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Ameren 10-Q 2011
Form 10-Q
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 September 30, 2011

OR

 

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from             to             .

 

Commission

File Number

  

Exact name of registrant as specified in its charter;

State of Incorporation;

Address and Telephone Number

  

IRS Employer

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    Ameren Illinois Company    37-0211380
   (Illinois Corporation)   
   300 Liberty Street   
   Peoria, Illinois 61602   
   (309) 677-5271   
333-56594    Ameren Energy Generating Company    37-1395586
   (Illinois Corporation)   
   1901 Chouteau Avenue   
   St. Louis, Missouri 63103   
   (314) 621-3222   

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.

 

Ameren Corporation      Yes         x         No         ¨      
Union Electric Company      Yes         x         No         ¨      
Ameren Illinois Company      Yes         x         No         ¨      
Ameren Energy Generating Company      Yes         x         No         ¨      

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Ameren Corporation      Yes         x         No         ¨      
Union Electric Company      Yes         x         No         ¨      
Ameren Illinois Company      Yes         x         No         ¨      
Ameren Energy Generating Company      Yes         x         No         ¨      

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 

     Large Accelerated
Filer
   Accelerated
Filer
   Non-Accelerated
Filer
   Smaller
Reporting
Company

Ameren Corporation

   x    ¨    ¨    ¨

Union Electric Company

   ¨    ¨    x    ¨

Ameren Illinois Company

   ¨    ¨    x    ¨

Ameren Energy Generating Company

   ¨    ¨    x    ¨

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

 

Ameren Corporation      Yes         ¨         No         x      
Union Electric Company      Yes         ¨         No         x      
Ameren Illinois Company      Yes         ¨         No         x      
Ameren Energy Generating Company      Yes         ¨         No         x      

The number of shares outstanding of each registrant’s classes of common stock as of October 31, 2011, was as follows:

 

Ameren Corporation   Common stock, $0.01 par value per share - 242,239,840
Union Electric Company  

Common stock, $5 par value per share, held by Ameren

Corporation (parent company of the registrant) - 102,123,834

Ameren Illinois 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

Resources Company, LLC (parent company of the

registrant and subsidiary of Ameren

Corporation) - 2,000

OMISSION OF CERTAIN INFORMATION

Ameren Energy Generating Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format allowed under that General Instruction.

 

 

This combined Form 10-Q is separately filed by Ameren Corporation, Union Electric Company, Ameren Illinois Company and Ameren Energy Generating 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.


Table of Contents

TABLE OF CONTENTS

 

         Page  

Glossary of Terms and Abbreviations

     3   

Forward-looking Statements

     3   

PART I

 

Financial Information

  

Item 1.

 

Financial Statements (Unaudited)

  
  Ameren Corporation   
 

        Consolidated Statement of Income

     5   
 

        Consolidated Balance Sheet

     6   
 

        Consolidated Statement of Cash Flows

     7   
  Union Electric Company   
 

        Statement of Income

     8   
 

        Balance Sheet

     9   
 

        Statement of Cash Flows

     10   
  Ameren Illinois Company   
 

        Consolidated Statement of Income

     11   
 

        Balance Sheet

     12   
 

        Consolidated Statement of Cash Flows

     13   
  Ameren Energy Generating Company   
 

        Consolidated Statement of Income

     14   
 

        Consolidated Balance Sheet

     15   
 

        Consolidated Statement of Cash Flows

     16   
 

Combined Notes to Financial Statements

     17   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     60   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     91   

Item 4.

 

Controls and Procedures

     95   

PART II

 

Other Information

  

Item 1.

 

Legal Proceedings

     96   

Item 1A.

 

Risk Factors

     96   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     96   

Item 6.

 

Exhibits

     97   

Signatures

     99   

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 beginning on page 4 of 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.

 

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Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

We use the words “our,” “we” or “us” with respect to certain information that relates to the individual registrants within the Ameren Corporation consolidated group. When appropriate, subsidiaries of Ameren Corporation are named specifically as their various business activities are discussed. Refer to the 2010 Form 10-K for a complete listing of glossary terms and abbreviations. Only new or significantly changed terms and abbreviations are included below.

Ameren Illinois or AIC - Ameren Illinois Company, an Ameren Corporation subsidiary that operates a rate-regulated electric and natural gas transmission and distribution business in Illinois, doing business as Ameren Illinois. This business consists of the combined rate-regulated electric and natural gas transmission and distribution businesses operated by CIPS, CILCO and IP before the Ameren Illinois Merger. References to Ameren Illinois prior to the Ameren Illinois Merger refer collectively to the rate-regulated electric and natural gas transmission and distribution businesses of CIPS, CILCO and IP. Immediately after the Ameren Illinois Merger, Ameren Illinois distributed the common stock of AERG to Ameren Corporation. AERG’s operating results and cash flows were presented as discontinued operations in Ameren Illinois’ financial statements.

Ameren Illinois Merger - On October 1, 2010, CILCO and IP merged with and into CIPS, with the surviving corporation renamed Ameren Illinois Company.

Ameren Illinois Regulated Segment - A financial reporting segment consisting of Ameren Illinois’ rate-regulated businesses.

Ameren Missouri or AMO - Union Electric Company, an Ameren Corporation subsidiary that operates a rate-regulated electric generation, transmission and distribution business, and a rate-regulated natural gas transmission and distribution business in Missouri, doing business as Ameren Missouri. Ameren Missouri is also defined as a financial reporting segment consisting of Union Electric Company’s rate-regulated businesses.

CCR - Coal combustion residuals.

Cole County Circuit Court - Circuit Court of Cole County, Missouri.

CSAPR - Cross-State Air Pollution Rule.

Form 10-K - The combined Annual Report on Form 10-K for the year ended December 31, 2010, filed by the Ameren Companies with the SEC.

MIEC - Missouri Industrial Energy Consumers.

MoOPC - Missouri Office of Public Counsel.

NO2 - Nitrogen dioxide.

NWPA - Nuclear Waste Policy Act of 1982, as amended.

 

 

FORWARD-LOOKING STATEMENTS

Statements in this report not based on historical facts are considered “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 anticipated. The following factors, in addition to those discussed under Risk Factors in the Form 10-K and elsewhere in this report and in our other filings with the SEC, could cause actual results to differ materially from management expectations suggested in such forward-looking statements:

 

 

regulatory, judicial, or legislative actions, including changes in regulatory policies and ratemaking determinations, such as the outcome of the pending Ameren Illinois electric and natural gas rate proceedings; the court appeals related to Ameren Missouri’s 2009, 2010, and 2011 electric rate orders, Ameren Illinois’ 2010 electric and natural gas rate order, and Ameren Missouri’s FAC prudence review; and future regulatory, judicial, or legislative actions that seek to change regulatory recovery mechanisms, such as the recent passage of legislation providing for formula ratemaking in Illinois;

 

 

the effects of, or changes to, the Illinois power procurement process;

 

 

changes in laws and other governmental actions, including monetary, fiscal, and tax policies;

 

 

changes in laws or regulations that adversely affect the ability of electric distribution companies and other purchasers of wholesale electricity to pay their suppliers, including Ameren Missouri and Marketing Company;

 

 

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, and the implementation of deregulation, such as occurred when the electric rate freeze and power supply contracts expired in Illinois at the end of 2006;

 

 

the effects on demand for our services resulting from technological advances, including advances in energy efficiency and distributed generation sources, which generate electricity at the site of consumption;

 

 

increasing capital expenditure and operating expense requirements and our ability to recover these costs through our regulatory frameworks;

 

3


Table of Contents
 

the effects of our and other members’ participation in, or potential withdrawal from, MISO, and the effects of new members joining MISO;

 

 

the cost and availability of fuel such as coal, natural gas, and enriched uranium used to produce electricity; the cost and availability of purchased power and natural gas for distribution; and the level and volatility of future market prices for such commodities, including the ability to recover the costs for such commodities;

 

 

the effectiveness of our risk management strategies and the use of financial and derivative instruments;

 

 

the level and volatility of future prices for power in the Midwest;

 

 

business and economic conditions, including their impact on interest rates, bad debt expense, and demand for our products;

 

 

disruptions of the capital markets or other events that make the Ameren Companies’ access to necessary capital, including short-term credit and liquidity, impossible, more difficult, or more costly;

 

 

our assessment of our liquidity;

 

 

the impact of the adoption of new accounting guidance and the application of appropriate technical accounting rules and guidance;

 

 

actions of credit rating agencies and the effects of such actions;

 

 

the impact of weather conditions and other natural phenomena on us and our customers;

 

 

the impact of system outages;

 

 

generation, transmission, and distribution asset construction, installation, performance, and cost recovery;

 

 

the extent to which Ameren Missouri prevails in its claims against insurers in connection with its Taum Sauk pumped-storage hydroelectric energy center incident;

 

 

the extent to which Ameren Missouri is permitted by its regulators to recover in rates investments made in connection with a proposed second unit at its Callaway energy center;

 

 

impairments of long-lived assets, intangible assets, or goodwill;

 

 

operation of Ameren Missouri’s Callaway energy center, including planned and unplanned outages, decommissioning costs and potential increased costs as a result of nuclear-related developments in Japan in 2011;

 

 

the effects of strategic initiatives, including mergers, acquisitions and divestitures;

 

 

the impact of current environmental regulations on utilities and power generating companies and the expectation that new or more stringent requirements, including those related to greenhouse gases, other emissions, and energy efficiency, will be enacted over time, which could limit or terminate the operation of certain of our generating units, increase our costs, result in an impairment of our assets, reduce our customers’ demand for electricity or natural gas, or otherwise have a negative financial effect;

 

 

the impact of complying with renewable energy portfolio requirements in Missouri;

 

 

labor disputes, work force reductions, future wage and employee benefits costs, including changes in discount rates and returns on benefit plan assets;

 

 

the inability of our counterparties and affiliates to meet their obligations with respect to contracts, credit facilities, and financial instruments;

 

 

the cost and availability of transmission capacity for the energy generated by the Ameren Companies’ energy centers or required to satisfy energy sales made by the Ameren Companies;

 

 

legal and administrative proceedings; and

 

 

acts of sabotage, war, terrorism, or intentionally disruptive acts.

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 update or revise publicly any forward-looking statements to reflect new information or future events.

 

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Table of Contents

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

AMEREN CORPORATION

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(Unaudited) (In millions, except per share amounts)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
         2011              2010              2011              2010      

Operating Revenues:

           

Electric

   $ 2,138        $ 2,133        $ 5,222        $ 5,140    

Gas

     130          134          731          792    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenues

     2,268          2,267          5,953          5,932    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses:

           

Fuel

     467          394          1,217          973    

Purchased power

     332          376          796          915    

Gas purchased for resale

     46          51          413          467    

Other operations and maintenance

     432          455          1,368          1,357    

Goodwill, impairment and other charges

     124          589          126          589    

Depreciation and amortization

     196          194          585          571    

Taxes other than income taxes

     121          119          355          342    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     1,718          2,178          4,860          5,214    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income

     550          89          1,093          718    

Other Income and Expenses:

           

Miscellaneous income

     18          24          51          70    

Miscellaneous expense

             10          15          19    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other income

     13          14          36          51    

Interest Charges

     113          130          336          377    
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (Loss) Before Income Taxes

     450          (27)         793          392    

Income Taxes

     163          137          293          295    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income (Loss)

     287          (164)         500          97    

Less: Net Income Attributable to Noncontrolling Interests

                             10    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income (Loss) Attributable to Ameren Corporation

   $ 285        $ (167)       $ 494        $ 87    
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (Loss) per Common Share – Basic and Diluted

   $ 1.18        $ (0.70)       $ 2.05        $ 0.37    
  

 

 

    

 

 

    

 

 

    

 

 

 

Dividends per Common Share

   $ 0.385        $ 0.385        $ 1.155        $ 1.155    

Average Common Shares Outstanding

     241.7          239.3          241.2          238.4    

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

AMEREN CORPORATION

CONSOLIDATED BALANCE SHEET

(Unaudited) (In millions, except per share amounts)

 

    September 30,
2011
    December 31,
2010
 
ASSETS    

Current Assets:

   

Cash and cash equivalents

  $ 522       $ 545    

Accounts receivable – trade (less allowance for doubtful accounts of $21 and $23, respectively)

    575         517    

Unbilled revenue

    292         406    

Miscellaneous accounts and notes receivable

    147         214    

Materials and supplies

    734         707    

Mark-to-market derivative assets

    94         129    

Current regulatory assets

    184         267    

Other current assets

    132         109    
 

 

 

   

 

 

 

Total current assets

    2,680         2,894    
 

 

 

   

 

 

 

Property and Plant, Net

    17,873         17,853    

Investments and Other Assets:

   

Nuclear decommissioning trust fund

    330         337    

Goodwill

    411         411    

Intangible assets

             

Regulatory assets

    1,213         1,263    

Other assets

    843         750    
 

 

 

   

 

 

 

Total investments and other assets

    2,803         2,768    
 

 

 

   

 

 

 

TOTAL ASSETS

  $ 23,356       $ 23,515    
 

 

 

   

 

 

 
LIABILITIES AND EQUITY    

Current Liabilities:

   

Current maturities of long-term debt

  $ 178       $ 155    

Short-term debt

    350         269    

Accounts and wages payable

    410         651    

Taxes accrued

    161         63    

Interest accrued

    159         107    

Customer deposits

    98         100    

Mark-to-market derivative liabilities

    118         161    

Current regulatory liabilities

    123         99    

Other current liabilities

    251         283    
 

 

 

   

 

 

 

Total current liabilities

    1,848         1,888    
 

 

 

   

 

 

 

Credit Facility Borrowings

           460    

Long-term Debt, Net

    6,682         6,853    

Deferred Credits and Other Liabilities:

   

Accumulated deferred income taxes, net

    3,299         2,886    

Accumulated deferred investment tax credits

    81         90    

Regulatory liabilities

    1,464         1,319    

Asset retirement obligations

    439         475    

Pension and other postretirement benefits

    922         1,045    

Other deferred credits and liabilities

    469         615    
 

 

 

   

 

 

 

Total deferred credits and other liabilities

    6,674         6,430    
 

 

 

   

 

 

 

Commitments and Contingencies (Notes 2, 8, 9 and 10)

   

Ameren Corporation Stockholders’ Equity:

   

Common stock, $.01 par value, 400.0 shares authorized – shares outstanding of 242.2 and 240.4, respectively

             

Other paid-in capital, principally premium on common stock

    5,580         5,520    

Retained earnings

    2,440         2,225    

Accumulated other comprehensive loss

    (25)        (17)   
 

 

 

   

 

 

 

Total Ameren Corporation stockholders’ equity

    7,997         7,730    

Noncontrolling Interests

    155         154    
 

 

 

   

 

 

 

Total equity

    8,152         7,884    
 

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

  $         23,356       $ 23,515    
 

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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AMEREN CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited) (In millions)

 

     Nine Months Ended
September 30,
 
       2011          2010    

Cash Flows From Operating Activities:

     

Net income

   $ 500        $ 97    

Adjustments to reconcile net income to net cash provided by operating activities:

     

Goodwill, impairment and other charges

     126          589    

Gain on sales of properties

     (12)         (5)   

Net mark-to-market (gain) loss on derivatives

     15          (27)   

Depreciation and amortization

     587          588    

Amortization of nuclear fuel

     51          36    

Amortization of debt issuance costs and premium/discounts

     17          19    

Deferred income taxes and investment tax credits, net

     380          409    

Allowance for equity funds used during construction

     (25)         (40)   

Other

             13    

Changes in assets and liabilities:

     

Receivables

     52          (154)   

Materials and supplies

     (34)         39    

Accounts and wages payable

     (191)         (170)   

Taxes accrued

     94          99    

Assets, other

     64          (107)   

Liabilities, other

     (4)         89    

Pension and other postretirement benefits

     (98)         (12)   

Counterparty collateral, net

     37          (24)   

Taum Sauk insurance recoveries, net of costs

     (1)         57    
  

 

 

    

 

 

 

Net cash provided by operating activities

     1,566          1,496    
  

 

 

    

 

 

 

Cash Flows From Investing Activities:

     

Capital expenditures

     (758)         (757)   

Nuclear fuel expenditures

     (45)         (24)   

Purchases of securities – nuclear decommissioning trust fund

     (163)         (207)   

Sales of securities – nuclear decommissioning trust fund

     147          195    

Proceeds from sales of properties

     50          20    

Other

     12          (3)   
  

 

 

    

 

 

 

Net cash used in investing activities

     (757)         (776)   
  

 

 

    

 

 

 

Cash Flows From Financing Activities:

     

Dividends on common stock

     (279)         (276)   

Capital issuance costs

             (15)   

Dividends paid to noncontrolling interest holders

     (5)         (7)   

Short-term debt and credit facility repayments, net

     (379)         (325)   

Redemptions, repurchases, and maturities:

     

Long-term debt

     (150)         (106)   

Preferred stock

             (52)   

Issuances of common stock

     49          60    

Generator advances for construction refunded, net of receipts

     (73)         (18)   

Other

               
  

 

 

    

 

 

 

Net cash used in financing activities

     (832)         (734)   
  

 

 

    

 

 

 

Net change in cash and cash equivalents

     (23)         (14)   

Cash and cash equivalents at beginning of year

     545          622    
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ 522        $ 608    
  

 

 

    

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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UNION ELECTRIC COMPANY

STATEMENT OF INCOME

(Unaudited) (In millions)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2011      2010      2011      2010  

Operating Revenues:

           

Electric

   $ 1,099        $ 1,040        $ 2,592        $ 2,384    

Gas

     16          20          113          118    

Other

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenues

     1,115          1,060          2,709          2,503    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses:

           

Fuel

     249          205          682          441    

Purchased power

     35          48          81          134    

Gas purchased for resale

                     55          64    

Other operations and maintenance

     218          233          682          691    

Loss from regulatory disallowance

     89                  89            

Depreciation and amortization

     102          99          300          283    

Taxes other than income taxes

     85          82          234          218    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     782          675          2,123          1,831    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income

     333          385          586          672    

Other Income and Expenses:

           

Miscellaneous income

     16          23          45          64    

Miscellaneous expense

                             11    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other income

     14          15          37          53    

Interest Charges

     54          56          153          158    
  

 

 

    

 

 

    

 

 

    

 

 

 

Income Before Income Taxes

     293          344          470          567    

Income Taxes

     102          120          166          200    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

     191          224          304          367    

Preferred Stock Dividends

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income Available to Common Stockholder

   $ 190        $ 223        $ 301        $ 363    
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Missouri are an integral part of these financial statements.

 

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UNION ELECTRIC COMPANY

BALANCE SHEET

(Unaudited) (In millions, except per share amounts)

 

     September 30,
2011
     December 31,
2010
 
ASSETS      

Current Assets:

     

Cash and cash equivalents

   $ 356        $ 202    

Accounts receivable – trade (less allowance for doubtful accounts of $7 and $8, respectively)

     308          217    

Accounts receivable – affiliates

               

Unbilled revenue

     131          159    

Miscellaneous accounts and notes receivable

     35          116    

Materials and supplies

     337          341    

Current regulatory assets

     103          179    

Other current assets

     68          55    
  

 

 

    

 

 

 

Total current assets

     1,339          1,275    
  

 

 

    

 

 

 

Property and Plant, Net

     9,796          9,775    

Investments and Other Assets:

     

Nuclear decommissioning trust fund

     330          337    

Intangible assets

               

Regulatory assets

     694          694    

Other assets

     474          421    
  

 

 

    

 

 

 

Total investments and other assets

     1,503          1,454    
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 12,638        $ 12,504    
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current Liabilities:

     

Current maturities of long-term debt

   $ 178        $   

Accounts and wages payable

     160          326    

Accounts payable – affiliates

     48          75    

Taxes accrued

     131          76    

Interest accrued

     72          63    

Current regulatory liabilities

     55          23    

Current accumulated deferred income taxes, net

     19          43    

Other current liabilities

     82          89    
  

 

 

    

 

 

 

Total current liabilities

     745          700    
  

 

 

    

 

 

 

Long-term Debt, Net

     3,777          3,949    

Deferred Credits and Other Liabilities:

     

Accumulated deferred income taxes, net

     2,148          1,908    

Accumulated deferred investment tax credits

     71          78    

Regulatory liabilities

     804          766    

Asset retirement obligations

     334          363    

Pension and other postretirement benefits

     352          369    

Other deferred credits and liabilities

     172          218    
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     3,881          3,702    
  

 

 

    

 

 

 

Commitments and Contingencies (Notes 2, 8, 9 and 10)

     

Stockholders’ Equity:

     

Common stock, $5 par value, 150.0 shares authorized – 102.1 shares outstanding

     511          511    

Other paid-in capital, principally premium on common stock

     1,555          1,555    

Preferred stock not subject to mandatory redemption

     80          80    

Retained earnings

     2,089          2,007    
  

 

 

    

 

 

 

Total stockholders’ equity

     4,235          4,153    
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $         12,638        $ 12,504    
  

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Missouri are an integral part of these financial statements.

 

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UNION ELECTRIC COMPANY

STATEMENT OF CASH FLOWS

(Unaudited) (In millions)

 

     Nine Months Ended
September 30,
 
     2011      2010  

Cash Flows From Operating Activities:

     

Net income

   $ 304        $ 367    

Adjustments to reconcile net income to net cash provided by operating activities:

     

Loss from regulatory disallowance

     89            

Depreciation and amortization

     300          283    

Amortization of nuclear fuel

     51          36    

Amortization of debt issuance costs and premium/discounts

               

Deferred income taxes and investment tax credits, net

     203          266    

Allowance for equity funds used during construction

     (22)         (38)   

Other

               

Changes in assets and liabilities:

     

Receivables

     (46)         (160)   

Materials and supplies

             10    

Accounts and wages payable

     (142)         (96)   

Taxes accrued

     51          118    

Assets, other

     56          (148)   

Liabilities, other

             77    

Pension and other postretirement benefits

             (5)   

Taum Sauk insurance recoveries, net of costs

     (1)         57    
  

 

 

    

 

 

 

Net cash provided by operating activities

     854          778    
  

 

 

    

 

 

 

Cash Flows From Investing Activities:

     

Capital expenditures

     (402)         (445)   

Nuclear fuel expenditures

     (45)         (24)   

Purchases of securities – nuclear decommissioning trust fund

     (163)         (207)   

Sales of securities – nuclear decommissioning trust fund

     147          195    

Other

               
  

 

 

    

 

 

 

Net cash used in investing activities

     (459)         (481)   
  

 

 

    

 

 

 

Cash Flows From Financing Activities:

     

Dividends on common stock

     (219)         (176)   

Dividends on preferred stock

     (3)         (4)   

Capital issuance costs

             (4)   

Redemptions, repurchases, and maturities:

     

Long-term debt

             (66)   

Preferred stock

             (33)   

Generator advances for construction received (refunded)

     (19)         10    
  

 

 

    

 

 

 

Net cash used in financing activities

     (241)         (273)   
  

 

 

    

 

 

 

Net change in cash and cash equivalents

     154          24    

Cash and cash equivalents at beginning of year

     202          267    
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ 356        $ 291    
  

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Missouri are an integral part of these financial statements.

 

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Table of Contents

AMEREN ILLINOIS COMPANY

CONSOLIDATED STATEMENT OF INCOME

(Unaudited) (In millions)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2011      2010(a)      2011      2010(a)  

Operating Revenues:

           

Electric

   $ 631        $ 632        $ 1,556        $ 1,630    

Gas

     114          114          619          674    

Other

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenues

     745          746          2,176          2,304    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses:

           

Purchased power

     270          286          677          782    

Gas purchased for resale

     43          42          358          401    

Other operations and maintenance

     152          155          501          476    

Depreciation and amortization

     55          52          161          158    

Taxes other than income taxes

     29          29          96          95    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     549          564          1,793          1,912    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income

     196          182          383          392    

Other Income and Expenses:

           

Miscellaneous income

                               

Miscellaneous expense

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other income

                               

Interest Charges

     33          37          103          108    
  

 

 

    

 

 

    

 

 

    

 

 

 

Income Before Income Taxes

     163          145          281          284    

Income Taxes

     65          54          111          109    
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from Continuing Operations

     98          91          170          175    

Income from Discontinued Operations, net of tax

             19                  40    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

     98          110          170          215    

Preferred Stock Dividends

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income Available to Common Stockholder

   $ 98        $ 109        $ 168        $ 211    
  

 

 

    

 

 

    

 

 

    

 

 

 

  

 

(a) 

Prior period reflects the Ameren Illinois Merger as discussed in Note 1 - Summary of Significant Accounting Policies.

The accompanying notes as they relate to Ameren Illinois are an integral part of these consolidated financial statements.

 

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AMEREN ILLINOIS COMPANY

BALANCE SHEET

(Unaudited) (In millions)

 

     September 30,
2011
     December 31,
2010
 

ASSETS

     

Current Assets:

     

Cash and cash equivalents

   $ 116        $ 322    

Accounts receivable – trade (less allowance for doubtful accounts of $13 and $13, respectively)

     194          230    

Accounts receivable – affiliates

             73    

Unbilled revenue

     122          205    

Miscellaneous accounts and notes receivable

     73          44    

Materials and supplies

     239          198    

Current regulatory assets

     247          260    

Other current assets

     108          106    
  

 

 

    

 

 

 

Total current assets

     1,108          1,438    
  

 

 

    

 

 

 

Property and Plant, Net

     4,699          4,576    

Investments and Other Assets:

     

Tax receivable – Genco

     61          72    

Goodwill

     411          411    

Regulatory assets

     571          747    

Other assets

     214          162    
  

 

 

    

 

 

 

Total investments and other assets

     1,257          1,392    
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 7,064        $ 7,406    
  

 

 

    

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY      

Current Liabilities:

     

Current maturities of long-term debt

   $       $ 150    

Accounts and wages payable

     135          182    

Accounts payable – affiliates

     58          82    

Taxes accrued

     12          26    

Interest accrued

     46          27    

Customer deposits

     80          83    

Mark-to-market derivative liabilities

     73          82    

Mark-to-market derivative liabilities – affiliates

     166          172    

Environmental remediation

     57          72    

Current regulatory liabilities

     68          76    

Other current liabilities

     58          63    
  

 

 

    

 

 

 

Total current liabilities

     753          1,015    
  

 

 

    

 

 

 

Long-term Debt, Net

     1,658          1,657    

Deferred Credits and Other Liabilities:

     

Accumulated deferred income taxes, net

     925          724    

Accumulated deferred investment tax credits

               

Regulatory liabilities

     660          553    

Pension and other postretirement benefits

     328          413    

Other deferred credits and liabilities

     231          460    
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     2,151          2,158    
  

 

 

    

 

 

 

Commitments and Contingencies (Notes 2, 8 and 9)

     

Stockholders’ Equity:

     

Common stock, no par value, 45.0 shares authorized – 25.5 shares outstanding

               

Other paid-in capital

     1,952          1,952    

Preferred stock not subject to mandatory redemption

     62          62    

Retained earnings

     471          542    

Accumulated other comprehensive income

     17          20    
  

 

 

    

 

 

 

Total stockholders’ equity

     2,502          2,576    
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $         7,064        $ 7,406    
  

 

 

    

 

 

 

The accompanying notes as they relate to Ameren Illinois are an integral part of these consolidated financial statements.

 

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Table of Contents

AMEREN ILLINOIS COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited) (In millions)

 

     Nine Months Ended
September 30,
 
     2011      2010(a)  

Cash Flows From Operating Activities:

     

Net income

   $ 170        $ 215    

Income from discontinued operations, net of tax

             (40)   

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

     161          158    

Amortization of debt issuance costs and premium/discounts

               

Deferred income taxes and investment tax credits, net

     202          143    

Other

     (7)         (5)   

Changes in assets and liabilities:

     

Receivables

     104          (16)   

Materials and supplies

     (41)         (31)   

Accounts and wages payable

     (58)         (41)   

Taxes accrued

     (14)         22    

Assets, other

     24          (76)   

Liabilities, other

     (11)         14    

Pension and other postretirement benefits

     (98)         (6)   

Operating cash flows provided by discontinued operations

             113    
  

 

 

    

 

 

 

Net cash provided by operating activities

     438          459    
  

 

 

    

 

 

 

Cash Flows From Investing Activities:

     

Capital expenditures

     (261)         (215)   

Returns from (advances to) ATXI for construction

     49          (7)   

Proceeds from intercompany note receivable – Genco

             45    

Net investing activities used in discontinued operations

             (6)   
  

 

 

    

 

 

 

Net cash used in investing activities

     (212)         (183)   
  

 

 

    

 

 

 

Cash Flows From Financing Activities:

     

Dividends on common stock

     (238)         (100)   

Dividends on preferred stock

     (2)         (4)   

Capital issuance costs

             (4)   

Redemptions, repurchases, and maturities:

     

Long-term debt

     (150)         (40)   

Preferred stock

             (19)   

Capital contribution from parent

               

Generator advances for construction refunded, net of receipts

     (53)         (28)   

Other

               

Net financing activities used in discontinued operations

             (107)   
  

 

 

    

 

 

 

Net cash used in financing activities

     (432)         (297)   
  

 

 

    

 

 

 

Net change in cash and cash equivalents

     (206)         (21)   

Cash and cash equivalents at beginning of year

     322          306    
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $ 116        $ 285    
  

 

 

    

 

 

 

  

 

(a) 

Prior period reflects the Ameren Illinois Merger as discussed in Note 1 - Summary of Significant Accounting Policies.

The accompanying notes as they relate to Ameren Illinois are an integral part of these consolidated financial statements.

 

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Table of Contents

AMEREN ENERGY GENERATING COMPANY

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(Unaudited) (In millions)

 

$327 $327 $327 $327
     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2011      2010      2011      2010  

Operating Revenues

   $ 327        $ 335        $ 828        $ 877    

Operating Expenses:

           

Fuel

     169          146          410          405    

Purchased power

     37          42          55          62    

Other operations and maintenance

     48          47          137          141    

Goodwill, impairment and other charges

     35          170          36          170    

Depreciation and amortization

     24          25          73          74    

Taxes other than income taxes

                     16          17    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     317          434          727          869    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income (Loss)

     10          (99)         101            

Other Income and Expenses:

           

Miscellaneous income

                               

Miscellaneous expense

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other income

                               

Interest Charges

     16          21          47          60    
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (Loss) Before Income Taxes

     (5)         (120)         55          (52)   

Income Taxes (Benefit)

     (1)         (20)         24          10    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income (Loss)

     (4)         (100)         31          (62)   

Less: Net Income Attributable to Noncontrolling Interest

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income (Loss) Attributable to Ameren Energy Generating Company

   $ (5)       $ (101)       $ 29        $ (65)   
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes as they relate to Genco are an integral part of these consolidated financial statements.

 

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Table of Contents

AMEREN ENERGY GENERATING COMPANY

CONSOLIDATED BALANCE SHEET

(Unaudited) (In millions, except share data)

 

    September 30,
2011
    December 31,
2010
 

ASSETS

   

Current Assets:

   

Cash and cash equivalents

  $      $   

Advances to money pool

    63         25    

Accounts receivable – affiliates

    82         126    

Miscellaneous accounts and notes receivable

    33         19    

Materials and supplies

    118         130    

Mark-to-market derivative assets

    10         26    

Other current assets

             
 

 

 

   

 

 

 

Total current assets

    322         336    
 

 

 

   

 

 

 

Property and Plant, Net

    2,219         2,248    

Investments and Other Assets:

   

Intangible assets

             

Other assets

    16         24    
 

 

 

   

 

 

 

Total investments and other assets

    16         27    
 

 

 

   

 

 

 

TOTAL ASSETS

  $ 2,557       $ 2,611    
 

 

 

   

 

 

 
LIABILITIES AND EQUITY    

Current Liabilities:

   

Accounts and wages payable

  $ 58       $ 62    

Accounts payable – affiliates

           23    

Current portion of tax payable – Ameren Illinois

             

Taxes accrued

    14         20    

Interest accrued

    27         13    

Mark-to-market derivative liabilities

             

Mark-to-market derivative liabilities – affiliates

             

Current accumulated deferred income taxes, net

    13         13    

Other current liabilities

    15         12    
 

 

 

   

 

 

 

Total current liabilities

    148         165    
 

 

 

   

 

 

 

Credit Facility Borrowings

           100    

Long-term Debt, Net

    824         824    

Deferred Credits and Other Liabilities:

   

Accumulated deferred income taxes, net

    313         253    

Accumulated deferred investment tax credits

             

Tax payable – Ameren Illinois

    61         72    

Asset retirement obligations

    69         74    

Pension and other postretirement benefits

    83         88    

Other deferred credits and liabilities

    14         23    
 

 

 

   

 

 

 

Total deferred credits and other liabilities

    543         513    
 

 

 

   

 

 

 

Commitments and Contingencies (Notes 8 and 9)

   

Ameren Energy Generating Company Stockholder’s Equity:

   

Common stock, no par value, 10,000 shares authorized – 2,000 shares outstanding

             

Other paid-in capital

    649         649    

Retained earnings

    422         393    

Accumulated other comprehensive loss

    (42)        (44)   
 

 

 

   

 

 

 

Total Ameren Energy Generating Company stockholder’s equity

    1,029         998    

Noncontrolling Interest

    13         11    
 

 

 

   

 

 

 

Total equity

    1,042         1,009    
 

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

  $ 2,557       $ 2,611    
 

 

 

   

 

 

 

The accompanying notes as they relate to Genco are an integral part of these consolidated financial statements.

 

15


Table of Contents

AMEREN ENERGY GENERATING COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited) (In millions)

 

     Nine Months Ended
September 30,
 
     2011      2010  

Cash Flows From Operating Activities:

     

Net income (loss)

   $ 31        $ (62)   

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

     

Goodwill, impairment and other charges

     36          170    

Loss on sales of emission allowances

               

Gain on sales of properties

     (12)         (5)   

Net mark-to-market (gain) loss on derivatives

             (2)   

Depreciation and amortization

     75          87    

Amortization of debt issuance costs and premium/discounts

               

Deferred income taxes and investment tax credits, net

     58            

Changes in assets and liabilities:

     

Receivables

             55    

Materials and supplies

             43    

Accounts and wages payable

     (16)         (20)   

Taxes accrued

     (6)         10    

Assets, other

               

Liabilities, other

     (9)         (4)   

Pension and other postretirement benefits

     (3)           
  

 

 

    

 

 

 

Net cash provided by operating activities

     179          293    
  

 

 

    

 

 

 

Cash Flows From Investing Activities:

     

Capital expenditures

     (112)         (71)   

Proceeds from sales of properties

     49          18    

Money pool advances, net

     (38)         (132)   
  

 

 

    

 

 

 

Net cash used in investing activities

     (101)         (185)   
  

 

 

    

 

 

 

Cash Flows From Financing Activities:

     

Capital issuance costs

             (4)   

Credit facility repayments, net

     (100)           

Note payable – affiliates

             (103)   

Capital contribution from parent

     24            
  

 

 

    

 

 

 

Net cash used in financing activities

     (76)         (107)   
  

 

 

    

 

 

 

Net change in cash and cash equivalents

               

Cash and cash equivalents at beginning of year

               
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $       $   
  

 

 

    

 

 

 

The accompanying notes as they relate to Genco are an integral part of these consolidated financial statements

 

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AMEREN CORPORATION (Consolidated)

UNION ELECTRIC COMPANY

AMEREN ILLINOIS COMPANY (Consolidated)

AMEREN ENERGY GENERATING COMPANY (Consolidated)

COMBINED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

September 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Ameren, headquartered in St. Louis, Missouri, is a public utility holding company under PUHCA 2005, administered by FERC. Ameren’s primary assets are the common stock of its subsidiaries. Ameren’s subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. These subsidiaries operate, as the case may be, rate-regulated electric generation, transmission and distribution businesses, rate-regulated natural gas transmission and distribution businesses, and merchant electric generation businesses in Missouri and Illinois. Dividends on Ameren’s common stock and the payment of expenses by Ameren depend on distributions made to it by its subsidiaries. Ameren’s principal subsidiaries are listed below. Also see the Glossary of Terms and Abbreviations at the front of this report and in the Form 10-K.

 

 

Ameren Missouri, or Union Electric Company, operates a rate-regulated electric generation, transmission and distribution business, and a rate-regulated natural gas transmission and distribution business in Missouri.

 

 

Ameren Illinois, or Ameren Illinois Company, operates a rate-regulated electric and natural gas transmission and distribution business in Illinois.

 

 

Resources Company, or Ameren Energy Resources Company, LLC, consists of non-rate-regulated operations, including Ameren Energy Generating Company (Genco), AmerenEnergy Resources Generating Company (AERG), Ameren Energy Marketing Company (Marketing Company) and AmerenEnergy Medina Valley Cogen, LLC (Medina Valley). Genco operates a merchant electric generation business in Illinois. Genco has an 80% ownership interest in EEI.

Ameren has various other subsidiaries responsible for activities such as the provision of shared services.

On October 1, 2010, Ameren, CIPS, CILCO, IP, AERG and Resources Company completed a two-step corporate internal reorganization. The first step of the reorganization was the Ameren Illinois Merger. Upon consummation of the Ameren Illinois Merger, the separate legal existence of CILCO and IP terminated. The second step of the reorganization involved the distribution of AERG stock from Ameren Illinois to Ameren and the subsequent contribution by Ameren of the AERG stock to Resources Company. The Ameren Illinois Merger and the distribution of AERG stock were accounted for as transactions between entities under common control. In accordance with authoritative accounting guidance, assets and liabilities transferred between entities under common control were accounted for at the historical cost basis of the common parent, Ameren, as if the transfer had occurred at the beginning of the earliest reporting period presented. Ameren’s historical cost basis in Ameren Illinois included purchase accounting adjustments related to Ameren’s acquisition of CILCORP in 2003. Ameren Illinois accounted for the AERG distribution as a spinoff. Ameren Illinois transferred AERG to Ameren based on AERG’s carrying value. Ameren Illinois has segregated AERG’s operating results and cash flows and presented them separately as discontinued operations in its consolidated statement of income and consolidated statement of cash flows, respectively, for all periods presented prior to October 1, 2010, in this report. For Ameren’s financial statements, AERG’s results of operations remain classified as continuing operations. See Note 14 - Discontinued Operations for additional information.

The financial statements of Ameren, Ameren Illinois and Genco are prepared on a consolidated basis. Ameren Missouri has no subsidiaries, and therefore its financial statements were not prepared on a consolidated basis. All significant intercompany transactions have been eliminated. All tabular dollar amounts are in millions, unless otherwise indicated.

Our accounting policies conform to GAAP. Our financial statements reflect all adjustments (which include normal, recurring adjustments) that are 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 that may be expected for a full year. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K.

During the second quarter 2011, Genco identified an error in the cash flow statement classification of a capital contribution from Ameren that impacted Genco’s year ended December 31, 2010, and three months ended March 31, 2011, consolidated statements of cash flows. For the year ended December 31, 2010, Genco’s reported cash flows

 

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provided by operating activities were $280 million and cash flows used in financing activities were $251 million. As corrected, Genco’s cash flows provided by operating activities were $304 million and cash flows used in financing activities were $275 million. For the three months ended March 31, 2011, Genco’s reported cash flows provided by operating activities were $100 million, and Genco had no reported cash flows from financing activities. As corrected, Genco’s cash flows provided by operating activities were $76 million and cash flows provided by financing activities were $24 million. The error was corrected in Genco’s six months ended June 30, 2011, consolidated statement of cash flows, included in the Form 10-Q for the quarter ended June 30, 2011. This correction had no impact on Ameren’s previously reported consolidated statement of cash flows.

Earnings Per Share

There were no material differences between Ameren’s basic and diluted earnings per share amounts for the three months and nine months ended September 30, 2011, and 2010. The number of restricted stock shares and performance share units outstanding had an immaterial impact on earnings per share.

Accounting Changes

Disclosures about Fair Value Measurements

See Note 7 - Fair Value Measurements for recently adopted guidance on fair value measurements.

In May 2011, FASB issued authoritative guidance regarding fair value measurements. The guidance amends the disclosure requirements for fair value measurements in order to align the principles for fair value measurements and the related disclosure requirements under GAAP and International Financial Reporting Standards. The amendments will not impact the Ameren Companies’ results of operations, financial positions, or liquidity, as this guidance only requires additional disclosures. This guidance will become effective for the Ameren Companies for periods starting after December 31, 2011.

Presentation of Comprehensive Income

In June 2011, FASB amended its guidance on the presentation of comprehensive income in financial statements. The amended guidance with respect to comprehensive income will not impact the Ameren Companies’ results of operations, financial positions, or liquidity. The amended guidance will not impact the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amended guidance will only change the presentation of comprehensive income in the financial statements. The new accounting guidance requires entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. This guidance will become effective for the Ameren Companies for periods starting after December 31, 2011.

Testing of Goodwill for Impairment

In September 2011, FASB amended its guidance for the testing of goodwill impairment. The amendments allow the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether an estimated fair value of a reporting unit should be calculated. If the qualitative evaluation yields support that the fair value of the reporting unit exceeds its carrying value, the quantitative impairment test is not required. This guidance will become effective for periods starting after December 31, 2011. Early adoption of the guidance is permitted, and Ameren and Ameren Illinois anticipate adopting the guidance for the annual goodwill impairment test performed as of October 31, 2011.

Goodwill and Intangible Assets

Goodwill. Goodwill represents the excess of the purchase price of an acquisition over the fair value of the net assets acquired. As of September 30, 2011, Ameren’s and Ameren Illinois’ goodwill related to the acquisition of IP in 2004 and the acquisition of CILCORP in 2003. We evaluate goodwill for impairment as of October 31 of each year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. During the third quarter of 2010, Ameren and Genco each recorded a noncash goodwill impairment charge, which was reflected in “Goodwill, impairment and other charges” in their statements of income. See Note 17 - Goodwill and Other Asset Impairments under Part II, Item 8, of the Form 10-K for additional information about the prior-year impairment charge.

Intangible Assets. Ameren, Ameren Missouri and Genco classify emission allowances and renewable energy credits as intangible assets. We evaluate intangible assets for impairment if events or changes in circumstances indicate that their carrying amount might be impaired.

In July 2011, the EPA issued the CSAPR, which created new allowances for SO2 and NOx emissions, and restricted the use of pre-existing SO2 and NOx allowances to the acid rain program and NOx budget trading program, respectively. In anticipation of the CSAPR announcement, observable market prices for existing emission allowances declined materially. Consequently, during the second quarter of 2011, Ameren and Genco recorded a noncash pretax impairment charge of $2 million and $1 million, respectively, which was reflected in “Goodwill, impairment and other charges” on their

 

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statements of income. Ameren Missouri recorded a $1 million impairment of its SO2 emission allowances by reducing a previously established regulatory liability relating to the SO2 emission allowances, which had no impact to earnings. See Note 9 - Commitments and Contingencies for additional information on emission allowances and the CSAPR. During the third quarter of 2010, Ameren and Genco each recognized an impairment charge of its intangible assets to reduce the carrying value of their SO2 emission allowances. The charge was reflected in “Goodwill, impairment and other charges” in their statements of income. See Note 17 - Goodwill and Other Asset Impairments under Part II, Item 8, of the Form 10-K for additional information about the prior-year impairment charge.

Emission allowances are charged to fuel expense as they are used in operations. The following table presents amortization expense based on usage of emission allowances, net of gains from emission allowance sales, for Ameren, Ameren Missouri and Genco during the three and nine months ended September 30, 2011, and 2010. The table below does not include the intangible asset impairment charges referenced above.

 

      Three Months     Nine Months  
      2011     2010     2011     2010  

Ameren(a)

   $ (b   $ 10      $ 2      $ 20   

Ameren Missouri

     -        (b     -        (b

Genco(a)

     (b     8        2        16   

AERG(a)

     (b     2        (b     4   

 

(a) Includes allowances consumed that were recorded through purchase accounting.
(b) Less than $1 million.

At September 30, 2011, Ameren’s and Ameren Missouri’s intangible assets also included renewable energy credits obtained through wind and solar power purchase agreements. The book value of each of Ameren’s and Ameren Missouri’s renewable energy credits as of September 30, 2011, was $5 million.

Excise Taxes

Excise taxes imposed on us are reflected on Ameren Missouri electric and natural gas customer bills and Ameren Illinois natural gas customer bills. They are recorded gross in “Operating Revenues” and “Operating Expenses - Taxes other than income taxes” on the statement of income. Excise taxes reflected on Ameren Illinois electric customer bills are imposed on the consumer and are therefore not included in revenues and expenses. They are recorded as tax collections payable and included in “Taxes accrued” on the balance sheet. The following table presents excise taxes recorded in “Operating Revenues” and “Operating Expenses - Taxes other than income taxes” for the three and nine months ended September 30, 2011, and 2010:

 

      Three Months      Nine Months  
      2011      2010      2011      2010  

Ameren Missouri

   $ 47       $ 45       $ 110       $ 103   

Ameren Illinois

     10         9         42         41   

Ameren

   $ 57       $ 54       $ 152       $ 144   

Uncertain Tax Positions

The amount of unrecognized tax benefits as of September 30, 2011, was $189 million, $144 million, $30 million, and $11 million for Ameren, Ameren Missouri, Ameren Illinois and Genco, respectively. The amount of unrecognized tax benefits (detriments) as of September 30, 2011, that would impact the effective tax rate, if recognized, was $3 million, $1 million, less than $(1) million and $1 million for Ameren, Ameren Missouri, Ameren Illinois and Genco, respectively.

In the second quarter of 2011, final settlement for the years 2005 and 2006 was reached with the Internal Revenue Service, which resulted in the reduction of uncertain tax liabilities by $39 million, $17 million, $12 million and $4 million for Ameren, Ameren Missouri, Ameren Illinois and Genco, respectively. Ameren’s federal income tax returns for the years 2007 through 2009 are before the Appeals Office of the Internal Revenue Service. Ameren’s federal income tax return for the year 2010 is currently under examination.

State income tax returns are generally subject to examination for a period of three years after filing of the return. The Ameren Companies do not currently have material state income tax issues under examination, administrative appeals, or litigation. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.

It is reasonably possible that events will occur during the next 12 months that would cause the total amount of unrecognized tax benefits for the Ameren Companies to increase or decrease. However, the Ameren Companies do not believe such increases or decreases would be material to their results of operations, financial position or liquidity.

 

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Asset Retirement Obligations

The following table provides a reconciliation of the beginning and ending carrying amount of AROs for the nine months ended September, 30 2011:

 

      Ameren(a)(b)     Ameren Missouri(b)     Ameren Illinois(c)     Genco     AERG  

Balance at December 31, 2010

   $ 475      $ 363      $ 3      $ 74      $ 35   

Liabilities incurred

     (d     -        -        (d     -   

Liabilities settled

     (2     (1     (d     (1     (d

Accretion in 2011(e)

     21        16        (d     4        1   

Change in estimates(f)

     (49     (44     (d     (2     (3

Balance at September 30, 2011

   $ 445 (g)    $ 334      $ 3      $ 75 (g)    $ 33   

 

(a) Includes amounts for Ameren registrant and nonregistrant subsidiaries.
(b) The nuclear decommissioning trust fund assets of $330 million and $337 million as of September 30, 2011, and December 31, 2010, respectively, were restricted for decommissioning of the Callaway energy center.
(c) Balance included in “Other deferred credits and liabilities” on the balance sheet.
(d) Less than $1 million.
(e) Accretion expense was recorded as an increase to regulatory assets at Ameren Missouri and Ameren Illinois.
(f) Ameren Missouri changed estimates related to its Callaway energy center decommissioning costs because of a cost study performed in 2011 and a decline in the cost escalation factor assumptions. Ameren Missouri and Genco changed estimates related to retirement costs for asbestos removal and river structures. Additionally, Genco and AERG changed estimates related to retirement costs for their coal combustion byproduct storage areas.
(g) Balance included $6 million in “Other current liabilities” on the balance sheet as of September 30, 2011.

Noncontrolling Interests

Ameren’s noncontrolling interests comprised the 20% of EEI not owned by Ameren and the preferred stock not subject to mandatory redemption of Ameren’s subsidiaries. These noncontrolling interests were classified as a component of equity separate from Ameren’s equity in its consolidated balance sheet. Genco’s noncontrolling interest comprised the 20% of EEI not owned by Genco. This noncontrolling interest was classified as a component of equity separate from Genco’s equity in its consolidated balance sheet.

A reconciliation of the equity changes attributable to the noncontrolling interests at Ameren and Genco for the three and nine months ended September 30, 2011, and 2010, is shown below:

 

      Three Months     Nine Months  
      2011     2010     2011     2010  

Ameren:

        

Noncontrolling interest, beginning of period

   $ 155      $ 206      $ 154      $ 204   

Net income attributable to noncontrolling interest

     2        3        6        10   

Dividends paid to noncontrolling interest holders

     (2     (2     (5     (7

Purchase of subsidiary preferred shares from noncontrolling interests(a)

     -        (52     -        (52

Noncontrolling interest, end of period

   $ 155      $ 155      $ 155      $ 155   

Genco:

        

Noncontrolling interest, beginning of period

   $ 12      $ 11      $ 11      $ 9   

Net income attributable to noncontrolling interest

     1        1        2        3   

Noncontrolling interest, end of period

   $ 13      $ 12      $ 13      $ 12   

 

(a) Represents preferred stock redemptions of $33 million and $19 million by Ameren Missouri and CILCO, respectively.

Genco Asset Sale

In June 2011, Genco completed the sale of its remaining interest in the Columbia CT facility to the city of Columbia, Missouri. Genco received cash proceeds of $45 million from the sale. Genco recognized an $8 million pretax gain during the second quarter of 2011 relating to this sale. Effective with the sale, the power purchase agreements between Marketing Company and the city of Columbia were terminated.

Closure of Meredosia and Hutsonville Energy Centers

On October 4, 2011, Resources Company announced that a total of four currently operating units at Genco’s Meredosia and Hutsonville energy centers will cease operating at the end of 2011. The closure of these units will result in the elimination of 90 positions. Ameren and Genco each recorded the following pretax charges to earnings during the third quarter of 2011 related to the planned closure of these energy centers:

 

 

a $26 million non-cash impairment of plant book value;

 

 

a $5 million non-cash impairment of materials and supplies; and

 

 

a $4 million estimate for future cash severance costs.

 

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These charges were recorded in Ameren’s and Genco’s statements of income as “Goodwill, impairment and other charges” and were included in the Merchant Generation segment results. Ameren and Genco anticipate that substantially all of the severance will be paid during the first quarter of 2012.

Ameren and Genco expect to receive cash tax benefits of $22 million and $33 million, respectively, as a result of the closure of these units. Previously recorded AROs for ash pond closures, and river structure and asbestos removals, for these energy centers were $38 million. Ameren and Genco expect cash expenditures over the next ten years along with associated cash tax benefits of $16 million.

The closure of these units is primarily the result of the expected cost of complying with the CSAPR, which was issued in July 2011. Genco determined that CSAPR compliance options for these four units were uneconomical. Another factor driving the closure of these facilities was a lack of a multi-year capacity market managed by MISO, without which Genco was not positioned to make the substantial investment for environmental controls that would be required to keep these units in service.

In addition, during the third quarter of 2010, Ameren and Genco each recognized long-lived asset impairment charges. See Note 17 - Goodwill and Other Asset Impairments under Part II, Item 8, of the Form 10-K for additional information about the prior-year impairment charge.

Employee Separation

On October 21, 2011, Ameren announced that, as part of its efforts to reduce its operations and maintenance expenses, it was extending a voluntary separation offer to approximately 715 management and labor union-represented employees who are 58 years of age or older as of December 31, 2011. This program is being offered to eligible employees at Ameren Missouri and at Ameren Services. Employees who accept the separation offer will receive benefits consistent with Ameren’s standard management severance benefits. Employees must decide whether to accept the separation offer by December 22, 2011, and those accepting are expected to leave their employment by December 31, 2011.

NOTE 2 - RATE AND REGULATORY MATTERS

Below is a summary of significant regulatory proceedings and related lawsuits. We are unable to predict the ultimate outcome of these matters, the timing of the final decisions of the various agencies and courts, or the impact on our results of operations, financial position, or liquidity.

Missouri

2009 Electric Rate Order

In January 2009, the MoPSC issued an order approving an increase for Ameren Missouri in annual revenues of approximately $162 million for electric service and the implementation of a FAC and a vegetation management and infrastructure inspection cost tracking mechanism, among other things. In February 2009, Noranda, Ameren Missouri’s largest electric customer, and the MoOPC appealed certain aspects of the MoPSC decision to the Circuit Court of Pemiscot County, Missouri, the Circuit Court of Stoddard County, Missouri, and the Cole County Circuit Court. The Stoddard and Pemiscot County cases were consolidated (collectively, the Stoddard County Circuit Court), and the Cole County case was dismissed. In September 2009, the Stoddard County Circuit Court granted Noranda’s request to stay the electric rate increase granted by the January 2009 MoPSC order as it applies specifically to Noranda’s electric service account until the court renders its decision on the appeal. From the granting of the stay request until June 2010, Noranda paid into the Stoddard County Circuit Court’s registry the entire amount of its monthly base rate increase and monthly FAC payments. In June 2010, when the May 2010 electric rate order became effective, Noranda ceased making base rate payments into the Stoddard County Circuit Court’s registry. Noranda continued to pay into the Stoddard County Circuit Court’s registry its monthly FAC payments that related to electric service received during the time periods prior to the effectiveness of the May 2010 electric rate order. Because of the lag between accumulations of changes in net fuel costs and when those net fuel costs are recovered through FAC charges applied to customers’ bills, a portion of Noranda’s FAC payment in January 2012 would be the last possible contested amount that could be deposited into the Stoddard County Circuit Court’s registry relating to this 2009 electric rate order appeal. As of September 30, 2011, the aggregate amount held in the Stoddard County Circuit Court’s registry was $18 million.

In August 2010, the Stoddard County Circuit Court issued a judgment that reversed parts of the MoPSC’s decision. Also, upon issuance, the Stoddard County Circuit Court suspended its own judgment. Therefore, the entire amount held in the Stoddard County Circuit Court’s registry will remain in the Stoddard County Circuit Court’s registry pending the appeal discussed below.

 

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In September 2010, Ameren Missouri filed an appeal with the Missouri Court of Appeals, Southern District. In November 2011, the Missouri Court of Appeals issued a ruling that upheld the MoPSC’s January 2009 electric rate order; thereby reversing the Stoddard County Circuit Court’s August 2010 decision. Noranda and MoOPC could request further appeals by early 2012. If the MoPSC’s January 2009 electric rate order is ultimately upheld, Ameren Missouri will receive all of the funds held in the Stoddard County Circuit Court’s registry, plus accrued interest. As a result of the Missouri Court of Appeals ruling, Ameren Missouri anticipates that the Stoddard County Circuit Court will release to Ameren Missouri the amount held in its registry by early 2012, depending on additional court proceedings.

2010 Electric Rate Order

In May 2010, the MoPSC issued an order approving an increase for Ameren Missouri in annual revenues for electric service of approximately $230 million, including $119 million to cover higher fuel costs and lower revenue from sales outside Ameren Missouri’s system.

The MIEC and MoOPC appealed certain aspects of the MoPSC order to the Cole County Circuit Court. In addition to the MIEC appeal, four industrial customers, who are members of MIEC, also filed a request for a stay with the Cole County Circuit Court. In December 2010, the Cole County Circuit Court granted the request of the four industrial customers to stay the MoPSC’s 2010 electric rate order and required those customers to pay into the Cole County Circuit Court’s registry the difference between their billings under the 2010 Missouri electric rate order and their billings under a Missouri electric rate order that became effective in June 2007, the last Ameren Missouri rate order for which appeals have been exhausted. On February 15, 2011, the four industrial customers posted the bond required by the stay. Since the bond was posted, the four industrial customers have made payments into the Cole County Circuit Court’s registry equal to the difference between their base rate billings under 2010 electric rates and 2007 electric rates, as well as their FAC amounts to the extent those billings relate to service prior to the effective date of the new rates established by the 2011 electric rate order. Because of the lag between accumulations of changes in net fuel costs and when those net fuel costs are recovered through FAC charges applied to customers’ bills, the four industrial customers will continue to pay a portion of their FAC payments to the Cole County Circuit Court’s registry to the extent those payments relate to service prior to the effective date of the new rates by the 2011 electric rate order. It is expected that a portion of the FAC billings invoiced to these customers in September 2012 will be the last contested amount deposited into the Cole County Circuit Court’s registry relating to this 2010 electric rate order appeal. As of September 30, 2011, the aggregate amount held by the Cole County Circuit Court, excluding the bond amount, was $14 million. A decision is expected to be issued on the MIEC’s and MoOPC’s appeal by the Cole County Circuit Court in 2011 or early 2012.

With respect to further judicial proceedings regarding the 2010 electric rate order, Ameren Missouri will continue to address the merits of the order and any further filings that might be made relating to the stay, if any, through the judicial and regulatory review processes. We cannot predict the ultimate outcome of these proceedings, which could have a material effect on Ameren Missouri’s and Ameren’s results of operations, financial position, and liquidity.

The stay in effect for the four industrial customers does not address the merits of the appeals of the MoPSC’s 2010 electric rate order or the 2009 electric rate order, which will be addressed in the ordinary course of the judicial review process. At this time, Ameren Missouri does not believe any aspect of the 2009 and 2010 electric rate increases authorized by the 2009 and 2010 MoPSC electric rate orders are probable of refund to Ameren Missouri’s customers. If Ameren Missouri were to conclude that some portion of these rate increases becomes probable of refund to Ameren Missouri’s customers, a charge to earnings would be recorded for the estimated amount of refund in the period in which that determination was made.

2011 Electric Rate Order

On July 13, 2011, the MoPSC issued an order approving an increase for Ameren Missouri in annual revenues for electric service of approximately $173 million, including $52 million related to an increase in normalized net fuel costs above the net fuel costs included in base rates previously authorized by the MoPSC in its May 2010 electric rate order. The revenue increase was based on a 10.2% return on equity, a capital structure composed of 52.2% common equity, and a rate base of approximately $6.6 billion. The rate changes became effective on July 31, 2011. The MoPSC order approved the continued use of Ameren Missouri’s vegetation

 

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management and infrastructure cost tracker, pension and postretirement benefit cost tracker, and FAC at the current 95% sharing level. The MoPSC order shortened the FAC recovery and refund period from 12 months to 8 months. The MoPSC order denied Ameren Missouri’s request for the ability to recover any under-recovery of fixed costs as a result of lower sales volumes from the implementation of energy efficiency measures.

Additionally, the MoPSC order provided for a tracking mechanism for uncertain income tax positions. The order provides that reserves for uncertain tax positions do not reduce rate base. However, when an uncertain tax position liability is resolved, the order requires the creation of a regulatory asset or regulatory liability to reflect the time value (using the weighted average cost of capital in the order) of the difference between the uncertain tax position liability that was excluded from rate base and the final tax liability. The resulting regulatory asset or liability will be amortized over three years beginning on the effective date of new rates established in the next electric rate case.

The 2011 electric rate order also allowed for the full recovery of investments for the Sioux energy center scrubbers and related 2011 property taxes for the Sioux and Taum Sauk energy centers. However, the MoPSC order disallowed the recovery of all costs of enhancements, or costs that would have been incurred absent the breach, related to the rebuilding of the Taum Sauk energy center in excess of amounts recovered from property insurance. As a result of the order, Ameren and Ameren Missouri each recorded a pretax charge to earnings of $89 million, relating to the Taum Sauk disallowance, in the quarter ended September 30, 2011. This charge was recorded on Ameren’s statement of income as “Goodwill, impairment and other charges” and recorded on Ameren Missouri’s statement of income as “Loss from regulatory disallowance.”

Further, the MoPSC order adjusted or established the recovery period of multiple regulatory assets and regulatory liabilities. The following table summarizes the changes to the recovery period of regulatory assets and regulatory liabilities as directed in the MoPSC’s July 2011 rate order. The recovery periods became effective on August 1, 2011.

 

Regulatory Assets and Liabilities    Regulatory Asset
(Liability) Balance
at July 31, 2011 (a)
   

Recovery Period

Ends

 

Demand-side costs(b)

   $ 33        July 2017   

Construction accounting for pollution control equipment(b)

     25        Sept. 2033   

SO2 emissions allowances sales tracker(c)

     8        July 2013   

FERC-ordered MISO resettlements(c)

     2        July 2013   

2006 Storm costs(c)

     1        July 2013   

Vegetation management and infrastructure inspection(c)

     (3     July 2013   

Pension and postretirement benefit cost tracker for 2010 costs(b)

     (11     July 2016   

Total

   $ 55           

 

(a) Represents amounts capitalized at implementation of the rate order at July 31, 2011, and excludes the impact of subsequent amortization of the regulatory assets or liabilities.
(b) Recovery period first established in the MoPSC’s July 2011 rate order.
(c) Previous recovery period was extended.

On July 1, 2011, a new law took effect that reformed the judicial appeal process for MoPSC rate orders. Among other items, the new law allows appeals to be made directly to the appellate court, bypassing the circuit court. The new law provides that rates cannot be stayed; however, the appellate court could direct the MoPSC to revise rates. Such rate revisions could be ordered to be applied retroactively. The provisions of this new law apply to any judicial appeals of the MoPSC’s July 2011 rate order.

In July 2011, Ameren Missouri and other parties to the rate case filed a rehearing request of various aspects of the order including the disallowance of Taum Sauk enhancements. The MoPSC denied the requests. Subsequently, Ameren Missouri appealed the disallowance of Taum Sauk enhancements to the Missouri Court of Appeals, Western District. MIEC also appealed certain aspects of the MoPSC’s electric rate order to the Missouri Court of Appeals, Western District. A decision is expected by the Missouri Court of Appeals, Western District, in 2012. Ameren Missouri cannot predict the ultimate outcome of these appeals.

 

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FAC Prudence Review

Missouri law requires the MoPSC to complete prudence reviews of Ameren Missouri’s FAC at least every 18 months. In April 2011, the MoPSC issued an order with respect to its prudence review of Ameren Missouri’s FAC for the period from March 1, 2009, to September 30, 2009. In this order, the MoPSC ruled that Ameren Missouri should have included in the FAC calculation all revenues and costs associated with certain long-term partial requirements sales that were made by Ameren Missouri due to the loss of Noranda’s load caused by a severe ice storm in January 2009. As a result of the order, Ameren Missouri recorded a pretax charge to earnings of $18 million, including $1 million for interest, in the second quarter of 2011 for its obligation to refund to Ameren Missouri’s electric customers the earnings associated with these sales previously recognized by Ameren Missouri during the period from March 1, 2009, to September 30, 2009. In October 2011, Ameren Missouri began refunding the $18 million to customers, through the FAC.

Ameren Missouri disagrees with the MoPSC order’s classification of these sales and believes that the terms of its FAC tariff did not provide for the inclusion of these sales in the FAC calculation. In May 2011, Ameren Missouri filed a rehearing request with the MoPSC, which was denied. In June 2011, Ameren Missouri filed an appeal with the Cole County Circuit Court. A decision is expected from the Cole County Circuit Court in late 2011 or in 2012. Separately, in July 2011, Ameren Missouri filed a request with the MoPSC for an accounting authority order that would allow Ameren Missouri to defer, as a regulatory asset, fixed costs totaling $36 million that were not recovered from Noranda as a result of the loss of load caused by the severe 2009 ice storm for potential recovery in a future electric rate case. We cannot predict the ultimate outcome of these regulatory or judicial proceedings.

Ameren Missouri recognized an additional $25 million of pretax earnings associated with the same long-term partial requirements sales contracts subsequent to September 30, 2009. The MoPSC order issued in April 2011 did not address any pretax earnings associated with the same long-term partial requirements contracts subsequent to September 30, 2009. The MoPSC’s FAC prudence review for the period from October 1, 2009, to May 31, 2011, was initiated in September 2011. On October 28, 2011, the MoPSC staff filed a recommendation with the MoPSC to direct Ameren Missouri to refund to customers, prior to the completion of the staff’s prudence review, the pretax earnings associated with the same long-term partial requirements sales contracts subsequent to September 30, 2009. The MoPSC staff calculated these pretax earnings to be $26 million. We cannot predict whether the MoPSC will approve this recommendation. If Ameren Missouri were to determine that these sales were probable of refund to Ameren Missouri’s electric customers, a charge to earnings would be recorded for the refund in the period in which that determination was made. Because of pending court appeals and regulatory review, Ameren Missouri does not believe these amounts are currently probable of refund to customers.

Illinois

Pending Electric and Natural Gas Delivery Service Rate Cases

In February 2011, Ameren Illinois filed a request with the ICC to increase its annual revenues for electric delivery service. The currently pending request, as revised, seeks to increase annual revenues for electric delivery service by $39 million. The revised electric rate increase request was based on an 11.0% return on equity, a capital structure composed of 52.9% common equity, and a rate base of $2 billion.

In February 2011, Ameren Illinois also filed a request with the ICC to increase its annual revenues for natural gas delivery service. The currently pending request, as revised, seeks to increase annual revenues for natural gas delivery service by $50 million. The revised natural gas rate increase request was based on a 10.75% return on equity, a capital structure composed of 52.9% common equity, and a rate base of $956 million.

In an attempt to reduce regulatory lag, Ameren Illinois used a future test year, 2012, in each of these rate requests.

In its response to Ameren Illinois’ rate increase requests the ICC staff recommended an increase in annual revenues for electric delivery service of $4 million, based on a 9.72% return on equity, a capital structure composed of 51.8% common equity, and a rate base of $2 billion. The ICC staff recommended an increase in annual revenues for natural gas delivery service of $29 million, based on an 8.9% return on equity, a capital structure composed of 51.8% common equity, and a rate base of $945 million. Other parties also made recommendations through testimony filed in the electric and natural gas delivery service rate cases.

A decision by the ICC in these proceedings is required in January 2012. Ameren Illinois cannot predict the level of any delivery service rate changes the ICC may approve or whether any rate changes that may eventually be approved will be sufficient to enable Ameren Illinois to recover its costs and earn a reasonable return on its investments when the rate changes go into effect.

In October 2011, as discussed below, the Energy Infrastructure Modernization Act was enacted in Illinois. Ameren Illinois plans to participate by adopting the performance-based formula process of the law and by withdrawing its pending electric delivery service rate case.

 

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Energy Infrastructure Modernization Act

In October 2011, the Energy Infrastructure Modernization Act was enacted into law and became effective immediately. Also, in October 2011, House Bill 3036, which, if enacted, would result in certain amendments to the Energy Infrastructure Modernization Act, was passed by the Illinois General Assembly. The Energy Infrastructure Modernization Act applies to certain electric utilities in Illinois on an opt-in basis. This law includes a performance-based formula process for determining rates that would provide for the recovery of actual costs of electric delivery service that are prudently incurred, reflect the utility’s actual regulated capital structure and include a formula for calculating the return on equity component of the cost of capital. House Bill 3036 modified the equity component of the formula rate to be based on the yields of 30-year United States treasury bonds plus 580 basis points, instead of 600 basis points. Participating utilities are subject to certain performance standards whereby the failure to achieve the standards will result in a reduction in the utility’s allowed return on equity calculated under the formula. Ameren Illinois would be required to invest $625 million in capital expenditures incremental to Ameren Illinois’ average capital expenditures for calendar years 2008 through 2010 over the next ten years to modernize its distribution system. Such investments are expected to encourage economic development and create an estimated 450 additional jobs within Illinois. Ameren Illinois also will be required to make a one-time $7.5 million non-recoverable donation to the Illinois Science and Energy Innovation Trust, as well as a $1 million annual donation to the trust for as long as it is under the formula ratemaking process. House Bill 3036 also would require Ameren Illinois to contribute $1 million annually for customer assistance programs for as long as it is under the formula ratemaking process, as well as require Ameren Illinois to withdraw its pending electric delivery service rate case. To become law, House Bill 3036 must be approved by the Illinois Governor, or if the Illinois Governor elects to veto the legislation, the Illinois General Assembly would have to override the veto. The formula ratemaking process is effective until the end of 2017, but could be extended by the Illinois General Assembly for an additional five years. Ameren Illinois is reviewing the final version of this law and House Bill 3036 to determine their potential impacts on Ameren’s and Ameren Illinois’ results of operations, financial position, and liquidity.

The Energy Infrastructure Modernization Act does not apply to natural gas utilities.

Federal

Electric Transmission Investment

FERC, in its order issued in May 2011, approved transmission rate incentives for ATX, Ameren Missouri and Ameren Illinois for two new transmission projects. The two projects are the Illinois River project and the Big Muddy project. These initial projects, subject to MISO approval, consist of a potential $1 billion investment in high voltage transmission assets in Illinois and Missouri. MISO approval for the Illinois River project as well as two additional projects is anticipated in December 2011. The FERC order approved the following rate mechanisms with respect to ATX’s Illinois River and Big Muddy projects:

 

 

Full recovery of financing costs associated with construction work in progress before the asset is placed in service;

 

 

Recovery of prudently incurred costs in developing project facilities that might later be abandoned due to issues outside the company’s control;

 

 

Use of a hypothetical capital structure reflecting the capital structure of Ameren Illinois as of December 31, 2009, which would afford ATX a capital structure that resembles that of a utility company; and

 

 

Permission to allow ATX to recover operating and maintenance costs incurred in the early development stages of the projects.

COLA and ESP

In 2008, Ameren Missouri filed an application with the NRC for a COLA for a new 1,600-megawatt nuclear unit at Ameren Missouri’s existing Callaway County, Missouri, nuclear energy center site. In 2009, Ameren Missouri suspended its efforts to build a new nuclear unit at its existing Missouri nuclear energy center site, and the NRC suspended review of the COLA.

Ameren Missouri is considering filing an application to obtain an ESP from the NRC for the Callaway energy center site. An ESP approves a specific location for a nuclear facility; however, additional licenses would be required for the specific type and design of nuclear facility to be built at that site. An ESP does not authorize construction of a plant. An ESP is valid for 20 years and potentially could be renewed for up to an additional 20 years. Attempts to pass legislation to maintain an option for nuclear power in the state of Missouri by recovering the costs of the ESP, subject to appropriate consumer protections, were not successful during the 2011 spring Missouri legislative session. However, support for nuclear power exists in the state of Missouri, which could lead to the passage of an ESP recovery mechanism in future legislative sessions. Ameren Missouri’s pursuit of an ESP is dependent upon enactment of a legislative framework ensuring cost recovery.

 

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As of September 30, 2011, Ameren Missouri had capitalized approximately $68 million relating to its efforts to construct a new nuclear unit. All of these incurred costs will remain capitalized while management assesses options to maximize the value of its investment in this project. If efforts are permanently abandoned or management concludes it is probable the costs incurred will be disallowed in rates, a charge to earnings would be recognized in the period in which that determination was made.

NOTE 3 - CREDIT FACILITY BORROWINGS AND LIQUIDITY

The liquidity needs of the Ameren Companies are typically supported through the use of available cash, short-term intercompany borrowings, drawings under committed bank credit facilities, or commercial paper issuances.

The following tables summarize the borrowing activity and relevant interest rates under credit facilities as of September 30, 2011, and excludes issued letters of credit:

 

Ameren (Parent) Ameren (Parent) Ameren (Parent)
2010 Missouri Credit Agreement ($800 million)    Ameren (Parent)     Ameren Missouri     Total  

Average daily borrowings outstanding during 2011

   $ 140      $ -      $ 140   

Outstanding credit facility borrowings at period end

     -        -        -   

Weighted-average interest rate during 2011

     2.30     -        2.30

Peak credit facility borrowings during 2011(a)

   $ 340      $ -      $ 340   

Peak interest rate during 2011

     4.30     -        4.30
      
2010 Genco Credit Agreement ($500 million)    Ameren (Parent)     Genco     Total  

Average daily borrowings outstanding during 2011

   $ -      $ 55      $ 55   

Outstanding credit facility borrowings at period end

     -        -        -   

Weighted-average interest rate during 2011

     -        2.30     2.30

Peak credit facility borrowings during 2011(a)

   $ -      $ 100      $ 100   

Peak interest rate during 2011

     -        2.31     2.31

 

(a) The timing of peak credit facility borrowings varies by company, and, therefore, the amounts presented by company might not equal the total peak credit facility borrowings for the period. The simultaneous peak credit facility borrowings by the Ameren Companies under all credit facilities during the first nine months of 2011 were $440 million.

Neither Ameren nor Ameren Illinois borrowed under the 2010 Illinois Credit Agreement during the nine months ended September 30, 2011.

The 2010 Credit Agreements are used for cash borrowings, to issue letters of credit, and to support borrowings under Ameren’s $500 million commercial paper program, Ameren Missouri’s $500 million commercial paper program and Ameren Illinois’ $500 million commercial paper program, the latter of which was created in October 2011. Any of the 2010 Credit Agreements are available to Ameren to support borrowings under Ameren’s commercial paper program, subject to borrowing sublimits. The 2010 Missouri Credit Agreement is available to support borrowings under Ameren Missouri’s commercial paper program, and the 2010 Illinois Credit Agreement is available to support borrowings under Ameren Illinois’ commercial paper program. At September 30, 2011, Ameren had $330 million of commercial paper outstanding and $15 million of letters of credit outstanding, and Ameren Missouri and Ameren Illinois had no commercial paper or letters of credit outstanding. Based on outstanding borrowings and letters of credit issued under the 2010 Credit Agreements as of September 30, 2011, as well as commercial paper outstanding as of such date, the aggregate amount of credit capacity available under the 2010 Credit Agreements at September 30, 2011, was $1.8 billion.

In June 2011, Ameren Missouri received approval from the MoPSC to extend the expiration of its borrowing sublimit under the 2010 Missouri Credit Agreement to September 10, 2013.

Other Agreements

On June 2, 2010, Ameren entered into a $20 million revolving credit facility ($20 Million Facility) that matures on June 1, 2012. The $20 Million Facility has been fully drawn since June 15, 2010. Borrowings under the $20 Million Facility bear interest at a rate equal to the applicable LIBOR plus 2.25% per annum. The obligations of Ameren under the $20 Million Facility are unsecured. No subsidiary of Ameren is a party to, guarantor of, or borrower under the facility.

Commercial Paper

At September 30, 2011, Ameren had $330 million of commercial paper outstanding. During the first nine months of 2011, Ameren had average daily commercial paper balances outstanding of $335 million with a weighted-average interest rate of 0.85%. The peak short-term commercial paper outstanding and peak interest rate during the first nine months of 2011 were $435 million and 1.46%, respectively.

 

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Indebtedness Provisions and Other Covenants

The information below presents a summary of the Ameren Companies’ compliance with indebtedness provisions and other covenants contained in the 2010 Credit Agreements and the $20 Million Facility. See Note 4 - Credit Facility Borrowings and Liquidity under Part II, Item 8, of the Form 10-K for a detailed description of those provisions.

The 2010 Credit Agreements contain conditions to borrowings and issuances of letters of credit, including the absence of default or unmatured default, material accuracy of representations and warranties (excluding any representation after the closing date as to the absence of material adverse change and material litigation), and required regulatory authorizations. In addition, solely with respect to borrowings under the 2010 Illinois Credit Agreement, it is a condition precedent to any such borrowing that, at the time of and after giving effect to such borrowing, the borrower will not be in violation of any limitation on its ability to incur unsecured indebtedness contained in its articles of incorporation. The 2010 Credit Agreements also contain nonfinancial covenants, including restrictions on the ability to incur liens, to transact with affiliates, to dispose of assets, to make investments in or transfer assets to affiliates, and to merge with other entities.

The 2010 Credit Agreements require each of Ameren, Ameren Missouri, Ameren Illinois and Genco to maintain consolidated indebtedness of not more than 65% of its consolidated total capitalization pursuant to a defined calculation set forth in the agreements. As of September 30, 2011, the ratios of consolidated indebtedness to total consolidated capitalization, calculated in accordance with the provisions of the 2010 Credit Agreements, were 48%, 46%, 40% and 45%, for Ameren, Ameren Missouri, Ameren Illinois and Genco, respectively. In addition, under the 2010 Genco Credit Agreement and the 2010 Illinois Credit Agreement, Ameren is required to maintain a ratio of consolidated funds from operations plus interest expense to consolidated interest expense of 2.0 to 1, to be calculated quarterly, as of the end of the most recent four fiscal quarters then ending, in accordance with the 2010 Genco Credit Agreement and the 2010 Illinois Credit Agreement, as applicable. Ameren’s ratio as of September 30, 2011, was 4.9 to 1. Failure of a borrower to satisfy a financial covenant constitutes an immediate default under the applicable 2010 Credit Agreement.

The $20 Million Facility requires Ameren to maintain consolidated indebtedness of not more than 65% of its consolidated capitalization pursuant to a defined calculation set forth in the agreement. As of September 30, 2011, Ameren’s consolidated indebtedness ratio, calculated in accordance with the provisions of the $20 Million Facility, was 48%. Failure by Ameren to satisfy this covenant would constitute an immediate default under the $20 Million Facility but, given the size of the facility, would not trigger an Ameren default under any of the 2010 Credit Agreements or Ameren’s indenture.

None of the Ameren Companies’ credit agreements or other financing arrangements contains credit rating triggers that would cause an event of default or acceleration of repayment of outstanding balances. At September 30, 2011, the Ameren Companies were in compliance with the provisions and covenants of their credit agreements.

Money Pools

Ameren has money pool agreements with and among its subsidiaries to coordinate and provide for certain short-term cash and working capital requirements. Separate money pools are maintained for utility and non-state-regulated entities. Ameren Services is responsible for the operation and administration of the money pool agreements.

Utility

Through the utility money pool, Ameren Missouri, Ameren Illinois and Ameren Services may access the committed credit facilities as both lenders and borrowers. Ameren and AERG may participate in the utility money pool only as lenders. Ameren Services administers the utility money pool and tracks internal and external funds separately. Internal funds are surplus funds contributed to the utility money pool from participants. The primary sources of external funds for the utility money pool are the 2010 Credit Agreements and the commercial paper programs. 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 that the pool participants have surplus funds or contribute funds from other external sources. The availability of funds is also determined by funding requirement limits established by regulatory authorizations. The utility money pool was established to coordinate and to provide short-term cash and working capital for the participants. Participants receiving a loan under the utility money pool agreement must repay the principal amount of such loan, together with accrued interest. The rate of interest depends on the composition of internal and external funds in the utility money pool. There were no utility money pool borrowings during the three and nine months ended September 30, 2011.

Non-state-regulated Subsidiary

Ameren Services, Resources Company, Genco, AERG, Marketing Company, and other non-state-regulated Ameren subsidiaries have the ability, subject to Ameren parent company authorization and applicable regulatory short-term borrowing authorizations, to access funding from the 2010 Credit Agreements and the commercial paper programs through a non-state-regulated subsidiary money pool

 

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agreement. The total amount available to the pool participants at any given time is reduced by the amount of borrowings made by Ameren’s subsidiaries, but is increased to the extent that other pool participants advance surplus funds to the non-state-regulated subsidiary money pool or remit funds from other external sources. See the discussion above for the amount available under the 2010 Credit Agreements at September 30, 2011. The non-state-regulated subsidiary money pool was established to coordinate and to provide short-term cash and working capital for Ameren’s non-state-regulated activities. Participants receiving a loan under the non-state-regulated subsidiary money pool agreement must repay the principal amount of such loan, together with accrued interest. The rate of interest depends on the composition of internal and external funds in the non-state-regulated subsidiary money pool. The average interest rate for borrowing under the non-state-regulated subsidiary money pool for the three and nine months ended September 30, 2011, was 0.83% and 0.89%, respectively (2010 - 0.34% and 0.65%, respectively).

See Note 8 - Related Party Transactions for the amount of interest income and expense from the money pool arrangements recorded by the Ameren Companies for the three and nine months ended September 30, 2011.

NOTE 4 - LONG-TERM DEBT AND EQUITY FINANCINGS

Ameren

Under DRPlus, pursuant to effective SEC Form S-3 registration statements, and under our 401(k) plan, pursuant to an effective SEC Form S-8 registration statement, Ameren issued a total of 0.6 million new shares of common stock valued at $17 million and 1.8 million new shares valued at $49 million in the three and nine months ended September 30, 2011, respectively.

Ameren Illinois

In June 2011, Ameren Illinois’ 6.625% $150 million senior secured notes matured and were repaid and retired using available cash on hand.

Indenture Provisions and Other Covenants

Ameren Missouri’s and Ameren Illinois’ indenture provisions and articles of incorporation include covenants and provisions related to issuances of first mortgage bonds and preferred stock. Ameren Missouri and Ameren Illinois are required to meet certain ratios to issue additional first mortgage bonds and preferred stock. However, not meeting these ratios would not result in a default under these covenants and provisions. The following table includes the required and actual earnings coverage ratios for interest charges and preferred dividends and bonds and preferred stock issuable for the 12 months ended September 30, 2011, at an assumed interest rate of 6% and dividend rate of 7%.

 

      Required Interest
Coverage Ratio(a)
   Actual Interest
Coverage Ratio
     Bonds Issuable(b)    

Required Dividend

Coverage Ratio(c)

  

Actual Dividend

Coverage Ratio

    

Preferred Stock

Issuable

 

Ameren Missouri

   ³2.0      3.3       $ 2,115      ³2.5      89.3       $ 1,696   

Ameren Illinois

   ³2.0      7.5         3,264 (d)    ³1.5      3.3         203   

 

(a) Coverage required on the annual interest charges on first mortgage bonds outstanding and to be issued. Coverage is not required in certain cases when additional first mortgage bonds are issued on the basis of retired bonds.
(b) Amount of bonds issuable based either on required coverage ratios or unfunded property additions, whichever is more restrictive. The amounts shown also include bonds issuable based on retired bond capacity of $89 million and $765 million at Ameren Missouri and Ameren Illinois, respectively.
(c) Coverage required on the annual dividend on preferred stock outstanding and to be issued, as required by the respective company’s articles of incorporation.
(d) Amount of bonds issuable by Ameren Illinois based on unfunded property additions and retired bonds solely under the former IP mortgage indenture.

Ameren’s indenture does not require Ameren to comply with any quantitative financial covenants. The indenture does, however, include certain cross-default provisions. Specifically, either (1) the failure by Ameren to pay when due and upon expiration of any applicable grace period any portion of any Ameren indebtedness in excess of $25 million or (2) the acceleration upon default of the maturity of any Ameren indebtedness in excess of $25 million under any indebtedness agreement, including the 2010 Credit Agreements, constitutes a default under the indenture, unless such past due or accelerated debt is discharged or the acceleration is rescinded or annulled within a specified period.

Ameren Missouri, Ameren Illinois and Genco as well as certain other nonregistrant Ameren subsidiaries are subject to Section 305(a) of the Federal Power Act, which makes it unlawful for any officer or director of a public utility, as defined

 

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