<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, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Transition Period From to
Commission file number 1-3672.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Illinois 37-0211380
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
607 East Adams Street, Springfield, Illinois 62739
(Address of principal executive offices and Zip Code)
Registrant's telephone number,
including area code: (217) 523-3600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
------------- ------------
Shares outstanding of each of registrant's classes of common stock as of April
30, 2000:Common Stock, no par value, held by Ameren Corporation (parent company
of Registrant) - 25,452,373
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Central Illinois Public Service Company
Index
Page No.
Part I Financial Information (Unaudited)
Management's Discussion and Analysis 2
Quantitative and Qualitative Disclosure
About Market Risk 5
Balance Sheet
- March 31, 2000 and December 31, 1999 7
Statement of Income
- Three months and 12 months ended
March 31, 2000 and 1999 8
Statement of Cash Flows
- Three months ended March 31, 2000 and 1999 9
Notes to Financial Statements 10
Part II Other Information 12
<PAGE>
PART I. FINANCIAL INFORMATION (UNAUDITED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Central Illinois Public Service Company (AmerenCIPS or the Registrant) is a
subsidiary of Ameren Corporation (Ameren), 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, the Registrant and CIPSCO
Investment Company (CIC), becoming subsidiaries of Ameren (the Merger).
The following discussion and analysis should be read in conjunction with the
Notes to Financial Statements beginning on page 10, and the Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A),
the Audited Financial Statements and the Notes to Financial Statements appearing
in the Registrant's 1999 Form 10-K.
RESULTS OF OPERATIONS
Earnings
First quarter 2000 earnings of $25 million increased $12 million from 1999's
first quarter earnings. Earnings for the 12 months ended March 31, 2000 were $62
million, a $16 million decrease from the preceding 12-month period.
Earnings fluctuated due to many conditions, primarily: sales growth, weather
variations, electric rate reductions, gas rate increases, competitive market
forces, fluctuating operating costs, changes in interest expense, changes in
income and property taxes and nonrecurring charges for a targeted employee
separation plan and for coal contract termination payments.
The significant items affecting revenues, costs and earnings during the
three-month and 12-month periods ended March 31, 2000 and 1999 are detailed
below.
Electric Operations
Electric Operating Revenues Variations for periods ended March 31, 2000
from comparable prior-year periods
- ---------------------------------------------------------------------
(Millions of Dollars) Three Months Twelve Months
- ---------------------------------------------------------------------
Rate variations $ - $ (4)
Effect of abnormal weather (1) (17)
Growth and other 15 23
Interchange sales 33 113
- ---------------------------------------------------------------------
$ 47 $ 115
- ---------------------------------------------------------------------
Electric revenues for the three months ended March 31, 2000, increased $47
million compared to the prior three- month period primarily driven by a 61
percent increase in interchange sales, due to strong marketing efforts, and a 29
percent increase in native sales. The increase in native sales was primarily due
to increased wholesale and industrial sales, partially offset by lower
residential and commercial sales, due to milder weather.
Electric revenues for the 12 months ended March 31, 2000, increased $115
million, compared to the same prior year period, primarily due to increases in
interchange sales of 39 percent, due to strong marketing efforts and increases
in native sales of 6 percent. The increase in native sales was primarily due to
increased wholesale and industrial sales, partially offset by reductions in
weather sensitive residential and commercial sales of 2 percent and 9 percent,
respectively. Electric revenues were further reduced by a residential rate
decrease.
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Fuel and Purchased Power Variations for periods ended March 31, 2000
from comparable prior-year periods
- -----------------------------------------------------------------------------
(Millions of Dollars) Three Months Twelve Months
- -----------------------------------------------------------------------------
Fuel:
Generation $ 11 $ 16
Price (5) (18)
Generation efficiencies and other 1 (2)
Coal contract termination payments - 52
Purchased power 19 57
- -----------------------------------------------------------------------------
$ 26 $ 105
- -----------------------------------------------------------------------------
Fuel and purchased power costs for the three months ended March 31, 2000
increased $26 million over the same period in the prior year primarily as a
result of increased generation and purchased power resulting from higher sales
volume, partially offset by lower fuel prices. The $105 million increase in fuel
and purchased power costs for the 12 months ended March 31, 2000 versus the
prior-year period was primarily the result of increased generation and purchased
power resulting from higher sales volume and coal contract termination payments,
partially offset by lower fuel prices.
Gas Operations
Gas revenues for the 12-month period ended March 31, 2000 increased $5 million
compared to the same year-ago period primarily due to a gas rate increase which
became effective in February 1999 and higher gas costs recovered through the
Registrant's purchased gas adjustment clause. These increases were partially
offset by a 15 percent decline in retail sales, as well as a decrease in
off-system sales to others.
Other Operating Expenses
Other operating expense variations reflected recurring factors such as growth,
inflation, labor and benefit increases, in addition to a charge for the targeted
separation plan.
Other operations expenses increased $3 million for the three months ended March
31, 2000 compared to the same year-ago period primarily due to increased
professional services, partially offset by lower employee benefit costs. Other
operations expenses increased $15 million for the 12 months ended March 31,
2000, compared to the same year-ago period, primarily due to increased
postretirement expenses resulting from changes in actuarial assumptions,
increased injuries and damages expenses based on claims experience and expenses
associated with deregulation in Illinois. These increases were partially offset
by a reduced workforce, coupled with the fact that expenses for the twelve
months ended June 30, 1999 included a nonrecurring pretax charge for a targeted
separation plan of $7 million.
Maintenance expenses for the 12 months ended March 31, 2000 increased $28
million from the comparable year-ago period due to increased power plant
maintenance.
Taxes
Income taxes for the three months ended March 31, 2000, increased $8 million,
primarily due to higher pretax income. Income taxes for the 12 months ended
March 31, 2000, decreased $8 million, primarily due to lower pretax income.
Other taxes for the 12 months ended March 31, 2000, decreased $8 million
primarily due to a decrease in gross receipt taxes. This decrease results from
the restructuring of the Illinois public utility tax whereby gross receipt taxes
are no longer recorded as electric revenue and gross receipt tax expense.
Other Income and Deductions
For the 12 months ended March 31, 2000, miscellaneous net increased $3 million,
compared to the same period in the prior year, primarily due to losses on the
disposal of property realized in 1998.
Balance Sheet
Changes in accounts and wages payable, taxes accrued, other accounts and notes
receivable, and other current assets resulted from the timing of various
payments to taxing authorities and suppliers. The $21 million decrease in
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intercompany notes payable is due to funds borrowed from a utility money pool
(see Note 5 under Notes to Financial Statements for further information).
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $66 million for the quarter ended
March 31, 2000, compared to $50 million during the same 1999 period.
Cash flows used in investing activities totaled $20 million and $22 million for
the three months ended March 31, 2000 and 1999, respectively. Construction
expenditures for the three months ended March 31, 2000, for constructing new or
improving existing facilities, were $20 million.
Cash flows used in financing activities totaled $45 million for the three months
ended March 31, 2000, compared to $38 million during the same 1999 period. The
Registrant's principal financing activities for the quarter included the
redemption of long-term debt and intercompany notes payable and the payment of
dividends, partially offset by the issuance of long-term debt. Proceeds from the
issuance of the long-term debt have been set aside in an environmental bond
redemption fund to be used to retire existing long-term indebtedness in the
second quarter.
The Registrant plans to continue utilizing short-term debt to support normal
operations and other temporary requirements. The Registrant is authorized by the
Securities and Exchange Commission under PUHCA to have up to $125 million of
short-term unsecured debt instruments outstanding at any one time. Short-term
borrowings consist of bank loans (maturities generally on an overnight basis)
and commercial paper (maturities generally within 1 to 45 days). At March 31,
2000, the Registrant had committed bank lines of credit aggregating $30 million
(all of which was unused and available at such date) which make available
interim financing at various rates of interest based on LIBOR, the bank
certificate of deposit rate or other options. The lines of credit are renewable
annually at various dates throughout the year. At March 31, 2000, the Registrant
had no outstanding short-term borrowings.
Also, the Registrant has the ability to borrow up to approximately $950 million
from Ameren or AmerenUE through a regulated money pool agreement. The regulated
money pool was established to coordinate and provide for certain short-term cash
and working capital requirements and is administered by Ameren Services Company,
another subsidiary of Ameren. Interest is calculated at varying rates of
interest depending on the composition of internal and external funds in the
regulated money pool. At March 31, 2000, the Registrant had $112 million of
intercompany borrowings outstanding and $701 million available through the
regulated money pool.
The Registrant, in the ordinary course of business, explores opportunities to
reduce its cost in order to remain competitive in the marketplace. Areas where
the Registrant focuses its review include, but are not limited to, labor costs
and fuel supply costs. In the labor area, the Registrant has reached agreements
with all of the Registrant's major collective bargaining units which will permit
it to manage its labor costs and practices effectively in the future. The
Registrant also explores alternatives to effectively manage the size of its
workforce. These alternatives include utilizing hiring freezes, outsourcing and
offering employee separation packages. In the fuel supply area, the Registrant
explores alternatives to effectively manage its overall fuel costs. These
alternatives include diversifying fuel sources for use at the Registrant's power
plants (e.g. utilizing low-sulfur versus high-sulfur coal), as well as
restructuring or terminating existing contracts with suppliers.
Certain of these cost reduction alternatives could result in additional
investments being made at the Registrant's power plants in order to utilize
different types of coal, or could require nonrecurring payments of employee
separation benefits or nonrecurring payments to restructure or terminate an
existing fuel contract with a supplier. Management is unable to predict which
(if any), and to what extent, these alternatives to reduce its overall cost
structure will be executed. Management is unable to determine the impact of
these actions on the Registrant's future financial position, results of
operations or liquidity.
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 at retail in Illinois.
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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 generation
supplier. The phase-in of retail direct access began on October 1, 1999, with
large commercial and industrial customers principally comprising the initial
group. The customers in this group represent approximately 24 percent of the
Registrant's total sales. As of March 31, 2000, the impact of retail direct
access on the Registrant's financial condition, results of operation or
liquidity was immaterial. 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.
In conjunction with another provision of the Law, on May 1, 2000, following the
receipt of all required State and Federal regulatory approvals, the Registrant
transferred its electric generating assets and liabilities, at historical net
book value, to a newly created nonregulated company, AmerenEnergy Generating
Company (Generating Company), a subsidiary of AmerenEnergy Resources Company, a
wholly-owned subsidiary of Ameren, in exchange for a promissory note from
Generating Company in the principal amount of approximately $600 million and
Generating Company common stock. The promissory note has a term of five years
and bears interest at 7 percent based on a 10-year amortization. The transferred
assets represent a generating capacity of approximately 2,900 megawatts.
Approximately 45 percent of the Registrant's employees were transferred to
Generating Company as a part of the transaction.
Also on May 1, 2000, an electric power supply agreement was entered into between
Generating Company and its newly created nonregulated affiliate, AmerenEnergy
Marketing Company (Marketing Company), also a wholly-owned subsidiary of
AmerenEnergy Resources Company. On the same date, Marketing Company entered into
an electric power supply agreement with the Registrant to supply it sufficient
power to meet native load requirements. This agreement expires December 31,
2004.
The creation of the new subsidiaries and the transfer of the Registrant's
generating assets and liabilities had no effect on the financial statements of
the Registrant as of the date of transfer.
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 market variables (e.g.,
interest rates, equity prices, commodity prices, etc.). The following discussion
of Ameren's, including AmerenCIPS', risk management activities includes
"forward-looking" statements that involve risks and uncertainties. Actual
results could differ materially from those projected in the "forward-looking"
statements. Ameren handles market risks in accordance with established policies,
which may include entering into various derivative transactions. In the normal
course of business, Ameren also faces risks that are either non-financial or
non-quantifiable. Such risks principally include business, legal, operational
and credit risk and are not represented in the following analysis.
Interest Rate Risk
The Registrant is exposed to market risk through changes in interest rates
through its issuance of both long-term and short-term variable-rate debt,
fixed-rate debt, commercial paper and auction market preferred stock. The
Registrant manages its interest rate exposure by controlling the amount of these
instruments it holds within its total capitalization portfolio and by monitoring
the effects of market changes in interest rates.
If interest rates increase one percentage point in 2001 as compared to 2000, the
Registrant's interest expense would increase and net income would decrease by
approximately $1 million. This amount has been determined using the assumptions
that the Registrant's outstanding variable rate debt, commercial paper and
auction market preferred stock as of March 31, 2000, continued to be outstanding
throughout 2001, and that the average interest rates for these instruments
increased one percentage point over 2000. 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 electricity. With regard to its natural gas utility business, the
Registrant's exposure to changing market prices is in large part mitigated by
the fact that the Registrant has a Purchased Gas Adjustment Clause (PGA) in
place. The PGA allows the Registrant to pass on to its customers its prudently
incurred costs of natural gas.
-5-
<PAGE>
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 to manage its exposure to fuel prices.
With regard to the Registrant's exposure to commodity price risk for purchased
power and excess electricity sales, Ameren has established a subsidiary,
AmerenEnergy, Inc. (AmerenEnergy), whose primary responsibility includes
managing market risks associated with the changing market prices for electricity
purchased and sold on behalf of the Registrant.
AmerenEnergy utilizes several techniques to mitigate its market risk for
electricity, 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, futures contracts and
option 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 Ameren officers and an independent risk
management officer at AmerenEnergy.
As of March 31, 2000, the fair value of derivative financial instruments exposed
to commodity price risk was immaterial.
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. The
following factors, in addition to those discussed elsewhere in this report and
in the Annual Report on Form 10-K for the fiscal year ended December 31, 1999,
and in subsequent securities filings, could cause results to differ materially
from management expectations as suggested by such "forward-looking" statements:
the effects of regulatory actions; changes in laws and other governmental
actions; the impact on the Registrant of current regulations related to the
phasing-in of the opportunity for some customers to choose alternative energy
suppliers in Illinois; the effects of increased competition in the future due
to, among other things, deregulation of certain aspects of the Registrant's
business at both the State and Federal levels; 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; the impact of current environmental regulations on
utilities and generating companies and the expectation that more stringent
requirements will be introduced over time, which could potentially have a
negative financial effect; monetary and fiscal policies; future wages and
employee benefits costs; and legal and administrative proceedings.
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<TABLE>
<CAPTION>
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEET
UNAUDITED
---------
(Thousands of Dollars, Except Shares)
March 31, December 31,
ASSETS 2000 1999
- ------ ---------- ----------
Property and plant, at original cost:
<S> <C> <C>
Electric $2,460,012 $2,422,002
Gas 270,029 267,909
---------- ----------
2,730,041 2,689,911
Less accumulated depreciation and amortization 1,271,760 1,260,582
---------- ----------
1,458,281 1,429,329
Construction work in progress 12,184 43,435
---------- ----------
Total property and plant, net 1,470,465 1,472,764
---------- ----------
Other assets 17,831 17,722
Current assets:
Cash and cash equivalents 13,176 12,536
Environmental bond redemption fund 51,100 --
Accounts receivable - trade (less allowance for doubtful
accounts of $2,184 and $1,828, respectively) 64,214 48,703
Unbilled revenue 55,279 75,884
Other accounts and notes receivable 20,363 20,875
Materials and supplies, at average cost -
Fossil fuel 39,084 47,291
Other 29,319 33,931
Other 9,787 10,387
---------- ----------
Total current assets 282,322 249,607
---------- ----------
Regulatory assets:
Deferred income taxes 21,520 21,520
Other 8,264 20,141
---------- ----------
Total regulatory assets 29,784 41,661
---------- ----------
Total Assets $1,800,402 $1,781,754
========== ==========
CAPITAL AND LIABILITIES
Capitalization:
Common stock, no par value, 45,000,000 shares authorized -
25,452,373 shares outstanding $ 120,033 $ 120,033
Retained earnings 421,594 414,345
---------- ----------
Total common stockholder's equity 541,627 534,378
Preferred stock not subject to mandatory redemption 80,000 80,000
Long-term debt 488,086 493,625
---------- ----------
Total capitalization 1,109,713 1,108,003
---------- ----------
Current liabilities:
Current maturity of long-term debt 87,000 35,000
Intercompany notes payable 111,720 132,900
Accounts and wages payable 61,143 82,800
Accumulated deferred income taxes 22,621 22,621
Taxes accrued 51,003 32,145
Other 41,279 39,619
---------- ----------
Total current liabilities 374,766 345,085
---------- ----------
Accumulated deferred income taxes 210,078 216,661
Accumulated deferred investment tax credits 33,368 32,169
Regulatory liability 36,981 34,004
Other deferred credits and liabilities 35,496 45,832
---------- ----------
Total Capital and Liabilities $1,800,402 $1,781,754
========== ==========
</TABLE>
See Notes to Financial Statements.
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<TABLE>
<CAPTION>
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF INCOME
UNAUDITED
---------
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Electric $ 202,503 $ 155,240 $ 842,739 $ 727,887
Gas 52,824 52,532 132,938 127,794
--------- --------- --------- ---------
Total operating revenues 255,327 207,772 975,677 855,681
OPERATING EXPENSES:
Operations
Fuel and purchased power 81,630 55,690 340,148 234,693
Gas 31,714 33,250 71,816 70,375
Other 42,996 40,398 193,220 178,581
--------- --------- --------- ---------
156,340 129,338 605,184 483,649
Maintenance 16,504 17,407 102,679 75,114
Depreciation and amortization 21,350 20,740 81,167 76,241
Income taxes 14,163 5,979 38,957 47,400
Other taxes 11,236 9,599 41,950 50,256
--------- --------- --------- ---------
Total operating expenses 219,593 183,063 869,937 732,660
OPERATING INCOME 35,734 24,709 105,740 123,021
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used
during construction -- (6) (2) (36)
Miscellaneous, net 377 356 2,051 (953)
--------- --------- --------- ---------
Total other income and (deductions) 377 350 2,049 (989)
INCOME BEFORE
INTEREST CHARGES 36,111 25,059 107,789 122,032
INTEREST CHARGES:
Interest 9,559 10,815 41,480 40,422
Allowance for borrowed funds
used during construction 220 (71) 312 (734)
--------- --------- --------- ---------
Net interest charges 9,779 10,744 41,792 39,688
--------- --------- --------- ---------
NET INCOME 26,332 14,315 65,997 82,344
PREFERRED STOCK DIVIDENDS 993 968 3,858 3,729
--------- --------- --------- ---------
NET INCOME AFTER PREFERRED
STOCK DIVIDENDS $ 25,339 $ 13,347 $ 62,139 $ 78,615
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
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<TABLE>
<CAPTION>
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF CASH FLOWS
UNAUDITED
---------
(Thousands of Dollars)
Three Months Ended
March 31,
------------------
2000 1999
---- ----
Cash Flows From Operating:
<S> <C> <C>
Net income $ 26,332 $ 14,315
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,350 20,740
Allowance for funds used during construction 220 (65)
Deferred income taxes, net (1,792) (4,975)
Deferred investment tax credits, net 1,199 (621)
Changes in assets and liabilities:
Receivables, net 5,606 (5,278)
Materials and supplies 12,819 8,657
Accounts and wages payable (21,657) (4,690)
Taxes accrued 18,858 9,641
Other, net 2,797 12,187
-------- --------
Net cash provided by operating activities 65,732 49,911
Cash Flows From Investing:
Construction expenditures (19,642) (22,075)
Allowance for funds used during construction (220) 65
-------- --------
Net cash used in investing activities (19,862) (22,010)
Cash Flows From Financing:
Dividends on common stock (18,057) (17,155)
Dividends on preferred stock (993) (926)
Environmental bond redemption fund (51,100) --
Redemptions -
Short-term debt -- (15,000)
Long-term debt (5,000) (5,000)
Intercompany notes payable (21,180) --
Issuances -
Long-term debt 51,100 --
-------- --------
Net cash used in financing activities (45,230) (38,081)
-------- --------
Net change in cash and cash equivalents 640 (10,180)
Cash and cash equivalents at beginning of year 12,536 10,180
-------- --------
Cash and cash equivalents at end of period $ 13,176 $ --
======== ========
Cash paid during the periods:
Interest (net of amount capitalized) $ 9,678 $ 8,750
Income taxes, net $ -- $ 754
</TABLE>
See Notes to Financial Statements.
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CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
Note 1 - Central Illinois Public Service Company (AmerenCIPS or the Registrant)
is a subsidiary of Ameren Corporation (Ameren), which is the parent company of
two utility operating companies, the Registrant and Union Electric Company
(AmerenUE). Ameren is a registered holding company under the Public Utility
Holding Company Act of 1935 (PUHCA) formed in December 1997 upon the merger of
CIPSCO Incorporated (the Registrant's former parent) and AmerenUE (the Merger).
Both Ameren and its subsidiaries are subject to the regulatory provisions of the
PUHCA. The operating companies are engaged principally in the generation,
transmission, distribution and sale of electric energy and the purchase,
distribution, transportation and sale of natural gas in the states of Illinois
and Missouri. Contracts among the companies--dealing with jointly-operated
generating facilities, interconnecting transmission lines, and the exchange of
electric power--are regulated by the Federal Energy Regulatory Commission (FERC)
or the Securities and Exchange Commission (SEC). Administrative support services
are provided to the Registrant by a separate Ameren subsidiary, Ameren Services
Company. The Registrant serves 400,000 electric and 175,000 gas customers in a
20,000 square-mile region of central and southern Illinois.
In conjunction with the Illinois Electric Service Customer Choice and Rate
Relief Law of 1997 (the Law), on May 1, 2000, following the receipt of all
required State and Federal regulatory approvals, the Registrant transferred its
electric generating assets and liabilities, at historical net book value, to a
newly created nonregulated company, AmerenEnergy Generating Company (Generating
Company), a subsidiary of AmerenEnergy Resources Company, a wholly-owned
subsidiary of Ameren, in exchange for a promissory note from Generating Company
in the principal amount of approximately $600 million and Generating Company
common stock. The promissory note has a term of five years and bears interest at
7 percent based on a 10-year amortization. The transferred assets represent a
generating capacity of approximately 2,900 megawatts. Approximately 45 percent
of the Registrant's employees were transferred to Generating Company as a part
of the transaction.
Also on May 1, 2000, an electric power supply agreement was entered into between
Generating Company and its newly created nonregulated affiliate, AmerenEnergy
Marketing Company (Marketing Company), also a wholly-owned subsidiary of
AmerenEnergy Resources Company. On the same date, Marketing Company entered into
an electric power supply agreement with the Registrant to supply it sufficient
power to meet native load requirements. This agreement expires December 31,
2004.
The Registrant also has a 20 percent interest in Electric Energy, Inc. (EEI),
which is accounted for under the equity method of accounting. EEI owns and
operates an electric generating and transmission facility in Illinois that
supplies electric power primarily to a uranium enrichment plant located in
Paducah, Kentucky.
Note 2 - Financial statement note disclosures, normally included in financial
statements prepared in conformity with generally accepted accounting principles,
have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the
SEC. However, in the opinion of the Registrant, the disclosures contained in
this Form 10-Q are adequate to make the information presented not misleading.
See Notes to Financial Statements included in the 1999 Form 10-K for information
relevant to the financial statements contained in this Form 10-Q, including
information as to the significant accounting policies of the Registrant.
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 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 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, 2000 and 1999, are not necessarily indicative of trends for any
three-month or 12-month period.
Note 5 - The Registrant has transactions in the normal course of business with
other Ameren subsidiaries. These transactions are primarily comprised of power
purchases and sales and services received or rendered. Intercompany receivables
included in other accounts and notes receivable were approximately $15 million
and $12 million,
-10-
<PAGE>
respectively, as of March 31, 2000 and December 31, 1999. Intercompany payables
included in accounts and wages payable totaled approximately $17 and $35
million, respectively, as of March 31, 2000 and December 31, 1999.
In addition, the Registrant has the ability to borrow up to approximately $950
million from Ameren or AmerenUE or invest funds through a regulated money pool
agreement. The regulated money pool was established to coordinate and provide
for certain short-term cash and working capital requirements and is administered
by Ameren Services Company. Interest is calculated at varying rates of interest
depending on the composition of internal and external funds in the regulated
money pool. At March 31, 2000, the Registrant had $112 million of intercompany
borrowings outstanding and $701million available through the regulated money
pool.
Note 6 - Segment information for the three month and 12 month periods ended
March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(in thousands) Electric Gas Total
- --------------------------------------------------------------------------------
Three months ended March 31, 2000:
<S> <C> <C> <C>
Revenues $202,503 $52,824 $255,327
Operating Income 30,032 5,702 35,734
- --------------------------------------------------------------------------------
Three months ended March 31, 1999:
Revenues $155,240 $52,532 $207,772
Operating Income (Loss) 19,816 4,893 24,709
- --------------------------------------------------------------------------------
12 months ended March 31, 2000:
Revenues $842,739 $132,938 $975,677
Operating Income 95,903 9,837 105,740
- --------------------------------------------------------------------------------
12 months ended March 31, 1999:
Revenues $727,887 $127,794 $855,681
Operating Income 115,795 7,226 123,021
- --------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
Reference is made to "Liquidity and Capital Resources" in Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 11 - Commitments and Contingencies in the Notes to Financial
Statements in the Registrant's Form 10-K for the year ended December 31, 1999,
for information regarding the United States Environmental Protection Agency's
(EPA) issuance in 1997 of National Ambient Air Quality Standards for ozone and
particulate matter. In May 1999, the United States Court of Appeals for the
District of Columbia Circuit remanded the ambient air quality standard
regulations to the EPA for reconsideration. In January and February 2000, the
parties to the litigation filed petitions for review before the United States
Supreme Court. The Supreme Court has not decided whether to accept the case for
review. At this time, the Registrant is unable to predict the ultimate impact of
those revised air quality standards on its future financial condition, results
of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
At the annual meeting of stockholders of the Registrant held on April 25,
2000, the following matter was 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
---- --- -------- -------
Paul A. Agathen.............. 25,940,091 5,854 0
Warner L. Baxter............. 25,940,226 5,749 0
Donald E. Brandt............. 25,940,231 5,744 0
Charles W. Mueller........... 25,940,241 5,734 0
Gary L. Rainwater............ 25,940,236 5,739 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements, 12 Months Ended March 31, 2000.
Exhibit 27 - Financial Data Schedule.
The following instrument defining the rights of holders of certain
unregistered long-term debt of AmerenCIPS has not been filed with the
Securities and Exchange Commission but will be furnished upon request.
1. Loan Agreement dated March 1, 2000, between AmerenCIPS and
Illinois Development Finance Authority (IDFA) in connection with
the IDFA's $51,100,000 Pollution Control Revenue Refunding Bonds
(AmerenCIPS Project) Series 2000A due March 1, 2014.
(b) Reports on Form 8-K. None.
-12-
<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.
CENTRAL ILLINOIS PUBLIC
SERVICE COMPANY
(Registrant)
By /S/ Warner L. Baxter
----------------------
Warner L. Baxter
Vice President and Controller
(Principal Accounting Officer)
Date: May 15, 2000
-13-
<TABLE>
<CAPTION>
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND
REQUIREMENTS
12 Months
Ended
Year Ended December 31, March 31,
-------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
Thousands of Dollars Except Ratios
<S> <C> <C> <C> <C> <C> <C>
Net Income $70,631 $77,393 $38,620 $80,147 $53,980 $65,997
Add- Extraordinary items net of tax - - 24,853 - - -
---------- -------- -------- -------- -------- ----------
Net income from continuing operations 70,631 77,393 63,473 80,147 53,980 65,997
Taxes based on income 44,483 47,286 33,922 45,412 30,763 39,143
---------- -------- -------- -------- -------- ----------
Net income before income taxes 115,114 124,679 97,395 125,559 84,743 105,140
---------- -------- -------- -------- -------- ----------
Add- fixed charges:
Interest on long term debt 31,168 31,409 32,271 37,260 38,223 35,887
Other interest 853 4,636 2,875 1,647 3,373 4,499
Amortization of net debt premium,
discount, expenses and losses 1,703 1,709 1,643 1,132 1,139 1,094
---------- -------- -------- -------- -------- ----------
Total fixed charges 33,724 37,754 36,789 40,039 42,735 41,480
---------- -------- -------- -------- -------- ----------
Earnings available for fixed charges 148,838 162,433 134,184 165,598 127,478 146,620
========== ======== ======== ======== ======== ==========
Ratio of earnings to fixed charges 4.41 4.30 3.64 4.13 2.98 3.53
========== ======== ======== ======== ======== ==========
Earnings required for preferred dividends:
Preferred stock dividends 3,850 3,721 3,715 3,745 3,833 3,858
Adjustment to pre-tax basis 2,425 2,273 1,985 2,122 2,185 2,288
---------- -------- -------- -------- -------- ----------
6,275 5,994 5,700 5,867 6,018 6,146
Fixed charges plus preferred stock
dividend requirements 39,999 43,748 42,489 45,906 48,753 47,626
========== ======== ======== ======== ======== ==========
Ratio of earnings to fixed charges plus
preferred stock dividend requirements 3.72 3.71 3.15 3.60 2.61 3.07
========== ======== ======== ======== ======== ==========
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
Exhibit 27
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
10-Q MARCH 31, 2000
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)
</LEGEND>
Value
-----------------
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,470,465
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 282,322
<TOTAL-DEFERRED-CHARGES> 17,831
<OTHER-ASSETS> 29,784
<TOTAL-ASSETS> 1,800,402
<COMMON> 120,033
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 421,594
<TOTAL-COMMON-STOCKHOLDERS-EQ> 541,627
0
80,000
<LONG-TERM-DEBT-NET> 488,086
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 87,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 603,689
<TOT-CAPITALIZATION-AND-LIAB> 1,800,402
<GROSS-OPERATING-REVENUE> 255,327
<INCOME-TAX-EXPENSE> 14,163
<OTHER-OPERATING-EXPENSES> 205,430
<TOTAL-OPERATING-EXPENSES> 219,593
<OPERATING-INCOME-LOSS> 35,734
<OTHER-INCOME-NET> 377
<INCOME-BEFORE-INTEREST-EXPEN> 36,111
<TOTAL-INTEREST-EXPENSE> 9,779
<NET-INCOME> 26,332
993
<EARNINGS-AVAILABLE-FOR-COMM> 25,339
<COMMON-STOCK-DIVIDENDS> 18,057
<TOTAL-INTEREST-ON-BONDS> 0 <F1>
<CASH-FLOW-OPERATIONS> 65,732
<EPS-BASIC> 0.00 <F2>
<EPS-DILUTED> 0.00 <F2>
<FN>
<F1> Required in fiscal year-end only.
<F2> Information not normally disclosed in financial statements and notes.
</FN>
</TABLE>
