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IOWA-ILLINOIS GAS & ELECTRIC $298 MILLION 'AA' SENIOR DEBT AFFIRMED BY FITCH -- FITCH FINANCIAL WIRE --

 IOWA-ILLINOIS GAS & ELECTRIC $298 MILLION 'AA' SENIOR DEBT
 AFFIRMED BY FITCH -- FITCH FINANCIAL WIRE --
 NEW YORK, March 25 /PRNewswire/ -- Iowa-Illinois Gas and Electric Co.'s (IWG) $298 million 'AA' first mortgage bonds, $19 million 'AA-' preferred stock, and $49 million 'A+' preference stock are affirmed by Fitch. The credit trend is improving.
 The rating reflects expectations of improved bondholder protection measures, a manageable low-risk construction program (largely transmission and distribution related) and minimal acid rain exposure. The company will be filing for higher electric and gas rates in Iowa (65 percent of 1991 revenues) shortly, and in Illinois probably before year end. In addition, an equity offering that will strengthen the capital structure is expected before the end of the third quarter. Interim rates could go into effect in Iowa as early as August with final rates expected by February, 1993.
 IWG has no base load construction anticipated until the turn of the century. Construction expenditures are expected to peak at $85.2 million this year, then average a very manageable $59.8 million for the next four years. Given the timing of rate relief and the magnitude of 1992 capital expenditures, coverage ratios should be slightly weaker this year before staging a recovery in 1993. Pretax interest coverage should rise to the 3.8 times level by 1995. Internally generated funds will provide approximately 70 percent of construction expenditures this year (down from 121 percent in 1991) and assuming constructive rate relief next year should stay above 100 percent for the next five years. Debt leverage of 50.0 percent (utility only) at year-end will fall to approximately 44.3 percent by year-end, if IWG proceeds with a planned $50 million equity offering. Allowing full credit for the equity capital of Intercoast Energy Co.(IEC), a wholly owned non regulated subsidiary, IWG's supplemental debt leverage of 43.6 percent would fall to approximately 38.6 percent by year-end. All measures of bondholder protection may be stronger if operating and maintenance expense at Quad- Cities Nuclear Power Station is reduced. However, this is not expected.
 Over the past four years, bondholder protection measures have generally weakened due to a larger construction program, the infusion of $95 million in equity capital into IEC, and earnings attrition due to rising nuclear-related operating and maintenance expenses. Since 1988, pretax interest coverage (excluding AFUDC and the deferred portion of the Louisa phase-In) declined from 3.96x to 3.47x at December 1991. Over this period, construction spending rose from $43 million to $60 million and internal cash flow relative to these expenditures fell from 206 percent to 121 percent at year-end.
 -0- 3/25/92
 /CONTACT: Craig M. Lucas of Fitch, 212-908-0576/
 (IWG) CO: Iowa-Illinois Gas and Electric Co. ST: Iowa IN: UTI SU: RTG


AH -- NY020 -- 1441 03/25/92 10:33 EST
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Date:Mar 25, 1992
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