18
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 MARCH 31, 1996
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, 75,681,937
shares outstanding at April 30,1996
Illinois Power Company Common stock, no par value, 72,704,254
shares outstanding held by Illinova
Corporation at April 30, 1996
ILLINOVA CORPORATION
ILLINOIS POWER COMPANY
This combined Form 10-Q is separately filed by Illinova
Corporation and Illinois Power Company. Information
contained herein relating to Illinois Power Company is filed
by Illinova Corporation and separately by Illinois Power
Company on its own behalf. 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 MARCH 31, 1996
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 - 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations for Illinova Corporation
and Illinois Power Company 14 - 17
Part II. OTHER INFORMATION
Item 1: Legal Proceedings 18
Item 4: Submission of Matters to a Vote of Security Holders 18
Item 6: Exhibits and Reports on Form 8-K 18
Signatures 19 - 20
Exhibit Index 21
PART I. FINANCIAL INFORMATION
ILLINOVA CORPORATION
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial
Statements)
MARCH 31, DECEMBER 31,
1996 1995
ASSETS (Unaudited)
(Millions of Dollars)
Utility Plant, at original cost
Electric (includes construction work
in progress of $234.1 million and
$199.8 million, respectively) $ 6,223.4 $ 6,189.0
Gas (includes construction work
in progress of $10.5 million and
$10.2 million, respectively) 628.3 625.9
---------- ----------
6,851.7 6,814.9
Less-Accumulated depreciation 2,298.3 2,251.7
---------- ----------
4,553.4 4,563.2
Nuclear fuel in process 5.8 5.7
Nuclear fuel under capital lease 90.4 95.2
---------- ----------
Total utility plant 4,649.6 4,664.1
---------- ----------
Investments and Other Assets 80.9 65.8
---------- ----------
Current Assets
Cash and cash equivalents 16.5 11.3
Notes receivable -- 6.1
Accounts receivable (less allowance
for doubtful accounts of $3.0 million)
Service 134.9 129.4
Other 20.0 13.2
Accrued unbilled revenue 88.0 89.1
Materials and supplies, at average cost 94.5 111.1
Prepayments and other 35.0 40.4
---------- ----------
Total current assets 388.9 400.6
---------- ----------
Deferred Charges
Deferred Clinton costs 106.5 107.3
Recoverable income taxes 107.6 128.7
Other 245.8 243.3
---------- ----------
Total deferred charges 459.9 479.3
---------- ----------
$ 5,579.3 $ 5,609.8
========== ==========
ILLINOVA CORPORATION
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial
Statements)
MARCH 31, DECEMBER 31,
1996 1995
CAPITAL AND LIABILITIES (Unaudited)
(Millions of Dollars)
Capitalization
Common stock -
No par value, 200,000,000 shares authorized;
75,681,937 and 75,643,937 shares outstanding,
respectively, stated at $ 1,425.7 $ 1,424.6
Less - Deferred compensation - ESOP 17.1 18.4
Retained earnings 151.7 129.6
Less - Capital stock expense 8.8 8.8
Preferred stock of subsidiary 125.3 125.6
Mandatorily redeemable preferred stock of
subsidiary 197.0 97.0
Long-term debt of subsidiary 1,723.5 1,739.3
---------- ----------
Total capitalization 3,597.3 3,488.9
---------- ----------
Current Liabilities
Accounts payable 129.1 119.9
Notes payable 204.6 359.6
Long-term debt and lease obligations
maturing within one year 96.6 95.0
Other 182.9 173.0
---------- ----------
Total current liabilities 613.2 747.5
---------- ----------
Deferred Credits
Accumulated deferred income taxes 995.3 1,012.8
Accumulated deferred investment tax credits 221.1 222.8
Other 152.4 137.8
---------- ----------
Total deferred credits 1,368.8 1,373.4
---------- ----------
$ 5,579.3 $ 5,609.8
========== ==========
ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED
MARCH 31,
1996 1995
(Unaudited)
(Millions except per share)
Operating Revenues:
Electric $ 278.7 $ 288.1
Electric interchange 31.9 22.4
Gas 136.1 115.0
----------- -----------
Total 446.7 425.5
----------- -----------
Operating Expenses and Taxes:
Fuel for electric plants 66.6 64.3
Power purchased 9.8 14.0
Gas purchased for resale 73.0 64.6
Other operating expenses 65.7 64.2
Maintenance 20.5 28.1
Depreciation & amortization 48.1 45.3
General taxes 37.8 38.2
Income taxes 37.1 28.5
----------- -----------
Total 358.6 347.2
----------- -----------
Operating Income 88.1 78.3
----------- -----------
Other Income and Deductions:
Allowance for equity funds
used during construction - 0.2
Miscellaneous - net (7.1) (2.4)
----------- -----------
Total (7.1) (2.2)
----------- -----------
Income Before Interest Charges 81.0 76.1
----------- -----------
Interest Charges:
Interest on long-term debt 31.2 34.5
Other interest charges 2.6 3.9
Allowance for borrowed funds
used during construction (1.7) (1.2)
Preferred dividend
requirements of subsidiary 5.6 6.5
----------- -----------
Total 37.7 43.7
----------- -----------
Net Income $ 43.3 $ 32.4
=========== ===========
Earnings per common share $0.57 $0.43
Cash dividends declared
per common share $0.28 $0.25
Cash dividends paid per
common share $0.28 $0.25
Weighted average number of
common shares outstanding
during period 75,674,514 75,643,937
ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED
MARCH 31,
1996 1995
(Unaudited)
(Millions of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 43.3 $ 32.4
Items not requiring cash, net 45.0 58.2
Changes in assets and liabilities 56.0 3.0
-------- --------
Net cash provided by operating
activities 144.3 93.6
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (47.9) (48.2)
Other investing activities (3.0) (2.6)
-------- --------
Net cash used in investing
activities (50.9) (50.8)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on common stock (21.2) (18.9)
Exercise of stock options 1.1 --
Redemptions -
Short-term debt (209.9) (64.6)
Long-term debt of subsidiary (10.0) --
Preferred stock of subsidiary (0.3) (15.2)
Issuances -
Short-term debt 55.0 9.6
Preferred Stock of subsidiary 100.0 --
Other financing activities (2.9) 0.5
--------- ---------
Net cash used in financing
activities (88.2) (88.6)
--------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 5.2 (45.8)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 11.3 50.7
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 16.5 $ 4.9
========= =========
ILLINOIS POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
MARCH 31, DECEMBER 31,
1996 1995
ASSETS (Unaudited)
(Millions of Dollars)
Utility Plant, at original cost
Electric (includes construction work
in progress of $234.1 million and
$199.8 million, respectively) $ 6,223.4 $ 6,189.0
Gas (includes construction work
in progress of $10.5 million and
$10.2 million, respectively) 628.3 625.9
------------ ------------
6,851.7 6,814.9
Less-Accumulated depreciation 2,298.3 2,251.7
------------ ------------
4,553.4 4,563.2
Nuclear fuel in process 5.8 5.7
Nuclear fuel under capital lease 90.4 95.2
------------ ------------
Total utility plant 4,649.6 4,664.1
------------ ------------
Investments and Other Assets 15.7 16.4
------------ ------------
Current Assets
Cash and cash equivalents 5.9 4.3
Accounts receivable (less allowance
for doubtful accounts of $3.0 million)
Service 134.9 129.4
Other 19.6 18.2
Accrued unbilled revenue 88.0 89.1
Materials and supplies,
at average cost 94.5 111.1
Prepayments and other 34.9 40.4
------------ ------------
Total current assets 377.8 392.5
------------ ------------
Deferred Charges
Deferred Clinton costs 106.5 107.3
Recoverable income taxes 107.6 128.7
Other 259.8 258.2
------------ ------------
Total deferred charges 473.9 494.2
------------ ------------
$ 5,517.0 $ 5,567.2
============ ============
ILLINOIS POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
MARCH 31, DECEMBER 31,
1996 1995
CAPITAL AND LIABILITIES (Unaudited)
(Millions of Dollars)
Capitalization
Common stock -
No par value, 100,000,000 shares
authorized; 75,643,937 shares issued,
stated at $ 1,424.6 $ 1,424.6
Retained earnings 151.9 129.6
Less - Capital stock expense 8.8 8.8
Less - 2,977,683 and 2,696,086 shares of
common stock in treasury, respectively,
at cost 75.0 67.3
Preferred stock 125.3 125.6
Mandatorily redeemable preferred stock 197.0 97.0
Long-term debt 1,723.5 1,739.3
------------ ------------
Total capitalization 3,538.5 3,440.0
------------ ------------
Current Liabilities
Accounts payable 123.1 119.9
Notes payable 204.6 359.6
Long-term debt and lease
obligations maturing
within one year 96.6 95.0
Other 182.8 173.0
------------ ------------
Total current liabilities 607.1 747.5
------------ ------------
Deferred Credits
Accumulated deferred income taxes 1,002.4 1,019.1
Accumulated deferred investment
tax credits 221.1 222.8
Other 147.9 137.8
------------ ------------
Total deferred credits 1,371.4 1,379.7
------------ ------------
$ 5,517.0 $ 5,567.2
============ ============
ILLINOIS POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED
MARCH 31,
1996 1995
(Unaudited)
(Millions of Dollars)
Operating Revenues:
Electric $ 278.7 $ 288.1
Electric interchange 31.9 22.4
Gas 136.1 115.0
----------- ___________
Total 446.7 425.5
----------- ___________
Operating Expenses and Taxes:
Fuel for electric plants 66.6 64.3
Power purchased 9.8 14.0
Gas purchased for resale 73.0 64.6
Other operating expenses 65.7 64.2
Maintenance 20.5 28.1
Depreciation & amortization 48.1 45.3
General taxes 37.8 38.2
Income taxes 37.1 28.5
----------- __________
Total 358.6 347.2
___________ __________
Operating Income 88.1 78.3
----------- __________
Other Income and Deductions:
Allowance for equity funds
used during construction - 0.2
Miscellaneous - net (6.9) 0.5
____________ __________
Total (6.9) 0.7
____________ __________
Income Before Interest Charges 81.2 79.0
_____________ ___________
Interest Charges and Other:
Interest on long-term debt 31.2 34.5
Other interest charges 2.6 3.9
Allowance for borrowed funds
used during construction (1.7) (1.2)
----------- -----------
Total 32.1 37.2
___________ __________
Net Income 49.1 41.8
Preferred dividend
requirements 5.6 6.5
___________ __________
Net Income applicable to
common stock $ 43.5 $ 35.3
=========== ==========
ILLINOIS POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED
MARCH 31,
1996 1995
(Unaudited)
(Millions of Dollars)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $ 49.1 $ 41.8
Items not requiring cash, net 45.9 58.6
Changes in assets and liabilities 51.7 27.0
------------- ------------
Net cash provided by operating 146.7 127.4
activities ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (47.9) (48.2)
Other investing activities 3.1 (1.0)
------------- ------------
Net cash used in investing (44.8) (49.2)
activities ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on preferred and (24.5) (25.7)
common stock
Repurchase of common stock (7.7) (30.5)
Redemptions -
Short-term debt (209.9) (64.5)
Long-term debt (10.0) --
Preferred Stock (0.3) (15.2)
Issuances
Short-term debt 55.0 9.6
Preferred Stock 100.0 --
Other financing activities (2.9) 0.5
------------- ------------
Net cash used in financing (100.3) (125.8)
activities ------------- ------------
NET CHANGE IN CASH AND CASH 1.6 (47.6)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 4.3 47.9
BEGINNING OF YEAR ------------- ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 5.9 $ 0.3
============ =============
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 the consolidated financial statements
and the accompanying notes in Illinova's 1995 Annual Report
to Shareholders (included in the Proxy Statement), the
consolidated financial statements and the accompanying notes
in IP's 1995 Annual Report to Shareholders (included in the
Information Statement) and Illinova's and IP's 1995 Form 10-
K filings to the Securities and Exchange Commission 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 March 31, 1996 and December 31, 1995,
the Consolidated Statements of Income for the three months
ended March 31, 1996 and 1995, and the Consolidated
Statements of Cash Flows for the three months ended March
31, 1996 and 1995. 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 March 31, 1996 and December 31, 1995, the Consolidated
Statements of Income for the three months ended March 31,
1996 and 1995, and the Consolidated Statements of Cash Flows
for the three months ended March 31, 1996 and 1995. 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 (IGC) and Illinova Power Marketing, Inc. (IPMI).
All significant intercompany balances and transactions have
been eliminated from the consolidated financial statements.
All non-utility operating transactions are included in the
section titled Other Income and Deductions, "Miscellaneous-
net" in Illinova's and IP's Consolidated Statements of
Income.
The consolidated financial statements of IP include the
accounts of Illinois Power Capital, L.P. and the accounts of
Illinois Power Financing I (IPFI). All significant
intercompany balances and transactions have been eliminated
from the consolidated financial statements. See "Liquidity
and Capital Resources" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
for further information on IPFI.
IP's consolidated financial position and results of
operation are currently the principal factors affecting
Illinova's consolidated financial position and results of
operations.
DECOMMISSIONING COSTS
On February 7, 1996, the Financial Accounting Standards
Board issued an exposure draft entitled "Accounting for
Certain Liabilities Related to Closure or Removal of Long-
Lived Assets". The proposed accounting standard would
require changes to current electric utility industry
accounting practices and will likely be effective beginning
January 1, 1997. The proposed changes may result in: 1)
increasing annual provisions for decommissioning through
increases in depreciation; 2) recording the estimated total
cost for decommissioning as a liability with a gross-up to
plant balances; and 3) reporting trust fund income from the
external decommissioning trusts as investment income rather
than as a reduction to decommissioning expense.
IP believes that, based on current information, these
changes will not have an adverse effect on results of
operations due to existing and anticipated future ability to
recover decommissioning costs through rates. This belief is
based on management's assessment of policies expressed, by
both state and federal regulatory agencies, regarding the
need to allow recovery mechanisms for such expenses. This
belief could be affected in the future by unanticipated
changes in these policies.
REGULATORY AND LEGAL MATTERS
MANUFACTURED GAS PLANT SITES
IP is currently recovering Manufactured Gas Plant (MGP)
site cleanup costs from its customers through tariff riders
approved by the Illinois Commerce Commission (ICC) in March
1996. Previous tariffs allowed IP to recover MGP site
remediation costs over a five-year period but did not allow
for the recovery of carrying costs. In April 1995, the
Illinois Supreme Court ruled that carrying costs should be
recoverable. Consequently, the ICC has approved the present
tariffs, which allow IP to recover MGP site remediation
costs in the year in which they are incurred, eliminating
the need to recover carrying costs. Due to the change in
cost recovery methods, IP is allowed to collect prior year
remediation expense balances and retroactive carrying costs
associated with those balances throughout 1996.
IP's current estimate of liability for MGP site
remediation is $74 million. This amount represents IP's
current best estimate of its cost to remediate the 24 MGP
sites for which it is responsible. Because of the unknown
and unique characteristics of each site, IP is not able to
determine its ultimate liability for remediation.
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, and an agreement in principle has been reached with
two other carriers. 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 be
credited to IP's customers through the tariff rider
mechanism.
TREASURY STOCK
On March 31, 1996, IP repurchased 281,597 shares of its
common stock from Illinova. Through March 31, 1996, IP has
purchased 2,977,683 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.
COMMON STOCK
During the first quarter of 1996, the number of shares
of Illinova common stock outstanding increased by 38,000.
These new shares were issued to several current and retired
officers of IP when they exercised stock purchase options.
ENHANCED SEVERANCE
In December 1994, IP announced plans for voluntary
enhanced retirement and severance programs. These programs
were offered to IP employees during the fourth quarter of
1995. At the expiration of the time to accept the enhanced
severance offer, IP recorded a liability of $11.0 million to
reflect the anticipated costs of the severance program.
During the first quarter of 1996, this liability has been
reduced by $5.2 million to reflect payments made to severed
employees under the program.
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 1995 Annual Report to Shareholders
(included in the Proxy Statement), the Consolidated
Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations
presented in IP's 1995 Annual Report to Shareholders
(included in the Information Statement), and Illinova's and
IP's Form 10-K for the year ended December 31, 1995.
ILLINOVA SUBSIDIARIES
IP is the primary business and subsidiary of Illinova
and engages in the generation, transmission, distribution
and sale of electric energy and the distribution,
transportation and sale of natural gas in the State of
Illinois.
IGC is a wholly-owned independent power subsidiary of
Illinova and invests in energy supply projects throughout
the world. IGC's strategy is to invest in and develop
"greenfield" power plants, acquire existing generation
facilities and provide power plant operations and
maintenance services.
IPMI is a wholly-owned subsidiary of Illinova and
engages in the brokering and marketing of electric power and
gas to various customers outside of IP's present service
territory. In September 1995, IPMI began buying and selling
wholesale electricity in the western United States. In
March 1996, IPMI announced plans to begin buying and selling
wholesale electricity in the central United States.
On April 10, 1996, Illinova announced its intent to
form a new subsidiary to be named Illinova Energy Partners
(IEP). The new company will offer a wide range of
customized energy services nationwide. IEP will incorporate
the ongoing business initiatives of IPMI and the Illinova
Energy Services group, a division within Illinova.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES AND REQUIREMENTS
Cash flows from operations during the first three
months of 1996 provided sufficient working capital to meet
ongoing operating requirements, to service existing common
and IP preferred stock dividends and debt requirements and
all of IP's construction requirements. Additionally,
Illinova expects 1996 cash flows will enable it to meet
operating requirements and continue to service IP's existing
debt, IP's preferred and Illinova's common stock dividends,
IP's sinking fund requirements and IP's anticipated
construction requirements. IP repurchased 281,597 shares of
its common stock from Illinova on March 31, 1996, to provide
Illinova cash for operations, in accordance with authority
granted by the ICC. Additionally, Illinova currently is
reviewing additional financing alternatives to provide cash
for operations.
Illinois Power Financing I (IPFI) is a statutory
business trust in which IP serves as sponsor. IPFI issued
$100 million of trust originated preferred securities
(TOPrS) at 8% (4.8% after-tax rate) in January 1996. IPFI
issued the TOPrS and invested the proceeds in an equivalent
amount of IP subordinated debentures due in 2045. IP used
the proceeds to repay short-term indebtedness on varying
dates on or before March 1, 1996. IP incurred the
indebtedness in December 1995, to redeem $95.3 million
(principal value) of higher-cost outstanding preferred stock
of IP.
On April 15, 1996, IP issued a notice of redemption to
all holders of its Adjustable Rate Series B Preferred Stock.
All 410,250 shares outstanding will be redeemed on May 15,
1996, at the redemption price of $50.00 per share.
Additionally, since the beginning of 1996, IP has redeemed
$39.5 million of bonds through open-market purchases. IP is
actively reducing its short-term debt as cash flows from
operations allow.
IP's capital requirements for construction were
approximately $48 million for each of the three months ended
March 31, 1996 and 1995.
Illinova and IP currently have total lines of credit
represented by bank commitments of $404 million. Both
Illinova and IP have adequate short- and intermediate-term
bank borrowing capacity. IP has remaining shelf authority
with the Securities and Exchange Commission to issue $120
million in debt securities and $56.5 million in preferred
stock.
In March 1996, Duff & Phelps established credit ratings
for IP's fixed income securities. IP's mortgage bonds were
given a BBB+ rating, and IP's preferred stock was given a
BBB- rating. IP's mortgage bonds currently are rated Baa2
by Moody's and BBB by Standard & Poor's. IP's preferred
stock currently is rated Baa3 by Moody's and BBB- by
Standard & Poor's.
REGULATORY MATTERS
OPEN ACCESS AND WHEELING
On September 11, 1995, IP announced its intention to
seek ICC and Federal Energy Regulatory Commission (FERC)
approval to conduct an open-energy access experiment
beginning in 1996 and ending on December 31, 1999. IP
received approval for the experiment from the ICC on March
13, 1996, and from the FERC on April 24, 1996.
The experiment allows certain industrial customers to
purchase electricity and related services from other
sources. On April 25, 1996, the first of the 21 eligible
customers began buying electricity from a supplier other
than IP. The electricity is being wheeled from another
supplier to an IP transmission system. As of May 4, 1996,
eight customers were participating in the experiment, and IP
expects that as many as ten more eligible customers will
participate. IP is studying the feasibility of offering a
similar experiment to commercial and residential customers.
The maximum total load involved in this experiment
represents approximately one percent of IP's total load or
about $7.5 million in net annual revenue. IP expects the
earnings impact to be immaterial, because 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 variable
operating costs.
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 MARCH 31, 1996 AND 1995
Electric Operations - The current quarter decrease of
$9.3 million in electric revenues is primarily due to a
decrease in sales to the industrial sector. Total
industrial sales decreased 3.6%. The mining sector caused
most of the decrease due to decreased mining activity in IP
service territory. Reduced pumping activity in the pipeline
industry also contributed to the decline in industrial
sales. Total kilowatt-hour sales (excluding interchange and
sales to municipalities) increased 22 million kwh, or less
than 1.0%, from the first quarter 1995. Interchange
revenues increased $9.5 million primarily due to greater
availability of IP's generating stations and increased sales
opportunities.
The current quarter cost of fuel for electric plants
increased $2.3 million while electric generation increased
25.0%. The increase in fuel cost was due to a higher level
of generation and the impact of the Uniform Fuel Adjustment
Clause, being partially offset by lower per-unit generation
costs at nearly all of IP's power plants. The equivalent
availability of IP's Clinton Power Station (Clinton) was
99.7% and 66.2% for the three months ended March 31, 1996
and 1995, respectively. The lower equivalent availability
for Clinton in 1995 was due to a scheduled maintenance and
refueling outage that began March 12, 1995. The equivalent
availability for IP's coal-fired plants was 82.9% and 76.3%
for the three months ended March 31, 1996 and 1995,
respectively. The increased availability is due to fewer
planned outages in the first quarter of 1996. Consequently,
power purchased and interchanged for the current quarter
decreased $4.2 million, with volume of kwh purchased
decreasing by 29.6%.
Gas Operations - Gas revenues increased $21.1 million
in the first quarter of 1996. Therm sales increased 18.5%
(50.1 million therms) and therms transported decreased
resulting in an increase in gas consumption of 9.6% (33.3
million therms). Because of the effects of the Uniform Gas
Adjustment Clause (UGAC), revenues increased at a greater
rate than the increase in volume. Residential sales
increased 12.7% (23.8 million therms), commercial sales and
transport increased 14.7% (10.7 million therms) and
industrial sales and transport decreased 1.4% (1.2 million
therms). The increase in gas sales is due primarily to
colder winter weather as compared to 1995, which had a
milder than normal winter.
The cost of gas purchased for resale increased $8.4
million in the first quarter. Higher prices increased the
cost of gas by $14.5 million and an increase in the quantity
purchased further increased the cost of gas purchased.
These increases were partially offset by the effects of the
UGAC.
Gas bypass (connection by the natural gas customer
directly to a pipeline, "bypassing" IP's sales and
transportation service) is occasionally considered or
utilized by several of IP's large customers. IP continues
to compete 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
decrease of $6.1 million dollars is due primarily to the
absence of costs associated with a Clinton refueling outage
which was in progress during the first quarter of 1995.
IP's reengineering efforts caused a decrease of $5 million
dollars in labor expenses during the first quarter. These
decreases have been partially offset by increased pension
and benefit funding and increased use of outside consulting
services.
Miscellaneous - Net - The current quarter increase in
net deductions of $4.7 million is partially a result of
costs recorded to reflect the planned disposition of
property, partially offset by the equity earnings of
Illinova's subsidiaries and increased interest revenues.
Additionally, in 1995, a favorable ICC decision related to
1993 transportation costs resulted in a one-time positive
impact on miscellaneous income.
Other Interest Charges - The current quarter decrease
of $1.3 million in other interest charges is due to lower
short-term borrowings and lower short-term interest rates.
Earnings per Common Share - The earnings per common
share for Illinova during the first quarter of 1996 and 1995
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 4. Submission of Matters to a Vote of Security
Holders
At the annual shareholders' meeting held on April 10,
1996, Illinova shareholders elected the Illinova Board of
Directors. A total of 66,973,194 shares were voted, with
66,531,800 voted for the nominees named on the proxy
solicited by the Illinova Board of Directors. The nominees
were: Richard R. Berry, Larry D. Haab, C. Steven McMillan,
Donald S. Perkins, Robert M. Powers, Walter D. Scott, Ronald
L. Thompson, Walter M. Vannoy, Marilou von Ferstel, John D.
Zeglis and Vernon K. Zimmerman. No other business was
submitted for a vote at the meeting.
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 December 31, 1995:
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
ILLINOVA CORPORATION
(Registrant)
By /s/ Larry F. Altenbaumer
---------------------------
Larry F. Altenbaumer,
Chief Financial Officer,
Treasurer and Controller
on behalf of
Illinova Corporation
Date: May 8, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
ILLINOIS POWER COMPANY
(Registrant)
By /s/ Larry F. Altenbaumer
---------------------------
Larry F. Altenbaumer,
Senior Vice President,
Chief Financial Officer and
Treasurer on behalf of
Illinois Power Company
Date: May 8, 1996
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 extracted from the balance
sheet, income statements 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>
<CIK> 0000049816
<NAME> ILLINOIS POWER COMPANY
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4649
<OTHER-PROPERTY-AND-INVEST> 16
<TOTAL-CURRENT-ASSETS> 378
<TOTAL-DEFERRED-CHARGES> 474
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5517
<COMMON> 1341
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 152
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1493
197
125
<LONG-TERM-DEBT-NET> 1668
<SHORT-TERM-NOTES> 56
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 149
<LONG-TERM-DEBT-CURRENT-PORT> 62
0
<CAPITAL-LEASE-OBLIGATIONS> 56
<LEASES-CURRENT> 35
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1676
<TOT-CAPITALIZATION-AND-LIAB> 5517
<GROSS-OPERATING-REVENUE> 447
<INCOME-TAX-EXPENSE> 37
<OTHER-OPERATING-EXPENSES> 322
<TOTAL-OPERATING-EXPENSES> 359
<OPERATING-INCOME-LOSS> 88
<OTHER-INCOME-NET> (7)
<INCOME-BEFORE-INTEREST-EXPEN> 81
<TOTAL-INTEREST-EXPENSE> 32
<NET-INCOME> 49
6
<EARNINGS-AVAILABLE-FOR-COMM> 43
<COMMON-STOCK-DIVIDENDS> 19
<TOTAL-INTEREST-ON-BONDS> 31
<CASH-FLOW-OPERATIONS> 147
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
