10-QPeriod: Q3 FY2011

AMEREN CORP Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 8, 2011For Securities:AEE

Summary

Ameren Corporation (AEE) reported a significant turnaround in its financial performance for the third quarter and first nine months of 2011, moving from a net loss in the prior year's comparable periods to substantial net income in the current periods. This improvement was driven by several factors, including higher electric rates in Missouri and Illinois, which helped offset increased operating expenses. The company also benefited from lower interest expenses due to debt repayments. A key area of concern and a significant factor impacting earnings was the "Goodwill, impairment and other charges," which were considerably higher in 2010 due to impairments in the Merchant Generation segment. In contrast, 2011 saw a substantial reduction in these charges, though the company did record impairments related to the planned closure of its Meredosia and Hutsonville energy centers and a regulatory disallowance for rebuilding costs at its Taum Sauk energy center. The company continues to navigate evolving environmental regulations, which are driving capital expenditures and influencing operational decisions, such as the planned closure of older generation facilities.

Financial Highlights

46 data points
Beta

Revenue

$2.27B

Net Income

$285.00M

12.6% Net Margin

EPS (Diluted)

$1.18

Total Assets

$23.36B

Cash & Equivalents

$522.00M

Free Cash Flow

$415.00M

Financial Statements
Beta
Revenue$2.27B
Operating Expenses$1.72B
Operating Income$550.00M
Interest Expense$113.00M
Net Income$285.00M
EPS (Basic)$1.18
Shares Outstanding (Basic)241.70M

Key Highlights

  • 1Ameren reported a net income of $285 million for Q3 2011, a significant improvement from a net loss of $167 million in Q3 2010.
  • 2Year-to-date net income through September 30, 2011, was $494 million, up from $87 million in the same period of 2010.
  • 3The company experienced lower 'Goodwill, impairment and other charges' in 2011 compared to 2010, though new charges were incurred related to planned energy center closures and regulatory disallowances.
  • 4Increased electric rates in Missouri (Ameren Missouri) and Illinois (Ameren Illinois) were key drivers for the improved financial performance.
  • 5Lower interest expenses contributed positively to the results, reflecting debt repayments and reduced borrowings.
  • 6The Merchant Generation segment faced lower realized power prices and higher fuel/transportation costs, impacting its margins.
  • 7Ameren announced a voluntary separation offer to approximately 715 employees as part of ongoing cost management efforts.

Frequently Asked Questions

The substantial improvement in net income was primarily driven by higher electric rates approved by regulators in Missouri and Illinois, which offset increased operating expenses. Additionally, lower interest expenses due to debt repayments and reduced borrowings contributed to the positive results. The reduction in goodwill, impairment, and other charges compared to the prior year also significantly boosted net income.

The company is facing challenges related to the slow economic recovery impacting retail sales volumes, increased environmental regulations requiring significant capital expenditures and potentially leading to the closure of older generation facilities (like Meredosia and Hutsonville), and volatility in commodity prices affecting the Merchant Generation segment. Regulatory lag in recovering costs and a disallowance for rebuilding costs at the Taum Sauk energy center also presented headwinds.

Ameren is actively managing its environmental compliance by investing in pollution control equipment and evaluating its generation portfolio. The planned closure of the Meredosia and Hutsonville energy centers by the end of 2011 is a direct response to the expected costs of complying with new environmental regulations like CSAPR, which made continued operation uneconomical. These actions, while incurring immediate charges, are intended to mitigate future operational and capital costs related to environmental compliance. The company is also monitoring developments in nuclear energy regulation and potential impacts of climate change legislation.

Ameren expects significant capital expenditures over the next five years, primarily for environmental compliance and infrastructure modernization. The company plans to finance these through a mix of debt and equity to maintain a target capital structure. Ameren Illinois is also pursuing a performance-based ratemaking framework under the Energy Infrastructure Modernization Act to improve regulatory recovery for its electric distribution business. The company believes it has adequate liquidity and access to capital markets.