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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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 1-14756
AMEREN CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
Missouri 43-1723446
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
1901 Chouteau Avenue, St. Louis, Missouri 63103
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (314) 621-3222
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<CAPTION>
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<S> <C>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $ .01 par value New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X).
Aggregate market value of voting stock held by non-affiliates as of
March 5, 1999, based on closing prices most recently available as reported in
The Wall Street Journal: $5,377,199,525.
Shares of Common Stock, $ .01 par value, outstanding as of March 5,1999:
137,215,462 shares.
DOCUMENTS INCORPORATED BY REFERENCES.
Portions of the registrant's 1998 Annual Report to Stockholders (the
"1998 Annual Report") are incorporated by reference into Parts I, II and IV.
Portions of the registrant's definitive proxy statement for the 1999
annual meeting are incorporated by reference into Part III.
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<CAPTION>
TABLE OF CONTENTS
PART I PAGE
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Item 1 - Business
General............................................................................. 1
Capital Program and Financing....................................................... 2
Rates............................................................................... 2
Fuel Supply......................................................................... 3
Regulation.......................................................................... 4
Industry Issues..................................................................... 5
Operating Statistics(1)............................................................. 6
Item 2 - Properties............................................................................... 6
Item 3 - Legal Proceedings........................................................................ 7
Item 4 - Submission of Matters to a Vote of Security Holders(2)
Executive Officers of the Company (Item 401(b) of Regulation S-K)....................................... 8
PART II
Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters(1).............................................................. 8
Item 6 - Selected Financial Data(1)............................................................... 9
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations(1)........................................................ 9
Item 7A - Quantitative and Qualitative Disclosures about Market Risk(1)............................ 9
Item 8 - Financial Statements and Supplementary Data(1)........................................... 9
Item 9 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure(2)
PART III
Item 10 - Directors and Executive Officers of the Registrant(1).................................... 9
Item 11 - Executive Compensation(1)................................................................ 9
Item 12 - Security Ownership of Certain Beneficial Owners
and Management(1)................................................................... 9
Item 13 - Certain Relationships and Related Transactions(1)........................................ 10
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K............................. 10
SIGNATURES ......................................................................................... 13
EXHIBITS ......................................................................................... 14
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- ---------------------------------
(1) Incorporated by reference.
(2) Not applicable and not included herein.
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PART I
ITEM 1. BUSINESS.
GENERAL
The Registrant, Ameren Corporation (Ameren or the Company), was
incorporated in Missouri on August 7, 1995. On December 31, 1997, following the
receipt of all required approvals, CIPSCO Incorporated (CIPSCO) and Union
Electric Company (UE) combined with the result that the common shareholders of
CIPSCO and UE became the common shareholders of the Company, and the Company
became the owner of 100% of the common stock of UE and CIPSCO's utility
operating subsidiary, Central Illinois Public Service Company (CIPS) (the
Merger).
For additional information about the Merger, see "Overview" in
"Management's Discussion and Analysis" and Notes 1 and 2 to the "Notes to
Consolidated Financial Statements" on Pages 15, 28, and 29, respectively, of the
1998 Annual Report pages incorporated herein by reference.
Ameren is a public utility holding company registered under the
Public Utility Holding Company Act of 1935 (PUHCA) and does not own or operate
any significant assets other than the stock of its subsidiaries, including its
two utility operating subsidiaries, CIPS and UE. Dividends on Ameren's Common
Stock are dependent on distributions to be made to it by CIPS, UE, and its other
subsidiaries. The 1998 Annual Reports Form 10-K for CIPS and UE are available
from the Company upon request.
CIPS is an Illinois corporation organized in 1902. It supplies
electric and gas service to territories in central and southern Illinois having
an estimated population of 820,000 within an area of approximately 20,000 square
miles. UE was incorporated in Missouri in 1922, and is successor to a number of
companies, the oldest of which was organized in 1881. It is the largest electric
utility in the State of Missouri and supplies electric and gas service in
territories in Missouri and Illinois having an estimated population of 2,600,000
within an area of approximately 24,500 square miles, including the greater St.
Louis area.
On a consolidated basis, 93.3% of the Company's 1998 operating
revenues were derived from the sale of electric energy, 6.5% came from the sale
of natural gas, and 0.2% came from other sources. Consolidated electric
operating revenues as a percentage of total operating revenues for both of the
years 1996 and 1997 were 92%.
The Company also owns all of the common stock of other subsidiary
companies as follows: (a) CIPSCO Investment Company, a non-regulated investment
company incorporated in Illinois; (b) Ameren Services Company, a Missouri
corporation which provides administrative, accounting, legal, engineering,
executive, and other support services to Ameren affiliates; (c) AmerenEnergy,
Inc., a Missouri corporation which primarily serves as a power marketing agent
for the operating companies and provides a range of energy and risk management
services to targeted customers; and (d) Ameren Development Company, a
non-regulated holding company incorporated in Missouri. In addition, through its
operating subsidiaries, the Company owns 60% of the Common Stock of Electric
Energy, Inc., which owns and operates a generating plant with a nominal capacity
of 1,000 mW. Of the plant's total output, 60% is committed to the Department of
Energy, 10% to UE, 5% to CIPS, and the remainder to its other owners.
At December 31, 1998, the Company and its subsidiaries had 7,450
employees. Approximately 70% of such employees are represented by local unions
affiliated with the AFL-CIO. For additional information on labor matters, see
Note 12 to the "Notes to Consolidated Financial Statements" on Page 38 of the
1998 Annual Report pages incorporated herein by reference.
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For additional information regarding the Company's business
operations, see "Management's Discussion and Analysis" on Pages 15-22 and the
Consolidated Financial Information on Pages 23-45 of the 1998 Annual Report
pages incorporated herein by reference.
CAPITAL PROGRAM AND FINANCING
The Company is engaged in a capital program under which capital
expenditures are expected to approximate $495 million in 1999. For the five-year
period 1999 through 2003, construction expenditures are estimated at $2.4
billion. This estimate includes capital expenditures for the purchase of six new
combustion turbines, as well as expenditures which will be incurred by the
Company to meet new air quality standards for ozone and particulate matter.
In addition to the funds required for construction during the
1999-2003 period, $520 million will be required to repay long-term debt as
follows: $202 million in 1999; $35 million in 2000; $30 million in 2001; $108
million in 2002; and $145 million in 2003. Amounts for years subsequent to 1999
do not include UE's nuclear fuel lease payments since the amounts of such
payments are not currently determinable.
Historically, CIPS and UE have financed those capital costs which
exceeded available internally generated funds through issuance of short-term
debt in the form of bank loans and commercial paper. As needed, the short-term
debt would be subsequently reduced by sales of long-term debt and equity
securities.
To issue first mortgage bonds and preferred stock, CIPS and UE
each must comply with earnings tests contained in their respective mortgages and
Articles of Incorporation. For the issuance of additional first mortgage bonds,
generally, earnings coverage of twice the annual interest charges on first
mortgage bonds outstanding and to be issued is required. Generally, for the
issuance of additional preferred stock, earnings coverage of one and one-half
times annual interest charges and preferred stock dividends is required under
the CIPS Articles, and earnings coverage of at least two and one-half times the
annual dividend on preferred stock outstanding and to be issued is required
under UE's Articles. The ability to issue such securities in the future will
depend on coverages at that time. Currently, each company expects to have
adequate coverage ratios for anticipated requirements.
For additional information on the Company's capital program and
financial needs, see "Liquidity and Capital Resources" in "Management's
Discussion and Analysis" on Page 17, and Notes 5, 7, 8, and 12 to the "Notes to
Consolidated Financial Statements" on Pages 32, 33 and 38, of the 1998 Annual
Report pages incorporated herein by reference.
RATES
For the year 1998, approximately 63%, 25%, and 12% of the
Company's electric operating revenues were based on rates regulated by the
Missouri Public Service Commission (MoPSC), the Illinois Commerce Commission
(ICC), and the Federal Energy Regulatory Commission (FERC) of the U. S.
Department of Energy, respectively.
The electric utility restructuring legislation in Illinois
included a 5% residential rate decrease for the Company's Illinois electric
customers, effective August 1, 1998. This rate decrease reduced electric
revenues approximately $6 million in 1998 and is expected to reduce electric
revenues by approximately $14 million annually thereafter, based on estimated
levels of sales and assuming normal weather conditions. See "Regulation" for
additional reference to this legislation.
The Company was also subject to an electric rate decrease for the
Company's Missouri customers, effective September 1, 1998. This rate decrease is
based on the weather-adjusted average
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annual credits to customers under an experimental alternative regulation plan
that ran from July 1, 1995 through June 30, 1998. The Company estimates that its
Missouri electric rate decrease should approximate $15 million to $20 million on
an annualized basis. However, the MoPSC staff has proposed adjustments to the
Company's estimate. The staff's adjustments, if ultimately accepted, could
increase the Company's proposed Missouri rate decrease by $15 million to $20
million.
As permitted by electric utility restructuring legislation in
Illinois, CIPS and UE have elected to eliminate the fuel adjustment clause on
sales of electricity in Illinois, thereby including a historical level of fuel
costs in base rates. The CIPS request was approved by the ICC in March 1998, and
the UE request was approved in April 1998.
In December 1997, the MoPSC approved a $12 million annual rate
increase for natural gas service in UE's Missouri jurisdiction. The rate
increase became effective in February 1998.
In June 1998, UE and CIPS filed requests with the ICC to increase
rates for natural gas service in the Illinois jurisdiction. In February 1999,
the ICC approved a $9 million annual rate increase. The rate increase became
effective in February 1999.
For additional information on "Rates", see "Regulation" section
below and Note 2 to the "Notes to Consolidated Financial Statements" on Page 29
of the 1998 Annual Report pages incorporated herein by reference.
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FUEL SUPPLY
COST OF FUELS YEAR
- ------------- -------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
UE
Per Million BTU - Coal 100.015(cent) 105.600(cent) 112.250(cent) 117.645(cent) 123.950(cent)
- Nuclear 48.803(cent) 47.472(cent) 47.499(cent) 48.592(cent) 49.932(cent)
- System 90.378(cent) 92.816(cent) 96.596(cent) 101.590(cent) 101.867(cent)
CIPS
Per Million BTU - System (Coal) 152.738(cent) 163.000(cent) 171.000(cent) 176.000(cent) 165.000(cent)
</TABLE>
OIL AND GAS. The actual and prospective use of such fuels is
minimal, and the Company has not experienced and does not expect to experience
difficulty in obtaining adequate supplies.
COAL. Because of uncertainties of supply due to potential work
stoppages, equipment breakdowns and other factors, the Company has a policy of
maintaining a coal inventory consistent with its expected burn practices.
NUCLEAR. The components of the nuclear fuel cycle required for
nuclear generating units are as follows: (1) uranium; (2) conversion of uranium
into uranium hexafluoride; (3) enrichment of uranium hexafluoride; (4)
conversion of enriched uranium hexafluoride into uranium dioxide and the
fabrication into nuclear fuel assemblies; and (5) disposal and/or reprocessing
of spent nuclear fuel.
The Company has agreements and/or inventories to fulfill its
Callaway Nuclear Plant needs for uranium, enrichment, fabrication and conversion
services through 2002. Additional contracts will have to be entered into in
order to supply nuclear fuel during the remainder of the life of the Plant, at
prices which cannot now be accurately predicted. The Callaway Plant normally
requires refueling at 18-month intervals, with the next regular refueling
presently scheduled for the fall of 1999. In April 1999, the Company anticipates
that it will be necessary to perform a special refueling at the Plant for about
two
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weeks to replace certain fuel assemblies. This refueling is required to maintain
the full generating capability of the Callaway Plant until the scheduled fall
1999 refueling, and is not expected to have a material adverse effect on the
Company's financial condition, results of operations or liquidity.
Under the Nuclear Waste Policy Act of 1982, the U. S. Department of
Energy (DOE) is responsible for the permanent storage and disposal of spent
nuclear fuel. DOE currently charges one mill per nuclear generated kilowatt-hour
sold for future disposal of spent fuel. Electric rates charged to customers
provide for recovery of such costs. DOE is not expected to have its permanent
storage facility for spent fuel available until at least 2015. The Company has
sufficient storage capacity at the Callaway site until 2004 and is pursuing a
viable storage alternative. This alternative has been approved by the Nuclear
Regulatory Commission, and when implemented, will provide sufficient spent fuel
storage for the licensed life of the plant. The delayed availability of the
DOE's disposal facility is not expected to adversely affect the continued
operation of Callaway Plant.
For additional information on the Company's "Fuel Supply", see
Notes 12 and 13 to the "Notes to Consolidated Financial Statements" on Pages 38
and 40, respectively, of the 1998 Annual Report pages incorporated herein by
reference.
REGULATION
As a holding company registered under the PUHCA, Ameren, along
with its subsidiaries, is subject to the regulatory provisions of said Act,
including provisions relating to the issuance of securities, sales and
acquisitions of securities and utility assets, the services performed by Ameren
Services Company, and the activities of certain other subsidiaries.
CIPS and UE are subject to regulation, as applicable, by the
MoPSC and the ICC as to rates, service, accounts, issuance of equity securities,
issuance of debt having a maturity of more than twelve months, mergers, and
various other matters. Said companies are also subject to regulation by the FERC
as to rates and charges in connection with the transmission of electric energy
in interstate commerce and the sale of such energy at wholesale in interstate
commerce, mergers, and certain other matters. Authorization to issue debt having
a maturity of twelve months or less is obtained from the Securities and Exchange
Commission.
In December 1997, the Governor of Illinois signed the Electric
Service Customer Choice and Rate Relief Law of 1997 providing for electric
utility restructuring in Illinois. This legislation introduces competition into
the supply of electric energy in Illinois and, as a result, retail direct
access, which allows customers to choose their electric generation supplier,
will be phased in over several years. Access for commercial and industrial
customers will occur over a period from October 1999 to December 2000, and
access for residential customers will occur after May 1, 2002. For a discussion
of the Illinois legislation, as well as the current status of electric utility
restructuring in Missouri, see "Electric Industry Restructuring" in
"Management's Discussion and Analysis" and Note 2 to the "Notes to Consolidated
Financial Statements" on Pages 18 and 29, respectively, of the 1998 Annual
Report pages incorporated herein by reference.
Operation of the Company's Callaway Plant is subject to
regulation by the Nuclear Regulatory Commission. Its Facility Operating License
for the Callaway Plant expires on October 18, 2024. The Company's Osage
hydroelectric plant and its Taum Sauk pumped-storage hydro plant, as licensed
projects under the Federal Power Act, are subject to FERC regulations affecting,
among other things, the general operation and maintenance of the projects. The
license for the Osage Plant expires on February 28, 2006, and the license for
the Taum Sauk Plant expires on June 30, 2010. The Company's Keokuk Plant and dam
located in the Mississippi River between Hamilton, Illinois and Keokuk, Iowa,
are operated under authority, unlimited in time, granted by an Act of Congress
in 1905.
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CIPS and UE are regulated, in certain of their operations, by air
and water pollution and hazardous waste regulations at the city, county, state
and federal levels.
ENVIRONMENTAL ISSUES. On December 22, 1995, a complaint was filed
in the Circuit Court for the Seventh Judicial Circuit, Sangamon County, Illinois
against CIPS and several other defendants. The complaint seeks unspecified
monetary damages and alleges that, as a result of exposure to carcinogens
contained in coal tar at the CIPS Taylorville gas plant site, plaintiffs'
children had suffered from a rare form of childhood cancer known as
"neuroblastoma". The plaintiffs in this complaint are the plaintiffs who on
October 5, 1995 voluntarily dismissed claims in a similar complaint in the
Circuit Court for the Fourth Judicial Circuit, Christian County, Illinois. On
April 17, 1996, the Seventh Judicial Circuit Court, Sangamon County, Illinois
granted approval of the petition by CIPS requesting transfer of this case to the
Circuit Court for the Fourth Judicial Circuit, Christian County, Illinois. On
March 27, 1998, a jury awarded plaintiffs $3.2 million. CIPS continues to
believe it has meritorious defenses and has appealed the verdict. Management
believes that final disposition of this matter will not have a material adverse
effect on financial position, results of operations or liquidity of the Company.
On August 2, 1996, the Illinois Attorney General filed a
complaint with the Illinois Pollution Control Board alleging various violations
of wastewater discharge permit conditions and ground water standards at CIPS'
Hutsonville Power Station. The complaint seeks monetary penalties and the award
of attorney fees. CIPS, the Board and the Attorney General are continuing to
work on a plan to resolve these issues. While the Company cannot predict the
final outcome of this matter, it does not believe that the final resolution will
have a material adverse effect on financial position, results of operations or
liquidity of the Company.
For additional discussion of environmental matters, see
"Liquidity and Capital Resources" in Management's Discussion and Analysis" and
Note 12 to the "Notes to Consolidated Financial Statements" on Pages 17 and 38,
respectively, of the 1998 Annual Report pages incorporated by reference.
Other aspects of the Company's business are subject to the
jurisdiction of various regulatory authorities and, for additional information
on "Regulation", see Note 2 to the "Notes to Consolidated Financial Statements"
on Page 29 of the 1998 Annual Report pages incorporated herein by reference.
INDUSTRY ISSUES
The Company is facing issues common to the electric and gas
utility industries which have emerged during the past several years. These
issues include: the potential for more intense competition and for changing the
structure of regulation; changes in the structure of the industry as a result of
changes in federal and state laws; on-going consideration of additional changes
of the industry by federal and state authorities; continually developing
environmental laws, regulations and issues, including proposed new air quality
standards; public concern about the siting of new facilities; proposals for
demand side management programs; public concerns about nuclear decommissioning
and the disposal of nuclear wastes; and global climate issues. The Company is
monitoring these issues and is unable to predict at this time what impact, if
any, these issues will have on its operations, financial condition, or
liquidity.
Also see "Electric Industry Restructuring" in "Management's
Discussion and Analysis" and Note 12 to the "Notes to Consolidated Financial
Statements" on Pages 18 and 38 respectively, of the 1998 Annual Report pages
incorporated herein by reference.
YEAR 2000 ISSUE. The Year 2000 Issue relates to how dates are
stored and used in computer systems, applications, and embedded systems. As the
century date change occurs, certain date-sensitive systems need to be able to
recognize the year as 2000 and not as 1900. This inability to recognize and
properly treat the year as 2000 may cause these systems to process critical
financial and operational
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information incorrectly. For additional information on this issue, see "Year
2000 Issue" in "Management's Discussion and Analysis" on Page 19 of the 1998
Annual Report pages incorporated herein by reference.
OPERATING STATISTICS
The information on Pages 44 and 45 in the Company's 1998 Annual
Report is incorporated herein by reference.
ITEM 2. PROPERTIES.
In planning its construction program, the Company is presently
utilizing a forecast of kilowatthour sales growth of approximately 1.6% and peak
load growth of 1.3%, each compounded annually, and is providing for a minimum
reserve margin of approximately 15% to 18% above its anticipated peak load
requirements.
The Company is a member of one of the ten regional electric
reliability councils organized for coordinating the planning and operation of
the nation's bulk power supply - MAIN (Mid-America Interconnected Network)
operating primarily in Wisconsin, Illinois and Missouri. The Company's bulk
power system is operated as an Ameren-wide control area and transmission system
under the FERC approved Joint Dispatch Agreement between UE and CIPS. Ameren has
interconnections for transmission service and the exchange of electric energy,
directly and through the facilities of others, with twenty private utilities and
nine government utilities that operate control areas.
The following table sets forth information with respect to the
Company's generating facilities and capability at the time of the expected 1999
peak.
<TABLE>
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GROSS KILOWATT
ENERGY INSTALLED
SOURCE PLANT LOCATION CAPABILITY
------ ----- -------- ------------
<S> <C> <C> <C>
Coal Labadie Franklin County, MO 2,400,000
Rush Island Jefferson County, MO 1,224,000
Newton Newton, IL 1,170,000
Sioux St. Charles County, MO 1,006,000
Meramec St. Louis County, MO 925,000
Coffeen Coffeen, IL 950,000
Meredosia Meredosia, IL 359,000
Grand Tower Grand Tower, IL 202,000
Hutsonville Hutsonville, IL 161,000
------------
Total Coal 8,397,000
Nuclear Callaway Callaway County, MO 1,196,000
Hydro Osage Lakeside, MO 212,000
Keokuk Keokuk, IA 126,000
------------
Total Hydro 338,000
Oil and Venice Venice, IL 442,000
Natural Other Various 566,000
Gas ------------
Total Oil and
Natural Gas 1,008,000
Pumped-
storage Taum Sauk Reynolds County, MO 440,000
------------
TOTAL 11,379,000
</TABLE>
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As of December 31, 1998, CIPS owned approximately 4,700 circuit
miles of electric transmission lines. CIPS operates one propane-air plant and
4,800 miles of gas mains. As of that date, UE owned approximately 3,300 circuit
miles of electric transmission lines. UE operates three propane-air plants and
2,800 miles of gas mains. Other properties of the companies include distribution
lines, underground cable, office buildings, warehouses, garages and repair
shops.
Substantially all of the properties and plant of CIPS and UE are
subject to the direct first liens of the indentures securing their first
mortgage bonds.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in legal and administrative proceedings
before various courts and agencies with respect to matters arising in the
ordinary course of business, some of which involve substantial amounts.
Management believes that the final disposition of these proceedings will not
have a material adverse effect on its financial position, results of operations
or liquidity.
For additional information on legal and administration
proceedings, see "Rates" and "Regulation Environmental Issues" under Item 1
herein and Notes 2 and 12 to the "Notes to Consolidated Financial Statements" on
Pages 29 and 38, respectively, of the 1998 Annual Report pages incorporated
herein by reference.
Reference is being made to Note 12 of the "Notes to Consolidated
Financial Statements" for a discussion of the August 1998 decision of the
National Labor Relations Board (NLRB) which upheld the lawfulness of CIPS' 1993
lockout of its unions. In December 1998, the NLRB denied the unions' motions for
reconsideration of its decision. Subsequently, in December 1998, the unions
filed a joint motion for a rehearing of their motions for reconsideration. On
March 5, 1999, the NLRB denied the unions' motion for reconsideration. The
Company expects that the unions will pursue a judicial appeal of the NLRB's
decision.
-------------------------------
Statements made in this report which are not based on historical
facts, are forward-looking and, accordingly, involve risks and uncertainties
that could cause actual results to differ materially from those discussed.
Although such forward-looking statements have been made in good faith and are
based on reasonable assumptions, there is no assurance that the expected results
will be achieved. These statements include (without limitation) statements as to
future expectations, beliefs, plans, strategies, objectives, events, conditions
and financial performance and the Year 2000 Issue. In connection with the "Safe
Harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company is providing this cautionary statement to identify important factors
that could cause actual results to differ materially from those anticipated.
Factors include, but are not limited to, the effects of: regulatory actions;
changes in laws and other governmental actions; competition; future market
prices for fuel and purchased power, electricity, and natural gas, including the
use of financial instruments; average rates for electricity in the Midwest;
business and economic conditions; interest rates; weather conditions; fuel
prices and availability; generation plant performance; monetary and fiscal
policies; future wages and employee benefits costs; and legal and administrative
proceedings.
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INFORMATION REGARDING EXECUTIVE OFFICERS REQUIRED BY ITEM 401(B) OF
REGULATION S-K:
<TABLE>
<CAPTION>
DATE FIRST ELECTED
AGE AT OR APPOINTED TO
NAME 12/31/98 PRESENT POSITION PRESENT POSITION
---- -------- ---------------- ----------------
<S> <C> <C> <C>
Charles W. Mueller 60 Chairman, President and
Chief Executive Officer,
and Director 12/31/97
Donald E. Brandt 44 Senior Vice President 12/31/97
Steven R. Sullivan 38 Vice President, General Counsel 7/1/98
and Secretary 9/1/98
Warner L. Baxter 37 Vice President 5/1/98
and Controller 12/31/97
Jerre E. Birdsong 44 Treasurer 4/23/96
</TABLE>
All officers are elected or appointed annually by the Board of
Directors following the election of such Board at the annual meeting of
stockholders held in April. There are no family relationships between the
foregoing officers of the Company. Except for Messrs. Baxter and Sullivan, each
of the above-named executive officers has been employed by the Company or its
affiliates for more than five years in executive or management positions. Mr.
Baxter was previously employed by PricewaterhouseCoopers LLP. Mr. Sullivan was
previously employed by Anheuser Busch Companies, Inc.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
On October 9, 1998, the Company adopted a Shareholder Rights Plan
and declared a dividend of one preferred share purchase right (a Right) for each
outstanding share of common stock, par value $ .01 per share, of the Company.
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock, par
value $ .01 per share, of the Company at a price of $180 per one one-hundredth
of a share of such Preferred Stock, subject to adjustment. The Rights will
become exercisable if someone buys 15 percent or more of the Company's common
stock. In addition, if someone buys 15 percent or more of the Company's common
stock, each right will entitle its holder (other than that buyer) to purchase a
number of shares of the Company's common stock having a market value of twice
the Right's $180 exercise price. If the Company is acquired in a merger, each
Right will entitle its holder to purchase a number of the acquiring company's
common shares having a market value at the time of twice the Right's exercise
price.
The Rights will expire on October 9, 2008. The Rights do not have
voting or dividend rights, and until they become exercisable, have no dilutive
effect on the per-share earnings of the Company. The Company has 4 million
shares of Preferred Stock initially reserved for issuance upon exercise of the
Rights. There is no Junior Participating Preferred Stock issued or outstanding.
For additional information on the Shareholder Rights Plan, see
Note 6 to the "Notes to Consolidated Financial Statements" on Page 32 of the
1998 Annual Report pages incorporated herein by reference.
Additional information required to be reported by this item is
included on the inside back cover of the 1998 Annual Report and is incorporated
herein by reference.
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ITEM 6. SELECTED FINANCIAL DATA.
Information for the 1993-1998 period required to be reported by
this item is included on Page 43 of the 1998 Annual Report and is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Information required to be reported by this item is included on
Pages 15 through 22 of the 1998 Annual Report and is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information required to be reported by this item is included under
"Market Risk Related to Financial Instruments and Commodity Instruments" in
"Management's Discussion and Analysis" on Page 20 of the 1998 Annual Report and
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Company on Pages 23 through 42,
the report thereon of PricewaterhouseCoopers LLP appearing on Page 14 and the
Selected Quarterly Information on Page 27 of the 1998 Annual Report are
incorporated herein by reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning directors required to be reported by this
item is included under "Item (1): Election of Directors" in the Company's 1999
definitive proxy statement filed pursuant to Regulation 14A and is incorporated
herein by reference.
Information concerning executive officers required by this item
is reported in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Any information required to be reported by this item is included
under "Compensation" in the Company's 1999 definitive proxy statement filed
pursuant to Regulation 14A and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Any information required to be reported by this item is included
under "Security Ownership of Management" in the Company's 1999 definitive proxy
statement filed pursuant to Regulation 14A and is incorporated herein by
reference.
9
<PAGE> 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Any information required to be reported by this item is included
under "Item (1): Election of Directors" in the Company's 1999 definitive proxy
statement filed pursuant to Regulation 14A and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Financial Statements: *
<TABLE>
<CAPTION>
Page From 1998
Annual Report
-------------
<S> <C>
Consolidated Report of Independent Accountants.................................. 14
Consolidated Statement of Income - Years 1998, 1997, and 1996................... 23
Consolidated Balance Sheet - December 31, 1998 and 1997......................... 24
Consolidated Statement of Cash Flows - Years 1998, 1997, and 1996............... 26
Consolidated Statement of Retained Earnings
- Years 1998, 1997, and 1996................................................. 27
Notes to Consolidated Financial Statements...................................... 28
</TABLE>
*Incorporated by reference from the indicated pages of the 1998
Annual Report
2. Financial Statement Schedule:
The following schedule, for the years ended December 31, 1998,
1997 and 1996, should be read in conjunction with the
aforementioned financial statements (schedules not included have
been omitted because they are not applicable or the required data
is shown in the aforementioned financial statements).
<TABLE>
<CAPTION>
Pages Herein
------------
<S> <C>
Report of Independent Accountants on Financial
Statement Schedule........................................................... 11
Valuation and Qualifying Accounts (Schedule II)................................. 12
</TABLE>
3. Exhibits: See EXHIBITS beginning on Page 14
(b) Reports on Form 8-K. The Registrant filed a report on Form 8-K
dated October 8, 1998 reporting on the impact of its employee
separation plan and on the effect of the final rule issued in
September 1998 by the United States Environmental Protection
Agency pertaining to nitrogen oxide emissions. Further, a report
dated October 14, 1998 was filed reporting the adoption of a
shareholders rights plan and declaration of the associated
dividend.
10
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Ameren Corporation
Our audits of the financial statements referred to in our report dated February
4, 1999 appearing in the 1998 Annual Report to Shareholders of Ameren
Corporation (which report and financial statements are incorporated by reference
in this Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion,
this Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Louis, Missouri
February 4, 1999
11
<PAGE> 14
AMEREN CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Col. A Col. B Col. C
------ ------ ------
Additions
-------------------------------------
(1) (2)
Balance at Charged to
beginning costs and Charged to
Description of period expenses other accounts
----------- --------- -------- --------------
<S> <C> <C>
Year ended December 31, 1998
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $4,845,328 $21,167,000
========== ===========
Year ended December 31, 1997
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $5,795,332 $12,648,812
========== ===========
Year ended December 31, 1996
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $7,524,965 $12,100,000
========== ===========
Col. A Col. D Col. E
------ ------ ------
<CAPTION>
Balance at
end of
Description Deductions period
----------- ---------- ------
(Note)
<S> <C> <C>
Year ended December 31, 1998
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $17,619,673 $8,392,655
=========== ==========
Year ended December 31, 1997
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $13,598,816 $4,845,328
=========== ==========
Year ended December 31, 1996
Reserves deducted in the balance sheet from
assets to which they apply:
Allowance for doubtful accounts $13,829,633 $5,795,332
=========== ==========
</TABLE>
Note: Uncollectible accounts charged off, less recoveries.
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
AMEREN CORPORATION
(Registrant)
CHARLES W. MUELLER
Chairman, President and
Chief Executive Officer
Date March 29, 1999 By /s/ Steven R. Sullivan
------------------------- ---------------------------------
(Steven R. Sullivan, Attorney-in-Fact)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ C. W. Mueller Chairman, President, Chief
- -------------------------------------------------- Executive Officer and Director
CHARLES W. MUELLER (Principal Executive Officer)
/s/ Donald E. Brandt Senior Vice President
- -------------------------------------------------- (Principal Financial and Accounting Officer)
DONALD E. BRANDT
/s/ Warner L. Baxter Vice President and Controller
- -------------------------------------------------- (Principal Accounting Officer)
WARNER L. BAXTER
/s/ William E. Cornelius
- -------------------------------------------------- ------------------------------------------------
WILLIAM E. CORNELIUS, Director HANNE M. MERRIMAN, Director
/s/ Clifford L. Greenwalt /s/ Paul L. Miller, Jr.
- -------------------------------------------------- ------------------------------------------------
CLIFFORD L. GREENWALT, Director PAUL L. MILLER, JR., Director
/s/ Thomas A. Hays /s/ Robert H. Quenon
- -------------------------------------------------- ------------------------------------------------
THOMAS A. HAYS, Director ROBERT H. QUENON, Director
/s/ Richard A. Liddy /s/ Harvey Saligman
- -------------------------------------------------- ------------------------------------------------
RICHARD A. LIDDY, Director HARVEY SALIGMAN, Director
/s/ Gordon R. Lohman /s/ Charles J. Schukai
- -------------------------------------------------- ------------------------------------------------
GORDON R. LOHMAN, Director CHARLES J. SCHUKAI, Director
/s/ Richard A. Lumpkin /s/ Janet McAfee Weakley
- -------------------------------------------------- ------------------------------------------------
RICHARD A. LUMPKIN, Director JANET McAFEE WEAKLEY, Director
/s/ John Peters MacCarthy /s/ James W. Wogsland
- -------------------------------------------------- ------------------------------------------------
JOHN PETERS MacCARTHY, Director JAMES W. WOGSLAND, Director
</TABLE>
By /s/ Steven R. Sullivan March 29, 1999
---------------------------------------
(Steven R. Sullivan, Attorney-in Fact)
13
<PAGE> 16
EXHIBITS
EXHIBITS FILED HEREWITH
EXHIBIT NO. DESCRIPTION
3(i) - Certificate of Amendment to the Restated Articles of
Incorporation filed with the Secretary of State of the State
of Missouri on December 14, 1998.
10.1 - Long-Term Incentive Plan of 1998.
10.2 - Change of Control Severance Plan.
10.3 - Deferred Compensation Plan for Members of the Ameren
Leadership Team.
10.4 - Deferred Compensation Plan for Members of the Board of
Directors.
13 - Those pages of the 1998 Annual Report incorporated herein by
reference.
21 - Subsidiaries of the Company.
23 - Consent of Independent Accountants.
24 - Powers of Attorney.
27 - Financial Data Schedule.
EXHIBITS INCORPORATED BY REFERENCE
The following exhibits heretofore have been filed with the
Securities and Exchange Commission pursuant to requirements of the Acts
administered by the Commission. Such exhibits are identified by the references
following the listing of each such exhibit, and they are hereby incorporated
herein by reference.
EXHIBIT NO. DESCRIPTION
2 -Agreement and Plan of Merger, dated as of August 11, 1995, by
and among the Company, CIPSCO Incorporated, UE, and Arch
Merger Inc. (June 30, 1995 Form 10-Q/A (Amendment No. 1),
Exhibit 2(a).)
3(i) -Restated Articles of Incorporation of the Company.
(Registration No. 33-64165, Annex F.)
3(ii) - By-Laws of the Company as amended to December 31, 1997.
(1997 Form 10-K, Exhibit 3(ii).)
4.1 -Indenture of Mortgage and Deed of Trust of Union Electric
Company dated June 15, 1937, as amended May 1, 1941, and
Second Supplemental Indenture dated May 1, 1941.
(Registration No.
2-4940, Exhibit B-1.)
14
<PAGE> 17
EXHIBIT NO. DESCRIPTION
4.2 - Supplemental Indentures to the Union Electric Company
Mortgage
<TABLE>
<CAPTION>
DATED AS OF FILE REFERENCE EXHIBIT NO.
<S> <C> <C>
March 1, 1967 2-58274 2.9
April 1, 1971 Form 8-K, April 1971 6
February 1, 1974 Form 8-K, February 1974 3
July 7, 1980 2-69821 4.6
May 1, 1990 Form 10-K, 1990 4.6
December 1, 1991 33-45008 4.4
December 4, 1991 33-45008 4.5
January 1, 1992 Form 10-K, 1991 4.6
October 1, 1992 Form 10-K, 1992 4.6
December 1, 1992 Form 10-K, 1992 4.7
February 1, 1993 Form 10-K, 1992 4.8
May 1, 1993 Form 10-K, 1993 4.6
August 1, 1993 Form 10-K, 1993 4.7
October 1, 1993 Form 10-K, 1993 4.8
January 1, 1994 Form 10-K, 1993 4.9
December 1, 1996 Form 10-K, 1996 4.36
</TABLE>
4.3 - Indenture of Mortgage or Deed of Trust dated October 1,
1941, from CIPS to Continental Illinois National Bank and
Trust Company of Chicago and Edmond B. Stofft, as Trustees.
(Exhibit 2.01 in File No. 2-60232.)
4.4 - Supplemental Indentures dated, respectively September 1,
1947, January 1, 1949, February 1, 1952, September 1, 1952,
June 1, 1954, February 1, 1958, January 1, 1959, May 1, 1963,
May 1, 1964, June 1, 1965, May 1, 1967, April 1, 1970, April
1, 1971, September 1, 1971, May 1, 1972, December 1, 1973,
March 1, 1974, April 1, 1975, October 1, 1976, November 1,
1976, October 1, 1978, August 1, 1979, February 1, 1980,
February 1, 1986, May 15, 1992, July 1, 1992, September 15,
1992, April 1, 1993, and June 1, 1995 between CIPS and the
Trustees under the Indenture of Mortgage or Deed of Trust
referred to above (Amended Exhibit 7(b) in File No. 2-7341;
Second Amended Exhibit 7.03 in File No. 2-7795; Second
Amended Exhibit 4.07 in File No. 2-9353; Amended Exhibit 4.05
in file No. 2-9802; Amended Exhibit 4.02 in File No. 2-10944;
Amended Exhibit 2.02 in File No. 2-13866; Amended Exhibit
2.02 in File No. 2-14656; Amended Exhibit 2.02 in File
No.2-21345; Amended Exhibit 2.02 in File No. 2-22326; Amended
Exhibit 2.02 in File No. 2-23569; Amended Exhibit 2.02 in
File No. 2-26284; Amended Exhibit 2.02 in File No. 2-36388;
Amended Exhibit 2.02 in File No. 2-39587; Amended Exhibit
2.02 in File No. 2-41468; Amended Exhibit 2.02 in File No.
2-43912; Exhibit 2.03 in File No. 2-60232; Amended Exhibit
2.02 in File No. 2-50146; Amended Exhibit 2.02 in File No.
2-52886; Second Amended Exhibit 2.04 in File No. 2-57141;
Amended Exhibit 2.04 in File No. 2-57557; Amended Exhibit
2.06 in File No. 2-62564; Exhibit 2.02(a) in File No.
2-65914; Amended Exhibit 2.02(a) in File No. 2-66380; and
Amended Exhibit 4.02 in File No. 33-3188; Exhibit 4.02 to
Form 8-K dated May 15, 1992; Exhibit 4.02 to Form 8-K dated
July 1, 1992; Exhibit 4.02 to Form 8-K dated September 15,
1992; Exhibit 4.02 to Form 8-K dated March 30, 1993; Exhibit
4.03 to Form 8-K dated June 5, 1995; Exhibit 4.03 to Form 8-K
dated March 15, 1997; Exhibit 4.03 to Form 8-K dated June 1,
1997; and Exhibit 4.02, Post-Effective Amendment No. 1 in
File No. 333-18473.)
15
<PAGE> 18
EXHIBIT NO. DESCRIPTION
4.5 - Agreement, dated as of October 9, 1998, between the Company
and First Chicago Trust Company of New York, as Rights Agent,
which includes the form of Certificate of Designation of the
Preferred Shares as Exhibit A, the form of Right Certificate
as Exhibit B and the Summary of Rights as Exhibit C. (October
14, 1998 Form 8-K, Exhibit 4.)
4.6 - Indenture dated as of December 1, 1998 from CIPS to the Bank
of New York relating to CIPS' Senior Notes, 5.375% due 2008
and 6.125% due 2028. (Exhibit 4.03, Post-Effective Amendment
No. 1 to File No. 333-18473.)
Note: Reports of Union Electric Company on Forms 8-K, 10-Q and 10-K are on
file with the SEC under File Number 1-2967.
Reports of Central Illinois Public Service Company on Forms 8-K, 10-Q
and Form 10-K are on file with the SEC under File Number 1-3672.
16
<PAGE> 1
EXHIBIT 3(i)
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF AMEREN CORPORATION
(Pursuant to Section 351.180 of the
General and Business Corporation
Law of the State of Missouri)
Ameren Corporation, a corporation organized and existing under the
General and Business Corporation Law of the State of Missouri (hereinafter
called the "Corporation"), hereby certifies that the following resolution was
adopted by the Board of Directors of the Corporation as required by the General
Corporation Law at a meeting duly called and held on October 9, 1998:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation, the Board of Directors hereby creates a series of Preferred
Stock, par value $.01 per share, of the Corporation (the "Preferred Stock"), and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 4,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Stock, par value $.01
per share (the "Common Stock"), of the Corporation, and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or
(b) subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to
<PAGE> 2
the first Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the
Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
2
<PAGE> 3
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series
A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
3
<PAGE> 4
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
4
<PAGE> 5
Section 9. Rank. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, Ameren Corporation has caused this certificate to
be executed, acknowledged and sworn to by DONALD E. BRANDT, Senior Vice
President, and attested by STEVEN R. SULLIVAN, Secretary, and its corporate seal
to be hereto affixed, all on this 11th day of December, 1998.
AMEREN CORPORATION
By /s/ Donald E. Brandt
-------------------------------
Senior Vice President
[CORPORATE SEAL]
Attest:
/s/ Steven R. Sullivan
- -------------------------------
Secretary
5
<PAGE> 6
STATE OF MISSOURI )
) SS.
CITY OF ST. LOUIS )
DONALD E. BRANDT, first being duly sworn, upon his oath states that he
is a Senior Vice President of Ameren Corporation, that as such he executed the
above certificate on behalf of Ameren Corporation, and that the statements
contained therein are true to the best of his knowledge, information and belief.
/s/ Donald E. Brandt
-----------------------------
Donald E. Brandt
Subscribed and sworn to before me this 11th day of December, 1998.
/s/ G. L. Waters
-----------------------------------
G. L. Waters
Notary Public - Notary Seal
STATE OF MISSOURI
St. Louis County
My Commission Expires: March 16, 1999
6
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EXHIBIT 10.1
AMEREN CORPORATION
LONG-TERM INCENTIVE PLAN OF 1998
SECTION 1. PURPOSE. The purpose of the Plan is to give Ameren Corporation, its
subsidiaries and certain affiliates a competitive advantage in attracting,
retaining and motivating officers, employees and directors by providing for the
awarding of incentives linked to the profitability of the Corporation and its
businesses and to increases in shareholder value.
SECTION 2. DEFINITIONS. In addition to the terms defined elsewhere in the Plan,
the following terms shall have the meanings set forth below:
"AFFILIATE" means a corporation or other entity controlled by the
Corporation and designated by the Committee from time to time as such.
"AWARD" means any Performance Unit, Option, Stock Appreciation Right,
Restricted Stock, Dividend Equivalent or Other Stock-Based Award, or any other
right or interest relating to Shares or cash, granted to a Participant under the
Plan.
"AWARD AGREEMENT" means any written agreement, contract or other
instrument or document evidencing an Award.
"BOARD" means the Board of Directors of the Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, including successor provisions thereto and regulations thereunder.
"COMMITTEE" means the Human Resources Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan,
or any subcommittee of either; provided, however, that the Committee (a) shall
be composed solely of two or more non-employee directors, as defined in Rule
16(b)-3(b)(3) under the Exchange Act, each of whom shall be an "outside
director" for purposes of Section 162(m) of the Code, and (b) shall be
constituted to permit Awards under the Plan to qualify for exemption under Rule
16b-3 under the Exchange Act and for the Section 162(m) Exemption.
"CORPORATION" means Ameren Corporation, a Missouri corporation.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, including successor provisions thereto and regulations thereunder.
"FAIR MARKET VALUE" means, with respect to Shares, Awards or other
property, the fair market value of such Shares, Awards or other property
determined by such methods or procedures as shall be established from time to
time by the Committee. Unless otherwise determined by the Committee, the Fair
Market Value of Shares as of any date shall be the closing sale price on that
date of a Share as reported on the New York Stock Exchange Composite Tape.
"INCENTIVE STOCK OPTION" means an Option that is designated as such by
the Committee and meets the requirements of Section 422 of the Code.
"NON-QUALIFIED STOCK OPTION" means an Option that is not an Incentive
Stock Option.
"PARTICIPANT" means a person who, as an officer, employee or director of
the Corporation, a Subsidiary or an Affiliate, has been granted an Award under
the Plan.
"PLAN" means the Ameren Corporation Long-Term Incentive Plan of 1998, as
set forth herein and as hereinafter amended from time to time.
"QUALIFIED PERFORMANCE-BASED AWARD" means an Award of Performance Units
or Restricted Stock, or other Award, designated as such by the Committee at or
prior to the time of grant, based upon a determination that the Committee
intends for such Award to qualify for the Section 162(m) Exemption.
"RULE 16B-3" means Rule 16b-3, as from time to time amended and
applicable to Participants, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.
"SECTION 162(M) EXEMPTION" means the exemption from the limitation on
deductibility imposed by Section 162(m) of the Code that is set forth in Section
162(m)(4)(C) of the Code.
"SHARES" means the Common Stock, $.01 par value per share, of the
Corporation and such other securities of the Corporation as may be substituted
for Shares pursuant to Section 10 of the Plan.
"SUBSIDIARY" means any company (other than the Corporation) with respect
to which the Corporation owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock. In addition, any other
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related entity may be designated by the Board as a Subsidiary, provided such
entity could be considered as a subsidiary according to generally accepted
accounting principles.
"YEAR" means a calendar year.
In addition to the foregoing, the terms "Performance Unit", "Option",
"Stock Appreciation Right", "Restricted Stock", "Dividend Equivalent" and "Other
Stock-Based Award" shall mean as described in Section 6 of the Plan.
SECTION 3. ADMINISTRATION.
3.01. Authority of the Committee. The Plan shall be administered by the
Committee on behalf of the Board. The Committee shall have full power to
interpret the Plan, to establish, modify and grant waivers of Award restrictions
and to adopt such rules, regulations and guidelines for carrying out the Plan as
it deems necessary or appropriate. All determinations by the Committee shall be
final and binding upon all parties affected thereby. Any authority granted to
the Committee may also be exercised by the full Board, except to the extent that
the grant or exercise of such authority would cause any Award or transaction to
fail to qualify for exemption under Rule 16b-3.
3.02. Manner of Exercise of Committee Authority. The express grant of any
specific power to the Committee, and the taking of any action by the Committee,
shall not be construed as limiting any power or authority of the Committee. A
memorandum signed by all members of the Committee shall constitute the act of
the Committee without the necessity, in such event, to hold a meeting. The
Committee may delegate to officers or managers of the Corporation or any
Subsidiary or Affiliate the authority, subject to such terms as the Committee
shall determine, to perform administrative functions under the Plan. Only the
Committee or the full Board may select, and grant Awards to, Participants who
are subject to Section 16 of the Exchange Act.
SECTION 4. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in the
Plan, the total number of Shares that may be issued or delivered pursuant to
Awards under the Plan shall be 4,000,000, which shall consist of (a) Shares
which have been authorized and issued and have been acquired by or on behalf of
the Corporation or the Plan and are available for Awards under the Plan or (b)
if the Board shall so authorize, authorized and unissued Shares. The Committee
may adopt procedures for the counting of Shares relating to any Award for which
the number of Shares to be distributed or with respect to which payment will be
made cannot be fixed at the date of grant to ensure appropriate counting, avoid
double counting (in the case of tandem or substitute awards), and provide for
adjustments in any case in which the number of Shares actually distributed or
with respect to which payments are actually made differs from the number of
Shares previously counted in connection with such Award. In the event that any
Shares to which an Award relates are forfeited or the Award is settled or
terminates without a distribution of Shares (whether or not cash, other Awards
or other property are distributed with respect to such Award), any Shares
counted against the number of Shares reserved and available under the Plan with
respect to such Award shall again be available for Awards under the Plan. The
maximum number of Shares with respect to which Options or Stock Appreciation
Rights may be granted to any one Participant under the Plan during any Year is
200,000 Shares.
SECTION 5. ELIGIBILITY. Awards may be granted only to individuals who are
officers, employees or directors of the Corporation, a Subsidiary or an
Affiliate; provided, however, that no Award shall be granted to any member of
the Committee except by action of the full Board and subject to such other
restrictions as the Board may require.
SECTION 6. SPECIFIC TERMS OF AWARDS.
6.01. General. The Committee may grant Awards as described in this
Section. The Committee shall determine who may participate in the Plan and the
number and types of Awards to be made to each Participant and shall determine
and set forth in the Award or the related Award Agreement the terms, conditions,
performance requirements (if any) and limitations (which need not be limited to
those referred to below) applicable to each Award. Awards may be granted singly,
in combination or in tandem.
6.02. Performance Units. An Award of Performance Units shall confer upon
the Participant a right to receive cash, Shares, other Awards or other property
contingent upon the achievement of performance goals specified by the Committee.
A Performance Unit shall be denominated in Shares and may be payable in cash,
Shares, other Awards or other Property, and have such other terms as shall be
determined by the Committee.
6.03. Restricted Stock. Restricted Stock shall confer upon the
Participant the right to receive Shares subject to such restrictions on
transferability and other restrictions as the Committee may impose (including,
without limitation, forfeiture if such restrictions are not satisfied,
limitations on the right to vote and limitations on the right to receive
dividends), which restrictions may expire at such times and under such
circumstances as the Committee shall determine.
6.04. Options. An Option shall confer upon the Participant the right to
purchase Shares, other Awards or property, subject to the following terms and
conditions:
(a) Exercise Price. The exercise price per share purchasable under
an Option shall not be less than the Fair Market Value of a Share on the date of
grant of such Option.
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(b) Time and Method of Exercise. The Committee shall determine the
time during which an Option may be exercised in whole or in part, the methods by
which the exercise price may be paid and the methods by which Shares will be
delivered to Participants. Options shall expire not later than ten years after
the date of grant.
(c) Terms Applicable to Incentive Stock Options. The terms of any
Incentive Stock Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code which, among other limitations,
provides that the aggregate Fair Market Value (determined at the time the Option
is granted) of Shares for which Incentive Stock Options are exercisable for the
first time by a Participant during any calendar year shall not exceed $100,000.
The number of Shares that shall be available for Incentive Stock Options granted
under the Plan is limited to 500,000. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options, other
than Section 9, shall be applied, interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised, so as to disqualify
the Plan under Section 422 of the Code or, without the consent of the
Participant affected, to disqualify any Incentive Stock Option under such
Section 422.
(d) Limitation on Re-Pricing and Replacement. No Option shall
provide by its terms for the re-setting of its exercise price, or for its
replacement, in whole or in part, upon its exercise or expiration; provided that
the foregoing shall not limit the authority of the Committee to grant additional
Options in any such event or circumstances.
(e) Cash Out by Committee. Upon receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of the
Shares for which an Option is being exercised by paying the optionee an amount,
in cash or Shares, equal to the excess of the Fair Market Value of Shares over
the option price times the number of Shares for which the Option is being
exercised on the effective date of such cash-out.
(f) Change in Control Cash-Out Right. Notwithstanding any other
provision of the Plan, during the 60-day period from and after a Change in
Control (the "Exercise Period"), unless the Committee shall determine otherwise
at the time of grant, a holder of an Option to purchase Shares shall have the
right, whether or not the Option is fully exercisable and in lieu of the payment
of the exercise price for the Shares being purchased under the Option and by
giving notice to the Corporation, to elect (within the Exercise Period) to
surrender all or part of the Option to the Corporation and to receive cash,
within 30 days of such notice, in an amount equal to the amount by which the
Change in Control Price per Share on the date of such election shall exceed the
exercise price per Share under the Option (the "Spread") multiplied by the
number of Shares granted under the Option as to which the right granted under
this Section 6.04(f) shall have been exercised. Notwithstanding the foregoing,
if any right granted pursuant to this Section 6.04(f) would make a Change in
Control transaction ineligible for pooling-of-interests accounting under APB No.
16 that but for the nature of such grant would otherwise be eligible for such
accounting treatment, the Committee shall have the ability to substitute for the
cash payable pursuant to such right Shares or other securities with a Fair
Market Value equal to the cash that would otherwise be payable hereunder.
6.05. Stock Appreciation Rights. A Stock Appreciation Right shall confer
upon the Participant a right to receive the excess of (a) the Fair Market Value
of one Share on the date of exercise (or, except in the case of a Stock
Appreciation Right related to an Incentive Stock Option, the Fair Market Value
of one Share at any time during a specified period before or after the date of
exercise) over (b) the grant price of the Stock Appreciation Right, which shall
be not less than the Fair Market Value of one Share on the date of grant. A
Stock Appreciation Right may be granted as a Limited Stock Appreciation Right
which may be exercised only upon the occurrence of a Change in Control. Stock
Appreciation Rights shall expire not later than ten years after the date of
grant.
6.06. Dividend Equivalents. A Dividend Equivalent shall confer upon the
Participant a right to receive cash, Shares, other Awards or other property
equal in value to dividends paid with respect to a specified number of Shares.
6.07. Other Stock-Based Awards. The Committee is authorized to grant to
Participants such other Awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, Shares,
as deemed by the Committee to be consistent with the purpose of the Plan.
SECTION 7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
7.01. Qualified Performance-Based Awards. The Committee may, at or prior
to the time of grant, designate Performance Units or Restricted Stock, or any
other Award, as a Qualified Performance-Based Award, in which event it shall
take such action with respect to such Award and the terms thereof (including the
imposition of additional requirements not otherwise required by the terms of the
Plan), and the provisions of the Plan or any Award Agreement shall be construed
or deemed amended, as shall be necessary to cause such Award to qualify for the
Section 162(m) Exemption.
7.02. Term of Awards. The term of each Award shall be for such period as
shall be determined by the Committee subject to the requirements of the Plan.
7.03. Forms of Payment. Subject to the terms of the Plan and any
applicable Award Agreement, (a) payments to be made by the Corporation, a
Subsidiary or Affiliate with respect to Awards are to be made in such forms as
the Committee shall determine; and (b) the timing, method, amount and nature of
payments to be made by Participants
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with respect to Awards (including, if permitted by the Committee, by means of
tendering Shares or Awards) shall be determined by the Committee.
7.04. Termination of Employment. If the employment of a Participant
terminates, all unexercised, deferred and unpaid Awards shall be cancelled
immediately, unless the Award Agreement provides otherwise or unless the
Committee shall provide otherwise in connection with such termination,
including, without limitation, in the case of termination pursuant to
retirement, resignation, death or disability of a Participant.
SECTION 8. GENERAL RESTRICTIONS APPLICABLE TO AWARDS.
8.01. Restrictions Under Rule 16b-3. It is the intent of the Corporation
that any Award granted to a person who is subject to Section 16 of the Exchange
Act qualify for exemption under Rule 16b-3. Accordingly, if any provision of the
Plan or any Award Agreement would cause such an Award to fail to qualify for
such exemption, such provision shall be construed or deemed amended to the
extent necessary to enable such Award to qualify for such exemption.
8.02. Limits on Transfer of Awards; Beneficiaries. No Award may be
assigned or transferred by a Participant otherwise than by will or the laws of
descent and distribution, or payable to or exercisable by anyone other than the
Participant to whom it was granted, and no right or interest of a Participant in
any Award may be pledged, encumbered or hypothecated to or in favor of any
party, or shall be subject to any lien, obligation or liability of a Participant
to any party; provided, however, that (a) a Participant may, in the manner
established by the Committee, designate a beneficiary or beneficiaries to
exercise the rights of the Participant, and to receive any distribution with
respect to any Award, upon the death or disability of the Participant, (b) the
Committee may provide in any Award or the related Award Agreement that an Award
(other than an Incentive Stock Option) may be assigned, transferred, exercisable
by another person or pledged, encumbered or hypothecated, subject to the
applicable requirements of the Code, and (c) transfers of Awards may be made to
the Corporation, a Subsidiary or an Affiliate to the extent permitted under the
terms of the Plan. A beneficiary, guardian, legal representative or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions applicable to such Participant, except to
the extent the Plan and such Award Agreement otherwise provide with respect to
such person, and to any additional restrictions deemed necessary or appropriate
by the Committee.
8.03. Share Certificates. All certificates for Shares delivered under the
Plan pursuant to an Award or the exercise thereof shall be subject to such
stop-transfer orders and other restrictions as the Committee may deem advisable
under applicable federal or state laws, rules and regulations and the rules of
any national securities exchange on which Shares are listed. The Committee may
cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions or any other restrictions that may be
applicable to Shares. In addition, during any period in which Awards or Shares
are subject to restrictions, or during any period during which delivery or
receipt of an Award or Shares has been deferred by the Committee or a
Participant, the Committee may require the Participant to enter into an
agreement providing that certificates representing Shares issued or issuable
pursuant to an Award shall remain in the physical custody of the Corporation or
such other person as the Committee may designate.
If certificates representing Restricted Stock are registered in the name
of the Participant, such certificates shall bear an appropriate legend referring
to the terms, conditions and restrictions applicable to such Restricted Stock,
the Corporation shall retain physical possession of the certificates and the
Participant shall deliver a stock power to the Corporation, endorsed in blank,
relating to the Restricted Stock.
SECTION 9. CHANGE IN CONTROL.
(a) Impact of Event. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change in Control: (i) any Options and
Stock Appreciation Rights outstanding as of the date such Change in Control is
determined to have occurred, and which are not then exercisable and vested,
shall become fully exercisable and vested to the full extent of the original
grant; (ii) the restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free of all
restrictions and become fully vested and transferable to the full extent of the
original grant; and (iii) all Performance Units shall be considered to be earned
and payable in full, and any deferral or other restriction shall lapse and such
Performance Units shall be settled in cash or other securities as promptly as is
practicable.
(b) Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following events:
(i) an acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then outstanding shares of common
stock of the Corporation (the "Outstanding Corporation Common Stock") or (2) the
combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"); excluding, however, the following:
(1) any acquisition directly from the Corporation, other than an acquisition by
virtue of the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Corporation, (2) any acquisition
by the Corporation, (3) any acquisition by any employee benefit plan
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(or related trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation or (4) any acquisition by any corporation pursuant
to a transaction which complies with clauses (1), (2) and (3) of subsection
(iii) of this Section 9(b); or
(ii) a change in the composition of the Board such that the
individuals who, as of the effective date of the Plan, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board; provided, however,
for purposes of this Section 9(b), that any individual who becomes a member of
the Board subsequent to the effective date of the Plan, whose election, or
nomination for election by the Corporation's shareholders, was approved by a
vote of at least a majority of those individuals who are members of the Board
and who are also members of the Incumbent Board (or deemed to be such pursuant
to this proviso) shall be considered as though such individual were a member of
the Incumbent Board; but, provided further, that any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board shall not be so considered as a member of the Incumbent Board; or
(iii) the approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation ("Corporate Transaction") or,
if consummation of such Corporate Transaction is subject, at the time of such
approval by shareholders, to the consent of any government or governmental
agency, obtaining of such consent (either explicitly or implicitly by
consummation); excluding however, such a Corporate Transaction pursuant to which
(1) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation which
as a result of such transaction owns the Corporation or all or substantially all
of the Corporation's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (2) no Person
(other than the Corporation, any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Corporate Transaction) will
beneficially own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed prior to the
Corporate Transaction, and (3) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or
(iv) the approval by the stockholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
(c) Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the higher of (i) the highest reported sales price, regular
way, of a Share in any transaction reported on the New York Stock Exchange
Composite Tape or other national exchange on which such Shares are listed or on
NASDAQ during the 60-day period prior to and including the date of a Change in
Control or (ii) if the Change in Control is the result of a tender or exchange
offer or a Corporate Transaction, the highest price per Share paid in such
tender or exchange offer or Corporate Transaction; provided, however, that in
the case of Incentive Stock Options and Stock Appreciation Rights relating to
Incentive Stock Options, the Change in Control Price shall be in all cases the
Fair Market Value of the Shares on the date such Incentive Stock Option or Stock
Appreciation Right (or related cash-out right under Section 6.04(f)) is
exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Board.
SECTION 10. ADJUSTMENT PROVISIONS. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spin-off, combination, repurchase or
share exchange, or other similar corporate transaction or event, affects the
Shares such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the rights of Participants under
the Plan, then the Committee shall, in such manner as it may deem equitable,
make any adjustments it deems appropriate (including, without limitation,
adjustments to the share limitations contained in Section 4 and to the terms of
then-outstanding Awards). In addition, the Committee is authorized to make such
adjustments as it deems appropriate in the terms and conditions of, and the
criteria included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, events described in the preceding sentence)
affecting the Corporation or any Subsidiary or Affiliate or the financial
statements
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of the Corporation or any Subsidiary or Affiliate, or in response to changes in
applicable laws, regulations or accounting principles.
SECTION 11. CHANGES TO THE PLAN AND AWARDS.
11.01. Changes to the Plan. The Board may amend, alter, suspend,
discontinue or terminate the Plan without the consent of shareholders or
Participants, except as is required by any federal or state law or regulation or
the rules of any stock exchange on which the Shares may be listed, or if the
Board in its discretion determines that obtaining such shareholder approval is
for any reason advisable; provided, however, that, without the consent of an
affected Participant, no amendment, alteration, suspension, discontinuation or
termination of the Plan may impair the rights of such Participant under any
Award theretofore granted to such Participant.
11.02. Changes to Awards. The Committee may waive any conditions or
rights under, or amend, alter, accelerate, suspend, discontinue or terminate,
any Award theretofore granted and any Award Agreement relating thereto;
provided, however, that, without the consent of an affected Participant, no such
amendment, alteration, suspension, discontinuation or termination of any Award
may impair the rights of such Participant under such Award; and provided,
further, that no amendment or alteration may be effective with respect to a
Qualified Performance-Based Award if and to the extent it would cause such Award
to cease to qualify for the Section 162(m) Exemption.
SECTION 12. GENERAL PROVISIONS.
12.01. No Rights to Awards. No Participant, officer, employee or director
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Participants or any other persons.
12.02. No Shareholder Rights. No Award shall confer on any Participant
any of the rights of a shareholder of the Corporation unless and until Shares
are duly issued or transferred to the Participant in accordance with the terms
of the Award.
12.03. Dividends. The recipient of any Award may, if so determined by the
Committee, be entitled to receive on a current or deferred basis, dividends or
Dividend Equivalents, with respect to the number of Shares covered by the Award.
12.04. Tax Withholding. The Corporation or any Subsidiary or Affiliate is
authorized to withhold from any award granted, any payment relating to an Award
under the Plan (including from a distribution of Shares) or any payroll or other
payment to a Participant, amounts of withholding and other taxes due with
respect thereto, its exercise or any payment thereunder, and to take such other
action as the Committee may deem necessary or advisable to enable the
Corporation and Participants to satisfy obligations for the payment of
withholding taxes and other tax liabilities relating to any Award. This
authority shall include authority to withhold or receive Shares or other
property and to make cash payments in respect thereof in satisfaction of a
Participant's tax obligations.
12.05. No Right to Employment. Nothing contained in the Plan or any Award
Agreement shall confer, and no grant of an Award shall be construed as
conferring, upon any employee any right to continue in the employ of the
Corporation or any Subsidiary or Affiliate or to interfere in any way with the
right of the Corporation or any Subsidiary or Affiliate to terminate the
employee's employment at any time or increase or decrease the employee's
compensation from the rate in existence at the time of granting of an Award.
12.06. Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. Nothing contained in
the Plan, any Award Agreement or any Award shall give any such Participant any
rights that are greater than those of an unsecured general creditor of the
Corporation.
12.07. Other Compensatory Arrangements. The Corporation or any Subsidiary
or Affiliate shall be permitted to adopt other or additional compensation
arrangements (which may include arrangements which relate to Awards), and such
arrangements may be either generally applicable or applicable only in specific
cases.
12.08. Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
12.09. Governing Law. The validity, construction and effect of the Plan,
any rules and regulations relating to the Plan, any action taken pursuant to the
Plan and any Award Agreement shall be governed by the laws of the State of
Missouri, without giving effect to principles of conflicts of laws, and
applicable federal law.
12.10. Tax Offset Bonuses. At the time an Award is made under the Plan or
at any time thereafter, the Committee may grant to the Participant receiving
such Award the right to receive a cash payment in an amount specified by the
Committee, to be paid at such time or times (if ever) as the Award results in
compensation income to the Participant, for the purpose of assisting the
Participant to pay the resulting taxes, all as determined by the Committee and
on such other terms and conditions as the Committee shall determine.
SECTION 13. LAWS AND REGULATIONS. The Plan, the granting and exercising of
Awards thereunder and the other obligations of the Corporation under the Plan
shall be subject to all applicable federal and state laws, rules and
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regulations and to such approvals by any regulatory or governmental agency as
may be required. The Corporation, in its discretion, may postpone the granting
and exercising of Awards, the issuance or delivery of Shares under any Award or
any other action permitted under the Plan to permit the Corporation, with
reasonable diligence, to complete any stock exchange listing or registration or
qualification of such Shares or other required action under any federal or state
law, rule or regulation and may require any participant to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance of delivery of Shares in compliance with applicable
laws, rules and regulations. The Corporation shall not be obligated by virtue of
any provision of the Plan to recognize the exercise of any Award or to otherwise
sell or issue Shares in violation of any such laws, rules, or regulations; and
any postponement of the exercise or settlement of any Award under this provision
shall not extend the term of such Award, and neither the Corporation nor its
directors or officers shall have any obligation or liability to any Participant
with respect to any Award (or stock issuable thereunder) that shall lapse
because of such postponement.
SECTION 14. EFFECTIVE DATE. The Plan shall become effective on April 1, 1998;
provided that the effectiveness of the Plan shall be subject to the approval of
the Plan by the affirmative vote of the holders of a majority of the Shares
present or represented and entitled to vote at the next following meeting of the
Corporation's shareholders. The Committee shall have the authority to grant
Awards prior to such approval; provided that the effectiveness of such Awards
shall be subject to such shareholder approval of the Plan. The Plan shall
terminate ten years after its effective date, subject to earlier termination by
the Board pursuant to Section 11, after which no Awards may be made under the
Plan, but any such termination shall not affect Awards then outstanding or the
authority of the Committee to continue to administer the Plan.
7
<PAGE> 1
EXHIBIT 10.2
AMEREN CORPORATION
CHANGE OF CONTROL SEVERANCE PLAN
INTRODUCTION
The Board of Directors of Ameren Corporation recognizes that, as is the
case with many publicly held corporations, there exists the possibility of a
Change of Control of the Company. This possibility and the uncertainty it
creates may result in the loss or distraction of senior executives of the
Company, to the detriment of the Company and its shareholders.
The Board considers the avoidance of such loss and distraction to be
essential to protecting and enhancing the best interests of the Company and its
shareholders. The Board also believes that when a Change of Control is perceived
as imminent, or is occurring, the Board should be able to receive and rely on
disinterested service from senior executives regarding the best interests of the
Company and its shareholders, without concern that senior executives might be
distracted or concerned by the personal uncertainties and risks created by the
perception of an imminent or occurring Change of Control.
In addition, the Board believes that it is consistent with the
Company's employment practices and policies and in the best interests of the
Company and its shareholders to treat fairly its employees whose employment
terminates in connection with or following a Change of Control.
Accordingly, the Board has determined that appropriate steps should be
taken to assure the Company of the continued employment and attention and
dedication to duty of its senior executives and to seek to ensure the
availability of their continued service, notwithstanding the possibility, threat
or occurrence of a Change of Control.
Therefore, in order to fulfill the above purposes, the following plan
has been developed and is hereby adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
As of the Effective Date, the Company hereby establishes a separation
compensation plan known as Ameren Corporation Change of Control Severance Plan,
as set forth in this document.
ARTICLE II
DEFINITIONS
As used herein, the following words and phrases shall have the
following respective meanings unless the context clearly indicates otherwise.
(a) Annual Bonus Award. The annual cash bonus that a
Participant is eligible to earn pursuant to the Company's Executive Incentive
Plan, and/or any successors thereto.
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(b) Annual Salary. The Participant's regular annual base
salary immediately prior to his or her termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by any Employer or deferred pursuant to a written plan or agreement
with any Employer.
(c) Board. The Board of Directors of the Company.
(d) Cause. With respect to any Participant: (i) the willful
and continued failure of the Participant to perform substantially the
Participant's duties with any Employer (other than any such failure resulting
from incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Participant by the Board or the
Chief Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Participant has
not substantially performed the Participant's duties, or (ii) the willful
engaging by the Participant in illegal conduct or gross misconduct which is
materially and demonstrably injurious to any Employer. For purposes of this
definition, no act or failure to act on the part of the Participant shall be
considered "willful" unless it is done, or omitted to be done, by the
Participant in bad faith or without reasonable belief that the Participant's
action or omission was in the best interests of the Employers. Any act or
failure to act based upon authority given PURSUANT to a resolution duly adopted
by the Board or upon the instructions of the Chief Executive Officer or a senior
officer of the Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Participant
in good faith and in the best interests of the Employers.
(e) Change of Control. The occurrence of any of the
following events after the Effective Date of this Plan:
(i) The acquisition by any individual entity or group
(within the meaning of Section 13)(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (x) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (y) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company, (B) any acquisition by the Company, (C)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (D)
any acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B) and (C) of paragraph (iii) below; or
(ii) Individuals who, as of the Effective Date of this Plan,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided, however, that any individual
becoming a director subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual
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<PAGE> 3
or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another corporation (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 80% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were,
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(f) Code. The Internal Revenue Code of 1986, as amended from
time to time.
(g) Committee. The Human Resources Committee of the Board.
(h) Company. Ameren Corporation and any successors thereto.
(i) Date of the Change of Control. The date on which a
Change of Control occurs.
(j) Date of Termination. The date on which a Participant
ceases to be an Employee.
(k) Disability. A termination of a Participant's Employment
for Disability shall have occurred if the Termination occurs because illness or
injury has prevented the Participant
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<PAGE> 4
from performing his or her duties (as they existed immediately prior to the
illness or injury) on a full time basis for 180 consecutive business days.
(l) Effective Date. The date specified in the resolution of
the Board adopting this Plan.
(m) Employee. Any full-time, regular-benefit, non-bargaining
employee of the Company or any other Employer.
(n) Employer. The Company or any subsidiary of the Company.
(o) Employment. The state of being an Employee.
(p) ERISA. The Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
(q) Good Reason. With respect to any Participant, (i) the
assignment to the Participant of any duties inconsistent in any respect with the
Participant's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities immediately before the
Change of Control, or any other action by any Employer which results in a
significant diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Employer promptly after receipt
of notice thereof given by the Participant; (ii) any material reduction in the
Participant's Annual Salary, opportunity to earn Annual Bonuses, or other
compensation or employee benefits, other than as a result of an isolated and
inadvertent action not taken in bad faith and which is remedied by the Employer
promptly after receipt of notice thereof' given by the Participant; (iii) the
Employer's requiring the Participant to relocate his or her principal place of
business to a place which is more than 50 miles from his or her previous
principal place of business; (iv) any purported termination of the Plan
otherwise than as expressly permitted by the Plan; or (v) any failure by the
Company to comply with and satisfy Article V of the Plan. For purposes of the
Plan, any good faith determination of "Good Reason" made by the Participant
shall be conclusive.
(r) Highest Annual Bonus. With respect to any Participant,
the higher of (i) the average of the Annual Bonuses received by the Participant
with respect to the three most recent years before the Date of the Change of
Control and (ii) the Annual Bonus most recently received by the Participant.
(s) Multiple. With respect to any Participant, the number
set forth opposite the Participant's name under the heading "Benefit Level" on
Schedule I hereto or, if less, the number of years and fractions thereof
remaining, as of the Participant's Date of Termination, until the Participant
reaches his or her mandatory retirement age (if any) under the applicable
Employer Policy.
(t) Participant. An individual who is designated as such
pursuant to Section 3.1.
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<PAGE> 5
(u) Plan. The Ameren Corporation Change of Control
Severance Plan.
(v) Retirement. A termination by Retirement shall have
occurred where a Participant's termination is due to his or her late, normal or
early retirement under a pension plan sponsored by the Company or any of its
affiliates, as defined in such plan.
(w) Separation Benefits. The benefits described in Section
4.2 that are provided to qualifying Participants under the Plan.
(x) Separation Period. With respect to any Participant, the
period beginning on a Participant's Date of Termination and ending after the
expiration of a number of years equal to the Multiple for such Participant.
ARTICLE III
ELIGIBILITY
3.1 Each of the individuals named on Schedule I hereto shall
be a Participant in the Plan. Schedule I may be amended by the Human Resources
Committee of the Board from time to time to add individuals as Participants.
3.2 Duration of Participation. A Participant shall only
cease to be a Participants in the Plan as a result of an amendment or
termination of the Plan complying with Article VI of the Plan, or when he
ceases to be an Employee, unless, at the time he ceases to be an Employee,
such Participant is entitled to payment of a Separation Benefit as provided in
the Plan or there has been an event or occurrence that constitutes Good Reason
that which would enable the Participant to terminate his employment and
receive a Separation Benefit. A Participant entitled to payment of a
Separation Benefit or any other amounts under the Plan shall remain a
Participant in the Plan until the full amount of the Separation Benefit and
any other amounts payable under the Plan have been paid to the Participant.
ARTICLE IV
SEPARATION BENEFITS
4.1 Terminations of Employment Which Give Rise to Separation
Benefits Under Plan. A Participant shall be entitled to Separation Benefits as
set forth in Section 4.2 below if, at any time before the third anniversary of
the Date of the Change of Control, the Participant's Employment is terminated
(i) by the Employer for any reason other than Cause, death, Disability or
Retirement or (ii) by the Participant within 90 days after the occurrence of
Good Reason.
4.2 Separation Benefits.
(a) If a Participant's employment is terminated under
circumstances entitling him to Separation Benefits as provided in Section 4.1,
the Company shall pay such Participant, within ten days of the Date of
Termination, a cash lump sum as set forth in subsection on (b) below and the
continued benefits set forth in subsection (c) below. For purposes of
determining the
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<PAGE> 6
benefits set forth in subsection (b) and (c), if the termination of the
Participant's employment is for Good Reason after there has been a reduction of
the Participant's Annual Salary, opportunity to earn Annual Bonuses, or other
compensation or employee benefits, such reduction shall be ignored.
(b) The cash lump sum referred to in Section 4.2(a) is the
aggregate of the following amounts:
(i) the sum of (1) the Participant's Annual Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the such year through the
Date of Termination, and the denominator of which is 365, and (3) any
accrued vacation pay, to the extent not theretofore paid and in full
satisfaction of the rights of the Participant thereto;
(ii) an amount equal to the product of (1) the Participant's
Multiple times (2) the sum of the Participant's (x) Annual Salary and
(y) Highest Annual Bonus; and
(iii) an amount equal to the difference between (a) the
actuarial equivalent of the benefit under the qualified defined
benefit retirement plans of the Employer in which the Participant
participates (collectively, the "Retirement Plan") and any excess or
supplemental retirement plans in which the Participant participates
(collectively, the "SERP") which the Participant would receive if his
or her employment continued during the Separation Period, assuming
that the Participant's compensation during the Separation Period would
have been equal to his or her compensation as in effect immediately
before the termination or, if higher, on the Effective Date, and (b)
the actuarial equivalent of the Participant's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as of the
Date of Termination. The actuarial assumptions used for purposes of
determining actuarial equivalence shall be no less favorable to the
Participant than the most favorable of those in effect under the
Retirement Plan and the SERP on the Date of Termination and the
Effective Date.
(c) The continued benefits referred to above are as follows:
(i) during the Separation Period, the Participant and his or
her family shall be provided with medical, dental and life insurance
benefits as if the Participant's employment had not been terminated;
provided, however, that if the Participant becomes reemployed with
another employer and is eligible to receive medical or other welfare
benefits under another employer-provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility.
For purposes of determining eligibility (but not the time of
commencement of benefits) of the Participant for retiree medical,
dental and life insurance benefits under the Employer's plans,
practices, programs and policies, the Participant shall be considered
to have remained employed during the Separation Period and to have
retired on the last day of such period; and
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<PAGE> 7
(ii) the Company shall, at its sole expense as incurred,
provide the Participant with outplacement services the scope and
provider of which shall be selected by the Participant in his or her
sole discretion (but at a cost to the Company of not more than
$30,000);
To the extent any benefits described in this Section 4.2(c) cannot be provided
pursuant to the appropriate plan or program maintained for Employees, the
Company shall provide such benefits outside such plan or program at no
additional cost (including without limitation tax cost) to the Participant.
4.3 Other Benefits Payable. The cash lump sum and continuing
benefits described in Section 4.2 above shall be payable in addition to, and
not in lieu of, all other accrued or vested or earned but deferred
compensation, rights, options or other benefits which may be owed to a
Participant upon or following termination, including but not limited to
accrued vacation or sick pay, amounts or benefits payable under any bonus or
other compensation plans, stock option plan, stock ownership plan, stock
purchase plan, life insurance plan, health plan, disability plan or similar or
successor plan, but excluding any severance pay or pay in lieu of notice
required to be paid to such Participant under applicable law.
4.4 Certain Additional Payments by the Company.
(a) Anything in this Plan to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of any
Participant (whether paid or payable or distributed or distributable pursuant
to the terms of this Plan or otherwise, but determined without regard to any
additional payments required under this Section 4.4) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Participant with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Participant shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Participant of all taxes
(including any interest, or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 4.4(c), all
determinations required to be made under this Section 4.4, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by Arthur Andersen or such other certified public accounting
firm as may be designated by the Participant (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and the
Participant within 15 business days of the receipt of notice from the
Participant that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
of Control, the Participant shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All
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fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 4.4 shall be paid
by the Company to the Participant within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Participant. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 4.4(c) and the Participant thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Participant.
(c) The Participant shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Participant
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Participant shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Participant in writing prior to the
expiration of such period that it desires to contest such claim, the Participant
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Participant harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4.4(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in
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respect of such claim and may, at its sole option, either direct the
Participant to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Participant agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Participant to
pay such claim and sue for a refund, the Company shall advance the amount of
such payment to the Participant, on an interest-free basis and shall indemnify
and hold the Participant harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year of
the Participant with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Participant shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Participant of an amount
advanced by the Company pursuant to Section 4.4(c), the Participant becomes
entitled to receive any refund with respect to such claim, the Participant shall
(subject to the Company's complying with the requirements of Section 4.4(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Participant of an amount advanced by the Company pursuant to
Section 4.4(c), a determination is made that the Participant shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Participant in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
4.5 Payment Obligations Absolute.
The obligations of the Company and the other Employers to pay
the separation benefits described in Section 4.2 and any additional payments
described in Section 4.4 shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company or any of
the other Employers may have against any Participant. In no event shall a
Participant be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to a Participant under any of the
provisions of this Plan, nor shall the amount of any payment hereunder be
reduced by any compensation earned by a Participant as a result of employment
by another employer, except as specifically provided in Section 4.2(c)(i).
4.6 Deferred Compensation Plan. With respect to each
Participant who is a participant in the Company's Deferred Compensation Plan
for Members of the Ameren Leadership Team, or any successor thereto
(collectively, the "Deferred Compensation Plan"), the definition of "Change of
Control" for purposes of the Deferred Compensation Plan shall be
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deemed to be the definition given in Article II of this Plan, rather than the
definition given in the Deferred Compensation Plan.
ARTICLE V
SUCCESSOR TO COMPANY
This Plan shall bind any successor of the Company, its assets
or its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent that the
Company would be obligated under this Plan if no succession had taken place.
In the case of any transaction in which a successor would not
by the foregoing provision or by operation of law be bound by this Plan, the
Company shall require such successor expressly and unconditionally to assume and
agree to perform the Company's obligations under this Plan, in the same manner
and to the same extent that the Company would be required to perform if no such
succession had taken place. The term "Company," as used in this Plan, shall mean
the Company as herein before defined and any successor or assignee to the
business or assets which by reason hereof becomes bound by this Plan.
ARTICLE VI
DURATION, AMMENDMENT AND TERMINATION
6.1 Duration. If a Change of Control has not occurred, this
Plan shall continue in effect until the fifth anniversary of the Effective Date,
and shall automatically be extended for successive two-year terms unless, not
less than one year before the end of the initial five-year term or any such
two-year extension, the Board determines that it shall not be so extended. If a
Change of Control occurs while this Plan is in effect, this Plan shall continue
in full force and effect and shall not terminate or expire until after all
Participants who become entitled to any payments hereunder shall have received
such payments in full and all adjustments required to be made pursuant to
Section 4.4 have been made.
6.2 Amendment or Termination. The Board may amend or
terminate this Plan at any time; provided, that this Plan may not be terminated
or amended (i) following a Change of Control, (ii) at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control,
or (iii) otherwise in connection with or in anticipation of a Change of Control,
in any manner that could adversely affect the rights of any Participant.
6.3 Procedure for Extension, Amendment or Termination. Any
extension, amendment or termination of this Plan by the Board in accordance with
the foregoing shall be made by action of the Board in accordance with the
Company's charter and by-laws and applicable law, and shall be evidenced by a
written instrument signed by a duly authorized officer of the Company,
certifying that the Board has taken such action.
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ARTICLE VII
MISCELLANEOUS
7.1 Indemnification. If a Participant institutes any legal
action in seeking to obtain or enforce, or is required to defend in any legal
action the validity or enforceability of, any right or benefit provided by this
Plan, the Company will pay for all actual legal fees and expenses incurred (as
incurred) by such Participant, regardless of the outcome of such action.
7.2 Employment Status. This Plan does not constitute a
contract of employment, nor does it impose on the Participant or the Employers
any obligation for the Participant to remain an Employee or change the status of
the Participant's employment or the Employers' policies regarding termination of
employment.
7.3 Named Fiduciary; Administration. The Company is the
named fiduciary of the Plan, with full authority to control and manage the
operation and administration of the Plan, acting through the Employee Benefits
Department.
7.4 Claim Procedure. If an Employee or former Employee makes
a written request alleging a right to receive benefits under this Plan or
alleging a right to receive an adjustment in benefits being paid under the Plan,
the Company shall treat it as a claim for benefit. All claims for benefit under
the Plan shall be sent to the Employee Benefits Department and must be received
within 30 days after termination of employment. If the Company determines that
any individual who has claimed a right to receive benefits, or different
benefits, under the Plan is not entitled to receive all or any part of the
benefits claimed, it will inform the claimant in writing of its determination
and the reasons therefor in terms calculated to be understood by the claimant.
The notice will be sent within 90 days of the claim unless the Company
determines additional time, not exceeding 90 days, is needed. The notice shall
make specific reference to the pertinent Plan provisions on which the denial is
based, and describe any additional material or information is necessary. Such
notice shall, in addition, inform the claimant what procedure the claimant
should follow to take advantage of the review procedures set forth below in the
event the claimant desires to contest the denial of the claim. The claimant may
within 90 days thereafter submit in writing to the Company a notice that the
claimant contests the denial of his or her claim by the Company and desires a
further review. The Company shall within 60 days thereafter review the claim and
authorize the claimant to appear personally and review pertinent documents and
submit issues and comments relating to the claim to the persons responsible for
making the determination on behalf of the Company. The Company will render its
final decision with specific reasons therefor in writing and will transmit it to
the claimant within 60 days of the written request for review, unless the
Company determines additional time, not exceeding 60 days, is needed, and so
notifies the Participant. If the Company fails to respond to a claim filed in
accordance with the foregoing within 60 days or any such extended period, the
Company shall be deemed to have denied the claim.
7.5 Unfunded Plan Status. This Plan is intended to be an
unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
within the meaning of Section 401 of ERISA. All payments pursuant to the Plan
shall be made from the general funds of the Company and no
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<PAGE> 12
special or separate fund shall be established or other segregation of assets
made to assure payment. No Participant or other person shall have under any
circumstances any interest in any particular property or assets of the Company
as a result of participating in the Plan. Notwithstanding the foregoing, one or
more of the Employers may (but shall not be obligated to) create one or more
grantor trusts, the assets of which are subject to the claims of the Employers'
creditors, to assist them in accumulating funds to pay their obligations under
the Plan.
7.6 Validity and Severability. The invalidity or
unenforceability of any provision of the Plan shall not affect the validity or
enforceability of any other provision of the Plan, which shall remain in full
force and effect, and any prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
7.7 Governing Law. The validity, interpretation,
construction and performance of the Plan shall in all respects be governed by
the laws of Missouri, without reference to principles of conflict of law, except
to the extent pre-empted by ERISA.
7.8 Prior Plan and Agreements. Notwithstanding any other
provision of this Plan or the Union Electric Change of Control Severance Plan
(the "Prior UE Plan"): (a) upon the occurrence of any Change of Control as
defined herein, this Plan shall supersede the Prior UE Plan; and (b) no
Participant shall be entitled to receive severance pay or benefits under both
the Prior UE Plan and under this Plan as a result of the same termination of
employment. In addition, notwithstanding any other provision of this Plan or any
Management Continuity Agreement between any individual and CIPSCO Incorporated
(a "Prior CIPSCO Agreement"), no individual who is designated as a Participant
and who is a party to a Prior CIPSCO Agreement shall become a Participant unless
and until such individual has executed a written agreement, substantially in the
form attached hereto as Exhibit A, to the effect that the Prior CIPSCO Agreement
shall terminate and be of no further effect upon the occurrence of any Change of
Control as defined herein, and that such individual shall not be entitled to
receive severance pay or benefits under both the Prior CIPSCO Agreement and
under this Plan as a result of the same termination of employment.
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<PAGE> 13
EXHIBIT A
---------
Form of Amendment to Prior CIPSCO Agreement
This Amendment to the Management Continuity Agreement (this
"Amendment"), effective as of __________, _________, by and between Ameren
Corporation ("Ameren") and (the "Executive")
WITNESSETH:
WHEREAS, Ameren is the successor to CIPSCO Incorporated
("CIPSCO"), which was merged with and into Ameren effective December 31, 1997
(the "Merger");
WHEREAS, the Executive and Ameren, as successor to CIPSCO, are
parties to a Management Continuity Agreement dated as of February 7, 1995
(the "Agreement"), which has become operative in accordance with its terms;
WHEREAS, Ameren has adopted the Ameren Corporation Change of
Control Severance Plan (the "Ameren Plan"), which provides certain severance
benefits to Participants therein whose employment terminates under certain
circumstances after a "Change of Control" (as defined in the Ameren Plan) that
occurs while the Ameren Plan is in effect (capitalized terms used in this
Amendment and not defined herein have the meanings given to them in the Ameren
Plan); and
WHEREAS, the Executive has been designated as a Participant in
the Ameren Plan, subject to the execution of this Amendment;
NOW, THEREFORE, Ameren and the Executive agree as follows:
1. If (a) there occurs a Change of Control after the date
hereof and (b) the Executive is an Employee at the time of such Change of
Control, the Agreement shall be null and void and of no further force or effect
from and after the date of such Change of Control.
2. In no event shall the Executive shall be eligible for
severance benefits under both the Agreement and the Ameren Plan.
3. Except as otherwise specified above, the Agreement is
hereby ratified and confirmed without amendment.
- ------------------------ AMEREN CORPORATION
[name of Executive]
----------------------------
By:
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<PAGE> 14
Schedule I
Participants
------------
Benefit
Name Level
Mueller, Charles W. 3
Agathen, Paul A. 3
Brandt, Donald E. 3
Schukai, Charles J. 3
Rainwater, Gary L. 3
Barrett, M. Patricia 2
Baxter, Warner L. 2
Birkett, James T. 2
Bremer, Charles A. 2
Capone, Donald W. 2
Carr, William J.- 2
Davis, James L. 2
Hannis, Jean M. 2
Kelley, R. Alan 2
Koertner, William A. 2
Moorman, Gilbert W. 2
Montana, Michael J. 2
Nelson, Craig D. 2
Randolph, Garry L. 2
Schukai, Robert J. 2
Shores, William C. 2
Sullivan, Steven R. 2
Voss, Thomas R. 2
Willis, Samuel E. 2
Zdellar, Ronald C. 2
Birdsong, Jerre E. 2
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<PAGE> 1
EXHIBIT 10.3
AMEREN CORPORATION
DEFERRED COMPENSATION PLAN
1. PURPOSE
The purpose of the Ameren Corporation Deferred Compensation Plan
("Plan") is to amend and restate the Union Electric Deferred
Compensation Plan dated January 1, 1986, and to provide eligible
participants with the opportunity to accumulate capital and postpone
the income taxes thereon of up to 30 percent of annual base salary.
Participation in the Plan is voluntary. The implementation of the Plan
will provide Ameren Corporation and its subsidiaries ("Ameren") with
the means to attract and retain key employees by offering a competitive
salary deferral program. The Plan is administered by a committee of
officers ("Committee") of Ameren Services Company ("Company") who have
been appointed by the Chief Executive Officer of Ameren.
2. DEFINITIONS
Certain words and phrases are defined when first used in later
paragraphs of the Plan. In addition, the following words and phrases
when used herein, unless the context clearly requires otherwise, shall
have the following respective meanings:
A. Ameren: As used herein shall mean Ameren Corporation and its
subsidiaries.
B. Company: As used herein shall mean Ameren Services Company, as
agent for Ameren and as administrator of the Plan.
C. Deferral Account: Book entries reflecting each Participant's
Deferred Amounts and Interest credited thereon pursuant to the
provisions of Section 7. A separate Deferral Account shall be
maintained for each Deferral Commitment commenced hereunder.
D. Deferral Commitment: The sum of the Salary deferrals to which
the Participant obligates himself pursuant to the provisions of
Section 4.
E. Deferred Amount: The amount of Salary which a Participant elects
to defer pursuant to the provisions of the Plan.
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<PAGE> 2
F. Effective Date: January 1, 1986, as restated and amended from
time to time.
G. Interest: The amount of interest which a Participant shall be
deemed to earn on his Deferred Amounts and which shall be
credited to his Deferral Account as determined pursuant to
Section 8.
H. Participant: Any person eligible to participate in the Plan
pursuant to Section 3 who elects or has elected to defer a
portion of his salary pursuant to the provisions of the Plan.
A Participant who transfers employment to any subsidiary of
Ameren Corporation or other business entity in which Ameren
Corporation has a ten percent (10%) or greater ownership
interest, shall be deemed not to have terminated employment as
long as such Participant is an employee of such a subsidiary or
business entity.
I. Plan: The Ameren Corporation Deferred Compensation Plan, as
revised and restated.
J. Plan Year: The 12-month period commencing January 1 and ending
on December 31, except in the case of the 1986 Plan Year in
which case the 5-month period commencing August 1, 1986 and
ending on December 31, 1986.
K. Retirement Age: Normal Retirement Age under the provisions of
the Plan shall be 65 years of age. However, retirement shall
be permitted under the provisions of the Plan as early as 55
years of age.
L. Salary: The annual base pay of a Participant, exclusive of any
income from commissions, benefits, allowances, and/or other
incentive plans paid by Ameren.
3. ELIGIBILITY
The Human Resources Committee of the Ameren Corporation Board of
Directors shall have sole authority to designate persons eligible to
participate in the Plan; however, any member who, as a Participant in
the Plan, accelerated a prior Deferral Commitment pursuant to the
provisions of Section 4 shall not be eligible to commence any further
Deferral Commitments. Any individual who is eligible to participate in
the Plan may become a Participant by commencing a Deferral Commitment.
4. COMMENCING A DEFERRAL COMMITMENT
A Participant may commence a Deferral Commitment by making an election
to defer a percentage of Salary up to a maximum of 30 percent (10
percent for Deferral Commitments commencing prior to January 1, 1991;
20 percent for Deferral
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<PAGE> 3
Deferred Compensation Plan (Continued)
Commitments commencing on or after January 1, 1991 and prior to January
1, 1995). The amount of Salary deferred may not reduce the amount of
the Participant's non-deferred Salary for the year of deferral below
the maximum level of "Federal Insurance Contributions Act taxable
wages" (i.e., the FICA wage base). The annual dollar value of the
percentage elected by the Participant must be at least $3,500. Except
as described below with respect to accelerating a Deferral Commitment,
during the term of a Deferral Commitment the deferral percentage
elected by the Participant shall not be increased or decreased. (The
dollar value of the percentage elected by the Participant will change
during the term of Deferral Commitment in response to adjustments to
the Participant's Salary.)
The term of a normal Deferral Commitment shall be four or fewer years
(except in the case of a Deferral Commitment commenced on August 1,
1986 in which case the term shall be four years and five months).
Beginning on January 1, 1991, the Plan shall consist of separate and
non-overlapping four-year segments, each made up of four consecutive
calendar years, with all Deferral Commitments commenced on any January
1 therein terminating on the last day of such four-year segment for all
purposes hereunder. The Committee may, in its absolute and sole
discretion, authorize a term of less than four years.
In the event that a Participant has fewer years remaining before his
retirement than remain in the then current four-year segment described
above, the Committee may, at the request of the Participant and in its
sole discretion, agree at any time prior to the completion of a
Deferral Commitment to waive the 30 percent maximum deferral percentage
and the FICA wage base limitations, on terms determined by the
Committee, so that such Participant may accelerate his Deferral
Commitment into the period remaining before retirement.
The Participant's Deferred Amounts shall be credited to his Deferral
Account by no later than the end of the month in which such amounts
would, but for such deferral, be payable to the Participant.
5. MULTIPLE DEFERRAL COMMITMENTS DURING A FOUR-YEAR SEGMENT
In the event that a Participant has, pursuant to the provisions of this
Section and Section 4, commenced one or more Deferral Commitments
during a four-year segment wherein his Deferral Commitments are for
less than the maximum deferral percentage of Salary otherwise permitted
hereunder, the Participant may commence another Deferral Commitment
effective on any subsequent January 1 prior to the end of the then
current four-year segment by electing to defer an additional percentage
of his prospective Salary, provided the combined Salary deferral
percentages of the Participant's Deferral Commitments in effect during
such four-year segment do not exceed the maximum deferral percentage of
Salary, and further provided that each additional Deferral Commitment
independently satisfies the requirements of Section 4.
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<PAGE> 4
Deferred Compensation Plan (Continued)
6. TERMS OF DEFERRAL ELECTION
A Participant's written election to defer Salary shall indicate the
percentage amount of Salary which the Participant is electing to defer
under the Plan and the method of distribution of such amounts. Such
election form shall be filed by the Participant with the Company's Vice
President, Human Resources, by no later than the last date specified
for such filing. Such election shall be effective on the first day of
the next Plan Year.
7. PARTICIPANT DEFERRAL ACCOUNT
There shall be established a Deferral Account in the name of each
Participant who elects to defer Salary by commencing a Deferral
Commitment under the provisions of the Plan. A separate Deferral
Account will be maintained for each Deferral Commitment commenced by
each Participant. The Deferral Account shall reflect the value of the
Participant's Deferred Amounts plus Interest credited thereon with
respect to the specific Deferral Commitment. The records for each
Deferral Account maintained for the Participant shall be available for
inspection by the Participant at reasonable times, and the Company
shall furnish the Participant on or before the first day of March of
each year a statement indicating the aggregate amount credited to each
of the Participant's Deferral Accounts through the last day of the
preceding Plan Year and the value of each such Deferral Account on such
date.
8. INTEREST ON DEFERRED AMOUNTS
Interest calculated at the rate or rates, as hereinafter described,
shall accrue from the date Salary deferrals are credited to the
Participant's Deferral Account and shall be compounded annually and
credited to the Participant's Deferral Account as of the last business
day of each Plan Year for which the Participant has a Deferral Account
balance. While the Participant is employed by Ameren (except where the
Participant has attained 65 years of age) the Participant's Deferral
Account balance shall earn Interest at the "Plan Interest Rate." After
retirement (and when the Participant remains employed by Ameren after
having attained 65 years of age) or following the death of the
Participant, the Participant's Deferral Account balance shall earn
interest at the "Base Interest Rate."
The "Plan Interest Rate" for any Plan Year shall be 150 percent of the
average Moody's Seasoned AAA Corporate Bond Yield Index (Moody's Index)
for the previous calendar year. Interests rates are calculated annually
as of the first day of the Plan Year. (For a Deferral Commitment
commenced on August 1, 1986, consult the plan document then in effect.)
The "Base Interest Rate" for any Plan Year shall be equal to the
average Moody's Index for the previous calendar year.
4
<PAGE> 5
Deferred Compensation Plan (Continued)
9. DISTRIBUTION AT RETIREMENT
The balance of each of a Participant's Deferral Accounts shall be
distributed to the Participant, each according to the pay-out method
selected by the Participant, beginning no later than the first day of
the first month following the month in which the Participant retires.
In the event the balances of one or more of the Participant's Deferral
Accounts are to be distributed as a single lump sum, such distribution
shall take place no later than the first day of the first month
following the month in which the Participant retires.
At the time that a Participant makes an election to defer Salary under
the Plan, he shall select a method for the distribution of the balance
of that Deferral Account at retirement by choosing one of the following
alternative methods of distribution:
1. The balance of the Participant's Deferral Account to be
distributed in a single lump sum.
2. The balance of the Participant's Deferral Account to be
distributed in substantially equal installments over a period
of 5 years commencing at retirement.
3. The balance of the Participant's Deferral Account to be
distributed in substantially equal installments over a period
of 10 years commencing at retirement.
4. The balance of the Participant's Deferral Account to be
distributed in substantially equal installments over a period
of 15 years commencing at retirement.
(Methods 2 through 4 shall be payable either in monthly or annual
installments as elected by the Participant or his beneficiary.)
With respect to Deferral Commitments commenced prior to January 1,
1991, a Participant may choose to have the balance of said Deferral
Account(s) distributed in substantially equal installments over the
period commencing at such Participant's retirement and continuing until
the Participant attains 80 years of age, provided such Participant
selected this distribution option prior to October 12, 1990.
Except as described in the preceding sentence, a Participant's
selection of a method of distribution may be changed by the Participant
as frequently as he chooses up to one year prior to the date when
distributions from the Participant's Deferral Account are to commence.
A change in the method of distribution must be made on a form provided
by the Company which must be filed by the Participant with the
Company's Vice President, Human Resources.
5
<PAGE> 6
Deferred Compensation Plan (Continued)
10. REVOCATION OF DEFERRAL ELECTION
A Participant may revoke his election to defer Salary at any time prior
to or after completing a Deferral Commitment. Such revocation must be
made in writing and filed with the Company's Vice President, Human
Resources. When the Participant revokes his deferral election, all
amounts deferred pursuant to that Deferral Commitment will be
distributed to the Participant in a single sum no later than 30 days
after the date the notice of revocation is filed. All Interest credited
to the Participant's corresponding Deferral Account will be forfeited,
and the Participant will not be permitted to commence another Deferral
Commitment any sooner than one year after the next January 1.
11. RETIREMENT OR TERMINATION PRIOR TO COMPLETION OF DEFERRAL COMMITMENT
If a Participant retires or terminates employment prior to completing a
Deferral Commitment all amounts thus far deferred pursuant to that
Deferral Commitment will be distributed to the Participant in a single
sum no later than 30 days after the date the Participant retires or
terminates employment. All interest credited to the Participant's
corresponding Deferral Account will be forfeited.
A Participant who retires may, in order to avoid the consequences of
this Section, complete a Deferral Commitment prior to retirement by
accelerating his Deferral Commitment subject to the provisions of
Section 4.
12. TERMINATION OF EMPLOYMENT PRIOR TO BECOMING ELIGIBLE FOR RETIREMENT
A. General:
Except as described in Paragraph B, below, in the event that a
Participant terminates employment after completing one or more
Deferral Commitments but prior to becoming eligible for
retirement, the balance of the Participant's corresponding
Deferral Account(s) shall be distributed in a single sum to
the Participant no later than 30 days after the date the
Participant terminates employment, except that such balance(s)
shall be reduced prior to distribution in order to reflect
that all Interest earned on the Participant's Deferral
Account(s) shall have been computed using the Base Interest
Rate only. Interest representing the increment over the Base
Interest Rate which would otherwise have been payable at or
after retirement shall be forfeited.
B. Change of Control:
6
<PAGE> 7
In the event that a Participant terminates employment from
Ameren after completing one or more Deferral Commitments but
prior to becoming eligible for retirement and after the
occurrence of a Change of Control, the balance of the
Participant's Deferral Account(s), including Interest
calculated at the Plan Interest Rate, shall be distributed in
a single sum to the Participant no later than 30 days after
the date the Participant terminates employment. For the
purposes of this Paragraph, Change of Control shall mean:
1. The purchase or other acquisition, within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, in
one or a series of transactions by a person or a group of
persons acting in concert, of beneficial ownership in
more than 25% of the then outstanding voting stock of
Ameren Corporation;
2. the receipt of proxies for the election of directors of
Ameren Corporation in opposition to the Board's slate of
nominees which proxies aggregate more than 40% of the
then outstanding voting stock of Ameren Corporation; or
3. the sale or issuance of such number of shares of voting
stock of Ameren Corporation for consideration other than
cash in any transaction or series of related transactions
which constitute more than 25% of the outstanding voting
power of Ameren Corporation after giving effect to such
issuance or sale.
HISTORICAL NOTE: A Change of Control occurred on December
31, 1997, with the merger of Union Electric Company and
CIPSCO to form Ameren Corporation. Participants in the
Plan as of that date vested in their completed Deferral
Account(s), including interest calculated at the Plan
Interest Rate, and will vest in all future Deferral
Account(s), with interest calculated at the Plan Interest
Rate, when the corresponding Deferral Commitments for
such Deferral Account(s) are completed.
13. TOTAL DISABILITY OF PARTICIPANT
In the event that it is determined by a duly licensed physician
selected by the Company that, because of ill health, accident or other
disability, a Participant is no longer able, properly and
satisfactorily, to perform his regular duties and responsibilities, and
therefore, such Participant has been placed on long term disability,
the Company shall commence distribution of the Participant's Deferral
Account(s) according to the method(s) of distribution selected by the
Participant pursuant to Section 9 no later than the thirty days after
the date on which the Participant is placed on long term disability by
the Company.
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<PAGE> 8
14. DEATH OF PARTICIPANT
A. Prior to Retirement:
1. In the event of the Participant's death prior to his
retirement, the Company shall commence distribution of
the Participant's Deferral Account(s) to the
Participant's designated beneficiary(ies) according to
the method(s) selected by the Participant pursuant to
Section 9 no later than the tenth day of the first month
following the date of the Participant's death, except
that if the Participant had selected method 1 (or the
additional method of distribution for Deferral
Commitments commenced prior to October 12, 1990) under
Section 9, distribution shall be made as if he had
selected method 4.
2. In addition, for Deferral Commitments commenced prior to
January 1, 1995, the following survivor benefits will be
payable:
The beneficiary(ies) designated by the Participant shall
receive from the Company an annual benefit for a period
of 10 years, payable in either monthly or annual
installments as elected by the beneficiary(ies), equal to
one-half of each of the Participant's Deferral
Commitments made prior to January 1, 1995 (based on the
dollar value of each Deferral Commitment on the date such
Deferral Commitment was commenced), except that the
benefit payable hereunder shall be calculated by using no
more than the first 10 percent of Salary deferred by such
Participant. In the event the Participant has designated
more than one beneficiary, this additional annual benefit
shall be divided among such beneficiaries in the same
percentages used to divide and distribute the
Participant's Deferral Account(s). (The beneficiary(ies)
of a Participant who is receiving or who has received
distributions pursuant to either Section 13 or Section 15
is eligible for the benefit described in this paragraph.)
In the event a Participant has or had more than one
Deferral Commitment in effect at any one time prior to
January 1, 1995, for purposes of calculating the
additional survivor benefit outlined in the preceding
paragraph, all such Deferral Commitments shall be
aggregated for the purposes of determining the amount of
the benefit payable hereunder with respect to such
Deferral Commitments.
B. After Retirement:
1. In the event of the Participant's death after his
retirement, the Company shall continue to make
distributions over the remainder of the period(s) that
would have been applicable to the Participant had he
survived except
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<PAGE> 9
that such continuing distributions shall be made to the
Participant's designated beneficiary(ies).
2. In addition, for Deferral Commitments commenced prior to
January 1, 1995, the following survivor benefits will be
payable:
If the Participant's death occurs within 15 years after
his retirement, the Participant's surviving spouse (if
any) shall receive an annual benefit for life, payable in
either monthly or annual installments, as elected by the
surviving spouse, equal to one-half of the annual amount
the Participant would have received from each of his
Deferral Accounts, based on each of the Participant's
Deferral Commitments commenced prior to January 1, 1995,
except that the benefit payable hereunder shall be
calculated by using no more than the first 10 percent of
Salary deferred by such Participant, and assuming he had
selected distribution method 4 pursuant to Section 9.
(For the purposes of the benefit described in the
preceding sentence, the Interest rate which shall be used
to calculate the amount of the annual benefit shall be
the Base Interest Rate in effect for the year immediately
preceding the year of the Participant's death.)
In the event a Participant had more than one Deferral
Commitment in effect at any one time prior to January 1,
1995, for purposes of calculating the additional survivor
benefit outlined in the preceding paragraph, all such
Deferral Commitments shall be aggregated for the purposes
of determining the amount of the benefit payable
hereunder with respect to such Deferral Commitments.
15. HARDSHIP DISTRIBUTION
In the event that a Participant (or in the case of the Participant's
death, his beneficiary) suffers a Financial Hardship, the Committee
may, if it deems advisable in its sole and absolute discretion,
distribute on behalf of the Participant, his beneficiary or legal
representative, any portion of the Participant's Deferral Account(s),
but in no event more than the amount necessary to meet the Financial
Hardship. Any such hardship distribution shall be made at such times as
the Committee shall determine, and the Participant's Deferral
Account(s) shall be reduced by the amount so distributed and/or
utilized. Financial Hardship shall mean an unanticipated emergency (as
defined by the Internal Revenue Service) caused by an event beyond the
control of the Participant or beneficiary which would result in severe
financial hardship if early withdrawal were not permitted.
16. WITHDRAWAL PRIOR TO RETIREMENT
As of the date which represents the sixth anniversary of the date on
which a Participant commenced a Deferral Commitment (provided such
Deferral Commitment was
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<PAGE> 10
commenced prior to January 1, 1991) and on any date thereafter, the
Participant may submit a request to withdraw the balance of his
corresponding Deferral Account. A request hereunder must be submitted
in writing to the Company's Vice President, Human Resources, and it
must state the Participant's reason for requesting the withdrawal. The
request must be submitted at least one year prior to the date on which
the requested withdrawal is to occur. The request may be granted or
denied by the Committee in its sole and absolute discretion. In the
event that such request is granted, the balance of such Participant's
corresponding Deferral Account shall be reduced prior to distribution
in order to reflect that all Interest earned thereon shall have been
computed using the Base Interest Rate only. Interest representing the
increment over the Base Interest Rate which would otherwise have been
payable with respect to such Deferral Account at or after retirement
shall be forfeited, and the Participant will not be permitted to
commence another Deferral Commitment any sooner than one year after the
next January 1. Withdrawals which are granted hereunder shall be made
in a single lump sum.
17. DESIGNATION OF BENEFICIARY
The Participant shall designate in writing, on a form to be furnished
by the Company, one or more primary and/or secondary beneficiaries who
shall receive distributions otherwise payable to the Participant or as
otherwise authorized by the Plan, and such beneficiary designation
shall be controlling with respect to all Deferral Accounts such
Participant may have pursuant to the provisions of the Plan. The
Participant's spouse, if any, must consent in writing to the
designation of a primary beneficiary(ies) other than such spouse as the
sole primary beneficiary. Subject to the requirement of the preceding
sentence, the Participant shall have the right, at any time and for any
reason, to submit a revised designation of beneficiary. Such revised
designation of beneficiary shall become effective provided it is
delivered to the Company's Vice President, Human Resources, prior to
the death of such Participant, and it shall supersede all prior
designations of beneficiary submitted by the Participant. A beneficiary
may be a natural person or an entity (such as a trust or a charitable
organization).
If no designation of beneficiary has been received by the Company from
the Participant prior to his death, or if the beneficiary(ies)
designated by the Participant has not survived the Participant or
cannot otherwise be located by the Company within a reasonable period
of time, distributions shall be made to the person or persons in the
first of the following classes of successive preference:
1. The Participant's surviving spouse.
2. The beneficiary(ies) named by the Participant in his most
recent Designation of Beneficiary Form filed with the Company
pursuant to the terms of the Company's Group Life Insurance
Plan.
3. The Participant's surviving children, equally.
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<PAGE> 11
4. The Participant's surviving parents, equally.
5. The Participant's surviving brothers and sisters, equally.
6. The Participant's personal representative(s), executor(s) or
administrator(s).
18. PAYMENTS TO MINORS OR INCOMPETENTS
Whenever, in the Committee's opinion, a person entitled to receive any
payment under the Plan is a minor, is under a legal or other disability
or is so incapacitated as to be unable to manage his financial affairs,
a distribution may be made to such person or to his legal
representative or to a relative or friend of such person for his
benefit, or for the benefit of such person in whatever manner the
Committee considers advisable. Any payment of a benefit in accordance
with the provisions of this Section shall be a complete discharge of
any liability for the making of such payment under the provisions of
the Plan.
19. ADMINISTRATION
Except as specified otherwise in the Plan, the Committee shall have
full power and discretion to administer, construe and interpret the
Plan. Any authorized action or decision under the provisions of the
Plan undertaken by the Committee arising out of, or in connection with
the administration, construction, interpretation or effect of the Plan,
or recommendations in accordance therewith, or any rules and
regulations adopted by the Committee shall be conclusive and binding on
all Participants and their beneficiaries and all other persons
whosoever.
20. EFFECT ON RETIREMENT PLAN BENEFITS
Any reduction in benefits which would otherwise be payable to a
Participant pursuant to the provisions of Ameren's retirement plans
resulting from his participation in the Plan will be made up by the
Company out of general assets of Ameren, as appropriate.
21. MISCELLANEOUS
A. Right of Setoff: If, at such time as the Participant becomes
entitled to distributions hereunder, the Participant has any
debt, obligation or other liability representing an amount
owing to Ameren, and if such debt, obligation, or other
liability is due and owing at the time that distributions are
payable hereunder, the amount owed or owing may be offset
against the amount otherwise distributable hereunder.
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B. No Trust Created: The arrangements hereunder are unfunded for
tax purposes and for the purposes of ERISA, Title I. Nothing
contained in the Plan, and no action taken pursuant to its
provisions shall create, or be construed to create, a trust,
escrow of any kind, or a fiduciary relationship between Ameren
and the Participant, his designated beneficiary(ies), other
beneficiaries of the Participant or any other person.
C. Unsecured General Creditor Status: Distributions to the
Participant or his designated beneficiary(ies) or any other
beneficiary(ies) hereunder shall be made from assets which
prior to distribution shall continue, for all purposes, to be
a part of the general corporate assets and no person
(including Participants) shall have any interest in such
assets of Ameren, including without limitation the proceeds of
life or other insurance policies, by virtue of the provisions
of the Plan. To the extent that any person, including the
Participant, acquires a right to receive distributions under
the provisions hereof, such right shall be no greater than the
right of any unsecured general creditor of Ameren and the
obligation to pay constitutes a mere promise of Ameren to make
payments in the future.
D. Recovery of Costs: In the event that the Company purchases an
insurance policy or policies insuring the life of a
Participant or any other property to allow Ameren to recover
the costs of providing deferred compensation in whole or in
part, hereunder, neither the Participant, his beneficiary(ies)
nor any other person or persons shall have any rights therein
whatsoever. Ameren shall be the sole owners and beneficiaries
of any such insurance policy and shall possess and may
exercise all incidents of ownership therein.
E. Protective Provisions: A Participant shall cooperate with the
Company by providing all information requested including a
medical history. In connection therewith, the Company reserves
the right to require that the Participant submit to a physical
examination if such examination is deemed to be necessary or
appropriate. The costs of all such physical examinations will
be paid by the Company. If the Participant refuses to
cooperate with the Company, the Company shall have no further
obligation to the Participant under the provisions of the
Plan. If the Participant makes any material misstatement of
information or non-disclosure of medical history, then no
benefits shall be payable to the Participant or his
beneficiary(ies) over and above actual Salary deferrals.
F. No Contract of Employment: Nothing contained herein shall be
construed to be a contract of employment for any term of
years, nor a conferring upon the Participant the right to
continue to be employed in his present capacity, or in any
capacity. It is expressly understood that the Plan relates to
the payment of deferred compensation for the Participant's
services normally distributable after termination of his
employment, and the Plan is not in any way intended to be an
employment contract.
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<PAGE> 13
G. Spendthrift Provisions: Neither the Participant, his
beneficiary(ies), nor any other person or persons shall have
any power or right to sell, alienate, attach, garnish,
transfer, assign, anticipate, pledge or otherwise encumber any
part or all of a Deferral Account maintained or distributable
hereunder. No amounts hereunder shall be subject to seizure by
any creditor of the Participant or a beneficiary,
beneficiary(ies) or any other person or persons by a
proceeding at law or in equity, nor shall such amounts be
transferable by operation of law in the event of divorce,
legal separation, bankruptcy, insolvency or death of the
Participant, his beneficiary(ies), or any other person or
persons. Any such attempted assignment or transfer shall be
null and void.
H. Withholding Taxes: To the extent required by the law in effect
at the time that deferrals are made hereunder, the Company
shall withhold from non-deferred compensation the payroll
taxes required to be withheld by the federal or any state or
local government.
I. Suspension, Termination and Amendment: The Board of Directors
of Ameren Corporation shall have the power to suspend or
terminate the Plan in whole or in part at any time, and from
time-to-time to extend, modify, amend or revise the Plan in
such respects as the Board of Directors by resolution may deem
advisable, provided that no such extension, modification,
amendment or revision shall deprive a Participant, or any
beneficiary(ies) thereof, of any part or all of the
Participant's Deferral Account.
J. Conflicts: Any conflict in the language or terms or
interpretation of the language or terms of the Plan between
this Plan document and any other document which purports to
describe the rights, benefits, duties or obligations of any
Participant, Ameren or any other person or entity shall be
resolved in favor of this Plan document.
K. Validity: In the event any provision of the Plan is held
invalid, void, or unenforceable, the same shall not affect, in
any respect whatsoever, the validity of any other provision of
the Plan.
L. Captions: The captions of the articles and sections of the
Plan are for convenience only and shall not control nor affect
the meaning or construction of any of its provisions.
M. Gender and Plurals: Wherever used in the Plan, words in the
masculine gender shall include masculine or feminine gender,
and, unless the context otherwise requires, words in the
singular shall include the plural, and words in the plural
shall include the singular.
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<PAGE> 14
N. Notice: Any election, beneficiary designation, notice, consent
or demand required or permitted to be given under the
provisions of the Plan shall be in writing and shall be signed
by the Participant. If such election, beneficiary designation,
notice, consent or demand is mailed by a Participant, it shall
be sent by United States Certified Mail, postage prepaid, and
addressed to the Vice President, Human Resources, Ameren
Services Company, P. O. Box 66149, St. Louis, Missouri
63166-6149. The date of such mailing shall be deemed to be the
date of such notice, consent or demand.
O. Governing Law: The Plan, and the rights of the parties
hereunder, shall be governed by and construed in accordance
with the laws of the State of Missouri.
P. Disputes: Time shall be of the essence in determining whether
any payments are due to the Participant or his
beneficiary(ies) under the Plan. Therefore, a Participant or
beneficiary(ies) may submit any claim for payment under the
Plan or dispute regarding the interpretation of the Plan to
arbitration. This right to select arbitration shall be solely
that of the Participant or his beneficiary(ies), and the
Participant or beneficiary(ies) may decide whether or not to
arbitrate in his sole discretion. The "right to select
arbitration" is not mandatory on the Participant or
beneficiary(ies), and the Participant or beneficiary(ies) may
choose in lieu thereof to bring an action in an appropriate
civil court. Once an arbitration has commenced, however, it
may not be discontinued without the mutual consent of the
Participant or beneficiary(ies), and the Company. During the
lifetime of the Participant only the Participant can use the
arbitration procedure set forth herein.
Any claim for arbitration may be submitted as follows: if the
Participant or his beneficiary(ies) disagrees with the Company
regarding the interpretation of the Plan and the claim is
finally denied by the Company in whole or in part, such claim
may be filed in writing with an arbitrator of the
Participant's or beneficiary(ies)'s choice who is selected by
the method described in the following paragraph.
The Participant or his beneficiary(ies) shall submit a list of
five potential arbitrators. Each of the five arbitrators so
listed must be either (1) a member of the American Arbitration
Association who is also a resident of the State of Missouri or
(2) a retired Missouri Circuit Court or Court of Appeals Court
judge. Within one week after receipt of said list, the Company
shall select one of the five arbitrators as the arbitrator for
the dispute in question and notify said arbitrator of his
selection. If the Company fails to select and notify an
arbitrator in a timely manner, the Participant or
beneficiary(ies) shall then designate one of the five
arbitrators as the arbitrator for the dispute in question.
The arbitration hearing shall be held within seven days (or as
soon thereafter as possible) after the selection of the
arbitrator. No continuance of said hearing
14
<PAGE> 15
shall be allowed without the mutual consent of the Participant
or his beneficiary(ies) and the Company. Absence from or
nonparticipation at the hearing by either the Participant, or
beneficiary(ies), or the Company shall not prevent the
issuance of an award by the arbitrator. Hearing procedures
which will expedite the hearing may be ordered at the
arbitrator's discretion, and the arbitrator may close the
hearing in his sole discretion when he decides he has heard
sufficient evidence to justify the issuance of an award.
The arbitration award may be enforced in any appropriate court
as soon as possible after its issuance. For the purposes of
apportioning expenses and fees, the Company will be considered
to be the prevailing party in a dispute if the arbitrator
determines (1) that Ameren has not breached its obligations or
duties under the provisions of the Plan and (2) the claim of
the Participant or beneficiary(ies) was not made in good
faith. Otherwise, the Participant or beneficiary(ies) will be
considered to be the prevailing party. In the event that
Ameren is the prevailing party, the fee of the arbitrator and
all necessary expenses of the hearing (excluding any
attorneys' fees incurred by the Company) including the fees of
stenographic reporting, if employed, shall be paid by the
Participant or beneficiary(ies). In the event that the
Participant or beneficiary(ies) is the prevailing party, the
fee of the arbitrator and all necessary expenses of the
hearing (including all attorneys' fees incurred by the
Participant or beneficiary(ies) in pursuing his claim),
including the fees of stenographic reporting, if employed,
shall be paid by the Company.
15
<PAGE> 1
EXHIBIT 10.4
AMEREN CORPORATION
DEFERRED COMPENSATION PLAN FOR MEMBERS
OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
1. PURPOSE
The purpose of the Ameren Corporation Deferred Compensation Plan for
Members of the Board of Directors ("Plan") is to provide members of the
Boards of Directors of Ameren Corporation and its subsidiaries
("Ameren") with the opportunity to accumulate capital and postpone the
income taxes thereon of up to 100 percent of their Director's Retainer.
Participation in the Plan is voluntary. The Plan is administered by a
committee of officers ("Committee") of Ameren Services Company ("the
Company") who have been appointed by the Chief Executive Officer of
Ameren.
2. DEFINITIONS
Certain words and phrases are defined when first used in later
paragraphs of the Plan. In addition, the following words and phrases
when used herein, unless the context clearly requires otherwise, shall
have the following respective meanings:
Boards of Directors:
A. Deferral Account: Book entries reflecting each Participant's
Deferred Amounts and Interest credited thereon pursuant to the
provisions of Section 7. A separate Deferral Account shall be
maintained for each Deferral Commitment commenced hereunder.
B. Deferral Commitment: The sum of the Director's Retainer Fee
and/or Meeting Stipend deferrals to which the Participant
obligates himself pursuant to the provisions of Section 4.
C. Deferred Amount: The amount of Director's Retainer Fees and
Meeting Stipends which a Participant elects to defer pursuant
to the provisions of the Plan.
D. Director's Retainer Fee: The monthly fee paid to a Participant
in his capacity as a member of the Board of Directors of
Ameren, exclusive of any other amounts paid by Ameren.
E. Meeting Stipend: The amount paid to the Director for attending
Board meetings.
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Deferred Compensation Plan (Continued)
F. Effective Date: January 1, 1999.
G. Interest: The amount of interest which a Participant shall be
deemed to earn on his Deferred Amounts and which shall be
credited to his Deferral Account as determined pursuant to
Section 8.
H. Participant: Any member of the Board of Directors of Ameren
who elects or has elected to defer a portion of his Director's
Retainer Fee and/or Director's Meeting Stipend pursuant to the
provisions of the Plan, and for whom the Company maintains one
or more Deferral Accounts pursuant to the provisions of the
Plan.
I. Plan: The Ameren Corporation Deferred Compensation Plan for
Members of the Board of Directors, as revised and restated.
J. Plan Year: The 12-month period commencing January 1 and ending
on December 31.
K. Retirement Age: Normal Retirement Age under the provisions of
the Plan shall be 72 years of age. However, retirement shall
be permitted under the provisions of the Plan as early as 55
years of age.
L. Salary: The annual base pay of a Participant, exclusive of any
income from commissions, benefits, allowances, and/or other
incentive plans paid by Ameren.
3. ELIGIBILITY
Members of the Boards of Directors of Ameren who are receiving a
Director's Retainer Fee shall be eligible to participate in the Plan.
Any individual who is eligible to participate in the Plan may become a
Participant by commencing a Deferral Commitment.
4. COMMENCING A DEFERRAL COMMITMENT
A Participant may commence a Deferral Commitment by making an election
to defer a percentage of his Retainer Fee and/or his Meeting Stipend
in the manner set forth in Section 6. A Participant may defer a
percentage of his Director's Retainer Fee up to a maximum of 100
percent; however, the annual dollar value of the percentage of the
Director's Retainer Fee deferred by the Participant must be at least
$3,500. Except as described below with respect to accelerating a
Deferral Commitment, during the term of a Deferral Commitment the
deferral percentage elected by the Participant shall not be increased
or decreased.
The term of a Deferral Commitment Plan shall consist of separate and
non-overlapping four-year segments, each made up of four consecutive
calendar years, with all Deferral Commitments commenced on any January
1 therein terminating on the last day of such
2
<PAGE> 3
Deferred Compensation Plan (Continued)
four-year segment for all purposes hereunder. The Committee may, in its
absolute and sole discretion, authorize a term of less than four years.
In the event that a Participant who has commenced a Deferral Commitment
during a four-year segment retires prior to the last day of such
four-year segment, the amount of such Deferral Commitment shall be
adjusted to reflect the Participant's actual deferrals to date such
that the Deferral Commitment shall be deemed to be complete as of the
date of retirement for all purposes pursuant to the provisions of the
Plan.
In the event a Participant who has elected to defer less than 100
percent of his Director's Retainer Fee has fewer years remaining before
his retirement than remain in the current four-year segment, described
above, the Committee, at the request of the Participant and in its sole
and absolute discretion, may agree at any time prior to completion of a
Deferral Commitment to permit the Participant to increase his deferral
percentage (up to a maximum of 100 percent) so that the Participant may
accelerate as much of his original Deferral Commitment as possible into
the period remaining before retirement.
The Participant's Deferred Amounts shall be credited to his Deferral
Account by no later than the end of the month in which such amounts
would, but for such deferral, be payable to the Participant.
5. MULTIPLE DEFERRAL COMMITMENTS DURING A FOUR-YEAR SEGMENT
In the event that a Participant has, pursuant to the provisions of this
Section and Section 4, commenced one or more Deferral Commitments
during a four-year segment wherein the Deferral Commitments are for
less than the maximum deferral percentage of his Director's Retainer
Fee, the Participant may commence another Deferral Commitment effective
on any subsequent January 1 prior to the end of the then current
four-year segment by electing to defer an additional percentage of his
Director's Retainer Fee, provided that each additional Deferral
Commitment independently satisfies the requirements of Section 4.
6. TERMS OF DEFERRAL ELECTION
A written deferral election shall indicate: (a) the percentage amount
of the Director's Retainer Fee which the Participant is electing to
defer under the Plan; (b) whether the Participant wishes to defer his
Director's Meeting Stipend; and (c) the method of distribution of such
amounts. The Participant may defer either the Director's Retainer Fee
or Meeting Stipend, or defer both. Such election form shall be filed by
the Participant with the Committee by no later than the last date
specified for such filing. Such election shall be effective on the
first day of the next Plan Year.
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Deferred Compensation Plan (Continued)
7. PARTICIPANT DEFERRAL ACCOUNT
There shall be established a Deferral Account in the name of each
Participant who elects to defer his Director's Retainer Fee and/or
Director's Meeting Stipend by commencing a Deferral Commitment under
the provisions of the Plan. A separate Deferral Account will be
maintained for each Deferral Commitment commenced by each Participant.
The Deferral Account shall reflect the value of the Participant's
Deferred Amounts plus Interest credited thereon with respect to the
specific Deferral Commitment. The records for each Deferral Account
maintained by the Company for the Participant shall be available for
inspection by the Participant at reasonable times, and the Company
shall furnish the Participant on or before the first day of March of
each year (and at such other times as the Company may choose) a
statement indicating the aggregate amount credited to each of the
Participant's Deferral Accounts through the last day of the preceding
Plan Year (or such other date as the Company may choose) and the value
of each such Deferral Account on such date.
8. INTEREST ON DEFERRED AMOUNTS
Interest calculated at the rate or rates, as hereinafter described,
shall accrue from the date deferrals are credited to the Participant's
Deferral Account and shall be compounded annually and credited to the
Participant's Deferral Account as of the last business day of each Plan
Year for which the Participant has a Deferral Account balance. While
the Participant is employed by Ameren (except where the Participant has
attained 65 years of age) the Participant's Deferral Account balance
shall earn Interest at the "Plan Interest Rate." After retirement (and
when the Participant remains employed by Ameren after having attained
65 years of age) or following the death of the Participant, the
Participant's Deferral Account balance shall earn interest at the "Base
Interest Rate."
Interest rates are calculated annually as of the first day of the Plan
Year. The "Plan Interest Rate" for any Plan Year shall be 150 percent
of the average Moody's Seasoned AAA Corporate Bond Yield Index (Moody's
Index) for the previous calendar year. (For a Deferral Commitment
commenced on August 1, 1986, consult the plan documents then in
effect.)
The "Base Interest Rate" for any Plan Year shall be equal to the
average Moody's Index for the previous calendar year.
9. DISTRIBUTION AT RETIREMENT
The balance of each of a Participant's Deferral Accounts shall be
distributed to the Participant, each according to the pay-out method
selected by the Participant, beginning no later than the first day of
the first month following the month in which the Participant retires
from the Board of Directors. In the event the balances of one or more
of the Participant's Deferral Accounts are to be distributed as a
single lump sum, such
4
<PAGE> 5
Deferred Compensation Plan (Continued)
distribution shall take place no later than the first day of the first
month following the month in which the Participant retires.
At the time that a Participant makes an election to defer his
Director's Retainer and/or Director's Meeting Fees under the Plan, the
Participant shall select a method for the distribution of the balance
of that Deferral Account at retirement by choosing one of the following
alternative methods of distribution:
1. The balance of the Participant's Deferral Account to be
distributed in a single lump sum.
2. The balance of the Participant's Deferral Account to be
distributed in substantially equal installments over a
period of 5 years commencing at retirement.
3. The balance of the Participant's Deferral Account to be
distributed in substantially equal installments over a
period of 10 years commencing at retirement.
4. The balance of the Participant's Deferral Account to be
distributed in substantially equal installments over a
period of 15 years commencing at retirement.
(Methods 2 through 4 shall be payable either in monthly or annual
installments as elected by the Participant or his beneficiary.)
With respect to Deferral Commitments commenced prior to January 1,
1991, a Participant may choose to have the balance of said Deferral
Account(s) distributed in substantially equal installments over the
period commencing at such Participant's retirement and continuing
until the Participant attains 80 years of age.
Except as described in the preceding sentence, a Participant's
selection of a method of distribution may be changed by the Participant
as frequently as he chooses up to one year prior to the date when
distributions from the Participant's Deferral Account are to commence.
A change in the method of distribution must be made on a form provided
by the Company which must be filed by the Participant with the Company.
10. REVOCATION OF DEFERRAL ELECTION
A Participant may revoke his election to defer his Director's Fee
and/or Stipend at any time prior to or after completing a Deferral
Commitment. Such revocation must be made in writing and filed with the
Company. When the Participant revokes his deferral election, all
amounts deferred pursuant to that Deferral Commitment will be
distributed to the Participant in a single sum no later than 30 days
after the date the notice of revocation is filed. All Interest credited
to the Participant's corresponding Deferral Account will be
5
<PAGE> 6
Deferred Compensation Plan (Continued)
forfeited, and the Participant will not be permitted to commence
another Deferral Commitment any sooner than one year after the next
January 1.
11. RESIGNATION PRIOR TO COMPLETION OF DEFERRAL COMMITMENT
If a Participant resigns from the Board of Directors prior to
completing a Deferral Commitment, such Deferral Commitment shall be
adjusted to reflect the Participant's actual deferrals to date such
that the Deferral Commitment shall be deemed to be complete as of the
date of resignation. The balance of the Participant's corresponding
Deferral Account shall be distributed in a single sum no later than 30
days after the Participant's resignation, except that such balance
shall be reduced prior to distribution in order to reflect that all
interest earned on the Participant's Deferral Account shall have been
computed with the Base Interest Rate only. Interest representing the
increment over the Base Interest Rate which would have otherwise have
been payable at or after retirement shall be forfeited.
12. RESIGNATION PRIOR TO BECOMING ELIGIBLE FOR RETIREMENT
A. General:
Except as described in Paragraph B below, in the event that a
Participant resigns from the Board of Directors after
completing one or more Deferral Commitments but prior to
becoming eligible for retirement, the balance of the
Participant's corresponding Deferral Account(s) shall be
distributed in a single sum to the Participant no later than 30
days after the date the Participant resigns, except that such
balance(s) shall be reduced prior to distribution in order to
reflect that all Interest earned on the Participant's Deferral
Account(s) shall have been computed using the Base Interest
Rate only. Interest representing the increment over the Base
Interest Rate which would otherwise have been payable at or
after retirement shall be forfeited.
B. Change of Control:
In the event that a Participant resigns from the Board of
Directors after completing one or more Deferral Commitments but
prior to becoming eligible for retirement and after the
occurrence of a Change of Control, the balance of the
Participant's Deferral Account(s), including Interest
calculated at the Plan Interest Rate, shall be distributed in a
single sum to the Participant no later than 30 days after the
date the Participant resigns. For the purposes of this
Paragraph, Change of Control shall mean:
1. The purchase or other acquisition, within the meaning
of Section 13(d) of the Securities Exchange Act of 1934,
in one or a series of transactions by a person or a group
of persons acting in concert, of beneficial ownership in
6
<PAGE> 7
Deferred Compensation Plan (Continued)
more than 25% of the then outstanding voting stock of
Ameren Corporation;
2. the receipt of proxies for the election of directors of
Ameren Corporation in opposition to the Board's slate of
nominees which proxies aggregate more than 40% of the
then outstanding voting stock of the Ameren Corporation;
or
3. the sale or issuance of such number of shares of voting
stock of Ameren Corporation for consideration other than
cash in any transaction or series of related transactions
which constitute more than 25% of the outstanding voting
power of Ameren Corporation after giving effect to such
issuance or sale.
13. TOTAL DISABILITY OF PARTICIPANT
In the event that it is determined by a duly licensed physician
selected by the Company that, because of ill health, accident or other
disability, a Participant is no longer able, properly and
satisfactorily, to perform his regular duties and responsibilities as
a member of the Board of Directors, the Company shall commence
distribution of the Participant's Deferral Account(s) according to the
method(s) of distribution selected by the Participant pursuant to
Section 9 no later than the tenth day of the first month following the
date of the physician's disability determination.
14. DEATH OF PARTICIPANT
A. Prior to Retirement:
1. In the event of the Participant's death prior to his
retirement, the Participant's Deferral Account(s) to
the Participant's designated beneficiary(ies) should
be distributed according to the method(s) selected by
the Participant pursuant to Section 9 no later than
the tenth day of the first month following the date
of the Participant's death, except that if the
Participant had selected method 1 (or the additional
method of distribution for Deferral Commitments
commenced prior to October 12, 1990) under Section 9,
distribution shall be made as if he had selected
method 4.
2. In addition, for Deferral Commitments commenced prior
to January 1, 1995, the following survivor benefits
will be payable:
The beneficiary(ies) designated by the Participant
shall receive from the Company an annual benefit for
a period of 10 years, payable in either monthly or
annual installments as elected by the
beneficiary(ies), equal to one-half of each of the
Participant's Deferral Commitments made prior to
January 1, 1995 (based on the dollar value of each
Deferral Commitment
7
<PAGE> 8
Deferred Compensation Plan (Continued)
on the date such Deferral Commitment was commenced),
except that the benefit payable hereunder shall be
calculated by using no more than the first 10 percent
of Salary deferred by such Participant. In the event
the Participant has designated more than one
beneficiary, this additional annual benefit shall be
divided among such beneficiaries in the same
percentages used to divide and distribute the
Participant's Deferral Account(s). (The
beneficiary(ies) of a Participant who is receiving or
who has received distributions pursuant to either
Section 13 or Section 15 is eligible for the benefit
described in this paragraph.)
B. After Retirement:
1. In the event of the Participant's death after
retirement, the Company shall continue to make
distributions over the remainder of the period(s)
that would have been applicable to the Participant
had he survived except that such continuing
distributions shall be made to the Participant's
designated beneficiary(ies).
2. In addition, for Deferral Commitments commenced prior
to January 1, 1995, the following survivor benefits
will be payable:
If the Participant's death occurs within 15 years
after retirement from the Board of Directors, the
Participant's surviving spouse (if any) shall receive
an annual benefit for life, payable in either monthly
or annual installments, as elected by the surviving
spouse, equal to one-half of the annual amount the
Participant would have received from each of his
Deferral Accounts, based on each of the Participant's
Deferral Commitments commenced prior to January 1,
1995, except that the benefit payable hereunder shall
be calculated by using no more than the first 10
percent of Salary deferred by such Participant, and
assuming he had selected distribution method 4
pursuant to Section 9. (For the purposes of the
benefit described in the preceding sentence, the
Interest rate which shall be used to calculate the
amount of the annual benefit shall be the Base
Interest Rate in effect for the year immediately
preceding the year of the Participant's death.)
15. HARDSHIP DISTRIBUTION
In the event that a Participant (or in the case of the Participant's
death, his beneficiary) suffers a Financial Hardship, the Committee
may, if it deems advisable in its sole and absolute discretion,
distribute on behalf of the Participant, or his/her beneficiary, any
portion of the Participant's Deferral Account(s), but in no event more
than the amount necessary, to meet the Financial Hardship. Any such
hardship distribution shall be made at such times as the Committee
shall determine, and the Participant's Deferral Account(s)
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<PAGE> 9
Deferred Compensation Plan (Continued)
shall be reduced by the amount so distributed and/or utilized.
Financial Hardship shall mean an unanticipated emergency (as defined by
the Internal Revenue Service) caused by an event beyond the control of
the Participant or beneficiary which would result in severe financial
hardship if early withdrawal were not permitted.
16. WITHDRAWAL PRIOR TO RETIREMENT
As of the date which represents the sixth anniversary of the date on
which a Participant commenced a Deferral Commitment (provided such
Deferral Commitment was commenced prior to January 1, 1991) and on any
date thereafter, the Participant may submit a request to withdraw the
balance of his corresponding Deferral Account. A request hereunder must
be submitted in writing to the Company's Vice President, Human
Resources, and it must state the Participant's reason for requesting
the withdrawal. The request must be submitted at least one year prior
to the date on which the requested withdrawal is to occur. The request
may be granted or denied by the Committee in its sole and absolute
discretion. In the event that such request is granted, the balance of
such Participant's corresponding Deferral Account shall be reduced
prior to distribution in order to reflect that all Interest earned
thereon shall have been computed using the Base Interest Rate only.
Interest representing the increment over the Base Interest Rate which
would otherwise have been payable with respect to such Deferral Account
at or after retirement shall be forfeited, and the Participant will not
be permitted to commence another Deferral Commitment any sooner than
one year after the next January 1. Withdrawals which are granted
hereunder shall be made in a single lump sum.
17. DESIGNATION OF BENEFICIARY
The Participant shall designate in writing, on a form to be furnished
by the Company, one or more primary and/or secondary beneficiaries who
shall receive distributions otherwise payable to the Participant or as
otherwise authorized by the Plan, and such beneficiary designation
shall be controlling with respect to all Deferral Accounts such
Participant may have pursuant to the provisions of the Plan. The
Participant's spouse, if any, must consent in writing to the
designation of a primary beneficiary(ies) other than such spouse as the
sole primary beneficiary. Subject to the requirement of the preceding
sentence, the Participant shall have the right, at any time and for any
reason, to submit a revised designation of beneficiary. Such revised
designation of beneficiary shall become effective provided it is
delivered to the the Company's Vice President, Human Resources, prior
to the death of such Participant, and it shall supersede all prior
designations of beneficiary submitted by the Participant. A beneficiary
may be a natural person or an entity (such as a trust or a charitable
organization).
9
<PAGE> 10
Deferred Compensation Plan (Continued)
If no designation of beneficiary has been received by the Company from
the Participant prior to his death, or if the beneficiary(ies)
designated by the Participant has not survived the Participant or
cannot otherwise be located by the Company within a reasonable period
of time, distributions shall be made to the person or persons in the
first of the following classes of successive preference:
1. The Participant's surviving spouse.
2. The beneficiary(ies) named by the Participant in his
most recent Designation of Beneficiary Form filed
with the Company pursuant to the terms of the
Company's Group Life Insurance Plan.
3. The Participant's surviving children, equally.
4. The Participant's surviving parents, equally.
5 The Participant's surviving brothers and sisters,
equally.
6. The Participant's personal representative(s),
executor(s) or administrator(s).
18. PAYMENTS TO MINORS OR INCOMPETENTS
Whenever, in the Committee's opinion, a person entitled to receive any
payment under the Plan is a minor, is under a legal or other disability
or is so incapacitated as to be unable to manage his/her financial
affairs, a distribution may be made to such person or to his legal
representative or to a relative or friend of such person for his/her
benefit, or for the benefit of such person in whatever manner the
Committee considers advisable. Any payment of a benefit in accordance
with the provisions of this Section shall be a complete discharge of
any liability for the making of such payment under the provisions of
the Plan.
19. ADMINISTRATION
Except as specified otherwise in the Plan, the Committee shall have
full power and discretion to administer, construe and interpret the
Plan. Any authorized action or decision under the provisions of the
Plan undertaken by the Committee arising out of, or in connection with
the administration, construction, interpretation or effect of the Plan,
or recommendations in accordance therewith, or any rules and
regulations adopted by the Committee shall be conclusive and binding on
all Participants and their beneficiaries and all other persons
whosoever.
10
<PAGE> 11
Deferred Compensation Plan (Continued)
20. MISCELLANEOUS
A. Right of Setoff: If, at such time as the Participant becomes
entitled to distributions hereunder, the Participant has any
debt, obligation or other liability representing an amount
owing to Ameren, and if such debt, obligation, or other
liability is due and owing at the time that distributions are
payable hereunder, Ameren Services may offset the amount owing
it against the amount otherwise distributable hereunder.
B. No Trust Created: The arrangements hereunder are unfunded for
tax purposes and for the purposes of ERISA, Title 1. Nothing
contained in the Plan, and no action taken pursuant to its
provisions shall create, or be construed to create, a trust,
escrow of any kind, or a fiduciary relationship between Ameren
and the Participant, his designated beneficiary(ies), other
beneficiaries of the Participant or any other person.
C. Unsecured General Creditor Status: Distributions to the
Participant or his designated beneficiary(ies) or any other
beneficiary(ies) hereunder shall be made from assets which
prior to distribution shall continue, for all purposes, to be
a part of the general corporate assets and no person
(including Participants) shall have any interest in such
assets, including without limitation the proceeds of life or
other insurance policies, by virtue of the provisions of the
Plan. To the extent that any person, including the
Participant, acquires a right to receive distributions under
the provisions hereof, such right shall be no greater than the
right of any unsecured general creditor of Ameren and the
obligation to pay constitutes a mere promise of Ameren to make
payments in the future.
D. Recovery of Costs: In the event that, in its discretion, the
Company purchases an insurance policy or policies insuring the
life of a Participant or any other property to allow Ameren to
recover the costs of providing deferred compensation in whole
or in part, hereunder, neither the Participant, his/her
beneficiary(ies) nor any other person or persons shall have
any rights therein whatsoever. Ameren shall be the sole owner
and beneficiary of any such insurance policy and shall possess
and may exercise all incidents of ownership therein.
E. Protective Provisions: A Participant shall cooperate with the
Company by providing all information requested including a
medical history. In connection therewith, the Company reserves
the right to require that the Participant submit to a physical
examination if such examination is deemed to be necessary or
appropriate. The costs of all such physical examinations will
be paid by the Company. If the Participant refuses to
cooperate with the Company, the Company shall have no further
obligation to the Participant under the provisions of the
Plan. If the Participant makes any material misstatement of
information or non-disclosure of medical history, then no
benefits shall be payable to the Participant or
beneficiary(ies) over and above actual deferrals.
11
<PAGE> 12
Deferred Compensation Plan (Continued)
F. No Contract of Services: Nothing contained herein shall be
construed to confer upon the Participant the right to continue
to serve on the Board of Directors of Ameren in his present
capacity, or in any capacity for any term of years. It is
expressly understood that the Plan relates to the payment of
deferred compensation for the Participant's director's
services normally distributable after termination of such
services, and the Plan is not in any way intended to be an
employment contract.
G. Spendthrift Provisions: Neither the Participant, his
beneficiary(ies), nor any other person or persons shall have
any power or right to sell, alienate, attach, garnish,
transfer, assign, anticipate, pledge or otherwise encumber any
part or all of a Deferral Account maintained or distributable
hereunder. No amounts hereunder shall be subject to seizure by
any creditor of the Participant or a beneficiary,
beneficiary(ies) or any other person or persons by a
proceeding at law or in equity, nor shall such amounts be
transferable by operation of law in the event of divorce,
legal separation, bankruptcy, insolvency or death of the
Participant, his beneficiary(ies), or any other person or
persons. Any such attempted assignment or transfer shall be
null and void.
H. Withholding Taxes: To the extent required by the law in effect
at the relevant time, the Company shall withhold payroll taxes
and other amounts required by law.
I. Suspension, Termination and Amendment: The Board of Directors
of Ameren Corporation shall have the power to suspend or
terminate the Plan in whole or in part at any time, and from
time-to-time to extend, modify, amend or revise the Plan in
such respects as the Board of Directors by resolution may deem
advisable, provided that no such extension, modification,
amendment or revision shall deprive a Participant, or any
beneficiary(ies) thereof, of any part or all of the
Participant's Deferral Account. Subject to the foregoing, this
Plan document supersedes all previous similar Plan documents.
J. Conflicts: Any conflict in the language or terms or
interpretation of the language or terms of the Plan between
this Plan document and any other document which purports to
describe the rights, benefits, duties or obligations of any
Participant, Ameren Services or any other person or entity
shall be resolved in favor of this Plan document.
K. Validity: In the event any provision of the Plan is held
invalid, void, or unenforceable, the same shall not affect, in
any respect whatsoever, the validity of any other provision of
the Plan.
12
<PAGE> 13
Deferred Compensation Plan (Continued)
L. Captions: The captions of the articles and sections of the
Plan are for convenience only and shall not control nor affect
the meaning or construction of any of its provisions.
M. Gender and Plurals: Wherever used in the Plan, words in the
masculine gender shall include masculine or feminine gender,
and, unless the context otherwise requires, words in the
singular shall include the plural, and words in the plural
shall include the singular.
N. Notice: Any election, beneficiary designation, notice, consent
or demand required or permitted to be given under the
provisions of the Plan shall be in writing and shall be signed
by the Participant. If such election, beneficiary designation,
notice, consent or demand is mailed by a Participant, it shall
be sent by United States Certified Mail, postage prepaid, and
addressed to the Chief Executive Officer, Ameren Corporation,
P. 0. Box 66149, St. Louis, Missouri 63166-6149. The date of
such mailing shall be deemed to be the date of such notice,
consent or demand.
0. Governing Law: The Plan, and the rights of the parties
hereunder, shall be governed by and construed in accordance
with the laws of the State of Missouri.
P. Disputes: Time shall be of the essence in determining whether
any payments are due to the Participant or his
beneficiary(ies) under the Plan. Therefore, a Participant or
beneficiary(ies) may submit any claim for payment under the
Plan or dispute regarding the interpretation of the Plan to
arbitration. This right to select arbitration shall be solely
that of the Participant or his/her beneficiary(ies), and the
Participant or beneficiary(ies) may decide whether or not to
arbitrate in his/her sole discretion. The "right to select
arbitration" is not mandatory on the Participant or
beneficiary(ies), and the Participant or beneficiary(ies) may
choose in lieu thereof to bring an action in an appropriate
civil court. Once an arbitration has commenced, however, it
may not be discontinued without the mutual consent of the
Participant or beneficiary(ies), and the Company. During the
lifetime of the Participant only the Participant can use the
arbitration procedure set forth herein.
Any claim for arbitration may be submitted as follows: if the
Participant or his/her beneficiary(ies) disagrees with the
Company regarding the interpretation of the Plan and the claim
is finally denied by the Company in whole or in part, such
claim may be filed in writing with an arbitrator of the
Participant's or beneficiary(ies)'s choice who is selected by
the method described in the following paragraph.
The Participant or his/her beneficiary(ies) shall submit a
list of five potential arbitrators. Each of the five
arbitrators so listed must be either (1) a member of the
American Arbitration Association who is also a resident of the
State of Missouri or (2) a retired Missouri Circuit Court or
Court of Appeals Court judge.
13
<PAGE> 14
Deferred Compensation Plan (Continued)
Within one week after receipt of said list, the Company shall
select one of the five arbitrators as the arbitrator for the
dispute in question and notify said arbitrator of his
selection. If the Company falls to select and notify an
arbitrator in a timely manner, the Participant or
beneficiary(ies) shall then designate one of the five
arbitrators as the arbitrator for the dispute in question.
The arbitration hearing shall be held within seven days (or as
soon thereafter as possible) after the selection of the
arbitrator. No continuance of said hearing shall be allowed
without the mutual consent of the Participant or his
beneficiary(ies) and the Company. Absence from or
nonparticipation at the hearing by either the Participant, or
beneficiary(ies), or the Company shall not prevent the
issuance of an award by the arbitrator. Hearing procedures
which will expedite the hearing may be ordered at the
arbitrator's discretion, and the arbitrator may close the
hearing in his sole discretion when he decides he has heard
sufficient evidence to justify the issuance of an award.
The arbitration award may be enforced in any appropriate court
as soon as possible after its issuance. For the purposes of
apportioning expenses and fees, the Company will be considered
to be the prevailing party in a dispute if the arbitrator
determines (1) that Ameren has not breached its obligations or
duties under the provisions of the Plan and (2) the claim of
the Participant or beneficiary(ies) was not made in good
faith. Otherwise, the Participant or beneficiary(ies) will be
considered to be the prevailing party. In the event that
Ameren is the prevailing party, the fee of the arbitrator and
all necessary expenses of the hearing (excluding any
attorneys' fees incurred by the Company) including the fees of
stenographic reporting, if employed, shall be paid by the
Participant or beneficiary(ies). In the event that the
Participant or beneficiary(ies) is the prevailing party, the
fee of the arbitrator and all necessary expenses of the
hearing (including all attorneys' fees incurred by the
Participant or beneficiary(ies) in pursuing his claim),
including the fees of stenographic reporting, if employed,
shall be paid by the Company.
14
<PAGE> 1
EXHIBIT 13
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Ameren Corporation is responsible for the information and
representations contained in the consolidated financial statements and in other
sections of this Annual Report. The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles. Other
information included in this report is consistent, where applicable, with the
consolidated financial statements.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance as to the integrity of the financial records and
the protection of assets. Qualified personnel are selected and an organization
structure is maintained that provides for appropriate functional responsibility.
Written policies and procedures have been developed and are revised as
necessary. The Company maintains and supports an extensive program of internal
audits with appropriate management follow up.
The Board of Directors, through its Auditing Committee comprised of outside
directors, is responsible for ensuring that both management and the independent
accountants fulfill their respective responsibilities relative to the financial
statements. Moreover, the independent accountants have full and free access to
meet with the Auditing Committee, with or without management present, to discuss
auditing or financial reporting matters.
February 4, 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Ameren Corporation:
In our opinion, based upon our audits and the reports of other auditors, the
accompanying consolidated balance sheet and the related consolidated statements
of income and retained earnings and of cash flows appearing on pages 23-27 of
this annual report present fairly, in all material respects, the financial
position of Ameren Corporation and its subsidiaries at December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of Central Illinois Public Service Company and CIPSCO
Investment Company, wholly-owned subsidiaries of Ameren Corporation, for the
years ended December 31, 1997 and 1996, which combined statements reflect total
assets of $1,889,451,000 at December 31, 1997, and total revenues of
$863,441,000 and $891,631,000 for the two years in the period ended December 31,
1997, respectively. Those statements were audited by other auditors whose
reports thereon have been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for Central Illinois Public
Service Company and CIPSCO Investment Company, is based solely on the reports of
the other auditors. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Louis, Missouri
February 4, 1999
14 1998 Annual Report
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Ameren Corporation (Ameren) is a holding company registered under the
Public Utility Holding Company Act of 1935 (PUHCA). In December 1997, Union
Electric Company (AmerenUE) and CIPSCO Incorporated (CIPSCO) combined to form
Ameren, with AmerenUE and CIPSCO's subsidiaries, Central Illinois Public Service
Company (AmerenCIPS) and CIPSCO Investment Company (CIC), becoming wholly-owned
subsidiaries of Ameren (the Merger). As a result of the Merger, Ameren also has
a 60% ownership interest in Electric Energy, Inc. (EEI), which is consolidated
for financial reporting purposes. In addition, Ameren formed a new energy
marketing subsidiary, AmerenEnergy, Inc., which primarily serves as a power
marketing agent for the operating companies and provides a range of energy and
risk management services to targeted customers.
The Merger was accounted for as a pooling of interests; therefore, the
consolidated financial statements are presented as if the Merger were
consummated as of the beginning of the earliest period presented. However, the
consolidated financial statements are not necessarily indicative of the results
of operations, financial position or cash flows that would have occurred had the
Merger been consummated for the periods for which it is given effect, nor is it
necessarily indicative of the future results of operations, financial position
or cash flows.
References to the Company are to Ameren on a consolidated basis; however,
in certain circumstances, the subsidiaries are separately referred to in order
to distinguish between their different business activities.
Results of Operations
Earnings
Earnings for 1998, 1997 and 1996, were $386 million ($2.82 per share), $335
million ($2.44 per share) and $372 million ($2.71 per share), respectively.
Earnings and earnings per share fluctuated due to many conditions, primarily:
weather variations, electric rate reductions, competitive market forces, credits
to electric customers, sales growth, fluctuating operating costs (including
Callaway Nuclear Plant refueling outages), merger-related expenses, changes in
interest expense, changes in income and property taxes, a charge for a targeted
employee separation plan and an extraordinary charge.
In 1998, the Company recorded a nonrecurring charge to earnings in
connection with a targeted separation plan it offered to employees in July 1998.
The charge reduced earnings $15 million, net of income taxes, or 11 cents per
share (see Note 3 Targeted Separation Plan under Notes to Consolidated Financial
Statements for further information). In addition, the Company recorded an
extraordinary charge to earnings in the fourth quarter of 1997 for the write-off
of generation-related regulatory assets and liabilities of the Company's
Illinois retail electric business as a result of electric industry restructuring
legislation enacted in Illinois in December 1997. The write-off reduced earnings
$52 million, net of income taxes, or 38 cents per share (see Note 2 - Regulatory
Matters under Notes to Consolidated Financial Statements for further
information).
The significant items affecting revenues, expenses and earnings for
the years ended December 31, 1998, 1997 and 1996 are detailed in the
following pages.
Electric Operations
ELECTRIC REVENUES
<TABLE>
<CAPTION>
Variations from Prior Year
In Millions 1998 1997 1996
- ---------------------------------------------------------------
<S> <C> <C> <C>
Rate variations $(13) $ -- $(20)
Credit to customers (24) 28 (15)
Effect of abnormal weather 61 3 (28)
Growth and other 45 5 67
Interchange sales 16 (43) 51
EEI (55) 9 (2)
--------------------
$ 30 $ 2 $ 53
--------------------
</TABLE>
Electric revenues for 1998 increased $30 million compared to 1997. Revenues
increased primarily due to higher sales to retail customers within the Company's
service territory, as a result of warm summer weather and economic growth in the
service area. Weather-sensitive residential and commercial sales increased 6%
and 4%, respectively, while industrial sales grew 2%. Additionally, interchange
revenues increased 7%, despite a 14% decline in interchange sales, due to market
conditions. These increases were partially offset by an increase in credits to
Missouri electric customers (see Note 2 - Regulatory Matters under Notes to
Consolidated Financial Statements for further information) and lower sales to
the United States Enrichment Corporation (USEC) by EEI.
Electric revenues for 1997 were flat compared to 1996, reflecting a
decrease in the Missouri electric customer credits recorded in 1997 versus 1996,
partly offset by a 1% decrease in kilowatthour sales. The kilowatthour sales
decrease was due to a 13% decrease in interchange sales due to market
conditions, a 1% decline in residential sales and differences in the
classification of certain interchange and purchased power transactions,
resulting from the Federal Energy Regulatory Commission (FERC) Order 888. These
decreases were partly offset by increases in commercial and industrial sales of
1% and 2%, respectively, attributable to economic growth. In addition, sales at
EEI were up 6% over 1996.
The increase in 1996 electric revenues was primarily due to a 5% increase
in kilowatthour sales over the prior year, partly offset by the 1.8% rate
decrease for Missouri electric customers and the net increase in Missouri
electric customer credits recorded in 1996 versus 1995. The kilowatthour sales
increase reflected economic growth in the service area and increased interchange
sales opportunities, partially offset by milder weather during the period.
Residential and industrial sales each rose 2% over 1995, while commercial sales
grew 3% and interchange sales increased 32%.
Ameren Corporation 15
<PAGE> 3
FUEL AND PURCHASED POWER
<TABLE>
<CAPTION>
Variations from Prior Year
In Millions 1998 1997 1996
- ------------------------------------------------------------
<S> <C> <C> <C>
Fuel:
Variation in generation $ 9 $ 25 $ 43
Price (23) (24) (14)
Generation efficiencies and other -- (5) 2
Purchased power variation (3) (50) 2
EEI (39) 10 23
--------------------
$(56) $(44) $ 56
--------------------
</TABLE>
The $56 million decrease in fuel and purchased power costs for 1998,
compared to 1997, was primarily driven by lower fuel and purchased power costs
at EEI as a result of fewer sales to the USEC. In addition, fuel cost reductions
were realized due to lower fuel prices, as well as through the joint dispatch of
generation. Upon consummation of the Merger, AmerenUE and AmerenCIPS began
jointly dispatching generation, therefore allowing the Company to utilize the
most cost efficient plants of both operating companies to serve customers in
either service territory. These decreases were partially offset by increased
generation to serve native load demand. The decrease in 1997 fuel and purchased
power costs was primarily due to reduced purchased power costs, resulting from
relatively flat native load sales and lower interchange sales, as well as lower
fuel prices, offset by greater generation. The increase in 1996 fuel and
purchased power costs was driven mainly by higher kilowatthour sales, partially
offset by lower fuel prices due to the use of lower cost coal.
While unprecedented prices for power purchases occurred in the marketplace
during the last week of June 1998, the Company was able to effectively manage
its power costs in the face of soaring wholesale electricity prices. Overall,
the abnormally high prices for power purchases in June had little impact on the
Company's financial results for 1998.
Gas Operations
Gas revenues in 1998 decreased $33 million, compared to 1997, primarily due
to an 8% decline in retail sales resulting from mild winter weather and lower
gas costs reflected in the Company's purchased gas adjustment clauses. These
decreases were partially offset by benefits realized from an annual $12 million
Missouri gas rate increase effective February 1998 (see Note 2 Regulatory
Matters under Notes to Consolidated Financial Statements for further
information). Gas revenues in 1997 decreased $4 million, primarily due to a 12%
decrease in retail sales. Milder winter weather resulted in a decline in
weather-sensitive residential and commercial sales of 15% and 18%, respectively.
These decreases were partly offset by a 20% increase in industrial sales and an
increase in off-system sales of gas to others. The increase in 1996 gas revenues
of $37 million was primarily the result of higher gas prices and increased sales
due to colder weather. Residential and commercial sales increased 13% and 17%,
respectively, in 1996 versus 1995.
Gas costs in 1998 declined $42 million compared to 1997. This decrease in
gas costs was due to lower sales and lower gas prices. Gas costs for 1997
remained flat as compared to those of 1996. The $35 million increase in 1996 gas
costs was primarily the result of a combination of increased demand, due to
colder weather, and an increase in the price paid for gas in 1996 versus 1995.
Other Operating Expenses
Other operating expense variations in 1996 through 1998 reflected recurring
factors such as growth, inflation, labor and benefit increases, in addition to a
charge for the targeted separation plan (TSP) as discussed below.
In March 1998, the Company announced plans to reduce its other operating
expenses, including plans to eliminate approximately 400 employee positions by
mid-1999 through a hiring freeze and the TSP. In July 1998, the Company offered
separation packages to employees whose positions were to be eliminated through
the TSP. During the third quarter of 1998, a nonrecurring, pre-tax charge of $25
million was recorded, which reduced earnings $15 million, or 11 cents per share,
representing costs incurred to implement the TSP. The elimination of these
positions, exclusive of the nonrecurring charge, reduced the Company's operating
expenses by approximately $15 million in 1998, and the Company expects operating
expenses to be reduced approximately $20 million to $25 million annually
thereafter. See Note 3 - Targeted Separation Plan under Notes to Consolidated
Financial Statements for further information.
The $62 million increase in other operations expense in 1998, compared to
1997, was primarily due to the charge for the TSP and increases in injuries and
damages expense and information system-related costs. In 1997, other operations
expense increased $41 million, primarily due to increases in information
system-related costs, labor, and injuries and damages expenses. In 1996, other
operations expense increased $2 million, primarily due to increases in employee
benefits, injuries and damages, and information system-related costs, offset by
decreases resulting from nonrecurring costs incurred in 1995, including the
write-off of system development costs.
Maintenance expenses increased $2 million in 1998, compared to 1997, due to
the scheduled spring refueling outage at the Callaway Nuclear Plant, partially
offset by less scheduled fossil plant maintenance. The spring 1998 refueling was
completed in 31 days. There was no refueling outage in 1997. Maintenance
expenses for 1997 increased $8 million primarily resulting from increased
scheduled fossil plant maintenance, partly offset by decreased expenses at
Callaway due to the absence of a refueling outage in 1997. In 1996, maintenance
expenses decreased $5 million primarily due to less scheduled power plant
maintenance, partly offset by increased labor expenses at Callaway.
Depreciation and amortization expense was relatively flat in 1998 compared
to 1997. Depreciation and amortization expense increased $7 million in 1997 and
$12 million in 1996, due to increased depreciable property.
16 1998 Annual Report
<PAGE> 4
Taxes
Income tax expense from operations increased $33 million in 1998, compared
to 1997, due to higher pre-tax income and a higher effective tax rate. Income
tax expense from operations decreased $19 million in 1997 principally due to
lower pre-tax income and a lower effective tax rate. Income tax expense from
operations decreased $8 million in 1996 principally due to lower pre-tax income.
Other Income and Deductions
Miscellaneous, net decreased $8 million for 1998, compared to 1997, due to
increased interest income and gains on the sale of property. Miscellaneous, net
decreased $11 million for 1997, compared to 1996, primarily due to the
capitalization of certain merger-related costs in 1997 (see Note 2 - Regulatory
Matters under Notes to Consolidated Financial Statements for further
information). Miscellaneous, net decreased $2 million for 1996 primarily due to
reduced merger-related expenses.
Interest
Interest expense decreased $4 million in 1998, compared to 1997, due to
lower interest rates and a decrease in other interest expense, partially offset
by an increase in interest on a higher amount of debt outstanding. Interest
expense increased $5 million in 1997 primarily due to higher debt outstanding
during the year at higher interest rates. Interest expense increased $2 million
for 1996 primarily due to a greater amount of short-term debt outstanding,
offset by lower rates on variable-rate long-term debt.
Balance Sheet
The $68 million decrease in accounts receivable at December 31, 1998,
compared to 1997, was due to lower sales and revenues in November and early
December 1998, compared to the same 1997 time period, due to mild winter
weather. The Company's service territory experienced much colder weather in the
latter part of December 1998, resulting in higher sales and revenues at that
time compared to the same 1997 period. This increase in sales caused a $48
million increase in unbilled revenues. The $48 million increase in other current
liabilities was primarily due to a higher estimated accrued customer credit (see
Note 2 - Regulatory Matters under Notes to Consolidated Financial Statements for
further information).
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $803 million for 1998,
compared to $708 million for 1997 and $782 million for 1996.
Cash flows used in investing activities totaled $323 million, $387 million
and $481 million, for the years ended December 31, 1998, 1997 and 1996,
respectively. Expenditures in 1998 for constructing new or improving existing
facilities and purchasing rail cars were $325 million. In addition, the Company
spent $20 million to acquire nuclear fuel.
Capital expenditures are expected to approximate $495 million in 1999. For
the five-year period 1999 through 2003, construction expenditures are estimated
at $2.4 billion. This estimate includes capital expenditures for the purchase of
six new combustion turbines (CTs), as well as expenditures which will be
incurred by the Company to meet new air quality standards for ozone and
particulate matter, as discussed below.
In 1998, the Company committed to purchase six new CT peaking units. The
CTs will add over 700 megawatts to the Company's net peaking capacity and are
expected to cost approximately $260 million. Three of the CTs are expected to be
installed in 2000, and the remaining three in 2001.
Under Title IV of the Clean Air Act Amendments of 1990, the Company is
required to significantly reduce total annual sulfur dioxide (SO2) and nitrogen
oxide (NOx) emissions by the year 2000. By switching to low-sulfur coal, early
banking of emissions credits and installing low NOx burner technology, the
majority of these reductions have been achieved.
In July 1997, the United States Environmental Protection Agency (EPA)
issued final regulations revising the National Ambient Air Quality Standards for
ozone and particulate matter. The new ambient standards may result in
significant additional reductions in SO2 and NOx emissions from the Company's
power plants. The new particulate matter standards may require SO2 reductions of
up to 50% beyond that already required by Phase II acid rain control provisions
of the 1990 Clean Air Act Amendments and could be required by 2007. The full
details of these requirements are under study by the Company. At this time, the
Company is unable to predict the ultimate impact of these revised air quality
standards on its future financial condition, results of operations or liquidity.
In an attempt to lower ozone levels across the eastern United States, the
EPA issued final regulations in September 1998 to reduce NOx emissions from
coal-fired boilers and other sources in 22 states, including Missouri and
Illinois (where all of the Company's coal-fired power plant boilers are
located). Although reduction requirements in NOx emissions from the Company's
coal-fired boilers are anticipated to exceed 75% from 1990 levels by the year
2003, it is not yet possible to determine the exact magnitude of the reductions
required from the Company's power plants because each state has up to one year
to develop a plan to comply with the EPA rule. The NOx emissions reductions
already achieved on several of the Company's coal-fired power plants will help
to reduce the costs of compliance with this regulation. However, preliminary
analysis of the regulations indicate that selective catalytic reduction
technology will be required for some of the Company's units, as well as other
additional controls.
Currently, the Company estimates that its additional capital expenditures
to comply with the EPA's final regulations, issued in September 1998, could
range from $250 million to $350 million over the period from 1999 to 2002.
Associated operations and maintenance expenditures could increase $10 million to
$15 million annually, beginning in 2003. The Company will explore alternatives
to comply with these new regulations in order to minimize, to the extent
possible, its capital costs and operating expenses. The Company is unable to
predict the ultimate impact of these standards on its future financial
condition, results of operations or liquidity.
Ameren Corporation 17
<PAGE> 5
In November 1998, the United States signed an agreement with numerous other
countries (the Kyoto Protocol) containing certain environmental provisions,
which would require decreases in greenhouse gases in an effort to address the
"global warming" issue. The Kyoto Protocol must be ratified by the United States
Senate before provisions are effective for the United States. Until ratification
is obtained, the Company is unable to predict what requirements, if any, will be
adopted in this country; however, implementation of the Kyoto Protocol in its
present form would likely result in significantly higher capital costs and
operations and maintenance expenses by the Company. At this time, the Company is
unable to determine the impact of these proposals on the Company's future
financial condition, results of operations or liquidity.
See Note 13 - Callaway Nuclear Plant under Notes to Consolidated Financial
Statements for a discussion of Callaway Plant decommissioning costs.
Cash flows used in financing activities were $446 million for 1998,
compared to $302 million for 1997 and $296 million for 1996. The Company's
principal financing activities during 1998 included the issuance of $255 million
of long-term debt, the redemption of $273 million of long-term debt and the
payment of dividends.
The Company plans to continue utilizing short-term debt to support normal
operations and other temporary requirements. The Company and its subsidiaries
are authorized by the Securities and Exchange Commission (SEC) to have up to an
aggregate $1.6 billion of short-term unsecured debt instruments outstanding at
any one time. Short-term borrowings consist of bank loans (maturities generally
on an overnight basis) and commercial paper (maturities generally within 10 to
45 days). At December 31, 1998, the Company had committed bank lines of credit
aggregating $217 million, all of which was unused and $170 million was available
at such date, which make available interim financing at various rates of
interest based on LIBOR, the bank certificate of deposit rate or other options.
The lines of credit are renewable annually at various dates throughout the year.
The Company had $59 million of short-term borrowings at year-end.
The Company has a bank credit agreement due 2003, which permits the
borrowing of up to $200 million on a long-term basis. This credit agreement is
available for the Company's own use and for the use of its subsidiaries. There
was $10 million outstanding under this agreement as of December 31, 1998.
AmerenUE also has a bank credit agreement due 2000, which permits the borrowing
of up to $300 million on a long-term basis, all of which was unused and
available at December 31, 1998.
Additionally, AmerenUE has a lease agreement which provides for the
financing of nuclear fuel. At December 31, 1998, the maximum amount that could
be financed under the agreement was $120 million. Cash used in financing for
1998 included redemptions under the lease for nuclear fuel of $68 million,
offset in part by $16 million of issuances. At December 31, 1998, $67 million
was financed under the lease. See Note 5 - Nuclear Fuel Lease under Notes to
Consolidated Financial Statements for further information.
DIVIDENDS
Common stock dividends paid in 1998 resulted in a payout rate of 90% of the
Company's net income. Dividends paid to common stockholders in relation to net
cash provided by operating activities for the same period were 43%.
The Board of Directors does not set specific targets or payout parameters
for dividend payments; however, the Board considers various issues including the
Company's historic earnings and cash flow; projected earnings, cash flow and
potential cash flow requirements; dividend payout rates at other utilities;
return on investments with similar risk characteristics; and overall business
considerations. On February 12, 1999, the Ameren Board of Directors declared a
quarterly common stock dividend of 63.5 cents per share, payable March 31, 1999.
RATE MATTERS
See Note 2 - Regulatory Matters under Notes to Consolidated Financial
Statements for a discussion of rate matters.
ELECTRIC INDUSTRY RESTRUCTURING
Changes enacted and being considered at the federal and state levels
continue to change the structure of the electric industry and utility
regulation, as well as encourage increased competition. At the federal level,
the Energy Policy Act of 1992 reduced various restrictions on the operation and
ownership of independent power producers and gave the FERC the authority to
order electric utilities to provide transmission access to third parties.
In April 1996, the FERC issued Order 888 and Order 889, which are intended
to promote competition in the wholesale electric market. The FERC requires
transmission-owning public utilities, such as AmerenUE and AmerenCIPS, to
provide transmission access and service to others in a manner similar and
comparable to that which the utilities have by virtue of ownership. Order 888
requires that a single tariff be used by the utility in providing transmission
service. Order 888 also provides for the recovery of stranded costs, under
certain conditions, related to the wholesale business.
Order 889 established the standards of conduct and information requirements
that transmission owners must adhere to in doing business under the open access
rule. Under Order 889, utilities must obtain transmission service for their own
use in the same manner their customers will obtain service, thus mitigating
market power through control of transmission facilities. In addition, under
Order 889, utilities must separate their merchant function (buying and selling
wholesale power) from their transmission and reliability functions.
The Company believes that Order 888 and Order 889, which relate to its
wholesale business, will not have a material adverse effect on its financial
condition, results of operations or liquidity.
In 1998, Ameren's operating subsidiaries joined a group of nine other
utility companies which support the formation of the Midwest Independent System
Operator (Midwest ISO). An ISO
18 1998 Annual Report
<PAGE> 6
operates, but does not own, transmission systems and maintains system
reliability and security while alleviating pricing issues associated with the
"pancaking" of rates. The Midwest ISO would be regulated by FERC. The FERC
conditionally approved the formation of the Midwest ISO in September 1998, and
it is expected to be operational by the year 2001. AmerenUE's membership in the
Midwest ISO must be approved by the Missouri Public Service Commission (MoPSC).
The Midwest ISO covers eight states and represents portions of 40,000 miles of
transmission line and 62,000 megawatts of electric power. Collectively, the
member companies serve more than seven million customers.
In addition, certain states are considering proposals or have adopted
legislation that will promote competition at the retail level. In December 1997,
the Governor of Illinois signed the Electric Service Customer Choice and Rate
Relief Law of 1997 (the Law) providing for electric utility restructuring in
Illinois. This legislation introduces competition into the supply of electric
energy in Illinois.
Major provisions of the Law include the phasing-in through 2002 of retail
direct access, which allows customers to choose their electric generation
supplier. In addition, the Law includes a 5% rate decrease for residential
customers, which became effective in August 1998. The decrease reduced electric
revenues by approximately $6 million in 1998 and is expected to reduce electric
revenues by approximately $14 million annually thereafter, based on estimated
levels of sales and assuming normal weather conditions. In 1998, the Company
eliminated its Uniform Fuel Adjustment Clauses (FACs) as allowed by the Law,
which the Company expects to benefit shareholders in the future (see Note 1 -
Summary of Significant Accounting Policies under Notes to Consolidated Financial
Statements for further information). The Law contains a provision allowing for
the potential recovery of a portion of strandable costs, which represent costs
which would not be recoverable in a restructured environment, through a
transition charge collected from customers who choose an alternate electric
supplier. In addition, the Law contains a provision requiring a portion of
excess earnings (as defined under the Law) for the years 1998 through 2004 to be
refunded to customers. See Note 2 - Regulatory Matters under Notes to
Consolidated Financial Statements for further information.
In December 1997, after evaluating the impact of the Law, the Company
determined that it was necessary to write-off the generation-related regulatory
assets and liabilities of its Illinois retail electric business. This
extraordinary charge reduced 1997 earnings $52 million, net of income taxes, or
38 cents per share. The Company has also concluded that its remaining net
generation-related assets are not impaired for financial reporting purposes and
that no plant writedowns are necessary at this time. See Note 2 - Regulatory
Matters under Notes to Consolidated Financial Statements for further
information.
In Missouri, where approximately 72% of the Company's retail electric
revenues are derived, a task force appointed by the MoPSC investigated electric
industry restructuring and competition. In 1998, the task force issued a report
to the MoPSC that addressed many of the restructuring issues, but did not
provide a specific recommendation or approach to restructure the industry. In
addition, in 1998, the MoPSC staff issued a proposed plan for restructuring
Missouri's electric industry. The staff's plan addressed a number of issues of
concern if the industry is restructured in Missouri. It also included a proposal
for less than full recovery of strandable costs. The staff's plan has not been
addressed by the MoPSC. A joint legislative committee is also conducting
hearings on these issues. The Company is unable to predict the timing or
ultimate outcome of electric industry restructuring in the state of Missouri.
In summary, the potential negative consequences associated with electric
industry restructuring could be significant and could include the impairment and
writedown of certain assets, including generation-related plant and net
regulatory assets, lower revenues, reduced profit margins and increased costs of
capital and operations expense. The Company is actively taking steps to mitigate
these negative consequences. Most importantly, the Company will continue to
focus on cost control to ensure that it maintains a competitive cost structure.
Also, in Illinois, the Company's actions include strengthening its marketing
operations to maintain its current customers and obtain new customers, as well
as enhancing its information systems. In Missouri, the Company is actively
involved in all major deliberations taking place surrounding electric industry
restructuring in an effort to ensure that restructuring legislation, if any,
contains an orderly transition and is equitable to the Company's shareholders.
The Company is also actively involved in shaping the policies of the Midwest ISO
to protect its shareholders' interests. At this time, the Company is unable to
predict the ultimate impact of electric industry restructuring on the Company's
future financial condition, results of operations or liquidity.
YEAR 2000 ISSUE
The Year 2000 Issue relates to how dates are stored and used in computer
systems, applications, and embedded systems. As the century date change occurs,
certain date-sensitive systems need to be able to recognize the year as 2000 and
not as 1900. This inability to recognize and properly treat the year as 2000 may
cause these systems to process critical financial and operational information
incorrectly. The Company's primary concern is the potential for any interruption
in providing electric and gas service to customers, as well as the potential
inability to process critical financial and operational information on a timely
basis, including billing its customers, if appropriate steps are not taken to
address this issue. Management has developed a Year 2000 Plan (Plan) and
Ameren's Board of Directors has been briefed about the Year 2000 Issue and how
it may affect the Company.
The Company's Plan to resolve the Year 2000 Issue involves three phases:
assessment, planning, and implementation/testing. Implementation of the Plan is
directly supervised by each area's responsible Vice President. A Year 2000
Project Director coordinates the implementation of the Plan among functional
teams who are addressing issues specific to a particular area, such as nuclear
and non-nuclear generation facilities, energy management systems,
Ameren Corporation 19
<PAGE> 7
gas distribution, etc. Ameren has also engaged certain outside consultants,
technicians and other external resources to aid in formulating and implementing
the Plan.
The Company has completed its assessment phase, which included analyzing
date-sensitive electronic hardware, software applications and embedded systems
and has developed a compliance plan to address issues that were identified. Many
of the major corporate computer systems at Ameren are relatively new and
therefore are either Year 2000 compliant or only require minor modifications.
Also, several of the operating hardware and embedded systems (i.e.,
microprocessor chips) use analog rather than digital technology and thus are
unaffected by the two-digit date issue. In addition, the Company has contacted
hundreds of vendors and suppliers to verify compliance.
The Company has also completed its planning phase. Items that have been
identified for remediation have been prioritized into groups based on their
significance to Company operations. The implementation/testing phase for all
components/applications is approximately 45% complete as of December 31, 1998.
The Company expects to complete remediation of its significant
components/applications by the end of the third quarter 1999.
With respect to third parties, for areas that interface directly with
significant vendors, the Company has inventoried vendors and major suppliers and
is currently assessing their Year 2000 readiness through surveys, websites and
personal contact. The Company plans to follow up with major suppliers and
vendors and verify Year 2000 compliance, where appropriate. The Company has also
queried its health insurance providers. To date, the Company is not aware of any
problems that would materially impact its financial condition, results of
operations or liquidity; however, the Company has no means of ensuring that
these parties will be Year 2000 compliant. The inability of those parties to
complete their Year 2000 resolution process could materially impact the Company.
The Company is also addressing the impact of electric power grid problems
that may occur outside of its own electric system. The Company has started Year
2000 electric power grid impact planning through the system's various electric
interconnection affiliations and is working with the Mid-American Interchange
Network (MAIN) to begin planning Year 2000 operational preparedness and
restoration scenarios. As of November 30, 1998 (the latest information
available), MAIN was 88% complete with its assessment phase, 74% complete with
its planning phase and 36% complete with the implementation/testing phase. In
addition, the Company provides monthly status reports to the North American
Electric Reliability Council (NERC) to assist them in assessing Year 2000
readiness of the regional electric grid. As of November 30, 1998 (the latest
information available), NERC was 96% complete with its assessment phase, 82%
complete with its planning phase and 44% complete with the
implementation/testing phase. Through the Electric Power Research Institute
(EPRI), an industry-wide effort has been established to deal with Year 2000
problems affecting digital systems and equipment used by the nation's electric
power companies. Under this effort, participating utilities are working together
to assess specific vendors' system problems and test plans. The assessment will
be shared by the industry as a whole to facilitate Year 2000 problem solving.
In addressing the Year 2000 Issue, the Company will incur internal labor
costs as well as external consulting and other expenses to prepare for the new
century. The Company estimates that its external costs (consulting fees and
related costs) for addressing the Year 2000 Issue will range from $10 million to
$15 million. As of December 31, 1998, the Company had expended approximately
$2.4 million. The Company's plans to complete Year 2000 modifications are based
on management's best estimates, which are derived utilizing numerous assumptions
of future events including the continued availability of certain resources, and
other factors. However, there can be no guarantee that these estimates will be
achieved, and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
The Company believes that, with appropriate modifications to existing
computer systems/components, updates by vendors and trading partners, and
conversion to new software and hardware in the ordinary course of business, the
Year 2000 Issue will not pose significant operational problems for the Company.
However, if such conversions are not completed in a proper and timely manner by
all affected parties, the Year 2000 Issue could result in material adverse
operational and financial consequences to the Company, and there can be no
assurance that the Company's efforts, or those of vendors and trading partners,
interconnection affiliates, NERC or EPRI to address the Year 2000 Issue will be
successful. The Company is in the process of developing contingency plans to
address potential risks, including risks of vendor/trading partners'
noncompliance, as well as noncompliance of any of the Company's material
operating systems. The first operational contingency plan addressing power grid
issues is expected to be completed by the end of the first quarter 1999.
Contingency plans related to the business areas are expected to be completed by
the end of the second quarter 1999. At this time, the Company is unable to
predict the ultimate impact, if any, of the Year 2000 Issue on the Company's
financial condition, results of operations or liquidity; however, the impact
could be material.
CONTINGENCIES
See Note 12 - Commitments and Contingencies and Note 2 - Regulatory Matters
under Notes to Consolidated Financial Statements for material issues existing at
December 31, 1998.
MARKET RISK RELATED TO FINANCIAL INSTRUMENTS
AND COMMODITY INSTRUMENTS
Market risk represents the risk of changes in value of a financial
instrument, derivative or non-derivative, caused by fluctuations in interest
rates and equity prices. The following discussion of the Company's risk
management activities includes "forward-looking" statements that involve risks
and uncertainties. Actual results could differ materially from those projected
in the "forward-looking" statements. The Company handles market risks in
accordance with established policies, which may include entering into various
deriv-
20 1998 Annual Report
<PAGE> 8
ative transactions. In the normal course of business, the Company also faces
risks that are either non-financial or non-quantifiable. Such risks principally
include credit risk and legal risk and are not represented in the following
analysis.
INTEREST RATE RISK
The Company is exposed to market risk through changes in interest rates,
principally at its subsidiaries, through its issuance of both long-term and
short-term variable-rate debt, fixed-rate debt, commercial paper and auction
market preferred stock. The Company manages its interest rate exposure by
controlling the amount of these instruments it holds within its total
capitalization portfolio and by monitoring the effects of market changes in
interest rates.
If interest rates increase 1% in 1999, as compared to 1998, the Company's
interest expense would increase by approximately $6 million and net income would
decrease by approximately $4 million. This amount has been determined using the
assumptions that the Company's outstanding variable-rate debt, commercial paper
and auction market preferred stock as of December 31, 1998, continued to be
outstanding throughout 1999, and that the average interest rates for these
instruments increased 1% over 1998. The model does not consider the effects of
the reduced level of overall economic activity that would exist in such an
environment. In the event of a significant change in interest rates, management
would likely take actions to further mitigate its exposure to this market risk.
However, due to the uncertainty of the specific actions that would be taken and
their possible effects, the sensitivity analysis assumes no change in the
Company's financial structure.
Commodity Price Risk
The Company is exposed to changes in market prices for natural gas and fuel
and purchased power. With regard to its natural gas utility business, the
Company's exposure to changing market prices is in large part mitigated by the
fact that the Company has a Purchased Gas Adjustment Clause (PGA) in place in
both its Missouri and Illinois jurisdictions. The PGA allows the Company to pass
on to its customers its prudently incurred costs of natural gas. With approval
of the MoPSC, AmerenUE is participating in an experimental program to control
the volatility of gas prices paid by its Missouri customers in the winter months
through the purchase of financial instruments.
Since the Company does not have a provision similar to the PGA for its
electric operations, the Company has entered into several long-term contracts
with various suppliers to purchase coal and nuclear fuel to manage its exposure
to fluctuating fuel prices (see Note 12 - Commitments and Contingencies under
Notes to Consolidated Financial Statements for further information). With regard
to the Company's exposure to commodity risk for purchased power, the Company has
established a subsidiary, AmerenEnergy, Inc., whose primary responsibility
includes managing market risks associated with the changing market prices for
purchased power for the Company's operating subsidiaries, AmerenUE and
AmerenCIPS.
AmerenEnergy utilizes several techniques to mitigate its market risk for
purchased power, including utilizing derivative financial instruments. A
derivative is a contract whose value is dependent on or derived from the value
of some underlying asset. The derivative financial instruments that AmerenEnergy
is allowed to utilize (which include forward contracts and futures contracts)
are dictated by a risk management policy, which has been reviewed with the
Auditing Committee of Ameren's Board of Directors. Compliance with the risk
management policy is the responsibility of a risk management steering committee,
consisting of Company officers and an independent risk management officer at
AmerenEnergy.
As of December 31, 1998, the fair value of derivative financial instruments
exposed to commodity price risk was immaterial. The Company expects an increase
in the derivative financial instruments used to manage risk in 1999 due to
expected growth at AmerenEnergy.
Equity Price Risk
The Company maintains trust funds, as required by the Nuclear Regulatory
Commission and Missouri and Illinois state laws, to fund certain costs of
nuclear decommissioning (see Note 13 - Callaway Nuclear Plant under Notes to
Consolidated Financial Statements for further information). As of December 31,
1998, these funds were invested primarily in domestic equity securities,
fixed-rate, fixed-income securities, and cash and cash equivalents. By
maintaining a portfolio that includes long-term equity investments, the Company
is seeking to maximize the returns to be utilized to fund nuclear
decommissioning costs. However, the equity securities included in the Company's
portfolio are exposed to price fluctuations in equity markets, and the
fixed-rate, fixed-income securities are exposed to changes in interest rates.
The Company actively monitors its portfolio by benchmarking the performance of
its investments against certain indices and by maintaining, and periodically
reviewing, established target allocation percentages of the assets of its trusts
to various investment options. The Company's exposure to equity price market
risk is in large part mitigated due to the fact that the Company is currently
allowed to recover its decommissioning costs in its rates.
ACCOUNTING MATTERS
In its November 1998 meeting, the Emerging Issues Task Force of the
Financial Accounting Standards Board (EITF) reached a consensus on EITF Issue
98-10, "Accounting for Energy Trading and Risk Management Activities." EITF
98-10 provides guidance on the accounting for energy contracts entered into for
the purchase or sale of electricity, natural gas, capacity and transportation.
The EITF reached a consensus in EITF 98-10 that sales and purchase activities
being performed need to be classified as either trading or non-trading.
Furthermore, transactions that are determined to be trading activities would be
recognized on the balance sheet measured at fair value, with gains and losses
included in earnings. EITF 98-10 includes factors or indicators to consider
Ameren Corporation 21
<PAGE> 9
when determining if a transaction is a trading or non-trading activity. EITF
98-10 will be effective beginning in 1999. Currently, AmerenEnergy enters into
contracts for the sale and purchase of energy on behalf of AmerenUE and
AmerenCIPS. These transactions are considered non-trading activities and are
accounted for using the accrual or settlement method, which represents industry
practice. Should any of AmerenEnergy's future activities be considered trading
activities based on the indicators provided in EITF 98-10, a change in
accounting practice would be required. EITF 98-10 is not expected to have a
material impact on the Company's financial position or results of operations
upon adoption. Many of the provisions of EITF 98-10 will likely be superceded by
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities" (see below).
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and requires recognition of all derivatives on the
balance sheet measured at fair value. SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999. Earlier application
is encouraged. SFAS 133 cannot be applied retroactively. At this time, the
Company is unable to determine the impact of SFAS 133 on its financial position
or results of operations upon adoption.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance on accounting for the costs of
computer software developed or obtained for internal use. Under SOP 98-1,
certain costs, which are currently expensed by the Company, may be capitalized
and amortized over some future period. SOP 98-1 is effective for fiscal years
beginning after December 15, 1998. SOP 98-1 is not expected to have a material
impact on the Company's financial position or results of operations upon
adoption.
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's rates for retail electric and gas service are regulated by
the MoPSC and the Illinois Commerce Commission. Non-retail electric rates are
regulated by the FERC.
The current replacement cost of the Company's utility plant substantially
exceeds its recorded historical cost. Under existing regulatory practice, only
the historical cost of plant is recoverable from customers. As a result, cash
flows designed to provide recovery of historical costs through depreciation
might not be adequate to replace plants in future years. Regulatory practice has
been modified for the Company's generation portion of its business in its
Illinois jurisdiction, and may be modified in the future for the Company's
Missouri jurisdiction (see Note 2 - Regulatory Matters under Notes to
Consolidated Financial Statements for further information). In addition, the
impact on common stockholders is mitigated to the extent depreciable property is
financed with debt that is repaid with dollars of less purchasing power.
In the Illinois retail jurisdiction, the cost of fuel for electric
generation, which was previously reflected in billings to customers through fuel
adjustment clauses, has been added to base rates as provided for in the Law (see
Note 2 - Regulatory Matters under Notes to Consolidated Financial Statements for
further information). In the Missouri retail jurisdiction, the cost of fuel for
electric generation is reflected in base rates with no provision for changes to
be made through a fuel adjustment clause. In Illinois and Missouri, changes in
gas costs are generally reflected in billings to customers through purchased gas
adjustment clauses.
Inflation continues to be a factor affecting operations, earnings,
stockholders' equity and financial performance.
SAFE HARBOR STATEMENT
Statements made in this annual report to stockholders which are not based
on historical facts, are forward-looking and, accordingly, involve risks and
uncertainties that could cause actual results to differ materially from those
discussed. Although such forward-looking statements have been made in good faith
and are based on reasonable assumptions, there is no assurance that the expected
results will be achieved. These statements include (without limitation)
statements as to future expectations, beliefs, plans, strategies, objectives,
events, conditions, financial performance and the Year 2000 Issue. In connection
with the "Safe Harbor" provisions of the Private Securities Litigation Reform
Act of 1995, the Company is providing this cautionary statement to identify
important factors that could cause actual results to differ materially from
those anticipated. Factors include, but are not limited to, the effects of
regulatory actions; changes in laws and other governmental actions; competition;
future market prices for fuel and purchased power, electricity, and natural gas,
including the use of financial instruments; average rates for electricity in the
midwest; business and economic conditions; interest rates; weather conditions;
fuel prices and availability; generation plant performance; monetary and fiscal
policies; future wages and employee benefits costs; and legal and administrative
proceedings.
22 1998 Annual Report
<PAGE> 10
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Thousands of Dollars, Except Share and Per Share Amounts Year ended December 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES:
Electric $ 3,094,211 $ 3,064,177 $ 3,061,856
Gas 216,681 249,815 254,412
Other 7,316 12,551 12,153
-----------------------------------------------
TOTAL OPERATING REVENUES 3,318,208 3,326,543 3,328,421
-----------------------------------------------
OPERATING EXPENSES:
Operations
Fuel and purchased power 780,123 836,445 880,204
Gas 118,846 160,679 160,776
Other 647,157 585,214 543,998
-----------------------------------------------
1,546,126 1,582,338 1,584,978
-----------------------------------------------
Maintenance 312,011 310,241 302,203
Depreciation and amortization 348,403 346,000 339,276
Income taxes 267,673 234,179 253,005
Other taxes 272,774 271,711 273,034
-----------------------------------------------
TOTAL OPERATING EXPENSES 2,746,987 2,744,469 2,752,496
-----------------------------------------------
OPERATING INCOME 571,221 582,074 575,925
-----------------------------------------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 5,001 5,244 6,870
Miscellaneous, net (2,609) (10,344) (21,229)
-----------------------------------------------
TOTAL OTHER INCOME AND (DEDUCTIONS) 2,392 (5,100) (14,359)
-----------------------------------------------
INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 573,613 576,974 561,566
-----------------------------------------------
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 181,580 185,368 180,402
Allowance for borrowed funds used during construction (7,026) (7,462) (7,490)
Preferred dividends of subsidiaries 12,562 12,532 16,970
-----------------------------------------------
NET INTEREST CHARGES AND PREFERRED DIVIDENDS 187,116 190,438 189,882
-----------------------------------------------
INCOME BEFORE EXTRAORDINARY CHARGE 386,497 386,536 371,684
EXTRAORDINARY CHARGE, NET OF INCOME TAXES (NOTE 2) -- (51,820) --
-----------------------------------------------
NET INCOME $ 386,497 $ 334,716 $ 371,684
===============================================
EARNINGS PER COMMON SHARE - BASIC AND DILUTED
(BASED ON AVERAGE SHARES OUTSTANDING)
Income before extraordinary charge $ 2.82 $ 2.82 $ 2.71
Extraordinary charge -- (.38) --
-----------------------------------------------
NET INCOME $ 2.82 $ 2.44 $ 2.71
===============================================
AVERAGE COMMON SHARES OUTSTANDING 137,215,462 137,215,462 137,215,462
</TABLE>
See Notes to Consolidated Financial Statements.
Ameren Corporation 23
<PAGE> 11
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Thousands of Dollars December 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
PROPERTY AND PLANT, AT ORIGINAL COST:
Electric $11,761,306 $11,522,730
Gas 469,216 447,458
Other 44,646 36,023
--------------------------
12,275,168 12,006,211
Less accumulated depreciation and amortization 5,602,816 5,285,434
--------------------------
6,672,352 6,720,777
Construction work in progress:
Nuclear fuel in process 108,294 134,804
Other 147,393 131,504
--------------------------
TOTAL PROPERTY AND PLANT, NET 6,928,039 6,987,085
--------------------------
INVESTMENTS AND OTHER ASSETS:
Investments 86,694 97,188
Nuclear decommissioning trust fund 161,877 122,438
Other 78,091 64,915
--------------------------
TOTAL INVESTMENTS AND OTHER ASSETS 326,662 284,541
--------------------------
CURRENT ASSETS:
Cash and cash equivalents 76,863 42,425
Accounts receivable - trade (less allowance for doubtful
accounts of $8,393 and $4,845, respectively) 198,193 266,306
Unbilled revenue 150,481 102,864
Other accounts and notes receivable 76,919 49,765
Materials and supplies, at average cost:
Fossil fuel 112,908 93,431
Other 132,884 134,152
Other 22,912 22,273
--------------------------
TOTAL CURRENT ASSETS 771,160 711,216
--------------------------
REGULATORY ASSETS:
Deferred income taxes 633,529 639,792
Other 188,049 204,913
--------------------------
TOTAL REGULATORY ASSETS 821,578 844,705
--------------------------
TOTAL ASSETS $ 8,847,439 $ 8,827,547
==========================
</TABLE>
See Notes to Consolidated Financial Statements.
24 1998 Annual Report
<PAGE> 12
<TABLE>
<CAPTION>
Thousands of Dollars, Except Share and Per Share Amounts December 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL AND LIABILITIES
CAPITALIZATION:
Common stock, $.01 par value, 400,000,000 shares
authorized - 137,215,462 shares outstanding (Note 6) $ 1,372 $ 1,372
Other paid-in capital, principally premium on common stock 1,582,548 1,582,938
Retained earnings (see accompanying statement) 1,472,200 1,434,658
---------------------------
Total common stockholders' equity 3,056,120 3,018,968
Preferred stock not subject to mandatory redemption (Note 6) 235,197 235,197
Long-term debt (Note 8) 2,289,424 2,506,068
---------------------------
TOTAL CAPITALIZATION 5,580,741 5,760,233
---------------------------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 3,534 3,534
---------------------------
CURRENT LIABILITIES:
Current maturity of long-term debt 201,713 52,241
Short-term debt 58,528 86,266
Accounts and wages payable 297,185 293,391
Accumulated deferred income taxes 66,299 56,094
Taxes accrued 114,106 110,566
Other 216,889 168,727
---------------------------
TOTAL CURRENT LIABILITIES 954,720 767,285
---------------------------
Commitments and Contingencies (Notes 2, 12 and 13)
Accumulated Deferred Income Taxes 1,521,417 1,536,696
Accumulated Deferred Investment Tax Credits 178,832 190,260
Regulatory Liability 198,937 224,225
Other Deferred Credits and Liabilities 409,258 345,314
---------------------------
TOTAL CAPITAL AND LIABILITIES $ 8,847,439 $ 8,827,547
===========================
</TABLE>
See Notes to Consolidated Financial Statements.
Ameren Corporation 25
<PAGE> 13
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Thousands of Dollars Year ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING:
Income before extraordinary charge $386,497 $386,536 $ 371,684
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 338,488 340,079 333,565
Amortization of nuclear fuel 36,855 37,126 37,792
Allowance for funds used during construction (12,027) (12,706) (14,360)
Deferred income taxes, net (24,849) (24,499) 12,665
Deferred investment tax credits, net (11,428) (18,967) (9,531)
Changes in assets and liabilities:
Receivables, net (6,658) 11,476 (25,468)
Materials and supplies (18,209) 16,523 2,376
Accounts and wages payable 3,794 (3,626) 7,302
Taxes accrued 3,540 45,321 6,259
Other 107,241 (68,820) 60,160
--------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 803,244 708,443 782,444
--------------------------------------
CASH FLOWS FROM INVESTING:
Construction expenditures (324,905) (380,593) (435,904)
Allowance for funds used during construction 12,027 12,706 14,360
Nuclear fuel expenditures (20,432) (35,432) (51,176)
Other 10,494 16,122 (7,784)
--------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (322,816) (387,197) (480,504)
--------------------------------------
CASH FLOWS FROM FINANCING:
Dividends on common stock (348,527) (331,282) (326,855)
Redemptions -
Nuclear fuel lease (67,720) (28,292) (34,819)
Short-term debt (27,738) - (18,300)
Long-term debt (273,444) (123,444) (35,000)
Preferred stock _ (63,924) (26)
Issuances -
Nuclear fuel lease 16,439 40,337 43,884
Short-term debt _ 17,198 9,847
Long-term debt 255,000 187,000 65,194
--------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (445,990) (302,407) (296,075)
--------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 34,438 18,839 5,865
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 42,425 23,586 17,721
--------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 76,863 $ 42,425 $ 23,586
======================================
Cash paid during the periods:
Interest (net of amount capitalized) $175,168 $162,459 $167,433
Income taxes $291,291 $242,222 $248,096
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTION:
An extraordinary charge to earnings was recorded in the fourth quarter of 1997
for the write-off of generation-related regulatory assets and liabilities of the
Company's Illinois retail electric business as a result of electric industry
restructuring legislation enacted in Illinois in December 1997. The write-off
reduced earnings $52 million, net of income taxes. See Note 2 Regulatory Matters
under Notes to Consolidated Financial Statements for further information.
See Notes to Consolidated Financial Statements.
26 1998 Annual Report
<PAGE> 14
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Thousands of Dollars Year ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $1,434,658 $1,431,295 $1,385,629
Add:
Net income 386,497 334,716 371,684
Deduct:
Common stock cash dividends 348,955 331,353 326,018
---------------------------------------
BALANCE AT CLOSE OF PERIOD $1,472,200 $1,434,658 $1,431,295
=======================================
</TABLE>
SELECTED QUARTERLY INFORMATION
(Unaudited)
<TABLE>
<CAPTION>
Thousands of Dollars, Except per Share Amounts
- ---------------------------------------------------------------------------------------------------------
QUARTER ENDED Operating Operating Net Income Earnings (Loss)
Revenues Income (Loss) Per Common Share
<S> <C> <C> <C> <C>
MARCH 31, 1998 (A) $ 700,810 $ 90,432 $ 39,927 $ .29
March 31, 1997 (a) 759,663 95,461 44,977 .33
------------------------------------------------------------
JUNE 30, 1998 (B) 821,777 128,158 83,632 .61
June 30, 1997 (b) 791,821 132,492 79,686 .58
------------------------------------------------------------
SEPTEMBER 30, 1998 (C) 1,117,118 283,652 236,657 1.73
September 30, 1997 1,043,137 269,093 215,423 1.57
------------------------------------------------------------
DECEMBER 31, 1998 678,503 68,979 26,281 .19
December 31, 1997 (d) 731,922 85,028 (5,370) (.04)
============================================================
</TABLE>
(a) The first quarter of 1998 and 1997 included credits to Missouri electric
customers which reduced net income approximately $6 million, or 4 cents per
share, and $7 million, or 5 cents per share, respectively.
(b) The second quarter of 1998 and 1997 included credits to Missouri electric
customers which reduced net income approximately $18 million, or 14 cents
per share, and $4 million, or 3 cents per share, respectively. Callaway
Plant refueling expenses, which decreased net income approximately $18
million, or 13 cents per share, were included in the second quarter of 1998.
(c) The third quarter of 1998 included a nonrecurring charge related to the
targeted separation plan which reduced net income $15 million, or 11 cents
per share. See Note 3 - Targeted Separation Plan under Notes to Consolidated
Financial Statements for further information.
(d) The fourth quarter of 1997 included a net reversal of merger-related
expenses of $17 million, or 13 cents per share. The fourth quarter of 1997
also included an extraordinary charge of $52 million, net of income taxes,
or 38 cents per share (see Note 2 - Regulatory Matters under Notes to
Consolidated Financial Statements for further information).
Other changes in quarterly earnings are due to the effect of weather on sales
and other factors that are characteristic of public utility operations.
See Notes to Consolidated Financial Statements.
Ameren Corporation 27
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Ameren Corporation (Ameren) is a holding company registered under the
Public Utility Holding Company Act of 1935 (PUHCA). In December 1997, Union
Electric Company (AmerenUE) and CIPSCO Incorporated (CIPSCO) combined to form
Ameren, with AmerenUE and CIPSCO's subsidiaries, Central Illinois Public Service
Company (AmerenCIPS) and CIPSCO Investment Company (CIC), becoming wholly-owned
subsidiaries of Ameren (the Merger). The accompanying consolidated financial
statements (the financial statements) reflect the accounting for the Merger as a
pooling of interests and are presented as if the companies were combined as of
the earliest period presented. However, the financial information is not
necessarily indicative of the results of operations, financial position or cash
flows that would have occurred had the Merger been consummated for the periods
for which it is given effect, nor is it necessarily indicative of future results
of operations, financial position or cash flows. The outstanding preferred
shares of AmerenUE and AmerenCIPS were not affected by the Merger.
The accompanying financial statements include the accounts of Ameren and
its consolidated subsidiaries (collectively the Company). All subsidiaries for
which the Company owns directly or indirectly more than 50% of the voting stock
are included as consolidated subsidiaries. Ameren's primary operating companies,
AmerenUE and AmerenCIPS, are engaged principally in the generation,
transmission, distribution and sale of electric energy and the purchase,
distribution, transportation and sale of natural gas. The operating companies
serve 1.5 million electric and 300,000 natural gas customers in a
44,500-square-mile area of Missouri and Illinois. The Company's non-regulated
subsidiaries include CIC, an investing subsidiary, and AmerenEnergy, Inc., an
energy marketing subsidiary. The Company also has a 60% interest in Electric
Energy, Inc. (EEI). EEI owns and operates an electric generation and
transmission facility in Illinois that supplies electric power primarily to a
uranium enrichment plant located in Paducah, Kentucky. All significant
intercompany balances and transactions have been eliminated from the
consolidated financial statements.
Regulation
Ameren is subject to regulation by the Securities and Exchange Commission
(SEC). AmerenUE is also regulated by the Missouri Public Service Commission
(MoPSC), the Illinois Commerce Commission (ICC) and the Federal Energy
Regulatory Commission (FERC). AmerenCIPS is also regulated by the ICC and the
FERC. The accounting policies of the Company conform to generally accepted
accounting principles (GAAP). See Note 2 - Regulatory Matters for further
information.
Property and Plant
The cost of additions to, and betterments of, units of property and plant
is capitalized. Cost includes labor, material, applicable taxes and overheads.
An allowance for funds used during construction is also added for the Company's
regulated assets, and interest during construction is added for non-regulated
assets. Maintenance expenditures and the renewal of items not considered units
of property are charged to income as incurred. When units of depreciable
property are retired, the original cost and removal cost, less salvage value,
are charged to accumulated depreciation.
Depreciation
Depreciation is provided over the estimated lives of the various classes of
depreciable property by applying composite rates on a straight-line basis. The
provision for depreciation in 1998, 1997 and 1996 was approximately 3% of the
average depreciable cost.
Fuel and Gas Costs
In the Missouri and Illinois retail electric jurisdictions, the cost of
fuel for electric generation is reflected in base rates with no provision for
changes to be made through fuel adjustment clauses (see Note 2 - Regulatory
Matters for further information). In 1997 and 1996, changes in fuel costs were
generally reflected in billings to electric customers through the fuel
adjustment clauses. In the Illinois and Missouri retail gas jurisdictions,
changes in gas costs are generally reflected in billings to gas customers
through purchased gas adjustment clauses.
Nuclear Fuel
The cost of nuclear fuel is amortized to fuel expense on a
unit-of-production basis. Spent fuel disposal cost is charged to expense
based on kilowatthours sold.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and temporary investments
purchased with an original maturity of three months
or less.
Income Taxes
The Company and its subsidiaries file a consolidated federal tax return.
Deferred tax assets and liabilities are recognized for the tax consequences of
transactions that have been treated differently for financial reporting and tax
return purposes, measured using statutory tax rates.
Investment tax credits utilized in prior years were deferred and are
being amortized over the useful lives of the related properties.
Allowance for Funds Used During Construction
Allowance for funds used during construction (AFC) is a utility industry
accounting practice whereby the cost of borrowed funds and the cost of equity
funds (preferred and common stockholders' equity) applicable to the Company's
construction program are capitalized as a cost of construction. AFC does not
represent a current source of cash funds. This accounting practice offsets the
effect on earnings of the cost of financing current construction, and treats
such financing costs in the same manner as construction charges for labor and
materials.
Under accepted ratemaking practice, cash recovery of AFC, as well as other
construction costs, occurs when completed projects are placed in service and
reflected in customer rates. The AFC ranges of rates used were 6% - 9% during
1998, and 8% - 9% during 1997 and 1996.
Unamortized Debt Discount, Premium and Expense
Discount, premium and expense associated with long-term debt are amortized
over the lives of the related issues.
Revenue
The Company accrues an estimate of electric and gas revenues for service
rendered but unbilled at the end of each accounting period.
28 1998 Annual Report
<PAGE> 16
Evaluation of Assets for Impairment
Statement of Financial Accounting Standards (SFAS) 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
prescribes general standards for the recognition and measurement of impairment
losses. The Company determines if long-lived assets are impaired by comparing
their undiscounted expected future cash flows to their carrying amount. An
impairment loss is recognized if the undiscounted expected future cash flows are
less than the carrying amount of the asset. SFAS 121 also requires that
regulatory assets which are no longer probable of recovery through future
revenues be charged to earnings (see Note 2 - Regulatory Matters for further
information). As of December 31, 1998, no impairment was identified.
Stock Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) 25,
"Accounting for Stock Issued to Employees" in accounting for
its plans.
Earnings Per Share
The Company's calculation of basic and diluted earnings per share resulted
in the same earnings per share amounts for each of the years 1998, 1997 and
1996. The reconciling item in each of the years is comprised of assumed stock
option conversions which increased the number of shares outstanding in the
diluted earnings per share calculation by 29,787 shares, 7,318 shares and 12,879
shares in 1998, 1997 and 1996, respectively.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make certain estimates and assumptions. Such estimates and
assumptions may affect reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to prior-years financial
statements to conform with 1998 reporting.
NOTE 2
REGULATORY MATTERS
In July 1995, the MoPSC approved an agreement establishing contractual
obligations involving the Company's Missouri retail electric rates. Included was
a three-year experimental alternative regulation plan that ran from July 1,
1995, through June 30, 1998, which provided that earnings in those years in
excess of a 12.61% regulatory return on equity (ROE) be shared equally between
customers and stockholders, and earnings above a 14% ROE be credited to
customers. The formula for computing the credit used twelve-month results ending
June 30, rather than calendar year earnings. In 1996, the Company recorded a $47
million credit for the first year of the plan. This credit reduced earnings $28
million, or 20 cents per share. During 1997, the Company recorded a $20 million
credit for the second year of the plan, which reduced earnings $11 million, or 8
cents per share. In 1998, the Company recorded an estimated $43 million credit
for the final year of the plan, which reduced earnings $24 million, or 18 cents
per share. In November 1998, the MoPSC staff proposed preliminary adjustments to
the Company's estimated credit. The credit for the final year of the plan will
be subject to regulatory proceedings. The Company expects that the regulatory
proceedings will be completed in 1999. The staff's proposed adjustments, if
ultimately accepted, could increase the Company's estimated credit up to $10
million.
Included in the joint agreement approved by the MoPSC in its February 1997
order authorizing the Merger, was a new three-year experimental alternative
regulation plan that will run from July 1, 1998, through June 30, 2001. Like the
original plan, the new plan requires that earnings over a 12.61% ROE up to a 14%
ROE will be shared equally between customers and shareholders. The new
three-year plan will also return to customers 90% of all earnings above a 14%
ROE up to a 16% ROE. Earnings above a 16% ROE will be credited entirely to
customers. In addition, the joint agreement provides for a Missouri electric
rate decrease, retroactive to September 1, 1998, based on the weather-adjusted
average annual credits to customers under the original experimental alternative
regulation plan. The Company estimates that its Missouri electric rate decrease
should approximate $15 million to $20 million on an annualized basis. However,
the MoPSC staff has proposed adjustments to the Company's estimate based upon
their methodology of calculating the weather-adjusted credits. In addition, the
results of the regulatory proceedings associated with the final year of the
original experimental alternative regulation plan will impact the final Missouri
electric rate decrease as well. The Company expects that the regulatory
proceedings associated with determining the Missouri electric rate decrease will
be completed in 1999. The staff's proposed adjustments, if ultimately accepted,
could increase the Company's proposed Missouri electric rate decrease by $15
million to $20 million.
In December 1997, the MoPSC approved a $12 million annual rate increase for
natural gas service in AmerenUE's Missouri jurisdiction. The rate increase
became effective in February 1998.
In June 1998, AmerenUE and AmerenCIPS filed requests with the ICC to
increase rates for natural gas service in the Illinois jurisdiction. In February
1999, the ICC approved a $9 million annual rate increase. The rate increase
became effective in February 1999.
In 1998, Ameren's operating subsidiaries joined a group of nine other
utility companies which support the formation of the Midwest Independent System
Operator (Midwest ISO). An ISO operates, but does not own, transmission systems
and maintains system reliability and security while alleviating pricing issues
associated with the "pancaking" of rates. The Midwest ISO would be regulated by
FERC. The FERC conditionally approved the Midwest ISO in September 1998, and it
is expected to be operational by the year 2001. AmerenUE's membership in the
Midwest ISO must be approved by the MoPSC. The Midwest ISO covers eight states
and represents portions of 40,000 miles of transmission line and 62,000
megawatts of electric power. Collectively, the member companies serve more than
seven million customers.
In addition, certain states are considering proposals or have adopted
legislation that will promote competition at the retail level. In December 1997,
the Governor of Illinois signed the Electric
Ameren Corporation 29
<PAGE> 17
Service Customer Choice and Rate Relief Law of 1997 (the Law) providing for
electric utility restructuring in Illinois. This legislation introduces
competition into the supply of electric energy in Illinois.
Under the Law, retail direct access, which allows customers to choose their
electric generation supplier, will be phased in over several years. Access for
commercial and industrial customers will occur over a period from October 1999
to December 2000, and access for residential customers will occur after May 1,
2002.
The Law includes a 5% residential electric rate decrease for the Company's
Illinois electric customers, effective August 1, 1998. This rate decrease
reduced electric revenues approximately $6 million in 1998 and is expected to
decrease electric revenues $14 million annually thereafter, based on estimated
levels of sales and assuming normal weather conditions. The Company may be
subject to additional 5% residential electric rate decreases in each of 2000 and
2002, to the extent its rates exceed the midwest utility average at that time.
The Company's rates are currently below the midwest utility average.
As a result of the Law, AmerenUE and AmerenCIPS filed proposals with the
ICC to eliminate the electric fuel adjustment clause for Illinois retail
customers, thereby including a historical level of fuel costs in base rates. The
ICC approved AmerenCIPS' and AmerenUE's filings in March and April 1998,
respectively.
The Law contains a provision requiring one-half of excess earnings from the
Illinois regulated jurisdiction for the years 1998 through 2004 to be refunded
to Ameren's Illinois customers. Excess earnings are defined as the excess of the
two-year average annual rate of return on common equity over the two-year
average of the average monthly yields of the 30-year U.S. Treasury bonds, plus
prescribed percentages ranging from 5.5% to 6.5%. Filings must be made with the
ICC on or before March 31 of each year 2000 through 2005. At this time, the
Company is unable to determine the impact of this provision on its future
financial condition, results of operations or liquidity.
Other provisions of the Law include (1) potential recovery of a portion of
strandable costs, which represent costs which would not be recoverable in a
restructured environment, through a transition charge collected from customers
who choose another electric supplier; (2) a mechanism to securitize certain
future revenues; (3) a requirement to file a delivery service tariff in March
1999 for customers who choose alternative suppliers; and (4) a provision
relieving the Company of the requirement to file electric rate cases or
alternative regulatory plans in Illinois following the consummation of the
Merger to reflect the effects of net merger savings.
The Company's accounting policies and financial statements conform to GAAP
applicable to rate-regulated enterprises and reflect the effects of the
ratemaking process in accordance with SFAS 71, "Accounting for the Effects of
Certain Types of Regulation." Such effects concern mainly the time at which
various items enter into the determination of net income in order to follow the
principle of matching costs and revenues. For example, SFAS 71 allows the
Company to record certain assets and liabilities (regulatory assets and
regulatory liabilities) which are expected to be recovered or settled in future
rates and would not be recorded under GAAP for non-regulated entities. In
addition, reporting under SFAS 71 allows companies whose service obligations and
prices are regulated to maintain assets on their balance sheets representing
costs they reasonably expect to recover from customers, through inclusion of
such costs in future rates. SFAS 101, "Accounting for the Discontinuance of
Application of FASB Statement No. 71," specifies how an enterprise that ceases
to meet the criteria for application of SFAS 71 for all or part of its
operations should report that event in its financial statements. In general,
SFAS 101 requires that the enterprise report the discontinuance of SFAS 71 by
eliminating from its balance sheet all regulatory assets and liabilities related
to the portion of the business that no longer meets the SFAS 71 criteria. The
Emerging Issues Task Force of the Financial Accounting Standards Board (EITF)
has concluded that application of SFAS 71 accounting should be discontinued once
sufficiently detailed deregulation legislation is issued for a separable portion
of a business for which a plan of deregulation has been established. However,
the EITF further concluded that regulatory assets associated with the
deregulated portion of the business, which will be recovered through tariffs
charged to customers of a regulated portion of the business, should be
associated with the regulated portion of the business from which future cash
recovery is expected (not the portion of the business from which the costs
originated), and can therefore continue to be carried on the regulated entity's
balance sheet to the extent such assets are recovered. In addition, SFAS 121
establishes accounting standards for the impairment of long-lived assets.
Due to the enactment of the Law, prices for the retail supply of electric
generation are expected to transition from cost-based, regulated rates to rates
determined in large part by competitive market forces in the state of Illinois.
As a result, the Company discontinued application of SFAS 71 for the Illinois
retail portion of its generating business (i.e., the portion of the Company's
business related to the supply of electric energy in Illinois) in the fourth
quarter of 1997. The Company evaluated the impact of the Law on the future
recoverability of its regulatory assets and liabilities related to the
generation portion of its business and determined that it was not probable that
such assets and liabilities would be recovered through the cash flows from the
regulated portion of its business. Accordingly, the Company's generation-related
regulatory assets and liabilities of its Illinois retail electric business were
written off in the fourth quarter of 1997, resulting in an extraordinary charge
to earnings of $52 million, net of income taxes, or 38 cents per share. These
regulatory assets and liabilities included previously incurred costs originally
expected to be collected/refunded in future revenues, such as fuel contract
restructuring costs, deferred charges related to a generating plant, costs
associated with an abandoned scrubber at a fossil plant, and income tax-related
regulatory assets and liabilities. In addition, the Company has evaluated
whether the recoverability of the costs associated with its remaining net
generation-related assets has been impaired as defined under SFAS 121. The
Company has concluded that impairment, as defined under SFAS 121, does not exist
and that no plant writedowns are necessary at this time. At December 31, 1998,
the Company's net investment in generation
30 1998 Annual Report
<PAGE> 18
facilities related to its Illinois retail jurisdiction approximated $841 million
and was included in electric plant in-service on the Company's consolidated
balance sheet.
The provisions of the Law could also result in lower revenues, reduced
profit margins and increased costs of capital and operations expense. At this
time, the Company is unable to determine the impact of the Law on the Company's
future financial condition, results of operations or liquidity.
In Missouri, where approximately 72% of the Company's retail electric
revenues are derived, a task force appointed by the MoPSC investigated electric
industry restructuring and competition. In 1998, the task force issued a report
to the MoPSC that addressed many of the restructuring issues, but did not
provide a specific recommendation or approach to restructure the industry. In
addition, in 1998, the MoPSC staff issued a proposed plan for restructuring
Missouri's electric industry. The staff's plan addressed a number of issues of
concern if the industry is restructured in Missouri. It also included a proposal
for less than full recovery of strandable costs. The staff's plan has not been
addressed by the MoPSC. A joint legislative committee is also conducting
hearings on these issues.
The Company is unable to predict the timing or ultimate outcome of electric
industry restructuring in the state of Missouri, as well as the impact of
potential electric industry restructuring matters on the Company's future
financial condition, results of operations or liquidity. The potential negative
consequences of electric industry restructuring could be significant and include
the impairment and writedown of certain assets, including generation-related
plant and net regulatory assets, lower revenues, reduced profit margins and
increased costs of capital and operations expense. At December 31, 1998, the
Company's net investment in generation facilities related to its Missouri
jurisdiction approximated $2.5 billion and was included in electric plant
in-service on the Company's balance sheet. In addition, at December 31, 1998,
the Company's Missouri net generation-related regulatory assets approximated
$464 million.
In accordance with SFAS 71, the Company has deferred certain costs pursuant
to actions of its regulators, and is currently recovering such costs in electric
rates charged to customers.
At December 31, the Company had recorded the following regulatory assets
and regulatory liability:
<TABLE>
<CAPTION>
In Millions 1998 1997
- ------------------------------------------------------------
<S> <C> <C>
REGULATORY ASSETS:
Income taxes $634 $640
Callaway costs 95 99
Unamortized loss on reacquired debt 33 32
Merger costs 24 28
Other 36 46
------------
Regulatory Assets $822 $845
============
REGULATORY LIABILITY:
Income taxes $199 $224
------------
Regulatory Liability $199 $224
============
</TABLE>
Income Taxes: See Note 9 - Income Taxes.
Callaway Costs: Represents Callaway Nuclear Plant operations and
maintenance expenses, property taxes and carrying costs incurred between the
plant in-service date and the date the plant was reflected in rates. These costs
are being amortized over the remaining life of the plant (through 2024).
Unamortized Loss on Reacquired Debt: Represents losses related to refunded
debt. These amounts are being amortized over the lives of the related new debt
issues or the remaining lives of the old debt issues if no new debt was issued.
Merger Costs: Represents the portion of merger-related expenses applicable
to the Missouri retail jurisdiction. These costs are being amortized within 10
years, based on a MoPSC order.
The Company continually assesses the recoverability of its regulatory
assets. Under current accounting standards, regulatory assets are written off to
earnings when it is no longer probable that such amounts will be recovered
through future revenues. However, as noted in the above paragraphs, electric
industry restructuring legislation may impact the recoverability of regulatory
assets in the future.
In April 1996, the FERC issued Order 888 and Order 889 related to the
industry's wholesale electric business. In January 1998, the Company filed a
combined open access tariff that conforms to the FERC's orders.
NOTE 3
TARGETED SEPARATION PLAN
In July 1998, the Company offered separation packages to employees whose
positions were eliminated through a targeted separation plan (TSP). During the
third quarter of 1998, a nonrecurring, pre-tax charge of $25 million was
recorded, which reduced earnings $15 million, or 11 cents per share. This
represented costs incurred to implement the TSP. The remaining liability
associated with the TSP at December 31, 1998 was $14 million.
NOTE 4
CONCENTRATION OF RISK
Market Risk
The Company engages in price risk management activities related to
electricity and natural gas. In addition to buying and selling these
commodities, the Company uses derivative financial instruments to manage market
risks and reduce exposure resulting from fluctuations in interest rates and the
prices of electricity and natural gas. Derivative instruments used include
futures and forward contracts. The use of these types of contracts allows the
Company to manage and hedge its contractual commitments and reduce exposure
related to the volatility of commodity market prices.
Credit Risk
Credit risk represents the accounting loss that would be recognized if
counterparties fail to perform as contracted. New York Mercantile Exchange
(NYMEX) traded futures contracts are guaranteed by NYMEX and have nominal credit
risk. On all other transactions, the Company is exposed to credit risk in the
event of nonperformance by the counterparties in the transaction.
Ameren Corporation 31
<PAGE> 19
The Company's financial instruments subject to credit risk consist
primarily of trade accounts receivable and forward contracts. The risk
associated with trade receivables is mitigated by the large number of customers
in a broad range of industry groups comprising the Company's customer base. The
Company's revenues are primarily derived from sales of electricity and natural
gas to customers in Missouri and Illinois. For each counterparty in forward
contracts, the Company analyzes the counterparty's financial condition prior to
entering into an agreement, establishes credit limits and monitors the
appropriateness of these limits on an ongoing basis.
NOTE 5
NUCLEAR FUEL LEASE
The Company has a lease agreement that provides for the financing of
nuclear fuel. At December 31, 1998, the maximum amount that could be financed
under the agreement was $120 million. Pursuant to the terms of the lease, the
Company has assigned to the lessor certain contracts for purchase of nuclear
fuel. The lessor obtains, through the issuance of commercial paper or from
direct loans under a committed revolving credit agreement from commercial banks,
the necessary funds to purchase the fuel and make interest payments when due.
The Company is obligated to reimburse the lessor for all expenditures for
nuclear fuel, interest and related costs. Obligations under this lease become
due as the nuclear fuel is consumed at the Company's Callaway Nuclear Plant. The
Company reimbursed the lessor $23 million in 1998, $31 million during 1997 and
$37 million during 1996.
The Company has capitalized the cost, including certain interest costs, of
the leased nuclear fuel and has recorded the related lease obligation. During
1998, the total interest charges under the lease were $5 million. In both 1997
and 1996, the total interest charges under the lease were $6 million. Interest
charges for these years were based on average interest rates of approximately
6%. Interest charges of $3 million were capitalized in each respective year.
NOTE 6
SHAREHOLDER RIGHTS PLAN AND
Preferred Stock of Subsidiaries
In October 1998, the Company's Board of Directors approved a share purchase
rights plan designed to assure shareholders of fair and equal treatment in the
event of a proposed takeover. The rights will be exercisable only if a person or
group acquires 15% or more of Ameren's common stock or announces a tender offer,
the consummation of which would result in ownership by a person or group of 15%
or more of the common stock. Each right will entitle the holder to purchase one
one-hundredth of a newly issued preferred stock at an exercise price of $180. If
a person or group acquires 15% or more of Ameren's outstanding common stock,
each right will entitle its holder (other than such person or members of such
group) to purchase, at the right's then-current exercise price, a number of
Ameren's common shares having a market value of twice such price. In addition,
if Ameren is acquired in a merger or other business combination transaction
after a person or group has acquired 15% or more of the Company's outstanding
common stock, each right will entitle its holder to purchase, at the right's
then-current exercise price, a number of the acquiring company's common shares
having a market value of twice such price. The acquiring person or group will
not be entitled to exercise these rights. The SEC approved the plan under PUHCA
in December 1998. The rights were issued as a dividend payable January 8, 1999,
to shareholders of record on that date; these rights expire in 2008. One right
will accompany each new share of Ameren common stock issued prior to such
expiration date.
At December 31, 1998 and 1997, AmerenUE and AmerenCIPS had 25 million
shares and 4.6 million shares respectively, of authorized preferred stock.
Outstanding preferred stock is entitled to cumulative dividends and is
redeemable at the prices shown in the following table:
PREFERRED STOCK OUTSTANDING NOT SUBJECT TO MANDATORY REDEMPTION:
<TABLE>
<CAPTION>
Redemption Price December 31,
In Millions (per share) 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Without par value and stated
value of $100 per share --
$7.64 Series - 330,000 shares $103.82-note (a) $ 33 $ 33
$5.50 Series A - 14,000 shares 110.00 1 1
$4.75 Series - 20,000 shares 102.176 2 2
$4.56 Series - 200,000 shares 102.47 20 20
$4.50 Series - 213,595 shares 110.00-note (b) 21 21
$4.30 Series - 40,000 shares 105.00 4 4
$4.00 Series - 150,000 shares 105.625 15 15
$3.70 Series - 40,000 shares 104.75 4 4
$3.50 Series - 130,000 shares 110.00 13 13
With par value of $100 per share --
4.00% Series - 150,000 shares 101.00 15 15
4.25% Series - 50,000 shares 102.00 5 5
4.90% Series - 75,000 shares 102.00 8 8
4.92% Series - 50,000 shares 103.50 5 5
5.16% Series - 50,000 shares 102.00 5 5
1993 Auction - 300,000 shares 100.00-note (c) 30 30
6.625% Series - 125,000 shares 100.00 12 12
Without par value and stated
value of $25 per share --
$1.735 Series - 1,657,500 shares 25.00 42 42
--------------
TOTAL PREFERRED OUTSTANDING STOCK NOT
SUBJECT TO MANDATORY REDEMPTION $ 235 $ 235
==============
</TABLE>
(a) Beginning February 15, 2003, eventually declining to $100 per share.
(b) In the event of voluntary liquidation, $105.50.
(c) Dividend rates, and the periods during which such rates apply, vary
depending on the Company's selection of certain defined dividend period
lengths.
The average dividend rate during 1998 was 4.04%.
32 1998 Annual Report
<PAGE> 20
NOTE 7
SHORT-TERM BORROWINGS
Short-term borrowings of the Company consist of bank loans (maturities
generally on an overnight basis) and commercial paper (maturities generally
within 10-45 days). At December 31, 1998 and 1997, $59 million and $86 million,
respectively, of short-term borrowings were outstanding. The weighted average
interest rates on borrowings outstanding at December 31, 1998 and 1997, were
4.9% and 6.5%, respectively.
At December 31, 1998, the Company had committed bank lines of credit
aggregating $217 million (all of which was unused and $170 million was
available) which make available interim financing at various rates of interest
based on LIBOR, the bank certificate of deposit rate, or other options. These
lines of credit are renewable annually at various dates throughout the year.
NOTE 8
LONG-TERM DEBT
<TABLE>
<CAPTION>
In Millions Long-term debt outstanding at December 31, 1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
FIRST MORTGAGE BONDS - note (a)
6 3/4% Series due 1999 $ 100 $ 100
7 1/8% Series W due 1999 50 50
8.33% Series due 2002 75 75
6 3/8% Series Z due 2003 40 40
7.65% Series due 2003 100 100
6 7/8% Series due 2004 188 188
7 3/8% Series due 2004 85 85
7 1/2% Series X due 2007 50 50
6 3/4% Series due 2008 148 148
7.61% 1997 Series due 2017 40 40
7.40% Series due 2020 - note (b) 60 60
8 3/4% Series due 2021 125 125
8 1/4% Series due 2022 104 104
8% Series due 2022 85 85
7.15% Series due 2023 75 75
7% Series due 2024 100 100
6.125% Series due 2028 60 -
5.45% Series due 2028 - note (b) 44 44
Other 5.375% - 7.05% due 1999 through 2008 168 186
------------
1,697 1,655
------------
</TABLE>
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
ENVIRONMENTAL IMPROVEMENT/POLLUTION
CONTROL REVENUE BONDS
1984 Series A paid in 1998 - 80
1984 Series B paid in 1998 - 80
1985 Series A due 2015 - note (c) 70 70
1985 Series B due 2015 - note (c) 57 57
1990 Series B 7.60% due 2013 32 32
1991 Series due 2020 - note (c) 43 43
1992 Series due 2022 - note (c) 47 47
1993 Series A 6 3/8% due 2028 35 35
1993 Series C-1 due 2026 - note (c) 35 35
1998 Series A due 2033 - note (c) 60 -
1998 Series B due 2033 - note (c) 50 -
1998 Series C due 2033 - note (c) 50 -
Other 3.875% - 7.60% due 2014 through 2028 80 80
--------------
559 559
--------------
SUBORDINATED DEFERRABLE INTEREST DEBENTURES
7.69% Series A due 2036 - note (d) 66 66
--------------
UNSECURED LOANS
Commercial paper - note (e) - 35
Credit agreements - note (f) 10 21
1991 Senior Medium Term Notes
8.60% due through 2005 47 54
1994 Senior Medium Term Notes
6.61% due through 2005 54 62
--------------
111 172
--------------
NUCLEAR FUEL LEASE 66 117
--------------
UNAMORTIZED DISCOUNT AND PREMIUM ON DEBT (8) (11)
--------------
MATURITIES DUE WITHIN ONE YEAR (202) (52)
--------------
TOTAL LONG-TERM DEBT $2,289 $2,506
==============
</TABLE>
(a) At December 31, 1998, substantially all of the property and plant was
mortgaged under, and subject to liens of, the respective indentures pursuant
to which the bonds were issued.
(b) Environmental Improvement Series
(c) Interest rates, and the periods during which such rates apply, vary
depending on the Company's selection of certain defined rate modes. The
average interest rates for the year 1998 are as follows:
1985 Series A 3.47%
1985 Series B 3.72%
1991 Series 3.75%
1992 Series 3.63%
1993 Series 3.90%
1998 Series A 3.54%
1998 Series B 3.50%
1998 Series C 3.57%
(d) During the terms of the debentures, the Company may, under certain
circumstances, defer the payment of interest for up to five years.
(e) A bank credit agreement, due 2000, permits the Company to borrow or to
support commercial paper borrowings up to $300 million. Interest rates will
vary depending on market conditions. At December 31, 1998, no such
borrowings were outstanding.
(f) A bank credit agreement, due 2003, permits the Company to borrow up to $200
million. Interest rates will vary depending on market conditions and the
Company's selection of various options under the agreement. At December 31,
1998, the average annualized interest rate was 5.7%.
Ameren Corporation 33
<PAGE> 21
Maturities of long-term debt through 2003 are as follows:
<TABLE>
<CAPTION>
In Millions Principal Amount
- ------------------------------
<C> <C>
1999 $202
2000 35
2001 30
2002 108
2003 145
===
</TABLE>
Amounts for years subsequent to 1999 do not include nuclear fuel lease
payments since the amounts of such payments are not currently determinable.
NOTE 9
INCOME TAXES
Total income tax expense for 1998 resulted in an effective tax rate of 40%
on earnings before income taxes (38% in 1997 and 40% in 1996).
Principal reasons such rates differ from the statutory federal rate:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------
<S> <C> <C> <C>
STATUTORY FEDERAL INCOME TAX RATE: 35% 35% 35%
Increases (Decreases) from:
Depreciation differences 1 1 1
State tax 4 4 4
Other - (2) -
------------------
EFFECTIVE INCOME TAX RATE 40% 38% 40%
------------------
<CAPTION>
Income tax expense components:
In Millions 1998 1997 1996
- -----------------------------------------------------------
<S> <C> <C> <C>
TAXES CURRENTLY PAYABLE
(PRINCIPALLY FEDERAL):
Included in operating expenses $303 $261 $255
Included in other income--
Miscellaneous, net (6) - -
------------------
297 261 255
------------------
DEFERRED TAXES (PRINCIPALLY FEDERAL):
Included in operating expenses --
Depreciation differences (10) (11) 2
Other (17) (7) 5
Included in other income --
Depreciation differences - - 1
Other 2 10 -
------------------
(25) (8) 8
------------------
DEFERRED INVESTMENT TAX CREDIT
AMORTIZATION:
Included in operating expenses (8) (9) (9)
------------------
TOTAL INCOME TAX EXPENSE $264 $244 $254
==================
</TABLE>
In accordance with SFAS 109, "Accounting for Income Taxes," a regulatory
asset, representing the probable recovery from customers of future income taxes,
which is expected to occur when temporary differences reverse, was recorded
along with a corresponding deferred tax liability. Also, a regulatory liability,
recognizing the lower expected revenue resulting from reduced income taxes
associated with amortizing accumulated deferred investment tax credits, was
recorded. Investment tax credits have been deferred and will continue to be
credited to income over the lives of the related property.
The Company adjusts its deferred tax liabilities for changes enacted in tax
laws or rates. Recognizing that regulators will probably reduce future revenues
for deferred tax liabilities initially recorded at rates in excess of the
current statutory rate, reductions in the deferred tax liability were credited
to the regulatory liability.
Temporary differences gave rise to the following deferred tax assets and
deferred tax liabilities at December 31:
<TABLE>
<CAPTION>
In Millions 1998 1997
- ------------------------------------------------------------
<S> <C> <C>
ACCUMULATED DEFERRED INCOME TAXES:
Depreciation $1,036 $1,045
Regulatory assets, net 433 409
Capitalized taxes and expenses 155 176
Deferred benefit costs (48) (46)
Other 12 9
----------------
TOTAL NET ACCUMULATED DEFERRED
INCOME TAX LIABILITIES $1,588 $1,593
----------------
</TABLE>
NOTE 10
RETIREMENT BENEFITS
In 1998, the Company adopted SFAS 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which resulted in revisions to the
1997 and 1996 information previously reported.
The Company has defined-benefit retirement plans covering substantially all
of its employees. Benefits are based on the employees' years of service and
compensation. The Company's plans are funded in compliance with income tax
regulations and federal funding requirements.
AmerenUE's plans cover qualified employees of AmerenUE as well as certain
employees of Ameren Services Company, another wholly-owned subsidiary of Ameren.
Following is the pension plan information related to AmerenUE's plans as of
December 31.
Pension costs for the years 1998, 1997 and 1996, were $28 million, $24
million and $28 million, respectively, of which approximately 19%, 17% and 19%,
respectively, was charged to construction accounts.
34 1998 Annual Report
<PAGE> 22
Funded Status of Pension Plans:
<TABLE>
<CAPTION>
In Millions 1998 1997
- ------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
<S> <C> <C>
Net benefit obligation at beginning of year $ 999 $ 919
Service cost 24 22
Interest cost 70 69
Amendments 10 -
Actuarial loss 38 42
Special termination benefit charge 7 -
Benefits paid (88) (53)
--------------
Net benefit obligation at end of year 1,060 999
--------------
CHANGE IN PLAN ASSETS*
Fair value of plan assets at
beginning of year 1,006 924
Actual return on plan assets 122 134
Employer contributions 1 1
Benefits paid (88) (53)
--------------
Fair value of plan assets at end of year 1,041 1,006
--------------
Funded status - (excess)/deficiency 19 (7)
Unrecognized net actuarial gain 121 115
Unrecognized prior service cost (73) (69)
Unrecognized net transition assets 6 7
--------------
ACCRUED PENSION COST AT DECEMBER 31 $ 73 $ 46
==============
</TABLE>
* Plan assets consist principally of common stocks and fixed income securities.
Components of Net Periodic Benefit Cost:
<TABLE>
<CAPTION>
In Millions 1998 1997 1996
- ------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 24 $22 $22
Interest cost 70 69 65
Expected return on plan assets (75) (71) (66)
Amortization of:
Transition asset (1) (1) (1)
Prior service cost 6 7 7
Actual (gain)/loss (3) (2) 1
Special termination benefit charge 7 - -
-------------------
NET PERIODIC BENEFIT COST $ 28 $24 $28
===================
</TABLE>
WEIGHTED-AVERAGE ASSUMPTIONS FOR ACTUARIAL
PRESENT VALUE OF PROJECTED BENEFIT OBLIGATIONS:
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------
<S> <C> <C>
Discount rate at measurement date 6.75% 7%
Expected return on plan assets 8.5% 8.5%
Increase in future compensation 4% 4%
</TABLE>
AmerenCIPS' plans cover substantially all employees of AmerenCIPS as well
as certain employees of Ameren Services Company. In 1998, AmerenCIPS changed its
measurement date for valuation of plan assets and liabilities to December 31.
1997 amounts have been restated to conform to the new date. Following is the
pension plan information related to AmerenCIPS' plans as of December 31.
Pension costs for the years 1998, 1997 and 1996 were $9 million, $5 million
and $4 million, respectively, of which approximately 19% in 1998 and 15% in 1997
and 1996 was charged to construction accounts.
Funded Status of Pension Plans:
<TABLE>
<CAPTION>
In Millions 1998 1997
- ------------------------------------------------------------
Change in benefit obligation
<S> <C> <C>
Net benefit obligation at beginning of year $ 249 $ 214
Service cost 8 7
Interest cost 17 16
Amendments 5 -
Actuarial loss 8 19
Special termination benefit charge 5 -
Benefits paid (31) (7)
-------------
Net benefit obligation at end of year 261 249
-------------
CHANGE IN PLAN ASSETS*
Fair value of plan assets at
beginning of year 319 265
Actual return on plan assets 38 52
Employer contributions 5 9
Benefits paid (31) (7)
-------------
Fair value of plan assets at end of year 331 319
-------------
Funded status - excess (70) (70)
Unrecognized net actuarial gain 73 65
Unrecognized prior service cost (13) (11)
Unrecognized net transition assets 2 3
-------------
PREPAID PENSION COST AT DECEMBER 31 $ (8) $ (13)
=============
</TABLE>
* Plan assets consist principally of common and preferred stocks, bonds, money
market instruments and real estate.
Components of Net Periodic Benefit Cost:
<TABLE>
<CAPTION>
In Millions 1998 1997 1996
- ------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 8 $ 7 $ 7
Interest cost 17 16 13
Expected return on plan assets (22) (19) (16)
Amortization of:
Prior service costs 1 1 -
Special termination benefit charge 5 - -
---------------------
NET PERIODIC BENEFIT COST $ 9 $ 5 $ 4
---------------------
</TABLE>
WEIGHTED-AVERAGE ASSUMPTIONS FOR ACTUARIAL
PRESENT VALUE OF PROJECTED BENEFIT OBLIGATIONS:
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------
<S> <C> <C>
Discount rate at measurement date 6.75% 7.25%
Expected return on plan assets 8.5% 8.5%
Increase in future compensation 4% 4.5%
</TABLE>
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees. The Company
accrues the expected postretirement benefit costs during employees' years of
service.
Ameren Corporation 35
<PAGE> 23
The following is information related to AmerenUE's postretirement benefit
plans as of December 31.
AmerenUE's funding policy is to annually contribute the net periodic cost
to a Voluntary Employee Beneficiary Association trust (VEBA). Postretirement
benefit costs were $43 million for 1998 and $44 million for both 1997 and 1996,
of which approximately 17% was charged to construction accounts in 1998 and
1997, and 19% in 1996. AmerenUE's transition obligation at December 31, 1998 is
being amortized over the next 14 years.
The MoPSC and the ICC allow the recovery of postretirement benefit costs in
rates to the extent that such costs are funded. In December 1995, AmerenUE
established two external trust funds for retiree health care and life insurance
benefits. In 1998, 1997 and 1996, claims were paid out of the plan trust funds.
Funded Status of the Plans:
<TABLE>
<CAPTION>
In Millions 1998 1997
- ------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
<S> <C> <C>
Net benefit obligation at beginning of year $333 $311
Service cost 14 12
Interest cost 24 23
Actuarial loss 9 5
Benefits paid (20) (18)
------------
Net benefit obligation at end of year 360 333
------------
CHANGE IN PLAN ASSETS*
Fair value of plan assets at
beginning of year 81 47
Actual return on plan assets 8 9
Employer contributions 44 44
Unincorporated business income tax (3) (1)
Benefits paid (20) (18)
------------
Fair value of plan assets at end of year 110 81
------------
Funded status - deficiency 250 252
Unrecognized net actuarial gain 11 18
Unrecognized prior service cost (3) -
Unrecognized net transition obligation (175) (187)
------------
Postretirement benefit liability
at December 31 $ 83 $ 83
============
</TABLE>
* Plan assets consist principally of common stocks and fixed income securities.
Components of Net Periodic Benefit Cost:
<TABLE>
<CAPTION>
In Millions 1998 1997 1996
- ------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 14 $ 12 $ 12
Interest cost 24 23 22
Expected return on plan assets (5) (2) (1)
Amortization of:
Transition obligation 12 12 12
Actuarial gain (2) (1) (1)
--------------------
Net periodic benefit cost $ 43 $ 44 $ 44
====================
</TABLE>
ASSUMPTIONS FOR THE OBLIGATION MEASUREMENTS:
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------
<S> <C> <C>
Discount rate at measurement date 6.75% 7%
Expected return on plan assets 8.5% 8.5%
Medical cost trend rate - initial 5.75% 7%
- ultimate 4.75% 5%
Ultimate medical cost trend rate
expected in year 2000 2000
=============
</TABLE>
A 1% increase in the medical cost trend rate is estimated to increase the
net periodic cost and the accumulated postretirement benefit obligation
approximately $4 million and $29 million, respectively. A 1% decrease in the
medical cost trend rate is estimated to decrease the net periodic cost and the
accumulated postretirement benefit obligation approximately $4 million and $29
million, respectively.
The following is information related to AmerenCIPS' postretirement benefit
plans as of December 31.
AmerenCIPS' funding policy is to fund the two VEBAs and the 401(h) account
established within the AmerenCIPS retirement income trust with the lessor of the
net periodic cost or the amount deductible for federal income tax purposes. In
1998, AmerenCIPS changed its measurement date for valuation of plan assets and
liabilities to December 31. 1997 amounts have been restated to conform to the
new date. Following is the postretirement plan information related to
AmerenCIPS' plans as of December 31.
Postretirement benefit costs were $6 million for 1998, $12 million for
1997, and $16 million for 1996, of which approximately 20% was charged to
construction accounts in 1998, 17% in 1997, and 15% in 1996. AmerenCIPS'
transition obligation at December 31, 1998 is being amortized over the next 14
years.
The ICC allows the recovery of postretirement benefit costs in rates to the
extent that such costs are funded.
36 1998 Annual Report
<PAGE> 24
<TABLE>
<CAPTION>
Funded Status of the Plans:
In Millions 1998 1997
- ------------------------------------------------------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Net benefit obligation at beginning of year $ 140 $ 139
Service cost 3 4
Interest cost 10 10
Actuarial (gain)/loss 4 (9)
Benefits paid (5) (4)
-------------
Net benefit obligation at end of year 152 140
-------------
CHANGE IN PLAN ASSETS*
Fair value of plan assets at beginning of year 115 88
Actual return on plan assets 16 20
Employer contributions 4 12
401(h) transfer (2) (1)
Benefits paid (5) (4)
-------------
Fair value of plan assets at end of year 128 115
-------------
Funded status - deficiency 24 25
Unrecognized net actuarial gain 58 63
Unrecognized net transition obligation (76) (84)
-------------
POSTRETIREMENT BENEFIT LIABILITY
AT DECEMBER 31 $ 6 $ 4
=============
</TABLE>
* Plan assets consist principally of common and preferred stocks, bonds, money
market instruments and real estate.
Components of Net Periodic Benefit Cost:
<TABLE>
<CAPTION>
In Millions 1998 1997 1996
- -------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 3 $ 4 $ 4
Interest cost 10 10 11
Expected return on plan assets (8) (5) (4)
Amortization of:
Transition obligation 5 5 6
Actual gain (4) (2) (1)
-------------------
NET PERIODIC BENEFIT COST $ 6 $12 $16
===================
</TABLE>
Assumptions for the Obligation Measurements:
<TABLE>
<CAPTION>
1998 1997
--------------
<S> <C> <C>
Discount rate at measurement date 6.75% 7.25%
Expected return on plan assets 8.5% 8.5%
Medical cost trend rate - initial 5.75% 8.5%
- ultimate 4.75% 5.5%
Ultimate medical cost trend rate
expected in year 2000 2000
=============
</TABLE>
A 1% increase in the medical cost trend rate is estimated to increase the
net periodic cost and the accumulated postretirement benefit obligation
approximately $2 million and $22 million, respectively. A 1% decrease in the
medical cost trend rate is estimated to decrease the net periodic cost and the
accumulated postretirement benefit obligation approximately $2 million and $22
million, respectively.
NOTE 11
STOCK OPTION PLANS
In 1998, the Company adopted a long-term incentive plan (the Plan) for
eligible employees, replacing the plan previously in place at AmerenUE. The Plan
provides for the grant of options, performance awards, restricted stock,
dividend equivalents and stock appreciation rights. Under the terms of the Plan,
options may be granted at a price not less than the fair market value of the
common shares at the date of grant. Granted options vest over a period of five
years, beginning at the date of grant, and provide for acceleration of
exercisability of the options upon the occurrence of certain events, including
retirement. Outstanding options expire on various dates through 2008. Under the
Plan, subject to adjustment as provided in the Plan, four million shares have
been authorized to be issued or delivered under the Company's plan. In
accordance with APB 25, no compensation cost has been recognized for the
Company's stock compensation plans. In 1996, the Company adopted the
disclosure-only method of fair value data under SFAS 123, "Accounting for
Stock-Based Compensation." If the fair value-based accounting method under this
statement had been used to account for stock-based compensation cost, the
effects on 1998, 1997 and 1996 net income and earnings per share would have been
immaterial.
The following table summarizes stock option activity during 1998, 1997 and
1996:
<TABLE>
<CAPTION>
1998
-------------------
Weighted
Average
Exercise
Shares Price
- ------------------------------------------------------------
<S> <C> <C>
Outstanding at beginning of year 496,070 $ 39.24
Granted 700,600 39.25
Exercised 72,390 36.81
Cancelled or expired 28,097 39.28
------------------
Outstanding at end of year 1,096,183 39.41
Exercisable at end of year 174,656 39.91
==================
</TABLE>
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 307,390 $39.71 142,500 $35.87
Granted 195,880 38.50 165,590 43.00
Exercised - - - -
Cancelled or expired 7,200 39.56 700 35.88
---------------------------------
Outstanding at end of year 496,070 39.24 307,390 39.71
Exercisable at end of year 134,785 38.55 39,710 38.86
---------------------------------
</TABLE>
Ameren Corporation 37
<PAGE> 25
Additional information about stock options outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Weighted Average
Exercise Price Outstanding Shares Life (Years) Exercisable Shares
- -------------------------------------------------------------------------
<S> <C> <C> <C>
$35.50 800 6.6 400
35.875 87,275 6.3 41,275
38.50 177,190 8.1 15,480
39.25 665,850 9.3 46,200
39.8125 5,300 9.5 -
43.00 159,768 7.1 71,301
- -------------------------------------------------------------------------
</TABLE>
The fair values of stock options were estimated using a binomial
option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
Risk-free Expected
Grant Date Interest Rate Option Term Expected Volatility Dividend Yield
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6/16/98 5.63% 10 years 17.68% 6.55%
4/28/98 6.01% 10 years 17.63% 6.55%
2/10/97 5.70% 10 years 13.17% 6.53%
2/7/96 5.87% 10 years 13.67% 6.32%
- -------------------------------------------------------------------------
</TABLE>
NOTE 12
COMMITMENTS AND CONTINGENCIES
The Company is engaged in a capital program under which expenditures
averaging approximately $488 million, including AFC, are anticipated during each
of the next five years. This estimate includes capital expenditures for the
purchase of six new combustion turbines (CTs), as well as expenditures which
will be incurred by the Company to meet new air quality standards for ozone and
particulate matter, as discussed later in this Note.
The Company has commitments for the purchase of coal under long-term
contracts. Coal contract commitments, including transportation costs, for 1999
through 2003 are estimated to total $1.6 billion. Total coal purchases,
including transportation costs, for 1998, 1997 and 1996 were $567 million, $547
million and $589 million, respectively. The Company also has existing contracts
with pipeline and natural gas suppliers to provide, transport and store natural
gas for distribution and electric generation. Gas-related contract cost
commitments for 1999 through 2003 are estimated to total $116 million. Total
delivered natural gas costs were $119 million for 1998 and $161 million for both
1997 and 1996. The Company's nuclear fuel commitments for 1999 through 2003,
including uranium concentrates, conversion, enrichment and fabrication, are
expected to total $107 million, and are expected to be financed under the
nuclear fuel lease. Nuclear fuel expenditures for 1998, 1997 and 1996, were $20
million, $35 million and $51 million, respectively. Additionally, the Company
has long-term contracts with other utilities to purchase electric capacity.
These commitments for 1999 through 2003 are estimated to total $203 million.
During 1998, 1997 and 1996, electric capacity purchases were $38 million, $36
million and $45 million, respectively.
During 1996, the Company restructured its contract with one of its major
coal suppliers. In 1997, the Company paid a $70 million restructuring payment to
the supplier, which allowed it to purchase at market prices low-sulfur,
non-Illinois coal through the supplier (in substitution for the high-sulfur
Illinois coal the Company was obligated to purchase under the original
contract); and would receive options for future purchases of low-sulfur,
non-Illinois coal from the supplier through 1999 at set negotiated prices.
By switching to low-sulfur coal, the Company was able to discontinue
operating a generating station scrubber. The benefits of the restructuring
include lower cost coal, avoidance of significant capital expenditures to
renovate the scrubber, and elimination of scrubber operating and maintenance
costs (offset by scrubber retirement expenses). The net benefits of
restructuring are expected to exceed $100 million through 2007. In December
1996, the ICC entered an order approving the switch to non-Illinois coal,
recovery of the restructuring payment, plus associated carrying costs
(Restructuring Charges) through the retail uniform fuel adjustment clause (FAC)
over six years, and continued recovery in rates of the undepreciated scrubber
investment plus costs of removal. Additionally, in May 1997 the FERC approved
recovery of the wholesale portion of the Restructuring Charges through the
wholesale FAC. As a result of the ICC and FERC orders, the Company classified
the $72 million of the Restructuring Charges made to the coal supplier in
February 1997 as a regulatory asset and, through December 1997, recovered
approximately $10 million of the Restructuring Charges through the retail FAC
and from wholesale customers.
A group of industrial customers filed with the Illinois Third District
Appellate Court (the Court) in February 1997 an appeal of the December 1996
order of the ICC. In November 1997, the Court reversed the ICC's December 1996
order, finding that the Restructuring Charges were not direct costs of fuel that
may be recovered through the retail FAC, but rather should be considered as a
part of a review of aggregate revenue requirements in a full rate case.
Restructuring Charges allocated to wholesale customers (approximately $7
million) are not in question as a result of the opinion of the Court. In
December 1997, the Company requested a rehearing by the Court; that request was
denied. However, the Court did rule that all revenues collected under the retail
FAC in 1997 would not have to be refunded to customers. The Company filed an
appeal with the Illinois Supreme Court. In December 1998, the Supreme Court
issued its decision, reversing the Court's opinion and affirming the ICC's
order. The Supreme Court held that the Restructuring Charges are recoverable
through the retail FAC. No further proceedings are anticipated.
The recoverability of the Restructuring Charges under the retail FAC in
Illinois was also impacted by the Law. Among other things, the Law provides
utilities with the option to eliminate the retail FAC and limits the ability of
utilities to file a full rate case for its aggregate revenue requirements. After
evaluating the impact of the Law on the future recoverability of the Company's
Restructuring Charges through future rates, the Company wrote off the
unamortized balance of the Illinois retail portion of its Restructuring Charges
as of December 31, 1997 ($34 million, net of income taxes). See Note 2 -
Regulatory Matters for further information.
38 1998 Annual Report
<PAGE> 26
The Company's insurance coverage for Callaway Nuclear Plant at December 31,
1998 was as follows:
TYPE AND SOURCE OF COVERAGE
<TABLE>
<CAPTION>
Maximum
Assessments
Maximum for Single
In Millions Coverages Incidents
- -------------------------------------------------------------
Public Liability:
<S> <C> <C>
American Nuclear Insurers $ 200 $ -
Pool Participation 9,602 88(a)
-------------------
$9,802(b) $88
-------------------
Nuclear Worker Liability:
American Nuclear Insurers $ 200(c) $ 3
-------------------
Property Damage:
Nuclear Electric Insurance Ltd. $2,750(d) $13
-------------------
Replacement Power:
Nuclear Electric Insurance Ltd. $ 494(e) $ 3
===================
</TABLE>
(a) Retrospective premium under the Price-Anderson liability provisions of the
Atomic Energy Act of 1954, as amended, (Price-Anderson). Subject to
retrospective assessment with respect to loss from an incident at any U.S.
reactor, payable at $10 million per year. Price-Anderson expires in 2002.
(b) Limit of liability for each incident under Price-Anderson.
(c) Industry limit for potential liability from workers claiming exposure to the
hazard of nuclear radiation.
(d) Includes premature decommissioning costs.
(e) Weekly indemnity of $3.5 million, for 58 weeks which commences after the
first 17 weeks of an outage, plus $2.8 million per week for 104 weeks
thereafter.
Price-Anderson limits the liability for claims from an incident involving
any licensed U.S. nuclear facility. The limit is based on the number of licensed
reactors and is adjusted at least every five years based on the Consumer Price
Index. Utilities owning a nuclear reactor cover this exposure through a
combination of private insurance and mandatory participation in a financial
protection pool as established by Price-Anderson.
If losses from a nuclear incident at Callaway exceed the limits of, or are
not subject to, insurance, or if coverage is not available, the Company will
self-insure the risk. Although the Company has no reason to anticipate a serious
nuclear incident, if one did occur it could have a material but indeterminable
adverse effect on the Company's financial position, results of operations or
liquidity.
Under Title IV of the Clean Air Act Amendments of 1990, the Company is
required to significantly reduce total annual sulfur dioxide (SO2) and nitrogen
oxide (NOx) emissions by the year 2000. By switching to low-sulfur coal, early
banking of emissions credits and installing low NOx burner technology, the
majority of these reductions have been achieved.
In July 1997, the United States Environmental Protection Agency (EPA)
issued final regulations revising the National Ambient Air Quality Standards for
ozone and particulate matter. The new ambient standards may result in additional
significant reductions in SO2 and NOx emissions from the Company's power plants.
The new particulate matter standards may require SO2 reductions of up to 50%
beyond that already required by Phase II acid rain control provisions of the
1990 Clean Air Act Amendments and could be required by 2007. The full details of
these requirements are under study by the Company. At this time, the Company is
unable to predict the ultimate impact of these revised air quality standards on
its future financial condition, results of operations or liquidity.
In an attempt to lower ozone levels across the eastern United States, the
EPA issued final regulations in September 1998 pertaining to NOx emissions from
coal-fired boilers and other sources in 22 states, including Missouri and
Illinois (where all of the Company's coal-fired power plant boilers are
located). Although reduction requirements in NOx emissions from the Company's
coal-fired boilers are anticipated to exceed 75% from 1990 levels by the year
2003, it is not yet possible to determine the exact magnitude of the reductions
required from the Company's power plants because each state has up to one year
to develop a plan to comply with the EPA rule. The NOx emissions reductions
already achieved on several of the Company's coal-fired power plants will help
to reduce the costs of compliance with this regulation. However, preliminary
analysis of the regulations indicate that selective catalytic reduction
technology will be required for some of the Company's units, as well as other
additional controls.
Currently, the Company estimates that its additional capital expenditures
to comply with the EPA's final regulations issued in September 1998, could range
from $250 million to $350 million over the period from 1999 to 2002. Associated
operations and maintenance expenditures could increase $10 million to $15
million annually, beginning in 2003. The Company will explore alternatives to
comply with these new regulations in order to minimize, to the extent possible,
its capital costs and operating expenses. The Company is unable to predict the
ultimate impact of these standards on its future financial condition, results of
operations or liquidity.
In November 1998, the United States signed an agreement with numerous other
countries (the Kyoto Protocol) containing certain environmental provisions,
which would require decreases in greenhouse gases in an effort to address the
"global warming" issue. The Kyoto Protocol must be ratified by the United States
Senate before provisions are effective for the United States. Until ratification
is obtained, the Company is unable to predict what requirements, if any, will be
adopted in this country; however, implementation of the Kyoto Protocol in its
present form would likely result in significantly higher capital costs and
operations and maintenance expenses by the Company. At this time, the Company is
unable to determine the impact of these proposals on the Company's future
financial condition, results of operations or liquidity.
As of December 31, 1998, the Company's utility operating subsidiaries were
designated as potentially responsible parties (PRP) by federal and state
environmental protection agencies at five hazardous waste sites. Other hazardous
waste sites have been identified for which the Company may be responsible but
has not been designated a PRP.
Costs relating to studies and remediation and associated legal and
litigation expenses at the sites located in Illinois are being accrued and
deferred rather than expensed currently, pending recovery through rates. Through
December 31, 1998, the total of the costs deferred, net of recoveries from
insurers and through environmental adjustment clause rate riders approved by the
ICC, was $12 million.
The ICC has instituted a reconciliation proceeding to review the Company's
environmental remediation activities from 1993 through 1997 and to determine
whether the revenues collected from customers under its environmental adjustment
clause rate rid-
Ameren Corporation 39
<PAGE> 27
ers were consistent with the amount of remediation costs prudently and properly
incurred. Amounts found to have been incorrectly included under the riders would
be subject to refund. Rulings from the ICC are still pending with respect to
these proceedings applicable to the years 1993 through 1996. The reconciliation
proceedings relating to the Company's 1997 environmental remediation activities
were commenced in April 1998, but have not yet been submitted to the ICC for a
decision.
The Company continually reviews remediation costs that may be required for
all of these sites. Any unrecovered environmental costs are not expected to have
a material adverse effect on the Company's financial position, results of
operations or liquidity.
In 1998, the Company committed to purchase six new CT peaking units. The
CTs will add over 700 megawatts to the Company's net peaking capacity and are
expected to cost approximately $260 million. Three of the CTs are expected to be
installed in 2000, and the remaining three in 2001.
The International Union of Operating Engineers Local 148 and the
International Brotherhood of Electrical Workers Local 702 filed unfair labor
practice charges with the National Labor Relations Board (NLRB), relating to the
legality of the 1993 lockout of both unions by AmerenCIPS. The NLRB issued
complaints against AmerenCIPS concerning its lockout. Both unions sought, among
other things, back pay and other benefits for the period of the lockout. At that
time, the Company estimated the amount of back pay and other benefits for both
unions to be approximately $17 million. In May 1996, an administrative law judge
of the NLRB ruled that the lockout was unlawful. In July 1996, the Company
appealed to the NLRB. In August 1998, a three-member panel of the NLRB reversed
the administrative law judge's decision and ruled that the lockout was lawful.
Both unions filed motions for review with the NLRB asking for reconsideration of
this decision. In December 1998, the NLRB denied the unions' motions for
reconsideration. Subsequently, in December 1998, the unions filed a joint motion
for a rehearing of their motions for reconsideration. The NLRB has not ruled on
this latest motion. The Company continues to believe that the lockout was both
lawful and reasonable and that the final resolution of the dispute will not have
a material adverse effect on its financial position, results of operations or
liquidity.
Certain employees of the Company are represented by the International
Brotherhood of Electrical Workers and the International Union of Operating
Engineers. These employees comprise approximately 70% of the Company's
workforce. The collective bargaining agreements covering 98% of these
represented employees expire in July 1999. Preliminary discussions with these
collective bargaining units are currently underway. At this time, the Company is
unable to predict the impact of these negotiations on its future financial
condition, results of operations or cash flows.
Regulatory changes enacted and being considered at the federal and state
levels continue to change the structure of the utility industry and utility
regulation, as well as encourage increased competition. At this time, the
Company is unable to predict the impact of these changes on the Company's future
financial condition, results of operations or liquidity. See Note 2 Regulatory
Matters for further information.
The Company is involved in other legal and administrative proceedings
before various courts and agencies with respect to matters arising in the
ordinary course of business, some of which involve substantial amounts. The
Company believes that the final disposition of these proceedings will not have a
material adverse effect on its financial position, results of operations or
liquidity.
NOTE 13
CALLAWAY NUCLEAR PLANT
Under the Nuclear Waste Policy Act of 1982, the Department of Energy (DOE)
is responsible for the permanent storage and disposal of spent nuclear fuel. The
DOE currently charges one mill per nuclear-generated kilowatthour sold for
future disposal of spent fuel. Electric rates charged to customers provide for
recovery of such costs. The DOE is not expected to have its permanent storage
facility for spent fuel available until at least 2015. The Company has
sufficient storage capacity at the Callaway site until 2004 and is pursuing a
viable storage alternative. This alternative has been approved by the Nuclear
Regulatory Commission, and when implemented, will provide sufficient spent fuel
storage for the licensed life of the plant. The delayed availability of the
DOE's disposal facility is not expected to adversely affect the continued
operation of Callaway Plant.
Electric rates charged to customers provide for recovery of Callaway Plant
decommissioning costs over the life of the plant, based on an assumed 40-year
life, ending with expiration of the plant's operating license in 2024. The
Callaway site is assumed to be decommissioned using the DECON (immediate
dismantlement) method. Decommissioning costs, including decontamination,
dismantling and site restoration, are estimated to be $485 million in current
year dollars and are expected to escalate approximately 4% per year through the
end of decommissioning activity in 2033. Decommissioning costs are charged to
depreciation expense over Callaway's service life and amounted to $7 million in
each of the years 1998, 1997 and 1996. Every three years, the MoPSC requires the
Company to file updated cost studies for decommissioning Callaway, and electric
rates may be adjusted at such times to reflect changed estimates. The latest
study was filed in 1996. Costs collected from customers are deposited in an
external trust fund to provide for Callaway's decommissioning. Fund earnings are
expected to average 9.25% annually through the date of decommissioning. If the
assumed return on trust assets is not earned, the Company believes it is
probable that such earnings deficiency will be recovered in rates. Trust fund
earnings, net of expenses, appear on the consolidated balance sheet as increases
in the nuclear decommissioning trust fund and in the accumulated provision for
nuclear decommissioning.
The staff of the SEC has questioned certain current accounting practices of
the electric utility industry, regarding the recognition, measurement and
classification of decommissioning costs for nuclear generating stations in the
financial statements of electric utilities. In response to these questions, the
Financial Accounting Standards Board has agreed to review the accounting for
removal costs, including decommissioning. The Company does not expect that
changes in the accounting for nuclear decommissioning costs will have a material
effect on its financial position, results of operations or liquidity.
40 1998 Annual Report
<PAGE> 28
NOTE 14
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
CASH AND TEMPORARY INVESTMENTS/SHORT-TERM BORROWINGS
The carrying amounts approximate fair value because of the short-term
maturity of these instruments.
MARKETABLE SECURITIES
The fair value is based on quoted market prices obtained from dealers or
investment managers.
NUCLEAR DECOMMISSIONING TRUST FUND
The fair value is estimated based on quoted market prices for securities.
Preferred Stock of Subsidiaries
The fair value is estimated based on the quoted market prices for the same
or similar issues.
LONG-TERM DEBT
The fair value is estimated based on the quoted market prices for same or
similar issues or on the current rates offered to the Company for debt of
comparable maturities.
Carrying amounts and estimated fair values of the Company's financial
instruments at December 31:
<TABLE>
<CAPTION>
1998 1998 1997 1997
Carrying Fair Carrying Fair
In Millions Amount Value Amount Value
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marketable securities $ 14 $ 14 $ 32 $ 32
Preferred stock 235 235 235 214
Long-term debt
(including current portion) 2,491 2,659 2,558 2,692
================================
</TABLE>
The Company has investments in debt and equity securities that are held in
trust funds for the purpose of funding the nuclear decommissioning of Callaway
Nuclear Plant (see Note 13 - Callaway Nuclear Plant). The Company has classified
these investments in debt and equity securities as available for sale and has
recorded all such investments at their fair market value at December 31, 1998
and 1997. In 1998, 1997 and 1996, the proceeds from the sale of investments were
$29 million, $24 million and $20 million, respectively. Using the specific
identification method to determine cost, the gross realized gains on those sales
were approximately $2 million for both 1998 and 1997 and $1 million for 1996.
Net realized and unrealized gains and losses are reflected in the accumulated
provision for nuclear decommissioning on the consolidated balance sheet, which
is consistent with the method used by the Company to account for the
decommissioning costs recovered in rates.
Costs and fair values of investments in debt and equity securities in
the nuclear decommissioning trust fund at December 31 were as follows:
<TABLE>
<CAPTION>
1998 In Millions Gross Unrealized
------------------------------------
Security Type Cost Gain (Loss) Fair Value
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities $48 $ 4 $ - $ 52
Equity securities 46 62 - 108
Cash equivalents 2 - - 2
------------------------------------
$96 $66 $ - $162
====================================
<CAPTION>
1997 In Millions Gross Unrealized
------------------------------------
Security Type Cost Gain (Loss) Fair Value
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities $34 $ 3 $ - $ 37
Equity securities 43 40 - 83
Cash equivalents 2 - - 2
- --------------------------------------------------------------
$79 $43 $ - $122
====================================
</TABLE>
The contractual maturities of investments in debt securities at December 31,
1998 were as follows:
<TABLE>
<CAPTION>
In Millions Cost Fair Value
- --------------------------------------------------------------
<S> <C> <C>
1 year to 5 years $ 3 $ 3
5 years to 10 years 21 22
Due after 10 years 24 27
---------------
$48 $52
===============
</TABLE>
NOTE 15
SEGMENT INFORMATION
In 1998, the Company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." Ameren's principal business segment is
comprised of the two regulated utility operating companies that provide electric
and gas service in portions of Missouri and Illinois. The other reportable
segment includes the non-regulated subsidiaries, as well as the Company's 60%
interest in Electric Energy, Inc.
The accounting policies of the segments are the same as those described in
Note 1 - Summary of Significant Accounting Policies. Segment data includes
intersegment revenues, as well as a charge allocating costs of administrative
support services to each of the operating companies. These costs are accumulated
in a separate subsidiary, Ameren Services Company, which provides a variety of
support services to Ameren and its subsidiaries. The Company evaluates the
performance of its segments and allocates resources to them, based on revenues,
operating income and net income.
Ameren Corporation 41
<PAGE> 29
The table below presents information about the reported revenues, operating
income, net income and total assets of Ameren Corporation for the years ended
December 31:
<TABLE>
<CAPTION>
Regulated Reconciling
1998 In Millions Utilities All Other Items Total
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $3,230 $190 $(102)* $3,318
Operating income 548 21 2 571
Net income 380 6 - 386
Total assets 8,594 237 16 8,847
==============================================================
1997 In Millions
- --------------------------------------------------------------
Revenues $3,139 $243 $ (55)* $3,327
Operating income 551 31 - 582
Net income 321 14 - 335
Total assets 8,591 243 (6) 8,828
=============================================================
1996 In Millions
- --------------------------------------------------------------
Revenues $3,141 $235 $ (48)* $3,328
Operating income 545 31 - 576
Net income 358 14 - 372
Total assets 8,666 272 (5) 8,933
==============================================================
</TABLE>
*Elimination of intercompany revenues.
Specified items included in segment profit/loss for the years ended December 31:
<TABLE>
<CAPTION>
1998 In Millions Regulated Utilities All Other Total
- -------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $170 $ 9 $179
Depreciation, depletion
and amortization expense 334 14 348
Income tax expense 263 5 268
=============================================================
1997 In Millions
- -------------------------------------------------------------
Interest expense $168 $10 $178
Depreciation, depletion
and amortization expense 331 15 346
Income tax expense 226 8 234
Extraordinary items (52) - (52)
=============================================================
1996 In Millions
- -------------------------------------------------------------
Interest expense $164 $ 9 $173
Depreciation, depletion
and amortization expense 323 16 339
Income tax expense 245 8 253
=============================================================
</TABLE>
Specified items related to segment assets as of December 31:
<TABLE>
<CAPTION>
1998 In Millions Regulated Utilities All Other Total
- -------------------------------------------------------------
<S> <C> <C> <C>
Expenditures for additions
to long-lived assets $290 $31 $321
=============================================================
1997 In Millions
- -------------------------------------------------------------
Expenditures for additions
to long-lived assets $375 $ 6 $381
=============================================================
1996 In Millions
- -------------------------------------------------------------
Expenditures for additions
to long-lived assets $432 $ 4 $436
=============================================================
</TABLE>
42 1998 Annual Report
<PAGE> 30
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Millions of Dollars Except Share and per Share
Amounts and Ratios 1998 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS Year ended December 31,
Operating revenues $3,318 $3,327 $3,328 $3,236 $3,270 $3,272
Operating expenses 2,747 2,744 2,752 2,658 2,685 2,724
Operating income 571 582 576 578 585 548
Income before extraordinary charge 386 387 372 373 391 369
Extraordinary charge, net of income taxes - 52 - - - -
Net income 386 335 372 373 391 369
Average common shares outstanding 137,215,462 137,215,462 137,215,462 137,215,462 137,253,617 137,254,771
--------------------------------------------------------------------------------
ASSETS, OBLIGATIONS AND EQUITY CAPITAL December 31,
Total assets $8,847 $8,828 $8,933 $8,788 $8,629 $8,546
Long-term debt obligations 2,289 2,506 2,335 2,373 2,413 2,301
Preferred stock subject to
mandatory redemption - - 1 1 1 1
Preferred stock not subject to
mandatory redemption 235 235 298 298 298 298
Common equity 3,056 3,019 3,016 2,971 2,917 2,840
--------------------------------------------------------------------------------
FINANCIAL INDICES Year ended December 31,
Earnings per share of common stock
before extraordinary charge $2.82 $2.82 $2.71 $2.72 $2.85 $2.69
Extraordinary charge, net of income taxes - $(.38) - - - -
Earnings per share of common stock
(based on average shares outstanding) $2.82 $2.44 $2.71 $2.72 $2.85 $2.69
Dividend payout ratio 90% 99% 88% 86% 80% 83%
Return on average common stock equity 12.82% 11.14% 12.51% 12.76% 13.69% 13.18%
Ratio earnings to fixed charges
AmerenUE 4.99 4.70 4.68 4.78 4.68 4.66
AmerenCIPS 4.13 3.64 4.30 4.41 4.93 4.82
Book value per common share $22.27 $22.00 $21.98 $21.65 $21.25 $20.69
--------------------------------------------------------------------------------
CAPITALIZATION RATIOS December 31,
Common equity 54.8% 52.4% 53.4% 52.6% 51.8% 52.2%
Preferred stock 4.2 4.1 5.3 5.3 5.3 5.5
Long-term debt 41.0 43.5 41.3 42.1 42.9 42.3
--------------------------------------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
================================================================================
</TABLE>
Ameren Corporation 43
<PAGE> 31
Electric Operating Statistics
<TABLE>
<CAPTION>
Year Ended December 31, 1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC OPERATING REVENUES Millions
<S> <C> <C> <C> <C> <C> <C>
Residential $1,125 $1,064 $1,070 $1,073 $1,014 $1,037
Commercial 966 927 920 906 884 861
Industrial 511 500 500 496 487 486
Wholesale 91 91 91 87 84 81
Other 23 24 28 28 22 28
--------------------------------------------------------------------------------------
Native 2,716 2,606 2,609 2,590 2,491 2,493
Interchange 240 224 280 230 243 254
EEI 152 207 198 201 276 251
Miscellaneous 29 47 22 20 20 18
Credit to customers (43) (20) (47) (33) -- --
--------------------------------------------------------------------------------------
TOTAL ELECTRIC OPERATING REVENUES $3,094 $3,064 $3,062 $3,008 $3,030 $3,016
--------------------------------------------------------------------------------------
KILOWATTHOUR SALES Millions
Residential 15,188 14,325 14,418 14,086 13,282 13,636
Commercial 15,555 14,990 14,872 14,464 14,043 13,642
Industrial 11,582 11,404 11,191 10,971 10,728 10,407
Wholesale 2,446 2,323 2,328 2,248 2,137 2,088
Other 303 317 305 316 301 317
--------------------------------------------------------------------------------------
Native 45,074 43,359 43,114 42,085 40,491 40,090
Interchange 8,075 9,402 10,768 8,176 8,080 10,326
EEI 8,296 11,220 10,554 10,850 14,594 12,521
--------------------------------------------------------------------------------------
TOTAL KILOWATTHOUR SALES 61,445 63,981 64,436 61,111 63,165 62,937
--------------------------------------------------------------------------------------
ELECTRIC CUSTOMERS End of Year
Residential 1,289,548 1,282,042 1,275,534 1,267,976 1,258,757 1,248,723
Commercial 181,678 180,206 176,621 173,810 171,072 168,566
Industrial 5,926 6,554 6,660 6,782 6,750 7,137
Wholesale 18 21 20 21 21 21
Miscellaneous 2,193 2,381 2,398 2,434 2,406 2,407
--------------------------------------------------------------------------------------
TOTAL ELECTRIC CUSTOMERS 1,479,363 1,471,204 1,461,233 1,451,023 1,439,006 1,426,854
--------------------------------------------------------------------------------------
RESIDENTIAL CUSTOMER DATA Average
Kilowatthours used 11,986 11,215 11,354 11,152 10,606 10,946
Annual electric bill $873.28 $833.34 $842.82 $849.62 $809.27 $832.46
Revenue per kilowatthour 7.29(cent) 7.38(cent) 7.30(cent) 7.62(cent) 7.63(cent) 7.61(cent)
--------------------------------------------------------------------------------------
GROSS INSTANTANEOUS PEAK DEMAND Megawatts
AmerenUE 8,429 8,055 8,085 7,965 7,430 7,540
AmerenCIPS 2,163 1,923 1,892 1,940 1,854 1,848
--------------------------------------------------------------------------------------
CAPABILITY AT TIME OF PEAK,
INCLUDING NET PURCHASES AND SALES Megawatts
AmerenUE 9,027 8,950 9,120 8,714 8,469 8,597
AmerenCIPS 2,417 2,491 2,519 2,489 2,510 2,439
--------------------------------------------------------------------------------------
GENERATING CAPABILITY AT TIME OF PEAK Megawatts
AmerenUE 8,282 8,279 8,244 8,184 8,057 7,963
AmerenCIPS 3,040 3,033 3,033 3,018 3,018 2,901
--------------------------------------------------------------------------------------
COAL BURNED Tons 22,959,000 21,392,000 20,062,000 17,715,000 16,885,000 14,879,000
--------------------------------------------------------------------------------------
PRICE PER TON OF COAL Average $21.29 $23.54 $25.25 $26.86 $28.02 $33.36
--------------------------------------------------------------------------------------
SOURCE OF ENERGY SUPPLY Percent
Coal 83.5% 83.8% 79.6% 76.3% 76.2% 70.7%
Nuclear 17.7 19.3 19.2 18.3 23.0 19.5
Hydro 3.8 2.7 2.8 3.6 3.9 4.6
Purchased, net (5.0) (5.8) (1.6) 1.8 (3.1) 5.2
--------------------------------------------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
======================================================================================
</TABLE>
44 1998 Annual Report
<PAGE> 32
<TABLE>
<CAPTION>
Year Ended December 31 1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATURAL GAS OPERATING REVENUES Millions
Residential $ 135 $ 150 $ 161 $ 137 $ 138 $ 153
Commercial 50 55 61 51 53 58
Industrial 19 22 21 18 24 22
Off system sales 3 13 -- -- -- --
Miscellaneous 10 10 11 11 10 12
--------------------------------------------------------------------------------------
TOTAL NATURAL GAS OPERATING REVENUES $ 217 $ 250 $ 254 $ 217 $ 225 $ 245
======================================================================================
MMBTU SALES Millions
Residential 21 23 27 24 23 26
Commercial 8 9 11 10 10 10
Industrial 6 6 5 5 6 6
Off system sales 1 5 -- -- -- --
--------------------------------------------------------------------------------------
TOTAL MMBTU SALES 36 43 43 39 39 42
======================================================================================
NATURAL GAS CUSTOMERS End of Year
Residential 263,405 263,588 260,989 257,848 254,328 251,171
Commercial 30,245 30,147 29,911 29,446 29,037 28,676
Industrial 407 412 402 378 351 307
--------------------------------------------------------------------------------------
TOTAL NATURAL GAS CUSTOMERS 296,057 294,147 291,302 287,672 283,716 280,154
======================================================================================
</TABLE>
1998 Annual Report 45
<PAGE> 33
INVESTOR INFORMATION
COMMON STOCK AND DIVIDEND INFORMATION
Ameren's common stock is listed on the New York Exchange (ticker symbol:
AEE). AEE began trading on January 2, 1998, following the merger of Union
Electric Company (UEP) and CIPSCO Incorporated (CIP) on December 31, 1997.
Common stockholders of record totaled 16,000 for Ameren at December 31, 1998.
The following includes the price ranges and dividends paid per common share for
AEE during 1998 and UEP and CIP during 1997:
AEE 1998
- --------------------------------------------------------------------------------
Quarter Ended High Low Close Dividends Paid
March 31 $43 1/8 $35 9/16 42 1/8 63 1/2(cent)
June 30 42 9/16 37 5/8 39 3/4 63 1/2
September 30 42 1/4 37 41 15/16 63 1/2
December 31 44 5/16 39 1/16 42 11/16 63 1/2
--------------------------------------------------------
UEP 1997
- --------------------------------------------------------------------------------
Quarter Ended High Low Close Dividends Paid
March 31 $39 3/4 $36 1/4 36 7/8 63 1/2(cent)
June 30 37 13/16 34 1/2 37 11/16 63 1/2
September 30 38 7/8 36 7/16 38 7/16 63 1/2
December 31 43 3/4 35 5/8 43 1/4 63 1/2
--------------------------------------------------------
CIP 1997
- --------------------------------------------------------------------------------
Quarter Ended High Low Close Dividends Paid
March 31 $37 $34 7/8 35 1/2 52 (cent)
June 30 36 5/8 33 1/2 36 9/16 53
September 30 38 9/16 36 38 1/8 53
December 31 45 36 3/8 44 1/4 53
--------------------------------------------------------
Annual Meeting
The annual meeting of Ameren stockholders will convene at 9 a.m., Tuesday,
April 27, 1999, at Powell Symphony Hall, 718 North Grand Boulevard, St. Louis,
Missouri, The annual meeting of Union Electric Company and Central Illinois
Public Service Company stockholders will convene at 9 a.m., Thursday, April 22,
1999, at Ameren's General Office Building, One Ameren Plaza, 1901 Chouteau, St.
Louis, Missouri.
DRPlus
Through DRPlus -- Ameren's dividend reinvestment and stock purchase plan --
stockholders, customers and employees of Ameren and its subsidiaries can:
- - make cash investments by check or automatic direct debit to their bank
accounts to purchase Ameren common stock, totaling up to $120,000
annually.
- - reinvest their dividends in Ameren common stock -- or receive Ameren
dividends in cash.
- - place Ameren common stock certificates in safekeeping and receive regular
account statements.
If you have not yet exchanged your Union Electric COmpany or CIPSCO
Incorporated common stock certificates for Ameren stock certificates, please
contact the Investor Service Department.
This is not an offer to sell, or a solicitation of an offer to buy, any
securities.
Direct Deposit of Dividends
All register Ameren common and Union Electric Company and Central Illinois
Public Service Company preferred stockholders can have their cash dividends
automatically credited to their bank accounts. This service gives stockholders
immediate access to their dividend on the dividend payment date and eliminates
the possibility of lost or stolen dividend checks.
Ameren's Web Site
To obtain AEE's daily stock price, recent financial statistics and other
information about the company, visit Ameren's home page on the Internet.
Ameren's web site address is:
http:\\www.ameren.com
Investor Services
The company's Investor Services representatives are available to help you each
business day from 7:30 a.m. to 4:30 p.m. (central time). Please write or call:
Ameren Services Company
Investor Service Department
P.O. box 66887
St. Louis, MO 63166-6887
St. Louis area 554-3502
Toll-free 1-800-255-2237
Office
One Ameren Plaza
1901 Chouteau Avenue
St. Louis, MO 63103
314-621-3222
Ameren Common and Union Electric Company and Central Illinois Public Service
Company Preferred Stock Transfer Agent, Registrar and Paying Agent.
Ameren Service Company
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF AMEREN CORPORATION
<TABLE>
<CAPTION>
State or Jurisdiction
Name of Incorporation
- ----------------------------------------------- -----------------------
<S> <C>
Ameren Corporation Missouri
Ameren Development Company Missouri
Ameren Energy Communications, Inc. Missouri
Ameren ERC, Inc. Missouri
Ameren Energy, Inc. Missouri
Ameren Services Company Missouri
Central Illinois Public Service Company (CIPS) Illinois
CIPSCO Investment Company Illinois
CIPSCO Securities Company Illinois
CIPSCO Leasing Company Illinois
CLC Aircraft Leasing Company Illinois
CLC Leasing Company A Illinois
CLC Leasing Company B Illinois
CLC Leasing Company C Illinois
CIPSCO Energy Company Illinois
CEC-PGE-G Co. Illinois
CEC-PGE-L Co. Illinois
CEC-APL-G Co. Illinois
CEC-APL-L Co. Illinois
CEC-PSPL-G Co. Illinois
CEC-PSPL-L Co. Illinois
CEC-MPS-G Co. Illinois
CEC-MPS-L Co. Illinois
CEC-ACE-G Co. Illinois
CEC-ACE-L Co. Illinois
CEC-ACLP Co. Illinois
CIPSCO Venture Company Illinois
Union Electric Company (UE) Missouri
Electric Energy, Inc.1 Illinois
</TABLE>
- ---------------------------
(1) Ameren owns 60% of the common stock.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-43721) and
the Registration Statement on Form S-8 (No. 333-43737 and No. 333-50793) of
Ameren Corporation of our report dated February 4, 1999, which appears on Page
14 of Ameren Corporation's 1998 Annual Report to Shareholders, which is
incorporated by reference in this Annual Report on Form 10-K. We also consent to
the incorporation by reference of our report on the Financial Statements
Schedule, which appears on Page 11 of this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Louis, Missouri
March 30, 1999
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, AMEREN CORPORATION, a Missouri corporation (herein referred to
as the "Company"), is required to file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, its annual report on Form 10-K for the year ended December 31, 1998;
and
WHEREAS, each of the below undersigned holds the office or offices in the
Company set opposite his or her name;
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints
Charles W. Mueller and/or Donald E. Brandt and/or Steven R. Sullivan the true
and lawful attorneys-in-fact of the undersigned, for and in the name, place and
stead of the undersigned, to affix the name of the undersigned to said Form 10-K
and any amendments thereto, and, for the performance of the same acts, each with
power to appoint in their place and stead and as their substitute, one or more
attorneys-in-fact for the undersigned, with full power of revocation; hereby
ratifying and confirming all that said attorneys-in-fact may do by virtue
hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
12th day of February 1999:
<TABLE>
<S> <C>
Charles W. Mueller, Chairman, President,
Chief Executive Officer and Director
(Principal Executive Officer) /s/ Charles W. Mueller
------------------------------
William E. Cornelius, Director /s/ William E. Cornelius
------------------------------
Clifford L. Greenwalt, Director /s/ Clifford L. Greenwalt
------------------------------
Thomas A. Hays, Director /s/ Thomas A. Hays
------------------------------
Richard A. Liddy, Director /s/ Richard A. Liddy
------------------------------
Gordon R. Lohman, Director /s/ Gordon R. Lohman
------------------------------
Richard A. Lumpkin, Director /s/ Richard A. Lumpkin
------------------------------
John Peters MacCarthy, Director /s/ John Peters MacCarthy
------------------------------
Hanne M. Merriman, Director
------------------------------
Paul L. Miller, Jr., Director /s/ Paul L. Miller, Jr.
------------------------------
Robert H. Quenon, Director /s/ Robert H. Quenon
------------------------------
Harvey Saligman, Director /s/ Harvey Saligman
------------------------------
Charles J. Schukai, Director /s/ Charles J. Schukai
------------------------------
Janet McAfee Weakley, Director /s/ Janet McAfee Weakley
------------------------------
James W. Wogsland, Director /s/ James W. Wogsland
------------------------------
Donald E. Brandt, Senior Vice President
(Principal Financial Officer) /s/ Donald E. Brandt
------------------------------
Warner L. Baxter, Vice President and Controller
(Principal Accounting Officer) /s/ Warner L. Baxter
------------------------------
</TABLE>
<PAGE> 2
STATE OF MISSOURI )
) SS.
CITY OF ST. LOUIS )
On this 12th day of February, 1999, before me, the undersigned Notary
Public in and for said State, personally appeared the above-named officers and
directors of Ameren Corporation, known to me to be the persons described in and
who executed the foregoing power of attorney and acknowledged to me that they
executed the same as their free act and deed for the purposes therein stated.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal.
/s/ K. A. Bell
----------------------------------------------
K. A. BELL
Notary Public - Notary Seal
STATE OF MISSOURI
St. Louis County
My Commission Expires: October 13, 2002
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,928,039
<OTHER-PROPERTY-AND-INVEST> 248,571
<TOTAL-CURRENT-ASSETS> 771,160
<TOTAL-DEFERRED-CHARGES> 78,091
<OTHER-ASSETS> 821,578
<TOTAL-ASSETS> 8,847,439
<COMMON> 1,372
<CAPITAL-SURPLUS-PAID-IN> 1,582,548
<RETAINED-EARNINGS> 1,472,200
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,056,120
0
235,197
<LONG-TERM-DEBT-NET> 2,239,794
<SHORT-TERM-NOTES> 58,528
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 184,444
0
<CAPITAL-LEASE-OBLIGATIONS> 49,630
<LEASES-CURRENT> 17,269
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,006,457
<TOT-CAPITALIZATION-AND-LIAB> 8,847,439
<GROSS-OPERATING-REVENUE> 3,318,208
<INCOME-TAX-EXPENSE> 267,673
<OTHER-OPERATING-EXPENSES> 2,479,314
<TOTAL-OPERATING-EXPENSES> 2,746,987
<OPERATING-INCOME-LOSS> 571,221
<OTHER-INCOME-NET> 2,392
<INCOME-BEFORE-INTEREST-EXPEN> 573,613
<TOTAL-INTEREST-EXPENSE> 174,554
<NET-INCOME> 386,497
12,562
<EARNINGS-AVAILABLE-FOR-COMM> 386,497
<COMMON-STOCK-DIVIDENDS> 348,527
<TOTAL-INTEREST-ON-BONDS> 152,689
<CASH-FLOW-OPERATIONS> 803,244
<EPS-PRIMARY> 2.82
<EPS-DILUTED> 2.82
</TABLE>
