UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q/A1
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1998
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 62521
(217) 424-6600
1-3004 Illinois Power Company 37-0344645
(an Illinois Corporation)
500 S. 27th Street
Decatur, IL 62521
(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, 71,713,387
shares outstanding at October 31, 1998
Illinois Power Company Common stock, no par
value, 65,150,562 shares outstanding
held by Illinova Corporation at
October 31, 1998
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ILLINOVA CORPORATION AND ILLINOIS POWER COMPANY
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains estimates, projections and other forward-looking
statements that involve risks and uncertainties. Actual results or outcomes
could differ materially from those provided in the forward-looking statements as
a result of such important factors as: the outcome of state and federal
regulatory proceedings affecting the restructuring of the electric and gas
utility industries; the impacts of new laws and regulations on Illinova and its
subsidiaries relating to restructuring, environmental and other matters; the
effects of increased competition on the utility businesses; risks of owning and
operating a nuclear facility; changes in prices and cost of fuel; factors
affecting non-utility investments, such as the risk of doing business in foreign
countries; construction and operation risks; and increases in financing costs.
All forward-looking statements are based upon information presently available,
and Illinova and IP assume no obligation to update any forward-looking
statements.
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 1997 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 1997 Annual Report to Shareholders (included in the
Information Statement), and Illinova's and IP's Form 10-K for the year ended
December 31, 1997 and Illinova's and IP's Report on Form 10-Q for the quarters
ended March 31 and June 30, 1998, and Illinova's and IP's 1998 Form 8-K filings.
ILLINOVA SUBSIDIARIES
IP, a subsidiary of Illinova, 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. IP has publicly traded
preferred shares outstanding but its common stock is wholly-owned by Illinova.
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.
IEP is a wholly-owned subsidiary of Illinova. IEP 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. The primary business of IIC is
to insure certain risks of Illinova and its subsidiaries.
IBE is a wholly-owned subsidiary of Illinova and was created to account
for miscellaneous business activities not regulated by the ICC or the Federal
Energy Regulatory Commission (FERC) and not falling within the business scope of
other Illinova subsidiaries.
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LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES AND REQUIREMENTS
Cash flows from operations during the first nine months of 1998,
supplemented by external financing, were sufficient to meet ongoing operating
requirements and to service existing common and preferred stock dividends, debt
requirements, IP's construction requirements and Illinova's investments in its
subsidiaries. However, Illinova's and IP's liquidity has decreased as a result
of higher than expected replacement power costs and higher Clinton costs
combined with lower revenues caused by the rate reduction mandated by P.A.
90-561 and lower than anticipated subsidiary earnings.
Illinova expects to use cash flows, supplemented by external financing,
to meet operating requirements and to continue to service existing debt, IP's
preferred and Illinova common stock dividends, IP's sinking fund requirements
and Illinova's and IP's anticipated subsidiary investments and construction
requirements for the remainder of 1998.
On January 28, 1998, Illinova issued $40 million of 6.46% medium-term
notes due October 1, 2002 under an existing $300 million shelf registration
statement. On September 9, 1998 Illinova issued an additional $30 million of
6.15% medium-term notes due September 10, 2001 under the same shelf
registration. Illinova currently has authority to issue an additional $130
million in debt securities under this shelf registration. Illinova's $110
million revolving credit agreement is subject to termination if Clinton is not
operational by January 31, 1999. In anticipation of this possibility, Illinova
has initiated action to replace this revolving credit agreement with a new
facility. There is no assurance that this can be done on terms as favorable as
the current agreement. IP pays Illinova dividends on the IP common stock held by
Illinova to provide Illinova cash for operations. IP also is allowed to
periodically repurchase its common stock from Illinova in accordance with
authority granted by the ICC, contingent on IP meeting certain cash flow tests.
Although IP currently satisfies this cash flow test, it is anticipated that it
will not satisfy the test at year-end 1998 and for a portion of 1999. This test
failure will not impact the ability to repurchase Illinova equity shares using
securitization proceeds. Illinova's current $130 million capacity under the
existing shelf registration should meet its cash requirements through the first
quarter of 1999. Illinova is developing additional financial capabilities to
meet future needs.
IP issued a redemption notice for all outstanding bonds of its 6.00%
Pollution Control First Mortgage Bonds due 2007 ($18.7 million) and its 8.30%
Pollution Control First Mortgage Bonds due 2017 ($33.8 million). Both series
were called April 1, 1998. On March 6, 1998, IP issued $18.7 million of 5.40%
Pollution Control Mortgage Bonds due 2028 and $33.8 million of 5.40% Pollution
Control Mortgage Bonds due 2028. On May 8, 1998, IP filed an SEC Form S-3
registration for a $200 million debt shelf authorization. This debt shelf became
effective May 27, 1998. On July 21, 1998, IP issued $100 million of 6.25%
Mortgage Bonds due 2002 against this registration. On September 16, 1998, IP
issued $100 million of 6.00% Mortgage Bonds due 2003 against this same shelf
registration. On September 28,1998, IP issued a call notice on the 6.60% Series
A Pollution Control Bonds due May 1, 2004. The bonds were called at par on
November 1, 1998.
IP's capital requirements for construction were approximately $190
million and $131 million during the nine months ended September 30, 1998 and
1997, respectively. Through 2000 IP plans to complete improvements in its
generation facilities including pollution control equipment, equipment to
support use of Powder River Basin coal and new combustion turbine peaking units.
These improvements will cost approximately $300 million. In addition to these
investments, IP will be required to deposit $62 million in cash with the IP Fuel
Company Trustee for noteholders and take title to the partially depleted nuclear
fuel in the reactor at Clinton Power Station on March 2, 1999 if Clinton does
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not return to service by January 31, 1999. IP currently has the authority to
issue $250 million in long-term debt and $500 million in short-term debt, which
includes $350 million in committed bank lines of credit. Of these authorized
amounts, IP has $128 million in remaining capacity that may be utilized to issue
commercial paper and extend floating rate notes. IP anticipates that this
liquidity will be sufficient to address its requirements into the second quarter
of 1999. IP is developing additional financial capabilities to meet future
needs.
On June 24, 1998, IP filed an application with the ICC seeking approval
for securitization notes totaling $864 million. This represents 25% of the
company's capitalization at December 31, 1996 as allowed by the 1997 Electric
Utility Transition Funding law. The proceeds from these notes will be used to
lower IP's cost of capital by repurchasing stock and retiring debt. The ICC
approved and issued the Transitional Funding Order on September 10, 1998. On
September 16, 1998, IP filed a shelf registration statement on Form S-3 with the
SEC. On September 30, 1998, the Internal Revenue Service issued a private letter
ruling to IP holding that, among other things, the notes will be obligations of
IP for federal income tax purposes. Interest paid on the notes generally will be
taxable to a United States Noteholder as ordinary interest income.
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 senior
and medium-term notes have a rating of Baa3 from Moody's and BBB- from Standard
& Poor's. On July 6, 1998, a change in outlook was issued. The outlook from
Moody's changed from stable to negative and the outlook from Standard & Poor's
changed from positive to stable.
To avoid any possible constraint imposed by Federal or State laws as
discussed above, on October 14, 1998, the Board of Directors declared IP
preferred stock dividends for the first quarter of 1999 and declared IP common
stock dividends which were paid in November totaling $.62 per share.
ACCOUNTING MATTERS
For further information on accounting issues, see "Accounting Matters"
under "Regulatory and Legal Matters" of the "Notes to Consolidated Financial
Statements" on page 13 of this report.
CLINTON POWER STATION
In September 1996, a leak in a recirculation pump seal caused IP
operations personnel to shut down Clinton. Clinton has not resumed operation.
In January 1997 and again in June 1997, the Nuclear Regulatory
Commission (NRC) named Clinton among plants having a trend of declining
performance. In June 1997, IP committed to conduct an Integrated Safety
Assessment (ISA) to thoroughly assess Clinton's performance. The ISA was
conducted by a team of 30 individuals with extensive nuclear experience and no
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substantial previous involvement at Clinton. Their report concluded that the
underlying reasons for the performance problems at Clinton were ineffective
leadership throughout the organization in providing standards of excellence,
complacency throughout the organization, barrier weaknesses and weaknesses in
teamwork. In late October, a team commissioned by the NRC performed an
evaluation to validate the ISA results. In December, this team concluded that
the findings of the ISA accurately characterized Clinton's performance
deficiencies and their causes.
On January 5, 1998, IP and PECO Energy Company (PECO) announced an
agreement under which PECO will provide management services for Clinton.
Although a PECO team will help manage the plant, IP continues to maintain the
operating license for Clinton and retain ultimate oversight of the plant. PECO
employees have assumed senior positions at Clinton, but the plant will remain
primarily staffed by IP employees. IP made this decision based on a belief that
bringing in PECO's experienced management team would be the most efficient way
to get Clinton back on line and operating at a superior level as quickly as
possible.
On January 21, 1998, the NRC placed Clinton on its Watch List of
nuclear plants that require additional regulatory oversight because of declining
performance. Twice a year the NRC evaluates the performance of nuclear power
plants in the United States and identifies those which require additional
regulatory oversight. Once placed on the Watch List, a plant must demonstrate
consistent improved performance before it is removed from the list. The Watch
List issued on July 29, 1998 still included Clinton. The NRC will monitor
Clinton more closely than plants not on the Watch List. This may include
increased inspections, additional required documentation, NRC-required approval
of processes and procedures and higher-level NRC oversight.
On February 19, 1998, IP filed Clinton's Summary Plan for Excellence
with the NRC. The Plan for Excellence provides a comprehensive set of strategies
and associated actions necessary to improve performance, permit safe restart of
the plant and achieve excellence in operations. IP is implementing the actions
required prior to plant restart. This recovery/restart program to get Clinton
back online is going through a formal parallel review process by the NRC.
The NRC has advised IP that it must submit a written report to the NRC
at least two weeks prior to restarting Clinton, giving the agency reasonable
assurance that IP's actions to correct recurring weaknesses in the corrective
action program have been effective. After the report is submitted, the NRC staff
will meet with IP's management to discuss the plant's readiness for restart.
IP announced October 19, 1998 that it now appears likely the plant's
restart will be after the first of the year. Moving restart into next year will
increase the expense for the station's recovery process. IP currently expects
Clinton's 1998 operating and maintenance expenses to be at least $88 million
more than Clinton's 1997 expenses, totaling approximately $210 to $215 million
for 1998.
The prolonged outage at Clinton is having an adverse effect on
Illinova's and IP's financial condition, through higher operating and
maintenance and capital costs, lost opportunities to sell energy, and
replacement power costs. The magnitude of these costs and lost opportunities is
unknown because of uncertainty regarding the timing of Clinton's return to
service, the ultimate cost of restart and uncertain market conditions. If
Clinton is not back in service by the end of January 1999, IP must deposit $62
million with the IP Fuel Co. Trustee for noteholders for the acquisition of core
fuel from IP Fuel Co. Previously disclosed earnings expectations are subject to
the effects of these uncertainties and changes.
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REGULATORY MATTERS
RATE REDUCTION FILING
IP submitted written filings with the ICC in June 1998 to begin the
process of implementing a 15 percent residential rate reduction effective August
1, 1998. On July 22, 1998, IP filed a plan with the ICC for a one time reduction
in residential and small commercial customers' electric bills of approximately
7.5 percent for the month of August in consideration of their energy
conservation efforts this summer. The reduction was in addition to the 15
percent residential rate reduction that was effective August 1, 1998 and had the
effect of beginning the 15 percent residential electric rate reduction two weeks
early.
ATTORNEY GENERAL COMPLAINT
On July 17, 1998, a complaint against IP was filed at the ICC by the
Illinois State Attorney General. The complaint alleges that IP failed to meet
its statutory obligations to provide adequate and reliable service in connection
with this summer's electric supply situation (for further disclosure, see "Power
Supply and Reliability" on pages 25-26). It asks the ICC to conduct a management
audit of IP and seeks an order requiring IP to offer compensation to customers
for voluntary conservation and service interruptions. The Company believes it
can effectively defend itself against these allegations, however, the outcome at
this point is uncertain.
SOYLAND POWER COORDINATION AGREEMENT
The FERC approved an amended Power Coordination Agreement (PCA) between
Soyland and IP in July 1997. Under the amended PCA, Soyland was allowed to
prepay an Elected Capacity Reduction Fee associated with a unilateral reduction
in its base capacity charge under the PCA. In December 1997, Soyland signed a
letter of intent to pay in advance the remainder of its base capacity charges in
the PCA. Soyland obtained the necessary financing and regulatory approvals
during the second quarter of 1998. During the first quarter of 1998, IP received
$30 million from Soyland and the remaining $40 million was received during the
second quarter of 1998. The prepayment has been deferred and is being recognized
as interchange revenue evenly over the initial term of the PCA which is from
September 1, 1996 through August 31, 2006.
UNIFORM FUEL ADJUSTMENT CLAUSE (UFAC)
Previously, IP's rate schedules contained provisions for passing
through to its electric customers increases or decreases in the cost of energy
provided to its native load customers under the UFAC. Such costs included fuel
and allowable fuel transportation costs, emission allowance costs, DOE spent
fuel disposal fees and costs of power purchased to serve native load. On March
6, 1998, IP filed with ICC the necessary documents required for elimination of
the UFAC. This established a new base fuel cost recoverable in IP's electric
tariffs effective on the date of the filing. As provided in P.A. 90-561, the new
base fuel cost is 1.287 cents per kwh, which is equal to 91 percent of IP's
average prudent and allowable fuel and purchased power supply costs in the two
most recent years for which the ICC has approved the level of recovery. Every
year UFAC cost recoveries are audited by the ICC in a reconciliation proceeding
in which they may be adjusted upward for actual costs not recovered, or downward
through a disallowance of costs incurred. By opting out of the UFAC, IP
eliminated exposure for potential disallowed fuel and purchased power costs for
periods after December 31, 1996, as those years will no longer be subject to the
ICC's annual reconciliation proceeding. This change will prevent IP from
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automatically passing through increases in cost and will expose IP to the risks
and opportunities of price volatility in the marketplace. Whether electric
energy costs will continue to be recovered in revenues from customers will
depend on a number of factors, including the number of customers served, demand
for electric service and changes in fuel cost components. These variables may be
influenced, in turn, by market conditions, availability of generating capacity,
future regulatory proceedings and environmental protection costs, among other
things.
DEREGULATION RULEMAKINGS AND TARIFFS
As a result of P.A. 90-561, ICC rulemakings are underway covering
issues such as affiliated interests and reliability. These regulatory
proceedings, alone or in combination, could significantly impact how IP operates
and is organized, but they are not likely to have a material impact on financial
results.
Under the new rules, Illinois utilities must keep records identifying
service interruptions experienced by each customer. Illinois utilities must also
file an annual report detailing the reliability of its service and explaining
its plans for reliability improvements. In addition, each utility must also
report the number and causes of service interruptions that were due to causes
within the utility's control. Outage targets were established for service to
individual customers and for system performance.
OPEN ACCESS AND COMPETITION
In January 1998, IP, in conjunction with eight other
transmission-owning entities, filed with the FERC for all approvals necessary to
create and implement the Midwest Independent Transmission System Operator, Inc.
(MISO). On September 16, 1998, the FERC issued an order authorizing the creation
of a MISO. The MISO must now elect a seven-person independent board of directors
within seventy five days of approval. The goals of this joint undertaking are
to: 1) put in place a tariff allowing easy and nondiscriminatory access to
transmission facilities in a multi-state region, 2) enhance regional reliability
and 3) establish an entity that operates independently of any transmission
owner(s) or other market participants, thus furthering competition in the
wholesale generation market consistent with the objectives of the FERC's Order
No. 888. Since January 1998, four other transmission-owning entities joined the
MISO. Participation in an ISO by utilities was one of the requirements included
in P.A. 90-561 enacted in 1997. The MISO has a stated goal to begin limited
operation in 1999, and to be fully operational in the year 2000.
See "Open Access and Competition" under "Regulatory and Legal Matters"
of the "Notes to Consolidated Financial Statements" on page 12 of this report
for additional information.
YEAR 2000 DATA PROCESSING
In November 1996, Illinova deployed a project team to coordinate the
identification, evaluation and implementation of changes to computer systems and
applications necessary to achieve a year 2000 date conversion with no effect on
customers or disruption to business operations.
These actions are necessary to ensure that systems and applications
will recognize and process coding for the year 2000 and beyond. Major areas of
potential business impact have been identified. Illinova has inventoried 99% of
its systems and assessment is 95% complete. Implementation efforts are
approximately 34% complete. Illinova also is communicating with third parties
with whom it does business to facilitate continued business operations.
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The cost of achieving year 2000 compliance is estimated to be
approximately $20.4 million through 1999. The amount expended as of October 31,
1998 is $6.4 million. Contingency plans for operating without year 2000
compliance have not been developed. Such activity is expected to begin in the
fourth quarter of 1998, but exact timing will depend on assessment of progress.
Project completion for Illinova is planned for the fourth quarter of 1999 for
Illinova overall. For IP alone, the project is scheduled to be virtually
complete by mid year 1999.
If Illinova, IP or critical interfacing third parties' year 2000
efforts are unsuccessful, some or all of Illinova's and IP's commercial and
operational activities could be interrupted for an indefinite time. In addition
to monetary loss, equipment could be damaged and public safety impaired. It is
uncertain whether such damage would be catastrophic or minimal. It is impossible
to assess third party performance beyond Illinova's and IP's control.
DIVERSIFIED BUSINESS ACTIVITIES
IGC, a wholly-owned subsidiary of Illinova, invests in energy-related
projects throughout the world. Prior to the fourth quarter 1998, IGC owned 50
percent of the North American Energy Services Company (NAES) and in October
1998, IGC purchased the remaining 50 percent. NAES supplies a broad range of
operations, maintenance and support services to the world-wide independent power
generation industry and operates the Tenaska generation plants in which IGC has
an equity interest.
ENVIRONMENTAL MATTERS
GAS MANUFACTURING SITES
See "Manufactured Gas Plant Sites" under "Regulatory and Legal Matters"
of the "Notes to Consolidated Financial Statements" on page 16 of this report.
NITROGEN OXIDE
On September 24,1998, the Administrator of the US Environmental
Protection Agency signed a final rule (commonly known as the NOx SIP Call)
requiring 22 States and the District of Columbia to submit State implementation
plans that address the regional transport of ground-level ozone through
reductions in nitrogen oxides (NOx). The rule imposes an ozone-season NOx
tonnage cap on each state. States have the ability to choose their NOx emission
reduction strategy; however, utility and large industrial sources are the most
likely targets for reductions. The State reduction plans are required by
September, 1999 and NOx emission reduction measures must be in place by May 1,
2003. Utility NOx emissions are expected to be capped based on a NOx limit of
0.15 pounds per million Btu of heat input; this is equivalent to an 85%
reduction in utility sector NOx emissions. IP's preliminary estimate to comply
with the anticipated utility NOx limit is $129 to $140 million beyond the $97.5
million cost of the Phase II Acid Rain NOx reduction requirements. The NOx SIP
Call is expected to be challenged by utility and industrial organizations as
well as several states.
EMISSION ALLOWANCE EXCHANGES
The value of emission allowances expected to be given up in future
periods as the result of exchange agreements was recorded in the third quarter
1998 at the current market price and a liability of $9.8 million was recognized.
This obligation will be adjusted as price fluctuates until the allowances are
surrendered.
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GLOBAL WARMING
On December 11, 1997, international negotiations to reduce greenhouse
gas emissions concluded with the adoption of the Kyoto Protocol. This Protocol
requires the United States to reduce greenhouse gas emissions to 7% below 1990
levels during the years 2008 through 2012 and to make further reductions
thereafter. This Protocol must be ratified by the United States Senate. United
States Senate Resolution 98 (passed 95-0) indicates the Senate would not ratify
an agreement that fails to involve all countries or would damage the United
States economy. Ratification will be a major political issue since the Protocol
does not contain key elements that Senate Resolution 98 said would be necessary
for ratification. It is anticipated that ratification will not occur in 1998.
IP will face major changes in how it generates electricity if the Kyoto
Protocol is ratified, or if the Protocol's reduction goals are incorporated into
other environmental regulations. IP would have to repower some generating units
and change from coal to natural gas in other units to reduce greenhouse gas
emissions. IP estimates that compliance with these proposed regulations may
require significant capital outlays and an increase in annual operating expenses
which could 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
was able to secure generation and transmission capacity in order to guard
against disruptions in service. IP took additional steps to avoid potential
shortages, including inspecting and upgrading transmission lines and equipment,
readying emergency procedures and restarting two plants that were in
cold-shutdown. Expenses incurred as a result of the shortage of electricity this
summer have had a material adverse impact on Illinova and IP.
IP experienced unprecedented and unexpected prices for power purchases
during the last week of June 1998. Replacement power costs for the second
quarter of 1998 were $49 million higher than the second quarter of 1997 and $55
million higher through June 1998 as compared to 1997. In addition, during June
1998 IP recorded an accrual of $58.3 million for probable and reasonably
estimable losses on power sales commitments with scheduled third quarter 1998
delivery dates. The earnings impact of replacement power costs for the third
quarter of 1998 was in line with July 1998 projections. The ultimate amount of
1998 losses associated with power sales commitments and lost margin on sales to
native load customers was largely the result of factors influencing the price of
purchased power such as regional weather, regional generation capacity, market
conditions including prices and liquidity, generation and transmission
availability as well as factors affecting IP's generating and transmission
capacity. In addition, IP is subject to future price and capacity risk related
to electric power supply contracts for the years 1999 and 2000. In the fourth
quarter of 1998, IP expects to accrue an additional amount of approximately $20
million to provide for other 1999 and 2000 sales agreements that it previously
expected to fulfill through IP generation.
The ultimate financial impact of these contracts will depend on market
conditions and IP's system availability. IP will continue to review its
accounting treatment of these commitments as further guidance is issued by the
EITF regarding issue 98-10, "Accounting for Energy Trading and Risk Management
Activities." See discussion of EITF 98-10 under "Accounting Matters" in the
"Notes To Consolidated Financial Statements" on page 15.
On July 7, 1998, IP testified before the ICC and July 8, 1998 before
the Environment and Energy Committee of the Illinois House of Representatives
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with regard to the electric supply problems of late June and IP's supply plans
for the rest of the summer. IP stated it was monitoring power plant maintenance
and transmission system preparation. In the third quarter, in response to the
summer supply situation, IP increased MWH generation 16.4 percent compared to
the same quarter of 1997 by running selected plants at peak and re-activating
oil-fired generating plants previously placed in cold shutdown.
In addition to having Clinton back in service, IP expects to have more
than 400 megawatts of additional generation on line for the summer of 1999. That
includes approximately 235 megawatts from five oil-fired units being brought up
from cold shutdown and 176 megawatts from four natural gas turbines that IP
plans to install before next summer. Total cost for the two projects is
estimated at $87 million. IP also plans to refurbish nine gas turbines already
in service at a cost of $13 million. At a public ICC proceeding on reliability
on October 4, 1998, IP said that, even though it expects Clinton to be available
by summer 1999, for purposes of advance coverage of anticipated summer demand it
is using the assumption that Clinton will not be operating. Options being
considered include various demand side management initiatives, power purchases
and selected financial and insurance products.
At an ICC proceeding on reliability October 4, 1998, IP said that, even though
it expects Clinton to be available by summer 1999, for purposes of covering
anticipated summer demand, it is assuming that Clinton will not be operational.
Various demand side management initiatives, power purchases, and financial and
insurance products are being used or reviewed as approaches to reduce the risk
of supply shortage.
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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 19, 1998
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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 19, 1998
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