SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to __________
Commission Registrants; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
1-11327 Illinova Corporation 37-1319890
(an Illinois Corporation)
500 S. 27th Street
Decatur, IL 62525
(217) 424-6600
1-3004 Illinois Power Company 37-0344645
(an Illinois Corporation)
500 S. 27th Street
Decatur, IL 62525
(217) 424-6600
Indicate by check mark whether the registrants (1) have
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) have
been subject to such filing requirements for the past 90
days.
Illinova Yes X No
Corporation ---- ----
Illinois Power Yes X No
Company ---- ----
Indicate the number of shares outstanding of each of
the issuers' classes of common stock, as of the latest
practicable date:
Illinova Corporation Common stock, no par value, 75,643,937
shares outstanding at October 31,1995
Illinois Power Company Common stock, no par value, 73,574,037
shares outstanding held by Illinova
Corporation at October 31, 1995
ILLINOVA CORPORATION
ILLINOIS POWER COMPANY
This combined Form 10-Q is separately filed by Illinova
Corporation and Illinois Power Company. Prior to the filing
of the combined 10-Q for the quarter ended June 30, 1994,
Illinova was not a reporting company for purposes of the
Securities Exchange Act of 1934, and Illinois Power Company
filed its own separate reports on Form 10-Q. Information
contained herein relating to Illinois Power Company is filed
by Illinova Corporation and separately by Illinois Power
Company on its own behalf. Illinois Power Company makes no
representation as to information relating to Illinova
Corporation or its subsidiaries, except as it may relate to
Illinois Power Company.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995
INDEX
PAGE NO.
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Illinova Corporation
Consolidated Balance Sheets 3 - 4
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Illinois Power Company
Consolidated Balance Sheets 7 - 8
Consolidated Statements of Income 9
Consolidated Statements of Cash Flows 10
Notes to Consolidated Financial Statements of
Illinova Corporation and
Illinois Power Company 11 - 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations for Illinova Corporation
and Illinois Power Company 13 - 18
Part II. OTHER INFORMATION
Item 1: Legal Proceedings 19
Item 6: Exhibits and Reports on Form 8-K 19
Signatures 20 - 21
Exhibit Index 22
PART I. FINANCIAL INFORMATION
ILLINOVA CORPORATION
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial
Statements)
SEPTEMBER 30, DECEMBER 31,
1995 1994
ASSETS (Unaudited)
(Millions of Dollars)
Utility Plant, at original cost
Electric (includes construction work
in progress of $219.3 million and
$202.8 million, respectively) $ 6,139.8 $ 6,023.1
Gas (includes construction work
in progress of $19.1 million and
$16.8 million, respectively) 620.6 606.1
---------- ----------
6,760.4 6,629.2
Less-Accumulated depreciation 2,212.4 2,102.7
---------- ----------
4,548.0 4,526.5
Nuclear fuel in process 5.8 6.2
Nuclear fuel under capital lease 104.8 111.5
---------- ----------
Total utility plant 4,658.6 4,644.2
---------- ----------
Investments and Other Assets 50.1 37.4
---------- ----------
Current Assets
Cash and cash equivalents 16.5 50.7
Accounts receivable (less allowance
for doubtful accounts of $3.0 million)
Service 120.9 110.4
Other 31.3 30.5
Accrued unbilled revenue 86.4 78.9
Material and supplies, at average cost 123.0 133.9
Prepayments and other 36.5 35.0
---------- ----------
Total current assets 414.6 439.4
---------- ----------
Deferred Charges
Deferred Clinton costs 108.2 110.8
Recoverable income taxes 147.3 147.3
Other 242.0 197.6
---------- ----------
Total deferred charges 497.5 455.7
---------- ----------
$ 5,620.8 $ 5,576.7
========== ==========
ILLINOVA CORPORATION
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial
Statements)
SEPTEMBER 30, DECEMBER 31,
1995 1994
CAPITAL AND LIABILITIES (Unaudited)
(Millions of Dollars)
Capitalization
Common stock -
No par value, 200,000,000 shares authorized;
75,643,937 shares outstanding,
stated at $ 1,424.6 $ 1,424.6
Less - Deferred compensation - ESOP 21.3 23.5
Retained earnings 150.7 58.8
Less - Capital stock expense 9.2 9.7
Preferred and preference stock of subsidiary 318.5 321.7
Mandatorily redeemable preferred stock
of subsidiary -- 36.0
Long-term debt of subsidiary 1,803.1 1,946.1
---------- ----------
Total capitalization 3,666.4 3,754.0
---------- ----------
Current Liabilities
Accounts payable 86.9 108.2
Notes payable 286.6 238.8
Long-term debt and lease obligations
maturing within one year 40.6 33.5
Other 139.0 149.9
---------- ----------
Total current liabilities 553.1 530.4
---------- ----------
Deferred Credits
Accumulated deferred income taxes 1,046.9 978.6
Accumulated deferred investment tax credits 225.8 230.9
Other 128.6 82.8
---------- ----------
Total deferred credits 1,401.3 1,292.3
---------- ----------
$ 5,620.8 $ 5,576.7
========== ==========
ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(Unaudited)
(Millions except per share)
Operating Revenues:
Electric $410.5 $362.4 $977.2 $912.1
Electric interchange 40.8 30.2 87.8 83.3
Gas 34.8 36.3 190.9 226.0
---------- ----------- ----------- ----------
Total 486.1 428.9 1,255.9 1,221.4
---------- ----------- ----------- -----------
Operating Expenses and
Taxes:
Fuel for electric 77.2 77.3 199.8 206.0
plants
Power purchased 20.3 12.8 49.4 39.5
Gas purchased for 15.2 13.5 94.4 129.9
resale
Other operating 66.2 61.4 193.9 190.7
expenses
Maintenance 20.0 19.8 76.8 63.5
Depreciation & amortization45.4 45.0 136.0 133.1
General taxes 34.7 32.8 104.0 100.0
Income taxes 69.9 54.1 119.0 103.0
---------- ----------- ----------- -----------
Total 348.9 316.7 973.3 965.7
---------- ----------- ----------- -----------
Operating Income 137.2 112.2 282.6 255.7
---------- ----------- ----------- -----------
Other Income and
Deductions:
Allowance for equity
funds used during 0.2 0.9 0.5 2.9
construction
Miscellaneous - net (6.3) (4.4) (7.2) (10.1)
---------- ----------- ----------- -----------
Total (6.1) (3.5) (6.7) (7.2)
---------- ----------- ----------- -----------
Income Before Interest 131.1 108.7 275.9 248.5
Charges ---------- ----------- ----------- -----------
Interest Charges:
Interest on long-term 33.4 32.9 101.2 103.1
debt
Other interest charges 3.5 (0.7) 11.3 3.3
Allowance for borrowed
funds used during (1.5) (1.2) (4.0) (4.3)
construction
Preferred dividend
requirements of 5.8 5.9 18.8 17.8
subsidiary ---------- ----------- ----------- -----------
Total 41.2 36.9 127.3 119.9
---------- ----------- ----------- -----------
Net Income $89.9 $ 71.8 $148.6 $ 128.6
========== =========== =========== ===========
Earnings per common share $1.18 $0.95 $1.96 $1.70
Cash dividends declared
per common share $0.25 $0.20 $0.75 $0.40
Cash dividends paid per
common share $0.25 $0.20 $0.75 $0.60
Weighted average number of
common shares outstanding
during period
75,643,937 75,643,937 75,643,937 75,643,937
ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(See accompanying Notes to Consolidated Financial
Statements)
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
(Unaudited)
(Millions of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 148.6 $ 128.6
Items not requiring cash, net 195.9 170.7
Changes in assets and liabilities (41.8) (89.3)
-------- --------
Net cash provided by operating
activities 302.7 210.0
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (143.3) (128.0)
Other investing activities (16.9) (15.4)
-------- --------
Net cash used in investing
activities (160.2) (143.4)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on common stock (56.7) (45.4)
Redemptions -
Short-term debt (154.3) (131.8)
Long-term debt of subsidiary (5.2) (145.8)
Preferred stock of subsidiary (39.2) (12.0)
Issuances -
Short-term debt 77.1 244.1
Long-term debt of subsidiary -- 35.6
Other financing activities 1.6 (6.3)
--------- ---------
Net cash used in financing
activities (176.7) (61.6)
--------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS (34.2) 5.0
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 50.7 9.9
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 16.5 $ 14.9
========= =========
ILLINOIS POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial
Statements)
SEPTEMBER 30, DECEMBER 31,
1995 1994
ASSETS (Unaudited)
(Millions of Dollars)
Utility Plant, at original cost
Electric (includes construction work
in progress of $219.3 million and
$202.8 million, respectively) $ 6,139.8 $ 6,023.1
Gas (includes construction work
in progress of $19.1 million and
$16.8 million, respectively) 620.6 606.1
------------ ------------
6,760.4 6,629.2
Less-Accumulated depreciation 2,212.4 2,102.7
------------ ------------
4,548.0 4,526.5
Nuclear fuel in process 5.8 6.2
Nuclear fuel under capital lease 104.8 111.5
------------ ------------
Total utility plant 4,658.6 4,644.2
------------ ------------
Investments and Other Assets 15.9 15.4
------------ ------------
Current Assets
Cash and cash equivalents 11.2 47.9
Accounts receivable (less allowance
for doubtful accounts of $3.0 million)
Service 120.9 110.4
Other 28.8 52.6
Accrued unbilled revenue 86.4 78.9
Material and supplies,
at average cost 123.0 133.9
Prepayments and other 36.4 34.9
------------ ------------
Total current assets 406.7 458.6
------------ ------------
Deferred Charges
Deferred Clinton costs 108.2 110.8
Recoverable income taxes 147.3 147.3
Other 259.6 219.5
------------ ------------
Total deferred charges 515.1 477.6
------------ ------------
$ 5,596.3 $ 5,595.8
============ ============
ILLINOIS POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial
Statements)
SEPTEMBER 30, DECEMBER 31,
1995 1994
CAPITAL AND LIABILITIES (Unaudited)
(Millions of
Dollars)
Capitalization
Common stock -
No par value, 100,000,000 shares
authorized; 73,574,037 shares
outstanding, stated at $ 1,424.6 $ 1,424.6
Retained earnings 150.5 51.1
Less - Capital stock expense 9.2 9.7
Less - 2,069,900 shares of common stock in
treasury, at cost 49.0 --
Preferred and preference stock 318.5 321.7
Mandatorily redeemable
preferred stock -- 36.0
Long-term debt 1,803.1 1,946.1
------------ ------------
Total capitalization 3,638.5 3,769.8
------------ ------------
Current Liabilities
Accounts payable 84.7 108.7
Notes payable 286.6 238.8
Long-term debt and lease
obligations maturing
within one year 40.6 33.5
Other 139.0 149.9
------------ ------------
Total current liabilities 550.9 530.9
------------ ------------
Deferred Credits
Accumulated deferred income taxes 1,052.5 981.4
Accumulated deferred investment
tax credits 225.8 230.9
Other 128.6 82.8
------------ ------------
Total deferred credits 1,406.9 1,295.1
------------ ------------
$ 5,596.3 $ 5,595.8
============ ============
ILLINOIS POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(Unaudited)
Operating Revenues:
Electric $410.5 $362.4 $977.2 $912.1
Electric interchange 40.8 30.2 87.8 83.3
Gas 34.8 36.3 190.9 226.0
----------- ----------- --------- ---------
Total 486.1 428.9 1,255.9 1,221.4
---------- ----------- --------- ----------
Operating Expenses and
Taxes:
Fuel for electric 77.2 77.3 199.8 206.0
plants
Power purchased 20.3 12.8 49.4 39.5
Gas purchased for 15.2 13.5 94.4 129.9
resale
Other operating 66.2 61.4 193.9 190.7
expenses
Maintenance 20.0 19.8 76.8 63.5
Depreciation & amortization45.4 45.0 136.0 133.1
General taxes 34.7 32.8 104.0 100.0
Income taxes 69.9 54.1 119.0 103.0
---------- ---------- ----------- -----------
Total 348.9 316.7 973.3 965.7
---------- ---------- ----------- -----------
Operating Income 137.2 112.2 282.6 255.7
---------- ---------- ----------- -----------
Other Income and
Deductions:
Allowance for equity
funds used during 0.2 0.9 0.5 2.9
construction
Miscellaneous - net (3.8) (3.7) (0.2) (7.2)
---------- ----------- ----------- -----------
Total (3.6) (2.8) 0.3 (4.3)
---------- ----------- ----------- -----------
Income Before Interest 133.6 109.4 282.9 251.4
Charges ----------- ----------- ----------- -----------
Interest Charges and
Other:
Interest on long-term 33.4 32.9 101.2 103.1
debt
Other interest charges 3.5 (0.7) 11.3 3.3
Allowance for borrowed
funds used during (1.5) (1.2) (4.0) (4.3)
construction ---------- ----------- ----------- -----------
Total 35.4 31.0 108.5 102.1
---------- ----------- ----------- -----------
Net Income 98.2 78.4 174.4 149.3
Preferred dividend
requirements of 5.8 5.9 18.8 17.8
subsidiary ----------- ----------- ---------- -----------
Net Income applicable to
common stock $92.4 $72.5 $155.6 $131.5
========== =========== ========== ===========
ILLINOIS POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(See accompanying Notes to Consolidated Financial
Statements)
NINE MONTHS ENDED
September 30,
1995 1994
(Unaudited)
(Millions except per share)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $174.4 $149.3
Items not requiring cash, 198.6 172.9
net
Changes in assets and (17.0) (103.5)
liabilities ------------- ------------
Net cash provided by 356.0 218.7
operating activities ------------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Construction expenditures (143.3) (128.0)
Other investing activities (4.7) (3.0)
------------- ------------
Net cash used in investing (148.0) (131.0)
activities ------------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends on preferred and (75.5) (63.4)
common stock
Repurchase of Common Stock (154.3) (131.3)
Redemptions -
Short-term debt (5.2) (145.8)
Long-term debt (36.0) (12.0)
Preferred Stock (49.0) --
Issuances
Short-term debt 77.1 243.0
Long-term debt -- 35.6
Other financing activities (1.8) (11.2)
------------- ------------
Net cash used in financing (244.7) (85.1)
activities ------------- ------------
NET CHANGE IN CASH AND CASH (36.7) 2.6
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 47.9 9.3
BEGINNING OF YEAR ------------- ------------
CASH AND CASH EQUIVALENTS AT $11.2 $11.9
END OF PERIOD ------------- ------------
ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
Financial Statement note disclosures, normally included
in financial statements prepared in conformity with
generally accepted accounting principles, have been omitted
from this Form 10-Q pursuant
to the Rules and Regulations of the Securities and Exchange
Commission. However, in the opinion of Illinova Corporation
(Illinova) and Illinois Power Company (IP), the disclosures
and information contained in this Form 10-Q are adequate and
not misleading. See Illinova's 1994 Annual Report to
Shareholders (included in the Proxy Statement), IP's 1994
Annual Report to Shareholders (included in the Information
Statement), Illinova's and IP's 1994 Form 10-K filings to
the Securities and Exchange Commission, and Illinova's and
IP's Reports on Form 10-Q for
the quarters ended March 31, 1995 and June 30, 1995, for
information relevant to the consolidated financial
statements contained herein, including information as to
certain regulatory and environmental matters and as to the
significant accounting policies followed.
In the opinion of Illinova, the accompanying unaudited
consolidated financial statements for Illinova reflect all
adjustments necessary to present fairly the Consolidated
Balance Sheets as of September 30, 1995 and December 31,
1994, the Consolidated Statements of Income for the three
months and nine months ended September 30, 1995 and 1994,
and the Consolidated Statements of Cash Flows for the nine
months ended September 30, 1995 and 1994. In addition, it
is Illinova's and IP's opinion that the accompanying
unaudited consolidated financial statements for IP reflect
all adjustments necessary to present fairly the Consolidated
Balance Sheets as of September 30, 1995 and December 31,
1994, the Consolidated Statements of Income for the three
months and nine months ended September 30, 1995 and 1994,
and the Consolidated Statements of Cash Flows for the nine
months ended September 30, 1995 and 1994. Due to seasonal
and other factors which are characteristic of electric and
gas utility operations, interim period results are not
necessarily indicative of results to be expected for the
year.
ACCOUNTING MATTERS
CONSOLIDATION
The consolidated financial statements of Illinova
include the accounts of Illinova, IP, Illinova Generating
Company and Illinova Power Marketing, Inc. All significant
intercompany balances and transactions have been eliminated
from the consolidated financial statements. All non-utility
operating transactions are included in the section titled
Other Income and Deductions, "Miscellaneous-net" in
Illinova's and IP's Consolidated Statements of Income.
Prior year amounts have been restated on a basis consistent
with the September 30, 1995 presentation.
IP's consolidated financial position and results of
operation are currently the principal factors affecting
Illinova's consolidated financial position and results of
operations.
REGULATORY AND LEGAL MATTERS
MANUFACTURED GAS PLANT SITES
IP is currently recovering Manufactured Gas Plant (MGP)
site cleanup costs from its customers through a tariff rider
approved by the Illinois Commerce Commission (ICC) in April
1993. After hearing appeals of the decision, the Illinois
Supreme Court issued a ruling on April 20, 1995, upholding
the ICC authorization of cost recovery through tariff
riders, and reversing the ICC's disallowance of carrying
costs. The Court has issued a mandate to the ICC to reissue
an order providing for full recovery of prudently incurred
MGP site cleanup costs, including carrying costs.
In September 1995, IP increased its estimate of
liability for MGP site remediation by $42 million to a total
of $72.5 million. This increase is based on a site-by-site
survey of twenty-four MGP sites for which IP is responsible.
The estimate to remediate the twenty-four sites is based on
current site information and remediation techniques. The
estimate was determined by IP in accordance with Electric
Power Research Institute guidelines, with assistance from
several external environmental consultants. Accordingly, in
September 1995, IP recorded a regulatory asset of $42
million, since the rulings from the ICC and the Illinois
Supreme Court will allow IP to recover the costs of MGP site
remediation from its customers. The previously recorded
liability of $30.5 million was based on an estimate to
remediate eight of the twenty-four sites and investigate the
remaining sixteen sites.
IP has begun settlement discussions with its insurance
carriers regarding the recovery of estimated MGP site
remediation costs. A settlement has been reached with one
carrier. On October 17, 1995, IP filed a lawsuit in the
Circuit Court of Macon County seeking a declaratory judgment
and damages regarding insurance coverage for four MGP sites.
Any insurance recoveries received will reduce the cost
recoveries obtained from customers through the rider
mechanism.
TREASURY STOCK
On September 30, 1995, IP repurchased 372,300 shares of
its common stock from Illinova. Under Illinois law, such
shares may be held as treasury stock and treated as
authorized but unissued, or may be canceled by resolution of
the Board of Directors. Through September 30, 1995, IP has
purchased 2,069,900 shares of its common stock, all of which
are held as treasury stock and are deducted from common
equity at the cost of the shares.
ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Notes to the Consolidated
Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations
presented in Illinova's 1994 Annual Report to Shareholders
(included in the Proxy Statement), IP's 1994 Annual Report
to Shareholders (included in the Information Statement),
Illinova's and IP's Form 10-K for the year ended December
31, 1994, and Illinova's and IP's Report on Form 10-Q for
the quarters ended March 31, 1995 and June 30, 1995.
Illinova Subsidiaries
IP, the primary business and subsidiary of Illinova, is
engaged in the generation, transmission, distribution and
sale of electric energy and the distribution, transportation
and sale of natural gas in the State of Illinois.
Illinova Generating Company (IG) is Illinova's wholly
owned independent power subsidiary which invests in energy
supply projects throughout the world. IG's strategy is to
invest in and develop "greenfield" power plants, acquire
existing generation facilities and provide power plant
operations and maintenance services. Illinova has invested
$39.7 million in IG as of September 30, 1995.
Illinova Power Marketing, Inc. (IPM) is a wholly owned
subsidiary of Illinova formed in July 1994. IPM is active
in the business of brokering and marketing electric power
and gas to various customers outside of IP's present service
territory. In September 1995, IPM began buying and selling
wholesale electricity in the western United States.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES AND REQUIREMENTS
Cash flow from operations during the first nine months
of 1995 provided sufficient working capital to meet ongoing
operating requirements, to service existing common and IP
preferred stock dividends and debt requirements and all of
IP's construction requirements. Additionally, Illinova
expects future cash flows will enable it to meet future
operating requirements and continue to service IP's existing
debt, IP preferred and Illinova common stock dividends, IP
sinking fund requirements and all of IP's anticipated
construction requirements. IP repurchased 1,347,600 shares
of its common stock from Illinova on March 31, 1995, 350,000
shares on June 30, 1995 and 372,300 shares on September 30,
1995, to provide Illinova cash for operations, in accordance
with authority granted by the ICC.
IP's capital requirements for construction were
approximately $143 million and $128 million during the nine
months ended September 30, 1995 and 1994, respectively.
Illinova and IP currently have total lines of credit
represented by bank commitments of $404 million. Illinois
Power Company mortgage bonds are currently rated Baa2 by
Moody's and BBB by Standard & Poor's. IP's preferred stock
is currently rated baa3 by Moody's and BBB- by Standard &
Poor's. Both Illinova and IP have adequate short- and
intermediate-term bank borrowing capacity.
On September 20, 1995, IP received ICC authorization to
issue an additional $300 million of debt and $100 million of
preferred stock and to sell an additional $50 million of
accounts receivable. IP now has ICC authorization to issue
$312 million of debt securities and $200 million of
preferred stock and to sell $100 million of accounts
receivable. In February 1995, IP redeemed $12 million of
8.0% mandatorily redeemable serial preferred stock. On May
1, 1995, IP redeemed the remaining $24 million of the 8.0%
mandatorily redeemable serial preferred stock. In August
1995, IP purchased $5 million of 8.75% First Mortgage Bonds
on the open market. On October 31, 1995, IP issued a Notice
of Redemption to all holders of its 8.00%, 7.56% and 8.24%
Serial Preferred Stock; the shares will be redeemed on
December 1, 1995
On October 20, 1995, IP and Illinois Power Financing
I(IPFI), a statutory business trust formed in the State of
Delaware, filed a registration statement with the Securities
and Exchange Commission (SEC) requesting authorization for
IPFI to issue four million shares (par value of $100
million) of Trust Originated Preferred Securities (TOPrS).
The TOPrS will be issued by IPFI, which will invest the
proceeds in an equivalent amount of IP subordinated
debentures due in 2044. The proceeds from the sale will be
used by IP to purchase or redeem outstanding shares of
preferred stock of IP. The registration statement is
currently under review by the SEC, and approval is expected
during the fourth quarter of 1995.
In a letter dated October 16, 1995, Illinova informed
Soyland Power Cooperative, Inc. (Soyland) of its intention
to terminate an agreement in principle for the possible
purchase of Soyland's assets. Soyland has not responded to
Illinova's letter of termination; thus, the agreement
entered on August 16, 1995 is still in effect. However, the
agreement will expire at the end of 1995 if all of the terms
have not been met. Under the August 16, 1995 proposal, IP
would continue to meet the bulk power needs of the twenty-
one electric distribution cooperatives who are members of
and have requirements contracts with Soyland. Soyland's
member cooperatives serve approximately 160,000 customers in
Illinois.
REGULATORY MATTERS
OPEN ACCESS AND WHEELING
On March 29, 1995, the Federal Energy Regulatory
Commission (FERC) issued a Notice of Proposed Rulemaking
(NOPR) designed to encourage a more fully competitive
wholesale electric market through mandated open access to
public utility transmission facilities, at rates to be
determined, at the outset, by the FERC. Under FERC's
proposal, all transmission-owning public utilities would be
required to file non-discriminatory open-access transmission
tariffs, available to all wholesale sellers and buyers of
electric energy; the utilities would be required to take
service under the tariffs for their own wholesale sales and
purchases of electric energy; and the utilities would be
allowed the opportunity under certain circumstances to
recover wholesale stranded costs.
On March 20, 1995, IP filed three transmission service
tariffs that offer eligible transmission customers the same
or comparable transmission service on terms comparable to
the service IP provides to itself. The FERC has recommended
that all transmission service tariffs filed prior to March
29, 1995 be accepted and set for hearing provided that the
proposed tariffs meet the FERC's pricing policies including
those set forth in the NOPR. The FERC accepted open-access
tariff filings for IPM and for IP on May 16, 1995.
On June 28, 1995, the FERC issued an order that
provides guidance and options for utilities that are either
contemplating filing open-access tariffs or have cases
pending. The order describes four categories of open-access
cases and the options available under each of those
categories. All tariffs that would be accepted for filing
without a hearing under the above options would be subject
to the substantive requirements of the NOPR final rule and
would have to be modified to ensure that they are consistent
with the requirements and contain certain basic non-
discriminatory provisions.
On July 26, 1995, IP notified the FERC and the
Administrative Law Judge (ALJ) that it intended to revise
its tariffs to be consistent with the FERC's proforma
tariffs with some slight modifications. The FERC approved
these tariffs on September 27, 1995, effective May 20, 1995.
On September 11, 1995, IP announced its intention to
seek ICC and FERC approval to conduct an open-energy access
experiment beginning in 1996. The experiment would allow
approximately twenty industrial customers to purchase
electricity and related services from other sources. IP
would transmit the electricity over its lines in the
practice called "wheeling". IP filed its proposal with the
ICC on September 11, 1995, and will seek FERC approval of
the experiment after ICC approval is received, which is
anticipated in the second quarter of 1996.
IP believes that competition is a critical issue in the
electric utility industry that will bring benefits to all
energy customers. IP also believes in a fair and equitable
transition from the current regulatory system to a
competitive system. The open-access experiment will allow
IP to evaluate the financial, operational and service
impacts of transporting power from other suppliers to
customers. Additionally, regulators and legislators can
benefit from the experiment because they can observe open-
energy access in a "laboratory setting" while they look for
ways to bring the benefits of competition to all customers.
Finally, the experiment provides an opportunity for
customers to gain experience in arranging their power
supplies and transmission requirements and managing their
operations under an open-energy access scenario.
The maximum total load involved in this experiment
represents approximately one percent of IP's total load or
about $16 million in annual gross revenue. IP expects the
earnings impact to be immaterial. Any loss of sales would
be offset by revenues obtained by selling the surplus energy
and capacity on the open market, by transmission and
ancillary service charges necessary for customers to obtain
energy from an alternative supplier as well as by
corresponding reductions in fuel and other operating costs
related to any over-all reduction in sales.
UFAC SUSPENSION
On June 26, 1995, IP filed a petition with the ICC for
authority to eliminate its Uniform Fuel Adjustment Clause
(UFAC), effective August 10, 1995, and to adjust its base
rate tariffs to a level that would recover fuel and
purchased power costs based on the projected costs of such
fuel and purchased power for the twelve months ending
December 31, 1995. IP's petition was filed under a
procedure that allows the ICC to grant or deny the specific
proposal but not to suspend it for hearings or require that
it be modified. IP believes that continuation of the UFAC
creates disincentives to efficient decisions made on a total
cost basis; that the UFAC is inconsistent with a competitive
environment; and that the significance of fuel costs as a
component of total costs has diminished, thereby reducing
the need for a UFAC as a risk-reduction mechanism. On
August 8, 1995, the ICC voted three to two to deny IP's
petition. IP currently is reviewing its alternatives in
light of the ICC decision.
ENVIRONMENTAL MATTERS
GAS MANUFACTURING SITES
See "Manufactured Gas Plant Sites" under "Regulatory
and Legal Matters" of the Notes to Consolidated Financial
Statements on page 12.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Electric Operations - The current quarter increase of
$48.1 million in electric revenues is primarily due to an
increase in sales to the residential and commercial sectors.
Total residential sales increased 20.1% and commercial sales
increased 10.3%. Higher temperatures, resulting in a
significantly greater number of cooling degree days in
August and September 1995, contributed to the sales gains.
Total kilowatt-hour sales (excluding interchange and sales
to municipalities) increased 7.8% or 356 million kwh from
the third quarter 1994. Interchange revenues increased
$10.7 million primarily as a result of one of IP's larger
interchange customers exercising its options for increased
capacity during the third quarter of 1995.
On Thursday, July 13, 1995, IP hit an all-time peak for
electric consumption when demand reached 4,055 megawatts.
Demand on both Wednesday, July 12, 1995, (3,897 megawatts)
and Friday, July 14, 1995, (4,000 megawatts) exceeded the
previous high of 3,775 megawatts set on August 16, 1988.
The current quarter cost of fuel for electric plants
decreased $0.1 million while electric generation increased
9.6%. The decrease in fuel cost is comprised of increased
fuel costs associated with a higher volume of kwh generated
and the cost of emission allowances, which were added to
fuel costs beginning in 1995, being more than offset by
lower per-unit generation costs at nearly all of IP's power
plants. Additionally, the impact of the UFAC was favorable.
The equivalent availability of IP's Clinton Power Station
(Clinton) was 94% and 93% for the three months ended
September 30, 1995 and 1994, respectively. The equivalent
availability for IP's coal-fired plants was 91% and 88% for
the three months ended September 30, 1995 and 1994,
respectively. Power purchased and interchanged for the
current quarter increased $7.5 million due both to increased
demand during lengthy periods of hot weather and to higher
interchange rates.
Gas Operations - Gas revenues decreased $1.5 million in
the third quarter of 1995. Therm sales decreased 8.3% (3.9
million therms) outweighed by an increase in therms
transported for a combined increase in gas consumption of
10.1% (9.6 million therms). Because of the effects of the
Uniform Gas Adjustment Clause (UGAC), revenues decreased
despite the increase in volume. Residential sales increased
0.9% (0.1 million therms), commercial sales and transport
decreased 3.7% (0.4 million therms) and industrial sales and
transport increased 15.2% (9.9 million therms).
The cost of gas purchased for resale increased $1.6
million in the third quarter. Lower prices reduced the cost
of gas by $4.9 million which was offset by an increase in
the quantity purchased.
Gas bypass (connection by the natural gas customer
directly to a pipeline, "bypassing" IP's sales and
transportation service) continues to be actively considered
or utilized by several of IP's large customers. IP is
aggressively competing with the bypass options available to
these customers in an attempt to minimize the potential loss
in earnings.
Operation and Maintenance Expense - The current quarter
increase of $5 million dollars is due primarily to IP's
ongoing reengineering efforts, increases in uncollectable
accounts, and increases in the use of outside consulting
services.
Miscellaneous - Net - The current quarter increase in
net deductions of $1.9 million is primarily a result of
costs recorded to reflect planned inventory reductions,
partially offset by non-utility income tax credits.
Other Interest Charges - The current quarter increase
of $4.2 million in other interest charges is due to a 1994
$3.6 million reversal of accrued interest on IRS audit
deficiencies and increased short-term borrowing rates in
1995.
Earnings per Common Share - The earnings per common
share for Illinova during the third quarter of 1995 and 1994
resulted from the interaction of all other factors discussed
herein.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Electric Operations - The current period increase of
$65.0 million in electric revenues is primarily due to
increased sales to both the residential and commercial
sectors. Improving regional economies have led to sales
gains in the commercial sector, and with cooling degree days
at 32% greater than last year and 26% greater than normal,
weather contributed to sales gains in both sectors. Total
kilowatt-hour sales (excluding interchange and sales to
municipalities) increased 3.3% or 417 million kwh. This
resulted from an increase in residential sales of 5.3% (192
million kwh), an increase in commercial sales of 10.8% (282
million kwh), and a decrease in industrial sales of 0.9% (57
million kwh). Interchange revenues increased $4.7 million
due to increased sales opportunities.
The current period cost of fuel for electric plants
decreased $6.2 million and electric generation decreased
0.6%. The decrease in fuel cost was attributable to lower
cost of fuel at the fossil plants, partially offset by the
cost of emission allowances and the impact of the UFAC. The
equivalent availability of Clinton was 72% and 93% for the
nine months ended September 30, 1995 and 1994, respectively.
The lower equivalent availability for Clinton in 1995 was
due to a scheduled maintenance and refueling outage that
began March 12 and ended on April 29. The equivalent
availability for IP's coal-fired plants was 82% and 77% for
the nine months ended September 30, 1995 and 1994,
respectively. Power purchased and interchanged for the
period increased $9.9 million due to increased purchase and
sales opportunities.
Gas Operations - Gas revenues decreased $35.1 million
in the current period due to warmer weather during the
heating season and the effects of the Uniform Gas Adjustment
Clause, partially offset by the ICC's April 1994 order
granting IP its first natural gas base rate increase in ten
years. Therm sales decreased 7.1% (30 million therms),
partially offset by an increase in therms transported for a
combined decrease in gas consumption of 0.2% (1.1 million
therms). Residential sales decreased 9.1% (24 million
therms), commercial sales and transport decreased 9.9% (10.7
million therms) and industrial sales and transport increased
14.7% (33.5 million therms).
The cost of gas purchased for resale decreased $35.6
million for the period as a result of the effects of the
lower cost of gas and the Uniform Gas Adjustment Clause.
Operation and Maintenance Expense - The current period
increase of $16.5 million dollars is due primarily to
expenses from the 1995 Clinton refueling outage. Without
the refueling charges, operation and maintenance expenses
for the first nine months of 1995 would have been
approximately $3 million less than the same period in 1994.
Miscellaneous - Net - The year-to-date decrease in net
deductions of $2.9 million is primarily a result of a
favorable ICC decision, received in 1995, related to 1993
transportation costs, and non-utility income tax credits,
partially offset by costs recorded to reflect planned
inventory reductions.
Other Interest Charges - The current period increase of
$8 million in other interest charges is due to a 1994 $3.6
million reversal of accrued interest on IRS audit
deficiencies and increased short-term borrowings at higher
rates in 1995.
Earnings per Common Share - The earnings per common
share for Illinova during the nine months ended September
30, 1995 and 1994 resulted from the interaction of all other
factors discussed herein.
PART II. OTHER INFORMATION
ITEM 1.
Legal Proceedings
See "Notes to Consolidated Financial Statements" in
Part I for a discussion of certain legal proceedings related
to manufactured gas plant sites.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The Exhibits filed with this 10-Q are listed
on the Exhibit Index.
(b) Reports on Form 8-K since June 30, 1995:
A current report on Form 8-K, dated
August 11, 1995, was filed reporting under Item 5,
Other Events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
ILLINOIS POWER COMPANY
(Registrant)
By /s/Larry F. Altenbaumer
---------------------------
Larry F. Altenbaumer,
Chief Financial Officer
Treasurer and Controller
on behalf of
Illinois Power Company
Date: November 08, 1995
EXHIBIT INDEX
PAGE NO. WITHIN
SEQUENTIAL
NUMBERING
EXHIBIT DESCRIPTION SYSTEM
27 Financial Data Schedule UT
(filed herewith)
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXRACTED FROM THE BALANCE
SHEET, INCOME STATEMENT AND CASH FLOW STATEMENT OF ILLINOIS POWER COMPANY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE BALANCE SHEET, INCOME STATEMENT
AND CASH FLOW STATEMENT OF ILLINOIS POWER COMPANY.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4659
<OTHER-PROPERTY-AND-INVEST> 16
<TOTAL-CURRENT-ASSETS> 407
<TOTAL-DEFERRED-CHARGES> 514
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5596
<COMMON> 1366
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 151
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1517
0
319
<LONG-TERM-DEBT-NET> 1739
<SHORT-TERM-NOTES> 106
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 181
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 64
<LEASES-CURRENT> 40
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1630
<TOT-CAPITALIZATION-AND-LIAB> 5596
<GROSS-OPERATING-REVENUE> 1256
<INCOME-TAX-EXPENSE> 119
<OTHER-OPERATING-EXPENSES> 854
<TOTAL-OPERATING-EXPENSES> 973
<OPERATING-INCOME-LOSS> 283
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 283
<TOTAL-INTEREST-EXPENSE> 108
<NET-INCOME> 175
19
<EARNINGS-AVAILABLE-FOR-COMM> 156
<COMMON-STOCK-DIVIDENDS> 57
<TOTAL-INTEREST-ON-BONDS> 101
<CASH-FLOW-OPERATIONS> 358
<EPS-PRIMARY> 0
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