8-KOther Events

AMEREN CORP 8-K Report, Corporate Update (Feb 5, 2009)

Filed February 5, 2009For Securities:AEE

Summary

Ameren Corporation (AEE) and its subsidiary, AmerenUE (UE), are filing an 8-K to address the impact of a significant ice storm on Noranda Aluminum, Inc.'s (Noranda) New Madrid, Missouri smelter plant. Noranda, UE's largest customer accounting for approximately 8% of UE's total electric sales, experienced a power outage affecting roughly 75% of its plant capacity due to damage to non-UE owned power lines. Restoration is expected to take up to 12 months, with partial capacity potentially phased in. This outage presents a potential margin reduction for UE, estimated at up to $73 million over 12 months if Noranda operates at 25% capacity. This is due to the new fuel and purchased power cost recovery mechanism approved by the Missouri Public Service Commission (MoPSC), which requires off-system sales revenues (generated from selling power freed up by Noranda's reduced demand) to be largely flowed back to customers, rather than benefiting UE's margins as off-system sales prices are likely higher than Noranda's tariff prices. AmerenUE has requested a rehearing from the MoPSC to adjust this mechanism and allow recovery of lost Noranda revenues before passing excess off-system sales revenue to customers.

Key Highlights

  • 1A major ice storm on January 28, 2009, caused a significant power outage at Noranda Aluminum's New Madrid, Missouri smelter plant.
  • 2Noranda is AmerenUE's largest customer, representing approximately 8% of its total electric sales and historically consuming 4 million megawatthours annually.
  • 3The outage has reduced Noranda's plant capacity by approximately 75%, with full restoration potentially taking up to 12 months.
  • 4AmerenUE estimates a potential margin reduction of up to $73 million over 12 months if Noranda operates at 25% capacity.
  • 5This margin impact is related to a new fuel and purchased power cost recovery mechanism that generally requires off-system sales revenues to be passed through to customers.
  • 6AmerenUE is seeking a rehearing from the Missouri Public Service Commission (MoPSC) to adjust the cost recovery mechanism to allow for recovery of lost revenues from Noranda.
  • 7The ultimate impact on Ameren and AmerenUE is uncertain pending the MoPSC's ruling on the rehearing request.

Frequently Asked Questions

The primary event is the impact of a severe ice storm on January 28, 2009, which caused a power outage at Noranda Aluminum's New Madrid, Missouri plant, AmerenUE's largest customer.

The outage could lead to a reduction in AmerenUE's margins by up to approximately $73 million over 12 months. This is because reduced sales to Noranda would free up generation, which could be sold off-system at higher prices. However, a new cost recovery mechanism requires most of these off-system sales revenues to be returned to customers, limiting AmerenUE's benefit from these sales.

AmerenUE has requested a rehearing from the Missouri Public Service Commission (MoPSC) of its recent rate order. The goal is to modify the fuel and purchased power cost recovery mechanism to allow AmerenUE to recover revenues lost from Noranda's reduced operations before passing any excess off-system sales revenues to customers.

Noranda's plant is currently operating at only about 25% of its capacity due to the outage. Full restoration of plant capacity is estimated to take up to 12 months, with a phased-in recovery of partial capacity during that period.