992 5,992 6,421 6,421
Interest on In-Core Fuel................. 6,174 6,174 6,696 6,696
Disallowed Clinton Plant Costs........... -- 270,956 -- 270,956
-------- ------------ --------- ------------
Earnings (loss) available for fixed charges
and preferred stock dividend
requirements............................... $150,543 $421,499 $167,586 $438,542
========= ============ ========= ============
Fixed charges and preferred stock dividend
requirements:
Interest on long-term debt................. $154,110 $154,110 $146,168 $146,168
Amortization of debt expense and premium --
net, and other interest charges.......... 27,619 27,619 28,287 28,287
One-third of all rentals (Estimated to be
representative of the interest
component)............................... 5,992 5,992 6,421 6,421
Earnings required (before taxes) for
preferred stock dividends)............... 26,123*** 43,100 24,283 *** 40,291
-------- ------------ --------- ------------
Fixed charges and preferred stock dividend
requirements............................... $213,844 $230,821 $205,159 $221,167
========= ============ ========= ============
Ratio of earnings to fixed charges and
preferred stock dividend requirements...... 0.70* 1.83 0.82 * 1.98
==== ==== ==== ====
</TABLE>

- ------------------
* Earnings are inadequate to cover fixed charges. Additional earnings
(thousands) of $412,323, $104,872, $63,301, and $37,573 for 1989, 1990, 1993
and the twelve months ended June 30, 1994, respectively, are required to
attain a one-to-one Ratio of Earnings to Fixed Charges.
** Supplemental Ratio of Earnings to Fixed Charges presented to exclude
nonrecurring item -- Disallowed Clinton plant costs.
*** Because the Company incurred a pre-tax loss, these amounts are at the net
preferred dividend requirement level.

<PAGE> 1

EXHIBIT 23(C)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 9, 1994, which appears on page 26 of the 1993 Annual Report to
Shareholders of Illinois Power Company, which is incorporated by reference in
Illinois Power Company's Annual Report on Form 10-K for the year ended December
31, 1993. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page 43 of such Annual Report on
Form 10-K. We also consent to the reference to us under the heading "Experts" in
such Prospectus.

PRICE WATERHOUSE LLP
August 18, 1994

<PAGE> 1
EXHIBIT 25

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY

UNDER THE TRUST INDENTURE ACT OF 1939

OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _____

THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)

A National Banking Association 36-0899825
(I.R.S. employer
identification number)

One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)

The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312)732-6919
(Name, address and telephone number of agent for service)

ILLINOIS POWER COMPANY
(Exact name of obligor as specified in its charter)

Illinois 37-0344645
(State or other jurisdiction of (I.R.S. employer
incorporation of organization) identification number)

500 South 27th Street 62525
Decatur, Illinois (Zip Code)
(Address of Principal
Executive Offices) SUBORDINATED DEBENTURES
(Title of Indenture Securities)

<PAGE> 2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:

(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING
AUTHORITY TO WHICH IT IS SUBJECT.

Comptroller of Currency, Washington, D. C.; Federal
Deposit Insurance Corporation, Washington, D. C., The
Board of Governors of the Federal Reserve System,
Washington, D. C. .

(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

The trustee is authorized to exercise corporate trust powers.

ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.

No such affiliation exists with the trustee.

ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
STATEMENT OF ELIGIBILITY.

1. A copy of the articles of association of the trustee now in
effect.*

2. A copy of the certificates of authority of the trustee to
commence business.*

3. A copy of the authorization of the trustee to exercise corporate
trust powers.*

4. A copy of the existing by-laws of the trustee.*

5. Not Applicable.

6. The consent of the trustee required by Section 321(b) of the Act.

7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.

8. Not Applicable

9. Not Applicable

* EXHIBITS 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING
IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF
CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE
CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418).

<PAGE> 3

Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 17th day of August, 1994.

THE FIRST NATIONAL BANK OF CHICAGO

BY: /s/ Steven M. Wagner
-------------------------------
STEVEN M. WAGNER
VICE PRESIDENT AND SENIOR COUNSEL
CORPORATE TRUST SERVICES DIVISION

<PAGE> 4

EXHIBIT 6

THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(B) OF THE ACT

August 17, 1994

Securities and Exchange Commission,
Washington, D.C. 20549

Gentlemen:

In connection with the qualification of an indenture between Illinois Power
Company and The First National Bank of Chicago, the undersigned, in accordance
with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby
consents that the reports of examinations of the undersigned, made by Federal
or State Authorities authorized to make such examinations, may be furnished by
such authorities to the Securities and Exchange Commission upon its request
therefore.

Very truly yours,

THE FIRST NATIONAL BANK OF CHICAGO

BY: /s/ Steven M. Wagner
-------------------------------
Steven M. Wagner
Vice President and Senior Counsel
Corporate Trust Services Division
<PAGE> 5

EXHIBIT 7

A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
<PAGE> 6
Legal Title of Bank: The First National Call Date: 3/31/94
Bank of Chicago ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza,
Suite 0460 Page RC-1
City, State Zip: Chicago, IL 60670

FDIC Certificate No.: 0/3/6/1/8

CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1994

All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.

SCHEDULE RC--BALANCE SHEET

<TABLE>
<CAPTION>
C400 <-
DOLLAR AMOUNTS IN ------------ ------------
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RCA-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . 0081 3,199,527 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . 0071 7,574,509 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) . . . 1754 125,951 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D). . 1773 318,814 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold. . . . . . . . . . . . . . . . . . . . . . . 0276 2,711,748 3.a.
b. Securities purchased under agreements to resell . . . . . . . . 0277 695,723 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 13,613,912 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . RCFD 3123 352,027 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c). . . . . . . . . . . . . . 2125 13,261,885 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . 3545 8,561,533 5.
6. Premises and fixed assets (including capitalized leases) . . . . . 2145 478,470 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . 2150 95,399 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . 2130 6,434 8.
9. Customers' liability to this bank on acceptances outstanding . . . 2155 452,815 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . 2143 140,023 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . 2160 1,048,744 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . 2170 38,671,575 12.
</TABLE>

(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.

<PAGE> 7
Legal Title of Bank: The First National Call Date: 3/31/94
Bank of Chicago ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza,
Suite 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8

SCHEDULE RC-CONTINUED

<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
---------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . RCON 2200 14,309,869 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . RCON 6631 5,980,761 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . RCON 6636 8,329,108 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries,
and IBFs (from Schedule RC-E, part II) . . . . . . . . RCFN 2200 9,813,189 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . RCFN 6631 374,630 13.b.(1)
(2) Interest-bearing RCFN 6636 9,438,559 13.b.(2)
14. Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the
bank and of its Edge and Agreement subsidiaries, and
in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . RCFD 0278 580,252 14.a.
b. Securities sold under agreements to repurchase . . . . RCFD 0279 1,543,995 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . . RCON 2840 102,941 15.a.
b. Trading Liabilities . . . . . . . . . . . . . . . . . RCFD 3548 5,353,511 15.b.
16. Other borrowed money:
a. With original maturity of one year or less . . . . . . RCFD 2332 1,590,728 16.a.
b. With original maturity of more than one year . . . . RCFD 2333 254,470 16.b.
17. Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 267,000 17.
18. Bank's liability on acceptance executed and outstanding RCFD 2920 452,815 18.
19. Subordinated notes and debentures . . . . . . . . . . . . RCFD 3200 1,175,000 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . RCFD 2930 549,976 20.
21. Total liabilities (sum of items 13 through 20) . . . . . RCFD 2948 35,993,746 21.
22. Limited-Life preferred stock and related surplus . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred
stock) . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3839 2,254,940 25.
26. a. Undivided profits and capital reserves . . . . . . . . RCFD 3632 222,981 26.a.
b. Net unrealized holding gains (losses) on
available-for-sale securities . . . . . . . . . . . . . . RCFD 8434 (8) 26.b.
27. Cumulative foreign currency translation adjustments . . . RCFD 3284 (942) 27.
28. Total equity capital (sum of items 23 through 27) . . . . RCFD 3210 2,677,829 28.
29. Total liabilities, limited-life preferred stock, and
equity capital (sum of items 21, 22, and 28) . . . . . . RCFD 3300 38,671,575 29.

Memorandum
To be reported only with the March Report of Condition.

1. Indicate in the box at the right the number of the statement
below that best describes the most comprehensive level of
auditing work performed for the bank by independent external Number

auditors as of any date during 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 6724 M.1.
</TABLE>

<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>

(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.