SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 1-3004
Illinois Power Company
Incentive Savings Plan
(Full title of the plan)
Illinova Corporation
500 South 27th Street
Decatur, Illinois 62525
(Name of issuer of the securities held
pursuant to the plan and the address
of its principal executive office.)
<PAGE>
ILLINOIS POWER COMPANY
INCENTIVE SAVINGS PLAN
FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
DECEMBER 31, 1999
<PAGE>
ILLINOIS POWER COMPANY
INCENTIVE SAVINGS PLAN
Index to Financial Statements and Additional Information
Financial Statements: Page
Report of Independent Accountants 1
Statement of Net Assets Available for Benefits 2
December 31, 1999 and 1998
Statement of Changes in Net Assets Available for
Benefits for the years ended 3
December 31, 1999 and 1998
Notes to Financial Statements 4-14
Additional Information:
Schedule I - Schedule of Assets Held for Investment Purposes
Note: Other schedules required by section 2520.103-10 of the
Department of Labor Rules and Regulations for Reporting and
Disclosure under ERISA have been omitted because they are
not applicable.
<PAGE>
Report of Independent Accountants
To the Participants and Administrator of
The Illinois Power Company
Incentive Savings Plan
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Illinois Power Company Incentive Savings Plan (the "Plan") at December
31, 1999 and 1998, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Plan's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As explained in Note 1 to the financial statements, Illinois Power Company sold
its Clinton Nuclear Power Plant ("Clinton") to AmerGen Energy Company("Amergen")
on December 15, 1999. Under terms of the sales agreement, the Plan accounts for
Clinton employees were transferred to AmerGen on January 21, 2000.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of Assets Held
for Investment Purposes is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
PricewaterhouseCoopers, LLP
June 23, 2000
1
<PAGE>
ILLINOIS POWER COMPANY
INCENTIVE SAVINGS PLAN
Statement of Net Assets Available for Benefits
<TABLE>
<S> <C> <C>
December 31,
1999 1998
ASSETS:
Cash and Temporary Cash Investments $ 778,291 $ 350,597
Investments at Fair Value 226,773,748 173,223,313
Participant Loans 4,133,430 4,190,017
------------ ------------
Total Investments 231,685,469 177,763,927
Dividends and Interest Receivable 1,596 1,413
Employee Contributions Receivable 259,160 374,692
Employer Contributions Receivable 3,343,289 199,698
------------ ------------
Other Assets 3,604,045 575,803
------------ ------------
Total Assets 235,289,514 178,339,730
------------ ------------
LIABILITIES:
Accrued Expenses 0 57,906
Transfer to AmerGen (Note 1) 61,210,672 0
------------ ------------
Total Liabilities 61,210,672 57,906
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $174,078,842 $178,281,824
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE>
ILLINOIS POWER COMPANY
INCENTIVE SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits
<TABLE>
<S> <C> <C>
December 31,
Sources of Participants' Equity: 1999 1998
---- ----
Contributions:
Employee $9,573,968 $9,534,379
Employer 5,841,996 1,599,690
------------ ------------
15,415,964 11,134,069
------------ ------------
Plan-to-Plan Transfers 626,204 1,074,726
Investment Income:
Dividend and Interest Income 19,248,968 13,734,280
Net Appreciation in Fair Value of
Investments 30,137,923 10,051,625
------------ ------------
49,386,891 23,785,905
------------ ------------
Application of Participants' Equity:
Distributions to Active and
Terminated Participants 8,380,075 7,953,357
Administrative and Miscellaneous
Expenses 41,294 104,884
---------- ------------
8,421,369 8,058,241
------------ ------------
Increase in Net Assets
Available for Benefits 57,007,690 27,936,459
Transfer to AmerGen (Note 1) (61,210,672) 0
Net Assets Available for Benefits,
Beginning of Year 178,281,824 150,345,365
------------ ------------
Net Assets Available for Benefits,
End of Year $174,078,842 $178,281,824
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
3
<PAGE>
ILLINOIS POWER COMPANY
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF PLAN:
General:
The Illinois Power Company Incentive Savings Plan (the Plan) is sponsored
and administered by Illinois Power Company (the Company). The Plan became
effective as of June 1, 1984. Assets of the Plan are held and managed by a
Trustee. Effective July 1, 1995, Fidelity Management Trust Company of Boston,
Massachusetts became trustee and custodian. The purpose of the Plan is to enable
participants to invest a portion of their salaries in tax-deferred savings
pursuant to section 401(k) of the Internal Revenue Code (IRC). The Plan is
subject to and in compliance with the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA) as amended.
Participation:
All salaried employees of the Company are eligible to participate in the
Plan. In addition, all employees of Illinois Power Company's parent company,
Illinova Corporation (Illinova), are eligible to participate, as are salaried
employees of Illinova's other subsidiary companies. Participation is voluntary.
Active participation ceases upon termination of employment with the Company.
Former employees can choose to liquidate their accounts or to leave them in the
Plan. Earnings will continue to accrue on undistributed accounts. All accounts,
whether for active or former employees, are fully vested.
Plan Changes and Amendments:
Effective January 1, 1999, the Company match contribution was increased.
The Company had previously matched 50% of the first $80 of the participants'
monthly before tax contributions and 25% of the balance of the contributions for
the month, up to 6% of the employee's base earnings for the month. Effective
January 1, 1999, the Company began matching 50% of the participants' monthly
before tax contributions, up to 6% of the employee's base earnings for the
month.
Effective December 15, 1999, Illinois Power sold its Clinton Nuclear
Power Plant to AmerGen Energy Company (AmerGen). Under terms of the sales
agreement, the plan accounts for Clinton employees were transferred to AmerGen.
Effective January 21, 2000, $61,210,672 in participants' accounts were
transferred to AmerGen. Incentive compensation contributions due to Clinton
employees were later posted to their Illinois Power accounts and then
transferred to AmerGen in February and March of 2000.
Amergen's plan would not accept transfer of the Fidelity Brokerage Link.
Employees who participated in this option were asked to liquidate their accounts
and transfer the funds to other funds or to the Fidelity Retirement Money Market
Fund. The trustee liquidated the accounts of employees who did not comply with
the request, and transferred the proceeds to the Fidelity Retirement Money
Market Fund. This fund is not ordinarily an available option for contributions;
it was used only to facilitate the liquidation of the Brokerage Link accounts.
At December 31, 1999, the fund held $2,045,747.
4
<PAGE>
Contributions:
Participants may make before-tax contribution by payroll deduction up to
the legal dollar limit. Participants may also make after-tax contributions in
cash or by payroll deduction. Total contributions are limited to the applicable
percentage limit set by law. A participant may also "roll-over" into the Plan
amounts previously invested in another retirement plan.
Participants have the option of investing their contributions into any or
all of the investment funds in the proportions they choose. They may change
their investment options or transfer amounts from fund to fund at any time.
Amounts are transferred to or from the Illinois Power Company Incentive Savings
Plan as participants' shift out of or into positions covered by a collective
bargaining agreement. These transfers are shown in the Statement of Changes in
Net Assets Available for Benefits with Fund Information as Plan-to-Plan
Transfers.
The Company contributes a monthly matching contribution to the Plan equal to 50%
of the participants' monthly before-tax contributions, up to 6% of the
employee's base earnings for the month. All Company matching contributions are
paid in units of Illinova common stock and are contained in the Stock Fund.
Dividends on stock held in the Stock Fund are also invested in the Stock Fund.
The Company has an Incentive Compensation arrangement in which all
participants employed by the company on the last day of the Plan year are
eligible to earn Illinova stock if specified performance goals are met. Units
awarded under the Incentive Compensation arrangement are held in the Stock Fund.
Dividends earned on these units are also invested in the Stock Fund.
Shares previously held in the Tax Reduction Act Stock Ownership Plan
(TRASOP), which was eliminated in 1988, are also held in the Stock Fund.
ESOP:
In October 1990, the Board of Directors authorized amendments to the
Incentive Savings Plan to provide for the implementation of an Employee Stock
Ownership Plan (ESOP) arrangement. Under this arrangement, the Company, pursuant
to authorization granted by the Illinois Commerce Commission (ICC), loaned $35
million to the Trustee of the ESOP in January 1991. The loan proceeds were used
to purchase 2,031,445 shares of the Company's common stock on the open market.
These shares are held in a suspense account under the Plans and are being
distributed to the accounts of participating employees as the loan is repaid by
the Trustee with funds contributed by Illinois Power, together with dividends on
the shares acquired with the loan proceeds. The shares are allocated to the
accounts of eligible participating employees as they are earned through the
Match or Incentive Compensation features of the Plan.
As of December 31, 1999, 450,189 and 339,205 shares have been allocated
to salaried employees for Matching Contribution and Company Incentive
Contributions.
5
<PAGE>
Distributions:
Distributions as provided for in the Plan are made to retired Plan
participants or their beneficiaries. Distributions must begin by April 1st of
the calendar year following the later of the calendar year in which the employee
reaches age 70 1/2 or the calendar year in which the employee retires. All
distributions are made in the form of cash and/or Illinova common stock.
Forfeitures:
Each participant is responsible for supplying the Company with a current
address. If the address of the participant (or the participant's beneficiary in
the event of participant's death) is not known to the Company within four years
(three years in the event of participant's death) of the date on which
distribution may first be made, the adjusted balance in the participant's
account shall be deemed a forfeiture and shall be used to reduce matching
contributions and company incentive contributions. In the event that the
participant or beneficiary makes a valid claim for the forfeited amount, the
benefits shall be reinstated.
Loans:
The Plan allows participants to borrow from their before-tax and TRASOP
accounts an amount not to exceed the lesser of $50,000 reduced by the excess of
the highest outstanding balance of loans during the one-year period before the
date the loan is made over the outstanding balance of loans on the date the loan
is made or 50% of the vested account balance. Interest is charged on these loans
at a rate commensurate with interest rates charged by persons in the business of
lending money for similar type loans. For 1999, the interest rate ranged from
8.75% to 9.50%; for 1998 the rate ranged from 8.75% to 9.50%.
All loans made will mature and be payable in full no earlier than one
year and no later than five years from the date of the loan. An exception exists
when the loan is used by the participant to acquire his or her principal
residence. In this case, the loan will mature and be payable in full no earlier
than one year and no later than ten years from the date of the loan. Loan
repayments are made by payroll deductions authorized by the participant and by
optional cash payments. Interest paid on the loan is credited to the
participant's account. The Trustee maintains a Loan Fund to hold the balances of
participants' loans.
Plan Termination:
The right to amend, modify or terminate the Plan is reserved by the
Company provided that such action does not retroactively and adversely affect
the rights of any participant or beneficiary under the Plan. See Note 6,
Subsequent Event.
6
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting:
The accompanying Plan financial statements are prepared on the accrual
basis of accounting.
Investments:
Participant notes receivable included in the loan fund are valued at
cost, which approximates fair value. Other investments are stated at current
value based on the latest quoted market price.
Investment securities are exposed to various risks, such as interest
rate, market, and credit. Due to the level of risk associated with certain
investment securities and the level of uncertainty related to changes in the
value of investment securities, it is at least reasonably possible that changes
in risks in the near term could materially affect the amounts reported in the
Statement of Net Assets Available for Benefits.
Income:
Interest and dividend income is accrued as earned.
Net appreciation (depreciation) of investments is comprised of realized
and unrealized gains and losses. Realized gains or losses represent the
difference between proceeds received upon sale and the average cost of the
investment. Unrealized gain or loss is the difference between market value and
cost of investments retained in the Plan (at financial statement date). For the
purpose of allocation to participants, the Illinova common stock is valued by
the Plan at market value on the date of allocation and current value is used at
the time of distribution to participants resulting in a realized gain or loss
and is reflected in the Net Appreciation in Fair Value of Investments in the
Statement of Changes in Net Assets Available for Benefits.
Expenses:
Certain expenses incurred in the administration of the Plan are paid by
the Plan rather than the Company. The expenses paid by the Plan include ESOP
record keeping fees and trustee administrative fees. All other expenses incurred
in the operation of the Plan are paid by the Company.
Income Taxes:
The Internal Revenue Service has determined and informed the Company by a
letter dated January 8, 1996, that the Plan and related trust are designed in
accordance with applicable sections of the IRC. The plan has been amended since
receiving the determination letter. However, the Plan Administrator and the
Plan's tax counsel believe that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC.
7
<PAGE>
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
8
<PAGE>
NOTE 3 - INVESTMENTS
Plan investments are received, invested and held by the Trustee.
Individual investments that represent 5% or more of the Plan's net assets
available for benefits include:
<TABLE>
<S> <C> <C> <C>
December 31, 1999
Investments at Fair Value as Determined by
Quoted Market Price
Units Value Cost
Illinova Common Stock 1,045,661 $36,336,720 $42,754,371
Fidelity Equity Income Fund 752,345 $40,325,424 $30,609,469
Fidelity Retirement Growth Fund 2,670,136 $69,023,023 $51,282,734
Fidelity Managed Income Portfolio Fund 21,765,711 $21,765,711 $21,765,711
Fidelity U. S. Equity Index Pool Fund 287,472 12,091,053 $ 9,341,730
</TABLE>
<TABLE>
<S> <C> <C> <C>
December 31, 1998
Investments at Fair Value as Determined by
Quoted Market Price
Units Value Cost
Illinova Common Stock 1,021,868 25,546,700 $21,420,783
Fidelity Equity Income Fund 782,044 43,442,523 $29,612,286
Fidelity Retirement Growth Fund
2,175,660 $44,622,782 $39,077,299
Fidelity Asset Manager Fund
621,938 $10,815,508 $10,111,240
Fidelity Managed Income Portfolio Fund 17,502,633 $17,502,633 $17,502,633
</TABLE>
9
<PAGE>
NOTE 4 - TRANSACTIONS WITH PARTIES-IN-INTEREST
Fidelity Management Trust Company, the Trustee for the Plan, purchased
shares of Illinova Common Stock at a cost of $5,250,541 in 353 transactions and
sold shares, the proceeds of which totaled $6,239,272, in 327 transactions. The
net gain on these sales was $1,496,345. The transactions are allowable
party-in-interest transactions under Section 408(3) of ERISA and the regulations
thereunder.
The majority of the assets of the Plan are invested in Fidelity Investments
mutual funds. The Plan also invests in a short-term money market fund, the
Fidelity Investments Cash Portfolio. The transactions with these Fidelity funds
are allowable party-in-interest transactions under Section 408(b)(8) of ERISA
and the regulations thereunder. The number of purchase transactions with each
fund and the dollar amount of purchases for each fund as of December 31, 1999
are listed below:
Purchase Purchase
Fund Transactions Amount
Fidelity Equity Income Fund 228 $ 8,977,416
Fidelity Retirement Growth Fund 232 $18,509,775
Fidelity Asset Manager Income Fund 142 $ 1,271,920
Fidelity Asset Manager Growth Fund 160 $ 1,980,671
Fidelity Asset Manager Fund 164 $ 2,489,364
Fidelity International Growth and Income Fund 141 $ 1,799,651
Fidelity Managed Income Portfolio Fund 208 $12,505,161
Fidelity US Equity Index Commingled Pool 181 $ 5,423,822
Founders Growth Fund 164 $ 4,112,221
USAA International Fund 124 $ 1,500,979
Warburg Pincus Emerging Growth 123 $ 2,539,090
Fidelity Brokerage Link 115 $ 6,653,111
Fidelity Retirement Money Market 37 $ 3,835,239
Cash Portfolio 163 $ 5,154,566
10
<PAGE>
The number of sales transactions with each fund, the dollar amount of
sales, and the gain on these sales for each fund as of December 31, 1999 are
shown below:
<TABLE>
<S> <C> <C> <C>
Sales
Trans- Sales
Fund actions Amount Gain
Fidelity Equity Income Fund 202 $10,715,345 $2,735,112
Fidelity Retirement Growth Fund 196 $ 7,300,445 $966,106
Fidelity Asset Manager Income Fund 79 $ 1,235,912 $(2,889)
Fidelity Asset Manager Growth Fund 106 $ 1,902,670 $273,877
Fidelity Asset Manager Fund 118 $ 2,353,604 $168,316
Fidelity International Growth and Income Fund 91 $ 765,415 $107,441
Fidelity Managed Income Portfolio Fund 180 $ 8,242,083 $ 0
Fidelity US Equity Index Commingled Pool 103 $ 2,629,318 $488,202
Founders Growth Fund 84 $ 1,416,736 $109,684
USAA International Fund 55 $ 1,090,100 $ 22,413
Warburg Pincus Emerging Growth 54 $ 426,583 $ 18,744
Fidelity Brokerage Link 252 $ 4,443,273 $ 0
Fidelity Retirement Money Market 19 $ 1,789,507 $ 0
Cash Portfolio 243 $ 5,110,084 $ 0
</TABLE>
11
<PAGE>
NOTE 5 - NONPARTICIPANT-DIRECTED INVESTMENTS
All funds in the plan are participant directed, with the exception of
the Illinova Stock Fund, which is partially nonparticipant directed as pertains
to the Company match and incentive compensation features of the plan.
Information about the net assets and the significant components of the changes
in net assets relating to the Illinova Stock Fund is as follows:
<TABLE>
<S> <C> <C>
December 31,
1999 1998
ASSETS:
Cash and Temporary Cash Investments $ 339,276 $ 350,597
Investments at Fair Value 36,336,720 25,546,700
----------- -----------
Total Investments 36,675,996 25,897,297
Dividends and Interest Receivable 1,596 1,413
Employee Contributions Receivable 4,966 93,940
Employer Contributions Receivable 3,343,289 199,698
Loan Repayments Receivable 0 879
----------- -----------
Other Assets 3,349,851 295,930
----------- -----------
Total Assets 40,025,847 26,193,227
----------- -----------
LIABILITIES:
Accrued Expenses 0 57,906
Assets to be transferred to AmerGen 10,244,086 0
----------- -----------
Total Liabilities 10,244,086 57,906
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $29,781,761 $26,135,321
=========== ===========
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C>
December 31,
1999 1998
Sources of Participants' Equity:
Contributions:
Employee $ 149,468 $ 96,592
Employer 5,841,996 1,599,690
----------- -----------
5,991,464 1,696,282
----------- -----------
Plan-to-Plan Transfers 197,561 182,169
Investment Income:
Dividend and Interest Income 1,332,489 1,224,013
Net Change in Fair Value of
Investments 10,479,096 (1,770,615)
----------- -----------
11,811,585 (546,602)
----------- -----------
Application of Participants' Equity:
Distributions to Active and
Terminated Participants 1,385,479 1,526,481
Administrative and Miscellaneous
Expenses 24,263 27,086
----------- -----------
1,409,742 1,553,567
----------- -----------
Increase (Decrease) in Net Assets
Available for Benefits prior to
interfund transfers 16,590,868 (221,718)
Loans to Participants, net 694 3,439
Fund-to-Fund Transfers (2,701,036) (715,794)
Assets to be Transferred to AmerGen (10,244,086) 0
Net Assets Available for Benefits,
Beginning of Year 26,135,321 27,069,394
----------- -----------
Net Assets Available for Benefits,
End of Year $29,781,761 $26,135,321
=========== ===========
</TABLE>
13
<PAGE>
NOTE 6 - SUBSEQUENT EVENT
On February 1, 2000, Illinova merged with Dynegy,Inc. which has its own 401
(k) Plan. No changes have yet been made to the Illinois Power Plan as a result
of the merger.
14
<PAGE>
Schedule 1
Illinois Power Company
Incentive Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1999
<TABLE>
<S> <C> <C>
Identity of Issue/ Current
Description of Investment Cost Value
*Illinova Common Stock $42,754,371 $36,336,720
*Fidelity Equity Income Fund 30,609,469 40,235,424
*Fidelity Retirement Growth Fund 51,282,734 69,023,023
*Fidelity Asset Manager Income Fund 1,888,012 1,928,344
*Fidelity Asset Manager Growth Fund 7,379,946 8,569,188
*Fidelity Asset Manager Fund 10,415,316 11,594,767
*Fidelity International Growth and Income Fund 4,166,873 6,045,033
*Fidelity Managed Income Portfolio Fund 21,765,711 21,765,711
*Fidelity US Equity Index Commingled Pool 9,341,730 12,091,053
*Founders Growth Fund 6,879,010 8,002,463
*USAA International Fund 1,176,342 1,295,128
*Warburg Pincus Emerging Growth 3,494,506 4,098,745
*Fidelity Brokerage Link 3,742,402 3,742,402
*Fidelity Retirement Money Market Fund 2,045,747 2,045,747
*Participant Loans** 4,133,430 4,133,430
--------- ---------
$201,075,599 $230,907,178
============ ============
</TABLE>
*A party-in-interest to the Plan
**Interest rates on loans range
from 7% to 11%
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Illinois Power Company has duly caused this annual report to be signed
on its behalf by the undersigned hereunto duly authorized.
Illinois Power Company
Incentive Savings Plan
By _______________________
R. Mark Relken
Director-Benefits, Compen-
sation, Recruiting, System
and Payroll
Date: June 28, 2000
16
<PAGE>
EXHIBIT INDEX
Exhibits Filed Herewith
Exhibit No. Description
--------------------------------------------------------------------------------
1 Consent of Independent Accountants
17
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-60278 of Illinova Corporation of our report dated
June 23, 2000 relating to the financial statements of the Illinois Power Company
Incentive Savings Plan, which appears in this Form 11-K.
PricewaterhouseCoopers LLP
St. Louis, Missouri
June 28, 2000
18
<PAGE>
