10-QPeriod: Q3 FY2012

AMEREN CORP Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 9, 2012For Securities:AEE

Summary

Ameren Corporation (AEE) reported a net income of $374 million for the third quarter of 2012, a significant increase from $285 million in the same period of 2011. This improvement was driven by several factors, including the absence of previously recorded charges related to the Taum Sauk energy center rebuilding and the closure of Meredosia and Hutsonville energy centers. Favorable impacts also came from higher utility rates at Ameren Missouri and Ameren Illinois, positive mark-to-market adjustments on derivatives, and reduced operations and maintenance expenses. These benefits were partially offset by lower earnings at Ameren Illinois due to the new formula ratemaking process and lower power prices in the Merchant Generation segment. For the nine months ended September 30, 2012, net income decreased to $182 million from $494 million in the prior year, primarily due to a substantial $628 million asset impairment charge related to the Duck Creek energy center in the Merchant Generation segment, along with other factors affecting Ameren Illinois and Merchant Generation. Ameren's regulated utilities, Ameren Missouri and Ameren Illinois, are undergoing significant regulatory proceedings. Ameren Missouri is seeking a substantial rate increase, while Ameren Illinois is appealing a recent regulatory order that reduced its revenue requirement. The company continues to invest in electric transmission projects, with significant capital expenditures planned for infrastructure improvements and environmental compliance. The Merchant Generation segment faced challenges from lower power prices, leading to asset impairments and a focus on cost reduction and hedging strategies.

Financial Highlights

49 data points
Beta

Revenue

$1.71B

Net Income

$374.00M

21.9% Net Margin

EPS (Diluted)

$1.54

Total Assets

$23.50B

Cash & Equivalents

$273.00M

Free Cash Flow

$274.00M

Financial Statements
Beta
Revenue$1.71B
Operating Expenses$1.13B
Operating Income$570.00M
Interest Expense$99.00M
Net Income$374.00M
EPS (Basic)$1.54
EPS (Diluted)$1.54
Shares Outstanding (Basic)242.60M
Shares Outstanding (Diluted)242.90M

Key Highlights

  • 1Net income for Q3 2012 was $374 million, up from $285 million in Q3 2011, driven by absence of prior charges, higher utility rates, and lower expenses.
  • 2Nine-month net income decreased to $182 million from $494 million in 2011, largely due to a $628 million asset impairment charge for the Duck Creek energy center.
  • 3Ameren Missouri is requesting a $323 million annual revenue increase in its pending rate case, while Ameren Illinois is appealing a regulatory decision that reduced its revenue requirement.
  • 4The company continues to invest in electric transmission projects, with over $1.3 billion planned for three major projects.
  • 5Merchant Generation segment faced challenges from lower power prices, leading to asset impairment and a focus on cost management and hedging.
  • 6Ameren declared a quarterly dividend of $0.40 per common share, an increase from the previous year's $0.385.
  • 7The company maintained strong liquidity with significant credit capacity available through its credit facilities.

Frequently Asked Questions

Net income increased in Q3 2012 primarily due to the absence of charges recorded in Q3 2011 related to the Taum Sauk energy center rebuilding and Meredosia/Hutsonville energy center closures. Higher utility rates in Missouri and Illinois, favorable mark-to-market adjustments on derivatives, and reduced operations and maintenance expenses also contributed positively. These were partially offset by lower earnings at Ameren Illinois due to formula ratemaking and lower power prices in the Merchant Generation segment.

Ameren recorded a significant non-cash, pre-tax asset impairment charge of $628 million in the first quarter of 2012 related to its Duck Creek energy center in the Merchant Generation segment. This charge substantially impacted the nine-month net income, reducing it from $494 million in 2011 to $182 million in 2012. This impairment was driven by a sharp decline in market power prices.

Ameren Missouri is seeking a $323 million annual revenue increase in its pending electric rate case, which is expected to be decided in December 2012. Ameren Illinois is appealing a recent Illinois Commerce Commission (ICC) order that reduced its electric delivery service revenue requirement under the new performance-based formula ratemaking process established by the IEIMA. Ameren Illinois believes the ICC misapplied the law and is concerned about the impact on its infrastructure improvement plans.

Ameren employs various risk management strategies, including hedging a significant portion of its expected generation and fuel costs through derivative financial instruments like forward contracts, futures, options, and swaps. For its regulated businesses, cost recovery mechanisms allow for the pass-through of prudently incurred fuel and purchased power costs to customers, mitigating direct exposure to price volatility.