CILCORP RIGHTS PLAN SHAREHOLDER LETTER


November 12, 1996

Dear CILCORP Shareholder:

     Your Board of Directors has recently adopted a Shareholder Rights Plan. 
The Plan provides for a dividend distribution of Rights to purchase units of
preferred stock, exercisable upon the occurrence of certain events.  

     Effective today, you have one Right for each share of Common Stock which
you own.  You need do nothing to receive your Rights which, for the time being,
simply represent another aspect of your Company shares.  We are enclosing a
summary description which outlines the principal features of the Plan, and we
urge you to read it carefully.  This letter summarizes our reasons for adopting
the Plan.

     While the Board is not aware of any effort to acquire control of the
Company, it believes that these Rights represent a sound and reasonable means of
safeguarding your interest as shareholders in the event that you and your
Company are confronted with coercive, unfair or abusive takeover tactics. 
The Plan
increases the Board's ability to effectively represent the interests of
shareholders of the Company in the event of an unsolicited takeover proposal or
attempt to acquire the Company through a gradual accumulation of shares.  The
Plan is not intended  to prevent a takeover of the Company and will not do so. 
The declaration of the Rights should not affect any prospective offeror willing
to make an offer to all shareholders at a fair price and negotiate with the
Board.  Furthermore, the Rights will not interfere with a merger or other
business combination approved by the Board.

     Distribution of the Rights does not affect or in any way weaken the
financial condition of the Company or interfere with its business plans.  The
distribution is not dilutive, does not affect reported earnings per share, is
not taxable either to you or to the Company, and will not change the way in
which you
can currently trade CILCORP shares.  

     In adopting the Plan, the Board has expressed its confidence in CILCORP's
future and its determination that shareholders be given every opportunity to
participate fully in that future.

                                   Sincerely,
                                   
                                   
                                   
                                   Robert O. Viets
                                   President and Chief Executive Officer