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ILLINOIS POWER CO. FIRST MORTGAGE BONDS RAISED TO 'BBB+', OFF FITCHALERT -- FITCH FINANCIAL WIRE --

ILLINOIS POWER CO. FIRST MORTGAGE BONDS RAISED TO 'BBB+', OFF FITCHALERT
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Dec. 13 /PRNewswire/ -- Illinois Power Co's. (IPC) $1.1 billion first mortgage bonds and $183 million secured pollution control bonds are upgraded to 'BBB+' from 'BBB-' by Fitch. IPC's $100 million unsecured notes are raised to 'BBB' from 'BB+' and its $413 million preferred stock to 'BBB' from 'BB'. All issues are removed from FitchAlert. The credit trend is improving.
 The action reflects the recent Illinois Commerce Commission (ICC) approval of a $100.2 million, or 9.2 percent, electric rate increase premised on a 12.4 percent return on equity. Fitch expects cash flow, interest coverage, and capital ratios to show significant improvement as a result of the rate hike. Importantly, the order found 100 percent of the Clinton Nuclear Power Station used and useful.
 The treatment of about $102 million of Clinton's deferred post construction costs incurred between January 1988 and April 1989 remains uncertain. The ICC ordered a rehearing to examine the treatment of deferred costs, which should be completed in about six months. IPC had sought about $19 million in additional revenue associated with these deferred costs. An unfavorable decision would require an after-tax writeoff of about $95 million.
 In addition, the commission will revisit the continued recovery of approximately $233 million of deferred costs that are already in rate base. The new rating anticipates that the rehearing will not jeopardize the recovery of the previously approved deferred costs. Unlike the deferred costs in the Commonwealth Edison case, which are not currently in rate base, IPC's previously rate based deferred costs are much more secure due to legal precedents in the state of Illinois prohibiting retroactive rate making.
 In the unlikely scenario that all deferred costs were to be excluded from rate base, the company would be forced to take a $327 million after-tax writeoff accompanied by an estimated rate reduction of approximately $43 million. Depending on the timing, such an action could wipe out retained earnings and result in the temporary interruption of the preferred dividend.
 A more probable scenario would entail the company being denied recovery of the deferred equity costs in the current case. In this scenario, IPC would have sufficient retained earnings to pay the preferred dividend uninterrupted by the time all appeals were exhausted. IPC's meager retained earnings of $76 million at year end will grow rapidly over the next few years.
 -0- 2/13/92
 /CONTACT: Craig M. Lucas of Fitch, 212-908-0576/
 (IPC) CO: Illinois Power Co. ST: Illinois IN: UTI SU: RTG


JT -- NY105 -- 9970 02/13/92 17:10 EST
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Date:Feb 13, 1992
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