Illinois Power Co.’s ratings get boost after announced sale to Ameren Corp.


New York, Feb. 5, 2004 — Moody’s upgraded the ratings of Illinois Power Company (IPC: Sr. Sec. Debt to B1 from B3) following the announcement that Ameren Corporation had signed a definitive agreement to purchase the stock of IPC and a 20% interest in Electric Energy, Inc. (EEI) from Dynegy, Inc. for approximately $2.3 billion.

IPC’s ratings remain under review for possible upgrade. The rating action incorporates Moody’s expectation that the transaction is highly likely to occur in substantially the proposed form, and that Illinois Power’s creditworthiness will benefit from ownership by a more highly rated entity.

The rating action considers the relatively stable financial performance expected by IPC, and plans to reduce leverage and improve credit metrics following the acquisition by Ameren. Moody’s notes that Ameren’s financing plan contemplates the issuance of new Ameren common stock, which will be used, among other things, to pay the cash portion of the acquisition price to Dynegy and to reduce certain IPC debt.

The rating action acknowledges the stated intention and demonstrated action by Dynegy to sell IPC to a third party, and reflects Moody’s belief that the transaction with Ameren, as structured, should not receive material opposition from key legislators and other interested parties.

Under the terms of the transaction valued at $2.3 billion, Ameren will assume approximately $1.8 billion in IPC debt and preferred stock, and pay the $500 million balance in cash at closing. However, $100 million of the cash portion of the purchase price will be placed in a six-year escrow account unless certain conditions are met prior to closing.

In addition to the purchase of IPC’s transmission and distribution systems, the purchase also includes Dynegy’s 20% interest in EEI, which is the owner of a 1,086-megawatt, Joppa, Ill.-based coal-fired power plant. This plant is already 60% owned by Ameren.

Upon closing of the acquisition, expected by year-end 2004, IPC would become a wholly-owned Ameren subsidiary. The transaction also contemplates a firm capacity power supply contract for the annual purchase by IPC of 2,800 megawatts of electricity from Dynegy.

The power supply contract, which extends through 2006, is expected to supply about 75% of IPC’s electric customer requirements.

The transaction was approved by the board of directors of each company, and no approval is required from either company’s shareholders. The acquisition is also subject to the approval of the Illinois Commerce Commission, the Securities and Exchange Commission, the Federal Energy Regulatory Commission, the Federal Communications Commission and the expiration of the waiting period under the Hart-Scott-Rodino Act.

The rating review will focus on the prospects for further credit improvement should the acquisition occur and the de-leveraging plan contemplated by Ameren for IPC is executed. The rating review will consider the timing and likelihood of various regulatory approvals, the most important of which being Illinois Commerce Commission approval.

Ratings upgraded and under review for possible upgrade are:

“- Senior secured debt to B1 from B3,
“- Senior unsecured debt and Issuer Rating to B2 from Caa1,
“- Trust preferred to B3 from Caa2,
“- Preferred stock to Caa2 from Ca, “- Shelf registration to (P)B1, (P)B2, (P)B3, (P)Caa2 from (P)B3, (P)Caa1, (P)Caa2, (P)Ca for the issuance of senior secured debt, senior unsecured debt, trust preferreds, and preferred stock, respectively.

IPC is an electric and gas distribution and transmission company headquartered in Decatur, Illinois.


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