Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
AEE > SEC Filings for AEE > Form 10-Q on 12-May-2014All Recent SEC Filings

Show all filings for AMEREN CORP

Form 10-Q for AMEREN CORP


12-May-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the financial statements contained in this Form 10-Q as well as Management's Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors contained in the Form 10-K. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of our business segments to provide a better understanding of how those segments and their results affect the financial condition and results of operations of Ameren as a whole. Also see the Glossary of Terms and Abbreviations at the front of this report and in the Form 10-K.
Ameren, headquartered in St. Louis, Missouri, is a public utility holding company under PUHCA 2005, administered by FERC. Ameren's primary assets are its equity interests in its subsidiaries. Ameren's subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. Dividends on Ameren's common stock and the payment of expenses by Ameren depend on distributions made to it by its subsidiaries. Ameren's principal subsidiaries are listed below.
Union Electric Company, doing business as Ameren Missouri, operates a rate-regulated electric generation, transmission and distribution business, and a rate-regulated natural gas transmission and distribution business in Missouri.

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

Ameren has various other subsidiaries responsible for activities such as the provision of shared services. Ameren also has a subsidiary, ATXI, that operates a FERC rate-regulated electric transmission business and is developing the Illinois Rivers project.
The operating results, assets, and liabilities for New AER and the Elgin, Gibson City, Grand Tower, Meredosia, and Hutsonville energy centers have been presented separately as discontinued operations for all periods presented in this report. Unless otherwise stated, the following sections of Management's Discussion and Analysis of Financial Condition and Results of Operations exclude discontinued operations for all periods presented. On January 31, 2014, Medina Valley completed its sale of the Elgin, Gibson City, and Grand Tower gas-fired energy centers to Rockland Capital. See Note 12 - Divestiture Transactions and Discontinued Operations under Part I, Item 1, of this report for additional information regarding the discontinued operations presentation. See Note 16 - Divestiture Transactions and Discontinued Operations under Part II, Item 8, of the Form 10-K for additional information regarding Ameren's divestiture of New AER in December 2013.

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. Ameren Missouri and Ameren Illinois have no subsidiaries, and therefore their financial statements are not prepared on a consolidated basis. All tabular dollar amounts are 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.
OVERVIEW
Net income attributable to Ameren Corporation was $96 million in the first quarter of 2014, compared with a net loss of $145 million in the first quarter of 2013. Net income attributable to Ameren Corporation from continuing operations was $97 million in the first quarter of 2014, compared with net income of $54 million in the first quarter of 2013. Net income from continuing operations was favorably affected by colder winter temperatures that drove higher electric and natural gas sales volumes. In addition, earnings increased because of increased rates for Ameren Illinois and ATXI transmission service under formula ratemaking, reflecting additional infrastructure investment; increased Ameren Illinois electric delivery service earnings under formula ratemaking, reflecting additional infrastructure investment and a higher allowed return on equity, and higher rates for Ameren Illinois natural gas distribution service pursuant to a December 2013 ICC order, each effective in January 2014. There was also a substantial elimination of costs previously incurred in support of the divested merchant generation business that benefited 2014 earnings comparisons. Additionally, net income from continuing operations was favorably affected by decreased interest expense.
Ameren will continue to execute on its strategy of investing and operating its utilities in a manner consistent with existing regulatory frameworks, as well as working to enhance those frameworks and advocating for responsible energy policies. Ameren is focused on creating and capitalizing on opportunities to invest in its rate-regulated businesses for the benefit of its customers and shareholders. Consistent with previous plans, Ameren will continue to allocate less discretionary capital to Ameren Missouri and greater levels of discretionary capital to Ameren Illinois energy delivery service and Ameren Illinois and ATXI electric transmission service projects because these services operate under formulaic regulatory frameworks that are more supportive of infrastructure investment. As a key component of Ameren's long-term strategy to enhance regulatory frameworks and advocate for responsible energy policies, Ameren Missouri will continue to actively work with legislators and other key stakeholders to build support for energy policies that reduce regulatory lag and support investment in aging


energy infrastructure that will result in long-term benefits for its customers. Ameren Missouri will file for increased electric service rates by July 15, 2014. The rate request will seek an increase to recover increased operating costs, including higher net fuel costs; to recover and earn a return on additional electric infrastructure investments made for the benefit of its customers; and to reflect rebates provided for customer-installed solar generation. The additional infrastructure investments include several significant projects. These projects include the replacement of the nuclear reactor head at Ameren Missouri's Callaway energy center in order to ensure continued safe and dependable operations; upgrades to the electrostatic precipitators at Ameren Missouri's coal-fired Labadie energy center to meet more stringent environmental regulations and reduce air emissions; and two new substations in St. Louis. Additionally, Ameren Missouri has begun construction on the O'Fallon energy center, Missouri's largest investor-owned utility solar power facility. These projects are scheduled for completion by the fourth quarter of 2014 and would be included in rate base as a part of Ameren Missouri's July 2014 rate case filing. In February 2014, Ameren Missouri's largest customer, Noranda, and 37 residential customers filed earnings complaint and rate shift complaint cases with the MoPSC. Ameren Missouri does not believe that a reduction in electric service rates is justified and will file testimony that supports that position, which is consistent with Ameren Missouri's expected July 2014 rate case filing. The rate shift complaint case seeks to reduce Noranda's electricity cost with an offsetting increase in electricity cost for Ameren Missouri's other customers. While the rate shift proposal is revenue neutral to Ameren Missouri, Ameren Missouri does not believe that the proposed reduction to Noranda's electric rates, which are significantly below Ameren Missouri's cost of service, is appropriate or in the best interests of Ameren Missouri's other electric customers.
In April 2014, the United States Supreme Court upheld the CSAPR. Ameren Missouri is continuing to review the United States Supreme Court's decision and expects the EPA to issue guidance in the near future on implementing the CSAPR. Ameren Missouri has already taken actions to prepare for the implementation of the CSAPR, including the installation of two scrubbers at its Sioux energy center and burning ultra-low sulfur coal. Assuming the EPA does not revise the emission reductions previously included in the CSAPR, Ameren Missouri does not expect to make additional capital investments to comply with the CSAPR.
In April 2014, Ameren Illinois filed with the ICC its annual electric delivery service formula rate update to establish the revenue requirement used to set rates for 2015. Pending ICC approval, Ameren Illinois' update filing will result in a $206 million increase in Ameren Illinois' electric delivery service revenue requirement beginning in January 2015. An ICC decision on this April 2014 filing is expected by December 2014. These rates will affect Ameren Illinois' cash flows during 2015.
Under the IEIMA, Ameren Illinois is subject to performance standards, including improvements in service reliability to reduce

both the frequency and duration of outages. Ameren Illinois continues to make investments to improve electric delivery service reliability and plans to invest in smart grid infrastructure, including smart meters, which enables customers to better manage their energy costs. The implementation of advanced technology is increasing electric system performance throughout Ameren Illinois' service territory, and over time, will improve service reliability by helping Ameren Illinois detect and isolate outages faster. Ameren Illinois is on track to meet the performance goals and the incremental capital investment required by the IEIMA, as well as pass the IEIMA rate impact test for the two-year period ending May 31, 2014. The investments made in modernizing the system are also generating new jobs.
Over the 2014 through 2018 period, Ameren currently plans to invest $2.25 billion in FERC-regulated electric transmission projects because of the local and regional needs for transmission investment and FERC's constructive forward-looking formula ratemaking framework (ATXI - $1.4 billion; Ameren Illinois - $850 million). ATXI's Illinois Rivers project, estimated at a total cost of $1.1 billion, is in the early stages of construction. ATXI is currently reviewing, and expects during 2014 to update, the estimated cost of the Illinois Rivers project incorporating the final route approved by the ICC, which is longer than originally proposed. ATXI plans to request a certificate of public convenience and necessity from the ICC for the Spoon River project in the third quarter of 2014. An ICC decision on this filing is expected in 2015. Separate from the ATXI projects discussed above, Ameren Illinois expects to invest approximately $850 million in electric transmission assets through 2018 to address load growth and reliability requirements.
In November 2013, a customer group filed a complaint case with FERC seeking a reduction in the allowed return on common equity to 9.15%, as well as a limit on the common equity ratio, under the MISO tariff. Currently, the FERC-allowed return on common equity for MISO transmission owners is 12.38%. This complaint case could result in a reduction to Ameren Illinois' and ATXI's allowed return on common equity. That reduction could also result in a refund for transmission service revenues earned after the filing of the complaint case in November 2013. FERC has not issued an order in this case, and it is under no deadline to do so. Ameren and Ameren Illinois continue to be actively engaged in this proceeding and strongly believe that constructive ratemaking policies, including the allowed return on common equity level, play a pivotal role in incenting investment, as evidenced by their current investment plans.
RESULTS OF OPERATIONS
Our results of operations and financial position are affected by many factors. Weather, economic conditions, the effects of energy efficiency programs, and the actions of key customers 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 prices we charge for our services. We principally use coal, nuclear fuel, natural gas, methane gas, and oil for fuel in our operations. The prices for


these commodities can fluctuate significantly because of the global economic and political environment, weather, supply and demand, and many other factors. We have natural gas cost recovery mechanisms for our Illinois and Missouri natural gas delivery service businesses, a purchased power cost recovery mechanism for our Illinois electric delivery service business, and a FAC for our Missouri electric utility business. Ameren Illinois' electric delivery service utility business, pursuant to the IEIMA, conducts an annual reconciliation of the revenue requirement necessary to reflect the actual costs incurred in a given year with the revenue requirement that was in effect for that year, with recoveries from or refunds to customers made in a subsequent year. Included in Ameren Illinois' revenue requirement reconciliation is a formula for the return on equity, which is equal to the average of the monthly yields of 30-year United States Treasury bonds plus 580 basis points. Therefore, Ameren Illinois' annual return on equity will be directly correlated to yields on United States Treasury bonds. Fluctuations in interest rates and conditions in the capital and credit markets also 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 energy centers and transmission and distribution systems and the level of purchased power costs, operations and maintenance costs, and capital investment are key factors that we seek to control to optimize our results of operations, financial position, and liquidity. Earnings Summary
The following table presents a summary of Ameren's earnings for the three months ended March 31, 2014, and 2013:

                                                        Three Months Ended
                                                            March 31,
                                                    2014                  2013
Net income (loss) attributable to Ameren
Corporation                                  $              96     $           (145 )
Earnings (loss) per common share - basic                  0.40                (0.60 )
Net income attributable to Ameren
Corporation - continuing operations                         97                   54
Earnings per common share - basic -
continuing operations                                     0.40                 0.22

Net income attributable to Ameren Corporation from continuing operations increased $43 million, or 18 cents per

share, in the first quarter of 2014 compared to the first quarter of 2013. The increase in net income attributable to Ameren Corporation from continuing operations between periods was caused by increased net income in the Ameren Missouri segment of $7 million, increased net income in the Ameren Illinois segment of $22 million, and decreased net loss in other nonregistrant subsidiaries of $14 million.
Net income from continuing operations at Ameren was favorably affected in the first quarter of 2014, compared with the same period in 2013, by:
the effect of colder winter temperatures on electric and natural gas demand (estimated at 7 cents per share);

higher electric transmission rates at Ameren Illinois and ATXI because of additional rate base (3 cents per share);

the substantial elimination of costs previously incurred in support of the divested merchant generation business (3 cents per share);

decreased interest expense, primarily due to interest associated with pre-MEEIA energy efficiency programs as well as Ameren Missouri's October 2013 long-term debt retirement and redemption (3 cents per share); and

an increase in Ameren Illinois' electric delivery service earnings under formula ratemaking due to increased rate base and a higher allowed return on equity as a result of increased yields on the 30-year United States Treasury bonds (estimated 2 cents per share).

The cents per share information presented above is based on the average shares outstanding in the first quarter of 2013. There were no material differences between the basic and diluted average shares outstanding for either the first quarter of 2014 or 2013.
For additional details regarding the Ameren Companies' results of operations, including explanations of Margins, Other Operations and Maintenance Expenses, Depreciation and Amortization, Taxes Other Than Income Taxes, Other Income and Expenses, Interest Charges, Income Taxes and Income (Loss) from Discontinued Operations, Net of Taxes, see the major headings below.


Below is a table of income statement components by segment for the three months ended March 31, 2014, and 2013:

                                                                        Other /
                                        Ameren          Ameren        Intersegment
                                       Missouri        Illinois       Eliminations       Ameren
Three Months 2014:
Electric margins                     $       512     $       272     $         6      $      790
Natural gas margins                           28             157              (1 )           184
Other operations and maintenance            (227 )          (200 )             7            (420 )
Depreciation and amortization               (116 )           (63 )            (2 )          (181 )
Taxes other than income taxes                (78 )           (46 )            (3 )          (127 )
Other income (expenses)                       10              (1 )             -               9
Interest charges                             (52 )           (30 )           (10 )           (92 )
Income taxes                                 (29 )           (35 )             -             (64 )
Income (loss) from continuing
operations                                    48              54              (3 )            99
Loss from discontinued operations,
net of tax                                     -               -              (1 )            (1 )
Net income (loss)                             48              54              (4 )            98
Preferred dividends                           (1 )            (1 )             -              (2 )
Net income (loss) attributable to
Ameren Corporation                   $        47     $        53     $        (4 )    $       96
Three Months 2013:
Electric margins                     $       493     $       233     $        (2 )    $      724
Natural gas margins                           27             131              (1 )           157
Other operations and maintenance            (221 )          (176 )            (2 )          (399 )
Depreciation and amortization               (111 )           (61 )            (3 )          (175 )
Taxes other than income taxes                (77 )           (42 )            (3 )          (122 )
Other income (expenses)                        9              (2 )             -               7
Interest charges                             (60 )           (31 )           (10 )          (101 )
Income (taxes) benefit                       (19 )           (20 )             4             (35 )
Income (loss) from continuing
operations                                    41              32             (17 )            56
Loss from discontinued operations,
net of tax                                     -               -            (199 )          (199 )
Net income (loss)                             41              32            (216 )          (143 )
Noncontrolling interests and
preferred dividends                           (1 )            (1 )             -              (2 )
Net income (loss) attributable to
Ameren Corporation                   $        40     $        31     $      (216 )    $     (145 )


Margins
The following table presents the favorable (unfavorable) variations by segment for electric and natural gas margins in the three months ended March 31, 2014, compared with the same period in 2013. Electric margins are defined as electric revenues less fuel and purchased power costs. Natural gas margins are defined as gas revenues less gas purchased for resale. We consider electric and natural gas margins useful measures to analyze the change in profitability of our electric and natural 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 may not be comparable to other companies' presentations or more useful than the GAAP information we provide elsewhere in this report.

                                                         Ameren       Ameren
                     Three Months                       Missouri     Illinois     Other(a)      Ameren
Electric revenue change:
Effect of weather (estimate)(b)                        $    26      $     4      $       -     $    30
Base rates (estimate)                                        -           22              -          22
Recovery of FAC under-recovery(c)                           (4 )          -              -          (4 )
Off-system sales and transmission services revenues
(included in base rates)                                    (7 )          -              1          (6 )
MEEIA (energy efficiency)                                   11            -              -          11
Transmission services                                        -            6              7          13
Bad debt, energy efficiency programs and environmental
remediation cost riders                                      -            6              -           6
Illinois pass-through power supply costs                     -          (46 )            -         (46 )
Sales volume (excluding the estimated effect of
abnormal weather)                                           (6 )          3              -          (3 )
Other                                                       (3 )         (2 )            -          (5 )
Total electric revenue change                          $    17      $    (7 )    $       8     $    18
Fuel and purchased power change:
Energy costs included in base rates                    $    (2 )    $     -      $       -     $    (2 )
Recovery of FAC under-recovery(c)                            4            -              -           4
Illinois pass-through power supply costs                     -           46              -          46
Total fuel and purchased power change                  $     2      $    46      $       -     $    48
Net change in electric margins                         $    19      $    39      $       8     $    66
Natural gas margins change:
Effect of weather (estimate)(b)                        $     1      $     6      $       -     $     7
Base rates (estimate)                                        -           10              -          10
Gross receipts tax                                           -            4              -           4
Bad debt, energy efficiency programs and environmental
remediation cost riders                                      -            3              -           3
Sales volume (excluding the estimated effect of
abnormal weather) and other                                  -            3              -           3
Net change in natural gas margins                      $     1      $    26      $       -     $    27

(a) Primarily includes amounts for ATXI and intercompany eliminations.

(b) Represents the estimated margin impact resulting primarily from the effects of changes in cooling and heating degree-days on electric and natural gas demand compared with the prior-year period; this is based on temperature readings from the National Oceanic and Atmospheric Administration weather stations at local airports in our service territories.

(c) Represents the change in the net fuel costs recovered under the FAC through customer rates, with corresponding offsets to fuel expense due to amortization of a previously recorded regulatory asset.

Ameren Corporation
Ameren's electric margins increased by $66 million, or 9%, for the three months ended March 31, 2014, compared with the same period in 2013. Ameren's natural gas margins increased by $27 million, or 17%, for the three months ended March 31, 2014, compared with the same period in 2013. These results were primarily driven by Ameren Missouri and Ameren Illinois results, as discussed below. Ameren's electric margins also reflected the results of operations of ATXI. ATXI's transmission revenues increased by $7 million, for the three months ended March 31, 2014, compared with the same period in 2013, under forward-looking formula ratemaking reflecting increased rate base investment and recoverable costs.

Ameren Missouri
Ameren Missouri has a FAC cost recovery mechanism that allows Ameren Missouri to recover, through customer rates, 95% of changes in net energy costs greater or less than the amount set in base rates without a traditional rate proceeding, subject to MoPSC prudence reviews. Net energy cost includes fuel (coal, coal transportation, natural gas for generation, and enriched uranium), certain fuel additives, emission allowances, purchased power costs, transmission costs and revenues, and MISO costs and revenues, net of off-system sales revenues. Ameren Missouri accrues, as a regulatory asset, net energy costs that exceed the amount set in base rates (FAC under-recovery). Net recovery of these costs under the FAC through customer rates decreased $4 million, for the three months ended March 31, 2014, compared


with the same period in 2013, with a corresponding offset to fuel expense to reduce the previously recognized FAC regulatory asset.
Ameren Missouri's electric margins increased by $19 million, or 4%, for the three months ended March 31, 2014, compared with the same period in 2013. The following items had a favorable effect on Ameren Missouri's electric margins:
Winter temperatures in 2014 were colder-than-normal compared to normal temperatures in 2013, as heating degree-days increased 17%, which increased revenues by an estimated $26 million, partially offset by an increase in net energy costs of $9 million. The increase in net energy costs is the sum of the change in energy costs included in base rates ($2 million) and the change in off-system sales and transmission services revenues ($7 million) in the above table.

Higher revenues associated with the MEEIA energy efficiency program cost recovery mechanism ($4 million) and lost revenue recovery mechanism ($7 million), which increased revenues by a combined $11 million. The higher revenues were driven by greater customer participation in the second year of the MEEIA program, which led to higher recovery of lost revenues. The lost revenue recovery mechanism helps compensate Ameren Missouri for lower sales from energy efficiency-related volume reductions in current and future periods. See Other Operations and Maintenance Expenses in this section for information on a related offsetting increase in energy efficiency program costs.

. . .

  Add AEE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for AEE - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.