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UNITED STATES
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 June 30, 2000
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ________________
Commission file number: 1-3004
ILLINOIS POWER COMPANY
(Exact name of registrant as specified in its charter)
ILLINOIS 37-0344645
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 S. 27TH STREET
DECATUR, ILLINOIS 62521-2200
(Address of principal executive offices)
(Zip Code)
(217) 424-6600
(Registrant's telephone number, including area code)
www.illinoispower.com
(Registrant's home page)
Indicate by check mark whether the registrant (1) has 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 reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
All outstanding common equity of Illinois Power Company is held by its parent
Illinova Corporation. Illinois Power is an indirect wholly owned subsidiary of
Dynegy Inc.
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ILLINOIS POWER COMPANY
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets:
June 30, 2000 and December 31, 1999...................................3
Condensed Consolidated Statements of Operations:
For the three and six months ended June 30, 2000 and 1999.............4
Condensed Consolidated Statements of Cash Flows:
For the six months ended June 30, 2000 and 1999.......................5
Notes to Condensed Consolidated Financial Statements......................6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...........................12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................20
Item 2. Not Applicable................................................--
Item 3. Not Applicable................................................--
Item 4. Not Applicable................................................--
Item 5. Not Applicable................................................--
Item 6. Exhibits and Reports on Form 8-K..............................20
</TABLE>
2
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ILLINOIS POWER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE DATA)
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JUNE 30, DECEMBER 31,
2000 1999
---------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
UTILITY PLANT:
Electric (includes construction work in progress of $90 million and $84
million, respectively) $ 2,237 $ 2,189
Gas (includes construction work in progress of $14 million and $17
million, respectively) 728 714
----------- ------------
2,965 2,903
Less: accumulated depreciation 1,170 1,139
----------- ------------
1,795 1,764
----------- ------------
INVESTMENTS AND OTHER ASSETS 20 13
----------- ------------
CURRENT ASSETS:
Cash and cash equivalents 23 24
Accounts receivable, net 106 108
Accounts receivable, affiliates 54 84
Accrued unbilled revenue 67 83
Inventory 31 41
Prepayments and other 14 102
----------- ------------
295 442
----------- ------------
DEFERRED CHARGES AND OTHER:
Transition period cost recovery 297 320
Note receivable, affiliate 2,262 2,598
Other 137 161
----------- ------------
2,696 3,079
----------- ------------
$ 4,806 $ 5,298
=========== ============
CAPITAL AND LIABILITIES
CAPITALIZATION:
Common stock -- no par value, 100,000,000 shares authorized:
75,643,937 shares issued $ 1,274 $ 1,274
Retained earnings - accumulated since January 1, 1999 101 55
Less: 12,751,724 shares of common stock in treasury, at cost 287 287
Less: capital stock expense 7 7
----------- ------------
1,081 1,035
Preferred stock 46 46
Mandatorily redeemable preferred stock 100 193
Long-term debt 1,831 1,907
----------- ------------
3,058 3,181
----------- ------------
CURRENT LIABILITIES:
Accounts payable 62 79
Accounts payable, affiliates 16 13
Accrued liabilities 103 110
Notes payable and current portion of long-term debt 212 564
----------- ------------
393 766
----------- ------------
DEFERRED CREDITS:
Deferred income taxes 1,092 1,100
Other 263 251
----------- ------------
1,355 1,351
----------- ------------
$ 4,806 $ 5,298
=========== ============
</TABLE>
See notes to condensed consolidated financial statements.
3
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ILLINOIS POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN MILLIONS)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $ 281 $ 277 $ 549 $ 532
Electric interchange 3 56 4 150
Gas 55 45 171 168
------------ ------------ ------------ ------------
339 378 724 850
------------ ------------ ------------ ------------
OPERATING EXPENSES AND TAXES:
Fuel for electric plants -- 60 -- 111
Power purchased 178 46 338 98
Gas purchased for resale 28 17 96 90
Other operating expenses 35 81 62 191
Retirement and severance expense -- -- 38 --
Maintenance 14 26 26 67
Depreciation and amortization 19 45 38 89
Amortization of regulatory asset 13 6 26 8
General taxes 16 23 38 53
Income taxes (4) 23 (9) 37
------------ ------------ ------------ ------------
299 327 653 744
------------ ------------ ------------ ------------
OPERATING INCOME 40 51 71 106
Other income (expenses), net (20) 10 (36) 17
Interest income from affiliates 43 1 91 1
------------ ------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES 63 62 126 124
Interest expense (34) (44) (72) (84)
Allowance for borrowed funds used
during construction 1 2 1 3
------------ ------------ ------------ ------------
NET INCOME 30 20 55 43
Preferred dividend requirement and other (4) (5) (9) (9)
------------ ------------ ------------ ------------
NET INCOME APPLICABLE TO COMMON
SHAREHOLDER $ 26 $ 15 $ 46 $ 34
============ ============ ============ ============
Net income applicable to common shareholder $ 26 $ 15 $ 46 $ 34
Unrealized gains on securities, net of taxes -- 2 -- 2
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME $ 26 $ 17 $ 46 $ 36
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
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ILLINOIS POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN MILLIONS)
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SIX MONTHS ENDED
JUNE 30,
----------------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 55 $ 43
Items not affecting cash flows from operating activities:
Depreciation and amortization 68 96
Deferred income taxes 18 40
Changes in assets and liabilities resulting from operating activities:
Accounts receivable 48 (16)
Inventories 10 10
Prepayments and other assets 80 3
Accounts payable (14) (15)
Accrued liabilities (33) (112)
Other, net 28 (11)
------------ ------------
Net cash provided by operating activities 260 38
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (66) (154)
Other, net (2) (2)
------------ ------------
Net cash used in investing activities (68) (156)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from affiliate note receivable 336 ---
Repayments of long-term borrowings (225) (490)
Issuances of long-term borrowings --- 250
Net change in commercial paper and money market lines of credit (202) (68)
Redemption of mandatorily redeemable preferred stock (93) (11)
Other, net (9) (50)
------------ ------------
Net cash used in financing activities (193) (369)
------------ ------------
Net change in cash and cash equivalents (1) (487)
Cash and cash equivalents, beginning of period 24 504
------------ ------------
Cash and cash equivalents, end of period $ 23 $ 17
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
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ILLINOIS POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
NOTE 1 -- ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to interim financial reporting as
prescribed by the Securities and Exchange Commission ("SEC"). These interim
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in Illinois Power's ("IP" or the
"Company") Annual Report on Form 10-K for the year ended December 31, 1999,
filed with the SEC.
The financial statements include all material adjustments consisting of normal
recurring adjustments, which, in the opinion of management, were necessary for a
fair presentation of the results for the interim period. Interim period results
are not necessarily indicative of the results for the full year. The preparation
of the consolidated financial statements in conformity with generally accepted
accounting principles requires management to develop estimates and make
assumptions that affect reported financial position and results of operations
and that impact the nature and extent of disclosure, if any, of contingent
assets and liabilities. Actual results could differ from those estimates.
The condensed consolidated financial statements include the accounts of IP;
Illinois Power Capital, L. P.; Illinois Power Financing I ("IPFI"); Illinois
Power Securitization Limited Liability Company ("LLC"); and Illinois Power
Special Purpose Trust ("IPSPT"). As of May 31, 2000, the Monthly Income
Preferred Securites held by IPFI were redeemed and no other debts exist within
the IPFI trust. All significant intercompany balances and transactions have been
eliminated from the consolidated financial statements. All nonutility operating
transactions are included in the line titled "Other income and expenses, net" in
IP's Condensed Consolidated Statements of Operations.
Cash and cash equivalents include cash on hand and temporary investments
purchased with an initial maturity of three months or less. At June 30, 2000,
$12 million of such cash and cash equivalents was restricted while at December
31, 1999, $13 million was restricted. This cash is reserved for use in retiring
the Transitional Funding Trust Notes issued under the provisions of P.A. 90-561
(Illinois electric utility restructuring legislation enacted in December 1997).
NOTE 2 -- BUSINESS COMBINATION
On February 1, 2000, Dynegy, a Delaware corporation since renamed Dynegy
Holdings Inc. ("Former Dynegy"), and Illinova Corporation ("Illinova") merged in
a transaction (the "Merger") in which Former Dynegy and Illinova became wholly
owned subsidiaries of Dynegy Inc., a newly formed Illinois corporation
("Dynegy"). This Merger, which was approved by shareholders of both Former
Dynegy and Illinova on October 11, 1999, resulted in each share of Illinova
common stock, no par value per share, being converted into one share of New
Dynegy Class A common stock, no par value per share. This Merger was accounted
for under the purchase method of accounting and Former Dynegy was the acquirer
for accounting purposes. IP continues to be a wholly owned subsidiary of
Illinova, but is ultimately subject to control by the Dynegy Board of Directors.
IP's condensed consolidated financial statements were prepared on the historical
cost basis and do not reflect an allocation of the purchase price to IP that was
recorded by Dynegy as a result of the Merger.
As part of the Merger, severance and retirement costs of $38 million ($23
million after-tax) were recorded in the first quarter 2000. Severance charges
represented approximately $20 million ($12 million after tax) of the total costs
incurred, of which $15 million had been paid by the end of the second quarter.
As of June 30, 2000, approximately 249 employees were either severed or have
retired as a result of the Merger. It is expected that an additional 25 will be
severed or retire by the end of the year. The severance/retirement plan is being
executed pursuant to IP's plan and related actions are expected to be
substantially complete by the end of 2000.
6
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ILLINOIS POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
NOTE 3 -- AFFILIATED COMPANIES
Effective October 1, 1999, IP transferred its wholly owned fossil generating
assets and other generation-related assets and liabilities at net book value, to
Illinova, in exchange for an unsecured note receivable of $2.8 billion. Such
assets were subsequently transferred by Illinova to a separate subsidiary, which
was later renamed Dynegy Midwest Generation, Inc. ("DMG"). The note matures on
September 30, 2009 and bears interest at an annual rate of 7.5%, due
semiannually in April and October. At June 30, 2000, principal and accrued
interest outstanding under the note receivable approximated $2.3 billion and $42
million, respectively. IP has recognized $90 million interest income from
Illinova on the note in 2000 and $42 million for the three months ended June 30,
2000.
IP routinely conducts business with subsidiaries of Dynegy. These transactions
include the purchase or sale of electricity, natural gas and transmission
services as well as certain other services. Operating revenue derived from
transactions with affiliates approximated $11 million and $17 million for the
three and six months ended June 30, 2000, respectively. Aggregate operating
expenses charged by affiliates approximated $155 million and $293 million for
the three and six months ended June 30, 2000, respectively. Related party
transactions have been conducted at prices and terms similar to those available
to and transacted with unrelated parties.
IP has a power purchase agreement ("PPA") with DMG, providing IP the right to
purchase power from DMG for a primary term extending through December 31, 2004,
with provisions to extend the PPA thereafter on an annual basis, subject to
concurrence by both parties. The PPA defines the terms and conditions under
which DMG provides capacity and energy to IP, using a tiered pricing structure.
Effective January 1, 2000, the Dynegy consolidated group, which includes IP,
began operating under a Services and Facilities Agreement, whereby the
affiliates exchange services with IP such as financial, legal, information
technology and human resources as well as shared facility space. IP services are
exchanged at fully distributed costs and revenue is not recorded under this
agreement.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
LEGAL AND ENVIRONMENTAL ISSUES.
ENVIRONMENTAL PROTECTION AGENCY COMPLAINT.
On November 3, 1999, the United States Environmental Protection Agency ("EPA")
issued a Notice of Violation ("NOV") against IP and, with the Department of
Justice ("DOJ"), filed a Complaint against IP in the U.S. District Court for the
Southern District of Illinois, No. 99C833. Subsequently, the DOJ and EPA amended
the NOV and Complaint to include DMG (IP and DMG collectively the "Defendants").
Similar notices and lawsuits have been filed against a number of other
utilities. Both the NOV and Complaint allege violations of the Clean Air Act and
regulations thereunder. More specifically, both allege, based on the same
events, that certain equipment repairs, replacements and maintenance activities
at the Defendants' three Baldwin Station generating units constituted "major
modifications" under either or both the Prevention of Significant Deterioration
and the New Source Performance Standards regulations. When non-exempt "major
modifications" occur, the Clean Air Act and related regulations generally
require that generating facilities meet more stringent emissions standards. The
DOJ amended its complaint to assert the claims found in the NOV. The Defendants
filed an answer denying all claims and asserting various specific defenses. By
order dated April 19, 2000, a trial date of November, 2001 was set. The initial
trial is limited to liability.
The regulations under the Clean Air Act provide certain exemptions to the
definition of "major modifications," particularly an exemption for routine
repair, replacement or maintenance. Management has analyzed each of the
activities covered by the EPA's allegations and believes each activity
represents prudent practice regularly performed throughout the utility industry
as necessary to maintain the operational efficiency and safety of equipment. As
such, Management believes that each of these activities is covered by the
exemption for routine repair, replacement and maintenance and that the EPA is
changing, or attempting to change through enforcement actions, the intent and
meaning of its regulations.
7
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ILLINOIS POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
Management also believes that, even if some of the activities in question were
found not to qualify for the routine exemption, there were no increases either
in annual emissions or in the maximum hourly emissions achievable at any of the
units caused by any of the activities. The regulations provide an exemption for
increased hours of operation or production rate and for increases in emissions
resulting from demand growth.
Although none of the Defendants' other facilities are covered in the Complaint
and NOV, the EPA has officially requested information concerning activities at
the Defendants' Vermilion, Wood River and Hennepin Plants. It is possible that
the EPA will eventually commence enforcement actions against those plants as
well.
The EPA has the authority to seek penalties for the alleged violations in
question at the rate of up to $27,500 per day for each violation. The EPA also
will be seeking installation of "best available control technology" ("BACT") (or
equivalent) at the Baldwin Station and possibly at the other three plants as
well.
Management believes that the EPA's and DOJ's claims are without merit, and that
the ultimate resolution of this lawsuit will not have a material adverse effect
on IP's financial position or results of operations.
MANUFACTURED GAS PLANTS ("MGP"). IP's estimated liability for MGP site
remediation is $56 million. This amount represents IP's current estimate of the
costs it will incur to remediate the 24 MGP sites for which it is responsible.
Because of the unknown and unique characteristics at each site, IP cannot
currently determine its ultimate liability for remediation of the sites. In
October 1995, IP initiated litigation against a number of its insurance
carriers. Settlement proceeds recovered from these carriers offset a significant
portion of the MGP remediation costs and are credited to customers through the
tariff rider mechanism that the Illinois Commerce Commission ("ICC") previously
approved. Cleanup costs in excess of insurance proceeds are considered probable
of recovery from IP's transmission and distribution customers.
OTHER LEGAL PROCEEDINGS. IP is involved in legal or administrative proceedings
before various courts and agencies with respect to matters occurring in the
ordinary course of business. Management believes that the final disposition of
these proceedings will not have a material adverse effect on IP's consolidated
financial position or results of operations.
REGULATORY MATTERS.
P.A. 90-561 - UTILITY EARNINGS CAP. P.A. 90-561 contains floor and ceiling
provisions applicable to IP's Return on Equity ("ROE") during the transition
period ending in 2006 (or 2008 at the option of the utility and with approval by
the ICC). Pursuant to these provisions, IP may request an increase in its base
rates if the two-year average of its earned ROE is below the two-year average of
the monthly average yields of 30-year U.S. Treasury bonds for the concurrent
period ("Treasury Yield"). Conversely, IP is required to refund amounts to its
customers equal to 50 percent of the value earned above a defined "ceiling
limit." The ceiling limit is exceeded if IP's ROE exceeds the Treasury Yield,
plus 6.5 percent in 2000 through 2004 (which increases to 8.5% in 2000 through
2004 if a utility chooses not to implement transition charges after 2006).
Regulatory asset amortization is included in the calculation of ROE for the
ceiling test, but is not included in the floor test calculation.
P.A. 90-561 - RATE ADJUSTMENT PROVISIONS. P.A. 90-561 gave IP's residential
customers a 15 percent decrease in base electric rates beginning August 1, 1998,
and an additional 5 percent decrease effective on May 1, 2002. The rate
decreases result in expected revenue reductions of approximately $75 million in
each of the years 2000 and 2001, approximately $92 million in 2002, and
approximately $101 million in 2003 and 2004, based on projected consumption.
P.A. 90-561 - DIRECT ACCESS PROVISIONS. Beginning in October 1999, customers
with demand greater than 4 MW at a single site, customers with at least 10 sites
having aggregate total demand of at least 9.5 MW, and customers representing
one-third of the remaining load in the non-residential class were free to choose
their electric generation suppliers ("direct access"). Direct access for
remaining non-residential customers occurs December 31, 2000. Direct access will
be available to all residential customers in May 2002. IP remains obligated to
serve all customers who continue to take service from IP at tariff rates and
remains obligated to provide delivery service to all customers at regulated
rates. The
8
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ILLINOIS POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
transition charges departing customers must pay to IP are not designed to
hold IP completely harmless from resulting revenue loss because of the
mitigation factor.
Although the specified residential rate reductions and the introduction of
direct access will lead to lower electric service revenues, P.A. 90-561 is
designed to protect the financial integrity of electric utilities in three
principal ways:
1) Departing customers are obligated to pay transition charges, based on the
utility's lost revenue from that customer. The transition charges are
applicable through 2006 and can be extended two additional years by the
ICC.
2) Utilities are provided the opportunity to lower their financing and capital
costs through the issuance of "securitized" bonds, also called transitional
funding instruments; and
3) The ROE of utilities is managed through application of floor and ceiling
test rules contained in P.A. 90-561 described elsewhere herein.
The extent to which revenues are affected by P.A. 90-561 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, among other things, the amount of revenues earned and
the cost of doing business.
P.A. 90-561 - INDEPENDENT SYSTEM OPERATOR ("ISO") PARTICIPATION. Participation
in an ISO by utilities serving retail customers in Illinois was one of the
requirements included in P.A. 90-561. In January 1998, IP, in conjunction with
eight other transmission-owning entities, filed with the FERC for all approvals
necessary to create and to 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 goals of this joint undertaking are: 1)
to put in place a tariff allowing easy and nondiscriminatory access to
transmission facilities in a multi-state region, 2) to enhance regional
reliability, and 3) to 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, eight other transmission-owning entities have
joined the MISO. The MISO has a stated goal to be fully operational by November
1, 2001.
OTHER COMMITMENTS AND CONTINGENCIES.
INTERNAL REVENUE SERVICE AUDIT. The Internal Revenue Service is currently
auditing Illinova's federal income tax returns for the years 1994 through 1997.
IP's operations were included in the consolidated federal income tax returns
filed by Illinova during those periods. Management believes that the ultimate
resolution of these proceedings will not have a material adverse effect on IP's
financial position or results of operations.
NOTE 5 -- SEGMENT INFORMATION
IP is engaged in the transmission, distribution and sale of electric energy and
the distribution, transportation and sale of natural gas in the state of
Illinois. In previous periods, IP was also engaged in the generation of electric
energy. As previously discussed, effective October 1, 1999, IP transferred its
fossil-fueled generating assets to Illinova. Additionally, as a condition
precedent to the Merger, IP sold its interest in the Clinton Nuclear Power
Station to AmerGen. As a result of these enterprise changes, the structure of
IP's internal organization has constricted into a single prospective reportable
segment. For 2000, this segment includes the transmission, distribution, and
sale of electric energy in Illinois; and the transportation, distribution, and
sale of natural gas in Illinois. Also included in this segment are specialized
support functions, including accounting, legal, performance management,
information technology, human resources, environmental resources, purchasing and
materials management, and public affairs. For comparability purposes, results
for 2000 should be compared with the Customer Service segment in previous
periods.
During the 1999 period, IP's operations were divided into four reportable
segments: Customer Service, Wholesale Energy, Nuclear and Other.
9
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ILLINOIS POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
The business groups and their principal services were as follows:
- Customer Service Business Group - transmission, distribution, and sale of
electric energy; distribution, transportation, and sale of natural gas in
Illinois.
- Wholesale Energy Business Group - fossil-fueled electric generation in
Illinois, wholesale electricity transactions throughout the United States,
and dispatching activities.
- Nuclear Generation Business Group - nuclear-fueled electric generation in
Illinois.
- Other - This category included the financial support functions such as
accounting, finance, corporate performance, audit and compliance, investor
relations, legal, corporate development, regulatory, risk management, and
tax services. Also included in this group were specialized support
functions, including information technology, human resources, environmental
resources, purchasing and materials management, and public affairs.
Generally, Illinois Power accounts for intercompany transactions at prevailing
rates or fully distributed costs. Operating segment information for the
three-month period ended June 30, 1999 is presented below.
<TABLE>
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====================================================================================================================
ILLINOIS POWER'S SEGMENT DATA FOR THE QUARTER ENDED JUNE 30, 1999
====================================================================================================================
CUSTOMER WHOLESALE
SERVICE ENERGY NUCLEAR OTHER TOTAL
------------------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Unaffiliated domestic revenues $ 321 $ 52 $ 5 $ --- $ 378
Intersegment domestic revenues (a) --- 119 37 (156) ---
------------------------------------------------------------------------
Total revenues 321 171 42 (156) 378
------------------------------------------------------------------------
Depreciation and amortization 24 26 1 --- 51
Other operating expenses (a) 210 135 59 (151) 253
Interest expense 20 21 3 --- 44
AFUDC --- (2) --- --- (2)
Interest and other income --- (2) (2) (1) (5)
Income tax expense (benefit) 26 (4) (7) 2 17
Net income (loss) after taxes $ 41 $ (3) $ (12) $ (6) $ 20
Identifiable assets:
Domestic (b) $ 2,315 $ 3,162 $ 199 $ 36 $ 5,712
Capital expenditures 28 86 --- 2 116
====================================================================================================================
</TABLE>
(a) Intersegment revenue priced at 2.9 cents per kwh delivered for 1999.
Intersegment expense is reflected in other operating expenses for
Customer Service. Intersegment revenues and expenses are eliminated in
the Other column.
(b) Primary assets for Nuclear include decommissioning assets, shared general
and intangible plant and nuclear fuel.
10
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ILLINOIS POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
Operating segment information for the six months ended June 30, 1999 is
presented below.
<TABLE>
<CAPTION>
====================================================================================================================
ILLINOIS POWER'S SEGMENT DATA FOR THE SIX MONTHS ENDED JUNE 30, 1999
====================================================================================================================
CUSTOMER WHOLESALE
SERVICE ENERGY NUCLEAR OTHER TOTAL
------------------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Unaffiliated domestic revenues $ 697 $ 146 $ 7 $ --- $ 850
Intersegment domestic revenues (a) --- 255 37 (292) ---
------------------------------------------------------------------------
Total revenues 697 401 44 (292) 850
------------------------------------------------------------------------
Depreciation and amortization 42 51 4 --- 97
Other operating expenses (a) 485 262 149 (286) 610
Interest expense 39 41 4 --- 84
AFUDC (1) (2) --- --- (3)
Interest and other income --- (2) (4) (3) (9)
Income tax expense (benefit) 51 18 (43) 2 28
Net income (loss) after taxes $ 81 $ 33 $ (66) $ (5) $ 43
Identifiable assets:
Domestic (b) $ 2,315 $ 3,162 $ 199 $ 36 $ 5,712
Capital expenditures 50 101 --- 3 154
====================================================================================================================
</TABLE>
(a) Intersegment revenue priced at 2.9 cents per kwh delivered for 1999.
Intersegment expense is reflected in other operating expenses for Customer
Service. Intersegment revenues and expenses are eliminated in the Other
column.
(b) Primary assets for Nuclear include decommissioning assets, shared general
and intangible plant and nuclear fuel.
11
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ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
The following discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements of IP included elsewhere
herein and with the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
GENERAL
COMPANY PROFILE. IP is engaged in the transmission, distribution and sale of
electric energy and the distribution, transportation and sale of natural gas
in the state of Illinois. IP's condensed consolidated financial statements
include the accounts of IP; Illinois Power Capital, L.P., a limited
partnership in which IP serves as the general partner; Illinois Power
Financing I, a statutory business trust in which IP serves as sponsor;
Illinois Power Securitization Limited Liability Company, a special purpose
Delaware LLC whose sole member is IP; and Illinois Power Special Purpose
Trust, a special purpose Delaware business trust whose sole owner is Illinois
Power Securitization LLC. Effective October 1, 1999, IP's wholly owned fossil
generating assets were transferred to Illinova and Illinova contributed these
assets to Illinois Power Marketing, Inc. ("IPMI"), a wholly owned subsidiary
of Illinova, which was later renamed Dynegy Midwest Generation, Inc.
following the Merger. As a condition precedent to the Merger, IP sold its
interest in the Clinton Power Station to AmerGen in December 1999. As of May
31, 2000, the Monthly Income Preferred Securites held by IPFI were redeemed
and no other debts exist within the IPFI trust.
On February 1, 2000, Dynegy, a Delaware corporation since renamed Dynegy
Holdings Inc. ("Former Dynegy"), and Illinova merged in a transaction in which
Former Dynegy and Illinova became wholly owned subsidiaries of Dynegy Inc., a
newly formed Illinois corporation ("Dynegy"). This Merger, which was approved by
shareholders of both Former Dynegy and Illinova on October 11, 1999, resulted in
each share of Illinova common stock, no par value per share, being converted
into one share of Dynegy Class A common stock, no par value per share. This
Merger was accounted for under the purchase method of accounting and Former
Dynegy was the acquirer for accounting purposes. IP continues to be a wholly
owned subsidiary of Illinova, but is ultimately subject to control by the Dynegy
Board of Directors.
IP's condensed consolidated financial statements have been prepared on the
historical cost basis and do not reflect an allocation of the purchase price to
IP that was recorded by Dynegy as a result of the Merger.
BUSINESS SEGMENTS. As a result of the enterprise changes impacting IP during the
fourth quarter of 1999, IP's operations now consist of a single prospective
reportable segment. For 2000, this segment includes the transmission,
distribution, and sale of electric energy in Illinois; and the transportation,
distribution, and sale of natural gas in Illinois. Also included in this segment
are specialized support functions, including accounting, legal, performance
management, information technology, human resources, environmental resources,
purchasing and materials management, and public affairs. For comparability
purposes, results for 2000 should be compared with the Customer Service segment
from the previous period.
IP's operations were divided into four reportable segments in 1999: Customer
Service, Wholesale Energy, Nuclear and Other.
The business groups and their principal services in 1999 were as follows:
- Customer Service Business Group - transmission, distribution, and sale of
electric energy; distribution, transportation, and sale of natural gas in
Illinois.
- Wholesale Energy Business Group - fossil-fueled electric generation in
Illinois, wholesale electricity transactions throughout the United States,
and dispatching activities.
- Nuclear Generation Business Group - nuclear-fueled electric generation in
Illinois.
- Other - This category included the financial support functions such as
accounting, finance, corporate performance, audit and compliance, investor
relations, legal, corporate development, regulatory, risk management, and
tax services. Also included in this group were specialized support
functions, including information technology, human resources, environmental
resources, purchasing and materials management, and public affairs.
12
<PAGE>
ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION. This Form 10-Q
contains various forward-looking statements, within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, and information that are based on management's beliefs as well as
assumptions made by and information currently available to management. When used
in this document, words such as "anticipate", "estimate", "project", "forecast"
and "expect" reflect forward-looking statements. Although IP believes that the
expectations reflected in such forward-looking statements are reasonable; it can
give no assurance that such expectations will prove to have been correct. Such
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated, projected, forecasted or expected. Among the key risk
factors that may have a direct bearing on IP's results of operations and
financial condition are:
- Competitive practices in the industries in which IP competes;
- Fluctuations in commodity prices for electricity and/or natural gas;
- Operational and systems risks;
- Environmental liabilities that are not covered by indemnity or insurance;
- General economic and capital market conditions, including fluctuations in
interest rates; and
- The impact of current and future laws and governmental regulations, whether
federally or state imposed (particularly environmental regulations and
further changes to energy deregulation), affecting the energy industry in
general, and IP's operations in particular.
COMPETITION. Competition has become a dominant issue for the electric utility
industry. It is a significant departure from traditional regulation in which
public utilities have a universal obligation to serve the public in return for
protected service territories and regulated pricing designed to allow a
reasonable return on prudent investment and recovery of operating costs.
Competition arises not only from co-generation or independent power production,
but also from municipalities seeking to extend their service boundaries to
include customers being served by utilities. The right of municipalities to have
power wheeled to them by utilities was established in 1973. IP has been
obligated to wheel power for municipalities and cooperatives in its territory
since 1976.
Further competition may be introduced by state action, as has occurred in
Illinois, or by federal regulatory action. However, the Energy Policy Act
currently precludes the FERC from mandating retail wheeling. Retail wheeling
involves the transport of electricity to end-use customers.
IMPACT OF PRICE FLUCTUATIONS. IP's operating results may be impacted by
commodity price fluctuations for electricity used in supplying service to its
customers. IP has contracted with AmerGen and DMG to supply power via Power
Purchase Agreements. With these arrangements, IP has provided adequate power
supply for expected IP load plus a reserve supply above that expected level.
Should power acquired under these agreements be insufficient to meet IP load
requirements, IP will have to buy power at current market prices. The power
purchase agreement with DMG obligates DMG to provide power up to the reservation
amount even if DMG has individual units unavailable at various times. The power
purchase agreement with AmerGen does not provide for an obligation by AmerGen to
acquire replacement power for IP in the event of a curtailment or shutdown at
the Clinton Power Station. Under a Clinton shutdown scenario, to the extent IP
exceeds its capacity reservation with DMG, IP will have to buy power at current
market prices.
The ICC determines IP's rates for gas service. These rates have been designed to
recover the cost of service and allow shareholders the opportunity to earn a
reasonable rate of return. Future natural gas sales will continue to be affected
by an increasingly competitive marketplace, changes in the regulatory
environment, transmission access, weather conditions, gas cost recoveries,
customer conservation efforts, and the overall economy.
13
<PAGE>
ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
SEASONALITY. IP's revenue and operating margin are impacted by seasonal factors
that affect sales volumes of electricity and gas. Typically, revenues from sales
of electricity are higher in the summer months resulting from the summer cooling
season; whereas, gas revenues are higher in the winter heating season.
EFFECT OF INFLATION. Although IP's operations are affected by general economic
trends, management does not believe inflation has had a material effect on IP's
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
IP has historically emphasized intellectual solutions to solving business
issues. IP was a leader in the development of the comprehensive electric utility
regulatory reform legislation for the state of Illinois, which provided the
foundation for the Company's subsequent strategic actions and transformation.
Following the successful execution of its strategy to transfer its fossil-fueled
generation to an unregulated status and to exit its nuclear operation, IP is now
focused on delivering reliable transmission and distribution services in a
cost-effective manner. IP will also continue its efforts to capitalize on
strategic and operational synergies made possible by the Merger.
IP has historically relied upon operating cash flow and borrowings from a
combination of commercial paper issuances, bank lines of credit, corporate
credit agreements and various public debt issuances for its liquidity and
capital resource requirements. The following briefly describes the terms of
these arrangements.
AFFILIATE TRANSACTION. IP maintains an unsecured note receivable due from its
parent relating to the October 1999 transfer of the fossil-fueled generating
assets. The note matures on September 30, 2009, and bears interest at an annual
rate of 7.5 percent, due semiannually in April and October. Principal
outstanding under this note totaled $2.3 billion at June 30, 2000. Principal
repayments and interest payments accruing under this arrangement provide IP with
a significant source of liquidity to meet its prospective operating and capital
expenditure requirements.
COMMERCIAL PAPER AND LINES OF CREDITS. At June 30, 2000, IP had commercial paper
outstanding in the amount of $125 million. Remaining availability under a credit
agreement totaled $175 million. IP believes additional financing arrangements
can be obtained at reasonable terms, if required.
MORTGAGE. Aggregate principal outstanding under IP's New Mortgage Bonds
approximated $1.1 billion at June 30, 2000, bearing interest ranging from 5.4
percent to 7.5 percent per annum. At June 30, 2000, IP had unsecured
non-mortgage-borrowing capacity totaling approximately $354 million.
SECURITIZATION. In December 1998, IPSPT issued $864 million of Transitional
Funding Trust Notes as allowed under the Illinois Electric Utility Transition
Funding Law in P.A. 90-651. Per annum interest on these notes averages
approximately 5.4 percent. IP is retiring the principal outstanding under these
notes through quarterly payments of $21.6 million.
DIVIDENDS. Under the Restated Articles of Incorporation, common stock dividends
are subject to the preferential rights of the holders of preferred and
preference stock. IP's retained earnings balance is expected to be sufficient
during 2000 to support payment of all scheduled preferred dividends.
PREFERRED SECURITIES OF SUBSIDIARY TRUST. A wholly owned subsidiary of IP has
$100 million aggregate liquidation amount of Subordinated Capital Income
Securities outstanding at June 30, 2000, which were issued in a private
transaction. These Trust Originated Preferred Securities ("TOPrS") were issued
at 8 percent with a $25 per share liquidation preference. The TOPrS mature on
January 31, 2045 and may be redeemed at IP's option, in whole or in part, from
time to time on or after January 31, 2001. IP redeemed all $93 million of the
tax advantaged Monthly Income Preferred Securities on May 31, 2000.
CAPITAL ASSET PROGRAM. Construction expenditures for the six months ended June
2000 were approximately $66 million. IP estimates that it will spend
approximately $98 million on construction for the remainder of 2000. IP
construction
14
<PAGE>
ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
expenditures for 2001 through 2004 are expected to total approximately $760
million. Additional expenditures may be required during this period to
accommodate the transition to a competitive environment, environmental
compliance, system upgrades, and other costs that cannot be determined at
this time.
YEAR 2000 ISSUES. IP completed all phases of the Year 2000 Program relative to
computer systems and technology infrastructure considered essential to IP's
business prior to the event. The year 2000 event passed without significant
incident. IP's contingency plans are designed to minimize any disruptions or
other adverse effects resulting from unexpected incompatibilities regarding core
systems and business applications and to facilitate the early identification and
remediation of system problems that manifest themselves after December 31, 1999.
To date, no significant items have been identified. IP continues to assess, test
and remediate business applications and technology infrastructure that were
previously determined to be other than essential to core business operations.
The extent of these activities is very insignificant to IP's overall business.
CONCLUSION. The Company continues to believe that it will be able to meet all
foreseeable cash requirements, including working capital, capital expenditures
and debt service, from operating cash flow, supplemented by borrowings under its
various credit facilities and other sources of liquidity.
15
<PAGE>
ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
RESULTS OF OPERATIONS
Provided below is an unaudited tabular presentation of certain IP operating and
financial statistics for the three month periods ended June 30, 2000 and 1999,
respectively.
<TABLE>
<CAPTION>
=======================================================================================================
THREE MONTHS ENDED JUNE 30,
-----------------------------------
2000 1999
----------------- ----------------
(IN MILLIONS)
<S> <C> <C>
ELECTRIC SALES REVENUES -
Residential $ 90 $ 90
Commercial 79 80
Industrial 93 95
Other 9 9
--------------- ---------------
Revenues from ultimate consumers 271 274
Interchange 3 56
Transmission/Wheeling 10 3
--------------- ---------------
Total Electric Revenues $ 284 $ 333
============== ==============
ELECTRIC SALES IN KWH (MILLIONS) -
Residential 1,041 1,018
Commercial 1,012 999
Industrial 2,314 2,321
Other 88 90
--------------- ---------------
Sales to ultimate consumers 4,455 4,428
Interchange 3 1,349
--------------- ---------------
Total Electric Sales 4,458 5,777
=============== ===============
GAS SALES REVENUES -
Residential $ 32 $ 26
Commercial 10 9
Industrial 7 7
Other 1 -
--------------- ---------------
Revenues from ultimate consumers 50 42
Transportation of customer-owned gas 2 2
Interdepartmental sales 3 1
--------------- ---------------
Total Gas Revenues $ 55 $ 45
============== ==============
GAS SALES IN THERMS (MILLIONS) -
Residential 38 34
Commercial 15 15
Industrial 17 23
--------------- ---------------
Sales to ultimate consumers 70 72
Transportation of customer-owned gas 64 67
--------------- ---------------
Total gas sold and transported 134 139
Interdepartmental sales 7 4
--------------- ---------------
Total Gas Delivered 141 143
=============== ===============
=======================================================================================================
</TABLE>
16
<PAGE>
ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
Provided below is an unaudited tabular presentation of certain IP operating and
financial statistics for the six month periods ended June 30, 2000 and 1999,
respectively.
<TABLE>
<CAPTION>
=======================================================================================================
SIX MONTHS ENDED JUNE 30,
-----------------------------------
2000 1999
----------------- ----------------
(IN MILLIONS)
<S> <C> <C>
ELECTRIC SALES REVENUES -
Residential $ 183 $ 185
Commercial 154 152
Industrial 177 172
Other 17 17
--------------- ---------------
Revenues from ultimate consumers 531 526
Interchange 4 150
Transmission/Wheeling 18 6
--------------- ---------------
Total Electric Revenues $ 553 $ 682
============== ==============
ELECTRIC SALES IN KWH (MILLIONS) -
Residential 2,277 2,306
Commercial 2,053 2,016
Industrial 4,412 4,290
Other 180 188
--------------- ---------------
Sales to ultimate consumers 8,922 8,800
Interchange 50 2,653
--------------- ---------------
Total Electric Sales 8,972 11,453
=============== ===============
GAS SALES REVENUES -
Residential $ 108 $ 111
Commercial 38 39
Industrial 15 12
Other 2 1
--------------- ---------------
Revenues from ultimate consumers 163 163
Transportation of customer-owned gas 3 3
Miscellaneous 5 2
--------------- ---------------
Total Gas Revenues $ 171 $ 168
============== ==============
GAS SALES IN THERMS (MILLIONS) -
Residential 183 203
Commercial 76 83
Industrial 41 37
--------------- ---------------
Sales to ultimate consumers 300 323
Transportation of customer-owned gas 139 145
--------------- ---------------
Total gas sold and transported 439 468
Interdepartmental sales 13 8
--------------- ---------------
Total Gas Delivered 452 476
=============== ===============
=======================================================================================================
</TABLE>
17
<PAGE>
ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
THREE MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
For the second quarter ended June 30, 2000, IP reported net income of $30
million, compared with second quarter 1999 net income of $20 million.
Operational factors impacting comparability of results period-to-period
include:
- market purchases of power during the 1999 period as a result of the
extended Clinton outage during that period,
- recognition of operational expenses in the 1999 period associated with the
fossil generation assets, and
- contractual terms associated with the purchased power from AmerGen and DMG
in the 2000 period.
Operating revenues in 2000 decreased $39 million primarily due to decreased
electric interchange sales.
Operating expenses and taxes decreased $28 million in 2000 compared to 1999.
The increase in power purchased was offset by reductions in production,
operating, maintenance, depreciation and amortization, and general taxes due
to the transfer of fossil assets in late 1999.
Other income includes interest income associated with the affiliate note
receivable of $42 million in 2000 arising from the October 1999 asset
transfer. Interest expense period-to-period decreased $10 million reflecting
lower average principal balances, partially offset by higher average rates.
IP reported an income tax provision of $21 million for the three-month period
ended June 30, 2000, compared to an income tax provision of $16 million for
the 1999 period. The effective tax rates approximated 41 and 45 percent in
2000 and 1999, respectively.
DIVIDEND REQUIREMENTS
The holders of the IP Serial Preferred Stock are entitled to receive
dividends if and when, as declared by the Board of Directors of the Company
out of funds legally available therefore. The Company paid approximately $4
million in cash dividends and distributions during the three-months ended
June 30, 2000, of which approximately $1 million was on its Preferred Stock.
In addition, IP paid dividends on its Monthly Income Preferred Securities
(MIPS) and Trust Originated Preferred Securities (TOPrS) of approximately $4
million. During the same quarter of 1999, dividends paid on MIPS and TOPrS
approximated $4 million.
SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
For the six months ended June 30, 2000, IP reported net income of $55
million, compared with net income of $43 million during the first six months
of 1999. Non-recurring charges totaling $38 million ($23 million after-tax)
relating to retirement and severance costs associated with the Merger
impacted the 2000 results. The 1999 results include Clinton operations and
maintenance expenses of $64 million ($38 million after-tax) and a
non-recurring contract pre-settlement gain of $61 million ($37 million
after-tax). After adjusting for these non-recurring charges and gains, and
deleting the effect of 1999 Clinton operation and maintenance expenses,
recurring net income for the first six months of 2000 totaled approximately
$78 million, compared to approximately $44 million in the same prior year
period. Other operational factors impacting comparability of results
period-to-period include:
- market purchases of power during the 1999 period as a result of the
extended Clinton outage during that period,
- recognition of operational expenses in the 1999 period associated with the
fossil generation assets, and
- contractual terms associated with the purchased power from AmerGen and DMG
in the 2000 period.
Operating revenues in 2000 excluding the contract settlement adjustment
identified above, decreased $65 million primarily due to decreased electric
interchange sales.
Operating expenses in 2000 excluding income taxes and the expense adjustments
identified above, decreased $19 million. The increase in power purchased was
offset by reductions in production, operating, maintenance, depreciation and
amortization, and general taxes due to the transfer of fossil assets in late
1999.
Other income includes interest income associated with the affiliate note
receivable of $90 million in 2000 arising from the October 1999 asset
transfer. Interest expense period-to-period decreased $12 million reflecting
lower average principal balances, partially offset by higher average rates.
18
<PAGE>
ILLINOIS POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999
IP reported an income tax provision of $34 million for the six-month period
ended June 30, 2000, compared to an income tax provision of $28 million for
the 1999 period. The effective tax rates approximated 38 and 39 percent in
2000 and 1999, respectively. The differences between the aforementioned
effective tax rates and the statutory tax rate of 40 percent for both periods
result principally from the tax deductibility of the dividends on company
obligated mandatorily redeemable preferred securities and depreciation not
normalized.
OPERATING CASH FLOW
Cash flow from operating activities totaled $260 million for the six-month
period ended June 30, 2000, compared to $38 million reported in the 1999
period. Changes in operating cash flow reflect the operating results
previously discussed herein. Also affecting cash flow for 2000 was a decrease
in receivables from associated companies, an income tax refund, fewer
purchases of gas stored underground, and decreases in accrued liabilities
attributable to interest accrued for federal and state taxes and to
reductions in deferred revenue.
CAPITAL EXPENDITURES AND INVESTING ACTIVITIES
During the six-months ended June 30, 2000, IP spent approximately $66 million
on electric and gas construction compared to $154 million in the same period
of 1999. IP expects expenditures for the remainder of the current year to
approximate $98 million.
DIVIDEND REQUIREMENTS
The holders of the IP Serial Preferred Stock are entitled to receive
dividends if and when, as declared by the Board of Directors of the Company
out of funds legally available therefore. The Company paid approximately $9
million in cash dividends and distributions during the six-months ended June
30, 2000, of which approximately $1 million was on its Preferred Stock. In
addition, IP paid dividends on its Monthly Income Preferred Securities (MIPS)
and Trust Originated Preferred Securities (TOPrS) of approximately $8
million. During the same period of 1999, dividends paid on MIPS and TOPrS
approximated $8 million.
19
<PAGE>
ILLINOIS POWER COMPANY
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
See "Note 4 - Commitments and Contingencies" in the Notes to Condensed
Consolidated Financial Statements for an update on legal proceedings.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following instruments and documents are included as exhibits to this
Form 10-Q.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
27 Financial Data Schedule-Schedule UT (filed only
electronically with the SEC)
</TABLE>
(b) There have been no Form 8-Ks, Commission File No. 1-3004, filed since the
first quarter Form 10-Q.
20
<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 and thereunto duly authorized.
Illinois Power Company
Date: August 14, 2000 By: /s/ Peggy E. Carter
---------------- -------------------------------
Peggy E. Carter, Controller
(Principal Accounting Officer)
21
