<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarterly Period Ended March 31, 1999
[ ] 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)
Missouri 43-1723446
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X. No .
Shares outstanding of each of registrant's classes of common stock as of April
30, 1999: Common Stock, $ .01 par value - 137,215,462
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Ameren Corporation
Index
Page No.
Part I Consolidated Financial Information (Unaudited)
Management's Discussion and Analysis 2
Quantitative and Qualitative Disclosure
About Market Risk 7
Consolidated Balance Sheet
- March 31, 1999 and December 31, 1998 9
Consolidated Statement of Income
- Three months and 12 months ended
March 31, 1999 and 1998 10
Consolidated Statement of Cash Flows
- Three months ended March 31, 1999 and 1998 11
Notes to Consolidated Financial Statements 12
Part II Other Information 15
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PART I. CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Ameren Corporation (Ameren or the Registrant) 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 has a 60 percent ownership interest in Electric Energy, Inc. (EEI), which
is consolidated for financial reporting purposes. In 1998, 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.
The following discussion and analysis should be read in conjunction with the
Notes to Consolidated Financial Statements beginning on page 12, and the
Management's Discussion and Analysis (MD&A), the Audited Consolidated Financial
Statements and the Notes to Consolidated Financial Statements appearing in the
Registrant's 1998 Annual Report to stockholders (which is incorporated by
reference in the Registrant's 1998 Form 10-K).
References to the Registrant 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
First quarter 1999 earnings of $54 million, or 40 cents per share, increased $14
million, or 11 cents per share, from 1998's first quarter earnings. Earnings for
the 12 months ended March 31, 1999, were $401 million, or $2.92 per share,
compared to $330 million, or $2.40 per share, for the preceding 12-month period.
Excluding the extraordinary charge recorded in the fourth quarter of 1997 to
write off the generation-related regulatory assets and liabilities of the
Registrant's Illinois retail electric business, earnings for the 12-month period
ended March 31, 1998, were $381 million, or $2.78 per share.
Earnings and earnings per share fluctuated due to many conditions, primarily:
weather variations, 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 as noted above.
The significant items affecting revenues, costs and earnings during the
three-month and 12-month periods ended March 31, 1999 and 1998 are detailed
below.
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Electric Operations
Electric Operating Revenues Variations for periods ended March 31, 1999
from comparable prior-year periods
- --------------------------------------------------------------------------------
(Millions of Dollars) Three Months Twelve Months
- --------------------------------------------------------------------------------
Rate variations $ (8) $ (21)
Credit to customers (10) (36)
Effect of abnormal weather 4 79
Growth and other 13 37
Interchange sales 29 78
EEI 2 (34)
- --------------------------------------------------------------------------------
$ 30 $ 103
- --------------------------------------------------------------------------------
The $30 million increase in first quarter electric revenues compared to the
year-ago quarter was primarily driven by increased interchange sales due to
strong marketing efforts and greater interchange opportunities, as well as
higher sales to retail customers within the Registrant's service territory as a
result of economic growth in the service area and favorable weather.
Weather-sensitive residential and commercial sales increased 3 percent and 1
percent, respectively, while industrial sales were unchanged. Interchange sales
increased 94 percent for the first quarter of 1999 compared to the year-ago
quarter. These increases were partially offset by rate decreases in both
Missouri and Illinois as well as credits to Missouri electric customers (see
Note 5 under Notes to Consolidated Financial Statements for further
information).
Electric revenues for the 12 months ended March 31, 1999 increased $103 million
compared to the prior 12-month period. The increase in revenues was primarily
driven by warm summer weather, a strong regional economy, and increased
interchange sales due to increased interchange opportunities. Weather-sensitive
residential and commercial sales increased 7 percent and 4 percent,
respectively, while industrial and interchange sales grew 1 percent and 15
percent, respectively. These increases were partially offset by rate decreases
in both Missouri and Illinois as well as credits to Missouri electric customers
(see Note 5 under Notes to Consolidated Financial Statements for further
information) and lower sales to the United States Enrichment Corporation (USEC)
by EEI.
Fuel and Purchased Power Variations for periods ended March 31, 1999
from comparable prior-year periods
- --------------------------------------------------------------------------------
(Millions of Dollars) Three Months Twelve Months
- --------------------------------------------------------------------------------
Fuel:
Variation in generation $ 14 $ 39
Price (7) (32)
Generation efficiencies and other (2) (6)
Purchased power variation 8 17
EEI variation 7 (16)
- --------------------------------------------------------------------------------
$ 20 $ 2
- --------------------------------------------------------------------------------
Fuel and purchased power costs for the first quarter 1999 versus the comparable
prior-year quarter increased $20 million primarily due to increased sales
volume, partially offset by lower fuel prices. The relatively flat fuel and
purchased power costs for the 12 months ended March 31, 1999 versus the
prior-year period were the result of increased generation and purchased power,
driven by higher kilowatthour sales, offset by lower fuel prices and decreased
fuel and purchased power costs at EEI as a result of fewer sales to USEC.
Gas Operations
Gas revenues for the quarter ended March 31, 1999, increased $5 million compared
to the year-ago quarter primarily due to an annual $9 million Illinois gas rate
increase effective February 1999 in addition to an annual $12 million Missouri
gas rate increase effective February 1998. These rate increases were partially
offset by a decrease in industrial sales and a decrease in off-system sales of
gas to others. Gas revenues for the 12-month period ended March 31, 1999,
decreased $13 million compared to the same year-ago period primarily due to a
decline in sales.
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Gas costs for the quarter ended March 31, 1999, increased $3 million due to an
increase in gas prices. Gas costs for the 12 months ended March 31, 1999
decreased $23 million compared to the year-ago period primarily due to lower
sales.
Other Operating Expenses
Other operating expense variations reflected recurring factors such as growth,
inflation, labor and benefit increases.
Other operations expenses decreased $8 million in the first quarter of 1999
versus the comparable prior-year quarter primarily due to decreased injuries and
damages expense and information system-related costs. Other operations expenses
increased $47 million for the 12-month period ended March 31, 1999 compared to
the same year-ago period primarily due to the charge for the targeted separation
plan and increases in injuries and damages expense and information
system-related costs.
Maintenance expenses for the quarter ended March 31, 1999, increased $7 million
compared to the year-ago period primarily due to increased scheduled power plant
maintenance. The $12 million increase in maintenance expenses for the 12-month
period ended March 31, 1999, compared to the prior 12-month period was primarily
due to the scheduled spring refueling outage at the Callaway Nuclear Plant in
1998.
Taxes
Income taxes increased $5 million and $42 million for the three and 12 months
ended March 31, 1999, respectively, due to higher pretax income.
Other Income and Deductions
Miscellaneous, net increased $8 million for the 12-month period ended March 31,
1999, compared to the year-ago period due to increased interest income and gains
on the sale of property.
Balance Sheet
Changes in accounts and wages payable, taxes accrued, other accruals and other
current liabilities resulted from the timing of various payments to taxing
authorities and suppliers.
The $29 million increase in other deferred credits and liabilities was primarily
due to the $20 million estimated credit to Missouri electric customers recorded
in the first quarter of 1999 under the three-year experimental alternative
regulation plan. See Note 5 under Notes to Consolidated Financial Statements for
further information.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $168 million for the quarter ended
March 31, 1999, compared to $115 million during the same 1998 period.
Cash flows used in investing activities totaled $66 million and $62 million for
the three months ended March 31, 1999 and 1998, respectively. Construction
expenditures for the quarter ended March 31, 1999 for constructing new or
improving existing facilities were $77 million. In addition, the Registrant
expended $2 million for the acquisition of nuclear fuel. Capital requirements
for the remainder of 1999 are expected to be principally for construction
expenditures and the acquisition of nuclear fuel.
Cash flows used in financing activities were $104 million for the three months
ended March 31, 1999, compared to $41 million during the same 1998 period. The
Registrant's principal financing activities for the quarter included the
redemption of $29 million of debt and the payment of dividends. On February 12,
1999, the Registrant's Board of Directors declared a quarterly dividend of 63.5
cents per common share that was paid to shareholders on March 31, 1999. Common
stock dividends paid for the 12 months ended March 31, 1999, resulted in a
payout rate of 87 percent of the Registrant's earnings to common stockholders.
Dividends paid to the Registrant's common shareholders relative to net cash
provided by operating activities for the same period were 41 percent. On April
27, 1999, the Registrant's Board of Directors declared a quarterly dividend for
the second quarter of 1999 of 63.5 cents per common share that will be paid to
shareholders on June 30, 1999.
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The Registrant plans to continue utilizing short-term debt to support normal
operations and other temporary requirements. The Registrant and its subsidiaries
are authorized by the Securities and Exchange Commission under PUHCA to have up
to an aggregate $2.8 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 March 31, 1999, the Registrant had committed
bank lines of credit aggregating $217 million (all of which was unused and $185
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 Registrant also has a bank credit agreement due 2003,
which permits the borrowing of up to $200 million on a short-term basis. This
credit agreement is available for the Registrant's own use and for the use of
its subsidiaries. There was $20 million outstanding under this agreement as of
March 31, 1999. Furthermore, the Registrant had $35 million of short-term
borrowings at March 31, 1999.
Additionally, AmerenUE 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 March 31, 1999.
AmerenUE also has a lease agreement that provides for the financing of nuclear
fuel. At March 31, 1999, the maximum amount that could be financed under the
agreement was $120 million. Cash used in financing activities for the three
months ended March 31, 1999, included redemptions under the lease for nuclear
fuel of $4 million, offset by $4 million of issuances. At March 31, 1999, $67
million was financed under the lease.
RATE MATTERS
In March 1999, AmerenUE and AmerenCIPS filed delivery service tariffs with the
Illinois Commerce Commission (ICC) to comply with the requirements of the
Electric Service Customer Choice and Rate Relief Law of 1997. These tariffs
would be used by electric customers who choose to purchase their power from an
alternate supplier. The ICC has until September 1, 1999 to render a decision.
See Note 5 under Notes to Financial Statements for further discussion of Rate
Matters.
ELECTRIC INDUSTRY RESTRUCTURING
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.
One of the major provisions of the Law includes the phasing-in through 2002 of
retail direct access, which allows customers to choose their electric supplier.
The phase-in of retail direct access begins on October 1, 1999, with large
commercial and industrial customers principally comprising the initial group.
The customers in this group represent approximately 10 percent of the
Registrant's total sales. Retail direct access will be offered to the remaining
commercial and industrial customers on December 31, 2000, and to residential
customers on May 1, 2002.
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 Registrant'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 Registrant.
The Registrant'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
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specific to a particular area, such as nuclear and non-nuclear generation
facilities, energy management systems, gas distribution, etc. Ameren has also
engaged certain outside consultants, technicians and other external resources to
aid in formulating and implementing the Plan.
The Registrant 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 Registrant has
contacted hundreds of vendors and suppliers to verify compliance.
The Registrant 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 70 percent complete as of March 31,
1999. The Registrant 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 Registrant has inventoried vendors and major suppliers
and is currently assessing their Year 2000 readiness through surveys, websites
and personal contact. The Registrant plans to follow up with major suppliers and
vendors and verify Year 2000 compliance, where appropriate. The Registrant has
also queried its health insurance providers. To date, the Registrant is not
aware of any problems that would materially impact its financial condition,
results of operations or liquidity. However, the Registrant 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 Registrant.
The Registrant is also addressing the impact of electric power grid problems
that may occur outside of its own electric system. The Registrant 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 April 1, 1999 (the latest information
available), MAIN was finished with its assessment and planning phases and 74
percent complete with its implementation/testing phase. In addition, the
Registrant 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 April 1, 1999 (the latest information
available), NERC was 99 percent complete with its assessment phase, 95 percent
complete with its planning phase and 75 percent complete with its
implementation/testing phase. The Registrant participated in a Year 2000 drill
conducted by NERC in April 1999. The drill focused on the testing of the backup
systems of voice and data communications needed to operate the electric power
grids in the event of a partial communication loss. The results of the drill at
Ameren were successful. Additional drills are planned. 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 Registrant will incur internal labor
costs as well as external consulting and other expenses related to
infrastructure enhancements necessary to prepare for the new century. The
Registrant 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 March 31, 1999, the Registrant has expended approximately $5 million. The
Registrant'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 Registrant 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
Registrant. 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 Registrant, and
there can be no assurance that the Registrant's efforts, or those of vendors and
trading partners, interconnection affiliates, NERC or EPRI to address the Year
2000
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Issue will be successful. The Registrant 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 Registrant's
material operating systems. The first operational contingency plan addressing
power grid issues was completed in March, 1999. Based on the findings of the
Year 2000 drill, minor modifications to the plan are being developed, with an
expected completion date by the end of the second quarter 1999. Contingency
plans related to the business areas are also expected to be completed by the end
of the second quarter 1999. At this time, the Registrant is unable to predict
the ultimate impact, if any, of the Year 2000 Issue on the Registrant's
financial condition, results of operations or liquidity; however, the impact
could be material.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 Registrant's risk management
activities includes "forward-looking" statements that involve risks and
uncertainties. Actual results could differ materially from those projected in
the forward-looking statements. The Registrant handles market risks in
accordance with established policies, which may include entering into various
derivative transactions. In the normal course of business, the Registrant 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 Registrant 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 percent in 2000 as compared to 1999, the
Registrant'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 Registrant's outstanding variable rate
debt, commercial paper and auction market preferred stock as of March 31, 1999,
continued to be outstanding throughout 2000, and that the average interest rates
for these instruments increased 1 percent over 1999. 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 Registrant's financial structure.
Commodity Price Risk
The Registrant is exposed to changes in market prices for natural gas and fuel
and purchased power. With regard to its natural gas utility business, the
Registrant's exposure to changing market prices is in large part mitigated by
the fact that the Registrant has a Purchased Gas Adjustment Clause (PGA) in
place in both its Missouri and Illinois jurisdictions. The PGA allows the
Registrant to pass on to its customers its prudently incurred costs of natural
gas. With approval of the Missouri Public Service Commission, AmerenUE is
participating in an experimental program to control the volatility of gas prices
paid by its Missouri customers in the 1998-1999 winter months through the
purchase of financial instruments.
Since the Registrant does not have a provision similar to the PGA for its
electric operations, the Registrant has entered into several long-term contracts
with various suppliers to purchase coal and nuclear fuel to manage its exposure
to fuel prices. With regard to the Registrant's exposure to commodity risk for
purchased power, the Registrant has established a subsidiary, AmerenEnergy,
Inc., whose primary responsibility includes managing market risks associated
with the changing market prices for purchased power for the Registrant'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
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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 March 31, 1999, the fair value of derivative financial instruments exposed
to commodity price risk was immaterial. The Registrant expects an increase in
the derivative financial instruments used to manage risk in 1999 due to expected
growth at AmerenEnergy.
Equity Price Risk
The Registrant maintains trust funds, as required by the Nuclear Regulatory
Commission and Missouri and Illinois state laws, to fund certain costs of
nuclear decommissioning. As of March 31, 1999, 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 Registrant is seeking to maximize the returns
to be utilized to fund nuclear decommissioning costs. However, the equity
securities included in the Registrant'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 Registrant 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 Registrant's exposure to equity price market risk is in large part
mitigated due to the fact that the Registrant is currently allowed to recover
its decommissioning costs in its rates.
SAFE HARBOR STATEMENT
Statements made in this Form 10-Q which are not based on historical facts, are
forward-looking and, accordingly, involve risks and uncertainties that could
cause actual results to differ materially from those discussed. Although such
forward-looking statements have been made in good faith and are based on
reasonable assumptions, there is no assurance that the expected results will be
achieved. These statements include (without limitation) statements as to future
expectations, beliefs, plans, strategies, objectives, events, conditions,
financial performance and the Year 2000 Issue. In connection with the "Safe
Harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Registrant is providing this cautionary statement to identify important factors
that could cause actual results to differ materially from those anticipated.
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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AMEREN CORPORATION
CONSOLIDATED BALANCE SHEET
UNAUDITED
(Thousands of Dollars, Except Shares)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
- ------ -------------- -------------
<S> <C> <C>
Property and plant, at original cost:
Electric $11,817,052 $11,761,306
Gas 474,419 469,216
Other 45,505 44,646
----------- -----------
12,336,976 12,275,168
Less accumulated depreciation and amortization 5,688,942 5,602,816
----------- -----------
6,648,034 6,672,352
Construction work in progress:
Nuclear fuel in process 110,718 108,294
Other 151,802 147,393
----------- -----------
Total property and plant, net 6,910,554 6,928,039
----------- -----------
Investments and other assets:
Investments 78,181 86,694
Nuclear decommissioning trust fund 169,351 161,877
Other 84,132 78,091
----------- -----------
Total investments and other assets 331,664 326,662
----------- -----------
Current assets:
Cash and cash equivalents 74,220 76,863
Accounts receivable - trade (less allowance for doubtful
accounts of $9,253 and $8,393, respectively) 226,678 198,193
Unbilled revenue 116,477 150,481
Other accounts and notes receivable 76,617 76,919
Materials and supplies, at average cost -
Fossil fuel 106,069 112,908
Other 136,422 132,884
Other 19,206 22,912
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Total current assets 755,689 771,160
----------- -----------
Regulatory assets:
Deferred income taxes 631,783 633,529
Other 183,406 188,049
----------- -----------
Total regulatory assets 815,189 821,578
----------- -----------
Total Assets $ 8,813,096 $ 8,847,439
=========== ===========
CAPITAL AND LIABILITIES
Capitalization:
Common stock, $.01 par value, authorized 400,000,000 shares -
outstanding 137,215,462 shares $ 1,372 $ 1,372
Other paid-in capital, principally premium on
common stock 1,582,524 1,582,548
Retained earnings 1,439,470 1,472,200
----------- -----------
Total common stockholders' equity 3,023,366 3,056,120
Preferred stock not subject to mandatory redemption 235,197 235,197
Long-term debt 2,285,654 2,289,424
----------- -----------
Total capitalization 5,544,217 5,580,741
----------- -----------
Minority interest in consolidated subsidiary 3,534 3,534
Current liabilities:
Current maturity of long-term debt 212,138 201,713
Short-term debt 35,020 58,528
Accounts and wages payable 181,021 297,185
Accumulated deferred income taxes 67,492 66,299
Taxes accrued 185,067 114,106
Other 260,263 216,889
----------- -----------
Total current liabilities 941,001 954,720
----------- -----------
Accumulated deferred income taxes 1,514,978 1,521,417
Accumulated deferred investment tax credits 176,825 178,832
Regulatory liability 194,131 198,937
Other deferred credits and liabilities 438,410 409,258
----------- -----------
Total Capital and Liabilities $ 8,813,096 $ 8,847,439
=========== ===========
</TABLE>
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AMEREN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
(Thousands of Dollars, Except Shares and Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
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1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $ 636,330 $ 606,100 $ 3,124,441 $ 3,021,494
Gas 97,450 92,338 221,793 234,905
Other 2,122 2,372 7,066 11,291
------------- ------------- ------------- -------------
Total operating revenues 735,902 700,810 3,353,300 3,267,690
OPERATING EXPENSES:
Operations
Fuel and purchased power 184,995 164,905 800,213 798,710
Gas 55,050 52,204 121,692 145,045
Other 139,240 146,755 639,642 592,237
------------- ------------- ------------- -------------
379,285 363,864 1,561,547 1,535,992
Maintenance 72,310 65,003 319,318 307,705
Depreciation and amortization 89,474 86,854 351,023 346,342
Income taxes 35,230 29,911 272,992 231,246
Other taxes 59,916 64,746 267,944 269,360
------------- ------------- ------------- -------------
Total operating expenses 636,215 610,378 2,772,824 2,690,645
OPERATING INCOME 99,687 90,432 580,476 577,045
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 2,662 1,063 6,600 5,213
Miscellaneous, net (2,265) (3,146) (1,728) (9,398)
------------- ------------- ------------- -------------
Total other income and deductions 397 (2,083) 4,872 (4,185)
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 100,084 88,349 585,348 572,860
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 44,415 47,495 178,500 186,792
Allowance for borrowed funds used during construction (1,862) (2,261) (6,627)
(8,021)
Preferred dividends of subsidiaries 3,172 3,188 12,546 12,603
------------- ------------- ------------- -------------
Net interest charges and preferred dividends 45,725 48,422 184,419 191,374
INCOME BEFORE EXTRAORDINARY CHARGE 54,359 39,927 400,929 381,486
------------- ------------- ------------- -------------
EXTRAORDINARY CHARGE (NET OF
INCOME TAXES) -- -- -- (51,820)
------------- ------------- ------------- -------------
NET INCOME $ 54,359 $ 39,927 $ 400,929 $ 329,666
------------- ------------- ------------- -------------
EARNINGS PER COMMON SHARE - BASIC
AND DILUTED (Based on average shares outstanding)
Income before extraordinary charge $ 0.40 $ 0.29 $ 2.92 $ 2.78
Extraordinary charge -- -- -- (0.38)
------------- ------------- ------------- -------------
Net income $ 0.40 $ 0.29 $ 2.92 $ 2.40
============= ============= ============= =============
AVERAGE COMMON SHARES OUTSTANDING 137,215,462 137,215,462 137,215,462 137,215,462
============= ============= ============= =============
</TABLE>
-10-
<PAGE>
AMEREN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Cash Flows From Operating:
Net income $ 54,359 $ 39,927
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 87,026 84,463
Amortization of nuclear fuel 10,416 9,617
Allowance for funds used during construction (4,524) (3,324)
Deferred income taxes, net (8,320) (6,830)
Deferred investment tax credits, net (2,007) (2,209)
Changes in assets and liabilities:
Receivables, net 5,821 52,331
Materials and supplies 3,301 (5,282)
Accounts and wages payable (116,164) (144,781)
Taxes accrued 70,961 58,701
Credit to customers 23,408 13,289
Other, net 43,685 18,952
--------- ---------
Net cash provided by operating activities 167,962 114,854
Cash Flows From Investing:
Construction expenditures (77,103) (64,946)
Allowance for funds used during construction 4,524 3,324
Nuclear fuel expenditures (2,381) (4,422)
Other 8,513 4,410
--------- ---------
Net cash used in investing activities (66,447) (61,634)
Cash Flows From Financing:
Dividends on common stock (87,132) (87,132)
Redemptions -
Nuclear fuel lease (3,635) (10,407)
Short-term debt (23,508) --
Long-term debt (5,000) (35,000)
Issuances -
Nuclear fuel lease 3,617 1,161
Short-term debt -- 25,863
Long-term debt 11,500 65,000
--------- ---------
Net cash used in financing activities (104,158) (40,515)
Net increase in cash and cash equivalents (2,643) 12,705
Cash and cash equivalents at beginning of year 76,863 42,425
--------- ---------
Cash and cash equivalents at end of period $ 74,220 $ 55,130
========= =========
Cash paid during the periods:
Interest (net of amount capitalized) $ 29,261 $ 29,319
Income taxes, net $ (4,180) $ (1,675)
</TABLE>
-11-
<PAGE>
AMEREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
Note 1 - 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 stock
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 Registrant). All subsidiaries for
which the Registrant owns directly or indirectly more than 50 percent 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 Registrant's non-regulated
subsidiaries include CIC, an investing subsidiary, and AmerenEnergy, Inc., an
energy marketing subsidiary. The Registrant also has a 60 percent 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.
Note 2 - Financial statement note disclosures, normally included in consolidated
financial statements prepared in conformity with generally accepted accounting
principles, have been omitted in this Form 10-Q pursuant to the Rules and
Regulations of the Securities and Exchange Commission. However, in the opinion
of the Registrant, the disclosures contained in this Form 10-Q are adequate to
make the information presented not misleading. See Notes to Consolidated
Financial Statements included in the 1998 Annual Report to Stockholders (which
is incorporated by reference in the Registrant's 1998 Form 10-K) for information
relevant to the consolidated financial statements contained in this Form 10-Q,
including information as to the significant accounting policies of the
Registrant.
Note 3 - In the opinion of the Registrant, the interim financial statements
filed as part of this Form 10-Q reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results for
the periods presented. The Registrant's consolidated financial statements were
prepared to permit the information required in the Financial Data Schedule
(FDS), Exhibit 27, to be directly extracted from the filed statements. The FDS
amounts correspond to or are calculable from the amounts reported in the
consolidated financial statements or notes thereto.
Note 4 - Due to the effect of weather on sales and other factors which are
characteristic of public utility operations, financial results for the periods
ended March 31, 1999 and 1998, are not necessarily indicative of trends for any
three-month or twelve-month period.
Note 5 - In July 1995, the Missouri Public Service Commission (MoPSC) approved
an agreement involving AmerenUE's Missouri electric rates. The Agreement
included a three-year experimental alternative regulation plan that provides
that earnings in excess of a 12.61 percent regulatory return on equity (ROE)
will be shared equally between customers and shareholders and earnings above 14
percent ROE will be credited to customers. The formula for computing the credit
uses twelve-month results ending June 30, rather than calendar year earnings.
The MoPSC staff has proposed adjustments to the Registrant's estimated $43
million credit for the final year of the original experimental alternative
regulation plan, which if ultimately accepted, could increase the Registrant's
estimated credit up to $10 million. This credit to is subject to regulatory
proceedings before the MoPSC which are scheduled to occur in June 1999.
-12-
<PAGE>
A new three-year experimental alternative regulation plan was included in the
joint agreement approved by the MoPSC in its February 1997 order approving the
Merger. Like the original plan, the new plan requires that earnings over a 12.61
percent ROE up to a 14 percent ROE will be shared equally between customers and
stockholders. The new three-year plan will also return to customers 90 percent
of all earnings above a 14 percent ROE up to a 16 percent ROE. Earnings above a
16 percent ROE will be credited entirely to customers. As of March 31, 1999, the
Registrant had recorded an estimated $20 million credit for the first year of
this plan, compared to a $10 million credit recorded for the same 1998 period
under the final year of the previous plan. This credit, which the Registrant
expects to pay to Missouri customers later this year, was reflected as a
reduction in electric revenues. The final amount of the credit will depend on
several factors, including the Registrant's earnings for the 12 months ending
June 30, 1999.
The joint agreement approved by the MoPSC in its February 1997 order approving
the Merger also provided 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 rate plan. The Registrant
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 Registrant'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 regulatory proceedings are scheduled to occur in June
1999. The staff's proposed adjustments, if ultimately accepted, could increase
the Registrant's proposed Missouri electric rate decrease by $15 million to $20
million.
In conjunction with the Electric Service Customer Choice and Rate Relief Law of
1997, a 5 percent residential electric rate decrease for the Registrant's
Illinois electric customers was effective August 1, 1998. This rate decrease is
expected to decrease electric revenues $14 million annually, based on estimated
levels of sales and assuming normal weather conditions. The Registrant may be
subject to additional 5 percent residential electric rate decreases in each of
2000 and 2002, to the extent its rates exceed the Midwest utility average at
that time. The Registrant's rates are currently below the Midwest utility
average.
Note 6 - Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" became effective on January 1,
1999. 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,
may be capitalized and amortized over some future period. SOP 98-1 did not have
a material impact on the Registrant's financial position or results of
operations upon adoption.
The Emerging Issues Task Force of the Financial Accounting Standards Board
(EITF) Issue 98-10, "Accounting for Energy Trading and Risk Management
Activities" became effective on January 1, 1999. 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 when determining if a
transaction is a trading or non-trading activity. Currently, AmerenEnergy Inc.,
an energy marketing subsidiary of Ameren, 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 did not have a material impact on the Registrant's
financial position or results of operations upon adoption.
-13-
<PAGE>
Note 7 - Segment information for the three month and 12 month periods ended
March 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Regulated Reconciling
(in millions) Utilities All Other Items Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Three months ended March 31, 1999:
Revenues $ 714 $ 48 $ (26)* $ 736
Net Income 53 1 -- 54
- ------------------------------------------------------------------------------------------------------------
Three months ended March 31, 1998:
Revenues $ 678 $ 40 $ (17)<F1> $ 701
Net Income 38 2 -- 40
- ------------------------------------------------------------------------------------------------------------
12 months ended March 31, 1999:
Revenues $3,265 $198 $(110)<F1> $ 3,353
Net Income 397 4 -- 401
- ------------------------------------------------------------------------------------------------------------
12 months ended March 31, 1998:
Revenues $3,110 $222 $ (64)<F1> $ 3,268
Net Income 317 13 -- 330
- ------------------------------------------------------------------------------------------------------------
<FN>
<F1> Elimination of intercompany revenues.
</FN>
</TABLE>
Note 8 - Certain reclassifications were made to prior-year financial statements
to conform to current-period presentation.
-14-
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders of the Registrant held on April
27, 1999, the following matters were presented to the meeting for a vote and the
results of such voting are as follows:
Item (1) Election of Directors.
Non-Voted
Name For Withheld Brokers(1)
William E. Cornelius.......... 107,785,635 2,835,476 0
Clifford L. Greenwalt......... 107,495,052 3,126,059 0
Thomas A. Hays................ 107,798,565 2,822,546 0
Richard A. Liddy.............. 107,852,170 2,768,941 0
Gordon R. Lohman.............. 107,713,701 2,907,410 0
Richard A. Lumpkin............ 107,821,598 2,799,513 0
John Peters MacCarthy......... 107,833,550 2,787,561 0
Hanne M. Merriman............. 107,739,512 2,881,599 0
Paul L. Miller, Jr............ 107,855,814 2,765,297 0
Charles W. Mueller............ 107,827,734 2,793,377 0
Robert H. Quenon.............. 107,657,049 2,964,062 0
Harvey Saligman............... 107,767,302 2,853,809 0
Janet McAfee Weakley.......... 107,564,381 3,056,730 0
James W. Wogsland............. 107,458,494 3,162,617 0
Item (2) Stockholder Proposal re Report on Callaway Plant Releases.
Non-Voted
For Against Abstain Brokers(1)
10,762,439 77,063,818 7,744,073 15,050,782
(1) Broker shares included in the quorum but not voting on the items.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. None.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMEREN CORPORATION
(Registrant)
By /s/ Donald E. Brandt
----------------------
Donald E. Brandt
Senior Vice President, Finance
(Principal Financial Officer)
Date: May 14, 1999
-16-
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
Exhibit 27
AMEREN CORPORATION
10-Q MARCH 31, 1999
FINANCIAL DATA SCHEDULE UT
PUBLIC UTILITY COMPANIES AND PUBLIC UTILITY HOLDING COMPANIES
APPENDIX E TO ITEM 601 (C) OF REGULATION S-K
(Thousands of Dollars Except Per Share Amounts)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,910,554
<OTHER-PROPERTY-AND-INVEST> 247,532
<TOTAL-CURRENT-ASSETS> 755,689
<TOTAL-DEFERRED-CHARGES> 84,132
<OTHER-ASSETS> 815,189
<TOTAL-ASSETS> 8,813,096
<COMMON> 1,372
<CAPITAL-SURPLUS-PAID-IN> 1,582,524
<RETAINED-EARNINGS> 1,439,470
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,023,366
0
235,197
<LONG-TERM-DEBT-NET> 2,234,967
<SHORT-TERM-NOTES> 35,020
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 195,944
0
<CAPITAL-LEASE-OBLIGATIONS> 50,687
<LEASES-CURRENT> 16,194
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,021,721
<TOT-CAPITALIZATION-AND-LIAB> 8,813,096
<GROSS-OPERATING-REVENUE> 735,902
<INCOME-TAX-EXPENSE> 35,230
<OTHER-OPERATING-EXPENSES> 600,985
<TOTAL-OPERATING-EXPENSES> 636,215
<OPERATING-INCOME-LOSS> 99,687
<OTHER-INCOME-NET> 397
<INCOME-BEFORE-INTEREST-EXPEN> 100,084
<TOTAL-INTEREST-EXPENSE> 42,553
<NET-INCOME> 54,359
3,172
<EARNINGS-AVAILABLE-FOR-COMM> 54,359
<COMMON-STOCK-DIVIDENDS> 87,132
<TOTAL-INTEREST-ON-BONDS> 0 <F1>
<CASH-FLOW-OPERATIONS> 167,962
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
<FN>
<F1> Required on fiscal year-end only.
</FN>
</TABLE>
