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Washington, D.C. 20549

FORM 10-K/A

For the fiscal year ended December 31, 2001

OR

For the transition period from                 to                

Commission File Number 1-9052

Registrant’s telephone number, including area code: 937-224-6000

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

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o

The aggregate market value of the voting stock held by nonaffiliates of the registrant as of February 28, 2002 was $2,923,447,446 based on a closing price of $23.11 on such date.

DOCUMENTS INCORPORATED BY REFERENCE

Parts I and II incorporate by reference portions of the registrant’s 2001 Annual Report to Shareholders.

Portions of the definitive Proxy Statement for the 2002 Annual Meeting of Shareholders of the registrant are incorporated by reference into Part III.

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DPL INC.

Index to Annual Report on Form 10-K/A
Fiscal Year Ended December 31, 2001

This Annual Report on Form 10-K/A is being filed to restate DPL Inc.’s consolidated
financial statements as of and for the year ended December 31, 2001.

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PART I

Item 1 — Business

DPL INC.

DPL Inc. (“DPL”) was organized in 1985 under the laws of the State of Ohio to engage in the acquisition and holding of securities of corporations for investment purposes. The executive offices of DPL are located at 1065 Woodman Drive, Dayton, Ohio 45432 - telephone (937) 224-6000.

DPL’s principal subsidiary is The Dayton Power and Light Company (“DP&L”). DP&L is a public utility incorporated under the laws of Ohio in 1911. DP&L sells electricity to residential, commercial and governmental customers in a 6,000 square mile area of West Central Ohio. Electricity for DP&L’s 24 county service area is generated at eight power plants and is distributed to more than 500,000 retail customers. Principal industries served include automotive, food processing, paper, technology, and defense. DP&L’s sales reflect the general economic conditions and seasonal weather patterns of the area.

Other subsidiaries of DPL include DPL Energy, LLC (“DPLE”), which engages in the business of development, construction, and operation of peaking generating facilities, and brokering wholesale electric energy; DPL Energy Resources, Inc., a competitive retail electric supplier; Plaza Building, Inc., which owns all the capital stock of MVE, Inc.; MVE, Inc., which provides financial support services to DPL and its subsidiaries; Miami Valley Insurance Company, an insurance company for DPL and its subsidiaries; Miami Valley Lighting, LLC, a street lighting business; Miami Valley Resources, Inc. (“MVR”), a natural gas supply management company; Miami Valley Leasing, which leases communications equipment and other miscellaneous equipment and owns real estate; Miami Valley CTC, Inc., a subsidiary of MVE, Inc., which provides transportation services; and MacGregor Park, Inc., an owner and developer of real estate.

DPL and its subsidiaries are exempt from registration with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 because its utility business operates solely in the State of Ohio.

DPL and its subsidiaries employed 1,554 persons as of December 31, 2001, of which 1,313 were full-time employees and 241 were part-time employees.

COMPETITION

In October 1999, legislation became effective in Ohio that gave electric utility customers a choice of energy providers as of January 1, 2001. Under the legislation, electric generation, aggregation, power marketing, and power brokerage services supplied to retail customers in Ohio is deemed to be competitive and is not subject to supervision and regulation by the Public Utilities Commission of Ohio (“PUCO”). As required by the legislation, DP&L filed its transition plan at the PUCO on December 20, 1999. DP&L received PUCO approval of its plan on September 21, 2000.

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The transition plan provides for a three-year transition period, which began on January 1, 2001 and ends on December 31, 2003, at which time DP&L’s generation assets will no longer be subject to Ohio regulation and will be able to sell all capacity in the open energy market. The plan also provides for a 5% residential rate reduction on the generation component of the rates, which reduces revenue by approximately $13-14 million; rate certainty for the three-year period for customers that continue to purchase power from DP&L; guaranteed rates for a six-year period for transmission and delivery services; and recovery of transition costs of approximately $600 million. Under the plan, DPL has the organizational and financial flexibility to continue its growth initiatives without regulatory restrictions.

On September 30, 1996, the FERC conditionally accepted DP&L’s market-based sales tariff, which will allow DP&L to sell wholesale generation supply at prices that reflect current market prices. At the same time, the FERC approved the application and authorization of DPLE to sell and broker wholesale electric power and also charge market-based prices for such power. DPL Energy Resources, Inc. and Miami Valley Lighting, LLC filed at the FERC for market-based rate authority on November 16, 2000 and received FERC authority on December 13, 2000 and December 15, 2000, respectively. DPL Energy Resources, Inc. received approval from the PUCO on December 8, 2000 to provide competitive retail electric service.

DPL competes through its principal subsidiaries, DP&L and DPLE. DP&L competes with privately and municipally owned electric utilities and rural electric cooperatives, and other alternate fuel suppliers on the basis of price and service. DPLE operates over 4,000 megawatts of generation capacity and markets wholesale energy throughout the eastern half of the United States.

Like other utilities and energy marketers, DP&L and DPLE from time to time have electric generating capacity available for sale on the wholesale market. DP&L and DPLE compete with other generators to sell electricity provided by such capacity. The ability of DP&L and DPLE to sell this electricity will depend on how DP&L’s and DPLE’s price, terms and conditions compare to those of other suppliers. In addition, from time to time, DP&L makes power purchases from other suppliers.

The National Energy Policy Act of 1992, which reformed the Public Utilities Holding Company Act of 1935, allows the federal government to mandate access by others to a utility’s electric transmission system and may accelerate competition in the supply of electricity.

DP&L provides transmission and wholesale electric service to twelve municipal customers, which distribute electricity within their corporate limits. In addition to these municipal customers, DP&L maintains an interconnection agreement with one municipality that has the capability to generate a portion of its energy requirements. Sales to municipalities represented 1.7% of total electricity sales in 2001.

The municipal agreements provide, among other things, for the sale of firm power by DP&L to the municipalities on specified terms. However, the parties disagreed in their interpretation of this portion of the agreement and DP&L filed suit against the eleven municipalities on December 28, 1998. The dispute was subsequently settled in 1999. In December 1999, DP&L filed a second suit against the municipalities to claim the

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municipalities’ initial failure to pay for certain services rendered under the contract. The municipalities filed a complaint at the Federal Energy Regulatory Commission (“FERC”) claiming violation of a mediation clause. On June 29, 2000 the FERC Administrative Law Judge issued an initial decision in the case, which was favorable to DP&L; however, the FERC has not yet issued a final order. This dispute is expected to be resolved through the FERC process, and is not expected to result in a material impact on DP&L’s financial position or results of operations.

On April 24, 1996, the FERC issued orders requiring all electric utilities that own or control transmission facilities to file open-access transmission service tariffs. Open-access transmission tariffs provide third parties with non-discriminatory transmission service comparable to what the utility provides itself. In its orders, the FERC further stated that FERC-jurisdictional stranded costs reasonably incurred and costs of complying with the rules will be recoverable by electric utilities. Both in 1997 and 1998, DP&L reached an agreement in principle with staff and intervenors in these tariff cases. The FERC issued an Order accepting the Stipulation between the parties in DP&L’s Open Access Transmission Tariff cases on July 30, 1999 and September 17, 1999. DP&L was not materially impacted by the Order.

The FERC issued a final rule on December 20, 1999 specifying the minimum characteristics and functions for Regional Transmission Organizations (“RTO”). The rule required that all public utilities that own, operate or control interstate transmission file a proposal to join an RTO by October 15, 2000 or file a description of efforts taken to participate in an RTO, reasons for not participating in an RTO, any obstacles to participation in an RTO, and any plans for further work towards participation. DP&L filed with the FERC on October 16, 2000 to join the Alliance RTO. On December 19, 2001, the FERC issued an Order that did not approve the Alliance RTO as a stand-alone regional transmission organization. As of December 31, 2001, DPL had invested approximately $6 million in its efforts to join the Alliance RTO. DPL is exploring its operational and financial options as a result of the FERC Order. The FERC recognized in its Order that substantial losses were incurred to establish the Alliance RTO and that it would consider proposals for rate recovery of prudently incurred costs.

On July 22, 1998, the PUCO approved the implementation of Minimum Electric Service Standards for all of Ohio’s investor-owned electric utilities. This Order details minimum standards of performance for a variety of service-related functions, effective July 1, 1999. On December 21, 1999, the PUCO issued additional rules proposed by the PUCO staff, which are designed to guide the electric utility companies as they prepare to enter into deregulation. These rules include certification of providers of competitive retail electric services, minimum competitive retail electric service standards, monitoring the electric utility market, and establishing procedures for alternative dispute resolution. There were also rules issued to amend existing rules for noncompetitive electric service and safety standards and electric companies long-term forecast reporting. DP&L submitted comments on the proposed rules on January 31, 2000. The rules were finalized by the PUCO in June 2000 and did not have a material impact on DP&L’s financial position.

On June 30, 2001, MVR sold substantially all of its customer contracts. The sale of these contracts did not have a material effect on overall results.

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In October 2000, DP&L completed the sale of its natural gas retail distribution assets and certain liabilities for $468 million in cash.

CONSTRUCTION PROGRAM

Construction additions are expected to approximate $161 million in 2002 and were $339 and $344 million in 2001 and 2000, respectively. The capital program includes the development of natural gas-fired combustion turbine generation peaking units and environmental compliance as follows:

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A summary of DPL’s peaking generation expansion program is presented below:

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DPL began construction on the final phase of its peaking generation capacity expansion program during the third quarter of 2001. This addition, totaling 480 MW will be on line in June 2002, bringing DPL’s generating capacity to 4,600 MW and achieving a generation mix of 65% base load and 35% peaking. DPL has not contracted for further capacity additions, but will continue licensing currently owned sites and evaluating the purchase of program equipment on the secondary market. If and when market-pricing conditions warrant, DPL will have the flexibility to expand its capacity.

Construction plans are subject to continuing review and are expected to be revised in light of changes in financial and economic conditions, load forecasts, legislative and regulatory developments and changing environmental standards, among other factors. DPL’s ability to complete its capital projects and the reliability of future service will be affected by its financial condition, the availability of external funds at reasonable cost, and adequate and timely rate recovery. DPL expects to finance its construction program in 2002 and 2003 with internal funds.

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See ENVIRONMENTAL CONSIDERATIONS for a description of environmental control projects and regulatory proceedings that may change the level of future construction additions. The potential impact of these events on DPL’s operations cannot be estimated at this time.

ELECTRIC OPERATIONS AND FUEL SUPPLY

DPL’s present winter generating capability is 4,151,000 KW. Of this capability, 2,843,000 KW (approximately 68%) is derived from coal-fired steam generating stations and the balance consists of combustion turbine and diesel-powered peaking units. Approximately 87% (2,472,000 KW) of the existing steam generating capability is provided by certain units owned as tenants in common with The Cincinnati Gas & Electric Company (“CG&E”) or with CG&E and Columbus Southern Power Company (“CSP”). Each company owns a specified undivided share of each of these units, is entitled to its share of capacity and energy output, and has a capital and operating cost responsibility proportionate to its ownership share.

The remaining steam generating capability (371,000 KW) is derived from a generating station owned solely by DP&L. DP&L’s all-time net peak load was 3,130,000 KW, occurring in 1999. The present summer generating capability is 3,973,000 KW.

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In order to transmit energy to their respective systems from their commonly owned generating units, the companies have constructed and own, as tenants in common, 847 circuit miles of 345,000-volt transmission lines. DP&L has several interconnections with other companies for the purchase, sale and interchange of electricity. In July 2001, DPL completed a 40.2-mile long, 345,000-volt circuit between CG&E’s Foster Substation and DP&L’s Bath Substation. The circuit is jointly owned by DP&L and CG&E.

DP&L generated 98% of its electric output from coal-fired units in 2001. The remainder was from oil or natural gas-fired units, which were used to meet peak demands.

DP&L has contracted approximately 95% and 74% of its total coal requirements for 2002 and 2003, respectively, with the balance to be obtained by spot market purchases. The prices to be paid by DP&L under its long-term coal contracts are subject to adjustment in accordance with various indices. Each contract has features that will limit price escalations in any given year.

The average fuel cost per kilowatt-hour (“kWh”) generated of fuel burned for electric generation (coal, gas and oil) for the year was 1.31¢ in 2001, 1.18¢ in 2000 and 1.30¢ in 1999. With the onset of competition in January 2001, the Electric Fuel Component became part of the Standard Offer Generation Rate. See RATE REGULATION AND GOVERNMENT LEGISLATION and ENVIRONMENTAL CONSIDERATIONS.

GAS OPERATIONS AND GAS SUPPLY

In October 2000, DP&L completed the sale of its natural gas retail distribution assets and certain liabilities for $468 million in cash. The transaction resulted in a pre-tax gain of $183 million ($121 million net of taxes). Proceeds from the sale were used to finance the regional generation expansion and reduce outstanding short-term debt.

RATE REGULATION AND GOVERNMENT LEGISLATION

DP&L’s sales to retail customers are subject to rate regulation by the PUCO and various municipalities. DP&L’s wholesale electric rates to municipal corporations and other distributors of electric energy are subject to regulation by the FERC under the Federal Power Act.

Ohio law establishes the process for determining rates charged by public utilities. Regulation of rates encompasses the timing of applications, the effective date of rate increases, the cost basis upon which the rates are based and other related matters. Ohio law also establishes the Office of the Ohio Consumers’ Counsel (the “OCC”), which has the authority to represent residential consumers in state and federal judicial and administrative rate proceedings.

Ohio legislation extends the jurisdiction of the PUCO to the records and accounts of certain public utility holding company systems, including DPL. The legislation extends the PUCO’s supervisory powers to a holding company system’s general condition and

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capitalization, among other matters, to the extent that they relate to the costs associated with the provision of public utility service.

Based on existing regulatory authorization, regulatory assets on the Consolidated Balance Sheet include:

             (a) As discussed in the COMPETITION section, DP&L received PUCO approval of its transition plan for the deregulation of its generation business. Accordingly, DP&L discontinued the use of its regulatory accounting model for its generation operations. As a result, a $63.7 million before tax benefits ($41.4 million net of taxes) reduction of generation-related regulatory assets was recorded in the third quarter of 2000 as an extraordinary item and other generation-related regulatory assets were reclassified to the “Regulatory transition costs” asset.

             (b) Certain deferred costs remain authorized for recovery by regulators. These relate primarily to DP&L’s electric transmission and distribution operations and are being amortized over the recovery period of the assets involved.

Under the legislation passed in 1999, the percentage of income payment plan (“PIPP”) for eligible low income households was converted to a Universal Service Fund in 2001. The universal service program is administered by the Ohio Department of Development and provides for full recovery of arrearages for qualifying low income customers. As part of DP&L’s Electric Transition Plan, DP&L was granted authority to recover PIPP arrearages remaining as of December 31, 2000 as part of a transition charge.

In 2000, the PUCO amended the rules for Long-Term Forecast Reports for all investor-owned electric transmission and distribution companies in Ohio. Under these rules, each transmission and/or distribution company must annually file a Long-Term Electric Forecast Report, which presents 10-year energy and demand transmission and distribution forecasts. The reports also must contain information on the company’s existing and planned transmission and distribution systems, as well as a substantiation of the need for any system upgrades or additions. DP&L filed a combined 2000/2001 Long-Term Electric Forecast Report under these amended rules in March 2001.

The PUCO is composed of five commissioners appointed to staggered five-year terms. The current Commission is composed of the following members:

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See COMPETITION for more detail regarding the impact of legislation passed in October 1999.

ENVIRONMENTAL CONSIDERATIONS

The operations of DPL and DP&L, including the commonly owned facilities operated by DP&L, CG&E and CSP, are subject to federal, state, and local regulation as to air and water quality, disposal of solid waste and other environmental matters, including the location, construction and initial operation of new electric generating facilities and most electric transmission lines. The possibility exists that current environmental regulations could be revised which could change the level of estimated construction expenditures. See CONSTRUCTION PROGRAM.

Air Quality

The Clean Air Act Amendments of 1990 (the “CAA”) have limited sulfur dioxide and nitrogen oxide emissions nationwide. The CAA restricts emissions in two phases. Phase I compliance requirements became effective on January 1, 1995 and Phase II requirements became effective on January 1, 2000.

DP&L’s environmental compliance plan (“ECP”) was approved by the PUCO on May 6, 1993, and on November 9, 1995, the PUCO approved the continued appropriateness of the ECP. Phase I requirements were met by switching to lower sulfur coal at several commonly owned electric generating facilities and increasing existing scrubber removal efficiency. Total capital expenditures to comply with Phase I of the CAA were approximately $5.5 million. Phase II requirements are being met primarily by switching to lower sulfur coal at all non-scrubbed coal-fired electric generating units.

In November 1999, the United States Environmental Protection Agency (“USEPA”) filed civil complaints and Notices of Violations (“NOV’s”) against operators and owners of certain generation facilities for alleged violations of the CAA. Generation units operated by partners CG&E (Beckjord 6) and CSP (Conesville 4) and co-owned by DP&L were referenced in these actions. Numerous northeast states have filed complaints or have indicated that they will be joining the USEPA’s action against the partners. DP&L was not identified in the NOVs, civil complaints or state actions. In December 2000, CG&E announced that it had reached an Agreement in Principle with the USEPA and other plaintiffs in an effort to settle the claims. Discussions on the final terms of the settlement are ongoing. The outcome of these claims or the impact, if any, on DP&L has not been determined. In June 2000, the USEPA issued a NOV to DP&L-operated J.M. Stuart Station (co-owned by DP&L, CG&E, and CSP) for alleged violations of the CAA. The NOV contained allegations consistent with NOV’s and complaints that the USEPA had recently brought against numerous other coal-fired utilities in the Midwest.

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DPL will vigorously challenge the NOV. At this time, the outcome of these claims or the impact, if any, on DP&L is unknown.

In September 1998, the USEPA issued a final rule requiring states to modify their State Implementation Plans (“SIPs”) under the CAA. The modified SIPs are likely to result in further nitrogen oxide (“NOx”) reduction requirements placed on coal-fired generating units by 2003. In order to meet these NOx requirements, DP&L’s total capital expenditures are estimated to be approximately $175 million, of which $94 million remains to be expended by May 2004. Industry groups and others appealed the rules in United States District Court. The requirement for states to submit revised implementation plans has been stayed until the outcome of the litigation. In March 2000, the United States District Court upheld the rule. Industry groups and others have appealed this decision. As a result of the litigation, the Court extended the compliance date of the rule an additional year, until May 31, 2004. In March 2001, the United States Supreme Court refused to hear further appeals of the SIP rules. In December 1999, the USEPA issued final rules granting various CAA Section 126 petitions filed by northeast states. DP&L’s facilities were identified, among many others, in the rulemaking. In January 2002, the USEPA announced that reductions required under the CAA Section 126 rulemaking will be extended until May 31, 2004 to be consistent with the NOx SIP rule. DP&L’s current NOx reduction strategy and associated expenditures to meet the SIP call should satisfy the rulemaking reduction requirements.

On December 14, 2000, the USEPA issued a determination that coal- and oil-fired electric generating units should be regulated for emissions of mercury and hazardous air pollutants. The USEPA will issue proposed rules by December 2003 and final rules by December 2004. The impact of the regulatory determination cannot be determined at this time.

In March 2002, the United States Court of Appeals for the District of Columbia upheld the USEPA’s National Ambient Air Quality Standards for ozone and fine particles. The USEPA is conducting a rulemaking regarding these standards. The impact of these standards and rules can not be determined at this time.

Land Use

DP&L and numerous other parties have been notified by the USEPA or the Ohio Environmental Protection Agency (“Ohio EPA”) that it considers them Potentially Responsible Parties (“PRP’s”) for clean-up at three superfund sites in Ohio: the Sanitary Landfill Site on Cardington Road in Montgomery County, Ohio; the North Sanitary (a.k.a. Valleycrest) Landfill in Dayton, Montgomery County, Ohio; and the Tremont City Landfill in Springfield, Ohio.

DP&L received notification from the USEPA in July 1987 for the Cardington Road site. DP&L has not joined the PRP group formed at that site because of the absence of any known evidence that DP&L contributed hazardous substances to this site. In September 2001, the Court entered and finalized DP&L’s settlements with the USEPA for this site. These settlements fully resolve DP&L’s liabilities for this site and did not have a material effect on DP&L’s financial position, earnings, or cash flow.

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DP&L and numerous other parties received notification from the Ohio EPA on July 27, 1994 that it considers them PRP’s for clean-up of hazardous substances at the North Sanitary Landfill site in Dayton, Ohio. DP&L has not joined the PRP group formed for the site because the available information does not demonstrate that DP&L contributed hazardous substances to the site. The Ohio EPA has not provided an estimated cost for this site. In October 2000, the PRP group brought an action against DP&L and numerous other parties alleging that DP&L and the others are PRP’s that should be liable for a portion of clean-up costs at the site. DP&L will vigorously challenge this action. The final resolution is not expected to have a material effect on DP&L’s financial position, earnings, or cash flow.

DP&L and numerous other parties received notification from the USEPA in January 2002 for the Tremont City site. The available information does not demonstrate that DP&L contributed any hazardous substances to the site. DP&L will vigorously challenge this action. The final resolution is not expected to have a material effect on the DP&L’s financial position, earnings, or cash flow.

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DPL INC.
OPERATING STATISTICS
ELECTRIC OPERATIONS

NOTE: See Note 12 to Consolidated Financial Statements for additional information.

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DPL INC.
OPERATING STATISTICS
GAS OPERATIONS

NOTE:

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Item 2 — Properties

Electric

Information relating to DP&L’s electric properties is contained in Item 1 – BUSINESS, DPL INC. (page 3), CONSTRUCTION PROGRAM (pages 6 and 7) and ELECTRIC OPERATIONS AND FUEL SUPPLY (pages 7 and 8) – and Item 8 – Notes 4 and 12 of Notes to Consolidated Financial Statements on pages 37 and 45-47, respectively, on this Form 10-K/A.

Gas

Information relating to DP&L’s gas properties is contained in Item 1 – BUSINESS, DPL INC. (page 3) and GAS OPERATIONS AND GAS SUPPLY (page 8) – and Item 8 – Note 3 of Notes to Consolidated Financial Statements on page 36 on this Form 10-K/A.

Substantially all property and plant of DP&L is subject to the lien of the Mortgage securing DP&L’s First Mortgage Bonds.

Item 3 — Legal Proceedings

Information relating to legal proceedings involving DP&L is contained in Item 1 – BUSINESS, DPL INC. (page 3), COMPETITION (pages 3-6), ELECTRIC OPERATIONS AND FUEL SUPPLY (pages 7 and 8), RATE REGULATION AND GOVERNMENT LEGISLATION (pages 8-10), ENVIRONMENTAL CONSIDERATIONS (pages 10-12) and Item 8 – Note 4 of Notes to Consolidated Financial Statements on page 37 on this Form 10-K/A.

Item 4 — Submission of Matters to a Vote of Security Holders

There were no submissions to the security holders in the fourth quarter.

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EXECUTIVE OFFICERS OF THE REGISTRANT
(As of March 1, 2002)

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PART II

Item 5 — Market for Registrant’s Common Equity and Related Stockholder Matters

As of December 31, 2001, there were 33,729 holders of record of DPL common equity, excluding individual participants in security position listings.

As long as any Preferred Stock is outstanding, DP&L’s Amended Articles of Incorporation contain provisions restricting the payment of cash dividends on any of its Common Stock if, after giving effect to such dividend, the aggregate of all such dividends distributed subsequent to December 31, 1946 exceeds the net income of DP&L available for dividends on its Common Stock subsequent to December 31, 1946, plus $1,200,000. As of year-end, all earnings reinvested in the business of DP&L were available for Common Stock dividends.

Item 6 — Selected Financial Data — Amended

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Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Amended

Overview

As publicly announced on August 14, 2002, DPL’s independent accountant, PricewaterhouseCoopers, has required use of a different accounting method to recognize the investment results and valuation of the Company’s financial asset portfolio. DPL agrees with this accounting method, which has been applied retroactively to 2001, and that recognizes income or loss from the financial asset portfolio in accordance with the equity and cost method of accounting. It is a non-cash change that adjusts the timing of when unrealized gains and losses are recognized in the income statement. Previously, they were reflected on the balance sheet in accumulated other comprehensive income. The revision resulted in a reduction in full year 2001 earnings of $19 million or $0.16 per share and an increase in publicly announced earnings for the first six months of 2002 of $23 million or $0.20 per share. DPL’s financial asset balance remains at $1.1 billion at December 31, 2001. See Note 1 to the financial statements for a description of the adjustments.

DPL Inc. (“DPL”) reported restated earnings of $1.71 per share for 2001, an increase of 10% over 2000 earnings of $1.56 per share and up 27% from the $1.35 per share in 1999. (Earnings per share numbers are before extraordinary and non-recurring items and share dilution.) Growth from increased wholesale sales, sales of capacity from DPL’s 2001 and 2000 peaking generation capacity additions, and increased retail revenues were the primary drivers.

Results for 2001 included net non-recurring items of $6.0 million after tax or $0.05 per share, reflecting the adoption of the new accounting standard for derivatives in the first quarter, and charges associated with a voluntary early retirement program completed in June 2001 and a non-union workforce reduction program completed in November 2001.

Several events affected DPL’s results in 2000 as it prepared for the deregulation of the energy markets. In the first quarter, DPL completed its leveraged recapitalization and realigned its compensation programs more fully with shareholders’ interests. In the third quarter, DPL’s subsidiary, The Dayton Power and Light Company (“DP&L”), received an order from the Public Utilities Commission of Ohio (“PUCO”) approving its deregulation transition plan (“Transition Plan”), which resulted in the elimination of regulatory accounting for the generation business. In the fourth quarter, DPL completed the sale of its natural gas retail distribution operations.

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Each of these non-recurring events affected 2001 and 2000 earnings per share as outlined below:

Looking forward, DPL’s earnings for 2002 are expected to range between $1.87 and $2.00 per share. Actual 2002 results will depend on a number of factors including weather conditions, customer growth, global economic conditions, and commodity prices. The broadness of the earnings range reflects the difficulty in predicting the timing and magnitude of each of these factors. For 2003, DPL expects 6-9% earnings growth.

Income Statement Highlights

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In 2001, net electric revenues increased $41.4 million or 5% primarily as a result of additional peaking generation capacity sales and increased wholesale and retail revenues. Wholesale revenues from existing generation increased as a result of higher sales volume and commodity prices. Retail revenues increased 1% in 2001. Growth in residential and commercial sales of 2% was offset by declines in industrial sales of 6%, reflecting current economic conditions and mild weather, which reduced overall retail sales by 1%. Fuel costs for existing generation increased as a result of higher spot-market prices for coal, and greater fuel usage and power purchases resulting from increased wholesale sales. In 2000, net electric revenues increased $47.0 million or 6% as a result of higher wholesale and retail sales, and the addition of peaking

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generation capacity sales. The effect of these increased sales on fuel and purchased power costs were offset by lower fuel expense used in generation.

The decline in net gas revenues for both 2001 and 2000 resulted from the sale of the natural gas retail distribution assets and certain liabilities, which was completed in October 2000.

Operation and maintenance expense decreased $30.2 million or 15% in 2001 primarily as a result of the sale of the natural gas retail distribution operations, lower employee benefit and insurance costs, and general cost containment efforts. These decreases were partially offset by charges for a voluntary early retirement program and a non-union workforce reduction program, totaling $10.7 million before taxes. Operation and maintenance expense increased $6.6 million or 4% in 2000 as a result of higher insurance and claims costs, uncollectibles, power production costs, and a loss from natural gas supply management contracts. These increases were partially offset by lower employee benefit costs and natural gas retail distribution system expense. Year to year variances in insurance and claims costs result primarily from adjustments to actuarially-determined reserve requirements for risks insured through a wholly-owned captive insurance company.

Depreciation and amortization expense decreased by 6% and 1% in 2001 and 2000, respectively, primarily as a result of depreciation rate changes for certain generation units in 2001 and the sale of the natural gas retail distribution assets. These decreases were partially offset by increased depreciation resulting from the addition of peaking generation assets of 544 and 224 megawatts in 2001 and 2000, respectively.

Beginning January 1, 2001, regulatory transition cost assets of $144.8 million are being amortized over a three-year period based on transition revenues. As a result, amortization expense increased by $30.6 million in 2001 for transition revenues recognized during the year.

General taxes decreased $29.4 million or 23% in 2001 primarily as a result of changes in tax laws associated with the Transition Plan, and the sale of the natural gas retail distribution assets.

Restated investment income in 2001 is comprised of realized gains and income of $65.3 million, and $17.3 million from the public securities and private investments under the cost method, respectively, offset by net unrealized losses from private securities under the equity method of $57.8 million. Investment income for 2001 reflects general declines in market value attributable to global market conditions. Investment income increased $38.3 million or 80% in 2000 compared to 1999 as a result of higher net realized gains. Investment income in 2000 is comprised of realized gains and income of $42.1 million and $28.7 million from the public securities and private investments under the cost method, respectively, and net realized gains of $15.1 million from the private investments under the equity method.

Interest expense decreased 2% in 2001 primarily as result of higher capitalized interest expense, lower average short-term debt levels, and lower interest rates. These decreases were partially offset by higher average long-term debt levels. Interest expense increased 27% in 2000 as a result of increased long-term debt levels and higher long-term debt interest rates.

Other income (deductions) decreased $135.7 million in 2001 as a result of the pre-tax $182.5 million gain that was recognized in 2000 for the sale of the natural gas retail distribution operations, partially offset by a receivable by DP&L for insurance claims

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under its business interruption policy related to deregulation (see Issues and Financial Risks - Other Matters), and costs associated with the elimination of certain compensation programs in 2000. Other income (deductions) increased $148.6 million in 2000 as a result of the $182.5 million gain, partially offset by costs as described above, property donations, stock compensation expense, and investment management fees.

Trust preferred distributions by subsidiary decreased $47.8 million or 55% in 2001 as a result of the amortization of the $50 million original issue discount in 2000 and the refinancing of the trust preferred securities in August 2001, which reduced the principal outstanding and the coupon rate.

Pursuant to deregulation legislation enacted in Ohio and the Order issued in September 2000 by the PUCO, DP&L discontinued the use of its regulatory accounting model for its generation operations. As a result, a $63.7 million before tax benefits ($41.4 million net of taxes) reduction of generation-related regulatory assets was recorded in the third quarter of 2000 as an extraordinary item in accordance with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 101, “Regulated Enterprises-Accounting for the Discontinuation of Application of FASB Statement No. 71.” (See Note 4 to the Consolidated Financial Statements.)

The cumulative effect of an accounting change reflects DPL’s adoption of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS No. 133”). SFAS No. 133 requires that all derivatives be recognized as either assets or liabilities in the consolidated balance sheet and be measured at fair value, and changes in the fair value be recorded in earnings, unless they are designated as hedges of an underlying transaction.

Capital Resources and Requirements

Construction additions are expected to approximate $161 million in 2002, and were $339 and $344 million in 2001 and 2000, respectively. The capital program includes the development of natural gas-fired combustion turbine generation peaking units and environmental compliance as follows:

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A summary of the peaking generation expansion program is presented below:

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DPL began construction on the final phases of its peaking capacity expansion during the third quarter of 2001. This addition, totaling 480 MW will be on line in June 2002, bringing DPL’s generating capacity to 4,600 MW and achieving a generation mix of 65% base load and 35% peaking. DPL has not contracted for further additions, but will continue licensing currently owned sites and evaluating the purchase of equipment on the secondary market. If and when market-pricing conditions warrant, DPL will have the flexibility to expand its capacity. DPL expects to finance its construction program in 2002 and 2003 with internal funds.

DPL’s financial assets of $1,143 million at December 31, 2001 are an additional capital resource, available to be invested in the energy sector when that market has favorable investment conditions. The financial asset portfolio is highly diversified both in terms of geography and industry, and consists of publicly traded securities as well as private investments with 26 Investment Firms managed by experienced investment professionals who make investment decisions and manage underlying companies. Publicly traded securities comprise 16% of the portfolio and are valued at current public market. Private securities, with more than 500 companies represented, are carried at cost unless an other than temporary decline in value has been recognized or at DPL’s share of the capital of the private equity fund, which reflects the value of the underlying companies. The Company may be called upon to make additional investments if and as the investment firms purchase additional companies during the funds' investment period. Over the last several years, these investments have been funded from the return of previously invested capital and gains, keeping the total private invested balance substantially the same. A part or all of the public securities portion of the portfolio, approximately $180 million, is available for funding capital calls, if and as required. The magnitude of future investment opportunities and corresponding capital calls by the funds as well as the rate of return of capital and gains cannot be predicted. However, with an average portfolio company life of just three years, the aggregate capital invested in the private equity portion of the portfolio is not expected to exceed $1 billion, notwithstanding that the Company can be called upon to additionally invest up to approximately $430 million during the next six years. These funds are saleable in an active secondary market although the breadth and quality of bids at any particular point in time cannot be predicted or assured. Investments by these Investment Firms and thus DPL's Investments are designed to be self-liquidating over time, typically five to seven years from the start.

During 2001, investing cash flows included a cash payment of $90.9 million for income taxes associated with the tax gain on the sale of the natural gas retail distribution operations that occurred in October 2000.

In August 2001, DPL issued $300 million of trust preferred securities at 8.125% and $400 million of senior unsecured notes at 6.875%. The trust preferred securities have a term of 30 years and the unsecured notes have a term of 10 years. The proceeds from the sale of these securities were used to redeem $550 million of 8.5% trust preferred securities and for general corporate purposes including the retirement of short-term debt.

In February 2000, DPL entered into a series of recapitalization transactions including the issuance of $550 million of a combination of voting preferred and trust preferred securities and warrants to an affiliate of investment company Kohlberg Kravis Roberts & Co. (“KKR”). The trust preferred securities sold to KKR had an aggregate face amount of $550 million, were issued at an initial discounted aggregate price of $500 million, had a maturity of 30 years (subject to acceleration six months after the exercise of the warrants), and paid distributions at a rate of 8.5% of the aggregate face amount per year. The 6.8 million shares of mandatorily redeemable voting preferred securities, par value of $0.01 per share, were issued at an aggregate purchase price of $68,000 and

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carry voting rights for up to 4.9% of DPL’s total voting rights and the nomination of one Board seat. The 31.6 million warrants were issued, representing approximately 25% of DPL’s shares currently outstanding, with a term of 12 years, and an exercise price of $21 per share. These warrants were sold for an aggregate price of $50 million. DPL recognized the entire trust preferred securities original issue discount of $50 million in 2000. The proceeds from this recapitalization, combined with the March 2000 issuance of $425 million of 8.25% Senior Notes due 2007, were used to finance the regional generation expansion, repurchase 31.3 million shares of DPL common shares, and reduce outstanding short-term debt.

DPL purchased 25 million shares of its common stock in a Dutch Auction self-tender in March 2000. Through December 31, 2001, DPL repurchased an additional 6.3 million shares under an authorized share repurchase program of up to 6.6 million shares. These shares are held as treasury stock.

DPL and its subsidiaries have $200 million available through revolving credit agreements with a consortium of banks. Facility fees are approximately $0.3 million per year. The primary purpose of the revolving credit facilities is to provide back-up liquidity for DPL’s commercial paper program. At December 31, 2001 and 2000, DPL had no outstanding borrowings under these credit agreements.

DP&L has $75.0 million available in short-term informal lines of credit. The commitment fees are not material. Borrowings at December 31, 2001 and 2000 were zero.

DPL had $12 million outstanding in commercial paper at year-end 2001 at an interest rate of 3.2% and no commercial paper outstanding at year-end 2000. DP&L had no outstanding commercial paper balances at December 31, 2001 and 2000.

Issuance of additional amounts of first mortgage bonds by DP&L is limited by provisions of its mortgage. The amounts and timing of future financings will depend upon market and other conditions, rate increases, levels of sales, and construction plans. DP&L currently has sufficient capacity to issue first mortgage bonds to satisfy its requirements in connection with the financing of its construction and refinancing programs during the five-year period 2002-2006.

At year-end 2001, DPL’s and DP&L’s senior debt credit ratings were as follows:

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Market Risk

The carrying value of DPL’s debt was $2,159 million at December 31, 2001, consisting of DP&L’s first mortgage bonds, DP&L’s guaranteed air quality development obligations, and DPL’s notes. The fair value of this debt was $2,234 million, based on current market prices or discounted cash flows using current rates for similar issues with similar terms and remaining maturities. The following table presents the principal cash repayments and related weighted average interest rates by maturity date for long-term, fixed rate debt at December 31, 2001:

Because the long-term debt is at a fixed rate, the primary market risk to DPL is short-term interest rate risk. The carrying value and fair value of short-term debt was $12 million with a weighted-average interest rate of 3.2% at December 31, 2001. The interest expense risk resulting from a hypothetical 10% increase/decrease in the quarterly weighted-average cost of this debt is negligible.

The fair value of fixed income and equity securities held was $1,147 million at December 31, 2001. The equity price risk related to these securities was estimated as the potential increase/decrease in fair value of $115 million at December 31, 2001, resulting from a hypothetical 10% increase/decrease in the value of the underlying securities. DPL is also exposed to foreign currency risk related to certain of its international investments.

DPL’s financial results are impacted by changes in electricity, coal, and gas commodity prices. Ten percent of DPL’s expected 2002 revenues are from spot energy sales in the wholesale market and sales of peaking capacity. Fuel and purchased power costs represented 41% of total operating costs in 2001. DPL has contracted for approximately 90% of its coal needs for 2002. A 2% change in overall fuel costs would result in a $3.5 million change in net income.

Issues and Financial Risks

This report contains certain forward-looking statements regarding plans and expectations for the future. Investors are cautioned that actual outcomes and results may vary materially from those projected due to various factors beyond DPL’s control, including abnormal weather, unusual maintenance or repair requirements, changes in fuel costs, increased competition, regulatory changes and decisions, changes in accounting rules, and adverse economic conditions.

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Electric Restructuring Legislation

In October 1999, legislation became effective in Ohio that gave electric utility customers a choice of energy providers starting January 1, 2001. Under the legislation, electric generation, aggregation, power marketing and power brokerage services supplied to retail customers in Ohio are deemed competitive and are not subject to supervision and regulation by the PUCO. As required by the legislation, DP&L filed its transition plan at the PUCO on December 20, 1999. DP&L received PUCO approval of its plan on September 21, 2000.

The transition plan provides for a three-year transition period, which began on January 1, 2001 and ends on December 31, 2003, at which time DP&L’s generation assets will be fully merchant. The plan also provides for a 5% residential rate reduction on the generation component of the rates, which reduces revenue by approximately $13-14 million; rate certainty for the three year period for customers that continue to purchase power from DP&L; guaranteed rates for a six year period for transmission and delivery services; and recovery of transition costs of approximately $600 million. Under the plan, DPL has the organizational and financial flexibility to continue its corporate realignment initiatives without regulatory restrictions.

In 1996 and 1997, the Federal Energy Regulatory Commission (“FERC”) issued orders requiring all electric utilities to file open-access transmission service tariffs. DP&L’s resulting tariff case proceedings with FERC staff and intervenors in 1997 and 1998 culminated in 1999 with the FERC issuing an Order approving DP&L’s settlement with no material adverse effect to DP&L. On October 16, 2000 DP&L filed with the FERC to join the Alliance Regional Transmission Organization (“Alliance RTO”). On December 19, 2001 the FERC issued an Order that did not approve the Alliance RTO as a stand-alone regional transmission organization. As of December 31, 2001, DP&L had invested approximately $6 million in its efforts to join the Alliance RTO. The FERC has indicated that prudently incurred costs are recoverable in future rates. DP&L is exploring its options.

Sale of Gas Operations

In October 2000, DP&L completed the sale of its natural gas retail distribution assets and certain liabilities for $468 million in cash. The transaction resulted in a pre-tax gain of $183 million ($121 million net of tax), which is reflected in “Other income (deductions)” on the Consolidated Statement of Results of Operations. Proceeds from the sale were used to finance the regional generation expansion and reduce outstanding short-term debt.

Environmental

In November 1999, the United States Environmental Protection Agency (“US EPA”) filed civil complaints and Notices of Violations (“NOV’s”) against operators and owners of certain generation facilities for alleged violations of the Clean Air Act (“CAA”). Generation units operated by partners Cincinnati Gas & Electric Company (Beckjord 6) and Columbus Southern Power Company (Conesville 4) and co-owned by DP&L were referenced in these actions. Numerous northeast states have filed complaints or have

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indicated that they will be joining the US EPA’s action against the partners. DP&L was not identified in the NOV’s, civil complaints or state actions. In December 2000, Cincinnati Gas & Electric Company announced that it had reached an Agreement in Principle with the US EPA and other plaintiffs in an effort to settle the claims. Discussions on the final terms of the settlement are ongoing. Therefore, it is not possible to determine the outcome of these claims or the impact, if any, on DP&L. In June 2000, the US EPA issued a NOV to DP&L-operated J.M. Stuart Station (co-owned by DP&L, Cincinnati Gas & Electric Company, and Columbus Southern Power Company) for alleged violations of the CAA. The NOV contained allegations consistent with NOV’s and complaints that the US EPA had recently brought against numerous other coal-fired utilities in the Midwest. DP&L will vigorously challenge the NOV. At this time, it is not possible to determine the outcome of these claims or the impact, if any, on DP&L.

The United States and Ohio EPA’s have notified numerous parties, including DP&L, that they are considered Potentially Responsible Parties (“PRP’s”) for clean up of three hazardous waste sites in Ohio. The US EPA has estimated total costs of under $10 million for its preferred clean-up plans at one of these sites. In September 2001, the Court entered and finalized DP&L’s settlements with the US EPA for the first site. DP&L also settled with the PRP group for the site. These settlements fully resolve DP&L’s liability for this site. The Ohio EPA has not provided an estimated cost for the second site. In October 2000, the PRP group at the second site brought an action against DP&L and numerous other parties to recover a portion of the clean-up costs. DP&L will vigorously challenge this action. In January 2002, DP&L and seventy-five other parties received notification from the US EPA that they might be PRP’s for clean up of hazardous substances at a third site. The available information demonstrates that DP&L did not contribute any hazardous substances to the site. The final resolutions of these matters are not expected to have a material effect on DP&L’s financial position, earnings or cash flow.

In September 1998, the US EPA issued a final rule requiring states to modify their State Implementation Plans (“SIP’s”) under the CAA. The modified SIP’s are likely to result in further Nitrogen Oxide (“NOx”) reduction requirements placed on coal-fired generating units by 2003. In order to meet these NOx requirements, DP&L’s total capital expenditures are estimated to be approximately $175 million over the next three years. Industry groups and others appealed the rules in the United States District Court. The requirement for states to submit revised implementation plans has been stayed until the outcome of the litigation. In March 2000, the United States District Court upheld the rule. Industry groups and others have appealed this decision. As a result of the litigation, the Court extended the compliance date of the rules an additional year, until May 31, 2004. In December 1999, the US EPA issued final rules granting various CAA Section 126 petitions filed by northeast states. DP&L’s facilities were identified, among many others, in the rulemaking. In January 2002, the US EPA announced that reductions required under the CAA Section 126 rulemaking will be extended until May 31, 2004 to be consistent with the NOx SIP rule. DP&L’s current NOx reduction strategy to meet the SIP call is expected to satisfy the rulemaking reduction requirements.

On December 14, 2000, the US EPA issued a determination that coal- and oil-fired electric generating units should be regulated for emissions of mercury and hazardous

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air pollutants. The US EPA will issue proposed rules by December 2003 and final rules by December 2004. The impact of the regulatory determination cannot be determined at this time.

Other Matters

A wholly-owned captive subsidiary of DPL provides insurance coverage solely to DPL including, among other coverages, business interruption and specific risk coverage with respect to environmental law and electric deregulation. “Insurance Claims and Costs” on the Consolidated Balance Sheet includes insurance reserves of approximately $87 million for this coverage based on actuarial methods and loss experience data. Such reserves are determined, in the aggregate, based on a reasonable estimation of probable insured events occurring. There is uncertainty associated with the loss estimates, and actual results could differ from the estimates. Modification of these loss estimates based on experience and changed circumstances are reflected in the period in which the estimate is reevaluated. As the outcome of electric deregulation becomes known during the three-year regulatory transition period ending December 31, 2003, policy payments from the captive subsidiary to DP&L, receivables for insurance claims for DP&L, or the release of the appropriate reserves will occur and be reflected in income. In 2001, a $29 million receivable was recognized by DP&L for insurance claims under its business interruption policy.

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”) that addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective for DPL as of January 1, 2003. DPL has not yet determined the extent to which its financial condition or results of operations may be affected by the implementation of this accounting standard.

Item 7A — Quantitative and Qualitative Disclosures about Market Risk

The information required by this item of Form 10–K is set forth in the Market Risk section under Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Item 8 — Financial Statements and Supplementary Data — Amended

DPL Inc.
Consolidated Statement of Results of Operations

See Notes to Consolidated Financial Statements.

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DPL Inc.
Consolidated Statement of Cash Flows

See Notes to Consolidated Financial Statements.

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DPL Inc.
Consolidated Balance Sheet