8-KMaterial AgreementsOther EventsExhibits & Filings

AMEREN CORP 8-K Report, Material Agreement (Mar 28, 2008)

Filed March 28, 2008For Securities:AEE

Summary

Ameren Corporation (AEE) filed this 8-K on March 28, 2008, to disclose two significant amendments to its existing financial agreements. The first pertains to amendments made on March 26, 2008, to two credit agreements originally entered into in 2006 and 2007 by its subsidiaries Central Illinois Public Service Company (AmerenCIPS), Central Illinois Light Company (AmerenCILCO), and Illinois Power Company (AmerenIP). These amendments effectively remove a covenant requiring these subsidiaries to reserve future bonding capacity under their respective mortgage indentures, thus providing them with greater flexibility in their capital structure. The second set of amendments, effective March 28, 2008, relates to two Power Supply Agreements (PSAs) between Ameren Energy Marketing Company and its generating subsidiaries, Ameren Energy Generating Company (Genco) and AmerenEnergy Resources Generating Company (AERG). These amendments clarify the financial liability of the generating subsidiaries in the event of unplanned outages or derates. Specifically, Genco and AERG will be liable to the Marketing Company for the difference between market prices and contract prices for undelivered capacity or energy due to such events, subject to insurance coverage and policy limits. Conversely, if the Marketing Company fails to take delivery without excuse, it will owe the generating subsidiaries the difference between contract and resale prices.

Key Highlights

  • 1Ameren subsidiaries (AmerenCIPS, AmerenCILCO, AmerenIP) amended credit agreements to remove a bonding capacity reservation covenant, enhancing financial flexibility.
  • 2The amendments to the credit agreements were effective March 26, 2008.
  • 3Power Supply Agreements (PSAs) between Ameren Energy Marketing Company and its generating subsidiaries (Genco, AERG) were amended.
  • 4Amended PSAs clarify liability for generating subsidiaries (Genco, AERG) in cases of unplanned outages or derates.
  • 5Generating subsidiaries will be liable for the difference between market and contract prices for undelivered capacity/energy due to outages, subject to insurance.
  • 6The amendments also address the Marketing Company's liability for failure to receive energy under the PSAs.
  • 7These changes provide clearer risk allocation within Ameren's power generation and marketing operations.

Frequently Asked Questions

The amendments to the credit agreements remove a requirement for Ameren's Illinois utility subsidiaries (AmerenCIPS, AmerenCILCO, AmerenIP) to reserve future bonding capacity. This provides these subsidiaries with greater flexibility in their capital structure and potentially improves their ability to access additional financing or issue debt without these prior reservations.

The amendments to the Power Supply Agreements between Ameren Energy Marketing Company and its generating subsidiaries (Genco and AERG) clarify the financial responsibilities in case of generation disruptions. Genco and AERG are now explicitly liable for market-to-contract price differences during unplanned outages, up to insurance limits. This shifts some of the short-term price risk associated with such events to the generating entities, while also defining the Marketing Company's liability if it fails to take delivery.

For the credit agreements, the removal of the bonding capacity reservation could be seen as potentially increasing leverage for those subsidiaries if not managed prudently. For the PSAs, while clarifying liability, the increased exposure of Genco and AERG to market price fluctuations during outages could lead to financial impacts if those outages are severe, prolonged, or exceed insurance coverage. However, the amendments also aim to better align risk and reward within the energy marketing structure.

The filing does not specify the exact generating units or plants covered by the amended Power Supply Agreements between Ameren Energy Marketing Company, Genco, and AERG. It refers generally to 'one or more of its generating units' within the generating plant site. Investors would need to refer to prior filings or company disclosures for details on the specific assets involved in these agreements.