UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From to
Commission file number 1-3672.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Illinois 37-0211380
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
607 East Adams Street, Springfield, Illinois 62739
(Address of principal executive offices and Zip Code)
Registrant's telephone number,
including area code: (217) 535-5411
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 .
------------- ------------
Shares outstanding of each of registrant's classes of common stock as of April
30, 2001: Common Stock, no par value, held by Ameren Corporation (parent
company of Registrant) - 25,452,373
Central Illinois Public Service Company
Index
Page No.
Part I Financial Information (Unaudited)
Management's Discussion and Analysis 2
Quantitative and Qualitative Disclosure
About Market Risk 6
Balance Sheet
- March 31, 2001 and December 31, 2000 8
Statement of Income
- Three months and 12 months ended
March 31, 2001 and 2000 9
Statement of Cash Flows
- Three months ended March 31, 2001 and 2000 10
Notes to Financial Statements 11
Part II Other Information 14
PART I. FINANCIAL INFORMATION (UNAUDITED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Central Illinois Public Service Company (AmerenCIPS or the Registrant) is a
subsidiary of Ameren Corporation (Ameren), a holding company registered under
the Public Utility Holding Company Act of 1935 (PUHCA). Both Ameren and its
subsidiaries are subject to the regulatory provisions of the PUHCA. The
Registrant is a public utility operating company engaged principally in the
transmission, distribution and sale of electric energy and the purchase,
distribution, transportation and sale of natural gas in the state of Illinois.
The Registrant serves 325,000 electric and 175,000 gas customers in a 20,000
square-mile region of central and southern Illinois.
On May 1, 2000, following the receipt of all required state and federal
regulatory approvals, the Registrant transferred its electric generating assets
and liabilities, at historical net book value, to a newly created nonregulated
company, AmerenEnergy Generating Company (Generating Company), a subsidiary of
AmerenEnergy Resources Company (Resources Company), which is a wholly owned
subsidiary of Ameren (the Transfer). Discussion below under Results of
Operations reflects that as a result of the Transfer, from May 1, 2000, the
Registrant's operating revenues will only include revenues derived from its
traditional transmission and distribution operations, and those revenues it
receives from its native load customers, or new customers allowed choice of an
electric supplier under state law. Sales under certain wholesale contracts and
interchange sales will no longer be reflected in operating revenues of the
Registrant. Instead, those revenues will be recorded at Resources Company. The
Registrant's operating expenses will only include those expenses it incurs under
its traditional transmission and distribution operations, and for purchased
power under an electric power supply agreement with Resources Company's newly
created marketing subsidiary, AmerenEnergy Marketing Company (the Power Supply
Agreement).
The following discussion and analysis should be read in conjunction with the
Notes to Financial Statements beginning on page 11, and the Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A),
the Audited Financial Statements and the Notes to Financial Statements appearing
in the Registrant's 2000 Form 10-K.
RESULTS OF OPERATIONS
Earnings
First quarter 2001 earnings of $10 million decreased $15 million from 2000's
first quarter earnings. Earnings for the 12 months ended March 31, 2001 were $60
million, a $2 million decrease from the preceding 12-month period.
Earnings fluctuated due to many conditions, primarily: sales growth, weather
variations, electric rate reductions, the Transfer, a gas rate increase,
competitive market forces, fluctuating operating costs, expenses relating to the
withdrawal from the electric transmission related Midwest Independent System
Operator (Midwest ISO), charges for coal contract termination payments, changes
in interest expense, and changes in income and property taxes.
The significant items affecting revenues, costs and earnings during the
three-month and 12-month periods ended March 31, 2001 and 2000 are detailed
below.
Electric Operations
Electric Operating Revenues Variations for periods ended March 31, 2001
from comparable prior-year periods
- --------------------------------------------------------------------------
(Millions of Dollars) Three Months Twelve Months
- --------------------------------------------------------------------------
Effect of abnormal weather $ 6 $ (4)
Growth and other 17) (21)
Interchange sales (36) (151)
- --------------------------------------------------------------------------
$ (47) $ (176)
- --------------------------------------------------------------------------
Electric revenues for the three months ended March 31, 2001, decreased $47
million compared to the prior three- month period primarily due to a decrease in
interchange sales, which are now being recorded at Resources Company as a result
of the Transfer. In addition, sales under certain wholesale contracts are no
longer being included in the Registrant's operating revenues as a result of the
2
Transfer. The decreases in interchange and wholesale sales were partially offset
by increases in residential and commercial sales of 15 percent and 16 percent,
respectively, primarily due to a return to more normal weather, compared to the
unusually mild weather of a year ago period, and an increase in industrial sales
of 55 percent due to a new industrial customer contract that became effective in
August 2000.
Electric revenues for the 12 months ended March 31, 2001, decreased $176 million
compared to the same prior year period, primarily due to decreases in
interchange sales as a result of the Transfer. In addition, sales under certain
wholesale contracts are no longer being included in the Registrant's operating
revenues as a result of the Transfer. The decreases in interchange and wholesale
sales were partially offset by increases in weather-sensitive residential and
commercial sales of 7 percent and 11 percent, respectively, and an increase in
industrial sales of 37 percent due to a new industrial customer contract that
became effective in August 2000.
Fuel and Purchased Power Variations for periods ended March 31, 2001
from comparable prior-year periods
- ---------------------------------------------------------------------------
(Millions of Dollars) Three Months Twelve Months
- ---------------------------------------------------------------------------
Fuel:
Generation $ (47) $ (167)
Generation efficiencies and other - (6)
Coal contract termination payments - (52)
Purchased power 73 281
- ---------------------------------------------------------------------------
$ 26 $ 56
- ---------------------------------------------------------------------------
Fuel and purchased power costs for the three months ended March 31, 2001
increased $26 million over the same period in the prior year primarily as a
result of increased purchased power under the provisions of the Power Supply
Agreement, partially offset by decreased generation resulting from the Transfer.
The $56 million increase in fuel and purchased power costs for the 12 months
ended March 31, 2001 versus the prior-year period was primarily the result of
increased purchased power under the provisions of the Power Supply Agreement,
partially offset by decreased generation resulting from the Transfer and lower
fuel costs due to the termination of certain coal contracts in the fourth
quarter of 1999.
Gas Operations
Gas revenues for the three month and 12 month periods ended March 31, 2001
increased $53 million and $97 million, respectively, compared to the prior-year
period, primarily due to increased retail sales resulting from a return to more
normal weather, as compared to the same year ago period and higher gas costs
recorded through the Registrant's purchased gas adjustment clause (PGA).
Gas costs for the three months and 12 months ended March 31, 2001 increased $49
million and $87 million, respectively, compared to the same year-ago periods,
primarily due to increased purchases as well as higher gas prices.
Other Operating Expenses
Other operating expense variations reflected recurring factors such as growth,
inflation, labor and employee benefit costs and the Transfer.
Other operations expenses decreased $13 million and $73 million for the three
months and 12 months ended March 31, 2001, respectively, compared to the same
year-ago periods primarily due to lower labor and employee benefit costs
resulting from the Transfer as well as lower information system-related costs.
Operations expenses decreased $73 million for the twelve months ended March 31,
2001 primarily resulting from the Transfer, partially offset by the charge in
the fourth quarter of 2000 for withdrawal from the Midwest ISO (see discussion
below under "Electric Industry Restructuring" for further information).
Maintenance expenses decreased $10 million and $68 million for the three months
and 12 months ended March 31, 2001, respectively, from the comparable year-ago
periods primarily due to decreased power plant maintenance resulting from the
Transfer.
Depreciation and amortization expenses decreased $9 million and $33 million for
the three months and 12 months ended March 31, 2001, respectively, compared to
the same year-ago periods due to decreased depreciable property resulting from
the Transfer.
3
Taxes
Income taxes from operations for the three months and 12 months ended March 31,
2001 decreased $10 million and $5 million, respectively, primarily due to lower
pretax income.
Other taxes for the 12 months ended March 31, 2001, decreased $5 million
primarily due to lower property taxes as a result of the Transfer.
Other Income and Deductions
For the three months and 12 months ended March 31, 2001, miscellaneous, net
increased $10 million and $36 million, respectively, compared to the same
periods in the prior year, primarily due to interest income earned on the
promissory note receivable from Generating Company as part of the Transfer. See
Electric Industry Restructuring and Note 1 under Notes to Financial Statements
for further discussion of the promissory note.
Balance Sheet
Changes in accounts and wages payable and taxes accrued primarily resulted from
the timing of various payments to taxing authorities and suppliers.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $39 million for the quarter ended
March 31, 2001, compared to $66 million during the same 2000 period.
Cash flows used in investing activities totaled $9 million and $20 million for
the three months ended March 31, 2001 and 2000, respectively. Construction
expenditures for the three months ended March 31, 2001, for constructing new or
improving existing facilities, were $9 million.
Cash flows used in financing activities totaled $26 million for the three months
ended March 31, 2001, compared to $45 million during the same 2000 period. The
Registrant's principal financing activities for the quarter included the
redemption of long-term debt and intercompany notes payable.
The Registrant plans to continue utilizing short-term debt to support normal
operations and other temporary requirements. The Registrant is authorized by the
Securities and Exchange Commission (SEC) under the PUHCA to have up to $250
million of short-term unsecured debt instruments outstanding at any one time.
Short-term borrowings consist of bank loans (maturities generally on an
overnight basis) and commercial paper (maturities generally within 1 to 45
days). At March 31, 2001, the Registrant had committed bank lines of credit
aggregating $25 million (all of which was unused and available at such date)
which make available interim financing at various rates of interest based on
LIBOR, the bank certificate of deposit rate or other options. The lines of
credit are renewable annually at various dates throughout the year. At March 31,
2001, the Registrant had no outstanding short-term borrowings.
In addition, the Registrant has the ability to borrow up to approximately $914
million from Ameren or from two of Ameren's other subsidiaries, Union Electric
Company (AmerenUE) and Ameren Services Company (Ameren Services), through a
regulated money pool agreement. The total amount available to the Registrant at
any given time from the regulated money pool is reduced by the amount of
borrowings by AmerenUE or Ameren Services, but increased to the extent AmerenUE
or Ameren Services have surplus funds and the availability of other external
borrowing sources. The regulated money pool was established to coordinate and
provide for certain short-term cash and working capital requirements of the
Registrant, AmerenUE and Ameren Services and is administered by Ameren Services.
Interest is calculated at varying rates of interest depending on the composition
of internal and external funds in the regulated money pool. For the quarter
ended March 31, 2001, the average interest rate for the regulated money pool was
5.50%. At March 31, 2001, the Registrant had $177 million of intercompany
borrowings outstanding and $604 million available through the regulated money
pool subject to reduction for borrowings by AmerenUE or Ameren Services.
In April 2001, the Registrant filed a shelf registration statement with the SEC
on Form S-3 authorizing the offering from time to time of senior notes in one or
more series with an offering price not to exceed $250 million. The SEC declared
the registration statement effective in May 2001. The Registrant plans to issue
up to $150 million of the senior notes in 2001. The Senior Notes will be secured
by a related series of the Registrant's first mortgage bonds. The proceeds of
those notes will be used to repay short-term debt incurred through the regulated
money pool and first mortgage bonds maturing in 2001.
4
During the course of the Registrant's resource planning, several alternatives
are being considered to satisfy regulatory load requirements for 2001 and beyond
for the Registrant, AmerenUE and Resources Company. AmerenUE has purchased 450
megawatts of capacity and energy for the summer of 2001 from Resources Company,
and is considering the purchase of an additional 100 megawatts. Alternatives
being considered for the summer of 2002 and beyond include the purchase of
capacity and energy, among other things. At this time, management is unable to
predict which course of action it will pursue to satisfy these requirements and
their ultimate impact on the Registrant's financial position, results of
operations or liquidity.
The Registrant, in the ordinary course of business, explores opportunities to
reduce its costs in order to remain competitive in the marketplace. An area
where the Registrant focuses its review includes, but is not limited to, labor
costs. In the labor area, over the past two years, the Registrant has reached
agreements with all of the Registrant's major collective bargaining units which
will permit it to manage its labor costs and practices effectively in the
future. The Registrant also explores alternatives to effectively manage the size
of its workforce. These alternatives include utilizing hiring freezes,
outsourcing and offering employee separation packages.
Certain of these cost reduction alternatives could require nonrecurring payments
of employee separation benefits. Management is unable to predict to what extent,
these alternatives to reduce its overall cost structure will be executed nor can
it determine the impact of these actions on its future financial position,
results of operations or liquidity.
ELECTRIC INDUSTRY RESTRUCTURING
Certain states are considering proposals or have adopted legislation that will
promote competition at the retail level. During 2000 and in early 2001,
deregulation laws established in the state of California, coupled with high
energy prices, increasing demands for power by users in that state, transmission
constraints, and limited generation resources, among other things, negatively
impacted several major electric utilities in that state. Federal and state
regulators and legislators have proposed and implemented, in part, different
courses of action to attempt to address these issues. The Registrant does not
maintain utility operations in the state of California, nor does it provide
energy directly to utilities in that state. At this time, the Registrant is
uncertain what impact, if any, changes in deregulation laws will have on future
federal and state deregulation laws, which could directly impact the
Registrant's future financial position, results of operations or liquidity.
In December 1997, the Governor of Illinois signed the Electric Service Customer
Choice and Rate Relief Law of 1997 (the Law) providing for electric utility
restructuring in Illinois. This legislation introduces competition into the
supply of electric energy at retail in Illinois.
Major provisions of the Law include the phasing-in through 2002 of retail direct
access, which allows customers to choose their electric generation supplier. The
phase-in of retail direct access began on October 1, 1999, with large commercial
and industrial customers principally comprising the initial group. The remaining
commercial and industrial customers were offered choice on December 31, 2000.
Commercial and industrial customers represent approximately 45% of the
Registrant's total sales. As of March 31, 2001, the impact of retail direct
access on the Registrant's financial condition, results of operations and
liquidity was immaterial. Retail direct access will be offered to residential
customers on May 1, 2002.
In conjunction with another provision of the Law, on May 1, 2000, following the
receipt of all required state and federal regulatory approvals, the Registrant
transferred its electric generating assets and liabilities, at historical net
book value, to Generating Company in exchange for a subordinated promissory note
from Generating Company in the principal amount of $552 million and 1,000 shares
of Generating Company common stock (the Transfer). The promissory note has a
term of five years and bears interest at 7 percent based on a 10-year
amortization. Debt service during the term of the subordinated promissory note
is payable solely from "available cash," defined as cash available after payment
of all operating and maintenance expenses, senior debt service, capital
expenditures, taxes and reasonable reserves for working capital and other
corporate purposes as determined by Generating Company in its discretion. Any
installment payment amount that is not paid when due because of the available
cash limitation will be payable when available cash becomes sufficient to permit
the payment, or else carried forward to maturity. The transferred assets
represent a generating capacity of approximately 2,900 megawatts. Approximately
45 percent of the Registrant's employees were transferred to Generating Company
as a part of the transaction.
5
The Transfer
In conjunction with the Transfer, an electric power supply agreement was entered
into between Generating Company and its newly created nonregulated affiliate,
AmerenEnergy Marketing Company (Marketing Company), also a wholly owned
subsidiary of Resources Company. In addition, Marketing Company entered into an
electric power supply agreement with the Registrant to supply it sufficient
energy and capacity to meet its obligations as a public utility through December
31, 2004. A portion of the capacity and energy supplied by Generating Company to
Marketing Company will be resold to the Registrant for resale to native load
customers at rates specified by the Illinois Commerce Commission (ICC) (which
approximate the historical regulatory rates for generation) or to retail
customers allowed choice of an electric supplier under state law at market based
prices. In turn, the Registrant will bill these customers at rates which
approximate the costs the Registrant incurs for its capacity and energy supplied
by Marketing Company. For the three-month and twelve-month periods ended March
31, 2001, $101 million and $358 million, respectively, of the Registrant's
purchased power was derived under the Power Supply Agreement.
As a result of the Transfer, coupled with the Power Supply Agreement,
prospectively from May 1, 2000 through December 31, 2004, the Registrant's
operating revenues will include revenues derived from its traditional
transmission and distribution operations, as well as those revenues it receives
from its native load customers, or new customers allowed choice of an electric
supplier under state law. Sales under certain wholesale contracts and
interchange sales will no longer be reflected in operating revenues of the
Registrant. Instead, those revenues will be recorded at Resources Company. The
Registrant's operating expenses will include those expenses it incurs under its
traditional transmission and distribution operations, as well as purchased power
expenses incurred under the terms of the Power Supply Agreement.
In addition, as a result of the Transfer, the Registrant incurred a deferred
intercompany tax gain, which resulted in an additional deferred tax liability.
An intercompany tax receivable with Generating Company was established for the
deferred tax liability. This asset and liability will be amortized over twenty
years. At March 31, 2001, the Registrant's deferred tax liability and
intercompany tax receivable was $207 million.
Midwest ISO and Alliance RTO
In the fourth quarter of 2000, the Registrant announced its intention to
withdraw from the Midwest ISO and to join the Alliance Regional Transmission
Organization (Alliance RTO), and recorded a pretax charge to earnings of $8
million ($5 million after taxes), which related to the Registrant's estimated
obligation under the Midwest ISO agreement for costs incurred by the Midwest
ISO, plus estimated exit costs. In January 2001, the Federal Energy Regulatory
Commission (FERC) conditionally approved the formation, including the rate
structure, of the Alliance RTO, and the Registrant announced that it had signed
an agreement to join the Alliance RTO. In February 2001, in a proceeding before
the FERC, the Alliance RTO and the Midwest ISO reached an agreement that would
enable the Registrant to withdraw from the Midwest ISO and to join the Alliance
RTO. In April 2001, this settlement agreement was certified by the
Administrative Law Judge of the FERC and submitted to the FERC Commissioners for
approval. The settlement agreement was approved by the FERC in May 2001. The
Registrant's transfer of control and operation of its transmission assets to the
Alliance RTO remains subject to ICC approval and its membership in the Alliance
RTO is subject to SEC approval under the PUHCA. At this time, the Registrant is
unable to determine the impact that its withdrawal from the Midwest ISO and its
participation in the Alliance RTO will have on its future financial condition,
results of operation or liquidity.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in value of a physical asset or a
financial instrument, derivative or non-derivative, caused by fluctuations in
market variables (e.g., interest rates, equity prices, commodity prices, etc.).
The following discussion of Ameren's, including the Registrant's, risk
management activities includes "forward-looking" statements that involve risks
and uncertainties. Actual results could differ materially from those projected
in the "forward-looking" statements. Ameren handles market risks in accordance
with established policies, which may include entering into various derivative
transactions. In the normal course of business, Ameren and the Registrant also
face risks that are either non-financial or non-quantifiable. Such risks
principally include business, legal, operational, and credit risk and are not
represented in the following analysis.
Ameren's risk management objective is to optimize its physical generating assets
within prudent risk parameters. Risk management policies are set by a Risk
Management Steering Committee, which is comprised of senior-level Ameren
officers.
6
Interest Rate Risk
The Registrant is exposed to market risk through changes in interest rates
through its issuance of both long-term and short-term variable-rate debt and
fixed-rate debt, commercial paper and auction-rate preferred stock. The
Registrant manages its interest rate exposure by controlling the amount of these
instruments it holds within its total capitalization portfolio and by monitoring
the effects of market changes in interest rates.
If interest rates increase one percentage point in 2002, as compared to 2001,
the Registrant's interest expense would increase by approximately $3 million and
net income would decrease by approximately $2 million. This amount has been
determined using the assumptions that the Registrant's outstanding variable-rate
debt, commercial paper and auction-rate preferred stock, as of March 31, 2001,
continued to be outstanding throughout 2002, and that the average interest rates
for these instruments increased one percent over 2001. The estimate does not
consider the effects of the reduced level of potential overall economic activity
that would exist in such an environment. In the event of a significant change in
interest rates, management would likely take actions to further mitigate its
exposure to this market risk. However, due to the uncertainty of the specific
actions that would be taken and their possible effects, the sensitivity analysis
assumes no change in the Registrant's financial structure.
Commodity Price Risk
The Registrant is exposed to changes in market prices for natural gas and
electricity. With regard to its natural gas utility business, the Registrant's
exposure to changing market prices is in large part mitigated by the fact that
the Registrant has a PGA in place. The PGA allows the Registrant to pass on to
its customers its prudently incurred costs of natural gas.
Since the Registrant does not have a provision similar to the PGA for its
electric operations, purchased power commodity price risk is mitigated in part
due to the fact that the Registrant has entered into a long-term contract with a
supplier for purchased power (see "Electric Industry Restructuring" above for
further discussion).
SAFE HARBOR STATEMENT
Statements made in this Form 10-Q which are not based on historical facts, are
"forward-looking" and, accordingly, involve risks and uncertainties that could
cause actual results to differ materially from those discussed. Although such
"forward-looking" statements have been made in good faith and are based on
reasonable assumptions, there is no assurance that the expected results will be
achieved. These statements include (without limitation) statements as to future
expectations, beliefs, plans, strategies, objectives, events, conditions and
financial performance. In connection with the "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Registrant is providing
this cautionary statement to identify important factors that could cause actual
results to differ materially from those anticipated. The following factors, in
addition to those discussed elsewhere in this report and in the Annual Report on
Form 10-K for the fiscal year ended December 31, 2000, and in subsequent
securities filings, could cause results to differ materially from management
expectations as suggested by such "forward-looking" statements: the effects of
regulatory actions, including changes in regulatory policy; changes in laws and
other governmental actions; the impact on the Registrant of current regulations
related to the phasing-in of the opportunity for some customers to choose
alternative energy suppliers in Illinois; the effects of increased competition
in the future due to, among other things, deregulation of certain aspects of the
Registrant's business at both the state and federal levels; the effects of
withdrawal from the Midwest ISO and membership in the Alliance RTO; future
market prices for purchased power and natural gas, including the use of
financial instruments; average rates for electricity in the Midwest; business
and economic conditions; the impact of the adoption of new accounting standards;
interest rates; weather conditions; the impact of current environmental
regulations on utilities; monetary and fiscal policies; future wages and
employee benefits costs; and legal and administrative proceedings.
7
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEET
UNAUDITED
(Thousands of Dollars, Except Shares)
March 31 December 31
ASSETS 2001 2000
- ------ ---------- ------------
Property and plant, at original cost:
Electric $1,200,808 $1,195,418
Gas 274,500 273,573
---------- ----------
1,475,308 1,468,991
Less accumulated depreciation and amortization 663,943 654,897
---------- ----------
811,365 814,094
Construction work in progress 6,650 6,558
---------- ----------
Total property and plant, net 818,015 820,652
---------- ----------
Investments and other assets:
Intercompany notes receivable 511,701 511,701
Intercompany tax receivable 191,318 194,975
Other assets 17,356 17,085
---------- ----------
Total investments and other assets 720,375 723,761
Current assets:
Cash and cash equivalents 32,926 29,801
Accounts receivable - trade (less allowance for doubtful
accounts of $1,732 and $1,777, respectively) 166,861 160,996
Other accounts and notes receivable 26,315 25,035
Intercompany notes receivable 39,925 39,925
Intercompany tax receivable 15,515 15,809
Materials and supplies, at average cost -
Fossil fuel 9,204 22,560
Other 9,842 9,821
Other 5,986 6,240
---------- ----------
Total current assets 306,574 310,187
---------- ----------
Regulatory assets 12,362 12,541
---------- ----------
Total Assets $1,857,326 $1,867,141
========== ==========
CAPITAL AND LIABILITIES
Capitalization:
Common stock, no par value, 45,000,000 shares authorized -
25,452,373 shares outstanding $ 120,033 $ 120,033
Retained earnings 445,459 435,211
---------- ----------
Total common stockholder's equity 565,492 555,244
Preferred stock not subject to mandatory redemption 80,000 80,000
Long-term debt 458,204 463,174
---------- ----------
Total capitalization 1,103,696 1,098,418
---------- ----------
Current liabilities:
Current maturity of long-term debt 30,000 30,000
Intercompany notes payable 203,075 223,320
Accounts and wages payable 97,010 106,739
Accumulated deferred income taxes 19,657 19,639
Taxes accrued 23,152 13,899
Other 42,698 33,448
---------- ----------
Total current liabilities 415,592 427,045
---------- ----------
Accumulated deferred income taxes 268,114 273,505
Accumulated deferred investment tax credits 12,700 12,965
Regulatory liability 34,798 34,898
Other deferred credits and liabilities 22,426 20,310
---------- ----------
Total Capital and Liabilities $1,857,326 $1,867,141
========== ==========
See Notes to Financial Statements
8
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF INCOME
UNAUDITED
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------ ------------------------
2001 2000 2001 2000
---- ---- ---- ----
OPERATING REVENUES:
Electric $ 155,553 $ 202,503 $ 670,177 $ 846,469
Gas 105,836 52,824 229,783 132,938
Other 66 -- 66 --
--------- --------- --------- ---------
Total operating revenues 261,455 255,327 900,026 979,407
OPERATING EXPENSES:
Operations
Fuel and purchased power 107,521 81,630 396,325 340,148
Gas 80,305 31,714 158,926 71,816
Other 29,761 42,996 120,322 193,220
--------- --------- --------- ---------
217,587 156,340 675,573 605,184
Maintenance 6,745 16,504 34,704 102,679
Depreciation and amortization 12,191 21,350 51,925 84,897
Income taxes 4,660 14,163 34,077 38,957
Other taxes 9,502 11,236 36,898 41,950
--------- --------- --------- ---------
Total operating expenses 250,685 219,593 833,177 873,667
OPERATING INCOME 10,770 35,734 66,849 105,740
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used
during construction -- -- -- (2)
Miscellaneous, net 10,090 377 37,593 2,051
--------- --------- --------- ---------
Total other income and (deductions) 10,090 377 37,593 2,049
INCOME BEFORE
INTEREST CHARGES 20,860 36,111 104,442 107,789
INTEREST CHARGES:
Interest 10,050 9,559 41,060 41,480
Allowance for borrowed funds used
during construction (65) 220 (523) 312
--------- --------- --------- ---------
Net interest charges 9,985 9,779 40,537 41,792
--------- --------- --------- ---------
NET INCOME 10,875 26,332 63,905 65,997
PREFERRED STOCK DIVIDENDS 975 993 3,864 3,858
--------- --------- --------- ---------
NET INCOME AFTER PREFERRED
STOCK DIVIDENDS $ 9,900 $ 25,339 $ 60,041 $ 62,139
========= ========= ========= =========
See Notes to Financial Statements
9
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF CASH FLOWS
UNAUDITED
(Thousands of Dollars)
Three Months Ended
March 31,
--------------------
2001 2000
---- ----
Cash Flows From Operating:
Net income $ 10,875 $ 26,332
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,191 21,350
Allowance for funds used during construction (65) 220
Deferred income taxes, net (5,344) (1,792)
Deferred investment tax credits, net (265) 1,199
Changes in assets and liabilities:
Receivables, net (7,145) 5,606
Materials and supplies 13,335 12,819
Accounts and wages payable (9,729) (21,657)
Taxes accrued 9,253 18,858
Other, net 15,572 2,797
-------- --------
Net cash provided by operating activities 38,678 65,732
Cash Flows From Investing:
Construction expenditures (9,398) (19,642)
Allowance for funds used during construction 65 (220)
-------- --------
Net cash used in investing activities (9,333) (19,862)
Cash Flows From Financing:
Dividends on common stock -- (18,057)
Dividends on preferred stock (975) (993)
Environmental bond redemption fund -- (51,100)
Redemptions -
Long-term debt (5,000) (5,000)
Intercompany notes payable (20,245) (21,180)
Issuances -
Long-term debt -- 51,100
-------- --------
Net cash used in financing activities (26,220) (45,230)
-------- --------
Net change in cash and cash equivalents 3,125 640
Cash and cash equivalents at beginning of year 29,801 12,536
-------- --------
Cash and cash equivalents at end of period $ 32,926 $ 13,176
======== ========
Cash paid during the periods:
Interest (net of amount capitalized) $ 8,779 $ 9,678
Income taxes, net $ -- $ --
See Notes to Financial Statements
10
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2001
Note 1 - Central Illinois Public Service Company (AmerenCIPS or the Registrant)
is a subsidiary of Ameren Corporation (Ameren), a holding company under the
Public Utility Holding Company Act of 1935 (PUHCA). Ameren is the parent company
of the following operating subsidiaries: the Registrant, Union Electric Company
(AmerenUE), and AmerenEnergy Generating Company (Generating Company), a wholly
owned subsidiary of AmerenEnergy Resources Company (Resources Company). Both
Ameren and its subsidiaries are subject to the regulatory provisions of the
PUHCA. The Registrant is a public utility engaged principally in the
transmission, distribution and sale of electric energy and the purchase,
distribution, transportation and sale of natural gas in the state of Illinois.
Contracts among the Registrant and other Ameren subsidiaries--dealing with
interconnecting transmission lines and the exchange of electric power--are
regulated by the Federal Energy Regulatory Commission (FERC) or the Securities
and Exchange Commission (SEC). Administrative support services are provided to
the Registrant by a separate Ameren subsidiary, Ameren Services Company (Ameren
Services). The Registrant serves 325,000 electric and 175,000 gas customers in a
20,000 square-mile region of central and southern Illinois. The Registrant also
has a 20% interest in Electric Energy, Inc. (EEI), which is accounted for under
the equity method of accounting. EEI owns and/or operates electric generating
and transmission facilities in Illinois that supply electric power primarily to
a uranium enrichment plant located in Paducah, Kentucky.
In conjunction with the Illinois Electric Service Customer Choice and Rate
Relief Law of 1997 (the Law), on May 1, 2000, following the receipt of all
required state and federal regulatory approvals, the Registrant transferred its
electric generating assets and liabilities, at historical net book value, to
Generating Company in exchange for a promissory note from Generating Company in
the principal amount of $552 million, $40 million of which is a current asset at
December 31, 2000, and 1,000 shares of Generating Company common stock (the
Transfer). The promissory note bears interest at 7 percent and has a term of
five years payable based on a 10-year amortization. The transferred assets
represent generating capacity of approximately 2,900 megawatts. Approximately 45
percent of the Registrant's employees were transferred to Generating Company as
a part of the transaction.
In conjunction with the Transfer, an electric power supply agreement was entered
into between Generating Company and its newly created nonregulated affiliate,
AmerenEnergy Marketing Company (Marketing Company), also a wholly-owned
subsidiary of AmerenEnergy Resources Company. In addition, Marketing Company
entered into an electric power supply agreement with the Registrant to supply it
sufficient energy and capacity to meet its obligations as a public utility
through December 31, 2004 (the Power Supply Agreement). A portion of the
capacity and energy supplied by Generating Company to Marketing Company will be
resold to the Registrant for resale to native load customers at rates specified
by the Illinois Commerce Commission (ICC) (which approximate the historical
regulatory rates for generation) or to retail customers allowed choice of an
electric supplier under state law at market based prices. In turn, the
Registrant will bill these customers at rates which approximate the costs the
Registrant incurs for its capacity and energy supplied by Marketing Company. For
the three-month and 12-month periods ended March 31, 2001, $101 million and $358
million, respectively, of the Registrant's purchased power was derived under the
Power Supply Agreement.
As a result of the Transfer, coupled with the Power Supply Agreement,
prospectively from May 1, 2000 through December 31, 2004, the Registrant's
operating revenues will include revenues derived from its traditional
transmission and distribution operations, as well as those revenues it receives
from its native load customers, or new customers allowed choice of an electric
supplier under state law. Sales under certain wholesale contracts and
interchange sales will no longer be reflected in operating revenues of the
Registrant. Instead, those revenues will be recorded at Resources Company. The
Registrant's operating expenses will include those expenses it incurs under its
traditional transmission and distribution operations, as well as purchased power
expenses incurred under the terms of the Power Supply Agreement.
In addition, as a result of the Transfer, the Registrant incurred a deferred
intercompany tax gain, which resulted in an additional deferred tax liability.
An intercompany tax receivable with Generating Company was established for the
deferred tax liability. This asset and liability will be amortized over twenty
years.
Note 2 - Financial statement note disclosures, normally included in financial
statements prepared in conformity with generally accepted accounting principles,
have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the
SEC. However, in the opinion of the Registrant, the disclosures contained in
11
this Form 10-Q are adequate to make the information presented not misleading.
See Notes to Financial Statements included in the 2000 Form 10-K for information
relevant to the financial statements contained in this Form 10-Q, including
information as to the significant accounting policies of the Registrant.
Note 3 - In the opinion of the Registrant, the interim financial statements
filed as part of this Form 10-Q reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results for
the periods presented.
Note 4 - Due to the effect of weather on sales and other factors which are
characteristic of public utility operations, financial results for the periods
ended March 31, 2001 and 2000, are not necessarily indicative of trends for any
three-month or 12-month period.
Note 5 - The Registrant has transactions in the normal course of business with
other Ameren subsidiaries. These transactions are primarily comprised of power
purchases and sales, including power purchases derived under the Power Supply
Agreement between the Registrant and Marketing Company, and services received or
rendered. Intercompany receivables included in other accounts and notes
receivable were approximately $22 million and $8 million, respectively, as of
March 31, 2001 and December 31, 2000. Intercompany payables included in accounts
and wages payable totaled approximately $85 million and $75 million,
respectively, as of March 31, 2001 and December 31, 2000.
In addition, the Registrant has the ability to borrow up to approximately $914
million from Ameren, AmerenUE or Ameren Services through a regulated money pool
agreement. The total amount available to the Registrant at any given time from
the regulated money pool is reduced by the amount of borrowings by AmerenUE or
Ameren Services but increased to the extent AmerenUE or Ameren Services have
surplus funds and the availability of other external borrowing sources. The
regulated money pool was established to coordinate and provide for certain
short-term cash and working capital requirements of the Registrant, AmerenUE and
Ameren Services and is administered by Ameren Services. Interest is calculated
at varying rates of interest depending on the composition of internal and
external funds in the regulated money pool. For the quarter ended March 31,
2001, the average interest rate for the regulated money pool was 5.50%. For each
of the quarters ended March 31, 2001 and 2000, intercompany interest expense
totaled approximately $2 million. Intercompany interest expense totaled
approximately $9 million and $5 million, respectively, for the 12 months ended
March 31, 2001 and 2000. At March 31, 2001, the Registrant had $177 million of
intercompany borrowings outstanding and $604 million available through the
regulated money pool subject to reduction for borrowings by AmerenUE or Ameren
Services.
In conjunction with the Transfer, the Registrant incurred a deferred
intercompany tax gain, which resulted in an additional deferred tax liability.
An intercompany tax receivable with Generating Company was established for the
deferred tax liability. This asset and liability will be amortized over twenty
years. At March 31, 2001, the Registrant's deferred tax liability and
intercompany tax receivable was $207 million.
The Registrant's intercompany note receivable from Generating Company related to
the Transfer totaled approximately $552 million at March 31, 2001. Intercompany
interest income for the three months and 12 months ended March 31, 2001 totaled
approximately $10 million and $35 million, respectively.
Note 6 - In the fourth quarter of 2000, the Registrant announced its intention
to withdraw from the Midwest Independent System Operator (Midwest ISO) and to
join the Alliance Regional Transmission Organization (Alliance RTO), and
recorded a pretax charge to earnings of $8 million ($5 million after taxes),
which related to the Registrant's estimated obligation under the Midwest ISO
agreement for costs incurred by the Midwest ISO, plus estimated exit costs. In
January 2001, the FERC conditionally approved the formation, including the rate
structure, of the Alliance RTO, and the Registrant announced that it had signed
an agreement to join the Alliance RTO. In February 2001, in a proceeding before
the FERC, the Alliance RTO and the Midwest ISO reached an agreement that would
enable the Registrant to withdraw from the Midwest ISO and to join the Alliance
RTO. In April 2001, this settlement agreement was certified by the
Administrative Law Judge of the FERC and submitted to the FERC Commissioners for
approval. The settlement agreement was approved by the FERC in May 2001. The
Registrant's transfer of control and operation of its transmission assets to the
Alliance RTO remains subject to ICC approval and its membership in the Alliance
RTO is subject to SEC approval under the PUHCA. At this time, the Registrant is
unable to determine the impact that its withdrawal from the Midwest ISO and its
participation in the Alliance RTO will have on its future financial condition,
results of operation or liquidity.
Note 7 - Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities" became effective on January
1, 2001. SFAS 133 establishes accounting and reporting standards for derivative
12
financial instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities and requires recognition of all
derivatives as either assets or liabilities on the balance sheet measured at
fair value. The intended use of the derivatives and their designation as either
a fair value hedge, a cash flow hedge, or a foreign currency hedge will
determine when the gains or losses on the derivatives are to be reported in
earnings and when they are to be reported as a component of other comprehensive
income in stockholder's equity. SFAS 133 did not have a material impact on the
Registrant's financial position or results of operations upon adoption.
Note 8 - Segment information for the three month and 12 month periods ended
March 31, 2001 and 2000 is as follows:
- --------------------------------------------------------------------------------
(in thousands) Electric Gas Other Total
- --------------------------------------------------------------------------------
Three months ended March 31, 2001:
Revenues $155,553 $105,836 $66 $261,455
Operating Income 2,971 7,733 66 10,770
- --------------------------------------------------------------------------------
Three months ended March 31, 2000:
Revenues $202,503 $ 52,824 -- $255,327
Operating Income 30,032 5,702 --
35,734
- --------------------------------------------------------------------------------
12 months ended March 31, 2001:
Revenues $670,177 $229,783 $66 $900,026
Operating Income 49,974 16,809 66 66,849
- --------------------------------------------------------------------------------
12 months ended March 31, 2000:
Revenues $846,469 $132,938 -- $979,407
Operating Income 95,903 9,837 -- 105,740
- --------------------------------------------------------------------------------
13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a)(i) Exhibits.
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements, 12 Months Ended
March 31, 2001.
(a)(ii) Exhibits Incorporated by Reference.
4.1 - Supplemental Indenture dated December 1, 1998
relating to Senior Note Mortgage Bonds Series AA-1 and
AA-2 (File No. 333-59438, Exhibit 4.2).
4.2 - Indenture dated as of December 1, 1998 between the
Registrant and The Bank of New York, as Trustee,
relating to the Senior Notes [including as exhibits
the forms of the Senior Notes] (File No. 333-59438,
Exhibit 4.4).
10.1 - 2nd Amended Electric Power Supply Agreement between
Generating Company and AmerenEnergy Marketing Company
[Marketing Co.] (March 31, 2001 Ameren Corporation
Form 10-Q, Exhibit 10.1).
10.2 - Amended Electric Power Supply Agreement between
Marketing Co. and AmerenCIPS (March 31, 2001 Ameren
Corporation Form 10-Q, Exhibit 10.2).
(b) Reports on Form 8-K. The Registrant filed a report on Form 8-K
dated January 11, 2001 reporting the recording of a
nonrecurring charge in the fourth quarter of 2000 as a result
of its decision to withdraw from the Midwest ISO.
Note: Reports of Ameren Corporation on Forms 8-K, 10-Q and Form 10-K
are on file with the SEC under File Number 1-14756.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTRAL ILLINOIS PUBLIC
SERVICE COMPANY
(Registrant)
By /s/ Warner L. Baxter
------------------------------------------------
Warner L. Baxter
Vice President and Controller
(Principal Accounting Officer)
Date: May 15, 2001
14
Exhibit 12
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND
REQUIREMENTS
12 Months
Ended
Year Ended December 31, March 31,
--------------------------------------------------------------------
--------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
Thousands of Dollars Except Ratios
Net Income $77,393 $38,620 $80,147 $53,980 $79,362 $63,905
Add- Extraordinary items net of tax - 24,853 - - - -
---------- -------- -------- -------- -------- -----------
---------- -------- -------- -------- -------- -----------
Net income from continuing operations 77,393 63,473 80,147 53,980 79,362 63,905
Taxes based on income 47,286 33,922 45,412 30,763 43,661 34,223
---------- -------- -------- -------- -------- -----------
---------- -------- -------- -------- -------- -----------
Net income before income taxes 124,679 97,395 125,559 84,743 123,023 98,128
---------- -------- -------- -------- -------- -----------
---------- -------- -------- -------- -------- -----------
Add- fixed charges:
Interest on long term debt 31,409 32,271 37,260 38,223 28,935 28,545
Other interest 4,636 2,875 1,647 3,373 8,497 9,410
Amortization of net debt premium,
discount, expenses and losses 1,709 1,643 1,132 1,139 2,880 2,847
---------- -------- -------- -------- -------- -----------
---------- -------- -------- -------- -------- -----------
Total fixed charges 37,754 36,789 40,039 42,735 40,312 40,802
---------- -------- -------- -------- -------- -----------
---------- -------- -------- -------- -------- -----------
Earnings available for fixed charges 162,433 134,184 165,598 127,478 163,335 138,930
========== ======== ======== ======== ======== ===========
========== ======== ======== ======== ======== ===========
Ratio of earnings to fixed charges 4.30 3.64 4.13 2.98 4.05 3.40
========== ======== ======== ======== ======== ===========
========== ======== ======== ======== ======== ===========
Earnings required for preferred dividends:
Preferred stock dividends 3,721 3,715 3,745 3,833 3,882 3,864
Adjustment to pre-tax basis 2,273 1,985 2,122 2,185 2,135 2,071
---------- -------- -------- -------- -------- -----------
---------- -------- -------- -------- -------- -----------
5,994 5,700 5,867 6,018 6,017 5,935
Fixed charges plus preferred stock
dividend requirements 43,748 42,489 45,906 48,753 46,329 46,737
========== ======== ======== ======== ======== ===========
========== ======== ======== ======== ======== ===========
Ratio of earnings to fixed charges plus
preferred stock dividend 3.71 3.15 3.60 2.61 3.52 2.97
requirements ========== ======== ======== ======== ======== ===========
========== ======== ======== ======== ======== ===========