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, 1998
                                
                               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.  [  ]









                                1

At March 19, 1999, the aggregate market value of the voting stock
of CILCORP Inc. (CILCORP) held by nonaffiliates was approximately
$825 million.  On that date, 13,610,680 common shares (no par
value) were outstanding.

At March 19, 1999, the aggregate market value of the voting stock
of Central Illinois Light Company (CILCO) held by nonaffiliates
was approximately $63 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, to be filed not later than
April 30, 1999, in connection with its Annual Meeting to be held
in June 1999, is incorporated into Part I and Part III hereof.

Central Illinois Light Company's Proxy Statement, to be filed not
later than April 30, 1999, in connection with its Annual Meeting
to be held in June 1999, is incorporated into Part I and Part III
hereof.

CILCORP Inc.'s Annual Report to Shareholders for the year ended
December 31, 1998 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations, which will
accompany or precede the mailing to shareholders of the above-
referenced proxy statement of CILCORP Inc., is incorporated
herein by reference into Part II Item 7.

CILCORP Inc.'s Annual Report to Shareholders for the year ended
December 31, 1998 -- Financial Statements, Notes to the Financial
Statements and Supplementary Data, which will accompany or
precede the mailing to shareholders of the above-referenced proxy
statement of CILCORP Inc., is incorporated herein by reference
into Part II Item 8.


                                
                                




























                                2

                          CILCORP INC.
                               and
                 Central Illinois Light Company
                  1998 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                    7-9
         Business of CILCO                                     9
           Electric Service                                  9-10
           Gas Service                                      10-11
           Regulation                                         11
           Electric Fuel and Purchased Gas
                  Adjustment Clauses                          12
           Fuel Supply - Coal                                 12
           Natural Gas Supply                                 12
           Financing and Capital Expenditures Programs        13
           Environmental Matters                            13-14
           Significant Customer                               14
           Franchises                                         14
           Competition                                      14-15
           Employees                                          15
           Union Contracts                                    15
         Business of QST (Excluding QST Environmental)        15
         Business of QST Environmental                      15-16
           Customers                                          16
           Regulation of QST Environmental's Clients          16
           Regulation of QST Environmental                    17
           Competition                                        17
           Subcontractors                                     17
           Government Contracts                               17
           Potential Liabilities and Insurance                18
           Employees                                          18
         Other Businesses                                     19
           CIM                                                19
           CVI                                                19
           Employees                                          19
         Year 2000                                            20
Item 2.  Properties                                         20-21
Item 3.  Legal Proceedings                                  21-22
Item 4.  Submission of Matters to a Vote of Security Holders  22
         Executive Officers of the Registrant               22-24
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                3

                             Part II

Item 5.  Market for the Registrant's Common Equity
            and Related Stockholder Matters                   25
Item 6.  Selected Financial Data                              26
Item 7.  Management's Discussion and Analysis of
            Financial Condition and Results of Operations     26
Item 8.  Index - Financial Statements, Supplementary Data
              and Exhibits                                    27
Item 9.  Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure            55
                                
                            Part III

Item 10. Directors and Executive Officers of the Registrants 55-56
Item 11. Executive Compensation                               56
Item 12. Security Ownership of Certain Beneficial
            Owners and Management                             56
Item 13. Certain Relationships and Related Transactions      56-57

                             Part IV

Item 14. Exhibits, Financial Statement Schedules, and
            Reports on Form 8-K                              58-63
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                4

                        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

CAA -- Clean Air Act

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 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.

CWA -- Clean Water Act

DSM -- Demand Side Management.  The process of helping customers
       control how they use energy resources.

FAC -- Fuel Adjustment Clause

FASB -- Financial Accounting Standards Board

FERC -- Federal Energy Regulatory Commission

FIFRA -- Federal Insecticide, Fungicide & Rodenticide Act








                                5

Heating Degree Day --    The measure of 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

IEPA -- Illinois Environmental Protection Agency

KW -- Kilowatt, a thousand watts

KWH --    Kilowatt-hour, one thousand watts used for one hour (unit of work)

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

NPDES -- National Pollutant Discharge Elimination System

OSHA -- Occupational Safety and Health Act

PGA -- Purchased Gas Adjustment

QST -- QST Enterprises Inc.

QST Communications -- 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

SDWA -- Safe Drinking Water 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).

TSCA -- Toxic Substances Control Act

USEPA -- U.S. Environmental Protection Agency

                                
                                
                                
                                
                                
                                
                                
                                6

                             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.(QST Environmental), formerly known as
Environmental Science & Engineering, Inc. (ESE) became a
subsidiary of QST effective October 29, 1996.  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.

On November 23, 1998, the Company announced that The AES
Corporation (AES) has offered to buy 100% of the Company's
outstanding common stock for $65 per share, subject to CILCORP
shareholder approval and various regulatory approvals.  On March
10, 1999, the Illinois Commerce Commission issued its approval of
CILCORP's merger with AES.  Other required approvals are in
process.  The Company anticipates that this transaction will
close in mid 1999.  Refer to Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations in
CILCORP's 1998 Annual Report to Shareholders incorporated herein
by reference for discussion regarding this transaction.

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, provided 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 purchased and sold energy in the wholesale
market.  QST provided fiber optic telecommunications services
through another wholly-owned subsidiary, QST Communications Inc.
(QST Communications).  In August 1998, QST sold its 100% interest
in QST Communications.  In the fourth quarter of 1998, QST
decided to discontinue its energy operations and report their
results as discontinued.  Refer to the caption "QST Enterprises
Discontinued Operations" of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations and to
"Note 10 - QST Enterprises Discontinued Operations" of Item 8.
Financial Statements and Supplementary Data included in CILCORP's
1998 Annual Report to Shareholders which is incorporated herein
by reference.

ESE was formed in February 1990 to conduct the environmental
consulting and analytical services businesses acquired from
Hunter Environmental Services, Inc. (Hunter) during that year.
Effective October 29, 1996, ESE (now known as



                                7

QST Environmental) became a wholly-owned subsidiary of QST.  QST
Environmental provides engineering and environmental consulting
services to a variety of governmental, industrial and commercial
customers.  QST Environmental has six wholly-owned 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.  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.  In the fourth quarter of 1998, the Company decided to
sell its 100% ownership interest in QST Environmental.  Refer to
the caption "QST Enterprises Discontinued Operations" of Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations and to "Note 10 - QST Enterprises
Discontinued Operations" of Item 8. Financial Statements and
Supplementary Data included in CILCORP's 1998 Annual Report to
Shareholders which is incorporated herein by reference.

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 gas management services
(including commodity purchasing).  During 1998, 1997 and 1996
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 in CILCORP's 1998 Annual Report to Shareholders which
is incorporated herein by reference.
























                                8

The following table summarizes the relative contribution of each
business group to consolidated assets at December 31, 1998, and
to revenue and net income for the year ended December 31, 1998.

<TABLE>
<CAPTION>
                                     Assets      Revenue    Net Income
                                                              (Loss)
                                             (In thousands)
<S>                              <C>           <C>          <C>
CILCO                            $1,024,428    $  534,079   $   41,041
Other Businesses                    170,945        24,717       (2,823)
                                                            ----------
Total Continuing Operations                                     38,218
QST Enterprises Discontinued Operations                        (21,908)
                                                            ----------
   Net Income                                               $   16,310
                                                            ==========
</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 in CILCORP's 1998
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, 1998, CILCO had
approximately 189,000 retail electric customers.





                                9

In 1998, 68% 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, 25%
from industrial sales, 5% 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>
                               1998       1997     1996
                                     (In thousands)
<S>                          <C>       <C>      <C>
Residential                  $133,687  $125,071 $121,668
Commercial                    111,830   103,747  100,944
Industrial                     87,895    82,318   79,065
Sales for resale               18,866    19,966   15,206
Street lighting                 1,385     1,343    1,283
Other revenue                   6,346     5,651    4,619
                             --------  -------- --------
     Total electric revenue  $360,009  $338,096 $322,785
                             ========  ======== ========
</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 1998 system peak demand was 1,195 MW on June 26,
1998.  This was a new all-time system peak demand.

The system peak demand for 1999 is estimated to be 1,228 MW with
a planned reserve margin of approximately 20.2%.  The planned
reserve margin takes into account 150 MW of firm purchased power
(see Note 8 - Commitments and Contingencies) and 93 MW of
interruptible industrial load and other related Demand Side
Management (DSM) programs.  CILCO's planned reserve margin is
designed to comply 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.

CILCO is interconnected with AmerenCIPS (CIPS), formerly Central
Illinois Public Service Company, 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, 1998, CILCO had approximately
197,000 gas customers, including 837 industrial, commercial and
residential gas transportation customers that purchase gas
directly from suppliers for transportation through CILCO's
system.  For further discussion of gas transportation, refer to
the caption "CILCO Gas Operations" of Item 7.  Management's
Discussion and Analysis of Financial Condition and Results of
Operations in CILCORP's 1998 Annual Report to Shareholders,
incorporated herein by reference.





                               10

In 1998, 32% of CILCO's total operating revenue was derived from
the sale or transportation of natural gas.  Approximately 58% of
gas revenue resulted from residential sales, 25% from commercial
sales, 4% from industrial sales, 3% from transportation and 10%
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>
                              1998     1997     1996
                                   (In thousands)
<S>                        <C>       <C>      <C>
Residential                $100,010  $124,440 $125,869
Commercial                   42,713    51,204   44,695
Industrial                    6,627     8,276    5,670
Transportation of gas         5,911     6,484    8,388
Other revenue                17,066    18,354   11,148
                           --------  -------- --------
     Total gas revenue     $172,327  $208,758 $195,770
                           ========  ======== ========
</TABLE>

CILCO's all-time maximum daily send-out of 443,167 MCF occurred
on January 15, 1972.  The 1998 peak day send-out of 327,328 MCF
occurred on January 13, 1998.  CILCO has been able to meet all of
its existing customer requirements during the 1998-1999 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 1999-2000 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.  In Illinois, the Electric Service Customer Choice and
Rate Relief Law of 1997 (Customer Choice Law) began a transition
process to a fully competitive market for electricity.  Large
industrial customers and customers representing one-third of
remaining non-residential Kwh sales will be able to choose their
electric supplier beginning October 1, 1999.  CILCO, as required
by the Customer Choice Law, filed its delivery service tariffs
pertaining to these customers on March 5, 1999.  The ICC must act
on CILCO's tariffs by September 1, 1999.  The ICC's supervision
and regulatory oversight of certain transactions by electric
utilities is reduced or suspended during the mandatory transition
period (which terminates on January 1, 2005) and, for certain non-
utility transactions, is permanently eliminated under the
Customer Choice Law.  Refer to the caption "Competition" of Item
7.  Management's Discussion and Analysis of Financial Condition
and Results of Operations in CILCORP's 1998 Annual Report to
Shareholders, which is incorporated herein by reference, for
changes in the Illinois regulatory environment enacted in 1997.
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.






                               11

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.

FUEL SUPPLY - COAL

Substantially all of CILCO's electric generation capacity is coal-
fired.  Approximately 2.7 million tons of coal were burned during
1998.  Existing coal contracts with suppliers in central Illinois
are expected to supply 100% of the 1999 requirements.

During the years 1998, 1997, and 1996, the average cost per ton
of coal burned, including transportation, was $33.56, $34.01, and
$31.82, respectively.  The cost of coal burned per million BTU's
was $1.54, $1.56, and $1.44, 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 the contract (with
two years' notice).  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 1999.  CILCO cannot at
this time predict the ultimate outcome of this dispute or whether
its resolution will have a material impact on CILCO's operating
results.

NATURAL GAS SUPPLY

During 1998, 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 20 gas suppliers.  Reliability is
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 1998, CILCO purchased and delivered approximately
37,828,000 MCF of natural gas at a cost of approximately $101.0
million, or an average cost of $2.67 per MCF.  The average cost
per MCF of natural gas purchased and delivered was $3.03 in 1997
and $3.05 in 1996 (see Electric Fuel and Purchased Gas Adjustment
Clauses).



                               12

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
1999 are estimated to be $56.6  million, including pollution
control expenditures of $4.9 million.  Expenditures include
$30.8 million for the electric business, $12.7 million for the
gas business and $13.1 million for general and miscellaneous
purposes.  Electric expenditures include $13.7 million for
additions and modifications to generating facilities and
$17.1 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 2000-2003
are $202.4 million.

The above estimates for 1999 capital expenditures include
$11.8 million for information technology projects.  Included in
1999 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.  Refer
to the caption "Year 2000" of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations in
CILCORP's 1998 Annual Report to Shareholders which is
incorporated herein by reference.

CILCO expects to finance its 1999 capital expenditures with funds
provided by operating activities.  Future funds provided by
operations may be affected by the deregulation of the electric
and natural gas utility industries.  CILCO's short-term debt
increased to $40.6 million at December 31, 1998, from
$21.3 million at December 31, 1997.  CILCO retired $10.65 million
of medium-term notes in June 1998 and $20 million of first
mortgage bonds in March 1997.  Also, in 1998, CILCO paid $20
million of dividends to CILCORP in addition to regular quarterly
dividends.  At December 31, 1998, CILCO had bank lines of credit
aggregating $45 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 1999.  Refer to the caption "Capital Resources and
Liquidity - CILCO" of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations in
CILCORP's 1998 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 in CILCORP's 1998 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 initiative 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.






                               13

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. The Clinton administration has approved
a program for U.S. GHG emissions reductions.  The
administration's program has not yet been approved by the U.S.
Senate.

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 September 2003.  CILCO has been targeted by the
U.S. Environmental Protection Agency (USEPA) for additional NOx
emission reductions of 85% at its power plants, by May 2003,
pursuant to regional ozone compliance programs, despite the fact
that CILCO's plants are in attainment areas.  Illinois has until
September 1999 to finalize a SIP to achieve this target.  CILCO's
capital expenditures to meet the NOx emission requirements could
total $59 million by 2003.

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 and manage this by-product.

SIGNIFICANT CUSTOMER

Caterpillar Inc. is CILCO's largest industrial customer.
Aggregate gas and electric revenues from sales to Caterpillar
were 7.6%, 7.5%, and 7.5% of CILCO's total operating revenue for
1998, 1997 and 1996, respectively.  Sales to Caterpillar from all
CILCORP subsidiaries represent 4.0%, 4.4%, and 6.3% of CILCORP
consolidated revenue for 1998, 1997 and 1996, 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 10 to 25 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 has not generally been in competition with
other public utilities for retail electric or gas customers in
these areas.  However, the passage of the Electric Service
Customer Choice and Rate Relief Law of 1997 began a transition
process to a fully competitive market for electricity in
Illinois.  In addition, 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 caption "Competition" of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations in CILCORP's 1998



                               14

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,
1998, was 1,274, excluding employees assigned to the Holding
Company.  Of these, 389 gas and electric department employees
were represented by Local 51 of the International Brotherhood of
Electrical Workers (IBEW), and 200 power plant employees were
represented by Local 8 of the National Conference of Firemen and
Oilers (NCF&O).

CILCO'S UNION CONTRACTS

The IBEW ratified its current agreement on October 10, 1997.  The
contract expires on July 1, 2000.  The NCF&O ratified its current
contract with the Company on October 23, 1998.  CILCO's previous
contract with the NCF&O expired on July 1, 1998, and the NCF&O
membership had been working without a contract since that time.
The new contract expires on July 1, 2001.

          BUSINESS OF QST (EXCLUDING QST ENVIRONMENTAL)
                                
QST Enterprises Inc. (QST) was formed in December 1995.  Through
its wholly-owned subsidiary, QST Energy, QST provided 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 provided fiber
optic telecommunication services in Central Illinois.  Due to
uncertainties related to energy deregulation across the country,
the illiquidity of certain energy markets and its pending
acquisition by AES, the Company will focus in the future on the
opportunities in the Illinois energy market resulting from the
deregulation of electricity under the Electric Service Customer
Choice and Rate Relief Law of 1997.  Accordingly, the operations
of QST Enterprises Inc. and its subsidiaries are shown as
discontinued operations in the statements of income.  QST sold
its wholly-owned fiber optic-based telecommunications subsidiary,
QST Communications, in August 1998.

                  BUSINESS OF QST ENVIRONMENTAL

QST Environmental is an environmental consulting and engineering
firm with additional capabilities in equipment manufacturing.  As
discussed above in "Business of QST (Excluding QST
Environmental)", the Company will focus in the future on the
opportunities in the Illinois energy market.  As a result, the
Company decided in the fourth quarter of 1998 to sell its 100%
ownership interest in QST Environmental.  Accordingly, the
operations of QST Environmental are shown as discontinued on the
statements of income.  Refer to the caption "QST Enterprises
Discontinued Operations" of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations and to
"Note 10 - QST Enterprises Discontinued Operations" of Item 8.
Financial Statements and Supplementary Data included in CILCORP's
1998 Annual Report to Shareholders which is incorporated herein
by reference.

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



                               15

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, state and
local 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.  In late 1998, QST
Environmental decided to discontinue its laboratory operations.

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 43% of
QST Environmental's revenue for 1998 was generated by services
performed for federal, state and local governmental agencies
compared to 48% for 1997.  In the year ended 1998, two customer
contracts, EPA and Lucent Technologies, Inc., accounted for 5.7%
and 5.4% of gross revenues, respectively.  The EPA contract was
rebid in 1998 and awarded to QST Environmental.  The Lucent
Technologies, Inc. contract was concluded in 1998.

In 1998, approximately 92% of QST Environmental's revenue was
generated from environmental consulting and engineering services,
6% 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 laws or regulations impacting QST Environmental and
the demand for its services include:

Clean Air Act of 1970 (CAA), Clean Water Act of 1972, as amended
in 1987 (CWA), Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (Superfund or CERCLA), Federal
Insecticide, Fungicide and Rodenticide Act (FIFRA), National
Environmental Policy Act of 1970 (NEPA), National Pollutant
Discharge Elimination System (NPDES) Stormwater Permitting
Regulations of 1990, Occupational Safety and Health Act of 1970
(OSHA), Resource Conservation and Recovery Act of 1976 (RCRA),
Safe Drinking Water Act, as amended in 1986 and 1996 (SDWA),
Toxic Substances Control Act of 1976 (TSCA), and State and Local
Regulations.



                               16

REGULATION OF QST ENVIRONMENTAL

The environmental statutes and regulations listed 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 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.








                               17

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, 1998,
has a limit of $8 million per claim ($13 million in aggregate for
the annual term), with the first $50,000 of each claim as
retention ($200,000 in aggregate).  The policies cover activities
in which QST Environmental is typically involved.  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, 1998, QST Environmental employed 501 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.

                                
                                
                                
                                
                                
                               18
                                
                        OTHER BUSINESSES

CIM

The investment portfolio of CIM at December 31, 1998, and
December 31, 1997, is shown in the following table:

<TABLE>
<CAPTION>
Type of Investment
At December 31                           1998        1997
                                          (In thousands)
<S>                                   <C>         <C>
Investment in leveraged leases        $146,990    $146,458
Cash and temporary cash investments         71         152
Investment in Energy Investors Fund      1,510       1,158
Investment in affordable
   housing funds                        13,808      15,557
Other                                      120         156
                                      --------    --------
   Total                              $162,499    $163,481
                                      ========    ========
</TABLE>

At December 31, 1998, 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 $1,510,000 in the Energy Investors
Fund, L.P.(Fund), representing a 3.1% interest in the Fund at
December 31, 1998.  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
10% at December 31, 1998.  The equity method of accounting is
used for these investments.

CVI

CVI's net investment in CESI, its wholly-owned subsidiary, is
approximately $1.1 million.  CESI's primary business is the sale
of gas management services (including commodity purchasing).  In
addition, during 1998, 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 in CILCORP's 1998 Annual Report to Shareholders which
is incorporated herein by reference.

EMPLOYEES

At December 31, 1998, there were 10 full-time employees assigned
to CILCORP, CVI and CIM.

                                
                                
                                
                                
                                
                                
                                
                               19
                                
                            YEAR 2000

Refer to the captions "Forward-Looking Information" and "Year
2000" of Item 7.  Management's Discussion and Analysis of
Financial Condition and Results of Operations in CILCORP's 1998
Annual Report to Shareholders which is incorporated herein by
reference.

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
1998.  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
1999), all of which are fueled with coal, are as follows:

<TABLE>
<CAPTION>
                                                Available
                                                 Summer
                                               Capability
                                                  (MW)
Station & Unit              Installed          Actual 1998
<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 16 principal substations with an installed
capacity of 2,150,000 kilovolt-amperes.

The electric distribution system includes approximately 6,223
miles of overhead pole and tower lines and 2,096 miles of
underground distribution cables.  The distribution system also
includes 105 substations with an installed capacity of 1,665,885
kilovolt-amperes.

The gas system includes approximately 3,581 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 office
space.  In Peoria, Illinois, QST



                               20

Environmental owns approximately 27,000 square feet of offices
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 22 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 Operations in CILCORP's
1998 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 in CILCORP's 1998 Annual Report to Shareholders,
incorporated herein by reference, for certain pending legal
proceedings and/or proceedings known to be contemplated by govern-
mental 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 United States Department
of Justice's (DOJ) investigation of CILCO's Springfield gas
operations.  In 1992, after a significant number of leaks were
detected in CILCO's Springfield cast iron distribution system,
CILCO began a detailed examination of the system and related
operating practices and procedures.  CILCO then began an
aggressive program, which it completed in September 1993, to
renew the Springfield cast iron system.  The ICC staff began an
informal review of CILCO's Springfield gas operations and
recordkeeping practices in September 1992.  Subsequently, the
U.S. Department of Transportation (DOT) and the DOJ began
conducting investigations of CILCO, which were also focused
principally on CILCO's Springfield gas operations.  The DOJ and
DOT investigations were subject to a September 1994 settlement
agreement under which CILCO entered into a federal court civil
consent decree that concluded the DOT and DOJ investigations.  As
part of the settlement, CILCO accepted adjustments recommended by
the ICC staff which resulted in disallowance from rate base of
$4.6 million of the cost of the Springfield renewal program and
payments of $1 million by CILCO in civil fines and investigation
costs.  Additionally, in an employment litigation matter, CILCO
has advanced legal expenses incurred by an officer who has been
named as a defendant in that litigation initiated by a former
employee.

On February 1, 1999, QST notified two of its California
commercial customers that they were in default of their agreement
to purchase energy from QST as a result of their failure to pay
$11 million billed to them by QST.  In late February, 1999, after
expiration of a period to cure the non-payment, QST filed suit in
Federal District Court for payment.  On March 1, the customers
filed a counter suit in California Superior Court alleging they
were not in default of the contract for various reasons,
including QST's issuance of estimated bills.  Management cannot
predict the ultimate outcome of this dispute, but intends to
vigorously pursue its legal remedies to receive payment.

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 will not result in a material
adverse effect on the financial position and results of
operations of the Company.  Risk of loss is mitigated, in some
cases, by insurance or




                               21

contractual or statutory indemnification.  The Company has
established appropriate 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 1998.

                              CILCO

There were no matters submitted to a vote of security holders
during the fourth quarter of 1998.

<TABLE>
<CAPTION>
                  Executive Officers of CILCORP
                   Age as                              Initial
      Name           of    Positions Held During      Effective
                  3/31/99     Past Five Years          Date(1)
<S>                  <C>   <C>                    <C>
R. O. Viets          55    President and Chief    
                             Executive Officer    February 1, 1988
                                                  
J. G. Sahn           52    Vice President,        
                           Secretary and          
                           Treasurer              August 17, 1998
                           Vice President,        
                           General Counsel and  
                           Secretary              March 1, 1994
                                                  
T. D. Hutchinson (2) 44    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) T. D. Hutchinson served as Controller from February 1, 1988,
    until April 1, 1995, when he became CILCO Director -
    Competitive Strategy.  From January 1, 1996 to January 20,
    1997, Mr. Hutchinson served as Director of Planning and
    Administration of QST Enterprises Inc.
</TABLE>
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                               22


<TABLE>
<CAPTION>
                   Executive Officers of CILCO
 
                  Age as of Positions Held During       Initial
  Name              3/31/99   Past Five Years(1)      Effective Date(2)
<S>               <C>  <C>                       <C>
R. O. Viets (3)   55   Chairman of the       
                       Board, President    
                       and Chief         
                         Executive Officer       August 17, 1998   
                       Chairman of the       
                       Board and Chief     
                       Executive Officer         April 1, 1995
                                             
J. M. Elliott (4) 55   Senior Vice           
                       President                 August 17, 1998
                                             
W. M. Shay (5)    46   Senior Vice           
                       President                 August 17, 1998
                                             
J. F. Vergon      51   Senior Vice           
                       President                 August 17, 1998
                                             
                       President and Chief   
                         Operating Officer       January 29, 1996
                       Group President,      
                         Gas Operations          April 1, 1995
                       Vice President            October 1, 1986
                                             
M. J. Bowling     52   Vice President            April 1, 1995
                                             
S. A. Cisel       45   Vice President            April 1, 1995
                                             
C. Gilson         41   Vice President            September 23, 1997
                                             
K. A. Lockenvitz  42   Vice President            September 23, 1997
                                             
T. S. Romanowski  49   Vice President            October 1, 1986
                                             
R. J. Sprowls (6) 41   Vice President and    
                       Chief Financial     
                       Officer                   August 17, 1998
                                             
W. R. Dodds       44   Treasurer and         
                       Manager of        
                       Treasury Department       October 1, 1990
                                             
T. D.             44   Controller and        
Hutchinson(7)          Manager of          
                       Accounting                January 1, 1997
                                             
J. G. Sahn (8)    52   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, Mr. Elliott, Mr. Shay, Mr. Sprowls 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.



                               23

(4)  Mr. Elliott continues to serve as President of QST
     Enterprises Inc., a position he has held since November 4,
     1996.  QST Enterprises Inc. is also a subsidiary of CILCORP
     Inc.

(5)  Mr. Shay served as Executive Vice President and Chief Legal
     Officer of CILCORP Inc. effective November 4, 1997 and as
     Executive Vice President as of November 4, 1996.  He 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.

(6)  Mr. Sprowls serves as CILCO's Chief Financial Officer.  He
     was Senior Vice President and Chief Financial Officer of QST
     Enterprises Inc. from April 22, 1997 to August 17, 1998 and
     Vice President from August 19, 1996 to April 22, 1997.  Mr.
     Sprowls was Vice President of the Company from April 1, 1995
     to January 29, 1996 and, from October 1, 1990 to April 25,
     1995, he served as Treasurer of CILCORP.

(7)  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.

(8)  Mr. Sahn also serves as Vice President of CILCORP Inc., a
     position he has held since February 1, 1989.  He was elected
     to the additional positions of Secretary of CILCORP
     effective March 1, 1994 and as Treasurer of CILCORP
     effective August 17, 1998.
</TABLE>

































                               24
                                
                             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, 1998, there
were 12,873 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
1997                First     Second     Third     Fourth
<S>               <C>        <C>        <C>       <C>
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
                                                  
1998                                              
Price Range                                       
High              $48 15/16  $50        $54 1/8   $61 9/16
Low               $44 3/16   $43 5/16   $45 1/4   $50 3/8
                                                  
Dividends Paid    $  .615    $  .615    $  .615   $  .615
<FN>
The number of common shareholders of record as of March 19, 1999,
was 12,729.
</TABLE>
                                
                              CILCO

CILCO's common stock is not traded on any market.  As of
March 19, 1999, 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.




















                               25

<PAGE>
Item 6. Selected Financial Data
<TABLE>
CILCORP INC.
Selected Financial Data
<CAPTION>
For the Years Ended December 31

                       1998      1997       1996      1995     1994
                            (In thousands except per share amounts)
<S>                  <C>       <C>       <C>       <C>       <C>
Revenue              $ 559,024 $ 557,906 $ 527,060 $ 482,642 $ 472,340
                                                                   
Net income available                                                          
  for common
  stockholders          16,310    16,395    27,943    38,582    32,586
Earnings per share        1.20      1.20      2.07      2.93      2.50
Total assets         1,312,940 1,334,819 1,285,693 1,279,303 1,238,384

Long-term debt         285,552   298,528   320,666   344,113   326,695
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

                        1998      1997       1996      1995      1994
                                       (In thousands)
<S>                  <C>       <C>       <C>       <C>       <C>
Electric and Gas                                                  
  Revenue            $ 532,336 $ 546,854 $ 518,555 $ 477,744 $ 461,370
                                                                  
Net income available
  for common                                                     
  stockholders          41,041    50,251    41,939    39,099    29,507
Total assets         1,024,428 1,022,655 1,036,169 1,063,223 1,019,109
Long-term debt         267,884   267,836   278,439   298,397   278,359
Ratio of earnings                                                  
  to fixed charges         3.4       3.5       3.4       3.3       3.0
</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 in
CILCORP's 1998 Annual Report to Shareholders is incorporated
herein by reference.















                               26

Item 8.  Financial Statements and Supplementary Data

The financial statements and Management's Report to the
Stockholders of CILCORP Inc. contained in CILCORP's 1998 Annual
Report to Shareholders are incorporated herein by reference.

Index to Financial Statements:
                                                  Page
                             CILCORP

Report of Independent Public Accountants on
  Schedules                                        28

                             CILCO
Management's Report                                29
Report of Independent Public Accountants           30
Consolidated Statements of Income                  31
Consolidated Balance Sheets                      32-33
Consolidated Statements of Cash Flows            34-35
Statements of Segments of Business               36-38
Consolidated Statements of Retained Earnings       39
Notes to Consolidated Financial Statements       40-55










































                               27


<PAGE>
      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, 1999.  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, 1999





































                               28

<PAGE>
                       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.




                                    R. O. Viets
                                    Chairman of the Board,
                                      President and Chief
                                      Executive Officer




                                    R. J. Sprowls
                                    Vice President and Chief
                                      Financial Officer




                                    T. D. Hutchinson
                                    Controller and Manager of
                                      Accounting














                               29
<PAGE>
        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, 1998 and 1997, 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, 1998.  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, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1998, 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, 1999

















                               30

                 Central Illinois Light Company
                Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Years Ended December 31      1998      1997      1996
                                          (In thousands)
<S>                                 <C>       <C>       <C>
Operating Revenues:                                  
Electric                            $360,009  $338,096  $322,785
Gas                                  172,327   208,758   195,770
                                    --------  --------  --------
     Total Operating Revenues        532,336   546,854   518,555
                                    --------  --------  --------
Operating Expenses:                                   
Cost of Fuel                          94,490    92,230    90,715
Cost of Gas                           93,586   123,531   108,286
Purchased Power                       29,568    22,851    10,907
Other Operations and Maintenance     118,707   109,833   119,334
Depreciation and Amortization         65,273    61,505    59,664
Income Taxes                          25,088    29,317    26,548
State and Local Taxes on Revenue      26,502    22,467    22,004
Other Taxes                           11,407    11,808    11,419
                                    --------  --------  --------
     Total Operating Expenses        464,621   473,542   448,877
                                    --------  --------  --------
Operating Income                      67,715    73,312    69,678
                                    --------  --------  --------
Other Income and Deductions:                          
Cost of Equity Funds Capitalized          --        35        36
CILCO-owned Life Insurance, Net       (1,013)   (1,177)     (679)
Other, Net                               274      (256)      200
                                    --------  --------  --------
     Total Other Income and
          (Deductions)                  (739)   (1,398)     (443)
                                    --------  --------  --------
Income Before Interest Expenses       66,976    71,914    69,235
                                    --------  --------  --------
Interest Expenses:                                    
Interest on Long-term Debt            19,498    20,024    21,012
Cost of Borrowed Funds Capitalized       (34)      (99)      (54)
Other                                  3,277     2,622     3,150
                                    --------  --------  --------
     Total Interest Expenses          22,741    22,547    24,108
                                    --------  --------  --------
Net Income Before Extraordinary                       
  Item and Preferred Dividends        44,235    49,367    45,127
Extraordinary Item                        --     4,100        --
                                    --------  --------  --------
Net Income Before Preferred
  Dividends                           44,235    53,467    45,127
                                                      
Dividends on Preferred Stock           3,194     3,216     3,188
                                    --------  --------  --------
Net Income Available for Common      
  Stock                             $ 41,041  $ 50,251  $ 41,939
                                    --------  --------  --------
Other Comprehensive Income              (169)     (317)       (5)
Comprehensive Income                $ 40,872  $ 49,934  $ 41,934
                                    ========  ========  ========
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
</TABLE>




                               31


<TABLE>
                 Central Illinois Light Company
                   Consolidated Balance Sheets
                             Assets
<CAPTION>
As of December 31                            1998        1997
                                              (In thousands)
<S>                                      <C>         <C>
Utility Plant, At Original Cost:                             
  Electric                               $1,237,885  $1,213,585
  Gas                                       417,585     401,870
                                         ----------  ----------
                                          1,655,470   1,615,455
  Less - Accumulated Provision for          
    Depreciation                            812,630     769,792
                                         ----------  ----------
                                            842,840     845,663
Construction Work in Progress                30,075      21,550
Plant Acquisition Adjustments, Net of                        
  Amortization                                  505       1,217
                                         ----------  ----------
    Total Utility Plant                     873,420     868,430
                                         ----------  ----------
Other Property and Investments:                              
Cash Surrender Value of Company-owned                        
  Life Insurance (Net of Related Policy                      
  Loans of $48,132 in 1998 and $42,898        
  in 1997)                                    2,655       2,399
Other                                         1,176       1,214
                                         ----------  ----------
    Total Other Property and Investments      3,831       3,613
                                         ----------  ----------
Current Assets:                                              
Cash and Temporary Cash Investments           1,362         698
Receivables, Less Reserves of $1,106 
  and $703                                   35,767      44,550
Accrued Unbilled Revenue                     31,315      31,248
Fuel, at Average Cost                        13,431       7,816
Materials and Supplies, at Average Cost      15,062      13,685
Gas in Underground Storage, at Avg. Cost     20,494      22,118
Prepaid Taxes                                 2,265       1,189
Other                                         6,626       6,331
                                         ----------  ----------
    Total Current Assets                    126,322     127,635
                                         ----------  ----------
Deferred Debits:                                             
Unamortized Loss on Reacquired Debt           3,261       3,581
Unamortized Debt Expense                      1,852       2,019
Prepaid Pension Cost                            417         455
Other                                        15,325      16,922
                                         ----------  ----------
    Total Deferred Debits                    20,855      22,977
                                         ----------  ----------
Total Assets                             $1,024,428  $1,022,655
                                         ==========  ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>








                               32

<PAGE>
<TABLE>
                 Central Illinois Light Company
                   Consolidated Balance Sheets
                 Capitalization and Liabilities
<CAPTION>
As of December 31                         1998         1997
                                            (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                         135,315     147,757
  Accumulated Other Comprehensive Income       (845)       (676)
                                         ----------  ----------
     Total Common Shareholder's Equity      320,131     332,742
Preferred Stock Without Mandatory      
   Redemption                                44,120      44,120
Preferred Stock With Mandatory Redemption    22,000      22,000
Long-term Debt                              267,884     267,836
                                         ----------  ----------
     Total Capitalization                   654,135     666,698
                                         ----------  ----------
Current Liabilities:                                 
Current Maturities of Long-Term Debt             --      10,650
Notes Payable                                40,600      21,300
Accounts Payable                             53,260      44,844
Accrued Taxes                                 7,303       2,593
Accrued Interest                              9,394       9,234
PGA Over-Recoveries                             304       1,666
Level Payment Plan                            1,519       2,375
Other                                         5,261       4,670
                                         ----------  ----------
     Total Current Liabilities              117,641      97,332
                                         ----------  ----------
Deferred Liabilities and Credits:                    
Accumulated Deferred Income Taxes           141,746     139,274
Regulatory Liability                         46,346      56,807
Investment Tax Credits                       19,450      21,117
Capital Lease Obligation                      1,703       2,182
Other                                        43,407      39,245
                                         ----------  ----------
     Total Deferred Liab. and Credits       252,652     258,625
                                         ----------  ----------
Total Capitalization and Liabilities     $1,024,428  $1,022,655
                                         ==========  ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>













                               33

<PAGE>
<TABLE>
                 Central Illinois Light Company
              Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended December 31            1998      1997       1996
                                               (In thousands)
<S>                                     <C>        <C>        <C>
Cash Flows from Operating Activities:                    
Net Income Before Extraordinary Item                     
  and Preferred Dividends               $ 44,235   $ 49,367   $ 45,127
Adjustments to Reconcile Net Income to                   
  Net Cash Provided by Operating
  Activities:
  Depreciation and Amortization           65,986     62,217     60,376
  Deferred Taxes, Investment Tax Credits                         
    and Regulatory Liability, Net         (7,690)    (6,585)    (1,727)
  Decrease(Increase) in Accts Receivable   8,328       (946)    (1,292)
  (Increase)Decrease in Fuel, Materials                           
    and Supplies, and Gas
    in Underground Storage                (5,368)     3,372     (5,262)
  Increase in Unbilled Revenue               (67)      (369)    (1,988)
  Increase(Decrease) in Accts Payable      8,416     (1,282)     5,643
  Increase(Decrease) in Accrued Taxes                    
     and Interest                          4,870     (4,947)     2,349
  Capital Lease Payments                     645        645        645 
  (Increase)Decrease in Other Current
    Assets                                (1,372)     3,331      7,427
  Decrease in Other Current Liabilities   (1,627)      (458)    (1,106)
  (Increase)Decrease in Other Non-                       
    Current Assets                         2,328      6,372     (3,506)
  Increase in Other Non-Current Liab.      3,571      1,273      5,130
                                        --------   --------   --------
    Net Cash Provided by Operating                       
        Activities                       122,255    111,990    111,816
                                        --------   --------   --------
Cash Flows from Investing Activities:                    
  Capital Expenditures                   (67,102)   (55,026)   (43,525)
  Cost of Equity Funds Capitalized            --        (35)       (36)
  Other                                   (5,817)    (5,950)    (2,495)
                                        --------   --------   --------
    Net Cash Used in Investing 
      Activities                         (72,919)   (61,011)   (46,056)
                                        --------   --------   --------
Cash Flows from Financing Activities:                    
  Common Dividends Paid                  (53,483)   (39,482)   (46,121)
  Preferred Dividends Paid                (3,194)    (3,216)    (3,188)
  Long-Term Debt Retired                 (10,650)   (20,000)   (16,000)
  Payments on Capital Lease Obligation      (645)      (645)      (645)
  Increase(Decrease) in Short-Term
    Borrowing                             19,300     11,400    (14,700)
                                        --------   --------   --------
    Net Cash Provided from (Used in)                     
        Financing Activities             (48,672)   (51,943)   (80,654)
                                        --------   --------   --------
Net Increase(Decrease) in Cash and                       
  Temporary Cash Investments                 664       (964)   (14,894)
Cash and Temporary Cash Investments at                   
  Beginning of Year                          698      1,662     16,556
                                        --------   --------   --------
Cash and Temporary Cash Investments at                   
  December 31                           $  1,362   $    698   $  1,662
                                        ========   ========   ========






                               34

Supplemental Disclosures of Cash Flow                    
Information:
Cash Paid During the Period for:                          
  Interest (Net of Cost of Borrowed                        
    Funds Capitalized)                  $23,200 $24,148  $23,475
                                                         
  Income Taxes                          $30,421 $37,907  $22,079
<FN>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these statements.
</TABLE>




















































                               35

<PAGE>
<TABLE>
                 Central Illinois Light Company
               Statements of Segments of Business
<CAPTION>
                                               1998
                               CILCO     CILCO     CILCO     Total
                              Electric    Gas      Other     CILCO
                                          (In thousands)
<S>                           <C>       <C>       <C>      <C>
Revenues                      $360,009  $172,327  $ 1,743  $  534,079
Interest Income                     --        --      228         228
                              --------  --------  -------  ----------
   Total                       360,009   172,327    1,971     534,307
                              --------  --------  -------  ----------
Operating Expenses             235,801   138,459    3,600     377,860
Depreciation and Amortization   46,017    19,256      713      65,986
                              --------  --------  -------  ----------
   Total                       281,818   157,715    4,313     443,846
                              --------  --------  -------  ----------
Interest Expense                16,261     6,514       --      22,775
Preferred Stock Dividends           --        --    3,194       3,194
Fixed Charges and Other Exp.       (34)       --    1,013         979
                              --------  --------  -------  ----------
   Total                        16,227     6,514    4,207      26,948
                              --------  --------  -------  ----------
Income from Continuing Oper.                                    
   Before Income Taxes          61,964     8,098   (6,549)     63,513
                                                           
Income Taxes                    21,645     3,443   (2,616)     22,472
                              --------  --------  -------  ----------
Segment Net Income            $ 40,319  $  4,655  $(3,933) $   41,041
                              ========  ========  =======  ==========
                                                           
Capital Expenditures          $ 44,213  $ 22,889  $    --  $   67,102
                                                           
Revenue from major customer                                
  Caterpillar Inc.            $ 39,354  $    948  $    --  $   40,302
                                                           
Segment Assets                $731,985  $287,371  $ 5,072  $1,024,428
























                               36

                                               1997
                               CILCO     CILCO     CILCO     Total
                              Electric    Gas      Other     CILCO
                                          (In thousands)
<S>                           <C>       <C>       <C>      <C>
Revenues                      $338,096  $208,758  $    --  $  546,854
Interest Income                     --        --      239         239
                              --------  --------  -------  ----------
   Total                       338,096   208,758      239     547,093
                              --------  --------  -------  ----------
Operating Expenses             217,700   165,020    2,831     385,551
Depreciation and Amortization   43,858    17,647      713      62,218
                              --------  --------  -------  ----------
   Total                       261,558   182,667    3,544     447,769
                              --------  --------  -------  ----------
Interest Expense                16,192     6,454       --      22,646
Preferred Stock Dividends           --        --    3,216       3,216
Fixed Charges and Other Exp.      (134)       --    1,177       1,043
                              --------  --------  -------  ----------
   Total                        16,058     6,454    4,393      26,905
                              --------  --------  -------  ----------
Income from Continuing Oper.                               
  Before Income Taxes           60,480    19,637   (7,698)     72,419
                                                           
Income Taxes                    21,901     7,416   (3,049)     26,268
                              --------  --------  -------  ----------
Net Income from Continuing                                 
  Operations before                                        
  Extraordinary Item            38,579    12,221   (4,649)     46,151
Extraordinary Item               4,100        --       --       4,100
                              --------  --------  -------  ----------
Segment Net Income            $ 42,679  $ 12,221  $(4,649) $   50,251
                              ========  ========  =======  ==========
                                                           
Capital Expenditures          $ 35,196  $ 19,830  $    --  $   55,026
                                                           
Revenue from major customer                                
  Caterpillar Inc.            $ 40,106  $    934  $    --  $   41,040
                                                           
Segment Assets                $725,725  $291,291  $ 5,639  $1,022,655























                                
                               37

                                               1996
                               CILCO     CILCO     CILCO     Total
                              Electric    Gas      Other     CILCO
                                          (In thousands)
<S>                           <C>       <C>       <C>      <C>
Revenues                      $322,785  $195,770  $    --  $  518,555
Interest Income                     --        --      680         680
                              --------  --------  -------  ----------
   Total                       322,785   195,770      680     519,235
                              --------  --------  -------  ----------
Operating Expenses             208,566   154,099    2,234     364,899
Depreciation and Amortization   42,530    17,134      713      60,377
                              --------  --------  -------  ----------
   Total                       251,096   171,233    2,947     425,276
                              --------  --------  -------  ----------
Interest Expense                17,445     6,716       --      24,161
Preferred Stock Dividends           --        --    3,188       3,188
Fixed Charges and Other Exp.       (90)       --      679         589
                              --------  --------  -------  ----------
   Total                        17,355     6,716    3,867      27,938
                              --------  --------  -------  ----------
Income from Continuing Oper.                                     
  Before Income Taxes           54,334    17,821   (6,134)     66,021
                                                           
Income Taxes                    19,576     6,972   (2,466)     24,082
                              --------  --------  -------  ----------
Segment Net Income            $ 34,758  $ 10,849  $(3,668) $   41,939
                              ========  ========  =======  ==========
                                                           
Capital Expenditures          $ 28,032  $ 15,529  $    --  $   43,561
                                                           
Revenue from major customer                                
  Caterpillar Inc.            $ 37,724  $  1,053  $    --  $   38,777
                                                           
Segment Assets                $733,071  $296,674  $ 6,424  $1,036,169
</TABLE>



























                               38

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

<CAPTION>
For the Years Ended December 31        1998      1997     1996
                                           (In thousands)
<S>                                 <C>      <C>      <C>
Balance Beginning of Year           $147,081 $136,629 $140,814
Add                                                          
Net Income Before Preferred
  Dividends                           44,235   53,467   45,127
                                    -------- -------- --------
        Total                        191,316  190,096  185,941
                                    -------- -------- --------
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, 1998 was 4.04%)   1,035    1,057    1,027
  Common Stock, No Par Value          53,483   39,482   46,121
                                    -------- -------- --------
        Total Dividends Declared      56,677   42,698   49,307
                                    -------- -------- --------
  Additional Minimum Liability for                           
    Non-Qualified Pension Plan at                            
    December 31, 1998, 1997, and                             
    1996 net of taxes of $111,                            
    $208 and $3, respectively            169      317        5
                                    -------- -------- --------
                                      56,846   43,015   49,312
                                    -------- -------- --------
Balance End of Year                 $134,470 $147,081 $136,629
                                    ======== ======== ========
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
</TABLE>






















                               39

<PAGE>
                 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 1998 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 (ICC) and the Federal Energy Regulatory
Commission (FERC) 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.  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 (see
Management's Discussion - Competition).

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.  Accordingly, 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.
Regulatory assets









                               40

included on the Consolidated Balance Sheets at December 31, 1998
and 1997 are as follows:

<TABLE>
<CAPTION>
                                            1998       1997
                                             (In thousands)
<S>                                        <C>       <C>
Included in prepayments and other:                          
    Fuel and gas cost adjustments          $ 4,740   $ 2,954
    Coal tar remediation cost -                             
      estimated current                        609       844
    Gas transition costs                        --       159
                                           -------   -------
          Current costs included in                         
            prepayments and other            5,349     3,957
                                           -------   -------
Included in other assets:                                   
    Coal tar remediation cost, net of                       
      recoveries                             1,281     2,745
    Regulatory tax asset                     5,723     7,578
    Deferred gas costs                       4,039     4,145
    Unamortized loss on reacquired debt      3,261     3,581
                                           -------   -------
      Future costs included in other assets 14,304    18,049
                                           -------   -------
              Total regulatory assets      $19,653   $22,006
                                           =======   =======
</TABLE>

Regulatory assets at December 31, 1998 are related to CILCO's
regulated electric and gas distribution activities.  CILCO does
not currently believe the costs recorded for its generating
plants and related assets at December 31, 1998 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 $46.3 million and $56.8 million at December 31,
1998 and 1997, respectively.



























                               41

CILCO's electric generation-related identifiable assets included
in the balance sheet at December 31, 1998 and 1997 were:

<TABLE>
<CAPTION>
                                        1998         1997
                                            (In thousands)
<S>                                  <C>           <C>
Property, Plant and Equipment        $ 537,358     $ 535,065
Less:  Accumulated Depreciation       (266,461)     (259,988)
                                     ---------     ---------
                                       270,897       275,077
Construction Work in Progress            3,268         1,979
                                     ---------     ---------
  Net Property, Plant and Equipment    274,165       277,056
Fuel, at Average Cost                    8,704         8,520
Materials and Supplies, at Avg. Cost     8,452         8,202
                                     ---------     ---------
Total Identifiable Electric                      
Generation Assets                    $ 291,321     $ 293,778
                                     =========     =========
</TABLE>

Accumulated deferred income taxes associated with electric
generation property  at December 31, 1998 and 1997 were
approximately $72 million and $79 million, respectively.

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.  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, 1998, CILCO had net receivables of $35.8 million, of which
approximately $4.7 million was due from its major 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.  Also, beginning in 1997,
CILCO sold natural gas to its affiliate CESI, in conjunction with
CESI's gas marketing program.  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



                               42

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
$11.6 million, $7.5 million, and $5.4 million in 1998, 1997 and
1996, 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 1998,
1997 and 1996 were 5.9%, 7.2% and 7.8%, 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.



















                               43

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>
                                    1998        1997
                                      (In thousands)
<S>                                 <C>       <C>
Cash surrender value of contracts   $ 50,786  $ 45,297
Borrowings against contracts         (48,132)  (42,898)
                                    --------  --------
  Net investment                    $  2,654  $  2,399
                                    ========  ========
</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 $3.6 million, $3.5 million
and $2.7 million for 1998, 1997 and 1996, 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 AFUDC and other items for which
deferred taxes had not previously been provided.  The temporary
differences



























                               44

related to the consolidated deferred income tax asset and
liability at December 31, 1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
December 31                     1998       1997       1996
                                     (In thousands)
<S>                           <C>        <C>        <C>
Deferred Tax Assets:
Deferred Tax Asset            $ 20,307   $ 16,752   $ 14,967
Adjustment to reflect                               
  regulatory asset              (5,723)    (7,578)    (4,777)
                              --------   --------   --------
Net deferred tax asset        $ 14,584   $  9,174   $ 10,190
                              ========   ========   ========
                                                    
Deferred Tax Liabilities:                           
Deferred Tax Liability-       $201,872   $205,777   $211,517
  property
Adjustment to reflect                               
  regulatory liability         (46,346)   (56,807)   (68,565)
                              --------   --------   --------
Net Deferred Tax Liability-                         
  property                     155,526    148,970    142,952
Deferred Tax Liability-other       804       (522)     2,489
                              --------   --------   --------
Accumulated Deferred Income                         
  Tax Liability               $156,330   $148,448   $145,441
                              ========   ========   ========
Accumulated Deferred Income                         
  Tax Liab., net of deferred          
  tax assets                  $141,746   $139,274   $135,251
                              ========   ========   ========
</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                     1998        1997
                                  (In thousands)
<S>                           <C>        <C>
Net change in deferred                   
  income tax liability per
  above table                 $  2,472   $  4,023
Change in tax effects of 
  income tax related
  regulatory assets
  and liabilities               (8,606)   (14,559)
Deferred taxes related to               
  extraordinary item                --      5,634
Other                              111        208
                              --------   --------
Deferred income tax expense              
  (benefit) for the period    $ (6,023)  $ (4,694)
                              ========   ========
</TABLE>








                               45

Income tax expenses were as follows:

<TABLE>
<CAPTION>
Years Ended December 31       1998       1997      1996
                                   (In thousands)
<S>                         <C>        <C>        <C>
Current income taxes
Federal                     $26,278    $29,244    $27,260
State                         6,260      6,350      5,504
                            -------    -------    -------
  Total operating current
    taxes                    32,538     35,594     32,764
                            -------    -------    -------
Deferred operating income                         
  taxes, net
Depreciation and amort.        (955)    (6,080)    (3,937)
Repair allowance                158      1,384       (197)
Borrowed component of AFUDC      37         80        136
Capitalized overhead costs     (783)      (807)      (750)
Removal costs                (3,189)     2,515      4,832
Gas take-or-pay settlements     522       (339)      (706)
Gas storage field            (1,681)      (191)       405
Taxable salvage                 599        220        351
Environmental remediation
  costs                          55         46       (642)
Pension expense                 869     (1,798)    (1,726)
Other                        (1,415)       377     (2,298)
                            -------    -------    -------
   Total operating deferred                                
     income taxes, net       (5,783)    (4,593)    (4,532)
Investment tax credit                             
  amortization               (1,667)    (1,684)    (1,684)
                            -------    -------    -------
Total operating
  income taxes               25,088     29,317     26,548
Income tax reduction for                          
  disallowed plant costs        133        144        156
Other, net                   (2,749)    (3,192)    (2,622)
                            -------    -------    -------
Total income taxes before                         
  extraordinary item         22,472     26,269     24,082
Deferred taxes related to                         
  extraordinary item             --     (5,634)        --
                            -------    -------    -------
Total income taxes          $22,472    $20,635    $24,082
                            =======    =======    =======
<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 $(848,000), $(65,000) and $(62,000) for
1998, 1997 and 1996, respectively.  Other, net, includes deferred
state income taxes of $(43,000), $(18,000) and $(51,000) for
1998, 1997 and 1996, respectively.
</TABLE>









                               46

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

<TABLE>
<CAPTION>
                                     1998    1997    1996
<S>                                  <C>     <C>     <C>
Statutory federal income tax rate    35.0%   35.0%   35.0%
                                     ====    ====    ====
Equity component of AFUDC not                        
  subject to taxation                  --      --      --
Amortization of property-related                     
  deferred taxes provided at tax                     
  rates in excess of the current
  rate                               (2.7)   (1.4)   (2.2)
Amortization of investment tax                       
  credit                             (2.6)   (2.4)   (2.6)
CILCO-owned life insurance           (1.4)   (1.1)   (1.1)
State income taxes                    5.2     5.0     5.0
Preferred dividends and other                        
  permanent differences               2.1     2.1     2.0
Other differences                    (0.1)   (0.2)    0.5
                                     ----    ----    ----
   Total                              0.5     2.0     1.6
                                     ----    ----    ----
Effective income tax rate before                     
  effect of extraordinary item       35.5    37.0    36.6
Tax effect of extraordinary item       --    (7.9)     --
                                     ----    ----    ----
Effective income tax rate            35.5%   29.1%   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 at
December 31, 1998 and 1997, for benefits other than pensions or
health care provided to former or inactive employees.  The
liability for these benefits (primarily long-term and short-term
disability payments under plans self-insured by CILCO) is
actuarially determined.

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.















                               47

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

<TABLE>
<CAPTION>                      1998      1997       1996
                                    (In thousands)
 <S>                         <C>        <C>       <C>
Operating expenses           $  (893)   $   493   $ 9,700
Utility plant and other            6        125       922
                             -------    -------   -------
  Net pension costs          $  (887)   $   618   $10,622
                             =======    =======   =======
</TABLE>

Provisions for pension expense reflect the use of the projected
unit credit actuarial cost method.  At December 31, 1998 and
1997, 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.

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.  Neither QST Enterprises nor
its subsidiaries provide health care benefits to retired
employees.

Postretirement health care benefit costs were charged as
follows:

<TABLE>
<CAPTION>
                                    1998     1997      1996
                                         (In thousands)
<S>                                <C>      <C>       <C>
Operating expenses                 $3,904   $3,989    $5,096
Utility plant and other             1,260    1,825     1,883
                                   ------   ------    ------
  Net postretirement health                                 
    care benefit costs             $5,164   $5,814    $6,979
                                   ======   ======    ======
</TABLE>

















                               48

The components of net periodic benefit costs follow:

<TABLE>
<CAPTION>
                             1998     1997       1998     1997
                                       (In thousands)
                                                     Other
                            Pension Benefits     Postretirement
                                                    Benefits
<S>                        <C>       <C>       <C>       <C>
Service cost               $  5,410  $  4,384  $  1,417  $  1,298
Interest cost                19,024    17,561     5,371     5,047
Expected return on plan
  assets                    (25,304)  (21,005)   (4,388)   (3,249)
Amortization of transition                                          
  liability (asset)            (888)     (888)    2,858     2,858
Amortization of past                                     
  service cost                1,068     1,068        --        --
Recognized actuarial loss      (197)     (502)      (94)     (140)
                           --------  --------  --------  --------
Net benefit cost           $   (887) $    618  $  5,164  $  5,814
                           ========  ========  ========  ========
Pension Plans with                                       
  Accumulated Benefit                
  Obligations in Excess              
  of Assets
Total projected benefit                                  
  obligation               $ (4,191) $ (3,692)
Total accumulated benefit                                
  obligation               $ (3,582) $ (2,902)
Total fair value of assets $     --  $     --                              
</TABLE>


































                               49

Information on the plans' funded status follows:

<TABLE>
<CAPTION>
                           1998      1997       1998     1997
                                          (In thousands)
                                                       Other
                             Pension Benefits      Postretirement
                                                      Benefits
<S>                        <C>        <C>        <C>       <C>
Change in Benefit                                          
  Obligations
Benefit obligation at                                      
  January 1,               $(254,929) $(235,441) $(72,542) $(67,367)
Service cost                  (5,410)    (4,384)   (1,417)   (1,298)
Interest cost                (19,024)   (17,561)   (5,371)   (5,047)
Actuarial (gain) loss        (22,521)   (13,928)   (7,500)   (2,891)
Benefits paid                 16,238     16,385     4,514     4,061
                           ---------  ---------  --------  --------
Benefit obligation at                                      
  December 31,             $(285,646) $(254,929) $(82,316) $(72,542)
                           =========  =========  ========  ========
Change in Plan Assets                                      
Fair value of assets at                                    
  January 1,               $ 289,091  $ 254,824  $ 52,263  $ 39,601
Actual return on assets       36,467     50,489     5,781     9,907
Company contributions            163        163       863     6,816
Participant contributions         --         --        --        --
Benefits paid                (16,238)   (16,385)   (4,514)   (4,061)
                           ---------  ---------  --------  --------
Fair value of assets at                                    
  December 31,             $ 309,483  $ 289,091  $ 54,393  $ 52,263
                           =========  =========  ========  ========
Funded Status at                                           
  December 31,
Benefit obligation less                                    
  (greater) than plan
  assets                   $  23,837  $  34,162  $(27,923) $(20,279)
Unrecognized net transition                                          
  liability (asset)           (4,011)    (4,899)   30,297    33,155
Unrecognized actuarial                                     
  (gain) loss                (35,875)   (47,431)   (6,777)  (12,977)
Unrecognized prior                                         
  service cost                 6,365      7,433        --        --
Intangible asset                (415)      (455)       --        --
Accumulated other                                          
  comprehensive income        (1,401)    (1,120)       --        --
                           ---------  ---------  --------  --------
Prepaid (accrued) benefit  
  cost                     $ (11,500) $ (12,310) $ (4,403) $   (101)
                           =========  =========  ========  ========
Assumptions as of                                          
  December 31,
Discount rate                6.75%    7.25%        6.75%   7.25%
Long-term return on assets   9.00%    8.50%        8.50%   8.50%
Long-term compensation                                     
  increase                   3.50%    4.50%         N/A     N/A
</TABLE>

For measurement purposes, a 7.2 percent annual rate of increase
in the per capita cost of covered health care benefits was
assumed for 1998.  The rate was assumed to decrease gradually to
5.7 percent for 2025 and remain 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,  1998, by $2.9 million and the
aggregate of the service and interest cost



                               50

components of net postretirement health care cost for 1998 by
$252,000.  Decreasing the assumed health care cost trend rate by
1% in each year would decrease the accumulated postretirement
benefit obligation at December 31, 1998, by $3.3 million and the
aggregate of the service and interest cost components of net
postretirement health care cost for 1998 by $295,000.

NOTE 4 - SHORT-TERM DEBT

CILCO had arrangements for bank lines of credit totaling $45
million at December 31, 1998, 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 $40.6 million
and $21.3 million at December 31, 1998 and 1997, 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, 1998, was $6.3 million.

NOTE 6 - PREFERRED STOCK

<TABLE>
<CAPTION>
At December 31                              1998         1997
                                             (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 (*)                     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>
(*)  Dividend rates at December 31, 1998 and 1997, were 4.04%
     and 4.18%, 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, 1998, is $3.2 million, assuming a
continuation of the auction dividend rate at December 31, 1998,
for the flexible auction rate series.








                               51

PREFERRED STOCK WITHOUT MANDATORY REDEMPTION

The call provisions of preferred stock redeemable at CILCO's
option outstanding at December 31, 1998, 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                      1998         1997
                                      (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                           
   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      268,550
Unamortized premium and discount             
  on long-term debt, net              (666)        (714)
                                  --------     --------
     Total CILCO long-term debt   $267,884     $267,836
                                  ========     ========
</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.




                               52

Scheduled maturities of long-term debt are $30 million for 2000
and $25 million for 2003.  There are no scheduled maturities of
long-term debt for 2001 or 2002.

NOTE 8 - COMMITMENTS & CONTINGENCIES

CILCO's 1999 capital expenditures for utility plant are estimated
to be $56.6 million, in connection with which CILCO has normal
and customary purchase commitments at December 31, 1998.

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 provided for a minimum
contract delivery rate from CIPS of 90 MW until the contract
expired in May 1998.

In March 1995, CILCO and CIPS amended 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 before the
Federal Energy Regulatory Commission (FERC) to raise contract
issues relating to CIPS' proposal to engage with a second
utility in joint dispatch of their respective generating units.
CILCO also challenged 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 October 1997 order, FERC
rejected CILCO's challenges to joint dispatch and denied CILCO's
request for an open season.  However, CIPS was ordered to file
the agreements with FERC and, on its own motion, FERC initiated
a separate proceeding to investigate the terms of the
agreements.  Hearings in that proceeding have concluded, and the
Administrative Law Judge has entered an order finding the
agreements are, with minor exceptions, just and reasonable.
CILCO is appealing that order to FERC and is requesting FERC to
assess penalties against CIPS for CIPS' failure to file the 1990
agreement before providing service to CILCO under that
agreement.  FERC's October 1997 order failed to address certain
contract issues raised by CILCO.  FERC denied rehearing of that
order in February 1998, and CILCO has appealed to the United
States Court of Appeals for the District of Columbia Circuit for
a review of FERC's orders concerning the CIPS agreements.  CILCO
also filed a separate complaint at FERC in December 1998,
challenging the manner in which CIPS is performing, or failing
to perform, under the agreements and has notified CIPS that
CILCO considers CIPS to be in default under the agreements.  On
the ground that CIPS is in default regarding performance under
the 1992 agreement, CILCO suspended capacity reservation
payments to CIPS under the agreements as of January 21, 1999.
CILCO cannot predict how FERC or the Court will ultimately rule
on the issues pending before them.  If CILCO's position is not
upheld on certain issues, CILCO could be required to pay the
suspended capacity reservation charges which are currently
$865,000 per month, plus interest, to CIPS.  While the capacity
payments are suspended, CILCO is purchasing power and energy
from other sources.

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 in CILCORP's 1998 Annual Report which is incorporated
herein by reference.





                               53

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,
1998, are $13.6 million in total.  Payments due during the years
ending December 31, 1999, through December 31, 2003, are $5.4
million, $3.7 million, $2.0 million, $1.4 million and $.5
million, respectively.

NOTE 10 - FINANCIAL INSTRUMENTS AND PRICE RISK MANAGEMENT

CILCO utilizes commodity futures contracts, options and swaps in
the normal course of its natural gas business activities.
However, it does not currently utilize these instruments to hedge
its electric purchase and sale transactions or to participate in
energy trading activities.  Gains and losses arising from
derivative financial instrument transactions which hedge the
impact of fluctuations in energy prices are recognized in income
concurrent with the related purchases and sales of the commodity.
If a derivative financial instrument contract is terminated
because it is probable that a transaction or forecasted
transaction will not occur, any gain or loss as of such date is
immediately recognized.  If a derivative financial instrument
contract is terminated early for other economic reasons, any gain
or loss as of the termination date is deferred and recorded
concurrently with the related purchase and sale of natural gas.
CILCO is subject to commodity price risk for deregulated sales to
the extent that energy is sold under firm price commitments.  Due
to market conditions, at times CILCO may have unmatched
commitments to purchase and sell energy on a price and quantity
basis.  Physical and derivative financial instruments give rise
to market risk, which represents the potential loss that can be
caused by a change in the market value of a particular
commitment.  Market risks are actively monitored to ensure
compliance with the Company's risk management policies, including
limits to the Company's total net exposure at any time.

The net loss reflected in operating results from derivative
financial instruments was $.2 million for the year 1998.  As of
December 31, 1998, CILCO had fixed-price derivative financial
instruments representing hedges of natural gas purchases of .4
Bcf and natural gas sales of .9 Bcf for commitments through March
1999.  The net deferred loss and carrying amount on these fixed-
price derivatives at December 31, 1998 was $.4 million.  At
December 31, 1998, CILCO had open positions in derivative
financial instruments used to hedge basis of 1.5 Bcf for
commitments through August 1999.  The net deferred gain on these
basis derivatives at December 31, 1998, was $.1 million.





















                               54

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>
1998
Operating revenue   $149,080  $116,614  $136,506  $130,136
Operating income      18,324    14,593    24,815     9,983
Net income            12,316     8,929    19,064     3,926
                                                          
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
</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 1999
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 1999 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



                               55

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
(excluding QST Environmental).  Through February 28, 1999,
CILCORP has guaranteed $12.1 million of the obligations of QST
(excluding QST Environmental).  CILCORP receives a fee for
providing these guarantees.

QST has been authorized to guarantee up to $50 million of
obligations incurred by its subsidiaries (excluding QST
Environmental).  Through February 28, 1999,




                               56

QST has guaranteed $3.0 million of its subsidiaries' obligations.
QST receives a fee for providing these guarantees.

QST (excluding QST Environmental) had no outstanding debt at the
end of 1998.

QST Environmental's cash flow is supplemented by a $15 million
revolving line of credit with the Holding Company which expires
in May 2000.  At December 31, 1998, QST Environmental had
borrowed $7 million from the Holding Company.

CIM had outstanding debt of $37.7 million (all to the Holding
Company) at the end of 1998.

Through December 31, 1998, CIM has paid $14 million to fund
affordable housing commitments, $3.8 million of which was paid
during 1998.  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,
President 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, Secretary and
Treasurer of CILCORP Inc.


                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                               57

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

(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 1998
       Annual Report:

       Management's Report

       Report of Independent Public Accountants

       Consolidated Statements of Income for the three
         years ended December 31, 1998

       Consolidated Balance Sheets as of
         December 31, 1998, and December 31, 1997

       Consolidated Statements of Segments of Business for
         the three years ended December 31, 1998

       Consolidated Statements of Cash Flows for the three
         years ended December 31, 1998

       Consolidated Statements of Common Stockholders' Equity
         for the three years ended December 31, 1998

       Notes to the Consolidated Financial Statements

(a) 2. Financial Statement Schedules

       The following schedules are included herein:
                                                        Page No.
                                                       Form 10-K
                                                       ---------
       Schedule II - Valuation and Qualifying Accounts
                       and Reserves                        64

       Schedule XIII -Investment in Leveraged Leases at
                       December 31, 1998                   66

       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 January 26, 1999.

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




                               58

  (10) CILCO Executive Deferral Plan.  As amended effective August
       17, 1998.

 (10)a CILCO Executive Deferral Plan II.  As amended effective           
       August 17, 1998.

 *(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; extended for a period of three years
        effective April 28, 1998).  [Designated in Form 10-K for
        the year ended December 31, 1997.  File No. 1-8946, as
        Exhibit 10(c)]

  (10)d CILCO Benefit Replacement Plan (as amended effective
        November 12, 1998).

 *(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).  [Designated in
        Form 10-K for the year ended December 31, 1997.
        File No. 1-8946, as Exhibit 10(f)].

 *(10)g Agreement and Plan of Merger between CILCORP and the AES
        Corporation  [Designated in Form 8-K filed December 3, 1998.
        File No. 1-8946].

  (10)h Management Continuity Agreement between CILCORP and
        various subsidiary officers (approved January 27, 1998).

  (10)i CILCO Compensation Protection Plan (approved November 20,
        1998).

  (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                    71

  (23) Consent of Arthur Andersen LLP                       72

  (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 December 3, 1998 regarding the
          Agreement and Plan of Merger between CILCORP Inc. and the
          AES Corporation.

 * 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.





                               59

 **A comparable Employment Agreement, effective April 28, 1998,
   exists between the Company and John G. Sahn.  The only
   material difference in these Agreements pertains to the
   duration of the Agreements and the annual base salary in
   effect on the date of each Agreement.  The duration of the
   Agreement with Mr. Sahn is two years and his annual base
   salary specified in the Agreement is $151,000.

***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.
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                               60

                              CILCO

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

          Management's Report                                    29

          Report of Independent Public Accountants               30

          Consolidated Statements of Income for the three years
            ended December 31, 1998                              31

          Consolidated Balance Sheets as of December 31, 1998
            and December 31, 1997                               32-33

          Consolidated Statements of Cash Flows for the three
            years ended December 31, 1998                       34-35

          Consolidated Statements of Segments of Business for
            the three years ended December 31, 1998             36-38

          Consolidated Statements of Retained Earnings for the
            three years ended December 31, 1998                  39

          Notes to the Consolidated Financial Statements        40-55

(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, 1998                      65

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 April 28, 1998.

  *(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,



                               61

        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
        effective August 17, 1998.

 (10)a  CILCO Executive Deferral Plan II.  As
        amended effective August 17, 1998.

**(10)b Employment Agreement between CILCORP and Robert O.
        Viets, Chairman, President and Chief Executive Officer
        of CILCO (effective September 23, 1997; extended for a
        period of three years effective April 28, 1998).
        [Designated in Form 10-K for the year ended December 31,
        1997.  File No. 1-2732, as Exhibit 10(b).]

 *(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 CILCORP Economic Value Added Incentive Compensation Plan
        (adopted February 29, 1989 and 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)e Benefit Replacement Plan (as amended effective November
        12, 1998).

 *(10)f CILCORP Shareholder Return Incentive Compensation Plan
        (as amended  effective October 28, 1997).
        [Designated in Form 10-K for the year ended December 31,
        1997.  File No. 1-2732, as Exhibit 10(f).]

  (10)g Management Continuity Agreement between CILCORP and
        various subsidiary officers (approved
        January 27, 1998).

  (10)h CILCO Compensation Protection Plan (approved November 20,
        1998).

  (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


                                  62

    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.

  **This exhibit has been previously filed with the Securities
    and Exchange Commission (SEC) as an exhibit to a previous
    filing on Form 10-K and is incorporated herein as an exhibit
    by reference.  Comparable Employment Agreements, also
    effective September 23, 1997, and extended for a period of
    three years effective April 28, 1998, exist between the
    Company and J. Mark Elliott, William M. Shay 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.




















































                               63


<PAGE>
<TABLE>
SCHEDULE II
CILCORP INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1998, 1997 and 1996
(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,                                          
1998
  Accumulated Provisions                                           
     Deducted from Assets-
     Doubtful Accounts     $2,518   $3,356   $  --      $2,463    $3,411
                                                                   
  Accumulated Provisions                                           
     Not Deducted from                                             
     Assets -
     Injuries and Damages   1,210      768      --         376     1,602
     Discontinued                                                  
       Operations Reserve      --    8,581      --          --     8,581
                                                                   
Year ended December 31,                                            
1997
  Accumulated Provisions                                           
     Deducted from Assets-                                          
     Doubtful Accounts     $2,600   $2,867   $  --      $2,949    $2,518
                                                                   
  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
</TABLE>




















                               64


<PAGE>
<TABLE>

SCHEDULE II
                 CENTRAL ILLINOIS LIGHT COMPANY
         Valuation and Qualifying Accounts and Reserves
          Years Ended December 31, 1998, 1997 and 1996
                     (Thousands of dollars)
                                
<CAPTION>
Column A                 Column B      Column C         Column DColumn 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,                                            
1998
  Accumulated Provisions                                           
     Deducted from Assets-                                          
     Doubtful Accounts     $  703    $2,500   $  --    $2,098      $1,105
                                                                   
  Accumulated Provisions                                           
     Not Deducted from                                             
     Assets -
     Injuries and Damages   1,210       768      --       376       1,602
                                                                   
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
</TABLE>





















                               65

<PAGE>
<TABLE>
SCHEDULE XIII
CILCORP INC. AND SUBSIDIARY COMPANIES
Investment in Leveraged Leases
<CAPTION>
Year Ended December 31, 1998
(Thousands of dollars)
                                             Amount
                           Cost of each    carried on
                             lease(A)       Balance
                                            Sheet(B)
<S>                         <C>           <C>
Office buildings            $ 23,130      $ 64,158
Warehouses                    11,746        19,855
Mining equipment              10,244        11,437
Generating stations           21,890        30,395
Passenger railway equipment    3,805         6,110
Cargo aircraft                 9,583        15,035
                            --------      --------
      Totals                $ 80,398      $146,990
                            ========      ========
<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.  The
    investment in leveraged leases balance does not include
    deferred taxes of $103,566.
</TABLE>


































                               66

<PAGE>
                           SIGNATURES

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

                                   CILCORP INC.

March 26, 1999                     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 and Chief   March 26, 1999
                           Executive Officer
                           and Director

(iii) Controller



  T. D. Hutchinson       Controller            March 26, 1999

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

M. Alexis*                    Director         March 26, 1999
J. R. Brazil*                 Director         March 26, 1999
W. Bunn III*                  Director         March 26, 1999
J. D. Caulder*                Director         March 26, 1999
H. J. Holland*                Director         March 26, 1999
H. S. Peacock*                Director         March 26, 1999
K. E. Smith*                  Director         March 26, 1999
M. M. Yeomans*                Director         March 26, 1999


  R. O. Viets                 Director         March 26, 1999

 *By

        R. O. Viets
      Attorney-in-fact










                               67

<PAGE>
                           SIGNATURES

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

                                 CENTRAL ILLINOIS LIGHT COMPANY


March 26, 1999                         By
                                       R. O. Viets
                                       Chairman of the Board,
                                         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) Principal executive officer and director:


R. O. Viets                 Chairman of the Board,   March 26, 1999
                              President and Chief
                              Executive Officer
                              and Director

(ii) Principal financial officer:



R. J. Sprowls                Vice President and      March 26, 1999
                               Chief Financial
                               Officer

(iii) Controller


T. D. Hutchinson             Controller and          March 26, 1999
                               Manager of Accounting

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


J. M. Elliott                 Director               March 26, 1999
T. S. Romanowski              Director               March 26, 1999
W. M. Shay                    Director               March 26, 1999
J. F. Vergon                  Director               March 26, 1999
R. O. Viets                   Director               March 26, 1999











                               68

<PAGE>
<TABLE>
EXHIBIT (12)
CILCORP INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
<CAPTION>
Twelve Months Ended           1998    1997     1996     1995    1994
                                      (Thousands of Dollars)
<S>                         <C>     <C>      <C>      <C>      <C>
Earnings, as Defined:                                               
  Net Income                $16,310 $16,395  $27,943  $38,582  $32,586
  Income Taxes                5,435  16,940   14,505   23,274   18,180
  Interest                   29,473  27,462   28,964   29,861   26,341
  Interest Portion of
    Rentals                   2,733   2,819    2,844    1,905    1,864
  Preferred Dividends         3,194   3,216    3,188    3,299    2,980
                            ------- -------  -------  -------  -------
   Total Earnings,
     as Defined             $57,145 $66,832  $77,444  $96,921  $81,951
                            ======= =======  =======  =======  =======
Fixed Charges, as Defined:                                          
  Interest Expense          $25,849 $23,971  $26,233  $27,512  $24,313
  Interest Expense on COLI    3,624   3,491    2,731    2,349    2,028
  Interest Portion of
    Rentals                   2,733   2,819    2,844    1,905    1,864
  Tax Effected Preferred                                            
     Dividends                5,294   5,331    5,284    5,468    4,939
                            ------- -------  -------  -------  -------
  Total Fixed Charges, as                                           
     Defined                $37,500 $35,612  $37,092  $37,234  $33,144
                            ======= =======  =======  =======  =======
Ratio of Earnings to Fixed                                          
  Charges*                      1.5     1.9      2.1      2.6      2.5
                                ===     ===      ===      ===      ===
<FN>
*The fixed charge coverage ratio without the effects of the QST
discontinued operations and the CILCO extraordinary item would
have been 2.5, 3.0 and 2.5 for 1998, 1997 and 1996,
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 3.7.
</TABLE>

























                               69

<PAGE>
<TABLE>

EXHIBIT (12)
                 CENTRAL ILLINOIS LIGHT COMPANY
                Computation of Ratio of Earnings
                        to Fixed Charges
<CAPTION>
Twelve Months Ended          1998    1997     1996     1995      1994
                                      (Thousands of Dollars)
<S>                         <C>     <C>      <C>      <C>      <C>
Earnings, as Defined:                                             
 Net Income                 $44,235 $ 53,467 $45,127  $42,398  $32,487
 Income Taxes                22,472   20,633  24,082   22,534   17,168
 Fixed Charges, as Below     28,187   29,434  28,504   27,876   24,693
                            ------- -------- -------  -------  -------
   Total Earnings, 
     as Defined             $94,894 $103,534 $97,713  $92,808  $74,348
                            ======= ======== =======  =======  =======
Fixed Charges, as Defined:                                       
 Interest on COLI           $ 3,624 $  3,491 $ 2,731  $ 2,349  $ 2,028
 Interest on Short-term Debt    962      281     149      744      292
 Interest on Long-term Debt  19,498   20,024  21,012   20,242   19,221
 Amortization of Debt                                            
   Discount & Expense,                                         
   Premium and    
   Reacquired Loss              535    2,218     681      669      665
 Miscellaneous Interest                                          
    Expense                   1,780    1,658   2,320    1,967      623
 Interest Portion of
    Rentals                   1,788    1,762   1,611    1,905    1,864
                            ------- -------- -------  -------  -------
    Total Fixed Charges, as                                         
      Defined               $28,187 $ 29,434 $28,504  $27,876  $24,693
                            ======= ======== =======  =======  =======
Ratio of Earnings to Fixed                                       
  Charges                       3.4      3.5     3.4      3.3      3.0
                                ===      ===     ===      ===      ===
</TABLE>


                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                

                               70

                             NOTICE

This copy of CILCORP Inc.'s and Central Illinois Light Company's
Form 10-K does not include our 1998 Consolidated Annual Report
which is to be mailed not later than June 1999.




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











































                               71

<PAGE>
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,
1999, 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 26, 1999











































                               72