Exelon said it would buy Illinois Power, which delivers electricity and natural gas to more than 1 million customers, for $275 million cash and $150 million of promissory note. It would also assume all $1.8 billion of Illinois Power debt in a deal that will help Dynegy in its quest to return to financial health. The promissory note carries interest at 5%, matures in December 2010 and is subject to mandatory prepayment or extension upon the occurrence of certain events, including those relating to ratings upgrades obtained by Dynegy and contingent environmental liabilities retained by Illinois Power.

The assets included in the transaction consist of approximately 40,000 miles of electric transmission and distribution lines, more than 750 miles of natural gas transmission pipe and 7,600 miles of natural gas distribution lines.

The sale is conditional upon receipt of approvals from the Illinois Commerce Commission, the Federal Energy Regulatory Commission, and the Securities and Exchange Commission. Pending these approvals, the acquisition is expected to close in the fourth quarter of 2004.

In a related agreement that is conditional upon closure of this transaction, Dynegy has contracted to sell 6000MWe capacity to an Exelon subsidiary for six years beginning in January 2005. The capacity, which will be provided by Dynegy’s coal-fired baseload facilities in Illinois, natural gas-fired peaking facilities developed by the company throughout the region and one of Dynegy’s tolling contracts, will be used by Exelon to meet its customer demand. Under this agreement, Exelon will purchase 2900MWe capacity and energy from Dynegy’s peaking facilities and the tolling arrangement. Also as part of the agreement, Exelon will purchase 3100MWe of capacity only from Dynegy’s baseload coal fleet.