| Notes to Financial Statements | |
| 6 Months Ended
Jun. 30, 2009
USD / shares
|
| Notes to Financial Statements [Abstract] | |
| NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Ameren, headquartered in St. Louis, Missouri, is a public utility holding company under PUHCA 2005, administered by FERC. Amerens primary assets are the common stock of its subsidiaries. Amerens subsidiaries are separate, independent legal entities with separate businesses, assets and liabilities. These subsidiaries operate rate-regulated electric generation, transmission and distribution businesses, rate-regulated natural gas transmission and distribution businesses, and non-rate-regulated electric generation businesses in Missouri and Illinois. Dividends on Amerens common stock and the payment of other expenses by Ameren and CILCORP holding companies depend on distributions made to it by its subsidiaries. Amerens principal subsidiaries are listed below. Also see the Glossary of Terms and Abbreviations at the front of this report.
UE, or Union Electric Company, also known as AmerenUE, operates a rate-regulated electric generation, transmission and distribution business, and a rate-regulated natural gas transmission and distribution business in Missouri.
CIPS, or Central Illinois Public Service Company, also known as AmerenCIPS, operates a rate-regulated electric and natural gas transmission and distribution business in Illinois.
Genco, or Ameren Energy Generating Company, operates a non-rate-regulated electric generation business in Illinois and Missouri.
CILCO, or Central Illinois Light Company, also known as AmerenCILCO, is a subsidiary of CILCORP (a holding company). It operates a rate-regulated electric transmission and distribution business, a non-rate-regulated electric generation business (through its subsidiary, AERG) and a rate-regulated natural gas transmission and distribution business, all in Illinois.
IP, or Illinois Power Company, also known as AmerenIP, operates a rate-regulated electric and natural gas transmission and distribution business in Illinois.
Ameren has various other subsidiaries responsible for the short- and long-term marketing of power, procurement of fuel, management of commodity risks, and provision of other shared services. Ameren has an 80% ownership interest in EEI, which until February29, 2008, was held 40% by UE and 40% by Development Company. Ameren consolidates EEI for financial reporting purposes. UE reported EEI under the equity method until February29, 2008. Effective February29, 2008, UEs and Development Companys ownership interests in EEI were transferred to Resources Company through an internal reorganization. UEs interest in EEI was transferred at book value indirectly through a dividend to Ameren.
The financial statements of Ameren, Genco, CILCORP and CILCO are prepared on a consolidated basis. UE, CIPS and IP have no subsidiaries and therefore their financial statements were not prepared on a consolidated basis. All significant intercompany transactions have been eliminated. All tabular dollar amounts are in millions, unless otherwise indicated.
Our accounting policies conform to GAAP. Our financial statements reflect all adjustments (which include normal, recu |
| NOTE 2 - RATE AND REGULATORY MATTERS |
NOTE 2 - RATE AND REGULATORY MATTERS
Below is a summary of significant regulatory proceedings and related lawsuits. We are unable to predict theultimate outcome of these matters, the timing of the final decisions of the various agencies and courts, or the impact on our results of operations, financial position, or liquidity.
Missouri
2009 Electric Rate Order
In January 2009, the MoPSC issued an order approving an increase for UE in annual revenues of approximately $162 million for electric service and the implementation of a FAC and a vegetation management and infrastructure inspection cost tracking mechanism, among other things. In February 2009, Noranda and the Missouri Office of Public Counsel appealed certain aspects of the MoPSC decision to the Circuit Court of Pemiscot County, Missouri, the Circuit Court of Stoddard County, Missouri, and the Circuit Court of Cole County, Missouri. UE cannot predict the outcome of the court appeals.
Pending Electric Rate Case
UE filed a request with the MoPSC in July 2009 to increase its annual revenues for electric service by $402 million. Included in this increase request was approximately $227 million of anticipated increases in normalized net fuel costs in excess of the net fuel costs included in base rates previously authorized by the MoPSC in its January 2009 electric rate order which, absent initiation of this general rate proceeding, would have been eligible for recovery through UEs existing FAC. The balance of the increase request is based primarily on investments made to continue system-wide reliability improvements for customers, increases in costs essential to generating and delivering electricity, and higher financing costs. The electric rate increase request is based on a 11.5% return on equity, a capital structure composed of 47.4% equity, a rate base for UE of $6.0 billion, and a test year ended March31, 2009, with certain pro-forma adjustments through the anticipated true-up date of February28, 2010.
UEs filing includes a request for interim rate relief which, if approved, would place into effect approximately $37 million of the requested increase on October1, 2009, subject to refund with interest based on the final outcome of the rate proceeding. The amount of this interim increase request reflects the increased revenue requirement associated with rate base additions made by UE between October 2008 and May 2009.
As part of its filing, UE also requested the MoPSC to approve the implementation of an environmental cost recovery mechanism and a storm restoration cost tracker. The environmental cost recovery mechanism, if approved, would allow UE to twice each year adjust electric rates outside of general rate proceedings to reflect changes in its prudently incurred costs to comply with federal, state or local environmental laws, regulations or rules greater than or less than the amount set in base rates. Rate adjustments pursuant to this cost recovery mechanism would not be permitted to exceed an annual amount equal to 2.5% of UEs gross jurisdictional electric revenues and would be subject to prudency reviews of the MoPSC. UEs request is consistent with the environme |
| NOTE 3 - SHORT-TERM BORROWINGS AND LIQUIDITY |
NOTE 3 - SHORT-TERM BORROWINGS AND LIQUIDITY
The liquidity needs of the Ameren Companies are typically supported through the use of available cash and drawings under committed bank credit facilities.
Amended and New Credit Facilities
On June30, 2009, Ameren and certain of its subsidiaries entered into multiyear credit facility agreements with 24 international, national and regional lenders with no single lender providing more than $146 million. These facilities, as described below, cumulatively provide $2.1 billion of credit through July14, 2010, reducing to $1.8795 billion through June30, 2011, and to $1.0795 billion through July14, 2011.
2009 Multiyear Credit Agreements
On June30, 2009, Ameren, UE, and Genco entered into an agreement (the 2009 Multiyear Credit Agreement) to amend and restate the $1.15 billion five-year revolving credit agreement that was originally entered into as of July14, 2005, then amended and restated as of July14, 2006, and due to expire in July 2010 (the Prior $1.15 Billion Credit Facility). Ameren, UE, and Genco also entered into a $150 million Supplemental Credit Agreement to the 2009 Multiyear Credit Agreement (the Supplemental Agreement), which provides Ameren, UE, and Genco with an additional facility of $150 million with terms and conditions substantially identical to the 2009 Multiyear Credit Agreement. Collectively, these agreements are the 2009 Multiyear Credit Agreements.
The obligations of each borrower under the 2009 Multiyear Credit Agreements are several and not joint, and except under limited circumstances relating to expenses and indemnities, the obligations of UE or Genco are not guaranteed by Ameren or any other subsidiary of Ameren. The combined maximum amount available to all of the borrowers, collectively, under the 2009 Multiyear Credit Agreements is $1.3 billion, and the combined maximum amount available to each borrower, individually, under the 2009 Multiyear Credit Agreements is limited as follows: Ameren - $1.15 billion, UE - $500 million and Genco - $150 million (such amounts being each borrowers Borrowing Sublimit). CIPS, CILCO, and IP have no borrowing authority or liability under the 2009 Multiyear Credit Agreements.
On July14, 2010, the Supplemental Agreement will terminate, all commitments and all outstanding amounts under the Supplemental Agreement will be consolidated with those under the 2009 Multiyear Credit Agreement, and the combined maximum amount available to all borrowers will be $1.0795 billion with the UE and Genco Borrowing Sublimits remaining the same as stated above and Amerens changing to $1.0795 billion. Ameren has the option to seek additional commitments from existing or new lenders to increase the total facility size to $1.3 billion after July14, 2010. The 2009 Multiyear Credit Agreement will terminate with respect to Ameren on July14, 2011, representing a one-year extension from the Prior $1.15 Billion Credit Facility. The Borrowing Sublimits of UE and Genco will continue to be subject to extension on a 364-day basis (but in no event later than July14, 2011) with the current maturity date of their Borrower Sublimits under the 2009 Multiyear Cred |
| NOTE 4 - LONG-TERM DEBT AND EQUITY FINANCINGS |
NOTE 4 - LONG-TERM DEBT AND EQUITY FINANCINGS
Ameren
Under DRPlus, pursuant to an effective SEC Form S-3 registration statement, and under our 401(k) plan, pursuant to an effective SEC Form S-8 registration statement, Ameren issued a total of 0.8million new shares of common stock valued at $19 million and 1.9million new shares valued at $47 million in the three and six months ended June30, 2009, respectively.
In May 2009, Ameren issued $425 million of 8.875% senior unsecured notes due May15, 2014, with interest payable semiannually on May15 and November15 of each year, beginning November15, 2009. Ameren received net proceeds of $420 million, which were used, together with other corporate funds, to repay borrowings under its $300 million term loan agreement and will be used to provide such amounts, by way of a capital contribution, loan or otherwise to CILCORP, to permit CILCORP to repay its outstanding 8.70% senior notes due October15, 2009.
UE
In March 2009, UE issued $350 million of 8.45% senior secured notes due March15, 2039, with interest payable semiannually on March15 and September15 of each year, beginning in September 2009. These notes are secured by first mortgage bonds. UE received net proceeds of $346 million, which were used to repay short-term debt. In connection with this issuance of $350 million of senior secured notes, UE agreed, for so long as these senior secured notes are outstanding, that it will not, prior to maturity, cause a first mortgage bond release date to occur. The first mortgage bond release date is the date at which the security provided by the pledge under UEs first mortgage indenture would no longer be available to holders of any outstanding series of its senior secured notes and such indebtedness would become senior unsecured indebtedness.
CILCORP
In conjunction with Amerens acquisition of CILCORP, CILCORPs long-term debt was increased to fair value by $111 million. Amortization related to fair-value adjustments was $0.5 million and $1 million (2008 - $2 million and $3 million) for the three and six months ended June30, 2009, respectively, and was included in interest expense in the Consolidated Statements of Income of Ameren and CILCORP.
In September 2008, CILCORP commenced a cash tender offer and related consent solicitation for any and all of its outstanding 8.70% senior notes due 2009 ($123.755 million aggregate principal amount) and its 9.375% senior bonds due 2029 ($210.565 million aggregate principal amount). In April 2009, CILCORP terminated the tender offer and the consent solicitation related to the outstanding 8.70% senior notes due 2009. In July 2009, CILCORP terminated the tender offer and the consent solicitation related to the outstanding 9.375% senior bonds due 2029. None of the 2009 notes or the 2029 bonds were purchased in the tender offer and consent solicitation.
IP
In March 2009, IP exchanged all $400 million of its unregistered 9.75% senior secured notes due November15, 2018, for a like amount of registered 9.75% senior secured notes due November15, 2018. The unregistered senior secured notes were issued and sold in October 2008 with registration rights in a |
| NOTE 5 - OTHER INCOME AND EXPENSES |
NOTE 5 - OTHER INCOME AND EXPENSES
The following table presents Other Income and Expenses for each of the Ameren Companies for the three and six months ended June30, 2009 and 2008:
ThreeMonths SixMonths
2009 2008 2009 2008
Ameren:(a)
Miscellaneous income:
Interest and dividend income $ 7 $ 13 $ 15 $ 25
Allowance for equity funds used during construction 8 5 14 11
Other 2 1 4 2
Total miscellaneous income $ 17 $ 19 $ 33 $ 38
Miscellaneous expense:
Other $ (7 ) $ (8 ) $ (11 ) $ (13 )
Total miscellaneous expense $ (7 ) $ (8 ) $ (11 ) $ (13 )
UE:
Miscellaneous income:
Interest and dividend income $ 7 $ 10 $ 14 $ 18
Allowance for equity funds used during construction 7 5 13 11
Other 1 - 1 -
Total miscellaneous income $ 15 $ 15 $ 28 $ 29
Miscellaneous expense:
Other $ (2 ) $ (2 ) $ (4 ) $ (4 )
Total miscellaneous expense $ (2 ) $ (2 ) $ (4 ) $ (4 )
ThreeMonths Six Months
2009 2008 2009 2008
CIPS:
Miscellaneous income:
Interest and dividend income $ 1 $ 2 $ 3 $ 5
Other 1 1 2 1
Total miscellaneous income $ 2 $ 3 $ 5 $ 6
Miscellaneous expense:
Other $ - $ (2 ) $ (1 ) $ (2 )
Total miscellaneous expense $ - $ (2 ) $ (1 ) $ (2 )
Genco:
Miscellaneous income:
Other $ - $ 1 $ - $ 1
Total miscellaneous income $ - $ 1 $ - $ 1
CILCORP:
Miscellaneous income:
Interest income $ - $ 1 $ - $ 1
Total miscellaneous income $ - $ 1 $ - $ 1
Miscellaneous expense:
Other (1 ) (2 ) (2 ) (2 )
Total miscellaneous expense $ (1 ) $ (2 ) $ (2 ) $ (2 )
CILCO:
Miscellaneous income:
Interest income $ - $ 1 $ - $ 1
Total miscellaneous income $ - $ 1 $ - $ 1
Miscellaneous expense:
Other (2 ) (1 ) (3 ) (1 )
Total miscellaneous expense $ (2 ) $ (1 ) $ (3 ) $ (1 )
IP:
Miscellaneous income:
Interest income $ - $ 2 $ - $ 4
Allowance for equity funds used during construction 1 - 1 -
Other - |
| NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS |
NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS
We use derivatives principally to manage the risk of changes in market prices for natural gas, fuel, electricity, and emission allowances. Price fluctuations in natural gas, fuel, electricity, and emission allowances may cause the following:
an unrealized appreciation or depreciation of our contracted commitments to purchase or sell when purchase or sale prices under the commitments are compared with current commodity prices;
market values of fuel and natural gas inventories, emission allowances or purchased power that differ from the cost of those commodities in inventory; and
actual cash outlays for the purchase of these commodities that differ from anticipated cash outlays.
The derivatives that we use to hedge these risks are governed by our risk management policies for forward contracts, futures, options, and swaps. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required. The goal of the hedging program is generally to mitigate financial risks while ensuring that sufficient volumes are available to meet our requirements. Contracts we enter into as part of our risk management program may be settled financially, settled by physical delivery, or net settled with the counterparty.
The following table presents open gross derivative volumes by commodity type as of June30, 2009:
Quantity
Commodity NPNS Contracts(a) CashFlow Hedges(b) Other Derivatives(c) DerivativesSubjectto RegulatoryDeferral(d)
Coal (in tons)
Ameren(e) 89,119,000 (f ) (f ) (f )
UE 49,242,000 (f ) (f ) (f )
Genco 19,155,000 (f ) (f ) (f )
CILCORP/CILCO 10,401,000 (f ) (f ) (f )
Natural gas (in mmbtu)
Ameren(e) 194,941,000 (f ) 6,278,000 118,342,000
UE 26,451,000 (f ) (f ) 18,189,000
CIPS 33,563,000 (f ) (f ) 19,186,000
Genco 1,665,000 (f ) 4,390,000 (f )
CILCORP/CILCO 57,903,000 (f ) 868,000 29,372,000
IP 75,197,000 (f ) (f ) 51,595,000
Heating oil (in gallons)
Ameren(e) (f ) (f ) 186,018,000 42,588,000
UE (f ) (f ) (f ) 42,588,000
Power (in megawatthours)
Ameren(e) 84,887,000 5,961,000 31,006,000 13,339,000
UE 3,921,000 (f ) 232,000 3,795,000
CIPS (f ) (f ) (f ) 12,813,000
CILCORP/CILCO (f ) (f ) (f ) 6,600,000
IP (f ) (f ) (f ) 19,413,000
SO2 emission allowances (in tons)
Ameren (f ) (f ) 2,000 (f )
Genco (f ) (f ) 2,000 (f )
(a) Contracts through 2013, 2015, and 2035 for coal, natural gas, and power, respectively.
(b) Contracts through 2011 for power.
(c)
Contracts through 2009, 2012, 2012, and 2009 for natural gas, heating oil, power, and SO2 emission allowances, respectively.
(d) |
| NOTE 7 - FAIR VALUE MEASUREMENTS |
NOTE 7 - FAIR VALUE MEASUREMENTS
SFAS No.157 provides a framework for measuring fair value for all assets and liabilities that are measured and reported at fair value. The Ameren Companies adopted SFAS No.157 as of the beginning of their 2008 fiscal year for financial assets and liabilities and as of the beginning of their 2009 fiscal year for nonfinancial assets and liabilities, except those already reported at fair value on a recurring basis. The impact of the adoption of SFAS No.157 for financial assets and liabilities at January1, 2008, and for nonfinancial assets and liabilities at January1, 2009, was not material. SFAS No.157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use various methods to determine fair value, including market, income, and cost approaches. With these approaches, we adopt certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk or the risks inherent in the inputs to the valuation. Inputs to valuation can be readily observable, market-corroborated, or unobservable. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. SFAS No.157 also establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. All financial assets and liabilities carried at fair value are classified and disclosed in one of the following three hierarchy levels:
Level 1: Inputs based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities primarily include exchange-traded derivatives and assets including U.S. treasury securities and listed equity securities, such as those held in UEs Nuclear Decommissioning Trust Fund.
Level 2: Market-based inputs corroborated by third-party brokers or exchanges based on transacted market data. Level 2 assets and liabilities include certain assets held in UEs Nuclear Decommissioning Trust Fund, including corporate bonds and other fixed-income securities, and certain over-the-counter derivative instruments, including natural gas swaps and financial power transactions. Derivative instruments classified as Level 2 are valued using corroborated observable inputs, such as pricing services or prices from similar instruments that trade in liquid markets. Our development and corroboration process entails obtaining multiple quotes or prices from outside sources. To derive our forward view to price our derivative instruments at fair value, we average the midpoints of the bid/ask spreads. To validate forward prices obtained from outside parties, we compare the pricing to recently settled market transactions. Additionally, a review of all sources is performed to identify any anomalies or potential errors. Further, we consider the volume of transactions on certain trading platforms in our reasonableness assessment of the averaged midpoint.
Level 3: Unobservable inputs that are not corrobora |
| NOTE 8 - RELATED PARTY TRANSACTIONS |
NOTE 8 - RELATED PARTY TRANSACTIONS
The Ameren Companies have engaged in, and may in the future engage in, affiliate transactions in the normal course of business. These transactions primarily consist of gas and power purchases and sales, services received or rendered, and borrowings and lendings. Transactions between affiliates are reported as intercompany transactions on their financial statements, but are eliminated in consolidation for Amerens financial statements. For a discussion of our material related party agreements, see Note 14 - Related Party Transactions under Part II, Item8 of the Form 10-K.
Illinois Electric Settlement Agreement
As part of the Illinois electric settlement agreement, the Ameren Illinois Utilities, Genco and AERG agreed to make aggregate contributions of $150 million over four years as part of a comprehensive program providing approximately $1 billion of funding for rate relief to certain Illinois electric customers, including customers of the Ameren Illinois Utilities. At June30, 2009, CIPS, CILCO and IP had receivable balances from Genco for reimbursement of customer rate relief of $1 million, less than $1 million, and $1 million, respectively. Also at June30, 2009, CIPS, CILCO and IP had receivable balances from AERG for reimbursement of customer rate relief of less than $1 million each. During the three and six months ended June30, 2009, Genco incurred charges to earnings of $3 million and $5 million, respectively, for customer rate relief contributions and program funding reimbursements to the Ameren Illinois Utilities (CIPS - $1 million and $2 million, CILCO - less than $1 million and $1 million, IP - $1 million and $2 million, respectively), and AERG incurred charges to earnings of $1 million and $2 million, respectively (CIPS - less than $1 million and $1 million, CILCO - less than $1 million for both periods, IP - less than $1 million and $1 million, respectively). The Ameren Illinois Utilities recorded most of the reimbursements received from Genco and AERG as electric revenue with an immaterial amount recorded as miscellaneous revenue.
Electric Power Supply Agreements
The following table presents the amount of physical gigawatthour sales under related party electric power supply agreements for the three and six months ended June30, 2009 and 2008:
ThreeMonths SixMonths
2009 2008 2009 2008
Genco sales to Marketing Company(a) 3,494 3,529 6,958 7,941
AERG sales to Marketing Company(a) 1,591 1,610 2,975 3,313
Marketing Company sales to CIPS(b) 372 472 818 1,094
Marketing Company sales to CILCO(b) 153 223 361 480
Marketing Company sales to IP(b) 506 698 1,127 1,502
(a) Genco and Marketing Company, and AERG and Marketing Company have power supply agreements whereby Genco and AERG sell and Marketing Company purchases all the capacity and energy available from Gencos and AERGs generation fleets.
(b) Marketing Company contracted with CIPS, CILCO, and IP to provide power based on the results of the September 2006 Illinois power procurement auction. The values in this table reflec |
| NOTE 9 - COMMITMENTS AND CONTINGENCIES |
NOTE 9 - COMMITMENTS AND CONTINGENCIES
We are involved in legal, tax and regulatory proceedings before various courts, regulatory commissions, and governmental agencies with respect to matters that arise in the ordinary course of business, some of which involve substantial amounts of money. We believe that the final disposition of these proceedings, except as otherwise disclosed in these notes to our financial statements, will not have a material adverse effect on our results of operations, financial position, or liquidity.
Reference is made to Note 1 - Summary of Significant Accounting Policies, Note 2 - Rate and Regulatory Matters, Note 14 - Related Party Transactions, and Note 15 - Commitments and Contingencies under Part II, Item8 of the Form 10-K. See also Note 1 - Summary of Significant Accounting Policies, Note 2 - Rate and Regulatory Matters, Note 8 - Related Party Transactions and Note 10 - Callaway Nuclear Plant in this report.
Callaway Nuclear Plant
The following table presents insurance coverage at UEs Callaway nuclear plant at June30, 2009. The property coverage and the nuclear liability coverage must be renewed on October1 and January1, respectively, of each year.
Type and Source of Coverage MaximumCoverages MaximumAssessmentsfor SingleIncidents
Public liability and nuclear worker liability:
American Nuclear Insurers $ 300 (a) $ -
Pool participation 12,219 118 (b)
$ 12,519 (c) $ 118
Property damage:
Nuclear Electric Insurance Ltd. $ 2,750 (d) $ 22
Replacement power:
Nuclear Electric Insurance Ltd. $ 490 (e) $ 9
Energy Risk Assurance Company $ 64 (f) $ -
(a) Provided through mandatory participation in an industry-wide retrospective premium assessment program.
(b) Retrospective premium under the Price-Anderson liability provisions of the Atomic Energy Act of 1954, as amended. This is subject to retrospective assessment with respect to a covered loss in excess of $300 million from an incident at any licensed U.S. commercial reactor, payable at $17.5 million per year.
(c) Limit of liability for each incident under Price-Anderson. A company could be assessed up to $118 million per incident for each licensed reactor it operates with a maximum of $17.5 million per incident to be paid in a calendar year for each reactor. This limit is subject to change to account for the effects of inflation and changes in the number of licensed reactors.
(d) Provides for $500 million in property damage and decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million primary coverage.
(e) Provides the replacement power cost insurance in the event of a prolonged accidental outage at a nuclear plant. Weekly indemnity of $4.5 million for 52 weeks, which commences after the first eight weeks of an outage, plus $3.6 million per week for 71.1 weeks thereafter.
(f) Provides the replacement power cost insurance in the event of a prolonged accidental outage at a nuclear pl |
| NOTE 10 - CALLAWAY NUCLEAR PLANT |
NOTE 10 - CALLAWAY NUCLEAR PLANT
Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the permanent storage and disposal of spent nuclear fuel. The DOE currently charges one mill, or 1/10 of one cent, per nuclear-generated kilowatthour sold for future disposal of spent fuel. Pursuant to this act, UE collects one mill from its electric customers for each kilowatthour of electricity that it generates and sells from its Callaway nuclear plant. Electric utility rates charged to customers provide for recovery of such costs. The DOE is not expected to have its permanent storage facility for spent fuel available before 2020. UE has sufficient installed storage capacity at its Callaway nuclear plant until 2020. It has the capability for additional storage capacity through the licensed life of the plant. The delayed availability of the DOEs disposal facility is not expected to adversely affect the continued operation of the Callaway nuclear plant through its currently licensed life.
Electric utility rates charged to customers provide for the recovery of the Callaway nuclear plants decommissioning costs, which include decontamination, dismantling, and site restoration costs, over an assumed 40-year life of the plant, ending with the expiration of the plants operating license in 2024. UE intends to submit a license extension application with the NRC to extend its Callaway nuclear plants operating license to 2044. It is assumed that the Callaway nuclear plant site will be decommissioned based on the immediate dismantlement method and removal from service. Ameren and UE have recorded an ARO for the Callaway nuclear plant decommissioning costs at fair value, which represents the present value of estimated future cash outflows. Decommissioning costs are charged to the costs of service used to establish electric rates for UEs customers. These costs amounted to $7 million in each of the years 2008, 2007 and 2006. Every three years, the MoPSC requires UE to file an updated cost study for decommissioning its Callaway nuclear plant. Electric rates may be adjusted at such times to reflect changed estimates. The latest cost study was filed in September 2008. The 2008 study included the minor tritium contamination discovered on the Callaway nuclear plant site, which did not result in a significant increase in the decommissioning cost estimate. Costs collected from customers are deposited in an external trust fund to provide for the Callaway nuclear plants decommissioning. If the assumed return on trust assets is not earned, we believe that it is probable that any such earnings deficiency will be recovered in rates. The fair value of the nuclear decommissioning trust fund for UEs Callaway nuclear plant is reported as Nuclear Decommissioning Trust Fund in Amerens Consolidated Balance Sheet and UEs Balance Sheet. This amount is legally restricted. It may be used only to fund the costs of nuclear decommissioning. Changes in the fair value of the trust fund are recorded as an increase or decrease to the nuclear decommissioning trust fund and to a regulatory asset or regulatory liability, as appropriate. |
| NOTE 11 - OTHER COMPREHENSIVE INCOME |
NOTE 11 - OTHER COMPREHENSIVE INCOME
Comprehensive income includes net income as reported on the statements of income and all other changes in common stockholders equity, except those resulting from transactions with common stockholders. A reconciliation of net income to comprehensive income for the three and six months ended June30, 2009 and 2008, is shown below for the Ameren Companies:
ThreeMonths Six Months
2009 2008 2009 2008
Ameren:(a)
Net income $ 168 $ 217 $ 313 $ 366
Unrealized net gain (loss) on derivative hedging instruments, net of taxes (benefit) of $9, $(27), $53 and $(63), respectively 17 (48 ) 98 (111 )
Reclassification adjustments for derivative (gain) loss included in net income, net of taxes (benefit) of $17, $(3), $43 and $(6), respectively (31 ) 5 (77 ) 11
Reclassification adjustment due to implementation of FAC, net of taxes of $-, $-, $18 and $-, respectively - - (29 ) -
Adjustment to pension and benefit obligation, net of taxes of $7, $3, $7 and $1, respectively (5 ) (4 ) (5 ) (2 )
Total comprehensive income, net of taxes 149 170 300 264
Less: Net income attributable to noncontrolling interests, net of taxes 3 11 7 22
Total comprehensive income attributable to Ameren Corporation, net of taxes $ 146 $ 159 $ 293 $ 242
UE:
Net income $ 84 $ 124 $ 106 $ 188
Unrealized net gain (loss) on derivative hedging instruments, net of taxes (benefit) of $-, $(4), $11 and $(11), respectively - (6 ) 17 (17 )
Reclassification adjustments for derivative (gain) included in net income, net of taxes of $-, $1, $8 and $1, respectively - (2 ) (13 ) (1 )
Reclassification adjustment due to implementation of FAC, net of taxes of $-, $-, $18 and $-, respectively - - (29 ) -
Total comprehensive income, net of taxes $ 84 $ 116 $ 81 $ 170
CIPS:
Net income (loss) $ 1 $ (3 ) $ 8 $ -
Total comprehensive income (loss), net of taxes $ 1 $ (3 ) $ 8 $ -
Genco:
Net income $ 46 $ 74 $ 93 $ 120
Unrealized net gain on derivative hedging instruments, net of taxes of $-, $4, $- and $-, respectively - 6 - -
Reclassification adjustments for derivative (gain) included in net income, net of taxes of $-, $4, $- and $4, respectively - (5 ) - (5 )
Adjustment to pension and benefit obligation, net of taxes (benefit) of $-, $-, $- and $(2), respectively - - 1 3
Total comprehensive income, net of taxes $ 46 $ 75 $ 94 $ 118
CILCORP:
Net income (loss) $ 24 $ 5 $ (408 ) $ 25
Reclassification adjustments for derivative (gain) included in n |
| NOTE 12 - RETIREMENT BENEFITS |
NOTE 12 - RETIREMENT BENEFITS
Amerens pension and postretirement plans are funded in compliance with income tax regulations and to achieve federal funding or regulatory requirements. As a result, Ameren expects to fund its pension plans at a level equal to the greater of the pension expense or the legally required minimum contribution. Taking into consideration our assumptions at December31, 2008, estimated investment performance through June30, 2009, and our pension funding policy, Ameren expects to make annual contributions of $90 million to $250 million in each of the next five years. These amounts are estimates. They may change with actual investment performance, changes in interest rates, any pertinent changes in government regulations, and any voluntary contributions. Our policy for postretirement benefits is primarily to fund the Voluntary Employee Beneficiary Association (VEBA) trusts to match the annual postretirement expense.
Ameren made a contribution to its pension plan of $24 million in the second quarter of 2009. A pension contribution was not made in the first half of 2008. In July 2009, Ameren made a $23 million contribution to its pension plan. Additionally, Ameren made contributions to its postretirement benefit plans during the second quarter of 2009 and 2008 of $23 million and $22 million, respectively.
The following table presents the components of the net periodic benefit cost for our pension and postretirement benefit plans for the three and six months ended June30, 2009 and 2008:
Pension Benefits(a) PostretirementBenefits(a)
ThreeMonths Six Months ThreeMonths SixMonths
2009 2008 2009 2008 2009 2008 2009 2008
Service cost $ 17 $ 14 $ 34 $ 29 $ 5 $ 4 $ 10 $ 9
Interest cost 46 46 93 93 16 16 33 35
Expected return on plan assets (50 ) (53 ) (102 ) (106 ) (14 ) (15 ) (27 ) (29 )
Amortization of:
Transition obligation - - - - 1 1 1 1
Prior service cost (benefit) 2 3 4 6 (2 ) (2 ) (4 ) (4 )
Actuarial loss 5 - 12 1 1 - 4 4
Net periodic benefit cost $ 20 $ 10 $ 41 $ 23 $ 7 $ 4 $ 17 $ 16
(a) Includes amounts for Ameren registrant and nonregistrant subsidiaries.
UE, CIPS, Genco, CILCORP, CILCO and IP are responsible for their share of the pension and postretirement costs. The following table presents the pension costs and the postretirement benefit costs incurred for the three and six months ended June30, 2009 and 2008:
Pension Costs Postretirement Costs
ThreeMonths Six Months ThreeMonths Six Months
2009 2008 2009 2008 2009 2008 2009 2008
Ameren(a) $ 20 $ 10 $ 41 $ 23 $ 7 $ 4 $ |
| NOTE 13 - SEGMENT INFORMATION |
NOTE 13 - SEGMENT INFORMATION
Ameren has three reportable segments: Missouri Regulated, Illinois Regulated and Non-rate-regulated Generation. The Missouri Regulated segment for Ameren includes all the operations of UEs business as described in Note 1 - Summary of Significant Accounting Policies, except for UEs 40% interest in EEI (which in February 2008 was transferred to Resources Company through an internal reorganization). The Illinois Regulated segment for Ameren consists of the regulated electric and gas transmission and distribution businesses of CIPS, CILCO, and IP, as described in Note 1 - Summary of Significant Accounting Policies. The Non-rate-regulated Generation segment for Ameren consists primarily of the operations or activities of Genco, the CILCORP parent company, AERG, EEI, and Marketing Company. The category called Other primarily includes Ameren parent company activities.
UE has one reportable segment: Missouri Regulated. The Missouri Regulated segment for UE includes all the operations of UEs business as described in Note 1 - Summary of Significant Accounting Policies, except for UEs former 40% interest in EEI.
CILCORP and CILCO have two reportable segments: Illinois Regulated and Non-rate-regulated Generation. The Illinois Regulated segment for CILCORP and CILCO consists of the regulated electric and gas transmission and distribution businesses of CILCO. The Non-rate-regulated Generation segment for CILCORP and CILCO consists of the generation business of AERG. For CILCORP and CILCO, Other comprises parent company activity and minor activities not reported in the Illinois Regulated or Non-rate-regulated Generation segments for CILCORP.
The following tables present information about the reported revenues and specified items included in net income of Ameren, UE, CILCORP, and CILCO for the three and six months ended June30, 2009 and 2008, and total assets as of June30, 2009, and December31, 2008.
Ameren
Three Months Missouri Regulated Illinois Regulated Non-rate-regulated Generation Other Intersegment Eliminations Consolidated
2009:
External revenues $ 745 $ 618 $ 315 $ 6 $ - $ 1,684
Intersegment revenues 7 6 106 6 (125 ) -
Net income (loss) attributabletoAmerenCorporation(a) 82 15 75 (7 ) - 165
2008:
External revenues $ 760 $ 717 $ 314 $ (1 ) $ - $ 1,790
Intersegment revenues 11 12 96 4 (123 ) -
Net income (loss) attributabletoAmerenCorporation(a) 122 (14 ) 98 - - 206
Six Months
2009:
External revenues $ 1,393 $ 1,546 $ 651 $ 10 $ - $ 3,600
Intersegment revenues 14 14 222 10 (260 ) -
Net income (loss) attributabletoAmerenCorporation(a) 103 40 168 (5 ) - 306
2008:
External revenues |
| NOTE 14 - GOODWILL IMPAIRMENT |
NOTE 14 - GOODWILL IMPAIRMENT
We evaluate goodwill for impairment as of October31 of each year, or more frequently if events and circumstances indicate that the asset might be impaired. Goodwill impairment testing is a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit with its carrying amount. If the estimated fair value of the reporting unit exceeds the carrying value, goodwill of the reporting unit is considered unimpaired. If the carrying amount of the reporting unit exceeds its estimated fair value, the second step is performed to measure the amount of impairment, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting units goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined by allocating the estimated fair value of the reporting unit to the estimated fair value of its existing assets and liabilities in a manner similar to a purchase price allocation. The unallocated portion of the estimated fair value of the reporting unit is the implied fair value of goodwill. If the implied fair value of goodwill is less than the carrying amount, an impairment loss, equivalent to the difference, is recorded as a reduction of goodwill and a charge to operating expense.
The goodwill impairment test that we performed in the fourth quarter of 2008 did not result in the second step assessment; the test indicated no impairment of Amerens, CILCORPs, or IPs goodwill. However, the estimated fair values of both of CILCORPs reporting units (Illinois Regulated and Non-rate-regulated Generation) exceeded carrying values by a nominal amount. We concluded that events had occurred and circumstances had changed during the first quarter of 2009, which required us to perform an interim goodwill impairment test. The following triggering events resulted in the need for us to perform an impairment test:
A significant decline in Amerens market capitalization.
The continuing decline in market prices for electricity.
A decrease in observable industry market multiples.
The fair value of Amerens, CILCORPs and IPs reporting units was estimated based on a risk-adjusted, probability-weighted discounted cash flow model that considered multiple operating scenarios. Key assumptions in the determination of fair value included the use of an appropriate discount rate, estimated five-year future cash flows, and an exit value based on observable industry market multiples. For the interim test conducted as of March31, 2009, the discount rate used was 3.8%, based on the twenty-year treasury yield. To assess the reasonableness of the estimated fair values, the sum of the estimated fair values of the Ameren reporting units is reconciled to our current market capitalization plus an estimated control premium. We use our best estimates in making these evaluations and consider various factors, including forward price curves for energy, fuel costs, the regulatory environment, and operating costs.
As a result of the interim impairment test as of March31, 2009, CILCORPs Illinois Regulated reporting un |
