10-KPeriod: FY2006

AMEREN CORP Annual Report, Year Ended Dec 31, 2006

Filed March 1, 2007For Securities:AEE

Summary

In 2006, Ameren Corporation faced significant operational challenges, including the aftermath of severe storms and ongoing remediation efforts for the Taum Sauk hydroelectric facility breach. The company's earnings per share decreased to $2.66 from $3.02 in 2005, impacted by storm restoration costs, Taum Sauk-related expenses, and higher operating costs for fuel and financing. Despite these challenges, Ameren's power plants performed well operationally, setting generation records. Regulatory matters in Illinois posed a key concern, with ongoing legislative debate around potential electric rate freezes that could materially impact the financial stability of its Illinois utilities. In Missouri, AmerenUE filed for its first electric rate increase in nearly 20 years, with decisions expected in mid-2007. The company anticipates significant increases in fuel and transportation costs in the coming years and plans substantial capital expenditures for environmental retrofits.

Key Highlights

  • 1Ameren's 2006 earnings per share were $2.66, a decrease from $3.02 in 2005, impacted by storm restoration costs and Taum Sauk facility issues.
  • 2The company experienced strong operational performance with record generation output from its power plants.
  • 3Significant capital expenditures are planned for environmental retrofitting of power plants, estimated between $3.5 billion and $4.5 billion between 2007 and 2016.
  • 4Regulatory uncertainty in Illinois regarding potential electric rate freezes poses a material risk to the financial stability of Ameren's Illinois utilities.
  • 5AmerenUE filed for its first electric rate increase in nearly 20 years, seeking a $361 million annual increase, with decisions expected in June 2007.
  • 6The company is exposed to potential adverse impacts from escalating fuel and transportation costs, with estimates of 15-20% increase for coal and related transportation in 2007.
  • 7Credit ratings from Moody's, S&P, and Fitch were placed under review or downgraded in late 2006 due to concerns over regulatory actions in Illinois.

Frequently Asked Questions

Ameren faced significant operational challenges in 2006 primarily due to unprecedented summer and winter storms that led to extensive restoration efforts. Additionally, ongoing remediation for the December 2005 breach of the upper reservoir at UE's Taum Sauk pumped-storage hydroelectric facility continued to impact operations and incur costs.

Ameren's Illinois regulated utilities (CIPS, CILCO, and IP) are facing significant uncertainty due to proposed legislation that could freeze electric rates at 2006 levels. The company believes such legislation would have a material adverse effect, potentially leading to financial insolvency and downgrades in credit ratings. Key decisions on electric delivery service rates and power procurement auctions are subject to ongoing regulatory and legislative review, with potential for further appeals.

The December 2005 breach of UE's Taum Sauk upper reservoir resulted in costs and lost electric margins that decreased Ameren's 2006 earnings by 20 cents per share. UE accepted responsibility for the incident and incurred costs for cleanup, damage, and liabilities, a significant portion of which it expects to recover from insurance carriers.

Ameren expects to invest between $3.5 billion and $4.5 billion between 2007 and 2016 to retrofit its power plants with pollution control equipment to comply with more stringent EPA emission limits. Approximately half of this investment is planned for UE's regulated operations, which is expected to be recoverable from ratepayers.