10-QPeriod: Q1 FY2001

AMEREN CORP Quarterly Report for Q1 Ended Mar 31, 2001

Filed May 15, 2001For Securities:AEE

Summary

Ameren Corporation (AEE) reported an increase in ongoing earnings for the first quarter of 2001, reaching $65 million ($0.48 per share), up from $61 million ($0.45 per share) in the prior-year period. This growth was driven by higher electric and gas revenues, largely due to improved weather conditions and increased sales volume, particularly in residential and commercial sectors, as well as new industrial contracts. However, reported earnings for the first quarter of 2001 were $58 million ($0.43 per share) due to a one-time charge of $6.8 million after-tax related to the adoption of new accounting standards for derivative financial instruments. The company is also navigating significant industry changes, including participation in discussions around alternative regulation plans in Missouri and the ongoing restructuring of the electric industry in Illinois. While the company has taken steps to manage market risks, particularly in fuel and electricity prices, potential future rate reductions and the impacts of industry restructuring present ongoing considerations for investors.

Key Highlights

  • 1First quarter 2001 ongoing earnings increased to $65 million ($0.48/share) from $61 million ($0.45/share) in Q1 2000.
  • 2Reported net income for Q1 2001 was $58 million ($0.43/share), impacted by a $6.8 million after-tax charge for adopting new accounting standards for derivatives (SFAS 133).
  • 3Total operating revenues increased by $199 million to $1.02 billion in Q1 2001 compared to Q1 2000, driven by higher electric and gas revenues.
  • 4Electric revenues saw a $113 million increase in Q1 2001 due to improved weather, higher residential, commercial, and industrial sales, and increased interchange sales.
  • 5Gas revenues increased by $87 million in Q1 2001, attributed to better weather and higher gas costs passed through the PGA.
  • 6The company is facing potential electric rate reductions in Missouri, with the MoPSC authorizing staff to file an earnings complaint for a rate reduction on July 1, 2001, if deemed warranted.
  • 7Ameren is in the process of withdrawing from the Midwest ISO and joining the Alliance RTO, with regulatory approvals pending from various commissions.

Frequently Asked Questions

The adoption of SFAS 133, 'Accounting for Derivative Instruments and Hedging Activities,' resulted in a one-time cumulative charge of $6.8 million after-tax for the first quarter of 2001. This charge reduced reported net income and earnings per share for the quarter. The company is managing its derivative instruments under the new standard and expects to reclassify certain deferred losses from other comprehensive income to earnings within the next twelve months.

Operating revenues increased significantly in the first quarter of 2001 primarily due to favorable weather conditions returning to normal, leading to higher electric sales in residential and commercial segments. Additionally, new industrial contracts and increased interchange sales contributed to higher electric revenues. Gas revenues also rose due to improved weather and higher gas costs reflected in the Purchased Gas Adjustment (PGA) clause.

The Missouri Public Service Commission (MoPSC) issued an order stating that the current experimental alternative regulation plan will not be continued beyond June 30, 2001. The MoPSC has authorized its staff to file an earnings complaint to seek a rate reduction on July 1, 2001, if they determine it is warranted. Ameren is engaged in discussions with the MoPSC and other parties regarding potential future rate changes and the development of a new regulation plan, but the outcome and timing remain uncertain.

Ameren manages interest rate risk by controlling the mix of variable and fixed-rate debt and monitoring market changes. For commodity prices (natural gas, fuel, electricity), the company uses various techniques, including derivative financial instruments like forward contracts and options. Its natural gas utility business is largely protected by Purchased Gas Adjustment (PGA) clauses. For electric operations, Ameren uses long-term contracts and aims to optimize its generation assets while managing price volatility.