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 September 30, 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) 523-3600
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
November 13, 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
Item 1. Financial Statements (Unaudited)
Balance Sheet
- September 30, 2001 and December 31, 2000 10
Statement of Income
- Three months, nine months and 12 months ended
September 30, 2001 and 2000 11
Statement of Cash Flows
- Nine months ended September 30, 2001 and 2000 12
Notes to Financial Statements 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 2
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 8
Part II Other Information
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
The unaudited financial statements of Central Illinois Public Service Company
(AmerenCIPS or the Registrant) appear on pages 10 through 16 of this report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
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 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 (Marketing Company)
(the Power Supply Agreement). The Registrant also has a 20 percent interest in
Electric Energy, Inc. (EEI). 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. The Registrant continues
to buy 20% of the excess generating output of EEI and sells this output as
interchange sales.
The Registrant's financial statements include charges for services that Ameren
Services Company (Ameren Services), a wholly owned subsidiary of Ameren
Corporation, provides to the Registrant. Ameren Services provides shared support
services for all Ameren subsidiaries. Charges are based upon the actual costs
incurred by Ameren Services, as required by PUHCA.
The following discussion and analysis should be read in conjunction with the
Notes to Financial Statements beginning on page 12, 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
Third quarter 2001 earnings of $24 million decreased $6 million from 2000's
third quarter earnings. Earnings for the nine months ended September 30, 2001
decreased $32 million from the year-ago period to $43 million. Earnings for the
12 months ended September 30, 2001 were $44 million, a $6 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.
2
The significant items affecting revenues, costs and earnings during the
three-month, nine-month and 12-month periods ended September 30, 2001 and 2000
are detailed below.
Electric Operations
Electric Operating Revenues Variations for periods ended September 30, 2001
from comparable prior-year periods
- -----------------------------------------------------------------------------------------------------------------------
(Millions of Dollars) Three Months Nine Months Twelve Months
------------ ----------- -------------
- -----------------------------------------------------------------------------------------------------------------------
Credits to customers $ -- $ -- $ (8)
Effect of abnormal weather 6 15 21
Growth and other 9 (6) (12)
Interchange sales (2) (49) (72)
- -----------------------------------------------------------------------------------------------------------------------
$ 13 $ (40) $(71)
- -----------------------------------------------------------------------------------------------------------------------
Electric revenues for the three months ended September 30, 2001, increased $13
million compared to the prior three- month period primarily due to an increase
in retail sales partially offset by 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 Transfer.
Electric revenues for the nine months ended September 30, 2001, decreased $40
million compared to the prior nine-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
Transfer. The decreases in interchange and wholesale sales were partially offset
by increases in residential and commercial sales of 3 percent and 10 percent,
respectively, primarily due to warmer weather, and an increase in industrial
sales of 49 percent due to a new industrial customer contract that became
effective in August 2000.
Electric revenues for the 12 months ended September 30, 2001 decreased $71
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. 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 52 percent due to a new industrial customer contract that
became effective in August 2000.
Fuel and Purchased Power Variations for periods ended September 30, 2001
from comparable prior-year periods
- ----------------------------------------------------------------------------------------------------------------------
(Millions of Dollars) Three Months Nine Months Twelve Months
------------ ----------- -------------
- ----------------------------------------------------------------------------------------------------------------------
Fuel:
Generation $ - $ (57) $ (97)
Price - - 1
Generation efficiencies and other 11 10 10
Coal contract termination payments - - (52)
Purchased power 8 115 202
- ---------------------------------------------------------------------------------------------------------------------
$ 19 $ 68 $ 64
- ---------------------------------------------------------------------------------------------------------------------
Fuel and purchased power costs for the three and nine months ended September 30,
2001 increased $19 million and $68 million, respectively, compared to the prior
year periods, primarily as a result of increased purchased power under
provisions of the Power Supply Agreement, partially offset by decreased
generation resulting from the Transfer.
The $64 million increase in fuel and purchased power costs for the 12 months
ended September 30, 2001 compared to 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.
Gas Operations
Gas revenues for the three-months ended September 30, 2001, decreased $3 million
compared to the same period in the prior year primarily due to lower gas costs
recovered through the purchased gas adjustment clause. Gas revenues for the
nine-month and 12-month periods ended September 30, 2001 increased $30 million
and $66 million, respectively, compared to the same year-ago periods primarily
due higher gas costs recovered through the Registrant's purchased gas adjustment
clause, partially offset by lower retail sales.
3
Gas costs for the nine month and 12-month periods ended September 30, 2001,
increased $34 million and $67 million, respectively, compared to the year-ago
periods primarily due to higher gas prices, partially offset by lower retail
sales.
Other Operating Expenses
Other operating expenses consist primarily of wages, employee benefits,
professional services and expenses associated with support services provided by
Ameren Services. Other operating expense variations reflected recurring factors
such as growth, inflation, labor and employee benefit costs and the Transfer.
Other operations expenses increased $6 million for the three months ended
September 30, 2001 compared to the same year-ago period primarily due to
increases in employee benefits costs resulting from changes in actuarial
assumptions as well as a decrease in prior year expenses related to a coal tar
environmental remediation. Other operations expenses decreased $8 million for
the nine months ended September 30, 2001, compared to the same year-ago period
primarily due to lower labor costs resulting from the Transfer, partially offset
by an increase in employee benefits costs resulting from changes in actuarial
assumptions and investment performance of employee benefit plans' assets. Other
operations expenses decreased $22 million for the 12 months ended September 30,
2001, compared to the same year-ago period, primarily due to lower labor costs
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) and the increase in
employee benefits costs noted above.
Support services provided by Ameren Services are based on actual costs incurred.
For each of the three months ended September 30, 2001 and 2000, other operating
expenses provided by Ameren Services totaled $13 million and $10 million,
respectively. For each of the nine months ended September 30, 2001 and 2000,
support services provided by Ameren Services totaled $41 million. For each of
the 12 months ended September 30, 2001 and 2000, support services provided by
Ameren Services totaled $51 million and $57 million, respectively.
Maintenance expenses for the three months ended September 30, 2001 were
comparable to the three months ended September 30, 2000. Maintenance expenses
for the nine months and 12 months ended September 30, 2001 decreased $14 million
and $42 million, respectively, from the comparable year-ago periods primarily
due to decreased power plant maintenance resulting from the Transfer.
Depreciation and amortization expenses for the three months ended September 30,
2001 were comparable to the three months ended September 30, 2000. Depreciation
and amortization expenses decreased $12 million and $21 million for the nine
months and 12 months ended September 30, 2001, respectively, compared to the
same year-ago periods due to the decreased depreciable property resulting from
the Transfer.
Taxes
Income taxes for the three months, nine months and 12 months ended September 30,
2001, decreased $7 million, $21 million and $12 million, respectively, primarily
due to lower pretax income.
Other taxes for the three months ended September 30, 2001 were comparable to the
three months ended September 30, 2000. Other taxes for the nine months and 12
months ended September 30, 2001 decreased $11 million in each period primarily
due to lower property taxes and payroll taxes as a result of the Transfer.
Other Income and Deductions
For the three, nine and 12 months ended September 30, 2001, miscellaneous net
increased $1 million, $13 million and $23 million, respectively, compared to the
same year-ago periods, primarily due to interest income earned on the
subordinated 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
The $27 million decrease in trade accounts receivable was due primarily to lower
gas revenues in August and September 2001, compared to November and December
2000.
4
The $40 million reduction in intercompany notes receivable is the result of a
payment received from Generating Company as part of the debt service on the
subordinated promissory note. See "Electric Industry Restructuring" below for
further discussion.
The $13 million increase in fossil fuel is primarily due to lower gas inventory
in November and December 2000 resulting from increased gas usage due to cold
weather and an increase in gas inventory in September 2001 in preparation for
the winter season.
Changes in taxes accrued, and other accounts and notes receivable resulted from
the timing of various payments to taxing authorities and receipts from
customers. The $194 million reduction in intercompany notes payable was due to
the repayment of funds borrowed from the regulated money pool (see Note 2 under
Notes to Financial Statements for further discussion) and the repayment of funds
owed to Generating Company as a result of the Transfer.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $81 million for the nine months
ended September 30, 2001, compared to $139 million during the same 2000 period.
Cash flows provided by investing activities totaled $6 million for the nine
months ended September 30, 2001 and cash flows used in investing activities
totaled $31 million for the nine months ended September 30, 2000. Construction
expenditures for the nine months ended September 30, 2001, for constructing new
or improving existing facilities, were $34 million. The $40 million change in
intercompany notes receivable represents payment received from Generating
Company as part of the debt service on the subordinated promissory note (see
"Electric Industry Restructuring" below for further discussion).
Cash flows used in financing activities totaled $92 million for the nine months
ended September 30, 2001, compared to $100 million during the same 2000 period.
The Registrant's principal financing activities for the nine months included the
issuance of long-term debt and the payment of intercompany notes payable,
partially offset by the redemption of long-term debt.
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 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 September
30, 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 September 30, 2001,
the Registrant had no outstanding short-term borrowings.
Also, the Registrant has the ability to borrow up to approximately $899 million
from Ameren or from two of Ameren's other subsidiaries, Union Electric Company
(AmerenUE) and 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 three months and nine months ended September 30,
2001, the average interest rate for the regulated money pool was 3.67 percent
and 4.51 percent, respectively. At September 30, 2001, the Registrant had $29
million of intercompany borrowings outstanding and $399 million available
through the regulated money pool subject to reduction for borrowings by AmerenUE
or Ameren Services.
In April 2001, the Registrant filed with the SEC a shelf registration statement
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. In June 2001, the Registrant
issued $150 million of the senior notes with an interest rate of 6.625 percent
due June 2011. The proceeds of these senior notes were used to repay short-term
debt borrowed through the regulated money pool and first mortgage bonds which
matured in June 2001.
5
During the course of Ameren's resource planning, several alternatives are being
considered to satisfy anticipated regulatory load requirements for 2001 and
beyond for the Registrant, AmerenUE and Resources Company. AmerenUE purchased 50
megawatts of capacity and energy during the third quarter of 2001 and is
considering proposals for purchases of up to 500 megawatts of capacity and
energy, for the summer of 2002 and beyond, 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 its major collective bargaining units which will
permit the Registrant 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.
One of the major provisions of the Law is 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 percent of the Registrant's total sales. As of September 30, 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.
The Transfer
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 (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.
In conjunction with the Transfer, an electric power supply agreement was entered
into between Generating Company and a newly created nonregulated affiliate,
Marketing Company, also a wholly owned subsidiary of Resources Company. In
addition, Marketing Company entered into the 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
6
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,
nine-month and 12-month periods ended September 30, 2001, $117 million, $318
million and $418 million, respectively, of the Registrant's power was purchased
through 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 September 30, 2001, the Registrant's deferred tax liability and
intercompany tax receivable was $199 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. During first quarter 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. Also in the first quarter 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 the second quarter of 2001, this settlement
agreement was approved by the FERC. Additional regulatory approvals of the SEC,
FERC and the ICC may be required in connection with various transactions
involving the Alliance RTO relating to its organization, capitalization and the
possible transfer of transmission assets. Such approvals, if required, will be
sought at the appropriate times. The Alliance RTO is expected to be operational
within 90-120 days after the FERC's approval. 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 operations or liquidity.
ACCOUNTING MATTERS
In July 2001, the FASB issued SFAS No. 141, "Business Combinations," SFAS 142,
"Goodwill and Other Intangible Assets," and SFAS 143, "Accounting for Asset
Retirement Obligations." SFAS 141 requires business combinations to be accounted
for under the purchase method of accounting, which requires one party in the
transaction to be identified as the acquiring enterprise and for that party to
record the assets and liabilities of the acquired enterprise at fair market
value rather than historical cost. It prohibits use of the pooling-of-interests
method of accounting for business combinations. SFAS 141 is effective for all
business combinations initiated after June 30, 2001, or transactions completed
using the purchase method after June 30, 2001. SFAS 142 requires goodwill
recorded in the financial statements to be tested for impairment at least
annually, rather than amortized over a fixed period, with impairment losses
recorded in the income statement. SFAS 142 is effective for all fiscal years
beginning after December 15, 2001. SFAS 143 requires an entity to record a
liability and corresponding asset representing the present value of legal
obligations associated with the retirement of tangible, long-lived assets. SFAS
143 is effective for fiscal years beginning after June 15, 2002. SFAS 141 and
SFAS 142 are not expected to have a material effect on the Registrant's
financial position, results of operations or liquidity upon adoption. At this
time, the Registrant is assessing the impact of SFAS 143 on its financial
position, results of operations or liquidity upon adoption.
7
ITEM 3. 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.
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 $2 million and net
income would decrease by approximately $1 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 September 30,
2001, continued to be outstanding throughout 2002, and that the average interest
rates for these instruments increased one percentage point 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 purchased gas adjustment clause (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, electricity and natural gas, including the
8
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; fuel availability; the impact of
current environmental regulations on utilities; monetary and fiscal policies;
future wages and employee benefits costs; and legal and administrative
proceedings.
9
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEET
UNAUDITED
(Thousands of Dollars, Except Shares)
September 30, December 31,
ASSETS 2001 2000
- ------ ------------- ------------
Property and plant, at original cost:
Electric $1,208,590 $1,195,418
Gas 281,933 273,573
---------- ----------
1,490,523 1,468,991
Less accumulated depreciation and amortization 683,632 654,897
---------- ----------
806,891 814,094
Construction work in progress 10,759 6,558
---------- ----------
Total property and plant, net 817,650 820,652
---------- ----------
Investments and other assets:
Intercompany notes receivable 468,981 511,701
Intercompany tax receivable 184,004 194,975
Other assets 17,996 17,085
---------- ----------
Total investments and other assets 670,981 723,761
---------- ----------
Current assets:
Cash and cash equivalents 25,393 29,801
Accounts receivable - trade (less allowance
for doubtful accounts of $1,470 and 133,509 160,996
$1,777, respectively)
Other accounts and notes receivable 41,166 25,035
Intercompany notes receivable 42,720 39,925
Intercompany tax receivable 14,927 15,809
Materials and supplies, at average cost -
Fossil fuel 36,049 22,560
Other 10,256 9,821
Other 5,707 6,240
---------- ----------
Total current assets 309,727 310,187
---------- ----------
Regulatory assets 15,328 12,541
---------- ----------
Total Assets $1,813,686 $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 445,453 435,211
---------- ----------
Total common stockholder's equity 565,486 555,244
Preferred stock not subject to mandatory 80,000 80,000
redemption
Long-term debt 579,015 463,174
---------- ----------
Total capitalization 1,224,501 1,098,418
---------- ----------
Current liabilities:
Current maturity of long-term debt 33,000 30,000
Intercompany notes payable 29,255 223,320
Accounts and wages payable 106,973 106,739
Accumulated deferred income taxes 19,657 19,639
Taxes accrued 36,164 13,899
Other 35,886 33,448
---------- ----------
Total current liabilities 260,935 427,045
---------- ----------
Accumulated deferred income taxes 258,452 273,505
Accumulated deferred investment tax credits 12,170 12,965
Regulatory liability 35,341 34,898
Other deferred credits and liabilities 22,287 20,310
---------- ----------
Total Capital and Liabilities $1,813,686 $1,867,141
========== ==========
See Notes to Financial Statements.
10
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF INCOME
UNAUDITED
(Thousands of Dollars)
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------ ----------------- -------------------
2001 2000 2001 2000 2001 2000
---- ---- ---- ---- ---- ----
OPERATING REVENUES:
Electric $ 210,353 $ 197,405 $ 529,455 $ 569,239 $ 677,343 $ 748,736
Gas 18,808 21,843 130,603 100,455 206,919 141,102
Other 106 -- 300 -- 300 --
--------- --------- --------- --------- --------- ---------
Total operating revenues 229,267 219,248 660,358 669,694 884,562 889,838
OPERATING EXPENSES:
Operations
Fuel and purchased power 123,354 104,560 336,019 268,318 438,135 374,222
Gas 9,283 10,081 88,221 54,241 144,315 77,267
Other 32,551 26,505 90,304 97,951 125,910 147,650
--------- ---------- --------- --------- --------- ----------
165,188 141,146 514,544 420,510 708,360 599,139
Maintenance 7,767 7,494 21,096 35,547 30,012 71,820
Depreciation and amortization 12,310 12,221 36,440 48,807 48,717 70,084
Income taxes 13,967 21,044 26,047 47,165 22,462 34,558
Other taxes 6,057 6,349 17,934 28,752 27,814 39,144
--------- --------- --------- --------- --------- ---------
Total operating expenses 205,289 188,254 616,061 580,781 837,365 814,745
OPERATING INCOME 23,978 30,994 44,297 88,913 47,197 75,093
OTHER INCOME AND (DEDUCTIONS):
Miscellaneous, net 11,119 10,172 31,011 17,988 40,903 18,404
--------- --------- --------- --------- --------- ---------
Total other income and (deductions) 11,119 10,172 31,011 17,988 40,903 18,404
INCOME BEFORE
INTEREST CHARGES 35,097 41,166 75,308 106,901 88,100 93,497
INTEREST CHARGES:
Interest 9,889 9,391 29,418 28,738 41,249 39,568
Allowance for borrowed funds used
during construction (47) (53) (179) 99 (516) 163
--------- --------- --------- --------- ---------- ---------
Net interest charges 9,842 9,338 29,239 28,837 40,733 39,731
NET INCOME 25,255 31,828 46,069 78,064 47,367 53,766
PREFERRED STOCK DIVIDENDS 902 1,027 2,778 2,857 3,803 3,848
--------- --------- --------- --------- --------- ---------
NET INCOME AFTER PREFERRED
STOCK DIVIDENDS $ 24,353 $ 30,801 $ 43,291 $ 75,207 $ 43,564 $ 49,918
========= ========= ========= ========= ========= =========
Notes to Financial Statements.
11
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF CASH FLOWS
UNAUDITED
(Thousands of Dollars)
Nine Months Ended
September 30,
-------------------
2001 2000
---- ----
Cash Flows From Operating:
Net income $ 46,069 $ 78,064
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 36,440 48,807
Allowance for funds used during construction (179) 99
Deferred income taxes, net (14,532) 9,503
Deferred investment tax credits, net (795) 607
Changes in assets and liabilities:
Receivables, net 11,356 (25,423)
Materials and supplies (13,924) (7,617)
Accounts and wages payable (17,866) 84,403
Taxes accrued 22,265 (1,465)
Other, net 12,395 (47,711)
--------- ---------
Net cash provided by operating activities 81,229 139,267
Cash Flows From Investing:
Construction
expenditures (34,098) (30,602)
Allowance for funds used during construction 179 (99)
Intercompany notes receivable 39,925 --
--------- ---------
Net cash provided by (used in) investing activities 6,006 (30,701)
Cash Flows From Financing:
Dividends on common stock (14,800) (54,171)
Dividends on preferred stock (2,778) (2,857)
Redemptions -
Long-term debt (30,000) (87,000)
Intercompany notes payable (194,065) (7,180)
Issuances -
Long-term debt 150,000 51,100
--------- ---------
Net cash used in financing activities (91,643) (100,108)
--------- ---------
Net change in cash and cash equivalents (4,408) 8,458
Cash and cash equivalents at beginning of year 29,801 12,536
--------- ---------
Cash and cash equivalents at end of period $ 25,393 $ 20,994
========= =========
Cash paid during the periods:
Interest (net of amount capitalized) $ 25,372 $ 30,619
Income taxes, net $ 16,531 $ 34,509
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTION:
In the second quarter of 2000, the Registrant transferred its electric
generating assets and liabilities, at historical net book value, to a newly
created nonregulated company, AmerenEnergy Generating Company, a subsidiary of
AmerenEnergy Resources Company, in exchange for a promissory note from
Generating Company in the principal amount of $552 million and Generating
Company common stock. The transaction also resulted in a deferred intercompany
tax gain liability and related tax receivable from AmerenEnergy Generating
Company in the amount of $219 million. See Note 1 in Notes to Financial
Statements for further information.
See Notes to Financial Statements.
12
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2001
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
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 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 percent 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. The Registrant
continues to buy 20% of the excess generating output of EEI and sells this
output as interchange sales.
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 (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 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.
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 (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,
nine-month and 12-month periods ended September 30, 2001, $117 million, $318
million and $418 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.
13
Interim Financial Statements
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 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.
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.
Factors Affecting Business
Due to the effect of weather on sales and other factors which are characteristic
of public utility operations, financial results for the periods ended September
30, 2001 and 2000, are not necessarily indicative of trends for any three-month,
nine-month or 12-month period.
Reclassifications
Certain reclassifications have been made to prior years' financial statements to
conform with 2001 reporting.
Note 2 - Related Party Transactions
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 $17 million and $8 million, respectively, as of
September 30, 2001 and December 31, 2000. Intercompany payables included in
accounts and wages payable totaled approximately $79 and $75 million,
respectively, as of September 30, 2001 and December 31, 2000.
Other operating expenses consist primarily of wages, employee benefits,
professional services and expenses associated with support services provided by
Ameren Services. The support services provided by Ameren Services are based on
actual costs incurred. For each of the three months ended September 30, 2001 and
2000, other operating expenses provided by Ameren Services totaled $13 million
and $10 million, respectively. For each of the nine months ended September 30,
2001 and 2000, support services provided by Ameren Services totaled $41 million.
For each of the 12 months ended September 30, 2001 and 2000, support services
provided by Ameren Services totaled $51 million and $57 million, respectively.
In addition, the Registrant has the ability to borrow up to approximately $899
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 three months and nine months
ended September 30, 2001, the average interest rate for the regulated money pool
was 3.67 percent and 4.51 percent, respectively. For each of the quarters ended
September 30, 2001 and 2000, intercompany interest expense totaled approximately
$.2 million and $2 million, respectively. For each of the nine-month periods
ended September 30, 2001 and 2000, intercompany interest expense totaled
approximately $4 million and $6 million, respectively. Intercompany interest
expense totaled approximately $6 million and $7 million, respectively, for the
12 months ended September 30, 2001 and 2000. At September 30, 2001, the
Registrant had $29 million of intercompany borrowings outstanding and $399
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 September 30, 2001, the Registrant's deferred tax liability and
intercompany tax receivable was $199 million.
14
The Registrant's intercompany note receivable from Generating Company related to
the Transfer totaled approximately $469 million at September 30, 2001.
Intercompany interest income for the three months, nine months and 12 months
ended September 30, 2001 totaled approximately $9 million, $28 million and $38
million, respectively.
Note 3 - Midwest ISO and Alliance RTO
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. During first
quarter 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. Also in the first quarter 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 the second quarter of 2001, this settlement
agreement was approved by the FERC. Additional regulatory approvals of the SEC,
FERC and the ICC may be required in connection with various transactions
involving the Alliance RTO relating to its organization, capitalization and the
possible transfer of transmission assets. Such approvals, if required, will be
sought at the appropriate times. The Alliance RTO is expected to be operational
within 90-120 days after the FERC's approval. 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 operations or liquidity.
Note 4 - Derivative Financial Instruments
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
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 or during
the three and nine months ended September 30, 2001.
15
Note 5 - Segment Information
Segment information for the three-month, nine-month and 12-month periods ended
September 30, 2001 and 2000 is as follows:
- --------------------------------------------------------------------------------------
(in thousands) Electric Gas Other Total
- --------------------------------------------------------------------------------------
Three months ended September 30, 2001:
Revenues $ 210,353 $ 18,808 $ 106 $ 229,267
Operating Income 25,114 (1,242) 106 23,978
- --------------------------------------------------------------------------------------
Three months ended September 30, 2000:
Revenues $ 197,405 $ 21,843 -- $ 219,248
Operating Income 27,175 3,819 -- 30,994
- --------------------------------------------------------------------------------------
Nine months ended September 30, 2001:
Revenues $ 529,455 $ 130,603 $ 300 $ 660,358
Operating Income 39,048 4,949 300 44,297
- --------------------------------------------------------------------------------------
Nine months ended September 30, 2000:
Revenues $ 569,239 $ 100,455 -- $ 669,694
Operating Income 77,615 11,298 -- 88,913
- --------------------------------------------------------------------------------------
12 months ended September 30, 2001:
Revenues $ 677,343 $ 206,919 $ 300 $ 884,562
Operating Income 38,468 8,429 300 47,197
- --------------------------------------------------------------------------------------
12 months ended September 30, 2000:
Revenues $ 747,686 $ 125,352 -- $ 895,433
Operating Income 119,358 8,437 -- 127,795
- --------------------------------------------------------------------------------------
16
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
The following material organizational changes have been made to senior
management by the Board of Directors of the Registrant:
o Warner L. Baxter was elected Senior Vice President, Finance, effective
August 30, 2001.
o Jerre E. Birdsong was elected Vice President and Treasurer, effective
October 12, 2001.
o Martin J. Lyons was appointed Controller, effective October 22, 2001,
replacing Warner L. Baxter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
12 - Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements, 12 months
Ended September 30, 2001.
(b) Reports on Form 8-K. None.
Note: Reports of Ameren Corporation on Forms 8-K, 10-Q and 10-K are on
file with the SEC under File Number 1-4756.
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
Senior Vice President, Finance
(Principal Financial Officer)
Date: November 14, 2001
17
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, September 30,
------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
Thousands of Dollars Except Ratios
Net Income $ 77,393 $ 38,620 $ 80,147 $ 53,980 $ 79,362 $ 47,367
Add- Extraordinary items net of tax -- 24,853 -- -- -- --
-------- -------- -------- -------- -------- --------
Net income from continuing operations 77,393 63,473 80,147 53,980 79,362 47,367
Taxes based on income 47,286 33,922 45,412 30,763 43,661 23,752
-------- -------- -------- -------- -------- --------
Net income before income taxes 124,679 97,395 125,559 84,743 123,023 71,119
-------- -------- -------- -------- -------- --------
Add- fixed charges:
Interest on long term debt 31,409 32,271 37,260 38,223 28,935 31,056
Other interest 4,636 2,875 1,647 3,373 8,497 7,145
Amortization of net debt premium, discount,
expenses and losses 1,709 1,643 1,132 1,139 2,880 2,790
-------- -------- -------- -------- -------- --------
Total fixed charges 37,754 36,789 40,039 42,735 40,312 40,991
-------- -------- -------- -------- -------- -----
Earnings available for fixed charges 162,433 134,184 165,598 127,478 163,335 112,110
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges 4.30 3.64 4.13 2.98 4.05 2.73
======== ======== ======== ======== ======== ========
Earnings required for preferred dividends:
Preferred stock dividends 3,721 3,715 3,745 3,833 3,882 3,803
Adjustment to pre-tax basis 2,273 1,985 2,122 2,185 2,135 1,905
-------- -------- -------- -------- -------- --------
5,994 5,700 5,867 6,018 6,017 5,708
Fixed charges plus preferred stock dividend
requirements 43,748 42,489 45,906 48,753 46,329 46,699
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges plus
preferred stock dividend requirements 3.71 3.15 3.60 2.61 3.52 2.40
======== ======== ======== ======== ======== ========