Item 1. Business
Illinois Power Company (the "Company") was incorporated under the laws of the State of Illinois on May 25, 1923. It is engaged in the generation, transmission, distribution and sale of electric energy and the distribution, transportation and sale of natural gas in the State of Illinois.
On February 9, 1994, the stockholders of the Company approved, by a favorable vote of 57,647,534 shares or 70.14% of the total shares outstanding, an agreement and plan of merger for creation of a holding company. The holding company will be named Illinova Corporation. Documents have been filed relating to the formation of a holding company with the Illinois Commerce Commission (ICC), the Federal Energy Regulatory Commission (FERC), the Securities and Exchange Commission (SEC) under the Public Utility Holding Company Act and the Nuclear Regulatory Commission (NRC). In January 1994, the NRC gave its consent to the restructuring. The applications filed with the FERC, the SEC, and the ICC are currently pending. The holding company formation is not subject to ICC approval; however, the ICC must approve the agreement under which the Company may provide services and facilities to the holding company and affiliates.
The territory served by the Company comprises substantial areas in northern, central and southern Illinois, including the following larger communities (1990 Federal Census data):
The Company holds franchises in all of the 310 incorporated municipalities in which it furnishes retail electric service and in all of the 257 incorporated municipalities in which it furnishes retail gas service.
Total operating revenues, including interchange sales, of the Company for the past three years by classes of service were as follows:
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Operating income before income taxes for the past three years by classes of service were as follows:
Identifiable assets for the past three years by classes of service were as follows:
At December 31, 1993, the Company had 4,540 employees.
Electric Business
Overview
The Company supplies electric service at retail to an estimated aggregate population of 1,265,000 in 310 incorporated municipalities, adjacent suburban and rural areas, and numerous unincorporated communities. Electric service at wholesale is supplied for resale to one electric utility and to the Illinois Municipal Electric Agency (IMEA) as agent for 11 municipalities. The Company also has a power coordination agreement with Soyland Power Cooperative, Inc. (Soyland). See the sub-caption "Power Coordination Agreement With Soyland" hereunder for additional information. In 1993, the Company provided interchange power to 13 utilities for resale.
The Company's highest system peak hourly demand (native load) in 1993 was 3,415,000 kilowatts on August 26, 1993. This 1993 peak load compares with the Company's historical high of 3,508,000 kilowatts in 1988.
The Company owns and operates electric generating facilities having a net summer capability of 4,416,000 kilowatts. The major electric generating stations are Clinton power station (Clinton) (933,000 kilowatts, of which 810,000 kilowatts of capability are owned by the Company and 123,000 kilowatts of capability are owned by Soyland), Baldwin (1,740,000 kilowatts), Havana (666,000 kilowatts), Wood River (603,000 kilowatts), Hennepin (286,000 kilowatts) and Vermilion (165,000 kilowatts). The other generating facilities owned by the Company consist of gas turbine units at three locations which provide peaking service and have an aggregate capability of 146,000 kilowatts. Havana Units 1-5 (238,000 killowatts) and Wood River Units 1-3 (139,000 kilowatts) are currently not staffed, but are available to meet reserve requirements with a maximum of four months' notice.
The Company owns 20% of the capital stock of Electric Energy, Inc. (EEI), an Illinois corporation, which was organized to own and operate a steam electric generating station and related transmission facilities near Joppa, Illinois to supply electric energy to the Department of Energy (DOE) for its project near Paducah, Kentucky. Under a power supply agreement with EEI, the Company has the right to purchase 5.0% of the annual output of the Joppa facility. The Company has the flexibility to schedule the capacity in varying amounts ranging from a nominal 51,000 kilowatts for 52 weeks up to a maximum of 203,000 kilowatts for approximately
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13 weeks. The Company must schedule its annual capacity entitlement by August 1 of the preceding year, and availability of the scheduled capacity is subject to certain other limitations related to scheduling considerations of the other co-owners of the Joppa facility and the DOE, and unit outages (if any).
The Company is a participant, together with Union Electric Company and Central Illinois Public Service Company, in the Illinois-Missouri Power Pool which was formed in 1952. The Pool operates under an Interconnection Agreement which provides for the interconnection of transmission lines and contains provisions for the coordination of generating equipment maintenance schedules, inter-company sales of firm and non-firm power, and the maintaining of minimum capacity reserves by each participant equal to the greater of 15% of its peak demand, one-half of its largest unit, or one-half of its largest non-firm purchase.
The Company, Central Illinois Public Service Company and Union Electric Company have a contract with Tennessee Valley Authority (TVA) providing for the interconnection of the TVA system with those of the three companies to exchange economy and emergency power and for other working arrangements.
The Company also has interconnections with Indiana-Michigan Power Company, Commonwealth Edison Company, Central Illinois Light Company, Iowa-Illinois Gas & Electric Company, Kentucky Utilities Company, Southern Illinois Power Cooperative, Soyland Power Cooperative, Inc. and the City of Springfield, Illinois for various interchanges, emergency services and other working arrangements.
The Company is also a member of the Mid-America Interconnected Network, which is one of nine regional reliability councils established to coordinate plans and operations of member companies regionally and nationally.
Power Coordination Agreement With Soyland
Under the provisions of a Power Coordination Agreement (PCA) between Soyland and the Company dated October 5, 1984, as amended, the Company is required to provide Soyland with 8.0% (288 megawatts) of electrical capacity from its fossil-fueled generating plants through 1994. This requirement will increase to 12% in 1995 and each year thereafter until the agreement expires or is terminated. This is in addition to the capacity Soyland receives as an owner of Clinton. The Company is compensated with capacity charges and for energy costs and variable operating expenses. The Company transmits energy for Soyland through the Company's transmission and subtransmission systems. Under provisions of the PCA, Soyland has the option of participating financially in major capital expenditures at the fossil-fueled plants, such as those needed for Clean Air Act compliance, to the extent of its capacity entitlement and with each party bearing its own direct capital costs, or having the costs treated as plant additions and billed to Soyland in accordance with other billing provisions of the PCA. See the sub-caption "Clean Air Act" on page 20, under "Environmental Matters" for further discussion. At any time after December 31, 2004, either the Company or Soyland can terminate the PCA by giving not less than seven years' prior written notice to the other party. The party to whom termination notice has been given may designate an earlier effective date of termination which shall be not less than twelve months after receiving notice. The revenues received from the power supplied to Soyland under the PCA are classified as operating revenues. In 1993, Soyland supplied electricity to 21 distribution cooperative members who served approximately 150,000 rural customers in 69 Illinois counties.
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Fuel Supply
The Company used coal to generate 70.2% of the electricity produced during the year ended December 31, 1993, with nuclear, oil, and gas contributing 28.4%, 0.4%, and 1.0%, respectively. The respective average costs of these fuels per million Btu during 1993 were: Coal $1.50, Nuclear $.90, Oil $3.40 and Gas $2.60 for a weighted average cost of $1.34. The weighted average cost of all fuels per million Btu during the years 1992 and 1991 was $1.33 and $1.37, respectively. High-sulfur coal mined in Illinois, Indiana and Kentucky provided 44.7%, 17.2% and 4.1%, respectively, of the coal delivered to the Company's electric generating stations in 1993. In addition, the Company received low-sulfur coal from Kentucky, Colorado, West Virginia, Wyoming, Montana, Tennessee, Utah and Illinois.
The average cost of primary fuel consumed at the Company's generating stations during the periods indicated was as follows:
The Company's rate schedules contain provisions for passing along to its electric customers increases or decreases in the cost of fuels used in its generating stations. See the information under the captions Revenue and Energy Cost of "Note 1 - Summary of Significant Accounting Policies" on page 33 of the Illinois Power Company 1993 Annual Report which is incorporated herein by reference and the sub-caption "1987 Uniform Fuel Adjustment Clause Reconciliation" on page 14 for additional information.
Reference is made to the sub-caption "Environmental Matters" hereunder for information regarding pollution control matters relating to the Company's fuel supply.
Coal - As shown below, the Company presently has contracts with expiration dates ranging from 1994 to 2004 which will provide about 41 million tons of coal. Based upon projected 1994 usage of approximately 6.6 million tons, this is equivalent to about 6.2 years of consumption.
Longer-term contracts with Peabody Coal Company (Peabody) and Arch Coal Sales Company, Inc. (Arch) in effect in 1993 provide for price renegotiations related to current market prices. In 1993, as hereinafter described, the Company negotiated contract amendments with each of these suppliers lowering the cost of their coal. These amendments provide for future price adjustments based on specified benchmarks. The shorter-term contracts with Northern Coal Company, CONSOL, Inc. and Golden Oak Mining Co. contain specified annual prices for each year in the contract term. The Company will be evaluating replacement coal supply alternatives to the CONSOL, Inc. contract at Wood River and the Northern Coal Company contract at Vermilion. Final decisions on both are expected by the end of the third quarter of 1994. Total contract purchases will range between 5.4 million to 5.7 million tons of coal in 1994.
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The sources and quantities of coal supplies, contract expiration dates, weighted average cost of coal purchases and anticipated sulfur contents are summarized in the following table:
* High-sulfur content classified as 2.5 percent or greater.
(a) The Company has a contract with Peabody to purchase, in total, 2,500,000 tons per year at Baldwin and Hennepin. The Company has also agreed to purchase and Peabody has agreed to supply through 1995 all coal needs above the Arch and Peabody contract quantities at Baldwin and Hennepin.
(b) This contract will supply 2,065,500 tons per year.
(c) This contract will supply 500,000 tons in 1994.
(d) This contract will supply 200,000 to 250,000 tons per year.
(e) This contract provides for delivery of 150,000 to 360,000 tons in 1994.
See the sub-caption "Environmental Matters" hereunder for additional information regarding the supply of coal at the Baldwin power station.
When the Company's needs exceed contracted quantities, coal is purchased on the spot market. Spot purchases in 1993 represented about 12% of the Company's total coal purchases. The delivered cost of coal purchased on a spot basis during the year varied between $26.47 per ton, or $1.27 per million Btu, and $50.11 per ton, or $2.01 per million Btu. The Company anticipates that the spot market will continue to be a favorable supplemental source of supply for the next few years, and the Company will have adequate supplies of coal. The coal inventory at December 31, 1993 represented a 25 day supply based on the Company's average daily burn projection for 1994.
In December 1992, the Company filed a complaint in the U. S. District Court in St. Louis, Missouri, against Peabody, in which the Company sought declaratory judgment and injunctive relief with respect to its contractual rights to test burn and use coal from other suppliers in order to achieve compliance with the Clean Air Act if to do otherwise would expose the Company to higher costs.
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In January 1993, the Company filed a complaint in the U. S. District Court in St. Louis, Missouri against Arch seeking a declaratory judgment to enforce provisions in the coal supply contracts with Arch which permit the Company under certain circumstances to negotiate or arbitrate lower coal prices and if coal is available from other suppliers at substantially lower cost, to terminate the contracts on one year's notice. In February 1993, Arch and two subsidiaries filed suit against the Company in Perry County, Illinois, seeking a declaratory judgment, specific performance and other relief related to the Company's rights to declare force majeure and limit its coal purchases under the existing contracts, State law, and the Clean Air Act, and its declaration of certain force majeure events in prior years. In accordance with agreements-in-principle executed by the Company with each of these suppliers, all litigation was temporarily placed on hold, and deadlines for responses extended, to allow the parties to conclude negotiation of terms under which the Company may continue to purchase coal,through amendments to the existing contracts, on a cost- competitive basis, during the Phase I compliance period of the Clean Air Act Amendments.
Final agreements were executed with both Arch and Peabody in 1993. In accordance with those agreements, all of the above-described litigation will be dismissed with prejudice.
Oil - The Havana power station (five units totaling 238,000 kilowatts), is the Company's only station which utilizes fuel oil for the generation of electric energy. These units are currently not staffed, but are available to meet reserve requirements with a maximum of four months' notice.
Gas - Three generating units (totaling 139,000 kilowatts) at the Wood River power station and two combustion peaking plants, Stallings (75,000 kilowatts) and Oglesby (60,000 kilowatts), are fueled with natural gas. The three units at Wood River are currently not staffed, but are available to meet reserve requirements with a maximum of four months' notice. These units have the capability of burning either natural gas or distillate fuel oil. Natural gas is also used in start-up and as a secondary boiler fuel for two generating units (totaling 286,000 kilowatts) at the Hennepin power station and as a secondary boiler fuel for one generating unit (totaling 92,000 kilowatts) at the Wood River power station. Natural gas is also used as start-up fuel for one additional unit at the Wood River power station. The Company anticipates that adequate supplies of gas for these uses will be available for the foreseeable future. See the sub-caption "Gas Business" hereunder.
Nuclear - The Company leases nuclear fuel from Illinois Power Fuel Company (Fuel Company). The Fuel Company, which is 50% owned by the Company, was formed in 1981, for the purpose of leasing nuclear fuel to the Company for Clinton. Lease payments are equal to the Fuel Company's cost of fuel as consumed (including related financing and administrative costs). This lease is recorded as a capitalized lease on the Company's books. As of December 31, 1993, the Fuel Company had an investment in nuclear fuel of approximately $129 million. The Company is obligated to make subordinated loans to the Fuel Company at any time the obligations of the Fuel Company which are due and payable exceed the funds available to the Fuel Company. At December 31, 1993 the Company had no outstanding loans to the Fuel Company.
At December 31, 1993, the Company's net investment in nuclear fuel consisted of $22 million of Uranium 308. This inventory represents fuel to be used in connection with the fifth reload of Clinton which is scheduled to commence in March 1995. The unamortized investment of the nuclear fuel assemblies in the reactor was $106 million.
The Company signed two contracts in 1988 for the supply of uranium concentrates beginning in 1991. One contract is with U. S. Energy/Crested Corporation and the other contract is with Cameco, a Canadian corpora- tion. Each of the two contracts is for 1,179,240 lbs. of uranium
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concentrates, with deliveries from 1991 to 1997. The contracts contain an option for an additional 479,440 lbs. of uranium concentrates for delivery through 2000. Each of the two contracts is to provide an estimated 35% of Clinton's fuel requirements, but each contract contains provisions permitting the Company to purchase 50-60% of Clinton's fuel requirements in certain years through the spot market. The decision to utilize these provisions is made the year before each delivery and depends on the estimated price and availability from the spot market versus the estimated contract prices. During 1993, all nuclear fuel purchases were settled in United States dollars.
In October 1993, the Company filed suit in U.S. District Court, Central District of Illinois, Danville, seeking a declaration that the Company's termination of one of these uranium supply contracts is permitted by the terms of the contract. Defendants in the lawsuit are U.S. Energy Corporation, Crested Corporation, U. S. Energy/Crested Corporation, Cycle Resources Investment Corporation, Sheep Mountain Partners, Nulux Nukem Luxemburg GMBH, and Dresdner Bank. The defendants are joint ventures, partnerships, and domestic and foreign corporations who are either original parties or parties by assignment to the contract. The Company purchased approximately half of its uranium concentrates supply under this contract, which the Company terminated shortly before filing this action. If the contract termination is upheld, the Company does not anticipate having difficulty in replacing the contract at significantly lower fuel prices. The defendants have filed responses including affirma- tive defenses and breach of contract claims. A motion for change of venue filed by certain of the defendants has been denied, and the case is proceeding.
Conversion services for the period 1991-2001 are contracted with Sequoyah Fuels. Sequoyah Fuels closed its Oklahoma conversion plant in 1992 and has joined with Allied Chemical Company to form a new marketing company named CoverDyn. All conversion services will be performed at Allied's Metropolis, Illinois facility, but Sequoyah Fuels will retain the contract with the Company. The Company has a Utility Services contract for uranium enrichment requirements with the DOE which provides 70% of the enrichment requirements of Clinton through September 1999. The remaining 30% has been contracted with the DOE through its incentive pricing plan through September 1995, and an amendment was signed in 1993 which covers the remaining 30% through 1999. This amendment allows the Company to either purchase the enrichment services at the DOE's incentive price or provide electricity at DOE's Paducah, Kentucky enrichment plant, an agreed exchange rate. In addition, legislation was passed to create a new private government corporation, the United States Enrichment Corporation (USEC), for enrichment services. All of the DOE's assets including all contracts were transferred to the USEC as of July 1993.
A contract with General Electric Company provides fuel fabrication requirements for the initial core and 2,196 fuel bundles (approximately 11 reloads through 2004). In 1993, an amendment was signed with the General Electric Company to add 1,472 fuel bundles to the contract and to change the existing price as well as some other terms and conditions. The additional 1,472 fuel bundles are expected to cover fuel fabrication requirements through 2017.
Beyond the stated commitments, the Company may enter into additional contracts for uranium concentrates, conversion to uranium hexafluoride, enrichment and fabrication.
Currently, no plants for commercial reprocessing of spent nuclear fuel are in operation in the U.S., and reprocessing cannot commence until appropriate licenses are issued by the NRC. Clinton has on-site high density storage capability which will provide spent nuclear fuel storage capacity to meet requirements until the year 2004. Various governmental agencies are currently reviewing the environmental impact of nuclear fuel reprocessing and waste management. The Nuclear Waste Policy Act of
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1982 was enacted to establish a government policy with respect to disposal of spent nuclear fuel and high-level radioactive waste. The Company signed a contract for disposal of spent nuclear fuel and/or high-level radioactive waste on July 6, 1984 with the DOE. Under the contract, the Company is required to pay the DOE one mill (one-tenth of a cent) per net kilowatt-hour (one dollar per MWH) of electricity generated and sold. The Company is recovering this amount through rates. The federal government is required to have a repository in place to accept spent nuclear fuel by January 31, 1998; however, current federal government schedules indicate the year 2010 for the acceptance of the first spent nuclear fuel. The Company expects that it will be able to meet interim storage requirements through 2009 on-site using existing in-core pool facilities.
Under the Energy Policy Act of 1992, the Company is responsible for a portion of the cost to decontaminate and decommission the DOE's uranium enrichment facilities. Each utility will be assessed an annual fee for a period of fifteen years based on quantities purchased from the DOE facilities prior to passage of the Act. During 1992 the Company recorded an estimated liability of $10.5 million, which was revised to $7.2 million in 1993. At December 31, 1993, the Company has a remaining liability of $6.7 million representing future assessments. The Company is recovering these costs, as amortized, through its fuel adjustment clause.
Construction Program
The cost, including allowance for funds used during construction (AFUDC), of the Company's construction program during 1994 and during the period January 1, 1994 to December 31, 1998 is estimated as follows:
Historic gas purchases are shown in the following table. The source labeled "Other" below represents purchases from small natural gas fields in Illinois.
The Company's present estimated supplies of gas from pipelines and its own storage are sufficient to serve all of its existing firm loads, and to provide best efforts service to interruptible loads. Gas service to interruptible customers was interrupted on six occasions for a total of 622 hours during the year 1993. On these occasions, storage service was made available in lieu of curtailment. Gas service continues to be available to all applicants on a current basis.
During 1993, the Company completed the Hillsboro Storage Field expansion project at a cost of approximately $56 million. The project included construction of a 62 mile pipeline from Hillsboro to the Decatur area, as well as additional facilities in the Metro-East area. The expansion increased total gas storage capacity by 42 percent and allows the Company to take maximum advantage of lower summer spot market prices, to reduce pipeline contract demand charges and to increase supplier price competition in the St. Louis Metro-East area. Nine new injection-withdrawal wells and two additional compressor units have been constructed to increase the storage capacity of the Hillsboro Field. Injection rates were tripled and delivery/withdrawal rates were increased 150 percent to better meet winter peak demand.
Environmental Matters
The Company is subject to regulation by certain federal and Illinois authorities with respect to environmental matters and may in the future become subject to additional regulation by such authorities or by other federal, state and local governmental bodies. Existing regulations affecting the Company are principally related to air and water quality, hazardous wastes and toxic substances.
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Air Quality
Pursuant to the Federal Clean Air Act (Act), the United States Environmental Protection Agency (USEPA) has established ambient air quality standards for air pollutants which in its judgment have an adverse effect on public health or welfare. The Act requires each state to adopt laws and regulations, subject to USEPA approval, designed to achieve such standards. Pursuant to the Illinois Environmental Protection Act, the Illinois Pollution Control Board (Board) adopted and, along with the Illinois Environmental Protection Agency (IEPA), is enforcing a comprehensive set of air pollution control regulations which include emission limitations and permitting, monitoring, and reporting requirements. These regulations have, with some modifications, received USEPA approval and are enforceable by both the Illinois and federal agencies.
The air pollution regulations of the Board impose limitations on emissions of particulate, sulfur dioxide, nitrogen oxides, and various other pollutants. Enforcement of emission limitations is accomplished in part through the regulatory permitting process. To construct a facility which will produce regulated emissions, a construction permit must be obtained, usually on the basis of the design being sufficient to permit operation within applicable emission limitations. Upon completion of construction, an operating permit for the facility must be obtained. Operating permits are granted for various periods, usually within a range from two to five years. The initial granting or subsequent renewal of operating permits is based upon a demonstration that the facility operates within prescribed limitations on emissions. The Company's practice is to obtain an operating permit for each source of regulated emissions. Presently, it has a total of approximately 100 permits for emission sources at its power stations and other facilities, expiring at various times. In addition to having the requisite operating permits, each source of regulated emissions must be operated within the regulatory limitations on emissions. Verification of such compliance is usually accomplished by reports to regulatory authorities and inspections by such authorities.
Jointly, the Company and IEPA petitioned the Board to adopt a regulatory amendment providing for a site-specific sulfur dioxide limitation applicable to the Baldwin power station. The Board granted that relief in 1979 and amended it in 1983 to satisfy certain concerns raised by USEPA. In October 1983, the amendment, with supporting information, was submitted to USEPA for approval as part of the State Implementation Plan (SIP). On March 5, 1990, USEPA approved the Baldwin SIP allowing the use of local coal up to full capacity of the Baldwin power station.
In addition to the sulfur dioxide emission limitations for existing facilities, both the USEPA and the State of Illinois adopted New Source Performance Standards (NSPS) applicable to coal-fired generating units limiting emissions to 1.2 pounds of sulfur dioxide per million Btu of heat input. This standard is applicable to the Company's Unit 6 at the Havana power station. The federal NSPS also limits nitrogen oxides, opacity and particulate emissions and imposes certain monitoring requirements. In 1977 and 1990 the Act was amended and, as a result, USEPA has adopted more stringent emission standards for new sources. These standards would apply to any new plant constructed by the Company.
Clean Air Act
On November 15, 1990, the U. S. Congress passed the Clean Air Act Amendments (Amendments). The Amendments create new programs to control acid rain, protect stratospheric ozone and require permits for most air pollution sources. The Amendments also modify the existing hazardous air pollutant program and impose new air quality requirements on sources in areas which do not meet the ambient air quality standards.
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As the regulations implementing the Amendments are developed, the Company will develop and implement plans to maintain compliance with any new air pollutant restrictions.
In August 1992, the Company announced that it had suspended construction of two scrubbers at the Baldwin power station, on which the Company has expended approximately $34.6 million. After suspending scrubber construction, the Company reconsidered its alternatives for complying with Phase I of the 1990 Clean Air Act Amendments. In March, the Company announced its compliance plan for Phase I (1995-1999) of the Clean Air Act.
To meet the Phase I sulfur dioxide requirements of the acid rain provisions of the Clean Air Act, the Company will purchase sulfur dioxide emission allowances while continuing the use of high-sulfur Illinois coal. An emission allowance is the authorization by the USEPA to emit one ton of sulfur dioxide. The Company has already contracted to purchase approximately 430,000 of the approximately 550,000 emission allowances it expects to need to acquire from outside sources for Phase I compliance purposes. In 1993 the Illinois General Assembly passed and the governor signed legislation authorizing the ICC to permit expenditures and revenues from emission allowance purchases and sales to be reflected in rates charged to customers through the fuel adjustment clause as a cost of fuel. On February 18, 1994, the Company filed with the ICC revised fuel adjustment clause tariffs providing for recovery of expenses and revenues from emission allowances. On March 16, 1994, the ICC suspended this filing for investigation pursuant to the provisions of the Illinois Public Utilities Act. In addition, on March 9, 1994, the ICC initiated a rule-making proceeding to consider changes to its Uniform Fuel Adjustment Clause regulation to conform to the 1993 legislation.
The Company's compliance plan will defer, until at least 2000, any need for scrubbers or other capital projects associated with sulfur dioxide emission reductions. Additional actions will be required by the Company to achieve compliance with the Phase II sulfur dioxide and nitrogen-oxide emission requirements of the Clean Air Act.
To achieve compliance with the Phase I nitrogen-oxide emission reduction requirements of the acid rain provision of the Clean Air Act, the Company is installing low-nitrogen-oxide burners at two generating units. The estimated capital cost for these burners is $13 million. Additional capital expenditures are anticipated prior to 2000 to comply with the Phase II nitrogen-oxide requirements, as well as potential requirements to further reduce nitrogen-oxide emissions in the St. Louis metropolitan area. The Company is also proceeding with installation of continuous emission monitoring systems at its major generating stations, as required by the acid rain provisions of the Clean Air Act. The estimated capital cost for these monitoring systems is $17 million. The Company has expended approximately $9 million through 1993 on continuous emission monitoring systems.
In July 1993, the Alliance for Clean Coal (Alliance), a coalition of Western coal producers and railroads, filed suit against the ICC in the U.S. District Court in Chicago. The Alliance sought a declaration that the Illinois statute regarding the filing with and approval by the ICC of utility Clean Air Act compliance plans is unconstitutional. In September 1993, the ICC issued an order pursuant to this statute approving the Company's compliance plan for Phase I. In December 1993, the U.S. District Court issued an opinion and an order in Alliance for Clean Coal vs. Ellen Craig, et al. declaring the statute unconstitutional. The order prohibits the ICC from enforcing the statute, and declares void compliance plans prepared and approved in reliance on the statute. The Company is of the belief that no regulatory approval is now required of its Clean Air Act compliance plan, and has determined to go forward with the plan it has adopted for Phase I. The ICC has appealed the District Court decision to the U.S. Court of Appeals.
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Gas Manufacturing Sites
The Company, through its predecessor companies, is identified on a State of Illinois list as the responsible party for potential environmental impairment at 25 former manufactured-gas plant sites. The Company is investigating each site to determine (1) the type and amount of residues present; (2) whether the residues constitute environment or health risks and, if present, the extent of those risks; and (3) whether the Company has any responsibility for remedial action. Because of the unknown and unique characteristics of each site (such as amount and type of residues present, physical characteristics of the site and the environmental risk) and uncertain regulatory requirements, the Company is not able to determine its ultimate liability for the investigation and remediation of the 25 sites. However, at December 31, 1993, the Company has estimated and recorded a minimum liability of $35 million, which is an increase of $10 million from 1992. This adjustment to the liability was made because the Company can better define the extent of contamination due to ongoing monitoring. In 1993, the Company spent approximately $1.5 million for investi- gation and remediation activities. The Company is unable to determine at this time what portion of these costs, if any, will be eligible for recovery from insurance carriers or other potentially responsible parties. In addition, the Company is unable to determine the time frame over which these costs may be paid out. The Company has also recorded a regulatory asset in the amount of $36 million, reflecting management's expectation that investigation and remediation costs for the manufactured-gas plant sites will be recovered from customers.
In September 1992, the ICC issued a generic order addressing the recoverability of costs incurred by utilities in cleaning up coal-tar deposits resulting from the operation and retirement of former manufactured-gas plant sites. The ICC order concluded that utilities will be allowed to collect from customers their prudently incurred costs paid to third parties over a five-year period with no recovery from customers of carrying costs on the unrecovered balance. Based on the ICC's ruling that carrying costs on unrecovered cleanup costs will not be allowed, the Company and other utilities appealed the ICC order to the Illinois Appellate Court, Third District. Other parties also filed appeals of the ICC order, contesting the ICC's ruling that cleanup costs may be recovered from customers and that those costs may be recovered through a tariff rider. In December 1993, the Appellate Court issued its opinion affirming the ICC's order in all respects. In February 1993, an intervenor filed a petition for leave to appeal the Appellate Court decision with the Illinois Supreme Court. In April 1993, the ICC approved tariffs filed by the Company that provide for recovery of such costs that fall within the guidelines of the ICC's September 1992 Order and were incurred by the Company subsequent to January 1, 1993. The Company is also pursuing recovery of cleanup costs from its insurance carriers.
Water Quality
The Federal Water Pollution Control Act Amendments of 1972 require that National Pollutant Discharge Elimination System permits be obtained from USEPA (or, when delegated, from individual state pollution control agencies) for any discharge into navigable waters. Such discharges are required to conform with the standards, including thermal, established by USEPA and also with applicable state standards.
Enforcement of discharge limitations is accomplished in part through the regulatory permitting process similar to that described previously under "Air Quality". Presently, the Company has approximately two dozen permits for discharges at its power stations and other facilities, which must be periodically renewed.
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In addition to obtaining such permits, each source of regulated discharges must be operated within the limitations prescribed by applicable regulations. Verification of such compliance is usually accomplished by monitoring results reported to regulatory authorities and inspections by such authorities.
The Baldwin permit was reissued during the fourth quarter of 1993 and is due for renewal in the fourth quarter of 1997. The Hennepin NPDES permit was reissued in 1992 and is due for renewal in the third quarter of 1997. The Clinton permit was reissued in 1990 and is due for renewal in the second quarter of 1995. The Vermilion, Wood River and Havana permits were reissued in 1991. These permits are due for renewal in the fourth quarter of 1995.
Operations at the Vermilion Plant (Plant) may be affected by allegations that continued discharge of certain levels of effluents from the ash pond at the Plant into the Middle Fork of the Vermilion River violates state water quality standards. Although both the Illinois Environmental Protection Agency and the Illinois Department of Conservation have supported the Company's position that current effluent discharge limitations, applied to the Plant since these standards first were adopted, continue to be appropriate, both the Illinois Pollution Control Board, in a 1993 decision currently under appeal by the Company, and a citizens group have challenged the Company's ability to continue to discharge these effluents at current levels, and the citizens group has notified the Company that it may bring suit against the Company and the United States and Illinois Environmental Protection Agencies to prevent such discharges. The Company is investigating compliance options to determine the least cost response should the most restrictive limitations be imposed and believes that it can avoid any material adverse impact on financial condition and operations.
Other Issues
Hazardous and nonhazardous wastes generated by the Company must be managed in accordance with federal regulations under the Toxic Substances Control Act, the Comprehensive Environmental Response, Compensation and Liability Act, and the Resource Conservation and Recovery Act (RCRA) and additional state regulations promulgated under both RCRA and state law. Regulations promulgated in 1988 under RCRA govern the Company's use of underground storage tanks. The use, storage, and disposal of certain toxic substances, such as polychlorinated biphenyls (PCB's) in electrical equipment, are regulated under the Toxic Substances Control Act. Hazardous substances used by the Company are subject to reporting requirements under the Community-Right-To-Know Act. The State of Illinois has been delegated authority for enforcement of these regulations under the Illinois Environ- mental Protection Act and state statutes. These requirements impose certain monitoring, recordkeeping, reporting, and operational requirements which the Company has implemented or is implementing to assure compliance. The Company does not anticipate that compliance will have a material adverse effect on its financial position or results of operations.
Between June 1983 and January 1985, the Company shipped various materials containing PCB's to the Martha C. Rose Chemicals, Inc. (Rose) facility in Holden, Missouri for proper treatment and disposal. Rose, pursuant to permits issued by USEPA, had undertaken to dispose of PCB materials for the Company and others, but failed in part to do so. As a result of such failure, PCB materials were being stored at the facility. In 1986, the Company joined with a number of other generators to efficiently and economically cleanup the facility. The Steering Committee, consisting of the Company and 15 other entities has received USEPA's approval to implement the Remedial Design Work Plan (Plan). All work is scheduled for completion by December, 1994. The Steering Committee is required to monitor the site for a minimum of five years after completion of the Plan. At the present time, the Company does not believe its ratable share of potential liability related to the cost of future activities at the Rose site will have a material adverse effect on its financial condition or results of
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operations. The Company, along with fourteen other steering committee members, reached a settlement with all but one of the non- participating potentially liable entities to recover their ratable share of these costs.
Electric and Magnetic Fields
The possibility that exposure to electric and magnetic fields emanating from power lines, household appliances and other electric sources may result in adverse health effects has been a subject of increased public, governmental and media attention. Lawsuits have been filed against several utilities seeking recovery for personal injury or loss of property values allegedly resulting from EMF emanating from power lines or substations, or to have such facilities relocated. A considerable amount of scientific research has been conducted on this topic without definitive results. Research is continuing to resolve scientific uncertainties. It is too soon to tell what, if any, impact these actions may have on the Company's financial position and results of operation.
Environmental Expenditures
Operating expenses for environmentally-related activities in 1993 were approximately $50 million (including the incremental costs of alternative fuels to meet environmental requirements). The Company's accumulated capital expenditures (including AFUDC) for environmental protection programs since 1969 have reached approximately $780 million. This accumulated amount of capital expenditures through 1993 has been reduced to reflect a pro rata share of the disallowance of Clinton plant costs.
Research and Development
The Company's research and development expenditures during 1993, 1992 and 1991 were approximately $6.4 million, $3.7 million and $7.3 million, respectively. The increased research and development costs in 1993 are primarily due to increased dues to the Electric Power Research Institute and increased alternate fuel testing at the Baldwin Power Station. The higher 1991 amount was due to incremental coal transportation costs associated with test burns of western low-sulfur coal at Baldwin, Hennepin and Havana power stations.
Regulation
Under the Illinois Public Utilities Act, the ICC has broad powers of supervision and regulation with respect to the rates and charges of the Company, its services and facilities, extensions or abandonment of service, classification of accounts, valuation and depreciation of property, issuance of securities, and various other matters. The Illinois Public Utilities Act was amended effective January 1, 1986 to include certain provisions specifying criteria for the inclusion of utility plant investment in rate base. These provisions state in substance that the ICC shall include in a utility's rate base only the value of its investment which is both prudently incurred and used and useful in providing service to customers; that no new electric generating plant or significant addition to existing facilities shall be included in rate base unless the ICC determines that such plant or facility is reasonable in cost, prudent and used and useful in providing utility service to customers; and that the ICC is empowered to determine whether a utility's generating capacity is in excess of that reasonably necessary to provide adequate and reliable service and to make appropriate and equitable adjustments to rates upon a finding of excess capacity, provided that any such determination and adjustment with respect to generating capacity existing or under construction prior to January 1, 1986 shall be limited to the determination and adjustment, if any, appropriate under the law then in effect.
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The Company is exempt from all the provisions of the Public Utility Holding Company Act of 1935 except Section 9(a)(2) thereof. That section requires approval of the Securities and Exchange Commission prior to certain acquisitions by the Company of any securities of other public utility companies or public utility holding companies.
The Company is subject to regulation under the Federal Power Act by the FERC as to rates and charges in connection with the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce, the issuance of debt securities maturing in not more than 12 months, accounting and depreciation policies, and certain other matters.
The FERC has declared the Company exempt from the Natural Gas Act and the orders, rules, and regulations of the Commission thereunder.
The Company is subject to the jurisdiction of the NRC with respect to Clinton. NRC regulations control the granting of permits and licenses for the construction and operation of nuclear power stations and subject such stations to continuing review and regulation. Additionally, the NRC review and regulatory process covers decommissioning, radioactive waste, environmental and radiological aspects of such stations. In general, the NRC continues to propose new and revised rules relating to the operations and maintenance aspects of nuclear facilities. It is unclear whether such proposed rules will be adopted and what effect, if any, such adoption will have on the Company.
The Company is subject to the jurisdiction of the Illinois Department of Nuclear Safety (IDNS) with respect to Clinton. IDNS and the NRC entered a memorandum of understanding which allows IDNS to review and regulate nuclear safety matters at state nuclear facilities. The IDNS review and regulatory process covers radiation safety, environmental safety, emergency preparedness and emergency response. IDNS continues to propose new and revised state administrative code through legislative approval. It is unclear if such proposed rules will be adopted and what effect, if any, such adoption will have on the Company. However, the NRC has the final authority over such nuclear facilities.
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The present term of office of each of the above executive officers extends to the first meeting of the Company's Board of Directors after the Annual Election of Directors. There are no family relationships among the executive officers and directors of the Company.
Each of the above executive officers, except for Ms. Stetzner, Dr. Dreyer and Mr. Schultz, has been employed by the Company for more than five years in executive or management positions. Prior to election to the positions shown above, the following executive officers held the following positions since January 1, 1989.
Mr. Haab was elected Chairman in June 1991. Prior to being elected Chief Executive Office in April 1991 and President in April 1989, he was Executive Vice President and Senior Vice President.
Mr. Altenbaumer was elected Senior Vice President and Chief Financial Officer in June 1992. Prior to being elected Vice President, Chief Financial Officer and Controller in June 1990, he was Controller and Treasurer.
Mr. Lang was elected Senior Vice President in June 1992. He joined the Company as Vice President in July 1986.
Mr. Perry was elected Senior Vice President in June 1992. Prior to being elected Vice President in December 1989, he was Assistant Vice President and Manager of Nuclear Program Coordination at Clinton.
Mr. Cook was elected Vice President in June 1992. He previously held the positions of Manager of Clinton Power Station and Manager of Nuclear Planning and Support.
Mr. Smith's employment with the Company ended on December 31, 1993.
Ms. Stetzner was elected Vice President, General Counsel and Corporate Secretary in February 1993. Prior to joining the Company as General Counsel and Corporate Secretary in 1989, she was Associate General Counsel with Burlington Northern Railroad Company.
Mr. Dreyer joined the Company as Controller in June 1992. He previously was a Senior Audit Manager with Price Waterhouse.
Mr. Schultz was elected Treasurer in July 1989. He previously was Director of Planning and Programming at Clinton.
Operating Statistics
The information under the captions "Selected Statistics" on page 48 of the Illinois Power Company 1993 Annual Report is incorporated herein by reference.
Item 2.
Item 2. Properties
The Company owns and operates electric generating stations at Havana, Wood River, Hennepin, Baldwin, and near Danville, Illinois (designated as the Vermilion station), totaling 3,460,000 kilowatts of net summer capability. The Company has an ownership in the Clinton power station (Clinton) of 86.8% and Soyland Power Cooperative, Inc. owns the remaining 13.2%. The
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Company's portion of net summer output capability of Clinton is 810,000 kilowatts. The Company also owns other gas turbine generating facilities, at three locations, with an aggregate capability of 146,000 kilowatts.
The Company owns an interconnected electric transmission system of approximately 2,800 circuit miles, operating from 69,000 to 345,000 volts and a distribution system which includes about 36,900 circuit miles of overhead and underground lines.
All outstanding first mortgage bonds issued under the Mortgage and Deed of Trust dated November 1, 1943 are secured by a first mortgage lien on substantially all of the fixed property, franchises and rights of the Company with certain exceptions expressly provided in the mortgage securing the bonds. All outstanding New Mortgage Bonds issued under the General Mortgage and Deed of Trust dated November 1, 1992, are secured by a lien on the Company's properties used in the generation, purchase, transmission, distribution and sale of electricity and gas, which lien is junior to the lien of the Mortgage and Deed of Trust dated November 1, 1943.
Item 3.
Item 3. Legal Proceedings
Fuel and Purchased Gas Adjustment Clauses
The ICC holds annual public hearings to determine whether each utility's fuel adjustment clause and purchased gas adjustment clause reflect actual costs of fuel and gas prudently purchased and to reconcile amounts collected with actual costs, with the possibility of surcharges or refunds to reflect amounts under-collected or over-collected. See "1987 Uniform Fuel Adjustment Clause Reconciliation" reported under "Clinton Power Station" in Item 1 for information regarding a February 1992 order from the ICC.
Environmental
See "Environmental Matters" reported under Item 1 for information regarding legal proceedings concerning environmental matters.
Peabody Coal Company and Arch Coal Sales Company, Inc.
See "Coal" reported under "Fuel Supply" in Item 1 for information regarding certain legal proceedings relating to the Clean Air Act.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matter to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 1993. At a special meeting of shareholders held on February 9, 1994, the Company's shareholders approved an agreement and plan of merger providing for the creation of a new holding company. See "Business" under Item 1 for a description of the holding company formation.
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PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information under the caption "Quarterly Financial Information and Common Stock Data (Unaudited)" on page 46 of the Illinois Power Company 1993 Annual Report is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data
The information under the caption "Selected Financial Data" on page 47 of the Illinois Power Company 1993 Annual Report is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information under the caption "Management's Discussion and Analysis" on pages 18 through 25 of the Illinois Power Company 1993 Annual Report is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data
The financial statements on pages 27 through 46 and Report of Independent Accountants on page 26 of the Illinois Power Company 1993 Annual Report are incorporated herein by reference. With the exception of the aformentioned information and the information incorporated in Items 5, 6, 7, and 8, the Illinois Power Company 1993 Annual Report is not to be deemed filed as part of this Form 10-K Annual Report.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The information relating to directors is set forth in Part III of this Annual Report on Form 10-K. The information relating to executive officers is set forth in Part I of this Annual Report on Form 10-K.
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Item 11.
Item 11. Executive Compensation
The following table sets forth a summary of the compensation of the Chief Executive Officer and the four other most highly compensated executive officers of the Company for the years indicated.
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A)The amounts shown in this column are the cash award portion of grants made to these individuals under the Executive Incentive Compensation Plan, including amounts deferred under the Executive Deferred Compensation Plan. See Plan description in footnote (B) below.
B)This table sets forth stock unit awards for 1993 under the Company's Executive Incentive Compensation Plan. One-half of each year's award under this plan is converted into stock units representing shares of the Company's Common Stock based on the closing price of the Common Stock on the last trading day of the award year. The other one-half of the award is paid to the recipient in cash in the following year and is included in the Summary Compensation Table as Bonus paid in the award year. Stock units awarded in a given year, together with cash representing the accumulated dividend equivalents on those stock units, become fully vested after a three-year holding period. Stock units are converted into cash and paid based on the closing price of the Common Stock on the first trading day of the distribution year. Participants (or beneficiaries of deceased participants) whose employment is terminated by retirement on or after age 55, disability or death receive the present value of all unpaid awards on of such termination. Participants whose employment is terminated for reasons other than retirement, disability or death forfeit all unvested awards. In the event of a termination of employment within two years after a change in control of the Company (as defined in the Employee Retention Agreement described below), without good cause or by any participant with good reason, all awards of the participant become fully vested and payable. As of December 31, 1993, named executive officers were credited with the following total aggregate number of unvested stock units under the Executive Incentive Compensation Plan since its inception, valued on the basis of the closing price of the Company's Common Stock on December 31, 1993: Mr. Haab, 3,374 units valued at $74,650; Mr. Wells, 1,992 units valued at $44,083; Mr. Lang, 1,557 units valued at $34,454. Mr. Perry, 1,528 units valued at $33,813; Mr. Altenbaumer, 1,319 units valued at $29,200. Although stock units have been rounded, valuation is based on total stock units, including partial shares.
C)The amounts shown in this column are Company contributions under the Incentive Savings Plan (including the market value of shares and sale of electricity and gas, which lien is junior to the lien of the Mortgage and Deed of Trust dated November 1, 1943).
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The following tables summarize grants during 1993 of stock options under the Company's 1992 Long Term Inc. Compensation Plan and awards outstanding at year end for the individuals named in the Summary Compensation Table. No options were exercisable or exercised during 1993.
a)Each option becomes exercisable on March 31, 1997. In addition to the specified expiration date, the grant expires on the first anniversary of the recipient's death and/or the 90th day following retirement, and is not exercisable in the event recipient's employment terminates. In the event of a public tender for all or a portion of the stock, or if a proposal to merge or consolidate the Company with another company is submitted to the shareholders for a vote, the Compensation and Nominating Committee may declare the option immediately exercisable.
b)These options have been valued using the Black-Scholes option pricing model. Disclosure of the grant date present value, using the Black-Scholes model or potential realizable value assuming 5% and 10% annualized growth rates, is mandated; however, the Company does not necessarily view the Black-Scholes pricing methodology, or any other methodology, as a valid or accurate means of valuing stock option grants. The Company elected to use the standard Black-Scholes model, which uses the following factors: fair market value of share at grant; option exercise price; term of the option; current yield of the stock; risk-free interest rate; volatility of the stock. The fair market value of the stock on June 9, 1993 was $24.25; the exercise price of the options is $24.25; and the term option is ten years. The annual dividend rate on the Company's Common Stock on June 9, 1993 was $0.80 for a yield of 3.3 percent. The risk-free interest rate used was 5.96 percent, based on the ten-year U.S. Treasury bond yield on May 14, 1993. The volatility of the stock used was .245. This figure is based on the absolute volatility (annualized standard deviation of the logarithms of the prior stock performance) for the 36-month period ending March, 1993. This is a relatively high volatility for an electric utility due, in part, to the Company's nuclear plant construction cost recovery disallowances, related write-offs, and temporary suspension of common stock dividend payments during this period. The value thus determined, $6.76 share, was not discounted.
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Aggregated Option and Fiscal Year-End Option Value Table
Pension Benefits
The Company maintains a Retirement Income Plan for Salaried Employees (the "Plan") providing pension for all eligible salaried employees of the Company. In addition to the Plan, the Company also maintains a nonqualified Supplemental Retirement Income Plan for Salaried Employees of Illinois Power Company (the "Supplemental Plan") that covers all elected officers eligible to participate in the Plan and provides for payments from general funds of the Company of any monthly retirement income not payable under the Plan because of benefit limits imposed by law or because of certain Plan rules limiting the amount of credited service accrued by a participant.
The following table shows the estimated annual pension benefits on a straight life annuity basis payable upon retirement based on specified annual average earnings and years of credited service classifications, assuming continuation of the Plan and Supplemental Plan and employment until age 65. This table does not show, but any actual pension benefit payments would be subject to, the Social Security offset.
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The earnings used in determining pension benefits under the Plan are the participants' regular base compensation, as set forth under salaries in the compensation table.
At December 31, 1993, for purposes of both the Plan and the Supplemental Plan, Messrs. Haab, Wells, Altenbaumer, Lang and Perry had completed 28, 30, 21, 7 and 9 years of credited service, respectively.
Employee Retention Agreements
The Company has entered into Employee Retention Agreements with each of its executive officers. Under each of these agreements, the officer would be entitled to receive a lump sum cash payment if his or her employment were terminated by the Company without good cause or voluntarily by the officer for good reason within two years following a change in control of the Company (as defined in the Agreement). The amount of the lump sum payment would be equal to (1) 36 months' salary at the greater of the officer's salary rate in effect on the date the change in control occurred or the salary rate in effect on the date the change in the officer's employment with the Company terminated; plus (2) three times the largest bonus earned by the officer during the three calendar years preceding termination of employment. Under the agreement, the officer would continue, after any such termination of employment, to participate in and receive benefits under other benefit plans of the Company. Such coverage would continue for 36 months following termination of employment, or, if earlier, until the officer reached age 65 or was employed by another employer; provided that, if the officer was 50 years of age or older at the time of such termination, then coverage under health, life insurance and similar welfare plans would continue until the officer became 55 years of age, at which time he or she would be eligible to receive the type of coverage extended to employees of the Company who elect early retirement.
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Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following are the only holders known by the Company to be the beneficial owners of more than five percent of any class of the Company's outstanding stock.
1) According to its Form 4 filing, American Express Company and its Subsidiaries beneficially own 303,245 shares of Serial Preferred Stock, without par value, as of February 18, 1994, as to which beneficial ownership is disclaimed, with sole power to vote and dispose of all shares. American Express Company was late in filing a Statement of Changes in Beneficial Ownership relating to a redemption by the Company of certain shares of serial preferred stock without par value.
2) According to its Schedule 13G filing dated February 11, 1994, American General Corporation and Subsidiaries beneficially own 242,000 shares of Serial Preferred Stock, $50 par value (consisting of 211,100 shares of 8.00% Cumulative Preferred Stock, and 30,900 shares of 8.24% Cumulative Preferred Stock), and have shared power to vote or direct voting and shared power to dispose or direct disposition of all of such shares.
3) According to its Schedule 13G filing dated February 11, 1994, FMR Corp. owns 7,026,460 shares of Common Stock, with sole power to vote or direct the vote of 1,022,800 shares and sole power to dispose or direct the disposition of all shares.
4) According to its Schedule 13G filing dated February 10, 1994, Mellon Bank Corporation and Subsidiaries beneficially own 5,363,000 shares of Common Stock, with sole power to vote 3,786,000 shares, shared power to vote 202,000 shares, sole power to dispose of 4,355,000 shares and shared power to dispose of 1,008,000 shares.
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The names of the Board of Directors and certain information, including their principal occupation during the last five years and ownership of securities of the Company, with respect to each are shown below:
(1) Member of the Finance Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation and Nominating Committee.
(4) Member of the Corporate Strategy Committee.
(5) Member of the Nuclear Operations Committee.
(6) Includes 3,929 and 6,354 shares held in the accounts of Messrs. Haab and Wells, respectively, under the Company's Incentive Savings Plan.
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(7) Includes 5,540 shares to which Mr. Hansen is entitled through the Company's Deferred Compensation Plan for Certain Directors.
(8) In addition to the shares shown, Mr. Perkins, as trustee of The Putnam Funds, has shared voting and investment power over 443,000 shares of Common Stock, as to which he disclaims beneficial ownership.
(9) Mr. Powers'wife owns 1,200 shares of Preferred Stock, as to which he does not disclaim beneficial ownership.
(10) Includes 1,000 and 1,932 shares held by wives of Messrs. Wells and Zimmerman, respectively.
The Chief Executive Officer and four other most highly paid executive officers beneficially own the following shares of equity securities of the Company:
Except as indicated above, no director or any executive officer owns any other equity securities of the Company. No director or executive officer owns as much as one percent of the Common Stock. All executive officers and directors as a group own 78,751 shares of the Common Stock (less than one percent). The nature of beneficial ownership for shares shown, unless otherwise indicated, is sole voting and investment power.
Directors of the Company who are not salaried officers ("Outside Directors") receive a retainer fee of $18,000 per year. Outside Directors who also chair Board committees receive an additional $2,000 per year retainer. Outside Directors receive a grant of 600 shares of the Company's Common Stock on the date of each Annual Shareholders Meeting, representing payment in lieu of attendance-based fees for all Board and Committee meetings to be held during the subsequent one-year period. Outside Directors elected to the Board between Annual Shareholders Meetings are paid $850 for each Board and Committee meeting attended prior to the first Annual Shareholders Meeting after their election to the Board. The Company has a Retirement Plan for Outside Directors. Under this plan, each Outside Director who has attained age 65 and has served on the Board for a period of 60 or more consecutive months is eligible for annual retirement benefits at the rate of the annual retainer fee in effect when the director retires. These benefits, at the discretion of the Board, may be extended to Outside Directors who have attained the age of 65 but not served on the Board for the specified period. The benefits are payable for a number of months equal to the number of months of Board service, subject to a maximum of 120 months, and cease upon the death of the retired Outside Director.
Pursuant to the Company's Deferred Compensation Plan for Certain Directors, any director who is not a salaried officer or employee of the Company may elect to defer all or any portion of his or her fees until termination of
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his or her services as a director. Such deferred dollar amounts are converted into stock units representing shares of the Company's Common Stock with the value of each stock unit based upon the last reported sales price of such stock at the end of each calendar quarter. Additional credits are made to the participating director's account in dollar amounts equal to the dividends paid on the Common Stock which the director would have received if the director had been the record owner of the shares represented by stock units, and are converted into additional stock units. Upon termination of a participating director's services as a director, payment of his or her deferred fees is made in shares of Common Stock in an amount equal to the aggregate number of stock units credited to his or her account. Such payment is made in such number of annual installments as the Company may determine beginning in the year following the year of termination.
Item 13.
Item 13. Certain Relationships and Related Transactions
None.
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PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this report. (1) Financial Statements: Page in Annual Report to Stockholders*
Report of Independent Accountants 26 Statements of Income for the three years ended December 31, 1993 27 Balance Sheets at December 31, 1993 and 1992 28 Statements of Cash Flows for the three years ended December 31, 1993 29 Statements of Retained Earnings (Deficit) for the three years ended December 31, 1993 29 Statements of Preferred and Preference Stock at December 31, 1993 and 1992 30 Statements of Long-Term Debt at December 31, 1993 and 1992 31 Notes to Financial Statements 32 - 46
Page in Form 10-K
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedules 43 V Utility 44 - 46 VI Accumulated Depreciation 47 - 49 VIII Valuation and Qualifying Accounts 50 - 52 X Supplementary Income Statement Information 53
* Incorporated by reference from the indicated pages of the 1993 Annual Report.
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
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Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
(3) Exhibits
The exhibits filed with the Form 10-K are listed in the Exhibit Index located elsewhere herein. All management contracts and compen- satory plans or arrangements set forth in such list are marked with a ~.
(b) Reports on Form 8-K since September 30, 1993:
A Current Report on Form 8-K, dated October 15, 1993, was filed reporting under Item 5, Other Events.
A Current Report on Form 8-K, dated February 9, 1994, was filed reporting under Item 5, Other Events.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 Larry D. Haab Larry D. Haab, Chairman, President and Chief Executive Officer
Date: March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.
Signature Title Date
Larry D. Haab Chairman,President, Chief Larry D. Haab Executive Officer and Director (Principal Executive Officer)
Larry F. Altenbaumer Senior Vice President Larry F. Altenbaumer and Chief Financial Officer Principal Financial Officer)
Alec G. Dreyer Controller Alec G. Dreyer (Principal Accounting Officer)
Richard R. Berry Richard R. Berry
Grover J. Hansen
Donald E. Lasater Donald E. Lasater
Donald S. Perkins March 30, 1994 Donald S. Perkins
Robert M. Powers Robert M. Powers
Walter D. Scott Walter D. Scott Director
Ronald L. Thompson Ronald L. Thompson
Walter M. Vannoy Walter M. Vannoy
Marilou von Ferstel Marilou von Ferstel
Charles W. Wells Charles W. Wells
John D. Zeglis John D. Zeglis
Vernon K. Zimmerman Vernon K. Zimmerman
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Report of Independent Accountants on Financial Statement Schedules
To the Board of Directors of Illinois Power Company
Our audits of the financial statements referred to in our report dated February 9, 1994, appearing on page 26 of the 1993 Annual Report to Stockholders of Illinois Power Company (which report and financial statements are incorporated by reference in this Annual Report on Form 10-K), also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements.
As discussed in Note 1 to the financial statements, the Company changed its method of accounting for income taxes.
\S\ Price Waterhouse
PRICE WATERHOUSE One Boatmen's Plaza St. Louis, Missouri
February 9, 1994
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( ) Credit (1) Gross-up to Plant ($162 million - Electric and $.9 million - Gas) for Net-of-Tax AFUDC in accordance with FAS 109. (2) Transfer of ($2.7 million) from Gas Stored Underground (Noncurrent) to Underground Storage at the Hillsboro Storage Field. (3) Transfer of $3.7 million from Inventory to Gas Stored Underground (Noncurrent) at the Hillsboro Storage Field. (4) Transfer between accounts - Clinton Unitization [Nuclear - ($7.8 million), Transmission - $9.7 million, General Plant - ($1.9 million)] (5) Includes ($11.6 million) deferred Clinton costs. (6) Includes ($1 million) capital lease property.
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( ) Credit (1) Transfer of $21.7 million from CWIP to Plant held for future use due to suspended scrubber project. (2) Transfer of $2.2 million to Plant held for future use and $.5 million to Non-utility property from Production ($2.4 million) and Transmission Plan ($.3 million). (3) Transfer of $2.3 million from Gas stored underground (noncurrent) to Underground storage at the Hillsboro Storage Field. (4) Transfer of $4.5 million from Inventory to Gas stored underground (noncurrent) at the Hillsboro Storage Field.
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( ) Credit (1) Reflects acquisition of capital lease property - computers and computer equipment - and their subsequent amortization. (2) Transfer of $2.2 million from Gas stored underground (noncurrent) to Underground storage at the Hillsboro Storage Field. (3) Transfer of $3.8 million from Inventory to Gas stored underground (noncurrent) at the Hillsboro Storage Field.
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( ) Credit (1) Includes Depreciation Reserve of $38.8 million (Electric) and $.7 million (Gas) associated with FAS 109 compliance. (2) Includes $1.8 million associated with write-off of deferred Clinton costs. (3) Includes provision of approximately $.5 million for transportation equipment harged to clearing accounts. (4) Includes provision of approximately $.9 million for transportation equipment charged to clearing accounts. (5) Transfer of $1.9 million in Accumulated Provision associated with reclassification of the Danville Propane Plant to Account 105 and $.6 million associated with Galesburg Propane Plant transfer to Account 121.
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( ) Credit
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( ) Credit - 49 -
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(1) Includes $2.5 million reduction to the reserve for uncollectible accounts.
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Exhibit 3(g)
Extract From Minutes of a Meeting of the Board of Directors of Illinois Power Company Held June 9, 1993
RESOLVED, that pursuant to the authority vested in the Board of Directors under the terms and provisions of Article V of the Restated Articles of Incorporation of the Company, there is hereby established, as a series of the authorized Serial Preferred Stock, $50 par value, of the Company, a series to be known and designated as 7.75% Cumulative Preferred Stock (such series being herein called the "New Preferred Stock"), the relative rights and preferences of which, in addition to those applicable to all Serial Preferred Stock as class, as stated in said Article V, are hereby fixed and determined as follows:
(a) The number of shares constituting the new Preferred Stock shall be 870,000.
(b) The annual dividend rate on the New Preferred Stock shall be $3.875 per share in cash, and no more, and the date from which dividends on all shares of the New Preferred Stock issued prior to the record date for the first dividend payment on the new Preferred Stock shall be cumulative shall be the date of issue thereof.
(c) The New Preferred Stock is not redeemable prior to July 1, 2003. On or after July 1, 2003, the new Preferred Stock shall be redeemable, in whole or in part, at the option of the Company. The redemption price for the New Preferred Stock (exclusive of accrued and unpaid dividends), to be paid in cash, shall be $50 per share.
(d) The amount payable to the holders of the New Preferred Stock upon voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company or upon any distribution of its capital shall be at the rate of $50 per share in cash (exclusive of accrued and unpaid dividends).
RESOLVED, that in light of the possibility that the Company's balance of retained earnings may become negative as a result of recording additional losses due to adverse decisions with respect to the Illinois Commerce Commission's August 7, 1992 rate order on appeal, there be and hereby is declared out of retained earnings of the Company a $.4317 per share dividend on the New Preferred Stock, when and if such New Preferred Stock is issued, payable on August 1, 1993, and a $.96875 per share payable dividend on the New Preferred Stock, payable on each of November 1, 1993, February 1, 1994 and May 1, 1994, to holders of record at the close of business on the applicable record dates in proportion to their respective holdings; provided, however, that payment is contingent on satisfaction, at the
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time of payment, of the financial tests set forth in the Illinois Commerce Commission Order dated March 24, 1993 in Docket 92- 0415 authorizing payment of dividends on the Company's outstanding Preferred and Common Stock in the event that the Company's retained earnings are insufficient to pay such dividends with respect to the aggregate amount of dividends on outstanding Preferred Stock and Common Stock to be paid at each payment date, including the dividends declared hereby and payment being otherwise lawful at the time made; and provided further, that if any such payment of dividends on new Preferred Stock cannot be made on each respective dividend payment date set forth above, then the payment of each such dividend shall be deferred until the earliest date on which such dividends may be paid, and in the event of such deferral, any payment in arrears shall be made to holders of record on the applicable record date which is related to the scheduled dividend payment date on which payment is made.
I, LEAH MANNING STETZNER, Vice President, General Counsel and Corporate Secretary of ILLINOIS POWER COMPANY, do hereby certify that the foregoing is a true and correct copy of a certain resolution duly adopted by the Board of Directors of said Company at a meeting of said Board duly convened and held on the 9th day of June, 1993 at which meeting a quorum of said Board was present and voting throughout, and that said resolution has not been altered or amended and is in full force and effect on the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of said Illinois Power Company this 9th day of June, 1993.
Secretary
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Exhibit 4(hh)
ILLINOIS POWER COMPANY
TO
HARRIS TRUST AND SAVINGS BANK,
as Trustee
SUPPLEMENTAL INDENTURE
Dated February 1, 1994
TO
Mortgage and Deed of Trust
Dated November 1, 1943
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Supplemental Indenture, dated the first day of February, Nineteen hundred and ninety-four (1994) (hereinafter referred to as the "Supplemental Indenture"), made by and between ILLINOIS POWER COMPANY, a corporation organized and existing under the laws of the State of Illinois (hereinafter called the "Company"), party of the first part, and HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the laws of the State of Illinois (hereinafter called the "Trustee"), as a Trustee under the mortgage and Deed of Trust dated November 1, 1943, hereinafter mentioned, party of the second part;
WHEREAS, the Company has heretofore executed and delivered its Mortgage and Deed of Trust dated November 1, 1943 (hereinafter referred to as the "Original Indenture"), to the Trustee, for the security of the First Mortgage Bonds of the Company issued and to be issued thereunder (hereinafter called the "Bonds"); and
WHEREAS, pursuant to the terms and provisions of the Original Indenture there were created and authorized by various Supplemental Indentures First Mortgage Bonds of various series, including a series known as First Mortgage Bonds, Pollution Control Series K ("Pollution Control Series K Bonds") which was created and authorized by Supplemental Indenture No. 1 dated June 1, 1992 ("Supplemental Indenture No. 1 of June 1, 1992") and
WHEREAS, the Pollution Control Series K Bonds were duly issued under and secured by the Indenture and Supplemental Indenture No. 1 of June 1, 1992 in the aggregate principal amount of $35,615,000, bearing interest at a rate of seven and three-tenths per cent (7.30%) per annum; and
WHEREAS, the Company deems it advisable that Supplemental Indenture No. 1 of June 1, 1992 be amended as herein provided, and the holder of the outstanding Pollution Control Series K Bonds has duly consented to this amendment and the execution of this Supplemental Indenture and has delivered to the Trustee an instrument duly setting forth such consent;
WHEREAS, the Company, in the exercise of the powers and authority conferred upon and reserved to it under the provisions of the Original Indenture, and pursuant to appropriate resolutions of the Board of Directors, has duly resolved and determined to make, execute and deliver to the Trustee a Supplemental Indenture in the form hereof for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make this Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled and the execution and delivery hereof have been in all respects duly authorized;
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NOW, THEREFORE, THIS INDENTURE WITNESSETH:
THAT Illinois Power Company, in consideration of the purchase and ownership from time to time of the Bonds and the service by the Trustee, and its successors, under the Original Indenture and of One Dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, hereby covenants and agrees to and with the Trustee and its successors in the trust under the Original Indenture, for the benefit of those who shall hold the Bonds and coupons, if any, appertaining thereto, as follows:
ARTICLE I.
AMENDMENT TO SUPPLEMENTAL INDENTURE NO. 1 OF JUNE 1, 1992.
SECTION 1. Wherever in Supplemental Indenture No. 1 of June 1, 1992 reference is made to interest on the Pollution Control Series K Bonds at the rate of seven and tree-tenths per cent (7.30%) per annum, Supplemental Indenture No. 1 of June 1, 1992 is hereby amended to read "five and seven- tenths per cent (5.70%)" in lieu of "seven and three-tenths per cent (7.30%)" in each and every place where the term "seven and three-tenths per cent (7.30%)" shall occur.
ARTICLE II.
MISCELLANEOUS PROVISIONS.
SECTION 1. Except as amended by this Supplemental Indenture, all of the provisions of the Indenture and Supplemental Indenture No. 1 of June 1, 1992 shall remain in full force and effect, and from and after the effective date of this Supplemental Indenture shall be deemed to have been amended as herein set forth.
SECTION 2. This Supplemental Indenture may be simultaneously executed in any number of counterparts, each of which when so executed shall be deemed to be an original; but such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, said Illinois Power Company has caused this Supplemental Indenture to be executed on its behalf by its Chairman and President, one of its Executive Vice Presidents, one of its Senior Vice Presidents or one of its Vice Presidents and its corporate seal to be hereto affixed and said seal and this Indenture to be attested by its Secretary or one of its Assistant Secretaries; and said Harris Trust and Savings Bank, in evidence of its
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acceptance of the trust hereby created, has caused this Indenture to be executed on its behalf by its President or one of its Vice Presidents and its corporate seal to be hereto affixed and said seal and this Indenture to be attested by its secretary or one of its Assistant Secretaries; all as of the first day of February, one thousand nine hundred and ninety-four.
ILLINOIS POWER COMPANY
(CORPORATE SEAL) BY__\s\ LARRY F. ALTENBAUMER Senior Vice President and Chief Financial Officer
ATTEST:
__\s\__Gary B. Pasek _________ Assistant Secretary
HARRIS TRUST AND SAVINGS BANK, Trustee
(CORPORATE SEAL) BY__\s\_J. Bartoline_______________ Vice President
ATTEST:
__\s\_D. G. Donovan_______
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STATE OF ILLINOIS ) SS.: COUNTY OF MACON )
BE IT REMEMBERED, that on this 27th day of January, 1994, before me, the undersigned Anita F. Ricker, a Notary public within and for the County and State aforesaid, personally came L. F. Altenbaumer, Senior Vice President and Chief Financial Officer, and G. B. Pasek, Assistant Secretary, of Illinois Power Company, a corporation duly organized, incorporated and existing under the laws of the State of Illinois, who are personally known to me to be such officers, and who are personally know to me to be the same persons who executed as such officers the within instrument of writing, and such persons duly acknowledged that they signed, sealed and delivered the said instrument as their free and voluntary act as such Vice President and Assistant Secretary, respectively, and as the free and voluntary act of said Illinois Power Company for uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal on the day and year last above written.
__\s\ Anita S. Ricker___
Notary Public, Macon County, Illinois
My Commission Expires on June 28, 1997.
(NOTARIAL SEAL)
STATE OF ILLINOIS ) SS.: COUNTY OF COOK )
BE IT REMEMBERED, that on this 26th day of January, 1994, before me, the undersigned Marianne Cody, a Notary Public within and for the County and State aforesaid, personally came J. Bartolini, Vice President, and D. G. Donovan, Assistant Secretary, of Harris Trust and Savings Bank, a corporation duly organized, incorporated and existing under the laws of the State of Illinois, who are personally known to me to be the same persons who executed as such officers the within instrument of writing, and such persons duly acknowledged that they signed, sealed and delivered the said instrument as their free and voluntary act as such Vice President and Assistant Secretary, respectively, and as the free and voluntary act of said Harris Trust and Savings Bank for the uses and purposes therein set forth.
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IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal on the day and year last above written.
_______\s\ Marianne Cody______________ Notary Public, Cook County, Illinois
My Commission Expires on May 29, 1997.
(NOTARIAL SEAL)
Return to: This Instrument was prepared by
ILLINOIS POWER COMPANY SCHIFF, HARDIN & WAITE Real Estate Dept. 7200 Sears Tower 500 S. 27th Street Chicago, IL 60606 Decatur, IL 62525
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Exhibit 10(h)
ILLINOIS POWER COMPANY STOCK PLAN FOR OUTSIDE DIRECTORS As Amended and Restated April 9, 1992 And As Further Amended April 14, 1993
1. HISTORY AND PURPOSE
The Stock Plan for Outside Directors (the "Plan") was established by Illinois Power Company (The "Company") to increase the stock ownership interests of directors in the Company and thereby provide further incentive to directors to work toward the long-term best interests of the Company and its shareholders. The following provisions constitute an amendment, restatement and continuation of the Plan as in effect immediately prior to April 9, 1992, the "Effective Date" of the Plan as set forth herein.
2. ELIGIBILITY
Only outside directors of the Company (i.e., directors who are not officers or employees of the Company or any of its subsidiaries or affiliates) are eligible to participate in the Plan.
3. GRANT OF STOCK
Each outside director elected to the Board of Directors of the Company (the "Board") at each annual shareholders meeting of the Company (beginning with the 1993 annual shareholders meeting) shall receive 600 shares of common stock of the Company as soon as practicable after such meeting.
Such shares shall be obtained from one or both of the following sources:
(a) Shares may be purchased on the open market for the accounts of directors by a broker selected by the chief financial officer of the Company, or his delegate. If shares are obtained in accordance with this paragraph 3(a), they shall be transferred directly to the director, and shall not be transferred to or held by the Company. The cost of obtaining such shares shall be paid by the Company.
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(b) Treasury shares may be used, to the extent permitted by applicable law.
The shares so transferred represent payment for all Board and committee meetings to be held during the one- year period prior to the next annual shareholders meeting. Nothing in this paragraph 3 shall be construed to prevent the Board from awarding cash meeting fees to any outside director, which cash fees shall be in addition to the amounts granted to the outside directors in accordance with the other provisions of this paragraph 3.
Outside directors elected to the Board between annual shareholders meetings shall be paid in cash for attendance at meetings prior to the first annual shareholders meeting after their election to the Board.
4. ADJUSTMENT TO SHARES
In the event of any change in the outstanding shares of the common stock of the Company by reason of any stock dividend, split, reverse split, spin-off, recapitalization, merger, consolidation, combination, exchange of shares or other similar change, the number of shares of stock to be awarded to each director under the Plan shall be equitably adjusted by the Board.
5. AMENDMENT
The Plan may be amended by the Board, except that, to the extent necessary to comply with Rule 16b- 3(c)(2)(ii), issued pursuant to the Securities Exchange Act of 1934, the provisions of the Plan may not be amended more than once in any six month period, other than to comport with changes in the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code, as amended, and applicable regulations thereunder.
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Exhibt 10(1)
ILLINOIS POWER COMPANY EXECUTIVE DEFERRED COMPENSATION PLAN
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ILLINOIS POWER COMPANY EXECUTIVE DEFERRED COMPENSATION PLAN
General
.1. Purpose. Illinois Power Company Executive Deferred Compensation Plan (the "Plan") has been established by Illinois Power Company (the "Company") so that it, and each of the Related Companies which, with the consent of the Company, adopts the Plan may provide its eligible key management employees with an opportunity to build additional financial security, thereby aiding such companies in attracting and retaining employees of exceptional ability.
.2. Effective Date. The "Effective Date" of the Plan is December 8, 1993. No deferrals of Compensation shall be permitted under the Plan for any Plan Year with respect to Compensation otherwise payable by any Employer during that year unless the Employer has specifically adopted the Plan with respect to such year.
.3. Related Companies and Employers. The term "Related Company" means any company during any period in which it owns at least fifty percent of the voting power of all classes of stock of the Company entitled to vote, and any company during any period in which at least fifty percent of the voting power of all classes entitled to vote is owned, directly or indirectly, by the Company or by any other company that is a Related Company by reason of its ownership of stock of the Company. The Company and each Related Company that adopts the Plan for the benefit of its eligible employees are referred to below collectively as the "Employers" and individually as an "Employer".
.4. Administration. The authority to control and manage the operation and administration of the Plan shall be vested in the Compensation and Nominating Committee (the "Committee") of the Board of Directors of the Company. In controlling and managing the operation and administration of the Plan, the Committee shall have the rights, powers and duties set forth in Section 7.
.5. Plan Year. The term "Plan Year" means the calendar year.
.6. Applicable Laws. The Plan shall be construed and administered in accordance with the laws of the State of Illinois
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to the extent that such laws are not preempted by the laws of the United States of America.
.7. Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.
.8. Notices. Any notice or document required to be filed with the Plan Administrator or the Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Plan Administrator, in care of the Company, at its principal executive offices. The Plan Administrator may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan may be waived by the person entitled to notice.
.9. Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the Plan Administrator at such times, in such form, and subject to such restrictions and limitations as the Plan Administrator shall require.
.10. Benefits Under Qualified Plans. Compensation of any Participant that is deferred under the Plan, and benefits payable under the Plan, shall be disregarded for purposes of determining the benefits under the Illinois Power Company Incentive Savings Plan (the "Savings Plan"), the Illinois Power Company Retirement Income Plan for Salaried Employees, and any other plan that is intended to be qualified under section 401(a) of the Internal Revenue Code of 1986.
.11. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.
.12. Action by Employers. Any action required or permitted to be taken by any Employer shall be by resolution of its Board of Directors, or by a duly authorized officer of the Employer.
.13. Defined Terms. Terms used frequently with the same meaning are indicated by initial capital letters, and are defined
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throughout the Plan. Appendix A contains an alphabetical listing of such terms and the locations in which they are defined.
Participation
.1. Participant. Any individual who is an Eligible Employee for any Plan Year shall be eligible to participate in the Plan for the Plan Year, subject to the terms of the Plan. For purposes of the Plan, the term "Eligible Employee" for any Plan Year shall mean any employee of the Company who is an elected officer of the Company for that Plan Year.
.2. Deferral Election. An Eligible Employee shall participate in the Plan by electing to defer payment of a portion of his Compensation pursuant to the terms of a "Deferral Election". An individual's Deferral Election shall be subject to the following:
(a) An individual who, prior to the beginning of any Plan Year, satisfies the requirements of an Eligible Employee for the Plan Year, shall be eligible to file a Deferral Election with respect to his Compensation for that Plan Year. Such Deferral Election shall be filed before the first day of that year (or at such earlier time as may be established by the Committee).
(b) An individual who, prior to the beginning of any Plan Year, has not satisfied the requirements of an Eligible Employee for the Plan Year, but who becomes an Eligible Employee during the Plan Year, shall be eligible to file a Deferral Election with respect to his Compensation for that Plan Year, subject to the limits of paragraph 2.2(d). Such Deferral Election shall be filed within thirty days (or such shorter period as may be specified by the Committee) after he first becomes an Eligible Employee for the year.
(c) If the Plan first becomes effective with respect to the employees of any Employer during any Plan Year, and an employee of that Employer becomes an Eligible Employee on the date the Plan becomes effective, such employee shall be eligible to file a Deferral Election with respect to Compensation for that Plan Year, subject to the limits of paragraph 2.2(d). Such Deferral
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Election shall be filed within thirty days (or such shorter period as may be specified by the Committee) after the date the Plan becomes effective.
(d) To the extent elected by a Participant, and subject to the terms of the Plan, a Participant's Deferral Election for any Plan Year shall apply to his Compensation for that Plan Year. The terms of a Deferral Election shall be subject to any conditions and limitations that may be imposed by the Committee. Except as otherwise provided in this subsection 2.2, a Deferral Election shall be irrevocable for the Plan Year to which it applies. In no event may a Deferral Election cover Compensation earned prior to the date the election is completed and filed in accordance with the Plan.
(e) The Committee may revoke an individual's Deferral Election as of the date on which the individual ceases to be an Eligible Employee.
(f) Each Deferral Election shall be revoked as of the date on which a Change in Control occurs, and no new Deferral Election shall be accepted for any date after the date of a Change in Control.
(g) Subject to the terms of the Plan, the Participant shall specify, as part of his Deferral Election, and in accordance with subsection 4.2, the time and form of distribution of the amounts deferred pursuant to such election.
.3. Compensation. For purposes of the Plan, a Participant's "Compensation" from any Employer for any Plan Year means any short-term incentive payable to him under the Illinois Power Company Executive Incentive Compensation Plan for that year (regardless of whether it is otherwise payable to him during that year or during a later year).
.4. Plan Not Contract of Employment. The Plan does not constitute a contract of employment, and participation in the Plan will not give any employee the right to be retained in the employ of any Employer nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.
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Plan Accounting
.1. Accounts. The Plan Administrator shall establish an Account for each Plan Year for each Participant who has filed a Deferral Election. If a Participant is employed by more than one Employer in any Plan Year, and his Compensation otherwise payable from such Employers is reduced pursuant to the Plan, a separate Account shall be established for the Participant with respect to the Compensation for the Plan Year from each such Employer.
.2. Adjustment of Accounts. Each Account shall be adjusted in accordance with this Section 3 in a uniform, non- discriminatory manner, as of such periodic "Accounting Dates" as may be determined by the Plan Administrator from time to time (which Accounting Dates shall be not less frequent than quarterly). As of each Accounting Date, the balance of each Account shall be adjusted as follows:
(a) first, charge to the Account balance the amount of any distributions under the Plan with respect to that Account that have not previously been charged;
(b) then, adjust the Account balance for the applicable Investment Return Rate(s); and
(c) then, credit to the Account balance the amount to be credited to that Account in accordance with subsection 3.3 that have not previously been credited.
.3. Crediting Under Deferral Election. The balance of a Participant's Account for any Plan Year shall be credited, in accordance with the provisions of paragraph 3.2(c), with the amount by which his Compensation for the year is reduced pursuant to a Deferral Election. Such crediting shall occur as of the date on which such Compensation would otherwise have been paid to the Participant by the Employer were it not for the reduction made pursuant to the Deferral Election or, if such date is not an Accounting Date, as of the first Accounting Date occurring thereafter.
.4. Investment Return Rates. The "Investment Return Rate(s)" with respect to the Account(s), or portions of the Account(s), of any Participant for any period shall be the Investment Return
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Rate(s) elected by the individual from among the following alternatives in accordance with subsection 3.5:
(a) The Investment Return Rates described in paragraph 3.6(b), provided that no Investment Return Rate based on stock or other securities of the Company shall be offered under this paragraph 3.6(a).
(b) The return from such other investment alternatives (if any) for that period which, in the discretion of the Committee, are offered from time to time under this paragraph 3.4(b).
Subject to the provisions of subsection 3.6, and any other applicable provisions of the Plan, the Committee may eliminate any Investment Return Rate alternative at any time; provided, however, that the Company may not retroactively eliminate any Investment Return Rate alternative.
.5. Employee Selection of Investment Return Rate. Subject to the terms of the Plan, a Participant may elect the Investment Return Rate(s) that will apply to all of his Accounts for any Plan Year, by filing an election with the Plan Administrator as to such Investment Return Rate(s), subject to the following:
(a) if the Investment Return Rate(s) being selected is for the first year in which an Eligible Employee participates in the Plan, the election as to Investment Return Rate(s) must be filed by the due date for filing the Participant's Deferral Election for that year, or at such earlier time as may be established by the Plan Administrator; and
(b) in all other cases, the election must be filed prior to the beginning of such Plan Year, or at such earlier time as may be established by the Plan Administrator.
The same Investment Return Rate(s) shall apply to all Accounts of a Participant for any Plan Year. To the extent permitted by the Committee, the Participant may elect to have different Investment Return Rates apply to different portions of his Account balances for any Plan Year.
.6. Protected Investment Return Rates. At all times the Plan is in effect, the Plan shall provide that the Investment Return
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Rate(s) offered to each Participant shall include the Investment Return Rate described in paragraph 3.6(a), or each of the Investment Return Rates described in paragraph 3.6(b).
(a) The Investment Return Rate described in this paragraph 3.6(a) for any period shall be the sum of: (i) the short-term borrowing rate for the Company for the period, plus (ii) 2.0 percentage points.
(b) The Investment Return Rates described in this paragraph 3.6(b) for any period shall be each of the respective rates of investment return provided by each of the investment funds available under the Savings Plan for that period, subject to the following:
(i) The rate of investment return with respect to the Company Stock Fund under the Savings Plan (or any investment fund based primarily on the return on stock or other securities of the Company, or any successor to the Company) need not be included as an Investment Return Rate under this Plan.
(ii) The net investment return provided by an investment fund under the Savings Plan shall be the rate determined after reduction for any investment management fee or other, similar administrative fee or charge, to the extent that such fee or charge is applied under the Savings Plan in determining the net investment return of such fund.
(iii) The net investment return from an investment fund under the Savings Plan shall not be reduced to reflect income taxes paid or payable with respect to such return; provided, however, that if, after the Effective Date, there is a material change in the applicable income tax laws, the rate of investment return may be adjusted by the Company to reflect income taxes to the extent that the Company reasonably determines such adjustment is necessary to preserve the benefit of the Plan, as originally established, for the Participants and the Company.
(iv) The Investment Return Rates offered pursuant to this paragraph 3.6(b) shall be revised from time
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to time to reflect changes in the investment funds offered under the Savings Plan; provided, however, that the recognition (with respect to this Plan) of any such changes in the investment funds offered by the Savings Plan may, in the discretion of the Company, be delayed for up to twelve months after such change is effective under the Savings Plan.
Nothing in this subsection 3.6 shall be construed to require the Plan to permit a Participant to select between the Investment Return Rate described in paragraph 3.6(a), and the Investment Return Rates described in paragraph 3.6(b), with respect to the same period.
Distributions
.1. General. Subject to this Section 4 and Section 5 (relating to change in control), the balance of a Participant's Account with respect to any year shall be distributed in accordance with the Participant's Deferral Election applicable to that Account. In no event shall the amount distributed with respect to any Participant's Account as of any date exceed the amount of the Account balance as of that date.
.2. Distribution Election. A Participant's Deferral Election for any year shall specify the manner (including the time and form of distribution) in which the Account attributable to such election shall be distributed, subject to such restrictions and limitations as may be imposed by the Committee.
.3. Unforeseeable Emergency. Prior to the date otherwise scheduled for distribution of his benefits under the Plan, upon a showing of an unforeseeable emergency, a Participant may elect to accelerate payment of an amount not exceeding the lesser of (a) the amount necessary to meet the emergency or (b) the sum of his Account balance(s) under the Plan. For purposes of the Plan, the term "unforeseeable emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant (or the control of the beneficiary, if the amount is payable to a beneficiary) and that would result in severe financial hardship to the individual if early withdrawal were not permitted. The determination of "unforeseeable emergency" shall
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be made by the Plan Administrator, based on such information as the Plan Administrator shall deem to be necessary.
.4. Sale of Business. If all or a substantial portion of the assets and business of an Employer (the "Selling Employer") is sold or otherwise transferred to a company (the "Purchaser") that is not a Related Company (a "Sale Transaction"), and in connection with the Sale Transaction, any Participant is employed by the Purchaser, then the Selling Employer may, in its sole discretion, discharge all obligation to the Participant by accelerating the date on which the Participant's Plan benefits are payable; provided, however, that any such acceleration shall be effective only if (i) the payment is made not later than 180 days following the date of the Sale Transaction, and (ii) the lump sum payable in settlement of the Employer's obligations to the Participant under the Plan is equal to 100% of the Participant's Account balances as of the date of payment.
.5. Designation of Beneficiary. Each Participant from time to time, by signing a form furnished by the Plan Administrator, may designate any legal or natural person or persons (who may be designated contingently or successively) to whom his benefits under the Plan are to be paid if he dies before he receives all of his benefits. A beneficiary designation form will be effective only when the signed form is filed with the Plan Administrator while the Participant is alive and will cancel all beneficiary designation forms filed earlier. Except as otherwise specifically provided in this subsection 4.5, if a deceased Participant failed to designate a beneficiary as provided above, or if the designated beneficiary of a deceased Participant dies before him or before complete payment of the Participant's benefits, his benefits shall be paid to the legal representative or representatives of the estate of the last to die of the Participant and his designated beneficiary.
.6. Distributions to Disabled Persons. Notwithstanding the provisions of this Section 4, if, in the Plan Administrator's opinion, a Participant or beneficiary is under a legal disability or is in any way incapacitated so as to be unable to manage his financial affairs, the Plan Administrator may direct that payment be made to a relative or friend of such person for his benefit until claim is made by a conservator or other person legally charged with the care of his person or his estate, and such payment shall be in lieu of any such payment to such Participant or beneficiary. Thereafter, any benefits under the Plan to which such Participant or beneficiary is entitled shall be paid to such
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conservator or other person legally charged with the care of his person or his estate.
.7. Benefits May Not be Assigned. Neither the Participant nor any other person shall have any voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part hereof, which are expressly declared to be unassignable and non-transferable. No part of the amounts payable shall be, prior to actual payment, subject to seizure or sequestration for payment of any debts, judgements, alimony or separate maintenance owed by the Participant or any other person, or be transferred by operation of law in the event of the Participant's or any other person's bankruptcy or insolvency.
.8. Offset. Notwithstanding the provisions of subsection 4.7, if, at the time payments are to be made under the Plan, the Participant or beneficiary or both are indebted or obligated to any Employer or Related Company, then the payments remaining to be made to the Participant or the beneficiary or both may, at the discretion of the Plan Administrator, be reduced by the amount of such indebtedness, or obligation, provided, however, that an election by the Plan Administrator not to reduce any such payment shall not constitute a waiver of the claim for such indebtedness or obligation.
Change in Control
.1. Distribution on Change in Control. Upon the occurrence of a Change in Control, each Participant shall receive a lump sum distribution equal to 100% of the Participant's Account balances determined as of the date of the Change in Control. Such distributions shall be made to Participants regardless of any elections that may otherwise be applicable to them under the Plan, and shall be made as soon as practicable after the date of such Change in Control, but in no event later than 15 days after the occurrence of such Change in Control. Payments under this subsection 5.1 shall be in lieu of any amounts that would otherwise be payable after the date as of which the Participant's Account balance is determined for purposes of payment under this subsection.
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.2. Change in Control Definition. For purposes of the Plan, a "Change in Control" will be deemed to occur on the earliest of the existence of one of the following and the receipt of all necessary regulatory approvals therefor:
(a) the acquisition by an entity, person or group (including all Affiliates or Associates of such entity, person or group) of beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, of capital stock of the Company entitled to exercise more than 20% of the outstanding voting power of all capital stock of the Company ("Voting Power");
(b) the effective time of (i) a merger or consolidation of the Company with one or more other corporations as a result of which the holders of the outstanding Voting Power of the Company immediately prior to such merger or consolidation (other than the surviving or resulting corporation or any Affiliate or Associate thereof) hold less than 80% of the Voting Power of the surviving or resulting corporation, (ii) a transfer of a majority of the Voting Power other than to an entity of which the Company owns at least 80% of the Voting Power, or (iii) a transfer (other than a sale/leaseback transaction) of a Substantial Portion of the Property of the Company other than to an entity of which the Company owns at least 80% of the Voting Power unless, within ten (10) days after such transfer of Property, the Board of Directors of the Company as constituted immediately before such transfer determines that such transfer shall not be a Change in Control hereunder; or
(c) the election to the Board of Directors of the Company, of directors constituting a majority of the number of the directors in office unless such directors were recommended for election by the existing Board of Directors.
For purposes of this subsection 5.2, (A) the term "Affiliate" or "Associate" shall have the meaning set forth in Rule 12b-2 under the Securities Exchange Act of 1934; and (B) the term "Substantial Portion of the Property of the Company" shall mean 80% of the aggregate book value of the assets of the Company and its Affiliates and Associates as set forth in the most recent balance sheet of the Company, prepared on a consolidated basis, by its regularly employed, independent public accountants.
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Source of Benefit Payments
.1. Liability for Benefit Payments. Subject to the provisions of this Section 6, an Employer shall be liable for payment of benefits under the Plan with respect to any Participant to the extent that such benefits are attributable to the deferral of Compensation otherwise payable by that Employer to the Participant. Any disputes relating to liability of Employers for benefit payments shall be resolved by the Committee.
.2. No Guarantee. Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Employers whatsoever, including, without limitation, any specific funds, assets, or other property which the Employers, in their sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Employers. Nothing contained in the Plan shall constitute a guarantee by any of the Employers that the assets of the Employers shall be sufficient to pay any benefits to any person.
.3. Transfer to Related Employer. If a Participant leaves the employ of an Employer (the "Original Employer") and becomes the employee of another Employer or a Related Company (the "New Employer") then, with the consent of the Original Employer and the New Employer, but without the consent of the Participant, the liability of the Original Employer to the Participant under the Plan may be transferred to the New Employer. In the event of such transfer:
(a) The Original Employer shall thereafter have no obligation to the Participant under the Plan.
(b) The New Employer's rights and obligations with respect to the Participant shall be governed by the terms of the Plan, with the New Employer substituted for the Original Employer under the Plan with respect to the obligation to pay benefits to the Participant.
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The New Employer shall not be required to give effect to the Participant's Deferral Election with respect to remuneration earned at the New Employer.
Committee
.1. Powers of Committee. Responsibility for the day-to- day administration of the Plan shall be vested in the Plan Administrator, which shall be the Committee. The authority to control and manage all other aspects of the operation and administration of the Plan shall also be vested in the Committee. The Committee is authorized to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, and to determine the terms and provisions of any agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. Except as otherwise specifically provided by the Plan, any determinations to be made by the Committee under the Plan shall be decided by the Committee in its sole discretion. Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
.2. Delegation by Committee. The Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked at any time. Until the Committee takes action to the contrary:
(a) The chief executive officer of the Company shall be delegated the power and responsibility to take all actions assigned to or permitted to be taken by the Committee under Section 2, Section 3, and Section 4 (other than the powers and responsibility of the Plan Administrator).
(b) The powers and responsibilities of the Plan Administrator shall be delegated to the Employee Services Department of the Company, subject to such direction as may be provided to the Employee Services Department from
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time to time by the Committee and the chief executive officer of the Company.
.3. Information to be Furnished to Committee. The Employers and Related Companies shall furnish the Committee with such data and information as may be required for it to discharge its duties. The records of the Employers and Related Companies as to an employee's or Participant's employment, termination of employment, leave of absence, reemployment and Compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the Plan.
.4. Liability and Indemnification of Committee. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the Employers be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Employers. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Employers against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance.
Amendment and Termination
The Committee may, at any time, amend or terminate the Plan, subject to the following:
(a) Subject to the following provisions of this Section 8, no amendment or termination may materially adversely affect the rights of any Participant or beneficiary under the Plan.
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(b) The Committee may revoke the right to defer Compensation under the Plan; provided, however, that no such revocation shall apply to the Compensation of any Participant to the extent that the revocation is adopted by the Committee after the date the Compensation is otherwise required to be credited to the Participant's Account under the Plan.
(c) The Committee may amend the Plan to eliminate any Investment Return alternative; provided, however, that the Plan may not be amended to retroactively eliminate any Investment Return alternative, and further provided that the provisions of subsection 3.6 (relating to Protected Investment Return Rates) may not be amended or otherwise modified to materially adversely affect any Participant's rights under that subsection without the express written consent of such Participant.
(d) The Plan may not be amended to delay the date on which benefits are otherwise payable under the Plan without the consent of each affected Participant. The Committee may amend the Plan to accelerate the date on which Plan benefits are otherwise payable under the Plan; provided, however, that any such amendment (and any termination of the Plan having the effect of such acceleration) shall be effective only if the acceleration results in payment of a lump sum of all benefits for all Participants at substantially the same time; and further provided that the lump sum payable in settlement of each Employer's obligations to each Participant under the Plan shall be equal to 100% of each Participant's Account balances as of the date of payment.
(e) Notwithstanding any other provision of the Plan to the contrary, the Committee may not delegate its rights and responsibilities under this Section 8; provided, however, that, the Board of Directors of the Company may, from time to time, substitute itself, or another committee of the Board of Directors of the Company, for the Compensation and Nominating Committee under this Section 8.
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* Earnings are inadequate to cover fixed charges. Additional earnings of $374,958, $68,033 and 36,891 for 1989, 1990, and 1993, respectively, are required to attain a one-to-one ratio of Earnings to Fixed Charges. ** Supplemental ratio of earnings to fixed charges presented to exclude Disallowed Clinton plant costs.
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Exhibit 13
Illinois Power Company 1993 Annual Report
The Illinois Power Company 1993 Annual Report was filed with the Securities and Exchange Commission.
REFERENCE: IPWR10EX13
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EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-22068), the Registration Statement on Form S-8 (No. 33-60278), and the Registration Statement on Form S-8 (No. 33-66124), and in the Prospectuses constituting part of the Registration Statement on Form S-3 (No. 33-50173), the Registration Statement on Form S-3 (No. 33-52048), the Registration Statement on Form S-3 (No. 33-62506), and the Registration Statement on Form S-3 (No. 33-25699) of Illinois Power Company of our report dated February 9, 1994, appearing on page 26 of the Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page 43 of this Form 10-K.
\s\ Price Waterhouse
PRICE WATERHOUSE March 25, 1994
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