1996 Proxy Statement and Annual Report to Shareholders
First

Notice of Annual Meeting of Shareholders
Proxy Statement 
Table of Contents

Notice of Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . 	 2
Proxy Statement  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
Appendix: 1996 Annual Report to Shareholders . . . . . . . . . . . . . .	 A-1

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   /  Map to Location of Annual       /
   /  Shareholders Meeting            /
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   ------------------------------------

To the Shareholders 
of Illinova Corporation:

Notice is Hereby Given that the Annual Meeting of Shareholders of Illinova 
Corporation ("Illinova") will be held at 10 a.m. Wednesday, April 9, 1997, at 
Shilling Community Education Center, Richland Community College, One College 
Park, Decatur, Illinois 62521, for the following purposes: 

(1) To elect the Board of Directors for the ensuing year. 

(2) To transact any other business which may properly come before the meeting 
    or any adjournment.
 
Shareholders of record at the close of business on February 10, 1997, will be 
entitled to notice of and to vote at the Annual Meeting. 

By Order of the Board of Directors, 


Leah Manning Stetzner, 
General Counsel and Corporate Secretary 
Decatur, Illinois 
March 3, 1997


IMPORTANT
Illinova invites each of its approximately 38,000 shareholders to attend the 
Annual Meeting. Shareholders will be admitted upon verification of record 
share ownership at the admission desk. Shareholders who own shares through 
banks, brokerage firms, nominees or other account custodians must present 
proof of beneficial share ownership (such as a brokerage account statement) 
at the admission desk. If you are unable to be present at the meeting, it is 
important that you, whether the owner of one or many shares, sign and return
the enclosed proxy.  An envelope on which postage will be paid by Illinova
is enclosed for that purpose.

Return of your executed proxy will ensure that you are represented at the 
Annual Meeting. Your cooperation is appreciated.

Proxy Statement

Solicitation and Revocation of Proxies

This Proxy Statement is furnished in connection with a solicitation of proxies 
by the Board of Directors of Illinova, for use at the Annual Meeting of 
Shareholders to be held at Shilling Community Education Center, Richland 
Community College, One College Park, Decatur, Illinois 62521, at 10 a.m. 
Wednesday, April 9, 1997, and at any adjournment thereof (the "Annual 
Meeting"). Any shareholder giving a proxy may revoke it at any time by giving 
a later proxy or by giving written notice of revocation to the Corporate
Secretary of Illinoise prior to the Annual Meeting.  All duly executed
proxies received prior to the Annual Meeting will be voted.

Shares credited to the accounts of participants in Illinova's Investment Plus 
Plan and Illinois Power Company's ("Illinois Power") Incentive Savings Plans 
will be voted in accordance with the instructions of the participants or 
otherwise in accordance with the terms of such plans.


Voting Rights 

Shareholders of record at the close of business on Monday, February 10, 1997 
(the "Record Date"), will be entitled to receive notice of and to vote at the 
Annual Meeting. As of such date, Illinova had outstanding 75,681,937 shares 
of Common Stock. Shareholders who are present at the Annual Meeting in person 
or by proxy will be entitled to one vote for each share of Illinova's Common 
Stock which they held of record at the close of business on the Record Date. 

When voting for candidates nominated to serve as directors, all shareholders 
will be entitled to 10 votes (the number of directors to be elected) for each 
of their shares and may cast all of their votes for any one candidate whose 
name has been placed in nomination prior to the voting or distribute their 
votes among two or more such candidates in such proportions as they may 
determine. In voting on other matters presented for consideration at the 
Annual Meeting, each shareholder will be entitled to one vote for each share
of Common Stock held of record at the close of business on the Record Date.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting is required for the election of directors.


Annual Report, Proxy and Proxy Statement

Accompanying this Proxy Statement, which includes Consolidated Financial 
Statements, is a Notice of Annual Meeting of Shareholders, a form of Proxy 
and the Summary Annual Report to Shareholders covering operations of Illinova 
for the year 1996. This Proxy Statement and accompanying documents are first 
being mailed to shareholders on or about March 3, 1997.


Board of Directors

Information Regarding the Board of Directors 
The Board of Directors held eight Board meetings during 1996. All directors 
attended at least 75 percent of the aggregate meetings of the Board and 
Committees of which they were members during 1996. The Board has three 
standing committees: the Audit Committee, the Finance Committee, and the 
Compensation and Nominating Committee.

The duties and members of the standing committees are: 

Audit Committee 
(1) Review with the Chairman, President and Chief Executive Officer and the 
independent accountants the scope and adequacy of Illinova's system of 
internal controls; (2) review the scope and results of the annual examination 
performed by the independent accountants; (3) review the activities of 
Illinova's internal auditors; (4) report its findings to the Board and 
provide a line of communication between the Board and both the internal 
auditors and the independent accountants; and (5) recommend to the Board the
appointment of the independent accountants and approval of the services
performed by the independent accountants, considering their independence with
regard thereto.
 
The Audit Committee met three times during 1996.

This Committee consists of the following non-employee directors ("Outside 
Directors"): Robert M. Powers, Chairman, Richard R. Berry, C. Steven McMillan,
Walter M. Vannoy, and Marilou von Ferstel.

Finance Committee 
(1) Review management's capital and operations and maintenance expenditure 
budgets, financial forecasts and financing program, and make recommendations 
to the Board regarding the approval of such budgets and plans; (2) review 
Illinova's banking relationships, short-term borrowing arrangements, dividend 
policies, arrangements with the transfer agent and registrar, investment 
objectives and the performance of Illinois Power's pension and other trust 
funds, evaluate fund managers, and make recommendations to the Board 
concerning such matters; (3) review Illinova's risk management programs, 
including insurance coverage, and make recommendations to the Board; and
(4) act in an advisory capacity to management, the Board of Directors, and
the Chairman, President and Chief Executive Officer on other financial 
matters as they may arise.

The Finance Committee met three times during 1996. 

This Committee consists of the following members of the Board: Walter D. Scott, 
Chairman, Richard R. Berry, Larry D. Haab, C. Steven McMillan, 
Robert M. Powers, and Marilou von Ferstel.

Compensation and Nominating Committee 
(1) Review performance and recommend salaries plus other forms of compensation 
of elected Illinova officers and the Board of Directors; (2) review Illinova's 
benefit plans for elected Illinova officers and make recommendations to the 
Board regarding any changes deemed necessary; (3) review with the Chairman, 
President and Chief Executive Officer any organizational or other personnel 
matters; and (4) recommend to the Board nominees to stand for election as 
director to fill vacancies in the Board of Directors as they occur.

The Compensation and Nominating Committee will consider shareholders' 
recommendations for nominees for director made pursuant to timely notice in 
writing addressed to the Chairman of the Committee at the executive offices 
of Illinova, together with a full description of the qualifications and 
business and professional experience of the proposed nominees and a statement 
of the nominees' willingness to serve. To be timely, the notice shall be 
delivered to or mailed and received at the executive offices of Illinova
not less than 90 nor more than 120 days prior to the Annual Meeting.

The Compensation and Nominating Committee met four times during 1996.

This Committee consists of the following Outside Directors: Donald S. Perkins, 
Chairman, Robert M. Powers, Walter D. Scott, Ronald L. Thompson, Marilou 
von Ferstel, and John D. Zeglis.

Board Compensation
The Outside Directors of Illinova 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 650 shares of 
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.

Illinova had a Retirement Plan for Outside Directors. Under this plan, each 
Outside Director who attained age 65 and served on the Board for a period of 
60 or more consecutive months was eligible for annual retirement benefits at 
the rate of the annual retainer fee in effect when the director retired. In 
1996, the Board of Directors adopted a Comprehensive Deferred Stock Plan for 
Outside Directors, replacing the Retirement Plan. Each former Outside 
Director whose right to receive the retirement benefit had vested continues
to receive such benefits in accordance with the term of the Retirement Plan.
All Outside Directors serving at the time this new plan was adopted were
granted a lump sum amount based on the net present value of these benefits
to them, were they to have retired under the Retirement Plan, based on the
number of years they have served on the Board but not to exceed 10.  This
dollar amount was converted into stock units, based on the then market value
of Illinova Common Stock, and placed into an account.  The value of these
stock units is to be paid out to the director in cash on termination of
service, based on the then market value of Illinova Common Stock, plus 
dividend equivalents, in a lump sum or installments.  In addition, each 
Outside Director receives an annual award of stock units having a value of
$6,000, to be paid to the Outside Directorin cash on retirement, at once
or in installments as the Director may elect, with the amount of such
payment determined by multiplying the number of stock units in the account
times the then market value of Illinova Common Stock, and adding the dividend
equivalents attributable to such stock units.
 
Pursuant to Illinova's Deferred Compensation Plan for Certain Directors, the 
Outside Directors may elect to defer all or any portion of their fees and 
stock grants until termination of their services as directors. Such deferred 
amounts are converted into stock units representing shares of Illinova's 
Common Stock with the value of each stock unit based on the last reported 
sales price of such stock. Additional credits are made to the participating 
director's account in dollar amounts equal to the dividends paid on 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.  On termination of the participating directors'
services as directors, payment of their deferred fees and stock grants is 
made in shares of Common Stock in an amount equal to the aggregate number
of stock units credited to their accounts.  Such payment is made in such
number of annual installments as Illinova may determine beginning in the 
year following the year of termination.

Election of Directors
Illinova's entire Board of Directors is elected at each Annual Meeting of 
Shareholders. Directors hold office until the next Annual Meeting of 
Shareholders or until their successors are elected and qualified. At the 
Annual Meeting a vote will be taken on a proposal to elect the 10 directors 
nominated by Illinova's Board of Directors. The names and certain additional 
information concerning each of the director nominees is set forth on the 
following pages. The dates shown for service as a director include service
as a director of Illinois Power prior to the May 1994 restructuring in which
Illinois Power became a wholly owned subsidiary of Illinova.  If any nominee
should become unable to serve as a director, another nominee may be selected
by the current Board of Directors.

Name of Director Nominee, Age,	                            Year in Which First	
Business Experience and 	                                   Elected a Director 
Other Information	                                              of Illinova

Richard R. Berry, 65                                               	1988
----------
/        / From June 1983 until retirement in February 1990, Mr. Berry was 
/        / Executive Vice President and director of Olin Corporation, Stamford, 
/ Picture/ Conn., a diversified manufacturer concentrated in chemicals, metals 
/        / and aerospace/defense products. 
----------

Larry D. Haab, 59	                                                  1986
----------- 
/         / Chairman, President and Chief Executive Officer of Illinova since 
/         / December 1993, and of Illinois Power since June 1991, and an 
/ Picture / employee of Illinois Power since 1965. He is a director of First 
/         / Decatur Bancshares, Inc.; The First National Bank of Decatur; and 
----------- Firstech, Incorporated. 

C. Steven McMillan, 51	                                             1996
-----------
/         / Executive Vice President and Director of Sara Lee Corporation, 
/         / Chicago, Ill., a global packaged food and consumer products 
/ Picture / company, since 1993. He was Senior Vice President-Strategy 
/         / Development from 1986 to 1993. He is Chairman of the Board of 
----------- Electrolux Corporation.

Robert M. Powers, 65	                                                1984
-----------
/         / From 1980 until retirement in December 1988, Mr. Powers was 
/         / President and Chief Executive Officer of A. E. Staley 
/ Picture / Manufacturing Company, Decatur, Ill., a processor of grain and 
/         / oil seeds. He is a director of A. E. Staley Manufacturing Company.
-----------

Sheli Z. Rosenberg, 55
------------	 
/          / President and Chief Executive Officer since 1994 and General 
/          / Counsel 1980 to 1994 of Equity Group Investments, Inc., 
/ Picture  / Chicago, Ill., a privately held business conglomerate holding 
/          / controlling interests in 10 publicly traded corporations involved 
------------ in basic manufacturing, radio stations, retail, insurance, and 
real estate. She is a director of American Classic Voyages Company; REVCO D.S., 
Inc.; Quality Food Centers, Inc.; Jacor Communications, Inc.; Anixter 
Corporation; Capsure Holdings Corporation; Falcon Building Products; and
Equity Residential Properties Trust.

Walter D. Scott, 65	                                              1990
-------------
/           / Professor of Management and Senior Austin Fellow, J. L. Kellogg 
/           / Graduate School of Management, Northwestern University, 
/ Picture   / Evanston, Ill., since 1988. He was Chairman of GrandMet USA 
/           / from 1984 to 1986 and President and Chief Executive Officer of 
------------- IDS Financial Services from 1980 to 1984. He is a director 
of Chicago Title and Trust Company, Chicago Title Insurance Company, and 
Intermatic Incorporated. 

Ronald L. Thompson, 47	                                            1991
-------------
/           / Chairman and Chief Executive Officer of Midwest Stamping 
/           / and Manufacturing Co., Bowling Green, Ohio, a manufacturer 
/ Picture   / of automotive parts, since 1993. He was President and 
/           / Chief Executive Officer and a director of The GR Group, Inc., 
------------- St. Louis, Mo., from 1980 to 1993. He is a director of McDonnell 
Douglas Corporation, Teachers Insurance and Annuity Association, and Ryerson 
Tull.

Walter M. Vannoy, 69	                                               1990
--------------
/            / Chairman until retirement in May 1995 and Chief Executive 
/            / Officer from May 1994 until January 1995 of Figgie 
/ Picture    / International, Inc., Willoughby, Ohio, a diversified 
/            / operating company serving consumer, industrial, technical, 
-------------- and service markets world-wide. From 1980 to 1988 he was 
President and Chief Operating Officer, Babcock and Wilcox, and Vice Chairman 
of McDermott International. He is a director of Figgie International, Inc.

Marilou von Ferstel, 59	                                            1990
--------------
/            / Executive Vice President and General Manager of Ogilvy 
/            / Adams & Rinehart, Inc., a public relations firm in Chicago, 
/ Picture    / Ill., since June 1990. She was Managing Director and Senior 
/            / Vice President of Hill and Knowlton, Chicago, Ill., from 1981 
-------------- to 1990. She is a director of Walgreen Company. 

John D. Zeglis, 49	                                                  1993
--------------
/            / Senior Executive Vice President and General Counsel of 
/            / AT&T, Basking Ridge, N.J., a diversified communications 
/ Picture    / company, since 1995. He was Senior Vice President-General 
/            / Counsel and Government Affairs from 1989 to 1995. He is a 
-------------- director of the Helmerich & Payne Corporation. 

Security Ownership of Management and 
Certain Beneficial Owners

The following table shows shares of stock beneficially owned as of January 31, 
1997, by each director nominee and the executive officers named in the 
Summary Compensation Table. To the best of Illinova's knowledge, no owner 
holds more than 5 percent of Illinova Common Stock. 

<TABLE>
     <C>                           <C>                 <C>            <C>
                                                   			Number 	
		                                                  	of Shares 	 
	  Name of	                        Class	           Beneficially 	  Percent
Beneficial Owner	                 of Stock	           Owned (1) 	   of Class
------------------------------------------------------------------------------
Richard R. Berry	                  Common	             4,390	          (2)
Larry D. Haab	                     Common	            10,725	          (2)
C. Steven McMillan	                Common	               650	          (2)
Robert M. Powers	                  Common	             7,900	          (2)
Sheli Z. Rosenberg	                Common	                 0	          (2)
Walter D. Scott	                   Common	             4,500	          (2)
Ronald L. Thompson	                Common	             4,338	          (2)
Walter M. Vannoy	                  Common	             4,000	          (2)
Marilou von Ferstel	               Common             	4,907	          (2)
John D. Zeglis                    	Common	             3,154	          (2)
Paul L. Lang	                      Common	             3,162	          (2)
Larry F. Altenbaumer	              Common	             4,644          	(2)
John G. Cook	                      Common	             1,862	          (2)
Wilfred Connell	                   Common             	1,630	          (2)

</TABLE>

(1)	The nature of beneficial ownership for shares shown is sole voting and/or 
    investment power.
(2)	No director or executive officer owns any other equity securities of 
    Illinova. No director or executive officer owns as much as 1% of the Common 
    Stock. All directors and executive officers of both Illinova and Illinois 
    Power Company as a group own 64,658 shares of Common Stock (less than 1%).
(3)	This number includes 1105 stock units under the Directors' Deferred 
    Compensation Plan.
(4)	This number includes 664 stock units under the Directors' Deferred 
    Compensation Plan.

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 Illinova and Illinois Power Company, its principal subsidiary, 
for the years indicated. The compensation shown includes all compensation 
paid for service to Illinova and its subsidiaries, including Illinois Power.

<TABLE>
                                                          Summary Compensation Table
                                                                                                 <C>
	                                                                                       Long-Term Compensation

                                                            <C>                              <C>                             
	                                                   Annual Compensation                   Awards 
                                   	       ---------------------------------   -----------------------------
           <C>                     <C>         <C>      <C>         <C>          <C>                <C>              <C>      
					                                                             Other	       Restricted	       Securities	     All Other 
                                                   				Bonus	     Annual      	Stock Awards	     Underlying	     Compensation
Name and Principal Position 	      Year	     Salary 	   (1) 	  Compensation	       (2)	            Options	           (3) 
------------------------------------------------------------------------------------------------------------------------------
Larry D. Haab	                     1996	  $	493,709	 $	69,267	   $	15,973	     $	69,267	          22,000 shs.	     $	2,615
Chairman, President and 	          1995	   	472,250		  91,144    		19,088	      	91,144 	         20,000 shs.		      2,550
Chief Executive Officer of        	1994	   	451,375	   42,881		    15,783		      42,881	          20,900 shs.		        360
Illinova and Illinois Power

Paul L. Lang	                      1996	  $	233,450 	$	19,747	    $	8,863	     $	19,747	           6,500 shs.	     $	2,595
Senior Vice President             	1995	   	222,812	  	23,841	     	8,265		      23,841	           6,500 shs.		      2,510
of Illinois Power                 	1994	   	213,562		  20,289		     8,672	       20,289 	          6,800 shs.		        440

Larry F. Altenbaumer	              1996  	$	222,374	 $	19,832	    $	8,459	     $	19,832	           7,500 shs.	     $	1,976
Chief Financial Officer,	          1995		   204,937		  20,391	     	7,686	      	20,391  	         6,500 shs.		      2,378
Treasurer and Controller          	1994   		196,562		  18,674		     8,975		      18,674	           6,800 shs.		        400
of Illinova, and Senior
Vice President and Chief 
Financial Officer of 
Illinois Power

John G. Cook	                      1996	 $	196,474	  $	16,293    	$	7,409	     $	16,293	           6,500 shs.	     $	2,575
Senior Vice President	             1995	  	179,069	   	16,620		     6,930	       16,620            4,500 shs. 		     2,530
of Illinois Power	                 1994		  163,708		   15,553	     	7,068		      15,553	           4,400 shs.		        400

Wilfred Connell	                   1996	 $	185,950	   $	9,832	    $	7,373	     $	 9,832	           4,500 shs.	     $	2,559
Vice President	                    1995		  172,975		   16,087	     	7,230		      16,087	           3,900 shs.		      2,402
of Illinois Power	                 1994		  165,562		   15,729		     7,705		      15,729	           4,400 shs.		        480

</TABLE>

(1) 	The amounts shown in this column are the cash award portion of grants 
made to these individuals under the Executive Incentive Compensation Plan 
("Compensation Plan") for 1996, including amounts deferred under the 
Executive Deferred Compensation Plan. See the Compensation Plan description 
in footnote (2) below. 

(2) 	This table sets forth stock unit awards for 1996 under the Compensation 
Plan. One-half of each year's award under this plan is converted into stock 
units representing shares of Illinova Common Stock based on the closing price 
of Common Stock on the last trading day of the award year. The other one-half 
of the award is cash and is included under Bonus in the Summary Compensation 
Table. 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 based
on the closing price of 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 the date 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 Illinova, without good cause or by any participant with good reason, all
awards of the participant become fully vested and payable.  As of December 31,
1996, named executive officers were credited with the following total aggregate
number of unvested stock units under the Compensation Plan since its inception,
valued on the basis of the closing proce of Common Stock on December 31, 1996:
Mr. Haab, 7,085 units valued at $214,633; Mr. Lang, 2,550 units valued at 
$70,123; Mr. Altenbaumer, 2,353 units valued at $64,718; Mr. Cook, 1,939 units 
valued at $53,330; Mr. Connell, 1,695 units valued at $46,600.  Although 
stock units have been rounded, valuation is based on total stock units, 
including partial shares.

(3) 	The amounts shown in this column are Illinois Power's contributions 
under the Incentive Savings Plan (including the market value of shares of 
Illinova Common Stock at the time of allocation).  

The following tables summarize grants during 1996 of stock options under 
Illinova's 1992 Long-Term Incentive Compensation Plan ("LTIC") and awards 
outstanding at year end for the individuals named in the Summary Compensation 
Table.

<TABLE>

                                                                Option Grants In 1996
                                                <C>
                                      			Individual Grants
                         --------------------------------------------------------------
       <C>                        <C>                <C>                        <C>                 <C>                <C> 
                         Number of Securities	  % of Total Options			
		                        Underlying Options	  Granted to Employees	   Exercise or Base		                           Grant Date
                           		Granted (1)	            in 1996	           Price Per Share (1)	   Expiration Date	  Present Value (2)
                         ----------------------------------------------------------------------------------------------------------
Larry D. Haab	                 22,000	                 27%	                   $29.75	               2/7/2006	        $	125,400
Paul L. Lang	                   6,500	                  8%	                    29.75	               2/7/2006		          37,050
Larry F. Altenbaumer	           7,500	                  9%	                    29.75	               2/7/2006		          42,750
John G. Cook                   	6,500	                  8%	                    29.75	               2/7/2006		          37,050
Wilfred Connell	                4,500	                  6%                    	29.75	               2/7/2006 		         26,650

</TABLE>

(1) 	Each option becomes exercisable on February 7, 1999. 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 a recipient's employment terminates. In the event of 
certain change-in-control circumstances, the Compensation and Nominating 
Committee may declare the option immediately exercisable. The exercise price 
of each option is equal to the fair market value of the Common Stock on the
date of the grant.  Recipients shall also receive, on or shortly after 
February 7, 1999, a target performance award, determined by calculating the
difference between the return earned by Illinova on its invested capital and
its cost of capital (the "spread"), then comparing this spread to that of a
peer group and reducing or increasing the target award depending on Illinova's
relative performance, but not reducing the payment below zero.  The target
award is equal to one-half of the mid-point of compensation for each officer's
salary grade (a market-based number) times a percentage, determined by the
Compensation and Nominating Committee.  In 1996 those percentages ranged
between 15 and 35 percent.  At the discretion of the Board of Directors, the
foregoing payment may be made in the form of Illinova Common Stock of 
equivalent value based on the average New York Stock Exchange price of the
stock during February, 1999, or in cash.

(2)	The Grant Date Present Value has been calculated using the Black-Scholes 
option pricing model. Disclosure of the Grant Date Present Value, or the 
potential realizable value of option grants assuming 5% and 10% annualized 
growth rates, is mandated by regulation; however, Illinova does not 
necessarily view the Black-Scholes pricing methodology, or any other present 
methodology, as a valid or accurate means of valuing stock option grants. The 
calculation was based on the following assumptions: (i) As of the grant date,
Illinova's calculated Black-Scholes ratio was .2036.  After discounting for
risk of forfeiture at three percent per year over Illinova's three-year 
vesting schedule, the ratio is reduced to .1914; (ii) An annual dividend
yield on Illinova Common Stock of 3.84%; (iii) A risk-free interest rate of
5.87%, based on the yield of a zero-coupon government bond maturing at the 
end of the option term; and (iv) Stock volatility of 17.34%.

<TABLE>

                     Aggregated Option and Fiscal Year-End Option Value Table 
                
   <C>                                     <C>                                                  <C>        
                     		 Number of Securities Underlying Unexercised	      Value of Unexercised In-the-Money  
	                              	Options at Fiscal Year-End  	                    Options at Fiscal Year-End 
Name	                            Exercisable/Unexercisable                       	Exercisable/Unexercisable
------------------------------------------------------------------------------------------------------------
Larry D. Haab	                    16,000 shs./82,900 shs.	                         $66,000/$255,963
Paul L. Lang	                      5,000 shs./25,800 shs.	                         $20,625/$81,613
Larry F. Altenbaumer              	5,000 shs./26,800 shs.	                         $20,625/$81,613
John G. Cook	                      2,500 shs./18,400 shs.	                         $10,313/$50,713
Wilfred Connell	                   3,000 shs./17,300 shs.	                         $12,375/$54,013

</TABLE>

Pension Benefits 
Illinois Power maintains a Retirement Income Plan for Salaried Employees (the 
"Retirement Plan") providing pension benefits for all eligible salaried 
employees. In addition to the Retirement Plan, Illinois Power also maintains 
a nonqualified Supplemental Retirement Income Plan for Salaried Employees (the 
"Supplemental Plan") that covers all elected officers eligible to participate 
in the Retirement Plan and provides for payments from general funds of 
Illinois Power of any monthly retirement income not payable under the 
Retirement Plan because of benefit limits imposed by law or because of certain
Retirement 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 Retirement 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. 

<TABLE>

                         Estimated Annual Benefits (rounded)
           ------------------------------------------------------------------
   <C>        <C>          <C>         <C>            <C>            <C>
	Annual
	Average	   15 Yrs.	     20 Yrs.	     25 Yrs.	       30 Yrs.        35 Yrs.
	Earnings	  Service	     Service	     Service	       Service	       Service
-----------------------------------------------------------------------------
$	125,000 		$	37,500	   $	50,000	     $	62,500	      $	75,000	      $	87,500
	 150,000 			 45,000		    60,000		      75,000		       90,000		      105,000
 	175,000 			 52,500		    70,000	      	87,500		      105,000      		122,500
 	200,000 		 	60,000		    80,000	     	100,000	      	120,000	      	140,000
 	250,000 		 	75,000		   100,000		     125,000		      150,000		      175,000
 	300,000 	 		90,000		   120,000	     	150,000	      	180,000      		210,000
 	350,000 			105,000   		140,000		     175,000	      	210,000      		245,000
 	400,000 			120,000	   	160,000		     200,000		      240,000	      	280,000
 	450,000 			135,000		   180,000	     	225,000		      270,000		      315,000
 	500,000 			150,000		   200,000	     	250,000	      	300,000	      	350,000
 	550,000 			165,000		   220,000		     275,000		      330,000		      385,000
 	600,000 			180,000	   	240,000		     300,000		      360,000	      	420,000
 	650,000			 195,000		   260,000	     	325,000		      390,000		      455,000

</TABLE>

The earnings used in determining pension benefits under the Retirement Plan 
are the participants' regular base compensation, as set forth under Salary 
in the Summary Compensation Table.  

At December 31, 1996, for purposes of both the Retirement Plan and the 
Supplemental Plan, Messrs. Haab, Lang, Altenbaumer, Cook and Connell had 
completed 31, 10, 24, 21 and 13 years of credited service, respectively. 


Employee Retention Agreements

Illinova has entered into Employee Retention Agreements with each of its 
executive officers and officers of its subsidiaries. Under each agreement, 
the officer would be entitled to receive a lump sum cash payment if his or 
her employment were terminated without good cause or voluntarily by the 
officer for good reason within two years following a change in control of 
Illinova (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 officer's employment with Illinova
terminated; plus (2) three times the latest 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 Illinova.  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 benefits extended to the employees of Illinova who elect early retirement.

Compensation and Nominating Committee 
Report on Officer Compensation 

The six-member Compensation and Nominating Committee of the Board of Directors 
(the "Committee") is composed entirely of Outside Directors. The Committee's 
role includes a review of the performance of the elected officers and the 
establishment of specific officer salaries subject to Board approval. The 
Committee establishes performance goals for the officers under the 
Compensation Plan, approves payments made pursuant to the Compensation Plan 
and recommends grants under the Long-Term Incentive Compensation Plan approved
by the shareholders in 1992.  The Committee also reviews other forms of 
compensation and benefits making recommendations to the Board on changes
whenever appropriate.  The Committee carries out these responsibilities with
assistance from an executive compensation consulting firm and with input from
the Chief Executive Officer and management as it deems appropriate.  
 
Officer Compensation Philosophy

Illinova's compensation philosophy reflects a commitment to compensate 
officers competitively with other companies in the electric and gas utility 
industry while rewarding executives for achieving levels of operational and 
financial excellence consistent with continuous improvement in customer 
satisfaction and shareholder value. Illinova's compensation policy is to 
provide a total compensation opportunity targeted to all utilities in the 
Edison Electric Institute (EEI) database. Eighty-four percent of the companies
in the S & P Utilities Index are also in the EEI database.  The S&P Utilities
Index is used to relate Illinova's shareholder value in the following 
performance graphs.  The S&P index covers the utility indsutry broadly 
including electric, gas, and telecommunication utilities.  After careful
consideration, the Committe has decided to maintain a separate compensation
peer group limited to electric or combination electric and gas companies
for reference purposes.  As an additional point of reference, Illinova also
looks at the pay practices of general industry (non-utility) companies.  While
such pay practices have not traditionally been a major driver of Illinova's
compensation philosophy, this reference point may be regarded more closely in
the future as the utility indsutry migrates toward deregulation and 
diversification.

The compensation program for officers consists of base salary, annual 
incentive and long-term incentive components. The combination of these three 
elements balances short- and long-term business performance goals and aligns 
officer financial rewards with those of Illinova's shareholders. The 
compensation program is structured so that, depending on the salary level, 
between 25 and 45 percent of an officer's total compensation target is 
composed of incentive compensation.

Base Salary Plan

The Committee determines base salary ranges for executive officers based on 
competitive pay practices of similar utilities. Officer salaries correspond 
to approximately the average of the companies in the compensation peer group. 
Individual increases are based on several factors, including the officer's 
performance during the year, the relationship of the officer's salary to the 
market salary level for the position and competitive industry salary increase 
practices.

Annual Incentive Compensation Plan

Annual incentive awards are earned based on the achievement of specific annual 
financial and operational goals by the Illinois Power officer group as a whole 
and consideration of the officer's individual contribution. If payment is 
earned under this Plan, one-half of the bonus is payable in cash during the 
year following the award year, and one-half is credited to the participant in 
the form of Common Stock units, the number of which is determined by dividing 
half of the earned bonus amount by the closing price of the Common Stock on
the last trading day of the award year.  The officer's interest in the stock
units vests at the end of the three-year period which begins the year after
the award year.  The officer receives this award in cash equal to (1) the
closing stock price on the first trading day of the distribution year times
the number of units held plus (2) dividend equivalents that would have been
received if the stock had actually been issued.

For Illinois Power officers, 1996 awards under the Compensation Plan are based 
on achievement in the performance areas: earnings per share, customer 
satisfaction, safety and employee teamwork, cost management and shareholder 
value added. Up to 25 percent of the awarded amount is based on an assessment 
of the individual officer's performance during the year.

Awards shown under Bonus in the Summary Compensation Table for performance 
during 1996 were based on the following results. Earnings per share, customer 
satisfaction and shareholder value added were at or better than the threshold 
level for the award. Safety performance and cost management performance were 
not at threshold for the award.

For the unregulated subsidiaries, Illinova Generating and Illinova Energy 
Partners, 1996 officer awards were based on achievement of specific marketing 
and earnings objectives. Up to 50 percent of the awarded amount is based on 
an assessment of the individual officer's performance during the year.

Long-Term Incentive Compensation Plan

Awards under the LTIC Plan are based on corporate performance as well as 
individual officers' contribution to corporate performance subject to the 
review of this Committee. The Committee may grant awards in the form of stock 
options, stock appreciation rights, dividend equivalents, restricted stock 
grants or performance-based cash awards. In 1996, it was determined that 
awards under the LTIC plan be delivered in two components. One-half of each 
officer's LTIC plan award is delivered in the form of stock options granted
at fair market value.  The stock options granted to the officers for 1996
represent an award based on Illinova and individual performance as evaluated
by the Chairman and reviewed by the Committee.  The other half of the LTIC
plan award is distributed to officers in cash based upon Illinova's Share-
holder Value-Added (SVA) performance relative to a peer group of other
utility companies, as measured in overlapping three-year periods.  Since 1996
represented the first year of SVA plan's first measurement cycle, no awards
are due to be paid out under the plan until 1999.

CEO Compensation

Larry Haab became Chairman, President, and Chief Executive Officer ("CEO") of 
Illinois Power on June 12, 1991, and Chairman, President and Chief Executive 
Officer of Illinova in December 1993. Illinova based Mr. Haab's 1996 
compensation on the policies and plans described above.

The Committee invokes the active participation of all non-management directors 
in reviewing Mr. Haab's performance before it makes recommendations regarding 
his compensation. The Committee is responsible for administering the processes 
for completing this review. The process starts early in the year when the 
Board of Directors works with Mr. Haab to establish his personal goals and 
short- and long-term strategic goals for Illinova. At the conclusion of the 
year Mr. Haab reviews his performance with the non-management directors.  The
Committee oversees this review and recommends to the Board appropriate 
adjustments to compensation.  In setting the CEO's salary for 1996, the 
Committee, with the participation of all Outside Directors, determined that
important goals were achieved and the results for Illinova for the year were
strong.  Mr. Haab's vision of the industry's evolution has led, and is
continuing to lead, to appropriate redeployment of Illinova resources.  The
Committee concluded that in 1996 Mr. Haab's performance continued to advance
Illinova toward the accomplishment of its strategic objectives.

The 1996 Annual Incentive Compensation Plan award for the Chief Executive 
Officer was calculated consistent with the determination of awards for all 
other Illinois Power officers. Under the terms of the plan, one-half of the 
award was paid in cash and one-half was converted to 2,519 stock units which 
vest over a three-year period as described above.

The 22,000 option shares granted to the CEO reflect the Committee's 
recognition of his work in directing Illinova towards its long-term objectives 
of outstanding customer satisfaction and sustained growth in shareholder 
return.

Compensation and Nominating Committee 
Donald S. Perkins, Chairman
Robert M. Powers
Walter D. Scott
Ronald L. Thompson
Marilou von Ferstel
John D. Zeglis 

Stock Performance Graphs 

The following performance graphs compare the cumulative total shareholder 
return on Illinova's Common Stock to the cumulative total return on the S&P 
500 Index, S&P MidCap 400 Index and S&P Utilities Index from (i) December 31, 
1991, through December 31, 1996, and (ii) December 31, 1993, through December 
31, 1996. 

<TABLE>
Comparison of Five-Year Cumulative Total Return

Among Illinova, S&P 500, S&P Midcap 400, and S&P Utilities

      <C>           <C>     <C>    <C>     <C>      <C>    <C>
                   1991    1992    1993    1994    1995   1996

Illinova            100      98     101     104     148    141
S&P 500             100     108     118     120     165    203
S&P Midcap 400      100     112     128     123     161    192
S&P Utilities       100     108     124     114     161    165

</TABLE>

Assumes $100 invested on December 31, 1991, in Illinova Common Stock, S&P 500 
Index, S&P MidCap 400 Index, and S&P Utilities Index. 

<TABLE>
Comparison of Three-Year Cumulative Total Return
Among Illinova, S&P 500, S&P Midcap 400, and S&P Utilities

      <C>         <C>      <C>      <C>      <C>
                  1993     1994     1995     1996
Illinova          100      103      147      140
S&P 500           100      101      139      171
S&P Midcap 400    100       96      126      151
S&P Utilities     100       92      130      134

</TABLE>





Assumes $100 invested on December 31, 1993, in Illinova Common Stock, S&P 500 
Index, S&P MidCap 400 Index, and S&P Utilities Index.

Independent Auditors

The Board of Directors of Illinova has selected Price Waterhouse LLP as 
independent auditors for Illinova for 1997. A representative of that firm will 
be present at the Annual Meeting and available to make a statement and to 
respond to questions. 

Other Matters

Illinova's 1996 Summary Annual Report to Shareholders was mailed to 
shareholders commencing on March 3, 1997. Copies of Illinova's Annual Report 
on Form 10-K will be available to shareholders, after its filing with the 
Securities and Exchange Commission on or before March 31, 1997. Requests 
should be addressed to Investor Relations, G-21, Illinova Corporation, 500 
South 27th Street, Decatur, Illinois 62525-1805. 

Any proposal by a shareholder to be presented at the next Annual Meeting must 
be received at Illinova's executive offices not later than November 3, 1997. 

Other Business

Management does not know of any matter which will be presented for 
consideration at the Annual Meeting other than the matters described in the 
accompanying Notice of Annual Meeting. 

By Order of the Board of Directors,


Leah Manning Stetzner, 
General Counsel and Corporate Secretary

Decatur, Illinois
March 3, 1997

Appendix: 1996 Annual Report to Shareholders

Table of Contents

Management's Discussion and Analysis . . . . . . . . . . . . . . . . . .	 A-2
Responsibility for Information	. . . . . . . . . . . . . . . . . . . . . A-10
Report of Independent Accountants  . . . . . . . . . . . . . . . . . . . A-10
Consolidated Statements of Income  . . . . . . . . . . . . . . . . . . . A-11
Consolidated Balance Sheets  . . . . . . . . . . . . . . . . . . . . . . A-12
Consolidated Statements of Cash Flows  . . . . . . . . . . . . . . . . . A-13
Consolidated Statements of Retained Earnings . . .	. . . . . . . . . . . A-13
Notes to Consolidated Financial Statements	. . . . . . . . . . . . . . . A-14
Selected Consolidated Financial Data	  . . . . . . . . . . . . . . . . . A-32
Selected Illinois Power Company Statistics	. . . . . . . . . . . . . . . A-33

Management's Discussion and Analysis

In this report, we refer to the Consolidated Financial Statements, related 
Notes to Consolidated Financial Statements, Selected Consolidated Financial 
Data and Selected Illinois Power Company Statistics for information concerning 
consolidated financial position and results of operations. A discussion of the 
factors having significant impact upon consolidated financial position and 
results of operations since January 1, 1994, is below.

Illinova Subsidiaries

The Consolidated Financial Statements include the accounts of Illinova 
Corporation (Illinova), a holding company, and its wholly owned subsidiaries: 
Illinois Power Company (IP), a combination electric and gas utility; Illinova 
Generating Company (IGC), which invests in energy-related projects throughout 
the world; Illinova Power Marketing, Inc. (IPMI), which brokers and markets 
electric power and natural gas in the United States; Illinova Energy Partners, 
Inc. (IEPI), which develops and markets energy-related services to the 
unregulated energy market throughout the United States, Canada, and through a
distributor in the United Kingdom; and Illinova Insurance Company (IIC), whose
purpose is to ensure the risks of the subsidiaries of Illinova and risks 
related to or associated with their business perspectives.

IEPI was formed in May 1996. It has its headquarters in Oak Brook, Illinois, 
with offices in several Western states and in the St. Louis, Missouri, area.  
In August 1996, IIC was licensed by the State of Vermont as a captive 
insurance company.

On February 12, 1997, the Illinova Board of Directors approved a merger of 
IEPI and IPMI. In the merger, IPMI will be dissolved, and IEPI will assume 
responsibility for the business functions previously handled by IPMI.

See "Note 2 - Illinova Subsidiaries" of the "Notes to Consolidated Financial 
Statements" for additional information. IP's consolidated financial position 
and results of operations are currently the principal factors affecting 
Illinova's consolidated financial position and results of operations.

Open Access and Wheeling

On March 29, 1995, the Federal Energy Regulatory Commission (FERC) issued a 
Notice of Proposed Rulemaking (NOPR) initiating the process of mandating 
non-discriminatory open access to public utility transmission services at 
cost-based rates. Transmission of electricity for a reseller or redistributor 
of energy is called wholesale wheeling. Transmission of electricity for end-
use customers is known as retail wheeling.

On April 24, 1996, FERC issued Orders 888 and 889 which established the Final 
Rule resulting from the NOPR. The Orders became effective July 9, 1996. The 
Rule requires that all public utilities under FERC jurisdiction that own 
transmission facilities file Open Access Transmission Tariffs (OATTs) in 
compliance with Pro Forma Tariffs attached to the Order. FERC also requires 
that all wholesale sales made by a utility provide for transmission of the 
power under the terms and conditions of the OATTs. Public utilities serving
customers at retail are not required, at this time, to use the OATTs to serve
retail customers.  The Orders do not require that retail customers be given
access to alternate energy suppliers or be found eligible as customers under
the OATTs.  IP made a compliance filing as required on July 9, 1996, which has
been accepted by FERC.

While the move to open-access transmission service will likely increase the 
level of competition in the wholesale energy market, it is not expected to 
have a significant financial impact.

Competition

On November 21, 1996, IP and its partners in the Illinois Coalition for 
Responsible Electricity Choice announced a legislative proposal which would 
begin transformation of the Illinois electric industry from a highly regulated 
monopoly to a competitive, customer-choice environment. The proposal, which 
was introduced in the Illinois House of Representatives on January 29, 1997, 
would allow for a managed transition to direct access for all consumers by 
the year 2005. The plan would balance the need to ensure the financial 
stability of current utility providers with the timing of customer choice.
Other parties have introduced plans that would not provide for this balance,
and would allow full competition by as early as 1998.
 
The Joint Committee on Electric Utility Regulatory Reform of the Illinois 
General Assembly deliberated the issue of regulatory reform for 18 months. 
Their report, issued December 4, 1996, stated that the Committee was unable 
to reach consensus on a legislative proposal. It is reasonable to assume that 
significant change will be made to the state laws governing IP's electric 
operations, but impossible to predict what these changes will be.

IP received approval from the Illinois Commerce Commission (ICC) on March 13, 
1996, and from FERC on April 24, 1996, to conduct an open access experiment 
beginning in 1996 and ending on December 31, 1999.

The experiment allows certain industrial customers to purchase electricity 
and related services from other sources. On April 25, 1996, the first of the 
21 eligible customers began buying part of their electricity from a supplier 
other than IP. Currently, 16 customers are participating in the experiment. 
The experiment has demonstrated some of the immediate advantages competition 
brings to customers, such as lower prices and innovative service offerings. 
It has also provided evidence of some of the challenges the industry faces as
it moves toward customer choice.  Challenges include dispatching small
amounts of electricity such as one or two megawatt hours (MWHs), and the
absence of requisite technology to dispatch fractional MWHs.

In 1996, the experiment cost IP approximately $3.2 million in lost revenue net 
of avoided fuel cost and variable operating expenses. This loss was partially 
offset by selling the surplus energy and capacity on the open market and by 
$.9 million in transmission service charges.

The issue of competition is one that raises both risks and opportunities. At 
this time, the ultimate effect of competition on Illinova's consolidated 
financial position and results of operations is uncertain. See "Note 1 - 
Summary of Significant Accounting Policies" of the "Notes to Consolidated 
Financial Statements" for additional discussion of the effects of regulation.

Regulatory Matters

On September 6, 1996, a leaking seal in one of two reactor recirculation pumps 
caused IP to shut down Clinton Power Station (Clinton). While a plant shutdown 
to correct this problem would not be a major concern in itself, the event was 
significant because of broader issues which surfaced during subsequent 
internal investigations, involving operating philosophies, procedure 
compliance issues, degree of management oversight, and tolerance of equipment 
problems.

This event prompted two special team inspections by the Nuclear Regulatory 
Commission (NRC). The first inspection covered the events associated with the 
leaking pump seal and the shutdown, while the second focused more broadly on 
operations at Clinton. In a public meeting held on October 4, 1996, the NRC 
discussed its findings, expressing concern over both the handling of the pump 
seal problem and general plant operating philosophies. It also commended 
subsequent actions taken by IP to address the issues raised.

IP decided not to restart Clinton prior to the start of the scheduled 
refueling outage on October 13, 1996. An action plan was developed to address 
the operational weaknesses identified by IP. Work began to correct the items 
in the action plan while the refueling outage progressed.

On November 19, 1996, the NRC issued a formal report of its two teams' 
inspections. IP agreed with the majority of the report's findings. The concerns 
of the NRC that had not already been addressed were incorporated into IP's 
action plan. On January 29, 1997, the NRC informed IP that it viewed Clinton 
as having a declining safety performance trend. The NRC did not, however, 
place Clinton on its "watch list." The NRC acknowledged that IP has allocated 
additional resources to correct deficiencies and noted recent conservative
decisions made by management that have impacted the length of the refueling
outage schedule.  The NRC held an enforcement conference with IP on February 4,
1997, to discuss the event and other issues identified during assessments and
inspections.  The plant will remain shut down until IP management is satisfied 
that all safety concerns have been addressed.

The operation and maintenance expense of the outage, including the scheduled 
refueling outage, is estimated at $30 million. The refueling outage was 
budgeted at $18 million.

Enhanced Retirement

In December 1994, IP announced plans for voluntary enhanced retirement and 
severance programs. During the fourth quarter of 1995, 727 employees accepted 
enhanced retirement or severance under these programs. The combined enhanced 
retirement and severance programs generated a pretax charge of $38 million 
against fourth quarter 1995 earnings.

Consolidated Results of Operations

Overview

Earnings applicable to common stock were $190 million for 1996, $148 million 
for 1995 and $158 million for 1994. Earnings per common share were $ 2.51 for 
1996, $1.96 for 1995 ($2.26 before the one-time charge of $38 million for 
enhanced retirement and severance), and $2.09 for 1994. The increase in 1996 
earnings per share over 1995 was due primarily to the one-time charge in 1995 
for the enhanced retirement and severance programs, lower operations expense 
due to the employment decrease, and lower financing costs.  The 1995 earnings
per share include $(.30) net-of-tax for the enhanced retirement and severance
program and $(.05) for the carrying amount under consideration paid for IP
preferred stock redeemed in December 1995.  The 1995 earnings as compared to
1994 also reflect increased electric sales due to unseasonably warm summer
weather, partially offset by increased operating and maintenance expenses due
to the Clinton refueling and maintenance outage.  The 1994 earnings per share
include $.08 for the carrying amount over consideration paid for IP preferred
stock redeemed in December 1994 and reflect an increase in gas rates as a 
result of IP's 1994 gas rate order.  The 1994 earnings also reflect increased
electric sales, lower operating and maintenance expenses due to ongoing cost
management efforts, no Clinton refueling and maintenance outage, and lower
financing costs as compared to 1993.

The ICC and FERC determine IP's rates for electric service at the retail and 
wholesale levels, respectively, and the ICC determines IP's rates for gas 
service. These rates are designed to recover the cost of service and allow 
shareholders the opportunity to earn a fair rate of return. Future electric 
and natural gas sales, including interchange sales, will continue to be 
affected by an increasingly competitive marketplace, changes in the regulatory 
environment, increased transmission access, weather conditions, competing 
fuel sources, interchange market conditions, plant availability, fuel cost
recoveries, customer conservation efforts and the overall economy.

<TABLE>

Operating Revenues
(Millions of dollars)
 <C>             <C>
1996           $1,688.7
1995           $1,641.4
1994           $1,589.5
1993           $1,581.2
1992           $1,479.5

</TABLE>

Illinois Power - Results of Operations
Electric Operations   For the years 1994 through 1996, electric revenues 
including interchange increased 4.1% and the gross electric margin increased 
6.1% as follows:

<TABLE>
         <C>                        <C>          <C>        <C>
---------------------------------------------------------------------
(Millions of dollars)		            1996		       1995		      1994
---------------------------------------------------------------------
Electric revenues	              $	1,202.9	    $	1,252.6	  $	1,177.5
Interchange revenues		              137.6	       	116.3		     110.0
Fuel cost & power purchased      		(313.3)	     	(333.4)		   (319.2)
----------------------------------------------------------------------
	  Electric margin             	$	1,027.2	    $	1,035.5	   $ 	968.3

</TABLE>

The components of annual changes in electric revenues were:

<TABLE>

          <C>                       <C>          <C>           <C>
----------------------------------------------------------------------
(Millions of dollars)		            1996		        1995		       1994
----------------------------------------------------------------------
Price	                           $	(7.2)      	$	13.3	      $	(23.2)
Volume and other		                  6.4		        42.7		        44.1
Fuel cost recoveries		            (48.9)		       19.1	        	21.0
----------------------------------------------------------------------
	 Revenue increase (decrease)	  $	(49.7)	      $	75.1	       $	41.9

</TABLE>

1996 Electric revenues excluding interchange sales decreased 4.0%, primarily 
due to reduction in revenues under the Uniform Fuel Adjustment Clause (UFAC). 
Volume changes by customer class were insignificant, as kilowatt-hour sales 

<TABLE>

Major Sources of Electric Energy
(Millions of megawatt-hours)
   <C>              <C>     <C>     <C>
                    1996   1995    1994
Fossil              16.3   14.5    13.2
Nuclear              4.6    5.3     6.4
Purchases            3.4    3.2     3.1

</TABLE>

to ultimate consumers (excluding interchange sales and wheeling) decreased .3%. 
Interchange revenues increased 18.3% as a result of higher plant availability 
in the first half of the year.

1995    The 6.4% increase in electric revenues was primarily due to a 1.9% 
increase in kilowatt-hour sales to ultimate consumers (excluding interchange 
sales and wheeling). Volume increases resulted from higher residential sales 
(4.8%) and higher commercial sales (8.2%) due to an improving economy and 
warmer summer temperatures compared to 1994. Industrial sales remained 
essentially unchanged from 1994. Interchange revenues increased $6.3 million 
(5.8%) as a result of increased sales opportunities.

1994    The 3.7% increase in electric revenues was primarily due to a 6.3% 
increase in kilowatt-hour sales to ultimate consumers (excluding interchange 
sales and wheeling). Volume increases resulted from higher commercial sales 
(8.3%) and higher industrial sales (7.0%) due to an improving economy. 
Residential sales remained essentially unchanged from 1993 primarily due to
milder temperatures in 1994 as compared to 1993. Interchange sales decreased 
19.6% from 1993 levels primarily due to unusually large sales opportunities
in 1993.

The cost of meeting IP's system requirements was reflected in fuel costs for 
electric plants and power purchased. Changes in these costs are detailed 
below:

<TABLE>
         <C>                          <C>            <C>       <C>
----------------------------------------------------------------------
(Millions of dollars)		               1996		        1995		     1994
Fuel for electric plants
	Volume and other	                   $	15.4       	$	9.8    	$	13.8
	Price		                              (12.0)	     	(35.5)		   (14.3)
	Emission allowances		                   .8		       18.5 		       - 
	Fuel cost recoveries	               	(30.0)		      14.5	     	32.0
-----------------------------------------------------------------------		
                                     	(25.8)	       	7.3	     	31.5
Power purchased		                       5.7	        	6.9	    	(25.9)
-----------------------------------------------------------------------
	Total increase (decrease)	         $	(20.1)	     $	14.2	     $	5.6
-----------------------------------------------------------------------
Weighted average system
generating fuel cost ($/MWH)	       $	11.01	      $	11.41	   $	12.72
------------------------------------------------------------------------
</TABLE>

System load requirements, generating unit availability, fuel prices, purchased 
power prices, resale of energy to other utilities, emission allowance 
purchases and fuel cost recovery through UFAC caused changes in these costs.

Changes in factors affecting the cost of fuel for electric generation are 
below:

<TABLE>
        <C>                  <C>       <C>      <C>
-----------------------------------------------------
                          			1996		    1995   		1994
-----------------------------------------------------
Increase in generation 	    	5.4%     		.7% 		  8.2% 
Generation mix  
	Coal and other		             78%		     73%	    	67%
	Nuclear		                    22%	     	27%		    33%
-----------------------------------------------------
</TABLE>

1996    The cost of fuel decreased 9.4% and electric generation increased 5.4%. 
The decrease in fuel cost was primarily attributable to the effects of the
UFAC, as well as a favorable price variance. These factors were partially 
offset by an increase in fuel cost due to the increase in generation. Power 
purchased increased $5.7 million primarily due to the extended Clinton outage. 
Clinton's equivalent availability and generation were lower than in 1995 due 
to that outage.

<TABLE>

Fuel Cost Per Million Btu
(Percent of generation)
  <C>           <C>      <C>
Coal          $1.28      76%
Nuclear       $ .81      22%
Other         $1.68       2%

</TABLE>

1995    The cost of fuel increased 2.8% and electric generation increased .7%. 
The increase in fuel cost was attributable to the effects of the UFAC, the 
increase in higher-cost fossil generation and the cost of emission allowances. 
Clinton's equivalent availability and generation were lower in 1995 as 
compared to 1994 due to the scheduled refueling and maintenance outage. 
Clinton returned to service April 29, 1995, after completing its fifth 
refueling and maintenance outage, which began March 12, 1995. Power purchased
increased $6.9 million.
 
1994   The cost of fuel increased 13.4% and electric generation increased 8.2%. 
The increase in fuel cost was attributable to the effects of the UFAC, 
partially offset by a decrease in fossil generation and an increase in lower-
cost nuclear generation. Clinton's equivalent availability and generation were 
higher in 1994 as compared to 1993 due to no refueling and maintenance outage. 
Power purchased for the period decreased $25.9 million. Unusually large 
interchange sales opportunities during 1993, which did not recur in 1994, 
were the primary cause of the decrease in purchased power.

Gas Operations    For the years 1994 through 1996, gas revenues including 
transportation increased 15.3%, while the gross margin on gas revenues 
increased 12.4% as follows:

<TABLE>
--------------------------------------------------------
        <C>                     <C>        <C>       <C>
(Millions of dollars)		        1996		     1995		    1994
--------------------------------------------------------
Gas revenues	                $	341.4	   $	264.5	 $	293.2
Gas cost		                    (202.6)	  	(138.8)		(172.4)
Transportation revenues		        6.8		      8.0		    8.8
---------------------------------------------------------
	Gas margin	                 $	145.6	   $	133.7	 $	129.6
---------------------------------------------------------
(Millions of therms)
Therms sold		                  703		      588	    	584
Therms transported		           251	      	273    		262
----------------------------------------------------------
	Total consumption		           954	      	861    		846
----------------------------------------------------------
</TABLE>

Changes in the cost of gas purchased for resale were:

<TABLE>
------------------------------------------------------------------------
         <C>                       <C>             <C>          <C>
(Millions of dollars)	            	1996	     	     1995    		   1994  
Gas purchased for resale
	Cost (excluding take-or-pay)   	$	48.6	        $	(43.1)     	$	(6.4)
	Take-or-pay costs	                 	.4	      	     (.4)	       	2.8
	Volume	                           	8.5	     	     25.3		      (13.6)
	Gas cost recoveries		              6.3	    	     (15.4)	    	   2.3
--------------------------------------------------------------------------
	Total increase (decrease)	      $	63.8   	     $	(33.6) 	   $	(14.9)
--------------------------------------------------------------------------
Average cost per therm delivered		 26.7 cents    	20.1 cents  		26.1 cents 
---------------------------------------------------------------------------
</TABLE>

The 1996 increase in gas costs was primarily due to higher prices from 
suppliers and the effects of the Uniform Gas Adjustment Clause (UGAC). The 
1995 decrease in the cost of gas purchased was due to lower gas prices caused 
by unusually warm winter weather nationwide. The 1994 decrease in the cost of 
gas purchased was primarily due to lower gas prices, the expanded use of 
additional gas storage and a decrease in therms purchased. Also contributing 
to the higher gas margins in 1995 and 1994 was the 6.1% increase in gas base
rates approved by the ICC in April 1994.

Other Expenses     A comparison of significant increases (decreases) in other 
operating expenses, maintenance and depreciation for the last three years is 
presented in the following table:

<TABLE>
----------------------------------------------------------
         <C>                      <C>       <C>       <C>
(Millions of dollars)		          1996		    1995		    1994
Other operating expenses	      $	(9.8)   	$	(.3)  	$	(9.2)
Maintenance		                     (.3)	   	10.4	   	(11.2)
Depreciation and amortization	    3.5	     	7.2	     	6.4
-----------------------------------------------------------
</TABLE>

The decrease in operating expenses for 1996 is due primarily to the savings 
from the enhanced retirement and severance program, partially offset by the 
costs of the extended Clinton outage and increased amortization of 
Manufactured Gas Plant (MGP) site expenses. The ICC approved tariff riders in 
March 1996 that resulted in the current recognition of MGP site remediation 
costs in operating expenses. The 1996 increase amounted to $5.5 million. This 
increase is offset by increased revenues collected under the riders.
 
The increase in maintenance expense for 1995 is primarily due to the refueling 
and maintenance outage at Clinton. The decrease in operating and maintenance 
expenses for 1994 is due to re-engineering efforts, improved operating 
efficiencies at IP's fossil plants and at Clinton, and no refueling and 
maintenance outage at Clinton. The increases in depreciation for each of the 
three years were due to increases in utility plant balances. The 1994 increase 
in depreciation expense is partially offset by the decrease in deferred
Clinton costs as a result of a September 1993 write-off of disallowed Clinton
post-construction costs.

<TABLE>

Operating and Maintenance Expenses
(Millions of Dollars)
 <C>        <C>
1996       $349.6
1995       $359.7
1994       $349.6
1993       $370.0
1992       $373.4

</TABLE>

Other Income and Deductions       The 1996 increase in Miscellaneous-net 
deductions was due primarily to increased losses for the subsidiary companies 
other than IP, partially offset by an increase in the credit for allocated 
income taxes. The 1995 change in Miscellaneous-net deductions was negligible. 
The 1994 increase in deductions was primarily due to the change in allocated 
taxes.

Interest Charges       Total interest charges, including Allowance for Funds 
Used During Construction (AFUDC) and preferred dividend requirements, 
decreased $16.9 million in 1996, increased $2.4 million in 1995, and decreased 
$23.2 million in 1994. The 1996 decrease was due to lower short-term interest 
rates and the impact of refinancing efforts and capitalization reduction 
during 1996.  The 1995 increase was due to increased short-term borrowings at 
higher interest rates. The 1994 decrease was primarily due to refinancing 
with lower cost debt and the retirement of debt in 1994 and 1993.

Inflation       Inflation, as measured by the Consumer Price Index, was 3.3%, 
2.5% and 2.5% in 1996, 1995 and 1994, respectively. IP recovers historical 
rather than current plant costs in rates.

Liquidity and Capital Resources

Soyland Power Cooperative Negotiations

IP and Soyland Power Cooperative (Soyland) have entered into an agreement to 
transfer Soyland's 13.2% ownership of Clinton to IP, contingent on approval 
by the NRC. The NRC is expected to act on IP's request during the first 
quarter of 1997.

IP and Soyland have renegotiated the existing Power Coordination Agreement. 
This agreement is expected to result in a reduction of rates for Soyland while 
IP will be assured a long-term sales agreement for 10 to 20 years. IP is 
expected to file a request for approval of this agreement with FERC by the 
end of February 1997.

1994 Gas Rate Order 

On April 6, 1994, the ICC approved an increase of $18.9 million, or 6.1%, in 
IP's gas base rates. For customers, the increase is partially offset by 
savings from lower gas costs resulting from the expansion of the Hillsboro 
gas storage field. The approved authorized rate of return on rate base is 
9.29%, with a rate of return on common equity of 11.24%. Concurrent with the 
gas rate increase, IP's gas utility plant composite depreciation rate 
decreased to 3.4%.

Dividends

On December 11, 1996, Illinova increased the quarterly common stock dividend 
by 11%. The $.31 per share dividend was payable February 1, 1997 to 
stockholders of record as of January 10, 1997. On December 13, 1995, Illinova 
increased the quarterly common stock dividend 12%, declaring the common stock 
dividend for the first quarter of 1996 at $.28 per share. On October 12, 1994, 
Illinova increased the quarterly common stock dividend 25%, declaring the 
common stock dividend for the first quarter of 1995 at $.25 per share.

Capital Resources and Requirements

Illinova and IP need cash for operating expenses, interest and dividend 
payments, debt and certain IP preferred stock retirements and construction 
programs. To meet these needs, Illinova and IP have used internally generated 
funds and external financings, including the issuance of IP preferred stock, 
debt and revolving lines of credit.  The timing and amount of external 
financings depend primarily on economic and financial market conditions, cash 
needs and capitalization ratio objectives.

Cash flows from operations during 1996 provided sufficient working capital to 
meet ongoing operating requirements, to service existing common and IP 
preferred stock dividends and debt requirements, and to meet all of IP's 
construction requirements. Additionally, Illinova expects that future cash 
flows will enable it to meet future operating requirements and continue to 
service IP's existing debt, IP's preferred and Illinova's common stock 
dividends, IP's sinking fund requirements and all of IP's anticipated
construction requirements.

To a significant degree, the availability and cost of external financing 
depend on the financial health of the company seeking those funds. Security 
ratings are an indication of a company's financial position and may affect 
the cost of securities, as well as the willingness of investors to invest in 
these securities. The current ratings of IP's securities by three principal 
securities rating agencies are as follows:

<TABLE>
-------------------------------------------------------------------------
          <C>                          <C>          <C>          <C>
                                          				    Standard	     Duff &
		                               	    Moody's     & Poor's     	Phelps
-------------------------------------------------------------------------
IP first/new mortgage bonds	           Baa1	         BBB	        	BBB+
IP preferred stock	                    baa2	         BBB-	       	BBB-
IP commercial paper	                    P-2	         A-2		        D-2
-------------------------------------------------------------------------
</TABLE>

Under current market conditions, these ratings would afford IP the ability to 
issue additional securities through external financing. Illinova and IP have 
adequate short-term and intermediate-term bank borrowing capacity.

Based on its 1993 revised standards for review of utility business and 
financial risks, Standard & Poor's (S&P) placed IP, along with approximately 
one-third of the industry, in a "somewhat below average" category. In April 
1994, S&P lowered IP's mortgage bond rating to BBB from BBB+. In August 1995, 
S&P revised its ratings outlook from stable to positive. In February 1996, 
Moody's also revised its ratings outlook from stable to positive.

Moody's upgraded IP's securities on July 1, 1996. The rating for mortgage 
bonds was raised from Baa2 to Baa1, while preferred stock ratings went from 
baa3 to baa2. In March 1996, the Duff & Phelps credit rating company 
established credit ratings for IP's fixed income securities, as shown on the 
preceding page. The agency has indicated that it expects IP's ratings to 
remain stable, reflecting a modestly strengthening financial profile 
characterized by good cash flow and an average business risk profile.

For the years 1996, 1995 and 1994, changes in long-term debt and IP preferred 
stock outstanding, including normal maturities and elective redemptions, were 
as follows:

<TABLE>
--------------------------------------------------------
          <C>                  <C>       <C>       <C>
(Millions of dollars)		        1996		    1995	    	1994
---------------------------------------------------------
Bonds	                      $	(132)    	$ 	(5) 	 $ 	(10)
Other long-term debt		         (22)       		-    		(100)
Preferred stock		               71		      (135)     		6
---------------------------------------------------------
	Total decrease	             $	(83)	   $ 	(140) 	$ 	(104)
---------------------------------------------------------
</TABLE>

The amounts shown in the preceding table for debt retirements do not include 
all mortgage sinking fund requirements. IP has generally met these 
requirements by pledging property additions as permitted under IP's 1943 
Mortgage and Deed of Trust. For additional information, see "Note 9 - Long-
Term Debt of Subsidiary" and "Note 10 - Preferred Stock of Subsidiary" of the 
"Notes to Consolidated Financial Statements."

During 1996, IP redeemed $2.2 million of Adjustable Rate Series A serial 
preferred stock, $20.5 million (all of the remaining) Adjustable Rate Series 
B serial preferred stock and $6.7 million of 7.75% serial preferred stock. 
During the year, IP also retired $62.9 million of 8.75% First Mortgage Bonds 
due 2021, $6.0 million of 8% New Mortgage Bonds due 2023 and $23 million of 
7.5% New Mortgage Bonds due 2025. The $40 million of 5.85% First Mortgage 
Bonds matured and were retired. In addition, $21.5 million of medium-term notes
matured and were retired.

In February 1995, IP redeemed $12 million of 8.00% mandatorily redeemable 
serial preferred stock. In May 1995, IP redeemed the remaining $24 million of 
8.00% mandatorily redeemable serial preferred stock. In March 1995, IP redeemed 
$.2 million of 7.56% serial preferred stock and $3 million of 8.24% serial 
preferred stock. In August 1995, IP purchased $5 million of 8.75% First 
Mortgage Bonds. In December 1995, IP redeemed $34.7 million of 8.00% serial 
preferred stock, $33.6 million of 7.56% serial preferred stock and $27
million of 8.24% serial preferred stock.
 
In February 1994, IP redeemed $12 million of 8.00% mandatorily redeemable 
serial preferred stock and issued $35.6 million of First Mortgage Bonds, 5.7% 
Series due 2024 (Pollution Control Series K). In May 1994, IP retired $35.6 
million of First Mortgage Bonds, 11 5/8% Series due 2014 (Pollution Control 
Series D) with the proceeds of the debt issuance. In August 1994, IP retired 
$100 million of 8 1/2% debt securities.

Illinois Power Financing I (IPFI) is a statutory business trust in which IP 
serves as sponsor. IPFI issued $100 million of trust originated preferred 
securities (TOPrS) at 8% (4.8% after-tax rate) in January 1996. The TOPrS 
were issued by IPFI, which invested the proceeds in an equivalent amount of 
IP subordinated debentures due in 2045. The proceeds were used by IP to repay 
short-term indebtedness on varying dates on or before March 1, 1996. IP 
incurred the indebtedness in December 1995 to redeem $95.3 million (principal
value) of higher-cost outstanding preferred stock of IP.

Illinois Power Capital, L.P. (IP Capital) is a limited partnership in which 
IP serves as a general partner. IP Capital issued $97 million of tax-
advantaged monthly income preferred securities (MIPS) at 9.45% (5.67% after-
tax rate) in October 1994. The proceeds were loaned to IP and were used to 
redeem $97 million (principal value) of higher-cost outstanding preferred 
stock of IP.

In December 1994, IP issued $84.1 million of First Mortgage Bonds, 7.4% Series 
due 2024 (Pollution Control Series L). In March 1995, the proceeds of the debt 
issuance were used to retire $84.1 million of First Mortgage Bonds, 103/4% 
Series due 2015 (Pollution Control Series E).

In 1992, IP executed a new general obligation mortgage (New Mortgage) to 
replace, over time, IP's 1943 Mortgage and Deed of Trust (First Mortgage). 
Both mortgages are secured by liens on substantially all of IP's properties. 
A corresponding issue of First Mortgage bonds, under the First Mortgage, 
secures any bonds issued under the New Mortgage. IP anticipates that during 
1997 the 1943 mortgage will be amended to be consistent with the 1992 mortgage.

At December 31, 1996, based on the most restrictive earnings test contained 
in the First Mortgage, IP could issue approximately $1.3 billion of additional 
First Mortgage bonds for other than refunding purposes. Also at December 31, 
1996, the unused portion of Illinova and IP total bank lines of credit was 
$427 million. The amount of available unsecured borrowing capacity totaled 
$222 million at December 31, 1996.

On February 12, 1997, the IP Board of Directors approved a change to the IP 
Articles of Incorporation to remove the limitation on the amount of unsecured 
debt that IP can issue. The purpose of the change is to give IP more financial 
flexibility in the changing environment of a competitive marketplace. The 
change will be voted on by the IP preferred stockholders at a special meeting 
planned to be held in 1997. 

In January 1997, a $300 million shelf registration statement for Illinova debt 
securities became effective. On February 5, 1997, Illinova issued $100 million 
of 71/8% Senior Notes with a seven year maturity under this registration 
statement. The proceeds will be used to redeem $77 million of short-term 
borrowings, and to invest in Illinova's unregulated subsidiaries.

Construction expenditures for the years 1994 through 1996 were approximately 
$590.3 million, including $21.8 million of AFUDC. Illinova estimates that it 
will spend $200 million for construction expenditures for IP in 1997, as 
detailed at right. IP construction expenditures for the period 1997 through 
2001 are expected to total no more than $1 billion, including $100 million 
for expenditures related to Phase II Clean Air Act compliance requirements. 
Illinova's capital expenditures for the years 1997 through 2001, in addition
to the IP construction expenditures, are expected to include $140 million for
nuclear fuel, $300 million for mandatory debt retirement and $425 million for
investments in the unregulated subsidiaries.

<TABLE>
---------------------------------------------------------------
        <C>                                               <C>
(Millions of dollars)		                                   1997
----------------------------------------------------------------
IP construction requirements
	Electric generating facilities         	                $ 	77
	Electric transmission and distribution facilities	        	65
	General plant		                                            33
	Gas facilities		                                           25
----------------------------------------------------------------
	   Total construction requirements		                      200

Nuclear fuel	                                              	38
Debt retirements	                                          	11
Investments in subsidiaries		                               81
-----------------------------------------------------------------
	   Total                                               	$	330
-----------------------------------------------------------------
</TABLE>

See "Note 4 - Commitments and Contingencies" of the "Notes to Consolidated 
Financial Statements" for additional information. Internal cash generation 
will meet substantially all construction and capital requirements.

Environmental Matters

See "Note 4 - Commitments and Contingencies" of the "Notes to Consolidated 
Financial Statements" for a discussion of environmental matters that impact 
or could potentially impact Illinova and IP.

Tax Matters

See "Note 7 - Income Taxes" of the "Notes to Consolidated Financial 
Statements" for a discussion of effective tax rates and other tax issues.

Accounting Matters

The FASB continues to review the accounting for liabilities related to closure 
and removal of long-lived assets, including decommissioning. See "Note 4 - 
Commitments and Contingencies" of the "Notes to Consolidated Financial 
Statements" for a discussion of decommissioning.

ILLINOVA CORPORATION
RESPONSIBILITY FOR INFORMATION

The consolidated financial statements and all information in this annual 
report are the responsibility of management. The consolidated financial 
statements have been prepared in conformity with generally accepted accounting 
principles applied on a consistent basis and include amounts that are based 
on management's best estimates and judgments. Management also prepared the 
other information in the annual report and is responsible for its accuracy 
and consistency with the consolidated financial statements. In the opinion of
management, the consolidated financial statements fairly reflect Illinova's
financial position, results of operations and cash flow.

Illinova believes that its accounting and internal accounting control systems 
are maintained so that these systems provide reasonable assurance that assets 
are safeguarded against loss from unauthorized use or disposition and that 
the financial records are reliable for preparing the consolidated financial 
statements.

The consolidated financial statements have been audited by Illinova's 
independent accountants, Price Waterhouse LLP, in accordance with generally 
accepted auditing standards. Such standards include the evaluation of internal 
accounting controls to establish a basis for developing the scope of the 
examination of the consolidated financial statements. In addition to the use 
of independent accountants, Illinova maintains a professional staff of 
internal auditors who conduct financial, procedural and special audits.  To
assure their independence, both Price Waterhouse LLP and the internal auditors
have direct access to the Audit Committee of the Board of Directors.

The Audit Committee is composed of members of the Board of Directors who are 
not active or retired employees of Illinova. The Audit Committee meets with 
Price Waterhouse LLP and the internal auditors and makes recommendations to 
the Board of Directors concerning the appointment of the independent 
accountants and services to be performed. Additionally, the Audit Committee 
meets with Price Waterhouse LLP to discuss the results of their annual audit, 
Illinova's internal accounting controls and financial reporting matters.  The
Audit Committee meets with the internal auditors to assess the internal audit
work performed, including tests of internal accounting controls.

/s/ Larry D. Haab

Larry D. Haab
Chairman, President 
and Chief Executive Officer


/s/ Larry F. Altenbaumer

Larry F. Altenbaumer
Chief Financial Officer,
Treasurer and Controller

ILLINOVA CORPORATION
REPORT TO INDEPENDENT ACCOUNTANTS

PRICE WATERHOUSE LLP

To the Board of Directors of Illinova Corporation

In our opinion, the consolidated financial statements of Illinova Corporation 
and its subsidiaries appearing on pages A-11 through A- 31 of this report 
present fairly, in all material respects, the financial position of Illinova 
Corporation and its subsidiaries at December 31, 1996 and 1995, and the 
results of their operations and their cash flows for each of the three years 
in the period ended December 31, 1996, in conformity with generally accepted 
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on 
these financial statements based on our audits.  We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable 
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, the amounts and disclosures in 
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable 
basis for the opinion expressed above.

Price Waterhouse LLP
St. Louis, Missouri
February 7, 1997

<TABLE>

ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------------------------------------------------------------------------
            <C>                                               <C>                <C>          <C>
                                                             (Millions of dollars except per share amounts)
-----------------------------------------------------------------------------------------------------------
For the Years Ended December 31,	                             1996	             1995 	       1994 

Operating Revenues

Electric                                                 	$	1,202.9	            $	1,252.6	    $	1,177.5
Electric interchange	                                        	137.6	               	116.3		       110.0
Gas		                                                         348.2		               272.5		       302.0
----------------------------------------------------------------------------------------------------------	
       Total		                                              1,688.7		             1,641.4		     1,589.5
----------------------------------------------------------------------------------------------------------
Operating Expenses and Taxes

Fuel for electric plants	                                   	 248.1		               273.9		       266.6
Power purchased		                                              65.2	           	     59.5		        52.6
Gas purchased for resale	                                    	202.6		               138.8		       172.4
Other operating expenses		                                    249.9	                259.7		       260.0
Maintenance	                                                  	99.7		               100.0		        89.6
Enhanced retirement and severance		                               -		                37.8		           -
Depreciation and amortization		                               190.0		               186.5		       179.3
General taxes		                                               131.3	           	    135.0		       130.3
Income taxes		                                                140.5		               125.8		       118.3
----------------------------------------------------------------------------------------------------------
	      Total		                                              1,327.3		             1,317.0		     1,269.1
----------------------------------------------------------------------------------------------------------
Operating income		                                            361.4		               324.4		       320.4
----------------------------------------------------------------------------------------------------------
Other Income and Deductions

Allowance for equity funds used during construction		             -		                   -		         3.8
Miscellaneous-net 		                                          (21.6)		               (7.1)		       (9.1)
-----------------------------------------------------------------------------------------------------------
	     Total		                                                 (21.6)		               (7.1)		       (5.3)
-----------------------------------------------------------------------------------------------------------
Income before interest charges 		                             339.8	 	               317.3		       315.1
-----------------------------------------------------------------------------------------------------------
Interest Charges

Interest expense		                                            133.0		                148.0		       143.9
Allowance for borrowed funds used during construction 		       (6.5)		                (6.0)		       (5.5)
Preferred dividend requirements of subsidiary	                	22.3	        	         23.7		        24.9
-----------------------------------------------------------------------------------------------------------
	     Total		                                                 148.8		                165.7		       163.3
-----------------------------------------------------------------------------------------------------------
Net income		                                                  191.0		                151.6		       151.8 

Carrying amount over (under) consideration paid for 
redeemed preferred stock of subsidiary		                        (.7)		                (3.5)		         6.4
----------------------------------------------------------------------------------------------------------- 
Net income applicable to common stock	                      $	190.3	                $	148.1	      $	158.2
===========================================================================================================
Earnings per common share	                                  $	2.51	                 $	1.96	       $	2.09 
Cash dividends declared per common share	                   $	1.15	                 $	1.03	       $ 	.65
Cash dividends paid per common share	                       $	1.12	                 $	1.00	       $ 	.80

Weighted average common shares	                         75,681,937	              75,643,937	   75,643,937

</TABLE>

See notes to consolidated financial statements which are an integral part of 
these statements.

<TABLE>
ILLINOVA CORPORATION
CONSOLIDATED BALANCE SHEETS

                       <C>                                                      <C>          <C>
---------------------------------------------------------------------------------------------------
                                                                               (Millions of dollars)
----------------------------------------------------------------------------------------------------
December 31, 		                                                                1996	          1995  

Assets
Utility Plant, At Original Cost
Electric (includes construction work in progress of 
  $212.5 million and $199.8 million, respectively)	                           $	6,335.4	    $	6,189.0 
Gas (includes construction work in progress of $21.2 million 
  and $10.2 million, respectively)		                                              646.1		       625.9
-----------------------------------------------------------------------------------------------------
			                                                                             6,981.5		     6,814.9
Less - accumulated depreciation		                                               2,419.7		     2,251.7
------------------------------------------------------------------------------------------------------
			                                                                             4,561.8		     4,563.2
Nuclear fuel in process		                                                           5.3		         5.7
Nuclear fuel under capital lease		                                                 96.4		        95.2
------------------------------------------------------------------------------------------------------
			                                                                             4,663.5		     4,664.1
------------------------------------------------------------------------------------------------------
Investments and Other Assets		                                                    146.2		        65.8
------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents		                                                        24.6		        11.3
Notes receivable		                                                                   -		          6.1
Accounts receivable (less allowance for doubtful accounts of $3 million) 
	Service		                                                                        138.8		        129.4
	Other		                                                                           62.0		         13.2
Accrued unbilled revenue		                                                        106.0		         89.1
Materials and supplies, at average cost	
	Fossil fuel		                                                                      7.9		          9.9
	Gas in underground storage		                                                      27.2		         18.5
	Operating materials		                                                             78.1		         82.7
Prepaid and refundable income taxes		                                                 -		         19.6
Prepayments and other		                                                            24.1		         20.8
-------------------------------------------------------------------------------------------------------
			                                                                               468.7	 	       400.6
-------------------------------------------------------------------------------------------------------
Deferred Charges
Deferred Clinton costs		                                                          103.9		         107.3
Recoverable income taxes		                                                        101.3		         128.7
Other	  	                                                                         229.2		         243.3
-------------------------------------------------------------------------------------------------------
			                                                                               434.4		         479.3
--------------------------------------------------------------------------------------------------------
		                                                                            $	5,712.8 	     $	5,609.8 
========================================================================================================
Capital and Liabilities
Capitalization
Common stock - No par value, 200,000,000 shares authorized; 75,681,937 and 
  75,643,937 shares outstanding, 	respectively, stated at	                    $	1,425.7	      $	1,424.6
Less - Deferred compensation - ESOP		                                              14.3		          18.4
Retained earnings		                                                               233.0		         129.6
Less - Capital stock expense		                                                      8.2	 	          8.8
--------------------------------------------------------------------------------------------------------
	Total common stock equity		                                                    1,636.2		       1,527.0
Preferred stock of subsidiary		                                                    96.2		         125.6
Mandatorily redeemable preferred stock of subsidiary		                            197.0		          97.0
Long-term debt of subsidiary		                                                  1,636.4		       1,739.3
-------------------------------------------------------------------------------------------------------
	Total capitalization		                                                         3,565.8		       3,488.9
-------------------------------------------------------------------------------------------------------
Current Liabilities
Accounts payable		                                                                166.7	 	        119.9
Notes payable		                                                                   387.0	 	        359.6
Long-term debt and lease obligations of subsidiary maturing within one year		      47.7	 	         95.0
Dividends declared		                                                               24.7		          23.0
Taxes accrued		                                                                    43.9		          44.8
Interest accrued		                                                                 34.3	 	         39.0
Other		                                                                            43.7		          66.2
--------------------------------------------------------------------------------------------------------
			                                                                               748.0		         747.5
--------------------------------------------------------------------------------------------------------
Deferred Credits
Accumulated deferred income taxes		                                             1,034.9		       1,012.8
Accumulated deferred investment tax credits		                                     215.5	 	        222.8
Other		                                                                           148.6	 	        137.8
--------------------------------------------------------------------------------------------------------
			                                                                             1,399.0		       1,373.4
-------------------------------------------------------------------------------------------------------
		                                                                             $	5,712.8 	    $	5,609.8 
(Commitments and Contingencies Note 4)
See notes to consolidated financial statements which are an integral part of 
these statements.


</TABLE>
<TABLE>

ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
----------------------------------------------------------------------------------------------------------------
                <C>                                                           <C>          <C>           <C>
                                                                                          (Millions of dollars)
----------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 	                                           1996	        1995 	        1994

Cash Flows from Operating Activities
Net income	                                                                  $	191.0	    $	151.6	      $	151.8 
Items not requiring (providing) cash -
	Depreciation and amortization		                                               195.3		     190.0		       182.3
	Allowance for funds used during construction		                                 (6.5)		     (6.0)		       (9.3)
	Deferred income taxes		                                                        57.4		      39.1		        36.4
	Enhanced retirement and severance		                                               -		      37.8		           -
Changes in assets and liabilities -
	Accounts and notes receivable		                                               (52.2)		     (7.8)		      (18.2)
	Accrued unbilled revenue		                                                    (16.9)		    (10.2) 	 	    (29.9)
	Materials and supplies		                                                       (2.1)		     22.8		        (2.3)
	Accounts payable		                                                             46.8		     (13.6)		      (20.6)
	Interest accrued and other, net		                                              (5.4)		      9.5		       (21.6)
-----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities		                                    407.4		     413.2		       268.6
-----------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Construction expenditures		                                                   (187.3)		   (209.3)		     (193.7)
Allowance for funds used during construction		                                   6.5		       6.0		         9.3
Other investing activities		                                                   (75.0)		    (34.9)		      (19.7)
-----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities		                                       (255.8)		   (238.2)		     (204.1)
-----------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Dividends on common stock		                                                     (84.7)		    (75.6)		      (60.5)
	Redemptions -
	   Short-term debt		                                                          (355.8)		   (213.6)		     (259.3)
	   Long-term debt of subsidiary		                                             (153.7)		     (5.2)		     (230.0)
	   Preferred stock of subsidiary		                                             (29.5)		   (134.5)		      (91.0)
	Issuances -
	   Short-term debt		                                                           383.2		     209.5		       405.8
	   Long-term debt of subsidiary		                                                  -		         -		       119.8
	   Preferred stock of subsidiary		                                             100.0		         -		        97.0
	   Common stock		                                                                1.1		         -		           -
	Premium paid on redemption of long-term debt of subsidiary		                       -		         -		        (2.8)
	Other financing activities		                                                     1.1		       5.0		        (2.7)
------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities		                                        (138.3)		   (214.4)		      (23.7)
------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents		                                        13.3		     (39.4)		       40.8
Cash and cash equivalents at beginning of year		                                 11.3		      50.7		         9.9
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year	                                      $	24.6	     $	11.3	       $	50.7 
===================================================================================================================
</TABLE>

<TABLE>
ILLINOVA CORPORATION
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
--------------------------------------------------------------------------------------------------------------------------
                        <C>                                                                         <C>      <C>       <C>
                                                                                                     (Millions of dollars)
---------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31,	                                                                  1996	    1995 	    1994
Balance (deficit) at beginning of year	                                                          $	129.6	  $	58.8	  $	(64.6)
Net income before dividends		                                                                      213.3		  175.3		   176.7
----------------------------------------------------------------------------------------------------------------------------
			                                                                                                342.9		  234.1		   112.1
----------------------------------------------------------------------------------------------------------------------------
Less -
	Dividends -
	   Preferred stock of subsidiary		                                                                 22.6		   23.6		    11.1
	   Common stock		                                                                                  86.6		   77.4		    48.6
Plus -
	Carrying amount over (under) consideration paid for redeemed preferred stock of subsidiary          (.7)		  (3.5)		    6.4
------------------------------------------------------------------------------------------------------------------------------
			                                                                                               (109.9)		(104.5)		  (53.3)
------------------------------------------------------------------------------------------------------------------------------
Balance at end of year	                                                                          $	233.0	  $	129.6	 $	58.8
==============================================================================================================================
</TABLE>

See notes to consolidated financial statements which are an integral part of 
these statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation     The consolidated financial statements include 
the accounts of Illinova Corporation (Illinova), a holding company, and its 
wholly owned subsidiaries: Illinois Power Company (IP), Illinova Generating 
Company (IGC), Illinova Insurance Company (IIC), Illinova Power Marketing, 
Inc. (IPMI), and Illinova Energy Partners, Inc. (IEPI). IP is a combination 
electric and gas utility. IGC invests in energy-related projects and competes 
in the independent power market. IIC's purpose is to insure the risks of the
subsidiaries of Illinova and risks related to or associated with their 
business enterprises.  IPMI is in the business of marketing energy and 
energy-related services to various customers.  IEPI develops and markets
energy-related services to the unregulated energy market.  On February 12,
1997, the Illinova Board of Directors approved a merger of IEPI and IPMI.
In the merger, IPMI will be dissolved, and IEPI will assume responsibility
for the business functions previously handled by IPMI.  See "Note 2 - Illinova
Subsidiaries" of the "Notes to Consolidated Financial Statements" for 
additional information.

IP's consolidated financial position and results of operations are currently 
the principal factors affecting Illinova's consolidated financial position and 
results of operations. All significant intercompany balances and transactions 
have been eliminated from the consolidated financial statements. All 
nonutility operating transactions are included in the section titled Other 
Income and Deductions, "Miscellaneous-net" in the Consolidated Statements of 
Income. Preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates.
Actual results could differ from those estimates.

Regulation           IP is subject to regulation by the Illinois Commerce 
Commission (ICC) and the Federal Energy Regulatory Commission (FERC) and, 
accordingly, prepares its consolidated financial statements based on the 
concepts of Statement of Financial Accounting Standards No. 71, "Accounting 
for the Effects of Certain Types of Regulation" (FAS 71), which requires that 
the effects of the ratemaking process be recorded. Such effects primarily 
concern the time at which various items enter the determination of net income
in order to follow the principle of matching costs and revenues.  Accordingly,
IP records various regulatory assets and liabilities to reflect the actions
of regulators.  It is reasonable to assume that significant changes will be
made to state laws governing IP's electric operations, but impossible to
predict what those changes will be.  Management believes that IP currently
meets the criteria for continued application of FAS 71, but will continue to
evaluate significant changes in the regulatory and competitive environment to
assess IP's overall compliance with such criteria.  These criteria include:
1) whether rates set by regulators are designed to cover the specific costs of
providing regulated services and products to customers and 2) whether 
regulators continue to establish rates based on cost.  In the event that
management determines that IP, or significant portions of its business, no
longer meet the criteria for application of FAS71, an extraordinary non-cash
charge to income would be recorded in order to remove the effects of the
actions of regulators from the consolidated financial statements.  The
discontinuation of application of FAS71 would likely have a material adverse
effect on Illinova's and IP's consolidated financial position and results of
operation.  Illinova's principal accounting policies are:

Regulatory Assets     Regulatory assets represent probable future revenues to 
IP associated with certain costs that are expected to be recovered from 
customers through the ratemaking process. Significant regulatory assets are 
as follows:

<TABLE>
-------------------------------------------------------------------
             <C>                                            <C>
(Millions of dollars)						                                1996
-------------------------------------------------------------------
Deferred Clinton Power Station (Clinton)
	post-construction costs				                            	$	103.9
Recoverable income taxes					                            $	101.3 
Unamortized losses on reacquired debt			                  $	87.7 
Manufactured-gas plant site cleanup costs		               $	69.1
-------------------------------------------------------------------
</TABLE>

Utility Plant       The cost of additions to utility plant and replacements 
for retired property units is capitalized. Cost includes labor, materials, 
and an allocation of general and administrative costs, plus an allowance for 
funds used during construction (AFUDC) as described below. Maintenance and 
repairs, including replacement of minor items of property, are charged to 
maintenance expense as incurred. When depreciable property units are retired, 
the original cost and dismantling charges, less salvage value, are charged to
accumulated depreciation.
 
Allowance for Funds Used During Construction          The FERC Uniform System 
of Accounts defines AFUDC as the net costs for the period of construction of 
borrowed funds used for construction purposes and a reasonable rate on other 
funds when so used.  In 1996, 1995 and 1994, the pre-tax rate used for all 
construction projects was 5.8%, 6.5% and 7.0%, respectively. Although cash is 
not currently realized from the allowance, it is realized under the 
ratemaking process over the service life of the related property through 
increased revenues resulting from a higher rate base and higher depreciation
expense.

Depreciation           For financial statement purposes, IP depreciates the 
various classes of depreciable property over their estimated useful lives by 
applying composite rates on a straight-line basis. In 1996, 1995 and 1994, 
provisions for depreciation were 2.8% of the average depreciable cost for 
Clinton. Provisions for depreciation for all other electric plant were 2.6% 
in 1996, 1995 and 1994. Provisions for depreciation of gas utility plant, as 
a percentage of the average depreciable cost, were 3.9% in 1996, 1995 and 
1994.

Amortization of Nuclear Fuel       IP leases nuclear fuel from Illinois Power 
Fuel Company (Fuel Company) under a capital lease. Amortization of nuclear 
fuel (including related financing costs) is determined on a unit of production 
basis. A provision for spent fuel disposal costs is charged to fuel expense 
based on kilowatt-hours generated. See "Note 4 - Commitments and 
Contingencies" of the "Notes to Consolidated Financial Statements" for 
discussion of decommissioning and nuclear fuel disposal costs. 

Deferred Clinton Costs         In accordance with an ICC order in April 1987, 
IP began deferring certain Clinton post-construction operating and financing 
costs until rates to reflect such costs became effective (April 1989). After 
issuance of the March 1989 ICC rate order, deferral of Clinton post-
construction costs ceased and amortization of the previously deferred post-
construction costs over a 37.5-year period began. Although cash is not 
currently realized from these deferrals, it is realized under the ratemaking
process over the service life of Clinton through increased revenues, 
resulting from a higher rate base and higher amortization expense.

Unamortized Debt Discount, Premium and Expense          Discount, premium and 
expense associated with long-term debt are amortized over the lives of the 
related issues. Costs related to refunded debt are amortized over the lives 
of the related new debt issues or the remaining life of the old debt if no 
new debt is issued.

Revenue and Energy Cost          IP records revenue for services provided but 
not yet billed to more closely match revenues with expenses. Unbilled 
revenues represent the estimated amount customers will be billed for service 
delivered from the time meters were last read to the end of the accounting 
period. Operating revenues include related taxes that have been billed to 
customers in the amount of $68 million in 1996 and $66 million in each of the 
years 1995 and 1994. The cost of fuel for the generation of electricity, 
purchased power and gas purchased for resale is recovered from customers
pursuant to the electric fuel and purchased gas adjustment clauses.  
Accordingly, allowable energy costs that are to be passed on to customers in
a subsequent accounting period are deferred.  The recovery of costs deferred
under these clauses is subject to review and approval by the ICC.

On April 6, 1994, the ICC approved an increase of $18.9 million, or 6.1%, in 
IP's gas base rates. The increase to customers is partially offset by savings 
from lower gas costs resulting from the expansion of the Hillsboro gas storage 
field. The approved authorized rate of return on rate base is 9.29%, with a 
rate of return on common equity of 11.24%.

Income Taxes        Under Statement of Financial Accounting Standards No. 109, 
"Accounting for Income Taxes" (FAS 109), deferred tax assets and liabilities 
are recognized for the tax consequences of transactions that have been treated 
differently for financial reporting and tax return purposes, measured on the 
basis of the statutory tax rates. In accordance with FAS 71, a regulatory 
asset (recoverable income taxes) has been recorded representing the probable 
recovery from customers of additional deferred income taxes established under
FA109.

Investment tax credits used to reduce federal income taxes have been deferred 
and are being amortized to income over the "service life" of the property that 
gave rise to the credits. Illinova and its subsidiaries file a consolidated 
federal income tax return. Income taxes are allocated to the individual 
companies based on their respective taxable income or loss. See "Note 7 - 
Income Taxes" of the "Notes to the Consolidated Financial Statements" for 
additional discussion.

Preferred Dividend Requirements of Subsidiary             Preferred dividend 
requirements of IP reflected in the Consolidated Statements of Income are 
recorded on the accrual basis.

Consolidated Statements of Cash Flows       Cash and cash equivalents include 
cash on hand and temporary investments purchased with an initial maturity of 
three months or less. Capital lease obligations not affecting cash flows 
increased by $31 million, $19 million and $28 million during 1996, 1995 and 
1994, respectively. Income taxes and interest paid are as follows:

<TABLE>

                                                      Years ended December 31,
         <C>                                <C>           <C>          <C>
------------------------------------------------------------------------------
(Millions of dollars)		                    1996		         1995		       1994
Income taxes	                             $	65.9	        $	64.7	      $	71.1
Interest	                                $	148.5	       $	152.4	     $	165.9
------------------------------------------------------------------------------
</TABLE>

Interest Rate Cap        Generally, premiums paid for purchased interest rate
cap agreements are being amortized to interest expense over the terms of the 
caps. Unamortized premiums are included in Current Assets, "Prepayments and 
other," in the Consolidated Balance Sheets. Amounts to be received under the 
cap agreements are recognized as a reduction in interest expense.

Forward Contracts of Subsidiary         In the normal course of business IPMI 
enters into contracts for the purchase and sale (physical delivery) of 
electricity. When markets allow, IPMI will hedge price exposure through the 
use of electricity futures contracts and through swaps. Since IPMI's futures  
contracts qualify and have been designated as hedges, any gains and losses 
resulting from market changes are deferred until, and generally offset by, 
the related physical transaction.

Note 2 - Illinova Subsidiaries
Illinova, a holding company, is the parent of wholly owned subsidiaries IP, 
IGC, IPMI, IEPI and IIC. IP, Illinois Power Company, the primary business and 
subsidiary of Illinova, 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. IGC, Illinova Generating 
Company, invests in energy-related projects throughout the world and competes 
in the independent power market. IPMI, Illinova Power Marketing, Inc., 
engages in the brokering and marketing of electric power and gas.  IEPI,
Illinova Energy Partners, Inc., develops and markets energy-related services
to the unregulated energy market throughout the United States.  On February 12,
1997, the Illinova Board of Directors approved a merger of IEPI and IPMI.  In
the merger, IPMI will be dissolved, and IEPI will assume responsibility for 
the business functions previously handled by IPMI.  IIC, Illinova Insurance
Company, was licensed in August 1996 by the State of Vermont as a captive
insurance company.  The primary business of IIC is to insure the risks of
the subsidiaries of Illinova and risks related to or associated with their
business enterprises.

In 1994, IGC became an equity partner with Tenaska, Inc., in four natural gas-
fired generation plants, of which three plants totaling approximately 700 MW 
are in operation and one 240 MW plant has had construction suspended. Tenaska, 
Inc. is an Omaha, Nebraska-based developer of independent power projects 
throughout the United States. In August 1994, IGC purchased 50 percent of the 
North American Energy Services Company (NAES). NAES supplies a broad range of 
operations, maintenance and support services to the world-wide independent
power generation indsutry and operates the Tenaska generation plants in which
IGC purchased an equity interest.  In November 1994, IGC became an equity
partner in an 80 MW operating diesel engine-powered generating plant in
Puerto Cortez, Honduras.

In May 1995, IGC became an equity partner in the Indeck North American Power 
Fund (Fund). The Fund's first project, in June 1995, a 70-MW plant, was the 
Harbor Cogeneration Project in Long Beach, California. In August 1995, the 
Fund acquired the Pepperell Cogeneration Project, a 38-MW gas-fired combined 
cycle facility located in Pepperell, Massachusetts. In the fourth quarter of 
1995, IGC completed its first investment in the People's Republic of China by 
investing in the Xinchang Project, a 24-MW coal-fired plant located in the
Zhejiang Province.  In December 1995, IGC signed a limited liability company
agreement to complete an initial investment in a 155-MW power project located
near Aguaytia, Peru.  Also in December 1995, IGC invested in the Jamaica
Energy Partners Project, a 74-MW barge-mounted facility located in Old
Harbour, Jamaica.  In June 1996, IGC finalized an investment in the Flores
Power Plant located in Barranquilla, Columbia.  Flores currently operates
two units totaling 250-MW.  A third unit, with capacity of 150-MW, is
scheduled to begin operating in the second quarter of 1997.  In August 1996,
Illinova's interest in the 1,000-MW coal-fired plant in Joppa, Illinois, was
transferred to IGC.  In September 1996, IGC achieved financial close as an
investor in a 586-MW coal-fired plant in Balochistan, Pakistan, which is
currently under construction and is expected to begin operating in 1998.  As
of December 31, 1996, IGC had ownership in power plants in operation or under
construction representing approximately 730 MW.

IGC's investments are primarily accounted for under the equity method. At 
December 31, 1996, Illinova's net investment in IGC was $122 million. See 
"Note 4 - Commitments and Contingencies" of the "Notes to Consolidated 
Financial Statements" for information about IGC contingencies.

On May 16, 1995, IPMI obtained approval from FERC to conduct business as a 
marketer of electric power and gas to various customers outside IP's present 
service territory. In September 1995, IPMI began buying and selling wholesale 
electricity in the western United States. IPMI acquired 50 percent ownership 
in Tenaska Marketing Ventures (TMV) on April 17, 1995, with the ownership 
interest retroactive to January 1, 1995. In October 1995, IPMI and TMV formed 
a natural gas company, Tenaska Marketing Canada, to market gas in Canada.  In
May 1996, IPMI expanded operations to include the midwestern United States.
In July 1996, IP received FERC approval to sell electricity to IPMI on an 
ongoing basis.  Previously, IP was required to obtain FERC approval for each
transaction with IPMI.  The new ruling greatly increases IP's ability to sell
electricity to IPMI.

In December 1995, Illinova established Illinova Energy Services (IES) to 
provide energy-related services to customers inside and outside IP's service 
territory. These services range from the management of energy demand 
procurement usage to the development, installation and operation of the energy 
infrastructure of its customers.

In May 1996, the services group of IPMI merged with IES and the unregulated 
marketing activities of Illinova to form a new venture known as Illinova 
Energy Partners, Inc. IEPI focuses on the development and sales of energy-
related services in North America.

At December 31, 1996, Illinova's total net investment in IEPI and IPMI was 
$9 million.

Note 3 - Clinton Power Station
IP and Soyland Power Cooperative, Inc. (Soyland) share ownership of Clinton, 
with IP owning 86.8% and Soyland owning 13.2%. IP and Soyland have entered 
into an agreement to transfer Soyland's 13.2% ownership of Clinton to IP 
contingent upon approval by the NRC. (See sub-caption "Soyland" of "Note 4 - 
Commitments and Contingencies" of the "Notes to Consolidated Financial 
Statements"). Clinton was placed in service in 1987 and represents 
approximately 18% of IP's installed generation capacity. The investment in
Clinton and its related deferred costs representedapproximately 50% of 
Illinova's total assets at December 31, 1996.  IP's 86.8% share of Clinton-
related costs represented 35% of Illinova's total 1996 other operating,
maintenance and depreciation expenses.  Clinton's equivalent availability was
66%, 76%, and 92% for 1996, 1995, and 1994, respectively.  Clinton's 
equivalent availability was higher in 1994 due to no refueling outage.

Ownership of an operating nuclear generating unit exposes IP to significant 
risks, including increased and changing regulatory, safety and environmental 
requirements and the uncertain future cost of closing and dismantling the 
unit. IP expects to be allowed to continue to operate Clinton; however, if 
any unforeseen or unexpected developments prevent IP from doing so, Illinova 
and IP would be materially adversely affected. See "Note 4 - Commitments and 
Contingencies" of the "Notes to Consolidated Financial Statements" for
additional information.

Note 4 - Commitments and Contingencies

Commitments
Estimated capital requirements in 1997 are $330 million, which includes $249 
million for capital expenditures by IP and $81 million for unregulated 
subsidiary activities. The 1997 capital expenditures for IP include $142 
million for electric facilities, $25 million for gas facilities, $38 million 
for nuclear fuel, $33 million for general plant and $11 million for mandatory 
debt retirement. Construction expenditures for IP for the 1997 through 2001 
period are expected to be no more than $1 billion, including $100 million of
expenditures to meet Phase II Clean Air Act Compliance requirements.  
Illinova's capital expenditures for the years 1997 through 2001, in addition
to the IP construction expenditures, are expected to include $140 million
for nuclear fuel, $300 million for mandatory debt retirement and $425 million
for investments in the unregulated subsidiaries.  These expenditures reflect
IP's share of Clinton (ownership share under negotiation -- see sub-caption
"Soyland" under Contingencies below).

In addition, IP has substantial commitments for the purchase of coal under 
long-term contracts. Estimated coal contract commitments for 1997 through 
2001 are $560 million (excluding price escalation provisions). Total coal 
purchases for 1996, 1995 and 1994 were $184 million, $168 million and $191 
million, respectively. IP has contracts with various natural gas suppliers 
and interstate pipelines to provide natural gas supply, transportation and 
leased storage. Estimated committed natural gas, transportation and leased
storage costs (including pipeline transition costs) for 1997 through 2001
total $92 million.  Total natural gas purchased for 1996, 1995 and 1994 was
$207 million, $150 million and $168 million, respectively.  IP's share
(ownership share under negotiation -- see sub-caption "Soyland" under
Contingencies below) of estimated nuclear fuel commitments for Clinton is
approximately $19 million for uranium concentrates through 2001, $5 million
for conversion services through 1999 and $198 million for fabrication services
through 2016.  IP is committed to purchase approximately $52 million of 
emission allowances through 1999.  IP anticipates that all of these costs
will be recoverable under IP's electric fuel and purchased gas adjustment
clauses.
 
Insurance      IP maintains insurance on behalf of IP and Soyland for certain 
losses involving the operation of Clinton. For physical damage to the plant, 
IP's insurance program has two layers: 1) a primary layer of $500 million 
provided by nuclear insurance pools; and 2) an excess coverage layer of $1.1 
billion provided by an industry-owned mutual insurance company for a total 
coverage of $1.6 billion. In the event of an accident with an estimated cost 
of reactor stabilization and site decontamination exceeding $100 million, NRC
regulations require that insurance proceeds be dedicated and used first to
return the reactor to, and maintain it in, a safe and stable condition, and
second, to decontaminate the reactor station site.  The insurers also provide
coverage for the shortfall in the Decommissioning Trust Fund caused by the
premature decommissioning of the reactor due to an accident.  In the event
insurance limits are not exhausted by the above, the remaining coverage will
be applied to property damage and a portion of the value of the undamaged 
property.  In addition, while IP has no reason to anticipate a serious nuclear
accident at Clinton, if such an accident should occur, the claims for property
damage and other costs could materially exceed the limits of current or
available insurance coverage.  In the event of an extended shutdown of 
Clinton due to accidental property damage, IP also purchases approximately
$.9 million per week of business interruption insurance coverage for its
ownership share of Clinton through an industry-owned mutual insurance
company.  This insurance does not provide coverage until Clinton has been
out of service for 21 weeks.  (Ownership share under negotiation -- see
sub-caption "Soyland" under Contingencies below.)


All United States nuclear power station operators are subject to the Price-
Anderson Act. This act currently limits public liability for a nuclear 
incident to $8.9 billion. Private insurance covers the first $200 million. 
Retrospective premium assessments against each licensed nuclear reactor in 
the United States provide excess coverage. Currently, the liability to these 
reactor operators/owners for such an assessment would be up to $79.3 million 
per incident, not including premium taxes which may be applicable, payable
in annual installments of not more than $10 million.

A Master Worker Policy covers worker tort claims alleging bodily injury, 
sickness or disease for workers whose initial radiation exposure occurred on 
or after January 1, 1988. The policy has an aggregate limit of $200 million 
that applies to the commercial nuclear industry as a whole. A provision 
provides for automatic reinstatement of policy limits up to an additional 
$200 million.

IP may be subject to other risks that may not be insurable, or the amount of 
insurance carried to offset the various risks may not be sufficient to meet 
potential liabilities and losses. There is also no assurance that IP will be 
able to maintain insurance coverage at its present level. Under those 
circumstances, such losses or liabilities may have a substantial adverse 
effect on Illinova's and IP's financial position.

Decommissioning and Nuclear Fuel Disposal Costs        IP is responsible for 
its ownership share (ownership share under negotiation - see sub-caption 
"Soyland" under Contingencies below) of the costs of decommissioning Clinton 
and for spent nuclear fuel disposal costs. IP is collecting future 
decommissioning costs through its electric rates based on an ICC-approved 
formula that allows IP to adjust rates annually for changes in decommissioning 
cost estimates.

Based on NRC regulations that establish a minimum funding level, IP estimates 
its 86.8% share (ownership share under negotiation - see sub-caption "Soyland" 
under Contingencies below) of Clinton decommissioning costs to be approximately 
$381 million (1996 dollars) or $687 million (2026 dollars, assuming a 2% 
inflation factor). The NRC bases the minimum only on the cost of removing 
radioactive plant structures. IP concluded a site-specific study in 1996 to 
estimate the costs of dismantlement, removal and disposal of Clinton.  This
study resulted in projected decommissioning costs of $473 million (1996 
dollars) or $853 million (2026 dollars, assuming a 2% inflation factor) for
IP.  Regulatory approval for funding of this increased decommissioning cost
is expected during the third quarter of 1997.

External decommissioning trusts, as prescribed under Illinois law and 
authorized by the ICC, accumulate funds for the future decommissioning of 
Clinton based on the expected service life of the plant. For the years 1996, 
1995 and 1994, IP contributed $3.9 million, $5.0 million and $5.5 million, 
respectively, to its external nuclear decommissioning trust funds. The 
balances in these nuclear decommissioning funds at December 31, 1996, and 
1995 were $41.4 million and $32.7 million, respectively. Decommissioning funds
are recorded as assets on the balance sheet.  A decommissioning liability
approximately equivalent to trust assets was also recorded.  IP  recognizes
earnings and expenses from the trust fund as changes in its assets and
liabilities relating to these funds.

The Financial Accounting Standards Board (FASB) is reviewing the accounting 
for closure and removal costs of long-lived assets. Changes to current 
electric utility industry accounting practices for decommissioning may result 
in recording the estimated total cost for decommissioning as a liability and 
an increase to plant balances, depreciating the increased plant balances, and 
reporting trust fund income from the external decommissioning trusts as 
investment income rather than as a reduction to decommissioning expense.
Based on current information, IP believes that these changes will not have an
adverse effect on results of operations due to existing and anticipated future
ability to recover decommissioning costs through rates.

In 1992, the ICC entered an order in which it expressed concern that IP take 
all reasonable action to ensure that Soyland contributes its ownership share 
of the current or any revised estimate of decommissioning costs. The order 
also states that if IP becomes liable for decommissioning expenses 
attributable to Soyland, the ICC will then decide whether that expense should 
be the responsibility of IP stockholders or its customers. If Soyland were to 
fail to meet these or other obligations related to its ownership of Clinton,
then IP could become liable for such payments.  (See sub-caption "Soyland"
under Contingencies below.)

Under the Nuclear Waste Policy Act of 1982, the Department of Energy (DOE) is 
responsible for the permanent storage and disposal of spent nuclear fuel. The 
DOE currently charges one mill ($0.001) per net kilowatt-hour (one dollar per 
MWH) generated and sold for future disposal of spent fuel. IP is recovering 
these charges through rates. In 1996, the D.C. Circuit Court of Appeals 
issued an order, at the behest of nuclear-owning utilities and state 
regulatory agencies, confirming DOE's unconditional obligation to take 
responsibility for spent nuclear fuel commencing in 1998, even if it has no
permanent repository at that time.  Notwithstanding this decision, which the
DOE did not appeal, the DOE has indicated to all nuclear utilities that it
may experience delay in performance.  The impact of any such delay on IP
will depend on many factors, including the duration of such delay and the
cost and feasibility of interim, on-site storage.

Environmental Matters

Clean Air Act         In August 1992, IP announced that it had suspended 
construction of two scrubbers at the Baldwin Power Station (Baldwin). At 
December 31, 1996, approximately $24 million in costs for the suspended 
Baldwin program continue to be carried by IP as plant held for future use.

To comply with the sulfur dioxide (SO2) emission reduction requirements of 
Phase I (1995-1999) of the 1990 Clean Air Act Amendments, IP continues to 
purchase emission allowances. An emission allowance is the authorization by 
the United States Environmental Protection Agency (U.S. EPA) to emit one ton 
of SO2. The ICC approved IP's Phase I Clean Air Act compliance plan in 
September 1993, and IP is continuing to implement that plan. IP has acquired 
sufficient emission allowances to meet most of its anticipated needs for
1997 and will purchase the remainder on the spot market.  In 1993, the 
Illinois General Assembly passed and the governor signed legislation 
authorizing, but not requiring, the ICC to permit expenditures and revenues
from emission allowance purchases and sales to be included in rates charged
to customers as a cost of fuel.  In December 1994, the ICC approved the
recovery of emission allowance costs through the Uniform Fuel Adjustment
Clause.  IP's compliance plan will defer, until at least 2000, any need for
scrubbers or other capital projects associated with SO2 emission reductions.
Phase II (2000 and beyond) SO2 emission requirements of the Clean Air Act
could require additional actions and may result in capital expenditures and
the purchase of emission allowances.

To comply with the Phase I nitrogen-oxide (NOx) emission reduction 
requirements of the acid rain provisions of the Clean Air Act, IP installed 
low-NOx burners at Baldwin Unit 3 and Vermilion Unit 2. On November 29, 1994, 
the Phase I NOx rules were remanded to the U.S. EPA. On April 13, 1995, the 
U.S. EPA reinstated, with some modifications, the Phase I NOx rules effective 
January 1, 1996. IP was positioned to comply with these revised rules without 
additional modifications to any of its generating plants.

The U.S. EPA issued revised Phase II NOx emission limits on December 10, 1996. 
IP has prepared a Phase II Compliance Plan. Litigation over the scope and 
legality of these Phase II NOx limits precludes a precise quantification of 
anticipated capital cost for compliance; however, capital expenditures for 
IP's NOx program, which includes upgrading two air heaters at Baldwin, are 
expected to be $100 million prior to the year 2000.

IP is monitoring the development of several emerging clean air compliance 
issues which could have a significant impact on its fossil-fueled generating 
plants. These issues include global climate change (theorized to result from 
emissions of "greenhouse gases" such as carbon dioxide), controls on 
"hazardous air pollutants," potential requirements to further reduce NOx 
emissions from IP plants to help achieve compliance with the air quality 
standards in the St. Louis and Chicago metropolitan areas and new standards
for fine particulates, ozone and SO2. Compliance with potential new 
regulations in these areas may require significant additional expenditures 
after 2000.

Manufactured-Gas Plant (MGP)         IP's estimated liability for MGP site 
remediation is $69 million. This amount represents IP's current best estimate 
of the costs that it will incur in remediation of the 24 MGP sites for which 
it is responsible. Because of the unknown and unique characteristics at each 
site, IP cannot presently determine its ultimate liability for remediation of 
the sites.

IP is currently recovering MGP site remediation through tariff riders approved 
by the ICC. Accordingly, IP has recorded a regulatory asset on its balance 
sheet totaling $69 million as of December 31, 1996. Management expects that 
cleanup costs will be fully recovered from IP's customers.

To offset the burden imposed on its customers, IP has initiated litigation 
against a number of insurance carriers. Any settlement proceeds or damages 
recovered from the carriers will be credited to IP's customers through the 
tariff rider mechanism which the ICC previously approved.

Electric and Magnetic Fields (EMF)       The possibility that exposure to EMF 
emanating from power lines, household appliances and other electric sources 
may result in adverse health effects continues to be the subject of litigation 
and governmental, medical and media attention. Litigants have also claimed 
that EMF concerns justify recovery from utilities for the loss in value of 
real property exposed to power lines, substations and other such sources of 
EMF. The National Research Council (Council) of the National Academy of 
Sciences released a report in 1996 which concluded there is "no conclusive 
and consistent evidence" that exposure to residential EMF presents a health 
hazard. The Council's conclusion is based on a review of more than 500 
studies conducted worldwide over the last 17 years. Additional research is 
being conducted to attempt to resolve continuing scientific uncertainties. 
It is too soon to tell what, if any, impact these actions may have on 
Illinova's and IP's consolidated financial position.

Other

Legal Proceedings     Illinova and IP are involved in legal or administrative 
proceedings before various courts and agencies with respect to matters 
occurring in the ordinary course of business, some of which involve 
substantial amounts of money. Management believes that the final disposition 
of these proceedings will not have a material adverse effect on the 
consolidated financial position or the results of operations.

Accounts Receivable   IP sells electric energy and natural gas to residential, 
commercial and industrial customers throughout Illinois. At December 31, 
1996, 68%, 20% and 12% of Accounts receivable - Service were from residential, 
commercial and industrial customers, respectively. IP maintains reserves for 
potential credit losses and such losses have been within management's 
expectations.

Contingencies

Soyland    IP and Soyland have entered into an agreement to transfer Soyland's 
13.2% ownership of Clinton to IP contingent on approval by the NRC. The NRC 
is expected to act on IP's request during the first quarter of 1997.

IP and Soyland have renegotiated the existing Power Coordination Agreement. 
This agreement is expected to result in a reduction of rates for Soyland 
while IP will be assured a long-term sales agreement for 10 to 20 years. IP 
is expected to file with FERC a request for approval of this agreement in 
February 1997.

FERC Audit       In 1996 FERC conducted an audit of IP's financial books and 
records for the years 1992 through 1995 and preliminarily identified a number 
of issues. IP responded to the issues raised. FERC has taken no action 
regarding disposition of these matters. At this time, the outcome of the 
audit cannot be determined; however, management does not expect that 
resolution of the audit will have a material adverse effect on IP's 
consolidated financial position or results of operations.

IRS Audit     The Internal Revenue Service is currently auditing IP's federal 
income tax returns for the years 1991 through 1993. At this time, the outcome 
of the audit cannot be determined; however, management does not expect that 
the results will have a material adverse effect on IP's consolidated financial 
position or results of operations. For a detailed discussion of income taxes, 
see "Note 7 - Income Taxes" of the "Notes to Consolidated Financial 
Statements."

IPMI    IPMI buys and sells electricity in the West and Midwest regions of the 
United States. In the normal course of doing business, IPMI is required to 
incur price exposure on the electricity bought or sold. Where the markets 
allow, IPMI will hedge such exposure through the use of electricity futures 
contracts or through swaps with qualified counterparties. The aggregate 
notional value, fair value, and unrealized gain related to futures contracts 
outstanding at December 31, 1996 are immaterial. In addition, IPMI considers
the risk of counterparty non-performance to be remote.

During 1996, IPMI entered into electricity sale contracts with delivery 
commencing in 1997 which exposed the company to risk as a result of price 
volatility in the western United States electricity market. At December 31, 
1996, IPMI recorded a $3.2 million reserve relating to these transactions in 
anticipation of such amount becoming a realized loss.

Illinova guarantees the performance of Tenaska Marketing Ventures (TMV) up to 
an aggregate of $50 million for net accounts payable or delivery obligations 
incurred during the ordinary course of purchasing and reselling natural gas. 
The level of payable guarantees in place during December 1996 peaked at just 
under $25 million. Illinova also guarantees performances by TMV of all 
obligations to parties providing price-hedging services. The guarantee to the 
parties providing hedging services is a function of the market price of gas.
Management believes that its exposure under these guarantees is insignificant.
See "Note 2 -- Illinova Subsidiaries" of the "Notes to Consolidated Financial
Statements" for additional information about IPMI.

IGC   In connection with IGC, as of December 31, 1996, Illinova guarantees the 
payment of $27 million to creditors for the construction of independent power 
projects. IGC has net investment in projects of $98 million. See "Note 2 - 
Illinova Subsidiaries" of the "Notes to Consolidated Financial Statements" 
for additional information about IGC.

Note 5 - Lines of Credit and Short-Term Loans
IP has total lines of credit represented by bank commitments amounting to 
$354 million, all of which were unused at December 31, 1996. These lines of 
credit are renewable in May 1997, August 1997 and May 2001. These bank 
commitments support the amount of commercial paper outstanding at any time, 
limited only by the amount of unused bank commitments, and are available to 
support other IP activities. In addition, Illinova's total lines of credit 
represented by bank commitments amount to $150 million, of which $73 million
was unused at December 31, 1996.  Illinova's letters of credit total $30.6
million.

IP pays facility fees up to .15% per annum on $350 million of the total lines 
of credit, regardless of usage. The interest rate on borrowings under these 
agreements is, at IP's option, based upon the lending banks' reference rate, 
their Certificate of Deposit rate, the borrowing rate of key banks in the 
London interbank market or competitive bid. 

IP has letters of credit totaling $206 million and pays fees up to .45% per 
annum on the unused amount of credit. 

In addition, IP and IP Fuel Company have a short-term financing option to 
obtain funds not to exceed $30 million. IP and IP Fuel Company pay no fees 
for this uncommitted facility and funding is subject to availability upon 
request. 

Illinova had $77 million of borrowings against its lines of credit at December 
31, 1996. For the years 1996, 1995 and 1994, IP had short-term borrowings 
consisting of bank loans, commercial paper, extendible floating rate notes 
and other short-term debt outstanding at various times as follows:

<TABLE>
------------------------------------------------------------------------------
               <C>                                 <C>       <C>         <C>
(Millions of dollars, except rates)		             1996		     1995		     1994
------------------------------------------------------------------------------
Short-term borrowings
	at December 31,	                              $	387.0	   $ 	359.6  	$ 	238.8
Weighted average interest
	rate at December 31,		                            5.8%	      	6.0%		     6.2%
Maximum amount outstanding
	at any month end	                             $	387.0	    $ 	359.6	 $ 	238.8
Average daily borrowings
	outstanding during 
	the year	                                     $	261.9	    $ 	306.5  	$	165.4
Weighted average interest
	rate during the year		                            5.7%	       	6.2%		    4.6%
------------------------------------------------------------------------------
</TABLE>

Interest rate cap agreements are used to reduce the potential impact of 
increases in interest rates on floating-rate debt. IP's three variable rate 
interest rate cap agreements cover up to $289 million of commercial paper. 
These agreements entitle IP to receive from a counterparty on a monthly basis 
the amount, if any, by which IP's interest payments on a nominal amount of 
commercial paper exceed the interest rate set by the cap. On December 31, 
1996, the cap rates were set at 6.0%, 6.25% and 7.0% while the current market
rate available to IP was 5.7%.

Note 6 - Facilities Agreements
IP and Soyland share ownership of Clinton, with IP owning 86.8% (ownership 
share under negotiation - see sub-caption "Soyland" of "Note 4 - Commitments 
and Contingencies" of the "Notes to Consolidated Financial Statements" for 
additional information) and Soyland owning 13.2%. Agreements between IP and 
Soyland provide that IP has control over construction and operation of the 
generating station, that the parties share electricity generated in proportion 
to their ownership interests and that IP will have certain obligations to
provide replacement power to Soyland if IP ceases to operate or reduces
output from Clinton.

Under the provisions of a Power Coordination Agreement (PCA) between Soyland 
and IP dated October 5, 1984, as amended, IP is required to provide Soyland 
with 12.0% (436 megawatts) of the electrical capacity from its fossil-fueled 
generating plants until the agreement expires or is terminated. This is in 
addition to the capacity Soyland receives as an owner of Clinton. IP is 
compensated with capacity charges and for energy costs and variable operating 
expenses. IP transmits energy for Soyland through IP's transmission and
subtransmission systems.  Under provisions of the PCA, Soyland has the 
option of participating financially in major capital expenditures at the
fossil-fueledplants, such as those needed for Phase II Clean Air Act 
compliance, to the extent of its capacity entitlement with each party bearing
its own direct capital costs, or by having the costs treated as plant 
additions and billed to Soyland in accordance with other billing provisions
of the PCA.  At any time after December 31, 2004, either IP or Soyland may
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 12 months after receiving notice.  See "Note 4 -- Commitments and
Contingencies" of the "Notes to Consolidated Financial Statements"  for
discussion of the Clean Air Act.

Note 7 - Income Taxes

Deferred tax assets and liabilities were comprised of the following:

<TABLE>
                                                   Balances as of December 31,
------------------------------------------------------------------------------
                  <C>                                 <C>            <C>
(Millions of dollars)    				                         1996		         1995
------------------------------------------------------------------------------
Deferred tax assets:
------------------------------------------------------------------------------
Current:
	Misc. book/tax recognition differences		           $	7.7          	$	26.1 
------------------------------------------------------------------------------
Noncurrent: 
	Depreciation and other property related		           42.0		           45.5
	Alternative minimum tax				                        198.5	          	183.1
	Tax credit and net operating loss
	   carryforward				                                 32.8		           32.4
	Unamortized investment tax credit			               120.9	          	126.1
	Misc. book/tax recognition differences			           78.9		           66.7
------------------------------------------------------------------------------
					                                               473.1	          	453.8
------------------------------------------------------------------------------
	   Total deferred tax assets     		             	$	480.8	         $	479.9
==============================================================================

Deferred tax liabilities:
------------------------------------------------------------------------------
Current:
	Misc. book/tax recognition differences		          $	11.3	           $	6.5 
------------------------------------------------------------------------------
Noncurrent: 
	Depreciation and other property related	        	1,350.1	        	1,303.5
	Deferred Clinton costs				                          58.2	           	60.1
	Misc. book/tax recognition differences			           99.7	          	103.0
------------------------------------------------------------------------------
				                                             	1,508.0		        1,466.6
------------------------------------------------------------------------------
	   Total deferred tax liabilities			           $	1,519.3       	$	1,473.1	
==============================================================================
</TABLE>

Income taxes included in the Consolidated Statements of Income consist of the 
following components:

<TABLE>

                                                      Years Ended December 31,
------------------------------------------------------------------------------
                <C>                                <C>         <C>       <C>
(Millions of dollars)		                            1996		      1995		    1994
------------------------------------------------------------------------------
Current taxes-
	Included in operating
	   expenses and taxes	                         $	79.2	     $ 	98.6	   $	58.3
	Included in other income
	   and deductions		                             (14.5)	 	    (20.3)	      	-
------------------------------------------------------------------------------
	   Total current taxes 	 	                       64.7		       78.3	 	   58.3
------------------------------------------------------------------------------
Deferred taxes-
	Included in operating
	expenses and taxes
	   Property related differences		                60.4		       62.2	    	60.0 
	   Alternative minimum tax		                      1.1	        	2.9		   (50.4) 
	   Gain/loss on reacquired debt		                (1.6)		      (1.9)      		- 
	   Net operating loss
	      carryforward		                                -		        (.2)		   62.0 
	   Enhanced retirement
	      and severance		                             2.6		      (15.0)	      	-
	   Misc. book/tax recognition
	      differences		                               6.1		      (13.9)		   (7.8)  
	   Internal Revenue Service
	      interest on tax issues	                      	-		          -		     7.5
	Included in other income
	and deductions	
	   Property related differences		                10.2	        	9.7	    	10.0
	   Net operating loss
	      carryforward		                                -		          -		   (17.4) 
	   Misc. book/tax recognition
	      differences		                              (8.3)		      (1.2)		    (.7) 
------------------------------------------------------------------------------
	   Total deferred taxes		                        70.5		       42.6		    63.2  
-------------------------------------------------------------------------------
Deferred investment 
tax credit-net
	Included in operating
	   expenses and taxes		                          (7.3)		      (6.9)		  (11.3)
	Included in other income
	   and deductions	                                 	-		          -		     (.3)
------------------------------------------------------------------------------
	   Total investment tax credit		                  (7.3)		      (6.9)	 	(11.6)
------------------------------------------------------------------------------
Total income taxes	                             $	127.9    	$ 	114.0	 $ 	109.9
==============================================================================
</TABLE>

The reconciliations of income tax expense to amounts computed by applying the 
statutory tax rate to reported pretax results for the period are set below:

<TABLE>
                                                      Years Ended December 31,
------------------------------------------------------------------------------
                <C>                                 <C>       <C>         <C>
(Millions of dollars)    		                         1996		    1995     		1994 
------------------------------------------------------------------------------
Income tax expense at the
	federal statutory tax rate	                     $	111.4	 $  	92.9	   $ 	91.6
Increases/(decreases) in taxes
resulting from-
	State taxes, 
	   net of federal effect		                         11.4		    12.4		     13.8 
	Investment tax credit 
	   amortization		                                  (7.3)		   (6.9)    		(7.8)  
Depreciation not normalized		                        9.4		     7.4		      4.3  
Preferred dividend requirement
	of subsidiary		                                     2.5		     5.8		      8.7
Other-net		                                           .5		     2.4	     	 (.7)
------------------------------------------------------------------------------
Total income taxes	                              $	127.9	  $	114.0  	$ 	109.9 
==============================================================================
</TABLE>

Combined federal and state effective income tax rates were 40.2%, 42.9% and 
42.0% for the years 1996, 1995 and 1994, respectively.

Illinova is subject to the provisions of the Alternative Minimum Tax System 
(AMT). As a result, Illinova has an AMT credit carryforward at December 31, 
1996, of approximately $198.5 million. This credit can be carried forward 
indefinitely to offset future regular income tax liabilities in excess of the 
tentative minimum tax.

The Internal Revenue Service is currently auditing IP's consolidated federal 
income tax returns for the years 1991 through 1993. At this time, the outcome 
of the audit cannot be determined. However, the results of the audit are not 
expected to have a material adverse effect on Illinova's consolidated 
financial position or results of operations.

Note 8 - Capital Leases

Illinois Power Fuel Company (Fuel Company), which is 50% owned by IP, was 
formed in 1981 for the purpose of leasing nuclear fuel to IP for Clinton. 
Lease payments are equal to the Fuel Company's cost of fuel as consumed 
(including related financing and administrative costs). Billings under the 
lease agreement during 1996, 1995 and 1994 were $35 million, $41 million and 
$52 million, respectively, including financing costs of $5 million, $7 million 
and $7 million, respectively. IP is obligated to make subordinated loans to
the Fuel Company at any time the obligations of the Fuel Company that are
due and payable exceed the funds available to the Fuel Company.  IP has an
obligation for nuclear fuel disposal costs of leased nuclear fuel.  See 
"Note 4 -- Commitments and Contingencies" of the "Notes to Consolidated
Financial Statements" for discussion of decommissioning and nuclear fuel
disposal costs.  Nuclear fuel lease payments are included with Fuel for
electric plants on Illinova's Consolidated Statements of Income.

At December 31, 1996 and 1995, current obligations under capital lease for 
nuclear fuel are $36.9 million and $33.3 million, respectively. 

Over the next five years estimated payments under capital leases are as 
follows:

<TABLE>
--------------------------------------------------
                             (Millions of dollars)
    <C>                               <C>
--------------------------------------------------
   1997				                        	$	39.7
   1998		                         				28.5
   1999                        						 18.6
   2000	                         					11.6
   2001	                          					5.1
   Thereafter                    						2.6
-------------------------------------------------
							                              106.1
Less: Interest						                   9.7
-------------------------------------------------
	Total					                         $	96.4
=================================================
</TABLE>

	
Note 9 - Long-Term Debt of Subsidiary

<TABLE>

                                                          (Millions of dollars)
-------------------------------------------------------------------------------
                     <C>                                      <C>         <C>
December 31,				                                              1996		      1995
First mortgage bonds- 
	5.85%	series due 1996			                                     $	-	      $	40.0
	61/2 %series due 1999			                                     	72.0		     72.0
	6.60%	series due 2004 (Pollution Control Series A)				         6.5		      6.8
	7.95%	series due 2004				                                     72.0		     72.0
	6%	series due 2007 (Pollution Control Series B)				           18.7	     	18.7
	75/8%	series due 2016 (Pollution Control Series F, G and H)		150.0    		150.0
	8.30%	series due 2017 (Pollution Control Series I)				        33.8	     	33.8
	73/8%	series due 2021 (Pollution Control Series J)				        84.7	     	84.7
	83/4%	series due 2021				                                     57.1		    120.0
	5.70%	series due 2024 (Pollution Control Series K)				        35.6	     	35.6
	7.40%	series due 2024 (Pollution Control Series L)				        84.1		     84.1
------------------------------------------------------------------------------
	Total first mortgage bonds				                               614.5    		717.7
------------------------------------------------------------------------------
New mortgage bonds-
	61/8%	series due 2000				                                     40.0	     	40.0
	5.625%series due 2000				                                    110.0    		110.0
	61/2%	series due 2003				                                    100.0	    	100.0
	63/4%	series due 2005			                                     	70.0     		70.0
	8%	series due 2023			                                       	229.0    		235.0
	71/2%	series due 2025				                                    177.0    		200.0
	Adjustable rate series due 2028 (Pollution Control 
     Series M, N and O)				                                   111.8    		111.8
------------------------------------------------------------------------------
	Total new mortgage bonds				                                 837.8    		866.8
------------------------------------------------------------------------------
	Total mortgage bonds				                                    1,452.3 		1,584.5
------------------------------------------------------------------------------
Medium-term notes, series A				                                 78.5   		100.0
Variable rate long-term debt due 2017				                       75.0    		75.0
------------------------------------------------------------------------------
	Total other long-term debt				                                153.5   		175.0
------------------------------------------------------------------------------
					                                                        1,605.8 		1,759.5

Unamortized discount on debt			                               	(18.1)  		(20.3)
------------------------------------------------------------------------------
	Total long-term debt excluding capital lease obligations				1,587.7 		1,739.2
	Obligations under capital leases				                           96.4		    95.1
------------------------------------------------------------------------------
					                                                        1,684.1	 	1,834.3

Long-term debt and lease obligations maturing within 
   one year                                                				(47.7)  		(95.0)
-------------------------------------------------------------------------------
	Total long-term debt		                                   	$	1,636.4	$	1,739.3
===============================================================================
</TABLE>

In 1996, a total of $62.9 million of 83/4% First Mortgage Bonds due 2021 was 
purchased at various times on the open market. In April 1996, $23.0 million 
of 71/2% New Mortgage Bonds due 2025 was purchased on the open market. In 
June 1996, $6.0 million of 8% New Mortgage Bonds due 2023 was purchased on 
the open market. 

In 1989 and 1991, IP issued a series of fixed rate medium-term notes. At 
December 31, 1996, the maturity dates on these notes ranged from 1997 to 1998 
with interest rates ranging from 9% to 9.31%. Interest rates on variable rate 
long-term debt due 2017 are adjusted weekly and ranged from 3.0% to 3.3% at 
December 31, 1996.

For the years 1997, 1998, 1999, 2000 and 2001, IP has long-term debt 
maturities and cash sinking fund requirements in the aggregate of (in 
millions) $10.8, $68.8, $72.8, $150.8 and $.8, respectively. These amounts 
exclude capital lease requirements. See "Note 8 - Capital Leases" of the 
"Notes to Consolidated Financial Statements." Certain supplemental indentures 
to the First Mortgage require that IP make annual deposits, as a sinking and 
property fund, in amounts not to exceed $1.8 million in each of the years
1997 through 2001.  These amounts are subject to reduction and historically
have been met by pleding property additions, as permitted by the First 
Mortgage.

At December 31, 1996, the aggregate total of unamortized debt expense and 
unamortized loss on reacquired debt was approximately $105.3 million.

IP's First Mortgage Bonds are secured by a first mortgage lien on 
substantially all of the fixed property, franchises and rights of IP with 
certain minor exceptions expressly provided in the First Mortgage. In 1992, 
the Board authorized a new general obligation mortgage, which is intended to 
replace the First Mortgage. IP anticipates that during 1997 the 1943 mortgage 
will be amended to be consistent with the 1992 mortgage. Bonds issued under 
the New Mortgage were secured by a corresponding issue of First Mortgage 
Bonds under the First Mortgage.  The remaining balance of net bondable 
additions at December 31, 1996, was approximately $1.5 billion.

Note 10 - Preferred Stock of Subsidiary

<TABLE>

                                                         (Millions of dollars)
------------------------------------------------------------------------------
                   <C>                                     <C>         <C>
December 31,					                                          1996		      1995

Serial Preferred Stock of Subsidiary, cumulative, 
    $50 par value-
Authorized 5,000,000 shares; 1,221,700 and 1,356,800 
    shares outstanding, respectively
	     Series	    Shares	   Redemption Prices
     	4.08%	    300,000	        $	51.50                  	$	15.0     	$	15.0
     	4.26%	    150,000	         	51.50	                    	7.5	       	7.5
     	4.70%	    200,000         		51.50                   		10.0      		10.0
     	4.42%	    150,000         		51.50	                    	7.5	       	7.5
     	4.20%	    180,000		         52.00	                    	9.0       		9.0
     	7.75%	    241,700		         50.00 after July 1, 2003		12.1		      18.8
     	Net premium on preferred stock			                      	.2		        .2
-----------------------------------------------------------------------------
	Total Preferred Stock of Subsidiary, $50 par value		    $	 61.3	     $	68.0
-----------------------------------------------------------------------------
Serial Preferred Stock of Subsidiary, cumulative, 
      without par value-
Authorized 5,000,000 shares; 698,200 and 1,152,550 
      shares outstanding, respectively
	    Series	   Shares	      Redemption Prices
      	A	      698,200	         $	50.00		                $	34.9	      $	37.1
      	B	         -		               -			                      -		       20.5
-----------------------------------------------------------------------------
	Total Preferred Stock of Subsidiary, without par value		$	34.9	      $	57.6
-----------------------------------------------------------------------------
Preference Stock of Subsidiary, cumulative, 
      without par value-
Authorized 5,000,000 shares; none outstanding				             -		          -
------------------------------------------------------------------------------
	Total Serial Preferred Stock, Preference Stock and 
         Preferred Securities of Subsidiary             	$	96.2	     $	125.6
==============================================================================
Company Obligated Mandatorily Redeemable Preferred 
Securities of:
Illinois Power Capital, L.P.
Monthly Income Preferred Securities, cumulative, 
         $25 liquidation preference-
3,880,000 shares authorized and outstanding		           $	97.0	       $	97.0
Illinois Power Financing I
Trust Originated Preferred Securities, cumulative, 
          $25 liquidation preference-
4,000,000 shares authorized and outstanding			           100.0		           -
-----------------------------------------------------------------------------

	Total Mandatorily Redeemable Preferred 
               Stock of Subsidiary	                    $	197.0	       $	97.0
=============================================================================

Serial Preferred Stock ($50 par value) is redeemable at the option of IP in 
whole or in part at any time with not less than 30 days and not more than 60 
days notice by publication.

Quarterly dividend rates for Serial Preferred Stock, Series A, are determined 
based on market interest rates of certain U.S. Treasury securities. Dividends 
paid in 1996 and 1995 were $.75 per quarter. The dividend rate for any 
dividend period will not be less than 6% per annum or greater than 12% per 
annum applied to the liquidation preference value of $50 per share.

Illinois Power Capital, L.P. is a limited partnership in which IP serves as a 
general partner. Illinois Power Capital issued (1994) $97 million of tax-
advantaged monthly income preferred securities (MIPS) at 9.45% (5.67% after-
tax rate) with a liquidation preference of $25 per share. IP consolidates the 
accounts of Illinois Power Capital.

Illinois Power Financing I (IPFI) is a statutory business trust in which IP 
serves as sponsor. IPFI issued $100 million of trust originated preferred 
securities (TOPrS) at 8% (4.8% after-tax rate) in January 1996. IPFI issued 
the TOPrS and invested the proceeds in an equivalent amount of IP subordinated 
debentures due in 2045. IP used the proceeds to repay short-term indebtedness 
on varying dates on or before March 1, 1996. IP incurred the indebtedness in 
December 1995, to redeem $95.3 million (principal value) of higher-cost 
outstanding preferred stock of IP.

On April 15, 1996, IP issued a notice of redemption to all holders of its 
Adjustable Rate Series B Preferred Stock. All 410,250 shares outstanding were 
redeemed on May 15, 1996, at the redemption price of $50 per share.

In 1996, IP redeemed $6.7 million of the 7.75% Serial Preferred Stock, $2.2 
million of its Series A Serial Preferred Stock and the remaining $20.5 million 
of its Series B Serial Preferred Stock. The carrying amount was $.7 million 
under consideration paid and was recorded in equity and included in Net 
income applicable to common stock.

Note 11 - Common Stock and Retained Earnings

IP has an Incentive Savings Plan (Plan) for salaried employees. IP's matching 
contribution is used to purchase Illinova common stock. Under this Plan, 
27,545 shares of common stock were designated for issuance at December 31, 
1996.

IP has an Incentive Savings Plan for Employees Covered Under a Collective 
Bargaining Agreement. IP's matching contribution is used to purchase Illinova 
common stock. Under this plan, 69,167 shares of common stock were designated 
for issuance at December 31, 1996.

Illinova has an Employees' Stock Ownership Plan (ESOP) that includes an 
incentive compensation feature which is tied to employee achievement of 
specified corporate performance goals. This arrangement began in 1991 when IP 
loaned $35 million to the Trustee of the Plans, which used the loan proceeds 
to purchase 2,031,445 shares of IP's common stock on the open market. The 
loan and common shares were converted to Illinova instruments with the 
formation of Illinova in May 1994. These shares are held in a suspense account
under the Plans and are being distributed to the accounts of participating
employees as the loan is repaid by the Trustee with funds contributed by IP,
together with dividends on the shares acquired with the loan proceeds.  IP
financed the loan with funds borrowed under its bank credit agreements.

For the year ended December 31, 1996, 69,367 common shares were allocated to 
salaried employees and 62,975 shares to employees covered under the Collective 
Bargaining Agreement through the matching contribution feature of the ESOP 
arrangement. Under the incentive compensation feature, 83,300 common shares 
were allocated to employees for the year ended December 31, 1996. During 1996, 
IP contributed $5.2 million to the ESOP and using the shares allocated method, 
recognized $1.6 million of expense. Interest paid on the ESOP debt was
approximately $1.6 million in 1996 and dividends used for debt services were
approximately $2.2 million.

As of July 1, 1996 Illinova amended the Automatic Reinvestment and Stock 
Purchase Plan and the Employees' Stock Ownership Plan. These plans were 
replaced with the Illinova Investment Plus Plan for which 5,000,000 shares of 
common stock were designated for issuance. Illinova is responsible for 
administering the Illinova Investment Plus Plan. The purpose of the Illinova 
Investment Plus Plan is to provide investors in Illinova with a convenient 
way to purchase shares of common stock and reinvest all or a portion of the
cash dividends paid on eligible securities in additional shares of common
stock.  The Illinova Investment Plus Plan allows purchases of common stock
on the open market, as well as purchases of new issue shares directly from
Illinova.  All accounts and all elections, notices, instructions and
authorizations under the Automatic Reinvestment and Stock Purchase Plan and
the Employees' Stock Ownership Plan automatically will continue under the
Illinova Investment Plus Plan, and participants in the Automatic Reinvestment
and Stock Purchase Plan and the Employees' Stock Ownership Plan will continue
as participants in the Illinova Investment Plus Plan.

In 1992, the Board of Directors adopted and the shareholders approved a Long-
Term Incentive Compensation Plan (the Plan) for officers or employee members 
of the Board, but excluding directors who are not officers or employees. 
Restricted stock, incentive stock options, non-qualified stock options, stock 
appreciation rights, dividend equivalents and other stock-based awards may be 
granted under the plan, for up to 1,500,000 sha90.3					$	148.1					$	158.2
Other information -
	Depreciation	$	164.0	$	22.5	$	186.5	$	161.4	$	21.6	$	
</TABLE>
<TABLE>
--------------------------------------------------------------------------
 <C>          <C>           <C>       <C>         <C>              <C>
Year      	Options	       Grant	      Year	      Expiration     	Options
Granted   	Granted       	Price	   Exercisable	     Date	       Exercised
---------------------------------------------------------------------------
1992	      	62,000	     $	233/8		      1996       	6/10/01		     38,000
1993	      	73,500     	$	241/4	      	1997      	  6/9/02	          	-
1994      		82,650	     $	207/8	      	1997	        6/8/03          		-
1995	      	69,300     	$	247/8	      	1998       	6/14/04	          	-
1996	      	80,500	     $	293/4	      	1999	        2/7/05          		-
============================================================================
</TABLE>

In October 1995, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 123, "Accounting for Stock-Based 
Compensation" (FAS 123), effective for fiscal years beginning after December 
15, 1995. If the accounting provisions of FAS 123 had been adopted as of the 
beginning of 1996, the effect  on 1996 net earnings would have been immaterial. 
Further, based on current and anticipated use of stock options, it is not 
envisioned that the impact of FAS 123 accounting provisions would be material 
in any future period. Illinova continues to account for its stock options in 
accordance with Accounting Principle Board Opinion No. 25.

The provisions of Supplemental Indentures to IP's General Mortgage Indenture
and Deed of Trust contain certain restrictions with respect to the declaration
and payment of dividends.  IP was not limited by any of these restrictions at
December 31, 1996.  Under the Restated Articles of Incorporation, common
stock dividends are subject to the preferential rights of the holders of
preferred and preference stock.

Note 12 - Pension and Other Benefit Costs

IP has defined-benefit pension plans covering all officers and employees.  
Benefits are based on years of service and compensation.  IP's funding policy
is to contribute annually at least the minimum amount required by government
funding standards, but not more than can be deducted for federal income tax
purposes.

Pension costs, a portion of which have been capitalized for 1996, 1995 and
1994, include the following components:

<TABLE>
                                                      Years Ended December 31,
------------------------------------------------------------------------------
              <C>                                    <C>       <C>       <C>
(Millions of Dollars)                               1996       1995      1994
------------------------------------------------------------------------------
Service cost on benefits
 earned during the year                           $ 10.2      $ 10.4    $ 11.9
Interest cost on projected
 benefit obligation                                 26.8        23.6      21.8
Return on plan assets                              (42.2)      (58.3)     (7.9)
Net amortization and deferral                        9.4        29.6     (19.2)
Effect of enhanced retirement       
  program                                              -        15.7         -
--------------------------------------------------------------------------------
Net periodic pension cost                        $   4.2      $ 21.0     $ 6.6
================================================================================
</TABLE>

The estimated funded status of the plans at December 31, 1996 and 1995, using
discount rates of 8.0% and 7.75%, respectively, and future compensation
increases of 4.5% was as follows:

<TABLE>
                                                  Balances as of December 31,
-----------------------------------------------------------------------------
               <C>                                <C>             <C>
(Millions of Dollars)                             1996            1995
-----------------------------------------------------------------------------
Acturial present value of:
  Vested benefit obligation                   $ (291.7)       $ (276.8)
-----------------------------------------------------------------------------
  Accumulated benefit obligation                (312.5)         (297.5)
-----------------------------------------------------------------------------
Projected benefit obligation                    (361.5)         (343.6)
Plan assets at fair value                        357.2           331.5
-----------------------------------------------------------------------------
  Funded Status                                   (4.3)          (12.1)
  Unrecognized net (gain)/loss                   (13.8)           (5.1)
  Unrecognized net asset at transition           (30.3)          (34.6)
  Unrecognized prior service cost                 19.3            21.2
-----------------------------------------------------------------------------
Accrued pension cost included in
  accounts payable                            $  (29.1)       $  (30.6)
=============================================================================
</TABLE>

The plan's assets consist primarily of common stocks, fixed income securities,
cash equivalents and real estate.  The acturial present value of accumulated
plan benefits at January 1, 1996 and 1995, were $361 million and $258 million,
respectively, including vested benefits of $337 million and $239 million,
respectively.  The pension cost for 1996, 1995 and 1994 was calculated using
a discount rate of 7.75%, 8.75% and 7.75%, respectively; future compensation
increases of 4.5% for 1996, 1995 and 1994; and a return on assets of 9.5% for
1996, 9.0% for 1995 and 1994.  The unrecognized net asset at transition and
unrecognized prior service cost are amortized on a straight-line basis over
the average remaining service period of employees who are expected to receive
benefits under the plan.  IP made cash contributions of $6 million in 1996,
$2 million and $10 million in 1994.

IP provides health care and life insurance benefits to certain retired 
employees, including their eligible dependents, who attain specified ages
and years of service under the terms of the defined-benefit plans.  Post-
retirement benefits, a portion of which have been capitalized, for 1996 and
1995 included the following components:

<TABLE>
                                                   Years Ended December 31,
----------------------------------------------------------------------------
                 <C>                               <C>             <C>
(Millions of Dollars)                              1996            1995
----------------------------------------------------------------------------
Service cost on benefits earned   
 during the year                                  $  2.2         $  2.1
Interest cost on projected
 benefit obligation                                  6.1            5.5
Return on plan assets                               (5.9)          (4.7)
Amortization of unrecognized
 transition obligation                               6.4            6.3
Effect of enhanced retirement program                  -            9.5
---------------------------------------------------------------------------
Net periodic postretirement
 benefit cost                                     $  8.8         $ 18.7
===========================================================================
</TABLE>

The net periodic postretirement benefit cost in the preceding table includes
amortization of the previously unrecognized accumulated postretirement benefit
plan obligation, which was $44.2 million and $52.3 million as of January 1,
1996 and 1995, respectively, over 20 years on a straight-line basis.

IP has established two separate trusts for those retirees who were subject to
a collectively bargained agreement and all other retirees to fund retiree
health care and life insurance benefits.  IP's funding policy is to contribute
annually an amount at least equal to the revenues collected for the amount of
postretirement benefit costs allowed in rates.  The plan assets consist of
common stocks and fixed income securities at December 31, 1996 and 1995.  The
estimated funded status of the plans at December 31, 1996 and 1995, using
weighted average discount rates of 8.0% and 7.75%, respectively, and a return
on assets of 9.0% was as follows:

<TABLE>

                                                Balances as of December 31,
----------------------------------------------------------------------------
                 <C>                            <C>                <C>
(Millions of Dollars)                           1996               1995
-----------------------------------------------------------------------------
Accumulated postretirement benefit obligation
  Retirees                                    $ (49.6)           $ (54.5)
  Other fully eligible participants              (3.5)              (3.0)
  Other active plan participants                (28.6)             (27.5)
-----------------------------------------------------------------------------
     Total benefit obligation                   (81.7)             (85.0)
Plan assets at fair value                        34.4               25.6
-----------------------------------------------------------------------------
Funded status                                   (47.3)             (59.4)
Unrecognized transition obligation               41.5               44.2
Unrecognized net (gain)/loss                     (9.2)                 -
-----------------------------------------------------------------------------
Accrued postretirement benefit cost
  included in accounts payable                $ (15.0)           $ (15.2)
=============================================================================
</TABLE>


Note 13 - Segments of Business

<TABLE>
                                                                                        (Millions of dollars)
-------------------------------------------------------------------------------------------------------------
                                         <C>                                <C>                               <C> 
                                         1996			                            1995			                           1994
          <C>                  <C>       <C>        <C>           <C>       <C>        <C>         <C>        <C>       <C> 
                                                    Total			                          Total			                          Total
                             Electric	   Gas	   Corporation	   Electric	   Gas	   Corporation	   Electric	   Gas	   Corporation 
-------------------------------------------------------------------------------------------------------------------------------
Operation information -
	Operating revenues	        $	1,340.5	  $	348.2	$	1,688.7 	  $	1,368.9 	 $	272.5	  	1,641.4	   $	1,287.5	  $	302.0	  $	1,589.5
	Operating expenses,
		excluding provision for 
  income taxes		                886.2		   300.5	  1,186.7        946.2		   245.0		  1,191.2	 	     876.1		   274.7		   1,150.8
-------------------------------------------------------------------------------------------------------------------------------
	Pre-tax operating income		     454.3		    47.7		   502.0		       422.7	 	  27.5 		   450.2		      411.4		    27.3		     438.7
	Allowance for funds used 
		during construction (AFUDC)     6.3 	      .2       6.5 	         5.5	 	    .5		      6.0	 	       8.9		       .4		      9.3
-------------------------------------------------------------------------------------------------------------------------------
	Pre-tax operating income,
		including AFUDC 	           $	460.6 	  $	47.9    $	508.5      $	428.2 	  $28.0	   $	456.2 	  $	  420.3	    $ 27.7	   $	448.0
-----------------------------------------------                 ------------------              -------------------           
	Other deductions, net						                          34.2	 					                      18.9		 				                        17.5
	Interest charges		                                  133.0 						                     148.0 						                       143.9
	Provision for income taxes	                         128.0		 				                     114.0	 					                       109.9
	Preferred dividend require-
  ments of subsidiary	    					                       22.3						                       23.7		 				                        24.9
------------------------------------------------------------------------------------------------------------------------------
	Net income			                                       191.0	 					                     151.6		 				                       151.8

	Carrying value over (under) 
  consideration paid for redeemed 
  preferred stock of subsidiary                        (.7) 						                     (3.5)				 		                        6.4
-------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common stock					           190.3 					                      $	148.1 					                     $	158.2  
===============================================================================================================================
Other information -
	Depreciation	            $	164.0	        $	22.5  	$	186.5 	   $	161.4	    $	21.6	    $	183.0	     $	156.1	    $	21.1	  $	177.2
-------------------------------------------------------------------------------------------------------------------------------
	Capital expenditures	    $ 164.0	        $	23.3	  $	187.3	    $	185.7	    $	23.6	    $	209.3	     $	173.1	    $	20.6	  $	193.7 
-------------------------------------------------------------------------------------------------------------------------------
Investment information -
	Identifiable assets*	   $	4,578.1 	      $	481.9	 $	5,060.0	 $4,580.4 	   $	446.3	  $	5,026.7	  $	4,589.0	   $	442.6 		5,031.6
       ------------------------------------------             ---------------------               --------------------    
 Nonutility plant and 
  other investments                                    132.4                               65.5                            37.2
 Assets utilized for 
  overall operations                                   520.4                              517.6                           507.9
-------------------------------------------------------------------------------------------------------------------------------
  Total Assets                                     $ 5,712.8                          $ 5,609.8                       $ 5,576.7
===============================================================================================================================
*Utility plant, nuclear fuel, materials and supplies, deferred Clinton costs
and prepaid and deferred energy costs.


Note 14 - Fair Value of Financial Instruments


</TABLE>
<TABLE>
                                             <C>                 <C>
                                          			1996    			         1995
---------------------------------------------------------------------------
                <C>                    <C>       <C>       <C>       <C> 
                                   		Carrying		  Fair	   Carrying	  	Fair
(Millions of dollars)	                Value 		  Value	    Value		   Value
----------------------------------------------------------------------------
Nuclear decommissioning
	trust funds	                       $	41.4	    $	41.4	   $	32.7	   $	32.7
Cash and cash equivalents		           24.6	     	24.6	    	11.3	    	11.3
Mandatorily redeemable
	preferred stock of subsidiary		     197.0	    	199.3	    	97.0	   	108.2
Long-term debt of subsidiary	      1,587.7		  1,629.3 		1,739.2 		1,855.8
Notes payable	                      	387.0	    	387.0		   359.6   		359.6
============================================================================
</TABLE>

The following methods and assumptions were used to estimate the fair value of 
each class of financial instruments listed in the table above:

Nuclear Decommissioning Trust Funds         The fair values of available-for-
sale marketable debt securities and equity investments held by the Nuclear 
Decommissioning Trust are based on quoted market prices at the reporting date 
for those or similar investments. 

Cash and Cash Equivalents    The carrying amount of cash and cash equivalents 
approximates fair value due to the short maturity of these instruments.

Mandatorily Redeemable Serial Preferred Stock of Subsidiary and Long-Term Debt 
of Subsidiary     The fair value of IP mandatorily redeemable preferred stock 
and IP long-term debt is estimated based on the quoted market prices for 
similar issues or by discounting expected cash flows at the rates currently 
offered to IP for debt of the same remaining maturities, as advised by IP's 
bankers.

Notes Payable    The carrying amount of notes payable approximates fair value 
due to the short maturity of these instruments.

Note 15 - Quarterly Consolidated Financial Information and Common Stock Data 
          (unaudited)
<TABLE>

                                                          (Millions of dollars except per common share amounts)
-----------------------------------------------------------------------------------------------------------------
                <C>                                   <C>              <C>            <C>              <C>
			                                              First Quarter	  Second Quarter	  Third Quarter	  Fourth Quarter
                                                  			1996	            1996	           1996	            1996
-----------------------------------------------------------------------------------------------------------------
Operating revenues	                                $	446.7	         $	365.7	       $	458.4	         $	417.9
Operating income		                                    88.1		           74.9		        133.3		           65.1
Net income		                                          43.3	           	36.7		         91.0		           20.0
Net income applicable to common stock		               43.3		           36.2		         90.7		           20.1
Earnings per common share	                           $	.57	           $	.48	        $	1.20	           $	.26 
Common stock prices and dividends
	High	                                            $	30 3/8	            $	29	       $	29 1/4	       $	28 5/8 
	Low	                                             $	27	            $	24 5/8	       $	25 1/4	       $	26 1/4
	Dividends declared	                                 $	.28	           $	.28	          $	.28	          $	.31


			                                              First Quarter	  Second Quarter	  Third Quarter	  Fourth Quarter
			                                                  1995	            1995	            1995	           1995
----------------------------------------------------------------------------------------------------------------
Operating revenues	                               $	425.5	         $	344.3	           $	486.1	        $	385.5
Operating income		                                   78.3		           67.1		            137.2		          41.8
Net income		                                         32.4		           26.3		             89.9		           3.0
Net income (loss) applicable to common stock		       32.4		           26.3		             89.9		           (.5)
Earnings per common share	                          $	.43           	$	.35 	           $	1.18	          $	.00 
Common stock prices and dividends
	High	                                           $	23 5/8            	$	26	          $	27 1/4	           $	30 
	Low	                                            $	21 1/4	        $	22 3/4	          $	24 1/4	           $	27
	Dividends declared	                                $	.25	           $	.25	             $	.25	          $	.28 


The 1995 fourth quarter earnings include $23 million net of tax, $(.30) per 
share, for the enhanced retirement and severance program and $3.5 million, 
$(.05) per share, for the carrying amount under consideration paid for 
redeemed preferred stock of IP. 

The common stock is listed on the New York Stock Exchange and the Chicago 
Stock Exchange. The stock prices above are the prices reported on the 
Composite Tape. There were 38,251 registered holders of common stock at 
January 10, 1997. 


</TABLE>
<TABLE>

ILLINOVA CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA*
---------------------------------------------------------------------------------------------------------------------------
                   <C>                                      <C>          <C>       <C>       <C>        <C>          <C>
                                                                                             	(Millions of dollars)
                                                        				1996		      1995		    1994		    1993		      1992		      1986
---------------------------------------------------------------------------------------------------------------------------
Operating revenues
	Electric	                                              $	1,202.9	   $	1,252.6	 $	1,177.5	 $	1,135.6	 $	1,117.9	   $	814.1
	Electric interchange		                                     137.6	      	116.3		    110.0		    130.8		     73.0		     76.6
	Gas	                                                      	348.2		      272.5		    302.0		    314.8		    288.6		    369.7
---------------------------------------------------------------------------------------------------------------------------
	Total operating revenues	                              $	1,688.7   	$	1,641.4	 $	1,589.5	 $	1,581.2	 $	1,479.5  $	1,260.4 
--------------------------------------------------------------------------------------------------------------------------
Net income (loss)	                                        $	191.0	     $	151.6	   $	151.8	   $	(81.9)	   $	93.2	   $	256.5
Effective income tax rate		                                  40.2%		      42.9%		    42.0%		   (39.8)%		   46.0%		    22.7%
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stock	             $	190.3     	$	148.1	   $	158.2	   $	(81.9)	   $	93.2	   $	256.5
Earnings (loss) per common share	                          $	2.51	      $	1.96	   $  2.09 	  $ (1.08) 	  $ 1.23	   $	 3.98
Cash dividends declared per common share	                  $	1.15      	$	1.03	   $  	.65	   $	  .40	    $	1.40	   $	 2.64
Dividend payout ratio (declared)		                           45.5%	      	52.3%		    30.7%		     N/A			   112.9%		    66.7% 
Book value per common share	                              $	21.62	     $	20.19	   $	19.17	   $	17.46	    $	18.81	  $	25.79
Price range of common shares
	High	                                                   $	30 3/8	        $	30	   $	22 5/8	  $	25 7/8	   $	25 1/8	 $  	 32
	Low	                                                    $	24 5/8	     	21 1/4	   $	18 1/8	  $	20 1/8	   $	19 1/4	 $	23 1/8
Weighted average number of common shares outstanding 
	during the period (thousands)		                           75,682		     75,644		    75,644		   75,644		    75,644		  64,503
----------------------------------------------------------------------------------------------------------------------------
	Total assets	                                          $	5,712.8	   $	5,609.8	   $	5,576.7	 $	5,423.5	  $	5,331.7	 $	5,622.8
-----------------------------------------------------------------------------------------------------------------------------
Capitalization
	Common stock equity	                                   $	1,636.2	   $	1,527.0	   $	1,450.2	 $	1,321.0	  $	1,422.7	 $	1,691.9
	Preferred stock of subsidiary		                             96.2		      125.6		      224.7		    303.7		     303.1		    315.2
	Mandatorily redeemable preferred stock of subsidiary		     197.0		       97.0		      133.0		     48.0		     100.0		    196.0
	Long-term debt of subsidiary		                           1,636.4		    1,739.3		    1,946.1		  1,926.3		   2,017.4		  2,241.0
-----------------------------------------------------------------------------------------------------------------------------
	Total capitalization	                                  $	3,565.8   	$	3,488.9	   $	3,754.0	 $	3,599.0	  $	3,843.2	 $	4,444.1
-----------------------------------------------------------------------------------------------------------------------------
Embedded cost of long-term debt		                             8.0%		       7.9%		       7.6%		     7.5%		      8.3%		     9.1%
------------------------------------------------------------------------------------------------------------------------------
Retained earnings (deficit)	                              $	233.0	     $	129.6	      $	58.8	   $	(64.6)	    $	41.0	   $	481.2
------------------------------------------------------------------------------------------------------------------------------
Capital expenditures	                                     $	187.3	     $	209.3	      $	193.7	  $	277.7	     $	244.4	  $	710.1
Cash flows from operations	                               $	407.4	     $	413.2	      $	268.6	  $	369.7	     $	344.8	  $	212.3
AFUDC as a percent of earnings applicable to common stock		   3.4%		       4.1%		        5.9%		   N/A			        5.6%		   85.5%
Return on average common equity		                            12.0%	       	9.9%		       11.4%		   (6.0)%		      6.5%		   15.9%
Ratio of earnings to fixed charges		                         3.09		        2.56		        2.56		     .66		       1.87		    2.57
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*		Millions of dollars except earnings (loss) per common share, cash dividends 
declared per common share, book value per common share and price range of 
common shares.

**		Restated for the effect of capitalized nuclear fuel lease.


<TABLE>

ILLINOVA CORPORATION
SELECTED ILLINOIS POWER COMPANY STATISTICS

                  <C>                                <C>       <C>       <C>       <C>       <C>       <C>
                                                 				1996		    1995		    1994		    1993	  	  1992  		  1986
------------------------------------------------------------------------------------------------------------
Electric Sales in KWH (Millions)
Residential		                                        4,782		   4,754		    4,537		  4,546		   4,138		   4,198
Commercial	                                         	3,894		   3,804	    	3,517		  3,246		   3,055		   2,821
Industrial		                                         8,493		   8,670		    8,685		  8,120		   8,083		   7,341
Other		                                                367		     367		      536		    337		     466		     875
-------------------------------------------------------------------------------------------------------------
	Sales to ultimate consumers		                      17,536		  17,595		  17,275		  16,249		  15,742		  15,235
Interchange	                                        	5,454		   4,444		   4,837		   6,015		   2,807		   2,726
Wheeling	                                             	928	     	642		     622		     569		     402		       -
-------------------------------------------------------------------------------------------------------------
	Total electric sales		                             23,918	  	22,681	  	22,734		  22,833		  18,951		  17,961
-------------------------------------------------------------------------------------------------------------
Electric Revenues (Millions)
Residential	                                         $	483	    $	500	   $	471	    $	463	    $	435	    $	293
Commercial		                                           318		     321		    295		     269		     263		     187
Industrial		                                           360		     392		    378		     360		     381		     290
Other		                                                 38	      	37		     30		      40		      38		      44
------------------------------------------------------------------------------------------------------------
	Revenues from ultimate consumers		                  1,199		   1,250		  1,174		   1,132		   1,117		     814

Interchange	                                          	138		     116		    110		     131		      73		      77
Wheeling		                                               4		       3		      3		       3		       1		       -
------------------------------------------------------------------------------------------------------------
	Total electric revenues	                          $	1,341  	$	1,369	 $	1,287	  $	1,266	  $	1,191	     	891
------------------------------------------------------------------------------------------------------------
Gas Sales in Therms (Millions)
Residential		                                          427		     356		    359		     371		     339		     357
Commercial		                                           177		     144		    144		     148		     138		     161
Industrial		                                            99		      88		     81		      78		      136		    198
------------------------------------------------------------------------------------------------------------
	Sales to ultimate consumers		                         703		     588		    584		     597		     613		     716

Transportation of customer-owned gas		                 251		     273		    262		     229		     204		     253
------------------------------------------------------------------------------------------------------------
	Total gas sold and transported		                      954	     	861		    846		     826		     817		     969

Interdepartmental sales		                                9		      21		      5		       7		      12		       1
-------------------------------------------------------------------------------------------------------------
	Total gas delivered		                                 963		     882		    851		     833		     829		     970
-------------------------------------------------------------------------------------------------------------
Gas Revenues (Millions)
Residential	                                         $	216	    $	173	   $	192	     $	200	   $	181	    $	206
Commercial		                                            79		      60		     66		       68		     61		      78
Industrial		                                            40		      24		     31		       34		     37		      73
-------------------------------------------------------------------------------------------------------------
	Revenues from ultimate consumers		                    335		     257		    289		      302		    279		     357

Transportation of customer-owned gas		                   7		       8		      9		        8		      7		      11
Miscellaneous	                                          	6		       7		      4		        5		      3		       2
------------------------------------------------------------------------------------------------------------
	Total gas revenues	                                 $	348	    $	272	   $	302	     $	315	   $	289	    $	370
------------------------------------------------------------------------------------------------------------
System peak demand (native load) in kw (thousands)		 3,492	   	3,667	  	3,395		    3,415		  3,109		   3,176
Firm peak demand (native load) in kw (thousands)		   3,381		   3,576		  3,232		    3,254		  2,925		   2,949
Net generating capability in kw (thousands)		        4,148		   3,862		  4,121		    4,045		  4,052		   3,397
-------------------------------------------------------------------------------------------------------------
Electric customers (end of year)		                 549,957	 	529,966		553,869		  554,270		549,391		 540,595
Gas customers (end of year)		                      389,223		 374,299		388,170		  394,379		386,261		 383,201
Employees (end of year)		                            3,635	   	3,559		  4,350		    4,540		  4,624		   4,593
------------------------------------------------------------------------------------------------------------
Illinova 500 South 27th Street, Decatur, Illinois 62525 
http://www.illinova.com




</TABLE>