UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549


                                    FORM 10-K



[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]


      For the Fiscal Year Ended December 31, 1997

                                       Or

[    ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
        EXCHANGE ACT OF 1934 [NO FEE REQUIRED]


        For the transition period from      to



                        Registrant, State of 
                        Incorporation, Address
Commission              of Principal Executive                   I.R.S. Employer
File Number             Offices and Telephone Number          Identification No.


1-11327                 ILLINOVA CORPORATION                        37-1319890
                        (an Illinois Corporation)
                        500 S. 27th Street
                        Decatur, IL  62521
                        (217) 424-6600



1-3004                  ILLINOIS POWER COMPANY                      37-0344645
                        (an Illinois Corporation)
                        500 S. 27th Street
                        Decatur, IL  62521
                        (217) 424-6600



<PAGE>


Securities registered pursuant to Section 12(b) of the Act:

Each of the following securities registered pursuant to Section 12(b) of the Act
are listed on the New York Stock Exchange.


Title of each class                                           Registrant
-------------------                                           ----------

Common Stock (a)                                           Illinova Corporation



Preferred stock, cumulative,                              Illinois Power Company
$50 par value
4.08% Series   4.26% Series   4.70% Series
4.20% Series   4.42% Series

Mandatorily redeemable preferred securities of subsidiary
(Illinois Power Capital, L.P.)
9.45% Series

Trust originated preferred securities of subsidiary
(Illinois Power Financing 1)
8.00% Series

First mortgage bonds
6 1/2% Series due 1999                                   8 3/4% Series due 2021
7.95% Series due 2004

New mortgage bonds
6 1/8% Series due 2000                                   6 3/4% Series due 2005
5.625% Series due 2000                                       8% Series due 2023
6 1/2% Series due 2003                                   7 1/2% Series due 2025

(a) Illinova Common Stock is also listed on the Chicago Stock Exchange.

         Indicate  by check  mark  whether  the  registrants  (1) have filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days.

                         Illinova Corporation  Yes [X] No
                        Illinois Power Company Yes [X] No

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrants'  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.

                          Illinova Corporation    [X]
                          Illinois Power Company  [X]


<PAGE>


      The   aggregate   market  value  of  the  voting   common  stock  held  by
non-affiliates  of Illinova  Corporation at February 28, 1998, was approximately
$2.0  billion.  Illinova  Corporation  is the sole holder of the common stock of
Illinois Power Company. The aggregate market value of the voting preferred stock
held by  non-affiliates  of Illinois  Power  Company at February 28,  1998,  was
approximately   $46   million.   The   determination   of  stock   ownership  by
non-affiliates was made solely for the purpose of responding to this requirement
and the registrants are not bound by this determination for any other purpose.

      The number of shares of Illinova  Corporation  Common  Stock,  without par
value, outstanding on February 28, 1998, was 71,701,937.

      The number of shares of Illinois Power Company  Common Stock,  without par
value,  outstanding on February 28, 1998, was 66,215,292,  all of which is owned
by Illinova Corporation.

                    Documents Incorporated by Reference

1.   Portions of the 1997 Annual Report to Shareholders of Illinova  Corporation
     in the appendix to the Illinova Corporation Proxy Statement.  

                    (Parts I, II, III and IV of Form 10-K)

2.    Portions  of the 1997 Annual  Report to  Shareholders  of  Illinois  Power
      Company  in  the  appendix  to  the  Illinois  Power  Company  Information
      Statement.
                     (Parts I, II, III and IV of Form 10-K)

3.   Portions of the Illinova 1997 Proxy Statement.

                    (Part III of Form 10-K)

4.   Portions of the Illinois Power 1997 Information Statement.

                    (Part III of Form 10-K)


<PAGE>


                              ILLINOVA CORPORATION

                             ILLINOIS POWER COMPANY

                                    FORM 10-K

                   For the Fiscal Year Ended December 31, 1997

         This combined Form 10-K is separately filed by Illinova Corporation and
Illinois Power Company.  Information contained herein relating to Illinois Power
Company is filed by  Illinova  Corporation  and  separately  by  Illinois  Power
Company on its own behalf.  Illinois Power Company makes no representation as to
information relating to Illinova  Corporation or its subsidiaries,  except as it
may relate to Illinois Power Company.

                                TABLE OF CONTENTS
                                                                              
Part I                                                                   Page

            Item 1. Business                                              6
                       General                                            6
                             Open Access and Competition                  7
                             Customer and Revenue Data                    8
                             Accounting Matters                           9
                             Dividends                                    9
                       IP Electric Business                               9
                             Overview                                     9
                             Soyland Power Cooperative, Inc.             10
                             Fuel Supply                                 11
                             Construction Program                        13
                             Clinton Power Station                       14
                               General                                   14
                               Decommissioning Costs                     15
                             Accounting Matters                          15
                       IP Gas Business                                   16
                             Gas Supply                                  16
                       Diversified Business Activities                   16
                       Environmental Matters                             17
                             Air Quality                                 17
                             Clean Air Act                               18
                             Global Warming                              18
                             Manufactured-Gas Plant Sites                18
                             Water Quality                               18
                             Other Issues                                19
                             Electric and Magnetic Fields                19
                             Environmental Expenditures                  19
                       Year 2000 Data Processing                         19
                       Research and Development                          20
                       Regulation                                        20
                       Executive Officers of Illinova Corporation        21
                       Executive Officers of Illinois Power Company      21
                       Operating Statistics                              22
            Item 2. Properties                                           22
            Item 3. Legal Proceedings                                    23
            Item 4. Submission of Matters to a Vote of
                    Security Holders                                     23

Part II

            Item 5. Market for Registrants' Common Equity
                    and Related Stockholder Matters                      24
            Item 6. Selected Financial Data                              24
            Item 7. Management's Discussion and Analysis
                    of Financial Condition and
                    Results of Operations                                24
            Item 8. Financial Statements and Supplementary
                      Data                                               25

<PAGE>


                          TABLE OF CONTENTS (Continued)

            Item 9.  Changes in and Disagreements With
                      Accountants on Accounting and
                      Financial Disclosure                               25

Part III

            Item 10. Directors and Executive Officers of
                      the Registrants                                    26
            Item 11. Executive Compensation                              26
            Item 12. Security Ownership of Certain
                      Beneficial Owners and Management                   26
            Item 13. Certain Relationships and Related
                      Transactions                                       26

Part IV

            Item 14.       Exhibits, Financial Statement
                              Schedules, and Reports on Form 8-K         27


Signatures                                                               29

Exhibit Index                                                            31


<PAGE>


                                     PART I

ITEM 1. Business
------
                                     General
                                     -------

         This report contains estimates,  projections and other  forward-looking
statements  that involve  risks and  uncertainties.  Actual  results or outcomes
could differ materially as a result of such important factors as: the outcome of
state and federal  regulatory  proceedings  affecting the  restructuring  of the
electric  and gas  utility  industries;  the  impacts  new laws and  regulations
relating to restructuring,  environmental,  and other matters,  have on Illinova
and its  subsidiaries;  the  effects of  increased  competition  on the  utility
businesses;  risks of owning and operating a nuclear facility; changes in prices
and cost of fuel; factors affecting non-utility investments, such as the risk of
doing  business in foreign  countries;  construction  and operation  risks;  and
increases in financing costs.

         Illinois  Power  Company  (IP) was  incorporated  under the laws of the
State of Illinois on May 25, 1923.

         Illinova Corporation  (Illinova) was incorporated under the laws of the
State of Illinois on May 27,  1994 and serves as the parent  holding  company of
four principal  operating  subsidiaries:  IP, Illinova Generating Company (IGC),
Illinova Energy Partners,  Inc. (IEP), and Illinova  Insurance Company (IIC). In
May  1996,  another  Illinova  subsidiary,  Illinova  Power  Marketing,  (IPMI),
consolidated its business  activities with those of Illinova Energy Services and
with the non-regulated  marketing activities of Illinova, in a new company named
IEP.  On April  1,  1997,  IEP and  IPMI  merged.  In the  merger,  IPMI was the
surviving corporation and subsequently changed its name to IEP.

         IP 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.  IP is  affected  by  changes  in the  electric  utility
industry  driven  by  regulatory  and   legislative   initiatives  to  introduce
competition  and end monopoly  franchises in at least the generation side of the
business. One aspect of this change is "direct access," meaning giving customers
the freedom to purchase  electricity  from  suppliers  they choose.  In December
1997, electric regulatory restructuring  legislation was enacted by the Illinois
General Assembly and was signed by the Governor.  For a more detailed discussion
of these  developments,  refer to the "Open Access and  Competition"  section of
this item.

         IP provides funds to Illinova for operations and investments.  Illinova
accrues  interest due to IP on any borrowed  funds at a rate equal to the higher
of the rate that Illinova  would have to pay if it used a currently  outstanding
line of credit,  or IP's actual cost of the funds  provided.  At the end of each
quarter,  if needed,  IP effects a common  stock  repurchase  from  Illinova  by
accepting  shares  having a  market  value  equivalent  to the  amount  of funds
provided  to  Illinova  during the quarter  plus the  accrued  interest  for the
quarter.  During  1997,  IP  provided  approximately  $122  million  in funds to
Illinova  through  this stock  repurchase  feature.  IP also  provides  funds to
Illinova  in the form of cash  dividends  payable on the common  stock of IP. In
1997,  approximately  $92 million in such  dividends was declared and paid.  For
further  information on IP common stock  repurchases,  see Item 7  "Management's
Discussion and Analysis of Financial Condition and Results of Operation" of this
report.

         IGC  is  Illinova's  wholly-owned  independent  power  subsidiary.  IGC
invests in energy-related  projects throughout the world. For further discussion
of IGC, see the "Diversified Business Activities" section later in this item.

         IEP is Illinova's wholly-owned subsidiary that engages in the brokering
and  marketing  of  electric  power  and  gas and the  development  and  sale of

<PAGE>

energy-related  services.  For further  discussion of IEP, see the  "Diversified
Business Activities" section later in this item.

         IIC 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.

Open Access and Competition

         Competition  has  become a  dominant  issue  for the  electric  utility
industry. It has been promoted by federal legislation,  starting with the Public
Utility  Regulatory  Policies Act of 1978, which  facilitated the development of
co-generators and independent power producers.  Federal promotion of competition
continued with enactment of the Energy Policy Act of 1992,  which authorized the
Federal Energy Regulatory  Commission  (FERC) to mandate  wholesale  wheeling of
electricity  by  utilities  at the  request  of  certain  authorized  generating
entities  and  electric  service   providers.   Wheeling  is  the  transport  of
electricity  generated by one entity over  transmission and  distribution  lines
belonging to another entity.

         Competition  arises not only from  co-generation  or independent  power
production,  but also  from  municipalities  seeking  to  extend  their  service
boundaries  to  include  customers  being  served  by  utilities.  The  right of
municipalities  to have power  wheeled to them by utilities was  established  in
1973. IP has been obligated to wheel power for  municipalities  and cooperatives
in its territory since 1976.

         Further  competition may be introduced by state action, as has occurred
in Illinois,  or by federal  regulatory  action,  although the Energy Policy Act
currently  precludes the FERC from mandating  retail  wheeling.  Retail wheeling
involves the transport of electricity to end-use customers.  It is a significant
departure from traditional regulation in which public utilities have a universal
obligation to serve the public in return for protected  service  territories and
regulated  pricing designed to allow a reasonable  return on prudent  investment
and recovery of operating costs.

         On  December  16,  1997,   Illinois   Governor  Edgar  signed  electric
deregulation  legislation,  An Act in Relation to the  Competitive  Provision of
Utility  Services (House Bill 362).  House Bill 362 guarantees IP's  residential
customers a 15 percent decrease in base electric rates beginning August 1, 1998,
and an  additional  5  percent  decrease  effective  on May 1,  2002.  The  rate
decreases  are expected to result in revenue  reductions  of  approximately  $40
million in 1998,  approximately  $80  million in each of the years 1999  through
2001 and  approximately  $100  million in 2002,  based on  current  consumption.
Customers  with demand greater than 4 MW at a single site will be free to choose
their electric  generation  suppliers  ("direct  access") starting October 1999.
Customers with at least 10 sites which aggregate at least 9.5 MW in total demand
also will have  direct  access  starting  October  1999.  Direct  access for the
remaining   non-residential  customers  will  occur  in  two  phases:  customers
representing  one-third of the remaining  load in the  non-residential  class in
October 1999 and customers  representing  the entire  remaining  non-residential
load on December 31, 2000.  Direct  access will be available to all  residential
customers in May 2002. IP remains  obligated to serve all customers who continue
to take  service  from IP at tariff  rates,  and  remains  obligated  to provide
delivery  service  to all at  regulated  rates.  In 1999,  rates  for  unbundled
delivery   services  will  be  established   in  proceedings   mandated  by  the
legislation.

Although the specified  residential  rate  reductions  and the  introduction  of
     direct access will lead to lower electric service revenues,  House Bill 362
     is designed to protect the  financial  integrity  of electric  utilities in
     three  principal  ways:

1)   Departing customers are obligated to pay transition  charges,  based on the
     utility's lost revenue from that customer,  adjusted to deduct: a) delivery
     charges the utility will continue to receive from the customer,  and b) the
     market value of the freed-up energy net of a mitigation factor,  which is a

<PAGE>

     percentage reduction of the transition charge amount. The mitigation factor
     is designed to provide  incentive for management to continue cost reduction
     efforts and generate new sources of revenue;  

2)   Utilities are provided the opportunity to lower their financing and capital
     costs through the issuance of "securitized" bonds, also called transitional
     funding instruments;  and 

3)   Utilities are permitted to seek rate relief in the event that the change in
     law leads to their return on equity falling below a specified minimum based
     on a prescribed test. Utilities are also subject to an "over-earnings" test
     which requires them, in effect, to share with customers  earnings in excess
     of specified levels.

         The extent to which  revenues  are  lowered  will depend on a number of
factors including future market prices for wholesale and retail energy, and load
growth and demand levels in the current IP service territory.  The impact on net
income will depend on, among other things, the amount of revenues earned and the
ongoing costs of doing business.

         Within the next several  months,  IP intends to seek Illinois  Commerce
Commission (ICC) approval for securitization financings up to $1.728 billion. It
plans to issue the transitional  funding instruments in two steps: 1) up to $864
million on or after August 1, 1998,  and 2) the  remainder on or after August 1,
1999. The transitional  funding  mechanism using securitized bonds as authorized
in House Bill 362 is  designed  to provide  these  bondholders  a prior claim on
future IP revenue.  This feature is intended to  facilitate  a favorable  credit
rating  which should  allow debt to be issued at an interest  rate  favorable to
that currently  available to IP. Proceeds would be used to refinance higher cost
debt and reduce the  capital  structure  through  the  purchase  of  outstanding
equity.

                  For  related   discussion   of  accounting   implications   of
deregulation,  see the "Accounting Matters" section under "IP Electric Business"
in this item.

         In 1996, IP received  approval from both the ICC and FERC 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.  Currently,  17 customers are participating
in the experiment. Since its inception, the experiment has cost IP approximately
$11.2  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 $2.7 million in transmission service charges.

         Competition  creates both risks and  opportunities.  At this time,  the
ultimate effect of competition on Illinova's consolidated financial position and
results of operations is uncertain.

Customer and Revenue Data
-------------------------

         In  1997,  approximately  57  percent  and  14  percent  of  Illinova's
operating  revenues were derived from IP's sale of electricity and IP's sale and
transportation  of  natural  gas,  respectively.  Approximately  29  percent  of
Illinova's operating revenues came from its diversified enterprises in 1997. The
territory  served by IP comprises  substantial  areas in  northern,  central and
southern  Illinois,  including ten cities with  populations  greater than 30,000
(1990  Federal  Census  data).  IP  supplies  electric  service  at retail to an
estimated aggregate population of 1,265,000 in 310 incorporated  municipalities,
adjacent suburban and rural areas, and numerous  unincorporated  communities and
retail  natural  gas  service  to an  estimated  population  of  920,000  in 257
incorporated  municipalities  and adjacent areas. IP holds  franchises in all of
the 310  incorporated  municipalities  in which  it  furnishes  retail  electric
service and in all of the 257 incorporated  municipalities in which it furnishes
retail gas service.  At February 10, 1998,  IP served  577,322  active  electric
customers  (billable meters) and 408,269 active gas customers (billable meters).
These numbers do not include non-metered  customers such as street lights. Sales
of electricity and gas sales and transportation are affected by seasonal weather

<PAGE>

patterns,  and, therefore,  operating revenues and associated operating expenses
are not distributed evenly during the year.

         For more information, see "Note 13 - Segments of Business" on page a-30
and "Note 2 - Illinova  Subsidiaries"  on pages a-16 and a-17 of the 1997 Annual
Report to  Shareholders in the appendix to the Illinova Proxy Statement which is
incorporated herein by reference.

         To the extent that information incorporated by reference herein appears
identically  in  both  the  1997  Annual  Report  to  Shareholders  of  Illinova
Corporation  and the 1997  Annual  Report  to  Shareholders  of  Illinois  Power
Company,  reference  will be made  herein  only to the  1997  Annual  Report  to
Shareholders  of  Illinova  Corporation,  and such  reference  will be deemed to
include a reference to the 1997 Annual Report of Illinois Power Company.

Accounting Matters
------------------

         The Illinova consolidated  financial statements include the accounts of
Illinova  Corporation,  a holding  company;  IP, a combination  electric and gas
utility; IGC, a wholly-owned  subsidiary that invests in energy-related projects
and competes in the  independent  power market;  IEP, a wholly-owned  subsidiary
that  develops and markets  energy-related  services to the  unregulated  energy
market;  and IIC, a wholly-owned  subsidiary whose primary business is to insure
certain risks of Illinova and its subsidiaries.

         All  significant  intercompany  balances  and  transactions  have  been
eliminated from the consolidated financial statements. All non-utility operating
transactions  are included in the  sections  titled  "Diversified  Enterprises",
"Interest  Expense",  "Income  Taxes",  and "Other  Income and  Deductions",  in
Illinova's Consolidated Statements of Income.

         The IP  consolidated  financial  statements  include  the  accounts  of
Illinois  Power Capital,  L.P., a limited  partnership in which IP serves as the
general  partner and Illinois Power  Financing I, a statutory  business trust in
which IP serves as sponsor.

Dividends
---------

         On  December  10,  1997,  Illinova  declared a quarterly  common  stock
dividend at $.31 per share  payable  February 1, 1998.  On  February  11,  1998,
Illinova  declared a quarterly  common stock  dividend at $.31 per share payable
May 1, 1998.


                              IP Electric Business
                              --------------------

Overview
--------

         IP supplies  electric service at retail to residential,  commercial and
industrial consumers in substantial  portions of northern,  central and southern
Illinois.  Electric  service at wholesale is supplied to numerous  utilities and
power marketing  entities,  as well as to the Illinois Municipal Electric Agency
(IMEA) as agent for 11  municipalities  and to Soyland Power  Cooperative,  Inc.
(Soyland)  for resale to its member  cooperatives.  For  additional  information
related to Soyland, see "Note 6 - Facilities Agreement" on page a-23 of the 1997
Annual Report to  Shareholders  in the appendix to the Illinova Proxy  Statement
which is  incorporated  herein by reference.  In 1997,  IP provided  interchange
power to 61 entities, including 37 power marketers.

         IP's  highest  system  peak  hourly  demand  (native  load) in 1997 was
3,532,000  kilowatts  on July 26,  1997.  IP's record for peak load is 3,667,000
kilowatts, set on July 13, 1995.
<PAGE>

         IP owns and  operates  generating  facilities  with a total net  summer
capability of 4,571,250  kilowatts.  The  generating  capability  comes from six
major steam  generating  plants and three  peaking  service  combustion  turbine
plants. See Item 2 "Properties" for further information.

         IP is a  participant,  together  with Ameren - Union  Electric  Company
(AmerenUE) and Ameren - Central Illinois Public Service Company (AmerenCIPS), in
the  Illinois-Missouri  Power Pool which was formed in 1952.  The Pool  operates
under an  interconnection  agreement which provides for the  interconnection  of
transmission  lines.  This  agreement has no expiration  date, but any party may
withdraw from the agreement by giving 36 months' notice to the other parties.

         IP,  AmerenCIPS and AmerenUE have a contract with the Tennessee  Valley
Authority (TVA) providing for the  interconnection  of the TVA system with those
of the three  companies to exchange  economy and  emergency  power and for other
working  arrangements.  This contract has no expiration  date, but any party may
withdraw  from the agreement by giving five years'  written  notice to the other
parties.

         IP also  has  interconnections  with  Indiana-Michigan  Power  Company,
Commonwealth Edison Company, Central Illinois Light Company, Mid-American Energy
Corporation,  Kentucky Utilities  Company,  Southern Illinois Power Cooperative,
Electric Energy Inc. (EEI),  Soyland, the City of Springfield,  Illinois and the
TVA.

         IP is a member of the Mid-America  Interconnected  Network,  one of ten
regional  reliability councils established to coordinate plans and operations of
member companies regionally and nationally.

         In   January   1998,    IP,   in    conjunction    with   eight   other
transmission-owning entities, filed with the FERC for all approvals necessary to
create and implement the Midwest Independent  Transmission System Operator, Inc.
The goals of this joint  undertaking  are to: 1) put in place a tariff  allowing
easy and  nondiscriminatory  access to transmission  facilities in a multi-state
region, 2) enhance regional reliability and 3) establish an entity that operates
independently of any  transmission  owner(s) or other market  participants  thus
furthering  competition in the wholesale generation market,  consistent with the
objectives of the FERC's Transmission Open Access Notice of Proposed Rulemaking,
Order No. 888. The parties have requested that the FERC rule on the joint filing
by no later than September 1, 1998, in order to allow the participants to create
the  infrastructure  needed to allow the  independent  system operator to become
operational.

         In 1996,  IP  transferred  through a dividend its 20%  ownership of the
capital stock of EEI to Illinova.  Illinova's interest was transferred to IGC in
1996. EEI was organized to own and operate a steam electric  generating  station
and related  transmission  facilities  near Joppa,  Illinois to supply  electric
energy to the U.S.
Department of Energy (DOE) for its project near Paducah, Kentucky.

Soyland Power Cooperative, Inc.
-------------------------------

         For  discussion  of the  transfer to IP of  Soyland's  share of Clinton
Power Station  (Clinton) and the amended Power  Coordination  Agreement  between
Soyland  and IP, see "Note 6 -  Facilities  Agreement"  on page a-23 of the 1997
Annual Report to  Shareholders  in the appendix to the Illinova Proxy  Statement
which is incorporated herein by reference.



<PAGE>


Fuel Supply
-----------

         Coal was used to generate approximately 97% of the electricity produced
by IP during 1997 with other fuels accounting for 3%. Based on current forecasts
through 2002,  after Clinton  returns to service the  percentages  of generation
attributable  to nuclear  fuel is  projected to increase to as much as 31% while
projected  generation  from coal will decline to about 69% during those years in
which there is not a scheduled refueling outage for Clinton.

         IP's rate  schedules  contain  provisions  for  passing  through to its
electric customers  increases or decreases in the cost of energy provided to its
native load customers  under the Uniform Fuel  Adjustment  Clause  (UFAC).  Such
costs include fuel and fuel transportation  costs, emission allowance costs, DOE
spent fuel  disposal  fees and costs of power  purchased  to serve  native load.
However,  on March 6, 1998, IP made the ICC filing  required for  elimination of
the UFAC. This will establish a new base fuel cost  recoverable in IP's electric
tariffs  effective on the date of the filing. As provided in House Bill 362, the
new base fuel cost is 1.287 cents per kwh,  which is equal to 91 percent of IP's
average  prudent and allowable fuel and purchased  power supply costs in the two
most recent years for which the ICC has  approved  the level of recovery.  Every
year UFAC cost recoveries are audited by the ICC in a reconciliation  proceeding
in which they may be adjusted upward for actual costs not recovered, or downward
through  a  disallowance  of costs  incurred.  By  opting  out of the  UFAC,  IP
eliminates exposure for potential disallowed replacement power costs for periods
after  December 31, 1996,  as those years will no longer be subject to the ICC's
annual reconciliation proceeding. This change will prevent IP from automatically
passing  through  increases  in  cost  and  will  expose  IP to  the  risks  and
opportunities  of price  volatility in these areas.  Prior to the elimination of
the UFAC,  under an IP petition  approved by the ICC on September 29, 1997, fuel
costs  charged to customers  were set at a maximum  level of 1.291 cents per kwh
until Clinton is back in service operating at least at a 65% capacity factor for
two  consecutive  months.  Whether  electric  energy  costs will  continue to be
recovered  in  revenues  from  customers  will  depend on a number  of  factors,
including  the number of  customers  served,  demand for electric  service,  and
changes in fuel cost components.  These variables may be influenced, in turn, by
market  conditions,  availability  of  generating  capacity,  future  regulatory
proceedings,  and  environmental  protection  costs,  among  other  things.  For
additional  information see the information under the sub-captions  "Revenue and
Energy Cost" of "Note 1 - Summary of  Significant  Accounting  Policies" on page
a-15 and "Fuel Cost  Recovery" of "Note 4 - Commitments  and  Contingencies"  on
page a-19 of the 1997  Annual  Report to  Shareholders  in the  appendix  to the
Illinova Proxy Statement which is incorporated herein by reference.

COAL - Coal is  expected  to be a major  source of fuel for  future  generation.
Through both long-term and short-term contracts, IP has obtained commitments for
the major portion of future coal requirements.  IP has new short-term  contracts
with two suppliers  which last through 2000 and a third new contract which lasts
through 2002.  Contracts  renegotiated in 1993 and 1994, which last through 1999
and 2010, are providing for the continued  economic use of high sulfur  Illinois
coal while IP complies with Phase I of the Clean Air Act Amendments  that became
effective  January 1, 1995.  IP is  currently  evaluating  its fuel  options for
compliance with Phase II of the Clean Air Act Amendments that becomes  effective
January 1, 2000.

         Spot  purchases  of coal in 1997  represented  9.0% of IP's  total coal
purchases.  IP believes that it will be able to obtain  sufficient  coal to meet
its future generating requirements.  However, IP is unable to predict the extent
to  which  coal  availability  and  price  may  fluctuate  in the  future.  Coal
inventories  on hand at December 31, 1997,  represented a 20-day supply based on
IP's average daily burn projections for 1998.

         IP continues to evaluate fuel options and  alternate  fuel delivery and
unloading  facilities  for  greater  flexibility  of  fuel  supplies.  New  rail
unloading  facilities at the Havana Station became  operational in the spring of
1996. In addition,  increased availability of nearby coal allowed for the return
of year-round coal generation at the Vermilion Station in June 1997.
<PAGE>

NUCLEAR  - IP leases  nuclear  fuel  from  Illinois  Power  Fuel  Company  (Fuel
Company). The 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).  As of  December  31,  1997,  the  Fuel  Company  had an
investment in nuclear fuel of  approximately  $127  million.  IP is obligated to
make  subordinated  loans to the Fuel Company at any time the obligations of the
Fuel Company  which are due and payable  exceed the funds  available to the Fuel
Company.  At December 31, 1997, IP had no outstanding loans to the Fuel Company.
For  additional  information  relating to the nuclear fuel lease,  see "Note 8 -
Capital  Leases" on page a-25 of the 1997 Annual Report to  Shareholders  in the
appendix  to the  Illinova  Proxy  Statement  which is  incorporated  herein  by
reference.

         At December 31, 1997,  IP's net investment in nuclear fuel consisted of
$65 million of Uranium 308. This  inventory  represents  fuel used in connection
with the sixth and  seventh  reloads of  Clinton.  At  December  31,  1997,  the
unamortized  investment  of the nuclear fuel  assemblies  in the reactor was $62
million.

         IP has one  long-term  contract for the supply of uranium  concentrates
with Cameco,  a Canadian  corporation.  The Cameco contract was  renegotiated in
1994 to lower the price  and  provide  55% to 65% of  Clinton's  estimated  fuel
requirements through 2000. The decision to utilize Cameco for the additional 10%
of Clinton's fuel requirements is made the year before each delivery and depends
on the  estimated  price  and  availability  from the  spot  market  versus  the
estimated  contract  price.  The contract with Cameco is stated in terms of U.S.
dollars.

         Conversion  services  for the  period  1991-2001  are  contracted  with
Sequoyah Fuels.  Sequoyah Fuels closed its Oklahoma conversion plant in 1992 and
joined with Allied Chemical Company to form a marketing  company named CoverDyn.
All  conversion  services  will be  performed at Allied's  Metropolis,  Illinois
facility, but Sequoyah Fuels retains the contract with IP.

         IP has a utility services contract for uranium enrichment  requirements
with the DOE  which  provides  70% of the  enrichment  requirements  of  Clinton
through  September  1999.  The  remaining 30% has been  contracted  with the DOE
through an amendment to its incentive  pricing plan through 1999. This amendment
allows IP to either  purchase  the  enrichment  services at the DOE's  incentive
price or provide  electricity at DOE's Paducah,  Kentucky enrichment plant at an
agreed exchange rate.

         A contract with General  Electric  Company  provides  fuel  fabrication
requirements for the initial core and approximately 19 reloads, or through 2019.

         Beyond the stated commitments,  IP may enter into additional  contracts
for uranium  concentrates,  conversion to uranium  hexafluoride,  enrichment and
fabrication.

         Currently, commercial reprocessing of spent nuclear fuel is not allowed
in the U.S. The Nuclear Waste Policy Act of 1982 (NWPA) was enacted to establish
a  government  policy  with  respect  to  disposal  of  spent  nuclear  fuel and
high-level  radioactive waste. On July 6, 1984, as required by NWPA, IP signed a
contract  with the DOE for  disposal of spent  nuclear  fuel  and/or  high-level
radioactive  waste.  Under the contract,  IP is required to pay the DOE one mill
(one-tenth of a cent) per net  kilowatt-hour  (one dollar per  megawatt-hour) of
electricity  generated and sold. IP had been  recovering this amount through its
UFAC  subject to UFAC  limitations  discussed  under the heading  "Fuel  Supply"
previously  in this item.  With the  elimination  of UFAC,  IP may  continue  to
recover some portion of these costs  through the new base fuel cost  included in
electric tariffs.

         On June 20, 1994,  IP,  along with other  utilities  and state  utility
commissions,  filed an action in the D.C.  Circuit  Court of Appeals  asking the
Court to rule that the DOE is obligated to take responsibility for spent nuclear

<PAGE>

fuel by  January  31,  1998  under the NWPA.  The  utilities  asked the Court to
confirm  the  DOE's  commitment  and to order the DOE to  develop  a  compliance
program with appropriate deadlines. The utilities also asked for relief from the
ongoing funding requirements or to have an escrow account established for future
funds paid to DOE. Subsequently,  the petition was amended to seek, in addition,
relief in the form of specific performance.

         A  three-judge  panel ruled in July 1996 that the DOE's  obligation  to
take spent fuel, by the January 1998 date  specified in the NWPA, is binding and
unconditional.  The DOE notified  utilities in December  1996 that it may not be
able to meet the 1998  deadline,  and solicited  utility  suggestions  on how to
accommodate the potential  delay.  In January 1997,  petitions were filed in the
D.C.  Circuit  Court of  Appeals  by IP and other  utilities  and state  utility
commissions,  seeking further enforcement of DOE's obligation.  In response, the
Court has reaffirmed its ruling that the DOE  obligation is  unconditional,  but
has not granted injunctive  relief.  This means that the Court has found the DOE
in breach of DOE's obligation but has not literally  ordered the DOE to perform.
The litigation is continuing.

         IP has on-site  storage  capacity that will  accommodate its spent fuel
storage needs until the year 2007, based on current operating levels. If by that
date the DOE has not complied with its statutory  obligation to dispose of spent
fuel, and IP has continued to operate the plant, IP will have to use alternative
means of disposal, such as dry storage in casks on site or transportation of the
fuel rods to private or collectively-owned utility repositories. IP is currently
an equity  partner with seven other  utilities in an effort to develop a private
temporary  repository.  Attempts to reach  agreement  with the Mescalaro  Apache
Tribe of New Mexico  ended in early 1996;  however,  the group signed a lease in
December  1996 with the  Goshute  Tribe to use land on its Utah  reservation.  A
spent fuel  storage  license  was filed with the Nuclear  Regulatory  Commission
(NRC) in 1997, initiating a process which will take the NRC up to three years to
complete.  Continued  participation  in  the  partnership  will  depend  on  the
technological and economic viability of the project.  Safe, dry, on-site storage
is  technologically  feasible,  but is subject to licensing and local permitting
requirements, for which there may be effective opposition.

         Under the Energy Policy Act of 1992, IP is responsible for a portion of
the  cost  to  decontaminate  and  decommission  the  DOE's  uranium  enrichment
facilities. Each utility is assessed an annual fee for a period of fifteen years
based on quantities  purchased from the DOE  facilities  prior to passage of the
Act.  At  December  31,  1997,  IP has a  remaining  liability  of $4.3  million
representing  future  assessments.  IP  had  been  recovering  these  costs,  as
amortized,  through its UFAC  subject to UFAC  limitations  discussed  under the
heading "Fuel Supply"  previously in this item. With the elimination of UFAC, IP
may continue to recover  some  portion of these costs  through the new base fuel
cost included in electric tariffs.

OIL and GAS - IP used  natural gas and oil to generate  1.0% of the  electricity
produced  in 1997.  IP has not  experienced  difficulty  in  obtaining  adequate
supplies  of these  resources.  However,  IP is unable to predict  the extent to
which oil and gas availability and price may fluctuate in the future.

         Reference is made to the section "Environmental  Matters" hereunder for
information regarding pollution control matters relating to IP's fuel supply.

Construction Program
--------------------

         To  meet  anticipated  needs,  Illinova  and IP  have  used  internally
generated  funds and  external  financings.  The timing  and amount of  external
financings  depend primarily on economic and financial market  conditions,  cash
needs and capitalization ratio objectives.

         For more information on Illinova's  construction program and liquidity,
see "Note 4 -  Commitments  and  Contingencies"  on page a-19 of the 1997 Annual
Report to  Shareholders in the appendix to the Illinova Proxy Statement which is
incorporated  herein  by  reference;  "Note 5 - Lines of Credit  and  Short-Term

<PAGE>

Loans" on page a-23 of the 1997 Annual Report to Shareholders in the appendix to
the Illinova Proxy  Statement  which is  incorporated  herein by reference;  and
"Capital  Resources and Requirements" in "Management's  Discussion and Analysis"
on pages a-8 and a-9 of the 1997 Annual Report to  Shareholders  in the appendix
to the Illinova Proxy Statement which is incorporated herein by reference.

         For more information on IP's  construction  program and liquidity,  see
"Note 3 -  Commitments  and  Contingencies"  on pages  a-18 and a-19 of the 1997
Annual Report to Shareholders in the appendix to the Illinois Power  Information
Statement which is incorporated  herein by reference;  "Note 4 - Lines of Credit
and Short-Term  Loans" on page a-23 of the 1997 Annual Report to Shareholders in
the appendix to the Illinois Power  Information  Statement which is incorporated
herein by reference;  and "Capital  Resources and Requirements" in "Management's
Discussion  and  Analysis" on pages a-7 through a-9 of the 1997 Annual Report to
Shareholders in the appendix to the Illinois Power  Information  Statement which
is incorporated herein by reference.

Clinton Power Station
---------------------

         General
         -------

          In March 1997, the NRC issued an order approving transfer to IP of the
Clinton  operating  license  related to Soyland's  13.2% ownership in connection
with the transfer  from  Soyland to IP of all of Soyland's  interest in Clinton.
Soyland's  title to the plant and directly  related  assets such as nuclear fuel
was  transferred  to IP in May 1997.  Soyland's  nuclear  decommissioning  trust
assets were  transferred to IP in May 1997,  consistent  with IP's assumption of
all  of   Soyland's   ownership   obligations   including   those   related   to
decommissioning.

         Clinton was placed in service in 1987 and represents  approximately 20%
of IP's installed generation capacity. For more information on the Clinton Power
Station, see "Note 3 - Clinton Power Station" on pages a-17 and a-18 of the 1997
Annual Report to  Shareholders  in the appendix to the Illinova Proxy  Statement
which is incorporated herein by reference.

         In  September  1996,  a leak in a  recirculation  pump  seal  caused IP
operations  personnel  to shut  down  Clinton.  As of the  date of this  report,
Clinton has not resumed operation.

         In January  1997 and again in June 1997,  the NRC named  Clinton  among
plants  having a trend of declining  performance.  In June 1997, IP committed to
conduct an Integrated  Safety  Assessment  (ISA) to thoroughly  assess Clinton's
performance.  The ISA was conducted by a team of 30  individuals  with extensive
nuclear  experience and no substantial  previous  involvement at Clinton.  Their
report  concluded that the underlying  reasons for the  performance  problems at
Clinton were  ineffective  leadership  throughout the  organization in providing
standards  of  excellence,  complacency  throughout  the  organization,  barrier
weaknesses and weaknesses in teamwork.  In late October,  a team commissioned by
the NRC performed an evaluation to validate the ISA results.  In December,  this
team concluded that the findings of the ISA accurately  characterized  Clinton's
performance deficiencies and their causes.

         On January 5, 1998,  IP and PECO Energy  Company  (PECO)  announced  an
agreement  under  which  PECO will  provide  management  services  for  Clinton.
Although a PECO team will help  manage the plant,  IP will  continue to maintain
the operating  license for Clinton and retain  ultimate  oversight of the plant.
PECO  employees  will assume  senior  positions  at Clinton,  but the plant will
remain  primarily  staffed by IP  employees.  IP made this  decision  based on a
belief that  bringing in PECO's  experienced  management  team would be the most
efficient way to get Clinton back on line and  operating at a superior  level as
quickly as possible.

         On  January  21,  1998,  the NRC  placed  Clinton  on its Watch List of
nuclear plants that require additional regulatory oversight because of declining
performance.  Twice a year the NRC  evaluates the  performance  of nuclear power

<PAGE>

plants in the United  States  and  identifies  those  which  require  additional
regulatory  oversight.  Once  placed on the Watch List a plant must  demonstrate
consistent improved performance before it is removed from the list. The NRC will
monitor Clinton more closely than plants not on the Watch List. This may include
increased inspections, additional required documentation,  NRC-required approval
of processes and procedures, and higher-level NRC oversight.

         The NRC has advised IP that it must submit a written  report to the NRC
at least two weeks prior to  restarting  Clinton,  giving the agency  reasonable
assurance  that IP's actions to correct  recurring  weaknesses in the corrective
action program have been effective. After the report is submitted, the NRC staff
plans to meet with IP's management to discuss the plant's readiness for restart.
The prolonged  outage at Clinton is having an adverse  effect on Illinova's  and
IP's financial  condition,  through higher operating and maintenance and capital
costs,  lost  opportunities  to sell energy,  and replacement  power costs.  The
magnitude  of  these  costs  and  lost   opportunities  is  unknown  because  of
uncertainty  regarding  the timing of Clinton's  return to service and uncertain
future market conditions.

         Decommissioning Costs
         ---------------------

         IP is  responsible  for 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 and through
its Power Coordination Agreement with Soyland. Illinois deregulation legislation
provides for the continued recovery of decommissioning  costs from IP's delivery
customers. For more information on the decommissioning costs related to Clinton,
see  "Decommissioning  and Nuclear Fuel  Disposal" in "Note 4 - Commitments  and
Contingencies"  on page a-20 of the 1997 Annual  Report to  Shareholders  in the
appendix  to the  Illinova  Proxy  Statement  which is  incorporated  herein  by
reference.

Accounting Matters
------------------

         Prior to the passage of House Bill 362, IP  prepared  its  consolidated
financial  statements  in  accordance  with  Statement of  Financial  Accounting
Standards (FAS) 71, "Accounting for the Effects of Certain Types of Regulation."
Reporting under FAS 71 allows companies whose service obligations and prices are
regulated to maintain  assets on their balance  sheets  representing  costs they
expect to  recover  from  customers,  through  inclusion  of such costs in their
future  rates.  In July 1997,  the Emerging  Issues Task Force of the  Financial
Accounting   Standards  Board  (EITF)  concluded  that  application  of  FAS  71
accounting  should be  discontinued  at the date of  enactment  of  deregulation
legislation  for  business  segments for which a plan of  deregulation  has been
established.  The EITF further  concluded that regulatory assets and liabilities
that  originated  in the portion of the  business  being  deregulated  should be
written off unless their  recovery is  specifically  provided for through future
cash flows from the regulated portion of the business.

         Because  House Bill 362 provides for  market-based  pricing of electric
generation  services,  IP discontinued  application of FAS 71 for its generating
segment as of December 1997. IP evaluated its regulatory  assets and liabilities
associated  with its generation  segment and  determined  that recovery of these
costs was not probable  through rates charged to transmission  and  distribution
customers, the regulated portion of the business.

         IP wrote off  generation-related  regulatory  assets and liabilities of
approximately  $195 million (net of income  taxes) in December  1997.  These net
assets  related  to  previously  incurred  costs  that had been  expected  to be
collected through future revenues, including deferred Clinton costs, unamortized
gains  and  losses  on  reacquired  debt,  recoverable  income  taxes  and other
generation-related  regulatory assets. At December 31, 1997, IP's net investment
in generation  facilities was $3.5 billion and was reflected in "Utility  Plant,
at Original Cost" on IP's balance sheet.
<PAGE>

         In addition,  IP evaluated its generation  segment plant investments to
determine if they had been impaired as defined in FAS 121,  "Accounting  for the
Impairment of Long-Lived  Assets and Long-Lived  Assets to Be Disposed Of." This
evaluation  determined  that future  revenues  were expected to be sufficient to
recover the costs of its generation  segment plant  investments and as a result,
no plant  write-downs were necessary.  However,  ultimate  recovery depends on a
number of factors and variables  including market conditions and IP's ability to
operate its generation assets efficiently.

         The provisions of House Bill 362 allow for an  acceleration in the rate
at which any  utility-owned  assets are  expensed  without  regulatory  approval
provided  such  charges  are  consistent  with  generally  accepted   accounting
principles.  Under  this  legislation,  up to an  aggregate  of $1.5  billion in
additional expense for  generation-related  assets could be accelerated  through
the year 2008.  This reduction in the net book value of IP's  generation-related
assets should help position IP to operate  competitively  and  profitably in the
changing  business  environment.  This  accelerated  charge  would have a direct
impact on earnings but not on cash flows.


                                 IP Gas Business
                                 ---------------

         IP  supplies  retail  natural  gas  service to an  estimated  aggregate
population  of 920,000 in 257  incorporated  municipalities,  adjacent  suburban
areas and numerous unincorporated communities. IP does not sell gas for resale.

         IP's rate schedules  contain  provisions for passing through to its gas
customers  increases or decreases in the cost of purchased gas. For  information
on revenue and energy costs,  see the  sub-caption  "Revenue and Energy Cost" of
"Note 1 - Summary of Significant  Accounting  Policies" on page a-15 of the 1997
Annual Report to  Shareholders  in the appendix to the Illinova Proxy  Statement
that is incorporated herein by reference.

         IP has eight  underground gas storage fields having a total capacity of
approximately  15.2 million  MMBtu and a total  deliverability  on a peak day of
about  347,000  MMBtu.  In  addition to the  capacity  of the eight  underground
storage  fields,  IP has  contracts  with  various  natural  gas  suppliers  and
producers  for 9.9 million  MMBtu of  underground  storage  capacity and a total
deliverability on a peak day of 160,000 MMBtu.  Operation of underground storage
permits IP to increase  deliverability to its customers during peak load periods
by taking gas into storage during the off-peak months.

         IP owns one active  liquefied  petroleum  gas plant having an aggregate
peak-day  deliverability  of about 20,000 MMBtu for peak-shaving  purposes.  Gas
properties include approximately 8,000 miles of mains.

         IP  experienced  its 1997 peak-day send out of 705,725 MMBtu of natural
gas on January 10, 1997.  This  compares  with IP's record  peak-day send out of
857,324 MMBtu of natural gas on January 10, 1982.

Gas Supply
----------

         IP has  contracts  with  six  interstate  pipeline  companies  for firm
transportation  and storage  services.  These contracts have varying  expiration
dates  ranging  from  1998  to  2002.  IP also  enters  into  contracts  for the
acquisition of natural gas supply.  Those  contracts  range in duration from one
month to five months.


                         Diversified Business Activities
                         -------------------------------

         IGC, a wholly-owned  subsidiary of Illinova,  invests in energy-related
projects  throughout the world.  IGC is an equity partner with Tenaska,  Inc. in

<PAGE>

four  natural  gas-fired  generation  plants,  of which  three  plants  totaling
approximately  700 megawatts  (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.  IGC also owns 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 industry and operates the Tenaska generation plants
in which IGC has an equity  interest.  IGC is an equity  partner  in the  Indeck
North  American  Power Fund  (Fund).  The Fund has  generation  projects in Long
Beach, California, and Pepperell,  Massachusetts. In addition to these ventures,
IGC is involved in  generation  projects in Teesside,  England;  Puerto  Cortez,
Honduras;  Zhejiang  Province and Hunan  Province,  People's  Republic of China;
Aguaytia, Peru; Old Harbour, Jamaica;  Barranquilla,  Columbia; and Balochistan,
Pakistan. In August 1996, Illinova's interest in the 1000 MW coal-fired plant in
Joppa, Illinois was transferred to IGC.

         IEP is Illinova's wholly-owned subsidiary that engages in the brokering
and marketing of electric power and gas,  respectively;  and the development and
sale of energy-related products and services. In May 1995, IEP obtained approval
from the FERC to conduct  business as a marketer  of  electric  power and gas to
various customers outside of IP's present service territory.  In September 1995,
IEP began buying and selling wholesale electricity in the Western United States.
IEP owns 50 percent of Tenaska Marketing  Ventures (TMV). TMV focuses on natural
gas marketing in the Midwestern  United States.  IEP and TMV have formed Tenaska
Marketing Canada to market natural gas in Canada. In July 1996, IP received FERC
approval to sell  electricity  to IEP without  prior  transaction  approval from
FERC.

         For more  information on the  activities of the Illinova's  diversified
enterprises,  see "Note 2 - Illinova Subsidiaries" on pages a-16 and a-17 of the
1997  Annual  Report to  Shareholders  in the  appendix  to the  Illinova  Proxy
Statement which is incorporated herein by reference.


                              Environmental Matters
                              ---------------------

         IP is subject to regulation by certain federal and Illinois authorities
with respect to  environmental  matters and may in the future become  subject to
additional  regulation by such authorities or by other federal,  state and local
governmental bodies.  Existing regulations  affecting IP are principally related
to air and water quality, hazardous wastes and toxic substances.

Air Quality
-----------

         Pursuant  to the  Federal  Clean  Air  Act  (Act),  the  United  States
Environmental  Protection  Agency  (USEPA) has  established  ambient air quality
standards for air pollutants  which, in its judgment,  have an adverse effect on
public  health  or  welfare.  The Act  requires  each  state to  adopt  laws and
regulations,  subject to USEPA  approval,  designed to achieve  such  standards.
Pursuant to the Illinois  Environmental  Protection Act, the Illinois  Pollution
Control  Board  (Board)  adopted  and,  along  with the  Illinois  Environmental
Protection  Agency  (IEPA),  is enforcing a  comprehensive  set of air pollution
control  regulations  which  include  emission  limitations,  permit  issuances,
monitoring and reporting requirements.

         The air  pollution  regulations  of the  Board  impose  limitations  on
emissions of particulate,  sulfur dioxide, carbon monoxide,  nitrogen oxides and
various other pollutants. Enforcement of emission limitations is accomplished in
part through the regulatory  permitting  process.  IP's practice is to obtain an
operating  permit for each source of regulated  emissions.  Presently,  it has a
total of  approximately  100 permits for emission  sources at its power stations
and other  facilities,  expiring  at various  times.  In  addition to having the
requisite operating permits, each source of regulated emissions must be operated
within the regulatory limitations on emissions.  Verification of such compliance
is usually accomplished by reports to regulatory  authorities and inspections by
such authorities.
<PAGE>

         In  accordance  with the  requirements  of the  Illinois  Clean Air Act
Permit Program (CAAPP), IP submitted new air permit applications for each of its
generating  facilities in 1995. The IEPA will review these  applications  and is
expected to issue CAAPP permits in 1998.

         In addition to the sulfur  dioxide  emission  limitations  for existing
facilities,  both  the  USEPA  and the  State of  Illinois  adopted  New  Source
Performance  Standards (NSPS) applicable to coal-fired generating units limiting
emissions  to 1.2 pounds of sulfur  dioxide per million Btu of heat input.  This
standard is applicable to IP's Unit 6 at the Havana Power  Station.  The federal
NSPS also limit nitrogen oxides,  opacity and particulate  emissions and imposes
certain monitoring requirements.  In 1977 and 1990 the Act was amended and, as a
result,  USEPA has adopted more  stringent  emission  standards for new sources.
These standards would apply to any new plant constructed by IP.

Clean Air Act
-------------

         For information on the impacts of the Clean Air Act Amendments of 1990,
see "Environmental  Matters" in "Note 4 - Commitments and Contingencies" on page
a-21 of the 1997 Annual Report to  Shareholders  in the appendix to the Illinova
Proxy Statement which is incorporated herein by reference.

Global Warming
--------------

         For  information on the impacts of the  international  negotiations  to
reduce  greenhouse  gas emissions  and the Kyoto  Protocol,  see  "Environmental
Matters" in "Note 4 - Commitments  and  Contingencies"  on page a-21 of the 1997
Annual Report to  Shareholders  in the appendix to the Illinova Proxy  Statement
which is incorporated herein by reference.

Manufactured-Gas Plant Sites
----------------------------

         IP's estimated liability for MGP site remediation is $65 million.  This
amount  represents  IP's current best estimate of the cost 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  costs through tariff
riders approved by the ICC.  Accordingly,  IP has recorded a regulatory asset on
its balance  sheet  totaling  $65 million as of December  31,  1997.  Management
expects that cleanup costs will be fully recovered from IP's customers.

         In October  1995,  to offset the burden  imposed on its  customers,  IP
initiated  litigation  against a number of  insurance  carriers.  As of February
1998,  settlements or settlements in principle have been reached with all of the
carriers.  Dismissal  of the  litigation  is  proceeding  pending the  necessary
documentation  with  the  court.  The  settlement  proceeds  recovered  from the
carriers will offset a significant  portion of the remediation costs and will be
credited  to  customers  through  the  tariff  rider  mechanism  which  the  ICC
previously approved.

Water Quality
-------------

         The Federal Water Pollution Control Act Amendments of 1972 require that
National Pollutant Discharge Elimination System (NPDES) permits be obtained from
USEPA (or, when delegated, from individual state pollution control agencies) for
any discharge into  navigable  waters.  Such  discharges are required to conform
with the  standards,  including  thermal,  established  by USEPA  and also  with
applicable state standards.

         Enforcement of discharge  limitations is  accomplished  in part through
the regulatory  permitting  process similar to that described  previously  under

<PAGE>

"Air Quality".  Presently, IP has approximately two dozen permits for discharges
at its power stations and other facilities, which must be periodically renewed.

         In  addition  to  obtaining  such  permits,  each  source of  regulated
discharges  must be operated  within the  limitations  prescribed  by applicable
regulations.   Verification  of  such  compliance  is  usually  accomplished  by
monitoring  results  reported to regulatory  authorities and inspections by such
authorities.

         The  Clinton  permit was  reissued  in the third  quarter of 1995.  The
Havana  Power  Station  permit was  reissued in the first  quarter of 1996.  The
Hennepin  Power Station permit  application  for reissuance was submitted in the
fourth  quarter of 1996 and is not  expected  until 1998.  The  Vermilion  Power
Station  permit was reissued in the fourth quarter of 1996. The Wood River Power
Station  permit was  reissued in the first  quarter of 1996.  The Baldwin  Power
Station permit was reissued in the first quarter of 1998.

Other Issues
------------

         Hazardous and  non-hazardous  wastes generated by IP must be managed in
accordance  with  federal  regulations  under the Toxic  Substances  Control Act
(TSCA), the Comprehensive Environmental Response, Compensation and Liability Act
and the  Resource  Conservation  and Recovery  Act (RCRA) and  additional  state
regulations  promulgated under both RCRA and state law. Regulations  promulgated
in 1988  under RCRA  govern  IP's use of  underground  storage  tanks.  The use,
storage,  and  disposal of certain  toxic  substances,  such as  polychlorinated
biphenyls  (PCBs)  in  electrical  equipment,  are  regulated  under  the  TSCA.
Hazardous substances used by IP are subject to reporting  requirements under the
Emergency  Planning and  Community-Right-To-Know  Act. The State of Illinois has
been delegated authority for enforcement of these regulations under the Illinois
Environmental  Protection  Act and state  statutes.  These  requirements  impose
certain monitoring, recordkeeping,  reporting and operational requirements which
IP has  implemented  or is  implementing  to  assure  compliance.  IP  does  not
anticipate that compliance will have a material  adverse effect on its financial
position or results of operations.

Electric and Magnetic Fields
----------------------------

         For  information  on Electric and Magnetic  Fields,  see  "Electric and
Magnetic Fields" in "Note 4 Commitments and  Contingencies"  on page a-22 of the
1997  Annual  Report to  Shareholders  in the  appendix  to the  Illinova  Proxy
Statement which is incorporated herein by reference.

Environmental Expenditures
--------------------------

         Operating  expenses  for  environmentally-related  activities  were $49
million in 1997  (including the incremental  costs of alternative  fuels to meet
environmental requirements). IP's net capital expenditures (including AFUDC) for
environmental  protection  programs  were  approximately  $7  million  in  1997.
Accumulated net capital expenditures since 1969 have reached  approximately $800
million.


                            Year 2000 Data Processing
                            -------------------------

         In November  1996,  Illinova  deployed a project team to coordinate the
identification,  evaluation,  and  implementation of changes to computer systems
and applications necessary to achieve a year 2000 date conversion with no effect
on customers or disruption to business operations.

         These  actions are  necessary to ensure that  systems and  applications
will recognize and process  coding for the year 2000 and beyond.  Major areas of
potential  business impact have been identified and initial  conversion  efforts
are  underway.  Illinova also is  communicating  with third parties with whom it

<PAGE>

does business to ensure  continued  business  operations.  The cost of achieving
year 2000 compliance is estimated to be at least $14 million through 1999.

         Contingency  plans for operating  without year 2000 compliance have not
been  developed.  Such activity  will depend on assessment of progress.  Project
completion is planned for the fourth quarter of 1999.


                            Research and Development
                            ------------------------

         Illinova's  research and  development  expenditures  for 1997  included
approximately  $5.4  million for IP and $2.0 million for  Illinova.  In 1996 and
1995, Illinova's research and development expenditures consisting entirely of IP
expenditures, were $5.4 million and $5.5 million, respectively.


                                   Regulation
                                   ----------

         The Illinois Public Utilities Act was significantly modified in 1997 by
House Bill 362, but the ICC  continues to have broad powers of  supervision  and
regulation  with  respect  to the rates and  charges  of IP,  its  services  and
facilities,  extensions or abandonment of service,  classification  of accounts,
valuation and depreciation of property, issuance of securities and various other
matters.  Before a significant plant addition may be included in IP's rate base,
the ICC must determine that the addition is reasonable in cost, prudent and used
and useful in  providing  utility  service to  customers.  IP must  continue  to
provide  bundled retail  electric  service to all who choose to continue to take
service at tariff rates,  and IP must provide  unbundled  electric  distribution
services to all customers at rates to be determined in a future ICC proceeding.

         Illinova  and IP are  exempt  from  all the  provisions  of the  Public
Utility Holding Company Act of 1935 except Section 9(a)(2) thereof. That section
requires  approval of the  Securities and Exchange  Commission  prior to certain
acquisitions  of any  securities  of other  public  utility  companies or public
utility holding companies.

         IP is subject to regulation  under the Federal Power Act by the FERC as
to rates and charges in connection  with the  transmission of electric energy in
interstate  commerce  and the sale of such  energy at  wholesale  in  interstate
commerce,  the issuance of debt securities  maturing in not more than 12 months,
accounting and depreciation policies,  interaction with affiliates,  and certain
other  matters.  The FERC has  declared  IP exempt  from the Natural Gas Act and
related FERC orders, rules and regulations.

         IP is subject to the  jurisdiction  of the NRC with respect to Clinton.
NRC   regulations   control  the  granting  of  permits  and  licenses  for  the
construction  and operation of nuclear power  stations and subject such stations
to continuing review and regulation. Additionally, the NRC review and regulatory
process   covers   decommissioning,   radioactive   waste,   environmental   and
radiological aspects of such stations.

         IP is subject to the jurisdiction of the Illinois Department of Nuclear
Safety (IDNS) with respect to Clinton.  IDNS and the NRC entered a memorandum of
understanding which allows IDNS to review and regulate nuclear safety matters at
state  nuclear  facilities.  The  IDNS  review  and  regulatory  process  covers
radiation safety,  environmental safety, non-nuclear pressure vessels, emergency
preparedness and emergency response.


<PAGE>



                   Executive Officers of Illinova Corporation
                   ------------------------------------------

Name of Officer               Age                   Position
---------------               ---                   --------

Larry D. Haab                 60       Chairman, President and Chief
                                       Executive Officer
Larry F. Altenbaumer          49       Chief Financial Officer, Treasurer
                                       and Controller
Leah Manning Stetzner         49       General Counsel and Corporate 
                                       Secretary


     Mr. Haab was elected  Chairman,  President and Chief  Executive  Officer in
December 1993.

     Mr.  Altenbaumer  was  elected  Chief  Financial  Officer,   Treasurer  and
Controller in June 1994.

     Ms. Stetzner was elected  General  Counsel and Corporate  Secretary in June
1994.

        The executive officers are elected annually by the Board of Directors at
the first  meeting of the Board held after the annual  meeting of  shareholders,
and hold office  until their  successors  are duly elected or until their death,
resignation or removal by the Board.

                  Executive Officers of Illinois Power Company
                  --------------------------------------------

Name of Officer                Age              Position
---------------                ---              --------

Larry D. Haab                  60     Chairman, President and Chief 
                                      Executive Officer
Larry F. Altenbaumer           49     Senior Vice President and Chief
                                      Financial Officer
Paul L. Lang                   57     Senior Vice President
Walter G. MacFarland, IV       48     Senior Vice President and Chief 
                                      Nuclear Officer
John G. Cook                   50     Senior Vice President
Richard W. Eimer, Jr.          49     Vice President
Kim B. Leftwich                50     Vice President
Robert D. Reynolds             41     Vice President
Robert A. Schultz              57     Vice President
Leah Manning Stetzner          49     Vice President, General Counsel 
                                      and Corporate Secretary
Cynthia G. Steward             40     Controller
Eric B. Weekes                 46     Treasurer

        Each  of the IP  executive  officers,  except  for  Mr.  Weekes  and Mr.
MacFarland,  has been employed by IP or another  subsidiary of Illinova for more
than five years in executive or management  positions.  Prior to election to the
positions  shown above,  the  following  executive  officers  held the following
positions since January 1, 1993.

     Mr. Altenbaumer was elected Senior Vice President,  Chief Financial Officer
and Treasurer in September  1995.  Prior to being elected  Senior Vice President
and Chief  Financial  Officer in June 1992, Mr.  Altenbaumer was Vice President,
Chief Financial Officer and Controller.

     Mr. Lang was elected  Senior Vice  President in June 1992.  He joined IP as
Vice President in July 1986.

        Mr.  MacFarland was contracted  from PECO Energy Company in Philadelphia
in January  1998.  He was elected  Senior Vice  President in February 1998 after

<PAGE>

being  named Chief  Nuclear  Officer in January  1998.  Prior to joining IP as a
contractor  from PECO, Mr.  MacFarland  held the positions of Vice President and
Director of Outage Management, both at PECO's Limerick Generating Station.

     Mr. Cook was elected Senior Vice President in December 1995. Prior to being
elected Vice President in 1992, Mr. Cook was Manager of Clinton Power Station.

     Mr. Eimer was elected Vice President in December  1995. He previously  held
the positions of Assistant to the Vice President and Manager of Marketing.

     Mr.  Leftwich was elected Vice  President in February  1998.  He previously
held the  positions of Managing  Director - Customer  Management  Processes  and
Manager of Marketing.

     Mr. Reynolds was elected Vice President in May 1996.  Prior to his election
to Vice  President,  Mr.  Reynolds  served as Director of Pricing and Manager of
Electric Supply.

     Mr. Schultz was elected Vice President in February 1998. He previously held
the positions of President of Illinova  Energy  Partners,  President of Illinova
Power Marketing and Treasurer of IP.

     Ms.  Stetzner was elected Vice  President,  General  Counsel and  Corporate
Secretary  in February  1993.  She joined IP as General  Counsel  and  Corporate
Secretary in October 1989.

     Ms. Steward was elected  Controller in September  1995. She previously held
the positions of Manager of Employee Services and Director of Accounting.

     Mr. Weekes joined IP as Treasurer in January 1997. He previously  served as
Director of Financial Analysis, Budgets and Controls with a unit of Kraft Foods.

        The  present  term of  office of each of the  above  executive  officers
extends to the first meeting of Illinova's and IP's Board of Directors after the
Annual Election of Directors. There are no family relationships among any of the
executive officers and directors of Illinova and IP.


                              Operating Statistics
                              ---------------------

        For Illinova the information under the caption "Selected  Illinois Power
Company  Statistics" on page a-33 of the 1997 Annual Report to  Shareholders  in
the  appendix  to  the  Illinova  Proxy  Statement  is  incorporated  herein  by
reference.

        For IP the information under the caption  "Selected  Statistics" on page
a-33 of the  1997  Annual  Report  to  Shareholders  in the  appendix  to the IP
Information Statement is incorporated herein by reference.

Item 2. Properties
-------

        IP owns and operates six steam  generating  stations with  composite net
summer capacity of 4,419,000  kilowatts.  In addition,  IP owns nine quick start
combustion  turbine  peaking units at three locations with a combined net summer
capacity of 147,000 kilowatts.  All of IP's generating stations are in the State
of Illinois,  including IP's only nuclear generating  station,  Clinton. IP owns
50% of three combustion turbine units,  located in Bloomington,  Illinois,  with
combined net capacity of 5,250 kilowatts.  State Farm Insurance Company owns the
other 50% of these  units.  The total IP  available  net  summer  capability  is
4,571,250 kilowatts.

        The major coal-fired units at Baldwin, Havana,  Hennepin,  Vermilion and
Wood  River  make up  3,112,000  kilowatts  of summer  capacity.  Three  natural
gas-fired  units at Wood  River were  reactivated  in 1997.  These  units have a

<PAGE>

combined  net summer  capacity of 139,000  kilowatts.  Five  oil-fired  units at
Havana remain in cold standby status, not currently staffed for operation.

     In December 1996, the control and computer rooms for Wood River Units 4 and
5 were damaged by an in-plant fire.  Unit 4 was returned to service in June 1997
and Unit 5 was returned to service in October 1997.

     During  1995,  natural  gas firing  capability  was added to the  Vermilion
station.  Vermilion now has the capability for either coal or natural gas firing
to achieve its summer capacity of 176,000 kilowatts. In June 1997, the Vermilion
units returned to coal as its primary fuel.

     IP owns an  interconnected  electric  transmission  system of approximately
2,800 circuit  miles,  operating from 69,000 to 345,000 volts and a distribution
system which  includes  about 35,800  circuit miles of overhead and  underground
lines.

        All outstanding  first mortgage bonds issued under the Mortgage and Deed
of  Trust  dated  November  1,  1943 are  secured  by a first  mortgage  lien on
substantially  all of the  fixed  property,  franchises  and  rights  of IP with
certain  exceptions  expressly  provided in the mortgage securing the bonds. All
outstanding  New Mortgage  Bonds  issued under the General  Mortgage and Deed of
Trust dated November 1, 1992, are secured by a lien on IP's  properties  used in
the generation, purchase, transmission, distribution and sale of electricity and
gas. On October 24, 1997, a special  meeting of First Mortgage  Bondholders  was
held. At this meeting the Trustee,  holding more that the required two-thirds of
First Mortgage Bonds  outstanding,  voted in favor of a resolution  amending the
Mortgage  and Deed of Trust  dated  November  1,  1943,  to  conform  in certain
respects to the General  Mortgage and Deed of Trust dated  November 1, 1992.  On
December 10, 1997, the IP Board of Directors  approved the resolution adopted by
the Bondholders and forwarded a certified  resolution approving the Bondholders'
resolution of amendment to the Mortgage Trustee. This resolution was received by
the Mortgage  Trustee on December 11, 1997, at which time the  amendment  became
effective.

Item 3. Legal Proceedings
-------

         See  discussion of legal  proceedings  in  "Manufactured-Gas  Plant" in
"Note 4 -  Commitments  and  Contingencies"  on pages  a-21 and a-22 of the 1997
Annual Report to  Shareholders  in the appendix to the Illinova Proxy  Statement
which is incorporated herein by reference.

        See  "Environmental  Matters"  reported  under Item 1 of this report for
information regarding legal proceedings concerning environmental matters.

        See "Fuel Supply"  reported under Item 1 of this report for  information
regarding legal proceedings concerning nuclear fuel disposal.

Item 4. Submission of Matters to a Vote of Security Holders
-------

        On October 24, 1997, a special meeting of First Mortgage Bondholders was
held. At this meeting the Trustee,  holding more that the required two-thirds of
First Mortgage Bonds  outstanding,  voted in favor of a resolution  amending the
Mortgage  and Deed of Trust  dated  November  1,  1943,  to  conform  in certain
respects to the General Mortgage and Deed of Trust dated November 1, 1992.

<PAGE>


                                     PART II
-------------------------------------------------------------------------------

Item 5.   Market for Registrants' Common Equity and Related
-------   Stockholder Matters

        For Illinova the information under the caption  "Quarterly  Consolidated
Financial  Information  and Common Stock Data  (Unaudited)"  on page a-31 of the
1997  Annual  Report to  Shareholders  in the  appendix  to the  Illinova  Proxy
Statement is incorporated herein by reference.

        For  IP  the  information  under  the  caption  "Quarterly  Consolidated
Financial  Information  and Common Stock Data  (Unaudited)"  on page a-31 of the
1997  Annual  Report  to  Shareholders  in the  appendix  to the IP  Information
Statement is incorporated herein by reference.

Item 6. Selected Financial Data
-------

        For Illinova the information  under the caption  "Selected  Consolidated
Financial  Data" on page a-32 of the 1997 Annual Report to  Shareholders  in the
appendix to the Illinova Proxy Statement is incorporated herein by reference.

        For  IP  the  information  under  the  caption  "Selected   Consolidated
Financial  Data" on page a-32 of the 1997 Annual Report to  Shareholders  in the
appendix to the IP Information Statement is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial
-------   Condition and Results of Operations

        For Illinova the information under the caption "Management's  Discussion
and Analysis" on pages a-2 through a-9 of the 1997 Annual Report to Shareholders
in the  appendix to the  Illinova  Proxy  Statement  is  incorporated  herein by
reference.

        For IP the information  under the caption  "Management's  Discussion and
Analysis" on pages a-2 through a-9 of the 1997 Annual Report to  Shareholders in
the  appendix  to  the  IP  Information  Statement  is  incorporated  herein  by
reference.

        In March  1995,  the ICC  approved a program  whereby IP will  reacquire
shares  of its  common  stock  from  Illinova,  from  time to  time,  at  prices
determined to be equivalent to current market value.  The reacquired  stock will
be retained as treasury  stock or  canceled.  The ICC did not set a limit on the
number of shares of common  stock  that can be  repurchased,  subject to meeting
certain financial tests. Authorization for this program expires October 3, 1998.
The repurchase program may be extended subject to ICC approval.  During 1997, IP
repurchased 6,017,748 shares for a total of $121.5 million,  averaging about $20
per share.

        For  information  regarding the  redemption of IP preferred  stock,  see
"Note  10 -  Preferred  Stock  of  Subsidiary"  in the  "Notes  to  Consolidated
Financial  Statements" on page a-27 in the 1997 Annual Report to Shareholders in
the appendix to the Illinova  Proxy  Statement or "Note 9 - Preferred  Stock" in
the "Notes to Consolidated Financial Statements" on page a-27 in the 1997 Annual
Report to Shareholders in the appendix to the IP Information Statement.

        On February 26, 1998, IP issued a redemption  notice for all outstanding
bonds of its 6.00%  Pollution  Control  First  Mortgage  Bonds  due 2007  ($18.7
million) and its 8.30%  Pollution  Control First  Mortgage Bonds due 2017 ($33.8
million).  The effective call date for both series is April 1, 1998. On March 6,
1998, IP issued $18.7 million of 5.40%  Pollution  Control First  Mortgage Bonds
due 2028 and $33.8 million of 5.40%  Pollution  Control First Mortgage Bonds due
2028.


<PAGE>


Item 8. Financial Statements and Supplementary Data
-------

         For Illinova the consolidated financial statements and related notes on
pages a-11 through a-31 and Report of  Independent  Accountants  on page a-10 of
the 1997 Annual  Report to  Shareholders  in the appendix to the Illinova  Proxy
Statement  are  incorporated  herein by  reference.  With the  exception  of the
aforementioned  information and the information incorporated in Items 1, 3, 5, 6
and 7, the 1997 Annual  Report to  Shareholders  in the appendix to the Illinova
Proxy  Statement  is not to be deemed  filed as part of this  Form  10-K  Annual
Report.

         For IP the consolidated financial statements and related notes on pages
a-11 through a-31 and Report of Independent Accountants on page a-10 of the 1997
Annual Report to  Shareholders  in the appendix to the IP Information  Statement
are incorporated  herein by reference.  With the exception of the aforementioned
information and the information incorporated in Items 1, 3, 5, 6 and 7, the 1997
Annual Report to Shareholders in the appendix to the IP Information Statement is
not to be deemed filed as part of this form 10-K Annual Report.

Item 9.   Changes in and Disagreements With Accountants on
-------   Accounting and Financial Disclosure

None.

<PAGE>


                                    PART III
-------------------------------------------------------------------------------

Item 10.   Directors and Executive Officers of the Registrants
--------

        For Illinova the  information  under the caption "Board of Directors" on
pages 3 through 7 of Illinova's  Proxy  Statement for its 1998 Annual Meeting of
Stockholders is incorporated  herein by reference.  The information  relating to
Illinova's  executive  officers is set forth in Part I of this Annual  Report on
Form 10-K.

        For IP the information under the caption "Board of Directors" on pages 4
through  7 of  IP's  Information  Statement  for  its  1998  Annual  Meeting  of
Stockholders is incorporated  herein by reference.  The information  relating to
Illinois  Power  Company's  executive  officers  is set  forth in Part I of this
Annual Report on Form 10-K.

Item 11. Executive Compensation
--------

         For Illinova the information under the caption "Executive Compensation"
on pages 8 through 12 of Illinova's  Proxy Statement for its 1998 Annual Meeting
of Stockholders is incorporated herein by reference.

         For IP the information  under the caption  "Executive  Compensation" on
pages 8 through 13 of IP's Information  Statement for its 1998 Annual Meeting of
Stockholders is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management
--------

         For Illinova the information under the caption  "Security  Ownership of
Management  and  Certain  Beneficial  Owners"  on  page  7 and  the  information
regarding  securities  owned by certain officers and directors under the caption
"Board of Directors" on pages 3 through 7 of Illinova's  Proxy Statement for its
1998 Annual Meeting of Stockholders is incorporated herein by reference.

         For IP  the  information  under  the  caption  "Security  Ownership  of
Management  and  Certain  Beneficial  Owners"  on  page  7 and  the  information
regarding  securities  owned by certain officers and directors under the caption
"Board of Directors" on pages 4 through 7 of IP's Information  Statement for its
1998 Annual Meeting of Stockholders is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions
--------

         None.


<PAGE>


                                     PART IV
------------------------------------------------------------------------

Item 14.    Exhibits, Financial Statement Schedules, and Reports on
--------    Form 8-K

     (a)    Documents filed as part of this report.
            (1a)   Financial Statements:
                                                             Page in 1997
                                                             Annual Report
                                                            to Shareholders
                                                            in the appendix
                                                            to the Illinova
                                                           Proxy Statement*
                                                           ----------------

               Report of Independent Accountants                     a-10
               Consolidated Statements of Income for the
                  three years ended December 31, 1997                a-11
               Consolidated Balance Sheets at
                  December 31, 1997 and 1996                         a-12
               Consolidated Statements of Cash Flows for
                  the three years ended December 31, 1997            a-13
               Consolidated Statements of Retained
                  Earnings for the three years
                  ended December 31, 1997                            a-13
                Notes to Consolidated Financial Statements    a-14 - a-31

     *    Incorporated  by reference from the indicated pages of the 1997 Annual
          Report  to   Shareholders  in  the  appendix  to  the  Illinova  Proxy
          Statement.

            (1b)   Financial Statements:
                                                             Page in 1997
                                                             Annual Report
                                                            to Shareholders
                                                            in the appendix
                                                               to the IP
                                                              Information
                                                               Statement**
                                                              ---------------

               Report of Independent Accountants                     a-10
               Consolidated Statements of Income for the
                 three years ended December 31, 1997                 a-11
               Consolidated Balance Sheets at
                 December 31, 1997 and 1996                          a-12
               Consolidated Statements of Cash Flows for 
                 the three years ended December 31, 1997             a-13
               Consolidated Statements of Retained
                 Earnings for the three years
                 ended December 31, 1997                             a-13
               Notes to Consolidated Financial Statements     a-14 - a-31

     **   Incorporated  by reference from the indicated pages of the 1997 Annual
          Report to Shareholders in the appendix to the IP Information Statement



<PAGE>



Item 14.        Exhibits, Financial Statement Schedules, and Reports on
--------        Form 8-K (Continued)

                (2)    Financial Statement Schedules:

         All  Financial  Statement  Schedules  are omitted  because they are not
applicable or the required  information is shown in the financial  statements or
notes thereto.

                (3)    Exhibits

                The exhibits filed with this Form 10-K are listed in the Exhibit
                Index located  elsewhere  herein.  All management  contracts and
                compensatory  plans or  arrangements  set forth in such list are
                marked with a ~.

        (b) Reports on Form 8-K since September 30, 1997:

                  Report filed on Form 8-K on November 21, 1997
                        Other Events:  IP releases results of independent
                                       assessment of the Clinton Power Station.

                  Report filed on Form 8-K on January 8, 1998
                        Other Events:  IP selects PECO Nuclear to manage
                                       Clinton Power Station.  Impacts
                                       of Illinois  House Bill 362 and
                                       returning  Clinton to operation
                                       will result in a fourth quarter
                                       1997  charge  of  $260  million
                                       (net of income taxes).

                  Report filed on Form 8-K on January 21, 1998
                        Other Events:  The Nuclear Regulatory Commission
                                       places IP's Clinton Power Station on 
                                       its Watch List.

                  Report filed on Form 8-K on January 21, 1998
                        Other Events:  Illinova offers Medium-Term Notes under 
                                       its shelf Registration Statement on 
                                       Form S-3.

                           Financial 
                           Statements, 
                           Pro Forma 
                           Financial
                           Information 
                           and 
                           Exhibits:   Exhibits

                  Report filed on Form 8-K on February 13, 1998
                        Other Events:  Illinova releases 1997 earnings and 
                                       discloses  that it will  not  take  a
                                       previously announced  $40  million charge
                                       (net of  income  taxes) in 1997 for
                                       returning Clinton Power Station to
                                       operation.







                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                          ILLINOIS POWER COMPANY
                                                                    (REGISTRANT)

                                                               By Larry D. Haab 
                                              Larry D. Haab, Chairman, President
                                                     and Chief Executive Officer

                                                           Date: March 11, 1998 

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities on the dates indicated.

 Signature                                 Title                          Date

   Larry D. Haab                        Chairman, President, Chief
   Larry D. Haab                        Executive Officer and Director
   (Principal Executive Officer)

   Larry F. Altenbaumer                 Senior Vice President and
   Larry F. Altenbaumer                 Chief Financial Officer
   (Principal Financial Officer)

   Cynthia G. Steward                   Controller
   Cynthia G. Steward
   (Principal Accounting Officer)

   J. Joe Adorjan                
   J. Joe Adorjan

   C. Steven McMillan            
   C. Steven McMillan

   Robert M. Powers              
   Robert M. Powers

   Sheli Z. Rosenberg            
   Sheli Z. Rosenberg                  Director                   March 11, 1998

   Walter D. Scott               
   Walter D. Scott

   Ronald L. Thompson            
   Ronald L. Thompson

   Walter M. Vannoy              
   Walter M. Vannoy

   Marilou von Ferstel           
   Marilou von Ferstel

   John D. Zeglis                
   John D. Zeglis

 
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                              ILLINOVA CORPORATION
                                              (REGISTRANT)

                                              By       Larry D. Haab            
                                              Larry D. Haab, Chairman, President
                                              and Chief Executive Officer

                                              Date:      March 11, 1998         

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities on the dates indicated.

Signature                          Title                                 Date

Larry D. Haab                      Chairman, President, Chief
Larry D. Haab                      Executive Officer and Director
(Principal Executive Officer)

Larry F. Altenbaumer               Chief Financial Officer,
Larry F. Altenbaumer               Treasurer and Controller
(Principal Financial
and Accounting Officer)

J. Joe Adorjan
J. Joe Adorjan

C. Steven McMillan
C. Steven McMillan

Robert M. Powers
Robert M. Powers

Sheli Z. Rosenberg
Sheli Z. Rosenberg

Walter D. Scott
Walter D. Scott                     Director                      March 11, 1998

Joe J. Stewart
Joe J. Stewart

Ronald L. Thompson
Ronald L. Thompson

Walter M. Vannoy
Walter M. Vannoy

Marilou von Ferstel
Marilou von Ferstel

John D. Zeglis
John D. Zeglis






                                     Exhibit Index
Exhibit                               Description


(3)(i) Articles of Incorporation

Illinova Corporation

     (a)(1) Articles of Amendment to the Articles of  Incorporation  of Illinova
          Corporation,  filed as of October 31,  1994.  Filed as Exhibit 3(a) to
          the Quarterly Report on Form 10-Q under the Securities Exchange Act of
          1934 for the quarter ended September 30, 1994 (File No. 1-11327). *

     (a)(2) Statement of Correction to the Articles of Incorporation of Illinova
          Corporation,  filed as of October 31,  1994.  Filed as Exhibit 3(b) to
          the Quarterly Report on Form 10-Q under the Securities Exchange Act of
          1934 for the quarter ended September 30, 1994 (File No. 1-11327). *

Illinois Power Company

     (b)(1) Amended and Restated  Articles of  Incorporation  of Illinois  Power
          Company, dated September 7, 1994. Filed as Exhibit 3(a) to the Current
          Report on Form 8-K dated September 7, 1994 (File No. 1-3004). *

(3)(ii) By-Laws

     (a)  By-laws of Illinova  Corporation,  as amended December 14, 1994. Filed
          as  Exhibit  3(b)(2)  to the  Annual  Report  on Form  10-K  under the
          Securities  Exchange Act of 1934 for the year ended  December 31, 1994
          (File No. 1-11327). *

     (b)  By-laws of Illinois Power Company, as amended December 14, 1994. Filed
          as  Exhibit  3(b)(1)  to the  Annual  Report  on Form  10-K  under the
          Securities  Exchange Act of 1934 for the year ended  December 31, 1994
          (File No. 1-3004). *

(4) Instruments Defining Rights of Security Holders,
    Including Indentures

Illinova Corporation

     (a)(1) See (4)(b) below for  instruments  defining the rights of holders of
          long-term debt of Illinois Power Company.

     (a)(2) Indenture dated February 1, 1997,  between Illinova  Corporation and
          The First  National  Bank of  Chicago,  as  trustee.  Filed as Exhibit
          (4)(a)(2)  to the  Annual  Report  on Form 10-K  under the  Securities
          Exchange Act of 1934 for the year ended  December 31, 1996.  (File No.
          1-11327) *


<PAGE>


     (a)(3)  Distribution  Agreement  dated  January  16,  1998,  and  Officers'
          Certificate  and Issuer Order of Illinova  Corporation,  dated January
          16,  1998  (with  forms of Fixed  Rate  Note and  Floating  Rate  Note
          attached),  delivered  pursuant to the terms of the Indenture dated as
          of  February  1,  1997,  between  Illinova  Corporation  and The First
          National  Bank of  Chicago.  Filed as Exhibit  (1) and (4) of Form 8-K
          under the  Securities  Exchange  Act of 1934 dated  January 21,  1998.
          (File No. 1-11327) *

Illinois Power Company

     (b)(1) Mortgage and Deed of Trust dated November 1, 1943.  Filed as Exhibit
          2(b) Registration No. 2-14066. *

     (b)(2) Supplemental  Indenture  dated May 1, 1974.  Filed as Exhibit  2(v)
          Registration No. 2-51674. *

     (b)(3)  Supplemental  Indenture  dated May 1, 1977.  Filed as Exhibit  2(w)
          Registration No. 2-59465. *

     (b)(4) Supplemental Indenture dated July 1, 1979. Filed as Exhibit 2 to the
          Quarterly  Report on Form 10-Q under the  Securities  Exchange  Act of
          1934 for the quarter ended June 30, 1979. *

     (b)(5) Supplemental Indenture dated March 1, 1985. Filed as exhibit 4(a) to
          the Quarterly Report on Form 10-Q under the Securities Exchange Act of
          1934 for the quarter ended March 31, 1985 (File No. 1-3004). *

     (b)(6) Supplemental Indenture dated July 1, 1987, providing for $33,755,000
          principal  amount of 8.30% First  Mortgage  Bonds,  Pollution  Control
          Series I, due April 1,  2017.  Filed as  Exhibit  4(ll) to the  Annual
          Report on Form 10-K under the Securities  Exchange Act of 1934 for the
          year ended December 31, 1987 (File No. 1-3004). *

     (b)(7)  Supplemental  Indenture  dated  December  13, 1989,  providing  for
          $300,000,000 principal amount of Medium-Term Notes, Series A. Filed as
          Exhibit 4(nn) to the Annual  Report on Form 10-K under the  Securities
          Exchange  Act of 1934 for the year ended  December  31, 1989 (File No.
          1-3004). *

     (b)(8) Supplemental Indenture dated July 1, 1991, providing for $84,710,000
          principal  amount of 7 3/8%  First  Mortgage  Bonds due July 1,  2021.
          Filed as  Exhibit  4(mm) to the  Annual  Report on Form 10-K under the
          Securities  Exchange Act of 1934 for the year ended  December 31, 1991
          (File No. 1-3004). *

     (b)(9)  Supplemental  Indenture No. 1 dated June 1, 1992.  Filed as Exhibit
          4(nn) to the Quarterly  Report on Form 10-Q for the quarter ended June
          30, 1992 (File No. 1-3004). *


<PAGE>



     (b)(10) Supplemental  Indenture No. 2 dated June 1, 1992.  Filed as Exhibit
          4(oo) to the Quarterly  Report on Form 10-Q for the quarter ended June
          30, 1992 (File No. 1-3004). *

     (b)(11) Supplemental  Indenture No. 1 dated July 1, 1992.  Filed as Exhibit
          4(pp) to the Quarterly  Report on Form 10-Q for the quarter ended June
          30, 1992 (File No. 1-3004). *

     (b)(12) Supplemental  Indenture No. 2 dated July 1, 1992.  Filed as Exhibit
          4(qq) to the Quarterly  Report on Form 10-Q for the quarter ended June
          30, 1992 (File No. 1-3004). *

     (b)(13)  Supplemental  Indenture  dated  September 1, 1992,  providing  for
          $72,000,000  principal  amount  of 6 1/2%  First  Mortgage  Bonds  due
          September 1, 1999.  Filed as Exhibit 4(rr) to the Quarterly  Report on
          Form 10-Q for the quarter ended  September 30, 1992 (File No. 1-3004).
          *

     (b)(14) General  Mortgage  Indenture and Deed of Trust dated as of November
          1,  1992.  Filed as Exhibit  4(cc) to the  Annual  Report on Form 10-K
          under the Securities  Exchange Act of 1934 for the year ended December
          31, 1992 (File No. 1-3004). *

     (b)(15) Supplemental  Indenture  dated  February 15, 1993, to Mortgage and
          Deed of Trust dated  November 1, 1943.  Filed as Exhibit  4(dd) to the
          Annual Report on Form 10-K under the  Securities  Exchange Act of 1934
          for the year ended December 31, 1992 (File No. 1-3004). *

     (b)(16) Supplemental Indenture dated February 15, 1993, to General Mortgage
          Indenture  and Deed of Trust dated as of  November  1, 1992.  Filed as
          Exhibit 4(ee) to the Annual  Report on Form 10-K under the  Securities
          Exchange  Act of 1934 for the year ended  December  31, 1992 (File No.
          1-3004). *

     (b)(17) Supplemental  Indenture No. 1 dated March 15, 1993, to Mortgage and
          Deed of Trust dated  November 1, 1943.  Filed as Exhibit  4(ff) to the
          Annual Report on Form 10-K under the  Securities  Exchange Act of 1934
          for the year ended December 31, 1992 (File No. 1-3004). *

     (b)(18)  Supplemental  Indenture  No. 1 dated  March 15,  1993,  to General
          Mortgage  Indenture  and Deed of Trust  dated as of  November 1, 1992.
          Filed as  Exhibit  4(gg) to the  Annual  Report on Form 10-K under the
          Securities  Exchange Act of 1934 for the year ended  December 31, 1992
          (File No. 1-3004). *

     (b)(19) Supplemental  Indenture No. 2 dated March 15, 1993, to Mortgage and
          Deed of Trust dated  November 1, 1943.  Filed as Exhibit  4(hh) to the
          Annual Report on Form 10-K under the  Securities  Exchange Act of 1934
          for the year ended December 31, 1992 (File No. 1-3004). *

     (b)(20)  Supplemental  Indenture  No. 2 dated  March 15,  1993,  to General
          Mortgage  Indenture  and Deed of Trust  dated as of  November 1, 1992.
          Filed as  Exhibit  4(ii) to the  Annual  Report on Form 10-K under the
          Securities  Exchange Act of 1934 for the year ended  December 31, 1992
          (File No. 1-3004). *

     (b)(21) Supplemental Indenture dated July 15, 1993, to Mortgage and Deed of
          Trust dated November 1, 1943.  Filed as Exhibit 4(jj) to the Quarterly
          Report on Form 10-Q for the  quarter  ended  June 30,  1993  (File No.
          1-3004). *

     (b)(22)  Supplemental  Indenture  dated July 15, 1993, to General  Mortgage
          Indenture  and Deed of Trust dated as of  November  1, 1992.  Filed as
          Exhibit  4(kk)to  the  Quarterly  Report on Form 10-Q for the  quarter
          ended June 30, 1993 (File No. 1-3004). *

     (b)(23)  Supplemental  Indenture dated August 1, 1993, to Mortgage and Deed
          of  Trust  dated  November  1,  1943.  Filed as  Exhibit  4(ll) to the
          Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  1993
          (File No. 1-3004). *

     (b)(24) Supplemental  Indenture  dated August 1, 1993, to General  Mortgage
          Indenture  and Deed of Trust dated as of  November  1, 1992.  Filed as
          Exhibit  4(mm) to the  Quarterly  Report on Form 10-Q for the  quarter
          ended June 30, 1993 (File No. 1-3004). *

     (b)(25) Supplemental Indenture dated October 15, 1993, to Mortgage and Deed
          of  Trust  dated  November  1,  1943.  Filed as  Exhibit  4(nn) to the
          Quarterly Report on Form 10-Q for the quarter ended September 30, 1993
          (File No. 1-3004). *

     (b)(26) Supplemental  Indenture dated October 15, 1993, to General Mortgage
          Indenture  and Deed of Trust dated as of  November  1, 1992.  Filed as
          Exhibit  4(oo) to the  Quarterly  Report on Form 10-Q for the  quarter
          ended September 30, 1993 (File No. 1-3004). *

     (b)(27) Supplemental Indenture dated November 1, 1993, to Mortgage and Deed
          of  Trust  dated  November  1,  1943.  Filed as  Exhibit  4(pp) to the
          Quarterly Report on Form 10-Q for the quarter ended September 30, 1993
          (File No. 1-3004). *

     (b)(28) Supplemental  Indenture dated November 1, 1993, to General Mortgage
          Indenture  and Deed of Trust dated as of  November  1, 1992.  Filed as
          Exhibit  4(qq) to the  Quarterly  Report on Form 10-Q for the  quarter
          ended September 30, 1993 (File No. 1-3004). *

     (b)(29) Supplemental Indenture dated February 1, 1994, to Mortgage and Deed
          of Trust dated November 1, 1943.  Filed as Exhibit 4(hh) to the Annual
          Report on Form 10-K under the Securities  Exchange Act of 1934 for the
          year ended December 31, 1993 (File No. 1-3004). *
<PAGE>

     (b)(30) Indenture dated October 1, 1994 between  Illinois Power Company and
          the First  National  Bank of  Chicago.  Filed as  Exhibit  4(a) to the
          Quarterly Report on Form 10-Q for the quarter ended September 30, 1994
          (File No. 1-3004). *

     (b)(31)Supplemental  Indenture dated October 1, 1994, to Indenture dated as
          of October 1, 1994.  Filed as Exhibit 4(b) to the Quarterly  Report on
          Form 10-Q for the quarter ended September 30, 1994 (File No.1-3004). *

     (b)(32) Indenture dated January 1, 1996 between  Illinois Power Company and
          Wilmington  Trust  Company.  Filed as Exhibit  4(b)(36)  to the Annual
          Report on Form 10-K under the Securities  Exchange Act of 1934 for the
          year ended December 31, 1995 (File No. 1-3004). *

     (b)(33)  First  Supplemental  Indenture  dated  January  1,  1996,  between
          Illinois Power Company and Wilmington Trust Company.  Filed as Exhibit
          4(b)(37)  to the  Annual  Report  on Form 10-K  under  the  Securities
          Exchange  Act of 1934 for the year ended  December  31, 1995 (File No.
          1-3004). *

     (b)  (34) Supplemental  Indenture dated April 1, 1997, to Mortgage and Deed
          of Trust dated November 1, 1943 Filed as Exhibit 4(a) to the Quarterly
          Report on Form 10-Q for the quarter  ended March 31,  1997.  (File No.
          1-3004) *

     (b)  (35)  Supplemental  Indenture dated April 1, 1997 to General  Mortgage
          Indenture and Deed of Trust dated  November 1, 1992.  Filed as Exhibit
          4(b) to the Quarterly  Report on Form 10-Q for the quarter ended March
          31, 1997. (File No. 1-3004) *

     (b)  (36)  Supplemental  Indenture  dated  December 1, 1997 to Mortgage and
          Deed of Trust dated November 1, 1943.

(10) Material Contracts

Illinova Corporation

     (a)(1)  Illinova  Corporation   Deferred   Compensation  Plan  for  Certain
          Directors,  as amended  April 10, 1991.  Filed as Exhibit 10(b) to the
          Annual Report on Form 10-K under the  Securities  Exchange Act of 1934
          for the year ended December 31, 1991 (File No. 1-3004).~ *

     (a)(2) Illinova  Corporation  Director Emeritus Plan for Outside Directors.
          Filed as  Exhibit  10(e) to the  Annual  Report on Form 10-K under the
          Securities  Exchange Act of 1934 for the year ended  December 31, 1989
          (File No. 1-3004).~ *


<PAGE>



     (a)(3) Illinova Corporation Stock Plan for Outside Directors as amended and
          restated  by the Board of  Directors  on April 9, 1992 and as  further
          amended April 14, 1993. Filed as Exhibit 10(h) to the Annual Report on
          Form 10-K under the Securities Exchange Act of 1934 for the year ended
          December 31, 1993 (File No. 1-3004).~ *

     (a)(4) Illinova  Corporation  Retirement  Plan for  Outside  Directors,  as
          amended  through  December  11,  1991.  Filed as Exhibit  10(j) to the
          Annual Report on Form 10-K under the  Securities  Exchange Act of 1934
          for the year ended December 31, 1991 (File No. 1-3004).~ *

     (a)(5) Illinova  Corporation 1992 Long-Term  Incentive  Compensation  Plan.
          Filed as Exhibit  10(k) to the  Quarterly  Report on Form 10-Q for the
          quarter ended March 31, 1992 (File No. 1-3004).~ *

     (a)(6) Illinova Corporation  Comprehensive  Deferred Stock Plan for Outside
          Directors,  as approved by the Board of Directors on February 7, 1996.
          Filed as Exhibit 10 (a)(6) to the Annual Report on Form 10-K under the
          Securities  Exchange Act of 1934 for the year ended  December 31, 1995
          (File No. 1-11327).~ *

     (a)(7) Form of  Employee  Retention  Agreement  in place  between  Illinova
          Corporation and its elected officers, Illinois Power Company's elected
          officers, and the Presidents of Illinova  Corporation's  subsidiaries.
          Filed as  Exhibit  10(g) to the  Annual  Report on Form 10-K under the
          Securities  Exchange Act of 1934 for the year ended  December 31, 1989
          (File no. 1-3004).~ *

     (a)(8) Illinova Corporation Leadership Incentive Program, effective January
          1, 1996.~

     (a)(9) Illinova  Corporation  Retirement  Plan for  Outside  Directors,  as
          amended by  resolutions  adopted by the Board of Directors on February
          7, 1996.~

     (a)(10) Illinova Corporation  Employee Retention  Agreement,  as amended by
          resolutions adopted by the Board of Directors on February 7, 1996.~

     (a)(11)  Illinova  Corporation  Deferred   Compensation  Plan  for  Certain
          Directors as amended October 9, 1996, effective January 1, 1997.~

     (a)(12) Illinova Corporation  Employee Retention  Agreement,  as amended by
          resolutions adopted by the Board of Directors on June 10-11, 1997.~

     (a)(13)  Illinova  Corporation  Deferred   Compensation  Plan  for  Certain
          Directors, as amended by resolutions adopted by the Board of Directors
          on June 10-11, 1997.~



<PAGE>



Illinois Power Company

     (b)(1) Group Insurance Benefits for Managerial  Employees of Illinois Power
          Company as amended  January  1,  1983.  Filed as Exhibit  10(a) to the
          Annual Report on Form 10-K under the  Securities  Exchange Act of 1934
          for the year ended December 31, 1983 (File No. 1-3004).~ *

     (b)(2) Illinois  Power Company  Incentive  Savings Trust and Illinois Power
          Company  Incentive  Savings  Plan and  Amendment  I thereto.  Filed as
          Exhibit 10(d) to the Annual  Report on Form 10-K under the  Securities
          Exchange  Act of 1934 for the year ended  December  31, 1984 (File No.
          1-3004).~ *

     (b)(3) Illinois Power  Company's  Executive  Incentive  Compensation  Plan.
          Filed as  Exhibit  10(f) to the  Annual  Report on Form 10-K under the
          Securities  Exchange Act of 1934 for the year ended  December 31, 1989
          (File No. 1-3004).~ *

     (b)(4) Illinois  Power  Company  Incentive  Savings  Plan,  as amended  and
          restated  effective  January  1, 1991.  Filed as Exhibit  10(h) to the
          Annual Report on Form 10-K under the  Securities  Exchange Act of 1934
          for the year ended December 31, 1990 (File No. 1-3004).~ *

     (b)(5) Illinois Power Company Executive  Deferred  Compensation Plan. Filed
          as  Exhibit  10(l)  to the  Annual  Report  on  Form  10-K  under  the
          Securities  Exchange Act of 1934 for the year ended December 31, 1993.
          (File No. 1-3004)~ *

     (b)(6) Illinois Power Company Retirement Income Plan for salaried employees
          as amended and restated  effective January 1, 1989, as further amended
          through  January 1, 1994.  Filed as Exhibit 10(m) to the Annual Report
          on Form 10-K under the  Securities  Exchange  Act of 1934 for the year
          ended December 31, 1994 (File No. 1-3004).~ *

     (b)(7) Illinois Power Company  Retirement Income Plan for employees covered
          under a  collective  bargaining  agreement  as  amended  and  restated
          effective as of January 1, 1994.  Filed as Exhibit  10(n)to the Annual
          Report on Form 10-K under the Securities  Exchange Act of 1934 for the
          year ended December 31, 1994 (File No. 1-3004).~ *

     (b)(8)  Illinois  Power  Company  Incentive  Savings  Plan as  amended  and
          restated  effective  January  1, 1991 and as further  amended  through
          amendments  adopted  December 28, 1994.  Filed as Exhibit  10(o)to the
          Annual Report on Form 10-K under the  Securities  Exchange Act of 1934
          for the year ended December 31, 1994 (File No. 1-3004).~ *


<PAGE>


     (b)(10) Illinois Power Company Incentive Savings Plan for employees covered
          under a  collective  bargaining  agreement  as  amended  and  restated
          effective  January 1, 1991 and as further amended  through  amendments
          adopted December 28, 1994. Filed as Exhibit 10(p) to the Annual Report
          on Form 10-K under the  Securities  Exchange  Act of 1934 for the year
          ended December 31, 1994 (File No. 1-3004).~ *

     (b)(11) Illinois Power Company Executive  Incentive  Compensation  Plan, as
          amended, effective January 1, 1997. ~

     (b)(12) Illinois  Power Company  Executive  Deferred  Compensation  Plan as
          amended  by  resolutions  adopted  by the Board of  Directors  on June
          10-11, 1997.~

     (b)(13) Illinois  Power  Company  Supplemental  Retirement  Income Plan for
          Salaried Employees of Illinois Power Company as amended by resolutions
          adopted by the Board of Directors on June 10-11, 1997.~

     (b)(14) Retirement  and  Consulting  Agreement  entered into as of June 30,
          1997 between Illinois Power Company and Wilfred Connell.~

(12) Statement Re Computation of Ratios

     (a)  Computation  of  ratio  of  earnings  to fixed  charges  for  Illinova
          Corporation.

     (b)  Computation  of ratio of earnings to fixed charges for Illinois  Power
          Company.

(13) Annual Reports to Shareholders

     (a)  Illinova  Corporation  Proxy  Statement  and  1997  Annual  Report  to
          Shareholders.

     (b)  Illinois Power Company Information Statement and 1997 Annual Report to
          Shareholders.

(21) Subsidiaries of Registrants

     (a)  Subsidiaries of Illinova Corporation and Illinois Power Company.

(23) Consents of Experts

     Consent of Independent Accountants for Illinova Corporation.

(27) Financial Data Schedules

     (a)  Illinova Corporation

     (b)  Illinois Power Company


*       Incorporated herein by reference.

~        Management contract and compensatory plans or arrangements.