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, 1997
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, 71,681,937
shares outstanding at October 31, 1997
Illinois Power Company Common stock, no par value, 66,292,732
shares outstanding held by Illinova
Corporation at October 31, 1997
<PAGE>
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 SEPTEMBER 30, 1997
INDEX
PAGE NO.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Illinova Corporation
Consolidated Balance Sheets 3 - 4
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Illinois Power Company
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 - 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations for Illinova Corporation
and Illinois Power Company 15 - 22
Part II. OTHER INFORMATION
Item 1: Legal Proceedings 23
Item 6: Exhibits and Reports on Form 8-K 23
Signatures 24 - 25
Exhibit Index 26
<PAGE>
PART I. FINANCIAL INFORMATION
ILLINOVA CORPORATION
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
SEPTEMBER 30, DECEMBER 31,
1997 1996
ASSETS (Unaudited)
(Millions of Dollars)
<TABLE>
<S> <C> <C>
Utility Plant, at original cost
Electric (includes construction work
in progress of $223.1 million and
$212.5 million, respectively) $ 6,452.7 $ 6,335.4
Gas (includes construction work
in progress of $11.4 million and
$21.2 million, respectively) 658.2 646.1
---------- ----------
7,110.9 6,981.5
Less-Accumulated depreciation 2,546.5 2,419.7
-------- ----------
4,564.4 4,561.8
Nuclear fuel in process ........ 5.6 5.3
Nuclear fuel under capital lease 116.7 96.4
------- -------
Total utility plant ..... 4,686.7 4,663.5
------- -------
Investments and Other Assets ... 188.3 146.2
------- -------
Current Assets
Cash and cash equivalents 24.9 24.6
Accounts receivable (less allowance
for doubtful accounts of $3.0 million)
Service 150.7 138.8
Other 165.2 62.0
Accrued unbilled revenue 114.1 106.0
Materials and supplies, at average cost 124.7 113.2
Prepayments and other 34.4 24.1
-------- ---------
Total current assets 614.0 468.7
-------- ---------
Deferred Charges
Deferred Clinton costs 101.3 103.9
Recoverable income taxes 97.9 101.3
Other 245.1 229.2
-------- ---------
Total deferred charges 444.3 434.4
-------- ---------
$ 5,933.3 $ 5,712.8
======== =========
</TABLE>
<PAGE>
ILLINOVA CORPORATION
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
SEPTEMBER 30, DECEMBER 31,
1997 1996
CAPITAL AND LIABILITIES (Unaudited)
(Millions of Dollars)
<TABLE>
<S> <C> <C>
Capitalization
Common stock -
No par value, 200,000,000 shares
authorized; 75,681,937 shares issued,
stated at $ 1,425.7 $ 1,425.7
Less - Deferred compensation - ESOP 10.7 14.3
Retained earnings 303.9 233.0
Less - Capital stock expense 8.2 8.2
Less - 4,000,000, and 0 shares of common
stock in treasury, respectively, at cost 90.4 --
Preferred stock of subsidiary 92.1 96.2
Mandatorily redeemable preferred stock of
subsidiary 197.0 197.0
Long-term debt 100.0 --
Long-term debt of subsidiary 1,597.9 1,636.4
--------- ---------
Total capitalization 3,607.3 3,565.8
---------- ---------
Current Liabilities
Accounts payable 277.9 166.7
Notes payable 351.5 387.0
Long-term debt and lease obligations of
subsidiary maturing within one year 107.2 47.7
Other 130.3 146.6
---------- ----------
Total current liabilities 866.9 748.0
---------- ----------
Deferred Credits
Accumulated deferred income taxes 1,094.1 1,034.9
Accumulated deferred investment tax credits 210.4 215.5
Other 154.6 148.6
---------- ----------
Total deferred credits 1,459.1 1,399.0
---------- ----------
$5,933.3 $ 5,712.8
========== ==========
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
(Unaudited)
(Millions except per share)
<TABLE>
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $ 394.0 $ 377.1 $ 977.9 $ 938.4
Electric interchange 61.3 43.3 141.4 108.8
Gas 41.8 38.0 265.9 223.6
Diversified enterprises 344.7 20.7 569.9 34.8
-------- ---------- ----------- -----------
Total 841.8 479.1 1,955.1 1,305.6
---------- ---------- ------------ ------------
Operating Expenses:
Fuel for electric plants 66.4 59.8 163.9 185.9
Power purchased 74.2 25.0 155.6 48.1
Gas purchased for resale 18.1 12.8 140.6 118.6
Diversified enterprises 353.4 26.8 612.6 57.6
Other operating expenses 73.4 62.9 196.4 181.9
Maintenance 27.9 21.1 78.1 65.9
Depreciation & amortization 50.1 48.5 148.4 144.9
General taxes 34.1 32.6 105.8 102.0
-------- --------- ---------- ----------
Total 697.6 289.5 1,601.4 904.9
--------- --------- ---------- ----------
Operating Income 144.2 189.6 353.7 400.7
---------- ---------- ----------- ----------
Other Income and Deductions:
Miscellaneous-net (0.9) 0.8 (2.4) (6.4)
Equity earnings in affiliates 4.7 1.2 11.1 6.3
---------- ---------- ----------- ----------
Total 3.8 2.0 8.7 (0.1)
----------- ---------- ----------- -----------
Income Before Interest Charges
and Income Taxes 148.0 191.6 362.4 400.6
------------ ----------- ----------- -----------
Interest Charges:
Interest expense 32.5 33.8 103.0 101.5
Allowance for borrowed funds
used during construction (0.7) (1.6) (3.4) (5.2)
Preferred dividend
requirements of subsidiary 5.5 5.5 16.4 16.8
------------ ----------- ---------- ----------
Total 37.3 37.7 116.0 113.1
------------ ------------ ---------- ----------
Income Before Income Taxes 110.7 153.9 246.4 287.5
Income Taxes 47.4 62.9 107.7 116.5
------------ ------------ --------- -----------
Net Income 63.3 91.0 138.7 171.0
Carrying amount over (under)
consideration paid for
redeemed preferred
stock of subsidiary 1.1 (0.3) 1.1 (0.8)
----------- --------- -------- ----------
Net Income Applicable to
Common Stock $ 64.4 $ 90.7 $ 139.8 $ 170.2
=========== ========== ======== ==========
Earnings per common share $0.87 $1.20 $1.87 $2.25
Cash dividends declared per
common share $0.31 $0.28 $0.93 $0.84
Cash dividends paid per common
share $0.31 $0.28 $0.93 $0.84
Weighted average number of
common shares outstanding
during period 73,009,027 75,681,937 74,770,016 75,679,472
</TABLE>
<PAGE>
ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(See accompanying Notes to Consolidated Financial Statements)
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
(Unaudited)
(Millions of Dollars)
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 138.7 $ 171.0
Items not requiring cash, net 206.5 192.8
Changes in assets and liabilities (69.4) (24.9)
-------- --------
Net cash provided by operating
activities 275.8 338.9
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (131.2) (129.2)
Other investing activities (41.0) (66.8)
-------- --------
Net cash used in investing
activities (172.2) (196.0)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on common stock (70.1) (63.6)
Exercise of stock options -- 1.1
Repurchase of common stock (90.4) --
Redemptions -
Short-term debt (168.5) (351.4)
Long-term debt of subsidiary (150.2) (92.1)
Preferred stock of subsidiary (4.1) (29.1)
Issuances -
Short-term debt 133.0 314.7
Long-term debt 250.0 --
Preferred stock of subsidiary -- 100.0
Other financing activities (3.0) (1.5)
--------- ---------
Net cash used in financing
activities (103.3) (121.9)
--------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS .3 21.0
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 24.6 11.3
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 24.9 $ 32.3
========= =========
</TABLE>
<PAGE>
ILLINOIS POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
SEPTEMBER 30, DECEMBER 31,
1997 1996
ASSETS (Unaudited)
(Millions of Dollars)
<TABLE>
<S> <C> <C>
Utility Plant, at original cost
Electric (includes construction work
in progress of $223.1 million and
$212.5 million, respectively) $ 6,452.7 $ 6,335.4
Gas (includes construction work
in progress of $11.4 million and
$21.2 million, respectively) 658.2 646.1
------------ ------------
7,110.9 6,981.5
Less-Accumulated depreciation 2,546.5 2,419.7
------------ ------------
4,564.4 4,561.8
Nuclear fuel in process 5.6 5.3
Nuclear fuel under capital lease 116.7 96.4
------------ ------------
Total utility plant 4,686.7 4,663.5
------------ ------------
Investments and Other Assets 6.4 14.5
------------ ------------
Current Assets
Cash and cash equivalents 12.2 12.5
Accounts receivable (less allowance
for doubtful accounts of $3.0 million)
Service 150.7 138.8
Other 1.1 51.1
Accrued unbilled revenue 114.1 106.0
Materials and supplies,
at average cost 124.1 112.2
Prepayments and other 33.5 23.7
------------ ------------
Total current assets 435.7 444.3
------------ -----------
Deferred Charges
Deferred Clinton costs 101.3 103.9
Recoverable income taxes 97.9 101.3
Other 252.7 241.0
------------ ------------
Total deferred charges 451.9 446.2
------------ ------------
$ 5,580.7 $ 5,568.5
============ ============
</TABLE>
<PAGE>
ILLINOIS POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(See accompanying Notes to Consolidated Financial Statements)
SEPTEMBER 30, DECEMBER 31,
1997 1996
CAPITAL AND LIABILITIES (Unaudited)
(Millions of Dollars)
<TABLE>
<S> <C> <C>
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 340.1 245.9
Less - Capital stock expense 8.2 8.2
Less - 9,351,205 and 3,410,897 shares of
common stock in treasury, respectively,
at cost 205.9 86.2
Preferred stock 92.1 96.2
Mandatorily redeemable preferred stock 197.0 197.0
Long-term debt 1,597.9 1,636.4
------------ ------------
Total capitalization 3,437.6 3,505.7
------------ ------------
Current Liabilities
Accounts payable 117.9 149.7
Notes payable 328.5 310.0
Long-term debt and lease
obligations maturing
within one year 107.2 47.7
Other 127.8 148.1
------------ ------------
Total current liabilities 681.4 655.5
------------ ------------
Deferred Credits
Accumulated deferred income taxes 1,101.7 1,048.0
Accumulated deferred investment
tax credits 210.4 215.5
Other 149.6 143.8
------------ ------------
Total deferred credits 1,461.7 1,407.3
------------ ------------
$ 5,580.7 $ 5,568.5
============ ============
</TABLE>
<PAGE>
ILLINOIS POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(See accompanying Notes to Consolidated Financial Statements)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
(Unaudited)
(Millions of Dollars)
<TABLE>
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $ 394.0 $ 377.1 $ 977.9 $ 938.4
Electric interchange 61.3 43.3 141.4 108.8
Gas 41.8 38.0 265.9 223.6
----------- ---------- ----------- -----------
Total 497.1 458.4 1,385.2 1,270.8
------------ ---------- ----------- -----------
Operating Expenses and Taxes:
Fuel for electric plants 66.4 59.8 163.9 185.9
Power purchased 74.2 25.0 155.6 48.1
Gas purchased for resale 18.1 12.8 140.6 118.6
Other operating expenses 73.4 62.9 196.4 181.9
Maintenance 27.9 21.1 78.1 65.9
Depreciation & amortization 50.1 48.5 148.4 144.9
General taxes 34.1 32.6 105.8 102.0
Income taxes 51.1 62.4 123.1 127.2
---------- ---------- ----------- -----------
Total 395.3 325.1 1,111.9 974.5
------------ ---------- ----------- -----------
Operating Income 101.8 133.3 273.3 296.3
------------ ---------- ----------- -----------
Other Income and
Deductions, Net 0.2 (1.2) (1.2) (2.5)
------------ ---------- ----------- ----------
Income Before
Interest Charges 102.0 132.1 272.1 293.8
------------ ---------- ------------ -----------
Interest Charges and Other:
Interest Expense 30.8 33.1 97.2 100.6
Allowance for borrowed funds
used during construction (0.7) (1.6) (3.4) (5.2)
----------- ---------- ------------ -----------
Total 30.1 31.5 93.8 95.4
------------ ----------- ------------ -----------
Net Income 71.9 100.6 178.3 198.4
Less-Preferred dividend
requirements 5.5 5.5 16.4 16.8
Plus-Carrying amount over
(under)consideration paid
for redeemed preferred stock 1.1 (0.3) 1.1 (0.8)
------------ ---------- ---------- -----------
Net Income applicable to
common stock $ 67.5 $ 94.8 $ 163.0 $ 180.8
============ ========== ========== ============
</TABLE>
<PAGE>
ILLINOIS POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(See accompanying Notes to Consolidated Financial Statements)
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
(Unaudited)
(Millions of Dollars)
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 178.3 $ 198.4
Items not requiring cash, net 201.1 200.8
Changes in assets and liabilities (62.2) (39.7)
---------------- ---------------
Net cash provided by operating 317.2 359.5
activities ---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (131.2) (129.2)
Other investing activities 9.2 0.6
---------------- ---------------
Net cash used in investing (122.0) (128.6)
activities ---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on preferred and common
stock (86.9) (81.1)
Repurchase of common stock (119.7) (18.9)
Redemptions -
Short-term debt (114.4) (351.4)
Long-term debt (150.2) (92.1)
Preferred stock (4.1) (29.1)
Issuances
Short-term debt 133.0 257.7
Long-term debt 150.0 --
Preferred Stock -- 100.0
Other financing activities (3.2) (0.6)
---------------- ---------------
Net cash used in financing activities (195.5) (215.5)
---------------- ---------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS (0.3) 15.4
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 12.5 4.3
---------------- ---------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 12.2 $ 19.7
=============== ==============
</TABLE>
<PAGE>
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 (SEC). 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
1996 Annual Report to Shareholders (included in the Proxy Statement), the
consolidated financial statements and the accompanying notes in IP's 1996 Annual
Report to Shareholders (included in the Information Statement), Illinova's and
IP's 1996 Form 10-K filings to the SEC, and Illinova's and IP's Reports on Form
10-Q for the quarters ended March 31, 1997, and June 30, 1997, 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, 1997 and December 31,
1996, the Consolidated Statements of Income for the three months and nine months
ended September 30, 1997 and 1996, and the Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997 and 1996. 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, 1997 and December 31, 1996,
the Consolidated Statements of Income for the three months and the nine months
ended September 30, 1997 and 1996, and the Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997 and 1996. 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.
The consolidated financial statements of Illinova include the accounts of
Illinova, IP, Illinova Generating Company (IGC), Illinova Insurance Company
(IIC), and Illinova Energy Partners, Inc. (IEPI). All significant intercompany
balances and transactions have been eliminated from the consolidated financial
statements. All non-utility operating transactions are included in the sections
titled "Diversified enterprises", "Interest expense", "Income taxes" and "Other
Income and Deductions, Net" in Illinova's Consolidated Statements of Income.
This represents a format change to Illinova's Consolidated Statements of Income
and subsequent reclassification of 1996 and previously classified 1997 amounts
to conform to the new presentation.
The consolidated financial statements of IP include the accounts of
Illinois Power Capital, L.P. and Illinois Power Financing I (IPFI). 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, Net" in IP's
Consolidated Statements of Income.
<PAGE>
REGULATORY AND LEGAL MATTERS
OPEN ACCESS AND COMPETITION
IP continues to work with other interested parties in the state on proposed
legislation entitled the "Electric Service Customer Choice and Rate Relief Law
of 1997" (House Bill 362). On October 30, 1997, the Illinois Senate voted to
approve House Bill 362 and forwarded the bill to the House of Representatives
for consideration. House Bill 362 represents a modified version of Senate Bill
55 approved by the Illinois House of Representatives on May 30, 1997. The new
bill is expected to go to the House in the fall veto session scheduled for
November 12-14, 1997. Although House Bill 362 was approved by a wide margin in
the Senate, action on the bill by the House cannot be predicted. IP believes
this legislation, as currently drafted, will provide an orderly transition to
direct access for all customers, and balance financial stability for current
utility providers with customer choice.
Currently, House Bill 362 guarantees IP's residential customers a fifteen
percent decrease in base electric rates beginning August 1998 and an additional
five percent decrease effective in May 2002. Customers with demand at a single
site greater than 4 MW could choose their electric generation supplier ("direct
access") starting October 1999. Customers with at least ten sites which
aggregate at least 9.5 MW in total demand could also have direct access starting
October 1999. Direct access for the remaining non-residential customers would
occur in two phases: customers representing one-third of the remaining load in
the non-residential class in October 1999 and customers representing the entire
remaining non-residential load on December 31, 2000. Direct access for all
residential customers would take place in May 2002. Although the specified
residential rate reductions and the introduction of direct access will lead to
lower electric service revenues, House Bill 362 is designed to protect the
financial integrity of electric utilities in at least three ways: 1) departing
customers are obligated to pay transition charges, based on the utility's lost
revenue from that customer, adjusted to deduct delivery charges the utility will
continue to receive from the customer, the market value of the freed-up energy,
net of a mitigation factor (i.e., percentage reduction of the transition charge
amount) to provide incentive for management to continue cost reduction efforts
and generate new sources of revenue; 2) utilities are provided the opportunity
to lower their financing and capital costs through the issuance of "securitized"
bonds; and 3) there is a provision for seeking rate relief in the event that the
change in law leads to IP's return on equity falling below a specified minimum
based on a prescribed test. The extent to which revenues are lowered will depend
on a number of factors including future market prices for wholesale and retail
energy, and load growth and demand levels in the current IP service territory.
The impact on net income will depend on the amount of revenues earned as well as
a number of factors including the ongoing costs of doing business.
IP currently prepares its financial statements in accordance with Statement
of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" (FAS 71). Reporting under FAS 71 allows companies whose
service obligations and prices are regulated to maintain assets on their balance
sheets representing costs they reasonably expect to recover from customers,
through inclusion of such costs in their future rates. At its July 24, 1997,
meeting, the Emerging Issues Task Force of the Financial Accounting Standards
Board (EITF) concluded that application of FAS 71 accounting should be
discontinued at the date of enactment of deregulation legislation for business
segments for which a plan of deregulation has been established. However, the
EITF further concluded that regulatory assets associated with a deregulated
business segment, which will be recovered through tariffs charged to customers
of a regulated business segment, should be associated with the regulated segment
from which the future cash recovery is expected (not the segment from which the
costs originated), and can therefore continue to be carried on the regulated
entity's balance sheet. In addition, the Task Force concluded that regulatory
assets that may arise after the date of enactment of deregulation legislation
are also eligible for regulatory asset accounting on the regulated segment's
balance sheet.
IP expects to discontinue application of FAS 71 for its generating segment
as a result of the enactment of House Bill 362. Based on the provisions of House
Bill 362, as currently drafted, and projections of future cash flows, management
believes that IP's regulatory assets which are currently associated with its
generation segment would be recoverable through rates charged to transmission
and distribution customers. In addition, management believes that the provisions
of House Bill 362 provide IP a means to recover a portion of its generating
plant investment during a transition period in preparation for this business
segment's entrance into a fully competitive marketplace. Management is currently
analyzing the full financial and accounting impact of the bill. IP's ultimate
ability to recover its full investment in generating plant will depend on the
interaction of all the provisions of the bill, and future sales, expenses and
cash flows. If regulatory reform legislation substantially different from House
Bill 362 is passed in Illinois, management will assess the provisions of the new
law to determine its impact on the recoverability of regulatory assets and plant
investment currently associated with its generation segment.
MANUFACTURED GAS PLANT SITES
IP's liability for Manufactured Gas Plant (MGP) site remediation is $67.9
million. This amount represents IP's best estimate of its remaining costs to
remediate the 24 MGP sites for which it is responsible. Because of the unknown
and unique characteristics of each site, IP is not able to determine its
ultimate liability for remediation. IP is recovering MGP site cleanup costs from
its customers through tariff riders approved by the Illinois Commerce Commission
(ICC) in March 1996. In anticipation of full recovery of MGP site costs, IP has
recorded a regulatory asset equivalent to its liability.
IP is continuing settlement discussions with its insurance carriers
regarding the recovery of estimated MGP site remediation costs. Settlement
agreements have been reached with several carriers, and settlement negotiations
with other carriers are ongoing. Litigation related to a lawsuit filed by IP in
October 1995 seeking a declaratory judgment and damages regarding insurance
coverage for four MGP sites is in progress. The trial has been scheduled for
January 1998. Any insurance recoveries received will cause the regulatory asset
to be reduced by the amount of the recovery.
TREASURY STOCK
During the third quarter of 1997, Illinova repurchased 3,481,400 shares of
common stock in the open market at a cost of $79.2 million thereby completing
its 4 million share repurchase program. The shares were repurchased under
authority granted by the Illinova Board of Directors on June 10, 1997. All
repurchased shares are held as treasury stock and are deducted from common
equity at the cost of the shares repurchased.
IP repurchased 2,121,444 shares of its common stock from Illinova on August
12, 1997, at a cost of $44.6 million and 2,454,148 shares on September 30, 1997,
at a cost of $47.5 million. Through September 30, 1997, IP has purchased a total
of 9,351,205 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 purchased.
<PAGE>
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 1996 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 1996 Annual Report to Shareholders (included in the
Information Statement), and Illinova's and IP's Form 10-K for the year ended
December 31, 1996, and Illinova's and IP's Reports on Form 10-Q for the quarters
ended March 31, 1997, and June 30, 1997. 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.
IEPI is a wholly-owned subsidiary of Illinova formed in May 1996. IEPI
develops and markets energy-related services to the unregulated energy market
throughout the United States and engages in the brokering and marketing of
electric power and gas.
IIC is a wholly-owned subsidiary of Illinova and was licensed by the State
of Vermont as a captive insurance company in August 1996. The primary business
of IIC is to insure certain risks of Illinova and its subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES AND REQUIREMENTS
Cash flows from operations during the first nine months of 1997 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 1997 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
periodically repurchases shares of its common stock from Illinova to provide
Illinova cash for operations, in accordance with authority granted by the ICC.
For more information, see "Treasury Stock" of the "Notes to Consolidated
Financial Statements" on pages 13-14 of this report.
On October 24, 1997, at a special bondholders meeting, the 1943 Mortgage
and Deed of Trust was amended to be generally consistent with the 1992 General
Mortgage Indenture and Deed of Trust. The 1992 Indenture and Deed of Trust
provides IP with increased financial flexibility.
To date this year, IP has repurchased 82,590 shares of various issues of
its preferred stock on the open market for a total cash outlay of $3.1 million.
On September 29, 1997, IP issued a redemption notice for all outstanding
shares of its Adjustable Rate Series A Cumulative Preferred Stock. The
redemption took place on November 1, 1997, at $50 per share for a total of $34.9
million.
IP's capital requirements for construction were approximately $131 million
and $129 million during the nine months ended September 30, 1997 and 1996,
respectively.
Illinova and IP currently have total lines of credit represented by bank
commitments of $150 million and $354 million, respectively. Both Illinova and IP
have adequate short- and intermediate-term bank borrowing capacity. Currently,
Illinova is reviewing additional financing alternatives to provide cash for
operating and investment purposes and has remaining shelf authority with the SEC
to issue $200 million in debt securities. Illinova expects to activate the shelf
as a medium-term note program during the fourth quarter of 1997.
On October 23, 1997, IP filed a petition with the ICC requesting
authorization to issue up to $600 million of long-term debt securities. Proceeds
will be used for refinancing existing debt or issuance of new long-term debt. It
is uncertain when the ICC will issue an order in the proceeding.
Presently, IP's mortgage bonds are rated Baa1 by Moody's, BBB+ by Duff &
Phelps, and BBB by Standard & Poor's. IP's preferred stock is rated Baa2 by
Moody's and BBB- by both Duff & Phelps and Standard & Poor's. Illinova's $100
million senior notes issued February 5, 1997, have a rating of Baa3 and BBB-
from Moody's and Standard & Poor's, respectively.
ACCOUNTING ISSUES
IP is considering seeking regulatory approval to increase the rate at which
its generation-related assets are amortized. Because, under current rulemaking,
this change is viewed as discretionary, and subject to regulatory approval, the
rate of such increase, if any, will be based on then current conditions and
financial performance. The increase in amortization could begin as early as the
first quarter of 1998 and could amount to at least $400 million in the aggregate
through the year 2001, and potentially more thereafter, depending on changes in
regulation, the marketplace and financial performance. This reduction in the net
book value of IP's generation-related assets should help position the Company to
operate competitively and profitably in the changing business environment. This
acceleration of amortization would have a direct impact on earnings but not on
cash flow.
If House Bill 362 is enacted in substantially its current form, an
acceleration in the rate at which any utility-owned assets are expensed can be
undertaken without regulatory approval provided such changes are consistent with
generally accepted accounting principles. Under this legislation, up to an
aggregate of $1 billion in additional expense could be accelerated through the
year 2008.
For further information on accounting issues, see "Open Access and
Competition" under "Regulatory and Legal Matters" of the "Notes to Consolidated
Financial Statements" on pages 12-13 of this report.
REGULATORY MATTERS
ASSUMPTION OF CLINTON POWER STATION FROM SOYLAND
On March 13, 1997, the Nuclear Regulatory Commission (NRC) issued an order
approving transfer of the Clinton Power Station (Clinton) operating license
related to Soyland Power Cooperative's (Soyland) 13.21% ownership, to IP, in
connection with the transfer from Soyland to IP of all of Soyland's interest in
Clinton pursuant to an agreement reached in 1996. Soyland's title to the plant
and directly related assets such as nuclear fuel were transferred to IP on May
1, 1997. Soyland's nuclear decommissioning trust assets were transferred to IP
on May 19, 1997, consistent with IP's assumption of all of Soyland's ownership
obligations including those related to decommissioning. On February 21, 1997,
and as updated on May 28, 1997, IP filed with the Federal Energy Regulatory
Commission (FERC) an amended Power Coordination Agreement (PCA) between Soyland
and IP entered into in furtherance of the transfer. FERC approved the amended
PCA on July 25, 1997. The Agreement obligates Soyland to purchase all of its
capacity and energy needs from IP for at least ten years.
SOYLAND PCA
The amended and restated PCA provides that a contract cancellation fee will
be paid by Soyland to IP in the event that a Soyland Cooperative member
terminates its membership from Soyland. On May 31, 1997, three distribution
cooperative members terminated their membership by buying out of their
respective long-term wholesale power contracts with Soyland. This action
resulted in Soyland paying a fee of $20.8 million to IP in the second quarter.
Fee proceeds of $2.3 million were used to offset the costs of acquiring
Soyland's share of Clinton with the remaining $18.5 million recorded as
interchange revenue.
FUEL COST ADJUSTMENT
On September 22, 1997, IP filed a petition with the ICC that stipulates
customers will not be charged for certain additional costs of energy incurred as
a result of Clinton being out of service. The petition, which was approved by
the ICC on September 29, specifies that IP will forego collecting from its
customers an estimated $20 million for higher-cost replacement power in 1997.
During the third quarter, IP forewent recovery of $15.3 million of fuel costs.
IP will forego recovery of additional fuel costs if the Clinton outage continues
into 1998. Under the petition, fuel costs charged to customers will be no higher
than average 1995-96 levels until Clinton is back in service operating at least
at a 65% capacity factor for two consecutive months. During these proceedings,
the ICC was asked to determine whether other Clinton investment and operating
costs should be excluded from rates in light of the extended outage. The ICC
rejected this request, but such a determination continues to be a risk under
existing law as long as Clinton is not operating.
OPEN ACCESS AND COMPETITION
See "Open Access and Competition" under "Regulatory and Legal Matters" of
the "Notes to Consolidated Financial Statements" on pages 12-13 of this report.
ENVIRONMENTAL MATTERS
GAS MANUFACTURING SITES
See "Manufactured Gas Plant Sites" under "Regulatory and Legal Matters" of
the "Notes to Consolidated Financial Statements" on page 13 of this report.
NITROGEN OXIDE
Regulators are continuing to examine potential approaches for compliance
with current federal ozone level requirements. On October 10, 1997, the USEPA
proposed air pollution rules which would require substantial reductions of
Nitrogen Oxide (NOx) emissions in Illinois and 21 other states. The proposal
would require the installation of NOx controls by no later than September 2002.
This proposal is expected to be finalized by October 1998 with Illinois utility
reduction requirements specified in 1999. Preliminary cost estimates to
implement the proposed required NOx controls are $130 to $150 million beyond
what is already needed to comply with the NOx requirements of Phase II of the
Acid Rain Program. The proposal includes a 120-day comment period. The legality
of this proposal along with its technical feasibility is expected to be
challenged by a number of utility groups including IP.
GLOBAL WARMING
On October 22, 1997, President Clinton outlined the administration's
position for negotiating a global warming agreement in Japan in December. The
President targeted not exceeding 1990 greenhouse gas emission levels during the
period 2008 to 2012 and reductions below 1990 levels for the following five
years. He also proposed that all countries participate in making reductions and
that flexible, market-based mechanisms be established to help make reductions.
During the last week of October, international negotiators prepared draft
language for the December negotiations in Japan. The United States proposal for
reduction targets and timetables as well as more restrictive proposals from
other countries were included in the text. However, the United States proposal
requiring all countries to participate in reductions and for flexible
market-based mechanisms was not included in the draft text.
United States Senate Resolution 98 (passed 95-0) indicates the Senate would
not ratify an agreement that does not involve all countries or would damage the
United States economy. IP estimates that reducing to 1990 levels by 2008 and
just stabilizing at that level until 2025 could require significant capital
outlays and annual operating expenses which could have a material adverse impact
on Illinova and IP.
CLINTON POWER STATION
On September 6, 1996, leakage at a recirculation pump seal caused IP
operations personnel to shut down Clinton. Clinton has not resumed operation
because of, among other things, a refueling, implementation of a new transformer
design, equipment performance problems, and the need to maintain strict
compliance with thousands of interrelated procedures. The electrical,
mechanical, and nuclear engineering aspects of such a power plant are complex,
and this complexity, combined with a regulatory and managerial intolerance of
procedural non-compliance, makes accurate predictions on start-up difficult, and
the length of the ongoing outage uncertain.
On June 25, 1997, the NRC requested a diagnostic inspection of Clinton to
assess both strong and weak areas at the plant and document the effect of recent
corrective actions on employee performance. This inspection was called for as a
result of the NRC's semi-annual update naming Clinton among plants with
declining performance. An Integrated Safety Assessment (ISA) team commissioned
by IP, composed of two dozen independent nuclear industry professionals,
completed its inspection of Clinton in early October. The ISA team issued a
report to IP on October 20 citing significant performance, management, safety,
and organizational culture problems. In late October, the NRC performed an
evaluation to validate the ISA team's results. IP anticipates the NRC will
conduct an exit meeting in mid-November. The results of the NRC and ISA teams'
reports as well as IP's responses will be discussed at a public meeting
currently scheduled for December 11. The reports from the ISA team and the NRC
are scheduled to be published on December 18, 1997.
No decision will be made regarding an estimated date of restart for Clinton
until after the ISA and NRC exit meeting. IP will restart the plant only when it
is confident that cultural issues, as well as safety and reliability issues,
have been thoroughly addressed. IP anticipates that the Clinton outage will
continue through at least the first quarter of 1998.
On September 26, 1997, the NRC informed IP that it will be required to
submit a written report to the NRC at least two weeks prior to restarting
Clinton in order for the agency to determine if further action is needed to
ensure compliance with NRC requirements. IP must provide information about
corrective actions taken since Clinton was shut down. After the report is
submitted, the NRC staff plans to meet with IP's management before the agency
makes a decision on the plant's readiness for restart.
Additional costs for 1997 associated with the Clinton outage are now
estimated to be at least $35 million greater than originally projected. This is
approximately $10 million (pre-tax) more than previously disclosed in a
September 1997 8-K filed by IP/Illinova. IP expects incremental annual
expenditures at least at this level to continue through 1999.
WOOD RIVER POWER STATION
On December 18, 1996, the control and computer rooms for Wood River units 4
and 5 were damaged by an in-plant fire. Unit 4 was returned to service on June
14, 1997. Unit 5 returned to service on October 17, 1997. The costs associated
with restoring the units to service were substantially offset by insurance
coverage and did not have a material adverse impact on Illinova and IP.
POWER SUPPLY AND RELIABILITY
Electricity was in short supply throughout Illinois and Wisconsin this
summer because of an unusually high number of plant outages in this region. IP
purchased replacement power, and secured generation and transmission capacity in
order to minimize disruptions in service. Recovery of the added energy and
transmission expense so incurred is subject to ICC approval in the annual
reconciliation of the Uniform Fuel Adjustment Clause (UFAC) cost recovery
mechanism, and a disallowance of such costs could have a material adverse
impact. IP has also incurred additional expense by reactivating older power
plants in cold storage and upgrading electric transmission facilities to
maintain reliability. For more information, see "Fuel Cost Adjustment" under
"Regulatory Matters" on page 17 of this report.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Electric Operations - Electric revenues for the third quarter of 1997
increased $16.9 million compared to the third quarter of 1996. An increase in
UFAC recoveries accounted for $13.1 million of the increase in revenues. In
addition, electric interchange sales increased $18.0 million primarily due to
increased activity on the interchange market. Power purchased increased $49.2
million due to lower equivalent availability at nuclear and fossil facilities
and increased interchange activity. Fuel for electric plants increased $6.6
million due to a decrease in UFAC underrecoveries of $9.5 million and a $5.0
million increase in emission allowance expense. These increases in expense were
partially offset by lower fuel costs of $6.9 million due to decreased
generation. During the quarter, IP forewent recovery of $15.3 million of future
revenues related to the fuel adjustment clause. For more information, see "Fuel
Cost Adjustment" under "Regulatory Matters" of the "Management's Discussion and
Analysis" on page 17 of this report. These factors combined to decrease electric
margin $20.9 million for the quarter.
Kilowatt hour (kwh) sales increased 3.0% for the quarter led by increases
of 4.0% and 3.0% in the industrial and the commercial markets, respectively.
Cooling degree days were almost the same during the third quarter of 1997
compared to the same time frame in 1996, resulting in relatively constant sales
to the temperature-sensitive residential market.
The equivalent availability of Clinton was 0.0% and 71.5% for the three
months ended September 30, 1997 and 1996, respectively. Clinton was unavailable
in the third quarter of 1997 due to the continued outage which began September
6, 1996. The equivalent availability for IP's coal-fired plants was 80.0% and
88.1% for the three months ended September 30, 1997 and 1996, respectively. The
lower equivalent availability for the fossil plants in 1997 was primarily due to
the fire and subsequent shut-down of the Wood River fossil station in December
1996.
Gas Operations - For the quarter, gas margin decreased $1.5 million
reflecting a 9.5% decrease in therm sales (excluding transport).
Operation and Maintenance Expense - The current quarter increase of $17.3
million dollars is primarily due to operating and maintenance expenses
associated with the Clinton outage. For more information, see "Clinton Power
Station" of the "Management's Discussion and Analysis" on pages 18-19 of this
report.
Diversified enterprises - Revenues increased $324.0 million for the third
quarter of 1997 due to increased activity at IEPI. However, diversified
enterprises expenses increased $326.6 million which offsets the growth in
revenues.
Equity Earnings in Affiliates - The current quarter increase of $3.5
million is largely due to increased earnings from IGC investments.
Earnings per Common Share - The earnings per common share for Illinova
during the third quarter of 1997 and 1996 resulted from the interaction of all
of the factors discussed herein as well as fewer shares of common stock
outstanding.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Electric Operations - Electric margin decreased $13.4 million for the first
nine months of 1997 compared to the same time frame in 1996. Electric revenues
increased $39.5 million as a result of an increase to the UFAC of $40.2 million.
In addition, electric interchange sales increased $32.6 million due to the
receipt of an opt-out fee from Soyland per the amended PCA in the second quarter
and increased kwh sales. For more information, see "Soyland PCA" under
"Regulatory Matters" of the "Management's Discussion and Analysis" on page 17 of
this report. Power purchased increased $107.5 million and fuel for electric
plants decreased $22.0 million largely due to lower equivalent availability at
nuclear and fossil facilities. During the third quarter, IP forewent recovery of
$15.3 million of future revenues related to the fuel adjustment clause. For more
information, see "Fuel Cost Adjustment" under "Regulatory Matters" of the
"Management's Discussion and Analysis" on page 17 of this report.
Cooling degree days decreased 21.2% for the nine month period which
resulted in a 2.4% decrease in kwh sales to the temperature-sensitive
residential market. Sales to the commercial and industrial markets remained
relatively stable.
The equivalent availability of Clinton was 0% and 87.9% for the nine months
ended September 30, 1997 and 1996, respectively. Clinton was unavailable for the
first nine months of 1997 due to the extended outage which began September 6,
1996. The equivalent availability for IP's coal-fired plants was 73.4% and 83.3%
for the nine months ended September 30, 1997 and 1996, respectively. The
decreased availability is due to the fire and subsequent shut-down of Wood River
fossil station in December 1996 and the scheduled 44 day maintenance outage of
Baldwin Unit 1.
Gas Operations - Gas revenues increased $42.3 million in the first nine
months of 1997. The increase in gas revenues was primarily due to significantly
higher Purchased Gas Adjustment (PGA) revenues ($36.9 million), resulting from
increases in the cost of gas and collection of prior period underrecoveries.
This increase more than offset the decrease caused by lower sales volumes. Therm
sales decreased a total of 15.1% (70.5 million therms). This decrease represents
a 11.8% (32.5 million) decrease in therm sales to the residential sector, a 7.7%
(9.7 million) decrease in therm sales to the commercial sector, and a 40.6%
(28.3 million) decrease to the industrial market. Therms transported increased
31.8% (57.5 million) resulting in a $1.3 million increase for the first nine
months compared to last year. Gas purchased for resale increased $22.0 million
during the first nine months of 1997. Gas costs increased due to higher prices
charged by suppliers ($11.2 million) and the amortization of prior period
underrecoveries ($30.8 million). This increase was partially offset by $19.2
million due to a decrease in the amount of therms purchased and reduced storage
costs.
Operation and Maintenance Expense - The increase of $26.7 million is
primarily due to increased company and contractor labor at the fossil and
nuclear plants due to scheduled and unscheduled outages. For more information,
see "Clinton Power Station" of the "Management's Discussion and Analysis" on
pages 18-19 of this report.
Diversified enterprises - Due primarily to increased activity at IEPI,
diversified enterprises revenues increased $535.1 million for the first nine
months of 1997. However, diversified enterprises expenses increased $555.0
million offsetting the growth in revenues.
Miscellaneous - Net - The decrease in deductions of $4.0 million is
primarily a result of 1996 accruals recorded for the planned disposition of
property.
Equity Earnings in Affiliates - The increase of $4.8 million in the nine
month period is largely due to increased earnings from IGC investments.
Earnings per Common Share - The earnings per common share for Illinova
during the first nine months of 1997 and 1996 resulted from the interaction of
all other factors discussed herein as well as fewer shares of common stock
outstanding.
<PAGE>
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, 1997:
Report filed on Form 8-K on September 24, 1997
Other Events: IP filed a petition with the Illinois
Commerce Commission to forego collecting a portion of its
energy costs related to the Clinton Power Station (Clinton)
outage. In addition, Illinova expects lower than anticipated
earnings in 1997. Also, IP discusses status of the Clinton
outage.
<PAGE>
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: November 10, 1997
<PAGE>
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 and
Chief Financial Officer
on behalf of
Illinois Power Company
Date: November 10, 1997
<PAGE>
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 sttement, 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> Sedonna S. Jordan
<SUBSIDIARY>
<NUMBER> 0
<NAME> 0
<MULTIPLIER> 1,000,000
<CURRENCY> Default
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4687
<OTHER-PROPERTY-AND-INVEST> 6
<TOTAL-CURRENT-ASSETS> 436
<TOTAL-DEFERRED-CHARGES> 452
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5581
<COMMON> 1211
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 340
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1551
197
92
<LONG-TERM-DEBT-NET> 1577
<SHORT-TERM-NOTES> 50
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 279
<LONG-TERM-DEBT-CURRENT-PORT> 11
0
<CAPITAL-LEASE-OBLIGATIONS> 59
<LEASES-CURRENT> 39
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1726
<TOT-CAPITALIZATION-AND-LIAB> 5581
<GROSS-OPERATING-REVENUE> 1385
<INCOME-TAX-EXPENSE> 123
<OTHER-OPERATING-EXPENSES> 989
<TOTAL-OPERATING-EXPENSES> 1112
<OPERATING-INCOME-LOSS> 273
<OTHER-INCOME-NET> 1
<INCOME-BEFORE-INTEREST-EXPEN> 272
<TOTAL-INTEREST-EXPENSE> 94
<NET-INCOME> 178
16
<EARNINGS-AVAILABLE-FOR-COMM> 163
<COMMON-STOCK-DIVIDENDS> 70
<TOTAL-INTEREST-ON-BONDS> 83
<CASH-FLOW-OPERATIONS> 311
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
