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lt)-Q FILED PERIOD 09/30/201 7
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC. 20549 FORM 10-Q F
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended September 30, 2017 OR D
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to W4mrn Ameren MISSOURI IIuI#I 1711 ILLMfOIS Exact name of registrant as specified in its charter; Commission State of Incorporation; IRS Employer File Number Address and Telephone Number Identification No.
1-14756 Ameren Corporation 43-1723446 (Missouri Corporation) 1901 Chouteau Avenue St. Louis, Missouri 63103 (314) 621-3222 1-2967 Union Electric Company 43-0559760 (Missouri Corporation) 1901 Chouteau Avenue St. LoLlis, Missouri 63103 (314) 621-3222 1-3672 Ameren Illinois Company 37-0211380 (Illinois Corporation) 6 Executive Drive Collinsville, Illinois 62234 (618) 343-8150 Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Ameren Corporation Yes No Union Electric Company Yes No Ameren Illinois Company Yes No Indicate by check mark whether each registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-I ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Ameren Corporation Yes No U
Union Electric Company Yes No Ameren Illinois Company Yes No U
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large Accelerated Accelerated Non-Accelerated Smaller Reporting Emerging Growth Filer Filer Filer Company Company Ameren Corporation U
U U
U Union Electric Company U
Ameren Illinois Company U
U If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Ameren Corporation U
Union Electric Company Ameren Illinois Company Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Ameren Corporation Yes U
No Union Electric Company Yes No I1 Ameren Illinois Company Yes No The number of shares outstanding of each registrants classes of common stock as of October 31, 2017, was as follows:
Ameren Corporation Common stock, SO.01 par value per share 242,634,798 Union Electric Company Common stock, $5 par value per share, held by Ameren Corporation 102,123,834 Ameren Illinois Company Common stock, no par value, held by Ameren Corporation 25,452,373 This combined Form 10-Q is separately filed byAmeren Corporation, Union Electric Company, and Ameren Illinois Company. Each registrant hereto is filing on its own behalf all of the information contained in this quarterly report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.
TABLE OF CONTENTS Page Glossary of Terms and Abbreviations Forward-looking Statements
.1 PART I Financial Information Item 1.
Financial Statements (Unaudited) 3 Ameren Corporation 3
Consolidated Statement of Income 3
Consolidated Statement of Comprehensive Income 4
Consolidated Balance Sheet 5
Consolidated Statement of Cash Flows Union Electric Company (dibla Ameren Missouri) 1 Statement of Income and Comprehensive Income 7
Balance Sheet 8
Statement of Cash Flows 9
Ameren Illinois Company (dlbla Ameren Illinois)
Statement of Income and Comprehensive Income 10 Balance Sheet ii Statement of Cash Flows Note 1 Summary ol Significant Accounting Policies 13 Note 2. Rate and Regulatory Matters 16 Note 3. Short-term Debt and Liquidity 18 Note 4. Long-term Debt and Equity Financings 19 Note 5. Other Income and Expenses 20 Note 6. Derivative Financial Instruments 20 Note 7. Fair Value Measurements 23 Note 8. Related Party Transactions Note 9. Commitments and Contingencies 29 Note 10. Callaway Energy Center 32 Note 11. Retirement Benefits Note 12. Segment Information Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations 37 Item 3.
Quantitative and Qualitative Disclosures About Market Risk 62 Item 4, Controls and Procedures PART N Other Information Item 1.
Legal Proceedings 64 Item 1A.
Risk Factors 64 Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds 65 Item 6.
Exhibits 65 Signatures 66
GLOSSARY OF TERMS AND ABBREVIATIONS We use the words our, we or us with respect to certain information that relates to Ameren, Ameren Missouri. and Ameren Illinois, collectively. When appropriate, subsidiaries ofAmeren Corporation are named specifically as their various business activities are discussed.
Refer to the Form 10-K for a complete listing of glossary terms and abbreviations. Only new or significantly changed terms and abbreviations are included below, EMANI European Mutual Association for Nuclear Insurance.
Form 10-K The combined Annual Report on Form 10-K for the year ended December31, 2016, filed by the Ameren Companies with the SEC.
Westinghouse Westinghouse Electric Company, LLC.
Zero-emission credit A credit that represents the environmental attributes of one MWh of energy produced from certain zero-emissions nuclear-powered generating facilities, which Illinois utilities are required to purchase pursuant to the FEJA.
FORWARD-LOOKING STATEMENTS Statements in this report not based on historical facts are considered forward-looking and, accordingly, involve risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking statements have been made in good faith and are based on reasonable assumptions, there is no assurance that the expected results will be achieved. These statements include (without limitation) statements as to future expectations, beliefs, plans, strategies, objectives, events, conditions, and financial performance.
In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we are providing this cautionary statement to identify important factors that could cause actual results to differ materially from those anticipated. The following factors, in addition to those discussed under Risk Factors in the Form 10-K and elsewhere in this report and in our other filings with the SEC, could cause actual results to differ materially from management expectations suggested in such forward-looking statements:
regulatory, judicial, or legislative actions, including any changes in regulatory policies and ratemaking determinations, such as those that may result from the complaint case filed in February 2015 with the FERC seeking a reduction in the allowed base return on common equity under the MISO tariff, Ameren Illinois April 2017 annual electric distribution formula rate update filing, and future regulatory, judicial, or legislative actions that change regulatory recovery mechanisms; the effect of Ameren Illinois participating in a performance-based formula ratemaking process under the IFIMA, including the direct relationship between Ameren Illinois return on common equity and 30-year United States Treasury bond yields. and the related financial commitments; the effects of changes in federal, state, or local laws and other governmental actions, including monetary, fiscal, and energy policies; the effects of changes in federal, state, or local tax laws, regulations, interpretations, or rates, such as the July 2017 change in Illinois law that increased the states corporate income tax rate, or changes to federal tax laws as a result of tax reform legislation currently being developed by Congress, and any challenges to the tax positions taken by the Ameren Companies; the effects on demand for our services resulting from technological advances, including advances in customer energy efficiency and private generation sources, which generate electricity at the site of consumption and are becoming more cost-competitive:
the effectiveness of Ameren Missouris customer energy efficiency programs and the related revenues and performance incentives earned under its MEEIA plans; Ameren Illinois ability to achieve FEJA electric energy efficiency goals and the resulting impact on its allowed return on program investments; our ability to align overall spending, both operating and capital, with frameworks established by our regulators and to recover these costs in a timely manner in our attempt to earn our allowed returns on equity; the cost and availability of fuel, such as ultra-low-sulfur coal, natural gas, and enriched uranium used to produce electricity; the cost and availability of purchased power, zero-emission credits, renewable energy credits, and natural gas for distribution; and the level and volatility of future market prices for such commodities, including our ability to recover the costs for such commodities and our customers tolerance for the related rate increases; disruptions in the delivery of fuel, failure of our fuel suppliers to provide adequate quantities or quality of fuel, or lack of adequate inventories of fuel, including nuclear fuel assemblies from Westinghouse, Callaways only NRC-licensed supplier of such assemblies, which is currently in bankruptcy proceedings; the effectiveness of our risk management strategies and our use of financial and derivative instruments; the ability to obtain sufficient insurance, including insurance for Ameren Missouris Callaway energy center, or, in the absence of insurance, the ability to recover uninsured losses from our customers; business and economic conditions, including their impact on interest rates, collection of our receivable balances, and demand for our products;
disruptions of the capital markets, deterioration in credit metrics of the Ameren Companies, or other events that may have an adverse effect on the cost or availability of capital, including short-term credit and liquidity; the actions of credit rating agencies and the effects of such actions; the impact of adopting new accounting guidance and the application of appropriate accounting rules and guidance; the impact of weather conditions and other natural phenomena on us and our customers, including the impact of system outages; the construction, installation, performance, and cost recovery of generation, transmission, and distribution assets; the effects of breakdowns or failures of equipment in the operation of natural gas transmission and distribution systems and storage facilities, such as leaks, explosions, and mechanical problems, and compliance with natural gas safety regulations; the effects of our increasing investment in electric transmission projects, as well as potential wind and solar generation projects, our ability to obtain all of the necessary approvals to complete the projects, and the uncertainty as to whether we will achieve our expected returns in a timely manner; operation of Ameren Missouris Callaway energy center, including planned and unplanned outages, and decommissioning costs; the effects of strategic initiatives, including mergers, acquisitions, and divestitures; the impact of current environmental regulations and new, more stringent, or changing requirements, including those related to C02, other emissions and discharges, cooling water intake structures, CCR. and energy efficiency, that are enacted over time and that could limit or terminate the operation of certain of Ameren Missouris energy centers, increase our costs or investment requirements, result in an impairment of our assets, cause us to sell our assets, reduce our customers demand for electricity or natural gas, or otherwise have a negative financial effect; the impact of complying with renewable energy portfolio requirements in Missouri; labor disputes, work force reductions, future wage and employee benefits costs, including changes in discount rates, mortality tables, and returns on benefit plan assets; the inability of our counterparties to meet their obligations with respect to contracts, credit agreements, and financial instruments; the cost and availability of transmission capacity for the energy generated by Ameren Missouris energy centers or required to satisfy Ameren Missouris energy sales; legal and administrative proceedings, the impact of cyber-attacks, which could, among other things. result in the loss of operational control of energy centers and electric and natural gas transmission and distribution systems and/or the loss of data, such as customer, employee, financial, and operating system information; and acts of sabotage, war, terrorism, or other intentionally disruptive acts.
New factors emerge from time to time, and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement. Given these uncertainties, undue reliance should not be placed on these forward-looking statements. Except to the extent required by the federal securities laws, we undertake no obligation to update or revise publicly any forward-looking statements to reflect new information or future events.
2
PART I. FINANCIAL INFORMATION Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 1,594 1725 4,183 4101 129 134 592 619 1,723 1859 4,775 4,720 199 205 594 574 162 178 491 451 25 34 196 227 402 411 1,229 1,246 225 211 668 628 129 129 364 358 1,142 1,168 3,542 3,484 581 691 1,233 1,236 13 18 42 54 2
8 16 21 11 10 26 33 97 97 295 287 495 604 964 982 205 233 376 356 290 371 588 626 2
2 5
5 288 369 583 621 1.19 1.52 2.40 S
2.56 S
1,18 1.52 2.39 2.56 0.44 0.425 1.32 1.275 242.6 242.6 242.6 242.6 244.7 242.9 244.0 243.0 The accompanying notes are an integral part of these consolidated financial statements.
AMEREN CORPORATION CONSOLIDATED STATEMENT OF INCOME (Unaudited) (In millions, except per share amounts)
ITEM 1. FINANCIAL STATEMENTS.
Operating Revenues:
Electric Natural gas Total operating revenues Operating Expenses:
Fuel Purchased power Natural gas purchased for resale Other operations and maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating Income Other Income and Expenses:
Miscellaneous income Miscellaneous expense Total other income Interest Charges Income Before Income Taxes Income Taxes Net Income Less: Net Income Attributable to Noncontrolling Interests Net Income Attributable to Ameren Common Shareholders Earnings per Common Share Basic Earnings per Common Share Diluted Dividends per Common Share Average Common Shares Outstanding Basic Average Common Shares Outstanding Diluted 3
AMEREN CORPORATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited) (In millions)
Net Income Other Comprehensive Income (Loss), Net of Taxes Pension and other postretirement benefit plan activity, net of income taxes of
$-, $, $1 and $4, respectively Comprehensive Income Less: Comprehensive Income Attributable to Noncontrolling Interests Comprehensive Income Attributable to Ameren Common Shareholders Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 290 371 588 626
(1) 2 1
290 370 590 627 2
2 5
5 288 368 585 622 The accompanying notes are an integral part of these consolidated financial statements.
4
AMEREN CORPORATION CONSOLIDATED BALANCE SHEET (Unaudited) (In millions, except per share amounts)
September 30, December31, 2017 2016 ASSETS Current Assets:
Cash and cash equivalents 9
9 Accounts receivable trade (less allowance for doubtful accounts of $20 and $19, respectively) 507 437 Unbilled revenue 262 295 Miscellaneous accounts receivable 85 63 Inventories 547 527 Current regulatory assets 75 149 Other current assets 96 113 Total current assets 1,581 1593 Property, Plant, and Equipment, Net 20,906 20,113 Investments and Other Assets:
Nuclear decommissioning trust fund 672 607 Goodwill 411 411 Regulatory assets 1,509 1,437 Other assets 538 538 Total investments and other assets 3,130 2,993 TOTAL ASSETS 25,617 24,699 LIABILITIES AND EQUITY Current Liabilities:
Current maturities of long-term debt 777 681 Short-term debt 446 558 Accounts and wages payable 548 805 Taxes accrued 159 46 Interest accrued 106 93 Customer deposits 108 107 Current regulatory liabilities 119 110 Other current liabilities 318 274 Total current liabilities 2581 2,674 Long.term Debt, Net 6,922 6,595 Deferred Credits and Other Liabilities:
Accumulated deferred income taxes, net 4,721 4,264 Accumulated deferred investment tax credits 50 55 Regulatory liabilities 2,045 1,985 Asset retirement obligations 631 635 Pension and other postretirement beneflts 711 769 Other deferred credits and liabilities 469 477 Total deferred credits and other liabilities 8,627 8,185 Commitments and Contingencies (Notes 2, 9, and 10)
Ameren Corporation Shareholders Equity:
Common stock, $01 par value, 400.0 shares authorized 242.6 shares outstanding 2
2 Other paid-in capital, principally premium on common stock 5,534 5,556 Retained earnings 1,830 1,568 Accumulated other comprehensive loss (21)
(23)
Total Ameren Corporation shareholders equity 7,345 7,103 Noncontrolling Interests 142 142 Total equity 7,487 7,245 TOTAL LIABILITIES AND EQUITY 25,617 S
24.699 The accompanying notes are an integral part of these consolidated financial statements.
5
AMEREN CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (In millions)
Nine Months Ended September 30, 2017 2016 Cash Flows From Operating Activities:
Net income 588 S
626 Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 653 625 Amortization of nuclear fuel 71 63 Amortization of debt issuance costs and premium/discounts 16 17 Deferred income taxes and investment tax credits, net 366 364 Allowance for equity funds used during construction (16)
(20)
Share-based compensation costs 12 17 Other (7)
(9)
Changes in assets and liabilities:
Receivables (59)
(134)
Inventories (20)
(13)
Accounts and wages payable (183)
(196)
Taxes accrued 138 119 Regulatory assets and liabilities 89 146 Assets, other 14 9
Liabilities, other 12 (29)
Pension and other postretirement benefits (31)
(26)
Net cash provided by operating activities 1,643 1,559 Cash Flows From Investing Activities:
Capital expenditures (1,523)
(1,496)
Nuclear fuel expenditures (52)
(41)
Purchases of securities nuclear decommissioning trust fund (248)
(310)
Sales and maturities of securities nuclear decommissioning trust fund 235 297 Other 3
(1)
Net cash used in investing activities (1,585)
(1,551)
Cash Flows From Financing Activities:
Dividends on common stock (320)
(309)
Dividends paid to noncontrolling interest holders (5)
(5)
Short-term debt, net (112) 307 Maturities of long-term debt (425)
(389)
Issuances of long-term debt 849 149 Share-based payments (39)
(32)
Debt issuance costs (5)
(1)
Other (1)
(2)
Net cash used in financing activities (58)
(282)
Net change in cash and cash equivalents
(274)
Cash and cash equivalents at beginning of year 9
292 Cash and cash equivalents at end of period 9
S 18 The accompanying notes are an integral part of these consolidated financial statements.
6
UNION ELECTRIC COMPANY (dibla AMEREN MISSOURI)
STATEMENT OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (In millions)
Operating Revenues:
Electric Natural gas Other Total operating revenues Operating Expenses:
Fuel Purchased power Natural gas purchased for resale Other operations and maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating Income Other Income and Expenses:
Miscellaneous income Miscellaneous expense Total other income Interest Charges Income Before Income Taxes Income Taxes Net Income Other Comprehensive Income Comprehensive Income Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 1,098 1,144 2,757 2,682 17 20 83 90
1
1 1,115 1,165 2,840 2,773 199 205 594 574 42 77 201 169 4
6 29 224 220 655 134 130 399 95 96 255 698 734 2,133 417 431 707 13 14 36 38 2
2 6
6 11 12 30 32 50 53 157 158 378 390 580 565 143 148 218 215 235 242 362 350 235 242 362 350 234 241 359 S
347 The accompanying notes as they relate to Ameren Missouri are an integral part of these financial statements.
33 670 384 252 2,082 691 Net Income Preferred Stock Dividends Net Income Available to Common Shareholder 235 242 362 350 1
1 3
3 7
UMON ELECTRIC COMPANY (d)bla AMEREN MISSOURI)
BALANCE SHEET (Unaudited) (In millions, except pet share amounts)
ASSETS Current Assets:
Cash and cash equivalents Advances to money pool Accounts receivable trade (less allowance for doubtful accounts of $8 and $7, respectively)
Accounts receivable affiliates Unbilled revenue Miscellaneous accounts receivable Inventories Current regulatory assets Other current assets Total current assets Property, Plant, and Equipment, Net Investments and Other Assets:
Nuclear decommissioning trust fund Regulatory assets Other assets Total investments and other assets TOTAL ASSETS Current Liabilities:
Current maturities of long-term debt Accounts and wages payable Accounts payable affiliates Taxes accrued Interest accrued Current regulatory liabilities Other current liabilities Total current liabilities Long-term Debt, Net Deferred Credits and Other Liabilities:
Accumulated deferred income taxes, net Accumulated deferred investment tax credits Regulatory liabilities Asset retirement obligations Pension and other postretirement benefits Other deferred credits and liabilities Total deferred credits and other liabilities Commitments and Contingencies (Notes 2, 8, 9, and 10)
Shareholders Equity:
Common stock, $5 par value, 150.0 shares authorized 102.1 shares outstanding Other paid-in capital, principally premium on common stock Preferred stock Retained earnings Total shareholders equity TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 161 187 12 154 14 392 23 35 43 49 964 1,004 11,538 11,478 672 607 576 619 318 327 1,566 1,553 14,068 14,035 383 226 102 148 61 18 12 118 123 7,056 1,162 3,584 3,563 3,073 49 1,275 1,215 627 629 274 291 13 19 5,311 5,220 511 511 1,698 1671 4,117 4,090 14,068 14.035 The accompanying notes as they relate to Ameren Missouri are an integral part of these financial statements.
September 30, December 31, 2017 2016 18 274 14 151 45 396 LIABILITIES AND SHAREHOLDERS EQUITY 431 444 68 30 54 3,013 53 1,828 80 1,828 80 8
UNION ELECTRIC COMPANY fdIbIa AMEREN MISSOURI)
STATEMENT OF CASH FLOWS (Unaudited) (In millions)
Nine Months Ended September 30, Cash Flows From Operating Activities:
Net income Adjustments to reconcile net income to net cash provided by operating activities:
2017 2016 362 Receivables Inventories Accounts and wages payable Taxes accrued Regulatory assets and liabilities Assets, other Liabilities, other Pension and other postretirement benefits Net cash provided by operating activities Cash Flows From Investing Activities:
Capital expenditures Nuclear fuel expenditures Purchases of securities nuclear decommissioning trust fund Sales and maturities of securities nuclear decommissioning trust fund Money pool advances, net Other Net cash used in investing activities Cash Flows From Financing Activities:
Dividends on common stock Dividends on preferred stock Maturities of long-term debt Issuances of long-term debt Capital contribution from parent Debt issuance costs Net cash used in financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of period 384 71 5
55 (15) 4 381 63 5
159 (16)
(117)
(95)
(3)
(5)
(151)
(176) 160 165 48 60 19 (8) 4 13 (7)
(8) 819 888 (533)
(500)
(52)
(41)
(248)
(310) 235 297 143 (165)
(5)
(455)
(724)
(332)
(285)
(3)
(3)
(425)
(260) 399 149 38 (3)
(1)
(364)
(362)
(198)
199 1
The accompanying notes as they relate to Ameren Missouri are an integral part of these financial statements.
Depreciation and amortization Amortization of nuclear fuel Amortization of debt issuance costs and premium/discounts Deferred income taxes and investment tax credits, net Allowance for equity funds used during construction Other Changes in assets and liabilities:
350 9
Operating Revenues:
Electric Natural gas Other Total operating revenues Operating Expenses; Purchased power Natural gas purchased for resale Other operations and maintenance Depreciation and amortization Taxes other than income taxes Total operating expenses Operating Income Other Income and Expenses:
Miscellaneous income Miscellaneous expense Total other income (expense)
Interest Charges Income Before Income Taxes Income Taxes Net Income Other Comprehensive Loss, Net of Taxes:
Pension and other postretirement benefit plan activity, net of income taxes (benefit) of $-, 5(1), $-and $(2), respectively Comprehensive Income Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 463 562 1,343 1,365 112 114 510 530 575 676 1,854 1895 124 110 312 304 21 28 167 194 183 198 590 592 86 80 254 237 33 30 101 98 447 446 1,424 1,425 128 230 430 470 1
4 7
15
3 8
11 1
1 (1) 4 36 35 109 105 93 196 320 369 38 77 127 144 55 119 193 225
(1)
(3) 55 118 193 222 Net Income Preferred Stock Dividends Net Income Available to Common Shareholder 55 119 193 225
2 2
55 119 191 223 The accompanying notes as they relate to Ameren Illinois are an integral part of these financial statements.
AMEREN ILLINOIS COMPANY (dibla AMEREN ILLINOIS)
STATEMENT OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (In millions) 10
AMEREN ILLINOIS COMPANY (dibla AMEREN ILLINOIS)
BALANCE SHEET tUnaudited) fin millions)
ASSETS Current Assets:
Cash and cash equivalents Accounts receivable trade (less allowance for doubiful accounts of $12 and $12, respectively)
Accounts receivable affiliates Unbilled revenue Miscellaneous accounts receivable Inventories Current regulatory assets Other current assets Total current assets Property, Plant, and Equipment, Net Investments and Other Assets:
Goodwill Regulatory assets Other assets Total investments and other assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS EQUITY Current Liabilities:
Current maturities of long-term debt Short-term debt Borrowings from money pool Accounts and wages payable Accounts payable affiliates Taxes accrued Interest accrued Customer deposits Current environmental remediation Current regulatory liabilities Other current liabilities Total current liabilities Long-term Debt, Net Deferred Credits and Other Liabilities:
Accumulated deferred income taxes, net Accumulated deferred investment tax credits Regulatory liabilities Pension and other postretirement benefits Environmental remediation Other deferred credits and liabilities Total deterred credits and other liabilities Commitments and Contingencies (Notes 2, 8, and 9)
Shareholders Equity:
Common stock, no par value, 45.0 shares authorized 25.5 shares outstanding Other paid-in capital Preferred stock Retained earnings Total shareholders equity TOTAL LIABILITIES AND SHAREHOLDERS EQUITY The accompanying notes as they relate to Ameren Illinois are an integral part of these financial statements.
S 219 21 111 September 30, December 31, 2017 2016 242 10 141 31 22 151 135 51 108 18 25 602 683 7,987 7,469 411 411 921 816 101 95 1,433 1,322 10,022 S
9.474 394 250 169 51 11 247 264 50 63 8
16 37 33 69 69 43 38 85 78 153 109 1,266 971 2,196 2,338 766 768 322 346 143 162 229 222 3,335 3,131 2,005 2,005 62 62 1,158 967 3,225 3,034 S
10,022 9.474 1,874 1,631 2
11
AMEREN ILLINOIS COMPANY (dibla AMEREN ILLINOIS)
STATEMENT OF CASH FLOWS (Unaudited) (In millions)
Nine Months Ended September 30, 2017 2016 Cash Flows From Operating Activities:
Net income 193 225 Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortizafon 254 236 Amortization of debt issuance costs and premium/discounts 10 11 Deferred income taxes and investment tax credits, net 161 141 Other (1)
(8)
Changes in assets and liabilities:
Receivables 59 (36)
Inventories (17)
(8)
Accounts and wages payable (24)
(17)
Taxes accrued (22) 5 Regulatory assets and liabilities 45 75 Assets, other (9) 11 Liabilities, other (2) 6 Pension and other postretirement benefits (19)
(14)
Net cash provided by operating activities 628 627 Cash Flows From Investing Activities:
Capital expenditures (760)
(683)
Other 6
4 Net cash used in investing activities (754)
(679)
Cash Flows From Financing Activities:
Dividends on common stock (95)
Dividends on preferred stock (2)
(2)
Short-term debt, net 118 157 Money pool borrowings, net 11 54 Maturities of long-term debt (129)
Other (1)
(1)
Net cash provided by (used in) financing activities 126 (16)
Net change in cash and cash equivalents
(68)
Cash and cash equivalents at beginning of year 71 Cash and cash equivalents at end of period
3 The accompanying notes as they relate to Ameren Illinois are an integral part of these financial statements.
12
AMEREN CORPORATION (Consolidated)
UNION ELECTRIC COMPANY (dibla Ameren Missouri)
AMEREN ILLINOIS COMPANY (U/b/a Ameren Illinois)
COMBINED NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 30, 2017 NOTE 1
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES General Ameren, headquartered in St. Louis, Missouri, is a public utility holding company whose primary assets are its equity interests in its subsidiaries. Amerens subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. Dividends on Amerens common stock and the payment of expenses by Ameren depend on distributions made to it by its subsidiaries. Ametens principal subsidiaries, Ameren Missouri, Ameren Illinois, and ATXI, are described below. Ameren also has other subsidiaries that conduct other activities, such as the provision of shared services, Ameren evaluates competitive electric transmission investment opportunities outside of MISO as they arise.
Union Electric Company, doing business as Ameren Missouri, operates a rate-regulated electric generation, transmission, and distribution business and a rate-regulated natural gas distribution business in Missouri.
Ameren Illinois Company, doing business as Ameren Illinois, operates rate-regulated electric transmission, electric distribution, and natural gas distribution businesses in Illinois.
ATXI operates a FERC rate-regulated electric transmission business. AIXI is developing MISO-approved electric transmission projects, including the Illinois Rivers. Spoon River, and Mark Twain projects.
Amerens financial statements are prepared on a consolidated basis and therefore include the accoLints of its majority-owned subsidiaries. All intercompany transactions have been eliminated. Ameren Missouri and Ameren Illinois have no subsidiaries. All tabular dollar amounts are in millions, unless otherwise indicated. Also see the Glossary of Terms and Abbreviations at the front of this report and in the Form 10-K.
As of September 30, 2017 and December 31, 2016, Ameren had unconsolidated variable interests as a limited partner in various equity method investments, totaling $14 million and $9 million, respectively, included in Other assets on Amerens consolidated balance sheet, Ameren is not the primary beneficiary of these investments because it does not have the power to direct matters that most signicantIy impact the activities of these variable interest entities, As of September 30, 2017, the maximum exposure to loss related to these variable interests is limited to the investment in these partnerships of $14 million plus associated outstanding funding commitments of $23 million.
Our accounting policies conform to GMP. Our financial statements reflect all adjustments (which include normal, recurring adjustments) that are necessary, in our opinion, for a fair statement of our results. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. Such estimates and assumptions affect reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. The results of operations of an intedm period may not give a true indication of results that may be expected for a full year. See Note 2 Rate and Regulatory Matters for information regarding the 2017 change in Ameren Illinois method used to recognize interim period revenue in connection with the revenue decoupling provisions of the FEJA. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K.
Discontinued operations were immaterial to all periods presented in Amerens financial statements. As such, the Assets of discontinued operations and Liabilities of discontinued operations included on the December31, 2016 balance sheet have been reclassified in this report to Other current assets and Other current liabilities, respectively. See Note 1 Summary of Significant Accounting Policies under Part II, Item 8, of the Form 10-K for additional information.
13
Asset Retirement Obligations The following table provides a reconciliation of the beginning and ending carrying amount of AROs for the nine months ended September 30, 2017:
Ameren Ameren Missouri IlIinols(i Ameren Balance at December 31, 2016 644 6
650 Liabilities settled (4)
(1)
(5)
Accretion 20 (U) 20 Change in estimatesl
)
(1)
(19)
Balance at September 30, 2017 642 (bi 4
646 b(
(a)
Included in Other deferred credits and liabilities on the balance sheet.
(b)
Balance included $15 million in Other current liabilities on the balance sheet as of both December 31,2016 and September 30, 2017, respectively, Ic)
Accrefion expense was recorded as a decrease to regulatory liabilities (U)
Less than $1 million,
)e)
Ameren Missoun changed its fair value estimate primarily due to an extension of the remediation period of certain CCR storage facilities, an update to the decommissioning of the Callaway energy center to reflect the cost study and funding analysis filed wilh the M0PSC in 2017, and an increase in the discount rate assumplion.
Share-based Compensation A summary of nonvested performance share units at September 30, 2017, and changes during the nine months ended September 30, 2017, under the 2014 Incentive Plan are presented below Performance Share Units Weighted-average Fair Share Units Value per Share Unit Nonvested at January 1, 2017 1,059,639 48.04 Granted 500,943 59.16 Forfeitures (48,661) 52 54 Vestedni (27,446) 52.88 Nonvested at September 30, 2017 1,484,475 51,55 (a)
Performance share units granted to certain executive and nonexecufive officers and other eligible employees under the 2014 Incentive Plan, (b)
Performance share units vested due to the attainment of retirement eligibility by certain employees. Actual shares issued for retirement-eligible employees vary depending on actual performance over the three-year measurement period The fair value of each performance share unit awarded in 2017 under the 2014 Incentive Plan was determined to be $59.16, which was based on Amerens closing common share price of $52.46 at December 31, 2016, and lattice simulations. Lattice simulations are used to estimate expected share payout based on Amerens total shareholder return for a three-year performance period beginning January 1, 2017, relative to the designated peer group. The simulations can produce a greater fair value for the performance share unit than the December 31 applicable closing common share price because they include the weighted payout scenarios in which an increase in the share price has occurred. The significant assumptions used to calculate fair value also included a three-year risk-free rate of 1,47%, volatility of 15% to 21%
for the peer group, and Amerens attainment of a three-year average earnings per share threshold during the performance period.
Operating Revenue The Ameren Companies record operating revenue for electric or natural gas service when it is delivered to customers. We accrue an estimate of electric and natural gas revenues for service rendered but unbilled at the end of each accounting period. For certain regulatory recovery mechanisms qualifying as alternative revenue programs, such as revenue requirement reconciliations, the Ameren Companies recognize revenues that have been authorized for rate recovery, are objectively determinable and probable of recovery, and are expected to be collected from customers within two years from the end of the year.
Excise Taxes Ameren Missouri and Ameren Illinois collect certain excise taxes from customers that are levied on the sale or distribution of natural gas and electricity. Excise taxes are levied on Ameren Missouris electric and natural gas businesses and on Ameren Illinois natural gas business and are recorded gross in Operating Revenues EIectric, Operating Revenues Natural gasp and Operating Expenses Taxes other than income taxes on the statement of income or the statement of income and comprehensive income. Excise taxes for electric service in Illinois are levied on the customer and therefore are not included in Ameren Illinois revenues and expenses. The following table presents 14
excise taxes recorded in Operating Revenues Electric, Operating Revenues Natural gas and Operating Expenses Taxes other than income taxes for the three and nine months ended September 30, 2017 and 2016:
Three Months Nine Months 2017 2016 2017 2016 Ameren Missouri 51 S
52 122 122 Ameren Illinois 10 9
40 40 Ameren 61 61 162 162 Earnings Per Share Basic earnings per share is computed by dividing Net Income Attributable to Ameren Common Shareholders by the weighted-average number of common shares outstanding during the period. Earnings per diluted share is computed by dividing Net Income Attributable to Ameren Common Shareholders by the weighted-average number of diluted common shares outstanding during the period. Earnings per diluted share reflects the dilution that would occur if certain stock-based performance share units were settled. The number of performance share units assumed to be settled was 2,1 million and 1.4 million in the three and nine months ended September 30, 2017, respectively, and 0.3 million and 0.4 million, respectively, in the year-ago periods. There were no potentially dilutive securities excluded from the earnings pet diluted share calculations for the three and nine months ended September 30, 2017 and 2016.
Income Taxes In July 2017, Illinois enacted a law that increased the states corporate income tax rate from 7.75% to 9,5% as of July 1, 2017. The law made the increase in the states corporate income tax rate, which was previously scheduled to decrease to 7.3% in 2025, permanent. In July 2017, Ameren recorded an expense of $14 million atAmeren (parent) due to the revaluation of accumulated deferred taxes and the estimated state apportionment of such taxes. Beyond this expense, Ameren does not expect this tax increase to have a material impact on its consolidated net income prospectively. The tax increase is not expected to materially impact the earnings of the Ameren Illinois Electric Distribution, the Ameren Transmission, ortheAmeren Illinois Transmission segments, since these businesses operate under formula ratemaking frameworks. The tax increase is expected to unfavorably affect 2017 net income of the Ameren Illinois Natural Gas segment by less than $1 million. In addition, in the third quarter of 2017, Amerens and Ameren Illinois accumulated deferred tax balances were revalued using the states new corporate income tax rate, which resulted in a net increase to the liability balances of $97 million and $79 million, respectively. These increased liabilities were offset by a regulatory asset, as well as income tax expense, as discussed above.
Accounting and Reporting Developments Below is a summary of updates related to our adoption of recently issued authoritative accounting standards. See Note 1 Summary of Significant Accounting Policies under Part II, Item 8, of the Form 10-K for additional information about recently issued authoritative accounting standards relating to leases, financial instruments, and restricted cash.
Revenue from Contracts with Customers In May 2014, the FASB issued authoritative guidance that changes the criteria for recognizing revenue from a contract with a customer.
The underlying principle of the guidance is that an entity will recognize revenue for the transfer of promised goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance requires additional disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, as well as separate presentation of alternative revenue programs on the income statement. Entities can apply the guidance to each reporting period presented (the full retrospective method) or by recording a cumulative effect adjustment to retained earnings in the period of initial adoption (the modified retrospective method).
We have substantially completed the evaluation of our contracts and do not expect material changes to the amount or timing of revenue recognition. We will finalize our contract assessments by the end of 2017. We will apply the guidance using the full retrospective method and include disaggregated revenue disclosures by segment and customer class in the combined notes to the financial statements in the first quarter of 2018.
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost In March 2017, the FASB issued authoritative guidance that requires an entity to retrospectively report the service cost component of net benefit cost in the same line item(s) as other compensation costs arising from services rendered by employees during the period and to present the other components of net benefit cost in the income statement separately from the service cost component and outside of operating income. The guidance also requires that an entity only capitalize the service cost component as part of an asset, such as inventory or property, plant, and equipment, on a prospective basis. Previously, all of the net benefit cost components were eligible for capitalization.
15
This change in the capitalization of net benefit costs will not affect out ability to continue to obtain recovery of net benefit costs through customer rates. See Note 11 Retirement Benefits for the components of net benefit cost. This guidance will be effective for the Ameren Companies in the first quarter of 2018. We are currently assessing the impacts of this guidance on our results of operations, financial position, and disclosures.
NOTE 2 RATE AND REGULATORY MATTERS Below is a summary of updates to significant regulatory proceedings and related lawsuits. See also Note 2 Rate and Regulatory Matters under Part II, Item 8, of the Form 10-K. We are unable to predict the ultimate outcome of these matters, the timing of the final decisions of the various agencies and courts, or the impact on our results of operations, financial position, or liquidity.
Missouri March 2017 Electric Rate Order In March 2017, the M0PSC issued an order approving a unanimous stipulation and agreement in Ameren Missouris July 2016 regulatory rate review. The order resulted in a $3.4 billion revenue requirement, which is a $92 million increase in Ameren Missouris annual revenue requirement for electric service, compared to its prior revenue requirement established in the MoPSCs April 2015 electric tate order.
The new rates, base level of expenses, and amortizations became effective on April 1, 2017.
The order authorized the continued use of the FAC and the regulatory tracking mechanisms for pension and postretirement benefits, uncertain income tax positions, and renewable energy standards that the MoPSC authorized in earlier electric rate orders. These regulatory tracking mechanisms provide for a base level of expense to be reflected in Ameren Missouris base electric rates with differences in the actual expenses incurred recorded as a regulatory asset or liability. Excluding cost reductions associated with reduced sales volumes, the base level of net energy costs decreased by $54 million from the base level established in the MoPSCs April 2015 electric rate order.
Changes in amortizations and the base level of expenses for the other regulatory tracking mechanisms, including extending the amortization period of certain regulatory assets, reduced expenses by $26 million from the base levels established in the MoPSCs April 2015 electric rate order.
A?Xls Mark Twain Project The Mark Twain project is a MISO-approved transmission line to be located in northeast Missouri. In the third quarter of 2017, ATXI finalized an alternative project route and reached agreements with a cooperative electric company in northeast Missouri and Ameren Missouri to locate nearly all of the Mark Twain project on existing transmission line corridors. It also received assents for road crossings from the five affected counties in northeast Missouri, ATXI had previously filed suit in the circuit courts to obtain assents for the original project route. ATXI has since withdrawn one of the lawsuits. The other lawsuits remain pending but have been stayed until the first quarter of 2018. In September 2017, ATXI filed for a certificate of convenience and necessity with the MoPSC and anticipates a decision from the MoPSC in the first half of 2018. AIXI plans to complete the project in December 2019; however, delays in obtaining approval from the MoPSC could delay completion.
Illinois IEIMA & FEJA Ameren Illinois electric distribution service rates are subject to an annual revenue requirement reconciliation to its actual recoverable costs and allowed return on equity under a formula ratemaking process effective through 2022. This formula ratemaking framework qualifies as an alternative revenue program under GAAP. Each year, Ameren Illinois records a regulatory asset or a regulatory liability and a corresponding increase or decrease to operating revenues for any differences between the revenue requirement reflected in customer rates for that year and its estimate of the probable increase or decrease in the revenue requirement expected to ultimately be approved by the ICC based on that years actual recoverable costs incurred and investment return, As of September 30, 2017, Ameren Illinois had recorded regulatory assets of $24 million to reflect its 2016 revenue requirement reconciliation adjustment, which was included in the April 2017 formula rate update discussed below, and $16 million for the approved 2015 revenue requirement reconciliation adjustment, each with interest. As of September 30, 2017, Ameren Illinois had recorded a regulatory liability of $1 million to reflect the difference between Ameren Illinois estimate of its 2017 revenue requirement and the revenue requirement reflected in customer rates, including interest.
In April 2017, Ameren Illinois filed with the ICC its annual electric distribution service formula rate update to establish the revenue requirement used for 2018 rates. In June 2017, the ICC staff submitted its calculation of the revenue requirement, which Ameren Illinois supported in its revised July 2017 filing, and recommended a decrease to the electric distribution service revenue requirement. Pending ICC approval, this update filing will result in a $17 million decrease in Ameren Illinois electric distribution service revenue requirement beginning in January 2018. This update reflects an increase to the annual formula rate based on 2016 actual costs and expected net plant additions for 2017, as well as an increase to include the 2016 revenue requirement reconciliation adjustment. The increases in the update filing are more than offset by a decrease for the conclusion of the 2015 revenue requirement reconciliation adjustment, which will be fully collected from 16
customers in 2017, consistent with the ICCs December 2016 annual update filing order. In November 2017, an administrative law judge issued a proposed order that was consistent with Ameren Illinois revised July 2017 filing. An ICC decision regarding the revenue requirement to be used for customer rates in 2018 is expected by December 2017.
The FEJA revised certain portions of the IEIMA, including extending the IEIMA formula ratemaking process through 2022 and clarifying that a common equity ratio of up to, and including, 50% is prudent. Beginning in 2017, the FEJA provides that Ameren Illinois will recover, within the following two years, its electric distribution revenue requirement for a given year, independent of actual sales volumes. Prior to the FE]A, Ameren Illinois interim period revenue recognition was volume-based, as revenues were affected by the timing of sales volumes due to seasonal rates and changes in volumes resulting from, among other things, weather and energy efficiency. This previous revenue recognition method resulted in more revenues during the third quarter and less revenues during the other quarters of each year. Beginning in 2017, in connection with the decoupling provisions of the FEJA, Ameren Illinois changed its method used to recognize interim period revenue.
Ameren Illinois now recognizes revenue consistent with the timing of actual incurred electric distribution recoverable costs and recognizes revenue associated with the expected return on its rate base ratably over the year. Ameren Illinois recognized a reduction to electric revenue to reflect the difference between the estimate of its revenue requirement and the revenue requirement reflected in customer rates of $76 million and $1 million for the three and nine months ended September 30, 2017, respectively. Comparative electric revenues at Ameren Illinois for the three and nine months ended September 30, 2016, were increased $11 million and $24 million, respectively, for the difference between the estimate of its revenue requirement and the revenue requirement reflected in customer rates.
In June 2017, pursuant to the FEJA, Ameren Illinois filed with the ICC an energy efficiency plan for 2018 through 2021. In September 2017, the ICC issued an order approving Ameren Illinois implementation of FEJA electric energy efficiency savings targets and investments.
Ameren Illinois plans to invest up to $99 million in electric energy efficiency programs per year from 2018 through 2021 that will earn a return.
The electric energy efficiency program investments and the return on those investments will be collected from customers through a rider and will not be included in the IEIMA formula ratemaking process.
ATXIs Illinois Rivers Project In August 2017, the Illinois Circuit Court for Edgar County dismissed several of ATXIs condemnation cases related to one segment in the Illinois Rivers project, which has an estimated segment cost of approximately $85 million, of which $32 million was invested as of September 30, 2017. These cases had been filed in order to obtain necessary easements and rights of way to complete the segment. The court found that required notice was not given to the relevant landowners during the underlying ICC proceeding. ATXI intends to appeal this decision. ATXI plans to complete the project in 2019; however, delays associated with the condemnation proceedings or an appeal arising from the order dismissing the Edgar County cases could delay the completion date. The other eight segments of the Illinois Rivers project are not affected by these proceedings.
Federal FERC Complaint Cases In November 2013, a customer group filed a complaint case with the FERC seeking a reduction in the allowed base return on common equity for FERC-regulated transmission rate base under the MISC tariff from 12.38% to 9.15%. In September 2016, the FERC issued a final order in the November 2013 complaint case, which lowered the allowed base return on common equity for the 15-month period of November 2013 to February 2015 to 10.32%, or a 10.82% total allowed return on common equity with the inclusion of a 50 basis point incentive adder for participation in an RTO. The order required customer refunds, with interest, to be issued for that 15-month period. In the first six months of 2017, Ameren and Ameren Illinois refunded $21 million and $17 million, respectively, related to the November 2013 complaint case. In addition, the 10.82% allowed return on common equity has been reflected in rates since September 2016. The 10.82% allowed return on common equity may be replaced prospectively after the FERC issues a final order in the February 2015 complaint case, discussed below.
Since the maximum FERC-allowed refund period for the November 2013 complaint case ended in February 2015, another customer complaint case was filed in February 2015. MISC transmission owners have since filed a motion to dismiss the February 2015 complaint. See below for additional information about the motion. The February 2015 complaint case seeks a further reduction in the allowed base return on common equity for FERC-regulated transmission rate base under the MISC tariff. In June 2016, an administrative law judge issued an initial decision in the February 2015 complaint case, which, if approved by the FERC, would lower the allowed base return on common equity for the 15-month period of February 2015 to May 2016 to 9.70%, or a 10.20% total allowed return on equity with the inclusion of a 50 basis point incentive adder for participation in an RTO, and require customer refunds, with interest, for that 15-month period. The timing of the issuance of the final order in the February 2015 complaint case is uncertain for two reasons. First, while the FERC reestablished a quorum of commissioners in August 2017 after six months without a quorum, the FERC is under no deadline to issue a final order. Second, in the second quarter of 2017, the United States Court of Appeals for the District of Columbia Circuit vacated and remanded to the FERC an order in a separate case in which the FERC established the allowed base return on common equity methodology used in the two MISC complaint cases described above. Ameren is unable to predict the impact of the outcome of the United States Court of Appeals for the District of Columbia Circuits remand on the MISC FERC complaint cases at this time.
17
In September 2017, MISC transmission owners, including Ameren Missouri, Ameren Illinois, and ATXI, filed a motion to dismiss the February 2015 complaint case with the FERC. The MISC transmission owners maintain that the February 2015 complaint was predicated on the now superseded 12.38% allowed base return on common equity being an unjust and unreasonable return and is not applicable given the currently effective 1032% allowed base return on common equity. The MISO transmission owners further maintain that the currently effective 10.32% allowed base return on common equity has not been proven to be unjust and unreasonable based on information provided, including the base return on common equity methodology ranges set forth in the February 2015 complaint case and the initial decision issued by an administrative law judge in June 2016. Additionally, the MISC transmission owners maintain that the February 2015 complaint should be dismissed because the approach utilized in the case to assert that a return on common equity was unjust and unreasonable is insufficient.
That same approach was rejected by the United States Court of Appeals for the District of Columbia Circuit, as discussed above. FERC is under no deadline to issue an order on this motion.
As of September 30, 2017, Ameren and Ameren Illinois had recorded current regulatory liabilities of $41 million and $24 million, respectively, to reflect the expected refunds, including interest, associated with the reduced allowed returns on common equity in the initial decision in the February 2015 complaint case. Ameren Missouri does not expect that a reduction in the FERC-allowed base return on common equity would be material to its results of operations, financial position, or liquidity.
NOTE 3 SHORT-TERM DEBT AND LIQUIDITY The liquidity needs of the Ameren Companies are typically supported through the use of available cash, drawings under committed credit agreements, commercial paper issuances, or, in the case ofAmeten Missouri and Ameren Illinois, short-term intercompany borrowings.
See Note 4 Short-term Debt and Liquidity under Part II, Item 8, in the Form 10-K for a description of our indebtedness provisions and other covenants as well as a description of money pool arrangements.
The Missouri Credit Agreement and the Illinois Credit Agreement, both of which expire in December2021, were not utilized for direct borrowings during the nine months ended September 30, 2017, but were used to support commercial paper issuances and to issue letters of credit. Based on commercial paper outstanding, as well as letters of credit issued under the Credit Agreements, the aggregate amount of credit capacity available under the Credit Agreements to Ameren (parent), Ameren Missouri, and Ameren Illinois, collectively, at September 30, 2017, was $1.7 billion. The Ameren Companies were in compliance with the covenants in their Credit Agreements as of September 30, 2017. As of September 30, 2017, the ratios of consolidated indebtedness to consolidated total capitalization, calculated in accordance with the provisions of the Credit Agreements, were 51 % 47%, and 46% for Ameren, Ameren Missouri, and Ameren Illinois, respectively.
Commercial Paper The following table presents commercial paper outstanding as of September 30, 2017, and December 31, 2016:
2017 2016 Ameren (parent) 277 507 Ameren Missouri
Ameren Illinois 169 51 Ameren consolidated 446 5
558 The following table summarizes the borrowing activity and relevant interest rates under Amerens (parent), Ameren Missouris, and Ameren Illinois commercial paper programs for the nine months ended September 30, 2017 and 2016:
Ameren Ameren Ameren Ameren (parentl Missouri Illinois Consolidated 2017 Average daily commercial paper outstanding 669 7
78 754 Weighted-average interest rate 1.27%
1.20%
1.28%
1.27%
Peak commercial paper during period 841 64 193 948 Peak interest rate 1.50%
1.41%
1.50%
1.50%
2016 Average daily commercial paper outstanding 5
435 80 48 563 Weighted-average interest tate 0.81%
0.74%
0.72%
0.79%
Peakcommerciatpaperduhngpehod 574 208 195 839 Peak interest rate 0.95%
0.85%
0.85%
0.95%
(a)
The timing of peak commercial paper issuances varies by company. Therefore, the sum of peak commercial paper issuances presented by company does not equal the Ameren Consolidated peak commercial paper issuances for the period.
18
Money Pools Ameren has money pool agreements with and among its subsidiaries to coordinate and provide for short-term cash and working capital requirements. The average interest rate for borrowing under the utility money pooi for the three and nine months ended September 30, 2017, was 1.24% and 1.1 8%, respectively (2016 0.53% and 0.54%, respectively). See Note 8 Related Party Transactions for the amount of interest income and expense from the money pool arrangements recorded by the Ameren Companies for the three and nine months ended September 30, 2017 and 2016.
NOTE 4 LONG-TERM DEBT AND EQUITY FINANCINGS Ameren Missouri In June 2017, Ameren Missouri issued $400 million principal amount of 2,95% senior secured notes, due June 2027, with interest payable semiannually on June 15 and December 15 of each year, beginning in December 2017. Ameren Missouri received proceeds of $396 million, which were used, in conjunction with other available funds, to repay at maturity in June 2017 $425 million principal amount of its 6.40% senior secured notes.
ATXI In June 2017, pursuant to a note purchase agreement, ATXI agreed to issue $450 million principal amount of 3.43% senior unsecured notes, due 2050, through a private placement offering exempt from registration under the Securities Act of 1933, as amended. ATXI issued
$150 million principal amount of the notes in June 2017 and the remaining $300 million principal amount of the notes in August2017. ATXI received proceeds of $449 million from the notes, which were used by ATXI to repay existing short-term and long-term affiliate debt owed to Ameren (parent).
ATXI may prepay at any time not less than 5% of the principal amount of notes then outstanding at 100% of the principal amount plus a make-whole premium. In the event of a change of control, as defined in the agreement, each holder of notes may require ATXI to prepay the entire unpaid principal amount of the notes held by such holder at a price equal to 100% of the principal amount of such notes together with accrued and unpaid interest thereon. The following table presents the principal maturities schedule for the notes:
Payment Date Principal Payment August 2022 49.5 August 2024 49.5 August2027 495 August 2030 49.5 August2032 495 August 2038 49.5 August 2043 76.5 August 2050 76.5 Total Principal Amount of Notes 450.0 The note purchase agreement includes financial covenants that require ATXI to not permit at any time: (i) debt to exceed 70% of total capitalization or (ii) secured debt to exceed 10% of total assets. The note purchase agreement also contains restrictive covenants that, among other things, restrict the ability ofATXI to: (i) enter into transactions with affiliates; (ii) consolidate, merge, transfer or lease all or substantially all of its assets; and (iii) create liens, Indenture Provisions and Other Covenants Ameren Missouris and Ameren Illinois indentures and articles of incorporation include covenants and provisions related to issuances of first mortgage bonds and preferred stock. Ameren Missouri and Ameren Illinois are required to meet certain ratios to issue additional first mortgage bonds and preferred stock. A failure to achieve these ratios would not result in a default under these covenants and provisions, but would restrict the companies ability to issue first mortgage bonds or preferred stock. See Note 5 Long-Term Debt and Equity Financings under Part II, Item 8, in the Form 10-K for a description of our indenture provisions and other covenants as well as restrictions on the payment of dividends. See the discussion above for covenants related to ATXIs note purchase agreement. At September 30, 2017, the Ameren Companies were in compliance with the provisions and covenants contained in their indentures and articles of incorporation, as applicable, and ATXI was in compliance with the provisions and covenants contained in its note purchase agreement.
Off-Balance-Sheet Arrangements At September 30, 2017, none of the Ameren Companies had off-balance-sheet financing arrangements, other than operating leases 19
entered into in the ordinary course of business, letters of credit, and Ameren parent guarantee arrangements on behalf of its subsidiaries.
NOTE 5OTHER INCOME AND EXPENSES The following table presents the components of Other Income and Expenses in the Ameren Companies statements of income for the three and nine months ended September 30. 2017 and 2016; Three Months Nine Months 2017 2016 2017 2016 Ameren:(a)
Miscellaneous income:
Allowance for equity funds used during construction 6
7 16 S
20 Interest income on industrial development revenue bonds 7
7 20 20 Interest income
3 5
1 1 Other
1 1
3 Total miscellaneous income 13 18 42 54 Miscellaneous expense:
Donations
1 7
8 Other 2
7 9
13 Total miscellaneous expense 2
8 76 S
21 Ameren Missouri:
Miscellaneous ir.come:
Allowance for equity funds used during conslwclion 6
6 15 15 Interest income on industrial development revenue bonds 7
7 20 20 Interest income
I
1 Other
1 1
Total miscellaneous income 13 14 36 S
38 Miscellaneous expense:
Donations
S
2 2
Other 2
2 4
4 Total miscellaneous expense 2
2 6
6 Ameren Illinois:
Miscellaneous income:
Allowance for equity funds used during construction
1 5
1 4
Interest income 1
2 5
9 Other
1 1
2 Total miscellaneous income 1
4 7
15 Miscellaneous expense:
Donations
5 1
5 6
Other
2 3
5 Total miscellaneous expense
3 8
1 1 (a)
Includes amounts for Ameren registrant and nonregistranl subsidiaries and intercompany eliminations.
NOTE 6 DERIVATIVE FINANCIAL INSTRUMENTS We use derivatives to manage the risk of changes in market prices for natural gas, power, and uranium, as well as the risk of changes in rail transportation surcharges through fuel oil hedges. Such price fluctuations may cause the following:
an unrealized appreciation or depreciation of our contracted commitments to purchase or sell when purchase or sale prices under the commitments are compared with current commodity prices; market values of natural gas and uranium inventories that differ from the cost of those commodities in inventory; and actual cash outlays for the purchase of these commodities that differ from anticipated cash outlays.
The derivatives that we use to hedge these risks are governed by our risk management policies for forward contracts, futures, options, and swaps. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required The goal of the hedging program is generally to mitigate financial risks while ensuring that sufficient volumes are available to meet our requirements. Contracts we enter into as part of our risk management program may be settled financially, settled by physical delivery, or net settled with the counterparty.
20
The following table presents open gross commodity contract volumes by commodity type for derivative assets and liabilities as of September 30, 2017, and December 31 2076. As of September 30, 2017, these contracts extended through October2019, March 2023, May 2032, and March 2020 for fuel oils, natural gas, power, and uranium, respectively.
Quantity liii millions, except as indicatedl 2017 2016 Ameren Ameren Ameren Ameren Commodity Missouri Illinois Ameren Missouri Illinois Ameren Fuel oils (in gallons).
30 (b) 30 30 (b) 30 Natural gas (in mmbtu) 24 145 169 25 129 154 Power (in megawatthours) 2 9
11 1
9 10 Uranium (pounds in thousands) 370 lb) 370 345 (b) 345 (a)
Consists of ultra-low-sulfur diesel products.
(b)
Not applicable All contracts considered to be derivative instruments are required to be recorded on the balance sheet at their fair values, unless the NPNS exception applies. See Note 7 Fair Value Measurements for a discussion of our methods of assessing the fair value of derivative instruments. Many of our physical contracts, such as our purchased power contracts, qualify for the NPNS exception to derivative accounting rules. The revenue or expense on NPNS contracts is recognized at the contract price upon physical delivery.
Itwe determine that a contract meets the definition of a derivative and is not eligible for the NPNS exception, we review the contract to determine whether the resulting gains or losses qualify for regulatory deferral. Derivative contracts that qualify for regulatory deferral are recorded at fair value, with changes in fair value recorded as regulatory assets or liabilities in the period in which the change occurs. We believe derivative losses and gains deferred as regulatory assets and liabilities are probable of recovery, or refund, through future rates charged to customers. Regulatory assets and liabilities are amortized to operating income as related losses and gains are reected in rates charged to customers. Therefore, gains and losses on these derivatives have no effect on operating income. As of September 30, 2077, and December31, 2016, all contracts that met the definition of a derivative and were not eligible for the NPNS exception received regulatory deferral.
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The following table presents the carrying value and balance sheet location of all derivative commodity contracts, none of which were designated as hedging instruments, as of September 30, 2017, and December31, 2016:
Ameren Ameren Balance Sheet Location Missouri Illinois Ameren 2017 Fuel oils Other current assets 2
2 Other assets I
Natural gas Other current assets
1 1
Other assets
1 1
Power Other current assets 10
ID Other assets I
1 Total assets ii 14 2
16 Fuel oils Other current liabilities 2
2 Natural gas Other current liabilities 3
8 11 Other deferred credits and liabilities 4
6 10 Power Other current liabilities 1
13 14 Other deferred credits and liabilities
179 179 Uranium Other deferred credits and habilities
ib)
ibi Total liabilities ()
10 206 216 2016 Fuel oils Other current assets 2
2 Other assets 1
1 Natural gas Other current assets 1
11 12 Otherassets 1
2 3
Power Other current assets 9
9 Total assets i 14 S
13 27 Fuel oils Other current liabilities 5
5 Natural gas Other current liabilities 1
3 4
Other deterred credits and liabilihes 5
5 10 Power Other current liabitities 3
12 15 Other deferred credits and liabilities
173 173 Uranium Other deferred credits and liabilities 4
4 Total liabilities hI 18 193 211 (al The cumulative amount of pretax net gains on all derivative instruments is deferred as a regulatory liability.
(b)
Beginning in 201?, as a result of rulebook amendments at the Chicago Mercantile Exchange, the fair value of uranium derivative liabilities are offset by certain settlement payments made to the exchange previously characterized as collateral and included within Other assets on Amerens and Ameren Missouris balance sheet, (c)
Th cumulative amount of pretax net losses on all derivative instruments is deferred as a regulatory asset.
Derivative instruments are subject to various credit-related losses in the event of nonperformance by counterparties to the transaction.
Exchange-traded contracts are supported by the financial and credit quality of the clearing members of the respective exchanges; these contracts have nominal credit risk. In all other transactions, we are exposed to credit risk. Our credit risk management program involves establishing credit limits and collateral requirements for counterparties, using master netting arrangements or similar agreements, and reporting daily exposure to senior management.
We believe that entering into master netting arrangements or similar agreements mitigates the level of financial loss that could result from default by allowing net settlement of derivative assets and liabilities, These master netting arrangements allow the counterparties to net settle sale and purchase transactions. Further, collateral requirements are calculated at the master netting arrangement or similar agreement level by counterparty.
The Ameren Companies elect to present the fair value amounts of derivative assets and derivative liabilities subject to an enforceable master netting arrangement or similar agreement gross on the balance sheet. However, if the gross amounts recognized on the balance sheet were netted with derivative instruments and cash collateral received or posted, the net amounts would not be materially different from the gross amounts at September 30, 2017, and December 31, 2016.
Concentrations of Credit Risk In determining our concentrations of credit risk related to derivative instruments, we review our individual counterparties and categorize each counterparty into groupings according to the primary business in which each engages. We calculate maximum exposures based on the 22
gross fair value of financial instruments, including NPNS and other accrual contracts. These exposures are calculated on a gross basis, which include affiliate exposure not eliminated at the consolidated Ameren level. As of September 30, 2017, if counterparty groups were to fail completely to perform on contracts, the Ameren Companies maximum exposure would have been immaterial with or without consideration of the application of master netting arrangements or similar agreements and collateral held.
Derivative Instruments with Credit Risk-Related Contingent Features Our commodity contracts contain collateral provisions tied to the Ameren Companies credit ratings. It our credit ratings were downgraded, or if a counterparty with reasonable grounds for uncertainty regarding our ability to satisfy an obligation requested adequate assurance of performance, additional collateral postings might be required. The following table presents, as of September 30, 2017, the aggregate fair value of all derivative instruments with credit risk-related contingent features in a gross liability position, the cash collateral posted, and the aggregate amount of additional collateral that counterparties could require. The additional collateral required is the net liability position allowed under the master netting arrangements or similar agreements, assuming (1) the credit risk-related contingent features underlying these arrangements were triggered on September 30, 2017, and (2) those counterparties with rights to do so requested collateral, Aggregate Fair Value of Cash Potential Aggregate Amount of Derivative Liabllities(
Collateral Posted Additional Collateral Requiredibi 2017 Ameren Missouri 59 3
48 Ameren Illinois 48
41 Ameren 107 3
89 lal Before consideration of master netting arrangements or similar agreements and including NPNS and other accrual contract exposures.
(b)
As collateral requirements with certain counterparties are based on master netting arrangements or similar agreements, The aggregate amount of additional collateral required to be posted is determined after consideration of the effects of such arrangements.
NOTE 7 FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received for an asset ot paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use various methods to determine fair value, including market, income, and cost approaches. With these approaches, we adopt certain assumptions that market participants would use in pricing the asset or liability, including assumptions about market risk or the risks inherent in the inputs to the valuation. Inputs to valuation can be readily observable, market-corroborated, or unobservable. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Authoritative accounting guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value, All financial assets and liabilities carried at fair value are classified and disclosed in one of three hierarchy levels. See Note 8 Fair Value Measurements under Part II, Item 8, of the Form 10-K for information related to hierarchy levels. We perform an analysis each quarter to determine the appropriate hierarchy level of the assets and liabilities subject to fair value measurements. Financial assets and liabilities are classified in their entirety according to the lowest level of input that is significant to the fair value measurement. All assets and liabilities whose fair value measurement is based on significant unobservable inputs are classified as Level 3.
The following table describes the valuation techniques and unobservable inputs utilized by the Ameren Companies for the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the periods ended September 30, 2017 and December 31, 2016:
Fair Value Weighted Assets Liabilities Valuation Technique(s)
Unobservable Input Range Average Level 3 Derivative asset and liability commodity contracts(i:
Fuel oils I
(1)
Option model Natural gas Discounted cash flow
(2)
Discounted cash flow Powern.
11 (193)
Discounted cash flow Volatilibesl%lr Counterparty credit risk)%lIiid)
Arneren Missouri credit risk(%).
Nodal basis t$Immbtulb Counterparty credit risk (%)(d)
Ameren Illinois credit risk 1%)d Average forward peak and off-peak pricing forward&swaps ($/MWhf Estimated aucton price for FIRs ($/MWl1bi Nodal basis (S!MWh)h 2432 0.120.22 0.37 11.10) 10.10) 0.346 0.37 2541 (324) 1,194 (3) 0 26 0.17 (a) 10.80) 0,73 (e) 28 269 (2) 2017 23
Fair Value Weighted Aaseta Liabilities Valuation Technique(s)
Unobservable Input Range Average Counterparty credit risk )%yCIdI 0.28 (e)
Ameren Illinois credit risk (%)r 0.37 (e)
Fundamental energy Estimated future natural gas prices )S!mmbtu).h 34 3
production model Escalation rate (%fsiii 3
(e)
Contract price allocation Estimated renewable energy credit costs (S/credit) bJ 5
7 6
2016 Fuel oils S
I S
Option model Volatihities )%)lbi 2466 28 Discounted cash flow Counterparty credit risk (%y:u 0.13 022 0,15 Ameren Missouri credit risk )%)
0.38
)e)
Escalation rate (%yvin (2) 2 0
Natural gas 1
(1)
Option model Volatilities )%)ibi 31 66 36 Nodal basis )S/mmbtefI (0.40) (0.10)
(0.20)
Discounted cash flow Nodal basis )S/mmbtufhi (0.80)C (0.50)
Counterpady credit risk 1%) iih 0.138 1
Ameren Illinois credit rink )%fi 0.38
)e)
PoweP 9
(187)
Discounted cash flow Average forward peak and off-peak pricing
2644 29 forwards/swaps )S/MWhyh Estimated auction price for FTRs )S/MW)hi (71) 5,270 125 Nodal basis )$/MWhyh (6) 0 (2)
Ameren Illinois credit risk )%)iciidi 0.38
)e)
Fundamental energy Estimated future natural gas prices )Simmbtu)n 34 3
production model Escalation rate )%)ib;J 5
)e)
Contract price allocation Estimated renewable energy credit costs )S/credit)ih 57 6
)4)
Option model Volatilities )%)bi 24
)e)
Discounted cash flow Average forward uranium pricing (S/pound) bi 2224 22 Ameren Missouri credit risk )%fiMi 0.38
)e)
(a)
The derivative asset and liability balances are presented net of counterparty credit considerations
)b)
Generally, significant increases (decreases) in this input in isolation would result in a significantly higher (lower) fair value measurement
)c)
Generally, significant increases (decreases) in this input in isolation would result in a significantly lower (higher) fair value measurement.
Id)
Counterparty credit risk is applied only to counterparlies with derivative asset balances. Ameren Missouri and Ameran Illinois credit risk is applied only to counlerparites with derivative liability balances.
)e)
Not applicable.
(1)
Escalation rate applies to fuel oil prices 2019 and heyond.
)g)
Power valuations use visible third-pariy pricing evaluated by month for peak and off-peak demand through 2021 for September 30, 2017, and through 2020 for December 31, 2016. Valuations beyond 2021 for September 30, 2017, and 2020 for December 31, 2016 use fundamentally modeled pricing by month for peak and off-peak demand.
)h)
The balance atAweren is comprised ofAwaren Missouri and Aweren Illinois power contracts, which respond differently to unobservable input changes due to their opposing positions.
(it Escalation rate applies to power pnces in 2031 and beyond.
We consider nonperformance risk in our valuation of derivative instruments by analyzing the credit standing of our counterparties and considering any counterparty credit enhancements (e,g., cotateral). The guidance also requires that the fair value measurement of liabNities reflect the nonperformance risk of the reporting entity, as applicable. Therefore, we have factored the impact of our credit standing, as we)) as any potential credit enhancements, into the fair value measurement of both dedvative assets and derivative )iabNities. Included in our valuation, and based on current market conditions, is a valuation adjustment for counterparty default derived from market data such as the price of credit default swaps, bond yields, and credit ratings. No gains or tosses related to valuation adjustments for counterparty default risk were recorded atAmeren, Ameren Missouri, orAmeren Illinois in the three and nine months ended September 30, 2017 or 2016. At September 30, 2017, and December31, 2016, the counterparty default risk valuation adjustment related to derivative contracts was immaterial forAmeren, Ameren Missouri, and Ameren Illinois.
24
The following table sets forth, by level within the fair value hierarchy, our assets and liabilities measured at fair value on a recurring basis as of September 30, 2017:
Quoted Prices in Active Markets for Significant Other Significant Other Identical Assets Observable Unobservable or Liabilities Inputs Inputs lLevel 1)
ILevel 2)
ILevel 3)
Total Assets:
Ameren Derivative assets commodity contractsv:
Fuel oils 5
2
1 3
Natural gas 1
1
2 Power
11 11 Total derivative assets commodity contracts 3
1 12 16 Nuclear decommissioning trust fund:
Cash and cash equivalents 2
2 Equity securities:
U.S. large capitalization 445
445 Debt securities u.s. treasury and agency securities
119
119 Corporate bonds
82
82 Other
24
24 Total nuclear decommissioning trust fund 5
447 225
672 Total Ameren 450 5
226 12 688 Ameren Missouri Derivative assets commodity contracts Fuel oils 2
1 3
Power
11 11 Total derivative assets commodity contracts 2
12 14 Nuclear decommissioning trust fund Cash and cash equivalents 5
2
S
2 Equity securities:
U.S. large capitalization 445
445 Debt securities U.S. treasury and agency securities
119
119 Corporate bonds
82
82 Other
24
24 Total nuclear decommissioning trust fund S
447 225
672 Total Ameren Missouri 449 S
225 12 686 Ameren Illinois Derivative assets commodity contracts Natural gas 1
1 S
2 LiabilIties:
Ameren Derivative liabilities commodity contracts:
Fuel oils 1
S
1 2
Natural gas
19 2
21 Power
193 193 TotalAmeren 5
1 19 196 216 uri Derivative liabilities commodity contractsial:
Fuel oils 1
1 2
Natural gas
7
7 Power
1 1
Total Ameren Missouri 1
7 2
10 Ameren Illinois Derivative liabilities commodity contractsv:
Natural gas
12 2
14 Power
192 192 Total Ameren Illinois
12 194 206 (a)
The derivative asset and liability balances are presented net of counterparty credit considerations.
25
The following table sets forth, by level within the fair value hierarchy, our assets and liabilities measured at fair value on a recurring basis as of December 31, 2016:
Quoted Prices in Active Markets for Significant Other Significant Other Identical Assets Observable Unobservable or Liabilities Inputs Inputs ILevel 1)
(Level 2)
(Level 3)
Total Assets:
Ameren Derivative assets commodity contracts1:
Fuel oils 2
S
1 3
Natural gas 2
12 1
15 Power
9 9
Total derivative assets commodity contracts S
4 12 S
11 S
27 Nuclear decommissioning trust fund:
Cash and cash equivalents 1
S
1 Equity securities:
U S. large capitalization 408
408 Debt securities:
U.S. treasury and agency securities
112
112 Corporate bonds
67 67 Other
17
17 Total nuclear decommissioning trust fund 409 196
5 605
Total Ameren S
413 208 11 632 Ameren Missouri Derivative assets commodity contracts Fuel oils 2
5
1 3
Natural gas
1 1
2 Power
9 9
Total derivative assets commodity contracts 2
1 11 14 Nuclear decommissioning trust fund:
Cash and cash equivalents 1
1 Equity securities:
U.S. large capitalization 408
408 Debt securities:
U.S. treasuryand agency securities
112
112 Corporate bonds
67
67 Other
17
17 Total nuclear decommissioning trust fund 409 S
196 5
605
° Total Ameren Missouri 411 197 5
11 619 Ameren Illinois Derivative assets commodity contractsi:
Natural gas 2
11
13 Liabilities:
Ameren Derivative liabilities commodity contracts:i:
Fuel oils 5
5
5 Natural gas
13 1
14 Power
t 187 188 Uranium
4 4
Total Ameren 5
14 192 211 Ameren Missouri Derivative liabilities commodity contractstal:
Fuel oils 5
5
5 Natural gas
6
6 Power
1 2
3 Uranium
4 4
Total Ameren Missouri 5
5 7
6 18 Ameren Illinois Derivative liabilities commodity contracts:
Natural gas
7 1
8 Power
185 165 Total Ameren Illinois
7 166 193 (a)
The derivative asset and liability balances are presenled net of counterparty credit considerations.
(b)
Balance excludes $2 million of receivables, payables, and accrued income, net.
26
All costs related to financial assets and liabilities classified as Level 3 in the fair value hierarchy are expected to be recoverable through customer rates: therefore, there is no impact to net income resulting from changes in the fair value of these instruments. For the three and nine months ended September 30, 2017 and 2016, the balances and changes in the fair value of Level 3 financial assets and liabilities associated with fuel oils, natural gas, and uranium were immaterial.
The following table summarizes the changes in the fair value of power financial assets and liabilities classified as Level 3 in the fair value hierarchy:
Net derivative commodity contracts Ameren Ameren Missouri Illinois Ameren For the three months ended September 30, 2017 Beginning balance at July 1, 2017 14 1192)
(178)
Realized and unrealized gains (losses) included in regulatory assets/liabilities 12)
(3)
(5)
Sales 1
1 Settlements (3) 3
Ending balance at September 30, 2017 10 (192)
(1821 Change in unrealized gains (losses) related to assets/liabilities held at September 30, 2017
(2)
(21 For the three months ended September 30, 2016 Beginning balance at July 1, 2016 14 (169)
(155)
Realized and unrealized gains (losses) included in regulatory assets/liabilities
(6)
(6)
Settlements (5) 3 (2)
Ending balance at September 30. 2016 9
(172) 1163)
Change in unrealized gains (losses) related to assets/liabilibes held at September 30, 2016
5 (2)
(2)
For the nine months ended September 30, 2017 Beginning balance at January 1, 2017 7
(185) 1178)
Realized and unrealized gains (losses) included in regulatory assets/liabilities (3) 114)
(17)
Purchases 15
15 Sales 1
1 Settlements (10) 7 (3)
Ending balance at September 30, 2017 10 (1921 (182)
Change In unrealized gains (losses) related to assets/liabilities held at September 30, 2017
(15)
(15)
For the nine months ended September 30, 2016 BeginningbalanceatJanuaryl,2016 16 5
(170) 1154)
Realized and unrealized gains (losses) included in regulatory assets/liabilities (4)
(13)
(17)
Purchases 13
13 Settlements (16) 11 (5)
Ending balance at September30, 2016 9
(172)
S (163)
Change in unrealized gains (losses) related to assets/liabilities held at September30, 2016 S
(7)
(7)
Transfers into or out of Level 3 represent either (1) existing assets and liabilities that were previously categorized as a higher level, but were recategorized to Level 3 because the inputs to the model became unobservable during the period or (2) existing assets and liabilities that were previously classified as Level 3, but were recategorized to a higher level because the lowest significant input became observable during the period. For the three and nine months ended September 30, 2017 and 2016, there were no material transfers between Level 1 and Level 2, Level 1 and Level 3, or Level 2 and Level 3 related to derivative commodity contracts.
The Ameren Companies carrying amounts of cash and cash equivalents, accounts receivable, unbilled revenue, accounts payable, and other current financial instruments approximate fair value because of the short-term nature of these instruments. They are considered to be Level 1 in the fair value hierarchy. The Ameren Companies short-term borrowings also approximate fair value because of their short-term nature. Short-term borrowings are considered to be Level 2 in the fair value hierarchy as they are valued based on market rates for similar market transactions. The estimated fair value of long-term debt and preferred stock is based on the quoted market prices for same or similar issuances for companies with similar credit profiles or on the current rates offered to the Ameren Companies for similar financial instruments, which fair value measurement is considered to be Level 2 in the fair value hierarchy.
27
The following table presents the carrying amounts and estimated fair values of our long-term debt, capital lease obligations and preferred stock at September 30, 2017, and December31 2016:
September 30. 2017 December 31, 2016 Carrying Fair Carrying Fair Amount Value Amount Value Ameren:
Long-term debt and capital lease obligations (including current portion) 7,699 8234 7,276 7,772 Preferred stock 142 131 142 131 Ameren Missouri:
Long-term debt and capital lease obligations (including current portion) 3,967 4,312 3,994 4,304 Preferred stock 80 79 80 79 Ameren Illinois:
Long-term debt (including current portion) 2,590 2,759 2,588 2,765 Preferred stock 62 52 62 52 (a)
Preferred stock is recorded in Noncontrolling lnterests on the consolidated balance sheet NOTE 8 RELATED PARTY TRANSACTIONS In the normal course of business, the Ameren Companies engage in affiliate transactions. These transactions primarily consist of power purchases and sales, services received or rendered, and borrowings and lendings. Transactions between affiliates are reported as intercompany transactions on their financial statements but are eliminated in consolidation for Amerens financial statements. For a discussion of our material related party agreements, see Note 14 Related Party Transactions under Part II, Item 8, of the Form 10-K and the money pool arrangements discussed in Note 3Short-term Debt and Liquidity of this report.
Electric Power Supply Agreement In April 2017, Ameren Illinois conducted a procurement event, administered by the IPA, to purchase energy products. Ameren Missouri was among the winning suppliers in this event. As a result, in April 2017, Ameren Missouri and Ameren Illinois entered into an energy product agreement by which Ameren Missouri agreed to sell, and Ameren Illinois agreed to purchase, 85,600 megawatthours at an average price of
$34 per megawatthour during the period of March 2019 through May 2020.
The following table presents the impact on Ameren Missouri and Ameren Illinois of related party transactions for the three and nine months ended September 30, 2017 and 2016:
Three Months Nine Months Income Statement Ameren Ameren Ameren Ameren Agreement Line Item Missouri Illinois Missouri Illinois Ameren Missouri power supply Operating Revenues 2017 $
4 $
(a) $
21 $
(a) agreements with Ameren Illinois 2016 9
(a) 21
)a)
Ameren Missouri and Ameren Illinois Operating Revenues 2017 7
1 20 3
rent and facility services 2016 5
1 18 3
Ameren Missouri and Ameren Illinois Operating Revenues 2017 (b)
(b)
Ib) 1 miscellaneous support services 2016 1
)b) 1 (b)
TotalOperatingRevenues 2017 5 11 1 $
41 $
4 2016 15 1
40 3
Ameten Illinois power supply Purchased Power 2017 $
(a) $
4 $
(a) $
21 agreements with Ameren Missouri 2016 Ia) 9 (a) 21 Ameren Illinois Iransmission Purchased Power 2017 (a)
(b)
(a) 1 services with AIXI 2016 (a)
I (a) 2 Total Purchased Power 2017 $
Ia) $
4 $
(a) $
22 2016 (a) 10 (a) 23 Mieren Services support services Other Operations and Maintenance 2077 $
34 $
33 $
103 $
99 agreement 2016 30 29 96 90 Money pool borrowings (advances)
Interest charges? Miscellaneous 2017 $
(b) $
(b)
(b) $
(b)
Income 2016 (b)
(b)
(b)
(b)
(a)
Not applicable.
)b)
Amount less than $1 million.
28
NOTE 9 COMMITMENTS AND CONTINGENCIES We are involved in legal, tax, and regulatoty proceedings before various courts, regulatory commissions, authorities, and governmental agencies with respect to matters that arise in the ordinary course of business, some of which involve substantial amounts of money. We believe that the final disposition of these proceedings. except as otherwise disclosed in the notes to our financial statements in this report and in the Form 1 0-K, will not have a material adverse effect on our results of operations, financial position, or liquidity.
Reference is made to Note 1 Summary of Significant Accounting Policies, Note 2 Rate and Regulatory Matters, Note 14 Related Party Transactions, and Note 15 Commitments and Contingencies under Part II, Item 8, of the Form 10-K. See also Note 1 Summary of Significant Accounting Policies, Note 2 Rate and Regulatory Matters, Note 8 Related Party Transactions, and Note 10 Callaway Energy Center of this report.
Other Obligations In April and September 2017, Ameren Illinois conducted procurement events, administered by the IPA, to purchase energy products through May 2020, In the April 2017 procurement event, Ameren Illinois contracted to purchase 4,249,800 megawatthours of energy products for $128 million from June 2017 through May 2020. In the September 2017 procurement event, Ameren Illinois contracted to purchase approximately 1,950,200 megawatthours of energy products for $57 million from October 2017 through May 2020. The results of both procurement events are reflected in the below table. See Note 8 Related Party Transactions for additional information regarding energy product agreements between Ameren Missouri and Ameren Illinois as a result of the April procurement event.
To supply a portion of the fuel requirements of Ameren Missouris energy centers, Ameren Missouri has entered into various long-term commitments for the procurement of coal, natural gas, nuclear fuel, and methane gas. Ameren Missouri and Ameren Illinois also have entered into various long-term commitments for purchased power and natural gas for distribution. The table below presents our estimated minimum fuel, purchased power, and other commitments for fuel at September 30, 2017. Amerens and Ameren Illinois purchased power commitments include the Ameren Illinois agreements entered into as part of the IPA-administered power procurement process. Included in the Other column are minimum purchase commitments under contracts for equipment, design and construction, and meter reading services, among other agreements, at September 30, 2017 Natural Nuclear Purchased Methane Coal Ga&a)
Fuel Power(bHI Gas Other Total Ameren:{d) 2017 162 65 19 S
59 I
33 339 2018 453 200 67 170 4
57 951 2019 356 148 27 63 4
39 637 2020 79 94 39 13 5
39 269 2021 27 36 45 2
5 26 141 Thereafter 47 58 20 64 123 312 Total 1,D77 590 255 327 83 317 2,649 Ameren Missouri:
2017 162 14 19
1 20 216 2018 453 42 67
4 44 610 2019 356 34 27
4 25 446 2020 79 26 39
5 25 174 2021 27 13 45
5 26 116 Thereafter
22 58
64 100 244 Total 1,077 151 255
83 240 1,806 Ameren IllinoIs:
2017
S 51
S 59
13 S
123 2018
158
170
13 341 2019
114
63
14 191 2020
68
13
14 95 2021
23
2
25 Thereafter
25
20
45 Total
439
327
S 54 820 29
(a)
Includes amounts for generation and for distribution (b)
The purchased power amounts for Ameren and Ameren Illinois exclude agreemenls for renewable energy credits through 2032 with various renewable energy suppliers due to the contingent nature of the payment amounts.
(c)
The purchased power amounts for Ameren and Ameren Missouri exclude a 102-megawatt power purchase agreement with a wind farm operator, which expires in 2024, duets the contingent nature of the payment amounts.
Cd)
Includes amounts forAmeren registrant and nonregistrant subsidiaries.
Environmental Matters We are subject to various environmental laws and regulations enforced by federal, state, and local authorities, The development and operation of electric generation, transmission, and distribution facilities and natural gas storage, transmission, and distribution facilities can trigger compliance obligations with respect to diverse environmental laws and regulations. These laws and regulations address emissions, discharges into water, water usage, impacts to air, land, and water, and chemical and waste handling. Complex and lengthy processes ate required to obtain and renew approvals, permits, and licenses for new, existing or modified facilities. Additionally, the use and handling of various chemicals or hazardous materials require release prevention plans and emergency response procedures.
The EPA has promulgated environmental regulations that have a significant impact on the electric Lltility industry. Overtime, compliance with these regulations could be costly for Ameren Missouri, which operates coal-fired power plants. As of December 31, 2016, Ameren Missouris fossil fuel-fired energy centers represented 18% and 34% ofAmerens and Ameren Missouris rate base, respectively. Regulations impacting air emissions from the electric utility industry include the revised NSPS, the CSAPR, the MATS, and the revised National Ambient Air Quality Standards, which are subject to periodic review for certain pollutants. Collectively, these regulations cover a variety of pollutants such as SO2, particulate matter. NON, mercury, toxic metals, and acid gases. Water intake and discharges from power plants are regulated under the Clean Water Act. Modifications to water intake structures and more stringent limitations or prohibitions against wastewater discharges at Ameren Missouris energy centers could result in significant capital expenditures. The management and disposal of coal ash is regulated under the CCR Rule, which will require the closure of surface impoundments and the installations of dry ash handling systems at several of Ameren Missouris energy centers, resulting in significant capital expenditures. The individual or combined effects of existing environmental regulations could result in significant capital expenditures, increased operating costs, the closure or alteration of the operation of some of Ameren Missouris energy centers, or require further capital investment. Ameren and Ameren Missouri expect that such compliance costs would be recoverable through rates, subject to MoPSC prudence review, but the timing of costs and their recovery could be subject to regulatory lag.
Ameren Missouris current plan for compliance with existing air emission regulations includes burning ultra-low-sulfur coal and installing new or optimizing existing pollution control equipment. Ameren and Ameren Missouri estimate that they will need to make capita) expenditures of $425 million to $525 million in the aggregate from 2017 through 2021 in order to comply with existing environmental regulations. Additional environmental controls beyond 2021 could be required. This estimate of capital expenditures includes expenditures required for the CCR regulations, Clean Water Act rules applicable to cooling water intake structures at existing power plants, and effluent limitation guidelines applicable to steam electric generating units, all of which are discussed below. The EPA has proposed to repeal the Clean Power Plan, which would have regulated CO2 emissions from power plants. The above capital expenditure amounts exclude estimated impacts from the Clean Power Plan. The actual amount of capital expenditures required to comply with existing environmental regulations may vary substantially from the above estimate because of uncertainty as to whether the EPA will substantively revise regulatory obligations, the precise compliance strategies that will be used and their ultimate cost, among other things.
The following sections describe the more significant environmental laws and rules and environmental enforcement and remediation matters that affect or could affect our operations. The EPA has initiated an administrative review of several regulations and rulemaking activities, including the effluent limitation guidelines and the CCR rule, which could ultimately result in the revision of all or part of such rules.
Clean Air Act Federal and state laws require significant reductions in 502 and NO through either emission source reductions or the use and retirement of emission allowances. The first phase of the CSAPR emission reduction requirements became effective in 2015. The second phase of emission reduction requirements, which were revised by the EPA in 2016, became effective in 2017; additional emission reduction requirements may apply in subsequent years. To achieve compliance with the CSAPR, Ameren Missouri bums ultra-low-sulfur coal, operates two scrubbers at its Sioux energy center, and optimizes other existing pollution control equipment. Ameren Missouri did not make additional capital investments to comply with the 2017 CSAPR requirements. However, Ameren Missouri expects to incur additional costs to lower its emissions at one or more of its energy centers to comply with the CSAPR in future years. These higher costs are expected to be recovered from customers through the FAC or higher base rates.
CO2 Emissions Standards In 2015, the EPA issued the Clean Power Plan, which sets forth CO2 emissions standards applicable to existing power plants. In October 2017, the EPA announced a proposal to repeal the Clean Power Plan and will seek public comment as to the scope of future regulations 30
under the Clean Air Act. The United States Court of Appeals for the District of Columbia Circuit has stayed further action pending the EPAs administrative review.
We cannot predict the outcome of the EPAs future rulemaking, the outcome of legal challenges relating to either the repeal of the Clean Power Plan or such future rulemakings, nor the resulting impact on our results of operations, financial position, or liquidity.
NSR and Clean Air Litigation In January 2011, the Department of Justice, on behalf of the EPA, filed a complaint against Ameren Missouri in the United States District Court for the Eastern District of Missouri. The complaint, as amended in October 2013, alleged that in performing projects at its Rush Island coal-fired energy center in 2007 and 2010, Ameren Missouri violated provisions of the Clean Air Act and Missouri law. The litigation has been divided into two phases: liability and remedy. In January 201?. the district court issued a liability ruling that the projects violated provisions of the Clean Air Act and Missouri law. The case will now proceed to the second phase to determine the actions required to remedy the violations found in the liability phase of the litigation. The EPA previously withdrew all claims for penalties and fines. No date has been set by the district court for a trial on the remedy phase of the litigation. At the conclusion of both phases of the litigation. Ameren Missouri intends to appeal the liability ruling to the United States Court of Appeals for the Eighth Circuit.
The ultimate resolution of this mailer could have a material adverse effect on the results of operations, financial position, and liquidity of Ameten and Ameren Missouri. Among other things, and subject to economic and regulatory considerations, resolution of this matter could result in increased capital expenditures for the installation of pollution control equipment, as well as increased operations and maintenance expenses. We are unable to predict the ultimate resolution of this matter or the costs that might be incurred.
Clean WaterAct In 2014, the EPA issued its final rule applicable to cooling water intake structures at existing power plants. The rule requires a case-by-case evaluation and plan for reducing aquatic organisms impinged on the facilitys intake screens or entrained through the plants cooling water system. All of Ameren Missouris coal-fired and nuclear energy centers are subject to the cooling water intake structures rule.
Implementation of the rule will occur during the permit renewal process of each energy centers water discharge permit. which will occur between 2018 and 2023.
Additionally, in 2015, the EPA issued a rule to revise the effluent limitation guidelines applicable to steam electric generating units. These guidelines established national standards for water discharges that are based on the effectiveness of available control technology. The EPAs 2015 rule prohibits effluent discharges of certain waste streams and imposes more stringent limitations on certain water discharges from power plants. In September2017, the EPA published a rule that postponed the compliance dates by two years for the limitations applicable to two specific waste streams so that it could potentially revise those standards.
Both the intake and effluent rules, if implemented as enacted. could have an adverse effect on Amerens and Ameren Missouris results of operations, financial position, and liquidity should such implementation require extensive modifications to the cooling water systems and water discharge systems at Ameren Missouris energy centers, and if such investments are not recovered on a timely basis in electric rates charged to Ameren Missouris customers.
Ash Management In 2015. the EPA issued regulations regarding the management and disposal of CCR from coal-fired energy centers. These regulations affect CCR disposal and handling costs at Ameren Missouris energy centers. They require closure of impoundments if performance criteria relating to groundwater impacts and location restrictions are not achieved. In September 2017, the EPA granted petitions filed on behalf of coal-fired electricity generators in which the EPA agreed to reconsider provisions of the CCR rules. Ameren and Ameren Missouris AROs associated with CCR storage facilities reflect the regulations issued in 2015. Ameren plans to close these OCR storage facilities between 2018 and 2024. Ameren Missouris capital expenditure plan includes the cost of constructing landfills as part of its environmental compliance plan.
Remediation The Ameren Companies are involved in a number of remediation actions to clean up sites impacted by the use or disposal of materials containing hazardous substances. Federal and state laws can require responsible parties to fund remediation regardless of their degree of fault, the legality of original disposal, or the ownership of a disposal site. Ameren Missouri and Ameren Illinois have each been identified by federal or state governments as a potentially responsible party at several contaminated sites.
As of September 30, 2017, Ameren Illinois owned or was otherwise responsible for 44 former MOP sites in Illinois, which are in various stages of investigation, evaluation, remediation, and closure. Ameren Illinois estimates it could substantially conclude remediation efforts by 31
2023. The ICC allows Ameren Illinois to recover remediation and litigation costs associated with its former MGP sites from its electric and natural gas utility customers through environmental adjustment rate riders. Costs are subject to annual review by the ICC, As of September 30, 2017, Ameren Illinois estimated the obligation related to these former MGP sites at $184 million to $255 million. Ameren and Ameren Illinois recorded a liability of $184 million to represent the estimated minimum obligation for these sites, as no other amount within the range was a better estimate, The scope of the remediation activities at these former MGP sites may increase as remediation efforts continue. Considerable uncertainty remains in these estimates because many site-specific factors can influence the ultimate actual costs, including unanticipated underground structures, the degree to which groundwater is encountered, regulatory changes, local ordinances, and site accessibility. The actual costs and timing of completion may vary substantially from these estimates.
Ameren Missouri participated in the investigation of various sites known as Sauget Area 2, located in Sauget, Illinois. In 2000, the EPA notified Ameren Missouri and numerous other companies that former landSIls and lagoons at those sites may contain soil and groundwater contamination. From about 1926 until 1976, Ameren Missouri operated an energy center adjacent to Sauget Area 2. Ameren Missouri currently owns a parcel of property at Sauget Area 2 that was once used by others as a landfill.
In 2013, the EPAissued its record of decision forSaugetArea 2, approving the investigation and the remediation actions recommended by the potentially responsible parties. Further negotiation among the potentially responsible parties will determine how to fund the implementation of the EPA-approved remedies, As of September 30, 2017, Ameren Missouri estimated its obligation related to Sauget Area 2 at $1 million to $2.5 million. Ameren Missouri recorded a liability of $1 million to represent its estimated minimum obligation for this site, as no other amount within the range was a better estimate.
Our operations or those of our predecessor companies involve the use of, disposal of, and, in appropriate circumstances, the cleanup of substances regulated under environmental laws. We are unable to determine whether such practices will result in future environmental commitments or will affect our results of operations, financial position, or liquidity.
Ameren Missouri Municipal Taxes The cities of Creve Coeur and Winchester, Missouri, on behalf of themselves and other municipalities in Ameren Missouris service area, filed a class action lawsuit in 2011 against Ameren Missouri in the Circuit Court of St. Louis County, Missouri. The lawsuit alleges thatAmeren Missouri failed to pay gross receipts taxes or license fees on certain revenues, including revenues from wholesale power and interchange sales. In the third quarter of 2017, the court issued an order preliminarily approving a settlement between Ameren Missouri and the plaintiffs, with final resolution of the case expected in the first quarter of 2018. Ameren and Ameren Missouri recorded immaterial liabilities on their respective balance sheets as of September 30, 2017, and December 31, 2016, representing their estimate of the probable loss due as a result of this lawsuit. Ameren and Ameren Missouri believe there is a remote possibility that a liability relating to this lawsuit could be material to Amerens and Ameren Missouris results of operations, financial position, and liquidity.
NOTE 10- CALLAWAY ENERGY CENTER Spent Nuclear Fuel Under the NWPA, the DOE is responsible for disposing of spent nuclear fuel from the Callaway energy center and other commercial nuclear energy centers. The NWPA established the fee that Ameren Missouri and other utilities that own and operate those energy centers pay the federal government for disposing of the spent nuclear fuel at one mill, or one-tenth of one cent, for each kilowatthour generated and sold by those plants. The NWPA also requires the DOE to review the nuclear waste fee annually against the cost of the nuclear waste disposal program and to propose to the United States Congress any fee adjustment necessary to offset the costs of the program. As required by the NWPA, Ameren Missouri and other utilities have entered into standard contracts with the DOE. Consistent with the NWPA and its standard contract, which stated that the DOE would begin to dispose of spent nuclear fuel by 1998, Ameren Missouri had historically collected one mill from its electric customers for each kilowallhour of electricity that it generated and sold from its Callaway energy center.
Because the federal government is not meeting its disposal obligation, the collection of this fee was suspended in May 2014. The DOEs delay in carrying out its obligation to dispose of spent nuclear fuel from the Callaway energy center is not expected to adversely affect the continued operations of the energy center.
As a result of the DOEs failure to fulfill its contractual obligations, Ameren Missouri and other nuclear energy center owners sued the DOE to recover costs incurred for ongoing storage of their spent fuel. The lawsuit resulted in a settlement agreement that provides for annual reimbursement of additional spent fuel storage and related costs. Ameren Missouri received reimbursements from the DOE of $3 million and
$24 million in October 2017 and September 2016, respectively. Ameren Missouri will continue to apply for reimbursement from the DOE for allowable costs associated with the ongoing storage of spent fuel.
32
Decommissioning Electric utility rates charged to customers provide for the recovery of the Callaway energy centers decommissioning costs, which include decontamination, dismantling, and site restoration costs, over the expected life of the nuclear energy center. Amounts collected from customers are deposited into the external nuclear decommissioning trust fund to provide for the Callaway energy centers decommissioning.
It is assumed that the Callaway energy center site will be decommissioned through the immediate dismantlement method and removed from service. Ameren and Ameren Missouri have recorded an ARC for the Callaway energy center decommissioning costs at fair value, which represents the present value of estimated future cash outflows. Annual decommissioning costs of $7 million are included in the costs used to establish electric rates for Ameren Missouris customers. Every three years, the MoPSC requires Ameren Missouri to file an updated cost study and funding analysis for decommissioning its Callaway energy center. An updated cost study and funding analysis was filed with the MoPSC in September 2017 and reflected within the ARC. Ameren Missouris filing supported no change in electric service rates for decommissioning costs, There is no deadline by which the MoP$C must issue an order regarding the filing.
The fair value of the trust fund for Ameren Missouris Callaway energy center is reported as Nuclear decommissioning trust fund in Amerens and Ameren Missouris balance sheets. This amount is legally restricted and may be used only to fund the costs of nuclear decommissioning. Changes in the fair value of the trust fund are recorded as an increase or decrease to the nuclear decommissioning trust fund, with an offsetting adjustment to the related regulatory liability. If the assumed return on trust assets is not earned, Ameren Missouri believes that it is probable that any such earnings deficiency will be recovered in rates.
Supplier of Fuel Assemblies Ameren Missouri received all necessary fuel assemblies for the fourth quarter 2017 refueling and maintenance outage. The Callaway energy center uses nuclear fuel assemblies fabricated by Westinghouse, which is the only NRC-licensed supplier authorized to provide fuel assemblies to the Callaway energy center, During the first quarter of 2017, Westinghouse filed voluntary petitions for a court-supervised restructuring process under Chapter 11 of the United States Bankruptcy Code. Westinghouse could petition the bankruptcy court to reject Ameren Missouris contracts as part of the restructuring process, and if the bankruptcy court agrees, this could result in Ameren Missouri not having access to the fuel assemblies necessary to refuel the Callaway energy center in future scheduled refueling and maintenance outages.
At this time. Ameren and Ameren Missouri believe the restructuring proceeding will not affect Westinghouses performance under the terms of its existing contracts with Ameren Missouri, and therefore do not expect any material impact to Ameren Missouris operations as a result of this restructuring proceeding. However, Ameren and Ameren Missouri could incur material unexpected costs as a result of the Westinghouse bankruptcy, such as the loss of fuel inventory that is stored at Westinghouses facility and the cost of replacement power if nuclear fuel assemblies were not available for a future scheduled refueling and maintenance outage. A change of fuel suppliers or a change in the type of fuel assembly design that is currently licensed for use at the Callaway energy center could take an estimated three years of analysis and NRC licensing efforts to implement.
Insurance The following table presents insurance coverage at Ameren Missouris Callaway energy center at September 30, 2017, The property coverage and the nuclear liability coverage renewal dates are April 1 and January 1, respectively, of each year. Both coverages were renewed in 2017.
Maximum Assessments Type and Source of Coverage Maximum Coverages for Single Incidents Public liability and nuclear worker liability:
American Nuclear Insurers 450
Pool participaflon 12,986 (aJ 127 S
13436 t 127 Property damage:
NEIL and EMANI 3,200 29 (
Replacement power:
NEIL 490
(
7 (a)
Provided through mandatory participation in an industrywide retrospective premium assessment program.
(bI Retrospective premium under the Price-Anderson Act. This is subject to retrospective assessment with respect to a covered loss in excess of $450 million in the event of an incident at any licensed United States commercial reactor, payable at Si 9 million per year.
(c)
Limit of liability for each incident under the Price-Anderson liability provisions of theAtomic Energy Act of 1954, as amended. This limit is subieci to change to account for the effects of inflation and changes in The number of licensed reactors.
(dl NEIL provides $2.7 billion in property damage, stabilization, decontamination, and premature decommissioning insurance for radiation events and $2.3 billion in property damage insurance for nonradiation events. EMANI provides $490 million in property damage insurance for both radiation and nonradiation events.
)e)
All NEIL insured plants could be subiect to assessments should losses exceed the accumulated funds from NEIL (f)
Provides replacement power cost insurance in the event of a prolonged accidental outage. Weekly indemnity up 1054.5 million for 52 weeks, which commences after the first twelve weeks of an outage, plus up to $3.6 million per week for a minimum of 71 weeks thereafter for a total not exceeding the policy limit of $490 million.
Nonradiation events are limited to $328 million.
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The Price-Anderson Act is a federal law that limits the liability for claims from an incident involving any licensed United States commercial nuclear energy center. The limit is based on the number of licensed reactors. The limit of liability and the maximum potential annual payments are adjusted at least every five years for inflation to reflect changes in the Consumer Price Index. The most recent five-year inflationary adjustment became effective in September 2013. Owners of a nuclear reactor covet this exposure through a combination of private insurance and mandatory participation in a financial protection pool, as established by the Price-Anderson Act.
Losses resulting from terrorist attacks on nuclear facilities are subject to industrywide aggregates, such that terrorist acts against one or more commercial nuclear power plants insured by NEIL or EMANI within a stated time period would be treated as a single event, and the owners of the nuclear power plants would share one full limit of liability. NEIL policies have an aggregate limit of $3.2 billion within a 12-month period for radiation events, or $1.8 billion for events not involving radiation contamination. The EMANI policies have an aggregate limit of 600 million for radiation and nonradiation events within a period of 72 hours8.333333e-4 days <br />0.02 hours <br />1.190476e-4 weeks <br />2.7396e-5 months <br />.
If losses from a nuclear incident at the Callaway energy center exceed the limits of, or are not covered by insurance, or if coverage is unavailable, Ameren Missouri is at risk for any uninsured losses. If a serious nuclear incident were to occur, it could have a material adverse effect on Amerens and Ameren Missouris results of operations, financial position, or liquidity.
NOTE 11 RETIREMENT BENEFITS The following table presents the components of the net periodic benefit cost (benefit), prior to capitalization, incurred for Amerens pension and postretirement benefit plans for the three and nine months ended September 30, 2017 and 2016:
Pension Benefits Postretirement Benefits Three Months Nine Months Three Months Nine Months 2017 2016 2017 2016 2017 2016 2017 2016 Service cost 24 20 70 60 6
5 16 15 Interest cost 44 46 134 138 12 12 35 35 Expected return on plan assets (65)
(63)
(196)
(189)
(19)
(18)
(561 (54)
Amortization of:
Prior seruice benefit 11)
Ii)
12)
(11 (4)
(3)
Actuarial loss (gain) 14 8
41 24 (21 t3) 15)
(8)
Net periodic benefit cost (benefit) 16 11 48 S
33 (5)
S (5)
(14)
(14)
Ameren Missouri and Ameren Illinois are responsible for their respective shares of Amerens pension and postretirement costs. The following table presents the pension costs and the postretirement benefit costs (benefit) incurred for the three and nine months ended September 30, 2017 and 2016:
Pension Benefits Postretirement Benefits Three Months Nine Months Three Months Nine Months 2017 2016 2017 2016 2017 2016 2017 2016 An,eren Missouri) 5 6
6 18 19 (1)
(1)
(3)
(31 Ameren Illinois 10 6
30 1?
13)
(3) 110) 110)
Other
(1)
(31 (1)
Ii)
(1)
(1)
Amerenb S
16 S
11 48 S
33 (5)
(51 5
(14) 5 (14)
(a)
Does not include the impact of the regulatory tracking mechanism for the difference between the level of pension and postretirement benefit costs incurred by Ameren Missouri under GAAP and the level of such costs included in rates.
IbI Includes amounts for Ameren registrants and nonregistrant subsidiaries.
NOTE 12 SEGMENT INFORMATION Ameren has four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. The Ameren Missouri segment includes all of the operations ofAmeren Missouri. Ameren Illinois Electric Distribution consists of the electric distribution business ofAmeren Illinois. Ameren Illinois Natural Gas consists of the natural gas business ofAmeren Illinois.
Ameren Transmission is primarily composed of the aggregated electric transmission businesses of Ameren Illinois and ATXI. The category called Other primarily includes Ameren parent company acvities and Ameren Services.
Ameren Missouri has one segment. Ameren Illinois has three segments: Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Illinois Transmission. See Note 1 Summary of Significant Accounting Policies for additional information regarding the operations ofAmeren Missouri, Ameren Illinois, and ATXI.
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Segment operating revenues and a majority of operating expenses are directly recognized and incurred by Ameren Illinois to each Ameren Illinois segment. Common operating expenses, miscellaneous income and expenses, interest charges, and income tax expense are allocated by Ameren Illinois to each Ameren Illinois segment based on certain factors, which primarily relate to the nature of the cost.
Additionally, Ameren Illinois Transmission earns revenue from transmission service provided to Ameren Illinois Electric Distbution. The transmission expense for Illinois customers who have elected to purchase their power from Ameren Illinois is recovered through a cost recovery mechanism with no net effect on Ameren Illinois Electric Distribution earnings, as costs are offset by corresponding revenues.
Transmission revenues from these transactions are reflected atAmeren Transmission and Ameren Illinois Transmission. An intersegment elimination at Ameren and Ameren Illinois occurs to eliminate these transmission revenues and expenses.
The following tables present revenues, net income attributable to common shareholders, and capital expenditures by segment at Ameren and Ameren Illinois for the three and nine months ended September 30, 2017 and 2016. Ameren, Ameren Missouri, and Ameren Illinois management review segment capital expenditure information rather than any individual or total asset amount.
Ameren Ameren Ameren Illinois Illinois Ameren Electric Natural Ameren Intersegment Three Months Missouri Distribution Gas Transmission Other Eliminations Consolidated 2017 External revenues 1.104 405 111 105 (2)
1,723 tntersegment revenues 11
1 14 I
(261
Net income attributable to Ameren common shareholders 234 31 2
38 ibi 117)
288 Capital expenditures 178 112 71 173 (2)
(7) 525 2016 Externairevenues 1,150 502 113 94
1,859 Inlersegment revenues 15 1
1 14
(31)
Net income attributable to Ameren common shareholders 241 93 2
39 ui (6)
369 Capital expenditures 147 123 50 175 1
496 Nine Months 2017 External revenues 2,799 1,176 509 293 (2)
4,775 Intersegment revenues 41 3
I 33
(78)
Net income attributable to Arneren common shareholders 359 94 40 106 (N
(16)
583 Capital expenditures 533 354 180 463 3
110) 1,523 2016 External revenues 2,733 1,210 529 247 1
S
4,720 Intersegment revenues 40 3
1 36 al
(80)
Net income attributable to Ameren common shareholders 347 122 44 98 51 10
621 Capital expenditures 500 359 130 503 4
1496 (a)
Ameren Transmission earns revenue from transmission service provided toAmeren Illinois Electric Distribution. See discussion of transactions above.
(b(
Ameren Transmission earnings include an allocabon of financing costs from Ameren (parent) 35
Ameren Illinois Ameren Illinois Ameren Ameren Electric Illinois Illinois Intersegment Three Months Distribution Natural Gas Transmission Eliminations Consolidated 2017 External revenues 405 112 58
575 Intersegment revenues
14
()
(14)
Net income available to common shareholder 31 2
22
55 Capital expenditures 112 71 93
276 2016 External revenues 5
503 114 59
676 Intersegment revenues
14 (14)
Net income available to common shareholder 93 2
24
119 Capital expenditures 123 50 68
241 Nine Months 2017 External revenues 1,179 510 165
1,854 Interseament revenues
32 l)
(32)
Net income available to common shareholder 94 40 57
191 Capital expenditures 354 180 226
760 2016 External revenues 1213 530 152
S 1895 Intersegment revenues
35 )
(35)
Net income available to common shareholder 122 44 57
223 Capital expenditures 359 130 194
683 (a)
Ameren Illinois Transmission earns revenue from transmission service provided to Ameren Illinois Electric Distribution. Sea discussion of transactions above.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, The following discussion should be read in conjunction with the financial statements contained in this Form 10-Q, as well as Managements Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors contained in the Form 10-K, We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of our business segments to provide a better understanding of how those segments and their results affect the financial condition and results of operations of Ameren as a whole. Also see the Glossary of Terms and Abbreviations at the front of this report and in the Form 10-K.
Ameren, headquartered in St. Louis, Missouri, is a public utility holding company whose primary assets are its equity interests in its subsidiaries. Amerens subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. Dividends on Amerens common stock and the payment of expenses by Ameren depend on distributions made to it by its subsidiaries. Amerens principal subsidiaries, Ameren Missouri, Ameren Illinois, and ATXI, are described below. Ameren also has other subsidiaries that conduct other activities, such as the provision of shared services. Ameren evaluates competitive electric transmission investment opportunities outside of MISO as they arise.
Union Electric Company, doing business as Ameren Missouri, operates a tate-regulated electric generation, transmission, and distribution business and a rate-regulated natural gas distribution business in Missouri.
Ameren Illinois Company, doing business as Ameren Illinois, operates rate-regulated electric transmission, electric distribution, and natural gas distribution businesses in Illinois.
AIXI operates a FERC rate-regulated electric transmission business. ATXI is developing MISO-approved electric transmission projects, including the Illinois Rivers, Spoon River, and Mark Twain projects.
Amerens financial statements are prepared on a consolidated basis and therefore include the accounts of its majority-owned subsidiaries. All intercompany transactions have been eliminated. Ameren Missouri and Ameren Illinois have no subsidiaries, All tabular dollar amounts are in millions, unless otherwise indicated.
In addition to presenting results of operations and earnings amounts in total, we present certain information in cents per diluted share.
These amounts reflect factors that directly affect Amerens earnings. We believe this per diluted share information helps readers to understand the impact of these factors on Amerens earnings per share.
OVERVIEW Net income attributable to Ameren common shareholders was $288 million in the three months ended September 30, 2017, compared with $369 million in the year-ago period. Net income attributable to Ameren common shareholders was $583 million in nine months ended September 30, 2017, compared with $621 million in the year-ago period. Net income was unfavorably affected in the three and nine months ended September 30, 2017, compared to the year-ago periods, by milder temperatures in 2017 and decreased Ameren Illinois Electric Distribution earnings due to a change in the method used to recognize interim period revenue related to Ameren Illinois Electric Distributions revenue requirement reconciliation in connection with the decoupling provisions of the FEJA. Earnings were also unfavorably affected in the three and nine months ended September 30, 2017, compared to the year-ago periods, by the absence of the recognition in 2016 of a MEEIA 2013 performance incentive award atAmeren Missouri. Net income in the three and nine months ended September 30, 2017, compared to the year-ago periods, was favorably affected by an increase in base rates and tower base level of tracked expense at Ameren Missouri pursuant to the MoPSCs March 2017 electric rate order and increased investments in infrastructure at the Ameren Illinois Electric Distribution and Ameren Transmission segments reflecting Amerens strategy to allocate incremental capital to those businesses.
Amerens strategic plan includes investing in, and operating its utilities in, a manner consistent with existing regulatory frameworks, enhancing those frameworks, and advocating for responsible energy and economic policies, as well as creating and capitalizing on opportunities for investment for the benefit of its customers and shareholders. Ameren remains focused on disciplined cost management and strategic capital allocation. In the first nine months of 2017, Ameren continued to allocate significant amounts of capital to those businesses that are supported by constructive regulatory frameworks, investing $1 billion of capital expenditures in its FERC rate-regulated electric transmission and Illinois electric and natural gas distribution businesses.
In March 2017, the MoPSC issued an order approving a unanimous stipulation and agreement in Ameren Missouris July 2016 regulatory rate review. The electric rate order resulted in a $92 million increase in Ameren Missouris revenue requirement, a $54 million decrease in the base level of net energy costs, and a 526 million reduction in the base level of certain tracked expenses, compared to the amounts in the MoPSCs April 2015 rate order. The new rates and base level of expenses became effective on April 1, 2017. In September 2017, Ameren Missouri filed its non-binding 20-year integrated resource plan with the M0PSC, which includes Ameren Missouris preferred plan for meeting customers projected long-term energy needs in a cost-effective fashion that maintains system reliability as it targets cleaner and more diverse sources of energy generation. These new renewable energy sources would also support Ameren Missouris compliance 37
with the state of Missouris requirement of achieving 15% of native load sales from renewable energy sources by 2021 subject to customer rate increase limitations. Ameren Missouris plan contemplates adding at least 700 megawatts of wind generation by 2020, as well as 100 megawatts of solar generation over the next 10 years, with 50 megawatts anticipated to come online by 2025. The new wind generation is expected to be located in Missouri and neighboring states. The source, location, and cost of the new wind generation, among other items, remain subject to reaching agreements with developers. Based on current and projected market prices for energy, and for wind and solar generation technologies, among other factors, Ameren Missouri expects its ownership of these renewable resources would represent the lowest-cost alternative for customers. The plan also includes expected implementation of continued customer energy efficiency programs.
Ameren Missouris plan for the addition of renewable resources could be impacted by, among other factors: the availability of federal production tax credits related to renewable energy and its ability to use such credits; the cost of wind and solar generation technologies, as well as energy prices; Ameren Missouris ability to obtain interconnection agreements with MISO or other RIOs, including the cost of such interconnections; and Ameren Missouris ability to obtain a certificate of convenience and necessity from the MoPSC for projects located in Missouri, or any other required project approvals. The wind generation identified in Ameren Missouris plan could represent incremental investments of approximately $1 billion. In connection with the integrated resource plan filing, Ameren Missouri established a goal of reducing C02 emissions 80% by 2050 from a 2005 base level. To meet this goal, Ameren Missouri is targeting a 35% CO2 emission redLiction by 2030 and a 50% reduction by 2040 from the 2005 level by retiring coal-fired generation at the end of its useful life.
Ameren Illinois invested approximately $535 million in electric distribution and natural gas infrastructure projects in the first nine months of 2017. In April 2017, Ameren Illinois filed with the ICC its annual electric distribution service formula rate update to establish the revenue requirement used for 2018 rates. In June 2017, the ICC staff submitted its calculation of the revenue requirement, which Ameren Illinois supported in its revised July 2017 filing, and recommended a decrease to the electric distribution service revenue requirement. Pending ICC approval, this update filing will result in a $17 million decrease in Ameren Illinois electric distribution service revenue requirement beginning in January 2018. This update reflects an increase to the annual formula rate based on 2016 actual costs and expected net plant additions for 2017, as well as an increase to include the 2016 revenue requirement reconciliation adjustment. The increases in the update filing are more than offset by a decrease for the conclusion of the 2015 revenue requirement reconciliation adjustment, which will be fully collected from customers in 2017. An ICC decision on the revenue requirement to be used for 2018 rates is expected by December 2017.
In the first nine months of 2017, Ameren Transmission invested approximately $460 million in FERC rate-regulated electric transmission projects, including the Illinois Rivers project, the Spoon River project, and Ameren Illinois transmission projects to maintain and improve reliability. ATXIs construction activities for its Illinois Rivers and Spoon River projects are continuing on schedule and are expected to be completed by 2019 and 2018, respectively. Related to its Mark Twain project, in the third quarter of 2017, ATXI finalized an alternative project route and reached agreements with a cooperative electric company in northeast Missouri and Ameren Missouri to locate nearly all of the project on existing transmission line corridors, It also received assents for road crossings from the five affected counties in northeast Missouri. ATXI filed for a certificate of convenience and necessity with the MoPSC and anticipates a decision from the MoPSC in the first half of 2018. ATXI plans to complete the project in December2019; however, delays in obtaining approval from the MoPSC could delay completion.
In June 2017, pursuant to a note purchase agreement. ATXI agreed to issue $450 million principal amount of 3.43% senior unsecured notes, due 2050, through a private placement offering. ATXI issued $150 million principal amount of the notes in June 2017 and the remaining $300 million principal amount of the notes in August 2017. AIXI received proceeds of $449 million from the notes which were used by ATXI to repay existing short-term and long-term affiliate debt owed to Ameren (parent).
RESULTS OF OPERATIONS Our results of operations and financial position are affected by many factors. Economic conditions, energy efficiency investments by our customers and us, and the actions of key customers can significantly affect the demand for our services. Ameren and Ameren Missouri results are also affected by seasonal fluctuations in winter heating and summer cooling demands as well as by nuclear refueling and other energy center maintenance outages. Additionally, fluctuations in interest rates and conditions in the capital and credit markets affect our cost of borrowing and our pension and postretirement benefits costs. Almost all of Amerens revenues are subject to state or federal regulation.
This regulation has a material impact on the prices we charge for our services. Our results of operations, financial position, and liquidity are affected by our ability to align our overall spending, both operating and capital, with regulatory frameworks established by our regulators.
Ameren Missouri principally uses coal, nuclear fuel, and natural gas for fuel in its electric operations and purchases natural gas for its customers. Ameren Illinois purchases power and natural gas for its customers. The prices for these commodities can fluctuate significantly because of the global economic and political environment, weather, supply, demand, and many other factors. As described below, we have natural gas cost recovery mechanisms for our Illinois and Missouri natural gas distribution service businesses, a purchased power cost recovery mechanism for Ameren Illinois electric distribution service business, and a FAC for Ameren Missouris electric utility business.
Ameren Missouris FAC cost recovery mechanism allows it to recover or refund, through customer rates, 95% of changes in net energy costs greater or less than the amount set in base rates without a traditional rate proceeding, subject to MoPSC prudence reviews, with the 38
remaining 5% of changes retained by Ameren Missouri. Net energy costs, as defined in the FAC, include fuel and purchased power costs net of off-system sales. Ameren Missouri accrues net energy costs that exceed the amount set in base rates (FAC under-recovery) as a regulatory asset. Net recovery of these costs through customer rates does not affect Ameren Missouris electric margins, as any change in revenue is offset by a corresponding change in fuel expense to reduce the previously recognized FAC regulatory asset. See the definition of margin in the Electric and Natural Gas Margins section below. In addition, Ameren Missouris MEEIA customer energy efficiency program costs, throughput disincentive, and any performance incentive are recoverable through the MEEIA cost recovery mechanism without a traditional rate proceeding. Ameren Missouri also has a cost recovery mechanism for natural gas purchased on behalf of its customers.
These pass-through purchased gas costs do not affect Ameren Missouris natural gas margins as any change in costs is offset by a corresponding change in revenues. Ameren Missouri employs other cost recovery mechanisms, including a pension and postretirement benefit cost tracker, an uncertain tax position tracker, a renewable energy standards cost tracker, and a solar rebate program tracker. Each of these trackers allows Ameren Missouri to record the difference between the level of incurred costs under GAAP and the level of such costs included in rates as a regulatory asset or regulatory liability, which will be reflected in base rates in a subsequent MoPSC rate order.
Ameren Illinois electric distribution service business has cost recovery mechanisms for power purchased and transmission services incurred on behalf of its customers. The FEJA also provides Ameren Illinois electric distribution with cost recovery of renewable energy credit compliance, zero-emission credits, and energy efficiency investments as well as a return on those investments. Ameren Illinois natural gas business has a cost recovery mechanism for natural gas purchased on behalf of its customers. These pass-through costs do not affect Ameren Illinois electric or natural gas margins, as any change in costs is offset by a corresponding change in revenues. Ameren Illinois employs other cost recovery mechanisms for customer energy efficiency program costs and certain environmental costs as well as bad debt expense and costs of certain asbestos-related claims not recovered in base rates. Ameren Illinois natural gas business also has the QIP rider to recover the costs of qualifying infrastructure plant investments placed in service between rate cases and earn a return those investments.
Ameren Illinois electric distribution service rates are subject to an annual revenue requirement reconciliation to its actual recoverable costs and allowed return on equity under a formula ratemaking process effective through 2022. These recoverable electric distribution costs include other operations and maintenance expenses, depreciation and amortization, taxes other than income taxes, interest charges, and income taxes. These recoverable costs do not include those costs recovered through separate cost recovery mechanisms. A portion of the electric distribution costs included in those income statement line items are not recoverable. If a given years revenue requirement is greater than the revenue requirement reflected in that years customer rates, an increase to electric operating revenues with an offset to a regulatory asset is recorded to reflect the expected recovery of those additional amounts from customers within two years. If a given years revenue requirement is less than the revenue requirement reflected in that years customer rates, a reduction to electric operating revenues with an offset to a regulatory liability is recorded to reflect the expected refund to customers within two years.
Ameren Illinois electric distribution service revenue requirement is based on recoverable costs, year-end rate base, a capital structure of 50% common equity, and a return on equity. The return on equity is equal to the average of the monthly yields of 30-year United States Treasury bonds plus 580 basis points. Therefore, Ameren Illinois annual return on equity for its electric distribution business is directly correlated to yields on United States Treasury bonds. Beginning in 2017, the FEJA also provides that Ameren Illinois recovers, within the following two years, its electric distribution revenue requirement for a given year, independent of actual sales volumes.
The provisions of FERCs electric transmission formula rate framework provide for an annual reconciliation of the electric transmission service revenue requirement, which reflects the actual recoverable costs incurred and the 13-month average rate base for a given year, with the revenue requirement in customer rates, including an allowed return on equity. These recoverable transmission costs are included in other operations and maintenance expenses, depreciation and amortization, taxes other than income taxes, interest charges, and income taxes. A portion of the transmission costs included in those income statement line items are not recoverable. Ameren Illinois and ATXI use a company specific, forward-looking rate formula framework in setting their transmission rates. These rates are updated each January with forecasted information. If a given years revenue requirement is greater than the revenue requirement reflected in that years customer rates, an increase to electric operating revenues with an offset to a regulatory asset is recorded to reflect the expected recovery of those additional amounts from customers within two years. If a given years revenue requirement is less than the revenue requirement reflected in that years customer rates, a reduction to electric operating revenues with an offset to a regulatory liability is recorded to reflect the expected refund to customers within two years. The total return on equity currently allowed for Ameren Illinois and AIXIs electric transmission service businesses is 10.82% and is subject to a FERC complaint case. See Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report for additional information.
We employ various risk management strategies to reduce our exposure to commodity risk and other risks inherent in our business. The reliability of Ameren Missouris energy centers and our transmission and distribution systems and the level and timing of operations and maintenance costs and capital investment are key factors that we seek to manage in order to optimize our results of operations, financial position, and liquidity.
39
Earnings Summary The following table presents a summary ofAmerens earnings for the three and nine months ended September 30, 2017 and 2016:
Three Months Nine Months 2017 2016 2017 2016 Net income attributable to Arneren common shareholders 288 369 583 S
621 Earnings per common share diluted 1.18 1.52 2.39 2.56 Net income attributable toAmeren common shareholders decreased $81 million, or34 cents per diluted share, in the three months ended September 30, 2017, compared with the year-ago period. The decrease was principally due to net income decreases of $62 million and $7 million atAmeren Illinois Electric Distribution and Ameren Missouri, respectively, and an increase in net loss of $11 million for activity not reported as part of a segment, primarily at Ameren (patent).
Net income attributable toAmeren common shareholders decreased $38 million, or 17 cents per diluted share, in the nine months ended September 30, 2017, compared with the year-ago period. The decrease was due to net income decreases of $28 million and $4 million at Ameren Illinois Electric Distribution and Ameren Illinois Natural Gas, respectively. Additionally, activity not reported as part of a segment, primarily Ameren (parent), had a $16 million net loss in the first nine months of 2017, compared with net income of $10 million in the same period in 2016. The decrease was partially offset by an increase in net income of $12 million and $8 million atAmeren Missouri and Ameren Transmission, respectively.
Earnings per diluted share were unfavorably affected in the three and nine months ended September 30, 2017, compared to the year-ago periods (except where a specific period is referenced), by:
decreased demand primarily atAmeren Missouri due to milder winter and summer temperatures in 2017 (estimated at 8 cents per share and 16 cents per share, respectively);
a change in the method used to recognize Ameren Illinois Electric Distributions interim period revenue in connection with the decoupling provisions of the FEJA as discussed in Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report (24 cents per share and 12 cents per share, respectively);
an increase in income tax expense due to an increase in the Illinois corporate income tax rate recorded at Ameren (parent) as discussed in Note 1 Summary of Significant Accounting Policies under Part I, Item 1, of this report (6 cents per share for both periods);
the absence in 2017 of the MEEIA 2013 performance incentive atAmeren Missouri recognized in the third quarter of 2016(5 cents per share for both periods);
increased depreciation and amortization expenses, primarily at Ameren Missouri, resulting from additional electric property. plant, and equipment (2 cents per share and 5 cents per share, respectively);
an increase in the effective tax rate. excluding the effect of the increase in the Illinois corporate income tax rate discussed above, primarily due to a decrease in the income tax benefit recorded at Ameren (parent) related to share-based compensation (4 cents per share for the nine months ended September 30, 2017);
the absence of increased Ameren Missouri electric margins in 2016 resulting from the suspension of operations at the New Madrid Smelter in the first quarter of 2016 and the elimination of recovery under the FAC tariff effective April 1, 2017, which had allowed Ameren Missouri to retain a portion of the revenues from off-system sales it made as a result of reduced sales to the New Madrid Smelter as discussed in the Electric and Natural Gas Margins section below (1 cent per share and 2 cents per share, respectively); and increased other operations and maintenance expenses not subject to riders or regulatory tracking mechanisms at Ameren Missouri, primarily due to increased repairs and compliance expenditures (2 cents per share for the nine months ended September 30, 2017).
Eamings per diluted share were favorably affected in the three and nine months ended September 30, 2017, compared to the year-ago periods (except where a specific period is referenced), by:
an increase in base rates and lower base level of expenses at Ameren Missouri pursuant to the MoPSCs March 2017 electric rate order as discussed in Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report (15 cents per share and 26 cents per share, respectively);
the absence in 2017 of costs associated with the Callaway energy centers scheduled refueling and maintenance outage in the second quarter of 2016, partially offset by costs incurred to prepare for the scheduled outage that began in October 2017 (7 cents per share for the nine months ended September 30, 2017);
increased Ameren Transmission earnings under formula ratemaking, primarily due to additional rate base partially offset by a lower recognized return on equity (1 cent per share and 5 cents per share, respectively); and increased Ameren Illinois Electric Distribution earnings under formula ratemaking, primarily due to additional rate base investment as well as a higher recognized return on equity (2 cents per share and 4 cents per share, respectively).
40
The cents per share information presented is based on the average diluted shares outstanding in the three and nine months ended September 30, 2016. Amounts have been presented net of income taxes using Amerens 2016 statutory tax rate of 39%. For additional details regarding the Ameren Companies results of operations, including explanations of Electric and Natural Gas Margins, Other Operations and Maintenance Expenses, Depreciation and Amortization, Taxes Other Than Income Taxes, Other Income and Expenses, Interest Charges, and Income Taxes, see the major headings below.
41
Below is Amerens table of income statement components by segment for the three and nine months ended September 30, 2017 and 2016:
Ameren Illinois Ameren Other Ameren Electric Illinois Ameren Intersegment Missouri Distribution Natural Gas Transmission Eliminations Total Three Months 2017:
Electric margins 857 267
119 1101 1233 Natural gas margins 13
91
104 Other operations and maintenance 12241 (118)
(52)
(16) 8 (4021 Depreciaton and amortization (134)
(60)
(151 (15)
(1)
(225)
Taxesotherthanincometaxes (95)
(20)
(12)
(1)
(1)
(129)
Other income (expense) 11 1
(1) 11 Interest charges (501 (19)
(8)
(18)
(2)
(97)
Income taxes (143)
(20)
(2)
(31)
(9)
(205)
Net income (loss) 235 31 2
38 (16) 290 Noncontrolling interests preferred stock dividends (1)
(1)
(2)
Net income (loss) attributable to Ameren common shareholders 234 31 2
38 (17) 288 Three Months 2016:
Eleclric margins 862 S
379
108 (7) 1342 Natural gas margins 14
86
100 Other revenues 1
(1)
Otheroperations and maintenance (220)
(132)
(52)
(17) 10 (411)
Depreciation and amortization (130)
(57)
(13)
(10)
(1)
(211)
Taxesotherthanincometaxes (96)
(20)
(10)
(1)
(2) 129)
Other income )expense(
12 2
(1)
(3(
Interest charges (53)
(17)
(8)
(17)
(2)
(97)
Income (taxes) benefit (148)
(62)
(24) 1 (233)
Net income (loss) 242 93 2
39 (5) 371 Noncontrolling interestspreferred stock dividends (1)
(1)
(2)
Net income (loss) attributable to Ameren common shareholders 241 93 2
39 (6) 5 369 Nine Months 2017:
Electric margins 1,962 834
326 (24) 3098 Natural gas margins 54
343
(1) 396 Otherrevenues
1
(1)
Other operations and maintenance (655)
(391)
(159)
(47) 23 (1,229)
Depreciation and amortization (399)
(178)
(44)
(44)
(3)
(668)
Taxes other than income taxes (255)
(56)
(43)
(4)
(6)
(364)
Other income (expense) 30 1
(2)
(3) 26 Interest charges (157)
(55)
(27)
(49)
(7)
(2951 Income (taxes) benefit (218)
(61)
(27)
(76) 6 (376)
Net income (loss) 362 95 41 106 (16) 588 Noncontrolling interests preferred dividends (3)
(1)
(1)
(5)
Net income (loss) attributable to Ameren common shareholders 359 94 40 106 (16) 583 Nine Months 2016:
Electric margins 1939 874
283 (20) 3076 Natural gas margins 57
336
(1) 392 Otherrevenues 1
(1)
Other operations and maintenance (670)
(399)
(153)
(47) 23 (1,246)
Depreciation and amortization (364)
(169(
(40)
(30)
(5)
(628)
Taxes other than income taxes (252)
(54)
(42)
(3)
(7)
(358)
Other income (expense) 32 5
(2) 1 (3) 33 Interest charges (158)
(54)
)26)
(43)
(6)
(287)
Income (taxes) benefit (215)
(80)
(28)
(63) 30 (356)
Net income 350 123 45 98 10 626 Noncontrolling interests preferred dividends (3)
(1)
(1)
(5)
Net Income athibutable to Ameren common shareholders 347 122 44 98 10 621 42
Below is Ameren Illinois table of income statement components by segment fat the three and nine months ended September 30, 2017 and 2016:
Ameren Illinois Ameren Ameran Electric Illinois Illinois Distribution Natural Gas Transmission Total Three Months 2017:
Electric and natural gas margins 267 91 72 430 Other operations and maintenance 11181 (52)
(13)
(183)
Depreciation and amortization (60)
(15)
(11) 186)
Taxes other Than income taxes (20)
(12)
(1)
(33)
Other income I
Interest charges (19)
(8)
(9)
(36)
Income taxes t20)
(2)
(16)
(38)
Net income 31 2
22 55 Preferred stock dividends
Net income attnbutable to common sharehotder 37 2
22 55 Three Months 2016:
Electric and natural gas margins 379 86 73 538 Other operations and maintenance (132)
(52)
(14)
(198)
Depreciation and amortization (57) t13)
(10)
(80)
Taxes other than income taxes (20) tlO)
(30)
Other income (expense) 2 (1)
1 Interest charges (17)
(8)
(10)
(35)
Income taxes (62)
(15)
(77)
Net income 93 2
24 119 Preferred stock dividends
Net income attributable to common shareholder 93 S
2 S
24 119 Nine Months 2017:
Electric and natural gas margins 834 343 197 1,374 Other revenues 1
1 Other operations and maintenance (391)
(159)
(40)
(590)
Depreciation and amortization (778)
(44)
(32)
(254)
Taxes other Ihan income taxes (56)
(43)
(2) 1101)
Other income (expense) 1 (2)
(1)
Interest charges (55) 127)
(27)
(709)
Income taxes (61)
(27)
(39)
(127)
Net income 95 41 57 793 Preferred stock dixidends (1)
(1)
(2)
Net income attributable to common shareholder 94 40 57 197 Nine Months 2016:
Electric and natural gas margins 874 336 S
187 S
1,397 Other operations and maintenance (399)
(153)
(40)
(592)
Depreciation and amortization (169)
(40)
(28)
(237)
Taxes other than income taxes (54)
(42)
(2)
(98)
Other income (expense) 5 (2) 1 4
Interest charges (54)
(26)
(25)
(105)
Income taxes (80)
(28)
(36)
(144)
Net income 123 45 57 225 Preferred stock dividends (1)
(1)
(2)
Netincomeatthbutabletocommonsharehotder 122 44 57 223 43
Electric and Natural Gas Margins The following table presents the favorable (unfavorable) variations by Ameren segment for electric and natural gas margins for the three and nine months ended September 30, 2017, compared with the year-ago periods. Electric margins are defined as electric revenues less fuel and purchased power costs. Natural gas margins are defined as natural gas revenues less natural gas purchased for resale. We consider electric and natural gas margins useful measures to analyze the change in profitability of out electric and natural gas operations between periods. We have included the analysis below as a complement to the financial information we provide in accordance with GMP. However, these margins may not be a presentation defined under GMP, and they may not be comparable to other companies presentations or more useful than the GMP information we provide elsewhere in this report.
44
Ameren Ameren Illinois Illinois Other!
Ameren Electric Natural Ameren Intersegment Three Months Missouri Distribution Gas Transmissioniv Eliminations Ameren Electric revenue change:
Effect of weather (estimate) b S
(33)
S (9)
S
(42)
Base rates (estimate) 29 10
11
50 FEJA impact on IEIMA timing of revenue recognition
(94)
(94)
Recovery of power restoration efforts provided to other utilities 5
1
6 Sales volume (excluding the effect of weather and the New Madrid Smeller) 8
8 New Madrid Smeffer revenues (1)
(1)
MEEIA 20f3 performance incentive (19)
(9)
Off-system sates (38)
(38)
Transmission services revenues 2
2 Other (8)
)4)
2 (10)
Cost recovery mechanisms offeet in fuel and purchased power:id)
Powersapptycosts
(7)
(7)
Renewable energy adluslment
4
4 Zero-emission credits
21
21 Recovery of FAC under-recovery 3
3 Other cost recovery mechanismse Bad debt, energy efficiency progrems, and remediation cost riders
(20)
(20)
MEEIA program costs 6
6 Total electric revenue change S
(46)
(98)
11 S
2 (131)
Fuel and purchased power change:
Energy costs (excluding the effect of weather and the New Madrid Smelter) 37
37 New Madrid Smelter energy costs (6)
(6)
Effect of weather (eslimate)t 7
2
g Effect of tower net energy costs included in base rates 20
20 Transmission services charges (5)
(5)
Other (9) 2
(5)
(12)
Cost recovery mechanisms offset in electric revenue:d)
Power supply costs
7
7 Renewable energy adjustment
)4)
(4)
Zero-emission credits
(21)
(21)
Recovery of FAC under-recovery (3)
(3)
Totalthetandpurchasedpowerchange 41
)14(
(5) 22 Net change in electric margins (5)
(112)
11 (3)
(109)
Natural gas revenue change QlPrider
3
3 Other
(1)
(1)
Purchased natural gas costs offset in natural gas purchased for resaledi (2)
(7)
)9)
Other cost recovery mechanisms:&
Bad debt, energy efficiency programs, and remediation cost riders
2
2 Cress receipts tax (1)
1
Total natural gas revenue change (3)
S
(2)
S
(5)
Natural gas purchased for resale change:
Purchased natural gas costs offset in natural gas revenue(dJ 2
7
9 Total natural gas purchased for resale change 2
7
9 Net change in natural gas margins (1)
5
4 45
Ameren Ameren Illinois Illinois Other!
Ameren Electric Natural Ameren Intersegment Nine Months Missouri Distribution Gas Transmissionw Eliminations Ameren Electric revenue change:
Effectofweather(estimate)b (72) 5 (7)
S
(79)
Base rates (estimate) 53 31
43
127 FEJA impact on IEIMA timing of revenue recognition
(47)
(47)
Recovery of power restoration efforts provided to other utilities 5
1
6 Sales volume (excluding the effect of weather and the New Madrid Smelter)
(4)
(4)
New Madrid Smelter revenues (9)
(9)
MEEIA 2013 performance incentive (19)
(19)
Off-system sales 94
94 Transmission services revenues 3
3 Other 8
(4)
(1) 3 Cost recovery mechanisms offset in fuel and purchased power:
Power supply costs
(18)
(18)
Renewable energy adjustment
4
4 Zero-emission credits
21
21 Transmission services recovery mechanism
1
1 Recovery of FAC under-recovery (7)
(7)
Other cost recovery mechanisms:
Bad debt, energy efficiency programs, and remed:afion cost riders
(17)
(17)
Gross receipts tax 1
1 MEEIA program costs 22
22 Total electric revenue change 75 (35)
43 (1) 82 Fuel and purchased power change.
Energy costs (excluding the effect of weather and the New Madrid Smelter)
(91)
(91)
New Madrid Smelter energy costs 1
1 Effect of weather )estimate)]
16
16 Effect of lower net energy costs included in base rates 32
32 Transmission service charges (7)
(7)
Other (10) 3
(3)
(10)
Cost recovery mechanisms offset in electric revenue.d Power supply costs
18
18 Renewable energy adjuslment
(4)
(4)
Zero-emission credits
(21)
(21)
Transmission services recovery mechanism
(1)
(1)
Recovery of FAC under-recovery 7
7 Total fuel and purchased power change 5
(52)
(5)
S
S (3)
(60)
Net change in electric margins 23 (40)
43 (4) 22 Natural gas revenue change:
Effect of weather (esfimateyb (6)
5
5
(5)
QlPrider
6
6 Other (1)
(2)
=
(3)
Purchased nalural gas costs offset in natural gas purchased for resale 1
(27)
(26)
Other cost recovery mechanisms:
Bad debt, energy efficiency programs, and remediation cost riders
3
3 Grossreceiptstex (1)
(1)
Total natural gas revenue charge S
(7) 5
(20)
(27)
Natural gas purchased for resale change:
Effect of wealher (estiwate) 5 5
S
5 Purchased natural gas costs offset in natural gas revenuetrl (1)
27
26 Total natural gas purchased for resale change 4
27
31 Net change in natural gas margins (3)
7
4 (a)
Includes a decrease in transmission margins of $1 million end an increase of $10 million for the three-and nine-month periods, respectively, alAmeren Illinois.
(b)
Represents the estimated variation resulting primanly from changes in cooling and heating degree-days on electric and natural gas demand compared with the prior year; this variation is based on temperature readings from the National Oceanic and Atmospheric Administration weather stations at local airports in our service territories.
Beginning in 2017, FEJA eliminated the impact of weather on Ameren Illinois Electric Distributions electric margins.
46
(c)
ForAmeren Illinois Electric Distribubon and Ameren Transmission, base rates include increases or decreases to operating revenues related to the revenue requirement reconciliation adjustment under formula rates.
(d)
Electric and natural gas revenue changes are offset by corresponding changes in Fuel, Purchased power, and Natural gas purchased for resale, resulting in no change to electric and natural gas margins.
(e)
See Other Operations and Maintenance Expenses or Taxes Other Than Income Taxes in this section for the related offsetbng increase or decrease to eapense. These items have no overall impact on earnings.
Ameren Amerens electric margins decreased $109 million, or 8%, for the three months ended September 30, 2017, compared with the year-ago period, primarily because of decreased margins at Ameren Illinois Electric Distribution. Amerens electric margins increased $22 million, or 1%, for the nine months ended September 30, 2017, compared with the year-ago period, primarily because of increased margins atAmeren Transmission and Ameren Missouri, partially offset by decreased margins atAmeren Illinois Electric Distribution.
Amerens natural gas margins increased $4 million, or 4%, and $4 million, or 1%, for the three and nine months ended September 30, 2017, respectively, compared with the year-ago periods, primarily because of increased margins atAmeren Illinois Natural Gas, partially offset by decreased margins at Ameren Missouri.
Ameren Transmission Ameren Transmissions margins increased $11 million, or 10%, and $43 million, or 15%, for the three and nine months ended September 30, 2017, respectively, compared with the year-ago periods. Margins were favorably affected by increased capital investment, as evidenced by a 22% increase in rate base used to calculate the revenue requirement at September 30, 2017, compared to September 30, 2016, as well as higher recoverable costs for the three and nine months ended September 30, 2017, compared with the year-ago periods, under forward-looking formula ratemaking. Margins were unfavorably affected for the three and nine months ended September 30, 2017, compared with the year-ago periods, by the absence of a temporarily higher allowed return on common equity of 12.38% for nearly four months in 2016 as a result of the expiration of the refund period in the February 2015 complaint case. See Note 2 Rate and Regulatory Matters under Part 1, Item 1 of this report for information regarding the allowed return on common equity for FERC-regulated transmission rate base.
Ameren Missouri Ameren Missouris electric margins decreased $5 million, or 1%, for the three months ended September 30, 2017, compared with the year-ago period. Ameren Missouris electric margins increased $23 million, or 1%, for the nine months ended September 30, 2017, compared with the year-ago period. Ameren Missouris natural gas margins were comparable for the three months ended September 30, 2017, compared with the year-ago period. Ameren Missouris natural gas margins decreased $3 million, or 5%. for the nine months ended September 30, 2017, compared with the year-ago period.
The following items had a favorable effect on Ameren Missouris electric margins for the three and nine months ended September 30, 2017, compared with the year-ago periods (except where a specific period is referenced):
Higher electric base rates, effective April 1, 2017, as a result of the March 2017 electric rate order, increased margins by an estimated
$49 million and $85 million, respectively. The change in electric base rates is the sum of the change in base rates (estimate) (÷$29 million and +$53 million, respectively) and the effect of lower net energy costs included in base rates (+520 million and ÷$32 million, respectively) in the Electric and Natural Gas Margins table above.
Excluding the estimated effect of weather, residential sales volumes increased by less than 1% for the three months ended September 30, 2017, compared with the year-ago period, which increased margins by $8 million, as a result of customer growth.
The recovery of labor and benefit costs for crews assisting other utilities with power restoration efforts primarily caused by hurricane damage, which increased revenues by $5 million for both periods and was fully offset by a related increase in operations and maintenance costs, with no overall impact on net income.
Increased transmission services revenues due to additional rate base investment, which increased margins by $2 million and $3 million, respectively.
The following items had an unfavorable effect on Ameren Missouris electric margins for the three and nine months ended September 30, 2017, compared with the year-ago periods (except where a specific period is referenced):
Summer temperatures were milder as cooling degree days decreased 11% and 8% for the three and nine months ended September 30, 2017, respectively, compared with the year-ago periods, and winter temperatures were milder as heating degree days decreased 15%
for the nine months ended September 30, 2017, compared with the year-ago period. The effect of weather decreased margins by an estimated $26 million and $56 million, respectively. The change in margins due to weather is the sum of the effect of weather (estimate) 47
on electric revenues (-$33 million and -$72 million, respectively) and the effect of weather (estimate) on fuel and purchased power (÷$7 million and +$16 million, respectively) in the Electric and Natural Gas Margins table above, The absence in 2017 of the MEEIA 2013 performance incentive, which increased margins by $19 million forthe three and nine months ended September 30, 2016.
Suspension of operations at the New Madrid Smelter in the first quarter of 2016 and the elimination of recovery under the FAC tariff effective April 1, 2017, which had allowed Ameren Missouri to retain a portion of the revenues from off-system sales it made as a result of reduced sales to the New Madrid Smelter, which decreased margins by $7 million and $8 million, respectively. As of April 1, 2017, higher electric base rates offset the absence of these revenues recovered under the FAC tariff. The decrease in margins due to the suspension of operations and elimination of the provision in the FAC tariff is the sum of New Madrid Smelter revenues (-$1 million and
$9 million, respectively) and New Madrid Smelter energy costs (-$6 million and +51 million, respectively).
Increased transmission services charges resulting from additional MISO-approved electric transmission investments made by other entities and shared by aTI MISO participants, which decreased margins by 55 million and $7 million, respectively.
Excluding the estimated effect of weather and reduced sales to the New Madhd Smelter, total retail sales volumes decreased by less than 1% for the nine months ended September 30, 2017, compared with the year-ago period, which decreased margins by$4 million due to the absence of the leap year benefit experienced in 2016 and the effects of the MEEIA programs, partially offset by growth. The throughput disincentive recovery, as part of MEEIA 2016, ensures that electric margins are not affected by reduced sales volumes as a result of MEEIA programs. Lower sales volumes led to a decrease in net energy costs of $3 million for nine months ended September 30, 2017, compared with the year-ago period. The change in net energy costs is the sum of the change in off-system sales (÷$94 million for the nine months ended September 30, 2017) and the change in energy costs (excluding the effect of weather and the New Madrid Smelter) (-$91 million for the nine months ended September30, 2017) in the Electric and Natural Gas Margins tabTe above.
Ameren Illinois Ameren Illinois electric margins decreased by $113 million, or 25%, and $30 million, or 3%, for the three and nine months ended September 30, 2017, respectively, compared with the year-ago periods, driven by a decrease in Ameren Illinois Electric Distribution ($112 million and $40 million, respectively). Ameren Illinois Natural Gas margins increased by $5 million, or 6%, and $7 million, or 2%, for the three and nine months ended September 30, 2017, respectively, compared with the year-ago periods, primarily due to increased rate base in 2017 under the QIP rider, which increased margins by $3 million and $6 million, respectively.
Ameren Illinois Electric Distribution Ameren Illinois Electric Distributions margins decreased $112 million, or 30%, and $40 million or 5%, for the three and nine months ended September 30, 2017, respectively, compared with the year-ago periods. The following items had an unfavorable effect on Ameren Illinois Electric Distributions margins for the three and nine months ended September 30, 2017, compared with the year-ago periods:
A change in the method used to recognize interim period revenue, in connection with the decoupling provisions of the FEJA, which decreased margins by $94 million and $47 million, respectively. This change will not impact annual earnings. See Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report for additional information on FEJA and IEIMA.
The absence of the impact of warmer-than-normal summer temperatures experienced in the third quarter of 2016 and the decoupling of revenues in 2017, which decreased margins by $7 million for both periods. The change in margins due to weather is the sum of the effect of weather (estimate) on revenues (-$9 million and -$7 million, respectively) and the effect of weather (estimate) on fuel and purchased power (+$2 million and fiat, respectively) in the Electric and Natural Gas Margins table above.
Ameren Illinois Electric Distributions base rates were favorably affected by increased recoverable expenses and rate base, as well as a higher 30-year United States Treasury bond yield under formula ratemaking, which collectively increased margins by $10 million and $31 million, respectively.
Ameren Illinois Transmission Ameren Illinois Transmissions margins decreased $1 million, or 1%, for the three months ended September 30, 2017, compared to the year-ago period. Ameren Illinois Transmissions margins increased $10 million, or 5%, for the nine months ended September 30, 2017, compared with the year-ago period. Margins were unfavorably affected for the three and nine months ended September 30, 2017, compared with the year-ago periods, by the absence of a temporarily higher allowed return on common equity of 12.38% for nearly four months in 2016 as a result of the expiration of the refund period in the February 2015 complaint case. Margins were favorably affected by increased capital investment, as evidenced by a 15% increase in rate base used to calculate the revenue requirement at September 30, 2017, compared to September 30, 2016. as well as higher recoverable costs for the three and nine months ended September 30, 2017, compared with the year-ago periods, under forward-looking formula ratemaking.
48
Other Operations and Maintenance Expenses Ameren Other operations and maintenance expenses were $9 million and $17 million lower in the three and nine months ended September 30, 20 17, respectively, as compared with the year-ago periods, as discussed below.
Ameren Transmission Other operations and maintenance expenses were comparable in the three and nine months ended September 30, 2017, with the year-ago periods.
Ameren Missouri Other operations and maintenance expenses were $4 million higher and $15 million lower in the three and nine months ended September 30, 2017, respectively, as compared with the year-ago periods. The following items decreased other operations and maintenance expenses for the three and nine months ended September 30, 2017, compared with the year-ago periods (except where a specific period is referenced):
Refueling and maintenance outage costs at the Callaway energy center were lower by $27 million in the nine-month period, as the current year refueling and maintenance outage began in October 2017, while the 2016 refueling and maintenance outage was completed in the second quarter.
Pension and benefit costs decreased by $5 million and $10 million, respectively, primarily as a result of the March 2017 MoPSC electric rate order.
Solar rebate amortization costs decreased by $3 million and $6 million, respectively, primarily as a result of the March 2017 MoPSC electric rate order.
Estimated litigation costs decreased by $3 million and $5 million, respectively.
The following items increased other operations and maintenance expenses for the three and nine months ended September 30, 2017, compared with the year-ago periods:
MEEIA customer energy efficiency program costs increased by $6 million and $22 million, respectively. Electric revenues related to MEEIA program costs increased by a corresponding amount, with no overall effect on net income.
Ameren Missouri incurred $5 million of labor and benefit costs in both periods for crews assisting other utilities with power restoration, primarily caused by hurricane damage. These costs are being recovered from the other utilities, with no overall effect on net income.
Energy center maintenance costs, excluding refueling and maintenance outage costs at the Callaway energy center, increased by $5 million in both periods, primarily because of higher coal handling charges.
Ameren Illinois Other operations and maintenance expenses were $15 million lower in the three months ended September 30, 2017, compared with the year-ago period, as discussed below. Other operations and maintenance expenses were comparable in the nine months ended September 30, 2017, with the year-ago period. Other operations and maintenance expenses were comparable in the three and nine months ended September 30, 2017, with the year-ago periods, atAmeren Illinois Transmission.
Ameren Illinois Electric Distribution Other operations and maintenance expenses decreased $14 million and $8 million in the three and nine months ended September 30, 2017, respectively, compared with the year-ago periods, primarily because of decreased customer energy efficiency and environmental remediation costs, which are included in cost recovery mechanisms resulting in decreased electric revenues, with no overall effect on net income. These decreases were partially offset by an increase in storm-related repair costs, as well as increased wages and staffing additions.
Ameren Illinois Natural Gas Other operations and maintenance expenses were comparable in the three months ended September 30, 2017, with the year-ago period. Other operations and maintenance expenses increased $6 million in the nine months ended September 30, 2017, compared with the year-ago period, primarily because of increased bad debt, customer energy efficiency, and environmental remediation costs, which are included in cost recovery mechanisms resulting in increased natural gas revenues, with no overall effect on net income. In addition, higher gas pipeline compliance costs contributed to the increase.
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Depreciation and Amortization Depreciation and amortization expenses increased $14 million and $40 million atAmeren, $4 million and $15 million atAmeren Missouri, and $6 million and $17 million atAmeren Illinois in the three and nine months ended September 30, 2017, respectively, compared with the year-ago periods, primarily because of additional property, plant, and equipment across their respective segments.
Taxes Other Than Income Taxes Taxes other than income taxes were comparable at each of the Ameren Companies and their respective segments in the three months ended September 30, 2017, with the year-ago period. Taxes other than income taxes increased $6 million atAmeren in the nine months ended September 30, 2017, compared with the year-ago period, primarily because of higher property taxes at Ameren Missouri and at each Ameren Illinois segment.
Other Income and Expenses Ameren Other income, net of expenses, was comparable in the three months ended September 30, 2017, with the year-ago period. Other income, net of expenses, decreased $7 million in the nine months ended September 30, 2017, compared with the year-ago period, as discussed below. See Note 5 Other Income and Expenses under Part I, Item 1 of this report for additional information.
Ameren Transmission Other income, net of expenses, was comparable in the three and nine months ended September 30, 2017, with the year-ago periods.
Ameren Missouri Other income, net of expenses, was comparable in the three and nine months ended September 30, 2017, with the year-ago periods.
Ameren Illinois Other income, net of expenses, was comparable in the three months ended September 30, 2017, with the year-ago period, for Ameren Illinois and each of its segments. Other income, net of expenses, decreased $5 million in the nine months ended September 30, 2017, compared with the year-ago period, primarily because of lower interest income associated with the IEIMA revenue requirement reconciliation at Ameren Illinois Electric Distribution. Other income, net of expenses, was comparable in the nine months ended September 30, 2017, with the year-ago period, for the remaining Ameren Illinois segments.
Interest Charges Ameren Interest charges were comparable in the three months ended September 30, 2017, with the year-ago period. Interest charges increased
$8 million in the nine months ended September 30, 2017, compared with the year-ago period, as discussed below.
Ameren Transmission Interest charges were comparable in the three months ended September 30, 2017, with the year-ago period. Interest charges increased
$6 million in the nine months ended September 30, 2017, compared with the year-ago period, primarily because of an increase in average outstanding debt atAmeren Illinois and AIXI.
Ameren Missouri Interest charges were comparable in the three and nine months ended September30, 2017, with the year-ago periods.
Ameren Illinois Interest charges were comparable in the three months ended September 30, 2017, with the year-ago period, for Ameren Illinois and each of its segments. Interest charges increased $4 million in the nine months ended September 30, 2017, compared with the year-ago period, primarily because of an increase in average outstanding debt at Ameren Illinois.
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Income Taxes The following table presents effective income tax rates for the three and nine months ended September30, 2017 and 2016:
Three Monthss Nine Months 2017 2016 2017 2016 Ameren 41%
39%
39%
36%
Ameren Missouri 38%
38%
38%
38%
Ameren Illinois 40%
39%
40%
39%
Ameren Illinois Electric Distribufion 38%
40%
39%
39%
Ameren Illinois Natural Gas 51%
20%
40%
39%
Ameren Illinois Transmission 42%
38%
40%
38%
Ameren Transmission 44%
38%
41%
39%
(a)
Estimate of the annual effecfive income tax rate adjusted to reflect the tax effect of items discrete to the three and nine months ended September 30, 2017 and 2016 Ameren The effective income tax rate was higher in the three and nine months ended September 30, 2017, compared with the year-ago periods.
because of an increase in the Illinois statutory income tax rate, which became effective on July 1,2017. Additionally, the effective income tax rate was higher in the nine-month period because of a decrease in the recognition of income tax benefits associated with share-based compensation.
Ameren Transmission The effective income tax rate was higher in the three and nine months ended September 30, 2017, compared with the year-ago periods, primarily because of the decreased effect of income tax benefits from certain depreciation differences on property-related items, along with the increase in the Illinois statutory income tax rate.
Ameren Missouri The effective income tax rate was comparable in the three and nine months ended September 30, 2017, with the year-ago periods.
Ameren Illinois The effective income tax rate was comparable in the three and nine months ended September 30, 2017, with the year-ago periods at Ameren Illinois, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Illinois Transmission, except as discussed below.
Ameren Illinois Electric Distribution The effective income tax rate was lower in the three months ended September 30, 2017, compared with the year-ago period, primarily because of the increased effect of income tax benefits on lower pretax income in the current year from certain depreciation differences on property-related items, partially offset by the increase in the Illinois statutory income tax rate.
Ameren Illinois Natural Gas The effective income tax rate was higher in the three months ended September 30, 2017, compared with the year-ago period, primarily because of the decreased effect of income tax benefits on higher pretax income in the current year from certain depreciation differences on property-related items, as well as the increase in the Illinois statutory income tax rate. Due to the small amount of pretax income in the third quarter of each year, the effective income tax rates in both periods can vary significantly.
Ameren Illinois Transmission The effective income tax rate was higher in the three months ended September 30, 2017, compared with the year-ago period, primarily because of a decrease in the income tax benefits from certain depreciation differences on property-related items, along with the increase in the Illinois statutory income tax rate.
LIQUIDITY AND CAPITAL RESOURCES Collections from our tariff-based revenues are our principal source of cash provided by operating activities, A diversified retail customer mix, primarily consisting of rate-regulated residential, commercial, and industrial customers, provides us with a reasonably predictable source 51
of cash. In addition to using cash provided by operating activities, we use available cash, borrowings under the Credit Agreements, commercial paper issuances, or, in the case of Ameren Missouri and Ameren Illinois, short-term intercompany borrowings to support operations and temporary capital requirements. We may reduce our short-term borrowings with cash provided by operations or, at our discretion, with long-term borrowings, or, in the case ofAmeren Missouri and Ameren Illinois, with capital contributions from Ameren (parent).
We expect to make significant capital expenditures over the next five years as we invest in our electric and natural gas utility infrastructure to support overall system reliability, environmental compliance, and other improvements. We intend to fund those capital expenditures primarily with cash provided by operating activities and short-term and long-term debt issuances so that we maintain an equity ratio around 50%,
assuming constructive regulatory environments.
The use of cash provided by operating activities and short-term borrowings to fund capital expenditures and other long-term investments may periodically result in a working capital deficit, defined as current liabilities exceeding current assets, as was the case at September 30, 2017, for the Ameren Companies. The working capital deficit as of September 30, 2017, was primarily the result of current maturities of long-term debt and our decision to finance our businesses with lower-cost commercial paper issuances. With the credit capacity available under the Credit Agreements, the Ameren Companies had access to $1.7 billion of liquidity at September 30, 2017.
The following table presents net cash provided by (used in) operating, investing, and financing activities for the nine months ended September 30, 2017 and 2016:
Net Cash Provided By Net Cash Used in Net Cash Provided by lUsed nI Operating Activities investing Activities Financing Activities 2017 2016 Variance 2017 2016 Variance 2017 2016 Variance Ameren&
1,643 1,559 S
84 (1,5851 (1,551)
(341 (58)
S (2821 224 Ameren Missouri 819 888 (69)
(455) 17241 269 13641 1362)
(2)
Anieren Illinois 628 627 1
(754)
(6791 (75) 126 (16) 142 Cal Inctudes amounts for Ameren registrant and nonregistrant subsidiaries and intercompany eliminations.
Cash Flows from Operating Activities Our cash provided by operating activities is affected by fluctuations of trade accounts receivable, inventories, and accounts and wages payable, among other things, as well as the unique regulatory environment for each of our businesses. Substantially all expenditures related to fuel, purchased power, and natural gas purchased for resale are recovered from customers through rate adjustment mechanisms, which may be adjusted without a traditional rate proceeding. Similar regulatory mechanisms exist for certain operating expenses that can also affect the timing of cash provided by operating activities. The timing of cash paid for costs recoverable under our regulatory mechanisms differs from the recovery period of those costs. Additionally, the seasonahty of our electric and natural gas businesses, primarily caused by changes in customer demand due to weather, significantly impact the amount and timing of our cash provided by operating activities.
Ameren Amerens cash from operating activities increased $84 million in the first nine months of 2017, compared with the year-ago period. The following items contributed to the increase:
A S160 million increase resulting from electric and natural gas margins, as discussed in Results of Operations, excluding certain noncash items, as well as the change in customer receivable balances.
A $26 million decrease in payments for scheduled nuclear refueling and maintenance outages at Ameren Missouris Callaway energy center, as the current year refueling and maintenance outage began in October 2017, while the 2016 refueling and maintenance outage was completed in the second quarter.
A $23 million increase in cash collected from Ameren Illinois alternative retail electric supplier customers for renewable energy credit compliance pursuant to the FEJA.
A 521 million increase in cash collected from Ameren Illinois customers related to zero-emission credits pursuant to the FEJA.
A$12 million increase in net energy costs collected from Ameren Missouri customers under the FAC.
An increase of $12 million in income tax refunds primarily as a result of higher tax credit sales and the receipt of a 2010 Illinois income tax refund.
The following items partially offset the increase in Amerens cash from operating activities between periods:
The absence of a $42 million insurance receipt atAmeren Missouri related to the Taum Sauk breach received in 2016.
A $35 million increase in expenditures for customer energy efficiency programs at Ameren Illinois compared with amounts collected from customers.
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A $30 million decrease in cash recoveries associated with Ameren Illinois IEIMA revenue requirement reconciliation adjustments. The 2015 revenue requirement reconciliation adjustment, which is being recovered from customers in 2017, was less than the 2014 revenue requirement reconciliation adjustment, which was recovered from customers in 2016.
Refunds of $21 million associated with the November 2013 FERC complaint case, as discussed in Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report.
An $18 million increase in purchased power costs collected from Ameren Illinois customers under the PGA.
A$13 million increase in payments related to natural gas held in storage caused primarily by reduced withdrawals as a result of milder winter temperatures compared with the prior year.
Ameren Missouri Ameren Missouris cash from operating activities decreased $69 million in the first nine months of 2017, compared with the year-ago period. The following items contributed to the decrease:
An increase in income tax payments of $115 million to Ameren (parent) pursuant to the tax allocation agreement, primarily related to higher taxable income in 2017, due to significantly lower property-related deductions.
The absence of a $42 million insurance receipt related to the Taum Sauk breach received in 2016.
The following items partially offset the decrease in Ameren Missouris cash from operating activities between periods:
A $62 million increase resulting from electric and natural gas margins, as discussed in Results of Operations, excluding certain noncash items, as well as the change in customer receivable balances, A $26 million decrease in payments for scheduled nuclear refueling and maintenance outages at the Callaway energy center, as the current year refueling and maintenance outage began in October 2017, while the 2016 refueling and maintenance outage was completed in the second quarter.
A $12 million increase in net energy costs collected from customers under the FAC, Ameren Illinois Ameren Illinois cash from operating activities increased $1 million in the first nine months of 2017, compared with the year-ago period.
The following items contributed to the increase:
An $84 million increase resulting from electric and natural gas margins, as discussed in Results of Operations, excluding certain noncash items, as well as the change in customer receivable balances.
A $23 million increase in cash collected from alternative retail electric supplier customers for renewable energy credit compliance pursuant to the FEJA.
A $21 million increase in cash collected from customers related to zero-emission credits pursuant to the FEJA.
An increase of $15 million in income tax refunds from Ameren (parent) pursuant to the tax allocation agreement, primarily related to a larger taxable loss in 2017, due to higher property-related deductions and use of net operating losses, The following items substantially offset the increase in Ameren Illinois cash from operating activities between periods:
A $35 million increase in expenditures for customer energy efficiency programs compared with amounts collected from customers.
A $30 million decrease in cash recoveries associated with IEIMA revenue requirement reconciliation adjustments. The 2015 revenue requirement reconciliation adjustment, which is being recovered from customers in 2017, was less than the 2014 revenue requirement reconciliation adjustment, which was recovered from customers in 2016.
An $18 million increase in purchased power costs collected from customers under the PGA.
Refunds of $17 million associated with the November 2013 FERC complaint case. as discussed in Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report.
A$13 million increase in interest payments, primarily due to an increase in the average outstanding debt.
A$12 million increase in payments related to natural gas held in storage caused primarily by reduced withdrawals as a result of milder winter temperatures compared with the prior year.
A $5 million increase in payments to contractors for additional reliability, maintenance, and IEIMA projects.
Cash Flows from Investing Activities Amerens cash used in investing activities increased $34 million in the first nine months of 2017, compared with the year-ago period.
Capital expenditures increased $27 million as a result of activity at Ameren Missouri and Ameren Illinois, discussed below, partially offset by a
$72 million decrease in capital expenditures at AIXI. ATXIs capital expenditures decreased as a result of decreased expenditures on the 53
Illinois Rivets project, partially offset by increased expenditures related to the Spoon River project. Nuclear fuel expenditures increased $11 million as a result of the activity at Ameren Missouri, as discussed below.
Ameren Missouris cash used in investing activities decreased $269 million between periods, primarily due to net money pool advances.
In 2017, Ameren Missouri received $143 million in returns of net money pool advances, compared to investing $165 million in money pool advances in 2016. The decrease was partially offset by increased capital expenditures of $33 million primarily related to electric distribution system reliability and energy center projects and investments in transmission communication technology, as well as an $11 million increase in nuclear fuel expenditures because of the timing of purchases in the first nine months of 2017, compared with the prior-year period.
Ameren Illinois cash used in investing activities increased $75 million between periods largely due to an increase in capital expenditures of $77 million primarily related to electric distribution and transmission system reliability projects, updates to natural gas main infrastructure, substation upgrades and investments in smart grid technology.
Cash Flows from Financing Activities Cash provided by, or used in, financing activities is a result of our financing needs, which depend on the level of cash provided by operating activities, the level of cash used in investing activities, the level of dividends, and our long-term debt maturities, among other things.
Amerens cash used in financing activities decreased $224 million during the first nine months of 2017, compared to the year-ago period.
During the first nine months of 2017, Ameren utilized net proceeds of $737 million from the issuance of long-term indebtedness and net commercial paper issuances to repay at maturity $425 million of higher cost long-term indebtedness and to fund, in part, investing activities.
In comparison, during the first nine months of 2016, Ameren used net proceeds of $456 million from the issuance of long-term indebtedness and net commercial paper issuances to repay at maturity $389 million of higher cost long-term indebtedness and to fund, in part, investing activities.
Ameren Missouris cash used in financing activities was comparable between periods. During the first nine months of 2017, Ameren Missouri issued $399 million of long-term indebtedness and used the proceeds, along with cash on hand, to repay at maturity $425 million of higher cost long-term indebtedness. In comparison, during the first nine months of 2016, Ameren Missouri issued $149 million of long-term indebtedness and used the proceeds, along with cash on hand, to repay at maturity $260 million of higher cost long-term indebtedness. In addition, during the first nine months of 2017, Ameren Missouri paid $332 million in common stock dividends compared with $285 million in dividend payments and the receipt of a $38 million capital contribution in the year-ago period.
Ameren Illinois financing activities provided cash of $126 million during the first nine months of 2017, compared with $16 million of cash used in financing activities during the year-ago period. During the first nine months of 2017, Ameren Illinois used proceeds from net commercial paper issuances of $118 million to fund, in part, investing activities. In comparison, during the first nine months of 2016, Ameren Illinois used proceeds from net commercial paper issuances to repay at maturity $129 million of higher cost long-term indebtedness. Ameren Illinois did not pay common stock dividends during the nine months ended September 30, 2017, compared to dividend payments of $95 million during the same peod in 2016. Additionally, money pool borrowings decreased $43 million, compared with the year-ago period.
See Long-term Debt and Equity in this section for additional information on maturities and issuances of long-term debt.
Credit Facility Borrowings and Liquidity The liquidity needs of Ameren, Ameren Missouri, and Ameren Illinois are typically supported through the use of available cash, commercial paper issuances, short-term intercompany borrowings, or drawings under the Credit Agreements. See Note 3 Short-term Debt and Liquidity under Part I, Item 1, of this report for additional information on the Credit Agreements, short-term borrowing activity, commercial paper issuances, relevant interest rates, and borrowings under Amerens money pool arrangements.
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The foflowing table presents Amerens consolidated liquidity as of September 30, 2017:
Ameren and Ameren Missouri:
Missouri Credit Agreement borrowing capacity S
1,000 Less: Ameren Iparent) commercial paper outstandwg 1 62 Missouri Credit Agreement credit available
838 Ameren and Ameren Illinois:
Iltinois Credit Agreement borrowing capacity 1100 Less: Ameren (parent) commercial paper outstanding 115 Less: Ameren Illinois commercial paper outstanding 169 Less: Letters of credit 1
Illinois Credit Agreement credit available 815 Total Credit Available 1,653 Cash and cash equivalents 9
Total Liquidity 1,662 The Credit Agreements are used to borrow cash, to issue letters of credit, and to support issuances underAmerens (parent), Ameren Missouris, and Ameren Illinois commercial paper programs. Both of the Credit Agreements are available to Ameren to support issuances under Amerens commercial paper program, subject to borrowing sublimits. The Missouri Credit Agreement is available to support issuances under Ameren Missouris commercial paper program. The Illinois Credit Agreement is available to support issuances under Ameren Illinois commercial paper program. Issuances under the Ameren (parent), Ameren Missouri, and Ameren Illinois commercial paper programs were available at lower interest rates than the interest rates available under the Credit Agreements. Commercial paper issuances were thus preferred to credit facility borrowings as a source of third-party short-term debt.
In addition, Ameren Missouri and Ameren Illinois may borrow cash from the utility money pool when funds are available. The rate of interest depends on the composition of internal and external funds in the utility money pooi. Ameren Missouri and Ameren Illinois will access funds from the utility money pool, the Credit Agreements, or the commercial paper programs depending on which option offers the lowest interest rates.
The issuance of short-term debt securities by Amerens utility subsidiaries is subject to approval by the FERC under the Federal Power Act. In June 2017, the FERC issued an order authorizing ATXI to issue up to $300 million of short-term debt securities through July 2019.
The Ameren Companies continually evaluate the adequacy and appropriateness of their liquidity arrangements given changing business conditions, When business conditions warrant, changes may be made to existing credit agreements or to other short-term borrowing arrangements.
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Long-term Debt and Equity The following table presents the issuances (net of any issuance discounts), matutities, and redemptions of long-term debt for Ameren Missouri, Ameren Illinois, and ATXI for the nine months ended September 30, 2017 and 2016. The Ameren Companies did not issue any common stock during the first nine months of 2017 or 2016. In March 2016, Ameren Missouri received cash capital contributions of $38 million from Ameren (parent).
Month Issued, Redeemed, or Matured 2017 2016 Issuances of Long-term Debt Ameren Missouri:
2.95% Senior secured notes due 2027 June 399
3.65% Senior secured notes due 2045 June
149 ATXI:
3.43% Senior notes due 2050 June 150 S
3.43% Senior notes due 2050 August 300
Total Ameren long-term debt issuarces 849 149 Redemptions and Maturities of Long-term Debt Ameren Missouri:
6.40% Senior secured notes due 2017 June 425 S
5.40% Senior secured notes due 2016 February
260 Ameren Illinois:
6.20% Senior secured notes due 2016 June
54 6 25% Senior secured notes due 2016 June
75 Total Ameren long-term debt redemptions and matunties 425 389 In June 2017, Ameren Missouri issued $400 million of 2.95% senior secured notes due June 2027, with interest payable semiannually on June 15 and December 15 of each year, beginning December 15, 2017. Ameren Missouri received proceeds of $396 million, which were used, in conjunction with other available funds, to repay at maturity $425 million of Ameren Missouris 6.40% senior secured notes in June 2017.
In June 2017, pursuant to a note purchase agreement, ATXI agreed to issue $450 million principal amount of 3.43% senior unsecured notes, due 2050, through a private placement offering exempt from registration under the Securities Act of 1933, as amended. ATXP issued
$150 million principal amount of the notes in June 2017 and the remaining $300 million principal amount of the notes in August 2017. ATXI received proceeds of $449 million from the notes, which were used by ATXI to repay existing short-term and long-term affiliate debt owed to Ameren (parent).
Indebtedness Provisions and Other Covenants See Note 3 Short-term Debt and Liquidity and Note 4 Long-term Debt and Equity Financings under Part I, Item 1. of this report and Note 4Short-term Debt and Liquidity and Note 5Long-term Debt and Equity Financings under Part II, Item 8, of the Form 10-K for a discussion of covenants and provisions (and applicable cross-default provisions) contained in our credit agreements, in ATXIs note purchase agreement, and in certain of the Ameren Companies indentures and articles of incorporation.
At September 30, 2017, the Ameren Companies were in compliance with the provisions and covenants contained in their credit agreements, indentures, and articles of incorporation, as applicable, and ATXI was in compliance with the provisions and covenants contained in its note purchase agreement.
We consider access to short-term and long-term capital markets a significant source of funding for capital requirements not satisfied by cash generated from our operating activities. Inability to raise capital on reasonable terms, particularly during times of uncertainty in the capital markets, could negatively affect out ability to maintain and expand our businesses. After assessing its current operating performance, liquidity, and credit ratings (see Credit Ratings below), Ameren, Ameren Missouri, and Ameren Illinois each believes that it will continue to have access to the capital markets. However, events beyond Amerens, Ameren Missouris, and Ameren Illinois control may create uncertainty in the capital markets or make access to the capital markets uncertain or limited. Such events could increase our cost of capital and adversely affect our ability to access the capital markets.
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Dividends The amount and timing of Amerens common stock dividends are within the sole discretion of Amerens board of directors. Amerens board of directors has not set specific targets or payout parameters when declaring common stock dividends, but it considers various factors, including Amerens overall payout ratio, payout ratios of our peers, projected cash flow and potential future cash flow requirements, historical earnings and cash flow, projected earnings, impacts of regulatory orders or legislation, and other key business considerations. Ameren expects its dividend payout ratio to be between 55% and 70% of annual earnings over the next few years. On October 13, 2017, Amerens board of directors declared a quarterly common stock dividend of 45.75 cents per share payable on December 29, 2017, to shareholders of record on December 13, 2017, resulting in an annualized equivalent dividend rate of $1.83 per share. The previous annualized equivalent dividend rate, based on the common stock dividend declared and paid in the third quarter of 2017, was $1.76 per share.
See Note 4Short-term Debt and Liquidity and Note 5 Long-term Debt and Equity Financings under Part II, Item 8, of the Form 10-K for additional discussion of covenants and provisions contained in certain of the Ameren Companies financial agreements and articles of incorporation that would restrict the Ameren Companies payment of dividends in certain circumstances. At September 30, 2017, none of these circumstances existed atAmeren, Ameren Missouri, orAmeren Illinois and, as a result, these companies were not restricted from paying dividends.
The following table presents common stock dividends declared and paid by Ameren Corporation to its common shareholders and by Ameren Missouri and Ameren Illinois to their parent, Ameren Corporation, for the nine months ended September 30, 2017 and 2016:
Nine Months 2017 2016 Ameten Missouri 332 285 Ameren Illinois
95 Ameren 320 309 Contractual Obligations For a listing of our obligations and commitments, see Other Obligations in Note 9 Commitments and Contingencies under Part I, Item 1, of this report. See Note 11 Retirement Benefits under Part I, Item 1, of this report for information regarding expected minimum funding levels for our pension plan.
At September 30, 2017, total obligations related to minimum purchase commitments for coal, natural gas, nuclear fuel, purchased power, methane gas, equipment, and meter reading services, among other agreements, atAmeren, Ameren Missouri, and Arneren Illinois were $2.649 million, $1,806 million, and $820 million, respectively.
Off-Balance-Sheet Arrangements At September 30, 2017, none of the Ameren Companies had off-balance-sheet financing arrangements, other than operating leases entered into in the ordinary course of business, letters of credit, and Ameren parent guarantee arrangements on behalf of its subsidiaries.
Credit Ratings The credit ratings of the Ameren Companies and ATXI assigned by Moodys and S&P, as applicable, can affect our liquidity, access to the capital markets and credit markets, cost of borrowing under credit facilities and commercial paper programs, and collateral posting requirements under commodity contracts.
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The following table presents the principal credit ratings of the Ameren Companies and ATXI, by Moodys and S&P, as applicable, effective on the date of this report:
Moodys S&P Ameren:
Issuer/corporate credit rating Baal 568+
Senior unsecured debt BaaJ BBS Commercial paper P-2 A-2 Ameren Missouri:
Issuer/corporate credit rating Baal BBB÷ Secured debt A2 A
Senior unsecured debt Seal BBB+
Commercial paper P-2 A-2 Ameren Illinois:
Issuer/corporate credit rating A3 868+
Secured debt Al A
Senior unsecured debt A3 BB8+
Commercial paper P-2 A-2 ATXI:
Issuer credit rating A2 Not Rated Senior unsecured debt A2 Not Rated A credit rating is not a recommendation to buy, sell, or hold securities. It should be evaluated independently of any other rating. Ratings ate subject to revision or withdrawal at any time by the rating organization.
Collateral Postings Any weakening of our credit ratings may reduce access to capital and trigger additional collateral postings and prepayments. Such changes may also increase the cost of borrowing, resulting in an adverse effect on earnings. Cash collateral postings and prepayments made with external parties, including postings related to exchange-traded contracts, and cash collateral posted by external parties were immaterial atAmeren, Ameren Missouri, and Ameren Illinois at September 30, 2017. A sub-investment-grade issuer or senior unsecured debt rating (whether below BBB-from S&P or below Baa3 from Moodys) at September 30, 2017, could have resulted in Ameren, Ameren Missouri, or Ameren Illinois being required to post additional collateral or other assurances for certain trade obligations amounting to $89 million, $48 million, and $41 million, respectively.
Changes in commodity prices could trigger additional collateral postings and prepayments. Based on credit ratings at September 30, 2017, if market prices were 15% higher or lower than September 30, 2017 levels in the next 12 months and 20% higher or lower thereafter through the end of the term of the commodity contracts, then Ameren, Ameren Missouri, orAmeren Illinois could be required to post an immaterial amount, compared to each companys liquidity, of collateral or other assurances for certain trade obligations.
OUTLOOK We seek to earn competitive returns on investments in our businesses. We seek to improve our regulatory frameworks and cost recovery mechanisms and simultaneously pursuing constructive regulatory outcomes within existing frameworks, while also advocating for responsible energy policies. We seek to align our overall spending, both operating and capital. with economic conditions and with regulatory frameworks established by our regulators and to create and capitalize on investment opportunities for the benefit of our customers and shareholders. We focus on minimizing the gap between allowed and earned returns on equity and allocating capital resources to our business opportunities that we expect to offer the most attractive risk-adjusted return potential.
As a part of Amerens strategic plan, we pursue projects to meet our customer energy needs and to improve electric and natural gas system reliability, safety, and security within our service territories, as well as evaluate competitive electric transmission investment opportunities outside of these territories, including investments outside of MISO as they arise. Additionally, Ameren Missouri will make investments over time that will enable it to transition to a more diverse energy generation portfolio.
Below are some key trends, events, and uncertainties that are reasonably likely to affect our results of operations, financial condition, or liquidity, as well as our ability to achieve strategic and financial objectives, for 2017 and beyond.
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Operations Ameren continues to invest in FERC-regulated electric transmission. MISO has approved three electric transmission projects to be developed by ATXI. The Illinois Rivers project involves the construction of a transmission line from eastern Missouri across the state of Illinois to western Indiana. Construction activities for the Illinois Rivers project ate continuing on schedule, and the last section of this project is expected to be completed by 2019. The Spoon River project, located in northwest Illinois, and the Mark Twain project, located in northeast Missouri and connecting the Illinois Rivers project to Iowa, are the other two MISO-approved projects to be constructed by ATXI. Construction activities for the Spoon River project are continuing on schedule, and the project is expected to be completed in 2018. See Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report for information regarding the Mark Twain project and its approval process and the Illinois Rivers project. The total investment in all three projects is expected to be more than $540 million from 2017 through 2019. Ameren Illinois expects to invest $2.2 billion in electric transmission assets from 2017 through 2021 to replace aging infrastructure and improve reliability.
Both Ameren Illinois and ATXI use a forward-looking rate calculation with an annual revenue requirement reconciliation for each companys electric transmission business. Based on the preliminary rate calculations that will become effective on January 1,2018, and the currently allowed 10.82% return on common equity, the 2018 revenue requirement that is expected to be collected in rates for Ameren Illinois electric transmission business is $297 million. The 2018 rates reflecta $38 million increase over the 2017 revenue requirement, primarily due to rate base growth. These rates reflect a capital structure comprised of 51.6% common equity and a projected average rate base of $1.6 billion. Based on the preliminary rate calculations that will become effective on January 1, 2018, and the currently allowed 10.82% return on equity, the 2018 revenue requirement that is expected to be collected in rates for ATXIs electric transmission business is $197 million. The 2018 rates represents a $27 million increase over the 2017 revenue requirement, primarily due to rate base growth. These rates reflect a capital structure comprised of 56,2% common equity and a projected average rate base of
$1.3 billion, reflecting additional investments in the Illinois Rivers and Spoon River projects.
The return on common equity for MISO transmission owners, including Ameren Illinois and ATXI, was the subject of two FERC complaint proceedings, the November 2013 complaint case and the February 2015 complaint case, that each challenged the allowed base return on common equity. In September 2016, the FERC issued a final order in the November 2013 complaint case, which lowered the allowed base return on common equity for the 15-month period of November2013 to February 2015 to 10.32%, ora 10.82% total allowed return on common equity with the inclusion of a 50 basis point incentive adder for participation in an RTO. The order required customer refunds, with interest, to be issued for that 15-month period. Refunds for the November 2013 complaint case were issued in the first six months of 2017. In June 2016, an administrative law judge issued an initial decision in the February 2015 complaint case, which, if approved by the FERC, would lower the allowed base return on common equity for the 15-month period of February 2015 to May 2016 to 9.70%, or a 10.20% total allowed return on equity with the inclusion of a 50 basis point incentive adder for participation in an RTO, and require customer refunds, with interest, for that 15-month period. The timing of the issuance of the final order in the February 2015 complaint case is uncertain for two reasons. First, while the FERC reestablished a quorum of commissioners in August 2017 after six months without a quorum, the FERC is under no deadline to issue a final order. Second, in the second quarter of 2017, the United States Court of Appeals for the District of Columbia Circuit vacated and remanded to the FERC an order in a separate case in which the FERC established the allowed base return on common equity methodology used in the two MISO complaint cases described above. In addition, in September 2017, MISO transmission owners, including Ameren Missouri, Ameren Illinois, and ATXI, filed a motion to dismiss the February 2015 complaint case with the FERC. See Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report for information regarding the MISO transmission owners motion to dismiss the February 2015 complaint case. A 50 basis point reduction in the FERC-allowed base return on common equity would reduce Amerens and Ameren Illinois annual earnings by an estimated $7 million and $4 million, respectively, based on each companys 2017 projected rate base. Ameren and Ameren Illinois recorded current regulatory liabilities on their respective September 30, 2017 balance sheets, representing their estimate of the expected refunds related to the February 2015 complaint case.
In March 2017, the MoPSC issued an order approving a unanimous stipulation and agreement in Ameren Missouris July 2016 regulatory rate review. The order resulted in a $3.4 billion revenue requirement, which is a $92 million increase in Ameren Missouris annual revenue requirement for electric service, compared to its prior revenue requirement established in the MoPSCs April 2015 electric rate order. The new rates, base level of expenses, and amortizations became effective on April 1. 2017. Excluding cost reductions associated with reduced sales volumes, the base level of net energy costs decrease by $54 million from the base level established in the MoPSCs April 2015 electric rate order. Changes in amortizations and the base level of expenses for the other regulatory tracking mechanisms, including extending the amortization period of certain regulatory assets, reduced expenses by $26 million from the base levels established in the MoPSCs April 2015 electric rate order.
Illinois law provides for an annual reconciliation of the electric disthbution revenue requirement necessary to reflect the actual costs incurred and investment return in a given year with the revenue requirement that was reflected in customer rates for that year.
Consequently, Ameren Illinois 2017 electric distribution service revenues will be based on its 2017 actual recoverable costs, rate base, and return on common equity as calculated under the Illinois performance-based formula ratemaking framework. The 2017 revenue 59
requirement is expected to be higher than the 2016 revenue requirement because of an expected increase in recoverable costs, expected rate base growth of 5%, and an expected increase in the monthly average of 30-year United States Treasury bonds. The 2017 revenue requirement reconciliation is expected to result in a regulatory asset that will be collected from customers in 2019. A 50 basis point change in the average monthly yields of the 30-year United States Treasury bonds would result in an estimated $7 million change in Amerens and Ameren Illinois net income, based on Ameren Illinois 2017 projected year-end rate base.
In April 2017, Ameren Illinois filed with the ICC its annual electric distribution service formula rate update to establish the revenue requirement used for 2018 rates. In ]une 2017, the ICC staff submitted its calculation of the revenue requirement, which Ameren Illinois supported in its revised July 2017 filing, and recommended a decrease to the electric distribution service revenue requirement Pending ICC approval, this update filing will result in a $17 million decrease in Ameren Illinois electric distribution service revenue requirement beginning in January 2018. These rates will affect Ameren Illinois cash receipts during 2018, but will not determine its electric distribution service operating revenues, which will instead be based on its 2018 actual recoverable costs, rate base, and return on common equity as calculated under the Illinois performance-based formula ratemaking framework. In November2017, an administrative law judge issued a proposed order that was consistent with Ameren Illinois revised July 2017 filing. An ICC decision on the revenue requirement used for 2018 rates is expected by December2017.
Beginning in 2017, the FEJA provides that Ameren Illinois recovers, within the following two years, its electric distribution revenue requirement for a given year, independent of actual sales volumes. In connection with the decoupling provisions of the FEJA, Ameren Illinois changed its method used to recognize its interim period revenue. Ameren Illinois now recognizes revenues consistent with the timing of incurred electric distribution recoverable costs and recognizes revenue associated with the expected return on its rate base ratably over the year. As a result of this change in recognition of the interim period revenue for the IEIMA formula rate framework, as modified by FEJA, Ameren Illinois incurred quarterly year-over-year increases to earnings in 2017 in comparison to 2016 for the first and second quarters and a decrease to earnings in the third quarter. Ameren Illinois expects an estimated $28 million increase to earnings in the fourth quarter of 2017 in comparison to 2016 as a result of the change. The change in interim period revenue recognition will not impact 2017s annual earnings.
Beginning in June 2017, the FEJA allows Ameren Illinois to earn a return on its electric energy efficiency program investments. Ameren Illinois electric energy efficiency investments will be deferred as a regulatory asset and will earn a return at the companys weighted average cost of capital, with the equity return based on the monthly average yield of the 30-year United States Treasury bonds pIus 580 basis points. The equity portion of Ameren Illinois return on electric energy efficiency investments can also be increased or decreased by 200 basis points based on the achievement of annual energy savings goals. Based on Ameren Illinois 2018 through 2021 energy efficiency plan and a formula provided in the FEJA, Ameren Illinois estimates it can annually invest up to $99 million from 2018 through 2021, up to $107 million annually from 2022 through 2025, and up to $114 million annually from 2026 through 2030, The ICC has the ability to lower the electric energy efficiency saving goals if there are insufficient cost effective measures available or if achieving the savings goals would require investment levels that exceed the formula amounts shown above. The electric energy efficiency program investments and the return on those investments will be recovered through a rider and will not be included in the IEIMA formula rate process. See Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report for information regarding Ameren Illinois approved energy efficiency program for 2018 through 2021.
In July 2017, Illinois enacted a law that increased the states corporate income tax rate from 7.75% to 9.5% as of July 1, 2017. The law made the increase in the states corporate income tax rate, which was previously scheduled to decrease to 7.3% in 2025, permanent. In July 2017, Ameren recorded an expense of $14 million at Ameren (parent) due to the revaluation of accumulated deferred taxes and the estimated state apportionment of such taxes. Beyond this expense, Ameren does not expect this tax increase to have a material impact on its consolidated net income prospectively. The tax increase is not expected to materially impact the earnings of the Ameren Illinois Electric Distribution, the Ameren Transmission, or the Ameren Illinois Transmission segments, since these businesses operate under formula ratemaking frameworks. The tax increase is expected to unfavorably affect 2017 net income of the Ameren Illinois Natural Gas segment by less than $1 million. The Ameren Illinois Natural Gas segment will continue to be impacted by the tax increase by approximately $1 million annually until customer rates are reset in a rate review to reflect the increased taxes.
In early 2018, Ameren Illinois expects to file for a natural gas regulatory rate review with the ICC. Ameren Illinois current allowed return on equity for natural gas delivery service is 9.60%, with a capital structure of 50% common equity, a rate base of $1.2 billion, and a 2016 future test year.
Ameren Missouris scheduled refueling and maintenance outage at its Callaway energy center began in October 2017. Ameren Missouri expects to incur $32 million of maintenance expenses, which approximates the cost of the spring 2016 outage. During a scheduled outage, which occurs every 18 months, maintenance expenses increase relative to non-outage years. Additionally, depending on the availability of its other generation sources and the market prices for power, Ameren Missouris purchased power costs may increase and the amount of excess power available for sale may decrease versus non-outage years. Changes in purchased power costs and excess 60
power available for sale are included in the FAC, which results in limited impacts to earnings. Ameren Missouri does not have a scheduled refueling and maintenance outage in 2018.
Ameren and Ameren Missouri expect an approximately $15 million decrease in annual interest charges as a result of the repayment of
$425 million ofAmeren Missouris 640% senior secured notes at maturity and issuance of $400 million 295% senior secured notes in 2017. In 2018, Ameren Missouri expects to refinance maturing long-term debt with lower-cost long-term debt, which would further reduce Amerens and Ameren Missouris annual interest charges.
As we continue to make infrastructure investments and to experience cost increases, Ameren Missouri and Ameren Illinois expect to seek regular electric and natural gas rate increases and timely cost recovery and tracking mechanisms from their regulators. Ameren Missouri and Ameren Illinois will also seek legislative solutions, as necessary, to address regulatory lag and to support investment in their utility infrastructure for the benefit of their customers. Ameren Missouri and Ameten Illinois continue to face cost recovery pressures, including limited economic growth in their service territories, customer conservation efforts, the impacts of additional customer energy efficiency programs, and increased customer use of increasingly cost-effective technological advances including private generation and storage. However, we expect the decreased demand to be partially offset by increased demand resulting from increased electrification of the economy as a means to address CO2 emission concerns. Increased investments, including expected future investments for environmental compliance, system reliability improvements, and potential new generation sources, result in rate base earnings growth but also higher depreciation and financing costs. Increased costs are also expected from rising employee benefit costs, higher property taxes, and higher state income taxes, among other costs.
For additional information regarding recent rate orders, lawsuits, the Westinghouse bankruptcy filing, and pending requests filed with state and federal regulatory commissions, see Note 2 Rate and Regulatory Matters and Note 10 Callaway Energy Center under Part I, Item 1, of this report and Note 2 Rate and Regulatory Matters under Part II, Item 8, of the Form JO-K.
Liquidity and Capital Resources Ameren Missouri files a non-binding 20-year integrated resource plan with the MoP$C every three years. Ameren Missouris integrated resource plan filed with the MoPSC in September 2017 includes Ameren Missouris preferred plan for meeting customers projected long-term energy needs in a cost-effective fashion that maintains system reliability as it targets cleaner and more diverse sources of energy generation. These new renewable energy sources would also support Ameren Missouris compliance with the state of Missouris requirement of achieving 15% of native load sales from renewable energy sources by 2021, subject to customer rate increase limitations. Ameren Missouris plan contemplates adding at least 700 megawatts of wind generation by 2020, as well as 100 megawatts of solar generation over the next 10 years, with 50 megawatts anticipated to come online by 2025. The new wind generation is expected to be located in Missouri and neighboring states. The source, location, and cost of the new wind generation, among other items, remain subject to reaching agreements with developers. Based on current and projected market prices for energy, and for wind and solar generation technologies, among other factors, Ameren Missouri expects its ownership of these renewable resources would represent the lowest-cost alternative for customers. The plan also includes expected implementation of continued customer energy efficiency programs. Ameren Missouris plan for the addition of renewable resources could be impacted by, among other factors: the availability of federal production tax credits related to renewable energy and its ability to use such credits; the cost of wind and solar generation technologies, as well as energy prices; Ameren Missouris ability to obtain interconnection agreements with MISO or other RIDs, including the cost of such interconnections; and Ameren Missouris ability to obtain a certificate of convenience and necessity from the MoPSC for projects located in Missouri, or any other required project approvals.
In connection with the integrated resource plan filing, discussed above, Ameren Missouri established a goal of reducing CO2 emissions 80% by 2050 from a 2005 base level. To meet this goal, Ameren Missouri is targeting a 35% CO2 emission reduction by 2030 and a 50% reduction by 2040 from the 2005 level by retiring coal-fired generation at the end of its useful life.
Through 2021, we expect to make significant capital expenditures to improve our electric and natural gas utility infrastructure, with a major portion directed to our transmission and distribution systems. We estimate that we will invest in total up to $11.2 billion (Ameren Missouri up to $4.2 billion; Ameren Illinois up to $6.4 billion; ATXI up to $0.6 billion) of capital expenditures during the period from 2017 through 2021. These estimates do not reflect the potential additional investments identified in Ameren Missouris integrated resource plan discussed above, which could represent incremental investments of approximately $1 billion and are subject to regulatory approval. Ameren and Ameren Missouri will evaluate alternatives for funding these potential additional investments.
Environmental regulations, including those related to 002 emissions, or other actions taken by the EPA could result in significant increases in capital expenditures and operating costs. Certain of these regulations are being challenged through litigation or are being reviewed by the EPA, so their ultimate implementation, as well as the timing of any such implementation, is uncertain. However, the individual or combined effects of existing environmental regulations could result in significant capital expenditures, increased operating costs, the closure or alteration of some of Ameren Missouris coal-fired energy centers, or require further capital investment, Ameren Missouris capital expenditures are subject to M0PSC prudence reviews, which could result in cost disallowances as well as regulatory 61
lag. The cost ofAmeren Illinois purchased power and natural gas purchased for resale could increase. However, Ameren Illinois expects these costs would be recovered from customers with no material adverse effect on its results of operations, financial position, or liquidity.
Amerens and Ameren Missouris earnings could benefit from increased investment to comply with environmental regulations if those investments are reflected and recovered on a timely basis in customer rates.
The Ameren Companies have multiyear credit agreements that cumulatively provide $2.1 billion of credit through December 2021, subject to a 364-day repayment term in the case ofAmeren Missouri and Ameren Illinois. See Note 4 Short-term Debt and Liquidity under Part I, Item 1, of this report for additional information regarding the Credit Agreements. By the end of 2018, $378 million and $707 million of senior secured notes are scheduled to mature at Ameten Missouri and Ameren Illinois, respectively. Ameren Missouri and Ameren Illinois expect to refinance these senior secured notes, as well as a portion of any outstanding short-term debt at the time, with long-term debt. Ameren, Ameren Missouri, and Ameren Illinois believe that their liquidity is adequate given their expected operating cash flows, capital expenditures, and related financing plans, However, there can be no assurance that significant changes in economic conditions, disruptions in the capital and credit markets, or other unforeseen events will not materially affect their ability to execute their expected operating, capital, or financing plans.
In December 2015, a federal tax law was enacted that authorized the continued use of bonus depreciation, which allows for an acceleration of deductions for tax purposes at a rate of 50% through 2017. The rate will be reduced to 40% in 2018 and to 30% in 2019.
Bonus depreciation will be phased out in 2020 unless a new law is enacted. Based on existing tax laws, Ameren expects to use this incremental cash flow to make capital investments in utility infrastructure for the benefit of its customers. Without these investments, bonus depreciation would reduce rate base, which reduces our revenue requirements and future earnings growth. The impact of bonus depreciation on the Ameren Companies will vary based on investment levels at each company.
As of September30, 2017, Ameren had $450 million in tax benefits from federal and state net operating loss carryforwards (Ameren Missouri $4 million and Ameren Illinois $115 million) and $116 million in federal and state income tax credit carryforwards (Ameren Missouri
$31 million and Ameren Illinois
$2 million). In addition, Ameren has $7 million of expected state income tax refunds and state overpayments. Consistent with the tax allocation agreement between Ameten and its subsidiaries, these carryforwards are expected to partially offset income tax liabilities for Ameren Missouri and Ameren Illinois until 2021. These tax benefits, primarily at the Ameren (parent) level, when realized, would be available to support funding Ameren Transmission investments. Based on existing tax laws, Ameren does not expect to make material federal income tax payments until 2021 and Ameren and Ameren Missouri do not expect to make material state income tax payments until 2021. Due to differences between federal and state tax laws, Ameren and Ameren Illinois expect to begin making material state income tax payments in 2018.
Since the 2016 presidential and congressional elections, there have been various legislative proposals to reform the federal income tax code, lax law changes that would affect our businesses include those changes associated with the statutory federal corporate income tax rate, interest deductibility, tax deductions for capital investments, the availability of federal production tax credits and our ability to use them, and state and local tax deductibility. Changes to the normalization of income taxes for ratemaking and return of excess deferred tax liabilities to customers could also affect our businesses. Depending on the magnitude and mix of any implemented changes, federal income tax reform could materially affect our results of operations, financial position, and liquidity.
Ameren expects its cash used for currently planned capital expenditures and dividends to exceed cash provided by operating activities over the next several years. Ameren expects to use debt to fund such cash shortfalls. If cash flows change materially from those expected. such as the cash flow needs associated with the potential investments identified in Ameren Missouris integrated resource plan, Ameren will reevaluate its funding plan.
The above items could have a material impact on our results of operations, financial position, or liquidity. Additionally, in the ordinary course of business, we evaluate strategies to enhance our results of operations, financial position, or liquidity. These strategies may include acquisitions, divestitures, opportunities to reduce costs or increase revenues, and other strategic initiatives to increase Amerens shareholder value. We are unable to predict which, if any, of these initiatives will be executed. The execution of these initiatives may have a material impact on our future results of operations, financial position, or liquidity.
REGULATORY MAHERS See Note 2 Rate and Regulatory Matters under Part I, Item 1, of this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of changes in value of a physical asset or a financial instrument, derivative or nonderivative, caused by fluctuations in market variables such as interest rates, commodity prices, and equity security prices. A derivative is a contract whose value is dependent on, or derived from, the value of some underlying asset or index. The following discussion of our risk management activities includes forward-looking statements that involve risks and uncertainties, Actual results could differ materially from those projected in the 62
forward-looking statements. We handle market risk in accordance with established policies, which may include entering into various derivative transactions. In the normal course of business, we also face risks that are either nonfinancial or nonquantifiable. Such risks, principally business, legal, and operational risks, are not part of the following discussion.
Our risk management objectives are to optimize our physical generating assets and to pursue market opportunities within prudent risk parameters. Our risk management policies are set by a risk management steering committee, which is composed of senior-level Ameren officers, with Ameren board of directors oversight.
With the exception of the following, there have been no material changes to the quantitative and qualitative disclosures about interest rate risk, credit risk, equity price risk, commodity price risk, and commodity supplier risk included in the Form 10-K. In the first quarter of 2017, Ameren Missouris supplier of nuclear fuel assemblies, Westinghouse, filed a voluntary petition for a court-supervised restructuring process under Chapter 11 of the United States Bankruptcy Code. At this time, Ameren and Ameren Missouri believe the restructuring proceeding will not affect Westinghouses performance under the terms of its existing contracts with Ameren Missouri, and therefore do not expect any material impact to Ameren Missouris operations as a result of this restructuring proceeding. Ameren Missouri received all necessary fuel assemblies for the fall 2017 refueling and maintenance outage. See Note 10 Callaway Energy Center under Part I, Item 1, of this report for additional information. See Item 7A under Part II of the Form 10-K for a more detailed discussion of our market risk.
Fair Value of Contracts We use derivatives principally to manage the risk of changes in market prices for natural gas, power, and uranium, as well as the risk of changes in rail transportation surcharges through fuel oil hedges. The following table presents the favorable (unfavorable) changes in the fair value of all derivative contracts marked-to-market during the three and nine months ended September 30, 2017. We use various methods to determine the fair value of out contracts. In accordance with authoritative accounting guidance for fair value hierarchy levels, the sources we used to determine the fair value of these contracts were active quotes (Level 1), inputs corroborated by market data (Level 2), and other modeling and valuation methods that are not corroborated by market data (Level 3). See Note 7 Fair Value Measurements under Part I, Item 1, of this report for additional information regarding the methods used to determine the fair value of these contracts.
Three Months Nine Months Ameren Ameren Ameren Ameren Missouri Illinois Ameren Missouri Illinois Ameren Fair value of contracts at beginning of period, net 2
5 (205)
(2031 (4)
(1801 S
(184)
Contracts realized or otherwise settled during the period (1) 6 5
(3) 2 (1)
Fair value of new contracts entered into during the period 1
1 10 (21 8
Other changes in fair value 2
(5)
(31 1
124) l23)
Fair value of contracts outstanding at end of period, net S
4 (204)
(200) 4 S
(204)
S (2001 The following table presents maturities of derivative contracts as of September 30, 2017, based on the hierarchy levels used to determine the fair value of the contracts:
Maturity Maturity in Less than Maturity Maturity Excess of Total Sources of Fair Value 1 Year 1-3 Years 3-5 Years 5 Years Fair Value Ameren Missouri:
Level 1 1
S 1
Level 2 131 (4)
(7)
Level 3b 8
2
10 Total 6
(2)
4 Ameren Illinois:
Level 1 S
1
1 Level 2l)
(7)
(4)
(11)
Level 3bi (13)
(29)
(29)
(123)
(194)
Total (201 (321 (29)
(123)
(2041 Ameren:
Level 1 1
1
2 Level 2)
(10)
(8)
(18)
Level 3(b)
(5)
(27)
(29)
(123)
(184)
Total 114)
(34)
(29)
(123)
(200)
(a)
Principally fixed-price vs. floating over-the-counter power swaps, power forwards, and fixed-price vs. floating over-the-counter natural gas swaps.
(b)
Principally power forward contract values based on information from external sources, historical results, and our estimates. Level 3 also includes option contract values based on an option valuation model.
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ITEM 4. CONTROLS AND PROCEDURES.
(a)
Evaluation of Disclosure Controls and Procedures As of September 30, 2017, evaluations were performed under the supervision and with the participation of management, including the principal executive officer and the principal financial officer of each of the Ameren Companies, of the effectiveness of the design and operation of such registrants disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on those evaluations, as of September 30, 2017, the principal executive officer and the principal financial officer of each of the Ameren Companies concluded that such disclosure controls and procedures are effective to provide assurance that information required to be disclosed in such registrants reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms and such information is accumulated and communicated to its management, including its principal executive officer and its principal financial officer, to allow timely decisions regarding required disclosure.
(b)
Changes in Internal Controls over Financial Reporting There has been no change in any of the Ameren Companies internal control over financial reporting during their most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, each of their internal control over financial reporting.
PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS.
We are involved in legal and administrative proceedings before various courts and agencies with respect to matters that adse in the ordinary course of business, some of which involve substantial amounts of money. We believe that the final disposition of these proceedings, except as otherwise disclosed in this report, will not have a material adverse effect on our results of operations, financial position, or liquidity.
Risk of loss is mitigated, in some cases, by insurance or contractual or statutory indemnification. Material legal and administrative proceedings, which are discussed in Note 2 Rate and Regulatory Matters, Note 9Commitments and Contingencies, and Note 10 Callaway Energy Center, under Part I, Item 1, of this report include the following:
ATXIs request for certificate of convenience and necessity from the MoPSC for the Mark Twain project; Ameren Illinois annual electric distribution service formula rate update filed with the ICC in April 2017; the February 2015 complaint case filed with the FERC seeking a reduction in the allowed base return on common equity under the MISO tariff; litigation against Ameren Missouri related to the EPA Clean Air Act; remediation matters associated with former MGP and waste disposal sites of the Ameren Companies; and the class action lawsuit against Ameren Missouri relating to municipal taxes.
ITEM IA. RISK FACTORS.
Adetailed discussion of our risk factors is included in Part I, Item 1A, Risk Factors in the Form 10-K. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in the Form 10-K, Our operations are subject to acts of terrorism, cyber-attacks, and other intentionally disruptive acts.
Like other electric and natural gas utilities, our energy centers, fuel storage facilities, transmission and distribution facilities, and information systems may be affected by terrorist activities and other intentionally disruptive acts, including cyber-attacks, which could disrupt our ability to produce or distribute our energy products. Within our industry, there have been attacks on energy infrastructure such as power plants, substations, and related assets in the past, and there may be more attacks in the future. Any such incident could limit our ability to generate. purchase, or transmit power or natural gas and could have significant regional economic consequences. Any such disruption could result in a significant decrease in revenues, a significant increase in costs including those for repair, or adversely impact economic activity in our service territory which could adversely affect our results of operations, financial position, and liquidity.
There has been an increase in the number and sophistication of cyber-attacks across all industries around the world. A security breach at our physical assets or in our information systems could affect the reliability of the transmission and distribution system. disrupt electric generation, including nuclear generation, and/or subject us to financial harm associated with theft or inappropriate release of certain types of information, including sensitive customer, employee, financial, and operating system information, Many of our suppliers, vendors, contractors, and information technology providers have access to our systems that support our operations and maintain customer and employee data. A breach of these third-party systems could adversely affect our business as if it was a breach of our own system. If a significant breach occurred, our reputation could be adversely affected, customer confidence could be diminished, or we could be subject to legal claims, any of which could result in a significant decrease in revenues or significant costs for remedying the impacts of such a breach, Our generation, transmission, and distribution systems are part of an interconnected system. Therefore, a disruption caused by a cyber-incident at another 64
utility, electric generator, RTD, or commodity supplier could also adversely affect our businesses. In addition, new regulations could requite changes in our security measures and result in increased costs. The occurrence of any of these events could adversely affect our results of operations, financial position, and liquidity, ITEM 2, UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Ameren. Ameren Missouri and Ameren Illinois did not purchase equity securities reportable under Item 703 of Regulation S-K during the period from July 1, 2017 to September 30, 2017.
ITEM 6. EXHIBITS.
The documents listed below are being filed or have previously been filed on behalf of the Ameren Companies and are incorporated herein by reference from the documents indicated and made a part hereof. Exhibits not identified as previously filed are filed herewith.
Exhibit Designation Registrant(s)
Nature of Exhibit Previously Filed as Exhibit to:
Instruments Defining Rights of Security Holders, Including Indentures 4 1 Amman SuccIen,?ntai lrdvnturv. dated as o October 25. 21.U7. to Ameren Illinois Ameren Illinois Murtorion Statement re: Computation of Ratios 12.1 Ameren AnierunsStalurTientof Computation of Ratio of Earninas to Fixed Charges 12.2 Ameren Arneren Missouris Statement of Computation of Ratio of Earninos to Fixed Missouri Charges and Combined Fixed Charoes and Preferred Stock Dividend Reoiiremerts 12.3 Ameren Arncren tilnois Statement of Comoutation of Ratio of Eaminos to Fixed Charaes Illinois and Combmed Fixed Charcies and Preferred Stock Dividend Reauirements Rule 13a.14(al I 15d.14(a) Certifications 31.1 Ameren Rule 13a-14(atlSd-141a1 Certification of Principal Executive OfficerpfAmeren 31.2 Ameren Rule 1 3a-l4lal/1 5d-14(al Certification of Principal Financial Officer of Ameren 31.3 Ameren Rule 13a-l4iaI!15d-14(at Certification of Principal Executive Officer ofAmeren Missouri Missouri 31.4 Ameren Rule 13a-14(a)115d-14(al Certification of Principal Financial OfficerotAmeren Missouri Missouri 31.5 Ameren Rule 1 3a-l4la)/1 5d-14(at Certification pf Principal Executive Officer ofAmeren Illinois ifl]ois 31.6 Ameren Rule 13a-14ta1/15d-14(af Certification of Principal Financial Officer of Amren Illinois Illinois Section 1350 Certifications 32.1 Ameren Section 1350 Certification of Principal Executive Officer and Principal Financial Officer of Ameren 32.2 Ameren Section 1350 Certification of Principal Executive Officxr nd Principal Financial Missouri Officer olAmeren Missouri 32.3 Ameren Section 1350 Certification of Pnncioai Executiun Officer and Principal Financial Illinois Officer ofAmeren Illinois Interactive Data Files 1Q1.INS Ameren XBRL Instance Document Companies 101.SCH Ameren XBRC Taxonomy Extension Schema Document Companies 101 CAL Amemn XBRL Taxonomy Extension Calculation Linkbase Document Companies 101 LAS Ameren XBRL Taxonomy Extension Label Linkbase Document Companies 101.PRE Ameren XBRL Taxonomy Extension Presentation Lirikbase Document Companies 101.DEF Ameren XBRL Taxonomy Extension Definition Document Companies The file number references for the Ameren Companies filings with the SEC are: Ameren, 1 -14756; Ameren Missouri, 1-2967; and Ameren Illinois, 1-3672.
Each registrant hereby undertakes to furnish to the SEC upon request a copy DI any long-term debt instrument not listed above that such registrant has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.
65
SIGNATU RES Pursuant to the requirements of the Exchange Act, each registrant has duly caused this report to be signed on its behalf by the undersigned theteunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.
AMEREN CORPORATION (Registrant)
Is! Martin J. Lyons, Jr.
Martin J. Lyons, Jr.
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
UNION ELECTRIC COMPANY (Registrant)
Is! Martin J. Lyons, Jr.
Martin J. Lyons, Jr.
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
AMEREN ILLINOIS COMPANY (Registrant)
/s! Martin J. Lyons, Jr.
Martin J. Lyons, Jr.
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Date: November 3, 2017 66
Exhibit 4.1 WHEN RECORDED MAIL TO:
Ameren Illinois Company Craig W. Stensland One Ameren Plaza (MC 13 10) 1901 Chouteau Avenue St. Louis, MO 63103 AME REX ILLINOIS COMPANY (SUCCESSOR TO ILLINOIS POWER COMPANY)
TO THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
AS SUCCESSOR TRUSTEE TO HARRIS TRUST AND SAVINGS BANK SUPPLEMENTAL INDENTURE DATED AS Of OCTOBER 25, 2017 TO GENERAL MORTGAGE INDENTURE AND DEED OF TRUST DATED AS Of NOVEMBER 1. 1992 This instrument was prepared by Gregory L. Nelson, Esq.. Senior Vice President. General Counsel and Secretary oF Ameren Illinois Company do Ameren Corporation, One Ameren Plaza, 1901 Choutcau Avenue, St. Louis, Missouri 63103.
SUPPLEMENTAL INDENTURE dated as of October 25, 2017 (this Supplemental 1ndenre), made by and between AMEREN ILLUNOIS COMPANY (formerly named Central Illinois Public Service Company (LPS) and successor to Illinois Power Company (if) pursuant to the Merger, as defined below), a corporation organized and existing under the laws of the State of Illinois (hereinafter sometimes called the Company), party of the first part, and THE BANK OF NEW YORK MELLON TRUST COMPANY, NA., a national banking association organized and existing under the laws of the United States, as successor trustee to Harris Trust and Savings Bank, as Trustee (the Trustee) under the General Mortgage Indenture and Deed oflrtist dated as ofNoveinber 1, 1992.
hereinafter mentioned, party of the second part:
WHEREAS, the Company has heretofore executed and delivered its General Mortgage Indenture and Deed of Trust dated as of November 1, 1992 as from time to time amended and supplemented (the Indenture), to the Trustee, for the security of the Bonds issued and to be issued thereunder (the Bonds): and WHEREAS, as of 12:01 am. Central Time (the Effective Time) on October 1,2010. pursuant to the Agreement and Plan of Merger dated as of April 13, 2010 among CIPS, I? and Central Illinois Light Company (CILCO). IP and CILCO were merged with and into the Company (the Merger) whereby the Company is the surviving corporation: and WHEREAS. pursuant to Sections 13.01 and 14.01(a) of the Indenture, the Co]llpany and the Trustee executed the Supplemental Indenture dated as of October 1, 2010 whereby, among other things, the Company (a) assumed the dcie and pcinctual payment of the principal of and premium, if any. and interest. ifany, on all otthe Bonds then Outstanding and the performance and observance of every covenant and condition of the Indenture to be performed or observed by IP and (b) subjected to the Lien of the Indenture all equipment and fixtures (other than Excepted Property, which is expressly excepted and excluded from the Lien of the Indenture) that were owned by CIPS immediately prior to the Effective Time and were of the same kind and character as the Mortgaged Property immediately prior to the Effective Time: and WHEREAS. pursuant to Sections 13.02 and 11.0 lta)(i) of the Indenttire. the Company has succeeded to.
and has been substituted for, and may exercise every right and power of, I? under the Indenture with the same effect as if the Company had been named the Company in the Indenture: and VHEREAS, pursuant to Section 14.01(a) of the Indenture, the Company and the Trustee executed 59 Suppleniental Indentures dated as of January 15. 2011 subjecting to the Lien of the Indenture certain real property that was owned by CIPS immediately prior to the Merger: and tHEREAS. pursuant to the terms and provisions of the Indcnttire there were created and authorized by stipplemental indentures thereto bearing the following dates, respectively, the Mortgage Bonds of the series issued thereunder and respectively identified opposite such dates:
DATE OF SLJPPLEM ETA L INDENTURE IDENTIFICATION OF SERIES CALLED February 15, 1993 8% Series due 2023 (redeemed)
Bonds of the 2023 Series March 15, 1993 6 l/8% Series due 2000 (paid at maturity)
Bonds of the 2000 Series March 15, 1993 6 3/4% Series due 2005 (paid at maturity)
Bonds of the 2005 Series July 15, 1993 7 1/2% Series due 2025 (redeemed)
Bonds of the 2025 Series August 1, 1993 6 12% Series due 2003 (paid at maturity)
Bonds of the 2003 Series
DATE Of SUPPLEItIENTAL INDENTURE October 15, 1993 November 1, 1993 November 1, 1993 November 1, 1993 April I, 1997 April 1, 1997 April I, 1997 March 1, 1998 March 1. 1998 Jtily 15, 1998 September 15, 1998 June 15, 1999 July 15, 1999 July 5, 1999 May l,2001 May 1,2001 July 1, 2002 July 1,2002 December 15, 2002 June 1, 2006 August 1. 2006 IDENTIFICATION Of SERIES 5 5/8% Series due 2000 (paid at maturity)
Pollution Control Series M (redeemed)
Pollution Control Series N (redeemed)
Pollution Control Series 0 (redeemed)
Pollution Control Series P (retired)
Pollution Control Series Q (retired)
Pollution Control Series R (retired)
Polltition Control Series S (redeemed)
Pollution Control Series I (redeemed) 6 1/4% Series dtie 2002 (paid at mattirity) 6% Series due 2003 (paid at maturity) 7.50% Series clue 2009 (paid at maturity)
Pollution Control Series U Pollution Control Series V (redeemed)
Pollution Control Series W (retired)
Pollution Control Series I (retired) 105/8% Series due 2007 (not issued) 105/8% Series due 2012 (not issued) 11.50% Series due 2010 (redeemed)
Mortgage Bonds, Senior Notes Series AA (retired)
Mortgage Bonds, 2006 Credit Agreement Series Bonds (retired)
CALLED Bonds of the Second 2000 Series Bonds of the Pollution Control Series M Bonds of the Pollution Control Series N Bonds of the Pollution Control Series 0 Bonds of the Pollution Control Series P Bonds of the Pollution Control Series Q Bonds of the Pollution Control Series R Bonds of the Pollution Control Series S Bonds of the Pollution Control Series T Bonds of the 2002 Series Bonds of the Second 2003 Series Bonds of the 2009 Series Bonds of the Pollution Control Series U Bonds of the PolluLtion Control Series V Bonds of the Pollution Control Series W Bonds of the Pollution Control Series X Bonds of the 2007 Series Bonds of the 2012 Series Bonds of the 2010 Series Bonds of Series AA 2006 Credit Agreement Series Bonds 2
DATE Of SUPPLEMENTAL INDENTURE IDENTIFICATION Of SERIES CALLED March 1, 2007 Mortgacze Bonds, 2007 Credit Agreement 2007 Credit Agreement Series Bonds (retired)
Series Bonds November 15. 2007 Mortgage Bonds. Senior Notes Series BB Bonds of Series BB April 1,2006 Mortgage Bonds, Senior Notes Series CC Bonds of Series CC October 1. 200$
Mortgage Bonds. Senior Notes Series DD Bonds of Series UD June 15. 2009 Mortgage Bonds, 2009 Credit Agreement Series 2009 Credit Agreement Series Bonds (retired)
Bonds October 1,2010 Mortgage Bonds, Senior Notes Series CIPS-AA Series CIPS-AA Mortgage Bonds October 1,2010 Mortgage Bonds, Senior Notes Series CIPS-B3 Series CIPS-BB Mortgage Bonds (retired)
October 1,2010 Mortgage Bonds, Senior Notes Series CIPS-CC Series CIPS-CC Mortgage Bonds August I, 2012 First Mortgage Bonds. SeniorNotes Series EE Bonds of Series FE December 1, 2013 First Mortgage Bonds, Senior Notes Series FF Bonds ot Series FF June 1,2014 First Mortgage Bonds, SeniorNotcs Series GG Bonds ofSeries GO December 1.2014 First Mortgage Bonds, Senior Notes Series RH Bonds of Series RH December 1,2015 First Mortuage Bonds, Senior Notes Series II Bonds of Series 11 and WHEREAS, a supplemental indenture with respect to the Bonds of the 2007 Series and the Bonds of the 2012 Series listed above was exectited and filed but such Bonds of the 2007 Series and Bonds of the 2012 Series ere never issued and a release with respect to such supplemental indenture was subsequently executed and filed; and WHEREAS, the Company, in the exercise of the powers and authority conferred upon and reserved to it under the provisions of the Indenture, and pursuant to appropriate resolutions of the Board of Directors. has duly resolved and determined to make, execute and deliver to the Trustee this Supplemental Indenture in the form hereof for the ptirposes herein provided; VJ-IEREAS, all conditions and requirements necessary to make this Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled and the execution and delivery hereof have been in all respects duly authorized: and WHEREAS, all of the rights reserved in Article I hereof and the amendment made in Article II hereof do not adversely affect the interests of the Holders of Outstanding Bonds of any series or Tranche in any material respect and are permitted by Section 140 l(xi) of the Indenture; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
THAT the Company, in consideration of the purchase and ownership from time to time of the Bonds and the service by the Trustee, and its successors, under the Indenture and of One Dollar to it duly paid by the Trustee at 3
or before the ensealing and delivery of these presents, the receipt of which is hereby acknowledged, hereby cocnants and agrees to and with the Trustee and its sciccessors in trust under the hidenture. for the benefit of those who shall hold Bonds, as follows:
ARTIC[E I RIGHTS RESERVED Section 1.
The Company reserves the right. without any consent, vote or other action by any holders of Bonds of any series created after the date of this Supplemental Indenture, to amend the Indenture to delete the requirements for a Net Earnings Certificate in any provision of the Indenture, including in Sections 401 and 1.02 of the Indenture.
Section 2.
The Company reserves the right, without any consent, vote or other action by any holders of Bonds of any series created after the date of this Stipplemental Indenture, to aniend the Indenture as follows:
To amend the definition of Permitted Liens in Section 1.01 of the lndcnttire to read substantially as follows:
Pe,inittcdLjci means, at any time, any of the following:
(a) the Lien of this Indenture and all liens and encumbrances jtmior thereto:
(b)
Liens for taxes, assessments and other governmental charges or reqcilrelnents which are not delinquent or which are being contested in good faith by appropriate proceedings or of which at least ten (10) Business Days notice has not been given to the general counsel of the Company or to such other Person designated by the Company to receive such notices; (c) mechanics, workmens, repairmens. materialmens, warehouscmens. and carriers Liens, other Liens incident to construction, Liens or privileges of any employees of the Company for salary or wages earned, but not yet payable, and other Liens, including without limitation Liens for workers compensation awards, arising in the ordinary course of business for charges or requirements which are not delinquent or which are being contested in good faith and by appropriate proceedings or of which at least ten (10) Btisiness Days notice has not been given to the general counsel of the Company or to such other Person designated by the Company to receive such notices; (d)
Liens in respect of attachments, judgments or awards or similar Liens arising out of judicial or administrative proceedings (i) in an amount not exceeding the greater of(A) Ten Million Dollars (510,000,000) and (3) three percent (3%) ofthe principal amocint of the sum of(x) the principal amount of Bonds then Outstanding and (y) the principal amount of any Prior Bonds then Ocitstanding, other than Pledged Bonds, or (ii) with respect to tvhich the Company shall (X) in good faith be prosectiting an appeal or other proceeding for review and with respect to which the Company shall have sectired a stay of execution pending such appeal or other proceeding or (Y) have the right to prosectite an appeal or other proceeding for review or (Z) have not received at least ten (10) Business Days notice given to the general counsel of the Company or to such other Person designated by the Company to receive such notices; (e) easements, leases, reservations or other rights of others in, on, over and/or across, and laws, regulations and restrictions affecting, and defects, irregularities, exceptions and limitations in title to, the Mortgaged Property or any part thereof; provided, hoiieve,; that such easements, leases, reservations, rights, laws, regulations, restrictions, defects, irregularities, exceptions and limitations do not in the aggregate materially impair the use by the Company of the Mortgaged Property considered as a whole for the purposes for which it is held by the Company; 4
(fi Liens, defects. irregularities, exceptions and limitations in (i) title to real property subject to rights-of-way in favor of the Company or otherwise or used otto be used by the Company primarily for right-of-way purposes: (ii) real property held under lease, easement, license or similar right: or (iii) the rights-of-way, leases, easements, licenses or similar rights in favor of the Company; provided, hoiievei, that (A) the Company shall have obtained from the apparent owner or owners of such real property a sufficient right, by the terms of the instrument granting such right-of-way, lease, easement, license or similar right, to the use thereof for the purposes for which the Company acquired the same; (B) the Company has power under eminent domain or similar statutes to remove or subordinate such Liens, defects, irregularities.
exceptions or limitations or (C) such defects, irregularities, exceptions and limitations may be otherwise remedied without undue effort or expense; and defects. irregularities, exceptions and limitations in title to tlood lands, flooding rights and/or water rights; (g)
Liens securing indebtedness or other obligations neither created, assumed nor guaranteed by the Company nor on account of which the Company customarily pays interest upon property of the Company, existing at the date of the execution and delivery of this Indenture, or. as to property thereafter acquired. upon real property or rights in or relating to real property acquired by the Company for the purpose of the transmission or distribution of electric energy, gas or water, for the purpose of telephonic.
telegraphic, radio, wireless or other electronic communication or otherwise for the pcmrpose of obtaining rightsofway:
(h) leases existing at the date of the execution and delivery of this Indentuire affecting properties owned by the Company at said date and renewals and extensions thereof; and leases affecting such properties entered into after such date or affecting properties acquired by the Company after such date which, in either case, (i) have respective terms of not more than ten (10) years (including extensions or renewals at the option of the tenant) or (ii) do not materially impair the tise by the Company of such properties for the respective ptirposes for which they are held by the Company; (i)
Liens vested in lessors, licensors, franchisors or permitters for rent or other amounts to become due or for other obligations or acts to be performed. the payment of which rent or the performance of which other obligations or acts is required cinder leases. subteases. licenses, franchises or permits. so long as the payment of such rent or other amocints or the performance of such other obligations or acts is not delinquent or is being contested in good faith and by appropriate proceedings:
j) controls, restrictions, obligations, duties and/or other burdens imposed by federal, state.
mimicipal or other law, or by rules, regulations or orders of Governmental Authorities, upon the Mortgaged Property or any part thereof or the operation or cisc thereof or tipon the Company with respect to the Mortgaged Property or any part thereof or the operation or use thereof or with respect to any franchise, grant. license, permit or public purpose requirenlent. or any rights reserved to or otherwise vested in Governmental Authorities to impose any such controls, restrictions, obligations. dcities and/or other burdens. inclciding any controls, liens, restrictions, regulations, easements, exceptions or reservations of any public authority or unit applying particularly to any form of space satellites (including but not limited to solar power satellites), space stations and other anatogocis facilities whether or not in the earths atmosphere; (k)
Liens granted on air or water pollution control, sewage or solid waste disposal, or other similar facilities of the Company in connection with the issuance of industrial development, pollution control or other revenue bonds, or other obligations the interest on which is not includable in taxable income for federal or state tax purposes or is otherwise entitled to tax benefits:
(I) rights which Governmental Authorities may have by virtue of franchises, grants, licenses.
permits or contracts, or by virtue of law, to purchase. recapture or designate a purchaser of or order the sale of the Mortgaged Property or any part thereof, to terminate franchises, grants, licenses, permits, contracts or other rights or to regulate the property and business of the Company; and any and all obligations otthe Company correlative to any such rights;
(m) any Liens which have been bonded for the full amOLint in dispute or for the payment of which other adequate security arrangements have been made; (n) irregularities in or defects of title to any property or rights-of-way of the Company, which do not materially impair the use of such property or rights-of-way for the purposes for which such property or rights-of-way are held by the Company; (o)
(i) rights and interests of Persons other than the Company and obligations of the Company arising out of contracts, agreements and other instruments to which the Company is a party and which relate to the common ownership or joint use of property, including partytvall agreements; (ii) all Liens on the interests of Persons other than the Company in property owned in common by such Persons and the Company if and to the extent that the enforcement of such Liens would not adversely affect the interests of the Company in such property in any material respect; (iii) rights reserved to or vested in others to take or receive any part of any coal, ore, gas, oil and other minerals, any timber and/or any electric capacity or energy. gas, water, steam and any other products. developed, produced, manufactured, generated, purchased or othenvise acquired by the Company or by others on property of the Company; and (iv) liens securing indebtedness inctirred by a Person, other than the Company, which indebtedness has been neither assumed nor guaranteed by the Company nor on which it customarily pays interest, existing on property which the Company owns jointly or in common with such Person or such Person and others, if there is an effective bar against partition of such property, which would preclude the sale of such property by such other Person or the holder of such lien without the consent of the Company; (p) any restrictions on assignment and/or requirements of any assignee to qualify as a permitted assignee and/or public utility or public service corporation; (q)
Liens in favor of a Governmental Authority securing payments or obligations pursuant to a statute (other than taxes and assessments); Liens required by law or governmental regulations (i) as a condition to the transaction of any business or the exercise of any privilege or license. (ii) to enable the Company to maintain self-insurance or to participate in any funds established to cover any insurance risks, (iü) in connection with workmens compensation. unemployment insurance, social security, any pension or welfare benefit plan or (iv) to share in the privileges or benefits required for companies participating in one or more of the arrangements described in clauses (ii) and (iii) above; (r) any other liens or encumbrances of whatever nature or kind which do not, individtmally or in the aggregate, materially impair the Lien of this Indenture or the security afforded thereby tor the benefit of the Bondholders, as evidenced by an Opinion of Counsel to such effect; (s) any trustees lien hereunder; and (t)
Prepaid Liens.
Section 3.
The Company reserves the right, without any consent, vote or other action by any holders of Bonds of any series created after the date of this Scipplemental Indenture, to amend the Indenture as follows:
(A)
To amend clauses (v) and (vi) of Section 4.03(b) of the Indenture to read substantially as tollows:
(v) either an Opinion of Counsel or Oticers Certificate to the effect:
(A) that (except as to paving, grading and other improvements to, under or upon highways, bridges, parks or other pcmblic property of analogous character) this Indenture constitutes, or. upon the delivery of, andor the filing and/or recording in the proper places and manner of the instruments of conveyance, assignment or transfer, if any, specified in said opinion or certificate, will constitcite, a Lien on all the Property Additions to be made the basis of the authentication and 6
delivery of such Bonds, subject to no Lien thereon prior to the Lien of this Indenture except Permitted Liens and the Lien of any Prior Mortgage and any other Liens of which the signer of said opinion or certificate has no actual knowledge and which do not appear on a specified lien search report received by said signer not more than five (5) Business Days prior to the date of said opinion or certificate and (B) that the Company has corporate authority to operate the Property Additions with respect to which such application is made; and (vi) copies of the instruments of conveyance. assignment and transfer, if any. specified in the opinion or certificate provided for in clause (v) above.
(B)
To amend Section 8.03(a)fvi) to read substantially as follows:
(vi) if any obligations sectired by a purchase money mortgage upon the property to be released are included in the consideration for such release and are delivered to the Trustee or to the trustee or other holder of a Lien prior to the Lien of this Indenture in connection with such release. (x) an Opinion of Cotinsel stating that, in the opinion of the signer, stich obligations are valid obligations enforceable in accordance with their terms, subject to Customary Exceptions, and that the purchase money mortgage securing the same is sufficient to afford a valid purchase money Lien upon the property to be released, and (y) and Opinion of Counsel or an Officers Certificate to the effect that that (except as to paving, grading and other improvements to, under or upon highways. bridges, parks or other public property of analogous character) such purchase money Lien constitutes, or, upon the delivery of, and/or the filing and/or recording in the proper places and manner of, the instruments of conveyance, assignment or transfer, if any, specitied in said opinion or certificate, will constitute, a Lien on such property to be released, subject to no Lien thereon prior thereto except Permitted Liens and such Liens, if any, as shall have existed thereon just prior to such release as Liens prior to the Lien of this Indenture and any other Liens of which the signer of said opinion or certificate has no actual knowledge and which do not appear on a specified lien search report received by said signer not more than five (5) Business Days prior to the date of said opinion or certificate.
Section 4.
The Company reserves the right, withotit any consent, vote or other action by any holders of Bonds of any series created after the date of this Supplemental Indenture, to amend the lndenttire as follows:
To amend Section 8.02(d) of the Indenture to read substantially as follows:
(d) terminate, abandon, surrender, cancel, release, modify, make substitutions for or dispose of any franchises, licenses or permits that are Mortgaged Property; pioiicleclthat such action is, in the opinion of the Company, necessary, desirable or advisable in the conduct of the business of the Company and will not materially impair the operation of other Mortgaged Property andprovided flirther that any franchises, licenses or permits that become Mortgaged Property and, in the opinion of the Compal7y, cease to be necessary for the operation of the Mortgaged Property shall automatically cease to be subject to the Lien of this Indenture, without any release or consent, or report to. the Trustee; and Section 5.
The Company reserves the right, without any consent, vote or other action by any holders of Bonds of any series created after the date of this Supplemental Indenture, to amend the Indenture as follows:
To amend the second sentence in Section 12.02 of the Indenture to read substantiatly as follows:
The Company shall file with the Trustee (within 30 days after filing with the Commission in the case of reports which pcmrsuant to the Trust Indenture Act must be filed with the Commission and 7
Icirnished to the Trustee) and transmit to the Holders such other information, reports and other documents, if any, at such times and in stich manner, as shall be required by the Trust Indenture Act.
Section 6.
The Company reserves the right, without any consent, vote Of other action by any holders of Bonds of any series created after the date of this Supplemental Indenture, to amend the Indenture as follows:
(A)
To add a new definition to Section 1.01 of the Indenture reading substantially as follows:
Bonding Ratio shall mean the percentage set forth in Section 4.03(a) of this Indenture, as such section may be amended from time to time. The reciprocal of the Bonding Ratio shall mean the percentage or fraction equal to I divided by the Bonding Ratio. If the Bonding Ratio is 75%, then the reciprocal of the Bonding Ratio is 43rds or 133 1/3%.
(B)
To add a new section after Section 13.05 of the Indenture reading stibstantially as follows:
Sctivn 13.06. Transfer ofLess than Substantial/u All.
A conveyance, transfer or lease by the Company of any part of the Mortgaged Property shall not be deemed to constitute the conveyance, transfer or lease as. or substantially as, an entirety of the Mortgaoed Property for purposes of this Indcntcire if the Fair Value ofthe Mortgaged Property retained by the Company exceeds the reciprocal of the Bonding Ratio multiplied by the aggregate principal amount of all Outstanding Bonds and any other outstanding debt of the Company secured by a Prior Lien on such retained Mortgaged Property. Such Fair Valcie shall be established by the delivery to the Trustee of an Independent Engineers Certificate stating the Independent Engineers Opinion of such fair Value as ofa date not more than 90 days before or after such conveyance, transfer or lease. This Article is not intended to limit the Companys conveyances, transfers or leases of less than substantially the entirety of the Mortgaged Property.
Section 7.
The Company reserves the right, without any consent, vote or other action by any holders of Bonds of any series created after the date of this Supplemental Indenture, to amend Section 10.11 of the Indenture to substitute the words this Indenture or the Bonds for the words this Indenture in stich section and to substitute the words remedy under this Indenture or the Bonds for the words remedy hereunder in such section.
ARTICLE II AMENUM ENT Pursuant to Section 14.01(a) of the Indenture, Section 3.01(a) of the Indenture is hereby amended to read as follows:
(a)
The aggregate principal amount of Bonds which may be exectited by the Company and authenticated by the Trustee and secured by this Indenture is limited to One Hundred Billion Dollars (S 100,000,000,000) in aggregate principal amount at any onetime Outstanding:prouidecl that the Company may. without any consent of any 1-lolders or the Trustee, amend this Indenture at any time and from time to time, by one or more indentures or instruments supplemental hereto, in form satisfactory to the Trustee, to increase or decrease such amount, provided that such amount shall not be decreased to an amount that is less than the aggregate principal amount of Bonds then Outstanding.
ARTICLE III THE TRUSTEE 8
The Trustee hereby accepts the trusts hereby declared and provided, and agrees to perform the same upon the terms and conditions in the Indenture set forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or the due execution hereof by the Company or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general. each and every term and condition contained in Article Eleven of the Indenture shall apply to this Supplemental Indenture with the same force and effect as if the same were herein set forth in full, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Supplemental Indenture.
ARTICLE It MISCELLANEOUS PROVISIONS Except as otherwise defined herein, capitalized terms defined in the Indenture are used herein as therein defined. This Supplemental Indenture may be simultaneously executed in any number of counterparts. each of which when so executed shall be deemed to be an original: but such counterparts shall together constitute but one and the same instrument.
9
IN WITNESS WHEREOF, said Ameren Illinois Company has caused this Supplemental Indenture to be executed on its behalf by an Authorized Executive Officer as detined in the Indenture, and its corporate seal to be hereto affixed and said seal and this Supplemental Indenture to be attested by an Authorized Executive Officer as defined in the Indenture: and said The Bank ofNew York Mellon Trust Company. NA., as successor trustee to Harris Trust and Savings Bank, in evidence of its acceptance of the trust hereby created, has caused this Supplemental Indenture to be executed on its behalf by one of its Vice Presidents and this Supplemental Indenture to be attested by its Secretary or one of its Vice Presidents*. all as of October 25, 2017.
AMEREN ILLiNOIS COMPANY (CORPORATE SEAL)
By; s1 Ryan J, Martin Name: Ryan J. Martin Title; Vice President and TrcasLlrer ATTEST; By:
Is! Craig W Stensland Name: Craig W Stensland
Title:
Assistant Secretary
ATTEST:
By:
// Lawrence NI. Kusch_
Name: Lawrence M. Kusch
Title:
Vice President THE BANK OF NEW YORK MELLON TRUST COMPANY, NA.
as successor trustee to Harris Trust and Savings Bank,
- TRUSTEE, By:
5; R. Tarnas Name: R. Tamas
Title:
Vice President
STATE Of MISSOURI ss CITY Of ST. LOUIS BE IT REMEMBERED, that on this 25th day of October, 2017. before mc. the undersigned, a Notary Public within and for the City and State aforesaid, personally came Ryan J. Martin. Vice President and Treasurer and Craig W. Stensland, Assistant Secretary, ofAmeren Illinois Company, a corporation duly organized. incorporated and existing under the laws of the State of Illinois. who are personally known to me to be such officers, and who are personally known to me to be the same persons who executed as such officers the within instrument of tvriting. and such persons dcily acknowledged that they signed. scaled and delivered the said instrument as their free and voluntary act as such officers and as the free and voluntary act of said Ameren Ellinois Company for the uses and purposes therein set forth.
IN WITNESS WHEREOF. I have hereunto stibscribcd my name and affixed my official seal on the day and year last above written.
/s Jessica Poat NOT1RY PUBLIC JESSICA POAT Notary Ptiblic Notary Seal State of Missouri Commissioned for Franklin County My Commission Expires: December 07, 2019 Commission Number: 11211966
STATE OF ILLINOIS ss.
COUNTY OF COOK BE IT REMEMBERED, that on this 25th day of October. 2017. before me. the undersigned, a Notary Public within and for the County and State aforesaid, personally came R. Tarnas, Vice President and Lawrence M.
Kusch, Vice President, of The Bank of New York Mellon Trust Company, NA., a national banking association duly oroanized, incorporated and existing under the laws of the United States, who are personally known to me or proved to me on the basis of satisfactory evidence to be the same persons who executed as such orncers the within instrument of writing, and such persons duly acknowledged that they signed and delivered the said instrument as their free and voluntary act as such Vice President and \\Tice President, and as the free and voluntary act of said The Bank of New York Mellon Trust Company. NA. for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal on the day and year last above written.
Official Seal
/s/ Carrie Al. Beecher Carrie M. Beecher NOT4RYPUBLJC Notary Public State of Illinois My Commission Expires 03/29/2021
Exhibit 12.1 Ameren Corporation Computation of Ratio of Earnings to Fixed Charges (Thousands of Dollars, Except Ratio)
Earnings available for fixed charges, as defined:
Net income from continuing operations attributable to Ameren Corporation Loss from equity investee lax expense based on income Fixed charges excluding subsidiary preferred stock dividends tax adjustment Earnings available for fixed charges, as defined Fixed charges, as defined; Interest expense on short-term and long-term debt Estimated interest cost within rental expense Amortization of net debt premium, discount, and expenses Subsidiary preferred stock dividends Adjust subsidiary preferred stock dividends to pretax basis Total fixed charges, as defined Nine Months Ended September 30, 2017 582,847 1,393 376,223 312,459 1,272,922 288,209 3236 16,182 4832 3039 S
315498 4.03 Consolidated ratio of earnings to fixed charges
Exhibit 12.2 Union Electric Company Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividend Requirements (Thousands of Dollars, Except Ratios)
Earnings available for fixed charges, as defined:
Net income Tax expense based on income Fixed charges Earnings available for fixed charges, as defined Fixed charges, as defined:
Interest expense on short-term and long-term debt Estimated interest cost within rental expense Amortization of net debt premium, discount, and expenses Total fixed charges, as defined Ratio of earnings to fixed charges Earnings required for combined fixed charges and preferred stock dividends:
Preferred stock dividends Adjustment to pretax basis Combined fixed charges and preferred stock dividend requirements Nine Months Ended September 30, 2017 361,618 218,200 167745 S
747,563 160,307 2,838 4,600 S
167,745 4.46 2,565 1548 S
4,113 S
171,858 4.35 Ratio of earnings to combined fixed charges and preferred stock dividend requirements
Exhibit 12.3 Ameren Illinois Company Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividend Requirements (Thousands of Dollars, Except Ratios)
Earnings available for fixed charges, as defined:
Net income Tax expense based on income Fixed charges Earnings available for fixed charges, as defined Fixed charges, as defined:
Interest expense on short-term and long-term debt Estimated interest cost within rental expense Amortization of net debt premium, discount, and expenses Total fixed charges, as defined Ratio of earnings to fixed charges Earnings required for combined fixed charges and preferred stock dividends:
Preferred stock dividends Adjustment to pretax basis Combined fixed charges and preferred stock dividend requirements Nine Months Ended September 30, 2017 5
193,442 127,217 111,489 S
432,148 101,053 437 9,999 s
111489 3.88 s
2,267 1491 3,758 115,247 3,75 Ratio of earnings to combined fixed charges and preferred stock dividend requirements
Exhibit 31.1 RULE 1 3a-1 4(a)/i 5d-14(a) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF AMEREN CORPORATION (required by Section 302 of the Sarbanes-Oxley Act of 2002)
I, Warner L. Baxter, certify that:
1.
have reviewed this report on Form 10-0 for the quarterly period ended September 30, 2017 of Ameren Corporation; 2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveted by this report; 3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedLires (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(fI) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c)
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter tthe registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and 5.
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record. process, summarize and report financial information; and b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: November 3, 2017 Is! Warner L. Baxter Warner L. Baxter Chairman, President and Chief Executive Officer (Principal Executive Officer)
Exhibit 31.2 RULE 13a-14(a)/15d-14(a) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF AMEREN CORPORATION (requited by Section 302 of the Sarbanes-Oxley Act of 2002)
I, Martin ]. Lyons, Jr., certify that:
1 I have reviewed this report on Form 1 Q-Q for the quarterly period ended September 30, 2017 of Ameren Corporation; 2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the tegistrant as of, and for, the periods presented in this report; 4.
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c)
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and 5.
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: November 3, 2017 Is! Martin J. Lyons, Jr.
Martin J. Lyons, Jr.
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Exhibit 31.3 RULE 13a-14(a)/15d-14(a) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF UNION ELECTRIC COMPANY (required by Section 302 of the Sarbanes-Oxley Act of 2002)
I, Michael L. Moehn, certify that:
1.
I have reviewed this report on Form 10-0 for the quarterly period ended September 30, 2017 of Union Electric Company; 2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made. not misleading with respect to the period covered by this report; 3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 1 3a-1 5(e) and 1 5d-1 5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c)
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, otis reasonably likely to materially affect, the registrants internal control over financial reporting; and 5.
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of intemal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: November 3, 2017
/s/ Michael L. Moehn Michael L. Moehn Chairman and President (Principal Executive Officer)
Exhibit 31.4 RULE 1 3a-i 4(a)/i 5d-i 4(a) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF UNION ELECTRIC COMPANY (required by Section 302 of the SarbanesOxley Act of 2002)
I, Martin J. Lyons, Jr., certify that:
1.
I have reviewed this report on Form i0-Q for the quarterly period ended September 30, 2017 of Union Electric Company; 2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and i5d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 1 3a-i 5(f) and 1 5d-i 5(1)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c)
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting: and 5.
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: November 3, 2017
/s/ Martin]. Lyons, Jr.
Martin I Lyons, Jr.
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Exhibit 31.5 RULE 13a-14(a)/15d-14(a) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF AMEREN ILLINOIS COMPANY (required by Section 302 of the Sarbanes-Oxley Act of 2002)
I, Richard]. Mark, certify that:
1.
I have reviewed this report on Form 10-0 for the quarterly period ended September 30 2017 of Ameren Illinois Company; 2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.
Based on my knowledge, the financial statements, and other financial information included in this report. fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c)
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and 5.
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: November 3, 2017 Is! Richard J. Mark Richard]. Mark Chairman and President (Principal Executive Officer)
Exhibit 31.6 RULE 13a-14(a)/15d-14(a) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF AMEREN ILLINOIS COMPANY (reqLlired by Section 302 of the Sarbanes-Oxley Act of 2002)
I, Martin]. Lyons, Jr., certify that:
1.
I have reviewed this report on Form 10-0 for the quarterly period ended September 30, 2017 of Ameren Illinois Company; 2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 1 3a-1 5(0 and 1 5d-1 5(1)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under out supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c)
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation: and d)
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quartet (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and 5.
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: November 3, 2017
/s! Martin J. Lyons, Jr.
Martin J. Lyons, Jr.
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Exhibit 32.1 SECTION 1350 CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER AND THE PRINCIPAL FINANCIAL OFFICER OF AMEREN CORPORATION (required by Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the report on Form 10-Q for the quarterly period ended September 30, 2017 of Ameren Corporation (the Registrant) as filed by the Registrant with the Securities and Exchange Commission on the date hereof (the Form 10-0),
each undersigned officer of the Registrant does hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Form 1 0-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)); and (2)
The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: November 3. 2017 Is! Warner L. Baxter Warner L. Baxter Chairman, President and Chief Executive Officer (Principal Executive Officer)
Is? Martin]. Lyons, Jr.
Martin J. Lyons, Jr.
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Exhibit 32.2 SECTION 1350 CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER AND THE PRINCIPAL FINANCIAL OFFICER OF UNION ELECTRIC COMPANY (requited by Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the report on Form 10-a for the quarterly period ended September 30, 2017 of Union Electric Company (the Registrant) as filed by the Registrant with the Securities and Exchange Commission on the date hereof (the Form 10-0), each undersigned officer of the Registrant does hereby certify, pursuant to 18 U.S.C. §1350: as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Form 10-0 fully complies with the requirements of Section 73(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or78o(d)): and (2)
The information contained in the Form 10-a fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: November 3. 2017
/sI Michael L. Moehn Michael L. Moehn Chairman and President (Principal Executive Officer)
Is? Martin J. Lyons, Jr.
Martin J. Lyons, Jr.
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Exhibit 32.3 SECTION 1350 CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER AND THE PRINCIPAL FINANCIAL OFFICER OF AMEREN ILLINOIS COMPANY (required by Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the report on Form 10-Q for the quarterly period ended September 30, 2017 of Ameren Illinois Company (the Registrant) as filed by the Registrant with the Securities and Exchange Commission on the date hereof (the Form 10-0), each undersigned officer of the Registrant does hereby certify. pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)); and (2)
The information contained in the Form 10-0 fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: November 3, 2017 Is! Richard J. Mark Richard]. Mark Chairman and President (Principal Executive Officer)
/s! Martin]. Lyons, Jr.
Martin J. Lyons, Jr.
Executive Vice President and Chief Financial Officer (Principal Financial Officer)