UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                          Washington, DC  20549
                                FORM 10-K
                                    
           [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934
               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
           For the Transition period from ........ to ........

Commission          Registrant; State of Incorporation;     IRS Employer
File Number            Address; and Telephone Number     Identification No.
                                    
  1-8946                       CILCORP Inc.                  37-1169387
                        (An Illinois Corporation)
                      300 Hamilton Blvd., Suite 300
                         Peoria, Illinois  61602
                             (309) 675-8810
                                    
  1-2732             CENTRAL ILLINOIS LIGHT COMPANY          37-0211050
                        (An Illinois Corporation)
                           300 Liberty Street
                         Peoria, Illinois  61602
                             (309) 675-8810

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

                                                Name of each exchange
Title of each class so registered                on which registered

CILCORP Inc. Common stock, no par value          New York and Chicago

CILCO Preferred Stock, Cumulative
    $100 par, 4 1/2% series                           New York
                                    
Securities registered pursuant to Section 12(g) of the Act: None

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.

                      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 registrant's 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.  (X)

At March 13, 1998, the aggregate market value of the voting stock of
CILCORP Inc. (CILCORP) held by nonaffiliates was approximately
$636 million.  On that date, 13,610,680 common shares (no par value)
were outstanding.

At March 13, 1998, the aggregate market value of the voting stock of
Central Illinois Light Company (CILCO) held by nonaffiliates was
approximately $62 million.  The voting stock of CILCO consists of its
common and preferred stock.  On that date, 13,563,871 shares of CILCO's
common stock, no par value, were issued and outstanding and privately
held, beneficially and of record, by CILCORP Inc.

                   DOCUMENTS INCORPORATED BY REFERENCE

CILCORP Inc.'s Proxy Statement dated March 13, 1998, in connection with
its Annual Meeting to be held on April 28, 1998, is incorporated into
Part I and Part III hereof.

Central Illinois Light Company's Proxy Statement dated March 27, 1998,
in connection with its Annual Meeting to be held on April 28, 1998, is
incorporated into Part I and Part III hereof.

CILCORP Inc.'s Annual Report to Shareholders for the year ended
December 31, 1997 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations is incorporated herein by reference
into Part II Item 7.

CILCORP Inc.'s Annual Report to Shareholders for the year ended
December 31, 1997 -- Financial Statements, Notes to the Financial
Statements and Supplementary Data is incorporated herein by reference
into Part II Item 8.

                              CILCORP INC.
                                   and
                     Central Illinois Light Company
                      1997 Form 10-K Annual Report

This combined Form 10-K is filed separately by CILCORP Inc. and Central
Illinois Light Company (CILCO).  Information herein relating to each
individual registrant is filed by such registrant on its own behalf.
Accordingly, except for its subsidiaries, CILCO makes no representation
as to information relating to any other subsidiary of CILCORP Inc.

                            Table of Contents


                                                                Page

Glossary                                                        5-6
                                 Part I

Item 1.    Business
           The Company and its Subsidiaries                     7-8
           Business of CILCO                                    8-9
              Electric Service                                 9-10
              Gas Service                                        10
              Regulation                                         11
              Electric Fuel and Purchased Gas
                Adjustment Clauses                               11
              Fuel Supply - Coal                               11-12
              Natural Gas Supply                                 12
              Financing and Capital Expenditures Programs      12-13
              Environmental Matters                            13-14
              Significant Customer                               14
              Franchises                                         14
              Competition                                        14
              Employees                                          15
              Union Contracts                                    15
              Early Retirement Programs                          15
           Business of QST (Excluding QST Environmental)         15
              Energy Supply                                      16
              Competition                                        16
              Employees                                          16
           Business of QST Environmental                       16-17
              Customers                                          17
              Regulation of QST Environmental's Clients        17-19
              Regulation of QST Environmental                    19
              Competition                                        19
              Subcontractors                                     19
              Government Contracts                             19-20
              Patents and Trademark Protection                   20
              Potential Liabilities and Insurance              20-21
              Employees                                          21
           Other Businesses                                      22
              CIM                                                22
              CVI                                                22
              Employees                                          22
Item 2.    Properties                                          23-24
Item 3.    Legal Proceedings                                     24
Item 4.    Submission of Matters to a Vote of Security Holders   25
           Executive Officers of the Registrant                25-27
                                    
                                 Part II

Item 5.    Market for the Registrant's Common Equity
              and Related Stockholder Matters                    28
Item 6.    Selected Financial Data                               29
Item 7.    Management's Discussion and Analysis of
              Financial Condition and Results of Operations      29
Item 8.    Index - Financial Statements, Supplementary Data
              and Exhibits                                       30
Item 9.    Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure             54
                                    
                                Part III

Item 10.   Directors and Executive Officers of the Registrants 54-55
Item 11.   Executive Compensation                                55
Item 12.   Security Ownership of Certain Beneficial
              Owners and Management                              55
Item 13.   Certain Relationships and Related Transactions      55-56

                                 Part IV

Item 14.   Exhibits, Financial Statement Schedules, and
              Reports on Form 8-K                              57-61


                           GLOSSARY OF TERMS
  
  
  When used herein, the following terms have the meanings indicated.
  
  AFUDC -- Allowance for Funds Used During Construction
  
  BTU -- British Thermal Unit.  The quantity of heat required to raise the
         temperature of one pound of water one degree Fahrenheit.
  
  Bcf -- Billion cubic feet
  
  Caterpillar -- Caterpillar Inc., CILCO's largest industrial customer
  
  CECO -- CILCO Energy Corporation, a wholly-owned subsidiary of CILCO
  
  CEDCO -- CILCO Exploration and Development Company, a wholly-owned
           subsidiary of CILCO
  
  CERCLA -- Comprehensive Environmental Response, Compensation and
            Liability Act
  
  CESI -- CILCORP Energy Services Inc.
  
  CILCO -- Central Illinois Light Company
  
  CIM -- CILCORP Investment Management Inc.
  
  CIPS - AmerenCIPS, formerly Central Illinois Public Service Company
  
  CLM -- CILCORP Lease Management Inc.
  
  Company -- CILCORP Inc. and subsidiaries
  
  Cooling Degree Day -- The measure of the degree of warmer than normal
                        weather experienced, based on the extent to
                        which the average of high and low temperatures
                        for a day rises above 65 degrees Fahrenheit
                        (annual degree days above historic average
                        indicate warmer than average temperatures); the
                        historic average provided by U.S. Weather Bureau
                        for 30-year period.
  
  CVI -- CILCORP Ventures Inc.
  
  DSM -- Demand Side Management.  The process of helping customers
         control how they use energy resources.
  
  EPA -- Environmental Protection Agency (Federal)
  
  FAC -- Fuel Adjustment Clause
  
  FASB -- Financial Accounting Standards Board
  
  FERC -- Federal Energy Regulatory Commission
  
  Heating Degree Day -- The measure of the degree of colder than normal
                        weather experienced, based on the extent to
                        which the average of high and low temperatures
                        for a day falls below 65 degrees Fahrenheit
                        (annual degree days above historic average
                        indicates cooler than average temperatures); the
                        historic average provided by U.S. Weather Bureau
                        for 30-year period.
  
  ICC -- Illinois Commerce Commission
  
  KW -- Kilowatt, a thousand watts
  
  KWH -- Kilowatt-hour, one thousand watts used for one hour (unit of
         work)
  
  LCP -- Least Cost Energy Plan, a long-term resource acquisition
         strategy that balances both supply and demand-side resource
         options designed to provide the best value at the least cost to
         customers.
  
  MAIN -- Mid-America Interconnected Network.  One of nine regions that
          make up the North American Electric Reliability Council.  Its
          purpose  is to ensure the Midwest region will meet its load
          responsibility.
  
  MCF -- One thousand cubic feet
  
  MW -- Megawatt, a million watts
  
  MWG -- Midwest Grain Products, Inc.
  
  NEPA -- National Energy Policy Act.
  
  PGA -- Purchased Gas Adjustment
  
  QST -- QST Enterprises Inc.
  
  QST Com -- QST Communications Inc.
  
  QST Energy -- QST Energy Inc.
  
  QST Environmental - QST Environmental Inc.
  
  QST Trading -- QST Energy Trading Inc.
  
  RCRA -- Resource Conservation and Recovery Act.
  
  SFAS -- Statement of Financial Accounting Standards
  
  Therm -- Unit of measurement for natural gas; a therm is equal to one
           hundred cubic feet (volume); a therm is also equal to 100,000
           BTUs (energy).
  
                                 PART I
Item 1.  Business

                    THE COMPANY AND ITS SUBSIDIARIES
  
CILCORP Inc. (CILCORP or the Company) was incorporated as a holding
company in the state of Illinois in 1985.  The financial condition and
operating results of CILCORP primarily reflect the operations of Central
Illinois Light Company (CILCO) and QST Enterprises Inc. (QST), the
Company's principal business subsidiaries. A former CILCORP first-tier
subsidiary, QST Environmental Inc., formerly known as Environmental
Science & Engineering, Inc. (ESE) became a subsidiary of QST effective
October 29, 1996.  Effective June 1, 1997, ESE began operating under the
name QST Environmental Inc. (QST Environmental).  The Company also has
two other first-tier subsidiaries,  CILCORP Investment Management Inc.
(CIM) and CILCORP Ventures Inc. (CVI), whose operations, combined with
those of the holding company itself (Holding Company), are collectively
referred to herein as Other Businesses.  CILCORP owns 100% of the common
stock of all of its subsidiaries.

CILCO is engaged in the generation, transmission, distribution and sale
of electric energy in an area of approximately 3,700 square miles in
central and east-central Illinois, and the purchase, distribution,
transportation and sale of natural gas in an area of approximately 4,500
square miles in central and east-central Illinois.

CILCO has two wholly-owned subsidiaries, CILCO Exploration and
Development Company (CEDCO) and CILCO Energy Corporation (CECO).  CEDCO
was formed to engage in the exploration and development of gas, oil,
coal and other mineral resources.  CECO was formed to research and
develop new sources of energy, including the conversion of coal and
other minerals into gas.  The operations of these subsidiaries are not
currently significant.

QST, formed in December 1995, provides energy and energy-related
services to a broad spectrum of retail and wholesale customers through
its subsidiary, QST Energy Inc. (QST Energy).  QST Energy has one wholly-
owned subsidiary - QST Energy Trading Inc. (QST Trading), which
purchases and sells energy in the wholesale market.  QST also provides
fiber optic telecommunications services through another wholly-owned
subsidiary, QST Communications Inc. (QST Com).  Effective October 29,
1996, ESE (now known as QST Environmental) also became a wholly-owned
subsidiary of QST.

ESE (now known as QST Environmental) was formed in February 1990 to
conduct the environmental consulting and analytical services businesses
acquired from Hunter Environmental Services, Inc. (Hunter) during that
year. QST Environmental provides engineering and environmental
consulting services to a variety of governmental, industrial and
commercial customers.  QST Environmental has six wholly-owned active
subsidiaries:  Keck Instruments, Inc., which manufactures geophysical
instruments used in environmental applications; QST Architectural
Services, Inc., which provides architectural services in Illinois;
National Professional Casualty Co., which provides professional and
pollution liability insurance to QST Environmental; Chemrox, Inc., which
formerly manufactured products and provided engineering services for the
safe use and control of ethylene oxide and chlorofluorocarbons;
Environmental Staffing Solutions, Inc., which provides temporary
staffing services, and ESE Land Corporation (ESE Land) which, either
directly or through special purpose subsidiaries, maintains interests in
environmentally distressed parcels of real estate acquired for resale.
During the fourth quarter of 1997, QST Environmental completed the sale
of substantially all of the assets of ESE Land for cash and continued
membership interests in the acquiring companies.  QST Environmental is
also a member of DSE Environmental L.L.C., organized to perform
environmental and remediation services.  In addition, QST Environmental
owns a minority interest in ESE Ohio, Inc., which provides professional
engineering services in the State of Ohio.

CIM manages the Company's investment portfolio.  CIM holds eight
leveraged lease investments through three wholly-owned subsidiaries:
CILCORP Lease Management Inc. which was formed in 1985, and CIM Leasing
Inc. and CIM Air Leasing Inc., which were both formed in 1993.  CIM's
other wholly-owned subsidiary is CIM Energy Investments Inc., which was
formed in 1989 to invest in non-regulated, independent power production
facilities (see Other Businesses).  CIM also directly owns limited
partnership interests in affordable housing portfolios.
  
CVI primarily invests in ventures in energy-related products and
services.  CVI has an 80% interest in the Agricultural Research and
Development Corporation and has one wholly-owned subsidiary, CILCORP
Energy Services, Inc. (CESI).  CESI was formed to pursue energy-related
opportunities in the non-regulated market.  CESI's primary business is
the sale of non-regulated energy services.  During 1996 and 1997 CESI
provided certain energy-related services to Caterpillar Inc.  Refer to
the caption "Competition" of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations beginning on
page 19 of CILCORP's 1997 Annual Report to Shareholders which is
incorporated herein by reference.

The following table summarizes the relative contribution of each
business group to consolidated assets, revenue and net income for the
year ended December 31, 1997.

<TABLE>
<CAPTION>
                          Assets         Revenue       Net Income
                                                         (Loss)
                                     (In thousands)
<S>                     <C>            <C>             <C>
CILCO                   $1,022,655     $546,854        $50,251
QST (excluding QST                                     
  Environmental)            97,869      346,290         (9,843)
QST Environmental           46,544       72,235        (21,571)
Other Businesses           167,751       11,106         (2,442)
                        ----------     --------        -------
                        $1,334,819     $976,485        $16,395
                        ==========     ========        =======
</TABLE>

CILCORP is an intrastate exempt holding company under Section 3(a)(1) of
the Public Utility Holding Company Act of 1935 (PUHCA).  Federal
legislation dealing with the restructuring of the electric utility
industry, including repeal of PUHCA, has been introduced in both Houses
of Congress.  Repeal of PUHCA would, among other things, remove certain
presently applicable restrictions to the merger or combination of non-
contiguous electric and natural gas utility holding companies.  The
Company cannot predict whether or when any of these proposals might be
enacted at the federal level or the ultimate effect on the Company.

                            BUSINESS OF CILCO

CILCO was incorporated under the laws of Illinois in 1913.  CILCO's
principal business is the generation, transmission, distribution and
sale of electric energy in an area of approximately 3,700 square miles
in central and east-central Illinois, and the purchase, distribution,
transportation and sale of natural gas in an area of approximately 4,500
square miles in central and east-central Illinois.
  
CILCO is continuing to experience, in varying degrees, the impact of
developments common to the electric and gas utility industries.  These
include increased competition in wholesale markets and the prospect of
competition in retail markets, changes in regulation and legislation
affecting utilities, uncertainties as to the future demand for
electricity and natural gas, structural and competitive changes in the
markets for these commodities, the high cost of compliance with
environmental and safety laws and regulations and uncertainties in
regulatory and political processes.  At the same time, CILCO has sought
to provide reliable service at reasonable rates for its customers and a
fair return for its investors.  Refer to the caption "Competition" of
Item 7.  Management's Discussion and Analysis of Financial Condition and
Results of Operations beginning on page 19 of CILCORP's 1997 Annual
Report to Shareholders which is incorporated herein by reference.

ELECTRIC SERVICE

CILCO furnishes electric service to retail customers in 136 Illinois
communities (including Peoria, East Peoria, Pekin, Lincoln and Morton).
At December 31, 1997, CILCO had approximately 193,000 retail electric
customers.

In 1997, 62% of CILCO's total operating revenue was derived from the
sale of electricity.  Approximately 37% of electric revenue resulted
from residential sales, 31% from commercial sales, 24% from industrial
sales, 6% from sales for resale and 2% from other sales.  Electric
sales, particularly residential and commercial sales during the summer
months, fluctuate based on weather conditions.

The electric operating revenues of CILCO were derived from the following
sources:

<TABLE>
<CAPTION>
                                       1997       1996        1995
                                            (In thousands)
<S>                                 <C>         <C>         <C>
Residential                         $125,071    $121,668    $129,722
Commercial                           103,747     100,944      99,992
Industrial                            82,318      79,065      87,491
Sales for resale                      19,966      15,206       5,132
Street lighting                        1,343       1,283       1,132
Other revenue                          5,651       4,619       2,729
                                    --------    --------    --------
       Total electric revenue       $338,096    $322,785    $326,198
                                    ========    ========    ========
</TABLE>

CILCO owns and operates two coal-fired base load generating plants, a
natural gas-fired cogeneration plant, and two natural gas combustion
turbine-generators which are used for peaking service. The 1997 system
peak demand was 1,135 MW on June 24, 1997.  The all-time system peak
demand of 1,188 MW was set on August 17, 1995.

The system peak demand for 1998 is estimated to be 1,216 MW with a
reserve margin of approximately 18.9%.  The system peak demand estimate
does not account for any load loss due to CILCO's retail competition
pilot programs (see Competition).  The reserve margin takes into account
90 MW of firm purchased power and 87 MW of interruptible industrial load
and other related Demand Side Management (DSM) programs. CILCO's planned
reserve margin complies with planning reserve margin requirements
established by the Mid-America Interconnected Network (MAIN), of which
CILCO is a member.

Studies conducted by CILCO indicate that it has sufficient base load
generating capacity and purchased capacity to provide an adequate and
reliable supply of electricity to satisfy base load demand through the
end of the century.  To help meet anticipated increases in peak demand
and maintain adequate reserve margins, CILCO has entered into three
wholesale bulk power agreements to purchase capacity from AmerenCIPS
(CIPS), formerly Central Illinois Public Service Company.  Each
agreement was approved by the Illinois Commerce Commission (ICC) as part
of CILCO's electric least cost energy plan filings.  See also Note 8.
Commitments and Contingencies for further discussion of the purchase
agreements with CIPS.

CILCO is interconnected with CIPS, Commonwealth Edison Company, Illinois
Power Company and the Springfield City Water, Light and Power Department
to provide for the interchange of electric energy on an emergency and
mutual help basis.

GAS SERVICE

CILCO provides gas service to customers in 128 Illinois communities
(including Peoria, East Peoria, Pekin, Lincoln and Springfield).  At
December 31, 1997, CILCO had approximately 202,000 gas customers,
including 1,892 industrial, commercial and residential gas
transportation customers (of which 1,769 are Power Quest customers) that
purchase gas directly from suppliers for transportation through CILCO's
system.  For further discussion of gas transportation, refer to the
captions "Competition" and "CILCO Gas Operations" of Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operations beginning on pages 19 and 24 of CILCORP's 1997 Annual
Report to Shareholders, incorporated herein by reference.

In 1997, 38% of CILCO's total operating revenue was derived from the
sale or transportation of natural gas.  Approximately 60% of gas revenue
resulted from residential sales, 24% from commercial sales, 4% from
industrial sales, 3% from transportation and 9% from other sales.  Gas
sales, particularly residential and commercial sales during the winter
months, fluctuate based on weather conditions.

The gas operating revenues of CILCO were derived from the following
sources:

<TABLE>
<CAPTION>
                                    1997        1996        1995
                                         (In thousands)
<S>                               <C>         <C>        <C>
Residential                       $124,440    $125,869   $103,992
Commercial                          51,204      44,695     32,792
Industrial                           8,276       5,670      3,165
Transportation of gas                6,484       8,388      8,927
Other revenue                       18,354      11,148      2,670
                                  --------    --------   --------
       Total gas revenue          $208,758    $195,770   $151,546
                                  ========    ========   ========
</TABLE>

CILCO's all-time maximum daily send-out of 443,167 MCF occurred on
January 15, 1972.  The 1997 peak day send-out of 381,384 MCF occurred on
January 10, 1997.  CILCO has been able to meet all of its existing
customer requirements during the 1997-1998 heating season.  CILCO
believes that its present and planned supplies of gas will continue to
be sufficient to serve all of its existing customer requirements during
the 1998-1999 heating season.

REGULATION

CILCO is a public utility under the laws of the State of Illinois and is
subject to the jurisdiction of the ICC.  The ICC has general power of
supervision and regulation with respect to services and facilities,
rates and charges, classification of accounts, valuations of property,
determination of depreciation rates, construction, contracts with any
affiliated interest, the issuance of stock and evidences of indebtedness
and various other matters.  With respect to certain electric matters,
CILCO is subject to regulation by the FERC.  CILCO is exempt from the
provisions of the Natural Gas Act, but is affected by orders, rules and
regulations issued by the FERC with respect to certain gas matters.
Refer to the caption "Competition" of Item 7.  Management's Discussion
and Analysis of Financial Condition and Results of Operations beginning
on page 19 of CILCORP's 1997 Annual Report to Shareholders, which is
incorporated herein by reference, for changes in the Illinois regulatory
environment enacted in 1997.

ELECTRIC FUEL AND PURCHASED GAS ADJUSTMENT CLAUSES

CILCO's tariffs provide for adjustments to its electric rates through
the fuel adjustment clause (FAC) to recover the cost of energy purchased
from other suppliers and to reflect increases or decreases in the cost
of fuel used in its generating stations.  The transportation costs of
coal are not currently included in the FAC, but are collected through
base rates.

CILCO's current tariffs also provide for adjustments to its gas rates
through the purchased gas adjustment clause (PGA) to reflect increases
or decreases in the cost of natural gas purchased for sale to customers.

CILCO is proposing, in a filing made on February 27, 1998, to cap its
natural gas prices for five years, beginning September 1, 1998.  It is
the first plan of its type filed with the ICC under a state utility
deregulation law enacted in December 1997.  The cap would replace the
PGA.  If approved by the ICC, CILCO would assume the risk of gas prices
rising above the cap.  The ICC has up to 240 days to act on the CILCO
proposal.

FUEL SUPPLY - COAL

Substantially all of CILCO's electric generation capacity is coal-fired.
Approximately 2.6 million tons of coal were burned during 1997.
Existing coal contracts with suppliers in central Illinois are expected
to supply 100% of the 1998 requirements.

During the years 1997, 1996 and 1995, the average cost per ton of coal
burned, including transportation, was $34.01, $31.82, and $37.21,
respectively.  The cost of coal burned per million BTU's was $1.56,
$1.44, and $1.62, respectively (see Electric Fuel and Purchased Gas
Adjustment Clauses).

CILCO has a long-term contract with Freeman United Coal Mining Company
(Freeman) for the purchase of high-sulfur, Illinois coal used
predominantly at the Duck Creek Station.  The contract gives CILCO the
flexibility to purchase between 500,000 and 1,000,000 tons annually.
Under the terms of the contract, CILCO's obligation to purchase coal
could be extended through 2010; however, Freeman has the option of
terminating (with two years' notice) the contract after 1997.  The
contract requires CILCO to pay all variable coal production costs on
tons purchased and certain fixed costs not affected by the volume
purchased.  On August 8, 1997, CILCO filed a demand for arbitration with
Freeman alleging that Freeman has failed to keep and perform its prudent
mining obligations, as required by the parties' contract.  The relief
sought by CILCO through this arbitration includes damages and
confirmation of CILCO's termination rights under this contract.  CILCO
and Freemen have agreed to continue operating under the present contract
until a ruling on CILCO's claims is reached by the arbitrators, which is
expected in late 1998 or early 1999.  CILCO cannot at this time predict
the ultimate outcome or materiality of this dispute.  For a discussion
of the agreement reached with Freeman regarding the accounting for
postretirement benefits costs, refer to the caption "CILCO Electric
Operations" of Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations beginning on page 23 of CILCORP's
1997 Annual Report to Shareholders which is incorporated herein by
reference.

NATURAL GAS SUPPLY

During 1997, CILCO continued to maintain a widely diversified and
flexible natural gas supply portfolio.  This portfolio is structured
around firm and interruptible gas transportation service provided by
five interstate pipeline suppliers and firm and interruptible gas
purchase arrangements of varying terms made directly with approximately
40 gas suppliers.  Reliability was enhanced through natural gas
injections and withdrawals at CILCO's two natural gas storage fields and
contracted storage facilities.  The supply and pipeline capacity
portfolio continues to provide reliable supplies at prevailing market
prices.  CILCO believes that its present and planned supply of gas will
continue to be sufficient to serve all of its present and projected firm
customer requirements.

During 1997, CILCO purchased and delivered approximately 40,469,000 MCF
of natural gas at a cost of approximately $122.6 million, or an average
cost of $3.03 per MCF.  The average cost per MCF of natural gas
purchased and delivered was $3.05 in 1996 and $2.17 in 1995 (see
Electric Fuel and Purchased Gas Adjustment Clauses).

FINANCING AND CAPITAL EXPENDITURES PROGRAMS

CILCO's ongoing capital expenditures program is designed to maintain
reliable electric and gas service and to meet the anticipated demands of
its customers.  Capital expenditures for 1998 are estimated to be $51.1
million, including pollution control expenditures of $4.4 million.
Expenditures include $25.2 million for the electric business,
$11.6 million for the gas business and $14.3 million for general and
miscellaneous purposes.  Electric expenditures include $9.0 million for
additions and modifications to generating facilities and $16.2 million
for transmission and distribution system additions and improvements.
Gas expenditures are primarily for necessary additions, replacements and
improvements to existing facilities.  Anticipated gas and electric
capital expenditures for 1999-2002 are $205.5 million.

The above estimates for 1998 capital expenditures includes $11.7 million
for information technology projects.  Included in 1998 information
technology projects is replacement of existing computer software
containing two-digit date fields which will not be able to distinguish
the year 2000 from the year 1900.  Modifications of existing programs
will be expensed as incurred, while expenditures for programs replaced
in their entirety will be capitalized.  Management continues to evaluate
CILCO's computer software systems and does not currently believe that
Year 2000 issues will materially impact CILCO's operations.

CILCO expects to finance its 1998 capital expenditures with funds
provided by operating activities and external sources of capital.
Future funds provided by operations may be affected by the deregulation
of the electric and natural gas utility industries.  CILCO retired $16
million and $20 million of first mortgage bonds due in February 1996 and
March 1997, respectively.  CILCO had $21.3 million of short-term
commercial paper outstanding at December 31, 1997, and expects to issue
short-term commercial paper periodically during 1998.  At December 31,
1997, CILCO had bank lines of credit aggregating $30 million, all of
which were unused, except in support of commercial paper issuance.
CILCO expects the support of commercial paper issuance to be the only
use of these bank lines during 1998.  Refer to the caption "Capital
Resources and Liquidity - CILCO" of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations on page 17 of
CILCORP's 1997 Annual Report to Shareholders which is incorporated
herein by reference.

ENVIRONMENTAL MATTERS

Refer to the caption "Environmental Matters" of Item 7.  Management's
Discussion and Analysis of Financial Condition and Results of Operations
on page 21 of CILCORP's 1997 Annual Report to Shareholders which is
incorporated herein by reference.

Since the adoption of the United Nations Framework on Climate Change in
1992, there has been a worldwide effort to reduce greenhouse gas (GHG)
emissions to 1990 levels or below.  In December of 1997, the Clinton
administration participated in the Kyoto, Japan negotiations, where the
basis of a Climate Change treaty was formulated.  Under the treaty, the
United States would have an overall reduction target of 7% in GHG
emissions from 1990 levels by 2008-2012.  A key part of the program is a
trading program for GHG emissions, which at this time is undefined.
CILCO estimates that reducing GHG emissions to 7% below the 1990 levels
during the period 2008-2012 could require significant capital outlays
and increases in annual operating expenses associated with electric
generation which could have a material adverse impact on the Company.

The U.S. Senate passed a resolution in 1997 indicating the Senate would
not ratify an agreement that does not involve commitments from
developing nations to limit GHG emissions or one that would damage the
U.S. economy.  It is uncertain if the treaty will be presented for
Senate approval during 1998.  The Clinton administration is expected to
propose funding for research and development and tax incentives as
necessary elements to reduce the GHG's (primarily carbon dioxide)
associated with the production of fossil-fired electricity.

Many urban areas around the country face the major challenge of
achieving compliance with ozone air quality standards.  Ozone is
formed when volatile organic compound (VOC) emissions and/or nitrogen
oxide (NOx) emissions photochemically react in the atmosphere.
Strategies for reduction of ozone levels have targeted mobile, area
and stationary sources (including power plants) of VOCs and NOx.

Under Title I of the Clean Air Act, states are required to develop and
implement State Implementation Plans (SIP) for ozone compliance by
2007.  Where boundary area emissions are contributing to the non-
attainment areas, additional VOC/NOx controls in attainment areas are
being considered.  This matter is further complicated by the transport
of emissions across state boundaries and regions.  CILCO may be
targeted for additional NOx emission reductions of up to 85% at its
power plants pursuant to regional ozone compliance programs, despite
the fact that CILCO's plants are in attainment areas.

CILCO is participating in ozone compliance strategy activities at the
national, regional, and state levels.  CILCO's position calls for
(1) equitable consideration among all VOC/NOx sources, (2) credit for
past and planned emission reductions and (3) cost-benefit/risk-benefit
support for control regulation.

On October 10, 1997, the USEPA proposed air pollution rules which
would require substantial reductions of NOx emissions in Illinois and
21 other states.  The proposal would require the installation of NOx
controls by no later than September 2002.  This proposal is expected
to be finalized by October 1998 with Illinois utility reduction
requirements specified in 1999.  The legality of this proposal along
with its technical feasibility is expected to be challenged by a
number of utility groups, including CILCO.

Should additional NOx emission controls be mandated for CILCO's power
plants, new and costly control technology retrofits would be required.
Multiple technologies might be necessary to meet extremely stringent
NOx levels.  The exact costs for such compliance cannot be determined
at this time, but they could have a material adverse impact on the
Company.

CILCO is currently in the process of investigating and implementing
potential beneficial re-use for ash (a coal combustion by-product)
generated at both generating stations.  Providing alternate uses for the
ash will allow CILCO to avoid potential costs associated with the
construction of additional facilities to store this by-product.

SIGNIFICANT CUSTOMER

Caterpillar Inc. is CILCO's largest industrial customer.  Aggregate gas
and electric revenues from sales to Caterpillar were 7.5%, 7.5%, and
8.6% of CILCO's total operating revenue for 1997, 1996 and 1995,
respectively.  See CILCO's Consolidated Statements of Segments of
Business under Item 8. Financial Statements and Supplementary Data.

FRANCHISES

CILCO negotiates franchise agreements which authorize it to provide
utility services to the communities in its service area.  The franchises
are for various terms, usually 25 to 50 years.  Based on past
experience, CILCO anticipates that, as franchises expire, new franchises
will be granted in the normal course of business.

COMPETITION

CILCO, as a regulated public utility, has an obligation to provide
service to retail customers within its defined service territory; thus,
CILCO is not generally in competition with other public utilities for
retail electric or gas customers in these areas.  However, electricity
and natural gas compete with other forms of energy available to
customers.  For example, within the City of Springfield, CILCO's natural
gas business competes with the City's municipal electric system to
provide customer energy needs.

Refer to the captions "Competition", "CILCO Electric Operations", and
"CILCO Gas Operations" of Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations beginning on pages 19,
23 and 24 of CILCORP's 1997 Annual Report to Shareholders, incorporated
herein by reference, for discussion regarding CILCO's electric and gas
pilot programs (collectively known as Power Quest), Illinois' Electric
Service Customer Choice and Rate Relief Law of 1997, and other
competitive trends which may affect CILCO's electric and gas operations.

EMPLOYEES

The number of full-time and part-time employees at December 31, 1997,
was 1,243, excluding employees assigned to the Holding Company.  Of
these, 418 gas and electric department employees were represented by
Local 51 of the International Brotherhood of Electrical Workers (IBEW),
and 202 power plant employees were represented by Local 8 of the
International Brotherhood of Firemen and Oilers (IBF&O).

CILCO'S UNION CONTRACTS

The International Brotherhood of Electrical Workers Local 51 (IBEW)
ratified the Company's contract proposal on October 10, 1997.  CILCO's
contract with the IBEW expired on June 30, 1997, and the IBEW membership
had been working without a contract since that time.  The new contract
expires on July 1, 2000, and among other items, provides for 3% wage
increases each year of the contract.  The current contract with the
International Brotherhood of Firemen and Oilers Local 8 expires June 30,
1998.

CILCO'S EARLY RETIREMENT PROGRAMS

As part of a continuing effort to reduce costs and better position
itself for competition in the energy services industry, in November
1996, CILCO offered Voluntary Early Retirement Programs to eligible
management and office and technical employees and employees represented
by the IBEW.  A total of 76 of the 210 eligible employees retired,
effective January 1, 1997.  The 1996 programs resulted in an after-tax
charge to earnings of approximately $5.4 million.

In 1995, CILCO offered similar Voluntary Early Retirement Programs to
selected employees.  A total of 166 of the 257 eligible employees
accepted the offer, resulting in an after-tax charge of approximately
$7.8 million in 1995.

              BUSINESS OF QST (EXCLUDING QST ENVIRONMENTAL)
                                    
QST Enterprises Inc. was formed in December 1995 to facilitate CILCORP's
expansion into non-regulated energy and related services businesses.
QST, through its wholly-owned subsidiary QST Energy, provides a
portfolio of non-regulated, energy-related products and services
including wholesale and retail sales of electricity and natural gas in
markets that are open to competition.  QST also provides fiber optic
telecommunication services in Central Illinois.

The initial focus of QST was to compete against energy suppliers that
participated in CILCO's Power Quest pilot programs.  Refer to the
caption "Competition" of Item 7.  Management's Discussion and Analysis
of Financial Condition and Results of Operations on page 19 of CILCORP's
1997 Annual Report to Shareholders which is incorporated herein by
reference.  Power Quest provides a means for certain customers to buy
energy from suppliers other than CILCO.  During 1997, QST Energy began
to acquire retail customers outside of Illinois.  QST Energy competes
against marketers to provide energy and services to customers of other
utilities and energy providers which offer, or will be required to
offer, retail competition programs, as well as marketing energy to
customers who may already have the ability to choose their supplier.
QST Energy, through its wholly-owned subsidiary QST Energy Trading, also
purchases and sells energy on a wholesale basis.  Its customers include
marketers, utilities, and independent power producers.  QST Energy is
also engaged in the development of on-site electric generating
facilities.

ENERGY SUPPLY

QST Energy and QST Energy Trading have entered into contracts and
enabling agreements with public utilities, independent electricity or
natural gas producers and transporters, and other marketers to purchase
electricity and natural gas to serve QST's customers.  Contracts have
various terms ranging from one month to three years.  Electricity is
purchased on either a term basis (which does not exceed one year) or a
spot basis.  The majority of QST's gas supply is currently purchased on
a 30-day spot basis.  QST has successfully met the energy requirements
of its retail customers during the past year.

COMPETITION

QST currently competes with utilities and marketers to provide
electricity to wholesale customers and to retail customers who may
choose their energy supplier, primarily as a result of retail
competition pilot programs offered by regulated utilities throughout the
United States.  QST also competes with other marketers and suppliers to
sell natural gas to wholesale and retail customers in a deregulated
market.  Currently, the market for natural gas sales is highly
competitive, particularly on the wholesale level and, in some areas of
the country (including Illinois), for large usage customers on the
retail level.  The market for wholesale electricity is also very
competitive and competition in QST's retail electric energy business is
partially a function of the design of retail competition programs.
Competition within both the electric and gas segments of QST's business
is expected to increase with the deregulation of the U.S. energy
industry.  Refer to the caption "Competition" in Item 7.  Management's
Discussion and Analysis of Financial Condition and Results of Operations
beginning on page 19 of CILCORP's Annual Report to Shareholders,
incorporated herein by reference.

EMPLOYEES

At December 31, 1997, QST (exclusive of QST Environmental) employed 109
full-time, part-time and on-call employees.


                      BUSINESS OF QST ENVIRONMENTAL

QST Environmental is an environmental consulting and engineering firm
with additional capabilities in laboratory analysis and equipment
manufacturing.  QST Environmental's services are intended to address the
concern over the quality of the environment, the numerous complex
federal, state and local environmental regulations and enforcement
efforts in support of environmental laws.  As such, QST Environmental's
business is affected by the existence and enforcement of various federal
and state statutes and regulations dealing with the environment and the
use, control, disposal and clean-up of hazardous wastes (see Regulation
of QST Environmental's Clients herein).  QST Environmental provides a
full-service approach to business, industrial and governmental clients,
commencing with problem identification and analysis, continuing through
regulatory negotiation and engineering, and concluding with the
preparation and implementation of a remediation plan or final design and
construction.

QST Environmental has a wide range of clients in business, industry and
government, including federal agencies, local and state governments,
institutional, commercial and industrial firms and professional service
firms.  QST Environmental employs environmental, chemical, geotechnical,
civil, mechanical, structural and transportation engineers; geologists;
hydrogeologists; chemists; biologists; toxicologists; meteorologists;
industrial hygienists; architects; and surveyors.  QST Environmental has
a nationwide network of offices with its corporate office in Peoria,
Illinois.  Presently, QST Environmental has one laboratory located in
Gainesville, Florida.  In late January 1998, QST Environmental entered
into a non-binding letter of intent to sell the assets of the
Gainesville laboratory.  On March 2, 1998, the prospective purchaser of
these assets decided not to proceed with this transaction.  Management
is currently considering various alternatives regarding the operations
of the Gainesville laboratory.

QST Environmental provides services in the following areas:  air
quality, chemical analysis, asbestos and lead-based paint management,
industrial hygiene, environmental assessment and toxicology,
hydrogeology, remediation, construction management, storage tank
management, surface water resources analysis, and environmental audits.
QST Environmental also provides engineering design, and environmental,
transportation, and water/wastewater engineering services.  In addition,
QST Environmental manufactures instrumentation for groundwater analysis
and mineral exploration through its wholly-owned subsidiary, Keck
Instruments, Inc.

CUSTOMERS

QST Environmental sells its products and services to governmental
agencies and public and private companies.  Approximately 48% of QST
Environmental's revenue for 1997 was generated by services performed for
federal, state and local governmental agencies compared to 43% for 1996.
In the year ended 1997, two federal government customer contracts, EPA
and Department of Defense (DOD), accounted for 7.7% and 6.4% of gross
revenues, respectively.  The EPA contract has been rebid with an
expected mid-1998 award date.  The DOD contract concludes in March 1998.
No single customer accounted for more than 5% of QST Environmental's
gross revenues for the year 1996.

In 1997, approximately 88% of QST Environmental's revenue was generated
from environmental consulting and engineering services, 10% from
laboratory services and 2% from manufactured equipment sales.

REGULATION OF QST ENVIRONMENTAL'S CLIENTS

The level and nature of QST Environmental's business activity is largely
dependent upon government statutes and regulations relating to the
environment.

Significant legislation includes the following:

Clean Air Act of 1970 (CAA):  Provisions of the CAA, as amended in 1977
and 1990, authorize the EPA to set maximum acceptable contaminant levels
in the ambient air, to control emissions of certain toxic materials, to
reduce acid rain, and to ensure compliance with air quality standards.

Clean Water Act of 1972, as amended in 1987 (CWA):  CWA requires every
state to set water quality standards for each significant body of water
within its boundaries and to ensure attainment and/or maintenance of
those standards.  These standards and limitations are enforced in large
part under a nationwide permit program known as the National Pollutant
Discharge Elimination System (NPDES).  CWA's reauthorization by Congress
is anticipated in the next three to five years.

Comprehensive Environmental Response, Compensation and Liability Act of
1980 (Superfund or CERCLA): CERCLA is the most significant federal
statute addressing practices involving hazardous substances and imposing
liability for cleaning up contamination in soil and groundwater.  This
legislation has four basic provisions:  (i) creation of an information
gathering and analysis program which enables federal and state
governments to identify abandoned waste sites and to set priorities for
investigation and response; (ii) granting of federal authority to
respond to hazardous waste emergencies and to clean up hazardous waste
sites; (iii) imposition of liability on persons responsible for disposal
of hazardous substances that may be released into the environment; and
(iv) creation of a federally managed trust fund to pay for the cleanup
of waste sites where a "potentially responsible party" cannot be
identified or where a threat to the environment requires immediate
response.  The EPA and State regulatory authorities are encouraging
"voluntary" clean-up of contaminated sites independent of CERCLA through
state-administered programs.  In October 1986, the Superfund Amendments
and Reauthorization Act (SARA) was passed as a five-year extension of
the Superfund program.  Title III of SARA, also known as the Emergency
Planning and Community Right-to-Know Act of 1986, established a
reporting and notification system for companies dealing with hazardous
chemicals.  The Superfund program was reauthorized in 1990 and was
extended without change through September 30, 1994. Revisions to CERCLA
and reauthorization are anticipated to be considered by Congress in
1998.

Federal Insecticide, Fungicide and Rodenticide Act (FIFRA):  FIFRA
regulates the use and manufacture of pesticides and related chemicals.

National Environmental Policy Act of 1970 (NEPA):  NEPA requires an
analysis of the environmental impact of any major federal action,
including the issuance of federal environmental permits for industrial
facilities which may significantly affect the quality of the
environment.

National Pollutant Discharge Elimination System (NPDES) Stormwater
Permitting Regulations of 1990:  The intent of these regulations, passed
in November 1990, is to control pollution from stormwater discharges
associated with industrial activity and municipal storm sewer systems.

Occupational Safety and Health Act of 1970 (OSHA):  Health and safety at
the workplace are regulated under OSHA.  OSHA provides for permissible
exposure levels for certain hazardous substances, including asbestos,
and also establishes an enforcement mechanism for these and other health
and safety standards.

Resource Conservation and Recovery Act of 1976 (RCRA):  While Superfund
seeks to remedy the damage caused by inactive or abandoned waste sites,
RCRA imposes comprehensive regulation of the management of hazardous
waste at active facilities.  RCRA and the regulations thereunder
establish a comprehensive "cradle to grave" regulatory program
applicable to hazardous waste and impose requirements for performance
testing and recordkeeping for any person generating, transporting,
treating, storing, or disposing of more than the specified minimum
levels of hazardous waste.  In November 1984, RCRA was amended by the
Hazardous and Solid Waste Amendments, which extend RCRA to most
industrial and commercial activities in the nation.  In addition, RCRA
requires that underground storage tanks be identified and inspected, and
those found to be leaking must be cleaned up.  RCRA's reauthorization by
Congress has been delayed and no action is anticipated in 1998.
Legislative actions continue to evolve through regulatory changes such
as risk-based corrective actions and Brownfield remediation programs in
many states.

Safe Drinking Water Act, as amended in 1986 and 1996 (SDWA):  The SDWA
affects numerous public water supplies.  Under this Act, the EPA
established and amended primary drinking water standards applicable to
public water supplies.

Toxic Substances Control Act of 1976 (TSCA):  TSCA authorizes the EPA to
gather information relating to the risks posed by chemicals and to
regulate the use and disposal of asbestos and polychlorinated biphenyls.

State and Local Regulations:  In addition to federal statutes and
regulations, numerous state and local statutes and regulations relating
to environmental risks impose additional environmental standards on QST
Environmental's customers.

REGULATION OF QST ENVIRONMENTAL

The environmental statutes and regulations described above primarily
affect QST Environmental's clients, and thus have a significant impact
on the volume of QST Environmental's business activity and specific
types of services that QST Environmental provides to its clients.  These
environmental statutes and regulations also govern the manner in which
QST Environmental performs services for its clients.  QST Environmental
must comply with specific worker protection requirements and other
health and safety standards.  These standards include taking steps to
limit exposure to asbestos and chemical substances in the workplace.
QST Environmental also must comply with regulations pertaining to the
disposal of certain hazardous chemicals and substances pursuant to
guidelines established under federal and state law.  Among those
substances are chemicals used in QST Environmental's laboratory
processes as well as materials removed from the properties and
facilities of its clients.  Disposal costs for these materials, and
legal compliance costs generally for QST Environmental, have risen
steadily in recent years and are expected to continue to increase.

Management believes that the degree of enforcement of environmental
regulations at the federal, state and local level will continue to
affect the levels of business of QST Environmental and its clients.

COMPETITION

The market for QST Environmental's consulting services is highly
competitive, and QST Environmental is subject to competition with
respect to all of the services it provides.  QST Environmental competes
primarily on the basis of quality of service, expertise, and price.  QST
Environmental's competitors range from small local firms to major
national companies.  No single entity currently dominates the
environmental consulting and engineering services marketplace.

SUBCONTRACTORS

Because of the nature of the projects in which QST Environmental is
involved, QST Environmental often subcontracts a portion of its projects
to other contractors in order to utilize their expertise, equipment and
experience in areas where QST Environmental may lack the ability to
complete the entire project.  For example, if QST Environmental does not
have the necessary equipment to perform all aspects of a project, such
work may be subcontracted to local contractors.  In addition, contracts
which QST Environmental has with federal, state and local governmental
agencies may require, as a matter of law, that on a particular job QST
Environmental hire a certain percentage of minority-owned
subcontractors.

GOVERNMENT CONTRACTS

Many of QST Environmental's contracts with governmental agencies are
cost-plus, based on a combination of labor cost, overhead cost and
allowable fee.  Overhead rates are estimated at the time of contract
negotiations.  Following the completion of a contract, actual overhead
is determined and the difference is reimbursed to the government or paid
to QST Environmental within the limits of the contract.  Although QST
Environmental enjoys a good working relationship with the governmental
agencies for which it performs these services, these contracts may be
subject to renegotiation of profits or termination at the election of
the governmental agency.

PATENTS AND TRADEMARK PROTECTION

QST Environmental has applied for or been assigned certain patents or
patent rights.  QST Environmental believes that its technical expertise,
field experience, understanding of regulatory requirements and
implementation of technological advances will continue to provide
opportunities for ideas to develop which may lead to patents; however,
research and development is not currently significant to QST
Environmental's operations.

POTENTIAL LIABILITIES AND INSURANCE

QST Environmental is exposed to risk of financial loss during its normal
course of business in a variety of ways typically associated with an
environmental and engineering consulting business, including:  work-
related injury or illness of employees or third parties; damage to
property in QST Environmental's control during the course of a project;
damage to QST Environmental's property; repair or rectification costs
resulting from failure to detect, analyze, or measure pollutants,
asbestos or other toxic substances; repair or rectification costs due to
faulty design, workmanship, or liability resulting from QST
Environmental's construction or design activities; failure to perform or
delay in project completion; and claims by third parties for alleged
pollution or contamination damage.  Also, QST Environmental assumes
contingent liabilities arising out of its need to exercise care in the
selection and supervision of subcontractors on various projects.  Since
QST Environmental derives revenues from work involving hazardous
materials, toxic wastes and pollutants, potential losses may surface
many years after a project is completed.

These risks, along with enforcement of environmental regulations and
increasing public awareness regarding environmental issues and
responsibilities, make it mandatory that QST Environmental maintain a
sound risk management and insurance program.

QST Environmental carries professional liability insurance which covers
design errors and omissions resulting from its typical operations.  This
policy is extended to include pollution liability losses.  The current
policy, effective April 1, 1996, has a limit of $8 million per claim
($10 million in aggregate for the three-year policy term), with the
first $3 million of coverage provided by QST Environmental's wholly-
owned captive insurance subsidiary, National Professional Casualty Co.
(Captive) and the next $5 million of coverage provided by a non-
affiliated company.  Captive is capitalized by the combination of a QST
Environmental bank letter of credit and cash.  Captive does not transfer
risk and is not reinsured; CILCORP does not provide credit support to
Captive.  The policies cover activities in which QST Environmental is
typically involved.  Accordingly, in the event of a serious spill or
loss resulting from a design error or omission, QST Environmental faces
potential liability for the self-insured retention portion of a claim,
as well as any amounts in excess of $8 million.  QST Environmental
expects to renew these policies annually in the normal course of
business.  The professional and pollution liability insurance policies
include standard industry exclusions for:  dishonesty, discrimination,
warranties and guarantees, punitive damages, intentional non-compliance
with government regulations or statutes, nuclear energy, war and bodily
injury from the specification, installation, transportation, storage or
disposal of asbestos.
  
QST Environmental also carries insurance policies covering workers'
compensation, general liability and auto and property damage claims.
The workers' compensation policy provides statutory average limits.
General liability and auto policies provide full insurance coverage with
minor deductible amounts.  Also, performance and payment bonds may be
provided for specific projects if required by clients.  To supplement
its risk transfer to insurance policies, QST Environmental attempts with
its clients to limit and/or transfer its risk contractually.

QST Environmental believes it operates in a safe manner and, as
described above, purchases insurance to protect against loss and
maintain competitiveness in the marketplace; however, its entire
potential liability may not be covered by insurance.  Also, the total
cost of a potential claim could exceed QST Environmental's policy
limits.

EMPLOYEES

At December 31, 1997, QST Environmental employed 591 full-time, part-
time and on-call employees, many of whom have advanced degrees in a
variety of technical disciplines and all of whom are non-union.

                            OTHER BUSINESSES

CIM

The investment portfolio of CIM at December 31, 1997, and December 31,
1996, is shown in the following table:

<TABLE>
<CAPTION>
Type of Investment
At December 31                                    1997          1996
                                                   (In thousands)
<S>                                            <C>            <C>
Investment in leveraged leases                 $146,458       $133,030
Cash and temporary cash investments                 152             53
Investment in Energy Investors Fund               1,158            129
Investment in affordable housing funds           15,557         17,172
Other                                               156             35
                                               --------       --------
   Total                                       $163,481       $150,419
                                               ========       ========
</TABLE>

At December 31, 1997, CIM held equity investments in eight leveraged
leases through its wholly-owned subsidiaries, CILCORP Lease Management
Inc. (CLM), CIM Air Leasing Inc. and CIM Leasing Inc.  According to the
terms of some of the lease agreements, under certain circumstances,
subsidiaries of CIM may be obligated to incur additional non-recourse
debt to finance the cost of certain alterations, additions, or
improvements required by the lessee.

CIM, through its wholly-owned subsidiary, CIM Energy Investments Inc.,
has a net investment of $1,158,000 in the Energy Investors Fund,
L.P.(Fund), representing a 3.1% interest in the Fund at December 31,
1997.  The Fund invests in non-regulated, non-utility facilities for the
production of electricity or thermal energy.  The equity method of
accounting is used for this investment.

CIM is a limited partner in eight affordable housing portfolios.  The
ownership interests in these partnerships range from 3% to 12% at
December 31, 1997.  The equity method of accounting is used for these
investments.

CVI

CVI's net investment in CESI, its wholly-owned subsidiary, is
approximately $70,000.  CESI's primary business is the sale of energy
related products and services to commercial and industrial customers,
municipalities, and other utilities.  These services include:  gas
management services (including commodity purchasing), gas and electric
non-regulated utility services, outdoor lighting services, and carbon
monoxide detectors.  In addition, during 1997, costs related to
providing additional value-added services to Caterpillar in connection
with CILCO's Power Quest programs were reflected in CESI's operating
results.  Refer to the caption "Competition" of Item 7.  Management's
Discussion and Analysis of Financial Condition and Results of Operations
beginning on page 19 of CILCORP's 1997 Annual Report to Shareholders
which is incorporated herein by reference.

EMPLOYEES

At December 31, 1997, there were 10 full-time employees assigned to
CILCORP, CVI and CIM.

Item 2. Properties

                                  CILCO
                                    
CILCO owns and operates two steam-electric generating plants, a
cogeneration plant and two combustion turbine-generators.  These
facilities had an available summer capability of 1,152 MW in 1997.  The
two combustion turbine generators have a summer rating of 30 MW (15 MW
each) and are used during peak periods.  They typically operate less
than 100 hours per year.  The cogeneration plant, which became
operational during 1995, produces steam for Midwest Grain Products, Inc.
(MWG) and also generates electricity for distribution to CILCO's
customers.  This turbine-generator has an available summer capability of
16 MW.

The major generating facilities of CILCO (representing 96.0% of CILCO's
available summer generating capability projected for 1998), all of which
are fueled with coal, are as follows:

<TABLE>
<CAPTION>
                                                       Available Summer
                                                       Capability (MW)
Station & Unit                     Installed             Actual 1997
<S>                                   <C>                    <C>
Duck Creek                                                     
   Unit 1                             1976                   366
E. D. Edwards                                                  
   Unit 1                             1960                   117
   Unit 2                             1968                   262
   Unit 3                             1972                   361
</TABLE>

CILCO's transmission system includes approximately 285 circuit miles
operating at 138,000 volts, 48 circuit miles operating at 345,000 volts
and 13 principal substations with an installed capacity of 3,032,700
kilovolt-amperes.

The electric distribution system includes approximately 6,220 miles of
overhead pole and tower lines and 2,050 miles of underground
distribution cables.  The distribution system also includes 104
substations with an installed capacity of 2,012,860 kilovolt-amperes.

The gas system includes approximately 3,540 miles of transmission and
distribution mains.

CILCO has an underground gas storage facility located about ten miles
southwest of Peoria near Glasford, Illinois.  The facility has a present
recoverable capacity of approximately 4.5 Bcf.  An additional storage
facility near Lincoln, Illinois, has a present recoverable capacity of
approximately 5.2 Bcf.
                                    
                            QST ENVIRONMENTAL

QST Environmental owns approximately 53 acres of land in Gainesville,
Florida, containing 118,000 square feet of offices, laboratory and other
space. In Peoria, Illinois, QST Environmental owns approximately 27,000
square feet of offices, laboratory and other space and leases
approximately 21,000 square feet of additional space for offices.  QST
Environmental and its subsidiaries lease additional facilities for
offices and warehouse space in 27 cities throughout the United States.
QST Environmental believes its facilities are suitable and adequate for
its current businesses and does not expect to make any material
acquisitions of real property in the near future.  Refer to the caption
"Capital Resources and Liquidity - QST Environmental" of Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operation on page 18 of CILCORP's 1997 Annual Report to shareholders
which is incorporated herein by reference.

Item 3.  Legal Proceedings

Reference is made to the captions "Environmental Matters" of Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operations and to "Note 9 - Commitments and Contingencies" of Item 8.
Financial Statements and Supplementary Data of CILCORP's 1997 Annual
Report to Shareholders, incorporated herein by reference, for certain
pending legal proceedings and/or proceedings known to be contemplated by
governmental authorities.

Pursuant to CILCO's By-Laws, CILCO has advanced legal and other expenses
actually and reasonably incurred by employees, and former employees, in
connection with the Department of Justice's (DOJ) investigation of
CILCO's Springfield gas operations.  The DOJ investigation was subject
to a September 1994 settlement agreement.

The Company and its subsidiaries are subject to certain claims and
lawsuits in connection with work performed in the ordinary course of
their businesses.  Except as otherwise disclosed or referred to in this
section, in the opinion of management, all such claims currently pending
either will not result in a material adverse effect on the financial
position and results of operations of the Company or are adequately
covered by: (i) insurance, (ii) contractual or statutory
indemnification, or (iii) reserves for potential losses.

Item 4.  Submission of Matters to a Vote of Security Holders
                                    
                                 CILCORP
                                    
There were no matters submitted to a vote of security holders during the
fourth quarter of 1997.

                                  CILCO

There were no matters submitted to a vote of security holders during the
fourth quarter of 1997.
<TABLE>
<CAPTION>
                      Executive Officers of CILCORP

                 Age as of  Positions Held During             Initial
    Name          3/31/98    Past Five Years              Effective Date(1)
<S>                   <C>   <C>                            <C>
R. O. Viets           54    President and Chief
                              Executive Officer            February 1, 1988

W. M. Shay (2)        45    Executive Vice President
                              and Chief Legal Officer      November 4, 1997
                            Executive Vice President       November 4, 1996

J. G. Sahn            51    Vice President, General
                              Counsel and Secretary        March 1, 1994
                            Vice President
                              and General Counsel          February 1, 1989

M. D. Austin          39    Treasurer and
                              Assistant Secretary          April 25, 1995
                            Director - Corporate
                              Investments                  April 1, 1990

T. D. Hutchinson (3)  43    Controller                     January 20, 1997

<FN>
 Notes:
(1)  The term of each executive officer extends to the organization
meeting of CILCORP's Board of Directors following the next annual
election of Directors.

(2)  W. M. Shay served as President and Chief Operating Officer of QST
     Enterprises Inc. from January 29, 1996 to November 4, 1996.
     Previously, he was Group President of CILCO from April 1, 1995 to
     January 29, 1996 and Vice President of CILCO from January 1, 1993
     to April 4, 1995.

(3)  T. D. Hutchinson served as Controller from February 1, 1988, until
     April 1, 1995, when he became CILCO Director - Competitive
     Strategy.  Mr. Hutchinson later served as Director of Planning and
     Administration for QST Enterprises Inc.
</TABLE>
<TABLE>
<CAPTION>
                       Executive Officers of CILCO
  
                   Age as of  Positions Held During       Initial
  Name              3/31/98    Past Five Years(1)     Effective Date(2)
<S>                   <C>  <C>                        <C>
R. O. Viets (3)       54   Chairman of the Board      
                             and Chief Executive      
                             Officer                  April 1, 1995
                                                      
J. F. Vergon (4)      50   President and Chief        
                             Operating Officer        January 29, 1996
                           Group President,           
                             Gas Operations           April 1, 1995
                           Vice President             October 1, 1986
                                                      
M. J. Bowling (5)     51   Vice President             April 1, 1995
                                                      
S. A. Cisel (5)       44   Vice President             April 1, 1995
                                                      
C. Gilson (5)         40   Vice President             September 23, 1997
                                                      
K. A. Lockenvitz(5)   41   Vice President             September 23, 1997
                                                      
S. E. Ogden (5)       40   Vice President             September 23, 1997
                                                      
P. M. Ratcliff (5)    37   Vice President             September 23, 1997
                                                      
T. S. Romanowski(5)   48   Vice President             October 1, 1986
                                                      
W. R. Dodds           43   Treasurer and Manager      
                             of Treasury Department   October 1, 1990
                                                      
T. D. Hutchinson(6)   43   Controller and Manager     
                             of Accounting            January 1, 1997
                                                      
J. G. Sahn (7)        51   Secretary                  March 1, 1993

<FN>
Notes:
(1) The officers listed have been employed by CILCO in executive or
    management positions for the past five years except for Mr. Viets
    and Mr. Hutchinson.

(2) The term of each executive officer extends to the organization
    meeting of CILCO's Board of Directors following the next annual
    election of Directors.

(3) Mr. Viets previously served as Chairman of the Board from February
    1, 1988 to April 23, 1991.  He also serves as President and Chief
    Executive Officer of CILCO's parent, CILCORP Inc., a position he
    has held since February 1, 1988.

(4) J. F. Vergon also serves as Chairman of the Board of CILCORP
    Investment Management Inc.

(5) M. J. Bowling, C. Gilson, K. A. Lockenvitz, S. E. Ogden and
    P. M. Ratcliff are leaders of strategic business units involving
    local distribution, power generation, technical services, marketing
    and sales and customer service, respectively.  T. S. Romanowski
    serves as CILCO's Chief Financial Officer and S. A. Cisel is
    responsible for legislative and regulatory affairs.

(6) Mr. Hutchinson is also Controller of CILCORP, effective January 20,
    1997, having previously served as CILCORP Controller from February
    1, 1988 to April 1, 1995.  He served as CILCO Director-Competitive
    Strategy from April 1, 1995 to December 31, 1995 and as Director of
    Planning and Administration of QST Enterprises Inc. from January 1,
    1996 to January 20, 1997.

(7) Mr. Sahn also serves as Vice President and General Counsel of
    CILCORP Inc., a position he has held since February 1, 1989.  He
    was elected to the additional positions of Secretary and Assistant
    Treasurer of CILCORP effective March 1, 1994.
</TABLE>

                                PART II

Item 5.    Market for the Registrant's Common Equity and Related
           Stockholder Matters

                                CILCORP

The Company's common stock is listed on the New York and Chicago Stock
Exchanges (ticker symbol CER).  At December 31, 1997, there were 11,542
holders of record of the Company's common stock.  The following table
sets forth, for the periods indicated, the dividends per share of common
stock and the high and low prices of the common stock as reported in New
York Stock Exchange Composite Transactions.

<TABLE>
<CAPTION>
                                         Quarter
 1996                  First       Second       Third        Fourth
<S>                   <C>          <C>          <C>          <C>
Price Range                                                  
High                  $45 1/8      $44 1/8      $43 1/2      $39 5/8
Low                   $40 1/2      $40 7/8      $39 1/2      $35 1/2
                                                             
Dividends Paid        $  .615      $  .615      $  .615      $  .615
                                                             
1997                                                         
Price Range                                                  
High                  $39 5/8      $41 3/8      $43          $49
Low                   $35 5/8      $37 1/2      $38 13/16    $40 1/2
                                                             
Dividends Paid        $  .615      $  .615      $  .615      $  .615
                                                             
<FN>
The number of common shareholders of record as of March 13, 1998, was
11,308.
</TABLE>
                                 CILCO

CILCO's common stock is not traded on any market.  As of March 13, 1998
13,563,871 shares of CILCO's Common Stock, no par value, were issued,
and outstanding and privately held, beneficially and of record, by
CILCORP Inc.

CILCO's requirement for retained earnings before common stock dividends
may be paid is described in Note 5 of CILCO's Notes to the Consolidated
Financial Statements contained in Item 8. Financial Statements and
Supplementary Data.
 
Item 6. Selected Financial Data
<TABLE>
CILCORP INC.
Selected Financial Data
<CAPTION>
For the Years Ended December 31

                        1997        1996        1995        1994       1993
                               (In thousands except per share amounts)
<S>                   <C>         <C>         <C>         <C>         <C>
Revenue               $  976,485  $  613,082  $  610,172  $  605,139  $  584,511
Net income available
  for common                                                                   
  stockholders            16,395      27,943      38,582      32,586      33,583
Earnings per share          1.20        2.07        2.93        2.50        2.60
Total assets           1,334,819   1,285,693   1,279,303   1,238,384   1,198,440
Long-term debt           298,528     320,666     344,113     326,695     325,711
Dividends declared                                                             
  per common share          2.46        2.46        2.46        2.46        2.46
</TABLE>

<TABLE>
Central Illinois Light Company
Selected Financial Data
<CAPTION>
For the Years Ended December 31
                          1997       1996       1995         1994       1993
                                         (In thousands)
<S>                   <C>         <C>         <C>         <C>          <C>
Revenue               $  546,854  $  518,555  $  477,744  $  461,370   $453,878
                                                                               
Net income available                                                           
 for common                                                                    
 stockholders             50,251      41,940      39,099      29,507     33,635
Total assets           1,022,655   1,036,169   1,063,223   1,019,109    988,325
Long-term debt           267,836     278,439     298,397     278,359    278,321
Ratio of earnings to                                                           
 fixed charges               3.7         3.4         3.3         3.0        3.2
</TABLE>

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

The information under the heading Management's Discussion and Analysis
of Financial Condition and Results of Operations on pages 15 through 29
of CILCORP's 1997 Annual Report to Shareholders is incorporated herein
by reference.

Item 8.:  Financial Statements and Supplementary Data

The financial statements on pages 31 through 48 and Management's
Report to the Stockholders of CILCORP Inc. on page 30 of CILCORP's
1997 Annual Report to Shareholders are incorporated herein by
reference.

Index to Financial Statements:
                                                             Page
                                 CILCORP

Report of Independent Public Accountants on
  Schedules                                                   31

                                 CILCO
Management's Report                                           32
Report of Independent Public Accountants                      33
Consolidated Statements of Income                             34
Consolidated Balance Sheets                                 35-36
Consolidated Statements of Cash Flows                       37-38
Statements of Segments of Business                            39
Consolidated Statements of Retained Earnings                  40
Notes to Consolidated Financial Statements                  41-54


          REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES


To CILCORP Inc.:

We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in CILCORP
Inc.'s Annual Report to Shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 27, 1998.
Our audits were made for the purpose of forming an opinion on those
statements taken as a whole.  The financial statement schedules listed
in Item 14(a)2 are the responsibility of the Company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as
a whole.




                                            ARTHUR ANDERSEN LLP

Chicago, Illinois
January 27, 1998



                           MANAGEMENT'S REPORT

The accompanying financial statements and notes for CILCO and its
consolidated subsidiaries have been prepared by management in accordance
with generally accepted accounting principles.  Estimates and judgments
used in developing these statements are the responsibility of
management.  Financial data presented throughout this report is
consistent with these statements.

CILCO maintains a system of internal accounting controls which
management believes is adequate to provide reasonable assurance as to
the integrity of accounting records and the protection of assets.  Such
controls include established policies and procedures, a program of
internal audit and the careful selection and training of qualified
personnel.

The financial statements have been audited by CILCO's independent public
accountants, Arthur Andersen LLP.  Their audit was conducted in
accordance with generally accepted auditing standards and included an
assessment of selected internal accounting controls only to determine
the scope of their audit procedures.  The report of the independent
public accountants is contained in this Form 10-K annual report.

The Audit Committee of the CILCORP Inc. Board of Directors, consisting
solely of outside directors, meets periodically with the independent
public accountants, internal auditors and management to review
accounting, auditing, internal accounting control and financial
reporting matters.  The independent public accountants have direct
access to the Audit Committee.  The Audit Committee meets separately
with the independent public accountants.




                                            J. F. Vergon
                                            President and Chief
                                              Operating Officer




                                            T. S. Romanowski
                                            Vice President and Chief
                                              Financial Officer




                                            T. D. Hutchinson
                                            Controller and Manager of
                                              Accounting

 
              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Central Illinois Light Company:

We have audited the accompanying consolidated balance sheets of Central
Illinois Light Company (an Illinois corporation) and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
income, cash flows, segments of business, and retained earnings for each
of the three years in the period ended December 31, 1997.  These
financial statements and the schedule referred to below are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements and schedule based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Central
Illinois Light Company and subsidiaries as of December 31, 1997 and
1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The financial statement schedule
listed in Item 14(a)2 is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not a required part of
the basic financial statements.  This financial statement schedule has
been subjected to the auditing procedures applied in our audits of the
basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



                                             ARTHUR ANDERSEN LLP
Chicago, Illinois
January 27, 1998




                     Central Illinois Light Company
                    Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Years Ended December 31               1997        1996      1995
                                                    (In thousands)
<S>                                        <C>        <C>        <C>
Operating Revenues:                                              
Electric                                   $338,096   $322,785   $326,198
Gas                                         208,758    195,770    151,546
                                           --------   --------   --------
      Total Operating Revenues              546,854    518,555    477,744
                                           --------   --------   --------
Operating Expenses:                                              
Cost of Fuel                                 92,230     90,715     94,235
Cost of Gas                                 123,531    108,286     68,948
Purchased Power                              22,851     10,907     12,353
Other Operations and Maintenance            109,833    119,334    125,556
Depreciation and Amortization                61,505     59,664     56,765
Income Taxes                                 29,317     26,548     23,267
State and Local Taxes on Revenue             22,467     22,004     20,867
Other Taxes                                  11,808     11,419     12,205
                                           --------   --------   --------
      Total Operating Expenses              473,542    448,877    414,196
                                           --------   --------   --------
Operating Income                             73,312     69,678     63,548
                                           --------   --------   --------
Other Income and Deductions:                                     
Cost of Equity Funds Capitalized                 35         36         97
CILCO-owned Life Insurance, Net              (1,177)      (678)      (623)
Other, Net                                     (256)       200      2,581
                                           --------   --------   --------
      Total Other Income and (Deductions)    (1,398)      (442)     2,055
                                           --------   --------   --------
Income Before Interest Expenses              71,914     69,236     65,603
                                           --------   --------   --------
Interest Expenses:                                               
Interest on Long-term Debt                   20,024     21,012     20,242
Cost of Borrowed Funds Capitalized              (99)       (54)      (417)
Other                                         2,622      3,150      3,380
                                           --------   --------   --------
      Total Interest Expenses                22,547     24,108     23,205
                                           --------   --------   --------
Net Income Before Extraordinary Item and                         
  Preferred Dividends                        49,367     45,128     42,398
Extraordinary Item                            4,100      --         --
                                           --------   --------   --------
Net Income Before Preferred Dividends        53,467     45,128     42,398
                                                                 
Dividends on Preferred Stock                  3,216      3,188      3,299
                                           --------   --------   --------
Net Income Available for Common Stock      $ 50,251   $ 41,940   $ 39,099
                                           ========   ========   ========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
</TABLE>

<TABLE>
                     Central Illinois Light Company
                       Consolidated Balance Sheets
                                 Assets
<CAPTION>
As of December 31                                     1997        1996
                                                      (In thousands)
<S>                                                <C>         <C>
Utility Plant, At Original Cost:                                         
  Electric                                         $1,213,585  $1,186,110
  Gas                                                 401,870     393,246
                                                   ----------  ----------
                                                    1,615,455   1,579,356
  Less - Accumulated Provision for Depreciation       769,792     724,398
                                                   ----------  ----------
                                                      845,663     854,958
Construction Work in Progress                          21,550      15,092
Plant Acquisition Adjustments, Net of                                    
  Amortization                                          1,217       1,930
                                                   ----------  ----------
    Total Utility Plant                               868,430     871,980
                                                   ----------  ----------
Other Property and Investments:                                          
Cash Surrender Value of Company-owned Life                               
  Insurance (Net of Related Policy Loans of                              
  $42,898 in 1997 and $37,948 in 1996)                  2,399       2,128
Other                                                   1,214       1,553
                                                   ----------  ----------
    Total Other Property and Investments                3,613       3,681
                                                   ----------  ----------
Current Assets:                                                          
Cash and Temporary Cash Investments                       698       1,662
Receivables, Less Reserves of $703 and $1,000          44,550      43,604
Accrued Unbilled Revenue                               31,248      30,879
Fuel, at Average Cost                                   7,816       7,643
Materials and Supplies, at Average Cost                13,685      15,126
Gas in Underground Storage, at Average Cost            22,118      24,222
Prepaid Taxes                                           1,189       1,183
Other                                                   6,331       9,668
                                                   ----------  ----------
    Total Current Assets                              127,635     133,987
                                                   ----------  ----------
Deferred Debits:                                                         
Unamortized Loss on Reacquired Debt                     3,581       5,572
Unamortized Debt Expense                                2,019       2,198
Prepaid Pension Cost                                      455         496
Other                                                  16,922      18,255
                                                   ----------  ----------
    Total Deferred Debits                              22,977      26,521
                                                   ----------  ----------
Total Assets                                       $1,022,655  $1,036,169
                                                   ==========  ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these balance sheets.
</TABLE>

<TABLE>
                     Central Illinois Light Company
                       Consolidated Balance Sheets
                     Capitalization and Liabilities
<CAPTION>
As of December 31                                      1997         1996
                                                       (In thousands)
<S>                                                 <C>          <C>
Capitalization:                                                           
Common Shareholder's Equity:                                              
   Common Stock, No Par Value; Authorized                                 
     20,000,000 Shares; Outstanding 13,563,871                               
     Shares                                         $  185,661   $ 185,661
   Retained Earnings                                   147,081     136,629
                                                    ----------  ----------
      Total Common Shareholder's Equity                332,742     322,290
Preferred Stock Without Mandatory Redemption            44,120      44,120
Preferred Stock With Mandatory Redemption               22,000      22,000
Long-term Debt                                         267,836     278,439
                                                    ----------  ----------
      Total Capitalization                             666,698     666,849
                                                    ----------  ----------
Current Liabilities:                                                      
Current Maturities of Long-Term Debt                    10,650      20,000
Notes Payable                                           21,300       9,900
Accounts Payable                                        44,844      46,126
Accrued Taxes                                            2,593       7,013
Accrued Interest                                         9,234       9,761
PGA Over-Recoveries                                      1,666         601
Level Payment Plan                                       2,375       2,737
Other                                                    4,670       5,831
                                                    ----------  ----------
      Total Current Liabilities                         97,332     101,969
                                                    ----------  ----------
Deferred Liabilities and Credits:                                         
Accumulated Deferred Income Taxes                      139,274     135,251
Regulatory Liability                                    56,807      68,565
Investment Tax Credits                                  21,117      22,801
Capital Lease Obligation                                 2,182       2,621
Other                                                   39,245      38,113
                                                    ----------  ----------
      Total Deferred Liabilities and Credits           258,625     267,351
                                                    ----------  ----------
Total Capitalization and Liabilities                $1,022,655  $1,036,169
                                                    ==========  ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these balance sheets.
</TABLE>

<TABLE>
                     Central Illinois Light Company
                  Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended December 31                     1997       1996     1995
                                                         (In thousands)
<S>                                             <C>       <C>        <C>
Cash Flows from Operating Activities:                                
Net Income Before Extraordinary Item and                             
  Preferred Dividends                           $ 49,367  $ 45,128   $ 42,398
Adjustments to Reconcile Net Income to Net                           
  Cash Provided by Operating Activities:                             
  Depreciation and Amortization                   62,217    60,376     57,478
  Deferred Taxes, Investment Tax Credits and                         
     Regulatory Liability, Net                    (6,585)   (1,727)    (6,454)
  Increase in Accounts Receivable                   (946)   (1,292)   (11,769)
  (Increase)Decrease in Fuel, Materials and                          
     Supplies, and Gas in Underground Storage      3,372    (5,262)     7,251
  Increase in Unbilled Revenue                      (369)   (1,988)    (6,551)
  Increase(Decrease) in Accounts Payable          (1,282)    5,643     (7,053)
  Increase(Decrease) in Accrued Taxes                                
     and Interest                                 (4,947)    2,349       (439)
  Capital Lease Payments                             645       645        590
  (Increase)Decrease in Other Current Assets       3,331     7,427     (8,958)
  Decrease in Other Current Liabilities             (458)   (1,106)    (2,831)
  (Increase)Decrease in Other Non-Current                            
   Assets                                          6,372    (3,506)    13,792
  Increase in Other Non-Current Liabilities        1,273     5,129      3,424
                                                --------  --------   --------
     Net Cash Provided by Operating                                  
        Activities                               111,990   111,816     80,878
                                                --------  --------   --------
Cash Flows from Investing Activities:                                
  Capital Expenditures                           (55,026)  (43,525)   (69,412)
  Cost of Equity Funds Capitalized                   (35)      (36)       (97)
  Other                                           (5,950)   (2,495)    (8,462)
                                                --------  --------   --------
     Net Cash Used in Investing Activities       (61,011)  (46,056)   (77,971)
                                                --------  --------   --------
Cash Flows from Financing Activities:                                
  Common Dividends Paid                          (39,482)  (46,121)   (20,056)
  Preferred Dividends Paid                        (3,216)   (3,188)    (3,299)
  Long-Term Debt Issued                                       --       35,765
  Long-Term Debt Retired                         (20,000)  (16,000)      --
  Payments on Capital Lease Obligation              (645)     (645)      (590)
  Increase(Decrease) in Short-Term Borrowing      11,400   (14,700)     1,200
                                                --------  --------   --------
     Net Cash Provided from (Used in)                                
        Financing Activities                     (51,943)  (80,654)    13,020
                                                --------  --------   --------
Net Increase(Decrease) in Cash and Temporary                         
 Cash Investments                                   (964)  (14,894)    15,927
Cash and Temporary Cash Investments at                               
  Beginning of Year                                1,662    16,556        629
                                                --------  --------   --------
Cash and Temporary Cash Investments at                               
  December 31                                   $    698  $  1,662   $ 16,556
                                                ========  ========   ========

Supplemental Disclosures of Cash Flow                                
Information:
Cash Paid During the Period for:                                     
  Interest (Net of Cost of Borrowed Funds                              
  Capitalized)                                   $24,148   $23,475    $22,145
                                                                     
  Income Taxes                                   $37,907   $22,079    $35,954
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
</TABLE>

<TABLE>
                     Central Illinois Light Company
                   Statements of Segments of Business
<CAPTION>
Operating Information
For the Years Ended December 31     1997          1996           1995
                                            (In thousands)
 <S>                              <C>            <C>           <C>
Utility Segment:
Electric Operations                                                    
Revenue                           $338,096       $322,785      $326,198
Expenses                           283,459        270,672       277,429
                                  --------       --------      --------
Operating Income                    54,637         52,113        48,769
Income Taxes                        21,901         19,576        17,975
                                  --------       --------      --------
Operating Income Before                                                
  Income Taxes                    $ 76,538       $ 71,689      $ 66,744
                                  ========       ========      ========
Depreciation and                                                       
  Amortization                    $ 43,858       $ 42,530      $ 40,665
Capital Expenditures                35,217         28,032        45,466
                                                                       
Gas Operations                                                         
Revenue                           $208,758       $195,770      $151,546
Expenses                           190,083        178,205       136,767
                                  --------       --------      --------
Operating Income                    18,675         17,565        14,779
Income Taxes                         7,416          6,972         5,292
                                  --------       --------      --------
Operating Income Before                                                
 Income Taxes                     $ 26,091       $ 24,537      $ 20,071
                                  ========       ========      ========
Depreciation and                                                       
 Amortization                     $ 17,647       $ 17,134      $ 16,100
Capital Expenditures              $ 19,844       $ 15,529      $ 24,043
</TABLE>

<TABLE>
<CAPTION>
Major Customer for the Years Ended December 31
                             1997               1996               1995
<S>                   <C>         <C>     <C>         <C>    <C>       <C>
Caterpillar Inc.                                                            
Electric Revenue      $40,106     11.9%   $37,724     11.7%  $40,109   12.3%
Gas Revenue               934       .4%     1,053       .5%    1,022     .7%
                      -------     ----    -------     -----  -------    ----
     Total            $41,040      7.5%   $38,777      7.5%  $41,131    8.6%
                      =======      ====   =======     =====  =======    ====
</TABLE>
<TABLE>
<CAPTION>
Utility Identifiable Assets as of December 31
                                     1997          1996           1995
<S>                             <C>            <C>            <C>
Electric                        $  711,445     $  721,468     $  735,463
Gas                                287,275        292,925        273,428
Other Utility Assets*               22,746         21,776         54,332
                                ----------     ----------     ----------
     Total Utility Assets**     $1,021,466     $1,036,169     $1,063,223
                                ==========     ==========     ==========
<FN>
 *Other investments, miscellaneous accounts receivable, prepaid assets,
  deferred pension costs and unamortized debt, discount and expense.
**Electric utility assets include generation-related assets which will
  be deregulated as a result of Illinois legislation.

The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>

<TABLE>
                     Central Illinois Light Company
              Consolidated Statements of Retained Earnings

<CAPTION>
For the Years Ended December 31             1997      1996      1995
                                                 (In thousands)
<S>                                       <C>       <C>       <C>
Balance Beginning of Year                 $136,629  $140,814  $122,125
Add                                                                   
Net Income Before Preferred Dividends       53,467    45,128    42,398
                                          --------  --------  --------
          Total                           $190,096  $185,942  $164,523
                                          --------  --------  --------
Deduct                                                                
Cash Dividends Declared                                               
  Preferred Stock                                                     
     $100 Par Value                                                   
        4 1/2% Series                          501       501       501
        4.64% Series                           371       371       371
        5.85% Series                         1,287     1,287     1,287
     Auction Rate Series (rate at                                     
        December 31, 1997 was 4.19%)         1,057     1,029     1,140
  Common Stock, No Par Value                39,482    46,121    20,056
                                          --------  --------  --------
          Total Dividends Declared          42,698    49,309    23,355
                                          --------  --------  --------
  Additional Minimum Liability for Non-                               
  Qualified Pension Plan at                                           
    December 31, 1997, 1996, and 1995                                 
net of taxes of $208, $3 and $233,                                    
respectively                                   317         4       354
                                          --------  --------   -------
                                            43,015    49,313    23,709
                                          --------  --------  --------
Balance End of Year                       $147,081  $136,629  $140,814
                                          ========  ========  ========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
</TABLE>

                     CENTRAL ILLINOIS LIGHT COMPANY
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of CILCO include the accounts
of CILCO and its subsidiaries, CILCO Exploration and Development
Company and CILCO Energy Corporation.  CILCO is a subsidiary of
CILCORP Inc.  Prior year amounts have been reclassified on a basis
consistent with the 1997 presentation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.  Actual results could differ
from those estimates.

REGULATION

CILCO is a public utility subject to regulation by the Illinois
Commerce Commission and the Federal Energy Regulatory Commission with
respect to accounting matters, and maintains its accounts in
accordance with the Uniform System of Accounts prescribed by these
agencies.

CILCO is subject to the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" (SFAS 71) for its regulated public utility
operations.  Under SFAS 71, assets and liabilities are recorded to
represent probable future increases and decreases, respectively, of
revenues to CILCO resulting from the ratemaking action of
regulatory agencies.

The Electric Service Customer Choice and Rate Relief Law of 1997
(Customer Choice Law) became effective in Illinois in December 1997
(see Management's Discussion - Competition).  Among other
provisions, this law begins a nine-year transition process to a
fully competitive market for electricity in Illinois.  Electric
transmission and distribution activities are expected to continue
to be regulated, but a customer may choose to purchase electricity
from another supplier.  Under these circumstances, a utility will
charge a fee for delivering power and may collect an additional non-
bypassable transition charge.  This transition charge, which may
generally be collected through 2006, must be filed with the ICC and
is designed to help utilities recover the costs of past investments
made under the regulated system.  However, the transition charge
may not cause customers to pay more than the utility's price per
KWH of electricity before enactment of the Customer Choice Law,
adjusted to reflect base rate reductions required by the law.

The Customer Choice Law contains many other provisions affecting
how CILCO will or may conduct its business in the future.  The
Customer Choice Law also requires the ICC to promulgate rules
pertaining to various matters, including accounting and
recordkeeping requirements, electric reliability standards, and
affiliated interest rules.  CILCO will adapt its business plans to
take advantage of the competitive opportunities afforded by the new
law.

Due to the transition cost recovery limitations and base rate
reductions of the Customer Choice Law, CILCO's electric generation
activities will no longer be subject to the provisions of SFAS 71.
In such circumstances, CILCO's generation-related regulatory assets
and liabilities must be written off.  Regulatory assets included on
the Consolidated Balance Sheets at December 31, 1997 and 1996 are
as follows:

<TABLE>
<CAPTION>
                                                       1997        1996
                                                       (In thousands)
<S>                                                  <C>         <C>
Included in prepayments and other:                                      
    Fuel and gas cost adjustments                    $ 2,954     $ 9,658
    Coal tar remediation cost - estimated                               
      current                                            844       1,071
    Gas transition costs                                 159       1,022
                                                     -------     -------
          Current costs included in                                     
            prepayments and other                      3,957      11,751
                                                     -------     -------
Included in other assets:                                               
    Coal tar remediation cost, net of                                   
      recoveries                                       2,745       2,839
    Regulatory tax asset                               7,578       4,777
    Deferred gas costs                                 4,145       4,330
    Unamortized loss on reacquired debt                3,581       5,572
                                                     -------     -------
         Future costs included in other assets        18,049      17,518
                                                     -------     -------
              Total regulatory assets                $22,006     $29,269
                                                     =======     =======
</TABLE>

Regulatory assets at December 31, 1997 are those related to CILCO's
regulated electric and gas distribution activities.  Regulatory
assets of $1.5 million and liabilities of $5.6 million associated
with electric generating plant were written-off or credited,
respectively, to income in 1997 as a net $4.1 million after-tax
extraordinary item.  CILCO does not currently believe the costs
recorded for its generating plants and related assets at December 31,
1997 to be impaired as a result of the Customer Choice Law.
Regulatory liabilities, consisting of deferred tax items primarily
related to CILCO's electric and gas transmission and distribution
operations, are approximately $56.8 million and $68.6 million at
December 31, 1997 and 1996, respectively.

CILCO's electric generation-related identifiable assets included in
the balance sheet at December 31, 1997 were:

<TABLE>
<CAPTION>
                                                 (In thousands)
       <S>                                        <C>
       Property, Plant and Equipment              $ 535,065
       Less:  Accumulated Depreciation             (259,988)
                                                  ---------
                                                    275,077
       Construction Work in Progress                  1,979
                                                  ---------
         Net Property, Plant and Equipment          277,056
       Fuel, at Average Cost                          8,520
       Materials and Supplies, at Average Cost        8,202
                                                  ---------
       Total Electric Generation-Related          
         Identifiable Assets                      $ 293,778
                                                  =========
</TABLE>

Accumulated deferred income taxes associated with electric generation
property at December 31, 1997 were approximately $79 million.

UTILITY OPERATING REVENUES, FUEL COSTS AND COST OF GAS

Electric and gas revenues include service provided but unbilled at
year end.  Substantially all electric rates and gas system sales rates
of CILCO include a fuel adjustment clause and a purchased gas
adjustment clause, respectively.  These clauses provide for the
recovery of changes in electric fuel costs, excluding coal
transportation, and changes in the cost of gas on a current basis in
billings to customers.  CILCO adjusts the cost of fuel and cost of gas
to recognize over or under recoveries of allowable costs.  The
cumulative effects are deferred on the Balance Sheets as a current
asset or current liability (see Regulation, above) and adjusted by
refunds or collections through future billings to customers.  Under
the Customer Choice Law, a regulated utility may elect to eliminate
its fuel or purchased gas adjustment clauses.  On February 27, 1998,
CILCO filed tariffs designed to eliminate the purchased gas adjustment
clause.  For further discussion, refer to the caption, "Electric Fuel
and Purchased Gas Adjustment Clauses" of Item 1. Business.

CONCENTRATION OF CREDIT RISK

CILCO, as a public utility, must provide service to customers within
its defined service territory and may not discontinue service to
residential customers when certain weather conditions exist.  CILCO
continually reviews customers' creditworthiness and requests or
refunds deposits based on that review.  At December 31, 1997, CILCO
had net receivables of $44.5 million, of which approximately $5.9
million was due from its major industrial customers.

TRANSACTIONS WITH AFFILIATES

CILCO, which is a subsidiary of CILCORP, incurs certain corporate
expenses such as legal, shareholder and accounting fees on behalf of
CILCORP and its other subsidiaries.  These expenses are billed monthly
to CILCORP and its other subsidiaries based on specific identification
of costs except for shareholder-related costs which are based on the
relative equity percentages of CILCORP and its subsidiary
corporations.  A return on CILCO assets used by CILCORP and its other
subsidiaries is also calculated and billed monthly.   Total billings
to CILCORP and its other subsidiaries amounted to $5.7 million, $5.4
million, and $1.7 million in 1997, 1996 and 1995, respectively.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)

The allowance, representing the cost of equity and borrowed funds used
to finance construction, is capitalized as a component of the cost of
utility plant.  The amount of the allowance varies depending on the
rate used and the size and length of the construction program.  The
Uniform System of Accounts defines AFUDC, a non-cash item, as the net
cost for the period of construction of borrowed funds used for
construction purposes and a reasonable rate upon other funds when so
used.  On the income statement, the cost of borrowed funds capitalized
is reported as a reduction of total interest expense and the cost of
equity funds capitalized is reported as other income.  In accordance
with the FERC formula, the composite AFUDC rates used in 1997, 1996
and 1995 were 7.2%, 7.8% and 6.7%, respectively.

DEPRECIATION AND MAINTENANCE

Provisions for depreciation of utility property for financial
reporting purposes are based on straight-line composite rates.  The
annual provisions for utility plant depreciation, expressed as a
percentage of average depreciable utility property, were 3.8% and 4.6%
for electric and gas, respectively, for each of the last three years.
Utility maintenance and repair costs are charged directly to expense.
Renewals of units of property are charged to the utility plant
account, and the original cost of depreciable property replaced or
retired, together with the removal cost less salvage, is charged to
the accumulated provision for depreciation.

INCOME TAXES

CILCO follows a policy of comprehensive interperiod income tax
allocation.  Investment tax credits related to utility property have
been deferred and are being amortized over the estimated useful lives
of the related property.  CILCORP and its subsidiaries file a
consolidated federal income tax return.  Income taxes are allocated to
the individual companies based on their respective taxable income or
loss.

CONSOLIDATED STATEMENTS OF CASH FLOWS

CILCO considers all highly liquid debt instruments purchased with a
remaining maturity of three months or less to be cash equivalents for
purposes of the Consolidated Statements of Cash Flows.

CILCO-OWNED LIFE INSURANCE POLICIES

The following amounts related to CILCO-owned life insurance
contracts, issued by one major insurance company, are recorded on the
Consolidated Balance Sheets:

<TABLE>
<CAPTION>
                                              1997        1996
                                                (In thousands)
<S>                                        <C>          <C>
Cash surrender value of contracts          $ 45,297     $ 40,076
Borrowings against contracts                (42,898)     (37,948)
                                            -------     --------
   Net investment                          $  2,399     $  2,128
                                           ========     ========
</TABLE>

Interest expense related to borrowings against CILCO-owned life
insurance, included in CILCO-owned Life Insurance, Net on the
Consolidated Statements of Income, was $3.5 million, $2.7 million and
$2.3 million for 1997, 1996 and 1995, respectively.

NOTE 2 - INCOME TAXES

CILCO uses the liability method to account for income taxes.  Under
the liability method, deferred income taxes are recognized at
currently enacted income tax rates to reflect the tax effect of
temporary differences between the financial reporting basis and the
tax basis of assets and liabilities.  Temporary differences occur
because the income tax law either requires or permits certain items to
be reported on CILCO's income tax return in a different year than they
are reported in the financial statements. CILCO has recorded a
regulatory asset and liability to account for the effect of expected
future regulatory actions related to unamortized investment tax
credits, income tax liabilities initially recorded at tax rates in
excess of current rates, the equity component of Allowance for Funds
Used During Construction and other items for which deferred taxes had
not previously been provided.  The temporary differences related to
the consolidated deferred income tax asset and liability at
December 31, 1997, 1996, and 1995 were as follows:

<TABLE>
<CAPTION>
December 31                             1997         1996          1995
                                               (In thousands)
<S>                                 <C>          <C>          <C>
Deferred Tax Assets:
Deferred Tax Asset                  $ 16,752     $ 14,967     $ 13,086
Adjustment to reflect regulatory                              
  asset                               (7,578)      (4,777)      (3,232)
                                    --------     --------     --------
Net deferred tax asset              $  9,174     $ 10,190     $  9,854
                                    ========     ========     ========
                                                              
Deferred Tax Liabilities:                                     
Deferred Tax Liability-property     $205,777     $211,517     $213,187
Adjustment to reflect regulatory                              
  liability                          (56,807)     (68,565)     (62,714)
                                    --------     --------     --------
Net Deferred Tax Liability-                                   
  property                           148,970      142,952      150,473
Deferred Tax Liability-other            (522)       2,489        3,759
                                    --------     --------     --------
Accumulated Deferred Income Tax                               
  Liability                         $148,448     $145,441     $154,232
                                    ========     ========     ========
Accumulated Deferred Income Tax                               
  Liability, net of deferred tax                              
  assets                            $139,274     $135,251     $144,378
                                    ========     ========     ========
</TABLE>

The following table reconciles the change in the accumulated deferred
income tax liability to the deferred income tax expense included in
the income statement for the period:

<TABLE>
<CAPTION>
December 31                             1997          1996
                                          (In thousands)
<S>                                 <C>           <C>
Net change in deferred income tax                 
  liability per above table         $  4,023      $ (9,127)
Change in tax effects of income                   
   tax related regulatory assets                  
   and liabilities                   (14,559)        4,306
Deferred taxes related to                         
  extraordinary item                   5,634           --
Other                                    208             3
                                    --------      --------
Deferred income tax expense                       
  (benefit) for the period          $ (4,694)     $ (4,818)
                                    ========      ========
</TABLE>

Income tax expenses were as follows:

<TABLE>
<CAPTION>
Years Ended December 31           1997          1996         1995
                                          (In thousands)
<S>                           <C>          <C>          <C>
Current income taxes
Federal                       $29,244      $27,260      $26,712
State                           6,350        5,504        5,780
                              -------      -------      -------
  Total operating current                               
    taxes                      35,594       32,764       32,492
                              -------      -------      -------
Deferred operating income                               
  taxes, net
Depreciation and                                        
  amortization                 (6,080)      (3,937)      (3,642)
Repair allowance                1,384         (197)       1,917
Borrowed component of AFUDC        80          136          396
Capitalized overhead costs       (807)        (750)        (893)
Removal costs                   2,515        4,832        2,130
Gas take-or-pay settlements      (339)        (706)        (751)
Gas storage field                (191)         405          861
Taxable salvage                   220          351          654
Environmental remediation                               
  costs                            46         (642)         642
Pension expense                (1,798)      (1,726)      (6,673)
Other                             377       (2,298)      (2,173)
                              -------      -------      -------
   Total operating deferred                             
     income taxes, net         (4,593)      (4,532)      (7,532)
Investment tax credit                                   
  amortization                 (1,684)      (1,684)      (1,693)
                              -------      -------      -------
Total operating income taxes   29,317       26,548       23,267
Income tax reduction for                                
  disallowed plant costs          144          156          168
Other, net                     (3,192)      (2,622)        (902)
                              -------      -------      -------
Total income taxes before                               
  extraordinary item           26,269       24,082       22,533
Deferred taxes related to                               
  extraordinary item           (5,634)      --           --
                              -------      -------      -------
Total income taxes            $20,635      $24,082      $22,533
                              =======      =======      =======
<FN>
The 1997 income tax provision has been reduced to reflect the
crediting to income as an extraordinary item the regulatory liability
related to electric generation property deferred taxes which were
recorded at tax rates in excess of the current rate (see Note 1).

Total operating deferred income taxes, net, includes deferred state
income taxes of $(65,000), $(62,000) and $(493,000) for 1997, 1996 and
1995, respectively.  Other, net, includes deferred state income taxes
of $(18,000), $(51,000) and $(40,000) for 1997, 1996 and 1995,
respectively.
</TABLE>

The following table represents a reconciliation of the effective tax
rate with the statutory federal income tax rate:

<TABLE>
<CAPTION>
                                               1997      1996      1995
<S>                                           <C>       <C>        <C>
Statutory federal income tax rate             35.0%     35.0%      35.0%
                                              ====      ====       ====
Equity component of AFUDC not subject to                        
  taxation                                       --       --       (0.1)
Amortization of property-related deferred                       
  taxes provided at tax rates in excess of                      
  the current rate                            (1.4)     (2.2)      (2.0)
Amortization of investment tax credit         (2.4)     (2.6)      (2.7)
CILCO-owned life insurance                    (1.1)     (1.1)      (1.0)
State income taxes                             5.0       5.0        5.8
Preferred dividends and other permanent                         
  differences                                  2.1       2.0        2.0
Other differences                             (0.2)      0.5       (0.4)
                                               ----     ----       ----
   Total                                       2.0       1.6        1.6
                                               ----     ----       ----
Effective income tax rate before effect of                      
  extraordinary item                          37.0      36.6       36.6
Tax effect of extraordinary item              (7.9)       --         --
                                              ----      ----       ----
Effective income tax rate                     29.1%     36.6%      36.6%
                                              ====      ====       ====
</TABLE>

NOTE 3 - POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS

POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE

CILCO has recorded a liability of approximately $1.5 million and
$1.4 million at December 31, 1997 and 1996, respectively, for benefits
other than pensions or health care provided to former or inactive
employees.

PENSION BENEFITS

Substantially all of CILCO's full-time employees, including those assigned
to the Holding Company, are covered by trusteed, non-contributory defined
benefit pension plans.  Benefits under these qualified plans reflect the
employee's years of service, age at retirement and maximum total
compensation for any consecutive sixty-month period prior to retirement.
CILCO also has an unfunded nonqualified plan for certain employees.

Pension costs for the past three years were charged as follows:

<TABLE>
<CAPTION>
                                    1997       1996        1995
                                          (In thousands)
<S>                                <C>        <C>         <C>
Operating expenses                 $  493     $ 9,700     $15,528
Utility plant and other               125         922         994
                                   ------     -------     -------
   Net pension costs               $  618     $10,622     $16,522
                                   ======     =======     =======
</TABLE>

Provisions for pension expense reflect the use of the projected unit
credit actuarial cost method.  At December 31, 1997 and 1996, CILCO
recognized an additional minimum liability on the Balance Sheets for
the plan in which the accumulated benefit obligation exceeds the fair
value of plan assets.

The components of net periodic pension costs follow:

<TABLE>
<CAPTION>
                                                   1997       1996
                                                   (In thousands)
<S>                                             <C>         <C>
                                                            
Cost of pension benefits earned by employees    $  4,384    $  4,998
Interest cost on projected benefit obligation     17,561      16,666
Actual return on plan assets                     (51,534)    (34,173)
Net amortization and deferral                     30,207      15,213
Special termination benefits                       --          7,918
                                                --------    --------
Net pension costs                               $    618    $ 10,622
                                                ========    ========
</TABLE>

During 1996, CILCO recognized $7.9 million of net pension costs in
accordance with Statement of Financial Accounting Standards No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits."  This amount
represented the costs associated with additional benefits extended in
connection with a voluntary early retirement program.

Information on the funded status of plans in which assets exceed
accumulated benefits follows:

<TABLE>
<CAPTION>
Actuarial present value of benefit obligation:       1997       1996
                                                      (In thousands)
<S>                                              <C>         <C>
Vested benefits - employees' rights to receive               
  benefits no longer contingent upon continued               
  employment                                     $(200,232)  $(191,301)
Non-vested benefits - employees' rights to                   
  receive benefits contingent upon continued                 
  employment                                       (15,287)    (11,293)
                                                 ---------   ---------
Accumulated benefit obligation                    (215,519)   (202,594)
Provision for future pay increases                 (35,718)    (30,224)
                                                 ---------   ---------
Projected benefit obligation                      (251,237)   (232,818)
Pension assets at fair market value                289,091     254,824
                                                 ---------   ---------
Projected benefit obligation (greater) less                  
  than plan assets                                  37,854      22,006
Unrecognized transition asset                       (4,899)     (5,787)
Unrecognized prior service cost                      6,978       8,006
Unrecognized net gain                              (49,341)    (33,488)
                                                 ---------   ---------
   Pension liability recorded on Balance Sheets  $  (9,408)  $  (9,263)
                                                 =========   =========
</TABLE>

Information on the funded status of the plan in which accumulated
benefits exceed assets follows:

<TABLE>
<CAPTION>
Actuarial present value of benefit obligation:        1997       1996
                                                       (In thousands)
<S>                                               <C>         <C>
Vested benefits - employees' rights to receive                
  benefits no longer contingent upon continued                
  employment                                      $(2,614)    $(1,938)
Non-vested benefits - employees' rights to                    
  receive benefits contingent upon continued                  
  employment                                         (288)       (169)
                                                  -------     -------
Accumulated benefit obligation                     (2,902)     (2,107)
Provision for future pay increases                   (790)       (515)
                                                  -------     -------
Projected benefit obligation                       (3,692)     (2,622)
Pension assets at fair market value                   --          --
                                                  -------     -------
Projected benefit obligation greater than                     
  plan assets                                      (3,692)     (2,622)
Unrecognized prior service cost                       455         495
Unrecognized net loss                               1,911       1,111
Additional minimum liability                       (1,576)     (1,091)
                                                  -------     -------
   Pension liability recorded on Balance Sheets   $(2,902)    $(2,107)
                                                  =======     =======
</TABLE>

<TABLE>
<CAPTION>
Significant assumptions used for calculations:   1997        1996
<S>                                              <C>         <C>
Discount rate                                    7.25%       7.75%
Expected rate of salary increase                 4.50%       4.50%
Expected long-term rate of return                8.50%       8.50%
</TABLE>

POSTRETIREMENT HEALTH CARE BENEFITS

Provisions for postretirement benefits expenses are determined under
the accrual method of accounting.

Substantially all of CILCO's full-time employees, including those
assigned to the Holding Company, are currently covered by a trusteed,
non-contributory defined benefit postretirement health care plan.  The
plan pays stated percentages of most necessary medical expenses
incurred by retirees, after subtracting payments by Medicare or other
providers and after a stated deductible has been met.  Participants
become eligible for the benefits if they retire from CILCO after
reaching age 55 with 10 or more years of service.

Postretirement health care benefit costs were charged as follows:

<TABLE>
<CAPTION>
                                         1997       1996      1995
                                             (In thousands)
<S>                                     <C>        <C>       <C>
Operating expenses                      $3,989     $5,096    $5,108
Utility plant and other                  1,825      1,883     1,882
                                        ------     ------    ------
   Net postretirement health care                                  
     benefit costs                      $5,814     $6,979    $6,990
                                        ======     ======    ======
</TABLE>

Information on the plans' funded status follows:
<TABLE>
<CAPTION>
                                               1997         1996
                                                (In thousands)
<S>                                       <C>          <C>
Components of net postretirement health care
  benefit costs:
     Service cost - benefits attributed                
       to service during the period       $  1,298     $  1,429
     Actual return on plan assets           (9,906)      (4,290)
     Interest cost on accumulated                      
       postretirement health care                      
       benefit obligation                    5,047        4,545
     Amortization of transition                        
       obligation over 18.6 years            2,858        2,858
     Other net amortization and                        
       deferral                              6,517        1,441
     Special termination benefits              --           996
                                          --------     --------
     Net postretirement health care                    
       benefit costs                      $  5,814     $  6,979
                                          ========     ========
  Actuarial present value of                           
    accumulated postretirement health
    care benefit obligation:
     Retirees                             $(49,737)    $(41,287)
     Other fully eligible participants      (3,368)      (3,904)
     Other active participants             (19,437)     (18,079)
                                          --------     --------
     Accumulated postretirement health                 
       care benefit obligation             (72,542)     (63,270)
  Plan assets at fair value                 52,263       39,601
                                          --------     --------
  Accumulated health care benefit                      
    obligation greater than plan assets    (20,279)     (23,669)
     Unrecognized actuarial gain           (12,977)     (13,447)
     Unrecognized transition obligation     33,155       36,013
                                          --------     --------
  Postretirement health care benefit                   
    liability recorded on Balance                      
    Sheets                                $   (101)    $ (1,103)
                                          ========     ========
</TABLE>

For measurement purposes, the annual health care cost trend rate
averaged 7.2% for 1997; the rate was assumed to decrease gradually to
5.7% by 2025 and remain at that level thereafter.

Increasing the assumed health care cost trend rate by 1% in each year
would increase the accumulated postretirement benefit obligation at
December 31, 1997, by $3.0 million and the aggregate of the service
and interest cost components of net postretirement health care cost
for 1997 by $268,000.  The discount rate used in determining the
accumulated postretirement benefit obligation at December 31, 1997,
was 7.25% and at December 31, 1996, was 7.75%.  The weighted average
expected return on assets net of taxes was 8.1%, where taxes are
assumed to decrease return by 0.4%.

NOTE 4 - SHORT-TERM DEBT

CILCO had arrangements for bank lines of credit totaling $30.0 million
at December 31, 1997, all of which were unused.  These lines of credit
were maintained by commitment fees of 1/20 of 1% per annum in lieu of
balances.  These bank lines of credit support CILCO's issuance of
commercial paper.  Short-term borrowings consisted of commercial paper
totaling $21.3 million and $9.9 million at December 31, 1997 and 1996,
respectively.

NOTE 5 - RETAINED EARNINGS

CILCO's Articles of Incorporation provide that no dividends shall be
paid on the common stock if, at the time of declaration, the balance
of retained earnings does not equal at least two times the annual
dividend requirement on all outstanding shares of preferred stock.
The amount of retained earnings so required at December 31, 1997, was
$6.4 million.

NOTE 6 - PREFERRED STOCK
<TABLE>
<CAPTION>
At December 31                            1997         1996
                                           (In thousands)
<S>                                     <C>          <C>
Preferred stock, cumulative
$100 par value, authorized 1,500,000 shares
   Without mandatory redemption                             
   4.50% series - 111,264 shares        $11,126      $11,126
   4.64% series - 79,940 shares           7,994        7,994
Class A, no par value, authorized                           
  3,500,000 shares                                          
   Flexible auction rate - 250,000                          
    shares (a)                           25,000       25,000
   With mandatory redemption                                
   5.85% series - 220,000 shares         22,000       22,000
                                        -------      -------
        Total preferred stock           $66,120      $66,120
                                        =======      =======
<FN>
(a)  Dividend rates at December 31, 1997 and 1996, were 4.18% and
     4.05%,respectively.
</TABLE>
All classes of preferred stock are entitled to receive cumulative
dividends and rank equally as to dividends and assets, according to their
respective terms.

The total annual dividend requirement for preferred stock outstanding at
December 31, 1997, is $3.2 million, assuming a continuation of the auction
dividend rate at December 31, 1997, for the flexible auction rate series.

PREFERRED STOCK WITHOUT MANDATORY REDEMPTION

The call provisions of preferred stock redeemable at CILCO's option
outstanding at December 31, 1997, are as follows:
<TABLE>
<CAPTION>

Series         Callable Price Per Share (plus accrued dividends)
<S>                                <C>
4.50%                              $110
4.64%                              $102
Flexible auction rate              $100
</TABLE>

PREFERRED STOCK WITH MANDATORY REDEMPTION

CILCO's 5.85% Class A preferred stock may be redeemed in 2003 at $100 per
share.  A mandatory redemption fund must be established on July 1, 2003.
The fund will provide for the redemption of 11,000 shares for $1.1 million
on July 1 of each year through July 1, 2007.  On July 1, 2008, the
remaining 165,000 shares will be retired for $16.5 million.

PREFERENCE STOCK, CUMULATIVE

No Par Value, Authorized 2,000,000 shares, of which none have been issued.

NOTE 7 - LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31                                1997         1996
                                               (In thousands)
<S>                                       <C>          <C>
First Mortgage Bonds
   7 1/2% series due 2007                 $ 50,000     $ 50,000
   8 1/5% series due 2022                   65,000       65,000
Medium-Term Notes                                     
   5.7% series due 1998                         --       10,650
   6.4% series due 2000                     30,000       30,000
   6.82% series due 2003                    25,350       25,350
   6.13% series due 2005                    16,000       16,000
   7.8% series due 2023                     10,000       10,000
   7.73% series due 2025                    20,000       20,000
Pollution Control Refunding Bonds                     
   6.5% series F due 2010                    5,000        5,000
   6.2% series G due 2012                    1,000        1,000
   6.5% series E due 2018                   14,200       14,200
   5.9% series H due 2023                   32,000       32,000
                                          --------     --------
                                           268,550      279,200
Unamortized premium and discount on                   
  long-term debt, net                         (714)        (761)
                                          --------     --------
     Total CILCO long-term debt           $267,836     $278,439
                                          ========     ========
</TABLE>

CILCO's first mortgage bonds are secured by a lien on substantially
all of its property and franchises.  Unamortized borrowing expense,
premium and discount on outstanding long-term debt are being
amortized over the lives of the respective issues.

Scheduled maturities of long-term debt for 2000 are $30 million.
There are no scheduled maturities of long-term debt for 1999, 2001 or
2002.  The 1998 maturities of long-term borrowings have been
classified as current liabilities.

NOTE 8 - COMMITMENTS & CONTINGENCIES

CILCO's 1998 capital expenditures for utility plant are estimated to
be $51.1 million, in connection with which CILCO has normal and
customary purchase commitments at December 31, 1997.

CILCO's policy is to act as a self-insurer for certain insurable
risks resulting from employee health and life insurance programs.

In August 1990, CILCO entered into a firm, wholesale power purchase
agreement with Central Illinois Public Service Company, now
AmerenCIPS (CIPS).  This agreement provides for a minimum contract
delivery rate from CIPS of 90 MW until the contract expires in 1998.

In March 1995, CILCO and CIPS renegotiated a limited-term power
agreement reached in November 1992.  This agreement, which now expires
in May 2009, provides for CILCO to purchase up to 150 MW of CIPS'
capacity from June 1998 through May 2002, and 50 MW from June 2002
through May 2009.

In January 1997, CILCO intervened in a proceeding pending before the
FERC to challenge the validity of the power agreements with CIPS
because of CIPS' failure to obtain FERC approval of the agreements.
In the alternative, CILCO requested that FERC provide an "open
season" during which CILCO may cancel the power agreements in whole
or in part.  In an order issued in October 1997, FERC rejected the
challenge to the validity of the agreements and denied CILCO's
request for an open season.  However, FERC ordered CIPS to file the
agreements with FERC and on its own motion initiated a separate
proceeding to investigate the terms of the agreements.  In February
1998, FERC denied CILCO's request for a rehearing of the October
order, but directed that issues related to the justness and
reasonableness of the provisions of the power agreement be reviewed.
CILCO also has requested the FERC to order CIPS to pay penalties to
CILCO for CIPS failure to file and seek approval for the agreements
with the FERC.

For a discussion of former gas manufacturing sites, refer to the
caption "Environmental Matters" of Item 7.  Management's Discussion
and Analysis of Financial Condition and Results of Operations on
page 21 of CILCORP's 1997 Annual Report which is incorporated herein
by reference.

NOTE 9 - LEASES

CILCO leases certain equipment, buildings and other facilities under
capital and operating leases.  Minimum future rental payments under
non-cancellable capital and operating leases having remaining terms in
excess of one year as of December 31, 1997, are $14.5 million in
total.  Payments due during the years ending December 31, 1998,
through December 31, 2002, are $5.4 million, $4.1 million, $2.1
million, $1.4 million and $1.2 million, respectively.

NOTE 10 - FINANCIAL INSTRUMENTS AND PRICE RISK MANAGEMENT

CILCO utilizes various commodity-based financial instruments (future
contracts, options and swaps) to reduce the impact of natural gas
price fluctuations related to natural gas supply and its storage
program, including the price risk related to physical location of
natural gas (basis risk).  This program is designed to provide a
higher level of price stability relative to winter market prices for
natural gas injected in CILCO-owned storage fields.  CILCO hedged
approximately 19% of its owned natural gas storage in 1997.

In hedging the acquisition cost of gas injected into storage, gain or
loss on derivative financial instruments is deferred as an adjustment
to gas in underground storage on the balance sheet.  As natural gas is
withdrawn from storage, these gains or losses are passed to customers
through the PGA, which is included in Cost of Gas on the income
statement.  If a derivative financial instrument contract is
terminated early for any reason, including regulatory concerns, any
gain or loss resulting will be deferred and recorded concurrent with
the related purchases and sales of natural gas.  In December 1997,
CILCO suspended the storage hedging program and closed out all open
futures and options positions due to the uncertainty of future
recovery of costs through the PGA.  At December 31, 1997, CILCO had
open positions in derivative financial instruments used to hedge basis
of 1.4 Bcf.

NOTE 11 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following quarterly operating results are unaudited, but, in the
opinion of management, include all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of CILCO's
operating results for the periods indicated.  The results of
operations for each of the fiscal quarters are not necessarily
comparable to, or indicative of, the results of an entire year due to
the seasonal nature of CILCO's business.

<TABLE>
<CAPTION>
For the Three Months Ended March 31   June 30   September 30 December 31
                                          (In thousands)
<S>                       <C>         <C>         <C>         <C>
1997
Operating revenue         $165,795    $111,520    $123,355    $146,184
Operating income            19,197      14,382      22,491      17,242
Net income before                                                     
  extraordinary item        13,051       8,567      16,337      11,412
Extraordinary item              --          --          --       4,100
Net income after                                                      
  extraordinary item        13,051       8,567      16,337      15,512
                                                                      
1996                                                                  
Operating revenue         $154,731    $108,434    $114,864    $140,526
Operating income            20,192      12,188      22,489      14,809
Net income                  13,918       6,310      16,234       8,666
</TABLE>

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

                                CILCORP

Not applicable.
                                 CILCO

Not applicable.

                                PART III

Item 10.    Directors and Executive Officers of the Registrant

                                CILCORP

The information required by Item 10 relating to directors is set forth
in the Company's definitive proxy statement for its 1998 Annual Meeting
of Stockholders filed with the United States Securities and Exchange
Commission (Commission) pursuant to Regulation 14A.  Such information is
incorporated herein by reference to the material appearing under the
caption "Election of Directors" of such proxy statement.  Information
required by Item 10 relating to executive officers of the Company is set
forth under a separate caption in Part I hereof.

                                 CILCO

The information required by Item 10 relating to directors is set forth
in CILCO's definitive proxy statement for its 1998 Annual Meeting of
Stockholders filed with the Commission pursuant to Regulation 14A.  Such
information is incorporated herein by reference to the material
appearing under the caption "Election of Directors" of such proxy
statement.  Information required by Item 10 relating to executive
officers of CILCO is set forth under a separate caption in Part I
hereof.

Item 11.    Executive Compensation

                                 CILCORP

The Company has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A.  The information required by Item 11 is
incorporated herein by reference to the material appearing under the
caption "Executive Compensation" of such proxy statement.

                                  CILCO

CILCO has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A.  The information required by Item 11 is
incorporated herein by reference to the material appearing under the
caption "Executive Compensation" of such proxy statement.

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

The Company has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A.  The information required by Item 12 is
incorporated herein by reference to the material appearing under the
caption "Voting Securities and Principal Holders" of such proxy
statement.
                                    
                                  CILCO

CILCO has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A.  The information required by Item 12 is
incorporated herein by reference to the material appearing under the
caption "Voting Securities and Principal Holders" of such proxy
statement.

Item 13.  Certain Relationships and Related Transactions

                                 CILCORP

CILCORP Inc. (CILCORP or Company), a holding company, is the parent of
its direct subsidiaries Central Illinois Light Company (CILCO), CILCORP
Investment Management Inc. (CIM), CILCORP Ventures Inc. (CVI), and QST
Enterprises Inc. (QST).  A former CILCORP first-tier subsidiary, QST
Environmental Inc., formerly known as Environmental Science &
Engineering, Inc. (ESE) became a subsidiary of QST effective October 29,
1996.  Effective June 1, 1997, ESE began operating under the name QST
Environmental Inc. (QST Environmental).  In the course of business, the
Company carries on certain relations with affiliated companies such as
shared facilities, utilization of employees and other business
transactions.  Central Illinois Light Company is reimbursed at cost by
the Company and the other subsidiaries for any services it provides.

CILCORP has been authorized by the Board of Directors to guarantee up to
$30 million of obligations incurred by QST Enterprises Inc. (QST) and
its subsidiaries.  Through February 28, 1998, CILCORP has guaranteed
$15.7 million of QST's and its subsidiaries' obligations.  CILCORP
receives a fee for providing these guarantees.

QST has been authorized to guarantee up to $50 million of obligations
incurred by its subsidiaries.  Through February 28, 1998, QST has
guaranteed $13.7 million of its subsidiaries' obligations.  QST receives
a fee for providing these guarantees.

QST has outstanding debt of $3.6 million (all to the Holding Company) at
the end of 1997.

QST Environmental's cash flow is supplemented by a $15 million revolving
line of credit with the Holding Company which expires on May 2, 1998.
This line of credit was unused at December 31, 1997.  QST Environmental
had outstanding debt at the end of 1997 of $12.5 million (all to the
Holding Company), less advances to the Holding Company of $2.4 million.
This term debt also expires on May 2, 1998.

CIM had outstanding debt of $41 million (all to the Holding Company) at
the end of 1997.  In 1997, CIM retired $3 million of third party debt
and spent $6.9 million to acquire a new leveraged lease asset.  Both of
these transactions were funded with cash borrowed from the Holding
Company.

Through December 31, 1997, CIM has paid $10.2 million to fund affordable
housing commitments, $4.2 million of which was paid during 1997.  CIM
funded these commitments with cash borrowed from the Holding Company.

CIM has guaranteed the performance of CIM Leasing Inc., CIM Air Leasing
Inc. and CLM Inc. VI (a second tier subsidiary) with respect to certain
obligations arising from the leveraged lease investments held by these
subsidiaries.
                                    
                                  CILCO

One member of the Board of Directors of CILCORP Inc. is also a member of
the Board of Directors of CILCO.  The Chairman and Chief Executive
Officer of CILCO is also the President and Chief Executive Officer of
CILCORP and the secretary of CILCO is also Vice President, General
Counsel and Secretary of CILCORP Inc.


                                PART IV

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

                                CILCORP
                                                                 Page in
                                                             Annual Report to
                                                              Stockholders
(a) 1.   Financial Statements

         The following statements are included in
         Exhibit 13 of this filing and are incorporated
         herein by reference from CILCORP Inc.'s 1997
         Annual Report:

         Management's Report                                      30

         Report of Independent Public Accountants                 30

         Consolidated Statements of Income for the three
           years ended December 31, 1997                          31

         Consolidated Balance Sheets as of
           December 31, 1997, and December 31, 1996             32-33

         Consolidated Statements of Segments of Business for
           the three years ended December 31, 1997              34-35

         Consolidated Statements of Cash Flows for the three
           years ended December 31, 1997                          36

         Consolidated Statements of Common Stockholders' Equity
           for the three years ended December 31, 1997            37

         Notes to the Consolidated Financial Statements         38-48

(a) 2.   Financial Statement Schedules

         The following schedules are included herein:
                                                               Page No.
                                                              Form 10-K
                                                              ---------
         Schedule II - Valuation and Qualifying Accounts
                         and Reserves                             62

         Schedule XIII -Investment in Leveraged Leases at
                        December 31, 1997                         64

         Other schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the financial statements or
notes thereto.

(a) 3.   Exhibits

  *(3)   Articles of Incorporation (Designated in Form 10-K for the
year ended December 31, 1991, File No. 1-8946, as Exhibit
3)).

  *(3)a  By-laws as amended effective April 25, 1995.  [Designated in
Form 10-K for the year ended December 31, 1995, File No. 1-
8946, as Exhibit (3)a]

***(4)   Instruments defining the rights of security holders, including
indentures

 *(10)   CILCO Executive Deferral Plan.  As amended through January 29,
1996.  (Designated in Form 10-K for the year ended December 31,
1995, File No. 1-8946, as Exhibit (10)).

 *(10)a  CILCO Executive Deferral Plan II.  As amended January 29, 1996
(Designated in Form 10-K for the year ended December 31, 1995,
File No. 1-8946, as Exhibit (10)a).

 *(10)b  CILCORP Economic Value Added Incentive Compensation Plan
(Adopted February 29, 1989 & Revised January 29, 1991 and
January 30, 1996.)  [Designated in Form 10-K for the year ended
December 31, 1995.  File No. 1-8946, as Exhibit 10(b)]

**(10)c  Employment Agreement between CILCORP and Robert O. Viets,
         President and Chief Executive Officer (effective September 23,
         1997).

  (10)d  CILCO Benefit Replacement Plan (as amended effective
September 23, 1997).

 *(10)e  CILCORP Deferred Compensation Stock Plan (Designated in Form
10-K for the    year ended December 31, 1991, File No. 1-8946, as
Exhibit (10)f).

  (10)f  CILCORP Shareholder Return Incentive Compensation Plan (as
amended effective October 28, 1997).

  (12)   Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
                                                             Page No.
                                                            Form 10-K
                                                           ----------
  (13)   Annual Report to Security Holders                     69

  (23)   Consent of Arthur Andersen LLP                        70

  (24)   Power of Attorney

  (27)   CILCORP Inc. Consolidated Financial Data Schedule

 (b) 3.   Reports on Form 8-K

             A Form 8-K was filed on January 8, 1998 to disclose the
         write-off of goodwill associated with CILCORP's environmental
         services business.

  *These exhibits have been previously filed with the Securities and
Exchange Commission (SEC) as exhibits to registration statements or
to other filings of CILCORP or CILCO with the SEC and are incorporated
herein as exhibits by reference.  The file number and exhibit
number of each such exhibit (where applicable) are stated in the
description of such exhibit.

 **Comparable Employment Agreements, also effective September 23, 1997,
   exist between the Company and William M. Shay, between Central
   Illinois Light Company and James F. Vergon and between QST
   Enterprises Inc. and J. Mark Elliott.  The only material difference
   in these Agreements pertains to annual base salary in effect on the
   date of each Agreement.  Annual base salary specified in the
   Agreements are as follows:  Mr. Shay $210,000; Mr. Vergon $210,000
   and Mr. Elliott $235,000.

***Pursuant to Paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K,
the Company has not filed as an exhibit to this Form 10-K any
instrument with respect to long-term debt as the total amount of
securities authorized thereunder does not exceed 10 percent of the
total assets of the Company and its subsidiaries on a consolidated
basis, but hereby agrees to furnish to the SEC on request any such
instruments.
                                  CILCO

                                                                     Page No.
                                                                    Form 10-K
                                                                    ----------
(a)  1.     Financial Statements
            The following are included herein:

            Management's Report                                         32

            Report of Independent Public Accountants                    33

            Consolidated Statements of Income for the three years
              ended December 31, 1997                                   34

            Consolidated Balance Sheets as of December 31, 1997 and
              December 31, 1996                                       35-36

            Consolidated Statements of Cash Flows for the three
              years ended December 31, 1997                           37-38

            Consolidated Statements of Segments of Business for
              the three years ended December 31, 1997                   39

            Consolidated Statements of Retained Earnings for the
              three years ended December 31, 1997                       40

            Notes to the Consolidated Financial Statements            41-54

(a)  2.     Financial Statement Schedules
            The following schedule is included herein:

            Schedule II - Valuation and Qualifying Accounts and
                            Reserves for the three years ended
                            December 31, 1997                           63

Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in
the financial statements or notes thereto.

(a) 3.            Exhibits

  *(3)         Articles of Incorporation. As amended July 26, 1993.

  *(3)   a     Bylaws.  As amended effective April 23, 1996.
         [Designated in Form 10-K for the year ended December 31, 1996,
         File No. 1-2732, as Exhibit (3)a.]

  *(4)               Indenture of Mortgage and Deed of Trust between
         Illinois Power Company and Bankers Trust Company, as Trustee,
         dated as of April 1, 1933, Supplemental Indenture between the
         same parties dated as of June 30, 1933, Supplemental Indenture
         between the Company and Bankers Trust Company, as Trustee,
         dated as of July 1, 1933 and Supplemental Indenture between
         the same parties dated as of January 1, 1935, securing First
         Mortgage Bonds, and indentures supplemental to the foregoing
         through November 1, 1994.  (Designated in Registration No. 2-
         1937 as Exhibit B-1, in Registration No. 2-2093 as Exhibit B-
         1(a), in Form 8-K for April 1940, File No. 1-2732-2, as
         Exhibit A, in Form 8-K for December 1949, File No. 1-2732-2,
         as Exhibit A, in Form 8-K for December 1951, File No. 1-2732,
         as Exhibit A, in Form 8-K for July 1957, File No. 1-2732, as
         Exhibit A, in Form 8-K for July 1958, File No. 1-2732, as
         Exhibit A, in Form 8-K for March 1960, File No. 1-2732, as
         Exhibit A, in Form 8-K for September 1961, File No. 1-2732, as
         Exhibit B, in Form 8-K for March 1963, File No. 1-2732, as
         Exhibit A, in Form 8-K for February 1966, File No. 1-2732, as
         Exhibit A, in Form 8-K for March 1967, File No. 1-2732, as
         Exhibit A, in Form 8-K for August 1970, File No. 1-2732, as
         Exhibit A, in Form 8-K for September 1971, File No. 1-2732, as
         Exhibit A, in Form 8-K for September 1972, File No. 1-2732, as
         Exhibit A, in Form 8-K for April 1974, File No. 1-2732, as
         Exhibit 2(b), in Form 8-K for June 1974, File No. 1-2732, as
         Exhibit A, in Form 8-K for March 1975, File No. 1-2732, as
         Exhibit A, in Form 8-K for May 1976, File No. 1-2732, as
         Exhibit A, in Form 10-Q for the quarter ended June 30, 1978,
         File No. 1-2732, as Exhibit 2, in Form 10-K for the year ended
         December 31, 1982, File No. 1-2732, as Exhibit (4)(b), in Form
         8-K dated January 30, 1992, File No. 1-2732, as Exhibit (4) in
         Form 8-K dated January 29, 1993, File No. 1-2732, as Exhibit
         (4) and in Form 8-K dated December 2, 1994, File No. 1-2732,
         as Exhibit (4).)

 *(10)            CILCO Executive Deferral Plan.  As amended
         January 29, 1996.  (Designated in Form 10-K for the year ended
         December 31, 1995, File No. 1-2732, as Exhibit (10).)

 *(10)a    CILCO Executive Deferral Plan II.  As amended
         January 29, 1996.  (Designated in Form 10-K for the year ended
         December 31, 1995, File No. 1-2732, as Exhibit (10)a.)

 **(10)b Employment Agreement between CILCORP and Robert O. Viets,
         Chairman and Chief Executive Officer of CILCO (effective
         September 23, 1997).

 *(10) c     CILCO Deferred Compensation Stock Plan.
         (Designated in Form 10-K for the year ended December 31, 1990,
         File No. 1-2732, as Exhibit (10)d.)

 *(10) d     CILCO Economic Value Added Incentive
         Compensation Plan (adopted January 29, 1991 and revised
         January 29, 1996).  (Designated in Form 10-K for the year
         ended December 31, 1995, File No. 1-2732, as Exhibit (10)d.)

 (10) e     Benefit Replacement Plan (as amended effective
         September 23, 1997).

 (10) f     CILCORP Shareholder Return Incentive Compensation
         Plan (as amended effective October 28, 1997)

  (12)    Computation of Ratio of Earnings to Fixed Charges

  (27)    Central Illinois Light Company Financial Data Schedule

(b) 3.   Reports on Form 8-K
         None

 * These exhibits have been previously filed with the Securities and
   Exchange Commission (SEC) as exhibits to registration statements or
   to other filings of CILCO with the SEC and are incorporated herein
   as exhibits by reference.  The file number and exhibit number of
   each such exhibit (where applicable) are stated in the description
   of such exhibit.

  **A comparable Employment Agreement, also effective September 23,
   1997, exists between the Company and James F. Vergon.  The only
   material difference in these Agreements pertains to the annual base
   salary in effect on the date of each Agreement.  Annual base salary
   specified in Mr. Vergon's Agreement is $210,000.

<TABLE>
SCHEDULE II
CILCORP INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1997, 1996 and 1995
(Thousands of dollars)
<CAPTION>
Column A                        Column B      Column C       Column D   Column E
                                              Additions
                              Balance at  Charged  Charged            Balance at
                              Beginning    to      to Other              End of
      Description             of Period   Income   Accounts  Deductions  Period
<S>                              <C>        <C>         <C>    <C>     <C>
Year ended December 31, 1997                                                    
   Accumulated Provisions                                                       
      Deducted from Assets -                                                    
      Doubtful Accounts          $2,600     $2,803      --     $2,949  $2,454
                                                                                
   Accumulated Provisions                                                       
      Not Deducted from Assets -                                                
      Injuries and Damages        1,381        814      --        985   1,210
                                                                                
Year ended December 31, 1996                                                    
   Accumulated Provisions                                                       
      Deducted from Assets -                                                    
      Doubtful Accounts          $2,223     $3,464      --     $3,087  $2,600
                                                                                
   Accumulated Provisions                                                       
      Not Deducted from Assets -                                                
      Injuries and Damages        2,550      1,328      --      2,497   1,381
                                                                                
Year ended December 31, 1995                                                    
   Accumulated Provisions                                                       
      Deducted from Assets -                                                    
      Doubtful Accounts          $2,291     $2,216      --     $2,284  $2,223
                                                                                
   Accumulated Provisions                                                       
      Not Deducted from Assets -                                                
      Injuries and Damages        2,600      1,279      --      1,329   2,550
</TABLE>



<TABLE>
                                                                 SCHEDULE II
                     CENTRAL ILLINOIS LIGHT COMPANY
             Valuation and Qualifying Accounts and Reserves
              Years Ended December 31, 1997, 1996 and 1995
                         (Thousands of dollars)
<CAPTION>
Column A                       Column B      Column C         Column D  Column E
                                             Additions
                             Balance at  Charged   Charged            Balance at
                              Beginning     to     to Other              End of
      Description             of Period   Income   Accounts  Deductions  Period
<S>                              <C>        <C>         <C>    <C>     <C>
Year ended December 31, 1997                                                    
   Accumulated Provisions                                                       
      Deducted from Assets -                                                    
      Doubtful Accounts          $1,000     $2,438      --     $2,735  $  703
                                                                                
   Accumulated Provisions                                                       
      Not Deducted from Assets -                                                
      Injuries and Damages        1,381        814      --        985   1,210
                                                                                
Year ended December 31, 1996                                                    
   Accumulated Provisions                                                       
      Deducted from Assets -                                                    
      Doubtful Accounts          $  650     $2,832      --     $2,482  $1,000
                                                                                
   Accumulated Provisions                                                       
      Not Deducted from Assets -                                                
      Injuries and Damages        2,550      1,328      --      2,497   1,381
                                                                                
Year ended December 31, 1995                                                    
   Accumulated Provisions                                                       
      Deducted from Assets -                                                    
      Doubtful Accounts          $  600     $1,299      --     $1,249  $  650
                                                                                
   Accumulated Provisions                                                       
      Not Deducted from Assets -                                                
      Injuries and Damages        2,600      1,279      --      1,329   2,550
</TABLE>

<TABLE>
SCHEDULE XIII
CILCORP INC. AND SUBSIDIARY COMPANIES
Investment in Leveraged Leases
<CAPTION>
Year Ended December 31, 1997
(Thousands of dollars)
                                                       Amount
                                  Cost of each       carried on
                                    lease(A)      Balance Sheet(B)
<S>                               <C>                <C>
Office buildings                  $ 23,130           $ 56,912
Warehouses                          11,746             19,855
Mining equipment                    10,244             19,391
Generating stations                 21,890             29,759
Passenger railway equipment          3,805              5,742
Cargo aircraft                       9,583             14,799
                                  --------           --------
      Totals                      $ 80,398           $146,458
                                  ========           ========
<FN>
(A)  This value is the original cost of the leveraged lease net of
     original nonrecourse debt.

(B)  The amount carried on the balance sheet includes current rents
     receivable and estimated residual value, net of unearned and
     deferred income and nonrecourse debt.
</TABLE>

                                 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.

                                          CILCORP INC.

March 18, 1998                       By
                                          R. O. Viets
                                          President and Chief
                                            Executive Officer

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 and on the dates indicated.

            Signature                Title                   Date

(i) and (ii) Principal executive officer, director and principal
financial officer:



  R. O. Viets                    President, Chief        March 18, 1998
                                   Executive Officer
                                   and Director

(iii) Controller



  T. D. Hutchinson               Controller              March 18, 1998

 (iv)  A majority of the Directors
       (including the director named above):

M. Alexis*                           Director            March 18, 1998
J. R. Brazil*                        Director            March 18, 1998
W. Bunn III*                         Director            March 18, 1998
J. D. Caulder*                       Director            March 18, 1998
H. J. Holland*                       Director            March 18, 1998
H. S. Peacock*                       Director            March 18, 1998
K. E. Smith*                         Director            March 18, 1998
R. M. Ullman*                        Director            March 18, 1998
M. M. Yeomans*                       Director            March 18, 1998


  R. O. Viets                        Director            March 18, 1998

 *By

        R. O. Viets
        Attorney-in-fact




                               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.

                                        CENTRAL ILLINOIS LIGHT COMPANY


March 18, 1998                            By
                                               J. F. Vergon
                                               President and Chief
                                                 Operating Officer

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 and on the dates indicated.

            Signature                Title                     Date

(i) Principal executive officer and director:



J. F. Vergon                       President and Chief         March 18, 1998
                                     Operating Officer
                                     and Director

(ii) Principal financial officer and director:



T. S. Romanowski                   Vice President              March 18, 1998

(iii) Controller



T. D. Hutchinson                   Controller and              March 18, 1998
                                     Manager of Accounting

 (iv)  A majority of the Directors
        (including the directors named above):



T. S. Romanowski                     Director                  March 18, 1998



J. F. Vergon                         Director                  March 18, 1998



R. O. Viets                          Director                  March 18, 1998


<TABLE>
EXHIBIT (12)
CILCORP INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
<CAPTION>
Twelve Months Ended                  1997      1996     1995     1994      1993
                                          (Thousands of Dollars)
<S>                                <C>       <C>       <C>      <C>      <C>
Earnings, as Defined:                                                           
   Net Income                      $16,395   $27,943   $38,582  $32,586  $33,583
   Income Taxes                     16,940    14,505    23,274   18,180   18,069
   Interest                         27,913    29,068    29,861   26,341   27,363
   Interest Portion of Rentals       2,819     2,844     1,905    1,864    2,447
   Preferred Dividends               3,216     3,188     3,299    2,980    4,043
                                   -------   -------   -------  -------  -------
    Total Earnings, as Defined     $67,283   $77,548   $96,921  $81,951  $85,505
                                   =======   =======   =======  =======  =======
Fixed Charges, as Defined:                                                      
   Interest Expense                $24,422   $26,337   $27,512  $24,313  $25,929
   Interest Expense on COLI          3,491     2,731     2,349    2,028    1,434
   Interest Portion of Rentals       2,819     2,844     1,905    1,864    2,447
   Tax Effected Preferred                                                       
     Dividends                       5,331     5,284     5,468    4,939    6,701
                                  --------   -------   -------  -------  -------
   Total Fixed Charges, as                                                      
     Defined                       $36,063   $37,196   $37,234  $33,144  $36,511
                                  ========   =======   =======  =======  =======
Ratio of Earnings to Fixed                                                      
  Charges*                             1.9       2.1       2.6      2.5      2.3
                                       ===       ===       ===      ===      ===
<FN>
*The fixed charge coverage ratio without the effects of the QST Environmental
discontinued operations and the CILCO extraordinary item would have been
1.8, 2.1 and 2.6 for 1997, 1996 and 1995, respectively.  Furthermore, if the
effect of the goodwill write-off was also excluded from operating results,
the 1997 fixed charge coverage ratio would have been 2.5.
</TABLE>


<TABLE>
                                                                 EXHIBIT (12)
                     CENTRAL ILLINOIS LIGHT COMPANY
                    Computation of Ratio of Earnings
                            to Fixed Charges
<CAPTION>
Twelve Months Ended                1997     1996     1995      1994     1993
                                          (Thousands of Dollars)
<S>                              <C>      <C>      <C>       <C>      <C>
Earnings, as Defined:                                                        
  Net Income                     $ 53,467 $45,128  $42,398   $32,487  $37,678
  Income Taxes                     20,633  24,082   22,534    17,168   20,368
  Fixed Charges, as Below          29,434  28,504   27,876    24,693   26,335
                                 -------- -------  -------   -------  -------
    Total Earnings, as Defined   $103,534 $97,714  $92,808   $74,348  $84,381
                                 ======== =======  =======   =======  =======
Fixed Charges, as Defined:                                                   
  Interest on COLI               $  3,491 $ 2,731  $ 2,349   $ 2,028  $ 1,434
  Interest on Short-term Debt         281     149      744       292      592
  Interest on Long-term Debt       20,024  21,012   20,242    19,221   19,753
  Amortization of Debt Discount                                              
    & Expense, Premium and                                                   
    Reacquired Loss                 2,218     681      669       665      624
  Miscellaneous Interest                                                     
    Expense                         1,658   2,320    1,967       623    1,485
  Interest Portion of Rentals       1,762   1,611    1,905     1,864    2,447
                                 -------- -------  -------   -------  -------
      Total Fixed Charges, as                                                   
  Defined                        $ 29,434 $28,504  $27,876   $24,693  $26,335
                                 ======== =======  =======   =======  =======
Ratio of Earnings to Fixed                                                   
  Charges*                            3.5     3.4      3.3       3.0      3.2
                                      ===     ===      ===       ===      ===
<FN>
*The 1997 fixed charge coverage ratio would have been 3.7 without the
 effects of the extraordinary item.
</TABLE>


                                 NOTICE

This copy of CILCORP Inc.'s and Central Illinois Light Company's Form 10-K
does not include our 1997 Consolidated Annual Report.  If you have not
received our 1997 Consolidated Annual Report and would like one, please
let us know.




Telephone:
  In Peoria 675-8808
  Elsewhere in Illinois 1-800-322-3569
  Outside Illinois 1-800-622-5514
  TDD 1-309-675-8892

Or you can write to us at:
  Investor Relations Department
  CILCORP Inc.
  300 Hamilton Blvd.
  Suite 300
  Peoria, IL  61602-1238


EXHIBIT 23

                CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference of our reports, dated January 27, 1998, included herein or
incorporated by reference in this Form 10-K, into CILCORP Inc.'s previously
filed Registration Statements File No. 33-45318, 33-51241 and 33-62105.






                               ARTHUR ANDERSEN LLP



Chicago, Illinois
March 18, 1998