UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
December 14, 1998
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
Total number of sequentially numbered pages is 10.
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Item 7. Exhibits
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(c) Exhibits
(99.1) Letter to the Financial Community, dated December 9, 1998
(99.2) Press Release, dated December 9, 1998
(99.3) Press Release, dated December 11, 1998
2
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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/ Charles E. Bayless
---------------------------
Charles E. Bayless
Chairman, President, and
Chief Executive Officer
on behalf of
Illinova Corporation
Date: December 14, 1998
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/ Charles E. Bayless
---------------------------
Charles E. Bayless
Chairman, President, and
Chief Executive Officer
on behalf of
Illinois Power Company
Date: December 14, 1998
3
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Exhibit Index
The following Exhibits are hereby filed as part of this Current Report on Form
8-K:
Exhibit
Number Description
99.1 Letter to the Financial Community, dated December 9, 1998
99.2 Press Release, dated December 9, 1998
99.3 Press Release, dated December 11, 1998
4
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December 9, 1998
Members of the Financial Community:
Attached is a press release announcing the decision of Illinois Power Company's
Board of Directors to exit the nuclear business and proceed with a
quasi-reorganization that will affect reported 1998 financial results. Also
included in the release are an update of the Company's securitization efforts
and an affirmation of Illinova's growth strategy.
The Board's decisions to exit the nuclear business and to execute a
quasi-reorganization are consistent with the strategy the Company has outlined
over the past several months. While this decision is a significant financial
milestone for the Company, we must still complete work on several important
issues before finalizing the detailed accounting entries, including, most
significantly, the size and amortization of a regulatory asset and the value of
the Company's fossil generation. Future financial results will also be
influenced by the specific exit strategy ultimately chosen by the Board and the
timing of its implementation.
Please also note the attached invitation to attend one of two meetings to be
hosted by Illinova next Wednesday, December 16, in New York.
Please contact Bob Schultz (217-424-8780), Eric Weekes (217-362-7635), Cindy
Steward (217-362-7633), Greg Gudeman (217-424-8715) or me if you have any
questions.
Sincerely,
/s/ Larry F. Altenbaumer
- ------------------------
Larry F. Altenbaumer
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For release: Dec. 9, 1998, 4 p.m. CST
TRANSACTIONS TO GIVE ILLINOVA FRESH START
Utility takes aggressive moves to exit nuclear business,
reposition itself as growth-oriented energy company
DECATUR, Ill. (Dec. 9, 1998) -- Illinova Corp. today announced it will exit
its nuclear business, proceed with an accounting restructuring, and pursue other
strategic opportunities for positioning itself as a competitive leader in new
energy markets.
The decisions came at the company's board of directors meeting earlier
today in Chicago. The company has not yet determined the specific path for
exiting the Clinton Power Station, its 950-megawatt nuclear generating facility.
The most likely alternatives are selling the plant or shutting it down. To date,
a number of companies have expressed interest in purchasing the plant.
Illinova Chairman, President and CEO Charles E. Bayless said today's board
actions are "watershed decisions.
"We've set in motion processes that will give Illinova a fresh start, both
financially and from a business strategy perspective," he said.
"I am excited about the opportunities we've identified, but I continue to
be frustrated by the diversion of attention and resources to the Clinton plant,"
Bayless said. "Mitigating the risks of being a single-unit nuclear operator is a
first step that will clear the way for us to pursue forward-looking business
strategies. But before we can move ahead, we must permanently resolve the
Clinton issues and get them behind us quickly."
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ILLINOVA
Dec. 9, 1998
Page 2
Accounting restructuring, securitized debt permit fresh start
In conjunction with today's decision to dispose of its nuclear assets, the
board also moved to effect a quasi-reorganization, whereby a company restates
the value of all its assets and liabilities to current market value. The
Securities and Exchange Commission last month confirmed for Illinova that such
an accounting procedure would be acceptable if the company were to exit the
nuclear business.
The company will write down to market value the Clinton Station -- whose
current book value, net of tax, is approximately $1.6 billion but whose market
value is far less -- and write up to market value its fossil generating stations
- -- older assets that have been depreciated to a book value of approximately $500
million but whose market value is considerably greater. New valuations will be
reflected in the company's year-end balance sheet. The write-down of the
company's nuclear assets will result in a charge to earnings and thus a
substantial per-share loss for 1998. The write-up of fossil assets will be
recorded as a direct increase to equity, but does not affect reported net
income. At the end of the quasi-reorganization process, Illinova's retained
earnings balance will be $0.
Another element of the company's "fresh start" is Illinois Power's issuance
later this week of $864 million of securitized debt, an initiative to
significantly reduce its cost of capital. The new debt issue is the single
largest financing in the company's history. Illinois Power will use the proceeds
to refinance its outstanding debt, retire preferred equity, and
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ILLINOVA
Dec. 9, 1998
Page 3
repurchase common equity. In October the Board approved the repurchase of up to
12 million shares of Illinova common stock in conjunction with Illinois Power's
upcoming issuance of securitized debt.
Board will pursue strategies for growth
The board today affirmed its strategy of continuing investments for growth
and development in its unregulated subsidiaries, Illinova Generating and
Illinova Energy Partners.
"Our decisions today will allow Illinova to be more nimble as we reposition
ourselves for growth in the quickly changing energy market," Bayless said.
In other action, the Illinova board today declared a common stock dividend
of 31 cents per share, payable Feb. 1, 1999, to shareholders of record Jan. 11.
Illinova Corp., headquartered in Decatur, Ill., is an energy services
company with annual revenues of $2.5 billion. Its subsidiaries include Illinois
Power, an electric and natural gas utility; Illinova Generating, which invests
in, develops and operates independent power projects worldwide; and Illinova
Energy Partners, which markets energy and energy-related services in the United
States and Canada.
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For immediate release: Dec. 11, 1998
IP SEES HIGH DEMAND, FAVORABLE RATES
FOR TRANSITION BOND OFFERING
DECATUR, Ill. -- Illinois Power yesterday successfully priced (sold) $864
million in asset-backed "transition funding" bonds. This was the single largest
financial transaction ever executed by Illinois Power.
The bonds were sold in seven tranches (groupings) with varying maturity
dates and interest rates. The average yield on these bonds was 5.52 percent.
"We're very pleased with the rates we were able to obtain and with the
broad demand for these bonds," said Eric B. Weekes, Illinois Power Treasurer.
The bonds had been rated AAA by four rating agencies (Duff & Phelps Credit
Rating Company, Fitch IBCA, Inc., Moody's Investors Service, Inc., and Standard
& Poor's).
This new funding option was made available to Illinois utilities in late
1997 with enactment of electric deregulation legislation. The aim was to provide
utilities a financial tool that could provide lower interest rates for ongoing
financing needs. The bonds are secured by the ongoing revenues received by the
utility related to electric service.
Weekes says the utility will use the bond revenues to redeem Illinois Power
common stock (entirely held by its parent, Illinova), debt and preferred stock.
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Illinova will use the proceeds from the IP common stock repurchase to redeem
several million of its own common shares (currently 71 million shares
outstanding).
The lead underwriter and sole manager of the "book" for the sale of the
bonds was Merrill Lynch. Salomon Smith Barney was the co-lead manager. Other
co-managers included: Chase Securities Inc.; Donaldson, Lufkin & Jenrette; First
Chicago Capital Markets, Inc.; NationsBanc Montgomery Securities LLC; ABN AMRO
Incorporated; A.G. Edwards & Sons, Inc.; J.P. Morgan & Co.; and Loop Capital
Markets, LLC.
