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 the Quarterly Period Ended March 31, 2004
OR
( ) Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the transition period from ________to _________.
Exact Name of Registrant as specified in its charter;
Commission State of Incorporation; IRS Employer
File Number Address and Telephone Number Identification No.
----------- ---------------------------- -----------------
1-14756 Ameren Corporation 43-1723446
(Missouri Corporation)
1901 Chouteau Avenue
St. Louis, Missouri 63103
(314) 621-3222
1-2967 Union Electric Company 43-0559760
(Missouri Corporation)
1901 Chouteau Avenue
St. Louis, Missouri 63103
(314) 621-3222
1-3672 Central Illinois Public Service Company 37-0211380
(Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
(217) 523-3600
333-56594 Ameren Energy Generating Company 37-1395586
(Illinois Corporation)
1901 Chouteau Avenue
St. Louis, Missouri 63103
(314) 621-3222
2-95569 CILCORP Inc. 37-1169387
(Illinois Corporation)
300 Liberty Street
Peoria, Illinois 61602
(309) 677-5230
1-2732 Central Illinois Light Company 37-0211050
(Illinois Corporation)
300 Liberty Street
Peoria, Illinois 61602
(309) 677-5230
Indicate by check mark whether the Registrants (1) have 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) have been subject to such
filing requirements for the past 90 days.
Yes (X) No ( )
Indicate by check mark whether each Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Ameren Corporation Yes (X) No ( )
Union Electric Company Yes ( ) No (X)
Central Illinois Public Service Company Yes ( ) No (X)
Ameren Energy Generating Company Yes ( ) No (X)
CILCORP Inc. Yes ( ) No (X)
Central Illinois Light Company Yes ( ) No (X)
The number of shares outstanding of each Registrant's classes of common
stock as of April 30, 2004, was as follows:
Ameren Corporation Common stock, $.01 par value - 182,643,788
Union Electric Company Common stock, $5 par value, held by Ameren
Corporation (parent company of the Registrant)-
102,123,834
Central Illinois Public Service Company Common stock, no par value, held by Ameren
Corporation (parent company of the Registrant)-
25,452,373
Ameren Energy Generating Company Common stock, no par value, held by Ameren Energy
Development Company (parent company of the
Registrant and indirect subsidiary of
Ameren Corporation) - 2,000
CILCORP Inc. Common stock, no par value, held by Ameren
Corporation (parent company of the Registrant)- 1,000
Central Illinois Light Company Common stock, no par value, held by CILCORP Inc.
(parent company of the Registrant and subsidiary of
Ameren Corporation) - 13,563,871
This combined Form 10-Q is separately filed by Ameren Corporation, Union
Electric Company, Central Illinois Public Service Company, Ameren Energy
Generating Company, CILCORP Inc. and Central Illinois Light Company. Each
Registrant hereto is filing on its own behalf all of the information contained
in this quarterly report that relates to such Registrant. Each Registrant hereto
is not filing any information that does not relate to such Registrant, and
therefore makes no representation as to any such information.
Prior to the quarterly report on Form 10-Q for the period ended September
30, 2003, separate filings were made by each Registrant, except CILCORP Inc. and
Central Illinois Light Company, which made a combined filing. Ameren Corporation
and its subsidiaries changed to a combined filing in order to improve disclosure
and to simplify administrative processes.
OMISSION OF CERTAIN INFORMATION
Ameren Energy Generating Company and CILCORP Inc. meet the conditions set
forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore
filing this Form 10-Q with the reduced disclosure format allowed under that
General Instruction.
TABLE OF CONTENTS
Page
----
Glossary of Terms and Abbreviations.......................................................... 5
Forward-looking Statements................................................................... 7
PART I. Financial Information
ITEM 1. Financial Statements (Unaudited)
Ameren Corporation
Consolidated Statement of Income.................................................. 9
Consolidated Balance Sheet........................................................ 10
Consolidated Statement of Cash Flows.............................................. 11
Union Electric Company
Consolidated Statement of Income.................................................. 12
Consolidated Balance Sheet........................................................ 13
Consolidated Statement of Cash Flows.............................................. 14
Central Illinois Public Service Company
Statement of Income............................................................... 15
Balance Sheet..................................................................... 16
Statement of Cash Flows........................................................... 17
Ameren Energy Generating Company
Statement of Income............................................................... 18
Balance Sheet..................................................................... 19
Statement of Cash Flows........................................................... 20
CILCORP Inc.
Consolidated Statement of Income.................................................. 21
Consolidated Balance Sheet........................................................ 22
Consolidated Statement of Cash Flows.............................................. 23
Central Illinois Light Company
Consolidated Statement of Income.................................................. 24
Consolidated Balance Sheet........................................................ 25
Consolidated Statement of Cash Flows.............................................. 26
3
Combined Notes to Financial Statements............................................ 27
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................. 52
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk........................ 71
ITEM 4. Controls and Procedures........................................................... 75
PART II. Other Information
ITEM 1. Legal Proceedings................................................................. 75
ITEM 6. Exhibits and Reports on Form 8-K.................................................. 76
SIGNATURES................................................................................... 79
This Form 10-Q contains "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements should be read with the cautionary statements
and important factors included in this Form 10-Q under the heading
Forward-looking Statements. Forward-looking statements are all statements
other than statements of historical fact, including those statements that
are identified by the use of the words "anticipates," "estimates,"
"expects," "intends," "plans," "predicts," "projects" and similar
expressions.
4
GLOSSARY OF TERMS AND ABBREVIATIONS
AERG - AmerenEnergy Resources Generating Company, a subsidiary of CILCO, which
operates a non rate-regulated electric generation business in Illinois and which
was formerly known as Central Illinois Generation, Inc.
AES - The AES Corporation.
AFS - Ameren Energy Fuels and Services Company, a subsidiary of Resources
Company, which procures fuel and gas and manages the related risks for the
Ameren Companies.
Ameren - Ameren Corporation and its subsidiaries on a consolidated basis. When
referring to financing or acquisition activities, Ameren is defined as Ameren
Corporation, the parent.
Ameren Companies - The individual Registrants within the Ameren consolidated
group.
Ameren Energy - Ameren Energy, Inc., a subsidiary of Ameren Corporation, which
serves as a power marketing and risk management agent for UE and Genco for
transactions of primarily less than one year.
Ameren Services - Ameren Services Company, a subsidiary of Ameren Corporation,
which provides a variety of support services to Ameren and its subsidiaries.
CILCO - Central Illinois Light Company, a subsidiary of CILCORP, which operates
a rate-regulated transmission and distribution business, an electric generation
business, and a rate-regulated natural gas distribution business in Illinois as
AmerenCILCO. CILCO owns all of the common stock of AERG.
CILCORP - CILCORP Inc., a subsidiary of Ameren Corporation, which operates as a
holding company for CILCO.
CIPS - Central Illinois Public Service Company, a subsidiary of Ameren
Corporation, which operates a rate-regulated electric and natural gas
transmission and distribution business in Illinois as AmerenCIPS.
CT - Combustion turbine generation equipment.
Development Company - Ameren Energy Development Company, a subsidiary of
Resources Company and parent of Genco, which develops and constructs generating
facilities for Genco.
DOE - Department of Energy, a governmental agency of the United States of
America.
DOJ - Department of Justice, a governmental agency of the United States of
America.
DRPlus - Ameren Corporation's dividend reinvestment and stock purchase plan.
Dynegy - Dynegy Inc., the indirect parent company of Illinois Power.
EEI - Electric Energy, Inc., a 60%-owned subsidiary of Ameren Corporation, which
is 40% owned by UE and 20% owned by Resources Company, which operates electric
generation and transmission facilities in Illinois.
EPA - Environmental Protection Agency, a governmental agency of the United
States of America.
ERISA - Employee Retirement Income Security Act of 1974, as amended.
Exchange Act - Securities Exchange Act of 1934, as amended.
FASB - Financial Accounting Standards Board, a rulemaking organization that
establishes financial accounting and reporting standards in the United States of
America.
FCC - Federal Communications Commission, a governmental agency of the United
States of America.
5
FERC - Federal Energy Regulatory Commission, a governmental agency of the United
States of America that, among other things, regulates interstate transmission
and wholesale sales of electricity and gas and related matters.
FIN - FASB Interpretation intended to clarify accounting pronouncements
previously issued by the FASB.
Fitch - Fitch Ratings, a leading global rating agency.
FTC - Federal Trade Commission, a governmental agency of the United States of
America.
GAAP - Generally accepted accounting principles in the United States of America.
Genco - Ameren Energy Generating Company, a subsidiary of Development Company,
which operates a non rate-regulated electric generation business in Illinois and
Missouri.
GridAmerica Companies - UE, CIPS, American Transmission Systems, Inc., a
subsidiary of FirstEnergy Corp., and Northern Indiana Public Service Company, a
subsidiary of NiSource, Incorporated.
Hart-Scott-Rodino Act - Hart-Scott-Rodino Antitrust Improvements Act of 1976,
which establishes procedures for companies involved in transactions that meet
certain criteria to file a premerger notification with the FTC and the DOJ
Antitrust Division and to wait prescribed time periods for government review
prior to completing their transaction.
Heating Degree Days - The summation of negative differences between the mean
daily temperature and the 65o Fahrenheit base. This statistic is useful as an
indicator of demand for electricity and natural gas for winter space heating for
residential and commercial customers.
IBEW - International Brotherhood of Electrical Workers.
ICC - Illinois Commerce Commission, a state agency that regulates the Illinois
utility businesses and operations of UE, CIPS and CILCO.
Illinois Customer Choice Law - Illinois Electric Service Customer Choice and
Rate Relief Law of 1997, which provides for electric utility restructuring and
introduces competition into the retail supply of electric energy in Illinois.
Illinois Power - Illinois Power Company, a wholly owned subsidiary of Illinova
Corporation, which is a subsidiary of Dynegy.
ITC - Independent Transmission Company.
IUOE - International Union of Operating Engineers.
Marketing Company - Ameren Energy Marketing Company, a subsidiary of Resources
Company, which markets power for periods primarily over one year.
Medina Valley - AmerenEnergy Medina Valley Cogen (No. 4), LLC and its
subsidiaries, which are subsidiaries of Resources Company, which indirectly own
a 40 megawatt, gas-fired electric generation plant.
Midwest ISO - Midwest Independent Transmission System Operator Inc.
Missouri Environmental Authority - State Environmental Improvement and Energy
Resources Authority of the State of Missouri, a governmental instrumentality
that is authorized to finance environmental projects through the issuance of tax
exempt bonds and notes.
Money Pool - Borrowing arrangements with and among the Ameren Companies to
coordinate and provide for certain short-term cash and working capital
requirements. Separate money pools are maintained between rate-regulated and non
rate-regulated businesses.
6
Moody's - Moody's Investors Service, Inc., a leading global rating agency.
MoPSC - Missouri Public Service Commission, a state agency that regulates the
Missouri utility business and operations of UE.
NRC - Nuclear Regulatory Commission, a governmental agency of the United States
of America.
NOx - Nitrogen oxide.
NYMEX - New York Mercantile Exchange.
OATT - Open Access Transmission Tariff.
OCI - Other Comprehensive Income (Loss) as defined by GAAP.
PUHCA - Public Utility Holding Company Act of 1935, as amended.
Resources Company - Ameren Energy Resources Company, a subsidiary of Ameren
Corporation, which consists of non rate-regulated operations, including
Development Company, Genco, Marketing Company, AFS and Medina Valley.
RTO - Regional Transmission Organization.
S&P - Standard and Poor's Inc., a leading global rating agency.
SEC - Securities and Exchange Commission, a governmental agency of the United
States of America.
SFAS - Statement of Financial Accounting Standards, the accounting and financial
reporting rules issued by the FASB.
SO2 - Sulfur dioxide.
UE - Union Electric Company, a subsidiary of Ameren Corporation, which operates
a rate-regulated electric generation, transmission and distribution business,
and a rate-regulated natural gas distribution business in Missouri and Illinois
as AmerenUE.
- --------------------------------------------------------------------------------
When we refer to "our", "we" or "us", it indicates that the referred
information relates to all Ameren Companies. When we refer to financing or
acquisition activities, we are defining Ameren as the parent holding company.
When appropriate, subsidiaries of Ameren are specifically referenced in order to
distinguish among their different business activities.
FORWARD-LOOKING STATEMENTS
Statements made in this report 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, we are providing this
cautionary statement to identify important factors that could cause actual
results to differ materially from those
7
anticipated. The following factors, in addition to those discussed elsewhere in
this report and in filings with the SEC, could cause actual results to differ
materially from management expectations as suggested by such "forward-looking"
statements:
o the closing and timing of Ameren's acquisition of Illinois Power and the
impact of any conditions imposed by regulators in connection with their
approval thereof;
o the effects of the stipulation and agreement relating to the UE Missouri
electric excess earnings complaint case and other regulatory actions,
including changes in regulatory policy;
o changes in laws and other governmental actions, including monetary and
fiscal policies;
o the impact on us of current regulations related to the opportunity for
customers to choose alternative energy suppliers in Illinois;
o the effects of increased competition in the future due to, among other
things, deregulation of certain aspects of our business at both the state
and federal levels;
o the effects of participation in the Midwest ISO;
o the availability of fuel for the production of electricity, such as coal
and natural gas, and purchased power and natural gas for distribution, and
the level and volatility of future market prices for such commodities,
including the ability to recover any increased costs;
o the use of financial and derivative instruments;
o average rates for electricity in the Midwest;
o business and economic conditions;
o the impact of the adoption of new accounting standards and the application
of appropriate technical accounting rules and guidance;
o interest rates and the availability of capital;
o actions of ratings agencies and the effects of such actions;
o weather conditions;
o generation plant construction, installation and performance;
o operation of nuclear power facilities and decommissioning costs;
o the effects of strategic initiatives, including acquisitions and
divestitures;
o the impact of current environmental regulations on utilities and generating
companies and the expectation that more stringent requirements will be
introduced over time, which could potentially have a negative financial
effect;
o future wages and employee benefits costs, including changes in returns on
benefit plan assets;
o disruptions of the capital markets or other events making the Ameren
Companies' access to necessary capital more difficult or costly;
o competition from other generating facilities, including new facilities that
may be developed;
o difficulties in integrating CILCO and Illinois Power (if consummated) with
Ameren's other businesses;
o changes adversely impacting synergy assumptions in connection with the
CILCORP and Illinois Power (if consummated) acquisitions;
o cost and availability of transmission capacity for the energy generated by
the Ameren Companies' generating facilities or required to satisfy energy
sales made by the Ameren Companies; and
o legal and administrative proceedings.
Given these uncertainties, undue reliance should not be placed on these
forward-looking statements. Except to the extent required by the federal
securities laws, we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
8
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMEREN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) (In millions, except per share amounts)
Three Months Ended
March 31,
----------------------
2004 2003
---------- ----------
Operating Revenues:
Electric $ 913 $ 856
Gas 301 250
Other 2 2
---------- ----------
Total operating revenues 1,216 1,108
---------- ----------
Operating Expenses:
Fuel and purchased power 271 232
Gas purchased for resale 213 181
Other operations and maintenance 306 292
Depreciation and amortization 130 124
Taxes other than income taxes 80 78
---------- ----------
Total operating expenses 1,000 907
---------- ----------
Operating Income 216 201
Other Income and (Deductions):
Miscellaneous income 8 6
Miscellaneous expense (1) (3)
---------- ----------
Total other income and (deductions) 7 3
---------- ----------
Interest Charges and Preferred Dividends:
Interest 64 66
Preferred dividends of subsidiaries 3 3
---------- ----------
Net interest charges and preferred dividends 67 69
---------- ----------
Income Before Income Taxes and Cumulative Effect of Change
in Accounting Principle 156 135
Income Taxes 59 52
---------- ----------
Income Before Cumulative Effect of Change in Accounting
Principle 97 83
Cumulative Effect of Change in Accounting Principle,
Net of Income Taxes of $- and $12 - 18
---------- ----------
Net Income $ 97 $ 101
========== ==========
Earnings per Common Share - Basic and Diluted:
Income before cumulative effect of change
in accounting principle $ 0.55 $ 0.52
Cumulative effect of change in accounting
principle, net of income taxes - 0.11
---------- ----------
Earnings per Common Share - Basic and Diluted $ 0.55 $ 0.63
========== ==========
Dividends per Common Share $ 0.635 $ 0.635
Average Common Shares Outstanding 174.3 158.9
The accompanying notes are an integral part of these consolidated financial
statements.
9
AMEREN CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited) (In millions, except per share amounts)
March 31, December 31,
2004 2003
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 633 $ 111
Accounts receivables - trade (less allowance for doubtful
accounts of $12 and $13, respectively) 326 326
Unbilled revenue 199 221
Miscellaneous accounts and notes receivable 63 126
Materials and supplies, at average cost 412 487
Other current assets 54 46
------------ ------------
Total current assets 1,687 1,317
------------ ------------
Property and Plant, Net 10,963 10,920
Investments and Other Non-Current Assets:
Investments in leveraged leases 161 164
Nuclear decommissioning trust fund 218 212
Goodwill and other intangibles, net 565 574
Other assets 344 320
------------ ------------
Total investments and other non-current assets 1,288 1,270
------------ ------------
Regulatory Assets 701 729
------------ ------------
TOTAL ASSETS $ 14,639 $ 14,236
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 331 $ 498
Short-term debt 2 161
Accounts and wages payable 249 480
Taxes accrued 182 103
Other current liabilities 252 215
------------ ------------
Total current liabilities 1,016 1,457
------------ ------------
Long-term Debt, Net 4,068 4,070
Preferred Stock of Subsidiary Subject to Mandatory Redemption 21 21
Deferred Credits and Other Non-Current Liabilities:
Accumulated deferred income taxes, net 1,800 1,853
Accumulated deferred investment tax credits 148 151
Regulatory liabilities 832 824
Asset retirement obligations 419 413
Accrued pension and other postretirement benefits 741 699
Other deferred credits and liabilities 186 190
------------ ------------
Total deferred credits and other non-current liabilities 4,126 4,130
------------ ------------
Preferred Stock of Subsidiaries Not Subject to Mandatory Redemption 182 182
Minority Interest in Consolidated Subsidiaries 23 22
Commitments and Contingencies (Note 9)
Stockholders' Equity:
Common stock, $.01 par value, 400.0 shares authorized -
shares outstanding of 182.5 and 162.9, respectively 2 2
Other paid-in capital, principally premium on common stock 3,425 2,552
Retained earnings 1,834 1,853
Accumulated other comprehensive income (loss) (44) (44)
Other (14) (9)
------------ ------------
Total stockholders' equity 5,203 4,354
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,639 $ 14,236
============ ============
The acccompanying notes are an integral part of these consolidated financial
statements.
10
AMEREN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (In millions)
Three Months Ended
March 31,
------------------------
2004 2003
----------- ----------
Cash Flows From Operating Activities:
Net income $ 97 $ 101
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting principle - (18)
Depreciation and amortization 130 124
Amortization of nuclear fuel 8 7
Amortization of debt issuance costs and premium/discounts 3 2
Deferred income taxes, net (24) 3
Deferred investment tax credits, net (3) (3)
Coal contract settlement 9 -
Changes in assets and liabilities, excluding the effects of the acquisitions:
Receivables, net 37 13
Materials and supplies 75 44
Accounts and wages payable (195) (186)
Taxes accrued 79 68
Assets, other (15) 5
Liabilities, other 55 73
Other (12) (7)
----------- -----------
Net cash provided by operating activities 244 226
----------- -----------
Cash Flows From Investing Activities:
Construction expenditures (165) (144)
Acquisitions, net of cash acquired - (488)
Nuclear fuel expenditures (3) -
Other 7 3
----------- -----------
Net cash used in investing activities (161) (629)
----------- -----------
Cash Flows From Financing Activities:
Dividends on common stock (116) (102)
Capital issuance costs (22) (10)
Redemptions, repurchases and maturities:
Nuclear fuel lease (67) (2)
Short-term debt (159) (255)
Long-term debt (100) (31)
Issuances:
Common stock 903 285
Long-term debt - 184
----------- -----------
Net cash provided by financing activities 439 69
----------- -----------
Net change in cash and cash equivalents 522 (334)
Cash and cash equivalents at beginning of year 111 628
----------- -----------
Cash and cash equivalents at end of period $ 633 $ 294
=========== ===========
Cash Paid During the Periods:
Interest $ 45 $ 45
Income taxes, net 34 11
The accompanying notes are an integral part of these consolidated financial
statements.
11
UNION ELECTRIC COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) (In millions)
Three Months Ended
March 31,
-----------------------------
2004 2003
----------- ------------
Operating Revenues:
Electric $ 548 $ 555
Gas 72 65
------------ ------------
Total operating revenues 620 620
------------ ------------
Operating Expenses:
Fuel and purchased power 143 140
Gas purchased for resale 44 39
Other operations and maintenance 193 187
Depreciation and amortization 72 70
Taxes other than income taxes 55 53
------------ ------------
Total operating expenses 507 489
------------ ------------
Operating Income 113 131
Other Income and (Deductions):
Miscellaneous income 5 1
Miscellaneous expense (1) (1)
------------ ------------
Total other income and (deductions) 4 -
------------ ------------
Interest Charges 25 25
------------ ------------
Income Before Income Taxes 92 106
Income Taxes 34 38
------------ ------------
Net Income 58 68
Preferred Stock Dividends 1 1
------------ ------------
Net Income Available to Common Stockholder $ 57 $ 67
============ ============
The accompanying notes as they relate to UE are an integral part of these
consolidated financial statements.
12
UNION ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEET
(Unaudited) (In millions, except per share amounts)
March 31, December 31,
2004 2003
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 7 $ 15
Accounts receivable - trade (less allowance for doubtful
accounts of $5 and $6, respectively) 166 172
Unbilled revenue 101 111
Miscellaneous accounts and notes receivable 61 117
Materials and supplies, at average cost 161 175
Other current assets 21 26
------------- -------------
Total current assets 517 616
------------- -------------
Property and Plant, Net 6,819 6,758
Investments and Other Non-Current Assets:
Nuclear decommissioning trust fund 218 212
Other assets 257 246
------------- -------------
Total investments and other non-current assets 475 458
------------- -------------
Regulatory Assets 656 685
------------- -------------
TOTAL ASSETS $ 8,467 $ 8,517
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt $ 277 $ 344
Short-term debt - 150
Borrowings from money pool 292 -
Accounts and wages payable 158 314
Taxes accrued 129 66
Other current liabilities 102 102
------------- -------------
Total current liabilities 958 976
------------- -------------
Long-term Debt, Net 1,758 1,758
Deferred Credits and Other Non-Current Liabilities:
Accumulated deferred income taxes, net 1,245 1,289
Accumulated deferred investment tax credits 113 114
Regulatory liabilities 657 652
Asset retirement obligations 414 408
Accrued pension and other postretirement benefits 340 317
Other deferred credits and liabilities 79 80
------------- -------------
Total deferred credits and other non-current liabilities 2,848 2,860
------------- -------------
Commitments and Contingencies (Note 9)
Stockholder's Equity:
Common stock, $5 par value, 150.0 shares authorized - 102.1 shares outstanding 511 511
Preferred stock not subject to mandatory redemption 113 113
Other paid-in capital, principally premium on common stock 702 702
Retained earnings 1,608 1,630
Accumulated other comprehensive income (loss) (31) (33)
------------- -------------
Total stockholder's equity 2,903 2,923
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 8,467 $ 8,517
============= =============
The accompanying notes as they relate to UE are an integral part of these
consolidated financial statements.
13
UNION ELECTRIC COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (In millions)
Three Months Ended
March 31,
-----------------------------
2004 2003
------------- -------------
Cash Flows From Operating Activities:
Net income $ 58 $ 68
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 72 70
Amortization of nuclear fuel 8 7
Amortization of debt issuance costs and premium/discounts 1 1
Deferred income taxes, net (22) (5)
Deferred investment tax credits, net (1) (1)
Coal contract settlement 9 -
Changes in assets and liabilities:
Receivables, net 24 7
Materials and supplies 14 15
Accounts and wages payable (142) (193)
Taxes accrued 63 60
Assets, other 15 (10)
Liabilities, other 4 26
Other 2 (1)
------------- -------------
Net cash provided by operating activities 105 44
------------- -------------
Cash Flows From Investing Activities:
Construction expenditures (105) (101)
Nuclear fuel expenditures (3) -
Other - 1
------------- -------------
Net cash used in investing activities (108) (100)
------------- -------------
Cash Flows From Financing Activities:
Dividends on common stock (79) (82)
Dividends on preferred stock (1) (1)
Capital issuance costs - (1)
Redemptions, repurchases, and maturities:
Nuclear fuel lease (67) (2)
Short-term debt (150) (250)
Issuances:
Long-term debt - 184
Borrowings from money pool 292 317
------------- -------------
Net cash provided by (used in) financing activities (5) 165
------------- -------------
Net change in cash and cash equivalents (8) 109
Cash and cash equivalents at beginning of year 15 9
------------- -------------
Cash and cash equivalents at end of period $ 7 $ 118
============= =============
Cash Paid During the Periods:
Interest $ 27 $ 23
Income taxes, net 17 7
The accompanying notes as they relate to UE are an integral part of these
consolidated financial statements.
14
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF INCOME
(Unaudited) (In millions)
Three Months Ended
March 31,
-----------------------------
2004 2003
-------------- ------------
Operating Revenues:
Electric $ 127 $ 132
Gas 85 77
-------------- ------------
Total operating revenues 212 209
-------------- ------------
Operating Expenses:
Purchased power 80 86
Gas purchased for resale 56 53
Other operations and maintenance 37 42
Depreciation and amortization 13 13
Taxes other than income taxes 9 9
-------------- ------------
Total operating expenses 195 203
-------------- ------------
Operating Income 17 6
Other Income and (Deductions):
Miscellaneous income 7 7
Miscellaneous expense - (1)
-------------- ------------
Total other income and (deductions) 7 6
-------------- ------------
8 9
-------------- ------------
Income Before Income Taxes 16 3
Income Taxes 6 1
-------------- ------------
Net Income 10 2
Preferred Stock Dividends 1 1
-------------- ------------
Net Income Available to Common Stockholder $ 9 $ 1
============== ============
The accompanying notes as they relate to CIPS are an integral part of these
financial statements.
15
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEET
(Unaudited)(In millions)
March 31, December 31,
2004 2003
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 14 $ 16
Accounts receivable - trade (less allowance for doubtful
accounts of $2 and $1, respectively) 59 48
Unbilled revenue 54 64
Miscellaneous accounts and notes receivable 14 22
Current portion of intercompany note receivable - Genco 49 49
Current portion of intercompany tax receivable - Genco 12 12
Materials and supplies, at average cost 25 51
Other current assets 13 6
------------- -------------
Total current assets 240 268
------------- -------------
Property and Plant, Net 952 955
Investments and Other Non-Current Assets:
Intercompany note receivable - Genco 324 324
Intercompany tax receivable - Genco 147 150
Other assets 20 17
------------- -------------
Total investments and other non-current assets 491 491
------------- -------------
Regulatory Assets 29 28
------------- -------------
TOTAL ASSETS $ 1,712 $ 1,742
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts and wages payable $ 62 $ 71
Borrowings from money pool 97 121
Taxes accrued 30 19
Other current liabilities 30 27
------------- -------------
Total current liabilities 219 238
------------- -------------
Long-term Debt, Net 485 485
Deferred Credits and Other Non-Current Liabilities:
Accumulated deferred income taxes, net 261 269
Accumulated deferred investment tax credits 11 11
Regulatory liabilities 146 145
Other deferred credits and liabilities 66 62
------------- -------------
Total deferred credits and other non-current liabilities 484 487
------------- -------------
Commitments and Contingencies (Note 9)
Stockholder's Equity:
Common stock, no par value, 45.0 shares authorized - 25.5 shares outstanding 120 120
Preferred stock not subject to mandatory redemption 50 50
Retained earnings 359 369
Accumulated other comprehensive income (loss) (5) (7)
------------- -------------
Total stockholder's equity 524 532
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,712 $ 1,742
============= =============
The accompanying notes as they relate to CIPS are an integral part of these
financial statements.
16
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF CASH FLOWS
(Unaudited) (In millions)
Three Months Ended
March 31,
---------------------
2004 2003
-------- -------
Cash Flows From Operating Activities:
Net income $ 10 $ 2
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13 13
Deferred income taxes, net (9) (5)
Deferred investment tax credits, net - (1)
Changes in assets and liabilities:
Receivables, net 7 1
Materials and supplies 26 22
Accounts and wages payable (9) (10)
Taxes accrued 11 6
Assets, other (7) 4
Liabilities, other 7 9
Other 2 -
------- --------
Net cash provided by operating activities 51 41
------- --------
Cash Flows From Investing Activities:
Construction expenditures (9) (10)
Advances to money pool - (7)
------- --------
Net cash used in investing activities (9) (17)
------- --------
Cash Flows From Financing Activities:
Dividends on common stock (19) (19)
Dividends on preferred stock (1) (1)
Redemptions, repurchases, and maturities:
Long-term debt - (5)
Repayments to money pool (24) -
------- --------
Net cash used in financing activities (44) (25)
------- --------
Net change in cash and cash equivalents (2) (1)
Cash and cash equivalents at beginning of year 16 17
------- --------
Cash and cash equivalents at end of period $ 14 $ 16
======= ========
Cash Paid During the Periods:
Interest $ 3 $ 5
Income taxes, net 6 -
The accompanying notes as they relate to CIPS are an integral part of these
financial statements.
17
AMEREN ENERGY GENERATING COMPANY
STATEMENT OF INCOME
(Unaudited) (In millions)
Three Months Ended
March 31,
--------------------------
2004 2003
---------- -----------
Operating Revenues:
Electric $ 216 $ 206
---------- -----------
Total operating revenues 216 206
---------- -----------
Operating Expenses:
Fuel and purchased power 92 88
Other operations and maintenance 30 35
Depreciation and amortization 19 18
Taxes other than income taxes 5 7
---------- -----------
Total operating expenses 146 148
---------- -----------
Operating Income 70 58
Other Income and (Deductions):
Miscellaneous income - 2
Miscellaneous expense (1) -
---------- -----------
Total other income and (deductions) (1) 2
---------- -----------
Interest Charges 23 26
---------- -----------
Income Before Income Taxes and Cumulative Effect of Change
in Accounting Principle 46 34
Income Taxes 17 13
---------- -----------
Income Before Cumulative Effect of Change in Accounting
Principle 29 21
Cumulative Effect of Change in Accounting Principle,
Net of Income Taxes - 18
---------- -----------
Net Income $ 29 $ 39
========== ===========
The accompanying notes as they relate to Genco are an integral part of these
financial statements.
18
AMEREN ENERGY GENERATING COMPANY
BALANCE SHEET
(Unaudited) (In millions, except shares)
March 31, December 31,
2004 2003
----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 2 $ 2
Accounts receivable 93 88
Materials and supplies, at average cost 88 90
Other current assets 2 4
---------- -----------
Total current assets 185 184
Property and Plant, Net 1,762 1,774
Other Non-Current Assets 17 19
---------- -----------
TOTAL ASSETS $ 1,964 $ 1,977
========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts and wages payable $ 52 $ 75
Borrowings from money pool 91 124
Current portion of intercompany notes payable - CIPS and Ameren 53 53
Current portion of intercompany tax payable - CIPS 12 12
Taxes accrued 46 30
Other current liabilities 35 23
---------- -----------
Total current liabilities 289 317
---------- -----------
Long-term Debt, Net 698 698
Intercompany Notes Payable - CIPS and Ameren 358 358
Deferred Credits and Other Non-Current Liabilities:
Accumulated deferred income taxes, net 106 99
Accumulated deferred investment tax credits 13 13
Intercompany tax payable - CIPS 147 150
Accrued pension and other postretirement benefits 21 19
Other deferred credits and liabilities 1 2
---------- -----------
Total deferred credits and other non-current liabilities 288 283
---------- -----------
Commitments and Contingencies (Note 9)
Stockholder's Equity:
Common stock, no par value, 10,000 shares authorized - 2,000 shares outstanding - -
Other paid-in capital 150 150
Retained earnings 181 170
Accumulated other comprehensive income (loss) - 1
---------- -----------
Total stockholder's equity 331 321
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,964 $ 1,977
========== ===========
The accompanying notes as they relate to Genco are an integral part of these
financial statements.
19
AMEREN ENERGY GENERATING COMPANY
STATEMENT OF CASH FLOWS
(Unaudited) (In millions)
Three Months Ended
March 31,
--------------------------
2004 2003
---------- ----------
Cash Flows From Operating Activities:
Net income $ 29 $ 39
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting principle - (18)
Depreciation and amortization 19 18
Deferred income taxes, net 9 20
Changes in assets and liabilities:
Accounts receivable (5) (18)
Materials and supplies 2 1
Taxes accrued 16 (2)
Accounts and wages payable (14) (22)
Assets, other 4 (1)
Liabilities, other 8 15
Other (1) -
----------- ----------
Net cash provided by operating activities 67 32
----------- ----------
Cash Flows From Investing Activities:
Construction expenditures (16) (10)
----------- ----------
Net cash used in investing activities (16) (10)
----------- ----------
Cash Flows From Financing Activities:
Dividends on common stock (18) (1)
Redemptions, repurchases, and maturities:
Repayments to money pool (33) (21)
----------- ----------
Net cash used in financing activities (51) (22)
----------- ----------
Net change in cash and cash equivalents - -
Cash and cash equivalents at beginning of year 2 3
----------- ----------
Cash and cash equivalents at end of period $ 2 $ 3
=========== ==========
Cash Paid During the Periods:
Interest $ 10 $ 11
Income taxes (refunded) paid (3) -
The accompanying notes as they relate to Genco are an integral part of these
financial statements.
20
CILCORP INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) (In millions)
---------------Successor--------- ---Predecessor---
Three Two
Months Months
Ended Ended
March 31, March 31, January
--------------- --------------- --------------
2004 2003 2003
--------------- --------------- --------------
Operating Revenues:
Electric $ 98 $ 80 $ 47
Gas 141 103 58
Other 1 1 -
--------------- --------------- --------------
Total operating revenues 240 184 105
--------------- --------------- --------------
Operating Expenses:
Fuel and purchased power 45 42 24
Gas purchased for resale 107 83 44
Other operations and maintenance 43 22 14
Depreciation and amortization 16 14 6
Taxes other than income taxes 9 8 4
--------------- --------------- --------------
Total operating expenses 220 169 92
--------------- --------------- --------------
Operating Income 20 15 13
Other Income and (Deductions):
Miscellaneous expense (1) - -
--------------- --------------- --------------
Total other income and (deductions) (1) - -
--------------- --------------- --------------
Interest Charges 12 9 5
Income Before Income Taxes and Cumulative Effect of
Change in Accounting Principle 7 6 8
Income Taxes 3 3 3
--------------- --------------- --------------
Income Before Cumulative Effect of Change in
Accounting Principle 4 3 5
Cumulative Effect of Change in Accounting Principle,
Net of Income Taxes of $-, $- and $2 - - 4
--------------- --------------- --------------
Net Income $ 4 $ 3 $ 9
=============== =============== ==============
The accompanying notes as they relate to CILCORP are an integral part of these
consolidated financial statements.
21
CILCORP INC.
CONSOLIDATED BALANCE SHEET
(Unaudited) (In millions)
---------Successor------------
March 31, December 31,
2004 2003
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 12 $ 11
Accounts receivables - trade (less allowance for doubtful
accounts of $6 and $6, respectively) 52 59
Unbilled revenue 32 40
Miscellaneous accounts and notes receivable 12 16
Materials and supplies, at average cost 121 154
Other current assets 3 5
------------ ------------
Total current assets 232 285
------------ ------------
Property and Plant, Net 1,136 1,127
Investments and Other Non-Current Assets:
Investments in leveraged leases 128 130
Goodwill and other intangibles, net 558 567
Other assets 20 11
------------ ------------
Total investments and other non-current assets 706 708
------------ ------------
Regulatory Assets 15 16
------------ ------------
TOTAL ASSETS $ 2,089 $ 2,136
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt $ - $ 100
Borrowings from money pool 192 145
Intercompany note payable - Ameren 38 46
Accounts and wages payable 102 108
Other current liabilities 48 38
------------ ------------
Total current liabilities 380 437
------------ ------------
Long-term Debt, Net 667 669
Preferred Stock of Subsidiary Subject to Mandatory Redemption 21 21
Deferred Credits and Other Non-Current Liabilities:
Accumulated deferred income taxes, net 175 181
Accumulated deferred investment tax credits 11 11
Regulatory liabilities 29 24
Accrued pension and other postretirement benefits 265 259
Other deferred credits and liabilities 37 37
------------ ------------
Total deferred credits and other non-current liabilities 517 512
------------ ------------
Preferred Stock of Subsidiary Not Subject to Mandatory Redemption 19 19
Commitments and Contingencies (Note 9)
Stockholder's Equity:
Common stock, no par value, 10,000 shares authorized - 1,000 shares outstanding - -
Other paid-in capital 490 490
Retained earnings (9) (13)
Accumulated other comprehensive income (loss) 4 1
------------ ------------
Total stockholder's equity 485 478
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 2,089 $ 2,136
============ ============
The accompanying notes as they relate to CILCORP are an integral part of these
consolidated financial statements.
22
CILCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (In millions)
--------Successor-------- --Predecessor--
Three Two
Months Months
Ended Ended
March 31, March 31, January
----------- ----------- -------------
2004 2003 2003
----------- ----------- -------------
Cash Flows From Operating Activities:
Net income $ 4 $ 3 $ 9
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting principle - - (4)
Depreciation and amortization 16 14 6
Deferred income taxes, net 2 (2) (5)
Changes in assets and liabilities:
Receivables, net 19 (7) (20)
Materials and supplies 33 - 13
Accounts and wages payable 7 1 20
Taxes accrued 1 4 11
Assets, other (4) 18 6
Liabilities, other 14 19 (5)
Other 3 (11) -
----------- ----------- -------------
Net cash provided by operating activities 95 39 31
----------- ----------- -------------
Cash Flows From Investing Activities:
Construction expenditures (35) (17) (16)
Other 2 - 1
----------- ----------- -------------
Net cash used in investing activities (33) (17) (15)
----------- ----------- -------------
Cash Flows From Financing Activities:
Redemptions, repurchases, and maturities:
Short-term debt - - (10)
Long-term debt (100) (26) -
Intercompany note payable - Ameren (8) - -
Issuances:
Borrowings from money pool 47 - -
----------- ----------- -------------
Net cash used in financing activities (61) (26) (10)
----------- ----------- -------------
Net change in cash and cash equivalents 1 (4) 6
Cash and cash equivalents at beginning of year 11 38 32
----------- ----------- -------------
Cash and cash equivalents at end of period $ 12 $ 34 $ 38
=========== =========== =============
Cash Paid During the Periods:
Interest $ 4 $ 4 $ 5
Income taxes, net 3 - -
The accompanying notes as they relate to CILCORP are an integral part of these
consolidated financial statements.
23
CENTRAL ILLINOIS LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) (In millions)
Three Months Ended
March 31,
----------------------------
2004 2003
------------- -------------
Operating Revenues:
Electric $ 98 $ 127
Gas 127 119
------------- -------------
Total operating revenues 225 246
------------- -------------
Operating Expenses:
Fuel and purchased power 45 67
Gas purchased for resale 94 84
Other operations and maintenance 47 41
Depreciation and amortization 16 18
Taxes other than income taxes 8 12
------------- -------------
Total operating expenses 210 222
------------- -------------
Operating Income 15 24
Other Income and (Deductions):
Miscellaneous expense (1) -
------------- -------------
Total other income and (deductions) (1) -
------------- -------------
Interest Charges 3 5
------------- -------------
Income Before Income Taxes and Cumulative Effect of Change
in Accounting Principle 11 19
Income Taxes 5 8
------------- -------------
Income Before Cumulative Effect of Change in Accounting
Principle 6 11
Cumulative Effect of Change in Accounting Principle,
Net of Income Taxes of $- and $16 - 24
------------- -------------
Net Income 6 35
Preferred Stock Dividends - -
------------- -------------
Net Income Available to Common Stockholder $ 6 $ 35
============= =============
The accompanying notes as they relate to CILCO are an integral part of these
consolidated financial statements.
24
CENTRAL ILLINOIS LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(Unaudited) (In millions)
March 31, December 31,
2004 2003
------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3 $ 8
Accounts receivable - trade (less allowance for doubtful
accounts of $6 and $6, respectively) 52 57
Unbilled revenue 28 35
Miscellaneous accounts and notes receivable 12 14
Materials and supplies, at average cost 40 69
Other current assets 3 5
------------- --------------
Total current assets 138 188
------------- --------------
Property and Plant, Net 1,115 1,101
Other Non-Current Assets 27 19
Regulatory Assets 15 16
------------- --------------
TOTAL ASSETS $ 1,295 $ 1,324
============= ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt $ - $ 100
Borrowings from money pool 200 149
Accounts and wages payable 105 101
Taxes accrued 13 13
Other current liabilities 33 30
------------- --------------
Total current liabilities 351 393
------------- --------------
Long-term Debt, Net 138 138
Preferred Stock Subject to Mandatory Redemption 21 21
Deferred Credits and Other Non-Current Liabilities:
Accumulated deferred income taxes, net 94 101
Accumulated deferred investment tax credits 11 11
Regulatory liabilities 169 167
Accrued pension and other postretirement benefits 138 128
Other deferred credits and liabilities 22 23
------------- --------------
Total deferred credits and other non-current liabilities 434 430
------------- --------------
Commitments and Contingencies (Note 9)
Stockholder's Equity:
Common stock, no par value, 20.0 shares authorized - 13.6 shares outstanding 186 186
Preferred stock not subject to mandatory redemption 19 19
Other paid-in capital 52 52
Retained earnings 101 95
Accumulated other comprehensive income (loss) (7) (10)
------------- --------------
Total stockholder's equity 351 342
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,295 $ 1,324
============= ==============
The accompanying notes as they relate to CILCO are an integral part of these
consolidated financial statements.
25
CENTRAL ILLINOIS LIGHT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (In millions)
Three Months Ended
March 31,
---------------------------
2004 2003
------------- -------------
Cash Flows From Operating Activities:
Net income $ 6 $ 35
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting principle - (24)
Depreciation and amortization 16 18
Deferred income taxes, net 2 (3)
Changes in assets and liabilities:
Receivables, net 14 (22)
Materials and supplies 29 16
Accounts and wages payable 11 20
Taxes accrued - 13
Assets, other (5) 12
Liabilities, other 3 11
Other 3 (1)
------------- ------------
Net cash provided by operating activities 79 75
------------- ------------
Cash Flows From Investing Activities:
Construction expenditures (35) (33)
------------- ------------
Net cash used in investing activities (35) (33)
------------- ------------
Cash Flows From Financing Activities:
Redemptions, repurchases, and maturities:
Short-term debt - (10)
Long-term debt (100) (26)
Issuances:
Borrowings from money pool 51 -
------------- ------------
Net cash used in financing activities (49) (36)
------------- ------------
Net change in cash and cash equivalents (5) 6
Cash and cash equivalents at beginning of year 8 22
------------- ------------
Cash and cash equivalents at end of period $ 3 $ 28
============= ============
Cash Paid During the Periods:
Interest $ 4 $ 9
Income taxes, net 3 -
The accompanying notes as they relate to CILCO are an integral part of these
consolidated financial statements.
26
AMEREN CORPORATION (CONSOLIDATED)
UNION ELECTRIC COMPANY (CONSOLIDATED)
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
AMEREN ENERGY GENERATING COMPANY
CILCORP INC. (CONSOLIDATED)
CENTRAL ILLINOIS LIGHT COMPANY (CONSOLIDATED)
COMBINED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Ameren, headquartered in St. Louis, Missouri, is a public utility holding
company registered with the SEC under the PUHCA. Ameren's primary asset is the
common stock of its subsidiaries. Ameren's subsidiaries operate rate-regulated
electric generation, transmission and distribution businesses, rate-regulated
natural gas distribution businesses and non rate-regulated electric generation
businesses in Missouri and Illinois. Dividends on Ameren's common stock are
dependent on distributions made to it by its subsidiaries. Ameren's principal
operating subsidiaries are listed below. Also see Glossary of Terms and
Abbreviations.
o UE, also known as Union Electric Company, operates a rate-regulated
electric generation, transmission and distribution business, and a
rate-regulated natural gas distribution business in Missouri and Illinois.
UE was incorporated in Missouri in 1922 and is successor to a number of
companies, the oldest of which was organized in 1881. It is the largest
electric utility in the State of Missouri and supplies electric and gas
service to a 24,500 square mile area located in central and eastern
Missouri and west central Illinois. This area has an estimated population
of 3 million and includes the greater St. Louis area. UE supplies electric
service to approximately 1.2 million customers and natural gas service to
approximately 130,000 customers. See Note 3 - Rate and Regulatory Matters
for information regarding the proposed transfer in 2004 of UE's Illinois
electric and natural gas transmission and distribution businesses to CIPS.
o CIPS, also known as Central Illinois Public Service Company, operates a
rate-regulated electric and natural gas transmission and distribution
business in Illinois. CIPS was incorporated in Illinois in 1902. It
supplies electric and gas utility service to portions of central and
southern Illinois having an estimated population of 1 million in an area of
approximately 20,000 square miles. CIPS supplies electric service to
approximately 325,000 customers and natural gas service to approximately
170,000 customers.
o Genco, also known as Ameren Energy Generating Company, operates a non
rate-regulated electric generation business. Genco was incorporated in
Illinois in March 2000, in conjunction with the Illinois Customer Choice
Law. Genco commenced operations on May 1, 2000, when CIPS transferred its
five coal-fired power plants and related liabilities to Genco at historical
net book value. Genco is a subsidiary of Development Company, a subsidiary
of Resources Company, which is a subsidiary of Ameren. See Note 3 - Rate
and Regulatory Matters for information regarding the proposed transfer in
2004 of Genco's CTs located in Pinckneyville and Kinmundy, Illinois to UE.
o CILCO, also known as Central Illinois Light Company, is a subsidiary of
CILCORP (a holding company) and operates a rate-regulated electric
transmission and distribution business, a primarily non rate-regulated
electric generation business and a rate-regulated natural gas distribution
business in Illinois. CILCO was incorporated in Illinois in 1913. It
supplies electric and gas utility service to portions of central and east
central Illinois in areas of approximately 3,700 and 4,500 square miles,
respectively, with an estimated population of 1 million. CILCO supplies
electric service to approximately 205,000 customers and natural gas service
to approximately 210,000 customers. In October 2003, CILCO transferred its
coal-fired plants and a CT facility, representing in the aggregate
approximately 1,100 megawatts of electric generating capacity, to a wholly
owned subsidiary, known as AERG, as a contribution in return for all the
outstanding stock of AERG and AERG's assumption of certain liabilities. The
net book value of the transferred assets was approximately $378 million and
no gain or loss was recognized as the transaction was accounted for as a
transfer between entities under common control. The transfer was made in
conjunction with the Illinois Customer Choice Law. CILCORP was incorporated
in Illinois in 1985.
27
Ameren has various other subsidiaries responsible for the short and
long-term marketing of power, procurement of fuel, management of commodity risks
and providing other shared services. Ameren also has a 60% ownership interest in
EEI through UE, which owns 40%, and Resources Company, which owns 20%. Ameren
consolidates EEI for financial reporting purposes, while UE and Resources
Company report EEI under the equity method.
When we refer to "our", "we" or "us", it indicates that the referenced
information relates to Ameren and its subsidiaries. When we refer to financing
or acquisition activities, we are defining Ameren as the parent holding company.
When appropriate, the Ameren Companies are specifically referenced in order to
distinguish among their different business activities.
The financial statements of Ameren are prepared on a consolidated basis and
therefore include the accounts of its majority-owned subsidiaries. Results of
CILCORP and CILCO reflected in Ameren's consolidated financial statements
include the period from the acquisition date of January 31, 2003. January 2003
data for CILCORP and CILCO are not included in Ameren's consolidated totals. See
Note 2 - Acquisitions for further information. All significant intercompany
transactions have been eliminated. All tabular dollar amounts are in millions,
unless otherwise indicated.
Our accounting policies conform to GAAP. Our financial statements reflect
all adjustments (which include normal, recurring adjustments) necessary, in our
opinion, for a fair presentation of our results. The preparation of financial
statements in conformity with GAAP requires management to make certain estimates
and assumptions. Such estimates and assumptions affect reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the dates of financial statements and the reported amounts of revenues and
expenses during the reported periods. Actual results could differ from those
estimates. The results of operations of an interim period may not give a true
indication of results for a full year. Certain reclassifications have been made
to prior year's financial statements to conform to 2004 reporting. These
statements should be read in conjunction with the financial statements and the
notes thereto included in the Ameren Companies' 2003 Annual Reports on Form
10-K.
Earnings Per Share
There were no differences between the basic and diluted earnings per share
amounts for the three month periods ended March 31, 2004 and 2003. Assumed stock
option conversions increased the number of shares outstanding in the diluted
earnings per share calculation by 300,333 shares for the three months ended
March 31, 2004 (2003 - 239,883 shares). Ameren' equity security units have no
dilutive effect on earnings per share, except during periods when the average
market price of Ameren's common stock is above $46.61. As only the Ameren parent
company has publicly held common stock, earnings per share calculations are not
relevant and are not presented for any of the subsidiary companies.
Accounting Changes and Other Matters
SFAS No.143 - "Accounting for Asset Retirement Obligations"
We adopted the provisions of SFAS No. 143, effective January 1, 2003. SFAS
No. 143 provides the accounting requirements for asset retirement obligations
associated with tangible, long-lived assets. Upon adoption of the standard,
Ameren and Genco recognized a net after-tax gain of $18 million in the first
quarter of 2003 for the cumulative effect of change in accounting principle.
Prior to Ameren's acquisition of CILCORP, predecessor CILCORP and CILCO
recognized a net after-tax gain upon adoption of SFAS No. 143 in 2003 of $4
million and $24 million, respectively, for the cumulative effect of change in
accounting principle. In addition, in accordance with SFAS No. 143, estimated
future removal costs associated with Ameren's, UE's, CIPS', CILCORP's and
CILCO's rate-regulated operations that had previously been embedded in
accumulated depreciation were classified to a regulatory liability.
Asset retirement obligations at Ameren and UE increased by $6 million
during the quarter ended March 31, 2004, to reflect the accretion of obligations
to their present value. Increases to Genco's, CILCORP's and CILCO's asset
retirement obligations were immaterial during these periods. Substantially all
of this accretion was recorded as an increase to regulatory assets.
28
FIN No. 46 - "Consolidation of Variable Interest Entities"
In January 2003, the FASB issued FIN No. 46, which changed the
consolidation requirements for special purpose entities (SPEs) and non-special
purpose entities (non-SPEs) that meet the criteria for designation as variable
interest entities (VIEs). In December 2003, the FASB revised FIN No. 46 (FIN No.
46R) to clarify certain aspects of FIN No. 46 and modify the effective dates of
the new guidance. FIN No. 46R provides guidance on the accounting for entities
that are controlled through means other than voting rights by another entity.
FIN No. 46R requires a VIE to be consolidated by a company if that company is
designated as the primary beneficiary.
Ameren does not have any interests in entities that are considered SPEs.
FIN No. 46R was effective on March 31, 2004 for any interests Ameren holds in
non-SPEs. The adoption of FIN No. 46R did not have a material impact on the
consolidated financial statements of the Ameren Companies. However, in
connection with the adoption of FIN No. 46R, we have determined that the
following significant variable interests are held by the Ameren Companies:
o EEI. Ameren has a 60% ownership interest in EEI through UE's 40% interest
and Resources Company's 20% interest. Under the FIN No. 46R model, Ameren,
UE and Resources Company have a variable interest in EEI, and Ameren is the
primary beneficiary. Accordingly, Ameren will continue to consolidate EEI,
and UE will continue to account for its investment in EEI under the equity
method of accounting. The maximum exposure to loss as a result of these
variable interests in EEI is limited to UE's and Resource Company's equity
investments in EEI and Ameren's 60% guarantee of a $40 million bank term
loan issued by EEI and due in 2004.
o Tolling agreement. CILCO has a significant variable interest in Medina
Valley through a tolling agreement to purchase steam, chilled water and
electricity. We have concluded that CILCO is not the primary beneficiary of
Medina Valley, and accordingly, CILCO does not consolidate Medina Valley.
The maximum exposure to loss as a result of this variable interest in the
tolling agreement is not material.
o Leveraged lease and affordable housing partnership investments. Ameren, UE,
and CILCORP have investments in leveraged lease and affordable housing
partnership arrangements that are variable interests. We have concluded
that Ameren, UE or CILCORP are not the primary beneficiary of any of the
VIEs related to these investments. The maximum exposure to loss as a result
of these variable interests is limited to the investments in these
arrangements. At March 31, 2004, Ameren and CILCORP had net investments in
leveraged leases of $161 million and $128 million, respectively. At March
31, 2004, Ameren, UE and CILCORP had investments in affordable housing
partnerships of $16 million, $8 million and $7 million, respectively.
FASB Staff Position SFAS No. 106-1 and Proposed FASB Staff Position SFAS No.
106-B - "Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003"
Through its postretirement benefit plans, Ameren provides retirees with
prescription drug coverage. On December 8, 2003, the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the Prescription Drug Act) was
enacted. The Prescription Drug Act introduced a prescription drug benefit under
Medicare as well as a federal subsidy to sponsors of retiree healthcare benefit
plans that provide a benefit that is at least actuarially equivalent to the
Medicare prescription drug benefit. In response to the enactment of the
Prescription Drug Act, the FASB issued FASB Staff Position SFAS No. 106-1 in
January 2004, which permitted a plan sponsor of a postretirement healthcare plan
that provides a prescription drug benefit to make a one-time election to defer
the accounting for the effects of the Prescription Drug Act. Ameren made this
one-time election allowed by FASB Staff Position SFAS No. 106-1. Thus, any
measures of the accumulated projected benefit obligation (APBO) or net periodic
postretirement benefit costs in Ameren's financial statements do not reflect the
effects of the Prescription Drug Act on Ameren's postretirement plans.
During the first quarter of 2004, FASB Staff Position SFAS No. 106-B was
issued for comment to supersede FASB Staff Position SFAS No. 106-1. FASB Staff
Position SFAS No. 106-B will be effective for periods beginning after June 15,
2004. FASB Staff Position SFAS No. 106-B provides specific guidance on the
accounting for the federal subsidy. Under this proposed Staff Position, if a
postretirement drug benefit was actuarially equivalent to the Medicare
prescription drug benefit on the date the Prescription Drug Act was enacted, the
employer should recognize the subsidy in the measurement of the APBO under SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." If the employer cannot conclude that the drug benefit was actuarially
equivalent, the Staff Position prescribes other effects the Prescription Drug
Act can have on the measurement of the APBO. Ameren is evaluating whether it
will
29
be eligible for a federal subsidy under the Prescription Drug Act, the impact,
if any, on its postretirement benefit plans and the resulting financial
statement impact, which we do not expect to be material.
Interchange Revenues
The following table presents the interchange revenues included in Operating
Revenues - Electric for the three months ended March 31, 2004 and 2003. See Note
8 - Related Party Transactions for further information on affiliates.
-----------------------------------------------------------------------------
Three Months
-----------------------------------------------------------------------------
2004 2003
---- ----
Ameren(a)....................................... $ 91 $ 114
UE.............................................. 84 102
CIPS............................................ 10 8
Genco........................................... 39 46
CILCORP(b)...................................... 1 5
CILCO........................................... 1 5
----------------------------------------------------------------------------
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date
of January 31, 2003; includes amounts for non-registrant Ameren
subsidiaries as well as intercompany eliminations.
(b) 2003 amounts include January 2003 predecessor information, which was
$3 million. CILCORP consolidates CILCO and therefore includes CILCO
amounts in its balances.
Purchased Power
The following table presents the purchased power expenses included in
Operating Expenses - Fuel and Purchased Power for the three months ended March
31, 2004 and 2003. See Note 8 - Related Party Transactions for further
information on affiliate purchased power transactions.
----------------------------------------------------------------------------
Three Months
----------------------------------------------------------------------------
2004 2003
---- ----
Ameren(a)....................................... $ 72 $ 52
UE.............................................. 50 46
CIPS............................................ 80 86
Genco........................................... 38 41
CILCORP(b)...................................... 22 40
CILCO........................................... 22 46
----------------------------------------------------------------------------
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date
of January 31, 2003; includes amounts for non-registrant Ameren
subsidiaries as well as intercompany eliminations.
(b) 2003 amounts include January 2003 predecessor information, which was
$12 million. CILCORP consolidates CILCO and therefore includes CILCO
amounts in its balances.
Excise Taxes
Excise taxes reflected on Missouri electric and gas, and Illinois gas,
customer bills are imposed on us and are recorded gross in Operating Revenues
and Other Taxes. Excise taxes reflected on Illinois electric customer bills are
imposed on the consumer and are recorded as tax collections payable and included
in Taxes Accrued. The following table presents excise taxes recorded in
Operating Revenues and Taxes Other than Income Taxes for the three months ended
March 31, 2004 and 2003:
----------------------------------------------------------------------------
Three Months
----------------------------------------------------------------------------
2004 2003
---- ----
Ameren(a).......................................... $ 34 $ 31
UE................................................. 24 23
CIPS............................................... 5 5
Genco.............................................. - -
CILCORP(b)......................................... 5 6
CILCO.............................................. 5 6
-----------------------------------------------------------------------------
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date
of January 31, 2003.
(b) 2003 amounts include January 2003 predecessor information which was $2
million. CILCORP consolidates CILCO and therefore includes CILCO
amounts in its balances.
30
NOTE 2 - ACQUISITIONS
CILCORP and Medina Valley
On January 31, 2003, Ameren completed the acquisition of all of the
outstanding common stock of CILCORP from AES. CILCORP is the parent company of
Peoria, Illinois-based CILCO. With the acquisition, CILCO became an indirect
Ameren subsidiary, but remains a separate utility company, operating as
AmerenCILCO. On February 4, 2003, Ameren also completed the acquisition from AES
of Medina Valley, which indirectly owns a 40 megawatt, gas-fired electric
generation plant. The results of operations for CILCORP and Medina Valley were
included in Ameren's consolidated financial statements effective with the
respective January and February 2003 acquisition dates. See Note 1 - Summary of
Significant Accounting Policies for further information on the presentation of
the results of CILCORP and CILCO in Ameren's consolidated financial statements.
Ameren acquired CILCORP to complement its existing Illinois gas and
electric operations. The purchase included CILCO's rate-regulated electric and
natural gas businesses in Illinois serving approximately 205,000 and 210,000
customers, respectively, of which approximately 150,000 are combination electric
and gas customers. CILCO's service territory is contiguous to CIPS' service
territory. CILCO also has a non rate-regulated electric and gas marketing
business principally focused in the Chicago, Illinois region. Finally, the
purchase included approximately 1,200 megawatts of largely coal-fired generating
capacity, most of which became non rate-regulated on October 3, 2003, due to
CILCO's transfer on that date of 1,100 megawatts of generating capacity to AERG.
The total acquisition cost was approximately $1.4 billion and included the
assumption by Ameren of CILCORP and Medina Valley debt and preferred stock at
closing of $895 million and consideration of $479 million in cash, net of $38
million cash acquired. The cash component of the purchase price came from
Ameren's issuance in September 2002 of 8.05 million common shares and its
issuance in early 2003 of an additional 6.325 million common shares, which
together generated aggregate net proceeds of $575 million.
The purchase price allocation for the acquisition of CILCORP and Medina
Valley was finalized in January 2004. As a result, goodwill decreased by $8
million since December 31, 2003, primarily due to January 2004 adjustments to
property and plant, income tax accounts and accrued severance expenses. The
following table presents the final estimated fair values of the assets acquired
and liabilities assumed at the dates of our acquisitions of CILCORP and Medina
Valley.
----------------------------------------------------------------------------
Current assets.............................................. $ 323
Property and plant.......................................... 1,162
Investments and other non-current assets.................... 154
Specifically-identifiable intangible assets................. 6
Goodwill.................................................... 560
----------------------------------------------------------------------------
Total assets acquired.................................... 2,205
----------------------------------------------------------------------------
Current liabilities......................................... 189
Long-term debt, including current maturities................ 937
Other non-current liabilities............................... 521
----------------------------------------------------------------------------
Total liabilities assumed................................ 1,647
----------------------------------------------------------------------------
Preferred stock assumed..................................... 41
----------------------------------------------------------------------------
Net assets acquired...................................... $ 517
----------------------------------------------------------------------------
Specifically-identifiable intangible assets of $6 million are comprised of
retail customer contracts, which are subject to amortization with an average
life of 10 years.
Goodwill of $560 million (CILCORP - $553 million; Medina Valley - $7
million) was recognized in connection with the CILCORP and Medina Valley
acquisitions. None of this goodwill is expected to be deductible for tax
purposes.
Illinois Power
On February 2, 2004, Ameren entered into an agreement with Dynegy to
purchase the stock of Decatur, Illinois-based Illinois Power and Dynegy's 20%
ownership interest in EEI. Illinois Power operates a rate-regulated electric and
natural gas transmission and distribution business serving approximately 600,000
electric and 415,000 gas customers in
31
areas contiguous to our existing Illinois utility service territories. The total
transaction value is approximately $2.3 billion, including the assumption of
approximately $1.8 billion of Illinois Power debt and preferred stock, with the
balance of the purchase price to be paid in cash at closing. Ameren will place
$100 million of the cash portion of the purchase price in a six-year escrow
pending resolution of certain contingent environmental obligations of Illinois
Power and other Dynegy affiliates for which Ameren has been provided
indemnification by Dynegy.
Ameren's financing plan for this transaction includes the issuance of new
Ameren common stock, which in total, is expected to equal at least 50% of the
transaction value. In February 2004, Ameren issued 19.1 million common shares
that generated net proceeds of $853 million. Proceeds from this sale and future
offerings are expected to be used to finance the cash portion of the purchase
price, to reduce Illinois Power debt assumed as part of this transaction, to pay
any related premiums and possibly to reduce present or future indebtedness
and/or repurchase securities of Ameren or our subsidiaries.
Upon completion of the acquisition, expected by the end of 2004, Illinois
Power will become an Ameren subsidiary operating as AmerenIP. The transaction is
subject to the approval of the ICC, the SEC, the FERC, the FCC, the expiration
of the waiting period under the Hart-Scott-Rodino Act and other customary
closing conditions. In March 2004, all necessary regulatory filings were made
for approval of the transaction. See Note 3 - Rate and Regulatory Matters for
further information on these regulatory proceedings. In addition, this
transaction includes a firm capacity power supply contract for Illinois Power's
annual purchase of 2,800 megawatts of electricity from a subsidiary of Dynegy.
This contract will extend through 2006 and is expected to supply about 75% of
Illinois Power's customer requirements.
According to Illinois Power's Annual Report on Form 10-K for the year ended
December 31, 2003, Illinois Power had revenues of $1.6 billion, operating income
of $166 million, and net income applicable to its common shareholder of $115
million, and at December 31, 2003, had total assets of $2.8 billion, excluding
an intercompany note receivable from its parent company of approximately $2.3
billion. Illinois Power files quarterly, annual and current reports with the SEC
pursuant to the Exchange Act.
NOTE 3 - RATE AND REGULATORY MATTERS
Illinois Power Acquisition
On March 24, 2004, Ameren and Illinois Power filed an application with the
ICC for approval of Ameren's acquisition of Illinois Power as discussed above in
Note 2 - Acquisitions. The application seeks expedited approval of the
acquisition by September 15, 2004. A procedural schedule has been adopted in
this proceeding which can permit an order to be issued by the ICC by September
15, 2004. On March 25, 2004, Ameren and Illinois Power filed an application with
the FERC for approval of Ameren's acquisition of Illinois Power and Dynegy's
interest in EEI. The application seeks approval of the acquisition by July 28,
2004. On March 29, 2004, Ameren and Dynegy filed an application with the FCC for
approval of the transfer of control of FCC licenses held by Illinois Power to
Ameren. On April 14, 2004, the FCC consented to the transfer of control. On
March 30, 2004, pursuant to the requirements of the Hart-Scott-Rodino Act,
Ameren and Dynegy filed notices with respect to the acquisition of Illinois
Power with the FTC and the Antitrust Division of the DOJ. On April 30, 2004, the
initial 30 calendar day waiting period expired without a request by the FTC or
DOJ for additional information or documents. As a result, Ameren and Dynegy are
allowed to conclude the acquisition as soon as all other conditions are
satisfied. On March 31, 2004, Ameren and Illinois Power filed an application
with the SEC under the PUHCA for approval of Ameren' acquisition of Illinois
Power.
We are unable to predict the ultimate outcome of these regulatory
proceedings or the timing of the final decisions of the various agencies.
Intercompany Transfer of Electric Generating Facilities and Illinois Service
Territory
As a part of the settlement of the Missouri electric rate case in 2002, UE
committed to making certain infrastructure investments from January 1, 2002
through June 30, 2006 of $2.25 billion to $2.75 billion, including the addition
of 700 megawatts of generation capacity. The new capacity requirement is
expected to be satisfied by the additions in 2002 of 240 megawatts and the
proposed transfer from Genco to UE, at net book value (approximately $250
million), of
32
approximately 550 megawatts of CTs at Pinckneyville and Kinmundy, Illinois. The
transfer is subject to receipt of FERC and SEC approval. Approval of the ICC is
not required contingent upon prior approval and execution of UE's transfer of
its Illinois public utility operations to CIPS as discussed below. Approval by
the MoPSC is not required in order for this transfer to occur. However, the
MoPSC has jurisdiction over UE's ability to recover the cost of the transferred
generating facilities from its electric customers in its rates. As part of the
settlement of the Missouri electric rate case in 2002, UE is subject to a rate
moratorium providing for no changes in its electric rates before June 30, 2006,
subject to certain statutory and other exceptions.
In February 2003, UE sought approval from the FERC to transfer the
Pinckneyville and Kinmundy CTs from Genco to UE. Certain independent power
producers objected to UE's request based on a claim that the transfer may harm
competition for the sale of electricity at wholesale and the FERC set the matter
for hearing. In February 2004, the Administrative Law Judge hearing the case
issued a preliminary order supporting the transfer. However, the FERC must
approve the order for it to become effective. The MoPSC has supported the CT
transfer.
In May 2003, UE announced its plan to limit its public utility operations
to the state of Missouri and to discontinue operating as a public utility
subject to ICC regulation. UE intends to accomplish this plan by transferring
its Illinois-based electric and natural gas businesses, including its
Illinois-based distribution assets and certain of its transmission assets, to
CIPS. In 2003, UE's Illinois electric and gas service territory generated
revenues of $155 million and had a net book value of $122 million at December
31, 2003. UE's electric generating facilities and a certain minor amount of its
electric transmission facilities in Illinois would not be part of the transfer.
The transfer was approved by the FERC in December 2003. The transfer of UE's
Illinois-based utility businesses will also require the approval of the ICC, the
MoPSC and the SEC under the provisions of the PUHCA. In August 2003, UE filed
with the MoPSC, and in October and November 2003, filed with the ICC and the SEC
for authority to transfer UE's Illinois-based utility businesses, at net book
value, to CIPS. The filing with the ICC seeks approval to transfer only UE's
Illinois-based natural gas utility business since the ICC authorized the
transfer of UE's Illinois-based electric utility business to CIPS in 2000. UE
proposes to transfer approximately one-half of the assets directly to CIPS in
consideration for a CIPS subordinated promissory note, and approximately
one-half of the assets by means of a dividend in kind to Ameren followed by a
capital contribution by Ameren to CIPS.
A filing seeking approval of both the transfer of UE's Illinois-based
utility businesses and Genco's CTs was made with the SEC in October 2003. If
completed, the transfers will be accounted for at book value with no gain or
loss recognition, which is appropriate treatment for transactions of this type
by two entities under common control. In January 2004, the MoPSC staff and the
Missouri Office of Public Counsel filed rebuttal testimony with the MoPSC
expressing concerns that the transfers of UE's Illinois-based utility businesses
may be detrimental to the public in Missouri and recommended that the transfers
be denied. Hearings occurred in late March and early April, 2004. Post-hearing
briefs will be filed by May 25, 2004, after which time the MoPSC will deliberate
on this matter and issue an order in due course. See Note 8 - Related Party
Transactions for a discussion of an amendment to the joint dispatch agreement
among UE, Genco and CIPS, which was proposed to address concerns raised before
the MoPSC in this proceeding.
We are unable to predict the ultimate outcome of these regulatory
proceedings or the timing of the final decisions of the various agencies.
Federal - Electric Transmission
Regional Transmission Organization
In December 1999, the FERC issued Order 2000 requiring all utilities
subject to FERC jurisdiction to state their intentions for joining a RTO. The
MoPSC issued an order in early 2004 authorizing UE to participate in the Midwest
ISO for a five year period, with participation after that period subject to
further approvals by the MoPSC. Subsequently, the FERC issued a final order
allowing UE's and CIPS' participation in the Midwest ISO. Under these orders,
the MoPSC continues to set the transmission component of UE's rates to serve its
bundled retail load. CILCO is already a member of the Midwest ISO and previously
transferred functional control of its transmission system to the Midwest ISO.
Genco does not own transmission assets, but pays the Midwest ISO to use the
transmission system to transmit power from the Genco generating plants.
33
On May 1, 2004, functional control of the UE and CIPS transmission systems
was transferred to the Midwest ISO through GridAmerica LLC, or Grid America. The
participation by UE and CIPS in the Midwest ISO is expected to increase annual
costs by $5 million to $10 million in the aggregate and could result in a
decrease in annual revenues of anywhere between zero and $10 million in the
aggregate. UE and CIPS may also be required to expand their transmission systems
according to decisions made by the Midwest ISO rather than their internal
planning process.
As a part of the transfer of functional control of UE's and CIPS'
transmission systems to the Midwest ISO, Ameren received $26 million, which
represented the refund of the $13 million exit fee paid by UE and the $5 million
exit fee paid by CIPS when they left the Midwest ISO in 2001 and the
reimbursement of funds that were invested in the proposed Alliance RTO. These
refunds will result in after-tax gains of approximately $11 million, $8 million
and $3 million for Ameren, UE and CIPS, respectively.
Through orders issued during late 2003 and early 2004, the FERC had ordered
the elimination of regional-through-and-out rates assessed by the Midwest ISO
that involves transmission service from the Midwest ISO regions into the PJM
region, to be effective May 1, 2004. However, on March 19, 2004, the FERC
accepted an agreement among affected transmission owners that retains the
regional through-and-out rates until December 1, 2004, and provides for
continued negotiations aimed at developing a long-term transmission pricing
structure to eliminate seams between the PJM and Midwest ISO regions based on
specified pricing principles. Until the long-term transmission pricing structure
has been established, UE and CIPS cannot predict the ultimate impact that such
structure will have on their costs and revenues.
On March 31, 2004, the Midwest ISO tendered for filing at the FERC a
proposed Open Access Transmission and Energy Markets Tariff (the "Energy Markets
Tariff"), which is intended to supercede its existing Open Access Transmission
Tariff. The Energy Markets Tariff establishes rates, terms and conditions
necessary for implementation of a centralized security-constrained economic
dispatch platform supported by a day-ahead and real-time energy market design,
including Locational Marginal-Cost Pricing and Financial Transmission Rights for
transmission service within the Midwest ISO region. The Energy Markets Tariff
also establishes market monitoring and mitigation procedures and codifies
existing resource adequacy requirements placed on Midwest ISO members by their
states or applicable regional reliability organization. The Midwest ISO has
proposed to make the Energy Markets Tariff effective on December 1, 2004,
subject to its ability to implement the Energy Markets Tariff. The Energy
Markets Tariff has not yet been accepted for filing by the FERC. Ameren is
unable to determine the full impact that the Energy Markets Tariff will have
until further information is available regarding the implementation of the
Energy Markets Tariff.
Until UE and CIPS achieve some degree of operational experience
participating in the Midwest ISO through GridAmerica, we are unable to predict
the ultimate impact that such participation or ongoing RTO developments at the
FERC or other regulatory authorities will have on our financial position,
results of operations or liquidity.
New Market Power Analysis Screen Order
In an order issued April 14, 2004, the FERC replaced the Supply Margin
Assessment Screen previously used to review applications by sellers of
electricity at wholesale for authorization to sell power at market-based rates
with two alternative measures of market power: (a) an uncommitted pivotal
supplier analysis, and (b) an uncommitted market share analysis which is to be
prepared on a seasonal basis. If an applicant passes both screens, a rebuttable
presumption will exist that it lacks generation market power. If the applicant
fails either screen, a rebuttable presumption will exist that it has market
power. Under such circumstances, the applicant may either seek to rebut the
presumption by preparing a delivered price test (identifying the amount of
economic capacity from neighboring areas that can be delivered to the control
area) or propose mitigation measures. Unless some other mitigation measure is
adopted, the applicant's authority to sell power at market-based rates in areas
in which it has market power will be revoked, and the applicant will be required
to sell at cost-based rates in those areas.
UE, CIPS, Genco, CILCO, AERG, Development Company, Marketing Company,
Medina Valley and EEI currently have authorization from the FERC to continue to
sell power at market-based rates. However, the FERC indicated in its April 14
order that it would apply the new market analysis screens to pending and future
market-based rate applications, including three-year market-based rate reviews.
All of the aforementioned Ameren entities currently have three-year market-based
rate reviews pending at the FERC. Until Ameren has evaluated the impact of the
FERC's order with respect to the Ameren system, we are unable to predict the
ultimate impact that the new market power analysis screens will have on Ameren's
ability to sell power at market-based rates.
34
NOTE 4 - SHORT-TERM BORROWINGS AND LIQUIDITY
Short-term borrowings consist of commercial paper and bank loans
(maturities generally within 1 to 45 days). As of March 31, 2004, short-term
borrowings at Ameren and UE totaled $2 million. UE had no short-term borrowings
outstanding at March 31, 2004, compared to $150 million at December 31, 2003.
CIPS, Genco, CILCORP and CILCO had no short-term borrowings as of March 31, 2004
and December 31, 2003. The average short-term borrowings at UE were $74 million
for the quarter ended March 31, 2004, with a weighted-average interest rate of
1.05%. Peak short-term borrowings for UE were $224 million for the quarter ended
March 31, 2004, with a weighted-average interest rate of 1.06%.
At March 31, 2004, certain of the Ameren Companies had committed bank
credit facilities totaling $829 million, all of which were available for use by
UE, CIPS, CILCO and Ameren Services through a utility money pool arrangement. In
addition, $600 million of the $829 million may be used by Ameren directly and
most of the non rate-regulated affiliates including, but not limited to,
Resources Company, Genco, Marketing Company, AFS, AERG and Ameren Energy through
a non state-regulated subsidiary money pool agreement. We have money pool
agreements with and among our subsidiaries to coordinate and provide for certain
short-term cash and working capital requirements. Separate money pools are
maintained between rate-regulated and non rate-regulated businesses. See Note 8
- - Related Party Transactions for a detailed explanation of the money pool
arrangements. The committed bank credit facilities are used to support our
commercial paper programs under which no amounts were outstanding at March 31,
2004 (December 31, 2003 - $150 million). Access to our credit facilities for any
of our subsidiaries is subject to reduction based on use by affiliates.
EEI also has two bank credit agreements totaling $45 million with
maturities through June 2004, all of which was available at March 31, 2004.
Ameren guarantees $24 million of these facilities. The facilities, which expire
in 2004, will be replaced or renewed by the Ameren Companies and EEI as they
mature on terms consistent with current market conditions for borrowings based
on the credit worthiness of the Ameren Companies and EEI.
Borrowings under Ameren's non state-regulated subsidiary money pool by
Genco, Development Company and Medina Valley, each an "exempt wholesale
generator," are considered investments for purposes of the 50% SEC aggregate
investment limitation. Based on Ameren's aggregate investment in these "exempt
wholesale generators" as of March 31, 2004, the maximum permissible borrowings
under Ameren's non state-regulated subsidiary money pool pursuant to this
limitation for these entities was $665 million.
Indebtedness Provisions and Other Covenants
Certain of the Ameren Companies' bank credit agreements contain provisions
which, among other things, place restrictions on the ability to incur liens,
sell assets and merge with other entities. Certain of these credit agreements
also contain a provision that limits Ameren's, UE's, CIPS' and/or CILCO's total
indebtedness to 60% of total capitalization pursuant to a calculation defined in
the related agreement. As of March 31, 2004, the ratio of total indebtedness to
total capitalization (calculated in accordance with this provision) for Ameren,
UE, CIPS and CILCO was 46%, 45%, 53% and 49%, respectively. In addition, certain
of these credit agreements contain indebtedness cross-default provisions and
material adverse change clauses, which could trigger a default under these
facilities in the event that any of Ameren's subsidiaries (subject to the
definition in the underlying credit agreements), other than certain project
finance subsidiaries, defaults in indebtedness in excess of $50 million. The
credit agreements also require us to meet minimum ERISA funding rules.
None of the Ameren Companies' credit agreements or financing agreements
contain credit rating triggers. A $100 million CILCO bank term loan containing a
credit ratings trigger was repaid in February 2004.
At March 31, 2004, Ameren and its subsidiaries were in compliance with
their credit agreement provisions and covenants.
35
NOTE 5 - LONG-TERM DEBT AND EQUITY FINANCINGS
Ameren
In February 2004, Ameren issued, pursuant to an August 2002 Form S-3 shelf
registration statement, 19.1 million shares of its common stock at $45.90 per
share for net proceeds of $853 million. This issuance substantially depleted all
of the capacity under the August 2002 shelf registration statement. The proceeds
from this offering are expected to provide funds required to pay the cash
portion of the purchase price for our acquisition of Illinois Power and Dynegy's
20% interest in EEI and to reduce Illinois Power debt assumed as part of this
transaction and pay related premiums. Pending such use, and/or if the
acquisition is not completed, we plan to use the net proceeds to reduce present
or future indebtedness and/or repurchase securities of Ameren or its
subsidiaries. A portion of the net proceeds may also be temporarily invested in
short-term instruments. See Note 2 - Acquisitions for further information. In
the first quarter of 2004, Ameren also issued 0.5 million new common shares
valued at $28 million under its DRPlus and its 401(k) plans for general
corporate purposes.
In March 2004, the SEC declared effective a Form S-3 registration statement
filed by Ameren in February 2004, authorizing the offering of six million
additional shares of its common stock under the DRPlus. Shares of common stock
sold under the DRPlus are, at Ameren's option, newly issued shares or treasury
shares, or shares purchased in the open market or in privately negotiated
transactions. Ameren is currently selling newly issued shares of its common
stock under the DRPlus.
On April 7, 2004, a new Form S-3 shelf registration statement was filed by
Ameren with the SEC. This registration statement, upon being declared effective
by the SEC, will authorize the offering from time to time of up to $2 billion of
various forms of securities including long-term debt, trust preferred securities
and equity securities to finance ongoing construction and maintenance programs,
to redeem, repurchase, repay, or retire outstanding debt, to finance strategic
investments, including our pending acquisition of Illinois Power and a 20%
interest in EEI, and for other general corporate purposes.
UE
In February and March 2004, in connection with the delivery of bond
insurance policies to secure the environmental improvement and pollution control
revenue bonds (Series 1991, 1992, 1998A, 1998B, 1998C, 2000A, 2000B and 2000C)
previously issued by the Missouri Environmental Authority, UE delivered separate
series of its first mortgage bonds (which are subject to fallaway provisions, as
defined in the indenture agreements, similar to those included in its first
mortgage bonds which secure UE's senior secured notes) to secure its respective
obligations under the existing loan agreements with the Missouri Environmental
Authority relating to such environmental improvement and pollution control
revenue bonds. As a result, the environmental improvement and pollution control
revenue bonds were classified as Aaa, AAA and AAA by Moody's, S&P's and Fitch's,
respectively.
UE had a lease agreement, which was scheduled to expire on August 31, 2031,
that provided for the financing of a portion of its nuclear fuel that was
processed for use or was consumed at UE's Callaway Nuclear Plant. In February
2004, UE terminated this lease with a final payment of $67 million.
CILCORP and CILCO
In February 2004, CILCO repaid its secured bank term loan totaling $100
million with available cash and borrowings from the utility money pool.
The amortization related to the fair value adjustments was approximately $2
million for the three months ended March 31, 2004, and was recorded in interest
expense in the Statement of Income for Ameren and CILCORP.
36
Amortization of Interest-related Costs
The following table presents the amortization of debt issuance costs and
any premium or discounts included in interest expense for the Ameren Companies
for the three months ended March 31, 2004 and 2003, respectively:
----------------------------------------------------------------------------
Three Months
----------------------------------------------------------------------------
2004 2003
---- ----
Ameren(a)(c)........................................ $ 5 $ 2
UE.................................................. 1 1
CIPS................................................ - -
Genco............................................... - -
CILCORP(b)(c) ...................................... 2 -
CILCO............................................... - -
----------------------------------------------------------------------------
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date
of January 31, 2003; includes amounts for non-registrant Ameren
subsidiaries as well as intercompany eliminations.
(b) January 2003 predecessor amounts were zero. CILCORP consolidates CILCO
and therefore includes CILCO amounts in its balances.
(c) In conjunction with the acquisition of CILCORP in 2003, CILCORP's
long-term debt was adjusted to fair value.
Indenture Provisions and Other Covenants
UE
UE's indenture agreements and Articles of Incorporation include covenants
and provisions which must be complied with in order to issue first mortgage
bonds and preferred stock. UE must comply with earnings tests contained in its
respective mortgage indenture and Articles of Incorporation. For the issuance of
additional first mortgage bonds, earnings coverage of twice the annual interest
charges on first mortgage bonds outstanding and to be issued is required. For
the 12 months ended March 31, 2004, UE had a coverage ratio of 8.5 times the
annual interest charges on the first mortgage bonds outstanding, which would
permit UE to issue an additional $4 billion of first mortgage bonds at an
assumed interest rate of 7%. For the issuance of additional preferred stock,
earnings coverage of at least 2.5 times the annual dividend on preferred stock
outstanding and to be issued is required under UE's Articles of Incorporation.
For the 12 months ended March 31, 2004, UE had a coverage ratio of 72.4 times
the annual dividend requirement on preferred stock outstanding which would
permit UE to issue an additional $2.4 billion in preferred stock at an assumed
dividend rate of 7%. The ability to issue such securities in the future will
depend on such tests at that time.
In addition, UE's mortgage indenture contains certain provisions which
restrict the amount of common dividends that can be paid by UE. Under this
mortgage indenture, $31 million of total retained earnings was restricted
against the payment of common dividends, except for those dividends payable in
common stock, leaving $1.6 billion of free and unrestricted retained earnings at
March 31, 2004.
CIPS
CIPS' indenture agreements and Articles of Incorporation include covenants
which must be complied with in order to issue first mortgage bonds and preferred
stock. CIPS must comply with earnings tests contained in its respective mortgage
indenture and Articles of Incorporation. For the issuance of additional first
mortgage bonds, earnings coverage of twice the annual interest charges on first
mortgage bonds outstanding and to be issued is required. For the 12 months ended
March 31, 2004, CIPS had a coverage ratio of 3.1 times the annual interest
charges for one year on the aggregate amount of first mortgage bonds
outstanding, and subsequently, the most restrictive test under the indenture
agreements would allow CIPS to issue an additional $121 million of first
mortgage bonds. For the issuance of additional preferred stock, earnings
coverage of 1.5 times annual interest charges on all long-term debt outstanding
and the annual preferred stock dividends is required under CIPS' Articles of
Incorporation. For the 12 months ended March 31, 2004, CIPS had a coverage ratio
of 2.0 times the sum of the annual interest charges and dividend requirements on
all long-term debt and preferred stock outstanding as of March 31, 2004, and
consequently had the availability to issue an additional $162 million of
preferred stock at an assumed dividend rate of 7%. The ability to issue such
securities in the future will depend on coverage ratios at that time.
37
Genco
Genco's senior note indenture includes provisions that require it to
maintain a senior debt service coverage ratio of at least 1.75 to 1 (for both
the prior four fiscal quarters and projected for the next succeeding four
six-month periods) in order to pay dividends to Ameren or to make payments of
principal or interest under certain subordinated indebtedness excluding amounts
payable under its intercompany note payable with CIPS. Genco's senior debt
service coverage ratio exceeded 1.75 to 1 in each of the last four fiscal
quarters. For the 12 months ended March 31, 2004, this ratio was 3.96 to 1. In
addition, the indenture also restricts Genco from incurring any additional
indebtedness, with the exception of certain permitted indebtedness as defined in
the indenture, unless its senior debt service coverage ratio equals at least 2.5
to 1 for the most recently ended four fiscal quarters and its senior debt to
total capital ratio would not exceed 60%, both after giving effect to the
additional indebtedness on a pro-forma basis. This debt incurrence requirement
is disregarded in the event certain rating agencies reaffirm the ratings of
Genco after considering the additional indebtedness. As of March 31, 2004,
Genco's senior debt to total capital ratio was 52%.
CILCORP
Covenants in CILCORP's indenture governing its $475 million (original
issuance amount) senior notes and bonds require CILCORP to maintain a debt to
capital ratio of no greater than 0.67 to 1 and an interest coverage ratio of at
least 2.2 to 1 in order to make any payment of dividends or intercompany loans
to affiliates other than to its direct and indirect subsidiaries, including
CILCO. However, in the event CILCORP is not in compliance with these tests,
CILCORP may only make such payments of dividends or intercompany loans if its
senior long-term debt rating is at least BB+ from S&P, Baa2 from Moody's and BBB
from Fitch. For the 12 months ended March 31, 2004, CILCORP's debt to capital
ratio was 0.61 to 1 and its interest coverage ratio was 2.8 to 1, calculated in
accordance with related provisions in this indenture. The common stock of CILCO
is pledged as security to the holders of these senior notes and bonds.
Off-Balance Sheet Arrangements
At March 31, 2004, neither Ameren nor any of its subsidiaries had any
off-balance sheet financing arrangements, other than operating leases entered
into in the ordinary course of business. Neither Ameren nor any of its
subsidiaries expects to engage in any significant off-balance sheet financing
arrangements in the near future.
NOTE 6 - Other Income and Deductions
The following table presents Other Income and Deductions for each of the
Ameren Companies for the three months ended March 31, 2004 and 2003:
===================================================================================================================
Three Months
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Ameren:(a)
Miscellaneous income:
Interest and dividend income....................................... $ 2 $ 1
Allowance for equity funds used during construction................ 3 -
Other.............................................................. 3 5
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous income............................................ $ 8 $ 6
-------------------------------------------------------------------------------------------------------------------
Miscellaneous expense:
Minority interest in subsidiary.................................... $ (1) $ (1)
Other.............................................................. - (2)
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous expense........................................... $ (1) $ (3)
===================================================================================================================
UE:
Miscellaneous income:
Interest and dividend income....................................... $ 1 $ -
Equity in earnings of subsidiary................................... 1 1
Allowance for equity funds used during construction................ 3 -
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous income............................................ $ 5 $ 1
-------------------------------------------------------------------------------------------------------------------
Miscellaneous expense:
Other.............................................................. $ (1) $ (1)
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous expense........................................... $ (1) $ (1)
-------------------------------------------------------------------------------------------------------------------
38
-------------------------------------------------------------------------------------------------------------------
Three Months
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
CIPS:
Miscellaneous income:
Interest and dividend income....................................... $ 7 $ 7
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous income............................................ $ 7 $ 7
-------------------------------------------------------------------------------------------------------------------
Miscellaneous expense:
Other.............................................................. $ - $ (1)
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous expense........................................... $ - $ (1)
===================================================================================================================
Genco:
Miscellaneous income:
Other............................................................... $ - $ 2
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous income............................................ $ - $ 2
-------------------------------------------------------------------------------------------------------------------
Miscellaneous expense:
Loss on disposition of property.................................... $ (1) $ -
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous expense........................................... $ (1) $ -
===================================================================================================================
CILCORP:(b)
Miscellaneous expense:
Other.............................................................. $ (1) $ -
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous expense........................................... $ (1) $ -
===================================================================================================================
CILCO:
Miscellaneous expense:
Other.............................................................. $ (1) $ -
-------------------------------------------------------------------------------------------------------------------
Total miscellaneous expense........................................... $ (1) $ -
===================================================================================================================
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003; includes amounts for non-registrant Ameren subsidiaries
as well as intercompany eliminations.
(b) January 2003 predecessor amounts were zero. CILCORP consolidates CILCO and
therefore includes CILCO amounts in its balances.
NOTE 7 - Derivative Financial Instruments
Cash Flow Hedges
The following table presents balances in certain accounts for cash flow
hedges as of March 31, 2004:
===================================================================================================================
Ameren UE CIPS Genco CILCORP(a) CILCO
-------------------------------------------------------------------------------------------------------------------
Balance Sheet:
Other assets........................... $ 24 $ 5 $ 4 $ 5 $ 10 $ 10
Other deferred credits and liabilities. 7 6 - 1 - -
Accumulated OCI:
Power forwards(b)....................... (1) (1) - - - -
Interest rate swaps(c).................. 5 - - 5 - -
Gas swaps and futures contracts(d)...... 16 2 4 - 10 10
Call options(e)......................... 3 3 - - - -
===================================================================================================================
(a) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
(b) Represents the mark-to-market loss for the hedged portion of electricity
price exposure for periods generally less than one year. Certain contracts
designated as hedges of electricity price exposure have terms up to five
years.
(c) Represents a gain associated with interest rate swaps at Genco that were a
partial hedge of the interest rate on debt issued in June 2002. The swaps
cover the first 10 years of debt that has a 30-year maturity and the gain
in OCI is amortized over a 10-year period that began in June 2002.
(d) Represents a gain associated with natural gas swaps and futures contracts.
The swaps are a partial hedge of our natural gas requirements through
October 2007. CILCO amount represents a gain associated with a partial
hedge of natural gas requirements through October 2007.
(e) Represents the mark-to-market gain of two call options accounted for as
cash flow hedges for coal held with two suppliers. One of these options to
purchase coal expires in October 2004 and the other option expires in July
2005.
The pre-tax net gain or loss on power forward derivative instruments
included in Other Income and Deductions at UE and Genco, which represented the
impact of discontinued cash flow hedges, the ineffective portion of cash flow
hedges, as well as the reversal of amounts previously recorded in OCI due to
transactions going to delivery or settlement,
39
was less than a $1 million loss for UE and was less than a $1 million gain for
Genco for the quarter ended March 31, 2004 (2003 - less than $1 million loss for
UE, less than $1 million loss for Genco).
Other Derivatives
The following table represents for the three months ended March 31, 2004
and 2003, the net change in market value of option transactions, which are used
to manage our positions in SO2 allowances, coal, heating oil and electricity or
power. Certain of these transactions are treated as non-hedge transactions under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
The net change in the market value of SO2 options is recorded in Operating
Revenues - Electric, while the net change in the market value of coal, heating
oil and electricity or power options is recorded as Operating Expenses - Fuel
and Purchased Power.
===================================================================================================================
Gains (Losses)(a) Three Months
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
SO2 options:
Ameren(b)............................................................. $ (1) $ 1
UE.................................................................... (3) -
CIPS.................................................................. - -
Genco................................................................. 2 1
CILCORP(c)............................................................ - -
CILCO(c).............................................................. - -
===================================================================================================================
(a) Coal, power and heating oil option gains and losses were less than $1
million for the periods shown above.
(b) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003; includes amounts for non-registrant Ameren subsidiaries
as well as intercompany eliminations.
(c) January 2003 predecessor amounts were zero.
NOTE 8 - Related Party Transactions
The Ameren Companies have engaged in, and may in the future engage in,
affiliate transactions in the normal course of business. These transactions
primarily consist of gas and power purchases and sales, services received or
rendered, borrowings and lendings. Transactions between affiliates are reported
as intercompany transactions on their financial statements, but are eliminated
in consolidation for Ameren's financial statements. For a discussion of our
material related party agreements, see Note 14 - Related Party Transactions
under Part II, Item 8 of the Ameren Companies' combined Form 10-K for the fiscal
year ended December 31, 2003. Below are descriptions of material changes to the
joint dispatch agreement which were recently proposed and of activities under
the money pool arrangements which occurred during the three months ended March
31, 2004.
Joint Dispatch Agreement
UE and Genco jointly dispatch electric generation under an amended joint
dispatch agreement. Under the agreement, each affiliate is required to serve its
load requirements from its own generation first, and then allow access to any
available generation to its affiliate. The joint dispatch agreement can be
terminated by either party by giving one year's notice on or after January 1,
2004. To address concerns raised before the MoPSC in the proceeding relating to
the transfer of UE's Illinois-based utility businesses to CIPS (see Note 3 -
Rate and Regulatory Matters), UE offered to seek to amend the joint dispatch
agreement so as to provide UE with a larger share of the margins on short term
sales of power from the combined generation of UE and Genco. In particular, UE
offered to use its best efforts to obtain all required regulatory approvals for
such an amendment, but only if the MoPSC concluded that this was a necessary
condition for its approval of the transfer of UE's Illinois-based utility
businesses. If made, such an amendment is expected to provide to UE additional
annual margins ranging from approximately $7 million to $24 million for UE's
share of short term power sales. Such an amendment is expected to result in a
corresponding reduction in Genco's margins from its share of short term power
sales. However, this reduction is expected to be offset by margins received from
additional power sales by Genco (through Marketing Company) to CIPS to serve the
transferred UE Illinois-based electric utility business. Also as part of the
proceeding before the MoPSC, UE offered to study alternatives to the current use
of incremental costs to price system energy transfers under the joint dispatch
agreement between UE and Genco, if the MoPSC concluded that this was a necessary
condition for its approval. As a result of the foregoing, there is
40
uncertainty as to the terms of the joint dispatch agreement and also as to its
duration. The termination of the agreement, or modifications to it, could have a
material adverse effect on UE or Genco. Modifications to, or termination of, the
agreement would not have an immediate impact on Ameren due to UE's Missouri
electric rate moratorium, which ends June 30, 2006.
Money Pools
Through the utility money pool, the pool participants can access committed
credit facilities at Ameren which totaled $600 million at March 31, 2004. These
facilities are in addition to UE's $154 million, CIPS' $15 million and CILCO's
$60 million in committed credit facilities which are also available to the
utility money pool participants. The total amount available to the pool
participants from the utility money pool at any given time is reduced by the
amount of borrowings by their affiliates, but increased to the extent the pool
participants have surplus funds or other external sources are used to increase
the available amounts. The average interest rate for borrowing under the utility
money pool for the three months ended March 31, 2004 was 1.0% (2003 - 1.3%).
At March 31, 2004, $600 million was available through the non
state-regulated subsidiary money pool, excluding additional funds available
through excess cash balances. The average interest rate for borrowing under the
non state-regulated subsidiary money pool for the three months ended March 31,
2004 was 8.8% (2003 - 8.8%).
CILCORP has been granted authority by the SEC under the PUHCA to borrow up
to $250 million directly from Ameren in a separate arrangement unrelated to the
money pools.
UE
The following tables present the impact of related party transactions on
UE's Consolidated Statement of Income and Consolidated Balance Sheet, based
primarily on the agreements discussed above and in Note 14 - Related Party
Transactions under Part II, Item 8 of the Ameren Companies' combined Form 10-K
for the fiscal year ended December 31, 2003:
===================================================================================================================
Statement of Income Three Months Ended March 31,
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Operating revenues from affiliates:
Power supply agreement with EEI................................ $ - $ -
Joint dispatch agreement with Genco............................ 30 32
Agency agreement with Ameren Energy............................ 53 71
Gas transportation agreement with Genco........................ - -
-------------------------------------------------------------------------------------------------------------------
Total operating revenues....................................... $ 83 $ 103
-------------------------------------------------------------------------------------------------------------------
Fuel and purchased power expenses from affiliates:
Power supply agreements:
EEI.......................................................... $ 16 $ 13
Marketing Company............................................ 2 2
Joint dispatch agreement with Genco............................ 12 11
Agency agreement with Ameren Energy............................ 19 17
-------------------------------------------------------------------------------------------------------------------
Total fuel and purchased power expenses........................ $ 49 $ 43
-------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Support service agreements:
Ameren Services.............................................. $ 38 $ 45
Ameren Energy................................................ 3 5
AFS.......................................................... 1 2
-------------------------------------------------------------------------------------------------------------------
Total other operating expenses............................... $ 42 $ 52
-------------------------------------------------------------------------------------------------------------------
Interest expense:
Borrowings (advances) related to money pool.................. $ - $ 1
===================================================================================================================
41
===================================================================================================================
Balance Sheet March 31, 2004 December 31, 2003
-------------------------------------------------------------------------------------------------------------------
Assets:
Miscellaneous accounts and notes receivable...................... $ 24 $ 16
Advances to money pool........................................... - 12
Liabilities:
Accounts payable and wages payable............................... $ 42 $ 46
Borrowings from money pool....................................... 292 -
===================================================================================================================
CIPS
The following tables present the impact of related party transactions on
CIPS' Statement of Income and Balance Sheet, based primarily on the agreements
discussed above and in Note 14 - Related Party Transactions under Part II, Item
8 of the Ameren Companies' combined Form 10-K for the fiscal year ended December
31, 2003:
===================================================================================================================
Statement of Income Three Months Ended March 31,
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Operating revenues from affiliates:
Power supply agreements:
Marketing Company............................................ $ 8 $ 7
CILCO........................................................ - 1
-------------------------------------------------------------------------------------------------------------------
Total operating revenues....................................... $ 8 $ 8
-------------------------------------------------------------------------------------------------------------------
Fuel and purchased power expenses from affiliates:
Power supply agreements:
Marketing Company............................................ $ 72 $ 80
EEI.......................................................... 8 7
-------------------------------------------------------------------------------------------------------------------
Total fuel and purchased power expenses........................ $ 80 $ 87
-------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Support service agreements:
Ameren Services.............................................. $ 12 $ 15
AFS.......................................................... - -
-------------------------------------------------------------------------------------------------------------------
Total other operating expenses................................. $ 12 $ 15
-------------------------------------------------------------------------------------------------------------------
Interest (expense) income:
Note receivable from Genco..................................... $ 7 $ 7
Borrowings (advances) related to money pool.................... - -
===================================================================================================================
===================================================================================================================
Balance Sheet March 31, 2004 December 31, 2003
-------------------------------------------------------------------------------------------------------------------
Assets:
Miscellaneous accounts and notes receivable................... $ 12 $ 10
Advances to money pool......................................... - -
Promissory note receivable from Genco(a)....................... 373 373
Tax receivable from Genco...................................... 159 162
Liabilities:
Accounts payable and wages payable............................. $ 41 $ 43
Borrowings from money pool..................................... 97 121
===================================================================================================================
(a) Amount includes current portion of $49 million as of December 31, 2003 and
March 31, 2004.
42
Genco
The following tables present the impact of related party transactions on
Genco's Statement of Income and Balance Sheet, based primarily on the agreements
discussed above and in Note 14 - Related Party Transactions under Part II, Item
8 of the Ameren Companies' combined Form 10-K for the fiscal year ended December
31, 2003:
===================================================================================================================
Statement of Income Three Months Ended March 31,
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Operating revenues from affiliates:
Power supply agreements:
Marketing Company........................................ $ 173 $ 157
EEI...................................................... - -
Joint dispatch agreement with UE........................... 12 11
Agency agreement with Ameren Energy........................ 27 35
Operating lease with Development Company................... 3 3
-------------------------------------------------------------------------------------------------------------------
Total operating revenues .................................. $ 215 $ 206
-------------------------------------------------------------------------------------------------------------------
Fuel and purchased power expenses from affiliates:
Joint dispatch agreement with UE........................... $ 30 $ 32
Agency agreement with Ameren Energy........................ 7 8
Power purchase agreement with Marketing Company............ - -
Gas transportation agreement with UE....................... - -
-------------------------------------------------------------------------------------------------------------------
Total fuel and purchased power expenses.................... $ 37 $ 40
-------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Support service agreements:
Ameren Services.......................................... $ 4 $ 5
Ameren Energy............................................ 1 3
AFS...................................................... - 1
-------------------------------------------------------------------------------------------------------------------
Total other operating expenses............................. $ 5 $ 9
-------------------------------------------------------------------------------------------------------------------
Interest expense:
Borrowings (advances) related to money pool................ $ 3 $ 5
Note payable to CIPS....................................... 7 7
Note payable to Ameren..................................... 1 1
===================================================================================================================
===================================================================================================================
Balance Sheet March 31, 2004 December 31, 2003
-------------------------------------------------------------------------------------------------------------------
Assets:
Miscellaneous accounts and notes receivable................ $ 81 $ 78
Liabilities:
Accounts payable and wages payable......................... 25 22
Interest payable........................................... 6 7
Promissory note payable to CIPS(a)......................... 373 373
Promissory note payable to Ameren(b)....................... 38 38
Tax payable to CIPS........................................ 159 162
Borrowings from money pool................................. 91 124
===================================================================================================================
(a) Amount includes current portion of $49 million as of December 31, 2003 and
March 31, 2004.
(b) Amount includes current portion of $4 million as of December 31, 2003 and
March 31, 2004.
43
CILCORP
The following tables present the impact of related party transactions on
CILCORP's Consolidated Statement of Income and Consolidated Balance Sheet, based
primarily on the agreements discussed above and in Note 14 - Related Party
Transactions under Part II, Item 8 of the Ameren Companies' combined Form 10-K
for the fiscal year ended December 31, 2003:
===================================================================================================================
Statement of Income(a)(b) Three Months Ended March 31,
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Operating revenues from affiliates:
Gas supply and services agreement with Medina Valley........... $ - $ 6
-------------------------------------------------------------------------------------------------------------------
Total operating revenues....................................... $ - $ 6
-------------------------------------------------------------------------------------------------------------------
Fuel and purchased power expenses from affiliates:
Executory tolling agreement with Medina Valley................. $ 10 $ 9
Power purchase agreement with CIPS............................. - 1
Bilateral supply agreement with Marketing Company.............. - -
-------------------------------------------------------------------------------------------------------------------
Total fuel and purchased power expenses........................ $ 10 $ 10
-------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Support services agreements:
Ameren Services.............................................. $ 13 $ -
AFS.......................................................... - -
-------------------------------------------------------------------------------------------------------------------
Total other operating expenses................................. $ 13 $ -
-------------------------------------------------------------------------------------------------------------------
Interest expense:
Note payable to Ameren......................................... $ 1 $ -
Borrowings related to money pool............................... $ 1 $ -
===================================================================================================================
(a) 2003 amounts include January 2003 predecessor information which included $2
million in operating revenues and $3 million in purchased power associated
with the executory tolling agreement with Medina Valley.
(b) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
===================================================================================================================
Balance Sheet(a) March 31, 2004 December 31, 2003
-------------------------------------------------------------------------------------------------------------------
Assets:
Miscellaneous accounts and notes receivable.................... $ 13 $ 8
Liabilities:
Accounts payable............................................... $ 46 $ 16
Note payable to Ameren......................................... 38 46
Borrowings from money pool..................................... 192 145
-------------------------------------------------------------------------------------------------------------------
(a) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
CILCO
The following tables present the impact of related party transactions on
CILCO's Consolidated Statement of Income and on the Consolidated Balance Sheet,
based primarily on the various agreements discussed above and in Note 14 -
Related Party Transactions under Part II, Item 8 of the Ameren Companies'
combined Form 10-K for the fiscal year ended December 31, 2003:
===================================================================================================================
Statement of Income Three Months Ended March 31,
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Operating revenues from affiliates:
Gas transportation agreement with Medina Valley......... $ - $ -
-------------------------------------------------------------------------------------------------------------------
Total operating revenues................................ $ - $ -
-------------------------------------------------------------------------------------------------------------------
Fuel and purchased power expenses from affiliates:
Executory tolling agreement with Medina Valley.......... $ 10 $ 9
Power purchase agreement with CIPS...................... - 1
Bilateral supply agreement with Marketing Company....... - -
-------------------------------------------------------------------------------------------------------------------
Total fuel and purchased power expenses................. $ 10 $ 10
-------------------------------------------------------------------------------------------------------------------
44
-------------------------------------------------------------------------------------------------------------------
Statement of Income Three Months Ended March 31,
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Other operating expenses:
Support services agreements:
Ameren Services....................................... $ 12 $ -
AFS................................................... - -
-------------------------------------------------------------------------------------------------------------------
Total other operating expenses.......................... $ 12 $ -
-------------------------------------------------------------------------------------------------------------------
Interest expense:
Borrowings related to money pool........................ $ 1 $ -
===================================================================================================================
===================================================================================================================
Balance Sheet March 31, 2004 December 31, 2003
-------------------------------------------------------------------------------------------------------------------
Assets:
Miscellaneous accounts and notes receivable............. $ 5 $ 6
Liabilities:
Accounts payable ....................................... $ 54 $ 23
Borrowings from money pool.............................. 200 149
===================================================================================================================
NOTE 9 - Commitments and Contingencies
Callaway Nuclear Plant
The following table presents insurance coverage at UE's Callaway Nuclear
Plant at March 31, 2004:
===================================================================================================================
Maximum Maximum Assessments
Type and Source of Coverage Coverages for Single Incidents
-------------------------------------------------------------------------------------------------------------------
Public liability:
American Nuclear Insurers...................... $ 300 $ -
Pool participation............................. 10,562 101(a)
------------------------------------------------------------
$ 10,862(b) $ 101
Nuclear worker liability:
American Nuclear Insurers...................... $ 300(c) $ 4
Property damage:
Nuclear Electric Insurance Ltd................. $ 2,750(d) $ 21
Replacement power:
Nuclear Electric Insurance Ltd................. $ 490(e) $ 7
===================================================================================================================
(a) Retrospective premium under the Price-Anderson liability provisions of the
Atomic Energy Act of 1954, as amended (Price-Anderson). This is subject to
retrospective assessment with respect to loss from an incident at any U.S.
reactor, payable at $10 million per year. Price-Anderson expired in August
2002 and the temporary extension expired December 31, 2003. Renewal
legislation is pending before Congress. Until Price-Anderson is renewed,
its provisions continue to apply to existing nuclear plants.
(b) Limit of liability for each incident under Price-Anderson.
(c) Industry limit for potential liability from workers claiming exposure to
the hazards of nuclear radiation.
(d) Includes premature decommissioning costs.
(e) Weekly indemnity of $3.5 million for 52 weeks, which commences after the
first eight weeks of an outage, plus $2.8 million per week for 110 weeks
thereafter.
Price-Anderson limits the liability for claims from an incident involving
any licensed U.S. nuclear facility. The limit is based on the number of licensed
reactors and is adjusted at least every five years based on the Consumer Price
Index. Utilities owning a nuclear reactor cover this exposure through a
combination of private insurance and mandatory participation in a financial
protection pool, as established by Price-Anderson.
If losses from a nuclear incident at the Callaway Nuclear Plant exceed the
limits of, or are not subject to, insurance, or if coverage is not available, we
self-insure the risk. Although we have no reason to anticipate a serious nuclear
incident, if one did occur, it could have a material, but indeterminable,
adverse effect on our financial position, results of operations or liquidity.
45
Environmental Matters
Clean Air Act
In mid-December 2003, the EPA issued proposed regulations with respect to
SO2 and NOx emissions (the "Interstate Air Quality Rule") and mercury emissions
from coal-fired power plants. The new rules, if adopted, will require
significant additional reductions in these emissions from our power plants in
phases, beginning in 2010. The rules are currently under a public review and
comment period and may change before being issued as final. The following table
presents preliminary estimated capital costs based on current technology on the
Ameren systems to comply with the SO2 and NOx rules, as proposed:
===================================================================================================================
By 2010 2011 - 2015
-------------------------------------------------------------------------------------------------------------------
Ameren...................................... $400 million to $600 million $500 million to $800 million
UE.......................................... $250 million to $350 million $300 million to $500 million
CIPS........................................ - -
Genco....................................... $140 million to $220 million $150 million to $200 million
CILCORP(a).................................. $10 million to $30 million $50 million to $100 million
CILCO....................................... $10 million to $30 million $50 million to $100 million
===================================================================================================================
(a) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
The proposed mercury regulations contain a number of options and the final
control requirements are highly uncertain. Ameren anticipates additional capital
costs to comply with the mercury rules could range from $300 million to $500
million by 2010, with UE incurring approximately half of the costs and Genco
incurring most of the remaining costs. Additional amounts could be required to
comply with mercury rules by 2018.
Remediation
In October 2002, UE was included in a Unilateral Administrative Order list
of potentially liable parties for groundwater contamination for a portion of the
Sauget Area 2 site. The Unilateral Administrative Order encompasses the
groundwater contamination releasing to the Mississippi River adjacent to
Monsanto Chemical Company's (now known as Solutia's) former chemical waste
landfill and the resulting impact area in the Mississippi River. UE is being
asked to participate in response activities that involve the installation of a
barrier wall around a chemical waste site with three recovery wells to divert
groundwater flow. The projected cost for this remedy method is approximately $26
million. In November 2002, UE sent a letter to the EPA asserting its defenses to
the Unilateral Administrative Order and requested its removal from the list of
potentially responsible parties under the Unilateral Administrative Order.
Solutia agreed to comply with the Unilateral Administrative Order. However, in
December 2003, Solutia filed for bankruptcy protection and is seeking to
discharge its environmental liabilities. In March 2004, Pharmacia Corporation,
the former parent company of Solutia, confirmed its intent to comply with the
EPA's Unilateral Administrative Order. As the status and scope of future
remediation at Sauget Area 2 is uncertain, we are unable to predict the ultimate
impact of the Sauget Area 2 site on our financial position, results of
operations or liquidity.
Asbestos-Related Litigation
Ameren, UE, CIPS, Genco and CILCO have been named, along with numerous
other parties, in a number of lawsuits which have been filed by certain
plaintiffs claiming varying degrees of injury from asbestos exposure. Most have
been filed in the Circuit Court of Madison County, Illinois. The number of total
defendants named in each case is significant with as many as 110 parties named
in a case to as few as six. However, the average number of parties is 61 in the
cases that were pending as of March 31, 2004.
The claims filed against Ameren, UE, CIPS, Genco and CILCO allege injury
from asbestos exposure during the plaintiffs' activities at our electric
generating plants. In the case of CIPS, its former plants are now owned by
Genco, and in the case of CILCO, most of its former plants are now owned by
AERG. As a part of the transfer of ownership of the generating plants, the
transferor (CIPS or CILCO) has contractually agreed to indemnify the transferee
(Genco or AERG) for liabilities associated with asbestos-related claims arising
from activities prior to the transfer. Each lawsuit seeks unspecified damages in
excess of $50,000, which, if proved, typically would be shared among the named
defendants.
46
From December 31, 2003 through March 31, 2004, 10 additional lawsuits were
filed against Ameren, UE and CIPS, mostly in the Circuit Court of Madison
County, Illinois, three lawsuits were dismissed and six were settled. The
following table presents the status as of March 31, 2004, of the
asbestos-related lawsuits that have been filed against the Ameren Companies:
===================================================================================================================
Specifically Named as Defendant
-----------------------------------------------------------------------
Total(a) Ameren UE CIPS Genco CILCO
-------------------------------------------------------------------------------------------------------------------
Filed.......................... 188 16 128 74 2 13
Settled........................ 37 - 27 13 - 1
Dismissed...................... 70 3 51 22 - 2
Pending........................ 81 13 50 39 2 10
===================================================================================================================
(a) Addition of the numbers in the individual columns does not equal the total
column because some of the lawsuits name multiple Ameren entities as
defendants.
Ameren, UE, CIPS, Genco and CILCO believe that the final disposition of
these proceedings will not have a material adverse effect on their financial
position, results of operations or liquidity.
Other Matters
On June 18, 2003, 20 retirees and surviving spouses of retirees of various
Ameren companies (the plaintiffs) filed a complaint in the U.S. District Court,
Southern District of Illinois, against Ameren, UE, CIPS, Genco and Ameren
Services, and against our Retiree Medical Plan (the defendants). The retirees
were members of various local labor unions of the IBEW and the IUOE. The
complaint, referred to as Barnett, et al. vs Ameren Corporation, et al., alleges
the following:
o the labor organizations which represented the plaintiffs have historically
negotiated retiree medical benefits with the defendants and that pursuant
to the negotiated collective bargaining agreements and other negotiated
documents, the plaintiffs are guaranteed medical benefits at no cost or at
a fixed maximum cost during their retirement;
o Ameren has unilaterally announced that, beginning in 2004, retirees must
pay a portion of their own healthcare premiums and either an increasing
portion of their dependents' premiums or newly imposed dependents'
premiums, and that surviving spouses will be paying increased amounts for
their medical benefits;
o the defendants' actions deprive the plaintiffs of vested benefits and thus
violate ERISA and the Labor Management Relations Act of 1947, and
constitute a breach of the defendants' fiduciary duties; and
o the defendants are estopped from changing the plan benefits. (This
allegation was subsequently dropped from the amended complaints referred to
below).
The plaintiffs filed the complaint on behalf of themselves, other similarly
situated former non-management employees and their surviving spouses who retired
from January 1, 1992 through October 1, 2002, and on behalf of all subsequent
non-management retirees and their surviving spouses whose medical benefits are
reduced or are threatened with reduction. The plaintiffs seek to have this
lawsuit certified as a class action, seek injunctive relief and declaratory
relief, seek actual damages for any amounts they are made to pay as a result of
the defendants' actions, and seek payment of attorney fees and costs. An amended
complaint that added three plaintiffs was filed July 15, 2003. In response to
the Court's ruling on the defendants' motions to dismiss various counts of the
complaint, a second amended complaint was filed on December 15, 2003, clarifying
some of the allegations, adding two and dropping two plaintiffs, and adding the
Ameren Group Medical Plan as a defendant. On April 27, 2004, the Court granted
the defendants motion to dismiss one of the counts brought in connection with
the amended complaint which alleges the defendants breached their fiduciary
duties under ERISA. We are unable to predict the outcome of this lawsuit or the
impact of the outcome on our financial position, results of operations or
liquidity.
NOTE 10 - Callaway Nuclear Plant
Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the
permanent storage and disposal of spent nuclear fuel. The DOE currently charges
one mill, or 1/10 of one cent, per nuclear-generated kilowatthour sold for
future disposal of spent fuel. Pursuant to this Act, UE collects one mill from
its electric customers for each kilowatthour of electricity that it generates
from its Callaway Nuclear Plant. Electric utility rates charged to customers
provide for recovery of such costs. The DOE is not expected to have its
permanent storage facility for spent fuel available until at least 2015. UE has
sufficient storage capacity at its Callaway Nuclear Plant until 2019 and has the
capability for additional storage capacity through the licensed life of the
plant. The delayed availability of the DOE's disposal facility
47
is not expected to adversely affect the continued operation of the Callaway
Nuclear Plant through its currently licensed life.
Electric utility rates charged to customers provide for the recovery of the
Callaway Nuclear Plant's decommissioning costs over the life of the plant, based
on an assumed 40-year life, ending with expiration of the plant's operating
license in 2024. The Callaway Nuclear Plant site is assumed to be decommissioned
based on immediate dismantlement method and removal from service.
Decommissioning costs, including decontamination, dismantling and site
restoration, are estimated to be $536 million in current year dollars and are
expected to escalate approximately 3.5% per year through the end of
decommissioning activity in 2033. Decommissioning costs are charged to cost of
services used to establish electric rates for UE's customers and amounted to
approximately $7 million in each of the years 2003, 2002 and 2001. Every three
years, the MoPSC and ICC require UE to file updated cost studies for
decommissioning its Callaway Nuclear Plant, and electric rates may be adjusted
at such times to reflect changed estimates. The latest studies were filed in
2002. Costs collected from customers are deposited in an external trust fund to
provide for the Callaway Nuclear Plant's decommissioning. Fund earnings are
expected to average approximately 8.6% annually through the date of
decommissioning. If the assumed return on trust assets is not earned, we believe
it is probable that any such earnings deficiency will be recovered in rates. The
fair value of the nuclear decommissioning trust fund for UE's Callaway Nuclear
Plant is reported in Nuclear Decommissioning Trust Fund in Ameren's and UE's
Consolidated Balance Sheets. This amount is legally restricted to fund the costs
of nuclear decommissioning. Changes in the fair value of the trust fund are
recorded as an increase or decrease to the nuclear decommissioning trust fund
and to the regulatory asset recorded in connection with the adoption of SFAS No.
143. Upon the completion of UE's transfer of its Illinois electric and gas
utility businesses to CIPS, which is subject to the receipt of regulatory
approvals, the assets and liabilities related to the Illinois portion of the
decommissioning trust fund will be transferred to Missouri. See Note 3 - Rate
and Regulatory Matters for further information.
NOTE 11 - Stockholders' Equity
Paid-In Capital
Ameren's paid-in capital increased by $873 million as of March 31, 2004
compared to December 31, 2003. Ameren received net proceeds of $853 million from
the issuance of 19.1 million shares of its common stock in February 2004 at a
price of $45.90 per share, pursuant to an August 2002 shelf registration
statement. In the first quarter of 2004, Ameren also issued 0.5 million new
shares valued at $28 million under its DRPlus and its 401(k) plans. Ameren's
paid-in capital decreased $8 million due to the cashless exercise of stock
options in the first quarter of 2004.
Other Comprehensive Income
Comprehensive income includes net income as reported in the accompanying
consolidated statements of income and all other changes in common stockholders'
equity, except those resulting from transactions with common stockholders. A
reconciliation of net income to comprehensive income for the three months ended
March 31, 2004 and 2003 is shown below for the Ameren Companies:
===================================================================================================================
Three Months
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Ameren:(a)
Net income................................................................... $ 97 $ 101
Unrealized loss on derivative hedging instruments,
net of taxes of $- and $-, respectively.................................... - (1)
Reclassification adjustments for losses included in net income,
net of taxes of $- and $(1), respectively.................................. - (2)
-------------------------------------------------------------------------------------------------------------------
Total comprehensive income, net of taxes................................ $ 97 $ 98
===================================================================================================================
===================================================================================================================
UE:
Net income................................................................... $ 58 $ 68
Unrealized gain on derivative hedging instruments,
net of taxes of $1 and $-, respectively.................................... 2 -
Reclassification adjustments for losses included in net income,
net of taxes of $- and $-, respectively.................................... - (1)
-------------------------------------------------------------------------------------------------------------------
Total comprehensive income, net of taxes................................ $ 60 $ 67
-------------------------------------------------------------------------------------------------------------------
48
-------------------------------------------------------------------------------------------------------------------
Three Months
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
CIPS:
Net income................................................................... $ 10 $ 2
Unrealized gain on derivative hedging instruments,
net of taxes of $1 and $-, respectively.................................... 3 -
Reclassification adjustments for losses included in net income,
net of taxes of $- and $-, respectively.................................... (1) -
-------------------------------------------------------------------------------------------------------------------
Total comprehensive income, net of taxes................................ $ 12 $ 2
===================================================================================================================
===================================================================================================================
Genco:
Net income................................................................... $ 29 $ 39
Unrealized loss on derivative hedging instruments,
net of taxes of $1 and $-, respectively.................................... (1) -
-------------------------------------------------------------------------------------------------------------------
Total comprehensive income, net of taxes................................ $ 28 $ 39
===================================================================================================================
===================================================================================================================
CILCORP:(b)
Net income................................................................... $ 4 $ 3
Unrealized gain (loss) on derivative hedging instruments,
net of taxes of $1 and $(1), respectively.................................. 3 (1)
-------------------------------------------------------------------------------------------------------------------
Total comprehensive income, net of taxes................................ $ 7 $ 2
===================================================================================================================
===================================================================================================================
CILCO:
Net income................................................................... $ 6 $ 35
Unrealized gain (loss) on derivative hedging instruments,
net of taxes of $1 and $(1), respectively.................................. 3 (1)
-------------------------------------------------------------------------------------------------------------------
Total comprehensive income, net of taxes................................ $ 9 $ 34
===================================================================================================================
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003 and includes amounts for non-registrant Ameren
subsidiaries as well as intercompany eliminations.
(b) 2003 amounts exclude January 2003 predecessor information. CILCORP
consolidates CILCO and therefore includes CILCO amounts in its balances.
Outstanding Shares of Common Stock
The following table reconciles the outstanding shares of Ameren common
stock for the three months ended March 31, 2004 and 2003:
===================================================================================================================
Three Months
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Shares outstanding at beginning of period.................................... 162.9 154.1
Shares issued................................................................ 19.6 7.0
-------------------------------------------------------------------------------------------------------------------
Shares outstanding at end of period..................................... 182.5 161.1
===================================================================================================================
NOTE 12 - PENSION AND OTHER POSTRETIREMENT BENEFITS
In December 2003, the FASB issued SFAS No. 132 (Revised 2003), "Employers'
Disclosures about Pensions and Other Postretirement Benefits (SFAS No. 132R),"
which retains the disclosure requirements in SFAS No. 132 and contains
additional requirements. These additional requirements include disclosures about
a plan sponsor's investment strategies, detailed information of plan assets,
expected future cash flow requirements, and interim disclosures related to
periodic benefit cost. The following table presents Ameren's net periodic
benefit costs (and the components of those
49
costs) for pension and other postretirement benefits for the three months ended
March 31, 2004 and 2003:
===================================================================================================================
Pension Benefits Postretirement Benefits
-------------------------------------------------------------------------------------------------------------------
2004 2003 2004 2003
---- ---- ---- ----
Service cost........................ $ 11 $ 10 $ 4 $ 3
Interest cost....................... 32 34 16 15
Expected return on plan assets...... (30) (33) (9) (8)
Amortization cost:
Transition obligation............. - - 1 1
Prior service cost................ 3 2 (1) (1)
Losses............................ 6 2 10 9
-------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost........... $ 22 $ 15 $ 21 $ 19
===================================================================================================================
The total amount of our contributions paid, and expected to be paid, do not
differ significantly from amounts previously disclosed.
UE, CIPS, Genco, CILCORP and CILCO are participants in Ameren's plans and
are responsible for their proportional share of the pension benefit costs. The
following table presents the pension costs incurred for the three months ended
March 31, 2004 and 2003:
===================================================================================================================
2004 2003
-------------------------------------------------------------------------------------------------------------------
Ameren(a)........................................................ $ 22 $ 15
UE............................................................... 13 10
CIPS............................................................. 3 2
Genco............................................................ 2 1
CILCORP(b)....................................................... 3 1
CILCO............................................................ 7 3
===================================================================================================================
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003; includes amounts for non-registrant Ameren subsidiaries.
(b) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
UE, CIPS, Genco, CILCORP and CILCO are participants in Ameren's plans and
are responsible for their proportional share of the postretirement benefit
costs. The following table presents the postretirement costs incurred for the
three months ended March 31, 2004 and 2003:
===================================================================================================================
2004 2003
-------------------------------------------------------------------------------------------------------------------
Ameren(a)........................................................ $ 21 $ 19
UE............................................................... 14 13
CIPS............................................................. 2 2
Genco............................................................ 1 1
CILCORP(b)....................................................... 3 2
CILCO............................................................ 5 3
===================================================================================================================
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003; includes amounts for non-registrant Ameren subsidiaries.
(b) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
NOTE 13 - Segment Information
Ameren's reportable segment, Utility Operations, is comprised of its
electric generation and electric and gas transmission and distribution
operations. Ameren's reportable segment, Other, is comprised of the parent
holding company, Ameren Corporation.
The accounting policies for segment data are the same as those described in
Note 1 - Summary of Significant Accounting Policies. Segment data includes
intersegment revenues, as well as a charge for allocating costs of
administrative support services to each of the operating companies, which, in
each case, is eliminated upon consolidation. Ameren Services allocates
administrative support services based on various factors, such as headcount,
number of customers and total assets.
50
The table below presents segment information about the reported revenues
and net income of Ameren for the three months ended March 31, 2004 and 2003:
===================================================================================================================
Reconciling
Utility Operations Other Items(b) Total
-------------------------------------------------------------------------------------------------------------------
2004:
Operating revenues....... $ 1,513 $ - $ (297) $ 1,216
Net income............... 97 -(c) - 97
-------------------------------------------------------------------------------------------------------------------
2003: (a)
Operating revenues....... $ 1,382 $ - $ (274) $ 1,108
Net income............... 107 (6) - 101
-------------------------------------------------------------------------------------------------------------------
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003; includes amounts for non-registrant Ameren subsidiaries
as well as intercompany eliminations.
(b) Elimination of intercompany revenues.
(c) Increased investment and other non-operating income ($2 million) offset the
corporate general and administrative expenses for the current quarter.
51
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Executive Summary
Despite mild winter weather, Ameren was able to produce solid earnings this
quarter. Excluding first quarter 2003 gains associated with the adoption of a
new accounting standard, 2004 first quarter earnings for Ameren were up over
first quarter 2003. The CILCORP acquisition, higher emission credit sales, sales
growth due to a recovering economy and results from our focus on cost control
positively affected 2004 first quarter earnings. These benefits more than offset
the negative effects of milder winter weather, higher fuel and purchased power
costs, weaker energy markets and earnings per share dilution resulting from
increased common shares outstanding.
In early February, Ameren announced the signing of a definitive agreement
to purchase Illinois Power and an increased interest in EEI in a transaction
valued at approximately $2.3 billion. In late March, Ameren completed the
initial filings required for regulatory approval. This acquisition remains on
target to close by the end of this year. Following the announcement of the
acquisition, Ameren quickly moved to sell common stock, generating proceeds of
approximately $850 million in order to secure a significant portion of the
equity financing planned for the Illinois Power transaction. In total, that
equity financing is expected to equal at least 50 percent of the transaction
value.
General
Ameren, headquartered in St. Louis, Missouri, is a public utility holding
company registered with the SEC under the PUHCA. Ameren's primary asset is the
common stock of its subsidiaries. Ameren's subsidiaries operate rate-regulated
electric generation, transmission and distribution businesses, rate-regulated
natural gas distribution businesses and non rate-regulated electric generation
businesses in Missouri and Illinois. Dividends on Ameren's common stock are
dependent on distributions made to it by its subsidiaries. See Note 1 - Summary
of Significant Accounting Policies to our financial statements under Part I,
Item 1 of this report for a detailed description of our principal operating
subsidiaries. Also see the Glossary of Terms and Abbreviations.
o UE, also known as Union Electric Company, operates a rate-regulated
electric generation, transmission and distribution business and a
rate-regulated natural gas distribution business in Missouri and Illinois.
o CIPS, also known as Central Illinois Public Service Company, operates a
rate-regulated electric and natural gas transmission and distribution
business in Illinois.
o Genco, also known as Ameren Energy Generating Company, operates a non
rate-regulated electric generation business.
o CILCO, also known as Central Illinois Light Company, is a subsidiary of
CILCORP (a holding company) and was acquired on January 31, 2003. It
operates a rate-regulated electric transmission and distribution business,
a primarily non rate-regulated electric generation business and a
rate-regulated natural gas distribution business in Illinois.
On February 2, 2004, Ameren entered into an agreement with Dynegy to
purchase the stock of Decatur, Illinois-based Illinois Power and Dynegy's 20%
ownership interest in EEI. See also Note 2 - Acquisitions and Note 3 - Rate and
Regulatory Matters to our financial statements under Part I, Item 1 of this
report for further information. Illinois Power also files quarterly, annual and
current reports with the SEC, pursuant to the Exchange Act.
When we refer to our, we or us, it indicates that the referenced
information relates to Ameren and its subsidiaries. When we refer to financing
or acquisition activities, we are defining Ameren as the parent holding company.
When appropriate, the Ameren Companies are specifically referenced in order to
distinguish among their different business activities.
52
The financial statements of Ameren are prepared on a consolidated basis and
therefore include the accounts of its majority-owned subsidiaries. Results of
CILCORP and CILCO reflected in Ameren's consolidated financial statements
include the period from the acquisition date of January 31, 2003. January 2003
data for CILCORP and CILCO is not included in Ameren's consolidated totals. See
Note 2 - Acquisitions to our financial statements under Part I, Item 1 of this
report for further information. All significant intercompany transactions have
been eliminated. All tabular dollar amounts are in millions, unless otherwise
indicated.
RESULTS OF OPERATIONS
Earnings Summary
Our results of operations and financial position are affected by many
factors. Weather, economic conditions and the actions of key customers or
competitors can significantly impact the demand for our services. Our results
are also affected by seasonal fluctuations caused by winter heating and summer
cooling demand. With over 90% of Ameren's revenues directly subject to
regulation by various state and federal agencies, decisions by regulators can
have a material impact on the price we charge for our services. Our non
rate-regulated sales are subject to market conditions for power. We principally
utilize coal, nuclear fuel, natural gas and oil in our operations. The prices
for these commodities can fluctuate significantly due to the world economic and
political environment, weather, supply and demand levels and many other factors.
We do not have fuel or purchased power cost recovery mechanisms in Missouri or
Illinois for our electric utility businesses, but we do have gas cost recovery
mechanisms in each state for our gas utility businesses. The electric rates for
UE, CIPS and CILCO are largely set through 2006 such that cost decreases or
increases will not be immediately reflected in rates. In addition, the gas
delivery rates for UE in Missouri are set through June 2006. Fluctuations in
interest rates impact our cost of borrowing and pension and postretirement
benefits. We employ various risk management strategies in order to try to reduce
our exposure to commodity risks and other risks inherent in our business. The
reliability of our power plants and transmission and distribution systems and
the level of operating and administrative costs and capital investment are key
factors that we seek to control in order to optimize our results of operations,
cash flows and financial position.
Ameren's net income decreased $4 million to $97 million, or 55 cents per
share, in the first quarter of 2004 from $101 million, or 63 cents per share, in
the first quarter of 2003. In 2003, Ameren's net income included a net
cumulative effect after-tax gain of $18 million, or 11 cents per share,
associated with the adoption of SFAS No. 143, "Accounting for Asset Retirement
Obligations." The SFAS No. 143 net gain resulted principally from the
elimination of non-legal obligation costs of removal for non rate-regulated
assets from accumulated depreciation.
The following table presents the net cumulative effect after-tax gain
recorded at each of the Ameren Companies upon adoption of SFAS No. 143:
===================================================================================================================
Net Cumulative Effect After-Tax Gain
-------------------------------------------------------------------------------------------------------------------
Ameren(a)............................................................................... $ 18
UE...................................................................................... -
CIPS.................................................................................... -
Genco................................................................................... 18
CILCORP(b).............................................................................. 4
CILCO................................................................................... 24
===================================================================================================================
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003; includes amounts for non-registrant Ameren subsidiaries
as well as intercompany eliminations.
(b) Represents predecessor information recorded in January 2003 prior to the
acquisition date of January 31, 2003. CILCORP consolidates CILCO and
therefore includes CILCO amounts in its balances.
Excluding the net cumulative effect after-tax gain discussed above,
Ameren's net income increased $14 million, and earnings per share increased 3
cents, for the first three months of 2004 as compared to the same period in
2003. The change in net income was primarily due to organic growth in revenues
due to a recovering economy, increased sales of emission credits, favorable gas
margins resulting from rate increases and results of CILCORP being included for
an additional month in the current year. Partially offsetting these benefits
were increased fuel and purchased power costs as a result of power plant
outages, increased employee benefit costs, lower margins on interchange sales
due to weaker
53
power prices and lower sales and mild winter weather conditions in the current
year. Increased common shares outstanding, primarily due to an offering to
prefund a portion of the expected equity financing for the Illinois Power
acquisition, also reduced earnings per share.
As a holding company, Ameren's net income and cash flows are primarily
generated by its principal subsidiaries, UE, CIPS, Genco and CILCORP. The
following table presents the contribution by Ameren's principal subsidiaries to
Ameren's consolidated net income for the three months ended March 31, 2004 and
2003:
===================================================================================================================
Three Months
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
Net income:
UE(a)............................................................... $ 57 $ 67
CIPS................................................................ 9 1
Genco(a)............................................................ 29 39
CILCORP(b).......................................................... 4 3
Other(c)............................................................ (2) (9)
-------------------------------------------------------------------------------------------------------------------
Ameren net income......................................................... $ 97 $ 101
===================================================================================================================
(a) Includes earnings from interchange sales by Ameren Energy that provided
approximately $17 million (2003 - $22 million) of UE's net income and
approximately $10 million (2003 - $12 million) of Genco's net income in the
first quarter of 2004.
(b) Excludes net income prior to the acquisition date of January 31, 2003.
January 2003 predecessor amount was $9 million. CILCORP consolidates CILCO
and therefore includes CILCO amounts in its balances.
(c) Includes corporate general and administrative expenses, transition costs
associated with the CILCORP acquisition and other non rate-regulated
operations.
Electric Operations
The following table presents the favorable (unfavorable) variations in
electric margins, defined as electric revenues less fuel and purchased power,
for the three months ended March 31, 2004 from the comparable period in 2003.
Although electric margin may be considered a non-GAAP measure, we believe it is
a useful measure to analyze the change in profitability of our electric
operations between periods. The variation for Ameren reflects the contribution
from CILCORP for the January 2004 period as a separate line item, which allows
for other margin components to be comparable year over year as we owned CILCORP
for only two months in the prior year period. The variations in CILCORP and
CILCO electric margins are for the three months ended March 31, 2004, as
compared to the same period in 2003.
===================================================================================================================
Three Months Ameren(a) UE CIPS Genco CILCORP(b) CILCO
-------------------------------------------------------------------------------------------------------------------
Electric revenue change:
CILCORP - January 2004............... $ 47 $ - $ - $ - $ - $ -
Effect of weather (estimate)......... (14) (10) (2) - (1) (1)
Growth and other (estimate).......... 55 28 (4) 16 (28) (28)
Rate reductions...................... (7) (7) - - - -
Interchange revenues................. (25) (18) 1 (6) - -
EEI.................................. 1 - - - - -
-------------------------------------------------------------------------------------------------------------------
Total .................................. $ 57 $ (7) $ (5) $ 10 $ (29) $ (29)
-------------------------------------------------------------------------------------------------------------------
Fuel and purchased power change:
CILCORP - January 2004............... $ (24) $ - $ - $ - $ - $ -
Fuel:
Generation and other............. (1) 6 - (5) (6) (5)
Price............................ (5) (4) - (2) 7 7
Purchased power...................... (6) (5) 6 3 20 20
EEI ................................. (3) - - - - -
-------------------------------------------------------------------------------------------------------------------
Total .................................. $ (39) $ (3) $ 6 $ (4) $ 21 $ 22
-------------------------------------------------------------------------------------------------------------------
Net change in electric margins.......... $ 18 $ (10) $ 1 $ 6 $ (8) $ (7)
===================================================================================================================
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003; includes amounts for non-registrant Ameren subsidiaries
as well as intercompany eliminations.
(b) Includes predecessor information for January 2003. CILCORP consolidates
CILCO and therefore includes CILCO amounts in its balances.
54
Ameren
Ameren's electric margin increased $18 million for the first three months
of 2004, compared to the same period in 2003. Excluding the additional month of
CILCORP results in the current year, electric margin decreased $5 million.
Decreases in electric margin were primarily attributable to unfavorable weather
conditions, rate reductions, decreased interchange margins, and an increase in
fuel and purchased power. Partially offsetting these reductions were increased
sales of emission credits, increased industrial, commercial and wholesale sales
resulting from improved economic conditions and increased sales into the
deregulated Illinois marketplace. Industrial and commercial sales rose 4% and
1%, respectively, during the quarter.
The unfavorable weather conditions were primarily due to warmer winter
weather in the first quarter of 2004 versus 2003. Heating degree days were
approximately 9% less in the first three months of 2004 in our overall service
territory compared to the same period in 2003 and approximately 6% less compared
to normal conditions.
Annual rate reductions as a result of the 2002 UE electric rate case
settlement in Missouri negatively impacted electric revenues during the first
quarter. Reductions of $50 million were effective April 1, 2002 and $30 million
were effective April 1, 2003. An additional $30 million of annual electric rate
reductions became effective April 1, 2004.
Interchange margins decreased $14 million for the first three months of
2004, compared to the same period in 2003, due to lower power prices in the
energy markets and decreased low-cost generation availability due to unplanned
outages at the Callaway Nuclear Plant and other fossil power plants at UE,
despite fewer outages at the Genco plants. Average realized power prices on
interchange sales decreased to approximately $34 per megawatthour in the first
three months of 2004 from approximately $42 per megawatthour in the first three
months of 2003. Power prices in the first quarter of 2003 were unusually strong.
Ameren's fuel and purchased power increased by $15 million, excluding the
additional month of CILCORP, in the first three months of 2004, compared to the
same period of 2003, due to increased power purchases necessitated by plant
outages and increased fuel prices.
UE
UE's electric margin decreased $10 million for the first three months of
2004, as compared to the same period in 2003. Decreases in electric margin in
the first three months of 2004 were primarily attributable to unfavorable
weather conditions, rate reductions resulting from the 2002 Missouri electric
rate case settlement mentioned above and decreased interchange margins.
Interchange margins decreased $10 million for the first three months of 2004 due
to lower power prices in the energy markets and decreased low-cost generation
availability as mentioned above. Partially offsetting these decreases were
higher emission sales in the first quarter of 2004. Fuel and purchased power
increased $3 million in the first quarter of 2004 primarily due to increased
power purchases as a result of plant outages.
CIPS
CIPS' electric margin was comparable in the first quarter of 2004 to the
same period in 2003.
Genco
Genco's electric margin increased $6 million for the first three months of
2004, as compared to the same period in 2003. Increases in electric margin were
primarily attributable to higher wholesale margins due to increased sales to new
customers coupled with increased use of lower cost generation due to fewer plant
outages, partially offset by decreased interchange margins resulting from
reduced sales and lower power prices.
CILCORP and CILCO
Electric margin decreased $8 million at CILCORP and $7 million at CILCO for
the first three months of 2004, as compared to the same period in 2003.
Decreases in electric margin were primarily attributable to the switch of two
large CILCO industrial customers to Marketing Company in July and October, 2003,
transfers of non rate-regulated customers to Marketing Company and unfavorable
weather conditions. Fuel and purchased power also decreased due to customers
switching.
55
Gas Operations
The following table presents the favorable (unfavorable) variations in gas
margins, defined as gas revenues less gas purchased for resale, for the three
months ended March 31, 2004, from the comparable period in 2003. Although gas
margin may be considered a non-GAAP measure, we believe it is a useful measure
to analyze the change in profitability of gas operations between periods.
===================================================================================================================
Three Months
-------------------------------------------------------------------------------------------------------------------
Ameren(a)........................................................... $ 19
UE.................................................................. 2
CIPS................................................................ 5
Genco............................................................... -
CILCORP(b).......................................................... -
CILCO............................................................... (2)
===================================================================================================================
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003; includes amounts for non-registrant Ameren subsidiaries
as well as intercompany eliminations.
(b) Includes predecessor information for January 2003. CILCORP consolidates
CILCO and therefore includes CILCO amounts in its balances.
Ameren's, UE's and CIPS' gas margins increased primarily due to delivery
rate increases, partially offset by milder winter weather. Ameren's margin also
increased due to the additional month of CILCORP results in the current year
($13 million). CILCO's gas margin decreased in the first quarter of 2004, as
compared to the same period of 2003, as the mild winter weather conditions in
CILCO's service territory more than offset the benefit of the delivery rate
increases. CILCORP's gas margin was comparable in the first quarter of 2004 to
the same period in 2003. The effect of all rate increases was approximately $9
million.
Operating Expenses and Other Statement of Income Items
The following table presents the favorable (unfavorable) variations in
operating and other expenses for the three months ended March 31, 2004, from the
comparable period in 2003:
===================================================================================================================
Three Months Ameren(a) UE CIPS Genco CILCORP(b) CILCO
-------------------------------------------------------------------------------------------------------------------
Other operations and maintenance....... $ (14) $ (6) $ 5 $ 5 $ (7) $ (6)
Depreciation and amortization.......... (6) (2) - (1) 4 2
Taxes other than income taxes.......... (2) (2) - 2 3 4
Other income and deductions............ 4 4 1 (3) (1) (1)
Interest............................... 2 - 1 3 2 2
Income taxes........................... (7) 4 (5) (4) 3 3
===================================================================================================================
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003. Includes amounts for non-registrant Ameren subsidiaries
as well as intercompany eliminations.
(b) Includes predecessor information for January 2003.
Other Operations and Maintenance
Ameren's other operations and maintenance expenses increased $14 million in
the first quarter of 2004 as compared to the same period in 2003. Excluding the
additional month of CILCORP results in the current year of $15 million, expenses
decreased $1 million. Expenses at Ameren and UE increased primarily due to
higher employee benefit costs and increased power plant maintenance expenses as
a result of the number and timing of outages, but were more than offset by lower
labor costs. See Outlook below for a discussion of the Callaway refueling
outage, which began in early April 2004.
CIPS' and Genco's other operations and maintenance expenses decreased in
the first quarter of 2004, as compared to the same period in 2003, primarily due
to decreased overhead costs and lower labor costs. Genco's expenses also
decreased due to lower power plant maintenance costs.
CILCORP's and CILCO's other operations and maintenance expenses increased
in the first three months of 2004, as compared to the same period in 2003,
primarily due to higher employee benefit costs and increased overhead costs.
56
Depreciation and Amortization
Ameren's depreciation and amortization expenses increased $6 million in the
first quarter of 2004, as compared to the same period in 2003. Excluding the
additional month of CILCORP depreciation and amortization expenses in the
current year ($6 million), expenses were comparable to the same period in 2003.
UE's depreciation and amortization expenses increased in the current
quarter, as compared to the same period in 2003, primarily due to capital
additions.
Depreciation and amortization expenses at CILCORP and CILCO decreased in
the first quarter of 2004, as compared to the same period in 2003, primarily due
to the write-off of software subsequent to our acquisition of CILCORP.
Depreciation and amortization expenses at CIPS and Genco were comparable in
the first quarter of 2004 to the same period in 2003.
Taxes Other Than Income Taxes
Taxes other than income taxes increased at both Ameren and UE in the first
quarter of 2004, as compared to 2003, primarily due to an increase in gross
receipts taxes.
Genco's taxes other than income taxes decreased in the first three months
of 2004, as compared to 2003, primarily due to favorable property tax
assessments in the current year.
Taxes other than income taxes decreased at CILCORP and CILCO in the first
quarter of 2004, as compared to 2003, primarily due to reduced gross receipts
taxes.
Taxes other than income taxes at CIPS were comparable in the first quarter
of 2004 to the same period in 2003.
Other Income and Deductions
Ameren's and UE's other income and deductions increased in the first
quarter of 2004, as compared to the same period in 2003, primarily due to
increased interest and dividend income and an increase in allowance for funds
used during construction. Ameren's increased interest and dividend income was a
result of investing the proceeds from the February 2004 equity offering.
Other income and deductions at Genco decreased in the first quarter of 2004
as compared to the same period in 2003, primarily due to losses on dispositions
of property.
Other income and deductions at CIPS, CILCORP and CILCO were comparable in
the first quarter of 2004 to the same period in 2003.
Interest
Interest expense decreased at Ameren primarily due to the redemption of
Ameren floating rate notes at the end of 2003, as well as redemptions of
long-term debt during 2003 at its subsidiaries as noted below.
Interest expense decreased at CIPS in the first quarter of 2004, as
compared to the same period of 2003, primarily due to the maturity or redemption
of first mortgage bonds in the second quarter of 2003.
Genco's interest expense was reduced in the first quarter of 2004, as
compared to the same period of 2003, primarily due to decreased borrowings from
Ameren's non state-regulated subsidiary money pool.
Interest expense decreased at CILCO in the first quarter of 2004, as
compared to the same period of 2003, primarily due to the redemption of
long-term debt in the second quarter of 2003, and decreased at CILCORP due to
the redemption of long-term debt in the third quarter of 2003.
57
UE's interest expense was comparable in the first quarter of 2004 to the
same period in 2003.
Income Taxes
Income tax expense increased at Ameren, CIPS and Genco in the first quarter
of 2004, as compared to the same period in 2003, primarily due to higher pre-tax
income. Income tax expense decreased at UE, CILCORP and CILCO primarily due to
lower pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
The tariff-based gross margins of Ameren's rate-regulated utility operating
companies continue to be the principal source of cash from operating activities
for Ameren and its rate-regulated subsidiaries. A diversified retail customer
mix of primarily rate-regulated residential, commercial and industrial classes
and a commodity mix of gas and electric service provide a reasonably predictable
source of cash flows. In addition, we plan to utilize short-term debt to support
normal operations and other temporary capital requirements.
The following tables present net cash provided by (used in) operating,
investing and financing activities for the three months ended March 31, 2004 and
2003:
===================================================================================================================
Net Cash Provided By Net Cash Used In Net Cash Provided By
Operating Activities Investing Activities (Used In) Financing Activities
-------------------------------------------------------------------------------------------------------------------
2004 2003 Variance 2004 2003 Variance 2004 2003 Variance
--------------------------------------------------------------------------------------------------
Ameren(a)...... $ 244 $ 226 $ 18 $ (161) $ (629) $ 468 $ 439 $ 69 $ 370
UE............. 105 44 61 (108) (100) (8) (5) 165 (170)
CIPS........... 51 41 10 (9) (17) 8 (44) (25) (19)
Genco.......... 67 32 35 (16) (10) (6) (51) (22) (29)
CILCORP(b)..... 95 70 25 (33) (32) (1) (61) (36) (25)
CILCO.......... 79 75 4 (35) (33) (2) (49) (36) (13)
===================================================================================================================
(a) Excludes amounts for CILCORP and CILCO prior to the acquisition date of
January 31, 2003; includes amounts for non-registrant Ameren subsidiaries
as well as intercompany eliminations.
(b) 2003 amounts include January 2003 predecessor information. CILCORP
consolidates CILCO and therefore includes CILCO amounts in its balances.
Cash Flows from Operating Activities
Cash flows provided by operating activities increased for each of the
Ameren Companies for the three months ended March 31, 2004 as compared to the
same period in 2003. The increase in cash flows provided by operating activities
for Ameren, CIPS and Genco was primarily a result of increased earnings before
the noncash gain from a change in accounting principle discussed above under
Results of Operations. Ameren's cash flows from operating activities also
increased due to cash received in the first quarter of 2004 totaling $9 million
related to UE's settlement of a dispute over mine reclamation issues with a coal
supplier. Genco's cash flows from operating activities also increased in the
first quarter of 2004, compared to the same period in 2003, due to the timing of
receipts of receivables and payments on accounts and wages payable.
UE's, CILCORP's and CILCO's cash flows from operating activities increased
for the three months ended March 31, 2004, compared to the same period in 2003,
due to the timing of receipts of receivables and payments on accounts and wages
payable offset by decreased net earnings discussed above under Results of
Operations. This increase at UE was supplemented by the coal settlement
payments received in the first quarter of 2004 as discussed above.
Cash Flows from Investing Activities
Cash flows used in investing activities decreased for Ameren and CIPS and
increased for UE, Genco, CILCORP and CILCO for the three months ended March 31,
2004 as compared to the same period in 2003. Ameren's decrease in cash used in
investing activities was primarily due to $488 million in cash paid for the
acquisitions of CILCORP and Medina Valley in early 2003. The decrease in
investing activities for Ameren was partially offset by higher construction
expenditures at UE, Genco, CILCORP and CILCO for the three months ended March
31, 2004 as compared to the same
58
period in 2003. Cash flows used in investing activities for CIPS decreased
primarily due to intercompany money pool investments in the first quarter of
2003 totaling $7 million compared to no investments in the first quarter of
2004. UE's, Genco's, CILCORP's and CILCO's increase in cash flows used in
investing activities was primarily related to increased capital expenditures.
Cash Flows from Financing Activities
Ameren
Ameren's cash flows from financing activities increased for the three
months ended March 31, 2004, as compared to the same period in 2003 primarily
due to an increase in proceeds received from the sale of common shares, net of
issuance costs, in the first quarter of 2004 compared to the same period in
2003. Proceeds of $853 million received in the first quarter of 2004 from the
issuance of 19.1 million shares are ultimately expected to be utilized to pay
the cash portion of the purchase price for Ameren's acquisition of Illinois
Power and Dynegy's 20% interest in EEI and to reduce Illinois Power debt assumed
as part of this transaction and pay related premiums. The common stock proceeds
received in the first quarter of 2003 were used to fund a portion of the
acquisitions of CILCORP in January 2003 and Medina Valley in February 2003. See
Note 2 - Acquisitions to our financial statements under Part I, Item 1 of this
report for further explanation.
The increase in cash flows from financing activities at Ameren was offset
by an increase in UE's redemptions, repurchases and maturities of short-term
debt and long-term debt, as well as the termination of UE's nuclear fuel lease,
totaling $326 million in the first quarter of 2004 compared to $288 million in
the same period in 2003. Additionally, an increase in payment of dividends on
common stock, totaling $116 million in the first quarter of 2004 compared to
$102 million in the same period in 2003, due to the increased number of shares
outstanding, offset the increase in cash flows from financing activities at
Ameren. There were no debt issuances in the current quarter.
UE
UE's cash flows from financing activities decreased for the three months
ended March 31, 2004, as compared to the same period in 2003, primarily due to a
decrease in proceeds received from the issuance of long-term debt and borrowings
from the utility money pool which totaled $292 million in the first quarter of
2004 compared to $501 million in 2003. The decrease in cash flows from financing
activities was partially offset by decreased payments on UE's short-term debt
and the termination of the nuclear fuel lease, totaling $217 million in 2004
compared to $252 million in 2003.
CIPS
CIPS' cash flows used in financing activities increased for the three
months ended March 31, 2004, as compared to the same period in 2003, principally
due to the repayment of utility money pool borrowings in the first quarter of
2004, partially offset by the redemption of long-term debt in the first quarter
of 2003.
Genco
Genco's cash flows used in financing activities increased for the three
months ended March 31, 2004, as compared to the same period in 2003, primarily
due to the repayment of the non-utility money pool borrowings, totaling $33
million in 2004 compared to $21 million in 2003, and an increase in dividends
paid to Ameren of $17 million.
CILCORP and CILCO
CILCORP's and CILCO's cash flows used in financing activities increased for
the three months ended March 31, 2004, as compared to the same period in 2003,
primarily due to the repayments of CILCO's $100 million bank term loan in the
first quarter of 2004 compared to repayment of short-term and long-term debt
totaling $36 million in the same period in 2003. The increase in cash flows used
in financing activities was partially offset by borrowings from the intercompany
money pool in the first quarter of 2004. The proceeds received by CILCO from the
money pool borrowings in the first quarter of 2004 were used to repay CILCO's
$100 million bank term loan facility.
59
Short-term Borrowings and Liquidity
Short-term borrowings consist of commercial paper and bank loans
(maturities generally within 1 to 45 days). As of March 31, 2004, short-term
borrowings at Ameren totaled $2 million. UE had no short-term borrowings
outstanding at March 31, 2004, compared to $150 million at December 31, 2003.
CIPS, Genco, CILCORP and CILCO had no short-term borrowings as of March 31, 2004
and December 31, 2003. The average short-term borrowings at UE were $74 million
for the quarter ended March 31, 2004, with a weighted-average interest rate of
1.05%. Peak short-term borrowings for UE were $224 million for the quarter ended
March 31, 2004, with a weighted-average interest rate of 1.06%.
The following table presents the various committed credit facilities of the
Ameren Companies and EEI as of March 31, 2004:
===================================================================================================================
Credit Facility Expiration Amount Committed Amount Available
-------------------------------------------------------------------------------------------------------------------
Ameren:(a)
364-day revolving............... July 2004 $ 235 $ 235
Multi-year revolving............ July 2005 130 130
Multi-year revolving............ July 2006 235 235
-------------------------------------------------------------------------------------------------------------------
UE:
Various 364-day revolving....... through May 2004 154 154
-------------------------------------------------------------------------------------------------------------------
CIPS:
Two 364-day revolving........... through July 2004 15 15
-------------------------------------------------------------------------------------------------------------------
CILCO:
Three 364-day revolving......... through August 2004 60 60
-------------------------------------------------------------------------------------------------------------------
EEI:
Two bank credit facilities...... through June 2004 45 45
-------------------------------------------------------------------------------------------------------------------
Total ........................ $ 874 $ 874
===================================================================================================================
(a) CILCORP and Genco may access the credit facilities through intercompany
borrowing arrangements.
At March 31, 2004, certain of the Ameren Companies had committed bank
credit facilities totaling $829 million, all of which were available for use by
UE, CIPS, CILCO and Ameren Services through a utility money pool arrangement. In
addition, $600 million of the $829 million may be used by Ameren directly and
most of the non rate-regulated affiliates including, but not limited to,
Resources Company, Genco, Marketing Company, AFS, AERG and Ameren Energy through
a non state-regulated subsidiary money pool agreement. We have money pool
agreements with and among our subsidiaries to coordinate and provide for certain
short-term cash and working capital requirements. Separate money pools are
maintained between rate-regulated and non rate-regulated businesses. See Note 8
- - Related Party Transactions to our financial statements under Part I, Item 1 of
this report for a detailed explanation of the money pool arrangements. The
committed bank credit facilities are used to support our commercial paper
programs under which there were no amounts outstanding at March 31, 2004
(December 31, 2003 - $150 million). Access to our credit facilities for any of
our subsidiaries is subject to reduction based on use by affiliates.
EEI also has two bank credit agreements totaling $45 million with
maturities through June 2004, all of which was available at March 31, 2004.
Ameren guarantees $24 million of these facilities. The facilities, which expire
in 2004, will be replaced or renewed by the Ameren Companies and EEI as they
mature on terms consistent with current market conditions for borrowings based
on the credit worthiness of the Ameren Companies and EEI.
In addition to committed credit facilities, a further source of liquidity
for the Ameren Companies is available cash and cash equivalents.
60
Ameren and UE are authorized by the SEC under PUHCA to have up to an
aggregate of $1.5 billion and $1 billion, respectively, of short-term unsecured
debt instruments outstanding at any time. In addition, CIPS, CILCORP and CILCO
each have PUHCA authority to have up to an aggregate of $250 million each of
short-term unsecured debt instruments outstanding at any time. Genco is
authorized by the FERC to have up to $300 million of short-term debt outstanding
at any time.
Long-term Debt and Equity
The following table presents the issuances of common stock and the
issuances, redemptions, repurchases and maturities of long-term debt for the
three months ended March 31, 2004 and 2003. For additional information related
to the terms and uses of these issuances and the sources of funds and terms for
the redemptions, see Note 5 - Debt and Equity Financings to our financial
statements under Part I, Item 1 of this report.
===================================================================================================================
Three Months
Month Issued, Redeemed, --------------------------
Repurchased or Matured 2004 2003
-------------------------------------------------------------------------------------------------------------------
Issuances
Long-term debt
UE:
5.50% Senior secured notes due 2034................ March $ - $ 184
-------------------------------------------------------------------------------------------------------------------
Total Ameren long-term debt issuances.................. $ - $ 184
-------------------------------------------------------------------------------------------------------------------
Common stock
Ameren:
6,325,000 Shares at $40.50......................... January $ - $ 256
19,063,181 Shares at $45.90........................ February 875 -
DRPlus and 401(k)(a)............................... Various 28 29
-------------------------------------------------------------------------------------------------------------------
Total Ameren common stock issuances.................... $ 903 $ 285
-------------------------------------------------------------------------------------------------------------------
Total Ameren long-term debt and common stock issuances. $ 903 $ 469
===================================================================================================================
Redemptions, Repurchases and Maturities
Long-term debt
CIPS:
6.99% Series 97-1 first mortgage bonds due 2003.... March $ - $ 5
CILCO:
Secured bank term loan............................. February 100 -
6.82% First mortgage bonds due 2003................ February - 26
-------------------------------------------------------------------------------------------------------------------
Total Ameren long-term debt redemptions,
repurchases and maturities..................... $ 100 $ 31
===================================================================================================================
(a) Includes issuances of common stock of 0.5 million shares in 2004 and 0.8
million shares in 2003 under our DRPlus plan and in connection with our
401(k) plans.
Ameren
In February 2004, Ameren issued, pursuant to an August 2002 Form S-3 shelf
registration statement, 19.1 million shares of its common stock at $45.90 per
share for net proceeds of $853 million. This issuance substantially depleted all
of the capacity under the August 2002 shelf registration statement. The proceeds
from this offering are expected to provide funds required to pay the cash
portion of the purchase price for our acquisition of Illinois Power and Dynegy's
20% interest in EEI and to reduce Illinois Power debt assumed as part of this
transaction and pay related premiums. Pending such use, and/or if the
acquisition is not completed, we plan to use the net proceeds to reduce present
or future indebtedness and/or repurchase securities of Ameren or its
subsidiaries. A portion of the net proceeds may also be temporarily invested in
short-term instruments. See Note 2 - Acquisitions to our financial statements
under Part I, Item 1 of this report for further information. In the first
quarter of 2004, Ameren also received net proceeds of $28 million from the
issuance of 0.5 million new common shares under its DRPlus and its 401(k) plans
for general corporate purposes.
In March 2004, the SEC declared effective a Form S-3 registration statement
filed by Ameren in February 2004, authorizing the offering of six million
additional shares of its common stock under DRPlus. Shares of common stock
61
sold under the DRPlus are, at Ameren's option, newly issued shares or treasury
shares, or shares purchased in the open market or in privately negotiated
transactions. Ameren is currently selling newly issued shares of its common
stock under DRPlus.
On April 7, 2004, a new Form S-3 shelf registration statement was filed by
Ameren with the SEC. This registration statement, upon being declared effective
by the SEC, will authorize the offering from time to time of up to $2 billion of
various forms of securities including long-term debt, trust preferred securities
and equity securities to finance ongoing construction and maintenance programs,
to redeem, repurchase, repay, or retire outstanding debt, to finance strategic
investments, including our pending acquisition of Illinois Power and a 20%
interest in EEI, and for other general corporate purposes.
UE
In February and March 2004, in connection with the delivery of bond
insurance policies to secure the environmental improvement and pollution control
revenue bonds (Series 1991, 1992, 1998A, 1998B, 1998C, 2000A, 2000B and 2000C)
previously issued by the Missouri Environmental Authority, UE delivered separate
series of its first mortgage bonds (which are subject to fallaway provisions, as
defined in the indenture agreements, similar to those included in its first
mortgage bonds which secure UE's senior secured notes) to secure its respective
obligations under the existing loan agreements with the Missouri Environmental
Authority relating to such environmental improvement and pollution control
revenue bonds. As a result, the environmental improvement and pollution control
revenue bonds were classified as Aaa, AAA and AAA by Moody's, S&P's and Fitch's,
respectively.
UE had a lease agreement, which was scheduled to expire on August 31, 2031,
that provided for the financing of a portion of its nuclear fuel that was
processed for use or was consumed at UE's Callaway Nuclear Plant. In February
2004, UE terminated this lease with a final payment of $67 million.
CILCORP and CILCO
In February 2004, CILCO repaid its secured bank term loan totaling $100
million with available cash and borrowings from the utility money pool.
In conjunction with the acquisition of CILCORP in 2003, CILCORP's long-term
debt was adjusted to fair value. The amortization related to the fair value
adjustments was approximately $2 million for the three months ended March 31,
2004 and was recorded in interest expense in the Consolidated Statements of
Income for Ameren and CILCORP.
Indebtedness Provisions, Other Covenants and Off Balance Sheet Arrangements
See Note 4 - Short-term Borrowings and Liquidity to our financial
statements under Part I, Item 1 of this report for a discussion of the
indebtedness provisions contained in certain of the Ameren Companies' bank
credit facilities. Also see Note 5 - Long-term Debt and Equity Financings to our
financial statements under Part I, Item 1 of this report for a discussion of
off-balance sheet arrangements and of the covenants and provisions contained in
certain of the Ameren Companies' indenture agreements and Articles of
Incorporation.
At March 31, 2004, Ameren and its subsidiaries were in compliance with
their credit agreement provisions and covenants.
We rely on our short-term and long-term capital markets as a significant
source of funding for capital requirements not satisfied by our operating cash
flows. Our inability to raise capital on favorable terms, particularly during
times of uncertainty in the capital markets, could negatively impact our ability
to maintain or grow our businesses. Based on our current credit ratings, we
believe that we will continue to have access to the capital markets. However,
events beyond our control may create uncertainty in the capital markets such
that our cost of capital would increase or our inability to access the capital
markets would be adversely affected. All of the Ameren Companies expect to fund
maturities of long-term debt and contractual obligations through a combination
of cash flow from operations and external financing.
62
Dividends
The amount and timing of dividends payable on Ameren's common stock are
within the sole discretion of Ameren's Board of Directors. Ameren's Board of
Directors has not set specific targets or payout parameters when declaring
common stock dividends. However, the Board considers various issues including
Ameren's historic earnings and cash flow, projected earnings, cash flow and
potential cash flow requirements, dividend payout rates at other utilities,
return on investments with similar risk characteristics, and overall business
considerations. Dividends paid by Ameren to stockholders during the first three
months of 2004 totaled $116 million or 63.5 cents per share (2003 - $102 million
or 63.5 cents per share). On April 27, 2004, Ameren's Board of Directors
declared a quarterly common stock dividend of 63.5 cents per share payable on
June 30, 2004, to stockholders of record on June 9, 2004.
UE's preferred stock dividend is payable August 15, 2004, to shareholders
of record on July 20, 2004. CIPS' preferred stock dividend is payable September
30, 2004, to shareholders of record on September 15, 2004. CILCO's preferred
stock dividend was paid on April 1, 2004, to shareholders of record on March 5,
2004.
Certain of our financial agreements and corporate organizational documents
contain covenants and conditions that, among other things, provide restrictions
on the Ameren Companies' payment of dividends. Ameren would experience
restrictions on dividend payments if it were to defer contract adjustment
payments on its equity security units. UE would experience restrictions on
dividend payments if it were to extend or defer interest payments on its
subordinated debentures. CIPS has provisions restricting dividend payments based
on ratios of common stock to total capitalization along with provisions related
to certain operating expenses and accumulations of earned surplus. Genco's
indenture includes restrictions which prohibit making any dividend payments if
debt service coverage ratios are below a defined threshold. CILCORP has
restrictions in the event leverage ratio and interest coverage ratio thresholds
are not met or if CILCORP's senior long-term debt does not have specified
ratings as described in its indenture. CILCO has restrictions on dividend
payments relative to the ratio of its balance of retained earnings to the annual
dividend requirement on its preferred stock and amounts to be set aside for any
sinking fund retirement of its 5.85% Series Preferred Stock.
The following table presents dividends paid directly or indirectly to
Ameren by its subsidiaries for the three months ended March 31, 2004 and 2003:
===================================================================================================================
Three Months
-------------------------------------------------------------------------------------------------------------------
2004 2003
---- ----
UE.................................................................. $ 79 $ 82
CIPS................................................................ 19 19
Genco............................................................... 18 1
CILCORP (parent company only)....................................... - -
CILCO............................................................... - -
Non-registrants..................................................... - -
-------------------------------------------------------------------------------------------------------------------
Dividends paid to Ameren............................................ $ 116 102
===================================================================================================================
Credit Ratings
As a result of the announcement of Ameren signing a definitive agreement to
acquire Illinois Power and a 20% interest in EEI from Dynegy in February 2004,
credit rating agencies placed Ameren Corporation's and its subsidiaries' debt
under review for a possible downgrade.
Any adverse change in the Ameren Companies' credit ratings may reduce their
access to capital and/or increase the costs of borrowings resulting in a
negative impact on earnings. At March 31, 2004, if the Ameren Companies were to
receive a sub-investment grade rating (less than BBB- or Baa3), Ameren, UE,
CIPS, Genco, CILCORP and CILCO could have been required to post collateral for
certain trade obligations amounting to $46 million, $12 million, none, $2
million, $10 million and $10 million, respectively. In addition, the cost of
borrowing under our credit facilities would increase or decrease based on credit
ratings. A credit rating is not a recommendation to buy, sell or hold securities
and should be evaluated independently of any other rating. Ratings are subject
to revision or withdrawal at any time by the assigning rating organization.
63
OUTLOOK
We expect the following industry-wide trends and company-specific issues to
impact earnings in 2004 and beyond:
o Economic conditions, which principally impact native load demand,
particularly from our industrial customers, have been weak for the past few
years, but improved in 2003 and early 2004.
o Ameren, UE and CIPS have historically achieved weather-adjusted growth in
their native electric residential and commercial load of approximately 2%
per year and expect this trend to continue for at least the next few years.
o Electric rates in UE's, CIPS' and CILCO's Illinois service territories are
legislatively fixed through January 1, 2007. An electric rate case
settlement in UE's Missouri service territory has resulted in annual
reductions of $50 million beginning on April 1, 2002, $30 million on April
1, 2003, and $30 million on April 1, 2004. In addition, electric rates in
Missouri cannot change prior to July 1, 2006, subject to certain exclusions
outlined in UE's rate settlement.
o Power prices in the Midwest impact the amount of revenues UE, Genco and
AERG can generate by marketing any excess power into the interchange
markets. Power prices in the Midwest also impact the cost of power we
purchase in the interchange markets. Long-term power prices continue to be
generally soft in the Midwest, despite a significant increase in power
prices in 2003 relative to 2002, due in part to higher prices for natural
gas.
o Increased expenses associated with rising employee benefit costs and higher
insurance and security costs associated with additional measures UE has
taken, or may have to take, at its Callaway Nuclear Plant and other
operating plants related to world events.
o UE's Callaway Nuclear Plant is undergoing an extended refueling outage in
the second quarter of 2004, which includes the replacement of condenser
bundles. This outage is expected to last 45 - 50 days and cost $40 million
to $55 million for maintenance and purchased power costs. In addition, the
amount of excess power available for sale from UE's power plants will be
reduced. Refueling outages occur approximately every 18 months and
typically include the replacement of fuel and the performance of
maintenance and inspections. Routine refueling outages have historically
lasted 30 - 35 days. If inspections discover items requiring additional
maintenance, the outage period could be longer, and cost significantly
more, than expected. UE's fall 2005 refueling outage is expected to last 70
days due to the installation of new steam generator units during the
refueling and is expected to be higher in cost.
o In January 2004, the MoPSC approved a settlement with UE authorizing an
annual gas delivery rate increase of approximately $13 million, which went
into effect on February 15, 2004. The settlement provides that gas delivery
rates cannot change prior to July 1, 2006, subject to certain exclusions.
In October 2003, the ICC issued orders awarding CILCO an increase in annual
gas delivery rates of $9 million and awarding CIPS and UE increases in
annual gas delivery rates of $7 million and $2 million, respectively that
went into effect in November 2003.
o In the second quarter of 2004, UE received a refund of $13 million and CIPS
received a refund of $5 million upon entering the Midwest ISO. These
refunds were for fees previously paid to exit the Midwest ISO. However,
Ameren, UE and CIPS will incur higher ongoing operation costs and may lose
some revenue as a result of participating in the Midwest ISO. See Note 3 -
Rate and Regulatory Matters to our financial statements under Part I, Item
1 of this report for additional information.
o Ameren, CILCORP and CILCO expect to realize further CILCORP integration
synergies associated with reduced overhead expenses and lower fuel costs.
o Ameren expects the acquisition of Illinois Power to be accretive to
earnings in the first two years of ownership. In February 2004, we sold
19.1 million shares of new Ameren common stock. Proceeds from this sale and
future offerings are expected to ultimately be used to finance the cash
portion of the purchase price of Illinois Power and Dynegy's 20% interest
in EEI and to reduce Illinois Power debt assumed as part of this
transaction and pay any related premiums. However, prior to the closing of
the acquisition of Illinois Power, we expect the new common shares to be
dilutive to earnings per share.
In the ordinary course of business, we evaluate strategies to enhance our
financial position, results of operations and liquidity. These strategies may
include potential acquisitions, divestitures, and opportunities to reduce costs
or increase revenues, and other strategic initiatives in order to increase
Ameren's shareholder value. We are unable to predict which, if any, of these
initiatives will be executed, as well as the impact these initiatives may have
on our future financial position, results of operations or liquidity, however
the impact could be material.
64
RISK FACTORS
Ameren may not be able to complete its acquisition of Illinois Power. If
Ameren does not complete the acquisition, dilution to its earnings per share
will result unless Ameren is able to otherwise use the proceeds from the common
stock it issued in February 2004, so as to avoid or mitigate such dilution.
On February 2, 2004, Ameren entered into an agreement with Dynegy to
purchase the stock of Illinois Power and Dynegy's 20% ownership interest in EEI.
The total transaction value is approximately $2.3 billion, including the
assumption of approximately $1.8 billion of Illinois Power debt and preferred
stock. Ameren's financing plan for this transaction includes the issuance of new
Ameren common stock, which in total, is expected to equal at least 50% of the
transaction value. Ameren currently expects to issue common stock to finance the
cash portion of the purchase price, to reduce Illinois Power debt assumed as
part of this transaction and pay any related premiums and possibly to reduce
present or future indebtedness and/or repurchase securities of Ameren or its
subsidiaries. Ameren issued and sold 19.1 million shares of common stock on
February 6, 2004, for this purpose. The acquisition is subject to various
regulatory approvals, including the ICC, the SEC and the FERC and other
customary closing conditions. See Note 3 - Rate and Regulatory Matters to our
financial statements under Part I. Item 1 of this report for information as to
the status of these regulatory proceedings. On April 14, 2004, the FCC has
consented to the transfer of control and, on April 30, 2004, the initial 30
calendar day waiting period expired without a request by the FTC or DOJ for
additional information or documents under the Hart-Scott-Rodino Act. Although
Ameren expects to complete the transaction by the end of 2004, it cannot be
certain that all of the required approvals will be obtained, or the other
closing conditions will be satisfied, within that time frame, if at all, or
without terms and conditions that may have a material adverse effect on our
operations. Ameren is also relying on the ability of Dynegy to close the sale of
Illinois Power when the required approvals are received. If Ameren is unable to
complete the acquisition, the issuance of the common stock on February 6, 2004,
and any other common stock issued with respect to the acquisition prior to its
closing will result in dilution to Ameren's earnings per share unless it is able
to otherwise use the proceeds from the common stock it issued in February 2004,
in a manner that will avoid or mitigate such dilution.
If Ameren is able to complete its acquisition of Illinois Power, Ameren may
not be able to successfully integrate it into its other businesses or achieve
the benefits it anticipates.
If Ameren completes the acquisition of Illinois Power, it cannot assure you
that it will be able to successfully integrate Illinois Power with its other
businesses. The integration of Illinois Power with its other businesses will
present significant challenges and, as a result, Ameren may not be able to
operate the combined company as effectively as expected. Ameren may also fail to
achieve the anticipated benefits of the acquisition as quickly or as cost
effectively as anticipated or may not be able to achieve those benefits at all.
While Ameren expects that this acquisition will be accretive to earnings per
share in the first full year of operation after the transaction is completed,
this expectation is based on important assumptions, including assumptions
related to interest rates and market prices for power, which may ultimately be
incorrect. As a result, if Ameren is unable to integrate its businesses
effectively or achieve the benefits anticipated, our financial position, results
of operations and liquidity may be materially adversely affected.
The electric and gas rates that certain of the Ameren Companies are allowed
to charge in Missouri and Illinois are largely set through 2006. This "rate
freeze," along with other actions of regulators, can significantly affect our
earnings, liquidity and business activities and are largely outside our control.
The rates that certain of the Ameren Companies are allowed to charge for
their services are the single most important item influencing the financial
position, results of operations and liquidity of the Ameren Companies. We are
highly regulated and the regulation of the rates that we charge our customers is
determined, in large part, outside of our control by governmental organizations,
including the MoPSC, the ICC and the FERC. Ameren, UE, CIPS, Genco and CILCORP
are also subject to regulation by the SEC under the PUHCA. Decisions made by
these regulators could have a material impact on our financial position, results
of operations and liquidity.
As a part of the settlement of UE's Missouri electric rate case in 2002, UE
is subject to a rate moratorium providing for no changes in its electric rates
in Missouri before July 1, 2006, subject to limited statutory and other
exceptions. A rate reduction of $30 million went into effect on April 1, 2004,
which is the last portion of the $110 million rate reduction included in the
stipulation entered into as part of the settlement of the Missouri electric rate
case. In addition, as a provision of the Illinois legislation related to the
restructuring of the Illinois electric industry, a rate freeze is in
65
effect in Illinois through January 1, 2007. This Illinois legislation also
contains a provision requiring that earnings from the Illinois jurisdiction in
excess of certain levels be shared equally with UE's, CIPS' and CILCO's Illinois
customers through 2006. This Illinois legislation is also applicable to Illinois
Power. Furthermore, as part of the settlement of UE's Missouri gas rate case,
which was approved by the MoPSC on January 13, 2004, UE agreed to a rate
moratorium providing for no changes in its gas delivery rates prior to July 1,
2006, subject to certain exceptions (the increased rates approved as part of the
settlement became effective on February 15, 2004).
As a part of the settlement of UE's Missouri electric rate case in 2002, UE
also undertook to use commercially reasonable efforts to make critical energy
infrastructure investments of $2.25 billion to $2.75 billion from January 1,
2002 through June 30, 2006, including, among other things, the addition of more
than 700 megawatts of new generation capacity (240 megawatts of which was added
in 2002) and the replacement of steam generators at UE's Callaway Nuclear Plant.
The amount of energy infrastructure investment through June 2006, described in
the settlement is consistent with UE's previously disclosed estimate of
construction expenditures UE expects to make over the same time period. However,
UE's agreement to a rate moratorium will result in these capital expenditures
not becoming recoverable in rates, or earning a return, before July 1, 2006.
Therefore, UE's undertakings with respect to making energy infrastructure
investments and funding new programs, coupled with the rate reductions and rate
moratorium described above, could result in increased financing requirements for
UE and thus have a material impact on our liquidity.
The Ameren Companies do not have the benefit of a fuel adjustment clause in
either Missouri or Illinois for their electric operations that would allow them
to recover increased fuel and power costs from customers. Therefore, to the
extent that we have not hedged our fuel and power costs, we are exposed to
changes in fuel and power prices to the extent fuel for our electric generating
facilities and power must be purchased on the open market in order for us to
serve our customers.
Steps taken and being considered at the federal and state levels continue
to change the structure of the electric industry and utility regulation. At the
federal level, the FERC has been mandating changes in the regulatory framework
in which transmission-owning public utilities, such as UE, CIPS and CILCO
operate. In Missouri, where a majority of our retail electric revenues are
derived, restructuring bills have been introduced in the past, but no
legislation has been passed. The Illinois Customer Choice Law provides for
electric utility restructuring and retail direct access. Retail direct access,
which allows customers to choose their electric generation supplier, was first
offered to Illinois residential customers on May 1, 2002. Although retail direct
access in Illinois has not had a negative effect on Ameren's revenues or
liquidity, we expect competitive forces in the electric supply segment of our
business to continue to increase.
The potential negative consequences associated with further electric
industry restructuring in our service territories, if it occurs, could be
significant and could include the impairment and writedown of certain assets,
including generation related plant and net regulatory assets, lower revenues,
reduced profit margins and increased costs of capital and operations expenses.
Increased federal and state environmental regulation could require UE,
Genco and CILCO to incur large capital expenditures and increase operating
costs.
Approximately 65% of Ameren's generating capacity is coal-fired. The
balance is nuclear, gas-fired, hydro and oil-fired. The EPA has recently issued
proposed regulations with respect to SO2, NOx and mercury emissions from
coal-fired power plants. These new rules, if adopted, would require significant
additional reductions in these emissions from our power plants in phases,
beginning in 2010. The rules are currently under a public review and comment
period, and may change before being issued as final late in 2004 or early 2005.
Preliminary estimates of capital costs based on current technology on the Ameren
systems to comply with the SO2 and NOx rules, as proposed, range from $400
million to $600 million by 2010, with an additional $500 million to $800 million
by 2015. The proposed mercury regulations contain a number of options and the
final control requirements are highly uncertain. Ameren anticipates additional
capital costs to comply with the mercury rules could range from $300 million to
$500 million by 2010, with UE incurring approximately half of the costs and
Genco incurring most of the remaining costs. Depending upon the final mercury
rules, additional amounts could be required to comply with mercury rules by
2018.
In addition, Illinois has developed a NOx control regulation for utility
generating plant boilers consistent with an EPA program aimed at reducing ozone
levels in the eastern United States. In February 2002, the EPA proposed similar
66
rules for Missouri. Ameren currently estimates that the remaining capital
expenditures could range from $210 million to $250 million between 2004 and 2008
in order to comply with the final NOx regulations in Missouri and Illinois. This
estimate includes the assumption that these rules will require the installation
of selective catalytic reduction technology on some units, as well as additional
controls.
We are unable to predict the ultimate effect of any new environmental
regulations, guidelines, enforcement initiatives or legislation on our financial
position, results of operations or liquidity. Any of these factors would add
significant pollution control costs to UE's, Genco's and CILCO's generating
assets and therefore, could also increase financing requirements for some of the
Ameren Companies. While costs incurred by UE would be eligible for recovery in
rates, subject to MoPSC or ICC approval, as applicable, there is no similar
mechanism for recovery of costs by Genco or CILCO in Illinois.
UE's and CIPS' participation in a RTO could increase costs, reduce revenues
and reduce UE's and CIPS' control over their transmission assets.
In December 1999, the FERC issued Order 2000 requiring all utilities
subject to FERC jurisdiction to state their intentions for joining a RTO. The
MoPSC issued an order in early 2004 authorizing UE to participate in the Midwest
ISO for a five year period, with participation after that period subject to
further approvals by the MoPSC. Subsequently, the FERC issued a final order
allowing UE's and CIPS' participation in the Midwest ISO. Under these orders,
the MoPSC continues to set the transmission component of UE's rates to serve its
bundled retail load. CILCO is already a member of the Midwest ISO and previously
transferred functional control of its transmission system to the Midwest ISO.
On May 1, 2004, functional control of the UE and CIPS transmission systems
was transferred to the Midwest ISO through GridAmerica LLC, or Grid America. The
participation by UE and CIPS in the Midwest ISO is expected to increase annual
costs by $5 million to $10 million in the aggregate and could result in a
decrease in annual revenues of anywhere between zero and $10 million in the
aggregate. UE and CIPS may also be required to expand their transmission systems
according to decisions made by a RTO rather than their internal planning
process. In addition, we are unable to determine the full impact of the Energy
Markets Tariff tendered by the Midwest ISO for filing at the FERC in March 2004
(discussed in Note 3 - Rate and Regulatory Matters to our financial statements
under Part I, Item 1 of this report) until further information is available
regarding the implementation of the Energy Markets Tariff.
Until UE and CIPS achieve some degree of operational experience
participating in the Midwest ISO through GridAmerica, we are unable to predict
the ultimate impact that such participation or ongoing RTO developments at the
FERC or other regulatory authorities will have on our financial position,
results of operations or liquidity.
The inability of UE and CIPS to recover "through and out" transmission
revenues could result in a material net revenue reduction.
Through orders issued during late 2003 and early 2004, the FERC had ordered
the elimination of regional-through-and-out rates assessed by the Midwest ISO
that involved transmission service from the Midwest ISO regions into the PJM
Interconnection LLC (PJM) region to be effective May 1, 2004. However, on March
19, 2004, the FERC accepted an agreement among affected transmission owners that
retains the regional-through-and-out rates until December 1, 2004, and provides
for continued negotiations aimed at developing a long-term transmission pricing
structure to eliminate seams between the PJM and Midwest ISO regions based on
specified pricing principles. Until the long-term transmission pricing structure
has been established, UE and CIPS cannot predict the ultimate impact that such
structure will have on their costs and revenues.
The substance and implementation of standard market design rules by the
FERC is uncertain and may adversely affect the way in which UE, CIPS and CILCO
operate their transmission assets.
On July 31, 2002, the FERC issued its standard market design NOPR. The NOPR
proposes a number of changes to the way the current wholesale transmission
service and energy markets are operated. Specifically, the NOPR proposes that
all jurisdictional transmission facilities be placed under the control of an
independent transmission provider (similar to a RTO), proposes a new
transmission service tariff that provides a single form of transmission service
for all users of the transmission system including bundled retail load, and
proposes a new energy market and congestion management system that uses
locational marginal pricing as its basis. In our initial comments on the NOPR,
which were filed at the FERC on November 15, 2002, we expressed our concern with
the potential impact of the proposed rules in their current form on the cost and
reliability of service to retail customers. We also proposed that certain
modifications be made to
67
the proposed rules in order to protect transmission owners from the possibility
of trapped transmission costs that might not be recoverable from ratepayers as a
result of inconsistent regulatory policies. We filed additional comments on the
remaining sections of the NOPR during the first quarter of 2003.
In April 2003, the FERC issued a "white paper" reflecting comments received
in response to the NOPR. More specifically, the white paper indicated that the
FERC will not assert jurisdiction over the transmission rate component of
bundled retail service and will insure that existing bundled retail customers
retain their existing transmission rights and retain rights for future load
growth in its final rule. Moreover, the white paper acknowledged that the final
rule will provide the states with input on resource adequacy requirements,
allocation of firm transmission rights, and transmission planning. The FERC also
requested input on the flexibility and timing of the final rule's
implementation.
Although issuance of the final rule is uncertain and its implementation
schedule is still unknown, the Midwest ISO was in the process of implementing a
separate market design similar to the proposed market design in the NOPR. In
July 2003, the Midwest ISO filed with the FERC a revised OATT codifying the
terms and conditions under which it will implement the new market design.
Thereafter, on October 17, 2003, the Midwest ISO filed a motion to withdraw its
revised OATT. On October 29, 2003, the FERC issued a series of orders granting
the motion for withdrawal of the revised OATT and providing guidance to be
followed by the Midwest ISO in developing a new energy market design in the
future. In March 2004, the Midwest ISO tendered for filing at the FERC a
proposed Energy Markets Tariff, which is intended to supercede its existing OATT
(see Note 3 - Rate and Regulatory Matters to our financial statements under Item
I, Part 1 of this report). Until the FERC issues a final rule and the Midwest
ISO finalizes its new market design, we are unable to predict the ultimate
impact of the NOPR or the Midwest ISO new market design on our future financial
position, results of operations or liquidity.
Increasing costs associated with our defined benefit retirement plans,
healthcare plans and other employee related benefits may adversely affect our
results of operations, liquidity and financial position.
The Ameren Companies made cash contributions totaling $25 million and $31
million to defined benefit retirement plans during 2003 and 2002, respectively.
In addition, a minimum pension liability was recorded at December 31, 2002,
which resulted in an after-tax charge to OCI and a reduction in stockholders'
equity for Ameren of $102 million. At December 31, 2003, the minimum pension
liability was reduced, resulting in OCI of $46 million and an increase in
stockholders' equity. The Ameren Companies expect to be required under the ERISA
to fund an average of approximately $115 million annually from 2005 through
2008, in order to maintain minimum funding levels for our pension plans. These
amounts are estimates and may change based on actual stock market performance,
changes in interest rates, and any pertinent changes in government regulations,
each of which could also result in a requirement to record an additional minimum
pension liability. Furthermore, if Ameren completes its acquisition of Illinois
Power, we could incur material funding requirements with respect to Illinois
Power's existing defined benefit retirement plans.
In addition to the costs of our retirement plans, the costs to us of
providing healthcare benefits to our employees and retirees have increased
substantially in recent years. We believe that our employee benefit costs,
including costs related to healthcare plans for our employees and former
employees, will continue to rise. The increasing costs and funding requirements
associated with our defined benefit retirement plans, healthcare plans and other
employee benefits may adversely affect our results of operations, liquidity or
financial position.
UE's, Genco's and CILCO's electric generating facilities are subject to
operational risks that could result in unscheduled plant outages, unanticipated
operation and maintenance expenses and increased power purchase costs.
UE, CILCO, Genco, AERG, Medina Valley, and EEI own and operate coal,
nuclear, gas-fired, hydro and oil-fired generating facilities constituting
approximately 14,600 megawatts (net) of installed capability. Operation of
electric generating facilities involves certain risks which can adversely affect
energy output and efficiency levels. Included among these risks are:
o increased prices for fuel and fuel transportation as existing contracts
expire,
o facility shutdowns due to a breakdown or failure of equipment or processes,
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o disruptions in the delivery of fuel and lack of adequate inventories,
o labor disputes,
o inability to comply with regulatory or permit requirements,
o disruptions in the delivery of electricity,
o increased capital expenditures requirements, including those due to
environmental regulation,
o operator error, and
o unusual or adverse weather conditions, including catastrophic events such
as fires, explosions, floods or other similar occurrences affecting
electric generating facilities.
A substantial portion of Genco's and CILCO's generating capacity is
committed under affiliate contracts which expire over the next several years.
Genco and CILCO have several electric power supply agreements under which
Genco and CILCO directly or indirectly supply the full requirements of UE, CIPS
and CILCO, including the following:
o Under two electric power supply agreements, Genco is obligated to supply to
Marketing Company, and Marketing Company, in turn, is obligated to supply
to CIPS, all of the energy and capacity needed by CIPS to offer service for
resale to its native load customers and to fulfill CIPS' other obligations
under all applicable federal and state tariffs or contracts. Any power not
used by CIPS is sold by Marketing Company under various long-term wholesale
and retail contracts. The agreement between CIPS and Marketing Company
expires on December 31, 2004. The agreement between Genco and Marketing
Company can be terminated by either party upon at least one year's notice,
but may not be terminated prior to December 31, 2004.
o AERG has an electric power supply agreement with CILCO to supply it
sufficient power to meet its native load requirements. This agreement
expires on December 31, 2004.
The affected Ameren Companies currently plan to pursue renewals or
extensions of these full requirements agreements as they expire. Such renewals
or extensions will depend on compliance with federal and state regulatory
requirements in effect at the time. Extensions through December 31, 2006, of the
agreements to which CIPS and CILCO are a party have been required by the ICC in
its order approving our acquisition of CILCORP and CILCO; however, approval by
the FERC is also required.
Midwest power markets have experienced high levels of new capacity
development over the last several years, which, in part, have contributed to
soft long-term power prices in this region. Owners of generating capacity in the
Midwest are actively seeking markets for their energy and capacity and have
asked our regulators to closely scrutinize power supply arrangements among our
subsidiaries when we have sought approval to enter into them. Even though the
ICC has required those extensions, it cannot be predicted whether obtaining
extensions of these agreements, described above, when they expire will be
successful. To the extent Genco or CILCO cannot secure extensions or other
long-term replacement power sale contracts for the energy and capacity currently
committed under these agreements, our generating subsidiaries and Marketing
Company will face competition from other power suppliers in the Midwest and will
be exposed to price risk.
Genco participates with UE in an agreement to jointly dispatch its
generating facilities with those of UE, which thereby produces benefits and
efficiencies for both generating parties. Pending or future federal and state
regulatory proceedings and policies may evolve in ways that could impact Genco's
ability to continue to participate in these affiliate transactions on current
terms. For example, as a result of the pending MoPSC proceeding relating to the
transfer of UE's Illinois-based utility business, there is uncertainty as to the
terms of the joint dispatch agreement and also as to its duration. The
termination of the agreement, or modifications to it, could have a material
adverse effect on UE or Genco.
Genco's and CILCO's electric generating facilities must compete for the
sale of energy and capacity, which exposes them to price risk.
As owners of non rate-regulated electric generating facilities, Genco
(4,800 megawatts) and CILCO (1,100 megawatts) will not have any recovery of
their costs or any specified rate of return set by a regulatory body. Of these
non rate-regulated electric generating facilities, approximately 3,500 megawatts
are currently under full requirements contracts with our affiliates, including
the contracts referred to in the immediately preceding risk factor. The
remainder
69
of the generating capacity must compete for the sale of energy and capacity. UE
is currently seeking regulatory approval of the transfer by Genco to it of
approximately 550 megawatts of CTs at Pinckneyville and Kinmundy, Illinois,
which transfer is expected to occur in 2004, with the result that those CTs will
no longer be non rate-regulated.
To the extent electric capacity generated by these facilities is not under
contract to be sold, either now or in the future, the revenues and results of
operations of these non rate-regulated subsidiaries will generally depend on the
prices that they can obtain for energy and capacity in Illinois and adjacent
markets. Among the factors that could influence such prices (all of which are
beyond our control to a significant degree) are:
o the current and future market prices for natural gas, fuel oil and coal,
o current and forward prices for the sale of electricity,
o the extent of additional supplies of electric energy from current
competitors or new market entrants,
o the pace of deregulation in our market area and the slowing expansion of
deregulated markets,
o the regulatory and pricing structures developed for Midwest energy markets
as they continue to evolve and the pace of development of regional markets
for energy and capacity outside of bilateral contracts,
o future pricing for, and availability of, transmission services on
transmission systems, the effect of RTOs, development and export energy
transmission constraints, which could limit the ability to sell energy in
markets adjacent to Illinois,
o the rate of growth in electricity usage as a result of population changes,
regional economic conditions and the implementation of conservation
programs, and
o climate conditions prevailing in the Midwest market from time to time.
UE's ownership and operation of a nuclear generating facility creates
business, financial and waste disposal risks.
UE owns the Callaway Nuclear Plant, which represents approximately 14% of
UE's generation capability. Therefore, UE is subject to the risks of nuclear
generation, which include the following:
o the potential harmful effects on the environment and human health resulting
from the operation of nuclear facilities and the storage, handling and
disposal of radioactive materials,
o limitations on the amounts and types of insurance commercially available to
cover losses that might arise in connection with UE's nuclear operations or
those of others in the United States,
o uncertainties with respect to contingencies and assessment amounts if
insurance coverage is inadequate,
o increased public and governmental concerns over the adequacy of security at
nuclear power plants, and
o uncertainties with respect to the technological and financial aspects of
decommissioning nuclear plants at the end of their licensed lives (UE's
facility operating license for the Callaway Nuclear Plant expires in 2024).
The NRC has broad authority under federal law to impose licensing and
safety related requirements for the operation of nuclear generation facilities.
In the event of non-compliance, the NRC has the authority to impose fines or
shut down a unit, or both, depending upon its assessment of the severity of the
situation, until compliance is achieved. Revised safety requirements promulgated
by the NRC could necessitate substantial capital expenditures at nuclear plants
such as UE's. In addition, although UE has no reason to anticipate a serious
nuclear incident at its plant, if an incident did occur, it could harm UE's
results of operations or financial position. A major incident at a nuclear
facility anywhere in the world could cause the NRC to limit or prohibit the
operation or licensing of any domestic nuclear unit.
Our energy risk management strategies may not be effective in managing fuel
and electricity pricing risks, which could result in unanticipated liabilities
to us or increased volatility of our earnings.
We are exposed to changes in market prices for natural gas, fuel,
electricity and emission credits. Prices for natural gas, fuel, electricity and
emission credits may fluctuate substantially over relatively short periods of
time and expose us to commodity price risk. We utilize derivatives such as
forward contracts, futures contracts, options and swaps to manage these risks.
We attempt to manage our exposure from these activities through enforcement of
established risk limits and risk management procedures. We cannot assure you
that these strategies will be successful in managing our pricing risk, or that
they will not result in net liabilities to us as a result of future volatility
in these markets.
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In addition, although we routinely enter into contracts to offset our
positions (i.e., to hedge our exposure to the risks of demand, market effects of
weather and changes in commodity prices), we do not always hedge the entire
exposure of our operations from commodity price volatility. Furthermore, our
ability to hedge our exposure to commodity price volatility depends on liquid
commodity markets. As a result, to the extent the commodity markets are
illiquid, we may not be able to execute our risk management strategies, which
could result in greater open positions than we would prefer at a given time. To
the extent that open positions exist, fluctuating commodity prices can improve
or diminish our financial results and financial position.
Our businesses are dependent on our ability to successfully access the
capital markets. We may not have access to sufficient capital in the amounts and
at the times needed.
We rely on access to short-term and long-term capital markets as a
significant source of liquidity and funding for capital requirements not
satisfied by our operating cash flows. The inability to raise capital on
favorable terms, particularly during times of uncertainty in the capital
markets, could negatively impact our ability to maintain and grow our
businesses. Based on our current credit ratings, we believe that we will
continue to have access to the capital markets. However, events beyond our
control may create uncertainty in the capital markets such that our cost of
capital would increase or our ability to access the capital markets would be
adversely affected.
REGULATORY MATTERS
See Note 3 - Rate and Regulatory Matters to our financial statements under
Part I, Item 1 of this report.
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 such as interest rates. The following discussion of our 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. We handle market risks in accordance with
established policies, which may include entering into various derivative
transactions. In the normal course of business, we also face risks that are
either non-financial or non-quantifiable. Such risks principally include
business, legal and operational risks and are not represented in the following
discussion.
Our risk management objective is to optimize our physical generating assets
within prudent risk parameters. Our risk management policies are set by a Risk
Management Steering Committee, which is comprised of senior-level Ameren
officers.
Interest Rate Risk
We are exposed to market risk through changes in interest rates associated
with:
o long-term and short-term variable-rate debt;
o fixed-rate debt;
o commercial paper;
o auction-rate long-term debt; and
o auction-rate preferred stock.
We manage our interest rate exposure by controlling the amount of these
instruments we hold within our total capitalization portfolio and by monitoring
the effects of market changes in interest rates.
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The following table presents the estimated increase (decrease) in our
annual interest expense and net income if interest rates were to change by 1% on
variable rate debt outstanding at March 31, 2004:
===================================================================================================================
Interest Expense Net Income(a)
-------------------------------------------------------------------------------------------------------------------
Ameren.............................................................. $ 6 $ (4)
UE.................................................................. 7 (4)
CIPS................................................................ 1 (1)
Genco............................................................... 1 (1)
CILCORP(b).......................................................... 2 (1)
CILCO............................................................... 2 (1)
===================================================================================================================
(a) Calculations are based on an effective tax rate of 37%.
(b) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
The model 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 our 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 our financial structure.
Credit Risk
Credit risk represents the loss that would be recognized if counterparties
fail to perform as contracted. NYMEX-traded futures contracts are supported by
the financial and credit quality of the clearing members of the NYMEX and have
nominal credit risk. On all other transactions, we are exposed to credit risk in
the event of nonperformance by the counterparties to the transaction.
Our physical and financial instruments are subject to credit risk
consisting of trade accounts receivables, executory contracts with market risk
exposures and leveraged lease investments. The risk associated with trade
receivables is mitigated by the large number of customers in a broad range of
industry groups comprising our customer base. No non-affiliated customer
represents greater than 10%, in the aggregate, of our accounts receivable. Our
revenues are primarily derived from sales of electricity and natural gas to
customers in Missouri and Illinois. UE and Genco have credit exposure associated
with accounts receivables from non-affiliated companies for interchange sales.
At March 31, 2004, UE's, Genco's and Marketing Company's combined credit
exposure to non-investment grade counterparties related to interchange sales was
$4 million, net of collateral. We establish credit limits for these
counterparties and monitor the appropriateness of these limits on an ongoing
basis through a credit risk management program which involves daily exposure
reporting to senior management, master trading and netting agreements, and
credit support such as letters of credit and parental guarantees. We also
analyze each counterparty's financial condition prior to entering into sales,
forwards, swaps, futures or option contracts and monitor counterparty exposure
associated with our leveraged leases.
Equity Price Risk
Our costs of providing non-contributory defined benefit retirement and
postretirement benefit plans are dependent upon a number of factors, such as the
rate of return on plan assets, discount rate, the rate of increase in healthcare
costs and contributions made to the plans. The market value of our plan assets
was affected by declines in the equity market for 2000 through 2002 for the
pension and postretirement plans. As a result, a minimum pension liability was
recorded at December 31, 2002, which resulted in a charge to OCI and a reduction
in stockholders' equity. At December 31, 2003, the minimum pension liability was
reduced resulting in OCI of $46 million and an increase in stockholders' equity.
The minimum pension liability has not changed as of March 31, 2004.
The amount of the pension liability as of March 31, 2004, was the result of
asset returns, interest rates and our contributions to the plans during 2003. In
future years, the liability recorded, the costs reflected in net income or OCI,
or cash contributions to the plans could increase materially without a recovery
in equity markets in excess of our assumed return on plan assets of 8.5%. If the
fair value of the plan assets were to grow and exceed the accumulated benefit
obligations in the future, the recorded liability would then be reduced and a
corresponding amount of equity would be restored, net of taxes.
72
Commodity Price Risk
The Ameren Companies are exposed to changes in market prices for natural
gas, fuel and electricity to the extent they cannot be recovered through rates.
For a more detailed discussion of our commodity price risk, see Commodity Price
Risk under Part II, Item 7A of the Ameren Companies' combined Form 10-K for the
fiscal year ended December 31, 2003. Below are tables presenting the percentage
of fuel price hedged and the effects a material change in price will have on our
coal costs not currently covered under fixed-price contracts as of March 31,
2004.
The following table presents the percentages of the required supply of coal
for our coal-fired power plants, nuclear fuel and natural gas for our CTs and
distribution, as appropriate, that are price-hedged for the remainder of 2004
through 2008:
===================================================================================================================
2004 2005 2006 - 2008
-------------------------------------------------------------------------------------------------------------------
Ameren:
Coal..................................................... 98% 90% 55%
Nuclear fuel............................................. 100 100 32
Natural gas for generation............................... 34 15 5
Natural gas for distribution............................. 31 12 5
===================================================================================================================
UE:
Coal..................................................... 98% 86% 48%
Nuclear fuel............................................. 100 100 32
Natural gas for generation............................... 31 12 4
Natural gas for distribution............................. 36 13 5
===================================================================================================================
CIPS:
Natural gas for distribution............................. 25% 14% 4%
===================================================================================================================
Genco:
Coal..................................................... 100% 100% 77%
Natural gas for generation............................... 25 15 5
===================================================================================================================
CILCORP:(a)
Coal..................................................... 100% 81% 49%
Natural gas for distribution............................. 34 11 5
===================================================================================================================
CILCO:
Coal..................................................... 100% 81% 49%
Natural gas for distribution............................. 34 11 5
===================================================================================================================
(a) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
The following table presents the estimated increase or decrease in our
total fuel expense and net income if coal costs were to change by 1% on any
requirements currently not covered by fixed-price contracts for the remainder of
2004 through 2008:
===================================================================================================================
Fuel Expense Net Income(a)
-------------------------------------------------------------------------------------------------------------------
Ameren..................................................................... $ 6 $ 4
UE......................................................................... 3 2
CIPS....................................................................... - -
Genco...................................................................... 1 1
CILCORP(b)................................................................. 1 -
CILCO...................................................................... 1 -
===================================================================================================================
(a) Calculations are based on an effective tax rate of 38%.
(b) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
In the event of a significant change in coal prices, we would likely take
actions to further mitigate our 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 our financial structure
or fuel sources.
73
Fair Value of Contracts
Most of our commodity contracts qualify for treatment as normal purchases
and normal sales. However, we utilize derivatives principally to manage the risk
of changes in market prices for natural gas, fuel, electricity and emission
credits. Price fluctuations in natural gas, fuel and electricity cause:
o an unrealized appreciation or depreciation of our firm commitments to
purchase or sell when purchase or sales prices under the firm commitment
are compared with current commodity prices;
o market values of fuel and natural gas inventories or purchased power to
differ from the cost of those commodities in inventory under firm
commitment; and
o actual cash outlays for the purchase of these commodities to differ from
anticipated cash outlays.
The derivatives that we use to hedge these risks are dictated by risk
management policies and include forward contracts, futures contracts, options
and swaps. We continually assess our supply and delivery commitment positions
against forward market prices and internally-forecasted forward prices and
modify our exposure to market, credit and operational risk by entering into
various offsetting transactions. In general, we believe these transactions serve
to reduce our price risk. See Note 7 - Derivative Financial Instruments to our
financial statements under Part I, Item 1 of this report for further
information.
The following table presents the favorable (unfavorable) changes in the
fair value of all contracts marked-to-market during the three months ended March
31, 2004:
===================================================================================================================
Ameren(a) UE CIPS CILCORP(b) CILCO
-------------------------------------------------------------------------------------------------------------------
Fair value of contracts at beginning of period, net..... $ 12 $ (1) $ 1 $ 6 $ 6
Contracts realized or otherwise settled during the
period............................................ 2 1 1 1 1
Changes in fair values attributable to changes in
valuation technique and assumptions............... - - - - -
Fair value of new contracts entered into during the
period............................................ - - - - -
Other changes in fair value........................... 4 (2) 2 4 4
-------------------------------------------------------------------------------------------------------------------
Fair value of contracts outstanding at end $ 18 $ (2) $ 4 $ 11 $ 11
of period, net....................................
===================================================================================================================
(a) Includes amounts for non-registrant Ameren subsidiaries as well as
intercompany eliminations.
(b) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
The following table presents maturities of contracts as of March 31, 2004:
===================================================================================================================
Sources Maturity Maturity Maturity Maturity in Total
of Less than 1-3 4-5 Excess of Fair
Fair Value 1 Year Years Years 5 Years Value(a)
-------------------------------------------------------------------------------------------------------------------
Ameren:
Prices actively quoted............... $ 4 $ - $ - $ - $ 4
Prices provided by other external
sources(b)........................ 6 6 - - 12
Prices based on models and other
valuation methods(c).............. 1 2 (1) - 2
-------------------------------------------------------------------------------------------------------------------
Total................................ $ 11 $ 8 $ (1) $ - $ 18
===================================================================================================================
UE :
Prices actively quoted............... $ - $ - $ - $ - $ -
Prices provided by other external
sources(b)........................ - 1 - - 1
Prices based on models and other
valuation methods(c).............. (4) 2 (1) - (3)
-------------------------------------------------------------------------------------------------------------------
Total................................ $ (4) $ 3 $ (1) $ - $ (2)
-------------------------------------------------------------------------------------------------------------------
74
-------------------------------------------------------------------------------------------------------------------
Sources Maturity Maturity Maturity Maturity in Total
of Less than 1-3 4-5 Excess of Fair
Fair Value 1 Year Years Years 5 Years Value(a)
-------------------------------------------------------------------------------------------------------------------
CIPS:
Prices actively quoted............... $ - $ - $ - $ - $ -
Prices provided by other external
sources(b)........................ 2 2 - - 4
Prices based on models and other
valuation methods(c).............. - - - - -
-------------------------------------------------------------------------------------------------------------------
Total................................ $ 2 $ 2 $ - $ - $ 4
===================================================================================================================
CILCORP(d):
Prices actively quoted .............. $ 4 $ - $ - $ - $ 4
Prices provided by other external
sources(b)........................ 3 4 - - 7
Prices based on models and other
valuation methods(c).............. - - - - -
-------------------------------------------------------------------------------------------------------------------
Total ............................... $ 7 $ 4 $ - $ - $ 11
===================================================================================================================
CILCO:
Prices actively quoted .............. $ 4 $ - $ - $ - $ 4
Prices provided by other external
sources(b)........................ 3 4 - - 7
Prices based on models and other
valuation methods(c).............. - - - - -
-------------------------------------------------------------------------------------------------------------------
Total ............................... $ 7 $ 4 $ - $ - $ 11
===================================================================================================================
(a) Contracts of less than $3 million were with non-investment-grade rated
counterparties.
(b) Principally power forward values based on NYMEX prices for over-the-counter
contracts and natural gas swap values based primarily on Inside FERC.
(c) Principally coal and SO2 option values based on a Black-Scholes model that
includes information from external sources and our estimates. Also includes
power forward contract values based on our estimates.
(d) CILCORP consolidates CILCO and therefore includes CILCO amounts in its
balances.
ITEM 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
As of March 31, 2004, the principal executive officer and principal
financial officer of each Registrant have evaluated the effectiveness of the
design and operation of such Registrant's disclosure controls and procedures (as
defined in Rules 13a - 15(e) and 15d - 15(e) of the Exchange Act). Based upon
that evaluation, the principal executive officer and principal financial officer
of each such Registrant have concluded that such disclosure controls and
procedures are effective in timely alerting them to any material information
relating to such Registrant, which is required to be included in such
Registrant's reports filed or submitted with the SEC under the Exchange Act.
(b) Change in Internal Controls
There has been no change in the Registrants' internal control over
financial reporting that occurred during their most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, their
internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
Note 3 - Rate and Regulatory Matters and Note 9 - Commitments and
Contingencies to our financial statements under Part I, Item 1 of Part I of this
report contain information on legal and administrative proceedings which are
incorporated by reference under this item.
75
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The documents listed below are being filed on behalf of
Ameren, UE, CIPS, Genco, CILCORP and CILCO (collectively the "Ameren
Companies").
-----------------------------------------------------------------------------------------------------------------------
Exhibit Registrant(s) Nature of Exhibit
Designation
-----------------------------------------------------------------------------------------------------------------------
Instruments Defining
Rights of Security
Holders
-----------------------------------------------------------------------------------------------------------------------
4.1 Ameren Supplemental Indenture dated as of February 1, 2004, to the Indenture of
UE Mortgage and Deed of Trust dated June 15, 1937 (UE Mortgage) relative to
Series 2004A (1998A) Bonds
-----------------------------------------------------------------------------------------------------------------------
4.2 Ameren Supplemental Indenture dated as of February 1, 2004 to the UE Mortgage
UE relative to Series 2004B (1998B) Bonds
-----------------------------------------------------------------------------------------------------------------------
4.3 Ameren Supplemental Indenture dated as of February 1, 2004 to the UE Mortgage
UE relative to Series 2004C (1998C) Bonds
-----------------------------------------------------------------------------------------------------------------------
4.4 Ameren Supplemental Indenture dated as of February 1, 2004 to the UE Mortgage
UE relative to Series 2004D (2000B) Bonds
-----------------------------------------------------------------------------------------------------------------------
4.5 Ameren Supplemental Indenture dated as of February 1, 2004 to the UE Mortgage
UE relative to Series 2004E (2000A) Bonds
-----------------------------------------------------------------------------------------------------------------------
4.6 Ameren Supplemental Indenture dated as of February 1, 2004 to the UE Mortgage
UE relative to Series 2004F (2000C) Bonds
-----------------------------------------------------------------------------------------------------------------------
4.7 Ameren Supplemental Indenture dated as of February 1, 2004 to the UE Mortgage
UE relative to Series 2004G (1991) Bonds
-----------------------------------------------------------------------------------------------------------------------
4.8 Ameren Supplemental Indenture dated as of February 1, 2004 to the UE Mortgage
UE relative to Series 2004A (1992) Bonds
-----------------------------------------------------------------------------------------------------------------------
4.9 Ameren First Amendment dated as of February 1, 2004 to Loan Agreement dated as of
UE December 1, 1991, between the Missouri Environmental Authority and UE
-----------------------------------------------------------------------------------------------------------------------
4.10 Ameren First Amendment dated as of February 1, 2004 to Loan Agreement dated as of
UE December 1, 1992, between the Missouri Environmental Authority and UE
-----------------------------------------------------------------------------------------------------------------------
4.11 Ameren First Amendment dated as of February 1, 2004 to Series 1998A Loan
UE Agreement dated as of September 1, 1998, between the Missouri
Environmental Authority and UE
-----------------------------------------------------------------------------------------------------------------------
4.12 Ameren First Amendment dated as of February 1, 2004 to Series 1998B Loan
UE Agreement dated as of September 1, 1998, between the Missouri
Environmental Authority and UE
-----------------------------------------------------------------------------------------------------------------------
4.13 Ameren First Amendment dated as of February 1, 2004 to Series 1998C Loan
UE Agreement dated as of September 1, 1998, between the Missouri
Environmental Authority and UE
-----------------------------------------------------------------------------------------------------------------------
Rule 13a-14(a) /
15d-14(a)
Certifications
-----------------------------------------------------------------------------------------------------------------------
31.1 Ameren Rule13a-14(a)/15d-14(a) Certification of Principal Executive Officer of
Ameren
-----------------------------------------------------------------------------------------------------------------------
31.2 Ameren Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer of
Ameren
-----------------------------------------------------------------------------------------------------------------------
31.3 UE Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer of UE
-----------------------------------------------------------------------------------------------------------------------
31.4 UE Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer of UE
-----------------------------------------------------------------------------------------------------------------------
31.5 CIPS Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer of
CIPS
-----------------------------------------------------------------------------------------------------------------------
31.6 CIPS Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer of
CIPS
-----------------------------------------------------------------------------------------------------------------------
76
-----------------------------------------------------------------------------------------------------------------------
Exhibit Registrant(s) Nature of Exhibit
Designation
-----------------------------------------------------------------------------------------------------------------------
31.7 Genco Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer of
Genco
-----------------------------------------------------------------------------------------------------------------------
31.8 Genco Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer of
Genco
-----------------------------------------------------------------------------------------------------------------------
31.9 CILCORP Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer of
CILCORP
-----------------------------------------------------------------------------------------------------------------------
31.10 CILCORP Rule13a-14(a)/15d-14(a) Certification of Principal Financial Officer of
CILCORP
-----------------------------------------------------------------------------------------------------------------------
31.11 CILCO Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer of
CILCO
-----------------------------------------------------------------------------------------------------------------------
31.12 CILCO Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer of
CILCO
-----------------------------------------------------------------------------------------------------------------------
Section 1350
Certifications
-----------------------------------------------------------------------------------------------------------------------
32.1 Ameren Section 1350 Certification of Principal Executive Officer of Ameren
-----------------------------------------------------------------------------------------------------------------------
32.2 Ameren Section 1350 Certification of Principal Financial Officer of Ameren
-----------------------------------------------------------------------------------------------------------------------
32.3 UE Section 1350 Certification of Principal Executive Officer of UE
-----------------------------------------------------------------------------------------------------------------------
32.4 UE Section 1350 Certification of Principal Financial Officer of UE
-----------------------------------------------------------------------------------------------------------------------
32.5 CIPS Section 1350 Certification of Principal Executive Officer of CIPS
-----------------------------------------------------------------------------------------------------------------------
32.6 CIPS Section1350 Certification of Principal Financial Officer of CIPS
-----------------------------------------------------------------------------------------------------------------------
32.7 Genco Section 1350 Certification of Principal Executive Officer of Genco
-----------------------------------------------------------------------------------------------------------------------
32.8 Genco Section 1350 Certification of Principal Financial Officer of Genco
-----------------------------------------------------------------------------------------------------------------------
32.9 CILCORP Section 1350 Certification of Principal Executive Officer of CILCORP
-----------------------------------------------------------------------------------------------------------------------
32.10 CILCORP Section 1350 Certification of Principal Financial Officer of CILCORP
-----------------------------------------------------------------------------------------------------------------------
32.11 CILCO Section 1350 Certification of Principal Executive Officer of CILCO
-----------------------------------------------------------------------------------------------------------------------
32.12 CILCO Section 1350 Certification of Principal Financial Officer of CILCO
-----------------------------------------------------------------------------------------------------------------------
(b) Reports on Form 8-K. The Ameren Companies filed the following
reports on Form 8-K during the quarterly period ended March 31,
2004:
Date of Report Items Reported Financial Statements Filed
-------------- -------------- --------------------------
Ameren:
January 14, 2004 5, 7 None
February 3, 2004 5, 7, 12 None
February 10, 2004 (a) 7, 12 (b)
March 23, 2004 5, 7 None
UE:
January 14, 2004 5, 7 None
February 3, 2004 5, 7, 12 None
March 23, 2004 5, 7 None
CIPS:
February 3, 2004 5, 7, 12 None
March 23, 2004 5, 7 None
Genco:
February 3, 2004 5, 7, 12 None
March 23, 2004 5, 7 None
77
Date of Report Items Reported Financial Statements Filed
-------------- -------------- --------------------------
CILCORP:
February 3, 2004 5, 7, 12 None
March 23, 2004 5, 7 None
CILCO:
February 3, 2004 5, 7, 12 None
March 23, 2004 5, 7 None
(a) This report was furnished pursuant to Item 12 and not
deemed "filed" for purposes of Section 18 of the
Exchange Act.
(b) Consolidated operating statistics for three months
ended December 31, 2003, and December 31, 2002,
unaudited consolidated balance sheet as of December 31,
2003, and December 31, 2002, unaudited consolidated
statement of income for three months ended December 31,
2003, and December 31, 2002, and twelve months ended
December 31, 2003, and December 31, 2002, and unaudited
consolidated statement of cash flows for twelve months
ended December 31, 2003 and December 31, 2002.
78
SIGNATURES
Pursuant to the requirements of the Exchange Act, each Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized. The signature for each undersigned company shall be deemed to relate
only to matters having reference to such company or its subsidiaries.
AMEREN CORPORATION
(Registrant)
/s/ Martin J. Lyons
-------------------------------------
Martin J. Lyons
Vice President and Controller
(Principal Accounting Officer)
UNION ELECTRIC COMPANY
(Registrant)
/s/ Martin J. Lyons
-------------------------------------
Martin J. Lyons
Vice President and Controller
(Principal Accounting Officer)
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(Registrant)
/s/ Martin J. Lyons
-------------------------------------
Martin J. Lyons
Vice President and Controller
(Principal Accounting Officer)
AMEREN ENERGY GENERATING COMPANY
(Registrant)
/s/ Martin J. Lyons
-------------------------------------
Martin J. Lyons
Vice President and Controller
(Principal Accounting Officer)
79
CILCORP Inc.
(Registrant)
/s/ Martin J. Lyons
-------------------------------------
Martin J. Lyons
Vice President and Controller
(Principal Accounting Officer)
Central Illinois Light Company
(Registrant)
/s/ Martin J. Lyons
-------------------------------------
Martin J. Lyons
Vice President and Controller
(Principal Accounting Officer)
Date: May 10, 2004
80