SECURITIES AND EXCHANGE COMMISSION
                              
                Washington, D. C.  20549-1004
                              
                              
                          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, 1996

                             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  62525-1805
                    (217) 424-6600
                                         
                                         
                                         
1-3004              ILLINOIS POWER COMPANY               37-0344645
                    (an Illinois Corporation)
                    500 S. 27th Street
                    Decatur, IL  62525-1805
                    (217) 424-6600


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

Preferred stock, cumulative,
no par value
Adjustable Rate Series A

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 5/8% 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]


   The aggregate market value of the voting common stock
held by non-affiliates of Illinova Corporation at February
28, 1997 was approximately $1.9 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, 1997, was approximately $75
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,  1997
was 75,681,937.

    The  number  of shares of Illinois Power Company  Common
Stock,  without par value, outstanding on February 28,  1997
was   72,233,040,  all  of  which  is  owned   by   Illinova
Corporation.

             Documents Incorporated by Reference

1. Portions of the 1996 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 1996 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 1996 Proxy Statement.
                   (Part III of Form 10-K)
                              
4. Portions of the Illinois Power 1996 Information
Statement.
                   (Part III of Form 10-K)


                      ILLINOVA CORPORATION
                                
                     ILLINOIS POWER COMPANY
                                
                            FORM 10-K
                                
           For the Fiscal Year Ended December 31, 1996

     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
                  Competition                                   7
                  Customer and Revenue Data                     9
                Electric Business                               9
                  Overview                                      9
                  Soyland                                      10
                  Fuel Supply                                  10
                  Construction Program                         13
                  Clinton Power Station                        13
                    General                                    13
                    Decommissioning Costs                      14
                  Accounting Matters                           14
                  Dividends                                    15
                Gas Business                                   15
                  Gas Supply                                   15
                Environmental Matters                          15
                  Air Quality                                  15
                  Clean Air Act                                16
                  Manufactured-Gas Plant(MGP) Sites            16
                  Water Quality                                16
                  Other Issues                                 17
                  Electric and Magnetic Fields                 17
                  Environmental Expenditures                   18
                Research and Development                       18
                Regulation                                     18
                Executive Officers of Illinova Corporation     19
                Executive Officers of Illinois Power Company   19
                Operating Statistics                           20
     Item 2.    Properties                                     20
     Item 3.    Legal Proceedings                              21
     Item 4.    Submission of Matters to a Vote of
                Security Holders                               21

Part II

     Item 5.    Market for Registrants' Common Equity
                and Related Stockholder Matters                22
     Item 6.    Selected Financial Data                        22
     Item 7.    Management's Discussion and Analysis
                of Financial Condition and
                Results of Operations                          22
     Item 8.    Financial Statements and Supplementary
                Data                                           22



                  TABLE OF CONTENTS (Continued)

     Item 9.    Changes in and Disagreements With
                Accountants on Accounting and
                Financial Disclosure                           23

Part III

     Item 10.   Directors and Executive Officers of
                the Registrants                                24
     Item 11.   Executive Compensation                         24
     Item 12.   Security Ownership of Certain
                Beneficial Owners and Management               24
     Item 13.   Certain Relationships and Related
                Transactions                                   24

Part IV

     Item 14.   Exhibits, Financial Statement
                Schedules, and Reports on Form 8-K          25-26


Signatures                                                  27-28

Exhibit Index                                                  29
                      

                               PART I
-------------------------------------------------------------------------------

ITEM 1.   Business
-------


                             General
                             -------

     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 currently
serves as the parent holding company of four principal operating
subsidiaries:  IP, Illinova Generating Company (IGC), Illinova
Energy Partners, Inc. (IEPI), and Illinova Insurance Company
(IIC).  In May, 1996, the services group of Illinova Power
Marketing (IPMI) consolidated with Illinova Energy Services (IES)
and the non-regulated marketing activities of Illinova to form a
new venture known as IEPI.  On February 12, 1997, the Illinova
Board of Directors approved a merger of IEPI and IPMI.  In the
merger, IPMI will be the surviving corporation and will change
its name to IEPI.

     IP, the primary business of Illinova, is engaged in the
generation, transmission, distribution and sale of electric
energy and the distribution, transportation and sale of natural
gas in the State of Illinois.  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
1995, IP was a participant in the development of Energy Choice
2000, a basis for formal review of utility regulation in
Illinois.  From this framework, IP continued its efforts to
ensure a managed transition to direct access with the
introduction of a legislative proposal in November 1996.   For a
more detailed discussion of these developments, refer to the
"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 equal in market value to the
amount of the funds provided to Illinova during the quarter plus
the accrued interest for the quarter.  During 1996, IP provided
approximately $81 million in funds to Illinova.  IP also provides
funds to Illinova in the form of cash dividends payable on the
Common Stock of IP.  In 1996, approximately $85 million in such
dividends was declared and paid.  Since Illinova's inception in
1994, IP has provided approximately $135 million to Illinova.
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.
  
     IP's financial position and results of operations are
currently the principal factors affecting Illinova's consolidated
financial position and results of operations.

     IGC is Illinova's wholly-owned independent power subsidiary
that invests in energy-related projects throughout the world.
IGC is an equity partner with Tenaska, Inc. in 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, 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.

     IEPI is Illinova's wholly-owned subsidiary that engages in
the brokering and marketing of electric power and gas and the
development and sales of energy related services.  In May 1995,
IPMI obtained approval from the Federal Energy Regulatory
Commission (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, IPMI began buying and
selling wholesale electricity in the western United States.  IPMI
owns 50 percent of Tenaska Marketing Ventures (TMV).  IPMI and
TMV have formed Tenaska Marketing Canada to market natural gas in
Canada.  In May 1996, IPMI expanded operations to include the
midwestern United States.  In July 1996, IP received FERC
approval to sell electricity to IPMI without prior transaction
approval from FERC.

     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.

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 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.  The Illinois Commerce
Commission (ICC) has been supportive of IP's attempts to maintain
its customer base through approval of special contracts and
flexible pricing that help IP to compete with existing municipal
providers.

     Further competition may be introduced by state action or by
federal regulatory action.  While the Energy Policy Act precludes
the FERC from mandating retail wheeling, state regulators and
legislators could open utility franchise territories to full
competition at the retail level.  Legislative action at the state
level would be required for retail wheeling to occur in Illinois.
Retail wheeling involves the transport of electricity to end-use
residential, commercial or industrial customers.  Such a change
would be a significant departure from existing regulation in
which public utilities have an universal obligation to serve the
public in return for relatively protected service territories and
regulated pricing which is designed to allow a reasonable return
on prudent investment and recovery of operating costs.

     On November 21, 1996, IP and its partners in the Illinois
Coalition for Responsible Electricity Choice announced a
legislative proposal which would begin transformation of the
Illinois electric industry from a highly regulated monopoly to a
competitive, customer-choice environment.  The proposal, which
was introduced in the Illinois House of Representatives on
January 29, 1997, would allow for a managed transition to direct
access for all consumers by the year 2005.  The plan balances the
need to ensure the financial stability of current utility
providers with the timing of customer choice.  Other parties have
introduced plans that allow for full competition by as early as
1998.  On February 18, 1997, the Citizen's Utility Board (CUB)
outlined its regulatory reform proposal which would require
utilities to separate their generation assets, shop for the
cheapest available power in the wholesale market, and sell that
power to consumers, by January 1999.  In addition, CUB's plan
calls for direct access for all customers by April 2000.  On
March 11, 1997, a new restructuring bill was introduced in the
Illinois House. This bill, supported by a broad-based alliance
representing residential, commercial and industrial consumers,
would allow all customers served by investor-owned utilities to
have equal access to a competitive electric market by May 1,
1998.  The plan also calls for a 10 percent rate reduction in the
first year, with further reductions possible in the second and
third years.  Utilities needing additional revenues to ensure
financial viability and reliability would be able to participate
in a trust fund by charging a surcharge to all consumers on their
system.

     A Joint Committee on Electric Utility Regulatory Reform of
the Illinois General Assembly deliberated the issue of regulatory
reform for 18 months.  Their report, issued December 4, 1996,
stated that the Committee was unable to reach consensus on a
legislative proposal.  It is reasonable to assume that
significant change will be made to the state laws governing IP's
electric operations, but impossible at this time to predict what
these changes will be.

     If there is significant change in the laws governing
electric utility operations, IP may be required to discontinue
reporting under Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation"
(FAS 71).  According to disclosures made by utilities in states
that have enacted such legislation, the Securities and Exchange
Commission (SEC) is raising the issue of continued qualification
to report under FAS 71, even where the legislation provides for a
transition to full competition and for stranded cost recovery.
Reporting under FAS 71 allows companies whose service obligations
and prices are regulated, to maintain assets on their balance
sheets representing costs they reasonably expect to recover from
customers in the future, through inclusion of such costs in their
rates.  If IP ceased to qualify for reporting under FAS 71, it
could be required to write off its regulatory assets, and this
could have a material, adverse impact on IP and its operations.

     IP received approval from the ICC on March 13, 1996, and
from FERC on April 24, 1996, to conduct an open access experiment
beginning in 1996 and ending on December 31, 1999.  The
experiment allows certain industrial customers to purchase
electricity and related services from other sources.  On April
25, 1996, the first of the 21 eligible customers began buying a
portion  of their electricity from a supplier other than IP.
Currently, 16 customers are participating in the experiment.  The
experiment has demonstrated immediate advantages competition
brings to customers, such as lower prices and innovative service
offerings.  It has also provided evidence of challenges the
industry faces as it moves toward customer choice.  Challenges
include dispatching small amounts of electricity such as one or
two megawatt hours (MWHs), and the absence of requisite
technology to dispatch fractional MWHs.  In 1996, the experiment
cost IP approximately $3.2 million in lost revenue net of avoided
fuel cost and variable operating expenses.  This loss was
partially offset by selling the surplus energy and capacity on
the open market and by $.9 million in transmission service
charges.

     The issue of competition is one that raises both risks and
opportunities.  At this time, the ultimate effect of competition
on Illinova's consolidated financial position and results of
operations is uncertain.



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

     Approximately 79 percent and 21 percent of Illinova's and
its subsidiaries' operating revenues are derived from the sale of
electricity and the sale and transportation of natural gas,
respectively.  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 28, 1997, IP served 577,862 active electric customers
and 404,838 active gas customers.  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 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 of the 1996 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 1996 Annual
Report to Shareholders of Illinova Corporation and the 1996
Annual Report to Shareholders of Illinois Power Company,
reference will be made herein only to the 1996 Annual Report to
Shareholders of Illinova Corporation, and such reference will be
deemed to include a reference to the 1996 Annual Report of
Illinois Power Company.


                        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 for resale to one electric utility and to
the Illinois Municipal Electric Agency (IMEA) as agent for 11
municipalities.  IP also has a power coordination agreement with
Soyland Power Cooperative, Inc. (Soyland).  See the sub-caption
"Soyland" hereunder for additional information.  In 1996, IP
provided interchange power to 44 entities, including 27 power
marketers.

    IP's highest system peak hourly demand (native load) in 1996
was 3,444,651 kilowatts on July 18, 1996.  IP's record for peak
load is 3,666,738 kilowatts, set on July 13, 1995.

    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 Union Electric Company
(UE) and Central Illinois Public Service Company (CIPS), 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, CIPS and UE 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 5 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, EEI, Soyland and
the City of Springfield, Illinois.

     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 August 1996, IP transferred through a dividend its 20%
ownership of the capital stock of Electric Energy, Inc. (EEI) to
Illinova.  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
-------

     IP has entered into an agreement with Soyland which will,
subject to receipt of regulatory approvals, terminate the
IP/Soyland Clinton Ownership Participation Agreement (OPA) and
amend the IP/Soyland Power Coordination Agreement (PCA).  Under
terms of the agreement, IP will acquire Soyland's 13.2% ownership
share of Clinton with no capital outlay.  On March 13, 1997,
approval to transfer Soyland's license to IP was granted from the
Nuclear Regulatory Commission (NRC).  Soyland's nuclear
decommissioning trust also will be transferred to IP, which will
assume all of Soyland's ownership obligations, including those
related to decommissioning.

     As part of the agreement, IP will be responsible for
providing Soyland's capacity and energy needs for a period of at
least ten and potentially twenty years charging fixed fees
designed to compensate IP for Clinton costs currently recovered
from Soyland under the OPA.  This agreement, and the amended PCA,
are subject to approval by FERC, and petitions seeking such
approvals have been filed.

     For more information on the PCA, see "Note 6 - Facilities
Agreements" on page A-23 of the 1996 Annual Report to
Shareholders in the appendix to the Illinova Proxy Statement
which is incorporated herein by reference.

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

     Coal was used to generate approximately 76% of the
electricity produced by IP during 1996, with nuclear contributing
22% and other fuels accounting for 2%.  Based on current
forecasts, the percentages of generation attributable to nuclear
fuel is projected to increase to as much as 32% while projected
generation from coal will decline to about 68% during those years
in which there is not a scheduled refueling outage for the
Clinton Power Station (Clinton).

     IP's rate schedules contain provisions for passing along to
its electric customers increases or decreases in the cost of
fuels used in its generating stations.  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 of the 1996 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 short-term contracts with four suppliers
which last through 1997 and long-term contracts with two
suppliers which last through 1999 and 2010.  Negotiations are
under way to address the contracts expiring at the end of 1997.
Contracts renegotiated in 1993 and 1994 have provided 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.

     Spot purchases of coal in 1996 represented 2.3% 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, 1996 represented a 22-day
supply based on IP's average daily burn projections for 1997.

     IP continues to evaluate and obtain alternate fuel delivery
and unloading facilities for greater flexibility of fuel
supplies.  New rail unloading facilities at the Havana Station
(Havana) became operational in the spring of 1996.

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, 1996, the Fuel Company had an invest
ment in nuclear fuel of approximately $96 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, 1996, IP had no outstanding loans to the Fuel
Company.

     At December 31, 1996, IP's net investment in nuclear fuel
consisted of $42 million of Uranium 308.  This inventory
represents fuel used in connection with the sixth reload of
Clinton which began in October 1996.  At December 31, 1996, the
unamortized investment of the nuclear fuel assemblies in the
reactor was $55 million.

     IP has two long-term contracts for the supply of uranium
concentrates.  One contract is 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
prices.  The contract with Cameco is stated in terms of U. S.
Dollars.

     The second uranium contract is with U.S. Energy/Crested
Corporation.  Originally, it was for 1,179,240 pounds of uranium
concentrates with deliveries through 1998.  IP  purchased
approximately one half of the uranium concentrates supply under
this contract before it was terminated in September 1993.  In
October 1993, IP filed suit in U.S. District Court, Central
District of Illinois, Danville, seeking a declaration that IP's
termination of the U.S. Energy contract was permitted by the
terms of the contract as they relate to rights of termination in
the event of certain receivership proceedings.  On September 1,
1994, the Court granted defendants' motions for summary judgment
and ruled that the termination constituted a breach of contract.
On June 15, 1995, IP concluded a negotiated settlement with U.S.
Energy/Crested Corporation.  That settlement reduced the quantity
to be purchased and shortened the contract term by one year,
while increasing the price per pound.  The final delivery under
this settlement will be made in May 1997.

     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 Department of Energy (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.

     Legislation was passed in October 1992 to create a new
private government corporation, the United States Enrichment
Corporation (USEC), for enrichment services.  All of the DOE's
assets including all contracts, were transferred to the USEC as
of July 1993.
     
     A contract with General Electric Company provides fuel
fabrication requirements for the initial core and approximately
19 reloads, or through 2016.

     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, 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
MWH) of electricity generated and sold.  IP is recovering this
amount through rates charged to customers.

     On June 20, 1994, IP and 13 other utilities 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 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.

     A three-judge panel ruled in July 1996 that the DOE's
obligation to take spent fuel by the 1998 date specified in the
NWPA is binding.  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 several utilities and state utility commissions,
seeking further enforcement of DOE's obligation, and seeking
authority to make further Nuclear Waste Fund payments into
escrow.

     IP has on-site storage capacity that will accommodate its
spent fuel storage needs until the year 2004, based on current
operating levels.  If by that date the U.S. Government has not
complied with its statutory obligation to dispose of spent fuel,
and IP has continued to operate the plant at current levels, 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 10 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 application is expected to be submitted to the
NRC in 1997.  Continued participation in the partnership will
depend on the technological and economic viability of the
project.  Current technology allows safe, dry, on-site storage,
subject to licensing and local permitting requirements.
     
     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, 1996, IP has a remaining liability of $5.0
million representing future assessments.  IP is recovering these
costs, as amortized, through its fuel adjustment clause.

OIL and GAS - IP used natural gas and oil to generate 0.6% of the
electricity produced in 1996.  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 sub-caption "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-
18 of the 1996 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 Loans" on
pages A-22 and A-23 of the 1996 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 page A-
7 of the 1996 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 page A-
17 of the 1996 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-21 of the 1996 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 page A-
7 of the 1996 Annual Report to Shareholders in the appendix to
the Illinois Power Information Statement which is incorporated
herein by reference.

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

     General
     -------

     IP and Soyland share ownership of Clinton, with IP owning
86.8% and Soyland 13.2%.  On February 21, 1997, IP filed with
FERC for approval to transfer Soyland's ownership of Clinton to
IP.  IP has entered into an agreement with Soyland which will,
subject to receipt of regulatory approvals, terminate the
IP/Soyland Clinton Ownership Participation Agreement (OPA) and
amend the IP/Soyland PCA.  Under terms of the agreement, IP will
acquire Soyland's 13.2% ownership share of IP's Clinton Power
Station with no capital outlay.  On March 13, 1997, approval to
transfer Soyland's license to IP was granted from the NRC.
Soyland's nuclear decommissioning trust also will be transferred
to IP, which is assuming 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 page A-18 of the 1996 Annual Report to
Shareholders in the appendix to the Illinova Proxy Statement
which is incorporated herein by reference.

     On September 6, 1996, leakage at a recirculation pump seal
caused IP operations personnel to shut down Clinton.  IP decided
not to restart Clinton prior to the start of the scheduled
refueling outage on October 13, 1996.  During the current
refueling outage, Clinton has attempted to modify the first of
three divisions of its electrical power system.  Because of
deficiencies in the implementation of the new transformer design,
the decision was made to return to the old transformers until the
newer design is modified and fully tested.   This unanticipated
delay, along with necessary NRC approval of the action, will
delay start up of Clinton.  It is anticipated that Clinton will
return to service before the summer cooling season, when demand
is greatest.  For more information on the shutdown and results of
the NRC findings, see "Management's Discussion and Analysis -
Regulatory Matters" on page A-3 of the 1996 Annual Report to
Shareholders in the appendix to the Illinova Proxy Statement
which is incorporated herein by reference.

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

     IP is responsible for its ownership share of the costs of
decommissioning Clinton and for spent nuclear fuel disposal
costs.  IP is collecting future decommissioning costs through its
electric rates based on an ICC-approved formula that allows IP to
adjust rates annually for changes in decommissioning cost
estimates.  For more information on the decommissioning costs
related to the Clinton Power Station, see "Note 4 - Commitments
and Contingencies" on page A-19 of the 1996 Annual Report to
Shareholders in the appendix to the Illinova Proxy Statement
which is incorporated herein by reference.

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; IPMI, a wholly-owned subsidiary
that markets energy and energy-related services; IEPI, 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.

     IP's consolidated financial position and results of
operations are currently the principal factors affecting
Illinova's consolidated financial position and results of
operations.  All significant intercompany balances and
transactions have been eliminated from the consolidated financial
statements. All non-utility operating transactions are included
in the section titled Other Income and Deductions, "Miscellaneous-
net" in the 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.

     IP currently prepares its financial statements in accordance
with FAS 71.  Accordingly, IP records various regulatory assets
and liabilities to reflect the actions of regulators.  It is
reasonable to assume that significant changes will be made to
state laws governing IP's electric operations, but impossible to
predict what those changes will be.  Management believes that IP
currently meets the criteria for continued application of FAS 71
but will continue to evaluate significant changes in the
regulatory and competitive environment to assess IP's overall
compliance with such criteria.  These criteria include:  1)
whether rates set by regulators are designed to recover the
specific costs of providing regulated services and products to
customers and 2) whether regulators continue to establish rates
based on cost.  In the event that management determines that IP,
or significant portions of its business, no longer meet the
criteria for application of FAS 71, an extraordinary non-cash
charge to income would be recorded in order to remove the effects
of the actions of regulators from the consolidated financial
statements.  The discontinuation of application of FAS 71 would
likely have a material adverse effect on Illinova's and IP's
consolidated financial position and results of operations.

Dividends
---------

     On December 11, 1996, Illinova increased the quarterly
common stock dividend 11%, to $.31 per share from $.28 per share,
effective with the common stock dividend for the first quarter of
1997.


                            Gas Business
                          ------------

     IP supplies retail natural gas service to an estimated
aggregate population of 920,000 in 257 incorporated municipali
ties, 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 1996 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
10.2 million MMBtu of underground storage capacity and a total
deliverability on a peak day of 160,000 MMBtu.  Operation of un
derground 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 two active liquefied petroleum gas plants 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 1996 peak-day send out of 758,927 MMBtu
of natural gas on February 2, 1996.  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.


                      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 and permitting and 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.

     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 beginning in 1997.

     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 "Note 4 - Commitments and Contingencies"
on pages A-20 and A-21 of the 1996 Annual Report to Shareholders
in the appendix to the Illinova Proxy Statement which is
incorporated herein by reference.

Manufactured-Gas Plant (MGP) Sites
----------------------------------

     For information on MGP sites, see "Note 4 - Commitments and
Contingencies" on page A-21 of the 1996 Annual Report to
Shareholders in the appendix to the Illinova Proxy Statement
which is incorporated herein by reference.

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 "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 late 1997.  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 will expire in the fourth
quarter of 1997.  An application to renew the permit will be
submitted in the second quarter of 1997.  On May 2, 1996, the
Illinois Pollution Control Board granted IP's request for an
Adjusted Water Quality Standard for boron, which satisfies the
compliance requirement in the permit.  The adjusted standard will
be incorporated into the reissued permit.

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.

     Between June 1983 and January 1985, IP shipped various
materials containing PCBs to the Martha C. Rose Chemicals, Inc.
(Rose) facility in Holden, Missouri for proper treatment and
disposal.  Rose, pursuant to permits issued by USEPA, had
undertaken to dispose of PCB materials for IP and others, but
failed in part to do so.  As a result of such failure, PCB
materials were being stored at the facility.  In 1986, IP joined
with a number of other generators to clean up the facility.  The
Steering Committee, consisting of IP and 15 other entities, has
successfully implemented the Remedial Design Work Plan.  The
Steering Committee is required to monitor ground water at the
site from a minimum of five years to a maximum of ten years after
completion of the plan.  Based upon the first and second years of
ground water monitoring data, the Steering Committee has
petitioned the USEPA to amend the record of decision to negate
additional ground water monitoring.  This will allow the USEPA to
end the Committee's liability at the Rose site.  At the present
time, management does not believe its ratable share of potential
liability related to the cost of future activities at the Rose
site will have a material adverse effect on Illinova's or IP's
consolidated financial position or results of operations.

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

     For information on Electric and Magnetic Fields, see "Note 4
- Commitments and Contingencies" on page A-21 of the 1996 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 $45 million and $46 million in 1995 and 1996, respectively
(including the incremental costs of alternative fuels to meet
environmental requirements).  IP's capital expenditures
(including AFUDC) for environmental protection programs were
approximately $1 million in 1996.  Accumulated capital
expenditures since 1969 have reached approximately $800 million.


                    Research and Development
                    ------------------------
                                
     Illinova's research and development expenditures, consisting
entirely of IP's research and development expenditures, during
1996, 1995 and 1994 were approximately $5.4 million, $5.5 million
and $5.5 million, respectively.
                                
                                
                           Regulation
                           ----------

     Under the Illinois Public Utilities Act, the ICC has 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 new electric generating plant or a
significant addition to an existing facility may be included in
IP's rate base, the ICC must determine that the plant or addition
is reasonable in cost, prudent and used and useful in providing
utility service to customers.

     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 Ex
change 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 the orders, rules and
regulations of the Commission thereunder.

     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.
                                
                                
                               
           Executive Officers of Illinova Corporation
           ------------------------------------------
                                 
Name of Officer          Age               Position
---------------          ---               --------
                                 
Larry D. Haab             59     Chairman, President and
                                 Chief Executive Officer
Larry F. Altenbaumer      48     Chief Financial Officer,
                                 Treasurer and Controller
Leah Manning Stetzner     48     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             59     Chairman, President and
                                 Chief Executive Officer
Larry F. Altenbaumer      48     Senior Vice President and
                                 Chief     Financial Officer
David W. Butts            42     Senior Vice President
John G. Cook              49     Senior Vice President
Paul L. Lang              56     Senior Vice President
Wilfred Connell           59     Vice President
Richard W. Eimer, Jr.     48     Vice President
Robert D. Reynolds        40     Vice President
Leah Manning Stetzner     48     Vice President, General
                                 Counsel and Corporate
                                 Secretary
Cynthia G. Steward        39     Controller
Eric B. Weekes            45     Treasurer

    Each of the IP executive officers, except for Mr. Weekes, 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, 1992.

    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. Butts was elected Senior Vice President in September
1995.  Prior to being elected President of IGC in 1993, Mr. Butts
was a Division Vice President of IP.

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

    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. 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.

    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 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 1996
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 1996 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 4,424,250 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 and
Wood River make up 2,936,000 kilowatts of summer capacity.  Units
comprising 377,000 kilowatts of summer capacity at the Wood River
and Havana stations currently are not staffed but are available
to meet reserve requirements with a maximum of four months
notice.

    On December 18, 1996, the control and computer rooms for Wood
River units 4 and 5 were damaged by an in-plant fire.  The extent
of the damage is currently being evaluated and repairs have been
started to return these two units to service as soon as possible.
Preliminary expectations are to return Unit 4 to service in the
second quarter of 1997, and Unit 5 later in the year.

    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.  Vermilion is operated as a peaking plant,
mainly during the summer season.

    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
37,400 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, which lien is
junior to the lien of the Mortgage and Deed of Trust dated
November 1, 1943.  IP anticipates that during 1997 the 1943
mortgage will be amended to be consistent with the 1992 mortgage.

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

     See discussion of legal proceedings under Item 1
"Competition" of this report and in "Manufactured-Gas Plant
(MGP)" in "Note 4 - Commitments and Contingencies" on page A-21
of the 1996 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.

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

    Neither Illinova nor IP submitted any matter to a vote of
security holders during the fourth quarter of the fiscal year
ended December 31, 1996.


                             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 (Unaudit
ed)" on page A-31 of the 1996 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 1996 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 1996 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 1996 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 1996
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 1996
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.  During 1996, IP repurchased 714,811
shares for a total of $18.9 million, averaging about $26 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" in the 1996 Annual
Report to Shareholders in the appendix to the Illinova Proxy
Statement or "Note 9 - Preferred Stock" in the "Notes to
Consolidated Financial Statements" in the 1996 Annual Report to
Shareholders in the appendix to the IP Information Statement.

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 Inde
pendent Accountants on page A-10 of the 1996 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 1996 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 1996 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 1996 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.


                            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 1997 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 1997
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 1997 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 1997 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 1997
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 1997 Annual
Meeting of Stockholders is incorporated herein by reference.

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

     None.


                           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 1996
                                                           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, 1996               A-11
            Consolidated Balance Sheets at
               December 31, 1996 and 1995                        A-12
            Consolidated Statements of Cash Flows for
               the three years ended December 31, 1996           A-13
            Consolidated Statements of Retained
               Earnings for the three years
               ended December 31, 1996                           A-13
            Notes to Consolidated Financial Statements       A-14 - A-31

*   Incorporated by reference from the indicated pages of
    the 1996 Annual Report to Shareholders in the appendix to
    the Illinova Proxy Statement.

        (1b)     Financial Statements:
                                                            Page in 1996
                                                            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, 1996              A-11
            Consolidated Balance Sheets at
               December 31, 1996 and 1995                       A-12
            Consolidated Statements of Cash Flows for
               the three years ended December 31, 1996          A-13
            Consolidated Statements of Retained
               Earnings for the three years
               ended December 31, 1996                          A-13
            Notes to Consolidated Financial Statements      A-14 - A-31

**  Incorporated by reference from the indicated pages of
    the 1996 Annual Report to Shareholders in the appendix to
    the IP Information Statement (See page 22 of this Form 10-K).


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, 1996:

          Report filed on Form 8-K on January 29, 1997
               Other Events:  NRC informed IP via letter that it
                              viewed Clinton as having a declining
                              safety performance trend, but did not
                              place Clinton on its semiannual "watch
                              list".
          Report filed on Form 8-K on March 6, 1997
               Other Events:  Communication to the Financial
                              Community regarding the status of
                              Clinton outage.