OVERVIEW

Ameren Executive Summary

Operations

In 2008 and early 2009, we were able to successfully execute on key aspects of our long-term strategic plan. Our strategic plan calls for generation excellence and improvement of customer service and satisfaction. UE's Callaway nuclear plant completed its first-ever breaker-to-breaker run and completed a plant record 28-day refueling and maintenance outage in the fall of 2008. In addition, the equivalent availability for UE's coal-fired generating units was a solid 88% as compared to 89% in 2007. Ameren's Non-rate-regulated Generation business segment set new generation records, producing approximately 31 million total megawatthours, as equivalent availability for its coal-fired units was 85% compared to 81% in 2007.

Amidst the economic challenges facing us and our nation, we have remained focused on our customers and have made significant investments in our energy infrastructure to improve overall reliability and customer satisfaction. In Missouri, through UE's Power On reliability program, we buried more than 100 miles of electric line, trimmed trees along more than 6,500 miles of overhead line, tested nearly 100,000 wood utility poles, and inspected more than 8,000 miles of electric line. In Illinois, we targeted the worst-performing circuits and aggressively trimmed trees in Illinois Regulated's 40,000 square-mile territory and continued to automate its transmission system to elevate its reliability. We believe that high-quality customer service is essential to earning solid returns in our rate-regulated businesses.

In Missouri, UE received approval of an electric rate increase in January 2009 with new rates effective March 1, 2009. The authorized increase in annual electric revenues is approximately $162 million based on a 10.76% return on equity. The MoPSC rate order authorized a FAC, as well as a vegetation management and infrastructure inspection cost tracking mechanism. The FAC and tracking mechanisms improve UE's ability to continue to invest in its infrastructure so that UE will be able to meet its customers' expectations for safe and reliable service.

In Illinois, the ICC authorized in September 2008 new electric and gas rates for the Ameren Illinois Utilities effective October 1, 2008. These new rates provide approximately $161 million in additional annual revenue based on allowed returns on equity of nearly 10.7%. The ICC also approved an increase in the fixed non-volumetric monthly charge for natural gas residential and commercial customers such that the Ameren Illinois Utilities now recover 80% of delivery service costs through this charge versus the prior 53%. The remainder is recovered through volume-based charges. This will make our gas utility earnings less sensitive to volumetric swings.

Earnings

Ameren reported net income of $605 million, or $2.88 per share, for 2008 compared with net income of $618 million, or $2.98 per share, in 2007. The decline in earnings in 2008 versus 2007 was principally due to higher fuel and related transportation prices, increased spending on utility distribution system reliability, higher plant operations and maintenance costs, milder weather, and net unrealized mark-to-market losses on nonqualifying hedges, among other things.

Those items more than offset the positive items. The positive items included improved generating plant output and higher realized margins from Non-rate-regulated Generation operations, the absence of costs in 2008 that were incurred in January 2007 associated with electric outages caused by severe ice storms and the amount of these costs that UE will recover as a result of an accounting order issued by the MoPSC, the reduced impact in 2008 of the Illinois electric settlement agreement, the absence in 2008 of the March 2007 FERC order that resettled costs among MISO market participants retroactive to 2005 that was recorded in 2007 and subsequent recovery of a portion of these costs in 2008 through a MoPSC order, net increases in electric and natural gas rates, and a 2008 lump-sum settlement payment from a coal supplier for expected higher fuel costs in 2009 as a result of a premature mine closure and contract termination, among other things.

Liquidity

Cash flows from operations of $1.5 billion in 2008 at Ameren, along with other funds, were used to pay dividends to common shareholders of $534 million and to partially fund capital expenditures of $1.9 billion. The remaining capital expenditures were primarily funded with debt.

We have taken actions to build on our financial strength and enhance our financial flexibility in light of the current difficult economic and capital and credit market conditions. These actions included the February 2009 decision of Ameren's board of directors to reduce its common dividend and accessing the capital markets to increase our available liquidity, as well as making significant reductions in our 2008 and projected 2009 spending plans while still meeting our reliability, environmental, and safety objectives.

Outlook

The global capital and credit markets experienced extreme volatility and disruption in 2008, and we expect those conditions to continue throughout 2009. We believe that the disruption in the capital and credit markets will further weaken global economic conditions. These weak economic conditions will likely result in volatility in the power and commodity markets, greater risk of defaults by our counterparties, weaker customer sales growth, particularly with respect to industrial sales, higher bad debt expense and possible impairment of goodwill and long-lived assets, among other things.

Over the next few years, we continue to expect to make significant investments in our electric and natural gas infrastructure to improve reliability of our distribution systems and to comply with environmental requirements. From 2009 through 2011, we expect our rate-regulated rate base to grow approximately 9% per year. Earnings growth in our rate-regulated businesses is expected to come from updating existing customer rates to reflect these investments and the current levels of costs UE and the Ameren Illinois Utilities are experiencing. We consider the 2008 and 2009 Illinois and Missouri rate orders to be constructive. However, the returns that UE and the Ameren Illinois Utilities expect to earn in 2009 are below levels allowed by the respective state utility commissions in their last rate orders. The new rates were based on historic test year data and 2009 costs are expected to be higher than the levels recovered in rates. This is especially true of financing costs in Illinois, where sharply higher debt financing costs, which were incurred after our rate cases were filed, are not being recovered in rates. UE and the Ameren Illinois Utilities will file more frequent rate cases requesting moderate rate increases, as well as continue to seek appropriate cost recovery and tracker mechanisms to mitigate regulatory lag.

In addition, we will continue to optimize Ameren's Non-rate-regulated Generation's assets, focusing on improving the output of these plants and related energy marketing. We believe Non-rate-regulated Generation's plants will be well positioned for earnings growth in the future should energy prices improve.

We will incur significant costs in future years to comply with existing federal EPA and state regulations regarding SO2, NOx, and mercury emissions from coal-fired power plants. Between 2009 and 2018, Ameren expects that certain Ameren Companies will be required to invest between $4.5 billion and $5.5 billion to retrofit their coal-fired power plants with pollution control equipment. Any pollution control investments will result in decreased plant availability during construction and significantly higher ongoing operating expenses. Approximately 50% of this investment is expected to be in our Missouri Regulated operations, and it is therefore expected to be recoverable from ratepayers.

Future initiatives regarding greenhouse gas emissions and global warming are subject to active consideration in the U.S. Congress. President Obama supports an economy-wide cap-and-trade greenhouse gas reduction program that would reduce emissions to 1990 levels by 2020 and to 80% below 1990 levels by 2050. President Obama has also indicated support for auctioning 100% of the emission allowances to be distributed under the legislation. Although we cannot predict the date of enactment or the requirements of any global warming legislation or regulations, it is likely that some form of federal greenhouse gas legislation or regulations will become law during President Obama's administration. Potential impacts from proposed legislation could vary depending upon proposed CO2 emission limits, the timing of implementation of those limits, the method of allocating allowances, and provisions for cost containment measures.

Future federal and state legislation or regulations that mandate limits on the emission of greenhouse gases would result in significant increases in capital expenditures and operating costs, which, in turn, could lead to increased liquidity needs and higher financing costs. Excessive costs to comply with future legislation or regulations might force UE, Genco, CILCO (through AERG) and EEI and other similarly-situated electric power generators to close some coal-fired facilities and could lead to possible impairment of assets. As a result, mandatory limits could have a material adverse impact on Ameren's, UE's, Genco's, CILCO's (through AERG) and EEI's results of operations, financial position, or liquidity.

General

Ameren, headquartered in St. Louis, Missouri, is a public utility holding company under PUHCA administered by FERC. Ameren's primary assets are the common stock of its subsidiaries. Ameren's subsidiaries are separate, independent legal entities with separate businesses, assets and liabilities. These subsidiaries operate rate-regulated electric generation, transmission and distribution businesses, rate-regulated natural gas transmission and distribution businesses, and non-rate-regulated electric generation businesses in Missouri and Illinois, as discussed below. Dividends on Ameren's common stock and the payment of other expenses by the Ameren and CILCORP holding companies are dependent on distributions made to it by its subsidiaries. See Note 1 - Summary of Significant Accounting Policies to our financial statements under Part II, Item 8, of this report for a detailed description of our principal subsidiaries.

† UE operates a rate-regulated electric generation, transmission and distribution business, and a rate-regulated natural gas transmission and distribution business in Missouri.

† CIPS operates a rate-regulated electric and natural gas transmission and distribution business in Illinois.

† Genco operates a non-rate-regulated electric generation business in Illinois and Missouri.

† CILCO, a subsidiary of CILCORP (a holding company), operates a rate-regulated electric and natural gas transmission and distribution business and a non-rate-regulated electric generation business (through its subsidiary, AERG) in Illinois.

† IP operates a rate-regulated electric and natural gas transmission and distribution business in Illinois.

The financial statements of Ameren are prepared on a consolidated basis and therefore include the accounts of its majority-owned subsidiaries. All significant intercompany transactions have been eliminated. All tabular dollar amounts are expressed in millions, unless otherwise indicated.

In addition to presenting results of operations and earnings amounts in total, we present certain information in cents per share. These amounts reflect factors that directly affect Ameren's earnings. We believe this per share information helps readers to understand the impact of these factors on Ameren's earnings per share. All references in this report to earnings per share are based on average diluted common shares outstanding during the applicable year.

RESULTS OF OPERATIONS

Earnings Summary

Our results of operations and financial position are affected by many factors. Weather, economic conditions, and the actions of key customers or competitors can significantly affect the demand for our services. Our results are also affected by seasonal fluctuations: winter heating and summer cooling demands. The vast majority of Ameren's revenues are subject to state or federal regulation. This regulation has a material impact on the price we charge for our services. Non-rate-regulated Generation sales are also subject to market conditions for power. We principally use coal, nuclear fuel, natural gas, and oil for fuel in our operations. The prices for these commodities can fluctuate significantly due to the global economic and political environment, weather, supply and demand, and many other factors. We do have natural gas cost recovery mechanisms for our Illinois and Missouri gas delivery businesses and purchased power cost recovery mechanisms for our Illinois electric delivery businesses. As part of the electric rate order issued by the MoPSC on January 27, 2009, UE was granted permission to put in place a FAC, which was effective March 1, 2009. See Note 2 - Rate and Regulatory Matters to our financial statements under Part II, Item 8, for a discussion of the January 27, 2009, MoPSC order in UE's electric rate proceeding. Fluctuations in interest rates and conditions in the capital and credit markets affect our cost of borrowing and our pension and postretirement benefits costs. We employ various risk management strategies to reduce our exposure to commodity risk and other risks inherent in our business. The reliability of our power plants and transmission and distribution systems, the level of purchased power costs, operating and administrative costs, and capital investment are key factors that we seek to control to optimize our results of operations, financial position, and liquidity.

Ameren's net income was $605 million ($2.88 per share) for 2008, $618 million ($2.98 per share) for 2007, and $547 million ($2.66 per share) for 2006.

Ameren's net income decreased $13 million and earnings per share decreased 10 cents in 2008 compared with 2007. Net income increased in the Non-rate-regulated Generation segment by $71 million in 2008 compared to 2007, while net income in the Missouri Regulated and Illinois Regulated segments decreased by $47 million and $15 million, respectively. Other net income decreased $22 million in 2008 compared with 2007, primarily because of net unrealized mark-to-market losses on nonqualifying hedges mainly related to fuel-related transactions and reduced interest and dividend income.

Compared with 2007 earnings, 2008 earnings were negatively affected by:

† higher fuel and related transportation prices, excluding net mark-to-market losses on fuel-related transactions (27 cents per share);

† increased distribution system reliability expenditures (16 cents per share);

† higher plant operations and maintenance expenses (16 cents per share);

† unfavorable weather conditions (estimated at 16 cents per share);

† net unrealized mark-to-market losses on nonqualifying hedges (11 cents per share);

† higher financing costs (10 cents per share);

† asset impairment charges recorded during 2008 to adjust the carrying value of CILCO's (through AERG) Indian Trails and Sterling Avenue generation facilities to their estimated fair values as of December 31, 2008 (6 cents per share);

† increased depreciation and amortization expense (6 cents per share);

† the absence in 2008 of the reversal, recorded in 2007, of the Illinois Customer Elect electric rate increase phase-in plan accrual (5 cents per share);

† higher labor and employee benefit costs (5 cents per share); and

† higher bad debt expenses (3 cents per share).

Compared with 2007 earnings, 2008 earnings were favorably affected by:

† higher realized electric margins in the Non-rate-regulated Generation segment;

† the absence of costs in 2008 that were incurred in January 2007 associated with electric outages caused by severe ice storms and the amount of these costs that UE will recover as a result of an accounting order issued by the MoPSC, which was recorded as a regulatory asset in 2008 (16 cents per share);

† the reduced impact in 2008 of the electric rate relief and customer assistance programs provided to certain Ameren Illinois Utilities electric customers under the Illinois electric settlement agreement (13 cents per share);

† the absence in 2008 of a March 2007 FERC order that resettled costs among MISO market participants retroactive to 2005 that was recorded in 2007 and the subsequent recovery of a portion of these costs in 2008, through a MoPSC order (10 cents per share);

† higher electric and natural gas delivery service rates in the Illinois Regulated segment pursuant to the ICC consolidated rate order for CIPS, CILCO, and IP issued in September 2008 (9 cents per share);

† a settlement agreement with a coal mine owner reached in June 2008 that reimbursed Genco, in the form of a lump-sum payment, for increased costs for coal and transportation that it expects to incur in 2009 due to the premature closure of an Illinois mine at the end of 2007 (8 cents per share);

† higher electric rates, lower depreciation expense and decreased income tax expense in the Missouri Regulated segment pursuant to the MoPSC electric rate order for UE issued in May 2007 (8 cents per share); and

† the reduced impact of the Callaway nuclear plant refueling and maintenance outage in 2008, as

The cents per share information presented above is based on average shares outstanding in 2007.

Ameren's net income increased $71 million and earnings per share increased 32 cents in 2007 compared with 2006.

Compared with 2006 earnings, 2007 earnings were favorably affected by:

† higher margins in the Non-rate-regulated Generation segment due to the replacement of below-market power sales contracts, which expired in 2006, with higher-priced contracts;

† higher electric rates, lower depreciation expense, decreased income tax expense and $5 million in SO2 emission allowance sales in the Missouri Regulated segment pursuant to the MoPSC electric rate order for UE issued in May 2007 (21 cents per share);

† decreased costs associated with outages caused by severe storms (17 cents per share);

† the absence of costs in 2007 that were incurred in 2006 related to the reservoir breach at UE's Taum Sauk plant (15 cents per share); and

† favorable weather conditions (estimated at 14 cents per share).

Compared with 2006 earnings, 2007 earnings were negatively affected by:

† the combined effect of the elimination of the Ameren Illinois Utilities' bundled electric tariffs, implementation of new delivery service tariffs effective January 2, 2007, and the expiration of below-market power supply contracts;

† higher fuel and related transportation prices (31 cents per share);

† electric rate relief and customer assistance programs provided to certain Ameren Illinois Utilities' electric customers under the Illinois electric settlement agreement (21 cents per share);

† higher labor and employee benefit costs (18 cents per share);

† higher financing costs (17 cents per share);

† lower emission allowance sales (16 cents per share);

† increases in distribution system reliability expenditures (15 cents per share);

† reduced gains on the sale of noncore properties, including leveraged leases (15 cents per share);

† increased depreciation and amortization expense (13 cents per share);

† a planned refueling and maintenance outage at UE's Callaway nuclear plant net of an unplanned outage at Callaway in 2006 (9 cents per share); and

† higher bad debt expenses (8 cents per share).

The cents per share information presented above is based on average shares outstanding in 2006.

Because it is a holding company, Ameren's net income and cash flows are primarily generated by its principal subsidiaries: UE, CIPS, Genco, CILCORP and IP. The following table presents the contribution by Ameren's principal subsidiaries to Ameren's consolidated net income for the years ended December 31, 2008, 2007 and 2006:

                                          2008      2007      2006
                     Net income:
                     UE(a)               $   245   $   336   $   343
                     CIPS                     12        14        35
                     Genco                   175       125        49
                     CILCORP                  42        47        19
                     IP                        3        24        55
                     Other(b)                128        72        46
                     Ameren net income   $   605   $   618   $   547

(a) Includes earnings from a non-rate-regulated 40% interest in EEI through February 29, 2008.

(b) Includes earnings from EEI, other non-rate-regulated operations, as well as corporate general and administrative expenses, and intercompany eliminations. Includes a 40% interest in EEI prior to February 29, 2008 and an 80% interest in EEI since that date.

Below is a table of income statement components by segment for the years ended December 31, 2008, 2007 and 2006:

                                                                   Non-rate-            Other /
                                 Missouri         Illinois         regulated          Intersegment
           2008                 Regulated        Regulated         Generation         Eliminations          Total
Electric margin                 $    1,924       $      817       $      1,188       $          (47 )     $    3,882
Gas margin                              78              342                  -                   (5 )            415
Other revenues                           3                -                  -                   (3 )              -
Other operations and
maintenance                           (922 )           (627 )             (356 )                 48           (1,857 )
Depreciation and
amortization                          (329 )           (219 )             (109 )                (28 )           (685 )
Taxes other than income
taxes                                 (240 )           (126 )              (26 )                 (1 )           (393 )
Other income and expenses               53               11                  -                  (15 )             49
Interest expense                      (193 )           (144 )              (99 )                 (4 )           (440 )
Income taxes (benefit)                (134 )            (16 )             (217 )                 40             (327 )
Minority interest and
preferred dividends                     (6 )             (6 )              (29 )                  2              (39 )
Net Income (loss)               $      234       $       32       $        352       $          (13 )     $      605
           2007
Electric margin                 $    1,984       $      759       $      1,037       $          (51 )     $    3,729
Gas margin                              70              317                  -                   (8 )            379
Other revenues                           2                3                  -                   (5 )              -
Other operations and
maintenance                           (900 )           (550 )             (313 )                 76           (1,687 )
Depreciation and
amortization                          (333 )           (217 )             (105 )                (26 )           (681 )
Taxes other than income
taxes                                 (234 )           (121 )              (25 )                 (1 )           (381 )
Other income and expenses               35               20                  3                   (8 )             50
Interest expense                      (194 )           (132 )             (107 )                 10             (423 )
Income taxes (benefit)                (143 )            (25 )             (182 )                 20             (330 )
Minority interest and
preferred dividends                     (6 )             (7 )              (27 )                  2              (38 )
Net Income                      $      281       $       47       $        281       $            9       $      618
           2006
Electric margin                 $    1,898       $      824       $        756       $          (46 )     $    3,432
Gas margin                              60              307                  -                   (3 )            364
Other revenues                           2                2                  1                   (5 )              -
Other operations and
maintenance                           (800 )           (535 )             (283 )                 62           (1,556 )
Depreciation and
amortization                          (335 )           (192 )             (106 )                (28 )           (661 )
Taxes other than income
taxes                                 (230 )           (137 )              (24 )                  -             (391 )
Other income and expenses               33               13                  2                  (17 )             31
Interest expense                      (171 )            (95 )             (103 )                 19             (350 )
Income taxes (benefit)                (184 )            (65 )              (78 )                 43             (284 )
Minority interest and
preferred dividends                     (6 )             (7 )              (27 )                  2              (38 )
Net Income                      $      267       $      115       $        138       $           27       $      547

Margins

The following table presents the favorable (unfavorable) variations in the registrants' electric and gas margins from the previous year. Electric margins are defined as electric revenues less fuel and purchased power costs. Gas margins are defined as gas revenues less gas purchased for resale. The table covers the years ended December 31, 2008, 2007, and 2006. We consider electric, interchange and gas margins useful measures to analyze the change in profitability of our electric and gas operations between periods. We have included the analysis below as a complement to the financial information we provide in accordance with GAAP. However, these margins may not be a presentation defined under GAAP, and they may not be comparable to other companies' presentations or more useful than the GAAP information we provide elsewhere in this report.

        2008 versus 2007            Ameren(a)         UE         CIPS         Genco       CILCORP       CILCO          IP
Electric revenue change:
Effect of weather (estimate)       $       (59 )   $    (36 )   $    (6 )   $       -     $     (4 )   $     (4 )   $    (13 )
Electric rate increases and
market price changes                       149           16           5            45           18           18           22
Interchange revenues, excluding
estimated weather impact of $53
million                                    (42 )        (47 )         -             -            -            -            -
. . .